Exhibit 4.10
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ZARLINK SEMICONDUCTOR INC.,
ZLE INC.,
LEGERITY HOLDINGS, INC.
AND
NAVIGANT CAPITAL ADVISORS, LLC, AS COMPANY STOCKHOLDER REPRESENTATIVE,
DATED AS OF JUNE 25, 2007
TABLE OF CONTENTS
Page
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Article 1 The Merger......................................................... 1
1.1 Certain Definitions................................................. 1
1.2 The Merger.......................................................... 11
1.3 Effective Time; Closing............................................. 11
1.4 Effect of the Merger................................................ 12
1.5 Certificate of Incorporation; By-Laws............................... 12
1.6 Directors and Officers.............................................. 12
1.7 Effect on Capital Stock............................................. 12
1.8 Treatment of Warrants............................................... 13
1.9 Repayment of Credit Agreement Debt.................................. 13
1.10 Payment of Common Merger Consideration.............................. 13
1.11 Delivery of Common Merger Consideration; Surrender
of Certificates................................................... 14
1.12 Taking of Necessary Action; Further Action.......................... 17
1.13 Working Capital Adjustment to Merger Consideration.................. 17
1.14 Dissenters' Rights.................................................. 19
1.15 Company Stockholder Representative.................................. 20
1.16 Approvals........................................................... 23
Article 2 Representations and Warranties of the Company...................... 23
2.1 Organization........................................................ 23
2.2 Subsidiaries........................................................ 23
2.3 Authorization....................................................... 23
2.4 Execution and Validity.............................................. 24
2.5 Consents and Approvals; No Violations............................... 24
2.6 Capitalization...................................................... 25
2.7 Financial Statements................................................ 25
2.8 No Undisclosed Liabilities.......................................... 26
2.9 Absence of Certain Changes.......................................... 26
2.10 Title to Properties; Encumbrances................................... 28
2.11 Real Property; Leases............................................... 28
2.12 Contracts and Commitments........................................... 28
2.13 Litigation.......................................................... 30
2.14 Compliance with Laws................................................ 30
2.15 Employee Benefit Plans.............................................. 31
2.16 Tax Matters......................................................... 32
2.17 Intellectual Property............................................... 34
2.18 Labor Matters....................................................... 36
2.19 Environmental Compliance............................................ 37
2.20 Certain Transactions................................................ 37
2.21 Brokers or Finders.................................................. 38
2.22 Accounts Receivable................................................. 38
2.23 Accounts Payable.................................................... 38
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2.24 Inventory........................................................... 38
2.25 Bank Accounts....................................................... 38
2.26 Indebtedness........................................................ 38
2.27 Large Customers..................................................... 38
2.28 Large Vendors....................................................... 39
2.29 Sufficiency of Assets............................................... 39
2.30 Previous Sales; Warranties.......................................... 39
2.31 Insurance........................................................... 39
2.32 Contracts with Indemnification/Warranty Provisions.................. 40
2.33 Disclosure.......................................................... 40
Article 3 Representations and Warranties of Purchaser and Merger Sub......... 40
3.1 Organization........................................................ 40
3.2 Authorization....................................................... 41
3.3 Execution and Validity.............................................. 41
3.4 Consents and Approvals; No Violations............................... 41
3.5 Availability of Funds............................................... 41
3.6 Litigation.......................................................... 41
3.7 Brokers or Finders.................................................. 41
Article 4 Conduct Prior to the Effective Time................................ 41
4.1 Interim Operations of the Company................................... 41
4.2 Tax Matters......................................................... 44
Article 5 Covenants.......................................................... 44
5.1 Stockholder Approval................................................ 44
5.2 Access.............................................................. 45
5.3 Confidentiality..................................................... 45
5.4 No Solicitation..................................................... 45
5.5 Public Disclosure................................................... 45
5.6 Reasonable Efforts; Notification.................................... 45
5.7 Antitrust and Other Filings......................................... 46
5.8 Disclosure.......................................................... 47
5.9 Employee Benefit Plans.............................................. 47
5.10 Indemnification, Exculpation and Insurance Plans.................... 47
5.11 Company 401(k) Plan(s).............................................. 48
5.12 Takeover Statutes................................................... 48
5.13 Saxon Divestiture................................................... 49
Article 6 Indemnification and Survival....................................... 50
6.1 Survival Period..................................................... 50
6.2 Indemnification of Purchaser........................................ 51
6.3 Indemnification of the Company Stockholders......................... 51
6.4 Procedure for Claims between Parties................................ 51
6.5 Arbitration......................................................... 52
6.6 Defense of Third-Party Claims....................................... 53
6.7 Limitation on Obligations of the Company Stockholder
Representative.................................................... 54
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6.8 Limitations on Indemnification Obligations.......................... 54
6.9 No Duplication; Exclusive Remedy.................................... 55
6.10 No Additional Representations or Warranties......................... 56
Article 7 Certain Tax Matters................................................ 56
7.1 Tax Indemnification................................................. 56
7.2 Straddle Period..................................................... 57
7.3 Responsibility for Filing Tax Returns............................... 57
7.4 Cooperation on Tax Matters.......................................... 57
7.5 Tax-Sharing Agreements.............................................. 58
7.6 Certain Taxes and Fees.............................................. 58
7.7 Refunds............................................................. 58
Article 8 Closing Conditions................................................. 59
8.1 General Conditions to Obligations to Effect the Merger.............. 59
8.2 Additional Conditions to Obligations of the Company................. 59
8.3 Additional Conditions to Obligations of Purchaser and Merger Sub.... 60
Article 9 Termination, Amendment and Waiver.................................. 62
9.1 Termination......................................................... 62
9.2 Notice of Termination; Effect of Termination........................ 63
9.3 Fees and Expenses................................................... 63
9.4 Amendment........................................................... 63
9.5 Waiver; Right to Proceed............................................ 63
Article 10 General Provisions................................................ 64
10.1 Notices............................................................. 64
10.2 Interpretation; Certain Defined Terms............................... 65
10.3 Counterparts........................................................ 65
10.4 Entire Agreement; Third-Party Beneficiaries......................... 65
10.5 Severability........................................................ 65
10.6 Governing Law; Submission to Jurisdiction........................... 65
10.7 Rules of Construction; Legal Representation......................... 66
10.8 Assignment.......................................................... 66
10.9 Waiver of Jury Trial................................................ 66
Exhibit A - Form of Certificate of Merger
Exhibit B - Form of Company Officer's Certificate
Exhibit C - Form of Company Secretary's Certificate
Exhibit D - Form of Opinions of Xxxxxxx Xxxxx LLP
Exhibit E - Form of Indemnification Escrow Agreement
Exhibit F - Form of Working Capital Escrow Agreement
Schedule 8.3(j) - Employees
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of June 25, 2007, by and among Zarlink Semiconductor Inc., a Canadian
corporation ("Purchaser"), ZLE Inc., a Delaware corporation and a directly or
indirectly wholly owned Subsidiary (as defined below) of Purchaser ("Merger
Sub"), Legerity Holdings, Inc., a Delaware corporation (the "Company"), and
Navigant Capital Advisors, LLC, as representative of the stockholders of the
Company (the "Company Stockholder Representative"). Purchaser, Merger Sub, the
Company and the Company Stockholder Representative are collectively referred to
herein as the "Parties."
RECITALS:
The respective Boards of Directors of Purchaser, Merger Sub and the
Company have adopted this Agreement as a plan of merger with respect to the
merger of Merger Sub with and into the Company (the "Merger") upon the terms and
subject to the conditions of this Agreement and in accordance with the Delaware
General Corporation Law and all amendments and additions thereto ("Delaware
Law").
AGREEMENT:
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the Parties agree as
follows:
Article 1
THE MERGER
1.1 Certain Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
"AAA Rules" shall have the meaning set forth in Section 6.5(a).
"Acquisition Proposal" shall mean any offer or proposal (other than an
offer or proposal by Purchaser or Merger Sub) relating to or involving: (i) any
acquisition or purchase by any Person (as defined below) or "group" (as defined
under Section 13(d) of the Exchange Act (as defined below) and the rules and
regulations thereunder) of beneficial ownership (as defined in Rule 13d-3 under
the Exchange Act) of more than fifty percent (50%) of the total number of
outstanding voting securities of the Company; (ii) any tender offer or exchange
offer that if consummated would result in any Person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) having beneficial ownership (as defined in Rule 13d-3 under the
Exchange Act) of more than fifty percent (50%) of the total number of
outstanding voting securities of the Company; (iii) any merger, consolidation,
business combination or similar transaction involving the Company pursuant to
which the stockholders of the Company immediately prior to such transaction hold
less than fifty percent (50%) of the equity interests of the Company or in the
surviving or resulting entity following such transaction; (iv) any sale, lease,
exchange, transfer, license (other than in the ordinary course of business), or
disposition of substantially all of the assets of the Company; or (v) any
liquidation or dissolution of the Company.
"Affiliate" of a specified Person shall mean each other Person who
controls, is controlled by, or is under common control with the specified
Person.
"Agreement" shall have the meaning set forth in the introductory paragraph
hereof.
"Antitrust Filings" shall have the meaning set forth in Section 5.7(a).
"Arbitration Notice" shall have the meaning set forth in Section 6.5(a).
"Balance Sheet" shall have the meaning set forth in Section 2.7.
"Balance Sheet Date" shall have the meaning set forth in Section 2.7.
"Certificate of Merger" shall have the meaning set forth in Section 1.2.
"Certificates" shall have the meaning set forth in Section 1.11(b).
"Claim Notice" shall have the meaning set forth in Section 6.4.
"Closing" shall have the meaning set forth in Section 1.3.
"Closing Date" shall have the meaning set forth in Section 1.3.
"Closing Cash" shall have the meaning set forth in Section 8.3(n).
"Closing Working Capital" shall have the meaning set forth in Section
1.13(c).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Merger Consideration" shall mean the Merger Consideration less (i)
the amount of Credit Agreement Debt as of immediately prior to the Effective
Time and (ii) the amount, if any, of the Working Capital Deficit as finally
determined in accordance with Section 1.13.
"Common Stock" shall mean the common stock, par value $0.001 per share, of
the Company.
"Company" shall have the meaning set forth in the introductory paragraph
hereof.
"Company Closing Statement" shall have the meaning set forth in Section
1.13(b).
"Company Common Stock" shall mean the Common Stock, the Series A Common
Stock and the Series B Common Stock.
"Company Disclosure Schedule" shall have the meaning set forth in the
introductory clause of Article 2.
"Company Employees" shall mean all those individuals who are employees of
the Company or its Subsidiaries as of the date of this Agreement and those
individuals who become
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employees of the Company or its Subsidiaries in the ordinary course of business
between the date of this Agreement and immediately prior to the Effective Time.
"Company IP" shall mean IP owned by the Company or its Subsidiaries (other
than Saxon).
"Company Licenses" shall have the meaning set forth in Section 2.17(c).
"Company Material Adverse Effect" shall mean any change, event,
circumstance or effect that, individually or when taken together with any other
change, event, circumstance or effect, is or would be materially adverse to the
business, assets, liabilities, condition (financial or otherwise), operations or
results of operations of the Company and its Subsidiaries, taken as a whole, or
the ability of the Company to complete the transactions contemplated by this
Agreement, except that none of the following shall be deemed in themselves,
either alone or in combination, to constitute, and none of the following shall
be taken into account in determining whether there has been or will be, a
Company Material Adverse Effect: (i) any change, event, circumstance or effect
attributable to general economic conditions in the United States, North America
or any foreign jurisdiction in which the Company or any of its Subsidiaries has
operations or sales; (ii) any change in any Legal Requirement or the
interpretation thereof; (iii) any change in accounting rules; (iv) any change,
event, circumstance or effect attributable to compliance with the terms of, or
the taking of or failure to take any action required by, this Agreement or
otherwise taken or not taken at the request of Purchaser; or (v) any change,
event, circumstance or effect attributable to national or international
political or social conditions, including the outbreak of war or international
hostilities, acts of war, sabotage or terrorism or military actions or any
escalation or material worsening of any such war, hostilities, acts of war,
sabotage or terrorism or military actions, whether in the United States or
elsewhere.
"Company Officer's Certificate" shall mean a certificate, substantially in
the form attached hereto as Exhibit B, dated as of the Closing Date and signed
by a duly authorized officer of the Company.
"Company Permits" shall have the meaning set forth in Section 2.14(b).
"Company Restricted Stock Plan" shall mean the Company's Restricted Stock
Plan adopted as of November 15, 2005.
"Company Secretary's Certificate" shall mean a certificate, substantially
in the form attached hereto as Exhibit C, dated as of the Closing Date and
signed by the Secretary (or another duly authorized officer) of the Company, as
to: (i) the absence of any amendments to the Certificate of Incorporation of the
Company since the date of the copy of such document attached to such
certificate, which copy shall have been certified by the Secretary of State of
the State of Delaware; (ii) the By-Laws of the Company; and (iii) the
resolutions of the board of directors and stockholders of the Company relating
to this Agreement and the transactions contemplated hereby.
"Company Stockholder Indemnified Parties" shall have the meaning set forth
in Section 6.3.
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"Company Stockholder Representative" shall have the meaning set forth in
the introductory paragraph hereof, as may be modified from time to time pursuant
to Section 1.13(b).
"Company Stockholders" shall mean the holders of Company Common Stock.
"Company Warrant" means a warrant to purchase Company Common Stock.
"Confidentiality Agreement" shall have the meaning set forth in Section
5.3.
"Contract" shall mean, with respect to any Person, any contract,
agreement, instrument, license, lease, mortgage, note, bond, debenture,
indenture, guarantee, franchise, concession, plan, warranty, purchase order,
insurance policy, obligation, arrangement or other commitment (whether written
or oral and whether express or implied) that is or purports to be legally
binding, to which such Person is a party or by which such Person or such
Person's properties or assets are bound, including Leases.
"Covered Transaction Expense Amount" shall mean an amount equal to
one-half of the Company's Transaction Expenses, up to a maximum of
$1,500,000.00.
"Credit Agreement" shall mean that certain Second Amended and Restated
Credit Agreement dated as of November 15, 2005 among Legerity, Inc. as the
Borrower, Legerity Holdings, Inc. and certain of Legerity, Inc.'s subsidiaries
named therein as Guarantors, the Initial Lenders and Initial Issuing Bank named
therein as Lender Parties, Xxxxxx Xxxxxxx Senior Funding, Inc. as Administrative
Agent, and Deutsche Bank Trust Company Americas as Syndication Agent.
"Credit Agreement Debt" shall mean the aggregate principal amount of
Indebtedness outstanding under the Credit Agreement and all accrued interest
thereon (including without limitation any "PIK" interest), and all fees,
expenses, and any other sums payable under the Credit Agreement by the Company
or any of its Subsidiaries to the extent still owing on the Closing Date.
"Delaware Law" shall have the meaning set forth in the recitals.
"Dispute Notice" shall have the meaning set forth in Section 6.4.
"Dissenting Shares" shall have the meaning set forth in Section 1.14(a).
"Effective Time" shall have the meaning set forth in Section 1.3.
"Encumbrances" shall mean liens, charges, security interests, options,
encroachments, reservations, orders, decrees, judgments, conditions,
restrictions, claims, mortgages, pledges, proxies, voting trusts or agreements,
any third-party right, or similar obligations or encumbrances of any kind.
"Enforceability Limitations" shall have the meaning set forth in Section
2.4.
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"Environmental Claims" shall mean any and all administrative, regulatory
or judicial actions, suits, demand letters, claims, liens or written notices of
violation of or liability arising under any Environmental Law relating to the
Company or any of its Subsidiaries.
"Environmental Laws" shall mean any applicable Legal Requirement relating
to (i) the protection, investigation or restoration of the environment, public
health and safety or natural resources or (ii) the handling, use, presence,
disposal, Release or threatened Release of any Hazardous Material.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any entity, person or business, whether or
not incorporated, that is treated as single employer with the Company under
Section 414 of the Code or Section 4001 of ERISA.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Agent" shall have the meaning set forth in Section 1.11(a).
"Financial Statements" shall have the meaning set forth in Section 2.7.
"Governmental Entity" shall mean any court or any administrative,
regulatory or governmental body, agency, department, board, commission, panel,
authority, organization or instrumentality, whether domestic, foreign or
international.
"Hazardous Materials" shall mean any hazardous substance, the use,
transportation or disposition of which is regulated by law or by any
Governmental Entity, including any petroleum product or by-product, material
containing asbestos, lead or polychlorinated biphenyls, radioactive material or
radon.
"HSR Act" shall mean the Xxxx Xxxxx Xxxxxx Antitrust Improvements Act of
1976, as amended.
"Immediate Family" shall mean any spouse, child or other relative sharing
the same household.
"Indebtedness" shall mean, with respect to any Person, (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services; (ii) any other indebtedness that is evidenced by a note, bond,
debenture or similar instrument; (iii) all obligations under financing and
operating leases; (iv) all obligations in respect of acceptances issued or
created; (v) all liabilities secured by any lien on any property; (vi) all
guarantee obligations; and (vii) all other obligations, contingent or otherwise,
which in accordance with GAAP would be required to be presented upon such
Person's balance sheet as liabilities.
"Indemnification Escrow Agent" shall have the meaning set forth in Section
1.10(ii).
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"Indemnification Escrow Agreement" shall have the meaning set forth in
Section 1.10(ii).
"Indemnification Escrow Amount" shall have the meaning set forth in
Section 1.10(ii).
"Indemnified Party" shall have the meaning set forth in Section 6.4.
"Indemnifying Party" shall have the meaning set forth in Section 6.4.
"Intellectual Property Rights" shall mean any or all of the following
statutory and/or common law rights throughout the world in, arising out of, or
associated therewith: (i) all patents and applications therefor and all
reissues, divisions, extensions, provisionals, continuations and continuations
in-part thereof and applications for such reissues, divisions, extensions,
provisionals, continuations and continuations in-part; (ii) all inventions
(whether patentable or not), invention disclosures and improvements, all trade
secrets, proprietary information, know-how and technology; (iii) all works of
authorship, copyrights, copyright rights, moral rights, rights of attribution
and integrity, sound recording rights and registrations and applications
therefor; (iv) all industrial and other designs and registered designs and
registrations and applications therefor; (v) all trade names, company names,
logos, trade dress, trademarks, service marks, collective membership marks,
certification marks, other indicia of origin and registrations and applications
therefor; (vi) mask works, mask work registrations and applications therefore,
and all other rights corresponding thereto throughout the world; (vii) all
databases and data collections (including knowledge databases, customer lists
and customer databases) and registrations and applications therefor; (viii) all
rights in software; (ix) rights to Uniform Resource Locators, Web site addresses
and domain names; (x) any similar, corresponding or equivalent rights to any of
the foregoing or in any Technology; and (xi) any goodwill associated with any of
the foregoing.
"IP" shall mean Intellectual Property Rights and Technology.
"IRS" shall mean the Internal Revenue Service.
"Knowledge of the Company" with respect to a fact or matter shall mean the
actual knowledge of the following officers of the Company, after reasonable
inquiry of those employees of the Company or any of its Subsidiaries whom such
officers reasonably believe would have actual knowledge of such fact or matter:
Xxxxx X. Xxxxxx, President and Chief Executive Officer; Xxxxx Xxxxxxx, Vice
President of Sales & Marketing; Xxxx Xxxxxx, Vice President of Operations; Xxxxx
Xxxxx, General Counsel and Secretary; Dr. Xxxxx Aylin, Director of Human
Resources, solely with respect to Sections 2.15 and 2.18; and Xxxxxxx Xxxxxx,
Controller.
"Lease" shall mean each real property lease or sublease to which the
Company or one of its Subsidiaries is a party.
"Legal Proceeding" shall mean any action, claim (including any cross-claim
or counter-claim), suit, litigation, arbitration, proceeding (including any
civil, criminal, administrative investigation or appellate proceeding), hearing,
inquiry, audit, examination or investigation
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commenced, brought or heard by or before, or otherwise involving, any court or
other Governmental Entity or any arbitrator or arbitration panel.
"Legal Requirement" shall mean any federal, state, local, municipal,
provincial, foreign, international or other law, statute, constitution, treaty,
principle of common law, resolution, ordinance, code, edict, decree, rule,
regulation, ruling or requirement issued, enacted, adopted, promulgated,
implemented or otherwise put into effect by or under the authority of any
Governmental Entity.
"Losses" shall mean any and all actually incurred claims, costs, losses,
liabilities, obligations, fines, penalties, awards, amounts paid in settlement,
Taxes, liens, damages and expenses (including reasonable and actual
out-of-pocket attorneys' fees and expenses) and any interest thereon; provided
that in no event shall Losses include any consequential or punitive damages of
any nature, regardless of the legal theory advanced.
"Material" shall mean material, within the meaning of GAAP, as in effect
on the date hereof, to the Company and its Subsidiaries taken as a whole.
"Material Contract" shall mean any Contract that is disclosed in Section
2.12(a) of the Company Disclosure Schedule.
"Merger" shall have the meaning set forth in the recitals.
"Merger Consideration" shall mean an amount in cash equal to $133,000,000,
(i) plus the value of the Closing Cash and (ii) plus the value of Working
Capital Surplus or minus the value of the Working Capital Deficit, as
applicable, and (iii) plus the Covered Transaction Expense Amount.
"Merger Sub" shall have the meaning set forth in the introductory
paragraph hereof.
"Merger Sub Common Stock" shall have the meaning set forth in Section
1.7(d).
"Neutral Accountant" shall have the meaning set forth in Section 1.13(d).
"Order" shall mean any decision, judgment, order, writ, injunction,
decree, award or determination (whether temporary, preliminary or permanent) of
any Governmental Entity.
"Other Filings" shall have the meaning set forth in Section 5.7(a).
"Owned IP" shall have the meaning set forth in Section 2.17(a).
"Parties" shall have the meaning set forth in the introductory paragraph
hereof.
"Payment Fund" shall have the meaning set forth in Section 1.10(i).
"Per Share Portion of the Common Merger Consideration" means an amount
equal to (x) the Common Merger Consideration divided by (y) the number of shares
of Company
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Common Stock (whether vested or unvested) outstanding immediately prior to the
Effective Time, including any Dissenting Shares.
"Permitted Encumbrances" shall mean (i) statutory liens for Taxes or other
governmental charges or assessments or levies not yet due and payable; (ii)
liens of landlords, carriers, warehousemen, mechanics, vendors or materialmen
securing obligations arising in the ordinary course of business that are not yet
due and payable; and (iii) liens incurred in the ordinary course of business in
connection with workers' compensation, unemployment insurance and other types of
social security or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return of money bonds and similar obligations; provided, however, in each case,
that the foregoing does not Materially affect the utility or value of the assets
or other matters or items to which they relate.
"Person" shall mean any individual, corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
"Plan" shall mean each bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock or other equity-based retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other employee benefit
plan, program, policy, practice, arrangement, agreement, fund or commitment,
including any "employee benefit plan" as defined in section 3(3) of ERISA,
whether or not subject to ERISA, and each employment, retention, consulting,
change in control, salary continuation, termination or severance plan, program,
policy, practice, arrangement or agreement entered into, maintained, sponsored
or contributed to by the Company or any of its Subsidiaries or to which the
Company or any of its Subsidiaries has any obligation to contribute, or with
respect to which the Company or any of its Subsidiaries has any liability,
direct or indirect, contingent or otherwise (including a liability arising out
of an indemnification, guarantee, hold harmless or similar agreement) or
otherwise providing benefits to any current, former or future employee, officer
or director of the Company or any of its Subsidiaries or to any beneficiary or
dependant thereof.
"Pre-Closing Tax Period" shall have the meaning set forth in Section 7.1.
"Pro Rata Portion" means, with respect to any Company Stockholder, a
fraction, expressed as a percentage, equal to: (x) the total Common Merger
Consideration payable to such Company Stockholder, divided by (y) the total
Common Merger Consideration payable to all Company Stockholders.
"Purchaser" shall have the meaning set forth in the introductory paragraph
hereof.
"Purchaser Indemnified Parties" shall have the meaning set forth in
Section 6.2.
"Purchaser Loss Threshold" shall have the meaning set forth in Section
6.8(a).
"Purchaser's Post-Closing Statement" shall have the meaning set forth in
Section 1.13(c).
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"Registered Intellectual Property" shall mean all United States, state,
international and foreign: (i) patents and applications therefor and all
reissues, divisions, extensions, provisionals, continuations and continuations
in-part thereof and applications for such reissues, divisions, extensions,
provisionals, continuations and continuations in-part; (ii) registrations and
applications for any other Intellectual Property Rights, including, copyrights,
mask works, domain names, industrial design rights, database rights, trademarks
and service marks.
"Release" shall mean any spilling, leaking, pumping, emitting, emptying,
discharging, injection, escaping, leaching, migrating, dumping, or disposing of
Hazardous Materials (including the abandonment or discarding of barrels,
containers or other closed receptacles containing Hazardous Materials) into the
environment.
"Required Stockholder Vote" shall mean the approval of this Agreement and
the Merger by the holders of a majority of the Company Common Stock, voting
together as one class.
"Restricted Stock" shall mean any stock issued pursuant to the Company
Restricted Stock Plan.
"Saxon" shall mean Saxon IP Assets, LLC, a (direct or indirect)
wholly-owned subsidiary of the Company that will be divested by the Company
prior to the Closing, as described in Section 5.13.
"Saxon Divestiture" shall have the meaning set forth in Section 5.13.
"Saxon Divestiture Agreements" shall have the meaning set forth in Section
5.13.
"Saxon IP" shall have the meaning set forth in Section 4.1(o).
"Saxon IP License" shall mean the license and covenant not to xxx
regarding the Saxon IP that will be granted to the Company in connection with
the Saxon Divestiture, as more fully described in Section 5.13.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Series A Common Stock" shall mean the Series A Common Stock, par value
$0.001 per share, of the Company.
"Series B Common Stock" shall mean the Series B Common Stock, par value
$0.001 per share, of the Company.
"Stockholder Notification" shall have the meaning set forth in Section
5.1.
"Straddle Period" shall have the meaning set forth in Section 7.2.
"Subsidiary" of a specified entity shall mean any corporation,
partnership, limited liability company, joint stock company, joint venture or
other legal entity of which the specified entity (either alone or through or
together with any other Subsidiary) owns, directly or indirectly,
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fifty percent (50%) or more of the stock or other equity, partnership or other
ownership interests the holders of which are generally entitled to vote for the
election of the Board of Directors or other governing body of such corporation
or other legal entity; provided that for purposes of the Company's
representations, warranties and covenants contained herein, Saxon shall be
excluded from the definition of Subsidiary under this Agreement unless expressly
stated otherwise. Included as "Subsidiary" separate from its owner(s) is any of
the above-noted entities as to which an election has been made pursuant to
Treas. Reg. ss. 301.7701-3(c).
"Survival Period" shall have the meaning set forth in Section 6.1.
"Surviving Corporation" shall have the meaning set forth in Section 1.2.
"Tax" or "Taxes" (and, with correlative meaning, "Taxable" and "Taxation")
shall mean any federal, state, local or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall
profits, environmental (including Taxes under Section 59A of the Code), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other Tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, including any transferee or
secondary liability for a Tax and any liability assumed by agreement or arising
as a result of being or ceasing to be a member of any affiliated group, or being
included or required to be included in any Tax Return thereto.
"Tax Benefits" shall mean the Tax savings (whether measured in terms of a
reduction of Taxes paid or that otherwise would have been paid or payable)
arising from any increased deductions, losses, or credits then allowable or
decreases in income, gains or recapture of Tax credits then allowable (including
by way of amended Tax Returns).
"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes required to be filed with
any federal, state, local or foreign governmental authority, including any such
document prepared on a consolidated, combined or unitary basis and also
including any schedule or attachment thereto, and including any amendment
thereof.
"Technology" shall mean all technology, including all know-how, show-how,
techniques, design rules, trade secrets, inventions (whether or not patented or
patentable), business materials, algorithms, routines, software (including
object code and source code therefor), files, databases, works of authorship,
processes, test methodologies, any media on which any of the foregoing is
recorded, any other tangible embodiments of any of the foregoing and all
devices, prototypes, hardware, equipment, development tools and test systems,
but not the Intellectual Property Rights in any of the foregoing.
"Third Party IP" shall have the meaning set forth in Section 2.17(b).
"Transaction Expenses" means all out-of-pocket fees and expenses incurred
by the Company or any of its Subsidiaries in connection with the negotiation and
effectuation of the terms and conditions of this Agreement and the transactions
contemplated hereby, including, without limitation, all legal, accounting,
financial advisory fees and expenses of third parties in
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connection therewith, and the cost of the runoff insurance policy pursuant to
Section 5.10(b) of this Agreement.
"Vested" means that a person's Restricted Stock will not be forfeited and
is not subject to forfeiture (i.e. not subject to repurchase at cost) upon
termination of such person's employment without regard to whether a Code Section
83(b) election was made by such person with respect to such Restricted Stock.
"Working Capital" shall mean, as of any applicable date, (i) the
consolidated current assets of the Company and its Subsidiaries, including but
not limited to, cash and cash equivalents (other than Closing Cash), accounts
receivable, inventory, prepaid expenses and other current assets, minus (ii) the
consolidated current liabilities of the Company and its Subsidiaries, including
but not limited to accounts payable, accrued compensation and benefits, current
taxes payable, current portion of capital leases, deferred revenue and other
current liabilities, in each case as would be reflected on a consolidated
balance sheet of the Company and its Subsidiaries as of such date prepared in
accordance with GAAP and applied in the same manner as in the preparation of the
audited consolidated financial statements of the Company and its Subsidiaries
for the year ended December 31, 2006; provided that any estimates of Working
Capital provided by the Company pursuant to this Agreement shall be prepared by
the Company in good faith in a manner reasonably consistent with the preparation
of the Company's financial statements but need not be in accordance with GAAP.
For greater certainty, Working Capital excludes Closing Cash and Credit
Agreement Debt.
"Working Capital Adjustment" shall have the meaning set forth in Section
1.13(a).
"Working Capital Deficit" shall mean the amount, if any, by which nine
million dollars ($9,000,000) exceeds the Closing Working Capital as of the
Effective Time.
"Working Capital Escrow" shall have the meaning set forth in Section
1.10(iii).
"Working Capital Escrow Amount" shall have the meaning set forth in
Section 1.10(iii).
"Working Capital Escrow Agreement" shall have the meaning set forth in
Section 1.10(iii).
"Working Capital Surplus" shall mean the amount, if any, by which the
Closing Working Capital exceeds twelve million dollars ($12,000,000) as of the
Effective Time.
1.2 The Merger. Upon the terms and subject to the conditions of this
Agreement, the Certificate of Merger attached hereto as Exhibit A (the
"Certificate of Merger") and the applicable provisions of Delaware Law, at the
Effective Time (as defined below), Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation of the Merger (the
"Surviving Corporation").
1.3 Effective Time; Closing. Subject to the provisions of this Agreement,
the Parties shall cause the Merger to be consummated by filing the Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with the relevant provisions of
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Delaware Law, the time of such filing (or such later time as may be agreed in
writing by the Company and Purchaser and specified in the Certificate of Merger)
being the "Effective Time", as soon as practicable on or after the Closing Date
(as defined below). The closing of the Merger (the "Closing") shall take place
at the offices of Xxxxxxx Xxxxx LLP, 000 Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx,
Xxxxx, at 10:00 a.m., Austin time, on the later of (i) July 20, 2007 and (ii)
the third business day following the satisfaction or waiver of the conditions
set forth in Sections 8.1, 8.2 and 8.3, provided that Purchaser may extend the
date of the Closing to a date not later than August 17, 2007 if and only if
advised by its financial advisor or investment syndicate that such additional
time is required in order to complete the financing(s) necessary to be completed
by Purchaser in order to pay the Merger Consideration, or at such other time,
date and location as Purchaser and the Company shall agree in writing (the
"Closing Date").
1.4 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement, the Certificate of Merger and Section
259 of the Delaware Law. 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.
1.5 Certificate of Incorporation; By-Laws.
(a) The Certificate of Merger shall provide that, at the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be in
the form of the Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time; provided, however, that, as of the
Effective Time, Article I of the Certificate of Incorporation of the Surviving
Corporation shall read: "The name of the corporation is: ZLE Inc."
(b) At the Effective Time, the By-Laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended; provided, however, that, as of the
Effective Time, the By-Laws of the Surviving Corporation shall reflect that the
name of the Surviving Corporation is Zarlink Semiconductor LE Inc.
1.6 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed and qualified.
1.7 Effect on Capital Stock.
(a) Company Stock. At the Effective Time and subject to and upon the
terms and conditions of this Agreement, by virtue of the Merger and without any
action on the part of Purchaser, Merger Sub, the Company, the Company
Stockholder Representative or the holders of Company Common Stock each share of
Company Common Stock outstanding (and not held by Purchaser) immediately prior
to the Effective Time (including each share of Company Common Stock that vests
pursuant to Section 1.7(b)), shall be automatically converted into the right to
receive cash, without interest, in an amount equal to the Per Share Portion of
the Common Merger Consideration.
(b) Acceleration of Vesting of Restricted Stock. Purchaser shall
take all actions necessary and desirable to cause each outstanding share of
Restricted Stock that was not
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vested immediately prior to the Effective Time to become fully vested and
nonforfeitable as of the Effective Time.
(c) Company or Purchaser Owned Stock. At the Effective Time, each
share of Company Common Stock held by the Company or owned by Merger Sub,
Purchaser or any direct or indirect wholly owned Subsidiary of the Company or
Purchaser immediately prior to the Effective Time, shall be canceled and
extinguished without any conversion thereof or payment of any consideration
therefor.
(d) Merger Sub Stock. At the Effective Time, each share of Merger
Sub common stock, par value $0.001 per share ("Merger Sub Common Stock"), issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and non-assessable share of common
stock, par value $0.001 per share, of the Surviving Corporation. Following the
Effective Time, each certificate evidencing ownership of shares of Merger Sub
Common Stock shall evidence ownership of such shares of capital stock of the
Surviving Corporation.
(e) Adjustments. The Per Share Portion of the Common Merger
Consideration shall be subject to adjustment to reflect appropriately the effect
of any stock split, reverse stock split, stock dividend (including any dividend
or distribution of securities convertible into any Company Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to any Company Common Stock occurring on or after the date hereof and
prior to the Effective Time.
1.8 Treatment of Warrants. Purchaser shall take all actions necessary and
desirable (including, without limitation, obtaining the written consent of the
holder of each outstanding Company Warrant) to cause each outstanding Company
Warrant to be automatically cancelled and terminated as of the Effective Time
and to cease to represent a right to acquire shares of Company Common Stock.
Neither Purchaser nor the Surviving Corporation shall assume any Company
Warrants after the Merger.
1.9 Repayment of Credit Agreement Debt. At the Closing, Purchaser shall
repay in full the amount of any Credit Agreement Debt, and the Credit Agreement
shall be terminated. Thereafter neither the Company, Purchaser nor the Surviving
Corporation shall have any obligations under the Credit Agreement.
1.10 Payment of Common Merger Consideration. On the Closing Date,
Purchaser shall:
(i) deposit, or cause to be deposited, in trust with the Exchange
Agent for the benefit of the holders of shares of Company Common Stock,
cash in an aggregate amount equal to the Common Merger Consideration less
(a) the Indemnification Escrow Amount, (b) the Working Capital Escrow
Amount (such amount being hereinafter referred to as the "Payment Fund")
and (c) the amount of Closing Cash to be transferred by the Company to the
Exchange Agent as provided in Section 8.3(n);
(ii) deposit the sum of Six Million Dollars ($6,000,000) (such
amount plus the earnings thereon, the "Indemnification Escrow Amount")
with JPMorgan Chase Bank, N.A., as the Indemnification Escrow Agent (the
"Indemnification Escrow
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Agent"), to be held and disposed of pursuant and subject to the terms
hereof and an escrow agreement by and among Purchaser, the Company
Stockholder Representative and the Indemnification Escrow Agent,
substantially in the form attached hereto as Exhibit E (the
"Indemnification Escrow Agreement"), provided, however, that the
Indemnification Escrow Amount shall be released twelve (12) months from
the Closing Date. The amount released shall be reduced by the amount of
any Unresolved Claims (as defined in the Indemnification Escrow
Agreement). Any amounts remaining with the Indemnification Escrow Agent
following termination of the Indemnification Escrow Agreement shall be
distributed to the Company Stockholders in accordance with the
Indemnification Escrow Agreement. Purchaser and the Company Stockholders,
severally in accordance with their respective Pro Rata Portions, shall
each pay one-half of any costs, expenses and fees charged by the
Indemnification Escrow Agent, with the fees attributable to the Company
Stockholders being deducted from their respective portions of the
Indemnification Escrow Amount in priority to any other claims against the
Indemnification Escrow. Neither the Company Stockholders nor the Company
Stockholder Representative shall have any individual liability with
respect to such fees. Any amount released to the Company Stockholders from
the Indemnification Escrow shall be composed of two portions: one portion
being part of the Common Merger Consideration and the other portion being
interest income paid by Purchaser to the Company Stockholders as provided
under the Indemnification Escrow Agreement; and
(iii) deposit an amount in escrow (the "Working Capital Escrow")
equal to the greater of (a) two million ($2,000,000) or (b) the Working
Capital Deficit set forth in the Company Closing Statement (the "Working
Capital Escrow Amount") with JPMorgan Chase Bank, N.A., as the Working
Capital Escrow Agent (the "Working Capital Escrow Agent"), to be held for
thirty (30) days (or such longer period as may be required to resolve any
dispute under Section 1.13(c) or (d) of this Agreement regarding the
calculation of the Working Capital or the Working Capital Deficit)
pursuant and subject to the terms hereof and an escrow agreement by and
among Purchaser, the Company Stockholder Representative and the Working
Capital Escrow Agent, substantially in the form of Exhibit F attached
hereto (the "Working Capital Escrow Agreement"). Purchaser and the Company
Stockholders, severally in accordance with their respective Pro Rata
Portions, shall each pay one-half of any costs, expenses and fees charged
by the Working Capital Escrow Agent, with the fees attributable to the
Company Stockholders being deducted from their respective portions of the
Working Capital Escrow Amount in priority to any other claims against the
Working Capital Escrow. Neither the Company Stockholders nor the Company
Stockholder Representative shall have any individual liability with
respect to such fees. Any amount released to the Company Stockholders from
the Working Capital Escrow shall be composed of two portions: one portion
being part of the Common Merger Consideration and the other portion being
interest income paid by Purchaser to the Company Stockholders as provided
under the Working Capital Escrow Agreement.
1.11 Delivery of Common Merger Consideration; Surrender of Certificates.
(a) Prior to the Effective Time, Purchaser shall appoint a
commercial bank or trust company reasonably acceptable to the Company to act as
exchange and paying agent, registrar and transfer agent (the "Exchange Agent")
for the purpose of exchanging certificates
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representing, immediately prior to the Effective Time, Company Common Stock for
the applicable portion of the Common Merger Consideration. The Exchange Agent
shall use the Payment Fund to make the payments provided for in Section 1.7 of
this Agreement (it being understood that any and all interest earned on the
Payment Fund made available to the Exchange Agent pursuant to this Agreement
shall be turned over to the party depositing such funds with the Exchange
Agent). The Payment Fund shall not be used for any other purpose except as
provided in this Agreement.
(b) Promptly after the Effective Time (and in any event within three
(3) business days thereof), Purchaser or the Surviving Corporation shall cause
the Exchange Agent to mail to each holder of record of a certificate or
certificates ("Certificates") that immediately prior to the Effective Time
represented outstanding shares of Company Common Stock that were converted into
the right to receive a portion of the Common Merger Consideration under Section
1.7 and to each holder of Dissenting Shares (i) a notice of the effectiveness of
the Merger; (ii) a letter of transmittal in customary form (that shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon proper delivery of the Certificates to the Exchange Agent
and shall contain such other provisions as are reasonably satisfactory to
Purchaser, the Surviving Corporation, the Company and the Company Stockholder
Representative); (iii) instructions for use in surrendering such Certificates
and receiving the applicable portion of the Common Merger Consideration in
respect thereof; and (iv) such notification as may be required under Delaware
Law to be given to the holders of Dissenting Shares. Upon surrender to the
Exchange Agent of a Certificate, together with such letter of transmittal duly
executed and completed in accordance with the instructions thereto, the holder
of such Certificate shall be entitled to receive, in exchange therefor, cash in
an amount equal to the applicable portion of the Common Merger Consideration
deposited in the Payment Fund with respect to the shares of Company Common Stock
represented by such Certificate, which amounts shall be paid by Exchange Agent
by check or wire transfer in accordance with the instructions provided by such
holder. No interest or dividends will be paid or accrued on the consideration
payable upon the surrender of any Certificate. If the consideration provided for
herein is to be delivered in the name of a Person other than the Person in whose
name the Certificate surrendered is registered, it shall be a condition of such
delivery that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the Person requesting such
delivery shall pay any transfer or other Taxes required by reason of such
delivery to a Person other than the registered holder of the Certificate, or
that such Person shall establish to the satisfaction of the Surviving
Corporation that such Tax has been paid or is not applicable.
(c) Until surrendered in accordance with the provisions of this
Section 1.11, each outstanding Certificate (other than Certificates representing
Dissenting Shares) will be deemed, from and after the Effective Time, for all
corporate purposes, to evidence only the right to receive the applicable portion
of the Common Merger Consideration (without interest) in accordance with this
Article 1. Each Certificate so surrendered shall forthwith be canceled.
(d) The applicable portion of the Common Merger Consideration issued
upon the surrender of Certificates in accordance with this Agreement shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock formerly represented thereby. After the Effective
Time, there shall be no transfers on the stock
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transfer books of the Surviving Corporation of any shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. If, after
the Effective Time, Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged as provided in this Article 1.
(e) Any portion of the Payment Fund (including any amounts that may
be payable to any holder of Company Common Stock in accordance with the terms of
this Agreement) which remains unclaimed upon the first anniversary of the
Closing Date shall be returned to Purchaser, upon demand, and any such holder
who shall have not theretofore complied with this Article 1 shall, subject to
the remainder of this Section 1.11, thereafter look to Purchaser only as a
general unsecured creditor thereof for payment of any portion of the Common
Merger Consideration, without any interest or dividends thereon, that may be
payable to such holder. Following the Closing, the Exchange Agent shall retain
the right to invest and reinvest the Payment Fund on behalf of the Surviving
Corporation in securities listed or guaranteed by the United States government
or certificates of deposit of commercial banks that have, or are members of a
group of commercial banks that has, consolidated total assets of not less than
$500,000,000, and the Surviving Corporation shall receive the interest earned
thereon. None of Purchaser, Merger Sub, the Company or Exchange Agent shall be
liable to a holder of Certificates or any other Person in respect of any cash
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificate (or an affidavit provided pursuant to
Section 1.10(g)) shall not have been surrendered on or before the seventh
anniversary of the Closing Date (or immediately prior to such earlier date on
which any portion of the Common Merger Consideration with respect to shares of
Company Common Stock in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity), the portion of the Common
Merger Consideration in respect of such Certificate shall, to the extent
permitted by applicable law, become the property of the Surviving Corporation,
free and clear of all claims or interests of any person previously entitled
thereto.
(f) Each of Purchaser, the Surviving Corporation and the Exchange
Agent shall be entitled to deduct and withhold from any consideration payable or
otherwise deliverable pursuant to this Agreement to any holder of Company Common
Stock such amounts as are required to be deducted or withheld therefrom under
the Code 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.
(g) If any Certificate shall have been lost, stolen or destroyed,
the Person who is the record owner of such Certificate shall deliver to the
Surviving Corporation an affidavit (in form and substance reasonably acceptable
to the Surviving Corporation) with respect to such loss, theft or destruction.
The Surviving Corporation may, in its discretion and as a condition precedent to
the delivery of any portion of the Common Merger Consideration to such owner in
respect of such Certificate, require such Person to indemnify the Surviving
Corporation against any claim that may be made against the Surviving Corporation
with respect to the Certificate alleged to have been lost, stolen or destroyed
(but shall not require the posting of any bond or other surety).
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(h) In addition, pursuant to the terms of the Indemnification Escrow
Agreement and the Working Capital Escrow Agreement, as applicable, and in
accordance with this Section, each Company Stockholder (other than any Company
Stockholder whose Company Common Stock becomes Dissenting Shares) shall be paid
such Company Stockholder's proportionate share of the remaining balance, if any,
of (i) the Indemnification Escrow Amount within ten (10) business days after
release thereof in accordance with the Indemnification Escrow Agreement and (ii)
and the Working Capital Escrow Amount within ten (10) business days after
release thereof in accordance with the Working Capital Escrow Agreement.
References in Section 1.7 and this Section 1.11 to payment of the Common Merger
Consideration shall be subject to, and deemed amended as required by, the
provisions of Section 1.13, the Indemnification Escrow Agreement and the Working
Capital Escrow Agreement, as applicable.
1.12 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub will take all such lawful and necessary action.
Purchaser shall cause Merger Sub to perform all of its obligations relating to
this Agreement and the transactions contemplated hereby.
1.13 Working Capital Adjustment to Merger Consideration.
(a) Working Capital Adjustment. In the event there is a Working
Capital Deficit or a Working Capital Surplus calculated and determined in
accordance with paragraph (c) and (d) of this Section 1.13, then the Merger
Consideration shall be reduced or increased, as the case may be,
dollar-for-dollar by the amount of the Working Capital Deficit or Working
Capital Surplus (the "Working Capital Adjustment"). If there is a Working
Capital Deficit and it is less than $2 million, then an amount equal to the
Working Capital Deficit shall be released from the Working Capital Escrow to
Purchaser and the balance of the Working Capital Escrow Amount shall be released
from the Working Capital Escrow to be distributed to the Company Stockholders in
accordance with this Agreement and the Working Capital Escrow Agreement. If
there is a Final Working Capital Deficit and it is $2 million or greater, then
the entire Working Capital Escrow Amount shall be released from the Working
Capital Escrow to Purchaser; and Purchaser may make a claim against the
Indemnification Escrow Amount for the payment of such difference; and if there
is any balance still due to Purchaser that is not otherwise satisfied by the
Indemnification Escrow Amount, then the Company Stockholders shall be
responsible for payment, severally in accordance with their respective Pro Rata
Portions and not jointly, the balance to Purchaser within ten (10) business days
after Purchaser's request. If there is a Working Capital Surplus, then (i)
Purchaser shall within five (5) business days following the determination of
Closing Working Capital deposit the amount of such Working Capital Surplus with
the Exchange Agent or the Working Capital Escrow Agent for payment to the
Company Stockholders, (ii) the Working Capital Escrow Amount shall be released
from the Working Capital Escrow, and (iii) each of (i) and (ii) shall be
distributed to the Company Stockholders in accordance with this Agreement and
the Working Capital Escrow Agreement. If there is neither a Working Capital
Deficit nor a Working Capital Surplus, then the Working Capital Escrow Amount
shall be released from Working Capital Escrow to be distributed to the Company
Stockholders in accordance with this Agreement and the Working Capital Escrow
Agreement.
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(b) Closing Statement. Not less than five (5) business days prior to
the Closing Date, the Company shall prepare and deliver to Purchaser and the
Company Stockholder Representative a statement ("Company Closing Statement")
setting forth in reasonable detail the Company's pre-closing calculations of
estimated Working Capital and the estimated Working Capital Deficit, if any, or
estimated Working Capital Surplus, if any, as of the Closing Date.
(c) Working Capital Adjustment Procedures. A final determination of
Working Capital (the "Closing Working Capital") and the Working Capital Deficit,
if any, or Working Capital Surplus, if any, as of the Closing Date shall be made
after Closing in accordance with this Section for the purpose of determining any
Working Capital Adjustment, if any, required under Section 1.13(a). Not later
than thirty (30) days after the Closing Date, Purchaser shall prepare and
deliver to the Company Stockholder Representative a statement (the "Purchaser's
Post-Closing Statement") setting forth in reasonable detail Purchaser's final
determinations of the Closing Working Capital and Working Capital Deficit, if
any, or Working Capital Surplus, if any. The Purchaser's Post-Closing Statement
shall be accompanied by supporting schedules setting forth in reasonable detail
all assets and liabilities included in such calculations. The Company Closing
Statement and Purchaser's Post-Closing Statement shall be prepared in accordance
with GAAP and otherwise in accordance with the same accounting principles and
policies used in the preparation of the Financial Statements, except as
otherwise expressly provided in this Agreement. In the event that the Company
Stockholder Representative disagrees with the Purchaser's Post-Closing
Statement, then the Company Stockholder Representative shall submit a written
notice of objection thereto to Purchaser within 15 days after the Company
Stockholder Representative's receipt of the Purchaser's Post-Closing Statement.
If within such 15 day period the Company Stockholder Representative does not
submit such a notice of objection, the Closing Working Capital and Working
Capital Deficit, if any, set forth in Purchasers' Post-Closing Statement shall
be deemed accepted, but if the Company Stockholder Representative does timely
object to Purchaser's Post-Closing Statement, such objection shall be resolved
as provided in Section 1.13(d). The Common Merger Consideration shall be
adjusted as provided in Section 1.13(a) based upon the Working Capital Deficit,
if any, or Working Capital Surplus, if any, as so agreed by the parties or
finally determined as provided herein.
(d) Resolution of Objections. Purchaser and the Company Stockholder
Representative shall negotiate in good faith to resolve any dispute arising
under Section 1.13(c) for a period not to exceed 30 days (except by mutual
agreement and which may be shortened by mutual agreement). Any objection timely
made under Section 1.13(c) that the Company Stockholder Representative and
Purchaser are unable to so resolve shall be determined by a "Neutral Accountant"
as defined below. A "Neutral Accountant" means an accountant or accounting firm
mutually agreed by the Parties or, if the Parties fail or are unable to agree,
an independent accounting firm which satisfies each of the following
requirements:
(i) neither the accountant nor the firm that employs the accountant
shall have performed any material accounting or consulting services for
any Party or its Affiliates at any time during the five (5) year period
immediately preceding the date of the notice from the Company Stockholder
Representative under Section 1.13(c);
(ii) is not related in any way to any Party or any executive
officer, director or Affiliate of any Party;
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(iii) has been a certified public accountant duly licensed to
practice in the state where he or she has his or her primary office for a
period of not less than ten (10) years;
(iv) is willing to accept engagement as the Neutral Accountant on
the terms and conditions of this Agreement.
Purchaser and the Company Stockholder Representative agree to use their
reasonable best efforts in good faith to select a Neutral Accountant who is
reasonably acceptable to both of them not later than fifteen (15) days after the
date on which the Company Stockholder Representative timely objects to
Purchaser's Post-Closing Statement. Initially, it is agreed that the Toronto
office of KPMG LLP shall be the Neutral Accountant unless such firm shall
hereafter fail to satisfy the requirements for the Neutral Accountant specified
above.
Within ten (10) days after the Neutral Accountant is appointed as
described above (or within 10 days after the termination of negotiations
mandated pursuant to the first sentence of this subsection (d) if the Neutral
Accountant remains the firm named above), Purchaser shall promptly forward a
copy of the Purchaser's Post-Closing Statement to the Neutral Accountant, and
the Company Stockholder Representative shall promptly forward a copy of the
written objection(s) thereto delivered pursuant to Section 1.13(c) to the
Neutral Accountant. The Neutral Accountant's role shall be limited to resolving
such objections. In resolving such objections, the Neutral Accountant shall
apply the provisions of this Agreement concerning determination of the Closing
Working Capital and Working Capital Deficit, as applicable. The Neutral
Accountant shall promptly provide written notice of its resolution of such
objections to Purchaser and the Company Stockholder Representative and the
resulting determinations of the Closing Working Capital and Working Capital
Deficit, if any, shall be final and binding on the Parties. The Neutral
Accountant shall be instructed to use reasonable efforts to perform its services
within thirty (30) days of submission of the statement(s) and objection(s) to it
and, in any case, as soon as practicable after such submission. If the Neutral
Accountant selected as described above is unable or unwilling to act when called
upon pursuant to this Section 1.13(d), then the parties shall promptly appoint a
substitute to act in substitution for the original designee, (or if no
substitute is so appointed within fifteen (15) days, then such dispute shall be
resolved by a single arbitrator, sitting in New York, New York, appointed by the
American Arbitration Association upon application by either Purchaser or the
Company Stockholder Representative), and, upon acceptance of such appointment
such substitute, or arbitrator so appointed, shall for purposes of this
Agreement be deemed the Neutral Accountant, as applicable, and the time periods
prescribed above in this Section 1.13(d) shall run from the date of such
substitute's or arbitrator's acceptance of appointment hereunder.
1.14 Dissenters' Rights.
(a) Notwithstanding any provision of this Agreement to the contrary
other than Section 1.14(b), any shares of Company Common Stock held by a holder
who duly and validly demands appraisal of such shares in accordance with
Delaware Law and is in compliance with all the provisions of Delaware Law
concerning the right of such holder to demand appraisal of such shares in
connection with the Merger and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights ("Dissenting
Shares"), shall not be converted into or represent a right to receive any
portion of the Common Merger Consideration pursuant to Section 1.7, but instead
shall be converted into the right to receive
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only such consideration as may be determined to be due with respect to such
Dissenting Shares under Delaware Law.
(b) Notwithstanding the provisions of Section 1.7, if any holder of
shares of Company Common Stock who demands payment for such shares under
Delaware Law shall effectively withdraw or lose (through failure to perfect or
otherwise) such holder's appraisal rights, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall no
longer be Dissenting Shares and shall automatically be converted into and
represent only the right to receive the applicable portion of the Common Merger
Consideration, as provided in Section 1.7, without interest thereon, upon
surrender of the certificate representing such shares in accordance with Section
1.11.
(c) The Company shall give Purchaser (i) prompt notice of the
receipt of any written notice of any demand for payment or intent to demand
payment for any shares of Company Common Stock, withdrawals of such demands, and
any other instruments served pursuant to Delaware Law and received by the
Company which relate to any such demand for payment and (ii) the opportunity to
participate in all negotiations and proceedings which take place prior to the
Effective Time with respect to demands for payment under Delaware Law. The
Company shall not, except with the prior written consent of Purchaser, either
(y) voluntarily make any payment with respect to any demands for payment for
Company Common Stock or offer to settle or settle any such demands or (z) make
any offer to buy, or accept any offer to sell, any shares of Company Common
Stock.
1.15 Company Stockholder Representative.
(a) Appointment; Powers. In order to administer efficiently the
assertion, defense, settlement and resolution of any claims for indemnification
pursuant to Article 6 and any other disputes or matters arising in connection
with this Agreement, the Indemnification Escrow Agreement, the Working Capital
Escrow Agreement or any other agreement entered into by the Company Stockholder
Representative on behalf of the Company Stockholders as contemplated hereunder,
upon the approval of this Agreement by the Company Stockholders in accordance
with Delaware Law, the Company Stockholder Representative shall be exclusively
(except in case of clause (iv) and clause (v) below in the event of a claim not
generally applicable to the Stockholders (a "Particular Claim"), in which case
such authorization shall be non-exclusive) authorized and empowered to: (i) to
the extent permitted by applicable law, amend, modify or waive any of the
provisions of this Agreement, the Indemnification Escrow Agreement, the Working
Capital Escrow Agreement or any other agreement contemplated hereby on behalf of
the Company Stockholders in any manner in which the Company Stockholder
Representative believes to be in the best interests of the Company Stockholders;
(ii) give all notices (including service of process) required to be given by or
on behalf of any Company Stockholder under this Agreement or any other agreement
contemplated hereby; (iii) take any action (or determine to take no action) in
connection with the defense, settlement, compromise, arbitration and/or other
resolution of any claim for indemnification by any Purchaser Indemnified Party
(as defined below) pursuant to Article 6 hereof, including compliance with any
Order in connection with any such claim, or any other claim, arbitration,
dispute, action, suit, or other proceeding in connection with this Agreement;
(iv) assert, bring, prosecute, maintain, settle, compromise, arbitrate and/or
otherwise resolve on behalf of the Company Stockholders any claim for
indemnification by any Company Stockholder Indemnified Party (as defined
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below) pursuant to Article 6 hereof or any other claim, arbitration, dispute,
action, suit, or other proceeding in connection with this Agreement; and (v)
take all such other actions (or determine to take no action) as the Company
Stockholder Representative may deem necessary or appropriate in his sole
judgment to carry out the foregoing. By his/its execution hereof, the Company
Stockholder Representative hereby accepts such appointment.
(b) Removal. The Company Stockholders may, at any time, remove the
Company Stockholder Representative and appoint a substitute representative by
written consent signed by Company Stockholders (or, if applicable, their
respective heirs, legal representatives, successors and assigns) who held a
majority of the voting power represented by the shares of Company Common Stock
issued and outstanding immediately prior to the Effective Time. If the Company
Stockholder Representative dies, becomes unable to perform his responsibilities
hereunder or resigns from such position, the Company Stockholders shall, by such
written consent, appoint a substitute representative to fill such vacancy. Any
such substitute representative shall be deemed to be the Company Stockholder
Representative for all purposes of this Agreement. Upon the selection of such
substitute representative, the substituted representative shall promptly notify
Purchaser in writing of his or her appointment pursuant to this Section 1.15(b),
which written notice shall be accompanied by a copy of the written consent
effectuating such appointment.
(c) Exclusive Right. Any claim, arbitration, action, suit, or other
proceeding, whether in law or equity, to enforce any right, benefit or remedy
granted to the Company Stockholders under this Agreement shall be asserted,
brought, prosecuted or maintained only by the Company Stockholder
Representative, except with respect to Particular Claims in connection with
which the affected Stockholders may act independently of the Stockholder
Representative. Except with respect to Particular Claims, all actions, decisions
and instructions of the Company Stockholder Representative, including the
defense, settlement, compromise and/or other resolution of any claims for
indemnification by any Purchaser Indemnified Party pursuant to Article 6, shall
be conclusive and binding upon all of the Company Stockholders, and no Company
Stockholder shall have any right to object, dissent, protest or otherwise
contest the same, nor have any claim or cause of action against the Company
Stockholder Representative for any action taken or not taken, decision made or
instruction given by the Company Stockholder Representative under this
Agreement, except for fraud, gross negligence or willful misconduct by the
Company Stockholder Representative.
(d) Reliance. Except with respect to Particular Claims, Purchaser
shall be able to rely conclusively on the actions, decisions and instructions of
the Company Stockholder Representative as to the settlement, compromise and/or
other resolution of any claims for indemnification by any Purchaser Indemnified
Party pursuant to Article 6 or any other actions required or permitted to be
taken by the Company Stockholder Representative under this Agreement, and no
Party hereunder shall have any claim or cause of action against any Purchaser
Indemnified Party for any action taken by such Purchaser Indemnified Party in
reliance upon the actions, decisions and instructions of the Company Stockholder
Representative.
(e) Information and Access. The Company Stockholder Representative
and its representatives and agents shall have reasonable access to information
about the Company, Surviving Corporation and Purchaser and the reasonable
assistance of the Company's, Surviving
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Corporation's and Purchaser's officers and employees for purposes of performing
its duties and exercising its rights hereunder, including in the case of the
Working Capital Adjustment, access to working papers and other books and records
the Company Stockholder Representative and/or its representatives and agents may
reasonably request; provided, however, that the Company Stockholder
Representative shall treat confidentially and not disclose any nonpublic
information from or about the Company, Surviving Corporation or Purchaser to
anyone other than its representatives and agents (except on a need to know basis
to individuals who agree to treat such information confidentially).
(f) Indemnification. The Company Stockholder Representative shall be
indemnified and held harmless by the Company Stockholders from all Losses
arising out of or in connection with the Company Stockholder Representative's
execution, delivery and performance of this Agreement, except for fraud, gross
negligence or willful misconduct by the Company Stockholder Representative. If
at any time the Company Stockholder Representative and any other Person shall
have any unsatisfied claims against the Company Stockholders pursuant to the
terms of this Agreement, the claims of the Company Stockholder Representative
shall be satisfied first including out of funds comprising the Indemnity Escrow
Amount and the Working Capital Escrow Amount, subject to the limits set forth in
the Indemnification Escrow Agreement and the Working Capital Escrow Agreement,
as applicable. The Company Stockholder Representative shall have the right to
make demands of the Company Stockholders directly, pro rata in accordance with
their respective Pro Rata Portions of the Common Merger Consideration, for such
indemnification and for payment of any fees and expenses (including attorneys'
fees and expenses) incurred in the discharge of the Company Stockholder
Representative's duties hereunder, which demand shall be promptly honored by the
Company Stockholders. Without in any way limiting the rights of the Company
Stockholder Representative as against the Company Stockholders, neither the
Company nor Purchaser shall have any liability or obligation whatsoever to the
Company Stockholder Representative arising out of or relating to any breach or
alleged breach by the Company Stockholders of their indemnification obligations
to the Company Stockholder Representative as contemplated hereby.
(g) Attorney-in-fact. Upon approval of this Agreement by the Company
Stockholders, the Company Stockholder Representative, or any assignee or
successor thereof, acting as hereinafter provided, shall be irrevocably
appointed as the attorney-in-fact and agent of the Company Stockholders (except
with respect to Company Stockholders, if any, who have caused their Company
Common Stock to become Dissenting Shares) to act in its, his or her name, place
and xxxxx in connection with all matters arising from and under this Agreement,
the Indemnification Escrow Agreement, the Working Capital Escrow Agreement and
any other agreement entered into by the Company Stockholder Representative on
behalf of the Company Stockholders, and acknowledges that such appointment is
coupled with an interest.
(h) Severability. The provisions of this Section 1.15 are
independent and severable, are irrevocable and coupled with an interest and
shall be enforceable notwithstanding any rights or remedies that any Company
Stockholder may have in connection with the transactions contemplated by this
Agreement.
(i) Binding Effect. The provisions of this Section 1.15 shall be
binding upon the heirs, legal representatives, successors and assigns of each
Company Stockholder, and any
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references in this Agreement to a Company Stockholder or the Company
Stockholders shall mean and include the successors to the rights of the Company
Stockholders hereunder, whether pursuant to testamentary disposition, the laws
of descent and distribution, assignment or otherwise.
1.16 Approvals. The approval of this Agreement by the Company Stockholders
shall constitute approval of the Indemnification Escrow Agreement and the
Working Capital Escrow Agreement and the appointment of the Company Stockholder
Representative, the Indemnification Escrow Agent and the Working Capital Escrow
Agent.
Article 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Schedule attached hereto,
the Company makes the following representations and warranties to Purchaser as
of the date hereof:
2.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to carry on its business
as now being conducted and to own the properties and assets it now owns and is
duly qualified or licensed to do business as a foreign corporation in good
standing in every jurisdiction in which such qualification is required, except
where the failure to be so qualified or licensed would not have, individually or
in the aggregate, a Company Material Adverse Effect. The Company has provided
Purchaser with true, correct and complete copies of the Certificate of
Incorporation and By-laws of the Company as currently in effect.
2.2 Subsidiaries.
(a) Section 2.2 of the Company Disclosure Schedule sets forth: (i)
the name of each Subsidiary of the Company, (ii) the number and type of
outstanding equity interest of each such Subsidiary and a list of the holders
thereof; and (iii) the jurisdiction of organization of each such Subsidiary.
(b) Each Subsidiary of the Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization. Each Subsidiary of the Company has the power to
own its properties and to carry on its business as currently conducted. Each
Subsidiary of the Company is duly qualified or licensed to do business and in
good standing as a foreign entity in each jurisdiction where the properties
owned, leased or operated by it, or the business conducted by it, require such
qualification or license, except in those jurisdictions where the failure to be
so qualified or licensed would not have a Company Material Adverse Effect. The
Company has delivered a true, correct and complete copy of each of each of its
Subsidiaries' organization documents, each as amended to date and in full force
and effect on the date hereof, to Purchaser.
2.3 Authorization.
(a) The Company has full corporate power and authority to execute
and deliver this Agreement and to perform its obligations hereunder, and to
consummate the transactions contemplated hereby. The execution and delivery by
the Company of this Agreement, the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all
-23-
necessary corporate action on the part of the Company, subject only to the
filing of Certificate of Merger pursuant to Delaware Law.
(b) The board of directors of the Company, at a meeting duly called
and held, has (i) adopted the plan of merger set forth in this Agreement and
approved this Agreement, (ii) declared that the Merger is advisable and in the
best interests of the Company and its stockholders, and (iii) recommended that
the stockholders of the Company approve this Agreement and the Merger.
2.4 Execution and Validity. This Agreement has been duly executed and
delivered by the Company. Assuming the due and valid authorization, execution
and delivery hereof by Purchaser, Merger Sub and the Company Stockholder
Representative, this Agreement is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms except (a) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other similar laws of general application affecting
enforcement of creditors' rights generally and (b) the availability of the
remedy of specific performance or injunctive or other forms of equitable relief
may be subject to equitable defenses and would be subject to the discretion of
the court before which any proceeding therefor may be brought ((a) and (b)
together, the "Enforceability Limitations").
2.5 Consents and Approvals; No Violations.
(a) Except for the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware, and the Antitrust Filings and
Other Filings, none of the execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder, nor the
consummation by the Company of the transactions contemplated hereby, including
without limitation the Saxon Divestiture, will (i) conflict with or result in
any breach of any provision of the Certificate of Incorporation or By-Laws of
the Company, each as amended to date; (ii) require any declaration or filing
with, or permit, authorization, consent or approval of, any Governmental Entity;
(iii) result in any violation or breach of, constitute a default under or give
rise to any right of termination, cancellation or acceleration, increase any
liability or result in the loss of any right or benefit, or create in another
Person a put-right, purchase obligation or similar right (with or without notice
or the lapse of time or both) pursuant to any term or provision of any Contract
to which the Company or any of its Subsidiaries is a party or by which any of
the Company's property or assets or the property or assets of its Subsidiaries
(whether tangible or intangible) may be bound; or (iv) result in or require the
creation or imposition of any Encumbrance of any nature upon, or result in the
creation or acceleration of any Indebtedness with respect to the assets of the
Company or its Subsidiaries, other than such violations, breaches, defaults or
rights of termination which would not, individually or in the aggregate, have a
Company Material Adverse Effect on the Company's ability to consummate the
transactions contemplated hereby.
(b) No Governmental Entity or any other Person has notified
the Company that such Governmental Entity or other Person intends to object to
the transactions contemplated hereunder. To the Knowledge of the Company, there
is no fact or circumstance relating to the Company, its Subsidiaries, any of the
Company's assets or any of its Subsidiaries' assets that would (i) cause the
filing of any objection to any application for any authorization required by any
Governmental Entity required in connection with the transactions contemplated
hereby; (ii)
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lead to any delay in processing any such application; or (iii) require any
waiver of any rule, policy or other applicable law of any Governmental Entity.
2.6 Capitalization.
(a) The authorized capital stock of the Company consists of
330,000,000 shares, of which 5,000,000 shares are designated preferred stock,
par value $0.001 per share, 25,000,000 shares are designated Common Stock,
150,000,000 shares are designated Series A Common Stock and 150,000,000 shares
are designated Series B Common Stock. As of the date of this Agreement, (i)
there are no shares of preferred stock outstanding; (ii) 10,085,648 shares of
Common Stock are issued and outstanding; (iii) 72,125,247 shares of Series A
Common Stock are issued and outstanding; and (iv) 16,836,413 shares of Series B
Common Stock are issued and outstanding. All the outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid and non-assessable
and not subject to preemptive rights created by statute, the Certificate of
Incorporation or By-laws of the Company, or any Contract to which the Company is
a party or by which any of the Company's property or assets (whether tangible or
intangible) may be bound, and have been issued in compliance in all Material
respects with all applicable federal, state and foreign securities laws. The
Company has not repurchased or redeemed any shares of is capital stock except in
compliance in all Material respects with all applicable federal, state, foreign,
or local statutes, laws, rules or regulations, including federal, state and
foreign securities laws and any agreements applicable thereto. There are no
declared or accrued but unpaid dividends with respect to any shares of capital
stock of the Company.
(b) Section 2.6(b) of the Company Disclosure Schedule sets forth the
following information with respect to each share of Restricted Stock outstanding
on the date of this Agreement: (i) the name of the holder of Restricted Stock;
(ii) the number of shares of Restricted Stock held by such holder; and (iii) the
date on which such Restricted Stock was issued. The Company has delivered to
Purchaser an accurate and complete copy of the Company Restricted Stock Plan.
(c) Except for the Company Restricted Stock Plan, pursuant to which
the Company intends to issue all authorized but unissued shares of Common Stock
reserved for issuance under such plan prior to the Closing to certain Company
Employees, (i) there are no equity-based compensation plans of the Company; (ii)
there are no existing options, warrants, calls, preemptive rights, subscriptions
or other rights, agreements, arrangements or commitments of any character,
relating to the issued or unissued capital stock of the Company, obligating the
Company to issue, transfer, redeem, purchase or sell or cause to be issued,
transferred, redeemed, purchased or sold any shares of capital stock of the
Company or to otherwise make any payment in respect of any such shares; and
(iii) there are no rights, agreements or arrangements of any character which
provide for any stock appreciation, phantom stock, profit participation or
similar right.
2.7 Financial Statements. Section 2.7 of the Company Disclosure Schedule
includes accurate and complete copies of (a) the unaudited consolidated balance
sheet and statements of income, stockholders' equity and cash flows of the
Company as of the fiscal quarter ended Xxxxx 0, 0000, (x) the unaudited
consolidated balance sheet and statements of income, stockholders' equity and
cash flows of the Company as of the fiscal five month period ended May 27, 2007
(the "Balance Sheet Date") and (c) the audited consolidated balance sheets
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and statements of income, stockholders' equity and cash flows of the Company as
of the fiscal years ended December 25, 2005 and December 31, 2006, respectively,
and for the fiscal years ended December 25, 2005 and December 31, 2006,
respectively. The financial statements referred to in the immediately preceding
sentence are sometimes referred to herein as the "Financial Statements," and the
Company's balance sheet as of the Balance Sheet Date is referred to herein as
the "Balance Sheet". Each balance sheet included in the Financial Statements
(including any related notes) has been prepared from the books and records of
the Company or its Subsidiaries and fairly presents in all Material respects the
Company's and its Subsidiaries' consolidated financial positions as of its date,
and each other statement included in the Financial Statements (including any
related notes) has been prepared from the books and records of the Company or
its Subsidiaries and fairly presents in all Material respects the Company's and
its Subsidiaries' consolidated results of operations, stockholders' equity and
cash flows, as the case may be, for the period covered thereby, in each case in
accordance with GAAP consistently applied, except as otherwise noted thereon and
except that the unaudited Financial Statements referred to in clause (a) above
may not contain all the footnotes required by GAAP, and are subject to normal
year-end adjustments.
2.8 No Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any liabilities of the type required to be disclosed in the
liabilities column of a balance sheet prepared in accordance with GAAP, except
for (i) liabilities and obligations shown on the Balance Sheet; (ii) liabilities
and obligations incurred since the Balance Sheet Date in the ordinary course of
business consistent with past practice (none of which is a liability resulting
from a breach of Contract that the Company or any of its Subsidiaries is a party
to or binds the property or assets (whether tangible or intangible) of the
Company or any of its Subsidiaries, breach of warranty, fraud, tort,
infringement or Legal Proceeding); (iii) Transaction Expenses incurred in
connection with the transactions contemplated hereby; and (iv) liabilities and
obligations created by this Agreement or the Merger or disclosed in this
Agreement or the Company Disclosure Schedule.
2.9 Absence of Certain Changes.
(a) During the period from the Balance Sheet Date through the date
hereof, there has not been, occurred or arisen any event or condition of any
character that has had or, to the Knowledge of the Company, would have a Company
Material Adverse Effect.
(b) There has not been, occurred or arisen since the Balance Sheet
Date any of the following events, except in the ordinary course of business as
conducted on that date and consistent with past practices or in connection with
the divestiture of Saxon by the Company:
(i) (y) any change by the Company in (A) its accounting
methods, principles or practices (except to the extent required by
GAAP), or (B) its pricing policies or payment or credit practices;
or (z) any failure by the Company to pay any creditor any amount
owed to such creditor when due (other than immaterial deviations
from the stated payment terms of a vendor or supplier);
(ii) any declaration, payment or setting aside for
payment by the Company of any dividend or other distribution in
respect of its capital stock or redemption, purchase or other
acquisition, directly or indirectly, of any shares of capital stock
or other securities of the Company;
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(iii) the sale, transfer or other disposition of any of
the Company's assets or any of the assets of its Subsidiaries having
an aggregate value of more than $250,000;
(iv) any loans or advances to, or guarantees for the
benefit of, any Person by the Company or any of its Subsidiaries,
except for advances made to directors, officers and employees of the
Company or such Subsidiary in the ordinary course of business;
(v) any amendment of, acceleration of, affirmative
waiver of any Material right under, termination of, cancellation of
or permitting to lapse of, any Material Contract, or entering into,
or permitting any of the Company's assets or any of its
Subsidiaries' assets to become subject to, any Contract;
(vi) any capital expenditures by the Company or its
Subsidiaries exceeding $250,000 in the aggregate;
(vii) any increase in the compensation payable or to
become payable (including bonuses, profit sharing, severance,
retention or vacation pay) to any of the Company Employees,
including the establishment or adoption of any employee benefit
plan;
(viii) any payment or agreement to pay any bonuses or
other compensation to any Company Employee in connection with the
transactions contemplated hereby;
(ix) any loss, damage or destruction to the Company's or
any of its Subsidiaries' properties or assets, whether or not
covered by insurance and whether or not in the ordinary course of
business, in an aggregate amount in excess of $500,000;
(x) any subjection of any of the Company's or any of its
Subsidiaries' assets to any Encumbrance other than Permitted
Encumbrances;
(xi) any commencement, settlement or agreement to settle
any Legal Proceeding related to the Company or its Subsidiaries;
(xii) any Tax election that does or would adversely
affect the Company or any of the Company's assets, or any Subsidiary
of the Company or any of such Subsidiaries' assets;
(xiii) (y) license, waiver or relinquishment of any
Material right to or for the benefit of any other Person by the
Company or any of its Subsidiaries or (z) writing up or writing down
the value of any of the Company's or any of its Subsidiaries'
assets, individually or in the aggregate, in an amount greater than
$250,000;
(xiv) any grant or transfer by the Company or any of its
Subsidiaries of any rights, ownership or interests (including any
license, sublicense or covenant not to xxx) to any other Person with
respect to any IP;
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(xv) any agreement by the Company or any of its
Subsidiaries pursuant to which the Company or any of its
Subsidiaries acquires any rights to IP by assignment, license or
otherwise and is required to pay consideration in excess of $50,000;
(xvi) any amendment or modification, or authorization of
any amendment or modification of, the Certificate of Incorporation,
By-laws or other organizational or governance documents of the
Company;
(xvii) any agreement, contract or other binding
commitment by the Company or any of its Subsidiaries to do any of
the foregoing; and
(xviii) any other Material agreement or commitment.
2.10 Title to Properties; Encumbrances. Except for properties and assets
sold in the ordinary course of business, the Company or one of its Subsidiaries
has good and valid title to all properties and assets reflected on the Balance
Sheet and not shown as leased, in each case free and clear of all Encumbrances
other than Permitted Encumbrances.
2.11 Real Property; Leases. The Company and its Subsidiaries do not own
any real property. Section 2.11 of the Company Disclosure Schedule sets forth a
list of the Leases. The Leases grant leasehold estates free and clear of all
Encumbrances other than Permitted Encumbrances. The Leases are, to the Knowledge
of the Company, in full force and effect and enforceable against each of the
other parties thereto in all Material respects in accordance with their
respective terms, subject to the Enforceability Limitations. The Company and its
Subsidiaries are not in Material breach of or default under any Lease, nor has
there occurred any event that with the passage of time or the giving of notice
or both would constitute a Material breach or default by the Company or its
Subsidiaries under any Lease. The Company has not received any notice that the
Company or any of its Subsidiaries is in Material breach of or default under any
Lease. To the Knowledge of the Company, no other party to any Lease is in
Material breach of or default under any Lease, nor, to the Knowledge of the
Company, has there occurred any event that with the passage of time or the
giving of notice or both would constitute such a breach or default. To the
Knowledge of the Company, the operations of the Company and its Subsidiaries on
the real property underlying the Leases or such real property underlying the
Leases, including the improvements thereon, in any case, do not violate in any
Material manner any applicable building code, zoning requirement, or
classification or statute relating to the particular property or such
operations, and such non-violation is not dependent, in any instance, on
so-called non-conforming use exceptions. There are no other parties occupying,
or with a right to occupy granted by the Company or its Subsidiaries, the real
property underlying the Leases. The Closing will not affect the enforceability
against any person of any Lease or the rights of Purchaser or the Surviving
Corporation to the use and possession of the real property underlying the Lease
for the conduct of business as currently conducted by the Company and its
Subsidiaries. The Company has provided Purchaser with a true, correct and
complete copy of all Leases, together with all amendments thereto or
modifications thereof.
2.12 Contracts and Commitments.
(a) Neither the Company nor any of its Subsidiaries is party to any:
(i) Contract with any current or former director,
officer, employee, consultant or agent providing for (A) severance,
change-in-control or retention benefits,
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(B) except as provided in the agreements with respect to the
Restricted Stock, the increase or acceleration of benefits payable
as a result of the Merger (or any termination of employment
following the Merger), or (C) the indemnification of any such party;
(ii) Contract to forgive any indebtedness in excess of
$250,000 of any Person to the Company or any of its Subsidiaries;
(iii) Contract regarding the purchase of real property;
(iv) loan agreement, promissory note, debenture, credit
or financing agreement, instrument or other Contract evidencing
indebtedness for borrowed money;
(v) Contract providing security for indebtedness or the
deferred purchase price of assets (other than any asset or group of
related assets having a purchase price of less than $250,000);
(vi) Contract to guarantee the obligations of, or to
indemnify, any third party (other than (A) indemnification of
customers, distributors, resellers, agents, suppliers, licensors or
licensees in the ordinary course of business and (B) indemnification
obligations set forth in the Certificate of Incorporation or By-Laws
of the Company, the organizational documents of its Subsidiaries or
in any written indemnification agreement with directors, officers
and agents of the Company or its Subsidiaries);
(vii) Contract which restricts the ability of the
Company or its Subsidiaries to (A) engage in any business activity
in any geographic area or line of business, which prohibits the
Company or its Subsidiaries from competing with, or soliciting the
services or employment of, any Person or (B) develop, use, sell or
license any IP which otherwise prohibits or Materially impairs any
current business practice of the Company or its Subsidiaries;
(viii) Other than the Saxon IP License and the Saxon
Divestiture Agreements, Contract for the sale or other disposition
of any assets of the Company or its Subsidiaries, other than in the
ordinary course of business;
(ix) Contract creating any partnership or joint venture;
(x) Contract obligating the Company or its Subsidiaries
to make aggregate payments in excess of $500,000 to any third party
which is not terminable by the Company or such Subsidiaries without
any liability upon 30 days' notice or less;
(xi) Other than the Saxon IP License and the Saxon
Divestiture Agreements, Contract pursuant to which the Company or
its Subsidiaries reasonably expect to receive aggregate payments in
excess of $500,000;
(xii) Contract containing any change of control, consent
or other similar provisions that may be or are triggered or
otherwise affected by any of the transactions contemplated by this
Agreement;
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(xiii) Contract relating to any Legal Proceeding or any
Order;
(xiv) Contract that contains an obligation of
confidentiality on the part of the Company or its Subsidiaries other
than non-disclosure agreements entered into in the ordinary course
of business;
(xv) any other Material agreement or commitment.
(b) The Company has made available to Purchaser a correct and
complete copy of each Material Contract (including all amendments thereto) and a
summary description of any oral or unwritten Material Contract. Each Material
Contract is, to the Knowledge of the Company, in full force and effect and
enforceable against the other party or parties thereto in accordance with its
terms, subject to the Enforceability Limitations. Neither the Company nor any of
its Subsidiaries is in Material breach of or default under any Material
Contract, nor has there occurred any event that with the passage of time or the
giving of notice or both would constitute a Material breach or default by the
Company or its Subsidiaries under any Material Contract. The Company has not
received any notice that the Company or any of its Subsidiaries is in Material
breach of or default under any Material Contract. To the Knowledge of the
Company, no other party to any Material Contract is in Material breach of or
default under any Material Contract, nor, to the Knowledge of the Company, has
there occurred any event that with the passage of time or the giving of notice
or both would constitute such a breach or default.
2.13 Litigation. There is no Material Legal Proceeding pending or, to the
Knowledge of the Company, threatened, against the Company or its Subsidiaries,
and, to the Knowledge of the Company, no facts or circumstances exist that would
reasonably be expected to result in a Legal Proceeding. There is no Order
outstanding against the Company or its Subsidiaries or, to the Knowledge of the
Company, any director, officer or employee of the Company or its Subsidiaries.
2.14 Compliance with Laws.
(a) The Company and its Subsidiaries are in compliance in all
Material respects with all Legal Requirements and Orders of all Governmental
Entities that apply to the Company and its Subsidiaries; provided, however, that
no representation is made in this Section 2.14 as to (i) matters relating to
Taxes (it being understood that all representations relating to Taxes are set
forth in Section 2.16); (ii) matters relating to employee benefit plans (it
being understood that all representations relating to employee benefit plans are
set forth in Section 2.15); and (iii) matters relating to environmental matters
(it being understood that all representations relating to environmental matters
are set forth in Section 2.19).
(b) Section 2.14 of the Company Disclosure Schedule lists all
Material governmental permits, licenses or authorizations held by the Company or
its Subsidiaries (the "Company Permits"). The Company Permits constitute all
Material governmental permits, licenses and authorizations required to conduct
the business of the Company as currently conducted. Neither the Company nor any
of its Subsidiaries is in Material breach of or default under any Company
Permit.
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2.15 Employee Benefit Plans.
(a) Section 2.15 of the Company Disclosure Schedule sets forth all
of the Plans. Prior to the date hereof, the Company has made available to
Purchaser true, correct and complete copies of each of the following, as
applicable, with respect to each Plan: (i) the plan document or agreement or,
with respect to any Plan that is not in writing, a written description of the
terms thereof; (ii) the trust agreement, insurance contract or other
documentation of any related funding arrangement; (iii) the summary plan
description; (iv) the three most recent annual reports, actuarial reports and/or
financial reports; (v) the three most recent required IRS Form 5500s, including
all schedules thereto; (vi) any communication during the six year period
preceding the execution of this Agreement to or from any Governmental Entity or
to or from any Plan participant regarding a dispute with respect to the
operation or administration of the Plan and any other dispute other than routine
claims for benefits that are in dispute; (vii) all amendments or modifications
to any such documents; and (viii) the most recent determination letter received
from the IRS with respect to each Plan that is intended to be a "qualified plan"
under Section 401 of the Code. Except as specifically provided in the foregoing
documents delivered to Purchaser, there are no amendments to any Plan that have
been adopted or approved nor has the Company or any of its Subsidiaries
undertaken to make any such amendments or to adopt or approve any new Plan. No
Plans cover employees outside the United States or are otherwise subject to the
Laws of any jurisdiction outside the United States.
(b) With respect to each Plan, (i) all payments due from the Company
or any of its Subsidiaries to date have been timely made and all amounts
properly accrued to date or as of the Effective Time as liabilities of the
Company or any of its Subsidiaries which are not yet due have been properly
recorded on the books of the Company and, to the extent required by GAAP,
adequate reserves are reflected on the financial statements of the Company, (ii)
all premiums due or payable with respect to insurance policies funding any Plan,
for any period through the date hereof have been timely made or paid in full,
and (iii) there are no Legal Proceedings pending (other than routine claims for
benefits) or, to the Knowledge of the Company, threatened or anticipated with
respect to such Plan, any fiduciaries of such Plan with respect to their duties
to any Plan, or against the assets of such Plan or any trust maintained in
connection with such Plan, (iv) it has been established, operated and
administered in Material compliance with its terms and all applicable Legal
Requirements, including ERISA and the Code.
(c) Each Plan which is intended to meet the requirements of a
"qualified plan" under Section 401(a) of the Code is subject to a currently
effective determination from the Internal Revenue Service that such Plan is so
qualified or is based on an approved prototype document that is subject to a
currently effective opinion letter from the Internal Revenue Service, and to the
Knowledge of the Company there are no facts or circumstances that would
adversely affect the qualified status of any such Plan.
(d) No Plan is under audit or is the subject of an investigation by
the IRS, the U.S. Department of Labor, the Pension Benefit Guaranty Corporation,
the Securities and Exchange Commission or any other Governmental Entity, nor to
the Company's Knowledge, is any such audit or investigation pending or
threatened.
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(e) Neither the Company nor any of its Subsidiaries nor any of its
ERISA Affiliates has ever maintained, established, sponsored, participated in or
contributed to or had any obligation to contribute to any (i) pension plan
(within the meaning of Section 3(2) of ERISA) that is subject to Title IV of
ERISA or Section 412 of the Code, (ii) multi-employer plan (within the meaning
of Section 3(37) of ERISA), (iii) "multiple employer plan" as defined in ERISA
or the Code, or (iv) "funded welfare plan" within the meaning of Section 419 of
the Code.
(f) Neither the Company nor any of its Subsidiaries has any
obligations for retiree health or life benefits under any Plan, other than
coverage as may be required under Section 4980B of the Code or Part 6 of ERISA,
or under any comparable continuation of coverage provisions of any Legal
Requirement.
(g) None of the execution and delivery by the Company of this
Agreement, the performance by the Company of its obligations hereunder or the
consummation by the Company of the transactions contemplated hereby will (i)
entitle any Company Employee to severance pay or any increase in severance pay
upon any termination of employment after the date hereof; (ii) accelerate the
time of payment or vesting or trigger any payment or funding (through a grantor
trust or otherwise) of compensation or benefits under, increase the amount
payable or trigger any other Material obligation pursuant to, any Plan; (iii)
result in any breach or violation of, or a default under, any Plan; or (iv)
result in any payment that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future. Prior to the Closing, the Company
will have provided Purchaser with reasonable estimates of the potential excess
parachute payments (within the meaning of Section 280G of the Code) paid or
payable by the Company or any of its Subsidiaries in connection with the
transactions contemplated by this Agreement, either as a result of the
transactions contemplated by this Agreement. or in conjunction with any other
event. At no time since January 1, 2005 has the Company or any of its
Subsidiaries had any liability for payment any "nonqualified deferred
compensation" within the meaning of Section 409A of the Code that could subject
any employee, independent contractor or agent of the Company or any of its
Subsidiaries to taxation under Section 409A.
2.16 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the
Company and each of its Subsidiaries have been timely filed (except as reflected
in Section 2.16(a) of the Disclosure Schedule, in each case to the extent that
the Company or any of its Subsidiaries is the beneficiary of any extension of
time within which to file any such Tax Return). All such Tax Returns were
correct and complete in all Material respects. All Taxes due and owing by the
Company and each of its Subsidiaries (whether or not shown on such Tax Returns)
have been paid. There are no Liens for Taxes (other than Taxes not yet due and
payable) upon any of the assets of the Company or any of its Subsidiaries. There
is no Material dispute or claim concerning any Tax liability of the Company or
any of its Subsidiaries claimed or raised by any Governmental Entity in writing.
(b) None of the federal, state, local and foreign Tax Returns filed
by the Company or any of its Subsidiaries on or before the date of this
Agreement have been, or are
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currently the subject of audit and no written notice of any such audit or intent
to audit or similar examination or a request for information from the relevant
governmental authority has been received, (ii) no deficiencies for any Taxes are
outstanding or have been proposed, asserted or assessed in writing by any
governmental authority; and (iii) there is no currently effective agreement or
other document extending, or having the effect of extending, the period of
statute of limitations in respect of Taxes or the assessment or collection of
Taxes nor has there been any request in writing for such extension. The statute
of limitations in respect of Taxes with respect to each of the Company and its
Subsidiaries for Tax Returns filed in respect of taxable years ending on or
before December 31, 2003 is closed. The Company has made available to Purchaser
correct and complete copies of all of the Company's and its Subsidiaries'
federal, state, local and foreign Tax Returns filed on or before the date of
this Agreement, examination reports, and statements of deficiencies assessed
against or agreed to by the Company or any of its Subsidiaries in respect of
taxable years ending after December 31, 2003.
(c) The Company will not be required to include any item of income
in, or exclude any item of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing Date as a result of any:
(i) change in method of accounting for a taxable period
ending on or before the Closing Date;
(ii) "closing agreement" as described in Section 7121 of
the Code (or any corresponding or similar provision of state, local
or foreign income Tax law) executed on or before the Closing Date;
(iii) inter-company transactions or any excess loss
account described in Treasury Regulations under Section 1502 of the
Code (or any corresponding or similar provision of state, local or
foreign income Tax law);
(iv) installment sale or open transaction disposition
made on or before the Closing Date; or
(v) prepaid amount received on or before the Closing
Date.
(d) Neither the Company nor any of its Subsidiaries has distributed
stock of another Person, or had its stock distributed by another Person, in a
transaction that was purported or intended to be governed in whole or in part by
Section 355 of the Code or Section 361 of the Code.
(e) 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
other third party.
(f) Neither the Company nor any of its Subsidiaries has any
liability for the Taxes of any Person (other than the Company or any of its
Subsidiaries) (i) under Treas. Reg. ss. 1.1502-6 (or any similar provision of
state, local or foreign law) or as a transferee or successor, by contract or
otherwise, or (ii) under a Tax allocation or sharing agreement.
-33-
(g) Neither the Company nor any of its Subsidiaries has Tax
liabilities (whether due or to become due) with respect to the income, property
and operations of the Company or its Subsidiaries that relate to any taxable
period (or portion thereof) ending on or before the Closing Date, except for Tax
liabilities (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) reflected in the Financial
Statements or that have arisen after the Balance Sheet Date.
(h) The Company and its Subsidiaries have made proper reserves and
allowances on its books to satisfy all of its liabilities for Taxes (rather than
any reserve for deferred Taxes established to reflect timing differences between
book and Tax income) through the Closing Date.
2.17 Intellectual Property. For the purpose of clarity, the Parties
acknowledge and agree that, unless expressly stated otherwise, Saxon is excluded
from the definition of Subsidiary as used in this Section 2.17 (or elsewhere in
this Agreement), and, accordingly, the representations and warranties set forth
below regarding IP of the Company and its Subsidiaries do not apply to Saxon or
the Saxon IP (other than as specifically stated in Section 2.17(k)).
(a) Section 2.17(a) of the Company Disclosure Schedule sets forth
(i) a true and complete list of all Registered Intellectual Property owned by
the Company or any of its Subsidiaries and (ii) a list of all unregistered trade
names, logos, trademarks, service marks, and a brief summary of all unregistered
mask works, copyrights and other Intellectual Property Rights (other than
Registered Intellectual Property) that are Material to and that are owned by the
Company or any of its Subsidiaries and (iii) a brief summary of all other IP not
listed or summarized pursuant to clause (i) or (ii) that is Material to and that
is owned by the Company or any of its Subsidiaries (collectively, the "Owned
IP"). To the Knowledge of the Company, the Intellectual Property Rights in the
Owned IP are valid, subsisting, enforceable, and in full force and effect and
neither the Company nor any of its Subsidiaries has received any notice claiming
or asserting that any of such Intellectual Property Rights are not valid,
subsisting, enforceable, owned by the Company, and in full force and effect.
(b) Section 2.17(b) of the Company Disclosure Schedule sets forth a
true and complete list of all Contracts to which the Company or any of its
Subsidiaries is a party pursuant to which the Company or any of its Subsidiaries
has received, acquired or obtained a license, other right (including an
ownership right) or covenant not to xxx respecting any IP of any Person that is
Material (collectively, "Third Party IP"), other than shrink wrap and other
generally available commercial licenses with respect to which no future license
or royalty payment will become due, or free software that is distributed without
restrictions on use.
(c) Section 2.17(c) of the Company Disclosure Schedule sets forth a
true and complete list of all Contracts to which the Company or any of its
Subsidiaries is a party pursuant to which the Company or any of its Subsidiaries
has granted, transferred or given to any Person a license, other right
(including an ownership right) or covenant not to xxx with respect to any
Company IP that is Material, (such Contracts, together with the agreements set
forth in Section 2.17(b) of the Company Disclosure Schedule, the "Company
Licenses"). True and complete copies of the Company Licenses have been provided
to Purchaser.
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(d) The Company or its Subsidiaries owns all right, title and
interest in and to, and has possession and control of, the Owned IP, free and
clear of all Encumbrances and claims of joint or co-ownership. The Company and
its Subsidiaries have a valid and enforceable license or right to use the Third
Party IP in the manner that it is used by the Company or any of its Subsidiaries
pursuant to a Company License, and has possession of such Third Party IP. The
rights of the Company and its Subsidiaries to and under the Company Licenses are
free of any Encumbrances. Each Company License is in full force and effect and
enforceable against the other party or parties thereto in accordance with its
terms, subject to the Enforceability Limitations. Neither the Company nor any of
its Subsidiaries is in Material breach of or default under any Company License,
nor has there occurred any event that with the passage of time or the giving of
notice or both would constitute a Material breach or default by the Company or
any of its Subsidiaries under any Company License or give any Person any right
to terminate or limit such Company License or any of the rights of the Company
or any of its Subsidiaries under the Company License. The Company has not
received any notice that the Company or any of its Subsidiaries is in breach of
or default under any Company License or there has been an occurrence of any
event that with the passage of time or the giving of notice or both would
constitute a breach or default by the Company or any of its Subsidiaries under
any Company License or give any Person any right to terminate or limit such
Company License or any of the rights of the Company or any of its Subsidiaries
under such Company License . To the Knowledge of the Company, no other party to
any Company License is in Material breach of or default under any Company
License, nor, to the Knowledge of the Company, has there occurred any event that
with the passage of time or the giving of notice or both would constitute such a
breach or default. The execution, delivery and performance of this Agreement
does not breach or violate or give rise to any right to terminate or limit any
Company License or any license or rights granted, given or obtained thereunder.
(e) The Company has not received any notice of any claim or
assertion that the products or services of the Company or any of its
Subsidiaries, nor the manufacture, use, importation or sale thereof, nor any of
the operations of the Company or any of its Subsidiaries infringe, violate,
misappropriate, breach or conflict with any Intellectual Property Rights or
other rights of any Person, and there are no actions, suits or proceedings
pending or, to the Knowledge of the Company, threatened, by any Person against
the Company or its Subsidiaries alleging infringement, misappropriation or
violation of or conflict with such Person's Intellectual Property Rights or
other rights. To the Knowledge of the Company, none of the products or services
of the Company or any of its Subsidiaries, nor the manufacture, use, importation
or sale thereof, nor any of the operations of the Company or any of its
Subsidiaries, infringes, violates, misappropriates, breaches or conflicts with
any Intellectual Property Rights of any Person.
(f) To the Knowledge of the Company, there is no Material Company IP
that will not be available to the Company and its Subsidiaries as of and after
the Closing on the same terms and conditions and in the same manner that such IP
was available to the Company and its Subsidiaries prior to the Closing, with the
exception of the terms of the Saxon IP License.
(g) To the Knowledge of the Company, no Intellectual Property Rights
owned by the Company or its Subsidiaries that are Material are being infringed,
violated, misappropriated or breached by any Person.
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(h) No federal, state, provincial or other regulatory agency or body
has provided any funding to the Company or any of its Subsidiaries which would
give such federal, state, provincial or other regulatory agency or body any
rights, titles or interest in or to the any Owned IP and no university, academic
institution or similar type of entity nor any of their employees has any rights,
titles or interests in or to the Owned IP.
(i) To the Knowledge of the Company, no open source software or code
is or was (i) used in the development, compilation, manufacture or creation of,
(ii) incorporated into, (iii) integrated or bundled with, any product or service
offered by the Company or any of its Subsidiaries.
(j) The Company and its Subsidiaries have taken commercially
reasonable measures to protect and maintain the confidential and proprietary
nature of trade secrets and other confidential information that are Material.
(k) Neither the Company nor any of its Subsidiaries (including in
this case Saxon if Saxon remains a subsidiary of the Company following the
Closing), has or will have following the Saxon Divestiture any indemnification
or other obligation or liability, contingent or otherwise, under, arising from
or related to: (i) any of the Saxon Divestiture Agreements, (ii) any of the
Saxon IP, (iii) the Saxon Divestiture or (iv) Saxon that is or will be
inconsistent with the provisions of Section 5.13.
2.18 Labor Matters.
(a) There is no labor strike, dispute, slowdown, stoppage or lockout
pending, or, to the Knowledge of the Company, threatened with respect to the
Company Employees.
(b) Neither the Company nor its Subsidiaries is party to or bound by
any labor or collective bargaining agreement applicable to the Company, any of
its Subsidiaries or to any Company Employees.
(c) To the Knowledge of the Company, none of the Company Employees
is represented by a labor union, and no petition has been filed, nor has any
proceeding been instituted by any Company Employee or group of Company Employees
with any labor relations board or commission seeking recognition of a collective
bargaining representative. To the Knowledge of the Company, there is no
organizational effort currently being made or threatened by or on behalf of any
labor union to organize any Company Employees.
(d) There is no Material grievance, unfair labor practice charge or
complaint against the Company or any of its Subsidiaries or regarding any
Company Employee or group of Company Employees (or any former employees of the
Company or any of its Subsidiaries) pending or, to the Knowledge of the Company,
threatened before any Governmental Entity.
(e) The Company and its Subsidiaries are in Material compliance with
all Legal Requirements applicable to the Company or any of its Subsidiaries
regarding the terms and conditions of employment or other labor related matters,
including Legal Requirements relating to discrimination, fair labor standards
and occupational health and safety or wrongful discharge, and there are no, in
each case, Material complaints, lawsuits or other Legal Proceedings pending or,
to the Knowledge of the Company, threatened against the Company or any of its
Subsidiaries
-36-
brought by or on behalf of any applicant for employment, any current or former
employee or any class of the foregoing, relating to any such Legal Requirements,
or alleging breach of any express or implied contract of employment, wrongful
termination of employment, or alleging any other discriminatory, wrongful or
tortious conduct in connection with the employment relationship.
(f) Since January 1, 2007, none of the Company nor any of its
Subsidiaries has effectuated (i) a "plant closing" (as defined in the Worker
Adjustment and Retraining Notification Act (the "WARN Act") or any similar Law)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility of the Company or any of its
Subsidiaries or (ii) a "mass layoff" (as defined in the WARN Act, or any similar
Law) affecting any site of employment or facility of the Company or any of its
Subsidiaries.
2.19 Environmental Compliance. The Company and its Subsidiaries are in
compliance in all Material respects with applicable Environmental Laws and have
not in the past five (5) years, received written notice of any Material
noncompliance with applicable Environmental Laws. The Company has not received
notice of any Material Environmental Claim, nor, to the Knowledge of the
Company, is the Company or any of its Subsidiaries subject to any Material
Environmental Claim. To the Knowledge of the Company, neither the Company nor
any of its Subsidiaries nor any other Person acting on its or their behalf has
disposed of, transported, stored, or arranged for the disposal of any Hazardous
Materials to, at or upon: (a) any location other than a site lawfully permitted
to receive such Hazardous Materials; (b) any premises owned or leased by the
Company or its Subsidiaries, except for the use of household cleaners and office
products in the ordinary course of business in Material compliance with
applicable Environmental Laws; or (c) any site which has been placed on the
National Priorities List, CERCLIS or their state equivalents. To the Knowledge
of the Company, there has not occurred during the period the Company or its
Subsidiaries operated or possessed any premises owned or leased by the Company
or its Subsidiaries, nor is there presently occurring, a Material Release of any
Hazardous Materials on, into or beneath the surface of, or adjacent to, any
premises owned or leased by the Company or its Subsidiaries. Except for the use
of household cleaners and office products in the ordinary course of business in
Material compliance with applicable Environmental Laws, no Hazardous Materials
are used, stored, manufactured, or otherwise present at any property leased or
owned by the Company or any of its Subsidiaries.
2.20 Certain Transactions. The Company and its Subsidiaries are not
indebted, directly or indirectly, to any of its or their directors or officers
or to any member of their Immediate Families in any amount whatsoever, except
for indebtedness to employees for accrued salaries, bonuses and other employee
benefits not yet payable or for reasonable business expenses actually incurred.
None of the directors or officers of the Company or its Subsidiaries, nor any
member of their Immediate Families, is indebted to the Company or its
Subsidiaries or, to the Knowledge of the Company, has any direct or indirect
economic interest in, or otherwise serves as a director, officer or employee of,
or consultant to, any firm or business entity with which the Company or its
Subsidiaries has a Material business relationship or competes (other than the
ownership of five percent (5%) or less of the outstanding voting securities of
any such firm or business entity). To the Knowledge of the Company, no officer
or director of the Company or its Subsidiaries, or any member of his or her
Immediate Family, is, directly or indirectly, interested in any Material
Contract.
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2.21 Brokers or Finders. Except for Merrill, Lynch, Xxxxxx, Xxxxxx & Xxxxx
Incorporated, neither the Company nor any of its Subsidiaries has entered into
any Contract entitling any agent, broker, investment banker, financial advisor
or other firm or Person to any broker's or finder's fee or any other commission
or similar fee in connection with any of the transactions contemplated hereby.
2.22 Accounts Receivable. All accounts receivable which are reflected in
the Balance Sheet have been generated in the ordinary course of business of the
Company and its Subsidiaries. All accounts receivable of the Company and its
Subsidiaries included in the Balance Sheet and those incurred in the ordinary
course of business of the Company and its Subsidiaries since the Balance Sheet
Date, are valid receivables subject to no set offs or counterclaims, are from
bona fide transactions and are collectible and in accordance with their terms at
their recorded amounts, subject only to reasonable reserves for bad debts,
returns, allowances and rebates that have been determined in accordance with
GAAP consistent with the past practices of the Company and reflected in the
books and records of the Company and its Subsidiaries.
2.23 Accounts Payable. Other than Transaction Expenses incurred after the
date hereof or for which the Company has not received an invoice, the Balance
Sheet sets forth all amounts payable by the Company or any of its Subsidiaries
to any vendor, supplier or customer arising out of or relating to any sale
actually made or service actually performed through such date. Except as accrued
for or reserved against in the Balance Sheet, neither the Company nor any of its
Subsidiaries has any obligations or liabilities to any vendors, suppliers or its
customers including with out limitation any refund or returns of products sold
prior to the Closing Date or any rebate by the Company or any of its
Subsidiaries to any of its customers.
2.24 Inventory. All inventory of the Company and of its Subsidiaries
consists of raw materials and supplies, manufactured and purchased parts, goods
in process and finished goods (the "Inventory"), all of which is merchantable
and fit for the purpose for which it was procured or manufactured, and none of
which is slow-moving, obsolete, damaged, or defective, subject only to the
reserve for Inventory write-down reflected in the Financial Statements, as
adjusted for the sale of Inventory through the Closing Date in accordance GAAP.
The quantities of each item of Inventory (whether raw materials, work-in-process
or finished goods) are reasonable in the present circumstances of the Company.
2.25 Bank Accounts. Section 2.25 of the Company Disclosure Schedule sets
forth the names and locations of all banks and other financial institutions at
which the Company or any of its Subsidiaries maintain a safe deposit box, lock
box, or monetary account of any nature, together with the type, identifying
number, and the authorized signatories of each such account. 2.26 Indebtedness.
Section 2.26 of the Company Disclosure Schedule sets forth all of the
outstanding Indebtedness of the Company (the "Scheduled Debt") as of the date
hereof, together with any prepayment or other penalties that would result from
the prepayment or refinancing of such Indebtedness. All of the Scheduled Debt
has been incurred in the ordinary course of business of the Company and its
Subsidiaries and has been used for valid corporate purposes. The Company has no
Indebtedness other than the Scheduled Debt.
2.27 Large Customers. Section 2.27 of the Company Disclosure Schedule sets
forth the 10 largest customers or group of related customers of the Company and
its Subsidiaries (the "Large Customers") for the fiscal year ended December 31,
2006. No other customer made payments which equaled or exceeded five percent
(5%) of the gross sales of the Company and its Subsidiaries for the fiscal year
ended December 31, 2006 or is projected to make
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payments which equal or exceed such percentage for the current fiscal year. None
of the Large Customers has terminated, or, to the Knowledge of the Company,
threatened to terminate, its relationship with the Company or has during the
last twelve (12) months significantly decreased or limited, or threatened to
significantly decrease or limit, its usage or purchase of the goods or services
of the Company. To the Knowledge of the Company, none of the Large Customers
presently intend to otherwise modify its relationship with the Company in a
manner adverse to the Company (other than seeking standard price reductions),
and the transactions contemplated by this Agreement will not, to the Knowledge
of the Company, adversely affect the relationship of the Surviving Corporation,
the business of the Surviving Corporation or Purchaser, as successor owner of
the Company, with any of the Large Customers.
2.28 Large Vendors. Section 2.28 of the Company Disclosure Schedule sets
forth the 10 largest vendors or group of related vendors of the Company and its
Subsidiaries (the "Large Vendors") for the fiscal year ended December 31, 2006.
No other vendor made sales which equaled or exceeded five percent (5%) of the
gross purchases of the Company and its Subsidiaries for the fiscal year ended
December 31, 2006 or is projected to make sales which equal or exceed such
percentage for the current fiscal year. None of the Large Vendors has
terminated, or threatened to terminate, its relationship with the Company or any
its Subsidiaries or has during the last twelve (12) months significantly
decreased or limited, or threatened to significantly decrease or limit, its sale
of goods or services to the Company or any of its Subsidiaries (other than
seeking standard cost increases). To the Knowledge of the Company, none of the
Large Vendors presently intend to otherwise modify its relationship with the
Company or its Subsidiaries in a manner adverse to the Company or its
Subsidiaries (other than seeking standard cost increases), and the transactions
contemplated by this Agreement will not, to the Knowledge of the Company,
adversely affect the relationship of the Surviving Corporation, the business of
the Surviving Corporation or Purchaser, as successor owner of the Company, with
any of the Large Vendors.
2.29 Sufficiency of Assets. Following consummation of the Saxon
Divestiture and the delivery of the Saxon IP License, the Company and its
Subsidiaries will continue to have all of the assets, property and rights that,
to the Knowledge of the Company, are necessary for the operation of the business
of the Company and each of its Subsidiaries as presently conducted by the
Company or any such Subsidiary. None of the Saxon IP constitutes, individually
or in the aggregate, any assets, property or rights used in connection with the
business of the Company or any of its Subsidiaries as presently conducted by the
Company or any of its Subsidiaries.
2.30 Previous Sales; Warranties. Except for such defects and other
breaches that have been reserved for in the Financial Statements or are not,
individually or in the aggregate, Material, all goods sold or distributed and
all services performed by the Company and its Subsidiaries were of merchantable
quality; and neither the Company nor any of its Subsidiaries has breached any
express or implied warranties offered by it in connection with the sale or
distribution of such goods or services.
2.31 Insurance. Set forth in Section 2.31 of the Company Disclosure
Schedule is a complete and accurate list and description of all policies
(including fire, liability, product liability, workers compensation, health and
other forms of insurance) issued to the Company or any of its Subsidiaries with
respect to the business or properties of the Company or any of its Subsidiaries.
The Company separately has provided or made available to Purchaser the following
information with each such policy:
(i) the name, address, and telephone number of the
agent;
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(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and
amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
With respect to each such insurance policy listed in Section 2.31 of the Company
Disclosure Schedule: (A) the policy is legal, valid, binding and in full force
and effect; (B) to the Knowledge of the Company, the policy will continue to be
legal, valid, binding and in full force and effect on identical terms
immediately following the consummation of the transactions contemplated hereby;
(C) neither the Company, any of its Subsidiaries nor any other party to the
policy is in Material breach or default (including with respect to the payment
of premiums or the giving of notices), and no event has occurred that, with
notice or the lapse of time, would constitute such a Material breach or default,
or permit termination, modification, or acceleration, under the policy; and (D)
no party to the policy has repudiated any Material provision thereof. Neither
the Company nor any of its Subsidiaries has been refused any insurance with
respect to any aspect of the operations of its business nor has its coverage
been limited by any insurance carrier to which it has applied for insurance or
with which it has carried insurance during the last three (3) years. There is no
claim by the Company or any of its Subsidiaries pending under any such policies
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies, and the Company has no Knowledge of any basis for denial of
any pending claim under any such policy.
2.32 Contracts with Indemnification/Warranty Provisions. Each Contract for
the provision of goods or services to which the Company or any of its
Subsidiaries is a party that imposes or imposed indemnification or warranty
obligations on the part of the Company or any such Subsidiary that survive as of
the date of this Agreement or as of the Closing Date expressly provides that the
liability of the Company or any such Subsidiary under such indemnification or
warranty provision is limited to an amount not in excess of the aggregate dollar
amount paid by the other party or parties to the Company or its Subsidiary, as
the case may be, under such Contract.
2.33 Disclosure. To the Knowledge of the Company, no representation or
warranty by the Company set forth in this Agreement (taking into account the
information provided in the Company Disclosure Schedule) contains any untrue
statement of a Material fact or omits to state any Material fact necessary in
order to make such representations and warranties, in light of the circumstances
under which they are made, not misleading.
Article 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
Purchaser and Merger Sub represent and warrant to the Company as set forth
in this Article 3.
3.1 Organization. Each of Purchaser and Merger Sub (a) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized; (b) has all requisite corporate power and
authority to carry on its business as now
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being conducted and to own the properties and assets it now owns; and (c) is
duly qualified or licensed to do business as a foreign corporation in good
standing in every jurisdiction in which such qualification is required, except
where the failure to be so qualified or licensed would not have, individually or
in the aggregate, a material adverse effect on the business, assets, liabilities
conditions (financial or otherwise), operations, prospects or results of
operations of Purchaser and its Subsidiaries, taken as a whole.
3.2 Authorization. Each of Purchaser and Merger Sub has full corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by Purchaser and
Merger Sub of this Agreement, the performance by Purchaser and Merger Sub of
their respective obligations hereunder and the consummation by Purchaser and
Merger Sub of the transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of Purchaser and Merger Sub, subject
only to the filing of Certificate of Merger pursuant to Delaware Law.
3.3 Execution and Validity. This Agreement has been duly executed and
delivered by Purchaser and Merger Sub. Assuming the due and valid authorization,
execution and delivery hereof by the Company and the Company Stockholder
Representative, this Agreement is a valid and binding obligation of each of
Purchaser and Merger Sub enforceable against Purchaser and Merger Sub in
accordance with its terms except for the Enforceability Limitations.
3.4 Consents and Approvals; No Violations. Except for the filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the HSR Act and the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware, none of the
execution and delivery by Purchaser and Merger Sub of this Agreement, the
performance by Purchaser and Merger Sub of their respective obligations
hereunder, nor the consummation by Purchaser and Merger Sub of the transactions
contemplated hereby will (a) conflict with or result in any breach of any
provision of the Certificate of Incorporation or By-Laws (or similar
organization documents) of Purchaser and Merger Sub, each as amended to date, or
(b) require any declaration or filing with, or permit, authorization, consent or
approval of, any Governmental Entity.
3.5 Availability of Funds. As of the date hereof, Purchaser has, and as of
the Closing Date, Purchaser will have, sufficient immediately available funds in
cash to (i) repay the Credit Agreement Debt, (ii) pay the Merger Consideration,
and (iii) pay any and all other amounts payable pursuant to this Agreement and
to effect the transactions contemplated hereby.
3.6 Litigation. There is no action, suit or proceeding, at law or in
equity, pending by or before any Governmental Entity or, to the knowledge of
Purchaser or Merger Sub, threatened, against Purchaser or Merger Sub that
challenges the validity of this Agreement or the ability of Purchaser or Merger
Sub to consummate the Merger.
3.7 Brokers or Finders. The Company Stockholders shall not have any
liability for any Contract to which Purchaser or Merger Sub is subject entitling
any agent, broker, investment banker, financial advisor or other firm or Person
to any broker's or finder's fee or any other commission or similar fee in
connection with any of the transactions contemplated hereby.
Article 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Interim Operations of the Company. From the date hereof through the
Effective Time, except (i) as otherwise expressly contemplated by this Agreement
or (ii) as may
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be consented to by Purchaser in writing, the Company shall, and shall cause its
Subsidiaries to, comply with the following:
(a) The Company and its Subsidiaries shall conduct its and their
business in the usual and ordinary course and shall use commercially reasonable
efforts to maintain the value of such business as a going concern and its
relationships with its current customers, suppliers, vendors, employees, agents
and other Persons having Material business relationships with the Company and
its Subsidiaries and preserve for Purchaser the goodwill of such customers,
suppliers, vendors, employees, agents and other Persons. Without limiting the
foregoing, the Company shall continue all pending and planned research and
development projects and shall provide no less than the level of resources
(human and financial) in connection therewith as have been provided in
accordance with past practices.
(b) The Company shall not (i) amend, modify, or repeal any provision
of its Certificate of Incorporation or By-Laws or consent to any such amendment,
modification or repeal; (ii) issue, sell, transfer, pledge, dispose of or
encumber any shares of any class or series of its capital stock, or securities
convertible into or exercisable or exchangeable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of any class or
series of its capital stock (other than the issuance of up to the balance of
authorized by unissued shares of Common Stock under the Company Restricted Stock
Plan to current or new Company Employees or service providers); (iii) except for
the Saxon Divestiture effected in the form of a "spin-off" (as described in
Section 5.13), declare, set aside or pay any dividend or other distribution
payable in cash, stock or property with respect to any shares of any class or
series of its capital stock; (iv) split, combine or reclassify any shares of any
class or series of its stock; or (v) redeem, purchase or otherwise acquire
directly or indirectly any shares of any class or series of its capital stock,
or any instrument or security which consists of or includes a right to acquire
such shares (other than any redemption, purchase or acquisition pursuant to the
Company Restricted Stock Plan).
(c) The Company and its Subsidiaries shall not, except in the
ordinary course of business consistent with past practice (i) create, incur,
assume, guarantee, endorse, refinance, modify, extend, renew or otherwise become
liable for any Indebtedness, obligation or other liability; (ii) other than with
respect to the Credit Agreement, pay, agree to cancel or pay, or otherwise
provide for a complete or partial discharge in advance of a scheduled payment
date with respect to any Indebtedness, obligation or other liability; (iii)
waive, cancel or compromise any right to receive any direct or indirect Material
payment or other benefit under any debt, obligation or other liability owing to
the Company or such Subsidiary; (iv) other than in connection with the Saxon
Divestiture, sell, lease or otherwise dispose of any Material assets; or (v)
grant any loans or extensions of credit to any third party.
(d) Except in connection with the Saxon Divestiture, the Company and
its Subsidiaries shall not (i) sell, license or transfer to any Person any
rights to any IP or enter into any agreement with respect to any IP with any
Person with respect to any IP of any Person; (ii) buy or license any IP or enter
into any agreement with respect to the IP of any Person; or (iii) enter into any
agreement with respect to the development of any IP with a third party;
(e) The Company and its Subsidiaries shall not commence or settle
any Legal Proceeding other than collection of debts in the ordinary course of
business;
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(f) Except in connection with the Saxon Divestiture, the Company and
its Subsidiaries shall not enter into any licensing (other than non-exclusive
end user licenses in the ordinary course of business and on standard terms and
conditions), distribution, joint venture, strategic alliance or joint marketing
or any similar arrangement or agreement;
(g) The Company and its Subsidiaries shall not enter into any
partnership, joint venture or other similar arrangement or agreement involving a
sharing of profits or losses;
(h) The Company and its Subsidiaries shall not (i) amend, terminate
or waive any right in any Material respect under any Material Contract, except
in the ordinary course of business consistent with past practice; (ii) merge or
consolidate with any Person; (iii) purchase any capital stock of or other equity
interest in any Person; (iv) purchase assets constituting a business, (v) create
or suffer the imposition of any Encumbrance upon any of its assets, except for
Permitted Encumbrances; (vi) make any change in its pricing policies or payment
or credit policies; or (vii) fail to pay any creditor any Material amount owed
to such creditor when due (other than amounts disputed in good faith in the
ordinary course of business consistent with past practice).
(i) Neither the Company nor any of its Subsidiaries shall (i)
increase the compensation payable or to become payable (including bonuses) to
any of the Company Employees (other than normal increases in the ordinary course
of business consistent with past practice or pursuant to plans, programs or
agreements existing on the date hereof), including the establishment or adoption
of any employee benefit plan, except as may be provided in any outstanding
employment or severance agreement or pursuant to the acceleration of vesting of
any Restricted Stock pursuant to an outstanding agreement, or (ii) pay or agree
to pay any bonus or other compensation to any Person in connection with the
transactions contemplated hereby.
(j) The Company shall not adopt or become a party to any plan of
complete or partial liquidation, dissolution, restructuring, recapitalization or
other reorganization of the Company.
(k) The Company shall not change in any Material respect any of the
accounting methods used by it or revalue any of its assets (whether tangible or
intangible) unless required by GAAP or change its annual accounting period.
(l) The Company and its Subsidiaries shall continue to make capital
expenditures in the ordinary course of business consistent with past practices
and the capital expenditure budget heretofore provided to Purchaser; provided,
however, the Company and its Subsidiaries shall not make any capital
expenditures exceeding $250,000 in the aggregate.
(m) The Company and its Subsidiaries shall not enter into any
agreement, contract or binding commitment to do any of the foregoing.
(n) The Company shall provide to Purchaser, as soon as available but
in no event later than 15 days after the end of each calendar month, the
Company's consolidated unaudited balance sheet as at the end of such month and
the related statements of income, retained earnings for such month covering the
Company's and Subsidiaries' operations during such month and for the portion of
the fiscal year then ended.
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(o) A list of all Registered Intellectual Property held by Saxon and
a summary of any other IP (if any) held by Saxon (collectively, the "Saxon IP")
and a list of any other assets transferred to Saxon or included in the Saxon
Divestiture is set forth in Section 4.1(o) of the Company Disclosure Schedule.
After the date of this Agreement, without the approval of Purchaser, neither the
Company nor any of its Subsidiaries will assign or transfer to Saxon any IP or
other assets of the Company or any of its Subsidiaries not set forth in Section
4.1(o) of the Company Disclosure Schedule; provided that the foregoing shall not
be deemed to restrict the Company from completing any assignment or
re-registration of IP that has been listed in Section 4.1(o) of the Company
Disclosure Schedule as currently pending or in progress, or, subject to
Purchaser's approval, which approval shall not be unreasonably withheld or
delayed, from correcting any administrative errors.
4.2 Tax Matters. Without the prior written consent of Purchaser, which
consent shall not be unreasonably withheld, delayed or conditioned, neither the
Company nor any of its Subsidiaries shall make or change any Tax election, file
any amended Tax Return, enter into any closing Contract, settle any Tax claim or
assessment, Knowingly surrender any right to claim a refund of Taxes, consent to
any extension or waiver of the limitation period applicable to any Tax claim or
assessment, or take any other similar action relating to the filing of any Tax
Return or the payment of any Tax, if such election, amendment, Contract,
settlement, surrender, consent or other action would have the effect of
increasing the Tax liability of the Company or any of its Subsidiaries for any
period ending after the Closing Date; provided, however, that this Section 4.2
shall not apply to the filing by the Company and its Subsidiaries of their
respective federal and state income Tax Returns in the ordinary course of
business consistent with past practice.
Article 5
COVENANTS
5.1 Stockholder Approval. Promptly after the execution of this Agreement,
the Company shall take such action as shall be necessary under Delaware Law to
submit this Agreement to the Company Stockholders for their approval by written
consent. The Company shall solicit the written consent of such Company
Stockholders as shall be necessary to achieve the Required Stockholder Vote as
promptly as practicable following the execution of this Agreement. Within ten
business days after the execution by Company Stockholders holding at least a
majority of the Company Common Stock of an action by written consent of Company
Stockholders approving this Agreement, the Company shall circulate to the
remaining holders of Company Common Stock written notice and appropriate
informational materials as and to the extent required under Delaware Law of the
taking of corporate action by less than unanimous written consent of the Company
Stockholders (the "Stockholder Notification"). The Stockholder Notification (if
any be required) shall be in form and substance reasonably acceptable to each of
Purchaser and the Company. The Stockholder Notification shall include (i) notice
under Delaware Law that the holders of Company Common Stock are or may be
entitled to assert dissenters' or appraisal rights under such law, (ii) a copy
of this Agreement, and (iii) other appropriate informational materials. Each of
Purchaser and the Company shall provide promptly to the other such information
concerning its business and affairs as the other shall reasonably request for
inclusion in such Stockholder Notification. The Company will promptly advise
Purchaser, and Purchaser will promptly advise the Company, if at any time prior
to the Effective Time either the Company or Purchaser, as applicable, shall
obtain knowledge of any
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facts that might make it necessary or appropriate to amend or supplement the
Stockholder Notification in order to make the statements contained or
incorporated by reference therein not misleading or to comply with applicable
law.
5.2 Access. Until the earlier of the Effective Time or the termination of
this Agreement pursuant to its terms, the Company shall give Purchaser and its
authorized representatives reasonable access to all books, records, personnel,
offices and other facilities and properties of the Company and its Subsidiaries;
provided, however, that any such access to the Company's and its Subsidiaries'
facilities shall be conducted at Purchaser's expense in the sole discretion of
the Company, at a reasonable time during normal business hours, under the
supervision of the Company's personnel and in such a manner as to maintain the
confidentiality of this Agreement and the transactions contemplated hereby and
not to interfere unreasonably with the normal operation of the business of the
Company. Nothing herein shall require the Company to disclose any information to
Purchaser if such disclosure would (i) jeopardize any attorney-client or other
legal privilege; or (ii) contravene any applicable Legal Requirements, fiduciary
duty or binding agreement entered into prior to the date of this Agreement
(including any confidentiality agreement to which the Company or any of its
Subsidiaries is a party); provided that the Company shall advise Purchaser of
any such information that is withheld solely by reason of a confidentiality
agreement with a third party and the parties will use all commercially
reasonable efforts to obtain the consent of such third party to such disclosure.
5.3 Confidentiality. Purchaser and the Company acknowledge that they are
parties to that certain Nondisclosure Agreement, dated as of April 27, 2006 (the
"Confidentiality Agreement"), which agreement shall continue in full force and
effect in accordance with its terms.
5.4 No Solicitation. From and after the date of this Agreement until the
earlier of the Effective Time, sixty (60) days following the date hereof or the
termination of this Agreement pursuant to its terms, the Company will not, nor
will the Company authorize or permit (to the extent within its power and
authority) any of its directors, officers, Subsidiaries, Affiliates or employees
or any investment banker, advisor, representative or other agent of the Company
to, directly or indirectly, (i) solicit, initiate or induce the making,
submission or announcement of any Acquisition Proposal or (ii) participate in or
encourage any discussions or negotiations regarding, or furnish to any Person
any nonpublic information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal.
5.5 Public Disclosure. Purchaser, Merger Sub, the Company and the Company
Stockholder Representative will not make any public disclosure concerning the
Merger or any of the other transactions contemplated hereby without the prior
written consent of Purchaser and the Company, except as may be required by any
applicable Legal Requirement.
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other Parties in doing, all things necessary,
proper or advisable (subject to any applicable Legal Requirements) to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including using all
commercially reasonable efforts to accomplish the following: (i) causing the
conditions precedent set forth in Article 7 to be satisfied; (ii) defending any
Legal Proceeding challenging this Agreement or the
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consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (iii) executing and delivering any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
(b) Promptly after the date hereof, the Company shall give all
notices required to be given to third parties in connection with the
transactions contemplated hereby, and the Company shall obtain prior to the
Closing all consents identified or required to be identified in Section 2.5 of
the Company Disclosure Schedule.
(c) Purchaser and Merger Sub, on the one hand, and the Company, on
the other hand, will give prompt notice to the other of (i) any notice or other
communication from any Person alleging that the consent of such Person is or may
be required in connection with the Merger; (ii) any notice or other
communication from any Governmental Entity in connection with the Merger; and
(iii) any Legal Proceeding relating to, involving or otherwise affecting the
consummation of the Merger or the other transactions contemplated hereby.
5.7 Antitrust and Other Filings.
(a) As promptly as practicable after the execution of this
Agreement, in the case of the Antitrust Filing required under the
Xxxx-Xxxxx-Xxxxxx Act, not later than three Business Days following such
execution, each of Purchaser and the Company shall prepare and file (i) any
pre-merger notification forms required by the merger notification or control
laws and regulations of any applicable jurisdiction, as agreed to by Purchaser
and the Company (the "Antitrust Filings") and (ii) any other filings required to
be filed by it under the Exchange Act, the Securities Act or any other Legal
Requirement relating to the Merger and the transactions contemplated hereby (the
"Other Filings"). Each of Purchaser and the Company shall promptly supply the
other with any information which may reasonably be required in order to
effectuate any filings pursuant to this Section 5.7. Concurrently with the
filing of the Antitrust Filings, or as soon thereafter as practicable, Purchaser
and the Company shall each request early termination of any waiting period under
any applicable Legal Requirement that permits such request for early
termination.
(b) Each of Purchaser, Merger Sub and the Company shall notify the
other promptly upon the receipt of any comments from any Governmental Entity in
connection with any filing made pursuant hereto and of any request for
amendments or supplements to any Antitrust Filing or Other Filing or for
additional information and shall supply the other with copies of all
correspondence between such Party or any of its representatives, on the one
hand, and any Governmental Entity, on the other hand, with respect to the Merger
or any Antitrust Filing or Other Filing. Each of Purchaser, Merger Sub and the
Company shall cause all documents that it is responsible for filing with any
Governmental Entity to comply in all material respects with all Legal
Requirements. Whenever any event occurs which is required to be set forth in an
amendment or supplement to any Antitrust Filing or Other Filing, Purchaser or
the Company, as the case may be, shall promptly inform the other of such
occurrence and cooperate in filing such amendment or supplement with the
appropriate Governmental Entity. Purchaser and the Company shall each pay fifty
percent (50%) of any and all filing fees, assessments or charges imposed by any
Governmental Entity in connection with any Antitrust Filings or Other Filings.
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5.8 Disclosure. Prior to the Effective Time, each Party shall give prompt
notice to the other Parties of: (a) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which is likely to cause any
representation or warranty of such Party contained in this Agreement to be
untrue or inaccurate in any Material respect at or prior to the Effective Time,
and (b) any failure of such Party to comply with or satisfy, in any Material
respect, any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.8 shall not (i) limit or otherwise affect any remedies available
to the Party receiving such notice or (ii) constitute an acknowledgement or
admission of a breach of this Agreement. In addition, until the Closing, the
Company may from time to time deliver to Purchaser such additions to or
modifications of any section of the Disclosure Schedule necessary to make the
information set forth therein and in the Sections and subsections of this
Agreement true, accurate and complete in all Material respects; provided,
however, that such supplemental disclosure shall not be deemed to be included in
the Company's representations for purposes of satisfying the condition to
Closing in Section 8.3(a) unless accepted (or not objected to) by Purchaser, in
which case such additional disclosures shall be deemed to modify and supplement
the Company's representations for all purposes hereunder.
5.9 Employee Benefit Plans. For a period of six (6) months after the
Effective Time, Purchaser and the Surviving Corporation shall either (i)
maintain in effect, on the same terms and conditions as shall be in effect
immediately prior to the Effective Time, the Plans that are "group health plans"
subject to Section 4980B of the Code in which any Company Employee shall
participate as of immediately prior to the Effective Time or (ii) provide
substantially equivalent group health benefits to the Company Employees (and
other covered persons). Group health benefits under a plan shall not be
"substantially equivalent" for purposes of this Section 5.9 unless such plan
shall (to the extent applicable) (x) recognize expenses and claims that were
incurred by the Company Employees (and other covered persons) in the year in
which the Effective Time occurs for purposes of computing deductible amounts,
co-payments or other limitations on coverage under such plan; (y) provide
coverage for pre-existing health conditions of any Company Employee (and other
covered persons), except to the extent that such pre-existing condition would
have been excluded under the terms of the Plan in effect immediately prior to
the Effective Time; and (z) take into account the service of the Company
Employee for the Company or any of its Subsidiaries prior to the Effective Time
for eligibility, vesting, benefit computation, accrual and other purposes.
Nothing in this Section 5.9 shall require the inclusion of any Company Employee
(or any other covered person) in any benefit plan of Purchaser. Nothing in this
Section 5.9 shall obligate the Surviving Corporation to employ any person for
any period of time after the Closing, and this Section 5.9 shall not be
construed to limit the ability of the Surviving Corporation to alter the terms
and conditions of, or terminate, the employment of any person (other than with
respect to benefits as provided herein).
5.10 Indemnification, Exculpation and Insurance Plans.
(a) Purchaser and Merger Sub agree that all rights to
indemnification and exculpation (including the advancement of expenses) from
liabilities for acts or omissions occurring at or prior to the Effective Time
(including with respect to the transactions contemplated hereby) now existing in
favor of the current or former directors or officers of the Company or its
Subsidiaries as provided in the Company's Certificate of Incorporation and
By-Laws or other organizational documents of a Subsidiary, or in any written
indemnification agreement with the officers, directors or agents of the Company
or its Subsidiaries, shall be assumed by the Surviving Corporation in the
Merger, without further action, as of the Effective
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Time and shall survive the Merger and shall continue in full force and effect in
accordance with their terms, and Purchaser shall cause the Surviving Corporation
to honor all such rights. The Certificate of Incorporation and By-Laws of the
Surviving Corporation will contain provisions with respect to exculpation and
indemnification (including the advancement of expenses) that are at least as
favorable to the current or former directors, officers, employees and agents of
the Company as those contained in the Certificate of Incorporation and By-Laws
of the Company as in effect on the date hereof, which provisions will not be
amended, repealed or otherwise modified for a period of seven years after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, immediately prior to the Effective Time, were directors,
officers, employees or agents of the Company, unless such modification is
required by law.
(b) On or before the Closing Date, Purchaser shall cause the
Surviving Corporation to obtain, at Purchaser's expense, a non-cancelable runoff
insurance policy for a period of not less than six (6) years after the Closing
Date to provide insurance coverage (which coverage shall be at least as
favorable to the insureds as the coverage now in effect) for events, acts or
omissions occurring on or prior to the Closing Date for all persons who were
directors or officers of the Company on or prior to the Closing Date.
(c) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, or otherwise dissolves, then, and in each
such case, Purchaser shall cause proper provision to be made so the successors
and assigns of the Surviving Corporation assume the obligations set forth in
this Section 5.10.
(d) The provisions of this Section 5.10: (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party and his or
her heirs, executors and legal representatives and (ii) are in addition to, and
not in substitution for, any other rights to indemnification or contribution
that any such person may have by contract or otherwise; provided, however, that
such third parties shall have no rights or remedies under this Agreement until
after the Effective Time.
5.11 Company 401(k) Plan(s). Prior to the Effective Time, the Company
shall terminate its 401(k) plan(s) effective as of the date immediately prior to
the Effective Time, but contingent on the Effective Time. Purchaser hereby
agrees that it will use its commercially reasonable efforts to cause its 401(k)
plan to accept direct rollovers of notes representing participant loans that
constitute "eligible rollover distributions" within the meaning of Section
402(c) of the Code from or relating to the Company's 401(k) plan(s) by employees
of the Company who become employees of Purchaser or Merger Sub by reason of the
transactions contemplated hereby. Rollover amounts contributed to Purchaser's
401(k) plan in accordance with this Section 5.11 shall at all times be one
hundred percent (100%) vested and shall be invested in accordance with the
provisions of Purchaser's 401(k) plan.
5.12 Takeover Statutes. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated hereby, each of
the Parties shall grant such approvals and take such lawful actions as are
necessary to eliminate or minimize the effects of such Takeover Statute and any
regulations promulgated thereunder on such transactions.
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5.13 Saxon Divestiture.
(a) Divestiture. Prior to the Closing, the Company intends to sell
either its ownership interest in Saxon or all of Saxon's assets, or,
alternatively, at the Company's sole discretion the equity interests of Saxon
may be distributed to the Company's Stockholders by means of a dividend (i.e., a
"spin-off"), which spin-off the Company shall be required to effect if the sale
of Saxon or its assets shall not have occurred prior to Closing (referred to
herein as the "Saxon Divestiture").
(b) License. The Saxon IP shall remain subject to each of those
certain Patent License Agreements, dated May 4, 2007 and March 24, 2006, by and
between Legerity, Inc. and Saxon, as amended in accordance with this Section
(the "Saxon License Agreements"). Within five days of the date hereof, and
before entering into the Saxon Divestiture, the Company shall: (i) have each
such Saxon License Agreement amended to specify that such agreement may be
assigned to Purchaser and its Affiliates (whether now existing or in the future
becoming so) after the closing hereunder; and (ii) if the Saxon IP encompasses
IP in addition to the IP included in the Saxon License Agreements, the May 4,
2007 Saxon License Agreement shall be further amended to include such additional
IP.
(c) Other Agreements. In connection with the Saxon Divestiture, the
Company and its Subsidiaries also will be granted a covenant not to xxx with
respect to the Saxon IP and a release, in form and substance reasonably
satisfactory to the Purchaser, releasing the Purchaser, the Company and its
Subsidiaries from any and all claims, actions and all other liabilities which
the acquiror of the Saxon IP then has or ever will have against the Purchaser,
the Company or such Subsidiaries arising out of the Saxon Divestiture or the
Saxon Divestiture Agreements (except to the limited extent of escrows
established as provided below). The Saxon IP shall be subject to such Saxon
License Agreements and covenant, regardless of any future transfer thereof or
any other right granted therein. The purchaser of the ownership interest in
Saxon or all of Saxon's assets shall acknowledge in writing the Saxon License
Agreements and such covenant, and any future purchaser of or holder of right in
or to any such Saxon IP shall be obligated to acknowledge in writing such
licenses and covenant if reasonably requested by Purchaser (or its successors
under the license terms).
(d) Saxon Divestiture Agreements; Escrow for Liabilities. Prior to
execution and delivery thereof by Saxon, the Company or any Subsidiary of the
Company, the Company shall provide Purchaser with copies of all agreements and
documents to be entered into or executed by Saxon, the Company or any Subsidiary
of the Company in connection with the Saxon Divestiture (collectively, the
"Saxon Divestiture Agreements"). The Saxon Divestiture Agreements shall be in
form and substance reasonably satisfactory to Purchaser, provided that in no
event shall the Company or any of its Subsidiaries, or, if it is to remain as a
subsidiary of the Company following the Closing, Saxon, have any indemnification
or other obligation or liability, contingent or otherwise, under or arising from
or related to the Saxon Divestiture Agreements, any of the Saxon IP or otherwise
following the Saxon Divestiture. Notwithstanding anything to the contrary stated
herein,
(A) if the Saxon Divestiture Agreements contain any representations,
warranties, covenants or agreements of the Company or any of its
Subsidiaries (including, for purposes of this provision only, Saxon if it
remains a subsidiary of
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Purchaser or the Surviving Corporation following the Merger) that survive
the closing the Saxon Divestiture and that impose or reasonably could be
expected to impose any indemnification obligation, liability, loss, cost
or expense on Purchaser, the Company or any of its Subsidiaries
(collectively, "Liability") and, notwithstanding the inclusion of such
provisions Purchaser has deemed the Saxon Divestiture Agreements
satisfactory as contemplated above, then
(i) if the Saxon Divestiture Agreements provide for an overall
cap on the indemnification obligations of Saxon, the Company or any
of its Subsidiaries in favor of the purchaser thereunder (the "Saxon
Indemnity Cap"), such portion of the cash proceeds from the Saxon
Divestiture as is equal to the Saxon Indemnity Cap shall be
deposited into escrow pursuant to the terms of an escrow agreement,
in form and substance substantially consistent with the
Indemnification Escrow Agreement, to secure any claims that may be
made against Purchaser, the Company or any of its Subsidiaries, and
(ii) if the Saxon Divestiture Agreements do not provide for an
overall cap on such indemnification, such portion of such cash
proceeds as is equal to the dollar amount of the mutually agreed
(which mutual agreement will not be unreasonably withheld by the
Company or Purchaser) potential Liability under the Saxon
Divestiture Agreements shall be so deposited, in each case for a
period of time equal to the post-closing period during which any
such representations, warranties, covenants and agreements or
potential Liability survive under the terms of the applicable Saxon
Divestiture Agreements; and
(B) The Saxon Divestiture Agreements shall expressly provide that
Saxon (or the Company or any of its Subsidiaries, as the case may be),
shall have the right to terminate the Saxon Divestiture Agreements if for
any reason the closing thereunder shall not have occurred on or before
July 20, 2007.
(e) Spin-off. Notwithstanding the foregoing, in the event that the
Company and Purchaser are unable to reach agreement regarding the matters in
this Section 5.13, the Company shall effect the Saxon Divestiture prior to
Closing by means of a dividend or distribution of Saxon's equity interests to
the Company Stockholders; provided that the spun-off entity remains subject to
the Saxon License Agreements.
Article 6
INDEMNIFICATION AND SURVIVAL
6.1 Survival Period. The representations and warranties of Purchaser,
Merger Sub and the Company contained in this Agreement or in any certificate
delivered at the Closing shall survive the Closing Date and continue in effect
for a period of 12 months after the Closing Date except for representations and
warranties of the Company set forth in Sections 2.6 (Capitalization), 2.15
(Employee Benefit Plans), 2.16 (Tax Matters) and 2.19 (Environmental Compliance)
and except for the obligation to indemnify pursuant to Article 7, which shall
survive for the period of the applicable statutes of limitation (as applicable,
the "Survival Period"), after which such representations and warranties shall
terminate immediately. Claims
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based upon or arising out of such representations and warranties may only be
asserted on or before the expiration of the applicable Survival Period. All
covenants and agreements that by their terms are to be performed after the
Closing shall expire upon the completion of performance or waiver thereof.
Claims based upon or arising out of covenants and agreements of the Company to
be performed at or prior to the Closing may only be asserted on or before the
expiration of the applicable Survival Period. No knowledge of, or investigation
by or on behalf of, any Party shall constitute or effectuate a waiver of such
Party's rights to indemnification under this Article 6. The termination of
representations, warranties, covenants and agreements provided in this Section
6.1 shall not affect the rights of any Indemnified Party (as defined below) in
respect of any claim made by any Indemnified Party in a writing received by the
Indemnifying Party (as defined below) pursuant to and in compliance with the
provisions of this Article 6 and Article 7 prior to the expiration of the
applicable Survival Period. Except to the extent provided herein, the Parties
intend to shorten the statute of limitations and agree that no claims or causes
of action based upon, directly or indirectly, any of the representations,
warranties, covenants or agreements terminated as provided in this Section 6.1
may be brought after the expiration of the applicable Survival Period. No
representation, warranty, covenant or agreement of any Party contained in this
Agreement shall survive any termination of this Agreement except as provided in
Section 9.2.
6.2 Indemnification of Purchaser. Subject to the limitations set forth in
this Article 6, Purchaser, the Surviving Corporation, their respective
directors, officers, employees, agents and Affiliates, and the respective heirs,
executors, personal representatives, successors and assigns of the foregoing
Persons (the "Purchaser Indemnified Parties"), shall be indemnified and held
harmless by the Company Stockholders, severally in accordance with their
respective Pro Rata Portions and not jointly, from and against and in respect of
all Losses arising out of or resulting from (i) any breach of, or inaccuracy in,
any representation or warranty contained in Article 2 of this Agreement, the
Company Officer's Certificate or the Secretary's Certificate; (ii) any breach of
any covenant or agreement of the Company contained in this Agreement; (iii)
indemnification for Taxes under Section 7.1; and (iv) any matter arising out of
or relating to the Saxon Divestiture.
6.3 Indemnification of the Company Stockholders. Subject to the
limitations set forth in this Article 6, the Company Stockholders, their
respective directors, officers, employees, agents, Subsidiaries and Affiliates,
and the respective heirs, executors, personal representatives, successors and
assigns of the foregoing Persons (the "Company Stockholder Indemnified
Parties"), shall be indemnified and held harmless by Purchaser and the Surviving
Corporation from and against and in respect of all Losses arising out of or
resulting from (i) any breach of, or inaccuracy in, any representation or
warranty contained in Article 3 of this Agreement or any certificate delivered
by Purchaser or Merger Sub at the Closing, (ii) indemnification for Taxes under
Article 7, or (iii) any breach of any covenant or agreement of Purchaser or
Merger Sub contained in this Agreement.
6.4 Procedure for Claims between Parties. If a claim for Losses is to be
made by a Person entitled to indemnification hereunder (an "Indemnified Party"),
the Indemnified Party shall give written notice (a "Claim Notice"), in the case
of claims pursuant to Section 6.2 and Section 7.1, to the Company Stockholder
Representative, and in the case of claims pursuant to Section 6.3, to Purchaser
(each Person so notified being referred to as the "Indemnifying Party") promptly
after the Indemnified Party becomes aware of any fact, condition or event which
may give rise to Losses for which indemnification may be sought under this
Article 6 or
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Article 7. Any failure to provide any such Claim Notice in a timely manner to
the Indemnifying Party shall not relieve the Indemnifying Party of any liability
hereunder, except to the extent the Indemnifying Party is actually prejudiced by
such failure. Each Claim Notice shall set forth: (i) the specific
representation, warranty, covenant or agreement alleged to have been breached;
(ii) the nature and amount of the claim asserted, together with sufficient facts
relating thereto so that the Indemnifying Party may reasonably evaluate such
claim; and (iii) a calculation or good faith estimate, if such can be reasonably
calculated, of the aggregate Losses to which the Indemnified Party believes it
is entitled in connection with the claim. If the Indemnifying Party, within
twenty (20) business days after receipt of the Claim Notice, does not give
written notice to the Indemnified Party stating its intent to contest such
claim, the claim shall be deemed accepted and the amount of the claim shall be
deemed a valid claim, and the Indemnifying Party shall, within ten (10) business
days after expiration of the prior notice period, deliver to the Indemnified
Party the amount of the Losses with respect to the claim. If the Indemnifying
Party shall contest the assertion of a claim by giving such written notice to
the Indemnified Party within such period (a "Dispute Notice"), then the Parties
shall act in good faith to reach agreement regarding such claim.
6.5 Arbitration.
(a) If the Indemnified Party and the Indemnifying Party shall not
have reached agreement regarding the claim that is the subject of a Dispute
Notice within thirty (30) days of delivery of the Dispute Notice, then each of
the Indemnified Party and the Indemnifying Party shall have the right, by
delivery of written notice to the other (the "Arbitration Notice"), to submit
the matter to binding arbitration in Austin, Texas. Such matter shall then be
settled by three arbitrators in accordance with the Commercial Arbitration Rules
then in effect of the American Arbitration Association (the "AAA Rules"). Each
of the Indemnified Party and the Indemnifying Party shall designate one
arbitrator within thirty (30) days of the delivery of the Arbitration Notice.
The Indemnified Party and the Indemnifying Party shall cause such designated
arbitrators mutually to agree upon and designate a third arbitrator; provided,
however, that (i) failing such agreement within sixty (60) days of delivery of
the Arbitration Notice, the third arbitrator shall be appointed in accordance
with the AAA Rules and (ii) if either the Indemnified Party or the Indemnifying
Party shall fail to timely designate an arbitrator, the dispute shall be
resolved by the one arbitrator timely designated. The fees and expenses of
designated arbitrators and the third arbitrator, if any, shall be borne equally
by the Indemnified Party and the Indemnifying Party (and, if the Company
Stockholder Representative shall be the Indemnifying Party, the Company
Stockholder Representative's portion of such fees and expenses shall be paid
exclusively by the Company Stockholders). The Indemnified Party and the
Indemnifying Party shall cause the arbitrators to decide the matter to be
arbitrated pursuant hereto within sixty (60) days after confirmation of the
appointment of the last arbitrator. The arbitrators' decision shall relate
solely to whether the Indemnified Party is entitled to receive the claimed
damages (or a portion thereof) pursuant to the terms of this Agreement. The
final decision of the majority of the arbitrators shall be furnished to the
Indemnified Party and the Indemnifying Party in writing and shall constitute a
conclusive, final and non-appealable determination of the issue in question,
binding upon the Indemnified Parties and the Indemnifying Parties, as
applicable, and their successors and assigns. Such decision may be used in a
court of law only for the purpose of seeking enforcement of the arbitrators'
award. Any award granted by the arbitrators will be subject to the limitations
contained in this Article 6.
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(b) Each of the Parties hereby irrevocably and unconditionally
waives its right to file claims in any court of law or equity (other than to
enforce the arbitrators' award) with respect to any and all disputes arising out
of or from or relating to the transactions contemplated hereby. Each of the
Parties hereby irrevocably and unconditionally consents to submit any and all
such disputes to the exclusive jurisdiction of the American Arbitration
Association.
(c) The Parties hereby exclude and waive any right of appeal to any
court of law or equity on the merits of any and all disputes. Subject to Section
10.6, the provisions of this Section 6.5 may be enforced in any court having
jurisdiction over the arbitrators' award or any of the Parties or any of their
respective assets, and judgment on the award (including equitable remedies)
granted in any arbitration hereunder may be entered in any such court.
(d) The prevailing Party in any arbitration (or any action, suit or
proceeding to enforce the arbitrators' award) shall be entitled to recover such
Party's reasonable costs and attorneys' fees incurred in connection with such
arbitration (or such action, suit or proceeding).
6.6 Defense of Third-Party Claims. If any action, suit or proceeding is
filed or any claim is made against any Indemnified Party by a third party, and
such Indemnified Party may be entitled to indemnification under this Agreement
with respect to such claim, such Indemnified Party shall give written notice
thereof to the Indemnifying Party as promptly as practicable (and in any event
within five (5) calendar days after receipt of service of process or other
notice of such action, suit, proceeding or claim). The failure of any
Indemnified Party to give timely notice hereunder shall not affect any rights to
indemnification hereunder, except to the extent that the Indemnifying Party is
actually prejudiced by such failure. After such notice, the Indemnifying Party
shall be entitled, if it so elects and at its own expense (subject to the
limitations set forth in this Article 6), (a) to take control of the defense and
investigation of such action, suit, proceeding or claim; (b) to employ and
engage attorneys of its own choice to handle and defend the same; provided,
however, that the Indemnified Party may participate in any action, suit,
proceeding or claim with attorneys of its own choice and at its own expense; and
provided further that if the named parties to such action, suit, proceeding or
claim include both the Indemnified Party and the Indemnifying Party (or, if the
Company Stockholder Representative is the Indemnifying Party, any Company
Stockholder), and the Indemnified Party has been advised in writing by its
counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or in addition to those available to
the Indemnifying Party, the Indemnified Party shall be entitled, at the
Indemnifying Party's expense (subject to the limitations set forth in this
Article 6), to separate counsel of its own choosing; and (c) to negotiate,
compromise or settle such claim, which compromise or settlement shall be made
only with the prior written consent of the Indemnified Party, such consent not
to be unreasonably withheld. The Indemnified Party shall cooperate with the
Indemnifying Party and its attorneys in the investigation, trial and defense of
such action, suit, proceeding or claim and any appeal arising therefrom. In the
case of Purchaser and the Surviving Corporation, such cooperation shall include
the retention, and the provision to the Company Stockholder Representative upon
request, of records and information reasonably relevant to such third-party
claim, and making employees of Purchaser and the Surviving Corporation available
on a mutually convenient basis to provide additional information and explanation
of any materials provided hereunder. The Parties shall cooperate with each other
in any notifications to insurers. If the Indemnifying Party fails to assume the
defense of such claim within fifteen (15) calendar days after receipt of notice
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of the third-party action, suit, proceeding or claim, the Indemnified Party
against which such claim has been asserted will (upon delivering notice to such
effect to the Indemnifying Party) have the right to undertake, at the
Indemnifying Party's expense (subject to the limitations set forth in this
Article 6), the defense, compromise or settlement of such claim on behalf of the
Indemnifying Party; provided, however, that such claim shall not be compromised
or settled without the prior written consent of the Indemnifying Party, such
consent not to be unreasonably withheld. If the Indemnified Party assumes the
defense of the claim, the Indemnified Party will keep the Indemnifying Party
reasonably informed of the progress of any such defense, compromise or
settlement. The Indemnifying Party shall be liable (subject to the limitations
set forth in this Article 6 and Article 7) for any settlement of any action,
suit, proceeding or claim effected pursuant to and in accordance with this
Section 6.6 and for any final judgment (subject to any right of appeal), and the
Indemnifying Party shall indemnify and hold harmless (subject to the limitations
set forth in this Article 6 and Article 7) an Indemnified Party from and against
any Losses by reason of such settlement or judgment. No Indemnified Party shall
take any action the purpose of which is to prejudice the defense of any claim
subject to indemnification hereunder or to induce a third party to assert a
claim subject to indemnification hereunder.
6.7 Limitation on Obligations of the Company Stockholder Representative.
If the Company Stockholder Representative is the Indemnifying Party, (a) the
Company Stockholder Representative shall be indemnified and held harmless by the
Company Stockholders severally (and not jointly) for all Losses incurred by or
on behalf of the Company Stockholder Representative pursuant to this Article 6
except where incurred as a result of the Company Stockholder Representative's
fraud, willful misconduct or gross negligence and (b) if at any time the Company
Stockholders fail to pay or provide for payment of any and all Losses so
incurred by the Company Stockholder Representative, the Company Stockholder
Representative shall have no further obligation to pursue any arbitration,
defend any third-party claim or otherwise to take any action whatsoever pursuant
to this Article 6. For purposes of clarity, in no event shall the Company
Stockholder Representative have any liability or obligation to any Indemnified
Party except out of, and solely to the extent of, amounts paid by or provided
for payment by the Company Stockholders.
6.8 Limitations on Indemnification Obligations.
(a) The Purchaser Indemnified Parties shall not be entitled to
recover for any Losses unless and until such time as the Losses in the aggregate
for which the Purchaser Indemnified Parties are entitled to be indemnified
hereunder, including the indemnification for Taxes set forth in Article 7,
exceed $250,000 (the "Purchaser Loss Threshold"), at which time the Purchaser
Indemnified Parties shall be entitled to recover all such Losses in excess of
the amount of the Purchaser Loss Threshold. Except for those Losses which arise
out of the indemnification for Taxes under Article 7 or a breach of the
representations and warranties contained in Section 2.1 (Organization), Section
2.2 (Subsidiaries), Section 2.4 (Execution and Delivery), Section 2.6
(Capitalization), and Section 2.16 (Tax Matters) or actual fraud, in no event
shall the Losses for which the Purchaser Indemnified Parties are entitled to be
indemnified hereunder exceed, with respect to any Company Stockholder, an amount
equal to $6.0 million, and in any event Losses with respect to the
indemnification for Taxes under Article 7 or with respect to breaches of
Sections 2.1 (Organization), 2.2 (Subsidiaries), 2.4 (Execution and Delivery),
2.6 (Capitalization) and 2.16 (Tax Matters) of this Agreement and actual fraud
shall not exceed with respect to a Company Stockholder such Company
Stockholder's Pro Rata Portion of the Common Merger Consideration actually
received by such Company Stockholder.
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Each Loss for which the Purchaser Indemnified Parties are entitled to be
indemnified hereunder shall be reduced by (i) the amount of any insurance
proceeds which the Purchaser Indemnified Parties recover with respect to such
Loss; (ii) any indemnity, contribution or other similar payment which the
Purchaser Indemnified Parties receive from any third party with respect to such
Loss; and (iii) an amount equal to any net Tax Benefits of the Purchaser
Indemnified Parties attributable to such Loss. The liability of any Company
Stockholder for damages under this Agreement shall be several and not joint, and
any assertion of Losses against any Company Stockholder may only be made pro
rata based on such Company Stockholder's Pro Rata Portion and limited to the
Common Merger Consideration actually received by such Company Stockholder. If a
Tax Benefit attributable to a Loss is realized by the Purchaser Indemnified
Parties after the taxable year of payment of the Loss, Purchaser shall pay to
each Company Stockholder an amount in cash equal to such stockholder's Pro Rata
Portion of the amount of such Tax Benefit.
(b) Each Loss for which the Company Stockholder Indemnified Parties
are entitled to be indemnified hereunder shall be reduced by (i) the amount of
any insurance proceeds which the Company Stockholder Indemnified Parties recover
with respect to such Loss; and (ii) any indemnity, contribution or other similar
payment which the Company Stockholder Indemnified Parties receive from any third
party with respect to such Loss.
(c) This Section 6.8 is in no way intended to affect the obligation
of Purchaser to deliver the Merger Consideration and the aggregate amount of
Credit Agreement Debt being paid by Purchaser at Closing in accordance with the
terms of this Agreement.
(d) Notwithstanding anything to the contrary contained herein, in
the Indemnification Escrow Agreement, the Working Capital Escrow Agreement, or
the Stockholder Representative Agreement, and in any of the agreements
contemplated hereby or thereby, the maximum aggregate liability of any Company
Stockholder to the Purchaser and Merger Sub, whether by reason of
indemnification, reimbursement or other payment obligation of any type, any
liability in tort, contract or otherwise, shall never exceed the amount of
Common Merger Consideration actually received by such Company Stockholder.
6.9 No Duplication; Exclusive Remedy.
(a) Any liability for indemnification hereunder and under Article 7
shall be determined without duplication of recovery by reason of the state of
facts giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement or constituting a breach of a
representation under Section 2.16 and an indemnification obligation under
Article 7. Without limiting the foregoing, amounts paid in accordance with
Section 1.13 with respect to a Working Capital Deficit shall not be subject to
duplication (e.g., in the event or to the extent that an inaccuracy in the
Company's financial statement representations gave rise to such adjustment).
(b) From and after the Closing, the sole remedy of the Purchaser
Indemnified Parties and the Company Stockholder Indemnified Parties with respect
to any breach of, or inaccuracy in, a representation or warranty contained in
this Agreement, the Company Officer's Certificate, the Company Secretary's
Certificate or any certificate delivered by Purchaser or Merger Sub at the
Closing, or any breach of any covenant or agreement in this Agreement shall
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be pursuant to the indemnification provisions set forth in this Article 6 and
Article 7. The foregoing sentence is in no way intended to affect the obligation
of Purchaser to deliver the Merger Consideration and the aggregate amount of
Credit Agreement Debt being paid by Purchaser at Closing in accordance with the
terms of this Agreement.
(c) This Section 6.9 shall not affect the rights or remedies of
third-party beneficiaries under Section 5.9 and Section 5.10; provided, however,
that such third parties shall have no rights or remedies under this Agreement
until after the Effective Time.
6.10 No Additional Representations or Warranties. Purchaser has conducted
its own independent investigation, review and analysis of the business,
operations, properties, premises, personnel, assets, liabilities, results of
operations, financial condition, software, technology and prospects of the
Company, which investigation, review and analysis was done by Purchaser and, to
the extent Purchaser deemed appropriate, by Purchaser's representatives.
Purchaser acknowledges that it and its representatives have been provided access
to the properties, premises, personnel and records of the Company which
Purchaser deemed sufficient for such purpose. In entering into this Agreement,
Purchaser acknowledges that it has relied solely upon the aforementioned
investigation, review and analysis and not on any representations, warranties or
statements of the Company, the Company Stockholders or their respective
representatives, except the representations and warranties of Company
specifically set forth in Article 2 of this Agreement.
Article 7
CERTAIN TAX MATTERS
7.1 Tax Indemnification. The Company Stockholders, severally in accordance
with their respective Pro Rata Portions and not jointly, shall indemnify the
Surviving Company and Purchaser and hold them harmless from and against without
duplication, any Losses, claim, liability, expense, or other damage attributable
to (i) all Taxes (or the non-payment thereof) of the Company and its
Subsidiaries for all taxable periods ending on or before the Closing Date and
the portion through the end of the Closing Date for any taxable period that
includes (but does not end on) the Closing Date ("Pre-Closing Tax Period"), (ii)
all Taxes of any member of an affiliated, consolidated, combined or unitary
group of which the Company or any of its Subsidiaries (or any predecessor of any
of the foregoing) is or was a member at or prior to the Effective Time,
including pursuant to Treas. Reg. ss. 1.1502-6 or any analogous or similar
state, local, or foreign law or regulation, and (iii) any and all Taxes of any
person (other than the Company and its Subsidiaries) imposed on the Company or
any of its Subsidiaries as a transferee or successor, by contract or pursuant to
any law, rule, or regulation, which Taxes relate to an event or transaction
occurring before the Closing; provided, however, that (A) in the case of clauses
(i), (ii), and (iii) above, the Company Stockholders shall be liable only to the
extent that such Taxes exceed the amount, if any, reserved for such Taxes
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) and taken into account in calculating
the Closing Working Capital pursuant to Section 1.13; and (B) the Company
Stockholders shall not be liable for any Taxes attributable to actions not in
the ordinary course of business and not contemplated by this Agreement taken by
Purchaser or the Company after the Effective Time. The Company Stockholders
shall, severally and not jointly, be liable to Purchaser for such Company
Stockholder's Pro Rata Portion of any Taxes of Company or its Subsidiaries that
are the responsibility of Company Stockholders pursuant to this
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Section 7.1 after determination and resolution pursuant to the procedures and
subject to the limitations set forth under Article 6. During any period in which
the Indemnification Escrow is in effect, Purchaser shall first be reimbursed for
such amounts from the Indemnification Escrow Amount, and only after exhausting
that amount, from the Company Stockholders, severally in accordance with their
respective Pro Rata Portions.
7.2 Straddle Period. In the case of any taxable period that includes (but
does not end on) the Closing Date (a "Straddle Period"), the amount of any Taxes
based on or measured by income or receipts of Company and its Subsidiaries for
the Pre-Closing Tax Period shall be determined based on an interim closing of
the books as of the close of business on the Closing Date (and for such purpose,
the taxable period of any partnership or other pass-through entity in which
Company or any of its Subsidiaries holds a beneficial interest shall be deemed
to terminate at such time); and the amount of other Taxes of Company and its
Subsidiaries for a Straddle Period that relates to the Pre-Closing Tax Period
shall be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in such Straddle Period.
7.3 Responsibility for Filing Tax Returns. Purchaser shall in good faith
prepare or cause to be prepared and timely file or cause to be timely filed all
Tax Returns for Company and its Subsidiaries relating to a Pre-Closing Tax
Period or a Straddle Period that are filed after the Closing Date. Purchaser
shall permit the Company Stockholder Representative to review and comment on
each such Tax Return and the records and work papers used in the preparation
thereof. All such Tax Returns shall be prepared on a basis consistent with the
most recent Tax Returns unless Purchaser determines that there is no reasonable
basis for such position, and shall be true, correct and complete in all material
respects. Purchaser shall make such changes to such Tax Returns as the Company
Stockholder Representative shall reasonably request (unless there is no
reasonable basis for such position), and shall not file such Tax Returns without
the Company Stockholder Representative's consent, which shall not be
unreasonably withheld, delayed or conditioned.
7.4 Cooperation on Tax Matters.
(a) Purchaser, the Surviving Corporation and its Subsidiaries, and
the Company Stockholder Representative shall cooperate fully, as and to the
extent reasonably requested by the other Party, in connection with the filing of
Tax Returns pursuant to this Section 7.4 and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include the retention
and (upon the other Party's request) the provision of records and information
that are reasonably relevant to any such audit, litigation or other proceeding
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
Surviving Corporation and its Subsidiaries agree (A) to retain all books and
records with respect to Tax matters pertinent to the Surviving Corporation and
its Subsidiaries relating to any taxable period beginning before the Closing
Date until the expiration of the statute of limitations (and, to the extent
notified by Company Stockholder Representative or Purchaser, any extensions
thereof) of the respective taxable periods, and to abide by all record retention
agreements entered into with any taxing authority, and (B) to give the other
Party reasonable written notice prior to transferring, destroying or discarding
any such books and records and, if the other Party so requests, the Surviving
Corporation and its Subsidiaries or the Company Stockholder Representative, as
the case may be, shall allow the other Party to take possession of such books
and records.
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(b) Purchaser and the Company further agree, upon request, to use
their reasonable best efforts to obtain any certificate or other document from
any governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not limited
to, with respect to the transactions contemplated hereby).
(c) Purchaser and the Company Stockholder Representative further
agree, upon request, to provide the other Party with all information that either
Party may be required to report pursuant to Code Section 6043A or the Treasury
Regulations promulgated thereunder.
(d) It is understood that following the Effective Time the Company
will be a wholly owned Subsidiary of Purchaser and that as a result Purchaser
shall be liable for any breach by the Company or its Subsidiaries of their
respective obligations under this Article 7.
7.5 Tax-Sharing Agreements. All Tax-sharing agreements or similar
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Effective Time and, after the Effective Time, the
Surviving Company and its Subsidiaries shall not be bound thereby or have any
liability thereunder.
7.6 Certain Taxes and Fees. Any sales or other similar Tax and any
transfer, recording or similar fee imposed on the Company with respect to the
transactions provided for in this Agreement, and any interest or penalties
related thereto, shall be shared on a 50/50 basis by the Company and by
Purchaser; provided, however, the Company shall be responsible for any Taxes
imposed on the Company or its Subsidiaries with respect to a transfer of Closing
Cash occurring on or before the Closing Date contemplated by Section 8.3(n) of
this Agreement. With respect to the Company's share of such Taxes and fees, such
Taxes and fees, including any interest or penalties related thereto, shall
either be paid by the Company prior to the Closing Date or shall be accrued for
by the Company as of the Closing Date and be considered in determining the
Closing Working Capital.
7.7 Refunds. Purchaser or the Surviving Corporation, as the case may be,
shall pay to the Company Stockholders in accordance with their respective Pro
Rata Portion, in cash any amount received as a refund, rebate, credit or set-off
of Taxes for which the Company Stockholders are responsible pursuant to this
Article 7 within fifteen (15) business days of such receipt by Purchaser or the
Surviving Corporation, except to the extent that such amount was taken into
account in calculating final Closing Working Capital; provided that (a)
Purchaser may offset its payment obligations under this Section 7.7 with
indemnifiable Tax Losses pursuant to Section 7.1, and (b) the obligation of
Purchaser under this Section 7.7 shall only take effect after the earlier to
occur of (i) amounts of Tax refunds, credits or set-offs so received or offset
against exceed $250,000 or (ii) Purchaser shall have made claims for Losses in
excess of the Purchaser Loss Threshold. Any such payment may, while the
Indemnification Escrow remains in existence, be deposited into the
Indemnification Escrow. Upon termination for the Indemnification Escrow (or
within such 15 business day period if the Indemnification Escrow shall have
already terminated) any such amounts shall be distributed (x) to the Company
Stockholders in accordance with their respective Pro Rata Portions.
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Article 8
CLOSING CONDITIONS
8.1 General Conditions to Obligations to Effect the Merger. The respective
obligations of the Company, Purchaser and Merger Sub 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 the Company and
Purchaser:
(a) Stockholder Approval. The Required Stockholder Vote shall have
been obtained.
(b) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any Legal Requirement or Order which is in
effect and which has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger.
(c) Governmental Consents. All Antitrust Filings and Other Filings
pursuant to Section 5.7 shall have been made or obtained (and all relevant
waiting periods shall have expired or early termination thereof have been
granted).
8.2 Additional Conditions to Obligations of the Company. The obligation 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. Each representation and warranty
of Purchaser and Merger Sub contained in this Agreement shall be true and
correct on and as of the Closing Date with the same force and effect as if made
on the Closing Date. The Company shall have received a certificate with respect
to the foregoing signed on behalf of Purchaser by an authorized officer of
Purchaser.
(b) Agreements and Covenants. Purchaser and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and the Company shall have received a certificate to such
effect signed on behalf of Purchaser by an authorized officer of Purchaser.
(c) Available Funding. Purchaser shall have sufficient immediately
available funds in cash to (i) repay the Credit Agreement Debt, (ii) pay the
Merger Consideration, and (iii) pay any and all other amounts payable pursuant
to this Agreement at the Effective Time and to effect the transactions
contemplated hereby, and shall have deposited with the Exchange Agent the
Payment Fund.
(d) Indemnification Escrow. A counterpart, duly executed by each of
Purchaser and the Indemnification Escrow Agent, of the Indemnification Escrow
Agreement.
(e) Working Capital Escrow. A counterpart, duly executed by each of
Purchaser and the Working Capital Escrow Agent, of the Working Capital Escrow
Agreement.
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(f) Saxon Divestiture. The Company shall have completed the Saxon
Divestiture, subject to and in accordance with Section 5.13; provided that this
shall cease to be a condition to Closing if the Saxon Divestiture shall not have
been consummated prior to July 20, 2007.
8.3 Additional Conditions to Obligations of Purchaser and Merger Sub. The
obligations of Purchaser 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
Purchaser:
(a) Representations and Warranties. Each representation and warranty
of the Company contained in this Agreement (other than those which address
matters only as of a particular date) shall be true and correct in all Material
respects (except that any representation and warranty expressly qualified as to
Materiality or with respect to the Knowledge of the Company or a Company
Material Adverse Effect shall be true and correct in all respects giving effect
to such qualifier) on and as of the date hereof and as of the Closing Date with
the same force and effect as if made on such dates, and each representation and
warranty which addresses matters only as of a particular date shall have been
true and correct in all Material respects (except that any representation and
warranty expressly qualified as to Materiality or with respect to the Knowledge
of the Company or a Company Material Adverse Effect shall be true and correct in
all respects giving effect to such qualifier) as of such particular date as
though made on the date hereof and as of the Closing Date.
(b) Agreements and Covenants. The Company and its Subsidiaries shall
have performed or complied in all Material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date, except that with respect to the covenants and
agreements contained in Section 5.13, the Company and its Subsidiaries shall
have performed or complied with all such agreements or covenants on or prior to
the Closing Date.
(c) Certificates. Purchaser shall have received the Company
Officer's Certificate and the Company Secretary's Certificate.
(d) No Restraints. There shall not be pending any Legal Proceeding
(i) seeking to restrain, prohibit or otherwise interfere with the ownership or
operation by Purchaser or any of its Subsidiaries of all or any Material portion
of the business of the Company or of Purchaser or any of its Subsidiaries or to
compel Purchaser or any of its Subsidiaries to dispose of or hold separate all
or any Material portion of the business or assets of the Company or of Purchaser
or any of its Subsidiaries; (ii) seeking to impose or confirm limitations on the
ability of Purchaser or any of its Subsidiaries effectively to exercise full
rights of ownership of the shares of Company Common Stock (or shares of stock of
the Surviving Corporation), including the right to vote on any matter; or (iii)
seeking to require divestiture by Purchaser or any of its Subsidiaries of any
such shares or any other Material assets.
(e) Legal Opinion. Purchaser shall have received from counsel to the
Company an opinion with respect to the matters set forth in Exhibit D.
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(f) FIRPTA. On or before the Closing Date, the Company shall have
delivered to Purchaser a certification that shares of Company Common Stock are
not "U.S. real property interests" in accordance with Treasury Regulations under
Sections 897 and 1445 of the Code, together with authorization for Purchaser, as
agent for the Company, to deliver a copy of the certification, along with the
appropriate notification, to the IRS on behalf of the Company, in accordance
with the provisions of Section 1.897-2(h)(2) of the Treasury Regulations.
(g) Release of Liens. Against and conditioned on repayment in full
of the amounts owing under the Credit Agreement, each lender party to the Credit
Agreement (or the administrative agent thereunder as applicable) shall have
delivered to Purchaser (i) a payoff letter with respect to such Credit Agreement
and (ii) a completed UCC-3 termination statement releasing all liens against
assets of the Company and its Subsidiaries, in each case to be held in escrow
until receipt by the lenders of all principal and interest outstanding under the
Credit Agreement.
(h) Indemnification Escrow. A counterpart, duly executed by each of
the Company Stockholder Representative and the Indemnification Escrow Agent, of
the Indemnification Escrow Agreement.
(i) Working Capital Escrow. A counterpart, duly executed by each of
the Company Stockholder Representative and the Working Capital Escrow Agent, of
the Working Capital Escrow Agreement.
(j) Employee Agreements. (i) A counterpart, duly executed by each of
the individuals identified on Schedule 8.3(j)(1) attached hereto, of an
employment letter agreement with the Surviving Corporation, in the form agreed
to by each such employee and Purchaser prior to execution of this Agreement.
(ii) In addition, at least 18/30 of the employees identified on Schedule
8.3(j)(2) attached hereto shall have agreed to continue in the employ of the
Surviving Corporation; provided that this condition in part (ii) shall only be
applicable if the terms of employment (including location, responsibilities,
salary and benefits, but excluding the equity-based compensation and bonus) that
have been offered by Purchaser or Surviving Corporation to each such employee
are on terms not materially inconsistent with such employees' current terms of
employment by the Company or its Subsidiaries.
(k) Payment of Company's Fees and Expenses. All Transaction Expenses
shall have been paid in full by the Company and Purchaser shall have received
evidence of such payment to its reasonable satisfaction.
(l) Working Capital Deficit. The Working Capital Deficit, if any,
estimated prior to Closing pursuant to Section 1.13, shall not be greater than
two million dollars ($2,000,000) unless the Company Stockholder Representative
shall have agreed (but without obligation to do so) to an increase in the
Working Capital Escrow Amount to an amount equal to such estimated Working
Capital Deficit.
(m) Dissenting Shares. Purchaser shall have received evidence, in
form and substance reasonably satisfactory to Purchaser, that the number of
Dissenting Shares shall
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constitute no more that five percent (5.0%) of the total number of shares of the
Company Common Stock Shares outstanding immediately prior to the Effective Time.
(n) Deposit of Closing Cash with Exchange Agent. Not later than
three business days prior to the anticipated Closing Date, the Company shall
deliver to Purchaser a certificate of the Company's principal financial officer
which shall set forth an estimate of the Covered Transaction Expense Amount and
an estimate of the amount of cash and cash equivalents of the Company and each
its Subsidiaries as of the Closing Date. The Company shall provide an updated
certificate as of the Closing Date, which shall include evidence satisfactory to
Purchaser of the amount of cash and cash equivalents (if any) that will be
transferred in immediately available funds to the Exchange Agent for
disbursement in accordance with Section 1.11 (such amount referred to herein as
"Closing Cash").
(o) Saxon Divestiture. The Saxon Divestiture shall have been
consummated at least one business day prior to the date set for Closing in
accordance with Section 1.3 on terms consistent with, and no less favorable to
Purchaser and the Surviving Corporation, than those set forth in Section 5.13.
Article 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the Required Stockholder Vote shall have
been obtained:
(a) by the written consent of Purchaser and the Company;
(b) by either the Company or Purchaser if the Merger shall not have
been consummated within sixty (60) days of the date hereof for any reason;
provided, however, that the right to terminate this Agreement under this Section
9.1(b) shall not be available to (i) the Company if any action or failure to act
by the Company shall have been a principal cause of or resulted in the failure
of the Merger to occur on or before such date and such action or failure to act
shall have constituted a material breach of this Agreement, or (ii) Purchaser if
any action or failure to act by Purchaser or Merger Sub shall have been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date and such action or failure to act shall have constituted a
material breach of this Agreement;
(c) by either the Company or Purchaser if a Governmental Entity
shall have issued an Order or taken any other action, in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which Order or other action is final and non-appealable;
(d) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Purchaser or Merger Sub set forth in this
Agreement, or if any representation or warranty of Purchaser or Merger Sub shall
have become untrue, in either case such that the conditions set forth in Section
8.2(a) or Section 8.2(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided that if such breach by Purchaser or Merger Sub or such inaccuracy in
the representations and warranties of Purchaser or Merger Sub is curable by
Purchaser or Merger
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Sub, then the Company may not terminate this Agreement under this Section 9.1(d)
until thirty (30) days after delivery of written notice to Purchaser of such
breach and intent to terminate, provided Purchaser and Merger Sub continue to
exercise commercially reasonable efforts to cure such breach (it being
understood that the Company may not terminate this Agreement pursuant to this
Section 9.1(d) if such breach by Purchaser or Merger Sub is cured during such
thirty (30) day period, or if the Company shall have materially breached this
Agreement); or
(e) by Purchaser, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement, or
if any representation or warranty of the Company shall have become untrue, in
either case such that the conditions set forth in Section 8.3(a) or Section
8.3(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue in any respect,
provided that if such breach by the Company or such inaccuracy in the
representations and warranties of the Company is curable by the Company, then
Purchaser may not terminate this Agreement under this Section 9.1(e) until
thirty (30) days after delivery of written notice to the Company of such breach
and intent to terminate, provided the Company continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Purchaser may
not terminate this Agreement pursuant to this Section 9.1(e) if such breach by
the Company is cured during such thirty (30) day period, or if Purchaser shall
have materially breached this Agreement).
9.2 Notice of Termination; Effect of Termination. Any proper termination
of this Agreement under Section 9.1 will be effective immediately upon the
delivery of written notice of termination by the terminating Party, in the case
of Purchaser, to the Company, and in the case of the Company, to Purchaser (it
being understood that, in the case of any termination pursuant to Section 9.1(d)
or Section 9.1(e) based on any breach or inaccuracy which is curable, delivery
of notice of intent to terminate pursuant to Section 9.1(d) or Section 9.1(e)
shall not be construed as notice of termination). In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect, except (i) as set forth in Section 9.1, this
Section 9.2 and Sections 10.1 through 10.9, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any Party
from liability for any breach of this Agreement. No termination of this
Agreement shall affect the obligations of the Parties contained in the
Confidentiality Agreement, all of the obligations of which shall survive
termination of this Agreement in accordance with its terms.
9.3 Fees and Expenses. Except to the extent otherwise provided in this
Agreement, all fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Party incurring such
expenses whether or not the Merger is consummated.
9.4 Amendment. Subject to applicable Legal Requirements, this Agreement
may be amended by the Parties hereto at any time by execution of an instrument
in writing signed on behalf of Purchaser, Merger Sub and the Company (and, as to
any amendment adversely affecting the rights and obligations of the Company
Stockholder Representative, the Company Stockholder Representative).
9.5 Waiver; Right to Proceed. Any Party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other Parties hereto to such Party; (ii) waive any inaccuracies in the
representations and warranties made to such Party contained herein or in any
document delivered pursuant hereto; and (iii) waive compliance with any of the
agreements or conditions for the benefit of such Party contained
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herein. Any agreement by a Party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed by such Party. Delay
in exercising any right under this Agreement shall not constitute a waiver of
such right.
Article 10
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
Parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a Party as such Party shall specify by like
notice):
(a) if to Purchaser or Merger Sub, to:
Zarlink Semiconductor Inc.
000 Xxxxx Xxxx
Xxxxxx, Xxxxxxx, Xxxxxx X0X 0X0
Facsimile: (000) 000-0000
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Xxxxxxxxxxxx Xxxx & Xxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxx
(b) if to the Company, to:
Legerity Holdings, Inc.
0000 Xxxxxxxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxxx, Xxxxx 00000-0000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx Xxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
Attention: J. Xxxxxxx Xxxxx, Esq.
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(c) if to the Company Stockholder Representative, to:
Navigant Capital Advisors, LLC
0000 Xxxxxxxxx Xx., Xxx. 000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx
10.2 Interpretation; Certain Defined Terms. When a reference is made in
this Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise indicated. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. The words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The headings contained in this Agreement are only for reference
purposes and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
Subsidiaries of such entity, taken as a whole. Reference to the Subsidiaries of
an entity shall be deemed to include all direct and indirect Subsidiaries of
such entity. Reference to an agreement herein is to such agreement as amended in
accordance with its terms up to the date hereof. Reference to a statute herein
is to such statute, as amended. References to "dollars" or "$" mean the lawful
tender of the United States of America.
10.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
Purchaser, Merger Sub, the Company, and the Company Stockholder Representative
and delivered to each of Purchaser and the Company, it being understood that all
such Parties need not sign the same counterpart.
10.4 Entire Agreement; Third-Party Beneficiaries. This Agreement, its
Exhibits and the documents and instruments and other agreements among the
Parties hereto as contemplated by or referred to herein, including the Company
Disclosure Schedule, (a) constitute the entire agreement among the Parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the Parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect and shall survive any termination of
this Agreement in accordance with its terms; and (b) except as expressly set
forth in Section 5.9 and Section 5.10, are not intended to confer upon any other
Person any rights or remedies hereunder.
10.5 Severability. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of the Parties hereto. The Parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.6 Governing Law; Submission to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAWS THEREOF. EXCEPT AS
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PROVIDED IN SECTION 6.5, THE PARTIES (i) AGREE AND CONSENT TO THE JURISDICTION
OF THE DISTRICT COURTS OF XXXXXX COUNTY, TEXAS, AND OF THE UNITED STATES
DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS; (ii) ACKNOWLEDGE THAT SUCH
COURTS SHALL CONSTITUTE PROPER AND CONVENIENT FORUMS FOR THE RESOLUTION OF ANY
ACTIONS AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF; AND (iii)
AGREE THAT SUCH COURTS SHALL BE THE SOLE AND EXCLUSIVE FORUMS FOR THE RESOLUTION
OF ANY ACTIONS AMONG THE PARTIES WITH RESPECT TO THE SUBJECT MATTER HEREOF.
10.7 Rules of Construction; Legal Representation. The Parties agree that
they have been represented by counsel during the negotiation and execution of
this Agreement, which they agree is their joint product, and therefore waive the
application of any Legal Requirement, 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. In connection with the transactions
contemplated by this Agreement, the parties acknowledge and agree that Xxxxxxx
Xxxxx LLP solely represented the Company, and not any of its stockholders,
employees, officers or directors.
10.8 Assignment. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written consent of
Purchaser, Merger Sub and the Company. Subject to the preceding sentence, this
Agreement shall be binding upon and shall inure to the benefit of the Parties
hereto and their respective successors and permitted assigns. Any purported
assignment in violation of this Section 10.8 shall be void.
10.9 Waiver of Jury Trial. EACH OF PURCHASER, MERGER SUB, THE COMPANY AND
THE COMPANY STOCKHOLDER REPRESENTATIVE HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON
CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
ACTIONS OF PURCHASER, MERGER SUB, THE COMPANY OR THE COMPANY STOCKHOLDER
REPRESENTATIVE IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT
HEREOF.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Purchaser, Merger Sub, the Company and the Company
Stockholder Representative have caused this Agreement and Plan of Merger to be
executed by their respective duly authorized officers as of the date first
written above.
PURCHASER:
ZARLINK SEMICONDUCTOR INC.
By: \s\ Xxxxx Xxxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxxx
Title: S.R.V.P, finance and CFO
By: \s\ Xxx XxXxxxxx
--------------------------------------
Name: Xxx XxXxxxxx
Title: S.R.V.P, General counsel
MERGER SUB:
ZLE INC.
By: \s\ Xxxxx Xxxxxxxx
--------------------------------------
Name: Xxxxx Xxxxxxxx
Title: S.R.V.P, finance and CFO
By: \s\ Xxx XxXxxxxx
--------------------------------------
Name: Xxx XxXxxxxx
Title: S.R.V.P, General Counsel
THE COMPANY:
LEGERITY HOLDINGS, INC.
By: \s\Xxxxx Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx
President and Chief Executive Officer
Solely for purposes of agreeing to its appointment and the provisions of
this Agreement that relate to the rights and obligations of the Company
Stockholder Representative:
COMPANY STOCKHOLDER REPRESENTATIVE:
NAVIGANT CAPITAL ADVISORS, LLC
By: \s\ G.H. Bejour
--------------------------------------
Name: G.H Bejour
Title:
[Signature page to Merger Agreement]
F-1
