Exhibit 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
By and Among
Integrated Circuit Systems, Inc.
("Buyer"),
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Marathon Merger Corp.
("Sub")
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and
Micro Networks Corporation
(the "Company")
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December 20, 2001
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AGREEMENT AND PLAN OF MERGER
INDEX
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Page
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SECTION 1. TRANSFER OF SHARES; PURCHASE PRICE .............................................. 1
1.01. The Merger ...................................................................... 1
1.02. Closing ......................................................................... 2
1.03. Effective Time .................................................................. 2
1.04. Effect of the Merger ............................................................ 2
1.05. Calculation of Merger Consideration; Conversion of Securities; Payment .......... 2
1.06. Merger Consideration ............................................................ 4
1.07. Lost or Stolen Certificates ..................................................... 5
1.08. Dissenters' Rights .............................................................. 5
1.09. No Further Rights in the Company ................................................ 5
1.10. Escrow Account; Escrow Agreement ................................................ 5
1.11. Effect of Stockholder Approval; Representatives ................................. 6
1.12. Further Assurances .............................................................. 7
1.13. Closing Estimates ............................................................... 7
1.14. Post-Closing Adjustment ......................................................... 7
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................................... 9
2.01. Making of Representations and Warranties ........................................ 9
2.02. Organization and Qualifications of the Company .................................. 10
2.03. Capital Stock ................................................................... 10
2.04. Stock Option Plans; Warrants .................................................... 11
2.05. Subsidiaries; Investments ....................................................... 11
2.06. Authority ....................................................................... 12
2.07. Real and Personal Property ...................................................... 13
2.08. Financial Statements ............................................................ 16
2.09. Taxes ........................................................................... 17
2.10. Inventories ..................................................................... 19
2.11. Absence of Certain Changes ...................................................... 19
2.12. Ordinary Course ................................................................. 20
2.13. Intellectual Property ........................................................... 20
2.14. Material Contracts .............................................................. 21
2.15. Litigation ...................................................................... 22
2.16. Compliance with Laws ............................................................ 22
2.17. Insurance ....................................................................... 23
2.18. Warranty Claims ................................................................. 23
2.19. Finder's Fee .................................................................... 23
2.20. Permits ......................................................................... 23
2.21. Copies of Documents ............................................................. 24
(i)
2.22. Transactions with Interested Persons .......................... 24
2.23. Employee Benefit Programs ..................................... 24
2.24. Environmental Matters ......................................... 26
2.25. List of Directors and Officers ................................ 27
2.26. Employees; Labor Matters ...................................... 27
2.27. Backlog ....................................................... 28
2.28. Customers, Distributors and Suppliers ......................... 28
2.29. Capital Expenditures .......................................... 28
SECTION 3. COVENANTS OF THE COMPANY ...................................... 29
3.01. Making of Covenants and Agreements ............................ 29
3.02. Conduct of Business ........................................... 29
3.03. Consents and Approvals ........................................ 31
3.04. Consummation of Agreement ..................................... 32
3.05. No Solicitation of Other Offers ............................... 32
3.06. [Intentionally Omitted] ....................................... 32
3.07. Antitakeover Statutes ......................................... 32
3.08. Access to Information ......................................... 32
3.09. Stockholder Approval .......................................... 33
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB ............... 33
4.01. Making of Representations and Warranties ...................... 33
4.02. Organization of Buyer and Sub ................................. 33
4.03. Authority of Buyer and Sub .................................... 33
4.04. Litigation .................................................... 34
4.05. Approvals and Consents ........................................ 34
4.06. Financing ..................................................... 34
4.07. Finder's Fee .................................................. 34
SECTION 5. COVENANTS OF BUYER ............................................ 34
5.01. Making of Covenants and Agreements ............................ 34
5.02. Confidentiality ............................................... 34
5.03. Non-Solicitation .............................................. 35
5.04. Consents ...................................................... 35
5.05. [Intentionally Omitted] ....................................... 35
5.06. Consummation of Agreement ..................................... 35
5.07. Employee Benefit Arrangements ................................. 35
5.08. HIG Dispute ................................................... 36
SECTION 6. CONDITIONS .................................................... 37
6.01. Conditions to the Obligations of Buyer ........................ 37
6.02. Conditions to Obligations of the Company ...................... 39
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED ................... 40
7.01. Termination ................................................... 40
7.02. Effect of Termination ......................................... 41
(ii)
7.03. Right to Proceed ...................................................... 41
SECTION 8. SURVIVAL .............................................................. 41
8.01. Survival of Warranties ................................................ 41
SECTION 9. INDEMNIFICATION ....................................................... 41
9.01. Indemnification of Buyer .............................................. 41
9.01A. Indemnification by the Equityholders .................................. 42
9.02. Limitations on Indemnification of Buyer ............................... 42
9.03. Indemnification by Buyer .............................................. 45
9.04. Limitations on Indemnification by Buyer ............................... 45
9.05. Notice; Defense of Claims ............................................. 47
9.06. Escrow; Right to Set-Off .............................................. 47
9.07. Limited Recourse ...................................................... 48
SECTION 10. MISCELLANEOUS ......................................................... 48
10.01. Fees and Expenses ..................................................... 48
10.02. Governing Law; Consent to Jurisdiction ................................ 48
10.03. Arbitration ........................................................... 49
10.04. Notices ............................................................... 49
10.05. Entire Agreement ...................................................... 50
10.06. Assignability; Binding Effect ......................................... 51
10.07. Captions and Gender ................................................... 51
10.08. Execution in Counterparts ............................................. 51
10.09. Amendments ............................................................ 51
10.10. Publicity and Disclosures ............................................. 51
10.11. Specific Performance .................................................. 51
10.12. Schedules ............................................................. 51
10.13. Definitions ........................................................... 52
(iii)
SCHEDULES AND EXHIBITS
Schedules
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Schedule 2.01 Company Knowledge
Schedule 2.03 Capital Stock
Schedule 2.05 Subsidiaries; Investments
Schedule 2.06 Authority
Schedule 2.07 Real Property
Schedule 2.07(a) Permitted Encumbrances
Schedule 2.07(b) Leased Real Property
Schedule 2.07(c) Consents
Schedule 2.07(d) Condition of Owned Real Property
Schedule 2.07(e) Personal Property
Schedule 2.08(a) Financial Statements
Schedule 2.08(b) Undisclosed Liabilities
Schedule 2.09 Taxes
Schedule 2.10 Inventories
Schedule 2.11 Absence of Certain Changes
Schedule 2.12 Extraordinary Events
Schedule 2.13 Intellectual Property
Schedule 2.14 Contracts
Schedule 2.15 Litigation
Schedule 2.16 Compliance with Laws
Schedule 2.17 Insurance
Schedule 2.18 Warranty Claims
Schedule 2.19 Finder's Fee
Schedule 2.22 Transactions with Interested Persons
Schedule 2.23 Employee Benefit Programs
Schedule 2.24 Environmental Matters
Schedule 2.25 List of Directors and Officers
Schedule 2.26 Employees; Labor Matters
Schedule 2.27 Backlog
Schedule 2.28 Customers, Distributors and Suppliers
Schedule 3.02 Conduct of Business
Schedule 6.01(o) Incentive Stock Option and Non-Competition Agreements
Exhibits
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Exhibit A Stockholders
Exhibit B Option Holders
Exhibit C Warrant Holders
Exhibit D Form of Escrow Agreement
Exhibit E Form of Employment and Non-Competition Agreement
Exhibit F-1 Form of Incentive Stock Option Agreement
Exhibit F-2 Form of Non-Competition Agreement
Exhibit G Certificate of Incorporation of Surviving Corporation
Exhibit H Form of Legal Opinion of Xxxxxxx Procter LLP
Exhibit I Form of Legal Opinion of Xxxxxx Xxxxxxxx LLP
(iv)
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is entered into as
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of December 20, 2001 by and among Integrated Circuit Systems, Inc., a
Pennsylvania corporation ("Buyer"), Marathon Merger Corp., a Delaware
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corporation and a wholly-owned subsidiary of Buyer ("Sub"), and Micro Networks
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Corporation, a Delaware corporation (the "Company").
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W I T N E S S E T H
WHEREAS, upon the terms and subject to the conditions of this Agreement
and in accordance with the Delaware General Corporation Law ( the "DGCL"),
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Buyer, Sub and the Company desire to enter into a business combination
transaction pursuant to which Sub will merge with and into the Company (the
"Merger");
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WHEREAS, Exhibit A attached hereto sets forth a list of each holder of
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record of issued and outstanding shares of capital stock of the Company
(collectively, the "Stockholders" and each individually a "Stockholder"),
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Exhibit B attached hereto sets forth a list of each holder of stock options
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outstanding under the Company's 1996 Incentive Stock Option Plan, as amended
(the "Incentive Stock Option Plan"), and the Company's 1996 Non-Qualified Stock
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Option Plan, as amended (the "Non-Qualified Stock Option Plan"), (collectively
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the "Option Holders" and each individually an "Option Holder") and Exhibit C
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attached hereto sets forth a list of each holder of warrants outstanding
(collectively the "Warrant Holders" and each individually a "Warrant Holder" and
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together with the Option Holders the "Right Holders" and each individually a
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"Right Holder"). The Stockholders and the Right Holders are sometimes
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collectively referred to herein as the "Equityholders" and each individually an
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"Equityholder";
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WHEREAS, the Board of Directors of the Company has approved this
Agreement and the transactions contemplated hereby and recommended the approval
and adoption of this Agreement and approval of the Merger by the Stockholders
pursuant to Section 251 of the DGCL; and
WHEREAS, the Board of Directors of Sub has approved this Agreement, and
Buyer, the sole stockholder of Sub, has adopted this Agreement pursuant to
Section 251 of the DGCL.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements, and upon the terms and subject to the
conditions, herein set forth, the parties hereto hereby agree as follows:
SECTION 1. TRANSFER OF SHARES; PURCHASE PRICE.
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1.01. The Merger. Upon the terms and subject to the conditions set forth in
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this Agreement, and in accordance with the relevant provisions of the DGCL, at
the Effective Time (as defined in Section 1.03), Sub shall be merged with and
into the Company. At the Effective Time, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving corporation of the
Merger (the "Surviving Corporation").
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1.02. Closing. Unless this Agreement shall have been terminated in
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accordance with Section 7 hereof, the closing of the Merger (the "Closing")
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shall take place at the offices of Xxxxxxx Procter LLP at Exchange Place, 00
Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000 commencing at 10:00 A.M. on the third
(3rd) business day following the satisfaction or, if applicable, waiver of the
conditions to closing set forth in Sections 6.01(d), 6.01(e), 6.01(f), 6.01(m),
6.01(p), 6.02(c), 6.02(d) and 6.02(h) hereof, or at such other time and date as
may be otherwise mutually agreed upon by the parties (the "Closing Date").
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Except as otherwise expressly provided in this Agreement or in any document
contemplated by this Agreement, all matters at the Closing shall be considered
to take place simultaneously and no delivery of any documents shall be deemed
complete until all transactions and deliveries of documents are completed.
1.03. Effective Time. As soon as practicable on the Closing Date, the
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parties hereto shall file the certificate of merger (the "Certificate of
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Merger") with the Secretary of State of the State of Delaware in such form as
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required by, and executed in accordance with the relevant provisions of the DGCL
(the date and time of such filings being the "Effective Time").
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1.04. Effect of the Merger. At the Effective Time, the effect of the Merger
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shall be as provided in Section 251 of the DGCL. Without limiting the generality
of the foregoing, and subject to Section 251 of the DGCL, at the Effective Time,
except as otherwise provided herein, all of the property, rights, privileges,
powers and franchises of the Company and Sub shall vest in the Surviving
Corporation, and all debts, liabilities, obligations and duties of the Company
and Sub shall become the debts, liabilities, obligations and duties of the
Surviving Corporation. At the Effective Time, the Certificate of Incorporation
of the Surviving Corporation shall be amended to read in its entirety as set
forth in Exhibit G and the By-laws of Sub as in effect immediately prior to the
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Effective Time shall become the By-laws of the Surviving Corporation (except
that the name of the Surviving Corporation shall be "Micro Networks
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Corporation"). At the Effective Time, the initial directors of the Surviving
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Corporation shall be Xx. Xxxx Tan and Xx. Xxxxxxx Xxxx. The initial officers of
the Surviving Corporation shall be as specified in a resolution of the Board of
Directors adopted after the Effective Time.
1.05. Calculation of Merger Consideration; Conversion of Securities;
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Payment.
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(a) The merger consideration shall be calculated by subtracting from
Seventy-Seven Million Dollars ($77,000,000), the sum of: (i) the aggregate
amount to be paid by the Company as severance and other obligations including
those that are, or may become, payable under any Benefit Plan (as defined in
Section 2.23(a)) (the "Change in Control Obligations") arising out of the change
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in control of the Company that will occur as a result of the transactions
contemplated herein (net of the Tax benefit to the Company resulting from such
payments and from the treatment of options and warrants pursuant to Section
1.05(b)(ii), and not including Transaction Expenses (as defined in Section
10.01)) (the "Change in Control Amount"); provided that the Change in Control
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Amount shall not include obligations to employees of the Company who are
terminated at the request of Buyer, plus (ii) the aggregate amount of the
Company's indebtedness for borrowed money (including, without limitation, long
term debt (senior and subordinate) and revolving credit facility and accrued
interest thereon) (the "Indebtedness") net of cash on the balance sheet of the
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Company as of the Closing Date (the "Funded Net Debt Amount"). The amounts to be
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paid in accordance with clause (i) above shall
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be paid by the Company in accordance with the determination of the Estimated
Change of Control Amount pursuant to Section 1.13. The merger consideration
shall be increased or decreased, as the case may be, as follows:
(i) in the event that the Estimated Working Capital Amount (as
defined below) exceeds the Working Capital (as defined below) as of
September 30, 2001 (calculated by reference to the Base Balance Sheet
(as defined in Section 2.08), the "September 30 Working Capital
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Amount"), the closing merger consideration shall be increased by an
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amount equal to the excess, if any, of (A) the Estimated Working
Capital Amount over (B) the product of (1) the September 30 Working
Capital Amount multiplied by (2) one hundred ten percent (110%) (any
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such amount, the "Estimated Working Capital Increase"); or
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(ii) in the event that the September 30 Working Capital Amount
exceeds the Estimated Working Capital Amount, the closing merger
consideration shall be reduced by an amount equal to the excess, if
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any, of (A) the product of (1) the September 30 Working Capital Amount
multiplied by (2) ninety percent (90%) over (B) the Estimated Working
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Capital Amount (any such amount, the "Estimated Working Capital
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Reduction").
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The merger consideration payable as of the Closing Date, calculated as set forth
herein with reference to the closing estimates described in Section 1.13, is
herein referred to as the "Closing Merger Consideration". For purposes of this
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Agreement, "Working Capital" shall mean the Company's current assets less
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current liabilities determined in accordance with generally accepted accounting
principles in the United States as promulgated by the Financial Accounting
Standards Board and the American Institute of Certified Public Accountants or
the various committees thereof and as in effect on the date hereof ("GAAP")
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consistent with past practices excluding cash, deferred Taxes, the current
portion of the Company's Indebtedness, Transaction Expenses and the Change in
Control Amount and any other current asset or current liability arising solely
from the transactions contemplated by this Agreement.
(b) At the Effective Time and without any action on the part of
Buyer, Sub, the Company, the Stockholders or any other holders of any of the
securities of any of those corporations:
(i) subject to Section 1.08 and Section 1.10, each share (or
fraction thereof) issued and outstanding immediately prior to the Effective
Time of the Company's (i) Common Stock, par value $.01 per share (the
"Voting Common Stock") and (ii) Non-Voting Common Stock, par value $.01 per
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share (the "Non-Voting Common Stock", and, together with the Voting Common
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Stock, the "Common Stock"), (iii) Class A Preferred Stock, par value $.01
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per share (the "Class A Preferred Stock"), (iv) Class B Preferred Stock,
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par value $.01 per share (the "Class B Preferred Stock"), (v) Series C
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Preferred Stock, par value $.01 per share (the "Series C Preferred Stock")
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and (vi) Series D Preferred Stock, par value $.01 per share (the "Series D
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Preferred Stock", and together with the Class A Preferred Stock, Class B
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Preferred Stock and Series C Preferred Stock, the "Preferred Stock") shall
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be converted into the right to receive the amount set forth on Exhibit A
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(such amount with respect to each class or series of capital stock of the
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Company and as adjusted pursuant to Sections 1.05, 1.13 and 1.14, the "Per
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Share Purchase Price") and only upon the surrender of the certificate(s)
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formerly representing such shares of Common Stock or Preferred Stock (or
fraction thereof);
(ii) immediately prior to the Effective Time, all issued and
outstanding options to acquire shares of any class or series of the
Company's capital stock and all issued and outstanding warrants to acquire
shares of any class or series of shares of the Company's capital stock
shall be deemed to be fully vested and exercisable. Except as otherwise
agreed to by Buyer and any individual Option Holder, at the Effective Time
each such option and each such warrant shall be converted into the right to
receive an amount in cash equal to the excess of the Per Share Purchase
Price for the Common Stock over the exercise price applicable to such
option or warrant multiplied by the number of shares purchasable upon
exercise of such option or warrant, as set forth on Exhibit B and Exhibit C
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attached hereto (such amount and as adjusted pursuant to Sections 1.05,
1.13 and 1.14, the "Option Purchase Price");
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(iii) the shares of issued and outstanding Common Stock and
Preferred Stock immediately prior to the Effective Time are collectively
referred to as the "Company Shares";
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(iv) the certificates representing the shares of Common Stock and
Preferred Stock are collectively referred to as the "Stock Certificates";
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(v) each share of Common Stock and Preferred Stock held in the
treasury of the Company immediately prior to the Effective Time shall
automatically be canceled and extinguished without any conversion thereof
and no payment shall be made with respect thereto;
(vi) each share of common stock of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and
exchangeable for one validly issued, fully paid and nonassessable share of
the common stock of the Surviving Corporation; and
(vii) the stock transfer books of the Company shall be closed,
and there shall be no further registration of transfers of shares of Common
Stock or Preferred Stock thereafter on the records of the Company. If,
after the Effective Time, Stock Certificates are presented for transfer,
they will be canceled against delivery of the Closing Merger Consideration
as provided herein.
The parties hereto acknowledge and agree that the information set forth on
Exhibit A, Exhibit B and Exhibit C is subject to adjustment at the time of the
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Closing in accordance with Section 1.13 and after the Closing in accordance with
Section 1.14 in respect of the adjustments to the Change in Control Amount, the
Funded Net Debt Amount and Working Capital as of the Closing and at the time of
the Closing in connection with the exercise by any Right Holder of any stock
options or warrants currently outstanding.
1.06. Merger Consideration. Subject to Section 1.10 hereof, Buyer shall
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deliver at Closing the Closing Merger Consideration in United States dollars by
wire transfer of
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immediately available funds to an exchange agent (the "Exchange Agent")
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designated by the Company. The procedures for the exchange of Company Shares and
options and warrants shall be as contemplated by an agreement (the "Exchange
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Agreement") by and among Buyer, the Company and the Exchange Agent.
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1.07. Lost or Stolen Certificates. In the event any Stock Certificate shall
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have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the person claiming such certificate to be lost, stolen or destroyed
and, if required by Buyer, the posting by such person of a bond in such
reasonable amount as Buyer may direct as indemnity against any claim that may be
made against it with respect to such certificate, Buyer will issue in exchange
for such lost, stolen or destroyed certificate the Closing Merger Consideration
to which such person is entitled under Section 1.05.
1.08. Dissenters' Rights.
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(a) For purposes of this Agreement, "Dissenting Shares" means Company
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Shares held as of the Effective Time by a Stockholder who has not voted such
Company Shares in favor of the adoption of this Agreement and the Merger and
with respect to which appraisal shall have been duly demanded and perfected in
accordance with Section 262 of the DGCL and not effectively withdrawn or
forfeited prior to the Effective Time. Dissenting Shares shall not be converted
into or represent the right to receive the Closing Merger Consideration, unless
such Stockholder shall have forfeited his, her or its right to appraisal under
the DGCL or properly withdrawn, his, her or its demand for appraisal. If such
Stockholder has so forfeited or withdrawn his, her or its right to appraisal of
Dissenting Shares, then as of the occurrence of such event, such holder's
Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the Closing Merger Consideration
issuable in respect of such Company Shares pursuant to Section 1.06, but subject
to Section 1.09.
(b) The Company shall give the Buyer (i) prompt notice of any written
demands for appraisal of any Company Shares, withdrawals of such demands, and
any other instruments that relate to such demands received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of the Buyer, make any payment with respect to any demands
for appraisal of Company Shares or offer to settle or settle any such demands.
The Buyer shall give the Company the opportunity to reasonably participate in
all negotiations and proceedings with respect to demands for appraisal under the
DGCL.
1.09. No Further Rights in the Company. The Closing Merger Consideration
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delivered upon the exchange of securities in accordance with the terms hereof
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such securities, and the Equityholders shall have no further
rights with respect thereto other than to receive the Closing Merger
Consideration and rights provided for herein.
1.10. Escrow Account; Escrow Agreement. Notwithstanding anything in this
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Agreement to the contrary, at Closing, Buyer (a) will withhold from the Closing
Merger Consideration a portion of the Closing Merger Consideration equal to
Thirteen Million Dollars ($13,000,000) (the "Escrow Amount"), and (b) will
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deliver the Escrow Amount to Boston Safe
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Deposit & Trust Company or a similar institution, as escrow agent (the "Escrow
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Agent"), to be held in escrow by the Escrow Agent in an interest-bearing account
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(the "Escrow Account") as security for (i) the indemnification obligations under
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Section 9 hereof; (ii) the post-Closing adjustments set forth in Section 1.14
hereof and (iii) any post-Closing unpaid portion of the Company-Paid Transaction
Expenses (as defined in Section 10.01), pursuant to the provisions of an escrow
agreement in substantially the form of Exhibit D attached hereto (the "Escrow
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Agreement") to be entered into on or prior to the Closing by Buyer, the Escrow
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Agent and the Representatives (as defined in Section 1.11). The Escrow Amount
shall be held by the Escrow Agent pursuant to and in accordance with the terms
of the Escrow Agreement. Distributions of any amounts from the Escrow Account
shall be governed by the terms and conditions of the Escrow Agreement.
1.11. Effect of Stockholder Approval; Representatives. Effective upon the
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Closing, Xxxxx Xxxxx and Xxxxx X. Xxxxxxxx XX shall act as representatives (the
"Representatives") under the Escrow Agreement. The Representatives shall take
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any and all actions and make any decisions required or permitted to be taken by
the Representatives under the Escrow Agreement, including, without limitation,
the exercise of the power to: (a) authorize delivery to Buyer of all or any
portion of the Escrow Amount in satisfaction of (x) indemnity claims by a Buyer
Indemnified Party with respect to claims for indemnification pursuant to Section
9 hereof, (y) a post-Closing adjustment claim pursuant to Section 1.14 hereof or
(z) any post-Closing unpaid portion of the Company-Paid Transaction Expenses (as
defined in Section 10.01); (b) agree to, negotiate, enter into settlements and
compromises of, demand arbitration of, and comply with orders of courts and
awards of arbitrators with respect to, such claims; (c) arbitrate, resolve,
settle or compromise any claim for indemnification by a Buyer Indemnified Party
made pursuant to Section 9 hereof, any claim with respect to a post-Closing
adjustment made pursuant to Section 1.14 hereof or any claim with respect to a
post-Closing unpaid portion of the Company-Paid Transaction Expenses made
pursuant to Section 10.01; and (d) take all actions necessary in the judgment of
the Representatives for the accomplishment of the foregoing. The Representatives
shall have authority and power to act with respect to the Escrow Agreement and
the disposition, settlement or other handling of all claims for indemnification
by a Buyer Indemnified Party under Section 9 hereof, for a post-Closing
adjustment under Section 1.14 hereof, for a post-Closing unpaid portion of the
Company-Paid Transaction Expenses under Section 10.01 or governed by the Escrow
Agreement, and all rights or obligations arising under the Escrow Agreement so
long as all Equityholders are treated in the same manner. Buyer shall be
entitled to rely on any action or decision of a Representative. In performing
the functions specified in this Agreement and the Escrow Agreement, the
Representatives shall not be liable to any Equityholder in the absence of gross
negligence or willful misconduct on the part of the Representatives. Any
out-of-pocket costs and expenses reasonably incurred by the Representatives in
connection with actions taken pursuant to the terms of this Agreement or the
Escrow Agreement will be paid to the Representatives out of the Escrow Account,
to the extent that any amount exists in the Escrow Account following
satisfaction of all claims made or asserted by a Buyer Indemnified Party under
the Escrow Agreement and in cash pro rata in proportion to each Equityholder's
respective percentage interests in the Escrow Account to the extent that any
such costs and expenses exceed the available Escrow Amount. This Agreement shall
not make any Representative liable for any amounts owed by any of the
Equityholders under, or other obligations undertaken by any of the Equityholders
in, this Agreement or any other agreement entered into by the Equityholders in
connection with the transactions
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contemplated hereby (all such amounts and obligations being referred to
collectively as the "Equityholders' Obligations"), it being expressly agreed and
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understood by Buyer that the Equityholders' Obligations are the full and
complete obligations of the Equityholders. A Representative may resign from such
position at any time upon ten (10) days' prior written notice to the other
Representative(s), the Buyer and the Escrow Agent. In the case of the
resignation, death, incapacity or inability to act of a Representative, the
other Representative(s) shall have the right to designate a successor
Representative upon written notice to the Buyer and the Escrow Agent. Any
successor Representative shall have the full powers, rights and authority
conferred upon the original Representatives.
1.12. Further Assurances. At any time prior to, and from time to time
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after, the Closing, the parties hereto shall, at the request of the other and
without further consideration, execute and deliver further instruments or
documents as the other parties hereto may reasonably require to evidence or
otherwise facilitate the consummation of the transactions contemplated hereby.
1.13. Closing Estimates. As soon as reasonably practicable following the
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date hereof but in no event later than five (5) business days prior to the
Closing Date, the Company and the Representatives shall cause (i) an estimate of
the Working Capital as of the Closing (the "Estimated Working Capital Amount"),
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(ii) an estimate of the Change in Control Amount (the "Estimated Change in
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Control Amount") and (iii) an estimate of the Funded Net Debt Amount (the
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"Estimated Funded Net Debt Amount") to be prepared and delivered to Buyer. If
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Buyer does not agree that (x) the Estimated Working Capital Amount accurately
reflects the projected Working Capital as of the Closing, (y) the Estimated
Change in Control Amount accurately reflects the Change in Control Obligations
of the Company or (z) the Estimated Funded Net Debt Amount accurately reflects
the current debt obligations of the Company, then the Representatives and Buyer
shall negotiate in good faith concerning any adjustments required to be made in
order to accurately reflect the Estimated Working Capital Amount, the Estimated
Change in Control Amount or the Estimated Funded Net Debt Amount (subject to
possible further adjustment post-Closing in accordance with Section 1.14 below).
In the event that the Representatives and Buyer are unable to agree on the
Estimated Working Capital Amount, the Estimated Change in Control Amount or the
Estimated Funded Net Debt Amount prior to Closing, then the Estimated Working
Capital Amount, the Estimated Change in Control Amount and the Estimated Funded
Net Debt Amount, respectively, shall be equal to the mean of such amounts as
estimated by the Company and the Representatives, on the one hand, and Buyer, on
the other hand.
1.14. Post-Closing Adjustment.
-----------------------
(a) As soon as reasonably practicable following the Closing Date and
in no event more than ninety (90) days after the Closing Date, Buyer shall cause
the Company's balance sheet as of immediately prior to Closing on the Closing
Date, prepared in accordance with GAAP, to be audited by Buyer's auditors.
Promptly upon receipt by Buyer of such audited financial statements, Buyer shall
compute and provide to the Representatives the computation of the Working
Capital as of the Closing (excluding any audit adjustments to Inventory due to
inventory costing standard revaluations or capitalizations of manufacturing
variances from September 30, 2001 to the Closing Date) (the "Final Working
-------------
Capital Amount"), the Change in
--------------
7
Control Amount (the "Final Change in Control Amount") and the Funded Net Debt
------------------------------
Amount (the "Final Funded Net Debt Amount") as derived from such balance sheet.
----------------------------
The Final Working Capital Amount, the Final Change in Control Amount and the
Final Funded Net Debt Amount shall become final and binding upon the parties
unless within twenty (20) days following submission to the Representatives, the
Representatives notify Buyer of their objection thereto in writing, providing
reasonable specificity as to the basis for their objection. If the
Representatives so notify Buyer of their objection to the Final Working Capital
Amount, the Final Change in Control Amount or the Final Funded Net Debt Amount,
the Representatives and Buyer shall negotiate in good faith to resolve any
differences. If, within thirty (30) days following the receipt of such notice by
Buyer, any of such differences have not been resolved, the differences shall be
submitted to Xxxxxx Xxxxxxxx LLP at such firm's Boston, Massachusetts office
(the "Accountants"); provided, however that, in the event that Xxxxxx Xxxxxxxx
----------- -------- -------
LLP is unavailable, the parties shall mutually agree on another independent
certified public accounting firm of recognized national standing to serve as the
"Accountants" for the purpose of this Section 1.14. The determination of the
-----------
Accountants shall be final, binding and not subject to any appeal. The
Accountants shall act as experts and not arbiters and shall not conduct an
audit, but shall determine only those items in dispute. The fees and expenses of
the Accountants in connection with any such determination shall be paid one-half
by Buyer and one-half by the Representatives (subject to reimbursement by the
Equityholders pursuant to Section 1.11).
(b) If the Final Change in Control Amount is greater than the
Estimated Change in Control Amount or the Final Funded Net Debt Amount is
greater than the Estimated Funded Net Debt Amount such difference shall be
subtracted from the Closing Merger Consideration, resulting in a decrease in the
Per Share Purchase Price and the Option Purchase Price, and shall be paid to
Buyer out of the Escrow Account. If the Final Change in Control Amount is less
than the Estimated Change in Control Amount or the Final Funded Net Debt Amount
is less than the Estimated Funded Net Debt Amount, such difference shall be
added to the Closing Merger Consideration, resulting in an increase in the Per
Share Purchase Price and the Option Purchase Price, and Buyer shall promptly pay
the additional Closing Merger Consideration to the Equityholders, on a pro rata
basis in accordance with each such Equityholder's percentage ownership of
capital stock of the Company immediately prior to the Merger (assuming
conversion of all Preferred Stock to Common Stock and the exercise of all
Incentive Stock Options, Non-Qualified Stock Options and warrants).
(c) The merger consideration shall be increased or decreased, as the
case may be, in respect of the Final Working Capital Amount as follows:
(i) In the event there was neither an Estimated Working Capital
Increase nor an Estimated Working Capital Reduction:
(A) In the event there is a Final Working Capital Increase
(as defined below), the Final Working Capital Increase shall be
promptly paid by Buyer to the Equityholders.
(B) In the event there is a Final Working Capital Reduction
(as defined below), such Final Working Capital Reduction shall be paid
to Buyer from the Escrow Account.
8
(ii) In the event there was an Estimated Working Capital
Increase:
(A) In the event there is a Final Working Capital Increase
and such Final Working Capital Increase is less than the Estimated
Working Capital Increase, then the difference shall be paid to Buyer
from the Escrow Account.
(B) In the event there is a Final Working Capital Increase
and such Final Working Capital Increase is greater than the Estimated
Working Capital Increase, then the difference shall be promptly paid
by Buyer to the Equityholders.
(C) In the event there is a Final Working Capital
Reduction, then the sum of the Final Working Capital Reduction plus
the Estimated Working Capital Increase shall be paid to Buyer from
the Escrow Account.
(iii) In the event there was an Estimated Working Capital
Reduction:
(A) In the event there is a Final Working Capital
Reduction and such Final Working Capital Reduction is less than the
Estimated Working Capital Reduction (on an absolute value basis),
then the difference shall be promptly paid by Buyer to the
Equityholders.
(B) In the event there is a Final Working Capital
Reduction and such Final Working Capital Reduction is greater than
the Estimated Working Capital Reduction (on an absolute value basis),
then the difference shall be paid to Buyer from the Escrow Account.
(C) In the event there is a Final Working Capital
Increase, then Buyer shall promptly pay to the Equityholders the sum
of the Final Working Capital Increase plus the Estimated Working
Capital Reduction.
The term "Final Working Capital Increase" shall mean the excess, if any, of (A)
------------------------------
the Final Working Capital Amount over (B) one hundred ten percent (110%) of the
September 30 Working Capital Amount. The term "Final Working Capital Reduction"
-------------------------------
shall mean the excess, if any, of (A) ninety percent (90%) of the September 30
Working Capital Amount over (B) the Final Working Capital Amount. All amounts
payable under this Section 1.14(c) by Buyer to the Equityholders shall be
distributed among the Equityholders on a pro rata basis in accordance with each
such Equityholder's percentage ownership of capital stock of the Company
immediately prior to the Merger (assuming conversion of all Preferred Stock to
Common Stock and the exercise of all Incentive Stock Options, Non-Qualified
Stock Options and warrants). The merger consideration, the Per Share Purchase
Price and the Option Purchase Price shall be adjusted in accordance with any
amounts payable under this Section 1.14(c).
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
---------------------------------------------
2.01. Making of Representations and Warranties. As a material inducement
----------------------------------------
to Buyer to enter into this Agreement and consummate the transactions
contemplated hereby, the Company
9
hereby makes to Buyer the representations and warranties contained in this
Section 2. For purposes of this Section 2, references to "knowledge" or "best
--------- ----
knowledge" of the Company shall mean the actual knowledge of the officers of the
---------
Company who are identified on Schedule 2.01 attached hereto after reasonable
-------------
inquiry of the officers and senior managers of the Company and its Subsidiaries.
2.02. Organization and Qualifications of the Company. The Company is a
----------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware with all requisite corporate power and authority
to own, lease or otherwise hold its properties and assets and to conduct its
business in the manner and in the places where such properties and assets are
owned or leased or such business is currently conducted. The copies of the
Company's Restated Certificate of Incorporation, as amended (the "Certificate of
--------------
Incorporation") and by-laws, as amended, made available to Buyer's counsel, are
-------------
true, complete and correct, and no amendments thereto are pending. The Company
is duly qualified to do business as a foreign corporation in each jurisdiction
where the nature of its properties or the conduct of its business makes its
qualification so necessary, except where the failure to be so qualified would
not have a material adverse effect on the business, assets, properties, results
of operations or financial condition of the Company and its Subsidiaries taken
as a whole (a "Company Material Adverse Effect").
-------------------------------
2.03. Capital Stock.
-------------
(a) The authorized capital stock of the Company consists of (i)
5,000,000 shares of Voting Common Stock, 576,657 shares of which are duly and
validly issued, outstanding, fully paid and non-assessable, (ii) 150,000 shares
of Non-Voting Common Stock, no shares of which are duly and validly issued,
outstanding, fully paid and non-assessable, (iii) 1,100,000 shares of Class A
Preferred Stock, 1,056,875 shares of which are duly and validly issued,
outstanding, fully paid and non-assessable, (iv) 750,000 shares of Class B
Preferred Stock, 731,716 shares of which are duly and validly issued,
outstanding, fully paid and non-assessable, (v) 750,000 shares of Series C
Preferred Stock, 715,000 shares of which are duly and validly issued,
outstanding, fully paid and non-assessable and (vi) 500,000 shares of Series D
Preferred Stock, 500,000 shares of which are duly and validly issued,
outstanding, fully paid and non-assessable. Except as disclosed on Schedule 2.03
-------------
attached hereto, (i) there are no outstanding warrants, options, pre-emptive
rights or other rights to purchase or acquire any of the shares of capital stock
of the Company, or any outstanding securities convertible into, exercisable for,
or exchangeable for shares of any class or series of the Company's capital stock
or outstanding or authorized warrants, options or other rights to acquire any
such convertible securities, (ii) there are no outstanding or authorized stock
appreciation, phantom stock, equity-based profit participation, or similar
rights, and (iii) there are no restrictions on the transfer of the Company's
capital stock, other than under applicable federal, state or foreign securities
laws. The allocation of the Closing Merger Consideration among the Equityholders
as set forth on Exhibit A, Exhibit B and Exhibit C, as adjusted pursuant to
--------- --------- ---------
Sections 1.05, 1.13 and 1.14, is in accordance with the Certificate of
Incorporation.
(b) Exhibit A hereto sets forth a list of all of the holders of
---------
record of all of the issued and outstanding shares of Common Stock and Preferred
Stock, including the numbers and
10
class of shares of Common Stock and Preferred Stock held by each holder and the
aggregate cumulative dividends, if any, accrued thereon.
2.04. Stock Option Plans; Warrants.
----------------------------
(a) The Company's Incentive Stock Option Plan authorizes it to
issue options to purchase up to an aggregate of 950,000 shares of Common Stock
(singularly an "Incentive Stock Option" or collectively the "Incentive Stock
---------------------- ---------------
Options"), of which (i) 77,800 shares of Common Stock have been issued pursuant
-------
to the exercise of Incentive Stock Options, (ii) 738,500 Incentive Stock Options
are issued and outstanding and (iii) 133,700 Incentive Stock Options are
available for issuance under the Incentive Stock Option Plan.
(b) The Company's Non-Qualified Stock Option Plan authorizes it to
issue options to purchase up to an aggregate of 375,000 shares of Common Stock
(singularly a "Non-Qualified Stock Option" or collectively the "Non-Qualified
-------------------------- -------------
Stock Options"), of which (i) 244,400 shares of Common Stock have been issued
-------------
pursuant to the exercise of Non-Qualified Stock Options, (ii) 129,500
Non-Qualified Stock Options are issued and outstanding and (iii) 1,100
Non-Qualified Stock Options are available for issuance under the Non-Qualified
Stock Option Plan.
(c) The Company's 1996 Warrant Plan (the "Warrant Plan") authorizes
------------
it to issue warrants to purchase up to an aggregate of 200,000 shares of Common
Stock (singularly a "Warrant" or collectively the "Warrants"), of which (i)
------- --------
30,000 Warrants are issued and outstanding and (ii) 170,000 Warrants are
available for issuance under the Warrant Plan.
(d) The Company has issued warrants outside the Warrant Plan to
purchase up to an aggregate of 70,000 shares of Common Stock of which (i) 30,000
shares of Common Stock have been issued pursuant to the exercise of such
warrants, and (ii) warrants are issued and outstanding to purchase 40,000 shares
of Common Stock.
(e) Exhibit B hereto sets forth a true and complete list of all
---------
holders of all issued and outstanding Incentive Stock Options and Non-Qualified
Stock Options as of the date hereof, including the name of the holder, the
number of Incentive Stock Options and/or Non-Qualified Stock Options held by
such holder and the expiration date and current exercise price thereof. Exhibit
-------
C hereto sets forth a true and complete list of all holders of all issued and
-
outstanding warrants to purchase shares of capital stock of the Company as of
the date hereof, including the name of the holder, the number of warrants held
by such holder, and the current exercise price thereof. The Company is not
obligated to issue any additional Incentive Stock Options, Non-Qualified Stock
Options or warrants to purchase shares of capital stock of the Company as of the
date hereof.
2.05. Subsidiaries; Investments. The Company's direct and indirect
-------------------------
subsidiaries are listed on Schedule 2.05 attached hereto (collectively, the
-------------
"Subsidiaries" and, individually, each a "Subsidiary"). The Company's
------------ ----------
investments in any other corporation or business entity are listed on Schedule
--------
2.05. Each Subsidiary is a duly incorporated, validly existing corporation or
----
other business entity in good standing under the laws of the jurisdiction of its
incorporation or formation with the requisite corporate power and authority to
own or lease its properties and to
11
conduct its business in the manner and in the places where such properties are
owned or leased or such business is currently conducted. Except as disclosed on
Schedule 2.05, all of the outstanding shares of capital stock, shares or other
-------------
equity ownership interest of each Subsidiary are owned beneficially and of
record by the persons indicated on such schedule, free of any lien, restriction
or encumbrance, other than restrictions under federal, state or foreign
securities laws and said shares have been duly and validly issued and are
outstanding, fully paid and nonassessable. There are no outstanding warrants,
options, pre-emptive rights or other rights to purchase or acquire any of the
shares of capital stock, shares or other ownership interests of any Subsidiary,
or any outstanding securities convertible into such shares or ownership
interests, outstanding warrants, options or other rights to acquire any such
convertible securities. Except as set forth on Schedule 2.05, there are no
-------------
restrictions on the transfer of any Subsidiary's capital stock, shares or other
ownership interests, other than under applicable federal, state or foreign
securities laws.
2.06. Authority. Subject to the satisfaction of the requirements set
---------
forth on Schedule 2.06 attached hereto, the Company has full right, authority
-------------
and power to execute, deliver and perform this Agreement and each agreement,
document and instrument to be executed and delivered by the Company pursuant to
this Agreement and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by the Company of this
Agreement and each such other agreement, document and instrument have been duly
authorized by all necessary action of the Company and no other action on the
part of the Company is required in connection therewith.
Subject to the satisfaction of the requirements set forth on Schedule 2.06,
-------------
this Agreement and each agreement, document and instrument executed and
delivered by the Company pursuant to this Agreement constitutes, or when
executed and delivered will constitute, valid and binding obligations of the
Company enforceable in accordance with their terms, except as limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors' rights and (ii) general
principles of equity that restrict the availability of equitable remedies
(regardless of whether enforceability is considered in a proceeding in equity or
at law). Subject to the satisfaction of the requirements set forth on Schedule
--------
2.06, the execution, delivery and performance by the Company of this Agreement
----
and each such other agreement, document and instrument to be executed and
delivered by the Company pursuant to this Agreement:
(a) do not and will not violate any provision of the Company's
Certificate of Incorporation or by-laws as amended, or the charter or by-laws of
any Subsidiary;
(b) do not and will not (i) conflict with or violate any laws or
statutes of the United States, or any state or other jurisdiction applicable to
the Company or any Subsidiary, (ii) conflict with, violate or result in a breach
of or constitute a default under any judgment, order, decree, injunction, ruling
or regulation of any federal, state, municipal or foreign entity, agency, court
or other governmental authority (each, a "Governmental Entity") to which the
-------------------
Company or any Subsidiary or any assets or properties of the Company or any
Subsidiary are subject or (iii) require the Company or any Subsidiary to give
any notice to, or obtain any authorization, approval, consent or waiver of, or
make any filing with, any third party (including, without limitation, any
Governmental Entity) that has not been obtained or made, other than as
12
set forth on Schedule 2.06, such filings or permits as may be required under any
-------------
applicable antitrust laws of foreign jurisdictions ("Foreign Antitrust Laws"),
----------------------
the Securities Act of 1933, as amended, state securities or blue sky laws, or
similar laws of any other jurisdiction, except, in each case, for such
conflicts, violations, breaches, defaults or failures which, individually or in
the aggregate, could not reasonably be expected to have a Company Material
Adverse Effect; and
(c) do not and will not result in a breach of, constitute a default
under, accelerate any obligation under, or give rise to a right of termination
of (in each case, with or without the lapse of time or the giving of notice or
both) any indenture, note or loan or credit agreement or any other material
agreement, understanding, arrangement, commitment, contract, instrument,
mortgage, lien, lease, sublease, permit, authorization, order, writ, judgment,
injunction, decree, determination or arbitration award to which the Company is a
party or by which the Company or any Subsidiary is bound or to which the
Company, any Subsidiary or the property or material assets of the Company or any
Subsidiary are subject, except for such breaches, defaults, accelerations or
rights of termination which, individually or in the aggregate, could not
reasonably be expected to have a Company Material Adverse Effect, or result in
the creation or imposition of any Encumbrances (as defined below) other than
Permitted Encumbrances (as defined below) on any of the assets, capital stock or
properties of the Company or any Subsidiary.
2.07. Real and Personal Property. All of the real property owned or leased
--------------------------
by the Company or any of its Subsidiaries is identified on Schedule 2.07
-------------
attached hereto (herein referred to as the "Owned Real Property" or the "Leased
-------------------
Real Property," as the case may be, as shown on such Schedule 2.07, or
-------------
collectively as the "Real Property").
-------------
(a) Title. Except as set forth on Schedule 2.07(a), the Company or
----- ----------------
one of its Subsidiaries has good and marketable title to all Owned Real
Property, free and clear of all easements, covenants, restrictions, leases,
mortgages, liens, assessments, claims, security interests, rights, judgments,
encroachments, or other matters affecting title (collectively, "Encumbrances"),
------------
other than the matters described in paragraphs (i) through (vi) below, none of
which interfere in any material respect with the use and operation of the Owned
Real Property as currently operated:
(i) easements, covenants, restrictions (including, without
limitation, use and zoning restrictions), encroachments and similar
encumbrances that do not materially interfere with the use of the Owned
Real Property as currently used and improved or pursuant to any expansion
plans;
(ii) the Mortgage and Security Agreement listed as item (b) in
Schedule 2.07(a) and, with respect to that portion of the Owned Real
----------------
Property described in the Specimen Owner's Policy of Title Insurance
attached to Schedule 2.07(a) as Exhibit 2.07(a)-1, such title matters or
---------------- -----------------
exceptions as are disclosed in such Specimen Policy, and as to the
remainder of the Owned Real Property (the "No Title Work Parcels"), such
---------------------
matters recorded in the appropriate land records office as will be
disclosed to Buyer as soon as the title report thereon is completed;
13
(iii) the lien, if any, for real estate taxes not yet due and
payable on the date of this Agreement;
(iv) the Permitted Encumbrances (as defined below);
(v) provisions of existing building, zoning and other
applicable laws, rules, ordinances and regulations that do not materially
interfere with the use as a matter of right (however, a legally
non-conforming use or structure shall not be deemed to interfere with such
use) of the Owned Real Property as currently used and improved or pursuant
to any expansion plans duly adopted by the Company and disclosed to Buyer
in writing; and
(vi) any liens for municipal betterments contemplated and
assessed after the date of this Agreement.
"Permitted Encumbrances" shall mean those Encumbrances which: (a) arise by
----------------------
operation of law or by any Governmental Entity for Taxes, assessments or charges
not yet due and payable or which are being contested in good faith and by
appropriate proceedings and as disclosed by the Company to Buyer in writing; (b)
unrecorded statutory carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Encumbrances resulting from liabilities arising and
anticipated to be paid in the ordinary course of business and which do not
exceed $100,000 in the aggregate; (c) pledges or deposits in connection with
worker's compensation, unemployment insurance and other social security
legislation; (d) deposits to secure the performance of any or all of the
following: bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business; (e) easements, rights-of-way, restrictions
and other similar Encumbrances on real property incurred in the ordinary course
of business; (f) liabilities that will be satisfied by the Company at Closing or
assumed by Buyer at Closing; (g) matters approved by Buyer; or (h) title
exceptions created directly by any act or omission of Buyer or its
representatives, agents, employees or invitees.
The Company has no knowledge of any reason why Buyer will not be able to
obtain title insurance at Buyer's sole cost and expense for the Owned Real
Property or the Leased Real Property (except to the extent that recording of any
lease is prohibited under the terms of such lease) at customary rates; provided,
--------
however, that the No Title Work Parcels may not have access to a public way, and
-------
accordingly, insurance as to access may not be obtainable.
(b) Status of Leases. All leases, including without limitation
----------------
all amendments, translations, modifications, exhibits, and schedules relating
thereto, for the Leased Real Property are identified on Schedule 2.07(b). True,
----------------
correct and complete copies of the leases for the Leased Real Property have been
delivered to Buyer. Buyer acknowledges that an English translation of the base
form of lease for the Netherlands property was delivered to Buyer by the
Company. To the knowledge of the Company, none of the terms of the lease for the
Netherlands property that are not translated into English materially adversely
affect the Company's ability to use such Leased Real Property as currently used
by the Company. Each of said leases is in full force and effect as to the
Company's obligations and, to the Company's knowledge, is in full force and
effect as to the obligations of each other party to such leases. To the
knowledge of the
14
Company, the Company and its Subsidiaries hold enforceable leasehold interests
in the Leased Real Property, in each case free and clear of all Encumbrances
other than Permitted Encumbrances, subject only to the right of reversion of the
lessor upon the expiration or termination of the lease and Encumbrances on the
lessor's interest, except as set forth in Schedule 2.07(b). Neither the Company
----------------
nor any of its Subsidiaries is in material default under any of said leases, nor
has any event occurred or shall occur under the Terms of this Agreement which,
with notice or the passage of time, or both, or action taken under this
Agreement, would, nor will the execution, delivery and performance by the
Company of this Agreement, give rise to such a default or otherwise result in a
termination of such lease. Except as set forth in Schedule 2.07(b), to the
----------------
knowledge of the Company, none of the other parties to said leases is in
material default thereunder and, to the knowledge of the Company, there is no
event which, with notice or the passage of time, or both, would give rise to
such a default.
(c) Consents. Except as set forth on Schedule 2.07(c), no approval
-------- ----------------
or consent is required to consummate the transactions contemplated by this
Agreement from the other parties to any lease for the Leased Real Property or
from the holder of any Encumbrance on any Owned Real Property.
(d) Condition of Real Property. To the knowledge of the Company and
--------------------------
except as set forth on Schedule 2.07(d), there are no defects in the physical
----------------
condition of any land, buildings or improvements constituting part of the Owned
Real Property, including, without limitation, structural elements, mechanical
systems, parking and loading areas, if any, which materially and adversely
impact or could reasonably be expected to materially and adversely impact the
use and operation of the Owned Real Property as currently used. To the knowledge
of the Company, all (A) public utilities, including water, electric, stormwater
drainage, sewage or subsurface disposal systems, required for the normal
operation of the Company's business, connect into the Real Property through
adjoining public highways or, if they pass through adjoining private land, do so
in accordance with valid easements, permits and licenses, (B) installation and
connection charges due and payable with respect thereto have been paid in full
or security provided for, and (C) such utilities are sufficient for the
operation of the Company's business in the ordinary course as currently
operated. To the Company's knowledge, all improvements forming a part of any of
the Owned Real Property and used in the operation of the Company's business are
located wholly within the boundaries of such Owned Real Property, as applicable,
and do not encroach in any material respect upon any recorded or unrecorded
easement or right-of-way affecting any of such Owned Real Property, or upon any
adjoining lands. To the Company's knowledge, there is no encroachment onto any
of the Owned Real Property by buildings or improvements owned by the owners of
adjoining lands that would have a material adverse effect on the operation of
the Company's business as currently operated. Each parcel of Owned Real
Property, and to the knowledge of the Company, each Leased Real Property, used
in the Company's business and operations is being used for purposes permitted as
a matter of right under the applicable zoning ordinances in effect in the
jurisdiction in which such parcel is located. To the knowledge of the Company,
all such buildings or improvements which comprise the Owned Real Property are
and have been maintained in generally good operating condition and repair and in
a condition which provides for the normal operations of such item (ordinary wear
and tear excepted). To the Company's knowledge, all licenses, permits,
authorizations and approvals necessary for the use and operation of the Real
Property by the Company as currently operated have been validly issued and are
in good standing and shall
15
remain so upon consummation of the transactions contemplated by this Agreement.
All charges and fees for such have been paid in full with respect to the Owned
Real Property, and to the knowledge of the Company, have been paid in full with
respect to the Leased Real Property. The Company has received no written notice
(and otherwise has no actual knowledge) that there exists any condition at the
Real Property that violates any applicable state or federal law, statute,
ordinance, code, order, rule or regulation.
(e) Personal Property. The Company and the Subsidiaries own or lease
-----------------
all machinery, equipment and other tangible assets currently used in the conduct
of their business as presently conducted. Except as specifically disclosed in
Schedule 2.07(e) or in the Base Balance Sheet (as hereinafter defined), the
----------------
Company and each of its Subsidiaries has good and marketable title to, or a
valid leasehold interest in, all of its personal property. None of such personal
property or assets is subject to any mortgage, pledge, conditional sale
agreement or lien except as specifically disclosed in Schedule 2.07(e) or in the
----------------
Base Balance Sheet. Except as otherwise specified in Schedule 2.07(e) hereto,
----------------
all leasehold improvements, furnishings, machinery and equipment of the Company
and each of its Subsidiaries are in good repair (ordinary wear and tear
excepted).
2.08. Financial Statements.
--------------------
(a) The Company has delivered to Buyer the following financial
statements, true, correct and complete copies of which are attached hereto as
Schedule 2.08(a):
----------------
(i) Consolidated balance sheet of the Company and its
Subsidiaries as of December 31, 2000 and statements of income and retained
earnings and statements of cash flows for the year then ended together with
notes thereto, which statements are audited by PricewaterhouseCoopers LLP,
independent public accountants (the "Audited Financial Statements");
----------------------------
(ii) Unaudited consolidated balance sheet of the Company and its
Subsidiaries as of September 30, 2001 (the "Base Balance Sheet");
-------------------
(iii) Unaudited consolidated statements of income of the Company
and its Subsidiaries for the nine-month period ended September 30, 2001
(the "Base Income Statement"); and
---------------------
(iv) Unaudited consolidated statements of cash flows of the
Company and its Subsidiaries for the nine-month period ended September 30,
2001 (the "Base Cash Flow Statement").
------------------------
Subject to the absence of footnotes and customary year-end audit
adjustments which will not be material in the aggregate with regard to the Base
Balance Sheet, Base Income Statement and Base Cash Flow Statement, the Audited
Financial Statements, Base Balance Sheet, Base Income Statement and Base Cash
Flow Statement have been prepared using the Company's past practices and
procedures in accordance with GAAP consistently applied throughout the relevant
periods and the Audited Financial Statements and the other financial statements
described in (ii) and (iii) present fairly in all material respects the
financial condition, results of operations and
16
cash flows of the Company and its Subsidiaries, as applicable, at the dates of
said statements and for the periods covered thereby.
(b) As of the date hereof and as of the Closing, all material
liabilities of the Company and its Subsidiaries have been (i) stated or
adequately reserved against on the Base Balance Sheet or disclosed in the notes
thereto, (ii) reflected on Schedule 2.08(b) attached hereto or the other
----------------
Schedules furnished to Buyer hereunder on the date hereof, or (iii) incurred
after the date of the Base Balance Sheet in the ordinary course of business
consistent with the terms of this Agreement.
2.09. Taxes. Except as disclosed in Schedule 2.09 attached hereto,
-----
(a) each of the Company and its Subsidiaries, including any
predecessors thereof, has (i) duly and timely filed (or there have been filed on
its behalf) with the appropriate governmental authorities all material Tax
Returns (as defined below) required to be filed by it on or prior to the date
hereof, and (ii) duly paid in full or made provision on the books and records of
the Company or its Subsidiaries, as the case may be, in accordance with GAAP (or
there has been paid or provision has been made on its behalf) for the payment of
all Taxes (as defined below) owed by it for all periods ending through the date
hereof, whether or not shown on any Tax Return;
(b) each of the Company and its Subsidiaries, including any
predecessors thereof, has withheld and paid over to the appropriate governmental
authority all material Taxes that it was required to withhold, and has complied
with all applicable laws, rules and regulations relating to information
reporting and backup withholding of material Taxes, including, without
limitation, maintenance of required records with respect thereto;
(c) there are no liens for Taxes upon any property or assets of
the Company or any Subsidiary thereof, except for liens for Taxes not yet due
and payable, and no portion of any real estate Taxes has been deferred or
otherwise delayed in payment;
(d) there are no pending or threatened audits, actions,
proceedings, investigations, legal proceedings, disputes or written claims with
respect to Taxes of the Company or any of its Subsidiaries, including any
predecessors thereof ("Audits"), and neither the Company nor any of its
------
Subsidiaries has received any written notice of any such Audits;
(e) none of the Tax Returns filed by the Company or any of its
Subsidiaries or material Taxes payable by the Company or any of its Subsidiaries
have been the subject of an Audit;
(f) there are no outstanding written requests, agreements,
consents or waivers to extend the statutory period of limitations applicable to
the assessment or collection of any Taxes or deficiencies against the Company or
any of its Subsidiaries, and no power of attorney granted by either the Company
or any of its Subsidiaries with respect to any Taxes is currently in force;
(g) neither the Company nor any of its Subsidiaries has received
written notice of any claim made by a governmental authority in a jurisdiction
where the Company or
17
any of its Subsidiaries, as applicable, does not file a Tax Return, that the
Company or such Subsidiary is or may be subject to taxation by that
jurisdiction;
(h) the Company and each of its Subsidiaries has delivered or
made available to Buyer complete and accurate copies of all federal income Tax
Returns of the Company or any of its Subsidiaries for all tax years ending on or
after March 31, 1998;
(i) neither the Company nor any of its Subsidiaries is a party
to any agreement providing for the allocation or sharing of Taxes and neither
the Company nor any of its Subsidiaries (i) has been a member of an affiliated
group (or similar state, local or foreign filing group) filing a consolidated
federal income Tax Return (other than the group the common parent of which is
the Company) or (ii) has any liability for the Taxes of any person (other than
the Company or any of its Subsidiaries) under Treasury Regulation ss. 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise;
(j) neither the Company nor any of its Subsidiaries has filed a
consent under Section 341(f) of the Code concerning collapsible corporations;
(k) neither the Company nor any of its Subsidiaries has
constituted either a "distributing corporation" or a "controlled corporation"
(within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of
stock qualifying for tax-free treatment under Section 355 of the Code (A) in the
two years prior to the date hereof or (B) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in connection with the
Merger;
(l) neither the Company nor any of its Subsidiaries is subject
to any adjustments under Section 481 of the Code and there has been no change of
control of the Company or any of its Subsidiaries for purposes of Section 382 of
the Code, other than as noted in the Audited Financial Statements; and
(m) there is no instrument which is necessary to establish the
Company's or each of its Subsidiaries' title to any right or asset which is
liable to stamp duty in the United Kingdom or elsewhere but which has not been
duly stamped or which would attract stamp duty if brought within the relevant
jurisdiction. The Company and each of its Subsidiaries has duly paid all stamp
duty and stamp duty reserve tax to which it is, has been or may be made liable
and there is no liability to any penalty in respect of such duty or tax nor are
there any circumstances or transactions to which the Company is or has been a
party which may result in the Company becoming liable to such a penalty. No
claim has been made by the Company or any of its Subsidiaries at any time during
the period of three (3) years prior to the date hereof in respect of stamp duty
relief under FA 1930 Section 42 or FA 1986 Section 75, 76 or 77.
(n) As used herein:
(i) "Taxes" means any and all federal, state, local,
-----
foreign or other taxes of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any governmental authority, including, without
limitation, taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales,
use, capital
18
stock, payroll, employment, unemployment, social security, workers'
compensation, or net worth, customs duties and taxes or other charges in
the nature of excise, withholding, ad valorem or value added; and
(ii) "Tax Return" means any return, report or similar
----------
statement (including the attached schedules) required to be filed with
respect to Taxes, including, without limitation, any information return,
claim for refund, amended return, or declaration of estimated Taxes.
2.10. Inventories. All items in the inventories of the Company and its
-----------
Subsidiaries (the "Inventory") reflected on the Base Balance Sheet or existing
---------
at the date hereof (including, without limitation, raw materials, work in
progress and finished goods), are of a quality and quantity saleable or usable
in the ordinary course of business consistent with past practices and subject to
the reserve reflected on the Base Balance Sheet. Said Inventories reflect
write-downs or reserves in the case of items which are below standard quality or
have become obsolete or unsaleable or unusable (except at prices less than cost)
in the ordinary course of the business. There have been no material write-downs
or reserves since the date of the Base Balance Sheet. Except as disclosed on
Schedule 2.10 attached hereto, all Inventory items are located on the premises
-------------
of the Owned Real Property or the Leased Real Property. Since the date of the
Base Balance Sheet, no Inventory items have been sold, leased or disposed of,
except through sales and leases in the ordinary course of business. The raw
materials included in Inventory were purchased in the ordinary course of
business at prices and in quantities consistent with past practices of the
Company and the Subsidiaries.
2.11. Absence of Certain Changes. Except as disclosed on Schedule 2.11
-------------------------- -------------
attached hereto, since the date of the Base Balance Sheet there has not been:
(a) Any change in the financial condition, properties, assets,
liabilities, business or operations of the Company or any Subsidiary, which
individually or in the aggregate and whether or not arising in the ordinary
course of business, has had, or could reasonably be expected to have, a Company
Material Adverse Effect;
(b) Any Encumbrance placed on any of the properties of the
Company or any of its Subsidiaries (other than as disclosed on Schedule 2.07)
-------------
which remains in existence on the date hereof or will remain on the Closing
Date;
(c) Any obligation or liability relating to the conduct of the
business of the Company or any of its Subsidiaries incurred by the Company or
any of its Subsidiaries other than obligations and liabilities incurred in the
ordinary course of business consistent with past practices;
(d) Any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company or any of its Subsidiaries other than in the
ordinary course of business consistent with past practices;
(e) Any damage, destruction or loss, whether or not covered by
insurance, which has had a Company Material Adverse Effect;
19
(f) Any declaration, setting aside or payment of any dividend by
the Company or any of its Subsidiaries, or the making of any other distribution
in respect of the capital stock, or other ownership interests, of the Company or
any of its Subsidiaries, or any direct or indirect redemption, purchase or other
acquisition by the Company or any of its Subsidiaries of its own capital stock,
or other ownership interests;
(g) Any claim of unfair labor practices involving the Company or
any of its Subsidiaries, any change in the compensation payable or to become
payable by the Company or any of its Subsidiaries to any of its officers,
employees, agents or independent contractors other than normal merit increases
in accordance with its usual practices, or any bonus payment or arrangement made
to or with any of such officers, employees, agents or independent contractors;
(h) Any obligation or liability incurred by the Company or any
of its Subsidiaries to any of its officers, directors, stockholders or
employees, or any loans or advances made by the Company or any of its
Subsidiaries to any of its officers, directors, stockholders or employees,
except normal compensation and expense allowances payable to officers or
employees;
(i) Any change in accounting methods or practices (other than
changes required by GAAP) or any material change in credit practices or
collection policies used by the Company or any of its Subsidiaries; or
(j) Any other transaction or agreement entered into by the
Company or any of its Subsidiaries other than transactions in the ordinary
course of business.
2.12. Ordinary Course. Since the date of the Base Balance Sheet,
---------------
except as otherwise described on Schedule 2.12 attached hereto, the Company and
-------------
each of its Subsidiaries has conducted its business only in the ordinary course.
2.13. Intellectual Property.
---------------------
(a) Set forth on Schedule 2.13 is a true and complete list, with
-------------
a brief description of each, including, where relevant, the applicable
jurisdiction, the registration number or application number, the date issued
and/or filed, of all material patents, patent rights, patent applications,
trademarks, trademark applications, service marks, service xxxx applications,
trade names, domain names, logos and registered copyrights owned by or
registered in the name of the Company or any of its Subsidiaries (the
"Registered Intellectual Property"). The Company and its Subsidiaries own or
--------------------------------
possess adequate licenses or other rights to use all patents, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names, domain names, logos, copyrights, manufacturing
processes, formulae, trade secrets and know how (collectively, the "Intellectual
------------
Property") necessary to the conduct of their business as conducted as of the
--------
date hereof. No claim is pending or, to the knowledge of the Company, threatened
and neither the Company nor any of its Subsidiaries has received written notice
to the effect that: (i) the Company or any of its Subsidiaries infringes upon,
misappropriates or conflicts with the asserted rights of any other person or
entity under any Intellectual Property; or (ii) the Company's interest in any
Intellectual Property owned or licensed by the Company or any of its
Subsidiaries, or which the Company or any of its
20
Subsidiaries otherwise has the right to use, is invalid or unenforceable by the
Company and its Subsidiaries. The Company and its Subsidiaries have taken
reasonable steps to protect and preserve the confidentiality of all technical
information developed by and belonging to the Company that has not been
patented. Except as set forth on Schedule 2.13, the Company has not granted or
-------------
assigned to any other person or entity any right to manufacture, have
manufactured, assemble or sell the products or proposed products or to provide
the services or proposed services of the Company or its Subsidiaries.
(b) Except as set forth in Schedule 2.13, all Registered
-------------
Intellectual Property developed by or for the Company or its Subsidiaries was
conceived, invented, reduced to practice, reduced to tangible form, written or
otherwise created solely by either (i) employees of the Company or its
Subsidiaries acting within the scope of their employment, or (ii) persons or
entities who have executed a written assignment that irrevocably assigns and
transfers all right, title and interest in and to such Registered Intellectual
Property (including the right to seek past and future damages with respect to
such Registered Intellectual Property) to Company and its Subsidiaries, and
Company or its Subsidiaries are the sole and exclusive owner(s) of such
Registered Intellectual Property. Except as set forth on Schedule 2.13, the
-------------
Company and its Subsidiaries have recorded each such patent assignment with the
relevant governmental authorities, including, without limitation, the United
States Patent and Trademark Office (the "PTO") or its equivalent in any relevant
---
foreign jurisdiction.
(c) Except as set forth in Schedule 2.13, neither the Company
-------------
nor any of its Subsidiaries has granted any license or other right to use any
Registered Intellectual Property, whether or not requiring the payment of
royalties, and no third party has any right to use any of the Registered
Intellectual Property. To the actual knowledge of the Company (without further
inquiry or investigation), no person or entity is infringing upon any of the
Company's or any of its Subsidiaries' rights to the Registered Intellectual
Property. Neither the Company nor any of its Subsidiaries has received written
notice of infringement upon, misappropriation of or conflict with any asserted
right of any third party (including, without limitation, any employee or former
employee of the Company or any of its Subsidiaries) under any Registered
Intellectual Property.
(d) Except as set forth in Schedule 2.13, none of the Registered
-------------
Intellectual Property is subject to the payment of any registration, maintenance
or renewal fees or taxes or actions and/or responses falling due within ninety
(90) days following the date hereof.
2.14. Material Contracts. Except for contracts, commitments, plans,
------------------
agreements, arrangements, understandings and licenses, whether written or oral,
which are reasonably described on Schedule 2.14 attached hereto (the
-------------
"Contracts"), neither the Company nor any of its Subsidiaries is a party to or
---------
subject to: (a) any contract materially limiting the freedom of the Company or
any of its Subsidiaries to engage in any line of business or to compete with any
other person; (b) any contract not entered into in the ordinary course of
business and which involves payment or the right to receive by the Company or
any of its Subsidiaries of $50,000 or more in any calendar year, which is not
cancelable without penalty within sixty (60) days and the duration of which is
greater than one year; (c) any material license agreement, whether as licensor
or licensee; (d) any note, bond, indenture, credit facility, mortgage, security
agreement or other instrument or document relating to or evidencing indebtedness
for money borrowed or a security interest in or mortgage on the material assets
of the Company or any Subsidiary; (e) any
21
warranty, indemnity or guaranty issued by the Company or any Subsidiary (other
than customary product warranties provided by the Company in the ordinary course
of business); (f) any contract granting to any third party the right to use any
material real or personal property or property right of the Company, including
any lease; (g) any joint venture agreement; (h) any contract with any
manufacturer or distributor of products of the Company or any Subsidiary which
is not cancelable without penalty upon ninety (90) days' notice or less; or (i)
any contract granting to a third party the right to any royalty, profit sharing,
management fee or any other similar contract. Except as set forth in Schedule
--------
2.14, each Contract is in full force and effect with respect to the Company and
----
any Subsidiary and, to the Company's knowledge, with respect to any other party
thereto, and there are no disputes or disagreements between the Company or any
Subsidiary, on the one hand, and any other party, on the other hand, with
respect to any Contract which could reasonably be expected to have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries is in
material default under any Contract or has any knowledge of conditions or facts
which, with notice or the passage of time, or both, would constitute a default.
2.15. Litigation. Except for (a) matters described on Schedule 2.15
---------- -------------
attached hereto, (b) matters individually involving a claim against the Company
or any of its Subsidiaries of less than $100,000, and (c) matters involving
claims by multiple claimants which are affiliates of each other aggregating with
respect to each such group of affiliates less than $100,000, there are no suits,
actions, proceedings (including, without limitation, arbitration or
administrative proceedings), claims or governmental investigations or audits (a)
pending or, to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries or any of their respective material properties or
assets, (b) pending or, to the knowledge of the Company, threatened against,
relating to or involving any of the officers, directors or employees of the
Company or its Subsidiaries in connection with the business of the Company or
its Subsidiaries, or (c) pending or, to the knowledge of the Company, threatened
challenging the validity or propriety of, or otherwise relating to, this
Agreement or the transactions contemplated hereby. Except as set forth on
Schedule 2.15, there is no material judgment, order, writ, injunction, decree or
-------------
award (whether issued by a court, an arbitrator, a Governmental Entity thereof
or otherwise) to which the Company or any Subsidiary is a party, or involving
the material properties or assets of the Company or any Subsidiary, which is
unsatisfied or which requires continuing compliance therewith by the Company or
any Subsidiary.
2.16. Compliance with Laws.
--------------------
(a) Except as set forth on Schedule 2.16 attached hereto, the
-------------
Company and each of its Subsidiaries has complied during the past three (3)
years in all material respects and is in compliance in all material respects
with all applicable laws, statutes, edicts, ordinances, orders, judgments,
decrees, rules and regulations promulgated by any Governmental Entity which
apply to the Company or its Subsidiaries or to the conduct of its or their
business, except where the failure to be in such compliance would not have,
either individually or in the aggregate, a Company Material Adverse Effect.
Except as set forth on Schedule 2.16, neither the Company nor any of its
-------------
Subsidiaries has received written notice of a material violation or alleged
violation of any such law, statute, edict, ordinance, order, rule or regulation
which matter has not been resolved by appropriate action.
22
(b) Section 2.16 above does not apply to (i) any environmental
laws, statutes, edicts, ordinances, regulations or by-laws promulgated by any
Governmental Entity, for which Section 2.24 hereof applies or (ii) any labor and
employment laws, statutes, edicts, ordinances, orders, judgments, decrees, rules
or regulations promulgated by any Governmental Entity, for which Section 2.26
hereof applies.
2.17. Insurance. Schedule 2.17 hereto sets forth a true, correct and
--------- -------------
complete list of all insurance policies carried by, or covering, the Company or
its Subsidiaries with respect to their respective businesses or in which the
Company or any Subsidiary is named as a beneficiary. A declarations page or
insurance binder relating to each such policy will be delivered to Buyer prior
to Closing. All such policies are in full force and effect, and no notice of
cancellation has been given with respect to any such policy. There are no
pending or, to the Company's knowledge, threatened material claims under any of
the Company's or its Subsidiaries' insurance policies. The Company has
maintained similar insurance policies at all times during the past three (3)
years in levels and terms in the aggregate not substantially less favorable to
the Company than those currently maintained.
2.18. Warranty Claims. There are no pending or, to the knowledge of
---------------
the Company, threatened product liability, warranty or other similar claims
against the Company or any of its Subsidiaries for products or services which
are defective or fail to meet any product or service warranties except claims
(i) which individually involve a claim against the Company or any of its
Subsidiaries of less than $100,000, (ii) by any single customer which in the
aggregate amount to less than $100,000, (iii) which have been disclosed on
Schedule 2.18 attached hereto, or (iv) which have been disclosed or reserved
-------------
against in the Base Balance Sheet. During the three (3) year period prior to the
date hereof, neither the Company nor any Subsidiary has paid any material
warranty claims.
2.19. Finder's Fee. Except as set forth on Schedule 2.19 attached
------------ -------------
hereto, neither the Company or any of its Subsidiaries nor any Stockholder has
incurred or become liable for any broker's commission or finder's fee relating
to or in connection with the transactions contemplated by this Agreement.
2.20. Permits.
-------
(a) The Company and each of its Subsidiaries have obtained all
permits, registrations, licenses, franchises, certifications and other approvals
(collectively, the "Approvals") required from federal, state, local or foreign
---------
authorities necessary for the conduct of its business, except for such Approvals
the absence of which could not reasonably be expected to have a Company Material
Adverse Effect. All such Approvals are valid and in full force and effect, and
the Company and each of its Subsidiaries are operating in all material respects
in compliance therewith.
(b) Section 2.20 above does not apply to any environmental
permits, registrations, licenses, franchises, certifications and other
approvals, for which Section 2.24 hereof applies.
23
2.21. Copies of Documents. The copies of the corporate records of the
-------------------
Company and each of its Subsidiaries, as made available to Buyer for review, are
true and complete copies of the originals of such documents; provided, that such
--------
records do not include minutes of the board of directors of the Company relating
to the solicitation of bids and the negotiation of the transactions contemplated
by this Agreement.
2.22. Transactions with Interested Persons. No stockholder, officer or
------------------------------------
director of the Company or of any of its Subsidiaries nor, to the knowledge of
the Company, any of their respective spouses or family members, owns directly or
indirectly on an individual or joint basis any material interest in, or serves
as an officer or director or in another similar capacity of, any competitor or
supplier of the Company or any of its Subsidiaries, or any organization which
has a material contract or arrangement with the Company or any of its
Subsidiaries. Except as set forth on Schedule 2.22 attached hereto, there are no
-------------
loans, leases, trusts or other continuing transactions between the Company or
any of its Subsidiaries and any present, or former, stockholder, director,
officer or, to the knowledge of the Company, any member of such stockholder's,
director's, officer's or employee's immediate family, or any business
organization controlled by any such stockholder, director, officer, employee or
his or her immediate family as they relate to the business of the Company and
its Subsidiaries.
2.23. Employee Benefit Programs.
-------------------------
(a) For purposes of this Agreement, "Benefit Plan" means each and
------------
every employment agreement, bonus, incentive compensation, deferred
compensation, pension, profit sharing, retirement, stock purchase, stock option,
stock ownership, stock appreciation rights, phantom stock, leave, layoff,
severance, separation, vacation, dependent care, legal service, cafeteria, life,
health, accident, disability or other employee benefit plan, practice, policy,
agreement or arrangement of any kind, whether written or oral, including,
without limitation, any "employee benefit plan" as defined in section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA");
-----
"ERISA Affiliate" means, with respect to any entity (i) a member of any
---------------
"controlled group" (as defined in section 414(b) of the Code) of which that
entity is also a member, (ii) a trade or business, whether or not incorporated,
under common control (within the meaning of section 414(c) of the Code) with
that entity, or (iii) a member of any affiliated service group (within the
meaning of section 414(m) of the Code) of which that entity is also a member.
For purposes of this Section 2.23, an entity "maintains" an employee benefit
---------
plan if such entity sponsors, contributes to, or provides benefits under such
employee benefit plan, or has any obligation by agreement to contribute to or
provide benefits under such employee benefit plan, or if such employee benefit
plan provides benefits to or otherwise covers employees of such entity, or their
spouses, dependents or beneficiaries.
(b) Schedule 2.23 attached hereto sets forth a complete list of all
-------------
Benefit Plans maintained by the Company, its Subsidiaries and/or any ERISA
Affiliate thereof (the "Benefit Plans").
-------------
(c) The Company has delivered or made available to Buyer or its
representatives a correct and complete copy of each such written Benefit Plan
and all amendments thereto, as applicable, including related trust agreements,
annuity contracts, insurance contracts, current summary plan descriptions, the
most recent IRS determination letter
24
(if any), and the most recent IRS Form 5500 Annual Report and any applicable
schedules thereto (if any).
(d) To the best of its knowledge, the Company believes that each
Benefit Plan that is intended to meet the requirements of section 401(a),
401(f), or 403(a) of the Code has been administered in all material respects to
meet such requirements and has received a favorable determination letter from
the IRS which remains in effect on the date hereof, and no determination letter
with respect to any Benefit Plan has been revoked nor has revocation been
threatened, nor has any Benefit Plan been amended since the date of its most
recent determination letter or application therefore in any respect which would
adversely affect its qualification or materially increase its cost, nor has any
Benefit Plan been amended in a manner that would require security to be provided
in accordance with section 401(a)(29) of the Code.
(e) To the best of the Company's knowledge, each Benefit Plan that
provides medical benefits has been operated in compliance with all requirements
of sections 601 through 734 of ERISA and either (i) section 162(i)(2) and (k) of
the Code and regulations thereunder (prior to 1989) or (ii) section 4980B of the
Code and regulations thereunder (after 1988). To the best of the Company's
knowledge, there are no claims for coverage under sections 601 through 608 of
ERISA that impose any liability on the Company, and the Company has or upon
Closing will have offered "continuation coverage" to all qualified beneficiaries
under its health plans to the extent required by law.
(f) Except as set forth in Schedule 2.23, each Benefit Plan has been
-------------
administered to be in compliance in all material respects with the presently
applicable provisions of ERISA and the Code, including but not limited to the
satisfaction of all applicable reporting and disclosure requirements under ERISA
and the Code. Each of the Benefit Plans has been administered at all times, and
in all material respects, in accordance with its terms except that in any case
in which any Benefit Plan is currently required to comply with a provision of
ERISA or of the Code, but is not yet required to be amended to reflect such
provision, it has been administered in accordance with such provision. All
material reports and similar documents required to be distributed to any
participant or beneficiary of a Benefit Plan have been duly and timely
distributed.
(g) Neither the Company nor any ERISA Affiliate employs any employees
for whom the employer is subject to a duty to bargain with a labor organization.
(h) Neither the Company nor any ERISA Affiliate maintains or otherwise
has any liability with respect to (or has ever maintained or otherwise had any
liability with respect to) any plan or arrangement subject to Title IV of ERISA,
including (without limitation) any "multiemployer plan" as defined in section
3(37) of ERISA.
(i) To the best of the Company's knowledge, no "prohibited
transaction," as defined in section 406 of ERISA or section 4975 of the Code,
has occurred with respect to any Benefit Plan that would result in a material
liability to the Company under section 406 of ERISA or section 4975 of the Code.
25
(j) Except as set forth in Schedule 2.23, no benefit that is or may
-------------
become payable by any Benefit Plan as a result of, or arising under, this
Agreement shall constitute an "excess parachute payment" (as defined in section
280G(b)(1) of the Code) that is subject to the imposition of an excise tax under
section 4999 of the Code or that would not be deductible by reason of section
280G of the Code.
(k) Except as set forth in Schedule 2.23, no employee of the Company
-------------
or any Subsidiary will be entitled to any additional benefits from Buyer or any
acceleration of the time of payment or vesting of any benefits under any Benefit
Plan as a result of the transactions contemplated by this Agreement.
(l) There are no currently pending or, to the best of the Company's
knowledge, threatened investigations by any governmental agency, claims (except
claims for benefits payable in the normal operation of the Benefit Plans),
suits, or proceedings against or involving any of the Benefit Plans, or
asserting any rights to, or claims for benefits under, any of the Benefit Plans,
that could reasonably be expected to have a Company Material Adverse Effect.
(m) The Company does not maintain or make contributions, nor does it
have any commitments or material obligations arising under, any written plan or
arrangement that provides post retirement medical benefits, post retirement
death benefits or other post retirement welfare benefits, except to the extent
required by Part 6 of Title I of ERISA or similar applicable state laws.
2.24. Environmental Matters. For purposes of this Section 2.24, (i)
---------------------
"Hazardous Material" shall mean any substance which may pose a threat to the
------------------
environment or to human health or safety, as defined or regulated under any
applicable Environmental Laws, including, without limitation, any hazardous
waste, hazardous material, hazardous substance, petroleum product, used and
waste fuel, oil, toxic substance, pollutant, contaminant, or radioactive waste;
and (ii) "Environmental Law" shall mean any environmental statute, regulation,
-----------------
ordinance, or by-law adopted or enacted at the federal, state, or local level.
Except as set forth on Schedule 2.24 attached hereto:
-------------
(a) The Company and each of its Subsidiaries hold and are in material
compliance with all environmental permits, certificates, licenses, approvals,
registrations, and authorizations ("Environmental Permits") required under all
---------------------
Environmental Laws in connection with its business, and all of such
Environmental Permits are in full force and effect. All such material
Environmental Permits are listed on Schedule 2.24(a). The Company and each of
----------------
its Subsidiaries has complied during the past three (3) years in all material
respects with, and is not in material violation of, the applicable environmental
statutes, rules, regulations, ordinances, and orders of any Governmental Entity,
including those relating to Hazardous Material, as defined herein.
(b) The Company and its Subsidiaries have not received any request
for information, notice of claim, demand, or other written notification that it
is or may be potentially responsible with respect to any investigation or
cleanup of and threatened or actual release of any Hazardous Material.
26
(c) The Company and its Subsidiaries have not treated, stored for
more than 90 days, recycled, or disposed of any Hazardous Material on any
property now owned, operated, or leased by the Company or any Subsidiary in
material violation of any Environmental Law, except where such violation would
not have, individually or in the aggregate, a Company Material Adverse Effect.
(d) No polychlorinated biphenyls ("PCBs") or friable asbestos are
----
present at any property now owned or leased by the Company or any Subsidiary,
nor are there any underground storage tanks, active or abandoned, at any
property now owned or leased by the Company or any Subsidiary.
(e) No Hazardous Material transported for the Company or any
Subsidiary has come to be located at any site which is listed on the National
Priorities List (the "NPL") promulgated pursuant to the Comprehensive
---
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), CERCLIS, or any equivalent list of sites for cleanup under a state
------
"Superfund" program.
(f) Except as authorized by law or a permit issued by a Governmental
Entity, the Company and its Subsidiaries have not released, spilled, discharged,
disposed of, pumped, poured, emitted, emptied, injected, leached, dumped, or
disposed of any Hazardous Material ("Released") into soil, sediment, groundwater
--------
or surface water at any property now owned or leased by the Company or any
Subsidiary, and no such property is listed on the NPL, CERCLIS, or any
equivalent list of sites under a state "Superfund" program.
(g) There are no environmental liens recorded on any properties owned
by the Company or any Subsidiary.
(h) The Company has provided or made available to Buyer all reports
concerning environmental conditions on any property now owned or leased by the
Company or any Subsidiary, including any ASTM "Phase I" or "Phase II"
assessments.
(i) No consent, approval, or authorization of, or registration of
filing with any environmental governmental authority or regulatory agency is
required in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby.
2.25. List of Directors and Officers. Schedule 2.25 attached hereto
------------------------------ -------------
contains a true and complete list of all current directors and officers of the
Company and each of its Subsidiaries.
2.26. Employees; Labor Matters. Neither the Company nor any Subsidiary is
------------------------
delinquent in payments to any of its employees for any wages, salaries,
commissions, bonuses or other direct compensation for any services performed for
it through the date hereof or amounts required to be reimbursed to such
employees. To the knowledge of the Company, except as set forth on Schedule 2.26
-------------
attached hereto, there are no charges of employment discrimination or unfair
labor practices, nor are there any strikes, slowdowns, stoppages of work or any
other concerted interference with normal operations which are existing, pending
or threatened against or involving the Company or any of its Subsidiaries. To
the knowledge of the Company, except as set forth on Schedule 2.26, there are no
-------------
formal grievances, complaints or charges that have
27
been filed against the Company or any of its Subsidiaries with any federal,
state or local court or governmental agency (including, but not limited to, any
proceedings under any dispute resolution procedure under any collective
bargaining agreement) and, to the knowledge of the Company, there is no
arbitration or similar proceeding pending and no claim therefor has been
asserted. None of the Company's or any of its Subsidiaries' employees are
represented by a collective bargaining agent and no collective bargaining
agreement is in effect or is currently being or is about to be negotiated by the
Company or any of its Subsidiaries in respect of its employees.
The Company and its Subsidiaries are in compliance with all labor and
employment related statutes, ordinances, orders, judgments, decrees, rules and
regulations applicable to the Company and its Subsidiaries and promulgated by
any federal, state, municipal or foreign entity, agency, court or other
governmental authority (including all laws, regulations and orders relating to
wages, hours, employment loss under the Worker Adjustment and Retraining
Notification Act (the "WARN Act"), employment discrimination, workplace safety
--------
and health, workers' compensation, the collection and payment of withholding
and/or social security taxes and visas), except where failure to be in
compliance would not reasonably be expected to have a Company Material Adverse
Effect.
2.27. Backlog. As of the date hereof, the Company and its Subsidiaries have
-------
a backlog of orders for the sale of products of the Company and its Subsidiaries
consistent with their prior practices, for which revenues have not been
recognized, as set forth on Schedule 2.27 attached hereto.
-------------
2.28. Customers, Distributors and Suppliers. Schedule 2.28 attached hereto
------------------------------------- -------------
sets forth any customer, sales representative or distributor (whether pursuant
to a commission, royalty or other arrangement) which accounts for more than five
percent (5%) of the sales of the Company and its Subsidiaries for the twelve
(12) months ended September 30, 2001 (each a "Customer" or "Distributor", as
-------- -----------
applicable, and collectively, the "Customers and Distributors"). Schedule 2.28
-------------------------- -------------
lists all of the suppliers of the Company and its Subsidiaries to whom during
the twelve (12) months ended September 30, 2001 the Company or its Subsidiaries
made payments aggregating Five Hundred Thousand Dollars ($500,000) or more,
showing, with respect to each, the name and dollar volume involved (each a
"Supplier" and collectively the "Suppliers"). The relationships with the
-------- ---------
Customers, Distributors and Suppliers are good commercial working relationships.
Except as set forth on Schedule 2.28, no Customer, Distributor or Supplier has
-------------
canceled, materially modified, or otherwise terminated its relationship with the
Company and its Subsidiaries, or has during the last twelve (12) months
decreased materially its services, supplies or materials to the Company and its
Subsidiaries or its usage or purchase of the services or products of the Company
and its Subsidiaries and the Company has not received written notice (including,
without limitation, written notice delivered by e-mail or other electronic
means) of any such intent by a Customer, Distributor or Supplier to cancel,
modify or terminate such relationship.
2.29. Capital Expenditures. The aggregate amount of capital expenditures
--------------------
required to be incurred in order to support a 3-shift SAW fabrication capacity
of 4,040 wafers per month will not be greater than One Million Dollars
($1,000,000).
28
SECTION 3. COVENANTS OF THE COMPANY.
-------------------------
3.01. Making of Covenants and Agreements. The Company hereby makes the
----------------------------------
covenants and agreements set forth in this Section 3 and the Company will cause
each of its Subsidiaries to comply with such agreements and covenants.
3.02. Conduct of Business. Except as set forth on Schedule 3.02 attached
------------------- -------------
hereto, as contemplated by this Agreement or as agreed to by Buyer, the Company
will and will cause each of its Subsidiaries to:
(a) Conduct its business only in the ordinary course consistent with
past practices and refrain from changing or introducing any method of management
or operations except in the ordinary course of business and consistent with
prior practices;
(b) Refrain from making any change or incurring any obligation to
make a change in its charter or bylaws (or comparable organizational documents)
or authorized or issued capital stock or ownership interests;
(c) Refrain from (i) declaring, setting aside or paying any
dividend, making any other distribution in respect of its capital stock, shares
or ownership interests, (ii) making any direct or indirect redemption, purchase
or other direct or indirect acquisition of its stock or ownership interests or
(iii) issuing, granting, awarding, selling, pledging, disposing of or
encumbering or authorizing the issuance, grant, award, sale, pledge, disposition
or encumbrance of any shares of, or securities convertible or exchangeable for,
or options, warrants, calls, commitments or rights of any kind to acquire, any
shares of its capital stock of any class thereof;
(d) Refrain from (i) prepaying any loans (if any) from its
stockholders, shareholders, officers or directors or any company affiliated with
any of the foregoing, (ii) making any change in its borrowing arrangements,
(iii) modifying, amending or terminating any of the Contracts except as
specifically provided in this Agreement or in the ordinary course of business
consistent with past practices, or (iv) waiving, releasing or assigning any
material rights or claims;
(e) Refrain from (i) changing financial or tax accounting policies,
principles, practices or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable) other than such changes required by GAAP or the Code or (ii) making,
causing to be made or revoking any elections on tax returns of the Company or
any Subsidiary other than as required by the Code or consistent with prior
elections;
(f) Pay all accounts payable in the ordinary course of business and
in a manner consistent with past practice unless they are being disputed in good
faith;
(g) Refrain from authorizing any capital expenditures in excess of
$500,000 in the aggregate or selling, pledging, disposing of or encumbering, or
agreeing to sell, pledge, dispose of or encumber, any material assets or Real
Property of the Company or any Subsidiary except for sales of inventory and
products and repairs or similar capital expenditures relating to Real Property,
in each case, in the ordinary course of business;
29
(h) Refrain from acquiring (by merger, share exchange,
consolidation, combination or acquisition of stock or assets) all or a material
portion of another entity or entering into any contract with respect to any of
the foregoing;
(i) Except for any borrowing under any credit facility of the
Company or any Subsidiary in existence as of the date hereof, refrain from
incurring any indebtedness for borrowed money, issue any debt securities or
enter into or modify in any material respect any contract with respect thereto;
(j) Refrain from (i) entering into, amending or terminating
(other than for cause) any employment or consulting agreement with any director,
consultant or employee of the Company or any Subsidiary, (ii) amending any
existing severance or termination arrangement in any manner which increases the
obligations of the Company or any Subsidiary or (iii) entering into any new
arrangements with respect to the grant or payment of any severance or
termination pay;
(k) Refrain from entering into, extending, renewing or amending
any lease of real property or any capital lease;
(l) Refrain from accelerating the collection of, or selling or
otherwise transferring any accounts receivable;
(m) Refrain from adopting, amending or terminating any bonus,
profit sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, agreement, trust, fund
or arrangement for the benefit or welfare of any employee or officer of the
Company or any Subsidiary, or withdrawing from any multi-employer plan so as to
create any liability under Article IV of ERISA to any entity;
(n) Refrain from writing down (or up) the value of any Inventory
or writing off as uncollectible any accounts receivable;
(o) Refrain from disposing of or permitting to lapse any right
to the use of any Registered Intellectual Property, or disposing of or
disclosing to any person any trade secret, formula, manufacturing process or
know-how not heretofore a matter of public knowledge except in the ordinary
course of business consistent with past practice;
(p) Refrain from granting or extending any power of attorney or
acting as guarantor, surety, co-signer, endorser, co-maker, indemnitor or
otherwise, in respect of the obligation of any person or entity;
(q) Refrain from extending any credit in the sale of products or
collection of accounts receivable except in the ordinary course of business
consistent with past practice;
(r) Maintain its corporate books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with past practice;
(s) Refrain from adopting or amending in any material respect
any collective bargaining agreement or Benefit Plan;
30
(t) Refrain from granting any increase in compensation, or
granting or making any bonus or other compensatory payments, to any director,
officer, employee or consultant of the Company or any Subsidiary except in the
ordinary course of business consistent with past practice;
(u) Use commercially reasonably efforts to preserve intact the
business organization of the Company and its Subsidiaries;
(v) Use commercially reasonable efforts to keep available the
services of the present officers and employees of the Company and its
Subsidiaries;
(w) Pay all material Taxes lawfully levied or assessed against
the Company and its Subsidiaries when due, or make adequate reserves on its
books and records in respect thereof, and file all material Tax Returns when
due;
(x) Perform in all material respects all of its obligations
under all Contracts;
(y) Keep in full force and effect all insurance policies listed
on Schedule 2.17 or, if any of those insurance policies expire or terminate,
-------------
obtain, and maintain policies of insurance substantially similar to those
expired or terminated policies (both in terms of coverage and amount of
coverage); and
(z) Refrain from entering into any executory agreement,
commitment or undertaking to do any of the activities prohibited by the
foregoing provisions.
3.03. Consents and Approvals.
----------------------
(a) Contracts listed on Schedule 2.14 with respect to which a
-------------
consent or approval to the transactions provided for in this Agreement is
required are designated with an asterisk (collectively, "Restricted Contracts").
--------------------
Notwithstanding any other provision of this Agreement, the Company will use
commercially reasonable efforts (not involving the payment by the Company or any
of its Subsidiaries of money to any party to any such Contract) to obtain the
consents or approvals of third parties required under any Restricted Contract by
reason of the transactions provided for in this Agreement. Nothing in this
Agreement will constitute a transfer or an attempted transfer of any Restricted
Contract which by its terms or under applicable law or governmental rules or
regulations requires the consent or approval of a third party (including,
without limitation, a governmental authority) unless such consent or approval
shall have been obtained.
(b) The Company shall use commercially reasonable efforts to
obtain all authorizations, orders, consents and approvals necessary to the
performance of its obligations under this Agreement and the transactions
contemplated hereby and to avoid any breach, default, termination, acceleration
or material adverse modification of any Contract, lease or permit as a result
of, or in connection with, the execution, delivery and performance of this
Agreement. As soon as reasonably practicable after the date hereof, except as
otherwise provided in this Agreement, the Company shall make or file all
filings, document submissions, applications, statements and reports to all
foreign, federal or state government agencies or entities that are required to
be made prior to the Closing Date by or on behalf of the Company or its
Subsidiaries
31
pursuant to any applicable statute, rule or regulation in connection with this
Agreement and the transactions contemplated hereby.
(c) The Company shall use its reasonable best efforts to obtain
the consent of the Option Holders of one hundred percent (100%) of all
outstanding Incentive Stock Options and Non-Qualified Stock Options to the
amendment or termination of such stock options to permit treatment of such stock
options as set forth in Section 1.05(b)(ii) hereof.
3.04. Consummation of Agreement. The Company shall use commercially
-------------------------
reasonable efforts to perform and fulfill, or cause to be performed or
fulfilled, all conditions and obligations on the part of the Company and its
Subsidiaries to be performed and fulfilled under this Agreement, to the end that
the transactions contemplated by this Agreement shall be fully carried out. To
this end, the Company will obtain prior to the Closing all necessary
authorizations or approvals of its Stockholders and board of directors and shall
have all necessary documentation thereof promptly executed and recorded without
additional cost or delay to Buyer.
3.05. No Solicitation of Other Offers. Unless and until this Agreement
-------------------------------
shall have been terminated, the Company will not and will not authorize or
permit any of its directors, officers, Subsidiaries, employees or agents to,
directly or indirectly, (i) take any action to directly or indirectly solicit,
initiate submission of or encourage, proposals or offers from any person
relating to any acquisition or purchase of all or (other than in the ordinary
course of business) a portion of the assets of, or any equity interest in, the
Company, any merger or business combination with the Company or any public or
private offering of interests in the Company (an "Acquisition Proposal"), (ii)
--------------------
furnish any information or afford access to the properties, books or records of
the Company to any person or entity that may consider making or has made an
offer with respect to an Acquisition Proposal other than Buyer and its
representatives, or (iii) otherwise cooperate in any way with, or assist or
participate in discussions or negotiations, facilitate or encourage, any effort
or attempt by any other person to do any of the foregoing. The Company will
promptly notify Buyer upon receipt of any offer or indication that any person is
considering making an offer with respect to an Acquisition Proposal (including
the material terms and conditions thereof and the identity of the person making
it) or any request for information relative to the Company or for access to the
properties, books and records of the Company.
3.06. [Intentionally Omitted]
3.07. Antitakeover Statutes. If any takeover statute becomes
---------------------
applicable to the Merger, the Company will take all commercially reasonable
actions to consummate the transactions contemplated by this Agreement as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate or minimize the effects of any takeover statute on the Merger.
3.08. Access to Information. To the extent permitted by law, the
---------------------
Company will permit, and the Company will cause each Subsidiary to permit,
representatives of Buyer (including, without limitation, outside counsel,
financial advisers, and accountants) to have reasonable access upon prior notice
of not less than one (1) business day to all premises, properties, personnel,
books, records (including Tax records, but excluding personnel records other
than personnel records relating to date of hire, compensation and pertinent
accruals), contracts and
32
documents of or pertaining to each of the Company and its Subsidiaries. The
Company will furnish, and the Company will cause each Subsidiary to furnish,
such persons with all financial, operating and other data and information as may
be reasonably requested. and otherwise act to eliminate or minimize the effects
of any takeover statute on the Merger.
3.09. Stockholder Approval. As soon as reasonably practicable, the
--------------------
Company shall either solicit the written consent of its stockholders or duly
call, convene and hold a meeting of its stockholders and take such other action
necessary to secure the the vote of its stockholders required by applicable law
and the Certificate of Incorporation or bylaws in order to obtain the approval
of this Agreement, the Merger and the other transactions contemplated hereby.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB.
-----------------------------------------------
4.01. Making of Representations and Warranties. As a material
----------------------------------------
inducement to the Company to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer and Sub hereby make the representations
and warranties to the Company contained in this Section 4.
4.02. Organization of Buyer and Sub.
-----------------------------
(a) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of the Commonwealth of Pennsylvania with full
corporate power to own or lease its properties and to conduct its business in
the manner and in the places where such properties are owned or leased or such
business is conducted by it.
(b) Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
to own or lease its properties and to conduct its business in the manner and in
the places where such properties are owned or leased or such business is
conducted by it.
4.03. Authority of Buyer and Sub. Each of Buyer and Sub has full
--------------------------
right, authority and power to execute, deliver and perform this Agreement and
each agreement, document and instrument to be executed and delivered by Buyer or
Sub pursuant to this Agreement and to consummate the transactions contemplated
hereby and thereby. The execution, delivery and performance by Buyer and Sub of
this Agreement and each such other agreement, document and instrument have been
duly authorized by all necessary corporate action of Buyer and Sub and no other
action on the part of Buyer or Sub is required in connection therewith. This
Agreement and each other agreement, document and instrument constitute, or when
executed and delivered will constitute, valid and binding obligations of each of
Buyer and Sub enforceable in accordance with their terms, except as limited by
(i) applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights and (ii)
general principles of equity that restrict the availability of equitable
remedies. The execution, delivery and performance by Buyer and Sub of this
Agreement and each such other agreement, document and instrument to be executed
and delivered by Buyer or Sub pursuant to this Agreement:
33
(a) do not and will not violate any provision of the articles of
incorporation, as amended, or bylaws, as amended, of Buyer or the certificate of
incorporation, as amended, or bylaws, as amended, of Sub;
(b) do not and will not violate any federal, state, local or
foreign laws applicable to Buyer or require Buyer to obtain any approval,
consent or waiver of, or make any filing with, any third party (including,
without limitation, any Governmental Entity) which has not been obtained or
made, other than such filings as may be required under Foreign Antitrust Laws;
and
(c) do not and will not result in a material breach of,
constitute a material default under, accelerate any material obligation under or
give rise to a right of termination under any indenture or loan agreement or any
other material agreement, contract, instrument, mortgage, lien, lease, permit,
authorization, order, writ, judgment, injunction, decree, determination or
arbitration award to which Buyer or Sub is party.
4.04. Litigation. There is no litigation pending or, to Buyer's
----------
knowledge, threatened against Buyer or Sub which would prevent or hinder the
consummation of the transactions contemplated by this Agreement.
4.05. Approvals and Consents. The only approvals or consents of
----------------------
persons and entities not a party to this Agreement that are legally or
contractually required to be obtained by Buyer and/or Sub in connection with the
consummation of the transactions contemplated by this Agreement are the filings
under Foreign Antitrust Laws.
4.06. Financing. Buyer has evidenced in a form satisfactory to Company
---------
sufficient funds or has legally binding commitments for sufficient funds to
consummate the transactions contemplated by this Agreement.
4.07. Finder's Fee. Buyer has not incurred or become liable for any
------------
broker's commission or finder's fee which would be payable by any Stockholder
relating to or in connection with the transactions contemplated by this
Agreement.
SECTION 5. COVENANTS OF BUYER.
------------------
5.01. Making of Covenants and Agreements. Buyer hereby makes the
----------------------------------
covenants and agreements set forth in this Section 5. For purposes of this
Section 5, the term "Buyer" shall include Sub.
-----
5.02. Confidentiality. Buyer shall hold in strict confidence, and will
---------------
not use, any confidential or proprietary data or information obtained from the
Company or any Subsidiary with respect to the Company's or any Subsidiary's
business or financial condition except for the purpose of evaluating,
negotiating and completing the transaction contemplated hereby. Information
generally known in the Company's industry, which is independently developed or
which has been disclosed to Buyer by third parties which have a right to do so
shall not be deemed confidential or proprietary information for purposes of this
Agreement. If the transaction contemplated by this Agreement is not consummated,
Buyer will return to the
34
Company all copies of such data and information, including but not limited to
financial information, customer lists, business and corporate records,
worksheets, test reports, tax returns, lists, memoranda, and other documents
made available to Buyer in connection with the transaction. Notwithstanding the
above, nothing in this Agreement shall restrict Buyer's reasonable compliance
with its disclosure or other obligations under any federal or state law, rule or
regulation to which Buyer is subject.
5.03. Non-Solicitation. Buyer agrees that until the earlier of (i) the
----------------
Closing and (ii) the date which is two (2) years after the date of this
Agreement, Buyer will not, without the prior written consent of the Company,
directly or indirectly, solicit for employment or hire any employee of the
Company with whom Buyer has had contact or who became known to Buyer in
connection with its consideration of the transaction contemplated hereby;
provided, however, that the foregoing provision will not prevent Buyer from (x)
-------- -------
employing any such person who contacts Buyer on his or her own initiative
without any direct or indirect solicitation by or encouragement from Buyer, (y)
advertising in connection with general solicitations for employment consistent
with Buyer's past practice, or (z) taking such actions as may be reasonably
necessary in connection with the satisfaction of the conditions to Closing set
forth in Sections 6.01(n) and 6.01(o). Buyer also agrees that until the earlier
of (a) the Closing and (b) the date which is two (2) years after the date of
this Agreement, Buyer will not, without the prior written consent of the
Company, initiate or maintain contact (except in the ordinary course of
business) with any officer, director, employee, supplier, distributor, broker or
customer of the Company for the purposes of obtaining information regarding the
Company's operations, assets, prospects or finances.
5.04. Consents. As soon as reasonably practicable after the date of
--------
this Agreement, Buyer shall make all filings with and notifications of
governmental authorities, regulatory agencies and other entities required to be
made by Buyer in connection with the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby; and Buyer shall
obtain all authorizations, waivers, consents and permits, from all third
parties, including, without limitation, applicable governmental authorities,
regulatory agencies, lessors, lenders and contract parties, required to permit
the consummation of the transactions contemplated by this Agreement, and to
avoid any breach, default, termination, acceleration or modification of any
material agreement, contract, lease or permit as a result of, or in connection
with, the execution and performance of this Agreement.
5.05. [Intentionally Omitted]
5.06. Consummation of Agreement. Buyer shall use commercially
-------------------------
reasonable efforts to perform and fulfill, or cause to be performed or
fulfilled, all conditions and obligations on the part of Buyer and Sub to be
performed and fulfilled under this Agreement, to the end that the transactions
contemplated by this Agreement shall be fully carried out.
5.07. Employee Benefit Arrangements.
-----------------------------
(a) After the Closing, Buyer shall cause the Surviving
Corporation to honor all obligations under (i) the existing terms of any written
employment and severance agreements to which the Company or any Subsidiary is
presently a party, except as may otherwise be agreed
35
to by the parties thereto, and (ii) the Company's and any Subsidiary's severance
policy. For a period of twelve (12) months following the Effective Time,
employees of the Surviving Corporation will be entitled to participate in
employee benefit plans of Buyer, an affiliate thereof or the Surviving
Corporation, the terms of which will be substantially equivalent in the
aggregate to those provided to similarly situated employees of Buyer.
(b) After the Closing, Buyer shall cause the Surviving Corporation to
honor all obligations which accrued prior to the Effective Time under the
Company's deferred compensation plans. Except as is otherwise required by the
existing terms of employment and severance agreements to which the Company is
presently a party, future accruals may be (but are not required to be) provided
for under any such plan(s) or under any similar plan(s) of the Surviving
Corporation or Buyer. Except as is otherwise required by the existing terms of
employment and severance agreements to which the Company is a presently party,
if future accruals are not provided for with respect to any current employee
participant in such plan as of the Effective Time, and such person remains an
employee of the Company or the Surviving Corporation or Buyer, the person's
continuing employment in such capacity shall be counted for purposes of vesting
(but not for purposes of benefit accrual) under such plan. Except as is
otherwise required by the existing terms of employment and severance agreements
to which the Company is a party, transfer of employment from the Company to the
Surviving Corporation or to Buyer or to an affiliate of Buyer shall not
constitute a termination of employment for purposes of payment of benefits under
any such plan.
(c) If any employee of the Company or any of the Subsidiaries becomes
a participant in any employee benefit plan, practice or policy of Buyer, any of
its affiliates or the Surviving Corporation, such employee and such employee's
spouse, dependents and beneficiaries, shall be given credit under such plan for
all service prior to the Effective Time with the Company and the Subsidiaries
and prior to the time such employee becomes such a participant, for purposes of
eligibility (including, without limitation, waiting periods) and vesting but not
for any other purposes for which such service is either taken into account or
recognized (including, without limitation, benefit accrual), provided, that such
employees will be given credit for such service for purposes of any vacation
policy. In addition, if any employee of the Company or any of the Subsidiaries
employed as of the Closing Date becomes covered by a medical plan of Buyer, any
of its affiliates or the Surviving Corporation, such medical plan shall not
impose any exclusion on coverage for preexisting medical conditions with respect
to these employees and such employee's spouse, dependents and beneficiaries. To
the extent possible under the relevant plan, such employees shall also be given
credit for any deductible or co-payment amounts paid in respect of the plan year
in which the Closing Date occurs to the extent that, following the Closing Date,
they participate in any plan of Buyer, any of its affiliates or the Surviving
Corporation for which deductible or co-payments are requested. Buyer and the
Surviving Corporation will use commercially reasonable efforts to make any
appropriate arrangements with the applicable insurance carrier(s) to achieve the
foregoing.
5.08. HIG Dispute. Xxxxxxx Procter LLP (or such other counsel acceptable to
-----------
the Representatives) shall continue, under the direction and at the discretion
of the Representatives, to represent the Company, the Equityholders and any
person who served as an officer or director of the Company prior to the Closing
in the dispute between the Company and HIG Hightec, Inc. ("HIG") which is
---
currently pending before the United States District Court for the District of
36
Massachusetts (the "Court"), U.S.D.C. Civil Action No. 01-40206, including,
-----
without limitation, any appeals thereof (the "HIG Dispute"). To the extent
-----------
commercially reasonable, Buyer shall cooperate, and shall cause the Surviving
Corporation and each of their officers, directors, employees, subsidiaries,
affiliates and successors to cooperate, with Xxxxxxx Procter LLP (or such other
counsel engaged by the Representatives) in the pursuit by, and the defense of,
the Company, the Equityholders and any person who served as an officer or
director of the Company prior to the Closing with respect to the HIG Dispute,
including, without limitation, (a) providing representatives of Xxxxxxx Procter
LLP, and other outside counsel, financial advisers, and accountants retained in
connection with the HIG Dispute with reasonable access to all premises,
properties, personnel, books, records, contracts and documents of or pertaining
to each of the Surviving Corporation, the Company and its successors, affiliates
and Subsidiaries, and (b) furnishing such persons with all relevant financial,
operating and other data and information of or pertaining to each of the
Surviving Corporation, the Company and its successors, affiliates and
Subsidiaries as may be reasonably requested. Any and all costs incurred and paid
by Buyer or the Surviving Corporation in connection with the foregoing shall be
reimbursed to Buyer from the Escrow Account.
SECTION 6. CONDITIONS.
----------
6.01. Conditions to the Obligations of Buyer. The obligation of Buyer and
--------------------------------------
Sub to consummate this Agreement and the transactions contemplated hereby are
subject to the fulfillment, prior to or at the Closing, of the following
conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects as of the Closing Date as though
made on and as of the Closing Date, except for such representations and
warranties as are made as of a specified date, and the Company shall, on or
before the Closing, have performed in all material respects all of its
obligations hereunder which by the terms hereof are to be performed on or before
the Closing.
(b) No Material Change. There shall have been no change in the
------------------
financial condition, properties, assets, liabilities, business or operations of
the Company or any of its Subsidiaries since the date hereof which has resulted
in a Company Material Adverse Effect, except for changes arising out of or
relating to (i) general economic conditions, (ii) changes in the industry
generally, including without limitation regulatory changes or (iii) changes
arising out of the execution, delivery and performance by the Company of this
Agreement and the transactions contemplated hereby; provided, however, that the
-------- -------
effect of these general economic conditions or industry conditions shall only be
considered to the extent of, and in the amount of, the disproportionate negative
impact, if any, they have on the Company as compared to the effect such
conditions have on Buyer.
(c) Certificate from Officers. The Company shall have delivered to
-------------------------
Buyer a certificate signed by each of the Company's President and Chief
Financial Officer or Treasurer dated as of the Closing Date to the effect that
the statements set forth in paragraphs (a) and (b) of this Section 6.01 are true
and correct.
37
(d) Consents and Approvals. All consents and approvals listed on
----------------------
Schedule 2.06 shall have been obtained.
-------------
(e) Antitrust Filings. All filings required to be made under Foreign
-----------------
Antitrust Laws shall have been made, and any applicable waiting period
thereunder shall have expired or been terminated.
(f) Stockholder Approval. This Agreement and the Merger shall have
--------------------
been approved and adopted by the affirmative votes of at least such percentage
of the Company's outstanding shares of capital stock (including any class vote)
as is required by the DGCL and by the Company's Certificate of Incorporation.
(g) Resignations of Directors and Officers. The written resignations,
--------------------------------------
effective as of the Closing Date, of all directors and officers of the Company
and its Subsidiaries that are requested by Buyer no less than five (5) days
prior to the Closing Date.
(h) No Prohibitions. No law, statute, edict, ordinance, order,
---------------
judgment, decree, ruling, regulation or injunction shall have been enacted,
entered, issued, promulgated or enforced by any Governmental Entity of competent
jurisdiction restraining, enjoining or otherwise preventing consummation of the
Merger on the terms contemplated by this Agreement; provided that Buyer and Sub
--------
have fully complied with their obligations under Sections 5.04 and 5.05.
(i) Records. At the Closing, the Company will deliver or otherwise
-------
make available to Buyer all of the minute books (including those minutes
referred to in the proviso contained in Section 2.21) and stock transfer records
of the Company and the Subsidiaries.
(j) Good Standing. The Company will deliver to Buyer a certificate
-------------
issued by the Secretary of State or other appropriate officials of the Company's
and its Subsidiaries' jurisdictions of incorporation or organization and of all
states in which the Company is qualified as a foreign entity as to the good
standing of the Company and its Subsidiaries in such jurisdictions and states as
of a date no earlier than five (5) days before the Closing Date.
(k) Escrow Agreement. The Representatives shall have executed and
----------------
delivered the Escrow Agreement in substantially the form attached hereto as
Exhibit D.
---------
(l) Legal Opinion. Buyer shall have received a legal opinion of
-------------
Xxxxxxx Procter LLP, counsel to the Company, in substantially the form attached
hereto as Exhibit H.
---------
(m) Amendment of Stock Options. Option Holders of not less than ninety
--------------------------
percent (90%) in interest of all outstanding Incentive Stock Options and
Non-Qualified Stock Options shall have agreed to the amendment or termination of
such stock options (i) to permit treatment of such stock options as set forth in
Section 1.05(b)(ii) hereof and (ii) to reflect such Option Holder's agreement to
be bound by Sections 1.10, 1.11, 9.01 and 9.01A of this Agreement.
38
(n) Employment and Non-Competition Agreement. Buyer shall have
----------------------------------------
received an executed copy of an Employment and Non-Competition Agreement in
substantially the form attached hereto as Exhibit E from Xxxxxxx X. Xxxxxxxxxx.
---------
(o) Incentive Stock Option and Non-Competition Agreements. Buyer
-----------------------------------------------------
shall have received executed copies of Incentive Stock Option Agreements and
Non-Competition Agreements in substantially the forms attached hereto as Exhibit
-------
F-1 and Exhibit F-2, respectively, from at least nine (9) of the eleven (11)
--- -----------
employees set forth on Schedule 6.01(o), including at least four (4) of the five
----------------
(5) persons designated on Schedule 6.01(o) as "SAW Engineers." Pursuant to such
----------------
Incentive Stock Options Agreements, Buyer shall grant to each employee options
to purchase the number of shares of common stock of Buyer set forth next to such
employee's name on Schedule 6.01(o).
----------------
(p) 280G Stockholder Approval. The payments by the Company in
-------------------------
connection with the Change in Control Obligations, the accelerated vesting of
options and warrants pursuant to Section 1.05(b)(ii), as applicable, and any
other "parachute payments" as defined in Section 280G of the Code shall have
been approved by the Stockholders in accordance with Section 280G(b)(5)(B) of
the Code and Answer A-7 of Proposed Regulation 1.280G-1.
(q) Closing Estimates. The Company and the Representatives shall
-----------------
have delivered the Estimated Working Capital Amount, the Estimated Change in
Control Amount and the Estimated Funded Net Debt Amount in accordance with
Section 1.13 hereof.
(r) Springer Estoppel Letter. Buyer shall have received an executed
------------------------
estoppel letter, in form and substance reasonably satisfactory to Buyer, from
Xxxxx Xxxxxxxx XX ("Xx. Xxxxxxxx") acknowledging that: (i) the aggregate amount
------------
of debt owed to Xx. Xxxxxxxx pursuant to those two (2) certain Amended and
Restated Term Notes dated as of September 15, 1998, as amended effective as of
July 6, 2001(the "Springer Notes"), is Two Million, Five Hundred Thousand
--------------
Dollars ($2,500,000); (ii) there are no current defaults or breaches (or any
facts in existence that with the passage of time or the giving of notice would
reasonably be expected to result in a breach) with respect to the Springer
Notes; and (iii) upon repayment of the Springer Notes, Xx. Xxxxxxxx shall
cooperate to the extent commercially reasonable in releasing all liens, security
interests, mortgages or other encumbrances on the property of the Company or any
of its Subsidiaries.
6.02. Conditions to Obligations of the Company. The obligations of the
----------------------------------------
Company to consummate this Agreement and the transactions contemplated hereby is
subject to the fulfillment, prior to or at the Closing, of the following
conditions precedent:
(a) Representations; Warranties; Covenants. Each of the
--------------------------------------
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the Closing Date as though made
on and as of the Closing Date. Buyer shall, on or before the Closing, have
performed in all material respects all of its obligations hereunder which by the
terms hereof are to be performed on or before the Closing. Buyer shall have
delivered to the Company a certificate of the President or any Vice President of
Buyer dated the Closing Date to such effect.
39
(b) Delivery of Merger Consideration. The Closing Merger
--------------------------------
Consideration shall have been delivered to the Exchange Agent and the Escrow
Agent in accordance with Sections 1.06 and 1.10.
(c) [Intentionally Omitted]
(d) Antitrust Filings. All filings required to be made under Foreign
-----------------
Antitrust Laws shall have been made, and any applicable waiting period
thereunder shall have expired or been terminated.
(e) No Prohibitions. No law, statute, edict, ordinance, order,
---------------
judgment, decree, ruling, regulation or injunction shall have been enacted,
entered, issued, promulgated or enforced by any Governmental Entity of competent
jurisdiction restraining, enjoining or otherwise preventing consummation of the
Merger on the terms contemplated by this Agreement; provided that the Company
--------
has fully complied with its obligations under Sections 3.03, 3.04, 3.07 and
3.08.
(f) Escrow Agreement. Buyer shall have executed and delivered the
----------------
Escrow Agreement in substantially the form attached hereto as Exhibit D.
---------
(g) Legal Opinion. The Company shall have received a legal opinion
-------------
of Xxxxxx Xxxxxxxx LLP, counsel to Buyer and Sub, in substantially the form
attached hereto as Exhibit I.
---------
(h) 280G Stockholder Approval. The payments by the Company in
-------------------------
connection with the Change in Control Obligations, the accelerated vesting of
options and warrants pursuant to Section 1.05(b)(ii), as applicable, and any
other "parachute payments" as defined in Section 280G of the Code shall have
been approved by the Stockholders in accordance with Section 280G(b)(5)(B) of
the Code and Answer A-7 of Proposed Regulation 1.280G-1.
SECTION 7. TERMINATION OF AGREEMENT; RIGHTS TO PROCEED.
-------------------------------------------
7.01. Termination. At any time prior to the Closing, this Agreement may be
-----------
terminated as follows:
(a) by mutual written consent of Buyer and the Company;
(b) by Buyer, provided that Buyer is not in material breach of this
Agreement, (A) if the Company is in material breach of this Agreement and such
breach shall remain uncured for a period of ten (10) business days after Buyer
shall have given written notice of such breach to the Company or (B) if the
Company shall have explicitly or by conduct repudiated this Agreement and such
repudiation shall have remained uncured for a period of ten (10) business days
after Buyer shall have given written notice thereof to the Company;
(c) by the Company, provided that the Company is not in material
breach of this Agreement, (A) if Buyer is in material breach of this Agreement
and such breach shall
40
remain uncured for a period of ten (10) business days after the Company shall
have given written notice of such breach to Buyer or (B) if Buyer shall have
explicitly or by conduct repudiated this Agreement and such repudiation shall
have remained uncured for a period of ten (10) business days after the Company
shall have given written notice thereof to Buyer; or
(d) by Buyer or the Company, if the Closing has not occurred on or
before February 28, 2002 (the "Termination Date"); provided that the terminating
---------------- --------
party is not in material breach of this Agreement.
7.02. Effect of Termination. All obligations of the parties hereunder shall
---------------------
cease upon any termination pursuant to Section 7.01; provided, however, that (i)
-------- -------
the provisions of this Section 7, Section 5.02, Section 5.03 and Section 10.01
hereof shall survive any termination of this Agreement, (ii) nothing herein
shall relieve any party from any liability for a material error or omission in
any of its representations or warranties contained herein or a material failure
to comply with any of its covenants, conditions or agreements contained herein,
and (iii) any party may proceed as further set forth in Section 7.03 below.
7.03. Right to Proceed. Anything in this Agreement to the contrary
----------------
notwithstanding, except for the condition set forth in Section 6.01(f), if any
of the conditions specified in Section 6.01 hereof have not been satisfied,
Buyer shall have the right to proceed with the transactions contemplated hereby
without waiving any of its rights hereunder, and, except for the condition set
forth in Section 6.02(b), if any of the conditions specified in Section 6.02
hereof have not been satisfied, the Company shall have the right to proceed with
the transactions contemplated hereby without waiving any of its rights
hereunder.
SECTION 8. SURVIVAL.
--------
8.01. Survival of Warranties. Each of the representations, warranties,
----------------------
agreements, covenants and obligations herein or in any Schedule attached hereto
shall survive the Closing and shall expire on the same dates as and to the
extent that the rights to indemnification with respect thereto under Section 9
shall expire.
SECTION 9. INDEMNIFICATION.
---------------
9.01. Indemnification of Buyer. Buyer and the Surviving Corporation and
------------------------
their respective subsidiaries and affiliates and persons serving as officers,
directors, partners or employees thereof (individually, a "Buyer Indemnified
-----------------
Party" and, collectively, the "Buyer Indemnified Parties") shall be indemnified
----- -------------------------
and held harmless from the Escrow Account from and against any damages,
liabilities, losses, Taxes, fines, penalties, costs and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) Fraud, intentional misrepresentation or a deliberate or willful
breach by the Company of any of its representations, warranties or covenants
under this Agreement or in any Schedule attached hereto;
41
(b) Any other breach of any representation, warranty or covenant of
the Company under this Agreement or in any Schedule attached hereto, or by
reason of any claim, action or proceeding asserted or instituted arising out of
any matter or thing constituting a breach of such representations, warranties or
covenants;
(c) The Company's failure to obtain the agreement of any Option
Holder(s) to the amendment or termination of such Option Holder(s)'s Incentive
Stock Options and Non-Qualified Stock Options to permit treatment as set forth
in Section 1.05(b)(ii) hereof; and
(d) The HIG Dispute, including, without limitation, any loss
resulting from any settlement, litigation, arbitration award or judgment and
legal fees and expenses and other professional fees related thereto.
9.01A. Indemnification by the Equityholders. The Equityholders, severally
------------------------------------
and not jointly, in accordance with their respective common equity percentage
interests as set forth on Exhibit A, Exhibit B and Exhibit C agree subsequent to
--------- --------- ---------
the Closing to indemnify and hold the Buyer Indemnified Parties harmless from
and against any damages, liabilities, losses, Taxes, fines, penalties, costs and
expenses (including, without limitation, reasonable fees of counsel) of any kind
or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by any of them arising out of or
based upon any of the following matters:
(a) Fraud, intentional misrepresentation or a deliberate or willful
breach by the Company of any of its representations, warranties or covenants
under this Agreement or in any Schedule attached hereto;
(b) Any breach of a representation or warranty by the Company
contained in Subsection 2.03(a).
Before Buyer shall be entitled to recover any amounts pursuant to an
indemnification claim under this Section 9.01A, Buyer shall first be required to
collect such amounts as are available to pay such claim from the Escrow Account.
The limitations set forth in Subsections 9.02(a), 9.02(b), 9.02(c) and 9.02(d)
shall not apply to any claim under this Section 9.01A.
9.02. Limitations on Indemnification of Buyer. Notwithstanding the
---------------------------------------
foregoing, the right of Buyer Indemnified Parties to indemnification under
Section 9.01 shall be subject to the following provisions:
(a) Subject to the exceptions set forth in Subsection 9.02(d): (i)
the aggregate amount for which the Buyer Indemnified Parties may be indemnified
under Subsections 9.01(b) and 9.01(c) of this Agreement shall not exceed an
amount equal to Seven Million, Seven Hundred Thousand Dollars ($7,700,000) (the
"Cap"); (ii) the aggregate amount for which the Buyer Indemnified Parties may be
---
indemnified under Subsections 9.01(b), 9.01(c) and 9.01(d) of this Agreement
shall not exceed Thirteen Million Dollars ($13,000,000).
(b) Subject to the exceptions set forth in Subsection 9.02(d), no
indemnification shall be payable pursuant to Subsection 9.01(b) above to any
Buyer Indemnified Party, unless the cumulative amount of all claims for
indemnification pursuant to Section 9.01
42
("Buyer Claims") shall exceed Five Hundred Thousand Dollars ($500,000) (the
------------
"Deductible"), whereupon only the amount of such claims in excess of such
----------
Deductible shall be recoverable by the Buyer Indemnified Parties from the Escrow
Account. For the sole purpose of calculating the amount of Buyer Claims arising
out of any breach of any representation or warranty made by the Company,
references to a Company Material Adverse Effect or materiality (or other
correlative terms) shall be disregarded.
(c) Subject to the exceptions set forth in Subsection 9.02(d), no
indemnification shall be payable to a Buyer Indemnified Party from the Escrow
Account with respect to claims under Subsection 9.01(b) which are asserted after
the date which is eighteen (18) months after the Closing Date (the "Expiration
----------
Date"); provided that if on or prior to the Expiration Date a specific state of
---- --------
facts shall have become known which may give rise to a claim for indemnification
under Subsection 9.01(b) and a Buyer Indemnified Party shall have given written
notice to the Representatives of such facts known by such Buyer Indemnified
Party at such time, then the right to indemnification with respect to such claim
shall remain in effect without regard to when such matter shall be finally
determined and disposed of.
(d) The limitations contained in Subsections 9.02(a), 9.02(b) and
9.02(c) of this Section 9.02 shall not apply to (i) the indemnification
obligations arising under Subsection 9.01(a) or (ii) breaches by the Company of
a representation or warranty contained in Subsection 2.03(a). The limitations
contained in Subsection 9.02(b) of this Section 9.02 shall not apply to (i)
adjustments required to be made pursuant to Sections 1.13 and 1.14, (ii) claims
with respect to a post-Closing unpaid portion of the Company-Paid Transaction
Expenses made pursuant to Section 10.01, or (iii) breaches by the Company of a
representation or warranty contained in Section 2.29. The limitations contained
in Subsections 9.02(b) and 9.02(c) of this Section 9.02 shall not apply to the
indemnification obligations arising under Subsections 9.01(c) and 9.01(d). The
obligation to indemnify the Buyer Indemnified Parties with respect to claims
under Subsection 9.01(a) or pursuant to a breach by the Company of a
representation or warranty contained in Subsection 2.03(a) shall remain in full
force and effect until the date which is one (1) day after the expiration of the
statute of limitations applicable to any such claim. The obligation to indemnify
the Buyer Indemnified Parties with respect to claims under Subsection 9.01(c)
shall remain in full force and effect until the earlier of (w) the date on which
Option Holders of one hundred percent (100%) of all outstanding Incentive Stock
Options and Non-Qualified Stock Options shall have agreed to the amendment or
termination of their Incentive Stock Options and Non-Qualified Stock Options to
permit treatment as set forth in Section 1.05(b)(ii) hereof and (x) the later of
(1) the latest expiration date of any outstanding Incentive Stock Option or
Non-Qualified Stock Option and (2) that date which is nine (9) months after the
latest exercise of any outstanding Incentive Stock Option or Non-Qualified Stock
Option; provided that if on or prior to such later date a specific state of
--------
facts shall have become known which may give rise to a claim for indemnification
under Subsection 9.01(c) and a Buyer Indemnified Party shall have given written
notice to the Representatives of such facts known by such Buyer Indemnified
Party at such time, then the right to indemnification with respect to such claim
shall remain in effect without regard to when such matter shall be finally
determined and disposed of. Upon the later of the Expiration Date or the date on
which the HIG Dispute shall have been fully and finally resolved, an amount
equal to the lesser of (i) the then current balance of the Escrow Amount and
(ii) the sum of (A) the amount of pending Buyer Claims plus (B) an amount equal
to five (5) times the Option Purchase Price payable in respect of all Incentive
43
Stock Options and Non-Qualified Stock Options then outstanding or exercised
after the Closing shall be retained in the Escrow Account to be available to
indemnify Buyer in respect of such claims and all other amounts held in the
Escrow Account shall be delivered to the Equityholders in accordance with the
terms of the Escrow Agreement. As more particularly described in the Escrow
Agreement, such amount retained in the Escrow Account shall be delivered to the
Equityholders in accordance with the terms of the Escrow Agreement upon the
later of (1) the latest expiration date of any outstanding Incentive Stock
Option or Non-Qualified Stock Option, (2) that date which is nine (9) months
after the latest exercise of any outstanding Incentive Stock Option or
Non-Qualified Stock Option, or (3) the full and final resolution of the HIG
Dispute. As more particularly provided in the Escrow Agreement, the
Equityholders shall become entitled to receive distributions from the Escrow
Amount upon the full and final resolution of the HIG Dispute or either of the
two components thereof: the "consent" component, which is the subject of Count
One of the Company's First Amended Verified Complaint filed with the Court on
November 14, 2001 (the "HIG Consent Dispute") and the "stock option" component,
-------------------
which is the subject of Count Six of the Company's Second Amended Verified
Complaint attached to a Motion for Leave to File the Second Amended Verified
Complaint filed with the Court on December 6, 2001 (the "HIG Stock Option
----------------
Dispute"). Upon resolution of the HIG Consent Dispute, the Equityholders shall
-------
(subject to the immediately succeeding sentence) become entitled to receive a
distribution from the Escrow Account equal to Two Million, Three Hundred
Thousand Dollars ($2,300,000) minus all indemnifiable losses or expenses
-----
incurred by the Buyer Indemnified Parties in connection with the HIG Consent
Dispute (or no distribution if such subtraction results in a negative number),
and upon resolution of the HIG Stock Option Dispute, the Equityholders shall
(subject to the immediately succeeding sentence) become entitled to receive a
distribution from the Escrow Account equal to Three Million Dollars ($3,000,000)
minus all indemnifiable losses or expenses incurred by the Buyer Indemnified
-----
Parties in connection with the HIG Stock Option Dispute (or no distribution if
such subtraction results in a negative number). All such distributions are
dependent on the availability of sufficient funds in the Escrow Account and are
subject to pending Buyer Claims against the funds held in the Escrow Account and
are further subject to the terms and conditions of the Escrow Agreement, which
shall govern in the event of any inconsistency between this Section 9.02(d) and
the Escrow Agreement.
(e) Notwithstanding anything herein to the contrary, none of the
Buyer Indemnified Parties shall be entitled to indemnity from the Escrow Account
or otherwise under Section 9.01 hereof with respect to, and the Equityholders
shall not otherwise be liable for, any matter (other than the HIG Dispute) of
which Buyer had actual knowledge at or prior to the Closing.
(f) Indemnification pursuant to Section 9.01 hereof shall be limited
to the amount of any liability or damage that remains after deducting therefrom
(and the cumulative amount of all Buyer Claims for purposes of determining the
Deductible above shall be reduced by the amount of) (i) any Tax Benefit (as
-----------
hereinafter defined) to Buyer or any of its affiliates and (ii) any insurance
proceeds and any indemnity, contribution or other similar payment recoverable by
Buyer or any of its affiliates from any third party with respect thereto. As
used herein, the term "Tax Benefit" shall mean the foreign, federal, state and
local tax savings that have resulted or would reasonably be likely to result, if
claimed, from any tax deduction or tax credit that (i) the indemnified party is
entitled to claim in accordance with applicable law (without regard to
44
the entitlement of such indemnified party to any indemnification payment
pursuant to the terms of this Section 9) on a foreign, federal, state or local
tax return filed for any tax year of the Company, any Subsidiary or Buyer and
(ii) is directly attributable to such claim. It shall be assumed that the
indemnified party is subject to the maximum marginal foreign, federal, state and
local tax rates for a corporation doing business in the principal jurisdiction
where the Company does business, unless the indemnified party's independent
certified public accountant certifies that such indemnified party is subject to
a different rate, in which case such different rate shall apply.
(g) Notwithstanding anything to the contrary contained in this
Agreement, none of the Buyer Indemnified Parties shall be entitled to indemnity
from the Escrow Account or otherwise under any provision of this Agreement for
and in no event shall the Deductible be applied to: (i) any liabilities or
damages to the extent that such liabilities or damages result from or arise out
of actions taken by Buyer, the Company, any Subsidiary or any of their
respective affiliates after the Closing Date or (ii) any consequential damages.
Buyer shall take and shall cause the Company (and/or the Subsidiaries) to take
all commercially reasonable steps to mitigate all such liabilities and damages
upon and after becoming aware of any event which could reasonably be expected to
give rise to such liabilities or damages.
9.03. Indemnification by Buyer. Buyer agrees to indemnify and hold the
------------------------
Equityholders and their respective officers, directors, employees, agents,
partners, stockholders and members and each of such parties respective
successors, executors, administrators, estates, heirs and permitted assigns
(individually, a "Equityholder Indemnified Party" and, collectively, the
------------------------------
"Equityholder Indemnified Parties") harmless from and against any damages,
--------------------------------
liabilities, losses Taxes, fines, penalties, costs and expenses (including,
without limitation, reasonable fees of counsel) of any kind or nature whatsoever
(whether or not arising out of third-party claims and including all amounts paid
in investigation, defense or settlement of the foregoing) which may be sustained
or suffered by any of them arising out of or based upon any of the following
matters:
(a) Fraud, intentional misrepresentation or a deliberate or willful
breach by Buyer or Sub of any of their representations, warranties or covenants
under this Agreement or in any Schedule attached hereto; and
(b) Any other breach of any representation, warranty or covenant of
Buyer or Sub under this Agreement or in any Schedule attached hereto, or by
reason of any claim, action or proceeding asserted or instituted arising out of
any matter or thing constituting a breach of such representations, warranties or
covenants.
9.04. Limitations on Indemnification by Buyer. Notwithstanding the
---------------------------------------
foregoing, the right of Equityholder Indemnified Parties to indemnification
under Section 9.03 shall be subject to the following provisions:
(a) Subject to the exceptions set forth in Subsection 9.04(d), the
Buyer's aggregate liability for indemnification under this Agreement shall not
exceed an amount equal to the Cap.
45
(b) Subject to the exceptions set forth in Subsection 9.04(d), no
indemnification shall be payable pursuant to Subsection 9.03(b) above to any
Equityholder Indemnified Party, unless the cumulative amount of all claims for
indemnification pursuant to Section 9.03 ("Equityholder Claims") shall exceed
-------------------
the Deductible, whereupon only the amount of such claims in excess of such
Deductible shall be recoverable by the Equityholder Indemnified Parties. For the
sole purpose of calculating the amount of Equityholder Claims arising out of any
breach of any representation or warranty made by Buyer or Sub, references to
material adverse effect or materiality (or other correlative terms) shall be
disregarded.
(c) Subject to the exceptions set forth in Subsection 9.04(d), no
indemnification shall be payable to a Equityholder Indemnified Party with
respect to claims under Subsection 9.03(b) which are asserted after the
Expiration Date; provided that if on or prior to the Expiration Date a specific
--------
state of facts shall have become known which may give rise to a claim for
indemnification under Subsection 9.03(b) and a Equityholder Indemnified Party
shall have given written notice to Buyer of such facts known by such
Equityholder Indemnified Party at such time, then the right to indemnification
with respect to such claim shall remain in effect without regard to when such
matter shall be finally determined and disposed of.
(d) The limitations contained in Subsections 9.04(a), 9.04(b) and
9.04(c) of this Section 9.04 shall not apply to the indemnification obligations
of Buyer arising under Subsection 9.03(a). The limitations contained in
Subsections 9.04(b) of this Section 9.04 shall not apply to adjustments required
to be made pursuant to Sections 1.13 and 1.14. Buyer's obligation to indemnify
the Equityholder Indemnified Parties with respect to claims under Subsection
9.03(a) shall remain in full force and effect until the date which is one (1)
day after the expiration of the statute of limitations applicable to any such
claim.
(e) Notwithstanding anything herein to the contrary, Buyer shall not
be obligated to provide any indemnification under Section 9.03 hereof with
respect to, and shall not otherwise be liable for, any matter of which the
Equityholders had actual knowledge at or prior to the Closing.
(f) Indemnification by Buyer pursuant to Section 9.03 hereof shall be
limited to the amount of any liability or damage that remains after deducting
therefrom (and the cumulative amount of all Equityholder Claims for purposes of
determining the Deductible above shall be reduced by the amount of) (i) any Tax
Benefit to such Equityholders or any of their affiliates and (ii) any insurance
proceeds and any indemnity, contribution or other similar payment recoverable by
such Equityholders or any of their affiliates from any third party with respect
thereto.
(g) Notwithstanding anything to the contrary contained in this
Agreement, Buyer shall have no liability under any provision of this Agreement
for and in no event shall the Deductible be applied to: (i) any liabilities or
damages to the extent that such liabilities or damages result from or arise out
of actions taken by the Equityholders or any of their affiliates after the
Closing Date or (ii) any consequential damages. The Equityholders shall take all
commercially reasonable steps to mitigate all such liabilities and damages upon
and after becoming aware of any event which could reasonably be expected to give
rise to such liabilities or damages.
46
9.05. Notice; Defense of Claims. An indemnified party may make claims for
-------------------------
indemnification hereunder by giving written notice thereof to the indemnifying
party (or, in the case of claims by the Buyer Indemnified Parties, to the
Representatives) within the period in which indemnification claims can be made
hereunder. If indemnification is sought for a claim or liability asserted by a
third party, the indemnified party shall also give written notice thereof to the
indemnifying party (or, in the case of claims by the Buyer Indemnified Parties,
to the Representatives) promptly after the indemnified party receives notice of
the claim or liability being asserted, but the failure to do so shall not
relieve the indemnifying party from any liability except to the extent that it
is prejudiced by the failure or delay in giving such notice. Such notice shall
summarize in reasonable detail the bases for the claim for indemnification and
any claim or liability being asserted by a third party. After receiving such
notice, the indemnifying party (or, in the case of claims by the Buyer
Indemnified Parties, the Representatives) shall have the right to assume,
conduct and control the defense of, and compromise or settle such claim, at its
own cost and expense, by giving written notice (the "Defense Notice") to the
--------------
indemnified party of its intention to do so within twenty (20) days after
receipt of the notice of claim. The indemnifying party (or, in the case of
claims by the Buyer Indemnified Parties, the Representatives) shall be entitled
to direct the defense against a third-party claim or liability with counsel
selected by it (subject to the consent of the indemnified party, which consent
shall not be unreasonably withheld) as long as the indemnifying party (or, in
the case of claims by the Buyer Indemnified Parties, the Representatives) is
conducting a good faith and diligent defense. As long as the indemnifying party
(or, in the case of claims by the Buyer Indemnified Parties, the
Representatives) is conducting a good faith and diligent defense of a claim, the
indemnified party shall not pay or settle such claim. The indemnified party
shall at all times have the right to fully participate in the defense of a
third-party claim or liability at its own expense directly or through counsel.
If no Defense Notice is given by the indemnifying party (or, in the case of
claims by the Buyer Indemnified Parties, by the Representatives), or if such
good faith and diligent defense is not being or ceases to be conducted by the
indemnifying party (or, in the case of claims by the Buyer Indemnified Parties,
by the Representatives), the indemnified party shall have the right, at the
expense of the indemnifying party, to undertake the defense of such claim or
liability (with counsel selected by the indemnified party), provided that the
indemnified party shall not compromise or settle such claim or liability without
the consent of the indemnifying party (or, in the case of claims by the Buyer
Indemnified Parties, of the Representatives) which consent shall not be
unreasonably withheld. If the third-party claim or liability is one that by its
nature cannot be defended solely by the indemnifying party (or, in the case of
claims by the Buyer Indemnified Parties, by the Representatives), then the
indemnified party shall make available such information and assistance as the
indemnifying party (or, in the case of claims by the Buyer Indemnified Parties,
as the Representatives) may reasonably request and shall cooperate with the
indemnifying party (or, in the case of claims by the Buyer Indemnified Parties,
with the Representatives) in such defense, at the expense of the indemnifying
party.
9.06. Escrow; Right to Set-Off. As provided in the Escrow Agreement, Buyer
------------------------
shall have the right to assert and collect for Buyer Claims against the Escrow
Account. The existence of the Escrow Agreement and the Escrow Account will not
limit the rights of Buyer in respect of the Buyer Claims. In addition to all
other rights and remedies that Buyer may have, Buyer shall have the right to
setoff against any amounts due to the Equityholders under this Agreement or
otherwise, any sums for which Buyer has been finally adjudicated to be entitled
to
47
indemnification under this Section 9. Buyer's rights to indemnification under
this Section 9 shall not be limited by or to this right to setoff.
9.07. Limited Recourse. Notwithstanding anything contained in this
----------------
Agreement to the contrary, the provisions of this Section 9 shall be the sole
recourse of the parties hereto (except with respect to any equitable remedy to
which a party may be entitled), or any affiliate of any thereof, for any breach,
misrepresentation or other matters relating to or arising in connection with
this Agreement and any of the agreements, documents or instruments executed and
delivered in connection herewith and therewith and any of the transactions
contemplated hereby or thereby, and such recourse is explicitly limited to the
amounts and time limits set forth in Sections 9.02 and 9.04 hereof and to the
claims as set forth in Sections 9.01 and 9.03 hereof.
SECTION 10. MISCELLANEOUS.
-------------
10.01. Fees and Expenses. Each party shall pay its own expenses and costs
-----------------
associated with the preparation and negotiation of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, legal fees, investment banking and financial advisory fees and
accounting fees (collectively "Transaction Expenses"), provided that solely in
-------------------- --------
the event that the Merger is consummated as contemplated hereunder, one-half of
the Transaction Expenses of the Company up to a maximum of Five Hundred Thousand
Dollars ($500,000) shall be paid by Buyer at the Closing, and the remaining
Transaction Expenses of the Company (the "Company-Paid Transaction Expenses")
---------------------------------
shall be paid by the Company prior to the Closing. To the extent that any
Company-Paid Transaction Expenses are not known as of the Closing or are
otherwise not paid prior to the Closing, the Surviving Corporation shall pay
such Company-Paid Transaction Expenses and the amount so paid will be
distributed to Buyer from the Escrow Account. Notwithstanding the foregoing, the
filing fees relating to filings under the Xxxx-Xxxxx-Xxxxxx Act (the "HSR Act")
-------
and any Foreign Antitrust Laws shall be borne by Buyer.
10.02. Governing Law; Consent to Jurisdiction. This Agreement, and all
--------------------------------------
disputes, actions or proceedings arising out of or relating to this Agreement or
the negotiation, validity or performance hereunder or the transactions
contemplated hereby and/or the rights and obligations of the parties to this
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware, without regard to its conflict of laws
provisions. Each of the parties hereto hereby irrevocably and unconditionally
consents to the jurisdiction of the Center for Public Resources to resolve any
such dispute, action or proceeding (except with respect to any equitable remedy
to which a party is entitled), and further consents to the jurisdiction of the
courts of The Commonwealth of Massachusetts and the United States District Court
for the District of Massachusetts for the purpose of enforcing the arbitration
provisions of Section 10.03 and pursuing any equitable remedy. Each of the
parties hereto hereby irrevocably and unconditionally waives any objection to
the laying of venue of any such dispute, action or proceeding before the Center
for Public Resources based on a lack of personal jurisdiction or the laying of
venue, and hereby further irrevocably and unconditionally waives and agrees not
to plead or claim in any court that arbitration before the Center for Public
Resources has been brought in an inconvenient forum. Each of the parties hereto
further agrees that service of process, summons, notice or document by U.S.
registered mail to such party's address set forth
48
in Section 10.04 hereof shall be effective service of process for any such
dispute, action or proceeding brought against such party in any such court.
10.03. Arbitration. Except as set forth in Section 1.14, any dispute
-----------
arising out of or relating to this Agreement or the breach, termination
negotiation, or validity hereof and/or the rights or obligations of the parties
arising out of or relating to this agreement or the breach, termination,
negotiation, or validity hereof shall be finally settled by binding arbitration
conducted expeditiously in accordance with the Center for Public Resources Rules
for Nonadministered Arbitration of Business Disputes (the "CPR Rules"). The
---------
Center for Public Resources shall appoint a neutral advisor from its National
CPR Panel. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. (S)(S)1-16, and judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof. The place
of arbitration shall be Boston, Massachusetts.
Such proceedings shall be administered by the neutral advisor in accordance
with the CPR Rules as he/she deems appropriate, however, such proceedings shall
be guided by the following agreed upon procedures:
(a) mandatory exchange of all relevant documents, to be accomplished
within forty-five (45) days of the initiation of the procedure;
(b) no other discovery;
(c) hearings before the neutral advisor which shall consist of a
summary presentation by each side of not more than three hours; such hearings to
take place on one or two days at a maximum; and
(d) decision to be rendered not more than ten (10) days following
such hearings.
Notwithstanding anything to the contrary contained herein, the provisions
of this Section 10.03 shall not apply with respect to any equitable remedies to
which any party may be entitled.
10.04. Notices. Any notice, request, demand or other communication required
-------
or permitted hereunder shall be in writing and shall be deemed to have been
given (i) if delivered or sent by facsimile transmission, upon acknowledgment of
receipt by the recipient, (ii) if sent by a nationally recognized overnight
courier, properly addressed with postage prepaid, on the next business day (or
Saturday or Sunday if delivered on such days), (iii) or if sent by registered or
certified mail, upon the earlier of the date on which receipt is acknowledged or
the date which is three (3) days after deposit in United States post office
facilities properly addressed with postage prepaid. All notices to a party will
be sent to the addresses set forth below or to such other address or person as
such party may designate by notice to each other party hereunder:
49
TO BUYER OR SUB: Integrated Circuit Systems, Inc.
---------------
2435 Boulevard of the Generals
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xx. Xxxx X. Xxx, Chief Executive Officer
With a copy to: Xxxxxx Xxxxxxxx LLP
--------------
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx Xxxxxxx, Esq.
TO THE COMPANY: Micro Networks Corporation
--------------
000 Xxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Chief Executive Officer
With a copy to: Xxxxxxx Procter LLP
--------------
Exchange Place, 00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Cable, P.C.
TO THE REPRESENTATIVES: Xxxxx Xxxxx
----------------------
New England Partners
Xxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
and
Xxxxx X. Xxxxxxxx
000 Xxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
With a copy to: Xxxxxxx Procter LLP
--------------
Exchange Place, 00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Cable, P.C.
Any notice given hereunder may be given on behalf of any party by his
counsel or other authorized representatives.
10.05. Entire Agreement. This Agreement, including the Schedules and
----------------
Exhibits hereto, the Confidentiality Agreement dated as of July 3, 2001, that
certain letter agreement of even date
50
herewith are complete, reflect the entire agreement of the parties with respect
to its subject matter, and supersede all previous written or oral negotiations,
commitments and writings on said subject matter. No promises, representations,
understandings, warranties and agreements have been made by any of the parties
hereto except as set forth herein or in such Schedules and Exhibits; and all
inducements to the making of this Agreement relied upon by either party hereto
have been expressed herein or in such Schedules or Exhibits.
10.06. Assignability; Binding Effect. This Agreement may not be assigned by
-----------------------------
any party hereto without the prior written consent of the other parties hereto.
This Agreement shall be binding upon and enforceable by, and shall inure to the
benefit of, the parties hereto and their respective successors and permitted
assigns.
10.07. Captions and Gender. The captions in this Agreement are for
-------------------
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine pronoun in
reference to a party hereto shall be deemed to include the feminine or neuter,
as the context may require.
10.08. Execution in Counterparts. For the convenience of the parties and to
-------------------------
facilitate execution, this Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same document.
10.09. Amendments. This Agreement may not be amended or modified, nor may
----------
compliance with any condition or covenant set forth herein be waived, except by
a writing duly and validly executed by Buyer and the Company, or in the case of
a waiver, the party waiving compliance.
10.10. Publicity and Disclosures. No press releases or public disclosure,
-------------------------
either written or oral, of the transactions contemplated by this Agreement,
shall be made by a party to this Agreement without the prior knowledge and
written consent of the other parties hereto. Notwithstanding the foregoing,
either party may disclose information to the extent such disclosure is required
pursuant to any applicable laws, statutes, edicts, ordinances, orders,
judgments, decrees, rules and regulations promulgated by any Governmental Entity
or the requirements of The Nasdaq Stock Market, Inc.
10.11. Specific Performance. The parties agree that it would be difficult
--------------------
to measure damages which might result from a breach of this Agreement by a party
hereto and that money damages would be an inadequate remedy for such a breach.
Accordingly, if there is a breach or proposed breach of any provision of this
Agreement by a party, and the other party does not elect to terminate under
Section 7, such other party shall be entitled, in addition to any other remedies
which it may have, to seek an injunction or other appropriate equitable relief
to restrain such breach without having to show or prove actual damage to such
other party.
10.12. Schedules. The representations and warranties contained in Section 2
---------
are qualified by reference to the Schedules attached hereto. The Schedules are
not intended to constitute, and shall not be construed as constituting,
representations or warranties of the Company except as and to the extent
provided in this Agreement. The Schedules may include items or information which
the Company is not required to disclose under this Agreement;
51
disclosure of such items or information shall not affect (directly or
indirectly) the interpretation of this Agreement or the scope of the disclosure
obligation of the Company under the Agreement. Inclusion of information in the
Schedules shall not be construed as an admission that such information is
material to the Company or the financial position or results of operation of the
Company.
Cross references that may be contained in certain of the Schedules to other
Schedules should not be regarded as all-inclusive. Any information disclosed on
any Schedule shall be deemed to be disclosed under each and every part, category
or heading of that Schedule and all other Schedules to the extent such
disclosure is expressly cross-referenced and shall be deemed to qualify the
representations and warranties of the Company in the Agreement, to the extent
such information may apply. Headings have been inserted on sections of the
Schedules for the convenience of reference only and shall to no extent affect
the construction or interpretation of any of the provisions of the Agreement or
the Schedules.
10.13. Definitions. Definitions in the preamble of this Agreement are
-----------
hereby incorporated into this Agreement by reference.
[End of Text]
52
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INTEGRATED CIRCUIT SYSTEMS, INC.
By: /s/ Xxxx X. Xxx
----------------
Name: Xxxx X. Xxx
Title: President and Chief Executive Officer
MARATHON MERGER CORP.
By: /s/ Xxxx X. Xxx
----------------
Name: Xxxx X. Xxx
Title: President
MICRO NETWORKS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxx
--------------------------
Name: Xxxxxxx X. Xxxxxxxxxx
Title: President and Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF XXXXXX]
X-0
