EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among:
Asyst Technologies, Inc.,
a California corporation;
PSTI Merger Sub Acquisition Corp.,
a Delaware corporation;
Progressive System Technologies, Inc.
a Texas corporation; and
Advent International Investor II, Envirotech Fund I
and Global Private Equity II
Dated as of June 2, 1999
TABLE OF CONTENTS
PAGE
SECTION 1 DESCRIPTION OF TRANSACTION............................................................ 1
1.1 Merger of Merger Sub into the Company................................................. 1
1.2 Effect of the Merger.................................................................. 1
1.3 Closing; Closing Date................................................................. 1
1.4 Payment of Proceeds................................................................... 2
1.5 Escrow................................................................................ 2
1.6 Employee Stock Options................................................................ 3
1.7 Closing of the Company's Transfer Books............................................... 3
1.8 Exchange of Certificates.............................................................. 3
1.9 Dissenting Shares..................................................................... 4
1.10 Articles of Incorporation and Bylaws; Directors and Officers.......................... 5
1.11 Tax Consequences...................................................................... 5
1.12 Accounting Treatment.................................................................. 5
1.13 Further Action........................................................................ 5
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SIGNING SHAREHOLDER..................................................................... 5
2.1 Due Organization; No Subsidiaries; Etc................................................ 6
2.2 Articles of Incorporation and Bylaws; Records......................................... 6
2.3 Capitalization, Etc................................................................... 7
2.4 Financial Statements.................................................................. 8
2.5 Absence of Changes.................................................................... 8
2.6 Title to Assets....................................................................... 10
2.7 Bank Accounts; Receivables............................................................ 10
2.8 Proprietary Assets.................................................................... 11
2.9 Contracts............................................................................. 12
2.10 Liabilities........................................................................... 14
2.11 Compliance with Legal Requirements.................................................... 14
2.12 Governmental Authorizations........................................................... 14
2.13 Tax Matters........................................................................... 15
2.14 Employee and Labor Matters; Benefit Plans............................................. 16
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TABLE OF CONTENTS
(Continued)
PAGE
2.15 Environmental Matters................................................................. 18
2.16 Insurance............................................................................. 19
2.17 Related Party Transactions............................................................ 19
2.18 Legal Proceedings; Orders............................................................. 19
2.19 Authority; Binding Nature of Agreement................................................ 20
2.20 Non-Contravention; Consents........................................................... 20
2.21 Full Disclosure....................................................................... 21
SECTION 3 REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB............................... 21
3.1 SEC Filings; Financial Statements..................................................... 21
3.2 Authority; Binding Nature of Agreement................................................ 22
3.3 Valid Issuance........................................................................ 22
3.4 Absence of Changes.................................................................... 22
3.5 Non-Contravention; Consents........................................................... 22
SECTION 4 CERTAIN COVENANTS OF THE COMPANY AND THE SIGNING SHAREHOLDER.......................... 22
4.1 Access and Investigation.............................................................. 22
4.2 Operation of the Company's Business................................................... 23
4.3 Notification; Updates to Disclosure Schedule.......................................... 24
4.4 No Negotiation........................................................................ 25
SECTION 5 ADDITIONAL COVENANTS OF THE PARTIES................................................... 25
5.1 Filings and Consents.................................................................. 25
5.2 Public Announcements.................................................................. 26
5.3 Pooling of Interests.................................................................. 26
5.4 Affiliate Agreements.................................................................. 26
5.5 Commercially Reasonable Efforts....................................................... 26
5.6 Offer Letters and Noncompetition Agreements........................................... 26
5.7 FIRPTA Matters........................................................................ 26
5.8 Release............................................................................... 26
5.9 Termination of Employee Plans......................................................... 26
SECTION 6 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB.......................... 27
6.1 Accuracy of Representations........................................................... 27
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TABLE OF CONTENTS
(Continued)
PAGE
6.2 Performance of Covenants.............................................................. 27
6.3 Shareholder Approval.................................................................. 27
6.4 Consents.............................................................................. 27
6.5 Balance Sheet Adjustment.............................................................. 27
6.6 Agreements and Documents.............................................................. 27
6.7 FIRPTA Compliance..................................................................... 28
6.8 No Restraints......................................................................... 28
6.9 No Legal Proceedings.................................................................. 28
6.10 Termination of Employee Plans......................................................... 28
6.11 1998 Audit............................................................................ 29
SECTION 7 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SIGNING SHAREHOLDER........ 29
7.1 Accuracy of Representations........................................................... 29
7.2 Performance of Covenants.............................................................. 29
7.3 Legal Opinions........................................................................ 29
7.4 No Restraints......................................................................... 29
SECTION 8 TERMINATION........................................................................... 29
8.1 Termination Events.................................................................... 29
8.2 Termination Procedures................................................................ 30
8.3 Effect of Termination................................................................. 30
SECTION 9 INDEMNIFICATION, ETC.................................................................. 30
9.1 Survival of Representations, Etc...................................................... 30
9.2 Indemnification by the Indemnitors.................................................... 31
9.3 Threshold............................................................................. 31
9.4 Escrow Fund; Ceiling.................................................................. 31
9.5 Claim Procedure....................................................................... 32
9.6 Objections to Claims.................................................................. 32
9.7 Resolution of Conflicts............................................................... 32
9.8 Defense of Third Party Claims......................................................... 34
9.9 Exercise of Remedies by Indemnitees Other Than Parent................................. 34
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TABLE OF CONTENTS
(Continued)
PAGE
SECTION 10 REGISTRATION OF THE PARENT COMMON STOCK; COMPLIANCE WITH THE SECURITIES ACT.......... 34
10.1 Definitions.......................................................................... 34
10.2 Registration Procedures and Expenses................................................. 35
10.3 Indemnification...................................................................... 36
10.4 Reporting Requirements............................................................... 37
10.5 Termination of Obligations........................................................... 38
10.6 Assignability of Registration Rights................................................. 38
SECTION 11 MISCELLANEOUS PROVISIONS............................................................. 38
11.1 Further Assurances................................................................... 38
11.2 Fees and Expenses.................................................................... 38
11.3 Attorneys' Fees...................................................................... 38
11.4 Notices.............................................................................. 38
11.5 Confidentiality...................................................................... 39
11.6 Time of the Essence.................................................................. 39
11.7 Headings............................................................................. 39
11.8 Counterparts......................................................................... 39
11.9 Governing Law........................................................................ 39
11.10 Successors and Assigns............................................................... 40
11.11 Remedies Cumulative; Specific Performance............................................ 40
11.12 Waiver............................................................................... 40
11.13 Amendments........................................................................... 40
11.14 Severability......................................................................... 40
11.15 Parties in Interest.................................................................. 40
11.16 Entire Agreement..................................................................... 41
11.17 Construction......................................................................... 41
iv
EXHIBITS
Exhibit A - Certain definitions
Exhibit B - Escrow Agreement
Exhibit C-1 - Form of Affiliate Agreement
Exhibit C-2 - Persons to execute Affiliate Agreements
Exhibit D - Persons to sign Offer Letters and Noncompetition
Agreements
Exhibit E - Form of Noncompetition Agreement
Exhibit F - Form of Release
Exhibit G - Form of legal opinions of Xxxxxxx Xxxxxxx & Xxxxxxxx
and Xxxxxxxx, Xxxxxxx & Xxxxxxx
Exhibit H - Form of legal opinion of Xxxxxx Godward LLP
Exhibit 2.4 - Financial Statements
AGREEMENT AND PLAN
OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is made
and entered into as of June 2, 1999, by and among: ASYST TECHNOLOGIES, INC., a
California corporation ("Parent"); PSTI MERGER SUB ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); PROGRESSIVE
SYSTEM TECHNOLOGIES, INC., a Texas corporation (the "Company"); and ADVENT
INTERNATIONAL INVESTORS II, ENVIROTECH FUND I AND GLOBAL PRIVATE EQUITY II (the
"Signing Shareholder"). Certain other capitalized terms used in this Agreement
are defined in Exhibit A.
RECITALS
A. Parent, Merger Sub, the Company and the Signing Shareholder intend to
effect a merger (the "Merger") of Merger Sub into the Company in accordance
with this Agreement and the Texas Business Corporation Act. Upon
consummation of the Merger, Merger Sub will cease to exist, and the Company
will become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For accounting purposes, it is intended that the
Merger be treated as a "pooling of interests."
C. This Agreement has been approved by the respective boards of directors of
Parent, Merger Sub, the Company and the Signing Shareholder.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 Merger of Merger Sub into the Company. Upon the terms and subject to
the conditions set forth in this Agreement, at the Closing Date (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 Effect of the Merger. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the Texas Business
Corporation Act.
1.3 Closing; Closing Date. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Cooley Godward LLP, 0000 Xx Xxxxxx Xxxx, Five Xxxx Xxxx Xxxxxx, Xxxx Xxxx,
Xxxxxxxxxx 00000 at 10:00 a.m. on June 3, 1999, or at such other time or place
as the parties may mutually agree (the date on which the Closing actually takes
place is referred to in this Agreement as the "Closing Date").
1
1.4 Payment of Proceeds.
(a) Subject to Sections 1.9(c) and 1.10, at the Closing Date, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any shareholder of the Company:
(i) shares of Company Common Stock outstanding immediately prior
to the Closing Date shall be converted into the right to receive the number of
shares of the common stock (no par value) of Parent ("Parent Common Stock") as
set forth on the attached Schedule 1.4(a);
(ii) each share of Company Preferred Stock outstanding
immediately prior to the Closing Date shall be converted into the right to
receive the number of shares of Parent Common Stock as set forth on the attached
Schedule 1.4(a);
(iii) each warrant to purchase shares of Company Common Stock
("Company Warrant") outstanding immediately prior to the Closing Date shall be
terminated and converted into the right to receive the number of shares of
Parent Common Stock as set forth on the attached Schedule 1.4(a); and
(iv) each share of the common stock (with no par value) of
Merger Sub outstanding immediately prior to the Closing Date shall be converted
into one share of common stock of the Surviving Corporation.
(b) In consideration for the cancellation of the subordinated debt of
the Company plus interest with a principal amount of $3,000,000, Petra Capital
shall be entitled to the right to receive 127,867 shares of Parent Common Stock.
(c) In consideration for the cancellation of the bridge financing
debt of the Company with a principal amount of $1,922,127, Advent International
Corporation shall be entitled to receive 97,323 shares of Parent Common Stock as
set forth on the attached Schedule 1.4(c).
(d) If any shares of Company Common Stock outstanding immediately
prior to the Closing Date are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends.
1.5 Escrow. As more fully described in the Escrow Agreement attached
hereto as Exhibit B (the "Escrow Agreement"), and Escrow Fund (as defined in the
Escrow Agreement) shall be established into which a portion of the Purchase
Price shall be deposited at the Closing. The amount to be withheld from the
Shareholders and contributed to the Escrow Fund shall be 50,000 shares of Parent
Common Stock. The individual Shareholders shall contribute such amount on a pro
rata basis based on their ownership of Parent Common Stock.
2
1.6 Employee Stock Options. At the Closing Date, each stock option that is
then outstanding under the Company's 1995 Stock Option/Issuance Plan or any
other plan, whether vested or unvested (a "Company Option"), shall be assumed by
Parent in accordance with the terms (as in effect as of the date of this
Agreement) of the Company's 1995 Stock Option/Issuance Plan or any other plan,
whether vested or unvested (a "Company Option"), shall be assumed by Parent in
accordance with the terms (as in effect as of the date of this Agreement) of the
Company's 1995 Stock Option/Issuance Plan or any other plan and the stock option
agreement by which such Company Option is evidenced. All rights with respect to
Company Common Stock under outstanding Company Options shall thereupon be
converted into rights with respect to Parent Common Stock. Accordingly, from and
after the Closing Date, (a) each Company Option assumed by Parent may be
exercised solely for shares Parent Common Stock, (b) the number of shares of
Parent Common Stock subject to each such assumed Company Option shall be as set
forth on the attached Schedule 1.6, (c) the per share exercise price for the
Parent Common Stock issuable upon exercise of each such assumed Company Option
shall be as set forth on the attached Schedule 1.6, and (d) all restrictions on
the exercise of each such assumed Company Option shall continue in full force
and effect, and the term, exercisability, vesting schedule and other provisions
of such Company Option shall otherwise remain unchanged; provided, however, that
each such assumed Company Option shall, in accordance with its terms, be subject
to further adjustment as appropriate to reflect any stock split, reverse stock
split, stock dividend, recapitalization or other similar transaction effected by
Parent after the Closing Date.
1.7 Closing of the Company's Transfer Books. At the Closing Date,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Closing Date shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Closing Date. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Closing Date. If, after the Closing Date, a valid certificate
previously representing any of such shares of the Company's capital stock (a
"Company Stock Certificate") is presented to the Surviving Corporation or
Parent, such Company Stock Certificate shall be canceled and shall be exchanged
as provided in Section 1.8.
1.8 Exchange of Certificates.
(a) At or as soon as practicable after the Closing Date, Parent will
send to the holders of Company Stock Certificates (i) a letter of transmittal in
customary form and containing such provisions as Parent may reasonably specify,
and (ii) instructions for use in effecting the surrender of Company Stock
Certificates in exchange for certificates representing Parent Common Stock. Upon
surrender of a Company Stock Certificate to Parent for exchange, together with a
duly executed letter of transmittal and such other documents as may be
reasonably required by Parent, the holder of such Company Stock Certificate
shall be entitled to receive in exchange therefor a certificate representing the
number of whole shares of Parent Common Stock that such holder has the right to
receive pursuant to the provisions of this Section 1, and the Company Stock
Certificate so surrendered shall be canceled. Until surrendered as contemplated
by this Section 1.8, each Company Stock Certificate shall be deemed, from and
after the Closing Date, to represent only the right to receive upon such
surrender a certificate representing shares of Parent Common Stock (and cash in
lieu of any fractional share of Parent Common Stock) as contemplated by this
Section 1. If any Company Stock Certificate shall have been lost, stolen or
destroyed, Parent may, in its discretion and as a condition precedent to the
3
issuance of any certificate representing Parent Common Stock, require the owner
of such lost, stolen or destroyed Company Stock Certificate to provide an
appropriate affidavit and to deliver a bond (in such sum as Parent may
reasonably direct) as indemnity against any claim that may be made against
Parent or the Surviving Corporation with respect to such Company Stock
Certificate.
(b) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Closing Date shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
Section 1.9 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).
(c) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock issuable to such holder) shall, upon surrender of such holder's Company
Stock Certificate(s), be paid in cash the dollar amount (rounded to the nearest
whole cent), without interest, such fraction.
(d) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(e) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.9 Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Closing
Date, are or may become "dissenting shares" within the meaning of Texas Business
Corporation Act shall not be converted into or represent the right to receive
Parent Common Stock in accordance with Section 1.4 (or cash in lieu of
fractional shares in accordance with Section 1.8(c)), and the holder or holders
of such shares shall be entitled only to such rights as may be granted to such
holder or holders in Texas Business Corporation Act; provided, however, that if
the status of any such shares as "dissenting shares" shall not be perfected, or
if any such shares shall lose their status as "dissenting shares," then, as of
the later of the Closing Date or the time of the failure to perfect such status
or the loss of such status, such shares shall automatically be converted into
and shall represent only the right to receive (upon the surrender of the
certificate or certificates
4
representing such shares) Parent Common Stock in accordance with Section 1.4
(and cash in lieu of fractional shares in accordance with Section 1.8(c)).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Closing Date to require the Company
to purchase shares of capital stock of the Company pursuant to Texas Business
Corporation Act and of any other demand, notice or instrument delivered to the
Company prior to the Closing Date pursuant to the Texas Business Corporation
Act, and (ii) the opportunity to participate in all negotiations and proceedings
with respect to any such demand, notice or instrument. The Company shall not
make any payment or settlement offer prior to the Closing Date with respect to
any such demand unless Parent shall have consented in writing to such payment or
settlement offer.
1.10 Articles of Incorporation and Bylaws; Directors and Officers.
Unless otherwise determined by Parent and the Company prior to the Closing Date:
(a) the Articles of Incorporation of the Surviving Corporation shall
be the Articles of Incorporation of the Merger Sub except as amended by the
Certificate of Merger filed with the Texas Secretary of State;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Closing Date to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Closing Date; and
(c) the directors and officers of the Surviving Corporation
immediately after the Closing Date shall be the current directors and officers
of the Merger Sub.
1.11 Tax Consequences. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this Agreement hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
United States Treasury Regulations.
1.12 Accounting Treatment. For accounting purposes, the Merger is intended
to be treated as a "pooling of interests."
1.13 Further Action. If, at any time after the Closing Date, any further
action is determined by Parent to be necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation or Parent with
full right, title and possession of and to all rights and property of Merger Sub
and the Company, the officers and directors of the Surviving Corporation and
Parent shall be fully authorized (in the name of Merger Sub, in the name of the
Company and otherwise) to take such action.
5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SIGNING
SHAREHOLDER
The Company and the Signing Shareholder represents and warrants, to and for
the benefit of the Indemnitees, as follows except as set forth in the Disclosure
Schedule:
2.1 Due Organization; No Subsidiaries; Etc.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Texas and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted; (ii) to own and use its assets in
the manner in which its assets are currently owned and used; and (iii) to
perform its obligations under all Company Contracts.
(b) The Company has not conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed
name, trade name or other name, other than the name "Private Corporation."
(c) The Company is not required to be qualified, authorized,
registered or licensed to do business as a foreign corporation in any
jurisdiction other than the jurisdictions identified in Part 2.1 of the
Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had a Material Adverse Effect on
the Company. The Company is in good standing as a foreign corporation in
each of the jurisdictions identified in Part 2.1 of the Disclosure
Schedule.
(d) Part 2.1 of the Disclosure Schedule accurately sets forth (i) the
names of the members of the Company's board of directors, (ii) the names of
the members of each committee of the Company's board of directors, and
(iii) the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1 of the
Disclosure Schedule, the Company has never owned, beneficially or
otherwise, any shares or other securities of, or any direct or indirect
equity interest in, any Entity. The Company has not agreed and is not
obligated to make any future investment in or capital contribution to any
Entity. The Company has not guaranteed and is not responsible or liable for
any obligation of any of the Entities in which it owns or has owned any
equity interest.
2.2 Articles of Incorporation and Bylaws; Records. The Company has
delivered to Parent copies of: (1) the Company's articles of incorporation and
bylaws, including all amendments thereto; (2) the stock records of the Company;
and (3) except as set forth in Part 2.2 of the Disclosure Schedule, the minutes
and other records of the meetings and other proceedings (including any actions
taken by written consent or otherwise without a meeting) of the shareholders of
the Company, the board of directors of the Company and all committees of the
board of directors of the Company. There have been no formal meetings or other
proceedings of the shareholders of the Company, the board of directors of the
Company or any committee of the board of directors of the Company that are not
fully reflected in such minutes or other records. There has not been any
violation of any of the provisions of the Company's articles of
6
incorporation or bylaws, and the Company has not taken any action that is
inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up-to-date and complete in all
material respects.
2.3 Capitalization, Etc.
(a) Prior to the Closing Date, the authorized capital stock of the
Company consists of: (i) 25,000,000 shares of Common Stock, $.0001 par value, of
which 11,609,711 shares have been issued and are outstanding as of the date of
this Agreement; and (ii) 5,000,000 shares of Preferred Stock, $.01 par value,
all of which have been designated "Series A Preferred Stock," of which 4,504,505
shares have been issued and are outstanding as of the date of this Agreement.
Each outstanding share of Series A Preferred Stock is convertible into one share
of Company Common Stock. All of the outstanding shares of Company Common Stock
and Series A Preferred Stock have been duly authorized and validly issued, and
are fully paid and non-assessable. Part 2.3 of the Disclosure Schedule provides
an accurate and complete description of the terms of each repurchase option
which is held by the Company and to which any of such shares is subject.
(b) The Company has reserved 1,810,944 shares of Company Common Stock
for issuance under its 1995 Stock Option/Issuance Plan, of which options to
purchase 1,005,700 shares are outstanding as of the date of this Agreement, and
902,701 shares of Company Common Stock for issuance pursuant to Company
Warrants. Part 2.3 of the Disclosure Schedule accurately sets forth, with
respect to each Company Option and Company Warrant that is outstanding as of the
date of this Agreement: (i) the name of the holder of such Company Option and
Company Warrant; (ii) the total number of shares of Company Common Stock that
are subject to such Company Option and Company Warrant and the number of shares
of Company Common Stock which are immediately exercisable; (iii) the date on
which such Company Option and Company Warrant was granted and the term of such
Company Option and Company Warrant; (iv) the vesting schedule for such Company
Option and Company Warrant; (v) the exercise price per share of Company Common
Stock purchasable under such Company Option and Company Warrant; and (vi)
whether such Company Option has been designated an "incentive stock option" as
defined in Section 422 of the Code. Except as set forth in Part 2.3 of the
Disclosure Schedule, there is no: (i) outstanding subscription, option, call,
warrant or right (whether or not currently exercisable) to acquire any shares of
the capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to the
best of the knowledge of the Company and the Signing Shareholder, condition or
circumstance existing as of the Closing Date that may give rise to or provide a
basis for the assertion of a claim by any Person to the effect that such Person
is entitled to acquire or receive any shares of capital stock or other
securities of the Company.
(c) All outstanding shares of Company Common Stock and Series A
Preferred Stock, and all outstanding Company Options and Company Warrants, have
been issued and
7
granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) The Company has never repurchased, redeemed or otherwise
reacquired any shares of capital stock or other securities of the Company. All
securities so reacquired by the Company were reacquired in compliance with (i)
the applicable provisions of the California General Corporation Law and all
other applicable Legal Requirements, and (ii) all requirements set forth in
applicable restricted stock purchase agreements and other applicable Contracts.
2.4 Financial Statements.
(a) The Company has delivered to Parent the financial statements and
notes attached hereto as Exhibit 2.4 (collectively, the "Company Financial
Statements"):
(i) The audited balance sheets of the Company as of December 31,
1998 and 1997, and the related audited income statements, statements of
shareholders' equity and statements of cash flows of the Company for the years
then ended, together with the notes thereto and the report and opinion of Ernst
& Young LLP relating thereto; and
(ii) the unaudited balance sheet of the Company as of March 31,
1999 (the "Unaudited Interim Balance Sheet"), and the related unaudited income
statement of the Company for the three months then ended.
(b) The Company Financial Statements are accurate and complete in all
material respects and present fairly the financial position of the Company as of
the respective dates thereof and the results of operations and (in the case of
the financial statements referred to in Section 2.4(a)(i)) cash flows of the
Company for the periods covered thereby. The Company Financial Statements have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except that the
financial statements referred to in Section 2.4(a)(ii) do not contain footnotes
and are subject to normal and recurring year-end audit adjustments).
2.5 Absence of Changes. Since March 31, 1999:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects;
(b) there has not been any material loss, damage or destruction to, or
any material interruption in the use of, any of the Company's assets (whether or
not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities except, in each case, as expressly authorized
by this Agreement;
(d) the Company has not sold, issued or authorized the issuance of (i)
any capital stock or other security (except for Company Common Stock issued upon
the exercise of
8
outstanding Company Options), (ii) any option or right to acquire any capital
stock or any other security (except for Company Options described in Part 2.3 of
the Disclosure Schedule), or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(e) the Company has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of its 1995 Stock
Option/Issuance Plan, (ii) any provision of any agreement evidencing any
outstanding Company Option, or (iii) any restricted stock purchase agreement;
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Acquisition Transaction, recapitalization, reclassification of shares, stock
split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when added
to all other capital expenditures made on behalf of the Company since March 31,
1999, exceeds $10,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Material Contract (as defined in Section 2.10(a)), or (ii) amended
or prematurely terminated, or waived any material right or remedy under, any
such Contract in each case except in the ordinary course of business;
(j) the Company has not (i) acquired, leased or licensed any right or
other asset from any other Person, (ii) sold or otherwise disposed of, or leased
or licensed, any right or other asset to any other Person, or (iii) waived or
relinquished any right, except for rights or other assets acquired, leased,
licensed or disposed of in the ordinary course of business and consistent with
the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees, or (iii) hired any new employee;
9
(o) the Company has not changed any of its methods of accounting or
accounting practices in any respect;
(p) the Company has not made any Tax election;
(q) the Company has not commenced or settled any Legal Proceeding;
(r) the Company has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(r)" above.
2.6 Title to Assets.
(a) The Company owns, and has good, valid and marketable title to, all
assets purported to be owned by it, including: (i) all assets reflected on the
Unaudited Interim Balance Sheet; (ii) all assets referred to in Parts 2.1,
2.7(b) and 2.9 of the Disclosure Schedule and all of the Company's rights under
the Contracts identified in Part 2.10 of the Disclosure Schedule; and (iii) all
other assets reflected in the Company's books and records as being owned by the
Company. All of said assets are owned by the Company free and clear of any liens
or other Encumbrances, except for (x) any lien for current taxes not yet due and
payable, and (y) minor liens that have arisen in the ordinary course of business
and that do not (in any case or in the aggregate) materially detract from the
value of the assets subject thereto or materially impair the operations of the
Company.
(b) The Company has good title to all assets that are material to the
business of the Company and that are being leased or licensed to the Company.
(c) All material items of equipment and other tangible assets owned by
or leased to the Company are adequate for the uses to which they are being put,
are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business substantially in the manner
in which such business is currently being conducted.
(d) The Company does not own any real property or any interest in real
property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Disclosure Schedule.
2.7 Bank Accounts; Receivables.
(a) Part 2.7(a) of the Disclosure Schedule identifies each account
maintained by or for the benefit of the Company at any bank or other financial
institution.
(b) Part 2.7(b) of the Disclosure Schedule provides an accurate and
complete breakdown and aging of all accounts receivable, notes receivable and
other receivables of the Company as of March 31, 1999. All existing accounts
receivable of the Company (including
10
those accounts receivable reflected on the Unaudited Interim Balance Sheet that
have not yet been collected and those accounts receivable that have arisen since
March 31, 1999 and have not yet been collected) (i) represent valid obligations
of customers of the Company arising from bona fide transactions entered into in
the ordinary course of business, and (ii) are current and will be collected in
full when due, without any counterclaim or set off (net of the allowance for
doubtful accounts set forth in the Unaudited Interim Balance Sheet).
2.8 Proprietary Assets.
(a) Part 2.8(a)(i) of the Disclosure Schedule sets forth, with respect
to each Company Proprietary Asset registered with any Governmental Body or for
which an application has been filed with any Governmental Body, (i) a list of
such Proprietary Asset, and (ii) the names of the jurisdictions covered by the
applicable registration or application. Part 2.8(a)(ii) of the Disclosure
Schedule identifies and provides a brief description of all other Company
Proprietary Assets owned by the Company. Part 2.8(a)(iii) of the Disclosure
Schedule identifies and provides a brief description of each Proprietary Asset
licensed to the Company by any Person (except for any Proprietary Asset that is
licensed to the Company under any third party software license generally
available to the public at a cost of less than $10,000). The Company has good,
valid and marketable title to all of the Company Proprietary Assets identified
in Parts 2.8(a)(i) and 2.8(a)(ii) of the Disclosure Schedule, free and clear of
all liens and other Encumbrances, and has a valid right to use all Proprietary
Assets identified in Part 2.8(a)(iii) of the Disclosure Schedule. The Company is
not obligated to make any payment to any Person for the use of any Company
Proprietary Asset. The Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken commercially reasonable measures and
precautions necessary to protect and maintain the confidentiality and secrecy of
all Company Proprietary Assets (except Company Proprietary Assets whose value
would be unimpaired by public disclosure) and otherwise to maintain and protect
the value of all Company Proprietary Assets. The Company has not (other than
pursuant to license agreements identified in Part 2.9 of the Disclosure
Schedule) disclosed or delivered to any Person (i) the source code of any
Company Proprietary Asset, or (ii) the object code of any Company Proprietary
Asset.
(c) Except for any Proprietary Assets licensed from Parent, none of
the Company Proprietary Assets infringes or conflicts with any Proprietary Asset
owned or used by any other Person. The Company is not infringing,
misappropriating or making any unlawful use of, and the Company has not at any
time infringed, misappropriated or made any unlawful use of, or received any
communication to any Named Officers or any written notice of any actual,
alleged, possible or potential infringement, misappropriation or unlawful use
of, any Proprietary Asset owned or used by any other Person. To the knowledge of
the Company and the Signing Shareholder, no other Person is infringing,
misappropriating or making any unlawful use of any Company Proprietary Asset.
(d) Each Company Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by or on behalf of the Company;
and (ii) there has not been any written claim by any customer or other Person
alleging that any Company Proprietary Asset does
11
not conform in all material respects with any specification, documentation,
performance standard, representation or statement made or provided by or on
behalf of the Company. The Company has established adequate reserves on the
Unaudited Interim Balance Sheet to cover all costs associated with any
obligations that the Company may have with respect to the correction or repair
of programming errors or other defects in the Company Proprietary Assets.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business substantially in
the manner in which such business has been and is being conducted. The Company
has not licensed any of the Company Proprietary Assets to any Person on an
exclusive basis, and the Company has not entered into any covenant not to
compete or Contract limiting its ability to exploit fully any of its Proprietary
Assets or to transact business in any market or geographical area or with any
Person.
(f) All current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially identical to the form of
Confidential Information and Invention Assignment Agreement previously delivered
to Parent, and all current and former consultants and independent contractors to
the Company have executed and delivered to the Company an agreement (containing
no exceptions to or exclusions from the scope of its coverage) that is
substantially identical to the form of Consultant Confidential Information and
Invention Assignment Agreement previously delivered to Parent.
(g) To the knowledge of the Company and the Signing Shareholder, each
computer program and other item of software that is owned by the Company is Year
2000 Compliant. Each computer program and other item of software that has been
designed, developed, sold, installed, licensed or otherwise made available by
the Company to any Person is Year 2000 Compliant. As used in this Section 2.8,
"Year 2000 Compliant" means, with respect to a computer program or other item of
software (i) the functions, calculations, and other computing processes of the
program or software perform in a consistent and correct manner without
interruption regardless of the date on which the Processes are actually
performed, whether before, on, or after January 1, 2000; (ii) the program or
software accepts, calculates, compares, sorts, extracts, sequences, and
otherwise processes date inputs and date values, and returns and displays date
values, in a consistent and correct manner regardless of the dates used whether
before, on, or after January 1, 2000; (iii) the program or software accepts,
stores, displays and responds to date information in a manner that resolves any
ambiguities as to century in a defined, predetermined, and appropriate manner;
and (iv) leap years will be determined by the following standard (A) if dividing
the year by 4 yields an integer, it is a leap year, except for years ending in
00, but (B) a year ending in 00 is a leap year if dividing it by 400 yields an
integer.
2.9 Contracts.
(a) Part 2.9 of the Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor;
12
(ii) each Company Contract relating to the acquisition, transfer,
use, development, sharing or license of any technology or any Proprietary Asset;
(iii) each Company Contract imposing any restriction on the
Company's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or any services from any other Person, to sell any
product or other asset to or perform any services for any other Person or to
transact business or deal in any other manner with any other Person, or (C)
develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any asset of the Company;
(vii) each Company Contract involving or incorporating any
guaranty, any pledge, any performance or completion bond, any indemnity or any
surety arrangement;
(viii) each Company Contract creating or relating to any partnership
or joint venture or any sharing of revenues, profits, losses, costs or
liabilities;
(ix) each Company Contract relating to the purchase or sale of any
product or other asset by or to, or the performance of any services by or for,
any Related Party (as defined in Section 2.17);
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside the
ordinary course of business or was inconsistent with the Company's past
practices;
(xii) any other Company Contract that has a term of more than 60
days and that may not be terminated by the Company (without penalty) within 60
days after the delivery of a termination notice by the Company; and
(xiii) any other Company Contract that contemplates or involves (A)
the payment or delivery of cash or other consideration in an amount or having a
value in excess of $10,000 in the aggregate, or (B) the performance of services
having a value in excess of $10,000 in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Material Contracts.")
(b) The Company has delivered or made available to Parent accurate and
complete copies of all written Contracts identified in Part 2.9 of the
Disclosure Schedule, including all amendments thereto. Part 2.9 of the
Disclosure Schedule provides an accurate
13
description of the terms of each Company Contract that is not in written form.
Each Contract identified in Part 2.9 of the Disclosure Schedule is valid and in
full force and effect, and, to the best of the knowledge of the Company and the
Signing Shareholder, is enforceable by the Company in accordance with its terms,
subject to (i) laws of general application relating to bankruptcy, insolvency
and the relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) The Company has not materially violated or breached, or committed
any material default under, any Company Contract, and, to the knowledge of the
Company and the Signing Shareholder, no other Person has materially violated or
breached, or committed any material default under, any Company Contract;
(d) To the knowledge of the Company and the Signing Shareholder, no
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time) will, (A) result in a material violation or
breach of any of the provisions of any Company Contract, (B) give any Person the
right to declare a default or exercise any remedy under any Company Contract,
(C) give any Person the right to accelerate the maturity or performance of any
Company Contract, or (D) give any Person the right to cancel, terminate or
modify any Company Contract;
(e) Since December 31, 1998, the Company has not received any oral
communication to any Named Officers or any written notice regarding any
violation or breach of, or default under, any Company Contract; and
(f) The Company has not waived any of its material rights under any
Material Contract.
(g) No Person is renegotiating, or has a right pursuant to the terms
of any Company Contract to renegotiate, any amount paid or payable to the
Company under any Material Contract or any other material term or provision of
any Material Contract.
(h) The Contracts identified in Part 2.9 of the Disclosure Schedule
collectively constitute all of the Contracts necessary to enable the Company to
conduct its business in the manner in which its business is currently being
conducted.
2.10 Liabilities. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; (b) accounts payable or accrued salaries that have been
incurred by the Company since March 31, 1999 in the ordinary course of business
and consistent with the Company's past practices; (c) liabilities under the
Company Contracts identified in Part 2.9 of the Disclosure Schedule, to the
extent the nature and magnitude of such liabilities can be specifically
ascertained by reference to the text of such Company Contracts; and (d) the
liabilities identified in Part 2.10 of the Disclosure Schedule.
2.11 Compliance with Legal Requirements . The Company is in compliance with
all applicable Legal Requirements, except where the failure to comply with such
Legal
14
Requirements has not had and will not have a Material Adverse Effect on the
Company. Since December 31, 1995, the Company has not received any notice or
other communication from any Governmental Body regarding any actual or possible
violation of, or failure to comply with, any Legal Requirement.
2.12 Governmental Authorizations. The Governmental Authorizations held by
the Company are valid and in full force and effect, and collectively constitute
all Governmental Authorizations necessary to enable the Company to conduct its
business substantially in the manner in which its business is currently being
conducted. The Company is in substantial compliance with the terms and
requirements of the respective Governmental Authorizations identified in Part
2.12 of the Disclosure Schedule. Since December 31, 1995, the Company has not
received any notice or other written communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.13 Tax Matters.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) have been or will be
filed on or before the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing Date have been or will be paid on or before the Closing Date, and no
other Taxes are payable by the Company with respect to items or periods covered
by such Tax Returns (whether or not shown on or reportable on such Tax Returns)
or with respect to any period prior to the date of this Agreement. The Company
has withheld and paid over all Taxes required to have been withheld and paid
over, and complied with all material information reporting and backup
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party. There are no liens on any of the
assets of the Company with respect to Taxes, other than liens for Taxes, not yet
due and payable. The Company has delivered or made available to Parent accurate
and complete copies of all Company Returns that are open to review by the
Internal Revenue Service or other Governmental Body. The amount of the Company's
liability for unpaid Taxes for all periods ending on or before March 31, 1999
does not, in the aggregate, exceed the amount of the current liability accruals
for Taxes reflected on the Unaudited Interim Balance Sheet, and the amount of
the Company's liability for unpaid Taxes for all periods ending on or before the
Closing Date shall not, in the aggregate exceed the amount of the current
liability accruals for Taxes as such accruals are reflected on the Unaudited
Interim Balance Sheet, as adjusted for operations and transactions in the
ordinary course of business of the Company since the date of the Unaudited
Interim Balance Sheet in accordance with past custom and practice.
(b) The Company Financial Statements fully accrue all material actual
and contingent liabilities for Taxes with respect to all periods through the
dates thereof in accordance with generally accepted accounting principles. The
Company will establish, in the ordinary
15
course of business and consistent with its past practices, reserves adequate for
the payment of all Taxes for the period from March 31, 1999 through the Closing
Date, and the Company will disclose the dollar amount of such reserves to Parent
on or prior to the Closing Date.
(c) No Company Return relating to income Taxes has ever been examined
or audited by any Governmental Body. There have been no examinations or audits
of any Company Return. The Company has delivered to Parent accurate and complete
copies of all audit reports and similar documents (to which the Company has
access) relating to the Company Returns. No extension or waiver of the
limitation period applicable to any of the Company Returns has been granted (by
the Company or any other Person), and no such extension or waiver has been
requested from the Company.
(d) No claim or Proceeding is pending or has been threatened against
or with respect to the Company in respect of any Tax. There are no unsatisfied
liabilities for Taxes (including liabilities for interest, additions to tax and
penalties thereon and related expenses) with respect to any notice of deficiency
or similar document received by the Company with respect to any Tax (other than
liabilities for Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Company and with respect
to which adequate reserves for payment have been established). There are no
liens for Taxes upon any of the assets of the Company except liens for current
Taxes not yet due and payable. The Company has not entered into or become bound
by any agreement or consent pursuant to Section 341(f) of the Code. The Company
has not been, and the Company will not be, required to include any adjustment in
taxable income for any tax period (or portion thereof) pursuant to Section 481
or 263A of the Code or any comparable provision under state or foreign Tax laws
as a result of transactions or events occurring, or accounting methods employed,
prior to the Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will give rise directly
or indirectly to the payment of any amount that would not be deductible pursuant
to Section 280G or Section 162 of the Code. The Company is not, and has never
been, a party to or bound by any tax indemnity agreement, tax sharing agreement,
tax allocation agreement or similar Contract.
2.14 Employee and Labor Matters; Benefit Plans.
(a) Part 2.14(a) of the Disclosure Schedule identifies each salary,
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance pay, termination pay, hospitalization, medical, life or other
insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("Employee"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $25,000 in the aggregate.
(b) The Company does not maintain, sponsor or contribute to, and, to
the best of the knowledge of the Company and the Signing Shareholder has not at
any time in the past maintained, sponsored or contributed to, any employee
pension benefit plan (as defined in
16
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), whether or not excluded from coverage under specific Titles or Merger
Subtitles of ERISA) for the benefit of Employees or former Employees (a "Pension
Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.14(c) of the Disclosure Schedule (the "Welfare Plans"), none of which is a
multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered or made
available to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for fiscal years 1996 and 1997;
(iii) an accurate and complete copy of the most recent summary plan
description, together with each Summary of Material Modifications, if required
under ERISA, with respect to such Plan, and all material employee communications
relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) The Company is not required to be, and, to the best of the
knowledge of the Company and the Signing Shareholder has never been required to
be, treated as a single employer with any other Person under Section 4001(b)(1)
of ERISA or Section 414(b), (c), (m) or (o) of the Code. The Company has never
been a member of an "affiliated service group" within the meaning of Section
414(m) of the Code. To the best of the knowledge of the Company and the Signing
Shareholder, the Company has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting
in "withdrawal liability," as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA).
17
(f) The Company does not have any plan or commitment to create
any additional Welfare Plan or any Pension Plan, or to modify or change any
existing Welfare Plan or Pension Plan (other than to comply with applicable law)
in a manner that would affect any Employee.
(g) No Welfare Plan provides death, medical or health benefits
(whether or not insured) with respect to any current or former Employee after
any such Employee's termination of service (other than (i) benefit coverage
mandated by applicable law, including coverage provided pursuant to Section
4980B of the Code, (ii) deferred compensation benefits accrued as liabilities on
the Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which
are borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a
group health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) Each of the Plans has been operated and administered in all
material respects in accordance with applicable Legal Requirements, including
but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section
401(a) of the Code has received a favorable determination from the Internal
Revenue Service, and neither the Company nor the Signing Shareholder is aware of
any reason why any such determination letter should be revoked.
(k) Neither the execution, delivery or performance of this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will result in any payment (including any bonus,
golden parachute or severance payment) to any current or former Employee or
director of the Company (whether or not under any Plan), or materially increase
the benefits payable under any Plan, or result in any acceleration of the time
of payment or vesting of any such benefits.
(l) Part 2.14(l) of the Disclosure Schedule contains a list of
all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(m) Part 2.14(m) of the Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date of
return to full service.
(n) The Company is in compliance in all material respects with
all applicable Legal Requirements and Contracts relating to employment,
employment practices, wages, bonuses and terms and conditions of employment,
including employee compensation matters.
18
(o) The Company has good labor relations, and none of the
Company's current employees has given notice to the Named Officers that such
employee intends to terminate his or her employment with the Company.
2.15 Environmental Matters. The Company is in compliance in all material
respects with all applicable Environmental Laws, which compliance includes the
possession by the Company of all permits and other Governmental Authorizations
required under applicable Environmental Laws, and compliance with the terms and
conditions thereof. The Company has not received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
employee or otherwise, that alleges that the Company is not in compliance with
any Environmental Law, and, to the knowledge of the Company and Signing
Shareholder, there are no circumstances that may prevent or materially interfere
with the Company's compliance with any Environmental Law in the future. To the
knowledge of the Company and the Signing Shareholder, no current or prior owner
of any property leased or controlled by the Company has received any written
notice whether from a Government Body, employee or otherwise, that alleges that
such current or prior owner or the Company is not in compliance with any
Environmental Law. All Governmental Authorizations currently held by the
Company pursuant to Environmental Laws are identified in Part 2.16 of the
Disclosure Schedule. (For purposes of this Section 2.16: (i) "Environmental Law"
means any federal, state, local or foreign Legal Requirement relating to
pollution or protection of human health or the environment (including ambient
air, surface water, ground water, land surface or subsurface strata), including
any law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern; and (ii) "Materials
of Environmental Concern" include chemicals, pollutants, contaminants, wastes,
toxic substances, petroleum and petroleum products and any other substance that
is now or hereafter regulated by any Environmental Law or that is otherwise a
danger to health, reproduction or the environment.)
2.16 Insurance. Part 2.16 of the Disclosure Schedule identifies all
insurance policies maintained by, at the expense of or for the benefit of the
Company and identifies any material claims made thereunder, and the Company has
made available to Parent accurate and complete copies of the insurance policies
identified on Part 2.16 of the Disclosure Schedule. Each of the insurance
policies identified in Part 2.16 of the Disclosure Schedule is in full force and
effect. Since December 31, 1995, the Company has not received any notice to a
Named Officer or written communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under any insurance policy, or (c) material
adjustment in the amount of the premiums payable with respect to any insurance
policy.
2.17 Related Party Transactions. Since January 10, 1996, no Related Party
has: (a) had any direct or indirect interest in any material asset used in or
otherwise relating to the business of the Company; (b) has been indebted to the
Company; (c) has entered into, or has had any direct or indirect financial
interest in, any Contract, transaction or business dealing involving the
Company; (d) has competed, directly or indirectly, with the Company; and (e) has
any claim or right against the Company (other than rights under company Options
and rights to receive compensation for services performed as an employee of the
Company). (For purposes of this
19
section, each of the following shall be deemed to be a "Related Party": (i) the
Signing Shareholder; (ii) each individual who is, or who has been, an officer of
the Company; (iii) each member of the immediate family of each of the
individuals referred to in clauses "(i)" and "(ii)" above; and (iv) any trust or
other Entity (other than the Company) in which any one of the individuals
referred to in clauses "(i)", "(ii)" and "(iii)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.)
2.18 Legal Proceedings; Orders.
(a) There is no pending Legal Proceeding, and, to the knowledge of the
Company and the Signing Shareholder, no Person has overtly threatened to
commence any Legal Proceeding: (i) that involves the Company or any of the
assets owned or used by the Company or any Person whose liability the Company
has or may have retained or assumed, either contractually or by operation of
law; or (ii) that challenges, or that may have the effect of preventing,
delaying, making illegal or otherwise interfering with, the Merger or any of the
other transactions contemplated by this Agreement.
(b) No Legal Proceeding has ever been commenced by or has ever been
pending against the Company.
(c) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject.
2.19 Authority; Binding Nature of Agreement. The Company and the Signing
Shareholder have the right, power and authority to enter into and to perform
their obligations under this Agreement; and the execution, delivery and
performance by the Company and the Signing Shareholder of this Agreement have
been duly authorized by all necessary action on the part of the Company and the
Signing Shareholder and their respective boards of directors. This Agreement
constitutes the legal, valid and binding obligation of the Company and the
Signing Shareholder, enforceable against the Company and the Signing Shareholder
in accordance with its terms, subject to (i) laws of general application
relating to bankruptcy, insolvency and the relief of debtors, and (ii) rules of
law governing specific performance, injunctive relief and other equitable
remedies.
2.20 Non-Contravention; Consents. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of incorporation or bylaws, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement
20
or any order, writ, injunction, judgment or decree to which the Company, or any
of the assets owned or used by the Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is or
would constitute a Material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Company Contract, (ii)
accelerate the maturity or performance of any such Company Contract, or (iii)
cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company).
The Company is not and will not be required to make any filing with or give
any notice to, or to obtain any Consent from, any Person in connection with (x)
the execution, delivery or performance of this Agreement or any of the other
agreements referred to in this Agreement, or (y) the consummation of the Merger
or any of the other transactions contemplated by this Agreement.
2.21 Full Disclosure.
(a) This Agreement (including the Disclosure Schedule) does not (i)
contain any representation, warranty that is false or misleading with respect to
any material fact, or (ii) to the knowledge of the Company and the Signing
Shareholder, omit to state any material fact necessary in order to make the
representations and warranties contained and to be contained herein and therein
(in the light of the circumstances under which such representations and
warranties were or will be made or provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company and the Signing Shareholder as follows:
3.1 SEC Filings; Financial Statements.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a form
other than Form S-8) and definitive proxy statement filed by Parent with the SEC
between January 1, 1998 and the date of this Agreement (the "Parent SEC
Documents"). As of the time it was filed with the SEC (or, if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing): (i) each of the Parent SEC Documents complied in all material
respects with
21
the applicable requirements of the Securities Act or the Exchange Act (as the
case may be); and (ii) none of the Parent SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading. As of the
Closing Date, no material deficiencies have been asserted by the SEC with
respect to the Parent SEC Documents.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered, except as may be indicated in the notes to
such financial statements and (in the case of unaudited statements) as permitted
by Form 10-Q of the SEC, and except that unaudited financial statements may not
contain footnotes and are subject to year-end audit adjustments; and (iii)
fairly present the consolidated financial position of Parent and its
subsidiaries as of the respective dates thereof and the consolidated results of
operations of Parent and its subsidiaries for the periods covered thereby.
3.2 Authority; Binding Nature of Agreement. Parent and Merger Sub have the
absolute and unrestricted right, power and authority to perform their
obligations under this Agreement; and the execution, delivery and performance by
Parent and Merger Sub of this Agreement (including the contemplated issuance of
Parent Common Stock in the Merger in accordance with this Agreement) have been
duly authorized by all necessary action on the part of Parent and Merger Sub and
their respective boards of directors. No vote of Parent's stockholders is needed
to approve the Merger. This Agreement constitutes the legal, valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, subject to (i) laws of general application relating to bankruptcy,
insolvency and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
3.3 Valid Issuance. Subject to Section 1.5(c), the Parent Common Stock to
be issued in the Merger will, when issued in accordance with the provisions of
this Agreement, be validly issued, fully paid and nonassessable.
3.4 Absence of Changes. Since March 31, 1999 there has not been any
material adverse change in the Parent's or Merger Sub's business, condition,
assets, liabilities, operations, financial performance or prospects, taken as a
whole.
3.5 Non-Contravention; Consents. Neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Parent's or Merger Sub's articles of incorporation or bylaws,
or (ii) any resolution adopted by Parent's shareholders, Parent's or Merger
Sub's board of directors or any committee of Parent's or Merger Sub's board of
directors;
22
(b) contravene, conflict with or result in a violation of, or give any
Governmental Body or other Person the right to challenge any of the transactions
contemplated by this Agreement or to exercise any remedy or obtain any relief
under, any Legal Requirement or any order, writ, injunction, judgment or decree
to which Parent, or any of the assets owned or used by Parent or Merger Sub, is
subject; or
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by Parent or Merger Sub that otherwise relates to Parent's or
Merger Sub's business or to any of the assets owned or used by Parent;
SECTION 4. CERTAIN COVENANTS OF THE COMPANY AND THE SIGNING SHAREHOLDER
4.1 Access and Investigation. During the period from the date of this
Agreement through the Closing Date (the "Pre-Closing Period"), the Company and
the Signing Shareholder shall, and shall cause its Representatives to: (a)
provide Parent and Parent's Representatives with reasonable access to the
Company's Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company; and (b) provide Parent and Parent's Representatives with copies
of such existing books, records, Tax Returns, work papers and other documents
and information relating to the Company, and with such additional financial,
operating and other data and information regarding the Company, as Parent may
reasonably request.
4.2 Operation of the Company's Business. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
suppliers, customers, landlords, creditors, employees and other Persons having
business relationships with the Company;
(c) the Company shall keep in full force all insurance policies
identified in Part 2.16 of the Disclosure Schedule;
(d) the Company shall cause its officers to cooperate with and inform
Parent concerning the status of the Company's business;
(e) except as provided herein, the Company shall not declare, accrue,
set aside or pay any dividend or make any other distribution in respect of any
shares of capital stock, and shall not repurchase, redeem or otherwise reacquire
any shares of capital stock or other securities (except that the Company may
repurchase Company Common Stock from former employees pursuant to the terms of
existing restricted stock purchase agreements);
23
(f) the Company shall not sell, issue or authorize the issuance of (i)
any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security;
(g) except as provided herein, the Company shall not amend or waive
any of its rights under, or permit the acceleration of vesting under, (i) any
provision of its 1995 Stock Option/Issuance Plan, (ii) any provision of any
agreement evidencing any outstanding Company Option, or (iii) any provision of
any restricted stock purchase agreement;
(h) neither the Company nor the Signing Shareholder shall amend or
permit the adoption of any amendment to the Company's articles of incorporation
or bylaws, or effect or permit the Company to become a party to any Acquisition
Transaction, recapitalization, reclassification of shares, stock split, reverse
stock split or similar transaction;
(i) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(j) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $5,000 per
month;
(k) the Company shall not (i) enter into, or permit any of the assets
owned or used by it to become bound by, any Contract that is or would constitute
a Material Contract, or (ii) amend or prematurely terminate, or waive any
material right or remedy under, any such Contract;
(l) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except in the ordinary course of business;
(m) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business and may, consistent with its past practices, allow employees to
acquire Company Common Stock in exchange for promissory notes upon exercise of
Company Options), or (ii) incur or guarantee any indebtedness for borrowed
money;
(n) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan (except that the Company will adopt the employee retention program
referred to in Section 5.11), (ii) pay any bonus or make any profit-sharing
payment, cash incentive payment or similar payment to, or increase the amount of
the wages, salary, commissions, fringe benefits or other compensation or
remuneration payable to, any of its directors, officers or employees, (iii)
enter into any employment contract or (iv) hire any new employee whose aggregate
annual compensation is expected to exceed $75,000;
(o) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
24
(p) the Company shall not make any Tax election;
(q) the Company shall not commence or settle any material Legal
Proceeding;
(r) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(q)" above.
4.3 Notification; Updates to Disclosure Schedule.
(a) During the Pre-Closing Period, the Company and the Signing
Shareholder shall promptly notify Parent in writing of:
(i) the discovery by the Company of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by the Company or the Signing Shareholder in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company or the Signing Shareholder in this Agreement if (A) such
representation or warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or circumstance, or (B)
such event, condition, fact or circumstance had occurred, arisen or existed on
or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of the Company or
the Signing Shareholder; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.3(a) requires any change in the Disclosure
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then the Company shall promptly deliver to Parent an update to the
Disclosure Schedule specifying such change. No such update shall be deemed to
supplement or amend the Disclosure Schedule for the purpose of (i) determining
the accuracy of any of the representations and warranties made by the Company or
the Signing Shareholder in this Agreement, or (ii) determining whether any of
the conditions set forth in Section 6 has been satisfied.
4.4 No Negotiation. During the Pre-Closing Period, neither the Company nor
the Signing Shareholder shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Acquisition
Transaction;
25
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Acquisition Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Acquisition Transaction.
The Company shall promptly notify Parent in writing of any material
inquiry, proposal or offer relating to a possible Acquisition Transaction that
is received by the Company or the Signing Shareholder during the Pre-Closing
Period.
SECTION 5. ADDITIONAL COVENANTS OF THE PARTIES
5.1 Filings and Consents. As promptly as practicable after the execution of
this Agreement, each party to this Agreement (a) shall make all filings (if any)
and give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall (upon request) promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Company during the
Pre-Closing Period.
5.2 Public Announcements. During the Pre-Closing Period, (a) no party shall
(and no party shall permit any of its Representatives to) issue any press
release or make any public statement regarding this Agreement or the Merger, or
regarding any of the other transactions contemplated by this Agreement, without
the other party's prior written consent, and (b) each Party will use reasonable
efforts to consult with the other party prior to issuing any press release or
making any public statement regarding the Merger.
5.3 Pooling of Interests. During the Pre-Closing Period, no party to this
Agreement shall take any action that could reasonably be expected to have an
adverse effect on the ability of Parent to account for the Merger as a "pooling
of interests."
5.4 Affiliate Agreements. The Company and the Signing Shareholder shall use
all commercially reasonable efforts to cause each other Person identified on
Exhibit C-2 to execute and deliver to Parent, as promptly as practicable after
the execution of this Agreement, an Affiliate Agreement in the form of
Exhibit C-1.
5.5 Commercially Reasonable Efforts. During the Pre-Closing Period, (a)
the Company and the Signing Shareholder shall use its best efforts to cause the
conditions set forth in Section 6 to be satisfied on a timely basis, and (b)
Parent and Merger Sub shall use their commercially reasonable efforts to cause
the conditions set forth in Section 7 to be satisfied on a timely basis.
5.6 Offer Letters and Noncompetition Agreements. At or prior to the
Closing, each of the persons identified on Exhibit D shall execute and deliver
to the Parent the offer letter
26
previously delivered by such employee by the Parent and a Noncompetition
Agreement in the form of Exhibit E.
5.7 FIRPTA Matters. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasure Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 - 0(x)(0)
xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.8 Release. At the Closing, each of the shareholders of the Company shall
execute and deliver to the Company a Release in the form of Exhibit F.
5.9 Termination of Employee Plans. Prior to the Closing, the Company shall
terminate its 401(k) Plan.
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of each of the following conditions:
6.1 Accuracy of Representations. Each of the representations and
warranties made by the Company and the Signing Shareholder in this Agreement and
in each of the other agreements and instruments delivered to Parent in
connection with the transactions contemplated by this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties), and shall be
accurate in all material respects as of the Closing Date as if made on the
Closing Date (without giving effect to any update to the Disclosure Schedule,
and without giving effect to any "Material Adverse Effect" or other materiality
qualifications, or any similar qualifications, contained or incorporated
directly or indirectly in such representations and warranties).
6.2 Performance of Covenants. All of the covenants and obligations that
the Company and the Signing Shareholder are required to comply with or to
perform at or prior to the Closing shall have been complied with and performed
in all respects.
6.3 Shareholder Approval. The principal terms of the Merger shall have
been duly approved by the affirmative vote of at least (a) 95% of the shares of
Company Common Stock entitled to vote with respect thereto, and (b) 95% of the
shares of Series A Preferred Stock entitled to vote with respect thereto.
6.4 Consents. All Consents required to be obtained in connection with the
Merger and the other transactions contemplated by this Agreement (including the
Consents identified in Part 2.21 of the Disclosure Schedule) shall have been
obtained and shall be in full force and effect.
27
6.5 Balance Sheet Adjustment. The Company shall have delivered the
schedules required in Section 1.5 to the Parent three (3) days prior to the
Closing Date.
6.6 Agreements and Documents. Parent and the Company shall have received
the following agreements and documents, each of which shall be in full force and
effect:
(a) Affiliate Agreements in the form of Exhibit C-1, executed by the
Persons identified on Exhibit C-2 and by any other Person who could reasonably
be deemed to be an "affiliate" of the Company for purposes of the Securities
Act;
(b) Noncompetition Agreements in the form of Exhibit G, executed by
the individuals identified on Exhibit D;
(c) offer letters previously delivered by Parent and executed by the
individuals listed on Exhibit D;
(d) a Release in the form of Exhibit F, executed by the shareholders
of the Company;
(e) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees and former
employees of the Company and by all consultants and independent contractors and
former consultants and former independent contractors to the Company who have
not already signed such agreements (including the individuals identified in Part
2.9(f) of the Disclosure Schedule);
(f) the Escrow Agreement substantially in the form of Exhibit B,
executed by the Indemnitors;
(g) a legal opinion of Xxxxxxxx, Xxxxxxx & Xxxxxxx and of Xxxxxxx
Phleger & Xxxxxxxx each dated as of the Closing Date, in the form of Exhibit H;
(h) a letter from Ernst & Young LLP, dated as of the Closing Date,
confirming that no transaction entered into by the Company, and no other fact or
circumstance relating to the Company, will prevent Parent from accounting for
the Merger as a "pooling of interests" in accordance with generally accepted
principles, Accounting Principles Board Opinion No. 16 and all published rules,
regulations and policies of the SEC;
(i) a certificate executed by the Chief Executive Officer of the
Company and the Signing Shareholder certifying that each of the representations
and warranties set forth in Section 2 is accurate in all respects as of the
Closing Date as if made on the Closing Date and that the conditions set forth in
Sections 6.1, 6.2, 6.3 and 6.4 have been duly satisfied (the "Closing
Certificates"); and
(j) written resignations of all directors of the Company, effective
as of the Closing Date.
6.7 FIRPTA Compliance. The Company shall have filed with the Internal
Revenue Service the notification referred to in Section 5.7.
28
6.8 No Restraints. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.9 No Legal Proceedings. No Person shall have commenced or threatened to
commence any Legal Proceeding challenging or seeking the recovery of a material
amount of damages in connection with the Merger or seeking to prohibit or limit
the exercise by Parent of any material right pertaining to its ownership of
stock of the Surviving Corporation.
6.10 Termination of Employee Plans. The Company shall have provided Parent
with evidence, reasonably satisfactory to Parent, as to the effective
termination of the benefit plans referred to in Section 5.9.
6.11 1998 Audit. The Company shall have completed and delivered to Parent
its audited financials at and for the year ended December 31, 1998.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SIGNING
SHAREHOLDER
The obligations of the Company and the Signing Shareholder to effect the
Merger and otherwise consummate the transactions contemplated by this Agreement
are subject to the satisfaction, at or prior to the Closing, of the following
conditions:
7.1 Accuracy of Representations. Each of the representations and warranties
made by Parent and Merger Sub in this Agreement shall have been accurate in all
material respects as of the date of this Agreement (without giving effect to any
materiality or similar qualifications contained in such representations and
warranties), and shall be accurate in all material respects as of the Closing
Date as if made on the Closing Date (without giving effect to any materiality or
similar qualifications contained in such representations and warranties).
7.2 Performance of Covenants. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all respects.
7.3 Legal Opinions. A legal opinion of Xxxxxx Godward LLP, dated as of the
Closing Date, in the form of Exhibit H; and
7.4 No Restraints. No temporary restraining order, preliminary or permanent
injunction or other order preventing the consummation of the Merger shall have
been issued by any court of competent jurisdiction and remain in effect, and
there shall not be any Legal Requirement enacted or deemed applicable to the
Merger that makes consummation of the Merger illegal.
29
SECTION 8. TERMINATION
8.1 Termination Events. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company or
the Signing Shareholder to comply with or perform any covenant or obligation set
forth in this Agreement or in any other agreement or instrument delivered to
Parent);
(c) by Parent if the Closing has not taken place on or before June 30,
1999 (other than as a result of any failure on the part of Parent to comply with
or perform any covenant or obligation of Parent set forth in this Agreement);
(d) by the Company if the Closing has not taken place on or before
June 30, 1999 (other than as a result of the failure on the part of the Company
or the Signing Shareholder to comply with or perform any covenant or obligation
set forth in this Agreement or in any other agreement or instrument delivered to
Parent); or
(e) by the mutual consent of Parent, the Company and the Signing
Shareholder.
8.2 Termination Procedures. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), Parent shall
deliver to the Company and the Signing Shareholder a written notice stating that
Parent is terminating this Agreement and setting forth a brief description of
the basis on which Parent is terminating this Agreement. If the Company wishes
to terminate this Agreement pursuant to Section 8.1(b), Section 8.1(d) or
Section 8.1(f), the Company shall deliver to Parent a written notice stating
that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
8.3 Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) the Company, the Signing Shareholder and
Parent shall not be relieved of any obligation or liability arising from any
prior breach by such party of any provision of this Agreement; and (b) the
parties shall, in all events, remain bound by and continue to be subject to the
provisions set forth in Section 10.
30
SECTION 9. INDEMNIFICATION, ETC.
9.1 Survival of Representations, Etc.
(a) The representations and warranties made by the Company and the
Signing Shareholder (including the representations and warranties set forth in
Section 2 and the representations and warranties set forth in the Closing
Certificates) shall survive the Closing and shall expire on the nine (9) month
anniversary of the Closing Date; provided, however, that if, at any time prior
to the nine (9) month anniversary of the Closing Date, any Indemnitee (acting in
good faith) delivers to the Indemnitors and the Escrow Agent a written notice
alleging the existence of an inaccuracy in or a breach of any of the
representations and warranties made by the Company (and setting forth in
reasonable detail the basis for such Indemnitee's belief that such an inaccuracy
or breach may exist) and asserting a claim for recovery under Section 9.2 based
on such alleged inaccuracy or breach, then the claim asserted in such notice
shall survive the nine (9) month anniversary of the Closing until such time as
such claim is fully and finally resolved. All representations and warranties
made by Parent and Merger Sub shall terminate and expire as of the nine (9)
month anniversary of the Closing Date, and any liability of Parent or Merger Sub
with respect to such representations and warranties shall thereupon cease.
(b) The representations, warranties, covenants and obligations of the
Company and the Signing Shareholder, and the rights and remedies that may be
exercised by the Indemnitees, shall not be limited or otherwise affected by or
as a result of any information furnished to, or any investigation made by or
knowledge of, any of the Indemnitees or any of their Representatives, unless
such information is included in the Disclosure Schedule.
(c) For purposes of this Agreement, each statement or other item of
information set forth in the Disclosure Schedule or in any update to the
Disclosure Schedule shall be deemed to be a representation and warranty made by
the Company in this Agreement.
9.2 Indemnification by the Indemnitors.
(a) From and after the Closing Date (but subject to Section 9.1(a)),
the Indemnitors, shall hold harmless and indemnify each of the Indemnitees from
and against, and shall compensate and reimburse each of the Indemnitees for, any
Damages which are directly or indirectly suffered or incurred by any of the
Indemnitees or to which any of the Indemnitees may otherwise become subject
(regardless of whether or not such Damages relate to any third-party claim) and
which arise from or as a result of, or are directly or indirectly connected
with: (i) any inaccuracy in or breach of any representation or warranty set
forth in Section 2 or in the Closing Certificates (after giving effect to any
update to the Disclosure Schedule delivered by the Company to Parent prior to
the Closing); (ii) any breach of any covenant or obligation of the Company or
the Signing Shareholder (including the covenants set forth in Sections 4 and 5);
or (iii) any Legal Proceeding relating to any inaccuracy or breach of the type
referred to in clause "(i)" or "(ii)" above (including any Legal Proceeding
commenced by any Indemnitee for the purpose of enforcing any of its rights under
this Section 9).
(b) The Company acknowledges and agrees that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then
31
(without limiting any of the rights of the Surviving Corporation as an
Indemnitee) Parent shall also be deemed, by virtue of its ownership of the stock
of the Surviving Corporation, to have incurred Damages as a result of and in
connection with such inaccuracy or breach.
9.3 Threshold.
(a) The Indemnitors shall not be required to make any indemnification
payment pursuant to Section 9.2(a) for any inaccuracy in or breach of any of
their representations and warranties set forth in Section 2 until such time as
the total amount of all Damages (including the Damages arising from such
inaccuracy or breach and all other Damages arising from any other inaccuracies
in or breaches of any representations or warranties) that have been directly or
indirectly suffered or incurred by any one or more of the Indemnitees, or to
which any one or more of the Indemnitees has or have otherwise become subject,
exceeds $50,000 in the aggregate. If the total amount of such Damages exceeds
$50,000 then the Indemnitees shall be entitled to be indemnified against and
compensated and reimbursed for the full amount of such damages (and not merely
the portion of such Damages exceeding $50,000).
9.4 Escrow Fund; Ceiling.
(a) Notwithstanding anything else herein, indemnification under this
Section 9 shall be satisfied solely from the Escrow Fund (described in Section
9.4(b) below). Except for any Damages from any fraud or intentional
misrepresentation, indemnification under this Section 9 shall be the sole and
exclusive remedy of the Indemnitees for any and all breaches of representations
and warranties contained in Section 2 hereof.
(b) Each Indemnitor, Parent, the Company and a banking institution
selected by Parent as escrow agent ("Escrow Agent") shall enter into the Escrow
Agreement (modified as requested by the Escrow Agent), under which, on the terms
and conditions set forth therein, a portion of the amounts to be paid to the
Indemnitors hereunder will be escrowed to pay amounts payable to Parent or the
Company under this Section 9.
The Escrow Fund shall consist of the amount set forth in Section 1.6. The
amount remaining in the Escrow Fund less the sum of any amounts payable from the
Escrow Fund that are subject to a claim made by Parent or the Company under this
Section 9 not yet resolved shall be distributed to the shareholders of the
Company on the nine (9) month anniversary of the Closing Date.
9.5 Claim Procedure. Upon delivery to the Escrow Agent and the Indemnitors
in accordance with Section 11.5 on or before the last day of the period set
forth in Section 9.1(a) above of a certificate signed by any officer of Parent
(an "Officer's Certificate")
(a) stating that Parent or the Company has paid or properly accrued or
reasonably anticipates that Parent or the Company will have to pay or accrue
Damages in an aggregate stated amount, and stating that Parent or the Company is
entitled to indemnity pursuant to this Agreement with respect to such amount,
and
(b) specifying the individual items of Damages included in the amount
so stated, the date each such item was paid or properly accrued, or the basis
for such anticipated liability;
32
The Escrow Agent shall, subject to the provisions of Section 9.6 hereof, deliver
to Parent as promptly as practicable, an amount from the Escrow Fund sufficient
to fully indemnify Parent or the Company against such Damages.
9.6 Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Indemnitors and for a period of thirty (30) days after such
delivery, the Escrow Agent shall make no delivery of cash pursuant to Section
9.5 hereof unless the Escrow Agent shall have received written authorization
from the Indemnitors to make such delivery. After the expiration of such 30-day
period, the Escrow Agent shall make delivery of the amount requested in the
Officer's Certificate in accordance with Section 9.5 hereof, provided that no
such payment or delivery need be made if the Indemnitors who received a majority
of the Parent Company Stock in the Merger shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to Parent (with a copy to the Escrow Agent) prior to the expiration of
such 30-day period.
9.7 Resolution of Conflicts.
(a) In case the Indemnitors who received a majority of the Parent
Company stock in the Merger shall so object in writing to the indemnity of
Parent or the Company in respect of any claim or claims made in any Officer's
Certificate, the Indemnitors who received a majority of the Parent Company stock
in the Merger and Parent (acting on its own behalf or on behalf of the Company)
shall attempt in good faith to agree upon the rights of the respective parties
with respect to each of such claims. If the Indemnitors who received a majority
of the Parent Company stock in the Merger and Parent should so agree, a
memorandum setting forth such agreement shall be prepared and signed by both
parties and shall be furnished to the Escrow Agent who shall thereupon promptly
pay the agreed upon amount of the claim to Parent.
(b) If no such agreement can be reached after good faith negotiation,
the claim shall be submitted to non-binding mediation under the rules then in
effect under the American Arbitration Association, or such other forum as the
parties may select. Each party shall have in attendance at such mediation
persons who have actual authority to bind the party to any settlement reached.
If the matter cannot be settled through mediation, then the claim shall be
submitted to binding arbitration under the following rules:
(i) Unless otherwise agreed by the parties, all such claims shall
be decided in San Jose, California by a single arbitrator, acting under the
Commercial Rules of the American Arbitration Association except as modified
herein. Either party may initiate the arbitration following failure of mediation
to resolve the issue by filing a demand for arbitration with the American
Arbitration Association, and simultaneously delivering a copy of such demand to
the other party.
(ii) Unless the parties agree to a mutually acceptable arbitrator
within thirty (30) days of a demand for arbitration, the arbitrator shall be
selected by the American Arbitration Association.
33
(iii) Unless otherwise agreed by the parties, the arbitrator shall
be a business attorney in practice for at least 10 years, with substantial
experience in the negotiating and drafting of business acquisition agreements.
(iv) It is the intent of the parties that the arbitration be held
in an efficient, economical and expeditious manner. Accordingly, the parties
shall meet in a pre-hearing conference as promptly as practicable after
selection of the arbitrator to establish the scope and extent of all discovery
and the schedule of the arbitration. Discovery shall be limited to that
necessary to resolve the disputed issues, in the judgment of the arbitrator. If
any party wishes to take discovery, including document productions,
interrogatories or depositions, a request to do so must be submitted to the
arbitrator in accordance with the procedures determined at the pre-hearing
conference. The arbitrator in his sole discretion may allow limited discovery,
all of which must be completed within 20 business days of the arbitrator's
directive unless extended for good cause by the arbitrator.
(v) The arbitrator shall not be bound by rules of evidence or
judicial procedures regarding the conduct of the hearing and shall be obligated
to follow California substantive law.
(vi) The arbitrator's authority shall be limited to determining
whether the claim gives rise to a right to indemnification under the provisions
of this Section 9 and, if so, the amount of Damages as to such claim. No other
issue involving interpretation of this Agreement shall be submitted to the
arbitrator without the consent of both parties.
(vii) The decision of the arbitrator as to the validity and amount
of Damages and the amounts in (c) below shall, subject to the above limitations,
be binding and conclusive upon the parties of this Agreement. The arbitrator
shall issue such decision, including a brief statement of the reasons for the
award and the calculation of damages awarded, within 25 days after completion of
the arbitration hearing and deliver such decision to the Escrow Agent.
(c) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. The non-prevailing party shall pay the
reasonable expenses (including attorneys' fees) of the prevailing party and the
arbitrator fees and administrative expenses associated with the arbitration
(which expenses and fees, in the event the Parent is the prevailing party, shall
constitute Damages to be satisfied solely from the Escrow Fund).
9.8 Defense of Third Party Claims. In the event of the assertion or
commencement by any Person of any claim or Legal Proceeding (whether against the
Surviving Corporation, against Parent or against any other Person) with respect
to which the Company may become obligated to hold harmless, indemnify,
compensate or reimburse any Indemnitee pursuant to this Section 9, Parent shall
have the right, at its election, to proceed with the defense of such claim or
Legal Proceeding on its own. If Parent so proceeds with the defense of any such
claim or Legal Proceeding:
(a) all reasonable expenses relating to the defense of such claim or
Legal Proceeding shall be borne and paid exclusively by the Company and;
34
(b) Parent shall have the right to settle, adjust or compromise such
claim or Legal Proceeding with the consent of the Indemnitors who received a
majority of the Parent Company Stock; provided, however, that such consent shall
not be unreasonably withheld.
Parent shall give the Indemnitors prompt notice of the commencement of any
such Legal Proceeding against Parent or the Surviving Corporation; provided,
however, that any failure on the part of Parent to so notify the Indemnitors
shall not limit any of the obligations of the Company under this Section 9
(except to the extent such failure materially prejudices the defense of such
Legal Proceeding).
9.9 Exercise of Remedies by Indemnitees Other Than Parent. No Indemnitee
(other than Parent or any successor thereto or assign thereof) shall be
permitted to assert any indemnification claim or exercise any other remedy under
this Agreement unless Parent (or any successor thereto or assign thereof) shall
have consented to the assertion of such indemnification claim or the exercise of
such other remedy.
SECTION 10. REGISTRATION OF THE PARENT COMMON STOCK; COMPLIANCE WITH THE
SECURITIES ACT.
10.1 Definitions. As used in this Section 10 the following terms shall
have the following respective meanings:
(a) "Registrable Parent Common Stock" shall mean the Parent Common
Stock issued pursuant to this Agreement;
(b) "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to the Registration
Statement referred to in Section 10.2; and
(c) "Untrue Statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
10.2 Registration Procedures and Expenses Parent is obligated to do the
following:
Parent shall, within 75 days following the Closing Date:
(a) prepare and file with the SEC a registration statement on Form
S-3 in order to register with the SEC under the Securities Act a sale by the
Shareholders on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act any or all of the Registrable Parent Common Stock through the
automated quotation system of the Nasdaq National Market System or the
facilities of any national securities exchange on which Parent's Common Stock is
then traded, or in privately-negotiated transactions (a "Registration
Statement") (notwithstanding anything to the contrary expressed or implied
herein, if a registration statement on Form S-3, or any substitute form, is not
then available for registration of the Registrable Parent Common Stock, Parent
shall be obligated instead to prepare and file with the SEC a registration
statement on Form S-1 in order to register the Registrable Parent Common Stock
under the Securities Act
35
and such registration statement will be a "Registration Statement" for the
purposes of this Agreement);
(b) use its best efforts, subject to receipt of necessary
information from the Shareholders, to cause such Registration Statement to
become effective as promptly after filing as practicable;
(c) notify each Shareholder, at any time when a prospectus relating
to such Registration Statement is required to be delivered under the Securities
Act, of the happening of any event as a result of which the prospectus included
in or relating to such Registration Statement contains an untrue statement of a
material fact or omits to state any fact necessary to make the statements
therein not misleading;
(d) prepare and file with the SEC such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective until termination
of such obligation as provided in Section 10.5 below;
(e) furnish to each Shareholder such number of copies of
prospectuses in conformity with the requirements of the Securities Act, in order
to facilitate the public sale or other disposition of all or any of the
Registrable Parent Common Stock by the Shareholders;
(f) file such documents as may be required of Parent for normal
securities law clearance for the resale of the Registrable Parent Common Stock
in which states of the United States as may be reasonably requested by each
Shareholder provided, however, that Parent shall not be required in connection
with this paragraph (e) to qualify as a foreign corporation or execute a general
consent to service of process in any jurisdiction;
(g) use its best efforts to cause all Registrable Parent Common
Stock to be listed on each securities exchange, if any, on which equity
securities by Parent are then listed; and
(h) bear all expenses in connection with the procedures in
paragraphs (a) through (f) of this Section 10.2, other than (i) fees and
expenses, if any, of counsel or other advisers to the Shareholders, and (ii) any
expenses relating to the sale of the Registrable Parent Common Stock by the
Shareholders, including broker's commission, discounts or fees and transfer
taxes.
10.3 Indemnification
(a) Parent agrees to indemnify and hold harmless each Shareholder
from and against any losses, claims, damages or liabilities to which such
Shareholder may become subject (under the Securities Act or otherwise) insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon, any Untrue Statement on the
effective date of the Registration Statement, or arise out of any failure by
Parent to fulfill any undertaking included in the Registration Statement and
Parent will reimburse such Shareholder for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that
36
Parent shall not be liable in any such case to the extent that such loss, claim,
damage or liability arises out of, or is based upon, an Untrue Statement made in
such Registration Statement in reliance upon and in conformity with written
information furnished to Parent by or on behalf of such Shareholder specifically
for use in preparation of the Registration Statement, or any statement or
omission in any prospectus that is corrected in any subsequent prospectus that
was delivered to the Shareholder prior to the pertinent sale or sales by the
Shareholder.
(b) Each Shareholder, severally and not jointly, agrees to indemnify
and hold harmless Parent (and each person, if any, who controls Parent within
the meaning of Section 15 of the Securities Act, each officer of Parent who
signs the Registration Statement and each director of Parent) from and against
any losses, claims, damages or liabilities to which Parent (or any such officer,
director or controlling person) may become subject (under the Securities Act or
otherwise), insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon, any Untrue
Statement contained in the Registration Statement on the effective date thereof
if such Untrue Statement was made in reliance upon and in conformity with
written information furnished by or on behalf of such Shareholder specifically
for use in preparation of the Registration Statement, and such Shareholder will
reimburse Parent (or such officer, director or controlling person), as the case
may be, for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided
that in no event shall any indemnity by a Shareholder under this Section 10.3
exceed the net proceeds received by such Shareholder from the sale of the Parent
Common Stock covered by such Registration Statement.
(c) Promptly after receipt by any indemnified person of a notice of a
claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 10.3, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and such indemnifying person shall have been notified
thereof, such indemnifying person shall be entitled to participate therein, and,
to the extent it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to such indemnified person. After notice from the
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that no indemnifying person shall be responsible for the fees and
expenses of more than one separate counsel for all indemnified parties.
(d) If the indemnification provided for in this Section 10.3 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such
37
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of material fact or the omission to state a material fact
relates to information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission; provided, that in
no event shall any contribution by a Shareholder hereunder exceed the net
proceeds received by such Shareholder from the sale of the Parent Common Stock
covered by the Registration Statement.
10.4 Reporting Requirements.
(a) Parent agrees to use its best efforts to:
(i) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(ii) file with the SEC in a timely manner all reports and other
documents required of Parent under the Securities Act and the Securities
Exchange Act of 1934; and
(iii) so long as any of the Shareholders own Registrable
Securities, to furnish to the Shareholders forthwith upon request (1) a written
statement by Parent as to whether it complies with the reporting requirements of
said Rule 144, the Securities Act and Securities Exchange Act of 1934, or
whether it qualifies as a registrant whose securities may be resold pursuant to
SEC Form S-3, (2) a copy of the most recent annual or quarterly report of
Parent and such other reports and documents so filed by Parent, and (3)
such other information as may be reasonably requested in availing the
Shareholders of any rule or regulation of the SEC that would permit the selling
of the Registrable Securities without registration.
10.5 Termination of Obligations The obligations of Parent pursuant to
Sections 10.2 through 10.5 hereof shall cease and terminate upon the earlier to
occur of (i) such time as all of the Registrable Parent Common Stock have been
resold, or (ii) such time as all of the Registrable Parent Common Stock may be
sold during any 90 day period pursuant to Rule 144.
10.6 Assignability of Registration Rights The registration rights set
forth in this Section 10 are not assignable other than to an affiliate of a
Shareholder.
SECTION 11. MISCELLANEOUS PROVISIONS
11.1 Further Assurances. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
38
11.2 Fees and Expenses. Parent shall bear and pay all fees, costs and
expenses (including legal fees and accounting fees) that have been incurred or
that are incurred by such party in connection with the transactions contemplated
by this Agreement, including all fees, costs and expenses incurred by such party
in connection with or by virtue of (a) the investigation and review conducted by
Parent and its Representatives with respect to the Company's business (and the
furnishing of information to Parent and its Representatives in connection with
such investigation and review), (b) the negotiation, preparation and review of
this Agreement (including the Disclosure Schedule) and all agreements,
certificates, opinions and other instruments and documents delivered or to be
delivered in connection with the transactions contemplated by this Agreement,
(c) the preparation and submission of any filing or notice required to be made
or given in connection with any of the transactions contemplated by this
Agreement, and the obtaining of any Consent required to be obtained in
connection with any of such transactions, and (d) the consummation of the
Merger; provided, however, that, to the extent the total amount of all such
fees, costs and expenses incurred by or for the benefit of the Company
(including all such fees, costs and expenses incurred prior to the date of this
Agreement and including the amount of all special bonuses and other amounts that
may become payable to any officers of the Company or other Persons in connection
with the consummation of the transactions contemplated by this Agreement in
excess of an aggregate of $500,000) exceeds $50,000 in the aggregate, such fees,
costs and expenses shall be borne and paid by the Shareholders and not by
Parent.
11.3 Attorneys' Fees. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
11.4 Notices. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
if to Parent: Asyst Technologies, Inc.
00000 Xxxx Xxxx
Xxxxxxx, XX 00000
Attn: Chief Financial Officer
with a copy to:
Cooley Godward LLP
Five Palo Alto Square
0000 Xx Xxxxxx Xxxx
Xxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxx
39
if to the Company: Progressive System Technologies, Inc.
00000 X. XxXxx, Xxxxx 0000
Xxxxxx, XX 00000
Attn: President
if to the Signing
Shareholder and
the Indemnitors: Advent International Corporation
00 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxxxx
with a copy to:
Xxxxxxxx, Xxxxxxx & Xxxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
11.5 Confidentiality. Without limiting the generality of anything
contained in Section 5.4, on and at all times after the Closing Date, the
Signing Shareholder shall keep confidential, and shall not use or disclose to
any other Person, any non-public document or other non-public information in the
Signing Shareholder's possession that relates to the business of the Company or
Parent.
11.6 Time of the Essence. Time is of the essence of this Agreement.
11.7 Headings. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
11.8 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
11.9 Governing Law. This Agreement shall be construed in accordance with,
and governed in all respects by, the internal laws of the State of California
(without giving effect to principles of conflicts of laws).
11.10 Successors and Assigns. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Signing Shareholder and its
successors and assigns (if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any). This Agreement shall
inure to the benefit of: Parent; the Company, the Signing Shareholder, Merger
Sub; the other Indemnitees (subject to Section 9.9); and the respective
successors and assigns (if any) of the foregoing. Parent may freely assign any
or all of its rights under this Agreement (including its indemnification rights
under Section 9), in whole or in part,
40
to any other Person without obtaining the consent or approval of any other party
hereto or of any other Person.
11.11 Remedies Cumulative; Specific Performance. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
11.12 Waiver.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly executed and delivered on
behalf of such Person; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
11.13 Amendments. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
11.14 Severability. In the event that any provision of this Agreement, or
the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
11.15 Parties in Interest. Except for the provisions of Sections 1.4,
1.5, 1.6 and 9, none of the provisions of this Agreement is intended to provide
any rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
11.16 Entire Agreement. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
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11.17 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(c) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
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The parties hereto have caused this Agreement to be executed and delivered.
Asyst Technologies, Inc. Envirotech Investment Fund I
a California corporation
By: /s/ Xxxxxxx X. XxXxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------- ----------------------
Name: Xxxxxxx X. XxXxxxxxxx Name: Xxxxxx X. Xxxxxxxx
--------------------- ------------------
Title: Senior Vice President, CFO Title: Senior Vice President
-------------------------- -----------------------
PSTI Merger Sub Acquisition Corp., Global Private Equity II
a Delaware corporation
By: /s/ Xxxxxxx X. XxXxxxxxxx By: /s/ Xxxxxx X. Xxxxxxxx
------------------------- ------------------------
Name: Xxxxxxx X. XxXxxxxxxx Name: Xxxxxx X. Xxxxxxxx
--------------------- --------------------
Title: President Title: Senior Vice President
--------- ---------------------
Progressive System Technologies, Inc.
a Texas corporation
By: /s/ Xxxxx Xxxxx
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Name: Xxxxx Xxxxx
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Title: CEO
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Advent International Investors II
By: /s/ Xxxxxx X. Xxxxxxxx
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Name: Xxxxxx X. Xxxxxxxx
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Title: Senior Vice President
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Exhibit A
CERTAIN DEFINITIONS
For purposes of the Agreement (including this Exhibit B):
Acquisition Transaction. "Acquisition Transaction" shall mean any
transaction involving:
(a) the sale, license, disposition or acquisition of all or a material
portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital stock
or other equity security of the Company (other than common stock issued to
employees of the Company, upon exercise of Company Options or otherwise, in
routine transactions in accordance with the Company's past practices), (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization or
similar transaction involving the Company.
Company Contract. "Company Contract" shall mean any Contract: (a) to
which the Company is currently a party; (b) by which the Company or any of its
assets is or may become bound or under which the Company has, or may become
subject to, any obligation; or (c) under which the Company has or may acquire
any right or interest.
Company Proprietary Asset. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
Consent. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
Contract. "Contract" shall mean any written, oral or other agreement,
contract, subcontract, lease, understanding, instrument, note, warranty,
insurance policy, benefit plan or legally binding commitment or undertaking of
any nature.
Damages. "Damages" shall include any loss, damage, injury, decline in
value, liability, claim, settlement, judgment, award, fine, penalty, Tax, fee
(including reasonable attorneys' fees), charge, cost (including costs of
investigation) or expense of any nature.
Disclosure Schedule. "Disclosure Schedule" shall mean the schedule (dated
as of the date of the Agreement) delivered to Parent on behalf of the Company.
Encumbrance. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement,
interference, option, right of first
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refusal, preemptive right, community property interest or restriction of any
nature (including any restriction on the voting of any security, any restriction
on the transfer of any security or other asset, any restriction on the receipt
of any income derived from any asset, any restriction on the use of any asset
and any restriction on the possession, exercise or transfer of any other
attribute of ownership of any asset).
Entity. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
Governmental Authorization. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
Governmental Body. "Governmental Body" shall mean any: (a) nation, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; or (c) governmental or quasi-governmental authority of any
nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or Entity and any court or
other tribunal).
Indemnitees. "Indemnitees" shall mean the following Persons: (a) Parent;
(b) Parent's current and future affiliates (including the Surviving
Corporation); (c) the respective Representatives of the Persons referred to in
clauses "(a)" and "(b)" above; and (d) the respective successors and assigns of
the Persons referred to in clauses "(a)", "(b)" and "(c)" above; provided,
however, that the Shareholders shall not be deemed to be "Indemnitees" except in
the case of indemnification by Parent pursuant to Section 10.3.
Indemnitors. "Indemnitors" shall mean the following Persons: the Signing
Shareholders, the Shareholders of the Company, and any other Person who receives
Parent Company Stock pursuant to this Agreement.
Legal Proceeding. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
Legal Requirement. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted,
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promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Body.
Material Adverse Effect. A violation or other matter will be deemed to
have a "Material Adverse Effect" on an entity if such violation or other matter
would have a material adverse effect on such entity's business, condition,
assets, liabilities, operations, financial performance or prospects, taken as a
whole.
Named Officers. "Named Officers" shall mean any Vice President of the
Company, the Chief Financial Officer of the Company, the President of the
Company, the Chief Executive Officer of the Company and the Chairman of the
Board of the Company.
Person. "Person" shall mean any individual, Entity or Governmental Body.
Proprietary Asset. "Proprietary Asset" shall mean any: (a) patent, patent
application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
Representatives. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
Securities Act. "Securities Act" shall mean the Securities Act of 1933, as
amended.
Tax. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
Tax Return. "Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
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Exhibit C-2
Persons to sign Affiliate Agreements
Advent International Investors II
Envirotech Investment Fund I
Global Private Equity II
Xxxxxxx XxXxxxxx
Xxxxxx Xxxxx
Xxx Xxxxx
Xxxxxx Xxxxxx
Xxxx Xxx Xxxxxx
Exhibit D
Persons to sign Offer Letters
Xxxxxxx XxXxxxxx
Xxx Xxxxx
Xxxxxx Xxxxx
Persons to sign Noncompetition Agreements
Xxx Xxxxx
Xxx Xxxxxxxx
Schedule 1.4(A)
COMPANY COMMON STOCKHOLDERS PARENT COMMON SHARES
Xxxxxxx XxXxxxxx 70,882
Xxxxxxx XxXxxx 77
Xxx XxXxxx 39
Xxxx Xxx 88
Xxxxxx Xxxxxxxx 87
Xxxxx Xxxxxx 175
Total: 71,348
PREFERRED STOCKHOLDERS & WARRANT HOLDERS PARENT COMMON SHARES
Advent International Investors LP 183
Growth Capital Partners 17,829
GPE II 122,288
Envirotech 41,856
Petra Capital 2,543
Total: 184,699
SCHEDULE 1.4(C)
NOTEHOLDERS PARENT COMMON SHARES
Advent International Investors LP 103
GPE II 72,429
Envirotech 24,791
Total: 97,323
Schedule 1.6
COMPANY COMMON STOCKHOLDERS PARENT COMMON SHARES EXERCISE PRICE
Xxxxxx Xxxxx 4,601
Xxx Xxxxx 4,601
Xxxxxx Xxxxxx 4,601
Xxxx Xxx Xxxxxx 4,601
Other holders 359
Total: 18,763
