EXHIBIT 2.1
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C.F.R. SECTIONS 200.80(b)(4) 200.83 AND 240.24b-2
MERGER AGREEMENT
by
and
among
IRIS INTERNATIONAL, INC.,
IRIS MOLECULAR DIAGNOSTICS, INC.,
XX. XXXXXX X. XXXXX,
and
LEUCADIA TECHNOLOGIES, INC.,
Dated: April 3, 2006
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C.F.R. SECTIONS 200.80(b)(4) 200.83 AND 240.24b-2
TABLE OF CONTENTS
ARTICLE 1. DEFINITIONS.........................................................1
ARTICLE 2. THE MERGER..........................................................9
2.1 The Merger...................................................9
2.2 Closing.....................................................10
2.3 Actions and Deliveries at Closing...........................10
2.4 Effect of the Merger........................................11
2.5 Charter and Bylaws..........................................11
2.6 Directors and Officers......................................11
2.7 Effect on Capital Stock.....................................11
2.8 Surrender of Certificates...................................13
2.9 Company Deferred Stock Units................................13
2.10 No Fractional Shares........................................14
2.11 Tax Treatment...............................................14
2.12 Intentionally Omitted.......................................14
2.13 Taking of Necessary Action; Further Action..................14
2.14 Adjustment of Merger Consideration..........................14
2.15 Stock Certificate Legends...................................15
ARTICLE 3. PARENT PARTY REPRESENTATIONS AND WARRANTIES........................16
3.1 Entity Status...............................................16
3.2 Power and Authority; Enforceability.........................16
3.3 No Violation................................................16
3.4 Brokers' Fees...............................................16
3.5 Merger Sub..................................................16
3.6 Capitalization..............................................17
3.7 Parent's Securities Filings and Financial Statements........17
3.8 Litigation..................................................18
3.9 No Material Adverse Effect..................................18
3.10 Tax-Free Reorganization.....................................18
ARTICLE 4. COMPANY AND STOCKHOLDER REPRESENTATIONS AND WARRANTIES.............18
4.1 Entity Status...............................................18
4.2 Power and Authority; Enforceability.........................19
4.3 No Violation................................................19
4.4 Brokers' Fees...............................................19
4.5 Capitalization; Shares and Stockholder Information..........19
4.6 Records.....................................................20
4.7 Subsidiaries................................................20
4.8 Financial Statements........................................20
4.9 Subsequent Events...........................................20
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4.10 Liabilities.................................................22
4.11 Legal Compliance............................................22
4.12 Tax Matters.................................................22
4.13 Title to and Condition of Assets............................24
4.14 Real Property...............................................24
4.15 Intellectual Property.......................................25
4.16 Inventory...................................................27
4.17 Contracts...................................................28
4.18 Receivables.................................................29
4.19 Powers of Attorney..........................................29
4.20 Insurance...................................................29
4.21 Litigation..................................................29
4.22 Product Warranty............................................30
4.23 Product Liability...........................................30
4.24 Labor; Employees............................................30
4.25 Employee Benefits...........................................30
4.26 Environmental, Health, and Safety Matters...................31
4.27 Customers and Suppliers.....................................31
4.28 Permits.....................................................31
4.29 Foreign Corrupt Practices Act Compliance....................31
4.30 Certain Business Relationships with the Company.............31
4.31 Accuracy of Information Furnished...........................32
4.32 Stockholder Experience and Due Diligence....................32
4.33 Tax-Free Reorganization.....................................32
ARTICLE 5. PRE-CLOSING COVENANTS..............................................32
5.1 General.....................................................32
5.2 Notices and Consents........................................33
5.3 Operation of Business.......................................33
5.4 Preservation of Business....................................33
5.5 Full Access.................................................34
5.6 Notice of Developments......................................34
5.7 Exclusivity.................................................34
5.8 Confidentiality.............................................34
5.9 Affiliated Transactions.....................................35
5.10 Repayment of Certain Notes Receivable from Stockholder......35
5.11 FIRPTA Compliance...........................................35
5.12 Employee Offers.............................................35
5.13 Listing of Additional Shares................................36
5.14 Treatment as Tax-Free Reorganization........................36
ARTICLE 6. CLOSING CONDITIONS.................................................36
6.1 Conditions Precedent to Obligation of the Parent Parties....36
6.2 Conditions Precedent to Obligation of the Company...........37
ARTICLE 7. TERMINATION........................................................38
7.1 Termination of Agreement....................................38
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7.2 Effect of Termination.......................................39
ARTICLE 8. INDEMNIFICATION....................................................39
8.1 Survival of Representations and Warranties..................39
8.2 Indemnification Provisions for Parent's Benefit.............40
8.3 Indemnification Provisions for the Stockholder's Benefit....40
8.4 Indemnification Claim Procedures............................40
8.5 Limitations on Indemnification Liability....................41
8.6 Escrow......................................................41
8.7 Exclusive Remedy; Offset....................................42
ARTICLE 9. INTENTIONALLY OMITTED..............................................42
ARTICLE 10. EARN-OUT..........................................................42
10.1 Earn-Out....................................................42
10.2 Retirement Option...........................................43
10.3 Certain Definitions.........................................44
10.4 Accounting and Other General Principles.....................45
10.5 Resolution of Conflicts.....................................45
ARTICLE 11. MISCELLANEOUS.....................................................46
11.1 Schedules...................................................46
11.2 Entire Agreement............................................46
11.3 Successors..................................................46
11.4 Assignments.................................................47
11.5 Notices.....................................................47
11.6 Specific Performance........................................48
11.7 Submission to Jurisdiction..................................48
11.8 Time........................................................48
11.9 Counterparts................................................48
11.10 Headings....................................................49
11.11 Governing Law...............................................49
11.12 Amendments..................................................49
11.13 Extensions; Waiver..........................................49
11.14 Severability................................................49
11.15 Expenses....................................................50
11.16 Construction................................................50
11.17 Incorporation of Exhibits, Annexes, and Schedules...........50
11.18 Remedies....................................................50
11.19 Electronic Signatures.......................................50
ATTACHMENTS
Exhibits
Exhibit A - List of Sellers and Share Ownership
Exhibit B - Form of Employment Agreement
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Exhibit C Form of Non-Competition Agreement
Exhibit D - Form of Escrow Agreement
Exhibit E - Form of Merger Certificate
Exhibit F - Form of Registration Rights Agreement
Exhibit G - Form of Standstill Agreement
Exhibit H - Form of the Company's Officers' Certificate
Exhibit I - Form of the Company's Secretary's Certificate
Exhibit J - Form of Parent's Officers' Certificate
Exhibit K - Form of Parent's Secretary's Certificate
Exhibit L - Form of Opinion of Counsel to the Company
Exhibit M - Form of Opinion of Counsel to Parent
Schedules
Schedule 2.14 Stockholder Notes Payable
Schedule 4.1 Company's Officers and Directors
Schedule 4.3 Company Required Consents
Schedule 4.5 Commitments on Company Shares
Schedule 4.7 Company Subsidiaries
Schedule 4.8 Company's Financial Statements
Schedule 4.9 Subsequent Events
Schedule 4.12(c) Tax Returns
Schedule 4.12(i) Certain Tax Information
Schedule 4.14 Real Property
Schedule 4.15(a) Patents
Schedule 4.15(b) Marks
Schedule 4.15(c) Copyrights
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Schedule 4.15(d)(1) Software
Schedule 4.15(d)(2) Software Developers
Schedule 4.15(d)(3) Preexisting Code
Schedule 4.15(e) Trade Secrets
Schedule 4.15(i)(1) Licensed Intellectual Property
Schedule 4.15(i)(2) Licensed Owned Intellectual Property
Schedule 4.15(j) Employees without Intellectual Property Contracts
Schedule 4.17 Contracts
Schedule 4.20 Insurance
Schedule 4.21 Litigation
Schedule 4.22 Standard Terms of Sale or Lease
Schedule 4.25 Employee Benefits
Schedule 4.26 Environmental Matters
Schedule 4.27 Customers and Suppliers
Schedule 4.28 Permits
Schedule 5.9 Surviving Affiliate Contracts
Schedule 5.10 Affiliated Notes Receivable
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MERGER AGREEMENT
This Merger Agreement (this "AGREEMENT"), dated April 3, 2006, is
entered into by and among Iris International, Inc., a Delaware corporation
("PARENT"), IRIS Molecular Diagnostics, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB" and, together with Parent, the
"PARENT PARTIES"), Leucadia Technologies, Inc., a Delaware corporation (the
"COMPANY"), and, for the limited purposes expressly provided herein, Xx. Xxxxxx
X. Xxxxx (the "STOCKHOLDER" and together with the Company and the Parent
Parties, the "Parties").
RECITALS:
A. Each Party's Board of Directors believes it is in its and its
stockholders' best interests that Parent acquire the Company through the
statutory merger of the Company with and into the Merger Sub (the "Merger") and,
in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger all of the Company's issued and outstanding
shares of common stock (the "COMPANY SHARES"), par value of $0.001 per share,
will be converted into the right to receive a combination of cash and shares of
Parent common stock, par value $0.01 per share ("PARENT COMMON SHARES").
C. On behalf of the Stockholder, Parent will place a portion of the
Parent Common Shares issued in the Merger into escrow, the release of which
shares will be contingent upon certain events and conditions.
D. The Parties desire to make certain representations and warranties
and other agreements in connection with the Merger.
E. For federal income tax purposes, the Parties intend for the Merger
to qualify as a reorganization under Section 368(a) of the Internal Revenue Code
of 1986 (the "CODE") and intend for this Agreement to constitute a "plan of
reorganization" within the meaning of the Code.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants contained herein, each Parent Party, the Company and the
Stockholder agree as follows:
ARTICLE 1
DEFINITIONS
"ACTION" means any action, appeal, petition, plea, charge, complaint,
claim, suit, demand, litigation, arbitration, mediation, hearing, inquiry,
investigation or similar event, occurrence, or proceeding.
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"AFFILIATE" or "AFFILIATED" with respect to any specified Person, means
a Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. For this definition, "control" (and its derivatives) means the
possession, directly or indirectly, or as trustee or executor, of the power to
direct or cause the direction of the management and policies of a Person,
whether through ownership of voting Equity Interests, as trustee or executor, by
contract or credit arrangements or otherwise.
"AFFILIATED GROUP" means any affiliated group under Code Section
1504(a) or any similar group defined under provisions of applicable Law.
"AGREEMENT" is defined in the preamble to this Agreement.
"ANCILLARY AGREEMENTS" means the Employment Agreement, Non-Competition
Agreements, Escrow Agreement, Registration Rights Agreement and Standstill
Agreements.
"APPLICABLE RATE" means 7%.
"BALANCE SHEET DATE" is defined in Section 4.8.
"BALANCE SHEET LIABILITIES" means Liabilities of a type required to be
reflected or reserved against on the balance sheet or notes thereto of the
Company in accordance with GAAP.
"BASIS" means any past or current fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction about which the relevant Person has
Knowledge that forms or could form the basis for any specified consequence.
"BREACH" means (a) any breach, inaccuracy, failure to perform, failure
to comply, conflict with, failure to notify, default, or violation or (b) any
other act, omission, event, occurrence or condition the existence of which would
(i) permit any Person to accelerate any obligation or terminate, cancel, or
modify any right or obligation or (ii) require the payment of money or other
consideration.
"CLOSING" is defined in Section 2.2.
"CLOSING DATE" is defined in Section 2.2.
"CODE" is defined in the recitals to this Agreement.
"COMMERCIALLY REASONABLE EFFORTS" means the efforts, time, and costs
that a prudent Person, desirous of achieving a result and acting in a
commercially reasonable manner, would use, expend, or incur in similar
circumstances to ensure that such result is achieved as expeditiously as
possible; provided, however, that no such use, expenditure, or incurrence will
be required if it would be commercially unreasonable in relation to the desired
result or would have a Material Adverse Effect on such Person.
"COMMITMENT" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, conversion rights, exchange
rights, or other Contracts that could
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require a Person to issue any of its Equity Interests or to sell any Equity
Interests it owns in another Person; (b) any other securities convertible into,
exchangeable or exercisable for, or representing the right to subscribe for any
Equity Interest of a Person or owned by a Person; (c) statutory pre-emptive
rights or pre-emptive rights granted under a Person's Organizational Documents;
and (d) stock appreciation rights, phantom stock, profit participation, or other
similar rights with respect to a Person.
"COMPANY" is defined in the preamble to this Agreement.
"COMPANY DEFERRED STOCK UNITS" means those certain Commitments of the
Company which are listed on SCHEDULE 4.5 hereto and which entitle the holder
thereof to receive Company Shares at one or more future dates.
"COMPANY FULLY DILUTED EQUITY" is defined in Section 2.7(f).
"COMPANY SHARES" is defined in the recitals to this Agreement.
"COMPANY STOCK CERTIFICATE" is defined in Section 2.7(c).
"CONFIDENTIAL INFORMATION" means any confidential information
concerning the businesses and affairs of Parent or the Company.
"CONSENT" means any consent, approval, notification, waiver, or other
similar action that is necessary or convenient.
"CONTRACT" means any contract, agreement, arrangement, commitment,
letter of intent, memorandum of understanding, heads of agreement, promise,
obligation, right, instrument, document, or other similar understanding, whether
written or oral.
"CONVERSION CONSIDERATION" is defined in Section 2.7(c).
"COPYRIGHTS" means all copyrights in published works or unpublished
works.
"CORPORATE LAWS" is defined in Section 2.1.
"DAMAGES" means all damages (including incidental and consequential
damages), losses, Liabilities, payments, amounts paid in settlement,
obligations, fines, penalties, expenses, and other costs (including reasonable
fees and expenses of attorneys, accountants and other professional advisors, and
of expert witnesses and other costs of investigation, preparation and litigation
in connection with any Action or Threatened Action) of any kind or nature
whatsoever, whether contingent or vested, or matured or unmatured.
"DEVELOPERS" is defined in Section 4.15(d).
"DISPUTED AMOUNT" is defined in Section 10.5.
"EARN-OUT AMOUNT" is defined in Section 10.3.
"EFFECTIVE TIME" is defined in Section 2.3.
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"EMPLOYEE AGREEMENT" means each management, employment, severance,
consulting, non-compete, confidentiality, or similar Contract between the
Company and any employee, consultant, independent contractor, or other
individuals providing services thereto pursuant to which the Company has or may
have any Liability.
"EMPLOYMENT AGREEMENT" means the employment agreement between Parent
and Xx. Xxxxxx X. Xxxxx, in substantially the form of Exhibit B.
"ENCUMBRANCE" means any Order, Security Interest, Contract, easement,
covenant, community property interest, equitable interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership,
except for liens for taxes not yet due and payable and mechanics' or similar
statutory liens arising in the Ordinary Course of Business..
"ENFORCEABLE" - a Contract is "Enforceable" if it is the legal, valid,
and binding obligation of the applicable Person enforceable against such Person
in accordance with its terms, except as such enforceability may be subject to
the effects of bankruptcy, insolvency, reorganization, moratorium, or other Laws
relating to or affecting the rights of creditors, and general principles of
equity.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" means all Laws and
Orders concerning or relating to public health and safety, worker/occupational
health and safety, and pollution or protection of the environment, including
those relating to the presence, use, manufacturing, refining, production,
generation, handling, transportation, treatment, recycling, transfer, storage,
disposal, distribution, importing, labeling, testing, processing, discharge,
release, threatened release, control, or other action or failure to act
involving cleanup of any hazardous materials, substances, or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic chemicals,
petroleum products or byproducts, asbestos, polychlorinated biphenyls, noise, or
radiation, each as amended and as now or hereafter in effect.
"EQUITY INTEREST" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust, or similar Person,
any and all units, interests or other partnership/limited liability company
interests, and any Commitments with respect thereto, and (c) any other equity
ownership or participation in a Person.
"ERISA" means the Employee Retirement Income Security Act of 1974.
"ERISA AFFILIATE" means each business or entity which is a member of a
"controlled group of corporations," under "common control" or an "affiliated
service group" with the Company within the meaning of Sections 414(b), (c) or
(m) of the Code, or required to be aggregated with the Company under Section
414(o) of the Code, or is under "common control" with the Company, within the
meaning of Section 4001(a)(14) of ERISA.
"ESCROW ACCOUNT" is defined in Section 8.6(a).
"ESCROW AGENT" means U.S. Bank National Association.
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"ESCROW AGREEMENT" means the escrow agreement between Parent, the
Stockholder, and Escrow Agent, in substantially the form of Exhibit D.
"ESCROW FUND" is defined in Section 8.6(a).
"ESCROW SHARES" is defined in Section 8.6(a).
"EXCESS LOSS ACCOUNT" is defined in Treas. Reg. Section 1.1502-19.
"EXCHANGE ACT" means the Securities Exchange Act of 1934.
"EXCHANGE RATIO" is defined in Section 2.7(f).
"EXCLUDED COMPANY SHARES" is defined in Section 2.7(a).
"EXPIRATION DATE" means April 7, 2006.
"FINANCIAL STATEMENTS" is defined in Section 4.8.
"FOREIGN CORRUPT PRACTICES ACT" means the Foreign Corrupt Practices Act
of 1977.
"GAAP" means United States generally accepted accounting principles.
"GOVERNMENTAL BODY" means any legislature, agency, bureau, branch,
department, division, commission, court, tribunal, magistrate, justice,
multi-national organization, quasi-governmental body, or other similar
recognized organization or body of any federal, state, county, municipal, local,
or foreign government or other similar recognized organization or body
exercising similar powers or authority.
"INDEMNIFICATION CLAIM" is defined in Section 8.4(a).
"INDEMNIFIED PARTIES" means, individually and as a group, the Parent
Indemnified Parties and the Stockholder Indemnified Parties.
"INDEMNITOR" means any Party having any Liability to any Indemnified
Party under this Agreement.
"INTELLECTUAL PROPERTY" means any rights, licenses, liens, security
interests, charges, encumbrances, equities, and other claims that any Person may
have to claim ownership, authorship or invention, to use, to object to or
prevent the modification of, to withdraw from circulation, or control the
publication or distribution of any Marks, Patents, Copyrights, or Trade Secrets.
"KNOWLEDGE" means the knowledge of a Person's officers and directors as
of the date hereof and the Closing Date, as applicable, after reasonable
investigation.
"LAW" means any law (statutory, common, or otherwise), constitution,
treaty, convention, ordinance, equitable principle, code, rule, regulation,
executive order, or other similar authority enacted, adopted, promulgated, or
applied by any Governmental Body.
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"LETTER OF INTENT" means that certain letter of intent dated January
18, 2006 between Parent and the Company.
"LIABILITY" OR "LIABLE" means any liability or obligation, whether
asserted or unasserted, absolute or contingent, conditional or unconditional,
accrued or unaccrued, or due or to become due.
"LIQUIDATED EARN-OUT AMOUNT" is defined in Section 10.3(e).
"MARKS" means all fictitious business names, trading names, corporate
names, registered and unregistered trademarks, service marks, and trademark
applications.
"MATERIAL ADVERSE CHANGE (OR EFFECT)" means (i) a change (or effect) in
the condition (financial or otherwise), properties, assets, Liabilities, rights,
obligations, operations, business, or prospects which change (or effect),
individually or in the aggregate, could reasonably be expected to be materially
adverse to such condition, properties, assets, Liabilities, rights, obligations,
operations, business, or prospects of the relevant Person and its Subsidiaries,
taken as a whole, (ii) a change (or effect) related to the announcement or
pendency of, or actions required or restricted by, this Agreement, or (iii) a
change (or effect) that could reasonably be expected to prevent or materially
delay the consummation of the Merger or otherwise have a material adverse effect
on the ability of a Party to perform its obligations under this Agreement;
provided, however, that changes in economic or other conditions that affect a
Person in a manner that is not disproportionate to the manner in which such
conditions affect other companies in such Person's industries or markets shall
not constitute a "Material Adverse Change (or Effect)."
"MERGER" is defined in the recitals to this Agreement.
"MERGER CERTIFICATE" is defined in Section 2.3.
"MERGER CONSIDERATION" is defined in Section 2.7(c).
"MERGER SUB" is defined in the preamble to this Agreement.
"NON-COMPETITION AGREEMENT" means the non-competition agreement between
Parent and Xx. Xxxxxx X. Xxxxx, in substantially the form of Exhibit C.
"ORDER" means any order, ruling, decision, verdict, decree, writ,
subpoena, mandate, precept, command, directive, consent, approval, award,
judgment, injunction, or other similar determination or finding by, before, or
under the supervision of any Governmental Body, arbitrator, or mediator.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity,
quality, and frequency) of the relevant Person and its Subsidiaries.
"ORGANIZATIONAL DOCUMENTS" means the articles of incorporation,
certificate of incorporation, charter, bylaws, articles of formation,
regulations, operating agreement, certificate of limited partnership,
partnership agreement, and all other similar documents, instruments or
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certificates executed, adopted, or filed in connection with the creation,
formation, or organization of a Person, including any amendments thereto.
"PARENT" is defined in the preamble to this Agreement.
"PARENT COMMON SHARES" is defined in the recitals to this Agreement.
"PARENT FINANCIAL STATEMENTS" is defined in Section 3.7.
"PARENT INDEMNIFIED PARTIES" means the Stockholder.
"PARENT INDEMNIFIED PARTIES THRESHOLD AMOUNT" is defined in Section
8.5(b)(ii).
"PARENT PARTIES" is defined in the preamble to this Agreement.
"PARENT SEC DOCUMENTS" is defined in Section 3.7.
"PARTIES" is defined in the preamble to this Agreement.
"PATENTS" means all (a) patents and patent applications, and (b)
business methods, inventions, and discoveries that may be patentable.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PER SHARE CASH AMOUNT" means $3,100,000, less all Balance Sheet
Liabilities of the Company as of the Closing (including any stockholder loans
set forth on Schedule 2.14, but excluding Permitted Liabilities), but in no
event less than zero, divided by the Company Fully Diluted Equity.
"PERMIT" means any permit, license, certificate, approval, consent,
notice, waiver, franchise, registration, filing, accreditation, or other similar
authorization required by any Law, Governmental Body, or Contract.
"PERMITTED LIABILITIES" shall mean (i) the current portion (defined as
any portion that is less than 30 days past due) of trade accounts payable of the
Company incurred in the Ordinary Course of Business, (ii) costs incurred in
connection with the negotiation of this Agreement and consummation of the
Transactions, and (iii) amounts advanced by Parent to the Company pursuant to
the Letter of Intent.
"PERSON" means any individual, partnership, limited liability company,
corporation, association, joint stock company, trust, entity, joint venture,
labor organization, unincorporated organization, or Governmental Body.
"PREEXISTING CODE" is defined in Section 4.15(d).
"PROHIBITED TRANSACTIONS" is defined in ERISA Section 406 and Code
Section 4975.
"PROPOSED EARN-OUT AMOUNT" is defined in Section 10.1(b).
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"PROPOSED LIQUIDATED EARN-OUT AMOUNT" is defined in Section 10.2(b).
"RECEIVABLES" means all receivables of the Company, including all
Contracts in transit, notes receivable and accounts receivable.
"REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement, in substantially the form of Exhibit F.
"SCHEDULES" means the Schedules to this Agreement.
"SEC" means the U. S. Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933.
"SECURITY INTEREST" means any security interest, deed of trust,
mortgage, pledge, lien, charge, claim, or other similar interest or right,
except for (i) liens for taxes, assessments, governmental charges, or claims
that are being contested in good faith by appropriate Actions promptly
instituted and diligently conducted and only to the extent that a reserve or
other appropriate provision, if any, has been made on the face of the Financial
Statements in an amount equal to the Liability for which the lien is asserted,
(ii) statutory liens of landlords and warehousemen's, carriers', mechanics',
suppliers', materialmen's, repairmen's, or other like liens (including
Contractual landlords' liens) arising in the Ordinary Course of Business and
with respect to amounts not yet delinquent and being contested in good faith by
appropriate proceedings, only to the extent that a reserve or other appropriate
provision, if any, has been made on the face of the Financial Statements in an
amount equal to the Liability for which the lien is asserted; and (iii) liens
incurred or deposits made in the Ordinary Course of Business in connection with
workers' compensation, unemployment insurance and other similar types of social
security.
"SHARE CONSIDERATION" is defined in Section 2.7(f).
"SOFTWARE" means computer software or middleware.
"STANDSTILL AGREEMENT" means the standstill agreement, in substantially
the form of Exhibit G.
"STOCKHOLDER INDEMNIFIED PARTIES" means (a) Parent, Merger Sub, and
their officers, directors, managers, employees, agents, representatives,
controlling Persons, and stockholders, and (b) the Company.
"STOCKHOLDER INDEMNIFIED PARTIES THRESHOLD AMOUNT" is defined in
Section 8.5(a)(ii).
"STOCKHOLDER" means Dr. Xxxxxx Xxxxx, the sole record and beneficial
owner of the Company Shares.
"SUBSIDIARY" means, with respect to any Person: (a) any corporation of
which more than 50% of the total voting power of all classes of the Equity
Interests entitled (without regard to the occurrence of any contingency) to vote
in the election of directors is owned by such Person
8
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directly or through one or more other Subsidiaries of such Person and (b) any
Person other than a corporation of which at least a majority of the Equity
Interest (however designated) entitled (without regard to the occurrence of any
contingency) to vote in the election of the governing body, partners, managers
or others that will control the management of such entity is owned by such
Person directly or through one or more other Subsidiaries of such Person.
"SURVIVING CORPORATION" is defined in Section 2.1.
"TAX" means any federal, state, local, or foreign income, gross
receipts, license, payroll, employment, excise, ad valorem, capital stock,
franchise, profits, withholding, social security, unemployment, disability, real
property, personal property, sales, use, transfer, value added, alternative or
add-on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes required to be filed with
any Governmental Body, including any schedule or attachment thereto, and
including any amendment thereof.
"TERMINATION DATE" means the earlier to occur of (a) the Expiration
Date and (b) the date on which this Agreement is terminated pursuant to Section
7.1 (other than Section 7.1(b)).
"THREATENED" means a demand or statement has been made (orally or in
writing) or a notice has been given (orally or in writing), that would lead a
prudent Person to conclude that a cause of Action or other matter is likely to
be asserted, commenced, taken, or otherwise initiated.
"TRADE SECRETS" means all know-how, trade secrets, reagent
formulations, confidential information, customer lists, Software (source code
and object code), technical information, data, process technology, plans,
designs, drawings, and blue prints.
"TRANSACTION DOCUMENTS" means this Agreement and the Ancillary
Agreements.
"TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including: (a) the Merger, the filing of the Merger Certificate, and
Parent's delivery of the Merger Consideration hereunder; (b) the execution,
delivery, and performance of all of the documents, instruments and agreements to
be executed, delivered, and performed in connection herewith, including each
Ancillary Agreement; and (c) the performance by the Parent Parties, the Company,
and the Stockholder of their respective covenants and obligations (pre- and
post-Closing) under this Agreement and the Ancillary Agreements.
"TREAS. REG." means the proposed, temporary and final regulations
promulgated under the Code.
ARTICLE 2
THE MERGER
2.1 THE MERGER.
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At the Effective Time subject to this Agreement and the Delaware
General Corporation Law (the "CORPORATE LAW"), the Company will be merged with
and into the Merger Sub, the Company's separate corporate existence will cease,
and the Merger Sub will continue as the surviving corporation and as a
wholly-owned Subsidiary of Parent. The Merger Sub as the surviving corporation
after the Merger is sometimes referred to as the "Surviving Corporation."
2.2 CLOSING.
The closing of the Merger (the "CLOSING") will take place at the
offices of Xxxxxx, Xxxxxxxx & Markiles LLP, commencing 9:00 am local time on the
first business day following the satisfaction or waiver of all conditions to
consummate the Merger (other than conditions with respect to actions the
respective Parties will take at the Closing itself) or such other date as Parent
and the Company may mutually determine (the "CLOSING DATE").
2.3 ACTIONS AND DELIVERIES AT CLOSING.
On the Closing Date, the Parties will cause the Merger to be
consummated by filing a Certificate of Merger (or like instrument) with the
Secretary of State of Delaware in substantially in the form of Exhibit E (the
"MERGER CERTIFICATE"), in accordance with the Corporate Law. The date and time
the Merger becomes effective as specified in the Merger Certificate or as
otherwise provided in accordance with the Corporate Law is referred to as the
"EFFECTIVE TIME." In addition: at the Closing,
(a) The Company will deliver to Parent:
(i) An Officers' certificate, substantially in the form
of Exhibit H, duly executed on the Company's behalf,
as to whether each condition specified in Sections
6.1(a) - (c) has been satisfied in all respects.
(ii) A Secretary's certificate, substantially in the form
of Exhibit I, duly executed on the Company's behalf.
(iii) The Employment Agreement and Non-Competition
Agreement, duly executed by Xx. Xxxxxx X. Xxxxx.
(iv) The Escrow Agreement, duly executed by the
Stockholder, and the Escrow Agent.
(v) The Registration Rights Agreement, duly executed by
the Stockholder.
(vi) The Standstill Agreement, duly executed by the
Stockholder.
(vii) A certificate of non-foreign status from the
Stockholder.
(b) Parent will deliver to the Company
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(i) An Officers' certificate, substantially in the form
of Exhibit J, duly executed on Parent's and Merger
Sub's behalf, as to whether each condition specified
in Sections 6.2(a) - (c) has been satisfied in all
respects.
(ii) A Secretary's certificate, substantially in the form
of Exhibit K, duly executed on Parent's and Merger
Sub's behalf;
(iii) The Escrow Shares to the Escrow Agent.
(iv) The Employment Agreement and Non-Competition
Agreement, duly executed by Parent.
(v) The Registration Rights Agreement, duly executed by
Parent.
(vi) The Escrow Agreement, duly executed by Parent and the
Escrow Agent.
2.4 EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger will be as provided in
the applicable Corporate Law. At the Effective Time all the Company's and Merger
Sub's property, rights, privileges, powers, and franchises will vest in the
Surviving Corporation, and all debts, liabilities, and duties of the Company and
Merger Sub will become the Surviving Corporation's debts, liabilities, and
duties.
2.5 CHARTER AND BYLAWS.
Unless Parent otherwise determines prior to the Effective Time, at the
Effective Time, Merger Sub's Certificate of Incorporation will be the Surviving
Corporation's Certificate of Incorporation until thereafter amended as provided
by Law and such Certificate of Incorporation. The Merger Sub's bylaws, as in
effect immediately prior to the Effective Time, will be the Surviving
Corporation's bylaws until thereafter amended.
2.6 DIRECTORS AND OFFICERS.
Merger Sub's director(s) and officers immediately prior to the
Effective Time will be the Surviving Corporation's initial director(s) and
officers.
2.7 EFFECT ON CAPITAL STOCK.
At the Effective Time, because of the Merger and without any action on
the part of Parent, Merger Sub, or the Company:
(a) CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. Each
Company Share that Merger Sub, Parent, the Company or any
direct or indirect wholly-owned Subsidiary of Parent or the
Company owns immediately prior to the Effective Time
(collectively, "EXCLUDED COMPANY SHARES") will be canceled and
extinguished without conversion.
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(b) CAPITAL STOCK OF MERGER SUB. Each share of Merger Sub's
capital stock issued and outstanding immediately prior to the
Effective Time will remain issued and outstanding and
constitute one (1) share of capital stock of the Surviving
Corporation. Each stock certificate of Merger Sub evidencing
such shares will from and after the Effective Time continue to
evidence ownership of such shares of the capital stock of the
Surviving Corporation.
(c) CONVERSION OF COMPANY STOCK. Subject to Sections 2.10 and
2.12, each Company Share issued and outstanding immediately
prior to the Effective Time (other than the Company Shares
referred to in Section 2.7(a) above) will be converted into
(i) the number of Parent Common Shares equal to the Exchange
Ratio and (ii) the right to receive the Per Share Cash Amount
(collectively, the "CONVERSION CONSIDERATION"). All such
Company Shares, when so converted, will no longer be
outstanding and will automatically be canceled and retired and
will cease to exist, and the holder of a certificate ("COMPANY
STOCK CERTIFICATE") that, immediately prior to the Effective
Time, represented outstanding Company Shares will cease to
have any rights with respect thereto, except the right to
receive, upon the surrender of such Company Stock Certificate,
(i) the Conversion Consideration, (ii) certain dividends and
other distributions under Section (e), and (iii) cash in lieu
of fractional Parent Common Shares under Section 2.10, in each
case without interest (collectively, the "MERGER
CONSIDERATION").
(d) RIGHTS PRIOR TO SURRENDER, STOCK SPLITS, ETC. AND STOCK
TRANSFER BOOKS. Until surrendered as contemplated by Section
2.8, each Company Stock Certificate will be deemed at any time
after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration. If
between the date hereof and the Effective Time the outstanding
Company Shares or Parent Common Shares are changed into a
different number of shares or a different class, because of
any stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares,
the Exchange Ratio will be correspondingly adjusted to reflect
such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
After the Effective Time, the Company's stock transfer books
will be closed and there will be no further transfers of
Company Shares prior to the Effective Time. If, at or after
the Effective Time, Company Stock Certificates are presented
to the Surviving Corporation, they will be canceled and
exchanged in accordance with this Agreement.
(e) DIVIDENDS AND DISTRIBUTIONS ON MERGER CONSIDERATION. No
dividends or other distributions declared or made having a
record date after the Effective Time will be paid to the
holder of any unsurrendered Company Stock Certificate until
the record holder of such Company Stock Certificate has
surrendered it under Section 2.8. Subject to the effect of
Laws (including escheat and abandoned property Laws),
following surrender of any such Company Stock Certificate
there will be paid to the record holder of the certificates
representing the Merger Consideration issued in exchange
therefor, without interest, (i) the amount of dividends or
other distributions with a record date after the Effective
Time that, absent the failure to surrender such Company Stock
Certificate, theretofore would have been required to be paid
with respect to such Merger Consideration, and (ii) if the
payment date for any dividend or distribution payable with
respect to such Merger Consideration has not occurred prior to
the surrender of such Company Stock Certificate, at the
appropriate payment date therefor, the amount of such
dividends or other distributions.
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(f) CERTAIN ADDITIONAL DEFINITIONS. For this Agreement the
following terms will have the indicated meanings:
"COMPANY FULLY DILUTED EQUITY" means the sum (without duplication) of:
(a) the number of Company Shares outstanding as of the Effective Time (excluding
Excluded Company Shares); and (b) the number of Company Shares issuable in
settlement of Company Deferred Stock Units outstanding as of the Effective Time.
"EXCHANGE RATIO" means the quotient of (a) Share Consideration divided
by (b) the Company Fully Diluted Equity.
"SHARE CONSIDERATION" means the number of shares obtained by dividing
(a) $5,000,000, less all Balance Sheet Liabilities of the Company as of the
Closing (including any stockholder loans set forth on Schedule 2.14, but
excluding Permitted Liabilities) in excess of $3,100,000, by (b) $15.42.
2.8 SURRENDER OF CERTIFICATES.
(a) EXCHANGE PROCEDURES. As soon as practicable after Closing, (i)
the holders of Company Stock Certificates will surrender such
certificates to Parent, (ii) upon surrender of a Company Stock
Certificate the holder thereof will be entitled to receive the
applicable Merger Consideration (less a pro rata portion of
the Escrow Shares), and (iii) the Company Stock Certificates
so surrendered will forthwith be canceled.
(b) TRANSFERS OF OWNERSHIP. If any certificate for Parent Common
Shares is to be issued in a name other than that in which the
Company Stock Certificate surrendered in exchange therefor is
registered, Parent will not be required to issue such Parent
Common Shares until (i) the Company Stock Certificate so
surrendered has been properly endorsed and is otherwise in
proper form for transfer and (ii) the Person requesting such
exchange has paid to Parent or any agent it designates any
transfer or other Taxes required because of the issuance of a
certificate for Parent Common Shares in any name other than
that of the registered holder of the Company Stock Certificate
surrendered, or established to the satisfaction of Parent or
any agent it designates that such Tax has been paid or is not
payable.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY SHARES. All Merger
Consideration will be deemed to have been issued in full
satisfaction of all rights pertaining to the Company Shares.
(d) LOST, STOLEN OR DESTROYED CERTIFICATES. If any Company Stock
Certificate has been lost, stolen, or destroyed, Parent will
issue the Merger Consideration deliverable in respect thereof
upon (i) the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen, or destroyed and
(ii) if the Surviving Corporation requires, the posting by
such Person of a bond in such reasonable amount as Parent may
direct as indemnity against any claim that may be made against
it with respect to such Certificate.
2.9 COMPANY DEFERRED STOCK UNITS.
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(a) ASSUMPTION OF COMPANY DEFERRED STOCK UNITS. At the Effective
Time, automatically and without any action on the part of the
holder thereof, Parent will assume each outstanding Company
Deferred Stock Unit listed on Schedule 4.5 and it will convert
into the right to receive, pursuant to the terms of the
Company Deferred Stock Units: (i) that number of Parent Common
Shares obtained by multiplying the number of Company Shares
issuable pursuant to such Company Deferred Stock Unit by the
Exchange Ratio and (ii) that amount of cash obtained by
multiplying the number of Company Shares issuable pursuant to
such Company Deferred Stock Unit by the Per Share Cash Amount.
(b) RESERVATION OF SHARES. Parent will take all corporate actions
necessary to reserve for issuance a sufficient number of
Parent Common Shares for delivery pursuant to the terms of the
Company Deferred Stock Units.
(c) FORM S-8. Within 180 days of the Closing date, Parent will
file a registration statement on Form S-8 (or any successor or
other appropriate forms) with respect to the Parent Common
Shares issuable upon settlement of the Company Deferred Stock
Units.
2.10 NO FRACTIONAL SHARES.
No fractional Parent Common Shares will be issued in the Merger and
fractional share interests will not entitle the owner thereof to vote or to any
rights of a Parent stockholder. The Stockholder will be entitled to receive, in
lieu thereof, an amount in cash determined by multiplying the fraction of a
Parent Common Share to which such holder would otherwise have been entitled by
$15.42.
2.11 TAX TREATMENT.
The Parties intend that the Merger constitute a tax free reorganization
under Code Section 368.
2.12 INTENTIONALLY OMITTED.
2.13 TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Effective Time, any such further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers, and franchises of the Company and Merger
Sub, the officers and directors of the Company, Parent, and Merger Sub are fully
authorized in the name of their respective corporations or otherwise to take,
and the Company and Parent will cause them to take, all such lawful and
necessary action.
2.14 ADJUSTMENT OF MERGER CONSIDERATION.
(a) The Parties acknowledge and agree that the Merger
Consideration has been calculated, and is being paid, based on
the understanding that the Company will have no Balance Sheet
Liabilities at the Closing, other than the Permitted
Liabilities, and will have no cash or cash equivalents at
Closing in excess of the total amounts advanced by Parent to
the Company pursuant to the Letter of Intent. In the event any
Balance Sheet Liabilities (other then Permitted
14
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Liabilities) exist at the Closing, the Merger Consideration
will be reduced dollar for dollar by the amount of such
Balance Sheet Liabilities. In the event that cash or cash
equivalents in excess of the total amounts advanced by Parent
to the Company pursuant to the Letter of Intent exist at the
Closing, the Merger Consideration will be increased dollar for
dollar by the amount of such excess cash and cash equivalents.
At the Closing, Parent will contribute cash to the Surviving
Corporation in an amount sufficient to pay, and shall cause
the Surviving Corporation to pay, each stockholder loan set
forth on Schedule 2.14 hereto and all costs incurred by the
Company in connection with the negotiation of this Agreement
and consummation of the Transactions. If, within 12 months of
the Closing, Parent discovers that any Balance Sheet
Liabilities (other than Permitted Liabilities) existed as of
the Closing and such Balance Sheet Liabilities are paid by the
Surviving Corporation, then the Parent shall be entitled to
receive out of the Escrow Shares, notwithstanding the
limitations set forth in Section 8.5, that number of Escrow
Shares with a value equal to such Balance Sheet Liabilities,
but only to the extent such Balance Sheet Liabilities were not
previously applied to reduce the Merger Consideration. For
purposes of the foregoing sentence, the per share value of the
Escrow Shares shall be $15.42.
(b) Notwithstanding any other provision in this Agreement to the
contrary, in the event that the tax opinion to be delivered to
the Company pursuant to SECTION 6.2(G) cannot be rendered
because the total number of Parent Common Shares into which
the Company Shares would otherwise be converted represents too
low a proportion of the total Merger Consideration (as
determined by counsel rendering such tax opinion), the number
of Parent Common Shares into which each Company Share shall be
converted (and the Exchange Ratio with respect thereto) shall
be proportionately increased, and the Per Share Cash Amount
into which each Company Share shall be converted shall be
proportionately decreased, to the minimum extent necessary to
enable such tax opinion to be rendered.
2.15 STOCK CERTIFICATE LEGENDS.
Each stock certificate Parent delivers to the Stockholder will be
imprinted with legends substantially in the following form:
THE SHARES THIS CERTIFICATE REPRESENTS HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT. SUCH SHARES HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED
AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE
SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SHARES UNDER THE
SECURITIES ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT
SUCH REGISTRATION IS NOT REQUIRED.
Each holder desiring to transfer such shares first must furnish the
issuer with (a) a written opinion reasonably satisfactory to the issuer in form
and substance from counsel reasonably satisfactory to the issuer under the
Securities Act and (b) a written undertaking executed by the desired transferee
reasonably satisfactory to the issuer in form and substance agreeing to be bound
by the restrictions on transfer contained herein.
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ARTICLE 3.
PARENT PARTY REPRESENTATIONS AND WARRANTIES
Each Parent Party, jointly and severally, represents and warrants to
the Company and the Stockholder as follows:
3.1 ENTITY STATUS.
Each Parent Party is an entity duly created, formed or organized,
validly existing and in good standing under the Laws of the jurisdiction of its
creation, formation or organization. Each Parent Party is duly authorized to
conduct its business and is in good standing under the laws of each jurisdiction
where such qualification is required and where the failure to be so qualified
would have a Material Adverse Effect on the Parent. Each Parent Party has the
requisite power and authority to own or lease its properties and to carry on its
business as currently conducted. Parent has delivered to the Company correct and
complete copies of each Parent Party's Organizational Documents. No Parent Party
is in material Breach of any provision of its Organizational Documents. There is
no pending or, to Parent's Knowledge, Threatened Action for the dissolution,
liquidation, insolvency, or rehabilitation of either Parent Party.
3.2 POWER AND AUTHORITY; ENFORCEABILITY.
Each Parent Party has the relevant entity power and authority to
execute and deliver each Transaction Document to which it is party, and to
perform and consummate the Transactions. Each Parent Party has taken all action
necessary to authorize the execution and delivery of each Transaction Document
to which it is party, the performance of its obligations thereunder, and the
consummation of the Transactions. Each Transaction Document to which a Parent
Party is party has been duly authorized, executed and delivered by, and is
Enforceable against, such Parent Party.
3.3 NO VIOLATION.
The execution and delivery of the applicable Transaction Documents by
the Parent Parties and the performance of their respective obligations hereunder
and thereunder, and consummation of the Transactions by each Parent Party will
not (i) Breach any Law or Order to which any Parent Party is subject or any
provision of the Organizational Documents of any Parent Party; (ii) Breach any
Contract, Order, or Permit to which any Parent Party is a party or by which it
is bound or to which any of its assets is subject (or result in the imposition
of any Encumbrance upon any of its assets); (iii) require any Consent, except
for the approval of its Board of Directors (and Merger Sub's Board of Directors
and stockholders), filings contemplated by the Transaction Documents and any SEC
filings required to be made by Parent; or (iv) trigger any rights of first
refusal, preferential purchase, or similar rights.
3.4 BROKERS' FEES.
No Parent Party has Liability to pay any compensation to any broker,
finder, or agent with respect to the Transactions for which the Stockholder
could become Liable.
3.5 MERGER SUB.
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Merger Sub has been formed for the sole purpose of effecting the Merger
and, except as contemplated by this Agreement, Merger Sub has not conducted any
business activities and does not have any material Liabilities.
3.6 CAPITALIZATION.
(a) Parent's authorized capital stock consists of 50,000,000
Parent Common Shares, of which 17,435,074 shares were issued
and outstanding as of March 10, 2006 and 3,000,000 shares of
preferred stock, none of which are outstanding. All of the
issued and outstanding Parent Common Shares (i) have been duly
authorized, are validly issued, fully paid, and nonassessable,
(ii) were issued in compliance with all applicable state and
federal securities Laws, and (iii) were not issued in Breach
of any Commitments. Except as described in the Parent SEC
Documents, as of the date the this Agreement (and as issued in
the ordinary course of Parent's business since the date of
this Agreement), no Commitments exist with respect to any
Parent Common Shares and no such Commitments will arise in
connection with the Transactions. There are no Contracts with
respect to the voting or transfer of Parent's capital stock.
Parent is not obligated to redeem or otherwise acquire any of
its outstanding capital stock.
(b) The Parent Common Shares to be issued pursuant to this
Agreement will be duly authorized, validly issued, fully paid,
and nonassessable and will be issued in compliance with all
applicable federal and state securities Laws.
3.7 PARENT'S SECURITIES FILINGS AND FINANCIAL STATEMENTS.
(a) Parent has furnished or made available to the Company true and
complete copies of all reports or registration statements it
has filed with the SEC under the Securities Act, and the
Exchange Act, for all periods subsequent to January 1, 2004,
all in the form so filed (collectively the "PARENT SEC
DOCUMENTS"). As of their respective filing dates, the Parent
SEC Documents complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as
applicable, and 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 to
make the statements made therein, in light of the
circumstances in which they were made, not misleading, except
to the extent corrected by a document filed with the SEC prior
to the date hereof or, for Parent SEC Documents filed after
the date hereof, to the extent corrected by a document filed
with the SEC prior to the Closing.
(b) Parent's financial statements, including the notes thereto,
included in the Parent SEC Documents (the "BUYER FINANCIAL
STATEMENTS") comply as to form in all material respects with
applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have
been prepared in accordance with GAAP consistently applied
(except as may be indicated in the notes thereto) and present
fairly Parent's consolidated financial position at the dates
thereof and of its operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to
normal audit adjustments). Since the date of the most recent
balance sheet included in the Buyer Financial Statements,
except as set forth in the Parent SEC Documents filed on or
prior to date hereof, Parent has not effected any change in
any method of accounting or accounting practice, except for
any such change required because of a concurrent change in
GAAP. Parent has no Liabilities, except (i) Liabilities
reflected or reserved
17
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against in the most recent balance sheet or notes thereto
included in the Buyer Financial Statements as of the date
hereof and not heretofore paid or discharged, (ii) Liabilities
of a type that would not be required to be reflected or
reserved against in the balance sheet of Parent or the notes
thereto prepared in accordance with GAAP, and (iii)
Liabilities that have arisen subsequent to the date of the
most recent balance sheet included in the Buyer Financial
Statements as of the date hereof that have been incurred in
the ordinary course of business and that, singularly or in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect on Parent.
3.8 LITIGATION.
No Parent Party is subject to any outstanding Order or is a party to,
the subject of, or is, to Parent's Knowledge, Threatened to be made a party to
or the subject of, any Action, except as disclosed in Parent SEC Documents filed
on or prior to the date hereof or Orders or Actions that, singularly or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect on
the Parent.
3.9 NO MATERIAL ADVERSE EFFECT.
Since the date of the most recent balance sheet included in the Buyer
Financial Statements as of the date hereof, the Parent Parties have operated in
the Ordinary Course of Business and there have been no events, series of events
or the lack of occurrence thereof which, singularly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on Parent.
3.10 TAX-FREE REORGANIZATION.
To the Knowledge of Parent after consultation with Parent's tax
advisors, neither Parent nor any of its directors, officers or stockholders has
taken any action which could reasonably be expected to jeopardize the status of
the Merger as a "reorganization" within the meaning of Section 368(a) of the
Code.
ARTICLE 4.
COMPANY AND STOCKHOLDER REPRESENTATIONS AND WARRANTIES
The Company and, solely with respect to Section 4.32, the Stockholder,
severally and not jointly, represent and warrant to Parent as follows:
4.1 ENTITY STATUS.
The Company is an entity duly created, formed or organized, validly
existing, and in good standing under the Laws of the jurisdiction of its
creation, formation, or organization. The Company is duly authorized to conduct
its business and is in good standing under the laws of each jurisdiction where
such qualification is required and where the failure to be so qualified would
have a Material Adverse Effect on the Company. The Company has the requisite
power and authority necessary to own or lease its properties and to carry on its
businesses as currently conducted. Schedule 4.1 lists the Company's directors
and officers. The Company has delivered to Parent correct and complete copies of
the Company's Organizational Documents, as amended to date. The Company is not
in material Breach of any provision of its Organizational
18
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Documents. There is no pending or, to the Company's Knowledge, Threatened Action
for the dissolution, liquidation, insolvency, or rehabilitation of the Company.
4.2 POWER AND AUTHORITY; ENFORCEABILITY.
The Company has the relevant entity power and authority necessary to
execute and deliver each Transaction Document to which it is a party and to
perform and consummate the Transactions. The Company has taken all action
necessary to authorize the execution and delivery of each Transaction Document
to which it is a party, the performance of the Company's obligations thereunder,
and the consummation of the Transactions. Each Transaction Document to which the
Company is party has been duly authorized, executed, and delivered by, and is
Enforceable against, the Company.
4.3 NO VIOLATION.
Except as listed on Schedule 4.3, the execution and the delivery of the
applicable Transaction Documents by the Company and the Stockholder and the
performance of their respective obligations hereunder and thereunder, and
consummation of the Transactions by each of the Company and the Stockholder will
not (a) Breach any Law or Order to which any such party is subject or any
provision of the Organizational Documents of the Company; (b) Breach any
Contract, Order, or Permit to which either the Company or the Stockholder is a
party or by which either is bound or to which any of the Company's assets is
subject (or result in the imposition of any Encumbrance upon any of its assets);
(c) require any Consent, except for filings contemplated by the Transaction
Documents and approval of the Company's Board of Directors and Stockholder; or
(d) trigger any rights of first refusal, preferential purchase, or similar
rights.
4.4 BROKERS' FEES.
The Company does not have any Liability to pay any compensation to any
broker, finder, or agent with respect to the Transactions for which Parent,
Merger Sub, or the Company could become directly or indirectly Liable.
4.5 CAPITALIZATION; SHARES AND STOCKHOLDER INFORMATION.
(a) CAPITALIZATION. The Company's authorized capital stock
consists of 100,000 Company Shares. Exhibit A sets forth the
number of shares of each Equity Interest that are issued and
outstanding and the number of shares of each Equity Interest
that are held in treasury. All of the issued and outstanding
Company Shares: (1) have been duly authorized and are validly
issued, fully paid, and nonassessable, (2) were issued in
compliance with all applicable state and federal securities
Laws, (3) were not issued in Breach of any Commitments, and
(4) as of the date hereof are held of record and owned
beneficially by the Stockholder as set forth in Exhibit A.
Schedule 4.5 lists (x) all Commitments with respect to any
Equity Interest of the Company, (y) the exercise price of such
Commitments, and (z) the termination date of such Commitments.
No additional Commitments will arise in connection with the
Transactions. There are no Contracts with respect to the
voting or transfer of the Company's Equity Interests. The
Company is not obligated to redeem or otherwise acquire any of
its outstanding Equity Interests.
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(b) SHARES AND STOCKHOLDER INFORMATION. As of the date hereof, the
Stockholder holds of record and owns beneficially all of the
Company Shares free and clear of any Encumbrances (other than
any restrictions under the Securities Act and state securities
Laws). Exhibit A also sets forth the address, state of
residence of the Stockholder as of the date hereof. The
Stockholder is not a party to any (i) Contract that could
require the Stockholder to sell, transfer, or otherwise
dispose of any capital stock of the Company (other than this
Agreement) or (ii) other Contract with respect to any Equity
Interests of the Company.
4.6 RECORDS.
The copies of the Company's Organizational Documents that were provided
to Parent are accurate and complete and reflect all amendments made through the
date hereof. The Company's minute books (including the stockholder ledger) made
available to Parent for review were correct and complete in all material
respects as of the date of such review, no further entries have been made
through the date of this Agreement, such minute books contain the true
signatures of the persons purporting to have signed them, and such minute books
contain an accurate record of all actions of the stockholders and directors of
the Company taken by written consent, at a meeting, or otherwise since
formation.
4.7 SUBSIDIARIES.
The Company has no Subsidiaries. The Company does not control, directly
or indirectly, or have any direct or indirect Equity Interest in any Person
other than as listed on Schedule 4.7.
4.8 FINANCIAL STATEMENTS.
(a) Set forth on Schedule 4.8 are the following financial
statements for the Company (collectively the "FINANCIAL
STATEMENTS"): unaudited balance sheets and statements of
income as of and for the fiscal years ended December 31, 2003,
December 31, 2004 and December 31, 2005 (the "BALANCE SHEET
DATE").
(b) The Financial Statements present fairly the financial
condition of the Company as of such dates and the results of
operations of the Company for such periods, are correct and
complete in all material respects, and are consistent with the
books and records of the Company.
4.9 SUBSEQUENT EVENTS.
Except as set forth in Schedule 4.9, since the Balance Sheet Date the
Company has operated in the Ordinary Course of Business and there have been no
events, series of events or the lack of occurrence thereof which, singularly or
in the aggregate could reasonably be expected to have a Material Adverse Effect
on the Company. Without limiting the foregoing, since that date, none of the
following have occurred:
(a) The Company has not sold, leased, transferred, or assigned any
assets other than for a fair consideration in the Ordinary
Course of Business and sales of assets not exceeding $10,000
singularly or $25,000 in the aggregate.
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(b) The Company has not entered into any Contract (or series of
related Contracts) either involving more than $10,000 or
outside the Ordinary Course of Business.
(c) No Encumbrance has been imposed upon any assets of the
Company.
(d) The Company has not made any capital expenditure (or series of
related capital expenditures) involving more than $10,000
individually, $25,000 in the aggregate, or outside the
Ordinary Course of Business.
(e) The Company has not made any capital investment in, any loan
to, or any acquisition of the securities or assets of, any
other Person involving more than $10,000 singularly, $25,000
in the aggregate, or outside the Ordinary Course of Business.
(f) The Company has not issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any
Liability for borrowed money or capitalized lease Contract
either involving more than $10,000 individually or $25,000 in
the aggregate.
(g) The Company has not delayed or postponed the payment of
accounts payable or other Liabilities either involving more
than $10,000 (individually or in the aggregate) or outside the
Ordinary Course of Business.
(h) The Company has not canceled, compromised, waived, or released
any Action (or series of related Actions) either involving
more than $10,000 or outside the Ordinary Course of Business.
(i) The Company has not granted any Contracts or any rights under
or with respect to any Intellectual Property.
(j) There has been no change made or authorized to be made to the
Organizational Documents of the Company.
(k) The Company has not issued, sold, or otherwise disposed of any
of its Equity Interests.
(l) The Company has not declared, set aside, or paid any dividend
or made any distribution with respect to its Equity Interests
(whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its Equity Interests.
(m) The Company has not experienced any material damage,
destruction, or loss (whether or not covered by insurance) to
its properties.
(n) The Company has not made any loan to, or entered into any
other transaction with, any of its directors, officers, or
employees.
(o) The Company has not entered into any employment, collective
bargaining, or similar Contract or modified the terms of any
existing such Contract.
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(p) The Company has not committed to pay any bonus or granted any
increase in the base compensation (i) of any director or
officer, or an employee who is an Affiliate of a Stockholder,
or (ii) outside of the Ordinary Course of Business, of any of
its other employees.
(q) The Company has not adopted, amended, modified, or terminated
any bonus, profit-sharing, incentive, severance, or similar
Contract for the benefit of any of its directors, officers, or
employees (or taken any such action with respect to any other
Employee Benefit Plan).
(r) The Company has not made any other change in employment terms
for (i) any officer or employee thereof that is an Affiliate
of the Stockholder, or (ii) outside of the Ordinary Course of
Business, any of its other directors, officers, or employees.
(s) The Company has not made or pledged to make any charitable or
other capital contribution either involving more than $10,000
(individually or in the aggregate) or outside the Ordinary
Course of Business.
(t) The Company has not committed to any of the foregoing.
4.10 LIABILITIES.
The Company does not have any Liability, except for (a) Liabilities
reserved against or specifically reflected in the Financial Statements and not
heretofore paid or discharged, and (b) Liabilities that have arisen after the
Balance Sheet Date in the Ordinary Course of Business which, individually or in
the aggregate, are not material and are of the same character and nature as the
Liabilities reserved against or specifically reflected in the Financial
Statements, none of which are past due or results from or relates to any Breach
of Contract, Breach of warranty, tort, infringement, or Breach of Law, or arose
out of any Action or Order.
4.11 LEGAL COMPLIANCE.
The Company and its respective predecessors and Affiliates has complied
with all applicable Laws, and no Action is pending or, to the Company's
Knowledge, Threatened against it alleging any failure to so comply. No material
expenditures are, or based on applicable Law, will be required of the Company
for it and its business and operations to remain in compliance with applicable
Law.
4.12 TAX MATTERS.
(a) The Company has duly and timely filed all Tax Returns that it
was required to file. All such Tax Returns were accurate,
correct and complete in all material respects and accurately
reflect the facts regarding the income, business, assets,
operations, activities, status, or other matters of the
Company or any other information required to be shown thereon.
All Taxes the Company owes (whether or not shown on any Tax
Return) have been fully and timely paid. The Company is not
currently the beneficiary of any extension of time within
which to file any Tax Return. No Action has ever been
initiated or, to the Company's Knowledge, Threatened by a
Governmental Body in a jurisdiction where the Company does not
file Tax Returns that it is
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or may be subject to Taxation by that jurisdiction. There are
no Encumbrances on any of the assets of the Company that arose
in connection with any failure (or alleged failure) to pay any
Tax.
(b) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owed
to any employee, independent contractor, creditor, holder of
its Equity Interests, or other third party.
(c) To the Company's Knowledge, there is no Threatened assessment
of any additional Taxes for any period for which Tax Returns
have been filed nor is there any Basis therefor. There is no
Action concerning any Tax Liability of the Company either (i)
claimed or raised or (ii) as to which the Company has
Knowledge. Schedule 4.12(c) lists all Tax Returns filed with
respect to the Company for taxable periods ended on or after
December 31, 2000, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are
the subject of audit. The Company has delivered to Parent
correct and complete copies of all Tax Returns, examination
reports, and statements of deficiencies assessed against or
agreed to by the Company since December 31, 2000.
(d) The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency.
(e) No property owned by the Company is (i) property required to
be treated as being owned by another Person pursuant to the
provisions of Section 168(f)(8) of the Internal Revenue Code
of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) "tax-exempt use
property" within the meaning of Code section 168(h)(1) or
(iii) "tax-exempt bond financed property" within the meaning
of Code section 168(g), (iv) "limited use property" within the
meaning of Rev. Proc. 76-30 or (v) subject to Code section
168(g)(1)(A).
(f) The Company has disclosed on its Tax Returns all positions
taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of
Code Section 6662. The Company has not entered into a
transaction that, at the time entered into, was a "reportable
transaction" or a "listed transaction," as such terms are
defined in Code section 6662A.
(g) The Company is not a party to any Tax allocation or sharing
Contract.
(h) The Company (i) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return; (ii) does not
have any Liability for the Taxes of any Person (other than the
Company) under Treas. Reg. Section 1.1502-6 or similar Law, as
a transferee or successor, by Contract, or otherwise; or (iii)
has not constituted either a "distributing corporation" or a
"controlled corporation" (within the meaning of Code section
355(a)(1)(A)) in a distribution of stock qualifying for
tax-free treatment under Code section 355.
(i) Schedule 4.12(i) sets forth the following information with
respect to the Company as of the most recent practicable date:
(i) the basis of the Company in its assets (including of the
Company in its Subsidiaries); (ii) the basis of the
stockholder(s) of each Company Subsidiary in its Equity
Interests (or the amount of any Excess Loss Account); (iii)
the amount of any net operating loss, net capital loss, unused
investment or other credit, unused foreign Tax, or excess
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charitable contribution allocable to the Company; (iv) the
amount of any deferred gain or loss allocable to the Company
arising out of any "intercompany transactions," as defined in
Treas. Reg. Section 1.1502-13, and (v) all material elections
with respect to Taxes affecting the Company.
(j) The unpaid Taxes of the Company (i) did not, as of the Balance
Sheet Date, exceed the reserve for Tax Liability (rather than
any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face
of the Financial Statements (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with
the past custom and practice of the Company in filing its Tax
Returns.
(k) The Company will not be required to include any item of income
in, or exclude any item of deduction from, taxable income for
any taxable period (or portion thereof) ending after the
Closing Date as a result of any: (i) change in method of
accounting for a taxable period ending on or prior to the
Closing Date; (ii) "closing agreement" as described in Code
section 7121 (or any corresponding or similar provision of
state, local, or foreign income Tax law) executed on or prior
to the Closing Date; (iii) intercompany transactions or any
excess loss account described in Treasury Regulations under
Code section 1502 (or any corresponding or similar provision
of state, local, or foreign income Tax law); (iv) installment
sale or open transaction disposition made on or prior to the
Closing Date; or (v) prepaid amount received on or prior to
the Closing Date.
(l) There is no Contract covering any Person that, individually or
collectively, could give rise to the payment of any amount
that would not be deductible by Parent, the Company or a
Company Subsidiary by reason of Code section 280G.
4.13 TITLE TO AND CONDITION OF ASSETS.
The Company has good and marketable title to, or a valid leasehold
interest in, all buildings, machinery, equipment, and other tangible assets (a)
located on their premises, shown on the Financial Statements, or acquired after
the Balance Sheet Date and (b) necessary for the conduct of their business as
currently conducted, in each case free and clear of all Encumbrances, except for
properties and assets disposed of in the Ordinary Course of Business since the
Balance Sheet Date. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in
good operating condition (subject to normal wear and tear), and is suitable for
the purposes for which it is currently used.
4.14 REAL PROPERTY.
Schedule 4.14 lists all real property the Company owns or leases. The
Company has good, marketable, and indefeasible title to the real property it
owns, including that reflected on Schedule 4.14, subject to no Encumbrance,
except for Encumbrances reflected on Schedule 4.14. Schedule 4.14 contains
accurate and complete copies of all title reports and title policies the Company
has obtained with respect to real property it owns. Schedule 4.14 also contains
an accurate and complete list of all leases and other Contracts in respect of
real property the Company leases, accurate and complete copies of which have
been delivered to Parent. Except as
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set forth on Schedule 4.14, all of such leases and Contracts included on
Schedule 4.14 are Enforceable against the Company, and, to the Company's
Knowledge, without investigation, the applicable counter-parties (and their
successors). To the Company's Knowledge, without investigation, all buildings,
plants, and structures the Company owns or uses lie wholly within the boundaries
of the real property the Company owns or leases and do not encroach upon any
other Person's property.
4.15 INTELLECTUAL PROPERTY.
(a) Schedule 4.15(a) contains a summary description of the
Company's Patents.
(b) Schedule 4.15(b) lists the Company's Marks. All Marks required
to be listed that have been registered with the United States
Patent and Trademark Office or with a corresponding state
office are currently in compliance with all formal legal
requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal
applications), are valid and, and to the Company's Knowledge,
Enforceable, and are not subject to any maintenance fees,
taxes, or actions falling due within 90 days after the Closing
Date. No Xxxx required to be listed has been or is now
involved in any opposition, invalidation, or cancellation,
and, to the Company's Knowledge, no such action is Threatened
with the respect to any such Xxxx. All products, services and
materials identified with a Xxxx required to be listed bear
the proper legal notice where permitted by Law.
(c) Schedule 4.15(c) lists the Company's Copyrights. All
Copyrights required to be listed that have been registered are
currently in compliance with formal legal requirements, are
valid and, to the Company's Knowledge, Enforceable, and are
not subject to any maintenance fees or taxes or actions
falling due within 90 days after the Closing Date. All works
encompassed by Copyrights required to be listed have been
marked with the proper copyright notice.
(d) Schedule 4.15(d)(1) lists all Software developed by or for the
Company. Schedule 4.15(d)(2) lists all originators,
developers, or programmers (other than employees), contractors
or agents, who have written any portion of or contributed to
any development of such Software (collectively, the
"DEVELOPERS"). Schedule 4.15(d)(3) contains a complete and
accurate list of all code incorporated into such Software that
was not specifically written or developed for use in such
Software (the "PREEXISTING CODE"). This list includes code
from toolkits, from preexisting code written by the Developers
and/or from third-party software used to write or otherwise
contribute to the development of any such Software. After
Closing, the Company will have at least a perpetual,
royalty-free, worldwide, non-exclusive right to use any such
Preexisting Code and there are no third-party rights to such
Preexisting Code that will materially interfere with the
Company's ownership, use, modification and distribution of
such Software.
(e) The Company has provided the Parent with a list of each
material Trade Secret of the Company. With respect to each
material Trade Secret of the Company, the documentation
relating to such Trade Secret is current, accurate, and
sufficient in detail and content to identify and explain it
and to allow its full and proper use without reliance on any
individual's knowledge or memory. The Company has taken all
reasonable precautions to protect the secrecy,
confidentiality, and value of all of its Trade Secrets. No
Trade Secret of the Company is part of the public knowledge or
literature, or, to the Company's Knowledge, has been used,
divulged, or
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appropriated either for the benefit of any third Person or to
the Company's detriment. No Trade Secret of the Company is
subject to any adverse claim nor, to the Company's Knowledge,
has any adverse claim been Threatened with respect to any such
Trade Secret and there is no Basis therefor.
(f) The Company owns or has the right to use pursuant to an
Enforceable Contract all Intellectual Property necessary to
operate or used in its business as currently conducted. Each
item of Intellectual Property that the Company owned or used
immediately prior to the Closing will be owned or available
for use by the Company on identical terms and conditions
immediately subsequent to the Closing. The Company has taken
all reasonably necessary action to maintain and protect each
item of Intellectual Property that it owns or uses.
(g) The Company has delivered to Parent correct and complete
copies of all written documentation evidencing ownership and
prosecution (if applicable) of each item of the Company's
Intellectual Property. With respect to each such item of
Intellectual Property:
(i) the Company possesses all right, title, and interest
in and to the item, free and clear of any
Encumbrance;
(ii) the item is not subject to any outstanding Order;
(iii) no Action is pending or, to the Company's Knowledge,
Threatened which challenges the Enforceability, use,
or ownership of the item; and
(iv) the Company has not ever agreed to indemnify any
Person for or against any interference, infringement,
misappropriation, or other conflict with respect to
the item.
(h) To the Company's Knowledge, the Company has not interfered
with, infringed upon, misappropriated, or otherwise violated
or come into conflict with any other Person's Intellectual
Property. The Company has not ever received any notice
alleging any such interference, infringement,
misappropriation, violation, or conflict (including any claim
that the Company must license or refrain from using any other
Person's Intellectual Property). To the Company's Knowledge,
no third Person has any Intellectual Property that interferes
or would be likely to interfere with the Company's use of any
of its Intellectual Property. To the Company's Knowledge, the
Company will not interfere with, infringe upon,
misappropriate, or otherwise violate or come into conflict
with, any Intellectual Property rights of any other Person as
a result of the continued operation of its businesses as
currently conducted and as currently proposed to be conducted.
To the Company's Knowledge, no other Person has interfered
with, infringed upon, misappropriated, or otherwise violated
or come into conflict with the Company's Intellectual
Property.
(i) Schedule 4.15(i)(i) identifies each item of Intellectual
Property, other than Software available on a retail basis
having a replacement cost of less than $500 per copy, that any
other Person owns or has rights to and that the Company uses.
Schedule 4.15(i)(ii) identifies each Contract pursuant to
which the Company has granted to a third party rights under or
with respect to any of its Intellectual Property (together
with any exceptions). The Company has made available to Parent
correct and complete copies of all Contracts with respect to
such use as
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amended to date. With respect to the Contracts (x) related to
each item of Intellectual Property required to be identified
in (1) Schedule 4.15(i)(i), the statements in clauses (i)
through (viii) below are true and correct, and (2) Schedule
4.15(i)(ii), the statements in clauses (i) through (iv) below
are true and correct and (y) related to each item of computer
software available on a retail basis having a replacement cost
of less than $500:
(i) the Contract is Enforceable;
(ii) the Contract will continue to be Enforceable on
identical terms following the consummation of the
Transaction;
(iii) neither the Company nor, to the Company's Knowledge,
any counter-party, is in Breach of such Contract, and
no event has occurred that with notice or lapse of
time would constitute a Breach thereunder;
(iv) to the Company's Knowledge, no party to the Contract
has repudiated any provision thereof;
(v) with respect to each sublicense Contract, to the
Company's Knowledge, the representations and
warranties set forth in Sections 4.15(i)(i) - (iv)
are true and correct with respect to the underlying
license Contract;
(vi) the underlying item of Intellectual Property is not
subject to any outstanding Order;
(vii) no Action is pending or, to the Company Knowledge,
Threatened that challenges the Enforceability of the
underlying item of Intellectual Property; and
(viii) the Company has not granted any sublicense or similar
Contract with respect to the Contract.
(j) Except as set forth on Schedule 4.15(j), all former and
current employees of the Company have executed written
Contracts with the Company that assign to the Company all
rights to all inventions, improvements, discoveries and
information relating to the Company's business. To the
Company's Knowledge, no employee of the Company has entered
into any Contract that restricts or limits in any way the
scope or type of work in which the employee may be engaged or
requires the employee to transfer, assign, or disclose
information concerning his or her work to any Person other
than the Company.
4.16 INVENTORY.
The Company's inventory whether reflected on the Financial Statements
or not, consists of raw materials and supplies, manufactured and processed
parts, goods in process, and finished goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, and, except as
has been written down on the Financial Statements, none of which is slow-moving,
obsolete, damaged, or defective. Any inventory that has been written down has
either been written off or written down to its net realizable value. There has
been no change in
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inventory valuation standards or methods with respect to the inventory in the
prior three years. The quantities of any kind of inventory are reasonable in the
current (and the currently foreseeable) circumstances of the Company. The
Company does not hold any items of inventory on consignment from other Persons
and no other Person holds any items of inventory on consignment from the
Company.
4.17 CONTRACTS.
Except as otherwise disclosed in Schedules 4.14, 4.15, 4.20 and 4.25,
Schedule 4.17 lists the following Contracts to which the Company is a party:
(a) Any Contract (or group of related Contracts) for the lease of
personal property to or from any Person providing for lease
payments in excess of $10,000 per annum.
(b) Any Contract (or group of related Contracts) for the purchase
or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period
of more than one year, result in a material loss to the
Company, or involve consideration in excess of $10,000.
(c) Any Contract concerning a limited liability company,
partnership, joint venture, or similar arrangement.
(d) Any Contract (or group of related Contracts) under which the
Company has created, incurred, assumed, or guaranteed any
Liability for borrowed money or any capitalized lease in
excess of $10,000, or under which the Contract has imposed or
the Company has suffered to exist an Encumbrance on any of its
assets.
(e) Any Contract concerning confidentiality or noncompetition.
(f) Any Contract with the Stockholder or any Affiliates of the
Stockholder.
(g) Any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other
similar Contract for the benefit of its current or former
directors, officers, and employees.
(h) Any collective bargaining Contract.
(i) Any Contract for the employment of any individual on a
full-time, part-time, consulting, or other basis providing
annual compensation in excess of $25,000 or providing
severance benefits.
(j) Any Contract under which it has advanced or loaned any amount
to any of its directors, officers or employees other than
advancement of Company related expenses incurred in the
Ordinary Course of Business.
(k) Any Contract relating to product development or other research
and development activities which was in effect anytime after
January 1, 2004.
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(l) Any other Contract (or group of related Contracts) the
performance of which involves receipt or payment of
consideration in excess of $10,000.
The Company has delivered to Parent a correct and complete copy of each
written Contract (as amended to date) listed in Schedule 4.17 and a written
summary setting forth the terms and conditions of each oral Contract referred to
in Schedule 4.17. With respect to each such Contract:
(i) the Contract is Enforceable;
(ii) the Contract will continue to be Enforceable on
substantially the same terms following the
consummation of the Transactions;
(iii) neither the Company nor, to the Company's Knowledge,
any counter-party is in Breach of such Contract, and
no event has occurred that with notice or lapse of
time would constitute a Breach under the Contract;
and
(iv) to the Company's Knowledge, no party to the Contract
has repudiated any provision thereof.
4.18 RECEIVABLES.
All of the Receivables are Enforceable, represent bona fide
transactions, and arose in the Ordinary Course of Business of the Company, and
are reflected properly in its books and records. All of the Receivables are
current, and to the Company's Knowledge, good and collectible receivables, and
will be collected in accordance with past practice and the terms of such
Receivables (and in any event within six months following the Closing Date),
without set off or counterclaims.
4.19 POWERS OF ATTORNEY.
There are no outstanding powers of attorney executed on behalf of the
Company.
4.20 INSURANCE.
Schedule 4.20 contains accurate and complete, (i) lists of all
insurance policies currently carried by the Company, (ii) lists of all insurance
loss runs or workers' compensation claims received for the past three policy
years, and (iii) copies of all insurance policies currently in effect. Such
insurance policies evidence all of the insurance that the Company is required to
carry pursuant to its Contracts and Law. Such insurance policies are currently
in full force and effect. No insurance that the Company has ever carried has
been canceled nor, to the Company's Knowledge, has any such cancellation been
Threatened. The Company has not ever been denied coverage nor, to the Company's
Knowledge, has any such denial been Threatened.
4.21 LITIGATION.
Schedule 4.21 sets forth each instance in which the Company (a) is
subject to any outstanding Order or (b) is a party to, the subject of, or, to
the Company's Knowledge, is
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Threatened to be made a party or the subject of, any Action. No Action required
to be set forth in Schedule 4.21 questions the Enforceability of this Agreement
or the Transactions, or could result in any Material Adverse Change with respect
to the Company.
4.22 PRODUCT WARRANTY.
Each product the Company has designed, manufactured, sold, leased, or
delivered has been in conformity with all applicable Law, Contracts, and all
express and implied warranties, and the Company does not have any Liability for
replacement or repair thereof or other Damages in connection therewith. No
product designed, manufactured, sold, leased, or delivered by the Company is
subject to any guaranty, warranty, or other indemnity or similar Liability
beyond the applicable standard terms and conditions of sale or lease. Schedule
4.22 includes copies of the standard terms and conditions of sale or lease for
the Company (containing applicable guaranty, warranty, and similar Liability
indemnity provisions).
4.23 PRODUCT LIABILITY.
The Company does not have any Liability arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product designed, manufactured, sold, leased, or delivered by the Company.
4.24 LABOR; EMPLOYEES.
To the Company's Knowledge, no executive, key employee, or group of
employees has any plans to terminate employment with the Company. The Company is
not a party to or bound by any collective bargaining Contract, nor has any of
them experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. The Company has not committed any unfair
labor practice (as determined under any Law). To the Company's Knowledge, there
is no organizational effort currently being made or Threatened by or on behalf
of any labor union with respect to the Company's employees.
4.25 EMPLOYEE BENEFITS.
Schedule 4.25 lists each non-qualified deferred compensation plan,
qualified defined contribution retirement plan, qualified defined benefit
retirement plan or other material fringe benefit plan or program that the
Company maintains or to which the Company contributes. With respect to any
employee benefit plan, within the meaning of Section 3(3) of ERISA, which is
subject to ERISA and which is sponsored, maintained or contributed to, or has
been sponsored, maintained or contributed to within six years prior to the
Closing Date, by the Company or any ERISA Affiliate, (a) no withdrawal
Liability, within the meaning of Section 4201 of ERISA, has been incurred, which
withdrawal Liability has not been satisfied, (b) no Liability to the PBGC has
been incurred by the Company or any ERISA Affiliate, which Liability has not
been satisfied, (c) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, and (d) all contributions (including installments) to such plan
required by Section 302 of ERISA and Section 412 of the Code have been timely
made. With respect to any kind of employee benefit plan, such plan has been
funded and maintained in compliance with all Laws applicable thereto and the
requirements of such plan's governing documents.
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4.26 ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
Except as set forth in Schedule 4.26, (a) the Company is in compliance
with all Environmental, Health and Safety Requirements in connection with
owning, using, maintaining, or operating its business or assets; (b) each
location at which the Company operates, or has operated, its business is in
compliance with all Environmental, Health and Safety Requirements; and (c) there
are no pending or, to the Company's Knowledge, Threatened allegations by any
Person that the Company's properties or assets are not, or that its business has
not been conducted, in compliance with all Environmental, Health and Safety
Requirements.
4.27 CUSTOMERS AND SUPPLIERS.
Schedule 4.27 lists the Company's (a) ten largest customers in terms of
sales during the 12 month period ended as of the Balance Sheet Date and states
the approximate total sales by the Company to each such customer during such
period, and (b) ten largest suppliers during the 12 month period ended as of the
Balance Sheet Date. Except as set forth in Schedule 4.27, the Company has not
received notice of termination or an intention to terminate the relationship
with the Company from any customer or supplier.
4.28 PERMITS.
The Company possesses all Permits required to be obtained for its
businesses and operations. Schedule 4.28 sets forth a list of all such Permits.
Except as set forth in Schedule 4.28, with respect to each such Permit:
(a) it is valid, subsisting and in full force and effect;
(b) there are no violations of such Permit that would result in a
termination of such Permit; and
(c) the Company has not received notice that such Permit will not
be renewed; and
(d) the Transactions will not adversely affect the validity of
such Permit or cause a cancellation of or otherwise adversely
affect such Permit.
4.29 FOREIGN CORRUPT PRACTICES ACT COMPLIANCE.
The Company has not, directly or indirectly, in connection with its
business, made or agreed to make any payment to any Person connected with or
related to any Governmental Body, except payments or contributions required or
allowed by applicable Law.
4.30 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY.
Except as set forth in Schedule 4.30, neither the Stockholder nor any
of its Affiliates has been involved in any business arrangement or relationship
with the Company within the past two years, and neither the Stockholder nor any
of its Affiliates owns any asset that is used in the Company's business.
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4.31 ACCURACY OF INFORMATION FURNISHED.
No representation, statement, or information contained in this
Agreement (including the Schedules) contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
to make the information contained therein, in light of the circumstances in
which there were made, not misleading. The Company has provided Parent with
correct and complete copies of all documents listed or described in the
Schedules.
4.32 STOCKHOLDER EXPERIENCE AND DUE DILIGENCE.
(a) The Stockholder has such knowledge and experience in financial
and business matters that he is capable of evaluating the
merits and risks of his investment in the Parent Common Shares
contemplated hereby, and that he is able to bear the economic
risk of such investment indefinitely.
(b) The Stockholder has (i) had the opportunity to meet with
representative officers and other representatives of Parent to
discuss its business, assets, liabilities, financial
condition, cash flow, and operations, and (ii) received all
materials, documents and other information that it deems
necessary or advisable to evaluate the Parent Common Shares
and the Transactions.
(c) The Stockholder has made his own independent examination,
investigation, analysis and evaluation of the Parent Common
Shares, including his own estimate of the value of the Parent
Common Shares.
(d) The Stockholder has undertaken such due diligence (including a
review of Parent's assets, properties, liabilities, books,
records, and contracts) as he deems adequate, including that
described above.
Nothing in Sections 4.32(a) - (d) will preclude the Stockholder from
relying on the representations, warranties, covenants, and agreements of the
Parent Parties herein or from pursuing their remedies with respect to a Breach
thereof.
4.33 TAX-FREE REORGANIZATION.
To the Knowledge of Company after consultation with the Company's tax
advisors, neither the Company nor any of its directors, officers or stockholders
has taken any action which could reasonably be expected to jeopardize the status
of the Merger as a "reorganization" within the meaning of Section 368(a) of the
Code.
ARTICLE 5.
PRE-CLOSING COVENANTS
The Parties agree as follows with respect to the period between the
execution of this Agreement and the earlier of the Closing and the Termination
Date:
5.1 GENERAL.
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Each Party will use its Commercially Reasonable Efforts to take all
actions and to do all things necessary to consummate, make effective, and comply
with all of the terms of this Agreement and the Transactions applicable to it
(including obtaining any required board or stockholder consents and
satisfaction, but not waiver, of the Closing conditions for which it is
responsible or otherwise in control, as set forth in ARTICLE 6).
5.2 NOTICES AND CONSENTS.
(a) The Company will give any notices to third parties, and will
use its Commercially Reasonable Efforts to obtain any third
party Consents listed on Schedule 4.3, or that Parent may
otherwise reasonably request in connection with the matters
referred to in Section 4.3. The Company will give any notices
to, make any filings with, and use its Commercially Reasonable
Efforts to obtain any Consents of Governmental Bodies, if any,
required or reasonably deemed advisable by Parent pursuant to
any applicable Law in connection with the Transactions
including in connection with the matters referred to in
Section 4.3.
(b) Each Parent Party will give any notices to third parties, and
will use its Commercially Reasonable Efforts to obtain any
third party Consents listed on Schedule 3.3, or that the
Company may otherwise reasonably request in connection with
the matters referred to in Section 3.3. Each Parent Party will
give any notices to, make any filings with, and use its
Commercially Reasonable Efforts to obtain any Consents of
Governmental Bodies, if any, required or reasonably deemed
advisable by the Company pursuant to any applicable Law in
connection with the Transactions including in connection with
the matters referred to in Section 3.3.
(c) Nothing in this Section 5.2 will require that (i) Parent or
its Affiliates divest, sell, or hold separately any of its
assets or properties, or (ii) Parent, its Affiliates, or the
Company (the determination with respect to which Parent will
make) take any actions that could affect the normal and
regular operations of Parent, its Affiliates, or the Company
after the Closing.
5.3 OPERATION OF BUSINESS.
Except as contemplated by this Agreement or with the written consent of
Parent, which shall not be unreasonably withheld, the Company will not engage in
any practice, take any action, or enter into any transaction outside the
Ordinary Course of Business or engage in any practice, take any action, or enter
into any transaction of the sort described in Section 4.9. Subject to compliance
with applicable Law, from the date hereof until the earlier to occur of the
Closing or the Termination Date, the Company will confer on a regular and
frequent basis with one or more representatives of Parent to report on
operational matters and the general status of the Company's ongoing business,
operations and finances and will promptly provide to Parent or its
representatives copies of all filings they make with any Governmental Body
during such period.
5.4 PRESERVATION OF BUSINESS.
The Company will keep its business and properties substantially intact,
including its present operations, physical facilities, and working conditions,
and relationships with lessors, licensors, suppliers, customers, and employees.
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5.5 FULL ACCESS.
The Company will permit representatives of Parent to have full access
at all reasonable times, and in a manner so as not to interfere with the normal
business operations of the Company, to all premises, properties, personnel,
books, records, Contracts, and documents pertaining to the Company and will
furnish copies of all such books, records, Contracts, and documents and all
financial, operating and other data, and other information as Parent may
reasonably request; provided, however, that no investigation pursuant to this
Section 5.5 will affect any representations or warranties made herein or the
conditions to the Parties' obligations to consummate the Transactions.
5.6 NOTICE OF DEVELOPMENTS.
The Company will give prompt written notice to Parent of any
development occurring after the date of this Agreement which causes or
reasonably could be expected to cause a Breach of any of the representations and
warranties in ARTICLE 4. Parent will give prompt written notice to the Company
of any development occurring after the date of this Agreement which causes or
reasonably could be expected to cause a Breach of any of the representations and
warranties in ARTICLE 3. Except as set forth in Section 8.2(a) or Section
8.3(a), no disclosure by any Party pursuant to this Section 5.6 will be deemed
to amend or supplement the Schedules or to prevent or cure any misrepresentation
or Breach of any representation, warranty, or covenant.
5.7 EXCLUSIVITY.
Each of the Company and the Stockholder will not (i) solicit, initiate,
or encourage the submission of any proposal or offer from any Person relating to
the acquisition of any Equity Interests or any substantial portion of the assets
of the Company (including any acquisition structured as a merger, consolidation,
or share exchange); or (ii) participate in any discussions or negotiations
regarding, furnish any information with respect to, assist or participate in, or
facilitate in any other manner any effort or attempt by any Person to do or seek
any of the foregoing. The Company will notify Parent promptly if any Person
makes any proposal, offer, inquiry, or contact with respect to any of the
foregoing and the terms of any such proposal, offer, inquiry, or contact. The
Stockholder will vote all of his Company Shares in favor of the Merger and the
approval and adoption of the terms contemplated by this Agreement and any
actions required in furtherance thereof and will not vote his Company Shares in
favor of any other competing or similar transaction.
5.8 CONFIDENTIALITY.
Except as may be required by Law, stock exchange or similar regulation
or as otherwise expressly contemplated herein, no Party or their respective
Affiliates, employees, agents and representatives will disclose to any Person
the existence of this Agreement, the subject matter or terms hereof or any
Confidential Information concerning the business or affairs of any other Party
that it may have acquired from such Party in the course of pursuing the
Transactions without the prior written consent of the Company or Parent, as the
case may be; provided, however, any Party may disclose any such Confidential
Information as follows: (a) to such
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Party's Affiliates and its or its Affiliates' employees, lenders, counsel, or
accountants, the actions for which the applicable Party will be responsible; (b)
to comply with any applicable Law or Order, provided that prior to making any
such disclosure the Party making the disclosure notifies the other Party of any
Action of which it is aware which may result in disclosure and uses its
Commercially Reasonable Efforts to limit or prevent such disclosure; (c) to the
extent that the Confidential Information is or becomes generally available to
the public through no fault of the Party or its Affiliates making such
disclosure; (d) to the extent that the same information is in the possession (on
a non-confidential basis) of the Party making such disclosure prior to receipt
of such Confidential Information as evidenced by written records; (e) to the
extent that the Party that received the Confidential Information independently
develops the same information without in any way relying on any Confidential
Information as evidenced by independent records; or (f) to the extent that the
same information becomes available to the Party making such disclosure on a
nonconfidential basis from a source other than a Party or its Affiliates, which
source, to the disclosing Party's Knowledge, is not prohibited from disclosing
such information by a legal, Contractual, or fiduciary obligation to the other
Party. Notwithstanding the foregoing, Parent may make such public disclosure of
the existence of this Agreement, the principal economic terms thereof, and the
status with respect to achieving the Closing as it desires; provided, that
Parent will consult with the Company prior to releasing any such public
disclosure so that the Company may notify the Company's employees of the
Transactions. Neither the Company nor any of its Affiliates will issue any press
release or other public announcement related to this Agreement or the
Transactions without Parent's prior written approval.
5.9 AFFILIATED TRANSACTIONS.
Except as contemplated by this Agreement or disclosed on Schedule 5.9,
the Company will cause all Contracts and transactions by and between the
Stockholder or any Affiliate of the Stockholder, on the one hand, and the
Company, on the other hand, to be terminated effective as of the Closing,
without any cost or continuing obligation to the Company or Parent, and will
deliver to Parent evidence of such terminations that is reasonably acceptable to
Parent.
5.10 REPAYMENT OF CERTAIN NOTES RECEIVABLE FROM STOCKHOLDER.
At or prior to the Closing, the Company will cause the Stockholder and
any Affiliate thereof (other than the Company) to satisfy, pay in full or
discharge all Liabilities they may have to the Company, including the notes
receivable described on Schedule 5.10. The Company will provide evidence to
Parent of such repayment, discharge, or forgiveness in form and substance
reasonably acceptable to Parent.
5.11 FIRPTA COMPLIANCE.
On or prior to the Closing Date, the Company shall cause the
Stockholder to deliver to Parent a properly executed certificate of non-foreign
status in a form reasonably acceptable to Parent.
5.12 EMPLOYEE OFFERS.
Parent will make employment offers to all employees of the Company,
provided that Parent's offer of employment shall be subject to and in compliance
with Parent's standard human
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resources policies and procedures and will be contingent upon such persons
executing standard employment related documentation and acknowledging that they
continue to be bound by and Parent is a beneficiary of any confidentiality and
inventions assignment agreements between such person and the Company. Parent
agrees that following the Closing such employees shall be eligible to receive
salary and employee benefits consistent with Parent's standard employment
practices, provided that the offer of employment to all employees shall be for a
salary mutually determined by the Company and Parent.
5.13 LISTING OF ADDITIONAL SHARES.
Prior to the Effective Time, Parent shall, to the extent required by
the rules of the Nasdaq National Market, file with the Nasdaq National Market
such documents as may be required with respect to the Parent Common Shares to be
issued, and the Parent Common Shares required to be reserved for issuance, in
connection with the Merger.
5.14 TREATMENT AS TAX-FREE REORGANIZATION.
Neither Parent nor the Company shall take any action prior to or
following the Closing that would cause the Merger to fail to qualify as a
"reorganization" within the meaning of section 368(a) of the Code.
ARTICLE 6.
CLOSING CONDITIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATION OF THE PARENT PARTIES.
The Parent Parties' obligation to effect the Merger and consummate the
other Transactions contemplated to occur in connection with the Closing and
thereafter is subject to the satisfaction of each condition precedent listed
below. Unless expressly waived pursuant to this Agreement, no representation,
warranty, covenant, right, or remedy available to a Parent Party in connection
with the Transactions will be deemed waived by any of the following actions or
inactions by or on behalf of a Parent Party (regardless of whether the Company
is given notice of any such matter): (i) consummation by the Parent Parties of
the Transactions, (ii) any inspection or investigation, if any, of the Company,
(iii) the awareness of any fact or matter acquired (or capable or reasonably
capable of being acquired) with respect to the Company, or (iv) any other
action, in each case at any time, whether before, on, or after the Closing Date.
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty set forth in ARTICLE 4 must have
been accurate and complete in all material respects (except
with respect to any provisions including the word "material"
or words of similar import, and except with respect to
materiality, as reflected under GAAP, in the representations
in Section 4.8 relating to the Financial Statements, with
respect to which such representations and warranties must have
been accurate and complete) as of the date of this Agreement,
and must be accurate and complete in all material respects
(except with respect to any provisions including the word
"material" or words of similar import and except with respect
to materiality, as reflected under GAAP, in the
representations in Section 4.8 relating to the Financial
Statements, with respect to which such representations and
warranties must have been accurate and complete) as of the
Closing Date, as if made on the Closing Date, (except for
representations and
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warranties that by their express terms are made solely as of a
specified earlier date), without giving effect to any
supplements to the Schedules.
(b) COMPLIANCE WITH OBLIGATIONS. The Company must have performed
and complied with all of its covenants to be performed or
complied with at or prior to Closing (singularly and in the
aggregate) in all material respects.
(c) NO MATERIAL ADVERSE CHANGE. Since the date hereof there must
have been no event, series of events or the lack of occurrence
thereof which, singularly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on
the Company.
(d) NO ORDER OR INJUNCTION. There must not be issued and in effect
any Order restraining or prohibiting the Transactions
(e) CONSENTS. The Company must have obtained all of the Consents
listed on Schedule 4.3 (except such Consents which, in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect on the Company).
(f) LEGAL OPINION. The Company must have delivered to Parent an
opinion of the outside counsel listed in Section 11.5, in form
and substance as set forth in Exhibit L, addressed to Parent
and dated as of the Closing Date.
(g) OPTIONS. Prior to the Closing, the Company must have cancelled
and terminated all options, warrants and other Commitments of
the Company, other than the Company Deferred Stock Units.
(h) TAX OPINION. Parent shall have received a written opinion from
legal counsel, in form and substance reasonably satisfactory
to Parent, to the effect that the Merger will constitute a
reorganization within the meaning of section 368(a) of the
Code.
(i) CERTIFICATE OF NON-FOREIGN STATUS. Parent shall have received
a certificate of non-foreign status from the Stockholder.
(j) EMPLOYMENT DOCUMENTS. Parent shall have received standard
confidentiality and inventions assignment agreements from each
of the employees of the Company.
6.2 CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY.
The Company's obligation to effect the Merger and consummate the other
Transactions contemplated to occur in connection with the Closing and thereafter
is subject to the satisfaction of each condition precedent listed below. Unless
expressly waived pursuant to this Agreement, no representation, warranty,
covenant, right, or remedy available to the Company or the Stockholder in
connection with the Transactions will be deemed waived by any of the following
actions or inactions by or on behalf of the Stockholder or the Company
(regardless of whether Parent is given notice of any such matter): (i)
consummation by the Company of the Transactions, (ii) any inspection or
investigation, if any, of Parent, (iii) the awareness of any fact or matter
acquired (or capable or reasonably capable of being acquired) with respect to
Parent, or (iv) any other action, in each case at any time, whether before, on,
or after the Closing Date.
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(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. Each
representation and warranty set forth in ARTICLE 3 must have
been accurate and complete in all material respects (except
with respect to any provisions including the word "material"
or words of similar import, with respect to which such
representations and warranties must have been accurate and
complete) as of the date of this Agreement, and must be
accurate and complete in all material respects (except with
respect to any provisions including the word "material" or
words of similar import, with respect to which such
representations and warranties must have been accurate and
complete) as of the Closing Date, as if made on the Closing
Date (except for representations and warranties that by their
express terms are made solely as of a specified earlier date).
(b) COMPLIANCE WITH OBLIGATIONS. Each Parent Party must have
performed and complied with all its covenants and obligations
required by this Agreement to be performed or complied with at
or prior to Closing (singularly and in the aggregate) in all
material respects.
(c) NO MATERIAL ADVERSE CHANGE. Since the date hereof there must
have been no event, series of events or the lack of occurrence
thereof which, singularly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect on
the Parent.
(d) NO ORDER OR INJUNCTION. There must not be issued and in effect
any Order restraining or prohibiting the Transactions.
(e) CONSENTS. The Parent must have obtained all of the Consents
listed on Schedule 3.3 (except such Consents which, in the
aggregate, could not reasonably be expected to have a Material
Adverse Effect on the Parent).
(f) LEGAL OPINION. Parent must have delivered to the Stockholder
an opinion of the outside counsel listed in Section 11.5, in
form and substance as set forth in Exhibit M, addressed to the
Stockholder and dated as of the Closing Date.
(g) TAX OPINION. The Company shall have received a written opinion
from legal counsel, in form and substance reasonably
satisfactory to the Company, to the effect that the Merger
will constitute a reorganization within the meaning of section
368(a) of the Code.
ARTICLE 7.
TERMINATION
7.1 TERMINATION OF AGREEMENT.
The Parties may terminate this Agreement as provided below:
(a) Parent and the Company may terminate this Agreement as to all
Parties by mutual written consent at any time prior to the
Closing.
(b) Parent or the Company may terminate this Agreement upon
delivery of notice if the Closing has not occurred prior to
the Expiration Date, provided that the Party delivering such
notice will not have caused such failure to close.
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(c) Parent may terminate this Agreement by giving written notice
to the Company at any time prior to the Closing if the Company
has Breached any representation, warranty, or covenant
contained in this Agreement in any material respect (except
with respect to materiality for any provisions including the
word "material" or words of similar import and Section 4.8, in
which case such termination rights will arise upon any Breach)
and (i) the Company is not using its reasonable efforts to
cure such Breach, or has not cured such Breach within thirty
(30) days, after notice of such breach, provided that no cure
period shall be required for a Breach which by its nature
cannot be cured) and (ii) as a result of such Breach any of
the conditions set forth in Section 6.1 would not be satisfied
as of the Closing Date.
(d) The Company may terminate this Agreement by giving notice to
Parent at any time prior to the Closing if any Parent Party
has Breached any representation, warranty, or covenant
contained in this Agreement in any material respect (except
with respect to materiality for any provisions including the
word "material" or words of similar import, in which case such
termination rights will arise upon any Breach) and (i) Parent
is not using its reasonable efforts to cure such Breach, or
has not cured such Breach within thirty (30) days, after
notice of such breach, provided that no cure period shall be
required for a Breach which by its nature cannot be cured) and
(ii) as a result of such Breach any of the conditions set
forth in Section 6.2 would not be satisfied as of the Closing
Date.
7.2 EFFECT OF TERMINATION.
(a) Except for the obligations under Section 5.8, this ARTICLE 7
and ARTICLE 11, if this Agreement is terminated under Section
7.1, then, except as provided in this Section 7.2, all further
obligations of the Parties under this Agreement will
terminate.
(b) If Parent or the Company terminates this Agreement pursuant to
Section 7.1(c) or 7.1(d), as the case may be, then the rights
of the non-breaching Party(ies) to pursue all legal remedies
available with respect to any breaching Party will survive
such termination unimpaired.
ARTICLE 8.
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Each representation and warranty of Stockholder or the Company
contained in this Agreement and any document delivered
pursuant to this Agreement and any certificate related to such
representations and warranties will survive the Closing and
will continue in full force and effect for one year
thereafter, except the representations and warranties set
forth in Sections 4.1 (first sentence only), 4.2 and 4.5 which
will survive the Closing and continue in full force and effect
forever.
(b) Each representation and warranty of Parent contained in this
Agreement and any document delivered pursuant to this
Agreement and any certificate related to such representations
and warranties will survive the Closing and continue in full
force and effect for one year thereafter.
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(c) Each other covenant, agreement and other provision in this
Agreement or any certificate or document delivered pursuant
hereto will survive for the relevant statute of limitations
period, unless a different period is expressly contemplated
herein or thereby (including, without limitation, covenants,
agreements and other provisions which by their terms
contemplate performance following the Closing, such as the
Parties' obligations under Section 10 which will continue
until the Parties have completed performance thereunder).
8.2 INDEMNIFICATION PROVISIONS FOR PARENT'S BENEFIT.
The Stockholder will indemnify and hold the Stockholder Indemnified
Parties harmless from and pay any and all Damages incurred by the Stockholder
Indemnified Parties directly or indirectly resulting from, relating to, arising
out of, or attributable to any one of the following:
(a) Any Breach of any representation or warranty the Company or
the Stockholder has made in this Agreement as if such
representation or warranty were made on and as of the Closing
Date without giving effect to any supplement to the Schedules,
other than (in the event the Transactions are consummated) any
such Breach that is disclosed in a supplement to the Schedules
delivered under Section 5.6, as having caused a condition
specified in Section 6.1 not to be satisfied.
(b) Any Breach by the Company or the Stockholder of any covenant
or obligation of such in this Agreement.
8.3 INDEMNIFICATION PROVISIONS FOR THE STOCKHOLDER'S BENEFIT.
The Parent Parties will indemnify and hold the Parent Indemnified
Parties harmless from and pay any and all Damages incurred by the Parent
Indemnified Parties directly or indirectly resulting from, relating to, arising
out of, or attributable to any of the following:
(a) Any Breach of any representation or warranty any Parent Party
has made in this Agreement as if such representation or
warranty were made on and as of the Closing Date without
giving effect to any supplement to the Schedules, other than
(in the event the Transactions are consummated) any such
Breach that is disclosed in a supplement to the Schedules
delivered under Section 5.6, as having caused a condition
specified in Section 6.2 not to be satisfied.
(b) Any Breach by any Parent Party of any covenant or obligation
of any Parent Party in this Agreement.
8.4 INDEMNIFICATION CLAIM PROCEDURES.
(a) If any Action is commenced in which any Indemnified Party is a
party that may give rise to a claim for indemnification
against any Indemnitor (an "INDEMNIFICATION CLAIM") then such
Indemnified Party will promptly give written notice to the
Indemnitor and will give the Indemnitor such information with
respect thereto as the Indemnitor may reasonably request.
Failure to notify the Indemnitor will not relieve the
Indemnitor of any Liability that it may have to the
Indemnified Party, except to the extent the defense of such
Action is materially prejudiced by the Indemnified Party's
failure to give such notice.
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(b) In connection with any Indemnification Claim, the Indemnified
Party may defend with attorneys of its choice against the
Indemnification Claim in any manner it may deem appropriate.
The Indemnified Party may not settle any such Indemnification
Claim without the written consent of the Indemnitor, which
consent will not be withheld unreasonably.
8.5 LIMITATIONS ON INDEMNIFICATION LIABILITY.
(a) With Respect to Claims by the Stockholder Indemnified Parties.
Any claims the Stockholder Indemnified Parties make under this
ARTICLE 8 will be limited as follows:
(i) CEILING. The Stockholder's aggregate Liability for
money Damages incurred under this Agreement related
to Breaches of the representations and warranties
herein will not exceed an amount equal to the Escrow
Shares, provided that the limitation contemplated
hereby will not be applicable with respect to (A)
Breaches of Sections 4.1 (first sentence only), 4.2
or 4.5 or (B) instances of fraud by the Stockholder.
(ii) BASKET/THRESHOLD. The Stockholder will have no
Liability for money Damages incurred under this
Agreement unless and until the aggregate of such
Damages exceeds $50,000 (the "STOCKHOLDER INDEMNIFIED
PARTIES THRESHOLD AMOUNT"); provided, however, if the
aggregate Damages incurred under this Agreement
exceeds the Stockholder Indemnified Parties Threshold
Amount, the Stockholder's Liability will relate back
to and include the first dollar of aggregate Damages
so incurred.
(b) WITH RESPECT TO CLAIMS BY THE PARENT INDEMNIFIED PARTIES. Any
claims the Parent Indemnified Parties make under this ARTICLE
8 will be limited as follows:
(i) CEILING. The Parent Parties' aggregate Liability for
money Damages incurred under this Agreement related
to Breaches of the representations, and warranties
herein will not exceed $300,000, provided that the
limitation contemplated hereby will not be applicable
with respect to (A) Breaches of Sections 3.1 (first
sentence only), 3.2 or 3.6 or (B) instances of fraud
by a Parent Party.
(ii) BASKET/THRESHOLD. The Parent Parties will have no
Liability for money Damages incurred under this
Agreement unless and until the aggregate of such
Damages exceeds $50,000 (the "PARENT INDEMNIFIED
PARTIES THRESHOLD AMOUNT"); provided, however, if the
aggregate Damages incurred under this Agreement
exceeds the Parent Indemnified Parties Threshold
Amount, the Parent Parties' Liability will relate
back to and include the first dollar of aggregate
Damages so incurred.
8.6 ESCROW.
(a) Concurrently with the Closing, 20,000 Parent Common Shares
(the "ESCROW SHARES") will be placed in an escrow fund (the
"ESCROW FUND"), which the Escrow Agreement will govern. The
Escrow Fund will be the exclusive source available to
compensate the
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Stockholder Indemnified Parties for any Damages incurred prior
to its distribution in full. A Stockholder Indemnified Party
may not receive any assets from the Escrow Fund unless and
until Officer's Certificates (as defined in the Escrow
Agreement) identifying the relevant Damages, have been
delivered to the Escrow Agent as provided in the Escrow
Agreement and the procedures (including any procedures
regarding dispute resolution) set forth in the Escrow
Agreement have been satisfied.
(b) For purposes of satisfying indemnification obligations under
this ARTICLE 8 and making claims against the Escrow Fund, the
value of Parent Common Shares will be the volume weighted
average closing price of Parent Common Stock over the five
days immediately preceding the date the amount of Damages is
finally determined in accordance with this Agreement and the
Escrow Agreement.
8.7 EXCLUSIVE REMEDY; OFFSET.
If the Closing occurs, the indemnification provisions in this ARTICLE 8
will be the Stockholder's and the Parent Parties' exclusive remedy with respect
to the Breach of the representations and warranties contained in this Agreement.
The Stockholder Indemnified Parties shall have the right to set-off any
obligation they may have to make payments to the Stockholder, including any
Earn-Out Amount, against any amounts the Stockholder owes them under ARTICLE 8,
to the extent that (i) such amounts owed by the Stockholder are not subject to
the limitation on Liability set forth in Section 8.5(a)(i), and (ii) the Escrow
Fund has been distributed in full.
Any Liability of the Company to any Parent Indemnified Party under this
Agreement will terminate for all purposes upon Closing and have no further force
or effect.
ARTICLE 9.
INTENTIONALLY OMITTED
ARTICLE 10.
EARN-OUT
10.1 EARN-OUT.
(a) As additional Merger Consideration, Parent will pay to the
Stockholder and the Deferred Stock Unit holders, on a pro rata
basis based on the amount of Company Fully Diluted Equity held
by each as of the Effective time, the Earn-Out Amount, if any,
pursuant to this ARTICLE 10. The Earn-Out Amount will be paid
in Parent Common Shares, valued at $15.42 per share (subject
to adjustments between the date hereof and such date for stock
splits, combinations, dividends or other dilutive events).
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(b) Within 15 calendar days following each Determination Date,
Parent will deliver to the Stockholder a notice setting forth
in reasonable detail Parent's calculation of whether the
applicable Earn-Out Amount(s) were earned (the "PROPOSED
EARN-OUT AMOUNT"). The Proposed Earn-Out Amount will be
subject to the Stockholder's review. In reviewing the Proposed
Earn-Out Amount, the Stockholder will have the right to
communicate with, and to review the work papers, schedules,
memoranda and other documents Parent prepared or reviewed in
determining the Proposed Earn-Out Amount and thereafter will
have access to all relevant books and records, all to the
extent the Stockholder reasonably requires to complete its
review of Parent's calculation of the Proposed Earn-Out
Amount. Within 15 calendar days after its receipt of Parent's
calculation of the Proposed Earn-Out Amount, the Stockholder
will advise Parent whether, based on such review, it has any
exceptions to such calculation. Unless the Stockholder
delivers to Parent within such 15 calendar day period a letter
describing its exceptions to Parent's calculation of the
applicable Earn-Out Amount as set forth in the schedule
delivered by Parent described in this Section 10.1(b), the
Proposed Earn-Out Amount for the applicable Determination Date
will be conclusive and binding on Parent and the Stockholder
as the Earn-Out Amount. If the Stockholder delivers such
letter, the Parties will follow the procedures for resolution
of disputes set forth in Section 10.5.
(c) Within two business days of the determination of the
applicable Earn-Out Amount under this Section 10.1 or Section
10.5, Parent will pay to the Stockholder and the Deferred
Stock Unit holders, on a pro rata basis based on the amount of
Company Fully Diluted Equity held by each as of the Effective,
an amount equal to such amount.
10.2 RETIREMENT OPTION.
(a) At any time, but only in connection with the sale of all or a
substantial portion of the assets of Parent or of all or a
majority of the Equity Interests in Parent, Parent will have
the option of terminating the payment of future Earn-Out
Amounts by making a lump sum payment to the Stockholder and
the Deferred Stock Unit holders, on a pro rata basis based on
the amount of Company Fully Diluted Equity held by each as of
the Effective time, equal to the Liquidated Earn-Out Amount.
The Liquidated Earn-Out Amount will be paid in Parent Common
Shares, valued at $15.42 per share (subject to adjustments
between the date hereof and such date for stock splits,
combinations, dividends or other dilutive events).
(b) As promptly as practicable but in any event no later than 30
calendar days prior to the consummation of the sale of all or
a substantial portion of Parent's assets or all or a majority
of the Equity Interests in Parent, Parent will deliver to the
Stockholder written notice of such transaction. Within 10
calendar days from delivery of such notice to the Stockholder,
Parent will deliver to the Stockholder a schedule setting
forth in reasonable detail their calculation of Liquidated
Earn-Out Amount (the "PROPOSED LIQUIDATED EARN-OUT AMOUNT").
If Parent fails to deliver such schedule within such period,
it will be deemed to have waived its rights under this Section
10.2. The Proposed Liquidated Earn-Out Amount will be subject
to the Stockholder's review. In reviewing the Proposed
Liquidated Earn-Out Amount, the Stockholder will have the
right to communicate with, and to review the work papers,
schedules, memoranda and other documents Parent prepared or
reviewed in determining the Proposed Liquidated Earn-Out
Amount for such period and thereafter will have access to all
relevant books and records, all to the extent the Stockholder
reasonably requires to complete its review of Parent's
calculation of
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the Proposed Liquidated Earn-Out Amount. Within 15 calendar
days after its receipt of Parent's calculation of the Proposed
Liquidated Earn-Out Amount, the Stockholder will advise Parent
whether, based on such review, it has any exceptions to such
calculation. Unless the Stockholder delivers to Parent, within
such 15 calendar day period, a letter describing its
exceptions to Parent's calculation of the proposed Liquidated
Earn-Out Amount as set forth in the schedule delivered by
Parent described in this Section 10.2(b), the Proposed
Liquidated Earn-Out Amount will be conclusive and binding on
Parent and the Stockholder as the Liquidated Earn-Out Amount.
If the Stockholder delivers such letter, the Parties will
follow the procedures for resolution of disputes set forth in
Section 10.5.
(c) Within two business days of the determination of the
Liquidated Earn-Out Amount under this Section 10.2 or Section
10.5, as applicable, Parent will pay to the Stockholder and
the Deferred Stock Unit holders, on a pro rata basis based on
the amount of Company Fully Diluted Equity held by each as of
the Effective time, an amount equal to such amount.
10.3 CERTAIN DEFINITIONS.
For this Agreement, the following terms will have the indicated
meanings.
(a) "BREAST NADIACYTE" means a NADIA based quantitation of
Her2-neu protein on breast epithelial cells isolated from
blood.
(b) "EARN-OUT AMOUNTS" means the dollar amounts (payable in Parent
Common Shares) that may be earned on each of the Determination
Dates (each a "DETERMINATION DATE") as set forth below:
(i) $* if the Isolation Technology receives FDA clearance
on or before * (the "FIRST DETERMINATION DATE");
(ii) $* if the HIV Nadia (Ultra Sensitive Detection)
receives FDA clearance on or before * (the "SECOND
DETERMINATION DATE");
(iii) $* if the Breast Nadiacyte receives FDA clearance on
or before * (the "THIRD DETERMINATION DATE");
(iv) $* if both: (x) the cumulative Sales of the Isolation
Technology, HIV Nadia (Ultra Sensitive Detection) and
Breast Nadiacyte equals or exceeds $* million during
the periods ended on or before * (the "FOURTH
DETERMINATION DATE"); and (y) the milestone set forth
in Section 10.3(b)(i) is satisfied;
(v) $* if either: (A) the cumulative Sales of the HIV
Nadia (Ultra Sensitive Detection) equals or exceeds
$* million during the periods ended on or before the
Fourth Determination Date; or (B) both (x) the
milestone set forth in Section 10.3(b)(iv)(x) is
satisfied and (y) the milestone set forth in Section
10.3(b)(ii) is satisfied; and
(vi) $* if either: (A) the cumulative Sales of the Breast
Nadiacyte equals or exceeds $* million during the
periods ended on or before the Fourth
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Determination Date; or (B) both (x) the milestone set
forth in Section 10.3(b)(iv)(x) is satisfied and (y)
the milestone set forth in Section 10.3(b)(iii) is
satisfied.
(c) "HIV NADIA (ULTRA SENSITIVE DETECTION)" means a test for the
ultrasensitive detection of HIV p24 antigen used for
monitoring HIV patients on HAART Therapy.
(d) "ISOLATION TECHNOLOGY" means antibody or other ligand coated
albumin microbubbles used for the isolation of bacteria and
other cells such as epithelial and endothelial cells.
(e) "LIQUIDATED EARN-OUT AMOUNT" means the amount equal to the net
present value of the aggregate remaining Earn-Out Amounts
calculated as if all of such remaining Earn-Out Amounts would
have been earned in full as of their respective Determination
Dates. In determining the net present value of such Earn-Out
Amounts, a discount rate equal to the Applicable Rate will be
used.
(f) "SALES" means net sales determined in accordance with GAAP.
10.4 ACCOUNTING AND OTHER GENERAL PRINCIPLES.
For purposes of making calculations in this ARTICLE 10, the following
provisions will apply.
(a) ACCOUNTING PRINCIPLES. All calculations under this ARTICLE 10
will be prepared in accordance with GAAP applied on a basis
that is consistent with the past practice of Parent in
research and development projects of this kind and on a basis
that is consistent throughout the periods covered thereby.
(b) ASSUMPTIONS AND ADJUSTMENTS. Parent will use Commercially
Reasonable Efforts to develop, market and sell the products
and technologies described in Section 10.3 and to otherwise
enable the Surviving Corporation to achieve the Earn-Out
Amounts, such efforts to be no less than those taken with
respect to other similar research and development projects of
Parent. In addition, and without limiting the foregoing, it is
currently anticipated that Parent will fund the Surviving
Company's research and development activities, including all
FDA and regulatory activities, (A) on a timely basis in the
amount of $2.1 million for fiscal year 2006, $3.5 million for
fiscal year 2007, and $4.5 million for fiscal year 2008; and
(B) such that the Surviving Corporation's cumulative research
and development expenditures as of the end of each such fiscal
year will be $2.1 million, $5.6 million and $10.1 million,
respectively. In the event that the Parties determine in good
faith that the foregoing assumptions are materially
inaccurate, or that other products or technologies of the
Surviving Corporation have greater potential or are more
likely to achieve regulatory or commercial success and should
be pursued instead of the products and technologies described
in Section 10.3, then the Parties will negotiate in good faith
appropriate adjustments to this ARTICLE 10, provided that in
no event will the total Earn-Out Amounts change.
10.5 RESOLUTION OF CONFLICTS.
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If Parent and the Stockholder are unable to agree on the Earn-Out
Amount or the Liquidated Earn-Out Amount (the "DISPUTED AMOUNT"), then (A) for
20 days after the date Parent receives the letter describing its exceptions to
Parent's calculation of the Disputed Amount, the Stockholder and Parent will use
Commercially Reasonable Efforts to agree on the calculation of the Disputed
Amount and (B) lacking such agreement, the matter will be referred to an
independent accounting firm mutually acceptable to Parent and Stockholder, who
will determine the correct Disputed Amount within 30 days of such referral,
which determination will be final and binding on Parent and Stockholder.
ARTICLE 11.
MISCELLANEOUS
11.1 SCHEDULES.
(a) The disclosures in the Schedules, and those in any supplement
thereto, relate only to the representations and warranties in
the Section or paragraph of the Agreement to which they
expressly relate and not to any other representation or
warranty in this Agreement.
(b) If there is any inconsistency between the statements in the
body of this Agreement and those in the Schedules (other than
an exception expressly set forth in the Schedules with respect
to a specifically identified representation or warranty), the
statements in the body of this Agreement will control.
(c) Nothing in the Schedules will be deemed adequate to disclose
an exception to a representation or warranty made herein,
unless the Schedules identify the exception with reasonable
particularity.
(d) The mere listing (or inclusion of a copy) of a document or
other item in a Schedule will not be deemed adequate to
disclose an exception to a representation or warranty made in
this Agreement (unless the representation or warranty pertains
to the existence of the document or other item itself).
11.2 ENTIRE AGREEMENT.
This Agreement, together with the Exhibits and Schedules hereto and the
certificates, documents, instruments and writings that are delivered pursuant
hereto, constitutes the entire agreement and understanding of the Parties in
respect of its subject matter and supersedes all prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they relate in any way to the subject matter hereof or the Transactions;
provided that Paragraph 10 of the Letter of Intent shall remain in full force
and effect following the execution hereof until the Closing or this Agreement is
terminated; and provided further, that certain Confidentiality Agreement, dated
July 12, 2004, between the Company and Parent, shall remain in effect in
accordance with its terms. Except as expressly contemplated by ARTICLE 8, there
are no third party beneficiaries having rights under or with respect to this
Agreement.
11.3 SUCCESSORS.
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All of the terms, agreements, covenants, representations, warranties,
and conditions of this Agreement are binding upon, and inure to the benefit of
and are enforceable by, the Parties and their respective successors.
11.4 ASSIGNMENTS.
No Party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval not to be
withheld unreasonably of Parent and (i) before the Closing, the Company, and
(ii) after the Closing, the Stockholder; provided, however, that Parent may (a)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (b) designate one or more of its Affiliates to perform its
obligations hereunder (in any or all of which cases Parent nonetheless will
remain responsible for the performance of all of its obligations hereunder).
11.5 NOTICES.
All notices, requests, demands, claims and other communications
hereunder will be in writing. Any notice, request, demand, claim or other
communication hereunder will be deemed duly given if (and then three business
days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to Parent and after Closing to the Company:
IRIS International, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Fax: (000) 000-0000
Copy to (which will not constitute notice):
Xxxxxx, Xxxxxxxx & Markiles LLP
00000 Xxxxxxx Xxxx., 00xx Xxxxx
Xxxxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Fax: (000) 000-0000
If to the Stockholder and before Closing to the Company:
0000 Xxxxx xxx Xxxxx, Xxxxx X
Xxxxxxxx, XX 00000
Attn: Xx. Xxxxxx X. Xxxxx
Fax: (___)__________________
Copy to (which will not constitute notice):
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Xxxxxxxx Xxxxxxxx Xxxx Xxxxxxx LLP
00 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, Xx., Esq.
Fax: (000) 000-0000
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication will be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
11.6 SPECIFIC PERFORMANCE.
Each Party acknowledges and agrees that the other Parties would be
damaged irreparably if Section 5.8 of this Agreement is not performed in
accordance with its specific terms or is otherwise Breached. Accordingly, each
Party agrees that the other Parties will be entitled to an injunction or
injunctions to prevent Beaches of such provision and to enforce specifically
such provision in any Action instituted in any court of the United States or any
state thereof having jurisdiction over the Parties and the matter, subject to
Sections 11.7 and 11.11, in addition to any other remedy to which they may be
entitled, at Law or in equity.
11.7 SUBMISSION TO JURISDICTION.
Each Party hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of the state and federal courts located in the City of
Los Angeles, for any actions, suits, or proceedings arising out of or relating
to this Agreement and the Transactions contemplated hereby (and each Party
agrees not to commence any action, suit or proceeding relating thereto except in
such courts), and further agrees that service of any process, summons, notice or
document by U.S. registered mail to its address for notices set forth in Section
11.5 shall be effective service of process of any action, suit or proceeding
brought against a Party, as applicable, in any such court. Each Party hereby
irrevocably and unconditionally waives any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the Transactions
contemplated hereby, in such state or federal courts as aforesaid and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum.
11.8 TIME.
Time is of the essence in the performance of this Agreement.
11.9 COUNTERPARTS.
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This Agreement may be executed in two or more counterparts, each of
which will be deemed an original but all of which together will constitute one
and the same instrument.
11.10 HEADINGS.
The article and section headings contained in this Agreement are
inserted for convenience only and will not affect in any way the meaning or
interpretation of this Agreement.
11.11 GOVERNING LAW.
This Agreement and the performance of the Transactions and obligations
of the Parties hereunder shall be governed by, and construed in accordance with,
the law of the State of California without reference to choice of law
principles, including all matters of construction, validity and performance.
11.12 AMENDMENTS.
The Parties may amend this Agreement by action taken by or on behalf of
the respective Boards of Directors of Parent, Merger Sub, and the Company at any
time prior to the Effective Time. Amendments to this Agreement must be in
writing that the Company, the Stockholder and Parent Parties have signed.
11.13 EXTENSIONS; WAIVER.
(a) At any time prior to the Effective Time, the Parent Parties,
on the one hand, and the Company, on the other, to the extent
legally allowed, may (i) extend the time for the performance
of any of the obligations of the other Party, (ii) waive any
inaccuracies in the representations and warranties made to
such Party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such Party
contained herein. Any agreement on the part of a Party to any
such extension or waiver will be valid only if set forth in an
instrument in writing signed on behalf of such Party.
(b) No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional
or not, may be deemed to extend to any prior or subsequent
default, misrepresentation, or Breach of warranty or covenant
hereunder or affect in any way any rights arising because of
any prior or subsequent such occurrence.
11.14 SEVERABILITY.
The provisions of this Agreement will be deemed severable and the
invalidity or unenforceability of any provision will not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, as applied to any Party or to any circumstance, is adjudged by a
Governmental Body, arbitrator, or mediator not to be enforceable in accordance
with its terms, the Parties agree that the Governmental Body, arbitrator, or
mediator making such determination will have the power to modify the provision
in a manner consistent with its objectives such that it is enforceable, and/or
to delete specific words or phrases, and in its reduced form, such provision
will then be enforceable and will be enforced.
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11.15 EXPENSES.
Except as otherwise expressly provided in this Agreement, each Party
will bear its own costs and expenses incurred in connection with the
preparation, execution and performance of this Agreement and the Transactions
including all fees and expenses of agents, representatives, financial advisors,
legal counsel and accountants.
11.16 CONSTRUCTION.
The Parties have participated jointly in the negotiation and drafting
of this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement will be construed as if drafted jointly by the Parties
and no presumption or burden of proof will arise favoring or disfavoring any
Party because of the authorship of any provision of this Agreement. Any
reference to any federal, state, local, or foreign Law will be deemed also to
refer to Law as amended and all rules and regulations promulgated thereunder,
unless the context requires otherwise. The words "include," "includes," and
"including" will be deemed to be followed by "without limitation." Pronouns in
masculine, feminine, and neuter genders will be construed to include any other
gender, and words in the singular form will be construed to include the plural
and vice versa, unless the context otherwise requires. The words "this
Agreement," "herein," "hereof," "hereby," "hereunder," and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. The Parties intend that each representation,
warranty, and covenant contained herein will have independent significance. If
any Party has breached any representation, warranty, or covenant contained
herein in any respect, the fact that there exists another representation,
warranty or covenant relating to the same subject matter (regardless of the
relative levels of specificity) which the Party has not breached will not
detract from or mitigate the fact that the Party is in breach of the first
representation, warranty, or covenant.
11.17 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES.
The Exhibits, Annexes, Schedules, and other attachments identified in
this Agreement are incorporated herein by reference and made a part hereof.
11.18 REMEDIES.
Except as expressly provided herein, the rights, obligations and
remedies created by this Agreement are cumulative and in addition to any other
rights, obligations or remedies otherwise available at Law or in equity. Except
as expressly provided herein, nothing herein will be considered an election of
remedies.
11.19 ELECTRONIC SIGNATURES.
Delivery of a copy of a Transaction Document or such other document
bearing an original signature by facsimile transmission (whether directly from
one facsimile device to another by means of a dial-up connection or whether
mediated by the worldwide web), by electronic mail in "portable document format"
(".pdf") form, or by any other electronic means intended to preserve the
original graphic and pictorial appearance of a document, will have the same
effect as physical delivery of the paper document bearing the original
signature.
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* TEXT OMITTED AND FILED SEPARATELY. CONFIDENTIAL TREATMENT REQUESTED UNDER 17
C.F.R. SECTIONS 200.80(b)(4) 200.83 AND 240.24b-2
IN WITNESS WHEREOF, the Parties have executed this Agreement on the
date first above written.
IRIS INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Executive Officer
IRIS MOLECULAR DIAGNOSTICS, INC.
By: /s/ Xxxxx Xxxxxx
----------------------------------------
Name: Xxxxx Xxxxxx
Title: President and Chief Executive Officer
LEUCADIA TECHNOLOGIES, INC.
By: /s/ Xx. Xxxxxx X. Xxxxx
----------------------------------------
Name: Xx. Xxxxxx X. Xxxxx
Title: President
STOCKHOLDER
/s/ Xx. Xxxxxx X. Xxxxx
---------------------------------------------
Xx. Xxxxxx X. Xxxxx
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