AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
Nanometrics INCORPORATED,
MAJOR LEAGUE MERGER CORPORATION,
MINOR LEAGUE MERGER CORPORATION
and
August Technology CORPORATION
Dated as of January 21, 2005
TABLE OF CONTENTS
Page
ARTICLE I THE MIGRATORY MERGER...........................................................................2
Section 1.1 The Migratory Merger..........................................................2
Section 1.2 Conditions to Migratory Merger................................................2
Section 1.3 Effective Time of Migratory Merger.............................................
Section 1.4 Effects of Migratory Merger...................................................3
Section 1.5 Certificate of Incorporation & Bylaws of Nanometrics Delaware.................3
Section 1.6 Board of Directors & Officers of Nanometrics Delaware.........................3
Section 1.7 Effect of Migratory Merger on Capital Stock...................................4
ARTICLE II THE ACQUISITION MERGER........................................................................4
Section 2.1 The Acquisition Merger........................................................4
Section 2.2 Effective Time of Acquisition Merger..........................................4
Section 2.3 Effects of Acquisition Merger.................................................5
Section 2.4 Articles of Incorporation & Bylaws of Surviving Corporation...................5
Section 2.5 Board of Directors & Officers of the Surviving Corporation....................5
Section 2.6 Effects of Acquisition Merger on Capital Stock................................5
ARTICLE III THE CLOSING..................................................................................7
Section 3.1 Closing.......................................................................7
Section 3.2 Exchange of Certificates......................................................7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................10
Section 4.1 Organization and Qualification; Subsidiaries.................................11
Section 4.2 Certificate of Incorporation and Bylaws......................................11
Section 4.3 Capitalization...............................................................11
Section 4.4 Authority Relative to this Agreement; Shareholder Approval.....................
Section 4.5 No Conflict; Required Filings and Consents...................................14
Section 4.6 Compliance; Permits..........................................................15
Section 4.7 SEC Filings; Financial Statements............................................15
Section 4.8 Disclosure Controls and Procedures...........................................17
Section 4.9 Absence of Certain Changes or Events.........................................17
Section 4.10 No Undisclosed Liabilities...................................................18
Section 4.11 Absence of Litigation; Investigations........................................18
Section 4.12 Agreements, Contracts and Commitments........................................19
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TABLE OF CONTENTS
(Continued)
Page
Section 4.13 Employee Benefit Plans, Options and Employment Agreements....................20
Section 4.14 Labor Matters................................................................24
Section 4.15 Properties and Assets........................................................26
Section 4.16 Taxes........................................................................26
Section 4.17 Environmental Matters........................................................28
Section 4.18 Intellectual Property........................................................29
Section 4.19 Insurance....................................................................31
Section 4.20 Interested Party Transactions................................................31
Section 4.21 Brokers......................................................................31
Section 4.22 Opinion of Financial Advisor of the Company..................................31
Section 4.23 Anti-Takeover Statute Not Applicable.........................................32
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT......................................................32
Section 5.1 Organization and Qualification; Merger Sub 1, Merger Sub 2...................32
Section 5.2 Certificate of Incorporation and Bylaws......................................33
Section 5.3 Capitalization...............................................................33
Section 5.4 Authority Relative to this Agreement; Shareholder Approval...................36
Section 5.5 No Conflict, Required Filings and Consents...................................36
Section 5.6 Compliance; Permits..........................................................37
Section 5.7 SEC Filings; Financial Statements............................................38
Section 5.8 Disclosure Controls and Procedures...........................................39
Section 5.9 Absence of Certain Changes or Events.........................................40
Section 5.10 No Undisclosed Liabilities...................................................40
Section 5.11 Absence of Litigation; Investigations........................................40
Section 5.12 Agreements, Contracts and Commitments........................................41
Section 5.13 Employee Benefit Plans, Options and Employment Agreements......................
Section 5.14 Labor Matters................................................................46
Section 5.15 Properties; Encumbrances.....................................................48
Section 5.16 Taxes........................................................................49
Section 5.17 Environmental Matters........................................................50
Section 5.18 Intellectual Property........................................................51
Section 5.19 Insurance....................................................................53
Section 5.20 Interested Party Transactions................................................53
Section 5.21 Brokers......................................................................53
Section 5.22 Opinion of Financial Advisor of Parent.......................................53
Section 5.23 Anti-Takeover Statute Not Applicable.........................................53
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TABLE OF CONTENTS
(Continued)
Page
ARTICLE VI INTERIM CONDUCT OF BUSINESS..................................................................53
Section 6.1 Affirmative Covenants........................................................53
Section 6.2 Restrictive Covenants........................................................54
ARTICLE VII ADDITIONAL AGREEMENTS.......................................................................57
Section 7.1 Access to Information; Notice of Certain Matters...............................
Section 7.2 No Solicitation..............................................................58
Section 7.3 Board Recommendations........................................................60
Section 7.4 Joint Proxy Statement/Prospectus; Registration Statement.....................61
Section 7.5 Merger Shareholders Meetings.................................................63
Section 7.6 Reasonable Best Efforts to Complete..........................................64
Section 7.7 Public Announcements.........................................................66
Section 7.8 Company Employee Benefits; Company 401(k) Plan...............................67
Section 7.9 Company Stock Plans..........................................................67
Section 7.10 Indemnification and Insurance................................................68
Section 7.11 Company Affiliates...........................................................70
Section 7.12 Tax Matters..................................................................71
Section 7.13 Takeover Statutes............................................................71
Section 7.14 Section 16 Matters...........................................................71
Section 7.15 Directorships................................................................71
ARTICLE VIII CONDITIONS TO THE ACQUISITION MERGER.......................................................72
Section 8.1 Conditions to Obligations of Each Party to Effect the Acquisition Merger.....72
Section 8.2 Additional Conditions to Obligations of Parent and Merger Sub 1 to Effect the
Acquisition Merger...........................................................73
Section 8.3 Additional Conditions to Obligation of the Company to Effect the Acquisition
Merger.......................................................................74
Section 8.4 Migratory Merger Not Condition to Acquisition Merger.........................74
ARTICLE IX TERMINATION..................................................................................75
Section 9.1 Termination..................................................................75
Section 9.2 Effect of Termination........................................................76
Section 9.3 Fees and Expenses............................................................77
ARTICLE X GENERAL PROVISIONS............................................................................78
Section 10.1 Nonsurvival of Representations, Warranties and Covenants.....................78
Section 10.2 Notices......................................................................79
Section 10.3 Certain Definitions..........................................................80
Section 10.4 Certain Interpretations. For purposes of this Agreement:....................84
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TABLE OF CONTENTS
(Continued)
Page
Section 10.5 Amendment....................................................................85
Section 10.6 Extension; Waiver............................................................85
Section 10.7 Severability.................................................................85
Section 10.8 Entire Agreement; No Third Party Beneficiaries...............................86
Section 10.9 Assignment...................................................................86
Section 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative........................86
Section 10.11 Governing Law................................................................86
Section 10.12 Counterparts.................................................................86
Section 10.13 WAIVER OF JURY TRIAL.........................................................86
Section 10.14 Specific Performance.........................................................87
Section 10.15 Disclosure Schedules.........................................................87
iv
DEFINED TERMS
Page
1991 Director Plan......................................................................................33
1991 Plan...............................................................................................33
1997 Plan...............................................................................................11
2000 Director Plan......................................................................................33
2000 Employee Plan......................................................................................33
2002 Parent NSO Plan....................................................................................33
401(k) Plan.............................................................................................67
Acquisition Merger.......................................................................................1
Acquisition Merger Effective Time........................................................................5
Acquisition Proposal....................................................................................80
Acquisition Transaction.................................................................................80
Affiliate...............................................................................................81
Agreement................................................................................................1
Antitrust Law...........................................................................................81
Articles of Acquisition Merger...........................................................................4
Assumed Option..........................................................................................67
August Nanometrics Inc...................................................................................5
Beneficial Owner........................................................................................81
Blue Sky................................................................................................35
Business Day............................................................................................81
California Migratory Merger Certificate..................................................................3
CCC......................................................................................................1
Certificate of Migratory Merger..........................................................................3
Certificates.............................................................................................7
Change of Recommendation................................................................................60
Closing..................................................................................................6
Closing Date.............................................................................................7
Code.....................................................................................................2
Company..................................................................................................1
Company Affiliate.......................................................................................70
Company Affiliates......................................................................................70
Company Balance Sheet...................................................................................16
Company Board...........................................................................................13
Company Bylaws..........................................................................................11
Company Charter.........................................................................................11
Company Common Stock.....................................................................................6
Company Disclosure Schedule.............................................................................10
Company Employee Plans..................................................................................20
v
DEFINED TERMS
(Continued)
Page
Company Employees.......................................................................................66
Company Environmental Claims............................................................................28
Company ESPP............................................................................................11
Company Material Adverse Effect.........................................................................81
Company Material Contracts..............................................................................18
Company Permits.........................................................................................15
Company Proprietary Product.............................................................................30
Company Real Property Leases............................................................................26
Company Registered Intellectual Property................................................................29
Company SEC Reports.....................................................................................15
Company Shareholder Voting Agreement.....................................................................1
Company Shareholders Meeting............................................................................14
Company Stock Options...................................................................................12
Company Termination Fee.................................................................................77
Company Voting Proposal.................................................................................13
Confidentiality Agreement...............................................................................58
Control.................................................................................................82
D&O Policy..............................................................................................69
DGCL.....................................................................................................1
Employee Benefit Plan...................................................................................82
Environmental Laws......................................................................................28
ERISA...................................................................................................82
ERISA Affiliate.........................................................................................82
Exchange Act............................................................................................13
Exchange Agent...........................................................................................7
Exchange Fund............................................................................................7
Exchange Ratio...........................................................................................6
Expenses................................................................................................77
GAAP....................................................................................................16
Governmental Entity.....................................................................................15
HSR Act.................................................................................................15
Include.................................................................................................82
Indemnified Parties.....................................................................................68
Intellectual Property...................................................................................82
Joint Proxy Statement/Prospectus........................................................................61
Law.....................................................................................................83
Liens...................................................................................................13
Materials of Environmental Concern......................................................................28
Maximum Annual Premium..................................................................................69
MBCA.....................................................................................................1
vi
DEFINED TERMS
(Continued)
Page
Merger Consideration.....................................................................................6
Merger Shareholders Meetings............................................................................36
Merger Sub 1.............................................................................................1
Merger Sub 1 Bylaws......................................................................................5
Merger Sub 1 Charter.....................................................................................5
Merger Sub 1 Charter Documents..........................................................................33
Merger Sub 1 Common Stock................................................................................6
Merger Sub 2.............................................................................................1
Merger Sub 2 Charter Documents..........................................................................33
Mergers..................................................................................................1
Migratory Merger.........................................................................................1
Migratory Merger Certificates............................................................................3
Migratory Merger Effective Time..........................................................................3
Nanometrics Delaware.....................................................................................2
Nanometrics Delaware Closing Price.......................................................................8
Nanometrics Delaware Common Stock........................................................................4
Nanometrics Incorporated.................................................................................3
NASDAQ...................................................................................................8
Outside Date............................................................................................75
Parent...................................................................................................1
Parent Balance Sheet....................................................................................38
Parent Board............................................................................................36
Parent Bylaws...........................................................................................33
Parent Charter..........................................................................................33
Parent Common Stock......................................................................................4
Parent Disclosure Schedule..............................................................................32
Parent Employee Plans...................................................................................42
Parent Environmental Claims.............................................................................50
Parent ESPP.............................................................................................33
Parent Material Adverse Effect..........................................................................83
Parent Permits..........................................................................................37
Parent Proprietary Product..............................................................................52
Parent Real Property Leases.............................................................................48
Parent Registered Intellectual Property.................................................................51
Parent SEC Reports......................................................................................38
Parent Shareholder Voting Agreement......................................................................1
Parent Shareholders Meeting.............................................................................36
Parent Stock Options....................................................................................33
Parent Stock Plans......................................................................................33
Parent Sub Documents....................................................................................33
vii
DEFINED TERMS
(Continued)
Page
Parent Termination Fee..................................................................................77
Parent Voting Proposal..................................................................................36
Person..................................................................................................83
Qualified Plan..........................................................................................21
Registered Intellectual Property........................................................................84
Registration Statement..................................................................................37
Regulation M-A Filing...................................................................................62
Requisite Company Stock Approval........................................................................14
Requisite Parent Shareholder Approval...................................................................36
Sarbanes-Oxley Act......................................................................................16
SEC.....................................................................................................15
Securities Act..........................................................................................35
Subsidiary..............................................................................................84
Subsidiary Documents....................................................................................11
Superior Proposal.......................................................................................84
Surviving Corporation....................................................................................4
Takeover Statute........................................................................................31
Tax.....................................................................................................84
Tax Returns.............................................................................................85
Taxes...................................................................................................84
Triggering Event........................................................................................76
WARN Act................................................................................................25
WSGR.....................................................................................................7
viii
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION is entered into as
of January 21, 2005 (this "Agreement") by and among Nanometrics Incorporated, a
California corporation ("Parent"), Major League Merger Corporation, a Minnesota
corporation and a wholly owned subsidiary of Parent ("Merger Sub 1"), Minor
League Merger Corporation, a Delaware corporation and a wholly owned subsidiary
of Parent ("Merger Sub 2"), and August Technology Corporation, a Minnesota
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Merger Sub 1,
Merger Sub 2 and the Company have each approved, and deemed it to be advisable
and in the best interests of their respective shareholders to consummate the
business combination transaction provided for in this Agreement in which (i)
Parent will merge with and into Merger Sub 2 (the "Migratory Merger") in
accordance with the terms and conditions of this Agreement and the applicable
provisions of the Delaware General Corporation Law (the "DGCL") and the
California Corporations Code ("CCC") and (ii) following the Migratory Merger,
Merger Sub 1 will merge with and into the Company (the "Acquisition Merger") in
accordance with the terms and conditions of this Agreement and the applicable
provisions of the Minnesota Business Corporations Act ("MBCA");
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, certain shareholders of the
Company are entering into voting agreements with Parent, in substantially the
form attached hereto as Exhibit A (each, a "Company Shareholder Voting
Agreement" and collectively, the "Company Shareholder Voting Agreements"),
pursuant to which such shareholders have agreed, among other things, to vote
their shares of Company Common Stock (as defined below) in favor of the
Acquisition Merger and the other transactions contemplated by this Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to the Company to enter into this Agreement, certain shareholders of
Parent have agreed to enter into voting agreements with the Company,
substantially in the form attached hereto as Exhibit B (each, a "Parent
Shareholder Voting Agreement" and collectively, the "Parent Shareholder Voting
Agreements"), pursuant to which such shareholders have agreed, among other
things, to vote their shares of Parent Common Stock (as defined below) in favor
of the Migratory Merger and the Acquisition Merger (collectively, the "Mergers")
and the other transactions contemplated by this Agreement; and
WHEREAS, for United States federal income tax purposes, it is intended
that the Mergers shall each qualify as reorganizations within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that this Agreement shall be, and is hereby, adopted as a plan of
reorganization for purposes of Section 368(a) of the Code.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties hereto agree as follows:
ARTICLE I
THE MIGRATORY MERGER
Section 1.1 The Migratory Merger. On the terms and subject to the
conditions of this Agreement, in accordance with the DGCL and the CCC, at the
Migratory Merger Effective Time (as defined in Section 1.3), Parent shall be
merged with and into Merger Sub 2. Merger Sub 2 shall continue as the surviving
corporation of the Migratory Merger and shall continue its corporate existence
under the Laws of the State of Delaware. Upon consummation of the Migratory
Merger, the separate corporate existence of Parent shall terminate. Merger Sub
2, in its capacity as the corporation surviving the Migratory Merger, is
hereinafter sometimes referred to as "Nanometrics Delaware." In the event that
Parent and Merger Sub 2 shall not effect the Migratory Merger prior to the
Closing, all references in this Agreement to Nanometrics Delaware (including,
without limitation, all references to Nanometrics Delaware Closing Price and
Nanometrics Delaware Common Stock) shall mean and refer to Parent (or Parent
Closing Price and Parent Common Stock, as the case may be).
Section 1.2 Conditions to Migratory Merger. The obligations of Parent
and Merger Sub 2 to effect the Migratory Merger pursuant to this ARTICLE I shall
be subject to the satisfaction of the following conditions:
(a) All requisite approvals of the shareholders of Parent to
authorize and approve the Migratory Merger under applicable Law, the Articles of
Incorporation of Parent and the Bylaws of Parent shall have been obtained.
(b) No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Migratory
Merger shall be in effect.
(c) No statute, rule, regulation or order shall be enacted,
entered, enforced or deemed applicable to the Migratory Merger by a governmental
authority of competent jurisdiction that makes the consummation of the Migratory
Merger illegal.
2
(d) The shares of Nanometrics Delaware Common Stock issuable in
the Migratory Merger shall have been authorized for listing on the NASDAQ.
Section 1.3 Effective Time of Migratory Merger. The Migratory Merger
shall become effective as set forth in the certificate of merger relating to the
Migratory Merger as contemplated by the DGCL (the "Certificate of Migratory
Merger"), which shall be filed with the Secretary of State of the State of
Delaware, and the certificate of ownership relating to the Migratory Merger as
contemplated by Section 1110 of the CCC (the "California Migratory Merger
Certificate" and, together with the Certificate of Migratory Merger, the
"Migratory Merger Certificates"), which shall be filed with the Secretary of
State of the State of California. The "Migratory Merger Effective Time" shall
mean the time at which the Migratory Merger becomes effective, as set forth in
the Migratory Merger Certificates.
Section 1.4 Effects of Migratory Merger. At and after the Migratory
Merger Effective Time, the Migratory Merger shall have the effects set forth in
the DGCL and CCC (including Section 1107 of the CCC and Section 259 of the
DGCL).
Section 1.5 Certificate of Incorporation & Bylaws of Nanometrics
Delaware.
(a) At the Migratory Merger Effective Time, the certificate of
incorporation of Merger Sub 2, as in effect immediately prior to the Migratory
Merger Effective Time, in the form set forth in Exhibit D (or any other form as
determined by Parent with the consent of the Company which consent shall not be
unreasonably withheld, subject to Section 7.15 below), shall be the certificate
of incorporation of Merger Sub 2 as the surviving corporation of the Migratory
Merger until thereafter amended as provided by the DGCL and such certificate of
incorporation, except that the name of Merger Sub 2 set forth thereon shall be
"Nanometrics Incorporated" and if the Acquisition Merger occurs, then the name
set forth thereon shall be "August Nanometrics Inc."
(b) At the Migratory Merger Effective Time, the bylaws of Merger
Sub 2, as in effect immediately prior to the Migratory Merger Effective Time, in
the form set forth as Exhibit E (or any other form as determined by Parent with
the consent of the Company which consent shall not be unreasonably withheld,
subject to Section 7.15 below), shall be the bylaws of Merger Sub 2 as the
surviving corporation until thereafter amended as provided by the DGCL, its
certificate of incorporation and such bylaws, except that the name of Merger Sub
2 set forth thereon shall be "Nanometrics Incorporated" and if the Acquisition
Merger occurs, then the name set forth thereon shall be "August Nanometrics
Inc."
Section 1.6 Board of Directors & Officers of Nanometrics Delaware.
3
(a) Subject to the terms of Section 7.15, the directors of Parent
immediately prior to the Migratory Merger Effective Time shall be the directors
of Nanometrics Delaware as the surviving corporation in the Migratory Merger.
(b) The officers of Parent immediately prior to the Migratory
Merger Effective Time shall be the officers of Nanometrics Delaware as the
surviving corporation in the Migratory Merger.
Section 1.7 Effect of Migratory Merger on Capital Stock. At the
Migratory Merger Effective Time, by virtue of the Migratory Merger and without
any action on the part of Parent, Merger Sub 2, or the holders of any of the
following securities:
(a) Each share of common stock, no par value, of Parent ("Parent
Common Stock") either issued and outstanding or which Parent is authorized to
issue, in each case, immediately prior to the Migratory Merger Effective Time,
shall be converted into one fully paid and nonassessable share of common stock,
$0.001 par value, of Merger Sub 2 ("Nanometrics Delaware Common Stock").
(b) Each option to purchase Parent Common Stock which Parent has
issued or is authorized to issue prior to the Migratory Merger Effective Time,
shall be converted into an option to purchase Nanometrics Delaware Common Stock
on the same terms and conditions as governed the original option.
(c) Each share of capital stock of Merger Sub 2 issued and
outstanding immediately prior to the Migratory Merger Effective Time shall be
cancelled and cease to be outstanding, without payment of any consideration
therefor, and shall cease to exist.
ARTICLE II
THE ACQUISITION MERGER
Section 2.1 The Acquisition Merger. On the terms and subject to the
conditions of this Agreement and in accordance with the MBCA, at the Acquisition
Merger Effective Time (as defined in Section 2.2), Merger Sub 1 shall merge with
and into the Company, the separate corporate existence of Merger Sub 1 shall
cease and the Company shall continue as the surviving corporation in the
Acquisition Merger as a wholly owned Subsidiary of Nanometrics Delaware. The
Company, in its capacity as the corporation surviving the Acquisition Merger, is
hereinafter sometimes referred to as the "Surviving Corporation").
Section 2.2 Effective Time of Acquisition Merger. On the Closing Date
(as defined in Section 3.1), Nanometrics Delaware and the Company shall cause
the Acquisition Merger to be consummated by filing a duly executed and delivered
articles of merger as required by the MBCA (the "Articles of Acquisition
Merger") with the Secretary of State of the State of Minnesota, in such form as
4
required by, and executed in accordance with the relevant provisions of, the
MBCA (the time of such filing, or such other time as Parent (or Nanometrics
Delaware) and the Company shall specify in the Certificate of Merger, being the
"Acquisition Merger Effective Time").
Section 2.3 Effects of Acquisition Merger. At the Acquisition Merger
Effective Time, the effect of the Acquisition Merger shall be as provided in
this Agreement and the Articles of Acquisition Merger and as specified in the
MBCA (including Section 302A.641 of the MBCA).
Section 2.4 Articles of Incorporation & Bylaws of Surviving
Corporation.
(a) At and after the Acquisition Merger Effective Time, the
articles of incorporation of Merger Sub 1 (the "Merger Sub 1 Charter"), as in
effect immediately prior to the Acquisition Merger Effective Time, subject to
the provisions of Section 7.10, shall be the articles of incorporation of the
Surviving Corporation, until amended in accordance with the MBCA, except that
the name of the Surviving Corporation shall be "August Nanometrics Inc." (or
such other name as the parties mutually agree).
(b) At and after the Acquisition Merger Effective Time, the
bylaws of Merger Sub 1 (the "Merger Sub 1 Bylaws"), as in effect immediately
prior to the Acquisition Merger Effective Time, subject to the provisions of
Section 7.10, shall be the bylaws of the Surviving Corporation until amended in
accordance with the MBCA, except that the name of the Surviving Corporation
shall be "August Nanometrics Inc."
Section 2.5 Board of Directors & Officers of the Surviving Corporation.
(a) The directors of Merger Sub 1 immediately prior to the Acquisition Merger
Effective Time shall be the initial directors of the Surviving Corporation and
shall hold office from the Acquisition Merger Effective Time until their
respective successors are duly elected or appointed and qualified in the manner
provided in the articles of incorporation or bylaws of the Surviving Corporation
or as otherwise provided by Law.
(b) The officers of Merger Sub 1 immediately prior to the
Acquisition Merger Effective Time shall be the initial officers of the Surviving
Corporation and shall hold office from the Acquisition Merger Effective Time
until their respective successors are duly elected or appointed and qualified in
the manner provided in the articles of incorporation or bylaws of the Surviving
Corporation or as otherwise provided by Law.
Section 2.6 Effects of Acquisition Merger on Capital Stock. At the
Acquisition Merger Effective Time, by virtue of the Acquisition Merger and
without any action on the part of the Company, Nanometrics Delaware, Merger Sub
5
1 or any holder of any shares of common stock, no par value per share, of the
Company ("Company Common Stock") or any holder of any shares of capital stock of
Merger Sub 1:
(a) Company Common Stock. Subject to this Section 2.6(a), each
share of Company Common Stock issued and outstanding immediately prior to the
Acquisition Merger Effective Time (other than shares to be cancelled in
accordance with Section 2.6(b)), shall be converted into the right to receive
(i) 0.6401 (the "Exchange Ratio") shares of Nanometrics Delaware Common Stock
(the "Merger Consideration") payable upon the surrender of the Certificates (as
defined in Section 3.2(b)). From and after the Acquisition Merger Effective
Time, all such shares of Company Common Stock, shall no longer be outstanding
and shall automatically be cancelled and retired and shall cease to exist, and
each holder of a Certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the Merger
Consideration pursuant to this Section 2.6(a), any cash in lieu of fractional
shares payable pursuant to Section 3.2(c) and any dividends or other
distributions to which such holder is entitled to pursuant to Section 3.2(c).
Notwithstanding the foregoing, the Exchange Ratio shall be appropriately
adjusted to reflect fully the effect of any stock split, reverse split,
reclassification, stock dividend, reorganization, recapitalization,
consolidation, exchange or other like change with respect to Nanometrics
Delaware Common Stock or Company Common Stock occurring (or having a record
date) after the date of this Agreement and prior to the Acquisition Merger
Effective Time.
(b) Cancellation of Treasury Stock and Parent-Owned Stock. All
shares of Company Common Stock that are (i) held by the Company as treasury
shares or (ii) owned by Nanometrics Delaware or any wholly owned Subsidiary (as
defined below) of Nanometrics Delaware, in each case immediately prior to the
Acquisition Merger Effective Time, shall be cancelled and retired and shall
cease to exist, and no securities of Nanometrics Delaware or other consideration
shall be delivered in exchange therefor.
(c) Capital Stock of Merger Sub 1. Each share of common stock, no
par value per share, of Merger Sub 1 ("Merger Sub 1 Common Stock") issued and
outstanding immediately prior to the Acquisition Merger Effective Time shall be
converted into and become one fully paid and nonassessable share of common
stock, no par value per share, of the Surviving Corporation.
(d) Stock Options. Outstanding options to purchase shares of
Company Common Stock shall be treated in the manner set forth in Section 7.9.
6
ARTICLE III
THE CLOSING
Section 3.1 Closing. Subject to the provisions of this Agreement, the
closing of the Migratory Merger and the Acquisition Merger (the "Closing") shall
take place sequentially beginning at 10:00 a.m. Pacific Time, at the offices of
Wilson Sonsini Goodrich & Rosati, Professional Corporation ("WSGR"), 650 Page
Mill Road, Palo Alto, California, on a date to be specified by Parent and the
Company which shall be no later than the second (2nd) business day after
satisfaction or waiver of each of the conditions set forth in ARTICLE VIII or on
such other date and such other time and place as Parent and the Company shall
agree. The date on which the Closing shall occur is hereinafter referred to as
the "Closing Date".
Section 3.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Closing Date, Parent shall
designate a bank or trust company to act as Exchange Agent hereunder (the
"Exchange Agent"). As soon as practicable after the Acquisition Merger Effective
Time, Nanometrics Delaware shall deposit with or for the account of the Exchange
Agent, for the benefit of the holders of Company Common Stock, stock
certificates representing the shares of Nanometrics Delaware Common Stock and an
amount of cash sufficient to deliver to the holders of Company Common Stock any
cash in lieu of fractional shares payable pursuant to Section 3.2(c) and any
dividends or other distributions to which such holders are entitled pursuant to
Section 3.2(c) (such certificates for shares of Nanometrics Delaware Common
Stock together with cash in lieu of fractional shares and dividends or other
distributions being hereinafter referred to as the "Exchange Fund") deliverable
pursuant to Section 2.6 in exchange for outstanding shares of Company Common
Stock.
(b) Exchange Procedures. As soon as practicable after the
Acquisition Merger Effective Time, Nanometrics Delaware shall instruct the
Exchange Agent to mail to each holder of record of a certificate or certificates
which immediately prior to the Acquisition Merger Effective Time represented
outstanding shares of Company Common Stock (the "Certificates") that were
converted pursuant to Section 2.6(a) into the right to receive the Merger
Consideration (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent and shall be
in such form and have such other provisions as Nanometrics Delaware may
reasonably specify that are not inconsistent with the terms of this Agreement)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for the Merger Consideration, the cash amount in lieu of any fractional
shares pursuant to Section 3.2(d) and any dividends or distributions payable
pursuant to Section 3.2(e). Upon surrender of a Certificate for cancellation to
the Exchange Agent together with such letter of transmittal, duly executed, and
7
such other customary documents as may be required pursuant to such instructions,
the holder of such Certificate shall be entitled to receive (A) certificates
evidencing the Merger Consideration which such holder has the right to receive
pursuant to Section 2.6(a) in respect of the shares of Company Common Stock
formerly evidenced by such Certificate, (B) cash in lieu of any fractional
shares of Nanometrics Delaware Common Stock to which such holder is entitled
pursuant to Section 3.2(d), and (C) any dividends or other distributions to
which such holder is entitled pursuant to Section 3.2(d), after giving effect to
any tax withholdings required by applicable Law, and the Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of shares of Company Common Stock which is not registered in the
transfer records of the Company as of the Acquisition Merger Effective Time, a
certificate representing the proper number of shares of Nanometrics Delaware
Common Stock may be issued to a transferee if the Certificate evidencing such
Company Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer pursuant to this Section
3.2(b) and by evidence that any applicable stock transfer taxes have been paid.
Until so surrendered, each outstanding Certificate that, prior to the
Acquisition Merger Effective Time, represented shares of Company Common Stock
will be deemed, from and after the Acquisition Merger Effective Time, for all
corporate purposes, to represent only the right to receive upon surrender the
Merger Consideration and any cash in lieu of any fractional shares of
Nanometrics Delaware Common Stock payable pursuant to Section 3.2(d), in
accordance with the terms of this Agreement.
(c) No Further Ownership Rights in Company Stock. At the
Acquisition Merger Effective Time, the stock transfer books of the Company shall
be closed and thereafter there shall be no further registration of transfers on
the stock transfer books of the Company or the Surviving Corporation of the
shares of Company Common Stock which were outstanding immediately prior to such
time. If, after such time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided in
this Section 3.2(b).
(d) No Fractional Shares. No certificate or scrip representing
fractional shares of Nanometrics Delaware Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional share interests
shall not entitle the owner thereof to vote or to any other rights of a
stockholder of Nanometrics Delaware. Notwithstanding any other provision of this
Agreement, each holder of shares of Company Common Stock converted pursuant to
the Acquisition Merger who would otherwise have been entitled to receive a
fraction of a share of Nanometrics Delaware Common Stock (after taking into
account all Certificates delivered by such holder and the aggregate number of
shares of Company Common Stock represented thereby) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of Nanometrics Delaware Common Stock multiplied by the last reported sales
price of Nanometrics Delaware Common Stock at the end of regular trading hours
on the NASDAQ Nanometrics Market (the "NASDAQ") on the Closing Date (the
"Nanometrics Delaware Closing Price").
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(e) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Acquisition Merger
Effective Time with respect to Nanometrics Delaware Common Stock with a record
date after the Acquisition Merger Effective Time shall be paid to the holder of
any unsurrendered Certificate with respect to the shares of Nanometrics Delaware
Common Stock represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 3.2(d), unless and
until the holder of such Certificate shall surrender such Certificate. Subject
to the effect of escheat, tax or other applicable Laws, following surrender of
any such Certificate, there shall be paid to the holder of the certificates
representing whole shares of Nanometrics Delaware Common Stock issued in
exchange therefor, in addition to the Merger Consideration deliverable therefore
pursuant to Section 2.6, without interest, (A) the amount of any cash payable
with respect to a fractional share of Nanometrics Delaware Common Stock to which
such holder is entitled pursuant to Section 3.2(d) and (B) at the appropriate
payment date, the amount of dividends or other distributions, with a record date
after the Acquisition Merger Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such whole shares of
Nanometrics Delaware Common Stock.
(f) Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares of
Nanometrics Delaware Common Stock as may be required pursuant to Section 2.6(a)
as well as the other Merger Consideration as provided in this Section 3.2(f) and
any dividends or other distributions to which the holders thereof are entitled
pursuant to Section 3.2(e); provided, however, that Nanometrics Delaware may, in
its discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed Certificates to deliver an agreement of
indemnification in form satisfactory to Nanometrics Delaware, or a bond in such
sum as Nanometrics Delaware may direct as indemnity against any claim that may
be made against Nanometrics Delaware or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
(g) Transfers of Ownership. If any certificate for shares of
Nanometrics Delaware Common Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition to the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise be in proper form for transfer and that the
person requesting such exchange will have paid to Nanometrics Delaware or any
9
agent designated by it any transfer or other taxes required by reason of the
issuance of a certificate for shares of Nanometrics Delaware Common Stock in any
name other than that of the registered holder of the Certificate surrendered, or
will have established to the satisfaction of Nanometrics Delaware or any agent
designated by it that such tax has been paid or is not payable.
(h) Termination of Exchange Fund. At any time following the six
(6) month anniversary of the Acquisition Merger Effective Time, Nanometrics
Delaware shall be entitled to require the Exchange Agent to deliver to
Nanometrics Delaware any portion of the Exchange Fund not disbursed to holders
of Certificates, and thereafter such holders shall be entitled to look only to
Nanometrics Delaware (subject to abandoned property, escheat or other similar
Law) with respect to the Merger Consideration to which such holders are entitled
pursuant to Section 2.6(a), any cash in lieu of fractional shares payable to
such holders pursuant to Section 3.2(d) and any dividends or other distributions
to which such holders are entitled pursuant to Section 3.2(e), upon due
surrender of their Certificates, without any interest thereon.
(i) No Liability. Neither Nanometrics Delaware, Parent, Merger
Sub 1, nor the Company shall be liable to any holder of Company Common Stock or
Parent Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or other similar Law following the
passage of time specified therein.
(j) Withholding Rights. Nanometrics Delaware, the Surviving
Corporation or the Exchange Agent shall be entitled to deduct and withhold from
the consideration otherwise payable pursuant to this Agreement to any person who
was a holder of Parent Common Stock or Company Common Stock immediately prior to
the Acquisition Merger Effective Time such amounts as Nanometrics Delaware, the
Surviving Corporation or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax Law. To the extent that amounts are so withheld by
Nanometrics Delaware, the Surviving Corporation or the Exchange Agent, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the shares of Parent Common Stock or Company Common
Stock in respect of which such deduction and withholding was made by Nanometrics
Delaware, the Surviving Corporation or the Exchange Agent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except (i) as set forth in the written disclosure schedule prepared by
the Company which is dated as of the date hereof and has been delivered by the
Company to Parent in connection herewith (the "Company Disclosure Schedule") or
(ii) as otherwise disclosed in any Company SEC Report (as defined below) filed
with the SEC prior to the date hereof (other than in any risk factors or forward
looking statements contained therein, which shall not qualify, modify or
10
otherwise affect the representations and warranties set forth in this Article
IV), the Company represents and warrants to Parent, Merger Sub 1 and Merger Sub
2 as follows:
Section 4.1 Organization and Qualification; Subsidiaries. The Company
and each of its Subsidiaries is an entity duly organized, validly existing and
in good standing under the Laws of the jurisdiction of its organization and has
the requisite corporate or other power and authority necessary to own, lease and
operate the properties it purports to own, lease or operate and to carry on its
business as it is now being conducted. Each of the Company and its Subsidiaries
is duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character or location of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. A true, complete and correct list of all of the Company's Subsidiaries,
together with the jurisdiction of incorporation of each Subsidiary, the
authorized capitalization of each Subsidiary, and the percentage of each
Subsidiary's outstanding capital stock owned by the Company or another
Subsidiary or affiliate of the Company, is set forth in Section 4.1 of the
Company Disclosure Schedule. The Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible into or exchangeable
or exercisable for any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other business
association or entity, excluding securities in the Company's Subsidiaries and
securities in any publicly traded company held for investment by the Company and
comprising less than one percent of the outstanding stock of such company.
Section 4.2 Certificate of Incorporation and Bylaws. The Company has
heretofore made available to Parent a true, complete and correct copy of its
articles of incorporation, as amended to date (the "Company Charter"), and
bylaws, as amended to date (the "Company Bylaws"), and has furnished to Parent
true, complete and correct copies of the charter and bylaws (or equivalent
organizational documents), each as amended to date, of each of its Subsidiaries
(the "Subsidiary Documents"). The Company Charter, Company Bylaws and the
Subsidiary Documents are in full force and effect. The Company is not in
violation of any of the provisions of the Company Charter or Company Bylaws and
the Company's Subsidiaries are not in violation of any of the provisions of
their respective Subsidiary Documents.
Section 4.3 Capitalization.
(a) The authorized capital stock of the Company consists of
42,000,000 shares of Company Common Stock and 3,000,000 shares of undesignated
stock. As of January 20, 2005, (i) 17,841,620 shares of Company Common Stock are
issued and outstanding, (ii) 218,884 shares of Company Common Stock are reserved
11
for issuance upon exercise of awards granted pursuant to the Company's 2000
Employee Stock Purchase Plan (the "Company ESPP"), (iii) 1,991,491 shares of
Company Common Stock are reserved for issuance upon exercise of awards granted
pursuant to the Company's 1997 Stock Incentive Plan (the "1997 Plan"), and (iv)
no shares of undesignated stock are issued and outstanding.
(b) Section 4.3(b) of the Company Disclosure Schedule sets forth
a true, complete and correct list of all persons who, as of January 20, 2005
held outstanding options to acquire shares of Company Common Stock (the "Company
Stock Options" under the Company Stock Plans or under any other equity incentive
plan or arrangement of the Company and its Subsidiaries, indicating, with
respect to each Company Stock Option then outstanding, the tax status of such
option under Section 422 of the Code, the number of shares of Company Common
Stock subject to such Company Stock Option, the name of the plan under which
such Company Stock Option was granted and the exercise price, date of grant,
vesting schedule and expiration date thereof, including to the extent to which
any vesting has occurred as of the date of this Agreement and whether (and to
what extent) the vesting of such Company Stock Option will be accelerated in any
way by the consummation of the transactions contemplated by this Agreement or by
the termination of employment or engagement or change in position of any holder
thereof following or in connection with the consummation of the Acquisition
Merger. The Company has made available to Parent true, complete and correct
copies of all Company Stock Plans and the 1997 Plan and the forms of all stock
option agreements evidencing outstanding Company Stock Options.
(c) Except as described in Section 4.3(a), no capital stock of
the Company or any of its Subsidiaries or any security convertible or
exchangeable into or exercisable for such capital stock, is issued, reserved for
issuance or outstanding as of the date of this Agreement. Except as described in
Section 4.3(a), there are no options, preemptive rights, warrants, calls,
rights, commitments, agreements, arrangements or understandings of any kind to
which the Company or any of its Subsidiaries is a party, or by which the Company
or any of its Subsidiaries is bound, obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock of the Company or any of its
Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend or accelerate the vesting of or enter into any such option, warrant,
call, right, commitment, agreement, arrangement or understanding. There are no
shareholder agreements, voting trusts, proxies or other similar agreements,
arrangements or understandings to which the Company or any of its Subsidiaries
is a party, or by which it or they are bound, obligating the Company or any of
its Subsidiaries with respect to any shares of capital stock of the Company or
any of its Subsidiaries. There are no rights or obligations, contingent or
otherwise (including rights of first refusal in favor of the Company), of the
Company or any of its Subsidiaries, to repurchase, redeem or otherwise acquire
12
any shares of capital stock of the Company or any of its Subsidiaries or to
provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any such Subsidiary or any other entity. There are
no registration rights or other similar agreements, arrangements or
understandings to which the Company or any of its Subsidiaries is a party, or by
which it or they are bound, obligating the Company or any of its Subsidiaries
with respect to any shares of Company Common Stock or shares of capital stock of
any such Subsidiary.
(d) All outstanding shares of the Company's capital stock are,
and all shares of Company Common Stock reserved for issuance as specified above
will be, upon issuance on the terms and conditions specified in the instruments
pursuant to which they are issuable, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the MBCA, the Company Charter
or the Company Bylaws or any agreement to which the Company is a party or is
otherwise bound. None of the outstanding shares of Company Common Stock have
been issued in violation of any federal or state securities Laws. All of the
outstanding shares of capital stock of each of the Company's Subsidiaries are
duly authorized, validly issued, fully paid and nonassessable, and all such
shares are owned by the Company or a Subsidiary of the Company free and clear of
all security interests, liens, claims, pledges, agreements, limitations in
voting rights, charges or other encumbrances of any nature whatsoever
(collectively, "Liens"). There are no accrued and unpaid dividends with respect
to any outstanding shares of capital stock of the Company or any of its
Subsidiaries.
(e) The Company Common Stock constitutes the only class of
securities of the Company or its Subsidiaries registered or required to be
registered under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
Section 4.4 Authority Relative to this Agreement; Shareholder Approval.
(a) Subject only to the approval of the shareholders of the
Company as described below, the Company has full corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
approved by the Board of Directors of the Company (the "Company Board"). The
Company Board has (i) unanimously determined that this Agreement and the
transactions contemplated hereby are advisable and in the best interests of the
shareholders of the Company, (ii) unanimously approved this Agreement and the
transactions contemplated hereby and (iii) unanimously recommended that the
shareholders of the Company adopt and approve this Agreement and the Acquisition
Merger (the "Company Voting Proposal"). A committee of disinterested directors
of the Company Board (which are all of the non-employee directors) has
unanimously approved the Acquisition Merger and the other transactions
contemplated hereby by the Company Board under the provisions of 302A.673 of the
13
MBCA such that Section 302A.673 of the MBCA does not prohibit this Agreement,
the Company Shareholder Voting Agreements or the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by the
Company, and (assuming due authorization, execution and delivery by Parent,
Merger Sub 1 and Merger Sub 2) this Agreement constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to creditors' rights generally and by
general equitable principles (regardless of whether enforceability is considered
in a proceeding in equity or at Law).
(b) Except for the approval of the Company Voting Proposal by the
affirmative vote of the holders of a majority of the voting power of all shares
of the Company Common Stock entitled to vote at a meeting (the "Company
Shareholders Meeting") of the shareholders of the Company convened to consider
and vote upon the Company Voting Proposal (the "Requisite Company Stock
Approval"), no other corporate proceedings on the part of the Company are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby.
Section 4.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery by the Company of this Agreement
do not, the execution and delivery by the Company of any instrument required
hereby to be executed and delivered by the Company at the Closing will not, and
the performance by the Company of its agreements and obligations under this
Agreement will not, (i) conflict with or violate the Company Charter or Company
Bylaws or any Subsidiary Documents, (ii) in any material respect, conflict with
or violate any Law applicable to the Company or by which its properties is bound
or affected, (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default), or impair the
Company's rights or alter the rights or obligations of any third party or the
Company (including monetary rights and obligations) under, or give to any third
party any rights of termination, amendment, payment, acceleration or
cancellation of, or result in the creation of a Lien on any of the properties or
assets (including intangible assets) of the Company pursuant to any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which the Company is a party or by which the
Company or its properties is bound or affected, or (v) other than the Company
Stock Options, give rise to or result in any person having, or having the right
to exercise, any pre-emptive rights, rights of first refusal, rights to acquire
or similar rights with respect to any capital stock of the Company or any of its
assets or properties.
(b) The execution and delivery by the Company of this Agreement do not, the
execution and delivery by the Company of any instrument required hereby to be
executed and delivered by the Company at the Closing will not, and the
14
performance of its agreements and obligations under this Agreement by the
Company will not, require any consent, approval, order, license, authorization,
registration, declaration or permit of, or filing with or notification to, any
nation or government, any state, province or other political subdivision thereof
or any multinational organization or body or other entity having or exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government (including any court, arbitrational tribunal,
administrative or regulatory agency or commission or other governmental
authority or instrumentality), whether domestic or foreign, (a "Governmental
Entity"), except (i) as may be required by the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), (ii) as may be required
under any foreign antitrust or competition Law, (iii) the filing of the Joint
Proxy Statement/Prospectus (as defined in Section 7.4) with the U.S. Securities
and Exchange Commission (the "SEC") under the Exchange Act, (iv) such consents,
approvals, orders, licenses, authorizations, registrations, declarations,
permits, filings, and notifications as may be required under applicable U.S.
federal and state or foreign securities Laws, (v) the filing of the Articles of
Acquisition Merger, the Migratory Merger Certificates or other documents as
required by the DGCL, the CCC and the MBCA and (vi) such other clearances,
consents, approvals, orders, registrations, declarations, permits, filings and
notifications which, if not obtained or made, would not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
Section 4.6 Compliance; Permits.
(a) The Company is and has been in material compliance with and
is not in material default or violation of (and have not received any notice of
material non-compliance, default or violation with respect to) any Law
applicable to the Company or by which any of its properties are bound or
affected.
(b) The Company holds all permits, licenses, easements,
variances, exemptions, consents, certificates, authorizations, registrations,
orders and other approvals from Governmental Entities that are material to the
operation of its business as currently conducted (collectively, the "Company
Permits"). The Company Permits are in full force and effect, have not been
violated in any material respect and, to the Company's knowledge, no suspension,
revocation or cancellation thereof has been threatened, and there is no action,
proceeding or investigation pending or threatened, seeking the suspension,
revocation or cancellation of any Company Permits. No Company Permit shall cease
to be effective as a result of the consummation of the transactions contemplated
by this Agreement, other than as would not reasonably be expected to have a
Company Material Adverse Effect.
Section 4.7 SEC Filings; Financial Statements.
15
(a) The Company has filed all forms, reports, schedules,
statements and other documents, including any exhibits thereto, required to be
filed by the Company since January 1, 2002 with the SEC (collectively, the
"Company SEC Reports"). The Company SEC Reports, including all forms, reports
and documents filed by the Company with the SEC after the date hereof and prior
to the Acquisition Merger Effective Time, (i) were and, in the case of Company
SEC Reports filed after the date hereof, will be, prepared in all material
respects in accordance with the applicable requirements of the Securities Act
(as defined below) and the Exchange Act, as the case may be, and the rules and
regulations thereunder, and (ii) did not at the time they were filed (or if
amended or superseded by a filing prior to the date of this Agreement, then on
the date of such filing), and in the case of such forms, reports and documents
filed by the Company with the SEC after the date of this Agreement, will not as
of the time they are filed, contain any untrue statement of a material fact or
omit to state a material fact required to be stated in such Company SEC Reports
or necessary in order to make the statements in such Company SEC Reports, in
light of the circumstances under which they were and will be made, not
misleading. None of the Subsidiaries of the Company is required to file any
forms, reports, schedules, statements or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes and schedules), contained in the Company SEC
Reports, including any Company SEC Reports filed between the date of this
Agreement and the Closing, complied or will comply, as of its respective date,
in all material respects with all applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, was or will be
prepared in accordance with U.S. generally accepted accounting principles
("GAAP") (except as may be indicated in the notes thereto) applied on a
consistent basis throughout the periods involved and fairly presented in all
material respects or will fairly present in all material respects the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the respective dates thereof and the consolidated results of the
operations and cash flows of the Company and its consolidated Subsidiaries for
the periods indicated, except as otherwise explained therein and except that any
unaudited interim financial statements are subject to normal and recurring
year-end adjustments which have not been made and are not expected to be
material in amount, individually or in the aggregate. The unaudited balance
sheet and notes related thereto of the Company contained in the Company SEC
Report on Form 10-Q for the quarter ended September 30, 2004 is referred to
herein as the "Company Balance Sheet").
(c) The chief executive officer and chief financial officer of
the Company have made all certifications required by, and would be able to make
such certifications as of the date hereof and as of the Closing Date as if
required to be made as of such dates pursuant to, Sections 302 and 906 of the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and any related rules and
regulations promulgated by the SEC, and the statements contained in any such
certifications are complete and correct, and the Company is otherwise in
compliance with all applicable effective provisions of the Sarbanes-Oxley Act
and the applicable listing standards and corporate governance rules of the
NASDAQ.
16
(d) Each of the consolidated financial statements (including, in
each case, any related notes and schedules) contained in the Company SEC Reports
accurately reflects the revenues and costs relating to the Company Material
Contracts.
Section 4.8 Disclosure Controls and Procedures. Since December 31,
2003, the Company and each of its Subsidiaries has had in place "disclosure
controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e)
promulgated under the Exchange Act) reasonably designed and maintained to ensure
that all information (both financial and non-financial) required to be disclosed
by the Company in the reports that it files or submits to the SEC under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the SEC and that such information is
accumulated and communicated to the Company's management as appropriate to allow
timely decisions regarding required disclosure and to make the certifications of
the chief executive officer and chief financial officer of the Company required
under the Exchange Act with respect to such reports. The Company maintains
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
Section 4.9 Absence of Certain Changes or Events. From the date of the
Company Balance Sheet through the date hereof, the Company has conducted its
business in the ordinary course of business consistent with past practice and,
since such date and through the date hereof, there has not occurred: (i) any
Company Material Adverse Effect; (ii) any amendments to or changes in the
Company Charter, Company Bylaws or Subsidiary Documents; (iii) any material
damage to, destruction or loss of any asset of the Company or any of its
Subsidiaries (whether or not covered by insurance); (iv) any change by the
Company in its accounting methods, principles or practices; (v) any revaluation
by the Company of any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the ordinary
course of business consistent with past practice; (vi) any sale of a material
amount of assets (tangible or intangible) of the Company or any of its
Subsidiaries; (vii) any recalls, field notifications or field corrections with
respect to products manufactured by or on behalf of the Company or any of its
Subsidiaries; or (viii) any other action or event that would have required the
consent of Parent pursuant to Section 6.2 had such action or event occurred
after the date of this Agreement.
17
Section 4.10 No Undisclosed Liabilities.
(a) Except as reflected in the Company Balance Sheet, the Company
has no liabilities (absolute, accrued, contingent or otherwise) which are
required by GAAP to be set forth on a consolidated balance sheet of the Company
and its consolidated Subsidiaries or in the notes thereto, other than (i) any
liabilities and obligations incurred since the date of the Company Balance Sheet
in the ordinary course of business consistent with past practice, (ii) any
liabilities or obligations incurred in connection with the transactions
contemplated by this Agreement and (iii) liabilities that, individually or in
the aggregate, have not had, and would not reasonably be expected to have, a
Company Material Adverse Effect.
(b) The Company is not a party to, or has any commitment to
become a party to, any joint venture, partnership agreement or any similar
contract (including any contract relating to any transaction, arrangement or
relationship between or among the Company or any of its Subsidiaries, on the one
hand, and any unconsolidated affiliate, including any structured finance,
special purpose or limited purpose entity or person, on the other hand) where
the purpose or intended effect of such arrangement is to avoid disclosure of any
material transaction involving the Company in the Company's consolidated
financial statements.
Section 4.11 Absence of Litigation; Investigations. Prior to the date
of this Agreement, there were no material claims, actions, suits, proceedings,
governmental investigations, inquiries or subpoenas (other than challenging or
arising from or relating to the Acquisition Merger or any of the other
transactions contemplated by this Agreement), (a) pending against the Company or
any of its properties or assets, (b) to the Company's knowledge, threatened
against the Company or any of its properties or assets or (c) whether filed or
threatened, that have been settled or compromised by the Company within the
three years prior to the date of this Agreement and at the time of such
settlement or compromise were material, which claims, actions, suits,
proceedings investigations, inquiries or subpoenas referred to in clause (a) and
(b) above would reasonably be expected to have a Company Material Adverse
Effect. The Company is not subject to any outstanding order, writ, injunction or
decree that would reasonably be expected to be material or would reasonably be
expected to prevent or delay the consummation of the transactions contemplated
by this Agreement. There has not been nor are there currently any internal
investigations or inquiries being conducted by the Company, the Company Board
(or any committee thereof) or any third party at the request of any of the
foregoing concerning any financial, accounting, tax, conflict of interest,
self-dealing, fraudulent or deceptive conduct or other misfeasance or
malfeasance issues.
18
Section 4.12 Agreements, Contracts and Commitments.
(a) For purposes of this Agreement, the term "Company Material
Contracts" shall mean any note, bond, mortgage, indenture, guarantee, other
evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which any of them or any of their assets are bound, and which:
(i) has a remaining term of more than one year from the
date hereof and (A) cannot be unilaterally terminated by the Company at any
time, without material penalty, within thirty (30) days of providing notice of
termination, and (B) involves the payment or receipt of money in excess of
$100,000 per year;
(ii) involves the payment or receipt of money in excess of
$250,000 in any year;
(iii) contains covenants limiting the freedom of the
Company or any of its Subsidiaries to sell any products or services of or to any
other person, engage in any line of business or compete with any person or
operate at any location;
(iv) was made with any officer, director, Company employee
or member of the Company Board, or any service, operating or management
agreement or arrangement with respect to any of the Company's assets or
properties (whether leased or owned), other than those that are terminable by
the Company on no more than thirty (30) days' notice without liability or
financial obligation to the Company;
(v) is a dealer, distributor, joint marketing or
development contract under which the Company has continuing material obligations
to jointly market any product, technology or service and which may not be
canceled without penalty upon notice of ninety (90) days or less, or any
contract pursuant to which the Company has continuing material obligations to
jointly develop any Intellectual Property that will not be owned, in whole or in
part, by the Company;
(vi) includes indemnification, guaranty or warranty other
than any those contracts entered into in the Ordinary Course of the Company's
business;
(vii) mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(viii) settlement agreements under which the Company has
ongoing obligations; or
(ix) Company Real Property Leases.
19
(b) All of the Company Material Contracts that are required to be
described in the Company SEC Reports (or to be filed as exhibits thereto) are so
described or filed and are enforceable and in full force and effect (except as
such enforceability may be subject to Laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of Law governing
specific performance, injunctive relief or other equitable remedies).
(c) Section 4.12(a) of the Company Disclosure Schedule contains a
complete and accurate list of, and true and complete copies have been delivered
or made available to Parent with respect to, all Company Material Contracts in
effect as of the date hereof other than the Company Material Contracts which are
listed as an exhibit to the Company's most recent annual report on Form 10-K or
a subsequent quarterly report on Form 10-Q or as otherwise set forth on Section
4.12(a) of the Company Disclosure Schedule.
(d) As of the date of this Agreement, (i) there is no breach or
violation of or default by the Company or any of its Subsidiaries under any of
the Company Material Contracts, except such breaches, violations and defaults as
have been waived in writing, and (ii) no event has occurred with respect to the
Company or any of its Subsidiaries which, with notice or lapse of time or both,
would constitute a breach, violation or default, or give rise to a right of
termination, modification, cancellation, foreclosure, imposition of a Lien,
prepayment or acceleration under any of the Company Material Contracts, which
breach, violation or default referred to in clauses (i) or (ii) would reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect.
Section 4.13 Employee Benefit Plans, Options and Employment Agreements.
(a) Section 4.13(a) of the Company Disclosure Schedule sets forth
a complete and accurate list of all Employee Benefit Plans maintained, or
contributed to by the Company or any of its ERISA Affiliates or to which the
Company or any of its ERISA Affiliates is obligated to contribute, or under
which any of them has or may have any liability for premiums or benefits
(collectively, the "Company Employee Plans").
(b) With respect to each Company Employee Plan, the Company has
made available to Parent complete and accurate copies of (i) such Company
Employee Plan (or a written summary of any unwritten plan) together with all
amendments, (ii) in the case of any plan for which Forms 5500 are required to be
filed, the most recent annual report (Form 5500) with schedules attached, (iii)
in the case of any plan that is intended to be qualified under Section 401(a) of
the Code, the most recent determination letter from the Internal Revenue
Service, (iv) each trust agreement, group annuity contract, administration and
similar material agreements, investment management or investment advisory
agreements, (v) the most recent summary plan descriptions and employee handbook,
20
or other similar material employee communications relating to employee benefits
matters, (vi) all personnel, payroll and employment manuals and policies, and
(vii) the most recent financial statements for each Company Employee Plan that
is funded.
(c) Each Company Employee Plan has been administered in all
material respects in accordance with ERISA, the Code and all other applicable
Laws and the regulations thereunder and materially in accordance with its terms
and each of the Company and its ERISA Affiliates have in all material respects
met their obligations with respect to each Company Employee Plan and have timely
made (or timely will make) all required contributions thereto. All filings and
reports as to each Company Employee Plan required to have been submitted to the
Internal Revenue Service or to the United States Department of Labor have been
timely submitted. With respect to the Company Employee Plans, no event has
occurred, and, to the Company's knowledge, there exists no condition or set of
circumstances in connection with which the Company, Parent or any of their
respective Subsidiaries or any plan participant could be subject to any material
liability (including penalties or taxes) under ERISA, the Code or any other
applicable Law, nor will the negotiation or consummation of the transactions
contemplated by this Agreement give rise to any such material liability.
(d) With respect to the Company Employee Plans, there are no
material benefit obligations for which contributions have not been made or
properly accrued and there are no benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
the requirements of GAAP, on the financial statements of the Company. The assets
of each Company Employee Plan which is funded are reported at their fair market
value on the books and records of such Employee Benefit Plan.
(e) No Company Employee Plan (other than the Company Stock Plans)
has assets that include securities issued by the Company or any its ERISA
Affiliates.
(f) All the Company Employee Plans that are intended to be
qualified under Section 401(a) of the Code (each, a "Qualified Plan") have
received determination, opinion or advisory letters from the Internal Revenue
Service to the effect that such Company Employee Plans are qualified and the
plans and trusts related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, or the Company has
remaining a period of time under applicable U.S. Department of the Treasury
regulations or Internal Revenue Service pronouncements in which to apply for
such a letter and to make any amendments necessary to obtain a favorable
determination as to the qualified status of each such Qualified Plan. To the
Company's knowledge, no such determination, opinion or advisory letter has been
revoked and revocation has not been threatened, and no such Employee Benefit
Plan has been amended or operated since the date of its most recent
21
determination letter or application therefor in any respect, and no act or
omission has occurred, that would reasonably be expected to adversely affect its
qualification or materially increase its cost. There has been no termination,
partial termination or discontinuance of contributions to any Qualified Plan
that will result in material liability to the Company. Each Company Employee
Plan which is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the
Code has been tested for compliance with, and satisfies in all material respects
the requirements of Section 401(k)(3) and Section 401(m)(2) of the Code, as the
case may be, for each plan year ending prior to the Closing Date for which
testing is required to be completed.
(g) Neither the Company nor any of its ERISA Affiliates has (i)
ever maintained a Company Employee Plan which was ever subject to Section 412 of
the Code or Title IV of ERISA or (ii) ever been obligated to contribute to a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA). No Company
Employee Plan is funded by, associated with or related to a "voluntary
employees' beneficiary association" within the meaning of Section 501(c)(9) of
the Code.
(h) To the extent permitted by applicable Law, each Company
Employee Plan (other than the Company Stock Plans or an employment, severance,
change in control or similar agreement with an individual) is amendable and
terminable unilaterally by the Company or covered thereby at any time without
material liability to the Company as a result thereof, other than for benefits
accrued as of the date of such amendment or termination and routine
administrative costs.
(i) Other than as required under Section 601 et seq. of ERISA,
none of the Company Employee Plans promises or provides health or other welfare
benefits (excluding normal claims for benefits under the Company's group life
insurance, accidental death and dismemberment insurance and disability plans and
policies) or coverage to any person following retirement or other termination of
employment. Section 4.13(i) of the Company Disclosure Schedule lists each
Company Employee Plan which provides benefits after termination of employment
(other than medical benefits required to be continued under Section 4980B of the
Code and part 6 of Subtitle B of Title I of ERISA) and normal claims for
benefits under the Company's group life insurance, accidental death and
dismemberment insurance and disability plans and policies) and the present value
of benefits accrued under each such Company Employee Plan are fully funded,
fully covered by insurance or reflected on the Company Balance Sheet in
accordance with GAAP.
(j) There is no action, suit, proceeding, claim, arbitration,
audit or investigation pending or, to the Company's knowledge, threatened, with
respect to any Company Employee Plan, other than claims for benefits in the
ordinary course. No Company Employee Plan is or within the last three calendar
years has been the subject of, or has received notice that it is the subject of,
examination by a government agency or a participant in a government sponsored
amnesty, voluntary compliance or similar program.
22
(k) To the Company's knowledge, each individual who has received
compensation for the performance of services on behalf of the Company, any of
the Company's Subsidiaries or any of their respective ERISA Affiliates has been
properly classified as an employee or independent contractor in accordance with
applicable Law.
(l) Except as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, with
respect to each Company Employee Plan maintained or covering employees outside
the United States, and the books and records thereof: (i) such plan is in
material compliance with all applicable Laws of each applicable jurisdiction
and; (ii) there is no action, suit, proceeding, claim, arbitration, audit or
investigation pending or, to the Company's knowledge, threatened, with respect
to such plan, other than claims for benefits in the ordinary course; (iii) all
liabilities with respect to such plan are set forth on a consolidated balance
sheet of Company or in the notes thereto in accordance with GAAP; and (iv) no
such plan is or within the last two calendar years has been the subject of, or
has received notice that it is the subject of, an examination by a government
agency or a participant in a government sponsored amnesty, voluntary compliance
or similar program that has given rise to or is reasonably expected to give rise
to any liability. Section 4.13(l) of the Company Disclosure Schedule lists each
country in which the Company or any of its Subsidiaries or affiliates has
operations and the number of employees in each such country.
(m) Section 4.13(m) of the Company Disclosure Schedule sets forth
a true, complete and correct list of: (i) all employment agreements with
employees of the Company or any of its Subsidiaries (other than at-will offer
letters that are consistent with the Company's general form and do not provide
for severance payments or benefits, notice periods for termination or change of
control benefits); (ii) all employees or former employees of the Company who
have executed a non competition agreement with the Company; (iii) all severance
agreements, programs and policies of the Company with or relating to its
employees, excluding programs and policies required to be maintained by Law; and
(iv) all plans, programs, agreements and other arrangements of the Company
pursuant to which payments (or acceleration of benefits or vesting of options or
lapse of repurchase rights) may be required, or may become payable directly or
indirectly as a result of or in connection with, the negotiation or consummation
of the transactions contemplated by, or the execution of, this Agreement. True,
complete and correct copies of each of the foregoing agreements to which any
employee of the Company is a party have been made available to Parent.
(n) All contributions required to be made with respect to any
Company Employee Plan on or prior to the Acquisition Merger Effective Time have
been or will be timely made or are reflected on the Company Balance Sheet. There
23
are no pending, threatened or reasonably anticipated claims by or on behalf of
any Plan, by any employee or beneficiary covered under any such Company Employee
Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
(o) The negotiation or consummation of the transactions
contemplated by this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee or officer of the
Company to severance pay, or any other payment from the Company or (ii)
accelerate the time of payment or vesting, cause a lapse of repurchase rights or
increase the amount of compensation due any such employee or officer. There is
no Company Employee Plan or other contract, agreement, plan or arrangement that,
individually or collectively, could give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G (determined without regard to
Section 280G(b)(4) of the Code) as a result of the Mergers or 162(m) of the
Code.
Section 4.14 Labor Matters.
(a) The Company is in compliance in all material respects with
all applicable Laws respecting employment and employment practices, including,
without limitation, all Laws respecting terms and conditions of employment,
health and safety, wages and hours, child labor, immigration, employment
discrimination, disability rights or benefits, equal opportunity, plant closures
and layoffs, affirmative action, workers' compensation, labor relations,
employee leave issues and unemployment insurance.
(b) There are no personnel manuals or handbooks applicable to
employees of the Company, other than those set forth in Section 4.14(b) of the
Company Disclosure Schedule, true and complete copies or written summaries of
which have heretofore been provided to Parent.
(c) There are no actions, suits, claims, grievances,
investigations, or other proceedings pending or, to the Company's knowledge,
threatened, between (i) the Company (and/or any of their current or former
officers, directors, employees, or representatives, in their capacities as such)
and (ii) any of their respective current or former employees, consultants or
independent contractors, or any applicant for employment or classes of the
foregoing, or any Governmental Entity, which actions, suits, claims, grievances,
investigations, or other proceedings have or would reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
(d) The Company has good labor relations, and the Company and its
employees, agents or representatives have not committed any unfair labor
practice as defined in the National Labor Relations Act. The Company is not a
party to, bound by or subject to (and none of the Company's properties or assets
is bound by or subject to) any labor agreement, collective bargaining agreement,
24
work rules or practices, or any other labor-related agreements or arrangements
with any labor union, labor organization, trade union or works council. There
are no labor agreements, collective bargaining agreements, work rules or
practices, or any other labor-related agreements or arrangements that pertain to
any of the employees of the Company, and no employees of the Company are
represented by any labor union, labor organization, trade union or works council
with respect to their employment with the Company.
(e) To the Company's knowledge, there are no current labor union
organizing activities with respect to any employees of the Company, and no labor
union, labor organization, trade union, works council, or group of employees of
the Company has made a pending demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. To the Company's knowledge, there are no labor
disputes, strikes, slowdowns, work stoppages, lockouts, or threats thereof,
against or affecting the Company.
(f) No employee of the Company (i) to the Company's knowledge, is
in violation of any term of any patent disclosure agreement, non-competition
agreement, or any restrictive covenant to a former employer relating to the
right of any such employee to be employed by the Company because of the nature
of the business conducted or presently proposed to be conducted by the Company
or relating to the use of trade secrets or proprietary information of others, or
(ii) in the case of any key employee or group of key employees, has given notice
as of the date of this Agreement to the Company that such employee or any
employee in a group of key employees intends to terminate his or her employment
with the Company.
(g) The Company is and has been in compliance with all notice and
other requirements under the Worker Adjustment and Retraining Notification Act
of 1988, as amended (the "WARN Act"), and any similar foreign, state or local
Law relating to plant closings and layoffs. The Company is not currently engaged
in any layoffs or employment terminations sufficient in number to trigger
application of the WARN Act or any similar state, local or foreign Law. Section
4.14(g) of the Company Disclosure Schedule contains a true and complete list of
the names and the sites of employment or facilities of those individuals who
suffered an "employment loss" (as defined in the WARN Act) at any site of
employment or facility of the Company during the 90-day period prior to the date
of this Agreement. Section 4.14(g) of the Company Disclosure Schedule shall be
updated immediately prior to the Closing with respect to the 90-day period prior
to the Closing.
25
(h) The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in any breach or
other violation of any collective bargaining agreement, employment agreement,
consulting agreement or any other labor-related agreement to which the Company
is a party.
Section 4.15 Properties and Assets.
(a) The Company has good and valid title to, or a valid leasehold
interest in, all the properties and assets which it purports to own or lease
(real, tangible, personal and mixed), including all the properties and assets
reflected in the Company Balance Sheet (except for personal property sold since
the date of the Company Balance Sheet in the ordinary course of business
consistent with past practice). All properties and assets reflected in the
Company Balance Sheet are free and clear of all Liens, except for Liens
reflected on the Company Balance Sheet and Liens for current taxes not yet due
and other Liens that do not materially impair the use or operation of the
property or assets subject thereto.
(b) Section 4.15 of the Company Disclosure Schedule sets forth a
true, complete and correct list of all real property owned, leased, subleased or
licensed by the Company and the location of such premises. All material real
property leases, licenses or other occupancy agreements to which the Company is
a party (collectively, the "Company Real Property Leases") are either filed as
exhibits to the Company SEC Reports or complete copies thereof have been
delivered to or made available to Parent. Section 4.15 of the Company Disclosure
Schedule lists all Company Real Property Leases other than the Company Real
Property Leases which are listed as an exhibit to the Company's most recent
annual report on Form 10-K or a subsequent quarterly report on Form 10-Q.
(c) As of the date of this Agreement, (i) all Company Real
Property Leases are in full force and effect (except as such enforceability may
be subject to Laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of Law governing specific performance,
injunctive relief or other equitable remedies), (ii) there is no existing
material default by the Company under any of the Company Real Property Leases,
except such defaults as have been waived in writing, (iii) no event has occurred
with respect to the Company which, with notice or lapse of time or both, would
constitute a default of any of the Company Real Property Leases, and (iv) to the
Company's knowledge, there are no defaults of any material obligations of any
party other than the Company under any Company Real Property Lease.
Section 4.16 Taxes.
(a) The Company has filed with the appropriate taxing authorities
all material Tax Returns required to be filed by them, and all such Tax Returns
are true, complete and correct in all material respects. All Taxes required to
26
be paid by the Company have been timely paid. There are no Liens relating or
attributable or Taxes on any assets of the Company, other than liens relating to
Taxes not yet due and payable. The Company has not granted any outstanding
waiver of any statute of limitations with respect to, or any outstanding
extension of a period for the assessment of, any Tax. The accruals and reserves
for Taxes (exclusive of any accruals for "deferred taxes" or similar items that
reflect timing differences between tax and financial accounting principles)
reflected in the Company Balance Sheet are adequate to cover all Taxes accruable
through the date thereof (including Taxes being contested) in accordance with
GAAP. All liabilities for Taxes attributable to the period commencing on the
date following the date of the Company Balance Sheet were incurred in the
ordinary course of business and are consistent in type and amount with Taxes
attributable to similar prior periods.
(b) The Company has timely paid or withheld with respect to its
employees all federal and state Taxes required to be paid or withheld (and have
timely paid over any withheld amounts to the appropriate Taxing authority). The
Company has not received any notice of any Tax deficiency outstanding, proposed
or assessed against the Company. No audit or other examination of any Tax Return
of the Company is presently in progress, and the Company has not received any
written notice of any audit examination, deficiency, refund litigation, proposed
adjustment or matter in controversy with respect to any Tax Return of the
Company.
(c) The Company is not a party to or bound by any Tax indemnity,
Tax sharing or Tax allocation agreements with any entity other than the Company
or any Company Subsidiary. Except for the group of which the Company and its
Subsidiaries are now currently members, the Company has never been a member of
an affiliated group of corporations within the meaning of Section 1504 of the
Code. Except with respect to the group referred to in the preceding sentence,
the Company is not liable for the Taxes of any person under Treasury Regulation
1.1502-6 (or any similar provision of state, local or foreign Law) as a
transferee or successor, by contract or otherwise. The Company has never been a
party to any joint venture, partnership or other agreement that could be treated
as a partnership for Tax purposes.
(d) To the extent requested by Parent, the Company has made
available to Parent complete and correct copies of all Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company with respect to all taxable years for which the statutes of limitation
have not expired.
(e) The Company has not agreed nor is it required to make any
material adjustment under Section 481 of the Code by reason of a change in
accounting method or otherwise prior to the Acquisition Merger Effective Time.
27
(f) The Company is not, or ever been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(g) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock intended to qualify for
tax-free treatment under Section 355 of the Code (i) in the two years prior to
the date of this Agreement or (ii) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in connection with the Acquisition
Merger. (h) The Company has not engaged in, or has any commitment to engage in,
any a transaction that is the same as or substantially similar to one of the
types of transactions that the Internal Revenue Service has determined to be a
tax avoidance transaction and identified by notice, regulation, or other form of
published guidance as a "reportable transaction," as set forth in Treas. Reg.
ss. 1.6011-4(b).
Section 4.17 Environmental Matters.
(a) The Company is in compliance in all material respects with
federal, state, local and foreign Laws and regulations relating to pollution,
protection or preservation of human health or the environment, including,
without limitation, Laws and regulations relating to emissions, discharges,
releases or threatened releases of toxic or hazardous substances, materials or
wastes, petroleum and petroleum products, asbestos or asbestos-containing
materials, polychlorinated biphenyls, radon, or lead or lead-based paints or
materials ("Materials of Environmental Concern"), or otherwise relating to the
generation, storage, containment (whether above ground or underground),
disposal, recycling, transport, management or handling of Materials of
Environmental Concern or any product containing Materials of Environmental
Concern, or the preservation of the environment, the mitigation of adverse
effects thereon or exposure of any person to Materials of Environmental Concern
(collectively, "Environmental Laws"), and including, but not limited to,
compliance with any Company Permits or other governmental authorizations or the
terms and conditions thereof and compliance with any Laws respecting the sale,
distribution or labeling of products pursuant to Environmental Laws.
(b) The Company has not received any written notice, whether from
a governmental authority or otherwise, alleging any violation of or
noncompliance with any Environmental Laws by Company for which it is
responsible.
(c) There is no pending or threatened claim, action,
investigation, or notice by any person or entity alleging potential liability on
the part of the Company for investigatory, cleanup or governmental response
costs, or natural resources or property damages, or personal injuries,
attorney's fees or penalties relating to (i) the presence, or release into the
28
environment, of any Materials of Environmental Concern at any location owned or
operated by Company, now or in the past, or otherwise caused by the Company or
by the actions of any other party for which the Company would be liable by
contract or pursuant to Environmental Laws, or (ii) any violation, or alleged
violation, of any Environmental Law (collectively, "Company Environmental
Claims"), except where such Company Environmental Claims would not have a
Company Material Adverse Effect or otherwise require disclosure in the Company
SEC Reports.
(d) There are no past or present facts or circumstances that
could reasonably be expected to form the basis of any Company Environmental
Claim against the Company or against any person or entity whose liability for
any Company Environmental Claim the Company has retained or assumed either
contractually or by operation of Law, except where such Company Environmental
Claim, if made, would not have a Company Material Adverse Effect or otherwise
require disclosure in the Company SEC Reports.
(e) The Company has made available to Parent all material
assessments, reports, data, results of investigations or audits, that is in the
possession of Company regarding environmental matters pertaining to the
environmental condition of the business of the Company, or the compliance (or
noncompliance) by the Company with any Environmental Laws.
Section 4.18 Intellectual Property.
(a) For purposes of this Agreement, the term "Company Registered
Intellectual Property" means all Registered Intellectual Property owned by the
Company or any of its Subsidiaries.
(b) Section 4.18(a) of the Company Disclosure Schedule sets forth
as of the date hereof a true, complete and correct list of all Company
Registered Intellectual Property. All of the Company Registered Intellectual
Property is owned solely by the Company and no Registered Intellectual Property
that ever was Company Registered Intellectual Property has been disposed of by
the Company in the two years preceding the date hereof.
29
(c) The Company Registered Intellectual Property, is subsisting,
and has not expired or been cancelled, or abandoned.
(d) There is no pending or, to the Company's knowledge,
threatened, and at no time within the three years prior to the date of this
Agreement has there been pending any, material suit, arbitration or other
adversarial proceeding before any court, government agency or arbitral tribunal
or in any jurisdiction alleging that any activities or conduct of the Company's
business infringes or will infringe upon, violate or constitute the unauthorized
use of the Intellectual Property of any third party or challenging the
ownership, validity, enforceability or registrability of any Intellectual
Property owned by the Company.
(e) The Company is not a party to any settlements, covenants not
to sue, consents, decrees, stipulations, judgments, or orders resulting from
suits, actions or similar legal proceedings which (i) restrict the Company's
rights to use any Intellectual Property owned by and material to the business of
the Company as currently conducted, (ii) restrict the conduct of the business of
the Company as currently conducted in order to accommodate any third party's
Intellectual Property rights, or (iii) permit third parties to use any
Intellectual Property owned by and used in the business of the Company as
currently conducted.
(f) The conduct of the business of the Company as currently
conducted does not infringe upon, violate or constitute the unauthorized use of
any Intellectual Property rights owned by any third party.
(g) The Company has taken reasonable measures to protect the
proprietary nature of the Intellectual Property owned by the Company that is
material to the business of the Company as currently conducted.
(h) To the Company's knowledge, no third party is
misappropriating, infringing, diluting or violating any Intellectual Property
owned by the Company that is material to the business of the Company as
currently conducted, and no Intellectual Property misappropriation, infringement
dilution or violation suits, arbitrations or other adversarial proceedings have
been brought before any court, government agency or arbitral tribunal against
any third party by the Company which remain unresolved.
(i) The Company has not (i) disclosed to any third person any
material confidential source code for any product currently being marketed,
sold, licensed or developed by the Company (each such product, a "Company
Proprietary Product"), or (ii) made any such source code subject to any open
source license, nor is the Company obligated to make the source code for such
Company Proprietary Product generally available.
(j) The Company does not have any obligation to pay any third
party any royalties or other fees in excess of $100,000 in the aggregate in
calendar year 2004 or any annual period thereafter for the use of Intellectual
Property and no obligation to pay such royalties or other fees in excess of
$250,000 in the aggregate will result from the execution and delivery by the
Company of this Agreement and the consummation of the transactions contemplated
by this Agreement.
30
(k) The Company is not in violation of any material license,
sublicense, agreement or instrument to which the Company is party or otherwise
bound under which the Company derives rights to Intellectual Property that is
material to the Company's business as currently conducted, nor will the
consummation by the Company of the transactions contemplated hereby result in
any loss or impairment of ownership by the Company of, or the right of any of
them to use, any Intellectual Property that is material to the business of the
Company as currently conducted, nor, to the Company's knowledge, require the
consent of any Governmental Entity or third party with respect to any such
Intellectual Property.
(l) The Company is not a party to any agreement under which a
third party would be entitled to receive or expand a license or any other right
to any material Intellectual Property of Parent or any of Parent's affiliates as
a result of the consummation of the transactions contemplated by this Agreement.
Section 4.19 Insurance. All fire and casualty, general liability,
business interruption, product liability, sprinkler and water damage insurance
policies and other forms of insurance maintained by the Company has been made
available to Parent. Each such policy is in full force and effect and all
premiums due thereon have been paid in full. None of such policies shall
terminate or lapse (or be otherwise adversely affect) by reason of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement.
Section 4.20 Interested Party Transactions. Since December 31, 2003, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction pursuant to Statement of Financial
Accounting Standards No. 57.
Section 4.21 Brokers. No broker, finder or investment banker (other
than Needham & Company, Inc., whose brokerage, finder's or other fees will be
paid by the Company) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The Company has
furnished to Parent a complete and correct copy of all agreements between the
Company and Needham & Company, Inc. pursuant to which Needham & Company, Inc.
would be entitled to any such payment.
Section 4.22 Opinion of Financial Advisor of the Company. The financial
advisor of the Company, Needham & Company, Inc., has delivered to the Company
its opinion, dated the date of this Agreement, that as of such date, the Merger
Consideration is fair, from a financial point of view, to the shareholders of
the Company. The Company has provided a true, complete and correct copy of such
opinion to Parent. As of the date hereof, such opinion has not been withdrawn,
revoked or modified.
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Section 4.23 Anti-Takeover Statute Not Applicable. Except for Section
302A.673 of the MBCA (which shall not prohibit the transactions contemplated by
the Agreement), no "business combination," "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation under
the Laws of the State of Minnesota or other applicable Law (each, a "Takeover
Statute") is applicable to the Acquisition Merger or any of the other
transactions contemplated by this Agreement or the Company Shareholder Voting
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Except (i) as set forth in the written disclosure schedule prepared by
Parent which is dated as of the date hereof and has been delivered by Parent to
the Company in connection herewith (the "Parent Disclosure Schedule") or (ii) as
otherwise disclosed in any Parent SEC Report (as defined below) filed with the
SEC prior to the date hereof (other than in any risk factors or forward looking
statements contained therein, which shall not qualify, modify or otherwise
affect the representations and warranties set forth in this Article V, Parent
represents and warrants to the Company as follows:
Section 5.1 Organization and Qualification; Merger Sub 1, Merger Sub 2.
Parent and each of its Subsidiaries (including Merger Sub 1 and Merger Sub 2) is
an entity duly organized, validly existing and in good standing under the Laws
of the jurisdiction of its organization and has the requisite corporate or other
power and authority necessary to own, lease and operate the properties it
purports to own, lease or operate and to carry on its business as it is now
being conducted. Parent and each of its Subsidiaries (including Merger Sub 1 and
Merger Sub 2) is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character or
location of the properties owned, leased or operated by it or the nature of its
activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. A true, complete and correct list of all of Parent's
Subsidiaries, together with the jurisdiction of incorporation of each
Subsidiary, the authorized capitalization of each Subsidiary, and the percentage
of each Subsidiary's outstanding capital stock owned by Parent or another
Subsidiary or affiliate of Parent, is set forth in Section 5.1 of the Parent
Disclosure Schedule. Parent owns all of the outstanding shares of capital stock
of each of its Subsidiaries. Except for obligations or liabilities incurred in
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connection with their incorporation and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, neither Merger Sub 1 nor Merger Sub 2 have
incurred, directly or indirectly, any obligations or liabilities or engaged in
any business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person. Neither Merger Sub 1 nor Merger Sub
2 directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for any equity or similar
interest in, any corporation, partnership, limited liability company, joint
venture or other business association or entity, excluding securities in any
publicly traded company held for investment by Parent and comprising less than
one percent of the outstanding stock of such company.
Section 5.2 Certificate of Incorporation and Bylaws. Parent has
heretofore made available to the Company a true, complete and correct copy of
its articles of incorporation, as amended to date (the "Parent Charter"), and
bylaws, as amended to date (the "Parent Bylaws"), and has furnished to the
Company true, complete and correct copies of the certificate of incorporation of
Merger Sub 1, as amended to date (the "Merger Sub 1 Charter Documents"), and the
articles of incorporation of Merger Sub 2, as amended to date (the "Merger Sub 2
Charter Documents"). The Parent Charter, Merger Sub 1 Charter Documents, Merger
Sub 2 Charter Documents and the charter and bylaws (or equivalent organizational
documents) each as amended to date, of each of Parent's Subsidiaries (the
"Parent Sub Documents") are in full force and effect. Parent is not in violation
of any of the provisions of the Parent Charter or Parent Bylaws, and none of
Parent's Subsidiaries is in violation of its respective Parent Sub Documents.
Section 5.3 Capitalization.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of Parent Common Stock. As of January 1, 2005, (i) 12,556,636 shares of
Parent Common Stock are issued and outstanding; (ii) 1,076,646 shares of Parent
Common Stock are reserved for issuance pursuant to Parent's 2002 Nonstatutory
Stock Option Plan (the "2002 Parent NSO Plan"); (iii) 90,000 shares of Parent
Common Stock are reserved for issuance upon exercise of awards granted pursuant
to Parent's 2000 Director Stock Option Plan (the "2000 Director Plan"); (iv)
1,324,129 shares of Parent Common Stock are reserved for issuance upon exercise
of awards granted pursuant to Parent's 2000 Employee Stock Option Plan (the
"2000 Employee Plan"); (v) 111,500 shares of Parent Common Stock are reserved
for issuance upon exercise of awards granted pursuant to Parent's 1991 Stock
Option Plan (the "1991 Plan"); (vi) 30,000 shares of Parent Common Stock are
reserved for issuance upon exercise of awards granted pursuant to Parent's 1991
Director Option Plan (the "1991 Director Plan"), and (vii) 750,000 shares of
Parent Common Stock are reserved for issuance pursuant to Parent's Employee
Stock Purchase Plan ("Parent ESPP"). The 2002 Parent NSO Plan, the 2000 Employee
Plan, the 2000 Director Plan, the 1991 Plan, and the 1991 Director Plan are
collectively referred to herein as the "Parent Stock Plans". Between January 1,
2005 and the date of this Agreement, Parent has not issued any securities
(including derivative securities) except for shares of Parent Common Stock
issued upon exercise of stock options outstanding.
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(b) Section 5.3(b) of the Parent Disclosure Schedule sets forth a
true, complete and correct list of all persons who, as of January 20, 2005 held
outstanding awards to acquire shares of Parent Common Stock (the "Parent Stock
Options") under the Parent Stock Plans or under any other equity incentive plan
or arrangement of Parent, indicating, with respect to each Parent Stock Option
then outstanding, the tax status of such option under Section 422 of the Code,
the number of shares of Parent Common Stock subject to such Parent Stock Option,
the name of the plan under which such Parent Stock Option was granted and the
exercise price, date of grant, vesting schedule and expiration date thereof,
including to the extent to which any vesting has occurred as of the date of this
Agreement and whether (and to what extent) the vesting of such Parent Stock
Option will be accelerated in any way by the consummation of the transactions
contemplated by this Agreement or by the termination of employment or engagement
or change in position of any holder thereof following or in connection with the
consummation of the Acquisition Merger. Parent has made available to the Company
true, complete and correct copies of all Parent Stock Plans and the forms of all
stock option agreements evidencing outstanding Parent Stock Options.
(c) Except as described in Section 5.3(a) no capital stock of the
Parent or any of its Subsidiaries or any security convertible or exchangeable
into or exercisable for such capital stock is issued, reserved for issuance or
outstanding as of the date of this Agreement. Except as described in Section
5.3(a), there are no options, preemptive rights, warrants, calls, rights,
commitments, agreements, arrangements or understandings of any kind to which
Parent or any of its Subsidiaries is a party, or by which Parent or any of its
Subsidiaries is bound, obligating Parent or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of Parent or any of its Subsidiaries or obligating Parent or any
of its Subsidiaries to grant, extend or accelerate the vesting of or enter into
any such option, warrant, call, right, commitment, agreement, arrangement or
understanding. There are no shareholder agreements, voting trusts, proxies or
other similar agreements, arrangements or understandings to which Parent or any
of its Subsidiaries is a party, or by which it or they are bound, obligating
Parent or any of its Subsidiaries with respect to any shares of capital stock of
Parent or any of its Subsidiaries. There are no rights or obligations,
contingent or otherwise (including rights of first refusal in favor of Parent),
of Parent or any of its Subsidiaries, to repurchase, redeem or otherwise acquire
any shares of capital stock of Parent or any of its Subsidiaries or to provide
funds to or make any investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity. There are no registration
rights or other similar agreements, arrangements or understandings to which
Parent or any of its Subsidiaries is a party, or by which it or they are bound,
obligating Parent or any of its Subsidiaries with respect to any shares of
Parent Common Stock or shares of capital stock of any such Subsidiary.
(d) All outstanding shares of Parent's capital stock are, all
shares of Parent Common Stock reserved for issuance as specified above will be
(upon issuance on the terms and conditions specified in the instrument pursuant
to which they are issuable), and all shares of Nanometrics Delaware Common Stock
to be issued in the Acquisition Merger have been or will be (when issued in
34
accordance with this Agreement), duly authorized, validly issued, fully paid and
nonassessable and not subject to, or issued in violation of, any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the CCC, the DCGL, the Parent
Charter, the Parent Bylaws or any agreement, arrangement or understanding to
which Parent is a party or is otherwise bound. None of the outstanding shares of
the Parent Common Stock have been issued in violation of any federal or state
securities Laws. All of the outstanding shares of capital stock of each of
Parent's Subsidiaries are duly authorized, validly issued, fully paid and
nonassessable, and all such shares are owned by Parent or a Subsidiary of Parent
free and clear of all Liens. The Nanometrics Delaware Common Stock to be issued
in the Acquisition Merger, when issued in accordance with this Agreement, will
be registered under the Securities Act of 1933, as amended (the "Securities
Act") and the Exchange Act and registered or exempt from registration under any
applicable state securities or "Blue Sky" Laws.
(e) The Parent Common Stock constitutes the only class of
securities of Parent or its Subsidiaries registered or required to be registered
under the Exchange Act.
(f) There are no accrued and unpaid dividends with respect to any
outstanding shares of capital stock of Parent.
(g) The authorized capital stock of Merger Sub 1 consists of 100
shares of Merger Sub 1 Common Stock, all of which are issued and outstanding and
fully paid and nonassessable. All of the issued and outstanding capital stock of
Merger Sub 1 is, and immediately preceding the Acquisition Merger Effective Time
will be, owned by Parent, and there are (i) no other shares of capital stock or
voting securities of Merger Sub 1, (ii) no securities of Merger Sub 1
convertible into or exchangeable for shares of capital stock or voting
securities of Merger Sub 1 and (iii) no options or other rights to acquire from
Merger Sub 1, and no obligations of Merger Sub 1 to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Merger Sub 1.
(h) The authorized capital stock of Merger Sub 2 consists of
1,000 shares of Merger Sub 2 Common Stock, all of which are issued and
outstanding and fully paid and nonassessable. All of the issued and outstanding
capital stock of Merger Sub 2 is, and immediately preceding the Migratory Merger
Effective Time will be, owned by Parent, and there are (i) no other shares of
capital stock or voting securities of Merger Sub 2, (ii) no securities of Merger
Sub 2 convertible into or exchangeable for shares of capital stock or voting
securities of Merger Sub 2 and (iii) no options or other rights to acquire from
Merger Sub 2, and no obligations of Merger Sub 2 to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of Merger Sub 2.
35
Section 5.4 Authority Relative to this Agreement; Shareholder Approval.
(a) Subject only to the approval of the shareholders of Parent as
described below, Parent has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Parent (the "Parent Board"), the Board of Directors of
Merger Sub 1 and the Board of Directors of Merger Sub 2. The Parent Board has
(i) unanimously determined that this Agreement and the transactions contemplated
hereby are advisable and in the best interests of the shareholders of Parent,
(ii) approved this Agreement and the Mergers and (iii) has unanimously
recommended that the shareholders of Parent approve the Migratory Merger, the
Acquisition Merger and the issuance of shares of Parent Common Stock in the
Migratory Merger and the Acquisition Merger (the "Parent Voting Proposal"). This
Agreement has been duly and validly executed and delivered by Parent, Merger Sub
1 and Merger Sub 2, and (assuming due authorization, execution and delivery by
the Company) this Agreement constitutes a valid and binding obligation of
Parent, Merger Sub 1 and Merger Sub 2, enforceable against Parent and Merger Sub
1 and Merger Sub 2 in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium or other similar Laws now or hereafter in effect relating to
creditors' rights generally and by general equitable principles (regardless of
whether enforceability is considered in a proceeding in equity or at Law).
(b) Except for the approval of Parent Voting Proposal by the
affirmative vote of the holders of a majority of the outstanding shares of
Parent Common Stock (the "Parent Shareholders Meeting" and together with the
Company Shareholder Meeting, the "Merger Shareholders Meetings"), of the
shareholders of Parent to consider Parent Voting Proposal (the "Requisite Parent
Shareholder Approval") and the approval of the Acquisition Merger and the
Migratory Merger by Parent, in its capacity as sole shareholder of Merger Sub 1
and the sole stockholder of Merger Sub 2, no other corporate proceedings on the
part of Parent, Merger Sub 1 or Merger Sub 2 are necessary to approve this
Agreement and to consummate the transactions contemplated hereby.
Section 5.5 No Conflict, Required Filings and Consents.
(a) The execution and delivery by Parent, Merger Sub 1 and Merger
Sub 2 of this Agreement do not, the execution and delivery by Parent, Merger Sub
1 and Merger Sub 2 of any instrument required hereby to be executed and
delivered at the Closing will not, and the performance by Parent, Merger Sub 1
and Merger Sub 2 of their respective agreements and obligations under this
Agreement by Parent, Merger Sub 1 and Merger Sub 2 will not, (i) conflict with
36
or violate the Parent Charter, the Parent Bylaws, the Merger Sub 1 Charter
Documents, the Merger Sub 2 Charter Documents or any Parent Sub Documents, (ii)
in any material respect, conflict with or violate any Law applicable to Parent,
Merger Sub 1 or Merger Sub 2 or any Law by which Parent's properties are bound
or affected, (iii) except as would not reasonably be expected to have a Parent
Material Adverse Effect, result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) or
impair Parent's rights or alter the rights or obligations of any third party
including monetary obligations under, or give to any third party any rights of
termination, amendment, payment, acceleration or cancellation of, or result in
the creation of a Lien on any of the properties or assets (including intangible
assets) of Parent pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent is a party or by which Parent or its properties is bound or
affected, or (iv) other than options under the Parent Stock Plans, give rise to
or result in any person having, or having the right to exercise, any pre-emptive
rights, rights of first refusal, rights to acquire or similar rights with
respect to any capital stock of Parent or any of its assets or properties.
(b) The execution and delivery by Parent, Merger Sub 1 and Merger
Sub 2 of this Agreement do not, the execution and delivery by Parent, Merger Sub
1 and Merger Sub 2 of any instrument required hereby to be executed and
delivered at the Closing will not, and the performance of the respective
agreements of, and obligations under, this Agreement by Parent, Merger Sub 1 and
Merger Sub 2 will not, require any consent, approval, order, license,
authorization, registration, declaration or permit of, or filing with or
notification to, any Governmental Entity, except (i) as may be required by the
HSR Act, (ii) as may be required under any foreign antitrust or competition Law
or regulation, (iii) the filing of the Registration Statement on Form S-4 (the
"Registration Statement") with the SEC in accordance with the Securities Act,
and the filing of the Joint Proxy Statement/Prospectus (as defined in Section
7.4) with the SEC under the Exchange Act, (iv) such clearances, consents,
approvals, orders, licenses, authorizations, registrations, declarations,
permits, filings and notifications as may be required under applicable U.S.
federal and state or foreign securities Laws, (v) the filing of the Articles of
Acquisition Merger, the Migratory Merger Certificates or other documents as
required by the CCC, the DGCL and the MBCA and (vi) such other consents,
approvals, orders, registrations, declarations, permits, filings or
notifications which, if not obtained or made, would not reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.
Section 5.6 Compliance; Permits.
(a) Parent is and has been in material compliance with and is not
in material default or violation of (and has not received any notice of material
non-compliance, default or violation with respect to) any Law applicable to it
or by which any of its respective properties are bound or affected.
37
(b) Parent holds all permits, licenses, easements, variances,
exemptions, consents, certificates, authorizations, registrations, orders and
other approvals from Governmental Entities that are material to the operation of
its business as currently conducted (collectively, the "Parent Permits"). The
Parent Permits are in full force and effect, have not been violated in any
material respect and no suspension, revocation or cancellation thereof has been
threatened, and to Parent's knowledge there is no action, proceeding or
investigation pending or threatened, seeking the suspension, revocation or
cancellation of any Parent Permits. No Parent Permit shall cease to be effective
as a result of the consummation of the transactions contemplated by this
Agreement, other than as would not reasonably be expected to have a Parent
Material Adverse Effect.
Section 5.7 SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports, schedules, statements
and other documents, including any exhibits thereto, required to be filed by
Parent since January 1, 2002 with the SEC (collectively, the "Parent SEC
Reports"). The Parent SEC Reports, including all forms, reports and documents
filed by Parent with the SEC after the date hereof and prior to the Acquisition
Merger Effective Time, (i) were and, in the case of Parent SEC Reports filed
after the date hereof, will be, prepared in all material respects in accordance
with the applicable requirements of the Securities Act and the Exchange Act, as
the case may be, and the rules and regulations thereunder and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) and, in the case of
such forms, reports and documents filed by Parent with the SEC after the date of
this Agreement, will not as of the time they are filed, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Parent SEC Reports or necessary in order to make the statements
in such Parent SEC Reports, in light of the circumstances under which they were
made, not misleading. None of the Subsidiaries of Parent is required to file any
forms, report, schedules or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in
each case, any related notes and schedules) contained in the Parent SEC Reports,
including any Parent SEC Reports filed between the date of this Agreement and
the Closing, complied or will comply, as of its respective date, in all material
respects with all applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, was or will be prepared in
accordance with GAAP (except as may be indicated in the notes thereto) applied
on a consistent basis throughout the periods involved and fairly presented in
all material respects or will fairly present in all material respects the
38
consolidated financial position of Parent and its consolidated Subsidiaries as
of the respective dates thereof and the consolidated results of the operations
and cash flows of Parent and its consolidated Subsidiaries for the periods
indicated, except as otherwise explained therein and except that any unaudited
interim financial statements are subject to normal and recurring year-end
adjustments which have not been made and are not expected to be material in
amount, individually or in the aggregate. The unaudited balance sheet and notes
related thereto of Parent contained in the Parent SEC Report on Form 10-Q for
the fiscal Quarter ended September 30, 2004 is referred to herein as the "Parent
Balance Sheet."
(c) The chief executive officer and chief financial officer of
Parent have made all certifications required by, and would be able to make such
certifications as of the date hereof and as of the Closing Date as if required
to be made as of such dates pursuant to, Sections 302 and 906 of the
Sarbanes-Oxley Act and any related rules and regulations promulgated by the SEC
and the statements contained in any such certifications are complete and
correct, and Parent is otherwise in compliance with all applicable effective
provisions of the Sarbanes-Oxley Act and the applicable listing standards and
corporate governance rules of the NASDAQ.
(d) Each of the consolidated financial statements (including, in
each case, any related notes and schedules) contained in the Parent SEC Reports,
accurately reflects the revenues and costs relating to the Parent Material
Contracts (as defined below).
Section 5.8 Disclosure Controls and Procedures. Since December 31,
2003, Parent and each of its Subsidiaries has had in place "disclosure controls
and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under
the Exchange Act) reasonably designed and maintained to ensure that all
information (both financial and non-financial) required to be disclosed by
Parent in the reports that it files or submits to the SEC under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the SEC and that such information is
accumulated and communicated to Parent's management as appropriate to allow
timely decisions regarding required disclosure and to make the certifications of
the chief executive officer and chief financial officer of Parent required under
the Exchange Act with respect to such reports. Parent maintains internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
39
Section 5.9 Absence of Certain Changes or Events. From the date of the
Parent Balance Sheet, Parent has conducted its business in the ordinary course
of business consistent with past practice and, since such date and through the
date hereof, there has not occurred: (i) any Parent Material Adverse Effect;
(ii) any amendments to or changes in the Parent Charter or Parent Bylaws; (iii)
any material damage to, destruction or loss of any asset of Parent (whether or
not covered by insurance); (iv) any change by Parent in its accounting methods,
principles or practices; (v) any revaluation by Parent of any of its assets,
including writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business consistent with past
practice; (vi) any sale of a material amount of assets (tangible or intangible)
of Parent; (vii) any recalls, field notifications or field corrections with
respect to products manufactured by or on behalf of Parent, or (viii) any other
action or event that would have required the consent of the Company pursuant to
Section 6.2 had such action or event occurred after the date of this Agreement.
Section 5.10 No Undisclosed Liabilities.
(a) Except as reflected in the Parent Balance Sheet, Parent has
no liabilities (absolute, accrued, contingent or otherwise) which are required
by GAAP to be set forth on a consolidated balance sheet of Parent and its
consolidated Subsidiaries or in the notes thereto, other than (i) any
liabilities and obligations incurred since the date of the Parent Balance Sheet
in the ordinary course of business consistent with past practice, (ii) any
liabilities or obligations incurred in connection with the transactions
contemplated by this Agreement and (iii) liabilities that, individually or in
the aggregate, have not had, and would not reasonably be expected to have, a
Parent Material Adverse Effect.
(b) Parent is not a party to, nor has any commitment to become a
party to, any joint venture, partnership agreement or any similar contract
(including any contract relating to any transaction, arrangement or relationship
between or among Parent or any of its Subsidiaries, on the one hand, and any
unconsolidated affiliate, including any structured finance, special purpose or
limited purpose entity or person, on the other hand) where the purpose or
intended effect of such arrangement is to avoid disclosure of any material
transaction involving Parent in the Parent's consolidated financial statements.
Section 5.11 Absence of Litigation; Investigations. Prior to the date
of this Agreement, there were no material claims, actions, suits, proceedings,
governmental investigations, inquiries or subpoenas (other than challenging or
otherwise arising from or relating to the Acquisition Merger or any of the other
transactions contemplated by this Agreement), (a) pending against Parent or any
of its properties or assets, (b) to Parent's knowledge, threatened against
Parent, or any of its properties or assets or (c) whether filed or threatened,
that have been settled or compromised by Parent within three years prior to the
date of this Agreement and at the time of such settlement or compromise were
material, which claims, actions, suits, proceedings investigations, inquiries or
subpoenas referred to in clause (a) and (b) above would reasonably be expected
40
to have a Parent Material Adverse Effect. Parent is not subject to any
outstanding order, writ, injunction or decree that would reasonably be expected
to be material or would reasonably be expected to prevent or delay the
consummation of the transactions contemplated by this Agreement. There has not
been nor are there currently any internal investigations or inquiries being
conducted by Parent, the Parent Board (or any committee thereof) or any third
party at the request of any of the foregoing concerning any financial,
accounting, tax, conflict of interest, self-dealing, fraudulent or deceptive
conduct or other misfeasance or malfeasance issues.
Section 5.12 Agreements, Contracts and Commitments.
(a) For purposes of this Agreement, the term "Parent Material
Contracts" shall mean any note, bond, mortgage, indenture, guarantee, other
evidence of indebtedness, lease, license, contract, agreement or other
instrument or obligation to which Parent is a party or by which it or any of its
assets is bound, and which:
(i) has a remaining term of more than one year from the
date hereof and (A) cannot be unilaterally terminated by Parent at any time,
without material penalty, within thirty (30) days of providing notice of
termination, and (B) involves the payment or receipt of money in excess of
$100,000 per year;
(ii) involves the payment or receipt of money in excess of
$250,000 in any year;
(iii) contains covenants limiting the freedom of Parent to
sell any products or services of or to any other person, engage in any line of
business or compete with any person or operate at any location;
(iv) was made with any officer, director, Parent employee
or member of the Parent Board, or any service, operating or management agreement
or arrangement with respect to any of Parent's assets or properties (whether
leased or owned), other than those that are terminable by Parent on no more than
thirty (30) days' notice without liability or financial obligation to Parent;
(v) is a dealer, distributor, joint marketing or
development contract under which Parent has continuing material obligations to
jointly market any product, technology or service and which may not be canceled
without penalty upon notice of ninety (90) days or less, or any contract
pursuant to which Parent has continuing material obligations to jointly develop
any Intellectual Property that will not be owned, in whole or in part, by
Parent;
41
(vi) includes indemnification, guaranty or warranty other
than any those contracts entered into in the ordinary course of Parent's
business;
(vii) mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(viii) settlement agreements under which Parent has
ongoing obligations; or
(ix) Parent Real Property Leases.
(b) All of the Parent Material Contracts that are required to be
described in the Parent SEC Reports (or to be filed as exhibits thereto) are so
described or filed and are enforceable and in full force and effect (except as
such enforceability may be subject to Laws of general application relating to
bankruptcy, insolvency, and the relief of debtors and rules of Law governing
specific performance, injunctive relief or other equitable remedies).
(c) As of the date of this Agreement, (i) there is no breach or
violation of or default by Parent or any of its Subsidiaries under any of the
Parent Material Contracts, except such breaches, violations and defaults as have
been waived, and (ii) no event has occurred with respect to Parent or any of its
Subsidiaries which, with notice or lapse of time or both, would constitute a
breach, violation or default, or give rise to a right of termination,
modification, cancellation, foreclosure, imposition of a Lien, prepayment or
acceleration under any of the Parent Material Contracts, which breach, violation
or default referred to in clauses (i) or (ii), would reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect.
(d) Section 5.12 of the Parent Disclosure Schedule contains a
complete and accurate list of, and true and complete copies have been delivered
or made available to the Company with respect to, all Parent Material Contracts
in effect as of the date hereof other than the Parent Material Contracts which
are listed as an exhibit to Parent's most recent annual report on Form 10-K or a
subsequent quarterly report on Form 10-Q or as otherwise set forth on Section
5.12(a) of the Parent Disclosure Schedule.
Section 5.13 Employee Benefit Plans, Options and Employment Agreements.
(a) Section 5.13(a) of the Parent Disclosure Schedule sets forth
a complete and accurate list of all Employee Benefit Plans maintained, or
contributed to by Parent, any of its Subsidiaries or any of their respective
ERISA Affiliates or to which Parent, any of its Subsidiaries or any of their
respective ERISA Affiliates is obligated to contribute, or under which any of
them has or may have any liability for premiums or benefits for the benefit of
employees located in the United States (collectively, the "Parent Employee
Plans").
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(b) With respect to each Parent Employee Plan, Parent has made
available to the Company complete and accurate copies of (i) such Parent
Employee Plan (or a written summary of any unwritten plan) together with all
amendments, (ii) in the case of any plan for which Forms 5500 are required to be
filed, the most recent annual report (Form 5500) with schedules attached, (iii)
in the case of any plan that is intended to be qualified under Section 401(a) of
the Code, the most recent determination letter from the Internal Revenue
Service, (iv) each trust agreement, group annuity contract, administration and
similar material agreements, investment management or investment advisory
agreements, (v) the most recent summary plan descriptions and employee handbook,
or other similar material employee communications relating to employee benefits
matters, (vi) all personnel, payroll and employment manuals and policies, and
(vii) the most recent financial statements for each Parent Employee Plan that is
funded.
(c) Each Parent Employee Plan has been administered in all
material respects in accordance with ERISA, the Code and all other applicable
Laws and the regulations thereunder and materially in accordance with its terms
and each of Parent, its Subsidiaries and their respective ERISA Affiliates have
in all material respects met their obligations with respect to each Parent
Employee Plan and have timely made (or timely will make) all required
contributions thereto. All filings and reports as to each Parent Employee Plan
required to have been submitted to the Internal Revenue Service or to the United
States Department of Labor have been timely submitted. With respect to the
Parent Employee Plans, no event has occurred, and, to Parent's knowledge, there
exists no condition or set of circumstances in connection with which Parent, its
Subsidiaries or any plan participant could be subject to any material liability
(including penalties or taxes) under ERISA, the Code or any other applicable
Law, nor will the negotiation or consummation of the transactions contemplated
by this Agreement give rise to any such material liability.
(d) With respect to the Parent Employee Plans, there are no
material benefit obligations for which contributions have not been made or
properly accrued and there are no benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
the requirements of GAAP, on the financial statements of Parent. The assets of
each Parent Employee Plan which is funded are reported at their fair market
value on the books and records of such Parent Employee Plan.
(e) No Parent Employee Plan has assets that include securities
issued by Parent, any of its Subsidiaries or any of their respective ERISA
Affiliates.
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(f) All the Parent Employee Plans that are Qualified Plans have
received determination, opinion or advisory letters from the Internal Revenue
Service to the effect that such Parent Employee Plans are qualified and the
plans and trusts related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, or Parent has remaining a
period of time under applicable U.S. Department of the Treasury regulations or
Internal Revenue Service pronouncements in which to apply for such a letter and
to make any amendments necessary to obtain a favorable determination as to the
qualified status of each such Qualified Plan. To Parent's knowledge, no such
determination, opinion or advisory letter has been revoked and revocation has
not been threatened, and no such Parent Employee Plan has been amended or
operated since the date of its most recent determination letter or application
therefor in any respect, and no act or omission has occurred, that would
reasonably be expected to adversely affect its qualification or materially
increase its cost. There has been no termination, partial termination or
discontinuance of contributions to any Qualified Plan that will result in
material liability to Parent. Each Parent Employee Plan which is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies in all material respects the requirements of
Section 401(k)(3) and Section 401(m)(2) of the Code, as the case may be, for
each plan year ending prior to the Closing Date for which testing is required to
be completed.
(g) Neither Parent, any of its Subsidiaries nor any of their
respective ERISA Affiliates has (i) ever maintained a Parent Employee Plan which
was ever subject to Section 412 of the Code or Title IV of ERISA or (ii) ever
been obligated to contribute to a "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA) that is subject to ERISA. No Parent Employee Plan is funded
by, associated with or related to a "voluntary employees' beneficiary
association" within the meaning of Section 501(c)(9) of the Code.
(h) To the extent permitted by applicable Law, each Parent
Employee Plan (other than the Parent Stock Plans or an employment, severance,
change in control or similar agreement with an individual) is amendable and
terminable unilaterally by Parent or one or more of its Subsidiaries party
thereto or covered thereby at any time without material liability to Parent or
any of its Subsidiaries as a result thereof, other than for benefits accrued as
of the date of such amendment or termination and routine administrative costs.
(i) Other than as required under Section 601 et seq. of ERISA,
none of the Parent Employee Plans promises or provides health or other welfare
benefits (excluding normal claims for benefits under the Parent's group life
insurance, accidental death and dismemberment insurance and disability plans and
policies) or coverage to any person following retirement or other termination of
employment. Section 5.13(i) of the Parent Disclosure Schedule lists each Parent
Employee Plan which provides benefits after termination of employment (other
than medical benefits required to be continued under Section 4980B of the Code
44
and part 6 of Subtitle B of Title I of ERISA) and normal claims for benefits
under the Parent's group life insurance, accidental death and dismemberment
insurance and disability plans and policies) and the present value of benefits
accrued under each such Parent Employee Plan are fully funded, fully covered by
insurance or reflected on the Parent Balance Sheet in accordance with GAAP.
(j) There is no action, suit, proceeding, claim, arbitration,
audit or investigation pending or, to Parent's knowledge, threatened, with
respect to any Parent Employee Plan, other than claims for benefits in the
ordinary course. No Parent Employee Plan is or within the last two calendar
years has been the subject of, or has received notice that it is the subject of,
examination by a government agency or a participant in a government sponsored
amnesty, voluntary compliance or similar program.
(k) To Parent's knowledge, each individual who has received
compensation for the performance of services on behalf of Parent, any of its
Subsidiaries or their respective ERISA Affiliates has been properly classified
as an employee or independent contractor in accordance with applicable Law.
(l) Except as would not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect, with respect
to each Employee Benefit Plan maintained by Parent, any of its Subsidiaries or
any of their ERISA Affiliates that covers employees outside the United States,
and the books and records thereof, (i) such plan is in compliance with all
applicable Laws of each applicable jurisdiction; (ii) there is no action, suit,
proceeding, claim, arbitration, audit or investigation pending or, to Parent's
knowledge, threatened, with respect to such plan, other than claims for benefits
in the ordinary course; (iii) all liabilities with respect to such plan are set
forth on a consolidated balance sheet of Parent and its Subsidiaries or in the
notes thereto in accordance with GAAP; and (iv) no such plan is or within the
last two calendar years has been the subject of, or has received notice that it
is the subject of, an examination by a government agency or a participant in a
government sponsored amnesty, voluntary compliance or similar program that has
given rise to or is reasonably expected to give rise to any liability. Section
5.13(l) of the Parent Disclosure Schedule lists each country in which Parent or
any of its Subsidiaries or affiliates has operations and the number of employees
in each such country.
(m) Section 5.13(m) of the Parent Disclosure Schedule sets forth
a true, complete and correct list of: (i) all employment agreements with
employees of Parent or any of its Subsidiaries (other than at-will offer letters
that are consistent with Parent's general form and do not provide for severance
payments or benefits, notice periods for termination or change of control
benefits); (ii) all employees or former employees of Parent who have executed a
non competition agreement with Parent; (iii) all severance agreements, programs
and policies of Parent or any of its Subsidiaries with or relating to its
employees, excluding programs and policies required to be maintained by Law; and
45
(iv) all plans, programs, agreements and other arrangements of Parent or any of
its Subsidiaries pursuant to which payments (or acceleration of benefits or
vesting of options or lapse of repurchase rights) may be required upon, or may
become payable directly or indirectly as a result of or in connection with, the
negotiation or consummation of the transactions contemplated by, or the
execution of, this Agreement. True, complete and correct copies of each of the
foregoing agreements to which any employee of Parent is a party have been made
available to Company.
(n) All contributions required to be made with respect to any
Parent Employee Plan on or prior to the Acquisition Merger Effective Time have
been or will be timely made or are reflected on the Parent Balance Sheet. There
are no pending, threatened or reasonably anticipated claims by or on behalf of
any Plan, by any employee or beneficiary covered under any such Parent Employee
Plan, or otherwise involving any such Plan (other than routine claims for
benefits).
(o) The negotiation or consummation of the transactions
contemplated by this Agreement will not, either alone or in combination with
another event, (i) entitle any current or former employee or officer of Parent
or any of its Subsidiaries to severance pay, or any other payment from Parent or
any of its Subsidiaries or (ii) accelerate the time of payment or vesting, cause
a lapse of repurchase rights or increase the amount of compensation due any such
employee or officer. There is no Parent Employee Plan or other contract,
agreement, plan or arrangement that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to
Sections 280G (determined without regard to Section 280G(b)(4) of the Code) as a
result of the Mergers or 162(m) of the Code.
Section 5.14 Labor Matters.
(a) Parent is in compliance in all material respects with all
applicable Laws respecting employment and employment practices, including,
without limitation, all Laws respecting terms and conditions of employment,
health and safety, wages and hours, child labor, immigration, employment
discrimination, disability rights or benefits, equal opportunity, plant closures
and layoffs, affirmative action, workers' compensation, labor relations,
employee leave issues and unemployment insurance.
(b) There are no personnel manuals or handbooks applicable to
employees of Parent, other than those set forth in Section 5.14(b) of the Parent
Disclosure Schedule, true and complete copies or written summaries of which have
heretofore been provided to the Company.
(c) There are no actions, suits, claims, grievances,
investigations, or other proceedings pending or, to Parent's knowledge,
threatened, between (i) Parent (and/or any of their current or former officers,
46
directors, employees, or representatives, in their capacities as such) and (ii)
any of their respective current or former employees, consultants or independent
contractors, or any applicant for employment or classes of the foregoing, or any
Governmental Entity, which actions, suits, claims, grievances, investigations,
or other proceedings have or would reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect.
(d) Parent has good labor relations, and Parent and its
employees, agents or representatives have not committed any unfair labor
practice as defined in the National Labor Relations Act. Parent is not a party
to, bound by or subject to (and none of Parent's properties or assets is bound
by or subject to) any labor agreement, collective bargaining agreement, work
rules or practices, or any other labor-related agreements or arrangements with
any labor union, labor organization, trade union or works council. There are no
labor agreements, collective bargaining agreements, work rules or practices, or
any other labor-related agreements or arrangements that pertain to any of the
employees of Parent, and no employees of Parent are represented by any labor
union, labor organization, trade union or works council with respect to their
employment with Parent.
(e) To Parent's knowledge, there are no current labor union
organizing activities with respect to any employees of Parent, and no labor
union, labor organization, trade union, works council, or group of employees of
Parent has made a pending demand for recognition or certification, and there are
no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or threatened in writing to be
brought or filed with the National Labor Relations Board or any other labor
relations tribunal or authority. To the Parent's knowledge, there are no labor
disputes, strikes, slowdowns, work stoppages, lockouts, or threats thereof,
against or affecting Parent.
(f) No employee of Parent (i) to Parent's knowledge, is in
violation of any term of any patent disclosure agreement, non-competition
agreement, or any restrictive covenant to a former employer relating to the
right of any such employee to be employed by Parent because of the nature of the
business conducted or presently proposed to be conducted by Parent or relating
to the use of trade secrets or proprietary information of others, or (ii) in the
case of any key employee or group of key employees, has given notice as of the
date of this Agreement to Parent that such employee or any employee in a group
of key employees intends to terminate his or her employment with Parent.
(g) Parent is and has been in compliance with all notice and
other requirements under the Worker Adjustment and Retraining Notification Act
of 1988, as amended (the "WARN Act"), and any similar foreign, state or local
Law relating to plant closings and layoffs. Parent is not currently engaged in
47
any layoffs or employment terminations sufficient in number to trigger
application of the WARN Act or any similar state, local or foreign Law. Section
5.14(g) of the Parent Disclosure Schedule contains a true and complete list of
the names and the sites of employment or facilities of those individuals who
suffered an "employment loss" (as defined in the WARN Act) at any site of
employment or facility of Parent during the 90-day period prior to the date of
this Agreement. Section 5.14(g) of the Parent Disclosure Schedule shall be
updated immediately prior to the Closing with respect to the 90-day period prior
to the Closing.
(h) The execution of this Agreement and the consummation of the
transactions contemplated by this Agreement will not result in any breach or
other violation of any collective bargaining agreement, employment agreement,
consulting agreement or any other labor-related agreement to which Parent is a
party.
Section 5.15 Properties; Encumbrances.
(a) Parent has good and valid title to, or a valid leasehold
interest in, all the properties and assets which it purports to own or lease
(real, tangible, personal and mixed), including all the properties and assets
reflected in the Parent Balance Sheet (except for personal property sold since
the date of the Parent Balance Sheet in the ordinary course of business
consistent with past practice). All properties and assets reflected in the
Parent Balance Sheet are free and clear of all Liens, except for Liens reflected
on the Parent Balance Sheet and Liens for current taxes not yet due and other
Liens that do not materially impair the use or operation of the property or
assets subject thereto.
(b) Section 5.15 of the Parent Disclosure Schedule sets forth a
true, complete and correct list of all real property owned, leased, subleased or
licensed by Parent and the location of such premises. All material real property
leases, licenses or other occupancy agreements to which Parent is a party
(collectively, the "Parent Real Property Leases") are either filed as exhibits
to the Parent SEC Reports or complete copies thereof have been delivered to or
made available to the Company. Section 5.15 of the Parent Disclosure Schedule
lists all Parent Real Property Leases other than the Parent Real Property Leases
which are listed as an exhibit to Parent's most recent annual report on Form
10-K or a subsequent quarterly report on Form 10-Q.
(c) As of the date of this Agreement, (i) all Parent Real
Property Leases are in full force and effect (except as such enforceability may
be subject to Laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of Law governing specific performance,
injunctive relief or other equitable remedies), (ii) there is no existing
material default by Parent under any of the Parent Real Property Leases, except
such defaults as have been waived in writing, (iii) no event has occurred with
respect to Parent which, with notice or lapse of time or both, would constitute
a default of any of the Parent Real Property Leases, and (iv) to the Parent's
knowledge, there are no defaults of any material obligations of any party other
than Parent under any Parent Real Property Lease.
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Section 5.16 Taxes.
(a) Parent has filed with the appropriate taxing authorities all
material Tax Returns required to be filed by them and all such Tax Returns are
true, complete and correct in all material respects. All Taxes required to be
paid by Parent have been timely paid. There are no Liens relating to or
attributable to Taxes on any assets of Parent other than Liens relating to Taxes
not yet due and payable. Parent has not granted any outstanding waiver of any
statute of limitations with respect to, or any outstanding extension of a period
for the assessment of, any Tax. The accruals and reserves for Taxes (exclusive
of any accruals for "deferred taxes" or similar items that reflect timing
differences between tax and financial accounting principles) reflected in the
Parent Balance Sheet are adequate to cover all Taxes accruable through the date
thereof (including Taxes being contested) in accordance with GAAP. All
liabilities for Taxes attributable to the period commencing on the date
following the date of the Parent Balance Sheet were incurred in the ordinary
course of business and are consistent in type and amount with Taxes attributable
to similar prior periods.
(b) Parent has timely paid or withheld with respect to its
employees all federal and state Taxes required to be paid or withheld (and have
timely paid over any withheld amounts to the appropriate Taxing authority).
Parent has not received any notice of any Tax deficiency outstanding, proposed
or assessed against Parent. No audit or other examination of any Tax Return of
Parent is presently in progress, and Parent has not received any written notice
of any audit examination, deficiency, refund litigation, proposed adjustment or
matter in controversy with respect to any Tax Return of Parent.
(c) Parent is not a party to or bound by any Tax indemnity, Tax
sharing or Tax allocation agreements with any entity other than Parent or any
Parent Subsidiary. Except for the group of which Parent and its Subsidiaries are
now currently members, Parent has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. Except with respect
to the group referred to in the preceding sentence, Parent is not liable for the
Taxes of any person under Treasury Regulation 1.1502-6 (or any similar provision
of state, local or foreign Law) as a transferee or successor, by contract or
otherwise. Parent has never been a party to any joint venture, partnership or
other agreement that could be treated as a partnership for Tax purposes.
(d) To the extent requested by the Company, Parent has made
available to the Company complete and correct copies of all Tax Returns,
examination reports and statements of deficiencies assessed against or agreed to
by Parent with respect to all taxable years for which the statutes of limitation
have not expired.
49
(e) Parent has not agreed nor is it required to make any material
adjustment under Section 481 of the Code by reason of a change in accounting
method or otherwise prior to the Acquisition Merger Effective Time.
(f) Parent is not, and has never been, a United States real
property holding corporation (as defined in Section 897(c)(2) of the Code)
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(g) Parent has not constituted either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock intended to qualify for
tax-free treatment under Section 355 of the Code (A) in the two years prior to
the date of this Agreement or (B) in a distribution which could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) in connection with the Acquisition
Merger.
(h) Parent has not engaged in, or has any commitment to engage
in, any transaction that is the same as or substantially similar to one of the
types of transactions that the Internal Revenue Service has determined to be a
tax avoidance transaction and identified by notice, regulation, or other form of
published guidance as a "reportable transaction," as set forth in Treas. Reg.
ss. 1.6011-4(b).
Section 5.17 Environmental Matters.
(a) Parent is in compliance in all material respects with
federal, state, local and foreign Laws and regulations relating to Materials of
Environmental Concern, or otherwise relating to Environmental Laws, and
including, but not limited to, compliance with any Parent Permits or other
governmental authorizations or the terms and conditions thereof and compliance
with any Laws respecting the sale, distribution or labeling of products pursuant
to Environmental Laws.
(b) Parent has not received any written notice, whether from a
governmental authority or otherwise, alleging any violation of or noncompliance
with any Environmental Laws by Parent for which it is responsible.
(c) There is no pending or threatened claim, action,
investigation or notice by any person or entity alleging potential liability on
the part of Parent or any of its Subsidiaries for investigatory, cleanup or
governmental response costs, or natural resources or property damages, or
personal injuries, attorney's fees or penalties relating to (i) the presence, or
release into the environment, of any Materials of Environmental Concern at any
location owned or operated by Parent, now or in the past, or otherwise caused by
Parent or by the actions of any other party for which Parent would be liable by
contract or pursuant to Environmental Laws, or (ii) any violation, or alleged
violation, of any Environmental Law (collectively, "Parent Environmental
Claims"), except where such Parent Environmental Claims would not have a Parent
Material Adverse Effect or otherwise require disclosure in the Parent SEC
Reports.
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(d) There are no past or present facts or circumstances that
could reasonably be expected to form the basis of any Parent Environmental Claim
against Parent or against any person or entity whose liability for any Parent
Environmental Claim Parent has retained or assumed either contractually or by
operation of Law, except where such Parent Environmental Claim, if made, would
not have a Parent Material Adverse Effect or otherwise require disclosure in the
Parent SEC Reports. Parent has made available to the Company all material third
party, non privileged assessments, reports, data, results of investigations or
audits that is in the possession of Parent regarding environmental matters
pertaining to the environmental condition of the business of Parent, or the
compliance (or noncompliance) by Parent with any Environmental Laws.
Section 5.18 Intellectual Property.
(a) For purposes of this Agreement, the term "Parent Registered
Intellectual Property" means all Registered Intellectual Property owned by
Parent or any of its Subsidiaries.
(b) Section 5.18(b) of the Parent Disclosure Schedule sets forth
as of the date hereof a true, complete and correct list of all Parent Registered
Intellectual Property. All of the Parent Registered Intellectual Property is
owned solely by Parent and no Registered Intellectual Property that ever was
Parent Registered Intellectual Property has been disposed of by Parent in the
two years preceding the date hereof.
(c) The Parent Registered Intellectual Property, is subsisting,
and has not expired or been cancelled, or abandoned.
(d) There is no pending or, to Parent's knowledge, threatened,
and at no time within the three years prior to the date of this Agreement has
there been pending any, material suit, arbitration or other adversarial
proceeding before any court, government agency or arbitral tribunal or in any
jurisdiction alleging that any activities or conduct of Parent's business
infringes or will infringe upon, violate or constitute the unauthorized use of
the Intellectual Property of any third party or challenging the ownership,
validity, enforceability or registrability of any Intellectual Property owned by
Parent.
(e) Parent is not a party to any settlements, covenants not to
sue, consents, decrees, stipulations, judgments, or orders resulting from suits,
actions or similar legal proceedings which (i) restrict Parent's rights to use
any Intellectual Property owned by and material to the business of the Parent as
currently conducted, (ii) restrict the conduct of the business of Parent as
currently conducted in order to accommodate any third party's Intellectual
Property rights, or (iii) permit third parties to use any Intellectual Property
owned by and used in the business of Parent as currently conducted.
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(f) The conduct of the business of Parent as currently conducted
does not infringe upon, violate or constitute the unauthorized use of any
Intellectual Property rights owned by any third party.
(g) Parent has taken reasonable measures to protect the
proprietary nature of the Intellectual Property owned by Parent that is material
to the business of Parent as currently conducted.
(h) To Parent's knowledge, no third party is misappropriating,
infringing, diluting or violating any Intellectual Property owned by Parent that
is material to the business of Parent as currently conducted, and no
Intellectual Property misappropriation, infringement dilution or violation
suits, arbitrations or other adversarial proceedings have been brought before
any court, government agency or arbitral tribunal against any third party by
Parent which remain unresolved.
(i) Parent has not (i) disclosed to any third person any material
confidential source code for any product currently being marketed, sold,
licensed or developed by Parent (each such product, a "Parent Proprietary
Product"), or (ii) made any such source code subject to any open source license,
nor is Parent obligated to make the source code for such Parent Proprietary
Product generally available.
(j) Parent does not have any obligation to pay any third party
any royalties or other fees in excess of $100,000 in the aggregate in calendar
year 2004 or any annual period thereafter for the use of Intellectual Property
and no obligation to pay such royalties or other fees in excess of $250,000 in
the aggregate will result from the execution and delivery by Parent of this
Agreement and the consummation of the transactions contemplated by this
Agreement.
(k) Parent is not in violation of any material license,
sublicense, agreement or instrument to which Parent is party or otherwise bound
under which Parent derives rights to Intellectual Property that is material to
Parent's business as currently conducted, nor will the consummation by Parent of
the transactions contemplated hereby result in any loss or impairment of
ownership by Parent of, or the right of any of them to use, any Intellectual
Property that is material to the business of Parent as currently conducted, nor,
to Parent's knowledge, require the consent of any Governmental Entity or third
party with respect to any such Intellectual Property.
(l) Parent is not a party to any agreement under which a third
party would be entitled to receive or expand a license or any other right to any
material Intellectual Property of the Company as a result of the consummation of
the transactions contemplated by this Agreement.
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Section 5.19 Insurance. All fire and casualty, general liability,
business interruption, product liability, sprinkler and water damage insurance
policies and other forms of insurance maintained by Parent have been made
available to the Company. Each such policy is in full force and effect and all
premiums due thereon have been paid in full. None of such policies shall
terminate or lapse (or be otherwise adversely affect) by reason of the execution
and delivery of this Agreement or the consummation of the transactions
contemplated by this Agreement.
Section 5.20 Interested Party Transactions. Since December 31, 2003, no
event has occurred that would be required to be reported as a Certain
Relationship or Related Transaction pursuant to Statement of Financial
Accounting Standards No. 57.
Section 5.21 Brokers. No broker, finder or investment banker (other
than Adams Harkness, Inc. whose brokerage, finder's or other fee will be paid by
Parent) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or any of its Subsidiaries. Parent
has furnished to the Company a complete and correct copy of all agreements
between Parent and Adams Harkness, Inc. pursuant to which Adams Harkness, Inc.
would be entitled to any such payment.
Section 5.22 Opinion of Financial Advisor of Parent. The financial
advisor of Parent, Adams Harkness, Inc., has delivered to Parent an opinion
dated on the date of this Agreement to the effect that as of such date, the
Merger Consideration is fair, from a financial point of view, to Parent. Parent
has provided a true, complete and correct copy of such opinion to the Company.
As of the date hereof, such opinion has not been withdrawn, revoked or modified.
Section 5.23 Anti-Takeover Statute Not Applicable. No Takeover Statute
is applicable to the Acquisition Merger or any of the other transactions
contemplated by this Agreement.
ARTICLE VI
INTERIM CONDUCT OF BUSINESS
Section 6.1 Affirmative Covenants. Except as described in Section 6.1
of the Company Disclosure Schedule in the case of the Company, or Section 6.1 of
the Parent Disclosure Schedule in the case of Parent, or to the extent the other
party hereto shall otherwise consent in writing (which consent shall not be
unreasonably withheld, delayed or conditioned), during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Acquisition Merger Effective Time, each party hereto shall (i)
conduct its business only in, and shall not take any action except in, the
53
ordinary course and in a manner that is consistent with past practices and in
compliance in all material respects with all applicable Laws, and (ii) use
commercially reasonable efforts to preserve intact its business organization,
keep available the services of its current officers, employees and consultants,
and preserve the its present relationships with customers, suppliers,
distributors and other persons with which it has significant business relations.
Section 6.2 Restrictive Covenants. Except as described in Section 6.2
of the Company Disclosure Schedule in the case of the Company, or Section 6.2 of
the Parent Disclosure Schedule in the case of Parent, or to the extent the other
party hereto shall otherwise consent in writing (which consent shall not be
unreasonably withheld, delayed or conditioned), during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Acquisition Merger Effective Time, neither party hereto (other
than Parent taking any action in furtherance of or otherwise implementing the
Migratory Merger) shall:
(i) amend or otherwise change its articles or certificate
of incorporation, bylaws or other equivalent organizational documents;
(ii) issue, sell, transfer, pledge, redeem, accelerate
rights under, dispose of or encumber, or authorize the issuance, sale, transfer,
pledge, redemption, acceleration of rights under, disposition or encumbrance of,
any shares of its capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of its
capital stock, or any other ownership interest in such party, other than grants
of stock options for the purchase of up to an aggregate of 50,000 shares of such
party's Common Stock to employees;
(iii) sell, pledge, mortgage, dispose, lease, license or
encumber any of its properties or assets (whether tangible or intangible), or
suffer to exist any Lien thereupon other than (A) sales of assets not to exceed
$100,000 in the aggregate and (B) sales, leases or licenses of the Parent
Proprietary Products or Company Proprietary Products, as the case may be, in the
ordinary course of business consistent with past practice;
(iv) (A) declare, set aside, make or pay any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock, except that a direct or
indirect wholly owned Subsidiary of a party (or a Subsidiary of a party) may
declare and pay a dividend to its parent, (B) split, combine or reclassify any
of its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (C) purchase, repurchase, redeem or otherwise acquire,
directly or indirectly, any of its securities, or any option, warrant or right
to acquire any such securities, or propose to do any of the foregoing, other
than pursuant to the exercise of repurchase rights with respect to unvested
shares held by individuals terminating employment or service;
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(v) acquire (by merger, consolidation or acquisition of
stock or assets or otherwise) any corporation, partnership or other business
organization or division thereof or any equity interest therein;
(vi) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for (whether directly, contingently or
otherwise), the obligations of any person for borrowed money, or make any loans
or advances or capital contributions to or investments in any other person,
except in the ordinary course of business and consistent with past practice;
(vii) (A) amend any Company Material Contract or Parent
Material Contract, as the case may be, in any material respect or enter into any
agreement that would be deemed to be a Company Material Contract or Parent
Material Contract, as the case may be; (B) terminate, cancel or waive any right
under any Company Material Contract or Parent Material Contract, as the case may
be, other than in the ordinary course of business consistent with past
practices, or (C) or enter into, amend or terminate any lease relating to real
property;
(viii) (A) adopt or implement any shareholder rights plan
or similar arrangement, or (B) take any action to cause any Takeover Statute to
apply (or fail to take any action to prevent any Takeover Statute from applying)
to this Agreement, the Company Shareholder Voting Agreements, the Parent
Shareholder Voting Agreements or the transactions contemplated hereby;
(ix) make or authorize any capital expenditures or
purchase of fixed assets, other than in the ordinary course of business;
(x) modify its standard warranty terms for its products or
amend or modify any product warranties in effect as of the date of this
Agreement in any manner that is materially adverse to it, other than extensions
of warranties in the ordinary course of business;
(xi) (A) increase the compensation payable or to become
payable to its directors, officers or employees, (B) hire or promote any officer
or director-level employee or appoint any director, (C) make any loan, advance
or capital contribution (other than loans or advances of reasonable relocation
expenses), or grant any severance or termination pay to any current or former
officers or employees, or enter into or amend any Company Employee Plan or other
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plan, contract, agreement or arrangement that would be a Company Employee Plan
in the case of the Company, or any Parent Employee Plan or other plan, contract,
agreement or arrangement that would be a Parent Employee Plan in the case of
Parent (provided that in connection with the Migratory Merger, Parent may adopt
Employee Benefit Plans, including Stock Plans or an ESPP) (D) establish, adopt,
enter into or amend any collective bargaining agreement or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any of its
current or former directors, officers or employees (except for Parent adopting
directors' and officers' liability insurance), (E) pay any discretionary bonuses
to any of its officers, or (F) materially change any actuarial assumption or
other assumption used to calculate funding obligations with respect to any
pension or retirement plan, or change the manner in which contributions to any
such plan are made or the basis on which such contributions are determined,
except, in each case, as may be required by applicable Law or contractual
commitments which are existing as of the date of this Agreement and listed in
Section 4.13 of the Company Disclosure Schedule in the case of the Company or
Section 5.13 of the Parent Disclosure Schedule in the case of Parent;
(xii) take any action to change accounting policies or
procedures (including procedures with respect to revenue recognition, payments
of accounts payable and collection of accounts receivable), change any
assumption underlying, or method of calculating, any bad debt contingency or
other reserve, except in each case as required under GAAP or applicable Law;
(xiii) make any Tax election inconsistent with past
practice, change any Tax election already made, settle or compromise any
federal, state, local or foreign Tax liability or agree to an extension of a
statute of limitations, fail to file any Tax Return when due (or, alternatively,
fail to file for available extensions) or fail to cause such Tax Returns when
filed to be complete and accurate; or fail to pay any Taxes when due;
(xiv) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practices of liabilities reflected
or reserved against in the financial statements contained in the Company SEC
Reports or the Parent SEC reports, as the case may be, or incurred in the
ordinary course of business and consistent with past practice;
(xv) fail to pay accounts payable and other obligations in
the ordinary course of business;
(xvi) accelerate the collection of receivables or modify
the payment terms of any receivables other than in the ordinary course of
business consistent with past practices;
(xvii) sell, securitize, factor or otherwise transfer any
accounts receivable;
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(xviii) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization (other than as expressly provided in this Agreement);
(xix) (A) at any time within the 90-day period before the
Acquisition Merger Effective Time, without complying fully with the notice and
other requirements of the WARN Act, effectuate (1) a "plant closing" (as defined
in the WARN Act) affecting any single site of employment or one or more
facilities or operating units within any single site of employment of the
Company or any of its Subsidiaries, or (2) a "mass layoff" (as defined in the
WARN Act) at any single site of employment or one or more facilities or
operating units within any single site of employment of the Company or any of
its Subsidiaries; or (B) terminate or lay off employees in such numbers as to
give rise to liability under any applicable Laws respecting the payment of
severance pay, separation pay, termination pay, pay in lieu of notice of
termination, redundancy pay, or the payment of any other compensation, premium
or penalty upon termination of employment, reduction of hours, or temporary or
permanent layoffs (it being understood and hereby agreed that for purposes of
the WARN Act and this Agreement, the Acquisition Merger Effective Time is and
shall be the same as the "effective date" within the meaning of the WARN Act);
(xx) take any action that would, or would reasonably be
expected to, prevent or materially impair or delay its ability to consummate the
transaction contemplated by the Agreement;
(xxi) take any action which would make any of its
representations or warranties contained in this Agreement untrue or incorrect,
or prevent it from performing or cause it not to perform its covenants
hereunder, in each case, such that the conditions set forth in Section 8.2 would
not be satisfied;
(xxii) authorize, take, or agree in writing or otherwise
to take, any of the actions described in Section 6.2(i) through (xxi) above,
inclusive.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information; Notice of Certain Matters.
(a) Subject to the terms of this Section 7.1, each of Parent and
the Company shall (and shall cause its Subsidiaries and its and their respective
directors, officers, employees, auditors, agents and other representatives to)
afford to the other party, and its officers, employees, financial advisors,
legal counsel, accountants, consultants and other representatives reasonable
access during normal business hours to all of its books and records, properties,
plants and personnel; provided, however, that any such access shall be conducted
under the supervision of personnel of the party providing such access and in a
manner that does not interfere with the normal operations of the party providing
such access.
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(b) The Company shall give prompt notice to Parent, and Parent
shall give prompt notice to the Company, upon any director or officer of the
Company or Parent (as applicable) becoming aware of (i) any governmental
complaints, investigations or hearings (or communications indicating that the
same may be contemplated), or the institution or the threat of significant
litigation involving such party or any of its Subsidiaries, and will keep the
other party fully informed of such events and (ii) the occurrence, or failure to
occur, of any event, that would be reasonably likely to cause any of the
conditions set forth in ARTICLE VIII not to be satisfied.
(c) Notwithstanding anything to the contrary set forth herein,
nothing in this Section 7.1 shall require the Company or Parent to disclose any
information that, in its sole and absolute discretion, (i) it is not legally
permitted to disclose or the disclosure of which would contravene any applicable
Law or binding order (including any Antitrust Law), (ii) the disclosure of which
would jeopardize any attorney-client or other legal privilege, or (iii) the
disclosure of which would conflict with, violate or cause a default under any
existing agreement to which it is a party.
(d) No information received pursuant to an investigation made
under this Section 7.1 shall be deemed to (i) qualify, modify, amend or
otherwise affect any representations, warranties, covenants or other agreements
of the parties set forth in this Agreement or any certificate or other
instrument delivered to other party in connection with the transactions
contemplated hereby, (ii) amend or otherwise supplement the information set
forth in the Company Disclosure Schedule or the Parent Disclosure Schedule, as
applicable, (iii) limit or restrict the remedies available to the parties under
applicable Law arising out of a breach of this Agreement, or (iv) limit or
restrict the ability of either party to invoke or rely on the conditions to the
obligations of the parties to consummate the transactions contemplated hereby
set forth in ARTICLE VIII hereof.
(e) Each of Parent and the Company shall (and shall cause its
directors, officers, employees, auditors, agents and other representatives to)
hold in confidence all non-public information acquired from the other party or
the other party's representatives as a result of any investigation made under
this Section 7.1 in accordance with the terms of the letter agreement, dated as
of October 26, 2004, between Parent and the Company (the "Confidentiality
Agreement").
Section 7.2 No Solicitation.
(a) Each of the Company and Parent shall and shall cause each of
their respective Subsidiaries, affiliates, directors, officers, employees,
agents and representatives (including any investment banker, financial advisor,
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attorney, accountant or other representative retained by them) to (i)
immediately cease any discussions or negotiations with any other parties that
may be ongoing with respect to the possibility or consideration of any
Acquisition Proposal (as defined below) and (ii) not release any third party
from, or waive any provisions of, any confidentiality or standstill agreement to
which it or any of its Subsidiaries is a party with respect to any Acquisition
Proposal. Subject to the terms of this Section 7.2, neither the Company nor
Parent shall, nor shall either of them authorize or permit any of their
respective Subsidiaries, directors, officers, employees, agents or
representatives (including any investment banker, financial advisor, attorney,
accountant or other representative retained by it) to, directly or indirectly
through another person, (i) solicit, initiate, facilitate or encourage
(including by way of furnishing information or assistance), or take any other
action designed to solicit, initiate, facilitate or encourage any inquiries with
respect to or the making of any proposal that constitutes, or is reasonably
likely to lead to, an Acquisition Proposal (except to disclose the existence of
this provision), (ii) participate in any discussions or negotiations regarding
an Acquisition Proposal (except to disclose the existence of this provision), or
(iii) enter into or execute any letter of intent, memorandum of understanding,
agreement in principle, merger agreement or similar agreement constituting or
relating to an Acquisition Proposal (other than a confidentiality agreement
entered into in the circumstances referred to and consistent with the provisions
of Section 7.2(c)). Any violation of the foregoing restrictions by any
representative of a party, whether or not such representative is so authorized
and whether or not such representative is purporting to act on behalf of such
party or otherwise, shall be deemed to be a breach of this Agreement by such
party.
(b) Notwithstanding anything to the contrary set forth herein, in
the event that the Company or Parent shall receive an unsolicited bona fide
written Acquisition Proposal after the date of this Agreement and prior to its
respective Merger Stockholders Meeting, the party receiving such Acquisition
Proposal shall be permitted to engage in discussions and negotiations with, and
provide nonpublic information or data to, the person making such Acquisition
Proposal, provided that (i) the party receiving such Acquisition Proposal has
entered into a confidentiality agreement with the person making such Acquisition
Proposal having provisions that are no less favorable to such party than those
contained in the Confidentiality Agreement, and (ii) the Board of Directors of
the party receiving such Acquisition Proposal has reasonably determined in good
faith (based on the advice of its outside legal counsel) that it is necessary to
take such action in order to comply with its fiduciary duties under applicable
Law.
(c) Each party hereto shall notify the other parties hereto
promptly (and in any event within 24 hours) after receipt of any Acquisition
Proposal, or any request for nonpublic information relating to such party by any
person that informs such party that it is considering making, or has made, an
Acquisition Proposal, or any inquiry from any person seeking to have discussions
or negotiations with such party relating to a possible Acquisition Proposal.
Such notice shall be made orally and confirmed in writing, and shall indicate
the identity of the person making the Acquisition Proposal, inquiry or request
59
and the material terms and conditions of any inquiries, proposals or offers
(including a copy thereof if in writing and any related documentation or
correspondence). Each party hereto shall also promptly (and in any event within
24 hours) notify the other parties hereto, orally and in writing, if it enters
into discussions or negotiations concerning any Acquisition Proposal or provides
nonpublic information or data to any person in accordance with this Section 7.2
and shall keep the other party hereto reasonably informed of the status and
terms of any such proposals, offers, discussions or negotiations on a current
basis, including by providing a copy of all material documentation or
correspondence relating thereto that is exchanged between such party and the
person making such Acquisition Proposal.
(d) Nothing set forth in this Section 7.2 shall prohibit any
party hereto from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act;
provided, however, that any action taken or disclosure made pursuant to such
rules shall not in any way limit or modify the effect that any action taken or
disclosure made pursuant to such rules has under any other provision of this
Agreement.
(e) Nothing set forth in this Section 7.2 shall (i) permit any
party hereto to terminate this Agreement (ii) affect any other obligation of the
parties under this Agreement, (iii) limit either Parent's or the Company's
obligation to duly call, give notice of, convene and hold its respective Merger
Shareholders Meeting, (iv) relieve either Parent or the Company of its
obligation to submit to a vote of its shareholders either the Company
Shareholder Proposal or the Parent Shareholder Proposal, as appropriate, at its
respective Merger Shareholders Meeting, or (v) permit either party hereto to
submit for a vote of its respective shareholders at or prior to its respective
Merger Shareholders Meeting any Acquisition Proposal other than the Parent
Voting Proposal and the Company Voting Proposal, as applicable.
Section 7.3 Board Recommendations.
(a) Subject to the terms of this , neither the Company Board (or
any committee thereof) nor the Parent Board (nor any committee thereof) shall:
(i) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to the other party, the approval or recommendation
by such Board of Directors or any such committee of this Agreement or the
transactions contemplated hereby (any such withdrawal, amendment, modification
or proposal, a "Change of Recommendation"); or
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(ii) adopt, approve or recommend to its shareholders that
they accept, or propose publicly to adopt, approve or recommend, any Acquisition
Proposal or Superior Proposal (as defined below).
(b) Notwithstanding anything to the contrary set forth herein,
each of the Company Board and the Parent Board may effect a Change of
Recommendation, provided that (i) the Company or Parent, respectively, has
received a Superior Proposal and such Superior Proposal has not been withdrawn
at the time such action is taken, (ii) the Company Shareholders Meeting or the
Parent Shareholders Meeting, respectively, has not occurred, and (iii) the Board
of Directors of the party receiving such Superior Proposal reasonably determines
in good faith (based on the advice of its outside legal counsel) that it is
necessary to take such action in order to comply with its fiduciary duties under
applicable Law, and (iv) the party hereto receiving such Superior Proposal has
provided the other party hereto five (5) business days prior written notice that
its Board of Directors intends to take such action, specifying the material
terms and conditions of such Superior Proposal (and providing a written copy
thereof) and identifying the person or persons making such Superior Proposal.
(c) In the event that, during the foregoing five-day period, the
party hereto that has received the foregoing notice shall make a counterproposal
to the party hereto that is proposing to effect a Change of Recommendation, the
party that is proposing to take such action shall consider and cause its
financial and legal advisors to negotiate on its behalf in good faith with
respect to the terms of such counterproposal.
(d) Nothing set forth in this Section 7.3 shall prohibit either
party hereto from taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act;
provided, however, that any action taken or disclosure made pursuant to such
rules shall not in any way limit or modify the effect that any action taken or
disclosure made pursuant to such rules has under any other provision of this
Agreement.
(e) Nothing set forth in this Section 7.3 shall (i) permit either
party hereto to terminate this Agreement (ii) affect any other obligation of the
parties under this Agreement, (iii) limit either party's obligation to duly
call, give notice of, convene and hold its respective Merger Shareholders
Meeting, (iv) relieve either party hereto of its obligation to submit to a vote
of its shareholders the Company Shareholder Proposal or the Parent Shareholder
Proposal, as appropriate, at its respective Merger Shareholders Meeting, or (v)
permit either party hereto to submit for a vote of its respective shareholders
at or prior to its respective Merger Shareholders Meeting any Acquisition
Proposal other than the Parent Voting Proposal and the Company Voting Proposal,
as applicable.
Section 7.4 Joint Proxy Statement/Prospectus; Registration Statement.
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(a) As promptly as practicable after execution of this Agreement,
Parent and the Company shall cooperate with each other regarding, and shall
prepare and file with the SEC, the Joint Proxy Statement/Prospectus (as amended
or supplemented, the "Joint Proxy Statement/Prospectus") to be sent to the
shareholders of the Company in connection with the Company Shareholders Meeting
and to the shareholders of Parent in connection with the Parent Shareholders
Meeting, and Parent shall prepare and file with the SEC the Registration
Statement (in which the Joint Proxy Statement/Prospectus will be included). The
Company and Parent shall use reasonable best efforts to cause the Registration
Statement to become effective as soon as practicable thereafter.
(b) Without limiting the generality of the foregoing, each of the
Company and Parent shall cause its respective representatives to fully cooperate
with the other parties and its respective representatives in the preparation of
the Joint Proxy Statement/Prospectus and the Registration Statement, and shall,
upon request, furnish the other parties with all information concerning it and
its Affiliates as the other may deem reasonably necessary or advisable in
connection with the preparation of the Joint Proxy Statement/Prospectus and the
Registration Statement. Parent or Nanometrics Delaware, as appropriate, shall
use reasonable efforts to take all actions required under any applicable federal
or state securities or Blue Sky Laws in connection with the issuance of shares
of Nanometrics Delaware Parent Common Stock pursuant to the Acquisition Merger.
As promptly as practicable after the Registration Statement becomes effective,
Parent and the Company shall cause the Joint Proxy Statement/Prospectus to be
mailed to their respective shareholders.
(c) The information supplied or to be supplied by either Parent
or the Company for inclusion in the Registration Statement shall not at the time
the Registration Statement is filed with the SEC or declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The information supplied or to be supplied by either party
for inclusion or incorporation by reference in the Joint Proxy
Statement/Prospectus to be sent to the shareholders of such party in connection
with the respective Merger Shareholders Meeting, or to be included or supplied
by or on behalf of either Parent or the Company for inclusion in any filing
pursuant to Rule 165 and Rule 425 under the Securities Act or Rule 14a-12 under
the Exchange Act (each, a "Regulation M-A Filing") shall not, on the date the
Joint Proxy Statement/Prospectus (or any amendment thereof or supplement
thereto) is first mailed to shareholders or at the time of the Company
Shareholders Meeting or at the time any Regulation M-A Filing is filed with the
SEC or as of the Acquisition Merger Effective Time, contain any statement which,
at such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein not false
or misleading; or omit to state any material fact necessary to correct any
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statement in any earlier communication with respect to the solicitation of
proxies for the Merger Shareholders Meeting which has become false or
misleading. The Proxy Statement/Prospectus shall comply in all material respects
as to form and substance with the requirements of the Securities Act, the
Exchange Act and the rules and regulations thereunder.
(d) Without limiting the generality of the foregoing, prior to
the Acquisition Merger Effective Time (i) the Company and Parent shall notify
each other as promptly as practicable upon becoming aware of any event or
circumstance which should be described in an amendment of, or supplement to, the
Joint Proxy Statement/Prospectus or the Registration Statement, and (ii) the
Company and Parent (or Nanometrics Delaware as the case may be) shall each
notify the other as promptly as practicable after the receipt by it of any
written or oral comments of the SEC on, or of any written or oral request by the
SEC for amendments or supplements to, the Joint Proxy Statement/Prospectus or
the Registration Statement, and shall promptly supply the other with copies of
all correspondence between it or any of its Representatives and the SEC with
respect to any of the foregoing filings.
(e) The Company and Parent shall make any necessary filing with
respect to the Acquisition Merger under the Securities Act and the Exchange Act
and the rules and regulations thereunder.
Section 7.5 Merger Shareholders Meetings.
(a) Each party acting through its respective Board of Directors, shall
take all actions in accordance with applicable Law, the rules of NASDAQ, in the
case of the Company, the Company Charter and the Company Bylaws and, in the case
of Parent, the Parent Charter and the Parent Bylaws, to promptly and duly call,
give notice of, convene and hold as promptly as practicable, and in any event
within forty-five (45) days after the declaration of effectiveness of the
Registration Statement, its respective Merger Shareholders Meeting for the
purpose of considering and voting upon, in the case of the Company, the approval
of the Company Voting Proposal and, in the case of Parent, the approval of the
Parent Voting Proposal. Each of the Company and Parent shall use their
respective reasonable best efforts to hold the Company Shareholders Meeting and
the Parent Shareholders Meeting on the same day and at the same time as the
other Merger Shareholders Meeting.
(b) Subject to Section 7.3, to the fullest extent permitted by
applicable Law, (i) in the case of the Company, the Company Board shall
recommend approval of the Company Voting Proposal by the shareholders of the
Company at the Company Shareholders Meeting and include such recommendation in
the Joint Proxy Statement/Prospectus, and (ii) in the case of Parent, the Parent
Board shall recommend approval of the Parent Voting Proposal by the shareholders
of Parent at the Parent Shareholders Meeting and include such recommendation in
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the Joint Proxy Statement/Prospectus. Unless the Board of Directors of either
party, or any committee thereof, shall effect a Change of Recommendation in
accordance with Section 7.3, each of the Company and Parent shall use its
reasonable best efforts to solicit from its shareholders proxies in favor of the
Company Voting Proposal or the Parent Voting Proposal, respectively, and to
secure the Requisite Company Shareholder Approval and the Requisite Parent
Shareholder Approval, respectively.
(c) The Company shall submit the Company Voting Proposal to its
shareholders at the Company Shareholders Meeting for the purpose of acting upon
such proposal whether or not (i) the Company Board at any time subsequent to the
date of this Agreement effects a Change of Recommendation or (ii) any actual,
potential or purported Acquisition Proposal or Superior Proposal has been
commenced, disclosed, announced or submitted to the Company. Parent shall submit
the Parent Voting Proposal to its shareholders at the Parent Shareholders
Meeting for the purpose of acting upon such proposal whether or not (A) the
Parent Board at any time subsequent to the date of this Agreement effects a
Change of Recommendation, or (B) any actual, potential or purported Acquisition
Proposal or Superior Proposal has been commenced, disclosed, announced or
submitted to Parent. Each of the Company and Parent shall use reasonable best
efforts to ensure that all proxies solicited in connection with its Merger
Shareholders Meetings are solicited, in compliance with the NASDAQ, in the case
of the Company, the MBCA, the Company Charter and the Company Bylaws and, in the
case of Parent, the CCC, the Parent Charter and the Parent Bylaws, and all other
applicable legal requirements. Notwithstanding anything to the contrary
contained in this Agreement, each of the Company or Parent, after consultation
with the other, may adjourn or postpone its respective Merger Shareholders
Meeting to the extent necessary to ensure that any required supplement or
amendment to the Joint Proxy Statement/Prospectus is provided to its respective
shareholders or, if as of the time for which the applicable Merger Shareholders
Meeting is originally scheduled (as set forth in the Joint Proxy
Statement/Prospectus), there are insufficient shares of, in the case of the
Company, Company Common Stock and, in the case of Parent, Parent Common Stock,
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the respective Merger Shareholders Meeting.
(d) Following the Merger Shareholders Meetings and at or prior to
the Closing, each of the Company and Parent shall deliver to the Corporate
Secretary of the other party a certificate setting forth the voting results from
the respective Merger Shareholders Meeting.
Section 7.6 Reasonable Best Efforts to Complete.
(a) Subject to the terms and conditions of this Agreement, each
of Parent and the Company shall cooperate fully with the other and use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things necessary, proper or advisable to consummate and
make effective, in the most expeditious manner possible, the Acquisition Merger
and the other transactions contemplated hereby, including by (i) obtaining (and
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cooperating with the other in obtaining) any clearance, consent, authorization,
order or approval of, or any exemption by, any Governmental Entity required to
be obtained or made by Parent or the Company in connection with the Acquisition
Merger, and making any and all registrations and filings that may be necessary
or advisable to obtain the approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, including all filings required by the
HSR Act and any other applicable Antitrust Laws, (ii) obtaining all necessary
consents, waivers and approvals under any of the Parent Material Contracts,
Company Material Contracts and Company Real Property Leases in connection with
the Acquisition Merger, (iii) authorizing for listing on the NASDAQ, upon
official notice of issuance, the shares of Nanometrics Delaware Common Stock to
be issued in the Acquisition Merger, (iv) reserving for issuance the shares of
Parent Common Stock issuable upon the exercise of all Assumed Options, (v)
defending any Lawsuit or other proceeding, whether brought by a Governmental
Entity or other third party, seeking to challenge this Agreement or the
transactions contemplated hereby, including by seeking to have lifted or
rescinded any injunction or restraining order or other order adversely affecting
the ability of the parties to consummate the transactions contemplated hereby,
and (vi) executing any certificates, instruments or other documents that are
necessary to consummate and make effective the transactions contemplated hereby
and to fully carry out the purposes and intent of this Agreement.
(b) Each of the Company and Parent shall keep the other
reasonably informed of the status of their respective efforts to consummate the
transactions contemplated hereby, including by (i) promptly notifying the other
of, and if in writing, furnishing the other with copies of (or, in the case of
material oral communications, advising the other orally of) any communications
from or with any Governmental Entity (whether domestic, foreign or
supranational) with respect to the transactions contemplated hereby, (ii)
permitting the other to review and discuss in advance, and consider in good
faith the views of the other in connection with, any proposed written (or any
material proposed oral) communication with any such Governmental Entity, (iii)
not participating in any meeting with any such Governmental Entity unless it
consults with the other in advance and to the extent permitted by such
Governmental Entity gives the other the opportunity to attend and participate
thereat, (iv) furnishing the other with copies of all correspondence, filings
and communications between it and any such Governmental Entity with respect to
this Agreement and the transactions contemplated hereby, and (v) furnishing the
other with such necessary information and reasonable assistance as each of them
may reasonably request in connection with its preparation of necessary filings
or submissions of information to any such Governmental Entity. Each of the
Company and Parent may, as each deems advisable and necessary, reasonably
designate any competitively sensitive material provided to the other under this
Section 7.6 as outside "counsel only" and, in such event, such material and the
information contained therein shall be given only to the outside legal counsel
of the recipient and shall not be disclosed by such counsel to non-legal
directors, officers, employees or other advisors or representatives of the
recipient unless express permission is obtained in advance from the source of
the materials or its legal counsel.
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(c) Notwithstanding anything to the contrary set forth in this
Section 7.6 or elsewhere in this Agreement, neither Parent nor any of its
affiliates shall be required to (i) sell or dispose of or hold separately
(through a trust or otherwise) any assets or businesses or interests in any
assets or businesses of Parent, the Company or their respective affiliates or
make any other change in any portion of the businesses of the Company or Parent
or incur any other limitation on the conduct of the businesses of the Company or
Parent to obtain such clearances, consents, authorizations, orders, approvals
and exemptions or agree to do, or submit to orders providing for, any of the
foregoing, in each case whether before or after the Acquisition Merger Effective
Time, or (ii) if any governmental body that has the authority to enforce any
Antitrust Law seeks, or authorizes its staff to seek, a preliminary injunction
or restraining order to enjoin consummation of the Acquisition Merger, take or
agree to take any action which Parent reasonably believes would be prohibited or
restricted under such preliminary injunction or restraining order.
(d) In case at any time after the Acquisition Merger Effective
Time any further action is necessary to carry out the purposes of this Agreement
or to vest the Surviving Corporation with full title to all properties, assets,
rights, approvals, immunities and franchises of any of the parties to the
Acquisition Merger, the proper officers and directors of each party hereto shall
take all such necessary action as may be reasonably requested by Nanometrics
Delaware to achieve such intent.
Section 7.7 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and
shall not issue any such press release or make any such public statement without
the prior written consent of the other party, which shall not be unreasonably
withheld, delayed or conditioned; provided, however, that a party may, without
the prior consent of the other party, issue such press release or make such
public statement as may upon consultation with outside counsel be required by
applicable Law or the rules and regulations of the NASDAQ if it has used all
reasonable best efforts to consult with the other party prior thereto regarding
the timing, scope and content of any such press release or public statement, and
provided, further, no such consultation shall be required to make any disclosure
or otherwise take any action expressly permitted by Section 7.3.
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Section 7.8 Company Employee Benefits; Company 401(k) Plan.
(a) From and after the Acquisition Merger Effective Time, Parent
will, or will cause the Surviving Corporation to, recognize the prior service
with the Company or its Subsidiaries of each employee of the Company or its
Subsidiaries as of the Acquisition Merger Effective Time (the "Company
Employees") in connection with all employee benefit plans, programs or policies
(including vacation) of Parent or its affiliates in which Company Employees are
eligible to participate following the Acquisition Merger Effective Time, for
purposes of eligibility, vesting and levels of vacation and severance benefits
(but not for purposes of benefit accruals or benefit amounts under any defined
benefit pension plan or to the extent that such recognition would result in
duplication of benefits).
(b) Prior to the Acquisition Merger Effective Time, the Company
shall take such actions as Parent may reasonably request so as to enable the
Surviving Corporation to effect such actions relating to the Company 401(k) Plan
(the "401(k) Plan") as Parent may deem necessary or appropriate (after
reasonable consultation with the Company), including terminating the 401(k) Plan
prior to the Acquisition Merger Effective Time.
Section 7.9 Company Stock Plans.
(a) At the Acquisition Merger Effective Time, Nanometrics
Delaware shall assume the rights and obligations of the Company with respect to
the Company Stock Plans as well as the duties of the Company with respect to the
administration of such plans such that Nanometrics Delaware may operate the
Company Stock Plans.
(b) At the Acquisition Merger Effective Time, each Company Stock
Option that is outstanding immediately prior to the Acquisition Merger Effective
Time, whether or not then vested or exercisable (each, an "Assumed Option"),
shall be assumed by Nanometrics Delaware. Each such Assumed Option shall
continue to have, and be subject to, the same terms and conditions as are in
effect immediately prior to the Acquisition Merger Effective Time, except that
(i) such Assumed Option shall be exercisable for that number of whole shares of
Nanometrics Delaware Common Stock equal to the product (rounded down to the next
whole number of shares of Nanometrics Delaware Common Stock) of the number of
shares of Company Common Stock that were issuable upon exercise of such Assumed
Option immediately prior to the Acquisition Merger Effective Time and the
Exchange Ratio, and (ii) the per share exercise price for the shares of
Nanometrics Delaware Common Stock issuable upon exercise of such Assumed Option
shall be equal to the quotient (rounded up to the next whole cent) obtained by
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dividing the exercise price per share of Company Common Stock at which such
Assumed Option was exercisable immediately prior to the Acquisition Merger
Effective Time by the Exchange Ratio. It is the intention of the parties that
each Assumed Option that qualified as an incentive stock option (as defined in
Section 422 of the Code) shall continue to so qualify, to the maximum extent
permissible, following the Acquisition Merger Effective Time.
(c) If and to the extent necessary or required by the terms of
any of the Company Stock Plans or any Company Stock Option, the Company shall,
prior to the Acquisition Merger Effective Time, (i) obtain any consents from
holders of Company Stock Options and (ii) amend the terms of its equity
incentive plans or arrangements, to give effect to the provisions of Section
7.9(b). The Company shall take no action, other than those actions contemplated
by this Agreement, that will cause or result in the accelerated vesting of the
Assumed Options.
(d) Except as otherwise requested by Parent subject to the last
sentence of this Section (d), prior to the Acquisition Merger Effective Time,
the Company shall take all necessary and appropriate actions requested by Parent
so that all outstanding purchase rights under the Company ESPP shall
automatically be exercised, in accordance with the terms of the Company ESPP,
prior to the Acquisition Merger Effective Time, and the shares of Company Common
Stock purchased under those exercised rights shall at the Acquisition Merger
Effective Time be cancelled and converted into the right to receive shares of
Nanometrics Delaware Common Stock pursuant to Section 2.6(a) of this Agreement.
Except as otherwise requested by Parent subject to the last sentence of this
Section (d), prior to the Acquisition Merger Effective Time, the Company shall
take all necessary and appropriate actions so that the Company ESPP shall
terminate immediately prior to the Acquisition Merger Effective Time, and no
further purchase rights shall be granted under the Company ESPP. Prior to the
Acquisition Merger Effective Time, the Company shall take all necessary and
appropriate actions requested by Parent so that all outstanding purchase rights
under the Company ESPP and the Company ESPP itself shall be treated in the
manner requested by Parent as long as such actions may be taken pursuant to the
Company ESPP.
(e) As soon as practicable following the Acquisition Merger
Effective Time, but in any event within fifteen (15) business days thereafter
(to the extent Parent or Nanometrics Delaware, as appropriate, have received the
most recent copies of the relevant Company Stock Plans), Nanometrics Delaware
shall prepare and file with the SEC a registration statement on Form S-8
covering the shares of Nanometrics Delaware Common Stock issuable pursuant to
the outstanding Assumed Options, Nanometrics Delaware shall cause the same to
become effective, and Parent shall take such further actions as may be
reasonably necessary to cover under such registration statement shares of Parent
Common Stock held by those persons eligible immediately prior to the Closing
Date pursuant to the 1995 Director Plan.
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Section 7.10 Indemnification and Insurance.
(a) For six (6) years after the Acquisition Merger Effective
Time, Nanometrics Delaware shall, and shall cause the Surviving Corporation and
its Subsidiaries to, honor and fulfill in all respects the obligations of the
Company and its Subsidiaries under any and all indemnification agreements in
effect immediately prior to the Acquisition Merger Effective Time between the
Company or any of its Subsidiaries and any of its current or former directors
and officers and any person who becomes a director or officer of the Company or
any of its Subsidiaries prior to the Acquisition Merger Effective Time (the
"Indemnified Parties"). In addition, for a period of six (6) years following the
Acquisition Merger Effective Time, Parent shall (and shall cause the Surviving
Corporation and its Subsidiaries to) cause the certificate or articles of
incorporation and bylaws (and other similar organizational documents) of the
Surviving Corporation and its Subsidiaries to contain provisions with respect to
indemnification and exculpation that are at least as favorable as the
indemnification and exculpation provisions contained in the certificate or
articles of incorporation and bylaws (or other similar organizational documents)
of the Company and its Subsidiaries immediately prior to the Acquisition Merger
Effective Time, and during such six-year period, such provisions shall not be
amended, repealed or otherwise modified in any respect, except as required by
Law.
(b) For a period of six (6) years after the Acquisition Merger
Effective Time, Nanometrics Delaware and the Surviving Corporation shall cause
to be maintained in effect the existing policy of the Company's directors' and
officers' and fiduciary liability insurance (the "D&O Policy") covering claims
arising from facts or events that occurred at or prior to the Acquisition Merger
Effective Time (including for acts or omissions occurring in connection with
this Agreement and the consummation of the transactions contemplated hereby, to
the extent that such acts or omissions are covered by the D&O Policy) and
covering each Indemnified Party who is covered as of the Acquisition Merger
Effective Time by the D&O Policy on terms with respect to coverage and amounts
that are no less favorable than those terms in effect on the date hereof;
provided, however, that in no event shall Nanometrics Delaware or the Surviving
Corporation be required to expend in any one year an amount in excess of 200% of
the current annual premium paid by the Company (which annual premium is set
forth on Schedule 6.11(b) of the Company Disclosure Schedule) for such insurance
(such 200% amount, the "Maximum Annual Premium"); and provided, further, that if
the annual premiums of such insurance coverage exceed such amount, Nanometrics
Delaware and the Surviving Corporation shall be obligated to obtain a policy
with the greatest coverage available for a cost not exceeding the Maximum Annual
Premium. Notwithstanding anything in this Section 7.10 to the contrary, Parent
may fulfill its (and Surviving Corporation's) obligations under this Section
7.10(b) by purchasing a D&O Policy or a "tail" policy under the Company's
existing D&O Policy, in either case which (i) has an effective term of six (6)
years from the Acquisition Merger Effective Time, (ii) covers only those persons
who are currently covered by the Company's directors' and officers' insurance
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policy in effect as of the date hereof and only for actions and omissions
occurring on or prior to the Acquisition Merger Effective Time, (iii) contains
terms with respect to coverage and amounts that are no less favorable than those
terms in the Company's D&O Policy on the date hereof.
(c) The obligations under this Section 7.10 shall not be
terminated, amended or otherwise modified in such a manner as to adversely
affect any Indemnified Party (or any other person who is a beneficiary under the
D&O Policy or the "tail" policy referred to in paragraph (b) above (and their
heirs and representatives)) without the prior written consent of such affected
Indemnified Party or other person who is a beneficiary under the D&O Policy or
the "tail" policy referred to in paragraph (b) above (and their heirs and
representatives). Each of the Indemnified Parties or other persons who are
beneficiaries under the D&O Policy or the "tail" policy referred to in paragraph
(b) above (and their heirs and representatives) are intended to be third party
beneficiaries of this Section 7.10, with full rights of enforcement as if a
party thereto. The rights of the Indemnified Parties (and other persons who are
beneficiaries under the D&O Policy or the "tail" policy referred to in paragraph
(b) above (and their heirs and representatives)) under this Section 7.10 shall
be in addition to, and not in substitution for, any other rights that such
persons may have under the certificate or articles of incorporation, bylaws or
other equivalent organizational documents, any and all indemnification
agreements of or entered into by the Company or any of its Subsidiaries, or
applicable Law (whether at Law or in equity).
(d) In the event that Nanometrics Delaware, Surviving Corporation
or any of their Subsidiaries (or any of their respective successors or assigns)
shall consolidate or merge with any other person and shall not be the continuing
or surviving corporation or entity in such consolidation or merger, or transfers
at least 50% of its properties and assets to any other person, then in each case
proper provision shall be made so that the continuing or surviving corporation
or entity (or its successors or assigns, if applicable), or transferee of such
assets, as the case may be, shall assume the obligations set forth in this
Section 7.10.
(e) Prior to or concurrently with the Acquisition Merger
Effective Time, Nanometrics Delaware shall cause to be in effect at the
Acquisition Merger Effective Time a policy of directors' and officers' liability
insurance covering claims arising from facts or events that occur after the
Acquisition Merger Effective Time for not less than $15 million in coverage.
Section 7.11 Company Affiliates. Section 7.11 of the Company Schedule
contains a complete and accurate list of those persons who may be deemed to be,
in the Company's reasonable judgment, affiliates of the Company within the
meaning of Rule 145 promulgated under the Securities Act (each, a "Company
Affiliate" and collectively, the "Company Affiliates"). The Company shall
provide Parent with such information and documents as Parent reasonably requests
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for purposes of reviewing and evaluating the foregoing schedule of Company
Affiliates. Parent will be entitled to place appropriate legends on the
certificates evidencing any Nanometrics Delaware Common Stock to be issued to a
Company Affiliate pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for the Nanometrics
Delaware Common Stock.
Section 7.12 Tax Matters. None of Nanometrics Delaware, Parent, Merger
Sub 1 or the Company shall, nor shall they permit any of their respective
Subsidiaries to, take any action prior to or following the Closing that would
reasonably be expected to cause either of the Mergers to fail to qualify as
reorganizations within the meaning of Section 368(a) of the Code. Officers of
each of Parent (or Nanometrics Delaware, as applicable), Merger Sub 1 and the
Company shall execute and deliver to WSGR, counsel to Parent, and to Fredrikson
& Byron, P.A., counsel to the Company, certificates containing appropriate
representations of Parent (or Nanometrics Delaware, as applicable), Merger Sub 1
and the Company at such time or times as may be reasonably requested by such Law
firms, including the effective date of the Registration and the Acquisition
Merger Effective Time, in connection with their respective deliveries of
opinions with respect to the Tax treatment of the Acquisition Merger.
Section 7.13 Takeover Statutes. Notwithstanding any other provision in
this Agreement, in no event shall the approval of the Acquisition Merger and
this Agreement by the Company Board under Section 302A.673of the MBCA be
withdrawn, revoked or modified by the Company Board. If any Takeover Statute is
or may become applicable to the Acquisition Merger or any of the other
transactions contemplated by this Agreement, the Company and the Company Board,
or Parent and the Parent Board, as applicable, shall promptly grant such
approvals and take such Lawful actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated by this Agreement or the Acquisition Merger, as the case may be,
and otherwise take such Lawful actions to eliminate or minimize the effects of
such statute, and any regulations promulgated thereunder, on such transactions.
Section 7.14 Section 16 Matters. Prior to the Acquisition Merger
Effective Time, each of the Company and Parent shall take all such steps as may
be required (to the extent permitted under applicable Law) to cause any
dispositions of Company Common Stock or acquisitions of Parent Common Stock
(including, in each case, derivative securities) resulting from the transactions
contemplated hereby by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the Company to
be exempt under Rule 16b-3 promulgated under the Exchange Act.
Section 7.15 Directorships. Effective as of the Acquisition Merger
Effective Time, the Board of Directors of Nanometrics Delaware shall be expanded
to seven (7) members, consisting of three individuals that prior to the
Acquisition Merger Effective Time served as directors of the Company (each, a
"Company Director"); three individuals that prior to the Migratory Merger
Effective Time served as directors of Parent (each, a "Parent Director"); and
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one individual acceptable to both Parent and the Company (the "Independent
Director"). The organizational documents of Nanometrics Delaware shall provide
for three classes of directors and staggered election of directors consistent
with the following. Classes I and II shall each consist of one Company Director
and one Parent Director. Class III shall consist of one Company Director, one
Parent Director and the Independent Director. Class I directors shall serve for
an initial term of one year and shall thereafter be elected to three year terms.
Class II directors shall serve for an initial term of two years and shall
thereafter be elected to three year terms. Class III Directors shall serve for
an initial term of three years and thereafter be elected to three year terms.
ARTICLE VIII
CONDITIONS TO THE ACQUISITION MERGER
Section 8.1 Conditions to Obligations of Each Party to Effect the
Acquisition Merger. The obligation of Parent to effect the Migratory Merger and
the Acquisition Merger, and the obligation of the Company to effect the
Acquisition Merger, shall be subject to the satisfaction at or prior to the
Closing of the following conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose and no
similar proceeding in respect of the Joint Proxy Statement/Prospectus shall have
been initiated or threatened in writing by the SEC.
(b) Shareholder Approval. The Requisite Company Shareholder
Approval and the Requisite Parent Shareholder Approval shall have been obtained.
(c) Antitrust Approvals. All necessary waiting periods (and all
extensions thereof) applicable to the Acquisition Merger under the Antitrust
Laws shall have terminated or expired, and all clearances, consents, approvals,
orders and authorizations necessary for the consummation of the Acquisition
Merger under the Antitrust Laws shall have been received.
(d) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Acquisition Merger shall be in effect.
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(e) No Illegality. No statute, rule, regulation or order shall be
enacted, entered, enforced or deemed applicable to the Acquisition Merger by a
governmental authority of competent jurisdiction that makes the consummation of
the Acquisition Merger illegal.
(f) NASDAQ Listing. The shares of Nanometrics Delaware Common
Stock issuable in the Acquisition Merger shall have been authorized for listing
on the NASDAQ.
(g) Tax Opinions. Nanometrics Delaware and the Company shall have
received an opinion of WSGR, and Fredrikson & Byron, P.A., respectively, dated
as of the Acquisition Merger Effective Time, to the effect that the Acquisition
Merger will qualify as a reorganization within the meaning of Section 368(a) of
the Code; provided, however, that if (i) Fredrikson & Byron, P.A., fails to
render such opinion, this condition shall nonetheless be deemed to be satisfied
with respect to the Company if WSGR renders such opinion to the Company and (ii)
if WSGR fails to render such opinion, this condition shall nonetheless be deemed
to be satisfied with respect to Nanometrics Delaware if Fredrikson & Byron,
P.A., renders such opinion to Nanometrics Delaware. The issuance of such
opinions shall be conditioned upon the receipt by such counsel of customary
representation letters from each of Parent (or Nanometrics Delaware, as
applicable), Merger Sub 1 and the Company, in each case, in form and substance
reasonably satisfactory to such counsel. Each such representation letter shall
be dated on or before the date of such opinion and shall not have been withdrawn
or modified in any material respect.
Section 8.2 Additional Conditions to Obligations of Parent and Merger
Sub 1 to Effect the Acquisition Merger. The obligations of Parent and Merger Sub
1 to effect the Migratory Merger and the Acquisition Merger are also subject to
the fulfillment on or prior to the Closing of the following additional
conditions (each of which may be waived by Parent and Merger Sub 1 in whole or
in part at any time prior to the Closing):
(a) Representations and Warranties. Each of the representations
and warranties of the Company contained in this Agreement shall be true and
correct (without giving effect to any qualification as to materiality or Company
Material Adverse Effect contained in any specific representation or warranty),
as of the date of this Agreement and as of the Closing Date, except (i) for
changes contemplated or permitted by this Agreement, (ii) that the accuracy of
representations and warranties that by their terms speak as of another date will
be determined as of such date and (iii) where any failures of any such
representations and warranties to be true and correct would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect; and Parent shall have received a certificate of the Company signed on
behalf of the Company by the chief executive officer and chief financial officer
of the Company to such effect.
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(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date; and Parent shall have received a certificate of the Company signed on
behalf of the Company by the chief executive officer and the chief financial
officer of the Company to such effect.
(c) No Company Material Adverse Effect. No Company Material
Adverse Effect shall have occurred since the date hereof.
Section 8.3 Additional Conditions to Obligation of the Company to
Effect the Acquisition Merger. The obligation of the Company to effect the
Acquisition Merger is also subject to the fulfillment at or prior to the Closing
of the following additional conditions (each of which may be waived by the
Company in whole or in part at any time prior to the Closing):
(a) Representations and Warranties. Each of the representations
and warranties of Parent contained in this Agreement shall be true and correct
(without giving effect to any qualification as to materiality or Parent Material
Adverse Effect contained in any specific representation or warranty), as of the
date of this Agreement and as of the Closing Date, except (i) for changes
contemplated or permitted by this Agreement, including the Migratory Merger,
(ii) that the accuracy of representations and warranties that by their terms
speak as of another date will be determined as of such date and (iii) where any
failures of any such representations and warranties to be true and correct would
not reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect; and the Company shall have received a certificate of
Parent signed on behalf of Parent by the chief executive officer and chief
financial officer of Parent to such effect.
(b) Agreements and Covenants. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date; and the Company shall have received a certificate of Parent signed on
behalf of Parent by the chief executive officer and the chief financial officer
of Parent to such effect.
(c) No Parent Material Adverse Effect. No Parent Material Adverse
Effect shall have occurred since the date hereof and be continuing.
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Section 8.4 Migratory Merger Not Condition to Acquisition Merger. The
parties hereto expressly agree that the failure of Parent and Merger Sub 2 to
consummate the Migratory Merger at or prior to the Closing shall not be a
condition to the obligations of Parent, Merger Sub 1 or the Company to effect
the Acquisition Merger and shall not in any way restrict, limit, qualify or
otherwise affect the obligations of Parent, Merger Sub 1 and the Company to
consummate the Acquisition Merger in accordance with the terms of this
Agreement.
ARTICLE IX
TERMINATION
Section 9.1 Termination. This Agreement may be terminated at any time
prior to the Acquisition Merger Effective Time, notwithstanding approval thereof
by the shareholders of the Company and/or Parent:
(a) by mutual written consent duly authorized by the Company
Board and the Parent Board (or the Board of Directors of Nanometrics Delaware as
the case may be);
(b) by either Parent or the Company, if the Acquisition Merger
shall not have been consummated by September 30, 2005 (the "Outside Date");
provided, however, that the right to terminate this Agreement under this Section
9.1(b) shall not be available to any party that has breached its obligations
under this Agreement, provided, further, that no termination by a party pursuant
this Section 9.1(b) shall be effective unless concurrently therewith such party
fulfills its obligation under Section 9.3.
(c) by either Parent or the Company, if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued a nonappealable final order, decree or ruling or taken any
other action having the effect of permanently restraining, enjoining or
otherwise prohibiting the Acquisition Merger (provided that the party seeking to
terminate this Agreement pursuant to this Section 9.1(c) shall have complied
with its obligations under Section 7.6 by using its reasonable best efforts to
have any such order, decree, ruling or other action vacated or lifted);
(d) by either Parent or the Company, if the Requisite Company
Shareholder Approval shall not have been obtained at the Company Shareholder
Meeting; provided, however, that the right to terminate this Agreement under
this Section 9.1(d) shall not be available to the Company if the Company shall
have breached the provisions of Section 7.2, Section 7.3 or Section 7.4;
provided, further, that no termination by a party pursuant this Section 9.1(d)
shall be effective unless concurrently therewith such party fulfills its
obligation under Section 9.3.
(e) by either Parent or the Company, if the Requisite Parent
Shareholder Approval shall not have been obtained at the Parent Shareholder
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Meeting; provided, however, that the right to terminate this Agreement under
this Section 9.1(e) shall not be available to Parent if Parent shall have
breached the provisions of Section 7.2, Section 7.3 or Section 7.4; provided,
further, that no termination by a party pursuant this Section 9.1(e) shall be
effective unless concurrently therewith such party fulfills its obligation under
Section 9.3.
(f) by Parent, if the Company shall have breached or failed to
perform any of its representations, warranties, or other covenants or agreements
contained in this Agreement (other than the covenants set forth in Section 7.2
or Section 7.3, the breach of which shall constitute a "Triggering Event"
pursuant to Section 9.1(h)), which breach or failure to perform would reasonably
be expected to cause the conditions set forth in Section 8.2 to not be satisfied
at the Closing and which breach or failure, if capable of being cured, shall not
have been cured within 20 days following receipt by the Company of written
notice of such breach or failure from Parent (it being understood and hereby
agreed that Parent may not terminate this Agreement pursuant to this Section
9.1(f) if such breach or failure is cured within such 20 day period);
(g) by the Company, if Parent shall have breached or failed to
perform any of its representations, warranties, or other covenants or agreements
contained in this Agreement (other than the covenants set forth in Section 7.2
or Section 7.3, the breach of which shall constitute a "Triggering Event"
pursuant to Section 9.1(h)), which breach or failure to perform would reasonably
be expected to cause the conditions set forth in Section 8.3 to not be satisfied
at the Closing and which breach or failure, if capable of being cured, shall not
have been cured within 20 days following receipt by Parent of written notice of
such breach from the Company (it being understood and hereby agreed that the
Company may not terminate this Agreement pursuant to this Section 9.1(g) if such
breach or failure is cured within such 20 day period) or
(h) by Parent or the Company if a Triggering Event shall have
occurred with respect to the other party. For purposes of this Agreement, a
"Triggering Event" shall be deemed to have occurred with respect a party if,
prior to the Acquisition Merger Effective Time: (A) such party has breached any
of the provisions of Section 7.2 or Section 7.3; (B) the Board of Directors (or
any committee thereof) of such party shall for any reason have effected a Change
of Recommendation; (C) such party shall have entered into any letter of intent
or similar document accepting an Acquisition Proposal; or (D) a tender or
exchange offer shall have been commenced by any person for such party's shares,
and such party shall not have sent to its stockholders pursuant to Rule 14e-2
promulgated under the Securities Act, within ten (10) business days after such
tender or exchange offer is first published, sent or given to such stockholders,
a statement reaffirming the Parent Voting Proposal or the Company Voting
Proposal (as appropriate), and recommending that their stockholders reject such
tender or exchange offer.
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Section 9.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 9.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or shareholders except (i) that the
provisions of this Section 9.2, Section 9.3 and ARTICLE X hereof shall survive
termination and (ii) nothing herein shall relieve any party from liability for
any willful or intentional breach of this Agreement. The Confidentiality
Agreement shall survive the termination of this Agreement as provided therein.
Section 9.3 Fees and Expenses.
(a) Except as set forth in this Section 9.3, all Expenses (as
defined below) incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such Expenses, whether
or not the Acquisition Merger is consummated; provided, however, that Parent and
the Company shall share equally all Expenses (but not including attorneys' fees
and expenses) incurred in connection with the printing and filing of the Joint
Proxy Statement/Prospectus (including any preliminary materials related
thereto), the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto and filings by Parent and
the Company under the HSR Act or any similar filing requirement of any
Governmental Entity applicable to the Acquisition Merger or this Agreement. For
purposes of this Agreement, "Expenses" includes all reasonable out-of-pocket
expenses (including all reasonable fees and expenses of counsel, accountants,
investment bakers, experts and consultants to a party hereto and its Affiliates)
incurred by a party or on its behalf in connection with or related to the
authorization, preparation, negotiation, execution and performance of this
Agreement and the transactions contemplated hereby, including the preparation,
printing, filing and mailing of the Joint Proxy Statement/Prospectus and
Registration Statement and the solicitation of shareholder approvals and all
other matters related to the transactions contemplated hereby.
(b) The Company shall pay to Parent (or Nanometrics Delaware as
the case may be) a termination fee equal to $8,300,000 (the "Company Termination
Fee"), and all Expenses of Parent of within one (1) business day after demand by
Parent and by wire transfer of immediately available funds to an account
designated in writing by Parent, in the event that: (i) this Agreement is
terminated by Parent pursuant to Section 9.1(h); or (ii) this Agreement is
terminated pursuant to Section 9.1(b), Section 9.1(d) or Section 9.1(f),
provided that following the execution and deliver of this Agreement and prior to
such termination pursuant to Section 9.1(b), Section 9.1(d), or Section 9.1(f),
an Acquisition Proposal or Acquisition Transaction with respect to the Company
shall have been publicly announced or otherwise become publicly known and not
withdrawn prior to the Company Shareholders Meeting or such termination, or any
person shall have publicly announced an intention (whether or not conditional)
to make an Acquisition Proposal or complete an Acquisition Transaction with
respect to the Company and not retracted such intention prior to the Company
Shareholders Meeting or such termination.
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(c) Parent shall pay to the Company a termination fee equal to
$8,300,000 (the "Parent Termination Fee"), and all Expenses of the Company
within one (1) business day after demand by the Company and by wire transfer of
immediately available funds to an account designated in writing by the Company,
in the event that: (i) this Agreement is terminated by the Company pursuant to
Section 9.1(h); or (ii) this Agreement is terminated pursuant to Section 9.1(b),
Section 9.1(e) or Section 9.1(g), provided that following the execution and
deliver of this Agreement and prior to such termination pursuant to any of
Section 9.1(b), 9.1(e) or Section 9.1(g), an Acquisition Proposal or Acquisition
Transaction with respect to Parent shall have been publicly announced or
otherwise become publicly known and not withdrawn prior to the Parent
Shareholders Meeting or such termination, or any person shall have publicly
announced an intention (whether or not conditional) to make an Acquisition
Proposal or complete an Acquisition Transaction with respect to Parent and not
retracted such intention prior to the Parent Shareholders Meeting or such
termination.
(d) All payments to be made pursuant to this Section 9.3 shall be
made by wire transfer of immediately available funds. If either party fails to
timely pay the Expenses of the other party or the Parent Termination Fee or
Company Termination Fee, as applicable, pursuant to this Section 9.3, then such
party shall pay all costs and expenses (including legal fees and expenses)
incurred by the other party in connection with any action or proceeding
(including the filing of any Lawsuit) taken by it to collect such unpaid
amounts, together with interest on such unpaid amounts at the prime lending rate
prevailing at such time, as published in the Wall Street Journal, from the date
such amounts were required to be paid until the date actually received by the
such other party.
(e) The parties acknowledge that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty, and that, without
these agreements, the parties would not have entered into this Agreement.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Nonsurvival of Representations, Warranties and Covenants.
None of the representations, warranties, covenants or other agreements in this
Agreement or in any certificate or other instrument delivered pursuant to this
Agreement shall survive the Acquisition Merger Effective Time, except for the
covenants and other agreements contained in: ARTICLE II and ARTICLE III, and
Section 7.6 (Reasonable Best Efforts to Complete); Section 7.7 (Public
78
Announcements); Section 7.8 (Company Employee Benefits; Company 401(k) Plan);
Section 7.9 (Company Stock Plans), Section 7.10 (Indemnification and Insurance),
Section 7.12 (Tax Matters), Section 9.2 (Effect of Termination) and Section 9.3
(Fees and Expenses); and this ARTICLE X. The Confidentiality Agreement shall
survive the execution and delivery of this Agreement or the termination of this
Agreement in accordance with the provisions of this Agreement, as the case may
be, pursuant to its terms and conditions.
Section 10.2 Notices. All notices and other communications given or
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made if and when delivered personally or by overnight courier to the
parties at the following addresses or sent by electronic transmission, with
confirmation received, to the telecopy numbers specified below (or at such other
address or telecopy number for a party as shall be specified by like notice):
If to Parent, Merger Sub 1 or Merger Sub 2:
1550 Buckeye Drive
Milpitas, California 95035
Attention: John D. Heaton
Facsimile No.: 408.232.5910
Telephone No.: 408.435.9600
With a copy to (which shall not constitute notice):
Wilson Sonsini Goodrich & Rosati, Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Aaron J. Alter
Adam R. Dolinko
Facsimile No.: 650-493-6811
Telephone No.: 650-493-9300
79
(a) If to the Company:
4900 West 78th Street
Bloomington, Minnesota 55435
Attention: Stan Piekos
Facsimile No.: 952-820-0060
Telephone No.: 952-820-0080
With a copy to (which shall not constitute notice):
Fredrikson & Byron
200 South Sixth Street, Suite 400
Minneapolis, Minnesota 55402-1425
Attention: Robert K. Ranum
Facsimile No.: 612 492-7077
Telephone No.: 612 492-7067
Any such notice or communication shall be deemed to have been delivered
and received (i) in the case of personal delivery, on the date of such delivery,
(ii) in the case of facsimile, on the date sent if confirmation of receipt is
received and such notice is also promptly mailed by registered or certified mail
(return receipt requested), (iii) in the case of a nationally-recognized
overnight courier in circumstances under which such courier guarantees next
business day delivery, on the next business day after the date when sent and
(iv) in the case of mailing, on the third business day following that on which
the piece of mail containing such communication is posted.
Section 10.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "Acquisition Proposal" means any inquiry, proposal or offer,
filing of any regulatory application or notice (whether in draft or final form)
or disclosure of an intention to do any of the foregoing from any person
relating to an Acquisition Transaction.
(b) "Acquisition Transaction" means any (i) direct or indirect
acquisition or purchase of a business that constitutes a substantial portion of
the net revenues, net income or assets of the Company or any of its "significant
subsidiaries" (as defined under Regulation S-X of the Securities Act), or Parent
or any of its significant subsidiaries, as the case may be, (ii) direct or
indirect acquisition or purchase of any class of equity securities representing
10% or more of the voting power of the Company or any of its significant
80
subsidiaries, or Parent or any of its significant subsidiaries, as the case may
be, (iii) tender offer or exchange offer that if consummated would result in any
person beneficially owning 10% or more of the voting power of the Company or
Parent, as the case may be, or (iv) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or Parent or any of their respective Subsidiaries, as the case may be,
in each case other than the transactions contemplated by this Agreement.
(c) "Affiliate" means a person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person;
(d) "Antitrust Law" means the Sherman Act, as amended, the
Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as
amended, the EC Merger Regulations and all other federal, state and foreign
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other Laws that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade;
(e) "Beneficial Owner" with respect to any shares of Company
Common Stock means a person who shall be deemed to be the beneficial owner of
such shares pursuant to Rule 13d-3 under the Exchange Act;
(f) "Business Day" means any day other than a Saturday or Sunday
or any day on which banks in the State of New York are required or authorized to
be closed;
(g) "Company Material Adverse Effect" means any change, effect or
circumstance that (i) is materially adverse to the business, operations,
properties condition (financial or otherwise) or capitalization of the Company
and its Subsidiaries, taken as a whole, or (ii) materially and adversely affects
the ability of the Company to consummate the transactions contemplated hereby;
provided, however, that in no event shall any of the following, either alone or
in combination, be deemed to constitute, nor shall any of the following be taken
into account in determining whether there has been or will or could be, a
Company Material Adverse Effect: (A) any changes resulting from or arising out
of general market, economic or political conditions (including any changes
arising out of acts of terrorism, war, weather conditions or other force majeure
events), provided that such changes do not have a substantially disproportionate
impact on the Company and its Subsidiaries, taken as a whole, (B) any changes
resulting from or arising out of general market, economic or political
conditions in the industries in which the Company or any of its Subsidiaries
conduct business (including any changes arising out of acts of terrorism, war,
81
weather conditions or other force majeure events), provided that such changes do
not have a substantially disproportionate impact on the Company and its
Subsidiaries, taken as a whole, (C) any changes resulting from or arising out of
actions taken pursuant to (and required by) this Agreement or at the request of
Parent or the failure to take any actions due to restrictions set forth in this
Agreement, (D) any changes in the price or trading volume of the Company's
stock, in and of itself, (E) any failure by the Company to meet published
revenue or earnings projections, in and of itself and (F) any changes or effects
arising out of or resulting from any legal claims or other proceedings made by
any of the Company's shareholders arising out of or related to this Agreement,
the Acquisition Merger or any other transactions contemplated hereby.
(h) "Control" including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the management or
policies of a person, whether through the ownership of stock, as trustee or
executor, by contract or credit arrangement or otherwise;
(i) "Employee Benefit Plan" means any "employee pension benefit
plan" (as defined in Section 3(2) of ERISA), any "employee welfare benefit plan"
(as defined in Section 3(1) of ERISA), and any other written or oral plan,
agreement or arrangement involving material compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of fringe benefits, perquisites, incentive compensation or
post-retirement compensation and all employment, change in control, severance or
similar agreements, written or otherwise, for the benefit of, or relating to,
any current or former employee, officer or director of the Company or Parent, as
applicable, or any of its ERISA Affiliates, as applicable;
(j) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended; and
(k) "ERISA Affiliate" means any entity which is, or at any
applicable time was, a member of (A) a controlled group of corporations (as
defined in Section 414(b) of the Code), (B) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code) or (C) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Company or Parent, as applicable.
(l) "Exchange Ratio" means 0.6401.
(m) "Include" or "including" means "include, without limitation"
or "including, without limitation," as the case may be, and the language
following "include" or "including" shall not be deemed to set forth an
exhaustive list;
(n) "Intellectual Property" shall mean the rights associated with
trademarks, service marks, trade names, and internet domain names, together with
registrations and applications related to the foregoing; patents and industrial
design registrations or applications (including any continuations, divisionals,
continuations-in-part, renewals, reissues, re-examinations and applications for
any of the foregoing); rights in works of authorship protected by copyright for
82
E.U. design registrations; copyrights (including any registrations and
applications for any of the foregoing); rights in mask works rights and trade
secrets and other confidential information, know-how, proprietary processes,
formulae, algorithms, models, and methodologies.
(o) "Law" with respect to any person means any applicable foreign
or domestic federal, state, provincial, local, municipal or other Law, statute,
code, treaty, ordinance, rule, regulation, administrative, executive or other
order (whether temporary, preliminary or permanent) of any Governmental Entity,
judgment, writ, stipulation, award, injunction, decree or arbitration award or
finding entered or imposed by any Governmental Entity, in any case that are in
force as of the date hereof or which come into force during the term of this
Agreement;
(p) "Parent Material Adverse Effect" means any change, effect or
circumstance that (i) is materially adverse to the business, operations,
properties condition (financial or otherwise) or capitalization of Parent and
its Subsidiaries, taken as a whole, or (ii) materially and adversely affects the
ability of Parent to consummate the transactions contemplated hereby; provided,
however, that in no event shall any of the following, either alone or in
combination, be deemed to constitute, nor shall any of the following be taken
into account in determining whether there has been or will or could be, a Parent
Material Adverse Effect: (A) any changes resulting from or arising out of
general market, economic or political conditions (including any changes arising
out of acts of terrorism, war, weather conditions or other force majeure
events), provided that such changes do not have a substantially disproportionate
impact on Parent and its Subsidiaries, taken as a whole, (B) any changes
resulting from or arising out of general market, economic or political
conditions in the industries in which Parent or any of its Subsidiaries conduct
business (including any changes arising out of acts of terrorism, war, weather
conditions or other force majeure events), provided that such changes do not
have a substantially disproportionate impact on Parent and its Subsidiaries,
taken as a whole, (C) any changes resulting from or arising out of actions taken
pursuant to (and required by) this Agreement or at the request of the Company or
the failure to take any actions due to restrictions set forth in this Agreement,
(D) any changes in the price or trading volume of Parent's stock, in and of
itself, (E) any failure by Parent to meet published revenue or earnings
projections, in and of itself and (F) any changes or effects arising out of or
resulting from any legal claims or other proceedings made by any of Parent's
shareholders arising out of or related to this Agreement, the Acquisition Merger
or any other transactions contemplated hereby.
(q) "Person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act); and
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(r) "Registered Intellectual Property" means U.S. and foreign (i)
patents and pending patent applications, (ii) trademark registrations (including
Internet domain registrations) and pending trademark applications, and (iii)
copyright registrations and pending copyright applications.
(s) "Subsidiary" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated, of
which (A) such party or any other Subsidiary of such party is a general partner,
manager or managing member, (B) such party or any Subsidiary of such party owns
at least 50% of the outstanding equity or voting securities or interests or (C)
such party or any Subsidiary of such party has the right to elect at least a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization.
(t) "Superior Proposal" means any Acquisition Proposal that the
Board of Directors of the party receiving it reasonably determines in good faith
(based on (i) the advice of its independent financial advisor or another
nationally recognized financial advisor and its outside legal counsel, and (ii)
the terms and conditions of such proposal, the financial, legal and regulatory
aspects of such proposal and the Person making such proposal) (A) is more
favorable to such party's shareholders than the Acquisition Merger or any
counterproposal made by the other party hereto pursuant to Section 7.3, (B) is
capable of being consummated in a timely manner in the terms being proposed, and
(C) is fully capable of being financed by the Person making such proposal, to
the extent required, or for which financing has been committed by a reputable
financing source, to the extent required.
(u) "Tax" or "Taxes" means (i) taxes, fees, assessments,
liabilities, levies, duties, tariffs, imposts and governmental impositions or
charges of any kind in the nature of (or similar to) taxes, payable to any
federal, state, local or foreign taxing authority, or any agency or subdivision
thereof, including income, franchise, profits, gross receipts, ad valorem, net
worth, value added, sales, use, service, real or personal property, special
assessments, capital stock, license, payroll, withholding, employment, social
security, workers' compensation, unemployment compensation, utility, severance,
production, excise, stamp, occupation, premiums, windfall profits, transfer and
gains taxes, and including all interest, penalties, fines, additional taxes and
additions to tax imposed with respect to any of the foregoing; (ii) any
liability for the payment of any amounts of the type described in the foregoing
clause (i) as a result of being a member of an affiliated, consolidated,
combined or unitary group for any period, and (iii) any liability for the
payment of any amounts of the type described in the foregoing clauses (i) or
(ii) as a result of any express or implied obligation to indemnify any other
person or as a result of any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor or transferor entity.
84
(v) "Tax Returns" shall mean returns, reports and information
statements with respect to Taxes required to be filed with a taxing authority,
domestic or foreign, including, consolidated, combined or unitary tax returns
and any amendments to any of the foregoing.
Section 10.4 Certain Interpretations. For purposes of this Agreement:
(a) Unless otherwise specified, all references in this Agreement
to Articles, Sections, Schedules and Exhibits shall be deemed to refer to
Articles, Sections, Schedules and Exhibits to this Agreement.
(b) The words "include", "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation".
(c) Unless otherwise specified or the context otherwise requires,
all references in this Agreement to Parent (including any reference to Parent as
a "party" shall be deemed to include Parent and its Subsidiaries, and all
references in this Agreement to the Company (including any reference to the
Company as a "party") shall be deemed to include the Company and its
Subsidiaries.
(d) All references in this Agreement to the Subsidiaries of an
entity shall be deemed to include all direct and indirect Subsidiaries of such
entity.
(e) The table of contents and the headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(f) The parties hereto agree that they have been represented by
legal counsel during the negotiation and execution of this Agreement and,
therefore, waive the application of any Law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document shall
be construed against the party drafting such agreement or document.
(g) In the event that the Migratory Merger has not occurred or
does not occur, all references to Nanometrics Delaware shall be deemed to refer
to Parent.
Section 10.5 Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective Boards of Directors
at any time prior to the Acquisition Merger Effective Time; provided, however,
that, after approval of the Acquisition Merger by the shareholders of the
Company, no amendment may be made which by Law requires further approval by such
shareholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
85
Section 10.6 Extension; Waiver. At any time prior to the Acquisition
Merger Effective Time, the parties hereto, by action taken or authorized by
their respective Boards of Directors, may to the extent legally allowed, (a)
extend the time for the performance of any of the obligations or other acts of
any other party hereto, (b) waive any inaccuracies in the representations and
warranties of any other party hereto contained herein or in any document
delivered pursuant hereto or (c) waive compliance with any of the agreements or
conditions of any other party hereto contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
Section 10.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
Section 10.8 Entire Agreement; No Third Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein, including
the Confidentiality Agreement) (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof, and (b)
is not intended to confer upon any person (regardless of any reference to such
person in this Agreement) other than the parties hereto any rights or remedies
hereunder, other than the persons intended to benefit from the provisions of
Section 7.10 (Indemnification and Insurance), who shall have the right to
enforce such provisions directly.
Section 10.9 Assignment. This Agreement shall not be assigned by
operation of Law or otherwise, except that Parent, Merger Sub 1 and Merger Sub 2
may assign all or any of their rights hereunder to any wholly owned subsidiary
thereof; provided, however, that no such assignment pursuant to this Section
10.9 shall relieve Parent, Merger Sub 1 or Merger Sub 2 of their respective
obligations hereunder.
Section 10.10 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude any other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement are cumulative to, and not exclusive of, any rights or
remedies otherwise available.
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Section 10.11 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal Laws of the State of Delaware,
without regard to the conflict of Law provisions thereof.
Section 10.12 Counterparts. This Agreement may be executed in two or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
Section 10.13 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB 1,
MERGER SUB 2 AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HERBY OR THE ACTIONS OF PARENT, MERGER SUB 1, MERGER SUB 2 OR THE
COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS
AGREEMENT.
Section 10.14 Specific Performance. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
Law in the event that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at Law or in equity.
Section 10.15 Disclosure Schedules.
(a) The information set forth in each section or subsection of
the Company Disclosure Schedules shall be deemed to provide the information
contemplated by, or otherwise qualify, the representations and warranties of the
Company set forth in the corresponding section or subsection of this Agreement
and any other section or subsection of ARTICLE IV if and to the extent that it
is reasonably apparent on the face of the disclosure that it applies to such
other section or subsection of ARTICLE IV.
(b) The information set forth in each section or subsection of
the Parent Disclosure Schedules shall be deemed to provide the information
contemplated by, or otherwise qualify, the representations and warranties of
Parent, Merger Sub 1 and Merger Sub 2 set forth in the corresponding section or
subsection of this Agreement and any other section or subsection of ARTICLE V if
and to the extent that it is reasonably apparent on the face of the disclosure
that it applies to such other section or subsection of ARTICLE V.
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IN WITNESS WHEREOF, Parent, Merger Sub 1, Merger Sub 2 and the Company
have caused this Agreement to be executed as of the date first written above by
their respective officers thereunto duly authorized.
NANOMETRICS INCORPORATED
By /s/ Vincent J. Coates
----------------------
Name: Vincent J. Coates
Title: Chairman of the Board and Secretary
MAJOR LEAGUE MERGER CORPORATION
By /s/ John D. Heaton
----------------------
Name: John D. Heaton
Title: Chief Executive Officer
MINOR LEAGUE MERGER CORPORATION
By /s/ John D. Heaton
----------------------
Name: John D. Heaton
Title: Chief Executive Officer
AUGUST TECHNOLOGY CORPORATION
By /s/ Stanley D. Piekos
----------------------
Name: Stanley D. Piekos
Title: Chief Financial Officer
88