EXHIBIT 2.1
EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
HARVARD BIOSCIENCE, INC. ("PARENT"),
HAG ACQ. CORP. ("MERGERCO"),
AND
GENOMIC SOLUTIONS INC. (THE "COMPANY")
Dated as of July 17, 2002
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER..............................................................................................2
1.1. The Merger......................................................................................2
1.2. Effective Time..................................................................................2
1.3. Closing 2
1.4. Tax Consequences................................................................................2
1.5. Taking of Necessary Action; Further Action......................................................3
ARTICLE II DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION....................................................3
2.1. Directors of the Surviving Corporation and the Company Subsidiaries.............................3
2.2. Officers of the Surviving Corporation and the Company Subsidiaries..............................3
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS.............................4
3.1. Effect on Capital Stock.........................................................................4
3.2. Appraisal Rights................................................................................5
3.3. Company Stock Options, Company Warrants and Related Matters.....................................6
ARTICLE IV PAYMENT OF SHARES......................................................................................8
4.1. Payment for Shares of Company Common Stock......................................................8
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................10
5.1. Existence; Good Standing; Authority; Compliance With Law.......................................10
5.2. Authorization, Validity and Effect of Agreements...............................................11
5.3. Capitalization.................................................................................12
5.4. Subsidiaries...................................................................................13
5.5. Other Interests................................................................................13
5.6. No Violation; Governmental Consents............................................................14
5.7. Commission Documents...........................................................................14
5.8. Litigation.....................................................................................15
5.9. Absence of Certain Changes.....................................................................15
5.10. No Undisclosed Liabilities.....................................................................15
5.11. Taxes ......................................................................................16
5.12. Properties.....................................................................................18
5.13. Intellectual Property..........................................................................19
5.14. Environmental Matters..........................................................................22
5.15. Employee Benefit Plans.........................................................................24
5.16. Labor Relations and Employment.................................................................27
5.17. No Brokers.....................................................................................28
5.18. Opinion of Financial Advisor...................................................................29
5.19. Vote Required..................................................................................29
5.20. Takeover Laws..................................................................................29
5.21. Contracts......................................................................................29
5.22. Collectibility of Accounts Receivable..........................................................30
5.23. Inventory......................................................................................30
(i)
5.24. Accounting Policies............................................................................31
5.25. Backlog .......................................................................................31
5.26. Customers, Distributors and Suppliers..........................................................31
5.27. Restructuring Plan.............................................................................32
5.28. Product Liability and Warranty.................................................................32
5.29. Certain Business Practices.....................................................................33
5.30. Insurance......................................................................................33
5.31. Reorganization.................................................................................33
5.32. Ownership of Parent Common Stock; Affiliates and Associates....................................34
5.33. Compliance with the Hart-Scott-Rodino Act......................................................34
5.34. No Contracts with Affiliates...................................................................34
5.35. Disclosure.....................................................................................34
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO.................................................35
6.1. Existence; Good Standing; Authority; Compliance with Law.......................................35
6.2. Authorization, Validity and Effect of Agreements...............................................36
6.3. Capitalization.................................................................................36
6.4. No Violation; Governmental Consents............................................................37
6.5. Commission Documents...........................................................................38
6.6. Litigation.....................................................................................38
6.7. Absence of Certain Changes.....................................................................39
6.8. No Undisclosed Liabilities.....................................................................39
6.9. Intellectual Property..........................................................................39
6.10. Environmental Matters..........................................................................39
6.11. Employee Benefit Plans.........................................................................40
6.12. Labor Relations and Employment.................................................................41
6.13. No Brokers.....................................................................................41
6.14. No Stockholder Vote Required...................................................................41
6.15. Takeover Laws..................................................................................41
6.16. Material Contracts.............................................................................41
6.17. Accounting Policies............................................................................42
6.18. Certain Business Practices.....................................................................42
6.19. Reorganization.................................................................................42
6.20. Ownership of Company Common Stock; Affiliates and Associates...................................42
6.21. Compliance with the Hart-Scott-Rodino Act......................................................43
ARTICLE VII COVENANTS............................................................................................43
7.1. No Solicitations...............................................................................43
7.2. Conduct of Business by the Company.............................................................45
7.3. Restructuring Plan.............................................................................48
7.4. Meeting of Company Stockholders................................................................48
7.5. Proxy Statement; Registration Statement; Filing Cooperation....................................49
7.6. Nasdaq Listing Application.....................................................................50
7.7. Additional Agreements; Regulatory Filings......................................................50
7.8. Affiliates.....................................................................................51
7.9. Fees and Expenses..............................................................................52
(ii)
7.10. Officers' and Directors' Indemnification.......................................................52
7.11. Access to Information; Confidentiality.........................................................52
7.12. Financial and Other Statements.................................................................53
7.13. Advice of Change...............................................................................53
7.14. Public Announcements...........................................................................54
7.15. Employee Benefit Arrangements..................................................................54
7.16. Delisting......................................................................................55
7.17. Further Assurances.............................................................................55
7.18. Tax-Free Reorganization........................................................................55
ARTICLE VIII CONDITIONS TO THE MERGER............................................................................55
8.1. Conditions to the Obligations of Each Party to Effect the Merger...............................55
8.2. Conditions to Obligations of the Company.......................................................56
8.3. Conditions to Obligations of Parent............................................................57
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.....................................................................59
9.1. Termination....................................................................................59
9.2. Effect of Termination..........................................................................61
9.3. Amendment......................................................................................61
9.4. Extension; Waiver..............................................................................62
ARTICLE X GENERAL PROVISIONS.....................................................................................62
10.1. Notices........................................................................................62
10.2. Interpretation.................................................................................63
10.3. Non-Survival of Representations, Warranties, Covenants and Agreements..........................63
10.4. Miscellaneous..................................................................................63
10.5. Assignment.....................................................................................63
10.6. Severability...................................................................................64
10.7. Choice of Law/Consent to Jurisdiction..........................................................64
(iii)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as
of July 18, 2002, by and among HARVARD BIOSCIENCE, INC., a Delaware corporation
("Parent"), HAG ACQ. CORP., a Delaware corporation and a wholly owned subsidiary
of Parent ("MergerCo"), and GENOMIC SOLUTIONS INC., a Delaware corporation (the
"Company").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, MergerCo and the
Company have approved the merger of the Company with and into MergerCo (the
"Merger") in accordance with the Delaware General Corporation Law (the "DGCL")
and, upon the terms and subject to the conditions set forth in this Agreement,
holders of shares of common stock, par value $0.001 per share, of the Company
(the "Company Common Stock") issued and outstanding immediately prior to the
Effective Time (as defined in Section 1.2) will be entitled, subject to the
terms and conditions hereof, to the right to receive shares of common stock, par
value $0.01 per share, of Parent (the "Parent Common Stock") and cash;
WHEREAS, the Board of Directors of the Company (the "Company Board")
has, in light of and subject to the terms and conditions set forth herein, (a)
determined that (i) the consideration to be paid for each share of Company
Common Stock in the Merger is fair to the stockholders of the Company, and (ii)
the Merger is in the best interests of the Company and its stockholders, and (b)
resolved to approve and adopt this Agreement and the transactions contemplated
or required by this Agreement, including the Merger (collectively, the
"Transactions"), and to recommend approval and adoption by the stockholders of
the Company of this Agreement and the Transactions;
WHEREAS, as a condition to the willingness of Parent and MergerCo to
enter into this Agreement, certain stockholders of the Company (the "Voting
Agreement Stockholders") have entered into a Voting Agreement, dated as of the
date hereof, with Parent and MergerCo (the "Voting Agreement"), pursuant to
which each Voting Agreement Stockholder has agreed, among other things, to vote
such Voting Agreement Stockholder's shares of Company Common Stock in favor of
the approval of the Transactions, upon the terms and subject to the conditions
set forth in the Voting Agreement;
WHEREAS, as a condition to the willingness of Parent and MergerCo to
enter into this Agreement, the President and Chief Executive Officer of the
Company has entered into an Employment Agreement, dated as of the date hereof,
with MergerCo (the "Employment Agreement"), upon the terms and subject to the
conditions set forth in the Employment Agreement;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code"), and this Agreement is intended to be and is adopted as a plan of
reorganization for purposes of Sections 354, 361 and 368 of the Code; and
WHEREAS, Parent, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Transactions, and also to prescribe various conditions to the Transactions.
NOW, THEREFORE, in consideration of the mutual agreements set forth
herein and other valuable consideration, the receipt and adequacy whereof are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement,
at the Effective Time, the Company and MergerCo shall consummate the Merger
pursuant to which (a) the Company shall be merged with and into MergerCo and the
separate corporate existence of the Company shall thereupon cease, (b) MergerCo
shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation"), shall continue under
the corporate name "Genomic Solutions Inc." and shall continue to be governed by
the laws of the State of Delaware and the DGCL, and (c) the separate corporate
existence of MergerCo with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The Merger shall have the
effects specified in Section 259 of the DGCL. The Certificate of Incorporation
of MergerCo (the "MergerCo Certificate"), as in effect at the Effective Time,
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided therein or by applicable law. The Bylaws of
MergerCo (the "MergerCo Bylaws"), as in effect at the Effective Time, shall be
the Bylaws of the Surviving Corporation until thereafter amended as provided
therein or by applicable law.
1.2. Effective Time. Subject to the provisions of this Agreement, as
soon as practicable after all of the conditions set forth in Article VIII shall
have been satisfied or, if permissible, waived, the parties will file a
certificate of merger (the "Certificate of Merger") executed in accordance with
the relevant provisions of the DGCL and will make all other filings or
recordings required under the DGCL in order to effect the Merger. The Merger
will become effective at such time as the Certificate of Merger has been duly
filed with the Secretary of State of the State of Delaware, or at such
subsequent date or time as MergerCo and the Company agree and specify in the
Certificate of Merger (the time the Merger becomes effective being herein
referred to as the "Effective Time").
1.3. Closing. The closing of the Merger (the "Closing") shall take
place at such time and on a date to be specified by the parties, which shall be
no later than the second business day after satisfaction or, if permissible,
waiver of all of the conditions set forth in Article VIII hereof (the "Closing
Date"), at the offices of Goodwin Procter LLP, Exchange Place, Boston,
Massachusetts 02109, unless another date or place is agreed to by the parties
hereto.
1.4. Tax Consequences. It is intended that the Merger will constitute a
reorganization within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of
the Code and that this Agreement constitutes a "plan of reorganization" for
purposes of Sections 354 and 361 of the
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Code. Parent, MergerCo and the Company will be a party within the meaning of
Section 368(b) of the Code to such reorganization.
1.5. Taking of Necessary Action; Further Action. Each of Parent,
MergerCo and the Company shall use its reasonable best efforts to take all such
action as may be necessary or appropriate in order to effectuate the Merger
under the DGCL as promptly as practicable following the requisite approval by
the stockholders of the Company. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, properties, rights, privileges, powers and franchises
of both the Company and MergerCo, the officers of such corporations are fully
authorized in the name of their corporation or otherwise to take, and shall
take, all such lawful and necessary action.
ARTICLE II
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
2.1. Directors of the Surviving Corporation and the Company
Subsidiaries. The directors of MergerCo immediately prior to the Effective Time
shall be the directors of the Surviving Corporation immediately after the
Effective Time until their successors shall have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation.
The Company will cause any director who is a designee of the Company on the
Board of Directors of any Company Subsidiary to resign as of the Effective Time,
unless otherwise directed by Parent. Such resignation shall include the
termination of (a) any indemnification agreement between the Company and such
director and (b) any registration rights with respect to Company Common Stock
held by such director.
2.2. Officers of the Surviving Corporation and the Company
Subsidiaries. The officers of MergerCo immediately prior to the Effective Time
shall be the officers of the Surviving Corporation immediately after the
Effective Time until their successors shall have been duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Incorporation and Bylaws of the Surviving Corporation.
The Company will cause any officer who is a designee of the Company of any
Company Subsidiary to resign as of the Effective Time, unless otherwise directed
by Parent. Such resignation shall include the termination of (a) any
indemnification agreement between the Company and such officer and (b) any
registration rights with respect to Company Common Stock held by such officer.
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ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
3.1. Effect on Capital Stock. As of the Effective Time, by virtue of
the Merger and without any action on the part of the holder of any shares of
Company Common Stock or any shares of capital stock of MergerCo:
(a) Each issued and outstanding share of Company Common Stock
owned by Parent, MergerCo or any other direct or indirect Subsidiary (as defined
in Section 10.2 hereof) of Parent (each, a "Parent Subsidiary" and collectively,
the "Parent Subsidiaries") or by the Company or any other direct or indirect
Subsidiary of the Company (each, a "Company Subsidiary" and collectively, the
"Company Subsidiaries"), including, without limitation, shares of Company Common
Stock in the treasury of the Company immediately prior to the Effective Time,
shall be canceled and retired and cease to exist without any conversion thereof
and no payment or distribution shall be made with respect thereto.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than (i) those shares referred to
in Section 3.1(a) and (ii) Dissenting Shares (as defined herein), shall be
canceled and shall be converted automatically into and represent the right to
receive (A) such number of shares of Parent Common Stock as is equal to the
Conversion Ratio (as defined herein) (the "Stock Consideration") and (B) a cash
amount equal to the Per Share Cash Consideration (as defined herein) (the "Cash
Consideration") (the Stock Consideration and the Cash Consideration,
collectively, the "Merger Consideration").
(c) The "Conversion Ratio" shall be the result obtained by
dividing (i) 3,200,000 shares of Parent Common Stock, as adjusted in the event
of any stock split, stock dividend, reverse stock split or similar event
affecting the Parent Common Stock, by (ii) the number of shares of outstanding
Company Common Stock immediately prior to the Effective Time.
(d) The "Per Share Cash Merger Consideration" shall be the
result obtained by dividing (i) Nine Million Dollars ($9,000,000) (the "Cash
Merger Consideration"), by (ii) the number of shares of outstanding Company
Common Stock immediately prior to the Effective Time.
(e) Each share of common stock, par value $0.01 per share, of
MergerCo (the "MergerCo Common Stock") issued and outstanding immediately prior
to the Effective Time shall remain outstanding and shall represent one validly
issued, fully paid and non-assessable share of common stock, par value $0.01 per
share, of the Surviving Corporation.
(f) All shares of Company Common Stock, when converted as
provided in Section 3.1(b), shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate previously evidencing such shares shall thereafter represent only
the right to receive the Merger Consideration and cash in lieu of fractional
shares
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of Parent Common Stock in accordance with Sections 3.1(b) and 4.1(e) and any
distribution or dividend as provided under Section 4.1(c), in each case without
interest. The holders of certificates previously evidencing shares of Company
Common Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to the Company Common Stock except as otherwise
provided herein or by law and, upon the surrender of such certificates in
accordance with the provisions of Article III hereof, shall only represent the
right to receive for their shares of Company Common Stock, the Merger
Consideration and cash in lieu of fractional shares of Parent Common Stock in
accordance with Sections 3.1(b) and 4.1(e) and any distribution or dividend as
provided under Section 4.1(c), in each case without interest.
(g) If at the time of the Closing, the aggregate value of the
Stock Consideration (other than cash in lieu of fractional shares) is less than
forty percent (40%) of the sum of (x) the aggregate value of the Merger
Consideration and (y) the value of the payments made for Dissenting Shares and
all other conditions to the Closing set forth in Article VIII have been
satisfied (or waived by the party entitled to waive such condition), then:
(i) the Merger Consideration will be adjusted by
increasing the value of the Stock Consideration and decreasing the Cash
Consideration so that the aggregate value of the Stock Consideration
(other than cash in lieu of fractional shares) constitutes forty
percent (40%) of the sum of (A) the aggregate value of the Merger
Consideration and (B) the aggregate value of the payments made for
Dissenting Shares; and
(ii) the aggregate value of the Merger Consideration
is the same as before any adjustments.
For purposes of this Section 3.1(g) only, the value of the Stock Consideration
will be the trading price for a share of Parent Common Stock on the Nasdaq
National Market ("Nasdaq") as of the time of the Closing as determined for
federal income tax purposes. For purposes of this Section 3.1(g) only, the value
of the payments made for Dissenting Shares will be deemed to be the aggregate
value of the Merger Consideration that the holders of Dissenting Shares would
have received if they had not elected to exercise their appraisal rights.
3.2. Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the
contrary, any shares of Company Common Stock ("Dissenting Shares") which are
issued and outstanding immediately prior to the Effective Time and which are
held by stockholders of the Company who have timely filed with the Company,
before the taking of the vote of the stockholders of the Company to approve the
Merger and adopt this Agreement, written objections to such approval and
adoption stating their intention to demand payment for such shares of Company
Common Stock, and who have not voted such shares of Company Common Stock in
favor of the approval of the Merger and the adoption of this Agreement will not
be converted as described in Section 3.1 hereof, but will thereafter constitute
only the right to receive payment of the fair value of such shares of Company
Common Stock in accordance with the applicable provisions of the DGCL (the
"Appraisal Rights Provisions"); provided, however, that all shares of Company
Common Stock held by stockholders who shall have failed to perfect or who
effectively shall have withdrawn or lost their rights to appraisal of such
shares of Company Common Stock under the Appraisal
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Rights Provisions shall thereupon be deemed to have been canceled and retired
and to have been converted, as of the Effective Time, into the right to receive
the Merger Consideration, without interest, in the manner provided in Section
3.1 hereof. Persons who have perfected statutory rights with respect to
Dissenting Shares as aforesaid will not be paid by the Surviving Corporation as
provided in this Agreement and will have only such rights as are provided by the
Appraisal Rights Provisions with respect to such Dissenting Shares.
Notwithstanding anything in this Agreement to the contrary, if Parent or
MergerCo abandons or is finally enjoined or prevented from carrying out, or the
stockholders rescind their approval of the Merger and adoption of, this
Agreement, the right of each holder of Dissenting Shares to receive the fair
value of such Dissenting Shares in accordance with the Appraisal Rights
Provisions will terminate, effective as of the time of such abandonment,
injunction, prevention or rescission.
(b) The Company shall give Parent (i) prompt notice of any
demands for appraisal received by the Company, withdrawals of such demands, and
any other instruments served pursuant to the DGCL and received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any demands
for appraisal or offer to settle any such demands.
(c) Each dissenting stockholder who becomes entitled under the
DGCL to payment for Dissenting Shares shall receive payment therefor after the
Effective Time from the Surviving Corporation (but only after the amount thereof
shall have been agreed upon or finally determined pursuant to the DGCL) and such
Dissenting Shares shall be canceled.
3.3. Company Stock Options, Company Warrants and Related Matters.
(a) At the Effective Time, each option to purchase shares of
Company Common Stock (collectively, the "Company Options") granted under the
B.I. Systems Corporation 1994 Omnibus Equity Incentive Plan, as amended (the
"1994 Plan"), the Company's 1998 Stock Option Plan, as amended (the "1998
Plan"), the Company's 1998 Non-Employee Director and Consultant Stock Option
Plan, as amended (the "Director Plan"), and the Company's 2002 Stock Option
Plan, as amended (the "2002 Plan" and the 2002 Plan together with the 1994 Plan,
the 1998 Plan and the Director Plan, the "Company Stock Option Plans"), which is
outstanding as of immediately prior to the Effective Time and which has not been
exercised or canceled prior thereto, whether or not then vested and exercisable,
shall be terminated as provided in this Section 3.3(a) without payment by the
Company of any consideration in connection therewith except as contemplated by
the Restructuring Plan (as defined in Section 5.27). The Company shall take all
actions within its power reasonably necessary to ensure that (i) all Company
Options, to the extent not exercised prior to the Effective Time, shall
terminate and be cancelled as of the Effective Time and thereafter be of no
further force or effect, (ii) no Company Options are granted after the date of
this Agreement, and (iii) at the Effective Time, the Company Stock Option Plans
and all Company Options issued thereunder shall terminate. If and only if Parent
so requests, the Company shall take all actions necessary to ensure that all or
any requested portion of the Company Options accelerate prior to the Effective
Time. With respect to any Company Option that has not been exercised and does
not terminate in accordance with its terms prior to the Effective Time, the
Company shall exercise reasonable efforts obtain, prior to the Effective Time,
the written consent in a form
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acceptable to Parent from each holder of a Company Option providing for, among
other things, the termination of such Company Option (each such document, an
"Option Termination"). Notwithstanding the foregoing, if any holder of a Company
Option not exercised or terminated prior to the Effective Time refuses to
execute an Option Termination, the Company shall take all actions within its
power reasonably necessary to cause each such Company Option outstanding as of
the Effective Time to be automatically converted at the Effective Time into an
option (a "Converted Option") to purchase that number of shares of Parent Common
Stock equal to the number of shares of Company Common Stock issuable immediately
prior to the Effective Time upon exercise of the Company Option (without regard
to actual restrictions on exercisability) multiplied by the Option Exchange
Ratio (with the number of shares rounded down to the nearest whole share), with
an exercise price per share of Parent Common Stock equal to the exercise price
per share of Company Common Stock which existed under the corresponding Company
Option divided by the Option Exchange Ratio (with the exercise price rounded up
to the nearest whole cent), and with other terms and conditions that are the
same as the terms and conditions of such Company Option immediately before the
Effective Time; provided, however, that in no event shall the aggregate number
of shares of Parent Common Stock subject to Converted Options held by persons
who as of the Effective Time are not employees of the Company exceed twenty
thousand (20,000) shares; provided further that in no event shall the aggregate
number of shares of Parent Common Stock subject to Converted Options held by
persons who as of the Effective Time are employees of the Company exceed one
hundred thousand (100,000) shares. "Option Exchange Ratio" means the sum of (x)
the Conversion Ratio plus (y) the quotient of (A) the Per Share Cash Merger
Consideration divided by (B) the closing price of a share of Parent Common Stock
on Nasdaq on the last full trading day immediately prior to the Closing Date,
rounded to the nearest third decimal place.
(b) At the Effective Time, each warrant to purchase shares of
Company Common Stock (the "Company Warrants") which is outstanding as of
immediately prior to the Effective Time and which has not been exercised or
canceled prior thereto, whether or not then vested and exercisable, shall be
terminated as provided in this Section 3.3(b) without payment by the Company of
any consideration in connection therewith. The Company shall take all actions
necessary to ensure that (i) all Company Warrants to the extent not exercised
prior to the Effective Time, shall terminate and be cancelled as of the
Effective Time and thereafter be of no further force or effect, and (ii) no
Company Warrants are granted after the date of this Agreement. With respect to
any Company Warrant that has not been exercised and does not terminate in
accordance with its terms prior to the Effective Time, the Company shall obtain,
prior to the Effective Time, the written consent in a form acceptable to Parent
from each holder of a Company Warrant providing for, among other things, the
termination of such Company Warrant and any registration rights held by such
holder with respect to the Company Common Stock (each such document, an "Warrant
Termination").
(c) The Company's 2000 Employee Stock Purchase Plan, as
amended (the "Company Stock Purchase Plan"), shall be terminated as of the
Effective Date, and each participant in the Company Stock Purchase Plan on such
date shall be deemed to have exercised his or her option under the Company Stock
Purchase Plan on such date and shall acquire from the Company (i) such number of
whole shares of Company Common Stock as his or her accumulated payroll
deductions on such date will purchase at the price specified in the Company
Stock Purchase Plan with the entire credit balance in such participant's Stock
Purchase Account
7
(as defined in the Company Stock Purchase Plan) (treating the last business day
prior to the Effective Date as the Offering Termination Date (as defined in the
Company Stock Purchase Plan) for all purposes of the Company Stock Purchase
Plan) and (ii) cash in the amount of any remaining balance in such participant's
account; provided, however, that any participant that has given notice to the
Company prior to the third to last business day prior to the Effective Date in
accordance with the Company Stock Purchase Plan that such participant requests
the distribution of his or her entire credit balance in cash shall receive cash
in the amount of the balance in such participant's Stock Purchase Account in
lieu of purchasing Company Common Stock thereunder.
ARTICLE IV
PAYMENT OF SHARES
4.1. Payment for Shares of Company Common Stock.
(a) At or prior to the Effective Time, Parent shall deposit,
or otherwise take all steps necessary to cause to be deposited, with such bank
or trust company designated by Parent (the "Exchange Agent") certificates
representing the shares of Parent Common Stock, the cash in lieu of fractional
shares and the Cash Merger Consideration (such cash and certificates for shares
of Parent Common Stock being hereinafter referred to as the "Exchange Fund") to
be issued pursuant to Section 3.1 and paid pursuant to this Article IV in
exchange for all of the outstanding shares of Company Common Stock.
(b) Promptly after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
other than the Company, Parent, MergerCo, any Company Subsidiary or any Parent
Subsidiary previously evidencing shares of Company Common Stock outstanding (i)
a letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to such certificates shall pass, only upon delivery of
such certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent may reasonably specify and (ii) instructions for use
in effecting the surrender of such certificates previously evidencing shares of
Company Common Stock in exchange for the Merger Consideration and cash in lieu
of fractional shares of Parent Common Stock. Upon surrender of a certificate
previously evidencing shares of Company Common Stock to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of such certificate shall
be entitled to receive in exchange therefor (x) a certificate representing the
Stock Consideration to which such holder shall be entitled, and (y) a check
representing the amount of Cash Consideration to which such holder shall be
entitled plus (z) the amount of cash in lieu of fractional shares, if any, plus
the amount of any dividends, or distributions, if any, pursuant to paragraph (c)
below, in all cases after giving effect to any required withholding tax. No
interest will be paid or accrued on the cash in lieu of fractional shares or on
the dividend or distribution, if any, payable to holders of certificates
previously evidencing shares of Company Common Stock pursuant to this Section
4.1. In the event of a transfer of ownership of Company Common Stock which is
not registered in the transfer records of the Company, a certificate
representing the proper Stock Consideration, together with a check for the
proper Cash Consideration plus the cash to be paid in lieu of fractional shares
of Parent Common Stock plus, to the extent applicable, the amount of any
dividend or distribution, if any, payable pursuant to paragraph (c) below, in
all cases after
8
giving effect to any required withholding tax. No interest will be paid or
accrued on the cash in lieu of fractional shares or on the dividend or
distribution, if any, payable to holders of certificates previously evidencing
shares of Company Common Stock pursuant to this Section 4.1. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the proper Stock
Consideration, together with a check for the proper Cash Consideration plus the
cash to be paid in lieu of fractional shares of Parent Common Stock plus, to the
extent applicable, the amount of any dividend or distribution, if any, payable
pursuant to paragraph (c) below, in all cases after giving effect to any
required withholding tax may be issued to a transferee if the certificate
representing shares of such Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer, including signature medallion guarantee, and to evidence that any
applicable stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions on Parent Common Stock shall be paid with
respect to any shares of Company Common Stock represented by a certificate until
such certificate is surrendered for exchange as provided herein; provided,
however, that subject to the effect of applicable laws, following surrender of
any such certificate, there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time and a payment
date prior to surrender theretofore payable with respect to such whole shares of
Parent Common Stock and not paid, less the amount of any withholding taxes which
may be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Common Stock, less the amount of any
withholding taxes which may be required thereon.
(d) At and after the Effective Time, there shall be no
transfers on the stock transfer books of the Company of any of the shares of
Company Common Stock. If, after the Effective Time, certificates previously
evidencing shares of Company Common Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged for the Merger Consideration
and cash in lieu of fractional shares, if any, in accordance with this Section
4.1 (plus dividends and distributions to the extent set forth in Section 4.1(c),
if any).
(e) No fractional shares of Parent Common Stock shall be
issued upon the surrender for exchange of certificates previously evidencing
shares of Company Common Stock, and such fractional share interest shall not
entitle its owner to vote, to receive dividends, or to any other rights as a
stockholder of Parent. In lieu of the issuance of any fractional share of Parent
Common Stock pursuant to Section 3.1(b), each holder of Company Common Stock
upon surrender of a certificate previously evidencing shares of Company Common
Stock for exchange shall be paid an amount in cash (without interest), rounded
to the nearest cent, determined by multiplying (i) the average per share closing
price of a share of Parent Common Stock as reported on Nasdaq over the five (5)
trading days immediately preceding the date of the Closing by (ii) the fraction
of a share of Parent Common Stock which such holder would otherwise be entitled
to receive under this Section 4.1.
(f) Any portion of the Exchange Fund (including the proceeds
of any investments thereof, which shall accrue solely for the account of Parent,
and any shares of Parent Common Stock) that remains unclaimed by the former
stockholders of the Company one (1) year after the Effective Time shall be
delivered to the Surviving Corporation. Any former stockholders of the Company
who have not theretofore complied with this Article IV shall thereafter look
only to the Surviving Corporation for payment of their Merger Consideration and
cash in lieu of fractional shares, (plus dividends and distributions to the
extent set forth in Section 4.1(c), if any), as determined pursuant to this
Agreement, without any interest thereon. Notwithstanding any of the foregoing,
none of Parent, MergerCo, the Company, the Exchange
9
Agent or any other person shall be liable to any former holder of shares of
Company Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws. In the event
any certificate previously evidencing shares of Company Common Stock shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such certificate to be lost, stolen or destroyed in form
acceptable to Parent and its transfer agent and registrar and, if required by
the Surviving Corporation and/or Parent's transfer agent and registrar, the
posting by such person of a bond in such amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such certificate or in such amount as the transfer agent and registrar of the
Parent Common Stock requires, the Exchange Agent or the Surviving Corporation
will issue in exchange for such lost, stolen or destroyed certificate the Merger
Consideration and cash in lieu of fractional shares (plus, to the extent
applicable, dividends and distributions payable pursuant to Section 4.1(c)) in
each case without interest.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter delivered at or prior to
the execution hereof to Parent and MergerCo, which shall refer to the relevant
Sections of this Agreement (the "Company Disclosure Schedule"), the Company
represents and warrants to Parent and MergerCo as follows:
5.1. Existence; Good Standing; Authority; Compliance With Law.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the requisite corporate or other power and authority to own, operate, lease and
encumber its properties and to carry on its business as it is now being
conducted. The Company is duly licensed or qualified to do business as a foreign
corporation and is in good standing under the laws of any other jurisdiction in
which the character of the properties owned, leased or operated by it therein or
in which the transaction of its business makes such license or qualification
necessary, except where the failure to be so licensed or qualified or to be in
good standing could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect (as hereinafter defined). For
purposes of this Agreement, a "Company Material Adverse Effect" means any
change, effect, event, occurrence, condition or development that is or is
reasonably likely to be materially adverse to (i) the business, operations,
assets, liabilities, properties, results of operations, prospects or condition
(financial or otherwise) of the Company and each Company Subsidiary, taken as a
whole, or (ii) the ability of the Company to perform its obligations under this
Agreement.
(b) Each of the Company Subsidiaries is a corporation,
partnership or limited liability company (or similar entity or association in
the case of those Company Subsidiaries organized and existing other than under
the laws of a state of the United States) duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the requisite corporate or other power and
authority to own, operate, lease and encumber its properties and to carry on its
business as it is now being
10
conducted, and is duly licensed or qualified to do business and is in good
standing in each jurisdiction in which the ownership of its property or the
conduct of its business requires such license or qualification, except for
jurisdictions in which such failure to be so licensed or qualified or to be in
good standing could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company is in physical
possession of all original stock certificates of the Company Subsidiaries.
(c) Neither the Company nor any of the Company Subsidiaries is
in violation of any order of any court, governmental authority or arbitration
board or tribunal, or any law, ordinance, bylaw, judgment, decree, order,
arbitration, concession, grant, governmental rule or regulation to which the
Company or any Company Subsidiary or any of their respective properties or
assets is subject, where such violation, alone or together with all other
violations, could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. The Company and the Company
Subsidiaries have obtained all licenses, permits, approvals and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their businesses as currently
conducted, except where the failure to obtain any such license, permit, approval
or authorization or to take any such action, alone or together with all other
failures, could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. All such licenses, permits,
approvals and other authorizations are in full force and effect. No violations
are or have been recorded in respect of any such license, permit, approval or
other authorization; to the knowledge of the Company, no event has occurred that
would allow revocation or termination or that would result in the impairment of
the Company's or any Company Subsidiary's rights with respect to any such
license, permit, approval or authorization; and no proceeding is pending or, to
the knowledge of the Company, threatened to revoke, limit or enforce any such
license, permit, approval or authorization, except in each case for violations,
revocations, terminations and proceedings which could not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
(d) True, complete and accurate copies of the Certificate of
Incorporation of the Company (the "Company Certificate") and the Bylaws of the
Company (the "Company Bylaws") and the other charter documents, bylaws,
organizational documents and partnership, limited liability company and joint
venture agreements (and in each such case, all amendments thereto) of the
Company and each of the Company Subsidiaries have been delivered to Parent prior
to the date of this Agreement, and, except as set forth in Section 5.1(d) of the
Company Disclosure Schedule, no amendments thereto are pending. Such charter
documents, bylaws, organizational documents and agreements are listed in Section
5.1(d) of the Company Disclosure Schedule. The Company is not in violation of
any provisions of the Company Certificate or the Company Bylaws, and no Company
Subsidiary is in violation of any of the provisions of its equivalent
organizational documents.
5.2. Authorization, Validity and Effect of Agreements. The Company has
the requisite power and authority to enter into and consummate the Transactions
and to execute and deliver this Agreement. The Company Board has approved this
Agreement and the Transactions and has resolved to recommend that the holders of
Company Common Stock adopt and approve this Agreement at the stockholders'
meeting of the Company to be held in accordance with the provisions of Section
7.4. Subject only to the adoption of this Agreement by the holders of a
11
majority of the outstanding shares of Company Common Stock, the execution and
delivery by the Company of this Agreement and the consummation of the
Transactions have been duly authorized by all requisite corporate action on the
part of the Company. As of the date hereof, all of the directors and executive
officers of the Company have indicated that they presently intend to vote all
shares of Company Common Stock that they own to approve this Agreement and the
Transactions at the stockholders' meeting of the Company to be held in
accordance with the provisions of Section 7.4. This Agreement has been duly
executed and delivered by the Company and, assuming due and valid authorization,
execution and delivery hereof by Parent and MergerCo, is a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights and general principles of equity.
5.3. Capitalization. The authorized capital stock of the Company
consists of 60,000,000 shares of Company Common Stock, par value $0.001 per
share, and 15,000,000 shares of preferred stock, par value $0.001 per share (the
"Company Preferred Stock"). As of the date of this Agreement, (a) 31,257,198
shares of Company Common Stock were issued and outstanding, (b) 7,965,720 shares
of Company Common Stock were authorized and reserved for issuance pursuant to
the Company Stock Option Plans, subject to adjustment on the terms set forth in
the Company Stock Option Plans, (c) 1,000,000 shares of Company Common Stock
were authorized and reserved for issuance pursuant to the Company Stock Purchase
Plan, (d) 3,115,833 Company Options were outstanding under the Company Stock
Option Plans, (e) 125,000 Company Warrants were outstanding, (f) no Company
Options were outstanding other than under the Company Stock Option Plans, (g) no
shares of Company Preferred Stock were issued and outstanding, and (h) no shares
of Company Common Stock and no shares of Company Preferred Stock were held in
the treasury of the Company. As of the date of this Agreement, the Company had
no shares of Company Common Stock or Company Preferred Stock reserved for
issuance other than as described above. All issued and outstanding shares of
capital stock of the Company are, and all shares of capital stock of the Company
which may be issued pursuant to the exercise of outstanding Company Options and
outstanding Company Warrants will be, duly authorized, validly issued, fully
paid, nonassessable and free of any preemptive rights. All issued and
outstanding shares of capital stock of the Company were, and all shares of
capital stock of the Company which may be issued pursuant to the exercise of
outstanding Company Options and outstanding Company Warrants will be, issued in
compliance with and in accordance with the applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), the Securities Act of 1933, as
amended and the rules and regulations promulgated thereunder, (the "Securities
Act" and together with the Exchange Act, the "Securities Laws") and applicable
state securities and "Blue Sky" laws. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter. Section 5.3
of the Company Disclosure Schedule sets forth a complete and accurate list of
the Company Options as of the date of this Agreement, including the name of the
person to whom each Company Option has been granted, the number of shares
subject to each Company Option, the per share exercise price for each Company
Option, the vesting schedule for each Company Option, and the Company Stock
Option Plan, if applicable, under which each Company Option has been issued.
Section 5.3 of the Company Disclosure Schedule sets forth a complete and
accurate list of the Company Warrants, including the name of the person to whom
12
each Company Warrant has been granted, the number of shares subject to each
Company Warrant, the per share exercise price for each Company Warrant, and the
vesting schedule for each Company Warrant. Except as set forth in Section 5.3 of
the Company Disclosure Schedule, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company to issue, transfer or sell any shares of
capital stock of the Company. Except as set forth in Section 5.3 of the Company
Disclosure Schedule, the vesting schedule of all Company Options and Company
Warrants shall not be changed or affected by the execution of this Agreement or
the consummation of the Transactions. The Company has previously provided Parent
with true, complete and accurate copies of all forms of option agreements with
respect to the Company Options and a true, complete and accurate list of options
issued under each such form of option agreement. The Company has previously
provided Parent with true, complete and accurate copies of all warrant
agreements with respect to the Company Warrants. Except as set forth in Section
5.3 of the Company Disclosure Schedule, there are no agreements or
understandings to which the Company or any Company Subsidiary is a party with
respect to the voting of any shares of capital stock of the Company or which
restrict the transfer of any such shares, nor does the Company have knowledge of
any third-party agreements or understandings with respect to the voting of any
such shares or which restrict the transfer of any such shares. Except as set
forth in Section 5.3 of the Company Disclosure Schedule, there are no
outstanding contractual obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock, partnership
interests or any other securities of the Company or any Company Subsidiary.
Except as set forth in Section 5.3 of the Company Disclosure Schedule, neither
the Company nor any Company Subsidiary is under any obligation, contingent or
otherwise, by reason of any agreement to register the offer and sale or resale
of any of their securities under the Securities Act.
5.4. Subsidiaries. Section 5.4 of the Company Disclosure Schedule
contains a complete and accurate list of all of the Company Subsidiaries. Except
as set forth in Section 5.4 of the Company Disclosure Schedule, the Company owns
directly or indirectly all of the outstanding shares of capital stock or other
equity interests of each of the Company Subsidiaries. Each of the outstanding
shares of capital stock of each of the Company Subsidiaries having corporate
form is duly authorized, validly issued, fully paid, nonassessable and free of
any preemptive rights. Except as set forth in Section 5.4 of the Company
Disclosure Schedule, each of the outstanding shares of capital stock or other
equity interest of each of the Company Subsidiaries is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims or other encumbrances. Except as set forth in Section 5.4 of
the Company Disclosure Schedule, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate any Company Subsidiary to issue, transfer or sell any
shares of its capital stock or other equity interests. The following information
for each Company Subsidiary as of the date of this Agreement is set forth in
Section 5.4 of the Company Disclosure Schedule: (a) its name and jurisdiction of
incorporation or organization; (b) its authorized capital stock, share capital
or other equity interest; and (c) the name of each stockholder or equity
interest holder and the number of issued and outstanding shares of capital
stock, share capital or other equity interest held by each such holder.
5.5. Other Interests. Except as set forth in Section 5.5 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary owns
directly or indirectly any
13
interest or investment (whether equity or debt) in any corporation, partnership,
limited liability company, joint venture, business, trust or other entity (other
than investments in short-term investment securities). Except as set forth in
Section 5.5 of the Company Disclosure Schedule, there are no outstanding
contractual obligations of the Company or any Company Subsidiary to acquire any
shares of capital stock, partnership interests or other securities of any such
entity in which it owns an interest or holds an investment. To the knowledge of
the Company, there is no dispute among the equity holders of any entity in which
the Company and the Company Subsidiaries own less than all of the equity
interests therein.
5.6. No Violation; Governmental Consents. Except as set forth in
Section 5.6 of the Company Disclosure Schedule, none of the execution, delivery
or performance of this Agreement by the Company, the consummation by the Company
of the Transactions, or the compliance by the Company with any of the provisions
hereof, will conflict with or result in a breach of any provision of the Company
Certificate or the Company Bylaws. Except as set forth in Section 5.6 of the
Company Disclosure Schedule, the execution, delivery and performance of this
Agreement by the Company, the consummation by the Company of the Transactions,
and the compliance by the Company with the provisions hereof, will not violate,
or conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of the Company or the Company Subsidiaries under, or
result in being declared void, voidable or without further binding effect, any
of the terms, conditions or provisions of (a) any note, bond, mortgage,
indenture or deed of trust to which the Company or any of the Company
Subsidiaries is a party, or by which the Company or any of the Company
Subsidiaries or any of their properties or assets is bound, (b) any license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of the Company Subsidiaries is a party,
or by which the Company or any of the Company Subsidiaries or any of their
properties or assets is bound, or (c) any order, writ, judgment, injunction,
decree, law (including common law), statute, rule or regulation applicable to
the Company or any Company Subsidiary or any of their properties or assets,
except as otherwise could not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect. Other than the filings
provided for in Section 1.2 or required pursuant to the Exchange Act or
applicable state securities and "Blue Sky" laws, the execution and delivery of
this Agreement by the Company does not, and the performance of and compliance
with this Agreement by the Company and consummation of the Transactions does
not, require any authorization, consent or approval of, permit from, or
declaration, filing or registration with, any governmental or regulatory
authority, except where the failure to obtain any such authorization, consent or
approval of, permit from, or declaration, filing or registration with, any
governmental or regulatory authority could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
5.7. Commission Documents. The Company has filed all required forms,
reports, exhibits, schedules, statements and other documents with the Commission
since the date the Company became subject to the reporting requirements of the
Exchange Act (as such documents may have been amended since the time of filing,
collectively, the "Company SEC Reports"), all of which were prepared in
accordance with the applicable requirements of the Exchange Act, the
14
Securities Act and the rules and regulations promulgated thereunder (the
"Securities Laws"). As of their respective dates, the Company SEC Reports (a)
complied as to form in all material respects with the applicable requirements of
the Securities Laws and (b) did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading. Each of the consolidated balance sheets of
the Company included in or incorporated by reference into the Company SEC
Reports (including the related notes and schedules) fairly presents the
consolidated financial position of the Company and the Company Subsidiaries as
of its date and each of the consolidated statements of income, retained earnings
and cash flows of the Company included in or incorporated by reference into the
Company SEC Reports (including any related notes and schedules) fairly presents
the results of operations, retained earnings or cash flows, as the case may be,
of the Company and the Company Subsidiaries for the periods set forth therein
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which would not be material in amount or effect), in each case in
accordance with generally accepted accounting principles ("GAAP") consistently
applied during the periods involved, except as may be noted therein and except,
in the case of the unaudited statements, as permitted by Form 10-Q pursuant to
Section 13 or 15(d) of the Exchange Act. No Company Subsidiary is required to
file any form, report or document with the Commission.
5.8. Litigation. Except as set forth in Section 5.8 of the Company
Disclosure Schedule, there are (a) no continuing orders, injunctions or decrees
of any court, arbitrator or governmental authority to which the Company or any
Company Subsidiary is a party or by which any of its properties or assets are
bound or to which any of its directors, officers, employees or agents, in such
capacities, is a party or by which any of its properties or assets are bound,
and (b) no actions, suits or proceedings pending against the Company or any
Company Subsidiary or against any of its directors, officers, employees or
agents, in such capacities, or, to the knowledge of the Company, threatened
against the Company or any Company Subsidiary or against any of its directors,
officers, employees or agents, at law or in equity, or before or by any federal
or state commission, board, bureau, agency or instrumentality or any arbitration
or other private dispute resolution mechanism.
5.9. Absence of Certain Changes. Except as set forth in Section 5.9 of
the Company Disclosure Schedule, since December 31, 2001, (a) the Company and
the Company Subsidiaries have conducted their businesses only in the ordinary
course of business, (b) neither the Company nor any of the Company Subsidiaries
has taken any of the actions or permitted to occur any of the events specified
in Section 7.2 hereof, and (c) up to and including the date of this Agreement,
there has not been any change, effect, event, occurrence, non-occurrence,
condition or development which has had or could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
5.10. No Undisclosed Liabilities. Except as set forth in Section 5.10
of the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has any material liabilities or obligations of any nature (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due, including any liability for Taxes (as defined in
Section 5.11) and any material obligations or liabilities whether or not of the
nature or type
15
required to be disclosed under GAAP) other than such liabilities or obligations
that have been specifically disclosed or provided in the Company SEC Reports.
5.11. Taxes.
(a) The Company and each of the Company Subsidiaries has paid
or caused to be paid all federal, state, provincial, local and foreign taxes,
fees, levies, duties, tariffs, imposts and other charges of any kind (together
with any and all interest, penalties, additions to tax and additional amounts
imposed with respect thereto) imposed by any government or taxing authority,
including, without limitation: taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security (including, without
limitation, in the United Kingdom, National Insurance contributions), worker's
compensation, disability, unemployment compensation or net worth; taxes or other
charges in the nature of excise, withholding, ad valorem, stamp, transfer, value
added or gains taxes; license, registration and documentation fees; and duties,
tariffs and similar charges (collectively, "Taxes"), required to be paid by it
whether disputed or not and including any obligations to indemnify or otherwise
assume or succeed to another's Tax liability except for Taxes the failure to
withhold or pay which could not, when added with any penalties applicable
thereto, reasonably be expected to have a Company Material Adverse Effect.
(b) The Company and each of the Company Subsidiaries has
withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other third party except for Taxes the
failure to withhold or pay which could not, when added with any penalties
applicable thereto, reasonably be expected to have a Company Material Adverse
Effect. The Company Subsidiary operating in the United Kingdom has correctly
operated the "Pay as You Earn" system.
(c) The Company and each of the Company Subsidiaries has in
accordance with applicable law filed all material reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes (collectively, "Tax Returns"), and all
such Tax Returns correctly and accurately set forth the amount of any Taxes
relating to the applicable period. The Company has delivered or made available
to Parent true, complete and accurate copies of all Tax Returns, and of all
examination reports and statements of deficiencies assessed against or agreed to
by the Company or any Company Subsidiary with respect to such Tax Returns.
(d) Neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting or, to the knowledge of the Company,
threatening to assert against the Company or any Company Subsidiary any
deficiency or claim for additional Taxes. No written claim has ever been made
by, and no stockholder or director or manager or person responsible for Tax
matters of the Company or its Subsidiaries expects a claim to be made by, an
authority in a jurisdiction where the Company or a Company Subsidiary does not
file reports and returns that the Company or such Company Subsidiary is or may
be subject to taxation by that jurisdiction. There are no security interests on
any of the assets of the Company and the Company Subsidiaries that arose in
connection with any failure (or alleged failure) to pay any Taxes.
16
(e) Except as set forth in Section 5.11(e) of the Company
Disclosure Schedule, there has not been any audit of any Tax Return filed by the
Company or any Company Subsidiary, no audit of any Tax Return of the Company or
any Company Subsidiary is in progress, and neither the Company nor any Company
Subsidiary has been notified in writing by any tax authority that any such audit
is contemplated or pending. Except as set forth in Section 5.11(e) of the
Company Disclosure Schedule, no extension of time with respect to any date on
which a Tax Return was or is to be filed by the Company or any Company
Subsidiary is in force, and no waiver or agreement by the Company or any Company
Subsidiary is in force for the extension of time for the assessment or payment
of any Taxes.
(f) Except as set forth in Section 5.11(f) of the Company
Disclosure Schedule, the most recent audited financial statements contained in
the Company SEC Reports reflect an adequate reserve for all Taxes payable by the
Company and the Company Subsidiaries for all taxable periods and portions
thereof through the date of such financial statements in accordance with GAAP,
whether or not shown as being due on any Tax Returns.
(g) Except as set forth in Section 5.11(g) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is a party
to any agreement providing for the allocation, indemnification or sharing of
Taxes with any person other than the Company or the Company Subsidiaries. The
Company has provided Parent with true, complete and accurate copies of any such
agreements.
(h) Except as set forth in Section 5.11(h) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary has ever
been (or has ever had any liability for unpaid Taxes under Treasury Regulations
Section 1.1502-6 (or comparable provisions of federal, state or local law)
because it once was) a member of an "affiliated group" (as defined in Section
1504(a) of the Code), except for any group of which the Company and the Company
Subsidiaries are the only members. No Company Subsidiary formed in the United
Kingdom is, ever has been, or is treated, as a member of a group for value added
tax purposes.
(i) Except as set forth in Section 5.11(i) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary (i) has made
any payments, is obligated to make any payments or is a party to any agreement
that under certain circumstances could obligate it to make any payments that
will not be deductible under Section 280G of the Code (or any similar provision
of state, local or foreign law), (ii) has filed a consent under Section 341(f)
of the Code concerning collapsible corporations or (iii) was, at any time during
the period specified in Section 897(c)(1)(A)(ii) of the Code, a United States
real property holding corporation within the meaning of Section 897(c)(2) of the
Code.
(j) Neither the Company nor any Company Subsidiary will be
required to include any item of income in, or exclude any deduction from,
taxable income for any taxable period (or portion thereof) ending after the
Closing Date as a result of any: (i) change in method of accounting for a
taxable period ending on or prior to the Closing Date; (ii) "closing agreement"
as described in Section 7121 of the Code (or any corresponding or similar
provision of state, local or foreign income Tax law) executed on or prior to the
Closing Date; (iii) intercompany transactions or any excess loss account
described in Treasury Regulations under Section 1502 of the Code (or any
corresponding or similar provision of state, local or foreign
17
income Tax law); (iv) installment sale or open transaction disposition made on
or prior to the Closing Date; or (v) prepaid amount received on or prior to the
Closing Date.
(k) No Company Common Stock is owned by any Company
Subsidiary.
(l) The merger of Cartesian Technologies, Inc. with and into
Cartesian Acquiring Corporation, which was at the time a wholly owned subsidiary
of the Company, qualified as a tax-free reorganization under Section 368(a) of
the Code.
(m) Neither the Company nor any Company Subsidiary has ever
participated in any way in any confidential corporate tax shelter within the
meaning of temporary Treasury Regulations Section 301.6111-2T(a)(2).
5.12. Properties.
(a) Neither the Company nor any Company Subsidiary owns
any real property. Section 5.12(a) of the Company Disclosure Schedule lists all
real property leased or subleased to or by the Company or any of the Company
Subsidiaries and lists the dates of and parties to each such lease, the dates
and parties to each amendment, modification and supplement to each such lease,
the term of such lease, and any extension options thereunder. The Company has
delivered to Parent true, complete and accurate copies of the leases and
subleases (each as amended to date) listed in Section 5.12(a) of the Company
Disclosure Schedule. Except as set forth in Section 5.12(a) of the Company
Disclosure Schedule, with respect to each such lease and sublease:
(i) the lease or sublease is a valid, binding and
enforceable obligation of the Company or the Company Subsidiary, as the
case may be, subject to applicable bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights and general
principles of equity;
(ii) neither the Company nor any Company Subsidiary,
or to the knowledge of the Company, any other party, is in breach or
violation of, or default under, any such lease or sublease, and no
event has occurred, is pending or, to the knowledge of the Company, is
threatened, which, after the giving of notice or the lapse of time or
both, would constitute a breach or default by the Company or a Company
Subsidiary, or to the knowledge of the Company, any other party under
such lease or sublease;
(iii) neither the Company nor any Company Subsidiary
has assigned, transferred, conveyed, mortgaged, deeded in trust or
encumbered any interest in the leasehold or subleasehold;
(iv) there are no Encumbrances (as hereinafter
defined), easements, covenants or other restrictions applicable to the
real property subject to such lease or sublease, except for easements,
covenants and other restrictions which do not, individually or in the
aggregate, materially impair the current uses or the occupancy by the
Company or the Company Subsidiary, as the case may be, of the property
subject thereto;
18
(v) to the knowledge of the Company, during the last
two years there have been no dealings with respect to any of the
leasehold or subleasehold properties other than at arms length
including, without limitation, dealings with respect to properties in
the United Kingdom at an undervalue which may give rise to a claim for
improper stamping or setting aside; and
(vi) to the knowledge of the Company there are no
structural or other defects in respect of the buildings and structures
on or comprising any of the leasehold or subleasehold properties.
(b) Except as set forth in Section 5.12(b) of the Company
Disclosure Schedule, the Company and the Company Subsidiaries own good title,
free and clear of all liens, mortgages, pledges, charges, security interests or
other encumbrances (collectively, "Encumbrances"), to all property and assets
necessary to conduct the business of the Company as currently conducted, except
for (i) Encumbrances reflected in the Company's consolidated balance sheet at
December 31, 2001 included in the Company SEC Reports, (ii) Encumbrances or
imperfections of title which do not materially detract from the value or
materially interfere with the present or presently contemplated use of the
assets subject thereto or affected thereby, and (iii) Encumbrances for current
Taxes not yet due and payable. The Company and the Company Subsidiaries, as
lessees, have the right under valid and subsisting leases to use, possess and
control all personalty leased by the Company or the Company Subsidiaries as now
used, possessed and controlled by the Company or the Company Subsidiaries, as
applicable. All of the machinery, equipment and other tangible personal property
and assets owned or used by the Company and the Company Subsidiaries are in
reasonably good condition, maintenance and repair, except for ordinary wear and
tear, are useable in the ordinary course of business consistent with past
practices, and are reasonably adequate and suitable for the uses to which they
are being put.
5.13. Intellectual Property.
(a) Section 5.13(a) of the Company Disclosure Schedule
contains a complete and accurate list of all Patents (as hereinafter defined)
owned by the Company or any Company Subsidiary or otherwise used in the Business
(as hereinafter defined) ("Company Patents"), registered Marks (as hereinafter
defined) and unregistered Marks under which the Company sells or distributes
Products (as hereinafter defined) owned by the Company or any Company Subsidiary
or otherwise used in the Business ("Company Marks") and registered Copyrights
(as hereinafter defined) owned by the Company or any Company Subsidiary or
otherwise used in the Business ("Company Copyrights"). Except as set forth in
Section 5.13(a) of the Company Disclosure Schedule:
(i) the Company or one of the Company Subsidiaries
owns or possesses rights to use, without payment to a third party, all
of the Intellectual Property Assets necessary for the operation of the
Business, free and clear of all Encumbrances;
(ii) all Company Patents, Company Marks and Company
Copyrights which are issued by or registered with, as applicable, the
U.S. Patent and Trademark Office, the U.S. Copyright Office or in any
similar office or agency anywhere in the
19
world are currently in compliance with formal legal requirements
(including, without limitation, as applicable, payment of filing,
examination and maintenance fees, proofs of working or use, timely
post-registration filing of affidavits of use and incontestability and
renewal applications) except for such non-compliance as could not
reasonably be expected to result in the abandonment, expiration or
lapse of any Company Patent, Company Mark or Company Copyright and, to
the Company's knowledge, are valid and enforceable;
(iii) there are no pending, or, to the Company's
knowledge, threatened claims against the Company, any Company
Subsidiary or any of their respective employees alleging that (A) any
of the Company Intellectual Property Assets or the Business infringes
the rights of others under any Intellectual Property Assets ("Third
Party Rights") or (B) the Company, any Company Subsidiary or any of
their respective employees have misappropriated any Third Party Right;
(iv) neither the Business nor any Company
Intellectual Property Asset infringes any Third Party Right (other than
any Patent) or, to the Company's knowledge, any Patent, and none of the
Company, the Company Subsidiaries or any of their respective employees
have misappropriated any Third Party Right;
(v) neither the Company nor any Company
Subsidiary has received any written communications alleging any of the
Company Intellectual Property Assets is invalid or unenforceable;
(vi) except as set forth in Section 5.13(a)(vi) of
the Company Disclosure Schedule, no current or former employee or
consultant of the Company or any Company Subsidiary owns any rights in
or to any of the Company Intellectual Property Assets;
(vii) the Company is not aware of any violation or
infringement by a third party of any of the Company Intellectual
Property Assets;
(viii) the Company and each Company Subsidiary has
taken reasonable security measures to protect the secrecy,
confidentiality and value of all Trade Secrets used by the Company
and/or any Company Subsidiary (the "Company Trade Secrets"), including,
without limitation, requiring all employees and consultants of the
Company and each Company Subsidiary and all other persons with access
to Company Trade Secrets to execute a binding confidentiality
agreement, a true and correct copy of which has been provided to
Parent, and, to the Company's knowledge, there has not been any breach
by any party to such confidentiality agreements;
(ix) except as set forth in Section 5.13(a)(ix) of
the Company Disclosure Schedule, (A) neither the Company nor any
Company Subsidiary has directly or indirectly granted any rights,
licenses or interests in the source code of any software in or provided
with any Product, and (B) if the Company or one of the Company
Subsidiaries, as applicable, developed the source code of any software
in or provided with any Product, neither the Company nor any Company
Subsidiary has provided or
20
disclosed the source code of any such software in or provided with any
Product to any person or entity;
(x) the software in or provided with any of the
Products perform in accordance with their documented specifications and
as the Company and/or the Company Subsidiaries have warranted to its
customers;
(xi) none of the Products intentionally contain
any "viruses", "time-bombs", "key-locks", or any other devices
intentionally created that could disrupt or interfere with the
operation of the Products or the integrity of the data, information or
signals they produce in a manner materially adverse to the Company, any
Company Subsidiary or any licensee or recipient; and
(xii) the Company and all Company Subsidiaries have
complied in all material respects with their obligations under the Data
Protection Act 1998 (UK).
(b) Except for licenses or agreements for computer software
which is generally commercially available, the per copy cost of which is less
than $2,500, all licenses or other agreements under which the Company and/or any
Company Subsidiary is granted rights by others in Company Intellectual Property
Assets are listed in Section 5.13(b) of the Company Disclosure Schedule. All
such licenses or other agreements are in full force and effect, and, to the
knowledge of the Company, there is no material default by any party thereto. All
of the rights of the Company and the Company Subsidiaries under such licenses or
other agreements are freely assignable. True and complete copies of all such
licenses or other agreements, and any amendments thereto, have been provided to
Parent, and to the knowledge of the Company, the licensors under the licenses
and other agreements under which the Company and/or any Company Subsidiary is
granted rights have all requisite power and authority to grant the rights
purported to be conferred thereby.
(c) Except for licenses or agreements for proprietary drivers,
firmware or system software distributed to customers with any of the Products or
any other software distributed to customers in the ordinary course of business
consistent with past practices (collectively, "Customer Licenses"), all licenses
or other agreements under which the Company and/or any Company Subsidiary has
granted rights to others in Company Intellectual Property Assets are listed in
Section 5.13(c) of the Company Disclosure Schedule. All such licenses or other
agreements and the Customer Licenses are in full force and effect, and, to the
knowledge of the Company there is no material default by any party thereto. All
of the rights of the Company and/or any Company Subsidiary under such licenses
or other agreements and the Customer Licenses are freely assignable. True and
complete copies of all such licenses or other agreements, and any amendments
thereto, have been provided to Parent, and the Company and/or a Company
Subsidiary has all requisite power and authority to grant the rights purported
to be conferred thereby and under the Customer Licenses.
(d) For purposes of this Agreement,
(i) "Business" means the business of the Company
and/or the Company Subsidiaries as currently conducted and proposed to
be conducted.
21
(ii) "Company Intellectual Property Assets" means all
Intellectual Property Assets owned by the Company or any Company
Subsidiary or otherwise used in the Business. "Company Intellectual
Property Assets" includes, without limitation, the Products, Company
Patents, Company Marks, Company Copyrights and Company Trade Secrets.
(iii) "Intellectual Property Assets" means:
(A) patents, patent applications and patent
rights (collectively, "Patents");
(B) trade names, trade dress, logos, packaging
design, slogans, Internet domain names, registered
and unregistered trademarks and service marks and
related registrations and applications for
registration (collectively, "Marks");
(C) copyrights in both published and
unpublished works and all copyright registrations and
applications (collectively, "Copyrights");
(D) know-how, trade secrets, confidential or
proprietary information, research in progress,
invention, discoveries, invention disclosures
(whether or not patented), algorithms, data, designs,
processes, formulae, drawings, schematics,
blueprints, flow charts, models, strategies,
prototypes, techniques, Beta testing procedures and
Beta testing results (collectively, "Trade Secrets");
and
(E) goodwill, franchises, licenses, permits,
consents, approvals, and claims of infringement
against third parties.
(iv) "Products" means those instruments, software,
licenses, consumables, other products and services designed,
manufactured, marketed, sold and/or distributed by the Company and/or
any Company Subsidiary and any other sources from which the Company
and/or any Company Subsidiary derives revenues. A complete list of the
Products from which the Company or any Company Subsidiary derives
revenues is provided on Section 5.13(d)(iv) of the Company Disclosure
Schedule attached hereto.
5.14. Environmental Matters.
(a) As used in this Agreement, (i) "Environmental Laws" shall
mean all environmental or health and safety-related federal, state and local
laws, rules, regulations, ordinances and binding and enforceable orders, and
(ii) "Hazardous Materials" means any pollutant, contaminant, toxic substance,
hazardous waste, hazardous material, or hazardous substance, or any oil,
petroleum, or petroleum product, as defined in or pursuant to the United States
Resource Conservation and Recovery Act, the United States Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the Federal
Clean Water Act and any other federal, state or local Environmental Law, all as
amended through the date of this Agreement, as well as any regulations
promulgated pursuant thereto, and, to the extent not included in the foregoing,
any medical waste.
22
(b) The Company and the Company Subsidiaries are in compliance
with all Environmental Laws, except for any noncompliance that could not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
(c) Except as set forth in Section 5.14(c) of the Company
Disclosure Schedule, (i) neither the Company nor any Company Subsidiary has
entered into or been subject to any consent decree, compliance order, or
administrative order under any Environmental Law, (ii) there is no
administrative or judicial enforcement proceeding pending, or to the knowledge
of the Company, threatened, against the Company or any Company Subsidiary under
any Environmental Law, (iii) neither the Company nor any Company Subsidiary has
received written notice under the citizen suit provision of any Environmental
Law, (iv) neither the Company nor any Company Subsidiary or, to the knowledge of
the Company, any legal predecessor of the Company or any Company Subsidiary, has
received any written notice that it is potentially responsible under any
Environmental Law for costs of response or for damages to natural resources, as
those terms are defined under the Environmental Laws, at any location, (v)
neither the Company nor any Company Subsidiary or, to the knowledge of the
Company, any legal predecessor of the Company or any Company Subsidiary, has
received any written request for information, notice, demand letter, or formal
or informal complaint or claim under any Environmental Law or with respect to
environmental matters, and (vi) the Company and the Company Subsidiaries have no
knowledge that any of the above will be forthcoming.
(d) Neither the Company nor any Company Subsidiary has
generated, manufactured, refined, transported, treated, stored, handled,
disposed, transferred, produced or processed any Hazardous Materials, except in
compliance with all applicable Environmental Laws except for any noncompliance
that, either individually or in the aggregate, could not reasonably be expected
to have, individually or in the aggregate, a Company Material Adverse Effect.
(e) Neither the Company nor any Company Subsidiary has
transported or disposed of, or allowed or arranged for any third party to
transport or dispose of, any waste containing Hazardous Materials to or at any
location included on the National Priorities List, as defined under CERCLA, or,
to the Company's knowledge, any location proposed for inclusion on that list or
at any location on any analogous state list.
(f) Except as set forth in Section 5.14(f) of the Company
Disclosure Schedule, (i) neither the Company nor any Company Subsidiary has
released (as that term is defined in CERCLA) any Hazardous Material on, in,
under or at any real property owned or leased by the Company or any Company
Subsidiary, and (ii) the Company has no knowledge of any release (as that term
is defined in CERCLA) on, in, under or at the real property owned or leased by
the Company or any Company Subsidiary or predecessor entity of Hazardous
Materials, in either event in quantities or concentrations requiring remediation
or clean-up under applicable Environmental Laws.
(g) Except as set forth in Section 5.14(g) of the Company
Disclosure Schedule, to the knowledge of the Company, there is no hazardous
waste treatment, storage or disposal facility, underground storage tank,
landfill, surface impoundment, underground injection well, friable asbestos or
polychlorinated biphenyls (PCBs), as those terms are defined
23
under any Environmental Laws, located at any of the real property owned or
leased by the Company or any Company Subsidiary or predecessor entity or
facilities utilized by the Company or the Company Subsidiaries.
(h) No lien has been imposed on any real property owned or, to
the knowledge of the Company, leased by the Company or any Company Subsidiary by
any governmental agency at the federal, state or local level in connection with
the presence on or off such property of any Hazardous Material.
5.15. Employee Benefit Plans.
(a) Section 5.15(a) of the Company Disclosure Schedule sets
forth a complete and accurate list of every Employee Program (as hereinafter
defined) that has been maintained by the Company or an Affiliate (as hereinafter
defined) at any time during the three-year period prior to the date hereof.
(b) Each Employee Program which has been maintained by the
Company or an Affiliate at any time during the three-year period prior to the
date hereof and which has been intended to qualify under Section 401(a) or
501(c)(9) of the Code has received a favorable determination or approval letter
from the IRS regarding its qualification under such section and has, in fact,
been qualified under the applicable section of the Code from the effective date
of such Employee Program through and including the Closing Date (or, if earlier,
the date of the final distribution of all of such Employee Program's assets). No
event or omission has occurred which would reasonably be expected to cause any
such Employee Program to lose its qualification or otherwise fail to satisfy the
relevant requirements to provide tax-favored benefits under the applicable Code
Section (including, without limitation, Code Sections 105, 125, 401(a) and
501(c)(9)). Each asset held under any such Employee Program may be liquidated or
terminated without the imposition of any redemption fee, surrender charge or
comparable liability. No partial termination (within the meaning of Section
411(d)(3) of the Code) has occurred with respect to any Employee Program.
(c) Neither the Company nor any Affiliate knows, nor should
any of them reasonably know, of any failure of any party to comply with any
applicable laws with respect to the Employee Programs by the Company or any
Affiliate at any time during the three-year period prior to the date hereof.
With respect to any Employee Program maintained by the Company or any Affiliate
at any time during the three-year period prior to the date hereof, there has
been no (i) "prohibited transaction" as defined in Section 406 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or Code Section
4975, (ii) material failure to comply with any provision of ERISA, other
applicable law, or any agreement, or (iii) non-deductible contribution, which,
in the case of any of (i), (ii) or (iii), could reasonably be expected to
subject the Company or any Affiliate to material liability either directly or
indirectly (including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties or taxes, or any
other loss or expense. No litigation or governmental administrative proceeding
(or investigation) or other proceeding (other than those relating to routine
claims for benefits) is pending or, to the Company's knowledge, threatened with
respect to any such Employee Program. All payments and/or contributions required
to have been made (under the provisions of any agreements or other governing
documents or applicable law) with
24
respect to all Employee Programs maintained by the Company or any Affiliate at
any time during the three-year period prior to the date hereof, either have been
made or have been accrued (and all such unpaid but accrued amounts are described
in Section 5.15(c) of the Company Disclosure Schedule).
(d) Neither the Company nor any Affiliate has incurred any
liability under Title IV of ERISA which has not been paid in full. There has
been no "accumulated funding deficiency" (whether or not waived) with respect to
any Employee Program maintained by the Company or any Affiliate and subject to
Code Section 412 or ERISA Section 302. With respect to any Employee Program
maintained by the Company or any Affiliate at any time during the three-year
period prior to the date hereof and subject to Title IV of ERISA, there has been
no (nor will there be any as a result of the Transactions) (i) "reportable
event," within the meaning of ERISA Section 4043 or the regulations thereunder,
for which the notice requirement is not waived by the regulations thereunder,
and (ii) event or condition which presents a material risk of a plan termination
or any other event that would reasonably be expected to cause the Company or any
Affiliate to incur a material liability or have a lien imposed on its assets
under Title IV of ERISA. Except as described in Section 5.15(d) of the Company
Disclosure Schedule, no Employee Program maintained by the Company or any
Affiliate and subject to Title IV of ERISA (other than a Multiemployer Plan (as
hereinafter defined)) has any "unfunded benefit liabilities" within the meaning
of ERISA Section 4001(a)(18). Neither the Company nor any Affiliate has ever
maintained a Multiemployer Plan. None of the Employee Programs maintained by the
Company or any Affiliate at any time during the three-year period prior to the
date hereof has ever provided health care or any other non-pension benefits to
any employees after their employment is terminated (other than as required by
part 6 of subtitle B of Title I of ERISA or applicable state continuation
coverage law) or has ever promised to provide such post-termination benefits.
(e) With respect to each Employee Program maintained by the
Company, true, complete and accurate copies of the following documents (if
applicable to such Employee Program) have previously been delivered to Parent:
(i) all documents embodying or governing such Employee Program, and any funding
medium for the Employee Program (including, without limitation, trust
agreements) as they may have been amended to the date hereof; (ii) the most
recent IRS determination or approval letter with respect to such Employee
Program under Code Section 401(a) or 501(c)(9), and any applications for
determination or approval subsequently filed with the IRS; (iii) the three most
recently filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the three most recent actuarial valuation
reports completed with respect to such Employee Program; (v) the summary plan
description for such Employee Program (or other descriptions of such Employee
Program provided to employees) and all modifications thereto; (vi) any insurance
policy (including any fiduciary liability insurance policy or fidelity bond)
related to such Employee Program; (vii) any registration statement or other
filing made pursuant to any federal or state securities law; and (viii) all
correspondence to and from any state or federal agency within the last three
years with respect to such Employee Program.
(f) Each Employee Program maintained by the Company or any
Affiliate required to be listed in Section 5.15(a) of the Company Disclosure
Schedule may be amended, terminated, or otherwise modified by the Company to the
greatest extent permitted by applicable
25
law, including the elimination of any and all future benefit accruals under any
Employee Program and no employee communications or provision of any Employee
Program document has failed to effectively reserve the right of the Company or
the Affiliate to so amend, terminate or otherwise modify such Employee Program.
(g) Each Employee Program maintained by the Company (including
each non-qualified deferred compensation arrangement) has been maintained in
compliance with all applicable requirements of federal and state securities laws
including (without limitation, if applicable) the requirements that the offering
of interests in such Employee Program be registered under the Securities Act
and/or state "Blue Sky" laws.
(h) Each Employee Program maintained by the Company or an
Affiliate has complied in all material respects with the applicable notification
and other applicable requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, Health Insurance Portability and Accountability Act
of 1996, the Newborns' and Mothers' Health Protection Act of 1996, the Mental
Health Parity Act of 1996, and the Women's Health and Cancer Rights Act of 1998.
(i) For purposes of this Section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited
to, multiple employer welfare arrangements (within the meaning of ERISA
Section 3(40)), plans to which more than one unaffiliated employer
contributes and employee benefit plans (such as foreign or excess
benefit plans) which are not subject to ERISA; (B) all stock option
plans, stock purchase plans, bonus or incentive award plans, severance
pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements (including any
informal arrangements) not described in (A) above, including without
limitation, any arrangement intended to comply with Code Section 120,
125, 127, 129 or 137; and (C) all plans or arrangements providing
compensation to employee and non-employee directors. In the case of an
Employee Program funded through a trust described in Code Section
401(a) or an organization described in Code Section 501(c)(9), or any
other funding vehicle, each reference to such Employee Program shall
include a reference to such trust, organization or other vehicle.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides benefits under or through
such Employee Program, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under or through
such Employee Program, or if such Employee Program provides benefits to
or otherwise covers employees of such entity (or their spouses,
dependents, or beneficiaries).
(iii) An entity is an "Affiliate" of the Company if it (A)
is considered a single employer with the Company under ERISA Section
4001(b) or part of the same "controlled group" as the Company for
purposes of ERISA Section 302(d)(8)(C) or (B) was considered a single
employer with, or part of the same controlled group as, the
26
Company, but solely to the extent that the Company has or will have
liability with respect to any Employee Program maintained by such
Affiliate that is no longer considered such a single employer or
controlled group member.
(iv) "Multiemployer Plan" means an employee pension or
welfare benefit plan to which more than one unaffiliated employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
(j) Other than the pension scheme disclosed in Section 5.15(a)
of the Company Disclosure Schedule (the "Pension Scheme"), there are no schemes
funds or arrangements to which the Company Subsidiaries operating in the United
Kingdom have contributed or under which the Company Subsidiaries operating in
the United Kingdom have any liability or moral obligation and which provides for
or in respect of any person benefits on or as a consequence of any person dying,
retiring, becoming incapacitated (whether permanently or temporarily) attaining
a specified age or completing a specified period of service. The Pension Scheme
is a defined contribution scheme and does not provide for a certain level of
benefit to be paid to any of its members on death, retirement, incapacitation
(permanent or temporary), reaching a specified age or completing a specified
period of service. Except as disclosed in Section 5.15(a) of the Company
Disclosure Schedule, no promises have been made to any members as to the amount
of contributions that will be made to the Pension Scheme or the amount of
benefits that will or may be received by any member. The Pension Scheme is an
exempt approved scheme for the purposes of Chapter I of Part XIV of the Income
and Corporation Taxes Act 1988 or capable of approval as such and is not a
contracted out scheme for the purposes of the Social Security Pension Act 1975.
All contributions and premiums payable to the Pension Scheme by the Company
Subsidiaries operating in the United Kingdom and any of its employees accrued
due have been paid. Except as disclosed in Section 5.15(a) of the Company
Disclosure Schedule, the Company Subsidiaries operating in the United Kingdom do
not operate any scheme pursuant to which employees thereof (or their successors)
will receive any payment on death.
5.16. Labor Relations and Employment.
(a) Except as set forth in Section 5.16(a) of the Company
Disclosure Schedule, (i) there is no labor strike, picketing of any nature,
material labor dispute, slowdown or any other concerted interference with normal
operations, stoppage or lockout pending or to the knowledge of the Company,
threatened against or affecting the Company or any Company Subsidiary, (ii)
there are no union claims or demands to represent the employees of the Company
or any Company Subsidiary or Contingent Workers (as defined in Section 5.16(c)),
neither the Company nor any Company Subsidiary has any collective bargaining
obligations with respect to any of its employees or Contingent Workers, and
there are no current union organizing activities among the employees of the
Company or any Company Subsidiary or Contingent Workers, (iii) neither the
Company nor any Company Subsidiary is a party to or bound by any collective
bargaining or similar agreement with any labor organization, or work rules or
practices agreed to with any labor organization or employee association,
applicable to employees of the Company or any Company Subsidiary, and (iv) with
respect to bargaining obligations disclosed in Section 5.16 of the Company
Disclosure Schedule, the Company and the Company Subsidiaries
27
have bargained and continues to bargain in good faith. With respect to the
Transactions, any notice required under any labor law has been given.
(b) As of the date of this Agreement, the Company and the
Company Subsidiaries employ a total of 163 full-time employees and 6 part-time
employees. Section 5.16(b) of the Company Disclosure Schedule contains a true
and complete list of all current directors, officers and employees of, and
consultants to, the Company and the Company Subsidiaries and the current job
title of each such individual as of the date hereof. A true and complete list of
the annual compensation of each such individual as of the date hereof has been
provided to Parent. The Company and the Company Subsidiaries are in compliance
with all applicable laws and regulations respecting labor, employment, fair
employment practices, work place safety and health, terms and conditions of
employment, and wages and hours, except where the failure to be in such
compliance could not, individually or in the aggregate, reasonably be expected
to result in a Company Material Adverse Effect. Except as set forth in Section
5.16(b) of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary has any policy, plan or program of paying severance pay or any form
of severance compensation in connection with the termination of the employees of
the Company and the Company Subsidiaries. The Company and the Company
Subsidiaries are, and at all time since November 6, 1986 have been, in
compliance with the requirements of the Immigration Reform Control Act of 1986
except for such non-compliance as could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Except as
set forth in Section 5.16(b) of the Company Disclosure Schedule, neither the
Company nor any Company Subsidiary has implemented any plant closing or layoff
of employees that could implicate the Worker Adjustment and Retraining
Notification Act of 1988, as amended, or any similar foreign, state, provincial,
or local law, regulation or ordinance. All terminations and layoffs of employees
that have occurred in the ninety (90) days prior to the date of this Agreement
are set forth in Section 5.16(b) of the Company Disclosure Schedule.
(c) Except as set forth in Section 5.16(c) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary employs or
uses any independent contractors, temporary employees, leased employees or any
other servants or agents compensated other than through reportable wages paid by
the Company or any Company Subsidiary (collectively, "Contingent Workers").
Except as set forth in Section 5.16(c) of the Company Disclosure Schedule, to
the extent that the Company or any Company Subsidiary employs or uses Contingent
Workers, it has properly classified and treated them in accordance with
applicable laws and for purposes of all benefit plans and perquisites except as
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect.
5.17. No Brokers. Neither the Company nor any of the Company
Subsidiaries has entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of such entity or Parent
or MergerCo to pay any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
consummation of the Transactions, except that the Company has retained U.S.
Bancorp Piper Jaffray Inc. ("Piper Jaffray") as its financial advisor in
connection with the Transactions. The Company has provided to Parent true,
complete and accurate copies of all agreements (including any amendments
thereto) between the Company and Piper Jaffray
28
pursuant to which Piper Jaffray would be entitled to any payment relating to the
Transactions and no oral or other understandings with Piper Jaffray exist except
as set forth therein. Other than the foregoing arrangements, the Company is not
aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or consummation of the Transactions.
5.18. Opinion of Financial Advisor. The Company Board has received the
opinion of Piper Jaffray to the effect that, as of July 16, 2002, the Merger
Consideration is fair to the Company's stockholders from a financial point of
view, and a true, complete and accurate signed copy of such opinion has been, or
promptly upon receipt thereof will be, delivered to Parent. The Company has been
authorized by Piper Jaffray to permit the inclusion of such opinion in its
entirety in the Proxy Statement (as defined in Section 7.5).
5.19. Vote Required. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock outstanding on the record date
for the meeting of the Company's stockholders Meeting is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve the Transactions and adopt this Agreement.
5.20. Takeover Laws. The Company Board has taken appropriate actions
and votes such that the provisions of Section 203 of the DGCL and all other
applicable takeover statutes will not apply to this Agreement, the Voting
Agreement or any of the Transactions. No foreign or state take-over law is
applicable to this Agreement, the Voting Agreement or any of the Transactions.
5.21. Contracts.
(a) Section 5.21(a) of the Company Disclosure Schedule lists
all Scheduled Contracts (as hereinafter defined) of the Company and the Company
Subsidiaries, and except as set forth in Section 5.21(a) of the Company
Disclosure Schedule, each Scheduled Contract is valid and binding on the Company
or such Company Subsidiary and is in full force and effect and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. Except as set forth in Section 5.21(a) of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary is in
default or has received notice of any violation or default under any such
Scheduled Contract and, to the knowledge of the Company, no other party is in
default under any of the Scheduled Contracts (in each case other than defaults
and violations that could not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect), and no such violations or
defaults will be triggered by the execution, delivery and performance of this
Agreement by the Company or the consummation of the Transactions. For purposes
of this Agreement, "Scheduled Contracts" shall mean (i) all contracts,
agreements or understandings with customers, suppliers and distributors of the
Company and the Company Subsidiaries involving any payments in an amount,
individually or in the aggregate, in excess of $50,000, (ii) all acquisition,
merger, asset purchase or sale agreements entered into by the Company or any
Company Subsidiary, (iii) all non-competition agreements and other agreements or
obligations which purport to limit in any respect the manner in which, or the
localities in which, all or any material portion of the business of the Company
or any Company Subsidiary may be conducted, (iv) all transactions, agreements,
arrangements or understandings
29
with any affiliate of the Company or any Company Subsidiary that would be
required to be disclosed under Item 404 of Regulation S-K of Title 17, Part 229
of the Code of Federal Regulations ("Regulation S-K"), (v) all voting or other
agreements governing how any shares of Company Common Stock shall be voted, (vi)
all agreements which provide for, or relate to, the incurrence by the Company or
any Company Subsidiary of indebtedness for borrowed money (including any
interest rate or foreign currency swap, cap, collar, hedge or insurance
agreements, or options or forwards on such agreements, or other similar
agreements for the purpose of managing the interest rate or foreign exchange
risk associated with its financing), (vii) all contracts or other agreements
which would prohibit or materially delay the consummation of the Transactions,
(viii) all joint venture agreements to which the Company or any Company
Subsidiary is a party, (ix) all agreements or other arrangements related to the
licensing of assets by or to the Company or any Company Subsidiary, and (x) all
other agreements within the meaning set forth in Item 601(b)(10) of Regulation
S-K.
(b) Except as set forth in Section 5.21(b) of the Company
Disclosure Schedule, the execution and delivery of this Agreement by the Company
does not, and the performance of and compliance with this Agreement by the
Company and consummation of the Transactions does not, require any
authorization, consent or approval of any third party under (i) any Scheduled
Contract, (ii) any other contract required to be scheduled pursuant to Section
5.21(a), or (iii) any other contract where the failure to obtain such
authorization, consent or approval could reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(c) Except as set forth in the Company Disclosure Schedule,
neither the Company nor any of the Company Subsidiaries is a party to any oral
or written (i) employment, severance, retention or termination agreements or
consulting agreements not terminable on less than thirty (30) days notice, (ii)
union or collective bargaining agreement, (iii) agreement with any executive
officer or other key employee of the Company or any of the Company Subsidiaries
the benefits of which are contingent or vest, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any of the Company Subsidiaries of the nature contemplated by this Agreement,
(iv) agreement with respect to any executive officer or other key employee of
the Company or any of the Company Subsidiaries providing any term of employment
or compensation guarantee or (v) agreement or plan, including any stock option,
stock appreciation right, restricted stock or stock purchase plan, any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the Transactions or the value
of any of the benefits of which will be calculated on the basis of any of the
Transactions.
5.22. Collectibility of Accounts Receivable. All of the accounts
receivable of the Company and the Company Subsidiaries shown in the consolidated
financial statements included or incorporated by reference in the Company SEC
Reports or acquired thereafter are valid and enforceable claims and arose in
connection with arms' length transactions conducted in the ordinary course of
business and, to the knowledge of the Company, are not subject to setoff or
counterclaim.
5.23. Inventory. Except as set forth in Section 5.23 of the Company
Disclosure Schedule, all inventory of the Company, including, without
limitation, raw materials, work in
30
process and finished products, packaging, items purchased for distribution or
resale and items which have been ordered or purchased by the Company and the
Company Subsidiaries, including, without limitation, inventory shown in the
consolidated financial statements included or incorporated by reference in the
Company SEC Reports or acquired thereafter (collectively, "Inventory"): (a) was
acquired or manufactured in the ordinary course of business consistent with past
practice; (b) is of good and merchantable quality, free of any defect or
deficiency; and (c) is saleable or usable for the purposes for which intended
(except in each case as could not reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect). The Company and the
Company Subsidiaries have good and valid title to all of their Inventory, free
and clear of all Encumbrances, other than as set forth in Section 5.23 of the
Company Disclosure Schedule.
5.24. Accounting Policies. The significant accounting policies,
including without limitation, those policies related to revenue recognition,
utilized by the Company and the Company Subsidiaries in preparing the Company's
financial statements are as set forth in Section 5.24 of the Company Disclosure
Schedule and Note 2 of the Company's consolidated financial statements filed as
part of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001 and Item 7 of such Form 10-K, and such policies are in
conformity with GAAP and have been consistently applied. All estimates made by
management in connection with the preparation of such financial statements were
made in accordance with these accounting policies, in good faith and on the
basis of management's reasonable beliefs. The financial statements included or
incorporated by reference in the Company SEC Reports were prepared in accordance
with such accounting policies.
5.25. Backlog.
(a) The Company defines "backlog" as a written purchase order
signed by a customer and received by the Company, which purchase order
authorizes the Company to ship the product or provide the service identified in
the purchase order at a specified price on specified terms and conditions. Based
on this definition, the Company's backlog at July 12, 2002 was $1.6 million
(excluding blanket orders for chemicals and reagents totaling $2.4 million);
provided that such customers may modify or terminate such purchase orders at any
time prior to shipment. No revenues have been recognized by the Company or the
Company Subsidiaries with respect to this backlog. None of such orders have
been, or to the knowledge of the Company are threatened to be cancelled or
reduced.
(b) The summary of shipments and orders received by the
Company and the Company Subsidiaries during the six-month period ended June 30,
2002, attached hereto as Section 5.25(b) of the Company Disclosure Schedule, is,
as of the date hereof, true, correct and complete in all material respects.
Section 5.25(b) of the Company Disclosure Schedule sets forth for each month in
such six-month period (i) the backlog at the end of each month, (ii) shipments
made during each month and (iii) the orders received for each month.
5.26. Customers, Distributors and Suppliers.
(a) A complete and accurate list of all customers,
representatives and distributors (whether pursuant to a commission, royalty or
other arrangement) who accounted for
31
more than 5% of the sales of the Company and the Company Subsidiaries for the
fiscal year ended December 31, 2001, showing, with respect to each, the name,
address and dollar amount involved (collectively, the "Customers and
Distributors") has been provided to Parent. Section 5.26(a) of the Company
Disclosure Schedule is a complete and accurate list of the suppliers of the
Company and the Company Subsidiaries to whom during the fiscal year ended
December 31, 2001, the Company and the Company Subsidiaries made payments
aggregating $10,000 or more, showing, with respect to each, the name, address
and dollar amount involved (the "Suppliers"). The relationships of the Company
and the Company Subsidiaries with their Customers, Distributors and Suppliers
are good commercial working relationships and, to the knowledge of the Company,
neither the announcement of the Transactions nor the consummation thereof will
adversely affect any of such relationships. No Customer, Distributor or Supplier
has cancelled, materially modified, or otherwise terminated its relationship
with the Company or any Company Subsidiary, or has decreased materially its
usage or purchase of the services or products of the Company or any Company
Subsidiary or its services, supplies or materials furnished to the Company or
any Company Subsidiary, nor, to the knowledge of the Company, does any Customer,
Distributor or Supplier have any plan or intention to do any of the foregoing.
(b) Section 5.26(b) of the Company Disclosure Schedule sets
forth by position of employment (as opposed to by name) all persons granted
authority to enter into (on behalf of the Company or any Company Subsidiary)
oral or written agreements or arrangements with any customer, supplier or
distributor related to the offering of discounts, extended warranties, service
contracts, bundling of any Products, rights of return or any other agreements or
arrangements and the nature of such authority, and neither the Company nor any
Company Subsidiary is a party to any such agreements or arrangements other than
those entered into in accordance with such authority.
5.27. Restructuring Plan. The restructuring plan and its effects on the
Company (collectively, the "Restructuring Plan") has been provided to Parent and
was prepared in good faith based on reasonable assumptions made by the Company
at the time the Restructuring Plan was made, and as of the date hereof, nothing
has occurred to make such assumptions upon which the Restructuring Plan is based
no longer reasonable. All severance and termination costs and expenses required
by law, contract or otherwise are set forth in the Restructuring Plan.
5.28. Product Liability and Warranty.
(a) There are no events, conditions, circumstances,
activities, practices, incidents, actions, omissions or plans which could
reasonably be expected to give rise to any liability or obligation or otherwise
form the basis of any claim based on or related to any product that is or was
designed, formulated, manufactured, processed, distributed, sold or placed in
the stream of commerce by the Company or any Company Subsidiary or any service
provided by or on behalf of the Company or any Company Subsidiary, except as
could not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. All products, including the packaging and
advertising related thereto, which were designed, formulated, manufactured,
processed, distributed, sold or placed in the stream of commerce by the Company
or any Company Subsidiary or any services provided by or on behalf of the
Company or any Company Subsidiary complied with applicable permits, applicable
laws or
32
applicable industry or customer standards, except as otherwise would not
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect, and there have not been and there are no defects or
deficiencies in such services or products.
(b) Section 5.28(b) of the Company Disclosure Schedule sets
forth the Company's standard product and service warranties on each of the
products or services that the Company distributes, services, markets, sells or
produces for itself, a customer or a third party. Other than such warranties,
the Company provides no other warranties, guarantees or rights of return on any
product or service.
5.29. Certain Business Practices. No director, officer, agent or
employee of the Company or any Company Subsidiary, has, directly or indirectly,
(a) made or agreed to make any contribution, payment or gift to any government
official, employee or agent where either the contribution, payment or gift or
the purpose thereof was illegal under the laws of any federal, state, local or
foreign jurisdiction, (b) established or maintained any unrecorded fund or asset
for any purpose or made any false entries on the books and records of the
Company or any of the Company Subsidiaries for any reason, (c) made or agreed to
make any contribution, or reimbursed any political gift or contribution made by
any other person, to any candidate for federal, state, local or foreign public
office or (d) paid or delivered any fee, commission or any other sum of money or
item of property, however characterized, to any finder, agent, government
official or other party, in the United States or any other country, which in any
manner relates to the assets, business or operations of the Company or the
Company Subsidiaries, which the Company, such Company Subsidiary or each
officer, director, agent or employee knew or had reason to believe to have been
illegal under any federal, state or local laws (or any rules or regulations
thereunder) of the United States or any other country having jurisdiction.
5.30. Insurance. The Company and the Company Subsidiaries maintain
insurance policies (the "Insurance Policies") against all risks of a character
and in such amounts as are usually insured against by similarly situated
companies in the same or similar businesses. Section 5.30 of the Company
Disclosure Schedule contains a complete and accurate list of all Insurance
Policies. Each Insurance Policy is in full force and effect and is valid,
outstanding and enforceable, and all premiums due thereon have been paid in
full. The Company and the Company Subsidiaries have complied in all material
respects with provisions of each Insurance Policy under which any of them is the
insured party. No insurer under any Insurance Policy has canceled or generally
disclaimed liability under any such policy or, to the knowledge of the Company,
indicated any intent to do so or not to renew any such policy. All material
claims under the Insurance Policies have been filed in a timely fashion.
5.31. Reorganization. Neither the Company nor any Company Subsidiary
has taken any action, or as the date of this Agreement, is aware of any fact
that would jeopardize the qualification of the Merger as a tax-free
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. Without
limiting the foregoing, neither the Company nor any Company Subsidiary has
disposed of any assets that would (i) prevent MergerCo from acquiring at least
90 percent of the fair market value of the net assets and 70 percent of the fair
market value of the gross assets held by the Company and the Company
Subsidiaries within the meaning of Revenue Procedure 86-42 or (ii) violate the
"substantially all" rule under Section 368(a)(2)(D) of the Code and the
corresponding Treasury Regulations. Except as set forth in Section 5.31 of
33
the Company Disclosure Schedule, the Company has not redeemed any part of its
outstanding stock or affected a distribution with respect to such stock for a
period of two years before the Closing Date. Any redemption set forth in Section
5.31 of the Company Disclosure Schedule was not done in contemplation of the
Transactions. The Company has not taken any action that would prevent Parent
from preserving a proprietary interest in the Company within the meaning of
Treasury Regulations Section 1.368-1(e). No Company Subsidiary has acquired
within the last two years any stock of Parent or taken any other action that
would prevent Parent from preserving a proprietary interest in the Company
within the meaning of Treasury Regulations Section 1.368-1(e). There is no plan
or intention by the Company or any Company Subsidiary to acquire stock of the
Company or the Parent Common Stock issued in the Merger.
5.32. Ownership of Parent Common Stock; Affiliates and Associates. As
of the date of this Agreement, neither the Company nor any of its affiliates or
associates (as such terms are defined under the Exchange Act) (a) beneficially
owns, directly or indirectly, or (b) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of Parent.
5.33. Compliance with the Hart-Scott-Rodino Act. No person or entity,
directly or indirectly through fiduciaries, agents, controlled entities, or
other means, holds fifty percent (50%) or more of the outstanding voting
securities of, or has the contractual right to designate fifty percent (50%) or
more of the directors of, the Company. In addition, the Company and the Company
Subsidiaries, on a consolidated basis, have less than (a) $100,000,000 of total
assets, as stated on the last regularly prepared consolidated balance sheet of
the Company and the Company Subsidiaries; and (b) $100,000,000 of annual net
sales.
5.34. No Contracts with Affiliates. Except as disclosed in Section 5.34
of the Company Disclosure Schedule, neither the Company nor any Company
Subsidiary has entered into any agreement, contract, subcontract, lease,
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy or legally binding commitment or undertaking of any
nature with any of its officers, directors or stockholders, except pursuant to
the Stock Option Plans and employment agreements, or consulting agreements in
each case as set forth in Section 5.34 of the Company Disclosure Schedule.
Except as set forth in Section 5.34 of the Company Disclosure Schedule, the
Company has no accounts or loans receivable from any person, firm or corporation
which is affiliated with the Company or any Company Subsidiary or from any
director, officer or employee of the Company or any Company Subsidiary.
5.35. Disclosure. The representations, warranties and statements by the
Company in this Agreement, the Company Disclosure Schedule and the certificates
delivered pursuant hereto do not contain any untrue statement of a material fact
and, when taken together with each other, do not omit to state a material fact
necessary to make such representations, warranties and statements, in the light
of the circumstances under which they are made, not misleading.
34
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO
Except as set forth in the disclosure schedules delivered at or prior
to the execution hereof to the Company, which shall refer to the relevant
Sections of this Agreement (the "Parent Disclosure Schedule"), each of Parent
and MergerCo represents and warrants to the Company as follows:
6.1. Existence; Good Standing; Authority; Compliance with Law.
(a) Each of Parent and MergerCo is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate or other power and authority to own,
operate, lease and encumber its properties and to carry on its business as it is
now being conducted. Each of Parent and MergerCo is duly licensed or qualified
to do business as a foreign corporation and is in good standing under the laws
of any other jurisdiction in which the character of the properties owned, leased
or operated by it therein or in which the transaction of its business makes such
license or qualification necessary, except where the failure to be so licensed
or qualified could not reasonably be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect (as hereinafter defined). For
purposes of this Agreement, a "Parent Material Adverse Effect" means any change,
effect, event, occurrence, condition or development that is or is reasonably
likely to be materially adverse to (i) the business, operations, assets,
liabilities, properties, results of operations, prospects or condition
(financial or otherwise) of Parent and each Parent Subsidiary, taken as a whole,
or (ii) the ability of Parent and MergerCo to perform their respective
obligations under this Agreement.
(b) Each of the Parent Subsidiaries is a corporation,
partnership or limited liability company (or similar entity or association in
the case of those Parent Subsidiaries organized and existing other than under
the laws of a state of the United States) duly incorporated or organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the requisite corporate or other power and
authority to own, operate, lease and encumber its properties and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such license or
qualification, except for jurisdictions in which such failure to be so licensed
or qualified or to be in good standing could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect.
(c) Neither Parent nor any of the Parent Subsidiaries is in
violation of any order of any court, governmental authority or arbitration board
or tribunal, or any law, ordinance, bylaw, judgment, decree, order, arbitration,
concession, grant, governmental rule or regulation to which Parent or any Parent
Subsidiary or any of their respective properties or assets is subject, where
such violation, alone or together with all other violations, could reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect. Parent and the Parent Subsidiaries have obtained all licenses, permits,
approvals and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their
35
businesses as currently conducted, except where the failure to obtain any such
license, permit, approval or authorization or to take any such action, alone or
together with all other failures, could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. All
licenses, permits, approvals and other authorizations required under such laws
and regulations are in full force and effect. No violations are or have been
recorded in respect of any such license, permit, approval or other
authorization; to the knowledge of Parent, no event has occurred that would
allow revocation or termination or that would result in the impairment of
Parent's or any Parent Subsidiary's rights with respect to any such license,
permit, approval or authorization; and no proceeding is pending or, to the
knowledge of Parent, threatened to revoke, limit or enforce any such license,
permit, approval or authorization, except in each case for violations,
revocations, terminations and proceedings which could not reasonably be expected
to have, individually or in the aggregate, a Parent Material Adverse Effect.
(d) True, complete and accurate copies of the Certificate of
Incorporation of Parent (the "Parent Certificate") and the Bylaws of Parent (the
"Parent Bylaws") (and in each such case, all amendments thereto) have been
delivered to the Company prior to the date of this Agreement, and no amendments
thereto are pending. Parent is not in violation of any provisions of the Parent
Certificate or the Parent Bylaws.
6.2. Authorization, Validity and Effect of Agreements. Each of Parent
and MergerCo has the requisite power and authority to enter into and consummate
the Transactions and to execute and deliver this Agreement. The Board of
Directors of Parent (the "Parent Board") has approved this Agreement and the
Transactions. The Board of Directors of MergerCo and the sole stockholder of
MergerCo have approved this Agreement and the Transactions. The execution and
delivery by Parent and MergerCo of this Agreement and the consummation of the
Transactions have been duly authorized by all requisite corporate action on the
part of Parent and MergerCo. This Agreement has been duly executed and delivered
by Parent and MergerCo and, assuming due and valid authorization, execution and
delivery thereof by the Company, is a valid and binding obligation of Parent and
MergerCo, enforceable against Parent and MergerCo in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
6.3. Capitalization.
(a) The authorized capital stock of Parent consists of
80,000,000 shares of Parent Common Stock, par value $0.01 per share, and
5,000,000 shares of preferred stock, par value $0.01 per share (the "Parent
Preferred Stock"). As of the date of this Agreement, (a) 26,792,932 shares of
Parent Common Stock were issued and outstanding, (b) 2,965,117 shares of Parent
Common Stock were authorized and reserved for issuance pursuant to Parent's 1996
Stock Option and Grant Plan and Parent's 2002 Stock Option and Incentive Plan
(the "Parent Stock Option Plans"), subject to adjustment on the terms set forth
in the Parent Stock Option Plans, (c) 476,925 shares of Parent Common Stock were
authorized and reserved for issuance pursuant to Parent's Employee Stock
Purchase Plan, (d) options to purchase 1,388,150 shares of Parent Common Stock
(the "Parent Options") were outstanding under the Parent Stock Option Plans, (e)
no shares of Parent Preferred Stock were issued and outstanding, and (f)
4,660,784 shares of Parent Common Stock and no shares of Parent Preferred Stock
were held
36
in the treasury of the Company. As of the date of this Agreement, Parent had no
shares of Parent Common Stock or Parent Preferred Stock reserved for issuance
other than as described above. All issued and outstanding shares of capital
stock of Parent are, and all shares of capital stock of Parent which may be
issued pursuant to the exercise of outstanding Parent Options will be, duly
authorized, validly issued, fully paid, nonassessable and free of any preemptive
rights. All issued and outstanding shares of capital stock of Parent were, and
all shares of capital stock of the Parent which may be issued pursuant to the
exercise of outstanding Parent Options will be, issued in compliance with and in
accordance with the applicable requirements of the Securities Laws and
applicable state securities and "Blue Sky" laws. Parent has no outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or which are convertible into or exercisable for securities
having the right to vote) with the stockholders of Parent on any matter. Except
for the Parent Options (all of which have been issued under the Parent Stock
Option Plans) and Parent's Employee Stock Purchase Plan, there are no options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate Parent to issue, transfer or sell any
shares of capital stock of Parent. Except as set forth in the Parent SEC Reports
(as defined below) or as could not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect, there are no agreements
or understandings to which Parent or any Parent Subsidiary is a party with
respect to the voting of any shares of capital stock of Parent or which restrict
the transfer of any such shares, nor does Parent have knowledge of any
third-party agreements or understandings with respect to the voting of any such
shares or which restrict the transfer of any such shares. Except as set forth in
the Parent SEC Reports or as could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect, there are no
outstanding contractual obligations of Parent or any Parent Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock, partnership
interests or any other securities of Parent or any Parent Subsidiary. Except as
set forth in the Parent SEC Reports or as could not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect,
neither Parent nor any Parent Subsidiary is under any obligation, contingent or
otherwise, by reason of any agreement to register the offer and sale or resale
of any of their securities under the Securities Act.
(b) The authorized capital stock of MergerCo consists of 1,000
shares of MergerCo Common Stock, of which 1,000 shares were outstanding as of
the date of this Agreement and owned by Parent. MergerCo is a direct wholly
owned subsidiary of Parent, was formed solely for the purpose of engaging in the
Transactions, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement.
6.4. No Violation; Governmental Consents. Except as could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, none the execution, delivery or performance by Parent
and MergerCo of this Agreement, the consummation by Parent and MergerCo of the
Transactions, or the compliance by Parent and MergerCo with any of the
provisions hereof, will conflict with or result in a breach of any provisions of
the Parent Certificate, the Parent Bylaws, the MergerCo Certificate or the
MergerCo Bylaws. The execution, delivery and performance by Parent and MergerCo
of this Agreement, the consummation by Parent and MergerCo of the Transactions,
and the compliance by Parent and MergerCo with any of the provisions hereof,
will not violate, or conflict with, or result in a breach of any provision of,
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or result in the termination or in a
right
37
of termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of Parent or the Parent Subsidiaries under, or result
in being declared void, voidable or without further binding effect, any of the
terms, conditions or provisions of (a) any note, bond, mortgage, indenture or
deed of trust, (b) any license, franchise, permit, lease, contract, agreement or
other instrument, commitment or obligation to which Parent or any of the Parent
Subsidiaries is a party, or by which Parent or any of the Parent Subsidiaries or
any of their properties or assets is bound, or (c) any order, writ, judgment,
injunction, decree, law (including common law), statute, rule or regulation
applicable to Parent or any Parent Subsidiary or any of their properties or
assets, except as otherwise could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. Other than
the filings provided for in Section 1.2 of this Agreement or required pursuant
to the Exchange Act or applicable state securities and "Blue Sky" laws, and
based upon the accuracy of the Company's representations and warranties
contained in Section 5.33 hereof, the execution and delivery of this Agreement
by Parent and MergerCo does not, and the performance of and compliance with this
Agreement by Parent and MergerCo and consummation of the Transactions does not,
require any authorization, consent or approval of, permit from, or declaration,
filing or registration with, any governmental or regulatory authority, except
where the failure to obtain any such authorization, consent or approval of,
permit from, or declaration, filing or registration with, any governmental or
regulatory authority could not reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect.
6.5. Commission Documents. Parent has filed all required forms,
reports, schedules, statements and other documents with the Commission since the
date Parent became subject to the reporting obligations of the Exchange Act (as
such documents may have been amended since the time of filing, collectively, the
"Parent SEC Reports"), all of which were prepared in accordance with the
applicable requirements of the Securities Laws. As of their respective dates,
the Parent SEC Reports (a) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (b) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Parent included in or incorporated by reference
into the Parent SEC Reports (including the related notes and schedules) fairly
presents the consolidated financial position of Parent and the Parent
Subsidiaries as of its date and each of the consolidated statements of income,
retained earnings and cash flows of Parent included in or incorporated by
reference into the Parent SEC Reports (including any related notes and
schedules) fairly presents the results of operations, retained earnings or cash
flows, as the case may be, of Parent and the Parent Subsidiaries for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which would not be material in amount or effect), in
each case in accordance with GAAP consistently applied during the periods
involved, except as may be noted therein and except, in the case of the
unaudited statements, as permitted by Form 10-Q pursuant to Section 13 or 15(d)
of the Exchange Act. No Parent Subsidiary is required to file any form, report
or document with the Commission.
6.6. Litigation. Except as set forth in the Parent SEC Reports or as
otherwise disclosed to the Company, there is no litigation, suit, action or
proceeding pending or, to the knowledge of Parent, threatened against Parent or
MergerCo, as to which there is a reasonable
38
likelihood of an adverse determination and which, if adversely determined,
individually or in the aggregate with all such other litigation, suits, actions
or proceedings, could reasonably be expected to (a) have a Parent Material
Adverse Effect, (b) materially and adversely affect the ability of Parent and
MergerCo to perform their respective obligations under this Agreement or (c)
prevent the consummation of any of the Transactions.
6.7. Absence of Certain Changes. Since March 31, 2002 and except as
otherwise publicly disclosed, (a) Parent and the Parent Subsidiaries have
conducted their businesses only in the ordinary course of business, and (b) up
to and including the date of this Agreement, there has not been any change,
effect, event, occurrence, non-occurrence, condition or development which has
had or could reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
6.8. No Undisclosed Liabilities. Neither Parent nor any of the Parent
Subsidiaries has any material liabilities or obligations of any nature (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due, including any liability for Taxes and any material
obligations or liabilities whether or not of the nature or type required to be
disclosed under GAAP) other than such liabilities or obligations that have been
specifically disclosed or provided in the Parent SEC Reports.
6.9. Intellectual Property. Parent or one of the Parent Subsidiaries
owns or possesses rights to use all of the Intellectual Property Assets
necessary for the operation of the business of Parent in the manner now
conducted, free and clear of all Encumbrances, except where the failure to own
or have such rights could not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
6.10. Environmental Matters. Parent is in compliance with all
Environmental Laws, except for any noncompliance that, either individually or in
the aggregate, could not reasonably be expected to have a Parent Material
Adverse Effect. Except as could not reasonably be expected to have, individually
or in the aggregate, a Parent Material Adverse Effect, (i) Parent has not
entered into or been subject to any consent decree, compliance order, or
administrative order under any Environmental Law, (ii) there is no
administrative or judicial enforcement proceeding pending, or to the knowledge
of Parent, threatened, against Parent under any Environmental Law, (iii) Parent
has not received written notice under the citizen suit provision of any
Environmental Law, (iv) Parent has not received any written notice that it is
potentially responsible under any Environmental Law for costs of response or for
damages to natural resources, as those terms are defined under the Environmental
Laws, at any location, (v) Parent has not received any written request for
information, notice, demand letter, or formal or informal complaint or claim
under any Environmental Law or with respect to environmental matters, and (vi)
Parent has no knowledge that any of the above will be forthcoming. Parent has
not generated, manufactured, refined, transported, treated, stored, handled,
disposed, transferred, produced or processed any Hazardous Materials, except in
compliance with all applicable Environmental Laws except for any noncompliance
that, either individually or in the aggregate, could not reasonably be expected
to have a Parent Material Adverse Effect.
39
6.11. Employee Benefit Plans.
(a) Each Employee Program maintained by Parent or an Affiliate
and which has been intended to qualify under Section 401(a) or 501(c)(9) of the
Code has, in fact, been qualified under the applicable section of the Code from
the effective date of such Employee Program through and including the Closing
Date except for any failure that could not reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect. To Parent's
knowledge, no event or omission has occurred which would reasonably be expected
to cause any such Employee Program to lose its qualification or otherwise fail
to satisfy the relevant requirements to provide tax-favored benefits under the
applicable Code Section (including, without limitation, Code Sections 105, 125,
401(a) and 501(c)(9)) except for any failure that could not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect.
(b) Neither Parent nor any Affiliate knows, nor should any of
them reasonably know, of any material failure of any party to comply with any
applicable laws with respect to the Employee Programs that have ever been
maintained by Parent or any Affiliate. With respect to any Employee Program
maintained by Parent or any Affiliate, there has been no (i) "prohibited
transaction" as defined in Section 406 of ERISA, or Code Section 4975, (ii)
material failure to comply with any provision of ERISA, other applicable law, or
any agreement, or (iii) non-deductible contribution, which, in the case of any
of (i), (ii) or (iii), could reasonably be expected to subject Parent or any
Affiliate to material liability either directly or indirectly (including,
without limitation, through any obligation of indemnification or contribution)
for any damages, penalties or taxes, or any other loss or expense. No material
litigation, governmental administrative proceeding (or investigation) or other
proceeding (other than those relating to routine claims for benefits) is pending
or, to Parent's knowledge, threatened with respect to any such Employee Program.
(c) Neither Parent nor any Affiliate has incurred any material
liability under Title IV of ERISA which has not been paid in full. There has
been no "accumulated funding deficiency" (whether or not waived) with respect to
any Employee Program maintained by Parent or any Affiliate and subject to Code
Section 412 or ERISA Section 302. With respect to any Employee Program
maintained by Parent or any Affiliate and subject to Title IV of ERISA, there
has been no (nor will there be any as a result of the Transactions) (i)
"reportable event," within the meaning of ERISA Section 4043 or the regulations
thereunder, for which the notice requirement is not waived by the regulations
thereunder, and (ii) event or condition which presents a material risk of a plan
termination or any other event that would reasonably be expected to cause Parent
or any Affiliate to incur a material liability or have a lien imposed on its
assets under Title IV of ERISA. No Employee Program maintained by Parent or any
Affiliate and subject to Title IV of ERISA (other than a Multiemployer Plan (as
hereinafter defined)) has any "unfunded benefit liabilities" within the meaning
of ERISA Section 4001(a)(18). Neither Parent nor any Affiliate has ever
maintained a Multiemployer Plan.
(d) For purposes of this Section: An entity is an "Affiliate"
of Parent if it (A) is considered a single employer with Parent under ERISA
Section 4001(b) or part of the same "controlled group" as Parent for purposes of
ERISA Section 302(d)(8)(C) or (B) was considered a single employer with, as part
of the same controlled group as, Parent, but solely to the extent
40
that Parent as or will have liability with respect to any Employee Program
maintained by such Affiliate that is no longer considered such a single employer
or controlled group member.
6.12. Labor Relations and Employment. (a) There is no labor strike,
picketing of any nature, material labor dispute, slowdown or any other concerted
interference with normal operations, stoppage or lockout pending or to the
knowledge of Parent, threatened against or affecting Parent, (b) there are no
union claims or demands to represent the employees of Parent, Parent does not
have any collective bargaining obligations with respect to any of its employees,
and there are no current union organizing activities among the employees of
Parent, (c) Parent is not a party to or bound by any collective bargaining or
similar agreement with any labor organization, or work rules or practices agreed
to with any labor organization or employee association, applicable to employees
of Parent, and (d) with respect to bargaining obligations, Parent has bargained
and continues to bargain in good faith. Parent is in compliance with all
applicable laws and regulations respecting labor, employment, fair employment
practices, work place safety and health, terms and conditions of employment, and
wages and hours, except where the failure to be in such compliance could not,
individually or in the aggregate, reasonably be expected to result in a Parent
Material Adverse Effect. Parent is, and at all time since November 6, 1986 have
been, in compliance with the requirements of the Immigration Reform Control Act
of 1986 except for such non-compliance as could not have, individually or in the
aggregate, a Parent Material Adverse Effect.
6.13. No Brokers. Neither Parent nor any of the Parent Subsidiaries has
entered into any contract, arrangement or understanding with any person or firm
which may result in the obligation of such entity or the Company to pay any
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or consummation of
the Transactions. Other than the Company's arrangements with Piper Jaffray,
Parent is not aware of any claim for payment of any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or consummation of the Transactions.
6.14. No Stockholder Vote Required. No vote by the holders of Parent
Common Stock is necessary to approve the Transactions and adopt this Agreement.
6.15. Takeover Laws. The Parent Board has taken appropriate actions and
votes such that the provisions of Section 203 of the DGCL and all other
applicable takeover statutes will not apply to this Agreement, the Voting
Agreement or any of the Transactions.
6.16. Material Contracts. The Parent SEC Reports list all material
Contracts of Parent and the Parent Subsidiaries, and each such material Contract
is valid and binding on Parent or such Parent Subsidiary and is in full force
and effect and enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws relating to creditors'
rights and general principles of equity. Except as set forth in the Parent SEC
Reports or as otherwise disclosed to the Company, neither Parent nor any Parent
Subsidiary is in default or has received notice of any violation or default
under any such material Contract and, to the knowledge of Parent, no other party
is in default under any of such material Contracts (in each case other than
defaults and violations that, individually or in the aggregate, could not
reasonably be expected to have a Parent Material Adverse Effect), and no such
violations or defaults will be
41
triggered by the execution, delivery and performance of this Agreement by Parent
or the consummation of the Transactions.
6.17. Accounting Policies. The significant accounting policies,
including without limitation, those policies related to revenue recognition,
utilized by Parent and the Parent Subsidiaries in preparing Parent's financial
statements are as set forth in Note 2 of Parent's consolidated financial
statements filed as part of Parent's Annual Report on Form 10-K for the fiscal
year ended December 31, 2001 and Item 7 of such Form 10-K, and such policies are
in conformity with GAAP and have been consistently applied.
6.18. Certain Business Practices. No director, officer, agent or
employee of Parent, has, directly or indirectly, (a) made or agreed to make any
contribution, payment or gift to any government official, employee or agent
where either the contribution, payment or gift or the purpose thereof was
illegal under the laws of any federal, state, local or foreign jurisdiction, (b)
established or maintained any unrecorded fund or asset for any purpose or made
any false entries on the books and records of Parent for any reason, (c) made or
agreed to make any contribution, or reimbursed any political gift or
contribution made by any other person, to any candidate for federal, state,
local or foreign public office or (d) paid or delivered any fee, commission or
any other sum of money or item of property, however characterized, to any
finder, agent, government official or other party, in the United States or any
other country, which in any manner relates to the assets, business or operations
of Parent, which Parent or each officer, director, agent or employee knew or had
reason to believe to have been illegal under any federal, state or local laws
(or any rules or regulations thereunder) of the United States or any other
country having jurisdiction.
6.19. Reorganization.
(a) Neither Parent nor any of its affiliates (as such term is
defined under the Exchange Act) has taken or agreed to take any action (other
than actions contemplated by this Agreement) that could reasonably be expected
to prevent the Merger from constituting a "reorganization" under Section 368(a)
of the Code. Parent is not aware of any agreement, plan or other circumstance
that could reasonably be expected to prevent the Merger from so qualifying.
(b) Following the Merger, MergerCo has no plan or intention to
issue additional shares that would result in Parent losing control of MergerCo
within the meaning of Section 368(c) of the Code.
(c) Parent has no plan or intention to reacquire, and, to
Parent's knowledge, no person related to Parent within the meaning of Treasury
Regulations Section 1.368-1(e)(2) has a plan or intention to acquire, any of the
Parent Common Stock issued in the Merger, other than pursuant to a share
repurchase program described in Revenue Ruling 99-58.
(d) No Company Common Stock is directly owned by the Parent,
MergerCo or any other Parent Subsidiary.
6.20. Ownership of Company Common Stock; Affiliates and Associates. As
of the date of the Agreement, neither Parent nor any of its affiliates or
associates (as such terms are defined
42
under the Exchange Act) (a) beneficially owns, directly or indirectly, or (b) is
a party to any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares of capital stock of the
Company.
6.21. Compliance with the Hart-Scott-Rodino Act. No person or entity,
directly or indirectly through fiduciaries, agents, controlled entities, or
other means, holds fifty percent (50%) or more of the outstanding voting
securities of, or has the contractual right to designate fifty percent (50%) or
more of the directors of, Parent. In addition, Parent and the Parent
Subsidiaries, on a consolidated basis, have less than (a) $100,000,000 of total
assets, as stated on the last regularly prepared consolidated balance sheet of
Parent and the Parent Subsidiaries; and (b) $100,000,000 of annual net sales.
ARTICLE VII
COVENANTS
7.1. No Solicitations.
(a) The Company represents and warrants that it has
terminated, and caused it Subsidiaries and affiliates, and their respective
officers, directors, employees, investment bankers, attorneys, accountants and
other advisors or representatives to terminate, any discussions or negotiations
relating to, or that could reasonably be expected to lead to, any Acquisition
Proposal (as hereinafter defined). Except as permitted by this Agreement, the
Company shall not, and shall not authorize or permit any Company Subsidiary or
any of its or their respective officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any Company Subsidiary to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
non-public information), or take any other action to facilitate, any inquiries,
discussions or the making of any proposal that constitutes, or could reasonably
be expected to lead to, an Acquisition Proposal, (ii) participate in any
discussions or negotiations, or otherwise communicate in any way with any person
(other than Parent or MergerCo), regarding an Acquisition Proposal or (iii)
enter into any agreement, arrangement or understanding regarding an Acquisition
Proposal or requiring it to abandon, terminate or fail to consummate the
Transactions. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
officer, director or employee of the Company or any Company Subsidiary or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any Company Subsidiary shall be deemed
to be a breach of this Section 7.1 by the Company. Notwithstanding the
foregoing, at any time prior to the date on which this Agreement is approved by
the stockholders of the Company at the meeting referred to in Section 7.4, in
response to a Superior Proposal (as hereinafter defined) that did not result
from a breach of this Section 7.1, the Company may (x) furnish non-public
information with respect to the Company and the Company Subsidiaries to the
person who made such Superior Proposal pursuant to a confidentiality agreement
on terms no more favorable to such person than the Confidentiality Agreement (as
hereinafter defined) and (y) participate in discussions or negotiations with
such person regarding such Superior Proposal, if the Company Board determines in
good faith (based on the advice of its outside legal counsel and after
consultation with its financial adviser and based upon such other matters as it
43
deems relevant) that failing to take such action would constitute a breach of
its fiduciary duties under applicable law.
(b) The Company Board shall not (i) withdraw or modify, or
propose to withdraw or modify, in a manner adverse to Parent or MergerCo, its
approval or recommendation of this Agreement or the Merger, (ii) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal, (iii)
approve or recommend, or propose to approve or recommend, or execute or enter
into a letter of intent, agreement in principle, definitive agreement or other
agreement relating to an Acquisition Proposal (other than a confidentiality
agreement described in the last sentence of Section 7.1(a) hereof), or (iv)
resolve to do any of the foregoing. Notwithstanding the foregoing, the Company
Board may withdraw or modify, in a manner adverse to Parent or MergerCo, its
approval or recommendation of this Agreement or the Merger if, in response to a
Superior Proposal that has not been withdrawn and that did not otherwise result
from a breach of this Section 7.1, the Company Board shall have determined in
good faith (based on advice of its outside legal counsel and after consultation
with its financial adviser and based upon such other matters as it deems
relevant) that failing to take such action would constitute a breach of its
fiduciary duties under applicable law; provided, however, that prior to taking
any such action, the Company shall have given Parent at least forty-eight (48)
hours written notice of the Company Board's intention to take such action and
the opportunity to meet with the Company, its financial advisors and its legal
counsel. Nothing contained in this Section 7.1(b) shall limit the Company's
obligation to hold and convene the meeting of the Company's stockholders
referred to in Section 7.4 (including, without limitation, regardless of whether
the recommendation or approval of the Company Board of this Agreement or the
Merger shall have been withdrawn or modified).
(c) The Company shall promptly (and in any event within 24
hours) advise Parent and MergerCo orally and in writing of any Acquisition
Proposal (including any amendments or proposed amendments thereof), or any
request or inquiry received by the Company or any Company Subsidiary with
respect to, or that could reasonably be expected to lead to, an Acquisition
Proposal, including, in each case, the identity of the person making any such
Acquisition Proposal, request or inquiry and the terms and conditions thereof,
and shall provide to Parent and MergerCo any written materials received by the
Company or any Company Subsidiary in connection therewith. The Company shall
keep Parent and MergerCo fully informed of the status of the discussions related
to such Acquisition Proposal, request or inquiry, including, without limitation,
by promptly (and in any event within 12 hours) providing Parent with all written
materials that it receives in connection with any such Acquisition Proposal. The
Company agrees not to release any person from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party (other
than the Confidentiality Agreement).
(d) Nothing contained in this Section 7.1 shall prohibit the
Company from at any time taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2 under the Exchange Act.
(e) As used in this Agreement, the term "Acquisition Proposal"
shall mean any proposed or actual tender offer, merger, consolidation or other
business combination involving the Company, or sale, lease or other disposition,
directly or indirectly, by merger,
44
consolidation, share exchange or otherwise, of any material assets or securities
of the Company or the Company Subsidiaries, or any transaction which is similar
in form, substance or purpose to any of the foregoing transactions; provided,
however, that the term "Acquisition Proposal" shall not include the Merger and
the other Transactions.
(f) As used in this Agreement, the term "Superior Proposal"
shall mean an unsolicited, bona fide written offer made by a third party to
consummate an Acquisition Proposal, which Acquisition Proposal is reasonably
likely to be consummated, and that (i) the Company Board determines in good
faith, after consulting with its outside legal counsel and its financial
advisor, would, if consummated, be reasonably likely to result in a transaction
that is more favorable to the stockholders of the Company than the transactions
contemplated hereby (taking into account all legal, financial, regulatory and
other aspects of the proposal and the person making the proposal), (ii) is not
conditioned on obtaining financing (and with respect to which Parent has
received written evidence of such person's ability to fully finance its
Acquisition Proposal), (iii) is for one hundred percent (100%) of the Company
Common Stock and (iv) the Company Board determines is, based on the advice of
Piper Jaffray (or any other nationally recognized investment banking firm), more
favorable to the stockholders of the Company from a financial point of view than
the transactions contemplated hereby.
7.2. Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time, except as otherwise contemplated
by this Agreement, the Company shall and shall cause each of the Company
Subsidiaries to carry on their respective businesses in the usual, regular and
ordinary course, consistent with past practice, and use their reasonable best
efforts to preserve intact their present business organizations, keep available
the services of their present advisors, managers, officers and employees and
preserve their relationships with customers, suppliers, licensors and others
having business dealings with them and continue existing contracts as in effect
on the date hereof (for the term provided in such contracts). Without limiting
the generality of the foregoing, neither the Company nor any of the Company
Subsidiaries will (except as expressly permitted by this Agreement, as expressly
set forth in the Restructuring Plan or in Section 7.2 of the Company Disclosure
Schedule, or to the extent that Parent shall otherwise consent in writing):
(a) split, combine or reclassify or redeem, purchase or
otherwise acquire any shares of its capital stock or other securities or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock, or property or any combination thereof) in respect of any shares of its
capital stock or other securities, except for dividends paid by any Company
Subsidiary to the Company or any Company Subsidiary that is, directly or
indirectly, wholly owned by the Company and except for any reverse stock split
with a record date prior to the Effective Time declared for the purpose of
complying with the Nasdaq listing qualifications;
(b) authorize for issuance, issue or sell or agree or commit
to issue or sell (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of any
class or any other securities or equity equivalents (including, without
limitation, stock appreciation rights) (other than the issuance of shares of
Company Common Stock upon the exercise of Company Options outstanding on the
date of this Agreement in accordance with their present terms);
45
(c) authorize, commit to or make any equipment purchases or
capital expenditures other than in the ordinary course of business and
consistent with past practice and in an amount not in excess of $25,000
individually or $100,000 in the aggregate;
(d) (i) acquire, sell, lease, license, encumber, transfer or
dispose of any assets outside the ordinary course of business which are material
to the Company or any of the Company Subsidiaries (whether by asset acquisition,
stock acquisition or otherwise), except pursuant to obligations in effect on the
date hereof as set forth in Section 7.2(d) of the Company Disclosure Schedule,
or (ii) enter into, modify or amend any agreement or other arrangement related
to the licensing of Intellectual Property Assets by or to the Company or any
Company Subsidiary except in the ordinary course of business consistent with
past practice;
(e) incur any amount of indebtedness for borrowed money
(except for additional borrowings under the Company's existing credit facility
with Comerica Bank as the same exists without amendment on the date hereof),
guarantee any indebtedness, issue or sell debt securities, make any loans,
advances or capital contributions, mortgage, pledge or otherwise encumber any
material assets, or create or suffer any material lien thereupon;
(f) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than any payment, discharge or satisfaction (i) in the
ordinary course of business consistent with past practice, or (ii) in connection
with the Transactions;
(g) change any of the accounting principles or practices used
by it (except as required by GAAP, in which case written notice shall be
provided to Parent and MergerCo prior to any such change);
(h) with respect to Taxes of or affecting the Company or any
Company Subsidiary, make, change or revoke any election, change any accounting
period, adopt or change any accounting method, file any amended Tax return,
enter into any closing agreement, settle any Tax claim or assessment relating to
the Company or any Company Subsidiary, surrender any right to claim a refund of
Taxes, consent to any extension or waiver of the limitation period applicable to
any Tax claim or assessment, fail to timely file any Tax return, take a position
on a Tax return not in keeping with prior practice or take or omit to take any
other action, if such election, adoption, change, amendment, agreement,
settlement, surrender, consent or other action or omission is outside the
ordinary course of business or could have the effect of materially increasing
the present or future Tax liability or materially decreasing any present or
future Tax asset of the Company or any Company Subsidiary;
(i) except as required by law and except for permitted
increases in employee salary deferral or salary reduction contributions to any
Employee Program, (i) enter into, adopt, amend or increase benefits under any
Employee Program, (ii) enter into, adopt, amend or renew any agreement,
arrangement, plan or policy between the Company or any of the Company
Subsidiaries and one or more of their respective directors, officers, employees,
agents or consultants, (iii) except for normal increases in the ordinary course
of business consistent with past practice, increase in any manner the
compensation or fringe benefits of any director, officer,
46
employee, agent or consultant or (iv) pay any benefit not required by any
Employee Program or arrangement as in effect on the date hereof;
(j) adopt any amendments to the Company Certificate or the
Company Bylaws or any of the organizational documents of the Company
Subsidiaries, except as expressly provided by the terms of this Agreement;
(k) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization;
(l) settle or compromise any pending or threatened litigation
related to the Transactions or settle or compromise any other material
litigation (whether or not commenced prior to the date of this Agreement);
(m) amend any term of any outstanding security of the Company
or any Company Subsidiary;
(n) modify or amend any Scheduled Contract or waive, release
or assign any rights or claims under any Scheduled Contract;
(o) enter into any agreement or other arrangement that is
material to the business of the Company or any Company Subsidiary;
(p) license, assign or otherwise transfer to any person or
entity any rights to the Intellectual Property Assets outside the ordinary
course of business or fail to maintain or enforce in a manner consistent with
past practice any of the Intellectual Property Assets;
(q) permit any insurance policy naming the Company or any
Company Subsidiary as a beneficiary or a loss payable payee to be canceled or
terminated without obtaining a replacement insurance policy in a comparable
amount and against comparable risks and losses;
(r) terminate the employment of any officer of the Company or
any Company Subsidiary;
(s) discourage customers, employees, suppliers, lessors, and
other associates of the Company and the Company Subsidiaries from maintaining
the materially same business relationships with the Company and the Company
Subsidiaries after the date of this Agreement as were maintained prior to the
date of this Agreement;
(t) enter into any oral or written agreement or arrangement
with any customer or distributor related to the offering of discounts, extended
warranties, service contracts, bundling of any Products, rights of return or any
other agreements or arrangements, other than agreements or arrangements (i) with
a term of less than ninety (90) days, (ii) entered into in the ordinary course
of business consistent with past practices and (iii) recorded in accordance with
GAAP;
47
(u) amend or restate any of the Company SEC Reports or any
financial statements contained therein;
(v) engage in any action that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code;
(w) take or agree to take any action which would make any of
the representations and warranties of the Company contained in this Agreement
untrue or incorrect as of the date when made in any material respect if such
action had then been taken; or
(x) enter into any agreement, contract, commitment or
arrangement with respect to, or authorize, recommend, propose or announce an
intention to do, any of the foregoing.
7.3. Restructuring Plan. During the period from the date of this
Agreement to the Effective Time, the Company shall, and shall cause each of the
Company Subsidiaries to, implement the Restructuring Plan in a commercially
reasonable manner, in good faith and in compliance with all applicable laws.
7.4. Meeting of Company Stockholders.
(a) Promptly after the date hereof, the Company will take all
action necessary in accordance with the DGCL and the Company Certificate and
Company Bylaws to convene a meeting of its stockholders to be held as promptly
as reasonably practicable after the Form S-4 (as defined below) is declared
effective by the Commission, for the purpose of voting upon this Agreement and
the Merger. Subject to Section 7.1, the Company will use its reasonable best
efforts to solicit from its stockholders proxies in favor of the adoption and
approval of this Agreement and the approval of the Merger and will take all
other action necessary or advisable to secure the vote or consent of its
stockholders as required by the rules of Nasdaq or the DGCL to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
the Company may adjourn or postpone the meeting of its stockholders to the
extent necessary to ensure that any necessary supplement or amendment to the
Proxy Statement is provided to the Company's stockholders in advance of a vote
on the Merger and this Agreement or, if as of the time for which the meeting of
the Company's stockholders is originally scheduled (as set forth in the Proxy
Statement) there are insufficient shares of Company Common Stock represented
(either in person or by proxy) to constitute a quorum necessary to conduct the
business of the meeting of the Company's stockholders. The Company shall ensure
that the meeting of the Company's stockholders is called, noticed, convened,
held and conducted, and that all proxies solicited by the Company in connection
with the meeting of the Company's stockholders are solicited, in compliance with
DGCL, the Company Certificate and the Company Bylaws, the rules of Nasdaq and
all other applicable legal requirements. The Company's obligation to call, give
notice of, convene and hold the meeting of its stockholders in accordance with
this Section 7.4(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to the Company of any
Acquisition Proposal.
(b) Subject to Section 7.1: (i) the Board of Directors of
Company shall unanimously recommend that Company's stockholders vote in favor of
and adopt and approve
48
this Agreement and the Merger at the meeting of the Company's stockholders; (ii)
the Proxy Statement shall include a statement to the effect that the Board of
Directors of the Company has unanimously recommended that the Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger at the meeting of the Company's stockholders; and (iii) neither the Board
of Directors of the Company nor any committee thereof shall withdraw, amend or
modify, or propose or resolve to withdraw, amend or modify in a manner adverse
to Parent, the unanimous recommendation of the Board of Directors of the Company
that the Company's stockholders vote in favor of and adopt and approve this
Agreement and the Merger.
7.5. Proxy Statement; Registration Statement; Filing Cooperation.
(a) As promptly as practicable after the execution of this
Agreement, the Company and Parent shall prepare and Parent shall file with the
Commission, under the Exchange Act and the Securities Act, a registration
statement on Form S-4 (such registration statement, together with any amendments
or supplements thereto, the "Form S-4") which shall include a proxy
statement/prospectus and form of proxy (such proxy statement/prospectus together
with any amendments or supplements thereto, the "Proxy Statement") relating to
the stockholders' meeting of the Company and the vote of the stockholders of the
Company with respect to this Agreement and the Transactions. Parent will cause
the Form S-4 to comply as to form in all material respects with the applicable
provisions of the Securities Act and the rules and regulations thereunder, and
the Company will cause the Proxy Statement to comply as to form in all material
respects with the applicable provisions of the Exchange Act and the rules and
regulations thereunder. Each of Parent and the Company shall furnish all
information about itself and its business and operations and all necessary
financial information to the other as the other may reasonably request in
connection with the preparation of the Proxy Statement and the Form S-4. Parent
shall use its reasonable best efforts, and the Company will cooperate with
Parent, to have the Form S-4 declared effective by the Commission as promptly as
practicable (including clearing the Proxy Statement with the Commission ). Each
of Parent and the Company agrees promptly to correct any information provided by
it for use in the Proxy Statement and the Form S-4 if and to the extent that
such information shall have become false or misleading in any material respect,
and the Company further agrees to take all steps necessary to amend or
supplement the Proxy Statement and, in the case of Parent, the Form S-4, and the
Company further agrees to take all steps necessary to cause the Proxy Statement
and, in the case of Parent, the Form S-4, as so amended or supplemented, to be
filed with the Commission and to be disseminated to the Company's stockholders
as and to the extent required by applicable federal and state securities laws.
Each of Parent and the Company agrees that the information provided by it for
inclusion in the Proxy Statement or the Form S-4 and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
meeting of stockholders of the Company, will not include an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the Company and Parent will advise
the other, and deliver copies (if any) to the other, promptly after either
receives notice thereof, of any request by the Commission for amendment of the
Proxy Statement or the Form S-4 or comments thereon and responses thereto or
requests by the Commission for additional information, or notice of the time
when the Form S-4 or Proxy Statement has become effective or any supplement or
amendment has been filed, the issuance of any stop order or the suspension
49
of the qualification of the securities issuable in connection with the Merger
for offering or sale in any jurisdiction.
(b) The Proxy Statement shall include the recommendation of
the Company Board in favor of the adoption and approval of this Agreement and
the approval of the Merger (subject to the terms of Section 7.1).
(c) The Company shall use its reasonable best efforts to
promptly mail the Proxy Statement to its stockholders.
(d) The Company shall cooperate with Parent and its advisors
in connection with any filings to be made by Parent, including, without
limitation, filings under the Securities Act and the Exchange Act or pursuant to
state securities laws, and shall furnish all information required in connection
therewith. Such cooperation shall include, but not be limited to, obtaining any
consent to inclusion of the Company's financial statements and the reports of
the Company's independent public accountants with respect thereto in any filing
made pursuant to any federal or state securities laws (and any public disclosure
related thereto).
7.6. Nasdaq Listing Application. Parent shall promptly prepare and
submit to Nasdaq all reports, applications and other documents that may be
necessary or desirable to enable all of the shares of Parent Common Stock that
will be outstanding or will be reserved for issuance at the Effective Time to be
listed on Nasdaq. Each of Parent and the Company shall furnish all information
about itself and its business and operation and all necessary financial
information to the other as the other may reasonably request in connection with
such Nasdaq listing process. Each of Parent and the Company agrees promptly to
correct any information provided by it for use in the Nasdaq listing process if
and to the extent that such information shall have become false or misleading in
any material respect. Each of Parent and the Company will advise and deliver
copies (if any) to the other parties, promptly after it receives notice thereof,
of any request by Nasdaq for amendment of any submitted materials or comments
thereon and responses thereto or requests by Nasdaq for additional information.
7.7. Additional Agreements; Regulatory Filings.
(a) Subject to the terms and conditions herein provided, each
of the parties hereto agrees to use its 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 as promptly as practicable the
Transactions and to cooperate with each other in connection with the foregoing,
including the taking of such actions as are necessary to obtain any necessary
consents, approvals, orders, exemptions and authorizations by or from any public
or private third party, including, without limitation, any that are required to
be obtained under any federal, state or local law or regulation or any contract,
agreement or instrument to which the Company or any Company Subsidiary is a
party or by which any of their respective properties or assets are bound, to
defend all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the Transactions, to cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the Transactions, and to effect all necessary
registrations and submissions of information requested by governmental
authorities. For purposes of the foregoing sentence, the obligation of the
50
Company, Parent and MergerCo to use their respective "best efforts" to obtain
waivers, consents and approvals to loan agreements, leases and other contracts
shall not include any obligation to agree to an adverse modification of the
terms of such documents or to prepay or incur additional obligations to such
other parties, and the obligation of the Company, Parent and MergerCo to use
their respective "best efforts" to take all actions to do all things necessary,
proper or advisable to consummate the Transactions shall not include any
obligation to divest any of their respective assets.
(b) Without limiting the generality of the foregoing, as
promptly as practicable, Parent and the Company each shall properly prepare and
file any other filings required under federal or state law relating to the
Merger and the other Transactions (including filings, if any, required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or under state
securities laws) (collectively, "Regulatory Filings"). Each of Parent and the
Company shall promptly notify the other of the receipt of any comments on, or
any request for amendments or supplements to, any Regulatory Filings by any
Governmental Entity or official, and each of Parent and the Company shall supply
the other with copies of all correspondence between it and each of its
Subsidiaries and representatives, on the one hand, and any other appropriate
governmental official, on the other hand, with respect to any Regulatory
Filings. The Company and Parent shall keep the other apprised of the status of
matters relating to the completion of the Transactions and work cooperatively in
connection with obtaining any consents from Governmental Entities, including,
without limitation: (i) promptly notifying the other of, and if in writing,
furnishing the other with copies of (or, in the case of material oral
communications, advise the other orally of) any communications from or with any
Governmental Entity with respect to the Merger or any of the other Transactions;
(ii) permitting the other party to review and discuss in advance, and
considering in good faith the views of one another in connection with, any
proposed written (or any material proposed oral) communication with any
Governmental Entity; (iii) not participating in any meeting with any
Governmental Entity unless it consults with the other party in advance and to
the extent permitted by such Governmental Entity gives the other party the
opportunity to attend and participate thereat; (iv) furnishing the other party
with copies of all correspondence, filings and communications (and memoranda
setting forth the substance thereof) between it and any Governmental Entity with
respect to this Agreement and the Transactions; and (v) furnishing the other
party with such necessary information and assistance as such other party may
reasonably request in connection with its preparation of necessary filings or
submissions of information to any Governmental Entity. The Company and Parent
may, as each deems advisable and necessary, reasonably designate any
competitively sensitive material provided to the other under this Section 7.7(b)
as "outside counsel only." Such materials and the information contained therein
shall be given only to the outside legal counsel of the recipient and shall not
be disclosed by such outside counsel to employees, officers or directors of the
recipient unless express written permission is obtained in advance from the
source of the materials (the Company or Parent, as the case may be) or its legal
counsel.
7.8. Affiliates. Section 7.8 of the Company Disclosure Schedule
contains a complete and accurate list of names and addresses of those persons
who may be deemed to be in the Company's reasonable judgment, "affiliates" (each
such person, an "Affiliate") of the Company within the meaning of Rule 145
promulgated under the Securities Act as of the date hereof. The Company shall
provide Parent such information and documents as Parent reasonably requests for
51
purposes of reviewing such list. The Company shall advise the persons identified
on the list of the resale restrictions imposed by applicable securities laws and
shall use its reasonable best efforts to deliver or cause to be delivered to
Parent, prior to the Closing Date, from each of the Affiliates, an Affiliate
Letter in the form attached hereto as Exhibit A. Parent shall be entitled to
place appropriate legends on the certificates evidencing any shares of Parent
Common Stock to be received by such Affiliates pursuant to the terms of this
Agreement, and to issue appropriate stop transfer instructions to the transfer
agent for such shares of Parent Common Stock, consistent with the terms of such
legends.
7.9. Fees and Expenses. Subject to Section 9.2 hereof and except as
otherwise expressly provided herein, whether or not the Merger is consummated,
all fees, costs and expenses incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such fees, costs or expenses,
provided, however, whether or not the Merger is consummated, all fees, costs and
expenses incurred in connection with (i) the preparation, printing, filing and
mailing of the Proxy Statement and the Form S-4 and (ii) any filing fees paid
pursuant to filings, if any, made under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, shall be paid 50% by the Company, on the
one hand, and 50% by Parent, on the other hand.
7.10. Officers' and Directors' Indemnification. The Surviving
Corporation agrees that all rights to indemnification existing in favor of, and
all limitations on the personal liability of, the directors, officers, employees
and agents of the Company and the Company Subsidiaries (collectively, the
"Indemnified Parties") provided for in the Company Certificate or the Company
Bylaws as in effect as of the date hereof with respect to matters occurring
prior to the Effective Time, and including the Merger and the other
Transactions, shall continue in full force and effect for a period of not less
than six (6) years from the Effective Time. Prior to the Effective Time, the
Company shall purchase an extended reporting period endorsement (a so called
"tail policy") under the Company's existing directors' and officers' liability
insurance coverage for the Company and the Company's directors and officers in a
form acceptable to the Company and Parent which shall provide the Company and
such directors and officers with coverage for six (6) years following the
Effective Time of not less than the existing coverage under, and have other
terms not materially less favorable on the whole to, the insured persons than
the directors' and officers' liability insurance coverage presently maintained
by the Company so long as the aggregate cost of the directors' and officers'
liability insurance for such six (6) year period is $360,000 or less (the
"Maximum Insurance Premium"); provided, however, that the Company agrees to
cooperate in good faith with Parent in order to obtain the lowest premium for
the above-referenced coverage. In the event that the Maximum Insurance Premium
is insufficient for the above-referenced coverage, the Company may spend up to
the Maximum Insurance Premium to purchase such lesser coverage that may be
obtained for the Maximum Insurance Premium. This Section 7.10 is intended for
the benefit of, and to grant third-party rights to, the Indemnified Parties and
shall be binding on all successors and assigns of Parent, the Company and the
Surviving Corporation.
7.11. Access to Information; Confidentiality. From the date hereof
until the Effective Time, the Company shall, and shall cause each of the Company
Subsidiaries and each of the Company's and the Company Subsidiaries' respective
officers, employees and agents to, afford to Parent and to the officers,
employees and agents of Parent complete access at all reasonable
52
times to such officers, employees, agents, properties, books, records and
contracts, and shall furnish to Parent such financial, operating and other data
and information as Parent may reasonably request. Prior to the Effective Time,
Parent and MergerCo shall hold in confidence all such information on the terms
and subject to the conditions contained in that certain mutual confidentiality
agreement between Parent and the Company dated April 22, 2002 (the
"Confidentiality Agreement"). The Company hereby waives the provisions of the
Confidentiality Agreement as and to the extent necessary to permit the making
and consummation of the Transactions.
7.12. Financial and Other Statements. During the term of this
Agreement, the Company shall also provide to Parent the following documents and
information:
(a) Contemporaneously therewith, the Company shall furnish to
Parent a copy of each Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
and Current Report on Form 8-K filed by the Company with the Commission and each
such report shall be in compliance with the Securities Laws and with all
representation and warranties contained in this Agreement applicable to Company
SEC Reports.
(b) As soon as practicable, the Company shall furnish to
Parent copies of all such financial statements and reports as it or any Company
Subsidiary shall send to its stockholders, the Commission or any other
regulatory authority, to the extent any such reports furnished to any such
regulatory authority are not confidential and except as legally prohibited
thereby.
(c) Promptly upon receipt thereof, the Company shall furnish
to Parent copies of all internal control reports submitted to the Company or any
Company Subsidiary by its independent accountants in connection with each
annual, interim or special audit of the books of the Company or any such Company
Subsidiary made by such accountants.
(d) As soon as practicable, the Company shall furnish to
Parent (i) monthly profit and loss statements, (ii) a listing of accounts
receivable, including aging, as of the end of each month, (iii) inventory
analysis as of the end of each month, (iv) a listing of accounts payable,
including aging, as of the end of each month, (v) a listing of the summary of
shipments and orders received as of the end of each month and (vi) such
additional financial data as Parent may reasonably request.
7.13. Advice of Change. Each party shall promptly advise the other of
(i) any change, effect, event, occurrence, non-occurrence, condition or
development which could reasonably be expected to cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect, and (ii) any material failure of such party to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
under this Agreement. The Company shall promptly advise Parent and MergerCo of
any change, effect, event, occurrence, non-occurrence, condition or development
that has had or could reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, and Parent shall promptly advise
the Company of any change, effect, event, occurrence, non-occurrence, condition
or development that has had or could reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect..
53
7.14. Public Announcements. The Company and Parent shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any of the Transactions and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which consent shall not be unreasonably
withheld; 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 be
required by law or the applicable rules of any stock exchange if it has used its
best efforts to consult with the other party and to obtain such party's consent
but has been unable to do so in a timely manner. In this regard, the parties
shall make a joint public announcement of this Agreement and the Transactions no
later than (i) the close of trading on Nasdaq on the day this Agreement is
signed, if such signing occurs during a business day or (ii) the opening of
trading on Nasdaq on the business day following the date on which this Agreement
is signed, if such signing does not occur during a business day.
7.15. Employee Benefit Arrangements.
(a) Subject to applicable law, following the Effective Time,
the employees of the Company and the Company Subsidiaries will be eligible to
participate in the health and welfare plans and 401(k) plans of Parent, one of
its affiliates or the Surviving Corporation as in effect on the date thereof on
terms substantially similar to those provided to similarly situated employees of
Parent or any Parent Subsidiary. Until such time as Parent causes employees of
the Company and the Company Subsidiaries to be eligible to participate in the
health and welfare plans of Parent or one of its affiliates or the Surviving
Corporation, employees of the Company and the Company Subsidiaries will continue
to be eligible to participate in the Company's health and welfare plans (other
than stock option or stock purchase plans) on substantially similar terms to
those currently in effect. Nothing in this Section 7.15 or elsewhere in this
Agreement shall be construed to create a right in any employee to employment
with Parent, the Surviving Corporation or any other Parent Subsidiary, and the
employment of each continuing employee shall be "at will" employment.
(b) If any employee of the Company or any of the Company
Subsidiaries becomes a participant in any employee benefit plan, practice or
policy of Parent, any of its affiliates or the Surviving Corporation, such
employee shall be given credit under such plan for all service prior to the
Effective Time with the Company and the Company Subsidiaries and prior to the
time such employee becomes such a participant, for purposes of eligibility
(including, without limitation, waiting periods) and vesting (but not for the
actual accrual of benefits), and such employees will be given credit for such
service for purposes of any vacation policy. In addition, if any employees of
the Company or any of the Company Subsidiaries employed as of the Closing Date
become covered by a medical plan of Parent, any of its affiliates or the
Surviving Corporation, such medical plan shall not impose any exclusion on
coverage for preexisting medical conditions with respect to such employees to
which they would not have been subject had they participated or continued to
participate in the medical plan of the Company and the Company Subsidiaries.
(c) Unless otherwise directed in writing by Parent at least
five days prior to the Effective Time, the Company shall take (or cause to be
taken) all actions necessary or appropriate to terminate, effective immediately
prior to the Effective Time, any Employee
54
Program sponsored by the Company or any Company Subsidiary (or in which the
Company or any Company Subsidiary participate) that contains a cash or deferred
arrangement intended to qualify under Section 401(k) of the Code. The Company
shall also take (or cause to be taken) such other action in furtherance of
terminating such 401(k) plans as Parent may reasonably require.
7.16. Delisting. Each of the parties hereto agrees to cooperate with
each other in taking, or causing to be taken, all actions necessary to delist
the Company Common Stock from Nasdaq, provided that such delisting shall not be
effective until after the Effective Time.
7.17. Further Assurances. At and after the Effective Time, the officers
and directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or MergerCo, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on behalf
of the Company or MergerCo, any other actions and things to vest, perfect or
confirm on record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
7.18. Tax-Free Reorganization. Parent, MergerCo and the Company will
execute and deliver to the tax counsel of Company, or Goodwin Procter LLP as
described in Section 8.2(e), certificates in customary form as are reasonably
requested by such counsel in connection with the delivery by such tax counsel of
the opinion described in Section 8.2(e). Except as otherwise required by law,
each of Parent, MergerCo and the Company agrees to file its tax returns in a
manner that is consistent with the Merger qualifying as a tax-free
reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. None of
Parent, MergerCo or the Company will knowingly take or cause to be taken any
action that, or knowingly fail to take or cause to be taken any action the
failure of which reasonably would be expected to affect adversely the
qualification of the Merger as a tax-free reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code. Each of Parent, MergerCo and the
Company will use its reasonable best efforts to cause the Merger to qualify as a
tax-free reorganization under Sections 368(a)(1)(A) and 368(a)(2)(D). The
Company will not redeem or make any distribution with respect to its stock. No
Company Subsidiary will acquire any Company Common Stock. Following the Merger,
Parent will cause MergerCo to continue the Company's historic business or to use
a significant portion of the Company's historic business assets in a business,
in each case within the meaning of Section 1.368-1(d) of the Treasury
Regulations, assuming that the assets of, and the business conducted by, the
Company on the Closing Date constitute the Company's historic business assets
and historic business, respectively.
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1. Conditions to the Obligations of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment or waiver, where permissible, at or prior to the Closing
Date, of each of the following conditions:
55
(a) Stockholders' Approval. This Agreement and the
Transactions, including the Merger, shall have been approved and adopted by the
affirmative vote of the stockholders of the Company to the extent required by
the DGCL and the Company Certificate.
(b) No Injunctions, Orders or Restraints; Illegality. No
statute, order, decree, ruling or injunction (whether temporary, preliminary or
permanent) ( an "Injunction") shall have been enacted, entered, issued,
promulgated or enforced by any Governmental Entity which prohibits the
consummation of the Merger on the terms contemplated by this Agreement; provided
that the party seeking to rely upon this condition has fully complied with and
performed its obligations pursuant to Section 7.7 hereof.
(c) Form S-4. The Form S-4 shall have been declared effective
by the Commission under the Securities Act, and no stop order suspending the
effectiveness of the Form S-4 shall have been issued by the Commission, and no
proceeding for that purpose shall have been initiated or, to the knowledge of
Parent or the Company, threatened by the Commission.
(d) Nasdaq Listing. Parent shall have obtained the approval
for the listing of the shares of Parent Common Stock issuable in the Merger on
Nasdaq, subject to official notice of issuance.
8.2. Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger are further subject to the fulfillment or
waiver, where permissible, at or prior to the Closing Date, of each of the
following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and MergerCo set forth herein shall be true and correct
both when made and at and as of the Effective Date, as if made at and as of such
time (except for representations and warranties that are expressly made as of a
specified date, which shall be true and correct as of such date), except, with
respect to the Effective Date, where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to materiality or material adverse effect set forth therein), individually or in
the aggregate, does not have, and could not reasonably be expected to have a
Parent Material Adverse Effect; provided, however that notwithstanding the
foregoing the representations and warranties contained in Section 6.21 shall be
true and correct at and as of the Effective Date.
(b) Performance of Obligations of Parent. Parent shall have
performed in all material respects all obligations required to be performed by
it under this Agreement.
(c) Officers' Certificate. The Company shall have received a
certificate of the Chief Executive Officer or President and the Chief Financial
Officer of Parent, dated the Closing Date, to the effect that the statements set
forth in paragraphs (a) and (b) of this Section 8.2 are true and correct.
(d) Consents, Approvals, Etc. All consents, authorizations,
orders and approvals of (or filings or registrations with) any governmental
commission, board, other regulatory body or third parties required to be made or
obtained by Parent and the Parent Subsidiaries and affiliated entities in
connection with the execution, delivery and performance of
56
this Agreement shall have been obtained or made, except where the failure to
have obtained or made any such consent, authorization, order, approval, filing
or registration, could not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
(e) Tax Opinion. The Company shall have received a written
opinion from its counsel, Jaffe, Raitt, Heuer & Weiss, P.C., in the form
attached hereto as Exhibit B; provided, that if Jaffe, Raitt, Heuer & Weiss,
P.C. is unwilling or unable to render such opinion, Goodwin Procter LLP may
render such opinion to the Company in satisfaction of this Section 8.2(e). In
connection with any such tax opinion, Parent, MergerCo and the Company will
provide such representations as are accurate and are reasonably requested by
counsel, which shall be entitled to rely upon such representations in rendering
its opinion.
8.3. Conditions to Obligations of Parent. The obligation of Parent
to effect the Merger is further subject to the fulfillment or waiver, where
permissible, at or prior to the Closing Date, of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct both when
made and at and as of the Effective Date, as if made at and as of such time
(except for representations and warranties that are expressly made as of a
specified date, which shall be true and correct as of such date), except, with
respect to the Effective Date, where the failure of such representations and
warranties to be so true and correct (without giving effect to any limitation as
to materiality or material adverse effect set forth therein), individually or in
the aggregate, does not have, and could not reasonably be expected to have a
Company Material Adverse Effect; provided, however that notwithstanding the
foregoing the representations and warranties contained in Section 5.33 shall be
true and correct at and as of the Effective Date.
(b) Performance of Obligations of the Company. The Company
shall have performed in all material respects all obligations required to be
performed by it under this Agreement.
(c) Absence of Company Changes. From the date of this
Agreement through the Closing Date, there shall not have occurred any change,
effect, event, occurrence, condition or development concerning the Company
and/or the Company Subsidiaries that individually or in the aggregate has had or
could reasonably be expected to have a Company Material Adverse Effect other
than (w) the taking of those actions expressly set forth in the Restructuring
Plan provided that such actions are taken in accordance with applicable laws,
(x) any change arising out of the announcement of the execution or existence of
this Agreement or the existence of the Transactions, (y) any change arising out
of conditions arising after the date hereof generally affecting the
biotechnology, life sciences research or drug discovery industries which
conditions must be proven and documented by the Company or (z) any change
arising out of a material disruption or adverse change arising after the date
hereof in general economic conditions or general conditions affecting the
securities markets.
(d) For purposes of Section 8.3(a) (both as to representations
and warranties when made and representations and warranties made at and as of
the Effective Date) and
57
Section 8.3(c) only, a change, effect, event, occurrence, condition or
development described in clause (i) of the definition of Company Material
Adverse Effect that is reasonably capable of monetization shall not be deemed to
have a Company Material Adverse Effect, unless and until it has or is reasonably
likely to have at least one of the following effects: (i) a reduction in net
worth of the Company (on a consolidated basis) of $1,000,000 or more excluding
any non-cash charge or adjustment made solely as a result of an impairment test
or assessment made in accordance with SFAS 142 (Goodwill and Other Intangible
Assets) but only to the extent that such charge or adjustment was not the result
of an inaccurate representation or warranty made by the Company in this
Agreement or (ii) a reduction in historical revenues for any year or prospective
revenues for fiscal year 2002 or any subsequent year of the Company (on a
consolidated basis) of $1,000,000 or more.
(e) Officers' Certificate. Parent shall have received a
certificate of the Chief Executive Officer and the Chief Financial Officer of
the Company to the effect that the statements set forth in paragraphs (a), (b)
and (c) of this Section 8.3 are true and correct.
(f) Consents, Approvals, Etc. All consents, authorizations,
orders and approvals of (or filings or registrations with) any governmental
commission, board, other regulatory body or third parties required to be made or
obtained by the Company and affiliated entities in connection with the
execution, delivery and performance of this Agreement shall have been obtained
or made, including without limitation those set forth in Section 5.21(b) of the
Company Disclosure Schedule, except where the failure to have obtained or made
any such consent, authorization, order, approval, filing or registration, could
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. Notwithstanding the foregoing, the Company shall have
obtained (i) written consent to assignment in connection with the Transactions
as required under the leases with respect to (A) 4335 Varsity Drive, Ann Arbor,
MI; (B) 4401 Varsity Drive, Ann Arbor, MI; (C) 17851 Sky Park Circle, Irvine,
CA, and (D) 77865 Sky Park Circle, Irvine, CA, (ii) written consent to
assignment in connection with the Transactions or a payoff letter under the loan
facility with Comerica Bank, and (iii) written consent to assignment in
connection with the Transactions under the merger agreement with Cartesian
Technologies, Inc. and the related escrow agreement.
(g) Affiliate Letters. The Parent shall have received an
executed copy of an Affiliate Letter from each Affiliate of the Company.
(h) Treatment of Company Options, Company Warrants, Company
Stock Purchase Plan. The Company shall have taken any and all action necessary
to cause the Company Options, the Company Warrants and the Company Stock
Purchase Plan to be treated as provided for in Section 3.3; provided, however,
that if all of the other conditions set forth in Article VIII shall have been
satisfied or, if permissible, waived, and the aggregate number of shares of
Parent Common Stock subject to Converted Options held by persons who as of the
Effective Time are not employees of the Company is greater than twenty thousand
(20,000) shares, Parent, at its election, will either (i) waive such requirement
as set forth in the first proviso of the penultimate sentence of Section 3.3(a),
or (ii) extend the Closing Date to October 18, 2002 or later.
58
(i) Dissenting Stockholders. The number of shares for which
the Company has received notice of the holder's intent to exercise appraisal
rights under Section 262 of the DGCL shall not exceed five percent (5%) of the
number of shares of outstanding Company Common Stock as of the record date of
the meeting of the Company's stockholders.
(j) Registration Rights. The Company shall have taken any and
all action necessary to terminate all outstanding registration rights with
respect to the Company Common Stock, including, without limitation, those set
forth in Section 5.3 of the Company Disclosure Schedule.
(k) Indemnification Agreements. The Company shall have taken
any and all action necessary to terminate all indemnification agreements with
continuing officers of the Company with respect to actions or events occurring
after the Effective Time.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Company stockholders' approval
hereof:
(a) by the mutual written consent of Parent or MergerCo and the
Company.
(b) by either of the Company or Parent or MergerCo:
(i) if the required approval of the stockholders of
the Company that is a condition to the obligations of Parent, MergerCo
or the Company under Section 8.1 of this Agreement shall not have been
obtained by reason of the failure to obtain the required vote upon a
vote held at a duly held meeting of stockholders of the Company or at
any adjournment thereof, provided, however, that the right to
terminate this Agreement under this Section 9.1(b)(i) shall not be
available to the Company where the failure to obtain Company
stockholder approval shall have been caused by the action or failure
to act of the Company and such action or failure to act constitutes a
breach by the Company of this Agreement; or
(ii) if any Governmental Entity shall have enacted,
entered, issued, promulgated or enforced a final and nonappealable
Injunction (which Injunction the parties hereto shall have used their
reasonable best efforts to lift), which prohibits the consummation of
the Merger or the other Transactions on the terms contemplated by this
Agreement (provided that the party seeking to rely upon this condition
has fully complied with and performed its obligations pursuant to
Section 7.7 hereof), or permanently enjoins the acceptance for payment
of, or payment for, shares of Company Common Stock pursuant to the
Merger;
(iii) if, without any material breach by the
terminating party of its obligations under this Agreement, the Merger
shall not have occurred on or before October 31, 2002 (the "Termination
Date"); provided, however, that if the Commission
59
elects to review the S-4, the Termination Date shall automatically be
extended by the number of days (inclusive) from the date of the initial
filing of the S-4 to the date of receipt of notification from the
Commission that the S-4 is cleared; provided, further, that none of
Parent, MergerCo or the Company shall terminate this Agreement prior to
the Termination Date if the Merger has not occurred by reason of the
pendency of a non-final Injunction, and Parent, MergerCo and the
Company shall use their reasonable best efforts to have any such
Injunction stayed or reversed; provided, that in no event shall the
Termination Date be after December 31, 2002.
(c) by the Company, if Parent or MergerCo shall have breached
any of their respective representations, warranties, covenants or other
agreements contained in this Agreement, which breach has not been cured within
ten (10) business days after the giving of written notice to Parent or MergerCo,
except, in any case, for such breaches which have not had and are not reasonably
likely to have, individually or in the aggregate, a Parent Material Adverse
Effect.
(d) by Parent or MergerCo if:
(i) the Company shall have breached any
representation, warranty, covenant or other agreement contained in this
Agreement (other than those set forth in Section 7.1 hereof), which
breach has not been cured within ten (10) business days after the
giving of written notice to the Company, except, in any case, for such
breaches which have not had and are not reasonably likely to have,
individually or in the aggregate, a Company Material Adverse Effect;
(ii) (A) the Company shall have breached any
representation, warranty, covenant or other agreement contained in
Section 7.1 of this Agreement, or (B) any of the signatories to the
Voting Agreement (other than Parent) shall have breached any
representation, warranty, covenant or agreement contained in the Voting
Agreement and as a result of such breach of the Voting Agreement the
condition set forth in Section 8.1(a) is not met;
(iii) if (A) the Company Board shall have withdrawn
or modified in a manner adverse to Parent or MergerCo its approval or
recommendation of this Agreement or the Transactions, approved or
recommended any Acquisition Proposal, or approved, recommended,
executed or entered into an agreement in principle or definitive
agreement relating to an Acquisition Proposal (other than a
confidentiality agreement described in the last sentence of Section
7.1(a) hereof), or proposed or resolved to do any of the foregoing, or
(B) a tender or exchange offer relating to securities of the Company
shall have been commenced by a third party and the Company shall not
have sent to its securityholders pursuant to Rule 14e-2 under the
Exchange Act, within ten business days after such tender or exchange
offer is first published, sent or given, a statement disclosing that
the Company recommends rejection of such tender or exchange offer.
For purposes of Section 9.1(d)(i) only, a change, effect, event,
occurrence, condition or development described in clause (i) of the definition
of Company Material Adverse Effect that is reasonably capable of monetization
shall not be deemed to have a Company Material Adverse
60
Effect, unless and until it has or is reasonably likely to have at least one of
the following effects: (i) a reduction in net worth of the Company (on a
consolidated basis) of $1,000,000 or more excluding any non-cash charge or
adjustment made solely as a result of an impairment test or assessment made in
accordance with SFAS 142 (Goodwill and Other Intangible Assets) but only to the
extent that such charge or adjustment was not the result of an inaccurate
representation or warranty made by the Company in this Agreement or (ii) a
reduction in historical revenues for any year or prospective revenues for fiscal
year 2002 or any subsequent year of the Company (on a consolidated basis) of
$1,000,000 or more.
9.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant
to Section 9.1 hereof, this Agreement shall forthwith become null and void and
have no effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or stockholders and all rights and obligations
of any party hereto shall cease except for the agreements contained in Sections
7.9 and 7.11, this Section 9.2 and Article X; provided, however, that nothing
contained in this Section 9.2 shall relieve any party from liability for fraud
or willful breach of this Agreement.
(b) If Parent or MergerCo terminates this Agreement pursuant
to Section 9.1(d)(ii)(A) or (iii) hereof, then the Company shall pay to Parent
an amount in cash equal to One Million Three Hundred Thousand Dollars
($1,300,000) (the "Liquidated Amount").
(c) Upon the termination of this Agreement by Parent or
MergerCo pursuant to Section 9.1(d)(i) or (ii)(B) hereof the Company shall pay
to Parent an amount in cash equal to the aggregate amount of Parent's and
MergerCo's out-of-pocket expenses incurred in connection with pursuing the
transactions contemplated hereby (including, without limitation, legal,
accounting, investment banking and printing fees) (collectively, the
"Reimbursable Expenses") (as such Reimbursable Expenses may be estimated by
Parent and MergerCo in good faith prior to the date of such payment, subject to
an adjustment payment between the parties upon Parent's definitive determination
of such Reimbursable Expenses).
(d) Any payment required by this Section 9.2 shall be payable
by the Company to Parent by wire transfer of immediately available funds to an
account designated by Parent. Such payments shall be made no later than one (1)
business day after the termination of this Agreement by Parent or MergerCo. Any
adjustment payment between the parties upon Parent's definitive determination of
the Reimbursable Expenses pursuant to Section 9.2(c) hereof shall be made no
later than one (1) business day after notice to the Company of such
determination.
9.3. Amendment. This Agreement may be amended by the parties hereto by
an instrument in writing signed on behalf of each of the parties hereto at any
time before or after any approval hereof by the stockholders of the Company;
provided, however, that after any such stockholder approval, no amendment shall
be made which by law requires further approval by the stockholders of the
Company without obtaining such approval.
61
9.4. Extension; Waiver. At any time prior to the Closing, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions 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 a written instrument signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1. 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 as of the date delivered or sent if delivered personally or sent by
cable, telegram, telecopier or telex or sent by prepaid overnight carrier to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
(a) if to Parent or MergerCo:
Harvard Bioscience, Inc.
84 October Hill Road
Holliston, Massachusetts 01746
Attention: David Green
Facsimile: (508) 429-8478
with a copy to:
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
Attention: H. David Henken, P.C.
Facsimile: (617) 523-1231
(b) if to the Company:
Genomic Solutions Inc.
4355 Varsity Drive
Ann Arbor, Michigan 48108
Attention: Jeffrey S. Williams
Facsimile: (734) 975-4809
62
with a copy to:
Jaffe, Raitt, Heuer & Weiss, P.C.
One Woodward Avenue, Suite 2400
Detroit, Michigan 48226
Attention: Peter Sugar, Esq.
Facsimile: (313) 961-8358
10.2. Interpretation. When a reference is made in this Agreement to
subsidiaries of Parent, Merger Co or the Company, the word "Subsidiary" means
any corporation more than fifty percent (50% ) of whose outstanding voting
securities, or any partnership, joint venture or other entity more than fifty
percent (50% ) of whose total equity interest, is directly or indirectly owned
by Parent, MergerCo or the Company, as the case may be. 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.
10.3. Non-Survival of Representations, Warranties, Covenants and
Agreements. Except for Articles I, II and IV, Sections 7.6, 7.8, 7.9, 7.10,
7.15, 7.17 and 7.18, the last sentence of Section 7.7, and Article X, none of
the representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Effective Time or the termination of this Agreement (other than in
the case of a termination to the extent provided for in Section 9.2(a)), and
except as provided in the preceding parenthetical thereafter there shall be no
liability on the part of either Parent, MergerCo or the Company or any of their
respective officers, directors or stockholders in respect thereof.
10.4. Miscellaneous. This Agreement (a) constitutes, together with the
Confidentiality Agreement, the Voting Agreement, the Employment Agreement, the
Company Disclosure Schedule, and the Parent Disclosure Schedule, the entire
agreement and supersedes all of the prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, (b) shall be binding upon and inure to the benefits of the
parties hereto and their respective successors and assigns and is not intended
to confer upon any other person (except as set forth below) any rights or
remedies hereunder and (c) may be executed in two or more counterparts which
together shall constitute a single agreement. Section 7.10 hereof is intended to
be for the benefit of those persons described therein and the covenants
contained therein may be enforced by such persons. The parties hereto agree that
irreparable damage would occur 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 hereof in the Delaware Courts (as
hereinafter defined), this being in addition to any other remedy to which they
are entitled at law or in equity.
10.5. Assignment. Except as expressly permitted by the terms hereof,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties, except that MergerCo may assign, in its sole discretion
and without the consent of any other party, any and all of its rights, interests
and obligations hereunder to Parent and/or one or more direct or indirect wholly
63
owned Subsidiaries of Parent; provided, however that any such assignee of
MergerCo shall (a) make the representations and warranties of MergerCo contained
in Article VI and (b) comply with the covenants of MergerCo contained in Section
7.18.
10.6. Severability. If any provision of this Agreement, or the
application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
10.7. Choice of Law/Consent to Jurisdiction. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement, or the Transactions shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws. Each of the Company, Parent and MergerCo hereby
irrevocably and unconditionally consents to submit to the sole and exclusive
jurisdiction of the courts of the State of Delaware and of the United States
District Court for the District of Delaware (the "Delaware Courts") for any
litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement, or the Transactions (and agrees not
to commence any litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the Delaware Courts
and agrees not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum. Each of the parties
hereto agrees, (a) to the extent such party is not otherwise subject to service
of process in the State of Delaware, to appoint and maintain an agent in the
State of Delaware as such party's agent for acceptance of legal process, and (b)
that service of process may also be made on such party by prepaid certified mail
with a proof of mailing receipt validated by the United States Postal Service
constituting evidence of valid service. Service made pursuant to (a) or (b)
above shall have the same legal force and effect as if served upon such party
personally within the State of Delaware. For purposes of implementing the
parties' agreement to appoint and maintain an agent for service of process in
the State of Delaware, each party does hereby appoint CT Corporation,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801, as
such agent.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Parent, MergerCo and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
HARVARD BIOSCIENCE, INC.
By: /s/ David Green
-----------------------------------
Name: David Green
Title: President
HAG ACQ. CORP.
By: /s/ David Green
-----------------------------------
Name: David Green
Title: President
GENOMIC SOLUTIONS INC.
By: /s/ Jeffrey S. Williams
-----------------------------------
Name: Jeffrey S. Williams
Title: President & CEO
S-1