CONCURRENT COMPUTER CORPORATION
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October
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28, 1999, between and among CONCURRENT COMPUTER CORPORATION, a Delaware
corporation ("Acquiror"), CONCURRENT ACQUISITION CORPORATION, a Delaware
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corporation ("Newco" and together with Acquiror referred to herein as the
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"Acquiror Parties"), VIVID TECHNOLOGY, INC., a Delaware corporation (the
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"Company"), and Fred Allegrezza and Gary Lauder (each individually a "Seller"
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and collectively the "Sellers").
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RECITALS:
WHEREAS, the Boards of Directors of Acquiror, Newco and the Company
deem it advisable and in the best interests of their respective companies and
their respective stockholders to enter into a business combination by means of
the merger of Newco with and into the Company under the terms of this Agreement
and have approved and adopted this Agreement; and
WHEREAS, the parties hereto intend that the transactions contemplated by
this Agreement constitute a reorganization within the meaning of Section 368(a)
of the Code;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1 Defined Terms. For all purposes in this Agreement, the
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following terms shall have the respective meanings set forth in this Section 1.
"Acquiror Common Stock" will mean the common stock, par value $0.01
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per share, of Acquiror.
"Acquiror's Disclosure Schedule" will mean a schedule of even date
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herewith delivered by Acquiror to the Company concurrently with the execution of
this Agreement, which, among other things, will identify exceptions to
Acquiror's representations and warranties contained in Article V by specific
section references.
"Acquiror's Offering Memorandum" will mean the Offering Memorandum dated
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October 26, 1999 distributed by Acquiror in connection with the transactions
contemplated hereby.
"Affiliate" will, with respect to any Person, mean any other Person
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that controls, is controlled by or is under common control with the former.
"Agreement" will mean this Agreement and Plan of Merger made and
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entered into as of October 28, 1999 by and among Acquiror, Newco, the Company
and Sellers including any amendments hereto and Schedules hereto (including
Acquiror's Disclosure Schedule and the Company's Disclosure Schedules but
excluding the Annexes hereto).
"Business Day" will mean any day other than a day on which banks in
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the State of Georgia or Pennsylvania are authorized or obligated to be closed.
"Certificate of Merger" will have the meaning ascribed to such term in
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Section 2.2.
"Closing" will mean a meeting, which will be held in accordance with
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Section 3.3, of all Persons interested in the transactions contemplated by this
Agreement at which all documents necessary to evidence the fulfillment or waiver
of all conditions precedent to the consummation of the transactions contemplated
by this Agreement are executed and delivered.
"Code" will mean the Internal Revenue Code of 1986, as amended.
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"Closing Date" will mean the date the Closing occurs.
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"Company Common Stock" will mean the common stock, par value $.001, of
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the Company.
"Company Preferred Stock" will mean the Series A Preferred Stock, par value
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$.001, of the Company.
"Company's Disclosure Schedule" will mean a schedule of even date
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herewith delivered by the Company to the Acquiror Parties concurrently with the
execution of this Agreement, which, among other things, will identify exceptions
to the Company's representations and warranties contained in Article IV by
specific section and subsection references.
"Control" (including the terms "controlled," "controlled by" and "under
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common control with") will mean the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or as
trustee or executor, by contract or credit arrangement or otherwise.
"Court" will mean any court or arbitration tribunal of the United
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States, any domestic state, or any foreign country, and any political
subdivision thereof.
"DGCL" will mean the Delaware General Corporation Law, as amended.
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"Effective Time" will mean the date and time of the completion of the
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filing of a properly executed Certificate of Merger with the Secretary of State
of the State of Delaware in accordance with Section 2.2, or at such later time
as Acquiror, the Company and Sellers shall have agreed upon and designated in
such filings in accordance with the DGCL.
"Environmental Claim" means any claim, action, cause of action,
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investigation or notice by any Person or Governmental Authority alleging
potential liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, release or disposal of any
Hazardous Materials at any location, whether or not owned or operated by the
Company, or (b) circumstances forming the basis of any violation, or alleged
violation, of any Environmental Law.
"Environmental Law" will mean any Law pertaining to: (i) the
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protection of health, safety and the indoor or outdoor environment; (ii) the
conservation, management or use of natural resources and wildlife; (iii) the
protection or use of surface water and ground water; (iv) the management,
manufacture, possession, presence, use, generation, transportation, treatment,
storage, disposal, release, threatened release, abatement, removal, remediation
or handling of, or exposure to, any Hazardous Material; or (v) pollution
(including any release to air, land, surface water and ground water); and
includes, without limitation, the Comprehensive Environmental, Response,
Compensation, and Liability Act of 1980, as amended, and the Regulations
promulgated thereunder and the Solid Waste Disposal Act, as amended, 42 U.S.C.
6901, et seq.
"Exchange Act" will mean the Securities Exchange Act of 1934, as
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amended, and the Regulations promulgated thereunder.
"GAAP" will mean generally accepted accounting principles,
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consistently applied.
"Governmental Authority" will mean any governmental agency or
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authority (other than a Court) of the United States, any domestic state, or any
foreign country, and any political subdivision or agency thereof, and will
include any authority having governmental or quasi-governmental powers.
"Hazardous Material" will mean any substance, chemical, compound,
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product, solid, gas, liquid, waste, by-product, pollutant, contaminant or
material which is hazardous or toxic and is regulated under any Environmental
Law, and includes without limitation, asbestos or any substance containing
asbestos, polychlorinated biphenyls or petroleum (including crude oil or any
fraction thereof).
"Intellectual Property" will mean: trademarks, service marks, trade
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names, URLs and Internet domain names, designs, slogans and general intangibles
of like nature, together with all goodwill related to the foregoing
(collectively, "Trademarks"); patents (including any registrations,
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continuations, continuations in part, renewals and applications for any of the
foregoing); copyrights (including any registrations and applications therefor);
computer software; databases; technology, trade secrets and other confidential
information, know-how, proprietary processes, formulae, algorithms, models, user
interfaces, customer lists, inventions, source codes, object codes,
methodologies and, with respect to all of the foregoing, related confidential
documentation (collectively, "Trade Secrets").
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"Knowledge" an individual will be deemed to have "Knowledge" of a
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particular fact or other matter if (a) such individual is actually aware of such
fact or other matter, or (b) such fact or matter is reflected in one or more
documents (including e-mails) in such individual's files. A Person (other than
an individual) will be deemed to have "Knowledge" of a particular fact or other
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matter if any individual who on the date hereof is serving as a director or
executive officer of such Person has Knowledge of such fact or other matter.
"Law" will mean all laws, statutes, ordinances and Regulations of any
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Governmental Authority including all decisions of Courts having the effect of
law.
"Lien" will mean any mortgage, pledge, security interest, attachment,
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encumbrance, lien or charge of any kind (including any agreement to give any of
the foregoing); provided, however, that the term "Lien" shall not include (i)
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statutory liens for Taxes, which are not yet due and payable or are being
contested in good faith by appropriate proceedings, (ii) statutory or common law
liens to secure landlords, lessors or renters under leases or rental agreements
confined to the premises rented, (iii) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment insurance,
old age pension or other social security programs mandated under applicable
Laws, (iv) statutory or common law liens in favor of carriers, warehousemen,
mechanics and materialmen, to secure claims for labor, materials or supplies and
other like liens, and (v) restrictions on transfer of securities imposed by
applicable state and federal securities Laws.
"Litigation" will mean any suit, action, arbitration, cause of action,
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claim, complaint, criminal prosecution, investigation, demand letter,
governmental or other administrative proceeding, whether at law or at equity,
before or by any Court or Governmental Authority or before any arbitrator.
"Material Adverse Effect" will mean, with respect to a specified Person,
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any change, event or effect that individually or in the aggregate (taking into
account all other such changes, events or effects) has had, or would be
reasonably likely to have, a material adverse effect on the consolidated
business, results of operations, assets, liabilities, prospects or financial
condition of such Person and its Subsidiaries, if any, taken as a whole.
"Material Contract" will mean any contract, agreement, promissory note,
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debt instrument, commitment, arrangement, undertaking or understanding to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound, whether written or oral, including without limitation each
and every amendment, modification or supplement to any of them, that is material
to the consolidated business, results of operations, assets, liabilities,
prospects or financial condition of the Company and its Subsidiaries taken as a
whole.
"Merger" will mean the merger of Newco with and into the Company
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provided for in this Agreement.
"Newco" will mean Concurrent Acquisition Corporation, a newly-formed
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Delaware corporation and a wholly owned direct Subsidiary of Acquiror.
"Order" will mean any judgment, order or decree of any Court or
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Governmental Authority.
"Permit" will mean any and all permits, licenses, authorizations,
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Orders, certificates, registrations or other approvals granted by any
Governmental Authority.
"Person" will mean an individual, partnership, limited liability
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company, corporation, joint stock company, trust, estate, joint venture,
association or unincorporated organization, or any other form of business or
professional entity, but will not include a Governmental Authority.
"Regulation" will mean any rule or regulation of any Governmental
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Authority having the effect of Law.
"SEC" will mean the Securities and Exchange Commission.
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"Securities Act" will mean the Securities Act of 1933, as amended, and
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the Regulations promulgated thereunder.
"Stock Option" will have the meaning specified in Section 6.4 hereto.
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A "Subsidiary" of a specified Person will be any corporation,
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partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, fifty percent (50%) or more of the
stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
"Tax Returns" will mean any declaration, return, report, schedule,
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certificate, statement or other similar document (including relating or
supporting information) required to be filed with a Governmental Authority, or
where none is required to be filed with a Governmental Authority, the statement
or other document issued by a Governmental Authority in connection with any Tax,
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
"Taxes" will mean any and all federal, state, local, foreign,
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provincial, territorial or other taxes, imposts, tariffs, fees, levies or other
similar assessments or liabilities and other charges of any kind, including
income taxes, ad valorem taxes, excise taxes, withholding taxes, stamp taxes or
other taxes of or with respect to gross receipts, premiums, real property,
personal property, windfall profits, sales, use, transfers, licensing,
employment, social security, workers' compensation, unemployment, payroll and
franchises imposed by or under any Law; and such terms will include any
interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any such tax or any contest or
dispute thereof.
ARTICLE II
TERMS OF MERGER
Section 2.1 Statutory Merger. Subject to the terms and conditions and
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in reliance upon the representations, warranties, covenants and agreements
contained herein, Newco will merge with and into the Company at the Effective
Time, the separate corporate existence of Newco will cease and the Company will
succeed to and assume all of the rights and obligations of Newco in accordance
with the DGCL (the Company is sometimes referred to herein as the "Surviving
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Corporation"). The Merger shall have the effect set forth in the DGCL.
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Section 2.2 Effective Time. On the Closing Date, the parties hereto
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will cause the Merger to be consummated by filing a certificate of merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware,
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in such form as required by, and executed in accordance with the relevant
provisions of, the DGCL. The Merger shall become effective at the later of (i)
time at which the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware (the time the Merger becomes effective in
accordance with the foregoing being referred to as the "Effective Time") and
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(ii) such later time as specified in the Certificate of Merger duly filed with
the Secretary of State of Delaware.
Section 2.3 Certificate of Incorporation; Bylaws. At the Effective
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Time, the certificate of incorporation of the Company as in effect immediately
prior to the Effective Time shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended as provided by Law and the
Certificate of Incorporation of the Surviving Corporation. At the Effective
Time, the by-laws of the Company as in effect immediately prior to the Effective
Time, shall be the by-laws of the Surviving Corporation until thereafter amended
as provided by Law and the certificate of incorporation of the Surviving
Corporation and such by-laws.
Section 2.4 Directors and Officers. The directors of Newco
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immediately prior to the Effective Time will be the directors of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and by-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time will be the officers of the
Surviving Corporation, in each case until their respective successors are duly
elected or
appointed and qualify for such election.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
Section 3.1 Merger Consideration; Conversion and Cancellation of
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Securities. At the Effective Time, by virtue of the Merger and without any
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action on the part of the holders of any of the following securities:
(a) Subject to the other provisions of this Article III, each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time and each share of Company Preferred Stock issued and outstanding
immediately prior to the Effective Time, each as reflected on Schedule 3.1(a)
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hereto, (excluding any Company Common Stock described in Section 3.1(c)) will
be converted into the right to receive 2.67831 (the "Exchange Ratio") shares of
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Acquiror Common Stock (the "Merger Consideration"). Notwithstanding the
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foregoing: (i) the number of shares of Acquiror Common Stock issuable pursuant
to this Section 3.1(a) and the number of shares of Acquiror Common Stock
issuable pursuant to Stock Options converted into options to receive Acquiror
Common Stock pursuant to Section 6.4 hereof shall not exceed 2,610,000 shares;
and (ii) if between the date of this Agreement and the Effective Time, the
outstanding shares of Acquiror Common Stock or Company Common Stock shall have
been changed into a different number of shares or a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
conversion, consolidation, combination or exchange of shares, the Exchange Ratio
will be correspondingly adjusted to reflect such stock dividend, subdivision,
reclassification, recapitalization, split, conversion, consolidation,
combination or exchange of shares.
(b) Subject to the other provisions of this Article III, all shares of
Company Common Stock will, upon conversion thereof into shares of Acquiror
Common Stock at the Effective Time, cease to be outstanding and will
automatically be cancelled and retired, and each certificate previously
evidencing Company Common Stock outstanding immediately prior to the Effective
Time (other than Company Common Stock described in Section 3.1(c)) will
thereafter represent only the right to receive (i) the number of whole shares of
Acquiror Common Stock and (ii) as provided in Section 3.2(b) cash in lieu of
fractional shares into which the shares of Company Common Stock represented by
such certificate have been converted pursuant to this Section 3.1(b). The
holders of certificates previously evidencing Company Common Stock will cease to
have any rights with respect to such Company Common Stock except as otherwise
provided herein or by Law.
(c) Notwithstanding any provision of this Agreement to the
contrary, each share of Company Common Stock held in the treasury of the Company
and each share of Company Common Stock, if any, owned by Acquiror or any direct
or indirect wholly owned Subsidiary of Acquiror or of the Company immediately
prior to the Effective Time will be cancelled.
(d) Each share of common stock, par value $.01 per share, of Newco
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one fully paid and nonassessable share of common
stock, no par value, of the Surviving Corporation.
Section 3.2 Exchange of Certificates.
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(a) Certificates. Assuming the satisfaction of all of the conditions
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to Acquiror's obligations to consummate the transactions contemplated hereby and
the surrender by a shareholder of the Company of the certificate or certificates
representing the total amount of Company Common Stock owned by such shareholder
or the delivery of an affidavit of lost certificate pursuant to Section 3.2(d),
Acquiror shall deliver to such former shareholder of the Company a certificate
representing the number of shares of Acquiror Common Stock to which such
shareholder is entitled pursuant to Section 3.1(a), less any fractional shares.
(b) No Fractional Shares. No certificates or scrip
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representing fractional shares of Acquiror Common Stock shall be issued upon the
surrender for exchange of certificates formerly representing shares of Company
Common Stock pursuant to this Article III; no dividend, stock split or other
change in the capital structure of Acquiror shall relate to any fractional
security; and such fractional interests shall not entitle the owner thereof to
vote or to any rights of a security holder. In lieu of any such fractional
shares, each holder of Company Common Stock who would otherwise be entitled to a
fraction of a share of Acquiror Common Stock upon the surrender of their stock
certificates for exchange will be paid cash upon such surrender in an amount
equal to the product of (i) $7.50 per share and (ii) a fraction equal to the
fraction of each shares so surrendered. For this purpose, shares of Company
Common Stock represented by two or more certificates may be aggregated, and in
no event shall any holder be paid a cash amount in respect of one or more than
one share of Acquiror Common Stock.
(c) Withholding of Tax. Acquiror will be entitled to deduct and
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withhold from the consideration otherwise payable pursuant to this Agreement to
any former holder of Company Common Stock such amounts as Acquiror (or any
Affiliate thereof) is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign Tax
Law. To the extent that amounts are so withheld by Acquiror, such withheld
amounts will be treated for all purposes of this Agreement as having been paid
to the former holder of Company Common Stock in respect of whom such deduction
and withholding was made by Acquiror.
(d) Lost Certificates. If any certificate evidencing Company
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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 and, if required by Acquiror, the posting by such Person of
a bond, in such reasonable amount as Acquiror may direct, as indemnity against
claims that may be made against it with respect to such certificate, Acquiror
will issue in exchange for such lost, stolen or destroyed certificate of
Acquiror Common Stock to which the holder may be entitled pursuant to this
Article III and cash and any dividends or other distributions to which the
holder thereof may be entitled pursuant to Section 3.2(d) or Section 3.2(e).
(e) Closing of Company Transfer Books. At the Effective Time, the
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stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made. If, after the Effective Time,
certificates representing shares of Company Common Stock are presented to the
Surviving Corporation, they shall be canceled and exchanged for certificates
representing shares of Acquiror Common Stock in accordance with this Article
III.
Section 3.3 Closing. The Closing will take place at the offices of
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Acquiror at 11:00 a.m. on October 28, 1999 or at such other place, time and date
as the parties hereto may agree. At the Closing, the parties hereto will cause
the Certificate of Merger to be filed with the Secretary of State of the State
of Delaware.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND SELLERS
The Company and the Sellers hereby jointly and severally represent and
warrant to the Acquiror Parties, subject to the exceptions set forth below and
in the Company's Disclosure Schedule (which exceptions shall specifically
identify a Section, Subsection or clause of a single Section or Subsection
hereof, as applicable, to which such exception relates, it being understood and
agreed that each such exception shall be deemed to be disclosed both under such
Section, Subsection or clause hereof and any other Section, Subsection or clause
hereof to which such disclosure reasonably relates) that:
Section 4.1 Organization and Qualification; Subsidiaries. The Company
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and each Subsidiary of the Company are legal entities duly organized, validly
existing and in good standing under the Laws of their respective jurisdictions
of incorporation or organization, have all requisite power and authority to own,
lease and operate their respective properties and to carry on their business as
it is now being conducted and are duly qualified and in good standing to do
business in each jurisdiction in which the nature of the business conducted by
them or the ownership or leasing of their respective properties makes such
qualification necessary. Section 4.1 of the Company's Disclosure Schedule sets
forth, as of the date of this Agreement, a true and complete list of all the
Company's directly or indirectly owned Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity interests owned by the
Company or another Subsidiary of the Company. Neither the Company nor any of
its Subsidiaries owns an equity interest in any partnership or joint venture
arrangement or other business entity that is material to the Company.
Section 4.2 Certificate of Incorporation; Bylaws. The Company has
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furnished or made available to Acquiror complete and correct copies of the
certificate of incorporation and the bylaws or the equivalent organizational
documents, in each case as amended or restated to the date hereof, of the
Company and each of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its certificate of
incorporation or bylaws or equivalent organizational documents.
Section 4.3 Capitalization.
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(a) The authorized capital stock of the Company consists of
5,000,000 shares of Company Common Stock of which 833,996 shares are issued and
outstanding and 199,387 shares of Company Preferred Stock of which no shares are
issued and outstanding, such issued shares being duly authorized, validly
issued, fully paid and nonassessable and were not issued in violation of any
preemptive or similar rights of any PersonAs of the date hereof, 600,000 shares
of Company Common Stock are held by Fred Allegrezza and 223,996 shares of
Company Common Stock are held by Gary Lauder.
(b) As of the date hereof, except for outstanding options to
purchase 140,500 sharesof Company Common Stock under the Company Stock Option
Plan, no shares of Company Common Stock are reserved for issuance, and there are
no contracts, agreements, commitments or arrangements obligating the Company to
offer, sell, issue or grant any shares of, or any options, warrants or rights of
any kind to acquire any shares of, or any securities that are convertible into
or exchangeable for any shares of, capital stock of the Company, to redeem,
purchase or acquire, or offer to purchase or acquire, any outstanding shares of,
or any outstanding options, warrants or rights of any kind to acquire any shares
of, or any outstanding securities that are convertible into or exchangeable for
any shares of, capital stock of the Company or to grant any Lien on any shares
of capital stock of the Company.
(c) The authorized, issued and outstanding capital stock of, or
other equity interests in, each of the Company's Subsidiaries and the names of
the holders of record of the capital stock or other equity interests of each
such Subsidiary, in each case, as of the date hereof, are set forth in Section
4.3(c) of the Company's Disclosure Schedule. The issued and outstanding shares
of capital stock of, or other equity interests in, each of the Subsidiaries of
the Company that are owned by the Company or any of its Subsidiaries have been
duly authorized and are validly issued, and, with respect to capital stock, are
fully paid and nonassessable, and were not issued in violation of any preemptive
or similar rights of any Person. All such issued and outstanding shares or
other equity interests, that are indicated as owned by the Company or one of its
Subsidiaries in Section 4.3(c) of the Company's Disclosure Schedule, are owned
beneficially as set forth therein and free and clear of all Liens. No shares of
capital stock of, or other equity interests in, any Subsidiary of the Company
are reserved for issuance, and there are no contracts, agreements, commitments
or arrangements obligating the Company or any of its Subsidiaries (i) to offer,
sell, issue, grant, pledge, dispose of or encumber any shares of capital stock
of, or other equity interests in, or any options, warrants or rights of any kind
to acquire any shares of capital stock of, or other equity interests in, or any
securities that are convertible into or exchangeable for any shares of capital
stock of, or other equity interests in, any of the Subsidiaries of the Company,
(ii) to redeem, purchase or acquire, or offer to purchase or acquire, any
outstanding shares of capital stock of, or other equity interests in, or any
outstanding options, warrants or rights of any kind to acquire any shares of
capital stock of, or other equity interest in, or any outstanding securities
that are convertible into or exchangeable for, any shares of capital stock of,
or other equity interests in, any of the Subsidiaries of the Company or (iii) to
grant any Lien on any outstanding shares of capital stock of, or other equity
interest in, any of the Subsidiaries of the Company.
(d) There are no voting trusts, proxies or other similar
agreements or understandings to which the Company or any of its Subsidiaries is
a party or by which the Company or any of its Subsidiaries is bound with respect
to the voting of any shares of capital stock of the Company or any of its
Subsidiaries or with respect to any other matter.
Section 4.4 Authorization of Agreement. The Company has all requisite
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corporate power and authority to execute and deliver this Agreement and each
instrument required hereby to be executed and delivered by it at the Closing, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by the
Company of this Agreement and each instrument required hereby to be executed and
delivered by it at the Closing and the performance of its obligations hereunder
and thereunder have been duly and validly authorized by all requisite corporate
action on the part of the Company (no additional approval of the shareholders of
the Company being required by Law or by the articles of incorporation or by-laws
of the Company). This Agreement has been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery hereof by the
Acquiror Parties, this Agreement constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or similar Laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity (regardless of whether enforceability is considered in a proceeding in
equity or at law).
Section 4.5 Approvals. No filing or registration with, no waiting
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period imposed by and no Permit, Order, authorization, consent or approval of,
any Court or Governmental Authority is required under any Law, Regulation or
Order applicable to the Company or any of its Subsidiaries to permit the Company
to execute, deliver or perform this Agreement or any instrument required hereby
to be executed and delivered by it at the Closing.
Section 4.6 No Violation. Except as disclosed in Section 4.6 of the
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Company's Disclosure Schedule, assuming effectuation of all filings and
registrations with, termination or expiration of any applicable waiting periods
imposed by and receipt of all Permits or Orders of, Courts and/or Governmental
Authorities indicated as required in Section 4.5, the execution and delivery of
this Agreement or any instrument required to be executed and delivered by the
Company at Closing, and the consummation of the transactions contemplated hereby
and thereby and compliance with the provisions hereof and thereof will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets of the
Company or any Subsidiary under, (i) the certificate of incorporation or by-laws
of the Company or comparable organizational documents of any Subsidiary, (ii)
any loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, concession, franchise, license, Permit, Order, or similar
authorization applicable to the Company or any Subsidiary or any of their
respective properties or assets or (iii) assuming the effectuation of all
filings and registrations with, termination or expiration of any applicable
waiting periods imposed by and receipt of all Permits or Orders of, Courts
and/or Governmental Authorities indicated as required in Section 4.5, any
judgment, Order, decree, statute, Law, ordinance, rule or regulation applicable
to the Company or any Subsidiary or any of their properties or assets, other
than, in the case of clauses(ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that individually or in the aggregate are not
(x) reasonably likely to have a Material Adverse Effect on the Company, (y)
reasonably likely to impair the ability of the Company to perform its
obligations under this Agreement or (z) reasonably likely to impair the ability
of the Company to consummate the transactions contemplated by this Agreement.
Section 4.7 Financial Statements. The Company has delivered to Acquiror
---------------------
copies of the following financial statements (including the respective notes
thereto) for the Company, which are true and correct in all material respects
(such financial statements and the notes thereto being hereinafter referred to
collectively as the "Financial Statements"):
---------------------
(a) The balance sheets of the Company as of December 31, 1996, 1997 and
1998 and the related statements of the income, retained earnings and changes in
financial position (or statements of cash flows, if applicable) for the fiscal
years then ended (the "Annual Financial Statements") (the balance sheet of the
---------------------------
Company as of December 31, 1998 is referred to herein as the "1998 Balance
------------
Sheet"); and
(b) The balance sheet of the Company as of September 30, 1999 (the
"September 30, 1999 Balance Sheet"), and the related statement of income,
---------------------------------
retained earnings and changes in financial position (or statements of cash
--
flows, if applicable) for the six-month period then ended (the "Interim
- -------
Financial Statements").
- -------------
The Annual Financial Statements have been prepared in accordance with GAAP, and
in each case such principles have been applied in a consistent manner in each of
the periods indicated. The Annual Financial Statements present fairly the
financial position of the Company as of December 31, 1996, 1997 and 1998 and the
results of operations of the Company for the years then ended. Except as
otherwise noted therein, the Interim Financial Statements have been prepared in
accordance with GAAP, consistently applied, and the Interim Financial Statements
present fairly the financial position of the Company as of September 30,1999 and
the results of operations of the Company for the six-month period then ended.
Section 4.8 No Undisclosed Liabilities. Neither the Company nor any
--------------------------
of its Subsidiaries has any liabilities or obligations of any nature, whether or
not accrued, contingent or otherwise, including, without limitation, any
liabilities with respect to the Company's international operations, except (a)
liabilities or obligations reflected in the September 30,1999 Balance Sheet, and
(b) liabilities or obligations incurred in the ordinary course of business
consistent with past practice since September 30,1999 which have not had, or
which are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on the Company. Notwithstanding the above, the Company
has no liabilities with respect to Fred Allegrezza or Gary Lauder as of the date
hereof.
Section 4.9 Absence of Certain Changes or Events. Since December 31, 1998,
------------------------------------
there has not occurred any change, event or condition which has had, or which is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on the Company.
Section 4.10 Title to Properties. The Company or its Subsidiaries,
---------------------
individually or together, have good, valid and marketable title to or a valid
leasehold in, all of the properties and assets (real, personal and mixed,
tangible and intangible) that are necessary to the conduct of the business of
the Company and its Subsidiaries as it is currently being conducted, including
all of the properties and assets reflected in the September 30,1999 Balance
Sheet, other than any such properties or assets that have been sold or otherwise
disposed of in the ordinary course of business since September 30,1999. The
Company or its Subsidiaries, individually or together, hold under valid lease
agreements all real and personal properties being held by the
Company or its Subsidiaries under leases, and enjoy peaceful and undisturbed
possession of such properties under such leases. Neither the Company nor any of
its Subsidiaries has received any written notice or has Knowledge of any adverse
claim to the title to any properties owned by them or with respect to any lease
under which any properties are held by them. Notwithstanding anything to the
contrary, nothing in this Section 4.10 shall be construed to relate to
Intellectual Property (it being understood that Section 4.19 contains
representations and warranties relating to Intellectual Property).
Section 4.11 Material Contracts. Each Material Contract is in full
------------------
force and effect, and is a legal, valid and binding obligation of the Company or
a Subsidiary and, to the Knowledge of the Company and Sellers, each of the other
parties thereto, enforceable in accordance with its terms, except that the
enforcement thereof may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar Laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law). No condition exists or event has occurred which (whether with or
without notice or lapse of time or both, or the happening or occurrence of any
other event) would constitute a default by the Company or a Subsidiary or, to
the Knowledge of the Company and Seller, any other party thereto under, or
result in a right in termination of, any Material Contract.
Section 4.12 Insurance. The Company and its Subsidiaries maintain
---------
with third parties policies of fire and casualty, liability and other forms of
insurance in such amounts, with such deductibles and retained amounts, and
against such risks and losses, as are consistent with industry practice and as
are reasonable for the conduct of the business as conducted on the date hereof
and for the assets of the Company and its Subsidiaries.
Section 4.13 Permits; Compliance. The Company and its Subsidiaries
--------------------
have obtained all material Permits that are necessary to carry on their
businesses as currently conducted. Such Permits are in full force and effect in
all material respects, have not been violated in any material respect, and, to
the Knowledge of the Company and Sellers, no suspension, revocation or
cancellation thereof has been threatened and there is no Litigation pending or,
to the Knowledge of the Company and Sellers, threatened regarding suspension,
revocation or cancellation of any of such Permits.
Section 4.14 Litigation. Except as disclosed on Section 4.14 of the
----------
Company's Disclosure Schedule, there is no Litigation pending, or to the
Knowledge of the Company and Sellers, threatened against the Company or any
Subsidiary of the Company, which if adversely determined would be or have a
Material Adverse Effect on the Company.
Section 4.15 Compliance with Laws. Neither the Company nor any Subsidiary
--------------------
is subject to any agreement, contract or Order with or by any Court or
Governmental Authority restricting in any material respect its operation or
requiring any materially adverse actions by the Company. The Company and its
Subsidiaries are in compliance in all material respects with all applicable Laws
and Regulations and are not in default in any material respect with respect to
any material Order applicable to the Company or any of its Subsidiaries.
Section 4.16 Employee Benefit Plans.
------------------------
(a) Section 4.16 of the Company's Disclosure Schedule contains a
true and complete list of each deferred compensation, incentive compensation,
stock purchase, stock option and other equity compensation plan, "welfare" plan,
fund or program (within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")); each "pension" plan, fund or
-----
program (within the meaning of Section 3(2) of ERISA); each employment,
consulting, termination or severance agreement to which the Company or any
Subsidiary is a party or by which it is bound, and each other employee benefit
plan, fund, program, agreement or arrangement, in each case, that is sponsored,
maintained or contributed to or required to be contributed to by the Company or
any entity, that together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA (an "ERISA Affiliate"), or to
---------------
which the Company or an ERISA Affiliate is a party, whether written or oral, for
the benefit of any employee or former employee of the Company or any of its
Subsidiaries (the "Company Plans").
--------------
(b) With respect to each Company Plan, the Company has heretofore
delivered or made available to Acquiror true and complete copies of the Company
Plan and any amendments thereto (or if the Company Plan is not a written Company
Plan, a description thereof), any related trust or other funding vehicle, any
reports or summaries required under ERISA or the Code and the most recent
determination letter received from the Internal Revenue Service with respect to
each Company Plan intended to qualify under Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA has been
incurred by the Company or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability.
(d) No Company Plan is subject to Title IV of ERISA or Section 412
of the Code, nor is any Company Plan a "multiemployer pension plan," as defined
in Section 3(37) of ERISA, or subject to Section 302 of ERISA.
(e) Except as disclosed in Section 4.16(e) of the Company's
Disclosure Schedule, each Company Plan has been operated and administered in all
respects in accordance with its terms and applicable Law, including ERISA and
the Code.
(f) Each Company Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code and the trusts maintained thereunder that
are intended to be exempt from taxation under Section 501(a) of the Code have
received a favorable determination or other letter indicating that they are so
qualified, and, to the Knowledge of the Company and Sellers, no event has
occurred since the date of said letter(s) that will adversely affect the
qualification of such
Company Plan.
(g) No Company Plan provides medical, surgical, hospitalization,
death or similar benefits (whether or not insured) for employees or former
employees of the Company or any of its Subsidiaries for periods extending beyond
their retirement or other termination of service, other than (i) coverage
mandated by applicable Law, (ii) death benefits under any "pension plan," or
(iii) benefits the full cost of which is borne by the current or former employee
(or his beneficiary).
(h) No amounts payable under the Company Plans will fail to be
deductible for federal income Tax purposes by virtue of Section 280G of the
Code.
(i) The execution, delivery and performance of, and consummation of the
transactions contemplated by, this Agreement will not (i) entitle any current or
former employee or officer of the Company or any ERISA Affiliate to severance
pay, unemployment compensation or any other payment, except as expressly
provided in this Agreement, or (ii) accelerate the time of payment or vesting,
or increase the amount of compensation due any such employee or officer.
(j) There are no pending or, to the Knowledge of the Company and
Sellers, any threatened or anticipated claims by or on behalf of any Company
Plan, by any employee or beneficiary covered under any such Company Plan, or
otherwise involving any such Company Plan (other than routine claims for
benefits).
Section 4.17 Taxes.
-----
(a) Tax Returns and Liabilities. Except as otherwise disclosed in
Section 4.17(a) of the Company's Disclosure Schedule: (i) all Tax Returns have
been duly filed and are true, correct and complete in all material respects;
(ii) all Taxes, deposits or other payments for which the Company has any
liability through the date hereof (whether or not shown on a return) have been
paid in full or are accrued as liabilities for Taxes on the books and records of
the Company; (iii) the amounts so paid on or before the date hereof, together
with any amounts accrued as liabilities for Taxes (whether accrued as currently
payable or deferred Taxes) on the books of the Company and reflected in the June
30 Balance Sheet will be adequate to satisfy all liabilities for Taxes of the
Company in any jurisdiction through the Closing Date, including Taxes accruable
upon income earned through the Closing Date; (iv) with respect to the Company,
there are not now any extensions of time in effect with respect to the dates on
which any Tax Returns were or are due to be filed; (v) all deficiencies asserted
as a result of any examination of any Tax Return of the Company have been paid
in full, accrued on the books of the Company, or finally settled, and no issue
has been raised in any such examination which, by application of the same or
similar principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined; (vi) no claims have been
asserted and, to the Knowledge of the Company and Sellers, no proposals or
deficiencies for any Taxes are being asserted against the Company, proposed or
threatened, and no audit or investigation of any return or report of Taxes is
currently underway, pending or, to the Knowledge of the Company and Sellers,
threatened; (vii) there are no outstanding waivers or agreements by Sellers or
the Company for the extension of time for the assessment of any Taxes or
deficiency thereof, nor are there any requests for rulings, outstanding
subpoenas or requests for information, notice of proposed reassessment of any
property owned or leased by the Company or any other matter pending between the
Company and any taxing authority; (viii) there are no liens for Taxes upon any
property or assets of the Company except liens for current Taxes not yet due,
nor are there any liens which, to the Knowledge of the Company and Sellers, are
pending or threatened; (ix) to the Knowledge of the Company and Sellers, there
are no facts which exist or have existed which would constitute meritorious
grounds for the assessment of any Taxes against the Company with respect to the
periods which have not been audited by the Internal Revenue Service or other
taxing authorities, (x) the Company is not a party to any Tax allocation or
sharing agreement; and (xi) the Company (A) has not been a member of an
affiliated group (within the meaning of Section 1504(a) of the Code) filing a
consolidated federal income tax return or (B) has no liability (whether known or
unknown, asserted or unasserted, liquidated or unliquidated, and whether due or
to become due) for the Taxes of any person under Treas. Reg. 1.1502-6 (or any
similar provision of state, local or foreign law), as transferee or successor,
by contract or otherwise.
(b) Reserves. In each case, adequate provision, including provision in
the deferred tax account, has been made in the Financial Statements for all
deferred and accrued tax liabilities as of their respective dates with respect
to operations for periods ending on such dates.
(c) Submission of Tax Returns. The Company has delivered to Acquiror true
and complete copies of all federal and state income tax returns (together with
any examination reports and statements of deficiency) relating to the operations
of the Company for the taxable years ended 1997 and 1998.
(d) Withholding. The Company has complied in all material respects with
all rules and Regulations relating to the payment and withholding of Taxes
(including, without limitation, withholding of Taxes pursuant to Sections 1441
and 1442 of the Code or similar provisions under any foreign Laws) and has,
within the time and in the manner required by law, withheld from employee wages
and paid over to the proper Governmental Authorities all material amounts
required to be so withheld and paid over under all applicable Laws.
(e) Elections. Neither Sellers nor the Company have filed a consent
pursuant to Section 341(f) of the Code. Neither the Company, nor any predecessor
in interest, has filed, or may be deemed to have filed, any election under
Section 338 of the Code.
(f) Industrial Development Bonds. No assets of the Company or of any
"Related Person," as that term is defined in Section 144(a)(3) of the Code (or
Section 103(b)(6)(C) of the Internal Revenue Code of 1954, as amended (the "1954
Code")) whether owned or leased pursuant to a capital lease, have been financed
by private activity bonds within the meaning of Section 141 of the Code (or
industrial development bonds within the meaning of Section 103(b) of the 1954
Code), and neither the Company nor any Related Person is a "principal user," as
that term is used in the context of Section 144(a) of the Code (or Section
103(b) of the 1954 Code) of any building which has been so financed.
(g) Excess Parachute Payments. Except as set forth in Schedule 4.17(g),
the Company has not made any payment which constitutes an "excess parachute
payment" within the meaning of Section 280G of the Code, and no payment by the
Company required to be made under any contract (including the obligation of the
Company described in Section 7.05 hereof) will, if made, constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(h) FIRPTA. The Company has not been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(i) Former Subchapter S Status. The Company (and any predecessor of the
Company) was a validly electing S corporation within the meaning of Sections
1361 and 1362 of the Code from September 1996 to June 1998.
(j) Tax Free Reorganization. To the Knowledge of the Company and Sellers,
neither the Company not any of its Affiliates of shareholders has taken or
agreed to take any action or failed to take any action that would prevent the
Merger from constituting a reorganization within the meaning of Section 368(a)
of the Code.
Section 4.18 Environmental Laws and Regulations. (a) The Company and its
----------------------------------
Subsidiaries are and have been in compliance with all applicable Environmental
Laws; (b) the Company and its Subsidiaries have obtained all Permits required by
any applicable Environmental Law and all such permits are in full force and
effect; (c) neither the Company nor any of its Subsidiaries has, and the Company
has no Knowledge of any other Person who has, caused any release, threatened
release or disposal of any Hazardous Material at any properties or facilities
previously or currently owned, leased or occupied by the Company or its
Subsidiaries; (d) the Company has no Knowledge that any of its Subsidiaries'
properties or facilities are adversely affected by any release, threatened
release or disposal of a Hazardous Material originating or emanating from any
other property; (e) neither the Company nor any of its Subsidiaries (i) has any
liability for response or corrective action, natural resources damage, or any
other harm pursuant to any Environmental Law, (ii) is subject to, has notice or
Knowledge of, or is required to give any notice of any environmental claim or
(iii) has Knowledge of any condition or occurrence which could form the basis of
an Environmental claim against the Company, any Subsidiary or any of their
properties or facilities; (f) the Company and its Subsidiaries' properties and
facilities are not subject to any, and the Company has no Knowledge of any,
imminent restriction on the ownership, occupancy, use or transferability of
their properties and facilities arising from any (i) Environmental Law or (ii)
release, threatened release or disposal of any Hazardous Material; and (g) there
is no Environmental Claim pending, or, to the Knowledge of the Company and
Sellers, threatened, against the Company or, to the Knowledge and the Company
and Sellers, against any Person whose liability for any Environmental Claim the
Company has or may have retained or assumed either contractually or by operation
of Law.
Section 4.19 Intellectual Property.
----------------------
(a) Section 4.19(a) of the Company's Disclosure Schedule sets
forth, for the Intellectual Property owned by the Company or its Subsidiaries
(collectively, the "Owned Intellectual Property"), a complete and accurate list
---------------------------
of all United States and foreign (i) Patents; (ii) Trademarks, whether
registered or unregistered; and (iii) copyright registrations and applications,
indicating for each, the applicable jurisdiction, registration number (or
application number), and date issued (or date filed).
(b) Section 4.19(b) of the Company's Disclosure Schedule sets
forth a complete and accurate list of all license agreements (collectively, the
"License Agreements") granting to the Company or any of its Subsidiaries any
-------------------
right to use or practice any rights under any Intellectual Property (such items
--
of Intellectual Property being the "Licensed Intellectual Property") indicating
------------------------------
for each the title and the parties thereto.
(c) (i) The Company or its Subsidiaries own, free and clear of
Liens, Orders and arbitration awards, all Owned Intellectual Property used in
the Company's business, and have a valid and enforceable right to use, without
cost, all of the Licensed Intellectual Property used in the Company's business;
(ii) The Company has taken reasonable steps to protect the Owned
Intellectual Property;
(iii) The conduct of the Company's and its Subsidiaries'
businesses as currently conducted does not infringe upon any Intellectual
Property or other rights owned or controlled by any third party;
(iv) There is no Litigation pending or, to the Knowledge of the
Company and Sellers, threatened nor is there any written claim from any Person
(A) alleging that the Company's activities or the conduct of its businesses or
that of any of its Subsidiaries infringes upon, violates, or constitutes the
unauthorized use of the Intellectual Property rights of any third party or (B)
challenging the ownership, use, validity or enforceability of any Owned
Intellectual Property or Licensed Intellectual Property;
(v) To the Knowledge of the Company and Sellers, no third party is
misappropriating, infringing, diluting, or violating any Owned Intellectual
Property and no such claims have been brought against any third party by the
Company or any of its Subsidiaries;
(vi) The execution, delivery and performance by the Company of this
Agreement, and the consummation of the transactions contemplated hereby and
thereby, will not result in the loss or impairment of, or give rise to any right
of any third party to terminate, any of the Company's or any of its
Subsidiaries' rights with respect to any Owned Intellectual Property or Licensed
Intellectual Property or their respective rights under the License Agreements,
nor require the consent of any Governmental Authority or third party in respect
of any such Intellectual Property; and
(vii) The Software owned or purported to be owned by the Company or any
of its Subsidiaries was either (i) developed by employees of Company or any of
its Subsidiaries within the scope of their employment who have assigned their
rights to the Company or one of its Subsidiaries ; (ii) developed by independent
contractors who have assigned their rights to the Company or one of its
Subsidiaries pursuant to written agreements; or (iii) otherwise acquired by the
Company or a Subsidiary from a third party. For purposes of this Section
4.19(c)(vii), "Software" means any and all (i) computer programs, including any
--------
and all software implementations of algorithms, models and methodologies,
whether in source code or object code, (ii) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (iii) descriptions, flow-charts and other work product used to
design, plan, organize and develop any of the foregoing, (iv) the technology
supporting any Internet site operated by or on behalf of the Company or any of
its Subsidiaries, and (iv) all documentation, including user manuals and
training materials, relating to any of the foregoing.
(d) All registered Trademarks listed in Section 4.19(a) of the
Company's Disclosure Schedule have been in continuous use by the Company or its
Subsidiaries in the form appearing in, and in connection with the goods and
services listed in, their respective registration certificates. To the
Knowledge of the Company and Sellers, there has been no prior use of such
Trademarks by any third party which would confer upon said third party superior
rights in such Trademarks. The Company and its Subsidiaries have adequately
policed such Trademarks against third party infringement.
(e) The Company has taken reasonable steps in accordance with normal
industry practice to protect the Company's rights in confidential information
and Trade Secrets of the Company. Without limiting the foregoing, the Company
enforces a policy of requiring each relevant employee, consultant and contractor
to execute proprietary information, confidentiality and assignment agreements
substantially in the Company's standard forms, and, except under confidentiality
agreements, there has been no disclosure by the Company or any Subsidiary of
material confidential information or Trade Secrets.
(f) The Company has taken reasonable steps with the intent of
ensuring that its products (including existing products and technology and
products and technology currently under development) will, when used in
accordance with associated documentation on a specified platform or platforms,
be capable upon installation of accurately processing, providing, and receiving
date data from, into, and between the Twentieth and Twenty-First centuries,
including the years 1999 and 2000, and making leap-year calculations, provided
that all other non-Company products (e.g., hardware, software and firmware) used
in or in combination with the Company's products, properly exchange data with
the Company's products. The Company has conducted a review of the preparedness
of its material vendors and suppliers and has received reasonable assurances
that no such vendor or supplier will be unable to provide products or services
as a consequence of any Y2K problem.
Section 4.20 Certain Business Practices. Neither the Company nor any
--------------------------
of its Subsidiaries nor any director, officer, employee or agent of the Company
or any of its Subsidiaries has (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful payments relating to political activity,
(ii) made any unlawful payment to any foreign or domestic government official or
employee or to any foreign or domestic political party or campaign or violated
any provision of the Foreign Corrupt Practices Act of 1977, as amended, (iii)
consummated any transaction, made any payment, entered into any agreement or
arrangement or taken any other action in violation of Section 1128B(b) of the
Social Security Act, as amended, or (iv) made any other unlawful payment.
Section 4.21 Technical Due Diligence. The description of the technical
--------------------------
specifications of the Company's products, including all software developed by
the Company, contained in Exhibit 4.21 hereto, is complete and accurate in all
material respects.
Section 4.22 Brokers. No broker, finder, investment banker or other
-------
Person is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
Section 4.23 Power, Authority, Ownership and Nature of Sellers. Each of
--------------------------------------------------
the Sellers, severally and not jointly, represents, warrants, covenants and
agrees, only on such Seller's behalf and with respect to the Shares set forth
beside the execution of this Agreement by such Seller, as of the date hereof and
as of the Closing Date, as follows:
(a) Authorization of Agreement. Such Seller has all requisite
----------------------------
power and authority to execute and deliver this Agreement and each instrument
required hereby to be executed and delivered by such Seller at the Closing, to
perform such Seller's obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by such Seller and, assuming due authorization, execution
and delivery hereof by the Acquiror Parties, this Agreement constitutes the
legal, valid and binding obligation of such Seller, enforceable against such
Seller in accordance with its terms, except that the enforcement thereof may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or similar
Laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity (regardless of whether enforceability if considered
in a proceeding in equity or at law). The execution and delivery of this
Agreement or any instrument required to be executed and delivered by such Seller
at Closing, and the consummation of the transactions contemplated hereby and
thereby and compliance with the provisions hereof and thereof will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under, or result in the
creation of any Lien upon any of shares of Company Common Stock owned by such
Seller under (i) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, concession, franchise, license, Permit,
Order, or similar authorization applicable to Such Seller or any of such
Seller's properties or assets or (ii) any judgment, Order, decree, statute,
Law, ordinance, rule or regulation applicable to such Seller or such Seller's
properties or assets.
(b) Except as set forth in Schedule 4.23(b), the shares owned by each
----------------
Seller (i) are validly issued, fully paid and nonassessable, and (ii) are free
and clear of any liens, restrictions, claims, equities, charges, options, rights
of first refusal, or encumbrances, with no defects of title whatsoever. Other
than the shares of Company Common Stock set forth beside the execution hereof by
such Seller, such Seller owns no shares of capital stock of the Company or of
any Subsidiary or any other equity security of the Company or of any Subsidiary
or right of any kind to have any such equity security issued.
(c) Each Seller has received prior to the date hereof a copy of the
Acquiror Offering Memorandum, and, prior to the date hereof, each Seller has had
a reasonable opportunity to review the Acquiror Offering Memorandum and all
documents referred to therein and make inquiry of Acquiror as to the matters
discussed therein.
(d) Each Seller hereby expressly acknowledges that the shares of
Acquiror Common Stock delivered to such Seller pursuant to Article III hereof
have not been registered under any applicable federal or state securities laws
and cannot be resold unless registered pursuant to such federal or state
securities laws or pursuant to an applicable exemption from registration under
such federal or state securities laws.
Section 4.24 Ancillary of Documents. Concurrently herewith, the Company
-----------------------
and/or Sellers, as the case may be, have executed and delivered to Acquiror: (i)
a registration rights agreement substantially similar in form to the agreement
attached hereto as Annex A; (ii) an escrow agreement substantially similar in
-------
form to the agreement attached hereto as Annex B; (iii) a waiver substantially
-------
similar in form to the waiver attached hereto as Annex C; and (iv) an accredited
-------
investor questionnaire as previously distributed by Acquiror.
Section 4.25 Employment Agreements. Concurrently herewith, (a) Fred
----------------------
Allegrezza has executed and delivered an employment agreement substantially
similar in form to the agreement attached hereto as Annex D, and (b) the Company
-------
has executed and delivered employment agreements substantially similar in form
to the agreements attached hereto as Annex E executed by the following
--------
individuals: L. Clifford Lewis II; Joseph Derham; John Fenley; Robert C.
Gaydos; Jim Schuler; and Phil Gabler.
Section 4.26 Non-Disclosure Agreements. Concurrently herewith, each
--------------------------
officer, director and employee of the Company as of the date hereof has executed
a non-disclosure agreement substantially similar in form to the agreement
attached hereto as Annex F.
--------
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR PARTIES
The Acquiror Parties hereby represent and warrant to the Company,
subject to the exceptions set forth in the Acquiror's Disclosure Schedule (which
exceptions shall specifically identify a Section, Subsection or clause of a
single Section or Subsection hereof, as applicable, to which such exception
relates, it being understood and agreed that each such exception shall be deemed
to be disclosed both under such Section, Subsection or clause hereof and any
other Section, Subsection or clause hereof to which such disclosure reasonably
relates) that:
Section 5.1 Organization and Qualification; Subsidiaries. The
-----------------------------------------------
Acquiror Parties are legal entities duly organized, validly existing and in good
standing under the Laws of their respective jurisdictions of incorporation or
organization, have all requisite power and authority to own, lease and operate
their respective properties and to carry on their business as it is now being
conducted and are duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by them or the
ownership or leasing of their respective properties makes such qualification
necessary.
Section 5.2 Certificate of Incorporation; Bylaws. The Acquiror has
-------------------------------------
furnished or made available to the Company complete and correct copies of the
certificate of incorporation and the bylaws, in each case as amended or restated
to the date hereof, of Acquiror and Newco. Neither the Acquiror nor Newco is in
violation of any of the provisions of its certificate of incorporation or
bylaws.
Section 5.3 Capitalization.
--------------
(a) As of the date hereof, the authorized capital stock of
Acquiror consists of (i) 100,000,000 shares of Acquiror Common Stock of which,
as of October 25, 1999, 49,259,187 shares were issued and outstanding, (ii)
20,000 shares of Class A Preferred Stock, par value $100 per share, of which
none is issued and (iii) 20,000,000 shares of preferred stock, par value $.01
per share, of which none is issued. All of the outstanding shares of Acquiror
Common Stock are, and all shares to be issued as part of the Merger
Consideration will be, when issued in accordance with the terms hereof, duly
authorized, validly issued, fully paid and nonassessable.
(b) Except as disclosed in Schedule 5.3(b), as of the date hereof,
no shares of Acquiror Common Stock are reserved for issuance, and there are no
contracts, agreements, commitments or arrangements obligating Acquiror to offer,
sell, issue or grant any shares of, or any options, warrants or rights of any
kind to acquire any shares of, or any securities that are convertible into or
exchangeable for any shares of, capital stock of Acquiror, to redeem, purchase
or acquire, or offer to purchase or acquire, any outstanding shares of, or any
outstanding options, warrants or rights of any kind to acquire any shares of, or
any outstanding securities that are convertible into or exchangeable for any
shares of, capital stock of Acquiror or to grant any Lien on any shares of
capital stock of Acquiror.
Section 5.4 Authorization of Agreement. Each of the Acquiror Parties
--------------------------
has all requisite corporate power and authority to execute and deliver this
Agreement and each instrument required hereby to be executed and delivered by
the Acquiror Parties at the Closing, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by the Acquiror Parties of this Agreement and each
instrument required hereby to be executed and delivered by the Acquiror Parties
at the Closing and the performance of their respective obligations hereunder and
thereunder have been duly and validly authorized all necessary corporate action
by the Company and Newco (no approval of the stockholders of Acquiror being
required by Law or the certificate of incorporation or bylaws of Acquiror).
Except for filing of the Certificate of Merger, no other corporate proceedings
on the part of Acquiror or Newco are necessary to authorize the consummation of
the transactions contemplated hereby. This Agreement has been duly executed
and delivered by each of the Acquiror Parties and, assuming due authorization,
execution and delivery hereof by the Company, constitutes a legal, valid and
binding obligation of each of the Acquiror Parties, enforceable against each of
the Acquiror Parties in accordance with its terms, except that the enforcement
thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium
or similar Laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity (regardless of whether
enforceability is considered in a proceeding in equity or at law).
Section 5.5 Approvals. Except for the applicable requirements, if
---------
any, of (a) the Securities Act, (b) the Exchange Act, (c) state securities or
blue sky Laws, (d) The NASDAQ National Market, and (e) the filing and
recordation of appropriate merger documents as required by the DGCL, no notices
to, consents or approvals of, or filings or registrations with any Court or
Governmental Authority is required under any Law, Regulation or Order applicable
to Acquiror or Newco to permit Acquiror or Newco to execute, deliver or perform
this Agreement or any instrument required hereby to be executed and delivered by
it at the Closing.
Section 5.6 No Violation. Assuming effectuation of all filings and
-------------
registrations with, termination or expiration of any applicable waiting periods
imposed by and receipt of all Permits or Orders of, Courts and/or Governmental
Authorities indicated as required in Section 5.5, the execution and delivery of
this Agreement or any instrument required to be executed and delivered by
Acquiror and Newco at Closing, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof, will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
a benefit under, or result in the creation of any Lien upon any of the
properties or assets of Acquiror or Newco under, (i) the certificate of
incorporation or by-laws of Acquiror Newco, (ii) any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument,
concession, franchise, license, Permit, Order, or similar authorization
applicable to Acquiror or Newco or any of their respective properties or assets
or (iii) assuming the effectuation of all filings and registrations with,
termination or expiration of any applicable waiting periods imposed by and
receipt of all Permits or Orders of, Courts and/or Governmental Authorities
indicated as required in Section 5.5, any judgment, Order, decree, statute, Law,
ordinance, rule or regulation applicable to Acquiror or Newco any of their
properties or assets, other than, in the case of clauses(ii) and (iii), any such
conflicts, violations, defaults, rights, losses or Liens that individually or in
the aggregate are not (x) reasonably likely to have a Material Adverse Effect on
Acquiror or Newco, (y) reasonably likely to impair the ability of Acquiror or
Newco to perform its obligations under this Agreement or (z) reasonably likely
to impair the ability of Acquiror or Newco to consummate the transactions
contemplated by this Agreement.
Section 5.7 Reports.
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(a) Acquiror has filed all reports required to be filed by it with
the SEC since January 1, 1998 pursuant to the Exchange Act which complied, at
the time of filing, in all material respects with applicable requirements of the
Exchange Act (collectively, the "Acquiror SEC Reports"). None of Acquiror SEC
--------------------
Reports, as of their respective dates, contained or, if filed after the date
hereof, will contain any untrue statement of a material fact or omitted or, if
filed after the date hereof, will omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, except to the
extent superseded by an Acquiror SEC Report filed subsequently and prior to the
date hereof.
(b) The consolidated statements of financial position and the
related consolidated statements of operations, stockholders' equity and cash
flows (including the related notes thereto) of Acquiror included in the Acquiror
SEC Reports complied in all material respects with applicable accounting
requirements and the published rules and Regulations of the SEC with respect
thereto, have been prepared in conformity with GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a basis
consistent with prior periods (except as otherwise noted therein), and present
fairly in all material respects the consolidated financial position of Acquiror
as at their respective dates, and the consolidated results of its operations and
its cash flows for the periods presented therein subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments that have
not been and are not expected to be material in amount.
Section 5.8 Absence of Certain Changes or Events. Since June 30,
---------------------------------------
1999, there has not been any material adverse change in the working capital,
financial condition, assets, liabilities (whether absolute, accrued, contingent
or otherwise), business or operations of Acquiror.
Section 5.9 Delivery of Documents. Concurrently herewith, Acquiror
----------------------
has executed and delivered to the Company and Sellers: (i) a registration rights
agreement substantially similar in form to the agreement attached hereto as
Annex A with the Company and Sellers; and (ii) an escrow agreement substantially
---
similar in form to the agreement attached hereto as Annex B with the Company and
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Sellers.
Section 5.10 Tax Considerations. As of the date hereof, to the Knowledge
------------------
of Acquiror, neither Acquiror nor any of its Affiliates has taken or agreed to
take any action or failed to take any action that would prevent the merger from
constituting a reorganization within the meaning of Section 368(a) of the Code.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 Tax Treatment.
--------------
Acquiror and the Company will each use reasonable efforts before and
after the Closing to cause the Merger to qualify as a reorganization within the
meaning of Section 368(a) of the Code, and will not take, and will use
reasonable efforts to prevent any Affiliate of such party from taking, any
actions which could prevent the Merger from qualifying as such a reorganization,
and will take such action as is available and may be reasonably required to
negate the impact of any past actions by such party or its respective Affiliates
which would reasonably be expected to adversely impact the qualification of the
Merger as a reorganization within the meaning of Section 368(a) of the Code.
Section 6.2 Conveyance Taxes. Acquiror and the Company shall
-----------------
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications, or other documents regarding (i) any real property
transfer gains, sales, use, transfer, value-added, stock transfer (subject to
Section 3.2(c)), and stamp Taxes (ii) any recording, registration and other
fees, and (iii) any similar Taxes or fees that become payable in connection with
the transactions contemplated hereby. The Taxes described in clause (i) above
shall be paid by the Company.
Section 6.3 Reasonable Efforts and Further Assurances. Subject to the
-----------------------------------------
terms and conditions hereof, each of the parties to this Agreement shall use
reasonable efforts to effectuate the transactions contemplated hereby. Subject
to the terms and conditions hereof, each party hereto, at the reasonable request
of another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
Section 6.4 Stock Options. Except as provided in this Agreement, the
Company will not exercise any right under the Company Stock Option Plan from the
date hereof to accelerate the vesting or exerciseability of or otherwise modify
the terms and conditions applicable to stock options outstanding under the
Company Stock Option Plan (the "Stock Options"). At the Effective Time, each of
the Company Stock Options which is outstanding and unexercised at the Effective
Time shall be converted automatically into an option to purchase shares of
Acquiror Common Stock in an amount and at an exercise price determined as
provided below (and otherwise subject to the terms of the Company Stock Option
Plan):
(i) The number of shares Acquiror Common Stock to be subject to such
Stock Option shall be equal to the product of the number of shares of Company
Common Stock subject to such Stock Option and the Exchange Ratio; and
(ii) The exercise price per share of Acquiror Common Stock under such
Stock Option shall be equal to the aggregate exercise price of the shares of
Company Common Stock issuable pursuant to such Stock Option divided by the total
number of full shares of Acquiror Common Stock subject to such Stock Option (as
determined under (1) immediately above), provided that such exercise price shall
be rounded up to the nearest cent.
Acquiror shall assume the obligations of the Company under the Company
Stock Option Plan in respect of each such Stock Option. The duration and other
terms of such Stock Option shall be the same as that of such Stock Option
immediately prior to the Effective Time, except that all references to the
Company shall be deemed to be references to Acquiror. Acquiror shall file with
the SEC a registration statement on Form S-8 (or other appropriate form) as
promptly as practicable after the Effective Time for purposes of registering all
shares of Acquiror Common Stock issuable after the Effective Time upon exercise
of such Stock Options, and shall have such registration statement or
post-effective amendment become effective as promptly as practicable.
Section 6.5 Employees. Each person who is an employee of the Company as of
---------
the date hereof and who becomes an employee of Acquiror at or shortly after the
Effective Time shall be entitled to such benefits as are generally provided to
similarly-situated employees of Acquiror, and for purposes of determining
seniority, such employees of the Company who become employees of Acquiror shall
be deemed to have been employed by Acquiror as of the date on which such
employees were first employed by the Company.
Section 6.6 Audited Financial Statements. Sellers severally and not
------------------------------
jointly agree to provide Acquiror with any and all materials in their respective
possession which Acquiror is required to provide to such independent accounting
firm as Acquiror may engage for the purpose of conducting a financial audit of
the Company after the date of this Agreement in connection with the preparation
of audited financial statements of the Company for each year in the two-year
period ending December 31, 1999. In addition, Sellers agree to provide
reasonable assistance and be reasonably accessible to Acquiror and such auditors
during the time the audit is being conducted.
Section 6.7 Expenses. All expenses incurred by the parties hereto in
--------
connection with the transactions contemplated hereby will be borne solely and
entirely by the party which has incurred such expenses.
Section 6.8 Indemnification. After the Effective Time, Acquiror will, and
---------------
will cause the Surviving Corporation to, indemnify and hold harmless the present
and former officers, directors and employees of the Company (collectively, the
"Section 6.8 Indemnified Parties") in respect of acts or omissions of such
Section 6.8 Indemnified Party in such person's capacity as an officer, director
and/or employee of the Company occurring on or prior to the Effective Time to
the maximum extent permitted by law and to the extent provided under the
Company's Certificate of Incorporation and Bylaws or any indemnification
agreement with the Company's officers and directors to which the Company is a
party, in each case in effect on the date hereof; provided that such
indemnification shall be subject to any limitation imposed from time to time
under applicable law. Without limitation of the foregoing, in the event any
such Section 6.8 Indemnified Party is or becomes involved in any capacity in any
action, proceeding or investigation, in such person's capacity as a former
director, officer or employee of the Company, in connection with any matter
relating to this Agreement or the transactions contemplated hereby occurring on
or prior to the Effective Time, Acquiror shall cause the Surviving Corporation
to pay as incurred such Section 6.8 Indemnified Party's reasonable legal and
other expenses (including the cost of any investigation and preparation)
incurred in connection therewith.
ARTICLE VII
INDEMNIFICATION
Section 7.1 Indemnification Obligations of Sellers. The Sellers will
severally but not jointly indemnify, defend and hold harmless Acquiror and its
Subsidiaries and Affiliates, each of their respective officers, directors,
employees, agents, shareholders, representatives and agents and each of the
successors and assigns of any of the foregoing (collectively, the "Acquiror
Indemnified Parties") from, against and in respect of any and all claims,
liabilities, obligations, losses, costs, expenses, penalties, fines and
judgments (at equity or at law) and damages whenever arising or incurred
(including amounts paid in settlement, costs of investigation and reasonable
attorneys' fees and expenses) arising out of or relating to:
(a) any breach or inaccuracy of any representation or warranty made by the
Company or Sellers in this Agreement; and
(b) any breach of any covenant, agreement or undertaking made by the
Company or Sellers in this Agreement.
The claims, liabilities, obligations, losses, costs, expenses, penalties,
fines and damages of the Acquiror Indemnified Parties described in this Section
7.1 as to which the Acquiror Indemnified Parties are entitled to indemnification
under this Section 7.1 are hereinafter collectively referred to as "Acquiror
Losses."
Section 7.2 Indemnification Obligations of Acquiror. Acquiror will
indemnify and hold harmless each Seller (collectively, the "Company Indemnified
Parties") from, against and in respect of any and all claims, liabilities,
obligations, losses, costs, expenses, penalties, fines and judgments (at equity
or at law) and damages whenever arising or incurred (including amounts paid in
settlement, costs of investigation and reasonable attorneys' fees and expenses)
arising out of or relating to:
(a) any breach or inaccuracy of any representation or warranty made by
Acquiror or Newco in this Agreement; and
(b) any breach of any covenant, agreement or undertaking made by Acquiror
or Newco in this Agreement.
The claims, liabilities, obligations, losses, costs, expenses, penalties,
fines and damages of the Company Indemnified Parties described in this Section
10.2 as to which the Company Indemnified Parties are entitled to indemnification
under this Section 10.2 are hereinafter collectively referred to as "Company
-------
Losses."
---
Section 7.3 Indemnification Procedure.
(a) Upon becoming aware of any action, claim or proceeding, or a
threatened action, claim or proceeding, by a third party (a "Third Party Claim")
with respect to which an Acquiror Indemnified Party or a Company Indemnified
Party (hereinafter collectively referred to as an "Indemnified Party") may be
entitled to make an indemnification claim pursuant to Section 7.1 or 7.2 against
the other Party for any Acquiror Losses or Company Losses (as the case may be),
such Indemnified Party must notify Acquiror or Sellers, whichever is the
appropriate indemnifying party hereunder (the "Indemnifying Party"), as promptly
as practicable, but in any event within 10 days of the Indemnified Party's
becoming aware of such Third Party Claim; provided, however, that the failure of
the Indemnified Party to so notify the Indemnifying Party will not relieve the
Indemnifying Party from liability for such Third Party Claim arising under
Section 7.1 or 7.2 unless the failure to so notify the Indemnifying Party
materially prejudices the ability of the Indemnifying Party to assert defenses
or counterclaims available to the Indemnifying Party with respect to such Third
Party Claim.
(b) The Indemnifying Party will have the right, upon written notice
delivered to the Indemnified Party within 20 days thereafter, to defend such
Third Party Claim by all appropriate proceedings at its sole cost and expense,
except as otherwise set forth in the Escrow Agreement. If, however, the
Indemnifying Party declines or fails to assume the defense of such Third Party
Claim within such 20 day period, then the Indemnified Party may defend the Third
Party Claim by all appropriate proceedings, at the cost and expense of the
Indemnifying Party (subject to the limits set forth in Section 7.5), and may
vigorously and diligently prosecute such Third Party Claim to a final
conclusion. The Party defending such Third Party Claim will have full control
of such defense, including the employment of counsel; provided, however, that if
requested by the Party defending such Third Party Claim, the other Party will
cooperate with the Party defending such Third Party Claim.
(c) In any Third Party Claim with respect to which indemnification is
sought under Section 7.1 or 7.2, the Party that is not defending such Third
Party Claim may participate in such Third Party Claim and retain its own counsel
at such Party's own expense. The Party defending the Third Party Claim will at
all times use reasonable efforts to keep the other Party reasonably apprised of
the status of the defense of such Third Party Claim and to cooperate in the
defense of such Third Party Claim.
(d) No Party may settle or compromise any Third Party Claim or consent to
the entry of any judgment with respect to such Third Party Claim for which
indemnification is being sought hereunder without the prior written consent of
the other Party, unless such settlement contains a complete release of such
other Party and imposes no financial or other obligation on such other Party.
(e) If an Indemnified Party claims a right to be indemnified
pursuant to this Agreement for Acquiror Losses or Company Losses that do not
arise from a Third Party Claim, then such Indemnified Party will promptly send
written notice of such claim to the Indemnifying Party. Such notice will
specify the basis for such claim in reasonable detail and be accompanied by such
other information as may be necessary for the Indemnifying Party to assess the
merits and amount of such claim. As promptly as possible after the Indemnified
Party has given such notice, the Indemnified Party and the Indemnifying Party
will establish the merits and amount of such claim (by mutual agreement,
litigation, arbitration or otherwise) and, within five (5) Business Days of the
final determination of the merits and amount of such claim, the Indemnifying
Party will pay to the Indemnified Party immediately available funds an amount
equal to such claim as determined hereunder.
Section 7.4 Claims Period. For purposes of this Agreement, a "Claims
Period" is the period after the Closing Date during which a claim for
indemnification may be asserted under this Agreement by an Indemnified Party.
The Claims Periods under this Agreement will terminate as to Acquiror Losses on
the expiration of the earlier of (x) one year after the Closing Date and (y) the
date on which Acquiror's independent accounting firm delivers its audit letter
with respect to the annual financial statements of Acquiror and its Subsidiaries
(including the Company) for the year ended June 30, 2000.
Section 7.5 Liability Limits. Notwithstanding anything to the contrary
set forth herein:
(a) The Acquiror Indemnified Parties will not make a claim against any
Seller for indemnification under Section 7.1 for Acquiror Losses unless and
until the aggregate amount of Acquiror Losses exceeds $250,000 (the "Threshold
Amount") and then the Sellers then shall be liable only for all Acquiror Losses
in excess of $100,000.
(b) No Seller shall be liable under this Article VII for any portion of
Acquiror Losses in excess of such Seller's proportionate share of the Merger
Consideration, which proportionate share, for purposes of this Section 7.5, is
set forth in Schedule 7.5(b) hereto. Except for Acquiror Losses resulting from a
breach of a representation, warranty, agreement or covenant contained in Section
4.23 of this Agreement by a particular Seller or the breach of a covenant,
agreement or undertaking by a particular Seller, all Acquiror Losses shall be
satisfied on a pro rata basis by the Sellers based on each Seller's
proportionate share of the Merger Consideration, which proportionate share, for
purposes of this Section 7.5 is set forth in Schedule 7.5(b) hereto.
(c) The total liability of each Seller under or in connection with this
Agreement including Article VII hereof, shall be limited to each such Seller's
respective interest in the "Escrow Shares" as such term is defined in the Escrow
Agreement
(d) No party shall be liable to any other party under this Article VII
for any consequential, incidental or indirect damages.
Section 7.6 Method of Calculating Losses. The amount of any
indemnification payable pursuant to this Article VII shall be (i) net of any
insurance proceeds received by the Indemnified Party in respect of the Acquiror
Losses or Company Losses, as the case may be, which gave rise to such
indemnification payment, (ii) net of any tax benefit realized or the
then-present value (based on a discount rate equal to the prime rate as
published in The Wall Street Journal from time to time) of such income tax
benefit reasonably expected to be realized by the Indemnified Party on a
consolidated basis by reason of the facts and circumstances giving rise to such
indemnification, and (iii) net of the amount of tax required to be paid by the
Indemnified Party on a consolidated basis as a result of the accrual or receipt
of the indemnification payment.
Section 7.7 Method of Settling Claims. If a claim for Acquiror Losses
pursuant to this Article VII is required to be paid by a Seller, the amount owed
by such Seller in respect of such Acquiror Losses shall be paid, by the release
of Escrow Shares held in the Escrow Account for such Seller. In the event that
Escrow Shares are released to Acquiror, such Acquiror Common Stock shall be
deemed to have a value of $7.50 per share. Recourse against the Escrow Shares
pursuant to the Escrow Agreement shall be the sole and exclusive remedy for any
amount owed under or in connection with this Agreement by any Seller to any
Acquiror Indemnified Party.
Section 7.8 Escrow Shares. The Escrow Shares held in the Escrow Account
--------------
shall be held as security for the obligations of the Sellers to indemnify
Acquiror Parties for any Acquiror Losses pursuant to this Article VII. The
Escrow Shares shall be held in the Escrow Account and released to Sellers or
Acquiror in accordance with the Escrow Agreement.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Interpretation.
--------------
(a) When a reference is made in this Agreement to a section or
article, such reference shall be to a section or article of this Agreement
unless otherwise clearly indicated to the contrary.
(b) Whenever the words "include", "includes" or "including" are
used in this Agreement they shall be deemed to be followed by the words "without
limitation."
(c) The words "hereof", "hereby", "herein" and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement,
and article, section, paragraph, exhibit and schedule references are to the
articles, sections, paragraphs, exhibits and schedules of this Agreement unless
otherwise specified.
(d) The plural of any defined term shall have a meaning
correlative to such defined term, and words denoting any gender shall include
all genders. Where a word or phrase is defined herein, each of its other
grammatical forms shall have a corresponding meaning.
(e) A reference to any legislation or to any provision of any
legislation shall include any modification or re-enactment thereof, any
legislative provision substituted therefor and all Regulations and statutory
instruments issued thereunder or pursuant thereto.
(f) The parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any provisions of this
Agreement.
Section 8.2 Effectiveness of Representations, Warranties and
----------------------------------------------------
Agreements.
-
(a) Except as set forth in Section 8.2(b) of this Agreement, the
representations, warranties and agreements of each party hereto will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of their officers, directors, representatives or agents whether prior to or
after the execution of this Agreement.
(b) The representations and warranties in this Agreement will
terminate as of the Closing Date; provided, however, this Section 8.2 (b) shall
in no way limit any covenant or agreement of the parties which by its terms
contemplates performance after the Closing Date.
Section 8.3 Notices. Any notice, request, instruction or other
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document to be given hereunder by any party to another party shall be in writing
and shall be deemed given when delivered personally, upon receipt of a
transmission confirmation (with a confirming copy sent by overnight courier) if
sent by facsimile or like transmission, and on the next Business Day when sent
by Federal Express, United Parcel Service, Express Mail or other reputable
overnight courier, as follows:
(a) If to either of the Acquiror Parties, to:
Concurrent Computer Corporation
4375 River Green Parkway
Duluth, Georgia 30096
Attn: E. Courtney Siegel
with a copy to:
King & Spalding
191 Peachtree Street
Suite 4900
Atlanta, Georgia 30303
Attn: John D. Capers, Jr., Esq.
(b) If to the Company, to:
Vivid Technology, Inc.
100 High Point Drive
Chalfont, Pennsylvania 18914
Attn: Fred Allegrezza
with a copy to:
Morgan Lewis & Bockius
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attn: Stephen M. Goodman, Esq.
(c) If to the Sellers, to:
Fred Allegrezza
c/o Concurrent Computer Corporation
100 High Point Drive
Chalfont, Pennsylvania 18914
and to:
Gary Lauder
88 Mercedes Lane
Atherton, California 94027
with a copy to:
Morgan Lewis & Bockius
1701 Market Street
Philadelphia, Pennsylvania 19103-2921
Attn: Stephen M. Goodman, Esq.
and to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
Attn: Daniel E. O'Connor, Esq. / David T. Young, Esq.
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. Nothing in this section shall be deemed to
constitute consent to the manner and address for service of process in
connection with any legal proceeding (including Litigation arising out of or in
connection with this Agreement), which service shall be effected as required by
applicable Law.
Section 8.4 Headings. The headings contained in this Agreement are
--------
for reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
Section 8.5 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement will
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
will negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
Section 8.6 Entire Agreement. This Agreement (not including the
-----------------
Annexes hereto, but including the Company's Disclosure Schedule and Acquiror's
Disclosure Schedule) constitute the entire agreement of the parties, and
supersede all prior agreements and undertakings, both written and oral, among
the parties, with respect to the subject matter hereof and thereof.
Section 8.7 Assignment. This Agreement may not be assigned by
----------
operation of Law or otherwise.
Section 8.8 Parties in Interest. This Agreement will be binding upon
-------------------
and inure solely to the benefit of each party hereto, and, nothing in this
Agreement, express or implied, is intended to or will confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
Section 8.9 Failure or Indulgence Not Waiver; Remedies Cumulative. No
--------------------------------------------------------
failure or delay on the part of any party hereto in the exercise of any right
hereunder will impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty, agreement or
covenant herein, nor will any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights
and remedies existing under this Agreement are cumulative to, and not exclusive
to, and not exclusive of, any rights or remedies otherwise available.
Section 8.10 Governing Law. This Agreement and the agreements,
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instruments and documents contemplated hereby will be governed by and construed
in accordance with the Laws of the state of Delaware (exclusive of conflicts of
law principles). Courts within the state of Delaware will have jurisdiction
over any and all disputes between the parties hereto, whether in law or equity,
arising out of or relating to this agreement and the agreements, instruments and
documents contemplated hereby. The parties consent to and agree to submit to
the jurisdiction of such Courts. Each of the parties hereby waives, and agrees
not to assert in any such dispute, to the fullest extent permitted by applicable
Law, any claim that (i) such party is not personally subject to the jurisdiction
of such Courts, (ii) such party and such party's property is immune from any
legal process issued by such Courts or (iii) any Litigation commenced in such
Courts is brought in an inconvenient forum.
Section 8.11 Counterparts. This Agreement may be executed in multiple
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counterparts, and by the different parties hereto in separate counterparts, each
of which when executed will be deemed to be an original but all of which taken
together will constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
CONCURRENT COMPUTER CORPORATION
By:_/s/ E. Courtney Siegel
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Name:
Title:
VIVID TECHNOLOGY, INC.
By:_/s/ Fred Allegrezza
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Name:
Title:
CONCURRENT ACQUISITION CORPORATION
By:_/s/ E. Courtney Siegel
--------------------------------------
Name:
Title:
/s/ Fred Allegrezza
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Fred Allegrezza
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Gary Lauder
Signature Page to Agreement and Plan of Merger