Exhibit 2.1
Execution Version
AGREEMENT AND PLAN OF MERGER
among
CIRRUS LOGIC, INC.,
as Buyer,
APEX ACQUISITION COMPANY,
as Merger Sub,
APEX MICROTECHNOLOGY CORPORATION,
as the Company,
AMI GROUP, LLC,
MIDWEST-APEX, LLC,
DEBBIE DRYSDALE,
GREGORY L. BRENNAN,
DAVID COX,
DANIEL REID,
and
JAMES THOMPSON,
as Sellers,
and
JAMES A. UNRUH,
as Representative
dated
July 11, 2007
TABLE OF CONTENTS
Page No.
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ARTICLE ONE
THE MERGER
Section 1.01 The Merger..........................................................................................1
Section 1.02 Effective Time......................................................................................1
Section 1.03 Effect of Merger....................................................................................2
Section 1.04 Articles of Incorporation; Bylaws...................................................................2
Section 1.05 Directors and Officers..............................................................................2
Section 1.06 Conversion of Outstanding Shares....................................................................2
Section 1.07 Treatment of Options and Restricted Stock Units.....................................................3
Section 1.08 Dissenters' Rights..................................................................................3
Section 1.09 Closing of Transfer Books...........................................................................4
Section 1.10 Payments............................................................................................4
Section 1.11 Closing Adjustment Amount...........................................................................6
Section 1.12 Final Adjustment Amount.............................................................................6
Section 1.13 Escrow..............................................................................................7
Section 1.14 Resignations........................................................................................8
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties of the Company.......................................................8
Section 2.02 Representations and Warranties of the Sellers......................................................29
Section 2.03 Representations and Warranties of Buyer and Merger Sub.............................................30
ARTICLE THREE
COVENANTS
Section 3.01 Additional Agreements..............................................................................32
Section 3.02 Non-Solicitation and Non-Competition...............................................................32
Section 3.03 Conduct of Business................................................................................34
Section 3.04 Third Party Consents...............................................................................35
Section 3.05 Notification of Certain Matters....................................................................35
Section 3.06 Company Transaction Costs..........................................................................36
Section 3.07 Pay-Off Letters....................................................................................36
Section 3.08 Access and Information.............................................................................36
Section 3.09 Bank Accounts......................................................................................36
Section 3.10 Required Stockholder Approval......................................................................36
Section 3.11 No Negotiation.....................................................................................37
Section 3.12 Termination of Agreements..........................................................................38
Section 3.13 Tax Matters........................................................................................38
Section 3.14 Drysdale Severance Obligations.....................................................................40
Section 3.15 Director and Officer Indemnification...............................................................41
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ARTICLE FOUR
CONDITIONS PRECEDENT
Section 4.01 Conditions to Each Party's Obligation..............................................................41
Section 4.02 Conditions to Obligation of Buyer..................................................................42
Section 4.03 Conditions to Obligations of the Company...........................................................43
ARTICLE FIVE
CLOSING
Section 5.01 Closing............................................................................................44
Section 5.02 Actions to Occur at Closing........................................................................44
ARTICLE SIX
TERMINATION, AMENDMENT AND WAIVER
Section 6.01 Termination........................................................................................45
Section 6.02 Effect of Termination..............................................................................46
Section 6.03 Return of Information..............................................................................46
ARTICLE SEVEN
INDEMNIFICATION
Section 7.01 Indemnification of the Buyer Indemnified Parties...................................................47
Section 7.02 Indemnification of Seller Indemnified Parties......................................................47
Section 7.03 Defense of Third Party Claims......................................................................47
Section 7.04 Direct Claims......................................................................................48
Section 7.05 No Contribution....................................................................................48
Section 7.06 Procedures for Claims Against,
and Distributions of, Funds Deposited With Escrow Agent..........................................49
Section 7.07 Minimum Loss Requirement...........................................................................50
Section 7.08 Indemnification Limits.............................................................................50
Section 7.09 Recourse Under Escrow Agreement....................................................................51
Section 7.10 Characterization of Payments.......................................................................51
ARTICLE EIGHT
GENERAL PROVISIONS
Section 8.01 Survival of Representations, Warranties, and Covenants.............................................51
Section 8.02 Further Actions....................................................................................52
Section 8.03 No Waiver Relating to Claims for Fraud.............................................................52
Section 8.04 Amendment and Modification.........................................................................52
Section 8.05 Waiver of Compliance...............................................................................52
Section 8.06 Specific Performance...............................................................................52
Section 8.07 Severability.......................................................................................53
Section 8.08 Expenses and Obligations...........................................................................53
Section 8.09 Parties in Interest................................................................................53
Section 8.10 Notices............................................................................................53
Section 8.11 Counterparts.......................................................................................55
Section 8.12 Entire Agreement...................................................................................55
Section 8.13 Public Announcements...............................................................................55
Section 8.14 Governing Law......................................................................................55
Section 8.15 Arbitration........................................................................................56
Section 8.16 Jurisdiction; Venue................................................................................56
Section 8.17 Assignment.........................................................................................56
Section 8.18 Headings...........................................................................................57
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ARTICLE NINE
THE REPRESENTATIVE
Section 9.01 Authorization of the Representative................................................................57
Section 9.02 Compensation; Exculpation; Indemnity...............................................................60
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EXHIBITS:
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Exhibit A -- Definitions
Exhibit B -- Seller Company Stock, Options and Restricted Stock Units
Exhibit C-1 -- Form of Letter of Transmittal
Exhibit C-2 -- Form of Option Surrender Agreement
Exhibit C-3 -- Form of Restricted Stock Unit Surrender Agreement
Exhibit D -- Escrow Agreement
Exhibit E -- Sellers and Other Current Director/Officer Resignations
Exhibit F -- Legal Opinion
Exhibit G -- Form of Key Employee Offer Letter and Employment Agreement
SCHEDULES:
- ----------
Company Disclosure Schedule
Schedule I -- Merger Consideration
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger ("Agreement") is entered into as of July
11, 2007 among (a) Cirrus Logic, Inc., a Delaware corporation ("Buyer"), (b)
Apex Acquisition Company, an Arizona corporation and wholly owned subsidiary of
Buyer (the "Merger Sub"), (c) AMI Group, LLC, an Arizona limited liability
company, Midwest-Apex, LLC, a Delaware limited liability company ("Midwest"),
Gregory L. Brennan, David Cox, Debbie Drysdale, Daniel Reid and James Thompson
(each a "Seller" and collectively the "Sellers"), (d) Apex Microtechnology
Corporation, an Arizona corporation (the "Company") and (e) James A. Unruh, in
his capacity as the Representative. Unless otherwise specified, all capitalized
terms used in this Agreement will have the meanings set forth in Exhibit A.
BACKGROUND
----------
The Sellers and the respective Boards of Directors of the Company, Buyer
and the Merger Sub deem it advisable that the Merger Sub merge with and into the
Company and, accordingly, have each approved this Agreement and the transactions
contemplated hereby, upon the terms and subject to the conditions set forth
herein. In connection with the Merger, the Sellers, the Company and Buyer desire
to consummate a series of transactions in which (a) the Sellers will agree not
to compete, subject to the terms and conditions set forth in this Agreement,
with the Business of the Surviving Company, and (b) the Sellers, the Company and
Buyer will take certain other actions ancillary to the transactions described
above. In order to provide for the consummation of the Merger and the
transactions contemplated above, the Sellers, the Company, the Merger Sub, Buyer
and the Representative are entering into this Agreement.
AGREEMENT
---------
ARTICLE ONE
THE MERGER
Section 1.01 The Merger. Upon the terms and subject to the conditions set
forth in this Agreement, at the Effective Time, the Merger Sub shall be merged
with and into the Company (the "Merger") in accordance with the terms of, and
subject to the conditions set forth in, this Agreement and the Arizona Business
Corporation Act (the "ABCA"). Following the Merger, the Company shall continue
as the Surviving Company in the Merger (sometimes hereinafter referred to as the
"Surviving Company") and shall be a wholly owned subsidiary of Buyer. The
corporate existence of the Merger Sub shall cease and the corporate existence of
the Company, with all its purposes, rights, privileges, franchises powers and
objects shall continue unaffected and unimpaired by the Merger (except as set
forth specifically in this Agreement) and, as the Surviving Company, the
Surviving Company shall continue to be governed by the laws of the State of
Arizona.
Section 1.02 Effective Time. As part of the Closing, the parties hereto
shall cause the Merger to be consummated by filing Articles of Merger meeting
the requirements of Section 10-1105 of the ABCA (the "Articles of Merger") with
the Arizona Corporation Commission, and by making all other filings or
publications required under the ABCA in connection with the Merger, in such form
as is required by, and executed in accordance with the relevant provisions of,
the ABCA. The Merger shall become effective at such time as the Articles of
Merger are duly filed with the Arizona Corporation Commission (the date and time
the Merger becomes effective, the "Effective Time").
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Section 1.03 Effect of Merger. The Merger shall have the effects set forth
in this Agreement, the Articles of Merger and the applicable provisions of the
ABCA. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of the Company and the Merger Sub shall vest in the Surviving Company, and all
debts, liabilities and duties of the Company and the Merger Sub shall become the
debts, liabilities and duties of the Surviving Company.
Section 1.04 Articles of Incorporation; Bylaws. At the Effective Time, the
articles of incorporation of the Company shall be amended to read as the
Articles of Incorporation of the Merger Sub immediately prior to the Effective
Time, and shall thereafter (as so amended) be the articles of incorporation of
the Surviving Corporation, until duly amended in accordance with the ABCA. The
bylaws of the Company shall be the bylaws of the Surviving Company as of the
Effective Time, until duly amended in accordance with the ABCA.
Section 1.05 Directors and Officers. The directors of the Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Company as of the Effective Time until they resign or are replaced as provided
in the bylaws or pursuant to applicable law. Except as otherwise provided
herein, the officers of the Merger Sub immediately prior to the Effective Time
shall be the officers of the Surviving Company as of the Effective Time until
they resign or are replaced as provided in the bylaws or pursuant to applicable
law.
Section 1.06 Conversion of Outstanding Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of any party:
(a) Each share of common stock, par value $0.001 per share, of the
Merger Sub issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall represent one share of common stock, par value
$0.001 per share, of the Surviving Company, so that, after the Effective Time,
Buyer shall be the holder of all of the issued and outstanding shares of the
Surviving Company's capital stock;
(b) Each share of Common Stock and each share of Class B Preferred
Stock outstanding immediately prior to the Effective Time (each, an "Outstanding
Share" and collectively, the "Outstanding Shares") (i) shall be converted into
the right to receive the Per Share Merger Consideration and (ii) shall otherwise
cease to be outstanding, shall be canceled and retired and cease to exist;
provided, that Dissenting Shares shall not be so converted or represent the
right to receive the foregoing consideration, but the holders of such Dissenting
Shares shall only be entitled to such rights as are set forth in Section 1.08;
and
(c) Each Outstanding Share held in the treasury of the Company
immediately prior to the Effective Time shall be canceled and retired without
any conversion thereof, and no payment or distribution shall be made with
respect thereto.
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Section 1.07 Treatment of Options and Restricted Stock Units.
(a) Prior to the Closing, the Company shall give notice in writing to
each holder of an Option (each an "Optionholder" and collectively, the
"Optionholders") outstanding immediately prior to the Effective Time (each an
"Outstanding Option" and collectively, the "Outstanding Options") that
notwithstanding anything to the contrary in the Option Plan or in any stock
option agreement, each Outstanding Option shall, by virtue of the Merger, be
converted into the right to receive the Per Option Merger Consideration. The
Company shall take such actions prior to the Closing, including amending the
Option Plan and stock option agreements, as may be required to facilitate the
foregoing.
(b) Prior to the Closing, the Company shall give notice in writing to
each holder of a Restricted Stock Unit outstanding immediately prior to the
Effective Time that notwithstanding anything to the contrary in the Company's
2004 Restricted Stock Unit Plan or in any agreement between the Company and the
holder of such Restricted Stock Unit, each Restricted Stock Unit shall, by
virtue of the Merger, be converted into the right to receive the Per Share
Merger Consideration (as if the holder of such Restricted Stock Unit instead
held a share of Common Stock). The Company shall take such actions prior to the
Closing, including amending the 2004 Restricted Stock Unit Plan and Restricted
Stock Unit agreements, as may be required to facilitate the foregoing.
Section 1.08 Dissenters' Rights.
(a) Promptly following the execution of this Agreement, the Company
shall provide each record holder of Outstanding Shares who shall not have voted
in favor of the Merger or consented thereto in writing, with notice of such
holder's appraisal rights pursuant to, and in accordance with, Section 10-1322
of the ABCA. The Company shall give Buyer prompt notice of any demands for
appraisal pursuant to Section 10-1328 of the ABCA received by the Company from
any Stockholders, withdrawals of such demands and any other instruments served
and received by the Company in connection therewith. No later than ten (10) days
following the date on which the Effective Time occurs, Buyer and the Surviving
Company shall provide notice of the Effective Time to each Stockholder who has
neither voted in favor of the Merger nor consented thereto in writing and has
not withdrawn or lost the right to the appraisal pursuant to Section 10-1323 of
the ABCA.
(b) Notwithstanding any provision of this Agreement to the contrary, no
Outstanding Shares that are held immediately prior to the Effective Time by
holders who have neither voted in favor of the Merger nor consented thereto in
writing and who have demanded and perfected the right, if any, for appraisal of
such Outstanding Shares in accordance with the provisions of Section 10-1323 of
the ABCA and have not withdrawn or lost such right to appraisal (collectively,
the "Dissenting Shares") shall be converted into or represent a right to receive
the Per Share Merger Consideration, but the holder of such Dissenting Shares
shall only be entitled to such appraisal rights as are granted by Section
10-1328 of the ABCA. If a holder of Outstanding Shares who demands appraisal of
such Outstanding Shares under the ABCA shall thereafter effectively withdraw or
lose (through failure to perfect or otherwise) the right to appraisal with
respect to such Outstanding Shares, then, as of the occurrence of such
withdrawal or loss, each such Outstanding Share shall be deemed to have been
converted into and represent only the right to receive, in accordance with
Section 1.06 and Section 1.10, the Per Share Merger Consideration.
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Section 1.09 Closing of Transfer Books. From and after the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of any
capital stock of the Company shall thereafter be made. From and after the
Effective Time, the holders of Certificates evidencing ownership of Outstanding
Shares immediately prior to the Effective Time shall cease to have any rights
with respect to such Outstanding Shares, except as otherwise provided for in
this Agreement or by Applicable Law.
Section 1.10 Payments.
(a) At the Closing, Buyer shall pay or cause to be paid the following
amounts by wire transfers of immediately available funds:
(i) Buyer shall pay or cause to be paid to each creditor of the
Company under the Indebtedness Agreements, to an account designated by such
creditor in writing, the amount of Indebtedness specified in such creditor's Pay
Off Letter (collectively, the sum of such Indebtedness amounts for all such
creditors being hereinafter referred to as the "Indebtedness Pay Off Amount");
(ii) Buyer shall deposit or cause to be deposited the Escrow Amount
with the Escrow Agent;
(iii) Buyer shall pay or cause to be paid all Company Transaction
Costs that remain outstanding as of the Closing Date to such account or accounts
as are designated by the Company at least two (2) Business Days prior to the
Closing Date (collectively, the sum of such payments for all payees of Company
Transaction Costs being hereinafter referred to as the "Paid Company Transaction
Costs");
(iv) Buyer shall pay or cause to be paid to accounts designated by
the Representative (with respect to Securityholders who are not employees) and
by the Company (with respect to Securityholders who are employees) at least two
(2) Business Days prior to the Closing Date, for distribution by the
Representative or the Surviving Company to such Securityholders in accordance
with Schedule I (and, in the case of payments to be distributed by the Surviving
Company, in accordance with Section 1.10(c)), the portion of the Closing Merger
Consideration attributable to those Securityholders that have delivered to Buyer
a Letter of Transmittal and stock certificate for cancellation (or an affidavit
of lost certificate as contemplated by the Letter of Transmittal), Option
Surrender Agreement and/or Restricted Stock Unit Surrender Agreement (as
applicable) prior to the Closing Date; and
(v) Buyer shall pay or cause to be paid to Drysdale the payments
described in Section 3.14(a) pursuant to the Drysdale Agreement.
(b) Following the Closing, Buyer shall promptly pay or cause to be paid
to accounts designated by the Representative (with respect to Securityholders
who are not employees) and by the Surviving Company (with respect to
Securityholders who are employees) for distribution by the Representative or the
Surviving Company to each Securityholder that delivers to Buyer a Letter of
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Transmittal and stock certificate for cancellation (or an affidavit of lost
certificate as contemplated by the Letter of Transmittal), Option Surrender
Agreement and/or Restricted Stock Unit Surrender Agreement (as applicable), the
amount (without interest) that would have been payable to such Securityholder
pursuant to Section 1.10(a)(iv) if such Securityholder had delivered such
documents on or prior to the Closing Date. Any other payments (including Escrow
Distributions and payments of any Final Adjustment Surplus) to be made to the
Securityholders shall be made to the account designated by the Representative
for the benefit of such Securityholders in accordance with Schedule I.
(c) Each of the Surviving Company and Buyer shall be entitled to deduct
and withhold from the consideration otherwise payable to any Securityholder
pursuant to this Agreement any amounts as the Surviving Company or Buyer, as the
case may be, is required to deduct and withhold with respect to payment under
any provision of federal, state or local Tax law. If the Surviving Company or
Buyer, as the case may be, so withholds amounts, such amounts shall be promptly
remitted to the appropriate taxing authority as required by Applicable Laws, and
shall be treated for all purposes of this Agreement as having been paid to the
Securityholders in respect of which the Surviving Company or Buyer, as the case
may be, made such deduction or withholding. Without limiting the generality of
the foregoing, the Surviving Company shall deduct, withhold and appropriately
remit from the payments made by it pursuant to Section 1.10(a)(iv) all amounts
for social security, Medicare, unemployment or other employment Taxes required
with respect to Securityholders who are employees of the Company, and shall
provide the Representative with an itemized summary by Securityholder of the
amounts so withheld and remitted. Except as provided in Section 1.13 with
respect to the Escrow Agreement, no interest shall accrue or be paid on the cash
payable to any Securityholder pursuant to this Agreement.
(d) If any portion of the consideration pursuant to this Agreement is
to be paid to a Person other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition to such payment that (i)
either such Certificate shall be properly endorsed or shall otherwise be in
proper form for transfer and (ii) the Person requesting such payment shall pay
to the Representative any transfer or other Taxes required as a result of such
payment to a Person other than the registered holder of such Certificate or
establish to the reasonable satisfaction of the Representative that such Tax has
been paid or is not payable.
(e) If any Certificate 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 agreeing to indemnify Buyer against any
claim that may be made against it with respect to such Certificate, Buyer will
issue in exchange for such lost, stolen or destroyed Certificate the
consideration otherwise payable pursuant to this Agreement.
(f) Any amounts paid to the Representative for the benefit of a
Securityholder that is attributable to a Dissenting Share shall be available to
pay the fair value of such Dissenting Share for which appraisal rights are
perfected pursuant to Section 10-1328 of the ABCA. With respect to any amounts
received by the Representative for the benefit of a Securityholder pursuant to
this Agreement that are attributable to a Dissenting Share, such amounts shall
be paid by the Representative to the Securityholder (or, after the 270th day
following the Closing Date, to the Surviving Company) for distribution to the
holder thereof in accordance with this Agreement following the first to occur,
with respect to such Dissenting Share, of either (i) the withdrawal of or loss
of the right to appraisal pursuant to Section 10-1328 of the ABCA or (ii) the
perfection of appraisal rights pursuant to Section 10-1328 of the ABCA.
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Section 1.11 Closing Adjustment Amount. No later than three (3) Business
Days before the Closing Date, the Company shall deliver to Buyer and the
Representative an estimated balance sheet of the Company prepared as of 11:59
p.m. on the date immediately prior to the Closing Date (the "Closing Balance
Sheet"), which sets forth a good faith estimate of the components of the Working
Capital Amount to enable Buyer to calculate the Working Capital Surplus or
Working Capital Deficiency. The Closing Balance Sheet shall be prepared by the
Company in accordance with this Agreement and Company Accounting Procedures
applied in a manner consistent with the preparation of the Financial Statements.
If a Working Capital Surplus exists, then the Closing Merger Consideration will
be increased by the amount of such excess, provided that such amount (the
"Holdback Amount") shall be held back by Buyer until such time as the Working
Capital Amount is finally determined pursuant to Section 1.12.
Section 1.12 Final Adjustment Amount.
(a) As promptly as practicable after the Closing Date (but in no event
later than thirty (30) days after the Closing Date), Buyer shall cause the
Company to prepare and deliver to the Representative a balance sheet of the
Company as of 11:59 p.m. on the date immediately prior to the Closing Date (the
"Final Balance Sheet"), which shall set forth the components of the Working
Capital Amount ("Closing Working Capital"). The Final Balance Sheet shall be
prepared in accordance with this Agreement and Company Accounting Procedures.
Following the delivery of the Final Balance Sheet to the Representative, Buyer
and the Surviving Company shall afford the Representative and its
representatives the opportunity to examine the Final Balance Sheet, and such
supporting schedules, analyses, workpapers, and other underlying records or
documentation as are reasonably necessary and appropriate. Buyer and the
Surviving Company shall cooperate fully and promptly with the Representative and
its representatives in such examination, including providing answers to
questions asked by the Representative and its representatives, and Buyer and the
Surviving Company shall promptly make available to the Representative and its
representatives any records under their reasonable control that are requested by
the Representative and its representatives.
(b) If within ten (10) days following delivery of the Final Balance
Sheet to the Representative, the Representative has not delivered to Buyer
written notice (the "Objection Notice") of its objections to the Final Balance
Sheet (such Objection Notice must contain a statement describing the basis of
such objections), then Closing Working Capital as set forth in or derived from
such Final Balance Sheet shall be deemed final and conclusive and shall be
"Final Working Capital". If the Representative delivers the Objection Notice
within such ten (10)-day period, then Buyer and the Representative shall
endeavor in good faith to resolve the objections, for a period not to exceed
fifteen (15) days from the date of delivery of the Objection Notice. If at the
end of the fifteen (15) day period there are any objections that remain in
dispute, then the remaining objections in dispute shall be submitted for
resolution to a "big four" accounting firm to be selected jointly by the
Representative and Buyer within the following five (5) days or, if the
Representative and Buyer are unable to mutually agree within such five (5)-day
period, such accounting firm shall be a mutually agreed upon reputable
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accounting firm that has not been hired by either the Company or Buyer within
the last five years (such jointly selected accounting firm, the "Referee"). The
Referee shall determine any unresolved items of Final Working Capital within
thirty (30) days after the objections that remain in dispute are submitted to
it. If any remaining objections are submitted to the Referee for resolution, (i)
each party shall furnish to the Referee such workpapers and other documents and
information relating to such objections as the Referee may request and are
available to that party or its subsidiaries (or its independent public
accountants) and will be afforded the opportunity to present to the Referee any
material relating to the determination of the matters in dispute and to discuss
such determination with the Referee; (ii) to the extent that a value has been
assigned to any objection that remains in dispute, the Referee shall not assign
a value to such objection that is greater than the greatest value for such
objection claimed by either party or less than the smallest value for such
objection claimed by either party; (iii) the determination by the Referee of
Final Working Capital, as set forth in a written notice delivered to both
parties and the Escrow Agent by the Referee, shall be made in accordance with
this Agreement and shall be binding and conclusive on the parties and shall
constitute an arbitral award that is final, binding and unappealable and upon
which a judgment may be entered by a court having jurisdiction thereof; and (iv)
fifty percent (50%) of the fees and expenses of the Referee shall be paid by
Buyer and the remaining fifty percent (50%) of the fees and expenses of the
Referee shall be paid by the Securityholders.
(c) To the extent that Final Working Capital exceeds Closing Working
Capital by an amount greater than the Holdback Amount, then Buyer shall release
the Holdback Amount (if any), and the Closing Merger Consideration shall be
further increased by the amount of such excess, which amount shall be paid by
Buyer to the Representative, on behalf of the Securityholders, within five (5)
days of the determination of Final Working Capital. To the extent that Final
Working Capital is less than Closing Working Capital (the "Final Adjustment
Deficiency"), (A) if the Final Adjustment Deficiency is less than the Holdback
Amount, then Buyer may retain the portion of the Holdback Amount equal to the
Final Adjustment Deficiency, and the remainder of the Holdback Amount shall be
paid to the Representative, on behalf of the Securityholders, by Buyer within
five (5) days of the determination of Final Working Capital, and (B) if the
Final Adjustment Deficiency is greater than the Holdback Amount, then Buyer may
retain the Holdback Amount, and the amount by which Final Adjustment Deficiency
exceeds the Holdback Amount shall be paid to Buyer by the Securityholders from
the Escrow Account within five (5) days of the determination of Final Working
Capital. For all Tax purposes, any payment under this Section 1.12 shall be
treated by Buyer, the Surviving Company, the Securityholders and their
respective Affiliates as an adjustment to the Closing Merger Consideration.
Section 1.13 Escrow.
(a) Escrow Amount. On or prior to the Closing, the Representative,
Buyer and the Escrow Agent shall enter into the Escrow Agreement, subject only
to the comments, if any, of the Escrow Agent as to its rights and obligations
thereunder. $6,300,000 of the Merger Consideration (together with all interest,
dividends and other income earned thereon (the "Escrow Amount")) shall be
deposited in escrow at Closing pursuant to Section 1.10(a)(ii) and shall be held
in escrow pursuant to the terms of this Agreement and the Escrow Agreement.
(b) Instructions to Escrow Agent.
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(i) The Representative covenants and agrees that at any time the
Securityholders are obligated to indemnify Buyer Indemnified Parties under
Article Seven, if requested by Buyer, the Representative shall execute and
deliver to the Escrow Agent joint written instructions with Buyer to release to
the Buyer Indemnified Parties such portion of the Escrow Amount as is necessary
to satisfy the Securityholders' indemnification obligations for Buyer
Indemnified Costs under Article Seven.
(ii) The Representative shall pay any amounts received by it out of
the Escrow Amount to the Securityholders in accordance with Schedule I;
provided, however, that, in lieu thereof and in satisfaction of the
Representative's obligations to the Securityholders in respect of any amounts to
be distributed from the Escrow Amount, the Representative may either remit such
amount to, or direct the Escrow Agent to remit such amounts otherwise
distributable to the Representative to, the Securityholders in accordance with
Schedule I.
Section 1.14 Resignations. At the Closing, (a) the Sellers, to the extent
applicable, will resign from their positions as officers and directors of the
Company by executing and delivering to the Company and Buyer their resignations
in the form of Exhibit E; provided, that each such Seller will remain an
employee of the Company, and (b) the Company will cause all other persons who
are officers and directors of the Company to resign from such positions by
executing and delivering to the Company and Buyer their resignations in the form
of Exhibit E.
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES
Section 2.01 Representations and Warranties of the Company. Except as set
forth in the Company Disclosure Schedule, as of the date of this Agreement and
as of the Effective Time (except to the extent that such representations and
warranties speak expressly to an earlier date), the Company represents and
warrants to Buyer and the Merger Sub (with the understanding that Buyer and the
Merger Sub are relying on such representations and warranties in entering into
and performing this Agreement) that:
(a) Organizational Matters.
(i) Organization, Standing and Power to Conduct Business. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Arizona; has the requisite power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted; and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification necessary, except where the failure to
be so qualified and in good standing in such jurisdiction would not have a
Material Adverse Effect.
(ii) Charter Documents. The Company has delivered to Buyer true and
complete copies of the articles of incorporation and bylaws of the Company, in
each case as amended to date and currently in effect (such instruments and
documents, the "Charter Documents"). The Company is not in violation of any of
the provisions of its Charter Documents.
8
(iii) No Subsidiaries. The Company does not own, hold or have any
interest in any capital stock of or other equity interests in, or rights or
obligations to acquire capital stock of or other equity interests in, any
Person, nor is the Company a general partner of any partnership, a member or
manager of any limited liability company or in any similar function with respect
to any Person.
(iv) Powers of Attorney. There are no outstanding powers of
attorney executed by or on behalf of the Company.
(b) Capital Structure.
(i) Capital Stock.
(A) The authorized capital stock of the Company consists of
10,000,000 shares of Common Stock and 250,000 shares of preferred stock. The
authorized preferred stock consists of 20,000 shares of Class A Redeemable
Preferred Stock and 230,000 shares of Class B Preferred Stock.
(B) At the date hereof, (1) there are 639,057 shares of Common
Stock issued and outstanding, (2) there are no shares of Class A Redeemable
Preferred Stock issued and outstanding, (3) there are 174,656 shares of Class B
Preferred Stock issued and outstanding and (4) except as set forth (1), (2) and
(3) above, the Company has no other Outstanding Shares or issued or outstanding
shares of capital stock. All of such Outstanding Shares have been duly
authorized and validly issued and are fully paid, non assessable and not subject
to any preemptive rights.
(C) No shares of Common Stock or other capital stock of the
Company are held as treasury stock or are owned by the Company.
(D) Section 2.01(b)(i)(D) of the Company Disclosure Schedule
sets forth a true and complete list of the holders of all the issued and
outstanding shares of Common Stock and Class B Preferred Stock as of the date
hereof and (assuming no exercise of options after the date hereof) as of the
Closing Date (the "Stockholders"), showing the number of shares of Common Stock
and Class B Preferred Stock held by each Stockholder as of the date hereof and
(assuming no exercise of options after the date hereof) as of the Closing Date.
No Person will be entitled to receive a portion of the Closing Merger
Consideration, or any other payment or consideration from Buyer as a result of
the transactions contemplated by this Agreement or any other Transaction
Document, other than the Securityholders.
(ii) Options and Restricted Stock Units. As of the date of this
Agreement, 33,166 shares of Common Stock are reserved for issuance under the
Option Plan, of which 33,166 shares of Common Stock are subject to outstanding
Options granted under the Option Plan. As of the date of this Agreement, 28,729
shares of Common Stock are reserved for issuance under the Company's 2004
Restricted Stock Unit Plan (the "RSU Plan"). Included in Section 2.01(b)(ii) of
the Company Disclosure Schedule is a correct and complete list, as of the date
hereof, of all Outstanding Options, Restricted Stock Units, or other rights to
purchase or receive shares of Common Stock granted under the Option Plan, the
RSU Plan or otherwise, and, for each such Option or Restricted Stock Unit or
other right (i) the number of shares of Common Stock subject thereto, (ii) the
9
date of grant, (iii) the expiration date, (iv) the exercise price thereof, and
(v) the number of shares in which the Option has vested. All Outstanding Options
and Restricted Stock Units have been granted in compliance with (x) all
applicable securities laws and other Applicable Laws and (y) all requirements
set forth in the Charter Documents and applicable Contracts. Each Optionholder
and each holder of Restricted Stock Units is a resident of the United States.
(iii) Other Securities. Except as otherwise set forth in this
Section 2.01(b), there are no capital stock or other securities, options,
warrants, calls, rights, commitments, agreements, arrangements or undertakings
of any kind to which the Company is a party or by which it is bound obligating
the Company to (A) issue, deliver or sell, or cause to be issued, delivered or
sold, shares of capital stock or other voting securities of the Company, (B)
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking or (C) issue or
distribute to holders of any shares of capital stock of the Company any
evidences of indebtedness or assets of the Company. The Company is not under any
obligation to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or, except as may be required by Applicable Laws,
to pay any dividend or make any other distribution with respect thereto.
(iv) No Agreements. There are no agreements, written or oral,
between the Company and any Stockholder, or among any Stockholders relating to
the acquisition (including rights of first refusal or preemptive rights),
disposition, registration under the Securities Act of 1933 (the "Securities
Act") or voting of the capital stock of the Company.
(v) Compliance with Laws. All issued and outstanding shares of
capital stock of the Company have been issued in compliance with all applicable
securities laws and all other Applicable Laws.
(c) Authority and Due Execution.
(i) Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and the other Transaction Documents to
which it is a party and to consummate the transactions contemplated hereby or
thereby. The execution, delivery and performance of this Agreement and the other
Transaction Documents by the Company, and the consummation of the transactions
contemplated hereby or thereby, have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize the execution, delivery
and performance of this Agreement and the other Transaction Documents by the
Company or to consummate the transactions contemplated hereby or thereby.
(ii) Due Execution. This Agreement and each other Transaction
Document to which the Company is a party has been, or upon execution and
delivery will be, duly executed and delivered by the Company and, assuming due
execution and delivery by Buyer and other parties hereto and thereto,
constitutes, or upon execution and delivery will constitute, the valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general principles of
equity.
10
(d) Non-Contravention and Consents.
(i) Non-Contravention. The execution and delivery of this Agreement
and each other Transaction Document by the Company does not, and the performance
of this Agreement and each other Transaction Document by the Company will not,
(A) conflict with or violate the Charter Documents of the Company, (B) conflict
with or violate any Applicable Laws or (C) result in any breach of or constitute
a default (or an event that with notice or lapse of time or both would become a
default) under, or impair the rights of the Company or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company pursuant
to, any Contract.
(ii) Contractual Consents. No Consent under any Material Contract
is required to be obtained in connection with the execution, delivery or
performance of this Agreement or any other Transaction Document by the Company
or the consummation of the transactions contemplated hereby or thereby.
(iii) Governmental Consents. No Consent of any national, state,
county, municipal, local or foreign government, any instrumentality,
subdivision, court, administrative agency or commission or other governmental
authority or instrumentality, or any quasi governmental or private body
exercising any regulatory, taxing, importing or other governmental or quasi
governmental authority (a "Governmental Entity") is required to be obtained or
made by the Company in connection with the execution, delivery and performance
of this Agreement or any other Transaction Document by the Company or the
consummation of the transactions contemplated hereby or thereby.
(e) Financial Statements. The Company has delivered to Buyer (i) its
audited consolidated financial statements (consisting of a balance sheet,
statement of operations and statement of cash flows) for the years ended
November 19, 2004, November 18, 2005 and November 17, 2006 and (ii) its
quarterly unaudited consolidated financial statements (consisting of a balance
sheet, income statement and statement of cash flows) for the quarterly period
ended May 4, 2007 (collectively, the "Financial Statements"). The Financial
Statements were prepared in accordance with Company Accounting Procedures
consistently applied and in accordance with historic past practices throughout
the periods involved and fairly present in all material respects the
consolidated financial position, results of operations and cash flows of the
Company as of the dates, and for the periods, indicated therein. Except as set
forth in the Financial Statements, the Company has no liabilities, whether known
or unknown, accrued, unliquidated, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to the date
of the most recent Financial Statements and (ii) obligations under Contracts
incurred in the ordinary course of business and not required under Company
Accounting Procedures to be reflected in the Financial Statements, which, in
both cases, individually or in the aggregate, are not material to the financial
condition or operating results of the Company.
11
(f) Indebtedness. As of the Closing Date, the Company does not have any
Indebtedness of any type (whether accrued, absolute, contingent, matured,
unmatured or other and whether or not required to be reflected in financial
statements prepared in accordance with Company Accounting Procedures) that is
not fully reflected on Section 2.01(f) of the Company Disclosure Schedule.
Section 2.01(f) of the Company Disclosure Schedule lists each item of
Indebtedness identifying the creditor, including name and address, the type of
instrument under which the Indebtedness is owed, the amount of the Indebtedness
that is principal as of the date hereof and an estimate of the amount of the
Indebtedness that is accrued interest as of the date hereof. With respect to
each item of Indebtedness, the Company is not in default, no payments are past
due, and no circumstance exists that, with notice, the passage of time or both,
could constitute a default by the Company under any item of Indebtedness. The
Company has not received any notice of a default, alleged failure to perform or
any offset or counterclaim with respect to any item of Indebtedness that has not
been fully remedied and withdrawn. The consummation of the transactions
contemplated by this Agreement or any other Transaction Document to which the
Company is a party will not cause a default, breach or an acceleration,
automatic or otherwise, of any conditions, covenants or any other terms of any
item of Indebtedness. The Company is not a guarantor or otherwise liable for any
liability or obligation (including Indebtedness) of any other Person.
(g) Salary Increases, Bonuses and Distributions. Since December 31,
2006, there have been no (i) salary increases or bonuses, or (ii) payments for
personal expenses or distributions from the Company to the Sellers or any other
employee of the Company (excluding ordinary business expense reimbursements).
(h) Litigation. There is no claim, action, suit or proceeding, or
governmental inquiry or investigation, pending, or to the Knowledge of the
Company, threatened against the Company, nor to the Knowledge of the Company is
there any basis for any such claim, action, suit, proceeding, inquiry or
investigation. There is no judgment, decree or order outstanding against the
Company. Section 2.01(h) of the Company Disclosure Schedule lists all litigation
that the Company has pending or threatened against other parties.
(i) Taxes.
(i) (A) all material Tax Returns which were required to be filed by
or with respect to the Company have been duly and timely filed, (B) all items of
income, gain, loss, deduction and credit or other items ("Tax Items") required
to be included in each such Tax Return have been so included and all such Tax
Items and any other information provided in each such Tax Return is true,
correct and complete in all material respects, (C) all Taxes owed by the Company
which are or have become due have been timely paid in full, (D) no penalty,
interest or other charge is or will become due with respect to the late filing
of any such Tax Return or late payment of any such Tax, (E) all Tax withholding
and deposit requirements imposed on or with respect to the Company have been
satisfied in full in all respects, (F) there are no Liens on any of the assets
of the Company that arose in connection with any failure (or alleged failure) to
pay any Tax, except Liens for Taxes not yet due and payable, and (G) the Company
is not liable for any Tax as a transferee or successor.
12
(ii) Section 2.01(i)(ii) of the Company Disclosure Schedule lists
all federal, state, local and foreign income Tax Returns filed with respect to
the Company for the six (6) taxable years ending prior to the Closing Date,
indicates those Tax Returns that have been audited, indicates those Tax Returns
that are currently the subject of audit, and indicates those Tax Returns whose
audits have been closed.
(iii) There is no claim against the Company for any Taxes, and no
assessment, deficiency or adjustment has been asserted, proposed, or threatened
with respect to any Tax Return of or with respect to the Company, other than
those disclosed (and to which are attached true and complete copies of all audit
or similar reports) on Section 2.01(i)(iii) of the Company Disclosure Schedule.
(iv) Section 2.01(i)(iv) of the Company Disclosure Schedule lists
all jurisdictions to which any material Tax is properly payable by the Company.
No claim has ever been made by an authority in a jurisdiction where the Company
does not file Tax Returns that it is or may be subject to taxation in that
jurisdiction.
(v) There is not in force any extension of time with respect to the
due date for the filing of any Tax Return of or with respect to the Company or
any waiver or agreement for any extension of time for the assessment or payment
of any Tax of or with respect to the Company.
(vi) There are no Tax allocation, sharing or indemnity agreements
or arrangements affecting the Company. No payments are due or will become due by
the Company pursuant to any such agreement or arrangement.
(vii) None of the property of the Company is held in an arrangement
that could be classified as a partnership for Tax purposes, and the Company does
not own any interest in any controlled foreign corporation (as defined in
Section 957 of the Code), passive foreign investment company (as defined in
Section 1297 of the Code) or other entity the income of which is or could be
required to be included in the income of the Company.
(viii) None of the property of the Company is subject to a
safe-harbor lease (pursuant to Section 168(f)(8) of the Internal Revenue Code of
1954 as in effect after the Economic Recovery Tax Act of 1981 and before the Tax
Reform Act of 1986) or is "tax-exempt use property" (within the meaning of
Section 168(h) of the Code) or "tax-exempt bond financed property" (within the
meaning of Section 168(g)(5) of the Code).
(ix) The Company (or the Surviving Company as successor to the
Company by merger, but only with respect to the historic business and assets of
the Company) will not be required to include any amount in income for any
taxable period ending after the Closing Date as a result of a change in
accounting method for any taxable period beginning on or before the Closing Date
or pursuant to any agreement with any Tax authority with respect to any such
taxable period. The Surviving Company, as successor of the Company by merger,
but only with respect to the historic business and assets of the Company, will
not be required to include in any period ending after the Closing Date any
income that accrued in a prior period but was not recognized in any prior period
as a result of the installment method of accounting, the completed contract
method of accounting, the long term contract method of accounting, the cash
method of accounting or otherwise.
13
(x) The Company does not have any liability for the Taxes of any
Person under Treasury Regulations Section 1.1502-6 (or any corresponding
provisions of state, local or foreign Tax law), or as a transferee or successor,
or by contract or otherwise. The Company is not and has never been a member of
an affiliated, consolidated, combined or unitary group filing a for federal or
state income tax purposes.
(xi) The Company has not entered into any agreement or arrangement
with any Taxing Authority that (i) will require any increase in taxable income
or alternative minimum taxable income, or any reduction in Tax deductions or Tax
credits, of the Company for any taxable period ending after the Closing Date, or
(ii) requires the Company (or any successor by merger) to take any action or to
refrain from taking any action. The Company is not a party to any agreement with
any Taxing Authority that would be terminated or adversely affected as a result
of the transactions contemplated by this Agreement.
(xii) To the extent applicable, the Company has properly and in a
timely manner documented its transfer pricing methodology in compliance with
Section 6662(e) (and any related sections) of the Code, the Treasury regulations
promulgated thereunder and any comparable provisions of state, local, domestic
or foreign Tax law.
(xiii) The Company has not participated, within the meaning of
Treasury Regulations Section 1.6011-4(c), in (A) any "reportable transaction"
within the meaning of Section 6011 of the Code and the Treasury Regulations
thereunder, (B) any "confidential corporate tax shelter" within the meaning of
Section 6111 of the Code and the Treasury Regulations thereunder, or (C) any
"potentially abusive tax shelter" within the meaning of Section 6112 of the Code
and the Treasury Regulations thereunder. The Company has disclosed on its Tax
Returns all positions taken therein that could give rise to a substantial
understatement of Tax within the meaning of Section 6662 of the Code (or any
similar provision of state, local or foreign law).
(xiv) The Company has not made any payments, is not obligated to
make any payments, and is not a party to any plan or agreement that under
certain circumstances could obligate it to make any payments that would not be
deductible under Sections 162(m), 280G (determined without regard to the
exceptions contained in Sections 280G(b)(4) and 280G(b)(6)), 404 or 409A of the
Code.
(xv) As a result of the transactions contemplated herein, the
Company will not recognize any income or gain as a result of or pursuant to
Treasury Regulation Section 1.1502-13 (deferred intercompany gain) or Treasury
Regulation Section 1.1502-19 (excess loss accounts) and the Company does not
have any such gain or excess loss accounts.
(xvi) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock intended
to qualify for tax-free treatment under Section 355 of the Code (1) in the two
years prior to the date of this Agreement or (2) in a distribution that could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated herein.
14
(j) Title to Property and Assets.
(i) The Company has good and marketable title to, or valid
leasehold interests in, all of its tangible properties and assets (real,
personal and mixed, including the Real Property) used or held for use in its
business or reflected in the Financial Statements. None of such properties or
assets is subject to any Lien of any nature whatsoever.
(ii) Section 2.01(j)(ii) of the Company Disclosure Schedule sets
forth a list of (A) all real property that is currently owned by the Company
(the "Owned Real Property"), and (B) all real property currently leased by the
Company or otherwise used or occupied by the Company for the operation of its
business (the "Leased Real Property"), the name of the lessor, the date of the
lease and each amendment thereto and the aggregate annual rental payable under
any such lease. The Company has delivered to Buyer true and complete copies of
(A) any title policy and the deed of the Company with respect to the Owned Real
Property, and (B) all leases, lease guaranties, subleases or other agreements of
the Company for the leasing, use or occupancy of, or otherwise granting a right
in or relating to, the Leased Real Property, including all amendments,
terminations and modifications thereof (the "Lease Agreements"). All Lease
Agreements are valid and enforceable and not in default, no rentals are past
due, and no circumstance exists that, with notice, the passage of time or both,
could constitute a default under any Lease Agreement by the Company or, to the
Knowledge of the Company, by any other party thereto. The Company has not
received any notice of a default, alleged failure to perform or any offset or
counterclaim with respect to any Lease Agreement that has not been fully
remedied and withdrawn. The consummation of the transactions contemplated by
this Agreement or any other Transaction Document to which the Company is a party
will not affect the enforceability against any Person of any such Lease
Agreement or the rights of the Company to the continued use and possession of
the Leased Real Property for the conduct of business as presently conducted. The
Real Property is in good operating condition and repair, to the Knowledge of the
Company, free from any material structural, physical and mechanical defects, is
maintained in a manner consistent with standards generally followed with respect
to similar properties and is suitable for the conduct of the business as
presently conducted. Section 2.01(j)(ii) of the Company Disclosure Schedule also
sets forth a list of the real property that was formerly owned by the Company.
(iii) Section 2.01(j)(iii) of the Company Disclosure Schedule lists
all material items of equipment owned or leased by the Company. Such equipment
is adequate for the conduct of the business of the Company as currently
conducted and in suitable operating condition, regularly and property
maintained, subject to normal wear and tear.
(iv) The Company has sole and exclusive ownership, free and clear
of any Liens, or the valid right to use, unrestricted by contract, all customer
lists, customer contact information, customer correspondence and customer
licensing and purchasing histories relating to current and former customers of
the Company. No Person other than the Company possesses any licenses, claims or
rights with respect to the use of any such customer information owned by the
Company.
15
(k) Intellectual Property.
(i) The Company owns, is licensed or otherwise possesses legally
transferable and enforceable rights to use all Intellectual Property that is
necessary for the conduct of, or used in, the business of the Company as
presently conducted, and such rights will not be adversely affected by the
consummation of the transactions contemplated by this Agreement or any other
Transaction Document to which the Company is a party. The Company has not
licensed any of its Intellectual Property, including in source code form, to any
party or entered into any exclusive or non-exclusive licenses or agreements
relating to any of its Intellectual Property with any party, except for licenses
and distribution agreements listed in Section 2.01(k)(i) of the Company
Disclosure Schedule. As used in this Agreement, "Intellectual Property" will
mean any or all of the following and all rights in, arising out of or associated
therewith: (A) all United States, international and foreign patents and
applications therefor and all reissues, divisions, renewals, extensions,
provisionals, continuations and continuations in part thereof, (B) all
inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, know how, technology, technical data and
customer lists and all documentation relating to any of the foregoing, (C) all
copyrights, copyright registrations and applications therefor and all other
rights corresponding thereto throughout the world, (D) all Software, (E) all
industrial designs and any registrations and applications therefor throughout
the world, (F) all maskworks and any registrations and applications therefor
throughout the world, (G) all trade names, logos, URLs, common law trademarks
and service marks, trademark and service mark registrations and applications
therefore throughout the world, (H) all databases, design databases, schematics
and data collections and all rights therein throughout the world, and (I) any
similar or equivalent rights to any of the foregoing anywhere in the world.
(ii) Section 2.01(k)(ii) of the Company Disclosure Schedule sets
forth a true, correct and complete list of (A) all computer programs (source
code or object code) owned by the Company (collectively, the "Owned Software"),
and (B) all computer programs (source code or object code) licensed to the
Company by any third party excluding any standard, off the shelf software
acquired by the Company for less than $3,000 (individually) (collectively, the
"Licensed Software" and, together with the Owned Software, the "Software"). The
Company has good, marketable and exclusive title to, and the valid and
enforceable power and unqualified right to sell, license, lease, transfer, use
or otherwise exploit, all versions and releases of the Owned Software and all
copyrights thereof, free and clear of all Liens. The Company is in actual
possession of the source code and object code for each computer program included
in the Owned Software. The Company is in actual possession of the object code
and user manuals (if any) for each computer program included in the Licensed
Software. No person other than the Company has any right or interest of any kind
or nature in or with respect to the Owned Software or any portion thereof or any
rights to sell, license, lease, transfer, use or otherwise exploit the Owned
Software or any portion thereof. Except for the Licensed Software, all software
code that comprises any of the Company's products or that was or is used in the
design or development of any the Company's products was either (A) developed by
employees of the Company within the scope of their employment, (B) developed by
independent contractors who have expressly assigned their rights and interest
therein to the Company pursuant to written agreements or (C) otherwise acquired
by the Company from a third party pursuant to a written agreement in which the
ownership rights therein were expressly assigned to the Company. No source code
16
of any of the Company's products has been licensed or otherwise provided to
another person, and all such source code has been safeguarded and protected as
trade secrets of the Company. None of the Company's products contains or
incorporates, in whole or in part, or is distributed with any Open Source
Software, or programming code, documentation or other materials or development
environments obtained from any person other than the Company.
(iii) Section 2.01(k)(iii) of the Company Disclosure Schedule sets
forth a true and complete list of (A) all patents and patent applications, all
registered and unregistered trademarks, tradenames, service marks and
copyrights, and all registered maskwork rights included in the Intellectual
Property of the Company, showing the jurisdictions in which each such
Intellectual Property right has been issued or registered (if applicable) or in
which any application for such issuance or registration has been filed (if
applicable), (B) all licenses, sublicenses and other agreements to which the
Company is a party and pursuant to which any person is authorized to use any
Intellectual Property of the Company and (C) all licenses, sublicenses and other
agreements to which the Company is a party and pursuant to which the Company is
authorized to use any third party patents, trademarks or copyrights
(collectively, "Third Party Intellectual Property Rights") that are incorporated
in, are or form a part of any product or service offering of the Company,
including products or service offerings that are currently under development.
(iv) To the Knowledge of the Company, there is no, and there never
has been any, unauthorized use, disclosure, infringement or misappropriation, or
any allegation made thereof, of any Intellectual Property rights of the Company
by any third party, including any employee or former employee of the Company.
There is no, and there never has been any, unauthorized use, disclosure,
infringement or misappropriation, or any allegation made thereof, of any
Intellectual Property rights of any third party by the Company or, to the
Knowledge of the Company, by any employee of the Company. There is no, and there
never has been any, unauthorized use, disclosure, infringement or
misappropriation of any Third Party Intellectual Property Rights by the Company
or, to the Knowledge of the Company, by any current or former employee of the
Company. The Company has not entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property or Third
Party Intellectual Property Rights.
(v) The Company is not or, as a result of the execution, delivery
or performance of this Agreement or any other Transaction Document by the
Company or the consummation of any transaction contemplated hereby or thereby,
will not be in breach of any license, sublicense or other agreement relating to
the Intellectual Property or Third Party Intellectual Property Rights.
(vi) All patents, registered trademarks, service marks and
copyrights held by the Company are valid and subsisting. The Company (A) has not
been sued in any action, suit or proceeding that involves, nor has it otherwise
been notified of, an objection or claim of infringement of any of its
Intellectual Property or any patents, trademarks, service marks or copyrights or
violation of any trade secret or other proprietary right of any third party, and
(B) has not brought any action, suit or proceeding for infringement of
Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party. The manufacturing, use,
marketing, licensing, offer for sale, or sale of the Company's products or
service offerings does not infringe, or has not been claimed to the Company to
infringe, any patent, trademark, service mark, copyright, trade secret or other
proprietary right of any third party.
17
(vii) The Company has secured written assignments from all Persons
who contributed to the creation or development of the Intellectual Property of
the Company of the rights to such contributions that are not already owned by
the Company by operation of law.
(viii) The Company has taken all commercially reasonable steps to
protect its rights in the Company's Intellectual Property, and to preserve the
confidentiality of all material Intellectual Property of the Company not
otherwise protected by patents, patent applications or copyright (collectively,
"Confidential Information"). All use, disclosure or appropriation of
Confidential Information owned by the Company by or to a third party has been
pursuant to the terms of a written agreement between the Company and such third
party, except where the failure to have a written agreement would not have a
Material Adverse Effect. All use, disclosure, or appropriation of Confidential
Information not owned by the Company has been pursuant to the terms of a written
agreement between the Company and the owner of such Confidential Information or
is otherwise lawful.
(l) Accounts Receivable.
Section 2.01(l) of the Company Disclosure Schedule sets forth a
list of all accounts receivable of the Company as of the date of the latest
balance sheet included in the Financial Statements, together with a range of
days elapsed since invoice for each such account receivable, and the aggregate
amount of reserves or allowances for doubtful accounts included on such balance
sheet. All of such accounts receivable are bona fide, arose in the ordinary
course of business and are carried at values determined in accordance with
Company Accounting Procedures consistently applied and in accordance with
historic past practice less any reserves for doubtful accounts. No Person has
any Lien on any of such accounts receivable, and no request or agreement for
deduction or discount has been made with respect to any of such accounts
receivable.
(m) Compliance; Permits.
(i) Compliance. The Company is not, in any material respect, in
conflict with, or in default or in violation of, any Applicable Laws. No
investigation or review by any Governmental Entity is pending, or to the
Knowledge of the Company, has been threatened, against the Company. There is no
agreement, commitment, judgment, injunction, order or decree binding upon the
Company.
(ii) Permits. The Company holds, to the extent required by
Applicable Law, all franchises, permits, licenses, variances, exemptions, orders
and approvals from Governmental Entities ("Permits") for the operation of the
business of the Company as presently conducted, except where the failure to have
a Permit would not have a Material Adverse Effect. Section 2.01(m)(ii) of the
Company Disclosure Schedule contains a complete list of all such Permits. No
suspension or cancellation of any such Permit is pending or, to the Knowledge of
the Company, threatened, and the Company is in compliance in all material
respects with the terms of such Permits.
18
(n) Brokers' and Finders' Fees. The Company has not incurred, nor will
it incur, directly or indirectly, any liability for brokerage or finders' fees
or agents' commissions or any similar charges in connection with this Agreement
or any other Transaction Document to which the Company is a party or any
transaction contemplated hereby or thereby.
(o) Restrictions on Business Activities. The Company has not entered
into any agreement under which the Company is, or Buyer or the Surviving Company
after the Closing will be, restricted from selling, licensing or otherwise
distributing any of its technology or products or from providing services to
customers or potential customers or any class of customers, in any geographic
area, during any period of time or in any segment of any market.
(p) Employment Matters. Except as contemplated by this Agreement or any
other Transaction Document, to the Knowledge of the Company, no executive, key
employee or group of employees has any plan or intention to terminate employment
with the Company. None of the employees of the Company is represented by a labor
union, and the Company is not subject to any collective bargaining or similar
agreement with respect to any of its employees. None of the Company, nor to the
Knowledge of the Company, any employee or representative of the Company, has
committed or engaged in any unfair labor practice in connection with the conduct
of the business of the Company, and there is no action, suit, claim, charge or
complaint against the Company pending or, to the Knowledge of the Company,
threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any employee of the Company, including charges
of unfair labor practices or discrimination complaints.
(q) Employee Benefit Plans.
(i) Section 2.01(q) of the Company Disclosure Schedule lists each
Employee Benefit Plan (as defined in clause (xvii) of this Section) that the
Company or any ERISA Affiliate (as defined in clause (xvii) of this Section)
maintains or to which the Company or any ERISA Affiliate contributes or is a
participating employer (collectively, the "Company Benefit Plans"). With respect
to each Company Benefit Plan, the Company has delivered to Buyer true and
complete copies of the plan documents and summary plan descriptions, and, if
applicable, the most recent determination letter (or opinion letter) received
from the Internal Revenue Service, the most recent Form 5500 Annual Report, the
most recent actuarial reports (including any estimates of retiree medical
liabilities), the most recent Pension Benefit Guaranty Corporation ("PBGC") Form
1 and all related trust agreements, insurance contracts and other funding
agreements associated with such Company Benefit Plan.
(ii) Except for benefits payable under the terms of any Company
Benefit Plan that arise in the ordinary course of plan administration and
expenses associated with any Company Benefit Plan that arise in the ordinary
course of plan administration, with respect to each Company Benefit Plan (and
each related trust, insurance contract or fund), no event has occurred and there
exists no condition or set of circumstances, in connection with which the
Company or any ERISA Affiliate would be subject to any liability under ERISA,
the Code or any other Applicable Law.
19
(iii) Each Company Benefit Plan (and each related trust, insurance
contract or fund) has been administered and operated in all material respects in
accordance with the terms of the applicable controlling documents and with the
applicable provisions of ERISA, the Code and all other Applicable Laws. Each
Company Benefit Plan (including any material amendments thereto) that is capable
of approval by, or registration for or qualification for special tax status
with, the appropriate taxation, social security or supervisory authorities in
the relevant jurisdiction has received such approval, registration or
qualification or there remains a period of time in which to obtain such
approval, registration or qualification retroactive to the date of any material
amendment that has not previously received such approval, registration or
qualification.
(iv) All required reports, descriptions and disclosures have been
filed or distributed appropriately with respect to each Company Benefit Plan.
The requirements of Part 6 of Subtitle B of Title I of ERISA and of Section
4980B of the Code have been met with respect to each Employee Welfare Benefit
Plan (as defined in clause (xvii) of this Section) that is a "group health plan"
as defined in Part 6 of Subtitle B of Title I of ERISA and Section 4980B of the
Code.
(v) All contributions (including all employer contributions and
employee salary reduction contributions) that are due and owing have been paid
to each Company Benefit Plan (or related trust or held in the general assets of
the Company or one or more ERISA Affiliates or accrued, as appropriate), and all
contributions for any period ending on or before the Closing Date that are not
yet due have been paid to each Company Benefit Plan or accrued in accordance
with the past custom and practice of the Company and the ERISA Affiliates. All
premiums or other payments for all periods ending on or before the Closing Date
have been paid with respect to each Company Benefit Plan that is an Employee
Welfare Benefit Plan.
(vi) Each Company Benefit Plan that is an Employee Pension Benefit
Plan (as defined in clause (xvii) of this Section) and that is intended to meet
the requirements of a "qualified plan" under Section 401(a) of the Code meets
such requirements and has either received or applied for (or has time remaining
to apply for) a favorable determination letter (or, in the case of a prototype
plan, an opinion letter) from the Internal Revenue Service within the applicable
remedial amendment periods. The Company has not employed any part-time employees
(within the definition of "part-time" employees in the Company's employee
handbook) and, as a result, no such part-time employees have been excluded from
participation in a Company Benefit Plan that is an Employee Pension Benefit Plan
to meet the requirements of a "qualified plan" under Section 401(a) of the Code.
(vii) Neither the Company nor any ERISA Affiliate has ever
maintained or contributed to an Employee Benefit Plan that is subject to Section
412 of the Code or Title IV of ERISA.
(viii) Neither the Company nor any ERISA Affiliate has ever
maintained or contributed to a trust that is subject to Section 501(c)(9) of the
Code.
20
(ix) Neither the Company nor any ERISA Affiliate maintains or
contributes to, nor has the Company or any ERISA Affiliate ever maintained or
contributed to, any Employee Welfare Benefit Plan providing medical, health or
life insurance or other welfare type benefits for current or future retired or
terminated employees, their spouses or their dependents (other than in
accordance with Section 4980B of the Code) that cannot be unilaterally
terminated by the Company or an ERISA Affiliate.
(x) Neither the Company nor any ERISA Affiliate, nor to the
Knowledge of the Company, any employee or representative of the Company or any
ERISA Affiliate, has made any oral or written representation or commitment with
respect to any aspect of any Company Benefit Plan that is not in accordance with
the written or otherwise preexisting terms and provisions of such Company
Benefit Plan. Neither the Company nor any ERISA Affiliate has entered into any
agreement, arrangement or understanding, whether written or oral, with any trade
union, works council or other employee representative body or any number or
category of its employees that would prevent, restrict or impede the
implementation of any lay off, redundancy, severance or similar program within
its or their respective workforces (or any part of them).
(xi) There are no unresolved claims or disputes under the terms of,
or in connection with, any Company Benefit Plan (other than routine undisputed
claims for benefits), and no action, legal or otherwise, has been commenced with
respect to any such claim or dispute.
(xii) With respect to each Company Benefit Plan that the Company or
any ERISA Affiliate maintains or ever has maintained or to which any of them
contributes or has ever contributed:
(A) There have been no Prohibited Transactions (as defined in
clause (xvii) of this Section) with respect to any such Company Benefit Plan
that would subject the Company or any ERISA Affiliate to a tax or penalty in an
amount in excess of $10,000 imposed pursuant to Section 4975 of the Code or
Section 502(c), (i) or (l) of ERISA.
(B) Neither the Company nor any ERISA Affiliate (by way of
indemnification, directly or otherwise) nor, to the Knowledge of the Company,
any Fiduciary (as defined in clause (xvii) of this Section) has any liability
for breach of fiduciary duty or any failure to act or comply in connection with
the administration or investment of the assets of any Company Benefit Plan.
(C) No action, suit, proceeding, hearing or investigation with
respect to the administration or the investment of the assets of any Company
Benefit Plan (other than routine claims for benefits) is pending or, to the
Knowledge of the Company, threatened, and to the Knowledge of the Company, there
is no basis for any such action, suit, proceeding, hearing or investigation.
(D) Neither Buyer nor the Company has or will have after the
Closing Date any liability relating to any Employee Benefit Plan maintained by
an ERISA Affiliate except the Company Benefit Plans.
(xiii) Neither the Company nor any ERISA Affiliate contributes to
or has ever contributed to any multiple employer plan or Multiemployer Plan (as
defined in clause (xvii)) of this Section) or has any liability (including
withdrawal liability) under any Multiemployer Plan.
21
(xiv) No Company Benefit Plan provides health benefits (whether or
not insured), with respect to employees after retirement or other termination of
service (other than coverage mandated by Applicable Laws).
(xv) The execution of this Agreement and any other Transaction
Document by the Company and the consummation of the transactions contemplated
hereby or thereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Benefit
Plan that will or may result in any payment (whether of severance pay or
otherwise), acceleration of payment, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with respect
to any employee of the Company or any ERISA Affiliate. There is no contract,
agreement, plan or arrangement with an employee to which the Company or any
ERISA Affiliate is a party that, individually or collectively and as a result of
the transactions contemplated by this Agreement or any other Transaction
Document to which the Company is a party (whether alone or upon the occurrence
of any additional or subsequent events), would reasonably be expected to give
rise to the payment of any amount that would not be deductible pursuant to
Section 280G of the Code.
(xvi) Except as otherwise contemplated by this Agreement or any
other Transaction Documents, neither the execution and delivery of this
Agreement or any other Transaction Document to which the Company is a party nor
the consummation of the transactions contemplated hereby or thereby will (A)
result in any payment (including severance, unemployment compensation, golden
parachute, bonus or otherwise) becoming due to any officer, director or employee
of the Company, (B) materially increase any benefits otherwise payable by the
Company or (C) result in the acceleration of the time of payment or vesting of
any such benefits.
(xvii) For purposes of this Agreement, the following terms will
have the respective meanings indicated below:
(A) "Employee Benefit Plan" means (1) any nonqualified deferred
compensation or retirement plan or arrangement that is an Employee Pension
Benefit Plan, (2) any qualified defined contribution retirement plan or
arrangement that is an Employee Pension Benefit Plan, (3) any qualified defined
benefit retirement plan or arrangement that is an Employee Pension Benefit Plan
(including any Multiemployer Plan), (4) any Employee Welfare Benefit Plan or
fringe benefit plan or program, (5) any profit sharing, bonus, stock option,
stock purchase, consulting, employment, severance or incentive plan, agreement
or arrangement or (6) any plan, agreement or arrangement providing benefits
related to clubs, vacation, childcare, sabbatical or sick leave that is
sponsored, maintained or contributed to by the Company or any ERISA Affiliate
for the benefit of the employees, former employees, independent contractors or
agents of the Company or any ERISA Affiliate or has been so sponsored,
maintained or contributed to at any time prior to the Closing Date.
22
(B) "ERISA Affiliate" means any subsidiary or other entity that
would be considered a single employer with the Company or a subsidiary within
the meaning of Section 414 of the Code.
(C) "Employee Pension Benefit Plan" has the meaning set forth
in Section 3(2) of ERISA;
(D) "Employee Welfare Benefit Plan" has the meaning set forth
in Section 3(1) of ERISA
(E) "Multiemployer Plan" has the meaning set forth in Section
3(37) of ERISA.
(F) "Prohibited Transaction" has the meaning set forth in
Section 406 of ERISA and Section 4975 of the Code.
(G) "Fiduciary" has the meaning set forth in Section 3(21) of
ERISA.
(r) Environmental Matters.
(i) The Real Property and the business and operations of the
Company as currently conducted with respect to each of the foregoing are, and
within the relevant time periods specified under all applicable statutes of
limitations have been, in compliance in all material respects with all
Environmental Laws (as defined in clause (viii) of this Section).
(ii) All material Environmental Permits required under
Environmental Laws in connection with the Real Property and the business and
operations of the Company as currently conducted with respect to each of the
foregoing, have been obtained, and are currently in full force and effect in all
material respects and there are no conditions or circumstances under which any
such existing Environmental Permit could be revoked or any pending application
for any new Environmental Permit or renewal of any existing Environmental Permit
could reasonably be expected to be protested or denied.
(iii) The Real Property and the business and operations of the
Company with respect to each of the foregoing are not subject to any pending or,
to the Knowledge of the Company and any Seller, threatened Environmental Claims,
nor has the Company received any notice of violation, noncompliance, or
enforcement that is currently pending.
(iv) There has been no Release (as defined in clause (viii) of this
Section) or, to the Knowledge of the Company, threatened Release, of Hazardous
Materials (as defined in clause (viii) of this Section) at, on, under or from
any of the Real Property or in connection with the business of the Company in
violation of Environmental Laws or in a manner that could give rise to any
material liability under Environmental Laws and there are no remediations,
abatements, removals, or monitorings or, to the Knowledge of the Company,
investigations, of Hazardous Materials required under any Environmental Laws
with respect to the Real Property or the Business.
23
(v) The Company has not received any written notice asserting any
alleged liability or obligation under any applicable Environmental Laws with
respect to the Release or threatened Release of any Hazardous Materials
generated by the Company at any location offsite of the Real Property and, to
the Knowledge of the Company, there are no conditions or circumstances that
could reasonably be expected to result in the receipt of such written notice.
(vi) To the Knowledge of the Company, there has been no exposure of
any Person or property to any Hazardous Materials as a result of or in
connection with the operations of the Company that could form the basis for an
Environmental Claim or any other claim for damages or compensation.
(vii) The Company has provided to Buyer true and complete copies of
all internal and external environmental audits and studies, and all material
correspondence on substantial environmental matters that are not subject to
attorney-client privilege, in its possession or control, relating to the Real
Property or the business of the Company.
(viii) For purposes of this Agreement, the following terms will
have the respective meanings indicated:
(A) "Environmental Claim" means any claim, demand, suit,
inquiry, action, order, proceeding, loss, cost, expense, liability, penalty, or
damages arising, incurred, or otherwise asserted pursuant to any Environmental
Law.
(B) "Environmental Law" means any Applicable Law of any
Governmental Entity pertaining to health, safety or the environment (including
any natural resource damages, any generation, use, storage, treatment, disposal,
Release, threatened Release, discharge, or emission of Hazardous Materials into
the indoor or outdoor environment, and any exposure to Hazardous Materials) in
effect in any jurisdiction in which the Company is conducting or at any time has
conducted operations or where the Real Property is located, and any judicial or
administrative interpretation (including, but not limited to, any judicial or
administrative order, consent decree, judgment or settlement) thereof, including
the Comprehensive Environmental Response, Compensation and Liability Act, the
Superfund Amendments Reauthorization Act, the Resource Conservation and Recovery
Act, the Clean Air Act, the Federal Water Pollution Control Act, the Oil
Pollution Act of 1990, the Toxic Substances Control Act, the Safe Drinking Water
Act, the Hazardous Materials Transportation Act, the Emergency Planning and
Community Right To Know Act, and the Occupational Safety and Health Act, as each
has been amended from time to time and all other environmental conservation and
protection laws.
(C) "Environmental Permit" means any permit, approval,
identification number, license, registration, consent, exemption, variance, or
other authorization required under or issued pursuant to any applicable
Environmental Law.
(D) "Hazardous Material" means any substance regulated or as to
which liability might arise under any applicable Environmental Law including
any: (1) chemical, product, material, substance or waste defined or included in
24
the definition of "hazardous waste," "hazardous substance," "hazardous
material," "restricted hazardous waste," "extremely hazardous waste," "solid
waste," "toxic waste," "extremely hazardous substance," "toxic substance,"
"toxic pollutant," "contaminant," "pollutant," or words of similar meaning or
import found in any applicable Environmental Law; (2) asbestos containing
materials; (3) polychlorinated biphenyls; (4) urea formaldehyde foam insulation;
(5) radon gas; (6) petroleum hydrocarbons, petrochemical or petroleum products;
(7) underground storage tanks, whether empty, filled or partially filled with
any substance; and (8) radioactive material, waste and pollutants, radiation,
radionuclides and their progeny, or nuclear waste including used nuclear fuel.
(E) "Release" means any depositing, spilling, leaking, pumping,
pouring, placing, emitting, discarding, abandoning, emptying, discharging,
migrating, injecting, escaping, leaching, dumping, or disposing.
(s) Material Contracts. Section 2.01(s) of the Company Disclosure
Schedule sets forth a list of all Material Contracts including the name of the
parties thereto, the date of each such Material Contract and each amendment
thereto. All Material Contracts are in full force and effect. All Material
Contracts are valid and enforceable and not in default, no payments or other
obligations are past due, and no circumstance exists that, with notice, the
passage of time or both, could constitute a default under any Material Contract
by the Company or, to the Knowledge of the Company or the Sellers, by any other
party thereto. The Company has not received any notice of a default, alleged
failure to perform or any offset or counterclaim with respect to any Material
Contract that has not been fully remedied and withdrawn. The consummation of the
transactions contemplated by this Agreement or any other Transaction Document to
which the Company is a party will not affect the enforceability against any
Person of any such Material Contract. The Company has provided Buyer with true
and complete copies of all Material Contracts including all amendments,
terminations and modifications thereof.
(t) Insurance.
(i) The Company has been covered during the past five (5) years by
insurance in scope and amount customary and reasonable for the businesses in
which it has been engaged during such period.
(ii) Section 2.01(t)(ii) of the Company Disclosure Schedule sets
forth the following information with respect to each insurance policy (including
policies providing property, casualty, liability or workers' compensation
coverage and bond and surety arrangements) to which the Company has been a
party, a named insured or otherwise the beneficiary of coverage: (A) the name,
address and telephone number of the agent; (B) the name of the insurer, the name
of the policyholder and the name of each covered insured; (C) the policy number
and the period of coverage; (D) the scope and amount of coverage (including an
indication of whether the coverage was on a claims made, occurrence or other
basis and a description of how deductibles and ceilings are calculated and
operate); and (E) a description of any retroactive premium adjustments or other
loss sharing arrangements. Each of such insurance policies is legal, valid,
binding, enforceable and in full force and effect and will continue to be legal,
valid, binding, enforceable and in full force and effect on identical terms
following consummation of the transactions contemplated by this Agreement and
25
any other Transaction Document. Neither the Company, nor to the Knowledge of the
Company, any other Person, is in breach or default under any such insurance
policy (including with respect to the payment of premiums or the giving of
notices), and to the Knowledge of the Company, no event has occurred that, with
notice or the lapse of time or both, would constitute such a breach or default,
or permit termination, modification or acceleration, under any such insurance
policy. To the Knowledge of the Company, no party to any such insurance policy
has repudiated any provision thereof.
(iii) Section 2.01(t)(iii) of the Company Disclosure Schedule
describes any self insurance arrangements affecting the Company.
(u) Transactions with Related Parties. No employee, officer, director
or Stockholder of the Company, nor any member of his or her immediate family, is
indebted to the Company, nor is the Company indebted (or committed to make loans
or extend or guarantee credit) to any of them. To the Knowledge of the Company,
none of such Persons has any direct or indirect ownership interest in (i) any
Person with which the Company is Affiliated or with which the Company has a
business relationship or (ii) any Person that competes with the Company (other
than the ownership of less than five percent (5%) of the outstanding class of
publicly traded stock in publicly traded companies that may compete with the
Company). To the Knowledge of the Company, no officer, director or Stockholder,
nor any member of his or her immediate family, is, directly or indirectly,
interested in any Material Contract (other than such contracts as relate to any
such Person's ownership of capital stock of the Company).
(v) Books and Records. The minute books of the Company contain complete
and accurate records in all material respects of all meetings and other
corporate actions of the stockholders and board of directors (including
committees thereof) of the Company. The stock ledger of the Company is complete
and reflects all issuances, transfers, repurchases and cancellations of shares
of capital stock of the Company. True and complete copies of the minute books
and the stock ledger of the Company have been made available to Buyer and will
be delivered to Buyer at the Closing. The Company maintains and will continue to
maintain up to Closing a standard system of accounting established and
administered in accordance with Company Accounting Procedures including, but not
limited to, complete books and records in written or electronic form.
(w) Absence of Changes. Since December 31, 2006, there has not
occurred, and the Company does not have Knowledge of, any Material Adverse
Effect. Since such date, the Company has conducted its business only in the
ordinary course of business consistent with past practices, and the Company has
not:
(i) failed to use commercially reasonable efforts to preserve
intact the Company's present business organization and to keep available the
services of its present officers, managerial personnel and key employees or
independent contractors and preserve its relationships with customers, suppliers
and others having business dealings with it; or
(ii) failed to use commercially reasonable efforts to maintain its
assets in their current condition, except for ordinary wear and tear, or failed
to repair, maintain, or replace any of its equipment in accordance with the
Company's normal maintenance procedures; or
26
(iii) amended, terminated, or failed to use commercially reasonable
efforts to renew any Material Contract; or
(iv) entered into any Material Contract; or
(v) accelerated, terminated, modified, or canceled, or received
notice of such from any other Person, any Material Contract (or series of
related Material Contracts) to which the Company is a party or by which the
Company or its assets are bound; or
(vi) granted any license or sublicense of any rights under or with
respect to any of its Intellectual Property except in the ordinary course of
business; or
(vii) made or pledged to make any charitable or other capital
contribution; or
(viii) adopted or amended any Employee Benefit Plan, or increased
in any manner the compensation or benefits of any officer, director, or employee
or other personnel (whether employees or independent contractors); or
(ix) terminated any employee; or
(x) acquired (including by merger, consolidation, or the
acquisition of any equity interest or assets) or sold (whether by merger,
consolidation, or the sale of an equity interest or assets), leased, or disposed
of any assets except in the ordinary course of business and consistent with past
practice or, even if in the ordinary course of business and consistent with past
practices, whether in one or more transactions, in no event involving assets
having an aggregate fair market value in excess of $50,000; or
(xi) mortgaged, pledged, or subjected to any Lien any of its
assets; or
(xii) except as required by Applicable Law, or circumstances which
did not exist as of such date, changed any of the accounting principles or
practices used by it; or
(xiii) changed its practices and procedures with respect to the
collection of accounts receivable or offered to discount the amount of any
account receivable or extended any other incentive (whether to the account
debtor or any employee or third party responsible for the collection of
receivables) with respect thereto; or
(xiv) paid any dividend or otherwise made any other distribution to
any Stockholder or purchase or acquire any shares of capital stock or other
securities of the Company; or
(xv) incurred any Indebtedness not in the ordinary course of
business or, whether or not in the ordinary course of business, incurred any
Indebtedness greater than $25,000; or
27
(xvi) failed to pay any Indebtedness or any other accounts payable
as it became due, or changed its existing practices and procedures for the
payment of Indebtedness or other accounts payable; or
(xvii) incurred or committed to incur any capital expenditures
except to the extent necessary to operate the Company's business and in the
ordinary course of business consistent with past practices; or
(xviii) entered into any Material Contracts that are performable
after the Closing other than contracts entered into in the ordinary course of
business consistent with past practices; or
(xix) agreed to or made any commitment, orally or in writing, to
take any actions prohibited by this Agreement.
(x) Products and Services. (i) There are no warranties express or
implied, written or oral, with respect to the products or services of the
Company, (ii) the products of the Company conform in all material respects to
their applicable specifications, and (iii) there are no pending or, to the
Knowledge of the Company, threatened claims with respect to any such products or
services, and the Company has no liability with respect to such products or
services, whether known or unknown, absolute, accrued, contingent or otherwise
and whether due or to become due.
(y) Disclosures. Neither this Agreement (including any Exhibit or
Schedule hereto) nor any other Transaction Document to which the Company is a
party nor any certificate furnished to Buyer in connection with the transactions
contemplated in this Agreement or any other Transaction Document to which the
Company is a party, when read together, contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company has no Knowledge of any
information or fact that has or would have a Material Adverse Effect on the
Company that has not been disclosed to Buyer in this Agreement (including the
Exhibits and Schedules hereto).
(z) Required Stockholder Approval. (i) The affirmative vote of at least
a majority of the Outstanding Shares as of the record date of the meeting at
which such vote is taken, and (ii) the affirmative vote of at least of a
majority of the Class B Preferred Stock as of the record date of the meeting at
which such vote is taken, are the only vote or consent of the holders of any
capital stock of the Company necessary pursuant to the Company's Charter
Documents and the ABCA to approve this Agreement and any other Transaction
Document and the transactions contemplated hereby or thereby (collectively, the
"Required Stockholder Approval").
(aa) Export Control Laws. The Company has conducted its export
transactions, if any, at all times in compliance with applicable provisions of
all Applicable Laws relating to export controls and regulations. Without
limiting the foregoing:
28
(i) The Company has obtained all material export licenses and other
approvals required for the Company's export of technologies, each of which are
listed on Section 2.01(aa) of the Company Disclosure Schedule;
(ii) The Company is in compliance in all material respects with the
terms of such applicable export licenses or other export approvals;
(iii) There are no pending or threatened claims against the Company
with respect to such export licenses or other approvals; and
(iv) There are no actions, or, to the Knowledge of the Company,
conditions or circumstances pertaining to the Company's export transactions that
may give rise to any future claims or liabilities.
(bb) No Other Representations. The Company is not making any
representations or warranties, expressed or implied, of any nature whatsoever
except as specifically set forth in this Agreement (including any Exhibit or
Schedule hereto).
Section 2.02 Representations and Warranties of the Sellers. Each Seller,
severally with respect to itself and not jointly, represents and warrants to
Buyer as follows (with the understanding that Buyer and the Merger Sub are
relying on such representations and warranties in entering into and performing
this Agreement):
(a) Owners of Shares. As of the date of this Agreement, each Seller is
the holder of record and owns beneficially that number of shares of Common Stock
and/or Class B Preferred Stock of the Company as set forth opposite each
Seller's name on Exhibit B, and, as of the Closing Date, will be the holder of
record and will own beneficially such number of shares of such capital stock
(collectively, the "Seller's Company Capital Stock"), in each case free and
clear of any Liens. Each Seller does not have, and will not have, the right to
acquire, any capital stock or other ownership interest in the Company, except
pursuant to Outstanding Options.
(b) Authority. Each Seller has full legal capacity to execute and
deliver this Agreement and the other Transaction Documents to which such Seller
is a party and to perform the obligations of such Seller hereunder and
thereunder. This Agreement and such Transaction Documents and the consummation
by such Seller of the transactions contemplated hereby or thereby have been, or
upon execution and delivery will be, duly and validly executed and delivered by
such Seller and constitute, or upon execution and delivery will constitute, a
valid and binding obligation of such Seller, enforceable against such Seller in
accordance with their respective terms, subject to applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting creditors' rights generally and subject, as to enforceability, to
general principles of equity.
(c) Non Contravention and Consents.
(i) Non-Contravention. The execution and delivery by each Seller of
this Agreement and each other Transaction Document to which such Seller is a
party do not, and the performance by each Seller of this Agreement and each
other Transaction Document to which such Seller is a party will not, (A)
conflict with or violate any Applicable Laws or (B) result in any breach of or
29
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the rights of such Seller or alter the
rights or obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the Seller's Company Capital Stock pursuant to, any
obligation to which such Seller is a party or by which such Seller may be bound.
(ii) Contractual Consents. No Consent under any Contract is
required to be obtained in connection with the execution, delivery or
performance of this Agreement or any other Transaction Document by any Seller or
the consummation by such Seller of the transactions contemplated hereby or
thereby.
(iii) Governmental Consents. No Consent of any Governmental Entity
is required to be obtained or made by any Seller in connection with the
execution, delivery and performance of this Agreement or any other Transaction
Document by such Seller or the consummation by such Seller of the transactions
contemplated hereby or thereby.
(d) Certain Contracts. Except as set forth in Section 2.01(u) of the
Company Disclosure Schedule, such Seller is not, and no Affiliate of such Seller
is, a party to any Contract with the Company or any Contract in any manner
relating to or in any way affecting Sellers' Outstanding Shares.
(e) Brokers' and Finders' Fees. No Seller has incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any other Transaction Document to which such Seller is a party or any
transaction contemplated hereby or thereby.
(f) Disclosures. Neither this Agreement (including any Exhibit or
Schedule hereto) nor any other Transaction Document to which such Seller is a
party nor any certificate furnished to Buyer by such Seller in connection with
the transactions contemplated in this Agreement or any other Transaction
Document to which any Seller is a party, when read together, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. No Seller has any
knowledge of any information or fact that has or would have a Material Adverse
Effect on the Company that has not been disclosed to Buyer in this Agreement
(including the Exhibits and Schedules hereto).
(g) No Other Representations. Sellers are not making any
representations or warranties, expressed or implied, of any nature whatsoever
except as specifically set forth in this Agreement (including any Exhibits or
Schedules hereto).
Section 2.03 Representations and Warranties of Buyer and Merger Sub. Buyer
and the Merger Sub each represent and warrant to the Company as follows (with
the understanding that the Company and the Sellers are relying on such
representations and warranties in entering into and performing this Agreement):
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(a) Organization, Standing and Power. Each of Buyer and the Merger Sub
is a corporation duly organized, validly existing, and in good standing under
the laws of Delaware, and has all requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted.
(b) Authority and Due Execution. Each of Buyer and the Merger Sub has
all requisite corporate power and authority to enter into this Agreement and any
other Transaction Documents to which it is a party and to consummate the
transactions contemplated hereby or thereby. The execution and delivery of this
Agreement and the other Transaction Documents to which Buyer or the Merger Sub
is a party and the consummation by Buyer or the Merger Sub of the transactions
contemplated hereby or thereby have been duly authorized by all necessary
corporate action on the part of Buyer and the Merger Sub, and no other corporate
proceedings on the part of the Company are necessary to authorize the execution,
delivery and performance of this Agreement and the other Transaction Documents
by Buyer and the Merger Sub or to consummate the transactions contemplated
hereby or thereby. This Agreement and the other Transaction Documents to which
Buyer or the Merger Sub is a party have been, or upon execution and delivery
will be, duly executed and delivered and constitute, or upon execution and
delivery will constitute, the valid and binding obligations of Buyer or the
Merger Sub enforceable against it in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights
generally and subject, as to enforceability, to general principles of equity.
(c) Non-Contravention and Consents.
(i) Non-Contravention. The execution and delivery of this Agreement
and each other Transaction Document by Buyer and the Merger Sub does not, and
the performance of this Agreement and each other Transaction Document by Buyer
and the Merger Sub will not, (A) conflict with or violate Buyer's or the Merger
Sub's certificate or articles of incorporation or bylaws, in each case as
amended to date and currently in effect, or (B) conflict with or violate any
Applicable Laws or (C) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair the rights of Buyer or the Merger Sub or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of Buyer's or the Merger Sub's assets or properties
pursuant to, any obligation to which Buyer or the Merger Sub is a party or by
which Buyer or the Merger Sub may be bound.
(ii) Contractual Consents. No Consent under any agreement to which
Buyer or the Merger Sub is a Party is required to be obtained in connection with
the execution, delivery or performance of this Agreement or any other
Transaction Document by Buyer or the Merger Sub or the consummation of the
transactions contemplated hereby or thereby.
(iii) Governmental Consents. No Consent of any Governmental Entity
is required to be obtained or made by Buyer or the Merger Sub in connection with
the execution, delivery and performance of this Agreement or any other
Transaction Document by Buyer or the Merger Sub or the consummation of the
transactions contemplated hereby or thereby.
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(d) Brokers' and Finders' Fees. Neither Buyer nor the Merger Sub has
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any other Transaction Document to which Buyer or the
Merger Sub is a party or any transaction contemplated hereby or thereby.
(e) Sufficient Funds. Buyer has sufficient funds available to pay the
Merger Consideration and to perform its other obligations pursuant to this
Agreement.
(f) Independent Investigation. Buyer and Merger Sub acknowledge that,
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE COMPANY AND SELLERS HAVE
NOT MADE, AND THE COMPANY AND SELLERS HEREBY EXPRESSLY DISCLAIM AND NEGATE, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OF ANY KIND OR NATURE WHATSOEVER
RELATING TO THE COMPANY, ITS ASSETS OR BUSINESS (INCLUDING ANY IMPLIED OR
EXPRESSED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE). As
of the date of this Agreement, Buyer is not aware of any breach of the
representations or warranties made by the Company or Sellers in Sections 2.01
and 2.02.
ARTICLE THREE
COVENANTS
Section 3.01 Additional Agreements. Subject to the terms and conditions of
this Agreement, each of the parties hereto will use commercially reasonable
efforts to do, or cause to be taken all action and to do, or cause to be done,
all things necessary, proper, or advisable under Applicable Laws to consummate
and make effective the transactions contemplated by this Agreement or any other
Transaction Document. Without limiting the generality of the foregoing, if,
after the Closing Date, Buyer or the Surviving Company seeks indemnification or
recovery from one or more other parties to a Material Contract or otherwise
seeks to enforce such Material Contract and, in order to obtain such
indemnification, recovery or enforcement, it is necessary for any Seller to
initiate a suit, participate in any enforcement proceeding or otherwise provide
assistance to Buyer or the Surviving Company, then, at the request and the sole
expense of Buyer, such party will take such action as Buyer may reasonably
request in connection with Buyer's or the Surviving Company's efforts to obtain
such indemnification, recovery or enforcement.
Section 3.02 Non-Solicitation and Non-Competition. Each Seller other than
Midwest, severally with respect to itself and not jointly, agrees as follows:
(a) Non-Solicitation.
(i) The Sellers acknowledge and agree that the proprietary
information of the Company includes confidential data pertaining to customers of
the Company, that such data and goodwill are valuable and unique assets of the
Company's business and that the success or failure of the Company's highly
specialized business is dependent in large part upon the ability of the Company
and its Affiliates to establish and maintain close and continuing personal
contacts and working relationships with such customers, and to develop proposals
which are specifically devised, refined and adjusted to meet, satisfy and
coincide with the interests and requirements of such customers. Therefore, until
the later of (a) two years after the Effective Date, and (b) one year after
32
termination of such Seller's employment with the Surviving Company or one of its
Affiliates, each Seller agrees that it will not, for any reason, individually or
collectively or in conjunction with others, directly or indirectly, solicit any
customer or prior customer of the Company or the Surviving Company to terminate
such customer's relationship with the Surviving Company or to become a customer
of the Sellers or any other Person, if the Sellers or such other Person offers
products or services which are competitive with those offered by the Surviving
Company.
(ii) The Sellers acknowledge that the success of the Company's and
the Surviving Company's business is dependent in large part upon the ability of
the Surviving Company to attract, hire and retain experienced, qualified
employees. Therefore, until the later of (a) two years after the Effective Date,
and (b) one year after termination of such Seller's employment with the
Surviving Company or one of its Affiliates, each Seller agrees that it will not,
for any reason, individually or collectively or in conjunction with others, on
its own behalf or on behalf of any other person, business or entity, directly or
indirectly: (A) solicit the services of any employee or former employee or agent
of the Company or the Surviving Company, or (B) solicit any of the employees or
agents of the Surviving Company to terminate their employment or agency with the
Surviving Company.
(b) Non-Competition. For the period beginning on the Closing Date and
ending on the later of (a) two years after the Closing Date and (b) one year
after such Seller ceases to be an employee of the Surviving Company or one of
its Affiliates for any reason, each Seller will not, and each Seller will ensure
that any Person directly or indirectly controlling, controlled by or under
common control with such Seller will not, directly or indirectly manage,
operate, control, participate in, engage in or become interested in or connected
with in any way with (including as a partner, stockholder, member, manager,
investor, owner, director, officer, employee, agent or consultant, except with
respect to the ownership of five percent (5%) or less of the outstanding capital
stock or partnership interests of a publicly traded corporation or partnership),
or lend any money to or guaranty any obligations of (except with respect to the
ownership of five percent (5%) or less of the outstanding debt securities of a
publicly traded corporation or partnership) any Person that is engaged in a
business that is competitive with the Business of the Surviving Company at the
Closing Date, anywhere within the United States.
(c) Interim Relief. The Sellers acknowledge that damages alone would be
an insufficient remedy for Buyer, the Surviving Company and their Affiliates,
and that Buyer, the Surviving Company and their Affiliates would suffer
irreparable injury, if the Sellers violate this Section 3.02. Accordingly,
Buyer, the Surviving Company and their Affiliates, upon application to a court
of competent jurisdiction, will be entitled to injunctive relief to enforce the
provisions of this Section 3.02 in the event of any breach, or threatened
breach, of its terms. The Sellers will reimburse Buyer, the Surviving Company
and their Affiliates for any costs and expenses (including reasonable legal
fees) incurred by Buyer, the Surviving Company and their Affiliates in
connection therewith. Buyer's, the Surviving Company's and their Affiliates'
right to seek injunctive relief pursuant to this Section 3.02 will be in
addition to any other remedies they may have at law or in equity. Buyer, the
Surviving Company and their Affiliates will additionally be entitled to
reasonable attorneys' fees incurred in enforcing the provisions of this
Agreement. No waiver of any violation of this Agreement will be implied from any
failure by Buyer, the Surviving Company or their Affiliates to take action under
this subsection.
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(d) Reasonable Limitations. Although Buyer, the Surviving Company and
the Sellers understand and believe that the limitations as to time, geographical
area and scope of activity contained in this Section 3.02 are reasonable and do
not impose a greater restraint than necessary to protect the goodwill or other
business interest of Buyer, the Company, the Surviving Company and their
Affiliates, if it is judicially determined not to be the case, such limitations
will be reformed to the extent necessary to make such limitations reasonable and
not to impose a restraint that is greater than necessary to protect the goodwill
or other business interest of Buyer, the Surviving Company and their Affiliates.
Section 3.03 Conduct of Business. Except as specifically permitted under
this Agreement or to the extent that Buyer shall otherwise consent in writing
(which consent shall not be unreasonably withheld), from the date of this
Agreement until the Closing, the Company covenants and agrees with Buyer that
the Company shall not:
(a) fail to act in the ordinary course of business and consistent with
past practices of the Company to (i) preserve substantially intact the Company's
present business organization and (ii) preserve its present relationships with
customers, suppliers and others having business dealings with it, except, in
each case, where such failure would not be reasonably likely to have a Material
Adverse Effect;
(b) fail to use commercially reasonable efforts to maintain the
material tangible assets of the Company in their current physical condition,
except for ordinary wear and tear;
(c) except for amendments, terminations or non-renewals in the ordinary
course of business and consistent with past practices of the Company, materially
amend, terminate or fail to use its commercially reasonable efforts to renew any
Material Contract;
(d) merge or consolidate with or into any other Person, dissolve or
liquidate;
(e) except in the ordinary course of business and consistent with past
practices of the Company or as required by the terms and provisions of written
contracts between the Company and an employee thereof as in existence on the
date of this Agreement, (i) adopt or amend any Employee Benefit Plan or (ii)
increase in any manner the aggregate compensation or fringe benefits of any
director, officer or employee of the Company;
(f) acquire (including by merger, consolidation or the acquisition of
any equity interest or assets), lease or dispose of any assets except
dispositions of assets completed in the ordinary course of business;
(g) mortgage, pledge or subject to any Lien any of its material assets;
(h) except as required by GAAP or by Applicable Law, change any of the
material accounting principles or practices used by the Company;
(i) pay, discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than in the ordinary course of business and consistent with
past practices of the Company;
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(j) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or property) in respect of, any of
its capital stock or other voting securities, (ii) adjust, split, combine, or
reclassify any of its capital stock or other voting securities or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or other voting securities, or
(iii) except in the case of an employee whose employment has terminated,
purchase, redeem or otherwise acquire any shares of capital stock or other
voting securities of the Company or any Options or Restricted Stock Units;
(k) except for the issuance of shares of capital stock of the Company
issuable upon the exercise of any Options or other rights set forth on Section
2.01(b)(i)(D) of the Company Disclosure Schedule, issue, sell, pledge, dispose
of, encumber or deliver (whether through the issuance or granting of any
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any capital stock or voting securities of any class or any securities
convertible into or exercisable or exchangeable for shares of capital stock or
voting securities of any class (except for the issuance of certificates in
replacement of lost certificates);
(l) change or amend its articles of incorporation or bylaws;
(m) except for current liabilities within the meaning of GAAP incurred
in the ordinary course of business and consistent with past practices of the
Company, incur or assume any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become liable or responsible for the obligations of any
other Person (other than endorsements of checks in the ordinary course) or make
any loans, advances or capital contributions to, or investments in, any Person;
(n) make any settlement of or compromise any Tax liability, change in
any material respect any Tax election or Tax method of accounting or make any
new Tax election or adopt any new Tax method of accounting;
(o) authorize any of, or commit or agree to take any of, the foregoing
actions; or
(p) enter into any agreement with any employee, officer, director, or
Stockholder of the Company.
Section 3.04 Third Party Consents. After the date of this Agreement and
prior to the Closing, the Company shall use its commercially reasonable efforts
to obtain the Consent from any party to a Material Contract that is required to
be set forth on Section 2.01(s) of the Company Disclosure Schedule.
Section 3.05 Notification of Certain Matters. Each of the Company and Buyer
shall give prompt notice to the other of (i) the occurrence, or failure to
occur, of any event of which it has knowledge that has caused any of its
representations or warranties contained in this Agreement to be untrue or
inaccurate in any material respect and (ii) the failure of such party to comply
with or satisfy in any material respect any covenant to be complied with by it
hereunder. No such notification shall affect the representations or warranties
of the parties or the conditions to their respective obligations hereunder.
35
Section 3.06 Company Transaction Costs. No later than two (2) Business Days
prior to the Closing Date, the Company shall provide the amount, in the
aggregate, of all Company Transaction Costs that are to be paid or caused to be
paid by Buyer at Closing and shall provide Buyer with a certificate setting
forth (a) the identity of each Person that is to be paid at Closing; (b) the
amount owed or to be owed to each such Person; and (c) the bank account and wire
transfer information for each such Person.
Section 3.07 Pay-Off Letters. No later than two (2) Business Days prior to
the Closing Date, the Company shall cause each of its creditors under the
Indebtedness Agreements to prepare and deliver to the Company and Buyer a
Pay-Off Letter, which Pay-Off Letters shall be updated, as necessary, on the
Closing Date to specify the aggregate amount of Indebtedness outstanding as of
immediately prior to the Closing, and shall specifically authorize the Company
and Buyer to file termination statements with respect to any Lien existing
pursuant to such Indebtedness Agreements.
Section 3.08 Access and Information. Until the Closing, the Company shall
afford to Buyer and its representatives (including accountants and counsel)
reasonable access to all properties, books, records, and Tax Returns of the
Company and all other information with respect to its business, together with
the opportunity, at the sole cost and expense of Buyer, to make copies of such
books, records and other documents and to discuss the business of the Company
with such directors, officers and counsel for the Company as Buyer may
reasonably request for the purposes of familiarizing itself with the Company.
Notwithstanding the foregoing provisions of this Section 3.08, the Company shall
not be required to grant access or furnish information to Buyer or any of
Buyer's representatives to the extent that such information is subject to an
attorney/client or attorney work product privilege unless Buyer and Company
mutually agree to enter into a common-interest privilege agreement to protect
such privilege. Notwithstanding the foregoing, Buyer shall not have access to
personnel records of the Company relating to individual performance or
evaluation records, medical histories or other information that could subject
the Company to risk of liability. All information provided pursuant to this
Agreement shall remain subject in all respects to the Confidentiality Agreement
until the Effective Time.
Section 3.09 Bank Accounts. The Company shall take all actions necessary to
remove all existing signatories to all bank accounts of the Company as of the
Closing Date and to replace such signatories effective as of the Closing Date
with individuals to be designated at least two (2) days prior to the Closing
Date by Buyer.
Section 3.10 Required Stockholder Approval.
(a) Promptly following the execution and delivery of this Agreement,
the Company shall notice a special meeting of the Stockholders pursuant to and
in accordance with the applicable provisions of the ABCA and the Company's
Articles of Incorporation to obtain the Required Stockholders Approval. The
Company shall promptly deliver an information statement to the Stockholders
(including information regarding the Company, the terms of the Merger and this
Agreement and the transactions contemplated hereby) pursuant to and in
accordance with the ABCA and the Company's Articles of Incorporation, which
Information Statement shall include the notices required by the ABCA and that
dissenters' rights are available. The Company agrees to use all reasonable
efforts to take all action necessary or advisable to secure the Required
Stockholder Approval. The Company's Board of Directors shall recommend the
Merger to the Stockholders.
36
(b) As an inducement to Buyer and the Merger Sub to enter into this
Agreement, each Seller acknowledges and agrees that:
(i) Such Seller shall not sell, transfer, pledge, encumber or
otherwise dispose of any of the Outstanding Shares owned (or obtainable upon
exercise of options) by him, her or it (other than pursuant to this Agreement or
pursuant to laws of descent) and shall not enter into any other agreement to do
the foregoing. In addition, such Seller shall not grant any proxies, deposit any
Outstanding Shares into a voting trust or enter into any other voting agreement
with respect to such Seller's Outstanding Shares.
(ii) Such Seller shall, at any meeting for the purpose of the vote
of the Stockholders and at every adjournment thereof, vote all of the
Outstanding Shares then owned, beneficially or of record, by such Seller in
favor of the Merger and this Agreement, and such Seller shall vote such
Outstanding Shares against any other merger or consolidation involving the
Company or any of its subsidiaries and any other transaction that would
terminate, prevent or hinder the Merger.
(iii) Such Seller hereby waives his, her or its dissenters rights
or rights to appraisal under the ABCA with respect to the Outstanding Shares
owned (or obtainable upon exercise of options) by such Seller, and agrees that
he, she or it shall not attempt to influence, encourage or persuade any person
or entity to exercise any appraisal or dissenters rights such person or entity
may have in connection with the Merger.
(iv) None of the information specifically supplied or to be
supplied by such Seller with respect to such Seller for inclusion in any written
materials provided to Stockholders in connection with the Merger or the vote of
the Stockholders shall (at the time of delivery or at the time of the vote of
the Stockholders) contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein, in light of
the circumstances in which they were made, not misleading.
Section 3.11 No Negotiation.
(a) Until the earlier of (x) the Closing and (y) the termination of
this Agreement in accordance with Article Six, the Company agrees that it will
not, and will not permit any of its representatives to directly or indirectly:
(i) solicit or encourage the initiation or submission of any
proposal or offer from any Person (other than Buyer or an Affiliate thereof)
relating to an Acquisition Transaction;
(ii) participate in any discussions or negotiations or enter into
any agreement with, or provide any non-public information to, any Person (other
than Buyer or any Affiliate thereof) relating to or in connection with a
proposal or offer made by such person relating to an Acquisition Transaction; or
37
(iii) assist or cooperate with any Person (other than Buyer or any
Affiliate thereof) to make any proposal or offer, accept any proposal or offer
from any Person (other than Buyer or any Affiliate thereof) relating to an
Acquisition Transaction.
(b) The Company shall advise Buyer within one (1) Business Day of (i)
the receipt by the Company or any representative of the Company of any proposal
or offer from any Person relating to an Acquisition Transaction; (ii) the
material terms of such Acquisition Transaction (which the Company shall describe
in writing, and which shall include any conditions to such Acquisition
Transaction, and the amount and form of consideration offered therein); and
(iii) the identity of the Person making any such proposal or offer for an
Acquisition Transaction except to the extent explicitly prohibited by the terms
of an agreement existing prior to the date hereof, in which case, the Company
will (x) provide to Buyer the maximum amount of information that is allowable
under the restriction at issue and (y) cooperate with Buyer in determining the
nature and extent of the information so provided. The Company shall keep Buyer
reasonably and currently informed regarding any Acquisition Transaction.
Section 3.12 Intentionally Omitted.
Section 3.13 Tax Matters.
(a) Buyer shall prepare and timely file (taking into account extensions
granted), or cause to be prepared and timely filed, any Tax Returns for the
Company for any period that ends on or prior to the Closing Date that are
required to be filed after the Closing Date. All such Tax Returns shall be
prepared using Tax accounting methods and principles, including depreciation
methods and other accounting methods which may be elected or adopted annually,
which are consistent with those used in the Tax Returns of the Company for
preceding Tax periods, unless a different treatment is required by Law. In
preparing such Tax Returns, Buyer shall not make any election with respect to
the computation of any item of income, deduction or credit of the Company
inconsistent with the preparation of prior years' Tax Returns, unless a
different treatment is required by Law. Buyer shall use its commercially
reasonable efforts to make such Tax Returns available for review sufficiently in
advance of the due date for filing such Tax Returns to provide the
Representative with a meaningful opportunity to analyze and comment on such Tax
Returns before filing, and in any event, Buyer shall make such Tax Returns
available for review by the Representative at least twenty (20) days prior to
their due date (giving effect to extensions, if any) together with a statement
of the amount of Buyer Indemnified Taxes with respect to such Tax Return. Buyer
shall make such changes and revisions to such Tax Returns as requested by the
Representative to the extent such changes and revisions relate to Taxes for a
period ending on or prior to the Closing Date and to the extent that such
changes and revisions are consistent with applicable Law and such changes could
not reasonably be expected to have an adverse effect on Buyer or the Company in
any period after Closing. No later than five (5) days prior to the due date for
the payment of any Taxes with respect to any such Tax Return (giving effect to
extensions, if any), the Representative, on behalf of the Securityholders, shall
pay to Buyer the amount of any Buyer Indemnified Taxes with respect to such Tax
Return.
38
(b) Buyer shall be liable to the Securityholders for, and shall hold
the Securityholders harmless from and against, any and all Taxes due or payable
by the Company that are not Buyer Indemnified Taxes.
(c) In the case of Taxes that are payable with respect to any Straddle
Period, the portion of any such Tax that is attributable to the portion of the
period ending on and including the Closing Date shall be:
(i) in the case of Taxes that are either (A) based upon or related
to income or receipts, or (B) imposed in connection with any sale or other
transfer or assignment of property (real or personal, tangible or intangible),
deemed equal to the amount that would be payable if the Taxable period of the
Company ended with (and included) the Closing Date; and
(ii) in the case of Taxes that are imposed on a periodic basis with
respect to the assets of the Company, deemed to be the amount of such Taxes for
the entire Straddle Period (or, in the case of such Taxes determined on an
arrears basis, the amount of such Taxes for the immediately preceding period),
multiplied by a fraction the numerator of which is the number of calendar days
in the portion of the period ending on and including the Closing Date and the
denominator of which is the number of calendar days in the entire period.
(d) Any refunds or credits of Taxes that were paid in respect of any
period ending on or prior to the Closing Date shall be for the account of the
Securityholders (except to the extent included as a Current Asset on the Final
Balance Sheet in the calculation of the Final Working Capital or attributable to
the carryback of net operating losses or other Tax attributes incurred after the
Closing Date), and any refund or credits of Taxes that were paid in respect of
any period following the Closing Date shall be for the account of Buyer. Buyer
or the Representative, on behalf of the Securityholders, as applicable, shall
pay the amount of any such refunds or credits to the other party within five (5)
days after receipt thereof.
(e) If Buyer or the Surviving Company becomes aware of any assessment,
official inquiry, examination or proceeding (a "Tax Proceeding") that could
result in an official determination with respect to any Buyer Indemnified Tax,
Buyer shall promptly so notify the Representative; provided, however, that the
failure to so notify the Representative shall not relieve the Securityholders of
their obligations with respect to such Buyer Indemnified Tax unless, and only to
the extent that, such failure results in actual prejudice to the
Securityholders. If the Representative becomes aware of any Tax Proceeding that
could result in an official determination with respect to Taxes related to the
Surviving Company, the Representative shall promptly so notify Buyer; provided,
however, that the failure to so notify Buyer shall not relieve Buyer of its
obligation under Section 3.13(b) unless, and only to the extent that, such
failure results in actual prejudice to Buyer.
(f) Subject to the provisions of this Section 3.13(f), the
Representative, on behalf of the Securityholders, shall have the right to
exercise control over the contest and/or settlement of any issue raised in any
Tax Proceeding that relates solely to Buyer Indemnified Taxes and the
Securityholders shall pay any expenses incurred in connection therewith;
provided, however, that (i) Buyer shall be entitled to participate in any such
Tax Proceeding and the Representative shall keep Buyer informed of all material
developments with respect thereto and (ii) the Representative may not settle or
39
compromise any issue that could affect the liability of Buyer or the Surviving
Company for any period following the Closing without the prior written consent
of Buyer, which such consent shall not be unreasonably withheld, conditioned or
delayed. Buyer shall cooperate with the Representative, as the Representative
may reasonably request, in any such Tax Proceeding. If the Representative does
not notify the Buyer within thirty (30) days after receipt of notice of any such
Tax Proceeding that the Representative elects to exercise control over the
contest and/or settlement thereof (and acknowledge the Securityholders'
obligation to indemnify Buyer with respect thereto Buyer shall exercise such
control, and the Securityholders shall pay any reasonable expenses in connection
therewith. No settlement of any inquiry, examination or proceeding over which
Buyer shall exercise control and with respect to which the Representative has
acknowledged the Securityholders' obligation to indemnify Buyer shall be made
without the prior written consent of the Representative, which consent shall not
be unreasonably withheld, conditioned or delayed.
(g) Except as provided in Section 3.13(f), Buyer shall have the right
to exercise control over the contest and/or settlement of any issue raised in
any Tax Proceeding with respect to Taxes related to the Surviving Company;
provided; however, that (i) Buyer shall keep the Representative informed of all
material developments with respect to such Tax Proceeding if it relates to any
Buyer Indemnified Taxes and (ii) Buyer shall not settle or compromise any such
Tax Proceeding that relates to any Tax for which the Securityholders could be
liable, except after good faith consultation with the Representative concerning
such settlement or compromise. Any reasonable expenses incurred in connection
therewith shall (y) be paid by the Securityholders to the extent that they
relate to any Buyer Indemnified Taxes and (z) shall be paid by Buyer to the
extent that such expenses relate to a Tax that is not a Buyer Indemnified Tax.
(h) The Representative and Buyer shall provide each other with any
information reasonably necessary to prepare and file complete and accurate Tax
Returns.
(i) Any disputes arising with respect to this Section 3.13 shall be
resolved by the Referee pursuant to the procedures set forth in Section 1.12(b)
regarding submission of unresolved items by the Referee.
Section 3.14 Severance Obligations.
(a) Notwithstanding the provisions of that certain Change In Control
Agreement, dated November 5, 2004, between Debbie Drysdale ("Drysdale") and the
Company (the "Drysdale Agreement"), Buyer, the Sellers and the Company agree as
follows with respect to the payment of the severance obligations to Drysdale
pursuant to the Drysdale Agreement: (a) the Company shall pay the obligations
set forth in Sections 4(a)(i) and 4(a)(iii) of the Drysdale Agreement at the
Closing; (b) the Surviving Company shall pay the obligations set forth in
Section 4(a)(iv) of the Drysdale Agreement (otherwise known as the Drysdale
Severance Payment on Schedule I hereto) at the Closing for the benefit of the
Securityholders (as the payment has been deducted from the Closing Merger
Consideration as provided in Schedule I), and shall assume the obligations in
Section 4(a)(v) of the Drysdale Agreement; and (c) Buyer shall pay the
obligations set forth in Section 4(a)(ii) of the Drysdale Agreement at the
Closing. Buyer, the Company, and the Surviving Company understand that the
payments to Drysdale under the Drysdale Agreement should not violate Code
40
Section 409A and the regulations promulgated thereunder, and Buyer and the
Surviving Company, as appropriate, intend to issue Drysdale's Form W-2 for 2007
in a manner consistent with this understanding; provided, however, that, for the
avoidance of doubt, this provision shall in no way be interpreted to be a
guarantee or indemnity of any sort by Buyer, the Company, or the Surviving
Company with respect to any tax liability (including, without limitation, any
penalties and interest) that Drysdale may be determined to owe, and Drysdale
shall be solely responsible for any such tax liability. Drysdale is expressly
made an intended third party beneficiary of this Section 3.14, and this Section
3.14 may be enforced by Drysdale without joinder of any other Person.
(b) Except as provided in Section 3.14(a), all employee severance
obligations that are triggered by the change in control that results from the
Merger will be satisfied by the Company and will not be, directly or indirectly,
the obligation or liability of the Sellers or the Securityholders.
Section 3.15 Director and Officer Indemnification. Buyer agrees that all
rights to indemnification (including advancement of expenses) existing on the
date hereof in favor of the present or former directors and officers (and other
employees to the extent currently covered) of the Company with respect to
actions taken in their capacities as directors, officers or employees of the
Company prior to Closing as provided in the Company's Articles of Incorporation
or Bylaws and indemnification agreements shall survive the Closing and continue
in full force and effect for a period of six years following the Closing. The
Company's present and former directors, officers and employees are hereby
expressly made intended third party beneficiaries of this Section 3.15, and this
Section 3.15 may be enforced by all or any of them without joinder of any other
Person.
ARTICLE FOUR
CONDITIONS PRECEDENT
Section 4.01 Conditions to Each Party's Obligation. The respective
obligations of Buyer, the Merger Sub, and the Company to effect the transactions
contemplated hereby are subject to the satisfaction on or prior to the Closing
Date of the following conditions:
(a) Consents and Approvals. All authorizations, Consents, orders, or
approvals of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity necessary for the consummation of the
transactions contemplated by this Agreement will have been filed, occurred, or
been obtained.
(b) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction, or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated by this Agreement or any other
Transaction Document will be in effect.
(c) No Action. No action will have been taken nor any statute, rule, or
regulation will have been enacted by any Governmental Entity that makes the
consummation of the transactions contemplated by this Agreement or any other
Transaction Document illegal.
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Section 4.02 Conditions to Obligation of Buyer. The obligation of Buyer and
the Merger Sub to effect the transactions contemplated hereby is subject to the
satisfaction of the following conditions unless waived, in whole or in part, by
Buyer:
(a) Representations and Warranties. The representations and warranties
of the Company and each Seller set forth in this Agreement will be true and
correct in all material respects (provided that any representation or warranty
of the Company and any Seller contained herein that is qualified by a
materiality standard or a Material Adverse Effect qualification will not be
further qualified hereby) as of the Closing Date as though made on and as of the
Closing Date, and Buyer and the Merger Sub will have received a certificate to
such effect signed by the Company and a certificate to such effect signed by
each Seller.
(b) Performance of Obligations. The Company and the Sellers will have
performed all obligations required to be performed by them under this Agreement
prior to the Closing Date, and Buyer and the Merger Sub will have received a
certificate to such effect signed by the Company and a certificate to such
effect signed by each Seller.
(c) Material Adverse Effect. There shall not have occurred a Material
Adverse Effect.
(d) Consents Under Agreements. Buyer and the Merger Sub will have been
furnished with evidence reasonably satisfactory to them of the consent or
approval of each party to a Material Contract (including evidence of the payment
or any required payment) whose consent or approval will be required in order to
permit the consummation of the transactions contemplated hereby or to prevent a
breach of such Contract or the creation of a right to terminate such Contract,
and such consent or approval will be in form and substance reasonably
satisfactory to Buyer and the Merger Sub.
(e) Legal Opinion. Buyer and the Merger Sub will have received from
counsel to the Sellers and the Company, an opinion dated the Closing Date, in
substantially the form attached hereto as Exhibit F.
(f) Closing Deliveries. All documents, instruments, certificates or
other items required to be delivered by the Company and the Sellers will have
been delivered.
(g) Pay-off Letters. Buyer will have received from each creditor of the
Company that holds Indebtedness under an Indebtedness Agreement a pay off letter
(each, a "Pay-Off Letter"), in the form and substance reasonably satisfactory to
Buyer, addressed to Buyer and the Surviving Company signed by such creditor
setting forth, (i) the amounts required to pay off in full at the Closing the
Indebtedness owing to such creditor (including, but not limited to, the
outstanding principal, accrued and unpaid interest and prepayment and other
penalties), (ii) upon payment of such amounts, a complete release of the
Surviving Company, and (iii) the agreement of such creditor that the Surviving
Company may, upon payment of such amounts, release all liens, if any, which such
creditor may hold on any of the assets of the Surviving Company within a
designated time period after the Closing Date.
(h) Required Stockholder Approval. The Company will have obtained the
Required Stockholder Approval.
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(i) Certificate of Non-Foreign Status. Buyer will have received a
certificate of non foreign status of each Seller which meets the requirements of
Treasury Regulation Section 1.1445-2(b)(2).
(j) Employment Arrangements. Buyer will have received from (i) at least
75% of the Company's current employees, and (ii) each of the Key Employees an
executed copy of Buyer's standard offer letter and employment agreement
substantially in the form attached hereto as Exhibit G (with the appropriate
paragraphs included, as described in Exhibit G), pursuant to which each such
employee agrees to be employed by the Surviving Company upon the terms and
conditions set forth in such agreements. Those employment agreements executed by
the Key Employees are herein referred to as the "Key Employment Agreements".
(k) Termination of Management and Oversight Agreement. Buyer will have
received evidence, in form and substance reasonably satisfactory to Buyer, of
the termination of that certain Management and Oversight Agreement, dated March
30, 2000, by and between the Company and Alerion Capital Group (the "Management
Agreement").
(l) Issuance of Environmental Insurance Coverage. Buyer will have
received, in form and substance reasonably satisfactory to Buyer, evidence of
the issuance of an insurance policy to be purchased on behalf of Buyer and the
Surviving Company, and to be in effect upon Closing, with respect to certain
potential environmental liabilities relating to the Company and its operations
in an amount, for a cost, and by an insurance company reasonably satisfactory to
Buyer.
Section 4.03 Conditions to Obligations of the Company. The obligation of
the Company and the Sellers to effect the transactions contemplated hereby is
subject to the satisfaction of the following conditions unless waived, in whole
or in part, by the Company.
(a) Representations and Warranties. The representations and warranties
of Buyer and the Merger Sub set forth in this Agreement will be true and correct
in all material respects (provided that any representation or warranty of Buyer
or the Merger Sub contained herein that is qualified by a materiality standard
will not be further qualified hereby) as of the Closing Date as though made on
and as of the Closing Date, and the Company and the Sellers will have received a
certificate to such effect signed by Buyer and the Merger Sub.
(b) Performance of Obligations of Buyer. Buyer and the Merger Sub will
have performed the obligations required to be performed by them under this
Agreement prior to the Closing Date, and the Company and the Sellers will have
received a certificate to such effect signed by Buyer and the Merger Sub.
(c) Closing Deliveries. All documents, instruments, certificates or
other items required to be delivered by Buyer and the Merger Sub will have been
delivered.
(d) Issuance of Environmental Insurance Coverage. The Representative
will have received, in form and substance reasonably satisfactory to the
Representative, evidence of the issuance of an insurance policy to be purchased
on behalf of the Securityholders, and to be in effect upon Closing, with respect
to certain potential environmental liabilities relating to the Company and its
operations in an amount, for a cost, and by an insurance company reasonably
satisfactory to the Representative (the "Securityholders Insurance Policy").
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ARTICLE FIVE
CLOSING
Section 5.01 Closing. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Article Six, and subject to the satisfaction or waiver of the conditions set
forth in Article Four, the Closing shall take place at 9:00 a.m., on a date not
later than the fifth business day following satisfaction or waiver of the
conditions set forth in Article Four, at the offices of Vinson & Elkins L.L.P.,
The Terrace 7, 2801 Via Fortuna, Austin, Texas, unless another date, time or
place is mutually agreed to in writing by Buyer and the Company. If any of the
conditions set forth in Article Four are not satisfied or waived at the time the
Closing is to occur pursuant to this Section 5.01, Buyer or the Company may, by
notice to the other, adjourn the Closing to a date specified in that notice (but
not later than the Termination Date).
Section 5.02 Actions to Occur at Closing.
(a) At the Closing, Buyer and Merger Sub shall deliver or pay, as the
case may be, the following in accordance with the applicable provisions of this
Agreement:
(i) Closing Merger Consideration. To accounts designated by the
Representative and the Company in accordance with Section 1.10(a)(iv), the
portion of the Closing Merger Consideration relating to those Securityholders
that have delivered to Buyer a Letter of Transmittal and stock certificate for
cancellation (or an affidavit of lost certificate as contemplated by the Letter
of Transmittal), Option Surrender Agreement and/or Restricted Stock Unit
Surrender Agreement (as applicable) prior to the Closing Date;
(ii) Escrow Agreement. To the Representative, a counterpart of the
Escrow Agreement executed by Buyer and Escrow Agent;
(iii) Escrow Amount. To the Escrow Agent, by wire transfer of
immediately available funds, the Escrow Amount;
(iv) Indebtedness Pay-Off Amount. To the creditors under the
Indebtedness Agreements, by wire transfer of immediately available funds, the
Indebtedness Pay-Off Amount in accordance with the Pay-Off Letters;
(v) Paid Company Transaction Costs. To the accounts designated by
the Company, by wire transfer of immediately available funds, the Paid Company
Transaction Costs, in accordance with Section 1.10(a)(iii); and
(vi) Certificates. The certificates described in Sections 4.03(a)
and (b).
(vii) Key Employees Employment Agreements. The Key Employment
Agreements, executed by the Buyer on behalf of the Surviving Company.
44
(viii) Drysdale Payments. To Drysdale, the payments under the
Drysdale Agreement required to be paid by Buyer and the Surviving Company
pursuant to Section 3.14(a).
(b) At the Closing, the Company and the Sellers shall deliver to Buyer
the following:
(i) Resignations. The resignations of the officers and directors of
the Company as described in Section 1.14;
(ii) Escrow Agreement. A counterpart of the Escrow Agreement
executed by the Representative;
(iii) Bank Accounts. Evidence of the replacement of the Company's
bank account signatories with Buyer's designees;
(iv) Termination of Management Agreement. Evidence of the
termination of the Management Agreement;
(v) Certificates. The certificates described in Section 4.02(a) and
(b);
(vi) Legal Opinion. From counsel to the Sellers and the Company, an
opinion dated the Closing Date, in substantially the form attached hereto as
Exhibit F;
(vii) Closing Balance Sheet. Pursuant to Section 1.11, the Closing
Balance Sheet;
(viii) Key Employees Employment Agreements. The Key Employee
Agreements, each executed by the appropriate Key Employee; and
(ix) General Employee Employment Agreements. Written confirmation
that at least 75% of the Company's current employees have executed copy of
Buyer's standard offer letter and employment agreement substantially in the form
attached hereto as Exhibit G (with the appropriate paragraphs included, as
described in Exhibit G), and copies of such executed offer letters and
employment agreements.
(c) After receipt of the respective items listed above, the Company and
Buyer shall cause the Articles of Merger to be properly executed and filed with
the Arizona Corporation Commission.
ARTICLE SIX
TERMINATION, AMENDMENT AND WAIVER
Section 6.01 Termination. This Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of Buyer and the Company; or
45
(b) by Buyer if the Company has not delivered to Buyer on or before the
date fifteen days after the date of this Agreement evidence to Buyer's
reasonable satisfaction of the obtainment of the Required Stockholder Approval.
(c) by either Buyer or the Company:
(i) if there shall have been any breach by the other party (which,
in the case of the right of termination by the Company, shall also include any
breach by the Merger Sub, and in the case of the right of termination by Buyer,
shall also include any breach by any Seller) of any representation, warranty,
covenant or agreement set forth in this Agreement, which breach (B) would give
rise to the failure of a condition to the Closing hereunder and (C) either (1)
cannot be cured or (2) if it can be cured, has not been cured prior to the first
to occur of (x) 5:00 p.m. on the date that is five (5) days following receipt by
the breaching party of written notice of such breach or (y) 5:00 p.m. on the
date immediately preceding the Termination Date (the "Cure Period");
(ii) if a court of competent jurisdiction or other Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(which order, decree or ruling Buyer and the Company shall use their reasonable
best efforts to lift), in each case permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and the
other Transaction Documents and such order, decree, ruling or other action shall
have become final and nonappealable; or
(iii) if the Closing shall not have occurred on or before 5:00 p.m.
on August 31, 2007 (the "Termination Date"); provided, however, that the right
to terminate this Agreement under this clause (iii) shall not be available to
any party whose breach of this Agreement (and in the case of the Company, any
breach of this Agreement by any Seller; and in the case of Buyer, any breach by
the Merger Sub) has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date.
Section 6.02 Effect of Termination. In the event of the termination of this
Agreement by either the Company or Buyer as provided in Section 6.01, this
Agreement shall forthwith become void and there shall be no liability or
obligation hereunder on the part of Buyer, Merger Sub, the Company, the Sellers
or their respective Affiliates, directors, officers, employees or stockholders,
except that this Article Six and Article Eight shall survive such termination.
Notwithstanding the foregoing, termination of this Agreement pursuant to this
Article Eight shall not in any way terminate, limit or restrict the rights and
remedies of any party against any other party that has breached this Agreement
before termination.
Section 6.03 Return of Information. Within ten (10) Business Days following
termination of this Agreement in accordance with Section 6.01, Buyer shall, and
shall cause Merger Sub and their respective Affiliates and representatives to,
return to the Company, or destroy, all Confidential Information (as defined in
the Confidentiality Agreement) furnished or made available to Buyer and Merger
Sub and their respective Affiliates and representatives by or on behalf of the
Company, and all analyses, compilations, data, studies, notes, interpretations,
memoranda or other documents prepared by Buyer or Merger Sub or any of their
respective Affiliates or representatives (including electronic copies thereof)
that refer to, relate to, discuss or contain, or are based on, in whole or in
part, any such Information.
46
ARTICLE SEVEN
INDEMNIFICATION
Section 7.01 Indemnification of the Buyer Indemnified Parties.
(a) Subject to the provisions of this Article Seven, each Seller
severally and not jointly agrees to indemnify and hold harmless the Buyer
Indemnified Parties from and against any and all Buyer Indemnified Seller Costs
caused by or relating to such Seller.
(b) Subject to the provisions of this Article Seven, by execution of
this Agreement by the Sellers or of a Letter of Transmittal, an Option Surrender
Agreement and/or a Restricted Stock Unit Surrender Agreement by the other
Securityholders, the Securityholders shall each be severally liable (along with
all other Securityholders) to indemnify and hold harmless the Buyer Indemnified
Parties from and against any and all Buyer Indemnified Costs with each
Securityholder being liable for such Securityholder's pro rata portion of the
amount of the Buyer Indemnified Costs, based upon the percentage that the
Securityholders share the Closing Merger Consideration.
Section 7.02 Indemnification of Seller Indemnified Parties. Subject to the
provisions of this Article Seven, Buyer and the Surviving Company, jointly and
severally agree to indemnify and hold harmless each of the Seller Indemnified
Parties from and against any and all Seller Indemnified Costs.
Section 7.03 Defense of Third Party Claims. An Indemnified Party will give
prompt written notice to any Person who is obligated to provide indemnification
hereunder (an "Indemnifying Party") of the commencement or assertion of any
action, proceeding, demand, or claim by a third party (collectively, a "Third
Party Action") in respect of which such Indemnified Party will seek
indemnification hereunder. Any failure so to notify an Indemnifying Party will
not relieve such Indemnifying Party from any liability that it, he, or she may
have to such Indemnified Party under this Article Seven unless the failure to
give such notice materially and adversely prejudices such Indemnifying Party.
Other than with respect to a Third Party Action relating to any Tax due from the
Surviving Company or Buyer, the Indemnifying Party will have the right to assume
control of the defense of, settle, or otherwise dispose of such Third Party
Action on such terms as it deems appropriate; provided, however, that:
(a) The Indemnified Party will be entitled, at its own expense, to
participate in the defense of such Third Party Action (provided, however, that
the Indemnifying Parties will pay the reasonable attorneys' fees of the
Indemnified Party if (i) the employment of separate counsel will have been
authorized in writing by all Indemnifying Parties in connection with the defense
of such Third Party Action, (ii) the Indemnifying Parties will not have employed
counsel reasonably satisfactory to the Indemnified Party to have charge of such
Third Party Action, (iii) the Indemnified Party will have reasonably concluded
that there may be defenses available to such Indemnified Party that are
different from or additional to those available to the Indemnifying Party, or
(iv) the Indemnified Party's counsel will have advised the Indemnified Party in
writing, with a copy delivered to the Indemnifying Party, that there is a
conflict of interest that could make it inappropriate under applicable standards
of professional conduct to have common counsel);
47
(b) The Indemnifying Party will obtain the prior written approval of
the Indemnified Party before entering into or making any settlement, compromise,
admission, or acknowledgment of the validity of such Third Party Action or any
liability in respect thereof if, pursuant to or as a result of such settlement,
compromise, admission, or acknowledgment, injunctive or other equitable relief
would be imposed against the Indemnified Party or if, in the reasonable opinion
of the Indemnified Party, such settlement, compromise, admission, or
acknowledgment could have an adverse effect on its business;
(c) No Indemnifying Party will consent to the entry of any judgment or
enter into any settlement that does not include as an unconditional term thereof
the giving by each claimant or plaintiff to each Indemnified Party of a release
from all liability; and
(d) The Indemnifying Party will not be entitled to control (but will be
entitled to participate at its own expense in the defense of), and the
Indemnified Party will be entitled to have sole control over, the defense or
settlement, compromise, admission, or acknowledgment of any Third Party Action
(i) relating to any Tax to be collected from a Buyer Indemnified Party or an
Affiliate of a Buyer Indemnified Party; (ii) as to which the Indemnifying Party
fails to admit liability in writing delivered to the Indemnified Party and/or
fails to assume the defense within a reasonable length of time; (iii) to the
extent the Third Party Action seeks an order, injunction, or other equitable
relief against the Indemnified Party which, if successful, would materially
adversely affect the business, operations, assets, or financial condition of the
Indemnified Party; or (iv) that involves an amount that exceeds the limits set
forth in Section 7.08; provided, however, in the case of (ii) and (iii), that
the Indemnified Party will make no settlement, compromise, admission, or
acknowledgment that would give rise to liability on the part of any Indemnifying
Party without the prior written consent of such Indemnifying Party.
The parties hereto will extend reasonable cooperation in connection with
the defense of any Third Party Action pursuant to this Article Seven and, in
connection therewith, will furnish such records, information, and testimony and
attend such conferences, discovery proceedings, hearings, trials, and appeals as
may be reasonably requested.
Section 7.04 Direct Claims. In any case in which an Indemnified Party seeks
indemnification hereunder which is not subject to Section 7.03 because no Third
Party Action is involved, the Indemnified Party will notify the Indemnifying
Party in writing of any Indemnified Costs which such Indemnified Party claims
are subject to indemnification under the terms hereof. Subject to the
limitations set forth in this Article Seven and Section 7.03, the failure of the
Indemnified Party to exercise promptness in such notification will not amount to
a waiver of such claim unless the resulting delay materially and adversely
prejudices the position of the Indemnifying Party with respect to such claim.
Section 7.05 No Contribution. Effective as of the Closing, the Sellers
hereby waive and release any and all rights that they may have under this
Agreement or any other Transaction Document to assert claims of contribution
against the Company. The Securityholders (other than the Sellers) shall execute
48
the Letter of Transmittal, the Option Surrender Agreement and/or the Restricted
Stock Unit Surrender Agreement, as applicable, pursuant to which they shall
waive and release any and all rights that they may have under this Agreement or
any other Transaction Document to assert claims of contribution against the
Company.
Section 7.06 Procedures for Claims Against, and Distributions of, Funds
Deposited With Escrow Agent.
(a) Claims. At the time a Buyer Indemnified Party gives, or at any time
after a Buyer Indemnified Party gives, an Indemnifying Party written notice of
such Buyer's Indemnified Party's indemnification claim pursuant to Section
7.01(b) or Section 7.03, Buyer may make a written claim against the Escrow
Amount held by the Escrow Agent (a "Claim") by delivering written notice of the
same (the "Claim Notice") to the Escrow Agent as more particularly provided in
the Escrow Agreement (in which event Buyer will provide a copy of such Claim
Notice to the Indemnifying Party and the Representative). Any such Claim Notice
will include, as more particularly provided in the Escrow Agreement, a brief
description of the Claim and the amount (which may be a reasonable estimate) of
the Claim. Upon receipt of a Claim Notice, the Escrow Agent will, as more
particularly provided in the Escrow Agreement, segregate from the Escrow Amount
into a separate account (the "Pending Claims Account") a portion of the Escrow
Amount as necessary to satisfy and pay the amount of the Claim as stated in the
Claim Notice and the Escrow Agent will only thereafter distribute any amounts so
deposited to the Pending Claims Account in accordance with the Joint Written
Instructions of Buyer and the Representative or a Final Court Order as provided
in Section 7.06(b) below and in the Escrow Agreement. No Claim may be made to
the Escrow Agent for an indemnification claim against a Seller pursuant to
Section 7.01(a).
(b) Distributions.
(i) Pursuant to Section 1.12, the amount, if any, by which any
Final Adjustment Deficiency exceeds the Holdback Amount shall be paid by the
Escrow Agent to Buyer within the time specified in Section 1.12;
(ii) On the six (6) month anniversary of the Closing Date, the
Escrow Agent will, as more particularly provided in the Escrow Agreement,
distribute to the Representative for the benefit of the Securityholders fifty
percent (50%) of the Escrow Amount, less all amounts then segregated in the
Pending Claims Account.
(iii) On the Expiration Date, the Escrow Agent will, as more
particularly provided in the Escrow Agreement, distribute to the Representative
for the benefit of the Securityholders the balance of the Escrow Amount, less
all amounts then segregated in the Pending Claims Account.
(iv) Except as provided above, the Escrow Agent will only
distribute the Escrow Amount, including all amounts at any time segregated in
the Pending Claims Account, in accordance with joint written instructions of
Buyer and the Representative given to the Escrow Agent (a "Joint Written
Instruction") or a final, non-appealable judgment of a court of competent
jurisdiction accompanied by an opinion of counsel to the party presenting such a
judgment as to certain matters as more particularly provided in the Escrow
Agreement (a "Final Court Order").
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Section 7.07 Minimum Loss Requirement.
(a) Anything in this Article Seven to the contrary notwithstanding,
except with respect to Buyer Indemnified Taxes, Buyer Indemnified Environmental
Matters or a breach of the Specified Representations, the Securityholders will
not be obligated to indemnify a Buyer Indemnified Party pursuant to this Article
Seven unless and until the Buyer Indemnified Parties' aggregate Buyer
Indemnified Costs exceed $100,000, in which event the Securityholders will be
obligated to indemnify the Buyer Indemnified Parties as provided in this Article
Seven for all Buyer Indemnified Costs including, but not limited to, the first
$100,000 of such Buyer Indemnified Costs, subject always to the limits set forth
in Section 7.08.
(b) Anything in this Article Seven to the contrary notwithstanding,
Buyer will not be obligated to indemnify a Seller Indemnified Party pursuant to
this Article Seven unless and until the Seller Indemnified Parties' aggregate
Seller Indemnified Costs exceed $100,000, in which event Buyer and the Surviving
Company will be obligated to indemnify the Seller Indemnified Parties as
provided in this Article Seven for all Seller Indemnified Costs including, but
not limited to, the first $100,000 of such Seller Indemnified Costs, subject
always to the limits set forth in Section 7.08.
(c) All materiality qualifications contained in the Sellers and/or the
Company's representations and warranties made in Article Two of this Agreement
or any other Transaction Document, including the term "Material Adverse Effect",
shall be taken into account under this Article Seven solely for purposes of
determining whether a breach or violation has occurred for which an indemnity
obligation exists. Without limiting the generality of the foregoing, all such
qualifications shall be ignored and not given effect for purposes of determining
whether the $100,000 threshold set forth in this section has been surpassed, or
the amount of any Buyer Indemnified Cost resulting from any such breach or
violations, after it has been determined that a breach or violation has
occurred.
Section 7.08 Indemnification Limits.
(a) Anything in this Article Seven to the contrary notwithstanding, the
Securityholders will only be obligated to indemnify the Buyer Indemnified
Parties pursuant to this Article Seven for Buyer Indemnified Costs that in the
aggregate are equal to or less than the Escrow Amount (the "Escrow Amount
Claims"); provided, however, that (i) with respect to Buyer Indemnified Costs
that are Buyer Indemnified Environmental Matters or result from a breach of the
Specified Representations, the Securityholders will be obligated to indemnify
the Buyer Indemnified Parties pursuant to this Article Seven for Buyer
Indemnified Costs that are in the aggregate equal to or less than $12,600,000,
less any Escrow Amount Claims previously paid and less any amounts previously
paid pursuant to the following clause (ii), and (ii) with respect to Buyer
Indemnified Costs that are Buyer Indemnified Taxes, the Securityholders will be
obligated to indemnify the Buyer Indemnified Parties pursuant to this Article
Seven for Buyer Indemnified Costs that are in the aggregate equal to or less
than the Closing Merger Consideration, less any Escrow Amount Claims previously
paid and less any amounts previously paid pursuant to the preceding clause (i).
For the avoidance of doubt, the foregoing limitations shall not apply to claims
pursuant to Section 7.01(a).
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(b) Buyer and the Surviving Company will only be obligated to indemnify
the Seller Indemnified Parties pursuant to this Article Seven for Seller
Indemnified Costs that in the aggregate are equal to or less than the Escrow
Amount.
Section 7.09 Recourse Under Escrow Agreement. The rights of the Buyer
Indemnified Parties to make claims against the funds held by the Escrow Agent
under the Escrow Agreement will not be the Buyer Indemnified Parties' exclusive
remedy with respect to indemnification under this Article Seven, and the Buyer
Indemnified Parties will be entitled to all other rights and remedies, at law or
in equity, against the Securityholders for the Buyer Indemnified Costs, subject
to the indemnification limits set forth in Section 7.08(a). However, the Buyer
Indemnified Parties must exhaust all funds in the Escrow Account (if any) prior
to collecting any funds from the Securityholders directly. The Buyer Indemnified
Parties may not proceed against the Escrow Amount for any Buyer Indemnified
Seller Costs, for which the applicable Seller will be liable to the Buyer
Indemnified Parties without limitation and for which the Buyer Indemnified
Parties may seek any and all rights and remedies, at law or equity, against the
Seller in breach. The Securityholders acknowledge that although some or all of
the Escrow Amount may be released to the Securityholders, subject to the
provisions of Section 7.06(b) and the Escrow Agreement, the Securityholders
shall remain liable to the Buyer Indemnified Parties for amounts in excess of
the amount then held in the Escrow Account, subject to the indemnification
limitations set forth in Section 7.08(a) and the time limitations set forth in
Section 8.01.
Section 7.10 Characterization of Payments. For all income Tax purposes, the
parties agree to treat (and shall cause each of their respective Affiliates to
treat) any indemnity payment under this Agreement as an adjustment to the
consideration payable to the Securityholders pursuant to Article One unless a
final and nonappealable determination by an appropriate Governmental Entity
(which shall include the execution of an IRS Form 870-AD or successor form)
provides otherwise; provided, that the Indemnifying Person's prior written
consent (which will not be unreasonably withheld, conditioned or delayed) will
be obtained by the Indemnified Person who seeks to accept, via a settlement or
compromise with any such Governmental Entity, a position that is contrary to
treatment of an indemnity payment as an adjustment to the Merger consideration
payable to the Securityholders pursuant to Article One.
ARTICLE EIGHT
GENERAL PROVISIONS
Section 8.01 Survival of Representations, Warranties, and Covenants.
Regardless of any investigation at any time made by or on behalf of any party
hereto or of any information any party may have in respect thereof, each of the
representations and warranties made in this Agreement or any other Transaction
Document will survive the Closing except as provided below. The representations
and warranties set forth in this Agreement will terminate at 11:59 p.m. Central
Standard Time on the Expiration Date; except that such time limitation will not
apply to any of the following claims or to a party's rights to recover on such
claims, and any representations and warranties relating thereto will survive (a)
until 11:59 p.m. Central Standard Time on the third anniversary of the Effective
51
Time with respect to claims for Buyer Indemnified Costs that are Buyer
Indemnified Environmental Matters or resulting from a breach of any Specified
Representation, and (b) until sixty (60) days after the expiration of the
applicable statute of limitations with respect to (i) claims for fraud pursuant
to Section 8.03 and (ii) claims for Buyer Indemnified Costs that are Buyer
Indemnified Taxes. Following the date of termination of a representation or
warranty, no claim can be brought with respect to a breach of such
representation or warranty, but no such termination will affect any claim for a
breach of a representation or warranty that was asserted before the date of
termination. Each of the covenants and agreements contained in this Agreement
and each other Transaction Document, will survive the Effective Time until fully
performed.
Section 8.02 Further Actions. After the Closing Date, the Sellers will
execute and deliver such other certificates, agreements, conveyances, and other
documents, and take such other action, as may be reasonably requested by Buyer
in order to give effect to the transactions contemplated by this Agreement.
Section 8.03 No Waiver Relating to Claims for Fraud. The liability of any
party under Article Seven will be in addition to, and not exclusive of, any
other liability that such party may have at law or equity based on such party's
fraudulent acts or omissions. None of the provisions set forth in this
Agreement, including the provisions set forth in Article Seven, will be deemed a
waiver by any party to this Agreement of any right or remedy which such party
may have at law or equity based on any other party's fraudulent acts or
omissions, nor will any such provisions limit, or be deemed to limit, (a) the
amounts of recovery sought or awarded in any such claim for fraud, (b) the time
period during which a claim for fraud may be brought, or (c) the recourse which
any such party may seek against another party with respect to a claim for fraud;
provided, that with respect to such rights and remedies at law or equity, the
parties further acknowledge and agree that none of the provisions of this
Section 8.03, nor any reference to this Section 8.03 throughout this Agreement,
will be deemed a waiver of any defenses which may be available in respect of
actions or claims for fraud, including defenses of statutes of limitations or
limitations of damages.
Section 8.04 Amendment and Modification. This Agreement may not be amended
except by an instrument in writing signed by all parties hereto.
Section 8.05 Waiver of Compliance. Any failure of Buyer or the Surviving
Company, on the one hand, or the Sellers or the Company, on the other hand, to
comply with any obligation, covenant, agreement, or condition contained herein
may be waived only if set forth in an instrument in writing signed by the party
or parties to be bound by such waiver, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement, or condition will
not operate as a waiver of, or estoppel with respect to, any other failure.
Section 8.06 Specific Performance. The parties recognize that in the event
the Sellers and/or the Company should refuse to perform under the provisions of
this Agreement, monetary damages alone will not be adequate. The Buyer will
therefore be entitled, in addition to any other remedies which may be available,
including money damages, to obtain specific performance of the terms of this
Agreement. In the event of any action to enforce this Agreement specifically,
the Sellers and the Company hereby waive the defense that there is an adequate
remedy at law.
52
Section 8.07 Severability. If any term or other provision of this Agreement
is invalid, illegal, or incapable of being enforced by any rule of Applicable
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 herein are 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
Governmental Entity making such determination is authorized and instructed to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in order that the transactions contemplated herein are
consummated as originally contemplated to the fullest extent possible.
Section 8.08 Expenses and Obligations. Except as otherwise expressly
provided in this Agreement, all costs and expenses incurred by the parties
hereto in connection with the transactions contemplated by this Agreement shall
be borne solely and entirely by the party that has incurred such expenses.
Section 8.09 Parties in Interest. This Agreement will be binding upon and,
except as provided in Section 3.14 and Section 3.15 or as provided below with
respect to the Indemnified Parties, inure solely to the benefit of each party
hereto and their successors and assigns and, from and after Closing, the
Securityholders, whether or not they are parties hereto, and nothing in this
Agreement, express or implied, is intended to confer upon any other person
(other than as provided in Section 3.14 and Section 3.15 and except with respect
to the Indemnified Parties as provided in Article Seven and, from and after
Closing, except with respect to the Securityholders who are not also parties
hereto) any rights or remedies of any nature whatsoever under or by reason of
this Agreement.
Section 8.10 Notices. All notices and other communications hereunder will
be in writing and will be deemed given if delivered personally, sent by
facsimile, mailed by registered or certified mail (return receipt requested) or
sent by overnight courier to the parties at the following addresses (or at such
other address for a party as will be specified by like notice):
53
Cirrus Logic, Inc.
2901 Via Fortuna
Austin, Texas 78746
Attention: General Counsel
Telephone: (512) 851-4950
Facsimile: (512) 851-4500
with a copy to:
Vinson & Elkins L.L.P.
The Terrace 7
2801 Via Fortuna, Suite 100
Austin, Texas 78746
Attention: J. Wesley Jones
Telephone: (512) 542-8703
Facsimile: (512) 236-3251
Apex Microtechnology Corporation
5980 N. Shannon Road
Tucson, Arizona 85741
Attention: Debbie Drysdale
Telephone: (520) 690-8600
Facsimile: (520) 888-3329
with a copy to:
AMI Group, LLC
c/o Alerion Capital Group, L.L.C.
7702 East Doubletree Ranch Road
Suite 350
Scottsdale, Arizona 85258
Attention: James A. Unruh
Telephone: (480) 367-0900
Facsimile: (480) 367-0936
and a copy to:
Midwest-Apex, LLC
135 S. LaSalle Street
Suite 3510
Chicago, IL 60603
Attention: David Gezon
Telephone: (312) 992-4580
Facsimile: (312) 992-4595
54
and a copy to:
Ballard Spahr Andrews & Ingersoll, LLP
3300 N. Central Ave., Suite 1800
Phoenix, AZ 85012
Attention: Karen C. McConnell
Telephone: (602) 798-5403
Facsimile: (602) 997-3114
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
will be effective only upon receipt. All notices, requests or instructions given
in accordance herewith will be deemed given (a) on the date of delivery, if hand
delivered, (b) on the date of receipt, if sent by facsimile during normal
business hours on a Business Day, and otherwise on the next Business Day, (c)
three (3) business days after the date of mailing, if mailed by registered or
certified mail, return receipt requested, and (d) one (1) business day after the
date of sending, if sent by Federal Express or other recognized overnight
courier.
Section 8.11 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, all of which
will be considered one and the same agreement and will become effective when one
or more counterparts have been signed by each of the parties and delivered to
the other parties, it being understood that all parties need not sign the same
counterpart.
Section 8.12 Entire Agreement. Except for (a) the other Transaction
Documents, and (b) the letter agreement with respect to confidentiality, dated
as of May 19, 2006, by and between Buyer and the Company (the "Confidentiality
Agreement"), this Agreement (which term will be deemed to include the Exhibits
and Schedules hereto and the other certificates, documents and instruments
delivered hereunder) constitutes the entire agreement of the parties hereto and
supersedes all prior agreements, letters of intent and understandings, both
written and oral, among the parties with respect to the subject matter hereof.
The Confidentiality Agreement will remain in full force and effect after the
Closing Date and will not be affected in any respect by the execution, delivery
or performance of this Agreement. There are no representations or warranties,
agreements, or covenants other than those expressly set forth in this Agreement
or the other Transaction Documents.
Section 8.13 Public Announcements. Except for statements made, filings or
press releases required by law, the Company and the Sellers, on the one hand,
and Buyer, on the other, will consult with each other before issuing any press
release or otherwise making any public statements with respect to this Agreement
or the transactions contemplated hereby.
Section 8.14 Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.
55
Section 8.15 Arbitration.
(a) If a dispute, controversy or claim ("Dispute") arises between the
Company and/or Sellers and Buyer relating to the interpretation or performance
of this Agreement, or the grounds for the termination hereof or thereof,
Sellers, the Company and Buyer intend that all such Disputes shall be settled by
them amicably through good faith discussions upon the written request of
Sellers, the Company or Buyer. Discussions and correspondence relating to trying
to resolve such Dispute shall be treated as confidential information developed
for the purpose of settlement and shall be exempt from discovery or production
and shall not be admissible as evidence in any proceeding.
(b) If any Dispute cannot be resolved through discussion within a
period of thirty (30) days, Sellers, the Company or Buyer may demand arbitration
by filing a written demand with the other within sixty (60) days after the
expiration of the first thirty (30)-day period. Such Dispute shall be finally
settled by binding arbitration, which shall take place in Wilmington, Delaware.
The arbitration shall be administered by JAMS pursuant to its Comprehensive
Arbitration Rules and Procedures. Such arbitration will be conducted with an
arbitration panel of three (3) arbitrators. Sellers, the Company and Buyer shall
each select one arbitrator, and the two arbitrators selected shall jointly
select the third arbitrator. Any award shall be rendered by a majority of the
arbitrators. Any judgment upon the award so rendered may be entered in any court
having jurisdiction, or application may be made to such court for judicial
acceptance of any award and an order of enforcement, as the case may be. The
decision of the arbitrators shall be final and non-appealable.
(c) The parties agree to have all Disputes decided by neutral binding
arbitration as provided in clause (b) above, and each party acknowledges that it
is giving up any rights it might possess to have such matters litigated in a
court or jury trial; provided, however, that each party may proceed directly to
court for the specific performance remedy provided in Section 8.06. Each party
acknowledges that it is giving up its judicial rights to discovery and appeal
except to the extent that they are specifically provided for under this
Agreement. If Sellers, the Company or Buyer refuses to submit to arbitration
after agreeing to this provision, such party may be compelled to arbitrate under
federal or state Law.
Section 8.16 Jurisdiction; Venue. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the other Transaction Documents or the
transactions contemplated hereby or thereby may only be brought in the United
States District Court for the District of Delaware, and each of the parties
hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum.
Section 8.17 Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder will be assigned by any of the parties
hereto, whether by operation of law or otherwise; provided, however, that upon
notice to the Sellers, (a) Buyer may assign or delegate any or all of its rights
56
or obligations under this Agreement to any Affiliate thereof and (b) nothing in
this Agreement will limit Buyer's ability to make a collateral assignment of its
rights under this Agreement to any lender that provides funds to Buyer, in each
case without the consent of the Surviving Company, the Sellers or the Company.
The Surviving Company, the Company and the Sellers will execute an
acknowledgment of such assignments and collateral assignments in such forms as
Buyer or its lenders may from time to time reasonably request; provided,
however, that unless written notice is given to the Surviving Company, the
Company and the Sellers that any such collateral assignment has been foreclosed
upon, the Surviving Company, the Company and the Sellers will be entitled to
deal exclusively with Buyer as to any matters arising under this Agreement or
any of the other agreements delivered pursuant hereto. In the event of such an
assignment, the provisions of this Agreement will inure to the benefit of and be
binding on Buyer's assigns, but Buyer shall not be relieved of liability
hereunder. Any attempted assignment in violation of this Section 8.17 will be
null and void.
Section 8.18 Headings. The headings of this Agreement are for convenience
of reference only and are not part of the substance of this Agreement.
ARTICLE NINE
THE REPRESENTATIVE
By their execution and delivery of this Agreement, the Company, the
Sellers, Buyer, Merger Sub and the Representative hereby agree as follows:
Section 9.01 Authorization of the Representative.
(a) As a condition to receiving the Per Share Closing Merger
Consideration, each of the Securityholders (other than holders of Dissenting
Shares) shall agree in a Letter of Transmittal, Option Surrender Agreement,
Restricted Stock Unit Surrender Agreement, or other documentation acceptable to
Buyer to be bound by (i) the provisions of this Agreement, (ii) the Escrow
Agreement, (iii) the appointment of the Representative as the agent and
attorney-in-fact of such holder for the purposes of this Agreement and the
Escrow Agreement (including to receive payments pursuant to this Agreement on
behalf of the Securityholders), and (iv) the taking by the Representative of any
and all actions and the making of any decisions required or permitted to be
taken by him under the Escrow Agreement, including the exercise of the power to
authorize delivery to any Indemnified Party of cash out of the Escrow Account in
satisfaction of claims by any Indemnified Party pursuant to this Agreement. The
Representative hereby is appointed, authorized and empowered to act as the agent
of the Securityholders in connection with, and to facilitate the consummation of
the transactions contemplated by, this Agreement and the other Transaction
Documents, and in connection with the activities to be performed on behalf of
the Securityholders under this Agreement and the Escrow Agreement, for the
purposes and with the powers and authority hereinafter set forth in this Article
Nine and in the Escrow Agreement, which shall include the full power and
authority:
(i) to execute and deliver the Escrow Agreement (with such
modifications or changes thereto as to which the Representative, in his
reasonable discretion, shall have consented to) and to agree to such amendments
or modifications thereto as the Representative, in his reasonable discretion,
may deem necessary or desirable to give effect to the matters set forth in
Article Seven and this Article Nine;
57
(ii) to take such actions and to execute and deliver such waivers
and consents in connection with this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby as the Representative, in his reasonable discretion, may deem necessary
or desirable to give effect to the intentions of this Agreement and the other
Transaction Documents;
(iii) as the Representative of the Securityholders, to enforce and
protect the rights and interests of the Securityholders and to enforce and
protect the rights and interests of the Representative arising out of or under
or in any manner relating to this Agreement, the Escrow Agreement and each other
Transaction Document and, in connection therewith, to (A) resolve all questions,
disputes, conflicts and controversies concerning (1) the determination of any
amounts (including Closing Merger Consideration, Working Capital Amounts, Per
Share Closing Merger Consideration, the Final Adjustment Surplus (if any) and
Per Share Escrow Distribution Amount) pursuant to Article One and (2) the
determination of any Buyer Indemnified Costs, (B) employ such agents,
consultants and professionals, to delegate authority to its agents, to take such
actions and to execute such documents on behalf of the Securityholders in
connection with this Agreement and the Escrow Agreement as the Representative,
in his reasonable discretion, deems to be in the best interest of the
Securityholders, (C) assert or institute any claim, action, Proceeding or
investigation, (D) investigate, defend, contest or litigate any claim, action,
Proceeding or investigation initiated by Buyer or the Merger Sub, or any other
Person, against the Representative and/or the Escrow Amount, and receive process
on behalf of any or all Securityholders in any such claim, action, Proceeding or
investigation and compromise or settle on such terms as the Representative shall
determine to be appropriate, and give receipts, releases and discharges on
behalf of all of the Securityholders with respect to any such claim, action,
Proceeding or investigation, (E) file any proofs, debts, claims and petitions as
the Representative may deem advisable or necessary, (F) settle or compromise any
claims asserted under this Agreement or under the Escrow Agreement, (G) assume,
on behalf of all of the Securityholders, the defense of any claim that is the
basis of any claim asserted under this Agreement or under the Escrow Agreement,
and (H) file and prosecute appeals from any decision, judgment or award rendered
in any of the foregoing claims, actions, Proceedings or investigations, it being
understood that the Representative shall not have any obligation to take any
such actions, shall not have liability for any failure to take such any action,
and shall not be responsible to the Securityholders if some or all of the Escrow
Amount is paid to Buyer in satisfaction of Buyer Indemnified Costs, it being
understood and agreed by all Securityholders that no assurances can be given
that they will ultimately receive all or any portion of the Escrow Amount;
(iv) to enforce payment from the Escrow Amount and of any other
amounts payable to the Securityholders, in each case on behalf of the
Securityholders, in the name of the Representative;
(v) to authorize and cause to be paid out of the Escrow Amount the
full amount of any Buyer Indemnified Costs in favor of any Buyer Indemnified
Party, and also any other amounts to be paid out of the Escrow Amount, pursuant
to this Agreement and the Escrow Agreement;
58
(vi) to receive and cause to be paid to Securityholders in
accordance with Schedule I any payment of Closing Merger Consideration, Final
Adjustment Surplus (if any), Escrow Distributions or other payments to be made
for the benefit of Securityholders received by the Representative;
(vii) to waive or refrain from enforcing any right of the
Securityholders or any of them and/or of the Representative arising out of or
under or in any manner relating to this Agreement, the Escrow Agreement or any
other Transaction Document; and
(viii) to make, execute, acknowledge and deliver all such other
agreements, guarantees, orders, receipts, endorsements, notices, requests,
instructions, certificates, stock powers, letters and other writings, and, in
general, to do any and all things and to take any and all action that the
Representative, in his sole and absolute direction, may consider necessary or
proper or convenient in connection with or to carry out the activities described
in subparagraphs (i) through (vii) above and the transactions contemplated by
this Agreement, the Escrow Agreement and the other Transaction Documents.
(b) Buyer, Merger Sub, and the Surviving Company shall be entitled to
rely exclusively upon the communications of the Representative relating to the
foregoing as the communications of the Securityholders, and such communications
of the Representative shall be fully binding upon the Securityholders. None of
Buyer, Merger Sub or the Surviving Company (i) need be concerned with the
authority of the Representative to act on behalf of all Securityholders
hereunder, or (ii) shall be held liable or accountable in any manner for any act
or omission of the Representative in such capacity.
(c) Notwithstanding anything to the contrary contained herein, the
parties acknowledge and agree that (i) the Representative may not enter into or
grant any amendments or modifications described in Section 9.01(a)(i) or waivers
or consents described in Section 9.01(a)(ii) unless such amendments,
modifications, waivers or consents shall affect each Securityholder similarly
and to the same relative extent, and (ii) any such amendment, modification,
waiver or consent that does not affect any Securityholder similarly and to the
same relative extent as it affects other Securityholders must be executed by
such Securityholder to be binding on such Securityholder.
(d) The grant of authority provided for in this Section 9.01 (i) is
coupled with an interest and is being granted, in part, as an inducement to the
Company, Buyer and Merger Sub to enter into this Agreement and shall be
irrevocable and survive the death, incompetency, bankruptcy or liquidation of
any Securityholder and shall be binding on any successor thereto, and (ii) shall
survive any distribution from the Escrow Amount.
(e) If the Representative shall die, become disabled or otherwise be
unable to fulfill his responsibilities as agent of the Securityholders, then
Ricardo DeAvila shall be appointed as a successor representative and shall
become the "Representative" for purposes of this Agreement and the Escrow
Agreement.
59
Section 9.02 Compensation; Exculpation; Indemnity.
(a) The Representative shall not be entitled to any fee, commission or
other compensation for the performance of his service hereunder. Notwithstanding
the foregoing, the Representative is not required to use his own funds in
connection with the performance of his obligations, and the Representative shall
not be required to expend funds or to engage counsel, public accountants or
other advisors unless the Securityholders have made adequate provision for the
out of pocket cost thereof. Without limiting the generality of the foregoing,
the Securityholders agree that the Representative may use the proceeds otherwise
payable to them from the Escrow Account to pay third party costs and expenses
incurred by the Representative in furtherance of fulfilling the Representative's
obligations under this Agreement; provided that the Representative shall from
time to time provide a reasonable accounting of such costs and expenses to the
Securityholders.
(b) In dealing with this Agreement, the Escrow Agreement and any
instruments, agreements or documents relating thereto, and in exercising or
failing to exercise all or any of the powers conferred upon the Representative
hereunder or thereunder, (i) the Representative shall not assume any, and shall
incur no, responsibility whatsoever to any Securityholder by reason of any error
in judgment or other act or omission performed or omitted hereunder or in
connection with this Agreement, the Escrow Agreement or any other Transaction
Document, unless by the Representative's gross negligence or willful misconduct,
and (ii) the Representative shall be entitled to rely on the advice of counsel,
public accountants or other independent experts experienced in the matter at
issue, and any error in judgment or other act or omission of the Representative
pursuant to such advice shall in no event subject the Representative to
liability to any Securityholder unless by the Representative's gross negligence
or willful misconduct. Except as set forth in the previous sentence,
notwithstanding anything to the contrary contained herein, the Representative,
in his role as Representative, shall have no liability whatsoever to the
Company, Buyer, Merger Sub or the Surviving Company or any other Person.
(c) Each Securityholder, severally, shall indemnify the Representative
up to, but not exceeding, an amount equal to the aggregate portion of the
amounts received by such Person under Article One, which indemnification shall
be paid by such Securityholder pro rata in accordance with the portion of the
aggregate amounts received by such Person under Article One against all damages,
liabilities, claims, obligations, costs and expenses, including reasonable
attorneys', accountants' and other experts' fees and the amount of any judgment
against it, of any nature whatsoever, arising out of or in connection with any
claim or in connection with any appeal thereof, relating to the acts or
omissions of the Representative hereunder, under the Escrow Agreement or
otherwise, except for such damages, liabilities, claims, obligations, costs and
expenses, including reasonable attorneys', accountants' and other experts' fees
and the amount of any judgment against the Representative that arise from the
Representative's gross negligence or willful misconduct, including the willful
breach of this Agreement or the Escrow Agreement. The foregoing indemnification
shall not be deemed exclusive of any other right to which the Representative may
be entitled apart from the provisions hereof. In the event of any
indemnification under this Section 9.01(c), each Securityholder shall as soon as
reasonably practicable deliver to the Representative full payment of his, her or
its ratable share of such Buyer Indemnification Claim.
60
(d) All of the indemnities, immunities and powers granted to the
Representative under this Agreement shall survive the Closing and/or any
termination of this Agreement and the Escrow Agreement.
[Signature Pages Follow]
61
Executed as of the date first written above.
BUYER:
CIRRUS LOGIC, INC.
By: ____________________________________________
Name: ____________________________________________
Title: ____________________________________________
MERGER SUB:
APEX ACQUISITION COMPANY
By: ____________________________________________
Name: ____________________________________________
Title: ____________________________________________
COMPANY:
APEX MICROTECHNOLOGY
CORPORATION
By: ____________________________________________
Name: ____________________________________________
Title: ____________________________________________
REPRESENTATIVE:
_____________________________________________________
James A. Unruh, solely in his capacity as the
Representative
Signature Page for
Agreement and Plan of Merger
SELLERS:
AMI GROUP, LLC
By: ALERCAP, LLC, its Manager
By:__________________________________________
Name:________________________________________
Title:_______________________________________
By:__________________________________________
Name:________________________________________
Title:_______________________________________
MIDWEST-APEX, LLC
By: ABN AMRO MEZZANINE MANAGEMENT II, INC., its
Manager
By:__________________________________________
Name:________________________________________
Title:_______________________________________
_____________________________________________________
GREGORY L. BRENNAN
_____________________________________________________
DAVID COX
_____________________________________________________
DEBBIE DRYSDALE
_____________________________________________________
DANIEL REID
_____________________________________________________
JAMES THOMPSON
Signature Page for
Agreement and Plan of Merger
EXHIBIT A
DEFINITIONS
(a) The following terms will have the following meanings in this Agreement:
"ABCA" is defined in Section 1.01.
"Acquisition Transaction" shall mean any transaction or series of
related transactions involving: (a) the disposition or acquisition of all or
substantially all of the business or assets of the Company; (b) the sale,
issuance, grant, disposition or acquisition of (i) any capital stock or other
equity security of the Company, (ii) any option, call, warrant or right (whether
or not immediately exercisable) to acquire any capital stock or other equity
security of the Company, or (iii) any security, instrument or obligation that is
or may become convertible into or exchangeable for any capital stock or other
equity security of the Company; or (c) any merger, consolidation, business
combination, tender offer, share exchange, reorganization or similar transaction
involving the Company; provided, however, (i) the issuance of stock by the
Company upon the exercise of Options or warrants outstanding as of the date
hereof will not be deemed to be an Acquisition Transaction and (ii) the Merger
and the other transactions contemplated hereby will not be deemed an Acquisition
Transaction in any case.
"Agreement" means this Agreement and Plan of Merger as defined in the
first paragraph of this Agreement.
"Affiliate" means, with respect to any person, any other person
controlling, controlled by or under common control with such person. For
purposes of this definition and this Agreement, the term "control" (and
correlative terms) means the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a person.
"Applicable Law" or "Applicable Laws" means all laws, statutes,
constitutions, rules, regulations, principals of common law, codes, ordinances,
judgments, orders, decrees, injunctions, and writs of any Governmental Entity
which has jurisdiction over the Company or the businesses, operations or assets
of the Company, as they may be in effect on or prior to the Closing.
"Articles of Merger" is defined in Section 1.02.
"Business" means the business and operations as are currently being
performed by the Company, including the manufacturing and sale of hybrid
microcurrents, open frame surface mount modules and proprietary circuits that
incorporate high power analog operational amplifier or high power PWM driver
technology.
"Business Day" means any day other than a Saturday, a Sunday, or a
holiday on which national banking associations in the State of New York are
authorized by law to close.
"Buyer" is defined in the first paragraph of this Agreement.
Exhibit A-1
"Buyer Indemnified Costs" means all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs, and expenses (including
court costs, reasonable attorneys' fees and other expenses incurred in
investigating and preparing for, or otherwise in connection with, any litigation
or proceeding) that any of the Buyer Indemnified Parties incurs and that relate
to or arise out of:
(a) the inaccuracy or breach of any representation or warranty made by
the Company in Section 2.01 of the Agreement, or in any certificate delivered by
the Company in connection with the Closing;
(b) any nonfulfillment or breach by the Company of any covenant or
agreement made by the Company in this Agreement;
(c) the amount of any Company Transaction Costs incurred and unpaid as
of the Closing Date and not deducted from the Closing Merger Consideration;
(d) the amount of any Indebtedness outstanding at Closing not deducted
from the Closing Merger Consideration;
(e) any claim, suit, action, litigation or Proceeding by any
Securityholder or purported Securityholder of the Company against the Company
and relating to or arising out of such Person's status, or purported status, as
a Securityholder of the Company;
(f) any amounts paid to holders of Dissenting Shares in excess of the
consideration that such holders would otherwise have been entitled to receive
pursuant to Article One;
(g) any Buyer Indemnified Environmental Matters; and
(h) any Buyer Indemnified Taxes.
"Buyer Indemnified Seller Costs" means all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs, and expenses (including
court costs, reasonable attorneys' fees and other expenses incurred in
investigating and preparing for, or otherwise in connection with, any litigation
or proceeding) that any of the Buyer Indemnified Parties incurs and that relate
to or arise out of:
(a) the inaccuracy or breach of any representation or warranty made by
a Seller in Section 2.02 of the Agreement, or in any certificate delivered by a
Seller in connection with the Closing;
(b) any nonfulfillment or breach by a Seller of any of the covenants
set forth in Section 3.02 in this Agreement.
"Buyer Indemnified Environmental Matters" means all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs, and expenses
(including court costs, reasonable attorneys' fees and other expenses incurred
in investigating and preparing for, or otherwise in connection with, any
litigation or proceeding) that any of the Buyer Indemnified Parties incurs and
Exhibit A-2
that relate to or arise at any time on, before, or after the Closing Date, due
to the Release of Hazardous Materials at any time prior to the Closing Date at
(i) any Real Property, or (ii) any property that is offsite from the Real
Property where the Company transported or disposed, or arranged for the
transportation or disposal, of Hazardous Materials.
"Buyer Indemnified Parties" means Buyer, the Merger Sub, the Surviving
Company and each officer, director, employee, consultant, stockholder, and
Affiliate of Buyer, the Merger Sub or the Surviving Company (other than the
Sellers) and each member of an ERISA Group in which Buyer is a member.
"Buyer Indemnified Taxes" means any and all Taxes together with any
costs, expenses or damages (including court and administrative costs and
reasonable legal fees and expenses incurred in investigating and preparing for
any audit, examination, litigation or other judicial or administrative
proceeding) arising out of, in connection with or incident to the determination,
assessment or collection of such Taxes (a) imposed on the Company (including
Taxes imposed on or with respect to the income, business, property or operations
of the Company), or for which the Company may otherwise be liable, with respect
to (i) any Taxable period ending on or prior to the Closing Date or (ii) the
portion of any Straddle Period ending on the Closing Date (determined in
accordance with Section 3.13(c)), (b) arising out of, in connection with, or
related to, a breach of any representation or warranty set forth in Section
2.01(i) (without giving effect to any materiality or knowledge qualifiers that
may be contained therein and without regard to any scheduled items) or covenants
set forth in Section 3.13, (c) that are Taxes due to payments made to
Securityholders pursuant to this Agreement (except for social security,
Medicare, unemployment or other employment Taxes due as a result of the
conversion of the Options and Restricted Stock Units pursuant to Section 1.07,
as to which the Surviving Company shall be required to make and remit proper
withholdings with respect to), (d) of any member of an affiliated, consolidated,
combined or unitary group of which the Company (or any predecessor thereof) is
or was a member on or prior to the Closing Date by reason of Treasury Regulation
ss.1.1502 6(a) or any analogous or similar state or local law or (e) of any
other Person for which the Company is or has been liable as a transferee or
successor, by contract or otherwise; provided, however, that any such Tax shall
not be a Buyer Indemnified Tax to the extent such Tax was included as a
liability in the determination of Final Working Capital as finally determined
pursuant to Section 1.12.
"Certificate" means a stock certificate representing Outstanding
Shares.
"Charter Documents" is defined in Section 2.01(a)(ii).
"Claim" is defined in Section 7.06(a).
"Claim Notice" is defined in Section 7.06(a).
"Class B Preferred Stock" means the preferred stock of the Company, par
value $0.0001 per share, which has been designated by the Company as "Class B
Convertible Preferred Stock".
"Closing" means the consummation of the transactions contemplated by
this Agreement in accordance with the provisions of Article One.
Exhibit A-3
"Closing Balance Sheet" is defined in Section 1.11.
"Closing Date" means the date on which the Closing occurs.
"Closing Merger Consideration" is defined on Schedule I.
"Closing Working Capital" is defined in Section 1.12(a).
"Code" means the United States Internal Revenue Code of 1986, as
amended. All references to the Code, U.S. Treasury regulations or other
governmental pronouncements shall be deemed to include references to any
applicable successor regulations or amending pronouncement.
"Common Stock" means the common stock of the Company, par value $0.0001
per share.
"Company" is defined in the first paragraph of this Agreement.
"Company Accounting Procedures" means GAAP.
"Company Benefit Plans" is defined in Section 2.01(q)(i).
"Company Transaction Costs" means the aggregate of (i) all fees, costs
and expenses of any brokers, financial advisors, consultants, accountants,
attorneys or other professionals engaged by the Company in connection with the
structuring, negotiation or consummation of the transactions contemplated by
this Agreement, (ii) all fees, costs and expenses of any party that are to be
paid by the Company as a result of the transactions contemplated by this
Agreement (other than pursuant to the Drysdale Agreement), and (iii) the cost of
the Securityholders Insurance Policy, in each case whether or not such costs,
fees and expenses have been paid prior to Closing.
"Confidential Information" is defined in Section 2.01(k)(viii).
"Confidentiality Agreement" is defined in Section 8.12.
"Consents" means all consents, approvals, orders or authorizations of,
or registration, qualification, designation, declaration or filing with, any
Governmental Entity, and all consents, waivers and approvals of third Persons.
"Contract" means any written or oral agreement, contract, subcontract,
settlement agreement, lease, instrument, note, option, warranty, purchase order,
license, sublicense, insurance policy, benefit plan or legally binding
commitment or undertaking of any nature to which the Company is a party or by
which the Company, or any of its properties or assets, is bound.
"Cure Period" is defined in Section 6.01.
Exhibit A-4
"Current Assets" means the sum of all current assets of the Company as
of 11:59 p.m. on the day immediately prior to the Closing Date, as determined in
accordance with this Agreement and Company Accounting Procedures; provided,
however, that Current Assets shall not include current and deferred income tax
assets.
"Current Liabilities" means the sum of all current liabilities of the
Company as of 11:59 p.m. on the day immediately prior to the Closing Date, as
determined in accordance with this Agreement and Company Accounting Procedures;
provided, however, that Current Liabilities shall not include, in whole or in
part, (i) deferred income tax liabilities, (ii) any prepaid or deferred revenue,
(iii) any Paid Company Transaction Costs, (iv) any employee severance
obligations, including related employment Taxes, triggered by the change in
control caused by the Merger, (v) any Tax withholding obligations triggered by
the vesting and sale of the Restricted Stock Units and Outstanding Stock
Options, or (vi) the current portion of long-term debt.
"Dispute" is defined in Section 8.15.
"Dissenting Shares" is defined in Section 1.08.
"Drysdale" is defined in Section 3.12(a).
"Drysdale Agreement" is defined in Section 3.12(a).
"Drysdale Severance Payment" is defined in Schedule I.
"Effective Time" is defined in Section 1.02.
"Employee Benefit Plan" is defined in Section 2.01(q)(xvii)(A).
"Employee Pension Benefit Plan" is defined in Section 2.01(q)(xvii)(C).
"Employee Welfare Benefit Plan" is defined in Section 2.01(q)(xvii)(E).
"Environmental Claim" is defined in Section 2.01(r).
"Environmental Law" is defined in Section 2.01(r).
"Environmental Permit" is defined in Section 2.01(r).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" is defined in Section 2.01(q)(xvii)(B).
"ERISA Group" means any corporation, trade, business, or entity under
common control within the meaning of Section 414(b), (c), (m), or (o) of the
Code.
"Escrow Account" has the meaning set forth in the Escrow Agreement.
Exhibit A-5
"Escrow Agent" means Wells Fargo Bank, National Association.
"Escrow Agreement" means the escrow agreement in substantially the form
of Exhibit D entered into on or prior to the Closing by and among Buyer, the
Representative and the Escrow Agent.
"Escrow Amount" is defined in Section 1.13(a).
"Escrow Distribution" means the amount of any distribution out of the
Escrow Account to the Representative for the benefit of the Securityholders.
"Expiration Date" means the date that is the first to occur of: (a)
thirty (30) days following the completion of the audit of the Company's
financial statements for fiscal year 2007, or (b) eighteen months after the
Closing Date.
"Fiduciary" is defined in Section 2.01(q)(xvii)(G).
"Final Adjustment Deficiency" is defined in Section 1.12(a).
"Final Adjustment Surplus" is defined in Section 1.12(b).
"Final Balance Sheet" is defined in Section 1.12(a).
"Final Court Order" is defined in Section 7.06(b).
"Final Working Capital" is defined in Section 1.12.
"Financial Statements" is defined in Section 2.01(e).
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Entity" is defined in Section 2.01(d)(iii).
"Hazardous Material" is defined in Section 2.01(r)(viii)(D).
"Holdback Amount" is defined in Section 1.11.
"Indebtedness" without duplication, means (a) all indebtedness
(including the principal amount thereof or, if applicable, the accreted amount
thereof and the amount of accrued and unpaid interest thereon) of the Company,
whether or not represented by bonds, debentures, notes or other securities, for
the repayment of money borrowed, whether owing to banks, financial institutions,
on equipment leases or otherwise, (b) all deferred indebtedness of the Company
for the payment of the purchase price of property or assets purchased, (c) all
obligations of the Company to pay rent or other payment amounts under a lease of
real or Personal Property which is required to be classified as a capital lease
or a liability on the face of a balance sheet prepared in accordance with
Company Accounting Procedures, (d) any outstanding reimbursement obligation of
the Company with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of the Company, (e) any payment obligation of
the Company under any interest rate swap agreement, forward rate agreement,
interest rate cap or collar agreement or other financial agreement or
arrangement entered into for the purpose of limiting or managing interest rate
Exhibit A-6
risks, (f) all indebtedness for borrowed money secured by any Lien existing on
property owned by the Company, whether or not indebtedness secured thereby shall
have been assumed, (g) all guaranties, endorsements, assumptions and other
contingent obligations of the Company in respect of, or to purchase or to
otherwise acquire, indebtedness for borrowed money of others, (h) all premiums,
penalties and change of control payments required to be paid or offered in
respect of any of the foregoing as a result of the consummation of the
transactions contemplated by this Agreement regardless if any of such are
actually paid, and (i) all obligations of the Company, whether interest bearing
or otherwise, owed to their existing stockholders and/or their Affiliates.
"Indebtedness Agreements" means all agreements between the Company and
a holder of Indebtedness.
"Indebtedness Pay-Off Amount" is defined in Section 1.10.
"Indemnified Costs" means the Buyer Indemnified Costs or the Sellers
Indemnified Costs, as the case may be.
"Indemnified Parties" means the Buyer Indemnified Parties or the
Sellers Indemnified Parties, as the case may be.
"Indemnifying Party" is defined in Section 7.03.
"Intellectual Property" is defined in Section 2.01(k)(i).
"IRS" means the Internal Revenue Service of the United States.
"Joint Written Instruction" is defined in Section 7.06(b).
"Key Employees" means Gregory L. Brennan, David Cox, Daniel Reid, and
James Thompson.
"Key Employment Agreements" is defined in Section 4.02(j).
"Knowledge of the Company" means the actual knowledge, and the
knowledge they would reasonably be expected to obtain after diligent inquiry, of
the Company's officers and directors and of Daniel Reid.
"Lease Agreements" is defined in Section 2.01(j)(ii).
"Leased Real Property" is defined in Section 2.01(j)(ii).
"Letter of Transmittal" means a letter of transmittal in the form
attached hereto as Exhibit C-1.
"Licensed Software" is defined in Section 2.01(k)(ii).
Exhibit A-7
"Lien" (or "Liens") means any pledges, claims, liens, charges,
encumbrances, options and security interests of any kind or nature whatsoever.
"Management Agreement" is defined in Section 4.02(k).
"Material Adverse Effect," means any result, occurrence, fact, change,
event or effect (whether or not foreseeable or known as of the date of the
Closing or covered by insurance) that, individually or in the aggregate with any
such other results, occurrences, facts, changes, events or effects, is or could
reasonably be expected to be materially adverse to (a) the business, operations,
licenses, permits, rights, privileges, assets, liabilities, financial condition
or results of operations of the Company or the Surviving Company or (b) the
ability of the Company to consummate any transaction contemplated by this
Agreement or any Transaction Documents.
"Material Contract" means any of the following:
(a) Any Contract that requires or that likely will require future
expenditures by the Company in excess of $25,000 or that likely will result in
payments to the Company in excess of $50,000;
(b) Any Contract to which the Company is a party that is material to
the business and that is not terminable without penalty on notice of sixty (60)
days or less;
(c) Any Contract with any Stockholder, director or officer of the
Company, or any Affiliate of any of such Persons, including any Contract
providing for the furnishing of services by, rental of real or personal property
from or otherwise requiring payments to any such Person;
(d) Any Contract relating to the Intellectual Property of the Company,
any Third Party Intellectual Property Rights or any Confidential Information;
(e) Any Contract containing any covenant (x) limiting the right of the
Company to engage in any line of business, make use of any Intellectual
Property, Third Party Intellectual Property Rights or any Confidential
Information or compete with any Person in any line of business, (y) granting any
exclusive distribution or supply rights or (z) otherwise having an adverse
effect on the right of the Company to sell, distribute or manufacture any
products or services or to purchase or otherwise obtain any software,
components, parts or subassemblies;
(f) Any Contract between the Company and any current or former
employee, consultant or director of the Company pursuant to which benefits would
vest or amounts would become payable or the terms of which would otherwise be
altered by virtue of the consummation of the transactions contemplated by this
Agreement or any other Transaction Document to which the Company is a party
(whether alone or upon the occurrence of any additional or subsequent events);
(g) Any Contract that requires a consent to a change of control, merger
or an assignment by operation of law, either before or after the Closing Date;
or
Exhibit A-8
(h) Any other Contract, or group of Contracts, the termination or
breach of which would have, or would be reasonably expected to have, a Material
Adverse Effect on the Company.
"Merger" is defined in Section 1.01.
"Merger Sub" is defined in the first paragraph of this Agreement.
"Multiemployer Plan" is defined in Section 2.01(q)(xvii)(F) and has the
meaning set forth in Section 3(37) or Section 4001(a)(3) of ERISA.
"Objection Notice" is defined in Section 1.12.
"Open Source Software" means software that is made available in source
code form to the general public for use and/or modification and (a) conditions
such use or the distribution of any software program that incorporates such
software on the disclosure, licensing or distribution of the source code of such
program (including such software) and (b) otherwise materially limits the
Company's freedom of action with regard to seeking compensation in connection
with sublicensing or distributing such program or Software in object code form.
"Option Plan" means the Company's 2000 Incentive Stock Option Plan.
"Option Surrender Agreement" means an Option Surrender Agreement in the
form attached hereto as Exhibit C-2.
"Optionholder" or "Optionholders" is defined in Section 1.07.
"Options" means the collective reference to all options to purchase
shares of Common Stock issued pursuant to the Option Plan and any and all other
options or warrants to purchase shares of Common Stock.
"Outstanding Option" or "Outstanding Options" is defined in Section
1.07.
"Outstanding Option Shares" is defined on Schedule I.
"Outstanding Share" or "Outstanding Shares" is defined in Section
1.06(b).
"Owned Real Property" is defined in Section 2.01(j)(ii).
"Owned Software" is defined in Section 2.01(k)(ii).
"Paid Company Transaction Costs" is defined in Section 1.10.
"Pay Off Letters" is defined in Section 4.02(g).
"PBGC" is defined in Section 2.01(q)(i).
"Pending Claims Account" is defined in Section 7.06(a).
Exhibit A-9
"Per Option Merger Consideration" means the amounts (if any) set forth
in Section 2(b) of Schedule I.
"Per Share Escrow Distribution Amount" is defined on Schedule I.
"Per Share Final Distribution Amount" is defined on Schedule I.
"Per Share Closing Merger Consideration" is defined on Schedule I.
"Per Share Merger Consideration" means the amount(s) set forth in
Section 2(a) of Schedule I.
"Permits" is defined in Section 2.01(m)(ii).
"Person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization, or other
entity.
"Personal Property" means all of the machinery, equipment, computer
programs, computer software, tools, motor vehicles, furniture, furnishings,
leasehold improvements, office equipment, inventory, supplies, plant, spare
parts, and other tangible or intangible personal property which are owned or
leased by the Company and which are used or held for use in its business or
operations as of the Closing Date.
"Proceeding" is defined in Section 3.03(d).
"Prohibited Transaction" is defined in Section 2.01(q)(xvii)(G).
"Real Property" means the Leased Real Property and the Owned Real
Property.
"Referee" is defined in Section 1.12(b).
"Release" " is defined in Section 2.01(r).
"Representative" means James A. Unruh, and any successor representative
appointed to act on his behalf.
"Required Stockholder Approval" is defined in Section 2.01(z).
"Restricted Stock Unit" means a grant pursuant to the Company's 2004
Restricted Stock Unit Plan, each such grant entitling the holder of one
Restricted Stock Unit to one share of Common Stock upon certain vesting
criteria.
"Restricted Stock Unit Surrender Agreement" means a Restricted Stock
Unit Surrender Agreement in the form attached hereto as Exhibit C-3.
"Schedules" means the Schedules attached hereto.
"Securities Act" is defined in Section 2.01(b)(iv).
Exhibit A-10
"Securityholders" means, collectively, the Stockholders, the
Optionholders, and the holders of Restricted Stock Units.
"Seller(s)" is defined in the first paragraph of this Agreement.
"Seller's Company Capital Stock" is defined in Section 2.02(a).
"Sellers Indemnified Costs" means any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs, and expenses (including
court costs, reasonable attorneys' fees and other expenses incurred in
investigating and preparing for, or otherwise in connection with, any litigation
or proceeding) that any of the Seller Indemnified Parties incurs and that relate
to or arise out of any breach or default by Buyer or the Merger Sub of any of
their representations and warranties, or any of their covenants or agreements,
under this Agreement or any other Transaction Document.
"Seller Indemnified Parties" means each of the Securityholders.
"Software" is defined in Section 2.01(k)(ii).
"Specified Representations" means the representations and warranties
contained in Section 2.01(b) (Capital Structure), Section 2.01(c) (Authority and
Due Execution), Section 2.01(f) (Indebtedness), Section 2.01(j) (Title to
Assets), Section 2.01(q) (ERISA), and Section 2.01(r) (Environmental).
"Stockholders" is defined in Section 2.01(b)(i)(D).
"Straddle Period" means any Taxable period that begins on or before the
Closing Date and ends after the Closing Date.
"Surviving Company" is defined in Section 1.01.
"Tax" or "Taxes" means (i) any taxes, assessments, fees, unclaimed
property, property subject to escheat and other governmental charges imposed by
any Governmental Entity, including income, profits, gross receipts, net
proceeds, alternative or add-on minimum, ad valorem, value added, turnover,
sales, use, property, personal property (tangible and intangible),
environmental, stamp, leasing, lease, user, excise, duty, franchise, capital
stock, transfer, registration, license, withholding, social security (or
similar), unemployment, disability, payroll, employment, fuel, excess profits,
occupational, premium, windfall profit, severance, estimated, or other charge of
any kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not, (ii) any liability of the Company for the payment of
any amounts of the type described in clause (i) as a result of being a member of
an affiliated, consolidated, combined or unitary group whereby liability of the
Company for the payment of such amounts was determined or taken into account
with reference to the liability of any other Person for any period and (iii) any
liability of the Company with respect to the payment of any amounts of the type
described in clause (i) or (ii) as a result of any express or implied obligation
to indemnify any other Person.
"Tax Items" is defined in Section 2.01(i).
Exhibit A-11
"Tax Proceeding" is defined in Section 3.13(e).
"Tax Return" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Taxing Authority" means, with respect to any Tax, the Governmental
Entity or political subdivision thereof that imposes such Tax, and the agency
(if any) charged with the collection of such Tax for such entity or subdivision,
including any Governmental Entity or agency that imposes, or is charged with
collecting, social security or similar charges or premiums.
"Termination Date" is defined in Section 6.01(c)(iii).
"Third Party Action" is defined in Section 7.03.
"Third Party Intellectual Property Rights" is defined in Section
2.01(k)(iii).
"Transaction Document" or "Transaction Documents" means this Agreement
and all other documents to be executed by any of the parties to this Agreement
in connection with the consummation of the transactions contemplated in this
Agreement.
"Working Capital Amount" equals Current Assets minus Current
Liabilities as of the Closing Date, as set forth on the Closing Balance Sheet.
"Working Capital Deficiency" means the amount, if any, by which the
Working Capital Target exceeds the Working Capital Amount as of the Effective
Time; provided, however, that the Working Capital Deficiency shall not be less
than zero.
"Working Capital Surplus" means the amount, if any, by which the
Working Capital Amount as of the Effective Time exceeds the Working Capital
Target; provided, however, that the Working Capital Surplus shall not be less
than zero.
"Working Capital Target" means $3,000,000.
(b) "References and Titles" means all references in this Agreement to
Exhibits, Schedules, Articles, Sections, subsections, and other subdivisions
refer to the corresponding Exhibits, Schedules, Articles, Sections, subsections,
and other subdivisions of this Agreement unless expressly provided otherwise.
Titles appearing at the beginning of any Articles, Sections, subsections, or
other subdivisions of this Agreement are for convenience only, do not constitute
any part of such Articles, Sections, subsections or other subdivisions, and
shall be disregarded in construing the language contained therein. The words
"this Agreement," "herein," "hereby," "hereunder," and "hereof," and words of
similar import, refer to this Agreement as a whole and not to any particular
subdivision unless expressly so limited. The words "this Section," "this
subsection," and words of similar import, refer only to the Sections or
subsections hereof in which such words occur. The word "or" is not exclusive,
and the word "including" (in its various forms) means "including, without
limitation." Pronouns in masculine, feminine, or neuter genders shall be
construed to state and include any other gender and words, terms, and titles
(including terms defined herein) in the singular form shall be construed to
include the plural and vice versa, unless the context otherwise expressly
requires. Unless the context otherwise requires, all defined terms contained
herein shall include the singular and plural and the conjunctive and disjunctive
forms of such defined terms.
Exhibit A-12
EXHIBIT B
SELLERS COMPANY STOCK, OPTIONS AND RESTRICTED STOCK UNITS
Exhibit B-1
EXHIBIT C-1
FORM OF LETTER OF TRANSMITTAL
[See Attached]
Exhibit C1-1
EXHIBIT C-2
OPTION SURRENDER AGREEMENT
[See Attached]
Exhibit C2-1
EXHIBIT C-3
FORM OF RESTRICTED STOCK UNIT SURRENDER AGREEMENT
[See Attached]
Exhibit C3-1
EXHIBIT D
ESCROW AGREEMENT
[See Attached]
Exhibit D-1
EXHIBIT E
FORM OF RESIGNATIONS
[See Attached]
Exhibit E-1
EXHIBIT F
FORM OF LEGAL OPINION
[See Attached]
Exhibit F-1
EXHIBIT G
FORM OF EMPLOYMENT AGREEMENT
[See Attached]
Exhibit B-1
SCHEDULE I
MERGER CONSIDERATION
1. Definitions. As used herein, the terms below shall have the following
definitions:
"Closing Merger Consideration" means an amount (not less than zero)
equal to (a) $42,000,000, minus (b) the Working Capital Deficiency (if any),
minus (c) the Escrow Amount, minus (d) the Indebtedness Pay-Off Amount, minus
(e) the Paid Company Transaction Costs, minus (f) the Drysdale Severance
Payment, plus (g) the aggregate exercise price of all Outstanding Option Shares.
"Drysdale Severance Payment" means the amount payable to Drysdale at
the Closing pursuant to Section 4(a)(iv) of the Drysdale Agreement.
"Outstanding Option Shares" means the number of shares of Common Stock
issuable immediately prior to the Effective Time for all Outstanding Options and
Restricted Stock Units (assuming that all of the Outstanding Options and
Restricted Stock Units are fully vested and exercisable immediately prior to the
Effective Time).
"Per Share Closing Merger Consideration" means the quotient (rounded to
the second decimal place) equal to (a) the Closing Merger Consideration, divided
by (b) the sum of (i) the Outstanding Shares, plus (ii) the Outstanding Option
Shares.
"Per Share Escrow Distribution Amount" means, with respect to any
Escrow Distribution, the quotient (rounded to the second decimal place) equal to
(a) such Escrow Distribution, divided by (b) the sum of (i) the Outstanding
Shares, plus (ii) the Outstanding Option Shares.
"Per Share Final Adjustment Surplus" means the quotient (rounded to the
second decimal place) equal to (a) the Final Adjustment Surplus (if any),
divided by (b) the sum of (i) the Outstanding Shares, plus (ii) the Outstanding
Option Shares.
2. Allocation of Merger Consideration. At the Effective Time, by virtue of
the Merger and without any action on the part of any party:
(a) Each Outstanding Share and Restricted Stock Unit shall be converted
into the right to receive:
(i) the Per Share Closing Merger Consideration, payable in cash (in
accordance with Section 1.10(a)(iv)) to the holder thereof, without interest
thereon;
(ii) the Per Share Final Adjustment Surplus, if any, payable in
cash to the holder thereof, without interest thereon; and
(iii) the Per Share Escrow Distribution Amount for each Escrow
Distribution, if any, payable in cash to the holder thereof, without interest
thereon;
Schedule I-1
(b) Each Outstanding Option shall be converted into the right to
receive:
(i) an amount, if any, equal to the product of (A) the number of
shares of Common Stock previously issuable immediately prior to the Effective
Time under such Option (assuming that all of the Outstanding Options are fully
vested and exercisable immediately prior to the Effective Time), multiplied by
(B) the excess of (1) the Per Share Closing Merger Consideration over (2) the
exercise price per share of Common Stock previously issuable pursuant to such
Option, payable in cash (in accordance with Section 1.10(a)(iv)) to the holder
thereof, without interest thereon;
(ii) an amount equal to the product of (A) the Per Share Final
Adjustment Surplus, if any, multiplied by (B) the number of shares of Common
Stock previously issuable immediately prior to the Effective Time under such
Option (assuming that all of the Outstanding Options are fully vested and
exercisable immediately prior to the Effective Time), payable in cash to the
holder thereof, without interest thereon; and
(iii) an amount equal to the product of (A) the Per Share Escrow
Distribution Amount for each Escrow Distribution, if any, multiplied by (B) the
number of shares of Common Stock previously issuable immediately prior to the
Effective Time under such Option (assuming that all of the Outstanding Options
are fully vested and exercisable immediately prior to the Effective Time),
payable in cash to the holder thereof, without interest thereon.
3. For greater certainty, the parties to the Merger Agreement agree that
the exercise price of the Options shall not be deducted from the Closing Merger
Consideration or be considered in the Working Capital Amount. An illustration of
the proceeds payable to Securityholders is attached to this Schedule I and
incorporated herein by reference.
Schedule I-2