AGREEMENT AND PLAN OF MERGER BY AND AMONG GEXFO DISTRIBUTION INTERNATIONALE INC., EXFO SERVICE ASSURANCE, INC. and BRIX NETWORKS, INC. and CHARLES RIVER VENTURES, LLC April 2, 2008
EXECUTION
VERSION
AGREEMENT
AND PLAN OF MERGER
BY
AND AMONG
GEXFO
DISTRIBUTION INTERNATIONALE INC.,
EXFO
SERVICE ASSURANCE, INC.
and
BRIX
NETWORKS, INC.
and
▇▇▇▇▇▇▇
RIVER VENTURES, LLC
April 2,
2008
AGREEMENT
AND PLAN OF MERGER
This
Agreement and Plan of Merger (this "Agreement"), is entered into as of the 2nd
day of April 2008, by and among GEXFO Distribution Internationale Inc., a
Province of Québec corporation ("Parent"), EXFO Service Assurance, Inc., a
Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and
Brix Networks, Inc., a Delaware corporation (the "Company"), and solely with
respect to Articles 1 and 6, ▇▇▇▇▇▇▇ River Ventures, LLC, as the Stockholders'
Representative. Capitalized terms that are used but not otherwise defined in
this Agreement shall have the respective meanings ascribed to them in Article 8
of this Agreement.
RECITALS
The
respective Boards of Directors of Parent, Merger Sub and the Company have each
determined that it is advisable and in the best interests of its respective
corporation and the stockholders thereof that the Company be acquired by Parent,
and, in furtherance thereof, that Merger Sub merge with and into the Company,
with the Company surviving the merger as a direct or indirect wholly owned
subsidiary of Parent. Pursuant to the Merger, the issued and outstanding shares
of the Company's capital stock will be converted into the right to receive
certain cash amounts, all as set forth in this Agreement.
NOW
THEREFORE, in consideration of the premises, and the representations,
warranties, covenants and other agreements contained herein, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by each of the Parties, and intending to be legally bound, the
Parties hereby agree as follows:
ARTICLE
1
THE MERGER
1.1 The
Merger.
Upon and
subject to the terms and conditions of this Agreement, Merger Sub shall merge
with and into the Company at the Effective Time. From and after the Effective
Time, the separate corporate existence of Merger Sub shall cease and the Company
shall continue as the Surviving Corporation and as a wholly-owned subsidiary of
Parent. The Merger shall have the effects set forth in Section 259 of the
Delaware General Corporation Law.
1.2 The
Closing.
The
Closing shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇ LLP in
Boston, Massachusetts, commencing at 10 A.M. Eastern US Time on the Closing Date
or at such other time and place as the Parties hereto shall mutually agree in
writing.
1.3 Actions
at the Closing.
(a) At the
Closing: (i) the Company shall deliver to Parent and Merger Sub each of the
certificates, instruments and documents referred to in Section 5.2;
(ii) Parent and Merger Sub shall deliver to the Company each of the
certificates, instruments and documents referred to in Section 5.3; and (iii)
Parent or Merger Sub shall cause the Certificate of Merger to be filed with the
Secretary of State of the State of Delaware.
(b) At the
Closing, Parent shall pay or cause Merger Sub or another direct or indirect
wholly owned subsidiary of Parent and intermediate parent of Merger Sub to pay
(by check or by wire transfer of immediately available funds), the Cash Price to
the Paying Agent, subject to Section 1.6.
(c) At the
Closing, the Company shall pay and cause its Subsidiary to pay the available
cash balance in all bank accounts of the Company and its Subsidiary (the "Cash
Amount") (by check or by wire transfer of immediately available funds) to the
Paying Agent.
(d) Following receipt of the
amounts required to be paid pursuant to Sections 1.3(b) and (c), on the Closing
Date, the Paying Agent shall pay (by check or by wire transfer of immediately
available funds) the sum of the Cash Price and the Cash Amount, in cash as
follows:
(i) first, to
the lenders to the Company or its Subsidiary, an amount equal to all amounts
owed by the Company or its Subsidiary to such lenders, including all principal,
interest, premiums and fees, as set forth in pay-off letters to be delivered to
Parent at least two (2) business days prior to Closing;
(ii) second, the Company Transaction
Costs to the Company's or its Subsidiary's investment banking, financial, legal,
accounting and other advisers, in accordance with the final bills and wire
transfer instructions from each payee of any portion of the Company Transaction
Costs to be delivered to Parent at least two (2) business days prior to Closing,
provided, however, that if any amounts are set forth on Schedule 1.3(d)(ii)
hereof under the heading, "Transaction Costs to be Paid by Company," (including
any amounts related to directors and officers tail insurance pursuant to Section
4.9 and, to the Stockholders’ Representative, an amount equal to the Holdback
Amount (as defined in Section 1.13)) such amounts shall not be deemed to be part
of the Company Transaction Costs;
(iii) third, to
the Company, (A) for the benefit of the Management Participants, an amount equal
to the aggregate of the respective amounts set forth opposite each such Person's
name on Schedule 1.3(d)(iii), and promptly following the Closing (and in any
event within three business days thereafter), the Company shall pay or cause to
be paid to the Management Participants, such amounts in accordance with Schedule
1.3(d)(iii) and Section 1.5 and (B) for the benefit of the Company, an amount
equal to the Company's portion of Medicare liability with respect to such
payments to the Management Participants;
(iv) fourth,
to the holders of Company Shares, an amount equal to the aggregate of the
respective amounts set forth opposite each such Person's name on Schedule
1.3(d)(iv), in accordance with Sections 1.5, 1.6 and 1.10.
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1.4 Additional
Action.
The Surviving Corporation may, at
any time after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or
Merger Sub, in order to consummate the transactions contemplated by this
Agreement.
1.5 Payment
of Cash Price and Conversion of Shares.
(a) Conversion of Outstanding
Common Shares and Preferred Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of any Party or any holder of any
of the following securities (and subject to the provisions of Sections 1.6 and
1.10):
(i) Each
share of Series C-1 Preferred Stock issued and outstanding immediately prior to
the Effective Time (other than Dissenting Shares and shares held in the
Company's treasury) shall be converted into and represent the right to receive a
portion of the Cash Price in accordance with this Section 1.5 and a portion of
the Earn-Out Amount in accordance with Section 1.11.
(ii) Each share of Series B-1
Preferred Stock issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares and shares held in the Company's treasury) shall
be converted into and represent the right to receive a portion of the Cash Price
in accordance with this Section 1.5 and a portion of the Earn-Out Amount in
accordance with Section 1.11.
(iii) Each share of Series A-1
Preferred Stock issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares and shares held in the Company's treasury) shall
be converted into and represent the right to receive a portion of the Cash Price
in accordance with this Section 1.5 and a portion of the Earn-Out Amount in
accordance with Section 1.11.
(iv) Each Common Share issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares and shares held in the Company's treasury) shall be converted into and
represent the right to receive a portion of the Cash Price in accordance with
this Section 1.5 and a portion of the Earn-Out Amount in accordance with Section
1.11.
(v) Each Option, Warrant or other
convertible security of the Company outstanding immediately prior to the
Effective Time (either vested or unvested) shall be cancelled, without any
action on the part of holder thereof, and shall have no right to any portion of
the Cash Price or Earn-Out Amount.
(b) Treasury Shares. Each
Company Share held in the Company's treasury immediately prior to the Effective
Time and each Company Share owned beneficially by Parent or Merger Sub shall be
cancelled and retired without payment of any consideration
therefor.
(c) Merger Sub Shares.
Each share of common stock, $0.01 par value per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be converted into and
thereafter evidence one share of common stock, $0.01 par value per share, of the
Surviving Corporation.
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(d) "Purchase Price" means
Thirty-Three Million Five Hundred Thousand Dollars ($33,500,000), which is the
sum of Twenty-Eight Million Four Hundred Seventy-Five Thousand Dollars
($28,475,000) (the "Cash Price") plus Five Million Twenty-Five Thousand Dollars
($5,025,000) (the "Base Earn-Out Amount"). In addition, the
Additional Earn-Out Amount (as defined below), if any, shall be payable in
accordance with Section 1.11(a)(iii).
(e) Payments. Subject to
Section 1.6 hereof, all amounts payable to Company Stockholders or the
Management Participants hereunder, including amounts payable pursuant to the
Brix Networks, Inc. Management Incentive Plan, will be distributed by the
Parent, Merger Sub, the Company, the Paying Agent or the Stockholders'
Representative, as the case may be, to the Company Stockholders and the
Management Participants in accordance with the liquidation provisions set forth
in the Company's Eighth Amended and Restated Certificate of Incorporation, as
such may be amended and restated after the date hereof to implement the
Brix Networks, Inc. Management Incentive Plan (the "Amended and Restated
Certificate of Incorporation") as in effect immediately prior to the Effective
Time. Upon the payment of any amount by or as directed by Parent or the
Surviving Corporation hereunder, Parent and Surviving Corporation shall have no
further liability or obligation to the Stockholders' Representative, the Paying
Agent, the Company Stockholders or the Management Participants for such
payments. Schedule 1.3(d)(iii) sets forth the true and complete
amount to which each Management Participant will be entitled as of the Effective
Time pursuant to the Amended and Restated Certificate upon the consummation of
the Merger in accordance with this Agreement. Subject to Section 1.6
hereof, Schedule 1.3(d)(iv) sets forth the true and complete amount to which
each Company Stockholder will be entitled as of the Effective Time pursuant to
the Amended and Restated Certificate upon the consummation of the Merger in
accordance with this Agreement.
1.6 Dissenting
Shares.
(a) Dissenting Shares shall
not be converted into or represent the right to receive any portion of the
Purchase Price unless the holder of such Dissenting Shares (a "Dissenting
Stockholder") shall have forfeited his, her or its right to appraisal under the
Delaware General Corporation Law or properly withdrawn his, her or its demand
for appraisal. If such Dissenting Stockholder has so forfeited or withdrawn his,
her or its right to appraisal of Dissenting Shares, then, (i) as of the
occurrence of such event, such holder's Dissenting Shares shall cease to be
Dissenting Shares and shall be converted into and represent the right (subject
to the provisions of Section 1.10) to receive the consideration payable in
respect of such Company Shares pursuant to Section 1.5 and Section 1.11, and
(ii) promptly following the occurrence of such event, Parent or the Surviving
Corporation shall pay or cause to be paid to such Dissenting Stockholder the
amount which such holder is then entitled to receive pursuant to Section 1.5 and
Section 1.11.
(b) The
Company shall give Parent prompt notice of any and all demands for appraisal of
any Company Shares, withdrawals of such demands, and any other instruments that
relate to such demands received by the Company and the Company shall have the
right to direct all negotiations and proceedings with respect to demands for
appraisal under the Delaware General Corporation Law. The Company shall not,
except with the prior written consent of Parent (which consent shall not be
unreasonably withheld), settle, offer to settle or make any payment with respect
to any demand for appraisal of Company Shares unless such settlement or payment
(i) is for an amount not exceeding the amount that would otherwise be payable
with respect to such Company Shares pursuant to this Agreement and (ii) is
conditioned upon the execution and delivery by the holder of a full and
unconditional release of all claims that such holder may have against the
parties to this Agreement, their respective Subsidiaries and Affiliates, and the
Representatives of each of them.
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(c) Notwithstanding
any other provision in this Agreement to the contrary, from and after the
Effective Time, any amount that would otherwise be distributable on account of
such Dissenting Shares pursuant to Section 1.5 hereof shall be held by the
Paying Agent until such time as the Parent and the Stockholders’ Representative
provide joint written instructions as to the disposition of such amounts in
accordance with this Section 1.6.
1.7 Options
and Warrants.
At or
prior to the Effective Time, all Options, Warrants and other convertible
securities of the Company which are issued and outstanding shall be
automatically and immediately cancelled.
1.8 Certificate of
Incorporation and Bylaws; Directors and Officers.
(a) At the
Effective Time, by virtue of the Merger and without any further action by the
Surviving Corporation or any other Person, the Certificate of Incorporation of
the Surviving Corporation as in effect immediately prior to the Effective Time
shall be amended and restated in its entirety in the form of the Certificate of
Incorporation of Merger Sub as in effect immediately prior to the Effective
Time, except that (i) the name of the corporation set forth therein shall be
changed to EXFO Service Assurance, Inc. and (ii) the identity of the
incorporator shall be deleted.
(b) At the Effective Time, by
virtue of the Merger and without any further action by the Surviving Corporation
or any other Person, the Bylaws of the Surviving Corporation as in effect
immediately prior to the Effective Time shall be amended and restated in their
entirety in the form of the Bylaws of Merger Sub as in effect immediately prior
to the Effective Time, except that the name of the corporation set forth therein
shall be changed to EXFO Service Assurance, Inc.
(c) From and after the
Effective Time, by virtue of the Merger and without any further action by the
Surviving Corporation or any other Person, (i) the directors of Merger Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation and its Subsidiary, each to hold office in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation or its
Subsidiary, as the case may be, and (ii) the officers of Merger Sub immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
and its Subsidiary, each to hold office in accordance with the bylaws of the
Surviving Corporation as amended and restated pursuant to Section 1.8(b) or its
Subsidiary, as the case may be.
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1.9 Closing
of Transfer Books; No Further Rights.
At the
Effective Time, the stock transfer books of the Company shall be closed and no
transfer of Company Shares shall thereafter be made. If, after the Effective
Time, certificates formerly representing Company Shares are presented to Parent
or the Surviving Corporation, they shall be cancelled and exchanged in
accordance with Section 1.5, subject to the provisions of Section 1.10 and,
subject further to applicable law in the case of Dissenting Shares. From and
after the Effective Time, no Company Shares shall be deemed to be outstanding,
and holders of certificates formerly representing Company Shares shall cease to
have any rights with respect thereto except as provided herein or by
law.
1.10 Exchange
of Shares.
(a) The
Paying Agent shall effect the payment of the portion of the Purchase Price
payable to the Company Stockholders in accordance with Sections 1.5 and 1.11,
and subject to Section 1.6, in exchange for certificates representing (or other
documentation, reasonably satisfactory, evidencing ownership of) the Company
Shares issued and outstanding immediately prior to the Effective Time (the
"Company Certificates"). Promptly (and in no event more than five (5) business
days) following the Effective Time, Parent shall cause the Company to send a
notice and a letter of transmittal to each holder of a Company Certificate whose
address appears in the Company's stock books advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Paying
Agent such Company Certificate in exchange for the portion of the Cash Price
payable to such holder pursuant to Section 1.5. Each holder of a Company
Certificate, upon proper surrender thereof to the Paying Agent in accordance
with the instructions in such notice, shall be entitled to receive in exchange
therefor (subject to the provisions of this Section 1.10 and the withholding of
all applicable taxes required to be withheld) the cash amount payable pursuant
to Section 1.5 and the right to receive a share of the Earn-Out Amount in
accordance with Section 1.11. Until properly surrendered, each Company
Certificate shall be deemed for all purposes to evidence only the right to
receive the cash amounts payable pursuant to Sections 1.5 and 1.11.
(b) If any
payment is to be made to or in the name of a Person other than the Person in
whose name the Company Certificate surrendered in exchange therefor is
registered, it shall be a condition to such payment that (i) the Company
Certificate so surrendered shall be transferable, and shall be properly
assigned, endorsed or accompanied by appropriate stock powers, (ii) such
transfer shall otherwise be proper, and (iii) the Person requesting such
transfer shall pay to the Company any transfer or other taxes payable by reason
of the foregoing or establish to the satisfaction of the Company that such taxes
have been paid or are not required to be paid. Notwithstanding the foregoing,
neither the Paying Agent nor any Party shall be liable to a holder of Company
Shares for any amount payable to such holder pursuant to Section 1.5 or Section
1.11 that is delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws. If any Company Certificate shall not have
been surrendered and exchanged in accordance with the procedures set forth in
this Section 1.10 immediately prior to the date on which any portion of the
Purchase Price would otherwise escheat or become the property of any
Governmental Entity, any such funds shall, to the extent permitted by applicable
law, become the property of the Surviving Corporation, free and clear of all
claims and interests of any Person previously entitled thereto.
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(c) In the
event any Company Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the Person claiming such Company
Certificate to be lost, stolen or destroyed, the Paying Agent shall pay or cause
to be paid in exchange for such lost, stolen or destroyed Company Certificate
the amount then payable in exchange therefor pursuant to Section 1.5 and Section
1.11. The Paying Agent may, in its discretion and as a condition precedent to
the payment thereof, require the owner of such lost, stolen or destroyed Company
Certificate to agree in writing to indemnify the Paying Agent against any claim
that may be made against Parent or the Surviving Corporation with respect to the
Company Certificate alleged to have been lost, stolen or destroyed.
(d) Any
portion of the Purchase Price made available to the Paying Agent pursuant
Sections 1.5 or 1.11 that remains unclaimed by the holders of Company Shares as
of the date that is thirty (30) days after the date on which the final payment
of the Earn-Out Amount is due (or is determined not to be earned) shall be
returned to Parent and any holder who has not completed the exchange procedures
set forth in this Section 1.10 shall thereafter look only to Parent for delivery
of the portion of the Purchase Price payable in respect of such holder's shares
without any interest thereon.
1.11 Earn-Out.
(a) Earn-Out
Amount. As additional consideration for the Merger, if
earned in accordance with this Section 1.11, but subject to off-set pursuant to
Article 6, an aggregate amount of up to the Earn-Out Cap shall be paid to the
Stockholders’ Representative (less any amounts payable to the Management
Participants, which shall be paid directly to the Management Participants by the
Surviving Corporation) after the Earn-Out Period as provided in subsections (i)
to (iv) below:
(i) If the Cumulative Company
Bookings Value is less than or equal to Sixteen Million Dollars ($16,000,000),
the Surviving Corporation shall not pay any amount in respect of the
Earn-Out;
(ii) Note
1
(iii) Note
1
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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(B) Note
1
(iv) Note 1
(b) Parent’s Statement; Dispute;
Payment. Within ten (10) days after expiration of the Earn-Out
Period, Parent shall deliver to the Stockholders' Representative a statement
setting forth the Cumulative Company Bookings Value as of the expiration of the
Earn-Out Period (the "Parent's Statement"). If, within ten (10) days
after Parent delivers the Parent Statement, no written notice of disagreement or
an affirmative notice of agreement is provided to Parent by the Stockholders’'
Representative, then the Stockholders' Representative shall be deemed to have
accepted the Parent's Statement and Parent shall make payment of the amount
payable pursuant to subsection (a), if any, within ten (10) days of such
notice. If, within such 10-day period, the Stockholders'
Representative gives written notice to Parent that it disagrees with the
Parent's Statement, then Parent and the Stockholders' Representative will
attempt in good faith to resolve their disagreement. If such
disagreement cannot be resolved within ten (10) days following Parent's receipt
of the notice from the Stockholders' Representative, the matter will be referred
to one of the “Big Four” accounting firms acceptable to Parent and the
Stockholders’ Representative (the "Accounting Referee"), for resolution of the
disagreement, with instructions to complete the same as promptly as practicable
but, in any event, within thirty (30) days of its engagement, and the
determination of the Accounting Referee shall be final and binding on Parent,
the Surviving Corporation, the Stockholder's Representative, and the Management
Participants. If the determination is made that the Cumulative
Company Bookings Value as of immediately upon the expiration of the Earn-Out
Period is equal to or less than the calculation set out in the Parent's
Statement, the Stockholders' Representative shall pay the fees of the Accounting
Referee for making the determination; otherwise, those fees shall be paid by the
Surviving Corporation. If, following the final determination by the
Accounting Referee, Parent is required to make any payment pursuant to
subsection (a), Parent shall make payment of such amount within five (5) days of
such final determination. Notwithstanding the foregoing, Parent may
withhold payment of an amount of the earned Earn-Out Amount due and payable
under this Section 1.11 equal to the amount of any outstanding indemnifiable
claims in accordance with Article 6 until such time as such claims are
resolved.
(c) Acceleration of
Payment. Upon the occurrence of a
Liquidation Event, the Stockholders' Representative shall have the option to
demand payment of the Base Earn-Out Amount within fifteen (15) days following
the consummation of such Liquidation Event, and upon such payment, Parent’s
Earn-Out payment obligations under this Section 1.11 shall be deemed fully
satisfied.
(d) Operation of Business During
Earn-Out Period. During the Earn-Out Period, Parent and the
Surviving Corporation shall cause the Surviving Corporation to be operated in
accordance with Schedule 1.11(d).
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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(e) No
Interest. No interest shall accrue or be paid on any portion
of the Earn-Out Amount or any payment or distribution pursuant to this Section
1.11. Payments made pursuant to this Section 1.11 shall be treated as
adjustments to the Purchase Price.
(f) Transferability. The
interests of the Company Stockholders and the Management Participants in the
Earn-Out Amount shall not be assignable or transferable, other than by operation
of law. Notice of any such assignment or transfer by operation of law shall be
given to Parent, and no such assignment or transfer shall be valid until such
notice is given.
(g) Dispute
Resolution. If there is a dispute with
respect to any provision of this Section 1.11 (including compliance with
Schedule 1.11(d)), other than the calculation of the Cumulative Company Bookings
Value, which is governed by Section 1.11(b), the parties will submit such
dispute to binding arbitration in accordance with the procedure set forth in
Section 6.3.
(h) Certain
Definitions. For the purposes hereof, the following terms
shall have the following meanings:
(i) "Company
Booking" Note
1
(ii) "Cumulative
Company Bookings Value" Note 1
(iii) "Earn-Out
Amount" shall mean the amount payable by the Surviving Corporation pursuant to
this Section 1.11.
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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(iv) "Earn-Out
Cap" Note 1
(v) "Earn-Out Period" shall mean
the twelve (12) month period following the Closing Date.
(vi) "Liquidation Event" shall mean
the closing of (A) the sale, transfer (including by way of an exclusive license)
or other disposition of all or substantially all of Parent's or the Surviving
Corporation's assets (except a sale, transfer or disposition in which EXFO,
directly or indirectly, continues to own or control at least fifty percent (50%)
of the voting power of the capital stock of the acquiring entity), (B) the
consummation of the merger, reorganization, or consolidation of Parent or the
Surviving Corporation with or into another entity (except a merger,
reorganization or consolidation in which (a) EXFO, directly or indirectly,
continues to hold at least fifty percent (50%) of the voting power of the
capital stock of Parent or the Surviving Corporation, as applicable, or the
surviving or acquiring entity or (b) the holders of capital stock of EXFO
immediately prior to such merger or consolidation continue to hold at least
fifty percent (50%) of the voting power of the capital stock of the surviving or
acquiring entity), or (C) a liquidation, dissolution or winding up of Parent or
the Surviving Corporation; provided, however, that a
transaction shall not constitute a Liquidation Event if its sole purpose is to
change the jurisdiction of Parent's or the Surviving Corporation's incorporation
or to create a holding company that will be owned, directly or indirectly, by
EXFO.
1.12 Withholding
Obligations.
(a) Notwithstanding
any other provision in this Agreement, the Parent, the Company, the Merger Sub,
the Paying Agent and the Stockholders' Representative shall have the right
to deduct and withhold Taxes from any payments to be made hereunder (including
any payments to be made under Article 6) if such withholding is required by law
and to collect any necessary Tax forms, including Form W-9 or the appropriate
series of Form W-8, as applicable, or any similar information, from the Company
Stockholders, Management Participants and any other recipients of payments
hereunder. To the extent that amounts are so withheld, such withheld amounts
shall be treated for all purposes of this Agreement as having been delivered and
paid to the Company Stockholder, Management Participant or other recipient of
payments in respect of which such deduction and withholding was
made.
(b) To the extent that any
amounts are required to be deducted or withheld from any payments to be made to
the employees or service providers of the Company hereunder, the Party making
such payments shall pay the gross amount of such payments to the Surviving
Corporation. The Surviving Corporation shall then deduct and withhold from such
payments such amounts as may be required to be deducted or withheld from such
payments under any Tax law, pay the remainder of such payments to the applicable
employees or service providers and make all required withholding Tax payments to
the applicable Governmental Entities.
1.13 Holdback
Amount. Note 1
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Parent and Merger Sub that, except as set
forth in the Company Disclosure Schedule, the statements contained in this
Article 2 are true and correct as of the date of this Agreement and will be true
and correct as of the Closing Date, except to the extent such representations
and warranties are specifically made as of a particular date (in which case such
representations and warranties will be true and correct as of such date). The
Company Disclosure Schedule shall be arranged in sections and subsections
corresponding to the numbered and lettered sections and subsections contained in
this Article 2. The disclosures in any section or subsection of the Company
Disclosure Schedule shall qualify other sections and subsections in this Article
2 only to the extent such disclosure is expressly cross-referenced in such other
sections and subsections (or the applicability of such disclosure to such other
sections and subsections is readily apparent.
2.1 Organization,
Qualification and Corporate Power.
The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. The Company is duly qualified to
conduct business and is in good standing under the laws of each jurisdiction
listed in Section 2.1 of the Company Disclosure Schedule, which jurisdictions
constitute the only jurisdictions in which the nature of the Company's
businesses or the ownership or leasing of its properties requires such
qualification, except where the failure to be so qualified would not be
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect. The Company has all requisite corporate power and authority to
carry on the businesses in which it is engaged and to own and use the properties
owned and used by it. The Company has furnished to Parent complete and accurate
copies of its Amended and Restated Certificate of Incorporation and bylaws. The
Company is not in default under or in violation of any provision of its Amended
and Restated Certificate of Incorporation or bylaws.
2.2 Capitalization.
(a) Note
1
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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Note 1
(b) Section
2.2 of the Company Disclosure Schedule sets forth a complete and accurate list,
as of the date of the Agreement, of the holders of capital stock of the Company,
showing the number of shares of capital stock, and the class or series of such
shares, held by each stockholder and (for shares other than Common Shares) the
Conversion Price (as defined in the Company's Amended and Restated Certificate
of Incorporation) of such shares. Section 2.2 of the Company Disclosure Schedule
also indicates all outstanding Common Shares that constitute restricted stock or
that are otherwise subject to a repurchase or redemption right, indicating the
name of the applicable stockholder, the vesting schedule (including any
acceleration provisions with respect thereto), and the repurchase price payable
by the Company. All of the issued and outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable. All of the issued and outstanding shares of capital stock of the
Company have been offered, issued and sold by the Company in compliance in all
material respects with all applicable federal, state, and foreign securities
laws.
(c) Section 2.2 of the
Company Disclosure Schedule sets forth a complete and accurate list, as of the
date of this Agreement of: (i) all Company Stock Plans, indicating for each
Company Stock Plan the number of Common Shares the Company is authorized to
issue under such Plan, the number of options exercised to date under such Plan,
the number of Common Shares subject to outstanding options under such Plan and
the number of Common Shares reserved for future issuance under such Plan; (ii)
all holders of outstanding Options as of the date hereof, indicating with
respect to each Option the Company Stock Plan under which it was granted, the
number of Common Shares subject to such Option, the exercise price, the date of
grant, and the vesting schedule (including any acceleration provisions with
respect thereto); and (iii) all holders of outstanding Warrants, the number of
shares of capital stock, and the class or series of such shares, subject to such
Warrant, the exercise price, the date of issuance and the expiration date
thereof. The Company has provided or made available to Parent
complete and accurate copies of all Company Stock Plans, forms of all stock
option agreements evidencing Options and forms of all Warrants. All of the
shares of capital stock of the Company subject to Options and Warrants will be,
upon issuance pursuant to the exercise of such instruments in accordance
therewith, duly authorized, validly issued, fully paid and nonassessable. Except
as set forth in Section 2.2 of the Company Disclosure Schedule, the Company has
never adjusted or amended the exercise price of any Options previously awarded,
whether through amendment, cancellation, replacement grant, repricing, or any
other means.
Note 1: Contains confidential information that would be seriously
prejudicial to the interests of EXFO.
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(d) Except as
set forth in this Section 2.2 or in Section 2.2 of the Company Disclosure
Schedule or with respect to the rights, preferences and privileges of the
Preferred Shares contained in the Company's Amended and Restated Certificate of
Incorporation in effect on the date hereof, (i) no subscription, warrant,
option, convertible security or other right (contingent or otherwise) to
purchase or acquire any shares of capital stock of the Company is authorized or
outstanding, (ii) the Company has no obligation (contingent or otherwise) to
issue any subscription, warrant, option, convertible security or other such
right, or to issue or distribute to holders of any shares of its capital stock
any evidences of indebtedness or assets of the Company, (iii) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or to make any other distribution in respect thereof, and (iv) there are no
outstanding or authorized stock appreciation, phantom stock or similar rights
with respect to the Company.
(e) Except as
set forth in Section 2.2 of the Company Disclosure Schedule, there is no written
agreement, or to the Company's knowledge, oral agreement, between the Company
and any holder of its securities, or, to the best of the Company's knowledge,
among any holders of its securities, relating to the sale or transfer (including
agreements relating to rights of first refusal, co-sale rights or "drag-along"
rights), registration under the Securities Act, or voting, of the capital stock
of the Company.
(f) Schedule 1.3(d)(iii) sets
forth the true and complete amount to which each Management Participant will be
entitled as of the Effective Time pursuant to the Amended and Restated
Certificate upon the consummation of the Merger in accordance with this
Agreement. Subject to Section 1.6 hereof, Schedule 1.3(d)(iv) sets
forth the true and complete amount to which each Company Stockholder will be
entitled as of the Effective Time pursuant to the Amended and Restated
Certificate upon the consummation of the Merger in accordance with this
Agreement.
2.3 Authorization
of Transaction.
The
Company has all requisite power and authority to execute and deliver this
Agreement and the Ancillary Agreements to which it is a party and to perform its
obligations hereunder and thereunder. The execution and delivery by the Company
of this Agreement and the Ancillary Agreements to which it is a party and,
subject to obtaining the Requisite Stockholder Approval, the consummation by the
Company of the transactions contemplated hereby, have been duly and validly
authorized by all necessary corporate action on the part of the
Company. Without limiting the generality of the foregoing, the Board
of Directors of the Company, at a meeting duly called and held, (i) determined
that the Merger is advisable and in the best interests of the Company and its
stockholders, (ii) approved this Agreement and the Ancillary Agreements in
accordance with the provisions of the Delaware General Corporation Law, and
(iii) directed that this Agreement and the Merger be submitted to the Company
Stockholders for their adoption and approval and resolved to recommend that the
Company Stockholders vote in favor of the adoption of this Agreement and the
approval of the Merger and the other transactions contemplated by this
Agreement. This Agreement and the Ancillary Agreements to which the Company is a
party have been duly and validly executed and delivered by the Company and
constitute valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms, except as enforceability may
be limited by (a) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors and (b) rules governing specific
performance, injunctive relief and other equitable remedies.
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2.4 Noncontravention.
Subject
to the filing of the Certificate of Merger as required by the Delaware General
Corporation Law, neither the execution and delivery by the Company of this
Agreement nor the Ancillary Agreement to which it is a party, nor the
transactions contemplated hereby and thereby, will (a) conflict with or violate
any provision of the Amended and Restated Certificate of Incorporation or Bylaws
of the Company or the charter, bylaws or other organizational document of the
Company's Subsidiary, (b) require on the part of the Company or its Subsidiary
any notice to or filing with, or any permit, authorization, consent or approval
of, any Governmental Entity, (c) conflict with, result in a breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of obligations under, create in any party the
right to terminate, modify or cancel, or require any notice, consent or waiver
under, any material contract or instrument to which the Company or its
Subsidiary is a party or by which the Company or its Subsidiary is bound or to
which any of their respective assets is subject, (d) result in the imposition of
any Security Interest upon any assets of the Company or its Subsidiary or (e)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company, its Subsidiary or any of their respective properties
or assets.
2.5 Subsidiaries.
(a) Section
2.5 of the Company Disclosure Schedule sets forth: (i) the name of the Company's
Subsidiary; (ii) the number and type of outstanding equity securities (and any
rights to purchase securities) of the Company's Subsidiary and a list of the
holders thereof; (iii) the jurisdiction of organization of the Company's
Subsidiary; (iv) the names of the officers and directors of the Company's
Subsidiary; and (v) the jurisdictions in which the Company's Subsidiary is
qualified or holds licenses to do business as a foreign corporation or other
entity.
(b) The Company's Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. The Company's Subsidiary is duly
qualified to conduct business and is in good standing under the laws of each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties requires such qualification. The Company's Subsidiary has all
requisite power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it, except where the failure
to be so qualified would not be reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect. The Company has delivered to
Parent complete and accurate copies of the charter, bylaws or other
organizational documents of the Company's Subsidiary. The Company's Subsidiary
is not in default under or in violation of any provision of its charter, bylaws
or other organizational documents. All of the issued and outstanding shares of
capital stock of the Company's Subsidiary are duly authorized, validly issued,
fully paid, nonassessable and free of pre-emptive rights. All shares of the
Company's Subsidiary are owned by the Company free and clear of any restrictions
on transfer (other than restrictions contained in such Subsidiary's constating
documents or under the UK Companies Act, EU legislation or other applicable
securities laws), claims, Taxes, Security Interests, options, warrants, rights,
contracts, calls, commitments, equities and demands. (i) There are no
outstanding or authorized options, warrants, rights, agreements or commitments
to which the Company or its Subsidiary is a party or which are binding on any of
them providing for the issuance, disposition or acquisition of any capital stock
of any of the Company's Subsidiary, (ii) there are no outstanding stock
appreciation, phantom stock or similar rights with respect to the Company's
Subsidiary and (iii) there are no voting trusts, proxies or other agreements or
understandings with respect to the voting of any capital stock of the Company's
Subsidiary.
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(c) The
Company does not control directly or indirectly or have any direct or indirect
equity participation or similar interest in any corporation, company,
partnership, limited liability company, joint venture, trust or other business
association or entity other than its Subsidiary, nor does it have the right to
obtain any of the foregoing.
2.6 Financial
Statements.
(a) The Company has provided
to Parent the Financial Statements. The Financial Statements have been prepared
in accordance with GAAP applied on a consistent basis throughout the periods
covered thereby, fairly present in all material respects the consolidated
financial condition, results of operations and cash flows of the Company and its
Subsidiary as of the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of the Company and its
Subsidiary; provided, however, that the Financial Statements referred to in
clause (b) and (c) of the definition of such term are subject to normal
recurring year-end adjustments (which will not be material) and do not include
footnotes. Since the beginning of the period covered by the Financial
Statements, there has been no material change in any accounting policies,
principles, methods or practices, including any change with respect to reserves
(whether for bad debts, contingent liabilities or otherwise), of the Company. No
audit firm has ever declined or indicated its inability to issue an opinion with
respect to any financial statements of the Company and its
Subsidiary. No independent accountant or auditor has issued letters
with respect to material weaknesses in internal controls made in connection with
any annual audit of any financial statements of the Company or its
Subsidiary.
(b) Since the
beginning of the periods covered by the Financial Statements, the Company and,
subject to the last sentence of this Section 2.6(b), its Subsidiary have, at all
times, (i) made and kept books and records that are accurate in all material
respects and (ii) maintained, enforced and complied in all material respects
with internal accounting controls sufficient to provide reasonable assurance
that (A) transactions are executed in accordance with management's general or
specific authorization, (B) transactions are recorded as necessary to permit
preparation of financial statements in accordance with GAAP and to maintain
accountability for assets, (C) access to assets is permitted only in accordance
with management's general or specific authorization, (D) the reported
accountability for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any differences, and
(E) all information required to be reported or reflected in the Financial
Statements is recorded, processed, summarized and timely reported to the
appropriate members of management and (in the case of information required to be
made available to the Company's independent accountants in connection with their
audit of the Financial Statements audited by them) made available to the
Company's independent auditors. During the periods covered by the Financial
Statements, there has been (i) no significant change in the internal controls of
the Company and its Subsidiary over financial reporting, (ii) no significant
deficiency or material weakness in the design or operation of the internal
controls of the Company and its Subsidiary over financial reporting which,
either individually or in the aggregate, is reasonably likely to have a material
adverse effect on the ability of the Company and its Subsidiary to record,
process, summarize and report financial information during any of the periods
covered by the Financial Statements, and (iii) to the knowledge of the Company,
no fraud, whether or not material, involving any member of the board of
directors or management of the Company or its Subsidiary or any other employee
of the Company or its Subsidiary who has (or had) a significant role in the
internal control of the Company and its Subsidiary over financial
reporting.
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(c) Except as
set forth in Section 2.6(c) of the Company Disclosure Schedule, as of the
Effective Time, neither the Company nor the Subsidiary shall have any
outstanding indebtedness or bonus obligations.
2.7 Absence
of Certain Changes.
Since the
Most Recent Balance Sheet Date, (a) there has occurred no event or development
which, individually or in the aggregate, has had, or would reasonably be
expected to have in the future, a Company Material Adverse Effect, and (b) the
Company and its Subsidiary have complied with the covenants set forth in Section
4.4 of this Agreement as if this Agreement had been executed as of such
date.
2.8 Undisclosed
Liabilities.
Except as
set forth in Section 2.8 of the Company Disclosure Schedule, neither the Company
nor its Subsidiary has any liability (whether known or unknown, whether absolute
or contingent, whether liquidated or unliquidated and whether due or to become
due), except for (a) liabilities shown on the Most Recent Balance Sheet,
(b) liabilities which have arisen since the Most Recent Balance Sheet Date
in the ordinary course of business which are not material in amount, and (c)
contractual and other liabilities incurred in the ordinary course of business
which are not required by GAAP to be reflected on a balance sheet and which are
not material in amount; provided that the Company may update Section 2.8 of the
Company Disclosure Schedule (the "Section 2.8 Update") to reflect new material
liabilities incurred in the ordinary course of business consistent with past
practice between the date hereof and the Closing Date.
2.9 Tax Matters.
Except as
set forth in the Company Disclosure Schedule:
(a) Each of
the Company and its Subsidiary has filed on a timely basis all Tax Returns that
it was required to file, and all such Tax Returns were complete and accurate in
all material respects. Neither the Company nor its Subsidiary is or has ever
been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns. Each of the
Company and its Subsidiary has paid all Taxes that were due and payable whether
or not shown as due on such Tax Returns, except for Taxes being contested in
good faith and described in Section 2.9(a) of the Company Disclosure Schedule.
The unpaid Taxes of the Company and its Subsidiary for Tax periods through the
Most Recent Balance Sheet Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the Most Recent
Balance Sheet and do not exceed those accruals and reserves as adjusted for the
passage of time though the Closing Date in accordance with past custom and
practice of the Company and its Subsidiary in filing Tax Returns. Neither the Company nor
its Subsidiary has any liability for any Tax obligation of any taxpayer
(including any affiliated group of corporations or other entities that included
the Company or its Subsidiary during a prior period) other than the Company and
its Subsidiary. All Taxes, namely but not limited to, income, sales , goods and
services taxes, that the Company or its Subsidiary is or was required by law to
withhold or collect have been duly withheld or collected and, to the extent
required, have been paid to the proper Governmental Entity, namely but not
limited to US, Canadian or any other competent jurisdiction. There are no liens
for Taxes (other than for current property Taxes not yet due and payable) upon
the assets of the Company or its Subsidiary.
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(b) The
Company has delivered to Parent complete and accurate copies of all U.S. federal
and state and all foreign income Tax Returns, examination reports and statements
of deficiencies assessed against or agreed to by the Company or its Subsidiary
for the past five Tax years. None of the income Tax Returns of the Company or
its Subsidiary have been audited by the Internal Revenue Service (or the
applicable state, local or foreign counterpart). No examination or audit of any
Tax Return of the Company or its Subsidiary by any Governmental Entity is
currently in progress or, to the knowledge of the Company, threatened or
contemplated, except as specified (including description of nature of
examination and any proposed adjustments to date) in Section 2.9(b) of the
Company Disclosure Schedule. Neither the Company nor its Subsidiary has been
informed by any jurisdiction that the jurisdiction believes that the Company or
its Subsidiary was required to file any Tax Return that was not filed. Neither
the Company nor its Subsidiary has any currently effective waiver of any statute
of limitations with respect to Taxes or agreement to an extension of time with
respect to a Tax assessment or deficiency in effect.
(c) Except as
set forth in Section 2.9(c) of the Company Disclosure Schedule, neither the
Company nor its Subsidiary: (i) is a "consenting corporation" within the meaning
of former Section 341(f) of the Internal Revenue Code, and none of the assets of
the Company or its Subsidiary are subject to an election under former Section
341(f) of the Internal Revenue Code; (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Internal
Revenue Code during the applicable period specified in Section 897(c)(l)(A)(ii)
of the Internal Revenue Code; (iii) has made any payments, is obligated to make
any payments, or is a party to any agreement, contract, arrangement or plan has
resulted or would result, separately or in the aggregate, in the making of any
payments that may be treated as an "excess parachute payment" under Section 280G
of the Internal Revenue Code or for which a deduction would be disallowed under
Section 162 or Section 404 of the Internal Revenue Code; or (iv) has any actual
or potential liability for any taxes of any Person (other than the Company and
its Subsidiary) under Treasury Regulation Section 1.1502-6 (or any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise.
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(d) None of
the assets of the Company or its Subsidiary: (i) is "tax-exempt use property"
within the meaning of Section 168(h) of the Internal Revenue Code; or
(ii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Internal Revenue Code.
(e) Neither the Company nor
its Subsidiary is required to include any item in income, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof) after
the Closing Date as a result of a change in its method of accounting resulting
in an adjustment to its taxable income pursuant to Section 481 of the Internal
Revenue Code.
(f) Neither the Company nor
its Subsidiary is a party to, or bound by, any Tax indemnity, Tax sharing or Tax
allocation agreement.
(g) Neither the Company nor
its Subsidiary has taken any positions on its federal income Tax Returns that
would require disclosure in order to avoid a substantial understatement penalty
within the meaning of Section 6662 of the Internal Revenue Code.
(h) Neither the Company nor
its Subsidiary is a party to any joint venture, partnership, or other
arrangement or contract which could be treated as a partnership for federal,
state or foreign income Tax purposes.
(i) Neither
the Company nor its Subsidiary has participated in any reportable transactions
under Treasury Regulation Section 1.6011-4(b) and its predecessors (including
any applicable administrative authority).
(j) Neither
the Company nor its Subsidiary has ever had any "nonqualified deferred
compensation plan" (within the meaning of Section 409A of the Internal Revenue
Code) that has at any time failed to meet the requirements of paragraphs (2),
(3), and (4), of Section 409A of the Internal Revenue Code or was not operated
in accordance with such requirements.
(k) Neither
the Company nor any Subsidiary has ever constituted either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Internal Revenue Code) in any distribution of stock
qualifying for tax-free treatment under Section 355 of the Internal Revenue
Code.
(l) Except as
set for on Section 2.9(l) of the Company Disclosure Schedule, none of the
outstanding capital stock of the Company is subject to a "substantial risk of
forfeiture" within the meaning of Section 83 of the Internal Revenue Code. All
shareholders of the Company who held stock that was at any time subject to a
"substantial risk of forfeiture" filed timely elections pursuant to Section
83(b) of the Internal Revenue Code. No portion of the Purchase Price, other than
amounts payable to the Management Participants, is subject to any Tax
withholding obligation. No disqualifying disposition within the
meaning of Section 422 of the Internal Revenue Code will occur as a result of
the transactions contemplated by this Agreement.
(m) None of the holders of
capital stock of the Company is a "foreign person" as that term is defined in
Section 1445 of the Internal Revenue Code.
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2.10 Assets.
(a) The
Company and its Subsidiary are the true and lawful owners, and have good title
to, all of the tangible and intangible assets (other than capitalized or
operating leases set forth on Section 2.10(a) of the Company Disclosure
Schedule, in which the Company or its Subsidiary, as the case may be, have a
valid leasehold interest) purported to be owned by the Company or its Subsidiary
(except for assets sold or otherwise disposed of since the Most Recent Balance
Sheet Date that are not material individually or in the aggregate, and products
sold in the ordinary course of business). Except as set forth in Section 2.10(a)
of the Company Disclosure Schedule, all such assets are owned by the Company and
its Subsidiary free and clear of all Security Interests. Each of the Company and
its Subsidiary owns or leases all tangible assets sufficient for and material to
the conduct of its businesses as presently conducted. Each tangible asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
No Person has the right, privilege or option to purchase or acquire any tangible
or intangible assets purported to be owned by the Company or its
Subsidiary.
(b) Section
2.10(b) of the Company Disclosure Schedule lists individually (i) all fixed
assets (within the meaning of GAAP) of the Company or its Subsidiary, indicating
the cost, accumulated book depreciation (if any) and the net book value of each
such fixed asset as of the Most Recent Balance Sheet Date, and (ii) each other
assets of a tangible nature (other than inventories) of the Company or its
Subsidiary whose book value exceeds Ten Thousand Dollars ($10,000).
(c) Each
material item of equipment, motor vehicle and other asset that the Company or
its Subsidiary has possession of pursuant to a lease agreement or other
contractual arrangement is in such condition that, upon its return to its lessor
or owner under the applicable lease or contract in such condition, the
obligations of the Company or its Subsidiary to such lessor or owner will have
been discharged in full.
(d) Section 2.10(d) of the
Company Disclosure Schedule lists all inventories of the Company as of February
29, 2008.
2.11 Owned
Real Property.
The Company and its Subsidiary have no
Owned Real Property.
2.12 Leases.
Section
2.12 of the Company Disclosure Schedule lists all Leases and lists the term of
such Leases and the current monthly rent, fees and charges payable thereunder.
The Company has delivered to Parent complete and accurate copies of the Leases.
The real property under the Leases (the "Leased Property") includes all real
property material to the conduct of business of the Company and its Subsidiary
as presently conducted. Neither the Company nor its Subsidiary needs to own or
lease any other real property to conduct its business as presently conducted. To
the knowledge of the Company, (i) the Leased Property is in compliance in all
material respects with all applicable laws, (ii) none of the buildings, plant or
structures on any Leased Property is in need of maintenance or repairs except
for ordinary, routine maintenance and repairs that are, individually and in the
aggregate, immaterial, (iii) all utility systems serving the Leased Property are
adequate for the business of the Company and its Subsidiary, (iv) each Leased
Property has adequate access for ingress from and egress to a public way, and
(v) there is no pending or threatened condemnation, eminent domain or similar
proceeding with respect to any Leased Property. Neither the Company nor its
Subsidiary sub-leases any of the Leased Property. With respect to each
Lease:
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(a) to the
knowledge of the Company, such Lease is legal, valid, binding, enforceable and
in full force and effect (except as enforceability may be limited by (i) laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies);
(b) to the
knowledge of the Company, such Leases will continue to be legal, valid, binding,
enforceable and in full force and effect (except as enforceability may be
limited by (i) laws of general application relating to bankruptcy,
insolvency, and the relief of debtors, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies) immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing;
(c) neither
the Company nor its Subsidiary nor, to the knowledge of the Company, any other
party, is in breach or violation of, or default under, any such Lease, and, to
the knowledge of the Company, no event has occurred, is pending or, to the
knowledge of the Company, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a breach or default by the Company
or its Subsidiary or any other party under such Lease;
(d) there are no material
disputes, oral agreements or forbearance programs in effect as to such
Lease;
(e) neither the Company nor
its Subsidiary has assigned, transferred, conveyed, mortgaged, hypothecated,
deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(f) the Company is not aware
of any Security Interest, easement, servitude, covenant or other restriction
applicable to the real (immovable) property subject to such lease which would
reasonably be expected to materially impair the current uses or the occupancy by
the Company or its Subsidiary of the property subject thereto; and
(g) the
Company or its Subsidiary is entitled to the benefit of non-disturbance
agreements that will permit it, subject to the qualifications set forth therein,
to continue to occupy any real property covered by such Lease in the event of a
change in ownership or foreclosure upon the fee interest in such
property.
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2.13 Intellectual
Property.
(a) Section
2.13(a) of the Company Disclosure Schedule lists all Intellectual Property
Registrations that are registered or filed in the name of the Company or its
Subsidiary, alone or jointly with others (the "Company IP Registrations") in
each case, enumerating as applicable the filing or registration number, title,
jurisdiction in which filing was made or from which registration issued, date of
filing or issuance, and all listed inventor(s), author(s), current applicant(s),
and registered owners(s). All assignments of Company IP Registrations to the
Company or its Subsidiary have been properly executed and
recorded. All issued patents in the Patent Rights and registered
trademarks in the Trademarks are valid, in good standing and enforceable, and no
third party has made or threatened to make, or to the knowledge of the Company
and its Subsidiary, has reasonable grounds to make or threaten, any allegation
that any issued patents in the Patent Rights or registered trademarks in the
Trademarks are invalid, not in good standing or
unenforceable. There are no material defects of form in the
filings of the Patent Rights and the Trademarks, and all issuance, renewal,
maintenance and other payments that are or have become due with respect to the
Company IP Registrations have been timely paid by or on behalf of the
Company.
(b) Neither the Company nor
its Subsidiary has received notice of any pending or threatened inventorship
challenges, ownership challenges, invalidity, opposition or nullity proceedings
or interferences with respect to any applications or registrations of the
Company IP Registrations.
(c) Except as
set forth in Section 2.13(c)(i) of the Company Disclosure Schedule, the Company
is the sole and exclusive owner of all Company Owned Intellectual Property, free
and clear of any Security Interests, and all joint owners of the Company Owned
Intellectual Property are listed in Section 2.13(c)(i) of the Company Disclosure
Schedule. The Company Intellectual Property constitutes all Intellectual
Property necessary to conduct the Company's business in all material respects in
the manner currently conducted and presently proposed to be conducted by the
Company and its Subsidiary, including but not limited to all Internal Systems.
All Internal Systems that are material to the business of the Company or its
Subsidiary are listed and described in Section 2.13(c)(ii) of the Company
Disclosure Schedule.
(d) The Company has taken
reasonable measures to protect the proprietary nature of each material item of
Company Owned Intellectual Property, and to maintain in confidence all trade
secrets and confidential information comprising a part thereof. The
Company has complied in all material respects with all applicable contractual
and legal requirements pertaining to information privacy and
security. No complaint relating to an improper use or disclosure of,
or a breach in the security of, any such information has been made in writing to
the Company or its Subsidiary or, to the knowledge of the Company and its
Subsidiary, threatened against Company or its Subsidiary. To the
knowledge of Company, there has been no: (i) unauthorized disclosure of any
material item of the Company Owned Intellectual Property or third party
proprietary or confidential information in the possession, custody or control of
Company or its Subsidiary and no collection, use or disclosure of any such
information in breach of any privacy laws; or (ii) material breach of the
security procedures of the Company or its Subsidiary wherein confidential
information has been disclosed to a third person. The Company and its Subsidiary
have actively policed the quality of all goods and services sold, distributed or
marketed under each of its Trademarks and have enforced adequate quality control
measures to ensure that no Trademarks that it has licensed to others shall be
deemed to be abandoned.
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(e) None of
the Customer Offerings, the Internal Systems, or the conduct of the Company's
business in the manner currently conducted and presently proposed to be
conducted, infringes or violates, or constitutes a misappropriation of any
Intellectual Property rights of any third party. No written complaint, claim,
allegation, notice, or threat of any of the foregoing (or any notification that
a license under any Intellectual Property rights is or may be required by, or is
available for license to, the Company or its Subsidiary) was received by the
Company or its Subsidiary.
(f) To the knowledge of the
Company, no Person (including, without limitation, any current or former
employee or consultant of Company or its Subsidiary) is infringing, violating or
misappropriating any of the Company Owned Intellectual Property or any Company
Licensed Intellectual Property that is exclusively licensed to the Company or
its Subsidiary.
(g) Section 2.13(g) of the
Company Disclosure Schedule identifies each material written license, covenant
or other agreement (other than confidentiality agreements and materials transfer
agreements entered into in the ordinary course of business and those listed on
Section 2.21 of the Company Disclosure Schedule) pursuant to which the Company
or its Subsidiary has assigned, transferred, licensed, distributed or otherwise
granted any right or access to any Person, or covenanted not to assert any
right, with respect to any past, existing or future Company Intellectual
Property. Except as described in Section 2.13(g) of the Company Disclosure
Schedule, neither the Company nor its Subsidiary has agreed to indemnify any
Person against any infringement, violation or misappropriation of any
Intellectual Property rights with respect to any Customer Offerings or any third
party Intellectual Property rights. Except as set forth in Section 2.13(g) of
the Company Disclosure Schedule, neither the Company nor its Subsidiary is a
member of or party to any patent pool, industry standards body, trade
association or other organization pursuant to the rules of which it is obligated
to license any existing or future Company Intellectual Property to any
Person.
(h) Section
2.13(h) of the Company Disclosure Schedule lists all Company’s distributors,
joint venturers, partners, sales agents, representatives or any other Persons,
including VARs, OEMs or resellers, who have rights to market, distribute or
license the Customer Offerings, including the Software, in any geographic,
product or customer market.
(i) Section 2.13(i) of the
Company Disclosure Schedule lists all license, maintenance or support
agreements, development contracts and all agreements, whether written or oral,
between the Company and end-user customers in respect of the Software
(collectively, the "Contracts"), Except as disclosed in Section 2.13(i) of the
Company Disclosure Schedule, all end-user customers under Contracts have been
granted non-transferable, non-exclusive, single-site licenses to use only object
code versions of the Software.
(j) Section 2.13(j) of the
Company Disclosure Schedule identifies (i) each item of Company Licensed
Intellectual Property and the license or agreement pursuant to which the Company
or its Subsidiary is a party (excluding off-the-shelf software programs that are
licensed by the Company pursuant to "shrink wrap" or "click wrap" licenses, the
total fees associated with which are less than Twenty-Five Thousand Dollars
($25,000) annually, and, Open Source Materials), and (ii) each agreement,
contract, assignment or other instrument pursuant to which the Company or its
Subsidiary has obtained any joint or sole ownership interest in or to each item
of Company Owned Intellectual Property. No third party Intellectual
Property including inventions, methods, services, materials, processes or
software are included in or required to Exploit the Customer Offerings, except
as specifically set forth in Section 2.13(j) of the Company Disclosure
Schedule.
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(k) Section
2.13(k) of the Company Disclosure Schedule contains a true and complete list of
the Company and its Subsidiary’s Software, programs, products, Documentation and
services. The Software, programs, products, Documentation and services of the
Company and its Subsidiary were written only by the individuals (the
"Developers") listed in Section 2.13(k) of the Company Disclosure
Schedule.
(l) Neither
the Company nor its Subsidiary has licensed, distributed, delivered or
disclosed, and the Company knows of no license, distribution, delivery or
disclosure by others (including its employees and contractors) of, the source
code for any Software included in the Customer Offerings except pursuant to a
written confidentiality agreement as set forth in Section 2.13(l)(i) of the
Company Disclosure Schedule. The Company and its Subsidiary have taken
commercially reasonable physical and electronic security measures to prevent
disclosure of such Software source code. Section 2.13(l)(ii) of the Company
Disclosure Schedule is a true and complete list of agreements pursuant to which
the source code to the Software has been or is required to be: (i) escrowed with
any third party, and, (ii) delivered to a third party for any purposes
whatsoever, including testing. No event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time, or both) will,
or would reasonably be expected to, nor will the consummation of the
transactions contemplated hereby, result in the disclosure or release of such
source code by Company, its Subsidiary or escrow agent(s) or any other Person to
any third party.
(m) Except as set forth in
Section 2.13(m) of the Company Disclosure Schedule, all of the Software and
Documentation comprising, incorporated in or bundled with the Customer Offerings
have been designed, authored, tested and debugged by regular employees of the
Company within the scope of their employment or by independent contractors of
the Company.
(n) Section 2.13(n) of the
Company Disclosure Schedule lists all Open Source Materials that Company or its
Subsidiary have utilized in any way in the Customer Offerings and describes the
manner in which such Open Source Materials have been utilized, including,
without limitation, whether and how the Open Source Materials have been
reproduced, modified and/or distributed by the Company. At Closing,
the conduct of the business in the manner currently conducted and presently
proposed to be conducted by the Company and its Subsidiary is in full compliance
with all licenses applicable to all such Open Source Materials. Except as
specifically disclosed in Section 2.13(n) of the Company Disclosure Schedule,
Company and its Subsidiary have not (i) incorporated Open Source Materials into
the Customer Offerings, or created derivative works of the Open Source Materials
that are included with the Customer Offerings; (ii) combined, merged or embedded
Open Source Materials with the Customer Offerings; (iii) linked
(dynamically or statically) Open Source Materials with the Customer Offerings;
(iv) distributed Open Source Materials in conjunction with any other Software
developed or distributed by Company; or (v) used Open Source Materials that
create, or purport to create, obligations for Company with respect to the
Customer Offerings or grant, or purport to grant, to any third party, any rights
or immunities under Intellectual Property rights (including, but not limited to,
using any Open Source Materials that require, as a condition of such use, that
other Software combined, merged or embedded with, linked with, incorporated
into, derived from or distributed with such Open Source Materials be (a)
disclosed or distributed in source code form, (b) licensed for the purpose of
making derivative works, (c) redistributable at no charge or minimal charge, or
(d) licensed or distributed with notices or markings explicitly referring to the
Open Source Materials). No Open Source Materials set forth in Section
2.13(n) of the Company Disclosure Schedule have been utilized in a manner that
imposes any obligation set forth above in subsection (v) of this Section 2.13(n)
with respect to a core component of the Customer Offerings.
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(o) Each
current and former Developer, whether an employee or independent contractor of
the Company or its Subsidiary, has executed a written agreement regarding
confidentiality and proprietary information, the forms of which have been made
available to Buyer, expressly assigning to the Company or its Subsidiary all
right, title and interest in any Intellectual Property related to the Customer
Offerings, inventions, whether or not patentable, and works of authorship,
invented, created, developed, conceived and/or reduced to practice during the
term of such employee's employment or such independent contractor's work for the
Company or its Subsidiary, and, except as set forth in Section 2.13(o) of the
Company Disclosure Schedule, has not excluded works or inventions made prior to
his, her or its engagement with the Company or its Subsidiary from his, her or
its assignment of inventions pursuant to such Person’s confidentiality and
proprietary information agreement with the Company or its Subsidiary. To the
Company’s knowledge, no employee or independent contractor is in violation of
his, her or its confidentiality agreement.
(p) Except as set forth in
Section 2.13(p)(i) of the Company Disclosure Schedule, as of the date hereof,
the Customer Offerings are free from material defects in design, workmanship and
materials and conform in all material respects to the written Documentation. The
Company and its Subsidiary have not received any contractual terminations or
requests for settlement or refund due to the failure of the Customer Offerings
to meet their specifications or otherwise to satisfy end user needs or for harm
or damage to any third party except as set forth in Section 2.13(p)(ii) of the
Company Disclosure Schedule.
(q) The Company and its
Subsidiary have neither sought, applied for nor received any support, funding,
resources or assistance from any federal, state, provincial local or foreign
governmental or quasi-governmental agency or funding source in connection with
the Customer Offerings, the Internal Systems or any facilities or equipment used
in connection therewith.
(r) Except as otherwise set
forth in Section 2.13(r) of the Company Disclosure Schedule, the Company does
not owe any royalties or other payments to third parties in respect of the
Company Licensed Intellectual Property. All royalties or other payments set
forth in Section 2.13(r) of the Company Disclosure Schedule are paid by the
Company in the ordinary course of business. The Company will not owe any such
royalties or any additional payments as a result of the execution of this
Agreement or the Ancillary Agreements to which it is a party.
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(s) Except as
set out in Section 2.13(s) of the Company Disclosure Schedule, the Company has
taken commercially reasonable measures in the physical and electronic protection
of its Internal Systems and of the source code related to the Software and, as
of the Effective Time, the Company Licensed Intellectual Property. To the
Company’s knowledge, there has been no breach of the Company’s Internal Systems.
The Company has adequate and appropriate internal policies and measures adopted
in respect of the use and access to the source code related to the Software and,
as of the Effective Time, to the Company Licensed Intellectual
Property.
2.14 Regulation.
(a) Neither
the Company nor its Subsidiary nor, to the Company's knowledge, any third party
manufacturer of the Customer Offerings of the Company or its Subsidiary, is in
receipt of notice of, or is known by the Company to be subject to any written,
adverse inspection, finding of deficiency, finding of non-compliance, regulatory
or warning letter, safety alert, mandatory or voluntary recall, investigation,
penalty for corrective or remedial action or other compliance or enforcement
action, in each case relating to the Customer Offerings of the Company or its
Subsidiary or to the facilities in which such Customer Offerings are developed,
manufactured, assembled, packaged or handled, by any applicable Governmental
Entity. There are no pending, or to the Company's knowledge, threatened civil,
criminal or administrative actions, suits, demands, claims, hearings,
investigations, demand letters, proceedings, complaints or requests for
information by any Governmental Entity related to the Company or its Subsidiary.
There is no act, omission, event, or circumstance of which the Company has
knowledge that would reasonably be expected to give rise to any such action,
suit, demand, claim, hearing, investigation, demand letter, proceeding,
complaint, or request for information or any such liability.
(b) Neither
the Company nor its Subsidiary has made any false statements on, or material
omissions from, any applications, approvals, reports and other submissions to
any applicable Governmental Entity or in or from any other records and
documentation prepared or maintained to comply with the requirements of any
Governmental Entity relating to the Customer Offerings of the Company or its
Subsidiary. There has not been any material violation of any law or regulation
by the Company or its Subsidiary in their prior product development efforts,
submissions or reports to any Governmental Entity that would reasonably be
expected to require investigation, corrective action or enforcement
action.
(c) Except as
set forth in Section 2.14 of the Company Disclosure Schedule, neither the
Company nor its Subsidiary has received any written notice pertaining to the
Customer Offerings of the Company or its Subsidiary that has resulted or is
likely, either individually or in the aggregate, to result in a material claim,
demand, complaint or proceeding.
(d) The Company and its
Subsidiary have completed and timely filed annual or other reports required by
applicable Governmental Entity in order to maintain the Product Registrations
and compliance with all laws and regulations in all material
respects.
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2.15 Contracts.
(a) Section 2.15 of the
Company Disclosure Schedule lists the following agreements (written or oral) to
which the Company or its Subsidiary is a party as of the date of this
Agreement:
(i) any agreement (or group of
related agreements) for the lease of personal (movable) property from or to
third parties providing for lease payments in excess of Fifty Thousand Dollars
($50,000) per annum or having a remaining term longer than 12
months;
(ii) any
agreement (or group of related agreements) for the purchase or sale of products
or for the furnishing or receipt of services (A) which requires the Company or
its Subsidiary to pay or otherwise give consideration of more than the sum of
Fifty Thousand Dollars ($50,000) over the term of the contract (other than
contracts listed in Section 2.21 of the Company Disclosure Schedule), (B) which
(pursuant to the terms of the Agreement) cannot be cancelled without payment or
penalty in excess of Ten Thousand Dollars ($10,000), (C) in which the
Company or its Subsidiary has granted manufacturing rights, "most favoured
nation" pricing provisions or marketing or distribution rights relating to any
products or territory or has agreed to purchase a at least Fifty Thousand
Dollars ($50,000) of goods or services or has agreed to purchase goods or
services exclusively from a certain party, or (D) which calls for performance
over a period of 12 months or more;
(iii) any
agreement concerning the establishment or operation of a partnership, joint
venture or limited liability company;
(iv) any agreement (or group of
related agreements) under which it has created, incurred, assumed or guaranteed
(or may create, incur, assume or guarantee) indebtedness (including capitalized
lease obligations) or under which it has imposed (or may impose) a Security
Interest on any assets (tangible or intangible) of the Company or its
Subsidiary;
(v) any agreement for the
disposition of any of the assets or business of the Company or its Subsidiary
(other than sales of products, leases or licenses, each as entered into in the
ordinary course of business) or any agreement for the acquisition of the assets
or business of any other entity (other than purchases of inventory or components
in the ordinary course of business);
(vi) any agreement concerning
non-solicitation or non-competition, including any agreement purporting to
restrict the territory in which the Company or any of its Subsidiaries shall
conduct its business;
(vii) any employment or consulting
agreement (excluding offer letters with non-management employees and the
contracts listed on Schedule 2.22(k) of the Company Disclosure
Schedule);
(viii) any
agreement involving any current officer, director or a holder (beneficially or
of record) of any capital stock of the Company or its Subsidiary other than (a)
for payment of salaries for services rendered, (b) reimbursement for customary
and reasonable expenses incurred on behalf of the Company or its Subsidiary in
the ordinary course of business, and (c) for other standard employee benefits
available to employees of the Company and its Subsidiary generally;
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(ix) any
agreement which contains any provisions requiring the Company or its Subsidiary
to indemnify any other party (excluding indemnities contained in agreements for
the purchase, sale or license of products entered into in the ordinary course of
business);
(x) any agreement with any
Governmental Entity or any educational institution (excluding confidentiality
agreements and materials transfer agreements entered into in the ordinary course
of business);
(xi) any
broker, deal, distributor, manufacturer's representative, agent or sales
promotion agreement that involves payments by the Company or its Subsidiary in
excess of Fifty Thousand Dollars ($50,000);
(xii) any
agency, distributor, sales representative, franchise or similar agreements;
and
(xiii) except as set forth in
subsections (i) through (xiii) above, any other agreement (or group of related
agreements) either involving more than Fifty Thousand Dollars ($50,000) or not
entered into in the ordinary course of business.
(b) Section 2.15 of the
Company Disclosure Schedule lists all consents required to give effect to the
transactions contemplated by this Agreement.
The
Company has delivered or made available to Parent a complete and accurate copy
of each agreement listed in Section 2.13 or Section 2.15 of the Company
Disclosure Schedule. The Company has delivered or made available to Parent a
complete and accurate copy of each agreement listed in Section 2.13 or Section
2.15 of the Company Disclosure Schedule. With respect to each agreement so
listed: (i) the agreement is legal, valid, binding and enforceable (except as
enforceability may be limited as provided in Section 2.21 or by (A) laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors, or (B) rules of law governing specific performance, injunctive relief
and other equitable remedies) and in full force and effect; (ii) subject to
obtaining the consents listed in Section 2.15(b) of the Company Disclosure
Schedule, the agreement will continue to be legal, valid, binding and
enforceable as aforesaid and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior to
the Closing; and (iii) neither the Company nor its Subsidiary nor, to the
knowledge of the Company, any other party, is in material breach or violation
of, or default under, any such agreement, and no event has occurred, is pending
or, to the knowledge of the Company, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a material breach or
default by the Company or its Subsidiary or, to the knowledge of the Company,
any other party under such agreement.
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2.16 Accounts
Receivable, Inventory; Backlog; Pipeline and Service Contracts.
(a) All
accounts receivable of the Company and its Subsidiary reflected on the Most
Recent Balance Sheet (other than those paid since such date) are valid
receivables subject to no setoffs or counterclaims and are current and
collectible (within 90 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. A complete and accurate list of the accounts receivable reflected on the
Most Recent Balance Sheet, showing the aging thereof, is included in Section
2.16 of the Company Disclosure Schedule. All accounts receivable of the Company
and its Subsidiary that have arisen since the Most Recent Balance Sheet Date are
valid receivables subject to no setoffs or counterclaims and are collectible
(within ninety (90) days after the date on which it first became due and
payable), net of an appropriate reserve for bad debts. Neither the Company nor
its Subsidiary has received any notice from an account debtor stating that any
account receivable is subject to any contest, claim or setoff by such account
debtor.
(b) The Inventories are new,
unused and of saleable quality and do not include any items which are below
customer specified quality standards or of a quality or quantity not useable or
saleable in the ordinary course of the business and are carried on the Financial
Statements in accordance with GAAP and in accordance with the Company's past
practices. The levels of Inventories have been maintained at such
amounts as are reasonably required for the operation of the business in the
ordinary course consistent with past practice. Section 2.16 of the
Company Disclosure Schedule contains a description and complete list of all
slow-moving and obsolete Inventories. The Inventories consists of raw
materials, manufactured and purchased parts and finished goods saleable or
usable in the ordinary course of business within nine (9) months.
(c) Section 2.16(c) of the
Company Disclosure Schedule lists a complete and correct backlog as of March 31,
2008 of products to be shipped by the Company or its Subsidiary within the next
60 days under standard Company terms and conditions, including a listing of each
customer’s name, each expected shipping date, and the amounts of products sold,
and the Company will update Section 2.16(c) of the Company Disclosure Schedule
(the "Section 2.16(c) Update") to list a complete and accurate backlog as of the
Closing Date.
(d) Section 2.16(d) of the
Company Disclosure Schedule includes a complete and correct list as of February
29, 2008 of all maintenance contracts under which the Company or its Subsidiary
is currently performing services, including a listing of each customer’s name,
each date performance of services began under the current term of the contract,
each date performance of services is scheduled to end and the pricing of such
services, and the Company will update Section 2.16(d) of the Company Disclosure
Schedule (the "Section 2.16(d) Update") to include a complete and accurate list
of such contracts as of the Closing Date.
(e) To the knowledge of the
Company, Section 2.16(e) of the Company Disclosure Schedule includes a complete
and correct list as of March 31, 2008 of all active sales opportunities that the
Company or its Subsidiary is tracking in the ordinary course of business,
including a listing of the name of each potential customer, the types and
amounts of products that may be sold to such customer and the expected date an
order will be made by such customer, and the Company will update Section 2.16(e)
of the Company Disclosure Schedule (the "Section 2.16(e) Update") to include, to
the knowledge of the Company, a complete and correct list of all active sales
opportunities as of the Closing Date.
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2.17 Powers of
Attorney.
Except as
set forth on Section 2.17 of the Company Disclosure Schedule, there are no
outstanding powers of attorney executed on behalf of the Company or its
Subsidiary.
2.18 Insurance.
Section
2.18 of the Company Disclosure Schedule lists each insurance policy (including
fire, theft, casualty, comprehensive general liability, workers compensation,
business interruption, environmental, product liability and automobile insurance
policies and bond and surety arrangements) to which the Company or its
Subsidiary is a party, all of which are in full force and effect. Such policies
are sufficient in amount (subject to reasonable deductibles) to allow the
Company and its Subsidiary to replace any of its material tangible assets that
might be damaged or destroyed. There is no claim pending under any such policy
as to which coverage has been questioned, denied or disputed by the underwriter
of such policy. All premiums due and payable under all such policies have been
paid in a timely manner, neither the Company nor its Subsidiary is liable for
retroactive premiums or similar payments, and the Company and its Subsidiary are
otherwise in compliance in all material respects with the terms of such
policies. The Company has no knowledge of any threatened termination of, or
premium increase with respect any such policy. Each of the Company and its
Subsidiary maintain all insurance required to be maintained by it pursuant to
the terms of the agreements set forth on Sections 2.12, 2.13 and 2.15 of the
Company Disclosure Schedule.
2.19 Litigation.
Except as
set forth in Section 2.19 of the Company Disclosure Schedule, there is no Legal
Proceeding which is pending or, to the knowledge of the Company, threatened
against the Company, its Subsidiary, or any of their respective officers or
directors, nor to the Company's knowledge is there any basis for the
foregoing. Neither the Company, its Subsidiary, nor, to the Company's
knowledge, any of their respective officers or directors, is a party or is named
as subject to the provisions of any order, writ, injunction, judgment or decree
of any Governmental Entity. There is no Legal Proceeding by the
Company or its Subsidiary pending or which the Company or its Subsidiary intends
to initiate.
2.20 Warranties.
(a) Except as
set forth in Section 2.20(a) of the Company Disclosure Schedule, no product or
service manufactured, sold, leased, licensed or delivered by the Company or its
Subsidiary is subject to any guaranty, warranty, right of return, right of
credit or other indemnity other than (i) the applicable standard terms and
conditions of sale or lease of the Company or its Subsidiary, which are set
forth in Section 2.20(a) of the Company Disclosure Schedule and (ii)
manufacturers' warranties for which neither the Company nor its Subsidiary has
any liability. Section 2.20(a) of the Company Disclosure Schedule sets forth the
aggregate expenses incurred by the Company and its Subsidiary in fulfilling
their obligations under their guaranty, warranty, right of return and indemnity
provisions during each of the fiscal years and the interim period covered by the
Financial Statements. The Company's and its Subsidiary's liability
for any breach of warranty for products manufactured or services provided prior
to Closing shall not exceed the warranty reserve set forth in the Most Recent
Balance Sheet.
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(b) Except as
set forth in Section 2.20(b) of the Company Disclosure Schedule, neither the
Company nor its Subsidiary has any liability to any customer in connection with
any product or service provided, licensed or delivered by the Company or its
Subsidiary to provide the customer with any other services or products of the
Company or its Subsidiary on pre-negotiated terms, including without limitation
for upgrades to other services or products at prices below the Company's or its
Subsidiary's published price for such services or products. Neither the Company
nor its Subsidiary has any liability to any customer in connection with any
product or service provided, licensed or delivered by the Company or its
Subsidiary other than those arising in the ordinary course of
business.
2.21 Employees.
(a) Section 2.21 of the
Company Disclosure Schedule contains as of the date hereof a list of all
employees of the Company and its Subsidiary whether actively at work or not,
along with their position, annual salary or wage rate, commission eligibility,
bonus potential, status as full-time or part-time employees and length of
service. Section 2.21 of the Company Disclosure Schedule contains a list of all
current and former employees of the Company or its Subsidiary who are a party to
a non-competition or non-solicitation agreement (that is by such agreement's
terms is still in effect) with the Company or its Subsidiary; copies of such
agreements have previously been delivered to Parent. All of the agreements
referenced in the preceding sentence and in Section 2.13(o) will continue to be
legal, valid, binding and enforceable and in full force and effect immediately
following the Closing in accordance with the terms thereof as in effect
immediately prior to the Closing; provided, however, that with respect to any
non-competition agreement binding an employee of the Company or its Subsidiary,
such agreement will continue to be legal, valid, binding and enforceable and in
full force and effect immediately following the Closing in accordance with the
terms thereof subject only to such limitations on its enforceability that may be
imposed by applicable law. Section 2.21 of the Company Disclosure Schedule
contains a list of all employees of the Company or its Subsidiary who work at a
facility located in the United States and who are not citizens of the United
States. To the knowledge of the Company, no key employee or group of employees
has any current plans to terminate employment with the Company or its
Subsidiary, nor does the Company or its Subsidiary have a present intention to
terminate any of the foregoing. Except as set forth in Section 2.21 of the
Company Disclosure Schedule or as required under applicable law, rule or
regulation, no employee of the Company or its Subsidiary has any agreement as to
length of notice, severance or termination payment required to terminate his
employment, and all such employees are terminable at the will of the Company or
its Subsidiary.
(b) Neither
the Company nor its Subsidiary is a party to, bound by or currently negotiating
any collective bargaining agreement, nor has either of them experienced nor does
the Company have knowledge of any pending or threatened strikes, work stoppage
or lockout, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company has no knowledge of any organizational effort
made or threatened, either currently or within the past two (2) years, by or on
behalf of any labor union or employee association with respect to employees of
the Company or its Subsidiary.
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(c) Each of
the Company and its Subsidiary: (i) is in compliance in all material respects
with all applicable laws, rules and regulations respecting employment,
employment practices, immigration, terms and conditions of employment, wages and
hours, and classification of employees as exempt employees and non-exempt
employees under the Fair Labor Standards Act and other applicable state or local
laws of similar purpose, in each case, with respect to employees; (ii) has
withheld and reported all amounts required by law or by agreement to be withheld
and reported with respect to the wages, salaries and other payments to
employees, (iii) has made all legally required contributions to Governmental
Entities and paid other levies due in respect of its employees in respect of
their employment; (iv) except as set forth in Section 2.21(c)(iv) of the Company
Disclosure Schedule, is not liable for any arrears of wages or any Taxes or any
penalty for failure to comply with any of the foregoing; and (v) except as set
forth in Section 2.21(c)(v) of the Company Disclosure Schedule, is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). All independent contractors providing services to the Company or
its Subsidiary have been properly classified as independent contractors for
purposes of applicable law. There are no pending or, to the knowledge of the
Company, threatened claims or actions against the Company or its Subsidiary
under any worker's compensation policy or long term disability policy with
respect to any employees.
(d) Except as
set forth in Section 2.21(d) of the Company Disclosure Schedule, there are no
actions, suits, charges, claims, labor disputes or grievances pending, or, to
the knowledge of Company, threatened against the Company or its Subsidiary
relating to any labor, workplace safety, employment, immigration or
discrimination matters involving any employee, including, without limitation,
charges of unfair labor practices or discrimination complaints. Neither the
Company nor its Subsidiary has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act or other applicable
law.
(e) Except as
set forth in Section 2.21(e) of the Company Disclosure Schedule, there are no
outstanding assessments, penalties, fines, liens, charges, surcharges or other
amounts due or owing pursuant to any workplace safety and insurance legislation
(other than insurance premiums and other routine payments to be made in the
normal course of business) and neither the Company nor its Subsidiary have been
reassessed in any material respect under such legislation during the past three
(3) years and, to the knowledge of the Company, no audit of the Company or its
Subsidiary is currently being performed pursuant to applicable workplace safety
and insurance legislation.
(f) As of the Effective Time,
the Company has no liability (whether known or unknown and whether
absolute or contingent) to indemnify or hold harmless (including the advancement
of expenses) any past or present officers or directors of the Company, whether
pursuant to the Company's Amended and Restated Certificate of Incorporation or
Bylaws, employment agreements identified in Section 2.21 of the Company
Disclosure Schedule, indemnification agreements identified in Section 2.21 of
the Company Disclosure Schedule or applicable law, for acts or omissions which
occurred at or prior to the Closing.
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2.22 Employee
Benefits.
(a) Section 2.22(a) of the
Company Disclosure Schedule contains a complete and accurate list of all Company
Plans. Complete and accurate copies of (i) all Company Plans which have been
reduced to writing, (ii) written summaries of all unwritten Company Plans,
(iii) all related trust agreements, insurance contracts and summary plan
descriptions, and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R
(and for all Company Plans of its Subsidiary, filed in accordance with Foreign
Law) and (for all funded plans) all plan financial statements and actuarial
valuation report for the last three (3) plan years for each Company Plan, have
been delivered or made available to Parent.
(b) Each
Company Plan has been administered, funded and invested in all material respect
in accordance with its terms and each of the Company, its Subsidiary and the
ERISA Affiliates has met its obligations with respect to each Company Plan and
has made all required contributions thereto. The Company, its Subsidiary, each
ERISA Affiliate and each Company Plan are in compliance in all material respects
with the currently applicable provisions of Foreign Law, ERISA and the Internal
Revenue Code and the regulations thereunder (including Section 4980B of the
Internal Revenue Code, Subtitle K, Chapter 100 of the Internal Revenue Code and
Sections 601 through 608 and Section 701 et seq. of ERISA). All filings and
reports as to each Company Plan required to have been submitted to the Internal
Revenue Service or to the United States Department of Labor or in accordance
with Foreign Law have been duly submitted. No Company Plan has assets that
include securities issued by the Company, its Subsidiary or any ERISA
Affiliate.
(c) There are no Legal
Proceedings (except claims for benefits payable in the normal operation of the
Company Plans and proceedings with respect to qualified domestic relations
orders) against or involving any Company Plan or asserting any rights or claims
to benefits under any Company Plan.
(d) All the Company Plans
that are intended to be qualified under Section 401(a) of the Internal Revenue
Code or registered under Foreign Law have received determination or opinion
letters from the Internal Revenue Service or the relevant Governmental Entity to
the effect that such Company Plans are qualified or registered and the plans and
the trusts related thereto are exempt from federal income taxes under Sections
401(a) and 501(a), respectively, of the Internal Revenue Code and from income
tax under Foreign Law, no such determination, opinion or registration letter has
been revoked and revocation has not been threatened, and no such Company Plan
has been amended since the date of its most recent determination or registration
letter or application therefor in any respect, and no act or omission has
occurred, that would adversely affect its qualification or registration or
materially increase its cost. Each Company Plan which is required to satisfy
Section 401(k)(3) or Section 401(m)(2) of the Internal Revenue Code has been
tested for compliance with, and satisfies the requirements of Section 401(k)(3)
and Section 401(m)(2) of the Internal Revenue Code for each plan year ending
prior to the Closing Date.
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(e) Neither the Company nor
its Subsidiary, nor any ERISA Affiliate maintains
an Employee Benefit Plan subject to Section 412 of the Internal Revenue Code or
Title IV of ERISA.
(f) The
Company, its Subsidiary and any ERISA Affiliate are not obligated to contribute
to any "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA).
(g) There are no unfunded
obligations under any Company Plan providing benefits after termination of
employment to any employee of the Company or its Subsidiary (or to any
beneficiary of any such employee), including but not limited to retiree health
coverage, but excluding continuation of health coverage required to be continued
under Section 4980B of the Internal Revenue Code or other applicable law and
insurance conversion privileges under state law or Foreign Law. The
assets of each Company Plan which is funded are reported at their fair market
value on the books and records of such Company Plan.
(h) No act or
omission has occurred and no condition exists with respect to any Company Plan
that would subject the Company, its Subsidiary or any ERISA Affiliate to (i) any
material fine, penalty, Tax or liability of any kind imposed under ERISA, the
Internal Revenue Code or Foreign Law or (ii) any material contractual
indemnification or contribution obligation protecting any fiduciary, insurer or
service provider with respect to any Company Plan.
(i) No
Company Plan is funded by, associated with or related to a "voluntary employees'
beneficiary association" within the meaning of Section 501(c)(9) of the Internal
Revenue Code.
(j) Each Company Plan is
amendable and terminable unilaterally by the Company at any time without
liability or expense to the Company or its Subsidiary or such Company Plan as a
result thereof (other than for benefits accrued through the date of termination
or amendment and reasonable administrative expenses related thereto) and no
Company Plan, plan documentation or agreement, summary plan description or other
written communication distributed generally to employees by its terms prohibits
the Company from amending or terminating any such Company Plan.
(k) Section 2.22(k) of the
Company Disclosure Schedule discloses each: (i) agreement with any
stockholder, director, executive officer or other key employee of the Company or
its Subsidiary (A) the benefits of which are contingent, or the terms of which
are altered, upon the occurrence of a transaction involving the Company or its
Subsidiary of the nature of any of the transactions contemplated by this
Agreement or the Ancillary Agreements, (B) providing any term of employment
or compensation guarantee or (C) providing severance benefits or other benefits
after the termination of employment of such director, executive officer or key
employee; (ii) agreement, plan or arrangement under which any person may receive
payments from the Company or its Subsidiary that would be subject to the Tax
imposed by Section 4999 of the Internal Revenue Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Internal Revenue Code; and (iii) agreement or plan binding the Company or its
Subsidiary, including any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan or Company
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the Ancillary Agreements or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or the Ancillary
Agreements.
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(l) Section
2.22(1) of the Company Disclosure Schedule sets forth the policy of the Company
and its Subsidiary with respect to accrued vacation, accrued sick time and
earned time off and the amount of such liabilities as of March 31,
2008.
(m) Each Plan
that is a "nonqualified deferred compensation plan" (as defined in Internal
Revenue Code Section 409A(d)(1)) has been operated since January 1, 2005 in good
faith compliance with Internal Revenue Code Section 409A and regulations and
guidelines issued thereunder. No event has occurred that would be treated by
Internal Revenue Code Section 409A(b) as a transfer of property for purposes of
Internal Revenue Code Section 83. No stock option granted under any Company Plan
has an exercise price that has been less than the fair market value of the
underlying stock as of the date such option was granted or has any feature for
the deferral of compensation other than the deferral of recognition of income
until the later of exercise or disposition of such option.
2.23 Environmental
Matters.
(a) Each of the Company and
its Subsidiary is in compliance in all material respects with all applicable
Environmental Laws. There is no pending or, to the knowledge of the Company,
threatened civil or criminal litigation, notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, alleging that the Company or its Subsidiary is in
material violation of, or has material liability under, any Environmental
Law.
(b) Neither
the Company nor its Subsidiary has any material liabilities or material
obligations arising from the release of any Materials of Environmental Concern
into the environment.
(c) Neither the Company nor
its Subsidiary is a party to or bound by any court order, administrative order,
consent order or other agreement, order or decree between it and any
Governmental Entity, in connection with any legal obligation or liability of the
Company or its Subsidiary arising under any Environmental Law.
2.24 Legal
Compliance.
Each of
the Company and its Subsidiary is currently conducting, and during the past
three (3) years has conducted, their respective businesses in compliance with
each applicable law (including rules and regulations thereunder) of any federal,
provincial, state, local, municipal or foreign government, or any other
Governmental Entity, except for violations or defaults that, individually or in
the aggregate, have not had as of the date of this Agreement and would not
reasonably be expected to have a material liability or a material restriction on
the operation of the business of the Company. Neither the Company nor its
Subsidiary has received any notice or communication from any Governmental Entity
alleging noncompliance with any applicable law, rule or
regulation.
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2.25 Customers
and Suppliers.
Section
2.25 of the Company Disclosure Schedule sets forth a list of (a) each customer
that accounted for any of the consolidated revenues of the Company during the
last full fiscal year or the interim period through the Most Recent Balance
Sheet Date and the amount of revenues accounted for by such customer during each
such period and (b) each supplier that is the sole supplier of any significant
product or service to the Company or its Subsidiary. As of the date
of this Agreement, no such customer or supplier has indicated to the Company or
its Subsidiary that it will stop, or decrease the rate of, buying products or
services or supplying products or services, as applicable, to the Company or its
Subsidiary. To the knowledge of the Company, since December 31, 2007
there have been no material written claims against the Company or its Subsidiary
alleging any significant defects or dissatisfaction with its services or
products or alleging any failure of the products or services of the Company or
its Subsidiary to meet applicable specifications, warranties or contractual
commitments. The Company's and its Subsidiary's relationships with
such customers and suppliers are good commercial working
relationships. To the knowledge of the Company, (a) all such
customers will continue purchasing products and services from the Company and
its Subsidiary after the Closing, and (b) all suppliers, vendors and service
providers which are material to the business will continue after the Closing to
sell the products and provide the services to the Company currently sold and
provided by them.
2.26 Permits.
Section
2.26 of the Company Disclosure Schedule sets forth a list of all Permits issued
to or held by the Company or its Subsidiary that are material to the conduct of
their business, taken as a whole. The Company or its Subsidiary has
all Permits that are required for the Company and its Subsidiary to conduct
their respective businesses as presently conducted, other than Permits, the
absence of which, individually and in the aggregate, is not material to the
business or financial position or results of operations of the Company and its
Subsidiary. Each such Permit is in full force and effect; the Company and its
Subsidiary is in compliance in all material respects with the terms of each such
Permit; and, to the knowledge of the Company, no suspension or cancellation of
such Permit is threatened and the Company has no basis for believing that such
Permit will not be renewable upon expiration. Each such Permit will continue in
full force and effect immediately following the Closing.
2.27 Certain
Business Relationships With Affiliates.
No
Affiliate of the Company or of its Subsidiary (a) owns any property or right,
tangible or intangible, which is used in the business of the Company or its
Subsidiary, (b) has any claim or cause of action against the Company or its
Subsidiary, or (c) owes any money to, or is owed any money by, the Company or
its Subsidiary, other than (i) for payment of salaries for services rendered,
(ii) reimbursement for customary and reasonable expenses incurred on behalf of
the Company or its Subsidiary in the ordinary course of business, and (iii) for
other standard employee benefits available to the Company's employees generally.
Section 2.27 of the Company Disclosure Schedule describes any commercial
transactions or relationships between the Company or its Subsidiary and any
Affiliate thereof which occurred or have existed since January 1,
2005.
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2.28 Brokers'
Fees.
Except as
disclosed in Section 2.28 of the Company Disclosure Schedule, neither the
Company nor its Subsidiary has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement.
2.29 Books and
Records.
The
minute books and other similar records of the Company and of its Subsidiary
contain complete and accurate records in all material respects of all actions
taken at any meetings of the Company's or its Subsidiary's stockholders, Board
of Directors or any committee thereof and of all written resolutions or consents
executed in lieu of the holding of any such meeting. The copy of such minute
books and other similar records provided to the Parent contains the minutes of
all meetings of stockholders, Board of Directors and any committee thereof and
all written resolutions or consents executed in lieu of the holding of such
meetings. The books and records of the Company and its Subsidiary have been
maintained in accordance with good business and bookkeeping practices. Section
2.29 of the Company Disclosure Schedule contains a list of all bank accounts and
safe deposit boxes of the Company and its Subsidiary and the names of persons
having signature authority with respect thereto or access thereto.
2.30 Disclosure.
No
representation or warranty by the Company contained in this Agreement, as
qualified by the Company Disclosure Schedule, and no certificate delivered or to
be delivered pursuant to Section 5.2 hereof by or on behalf of the Company in
connection with this Agreement contains or will contain any untrue statement of
a material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
2.31 Information.
The
Company has provided or made available to Parent all information requested by
Parent pursuant to written requests made in connection with the transactions
contemplated by this Agreement.
2.32 Business
Plan.
Each of
(i) the financial projection sheet through the end of 2010 provided by the
Company to Parent (the "Financial Projection Sheet") and (ii) the research and
development plan provided by the Company to Parent (the "R&D Plan") were
prepared by the Company in good faith based on information believed by
management of the Company to be reliable and assumptions believed by management
of the Company to be reasonable as of the date hereof; provided, however, none
of the Financial Projection Sheet or the R&D Plan is a guarantee or a
representation that the results projected therein will be
achieved.
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2.33 Foreign
Corrupt Practices Act.
To the
knowledge of the Company, no officer, director, employee or agent of the Company
or its Subsidiary or any Company Stockholder or Affiliate acting on behalf of
the Company or its Subsidiary, authorized, directed or participated in any act
in violation of any provision of the United States and Foreign Corrupt Practices
Act of 1977, as applied to such officer, director, employee, agent, Company
Stockholder or Affiliate.
2.34 Controls
and Procedures.
Each of
the Company and its Subsidiary maintains accurate books and records reflecting
its assets and liabilities and maintains proper and adequate internal control
over financial reporting which provide reasonable assurance that (a)
transactions are executed with management’s authorization, (b) transactions are
recorded as necessary to permit preparation of the consolidated financial
statements of the Company and to maintain accountability for the Company’s
consolidated assets, (c) access to assets of the Company and its Subsidiary is
permitted only in accordance with management’s authorization, (d) the reporting
of assets of the Company and its Subsidiary is compared with existing assets at
regular intervals and (e) accounts, notes and other receivables and inventory
were recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
ARTICLE 3
REPRESENTATIONS
AND WARRANTIES OF PARENT
AND
MERGER SUB
Each of
Parent and Merger Sub represents and warrants to the Company that the statements
contained in this Article 3 are true and correct as of the date of this
Agreement and will be true and correct as of the Closing Date, except to the
extent such representations and warranties are specifically made as of a
particular date (in which case such representations and warranties will be true
and correct as of such date).
3.1 Organization and
Corporate Power.
Each of
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation. Parent has all
requisite corporate power and authority to carry on the businesses in which it
is engaged and to own and use the properties owned and used by
it.
3.2 Authorization
of Transaction.
Each of
Parent and Merger Sub has all requisite power and authority to execute and
deliver this Agreement and the Ancillary Agreements to which it is a party and
to perform its obligations hereunder and thereunder. The execution and delivery
by Parent and Merger Sub of this Agreement and the Ancillary Agreements to which
each of them is a party and the consummation by Parent and Merger Sub of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, respectively. This Agreement has been duly and validly executed and
delivered by Parent and Merger Sub and constitutes a valid and binding
obligation of Parent and Merger Sub, enforceable against them in accordance with
its terms, except as enforceability may be limited by (i) laws of general
application relating to bankruptcy, insolvency, and the relief of debtors, and
(ii) rules of law governing specific performance, injunctive relief and other
equitable remedies.
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3.3 Noncontravention.
Neither
the execution and delivery by Parent or Merger Sub of this Agreement or the
Ancillary Agreements to which it is a party, nor the consummation by Parent or
Merger Sub of the transactions contemplated hereby or thereby, will (a) conflict
with or violate any provision of the charter or Bylaws of Parent or Merger Sub,
(b) require on the part of Parent or Merger Sub any notice to or filing with, or
any permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in a breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party the right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which Parent or Merger Sub is a party or by which the Company or its Subsidiary
is bound, or (d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Parent or Merger Sub. Other than the filing of the
Certificate of Merger, no consent or authorization of any third party is
required in connection with the transactions contemplated by this Agreement or
the Ancillary Agreements.
3.4 Litigation.
Except as
disclosed in Parent's periodic or current reports filed with the Securities
Exchange Commission, there is no Legal Proceeding which is pending or, to the
knowledge of Parent, has been threatened in writing against Parent or Merger Sub
which in any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
3.5 No Parent
Vote Required.
No vote
or other action of the shareholders of Parent is required by applicable law, the
certificate of incorporation of Parent, the bylaws of Parent or otherwise in
order for Parent and Merger Sub to consummate the Merger and the transactions
contemplated hereby.
3.6 Merger
Sub.
Merger
Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and
has conducted its operations only as contemplated by this
Agreement.
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3.7 Available
Cash.
Parent
has and will have, immediately prior to, from and after the Effective Time,
sufficient funds on-hand and available through existing liquidity facilities
(without restrictions on drawdown that would delay payment of the Cash Price in
accordance with Article 1 hereof) to consummate the transactions contemplated
hereby.
ARTICLE
4
COVENANTS
4.1 Closing
Efforts.
Each of
the Parties shall use commercially reasonable efforts to perform its obligations
under, and to consummate the transactions contemplated by, this Agreement,
including commercially reasonable efforts to cause (i) its representations and
warranties to remain true and correct in all material respects through the
Closing Date and (ii) the conditions set forth in Section 5.1 and the conditions
to the obligations of the other Parties to consummate the Merger to be
satisfied.
4.2 Governmental and
Third-Party Notices and Consents.
(a) Each Party shall use
commercially reasonable efforts to obtain, at its expense, all waivers, permits,
consents, approvals or other authorizations from Governmental Entities, and to
effect all registrations, filings and notices with or to Governmental Entities,
as may be required for such Party to consummate the transactions contemplated by
this Agreement and to otherwise comply with all applicable laws and regulations
in connection with the consummation of the transactions contemplated by this
Agreement.
(b) The Company shall use
commercially reasonable efforts to obtain, at its expense, all such waivers,
consents or approvals from third parties, and to give all such notices to third
parties, as are required to be listed in the Company Disclosure
Schedule.
4.3 Stockholder
Approval.
(a) The Company shall take
all commercially reasonable action necessary to obtain and deliver to Parent,
immediately following the execution and delivery of this Agreement, written
consents of the Company Stockholders, in accordance with applicable law and the
Company's Amended and Restated Certificate of Incorporation and Bylaws, which
contain the Requisite Shareholder Approval for the Merger and the other
transactions contemplated hereby and the adoption of this
Agreement.
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(b) In
connection with such written consents, the Company shall provide to all of its
stockholders (promptly after the date hereof and in any event within five (5)
business days) the Disclosure Statement, which shall include (A) a summary of
the Merger and this Agreement (which summary shall include a summary of the
terms relating to the indemnification obligations of the Company Stockholders
and a statement that the adoption of this Agreement by the stockholders of the
Company shall constitute approval of such terms), and (B) a statement that
appraisal rights are available for the Company Shares pursuant to Section 262 of
the Delaware General Corporation Law and a copy of such Section 262. The Company
agrees not to distribute the Disclosure Statement until Parent has had a
reasonable opportunity to review and comment on the Disclosure Statement and the
Disclosure Statement has been approved by Parent (which approval may not be
unreasonably withheld, conditioned or delayed). The Company shall send, pursuant
to Sections 228 and 262(d) of the Delaware General Corporation Law, a written
notice to all stockholders of the Company that did not execute such written
consent informing them that this Agreement and the Merger were adopted and
approved by the stockholders of the Company and that appraisal rights are
available for their Company Shares pursuant to Section 262 of the Delaware
General Corporation Law (which notice shall include a copy of such Section 262),
and shall promptly inform Parent of the date on which such notice was sent. The
Company, acting through its Board of Directors, shall include in the Disclosure
Statement the recommendation of its Board of Directors that the stockholders of
the Company vote in favor of the adoption of this Agreement and the approval of
the Merger.
(c) The
Company shall also submit to a stockholder vote the right of any "disqualified
individual" (as defined in Section 280G(c) of the Internal Revenue Code) to
receive any and all payments (or other benefits) that could be deemed "parachute
payments" under Section 280G(b) of the Internal Revenue Code, in a manner that
satisfies the stockholder approval requirements of Section 280G(b)(5)(B) of the
Internal Revenue Code and the Treasury Regulations promulgated thereunder.
Consistent with the requirements of Section 280G(b)(5)(B) and the Treasury
Regulations, such vote shall establish the "disqualified individual's" right to
the payment, benefit or other compensation, and before the Closing Date, the
Company shall provide adequate disclosure to all stockholders of all material
facts concerning all payments that, but for such vote, could be deemed
"parachute payments" to a "disqualified individual" under Section 280G of the
Internal Revenue Code in a manner that satisfies Section 280G(b )(5)(B)(ii) of
the Internal Revenue Code and the Treasury Regulations promulgated
thereunder. The vote set forth in this Section 4.3(b) is referred to
herein as the "280G Vote."
(d) The
Company shall ensure that the Company Disclosure Statement does not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in light of the circumstances under which
they were made, not misleading (provided that the Company shall not be
responsible under this Agreement for the accuracy or completeness of any
information concerning Parent or Merger Sub furnished by Parent or its
Representatives in writing for inclusion in the Disclosure
Statement).
(e) Parent shall ensure that
any information furnished by Parent to the Company in writing for inclusion in
the Disclosure Statement does not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not
misleading.
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4.4 Operation
of Business
Except as
required to comply with the Company's obligations under this Agreement or
otherwise with Parent's prior written consent (which shall not be unreasonably
withheld or delayed), during the period from the date of this Agreement until
the earlier of the Closing or a termination of this Agreement pursuant to
Article 7, the Company shall (and shall cause its Subsidiary to) conduct its
operations in the ordinary course of business and in compliance in all material
respects with all applicable laws and regulations and, to the extent consistent
therewith, use commercially reasonable efforts to preserve its current business
organization, keep its physical assets in good working condition, keep available
the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect. Without limiting the generality of the foregoing, during
the period from the date of this Agreement until the earlier of the Closing or a
termination of this Agreement pursuant to Article 7, except as required to
comply with the Company's obligations under this Agreement, or otherwise with
Parent's prior written consent (which shall not be unreasonably withheld or
delayed), the Company shall not (and shall cause its Subsidiary not
to):
(a) issue or
sell any stock or other securities of the Company or its Subsidiary or any
options, warrants or rights to acquire any such stock or other securities
(except pursuant to the conversion or exercise of Preferred Shares, Options or
Warrants outstanding on the date hereof), or amend any of the terms of
(including the vesting of) any Options, Warrants or restricted stock agreements
(other than as required to consummate the transactions set forth in this
Agreement), or repurchase or redeem any stock or other securities of the Company
(except from former employees, directors or consultants in accordance with
agreements providing for the repurchase of shares at their original issuance
price in connection with any termination of employment with or services to the
Company);
(b) split, combine or
reclassify any shares of its capital stock; or declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock;
(c) create,
incur or assume any indebtedness (including obligations in respect of capital
leases); assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person; or make any loans, advances or capital contributions to, or investments
in, any other Person (other than intercompany advances by the Company to or
investments by the Company in the Subsidiary);
(d) enter into, adopt or
amend any Employee Benefit Plan or any employment or severance agreement or
arrangement of the type described in Section 2.22(k) or (except for year-end
bonuses and normal salary increases in the ordinary course of business for
employees who are not directors, officers or Affiliates of the Company) increase
in any manner the compensation or fringe benefits (other than immaterial changes
in existing benefits made as par of year-end renewals of benefit plans) of, or
materially modify the employment terms of, its directors, officers or employees,
generally or individually, or pay any bonus or other benefit to its directors,
officers or employees (except for existing payment and other obligations listed
in Section 2.22 of the Company Disclosure Schedule and except with respect to
the allocation of unallocated amounts under the Brix Networks, Inc. Management
Incentive Plan as of the date hereof) or hire any new officers or (except in the
ordinary course of business) any new employees;
(e) acquire, sell, lease,
license or dispose of any material asset or property or material amount of
assets or properties (including any shares or other equity interests in or
securities of the Company's Subsidiary or any corporation, partnership,
association or other business organization or division thereof), other than
purchases, sales, leases and nonexclusive licenses of assets in the ordinary
course of business;
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(f) mortgage,
hypothecate or pledge any of its property or assets or subject any such property
or assets to any Security Interest;
(g) discharge or satisfy any
Security Interest or pay any material obligation or liability other than in the
ordinary course of business or with respect to its lenders pursuant to Section
4.12;
(h) amend its
certificate of incorporate, bylaws or other organizational documents (except in
connection with the Brix Networks, Inc. Management Incentive Plan in the form
previously provided to Parent);
(i) change
its accounting methods, principles or practices, except insofar as may be
required by a generally applicable change in GAAP;
(j) enter
into, amend, terminate, take or omit to take any action that would constitute a
violation of or default by the Company or its Subsidiary under, or waive any
material rights under, any contract or agreement of a nature required to be
listed in Section 2.12, Section 2.13 or Section 2.15 of the Company Disclosure
Schedule;
(k) make or commit to make
any capital expenditure not in the ordinary course of business in excess of
Twenty-Five Thousand Dollars ($25,000) in the aggregate;
(l) institute
or settle any Legal Proceeding (unless the Board of Directors concludes, after
consultation with Parent, that failure to institute or settle such Legal
Proceeding would create a material risk of a material liability to, or loss of a
material asset or right of, the Company and its Subsidiary);
(m) shorten
or lengthen the customary payment cycles for any of its payables or
receivables;
(n) with
respect to Taxes, make or change any election, change an annual accounting
period, adopt or change any accounting method (other than as required by changes
in GAAP or Tax laws, rules or regulations), file any amended Tax Return, enter
into any closing agreement, settle any Tax claim or assessment, surrender any
right to claim a refund of Taxes, consent to any extension or waiver of the
limitation period applicable to any Tax claim or assessment, or take any other
similar action relating to the filing of any Tax Return or the payment of any
Tax, if such election, adoption, change, amendment, agreement, settlement,
surrender, consent or other action would have the effect of increasing the Tax
liability of the Company or its Subsidiary or decreasing any Tax attribute of
the Company or its Subsidiary;
(o) fail to
preserve the validity of any material Company Owned Intellectual Property or
Permit or the Company's right to use any material Company Licensed Intellectual
Property; or
(p) agree in writing or
otherwise to take any of the foregoing actions.
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4.5 Access to
Information.
(a) The Company shall (and
shall cause its Subsidiary to) permit representatives of Parent to have full
access (at all reasonable times, and in a manner so as not to interfere with the
normal business operations of the Company and its Subsidiary) to all premises,
properties, financial, Tax and accounting records (including the work papers of
the Company's independent accountants and letters to the Company's independent
accountants from the Company's lawyers), contracts, other records and documents,
and personnel, of or pertaining to the Company and its Subsidiary, subject to
compliance with confidentiality obligations incurred prior to the date of this
Agreement and applicable laws.
(b) Within
ten (10) days after the end of each month ending prior to the Closing, beginning
with April 2008, the Company shall furnish to Parent an unaudited income
statement for such month and a balance sheet and cash-flow statement as of the
end of such month, prepared on a basis consistent with the unaudited Financial
Statements. Such unaudited financial statements shall present fairly in all
material respects the financial condition and results of operations of the
Company and its Subsidiary on a consolidated basis as of the dates thereof and
for the periods covered thereby, subject to normal year-end adjustments, and
shall be consistent with the books and records of the Company and its
Subsidiary.
4.6 Notice of
Breaches.
(a) From the date of this
Agreement until the earlier of the Closing or a termination of this Agreement
pursuant to Article 7, the Company shall promptly deliver to Parent supplemental
information known by it concerning events or circumstances occurring subsequent
to the date hereof which would render any representation, warranty or statement
in this Agreement or the Company Disclosure Schedule inaccurate or incomplete in
any material respect at any time after the date of this Agreement until the
Closing. No such supplemental information shall be deemed to avoid or cure any
misrepresentation or breach of warranty or constitute an amendment of any
representation, warranty or statement in this Agreement or the Company
Disclosure Schedule.
(b) From the
date of this Agreement until earlier of the Closing or a termination of this
Agreement pursuant to Article 7, Parent shall promptly deliver to the Company
supplemental information known by it concerning events or circumstances
occurring subsequent to the date hereof which would render any representation or
warranty in this Agreement inaccurate or incomplete in any material respect at
any time after the date of this Agreement until the Closing. No such
supplemental information shall be deemed to avoid or cure any misrepresentation
or breach of warranty or constitute an amendment of any representation or
warranty in this Agreement.
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4.7 Exclusivity.
(a) From and after receipt of
the Requisite Stockholder Approval, until the earlier of the Effective Time or
the termination of this Agreement in accordance with its terms (the "Exclusive
Period"), neither the Company nor its Subsidiary shall, (i) authorize, direct or
permit any of its or their respective directors, officers, affiliates, employees
(attorneys, accountants, investment bankers or advisors ("Representatives") or
finders, brokers, representatives or other agents or intermediaries ("Other
Intermediaries"), or authorize, direct or cause any other Company Stockholder
(other than Representatives and Intermediaries) (an "Other Company
Stockholder"), to take any action to directly or indirectly solicit, initiate,
seek, encourage, facilitate, approve, endorse, recommend or respond to any
inquiry, proposal, or offer (whether formal or informal, written, oral or
otherwise) from, or participate in any discussions or negotiations with, any
third party regarding any (A) direct or indirect acquisition or sale of the
Company or its Subsidiary, (B) merger, consolidation, reorganization,
recapitalization, liquidation, dissolution or other business combination or
extraordinary corporate transaction involving the Company or its Subsidiary,
(C) acquisition or disposition of any portion of the stock or voting power
of the Company or its Subsidiary (whether by sale, assignment, issuance, proxy,
pledge, encumbrance or otherwise (other than the issuance of shares of Company
capital stock upon exercise or conversion of options, warrants or other
equity-based securities issued prior to the date of this letter), or (D)
acquisition or disposition of any material asset or material portion of the
assets of the Company or its Subsidiary, whether by sale, assignment, option,
license, pledge, encumbrance, or otherwise (other than (1) bona fide sales and
nonexclusive licenses of products to customers in the ordinary course of
business, or (2) acquisitions of assets and in-licenses in the ordinary course
of business or that would not reasonably be expected to result in a material
restriction on the operation of the business of the Company and its Subsidiary)
(any such transaction described in clauses (A), (B), (C) or (D) of this Section
4.7(a)(i) being a "Third Party Acquisition"); (ii) furnish any non public
information concerning the business, properties or assets of the Company or its
Subsidiary to any other Person (other than Parent and its Representatives) in
connection with a potential Third Party Acquisition or an inquiry, offer or
proposal involving a potential Third Party Acquisition; or (iii) engage in
discussions or negotiations with any Person (other than Parent and its
Representatives) concerning any Third Party Acquisition. The Company agrees that
any such discussions or negotiations in progress as of the date of this
Agreement shall be immediately terminated and that in no event shall the Company
approve, accept or enter into an agreement concerning any Third Party
Acquisition during the Exclusive Period. During the Exclusive Period, neither
the Company nor its Subsidiary shall, and neither the Company nor its Subsidiary
shall authorize, direct or permit any of its or their respective Representatives
or Other Intermediaries or authorize, direct or cause any Other Company
Stockholder to continue or participate in any negotiations or discussions with
any Person or company for the purpose of effecting an acquisition of, joint
venture with or strategic investment in any other Person.
(b) The
Company shall immediately notify any Person with whom or with which discussions
or negotiations of the nature described in Section 4.7(a) are pending as of the
beginning of the Exclusive Period that the Company is terminating such
discussions or negotiations. If the Company receives any inquiry, proposal or
offer of the nature described in Section 4.7(a), the Company shall, within one
(1) business day after such receipt, notify Parent of such inquiry, proposal or
offer, including the identity of the other party and the terms of such inquiry,
proposal or offer.
4.8 Expenses.
Except as
otherwise expressly set forth herein, each of the Parties shall bear its own
costs and expenses (including legal and accounting fees and expenses) incurred
in connection with this Agreement and the transactions contemplated hereby;
provided that any Company Transaction Costs shall be paid by the Company
Stockholders at or prior to Closing.
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4.9 Indemnification.
Note
1, Parent agrees to
cause the Surviving Corporation to indemnify (including advancement of expenses)
and hold harmless all past and present officers and directors of the Company to
the same extent such persons are indemnified by the Company as of the date of
this Agreement pursuant to the Company's Amended and Restated Certificate of
Incorporation or Bylaws, employment agreements identified in Section 2.21
of the Company Disclosure Schedule, indemnification agreements identified in
Section 2.21 of the Company Disclosure Schedule or applicable law for acts or
omissions which occurred at or prior to the Closing. Parent shall
not, Note 1 ,
take any action to alter or impair any exculpatory or indemnification provisions
now existing in the Amended and Restated Certificate of Incorporation or Bylaws
of the Company for the benefit of any individual who served as a director or
officer of the Company at any time prior to the Closing, except for any changes
which may be required to conform with changes in applicable law and any changes
which do not affect the application of such provisions to acts or omissions of
such individuals prior to the Closing. Prior to the Closing, the Stockholders’
Representative, on behalf of the Company Stockholders, shall secure a directors
and officers tail insurance policy covering all past and present officers and
directors of the Company Note
1.
4.10 Certain
Employment-Related Matters.
From and
after the Effective Time, subject to the provisions of the employment
agreements, employment offer letters and similar documentation executed and
delivered in connection with this Agreement, Parent shall cause the Surviving
Corporation to honor the severance and change-in-control agreements listed in
Section 2.21(a) of the Company Disclosure Schedule in accordance with the terms
thereof and subject to the conditions and limitations set forth
therein.
4.11 Tax
Matters.
(a) Pre-Closing Tax
Period. The "Pre-Closing Tax Period" shall include any taxable period
that ends on or before the Closing Date. The Company Stockholders shall be
responsible for all Taxes of the Company or its Subsidiary for all Pre-Closing
Tax Periods and for the portion of any Straddle Period ending on the Closing
Date, and shall pay to (or as directed by) the Surviving Corporation any Taxes
of the Company or its Subsidiary for all such periods. Such payments shall be
made no later than five (5) business days prior to the due date for paying such
amount of Taxes to the relevant tax authority.
(b) Straddle Period. In
the case of any taxable period that includes (but does not end on) the Closing
Date (a "Straddle Period"), the amount of any Taxes of the Company and its
Subsidiary for such portion of any Straddle Period ending on the Closing Date
shall be determined based on an interim closing of the books as of the close of
business on the Closing Date. For purposes of this Section 4.11, in the case of
any Taxes that are imposed on a periodic basis and are payable for a Straddle
Period, the portion of such Tax that relates to the Pre-Closing Tax Period shall
(i) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire taxable period
multiplied by a fraction the numerator of which is the number of days in the
taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire taxable period, and (ii) in the case of any Tax
based upon or related to income or receipts, be deemed equal to the amount which
would be payable if the relevant taxable period ended on the Closing
Date.
Note 1:
Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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(c) Responsibility for Filing
Tax Returns. The Company shall prepare or cause to be prepared and file
or cause to be filed all Tax Returns of the Company and its Subsidiary due on or
before the Closing Date. Parent shall have the right to review and
comment on such Tax Returns at least ten (10) days prior to
filing. Parent shall prepare or cause to be prepared and file or
cause to be filed all other Tax Returns of the Company and its Subsidiary; provided, however, that in the
case of any Tax Returns for a Pre-Closing Tax Period or a Straddle Period, the
Stockholders' Representative shall have the right to review and comment on such
Tax Returns at least ten (10) days prior to filing. All Tax Returns
described in this Section 4.11(c) for a Pre-Closing Tax Period or a Straddle
Period shall be prepared in a manner consistent with the past practice of the
Company, except as otherwise required by law.
(d) Cooperation on Tax
Matters. The Company and its Subsidiary shall cooperate fully, as and to
the extent reasonably requested by the Stockholders' Representative and Parent,
in connection with the filing of Tax Returns pursuant to Section 4.11 and any
audit, litigation or other proceeding with respect to Taxes.
(e) Certain
Taxes. All transfer, documentary, sales, use, real property
gains, stamp, registration, and other such Taxes and fees incurred in connection
with this Agreement shall be paid by the Company Stockholders when due, and the
Company will, at the Company Stockholders' expense, file all necessary Tax
Returns and other documentation with respect to all such transfer, documentary,
sales, use, real property gains, stamp, registration, and other Taxes and fees,
and, if required by applicable law, the Parent and the Company Stockholders will
join in the execution of any such Tax Returns and other
documentation.
4.12 Certain
Actions Required Prior to Closing.
Note 1
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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ARTICLE 5
CONDITIONS
TO CONSUMMATION OF MERGER
|
|
5.1
|
Conditions
to Each Party's Obligations.
|
The
respective obligations of each Party to consummate the Merger are subject to the
satisfaction of the following condition that this Agreement and the Merger shall
have received the Requisite Stockholder Approval.
5.2 Conditions
to Obligations of Parent and Merger Sub.
The
obligation of each of Parent and Merger Sub to consummate the Merger is subject
to the satisfaction (or waiver by Parent) of the following additional
conditions:
(a) Either (i) the number of
Dissenting Shares shall not exceed Note
1 of the outstanding Common Shares as of the
Effective Time (calculated as if all the issued and outstanding Preferred Shares
had been converted into Common Shares), or (ii) Company Stockholders who hold,
in the aggregate, no less than Note
1 of the number of outstanding Common Shares as of
the Effective Time (calculated as if all the issued and outstanding Preferred
Shares had been converted into Common Shares) shall have delivered to the
Company written consents to the Merger or otherwise waived their dissenters
rights under Delaware law in respect of the Merger;
(b) the
Company and its Subsidiary shall have obtained at their own expense (and shall
have provided copies thereof to Parent) all of the waivers, releases, permits,
consents, approvals or other authorizations referred to in Schedule 5.2, and
effected all of the registrations, filings and notices referred to in Schedule
5.2, all of which shall been full force and effect;
(c) the
representations and warranties of the Company set forth in this Agreement shall
be true and correct as of the Closing Date as though made on and as of the
Closing Date (other than representations and warranties expressly made as of
another date, which shall be true and correct as of such other date) in all
material respects;
(d) the
Company shall have performed or complied with in all material respects its
agreements and covenants required to be performed or complied with under this
Agreement as of or prior to the Closing;
(e) no Legal
Proceeding shall be pending or threatened in writing that is reasonably likely
to (i) prevent consummation of the transactions contemplated by this Agreement,
or (ii) cause the transactions contemplated by this Agreement to be rescinded
following consummation, and no such judgment, order, decree, stipulation or
injunction shall be in effect;
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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(f) no Legal
Proceeding shall have been commenced or threatened in writing after the date
hereof (other than Legal Proceedings that have been dismissed with prejudice or
otherwise definitively and unconditionally withdrawn) that would be reasonably
likely to have, individually or in the aggregate, a Company Material Adverse
Effect on the business of the Company or any of its Subsidiaries;
(g) the
Company shall have delivered to Parent and Merger Sub the Company Compliance
Certificate;
(h) the persons named in
Schedule 5.2(h) shall have executed and delivered to Parent a confidentiality,
assignment of work product, non-competition and non-solicitation agreement (the
"Proprietary Rights Agreement") and an offer letter, each in form and substance
acceptable to Parent, each such Proprietary Rights Agreement and offer letter
shall be in full force and effect, no such Person shall have taken any actions
which would be prohibited by his or her Proprietary Rights Agreement or offer
letter in any material respect if such Person were employed pursuant to the
terms of such offer letter at the time of such action, and to the knowledge of
the Company, no other key employee shall have communicated his or her intention
of terminating his or her employment with the Surviving
Corporation;
(i) Parent
shall have received from counsel to the Company an opinion of ▇▇▇▇▇▇▇ Procter
LLP in substantially the form attached hereto as Exhibit A, addressed to Parent
dated as of the Closing Date, and a secretary's certificate in customary form
attesting to the incumbency of the directors and officers of the Company and its
Subsidiary, and attaching (i) certified copies of (A) the certificate of
incorporation, bylaws and similar governing documents of the Company and its
Subsidiary as in effect immediately prior to the Effective Time, and (B)
certified copies of all resolutions of the Board of Directors of the Company
related to this Agreement, the Ancillary Agreements, the merger and the other
transactions contemplated hereby and thereby, and (ii) certificates of good
standing (or equivalents of certificates of good standing under Foreign Law) of
the Company and its Subsidiary in their respective jurisdictions of
organization;
(j) no
Company Material Adverse Effect shall have occurred prior to the Closing
Date;
(k) no Parent Material
Adverse Effect shall have occurred prior to the Closing Date;
(l) the Company shall have
provided to Parent or Merger Sub an affidavit certifying that the Company is not
and has not been a United States real property holding corporation (as defined
in Internal Revenue Code section 897(c)(2)) during the applicable period
specified in Internal Revenue Code section 897(c)(1)(A)(ii);
(m) all
Options shall have vested in full and all Options, Warrants and other
convertible securities of the Company shall have been exercised by their
respective holders or terminated by the Company;
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(n) all Major
Holders shall have surrendered their Company Certificates and executed their
letters of transmittal and shall have executed a counterpart signature page
hereto to be bound by the Indemnification Agreement;
(o) the
Parent shall have received copies of the resignations, effective as of the
Closing, of each director and officer of the Company and the
Subsidiary;
(p) none of the customers or
suppliers of the Company or its Subsidiary listed on Schedule 5.2(p) shall have
terminated its ongoing business with the Company or its Subsidiary, or delivered
written notice to the Company of its intention to do so;
(q) the
Company shall have provided evidence satisfactory to Parent that all amounts
listed under "Transaction Costs to be Paid by Company" set forth on Schedule
1.3(d)(ii) have been paid and evidence that the director and officer tail
insurance policy required by Section 4.9 is in place;
(r) the
Company shall have provided to Parent evidence satisfactory to Parent in its
sole discretion that each of the actions set forth in Section 4.12 shall be
completed at or prior to Closing and that the 280G Vote has
occurred;
(s) Notes 1
and 2
(t) Note
1
(u) the
Company shall have provided to Parent the Section 2.8 Update, which shall be
reasonably acceptable to the Parent based on the past practices of the Company,
and the Company shall have provided to Parent the Section 2.16(c) Update, the
Section 2.16(d) Update and the 2.16(e) Update; and
(v) the Company and Parent
shall negotiate in good faith to terminate or replace the letter of credit
supporting the Company’s obligations under the headquarters Lease.
(w) the
Company shall have provided to Parent evidence satisfactory to Parent in its
sole discretion taht the Brix Networks, Inc. Management Incentive Plan has been
implemented and approved by the stockholders of the Company in the form
previously provided to Parent and that such plan is compliant with Section 409A
of the Internal Revenue Code; and
(x) the
Paying Agent and the Company shall have entered into the Paying Agent Agreement
(and any other documentation required by the Paying Agent) with Parent in form
and substance reasonably satisfactory to Parent.
Note 1:
Contains confidential employee related information.
Note
2: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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5.3 Conditions
to Obligations of the Company.
The
obligation of the Company to consummate the Merger is subject to the
satisfaction of the following additional conditions:
(a) the
representations and warranties of Parent and Merger Sub set forth in this
Agreement shall be true and correct as of the Closing Date as though made on and
as of the Closing Date (other than representations and warranties expressly made
as of another date, which shall be true and correct as of such other date) in
all material respects;
(b) each of
Parent and Merger Sub shall have performed or complied with in all material
respects its agreements and covenants required to be performed or complied with
under this Agreement as of or prior to the Closing;
(c) no Legal Proceeding shall
be pending or threatened in writing that is reasonably likely to (i) prevent
consummation of the transactions contemplated by this Agreement or (ii) cause
the transactions contemplated by this Agreement to be rescinded following
consummation, and no such judgment, order, decree, stipulation or injunction
shall be in effect;
(d) Parent shall have
delivered to the Company the Parent Compliance Certificate;
(e) Notes 1
and 2
ARTICLE
6
SURVIVAL INDEMNIFICATION
6.1 Survival
of Representations and Warranties.
The
representations and warranties of the Company in this Agreement and the
certificates delivered in connection therewith shall (a) survive the Closing and
(b) shall expire on the Expiration Date, except that (i) the representations and
warranties set forth in Section 2.2 and Section 2.9 shall survive the Closing
until the expiration of the statute of limitations applicable to claims with
respect to the matters covered therein and (ii) the representations and
warranties set forth in Section 2.13 shall survive the Closing and shall expire
on the date which is twenty-four (24) months after the date on which the
Effective Time occurs. Unless Parent delivers to the Stockholders'
Representative a Claim Notice with respect to any alleged breach of any
representation or warranty before expiration of the applicable period of
survival for such representation or warranty, such alleged breach may not be
pursued and is irrevocably waived after such time.
Note 1:
Contains confidential employee related information.
Note
2: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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6.2 Indemnification
by Company Stockholders.
The
Company shall, prior to the Effective Time, and the Company Stockholders,
severally and not jointly, shall, from and after the Effective Time, indemnify
Parent, the Surviving Corporation and the other Indemnified Parties for and in
respect of, and hold each of them harmless from and against, any and all such
Losses in respect of:
(a) any
breach of or inaccuracy in any representation or warranty of the Company
contained (i) in this Agreement, (A) prior to Closing, when made as of the
effective date of this Agreement and (B) after Closing, as though made
immediately prior to the Effective Time, (ii) in any of the Ancillary Agreements
to which the Company is a party, or (iii) in any certificate delivered by the
Company to Parent pursuant to Section 5.2 of this Agreement;
(b) any
breach or nonperformance by the Company of or noncompliance by the Company with
any covenant, agreement or other obligation of the Company set forth in or
arising under this Agreement or any of the Ancillary Agreements to which the
Company is a party;
(c) the failure of any
Company Stockholder to have good, valid and marketable title to the issued and
outstanding Company Shares or Warrants issued in the name of such Company
Stockholder, free and clear of all Liens, provided, however, that such Company
Stockholder shall be solely responsible for indemnification in respect of any
Losses resulting from such failure;
(d) any claim
by a stockholder or former stockholder of the Company, or any other Person,
seeking to assert, or based upon: (i) ownership or rights to ownership of any
shares of stock of the Company; (ii) any rights of a stockholder, including any
option, preemptive rights or rights to notice or to vote; (iii) any rights under
the Amended and Restated Certificate of Incorporation of By-Laws of the Company,
(iv) any claim that his, her or its shares were wrongfully repurchased by the
Company, (v) any claim under the appraisal rights provisions of the Delaware
General Corporation Law exceeding the amount that such holder is entitled to
receive pursuant to Section 1.5 of this Agreement or (vi) any claim related to
the 280G Vote (including the failure to obtain the requisite
approval);
(e) any
failure to pay the Company Transaction Costs or the "Transaction Costs to be
Paid by the Company" listed on Schedule 1.3(d)(ii).
In
determining the amount of Losses for which Parent and the other Indemnified
Parties will have a remedy pursuant to clauses (a) and (b) above, once a breach
or inaccuracy within the scope of clause (a) or a breach or nonperformance
within the scope of clause (b) has been established, the amount of Losses for
which Parent and the other Indemnified Parties will have a remedy in respect of
such breach, inaccuracy or nonperformance shall be determined without giving
effect to any materiality limitation in the representations, warranties,
covenants, agreements and other obligations covered thereby. The rights to
indemnification set forth in this Article 6 shall not be affected by any
investigation conducted by or on behalf of any Indemnified Party or any
knowledge acquired (or capable of being acquired) by any Indemnified Party,
whether before or after the date of this Agreement, with respect to the
inaccuracy or noncompliance with any representation, warranty, certification,
covenant, this Section 6.2, or agreement or other obligation within the scope of
clauses (a) through (d).
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6.3 Claims
For Indemnification.
(a) In order to seek
indemnification pursuant to this Article 6, Parent shall deliver a Claim Notice
to the Stockholders' Representative.
(b) Within
twenty (20) business days after delivery of a Claim Notice to the Stockholders'
Representative, the Stockholders' Representative shall deliver to Parent a
Response, in which the Stockholders' Representative shall: (i) agree that the
Indemnified Party is entitled to a remedy with respect to all of the Claimed
Amount, (ii) agree that the Indemnified Party is entitled to a remedy with
respect to the Agreed Amount, or (iii) dispute that the Indemnified Party is
entitled to any remedy with respect to the Claimed Amount.
(c) During the 30-day period
following the delivery of a Response that reflects a Dispute, the Stockholders'
Representative and Parent shall use good faith efforts to resolve the Dispute.
If the Dispute is not resolved within such 30-day period, the Stockholders'
Representative and Parent shall submit the Dispute to binding arbitration and
the provisions of Section 6.3(d) shall become effective with respect to such
Dispute.
(d) If Parent
and the Stockholders' Representative submit any Dispute to binding arbitration,
the arbitration shall be conducted by a single arbitrator (the "Arbitrator") in
accordance with the Comprehensive Rules in effect from time to time and the
following provisions:
(i) In the
event of any conflict between the Comprehensive Rules in effect from time to
time and the provisions of this Agreement, the provisions of this Agreement
shall prevail and be controlling.
(ii) The
Parties shall commence the arbitration by jointly filing a written submission
with the Boston office of the Arbitrator in accordance with Rule 5 of the
Comprehensive Rules (or any successor provision).
(iii) No depositions or other
discovery shall be conducted in connection with the arbitration.
(iv) Not later than twenty (20)
business days after the conclusion of the arbitration hearing, the Arbitrator
shall prepare and distribute to the Parties a writing setting forth the arbitral
award and the Arbitrator's reasons therefor. Any award rendered by the
Arbitrator shall be final, conclusive and binding upon the parties, and judgment
thereon may be entered and enforced in any court of competent jurisdiction
(subject to Section 9.11), provided that the Arbitrator shall have no power or
authority to (x) award damages in excess of the portion of the Claimed Amount
that is subject to such Dispute, (y) award multiple, consequential, punitive or
exemplary damages (except to the extent that such damages constitute an element
of Loss paid, incurred, sustained or accrued in respect of a Third Party
Action), or (z) grant injunctive relief, specific performance or other equitable
relief.
(v) The Arbitrator shall have no
power or authority, under the Comprehensive Rules or otherwise, to (x) modify or
disregard any provision of this Agreement, or (y) address or resolve any issue
not submitted by the Parties.
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(vi) In connection with any
arbitration proceeding pursuant to this Agreement, each party shall bear its own
costs and expenses, except that the fees and costs of J.A.M.S. and the
Arbitrator, the costs and expenses of obtaining the facility where the
arbitration hearing is held, and such other costs and expenses as the Arbitrator
may determine to be directly related to the conduct of the arbitration and
appropriately borne jointly by the parties (which shall not include any party's
attorneys' fees or costs, witness fees (if any), costs of investigation and
similar expenses) shall be shared equally by Parent and the Company
Stockholders.
(e) The
Stockholders' Representative shall have full power and authority on behalf of
each Company Stockholder to take any and all actions on behalf of, execute any
and all instruments on behalf of, and execute or waive any and all rights of,
the Company Stockholders under this Article 6. The Stockholders' Representative
shall have no liability to any Company Stockholder for any action taken or
omitted on behalf of the Company Stockholders or Parent pursuant to this
Article 6.
6.4 Third
Party Actions.
(a) Parent
shall give written notification to the Stockholders' Representative of the
commencement against Parent or the Surviving Corporation of any Third Party
Action after the Effective Time. Such notification shall be given within twenty
(20) business days after receipt by Parent of notice of such Third Party Action,
and shall describe in reasonable detail (to the extent known by Parent) the
facts constituting the basis for such Third Party Action and the amount of the
claimed damages; provided, however, that no delay or failure on the part of
Parent in so notifying the Stockholders' Representative shall relieve the
Company Stockholders of any liability or obligation hereunder except to the
extent of any damage or liability caused by or arising out of such failure.
Within twenty (20) business days after delivery of such notification, the
Stockholders' Representative may, upon written notice thereof to Parent, assume
control of the defense of such Third Party Action, including the payment of all
fees and expenses, with counsel reasonably satisfactory to Parent; provided
that Note
1
(ii) the
Stockholders' Representative may not assume control of the defense of a Third
Party Action involving Taxes, customers or suppliers of the Company, criminal
liability or any Third Party Action in which injunctive relief is
sought. If the Stockholders' Representative does so assume control of
the defense of a Third Party Action, it shall vigorously pursue any and all
defenses available to Parent and the Surviving Corporation, and any Dispute
between the Parties with respect to any damages, fines, costs or other
liabilities that may have been assessed against the Indemnified Party in
connection with such Third Party Claim shall be resolved pursuant to Section 6.3
above. If the Stockholders' Representative does not, or is not
permitted under the terms hereof to, so assume control of the defense of a Third
Party Action, or if after assuming such control, does not vigorously pursue the
defense of such Third Party Action, as determined in the reasonable discretion
of Parent, the Parent shall be entitled to control such defense. The
Non-Controlling Party may participate in such defense, and such participation
shall (in the case of the Stockholders' Representative) be at its own expense.
The Controlling Party shall keep the Non-Controlling Party advised of the status
of such Third Party Action and the defense thereof and shall consider in good
faith recommendations made by the Non-Controlling Party with respect
thereto. The Non-Controlling Party shall furnish the Controlling
Party with such information as it may have with respect to such Third Party
Action (including copies of any summons, complaint or other pleading which may
have been served on such party and any written claim, demand, invoice, billing
or other document evidencing or asserting the same) and shall otherwise
cooperate with and assist the Controlling Party in the defense of such Third
Party Action. The reasonable fees and expenses of counsel to the
Indemnified Party with respect to a Third Party Action for which the Indemnified
Party is entitled to indemnification pursuant to this Article 6 shall be
considered Losses for purposes of this Agreement. The Controlling
Party shall not agree to any settlement of, or the entry of any judgment arising
from, any Third Party Action without the Non-Controlling Party's prior written
consent, which shall not be unreasonably withheld, conditioned or
delayed.
Note 1: Contains confidential information that would be seriously
prejudicial to the interests of EXFO.
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(b) If a
third party asserts (other than by means of a lawsuit) that an Indemnified Party
is liable to such third party for a monetary or other obligation which may
constitute or result in Losses for which such Indemnified Party may be entitled
to indemnification pursuant to this Article 6, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) such Indemnified Party shall be entitled to settle or
satisfy such obligation, with prior written consent from the Stockholders'
Representative (which shall not be unreasonably withheld or delayed), and,
subject to the right of the Stockholders' Representative to dispute the validity
and amount of such claim pursuant to the provisions of Section 6.3(b) and the
dispute resolution procedures of Section 6.3(c) and Section 6.3(d), (ii) such
Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article 6, and (ii) such Indemnified
Party shall be entitled to a remedy, in accordance with the provisions of this
Article 6, for any such Losses for which it is entitled to indemnification
pursuant to this Article 6.
6.5 Limitations.
Note
1
Note 1:
Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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Note
1
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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Note
1
6.6 Liability
and Authority of Stockholders' Representative; Successors and
Assignees.
(a) Limitation on
Liability. The Stockholders' Representative shall incur no liability to
Parent or the Company Stockholders with respect to any action taken or suffered
by them in reliance upon any notice, direction, instruction, consent, statement
or other documents believed by it to be genuine and duly authorized, nor for
other action or inaction except its own wilful misconduct or gross negligence.
The Stockholders' Representative may, in all questions arising under this
Agreement, rely on the advice of counsel and the Stockholders' Representative
shall not be liable to the Parent or Company Stockholders for anything done,
omitted or suffered in good faith by the Stockholders' Representative based on
such advice. To the fullest extent permitted by applicable
law, Note
1 and hold the Stockholders' Representative
harmless against any loss, liability or expense incurred without gross
negligence or wilful misconduct on the part of the Stockholders' Representative
and arising out of or in connection with the acceptance or administration of the
Stockholders' Representative's duties hereunder, including the reasonable fees
and expenses of any legal counsel retained by the Stockholders' Representative.
At the time of payment pursuant to Section 1.11 to the Company Stockholders of
any portion of the Earn-Out Amount, the Stockholders' Representative shall be
entitled to deduct and withhold from such payment such amount as may be required
to pay and reimburse fees and expenses of third parties incurred or expected to
be incurred in connection with the Stockholders' Representative's role as
Stockholders' Representative pursuant to this Agreement.
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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(b) Successor Stockholders'
Representative. In the event of the death or permanent disability of any
Stockholders' Representative, or his or her resignation as a Stockholders'
Representative, a successor Stockholders' Representative shall be elected by
written consent of a majority-in-interest of the interests held by the Major
Holders as determined immediately prior to the Effective Time. Each successor
Stockholders' Representative shall have all of the power, authority, rights and
privileges conferred by this Agreement upon the original Stockholders'
Representative, and the term "Stockholders' Representative" as used herein shall
be deemed to include successor Stockholders' Representative.
(c) Power and Authority.
The Stockholders' Representative shall have full power and authority to
represent the Company Stockholders, and their successors, with respect to all
matters arising under this Agreement and all actions taken by any Stockholders'
Representative hereunder shall be binding upon the Company Stockholders, and
their successors, as if expressly confirmed and ratified in writing by each of
them. Without limiting the generality of the foregoing, the Stockholders'
Representative shall have full power and authority to interpret all of the terms
and provisions of this Agreement, to compromise any claims asserted hereunder
and to authorize payments to be made with respect thereto, on behalf of the
Company Stockholders and their successors. In connection with the performance of
its obligations hereunder, the Stockholders' Representative shall have the right
at any time and from time to time to select and engage, at the cost and expense
of the Major Holders, attorneys, accountants, investment bankers, advisors, and
consultants and to obtain such other professional and expert assistance and to
maintain such records as the Stockholders' Representative may deem necessary or
desirable and to incur other out-of-pocket expenses related to the performance
of its services hereunder.
ARTICLE
7
TERMINATION
7.1 Termination
of Agreement.
The
Parties may terminate this Agreement prior to the Closing (whether before or
after Requisite Stockholder Approval), as provided below upon the occurrence of
any of the events set forth in clauses (a) though (d):
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(a) The
Parties may terminate this Agreement by mutual written consent.
(b) Parent may terminate this
Agreement by giving written notice to the Company in the event the Company is in
breach of any representation, warranty or covenant contained in this Agreement,
and such breach (i) individually or in combination with any other such breach,
would cause the conditions set forth in Section 5.2 not to be satisfied and (ii)
is not cured within thirty (30) days following delivery by Parent to the Company
of written notice of such breach.
(c) The Company may terminate
this Agreement by giving written notice to Parent in the event Parent or Merger
Sub is in breach of any representation, warranty or covenant contained in this
Agreement, and such breach (i) individually or in combination with any other
such breach, would cause the conditions set forth in Section 5.3 not to be
satisfied and (ii) is not cured within thirty (30) days following delivery by
the Company to Parent of written notice of such breach.
(d) Either
Parent or the Company may terminate this Agreement if the transactions
contemplated hereby have not been consummated as of June 2, 2008.
Notwithstanding
the foregoing, this Agreement may not be terminated under this Section 7.1 by or
on behalf of any Party that is in breach of any representation or warranty or in
violation of any covenant or agreement contained herein.
7.2 Effect of
Termination
(a) If this
Agreement is terminated under Section 7.1(a) herein at a time when no Party is
in breach of a representation or warranty or in violation of a covenant or
agreement contained herein, neither Party shall have any further liability or
obligation to any other Party, except as otherwise provided herein.
(b) If this
Agreement is terminated under Section 7.1(b), (c) or (d), neither Party shall
have any further liability or obligation to any other Party, except as otherwise
provided herein; provided, however, that nothing in this Agreement shall relieve
any Party from liability for any wilful breach of any covenant, agreement,
representation or warranty contained in this Agreement (including any failure of
the Company to use its commercially reasonable efforts to cure any breach of any
representation, warranty or covenant contained in this Agreement).
ARTICLE
8
DEFINITIONS
8.1 Certain
Definitions.
For
purposes of this Agreement, each of the following terms has the meaning set
forth below.
"280G Vote" has the
meaning set forth in Section 4.3(c).
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"401(k) Plan" has the
meaning set forth in Section 4.12.
"Affiliate" means any
affiliate, as defined in Rule 12b-2 under the Securities Exchange Act of
1934.
"Agreed Amount" mean part,
but not all, of the Claimed Amount.
"Agreement" has the
meaning set forth in the first paragraph of this Agreement.
"Amended and Restated
Certificate of Incorporation" has the meaning set forth in Section
1.5(e).
"Ancillary Agreements" means
the non-competition agreements and the offer letters described in Section
5.2(h), and any other agreement entered into in connection with the transactions
contemplated hereby, including but not limited to the Indemnification
Agreement.
"Arbitrator" has the
meaning set forth in Section 6.3(d).
"Base Earn-Out Amount"
has the meaning set forth in Section 1.5(d).
"Business Plan" has
the meaning set forth in Section 2.32.
"Cash Amount" has the
meaning set forth in Section 1.3(c).
"Cash Price" has the
meaning set forth in Section 1.5(d).
"CERCLA" means the
federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended.
"Certificate of
Merger" means the certificate of merger or other appropriate documents
prepared and executed in accordance with Section 251(c) of the Delaware General
Corporation Law.
"Claim Notice" means
written notification which contains (i) a description of the Losses paid,
incurred, sustained, accrued or reasonably expected to be paid, incurred,
sustained, or accrued by the Indemnified Party and the Claimed Amount of such
Losses, to the extent then known, and (ii) a statement that the Indemnified
Party is entitled to indemnification under Article 6 for such Losses and a
reasonable explanation of the basis therefor.
"Claimed Amount" means
the amount of any Losses paid, incurred, sustained, or accrued or reasonably
expected to be paid, incurred, sustained, or accrued by the Indemnified
Party.
"Closing" means the
closing of the transactions contemplated by this Agreement.
"Closing Date" means
the date two business days after the satisfaction or waiver of all of the
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (excluding the delivery at the Closing of any of the
documents set forth in Article 5), or such other date as may be mutually
agreeable to the Parties.
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"Common Shares" means
the shares of common stock, $0.001 par value per share, of the
Company.
"Company" has the
meaning set forth in the first paragraph of this Agreement.
"Company Certificate"
has the meaning ascribed to it in Section 1.10(a).
"Company Compliance
Certificate" means a certificate to the effect that each of the
conditions specified in Section 5.2 is satisfied in all respects.
"Company Disclosure
Schedule" means the disclosure schedule provided by the Company to Parent
on the date hereof and accepted in writing by Parent.
"Company Intellectual
Property" means the Company Owned Intellectual Property and the Company
Licensed Intellectual Property.
"Company IP Registrations" has
the meaning set forth in Section 2.13(a).
"Company Licensed
Intellectual Property" means all Intellectual Property that is licensed
to the Company or its Subsidiary by any third party.
"Company Material Adverse
Effect" means any material adverse change, event, circumstance or
development with respect to, or material adverse effect on, (a) the business,
assets, liabilities, capitalization, operations, condition (financial or other),
results of operations or prospects of the Company and its Subsidiary as a whole,
or (b) the ability of Parent to operate the business of the Company and of its
Subsidiary immediately after Closing in the manner operated by the Company and
its Subsidiary as a whole prior to the Closing; provided, that none of the
following shall constitute or be considered in determining whether a Company
Material Adverse Effect shall have occurred: (i) temporary or short-term
cyclical changes generally affecting any of the economies in which the Company
and its Subsidiary conduct business (except to the extent that such changes have
a materially disproportionate effect on the Company and its Subsidiary); (ii)
changes in GAAP so long as such changes have not had and do not have a
materially disproportionate effect on the consolidated financial condition and
results or operations of the Company and its Subsidiary; (iii) termination of
employment of any employees of the Company and its Subsidiary so long as the
conditions set forth in Sections 4.10 and 5.2(h) are satisfied; and (iv) any
changes resulting from the execution of this Agreement or any of the Ancillary
Agreements or any public announcement of the transactions contemplated hereby
and thereby so long as the other conditions in Section 5.2 are
satisfied. For the avoidance of doubt, the parties agree that the
terms "material", "materially" or "materiality" as used in this Agreement with
an initial lower case "m" shall have their respective customary and ordinary
meanings, without regard to the meaning ascribed to Company Material Adverse
Effect.
"Company Owned Intellectual
Property" means all
Intellectual Property owned or purported to be owned by the Company or its
Subsidiary, in whole or in part.
"Company Plan" means any
Employee Benefit Plan maintained, or contributed to, by the Company, its
Subsidiary or any ERISA Affiliate.
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"Company Shares" means
the Common Shares and the Preferred Shares together.
"Company Stock Plan"
means any stock option plan or other stock or equity related plan of the
Company.
"Company Stockholders"
means the stockholders of record of the Company immediately prior to the
Effective Time.
"Company Transaction Costs"
means all fees and expenses of the Company's investment banking, financial,
legal, accounting and other advisers in connection with the Merger, this
Agreement and the Ancillary Agreements, the negotiations related thereto, and
the transactions contemplated hereby and thereby.
"Comprehensive Rules"
means the J.A.M.S. Comprehensive Arbitration Rules and Procedures.
"Contracts" has the
meaning set forth in Section 2.13(i).
"Controlling Party"
means the party controlling the defense of any Third Party Action.
"Copyrights" has the
meaning set forth in subsection (c) of the Intellectual Property definition
below.
"Customer Offerings"
means (a) the products (including Software and Documentation) that the Company
or its Subsidiary (i) currently develops, manufactures, markets, distributes,
makes available, sells or licenses to third parties, or (ii) has developed,
manufactured, marketed, distributed, made available, sold or licensed to third
parties within the previous five (5) years, or (ii) currently plans to develop,
manufacture, market, distribute, make available, sell or license to third
parties in the future and (b) the services that the Company or its Subsidiary
(i) currently provides or makes available to third parties, or (ii) has provided
or made available to third parties within the previous five (5) years, or (iii)
currently plans to provide or make available to third parties in the future. A
true and complete list of all Customer Offerings is set forth in Section 2.13 of
the Company Disclosure Schedule.
"Developers" has the
meaning set forth in Section 2.13(k).
"Disclosure Statement"
means a written information statement containing the information prescribed by
Section 4.3 and the Delaware General Corporation Law.
"Dispute" means the
dispute resulting if the Stockholders' Representative in a Response disputes its
liability for all or part of the Claimed Amount.
"Dissenting Shares"
means Company Shares held as of the Effective Time by a Company Stockholder who
has not voted such Company Shares in favor of the adoption of this Agreement and
with respect to which appraisal shall have been duly demanded and perfected in
accordance with Section 262 of the Delaware General Corporation Law and not
effectively withdrawn or forfeited prior to the Effective
Time.
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"Dissenting
Stockholders" has the meaning set forth in Section 1.6.
"Documentation" means
reports, white papers, documentation, specifications, designs, flow charts, code
listings, instructions, user manuals, frequently asked questions, release notes,
recall notices, error logs, diagnostic reports, marketing materials, packaging,
labeling, service manuals and other printed, visual or electronic materials
describing the use, operation, installation, configuration, features,
functionality, pricing, marketing or correction of a product, whether or not
provided to end users.
"Effective Time" means
the time at which the Surviving Corporation files the Certificate of Merger with
the Secretary of State of the State of Delaware.
"Employee Benefit
Plan" means, whether or not subject to ERISA, any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement or arrangement involving direct or indirect compensation,
including day and dependent care, legal services, cafeteria, life, health,
medical, dental, vision, welfare, accident, unemployment, workmen's compensation
and other insurance coverage; severance, separation, termination or similar
benefits; disability benefits; deferred compensation, bonuses, stock options,
stock purchase, phantom stock, stock appreciation or other forms of incentive
compensation or postretirement compensation.
"Environmental Law"
means any foreign, federal, provincial, state, local or municipal law, statute,
rule, order, directive, judgment, Permit, policy, guideline, treaty or
regulation or the common law relating to the environment, occupational health
and safety, or exposure of persons or property to Materials of Environmental
Concern, including any statute, regulation, administrative decision or order
pertaining to: (i) the presence of or the treatment, storage, disposal,
generation, transportation, handling, distribution, manufacture, processing,
use, import, export, labelling, recycling, registration, investigation or
remediation of Materials of Environmental Concern or documentation related to
the foregoing; (ii) air, water and noise pollution; (iii) groundwater and soil
contamination; (iv) the release, threatened release, or accidental release into
the environment, the workplace or other areas of Materials of Environmental
Concern, including emissions, discharges, injections, spills, leaks, escapes or
dumping of Materials of Environmental Concern; (v) transfer of interests in or
control of real property which may be contaminated; (vi) community or worker
right-to-know disclosures with respect to Materials of Environmental Concern;
(vii) the protection of wild life, marine life and wetlands, and endangered and
threatened species; (vii) storage tanks, vessels, containers, abandoned or
discarded barrels and other closed receptacles; (ix) health and safety of
employees and other persons; and (x) restrictions on the use and waste of
hazardous substances in electrical and electronic equipment including the
legislation of the European Commission with reference to RoHS (restriction on
the use of certain hazardous substances in electrical and electronic equipment)
and WEEE (Waste Electric and Electronic Equipment). As used above, the term
"release" has the meaning set forth in CERCLA.
"ERISA" mean the
Employee Retirement Income Security Act of 1974, as amended.
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"ERISA Affiliate"
means any entity which is a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Internal Revenue Code), (2) a group of trades
or businesses under common control (as defined in Section 414( c) of the
Internal Revenue Code), or (3) an affiliated service group (as defined under
Section 414(m) of the Internal Revenue Code or the regulations under Section
414(o) of the Internal Revenue Code), any of which includes the Company or its
Subsidiary.
"Excepted Matters" has
the meaning set forth in Section 6.5(a).
"Exclusive Period" has the
meaning set forth in Section 4.7(a).
"EXFO" means EXFO
Electro-Optical Engineering Inc., a Province of Québec corporation.
"Expiration Date"
means 11:59 p.m. Eastern Time on the date which is twelve (12) months after the
date on which the Effective Time occurs.
"Exploit" means all
rights of exploitation including the rights to develop, design, test, modify,
make, use, sell, have made, used and sold, import, export, produce, reproduce,
market, distribute, commercialize, support, maintain, correct, translate, adapt,
modify, create derivative works of, transmit, communicate, display or authorize
any of the foregoing acts.
"Financial Projection
Sheet" has the meaning set forth in Section 2.32.
"Financial Statements"
means:
(a) the
audited consolidated balance sheets and statements of income, changes in
stockholders' equity and cash flows of the Company as of the end of 2006 and
2005;
(b) the unaudited consolidated
balance sheets and statements of income, changes in stockholders' equity and
cash flows of the Company as of the end of 2007; and
(c) the Most
Recent Balance Sheet and the unaudited consolidated statements of income,
changes in stockholders' equity and cash flows of the Company for the two (2)
months ended as of the Most Recent Balance Sheet Date.
"Foreign Law" means
any federal, provincial or local law, statute, rule, order, directive, judgment,
permit or regulation of a country other than the United States of America in
which the Company or its Subsidiary carries on business or
operates.
"GAAP" means United
States generally accepted accounting principles.
"Governmental Entity"
means any court, arbitrational tribunal, administrative agency or commission or
other federal, national, state, provincial, local, municipal or multinational
governmental, quasi-governmental or regulatory authority or agency of the United
States of America or any state thereof, any other country, or any subdivision or
authority of any of the foregoing.
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“Indemnification
Agreement” Note 1
"Indemnified Parties"
means Parent and Merger Sub prior to the Effective Time and their respective
directors, officers, employees, and Representatives, and Parent and the
Surviving Corporation after the Effective Time and their respective directors,
officers, employees, and Representatives.
"Intellectual Property" means the
following subsisting throughout the world:
(d) patents,
patent applications, utility models, design registrations and certificates of
invention and other governmental grants for the protection of inventions or
industrial designs (including all related continuations, continuations-in-part,
divisions, reissues, reexaminations, and extensions) (collectively, "Patent
Rights");
(e) trademarks
and service marks, logos, Internet domain names, trade dress, distinguishing
guises, corporate names and doing business designations, and all registrations
and applications for registration of the foregoing, common law trademarks and
service marks (collectively "Trademarks"), and all goodwill in the
foregoing;
(f) copyrightable
works and works of authorship, designs, drawings, Software, data and database
rights and registrations and applications for registration thereof
(collectively, "Copyrights");
(g) inventions,
algorithms, methods, procedures, techniques, instructions, guides, manuals,
samples, specifications, schematics, invention disclosures, statutory invention
registrations, trade secrets and confidential business information, know-how,
manufacturing and product processes and techniques, research and development
information, records, financial, marketing and business data, pricing and cost
information, business and marketing plans and customer and supplier lists and
information, whether patentable or nonpatentable, whether copyrightable or
noncopyrightable and whether or not reduced to practice; and
(h) other
proprietary rights relating to any of the foregoing, whether recognized by
statutory law or common or civil law (including remedies against infringement
thereof and rights of protection of interest therein under the laws of all
jurisdictions).
"Intellectual Property
Registrations" means all certificates of registration and applications
for registration of Patent Rights, Trademarks, Copyrights and any other
Intellectual Property, throughout the world.
"Internal Revenue Code" means
the Internal Revenue Code of 1986, as amended.
"Internal Systems"
means the Software and Documentation and the computer, communications and
network systems (both desktop and enterprise-wide), laboratory equipment,
reagents, materials and test, calibration and measurement apparatus used by the
Company or its Subsidiary in their business or operations or to develop,
manufacture, fabricate, assemble, provide, distribute, support, maintain or test
the Customer Offerings, whether located on the premises of the Company or its
Subsidiary or hosted at a third party Internet site.
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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"Inventories" means,
at any time, all inventories of the Company and its Subsidiary wherever located,
including (i) all finished goods (products held for sale), work in process
(products at some stage of production) raw materials and goods in transit, and
(ii) all other maintenance, repair and operating materials and supplies,
including spare parts, fuels, and packaging material.
“IP Breach” means any
breach of a representation or warranty contained in Section
2.13 Note 1
“IP Indemnification
Cap” has the meaning set forth in Section 6.5(c).
"Lease" means any
lease or sublease pursuant to which the Company or its Subsidiary leases or
subleases from another Person any real property.
"Leased Property" has
the meaning set forth in Section 2.12.
"Legal Proceeding" means any
action, suit, proceeding, claim, arbitration or investigation before any
Governmental Entity or before any arbitrator.
"Liability Basket" has
the meaning set forth in Section 6.5(a).
"Losses" means any and
all debts, obligations and other liabilities, judgments, monetary damages,
fines, fees, penalties, interest obligations, Taxes, charges, assessments,
deficiencies, other losses, and expenses (including reasonable expenses of
investigation, defense, prosecution, and settlement of claims; court costs;
reasonable fees, expenses, and costs of attorneys, accountants, investigators,
financial advisors, and experts; and other reasonable expenses of litigation,
arbitration or other dispute resolution proceedings).
"Major Holders" means
the holders of Preferred Shares that have executed a counterpart signature page
hereto.
"Management
Participant" means an employee of the Company entitled to a bonus payment
pursuant to the Brix Networks, Inc. Management Incentive Plan.
"Materials of Environmental
Concern" means any: pollutants, contaminants or hazardous substances (as
such terms are defined under CERCLA and any other applicable Environmental
Laws), pesticides (as such term is defined under the Federal Insecticide,
Fungicide and Rodenticide Act and any other applicable Environmental Laws),
hazardous wastes (as such term is defined under the Resource Conservation and
Recovery Act and any other applicable Environmental Laws), other hazardous,
radioactive, explosive or toxic materials, asbestos and asbestos-containing
materials, oil, petroleum and petroleum products (and fractions thereof),
biohazards and medical wastes, or any other material listed or subject to
regulation under any Environmental Law due to its potential to harm the
environment or human health.
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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"Merger" means the
merger of Merger Sub with and into the Company in accordance with the terms of
this Agreement.
"Merger Sub" has the meaning
set forth in the first paragraph of this Agreement.
"Most Recent Balance
Sheet" means the unaudited consolidated balance sheet of the Company as
of the Most Recent Balance Sheet Date.
"Most Recent Balance Sheet Date"
means February 29, 2008.
"Non-Controlling Party" means the
party not controlling the defense of any Third Party Action.
"Open Source
Materials" means all Software, Documentation or other material that is
distributed as "free software", "open source software" or under a similar
licensing or distribution model, Note
1
"Option" means each
option to purchase or acquire Common Shares.
"Other Intermediaries"
has the meaning set forth in Section 4.7(a).
"Other Company
Stockholder" has the meaning set forth in Section 4.7(a).
"Owned Real Property"
means each item of real (immovable) property owned by the Company or its
Subsidiary.
"Parent" has the
meaning set forth in the first paragraph of this Agreement.
"Parent Compliance
Certificate" means a certificate to the effect that each of the
conditions specified in Section 5.3 is satisfied in all respects
"Parent Material Adverse
Effect" means any material adverse change, event, circumstance or
development with respect to, or material adverse effect on, (a) the business,
assets, liabilities, capitalization, operation, condition (financial or other),
results of operations or prospects of Parent or its subsidiaries as a whole or
(b) the ability of Parent to consummate the transactions contemplated hereby;
provided, however, that none of the following shall constitute or be considered
in determining whether a Parent Material Adverse Effect shall have
occurred: (i) temporary or short term cyclical changes generally
affecting any of the economics in which Parent or its subsidiaries conduct
business (except to the extent that such changes have a materially
disproportionate effect on the Parent and its subsidiaries); (ii) changes in
GAAP so long as such changes have not had and do not have a materially
disproportionate effect on the financial condition and results of Parent; and
(iii) any changes resulting from the execution of this Agreement or any of the
Ancillary Agreements or any public announcement of the transactions contemplated
hereby and thereby.
"Parties" means
Parent, Merger Sub and the Company.
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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"Patent Rights" has
the meaning set forth in subsection (a) of the Intellectual Property definition
above.
"Paying Agent" means
U.S. Bank National Association.
"Permits" means all
permits, licenses, registrations, certificates, orders, approvals, renewals,
franchises, variances and similar rights or authorizations issued by or obtained
from any Governmental Entity (including those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property).
"Person" means any:
(i) individual, (ii) corporation, general partnership, limited partnership,
limited liability partnership, trust, company (including any limited liability
company or joint stock company) or other organization or entity, or (iii) any
Governmental Entity.
"Pre-Closing Tax
Period" has the meaning set forth in Section 4.l1(a).
"Preferred
Shares" Note 1
"Product Registration"
means permission from any governmental authority allowing a device or a software
to be lawfully distributed for commercial use in a country, including
establishment registration and device or software listing with the Federal
Communications Commission.
"Purchase Price" has
the meaning set forth in Section 1.5(d).
"R&D Plan" has the
meaning set forth in Section 2.32.
"Representatives" has
the meaning set forth in Section 4.7(a).
"Requisite Stockholder Approval" means the
adoption of this Agreement and the approval of the Merger by (a) a majority of
the votes represented by the outstanding Company Shares and Preferred Shares
entitled to vote on this Agreement and the Merger, voting together as a single
class, (b) at least seventy percent (70%) of the votes represented by the
outstanding shares of Series A-1 Preferred Stock, voting as a separate class,
and (c) at least sixty-seven percent (67%) of the votes represented by the
outstanding Preferred Shares, voting together as a single class.
"Response" means a
written response containing the information provided for in Section
6.3(b).
"Securities Act" means
the Securities Act of 1933, as amended.
Note
1: Contains confidential information that would be seriously prejudicial to the
interests of EXFO.
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"Security Interest"
means any mortgage, hypothecation, pledge, assessment, security interest, lease,
prior claims, encumbrance, charge, license, covenant, condition, levy, option,
equity, adverse claim or restriction or other lien of any kind (whether arising
by contract or by operation of law), or any conditional sale Contract, title
retention Contract or other Contract to give any of the foregoing, except for
any restrictions on transfer generally arising under any applicable securities
laws, other, in each case, than (i) mechanic's, materialmen's, and similar
liens; (ii) liens arising under worker's compensation, unemployment insurance,
social security, retirement, and similar legislation; (iii) liens for current
taxes not yet due and payable or that are being contested in good faith by
appropriate proceedings; (iv) liens securing debt that is reflected on the Most
Recent Balance Sheet and that is being repaid at or prior to the Effective Time;
and (v) easements, reservations, rights-of-way, restrictions, minor defects or
irregularities in title and other similar liens affecting real property not
interfering in any material respect with the ordinary conduct of the business of
the Company.
"Software" shall mean
all computer programs and all updates, upgrades and all versions thereof
developed, sold, licensed to third parties, marketed or supported by the Company
in its normal course of business, including but not limited to all computer
software code, applications, utilities, development tools, diagnostics,
databases and embedded systems, whether in source code, interpreted code or
object code form, program files, data files, computer related data, field and
data definitions and relationships, data definitions specifications, data
models, programs and systems logic, interfaces, program modules, routines,
sub-routines, algorithms, program architecture, design concepts, system designs,
program structure, sequence and organization, screen displays and report
layouts.
"Stockholders'
Representative" means ▇▇▇▇▇▇▇ River Ventures, LLC.
"Straddle Period" has
the meaning set forth in Section 4. 11(a).
"Subsidiary" with
respect to any Party, means any corporation, partnership, trust, limited
liability company or other non-corporate business enterprise in which such Party
(or another Subsidiary of such Party) holds stock or other ownership interests
representing (a) more than 50% of the voting power of all outstanding stock or
ownership interests of such entity or (b) the right to receive more than 50% of
the net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution of
such entity.
"Surviving
Corporation" means the Company, as the surviving corporation in the
Merger, for time periods from and after the Effective Time.
"Taxes" means all
taxes, charges, fees, levies, duties or other similar assessments or
liabilities, including income, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, capital, sales, goods and services,
use, transfer, withholding, employment, unemployment, pension plan (whether
federal, state, national or provincial), insurance, social security, business
license, business organization, environmental, workers compensation, payroll,
profits, license, lease, service, service use, severance, stamp, occupation,
windfall profits, customs, duties, franchise and other taxes imposed by any
domestic or foreign federal, national, state, provincial, local or municipal
government, or any agency thereof, or any political subdivision the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof.
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"Tax Returns" means
all reports, returns, declarations, elections, statements or other information
required to be supplied to a taxing authority in connection with
Taxes.
"Third Party
Acquisition" has the meaning set forth in Section 4.7(a).
"Third Party Action"
means any suit or proceeding by a Person other than (and unaffiliated with)
Parent or the Company, which would reasonably be expected to result in an
indemnification claim pursuant to Article 6.
"Trademarks" has the
meaning set forth in subsection (b) of the Intellectual Property definition
above.
"Transaction Costs"
has the meaning set forth in Section 1.3(d)(ii).
"Warrant" means each
warrant or other contractual right to purchase or acquire Company Shares;
provided that Options and Preferred Shares shall not be considered
Warrants.
8.2 Certain
Rules of Construction.
(a) The terms "law" and
"laws" refer to each applicable U.S. and foreign federal, state, national,
provincial, local and municipal law, statute, rule, regulation and directive and
each judgment, order, decree, permit, or order of each court and other
Governmental Entity of competent jurisdiction. Any reference to any federal,
state, national provincial, local, municipal, foreign or other law shall be
deemed also to refer to all rules and regulations promulgated thereunder
(including rues and regulations of the Securities and Exchange Commission, state
securities regulators, the NASD and its affiliates), unless the context requires
otherwise.
(b) Unless
the context of this Agreement otherwise requires, (i) words of either gender or
the neuter include the other gender and the neuter, (ii) words using the
singular number also include the plural number and words using the plural number
also include the singular number, (iii) the terms "hereof', "herein", "hereby"
and derivative or similar words refer to this entire Agreement as a whole and
not to any particular Article, Section or other subdivision, (iv) the terms
"Article" or "Section" or other subdivision refer to the specified Article,
Section or other subdivision of the body of this Agreement, (v) the phrases
"ordinary course of business" and "ordinary course of business consistent with
past practice" refer to the Company, (vi) the word "include" shall be deemed to
be followed by business and practice of the phrase "but are not limited to", the
word "includes" shall be deemed to be followed by the phrase "but is not limited
to", and the word "including" shall be deemed to be followed by the phrase "but
not limited to", (vii) the phrase "materiality limitation", with respect to a
party's representations, warranties, covenants and agreements, includes all
qualifications, limitations, thresholds and exceptions based on the concept of
materiality, whether expressed by the word "material", "materially",
"materiality", "material adverse change", "Parent Material Adverse Effect" or
"Company Material Adverse Effect", (vii) when a reference is made in this
Agreement to Exhibits, such reference shall be to an Exhibit to this Agreement
unless otherwise indicated, (ix) when a statement herein with respect to a
particular matter is qualified by the phrase "in all material respects",
materiality shall be determined solely by reference to, and solely within the
context of, the specified matter and not with respect to the entirety of this
Agreement or the entirety of the transactions contemplated hereby, (x) the terms
"party" or "parties" refer to Parent and Merger Sub, on the one hand, and the
Company, on the other, and the terms "third party" or "third Parties" refers to
Persons other than Parent, Merger Sub and the Company, (xi) when reference is
made in this Agreement to a "product" of the Company, such reference shall
include products under development, and when reference is made in this Agreement
to the business of the Company as "proposed" to be conducted, or to Intellectual
Property "proposed" to be embodied in a product, technology or service of the
Company or used in and/or necessary to the conduct of the business of the
Company as "proposed" to be conducted, such reference shall include the
businesses, activities, Intellectual Property, products, technologies and
services reflected in the Business Plan. All accounting terms used herein and
not expressly defined herein shall have the meanings given to them under
GAAP.
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(c) When used
herein, the phrases "to the knowledge of' any Person, "to the best knowledge of'
any Person, "known to" any Person or any similar phrase, means (i) with respect
to the Company, the actual knowledge of the directors and officers of the
Company and its Subsidiary and other individuals that have a similar position or
have similar powers and duties as the officers and directors of the Company and
its Subsidiary, including, in the case of such officers, the knowledge of facts
that such officers should have after due inquiry, (ii) with respect to any
Person who is an individual, the actual knowledge of such Person, and (iii) with
respect to any other Person, the actual knowledge of the directors and officers
of such Person and other individuals that have a similar position or have
similar powers and duties as the officers and directors of such Person. For this
purpose, "due inquiry" with respect to any matter means inquiry of and
consultations with (A) the directors and officers of such Person and other
individuals that have a similar position or have similar powers and duties as
such officers and directors, (B) other employees of and the advisors to such
Person, including legal counsel and outside auditors, who have principal
responsibility for the matter in question or are otherwise likely to have
information relevant to the matter, and (C) the stockholders owning more than
ten percent (10%) of the equity interests, by vote or value, of such
Person..
(d) The
language used in this Agreement shall be deemed to be the language chosen by the
Parties to express their mutual intent, and no rule of strict construction shall
be applied against any Party. The drafting and negotiation of the
representations, warranties, covenants and conditions to the obligations of
Parent, Merger Sub and the Company herein reflect compromises, and certain
provisions may overlap with other provisions or may address the same or similar
subject matters in different ways or for different purposes. It is the intention
of the Parties that, to the greatest extent possible, unless provisions are
mutually exclusive and effect cannot be given to both or all such provisions,
(i) the provisions of in this Agreement shall be construed to be cumulative;
(ii) each provision of this Agreement shall be given full separate and
independent effect; and (iii) no provision shall be limited by any other
provision unless such limitation is expressly set forth.
(e) All
references to "dollars" or "$" shall mean references to U.S.
Dollars.
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ARTICLE 9
MISCELLANEOUS
9.1 Press
Releases and Announcements.
No Party
shall issue any press release or public announcement relating to the subject
matter of this Agreement without the prior written approval of the other
Parties; provided, however, that Parent may make any public disclosure it
believes in good faith is required by applicable law, regulation or stock market
rule (in which case Parent shall use reasonable efforts to advise the Company
and provide it with a copy of the proposed disclosure prior to making the
disclosure).
9.2 No Third Party
Beneficiaries.
This
Agreement shall not confer any rights or remedies upon any Person other than the
Parties and their respective successors and permitted assigns; provided,
however, that (a) the provisions in Article 1 concerning payment of the Purchase
Price and (b) the provisions of Section 4.9 concerning indemnification and
insurance are intended for the benefit of the individuals specified
therein.
9.3 Entire
Agreement.
This
Agreement (including the documents referred to herein) constitutes the entire
agreement among the Parties and supersedes any prior understandings, agreements
or representations by or among the Parties, written or oral, with respect to the
subject matter hereof; provided that the Confidential Disclosure Agreement
between Parent and the Company shall remain in effect in accordance with its
terms. Notwithstanding the foregoing, this Agreement and any provision,
Schedule, Exhibit, document or other agreement referenced herein may be
disclosed by Parent as required by applicable securities laws.
9.4 Succession
and Assignment.
This
Agreement shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign any of its rights or delegate any of its performance obligations
hereunder without the prior written approval of the other Parties; provided that
Merger Sub may assign its rights, interests and obligations hereunder to an
Affiliate of Parent. Any purported assignment of rights or delegation of
performance obligations in violation of this Section 9.4 is void.
9.5 Counterparts
and Facsimile Signature.
This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument. This Agreement may be executed by facsimile or PDF
signature.
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9.6 Headings.
The
section headings contained in this Agreement are inserted for convenience only
and shall not affect in any way the meaning or interpretation of this
Agreement.
9.7 Notices.
All
notices, requests, demands, claims, and other communications hereunder shall be
in writing. Any notice, request, demand, claim or other communication hereunder
shall be deemed duly delivered four business days after it is sent by registered
or certified mail, return receipt requested, postage prepaid, or one business
day after it is sent for next business day delivery via a reputable nationwide
overnight courier service, in each case to the intended recipient as set forth
below:
If to the Company prior to Closing:
|
Brix
Networks, Inc
▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
President
|
Copy
to:
|
▇▇▇▇▇▇▇
Procter LLP
Exchange
Place
Boston,
MA 02109
Attn:
▇▇▇▇ ▇▇▇
|
If to Parent, Merger Sub or Surviving Corporation:
|
▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇
(▇▇▇▇▇▇) ▇▇▇ ▇▇▇
▇▇▇▇▇▇
Attn:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
|
Copy
to:
|
▇▇▇▇▇▇
Hall & ▇▇▇▇▇▇▇ LLP
▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇ ▇▇▇▇▇▇▇
|
Any Party
may give any notice, request, demand, claim or other communication hereunder
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the party for whom it is
intended. Any Party may change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered by giving the
other Parties notice in the manner herein set forth.
9.8 Governing
Law.
All
matters arising out of or relating to this Agreement and the transactions
contemplated hereby (including without limitation its interpretation,
construction, performance and enforcement) shall be governed by and construed in
accordance with the internal laws of The Commonwealth of Massachusetts without
giving effect to any choice or conflict of law provision or rule (whether of The
Commonwealth of Massachusetts or any other jurisdiction) that would cause the
application of laws of any jurisdictions other than those of The Commonwealth of
Massachusetts.
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9.9 Amendments
and Waivers.
The
Parties may mutually amend any provision of this Agreement at any time prior to
the Closing; provided, however, that any amendment effected subsequent to the
Requisite Stockholder Approval shall be subject to any restrictions contained in
the Delaware General Corporation Law. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by all
of the Parties. No waiver of any right or remedy hereunder shall be valid unless
the same shall be in writing and signed by the Party giving such waiver. No
waiver by any Party with respect to any default, misrepresentation or breach of
warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrences. Without limiting the generality of the foregoing,
no amendment, supplement or update after the date of this Agreement shall be
made to the Company Disclosure Schedule without the express written consent of
Parent, or to the Parent Company Disclosure Schedule without the express written
consent of the Company, and no amendment, supplement or update made
or delivered (or purporting to be made or delivered) after the date of this
Agreement without such consent shall have any effect on any of the rights or
obligations of the Company or Parent, respectively.
9.10 Severability.
Any term
or provision of this Agreement that is invalid or unenforceable in any situation
in any jurisdiction shall not affect the validity or enforceability of the
remaining terms and provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction declares that any
term or provision hereof is invalid or unenforceable, the Parties agree that the
court making the determination of invalidity or unenforceability shall have the
power to limit the term or provision, to delete specific words or phrases, or to
replace any invalid or unenforceable term or provision with a term or provision
that is valid and enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified.
9.11 Submission
to Jurisdiction.
Each
Party (a) submits to the non-exclusive jurisdiction of any state or federal
court sitting in Massachusetts in any action or proceeding arising out of or
relating to this Agreement (including any action or proceeding for the
enforcement of any arbitral award made in connection with any arbitration of a
Dispute hereunder), (b) agrees that all claims in respect of such action or
proceeding may be heard and determined in any such court, (c) waives any claim
of inconvenient forum or other challenge to venue in such court, and (d) waives
any right it may have to a trial by jury with respect to any action or
proceeding arising out of or relating to this Agreement; provided, in each case
that, solely with respect to any arbitration of a Dispute, the Arbitrator shall
resolve all threshold issues relating to the validity and applicability of the
arbitration provisions of this Agreement, contract validity, applicability of
statutes of limitations and issue preclusion, and such threshold issues shall
not be heard or determined by such court. Each Party agrees to accept service of
any summons, complaint or other initial pleading made in the manner provided for
the giving of notices in Section 9.7, provided that nothing in this Article 9
shall affect the right of any Party to serve such summons, complaint or other
initial pleading in any other manner permitted by law.
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ARTICLE
10
GUARANTY
EXFO
hereby unconditionally guarantees the performance of all of Parent's obligations
under this Agreement and, from and after the Closing, the Surviving
Corporation’s obligations to pay the Earn-Out Amount under Section 1.11 of this
Agreement.
ARTICLE
11
VALIDITY
In the
event the Requisite Stockholder Approval is not obtained by 3:45 PM EDT on
April 2, 2008 (i.e., following the execution of this Agreement), this Agreement
shall expire, be null and void ab
initio and shall not be enforceable in any way and no Party shall have
any liability or obligation to any other Party hereunder.
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IN
WITNESS WHEREOF, the Parties have executed this Agreement as of
the
date first above written.
|
GEXFO
DISTRIBUTION INTERNATIONALE INC.
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
Director
|
||
|
EXFO
SERVICE ASSURANCE INC.
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
Director
|
||
|
BRIX
NETWORKS, INC.
|
||||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | |||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
||||
|
Title:
|
President
and CEO
|
|||
|
▇▇▇▇▇▇▇
RIVER VENTURES, LLC
|
|||
|
By:
|
|||
|
Title:
|
|||
|
For
purposes of Article 10 only:
EXFO
ELECTRO-OPTICAL ENGINEERING INC.
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | ||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
Vice
President of Finance and
Chief Financial Officer
|
||
IN
WITNESS WHEREOF, the Parties have executed this Agreement as of
the
date first above written.
|
GEXFO
DISTRIBUTION INTERNATIONALE INC.
|
|||
|
By:
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
Director
|
||
|
EXFO
SERVICE ASSURANCE INC.
|
|||
|
By:
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
Director
|
||
|
BRIX
NETWORKS, INC.
|
||||
|
By:
|
||||
|
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
|
||||
|
Title:
|
President
and CEO
|
|||
|
▇▇▇▇▇▇▇
RIVER VENTURES, LLC
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇ | ||
|
Title:
|
|||
|
For
purposes of Article 10 only:
EXFO
ELECTRO-OPTICAL ENGINEERING INC.
|
|||
|
By:
|
|||
|
▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
Vice
President of Finance and
Chief Financial Officer
|
||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ | ||
|
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
|
|||
|
Title:
|
|||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
|
|||
|
By:
|
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ | 4/2/8 | |
|
Name:
▇▇▇▇▇ ▇▇▇▇▇▇
|
|||
|
Title:
|
|||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
CASTILE VENTURES, L.P.
NAME
OF MAJOR HOLDER:
By: Castile Partners,
LLC, its general partner
|
|||
|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇ | ||
|
Name:
▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|||
|
Title:
|
Castile
Ventures
Manager
|
||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER
PARTNERSHIPIX, A LIMITED PARTNERSHIP
BY ▇▇▇▇▇▇▇ RIVER IX
GP LIMITED PARTNERSHIP, GENERAL PARTNER
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
General Partner | ||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER
PARTNERSHIP IX-A, A LIMITED PARTNERSHIP
BY ▇▇▇▇▇▇▇ RIVER IX
GP LIMITED PARTNERSHIP, GENERAL PARTNER
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
General Partner | ||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER IX-B,
LLC
BY ▇▇▇▇▇▇▇ RIVER
FRIENDS, Inc., Manager
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
Officer | ||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER IX-C,
LLC
BY ▇▇▇▇▇▇▇ RIVER
FRIENDS, Inc., Manager
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
Officer | ||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER
PARTNERSHIPX, A LIMITED PARTNERSHIP
BY ▇▇▇▇▇▇▇ RIVER X
GP, LLC
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
Managing Member | ||
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER
PARTNERSHIP X-A, A LIMITED PARTNERSHIP
BY ▇▇▇▇▇▇▇ RIVER X
GP, LLC
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
Managing Member | ||
[Signature
Page to Merger Agreement]
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER
FRIENDS, X-B LLC
BY ▇▇▇▇▇▇▇ RIVER
FRIENDS, INC.
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
Officer | ||
[Signature
Page to Merger Agreement]
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
NAME
OF MAJOR HOLDER:
▇▇▇▇▇▇▇ RIVER
FRIENDS, X-C LLC
BY ▇▇▇▇▇▇▇ RIVER
FRIENDS, INC., Manager
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇▇ J, Zak | ||
|
Name:
▇▇▇▇▇▇▇ ▇. ▇▇▇
|
|||
|
Title:
|
Officer | ||
[Signature
Page to Merger Agreement]
|
The
undersigned Major Holder hereby executes this counterpart signature page
to the
Agreement
for the purposes Section 6.5 only.
FIDELITY VENTURES
II, LIMITED PARTNERSHIP
NAME
OF MAJOR HOLDER:
By: Fidelity
Ventures Advisors II LLC, Its General Partner
By: Fidelity Investors Management Corp., Its
Managing
Member
|
|||
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ | ||
|
Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|||
|
Title:
|
Partner and Chief Financial Officer | ||
[Signature
Page to Merger Agreement]