EXECUTION VERSION
EXHIBIT 10.2
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AGREEMENT AND PLAN OF MERGER AND
SHARE EXCHANGE
AMONG
▇▇▇▇▇▇ HOLDINGS, INC.,
PARALLEL ACQUISITION, INC.,
▇▇▇▇▇▇ TECHNOLOGIES, INC.,
▇▇▇▇▇▇▇ CAPITAL II, L.P.
AND
STRATEGIC ENTREPRENEUR FUND II, L.P.
DATED AS OF MAY 7, 2004
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TABLE OF CONTENTS
Section Page
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ARTICLE I THE SHARE EXCHANGE AND THE MERGER......................................................... 2
SECTION 1.01 The Share Exchange............................................... 2
SECTION 1.02. The Merger....................................................... 4
SECTION 1.03. Effective Time; Closing.......................................... 4
SECTION 1.04. Effect of the Merger............................................. 4
SECTION 1.05. Certificate of Incorporation; By-laws............................ 4
SECTION 1.06. Directors and Officers........................................... 4
SECTION 1.07. Other Effects.................................................... 5
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES....................................... 5
SECTION 2.01. Conversion Of Securities......................................... 5
SECTION 2.02 Equity Election.................................................. 6
SECTION 2.03. Surrender of Shares; Transfer Books.............................. 8
SECTION 2.04. Effect of the Merger on Stock Options and Warrants............... 10
SECTION 2.05. Escrow........................................................... 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................... 13
SECTION 3.01. Organization and Qualification; Subsidiaries..................... 13
SECTION 3.02. Certificate of Incorporation and By-laws......................... 13
SECTION 3.03. Capitalization................................................... 14
SECTION 3.04. Authority Relative to This Agreement............................. 15
SECTION 3.05. No Conflict; Required Filings and Consents....................... 15
SECTION 3.06. Permits.......................................................... 16
SECTION 3.07. SEC Filings; Financial Statements................................ 17
SECTION 3.08. Disclosure Documents............................................. 18
SECTION 3.09. Absence of Certain Changes or Events............................. 19
SECTION 3.10. Absence of Litigation............................................ 20
SECTION 3.11. Employee Benefit Plans........................................... 20
SECTION 3.12. Labor Matters.................................................... 22
SECTION 3.13. Personal Property, Real Property and Leases...................... 22
SECTION 3.14. Intellectual Property............................................ 22
SECTION 3.15. Taxes. (a)....................................................... 23
SECTION 3.16. Environmental Matters............................................ 25
SECTION 3.17. Material Contracts and Government Contracts...................... 26
SECTION 3.18. Opinion of Financial Advisor..................................... 27
SECTION 3.19. Board Approval; Certain Anti-Takeover Provisions Not Applicable.. 27
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SECTION 3.20. Votes Required....................................................... 28
SECTION 3.21. Brokers.............................................................. 28
SECTION 3.22. Customers............................................................ 28
SECTION 3.23. Certain Payments..................................................... 28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB................................. 29
SECTION 4.01 Organization and Qualification; Subsidiaries......................... 29
SECTION 4.02. Certificate of Incorporation and By-laws; Capitalization............. 30
SECTION 4.03. Authority Relative to this Agreement................................. 30
SECTION 4.04. No Conflict; Required Filings and Consents........................... 31
SECTION 4.05. Absence of Litigation................................................ 31
SECTION 4.06 No Operations or Liabilities......................................... 31
SECTION 4.07 Information Supplied................................................. 32
SECTION 4.08 Brokers.............................................................. 32
ARTICLE V CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME................................................ 32
SECTION 5.01. Conduct of Business by the Company Pending the Effective Time........ 32
ARTICLE VI ADDITIONAL AGREEMENTS........................................................................ 35
SECTION 6.01. Company Stockholders' Meeting........................................ 35
SECTION 6.02. SEC Transaction Filings.............................................. 35
SECTION 6.03. Appropriate Action; Consents; Filings................................ 36
SECTION 6.04. Access to Information; Confidentiality............................... 38
SECTION 6.05. No Solicitation of Competing Transactions............................ 38
SECTION 6.06. Directors' and Officers' Indemnification and Insurance............... 40
SECTION 6.07. Notification of Certain Matters; Updating of Disclosure Schedules.... 40
SECTION 6.08. Public Announcements................................................. 41
SECTION 6.09. State Takeover Laws.................................................. 41
SECTION 6.10. Additional Company SEC Reports; Financial Statements................. 41
ARTICLE VII CONDITIONS.................................................................................. 42
SECTION 7.01. Conditions to the Obligations of Each Party to the Share Exchange.... 42
SECTION 7.02. Conditions to the Obligations of Each Party to the Merger............ 42
SECTION 7.03. Conditions to the Obligations of the Company Concerning the Merger... 43
SECTION 7.04. Conditions to the Obligations of Parent and Acquisition Sub
Concerning the Merger................................................. 44
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ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER....................................................... 45
SECTION 8.01. Termination......................................................... 45
SECTION 8.02. Effect of Termination............................................... 46
SECTION 8.03. Fees and Expenses................................................... 46
SECTION 8.04. Amendment........................................................... 47
SECTION 8.05. Waiver.............................................................. 47
ARTICLE IX INDEMNIFICATION .......................................................................... 47
SECTION 9.01. Indemnification of Parent by ▇▇▇▇▇▇▇, SEF and the Series F Holders.. 47
SECTION 9.02. Indemnification of ▇▇▇▇▇▇▇, SEF and the Series F Holders by Parent.. 50
SECTION 9.03. Procedures.......................................................... 50
ARTICLE X GENERAL PROVISIONS......................................................................... 53
SECTION 10.01. Survival of Representations and Warranties.......................... 53
SECTION 10.02. Notices............................................................. 53
SECTION 10.03. Certain Definitions; Interpretation................................. 54
SECTION 10.04. Severability........................................................ 63
SECTION 10.05. Entire Agreement; Assignment........................................ 63
SECTION 10.06. Parties in Interest................................................. 63
SECTION 10.07. Specific Performance................................................ 64
SECTION 10.08. Governing Law....................................................... 64
SECTION 10.09. Consent to Jurisdiction............................................. 64
SECTION 10.10. Headings............................................................ 64
SECTION 10.11. Counterparts........................................................ 64
SECTION 10.12 Waiver of Jury Trial................................................ 65
Exhibits:
Exhibit A Exchanged Shares
Exhibit B Form of Escrow Agreement
Exhibit C Interim Balance Sheet
Exhibit D Stockholders Agreement
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COMPANY DISCLOSURE SCHEDULE
Schedule No. Summary Description
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2.04 Company Options
3.01 Subsidiaries
3.03 Capitalization
3.05(a) No Conflict
3.05(b) Required Filings and Consents
3.06-1 Company Authorizations
3.06-2 Company Permits
3.07(g) Amendments/Modifications to Documents filed with SEC
3.09 Changes or Events Since December 31, 2003
3.10 Litigation
3.11 Employee Benefit Plans
3.13 Real Property and Leases
3.14-b Intellectual Property
3.14-c Intellectual Property
3.14-d Intellectual Property
3.14-e Intellectual Property
3.14-f Intellectual Property
3.14-g Intellectual Property
3.15(a) Taxes
3.15(b) Taxes
3.15(f) Taxes
3.15(g) Taxes
3.16 Environmental Matters
3.17(a) Material Contracts
3.17(b) Unfurnished Material Contracts
3.21 Brokers
3.22 Customers
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PARENT DISCLOSURE SCHEDULES
Schedule No. Summary Description
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4.04(a) No Conflict
4.04(b) Required Filings and Consents
OTHER DISCLOSURE SCHEDULES
Schedule No. Summary Description
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5.01 Conduct of Business
10.03 Specified Litigation
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AGREEMENT AND PLAN OF MERGER AND SHARE EXCHANGE
This is an AGREEMENT AND PLAN OF MERGER AND SHARE EXCHANGE, dated as of
May 7, 2004 (this "Agreement"), made by and among ▇▇▇▇▇▇ Holdings, Inc., a
Delaware corporation ("Parent"), Parallel Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of Parent ("Acquisition Sub"), ▇▇▇▇▇▇
Technologies, Inc., a Delaware corporation (the "Company"), ▇▇▇▇▇▇▇ Capital II,
L.P., a Delaware limited partnership ("▇▇▇▇▇▇▇") and Strategic Entrepreneur Fund
II, L.P., a Delaware limited partnership ("SEF"). Certain terms used in this
Agreement are defined in Section 10.03 below.
Parent is a newly formed Delaware corporation that has been formed by
the Company for the purpose of entering into and consummating the transactions
contemplated by this Agreement. Concurrent with the execution and delivery of
this Agreement, Quadrangle Capital Partners LP, a Delaware limited partnership
("QCP"), Quadrangle Select Partners LP, a Delaware limited partnership ("QSP"),
Quadrangle Capital Partners-A LP, a Delaware limited partnership ("QCP-A" and
collectively with QCP and QSP, "Quadrangle"), ▇▇▇▇▇▇▇ and SEF are entering into
an Investment Agreement (the "Investment Agreement"), pursuant to and subject to
the terms and conditions of which they have agreed to invest an aggregate of $30
million in cash in Parent in consideration of the issuance by Parent of shares
of Parent Series A PIK Preferred. Also concurrent with the execution and
delivery of this Agreement, Parent has agreed to purchase all outstanding shares
of the outstanding capital stock of Protek Telecommunications Solutions Limited,
a company organized in the United Kingdom ("Protek") pursuant to and subject to
the terms and conditions set forth in a Stock Purchase Agreement of even date
herewith (the "Protek Agreement"). Concurrent therewith, the Company is entering
into the Bridge Loan Facility with an operating subsidiary of Protek, and
▇▇▇▇▇▇▇ is providing a bridge loan facility to the Company.
▇▇▇▇▇▇▇ and SEF desire to exchange their existing holdings of the
capital stock of the Company for a combination of shares of Parent PIK Preferred
and Parent Common Stock, on the terms and subject to the conditions set forth
herein (the "Share Exchange"). Upon consummation of the Share Exchange, the
parties further desire to cause Acquisition Sub to merge with and into the
Company, on the terms and subject to the conditions set forth herein (the
"Merger"). These transactions are expected to have the effect of permitting the
Company to cease to be a reporting company under the Securities Exchange Act of
1934, as amended (the "Exchange Act").
The respective boards of directors (or equivalent governing bodies) of
Parent, Acquisition Sub, the Company, ▇▇▇▇▇▇▇ and SEF have approved and declared
advisable this Agreement, the Share Exchange and the Merger, upon the terms and
subject to the conditions hereof, whereby each Share not owned, directly or
indirectly, by the Company, Parent or any of their respective Subsidiaries,
excluding Shares held by persons who comply with all provisions of Delaware law
concerning the right of holders of Shares to dissent from the Merger and require
appraisal of their Shares, will be converted into the right to receive the
respective consideration provided for herein pursuant to the Merger. In
addition,
certain stockholders of the Company have entered into Voting Agreements
(collectively, the "Voting Agreements"), with Quadrangle, providing, among other
things, that the stockholders party thereto shall vote all shares of the capital
stock of the Company held by them in favor of the Merger and the other
transactions contemplated by this Agreement.
Valuation Research Corporation, financial advisor to the Company, has
on the date hereof issued an opinion addressed to the Special Committee of the
Board of Directors of the Company for the benefit of the Board of Directors of
the Company and its stockholders as to the fairness, from a financial point of
view, of the consideration to be issued to the stockholders of the Company in
connection with the Merger.
Parent, Acquisition Sub and the Company desire to make certain
representations, warranties and agreements in connection with the Share
Exchange, the Merger and the other transactions contemplated by this Agreement
and also to prescribe various conditions to the Share Exchange, the Merger and
the other transactions contemplated by this Agreement.
In consideration of the foregoing and the mutual covenants and
agreements herein contained, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound hereby, Parent, Acquisition Sub,
the Company, ▇▇▇▇▇▇▇ and SEF hereby agree as follows:
ARTICLE I
THE SHARE EXCHANGE AND THE MERGER
SECTION 1.01 The Share Exchange.
(a) Provided that this Agreement shall not have been terminated in
accordance with Article VIII and the conditions set forth in Section 7.01 shall
have been satisfied (unless, to the extent permitted hereby, waived), on the
Closing Date, immediately prior to the Merger Closing, ▇▇▇▇▇▇▇, SEF and Parent
shall consummate the Share Exchange (the "Share Exchange Closing") by making the
respective deliveries set forth in paragraphs (b) and (c) following.
Notwithstanding consummation of the Share Exchange Closing, if for any reason
the Merger shall not occur or be deemed not to have occurred, the Share Exchange
Closing shall be deemed void and of no effect, and the parties shall use their
respective best efforts to reverse the deliveries set forth in paragraphs (b)
and (c) below.
(b) At the Share Exchange Closing, each of ▇▇▇▇▇▇▇ and SEF shall
deliver to Parent all shares of the Series F Convertible Preferred Stock, par
value $0.01 per share, of the Company (the "▇▇▇▇▇▇ Series F Preferred Stock")
held by it (all such shares of ▇▇▇▇▇▇ Series F Preferred Stock held by ▇▇▇▇▇▇▇
and SEF together, the "Exchanged Shares"), together with all certificates
representing the same, duly endorsed in blank or with duly executed stock powers
attached thereto, in proper form for transfer, free and clear of all Liens
together with payment of any Taxes imposed on the transfer of such Exchanged
Shares, and shall also deliver to Parent duly executed copies of the
Stockholders Agreement.
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(c) At the Share Exchange Closing, Parent shall issue to ▇▇▇▇▇▇▇
and SEF in respect of each Exchanged Share,
(x) a number of shares of Parent PIK Preferred equal
to the result obtained by dividing (A) $5,000,000 by (B) the
product of the Parent PIK Value and the aggregate number of
Exchanged Shares, plus
(y) a number of shares of Parent Common Stock equal
to the result obtained by dividing (A) the excess of (X) the
Series F Value times the aggregate number of Exchanged Shares
over (Y) $5,000,000, by (B) the product of the Parent Common
Stock Value and the aggregate number of Exchanged Shares;
in each case duly certificated in the names of ▇▇▇▇▇▇▇ and SEF as the respective
record holders thereof (collectively, the "Share Exchange Consideration");
provided, however, that certificates in respect of the Escrow Percentage of the
shares of Parent PIK Preferred included in the Share Exchange Consideration and
the Escrow Percentage of the shares of Parent Common Stock included in the Share
Exchange Consideration shall be delivered to the Escrow Agent as contemplated by
Section 2.05. The aggregate number of shares of Parent PIK Preferred and Parent
Common Stock issued to ▇▇▇▇▇▇▇ and SEF respectively in the Share Exchange will
be rounded down to the nearest whole share, without payment for any fractional
shares eliminated by such rounding. For purposes of this Agreement, "Parent PIK
Value" shall mean $100, and "Parent Common Stock Value" shall mean $25. The
"Series F Value" shall mean $34.28 per share of ▇▇▇▇▇▇ Series F Preferred Stock.
(d) Each of ▇▇▇▇▇▇▇ and SEF hereby represents, warrants and
covenants, severally and not jointly, both as of the date hereof and as of the
Share Exchange Closing, that (i) it holds record and beneficial title to the
number of shares of Common Stock, par value $0.01 per share, of the Company (the
"▇▇▇▇▇▇ Common Stock") and ▇▇▇▇▇▇ Series F Preferred Stock set forth next to its
name on Exhibit A, free and clear of all Liens other than Liens created by this
Agreement, (ii) upon delivery of the Share Exchange Consideration, Parent will
have good, legal and marketable title to the representing entity's Exchanged
Shares, free and clear of all Liens, (iii) except for this Agreement and such
representing entity's Voting Agreement, none of such entity's Exchanged Shares
is subject to any voting trust, proxy or other contract, agreement or
arrangement, including any such contract, agreement or arrangement relating to
the voting, dividend rights, liquidation rights, redemption rights or
disposition of any such Exchanged Shares, (iv) there are no subscriptions,
options, warrants, calls, preemptive rights or rights of conversion or other
rights, agreements, arrangements or commitments relating to the Exchanged Shares
obligating such representing entity to sell or transfer any Exchanged Shares and
(v) it shall not at any time prior to Closing (or earlier termination of this
Agreement in accordance with the terms hereof) enter into or effect any
contract, agreement, arrangement or transaction that would reasonably be
expected to have the effect of causing any of the foregoing representations and
warranties to be incorrect in any material respect.
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SECTION 1.02. The Merger. Upon the terms and subject to the conditions
set forth herein, and in accordance with the Delaware General Corporation Law
(the "DGCL"), at the Effective Time, Acquisition Sub shall be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
Acquisition Sub shall cease, and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation").
SECTION 1.03. Effective Time; Closing. As promptly as practicable
after, but not later than the second business day following, the satisfaction
or, if permissible, waiver of the conditions set forth in Article VII, the
parties hereto shall cause the Merger to be consummated by filing a certificate
of merger (the "Certificate of Merger") with the Secretary of State of the State
of Delaware, in such form as is required by, and executed in accordance with the
relevant provisions of, the DGCL. The term "Effective Time" means the date and
time of the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware (or such later time as may be agreed by each of the
parties hereto and specified in the Certificate of Merger). Immediately prior to
the filing of the Certificate of Merger, the Share Exchange Closing and
consummation of the other transactions contemplated by this Agreement (the
"Merger Closing" and, together with the Share Exchange Closing, the "Closing")
at the offices of ▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ at 11 a.m., local time, on or before September 30, 2004, or
at such other time, date and/or place as the parties may mutually agree in
writing (the date of such Closing, the "Closing Date").
SECTION 1.04. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Acquisition Sub shall vest in the Surviving Corporation, and all
debts, liabilities, and duties of each of the Company and Acquisition Sub shall
become the debts, liabilities, and duties of the Surviving Corporation.
SECTION 1.05. Certificate of Incorporation; By-laws.
(a) At the Effective Time, the Certificate of Incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(b) At the Effective Time, the By-laws of the Company, as in
effect immediately prior to the Effective Time, shall be the By-laws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such By-laws.
SECTION 1.06. Directors and Officers. The directors of Acquisition Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the
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Effective Time shall be the initial officers of the Surviving Corporation, in
each case until their respective successors are duly elected or appointed and
qualified.
SECTION 1.07. Other Effects. From and after the Effective Time, the
Surviving Corporation shall possess all the assets, rights, privileges, powers
and franchises and be subject to all of the liabilities, restrictions,
disabilities and duties of the Company, all as provided under Delaware law.
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. Conversion Of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Acquisition Sub, the
Company or the holders of any of the following securities:
(a) Each Share of ▇▇▇▇▇▇ Series F Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than any Shares to be
canceled pursuant to Section 2.01(d) (including Exchanged Shares) and other than
Dissenting Shares) shall convert into the right to receive (subject to the
escrow provided for in Section 2.05):
(i) cash per share equal to the result obtained by dividing
(x) the result obtained by subtracting from $4,600,000 the sum of all amounts to
be paid under paragraph (c) of this Section (assuming for purposes of such
calculation that there are no Dissenting Shares), by (y) the aggregate number of
shares of ▇▇▇▇▇▇ Series F Preferred Stock held by record holders (other than
Parent) that have not duly and timely delivered an Equity Election Notice; plus
(ii) a number of fully paid and nonassessable shares of Parent
Common Stock equal to the result obtained by dividing (x) the excess of the
Series F Value over the per share amount resulting from the calculation in
clause (i) immediately preceding, by (y) the Parent Common Stock Value;
provided, however, that in the event that an Equity Election has been validly
made and not withdrawn by the record holder of a share of ▇▇▇▇▇▇ Series F
Preferred Stock in accordance with Section 2.02, such share shall convert
instead into the right to receive that number of fully paid and nonassessable
shares of Parent Common Stock equal to the result obtained by dividing the
Series F Value by the Parent Common Stock Value, subject to the escrow provided
for in Section 2.05.
(b) [Reserved].
(c) Each share of ▇▇▇▇▇▇ Common Stock issued and outstanding
immediately prior to the Effective Time (other than any Shares to be canceled
pursuant to Section 2.01(d) and other than Dissenting Shares) shall convert into
the right to receive $0.0384 in cash
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(subject, in the case of shares of ▇▇▇▇▇▇ Common Stock held by ▇▇▇▇▇▇▇ and SEF,
to the escrow described in Section 2.05 below).
(d) Each share of the capital stock of the Company ("Share") held
in the treasury of the Company and each Share owned by Parent or any direct or
indirect wholly owned subsidiary of Parent or of the Company immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof, and no payment shall be made with respect thereto.
(e) Each share of common stock of Acquisition Sub issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock of the
Surviving Corporation.
(f) As of the Effective Time, all Shares outstanding immediately
prior to the Effective Time (other than Shares to be cancelled pursuant to
Section 2.01(d)) shall no longer be outstanding and shall automatically be
canceled and shall cease to exist, and each holder of a certificate or
certificates which prior thereto represented Shares shall cease to have any
rights with respect thereto, except the right to receive, for each Share
represented by such certificate, the respective consideration provided for in
Section 2.01(a), (b) or (c) ("Merger Consideration"), as the case may be,
without interest, or, if such holder is a Dissenting Stockholder, the rights, if
any, afforded to such holder under Section 262 of the DGCL.
(g) Notwithstanding anything in this Agreement to the contrary,
any Shares held by a person (a "Dissenting Stockholder") who shall have demanded
and perfected a right to receive payment of the fair value of such Shares
pursuant to Section 262 of the DGCL ("Dissenting Shares") shall not be converted
as described in Section 2.01(a), (b) or (c), as the case may be, unless such
holder fails to comply with the provisions of Section 262 of the DGCL or
withdraws or otherwise loses its right to receive such fair value payment. At
the Effective Time, by virtue of the Merger and without any action on the part
of the Dissenting Stockholder, all Dissenting Shares shall be cancelled and
cease to exist and shall represent only the right to receive only those rights
provided under the DGCL. If, after the Effective Time, such Dissenting
Stockholder fails to comply with the provisions of Section 262 of the DGCL or
withdraws or loses his or her right to receive such fair value payment, such
Dissenting Stockholder's Shares shall no longer be considered Dissenting Shares
for the purposes of this Agreement and shall thereupon be deemed to have been
converted into and to have become exchangeable for, at the Effective Time, the
right to receive for each such Share the respective Merger Consideration
provided for in Section 2.01(a), (b) or (c), as the case may be, without
interest. The Company shall give Parent (i) prompt notice of any demands to
receive payment of fair value of shares received by the Company and (ii) the
opportunity to participate in and direct all negotiations and proceedings with
respect to such demands. The Company shall not, without the prior written
consent of Parent, make any payment with respect to, or settle, offer to settle
or otherwise negotiate, any such demands.
SECTION 2.02 Equity Election.
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(a) Each record holder of ▇▇▇▇▇▇ Series F Preferred Stock as of
the record date for the Company Stockholders Meeting shall be entitled to make a
joint election (a "Equity Election") to receive (subject to the terms and
conditions of this Agreement) shares of Parent Common Stock in accordance with
the proviso to Section 2.01(a) (the "Equity Election Consideration"). Such
Equity Election may be made on or prior to the Election Date to receive the
Equity Election Consideration, on the basis hereinafter set forth.
(b) Prior to the mailing of the Company Proxy Statement, Parent
and Acquisition Sub shall appoint SunTrust Bank or another national bank or
trust company mutually acceptable to Parent and the Company to act as exchange
agent (the "Exchange Agent") for the payment of the Merger Consideration, and
Parent shall enter into an exchange agent agreement with the Exchange Agent in
form and substance reasonably acceptable to the Company.
(c) The Company shall, subject to any required clearance by the
Securities and Exchange Commission (the "SEC"), prepare and mail a Equity
Election Notice, which form shall be subject to the reasonable approval of
Acquisition Sub (the "Equity Election Notice"), with the Company Proxy Statement
to the record holders of Shares as of the record date for the Company
Stockholders' Meeting, which Equity Election Notice shall be used by each holder
of ▇▇▇▇▇▇ Series F Preferred Stock that wishes to elect to receive the Equity
Election Consideration upon conversion of such holder's shares of ▇▇▇▇▇▇ Series
F Preferred Stock in the Merger, subject to the provisions of this Article II.
The Company will use its best efforts to make the Equity Election Notice and the
Proxy Statement available to all persons who become holders of ▇▇▇▇▇▇ Series F
Preferred Stock during the period between such record date and the Election Date
referred to below. Any such holder's election to receive the Equity Election
Consideration shall have been properly made only if the Exchange Agent shall
have received at its designated office, by 5:00 p.m., New York City time on the
business day (the "Election Date") preceding the date of the Company
Stockholders' Meeting, a Equity Election Notice properly completed and signed by
such holder. Without limitation of the foregoing, in order to be deemed properly
completed and submitted by a holder such holder must duly execute any joinder to
the Stockholders Agreement included therein.
(d) Any Equity Election Notice may be revoked by the record holder
submitting it to the Exchange Agent only by written notice of such holder
received by the Exchange Agent prior to 5:00 p.m., New York City time, on the
Election Date.
(e) The determination of the Exchange Agent shall be binding
whether or not any Equity Election has been properly made or revoked pursuant to
this Section 2.02 and when elections and revocations were received by it. If the
Exchange Agent determines that any Equity Election was not properly made, the
respective Shares shall be converted in the Merger into the right to receive
cash and shares of Parent Common Stock in accordance with Section 2.01(a). The
Exchange Agent shall also make all computations contemplated by Section 2.01(a),
and any such computation shall be conclusive and binding on the holders of
Shares. The Exchange Agent may, with the mutual agreement of the Company,
Acquisition Sub and Parent, make such rules as are consistent with this Section
2.02 for the
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implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
SECTION 2.03. Surrender of Shares; Transfer Books.
(a) Exchange Agent. At or prior to the Effective Time, Parent
shall deposit with the Exchange Agent, for the benefit of the holders of Shares,
the Merger Consideration for exchange in accordance with this Article II
(subject to the escrow described in Section 2.05 below). The cash portion of the
Merger Consideration shall be invested by the Exchange Agent as directed by
Parent. Any net profit resulting from, or interest or income produced by, such
investments will be payable to Parent.
(b) Exchange Procedures. Promptly and as soon as practicable after
the Effective Time, each holder of an outstanding certificate or certificates
which prior thereto represented Shares shall, upon surrender to the Exchange
Agent of such certificate or certificates and acceptance thereof by the Exchange
Agent, be entitled to certificates representing the number of full shares of
Parent Common Stock, if any, to be received by the holder thereof pursuant to
this Agreement and the amount of cash, if any, which the holder of such shares
has the right to receive pursuant to this Agreement and the cash, if any,
payable in lieu of any fractional shares, subject to the escrow provided for in
Section 2.05. The Exchange Agent shall accept such certificates upon compliance
with such reasonable terms and conditions as the Exchange Agent may impose to
effect an orderly exchange thereof in accordance with normal exchange practices.
After the Effective Time, there shall be no further transfer on the records of
the Company or its transfer agent of certificates representing Shares which have
been converted pursuant to this Agreement into the right to receive the Merger
Consideration, and if such certificates are presented to the Company for
transfer, they shall be canceled against delivery of cash and/or certificates
for shares of Parent Common Stock, as the case may be. If any certificate for
such Parent Common Stock is to be issued in, or if cash is to be remitted to, a
name other than that in which the certificate for Shares surrendered for
exchange is registered, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed, with signature
guaranteed, or otherwise in proper form for transfer and that the person
requesting such exchange shall pay to Parent or its transfer agent any transfer
or other taxes required by reason of the issuance of certificates for such
Shares in a name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of Parent or its transfer agent
that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.03(b), each certificate for Shares which have
been converted into the right to receive the Merger Consideration shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration as contemplated by and
determined in accordance with Sections 2.01 and 2.02. No interest will be paid
or will accrue on any cash payable as Merger Consideration or in lieu of any
fractional shares of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions with respect to shares of Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered certificate for Shares with
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respect to the shares of Parent Common Stock, if any, to be received in respect
thereof and no cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.03(e) until the surrender of such certificate
in accordance with this Article II. Subject to the effect of applicable laws,
following surrender of any such certificate, there shall be paid to the holder
of the certificate representing whole shares of Parent Common Stock issued in
connection therewith, without interest, (i) at the time of such surrender the
amount of any cash payable in lieu of a fractional share of Parent Common Stock
to which such holder is entitled pursuant to Section 2.03(e) and the
proportionate amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole shares of
Parent Common Stock, and (ii) at the appropriate payment date, the proportionate
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such whole shares of Parent Common Stock;
provided, however, that dividends or other distributions in respect of shares of
Parent Common Stock held by the Escrow Agent in accordance with Section 2.05
shall not be delivered to the record holder thereof, but shall instead be
delivered to the Escrow Agent to be held and applied in accordance with the
Escrow Agreement.
(d) No Further Ownership Rights in Shares. All Merger
Consideration paid or delivered upon the surrender for exchange of certificates
representing Shares in accordance with the terms of this Article II (including
any cash paid pursuant to Section 2.03(e)) shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to the Shares exchanged
therefor theretofore represented by such certificates.
(e) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued in connection with the
Merger, and such fractional share interests will not entitle the owner thereof
to vote or to any rights of a shareholder of Parent after the Merger. Each
record holder of Shares exchanged pursuant to the Merger who would otherwise
have been entitled to receive a fraction of a share of Parent Common Stock
(after taking into account all Shares delivered by such holder) shall receive,
in lieu thereof, a cash payment (without interest) in lieu of such fractional
share in an amount equal to the product of such fraction multiplied by the
Parent Common Stock Value.
(f) Termination of Exchange Fund. Any portion of the Merger
Consideration deposited with the Exchange Agent pursuant to this Section 2.03
(the "Exchange Fund") which remains undistributed to the holders of the
certificates formerly representing Shares on the date that is 180 days after the
Effective Time shall be promptly delivered to Parent, and any holders of Shares
prior to the Merger who have not theretofore complied with this Article II shall
thereafter look only to Parent and only as general creditors thereof for payment
of their claim for cash, if any, shares of Parent Common Stock, if any, any cash
in lieu of fractional shares of Parent Common Stock, and any dividends or
distributions with respect to shares of Parent Common Stock, as applicable, to
which such holders may be entitled.
(g) No Liability. None of Acquisition Sub, Parent, the Company nor
the Exchange Agent shall be liable to any person in respect of any shares of
Parent Common
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Stock (or dividends or distributions with respect thereto) or cash from the
Exchange Fund delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any certificates representing
Shares immediately prior to the Effective Time shall not have been surrendered
prior to the date that is the first anniversary of the Effective Time (or
immediately prior to such earlier date on which any cash, if any, any cash in
lieu of fractional shares of Parent Common Stock, any dividends or distributions
with respect to shares of Parent Common Stock in respect of such certificate
would otherwise escheat to or become the property of any Governmental Entity,
any such cash, dividends or distributions in respect of such certificate shall,
to the extent permitted by applicable law, become the property of Parent, free
and clear of all claims or interests of any person previously entitled thereto.
(h) Withholding Rights. Each of the Surviving Corporation and
Parent shall be entitled to deduct and withhold, and to direct the Exchange
Agent to so deduct and withhold, from the consideration otherwise payable
pursuant to this Agreement to any holder of Shares such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Internal Revenue Code of 1986, as amended (the "Code"), or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
the Surviving Corporation or Parent, as the case may be, such withheld amounts
shall be treated for all purposes of this Agreement as having been paid to the
holder of such Shares in respect of which such deduction and withholding was
made by the Surviving Corporation or Parent, as the case may be.
SECTION 2.04. Effect of the Merger on Stock Options and Warrants.
(a) As of the Effective Time, by virtue of the Merger and
corporate actions taken concurrent with the execution and delivery of this
Agreement and without any further action on the part of Acquisition Sub, the
Company or the holders thereof, each option to purchase capital stock of the
Company listed on Schedule 2.04 to the Company Disclosure Schedule (the "Company
Options"), whether or not exercisable, whether or not vested, and whether or not
performance-based, outstanding under the Company's stock plans listed on
Schedule 2.04 to the Company Disclosure Schedule (collectively, the "Company
Stock Option Plans"), shall, to the extent not exercised between the date hereof
and Closing, be terminated. The Company has, concurrent with the execution and
delivery of this Agreement, amended the terms of each grant under such Company
Stock Option Plan to provide that vesting and exercise of each such Company
Option shall accelerate effective as of the Closing Date, and that, unless
exercised by written notice of exercise delivered prior to the Closing Date (and
conditioned solely on the occurrence of Closing), such Company Option shall be
terminated immediately prior to the Effective Time without further action or the
Company or the holder thereof. Such amendments are effective to ensure that,
following the Effective Time, no current or former employee, director,
consultant or other person shall have any option to purchase Shares or any other
equity interests or any phantom stock options or stock appreciation rights in
the Company under any Company Stock Option Plan to require the Company to
purchase Shares for his or her benefit or shall have any right to acquire or
receive any securities of the Surviving Corporation or any consideration except
as contemplated by this Section 2.04(a).
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(b) As of the Effective Time, by virtue of the Merger and the consents
set forth in the Voting Agreements and without any action on the part of
Acquisition Sub, the Company or the holders thereof, all outstanding warrants of
the Company shall be terminated and cancelled.
SECTION 2.05. Escrow. (a) General. Subject to the terms and conditions
of an escrow agreement in substantially the form of Exhibit B (the "Escrow
Agreement"), (a) the following portions of each of the aggregate cash and shares
of Parent Common Stock deliverable to the Series F Holders under Section 2 and
(b) the cash deliverable to ▇▇▇▇▇▇▇ and SEF in respect of their shares of ▇▇▇▇▇▇
Common Stock shall not be delivered to such persons at Closing, but shall
instead be delivered to be held in escrow in accordance with the terms of the
Escrow Agreement:
(i) an aggregate of 12.5% (the "Escrow Percentage") shall be
delivered to the Escrow Agent to be held as a general escrow account securing
the indemnification obligations of the Series F Holders under Section 9.01(a)
(the "General Escrow");
(ii) if, but only if, any Specified Litigation is pending as of the
Effective Time, 6.49% shall be delivered to the Escrow Agent to be held as a
special escrow account securing the indemnification obligations of the Series F
Holders under Section 9.01(d) (the "Special Escrow"); and
(iii) all cash that would otherwise be deliverable to ▇▇▇▇▇▇▇ and
SEF in respect of their shares of ▇▇▇▇▇▇ Common Stock shall be delivered to the
Escrow Agent to be held as an escrow account securing the indemnification
obligations of ▇▇▇▇▇▇▇ and SEF under Sections 9.01(a) and 9.01(d) (the "▇▇▇▇▇▇▇
Escrow").
Certificates in respect of the shares so delivered into escrow shall be issued
in the name of the respective Series F Holder shall be issued in the name of
such holder as the record holder thereof, but shall be delivered to and held by
the Escrow Agent as provided in the Escrow Agreement.
(b) Initial Release. If, within thirty (30) calendar days of the
receipt by Parent of its audited financial statements for fiscal year ending
December 31, 2004 (which audited financial statements Parent shall make all
commercially reasonable efforts to have completed by March 31, 2005), at least
seventy-five percent (75%) of each of the cash and shares of Parent Common Stock
that were delivered to the Escrow Agent at Closing and allocated to the General
Escrow remain in escrow and are not otherwise the subject of any good faith
claim made by a Parent Indemnitee pursuant to Article 9, then fifty percent
(50%) of each of the cash and shares of Parent Common Stock that were delivered
to the Escrow Agent at Closing and allocated to the General Escrow and are not
the subject of a good faith Parent Indemnitee claim pursuant to Article 9 shall
be released to the Series F Holders pro rata to their interests therein. For the
purpose of avoidance of doubt, it is acknowledged for purposes of this Section
2.05(b) that in respect of any third party claim a Parent Indemnitee shall have
a good faith claim in respect of the full amount (including
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Parent's reasonable estimate of attorneys fees and costs) claimed by such third
party (or, if no specific amount is claimed, Parent's good faith determination
of such Parent Indemnitee's maximum exposure if all claims presented by such
third party claimant were to be finally determined adversely to such Parent
Indemnitee).
(c) Release Following Survival Period. If, at any time after the
thirtieth (30th) day after the receipt by Parent of its audited financial
statements for fiscal year ending December 31, 2005 (which audited financial
statements Parent shall make all commercially reasonable efforts to have
completed by March 31, 2006), any portion of each of the cash and shares of
Parent Common Stock held in the General Escrow is not the subject of a good
faith Parent Indemnitee claim pursuant to Article 9, such portion shall be
released to the Series F Holders pro rata to their interests therein.
(d) Release to Parent Indemnitees. Assets held in the General
Escrow or in ▇▇▇▇▇▇▇ Escrow with respect to a good faith claim of any Parent
Indemnitee shall be released to such Parent Indemnitee upon the earlier of (x)
the 20th business day after delivery by a Buyer Indemnitee of a written claim
for indemnification under Section 9.01 if the Stockholder Representative has not
delivered to the Buyer a written notice of objection to such claim by such day,
(y) the date of a written agreement between the Stockholders' Representative and
such Buyer Indemnitee establishing the amount of such claim to be indemnified
and (z) a final and binding adjudication of such claim for indemnification, in
each case in accordance with the provisions of the Escrow Agreement. Assets held
in the General Escrow after each such release to a Parent Indemnitee subsequent
to the date on which the release contemplated by Section 2.05(c) has been made
(or would have been made but for the existence of claims by Parent Indemnitees)
that are not otherwise subject to a good faith claim for indemnification by a
Parent Indemnitee shall be released to the Series F Holders pro rata to their
interests therein.
(e) Special Escrow. The Special Escrow shall be delivered to the
Escrow Agent for the sole purpose of securing the indemnification obligations of
the Series F Holders under Section 9.01(d). Assets held in the Special Escrow
shall be released to Parent upon the earlier of (x) the 20th business day after
delivery by a Buyer Indemnitee of a written claim for indemnification under
Section 9.01(d) if the Stockholders' Representative has not delivered to the
Buyer a written notice of objection to such claim by such day, (y) the date of a
written agreement between the Stockholder Representative and such Buyer
Indemnitee establishing the amount of such claim to be indemnified and (z) a
final and binding adjudication of such claim for indemnification, in each case
in accordance with the provisions of the Escrow Agreement. Assets held in the
Special Escrow after each such release to a Parent Indemnitee that are not
otherwise subject to a good faith claim for indemnification by a Parent
Indemnitee shall be released to the Series F Holders pro rata to their interests
therein.
(f) ▇▇▇▇▇▇▇ Escrow. The ▇▇▇▇▇▇▇ Escrow shall be delivered to the
Escrow Agent for the sole purpose of securing the indemnification obligations of
▇▇▇▇▇▇▇ and SEF under Sections 9.01(a) and 9.01(d). Amounts remaining in the
▇▇▇▇▇▇▇ Escrow shall be released to ▇▇▇▇▇▇▇ and SEF, pro rata to their interests
therein, on the later of (i) the date
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on which all remaining assets in the General Escrow have been released to the
Series F Holders pursuant to either (x) Section 2.05(c) or (y) the final
sentence of Section 2.05(d) and (ii) the date on which all remaining assets in
the Special Escrow have been released to the Series F Holders pursuant to the
final sentence of Section 2.05(e).
(g) Notices to Escrow Agent. Parent and the Stockholders'
Representative shall give all such notices to Escrow Agent as are necessary or
appropriate to effect the provisions of this Section 2.05.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Acquisition
Sub that:
SECTION 3.01. Organization and Qualification; Subsidiaries. Each of the
Company and each subsidiary of the Company (a "Subsidiary") is an entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation and has the requisite power
(corporate or otherwise) and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted, except where the
failure to be so organized, existing or in good standing or to have such power
and authority would not, individually or in the aggregate, be reasonably likely
to have a Company Material Adverse Effect. The Company and each Subsidiary is
duly qualified or licensed as a foreign corporation (or other business entity)
to do business, and is in good standing, in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary, except for any failure
to be so qualified or licensed and in good standing that would not, individually
or in the aggregate, be reasonably likely to have a Company Material Adverse
Effect. A true and complete list of all the Subsidiaries, together with the
jurisdiction of incorporation or formation of each Subsidiary, the ownership of
the outstanding capital stock or other equity interests of such Subsidiary and
the percentage of the outstanding capital stock or other equity interests of
each Subsidiary owned by the Company and each other Subsidiary, is set forth in
Schedule 3.01 of the separate Disclosure Schedule previously delivered by the
Company to Parent (the "Company Disclosure Schedule"). Except as disclosed in
such Schedule 3.01, the Company does not directly or indirectly own any equity
or similar interest in, or any interest convertible into or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity. The Company
wholly owns, directly or indirectly, and has full voting and disposition power
over all of the equity interests of each of its Subsidiaries. No stock
appreciation rights, phantom stock, profit participation or other similar rights
with respect to any Subsidiary or any capital stock of any Subsidiary are
authorized or outstanding.
SECTION 3.02. Certificate of Incorporation and By-laws. The Company has
heretofore furnished to Parent (i) a complete and correct copy of the
Certificate of Incorporation and the By-laws or equivalent organizational
documents, each as amended to date, of the Company and each Subsidiary; (ii) the
minute books of the Company and each
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Subsidiary (which contain complete and accurate records of all meetings and
accurately reflect all other corporate action of the stockholders and board of
directors (including committees thereof) of the Company and its Subsidiaries)
and (iii) the stock certificate books and stock transfer ledgers of the Company
and its Subsidiaries. Each such Certificate of Incorporation, By-laws and
equivalent organizational documents is in full force and effect. Neither the
Company nor any Subsidiary is in violation of any provision of its Certificate
of Incorporation, By-laws or equivalent organizational documents.
SECTION 3.03. Capitalization. As of the date hereof, the authorized
capital stock of the Company consists of (i) 200,000,000 shares of ▇▇▇▇▇▇ Common
Stock, $0.01 par value per share, of which 46,929,372 shares are issued and
outstanding as of the date hereof; and (ii) 21,877,236 shares of Preferred
Stock, $0.01 par value per share, of which (A) 3,000,000 shares are designated
as Series A Convertible Preferred Stock (with no shares issued and outstanding);
(B) 1,250,000 shares are designated as Series B Convertible Preferred Stock
(with no shares issued and outstanding); (C) 1,222,222 shares are designated as
Series C Convertible Preferred Stock (with no shares issued and outstanding);
(D) 4,221,846 shares are designated as Series D Convertible Preferred Stock
(with no shares issued and outstanding); (E) 686,553 shares are designated as
Series D-1 Convertible Preferred Stock (with no shares issued and outstanding);
(F) 1,496,615 shares are designated as Series E Convertible Preferred Stock
(with no shares issued and outstanding); and (G) 588,312 shares are designated
as Series F Preferred Stock (with 449,237 shares issued and outstanding as of
the date hereof). Set forth on Schedule 3.03 is a description of the grant date,
number of shares available under, strike or exercise price and holder of each
outstanding grant of Company Options or any other rights to acquire Shares
pursuant to the Company Stock Option Plans. Each grant of Company Stock Options
or other rights to acquire Common Stock under any of the Company Stock Option
Plans is evidenced by a Stock Option Agreement, each in the form previously
provided to the Parent. Except for rights to acquire Common Stock under the
Company Stock Option Plans as set forth in this Section 3.03 and for the
warrants set forth on Schedule 3.03 (which sets forth the holders of record of
such securities), there are no options, warrants or other rights, agreements,
arrangements or commitments of any character relating to the issued or unissued
capital stock of the Company or any Subsidiary or obligating the Company or any
Subsidiary to issue or sell any shares of capital stock of, or other equity
interests in, the Company or any Subsidiary. All of the issued and outstanding
Shares have been duly authorized and are validly issued, fully paid,
nonassessable and were not issued in violation of any preemptive rights or
comparable rights of any Person to acquire such shares. All Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as contemplated by this
Agreement and as set forth on Schedule 3.03, there are no outstanding
commitments, agreements, proxies, voting trusts, arrangements or undertakings of
any kind to which the Company or any of its Subsidiaries is a party or by which
any of them is bound obligating the Company or any of its Subsidiaries to
dispose or vote any shares of capital stock or other equity securities of the
Company or of any of its Subsidiaries and the Company is not bound by any debt
agreements or instruments which grant any rights to vote (contingent or
otherwise) on matters on which shareholders of the Company may vote. Except as
set forth on
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Schedule 3.03, there are no outstanding contractual obligations of the Company
or any Subsidiary to repurchase, redeem or otherwise acquire any Shares or any
capital stock of or any equity interests in, any Subsidiary. Except as set forth
on Schedule 3.03, each outstanding share of capital stock or other equity
interest of each Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share or other equity interest owned by the Company
or any Subsidiary is free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on the
Company's or such other Subsidiary's voting rights, charges and other
encumbrances of any nature whatsoever.
SECTION 3.04. Authority Relative to This Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the Merger and the other
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the Merger
(other than, with respect to the Merger, the stockholder approvals described in
Section 3.20 and the filing and recordation of appropriate merger documents as
required by the DGCL) and the other transactions contemplated hereby. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Parent and Acquisition
Sub, constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company do not,
and the performance of this Agreement by the Company will not (i) conflict with
or violate the Certificate of Incorporation or By-laws or equivalent
organizational documents of the Company or any Subsidiary; (ii) conflict with or
violate any domestic (federal, state or local) or foreign law, rule, regulation,
order, judgment or decree (collectively, "Laws") applicable to the Company or
any Subsidiary or by which any property or asset of the Company or any
Subsidiary is bound or affected, except for such conflicts or violations which
would not, individually or in the aggregate, be reasonably likely to result in a
Company Material Adverse Effect or impair the ability of the Company to perform
its obligations under this Agreement in any material respect; (iii) result in a
conflict with, a breach or violation of, a default under (or an event which with
notice or lapse of time or both would become a default) or the triggering of any
payment or other material obligations to any of the Company's or any of its
Subsidiaries' present or former employees pursuant to any of the Company's or
any of its Subsidiaries' existing employee benefit plans (as set forth in
Section 3.11) or any grant or award made under any of the foregoing, other than
the accelerated vesting of options under any of the Company Stock Option Plans,
or (iv) except as specified in Schedule 3.05(a), result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the
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creation of a lien or other encumbrance on any property or asset of the Company
or any Subsidiary pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any property or asset of the Company or any Subsidiary is bound or
affected, except for any such breaches, defaults or other occurrences which
would not, individually or in the aggregate, have or reasonably be expected to
result in a Company Material Adverse Effect.
(b) None of the execution or delivery or performance of this Agreement
by the Company, the consummation by the Company of the Merger or the other
transactions contemplated hereby, compliance by the Company with any of the
provisions of this Agreement or the performance of this Agreement by the Company
do or will require any consent, approval, authorization or permit of, or filing
with or notification to, any Governmental Entity, except (i) (A) for applicable
requirements, if any, of the Exchange Act or the Securities Act of 1933, as
amended (the "Securities Act"), including the SEC Transaction Filings, (B) such
filings and approvals as may be required by any applicable state securities,
blue sky or takeover laws, and (C) the filing and recordation of appropriate
merger documents as required by the DGCL; (ii) as specified in Schedule 3.05(b);
and (iii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not by the terms of the
applicable requirement prevent or delay consummation of the Merger or any other
transaction contemplated hereby, would not, individually or in the aggregate,
have or reasonably be expected to have a Company Material Adverse Effect and
would not impair the ability of the Company to perform its obligations under
this Agreement in any material respect.
SECTION 3.06. Permits. Except as set forth on Schedule 3.06-1, the
Company and each Subsidiary is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders necessary for the Company and each Subsidiary
to own, lease and operate its properties or to carry on its business as it is
now being conducted (the "Company Permits"), and no suspension or cancellation
of any of the Company Permits is pending or, to the knowledge of the Company,
threatened, except where the failure to have, or the suspension or cancellation
of, any of the Company Permits would not, individually or in the aggregate, have
or reasonably be expected to have a Company Material Adverse Effect. Set forth
on Schedule 3.06-2 is a list of those Company Permits, the loss or suspension of
any of which could, individually or in the aggregate, have or reasonably be
expected to have a Company Material Adverse Effect. Neither the Company nor any
Subsidiary is in conflict with, or in default or violation of, (i) any Laws,
including the Foreign Corrupt Practices Act and related regulations, applicable
to the Company or any Subsidiary or by which any property or asset of the
Company or any Subsidiary is bound or affected; (ii) any of the Company Permits;
or (iii) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any Subsidiary is a party or by which the Company or any Subsidiary
or any property or asset of the Company or any Subsidiary is bound or affected,
except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have or reasonably be expected to have a
Company Material Adverse Effect.
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SECTION 3.07. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports and documents required to
be filed by it with the SEC since December 31, 2001 (the "SEC Filings"), and has
heretofore made available to Parent, in the form filed with the SEC and as
amended prior to the date hereof, (i) its Annual Report on Form 10-K for the
fiscal year ended December 31, 2003; (ii) all proxy statements relating to the
Company's meetings of stockholders (whether annual or special) held since
January 1, 2003; and (iii) all other forms, reports and other registration
statements filed by the Company with the SEC since January 1, 2003 (the forms,
reports and other documents referred to in clauses (i), (ii) and (iii) above
being referred to herein, collectively, as the "Company SEC Reports"). As of
their respective dates, the SEC Filings (i) were prepared in accordance with the
requirements of the Exchange Act and the Securities Act, as the case may be, and
the rules and regulations thereunder including, without limitation, those
amendments to the federal securities laws effected by, and those regulations
adopted in accordance with, the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 to the extent
applicable thereto; (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading; and (iii) did not omit any documents
required to be filed as exhibits thereto. No Subsidiary is required to file any
form, report or other document with the SEC.
(b) Each of (a) the consolidated financial statements (including, in
each case, any notes thereto) contained in the SEC Filings and (b) the unaudited
balance sheet of the Company attached as Exhibit C hereto (the "Interim Balance
Sheet") was prepared in accordance with GAAP (except as may be indicated in the
notes, if any, thereto), and each fairly presented the consolidated financial
position, results of operations and cash flows of the Company and the
consolidated Subsidiaries as of the respective dates thereof and for the
respective periods indicated therein in accordance with GAAP (subject, in the
case of unaudited statements, to the absence of notes thereto and to normal and
recurring quarter-end adjustments which were not material in amount).
(c) With respect to each Annual Report on Form 10-K and each Quarterly
Report on Form 10-Q included in the Company SEC Reports, the financial
statements and other financial information included in such reports fairly
present (within the meaning of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002) in all material
respects the consolidated financial condition and results of operations of the
Company and its Subsidiaries as of, and for, the periods presented in the
Company SEC Reports. The reports of the Company's independent auditors regarding
the Company's consolidated financial statements in the SEC Filings have not been
withdrawn, supplemented or modified, and none of the Company or any of its
Subsidiaries has received any communication from its independent auditors
concerning any such withdrawal, supplement or modification.
(d) The Company's principal executive officer and its principal
financial officer have disclosed, based on their most recent evaluation, to the
Company's auditors and the audit committee of the Board of Directors of the
Company (i) all significant deficiencies in
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the design or operation of internal controls which could adversely affect the
Company's ability to record, process, summarize and report financial data and
have identified for the Company's auditors any material weaknesses in internal
controls and (ii) any fraud, whether or not material, that involves management
or other employees who have a significant role in the Company's internal
controls.
(e) The Company has established and maintains disclosure controls and
procedures (as such term is defined in Rule 13a-14 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated Subsidiaries, is
made known to the Company's principal executive officer and its principal
financial officer by others within those entities, particularly during the
periods in which the periodic reports required under the exchange Act are being
prepared; and, to the Company's knowledge, such disclosure controls and
procedures are effective in timely alerting the Company's principal executive
officer and its principal financial officer to material information required to
be included in the Company's periodic reports required under the Exchange Act.
(f) Except as and to the extent set forth on the consolidated balance
sheet of the Company and the consolidated Subsidiaries as of December 31, 2003,
including the notes thereto (the "Company 2003 Balance Sheet"), neither the
Company nor any Subsidiary has any liability or obligation of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a consolidated balance sheet of the Company and its Subsidiaries,
except for liabilities and obligations (i) disclosed in any Company SEC Report;
(ii) incurred since December 31, 2003 in the Ordinary Course; (iii) incurred in
connection with the filing of the Company's preliminary proxy statement of
January 28, 2004 relating to a proposed reverse stock split, or (iv) incurred
pursuant to or as contemplated by this Agreement (including Company Transaction
Expenses).
(g) The Company has heretofore made available to Parent complete and
correct copies of all amendments and modifications that have not been filed by
the Company with the SEC to all agreements, documents and other instruments that
previously had been filed by the Company with the SEC and are currently in
effect, and has made available to Parent complete and unredacted copies of
exhibits, if any, that were filed with any Company SEC Report in redacted form.
Such amendments, modifications and agreements are identified on Schedule
3.07(g).
SECTION 3.08. Disclosure Documents. Neither the proxy statement
relating to the special meeting of the Company's stockholders to approve the
Merger and the other transactions contemplated hereby (the "Company Proxy
Statement") nor the Company's Rule 13e-3 Transaction Statement on Schedule 13E-3
(the "13E-3" and, together with the Proxy Statement, the "SEC Transaction
Filings") will, at the respective time any such SEC Transaction Filing
(including any amendments or supplements thereto) is filed with the SEC, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. At the respective times when they are filed with the SEC, each SEC
Transaction Filing (in each case, including any
- 18 -
amendments or supplements thereto) will comply as to form in all material
respects with the applicable requirements of the Exchange Act, and the rules and
regulations thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by
Quadrangle, ▇▇▇▇▇▇▇, SEF, Protek or any of their respective representatives for
inclusion in any SEC Transaction Filing (including any amendments or supplements
thereto).
SECTION 3.09. Absence of Certain Changes or Events. Since December 31,
2003, except as contemplated by this Agreement or any other Transaction
Agreement or as disclosed in any Company SEC Report or set forth in Schedule
3.09, the Company and the Subsidiaries have conducted their businesses in the
Ordinary Course and there has not been (a) any event or events having, or
reasonably likely to have, individually or in the aggregate, a Company Material
Adverse Effect, (b) any revaluation by the Company of any asset (including,
without limitation, any writing down of the value of inventory or writing off of
notes or accounts receivable), other than in the ordinary course of business
consistent with past practice, (c) any entry by the Company or any Subsidiary
into any commitment or transaction except in the ordinary course of business and
consistent with past practice, (d) any declaration, setting aside or payment of
any dividend or distribution in respect of any capital stock of the Company or
any redemption, purchase or other acquisition of any of its securities, (e) any
split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, (f) except
insofar as may have been disclosed in the SEC Filings or required by a change in
GAAP, any change in accounting methods, principles or practices, (g) any making
or revocation of any material Tax elections or any settlement or compromises of
any material federal, state, foreign or local Tax liability or any waivers or
extensions of the statute of limitations in respect of such Taxes, (h) any
making of loans, advances or capital contributions to, or investments in, any
Person or payment of any fees or expenses to any of the Company's shareholders
or any Affiliate of any of such shareholders; (i) any mortgage or pledge of any
Lien of any of its assets, or acquisition of any assets or sale, assignment,
transfer, conveyance, lease or other disposition of any assets of the Company or
any Subsidiary, except for assets acquired or sold, assigned, transferred,
conveyed, leased or otherwise disposed of in the ordinary course of business,
(j) any discharge or satisfaction of any Lien, or payment of any obligation or
liability (fixed or contingent), except in the Ordinary Course and which, in the
aggregate, would not be material to the Company and its Subsidiaries taken as a
whole; (k) any cancellation or compromises of any debt or claim or amendment,
cancellation, termination relinquishment, waiver or release of any contract or
right except in the Ordinary Course and which, in the aggregate, would not be
material to the Company and its Subsidiaries taken as a whole; (l) any material
delay in making any capital expenditure for an approved capital project as set
forth in the Company's budget in excess of $25,000 individually or $100,000 in
the aggregate, or the making or commitment to make any capital expenditures or
capital additions or betterments in excess of $100,000 individually or $250,000
in the aggregate; (m) any incurrence of any indebtedness for borrowed money in
an amount in excess of $25,000 in the aggregate; (n) any grant of any license or
sublicense of any rights under or with respect to any Intellectual Property,
other than pursuant to customer contracts entered into in the Ordinary Course;
(o) any institution or settlement of any material Legal
- 19 -
Proceeding; (p) other than pursuant to the contracts referred to in Section
3.11, any increase in or establishment of any bonus, insurance, severance,
deferred compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Company or any Subsidiary, except for salary increases and benefit accruals
in the Ordinary Course, or (q) any agreement to do anything set forth in this
Section 3.09.
SECTION 3.10. Absence of Litigation. Except as disclosed in any Company
SEC Report or as set forth in Schedule 3.10, there is no claim, action,
proceeding, compliance review or investigation pending or, to the knowledge of
the Company, threatened against the Company or any Subsidiary, or any property
or asset of the Company or any Subsidiary, before any court, arbitrator or
Governmental Entity, which (a) individually or in the aggregate, is reasonably
likely to have a Company Material Adverse Effect or to impair the Company's
ability to consummate the transactions contemplated under this Agreement or (b)
seeks to delay or prevent the consummation of the Share Exchange, the Merger or
the other transactions contemplated hereby. Except as disclosed in any Company
SEC Report or Schedule 3.10, as of the date, neither the Company nor any
Subsidiary nor any property or asset of the Company or any Subsidiary is subject
to any order, writ, judgment, injunction, decree, determination or award having
or reasonably expected to have, individually or in the aggregate, a Company
Material Adverse Effect.
SECTION 3.11. Employee Benefit Plans.
(a) "Plans" means all severance, benefit, deferred compensation,
incentive compensation, stock option, stock purchase and other equity,
retirement, bonus, welfare benefit and other employee benefit plans, programs,
agreements, policies and arrangements providing benefits to any present or
former director, officer or employee of the Company or any of its Subsidiaries,
or any beneficiary or dependent of any such person, to which the Company or any
of its Subsidiaries or ERISA Affiliates contributes or is obligated to
contribute or has any liability (contingent or otherwise). Without limiting the
generality of the foregoing, the term "Plans" includes all employee welfare
benefit plans within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended, and the regulations thereunder
("ERISA") and all employee pension benefit plans within the meaning of Section
3(2) of ERISA. An ERISA Affiliate means, with respect to the Company, any
corporation, person or trade or business which is a member of the group which is
under common control with the Company, and which together with the Company is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code. "Controlled Group Liability" means any and all liabilities
(contingent or otherwise) of the Company and any of its ERISA Affiliates (i)
under Title IV of ERISA, (ii) under Section 302 of ERISA, (iii) under Sections
412 and 4971 of the Code, (iv) as a result of a failure to comply with the
continuation coverage requirements of Section 601 et seq. of ERISA and Section
4980B of the Code, and (v) under corresponding or similar provisions of foreign
laws or regulations.
- 20 -
(b) Schedule 3.11 includes a complete list of each material Plan. With
respect to each Plan, the Company has made available to Parent a true, correct
and complete copy of (if applicable): (i) all plan documents, benefit schedules,
trust agreements, and insurance contracts and other funding vehicles; (ii) the
most recent summary including but not limited to the most recent Annual Report
(Form 5500 Series) and accompanying schedule, if any; (iii) the current summary
plan description, if any; (iv) the most recent annual financial report, if any;
(v) the most recent actuarial report, if any; and (vi) the most recent
determination letter from the Internal Revenue Service (the "IRS"), if any.
(c) Except as has not had, or would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, the Company
and each of its Subsidiaries has complied, and is now in compliance, with all
provisions of ERISA, the Code and all laws and regulations applicable to the
Plans.
(d) Except as has not had, or would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, all
contributions required to be made to any Plan, and all premiums due or payable
with respect to insurance policies funding any Plan, have been made within the
earliest time prescribed by in a timely manner in accordance with the
requirements of any such plan, agreement or law. There does not now exist, nor,
to the knowledge of the Company, do any circumstances exist that could
reasonably be expected to result in, any Controlled Group Liability that would
be a liability of the Company or its Subsidiaries, which has or would reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect, following the Effective Time.
(e) Except as has not had, or would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, (i) as of
the date hereof, each Plan that is subject to Section 302 of ERISA and Section
412 of the Code meets the minimum funding standards of Section 302 of ERISA and
Section 412 of the Code (without regard to any funding waiver); and (ii) as of
the date hereof, neither the Company nor any of its Subsidiaries is required to
provide security to such Plan pursuant to Section 307 of ERISA or Section
501(a)(29) of the Code and no condition exists that could reasonably be expected
to result in the Company or any ERISA Affiliate to provide such security.
(f) No Plan is a multiemployer plan, as defined in Section 3(37) of
ERISA. Except as has not had, or would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, no claims
are pending or, to the knowledge of the Company, threatened or anticipated
against the Plans, or the Company or any of its Subsidiaries with respect to the
Plans, except for benefit payments in the normal course of business. No Plan
provides benefits to current or former employees, beneficiaries, or dependents
of the Company or its Subsidiaries which continue after termination of
employment, other than as required by Section 601 et seq. of ERISA.
- 21 -
(g) Except as set forth in Schedule 3.11, the consummation of the
transactions contemplated in this Agreement will not, either alone or in
combination with another event, (i) entitle any current or former employee or
officer of the Company or any of its ERISA Affiliates to any severance benefit
or any other payment or (ii) accelerate the time of payment or vesting, or
increase the amount of compensation due any such employee or officer or result
in an obligation to fund to a trust or otherwise any compensation or benefits of
any such employee or officer.
(h) None of the Company or any Subsidiary has incurred any material
liability for any Tax or penalty imposed by section 4975 of the Code or section
502(i) of ERISA. None of the Company or any Subsidiary has withdrawn at any time
within the preceding six years from any multiemployer plan, as defined in
section 3(37) of ERISA. With respect to each Plan that is intended to be a
"qualified plan" within the meaning of Section 401(a) of the Code, each such
Plan is so qualified, and, to the knowledge of the Company, nothing has occurred
or is expected to occur that would adversely affect the qualified status of such
Plan or any related trust.
SECTION 3.12. Labor Matters. Neither the Company nor any Subsidiary is
a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or any Subsidiary, and since
January 1, 2000 there has not occurred any strike, work stoppage or union
organizing effort and, to the knowledge of the Company, no such action is
threatened or contemplated.
SECTION 3.13. Personal Property, Real Property and Leases.
(a) Schedule 3.13 sets forth a list of all real property owned, leased
or used by the Company or any Subsidiary since January 1, 2002, and separately
identifies that which is or has been owned and that which is or has been leased
or otherwise used. The Company and the Subsidiaries have sufficient title or
leasehold interests to all their properties and assets to conduct their
respective businesses as currently conducted or as contemplated to be conducted,
with only such exceptions as, individually or in the aggregate, would not have
or reasonably be expected to have a Company Material Adverse Effect.
(b) All leases of real property leased for the use or benefit of the
Company or any Subsidiary to which the Company or any Subsidiary is a party, and
all amendments and modifications thereto are in full force and effect and have
not been modified or amended, and there exists no default under any such lease
by the Company, any Subsidiary, or, to the knowledge of the Company, by any
other party thereto (nor, to the knowledge of the Company, is there any default
by the sublessor under the sublease set forth on Schedule 3.13), nor any event
which with notice or lapse of time or both would constitute a default thereunder
by the Company or any Subsidiary or, to the knowledge of the Company, by any
other party thereto.
SECTION 3.14. Intellectual Property.
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(a) "Company Intellectual Property" means all trademarks, trademark
rights, trade names, trade name rights, patents, patent rights, industrial
models, inventions, copyrights, servicemarks, trade secrets, know-how, computer
software programs, applications and other proprietary rights and information
used or held for use in connection with the business of the Company and the
Subsidiaries as currently conducted, together with all applications currently
pending for any of the foregoing.
(b) Except as set forth in Schedule 3.14-b, the Company and the
Subsidiaries own or have legally enforceable rights to use all of the Company
Intellectual Property, and there is no assertion or claim (or basis therefor)
challenging the validity of the Company's ownership of, or right to use, any
Company Intellectual Property.
(c) Except as set forth on Schedule 3.14-c, the Company is not party to
any license or other agreement pursuant to which it has the right to use any
Company Intellectual Property utilized in connection with any product or process
of the Company or any of its Subsidiaries.
(d) Except as set forth on Schedule 3.14-d, there are no pending or, to
the knowledge of the Company, threatened interferences, re-examinations,
oppositions or nullities involving any patents, patent rights or applications
therefor of the Company or any Subsidiary that, individually or in the
aggregate, would have or reasonably be expected to have a Company Material
Adverse Effect.
(e) All employees of the Company have executed confidentiality and
invention assignment agreements substantially in the forms previously delivered
to the Parent except as set forth on Schedule 3.14-e. None of the employees of
the Company maintains any proprietary interest in Company Intellectual Property,
other than an indirect interest by virtue of his or its equity interest in the
Company.
(f) Except as set forth in Schedule 3.14-f, the operation of the
business of the Company and its Subsidiaries as such businesses currently are
conducted does not infringe or misappropriate the intellectual property of any
third party or constitute unfair competition or trade practices under the laws
of any jurisdiction.
(g) Except as disclosed in Schedule 3.14-g, to the knowledge of the
Company there are no infringements by third parties of any Company Intellectual
Property which, individually or in the aggregate, have or would reasonably be
expected to have a Company Material Adverse Effect.
(h) Other than pursuant to license agreements entered into in the
Ordinary Course, neither the Company nor any Subsidiary has licensed or
otherwise permitted the use by any third party of any Company Intellectual
Property.
SECTION 3.15. Taxes. (a) Except as described in Schedule 3.15(a), or as
reflected or reserved against in the the Interim Balance Sheet, (i) the Company
and each Subsidiary have filed all federal and all other material state, local
and foreign Tax Returns, reports and declarations heretofore required to be
filed by such entity on or prior to the
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Closing Date, and all such Tax Returns are true, correct and complete in all
material respects, (ii) all Taxes due by the Company or any of its Subsidiaries
have been timely paid in full or adequately reserved for in the Interim Balance
Sheet in accordance with GAAP, as such reserves may be adjusted for the passage
of time and transactions occurring in the Ordinary Course through the Closing
Date in accordance with the past practice and custom of the Company and its
Subsidiaries in filing their Tax Returns, and (iii) no claim for assessment and
collection of Taxes in respect of their respective businesses is being asserted
against the Company or any Subsidiary. The Company and the Subsidiaries have
withheld or collected and paid over to the appropriate Governmental Entities or
are properly holding for such payment all Taxes required by law to be withheld
or collected. There are no liens for Taxes upon the assets of the Company or the
Subsidiaries, other than liens for Taxes that are being contested in good faith
by appropriate proceedings (each of which is described on Schedule 3.15).
(b) Except as set forth in Schedule 3.15(b), neither the Company nor
any of its Subsidiaries has (i) been notified in writing that any Tax Return is
currently under audit by the IRS or any state or local taxing authority or that
it intends to conduct such an audit and no action, suit, investigation, claim or
assessment is pending or, to the knowledge of the Company, proposed with respect
to any Taxes; (ii) made any agreement for the extension of time or the waiver of
the statute of limitations for the assessment, collection or payment of any
Taxes; or (iii) executed any power of attorney with respect to any Tax matter
that is currently in force.
(c) Neither the Company nor any of its Subsidiaries has any liability
for Taxes as a result of Section 1.1502-6 of the Treasury Regulations or any
comparable provision of state, local or foreign law (other than as a result of
being in a group of which the Company is the common parent). The Company is not
a United States real property holding corporation ("USRPHC") and was not a
USRPHC on any "determination date" (as defined in Section 1.897-2(c) of the
Treasury Regulations) that occurred in the five-year period preceding the
Closing Date.
(d) Except as set forth in Schedule 3.15(f), no written claim has been
made by a taxing authority in a jurisdiction where the Company or any of its
Subsidiaries does not file Tax Returns to the effect that such entity is or may
be subject to taxation by that jurisdiction.
(e) Parent has been provided or given access to (i) all federal and
other material income Tax Returns of the Company and its Subsidiaries for all
taxable periods ending on or after December 31, 2001 and (ii) all United States
revenue agents' reports and other similar reports relating to the audit or
examination of the Tax Returns of the Company and its Subsidiaries for all
taxable periods ending on or after December 31, 2001.
(f) Neither the Company nor any other Person (including any of its
Subsidiaries) on behalf of the Company or any of its Subsidiaries has (i) agreed
to or are required to make any adjustments pursuant to Section 481(a) of the
Code or any similar provision of state, local of foreign law by reason of a
change in accounting method or has any knowledge that
- 24 -
the IRS has proposed any such adjustment or change in accounting method, or has
any application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company or any of its Subsidiaries, or (ii) filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to the
disposition of a subsection (f) asset (as such term is defined in Section 341(f)
of the Code) owned by the Company or any of its Subsidiaries.
(g) Except as set forth in Schedule 3.15(g), neither the Company nor
any of its Subsidiaries is a party to (i) any tax sharing or similar agreement
or arrangement (whether or not written) pursuant to which they will have any
obligation to make any payment after the Closing, (ii) any agreement that could
obligate it to make any payment in connection with the transactions contemplated
by this Agreement that will not be deductible by the Company or any of its
Subsidiaries by reason of Section 280G of the Code, (iii) a closing agreement
pursuant to Section 7121 of the Code or any predecessor provision thereof or any
similar provision of state, local or foreign law with respect to the Company or
any of its Subsidiaries or (iv) otherwise bound by any private letter ruling of
the IRS or comparable rulings or guidance issued by any other taxing authority.
(h) Neither the Company nor any of its Subsidiaries (i) has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (x) in the two
years prior to the date of this Agreement or (y) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement or (ii) is or was a member of any
consolidated, combined, unitary or affiliated group of corporations that filed
or was required to file a consolidated, combined or unitary Tax Return, other
than the group of which it is now a member.
SECTION 3.16. Environmental Matters.
(a) For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Substances" means (A) those substances
defined in or regulated under any of the following U.S. federal statutes and
their state or foreign counterparts, as each may be amended from time to time,
and all regulations thereunder: the Hazardous Materials Transportation Act, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act, the Clean Water Act, the Safe Drinking
Water Act, the Toxic Substances Control Act, the Marine Protection, Research and
Sanctuaries Act, the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, the Occupational Health and Safety Act and the Clean Air Act;
(B) petroleum and petroleum products including crude oil and any fractions
thereof; (C) natural gas, synthetic gas, and any mixtures thereof; (D) radon;
(E) asbestos; (F) any other pollutant or contaminant; and (G) any substance with
respect to which a federal, state or local agency requires environmental
investigation, monitoring, reporting or remediation; (ii) "Environmental Laws"
means any U.S. or foreign federal, state or local law relating to (A) releases
or threatened releases of Hazardous Substances or materials containing
- 25 -
Hazardous Substances; (B) the manufacture, handling, transport, use, treatment,
management, storage or disposal of, or exposure to, Hazardous Substances or
materials containing Hazardous Substances; or (C) otherwise relating to
pollution of the environment or the protection of human health; and (iii)
"Release" means spill, emission, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration of a Hazardous Substance into the
environment, including the abandonment or discarding of barrels, containers, and
other closed receptacles containing any Hazardous Substance.
(b) Except as disclosed in the Company SEC Reports, on Schedule 3.16 or
as has not had, or would not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect, (i) there has been no Release
of Hazardous Substances on any real property currently owned, leased or operated
by the Company or any of its Subsidiaries that would require a remedial action
under applicable Environmental Law and no real property currently owned, leased
or operated by the Company or any Subsidiary thereof is contaminated with any
Hazardous Substances in a manner which would require a remedial action under
Environmental Law; (ii) no judicial or administrative proceeding, order,
judgment, decree or settlement is pending or, to the knowledge of the Company,
threatened against the Company or its Subsidiaries relating to alleged
violations of or potential liabilities under Environmental Laws; and (iii) since
December 31, 2001, the Company and its Subsidiaries have not received in writing
any claims, notices or correspondence alleging liability under any Environmental
Law from any Governmental Entity. No facts, circumstances or conditions exist
with respect to the Company, its operations or any real property currently or
formerly owned, operated or leased by the Company that could reasonably be
expected to result in the Company incurring liabilities under Environmental
Laws.
SECTION 3.17. Material Contracts and Government Contracts.
(a) The exhibit tables to the Company SEC Reports and Schedule 3.17(a)
collectively set forth a list of all contracts and agreements (including,
without limitation, oral and informal arrangements, and modifications,
amendments and waivers of any of the foregoing) which either (a) are material as
such term is used in Item 601 of Regulation S-K under the Securities Act, (b)
are contracts which in the year ended December 31, 2003 generated, or are
expected to generate in any fiscal year thereafter, revenues in excess of
$250,000, (c) are contracts which in the year ended December 31, 2003 required
payments by the Company or any subsidiary, or are expected to require payments
in any fiscal year thereafter, of in excess of $250,000, or (d) are of a type
described below:
(i) any partnership, limited liability company, joint venture
or other similar agreement or arrangement;
(ii) any franchise agreements;
(iii) any agreement that limits (or would limit after the date
hereof) the freedom or ability of the Company or any of its
Subsidiaries to compete in any material manner in any line of business
or in any geographic area; and
- 26 -
(iv) any agreement or arrangement with (A) any present or
former officer or director of the Company or any of its Subsidiaries
or any of their immediate family members (including their spouses),
(B) any record or beneficial owner of five percent or more of the
Shares, or (C) any Affiliate of any such director, officer, family
member, or beneficial owner
(collectively, the "Material Contracts").
(b) Each Material Contract, is a legal, valid and binding agreement,
and none of the Company, any Subsidiary or, to the knowledge of the Company, any
other party thereto is in default under any Material Contract; neither the
Company, nor any Subsidiary is in default under any Material Contract; and none
of the Company or any of the Subsidiaries anticipates any termination or change
to, or receipt of a proposal with respect to, any of the Material Contracts as a
result of the Share Exchange, the Merger or otherwise. Except as disclosed in
Schedule 3.17(b), the Company has furnished Parent with true and complete copies
of all Material Contracts, together with all amendments, waivers, or other
changes thereto. At the Effective Time, the Long Term Incentive Plan shall have
been terminated and shall be void and of no further effect.
SECTION 3.18. Opinion of Financial Advisor. The Company's Board of
Directors has received the opinion of Valuation Research Corporation ("VRC") on
or prior to the date of this Agreement, addressed to the Special Committee of
the Board of Directors and for the benefit of the Board of Directors and the
Company's stockholders, to the effect that, as of the date of such opinion, the
consideration to be received pursuant to the Merger is fair to the holders of
▇▇▇▇▇▇ Common Stock and of ▇▇▇▇▇▇ Series F Preferred Stock from a financial
point of view, a copy of which opinion has been or will promptly after receipt
thereof by the Company be delivered to Parent.
SECTION 3.19. Board Approval; Certain Anti-Takeover Provisions Not
Applicable.
(a) Subject to Section 6.05, the Board of Directors of the Company, at
a meeting duly called and held has unanimously adopted resolutions (i) approving
and declaring advisable this Agreement, the Voting Agreements, the Share
Exchange, the Merger and the other transactions contemplated hereby, (ii)
declaring that it is in the best interests of the Company's stockholders that
the Company enter into this Agreement and consummate the Merger and the other
transactions contemplated hereby on the terms and subject to the conditions set
forth in this Agreement (as it may be amended from time to time), (iii)
recommending that the Company's stockholders approve and adopt this Agreement
and approve the Merger contemplated hereby, and (iv) approving the acquisition
of Shares by Parent in the Share Exchange and the other transactions
contemplated by this Agreement, including for purposes of Section 203 of the
DGCL.
(b) No state takeover statute (including, without limitation, Section
203 of the DGCL), other than those with which this Agreement complies, applies
or purports to apply
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to the Share Exchange, the Merger, this Agreement or the Voting Agreements, or
any of the transactions contemplated hereby or thereby. The Company does not,
and as of the Closing and the Effective Time will not, have a stockholder rights
plan or "poison pill."
SECTION 3.20. Votes Required. Approval of the Merger will require the
affirmative vote of the holders of a majority of the votes represented by all
shares of ▇▇▇▇▇▇ Common Stock and ▇▇▇▇▇▇ Series F Preferred Stock outstanding as
of the record date for the Company Stockholders' Meeting (with each share of
▇▇▇▇▇▇ Series F Preferred Stock being entitled to 100 votes in connection
therewith). In addition, consummation of the Merger in accordance with the terms
of this Agreement will require the affirmative vote or written consent of the
holders of a majority of the shares of Series F Preferred Stock in favor of the
waiver of the mandatory redemption rights of the Series F Preferred Stock in
connection with the Merger. The foregoing votes and consents are the only votes
or consents of the holders of any class or series of capital stock of the
Company necessary to approve the Merger.
SECTION 3.21. Brokers. No broker, finder, investment banker or other
person (other than the Persons set forth on Schedule 3.21, whose fees and
expenses are deemed Company Transaction Expenses) is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or any Subsidiary. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and the Persons
set forth on Schedule 3.21 pursuant to which such Persons would be entitled to
any payment relating to the transactions contemplated by this Agreement.
SECTION 3.22. Customers. Schedule 3.22 sets forth the ten (10) largest
customers of the Company, each ranked by revenue, for the most recent fiscal
year. Except as set forth on Schedule 3.22 or as set forth in the Company SEC
Reports, no customer named on Schedule 3.22 has cancelled, otherwise terminated
or materially curtailed, or, to the knowledge of the Company, threatened to
cancel, otherwise terminate or materially curtail its relationship with the
Company.
SECTION 3.23. Certain Payments. Neither the Company nor any Subsidiary
or any director, officer, agent or employee of the Company or any Subsidiary, or
any other entity associated with or acting for or on behalf of the Company or
any Subsidiary, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback or other payment to any
entity, private or public, regardless of form, whether in money, property or
services (i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Company, any
Subsidiary or any affiliate of the Company or any Subsidiary or (iv) in
violation of any federal, state, territorial, local or foreign law, statute,
rule or regulation or (b) established or maintained any fund or asset that has
not been recorded in the books and records of the Company or any Subsidiary.
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SECTION 3.24 Insurance. Schedule 3.24 sets forth a correct and complete
list of all material insurance policies (including information on the premiums
payable in connection therewith and the scope and amount of the coverage
provided thereunder) maintained by the Company or any of its Subsidiaries (the
"Policies"). The Policies provide coverage for the operations conducted by the
Company and its Subsidiaries of a scope and coverage consistent with customary
practice in the industries in which the Company and its Subsidiaries operate.
Except for the termination of the Company's current director and officers
liability policy, which is the subject of the Parent's covenants in Section 6.06
and except as set forth in Schedule 3.24, the consummation of the Merger will
not, in and of itself, cause the revocation or cancellation of any Policy except
for such revocations or cancellations which have not had and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
SECTION 3.25 Title to Properties. The Company and each of its
Subsidiaries (i) has good and marketable title to all properties and other
assets which are reflected on the 2003 Company Balance Sheet as being owned by
the Company or one of its Subsidiaries (or acquired after the date hereof)
except (x) statutory liens securing payments not yet due, (y) security
interests, mortgages and pledges that are disclosed in the SEC Reports that
secure (a) the indebtedness under the Silicon Valley Bank Revolving Loan
Facility or (b) indebtedness that is reflected in the most recent consolidated
financial statements in the SEC Reports and (z) such other imperfections or
irregularities of title or other Liens that, individually or in the aggregate,
do not and could not reasonably be expected to have a Company Material Adverse
Effect, (ii) has a valid leasehold interest in all leasehold interests set forth
on Schedule 3.13, and (iii) is the lessee or sublessee of all leasehold estates
and leasehold interests set forth on Schedule 3.13.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
AND ACQUISITION SUB
Parent and Acquisition Sub hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.01 Organization and Qualification; Subsidiaries. Each of
Parent and Acquisition Sub is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation and has
the requisite power and authority to own, lease and operate its properties and
to carry on its business as it is now being conducted, except where the failure
to be so organized, existing or in good standing or to have such power and
authority would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect. Each of Parent and Acquisition Sub is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the
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nature of its business makes such qualification or licensing necessary, except
for such failures to be so qualified or licensed and in good standing that would
not, individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.02. Certificate of Incorporation and By-laws; Capitalization.
Parent has heretofore furnished to the Company a complete and correct copy of
the Certificate of Incorporation and the By-laws, each as amended to date, of
Parent and Acquisition Sub. Such Certificates of Incorporation and By-laws are
in full force and effect. Neither Parent nor Acquisition Sub is in violation of
any provision of its Certificate of Incorporation or By-laws. As of the Closing,
the Certificate of Incorporation and Bylaws of Parent shall be as described in
the Investment Agreement. Immediately after Closing, the issued shares of
capital stock of Parent shall consist solely of (a) the shares of Parent PIK
Preferred and Parent Common Stock to be issued under this Agreement, (b) 300,000
shares of Parent Series A PIK Preferred to be issued to Quadrangle, ▇▇▇▇▇▇▇ and
SEF under the Investment Agreement, (c) [200,000 less Converting Optionholder
shares subject to new options] shares of Parent Common Stock to be issued under
the Protek Agreement, (d) shares of Parent Common Stock subject to options to be
granted under the Management Incentive Plan of Parent and under the Protek
Agreement, and (e) 100 shares of Parent's Junior Preferred Stock. Except as set
forth in this Agreement, the Investment Agreement and the Protek Agreement, no
equity securities are required to be issued by Parent or Acquisition Sub by
reason of any currently existing or contemplated options, warrants, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any securities of Parent or Acquisition
Sub, as applicable, and there are no Contracts, commitments, understandings, or
arrangements by which Parent or Acquisition Sub is bound to issue additional
respective securities, or options, warrants or rights to purchase or acquire any
additional respective securities. Except as set forth on Schedule 4.02, Parent
is not a party or subject to any agreement or understanding, nor, to the
knowledge of Parent, is there any agreement or understanding between any persons
that affects or relates to the voting or giving of written consents with respect
to any security or the voting by a director of Parent. Upon issuance, each share
of Parent PIK Preferred and Parent Common Stock to be issued under this
Agreement will have been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of this Agreement, will be duly and
validly issued, fully paid, and nonassessable and will be free of restrictions
on transfer other than restrictions on transfer under the Stockholders Agreement
and under applicable state and federal securities laws.
SECTION 4.03. Authority Relative to this Agreement. Each of Parent and
Acquisition Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Share Exchange, the Merger and the other transactions contemplated hereby.
The execution and delivery of this Agreement by Parent and Acquisition Sub and
the consummation by Parent and Acquisition Sub of the Share Exchange, the Merger
and the other transaction contemplated hereby have been duly and validly
authorized by all necessary corporate action, and no other corporate proceedings
on the part of Parent or Acquisition Sub are necessary to authorize this
Agreement or to consummate the Share Exchange, the Merger or the other
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by
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Parent and Acquisition Sub and, assuming due authorization, execution and
delivery by the Company, constitutes a legal, valid and binding obligation of
each of Parent and Acquisition Sub enforceable against each of Parent and
Acquisition Sub in accordance with its terms.
SECTION 4.04. No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by Parent and
Acquisition Sub do not, and the performance of this Agreement by Parent and
Acquisition Sub will not, (i) conflict with or violate the Certificate of
Incorporation or By-laws of Parent or Acquisition Sub; (ii) conflict with or
violate any Law applicable to Parent or Acquisition Sub or by which any property
or asset of either of them is bound or affected, except for such conflicts or
violations which would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect; or (iii) except as specified
in Schedule 4.04(a) of the separate Disclosure Schedule previously delivered by
Parent to the Company (the "Parent Disclosure Schedule"), result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Acquisition Sub
pursuant to any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Acquisition Sub is a party or by which Parent or Acquisition Sub or any property
or asset of either of them is bound or affected, except for any such breaches,
defaults or other occurrences which would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and
Acquisition Sub do not, and the performance of this Agreement by Parent and
Acquisition Sub will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Entity, except (i) (A)
for applicable requirements, if any, of the Exchange Act or the Securities Act;
(B) such filings and approvals as may be required by any applicable state
securities, blue sky or takeover laws, and (C) the filing and recordation of
appropriate merger documents as required by the DGCL; (ii) as specified in
Schedule 4.04(b) of the separate Parent Disclosure Schedule; and (iii) where
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not by the terms of the applicable
requirement prevent or delay consummation of the Merger, and would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.05. Absence of Litigation. There is no claim, action,
proceeding or investigation pending or, to the knowledge of the Parent,
threatened against the Parent before any court, arbitrator or Governmental
Entity, which seeks to delay or prevent the consummation of the Share Exchange,
the Merger and or any other transaction contemplated hereby.
SECTION 4.06 No Operations or Liabilities. Parent and Acquisition Sub
are each newly formed entities created solely for the purpose of entering into
and
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consummating this Agreement and the other Transaction Agreements to which they
are party, and except for this Agreement and the other Transaction Agreements to
which they are party, neither Parent nor Acquisition Sub is party to any
Contract, nor have either otherwise conducted any business or incurred any
liability or obligation.
SECTION 4.07 Information Supplied. None of the written information
supplied or to be supplied by Parent or the Acquisition Sub specifically for
inclusion or incorporation by reference in any SEC Transaction Filing, at the
date it or any amendment or supplement thereto is to be filed with the SEC, will
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
SECTION 4.08 Brokers. Except as otherwise disclosed in this Agreement,
no broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Parent or Acquisition
Sub.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE EFFECTIVE TIME
SECTION 5.01. Conduct of Business by the Company Pending the Effective
Time. The Company covenants and agrees that, between the date of this Agreement
and the earlier of the termination of this Agreement pursuant to Article VIII or
the Effective Time, unless disclosed on Schedule 5.01 or Parent shall otherwise
agree in writing, the businesses of the Company and the Subsidiaries shall be
conducted only in, and the Company and the Subsidiaries shall not take any
action except in, the Ordinary Course; and the Company shall use all
commercially reasonable efforts to preserve intact its business organization, to
keep available the services of the current officers, employees and consultants
of the Company and the Subsidiaries and to preserve the current relationships of
the Company and the Subsidiaries with customers, suppliers and other persons
with which the Company or any Subsidiary has business relations. By way of
amplification and not limitation, except as contemplated by this Agreement,
neither the Company nor any of the Subsidiaries shall, between the date of this
Agreement and the earlier of the termination of this Agreement pursuant to
Article VIII or the Effective Time, directly or indirectly do, propose or commit
to do, or authorize any of the following without the prior written consent of
Parent (except as disclosed on Schedule 5.01 or as the same may be expressly
required by or necessary to perform its obligations under this Agreement or any
other Transaction Agreement):
(a) amend or otherwise change the Company's Certificate of
Incorporation or By-laws or equivalent organizational documents of any
Subsidiary;
(b) issue, sell, pledge, dispose of, grant, encumber, or
authorize the issuance, sale, pledge, disposition, grant or encumbrance
of any Shares or any shares of capital stock of any class of the
Company or the Subsidiaries, or any options,
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warrants, convertible securities or other rights of any kind to acquire
any Shares or shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any Subsidiary (except for the issuance of Shares issuable
pursuant to the exercise of employee stock options or other awards
outstanding on the date hereof as set forth on Schedule 3.03 to the
Company Disclosure Statement);
(c) transfer, lease, license, guarantee, sell, mortgage,
pledge, dispose of or encumber any assets of the Company or any
Subsidiary, except for sales and licenses in the Ordinary Course;
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that a wholly-owned
Subsidiary may declare and pay a dividend to its parent;
(e) reclassify, combine, split, subdivide or redeem, purchase
or otherwise acquire, directly or indirectly, any of its capital stock;
(f) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
assets outside the Ordinary Course; (ii) incur any indebtedness for
borrowed money or issue any debt securities or assume, guarantee or
endorse, or otherwise as an accommodation become responsible for, the
obligations of any person, or make any loans or advances, except in the
Ordinary Course; or (iii) enter into or amend in any material respect
any Material Contract or enter into any Material Contract that would be
breached by, or require the consent of any third party in order to
continue in full force following, consummation of the Merger;
(g) increase (except salary increases in the Ordinary Course)
the compensation payable or to become payable to its officers or
employees generally, or grant any bonus, severance or termination pay
to, or enter into any employment or severance agreement with any
director, officer or other employee of the Company or any Subsidiary,
or establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted
stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;
(h) take any action, other than reasonable and usual actions
in the Ordinary Course, with respect to accounting policies or
procedures (including, without limitation, procedures with respect to
the payment of accounts payable and collection of accounts receivable);
(i) pay, discharge or satisfy any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment,
- 33 -
discharge or satisfaction, in the Ordinary Course, of liabilities
reflected or reserved against in the Company 2003 Balance Sheet, or
subsequently incurred in the Ordinary Course, or as permitted by clause
(l) below;
(j) fail to comply in all material respects with applicable
Laws;
(k) fail to pay and discharge any Taxes upon or against any of
its properties or assets before the same shall become delinquent and
before penalties accrue thereon, except to the extent and so long as
the same are being contested in good faith and by appropriate
proceedings;
(l) settle or compromise any claims or litigation (x) for an
amount in any case in excess of $250,000 or (y) seeking injunctive
relief against or on behalf of the Company;
(m) authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the
Company or any of its Subsidiaries;
(n) make or revoke any material tax election not required by
law or settle or compromise any material tax liability or amend, in any
material respect, any Tax Return or closing agreement with respect to
Taxes;
(o) other than in the Ordinary Course, (i) waive any rights of
material value or (ii) cancel or forgive any material indebtedness for
borrowed money owed to the Company or any of its Subsidiaries other
than indebtedness of the Company or a wholly-owned Subsidiary of the
Company;
(p) except as may be required as a result of a change in law
or under GAAP, make any material change in its methods, principles and
practices of accounting, including tax accounting policies and
procedures;
(q) acquire (by merger, consolidation or acquisition of stock
or assets) any corporation, partnership or other business organization
or division thereof material to the Company and its Subsidiaries taken
as a whole;
(r) enter into any material joint venture, partnership or
similar agreement;
(s) enter into any contract or agreement which limits the
ability of the Company or any Subsidiary to compete in any material
manner with or conduct any business or line of business in any
geographic area;
(t) terminate or fail to maintain any insurance policies,
other than with respect to Policies which are replaced in the Ordinary
Course with policies of substantially similar type, term, amount of
coverage, and premium; or
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(u) commit to do any of the foregoing, take, or agree in
writing or otherwise to take, any of the foregoing actions or take or
fail to take any action which would make any representation or warranty
of the Company contained in this Agreement untrue or incorrect as of
the date when made or as if made as of the Effective Time (other than
representations and warranties which address matters only as of a
certain date(s), in which case untrue or incorrect as of such certain
date(s).
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Company Stockholders' Meeting. The Company shall duly
give notice of, convene and hold a meeting of its stockholders (the "Company
Stockholders Meeting") for the purpose of voting upon this Agreement (insofar as
it relates to the Merger), the Merger and related matters within 40 calendar
days of the mailing of the definitive Company Proxy Statement as contemplated by
Section 6.02 below. The Company shall, through its Board of Directors, recommend
to its stockholders approval and adoption of this Agreement and approval of the
Merger. If the Board of Directors of the Company shall have withdrawn its
approval or recommendation of this Agreement or the Merger to the extent
permitted by Section 6.05, the obligations set forth in the preceding two
sentences of this paragraph shall terminate and be of no further force or
effect.
SECTION 6.02. SEC Transaction Filings. Within fifteen (15) calendar
days following the date of this Agreement, the Company shall file the
preliminary SEC Transaction Filings related to the Merger and this Agreement
with the SEC and shall use reasonable best efforts to respond to any comments of
the SEC or its staff and to cause a definitive Company Proxy Statement to be
mailed to the Company's stockholders within five (5) days after the SEC
Transaction Filings is cleared by the SEC. The Parent and the Company shall
cooperate with each other in the preparation of the SEC Transaction Filings. The
Company shall notify Parent promptly of the receipt of and shall respond
promptly to (i) any comments from the SEC or its staff and (ii) any request by
the SEC or its staff for amendments or supplements to the SEC Transaction
Filings or for additional information and will supply Parent with copies of all
correspondence between the Company or any of its representatives, on the one
hand, and the SEC or its staff, on the other hand, with respect to the SEC
Transaction Filings or the Merger. If at any time prior to the approval of this
Agreement by the Company's stockholders there shall occur any event that is
required to be set forth in an amendment or supplement to any SEC Transaction
Filing, the Company will promptly notify Parent thereof and the Parent and the
Company shall cooperate in the preparation and mailing to its stockholders such
an amendment or supplement. Parent and its counsel shall be given a reasonable
opportunity to be involved and the Company and the Parent shall cooperate in the
drafting of and review and comment upon any SEC Transaction Filing and any
amendment or supplement thereto and any such correspondence and the Company
shall not mail any Company Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects. Subject to Section 6.05, the
Company shall include in the definitive Company Proxy Statement the
recommendation of
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the Company's board of directors that stockholders of the Company vote in favor
of the approval of the Merger and the adoption of this Agreement and shall use
all reasonable efforts to solicit from the holders of ▇▇▇▇▇▇ Common Stock and
▇▇▇▇▇▇ Series F Preferred Stock proxies in favor of the Merger, and take all
actions reasonably necessary or, in the reasonable opinion of Parent and
Acquisition Sub, advisable to secure the approval of stockholders required by
the DGCL, the Company's Certificate of Incorporation and any other applicable
law to effect the Merger.
SECTION 6.03. Appropriate Action; Consents; Filings.
(a) The Company and Parent shall use commercially reasonable efforts to
(i) take, or cause to be taken, all appropriate action and do, or cause to be
done, all things necessary, proper or advisable under applicable Law or
otherwise to consummate and make effective the Share Exchange, the Merger and
the other transactions contemplated hereby as promptly as practicable; (ii)
obtain in a timely manner from any Governmental Entities any consents, licenses,
permits, waivers, approvals, authorizations or orders required to be obtained or
made by Parent or the Company or any of their subsidiaries in connection with
the authorization, execution and delivery of this Agreement and the consummation
of the Share Exchange, the Merger and the other transactions contemplated
hereby; and (iii) as promptly as practicable make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement,
the Share Exchange, the Merger or the other transactions contemplated hereby
that are required under (A) the Exchange Act, and any other applicable federal
or state securities laws, (B) the HSR Act and any related governmental request
thereunder, and (C) any other applicable Law; provided that Parent and the
Company shall cooperate with each other in connection with the making of all
such filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Company and Parent shall furnish to each other all information required for
any application or other filing to be made pursuant to the rules and regulations
of any applicable law (including all information required to be included in any
SEC Transaction Filing) in connection with the transactions contemplated by this
Agreement.
(b) Without limiting the generality of their undertakings pursuant to
Section 6.03(a), each party hereto shall (i) use commercially reasonable efforts
to prevent the entry in a judicial or administrative proceeding brought under
any antitrust law by any Governmental Entity with jurisdiction over enforcement
of any applicable antitrust laws or any other party of any permanent or
preliminary injunction or other order that would make consummation of the Share
Exchange, the Merger or any other transaction contemplated hereby in accordance
with the terms of this Agreement (as it may be amended from time to time)
unlawful or would prevent or delay it; and (ii) take promptly, in the event that
such an injunction or order has been issued in such a proceeding, all steps
necessary to take an appeal of such injunction or order.
(c) Notwithstanding anything to the contrary in this Section 6.03, the
parties agree that, in response to any action taken or threatened to be taken by
any court or
- 36 -
Governmental Entity, Parent shall not be required to (i) take any action or
agree to the imposition of any order that would compel Parent or the Company (or
any of their respective subsidiaries) to sell, license or otherwise dispose of,
hold separate or otherwise divest itself of any portion of its respective
business or assets in order to consummate the Share Exchange, the Merger or any
other transaction contemplated hereby or (ii) impose any limitation on Parent's
ability to own or operate the business and operations of the Company and its
Subsidiaries.
(d) (i) Each of Parent and the Company shall give (or shall cause
its respective subsidiaries to give) any notices to third parties and use, and
cause its respective subsidiaries to use, their reasonable best efforts to
obtain any third party consents (A) necessary, proper or advisable to consummate
the transactions contemplated in this Agreement, (B) disclosed or required to be
disclosed in the Company Disclosure Schedule or the Parent Disclosure Schedule
or (C) required to prevent a Company Material Adverse Effect from occurring
prior to or after the Effective Time or a Parent Material Adverse Effect from
occurring after the Effective Time; provided, however, that the Company and its
Subsidiaries shall not be required to, and shall not without the written consent
of Parent, incur fees and expenses in excess of $[100,000] in the aggregate in
order to obtain any such third party consents.
(ii) In the event that either Parent or the Company shall fail
to obtain any third party consent described in subsection (b)(i) above, it shall
use its commercially reasonable efforts, and shall take any such actions
reasonably requested by the other party, to minimize any adverse effect upon the
Company and Parent, their respective subsidiaries, and their respective
businesses resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
(e) From the date of this Agreement until the Effective Time, each
party shall promptly notify the other party in writing of any pending or, to the
knowledge of the first party, threatened action, proceeding or investigation by
any Governmental Entity or any other person (i) challenging or seeking material
damages in connection with the Share Exchange, the Merger or any other
transaction contemplated hereby; or (ii) seeking to restrain or prohibit the
consummation of the Share Exchange, the Merger or any other transaction
contemplated hereby or otherwise limit the right of Parent or, to the knowledge
of such first party, Parent's subsidiaries to own or operate all or any portion
of the businesses or assets of the Company or its Subsidiaries, which in either
case is reasonably likely to have, individually or in the aggregate, a Company
Material Adverse Effect prior to or after the Effective Time, or a Parent
Material Adverse Effect prior to the Effective Time.
(f) Each of the Company and Parent shall keep the other informed of any
material communication, and provide to the other copies of all correspondence
between it (or its advisors) and any Government Entity relating to this
Agreement and shall permit the other to review any material communication to be
given by it to, and shall consult with each other in advance of any telephone
calls, meetings or conferences with, any Government Entity and, to the extent
permitted, give the other party the opportunity to attend and participate in
such telephone calls, meetings and conferences.
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SECTION 6.04. Access to Information; Confidentiality.
(a) From the date hereof to the earlier of the termination of this
Agreement and the Effective Time, upon reasonable notice and subject to
restrictions contained in confidentiality agreements to which the Company is
subject (from which the Company shall use commercially reasonable efforts to be
released), the Company and its subsidiaries will provide to Parent (and its
representatives, advisors, counsel and consultants) full access to the offices
and other facilities and to the books and records of the Company and its
Subsidiaries and all information and documents which Parent may reasonably
request regarding the business, assets, liabilities, employees and other aspects
of the Company, other than information and documents that in the opinion of the
Company's counsel may not be disclosed under applicable law.
(b) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.05. No Solicitation of Competing Transactions. Neither the
Company nor any Subsidiary shall, directly or indirectly, through any officer,
director, agent or otherwise, initiate, solicit or knowingly encourage
(including by way of furnishing non-public information or assistance), or take
any other action to facilitate knowingly, any inquiries about or the making of
any proposal that the Company enter into any Competing Transaction, or enter
into or maintain or continue discussions or negotiate with any person or entity
in furtherance of such inquiries or to obtain a Competing Transaction, or agree
to or endorse any Competing Transaction or withdraw or modify or propose
publicly to withdraw or modify the approval or recommendation of the Board of
Directors of this Agreement, the tender of Shares pursuant to the Share
Exchange, the Merger or any other transaction contemplated hereby, or authorize
or permit any person to take any such action, and the Company shall notify
Parent orally (within one (1) business day) and in writing (as promptly as
practicable) after receipt by any officer or director of the Company or any
Subsidiary or any investment banker, financial advisor or attorney retained by
the Company or any Subsidiary, of any inquiry concerning, or proposal for, a
Competing Transaction, or of any request for nonpublic information relating to
the Company or any of its Subsidiaries either in connection with such an inquiry
or proposal or when such request for nonpublic information could reasonably be
expected to lead to such a proposal, provided, however, that nothing contained
in this Section 6.05 shall prohibit the board of directors of the Company from
(i) furnishing information to, or entering into discussions or negotiations
with, any person or entity that makes an unsolicited, bona fide written proposal
for a Competing Transaction, if, and only to the extent that, (A) the board of
directors of the Company, after consultation with independent legal counsel (who
may be the Company's regularly engaged independent legal counsel), determines in
good faith that such action is necessary for the board of directors of the
Company to comply with its fiduciary duties to stockholders under applicable
law, and, solely with respect to entering into such discussions or negotiations,
the board of directors of the Company determines in good faith, based on the
written opinion of VRC or another nationally recognized financial advisor, that
such
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Competing Transaction is reasonably likely to be more favorable to the Company's
stockholders from a financial point of view than the Share Exchange, the Merger
and the other transactions contemplated hereby and (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, the Company (x) provides at least five (5) business days' notice to
Parent to the effect that it is furnishing information to, or entering into
discussions or negotiations with, such person or entity and provides in any such
notice to Parent in reasonable detail, the identity of the person or entity
making such proposal and the terms and conditions of such proposal and any
material updates with respect thereto, (y) provides Parent with all information
to be provided to such person or entity which Parent has not previously been
provided, and (z) receives from such person or entity an executed
confidentiality agreement in reasonably customary form; (ii) complying with Rule
14e-2 promulgated under the Exchange Act with regard to a third-party tender or
exchange offer, provided, however, that the board of directors of the Company
shall not recommend acceptance of such tender or exchange offer unless, in the
good faith judgment of the board of directors of the Company, after consultation
with independent legal counsel, failure to recommend acceptance would constitute
a violation of its fiduciary duties to the Company's stockholders under
applicable law; or (iii) failing to make or withdrawing or modifying its
recommendation of acceptance of the Share Exchange or the Merger following the
making of an unsolicited, bona fide written proposal relating to a Competing
Transaction if the board of directors of the Company, after consultation with
independent legal counsel (who may be the Company's regularly engaged
independent legal counsel) determines in good faith that such action is
necessary for the board of directors of the Company to comply with its fiduciary
duties to stockholders under applicable law and the board of directors of the
Company determines in good faith, based on the written opinion of a nationally
recognized financial advisor, that such Competing Transaction is reasonably
likely to be more favorable to the Company's stockholders from a financial point
of view than the Share Exchange, the Merger and the other transactions
contemplated hereby. The Company agrees not to release any third party from, or
waive any provision of, any confidentiality or standstill agreement to which the
Company is a party. For purposes of this Agreement, "Competing Transaction"
shall mean: (i) any merger, consolidation, share exchange, business combination,
liquidation, recapitalization or other similar transaction involving the Company
or any Subsidiary; (ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of fifteen percent (25%) or more of the assets of the Company
and the Subsidiaries, taken as a whole, in a single transaction or series of
transactions; (iii) any tender offer or exchange offer for fifteen (25%) or more
of the Shares or the filing of a registration statement under the Securities Act
in connection therewith; (iv) any person having acquired beneficial ownership or
the right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder) having been formed which beneficially owns or has the
right to acquire beneficial ownership of, fifteen (25%) or more of the Shares;
or (v) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. In addition to the
other obligations of the Company set forth in this Section 6.05, the Company
shall promptly advise Parent orally and in writing of any request for
information or other inquiry that the Company reasonably believes could lead to
a Competing Transaction, the terms and conditions of any such request or inquiry
(including any changes thereto) and the identity of
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the person making any such request or inquiry. The Company shall (i) promptly
keep Parent fully informed of the status and details (including any change to
the terms thereof) of any such request or inquiry and (ii) provide to Parent as
soon as practicable after receipt or delivery thereof copies of any written
offer, all correspondence and any other written material sent or provided to the
Company or any of its Subsidiaries from any person that describes any of the
terms or conditions of any such request or inquiry.
SECTION 6.06. Directors' and Officers' Indemnification and Insurance.
(a) The Surviving Corporation shall use commercially reasonable efforts
to maintain in effect for six (6) years from the Effective Time, if available,
(i) directors' and officers' liability insurance covering those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms comparable to those applicable to the then current directors and
officers of Parent; or (ii) the current directors' and officers' liability
insurance policies maintained by the Company with respect to matters occurring
prior to the Effective Time; provided, however, that in no event shall the
Surviving Corporation be required to expend pursuant to this Section 6.06 more
than an amount per year equal to 200% of current annual premiums paid by the
Company for such insurance.
(b) This Section 6.06 shall survive the consummation of the Merger at
the Effective Time, is intended to benefit the Company, the Surviving
Corporation and the present and former directors and officers of the Company
(the "Indemnified Parties"), shall be binding, jointly and severally on all
successors and assigns of the Surviving Corporation, and shall be enforceable by
the Indemnified Parties.
SECTION 6.07. Notification of Certain Matters; Updating of Disclosure
Schedules. (a) Certain Notices. From and after the date of this Agreement until
the Effective Time, each party hereto shall promptly notify the other party
hereto of (a) the occurrence, or nonoccurrence, of any event the occurrence, or
non-occurrence of which would be likely to cause (i) any representation or
warranty made in this Agreement by such party, or any information furnished on
any Schedule in the Parent Disclosure Schedule or the Company Disclosure
Schedule by such party, to be inaccurate either at the time such representation
or warranty is made, or such information is furnished, or at the time of the
occurrence or non-occurrence of such event; or (ii) any failure by such party to
comply with or satisfy any condition to the obligations of such party to effect
the Share Exchange, the Merger and the other transactions contemplated by this
Agreement, or (b) the failure of the Company or Parent, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it pursuant to this Agreement which would be likely to result in
any condition to the obligations of any party to effect the Share Exchange, the
Merger and the other transactions contemplated by this Agreement not to be
satisfied; provided, however, that the delivery of any notice pursuant to this
Section 6.07 shall not be deemed to be an amendment of this Agreement or any
Schedule in the Parent Disclosure Schedule or the Company Disclosure Schedule
and shall not cure any breach of any representation or warranty requiring
disclosure of such matter prior to the date of this
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Agreement. No delivery of any notice pursuant to this Section 6.07 shall limit
or affect the remedies available hereunder to the party receiving such notice.
(b) Updating of Disclosure Schedules. Not later than the fifth business
day prior to the scheduled Closing Date, the Company shall provide updated
disclosure schedules to Parent reflecting any developments between the date
hereof and the Closing Date which are expected to cause any of the
representations of the Company set forth herein to be inaccurate or incomplete
in any respect as of the Closing. Delivery of such updated disclosure schedules
shall not be deemed to update, modify or amend in any respect the
representations and warranties of the Company for purposes of Section 7.04, save
in respect of such matters as fall within the exclusions from the definition of
"Company Material Adverse Effect" set forth in Section 13.1, and, subject to the
foregoing exception, Parent shall retain all of its rights under Section 7.04
based on the representations and warranties of the Company contained herein, as
modified by the disclosure schedules delivered on the date hereof. If Parent
elects to consummate the Closing notwithstanding the matters disclosed on such
updated disclosure schedules, then the representations and warranties of the
Company and shall be deemed modified for purposes of Article IX solely to the
extent of matters that both (a) are expressly disclosed on the respective
updated schedules and (b) relate solely to matters intervening between the date
hereof and the Closing Date that cause a representation which is true and
correct as of the date hereof not to be correct when given as of the Closing
Date. The modification provided for in the preceding sentence shall not apply to
a matter insofar as knowledge acquired between the date hereof and Closing
causes a representation or warranty to be known to have been incorrect as of the
date hereof.
SECTION 6.08. Public Announcements. Parent and the Company shall
consult with each other before issuing any press release or otherwise making any
public statements with respect to this Agreement or the Share Exchange, the
Merger and the other transactions contemplated hereby and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by Law. The parties have agreed on the text of a joint
press release by which Parent and the Company will announce the execution of
this Agreement.
SECTION 6.09. State Takeover Laws. If any "fair price," "moratorium,"
"control share acquisition," "interested stockholder" or other similar
anti-takeover statute or regulation (each a "Takeover Statute") (including the
Interested Stockholder Statute) is or may become applicable to the Merger or the
other transactions contemplated by this Agreement, each of Parent and the
Company shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement, and otherwise act to eliminate or minimize
the effects of such Takeover Statutes.
SECTION 6.10. Additional Company SEC Reports; Financial Statements.
From and after the date of this Agreement until the Effective Time, (i) the
Company shall file all forms, reports and documents required to be filed by it
with the SEC; (ii) each of such forms shall be prepared in accordance with the
requirements of the Securities Act and the Exchange Act, as the case may be, and
the rules and regulations thereunder; (iii) each of
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such forms will not at the time they are filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading; and (iv) each of such
forms will not at the time they are filed omit any documents required to be
filed as exhibits thereto. Each of the consolidated financial statements
(including, in each case, the notes thereto) contained in the SEC reports
referred to in the previous sentence shall be prepared in accordance with GAAP
(except as may be indicated in the notes thereto) and each will fairly present
the consolidated financial position, results of operations and cash flows of the
Company and the consolidated Subsidiaries as at the respective dates thereof and
for the respective periods indicated therein in accordance with GAAP (subject,
in the case of unaudited statements, to normal and recurring quarterly and/or
year-end adjustments which are not expected to be material in amount).
ARTICLE VII
CONDITIONS
SECTION 7.01. Conditions to the Obligations of Each Party to the Share
Exchange. The obligations of Parent, ▇▇▇▇▇▇▇ and SEF to consummate the Share
Exchange shall be subject to the satisfaction each of the conditions set forth
in Sections 7.02, 7.03 and 7.04 following, save for those conditions which can
only be satisfied by a delivery made at the Merger Closing. In addition, the
obligations of Parent to consummate the Share Exchange shall be subject to the
satisfaction of the condition that each of the representations of ▇▇▇▇▇▇▇ and
SEF in Section 1.01(d) be true and correct as of the Share Exchange Closing as
if made on the Closing Date.
SECTION 7.02. Conditions to the Obligations of Each Party to the
Merger. The obligations of the Company, Parent and Acquisition Sub to consummate
the Merger are subject to the satisfaction of the following conditions:
(a) this Agreement (insofar as it relates to the Merger) and
the Merger contemplated hereby shall have been approved and adopted by
the requisite affirmative vote or consent of the stockholders of the
Company in accordance with the DGCL and the Company's Certificate of
Incorporation;
(b) ▇▇▇▇▇▇▇ and SEF shall have delivered the Exchange Shares
to Parent and Parent shall have issued the Share Exchange
Consideration to ▇▇▇▇▇▇▇ and SEF as contemplated by Section 1.01;
(c) all conditions to the consummation of the transactions
contemplated by the Investment Agreement shall have been satisfied
(or, to the extent permitted thereby, waived), save for (i) the
Closing hereunder, (ii) the consummation of the transactions
contemplated by the Protek Agreement, and (iii) those conditions which
- 42 -
could only be satisfied by deliveries made at the closing under the
Investment Agreement;
(d) all conditions to the consummation of the transactions
contemplated by the Protek Agreement shall have been satisfied (or, to
the extent permitted thereby, waived), save for (i) the Closing
hereunder, (ii) the consummation of the Investment Agreement, and (iii)
those conditions which could only be satisfied by deliveries made at
the closing under the Protek Agreement;
(e) the Dissenting Shares shall not include more than (a) 5%
of the shares of ▇▇▇▇▇▇ Common Stock outstanding as of the Effective
Time (including Exchanged Shares) nor (b) 5% of the outstanding shares
of ▇▇▇▇▇▇ Series F Preferred Stock outstanding as of the Effective
Time (including Exchanged Shares); and
(f) no order, stay, decree, judgment or injunction shall have
been entered, issued or enforced, by any Governmental Entity or court
of competent jurisdiction which prohibits consummation of the Merger
or any other transaction contemplated hereby, and there shall not be
any action taken, or any statute, rule, regulation or order enacted,
entered, enforced or deemed applicable to the Merger or any other
transaction contemplated hereby, which makes the consummation of the
Merger or any other transaction contemplated hereby illegal or
substantially deprives the Parent of any of the anticipated benefits
of the Merger or any other transaction contemplated hereby.
SECTION 7.03. Conditions to the Obligations of the Company Concerning
the Merger. The obligations of the Company to consummate the Merger are subject
to the satisfaction of the following conditions:
(a) The representations and warranties of Parent and
Acquisition Sub contained in this Agreement (i) to the extent
qualified by materiality or Material Adverse Effect shall be true and
correct in all respects at and as of the date of this Agreement and as
if made on and as of the Effective Time (other than those
representations and warranties which address matters only as of a
certain date, which shall be true and correct as of such certain
date), (ii) to the extent not qualified by materiality or Material
Adverse Effect (other than Section 4.02) shall be true and correct in
all material respects at and as of the date of this Agreement and as
if made on and as of the Effective Time (other than those
representations and warranties which address matters only as of a
certain date, which shall be true and correct as of such certain
date), and (iii) to the extent contained in Section 4.02 shall be true
and correct in all respects at and as of the date of this Agreement
and as if made on and as of the Effective Time (other than those
representations and warranties which address matters only as of a
certain date, which shall be true and correct as of such certain
date);
(b) Parent and Acquisition Sub shall have fully performed in
all material respects each of their covenants set forth in this
Agreement; and
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(c) Parent and Acquisition Sub shall have delivered to the
Company a certificate of an authorized officer of each of them, in
form and substance satisfactory to the Company, as to the satisfaction
of the conditions set forth in paragraphs (a) and (b) preceding.
SECTION 7.04. Conditions to the Obligations of Parent and Acquisition
Sub Concerning the Merger. The obligations of Parent and Acquisition Sub to
consummate the Merger are subject to the satisfaction of the following
conditions:
(a) The representations and warranties of the Company
contained in this Agreement (i) to the extent qualified by materiality
or Material Adverse Effect shall be true and correct in all respects at
and as of the date of this Agreement and as if made on and as of the
Effective Time (other than those representations and warranties which
address matters only as of a certain date, which shall be true and
correct as of such certain date), (ii) to the extent not qualified by
materiality or Material Adverse Effect (other than Section 3.03) shall
be true and correct in all material respects at and as of the date of
this Agreement and as if made on and as of the Effective Time (other
than those representations and warranties which address matters only as
of a certain date, which shall be true and correct as of such certain
date), and (iii) to the extent contained in Section 3.03 shall be true
and correct in all respects at and as of the date of this Agreement and
as if made on and as of the Effective Time (other than those
representations and warranties which address matters only as of a
certain date, which shall be true and correct as of such certain date),
provided, however, that no representation or warranty shall be deemed
to be untrue or incorrect as of the Effective Time on the basis of the
existence, settlement or resolution of any Specified Litigation;
(b) The Company shall have fully performed in all material
respects each of its covenants set forth in this Agreement;
(c) The Company shall have delivered to Parent and Acquisition
Sub a certificate of an authorized officer of the Company, in form and
substance satisfactory to Parent and Acquisition Sub, as to the
satisfaction of the conditions set forth in paragraphs (a) and (b)
preceding;
(d) The Company shall have obtained a written consent and
waiver agreement from Silicon Valley Bank and the United States Export
Import Bank consenting to the execution, delivery and performance of
this Agreement and each other Transaction Agreement and waiving any
default in respect of the same; and
(e) There shall not have occurred after the date hereof, or as
of the Closing Date, any occurrence that has or would reasonably be
expected to have a Company Material Adverse Effect, and the aggregate
amount of all claims by Parent Indemnitees for indemnification under
Section 9.01(d) made prior to the Closing Date
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shall not exceed, after giving effect to the limitations on
indemnification in Section 9.01(e) and to all offsets pursuant to
Section 9.04, $1,000,000.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Share Exchange, the Merger and the other transactions contemplated hereby may be
abandoned at any time prior to the Effective Time, notwithstanding any requisite
approval and adoption of this Agreement and the transactions contemplated hereby
by the stockholders of the Company:
(a) by mutual written consent duly authorized by the boards of
directors of each of Parent, Acquisition Sub and the Company; or
(b) by either Parent or the Company if a court of competent
jurisdiction or other Governmental Entity shall have issued, enacted,
promulgated, or enforced any law, order, judgment, decree, injunction or ruling
or taken any other action (that has not been vacated, withdrawn or overturned),
in each case permanently restraining, enjoining or otherwise prohibiting the
Share Exchange, the Merger or any other transaction contemplated hereby, and
such law, order, judgment, ruling, injunction, order or decree shall have become
final and nonappealable; provided, that the party seeking to terminate pursuant
to this Section 8.01(b) shall have used its reasonable best efforts to challenge
such law, order, judgment, decree, injunctions or ruling;
(c) by Parent or the Company, if the Effective Time shall not have
occurred on or prior to September 30, 2004 (the "Termination Date"); provided
that the right to terminate this Agreement pursuant to this Section 8.01(c)
shall not be available to the Parent or the Company if such party shall have
materially breached this Agreement, or if the failure of the Effective Time to
have occurred by the Termination Date is the result of a material breach of this
Agreement by the party seeking to terminate this Agreement;
(d) by the Company, if there shall have occurred, on the part of Parent
or Acquisition Sub, a breach of any representation, warranty, covenant or
agreement contained in this Agreement that (x) would result in a failure of a
condition set forth in Section 7.03(a) or 7.03(b) and (y) which is not curable
or, if curable, is not cured within thirty (30) calendar days after written
notice of such breach is given by the Company to Parent;
(e) by Parent, if there shall have occurred, on the part of the
Company, a breach of any representation, warranty, covenant or agreement
contained in this Agreement that (x) would result in a failure of a condition
set forth in Section 7.04(a) or 7.04(b) and (y) which is not curable or, if
curable, is not cured within thirty (30) calendar days after written notice of
such breach is given by Parent to the Company;
- 45 -
(f) by Parent, if (i) the Company's board of directors or any committee
thereof shall have withdrawn, modified, changed or failed to publicly affirm,
within ten (10) days after the Parent's reasonable request, its approval or
recommendation in respect of this Agreement, the Merger or the Share Exchange in
a manner adverse to the Merger or the Share Exchange, or to Parent or
Acquisition Sub, (ii) the Company's board of directors or any committee thereof
shall have recommended any Competing Transaction, the Company enters into an
agreement relating to the Company Transaction or the Company shall have
consummated a Competing Transaction; (iii) the Company shall have violated or
breached in any material respect any of its obligations under Section 6.05 or
(iv) the board of directors of the Company or any committee thereof shall have
resolved to take any of the foregoing actions;
(g) by the Company, if the board of directors of the Company or any
committee thereof, after compliance with its obligations under Section 6.05,
shall have recommended or resolved to recommend to the stockholders of the
Company a proposal for a Competing Transaction under circumstances where a
majority of such directors reasonably determines in good faith (i) after
consultation with independent legal counsel, that failure to accept such
proposal would be a breach of the fiduciary duty of such directors and (ii)
based on the written opinion of a nationally recognized financial advisor, that
such Competing Transaction is reasonably likely to be more favorable to the
Company's stockholders from a financial point of view than the Merger; provided
that any termination of this Agreement by the Company pursuant to this Section
8.01(g) shall not be effective unless and until (A) the board of directors of
the Company has provided Parent with written notice that the Company intends to
enter into a binding written agreement in respect of such Competing Transaction,
(B) the Company shall have attached the most current written version of such
Competing Transaction to such notice, and (C) Parent does not make, within five
(5) days after receipt of the Company's written notice, an offer that the board
of directors of the Company shall have determined in good faith (after
consultation with its aforementioned outside legal and financial advisors) is as
favorable to the stockholders of the Company as such Competing Transaction.
SECTION 8.02. Effect of Termination. Except as provided in Section
10.01, Section 6.04, this Section 8.02, Article X, in the event of the
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
Parent, Acquisition Sub, the Company, ▇▇▇▇▇▇▇, SEF or any of their respective
officers or directors. Nothing contained in this Section 8.02 shall relieve any
party from liability for any material breach of this Agreement.
SECTION 8.03. Fees and Expenses.
(a) Upon a termination of this Agreement pursuant to Sections 8.01(f)
or (g), the fees described in the Transaction Support Agreement shall be
payable, subject to the terms and conditions set forth therein.
(b) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Share Exchange, the Merger or
any other
- 46 -
transaction contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Share Exchange, the Merger or any other transaction
contemplated hereby is consummated.
SECTION 8.04. Amendment. This Agreement may be amended by Parent and
the Company by action taken by or on behalf of their respective boards of
directors at any time prior to the Effective Time; provided, however, that (a)
after the approval and adoption of this Agreement and the transactions
contemplated hereby by the stockholders of the Company, if required, no
amendment may be made which would reduce the per share amount or change the type
of consideration into which each Share shall be converted upon consummation of
the Merger, (b) no provision of Section 1.01 hereof may be amended without the
written consent of ▇▇▇▇▇▇▇ and SEF, (c) no amendment which otherwise adversely
affects the rights and obligations of ▇▇▇▇▇▇▇ and SEF hereunder may be made
without the written consent of ▇▇▇▇▇▇▇ and SEF, and (d) the rights of amendment
provided for hereunder are acknowledged to be subject to certain provisions of a
Transaction Support Agreement of even date herewith among the parties to this
Agreement, the Investment Agreement and the Protek Agreement. This Agreement may
not be amended prior to the Effective Time except by an instrument in writing
signed by the parties hereto provided for in the preceding sentence. This
Agreement may be amended after the Effective Time by the written consent of
Parent, ▇▇▇▇▇▇▇ and Series F Holders holding a majority in interest of all
shares of ▇▇▇▇▇▇ Series F Preferred Stock held by Series F Holders immediately
prior to the Effective Time.
SECTION 8.05. Waiver. Any party hereto may, to the extent legally
allowed, (a) extend the time for the performance of any obligation or other act
of any other party hereto, (b) waive any inaccuracy in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby. Such rights of waiver shall
be subject to the provisions of the Transaction Support Agreement.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Indemnification of Parent by ▇▇▇▇▇▇▇, SEF and the Series
F Holders.
(a) Subject to the limitations and expiration dates contained in
Section 10.01 and in this Article 9, ▇▇▇▇▇▇▇, SEF and each Series F Holder (or,
if the Closing shall not have occurred, the Company) shall, severally but not
jointly, indemnify, defend and hold harmless Parent and its respective
directors, officers, managers, employees, equity holders, agents, Affiliates
(including upon Closing the Company and the Subsidiaries), successors and
permitted assigns (collectively, the "Parent Indemnitees") and each of them from
and against, and shall pay and/or reimburse the foregoing Persons for, any and
all losses, Liabilities, claims, obligations, damages and costs and expenses
(including reasonable
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attorneys' fees and disbursements and other costs incurred or sustained by an
Indemnitee in connection with the investigation, defense or prosecution of any
such claim or any action or proceeding between the Indemnitee and the
Indemnifying Party or between the Indemnitee and any third party or otherwise),
whether or not involving a third-party claim (collectively, "Losses"), relating
to or arising out of the breach of any representation, warranty, covenant or
agreement of the Company, ▇▇▇▇▇▇▇ or SEF contained in this Agreement.
(b) Except as set forth in the second sentence of this paragraph and
subject to the additional limitations set forth in Section 9.01(c), ▇▇▇▇▇▇▇, SEF
and the Series F Holders (or, if closing shall not have occurred, the Company)
shall not be required to indemnify the Parent Indemnitees with respect to any
claim for indemnification pursuant to Section 9.01(a) unless and until the
aggregate amount of all claims against ▇▇▇▇▇▇▇, SEF and the Series F Holders
(or, if Closing shall not have occurred, the Company) under Section 9.01(a)
exceeds $250,000, at which point ▇▇▇▇▇▇▇, SEF and the Series F Holders (or, if
Closing shall not have occurred, the Company) shall be liable for the full
amount of all such Losses. The amount of the indemnifiable portion of any Loss
for which indemnification is sought under Section 9.01(a) shall be allocated
among ▇▇▇▇▇▇▇, SEF and the Series F Holders as follows: (a) 49.8%(the "▇▇▇▇▇▇▇
Indemnification Percentage") to ▇▇▇▇▇▇▇ and SEF, pro rata to their ownership of
▇▇▇▇▇▇ Series F Preferred Stock immediately prior to consummation of the Share
Exchange, to the extent there are assets available therefor in the ▇▇▇▇▇▇▇
Escrow, and (b) 50.2%(the "Series F Indemnification Percentage") to the Series F
Holders, pro rata to their ownership of ▇▇▇▇▇▇ Series F Preferred Stock
immediately prior to the Effective Time, to the extent there are assets
available therefor in the General Escrow. The limitations in the preceding
sentence shall not limit in any way (a) the rights of the Parent Indemnitees to
indemnification in respect of any remedies in respect of any inaccuracies in the
representations and warranties contained in Sections 4.1, 4.2, 4.4 and Section
5, nor (b) the remedies of the Parent Indemnitees in respect of fraud or willful
misrepresentation.
(c) The sole remedy of any Parent Indemnitee in respect of any claim
for indemnification against ▇▇▇▇▇▇▇, SEF or the Series F Holders under Section
9.01(a) (absent fraud by such entity and except in respect of any remedies in
respect of any inaccuracies in the representations and warranties contained in
Section 1.01(d)) shall be the right of Parent, exercisable on its own behalf or
on behalf of the other Parent Indemnitees, to cause the forfeiture to Parent of
such cash or shares of Parent capital stock as are held by the Escrow Agent in
the General Escrow in respect of such Series F Holder and in the ▇▇▇▇▇▇▇ Escrow
in respect of ▇▇▇▇▇▇▇ or SEF, as the case may be. For the purpose of avoidance
of doubt, (i) the aggregate liability of the Series F Holders in respect of any
claim for indemnification under Section 9.01(a) shall in no event exceed the
Series F Indemnification Percentage of such claim, (ii) the aggregate liability
of ▇▇▇▇▇▇▇ and SEF in respect of any claim for indemnification under Section
9.01(a) shall in no event exceed the ▇▇▇▇▇▇▇ Indemnification Percentage of such
claim, and (iii) if the cash remaining in the ▇▇▇▇▇▇▇ Escrow is insufficient to
fund the ▇▇▇▇▇▇▇ Percentage of such claim, the Parent Indemnitees shall not be
entitled to indemnification from ▇▇▇▇▇▇▇, SEF or any Series F Holder in respect
of such shortfall, notwithstanding that assets may remain in the General Escrow.
- 48 -
(d) Subject to the limitations and expiration dates contained in
Section 10.01 and in this Article 9, ▇▇▇▇▇▇▇, SEF and each Series F Holder (or,
if the Closing shall not have occurred, the Company) shall, severally but not
jointly, indemnify, defend and hold harmless the Parent Indemnitees and each of
them from and against, and shall pay and/or reimburse the foregoing Persons for,
66.67% of any and all Losses relating to or arising out of any Specified
Litigation.
(e) Except as set forth in the second sentence of this paragraph and
subject to the additional limitations set forth in Section 9.01(f), ▇▇▇▇▇▇▇, SEF
and the Series F Holders (or, if closing shall not have occurred, the Company)
shall not be required to indemnify the Parent Indemnitees with respect to any
claim for indemnification pursuant to Section 9.01(d) unless and until the
aggregate amount of all claims against ▇▇▇▇▇▇▇, SEF and the Series F Holders
(or, if Closing shall not have occurred, the Company) under Section 9.01(d)
exceeds $250,000, at which point ▇▇▇▇▇▇▇, SEF and the Series F Holders (or, if
Closing shall not have occurred, the Company) shall be liable for 66.67% of the
excess of the full amount of all such Losses over $250,000. The amount of the
indemnifiable portion of any Loss for which indemnification is sought under
Section 9.01(d) shall be allocated among ▇▇▇▇▇▇▇, SEF and the Series F Holders
as follows: (a) the ▇▇▇▇▇▇▇ Indemnification Percentage to ▇▇▇▇▇▇▇ and SEF, to
the extent there are assets available therefor in the ▇▇▇▇▇▇▇ Escrow, pro rata
to their ownership of ▇▇▇▇▇▇ Series F Preferred Stock immediately prior to
consummation of the Share Exchange, and (b) the Series F Indemnification
Percentage to the Series F Holders, to the extent there are assets available
therefor in the Special Escrow, pro rata to their ownership of ▇▇▇▇▇▇ Series F
Preferred Stock immediately prior to the Effective Time.
(f) The sole remedy of any Parent Indemnitee in respect of any claim
for indemnification against ▇▇▇▇▇▇▇, SEF or the Series F Holders under Section
9.01(d) or otherwise relating to or arising out of any Specified Litigation
shall be the right of Parent, exercisable on its own behalf or on behalf of the
other Parent Indemnitees, to cause the forfeiture to Parent of such cash or
shares of Parent capital stock as are held as are held by the Escrow Agent in
the Special Escrow in respect of such Series F Holder and in the ▇▇▇▇▇▇▇ Escrow
in respect of ▇▇▇▇▇▇▇ or SEF, as the case may be. For the purpose of avoidance
of doubt, (i) the aggregate liability of the Series F Holders in respect of any
claim for indemnification under Section 9.01(d) shall in no event exceed the
Series F Indemnification Percentage of such claim, (ii) the aggregate liability
of ▇▇▇▇▇▇▇ and SEF in respect of any claim for indemnification under Section
9.01(d) shall in no event exceed the ▇▇▇▇▇▇▇ Indemnification Percentage of such
claim, and (iii) if the cash remaining in the ▇▇▇▇▇▇▇ Escrow is insufficient to
fund the ▇▇▇▇▇▇▇ Percentage of such claim, the Parent Indemnitees shall not be
entitled to indemnification from ▇▇▇▇▇▇▇, SEF or any Series F Holder in respect
of such shortfall, notwithstanding that assets may remain in the Special Escrow.
(g) For avoidance of doubt, in no event shall the aggregate liability
of ▇▇▇▇▇▇▇ and SEF in respect of all claims for indemnification brought by
Parent Indemnitees under Article 9 exceed the amount of the ▇▇▇▇▇▇▇ Escrow.
- 49 -
SECTION 9.02. Indemnification of ▇▇▇▇▇▇▇, SEF and the Series F Holders
by Parent.
(a) Subject to the limitations and expiration dates contained in
Section 10.01 and in this Article 9 and the rights of the Investor Indemnified
Parties (as defined in the Investment Agreement) pursuant to Section 8.2(a) of
the Investment Agreement, Parent and Acquisition Sub shall, jointly and
severally, indemnify, defend and hold harmless ▇▇▇▇▇▇▇, SEF and the Series F
Holders (and if the Closing shall not have occurred, the Company) and each of
their respective directors, officers, managers, employees, equity holders,
agents, Affiliates, successors and permitted assigns (collectively, the "Company
Indemnitees") and each of them from and against, and shall pay and/or reimburse
the foregoing Persons for, any and all Losses, relating to or arising out of the
breach of any representation, warranty, covenant or agreement of the Parent or
Acquisition Sub contained in this Agreement.
(b) Except as set forth in the second sentence of this paragraph,
Parent and Acquisition Sub shall not be required to indemnify the Company
Indemnitees with respect to any claim for indemnification pursuant to Section
9.02(a) unless and until the aggregate amount of all claims against Parent and
Acquisition Sub under Section 9.02(a) exceeds $250,000, at which point Parent
and Acquisition Sub shall be liable for the full amount of all such Losses;
provided, however, that the aggregate liability of Parent and Acquisition Sub to
the Company Indemnitees shall in no event exceed $966,916. The limitations in
the preceding sentence shall not limit in any way the remedies of the Company
Indemnitees in respect of fraud or willful misrepresentation.
SECTION 9.03. Procedures. If any party (the "Indemnitee") receives
notice of any claim or the commencement of any action or proceeding with respect
to which the other party (or parties) is obligated to provide indemnification
(the "Indemnifying Party") pursuant to Sections 9.01 or 9.02, the Indemnitee
shall give the Indemnifying Party written notice thereof within a reasonable
period of time following the Indemnitee's receipt of such notice. Such notice
shall describe the claim in reasonable detail and shall indicate the amount
(estimated if necessary) of the Losses that have been or may be sustained by the
Indemnitee. The Indemnifying Party may, subject to the other provisions of this
Section 9.03, compromise or defend, at such Indemnifying Party's own expense and
by such Indemnifying Party's own counsel, any such matter involving the asserted
Liabilities of the Indemnitee in respect of a third-party claim. If the
Indemnifying Party elects to compromise or defend such asserted Liabilities, it
shall within thirty (30) days (or sooner, if the nature of the asserted
Liabilities so requires) notify the Indemnitee of its intent to do so, and the
Indemnitee, shall reasonably cooperate, at the request and reasonable expense of
the Indemnifying Party, in the compromise of, or defense against, such asserted
Liabilities. The Indemnifying Party will not be released from any obligation to
indemnify the Indemnitee hereunder with respect to a claim without the prior
written consent of the Indemnitee, unless the Indemnifying Party delivers to the
Indemnitee a duly executed agreement settling or compromising such claim with no
monetary liability to or injunctive relief against the Indemnitee and a complete
release of the Indemnitee with respect thereto. The Indemnifying Party shall
have the right to conduct and control the defense of any third-party claim made
for which it has been provided notice hereunder, other than a third-party claim
with respect to breach of a representation or warranty contained in Section
3.15, which shall
- 50 -
be conducted and controlled by the Company, provided, that the Company shall act
reasonably and in good faith in the conduct and control thereof and shall
consult with the Indemnifying Parties with respect thereto. All costs and fees
incurred with respect to any such claim will be borne by the Indemnifying Party.
The Indemnitee will have the right to participate, but not control, at its own
expense, the defense or settlement of any such claim; provided, that if the
Indemnitee and the Indemnifying Party shall have conflicting claims or defenses,
the Indemnifying Party shall not have control of such conflicting claims or
defenses and the Indemnitee shall be entitled to appoint a separate counsel for
such claims and defenses at the cost and expense of the Indemnifying Party. If
the Indemnifying Party chooses to defend any claim, the Indemnitee shall make
available to the Indemnifying Party any books, records or other documents within
its control that are reasonably required for such defense.
SECTION 9.04. Reduction by Insurance Recoveries.
(a) Any payment made to an Indemnitee hereunder shall be net of any
insurance proceeds realized by and paid to such Indemnitee in respect of the
respective claim (after giving effect to the present value of any costs,
increased retentions, premium increases and similar present and future costs and
expenses associated with the respective insurance claim). No Indemnitee shall be
obligated to make any claim under an insurance policy if the Indemnitee, in its
reasonable judgment, believes that the cost of pursuing such insurance claim,
together with any corresponding increase in premiums or other costs or expenses,
would exceed the value of the claim for which such Indemnitee is seeking
indemnification. No Indemnitee shall have any obligation to bring litigation
against an insurer or take other action in respect of any insurer's denial,
whether in whole or in part, of a claim.
(b) No Indemnitee shall be obligated to recover from or pursue payment
from insurance policies prior to the Indemnifying Person being required to
provide indemnification hereunder. The Indemnitee shall provide the Indemnifying
Person with prompt written notice of any receipt of insurance proceeds realized
in respect of claims for which payment of indemnity has previously been made,
and shall make prompt delivery to the Indemnifying Person of such portion of the
same as equals the amount by which payment of indemnification would have been
reduced pursuant to Section 9.04(a) if such proceeds had been realized prior to
the making of such payment of indemnification.
SECTION 9.05. Stockholders' Representative. ▇▇▇▇▇▇▇ and SEF by their
execution hereof, and each Series F Holder, by their acceptance of the Merger
Consideration, shall be deemed to have designated and appointed ▇▇▇▇▇▇▇ Brothers
LLC (the "▇▇▇▇▇▇▇ Designee") and a party to be named by written consent of
Series F Holders holding a majority of the shares of Series F Preferred Stock
held by the Series F Holders (the "Series F Designee") with full power of
substitution (jointly, the "Stockholders' Representative") as the representative
of each such stockholder, to perform all such acts as are required, authorized
or contemplated by this Agreement and by the Escrow Agreement to be performed by
them pursuant to Section 2.05 and Article IX hereof and the Escrow Agreement,
and hereby acknowledges that the Stockholders' Representative shall be the only
person authorized to take any action so required, authorized or contemplated by
- 51 -
Section 2.05 and Article IX hereof and the Escrow Agreement. Prior to the date
on which all funds in the ▇▇▇▇▇▇▇ Escrow shall have been exhausted by delivery
to Parent Indemnitees, both the ▇▇▇▇▇▇▇ Designee and the Series F Designee shall
be required to sign any instruction or other instrument on behalf of the
Stockholders Representative for such instrument to be effective. The ▇▇▇▇▇▇▇
Designee or its designated successor (as appointed by ▇▇▇▇▇▇▇) shall be deemed
to have ceased to be included in the definition of the Stockholders'
Representative on such date as all funds in the ▇▇▇▇▇▇▇ Escrow have been
exhausted, and thereafter the Seires F Designee or its designated successor
shall have sole authority to act as Stockholders' Representative except to the
extent any action undertaken or proposed to be undertaken under such sole
authority could reasonably be expected to adversely affect ▇▇▇▇▇▇▇ or SEF, in
which case the consent of ▇▇▇▇▇▇▇ shall be required. The Stockholders'
Representative shall act as the representative of ▇▇▇▇▇▇▇, SEF, and each Series
F Holders under Section 2.05 and this Article IX and the Escrow Agreement, and
shall be authorized to act on behalf of ▇▇▇▇▇▇▇, SEF, and each Series F Holders
and to take any and all actions required or permitted to be taken by the
Stockholders' Representative under Section 2.05 and this Article IX or the
Escrow Agreement with respect to any claims (including the settlement thereof)
made by any Parent Indemnitees for indemnification pursuant to Section 2.05 and
this Article IX of the Agreement and with respect to any actions to be taken by
the Stockholders' Representative pursuant to the terms of the Escrow Agreement.
▇▇▇▇▇▇▇, SEF, and each Series F Holders shall be bound by all actions taken by
the Stockholders' Representative in its capacity thereof. The Stockholders'
Representative shall promptly, and in any event within five business days,
provide written notice to ▇▇▇▇▇▇▇, SEF, and each Series F Holders of any action
taken on behalf of ▇▇▇▇▇▇▇, SEF, and each Series F Holders by the Stockholders'
Representative pursuant to the authority delegated to the Stockholders'
Representative under this Section 9.05. Each of ▇▇▇▇▇▇▇, SEF and the Series F
Holders is thereby deemed to have further acknowledged that the foregoing
appointment and designation shall be deemed to be coupled with an interest and
shall survive the death or incapacity of such stockholder. Each of ▇▇▇▇▇▇▇, SEF
and the Series F Holders is thereby deemed to have authorized the other parties
hereto to disregard any notice or other action taken by such stockholder
pursuant to Section 2.05 and Article IX hereof and the Escrow Agreement except
for the Stockholders' Representative. The other parties hereto are and will be
entitled to rely on any action so taken or any notice given by the Stockholders'
Representative and are and will be entitled and authorized to give notices only
to the Stockholders' Representative for any notice contemplated by Section 2.05
and Article IX hereof and the Escrow Agreement to be given to any such
stockholder. The Stockholders' Representative may be replaced, and any successor
thereto appointed, by written consent executed by (a) ▇▇▇▇▇▇▇ in respect of the
▇▇▇▇▇▇▇ Designee and its designated successors and (b) Series F Holders holding
a majority of the shares of ▇▇▇▇▇▇ Series F Preferred Stock held by all Series F
Holders as of the Effective Time in respect of the Series F Designee and his
designated successors, with such written consent to be delivered to Parent and
the Escrow Agent not later than the fifth business day after the execution and
delivery thereof. The Stockholders' Representative shall not be liable for any
act done or omitted in such capacity while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted pursuant to the
advise of counsel shall be conclusive evidence of such good faith. ▇▇▇▇▇▇▇, SEF
and each Series F Holder shall, by their execution hereof or their acceptance of
the Merger
- 52 -
Consideration, as the case may be, be deemed to have agreed to severally
indemnify the Stockholders' Representative and hold it harmless against any
loss, liability or expense incurred without gross negligence or bad faith on the
part of the Stockholders' Representative and arising out of or in connection
with the acceptance or administration each of their duties hereunder. For the
avoidance of doubt, the Stockholders' Representative is not authorized to take
any action in the name of ▇▇▇▇▇▇▇, SEF or any Series F Holder other than as
expressly required, authorized or contemplated by Section 2.05 and Article IX
hereof and the Escrow Agreement, and shall not have authority to enter into any
amendment, waiver or modification of this Agreement (including Section 2.05 and
Article IX hereof), which amendments, waivers and modifications are solely
governed by Section 8.04.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.01. Survival of Representations and Warranties. The
representations and warranties in this Agreement shall survive until the
thirtieth day after the receipt of the audited financial statements for the
Company for the fiscal year ended December 31, 2005 or the earlier termination
of this Agreement pursuant to Section 8.01, as the case may be. The agreements
and covenants set forth in this Agreement shall survive the Closing until the
performance thereof, and those set forth in Sections 6.08, 8.02, 8.03, Article
IX and Article X shall survive termination of this Agreement indefinitely.
SECTION 10.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
facsimile, telegram or telex or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 10.02):
if to Parent or Acquisition Sub after the Effective Time, in care of:
Quadrangle Group LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
Weil, Gotshal & ▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
- 53 -
if to the Company:
Chief Executive Officer
▇▇▇▇▇▇ Technologies, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Building
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 10.03. Certain Definitions; Interpretation.
(a) For purposes of this Agreement and its Exhibits and
schedules, the following terms shall have the following meanings unless the
context otherwise clearly requires:
"13E-3" shall have the meaning given to it in Section 3.08.
"Acquisition Sub" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"affiliate" of a specified person means a person who directly
or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, such specified person;
"Agreement" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"▇▇▇▇▇▇▇" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"beneficial owner" with respect to any shares means a person
who shall be deemed to be the beneficial owner of such shares (i) which
such person or any of its affiliates or associates (as such term is
defined in Rule 12b-2 promulgated under the Exchange Act) beneficially
owns, directly or indirectly; (ii) which such person or any of its
affiliates or associates has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or subject only
to the passage of
- 54 -
time), pursuant to any agreement, arrangement or understanding or upon
the exercise of consideration rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding; or (iii) which are
beneficially owned, directly or indirectly, by any other persons with
whom such person or any of its affiliates or associates or any person
with whom such person or any of its affiliates or associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any such shares;
"business day" means any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings or, in the case
of determining a date when any payment is due, any day on which banks
are not required or authorized to close in the City of New York, New
York;
"Bridge Loan Facility" means that certain Working Capital
Facility Agreement of even date herewith between the Company and
Protek, together with the other instruments and agreements contemplated
thereby.
"Certificate of Merger" shall have the meaning given to it in
Section 1.03;
"Closing" shall have the meaning given to it in Section 1.03;
"Code" shall have the meaning given to it in Section 2.03(h);
"Company" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"Company 2003 Balance Sheet" shall have the meaning given to
it in Section 3.07;
"Company Disclosure Schedule" shall have the meaning given to
it in Section 3.01;
"Company Indemnitees" shall have the meaning given to it in
Section 9.02;
"Company Intellectual Property" shall have the meaning given
to it in Section 3.14(a);
"Company Material Adverse Effect" shall mean any material
adverse change in or effect upon the financial condition, business,
operations or assets of the Company and its Subsidiaries taken as a
whole, or upon the ability of the Company to consummate the
transactions contemplated hereby, other than
(a) changes of a general economic character
applicable to all industries in a material region of
the operations of the Company and Company Subs;
- 55 -
(b) changes resulting from the performance by the
Company of its express obligations under this
Agreement;
(c) changes resulting from actions consented to by
Buyer under Section 5.01;
(d) changes resulting from the incurrence of Company
Transaction Expenses;
(e) changes resulting from or relating to any
Specified Litigation; and
(f) the realization of any contingent liability expressly
disclosed in the Company Disclosure Schedules, but
solely if and to the extent of the specific dollar
amount of such liability disclosed on such Schedule.
"Company Options" shall have the meaning given to it in
Section 2.04(b);
"Company Permits" shall have the meaning given to it in
Section 3.06;
"Company Proxy Statement" shall have the meaning given to it
in Section 3.08;
"Company SEC Reports" shall have the meaning given to it in
Section 3.07;
"Company Stockholders Meeting" shall have the meaning given to
it in Section 6.01;
"Company Stock Option Plans" shall have the meaning given to
it in Section 2.04(b);
"Company Transaction Expenses" means any and all Transaction
Expenses of the Company and its Subsidiaries, including (a) any and all
management retention bonuses, (b) any and all Taxes, costs and expenses
associated with options, (c) any and all fees payable to any Person
pursuant to any agreement disclosed on Schedule 3.21, (d) any and all
payments to be made by the Company or Parent under any Transaction
Agreement, (e) any and all payments, costs and expenses relating to or
arising out of a Specified Litigation, (f) any and all other costs and
expenses incurred by the Company or any Subsidiary in order to perform
its covenants and obligations hereunder, and (g) any one-time
accounting charges relating to or arising out of this Agreement, any
other Transaction Agreement, or any transaction contemplated hereby or
thereby.
"Competing Transaction" shall have the meaning given to it in
Section 6.05;
"control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the
- 56 -
power to direct or cause the direction of the management and policies
of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or otherwise;
"▇▇▇▇▇▇ Common Stock" shall have the meaning given to it in
Section 1.01(d);
"▇▇▇▇▇▇ Series F Preferred Stock" shall have the meaning given
to it in Section 1.01(a);
"DGCL" shall have the meaning given to it in Section 1.02;
"Dissenting Shares" shall have the meaning given to it in
Section 2.01(g);
"Dissenting Stockholder" shall have the meaning given to it in
Section 2.01(g);
"Effective Time" shall have the meaning given to it in Section
1.03;
"Election Date" shall have the meaning given to it in Section
2.02(c);
"Environmental Laws" shall have the meaning given to it in
Section 3.16;
"Equity Election" shall have the meaning given to it in
Section 2.02(a);
"Equity Election Consideration" shall have the meaning given
to it in Section 2.02(a);
"Equity Election Notice" shall have the meaning given to it in
Section 2.02(c);
"ERISA" shall have the meaning given to it in Section 3.11;
"Escrow Agent" shall mean SunTrust Bank as escrow agent under
the Escrow Agreement and any successor escrow agent as appointed in
accordance therewith;
"Escrow Agreement" shall have the meaning given to it in
Section 2.05;
"Exchange Act" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"Exchange Agent" shall have the meaning given to it in Section
2.02(b);
"Exchange Fund" shall have the meaning given to it in Section
2.03(f);
"Exchanged Shares" shall have the meaning given to it in
Section 1.01;
- 57 -
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time, applied on a consistent
basis for the period involved;
"Governmental Entity" means any United States (federal, state
or local) or foreign government, or governmental, regulatory or
administrative authority, agency or commission;
"Hazardous Substances" shall have the meaning given to it in
Section 3.16;
"Indemnifying Party" shall have the meaning given to it in
Section 9.03;
"Indemnitee" shall have the meaning given to it in Section
9.03;
"Investment Agreement" shall have the meaning given to it in
the introductory paragraphs to this Agreement;
"IRS" shall have the meaning given to it in Section 3.11(b);
"knowledge of the Company" means the actual knowledge of
▇▇▇▇▇▇ Quick, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇ after their conducting reasonable inquiries
of the appropriate employees of the Company;
"Laws" shall have the meaning given to it in Section 3.05;
"Liabilities" means any and all debts, liabilities or
obligations (including guarantees), whether absolute or contingent,
asserted or unasserted, accrued or unaccrued, known or unknown,
liquidated or unliquidated, matured or unmatured, direct or by way of
indemnification, due or to become due, or fixed or unfixed;
"Lien" means and includes any lien, pledge, mortgage, security
interest, claim, lease, charge, option, right of first refusal or
offer, easement, servitude, transfer restriction or voting requirement
under any or similar agreement, or any other encumbrance, restriction
or limitation whatsoever;
"Losses" shall have the meaning given to it in Section 9.01;
"Material Contracts" shall have the meaning given to it in
Section 3.17;
"Merger" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"Merger Closing" shall have the meaning given to it in Section
1.03;
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"Ordinary Course" shall mean, in respect of any person, the
ordinary course of business of such person consistent with past
practice, including with respect to policies concerning revenue
recognition, pre-paid revenue, work in progress, expected profit
contribution from new contracts and in the aggregate, revenue from
hardware as a percent of revenue from individual contracts, settlement
of contractual disputes with customers (but excluding any such
settlement that would result in a payment that would, if made after the
date hereof, require the consent of Parent under Section 5.01(l)),
payables management, research and development expenditures and all
other items that affect the income, cash flow and balance sheet of such
Person. For the purpose of avoidance of doubt, special distributions or
bonuses to employees or shareholders or any other distributions and
dividends to equityholders shall be considered outside of the Ordinary
Course.
"person" means an individual, corporation, partnership,
limited partnership, syndicate, person (including, without limitation,
a "person" as defined in Section 13(d)(3) of the Exchange Act), trust,
association or entity or government, political subdivision, agency or
instrumentality of a government;
"Parent Common Stock" shall mean the Common Stock, par value
$0.01 per share, of Parent;
"Parent Common Stock Value" shall have the meaning given to it
in Section 1.01;
"Parent Disclosure Schedule" shall have the meaning given to
it in Section 4.04;
"Parent Indemnitees" shall have the meaning given to it in
Section 9.01;
"Parent Material Adverse Effect" shall mean any material
adverse change in or effect upon the financial condition, business,
operations or assets of Parent and Acquisition Sub taken as a whole, or
upon the ability of Parent or Acquisition Sub to consummate the
transactions contemplated hereby, other than
(a) changes of a general economic character
applicable to all industries in a material region of the
operations of the Parent and Acquisition Sub;
(b) changes resulting from the performance by the
Parent and Acquisition Sub of their express obligations under
this Agreement;
(c) changes resulting from or relating to any
Specified Litigation;
(d) changes resulting from the incurrence of
Transaction Expenses; and
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(e) matters in respect of Protek that are excluded
from the definition of "Company Material Adverse Effect" in the
Protek Agreement.
"Parent PIK Preferred" shall mean the Series A-1 Redeemable
Convertible PIK Preferred Stock, par value $0.01 per share, of Parent,
having the designations, preferences, privileges and other rights set
forth in the Certificate of Designations in respect thereof;
"Parent PIK Value" shall have the meaning given to it in
Section 1.01; .
"Parent Series A PIK Preferred" shall mean the Series A
Redeemable Convertible PIK Preferred Stock, par value $0.01 per share,
of Parent, having the designations, preferences, privileges and other
rights set forth in the Certificate of Designations in respect thereof;
"Plans" shall have the meaning given to it in Section 3.11;
"Policies" shall have the meaning given to it in Section 3.24;
"Protek" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"Protek Agreement" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"Quadrangle" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"Release" shall have the meaning given to it in Section
3.16(a);
"SEC" shall have the meaning given to it in Section 2.02(c);
"SEC Transaction Filings" shall have the meaning given to it
in Section 3.08;
"Securities Act" shall have the meaning given to it in Section
3.05;
"SEF" shall have the meaning given to it in the introductory
paragraphs to this Agreement;
"Series F Holder" means each record holder of Series F
Preferred Stock as of the Effective Time, other than ▇▇▇▇▇▇▇ and SEF;
"Series F Group" shall have the meaning given to it in Section
2.01(a);
"Series F Value" shall have the meaning given to it in Section
1.01(c);
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"Share" shall have the meaning given to it in Section 2.01(d);
"Share Exchange" shall have the meaning given to it in the
introductory paragraphs to this Agreement;
"Share Exchange Closing" shall have the meaning given to it in
Section 1.01;
"Share Exchange Consideration" shall have the meaning given to
it in Section 1.01;
"Specified Litigation" means any litigation that is or is of a
type described on Schedule 10.03 and subject to the limitations set
forth thereon;
"Stockholders Agreement" shall mean an agreement among Parent,
Quadrangle, ▇▇▇▇▇▇▇, SEF and certain of Parents other stockholders in
substantially the form attached as Exhibit D;
"Subsidiary" shall have the meaning given to it in Section
3.01;
"subsidiary" or "subsidiaries" of any person means any
corporation, partnership, joint venture or other legal entity of which
such person (either above or through or together with any other
subsidiary), owns, directly or indirectly, more than 50% of the stock
or other equity interests, the holders of which are generally entitled
to vote for the election of the board of directors or other governing
body of such corporation or other legal entity;
"Surviving Corporation" shall have the meaning given to it in
Section 1.02;
"Tax" means (i) any net income, capital gains, gross income,
gross receipts, sales, use, transfer, ad valorem, franchise, profits,
license, capital, inventory, capital stock, social security,
unemployment, value added, withholding, payroll, employment, excise,
goods and services, severance, stamp, occupation, premium, property,
windfall profits or other tax, charge, fee, levy, custom duties, or
other similar charge imposed by a taxing authority of the United States
or any state, local, or foreign government or agency or subdivision
thereof, including any interest, penalties, additions to tax, or
additional amounts accrued under applicable law or charged by any
taxing authority and (ii) any liability in respect of any items
described in clause (i) as a transferee, pursuant to Treasury
Regulation Section 1.1502-6 (or a similar provision of state, local or
foreign law) or as an indemnitor, guarantor, surety or in a similar
capacity under any contract, arrangement, agreement, understanding or
commitment, whether oral or written;
"Tax Return" means any return, declaration, report, claim for
refund, or information return or other statement in relation to Taxes,
including any schedule or attachment thereto or amendment thereof;
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"Transaction Agreements" means (a) this Agreement, (b) the
Protek Agreement, (c) the Investment Agreement, (d) the Protek Bridge
Agreement, (e) the Subordinated Bridge Loan Agreement by and among the
Company, ▇▇▇▇▇▇▇, and SEF and (f) the Transaction Support Agreement,
together with each other Contract to be entered into at Closing that is
attached as an exhibit to any of the foregoing;
"Transaction Expenses" shall have the meaning given to it in
the Transaction Support Agreement;
"Transaction Support Agreement" means the Transaction Support
Agreement of even date herewith by and among the Company, Parent,
Quadrangle, ▇▇▇▇▇▇▇, SEF, Protek and the Specified Sellers (as defined
in the Protek Agreement);
"Voting Agreement" shall have the meaning given to it in the
introductory paragraphs to this Agreement; and
"VRC" shall Valuation Research Corporation, financial advisor
to the Company;
(f) When the context in which words are used in this Agreement
indicates that such is the intent, words used in the singular shall
have a comparable meaning when used in the plural, and vice versa;
pronouns stated in the masculine, feminine or neuter shall include each
other gender.
(g) Section and Schedule references are to this Agreement,
unless otherwise specified; provided, that all references to Schedules
in Article III mean the specific Schedules included in the Company
Disclosure Schedule and all references to Schedules in Article IV mean
the specific Schedules included in the Parent Disclosure Schedule.
(h) The Section headings contained in this Agreement are
solely for the purpose of reference, are not part of the agreement of
the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
(i) The term "including" is not limiting and means "including,
without limitation."
(j) Unless the context clearly requires otherwise, the term
"and" is not limiting and means "and/or."
(k) In the computation of periods of time from a specified
date to a later specified date, the word "from" means "from and
including"; the words "to" and "until" each mean "to but excluding",
and the word "through" means "to and including."
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(l) Unless otherwise expressly provided herein, (i) references
to agreements (including this Agreement) and other contractual
instruments shall be deemed to include all subsequent amendments and
other modifications thereto, but only to the extent such amendments and
other modifications are not prohibited by the terms of this Agreement,
and (ii) references to any statute or regulation shall be construed as
including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.
(m) This Agreement and the other agreements contemplated by
this Agreement are the result of negotiations among, and have been
reviewed by counsel to, the parties hereto and are the products of all
the parties. Accordingly, they shall not be construed against any party
hereto merely because of the nature or extent of such party's
involvement in their preparation.
(n) "Dollars" or "$" means the currency of the U.S. that, as
at the time of payment, is legal tender for the payment of public and
private debts.
(o) The words "hereto," "herewith," "hereof," "hereby,"
"herein" and "hereunder" refer to this Agreement.
SECTION 10.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger and the other transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the Merger and the other
transactions contemplated hereby be consummated as originally contemplated to
the fullest extent possible.
SECTION 10.05. Entire Agreement; Assignment. This Agreement, together
with the other Transaction Agreements, constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise, except that Parent and Acquisition
Sub may assign all or any of their rights and obligations hereunder to any
affiliate of Parent provided that no such assignment shall relieve the assigning
party of its obligations hereunder if such assignee does not perform such
obligations.
SECTION 10.06. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, other than Section 6.06 (which
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is intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
SECTION 10.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
SECTION 10.08. Governing Law. This Agreement shall be governed by, and
construed in accordance with the laws of the State of New York applicable to
contracts executed in and to be performed in that State.
SECTION 10.09. Consent to Jurisdiction.
(a) EACH OF PARENT, THE COMPANY, ACQUISITION SUB, ▇▇▇▇▇▇▇ AND
SEF HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE
STATE COURTS OF THE STATE OF NEW YORK AND TO THE JURISDICTION OF THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR
THE PURPOSE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND EACH OF PARENT, THE COMPANY, ACQUISITION SUB,
▇▇▇▇▇▇▇ AND SEF HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT TO
SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED EXCLUSIVELY IN
ANY NEW YORK STATE OR FEDERAL COURT SITTING IN THE CITY OF NEW YORK.
EACH OF PARENT, THE COMPANY AND ACQUISITION SUB AGREES THAT A FINAL
JUDGMENT IN ANY ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER
MANNER PROVIDED BY LAW.
(b) EACH OF PARENT, THE COMPANY, ACQUISITION SUB, ▇▇▇▇▇▇▇ AND
SEF IRREVOCABLY CONSENTS TO THE SERVICE OF THE SUMMONS AND COMPLAINT
AND ANY OTHER PROCESS IN ANY OTHER ACTION OR PROCEEDING RELATING TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ON BEHALF OF ITSELF OR ITS
PROPERTY, BY THE PERSONAL DELIVERY OF COPIES OF SUCH PROCESS TO SUCH
PARTY. NOTHING IN THIS SECTION 10.09 SHALL AFFECT THE RIGHT OF ANY
PARTY TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
SECTION 10.10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 10.11. Counterparts. This Agreement may be executed and
delivered (including by facsimile transmission) in one or more counterparts, and
by the different
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parties hereto in separate counterparts, each of which when executed and
delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.
SECTION 10.12 Waiver of Jury Trial. EACH OF THE COMPANY,
PARENT, ACQUISITION SUB, ▇▇▇▇▇▇▇ AND SEF ACKNOWLEDGES AND AGREES THAT ANY
CONTROVERSY OR DISPUTE THAT MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND THEREFORE EACH SUCH PARTY HEREBY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH OF THE
COMPANY, PARENT, ACQUISITION SUB, ▇▇▇▇▇▇▇ AND SEF CERTIFIES AND ACKNOWLEDGES
THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH SUCH PARTY
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH SUCH
PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH SUCH PARTY HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 10.12.
[Remainder of page intentionally left blank; signature page follows]
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Intending to be bound hereby, Parent, Acquisition Sub, the Company, ▇▇▇▇▇▇▇ and
SEF have caused this Agreement to be executed as of the date first written above
by their respective officers thereunto duly authorized.
▇▇▇▇▇▇ HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇ Quick
---------------------------------------
Name: ▇▇▇▇▇▇ Quick
Title: Chief Executive Officer
PARALLEL ACQUISITION, INC.
By: /s/ ▇▇▇▇▇▇ Quick
---------------------------------------
Name: ▇▇▇▇▇▇ Quick
Title: Chief Executive Officer
▇▇▇▇▇▇ TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇▇ Quick
---------------------------------------
Name: ▇▇▇▇▇▇ Quick
Title: President & Chief Executive Officer
▇▇▇▇▇▇▇ CAPITAL II, L.P.
By : ▇▇▇▇▇▇▇ Brothers, LLC, its General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Managing Member
STRATEGIC ENTREPRENEUR FUND II, L.P.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: General Partner
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