AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NOVELLUS SYSTEMS, INC.
NHL ACQUISITION-SUB, INC.
AND
SPEEDFAM-IPEC, INC.
AUGUST 11, 2002
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
TABLE OF CONTENTS
Page
ARTICLE I THE MERGER..................................................... 2
1.1 The Merger................................................... 2
1.2 Closing; Effective Time...................................... 2
1.3 Effect of the Merger......................................... 2
1.4 Articles of Incorporation; Bylaws............................ 2
1.5 Directors and Officers....................................... 3
1.6 Effect on Capital Stock...................................... 3
1.7 Surrender of Certificates.................................... 5
1.8 No Further Ownership Rights in Company Capital Stock......... 7
1.9 Tax Consequences............................................. 7
1.10 Withholding Rights........................................... 7
1.11 Taking of Necessary Action; Further Action................... 8
1.12 Dissenters' Rights........................................... 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF Company..................... 8
2.1 Organization, Standing and Power............................. 10
2.2 Capital Structure............................................ 10
2.3 Authority.................................................... 12
2.4 SEC Documents, Financial Statements.......................... 13
2.5 Absence of Certain Changes................................... 14
2.6 Absence of Undisclosed Liabilities........................... 14
2.7 Litigation................................................... 14
2.8 Governmental Authorization................................... 15
2.9 Title to Personal Property................................... 15
2.10 Intellectual Property........................................ 16
2.11 Environmental Matters........................................ 18
2.12 Taxes........................................................ 21
2.13 Employee Benefit Plans....................................... 22
2.14 Certain Agreements Affected by the Merger.................... 25
2.15 Employee Matters............................................. 25
2.16 Insurance.................................................... 26
2.17 Compliance With Laws......................................... 26
2.18 Brokers' and Finders' Fees................................... 26
2.19 Vote Required................................................ 27
2.20 Board Approval............................................... 27
2.21 Customers and Suppliers...................................... 27
2.22 Material Contracts........................................... 27
2.23 No Breach of Material Contracts.............................. 28
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2.24 Material Third Party Consents................................ 29
2.25 Real Property and Real Property Leases....................... 30
2.26 Registration Statement; Proxy Statement/Proxy................ 32
2.27 Tax Matters.................................................. 33
2.28 Opinion of Financial Advisor................................. 33
2.29 Takeover Statutes............................................ 33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...... 33
3.1 Organization, Standing and Power............................. 34
3.2 Capital Structure............................................ 34
3.3 Authority.................................................... 36
3.4 SEC Documents; Financial Statements.......................... 37
3.5 Tax Matters.................................................. 37
3.6 Absence of Undisclosed Liabilities........................... 38
3.7 Litigation................................................... 38
3.8 Board and Shareholder Approval............................... 38
3.9 Registration Statement; Proxy Statement/Proxy................ 38
3.10 Opinion of Financial Advisor................................. 39
3.11 Investigation by Parent; Company's Liability................. 39
3.12 Absence of Certain Changes................................... 39
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME........................... 40
4.1 Conduct of Business of Company............................... 40
4.2 Restriction on Conduct of Business of Company................ 40
4.3 No Solicitation.............................................. 43
ARTICLE V ADDITIONAL AGREEMENTS.......................................... 45
5.1 Proxy Statement/Prospectus; Registration Statement........... 45
5.2 Meeting of Shareholders...................................... 45
5.3 Access to Information; Disclosure Schedule Updates........... 45
5.4 Confidentiality.............................................. 47
5.5 Public Disclosure............................................ 47
5.6 Consents; Cooperation........................................ 47
5.7 Affiliates................................................... 48
5.8 Voting Agreement............................................. 49
5.9 FIRPTA....................................................... 49
5.10 Legal Requirements........................................... 49
5.11 Employee Benefit Plans....................................... 49
5.12 Indemnification.............................................. 52
5.13 Form S-8..................................................... 53
5.14 Treatment as Reorganization.................................. 54
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5.15 Takeover Statutes............................................ 54
5.16 Notices...................................................... 54
5.17 Listing of Additional Shares................................. 54
5.18 Further Assurances........................................... 54
ARTICLE VI CONDITIONS TO THE MERGER...................................... 55
6.1 Conditions to Obligations of Each Party to Effect the Merger. 55
6.2 Additional Conditions to Obligations of Company.............. 56
6.3 Additional Conditions to the Obligations of Parent........... 56
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER............................ 56
7.1 Termination.................................................. 56
7.2 Effect of Termination........................................ 56
7.3 Expenses and Termination Fees................................ 56
7.4 Amendment.................................................... 56
7.5 Extension; Waiver............................................ 56
ARTICLE VIII GENERAL PROVISIONS.......................................... 56
8.1 Non-Survival at Effective Time............................... 56
8.2 Notices...................................................... 56
8.3 Interpretation; Certain Definitions.......................... 56
8.4 Counterparts; Facsimile Delivery............................. 56
8.5 Entire Agreement; Nonassignability; Parties in Interest...... 56
8.6 Severability................................................. 56
8.7 Remedies Cumulative.......................................... 56
8.8 Governing Law................................................ 56
8.9 Rules of Construction........................................ 56
8.10 Assignment................................................... 56
8.11 Attorneys' Fees.............................................. 56
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SCHEDULES
Company Disclosure Schedule
Parent Disclosure Schedule
Other Schedules
Schedule 5.7 - Company Affiliates
Schedule 5.8 Signatories of Shareholder Voting Agreement
Schedule 5.11(a) - Holders of Outstanding Company Options
Schedule 5.11(e) Assumed Employment Agreements
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EXHIBITS
Exhibit A-1 - Form of Certificate of Merger
Exhibit A-2 - Form of Articles of Merger
Exhibit B Form of Bylaws
Exhibit C - Form of Shareholder Voting Agreement
Exhibit D - Confidentiality Agreement
Exhibit E - Form of FIRPTA Notice
Exhibit F - Form of IRS Notice
Exhibit G-1 - Form of Certificate of Officer of Company
Exhibit G-2 - Form of Certificate of Officer of Parent
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AGREEMENT AND PLAN OF MERGER AND
REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (the
"Agreement") is made as of August 11, 2002 (the "Execution Date") by and among
NOVELLUS SYSTEMS, INC., a California corporation ("Parent"), NHL
ACQUISITION-SUB, INC., a Delaware corporation ("Merger Sub"), and SPEEDFAM-IPEC,
INC., an Illinois corporation ("Company"). An index of the defined terms used in
this Agreement can be found in Appendix I hereto.
RECITALS
A. The Boards of Directors of Parent, Merger Sub and Company each
have determined that the business combination between Parent and Company through
the merger of Merger Sub with and into Company pursuant to the terms and subject
to the conditions set forth herein (the "Merger") is advisable and in the best
interests of their respective companies, shareholders and stockholders.
B. Merger Sub is a wholly-owned subsidiary of Parent.
C. Pursuant to the Merger, among other things, each outstanding
share of capital stock of Company shall be converted into a fraction of a share
of common stock of Parent, at the rate set forth herein.
D. Company and Parent desire to make certain representations,
warranties, covenants and other agreements in connection with the Merger.
E. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a) of the Code.
G. As an inducement to Parent to enter into this Agreement,
certain officers, directors and shareholders of Company have concurrently
herewith entered into an agreement to vote the shares of Company's Capital Stock
owned by such persons to approve the Merger and this Agreement.
NOW, THEREFORE, in consideration of the covenants and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. Subject to and in accordance with the terms and
conditions set forth in this Agreement, at the "Effective Time" (as defined in
Section 1.2 hereof), Merger Sub shall be merged with and into Company, which
shall be the surviving corporation ("Surviving Corporation") in the Merger, and
the separate existence of Merger Sub shall thereupon cease. The name of
Surviving Corporation shall remain "SpeedFam-IPEC, Inc.". The Merger shall have
the effects set forth in the applicable provisions of the Delaware General
Corporation Law ("Delaware Law") and the Illinois Business Corporations Act
("Illinois Law").
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "Closing") shall take place as soon as practicable and
in any event not later than two business days after the satisfaction or waiver
of each of the conditions set forth in Article VI hereof or at such other time
as the parties hereto agree (the "Closing Date"). The Closing shall take place
at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, 755 Page Mill Road, Palo Alto,
California, or at such other location as the parties hereto agree. In connection
with the Closing, the parties hereto shall cause the Merger to be consummated by
filing (i) the Certificate of Merger, in substantially the form attached hereto
as Exhibit A-1 (the "Certificate of Merger"), together with any required
officers' certificates, with the Secretary of State of the State of Delaware, in
accordance with the relevant provisions of Delaware Law; and (ii) the Articles
of Merger, in substantially the form attached hereto as Exhibit A-2 (the
"Articles of Merger"), together with any required officers' certificates, with
the Secretary of State of the State of Illinois, in accordance with the relevant
provisions of Illinois Law (the time of such filing with the Secretary of State
of Illinois being the "Effective Time" and the date of such filing being the
"Effective Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger, the
Articles of Merger and the applicable provisions of Delaware Law and Illinois
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, all the property, rights, privileges, powers and franchises
of Company and Merger Sub shall vest in Surviving Corporation, and all debts,
liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of
Company, as in effect immediately prior to the Effective Time, shall be the
Articles of Incorporation of Surviving Corporation until thereafter amended as
provided by Illinois Law and such Articles of Incorporation; provided, that as
of the Effective Time, Company's Articles of Incorporation shall be amended
substantially as set forth in Exhibit A to the Certificate of Merger.
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(b) The Bylaws of Company, as in effect immediately prior to
the Effective Time, shall be the Bylaws of Surviving Corporation until
thereafter amended as provided by Illinois Law and such Bylaws; provided, that
as of the Effective Time, Company's Bylaws shall be amended substantially as set
forth in the form attached hereto as Exhibit B.
1.5 Directors and Officers. At the Effective Time, the directors of
Merger Sub, serving in such capacity immediately prior to the Effective Time,
shall be the directors of Surviving Corporation, until their respective
successors are duly elected or appointed and qualified. The officers of Merger
Sub, holding office immediately prior to the Effective Time, shall be the
officers of Surviving Corporation, until their respective successors are duly
elected or appointed and qualified.
1.6 Effect on Capital Stock.
(a) Certain Definitions.
"COMPANY CAPITAL STOCK" shall mean all outstanding
shares of Company Common Stock and all outstanding shares of any other capital
stock of Company as of the Effective Time.
"COMPANY COMMON STOCK" shall mean shares of the common
stock of Company, no par value.
"COMPANY CONVERTIBLE SECURITIES" shall mean any and all
warrants, rights or other convertible securities to purchase or otherwise
acquire shares of Company Capital Stock, whether or not presently exercisable or
subject to additional conditions prior to exercise, not including Company
Options or Company Notes.
"COMPANY ESPP" shall mean the 1995 Employee Stock
Purchase Plan of Company.
"COMPANY NOTES" shall mean the $115 million Convertible
Subordinated Notes of Company due in 2004 and issued pursuant to that certain
Indenture between Integrated Process Equipment Corporation ("IPEC") and State
Street Bank and Trust Company of California, N.A., as trustee (the "Trustee"),
dated as of September 15, 1997, as amended by that certain First Supplemental
Indenture by and among Company, IPEC and the Trustee, dated as of April 6, 1999
(collectively, the "Indenture").
"COMPANY OPTIONS" shall mean any and all options or
other rights to purchase or otherwise acquire shares of Company Capital Stock,
whether or not presently exercisable or subject to additional conditions prior
to exercise, under and pursuant to the (i) 1991 Employee Incentive Stock Option
Plan, as amended; (ii) IPEC 1992 Stock Option Plan, as amended; (iii) 1995 Stock
Plan for Employees and Directors of SpeedFam International, Inc., as amended;
(iv) 2001 Nonstatutory Stock Option Plan, and (v) the non-Plan stand alone
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stock option agreement between Company and ▇▇▇▇▇ ▇▇▇▇▇▇ (each, a "Company Stock
Option Plan," and collectively, the "Company Stock Option Plans").
"EXCHANGE RATIO" shall mean 0.1818, as may be adjusted
pursuant to Section 1.6(f) hereof.
"PARENT COMMON STOCK" shall mean shares of the common
stock of Parent, no par value.
(b) Conversion of Company Capital Stock. By virtue of the
Merger and without any further action on the part of Parent, Company, Merger Sub
or the holders of any of Company's securities, at the Effective Time, each share
of Company Capital Stock issued and outstanding immediately prior to the
Effective Time, but excluding any shares canceled pursuant to Section 1.6(c)),
will be automatically canceled, extinguished and converted into the right to
receive a fraction of a share of Parent Common Stock equal to the Exchange Ratio
and cash in lieu of fractional shares in accordance with Section 1.6(g).
(c) Cancellation of Company Capital Stock Owned by Company. At
the Effective Time, all shares of Company Capital Stock that are owned by
Company as treasury stock and each share of Company Capital Stock owned by
Parent or any direct or indirect wholly-owned subsidiary of Company or Parent
shall be canceled and extinguished without any rights to conversion thereof and
no consideration shall be delivered in exchange therefore. At the Effective
Time, any shares of Company Capital Stock that are owned by Parent, Merger Sub
or any other wholly-owned subsidiary of Parent shall be canceled, retired and
extinguished without any conversion thereof and no consideration shall be
delivered in exchange therefor.
(d) Treatment of Company Options and Company ESPP Rights. At
the Effective Time, (i) the Company Stock Option Plans and all Company Options
then outstanding under the Company Stock Option Plans shall be assumed by Parent
and converted into Parent Options in accordance with Section 5.11(a) hereof; and
(ii) all purchase rights for shares of Company Common Stock outstanding under
the Company ESPP immediately prior to the Effective Time shall be exercised in
accordance with Section 5.11(b) hereof, and the purchased shares of Company
Common Stock shall at the Effective Time be converted into shares of Parent
Common Stock and cash in lieu of fractional shares, as provided in Section
1.6(g) hereof.
(e) Treatment of Company Notes and other Company Convertible
Securities. At the Effective Time, (i) the Company Notes shall be assumed or
guaranteed by Parent and converted into subordinated convertible debt of Parent
in accordance with Section 5.11(c) hereof; and (ii) all other Company
Convertible Securities shall be converted into securities convertible into
shares of Parent Common Stock at the Exchange Ratio.
(f) Adjustments to Exchange Ratio. The Exchange Ratio shall
only be adjusted to reflect fully the effect of any stock split, reverse stock
split, stock dividend (including any dividend or distribution of securities
convertible into Parent Common Stock or Company Capital Stock),
reclassification, reorganization, recapitalization or other like change with
respect
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to Parent Common Stock or Company Capital Stock occurring after the date hereof
and prior to the Effective Time, so as to provide holders of Company Common
Stock and Parent the same economic effect as contemplated by this Agreement
prior to such stock split, reverse split, stock dividend, reorganization,
recapitalization, like change or increase.
(g) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued, but in lieu thereof each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall receive from Parent an amount of cash (rounded
to the nearest whole cent) equal to the product of (i) such fraction, multiplied
by (ii) the average closing price per share of Parent's Common Stock as quoted
on the Nasdaq National Market for the twenty (20) trading days ending on the day
which is two days before the Closing Date (the "Parent Stock Price"), less any
amount required to be withheld under foreign, federal, state or local tax laws.
(h) Capital Stock of Merger Sub. At the Effective Time, each
share of common stock of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership of any such shares
shall continue to evidence ownership of such shares of capital stock of
Surviving Corporation.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent's transfer agent, Mellon Investor
Services LLC, shall act as the exchange agent (the "Exchange Agent") in the
Merger.
(b) Parent to Provide Common Stock and Cash. As soon as
reasonably practicable after the Effective Time, Parent shall deposit with the
Exchange Agent for exchange in accordance with this Article I, through such
reasonable procedures as Parent may adopt, (i) the shares of Parent Common Stock
issuable pursuant to Section 1.6(b) (provided that delivery of any shares that
are subject to vesting shall be in book entry form only until such vesting
restrictions have lapsed) in exchange for shares of Company Capital Stock
outstanding immediately prior to the Effective Time, and (ii) cash in an amount
sufficient to permit payment of cash in lieu of fractional shares pursuant to
Section 1.6(g), less any amounts required to be withheld from such cash under
foreign, federal, state or local laws.
(c) Exchange Procedures.
(i) As soon as reasonably practicable after the
Effective Time, Parent shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time represented outstanding shares of Company Capital Stock, whose
shares were converted into the right to receive shares of Parent Common Stock
(and cash in lieu of fractional shares, less any amount required to be withheld
from such cash under foreign, federal, state or local tax laws), (1) a letter of
transmittal in
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customary form (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Parent may reasonably specify), and (2) instructions for use
in effecting the surrender of the Certificates in exchange for certificates (or
book entries in the case of shares that have not yet vested) representing shares
of Parent Common Stock (and cash in lieu of fractional shares, less any amount
required to be withheld from such cash under foreign, federal, state or local
tax laws).
(ii) Upon surrender of a Certificate for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, (A) the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate (or
a book entry in the case of shares that have not yet vested in full)
representing the number of whole shares of Parent Common Stock equal to the
product of (i) the number of Company shares represented by such certificate
multiplied by (ii) the Exchange Ratio, and, if applicable, payment in lieu of
fractional shares which such holder has the right to receive pursuant to Section
1.6(g), and (B) the Certificate so surrendered shall forthwith be canceled.
(iii) In the event that any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
Company shareholder claiming such Certificate to be lost, stolen or destroyed,
the Exchange Agent will issue or cause to be issued to such Person in exchange
for such lost, stolen or destroyed Certificate, a new certificate into which the
shares of such Person's Company Capital Stock that are converted on the
Effective Date and/or, if applicable, deliver or cause to be delivered to such
Person a check in respect of any fractional share interests or dividends or
distributions, which such Person shall be entitled to receive pursuant to
Section 1.6(g). When authorizing such issuance in exchange therefor, Parent
and/or the Exchange Agent may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to give Parent and/or the Exchange Agent a reasonable form of bond
as indemnity, as it shall direct, against any claim that may be made against
Parent or the Exchange Agent with respect to the Certificate alleged to have
been lost, stolen or destroyed.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby until the holder of record of such Certificate shall
surrender such Certificate. Subject to applicable law, following surrender of
any such Certificate, there shall be paid to the record holder of the
Certificate representing whole shares of Parent Common Stock issued in exchange
therefor, without interest, at the time of such surrender, the amount of any
such dividends or other distributions with a record date after the Effective
Time theretofore payable (but for the provisions of this Section 1.7(d)) with
respect to such shares of Parent Common Stock.
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(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange will have paid to the Exchange Agent, Parent or any
other agent designated by Parent, as applicable, any transfer or other taxes
required by reason of the issuance of a certificate for shares of Parent Common
Stock in any name other than that of the registered holder of the Certificate
surrendered, or established to the satisfaction of the Exchange Agent, Parent or
any other agent designated by Parent, as applicable, that such tax has been paid
or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, none of the Exchange Agent, Parent, Surviving Corporation or
any other party hereto shall be liable to any Person for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
1.8 No Further Ownership Rights in Company Capital Stock. All shares
of Parent Common Stock issued upon the surrender for exchange of shares of
Company Capital Stock in accordance with the terms hereof (including any cash
paid in lieu of fractional shares) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Capital Stock,
and after the Effective Time there shall be no further registration of transfers
on the records of Surviving Corporation of shares of Company Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to Surviving Corporation for any
reason, they shall be exchanged and canceled as provided in this Article I.
1.9 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties to this Agreement hereby adopt this Agreement as a "plan
of reorganization" within the meaning of sections 1.368-2(g) and 1.368-3(a) of
the United States Treasury Regulations.
1.10 Withholding Rights. Parent and Surviving Corporation shall be
entitled to deduct and withhold from the number of shares of Parent Common Stock
otherwise deliverable under this Agreement, and from any other payments made
pursuant to this Agreement, such amounts as Parent and Surviving Corporation are
required to deduct and withhold with respect to such delivery and payment under
the Code or any provision of state, local, provincial or foreign tax law. To the
extent that amounts are so withheld, such withheld amounts shall be treated for
all purposes of this Agreement as having been delivered and paid to the holder
of shares of Company Common Stock in respect of which such deduction and
withholding was made by Parent and Surviving Corporation.
1.11 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Surviving Corporation with full
right, title and possession to all assets,
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property, rights, privileges, powers and franchises of Company, the officers and
directors of Company, Parent and Surviving Corporation are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
1.12 Dissenters' Rights. Notwithstanding anything in this Agreement
to the contrary, each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time and that is held by a
Company shareholder who has properly demanded and perfected such shareholder's
rights to dissent from the Merger and to be paid the fair value of such shares
in accordance with Sections 11.65 and 11.70 of Illinois Law (the "Dissenting
Shares"), shall not be converted into the right to receive the Parent Common
Stock, but the holder thereof shall be entitled to such rights as are granted by
Illinois Law and Surviving Corporation shall make all payments to the holders of
such Dissenting Shares with respect to such demands in accordance with Illinois
Law; provided however, that if any such holder shall, prior to or after the
Effective Time, have failed to perfect or shall have lost the right to dissent
and obtain payment for such holder's Dissenting Shares under the Illinois Law,
each share of Company Common Stock held by such holder shall thereupon be deemed
to have been converted into, as of the Effective Time, solely the right to
receive the Parent Common Stock. Company shall give prompt written notice to
Parent and Merger Sub of any demands received by Company for payment under
Sections 11.65 and 11.70 of the Illinois Law, and the Parent and Merger Sub
shall have the right to participate in all negotiations and proceedings with
respect to such demands. Company shall not, except with the prior written
consent of Parent and Merger Sub, make any payment with respect to, settle, or
offer to settle, or offer to make any payment to settle, any such demands,
except that Company may make payments to settle such demands provided that the
per share settlement amount does not exceed the closing market price per share
of Company's Common Stock as of the last day of trading prior to the
announcement of the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity and
its subsidiaries taken as a whole.
In this Agreement, any reference to a "Company Material Adverse
Effect" means any change, event or effect that is materially adverse to the
condition (financial or otherwise), properties, assets (including intangible
assets), liabilities, business, operations or results of operations of Company
and its subsidiaries, taken as a whole; provided, however, that none of the
following shall be deemed in themselves, either alone or in combination, to
constitute, and none of the following shall be taken into account in determining
whether there has been or will
8
be, a Company Material Adverse Effect: (a) any change in the market price or
trading volume of Company's stock after the date hereof; (b) any adverse change,
effect, event, occurrence, state of facts or development to the extent
attributable to the announcement or pendency of the Merger (including any
cancellation of or delays in customer orders, any reduction in sales, any
disruption in supplier, distributor, partner or similar relationships or any
loss of employees); (c) any adverse change, effect, event, occurrence, state of
facts or development attributable to conditions affecting the industries as a
whole in which Company participates, the U.S. economy as a whole or the foreign
economies as a whole in any locations where Company or any of its Subsidiaries
has material operations or sales; or (d) any adverse change, effect, event,
occurrence, state of facts or development arising from or relating to compliance
with the terms of, or the taking of any action required by, this Agreement; or
(e) any litigation or other Proceeding (as defined below) brought by any
shareholder, governmental entity or third-party competitor of Company or Parent
after the Execution Date that (x) is brought or threatened against Company or
any of its subsidiaries or any member of its board of directors in respect of
this Agreement or the transactions contemplated hereby or (y) in the case of a
third-party competitor is brought or threatened against Company or any of its
subsidiaries or any member of its board of directors and is reasonably likely to
have been brought with the intended purpose or effect of preventing, enjoining,
materially altering or delaying or otherwise interfering with the transactions
contemplated by this Agreement (each a "Specified Proceeding").
In this Agreement, any reference to a party's "knowledge" means
actual knowledge of such party's officers and directors, provided that officers
shall have made reasonable due and diligent inquiry of those employees of such
party whom such officers reasonably believe would have actual knowledge of the
matters represented.
In this Agreement, any reference to a party conducting its business
or other affairs or taking any action in the "ordinary course of business" means
that such an action taken by or on behalf of such party shall not be deemed to
have been taken in the "ordinary course of business" unless such action is taken
in the ordinary course of such party's normal day to day operations and is
similar in nature and magnitude to actions customarily taken, without any
separate or special authorization.
In this Article II, any reference to Company shall be deemed to
include Company as well as any subsidiary of Company whether or not so specified
in the particular representation or warranty.
Except as disclosed in a document of even date herewith and attached
to this Agreement and delivered by Company to Parent prior to the execution and
delivery of this Agreement and referring by section number to the
representations and warranties in this Agreement (the "Company Disclosure
Schedule"), provided that any disclosure shall qualify the disclosure under the
section number referred to in the Company Disclosure Schedule as well as all
other sections in this Agreement, when it is reasonably apparent from a reading
of such disclosure that it also qualifies or applies to such other sections,
provided further that Company shall make all reasonable efforts to specifically
cross reference in the Company Disclosure
9
Schedule all sections where a particular disclosure qualifies or applies,
Company represents and warrants to Parent as follows:
2.1 Organization, Standing and Power. Each of Company and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Company and
its subsidiaries has the corporate power to own its properties and to carry on
its business as now being conducted and as currently proposed to be conducted
and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified and in good standing would
have a Company Material Adverse Effect. Company has delivered or made available
a true and correct copy of the Articles of Incorporation and Bylaws or other
charter documents, as applicable, of Company and each of its subsidiaries, each
as amended to date, to Parent. Neither Company nor any of its subsidiaries is in
violation of any of the provisions of its Articles of Incorporation or Bylaws or
equivalent organizational documents. Company is the owner, directly or
indirectly, of all outstanding shares of capital stock of each of its
subsidiaries and all such shares are duly authorized, validly issued, fully paid
and nonassessable. Except as disclosed in the Company SEC Documents (as defined
in Section 2.4(a) hereof), Company does not directly or indirectly own any
equity or similar interest in, or any interest convertible or exchangeable or
exercisable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity, excluding
securities in any publicly traded company held for investment by Company or any
of it subsidiaries in accordance with and pursuant to Company's formal
investment policy and comprising less than 5% of the outstanding stock of such
company.
2.2 Capital Structure.
(a) The authorized capital stock of Company consists of (i)
60,000,000 shares of Common Stock, no par value per share, of which there were
31,058,793 shares issued and outstanding as of the close of business on the day
two days prior to the Execution Date; and (ii) 1,000,000 shares of Preferred
Stock none of which are currently issued and outstanding as of the Execution
Date. On the Execution Date there are, and as of the Effective Time there will
be, no outstanding commitments to issue any shares of capital stock or voting
securities, other than pursuant to the exercise of Company Options under the
Company Stock Option Plans or the Company ESPP, pursuant to the exercise of
Company Convertible Securities, or pursuant to the conversion of the Company
Notes, in each case as outstanding as of the Execution Date, or as otherwise
specifically allowed pursuant to Section 4.2(e) hereof.
(b) All outstanding shares of Company Capital Stock are duly
authorized, validly issued, fully paid and non-assessable and are free of any
liens or encumbrances, other than any liens or encumbrances created by or
imposed upon the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of Company or any agreement to which Company is a party or by which it is
bound. All outstanding shares of Company Capital Stock were issued in compliance
in all material respects with all applicable federal and state securities laws.
As of the date hereof, Company has reserved (i) 1,500,000] shares of Common
Stock for issuance to employees
10
pursuant to the Company 1991 Incentive Stock Option Plan, as amended, of which
904,526 shares have been issued pursuant to option exercises or direct stock
purchases, 268,744 shares are subject to outstanding, unexercised options, and
326,730 shares are available for issuance thereunder; (ii) 3,727,500 shares of
Common Stock for issuance to directors, employees and consultants pursuant to
options assumed in Company's merger with IPEC which were issued pursuant to
IPEC's 1992 Stock Option Plan, as amended, of which 1,027,466 shares have been
issued pursuant to option exercises or direct stock purchases, and 797,105
shares are subject to outstanding, unexercised options, (iii) 5,300,000 shares
of Common Stock for issuance to directors and employees pursuant to the 1995
Stock Plan for Employees and Directors of SpeedFam International, Inc., as
amended, of which 80,239 shares have been issued pursuant to option exercises or
direct stock purchases, 2,860,582 shares are subject to outstanding, unexercised
options, and 2,359,179 shares are available for issuance thereunder; (iv)
3,000,000 shares of Common Stock for issuance to directors, employees and
consultants pursuant to the 2001 Nonstatutory Stock Option Plan of which 44,636
shares have been issued pursuant to option exercises or direct stock purchases,
2,862,394 shares are subject to outstanding, unexercised options, and 92,970
shares are available for issuance thereunder; and (v) 1,907,884 shares of Common
Stock for issuance pursuant to the Company ESPP, of which 1,427,366 shares have
been issued. On the Execution Date, except for (i) the rights created pursuant
to this Agreement, the Company Stock Option Plans, the Company ESPP, the Company
Convertible Securities and the Company Notes, and (ii) Company's right to
repurchase any unvested shares under the Company Stock Option Plans or the stock
option agreements thereunder, there are no, and as of the Effective Time, there
will be no, other options, warrants, calls, rights, commitments or agreements of
any character to which Company is a party or by which it is bound obligating
Company to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of Company Capital Stock or
obligating Company to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement, except as may be permitted under Section 4.2(e) hereof.
Except for the agreements contemplated by this Agreement and the agreements set
forth on Schedule 2.2(b) to the Company Disclosure Schedule, there are no
contracts, commitments or agreements relating to voting, purchase or sale of
Company Capital Stock (i) between or among Company and any of its
securityholders and (ii) to Company's knowledge, between or among any of
Company's securityholders.
(c) The terms of the Company Stock Option Plans permit the
assumption of the Company Options by Parent as provided for in this Agreement,
without the consent or approval of the holders of the Company Options, the
Company shareholders, or otherwise, without any acceleration of the exercise
schedule or vesting provisions with respect to those options. The current
"Offering Period," as defined in the Company ESPP commenced under the Company
ESPP on July 1, 2002 and will end prior to the Effective Time as provided in
this Agreement, and except for the purchase rights granted on such commencement
date to participants in the current Purchase Period, there are no other purchase
rights or options outstanding under the Company ESPP. Except as set forth on
Schedule 2.2(c), none of the outstanding Company Options, Company Convertible
Securities or Company Notes permit any accelerated vesting or exercisability of
those options, securities or notes, as applicable, by reason
11
of the Merger or any other transactions contemplated by this Agreement. True and
complete copies of all agreements and instruments relating to or issued under
the Company Stock Option Plans, or otherwise relating to the issuance of Company
Options, the Company Convertible Securities and the Company Notes have been
provided or made available to Parent and such agreements and instruments have
not been amended, modified or supplemented, and, except as otherwise expressly
contemplated herein, there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the forms provided to Parent.
2.3 Authority.
(a) Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, other than approval by the Company
Shareholders.
(b) This Agreement has been duly executed and delivered by
Company and constitutes the valid and binding obligation of Company enforceable
against Company by Parent in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium and other similar laws and
equitable principles relating to or limiting creditors' rights generally and by
general principles of equity. The execution and delivery of this Agreement by
Company does not, and the execution of the other agreements contemplated by this
Agreement and the consummation of the transactions contemplated hereby and
thereby will not, conflict with or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (i) any provision of the Articles of Incorporation or Bylaws of
Company, as amended, or (ii) any Company Authorization, (as defined in Section
2.8), except where such conflict, violation, default, termination, cancellation
or acceleration with respect to the foregoing provisions in subsection (ii)
would not be reasonably expected to have a Company Material Adverse Effect.
(c) Except as would not otherwise have a Company Material
Adverse Effect, no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, foreign, federal,
state or local (each, a "Governmental Entity") is required with respect to
Company in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filings
of the Certificate of Merger and the Articles of Merger, together with the
required officers' certificates, as provided in Section 1.2, (ii) the filing
with the Securities and Exchange Commission (the "SEC") and the National
Association of Securities Dealers, Inc. ("NASD") of the Proxy Statement (as
defined in Section 2.26) relating to the Company Shareholders Meeting (as
defined in Section 2.26), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws and the securities laws of any foreign country,
(iv) such filings as may be required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
12
Improvements Act of 1976, as amended ("HSR"); (v) the filing by Parent and the
effectiveness of a Form S-4 Registration Statement with the SEC in accordance
with the Securities Act of 1933 (the "Securities Act"), as amended; (vi) the
filing, if required, of a current report by Parent on Form 8-K with the SEC and
the NASD within fifteen (15) days after the Closing Date; (vii) any notice
described in Section 5.16 hereof; and (viii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not prevent, materially alter or delay any of the transactions
contemplated by this Agreement.
2.4 SEC Documents, Financial Statements.
(a) Company has made available to Parent a true and complete
copy of each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement, and other filings filed with the SEC by Company (collectively, the
"Company SEC Documents"). In addition, Company has made available or provided to
Parent complete copies of all exhibits to the Company SEC Documents filed prior
to the date hereof, and will promptly make available to Parent all exhibits to
any additional Company SEC Documents filed prior to the Effective Time. To the
knowledge of Company, all documents required to be filed as exhibits to the
Company SEC Documents have been so filed. As of their respective filing dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the Securities Act and, to Company's knowledge, none of the Company
SEC Documents contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they were made,
not misleading, except to the extent corrected, supplemented or superseded by a
subsequently filed Company SEC Document.
(b) The financial statements of Company, including the notes
thereto, included in the Company SEC Documents (the "Company Financial
Statements") and the unaudited balance sheet of Company, dated as of June 1,
2002 (the "Company Balance Sheet Date") were complete and correct in all
material respects as of their respective dates, complied as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto as of their respective
dates, and have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") applied on a basis consistent throughout the
periods indicated and consistent with each other (except as may be indicated in
the notes thereto or, in the case of unaudited statements, included in Quarterly
Reports on Form 10-Q, as permitted by Form 10-Q of the SEC). The Company
Financial Statements fairly present in all material respects the consolidated
financial condition and operating results of Company as of the dates and for the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end adjustments). There has been no change in Company
accounting policies except as described in the notes to the Company Financial
Statements.
13
(c) Company has fully complied with all certification
requirements, and will comply with all certification requirements prior to the
Effective Time, under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002.
2.5 Absence of Certain Changes. Except as set forth in the Company
SEC Documents prior to the date hereof or as expressly contemplated by this
Agreement, since the Company Balance Sheet Date there has not occurred, (except
as permitted by Section 4.2 hereof): (i) any change, event or condition (whether
or not covered by insurance or similar indemnification agreement) that has
resulted in, or would reasonably be expected to result in, a Company Material
Adverse Effect, (ii) any acquisition, sale or transfer of any material asset of
Company or any of its subsidiaries, (iii) any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Company or any revaluation by Company of any of its or any of its
subsidiaries' assets, (iv) any declaration, setting aside, or payment of a
dividend or other distribution with respect to the shares of Company, or any
direct or indirect redemption, purchase or other acquisition by Company of any
of its shares of capital stock, (v) any action to amend or change the Articles
of Incorporation or Bylaws of Company, or (vi) any negotiation or agreement by
Company or any of its subsidiaries to do any of the things described in the
preceding clauses (i) through (v) (other than negotiations with Parent and its
representatives regarding the transactions contemplated by this Agreement).
2.6 Absence of Undisclosed Liabilities. Except as set forth on
Schedule 2.6, Company has no material obligations or liabilities of any nature
(matured or unmatured, fixed or contingent) other than (i) those set forth or
adequately reflected or reserved against in the balance sheet or in the notes to
the Company Financial Statements included in the Company Financial Statements in
Company's Quarterly Report on Form 10-Q for the period ended on the Company
Balance Sheet Date, (ii) those incurred in the ordinary course of business since
the Company Balance Sheet Date, (iii) those incurred in connection with the
execution of this Agreement, and (iv) those disclosed on Schedule 2.6.
2.7 Litigation. Except as set forth in the Company SEC Documents, as
of the date of this Agreement, there is no material private or governmental
action, suit, proceeding, claim, arbitration, governmental investigation, or to
the knowledge of Company any private investigation, pending before any agency,
court or tribunal, foreign or domestic (each a "Proceeding"), or, to the
knowledge of Company or any of its subsidiaries, threatened against Company, any
of its subsidiaries or any of their respective properties or any of their
respective officers or directors (in their capacities as such). There is no
judgment, decree or order against Company or any of its subsidiaries, or, to the
knowledge of Company, or any of its subsidiaries, or any of their respective
directors or officers (in their capacities as such), that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Company Material
Adverse Effect. Notwithstanding the foregoing, no judgment, decree or order
arising from or relating to any Specified Proceeding shall be deemed to
constitute or give rise to any breach of this Section 2.7. Schedule 2.7 of the
Company Disclosure Schedule also lists all material litigation that Company has
pending as of
14
the date of this Agreement against other parties which is not disclosed in the
Company SEC Documents.
2.8 Governmental Authorization. Company and each of its
subsidiaries, has obtained each federal, state, county, local or foreign
governmental consent, license, permit, grant, or other authorization of a
Governmental Entity (i) pursuant to which Company or any of its subsidiaries
currently operates or holds any interest in any of its properties (including the
Properties or the Facilities) or (ii) that is required for the operation of
Company's or any of its subsidiaries' business or the holding of any such
interest ((i) and (ii) herein collectively called the "Company Authorizations"),
and all of such Company Authorizations are in full force and effect, except
where the failure to obtain or have any such Company Authorizations could not
reasonably be expected to have a Company Material Adverse Effect.
2.9 Title to Personal Property. Company and each of its subsidiaries
has good, valid and marketable title to all of their respective material
personal properties, interests in material personal properties and material
assets reflected in the Company Balance Sheet or acquired after the Company
Balance Sheet Date, which properties and assets with a book value of $200,000 or
above are listed on Schedule 2.9 (except properties, interests in properties and
assets sold or otherwise disposed of since the Company Balance Sheet Date in the
ordinary course of business), or with respect to leased properties and assets,
valid leasehold interests, free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except (i) a lien for current
taxes not yet due and payable, (ii) such imperfections of title, liens and
easements as do not and will not materially detract from or interfere with the
use of the properties subject thereto or affected thereby, or otherwise
materially impair business operations involving such properties, (iii) liens
securing debt which are reflected on the Company Balance Sheet, and (iv) liens
that in the aggregate would not have a Company Material Adverse Effect. To
Company's knowledge, the material plants, property and equipment of Company that
are used in the operations of its business are in good operating condition and
repair, subject to normal wear and tear. All personal properties used in the
operations of Company are reflected in the Company Balance Sheet to the extent
GAAP requires the same to be reflected.
2.10 Intellectual Property.
(a) Company and its subsidiaries own (free and clear of all
liens and encumbrances), or are licensed or have valid rights to use (or
otherwise possess legally enforceable rights to use) all the U.S. or foreign
patent, patent application, trademark (whether registered or unregistered),
trademark application, trade name, domain name, fictitious business name,
service ▇▇▇▇ (whether registered or unregistered), service ▇▇▇▇ application,
copyright (whether registered or unregistered and whether or not relating to a
published work), copyright registration application, maskwork, maskwork
registration application, trade secret, know how, rights in data or databases,
invention, or other proprietary right, all licenses, sublicenses and agreements
related to the foregoing, and any other intellectual property right or
intangible asset ("Intellectual Property") that is used, subject to a pending
application for registration, or
15
necessary for the conduct of the business of Company and its subsidiaries as
currently conducted by Company and its subsidiaries.
(b) Neither Company nor its subsidiaries has (i) to the
knowledge of Company, licensed any of its Intellectual Property in source code
form to any party, (ii) entered into any exclusive agreements relating to its
Intellectual Property with any party, or (iii) to the knowledge of Company,
entered into any source code escrow agreements. To the knowledge of Company, the
source code and system documentation relating to any software included in the
Intellectual Property have at all times been maintained in confidence and have
been disclosed only to employees and consultants having a "need to know" of the
contents thereof in connection with their duties to Company or its subsidiaries
and such employees and consultants have executed appropriate confidentiality
agreements in connection therewith.
(c) Schedule 2.10(c) lists (i) all issued patents, all
registered trademarks, all registered trade names, all registered service marks,
all registered copyrights, all registered maskworks, and all pending
applications and registrations relating to all patents, trademarks, trade names,
service marks, and copyrights, and maskworks included in the Intellectual
Property, including the jurisdictions in which each such Intellectual Property
right has been issued or registered or in which any application for such
issuance and registration has been filed, (ii) all material licenses,
sublicenses and other agreements as to which Company or its subsidiaries is a
party and pursuant to which any Person is authorized to use any Intellectual
Property of Company, and (iii) all material licenses, sublicenses and other
agreements as to which Company or its subsidiaries is a party and pursuant to
which Company or any subsidiary is authorized to use any third party
Intellectual Property, other than end-user licenses entered into in the ordinary
course of business relating to off-the-shelf "shrink-wrap" software with a
purchase price per copy of less than $10,000 ("Third Party Intellectual Property
Rights").
(d) To Company's knowledge, there is no, nor has there been
any, unauthorized use, disclosure, infringement or misappropriation of any
Intellectual Property rights of Company or any of its subsidiaries, by any third
party, including any employee or former employee of Company or any subsidiary.
Neither Company nor any subsidiary has entered into any agreement to indemnify
any other Person against any charge of infringement of any Intellectual
Property, other than indemnification provisions contained in purchase orders or
license agreements arising in the ordinary course of business, containing such
terms as are typical for the business, services and products of Company.
(e) To Company's knowledge, Company is not, nor will it be as
a result of the execution and delivery of this Agreement or the performance of
its obligations under this Agreement, in material breach of any license,
sublicense or other agreement to which it is a party relating to the
Intellectual Property or Third Party Intellectual Property Rights.
(f) To Company's knowledge, all patents and registered
trademarks, service marks and copyrights held by Company or any of its
subsidiaries are valid and subsisting. To Company's knowledge, neither Company
nor any of its subsidiaries are infringing and has at
16
any time infringed (either through the conduct of its business or by the
manufacturing, marketing, licensing, use or sale of its products and services)
any license, patent, copyright, service ▇▇▇▇, trademark, trade name, trade
secret or other Intellectual Property or proprietary rights of any other Person
or third party. Neither Company nor any of its subsidiaries has received any
unresolved notice or other communication (in writing or otherwise) of any
actual, alleged, possible or potential infringement of any Intellectual Property
or other proprietary right owned or licensed to any other Person or third party.
Neither Company nor any of its subsidiaries is the subject of a pending or, to
its knowledge, threatened suit, action or Proceeding that involves a claim of
infringement or violation of any Intellectual Property or other proprietary
right of any third party. Neither Company nor any of its subsidiaries is
prosecuting any action, suit or proceeding for infringement of Intellectual
Property of Company or any of its subsidiaries or breach of any license or
agreement involving Intellectual Property of Company or any of its subsidiaries
against any third party which is not disclosed in the Company SEC Documents.
(g) To Company's knowledge, Company has secured valid written
assignments from all consultants and employees who contributed to the creation
or development of material Intellectual Property of the rights to such
contributions that Company does not already own by operation of law.
(h) To Company's knowledge, Company has taken reasonable and
appropriate steps to protect and preserve the confidentiality of all trade
secrets, know-how and other proprietary information that is not generally known
by or accessible to the public ("Confidential Information"). To Company's
knowledge, all use, disclosure or appropriation of material Confidential
Information owned by Company by or to a third party has been pursuant to the
terms of a written agreement between Company and such third party. To Company's
knowledge, all use, disclosure or appropriation of Confidential Information not
owned by Company has been in all material aspects pursuant to the terms of a
written agreement between Company and the owner of such Confidential
Information, or is otherwise lawful.
(i) Schedule 2.10(i) of the Company Disclosure Schedule, sets
forth all actions that must be taken by Company by December 31, 2002 that, if
not taken, will result in the loss of any material Intellectual Property,
including the payment of any registration, maintenance or renewal fees or the
filing of any responses to the United States Patent and Trademark Office
actions, documents, applications or certificates for the purposes of obtaining,
maintaining, perfecting or preserving or renewing any such Intellectual
Property.
2.11 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental Claim" shall mean all claims or
causes of actions, whether or not asserted, including but not limited to claims
by any person or Governmental Entity or other third party, alleging potential
liability or responsibility for violation of any Environmental Law or any
Environmental Approval (as defined below) or for threat or injury to the
environment, health or safety, personal injury (including sickness, disease
17
or death) or property or natural resource damage, or otherwise alleging
liability or responsibility for damages (punitive or otherwise), investigation,
cleanup, removal, remedial or response action or costs, contribution,
restitution, administrative civil or criminal penalties, injunctive relief, or
other type of relief, resulting from or based upon a Pre-Existing Environmental
Condition.
(ii) "Environmental Law" shall mean any statute, law
(including common law), treaty, ordinance, rule, regulation, code, policy,
license, permit, consent, approval, judgment, order, administrative order or
decision, decree or injunction of any Governmental Entity relating to the
protection of human health or the environment (including air, water, soil and
natural resources), or the generation, treatment, manufacturing, use, storage,
handling, recycling, presence, release, disposal, transportation or shipment of
any Hazardous Material.
(iii) "Facilities" shall mean all buildings and
improvements on the Property.
(iv) "Hazardous Material" shall mean any material,
substance, waste, pollutant or contaminant listed, defined, designated or
classified as hazardous, toxic, flammable, explosive, reactive, corrosive,
infectious, carcinogenic, mutagenic or radioactive or otherwise regulated by any
Governmental Entity or under any Environmental Law, including petroleum or
petroleum products (including crude oil) and any derivative or by-products
thereof, natural gas, synthetic gas and any mixtures thereof, or any substance
that is or contains polychlorinated biphenyls (PCB's), radon gas, urea
formaldehyde, asbestos-containing materials (ACM) or lead.
(v) "Pre-Existing Environmental Condition" shall mean
(i) any presence or Release of any Hazardous Material at, on, under, from or to
the Property or Facilities before or at Closing (and any migration therefrom,
whether before or after Closing); (ii) any presence, Release or threatened
Release of any Hazardous Material at, on, under, from or to any other location
before or at Closing (and any migration therefrom, whether before or after
Closing); and (iii) any other circumstances occurring before or at Closing
forming the basis of any actual or alleged violation of, or liability under, any
Environmental Law or any Environmental Approval (as defined below).
(vi) "Property" shall mean all real property leased or
owned by Company or its subsidiaries either currently or in the past, including
the Real Property (as defined in Section 2.25(a)) and the Leased Premises (as
defined in Section 2.25(f)).
(vii) "Release" shall mean any releasing, spilling,
leaking, pumping, pouring, placing, emitting, emptying, discharging, injecting,
escaping, leaching, disposing, or dumping into the environment, whether
intentional or unintentional, negligent or non-negligent, sudden or non-sudden,
accidental or non-accidental.
18
(b) Except as disclosed on Schedule 2.11(b), Company
represents and warrants as follows:
(i) The operations of Company and each of its
subsidiaries have at all times been and are in full compliance with all
Environmental Laws.
(ii) Company has obtained and is in full compliance with
all permits, licenses, authorizations and approvals required under Environmental
Law with respect to the operation or conduct of its business or the ownership or
operation of the Property and Facilities (the "Environmental Approvals"), each
such Environmental Approval is in full force and effect, and each such
Environmental Approval will remain in full force and effect after the execution,
delivery and performance of this Agreement, provided any transfer documents
required by Environmental Law for such Environmental Approval are completed as
required by Environmental Law.
(iii) Neither Company nor any of its subsidiaries,
Property or Facilities is subject to any Order (as defined in Section 5.6(b)) or
proposed Order under any Environmental Law. Company has not received any notice
from any person or Governmental Entity regarding or alleging, and no condition
or circumstance exists that is reasonably likely to result in (with or without
notice or lapse of time or both) a violation or failure to comply with any term
or requirement of any Environmental Law or Environmental Approval.
(iv) There are no Proceedings (whether adjudicatory,
rulemaking, licensing or otherwise) pending or threatened in law or in equity,
or under any administrative or regulatory authority before any Governmental
Entity, by, against or affecting Company or any of its subsidiaries, Property or
Facilities involving any actual or alleged Environmental Claim or any potential
suspension, revocation, revision, limitation, restriction, termination or
invalidation of any Environmental Approval. Company has not received any notice
or other communication (whether written or oral) from any person or Governmental
Entity, and no condition or circumstance exists, that (with or without notice or
lapse of time or both) might directly or indirectly give rise to, or serve as a
basis for, the commencement of any such Proceeding.
(v) Neither Company nor any of its subsidiaries have
Released or threatened to Release, or arranged for any other person to Release,
any Hazardous Material in connection with or resulting from the operation or
conduct of the Company's or its subsidiaries' business at, on, under, from or to
any Property or Facilities, or any other location, except in each case (1) in
full compliance with Environmental Law, (2) in a manner that would not give rise
to any Environmental Claim and (3) at a location that (A) is fully permitted for
such Release, (B) has not been listed or proposed for listing on the National
Priorities List under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, 42 U.S.C. Section 9601 et seq., or any similar list under
any other Environmental Law and (C) is not subject to any Proceeding or Order
for investigation or cleanup under any Environmental Law. No Release or
threatened Release of any Hazardous Material has occurred, or is occurring, at,
on, under, from
19
or to any Property or Facilities, and no Hazardous Material is present in, on,
under or about, or migrating to or from any such Property or Facilities that
could give rise to any Environmental Claim or cause of action.
(vi) There are no liens, declarations or deed
restrictions that have arisen or been imposed pursuant to any Environmental Law
on any Property or Facilities, and no action of any Governmental Entity has been
taken or is in process which could subject any of such Property or Facilities to
such liens, declarations or deed restrictions.
(vii) Company has provided or made available to Parent
true, complete and correct copies and results of all studies, reports,
assessments, surveys, correspondence, investigations, audits, analysis, tests
and other documents (whether in hard copy or electronic form) in Company's, each
of its subsidiaries' or their respective counsel's possession or control
pertaining to the presence or alleged presence of any Hazardous Material at, on
or affecting any Property or Facilities, or regarding Company's or any of its
subsidiaries' compliance with any applicable Environmental Law or Environmental
Approval.
(viii) None of the following exists at any Property or
Facilities: any asbestos-containing material in any form which is friable; urea
formaldehyde foam insulation; polychlorinated biphenyls; active or
out-of-service or underground storage tanks or sites from which such storage
tanks have been removed; or landfills, surface impoundments, waste piles or land
disposal areas.
(ix) Neither Company nor any of its subsidiaries is a
potentially responsible party under the federal Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA), or state analog statute,
arising out of events occurring prior to the Closing Date.
2.12 Taxes.
(a) Company and each of its subsidiaries has timely filed all
Tax Returns (as defined below) that it was required to file, and such Tax
Returns are true, correct and complete in all material respects. All Taxes (as
defined below) shown to be payable on such Tax Returns or on subsequent
assessments with respect thereto have been paid in full on a timely basis, and
no other Taxes are payable by Company or any subsidiary with respect to any
period ending prior to the date of this Agreement, whether or not shown due or
reportable on such Tax Returns, other than Taxes for which adequate accruals
have been provided in the Company Financial Statements or amounts payable with
respect to periods or portions of periods after the Company Balance Sheet Date.
Company and each of its subsidiaries has withheld and paid over all Taxes
required to have been withheld and paid over, and complied with all information
reporting and backup withholding requirements, including maintenance of required
records with respect thereto. Neither Company nor any subsidiary has any
material liability for unpaid Taxes accruing after the date of its latest
Financial Statements except for Taxes incurred in the ordinary course of
business. Except as disclosed in the Company SEC Documents, there are no liens
for
20
Taxes on the properties of Company or any of its subsidiaries, other than liens
for Taxes not yet due and payable.
(b) Except as disclosed in the Company SEC Documents, no Tax
Returns of Company or any of its subsidiaries have been audited. Company has
delivered or made available to Parent correct and complete copies of all Tax
Returns filed, examination reports, and statements of deficiencies assessed or
agreed to by Company or any of its subsidiaries for the last five years. Except
as disclosed in the Company SEC Documents, neither Company nor any of its
subsidiaries has waived any statute of limitations in respect of any Tax or
agreed to an extension of time with respect to any Tax assessment or deficiency.
(c) Except as disclosed in the Company SEC Documents, neither
Company nor any of its subsidiaries is a party to or bound by any tax indemnity
agreement, tax sharing agreement or similar contract. Neither Company nor any of
its subsidiaries is a party to any joint venture, partnership, or other
arrangement or contract which could be treated as a partnership or "disregarded
entity" for United States federal income tax purposes.
(d) Neither Company nor any of its subsidiaries is obligated
under any agreement, contract or arrangement that may result in the payment of
any amount that would not be deductible by reason of Sections 162(m) or 280G of
the Code.
(e) Neither Company nor any of its subsidiaries has been or,
to its knowledge, will be required to include any material adjustment in Taxable
income for any Tax period (or portion thereof) pursuant to Section 481 or 263A
of the Code or any comparable provision under state or foreign Tax laws as a
result of transactions, events or accounting methods employed prior to the
Merger other than any such adjustments required as a result of the Merger.
Neither Company nor any of its subsidiaries has filed or will file any consent
to have the provisions of paragraph 341(f) of the Code (or comparable provisions
of any state Tax laws) apply to Company or such subsidiaries. Neither Company
nor any of its subsidiaries has filed any disclosures under Section 6662 or
comparable provisions of state, local or foreign law to prevent the imposition
of penalties with respect to any Tax reporting position taken on any Tax Return.
Neither Company nor any of its subsidiaries is currently or has been a United
States real property holding corporation (within the meaning of Section
897(c)(2) of the Code) during the applicable periods specified in Section
897(c)(1)(A)(ii) of the Code.
(f) Neither Company nor any of its subsidiaries has incurred
any liability for Taxes pursuant to Section 1374 or 1375 of the Code (and any
predecessor provision and any similar provision of applicable state or local or
other Tax law).
(g) Neither Company nor any of its subsidiaries has been the
"distributing corporation" (within the meaning of Section 355(c)(2) of the Code)
with respect to a transaction described in Section 355 of the Code within the
three (3) year period ending as of the date of this Agreement.
21
(h) For purposes of this Agreement, the following terms have
the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, transfer, franchise, profits,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property, environmental or windfall profit tax, custom, duty or other
tax, governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "Tax Authority") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period, and (iii) any liability for the payment of any amounts of the type
described in (i) or (ii) as a result of being a transferee of or successor to
any Person, or as a result of any express or implied obligation to indemnify any
other Person. As used herein, "Tax Return" shall mean any return, statement,
report or form (including, without limitation, estimated tax returns and
reports, withholding tax returns and reports and information reports and
returns) required to be filed with respect to Taxes.
2.13 Employee Benefit Plans.
(a) The following terms shall be defined as follows:
(i) "Defined Benefit Plan" shall mean either a plan
described in Section 3(35) of ERISA or a plan subject to the minimum funding
standards set forth in Section 302 of ERISA and Section 412 of the Code.
(ii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(iii) "Member of the Controlled Group" shall mean each
trade or business, whether or not incorporated, that would be treated as a
single employer with Company under Section 4001 of ERISA or Section 414(b), (c),
(m) or (o) of the Code.
(iv) "Multiemployer Plan" shall mean a plan described in
Section 3(37) of ERISA.
(b) Schedule 2.13(b) lists (i) all material "employee benefit
plans" within the meaning of Section 3(3) of ERISA, (ii) all employment
agreements, including, but not limited to, any individual benefit arrangement,
policy or practice with respect to any current or former employee or director of
Company or Member of the Controlled Group, and (iii) all other employee benefit,
bonus or other incentive compensation, stock option, stock purchase, stock
appreciation, severance pay, lay-off or reduction in force, change in control,
sick pay, vacation pay, salary continuation, retainer, leave of absence,
educational assistance, service award, employee discount, fringe benefit plans,
arrangements, policies or practices, whether legally binding or not, which
Company or any Member of the Controlled Group maintains, to which any
22
of them contributes, or for which any of them has any obligation or liability
(collectively, the "Plans").
(c) None of the Plans is a Defined Benefit Plan, and neither
Company nor any Member of the Controlled Group has ever sponsored, maintained or
contributed to, or ever been obligated to contribute to, a Defined Benefit Plan.
(d) None of the Plans is a Multiemployer Plan, and neither
Company nor any Member of the Controlled Group has ever contributed to, or ever
been obligated to contribute to, a Multiemployer Plan.
(e) Company does not maintain or contribute to any plan that
provides health benefits to an employee after the employee's termination of
employment or retirement except as required under Section 4980B of the Code and
Sections 601 through 608 of ERISA.
(f) Each Plan which is an "employee benefit plan," as defined
in Section 3(3) of ERISA, complies in all material respects by its terms and in
operation with the requirements provided by any and all statutes, orders or
governmental rules and regulations currently in effect and applicable to the
Plan, including but not limited to ERISA and the Code.
(g) All reports, forms and other documents required to be
filed with any government entity or furnished to employees, former employees or
beneficiaries with respect to any Plan (including without limitation, summary
plan descriptions, Forms 5500 and summary annual reports) have been timely filed
and furnished and are accurate, except for those instances which, either
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(h) Each of the Plans that is intended to qualify under
Section 401(a) of the Code has been determined by the Internal Revenue Service
so to qualify after January 1, 1989, and each trust maintained pursuant thereto
has been determined by the Internal Revenue Service to be exempt from taxation
under Section 501 of the Code. Nothing has occurred since the date of the
Internal Revenue Service's favorable determination letter that could adversely
affect the qualification of the Plan and its related trust. Company and each
Member of the Controlled Group have timely amended and operated each of these
Plans to comply with the Small Business and Job Protection Act of 1996 and
subsequent legislation enacted through the date hereof, and Section 501 of the
Code.
(i) All contributions for all periods ending prior to the
Closing Date (including periods from the first day of the current plan year to
the Closing Date) have been made prior to the Closing Date by Company or have
been reserved against on the Company Financial Statements.
(j) All insurance premiums have been paid in full, subject
only to normal retrospective adjustments in the ordinary course, with regard to
the Plans for plan years ending
23
on or before the Closing Date, except for those instances which, either
individually or in the aggregate, would not have a Company Material Adverse
Effect.
(k) With respect to each Plan: (i) to Company's knowledge, no
prohibited transactions (as defined in Section 406 or 407 of ERISA or Section
4975 of the Code) have occurred for which a statutory exemption is not
available; (ii) no action or claims (other than routine claims for benefits made
in the ordinary course of Plan administration for which Plan administrative
review procedures have not been exhausted) are pending, or to the knowledge of
Company, threatened or imminent against or with respect to the Plan, any
employer who is participating (or who has participated) in any Plan or any
fiduciary (as defined in Section 3(21) of ERISA), of the Plan; (iii) neither
Company, nor any fiduciary has any knowledge of any facts that could give rise
to any such action or claim; and (iv) it provides that it may be amended or
terminated at any time and, except for benefits protected under Section 411(d)
of the Code, all benefits payable to current, terminated employees or any
beneficiary may be amended or terminated by Company at any time without
liability other than ordinary administrative expenses.
(l) Neither Company nor, to the knowledge of Company, any
Member of the Controlled Group has any material liability or is, to the
knowledge of Company, threatened with any material liability (whether joint or
several) (i) for any excise tax imposed by Sections 4971, 4975, 4976, 4977 or
4979 of the Code, or (ii) to a fine under Section 502 of ERISA.
(m) All of the Plans, to the extent applicable, are in
material compliance with the continuation of group health coverage provisions
contained in Section 4980B of the Code and Sections 601 through 608 of ERISA.
(n) True, correct and complete copies of all documents
creating or evidencing any Plan have been delivered or made available to Parent,
and true, correct and complete copies of all reports, forms and other documents
required to be filed with any Governmental Entity or furnished to employees,
former employees or beneficiaries (including, without limitation, summary plan
descriptions, Forms 5500 and summary annual reports for all plans subject to
ERISA, but excluding individual account statements and tax forms) have been
delivered to Parent. There are no negotiations, demands or proposals which are
pending or have been made which concern matters now covered, or that would be
covered, by the type of agreements required to be listed in Schedule 2.13(b) and
that are reasonably likely to have a Company Material Adverse Effect.
(o) All expenses and liabilities relating to all of the Plans
have been, and will on the Closing Date be fully and properly accrued on
Company's books and records and disclosed in accordance with GAAP and in Plan
financial statements.
2.14 Certain Agreements Affected by the Merger. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any material payment
(including, without limitation, any severance, unemployment
24
compensation, golden parachute or bonus payment) becoming due to any director,
officer, agent or employee of Company or any of its subsidiaries or any other
third party, (ii) materially increase any benefits otherwise payable by Company
or any of its subsidiaries to their respective employees or (iii) result in the
acceleration of the time of payment or vesting of any such benefits.
2.15 Employee Matters.
(a) Company and each of its subsidiaries are in compliance in
all material respects with all currently applicable laws and regulations
respecting employment, discrimination in employment, terms and conditions of
employment, wages, hours and occupational safety and health and employment
practices, and are not engaged in any unfair labor practice, except where the
failure to be in compliance or the engagement in unfair labor practices has not
had and would not be reasonably expected to have a Company Material Adverse
Effect. Company and each of its subsidiaries have in all material respects
withheld all amounts required by law or by agreement to be withheld from the
wages, salaries, and other payments to their respective employees; and are not
liable for any arrears of wages or any taxes or any penalty for failure to
comply with any of the foregoing.
(b) To Company's knowledge, neither Company nor any of its
subsidiaries is liable for any payment to any trust or other fund or to any
Governmental Entity, with respect to unemployment compensation benefits, social
security or other benefits or obligations for employees (other than routine
payments to be made in the normal course of business and consistent with past
practice). There are no pending claims against Company or any of its
subsidiaries under any workers' compensation plan or policy or for long term
disability that are not covered by insurance. Neither Company or any of its
subsidiaries has any obligations under COBRA with respect to any former
employees or qualifying beneficiaries thereunder, except obligations that would
not have a Material Adverse Effect on Company. There are no controversies
pending or, to the knowledge of Company or any of its subsidiaries, threatened,
between Company or any of its subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to result in
a Proceeding against Company before any Governmental Entity except for such
Proceeding that would not have a Company Material Adverse Effect. Neither
Company nor any of its subsidiaries is a party to any collective bargaining
agreement or other labor union contract, nor does Company or any of its
subsidiaries know of any activities or proceedings of any labor union or
organization of any such employees.
(c) To Company's or any of its subsidiaries' knowledge, no
employees of Company or its subsidiaries are in violation of any term of any
employment contract, patent disclosure agreement, enforceable noncompetition
agreement, or any enforceable restrictive covenant to a former employer relating
to the right of any such employee to be employed by Company or any of its
subsidiaries because of the nature of the business conducted or presently
proposed to be conducted by Company or its subsidiaries or to the use of trade
secrets or proprietary information of others. No employees which are considered
key to the operations or
25
the business of Company or any of its subsidiaries have given notice to Company
or its subsidiaries, nor is Company or any of its subsidiaries otherwise aware
that any such employee intends to terminate his or her employment with Company
or its subsidiaries.
2.16 Insurance. Company and each of its subsidiaries have made
available to Parent all material policies of insurance. There is no material
claim pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies and bonds have been paid
and Company and its subsidiaries are otherwise in compliance with the terms of
such policies and bonds. Neither Company nor any of its subsidiaries has
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
2.17 Compliance With Laws. Each of Company and its subsidiaries has
complied with, is not in violation of, and has not received any notices of
violation with respect to any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not be reasonably expected to have a Company Material Adverse Effect.
2.18 Brokers' and Finders' Fees. Except for its engagement letter
dated August 8, 2002 with ▇▇▇▇▇▇▇ & Company, the Company has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement, the Merger or any other transaction
contemplated hereby. Company has furnished or made available to Parent accurate
and complete copies of all agreements under which any such finders' fees or
agents' commissions or investment bankers' fees or any similar charges have been
paid or may become payable to, and all indemnification and other agreements
related to the engagement of ▇▇▇▇▇▇▇ & Company.
2.19 Vote Required. The affirmative vote of the holders of a
majority of the shares of Company Common Stock outstanding on the record date
set for the Company Shareholders Meeting is the only vote of the holders of any
of Company's Capital Stock or any Company Notes necessary to approve this
Agreement and the transactions contemplated hereby.
2.20 Board Approval. The Board of Directors of Company has (i)
approved this Agreement and the Merger, (ii) determined that the Merger is in
the best interests of the shareholders of Company and is on terms that are fair
to such shareholders, and (iii) recommended that the shareholders of Company
approve this Agreement and the Merger.
2.21 Customers and Suppliers. Schedule 2.21 lists the top 10
customers of Company in terms of gross revenues during the twelve (12) months
prior to the Execution Date; and no such customer and no supplier of Company or
any of its subsidiaries has canceled or otherwise terminated or made any written
threat to Company or any of its subsidiaries to cancel or otherwise terminate
its relationship with Company or any of its subsidiaries, or at any time on or
after the Company Balance Sheet Date has decreased materially its services or
supplies to
26
Company or any of its subsidiaries in the case of any such supplier, or its
usage of the services or products of Company in the case of such customer, and
to Company's or any of its subsidiaries knowledge, no such supplier or customer
intends to cancel or otherwise terminate its relationship with Company or any of
its subsidiaries or to decrease materially its services or supplies to Company
or any of its subsidiaries or its usage of the services or products of Company
or any of its subsidiaries, as the case may be. Neither Company or any of its
subsidiaries has knowingly breached, so as to provide a benefit to Company or
any of it subsidiaries that was not intended by the parties, any agreement with,
or engaged in any fraudulent conduct with respect to, any customer or supplier
of Company or any of its subsidiaries.
2.22 Material Contracts. Except (i) as set forth in the Company SEC
Documents filed prior to the date of this Agreement; (ii) as set forth in
Schedule 2.10; (iii) as set forth in this Schedule 2.22 (the contracts in (i),
(ii), and (iii) being collectively referred to herein as the "Material
Contracts"); and (iv) for this Agreement, and other contracts and agreements
which individually or in the aggregate are not material to Company's or any of
its subsidiaries' businesses, as of the date of this Agreement, Company is not a
party to or bound by:
(a) any distributor, sales, agency or manufacturer's
representative, consulting, joint-venture, or partnership contract or joint R&D
or technology sharing arrangements;
(b) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such contact more
than $200,000 over the life of the contract;
(c) any trust indenture, mortgage, promissory note, loan
agreement or other contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of the type
required to be capitalized in accordance with GAAP;
(d) any contract for capital expenditures in excess of
$200,000 in the aggregate;
(e) any contract limiting the freedom of Company to engage in
any line of business, to acquire any product or asset from any other Person, to
sell any product or asset to, or to perform any service for, any Person, or to
compete with any other Person (as that term is defined in the Exchange Act);
(f) any confidentiality, secrecy or non-disclosure contract,
which individually or in the aggregate, materially affects or could be
reasonably anticipated to materially affect the business or operations of
Company;
(g) any contract pursuant to which Company is a lessor of real
property or any machinery, equipment, motor vehicles, office furniture, fixtures
or other personal property
27
involving in the case of any such personal property contact more than $200,000
over the life of the contract;
(h) any contract with any Person with whom Company does not
deal at arm's length;
(i) any contract which provides for the indemnification of any
officer, director, employee or agent; or
(j) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect to, the
obligations, liabilities (whether accrued, absolute, contingent or otherwise) or
indebtedness of any other Person.
2.23 No Breach of Material Contracts. All Material Contracts are in
the written form previously provided or made available to Parent. Company has
performed all of the material obligations required to be performed by it as of
the date hereof and is entitled to all benefits under, and, to Company's
knowledge, is not alleged to be in material breach or default in respect of any
Material Contract. To Company's knowledge, each of the Material Contracts is in
full force and effect, unamended except as provided or made available to Parent,
and there exists no default or event of default or event, occurrence, condition
or act, with respect to Company or, to Company's knowledge, with respect to the
other contracting party, which, with the giving of notice, the lapse of the time
or the happening of any other event or conditions, would become a default or
event of default under any Material Contract or would give any Person the right
to exercise any remedy, or the right to any rebate, chargeback, penalty or
change in delivery schedule, except to the extent such defaults, remedies,
penalties or changes have not had and would not be reasonably expected to have a
Material Adverse Effect on Company.
2.24 Material Third Party Consents. Schedule 2.24 lists all
contracts that require a novation or consent to the Merger or change of control,
as the case may be, prior to the Effective Time so that such contracts may
remain in full force and effect after the Closing (the "Contracts Requiring
Novation or Consent to Change of Control") which, if no novation occurs or if no
consent to the Merger or change of control is obtained, would have a Material
Adverse Effect on Parent's ability to operate the business in the same manner as
the business was operated by Company prior to the Effective Time.
2.25 Real Property and Real Property Leases.
(a) Schedule 2.25(a) sets forth an accurate, correct and
complete list of each parcel of real property owned by Company (the "Real
Property"), including a street address, complete legal description and a list of
all leases, contracts or other agreements to which Company is a party and
affecting the Real Property or any interest therein. Company has delivered to
Parent accurate, correct and complete copies of all such leases, contracts, and
agreements. Company is the sole and exclusive legal and record owner of and has
good and marketable title in fee simple absolute to, and is in possession of,
all Real Property, including the buildings, structures, fixtures and
improvements situated thereon and appurtenances thereto,
28
including such right of ways and easements running toward the benefit of such
Real Property, in each case free and clear of all tenancies and other possessory
interests, security interests, conditional sale or other title retention
agreements, liens, encumbrances, mortgages, pledges, assessments, easements,
rights of way, covenants, restrictions, reservations, options, rights of first
refusal, defects in title, encroachments and other burdens, except the leases,
contracts, agreements and other matters set forth on Schedule 2.25(a) or except
those that do not materially and adversely affect the current use and operation
of such properties. All leases, contracts and agreements to which Company is a
party and affecting the Real Property are set forth on Schedule 2.25(a) and are
legally valid and binding and in full force and effect, and there are no
defaults, offsets, counterclaims or defenses thereunder, and Company has
received no notice of default, offset, counterclaim or defense under any such
contracts.
(b) No Real Property is located within a designated erosion,
flood or seismic safety hazard area. Neither the whole nor any portion of any
Real Property owned, leased, occupied or used by Company has been condemned,
requisitioned or otherwise taken by any public authority, and no notice of any
such condemnation, requisition or taking has been received. To the knowledge of
Company, no such condemnation, requisition or taking is threatened or
contemplated. Company has no knowledge of any public improvements which may
result in special assessments against or otherwise affect the Real Property.
(c) To Company's knowledge, the Real Property is in material
compliance with all applicable Environmental Laws, planning, zoning, building,
health, fire, water, use or similar legal requirements. The zoning of each
parcel of Real Property permits the existing improvements and the continuation
following consummation of the transaction contemplated hereby of the businesses
of Company and its Affiliates as presently conducted thereon. Company has all
licenses, certificates of occupancy, permits and authorizations required to
utilize the Real Property for the business presently conducted thereon. Company
has all easements and rights necessary to conduct its businesses, including
easements for all utilities, services, roadway, railway and other means of
ingress and egress. The Real Property as conveyed pursuant to this Agreement
shall include all rights to any off-site facilities necessary to ensure
compliance in all material respects with all applicable planning, zoning,
building, health, fire, water, use or similar legal requirements. To the
knowledge of Company, no fact or condition exists which would result in the
termination or impairment of existing access to the Real Property or
discontinuation of existing sewer, water, electric, gas, telephone or other
communications facilities, waste disposal or other utilities or services serving
the Real Property. To the knowledge of Company, the facilities servicing the
Real Property are in material compliance with all applicable legal requirements.
(d) Company has delivered to Parent accurate, correct and
complete copies of all existing title insurance policies, title reports,
surveys, environmental reports, if any, with respect to each parcel of Real
Property.
(e) With respect to the Real Property,
29
(i) to the knowledge of Company, there are no
outstanding options or rights of first refusal or similar rights to purchase any
such parcel or any portion thereof or interest therein, except as disclosed in
written agreements relating thereto as set forth on Schedule 2.25(a), and
(ii) to the knowledge of Company, each such parcel abuts
on and has adequate direct vehicular access to a public road and there is no
pending or, to the knowledge of Company, threatened termination of such access.
(f) To the extent not disclosed in the Company SEC Documents,
Schedule 2.25(f) sets forth a list of all leases, licenses or other occupancy
agreements to which Company or any of its subsidiaries is a party, that are for
the use or occupancy of real estate owned by a third party ("Leases") (copies of
which have previously been furnished to Parent), in each case, setting forth:
(i) the lessor and lessee thereof and the commencement date, term and renewal
rights under each of the Leases, and (ii) the street address or legal
description of each property covered thereby (the "Leased Premises"). The Leases
are in full force and effect in all material respects, and to the knowledge of
Company, have not been amended except as disclosed in the Company SEC Documents
or Schedule 2.25(f), and Company is not and, to the knowledge of Company, no
other party thereto, is in default or breach under any such Lease and no event
has occurred by Company that, with the passage of time or the giving of notice
or both, would cause a breach of or default of Company under any of such Leases,
except to the extent such default would not have a Company Material Adverse
Effect. Except as disclosed in the Company SEC Documents or Schedule 2.25(f),
either Company or its subsidiaries have valid leasehold interests in each of the
Leased Premises, which leasehold interest is free and clear of any liens,
covenants and easements or title defects of any nature whatsoever, except the
matters set forth on Schedule 2.25(f), or those that do not materially and
adversely affect the current use of the property.
(g) With respect to the Leased Premises, and except as set
forth on Schedule 2.25(g),
(i) there are no pending or, to the knowledge of
Company, threatened condemnation proceedings, suits or administrative actions
relating to any such parcel or other matters affecting materially and adversely
the current use, occupancy or value thereof,
(ii) to the knowledge of Company, all improvements,
buildings and systems on any such parcel are in good repair and safe for their
current occupancy and use,
(iii) to the knowledge of Company, there are no
contracts or agreements (whether oral or written) granting to any party or
parties the right of use or occupancy of any such parcel, and there are no
parties (other than Company) in possession of any such parcel,
30
(iv) to the knowledge of Company, there are no
outstanding options or rights of first refusal or similar rights to purchase any
such parcel or any portion thereof or interest therein,
(v) to the knowledge of Company, all Facilities located
on each such parcel are supplied with utilities and other services necessary for
their ownership, operation or use, currently or as currently proposed by
Company, all of which services are adequate in accordance with all applicable
laws, ordinances, rules and regulations, and
(vi) to the knowledge of Company, each such parcel abuts
on and has adequate direct vehicular access to a public road and there is no
pending or, to the knowledge of Company, threatened termination of such access.
(h) With respect to that certain Purchase and Sale Agreement,
dated May 31, 2002 between the Company and Phoenix Industrial Investment
Partners, L.P. and the Lease dated June 21, 2002 between the Company and Phoenix
Industrial Investment Partners, L.P., the Company hereby represents that the
terms and rates set forth in such agreements were arrived at by arms-length
negotiations between the parties thereto and are fair and reasonable as compared
to similar agreements in the same market.
2.26 Registration Statement; Proxy Statement/Proxy. The information
relating to Company which is provided by Company (including any information
previously provided by Company in the Company SEC Documents) for inclusion in
the Parent's registration statement on Form S-4 (or such other successor form as
may be appropriate) pursuant to which the shares of Parent Common Stock to be
issued in the Merger will be registered with the SEC, including any amendments
or supplements thereto (the "Registration Statement") shall not, at the time the
Registration Statement is declared effective by 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. The information
relating to Company which is provided by Company (including any information
previously provided by Company in the Company SEC Documents) for inclusion in
the proxy statement/prospectus to be sent to the shareholders of Company in
connection with the meeting of the Company Shareholders (the "Company
Shareholders Meeting"), as may be amended or supplemented (the "Proxy
Statement") shall not, on the date the Proxy Statement is first mailed to the
shareholders of Company, at the time of the Company Shareholders Meeting and at
the Effective Time, 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; or omit to state a material fact necessary to correct any
statement in an earlier communication with respect to the solicitation of
proxies for the Company Shareholders Meeting which has become false or
misleading. Notwithstanding the foregoing, Company makes no representation,
warranty or covenant with respect to any information supplied by Parent and
relating to Parent which is contained in the Registration Statement or the Proxy
Statement.
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2.27 Tax Matters. To Company's knowledge neither Company nor any of
its Affiliates has taken or agreed to take any action, nor does Company have
knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
2.28 Opinion of Financial Advisor. Company has been advised in
writing by its financial advisor, ▇▇▇▇▇▇▇ & Company, that in such advisor's
opinion, as of the date hereof, the consideration to be received by the
shareholders of Company is fair from a financial point of view, to the
shareholders of Company.
2.29 Takeover Statutes. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute in Illinois Law (each,
a "Takeover Statute") is applicable to the Merger, except for such statutes or
regulations as to which all necessary actions have been taken by Company and its
Board of Directors to permit the consummation of the Merger in accordance with
the terms hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
In this Agreement, any reference to a "Parent Material Adverse Effect" any
change, event or effect that is materially adverse to the condition (financial
or otherwise), properties, assets (including intangible assets), liabilities,
business, operations or results of operations of Parent and its subsidiaries,
taken as a whole; provided, however, that none of the following shall be deemed
in themselves, either alone or in combination, to constitute, and none of the
following shall be taken into account in determining whether there has been or
will be, a Parent Material Adverse Effect: (a) any change in the market price or
trading volume of Parent's stock after the date hereof; (b) any adverse change,
effect, event, occurrence, state of facts or development to the extent
attributable to the announcement or pendency of the Merger (including any
cancellation of or delays in customer orders, any reduction in sales, any
disruption in supplier, distributor, partner or similar relationships or any
loss of employees); (c) any adverse change, effect, event, occurrence, state of
facts or development attributable to conditions affecting the industries as a
whole in which Parent participates, the U.S. economy as a whole or the foreign
economies as a whole in any locations where Parent or any of its subsidiaries
has material operations or sales; or (d) any adverse change, effect, event,
occurrence, state of facts or development arising from or relating to compliance
with the terms of, or the taking of any action required by, this Agreement.
Except as disclosed in a document of even date herewith and
delivered by Parent to Company prior to the execution and delivery of this
Agreement and referring to the representations and warranties in this Agreement
(the "Parent Disclosure Schedule"), provided that any disclosure shall qualify
the section number referred to in the Parent Disclosure Schedule as well as all
other sections in this Article III when it is reasonably apparent from a reading
of such disclosure that it also qualifies or applies to such other sections,
provided further that Parent
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shall make all reasonable efforts to specifically cross reference in the Parent
Disclosure Schedule all sections where a particular disclosure qualifies or
applies, Parent represents and warrants to Company as follows:
3.1 Organization, Standing and Power. Parent and each of its
subsidiaries, including Merger Sub, are corporations duly organized, validly
existing and in good standing under the laws of their respective jurisdictions
of organization. Each of Parent and its subsidiaries, including Merger Sub, have
the corporate power to own their respective properties and to carry on their
respective businesses as now being conducted and as proposed to be conducted and
are each duly qualified to do business and are in good standing in each
jurisdiction in which the failure to be so qualified and in good standing would
have a Parent Material Adverse Effect. Neither Parent nor any of its
subsidiaries, including Merger Sub, is in violation of any of the provisions of
its respective Articles of Incorporation or Bylaws or equivalent organizational
documents. Parent is the owner of all outstanding shares of capital stock of
each of its subsidiaries and all such shares are duly authorized, validly
issued, fully paid and nonassessable. Except as disclosed in the Parent SEC
Documents (as defined in Section 3.4 hereof), Parent does not directly or
indirectly own any equity or similar interest in, or any interest convertible or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture or other business association or entity,
excluding securities in any publicly traded company held for investment by
Parent or any of it subsidiaries in accordance with and pursuant to the Parent's
formal investment policy and comprising less than 5% of the outstanding stock of
such company.
3.2 Capital Structure.
(a) The authorized capital stock of Parent consists of (i)
240,000,000 shares of Common Stock, no par value, of which there were
143,467,924 shares issued and outstanding as of the close of business on the day
two days prior to the Execution Date, and (ii) 10,000,000 shares of Preferred
Stock, no par value, of which there were no shares issued and outstanding as of
the close of business on the day two days prior to the Execution Date. There are
no other outstanding shares of capital stock or voting securities and no
outstanding commitments to issue any shares of capital stock or voting
securities, other than pursuant to the exercise of options outstanding as of
such date under the Parent 1992 Stock Option Plan, the Parent 2001 Stock
Incentive Plan, the Parent 2001 Non-Qualified Stock Option Plan, the GaSonics
International Corporation 1994 Stock Option/Stock Issuance Plan, the Gamma
Precision Technology 1998 Stock Option Plan, the GaSonics International
Corporation 2000 Supplemental Stock Option Plan (collectively, the "Parent Stock
Option Plans"), and the Parent 1992 Employee Stock Purchase Plan (the "Parent
ESPP"). The authorized capital stock of Merger Sub consists of 1,000 shares of
common stock, $0.001 par value, all of which are issued and outstanding and held
by Parent. The shares of Parent Common Stock to be issued in the Merger will be
duly authorized, validly issued, fully paid and nonassessable and registered
with the SEC pursuant to the Securities Act.
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(b) All outstanding shares of Parent Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are free of any
liens or encumbrances, other than any liens or encumbrances created by or
imposed upon the holders thereof, and are not subject to preemptive rights or
rights of first refusal created by statute, the Articles of Incorporation or
Bylaws of Parent or any agreement to which Parent is a party or by which it is
bound. As of the close of business on August 7, 2002, Parent has reserved (i)
33,345,000 shares of Common Stock for issuance to directors, employees and
consultants pursuant to the Parent 1992 Stock Option Plan, of which 33,241,624
shares have been issued pursuant to option exercises or direct stock purchases,
16,621,789 shares are subject to outstanding, unexercised options, and no shares
are available for issuance thereunder, (ii) 6,360,000 shares of Common Stock for
issuance to directors, employees and consultants pursuant to the Parent 2001
Stock Incentive Plan, of which no shares have been issued pursuant to option
exercises or direct stock purchases, no shares are subject to outstanding,
unexercised options, and 6,360,000 shares are available for issuance thereunder,
(iii) 6,000,000 shares of Common Stock for issuance to directors, employees and
consultants pursuant to the Parent 2001 Non-Qualified Stock Option Plan, of
which 3,778,173 shares have been issued pursuant to option exercises or direct
stock purchases, 3,775,673 shares are subject to outstanding, unexercised
options, and 2,221,827 shares are available for issuance thereunder, (iv)
1,336,059 shares of Common Stock for issuance to directors, employees and
consultants pursuant to the GaSonics International Corporation 1994 Stock
Option/Stock Issuance Plan of which 1,321,914 shares have been issued pursuant
to option exercises or direct stock purchases, 860,932 shares are subject to
outstanding, unexercised options, and 14,145 shares are available for issuance
thereunder, (v) 33,680 shares of Common Stock for issuance to directors,
employees and consultants pursuant to the Gamma Precision Technology 1998 Stock
Option Plan of which 32,312 shares have been issued pursuant to option exercises
or direct stock purchases, 15,650 shares are subject to outstanding, unexercised
options, and 1,368 shares are available for issuance thereunder, (vi) 104,000
shares of Common Stock for issuance to directors, employees and consultants
pursuant to the GaSonics International Corporation 2000 Supplemental Stock
Option Plan of which 78,288 shares have been issued pursuant to option exercises
or direct stock purchases, 62,828 shares are subject to outstanding, unexercised
options, and 25,712 shares are available for issuance thereunder, and (vii)
4,900,000 shares of Common Stock under the Parent ESPP, of which 3,637,974
shares have been issued. On the Execution Date, except as set forth in the
Parent SEC Documents and except for (i) the rights created pursuant to this
Agreement, the Parent Stock Option Plans, and the Parent ESPP and (ii) Parent's
right to repurchase any unvested shares under the Parent Stock Option Plans,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Parent is a party or by which it is bound obligating
Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of Parent Capital Stock or
obligating Parent to grant, extend, accelerate the vesting of, change the price
of, or otherwise amend or enter into any such option, warrant, call, right,
commitment or agreement.
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3.3 Authority.
(a) Parent and Merger Sub each have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of each of Parent and
Merger Sub, as applicable.
(b) This Agreement has been duly executed and delivered by
each of Parent and Merger Sub, as applicable, and each constitutes the valid and
binding obligations of Parent and Merger Sub enforceable against each by Company
in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws and equitable
principles relating to or limiting creditors' rights generally and by general
principles of equity. The execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or loss of a benefit under (i)
any provision of the Articles of Incorporation or Bylaws of Parent or the
Certificate of Incorporation or Bylaws of Merger Sub, as amended, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Merger Sub or their
respective properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration with respect to the foregoing
provisions in subsection (ii) would not have had and would not be reasonably
expected to have a Parent Material Adverse Effect.
(c) Except as otherwise would not have a Parent Material
Adverse Effect, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated hereby and thereby,
except for (i) the filing of the Certificate of Merger and the Articles of
Merger, together with the required officers' certificates, as provided in
Section 1.2, (ii) the filing with the SEC and the NASD of the Registration
Statement, (iii) any filings as may be required under applicable federal, state
and local securities laws and the securities laws of any foreign country, (v)
such filings as may be required under HSR, (iv) the filing with the NASDAQ Stock
Market of a Notification Form for Listing of Additional Shares with respect to
the shares of Parent Common Stock issuable upon conversion of the Company Common
Stock in the Merger and upon exercise of the options under the Company Stock
Option Plans and assumed by Parent, to the extent required, (v) the filing of a
registration statement on Form S-8 with the SEC, or other applicable form
covering the shares of Parent Common Stock issuable pursuant to outstanding
options under the Company Stock Option Plans and assumed by Parent; and (vi)
such other consents, authorizations, filings, approvals and registrations which,
if not obtained or made, would not prevent, materially alter or delay any of the
transactions contemplated by this Agreement.
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3.4 SEC Documents; Financial Statements. Parent has made available
to Company each statement, report, registration statement (with the prospectus
in the form filed pursuant to Rule 424(b) of the Securities Act), definitive
proxy statement, and other filing filed with the SEC by Parent since January 1,
1997 (collectively, the "Parent SEC Documents"). In addition, Parent has made
available to Company all exhibits to the Parent SEC Documents filed prior to the
date hereof, and will promptly make available to Company all exhibits to any
additional Parent SEC Documents filed prior to the Effective Time. As of their
respective filing dates, the Parent SEC Documents complied in all material
respects with the requirements of the Exchange Act and the Securities Act. The
financial statements of Parent, including the notes thereto, included in the
Parent SEC Documents (the "Parent Financial Statements") were complete and
correct in all material respects as of their respective dates, complied as to
form in all material respects with applicable accounting requirements and with
the published rules and regulations of the SEC with respect thereto as of their
respective dates, and have been prepared in accordance with GAAP applied on a
basis consistent throughout the periods indicated and consistent with each other
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, included in Quarterly Reports on Form 10-Qs, as permitted by Form
10-Q of the SEC). The Parent Financial Statements fairly present in all material
respects the consolidated financial condition and operating results of Parent as
of the dates and for the periods indicated therein (subject, in the case of
unaudited statements, to normal, recurring year-end adjustments). Parent has
fully complied with all certification requirements, and will comply with all
certification requirements prior to the Effective Time, under the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act of 2002 and under Order 4-460.
3.5 Tax Matters. To Parent's knowledge neither Parent nor any of its
affiliates has taken or agreed to take any action, nor does Parent have
knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
3.6 Absence of Undisclosed Liabilities. Parent has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in the
balance sheet or in the notes to the Parent Financial Statements included in the
Parent Financial Statements in Parent's Quarterly Report on Form 10-Q for the
period ended on June 29, 2002 (the "Parent Balance Sheet Date"), (ii) those
incurred in the ordinary course of business since the Parent Balance Sheet Date
and consistent with past practice, (iii) those incurred in connection with the
execution of this Agreement, and (iv) those disclosed on Schedule 3.6.
3.7 Litigation. Except as set forth in the Parent SEC Documents, as
of the date of this Agreement, there is no material private or governmental
action, suit, proceeding, claim, arbitration, governmental investigation, or to
the knowledge of Parent private investigation, pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Parent or any of its
subsidiaries, threatened against Parent, any of its subsidiaries or any of their
respective properties or any of their respective officers or directors (in their
capacities as such). There is no judgment, decree or order against Parent or any
of its subsidiaries, or, to the
36
knowledge of Parent, or any of its subsidiaries, or any of their respective
directors or officers (in their capacities as such), that could prevent, enjoin,
or materially alter or delay any of the transactions contemplated by this
Agreement, or that could reasonably be expected to have a Parent Material
Adverse Effect. Schedule 3.7 of the Parent Disclosure Schedule also lists all
material litigation that Parent has pending as of the date of this Agreement
against other parties which is not disclosed in the Parent SEC Documents.
3.8 Board and Shareholder Approval. The Board of Directors of Parent
has (i) approved this Agreement and the Merger, and (ii) determined that the
Merger is in the best interests of the shareholders of Parent and is on terms
that are fair to such shareholders. No action is necessary on the part of the
shareholders of Parent in connection with this Agreement or the Merger.
3.9 Registration Statement; Proxy Statement/Proxy. The information
relating to Parent which is provided by Parent (including any information
previously provided by Parent in the Parent SEC Documents) for inclusion in the
Registration Statement shall not, at the time the Registration Statement is
declared effective by the SEC and at all times subsequent thereto (through and
including the Effective Date), 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. The information relating to Parent which is
provided by Parent (including any information previously provided by Parent in
the Parent SEC Documents) for inclusion in the Proxy Statement shall not, on the
date the Proxy Statement is first mailed to the shareholders of Company, at the
time of the Company Shareholders Meeting and at the Effective Time, 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; or omit
to state a material fact necessary to correct any statement in an earlier
communication with respect to the solicitation of proxies for the Company
Shareholders Meeting which has become false or misleading. Notwithstanding the
foregoing, Parent makes no representation, warranty or covenant with respect to
any information supplied by Company or relating to Company which is contained in
the Registration Statement or the Proxy Statement.
3.10 Opinion of Financial Advisor. Parent has been advised in
writing by its financial advisor, ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated, that in such advisor's opinion, as of the date hereof, the
Exchange Ratio is fair from a financial point of view, to Parent.
3.11 Investigation by Parent; Company's Liability. Parent has
conducted its own independent investigation, review and analysis of the
business, operations, assets, liabilities, results of operations, financial
condition, software, technology and prospects of the Company, which
investigation, review and analysis was done by Parent and its Affiliates and, to
the extent Parent deemed appropriate, by Parent's representatives. Parent
acknowledges that it and its representatives have been provided adequate access
to the personnel, properties, premises and
37
records of the Company and the Company Subsidiaries as Parent has requested for
such purpose. In entering into this Agreement, Parent acknowledges that it has
relied solely upon the aforementioned investigation, review and analysis and not
on any factual representations or opinions of Company's or any of Company's
representatives (except the specific representations and warranties of Company
set forth in this Agreement and the Company Disclosure Schedules). Parent has
formed an independent judgment concerning the Company.
3.12 Absence of Certain Changes. Except as set forth in the Parent
SEC Documents prior to the date hereof or as expressly contemplated by this
Agreement, since the Parent Balance Sheet Date there has not occurred any
change, event or condition (whether or not covered by insurance or similar
indemnification agreement) that has resulted in, or would reasonably be expected
to result in, a Parent Material Adverse Effect.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Company agrees (except to the extent expressly
contemplated by this Agreement, Section 4.2 hereof or as consented to in writing
by Parent), to carry on its business in the usual, regular and ordinary course
in substantially the same manner as heretofore conducted. Subject to Section 4.2
hereof, Company further agrees to pay all debts and Taxes when due, subject to
(i) good faith disputes over such debts or Taxes and (ii) the filing of material
Tax Returns (provided that Company shall inform Parent of its intention to file
such Tax Returns prior to filing), to pay or perform other obligations when due,
and to use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organizations, to keep available the
services of its present officers and key employees and to preserve its
relationships with customers, suppliers, distributors, licensors, licensees and
others having business dealings with it, to the end that its goodwill and
ongoing businesses shall be unimpaired at the Effective Time, other than what
would not have a Material Adverse Effect on Company. Company agrees to promptly
notify Parent of any event or occurrence not in the ordinary course of its
business, and of any event which could reasonably be expected to have a Company
Material Adverse Effect.
4.2 Restriction on Conduct of Business of Company. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, except as set forth in the
Company Disclosure Schedule or as expressly contemplated by this Agreement,
Company shall not do, cause or permit any of the following, without the prior
written consent of Parent:
(a) Charter Documents. Cause or permit any amendments to its
Articles of Incorporation or Bylaws;
38
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock; or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it;
(c) Stock Option Plans, Convertible Securities and Notes.
Accelerate, amend or change the period of exercisability or vesting of options,
securities or other rights granted under the Company Stock Option Plans or
pursuant to Company Convertible Securities or Company Notes or authorize cash
payments in exchange for any options or other rights granted under any of the
above, except in each case, to the extent required by the existing terms of any
such Company Stock Option Plan, Company Convertible Security, or Company Note,
which has not been amended or otherwise modified to provide such change to
acceleration, period of exercisability or vesting within thirty (30) days prior
to the Execution Date;
(d) Material Contracts. Enter into any material contract or
commitment, or violate, amend or otherwise modify or waive any of the terms of
any of its material contracts other than in the ordinary course of business;
provided, further, that other than in the ordinary course of business, Company
shall not enter into any contract, commitment or agreement (i) which grants any
third party exclusive rights, (ii) which provides any third party with equity,
as compensation or otherwise, or (iii) with any third party which could
reasonably be deemed to be a competitor of Parent;
(e) Issuance of Securities. Except with respect to the
transfer of Company securities contemplated by this Agreement, issue, deliver or
sell or authorize or propose the issuance, delivery or sale of, or purchase or
propose the purchase of, any shares of its capital stock or securities
convertible into, or subscriptions, rights, warrants or options to acquire, or
other agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than the issuance of shares of
Company Common Stock pursuant to (i) the exercise of Company Options issued and
outstanding on the date hereof, (ii) other rights therefor outstanding as of the
date of this Agreement; (iii) the issuance of no more than 200,000 additional
stock options in accordance with Company guidelines in effect as of the
Execution Date for the issuance of the same for such level of employee, a copy
of which has been provided to Company by Parent; and (iv) pursuant to the
Company ESPP pursuant to Section 5.11(b) hereof.
(f) Intellectual Property. Transfer to any Person or entity
any of its Intellectual Property or any rights to its Intellectual Property
other than in the ordinary course of business consistent with past practice;
provided that Company will promptly disclose any such transfer to Parent;
39
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its products or
technology;
(h) Dispositions. Sell, lease, license or otherwise dispose of
or encumber any of its properties or assets which are material, individually or
in the aggregate, to its business, taken as a whole except for sales of products
in the ordinary course;
(i) Indebtedness. Incur any indebtedness for borrowed money
under existing credit lines or otherwise, except as reasonably necessary for the
operation of its business in a manner, and in amounts, consistent with past
practices, or guarantee any such indebtedness or issue or sell any debt
securities or guarantee any debt securities of others;
(j) Leases. Enter into any material operating lease;
(k) Payment of Obligations. Pay, discharge or satisfy in an
amount in excess of $100,000 in any one case or $500,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
and other than the payment, discharge or satisfaction of liabilities reflected
or reserved against in the Company Financial Statements;
(l) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice, and not withstanding the above, make
any such expenditures, additions or improvements in excess of $250,000 in any
one case;
(m) Other Expenses. Except in the ordinary course of business,
commit to or incur any other expenses (excluding discharge of indebtedness which
is addressed in (k) above and capital expenditures which are addressed in (l)
above) in an amount in excess of $250,000 in any one case, and except for
payment of legal, accounting and banking fees in connection with this Agreement
and the transactions contemplated hereunder in the amounts set forth in Section
6.3(e);
(n) Insurance. Materially reduce the amount of any insurance
coverage provided by existing insurance policies;
(o) Termination or Waiver. Terminate or waive any right of any
material or substantial value, except in the ordinary course of business;
(p) Employee Benefit Plans; New Hires; Pay Increases. Adopt or
amend any employee benefit or stock purchase or option plan, except as required
under ERISA or except as necessary to maintain the qualified status of such plan
under the Code, or hire any new director level or officer level employee, or
increase the annual level of compensation of any employee, or grant any unusual
or extraordinary bonuses, benefits or other forms of direct or
40
indirect compensation to any employee, officer, director or consultant, except
in the ordinary course of business and in amounts consistent with past
practices;
(q) Severance Arrangements. Grant any severance or termination
pay (i) to any director or officer or (ii) to any other employee, except
payments made pursuant to written agreements outstanding on the date hereof;
(r) Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with Parent
prior to the filing of such a suit, or (iii) for a breach of this Agreement or
any Exhibits hereto;
(s) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its business, taken as a whole;
(t) Taxes. Other than in the ordinary course of business, or
as required by GAAP, make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, file any material Tax
Return or any amendment to a material Tax Return, enter into any closing
agreement, settle any claim or assessment in respect of Taxes, or consent to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes;
(u) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(v) Other. Take or agree in writing or otherwise to take, any
of the actions described in Sections 4.2(a) through (u) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect in any material respect or prevent it from
performing or cause it not to perform its covenants hereunder.
4.3 No Solicitation.
(a) Company and its subsidiaries and the officers, directors,
employees or other agents of Company and its subsidiaries will not, directly or
indirectly, (i) take any action to solicit, initiate or intentionally encourage
any Takeover Proposal (defined below) or (ii) subject to the terms of Section
4.3(b) below, take any action to solicit, intentionally facilitate,
intentionally encourage or engage in negotiations or discussions with, or
disclose any nonpublic information relating to Company or any of it subsidiaries
to, or afford access to the properties, books or records of Company or any of
its subsidiaries to, any Person that has advised Company in writing that it
intends to make, or that has made, a Takeover Proposal; provided, nothing
41
herein shall prohibit Company's Board of Directors from complying with Rules
14d-9 and 14e-2 promulgated under the Exchange Act with regard to a tender or
exchange offer.
(b) Notwithstanding Section 4.3(a) above, if an unsolicited
written Takeover Proposal, or an unsolicited written expression of interest that
can reasonably be expected to lead to a Takeover Proposal, shall be received by
the Board of Directors of Company, then (i) if none of Company, its
subsidiaries, and their respective officers, directors, employees or other
agents and representatives have violated in any material respect any of the
restrictions in Section 4.3(a), and (ii) to the extent the Board of Directors of
Company believes in good faith (after consultation with its financial advisors)
that such Takeover Proposal would reasonably be expected to result in a
transaction more favorable to Company's shareholders than the transaction
contemplated by this Agreement (any such more favorable Takeover Proposal being
referred to in this Agreement as a "Superior Proposal"), and (iii) the Board of
Directors of Company determines in good faith (after consultation with outside
legal counsel) that failure to take action with respect to such Superior
Proposal would be inconsistent with the fiduciary duties of the Board of
Directors of Company to Company Shareholders under applicable law, Company and
its officers, directors, employees, investment bankers, financial advisors,
attorneys, accountants and other representatives retained by it may furnish in
connection with such a Superior Proposal information and take such other actions
with respect to such Superior Proposal as are consistent with the fiduciary
obligations of Company's Board of Directors, and such actions with respect to
such Superior Proposal shall not be considered a breach of Section 4.3(a),
provided that in each such event Company (A) notifies Parent in writing of such
determination by the Company Board of Directors, (B) provides Parent with a
summary of the Superior Proposal received from such third party so long as such
disclosure does not cause the breach of any non-disclosure or confidentiality
agreements of Company outstanding as of the Execution Date, and (C) informs
Parent generally of all documents containing or referring to non-public
information of Company that are supplied to such third party so long as such
disclosure does not cause the breach of any non-disclosure or confidentiality
agreements of Company outstanding as of the Execution Date. Notwithstanding the
immediately preceding sentence, neither Company nor its representatives may take
any action with respect to a Superior Proposal unless (x) the Board of Directors
of Company has determined, after consultation with Company's investment bankers,
that such third party is actually capable of making a Superior Proposal upon
satisfactory completion of such third party's review of the information supplied
by Company, and (y) Company provides such non-public information to such third
party pursuant to a non-disclosure or confidentiality agreement containing
provisions regarding non-disclosure at least as restrictive as the
Confidentiality Agreement (as defined in Section 5.4). Additionally Company
shall not, and shall not permit any of its officers, directors, employees or
other representatives to agree to or intentionally endorse any Takeover Proposal
(including any Superior Proposal) unless Parent or Company terminates this
Agreement and Company pays to Parent all amounts payable to Parent as more fully
provided in Section 7.3(b) hereof.
(c) Company will promptly notify Parent after receipt, but in
no event later than 24 hours from such receipt, of any Takeover Proposal or any
notice that any Person is considering making a Takeover Proposal or any request
for non-public information relating to
42
Company or any of its subsidiaries or for access to the properties, books or
records of Company or any of its subsidiaries by any Person that has advised
Company that it may be considering making, or that has made, a Takeover Proposal
and will keep Parent fully informed of the status of any such Takeover Proposal
notice or request and shall provide Parent with a true summary of such Takeover
Proposal notice or request.
(d) For purposes of this Agreement, "Takeover Proposal" means
any offer or proposal for, or any indication of interest in (whether written or
oral), a merger or other business combination involving Company or any of its
subsidiaries or the acquisition of any significant equity interest (30%) in, or
a significant portion of the assets (30% or more on a consolidated basis) of,
Company or any of its subsidiaries, other than the transactions contemplated by
or disclosed in this Agreement or Schedule 2.5.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement. Promptly
after the execution of this Agreement, Company and Parent shall prepare, and
Parent shall file with the SEC, a Registration Statement on Form S-4 (or such
other form or successor form as shall be appropriate), which complies in form
with applicable SEC requirements and shall use all reasonable efforts to cause
the Registration Statement to become effective as soon thereafter as
practicable. If, at any time prior to the Effective Time, any event or
information should be discovered by Company which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement,
Company shall promptly inform Parent. Subject to the provisions of Section 4.3,
the Proxy Statement shall include the recommendation of the Board of Directors
of Company that the Company Shareholders vote in favor of the Merger and approve
this Agreement; provided that such recommendation may not be included or may be
withdrawn if previously included if (i) Company's Board of Directors believes in
good faith that a Superior Proposal has been made, and (ii) following
consultation with outside legal counsel, Company's Board of Directors determines
that the inclusion of such recommendation or the failure to withdraw such
recommendation would be inconsistent with the fiduciary duties of the Board of
Directors of Company to the shareholders of Company under applicable laws.
5.2 Meeting of Shareholders. Company shall promptly after the date
hereof take all action necessary in accordance with Illinois Law and its
Articles of Incorporation and Bylaws to call, give notice of, convene and hold
the Company Shareholders Meeting, as promptly as practicable, and in any event
within forty-five (45) days of the Registration Statement being declared
effective by the SEC. Company shall give Parent no less than ten (10) business
days advance notice of the date which shall be set as the "record date" for the
Company Shareholders eligible to vote on this Agreement and the Merger. Company
shall also consult with Parent regarding the date of the Company Shareholders
Meeting and shall not postpone or adjourn (other than for the absence of a
quorum) the Company Shareholders Meeting without the consent of Parent unless
this Agreement is first terminated by Company pursuant to Article VII hereof.
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Subject to Sections 4.3 and 5.1, Company shall use commercially reasonable
efforts to solicit from shareholders of Company proxies in favor of the Merger
and shall take all other action necessary or advisable to secure the vote or
consent of the Company Shareholders as required by the rules of Nasdaq, the laws
of Illinois or other applicable law to effect the Merger.
5.3 Access to Information; Disclosure Schedule Updates.
(a) Upon reasonable notice, Company shall afford Parent and
its accountants, counsel and other representatives, reasonable access during
normal business hours during the period prior to the Effective Time or the
earlier termination of this Agreement in accordance with its terms, provided
that such access does not cause disruption to the day-to-day operation of
Company and provided further that Parent contacts Company's Chief Financial
Officer prior to contacting any other employee of Company, to (i) all of
Company's properties, books, contracts, commitments and records, and (ii) all
other information concerning the business, properties and personnel of Company
as Parent may reasonably request. Company agrees to provide to Parent and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request.
(b) Subject to compliance with applicable law, from the date
hereof until the Effective Time or the earlier termination of this Agreement in
accordance with its terms, Company and Parent shall confer on a regular and
frequent basis to report operational matters of materiality and the general
status of ongoing operations of Company.
(c) No information or knowledge obtained in any investigation
after the Execution Date pursuant to this Section 5.3 shall affect or be deemed
to modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger; provided, however that
Company shall promptly inform Parent of any such information or knowledge
obtained in its investigation which would reasonably be likely to have a Company
Material Adverse Effect. Additionally, during the period from the date hereof
and prior to the Effective Time or the earlier termination of this Agreement in
accordance with its terms, Company shall promptly notify Parent in writing of:
(i) the discovery of any event, condition, fact or
circumstance which causes, caused, constitutes or constituted a breach of any
representation or warranty made by Company in this Agreement or any other
agreement contemplated hereby to the extent that such event, condition, fact or
circumstance would cause the condition in Section 6.3(a) of this Agreement not
to be satisfied;
(ii) any material breach of any covenant or obligation
by Company; and
(iii) any event, condition, fact or circumstance that
may make the timely satisfaction of any of the covenants or conditions set forth
in this Article V or Article VI impossible or unlikely.
44
(d) If any event, condition, fact or circumstances that is
required to be disclosed pursuant to Section 5.3(c) requires any material change
in Company's Disclosure Schedule, or if any such event, condition, fact or
circumstance would require such a change assuming Company's Disclosure Schedule
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstances, then Company shall promptly deliver to
Parent an update to its Disclosure Schedule specifying such change (a
"Disclosure Schedule Update"). Notwithstanding anything therein to the contrary,
no such update shall be deemed to supplement or amend Company's Disclosure
Schedule for the purpose of (A) determining the accuracy of any of the
representations and warranties made by such party in this Agreement, or (B)
determining whether any of the conditions set forth in Article VI has been
satisfied.
(e) Company shall provide Parent and its accountants, counsel
and other representatives reasonable access, during normal business hours during
the period prior to the Effective Time, to all of Company's Tax Returns and
other records and workpapers relating to Taxes, provided that such access does
not cause disruption to the day-to-day operation of Company and provided further
that Parent contacts Company's Chief Financial Officer prior to contacting any
other employee of Company, and shall provide to Parent and its representatives
the following information promptly upon the request of Parent: (i) the types of
Tax Returns being filed by Company in each taxing jurisdiction, (ii) the year of
the commencement of the filing of each such type of Tax Return, (iii) all closed
years with respect to each such type of Tax Return filed in each jurisdiction,
(iv) all material Tax elections filed in each jurisdiction by Company, (v) any
deferred intercompany gain with respect to transactions to which Company has
been a party, and (vi) receipts for any Taxes paid to foreign Tax authorities.
5.4 Confidentiality. The parties acknowledge that Parent and Company
have previously executed a Mutual Nondisclosure Agreement dated August 8, 2002
(the "Confidentiality Agreement"), a copy of which is attached hereto as Exhibit
D, which Confidentiality Agreement shall continue in full force and effect in
accordance with its terms.
5.5 Public Disclosure. Company and Parent shall consult with each
other before issuing any press releases or otherwise make any public statements
or make any other public (or non-confidential) disclosures (whether or not in
response to an inquiry) regarding the terms of this Agreement and the
transactions contemplated hereby, and neither shall issue a press release or
make any statements or disclosures without the prior written approval of the
other (which consent shall not be unreasonably withheld), except as may be
required by law or by obligations pursuant to any listing agreement with any
national securities exchange or with the NASD.
5.6 Consents; Cooperation.
(a) Each of Parent and Company shall promptly apply for or
otherwise seek, and use commercially reasonable efforts to obtain, all consents
and approvals required to be obtained by it for the consummation of the Merger,
including those required under HSR. Company and Parent shall each use their
respective reasonable best efforts to obtain all necessary
45
consents, waivers and approvals under any of their respective material contracts
in connection with the Merger for the assignment thereof or otherwise. The
parties hereto will consult and cooperate with one another, and consider in good
faith the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to HSR or any other federal or state antitrust or fair trade
law.
(b) Each of Parent and Company shall use all commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended,
the Federal Trade Commission Act, as amended, and any other Federal, state or
foreign statutes, rules, regulations, orders or decrees that are designed to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of Parent
and Company shall cooperate and use all commercially reasonable efforts
vigorously to contest and resist any such action or proceeding and to have
vacated, lifted, reversed, or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (each an "Order"), that
is in effect and that prohibits, prevents, or restricts consummation of the
Merger or any such other transactions, unless by mutual agreement Parent and
Company decide that litigation is not in their respective best interests.
Notwithstanding the provisions of the immediately preceding sentence, it is
expressly understood and agreed that neither party shall have any obligation to
litigate or contest any administrative or judicial action or proceeding or any
Order beyond the date of a ruling preliminarily enjoining the Merger issued by a
court of competent jurisdiction. Each of Parent and Company shall use all
commercially reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under HSR or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement.
(c) Notwithstanding anything to the contrary in Section 5.6(a)
or (b), (i) Parent shall not be required to divest any of its or its
subsidiaries' businesses, product lines or assets, or to take or agree to take
any other action or agree to any limitation where such divestiture or other
action could reasonably be expected to have a Material Adverse Effect on Parent
or of Surviving Corporation after the Effective Time, and (ii) Company and its
subsidiaries shall not be required to divest any of their respective businesses,
product lines or assets, or to take or agree to take any other action or agree
to any limitation where such divestiture or other action could reasonably be
expected to have a Company Material Adverse Effect.
(d) Company shall use commercially reasonable efforts to
furnish Parent, on or prior to the Closing Date, with evidence satisfactory to
it of the consent or approval of those Persons whose consent or approval shall
be required in connection with the Merger under the contracts of Company set
forth, or required to be set forth, on Schedule 2.25.
46
5.7 Affiliates. Schedule 5.7 sets forth those persons who may be
deemed "affiliates" of Company as such term is used in the Securities Act and
the regulations thereunder. Company shall provide Parent with such information
and documents as Parent shall reasonably request for purposes of reviewing such
list. Parent and Merger Sub shall be entitled to place appropriate legends on
the certificates evidencing any Parent Common Stock to be received by such
Affiliates pursuant to the terms of this Agreement and to issue appropriate
stock transfer instructions to the transfer agent for Parent Common Stock.
5.8 Voting Agreement. Company shall use its commercially reasonable
efforts, on behalf of Parent, and pursuant to the request of Parent, to cause
the officers, directors and shareholders of Company listed on Schedule 5.8 to
execute and deliver to Parent a Shareholder Voting Agreement substantially in
the form attached hereto as Exhibit C and an Irrevocable Proxy substantially in
the form of Attachment A attached thereto concurrently with the execution of
this Agreement.
5.9 FIRPTA. Company shall, on or prior to the Closing Date, provide
Parent with a properly executed FIRPTA Notification Letter, substantially in the
form attached hereto as Exhibit E, which states that shares of capital stock of
Company do not constitute "United States real property interests" under Section
897(c) of the Code, for purposes of satisfying Parent's obligations under
Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously with
delivery of such Notification Letter, Company shall have provided to Parent, as
agent for Company, a form of notice to the Internal Revenue Service in
accordance with the requirements of Treasury Regulation Section 1.897-2(h)(2)
and substantially in the form attached hereto as Exhibit F, along with written
authorization for Parent to deliver such notice form to the Internal Revenue
Service on behalf of Company upon the Closing of the Merger.
5.10 Legal Requirements. Each of Parent and, subject to Sections 4.3
and 5.1 of this Agreement, Company, shall take all reasonable actions necessary
to comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon such other party
in connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other Person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.11 Employee Benefit Plans.
(a) Assumption of Company Options. At the Effective Time, the
Company Stock Option Plans will be assumed by Parent and each outstanding
Company Option to purchase shares of Company Common Stock under the Company
Stock Option Plans, whether vested or unvested, will be assumed by Parent and
converted into an option to purchase shares of Parent Common Stock (each a
"Parent Option"). Schedule 5.11(a) hereto sets forth a true and
47
complete list as of the date hereof of all holders of outstanding Company
Options under each of the Company Stock Option Plans, including the number of
shares of Company Capital Stock subject to each such option, the exercise or
vesting schedule, the exercise price per share and the term of each such option.
On the Closing Date, Company shall deliver to Parent an updated Schedule 5.11(a)
hereto current as of such date. Except as provided below or on Schedule 5.11(a),
each such Company Option so assumed by Parent under this Agreement shall retain
its respective vesting schedule under the applicable Company Stock Option Plan
and its respective stock option agreement and each such Company Option shall
continue to be subject to the terms and conditions set forth in the applicable
Company Stock Option Plan, except that (i) each such option will be exercisable
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares of Company Common Stock that would be issuable upon
exercise of such option immediately prior to the Effective Time, assuming that
all vesting conditions applicable to such option were then satisfied, multiplied
by the Exchange Ratio and rounded down to the nearest whole number of shares of
Parent Common Stock, and (ii) the per share exercise price for the shares of
Parent Common Stock issuable upon exercise of such assumed Company Option will
be equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest tenth of a
cent. Consistent with the terms of the Company Stock Option Plans and the
documents governing the outstanding Company Options under such plans, except as
otherwise set forth on Schedule 5.11(a), the Merger will not terminate any of
the outstanding Company Options under the Company Stock Option Plans or
accelerate the exercisability or vesting of such options or the shares of Parent
Common Stock which will be subject to those options upon the assumption of the
Company Options in connection with the Merger. It is the intention of the
parties that the Company Options assumed by Parent qualify, to the maximum
extent permissible, following the Effective Time, as incentive stock options, as
defined in Section 422 of the Code, to the extent, and only to the extent, the
Company Options so replaced qualified as incentive stock options prior to the
Effective Time. Parent shall use reasonable best efforts, within thirty days
after the Form S-8 filed pursuant to Section 5.13 hereof is declared effective,
to issue to each Person who, immediately prior to the Effective Time, was a
holder of an outstanding Company Option, a copy of the effective Form S-8 and
such other documents as are reasonably advisable, as evidence of the foregoing
assumption of such Company Options by Parent. The Company Board of Directors
shall, to the extent necessary, take appropriate action, prior to or as of the
Effective Time, to approve, for purposes of Section 16(b) of the Exchange Act,
the deemed disposition and cancellation of the Company Options in the Merger.
Provided that Company shall first provide to Parent the names of its
shareholders and the number of shares of Company Capital Stock or Company
Options which may be subject to Section 16(b) of the Exchange Act and any other
information reasonably requested by Parent and relating to the same, the Board
of Directors of Parent shall, prior to the Effective Time, take appropriate
action to approve, for purposes of Section 16(b) of the Exchange Act, the deemed
grant of options to purchase Parent Common Stock under the Company Options (as
assumed pursuant to this Section 5.11(a)). As of or prior to the Effective Time,
the disposition of shares of Company Common Stock by the Company executive
officers and Board members and the issuance of shares of Parent Common Stock to
48
such persons in the Merger shall also be included in the approval process of the
Boards of Directors of Company and Parent for purposes of Section 16(b) of the
Exchange Act.
(b) Company ESPP. The Company shall take all actions necessary
to cause all outstanding purchase rights under the Company ESPP to be exercised
upon the earlier of (i) the next scheduled purchase date under the Company ESPP,
or (ii) immediately prior to the Effective Time, and each participant in the
Company ESPP shall accordingly be issued shares of Company Common Stock at that
time which shall be converted into shares of Parent Common Stock in the Merger.
The Company shall take all actions necessary to terminate the Company ESPP as of
such exercise date, and no purchase rights shall be subsequently granted or
exercised under the Company ESPP. Employees of Company and other Members of the
Controlled Group who become employees of Parent or any of its subsidiaries as of
the Effective Time shall be permitted to participate in the Parent ESPP
commencing on the first enrollment date following the Effective Time, subject to
compliance with the eligibility provisions of such plan (with employees
receiving credit, for purposes of such eligibility provisions, for service with
the Company or any other Member of the Controlled Group to the extent permitted
by applicable law and applicable tax qualification requirements).
(c) Company Notes. Effective as of the Effective Time, Parent
shall execute and deliver a supplemental indenture with the Trustee, in form
reasonably satisfactory to Parent and the Trustee, to provide for (1) the
express assumption by Parent of the Indenture, the Company Notes and all
liabilities and obligations of the Company thereunder; and (2) an amendment to
the conversion terms of the Company Notes to provide for the right of the
holders of Company Notes to convert into Parent Common Stock. Parent will
succeed to and be substituted for the Company in the original Company Note
documents (including the Indenture (as supplemented) and the Registration Rights
Agreement).
(d) Termination of Employee Plans. If requested by Parent,
Company shall, immediately prior to the Closing Date, terminate the Company
Plans and no further contributions shall be made to the Company Plans, provided
that, as conditions of such termination, (i) Company's employees who become
employees of Parent and/or Surviving Corporation shall receive employee benefits
which in the aggregate are no less favorable than those provided from time to
time by Parent and its subsidiaries to their respective similarly situated
employees; and (ii) Company's employees shall be eligible to participate in
Parent's 401(k) plan immediately following the Closing Date, subject to
compliance with the eligibility provisions of such plan. Parent and/or Surviving
Corporation shall provide or cause to be provided that under each employee
benefit plan, policy, program or arrangement where service is relevant to a
determination of an employee's eligibility to participate, vesting, or level or
amount of benefits, employees of Company who become employees of Parent and/or
Surviving Corporation shall be credited with their period of service with
Company prior to the Closing, to the extent permitted by applicable law and
applicable tax qualification requirements, and subject to any generally
applicable break in service or similar rules. Subject to the approval of any
insurance carrier and to the extent consistent with applicable law and
applicable tax qualification requirements, Parent and/or Surviving Corporation
shall make available, or cause to be made
49
available, to those employees of Company who become employees of Parent and/or
Surviving Corporation, medical, dental, disability and other welfare benefits
plans and programs, to the extent the same is offered by Parent and/or Surviving
Corporation generally to their respective employees, without regard to any
preexisting condition limitation, actively-at-work requirement or similar
limitation, provided, and only to the extent, that any analogous restriction
applied to such employee under an analogous plan of Company had been satisfied
as of the Closing Date. In determining an employee's share of the cost of
coverage under any plan or program of Parent and/or Surviving Corporation for
the year in which the Closing occurs, Parent and/or Surviving Corporation shall
make commercially reasonable efforts to credit the employee with any pre-Closing
co-pays and deductibles made by or on behalf of such employee under each
comparable plan maintained by Company prior to the Effective Time for such year.
Parent shall not be required to have any preexisting condition limitation,
actively-at-work requirement or similar limitation waived or to credit any
pre-Closing co-pays and deductibles made by or on behalf of such employee unless
Company (or its successor entity) or the applicable insurance carrier makes
available a HIPAA Certificate evidencing prior coverage under the corresponding
or analogous Company plan. Company shall provide to Parent (i) executed
resolutions by the Board of Directors of Company authorizing the termination and
(ii) an executed amendment to the Plans sufficient to assure compliance with all
applicable requirements of the Code and regulations thereunder so that the
tax-qualified status of the Plan will be maintained at the time of termination.
(e) Assumption. Parent shall, or shall cause Surviving
Corporation to assume each of the employment agreements listed on Schedule
5.11(e).
5.12 Indemnification.
(a) After the Effective Time, Parent will, and will cause
Surviving Corporation to, indemnify and hold harmless the present and former
officers, directors, employees and agents of Company (the "Indemnified Parties")
in respect of acts or omissions occurring on or prior to the Effective Time to
the extent provided for under the Company's Articles of Incorporation and Bylaws
and each indemnification agreement with Company officers and directors to which
Company is a party, in each case in effect on the date hereof; provided that
such indemnification shall be subject to any limitation imposed from time to
time under applicable law. Without limitation of the foregoing, in the event any
such Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter relating to this
Agreement or the transactions contemplated hereby occurring on or prior to the
Effective Time, Parent shall cause Surviving Corporation to pay as incurred such
Indemnified Party's reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith.
(b) For six (6) years after the Effective Time, Parent will,
and will cause Surviving Corporation to, use best efforts to provide officers'
and directors' liability insurance in respect of acts or omissions occurring on
or prior to the Effective Time covering each such Person currently covered by
Company's officers' and directors' liability insurance policy on
50
terms at least as favorable as the coverage currently in effect on the date
hereof, provided that in satisfying its obligation under this Section 5.12(b),
Parent shall not be obligated to cause Surviving Corporation to pay premiums in
excess of 150% of the amount per annum Company paid in its last full fiscal
year, which amount has been disclosed to Parent and if Surviving Corporation is
unable to obtain the insurance required by this Section 5.12(b), it shall obtain
as much comparable insurance as possible for an annual premium equal to such
maximum amount.
(c) For a period of six (6) years after the Effective Time, to
the extent there is any claim, action, suit, proceeding or investigation
(whether commencing before or after the Effective Time) against or involving any
Indemnified Party that arises out of or pertains to any action or omission (or
alleged action or omission) in his or her capacity as a director, officer,
employee, or agent of Company, which act omission occurred prior to the
Effective Time, Parent shall, and shall cause Surviving Corporation to, provide
legal counsel and to defend such Indemnified Party and to pay the reasonable
fees and expenses of such counsel. Parent shall, and shall cause Surviving
Corporation, to cooperate in the defense of any such matter; provided, however,
that neither Surviving Corporation nor Parent shall be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld, conditioned or delayed); and provided, further, that, in the event
that any claim or claims for indemnification are asserted or made within such
six-year period all rights to indemnification in respect to any such claim or
claims shall continue until the final disposition of any and all such claims.
(d) Parent shall pay all expenses, including reasonable
attorneys' fees, that may be incurred by any Indemnified Party in enforcing the
indemnity and other obligations provided for in this Section 5.12 to the extent
that such Indemnified Party is determined to be entitled to indemnification
under this Section 5.12.
(e) The provisions of this Section 5.12 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives.
(f) In the event Parent or Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other Person and shall not be the continuing or surviving corporation or entity
in such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any Person, then, and in each case, proper
provision shall be made so that the successors and assigns of Parent or
Surviving Corporation, as the case may be, honor the indemnification obligations
set forth in this Section 5.12.
5.13 Form S-8. Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Parent Common Stock for
delivery upon the exercise of the Company Options assumed in accordance with
Section 5.11(a). As soon as practicable and in no event more than twenty (20)
days after the Closing, Parent shall file a registration statement on Form S-8
(or any successor or other appropriate forms) with respect to the shares of
Parent Common Stock subject to such options or on another appropriate form of
registration statement for any such shares of Parent Common Stock which are not
registrable on Form S-8 and shall use its reasonable best efforts to maintain
the effectiveness of such registration statement or
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registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
Company will cooperate and assist Parent in the preparation of such registration
statement(s).
5.14 Treatment as Reorganization. Neither Company nor Parent shall
take any action prior to or following the Closing that would cause the merger to
fail to qualify as a "reorganization" within the meaning of Section 368(a) of
the Code. Company and Parent shall cooperate in obtaining the opinions referred
to in Section 6.1(e) hereof, including providing counsel with the representation
letters also described in Section 6.1(e).
5.15 Takeover Statutes. If any Takeover Statute shall become
applicable to the transaction contemplated hereby, Company and the members of
the Board of Directors of Company shall grant such approvals and take such
actions as are necessary so that the Merger and the transactions contemplated
hereby may be commenced as promptly as practicable on the terms contemplated
hereby and otherwise act to eliminate or minimize the effects of such statute or
regulation in the transaction contemplated hereby, except, in each such case, to
the extent required in the exercise of the fiduciary duties of the Board of
Directors of Company under applicable law as advised by independent counsel.
5.16 Notices. Company shall give all notices and other information
required to be given to the employees of Company, any collective bargaining unit
representing any group of employees of Company, if applicable, and any
applicable government authority under the WARN Act, the National Labor Relations
Act, the Internal Revenue Code, the Consolidated Omnibus Budget Reconciliation
Act, and other applicable law in connection with the transactions provided for
in this Agreement.
5.17 Listing of Additional Shares. To the extent required, Parent
shall, prior to the Effective Time, cause all shares of Parent Common Stock to
be issued pursuant to the terms of this Agreement to be approved for listing on
the Nasdaq National Market.
5.18 Further Assurances. Parent, Merger Sub and, subject to Sections
4.3 and 5.1 of this Agreement, Company, shall use commercially reasonable best
efforts to effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to closing under this Agreement. Each party
hereto, at the reasonable request of another party hereto, shall execute and
deliver such other instruments and do and perform such other acts and things as
may be necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
No party may refuse to close if any condition remains unsatisfied where
such party's failure to fulfill its obligations under this Agreement shall have
been the cause of, or resulted in, the condition not being satisfied.
52
6.1 Conditions to Obligations of Each Party to Effect the Merger.
The respective obligations of each party to this Agreement to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Shareholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the Company
Shareholders.
(b) Registration Statement. The SEC shall have declared the
Registration Statement effective in accordance with the provisions of the
Securities Act, and shall be effective at the Effective Time, and no stop order
suspending effectiveness of the Registration Statement shall have been issued,
no action, suit, proceedings or investigation by the SEC to suspend the
effectiveness thereof shall have been initiated and be continuing.
(c) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (which has
jurisdiction over Company or Parent), seeking any of the foregoing be pending;
nor shall there be any action taken, or any statute, rule, regulation or order
enacted, entered, enforced or deemed applicable to the Merger, which makes the
consummation of the Merger illegal. In the event an injunction or other order
shall have been issued, each party agrees to use its reasonable efforts to have
such injunction or other order lifted.
(d) Governmental Approval. Parent, Merger Sub and Company
shall have timely obtained from each Governmental Entity all approvals, waivers
and consents, if any, necessary for consummation of or in connection with the
Merger and the several transactions contemplated hereby, including but not
limited to such approvals, waivers and consents as may be required under the
Securities Act, under state blue sky laws, and under HSR.
(e) Tax Opinion. Each of Parent and Company shall have
received written opinions of its respective legal counsel, in form and substance
reasonably satisfactory to Parent or Company, as the case may be, and dated on
or about the Closing Date to the effect that the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code and that each
of Parent, Merger Sub and Company is a "party to a reorganization" within the
meaning of Section 368(b) of the Code, and such opinions shall not have been
withdrawn; provided, however, that if Company's legal counsel does not render
such opinion, this condition shall nevertheless be deemed satisfied with respect
to Company if Parent's legal counsel renders such opinion to Parent. The parties
to this Agreement agree to make such reasonable representations as requested by
the legal counsel of Parent and/or Company for the purpose of rendering such
opinions and that such legal counsel are entitled to rely on such
representations, substantially in the form attached hereto as Exhibit G-1 and
Exhibit G-2.
53
6.2 Additional Conditions to Obligations of Company. The obligations
of Company to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, by Company:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Parent Disclosure Schedule dated the date of this Agreement,
(i) the representations and warranties of Parent in this Agreement shall be true
and correct in all material respects on and as of the Effective Time as though
such representations and warranties were made on and as of such time or, in the
case of representations and warranties of Parent which speak specifically as of
an earlier date, shall be true and correct as of such earlier date, except in
each case, (A) for changes contemplated by the Agreement, or (B) where the
failure to be true and correct has not had, and would not reasonably be expected
to result in, a Parent Material Adverse Effect and (ii) Parent shall have
performed and complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed and complied with by
Parent as of the Effective Time.
(b) Certificate of Parent. Company shall have been provided
with a certificate executed on behalf of Parent by an authorized officer to the
effect set forth in Section 6.2(a).
6.3 Additional Conditions to the Obligations of Parent. The
obligations of Parent to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Parent:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Company Disclosure Schedule dated the date of this Agreement,
(i) the representations and warranties of Company in this Agreement shall be
true and correct in all material respects on and as of the Effective Time as
though such representations and warranties were made on and as of such time and
or, in the case of representations and warranties of Company which speak
specifically as of an earlier date, shall be true and correct as of such earlier
date, except in each case, (A) for changes contemplated by the Agreement, or (B)
where the failure to be true and correct has not had, and would not reasonably
be expected to result in, a Company Material Adverse Effect and (ii) Company
shall have performed and complied in all material respects with all covenants,
obligations and conditions of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) Certificate of Company. Parent shall have been provided
with a certificate executed on behalf of Company by its President to the effect
set forth in Section 6.3(a).
(c) Company Expenses. In connection with this Agreement and
the transactions contemplated hereunder, Company shall not have incurred any
expenses, costs or other fees (including all accountant, attorney and investment
banker fees) in excess of
54
$1,900,000 and Parent shall have been provided with a certificate executed on
behalf of Company by its President certifying that such cap has not been
exceeded; provided, however, that the following expenses shall not be considered
in determining whether the Company has exceeded the limitation set forth in this
Section 6.3(c): (i) expenses incurred in connection with any Specified
Proceeding, and (ii) expenses incurred in connection with the consideration of a
Takeover Proposal (including attorney and investment banker fees incurred in
connection with the analysis or negotiation of such Takeover Proposal by the
Company or its Board of Directors).
(d) Dissenters. The holders of no more than ten percent (10%)
of the outstanding shares of Company Capital Stock shall have either elected to
exercise their rights to dissent from the Merger and shall have not effectively
lost or withdrawn such dissenters rights or shall otherwise be entitled to
exercise their rights to dissent from the Merger and shall have not effectively
lost or withdrawn their right to exercise such dissenters rights.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination.
(a) At any time prior to the Effective Time, whether before or
after approval of the matters presented in connection with the Merger by the
shareholders of Company, this Agreement may be terminated:
(i) by mutual written consent duly authorized by each
party's Board of Directors;
(ii) by either Parent or Company, if the Closing shall
not have occurred on or before the date which is six months after the date
hereof (provided, a later date may be agreed upon in writing by the parties
hereto, and provided further that the right to terminate this Agreement under
this Section 7.1(a)(ii) shall not be available to any party whose action or
failure to act has been the cause of the failure of the Merger to occur on or
before such date and such action or failure to act constitutes a breach of this
Agreement);
(iii) by Parent, if (A) Company shall materially breach
any representation, warranty, obligation or agreement hereunder (other than a
breach of Section 4.3(a) hereof which is specifically addressed in subsection
(v) below or a breach which has not had, and would not reasonably be expected to
result in, a Company Material Adverse Effect ) and such breach shall not have
been cured within twenty (20) business days of receipt by Company of written
notice of such breach (describing the details of such breach) provided that the
right to terminate this Agreement by Parent under this Section 7.1(a)(iii)(A)
shall not be available to Parent where Parent is at that time in breach of this
Agreement, (B) the Board of Directors of Company shall have withdrawn or
modified its recommendation of this Agreement or the Merger in a manner adverse
to Parent or recommended, endorsed, accepted or agreed to a Takeover Proposal or
shall have resolved to do any of the foregoing, (C) the Board of Directors
55
of Company shall have publicly announced a rejection of a Takeover Proposal, but
failed to give Parent a written reaffirmation of its recommendation of this
Agreement, the Merger and the other transactions contemplated hereby within five
(5) business days of Parent's request thereof following the rejection of such
Takeover Proposal (the "Reaffirmation"), (D) a Trigger Event is commenced (other
than by Parent or an Affiliate of Parent) and the Board of Directors of Company
(x) recommends that the shareholders of Company tender their shares in such
tender or exchange offer; or (y) within ten (10) days after such tender or
exchange offer, fails to recommend against acceptance of such offer or takes no
position with respect to the acceptance of such Trigger Event and fails to
deliver to Parent a Reaffirmation within five (5) business days of Parent's
request therefore; or (E) for any reason (other than as the result of the
failure of Parent to satisfy the conditions specified in Sections 6.1 or
6.2(a)), Company fails to call and hold the Company Shareholders Meeting by
December 31, 2002;
(iv) by Company, if (A) Parent shall materially breach
any representation, warranty, obligation or agreement hereunder (other than a
breach which has not had, and would not reasonably be expected to result in, a
Parent Material Adverse Effect) and such breach shall not have been cured within
twenty (20) business days of receipt by Parent of written notice of such breach
(describing the details of such breach) provided that the right to terminate
this Agreement by Company under this Section 7.1(a)(iv)(A) shall not be
available to Company where Company is at that time in breach of this Agreement,
or (B) the Board of Directors of Company shall recommend, endorse, accept or
agree to a Superior Proposal or shall have resolved to recommend, endorse,
accept or agree to a Superior Proposal;
(v) by Parent if Company or any of its subsidiaries or
their respective officers, directors, employees or representatives have
willfully breached or violated the restrictions of Section 4.3(a); or
(vi) by either Parent or Company if (A) any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable, or (B) if
any required approval of the shareholders of Company shall not have been
obtained by reason of the failure to obtain the required vote upon a vote held
at a duly held meeting of shareholders or at any adjournment thereof.
(b) As used herein, a "Trigger Event" shall occur if any
Person acquires securities representing twenty-five percent (25%) or more, or
commences a tender or exchange offer following the successful consummation of
which the offeror and its affiliate would beneficially own securities
representing twenty-five (25%) or more, of the voting power of Company.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part, of Parent, Merger Sub
or Company or their respective officers, directors, shareholders or affiliates,
except to the extent that such termination results from the
56
willful breach by a party hereto of any of its representations, warranties or
covenants set forth in this Agreement; provided that, notwithstanding the above,
the provisions of Section 5.4 (Confidentiality), this Section 7.2 and Section
7.3 (Expenses and Termination Fees) shall remain in full force and effect and
survive any termination of this Agreement and Parent's right to a remedy for
Company's breach of Section 4.3 shall survive any termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to subsections (b), (c) and (d) of this Section
7.3 and Section 6.3(c), whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
advisers, accountants and legal counsel) shall be paid by the party incurring
such expense.
(b) In the event that (i) Parent shall terminate this
Agreement pursuant to Section 7.1(a)(v), (ii) either Parent or Company shall
terminate this Agreement pursuant to Section 7.1(a)(vi)(B) following a failure
of the shareholders of Company to approve this Agreement after any Takeover
Proposal and, within six (6) months after such termination, the Company shall
enter into a term sheet, letter of intent or definitive agreement with respect
to a transaction associated with any Takeover Proposal, (iii) Parent shall
terminate this Agreement pursuant to Section 7.1(a)(iii)(B), (C) or (D), or (iv)
Company shall terminate this Agreement pursuant to Section 7.1(a)(iv)(B), then
Company shall promptly, but in no event (x) later than fifteen (15) business
days after such termination with respect to clause (i), pay to Parent in cash
$2,500,000 (the "No-Shop Termination Fee"), and (y)(1) no later than fifteen
(15) days after such termination with respect to clauses (iii) or (iv) above,
and (2) later than fifteen (15) days after entering into a term sheet, letter of
intent or definitive agreement with respect to clause (ii) above, pay to Parent
in cash $5,000,000 in cash (the "Full Termination Fee"; and together with the
No-Shop Termination Fee collectively, the "Termination Fee"); provided, however,
that with respect to Section 7.3(b)(iii), a Trigger Event shall not be deemed to
include the acquisition by any Person of securities representing twenty-five
percent (25%) or more of Company if such Person has acquired such securities not
with the purpose nor with the effect of changing or influencing the control of
Company, nor in connection with or as a participant in any transaction having
such purpose or effect, including without limitation not in connection with such
Person (i) making any public announcement with respect to the voting of such
shares at any meeting to consider any merger, consolidation, sale of substantial
assets or other business combination or extraordinary transaction involving
Company, (ii) making, or in any way participating in, any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A under the
Exchange Act) to vote any voting securities of Company (including, without
limitation, any such solicitation subject to Rule 14a-11 under the Exchange Act)
or seeking to advise or influence any Person with respect to the voting of any
voting securities of Company, (iii) forming, joining or in any way participating
in any "group" within the meaning of Section 13(d)(3) of the Exchange Act with
respect to any voting securities of Company or (iv) otherwise acting, alone or
in concert with others, to seek control of Company or to seek to control or
influence the management or policies of Company.
57
(c) In the event that Parent shall terminate this Agreement
pursuant to Section 7.1(a)(iii)(A), Company shall promptly reimburse Parent for
all of the actual, documented, reasonable out-of-pocket costs and expenses
incurred by Parent in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, the fees and expenses of its
outside advisors, outside accountants and outside legal counsel).
(d) In the event that Company shall terminate this Agreement
pursuant to Section 7.1(a)(iv)(A), Parent shall promptly reimburse Company for
all of the actual, documented and reasonable out-of-pocket costs and expenses
incurred by Company in connection with this Agreement and the transactions
contemplated hereby (including without limitation the fees and expenses of its
outside advisors, outside accountants and outside legal counsel).
7.4 Amendment. The boards of directors of the parties hereto may
cause this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of the Agreement by the shareholders of
Company shall not (i) alter or change the amount or kind of consideration to be
received on conversion of the Company Capital Stock, (ii) alter or change any
term of the Articles of Incorporation of Surviving Corporation to be effected by
the Merger, or (iii) alter or change any of the terms and conditions of the
Agreement, if such alteration or change would materially adversely affect the
holders of Company Capital Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or acts of the other parties hereto, (ii)
waive any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of the other
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party granting such waiver or extension.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival at Effective Time. The representations, warranties
and agreements set forth in this Agreement shall terminate at the Effective
Time, except that the agreements set forth in Article I, Section 5.4
(Confidentiality), Section 5.11 (Employee Benefit Plans), Section 5.12
(Indemnification), Section 5.13 (Form S-8), Section 5.18 (Further Assurances),
Section 7.3 (Expenses and Termination Fees), Section 7.4 (Amendment), and this
Article VIII shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation
58
of receipt) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Parent, to:
Novellus Systems, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. Royal
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Company, to:
SpeedFam-IPEC, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation; Certain Definitions. When a reference is made in
this Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement", "the date hereof", and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to the Execution Date.
The term "Person" shall mean any
59
corporation, partnership, individual, trust, unincorporated association or other
entity or Group (within the meaning of Section 13(d)(3) of the Exchange Act).
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.4 Counterparts; Facsimile Delivery. This Agreement may be executed
in one or more counterparts and delivered by facsimile, all of which shall be
considered one and the same agreement and shall become effective when one or
more counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
8.5 Entire Agreement; Nonassignability; Parties in Interest. This
Agreement and the documents and instruments and other agreements specifically
referred to herein or delivered pursuant hereto, including the Exhibits, the
Schedules, including the Company Disclosure Schedule and the Parent Disclosure
Schedule, (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, except for the Confidentiality Agreement, which shall continue in full
force and effect, and shall survive any termination of this Agreement or the
Closing, in accordance with its terms, (b) are not intended to confer upon any
other Person any rights or remedies hereunder, except as set forth in Sections
1.6(a), (b) and (d)-(g), 1.7, 1.10, 5.11, 5.12 and 5.13, and (c) shall not be
assigned by operation of law or otherwise except as otherwise specifically
provided herein.
8.6 Severability. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 Remedies Cumulative. Except as otherwise provided herein (and
specifically with respect to the remedy provided upon a termination by Parent
pursuant to Section 7.3(b)(i)), any and all remedies herein expressly conferred
upon a party will be deemed cumulative with and not exclusive of any other
remedy conferred hereby, or by law or equity upon such party, and the exercise
by a party of any one remedy will not preclude the exercise of any other remedy.
8.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of Delaware without reference to such state's
principles of conflicts of law. Each of the parties hereto irrevocably consents
to the jurisdiction of any court located within the State of Delaware, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in
60
any manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process. THE PARTIES HERETO
IRREVOCABLY WAIVE THE RIGHT TO A JURY TRIAL IN CONNECTION WITH ANY ACTIONS,
SUITS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE MERGER OR
THE TRANSACTIONS CONTEMPLATED HEREBY.
8.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation, preparation and execution of
this Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement or
other document will be construed against the party drafting such agreement or
document.
8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
8.11 Attorneys' Fees. In any action at law or suit in equity to
enforce this Agreement or the rights of any of the parties hereunder, the
prevailing party in such action or suit shall be entitled to receive a sum for
its attorneys' fees and all other costs and expenses incurred in such action or
suit.
[Signatures Follow On A Separate Page]
61
IN WITNESS WHEREOF, Company, Parent and Merger Sub have each caused
this Agreement to be executed and delivered by their respective officers
thereunto duly authorized, all as of the date first written above.
"COMPANY"
SPEEDFAM-IPEC, INC.
By:
--------------------------
Name:
--------------------------
Title:
--------------------------
"PARENT"
NOVELLUS SYSTEMS, INC.
By:
--------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President
"MERGER SUB"
NHL ACQUISITION-SUB, INC.
By:
--------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER AND REORGANIZATION]
APPENDIX I
INDEX OF DEFINED TERMS
DEFINED TERM SECTION
Agreement Introduction
Antitrust Laws 5.6(b)
Articles of Merger 1.2
Certificate of Merger 1.2
Certificates 1.7(c)(i)
Closing 1.2
Closing Date 1.2
Code Recital E
Company Introduction
Company Authorizations 2.8
Company Balance Sheet Date 2.4(b)
Company Capital Stock 1.6(a)
Company Common Stock 1.6(a)
Company Convertible Securities 1.6(a)
Company Disclosure Schedule Article II
Company ESPP 1.6(a)
Company Financial Statements 2.4(b)
Company Material Adverse Effect Article II
Company Notes 1.6(a)
Company Options 1.6(a)
Company Preferred Stock 1.6(a)
Company SEC Documents 2.4(a)
Company Shareholders Meeting 2.26
Company Stock Option Plan(s) 1.6(a)
Confidential Information 2.10(h)
Confidentiality Agreement 5.4
Contracts Requiring Novation or Consent to Change
of Control 2.24
Defined Benefit Plan 2.13(a)(i)
Delaware Law 1.1
Disclosure Schedule Update 5.3(d)
Dissenting Shares 1.12
Effective Date 1.2
Effective Time 1.2
Environmental Approval 2.11(b)(ii)
Environmental Claim 2.11(a)(i)
Environmental Law 2.11(a)(ii)
ERISA 2.13(a)(ii)
2
DEFINED TERM SECTION
Exchange Act 2.4(a)
Exchange Agent 1.7(a)
Exchange Ratio 1.6(a)
Execution Date Introduction
Facilities 2.11(a)(iii)
Full Termination Fee 7.3(b)(iii)
GAAP 2.4(b)
Governmental Entity 2.3(c)
Hazardous Material 2.11(a)(iv)
HSR 2.3(c)(iv)
Illinois Law 1.1
Indemnified Parties 5.12(a)
Indenture 1.6(a)
Intellectual Property 2.10(a)
IPEC 1.6(a)
knowledge Article II
Leased Premises 2.25(e)
Leases 2.25(e)
Material Contracts 2.22
Member of the Controlled Group 2.13(a)(iii)
Merger Recital A
Merger Sub Introduction
Multiemployer Plan 2.13(a)(iv)
NASD 2.3(c)(ii)
No-Shop Termination Fee 7.3(b)(iii)
Order 5.6(b)
ordinary course of business Article II
Parent Introduction
Parent Balance Sheet Date 3.6
Parent Common Stock 1.6(a)
Parent Disclosure Schedule Article III
Parent ESPP 3.2(a)
Parent Financial Statements 3.4
Parent Material Adverse Effect Article III
Parent Option 5.11(a)
Parent SEC Documents 3.4
Parent Stock Option Plans 3.2(a)
Parent Stock Price 1.6(g)
Person 8.3
Plans 2.13(b)
Pre-Existing Environmental Condition 2.11(a)(v)
Proceeding 2.7
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DEFINED TERM SECTION
Property 2.11(a)(vi)
Proxy Statement 2.26
Reaffirmation 7.1(a)(iii)(C)
Real Property 2.25(a)
Registration Statement 2.26
Release 2.11(a)(vii)
SEC 2.3(c)(ii)
Securities Act 2.3(c)(v)
Shareholder Voting Agreement 5.8
Specified Proceeding Article II
Superior Proposal 4.3(b)
Surviving Corporation 1.1
Takeover Proposal 4.3(d)
Takeover Statute 2.29
Tax Authority 2.12(h)
Tax Return 2.12(h)
Tax, Taxes and Taxable 2.12(h)
Termination Fee 7.3(b)
Third Party Intellectual Property Rights 2.10(c)
Trigger Event 7.1(b)
Trustee 1.6(a)
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