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EXHIBIT 2.01
AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF APRIL 20, 1999
by and among
Tekelec, Eagle ▇▇▇▇▇▇▇▇ Corporation, IEX Corporation, IEX Partners,
Teknekron Partners II, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇
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The following Exhibits and Schedules to the Plan have not been filed and shall
be furnished to the Commission upon request:
o Exhibit A (Form of Articles of Merger) sets forth terms for possible
inclusion in any Articles of Merger or similar document required to be
filed under applicable state law to effect the Merger;
o Exhibit B (Form of Notes) is included as Exhibit A to the Note and
Security Agreement set forth in Exhibit 4.01 to this Form 8-K;
o Exhibit C (Form of Voting Agreement) is an agreement entered into by
Tekelec and each of the Significant Stockholders providing, in part,
that each Significant Stockholder vote in favor of the Merger;
o Exhibit D (Form of Escrow Agreement), as entered into by parties
thereto, is described in Item 2 of this Form 8-K;
o Exhibit E (Form of Non-Competition Agreement), as entered into by
parties thereto, is described in Item 2 of this Form 8-K;
o Exhibit F (Form of Note and Security Agreement), as entered into by
parties thereto, is included as Exhibit 4.01 to this Form 8-K; and
o Schedules 7.7 and 8.5 (Forms of Opinions of Counsel) set forth matters
for possible inclusion in legal opinions to be rendered by counsel for
parties to the Plan.
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[EXECUTION COPY]
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
TEKELEC,
IEX CORPORATION,
EAGLE ▇▇▇▇▇▇▇▇ CORPORATION
AND
STOCKHOLDERS OF IEX CORPORATION
APRIL 20, 1999
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TABLE OF CONTENTS
Page
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1. PLAN OF REORGANIZATION...............................................................2
1.1 The Merger....................................................................2
1.2 Effective Time of the Merger..................................................2
1.3 Merger Consideration..........................................................2
1.4 Company Dissenting Shares.....................................................4
1.5 Surrender of Certificates and Establishment of Escrow.........................5
1.6 No Further Ownership Rights in Company Common Stock...........................6
1.7 Lost, Stolen or Destroyed Certificates........................................6
1.8 Stockholder Representatives...................................................6
1.9 Additional Effects of the Merger..............................................7
1.10 Further Assurances............................................................7
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE STOCKHOLDERS.....................................................................8
2.1 Organization and Good Standing; Title.........................................8
2.2 Power, Authorization and Validity.............................................9
2.3 Capitalization................................................................9
2.4 Subsidiaries.................................................................10
2.5 No Conflict..................................................................10
2.6 Proceedings; Orders..........................................................11
2.7 Company Financial Statements.................................................12
2.8 Taxes........................................................................13
2.9 Title to Properties..........................................................14
2.10 Absence of Certain Changes...................................................14
2.11 Agreements and Commitments...................................................16
2.12 No Default; No Consent Required; No Restrictions.............................17
2.13 Intellectual Property........................................................18
2.14 Compliance with Laws.........................................................21
2.15 Certain Transactions and Agreements..........................................22
2.16 Employees....................................................................22
2.17 Corporate Documents..........................................................25
2.18 No Brokers...................................................................25
2.19 Bank Accounts................................................................25
2.20 Insurance....................................................................25
2.21 Environmental Matters........................................................25
2.22 Customers....................................................................26
2.23 Accounts Receivable; Accounts Payable........................................27
2.24 Voting Agreement; Proxies....................................................27
2.25 Vote Required................................................................27
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TABLE OF CONTENTS (CONT'D)
2.26 Board Approval...............................................................27
2.27 No Existing Discussions......................................................27
2.28 Year 2000 Compliance.........................................................27
2.29 Disclosure...................................................................28
2.30 Knowledge....................................................................28
2.31 Material Adverse Effect......................................................28
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO..................................28
3.1 Organization and Good Standing...............................................29
3.2 Power, Authorization and Validity............................................29
3.3 No Conflict..................................................................30
3.4 SEC Filings..................................................................30
3.5 Proceedings; Orders..........................................................30
3.6 No Material Adverse Change...................................................31
3.7 No Brokers...................................................................31
3.8 Disclosure...................................................................31
3.9 Material Adverse Effect......................................................31
3.10 Knowledge of Parent..........................................................31
4. PRE-CLOSING COVENANTS OF THE COMPANY................................................31
4.1 Advice of Changes............................................................31
4.2 Maintenance of Business......................................................32
4.3 Conduct of Business..........................................................32
4.4 Approval of the Company's Stockholders.......................................34
4.5 Proxy Statement..............................................................34
4.6 Regulatory Approvals.........................................................35
4.7 Acceleration of Company Options..............................................35
4.8 Necessary Consents...........................................................35
4.9 Proceedings and Orders.......................................................35
4.10 No Other Negotiations........................................................35
4.11 Access to Information........................................................36
4.12 Satisfaction of Conditions Precedent.........................................36
4.13 Securities Laws..............................................................36
4.14 Notification of Employee Problems............................................36
4.15 Company Dissenting Shares....................................................37
4.16 Termination of Registration and Voting Rights................................37
4.17 Invention Assignment and Confidentiality Agreements..........................37
4.18 Company Employee Plans and Benefit Arrangements..............................37
4.19 Takeover Statutes............................................................37
4.20 Closing of Merger............................................................37
4.21 Termination of Management Agreement..........................................38
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TABLE OF CONTENTS (CONT'D)
5. COVENANTS OF PARENT.................................................................38
5.1 Advice of Changes............................................................38
5.2 Satisfaction of Conditions Precedent.........................................38
5.3 Regulatory Approvals.........................................................38
6. CLOSING MATTERS.....................................................................38
6.1 The Closing..................................................................38
7. CONDITIONS TO OBLIGATIONS OF THE COMPANY............................................39
7.1 Accuracy of Representations and Warranties...................................39
7.2 Covenants....................................................................39
7.3 Requisite Approvals..........................................................39
7.4 Compliance with Law; No Legal Restraints; No Litigation......................39
7.5 Government Consents; HSR Act Compliance......................................39
7.6 Documents....................................................................40
7.7 Opinion of Parent's Counsel..................................................40
7.8 Agreements...................................................................40
7.9 No Material Adverse Change...................................................40
8. CONDITIONS TO OBLIGATIONS OF PARENT AND NEWCO.......................................40
8.1 Accuracy of Representations and Warranties...................................40
8.2 Covenants; No Material Adverse Change........................................40
8.3 Compliance with Law; No Legal Restraints; No Litigation......................40
8.4 Government Consents; HSR Act Compliance......................................41
8.5 Opinion of the Company's Counsel.............................................41
8.6 Requisite Approvals..........................................................41
8.7 Restriction on Dissenting Shares.............................................41
8.8 Documents....................................................................41
8.9 Escrow Agreement.............................................................41
8.10 Non-Competition Agreements...................................................41
8.11 Continued Employment of Certain Personnel....................................41
8.12 Resignation of Directors.....................................................42
8.13 Due Diligence................................................................42
9. TERMINATION.........................................................................42
9.1 Termination..................................................................42
9.2 Effect of Termination........................................................43
9.3 Termination Fee..............................................................44
9.4 Non-Exclusivity of Termination Rights........................................44
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS................................................................44
10.1 Survival.....................................................................44
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TABLE OF CONTENTS (CONT'D)
10.2 Indemnification by Significant Stockholders..................................45
10.3 Indemnification by Parent....................................................46
10.4 Procedures...................................................................46
10.5 Third-Party Claims...........................................................47
10.6 Resolution of Conflicts: Arbitration.........................................48
10.7 Other Indemnification Provisions.............................................49
11. MISCELLANEOUS.......................................................................49
11.1 Governing Law................................................................50
11.2 Assignment; Successors and Assigns...........................................50
11.3 Severability.................................................................50
11.4 Counterparts.................................................................50
11.5 Other Remedies...............................................................50
11.6 Amendment and Waivers........................................................50
11.7 No Waiver....................................................................50
11.8 Expenses.....................................................................50
11.9 Attorneys' Fees..............................................................51
11.10 Notices......................................................................51
11.11 Construction of Agreement....................................................51
11.12 No Joint Venture.............................................................52
11.13 Further Assurances...........................................................52
11.14 Absence of Third Party Beneficiary Rights....................................52
11.15 Public Announcement..........................................................52
11.16 Confidentiality..............................................................52
11.17 Time is of the Essence.......................................................52
11.18 Disclosure Letter............................................................53
11.19 Entire Agreement.............................................................53
11.20 Submission to Jurisdiction; Waiver of Jury Trial.............................53
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Exhibits
Exhibit A Form of Articles of Merger
Exhibit B Form of Notes
Exhibit C Form of Voting Agreement
Exhibit D Form of Escrow Agreement
Exhibit E Form of Non-Competition Agreement
Exhibit F Form of Note and Security Agreement
Schedule 1.3 Significant Stockholders
Schedule 2.30 Knowledge of the Company and/or the Stockholders
Schedule 7.7 Form of Opinion of Counsel to Parent and Newco
Schedule 8.5 Form of Opinion of Counsel to the Company and the
Stockholders
Schedule 8.10 List of Parties Required to Enter into Non-Competition
Agreements
Schedule 8.11 List of Company Employees Entering into Employment
Agreements with Company
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is entered
into as of April 20, 1999 (the "Agreement Date"), by and among Tekelec, a
California corporation ("Parent"), Eagle ▇▇▇▇▇▇▇▇ Corporation, a Delaware
corporation and a wholly-owned subsidiary of Parent ("Newco"), IEX Corporation,
a Nevada corporation (the "Company"), and Teknekron Partners II, IEX Partners,
▇▇▇▇ ▇▇▇▇▇▇▇▇, and ▇▇▇▇▇▇▇ ▇▇▇▇ (collectively, the "Stockholders").
RECITALS
A. The parties intend that Newco, a new Delaware corporation that will
be organized as a wholly-owned subsidiary of Parent, will merge with and into
the Company in a reverse triangular merger (the "Merger"), with the Company to
be the surviving corporation of the Merger, all pursuant to the terms and
conditions of this Agreement, the Articles of Merger substantially in the form
of Exhibit A (the "Articles of Merger") and the provisions of applicable law.
Upon the effectiveness of the Merger, all the shares of common stock of the
Company ("Company Common Stock") that are outstanding immediately prior to the
effectiveness of the Merger, together with all outstanding unexercised Company
Options (as defined herein), will be converted into the right to receive an
amount of cash from Parent and, in certain circumstances, short term
subordinated notes issued by Parent in the form of Exhibit B (the "Notes") on
the basis determined herein and as provided in the Articles of Merger.
B. The Board of Directors of the Company has approved the Merger, this
Agreement, the Articles of Merger and the transactions provided for herein and
therein.
C. Each of the Significant Stockholders (as defined herein) is agreeing
to vote its shares in favor of the Merger, this Agreement, the Articles of
Merger and the transactions provided for herein and therein in a Voting
Agreement in substantially the form of Exhibit C hereto (the "Voting
Agreement"). The Significant Stockholders collectively own in excess of eighty
percent (80%) of the issued and outstanding capital stock of the Company.
D. At or prior to the closing of the Merger and the transactions
contemplated herein (the "Closing"),
1. Parent, the Representatives (as defined herein) and the Escrow
Agent (as defined herein) will enter into an Escrow Agreement in substantially
the form of Exhibit D hereto (the "Escrow Agreement");
2. Parent, the Significant Stockholders and ▇▇▇▇▇▇ ▇▇▇▇▇▇ will enter
into Non-Competition Agreements in substantially the form of Exhibit E hereto
(the "Non-Competition Agreements");
3. Company and certain employees of the Company will enter into
employment agreements; and
4. Parent and the Significant Stockholders will enter into the Note
and Security Agreement in substantially the form of Exhibit F hereto.
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In consideration of the foregoing and the representations,
warranties, covenants and agreements set forth in this Agreement, the parties
hereto agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.2), Newco shall be
merged with and into the Company (the "Merger"), the Company shall be the
surviving corporation (the "Surviving Corporation"), and the separate existence
of Newco shall thereupon cease. The Merger shall have the effect set forth in
applicable provisions of the Nevada Revised Statutes ("Nevada Law") and the
Delaware General Corporation Law ("Delaware Law"). Without limiting the
generality of the foregoing, at and after the Effective Time, the Surviving
Corporation shall possess the title to all real and other property owned by each
merging constituent entity; and be subject to all of the liabilities of each of
the constituent corporations in the Merger.
1.2 Effective Time of the Merger. The Merger shall become effective
when properly executed Articles of Merger, in substantially the form attached
hereto as Exhibit A, or as otherwise agreed by the parties hereto and as
required by the relevant provisions of Nevada Law and Delaware Law, is duly
filed with the Secretaries of States of the States of Nevada and Delaware, which
filing shall be made in connection with the Closing of the transactions
contemplated herein in accordance with Article 6 upon satisfaction or waiver of
the conditions set forth in Articles 7 and 8. When used in this Agreement, the
term "Effective Time" shall mean the date and time at which such Articles of
Merger has been so filed or such later date as provided in the Articles of
Merger.
1.3 Merger Consideration. The consideration to be paid by Parent in
exchange for the acquisition by Parent at the Effective Time of (i) all
outstanding Company Common Stock (including Dissenting Shares), (ii) that
certain option dated February 1, 1999 to purchase 700,000 shares of the
Company's Common Stock held by Teknekron Corporation (the "Teknekron Option";
the maximum number of shares for which such option is exercisable to be known as
the "Teknekron Shares") and (iii) all other outstanding Company Options (as
defined below) shall not exceed an amount equal to the Aggregate Merger
Consideration (as defined below) reduced by the aggregate exercise price of
Company Options bought out by Parent under Section 1.3(b). Subject to the terms
and conditions of this Agreement, as of the Effective Time, by virtue of the
Merger and without any action on the part of Newco, the Company, or the holder
of any shares of the Company Common Stock or the holder of any Company Options,
the following shall occur:
(a) Consideration for Company Common Stock. Upon the terms and
subject to the conditions set forth below and throughout this Agreement,
including, without limitation, the escrow provisions set forth in Section 1.5
and Article 10 hereof, each share of Company Common Stock issued and outstanding
immediately prior to the Closing other than any Company Dissenting Shares (as
defined and to the extent provided in Section 1.4) will be canceled and
extinguished and be converted automatically into the right to receive upon
surrender of the certificate representing such share of Company Common Stock in
the manner provided in Section 1.5, without interest:
(i) for each share of Company Common Stock owned by a
Company stockholder who is not a Significant Stockholder (as defined below),
cash in the
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amount of the Per Share Payment, as defined below (the aggregate consideration
paid under this Section 1.3(a)(i) to all holders of Company Common Stock (other
than Significant Stockholders) plus the amount payable to such holders who hold
Company Dissenting Shares, is herein referred to as the "Minority
Consideration"); or
(ii) for each share of Company Common Stock owned by a
Company stockholder listed in Schedule 1.3 (a "Significant Stockholder"), the
sum of (A) the Per Share Note Amount (as defined below) payable by Note, and (B)
cash (the "Significant Stockholder Per Share Cash Amount") equal to the quotient
obtained by dividing the remainder of the Aggregate Cash Amount less (i) the
Minority Consideration and (ii) the amount of the Option Payment allocated to
holders of Company Common Stock (other than Significant Stockholders), by the
aggregate number of shares of Company Common Stock or subject to Company Options
(including Teknekron Options) which are bought out by Parent under Section
1.3(b) held or owned by the Significant Stockholders, with such sum of (A) and
(B) to be subject to reduction by the Escrow Amount attributable to such
Significant Stockholder as provided in Section 1.5; and
(iii) for each share of Company Common Stock owned by any
Company stockholder, which share was purchased by a promissory note ("Promissory
Note") from such Company stockholder to the Company, the Parent may reduce the
per share amount payable to such stockholder by an amount equal to the quotient
of (A) the amount, if any, outstanding as of the Closing under such Promissory
Note and (B) the number of shares of Company Common Stock purchased with such
Promissory Note, and the Parent shall pay the Company the amount of such
reduction in order to pay down the Promissory Note on behalf of such
stockholder.
(b) Treatment of Stock Options. To the extent any option
(including the Teknekron Option) or other right to purchase shares of Company
Common Stock (each such option, including the Teknekron Option, is herein
referred to as a "Company Option") then outstanding either under the Company's
1996 Stock Incentive Plan (the "Option Plan") or otherwise has not been
exercised in full and is outstanding immediately prior to the Closing, Parent
will buy out and cancel such Company Option at the Closing by paying, with
respect to each share of Company Common Stock for which such Company Option is
exercisable: (i) if such Company Option is held by a Significant Stockholder, an
amount equal to the sum of (x) the Per Share Note Amount plus (y) the
Significant Stockholder Per Share Cash Amount less the per share exercise price
payable with respect to such Company Option; and (ii) if such Company Option is
not held by a Significant Stockholder, an amount equal to the Per Share Payment
less the per share exercise price payable with respect to such Company Option.
The Company shall notify the Parent of the amount of the Option Payment and
provide such other information requested by the Parent with respect thereto on
or before the Closing.
(c) Conversion of Newco Shares. Each share of Newco Common
Stock, par value $0.001 per share ("Newco Common Stock"), that is issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without further action on the part of the sole stockholder of Newco,
be converted into and become one share of Company Common Stock that is issued
and outstanding immediately after the Effective Time, and the shares of Company
Common Stock into which the shares of Newco Common Stock are
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so converted shall be the only shares of Company Common Stock that are issued
and outstanding immediately after the Effective Time.
(d) Adjustments to Consideration. Any payment made under this
Section 1.3 shall be adjusted proportionally to reflect fully the effect of any
stock split, reverse split, stock dividend (including any dividend or
distribution of securities convertible into Company Common Stock),
reorganization, capitalization or other like change with respect to Company
Common Stock occurring after the Agreement Date and prior to the Effective Time.
(e) Definitions.
(i) "Aggregate Cash Amount" means $63,000,000.
(ii) "Aggregate Note Amount" means $100,000,000.
(iii) "Aggregate Merger Consideration" means the sum of the
Aggregate Cash Amount and the Aggregate Note Amount.
(iv) "Option Payment" means that amount equal to the number
of shares of Company Common Stock subject to Company Options which are bought
out by Parent under Section 1.3(b) multiplied by the Per Share Payment.
(v) "Per Share Note Amount" means the quotient obtained by
dividing the Aggregate Note Amount by the sum of (A) the shares of Common Stock
owned by the Significant Stockholders immediately prior to the Closing, and (B)
the number of shares of Company Common Stock (including the Teknekron Shares)
subject to Company Options held by Significant Stockholders which are bought out
by Parent under Section 1.3(b).
(vi) "Per Share Payment" means the quotient obtained by
dividing the Aggregate Merger Consideration by the sum of (A) the number of
shares of Company Common Stock outstanding immediately prior to the Closing that
are held by all stockholders of the Company, and (B) the number of shares of
Company Common Stock (including the Teknekron Shares) subject to Company Options
bought out by Parent under Section 1.3(b). To determine the amount of
consideration payable to a particular stockholder or option holder under this
Section 1.3, the Per Share Payment shall be multiplied by the number of shares
of Company Common Stock held by such stockholder or subject to an unexercised
Company Option, as the case may be, and in the case of Company Common Stock that
has been purchased by such stockholder with a Promissory Note, reduced by the
amount the Parent pays down the outstanding balance of such Promissory Note
under Section 1.3(a)(iii) on behalf of such stockholder and in the case of
unexercised Company Option reduced by the aggregate exercise price payable with
respect to such Company Option and then rounded to the nearest whole cent.
1.4 Company Dissenting Shares. Holders of Company Dissenting Shares
(if any) will be entitled to their appraisal rights under Section 92A.300 et
seq. of Nevada Law with respect to such Company Dissenting Shares and such
Company Dissenting Shares will not be converted into the right to receive
consideration in the Merger as provided in Section 1.3; provided, however, that
nothing in this Section 1.4 is intended to remove, release, waive, alter or
affect any of the conditions to Parent's and Newco's obligations to consummate
the Merger set forth in Sections 8.6 and 8.7, or any other provision of this
Agreement relating to Company
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Dissenting Shares. Shares of the capital stock of the Company that are
outstanding immediately prior to the Effective Time and with respect to which
dissenting stockholders' rights of appraisal under Nevada Law have either (a)
not been properly exercised and perfected or (b) with the consent of the Company
and Parent, been withdrawn, will, when such dissenting stockholders' rights can
no longer be legally exercised under Nevada Law, be converted into the right to
receive the Merger consideration as provided in Section 1.3. "Company Dissenting
Shares" means any shares of any capital stock of the Company that (i) are
outstanding immediately prior to the Effective Time and (ii) with respect to
which dissenter's rights to obtain payment for such dissenting shares in
accordance with Section 9A.300 et seq. of Nevada Law have been duly and properly
exercised and perfected in connection with the Merger.
1.5 Surrender of Certificates and Establishment of Escrow.
(a) Escrow Agent. Prior to the Effective Time, Parent shall
designate State Street Bank and Trust Company of California, N.A. to act as
escrow agent ( the "Escrow Agent") in the Merger.
(b) Establishment of Escrow. On the business day in which the
Closing occurs, Parent shall withhold and deposit into an escrow account Notes
(the "Escrow Notes") in the aggregate principal amount equal to ten percent
(10%) of the gross amount payable (before any reduction or offset for Escrow
Amount, Promissory Notes paid down by the Parent under Section 1.3(a)(iii) or
exercise price of Company Options which are bought out by Parent under Section
1.3(b), to the extent applicable to the Significant Stockholders) to the
Significant Stockholders under Section 1.3 (the "Escrow Amount"). Pursuant to
the Escrow Agreement, Parent will deduct from the amounts otherwise deliverable
to each Significant Stockholder and deposit with the Escrow Agent the Escrow
Amount solely from the consideration payable to the Significant Stockholders,
allocated proportionately according to the gross consideration payable to each
Significant Stockholder under Section 1.3 in exchange for (i) outstanding shares
of Company Common Stock and (ii) unexercised Company Options held by such
Significant Stockholder. The Escrow Amount shall be administered in accordance
with the provisions of Article 10 and the Escrow Agreement.
(c) Exchange Procedures. Prior to the Closing, Parent shall
cause to be delivered to each Company stockholder (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Company stock or option certificates ("Certificates") owned by such
holder shall pass, only upon delivery of the Certificates owned by such holder
to Parent, and shall be in such form and have such other provisions as Parent
may reasonably specify), and (ii) instructions for use in effecting the
surrender of such holder's Certificates in exchange for the consideration
payable under Section 1.3. Upon surrender of a Certificate for cancellation to
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor, at the Closing,
the consideration (subject to the escrow provisions hereof and in Article 10),
to which such holder is entitled pursuant to Section 1.3, and the Certificate so
surrendered shall forthwith be canceled. Payments of cash to stockholders
pursuant to this Section 1.5 shall be made by wire transfer of immediately
available funds to a single disbursing agent to be designated by the
Representatives not less than three (3) business days prior to the Closing.
Notwithstanding any other provision of this Agreement, any payment due under
Section 1.3 may be reduced to the extent of any withholding taxes.
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(d) Payments With Respect to Unexchanged Shares. No interest
shall accrue or be payable with respect to the Merger consideration payable on
any unexchanged shares of Company Common Stock.
(e) No Liability. Notwithstanding anything to the contrary in
this Section 1.5, none of the Parent, the Surviving Corporation or any party
hereto shall be liable to a holder of a Certificate for any amount properly paid
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
1.6 No Further Ownership Rights in Company Common Stock. All amounts
paid upon the surrender for exchange of shares of Company Common Stock and
Company Options in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock and Company Options and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock or Company Options which were outstanding immediately prior to the
Effective Time. Until so surrendered, each outstanding Certificate that, prior
to the Effective Time, represented shares of Company Common Stock or Company
Options will be deemed from and after the Effective Time, for all corporate
purposes, to evidence only the right to receive the consideration payable under
Section 1.3 in respect of each such share or option, as the case may be,
(subject to the escrow provisions set forth in Section 1.5 and Article 10
hereof). If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and the
consideration payable under Section 1.3 shall be delivered to the person
entitled thereto (subject to the escrow provisions set forth in Section 1.5 and
Article 10 hereof).
1.7 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such amount of cash and Notes as
may be required pursuant to Section 1.3; provided, however, that Parent may, in
its reasonable discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificates to deliver a
bond in such sum or provide such other assurances as it may reasonably direct as
indemnity against any claim that may be made against Parent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.8 Stockholder Representatives. By their approval of the Merger,
the Significant Stockholders will be conclusively and irrevocably deemed to have
consented to, approved and agreed to be personally bound by: (i) the
indemnification provisions of Article 10; (ii) the Escrow Agreement; (iii) the
appointment of ▇▇▇▇▇▇ ▇. ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ as the representatives of the
Significant Stockholders (the "Representatives") under the Escrow Agreement and
as the attorney-in-fact and agent for and on behalf of each Significant
Stockholder as provided in the Escrow Agreement; and (iv) the taking by the
Representatives of any and all actions and the making of any decisions required
or permitted to be taken by the Representatives under this Agreement and/or the
Escrow Agreement, including, without limitation, the exercise of the power to:
(a) authorize delivery to Parent of all or some of the Escrow Amount in
satisfaction of indemnity claims by Parent or any other Indemnified Party (as
defined in Section 10.2) pursuant to Article 10 and/or the Escrow Agreement; (b)
agree to, negotiate, enter into settlements and compromises of, demand
arbitration of, and comply with
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orders of courts and awards of arbitrators with respect to, such claims; (c)
arbitrate, resolve, settle or compromise any claim for indemnity made pursuant
to Article 10; and (d) take all actions necessary in the judgment of the
Representatives for the accomplishment of the foregoing. Parent shall, at its
sole option and discretion, be entitled to condition the issuance of any of the
Escrow Amount to a Significant Stockholder pursuant to Section 1.3 on its
receipt of a written instrument executed by such Significant Stockholder,
customary in form and substance and reasonably acceptable to Parent,
acknowledging and agreeing to the foregoing. The Representatives will have
authority and power to act on behalf of each Significant Stockholder with
respect to the Escrow Agreement and the disposition, settlement or other
handling of all claims under Article 10 hereof or governed by the Escrow
Agreement, and all rights or obligations arising under the Escrow Agreement so
long as all Significant Stockholders are treated in the same manner. The
Significant Stockholders will be bound by all actions taken and documents
executed by the Representatives in connection with the Escrow Agreement, and
Parent will be entitled to rely on any action or decision of the
Representatives. In the event of a disagreement between the Representatives,
they shall act in accordance with the vote of a Majority In Interest of the
Significant Stockholders. A "Majority In Interest" of the Significant
Stockholders means Significant Stockholders holding greater than fifty percent
(50%) of the Company Common Stock and Company Options, or securities convertible
therefor, immediately prior to the Effective Time. In performing the functions
specified in this Agreement and the Escrow Agreement, the Representatives will
not be liable to any Significant Stockholder in the absence of gross negligence
or willful misconduct on the part of either of the Representatives. Any
out-of-pocket costs and expenses reasonably incurred by the Representatives in
connection with actions taken pursuant to the terms of the Escrow Agreement will
be paid by the Significant Stockholders to the Representatives, first, out of
the interest accrued on the Escrow Notes and second, out of the Escrow Amount
pro rata in proportion to their respective percentage interests in the Escrow
Amount, but only to the extent that any of the Escrow Amount remains available
for distribution to the Significant Stockholders following expiration of the
Escrow Period and satisfaction of all claims made or asserted by Parent or any
Indemnified Person under Article 10 or the Escrow Agreement, in all cases
subject to Parent's rights in and to the Escrow Amount.
1.9 Additional Effects of the Merger. At and subject to and upon the
Effective Time: (a) the Articles of Incorporation and Bylaws of the Company will
be amended and restated (in a form to be delivered to the Company prior to the
Effective Time) immediately after the Effective Time until duly amended in
accordance with the terms thereof and applicable law; and (b) the Board of
Directors and executive officers of Parent will remain unchanged, the sole
director of Newco immediately prior to the Effective Time will become the sole
director of the Surviving Corporation and the officers of Newco immediately
prior to the Effective Time will become the officers of the Surviving
Corporation.
1.10 Further Assurances. The Company agrees that if, at any time
after the Effective Time, Parent considers or is advised that any further
instruments, deeds, assignments or assurances are reasonably necessary or
desirable to vest, perfect or confirm in the Surviving Corporation title to any
property or rights of the Company as provided herein, then Parent, the Surviving
Corporation and their respective officers and directors are hereby authorized by
the Company to execute and deliver all such proper instruments, deeds,
assignments and assurances and do all other things necessary or desirable to
vest, perfect or confirm title to such property or
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rights in Parent and otherwise to carry out the purposes of this Agreement, in
the name of the Company or otherwise.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE STOCKHOLDERS
The Company and the Stockholders hereby severally represent and
warrant to Parent and Newco that, except as set forth in the Company disclosure
letter delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Letter"; for all purposes of this Agreement,
the statements contained in the Company Disclosure Letter shall also be deemed
to be representations and warranties made and given by the Company and the
Stockholders under Article 2 of this Agreement), including items in the Company
Disclosure Letter referred to as "Items" below, each of the following
representations, warranties and statements in this Article 2 are true and
accurate as of the Agreement Date and will be true and accurate as of the
Closing Date:
2.1 Organization and Good Standing; Title.
2.1.1 Organization and Good Standing. The Company is a
corporation duly organized, validly existing and in good standing under Nevada
Law, has the requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and is duly
qualified or licensed as a foreign corporation in each jurisdiction listed on
Item 2.1.1, which is each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect on the Company. The Company has no subsidiaries
and has never had any subsidiaries. The Company has never conducted directly or
through any subsidiary any business under or otherwise used, for any purpose or
in any jurisdiction, any fictitious name, assumed name, trade or other name. The
Company has heretofore delivered to Parent true and complete copies of its
Articles of Incorporation and Bylaws. The Company is not in violation of any of
the provisions of the Articles of Incorporation or Bylaws of the Company or of
any resolution adopted by the stockholders of the Company or the Boards of
Directors of the Company, and to the best knowledge of the Company, no event has
occurred, and no condition or circumstance exists, that likely would (with or
without notice or lapse of time) constitute or result directly or indirectly in
such a violation.
2.1.2 Board of Directors and Officers. Item 2.1.2 accurately
sets forth (i) the names of the members of the Company's Board of Directors,
(ii) the names and titles of the Company's officers and (iii) the names of the
members of the committees of the Company's Board of Directors.
2.1.3 No Cessation of Business. There is no proceeding pending
or any election or action contemplating, the dissolution or liquidation of the
Company or the winding up or cessation of the Company's business or affairs.
2.1.4 Title. Except as set forth in Item 2.1.4, each Company
stockholder owns and holds good and valid title to such Company stockholder's
Company Common Stock to be exchanged in the Merger, free and clear of any
pledges, claims, liens, charges, encumbrances, security interests of any kind or
nature whatsoever and free of any other limitation or restriction (including any
restriction on the right to vote, sell or otherwise dispose of such Company
Common Stock). No Company stockholder has any interest or right in the equity or
assets of the
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Company other than the Company Common Stock owned by such Company stockholder to
be exchanged in the Merger.
2.2 Power, Authorization and Validity.
2.2.1 Power and Authority. The Company has the corporate right,
power and authority to enter into and perform its obligations under this
Agreement and all agreements to which the Company is or will be a party that are
required to be executed pursuant to this Agreement (the "Company Ancillary
Agreements") and the transactions contemplated hereby and thereby. This
Agreement and the Company Ancillary Agreements have been duly and validly
authorized by all necessary corporate action on the part of the Company, subject
to obtaining the requisite approval of the Company's stockholders in connection
with the consummation of the Merger. Each Stockholder has the legal power and
capacity to enter into and perform its obligations under this Agreement and all
agreements to which such Stockholder is or will be a party that are required to
be executed pursuant to this Agreement (the "Stockholder Ancillary Agreements")
and the transactions contemplated hereby and thereby.
2.2.2 No Consents. No filing, authorization, approval or
consent, governmental or otherwise, is necessary to enable the Company or the
Stockholders to enter into, and to perform their respective obligations under,
this Agreement, the Company Ancillary Agreements and the Stockholder Ancillary
Agreements, except for (a) the filing of the Articles of Merger with the
Secretaries of State of the States of Nevada and Delaware, the filing of such
officers' certificates and other documents as are required to effectuate the
Merger under Nevada Law and Delaware Law and the filing of appropriate documents
with the relevant authorities of the states in which the Company is qualified or
licensed to do business, (b) such filings as may be required to comply with
federal and state securities laws, (c) filings required under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder (the "HSR Act") and the expiration of applicable
waiting periods under the HSR Act and (d) consents required under agreements set
forth in Item 2.5 as exceptions to the representation made in the second
sentence of Section 2.5.
2.2.3 Enforceability. This Agreement and the Company Ancillary
Agreements are, or when executed and delivered by the Company and the other
parties thereto will be, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as to the effect, if any, of (a) applicable bankruptcy and other similar
laws affecting the rights of creditors generally and (b) rules of law governing
specific performance, injunctive relief and other equitable remedies; provided,
however, that the Company Ancillary Agreements will not be effective until the
earlier of the Effective Time or the date provided for therein. This Agreement
and the Stockholder Ancillary Agreements are, or when executed and delivered by
the respective Stockholders and the other parties thereto will be, valid and
binding obligations of such Stockholders enforceable against such Stockholders
in accordance with their respective terms, except as to the effect, if any, of
(a) applicable bankruptcy and other similar laws affecting the rights of
creditors generally and (b) rules of law governing specific performance,
injunctive relief and other equitable remedies; provided, however, that the
Stockholder Ancillary Agreements will not be effective until the earlier of the
Effective Time or the date provided for therein.
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2.3 Capitalization.
2.3.1. Authorized/Outstanding Capital Stock. Set forth in Item
2.3.1 is the authorized capital stock of the Company and the shares of Company
Common Stock issued and outstanding as of the Agreement Date and updated as of
the Closing Date. No fractional shares of Company Common Stock are issued or
outstanding and the Company holds no treasury shares. All issued and outstanding
shares of the Company's capital stock have been duly authorized and validly
issued, are fully paid and nonassessable, are not subject to any claim, lien,
security interest, preemptive right, right of first refusal, right of first
offer or right of rescission, and have been offered, issued, sold and delivered
by the Company in compliance with all registration or qualification requirements
(or applicable exemptions therefrom) of all applicable federal and state
securities laws. A true and complete list of all holders of the Company's
outstanding capital stock, and the total number of shares of Company Common
Stock owned by each such holder as of the Agreement Date and updated as of the
Closing Date is set forth in Item 2.3.1. Except as set forth in Item 2.3.1, no
stockholder of the Company owes the Company any money or other consideration
representing any part of the purchase price of any outstanding shares of the
Company's capital stock, including without limitation any money due under a
promissory note payable to the Company. The Company has no liability to any
stockholder for any dividends that have been declared or accrued.
2.3.2 Options/Rights. The Company Options each set forth on
Section 2.3.2, were each duly authorized and validly issued and, with respect to
all the Company Options (other than the Teknekron Option) validly issued under
the Option Plan. A true and complete list of all holders of Company Options that
are outstanding on the Agreement Date, the number of Company Options held by
each such holder, the exercise price and vesting schedule of each Company Option
held by each such person and the name of the Stock Plan under which each such
option was granted is set forth in Item 2.3.2. All Company Options shall be duly
and validly accelerated prior to the Effective Time. Except for the Company
Options as of the date of the Agreement, there are no other stock appreciation
rights, options, warrants, convertible securities or other securities, calls,
commitments, conversion privileges or preemptive or other rights or agreements
outstanding to purchase or otherwise acquire (whether directly or indirectly)
any of the Company's authorized but unissued capital stock; and there are no
stock appreciation rights, options, warrants, convertible securities or other
securities, calls, commitments, conversion privileges or preemptive or other
rights or agreements to which the Company is a party involving the purchase or
other acquisition (whether directly or indirectly) of any shares of the
Company's capital stock. The Company has no liability for dividends accrued but
unpaid and there are no voting agreements, voting trusts, registration rights,
rights of first refusal or other restrictions (other than normal restrictions on
transfer under applicable federal and state securities laws) applicable to any
of the Company's outstanding securities. There are no bonds, debentures, notes
or other indebtedness of the Company having the right to vote (or convertible
into, or exchangeable for, securities having the right to vote) on any matters
on which stockholders of the Company may vote.
2.4 Subsidiaries. The Company has no subsidiaries. Except as set
forth in Item 2.4, the Company does not own, directly or indirectly, any equity
interest in any corporation, partnership, joint venture or other business
entity.
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2.5 No Conflict. Neither the execution and delivery of this
Agreement, any Company Ancillary Agreement or any Stockholder Ancillary
Agreement, nor the consummation of the transactions provided for herein or
therein, will conflict with, or (with or without notice or lapse of time, or
both) result in a termination, breach, impairment or violation of, (a) any
provision of the Articles of Incorporation or Bylaws of the Company as currently
in effect, (b) any note, bond, lease, mortgage, indenture, license, franchise,
permit, agreement, Contract (as defined in Section 2.11) or other instrument or
obligation (whether oral or in writing) to which the Company or a Stockholder is
a party or by which the Company or a Stockholder is bound or affected which
termination, breach, impairment or violation would have a Material Adverse
Effect on the Company or (c) any federal, state, local or foreign Order (as
defined in Section 2.6.2), statute, rule, regulation or ordinance applicable to
the Company or any of their respective assets or properties. The consummation of
the Merger by the Company will not require any consent, release, waiver or
approval other than (i) the approval of the Company's stockholders and (ii) the
expiration of any applicable waiting periods regarding the Merger under the HSR
Act, and will not materially adversely affect any of the rights, licenses,
permits, franchises, leases, agreements or Contracts of the Company set forth in
Item 2.11 pursuant to their terms other than as set forth in Item 2.5. Neither
the Company's nor the Stockholders' entering into this Agreement nor the
consummation of the Merger will give rise to or trigger the application of, any
right of any third party that has not been waived by such third party in a
writing signed by it.
2.6 Proceedings; Orders.
2.6.1 Except as set forth in Item 2.6, there is no pending
action, suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding and any informal
proceeding), prosecution, contest, hearing, inquiry, inquest, audit, examination
or investigation, commenced, brought, conducted or heard by or before, or that
otherwise has involved, any Governmental Body, arbitrator, arbitration panel or
mediator ("Proceeding"), and to the best knowledge of the Company, no person or
entity has threatened to commence any Proceeding: (i) that involves the Company
or that otherwise relates to or likely would affect the Company's businesses or
any of the assets or properties owned or used by the Company (whether or not the
Company is named as a party thereto), except in each case for threatened
Proceedings that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company; or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
any of the transactions that are provided for in this Agreement, the Articles of
Merger, the Company Ancillary Agreements, the Stockholder Ancillary Agreements,
the Parent Ancillary Agreements (as defined below) or the Newco Ancillary
Agreements (as defined below) (all such transactions, the "Transactions"). For
purposes of this Agreement, "Parent Ancillary Agreements" shall mean all
agreements to which Parent is or will be a party that are required to be
executed pursuant to this Agreement, and "Newco Ancillary Agreements" shall mean
all agreements to which Newco is or will be a party that are required to be
executed pursuant to this Agreement. The Company has delivered to Parent true
and complete copies of all pleadings, material correspondence and other written
materials to which the Company has access that relate to the Proceedings
identified in Item 2.6. "Governmental Body" shall mean any: (a) nation,
principality, state, commonwealth, province, territory, county, municipality,
district or other jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or quasi-governmental
authority of
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any nature (including any governmental division, subdivision, department,
agency, bureau, branch, office, commission, council, board, instrumentality,
officer, official, representative, organization, unit, body or entity and any
court or other tribunal); (d) multinational organization or body; or (e)
individual, entity or body exercising, or entitled to exercise, any executive,
legislative, judicial, administrative, regulatory, police, military or taxing
authority or power of any nature.
2.6.2 There is no order, judgment, injunction, edict, decree,
ruling, pronouncement, determination, decision, opinion, verdict, sentence,
subpoena, writ or award that is or has been issued, made, entered, rendered or
otherwise put into effect by or under the authority of any court, administrative
agency or Governmental Body, arbitrator, arbitration panel or mediator
("Order"), or proposed Order, expressly applicable to the Company or any of the
assets or properties owned or used by the Company that (i) likely would have a
Material Adverse Effect on the Company, or adversely affect the ability of the
Company to comply with or perform any covenant or obligation under this
Agreement, the Articles of Merger, the Company Ancillary Agreements, the
Stockholder Ancillary Agreements, the Parent Ancillary Agreements or the Newco
Ancillary Agreements (the "Transactional Agreements"); or (ii) may have the
effect of preventing, delaying, making illegal or otherwise interfering with any
of the Transactions.
2.6.3 To the best knowledge of the Company, no officer or
employee of the Company is subject to any Order that prohibits such officer or
employee from engaging in or continuing any conduct, activity or practice
relating to the Company's business.
2.6.4 Except as set forth in Item 2.6.4, to the best knowledge
of the Company, no event has occurred, and no claim, dispute or other condition
or circumstance exists, that would reasonably be expected to cause or provide a
basis for a director, officer, employee or other representative of the Company
to seek indemnification from, or commence a Proceeding against or involving the
Company.
2.7 Company Financial Statements. The Company has delivered to
Parent the Company's audited balance sheet as of December 31, 1998 (the "Balance
Sheet Date"), unaudited balance sheet as of March 31, 1999, and related
statement of operations, statement of stockholders' equity and statement of cash
flows for the year ended December 31, 1998 and for the quarter ended March 31,
1999 (collectively, the "Company Financial Statements"). Except as set forth in
Item 2.7, each of the Company Financial Statements is derived from and in
accordance with the books and records of the Company and has been prepared in
conformity with GAAP consistent with prior periods, except as indicated in the
notes thereto, except that unaudited financial statements may not contain
footnotes and are subject to normal and recurring year-end audit adjustments.
The balance sheet as of the Balance Sheet Date presents fairly and accurately in
all material respects the position of the Company at such date, and the related
statements of the Company for the specified period then ended present fairly and
accurately in all respects the results of operations and cash flows of the
Company for such period. For the purposes of this Agreement, all Company
Financial Statements referred to in this paragraph shall include any notes or
schedules to such Company Financial Statements. Except as set forth in Item 2.7,
at the Agreement Date the Company has no debt, liability or obligation of any
nature, whether accrued, absolute, contingent or otherwise, and whether due or
to become due, that is in excess of $50,000 in any one case or $250,000 in the
aggregate, that is not reflected, reserved
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against or disclosed in the Company Financial Statements. All reserves
established by the Company and set forth in or reflected in the Company
Financial Statements were adequate as of the date thereof, and to the best
knowledge of the Company, are adequate. At the Balance Sheet Date, there were no
material loss contingencies (as such term is used in Statement of Financial
Accounting Standards No. 5 issued by the Financial Accounting Standards Board in
March 1975) that are not adequately provided for in the Company Financial
Statements as required by said Statement No. 5.
2.8 Taxes. The Company has filed all federal, state, local and
foreign Tax and information returns and reports required to be filed prior to
the Agreement Date, has paid all Taxes required to be paid in respect of all
periods prior to the Agreement Date for which returns have been filed, has made
all necessary estimated Tax payments, and has no liability for Taxes in excess
of the amounts so paid, except to the extent adequate reserves have been
established in the Company Financial Statements. All such returns and reports
filed by the Company were accurate in all material respects as of their
respective dates. True and complete copies of all Tax and information returns
and reports filed by the Company for the last three years have been provided or
made available by the Company to Parent. The Company is not delinquent in the
payment of any Tax or in the filing of any Tax returns or reports, and no
deficiencies for any Tax have been threatened, claimed, proposed or assessed
that have not been settled or paid. Except as set forth in Item 2.8, no Tax
return of the Company has ever been audited by the Internal Revenue Service or
any Governmental Body or state or other national taxing agency or authority. The
Company has made (A) accruals for Taxes on the balance sheet as of the Balance
Sheet Date and (B) with respect to periods after the Balance Sheet Date,
provisions on a periodic basis consistent with past practice on the Company's
books and records or financial statements, in each case which are adequate to
cover any Tax liability of the Company determined in accordance with GAAP
through the Balance Sheet Date or the date of the provision, as the case may be,
except where failures to make such accruals or provisions could not reasonably
be expected to have, individually or in the aggregate, a material Adverse Effect
on the Company. The Company is not a party to any agreement with a party other
than the Company or providing for the allocation or payment of Tax liabilities
or payment for Tax benefits with respect to a consolidated, combined or unitary
return which return includes or included the Company. The Company has never been
a member of an affiliated group of corporations within the meaning of Section
1504 of the Code. The Company has not agreed to make nor is it required to make
any adjustment under Section 481(a) of the Code by reason of a change in
accounting method or otherwise. The Company is not, and has not at any time
been, a "United States Real Property Holding Corporation" within the meaning of
Section 897(c)(2) of the Code. The Company has not made any payments, is not
obligated to make any payments, is not a party to any agreement that under
certain circumstances could obligate it to make any payments, and has not
entered into any transaction, including but not limited to the acceleration of
Company options, that will not be deductible under Section 280G of the Code or
would subject the Company to an excise tax under Section 280G of the Code,
except for payments which will be cured by stockholder approval and are set
forth in Item 2.8. The Company has no current or deferred federal income Tax
liabilities, other than as disclosed in the Company Financial Statements, and
will not as a result of the Merger become liable for any income Tax not
adequately reserved against on the Company Financial Statements. The Company has
not filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subSection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company. The Company
has
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not executed or requested any waiver of any statute of limitation, or extending
the period for, the collection or assessment of any Tax. If the Company becomes
subject to an audit by the Internal Revenue Service or any state or other
national taxing agency or authority for tax years or periods prior to the
Effective Time (including, but not limited to, any short tax year resulting from
the Merger), the Stockholders will be responsible for such audit(s) and shall
resolve all such audits in a manner consistent with the intentions of the
Company and Parent as expressed in this Agreement, provided Parent shall provide
notice of any such audit and access to all relevant books and records and shall
cooperate fully and in good faith with the Stockholders in connection with such
audits. The terms "Tax" and "Taxes" include all federal, state, local and
foreign income, gains, franchise, excise, property, sales, use, employment,
license, payroll, occupation, recording, value added or transfer taxes,
governmental charges, fees, levies or assessments (whether payable directly or
by withholding), and, with respect to such taxes, any estimated tax, interest
and penalties or additions to tax and interest on such penalties and additions
to tax.
2.9 Title to Properties. Item 2.9 sets forth a true and complete
list and brief description of each item of real and personal property owned or
leased by the Company having a value in excess of $2,500. The Company has good
and marketable title to, or a valid leasehold interest in, as applicable, all of
the assets reflected on the Company Financial Statements, free and clear of all
liens, security interests, mortgages, pledges, claims, charges, interests, or
encumbrances of any kind other than as set forth on Item 2.9 or assets that are
subject to capitalized leases. Except as set forth in Item 2.9, there are no UCC
or other financing statements, mortgages, assignments or other documents or
instruments on record with the State of Nevada or any other Governmental Body or
authority naming the Company or any of its subsidiaries as debtor. Such assets
and those set forth in Item 2.13.6 (A) are in all material respects in good
operating condition and repair, normal wear and tear excepted, and (B)
constitute all material properties, interests, assets and rights held for use or
used in connection with the business of the Company and constitute all those
necessary to continue to operate the business of the Company consistent with
current practice. All leases of real or personal property to which the Company
is a party are in full force and effect and afford the Company or such
subsidiary peaceful and undisturbed possession of the subject matter of the
lease. The Company does not own any real property. The Company is not in
violation of any material zoning, building, safety or environmental ordinance,
regulation or requirement or other law or regulation applicable to the operation
of owned or leased properties, and the Company has not received any notice of
such violation with which it has not complied or had waived.
2.10 Absence of Certain Changes. Since the Balance Sheet Date, the
Company has carried on its business in the ordinary course in accordance with
the procedures and practices in effect on the Balance Sheet Date, and except as
set forth in Item 2.10, since the Balance Sheet Date there has not been with
respect to the Company any:
(a) material adverse change in the financial condition,
properties, assets, liabilities, customer contracts or other customer
arrangements, business, financial performance, results of operations or
prospects;
(b) debt, obligation, liability or indebtedness for borrowed
money (whether absolute, accrued, contingent or otherwise, and whether due or to
become due), including without limitation customer contracts and current
obligations, incurred other than in
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the ordinary course of business that exceeds $50,000 in any one case or $250,000
in the aggregate;
(c) debt, obligation or liability incurred by the Company to any
of its officers, directors, stockholders or affiliates, or any loans or advances
made to any of its officers, directors, stockholders or affiliates, except
normal compensation and expense allowances payable to officers;
(d) payment, discharge or satisfaction of a lien or liability,
which lien or liability was not either (i) shown on the balance sheet as of the
Balance Sheet Date or (ii) incurred in the ordinary course of business after the
Balance Sheet Date;
(e) contingent liability incurred as guarantor or surety with
respect to the debts, liabilities or obligations of others;
(f) mortgage, deed of trust, security interest, pledge, lien,
title retention device, collateral assignment, claim, interest, charge,
restriction or other encumbrance of any kind on any of the assets or properties
of the Company;
(g) issuance or sale of any debt or equity securities of the
Company, or any options, warrants or other rights to acquire from the Company,
directly or indirectly, any debt or equity securities of the Company;
(h) purchase, lease, license, assignment, sale or other
disposition or transfer, or any agreement or other arrangement for the purchase,
lease, license, assignment, sale or other disposition or transfer, of any of its
properties or assets other than in the ordinary course of business ;
(i) damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting its properties, assets or
business;
(j) cancellation of any debts to or claims of the Company, or
any amendment, modification, termination or waiver of any rights of value to the
Company in excess of $50,000 in any one case or $250,000 in the aggregate;
(k) declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock of the
Company, any split, subdivision, stock dividend, combination or recapitalization
of the capital stock of the Company or any direct or indirect redemption,
purchase or other acquisition by the Company of the capital stock of the
Company;
(l) labor dispute or claim of unfair labor practices, any change
in the compensation payable or to become payable to any of the Company's
officers, employees or agents, or any bonus payment or compensation arrangement
made to or with any of such officers, employees or agents (except as previously
disclosed in writing to and approved in writing by Parent) other than normal
bonuses or compensation increases noted on Item 2.10(l);
(m) termination of employment with respect to its management,
supervisory, development or other key personnel (a true and complete list of all
management,
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supervisory, development and other key personnel of the Company as of the
Agreement Date has been provided to Parent);
(n) amendment or change in the Articles of Incorporation or
Bylaws or equivalent charter documents of the Company;
(o) entering into, amendment, modification, waiver,
relinquishment, termination or non-renewal by the Company of any Contract (as
defined in Section 2.11) other than in the ordinary course of its business or
any written or oral indication or assertion by the other party thereto of any
material problems with the Company's services or performance under such Contract
or of such other party's demand to amend, modify, terminate or not renew any
such Contract;
(p) material change in the manner in which the Company extends
discounts, credits or warranties to customers or otherwise deals with its
customers;
(q) entering into by the Company of any Contract (i) that
requires or contemplates a current and/or future financial commitment, expense
or obligation on the part of the Company involving in excess of $100,000, or
(ii) that is not entered into in the ordinary course of the Company's business
and is in an amount involving in excess of $10,000 individually or $100,000 in
the aggregate;
(r) license, transfer or grant of a right with respect to
Company Intellectual Property (as defined in Section 2.13), other than those
licensed, transferred or granted in the ordinary course of the Company's
business consistent with its past practices;
(s) the Company has not (i) received any Acquisition Proposal
(as defined in Section 4.9), or (ii) solicited, initiated, encouraged or
induced, or provided any nonpublic information to or entered into any
discussions with any person or entity for the purpose of soliciting, initiating,
encouraging or inducing, the making or submission of any Acquisition Proposal;
(t) the Company has not formed any subsidiary or acquired any
equity interest or other interest in any other entity;
(u) the Company has not made any capital expenditures outside
the ordinary course of business, except for such capital expenditures as in the
aggregate, measured by invoice amount, do not exceed $100,000 or were consented
to by Parent in writing; or
(v) agreement, whether in writing or otherwise, to take any of
the actions specified in the foregoing items (a) through (u).
2.11 Agreements and Commitments. Except as set forth in Item 2.11,
or otherwise provided to Parent in its due diligence review of the Company, the
Company is not a party or subject to any oral or written agreement, contract,
lease, license, assignment, mortgage, instrument, transaction, quotation,
obligation or commitment ("Contract"), including but not limited to the
following:
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(a) any Contract entered into after January 1, 1997 providing
for payments (whether fixed, contingent or otherwise) by or to the Company in an
aggregate amount of $250,000 or more under which the Company currently has any
executory obligations (other than the Company's standard form indemnity or
warranty obligations);
(b) any material Contract entered into by the Company with
respect to the grant, purchase, sale, license, transfer or encumbrance of
Intellectual Property Rights (as defined in Section 2.13) of any kind, including
but not limited to the Company Intellectual Property, except for "shrink wrap"
licenses (all forms of which have been provided to Parent);
(c) any Contract for the purchase, sale, lease, license or
transfer of real or personal property providing for payments (whether fixed,
contingent or otherwise) in excess of $50,000 per year other than purchase
orders entered into in the ordinary course of business;
(d) any dealer, distributor, sales representative, original
equipment manufacturer (OEM), value added remarketer or other Contract for the
production, distribution or marketing of the Company's products or services;
(e) any franchise agreement, financing statement, mortgage or
security agreement;
(f) any Contract with respect to the redemption or purchase of
the Company's capital stock other than purchase agreements relating to Company
Options or Company Common Stock issued under stock plans;
(g) any joint venture agreement or arrangement or any other
Contract that involves a sharing of profits with, or the payment of royalties
to, any other person or entity in an aggregate amount of $75,000 or more;
(h) any instrument evidencing indebtedness for borrowed money by
way of direct loan, sale of debt securities, purchase money obligation,
conditional sale, guarantee or otherwise, except for trade indebtedness of the
Company incurred or made in the ordinary course of business, and except as
disclosed in the Company Financial Statements;
(i) any Contract containing covenants limiting or purporting to
limit the Company's freedom to compete at any time in any line of business in
any geographic area;
(j) any Contract relating to the employment or compensation of
any director, officer, employee, consultant or other agent of the Company;
(k) any Contract between the Company and any Stockholder or
affiliate; or
(l) any Contract that is otherwise material to the Company, or
entered into other than in the ordinary course of business and involving a
payment of more than $50,000.
The Company has provided Parent with true and complete copies of each
of the Contracts set forth in Item 2.11 (collectively, the "Company
Agreements"), which Item 2.11 is
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true and complete. All Company Agreements are valid, binding and enforceable
against the parties thereto and in full force and effect.
2.12 No Default; No Consent Required; No Restrictions. The Company
is not in any respect in breach of or default under any Company Agreement which
breach or default would have a Material Adverse Effect on the Company. Except as
set forth in Item 2.12, the Company has not received any notice or other
communication regarding any such actual or possible breach of, or default under,
any Company Agreement. The Company does not have any liability for
renegotiations of government Contracts or subcontracts. Except as set forth in
Item 2.12, no consent, waiver, or approval of any third party is required to
ensure that, following the Effective Time, any Company Agreement will continue
to be in full force and effect without any breach, default or violation thereof
caused by virtue of the Merger or by any of the Transactions or Transactional
Agreements. Except as set forth in Item 2.12, the Company is not a party to, and
no asset or property of the Company is bound or affected by, any Order,
Contract, covenant or agreement (noncompete or otherwise) that restricts or
prohibits (or purports to restrict or prohibit) the Company from making material
acquisitions of property or freely engaging at any time in any business now
conducted by any of them or from competing anywhere in the world (including
without limitation any Orders, Contracts, covenants or agreements restricting
the geographic area in which the Company may sell, license, market, distribute
or support any products or technology or provide services, or restricting the
markets, customers or industries that the Company may address in operating their
respective businesses), or includes any grants by the Company of exclusive
licenses.
2.13 Intellectual Property.
2.13.1 The Company owns, or has the valid right or license to
use, possess, sell or license, all Intellectual Property Rights necessary or
required for the conduct of the business of the Company as presently conducted
and as presently proposed to be conducted (such Intellectual Property Rights
being hereinafter collectively referred to as the "Company Intellectual
Property"), and such Intellectual Property Rights to use, possess, sell or
license are sufficient for such conduct of such business as presently conducted.
As used herein, the term "Intellectual Property Rights" means, collectively, all
worldwide industrial and intellectual property rights, including, without
limitation, patents, patent applications, patent rights, trademarks, trademark
registrations and applications therefor, trade dress rights, trade names,
service marks, service ▇▇▇▇ registrations and applications therefor, copyrights,
copyright registrations and applications therefor, mask work rights, mask work
registrations and applications therefor, inventions, trade secrets, know-how,
customer lists, supplier lists, proprietary processes and formulae, software
source and object code, algorithms, architectures, structures, screen displays,
layouts, inventions, development tools, designs, blueprints, specifications,
technical drawings (or similar information in electronic format) and all
documentation and media constituting, describing or relating to the above,
including, without limitation, manuals, programmers' notes, memoranda and
records.
2.13.2 Except for required consents disclosed in Item 2.13.2,
the execution, delivery and performance of this Agreement, the Articles of
Merger and the consummation of the Merger and the other Transactions
contemplated hereby and/or by the Company Ancillary Agreements will not
constitute a material breach of or default under any Contract, license or other
agreement governing any Company Intellectual Property to which the
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Company is a party (collectively, the "Company Intellectual Property
Agreements"), will not cause the forfeiture or termination of, or give rise to a
right of forfeiture or termination of, any Company Intellectual Property or
materially impair the right of the Company, Parent or the Surviving Corporation
to use, possess, sell or license any Company Intellectual Property or portion
thereof. There are no royalties, honoraria, fees or other payments payable by
the Company to any third person by reason of the ownership, use, possession,
license, sale or disposition of any Company Intellectual Property by the Company
and none will become payable as a result of the consummation of the transactions
contemplated by this Agreement.
2.13.3 Neither the manufacture, marketing, license, sale,
furnishing or intended use of any product or service currently licensed,
utilized, sold, provided or furnished by the Company or currently under
development by the Company violates any license or Contract between the Company
and any third party or infringes or misappropriates any Intellectual Property
Right of any other party; and there is no pending or, to the knowledge of the
Company, threatened claim or litigation contesting the validity, ownership or
right of the Company to use, possess, sell, license or dispose of any Company
Intellectual Property nor, to the knowledge of the Company, is there any basis
for any such claim, nor has the Company received any notice asserting that any
Company Intellectual Property or the proposed use, sale, license or disposition
thereof conflicts or will conflict with the rights of any other party, nor, to
the knowledge of the Company, is there any basis for any such assertion. To the
best knowledge of the Company, no third party has infringed or misappropriated
any Company Intellectual Property, except as disclosed to Parent in writing.
2.13.4 To the best knowledge of the Company, no current or
former employee of or consultant to the Company is in violation of any material
provision of any employment contract, patent disclosure agreement,
non-competition agreement, non-solicitation agreement or any other Contract, or
any restrictive covenant relating to the right of any such employee to be
employed by the Company, or to use trade secrets or proprietary information of
others, and the employment of such employees or consultants by the Company does
not subject the Company to any liability.
2.13.5 The Company has taken all reasonable and practicable
steps, consistent with industry standards, to protect, preserve and maintain the
secrecy and confidentiality of the Company Intellectual Property and all the
Company's proprietary rights therein. Except as disclosed in Item 2.13.5, all
current and former officers, employees and consultants of the Company having
access to proprietary information have executed and delivered to the Company an
agreement regarding the protection of such proprietary information and the
assignment of inventions to the Company and to the best knowledge of the
Company, no current or former officer, employee or consultant is in violation of
any provision thereof; and copies of the form of all such agreements have been
delivered to Parent's counsel. The Company has secured valid written assignments
from all consultants, contractors and employees who were involved in, or who
contributed to, the creation or development of any Company Intellectual Property
of the rights to such contributions that the Company does not already own by
operation of law. No current or former employee, officer, director, consultant
or independent contractor of the Company has any right, license, claim or
interest whatsoever in or with respect to any Company Intellectual Property.
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2.13.6 Item 2.13.6 contains a complete list of (i) all
worldwide registrations of any patents, copyrights, mask works, trademarks and
services marks with any Governmental Body; (ii) all applications, registrations,
filings and other formal actions made or taken pursuant to federal, state and
foreign laws by the Company to secure, perfect or protect its interest in the
Company Intellectual Property, including, without limitation, all patent
applications, copyright applications, and applications for registration of
trademarks and service marks; and (iii) all unregistered copyrights, trademarks
and service marks. All patents, and all registered trademarks, service marks and
copyrights held by the Company are valid, enforceable and subsisting. The
Company owns all right, title and interest in and to all such Company
Intellectual Property free and clear of all security interests, liens, pledges,
mortgages, assignments, claims, licenses, restrictions and encumbrances.
2.13.7 Item 2.13.7 contains a complete list of (i) all
licenses, sublicenses and other Contracts as to which the Company is a party and
pursuant to which any person is authorized to use any Company Intellectual
Property, and (ii) all licenses, sublicenses and other Contracts as to which the
Company is a party and pursuant to which the Company is authorized to use any
third party patents, trademarks or copyrights, including but not limited to
software ("Third Party Intellectual Property") which (x) but for such Contracts
would be infringed by, or (y) are incorporated in, or form a part of, any
product or service sold, licensed, distributed, provided or marketed by the
Company.
2.13.8 Neither the Company, nor any other party acting on its
behalf, has disclosed or delivered to any party, or permitted the disclosure or
delivery to any escrow agent or other party of any Company Source Code. No event
has occurred, and no circumstance or condition exists, that (with or without
notice or lapse of time) will, or would reasonably be expected to, result in the
disclosure or delivery to any party of any the Company Source Code. Item 2.13.8
identifies each Contract (whether written or oral) pursuant to which the Company
has deposited, or is or may be required to deposit, with an escrowholder or any
other party, any the Company Source Code and further describes whether the
execution of this Agreement or the consummation of the Merger or any of the
other transactions contemplated hereby, in and of itself, would reasonably be
expected to result in the release from escrow of any the Company Source Code. As
used in this Section 2.13.8, "the Company Source Code" means, collectively, any
source code, or any material portion or aspect of the source code, or any
material proprietary information or algorithm contained in or relating to any
source code, of any Company Intellectual Property or any other product marketed
by the Company.
2.13.9 Except as set forth in Item 2.13.9, to the Company's
knowledge, all software developed by the Company and licensed by the Company to
customers and all other products manufactured, sold, licensed, leased or
delivered by the Company to customers and all services provided by the Company
to customers on or prior to the Closing Date conform in all material respects to
applicable contractual commitments, express and implied warranties, product
specifications and product documentation and to any representations provided to
customers and the Company has no material liability (and, to the best of
Company's knowledge, there is no basis for any present or future action, suit,
Proceeding, charge, complaint, claim or demand against the Company giving rise
to any liability that could have a Material Adverse Effect on the Company) for
replacement or repair thereof or other damages in connection therewith in excess
of any reserves therefor reflected on the Company Financial Statements. During
the six (6) month period ended on March 31, 1999, the Company has not
experienced any product or
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service warranty claims that were materially greater than the amount of the same
type of claims experienced for the six (6) month period ended September 30,
1998. Since January 1, 1996, the Company has not had any of its products
returned by a purchaser thereof except for normal warranty returns consistent
with past history and those returns that would not result in a reversal of any
material amount of revenue recognized by the Company on any of its financial
statements from such purchases. The Company is not under any liability or
obligation, and no such outstanding claim has been made, with respect to the
return of inventory or products in the possession of customers, licensees,
distributors, retailers, or end-users, except such liabilities, obligations and
claims as, in the aggregate, do not exceed $100,000.
2.13.10 No government funding or university or college
facilities were used in the development of the computer software programs or
applications owned by the Company.
2.13.11 All versions of the software products currently being
developed, licensed, marketed or distributed by the Company are (and, to the
Company's knowledge, any third party software included in any such products is)
Year 2000 Ready. To the extent that older versions of the Company's products are
not Year 2000 Ready: the Company has no contractual obligations to make such
older versions Year 2000 Ready; customers using any of such older versions have
been informed of upgrade paths to products that are Year 2000 Ready, and such
upgrades are available; and the failure of such customers to upgrade to Year
2000 Ready versions of such software products will not directly or indirectly
have a Material Adverse Effect on the Company. "Year 2000 Ready" means, as
applied to a software product, that: (i) such software product has been tested
by the Company and found to be Y-2000 Compliant (as defined in Section 2.28) or,
only as to software products which Company only markets or distributes, has been
represented and warranted to the Company, in writing, by the developer or owner
thereof as being Y-2000 Compliant, which written representations and warranties
have been provided to Parent; and (ii) accurately processes date and/or
time-dependent data (including, but not limited to, calculating, comparing and
sequencing) from, into, throughout and between the 20th and 21st centuries
(through 2035), the years 1999 and 2000, and leap year calculations (year 2000
is a leap year); and (iii) when used in combination with other information
technology, such software product will accurately process date and/or
time-dependent data if the other information technology generates accurate date
and/or time output.
2.14 Compliance with Laws. The Company has complied and is in
compliance with all applicable laws, statutes, ordinances, regulations and
rules, and all Orders applicable to the Company or to its assets, properties and
business, including, without limitation: (a) all applicable federal and state
securities laws and regulations; (b) all applicable federal, state and local
laws, statutes, ordinances, rules and regulations, and all Orders pertaining to
(i) the sale, licensing, leasing, ownership or management of the Company's
owned, leased or licensed real or personal property, Company Intellectual
Property, products or technical data, (ii) employment or employment practices,
terms and conditions of employment, or wages and hours or (iii) safety, health,
fire prevention, environmental protection (including toxic waste disposal and
related matters described in Section 2.21), building standards, zoning or other
similar matters; (c) the Export Administration Act and regulations promulgated
thereunder or other laws, regulations, rules or Orders applicable to the export
or re-export of controlled commodities or technical data; or (d) the Immigration
Reform and Control Act, except in each case where the failure to so comply would
not have a Material Adverse Effect on the Company. The Company has received
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all licenses, permits and approvals from, and has made all filings with, third
parties, including Governmental Bodies and authorities, necessary to conduct its
business as presently conducted, all of which licenses, permits and approvals
are set forth in Item 2.14, except licenses, permits, approvals and filings, the
absence of which, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
2.15 Certain Transactions and Agreements. Except as set forth in
Item 2.15, no person who is an officer, director, employee or stockholder of the
Company, or a member of any such person's immediate family, has any direct or
indirect ownership interest in, or any employment or consulting agreement with,
any entity that competes with the Company or Parent (except with respect to any
interest in less than 1% of the outstanding voting shares of any corporation
whose stock is publicly traded). Except as set forth in Item 2.15, no person who
is an officer, director, employee or stockholder of the Company, or any member
of any such person's immediate family, is directly or indirectly interested in
any Contract or informal arrangement with the Company, including, without
limitation, any loan arrangements, except for compensation for services as an
officer, director or employee of the Company and except for the normal rights of
a stockholder or optionholder. Except as set forth in Item 2.15, none of such
officers, directors, employees or stockholders or family members has any
interest in any property, real or personal, tangible or intangible, including,
without limitation, inventions, patents, copyrights, trademarks, trade names or
trade secrets, used in the business of the Company. With regard to stockholders
of the Company that are not Significant Stockholders, the Company makes the
representations and warranties set forth in this Section 2.15 to the best of its
knowledge.
2.16 Employees.
2.16.1 To the best knowledge of the Company, the Company is in
compliance in all material respects with all applicable laws, agreements and
Contracts relating to employment, employment practices, wages, hours, and terms
and conditions of employment, including, but not limited to, employee
compensation matters. Except as set forth in Items 2.16.1 and 2.16.4 or as
previously provided to Parent, the Company does not have any employment
contracts or consulting agreements currently in effect that are not terminable
at will (other than agreements with the sole purpose of providing for the
confidentiality of proprietary information or assignment of inventions). All
independent contractors have been properly classified as independent contractors
for the purposes of federal and applicable state tax laws, laws applicable to
employee benefits and other applicable law, except where the failure to be so
classified, in the aggregate, results in actual or potential liability to the
Company of no more than $100,000.
2.16.2 The Company is not: (i) nor has ever been, subject to a
union organizing effort; (ii) subject to any collective bargaining agreement
with respect to any of its employees; (iii) subject to any other Contract,
written or oral, with any trade or labor union, employees' association or
similar organization; or (iv) the subject of any current labor disputes that
would materially impair the operations of the Company's business. The Company
has good labor relations, and the Company has no knowledge of any facts
indicating that the consummation of the Merger or any of the other transactions
contemplated hereby will adversely impact such labor relations in a material
manner. As of the Agreement Date, the Company has no knowledge that any of its
employees having an annual salary in excess of $50,000 intends to leave his or
her employ. There are no controversies pending or, to the best knowledge of the
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Company, threatened, between the Company (on the one hand) and any of its
employees (on the other hand) that would be reasonably likely to result in the
Company incurring any material liability. All of the employees of the Company
employed in the United States of America are legally permitted to be employed by
the Company in the United States of America.
2.16.3 The Company has no pension plan which constitutes, or
has since the enactment of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), constituted, a "multiemployer plan" as defined in Section
3(37) of ERISA. No pension plan of the Company is subject to Title IV of ERISA.
2.16.4 Except as set forth in Item 2.16.4, the Company has
previously delivered to Parent each employment, severance or other similar
Contract, arrangement or policy, each "employee benefit plan" as defined in
Section 3(3) of ERISA and each plan or arrangement (written or oral) providing
for insurance coverage (including any self-insured arrangements), workers'
benefits, vacation benefits, severance benefits, disability benefits, death
benefits, hospitalization benefits, retirement benefits, deferred compensation,
profit-sharing, bonuses, stock options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits for employees, consultants or directors
which has been entered into, maintained or contributed to by the Company since
January 1, 1994. Such Contracts, plans and arrangements as are described in Item
2.16.4 are hereinafter collectively referred to as "Company Benefit
Arrangements." To the best knowledge of the Company, except as otherwise
described in Item 2.16.4, each Company Benefit Arrangement has been maintained
in compliance in all material respects with its terms and with the requirements
prescribed by any and all laws, statutes, Orders, rules and regulations that are
applicable to such Company Benefit Arrangement, and each such Company Benefit
Arrangement that is an "employee pension benefit plan" as defined in Section
3(2) of ERISA that is intended to qualify under Section 401(a) of the Code has
received a favorable determination letter that such plan satisfied the
requirements of the Tax Reform Act of 1986 (a copy of which letter(s), if any,
have been delivered to Parent and its counsel) or has been applied for and is
currently pending a favorable determination letter that such plan satisfies the
Tax Reform Act of 1986. The Company has delivered to Parent and its counsel a
true and complete copy and description of each Company Benefit Arrangement. The
Company has timely filed and delivered to Parent and its counsel the most recent
annual report (Form 5500) for each Company Benefit Arrangement that is an
"employee benefit plan" as defined under ERISA that is subject to such
requirements. To the best knowledge of the Company, the Company has never been a
participant in any "prohibited transaction," within the meaning of Section 406
of ERISA with respect to any employee pension benefit plan (as defined in
Section 3(2) of ERISA) which the Company sponsors as employer or in which
Company participates as an employer, which was not otherwise exempt pursuant to
Section 408 of ERISA (including any individual exemption granted under Section
408(a) of ERISA), or which could result in an excise tax under the Code. All
contributions due from the Company as of the date of the most recent balance
sheet provided by the Company to Parent with respect to any of the Company
Benefit Arrangements have been made or have been accrued on such balance sheet
and no further contributions will be due or will have accrued thereunder as of
the Closing Date other than amounts consistent with the amounts paid or accrued
in the periods reflected on such balance sheet. All individuals who, pursuant to
the terms of any Company Benefit Arrangement, are entitled to participate in any
such Company
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Benefit Arrangement, are currently participating in such Company Benefit
Arrangement or have been offered an opportunity to do so and have declined.
2.16.5 There has been no amendment to, written interpretation
or announcement (whether or not written) by the Company relating to, or change
in employee participation or coverage under, any Company Benefit Arrangement
that would increase materially the expense of maintaining such Company Benefit
Arrangement above the level of the expense incurred in respect thereof for the
Company's fiscal year ended December 31, 1998.
2.16.6 To the best knowledge of the Company, the group health
plans (as defined in Section 4980B(g) of the Code) that benefit employees of the
Company are in compliance, in all material respects, with the continuation
coverage requirements of Section 4980B of the Code as such requirements affect
the Company and its employees. As of the Closing Date, there will be no material
outstanding, uncorrected violations under the Consolidation Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), with respect to any of the
Company Benefit Arrangements, covered employees, or qualified beneficiaries.
2.16.7 Except as otherwise described in Item 2.16.7 or as set
forth in Item 2.8, no benefit payable or which may become payable by the Company
pursuant to any Company Benefit Arrangement or as a result of or arising under
this Agreement or the other Transactional Agreements will constitute an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code) which is
subject to the imposition of an excise tax under Section 4999 of the Code or
which would not be deductible by reason of Section 280G of the Code. Except as
set forth on Item 2.16.7, the Company is not a party to any: (i) Contract with
any executive officer or other key employee thereof (A) the benefits of which
are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company in the nature of the Merger or
any of the other Transactions or any Transactional Agreements, (B) providing any
term of employment or compensation guarantee, or (C) providing severance
benefits or other benefits after the termination of employment of such employee
regardless of the reason for such termination of employment; or (ii) Contract or
plan, including, without limitation, any stock option plan, stock appreciation
rights plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of benefits of which will be accelerated, by the
occurrence of the Merger or any of the other Transactions or any Transactional
Agreements, or the value of any of the benefits of which will be calculated on
the basis of any of the Transactions or any Transactional Agreements.
2.16.8 To the Company's knowledge, no current or former
employee, consultant or independent contractor of the Company: (i) is in
violation of any term or covenant of any employment contract, patent disclosure
agreement, noncompetition or nondisclosure agreement or any other Contract or
agreement with, or obligation to, any other party by virtue of such employee's,
consultant's, or independent contractor's being employed by, or performing
services for, the Company or using trade secrets or proprietary information of
others; or (ii) has developed any technology, software or other copyrightable,
patentable, or otherwise proprietary work for the Company that is subject to any
Contract under which such employee, consultant or independent contractor has
assigned or otherwise granted to any third party any rights or interest
(including without limitation Company Intellectual Property) in such technology,
software or other copyrightable, patentable or otherwise proprietary work,
except for technology developed
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by the Company specifically for its customers pursuant to development contracts
entered into by the Company in the ordinary course of its business, which
provide for retention of such technology and the related intellectual property
rights by such customers. To the Company's knowledge, the employment of any
employee of the Company does not subject the Company or to any liability to any
third party.
2.16.9 There are no material pending claims against the Company
under any workers' compensation plan or policy or for long-term disability
benefits.
2.17 Corporate Documents. The books of account, stock records,
minute books and other records of the Company are accurate, up to date and
complete in all material respects, have been maintained in accordance with sound
and prudent business practices and accurately and fairly reflect in all material
respects the basis for the Company Financial Statements. All of the records of
the Company are in the actual possession and direct control of the Company. The
Company has made available to Parent for examination all documents and
information listed in Items 2.1 through 2.23 and 2.30 or other exhibits called
for by this Agreement that have been requested by Parent or its legal counsel,
including, without limitation, the following: (a) copies of the Company's
Articles of Incorporation or Bylaws as currently in effect; (b) the Company's
minute book containing all records of all proceedings, consents, actions and
meetings of its directors and stockholders; (c) the Company's stock ledger,
journal and other records reflecting all stock issuances and transfers; and (d)
all permits, Orders and consents issued by any regulatory agency or other
Governmental Body with respect to the Company, or any securities of the Company,
and all applications for such permits, Orders and consents.
2.18 No Brokers. Neither the Company nor any affiliate of the
Company is obligated for the payment of any fees or expenses of any investment
banker, broker, finder or similar party in connection with the origin,
negotiation or execution of this Agreement or the Articles of Merger or in
connection with the Merger or any other transaction contemplated by this
Agreement, and Parent will not incur any liability to any such investment
banker, broker, finder or similar party as a result of, this Agreement, the
Merger or any act or omission of the Company or any of its employees, officers,
directors, stockholders, agents or affiliates.
2.19 Bank Accounts. Item 2.19 sets forth a true and complete list of
(i) all bank accounts and safe deposit boxes of the Company and all persons who
are signatories thereunder or who have access thereto and (ii) the names of all
persons holding general or special powers-of-attorney from the Company and a
summary of the terms thereof.
2.20 Insurance. During the prior two years, the Company has
maintained, and now maintains, policies of insurance and bonds of the type and
in amounts customarily carried by persons or entities conducting businesses or
owning assets similar in type and size to those of the Company. There is no
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 timely
paid and the Company is otherwise in compliance with the terms of such policies
and bonds. The Company has no knowledge of any threatened termination of any of
such policies or bonds. All policies of insurance and bonds now held by the
Company are set forth in Item 2.20 or have been delivered to Parent together
with the name of the insurer under each policy, the policy coverage amount and
any pending claims under the policy.
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2.21 Environmental Matters.
2.21.1 To the best knowledge of the Company, during the period
that the Company has owned or leased the premises occupied by it since the date
of its organization, including the premises currently occupied by it, there have
been no disposals, releases or threatened releases of Hazardous Materials on any
such premises that might have a Material Adverse Effect on the Company. Neither
the Company nor any Stockholder has any knowledge of any presence, disposals,
releases or threatened releases of Hazardous Materials on or from any of such
premises, which may have occurred prior to the Company having taken possession
of any of such premises that would have a Material Adverse Effect on the
Company. For purposes of this Agreement, the terms "disposal," "release," and
"threatened release" have the definitions assigned thereto by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
Section 9601 et seq., as amended ("CERCLA"). For the purposes of this Section
2.21, "Hazardous Materials" mean any hazardous or toxic substance, material or
waste that is or becomes prior to the Closing Date regulated under, or defined
as a "hazardous substance," "pollutant," "contaminant," "toxic chemical,"
"hazardous material," "toxic substance" or "hazardous chemical" under (i)
CERCLA; (ii) the Emergency Planning and Community Right-to-Know Act, 42 U.S.C.
Section 11001 et seq.; (iii) the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; (iv) the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq.; (v) the Occupational Safety and Health Act of 1970, 29
U.S.C. Section 651 et seq.; (vi) regulations promulgated under any of the above
statutes; or (vii) any applicable state or local law, statute, ordinance, rule
or regulation that has a scope or purpose similar to those identified above.
2.21.2 To the best knowledge of the Company, during the time
that the Company has owned or leased such premises, none of the premises
currently owned or leased by the Company or any premises previously occupied by
the Company has been or is in material violation of any federal, state or local
law, statute, ordinance, rule, regulation or Order relating to industrial
hygiene or to the environmental conditions in such premises.
2.21.3 To the best knowledge of the Company, during the time
that the Company has owned or leased the premises currently occupied by it or
any premises previously occupied by the Company, neither the Company, nor, to
the Company's knowledge, any third party, has used, generated, manufactured or
stored in such premises or transported to or from such premises any Hazardous
Materials that would have a Material Adverse Effect on the Company.
2.21.4 To the best knowledge of the Company, during the time
that the Company has owned or leased the premises currently occupied by it or
any premises previously occupied by the Company, there has been no Proceeding
brought or threatened in writing against the Company, or any settlement reached
by the Company with any party or parties alleging the presence, disposal,
release or threatened release of any Hazardous Materials on, from or under any
of such premises.
2.21.5 To the best knowledge of the Company, during the time
that the Company has owned or leased the premises currently occupied by it or
any premises previously occupied by the Company, no Hazardous Materials have
been transported from such premises to
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any site or facility now listed or proposed for listing on the National
Priorities List, at 40 C.F.R. Part 300, or any list with a similar scope or
purpose published by any state authority.
2.22 Customers. The Company has made available to Parent a true and
complete list of the names with the dollar value of sales to each of the
customers of the Company having aggregate annual sales of $50,000 or more in any
calendar year since January 1, 1996. Except as set forth in Item 2.22, the
Company has no outstanding disputes with any such customer, except where the
failure to resolve such dispute would not have a Material Adverse Effect on the
Company.
2.23 Accounts Receivable; Accounts Payable.
2.23.1 Item 2.23.1 sets forth a true and complete aged list of
unpaid accounts and notes receivable owing to the Company, all of which are, and
all receivables generated from the Agreement Date through the Closing Date will
be, collectible in full in the ordinary course of business except to the extent
that reserves have been established in the Company Financial Statements or are
set forth in Item 2.23.1, which reserves, to the best knowledge of the Company,
are sufficient. No such account has been assigned or pledged to any other person
or entity and no defense or setoff to any such account has been asserted by the
account obligor.
2.23.2 Item 2.23.2 sets forth a true and complete list of all
accounts payable of the Company in an amount in excess of $10,000 as of March
31, 1999.
2.24 Voting Agreement; Proxies. The Significant Stockholders (other
than Teknekron Corporation) have executed Voting Agreements, and the Irrevocable
Proxies attached thereto as Exhibit A ("Proxies"). If Teknekron Corporation
exercises the Teknekron Option in whole or in part, then upon the request of
Parent, Teknekron Corporation will execute and deliver to Parent a Voting
Agreement and Irrevocable Proxy within three (3) days of such request.
2.25 Vote Required. The affirmative vote of the holders of a
majority of the shares of Company Common Stock that are issued and outstanding
on the Record Date voting together as a single class is the only vote of the
holders of any of the shares of the Company's capital stock necessary to approve
this Agreement, the Merger, the Articles of Merger and the other Transactions.
As used in this Section 2.25, the term "Record Date" means the record date for
determining those stockholders of the Company who are entitled to vote at the
Company Stockholders' Meeting (as defined in Section 4.4) or at any action taken
by written consent of the Company's stockholders without a meeting under
applicable law.
2.26 Board Approval. The Board of Directors of the Company has
unanimously (i) duly approved this Agreement, the Articles of Merger and the
Merger, and (ii) determined that the Merger is in the best interests of the
stockholders of the Company and is on terms that are fair to such stockholders.
2.27 No Existing Discussions. Neither the Company nor any director,
officer, stockholder, employee or agent of the Company is engaged in any way,
directly or indirectly, in
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any discussions, communications or negotiations with any third party relating to
any Acquisition Proposal (as defined in Section 4.10).
2.28 Year 2000 Compliance. The Company is conducting a comprehensive
review of all operating codes, programs, utilities and other software, as well
as all hardware and systems, utilized by the Company (collectively, "Systems")
to determine whether such Systems are designed or have been remediated to
record, store, process and present dates on or after January 1, 2000
("Millennial Dates") in the same manner, and with the same functionality, as
provided on or before December 31, 1999, and are designed to not lose
functionality or degrade in performance as a consequence of such software
operating at a Millennial Date (such design and performance being referred to as
"Y-2000 Compliant"). The Systems that have been tested by the Company as of the
Agreement Date are identified in Item 2.28 and were either Y-2000 Compliant, or
made to be Y-2000 Compliant, and the Company warrants the Y-2000 Compliant
status thereof. If any Systems tested to date are or were not fully Y-2000
Compliant, such non-compliant Systems, or subparts thereof, are: (a) currently
being modified, remediated, repaired, replaced, or otherwise made fully Y-2000
Compliant by the Company, and the scope and projected expense of said
remediation is set forth in Item 2.28; or (b) such non-compliant Systems, or
subparts thereof, are being superseded or phased out according to a written plan
and schedule for system reorganization that is set forth in Item 2.28. To the
best knowledge of the Company, all material vendors and suppliers to the Company
are Y-2000 Compliant.
2.29 Disclosure.
2.29.1 No statement made by the Company or the Stockholders in
either this Agreement, its exhibits and the Company Disclosure Letter, nor any
of the certificates to be delivered by the Company or the Stockholders to Parent
under this Agreement, taken together, contains any untrue statement of a
material fact or omits to state any material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances under
which such statements were made, not misleading.
2.29.2 None of the information supplied or to be supplied by or
on behalf of the Company or the Stockholders for inclusion or incorporation by
reference in any statement, recommendation, proposal or document provided to the
stockholders of the Company, at the time of the Company Stockholders' Meeting
(as defined in Section 4.4) or as of 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 the
light of the circumstances under which they are made, not misleading.
2.30 Knowledge. As used in this Agreement, the term "knowledge" or
"best knowledge" of the Company and/or the Stockholders shall mean the actual
knowledge, after reasonable investigation, of any of the persons listed in
Schedule 2.30.
2.31 Material Adverse Effect. As used with respect to the Company,
Material Adverse Effect shall mean any event, change or effect that is (or will
with the passage of time be) materially adverse to the financial condition,
properties, assets, liabilities, employee base, business, prospects, operations
or results of operations of the Company.
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3. REPRESENTATIONS AND WARRANTIES OF PARENT AND NEWCO.
Parent and Newco hereby represent and warrant to the Company that
except as may be set forth in a Parent disclosure letter delivered by Parent to
the Company prior to the execution of this Agreement (the "Parent Disclosure
Letter"; for all purposes of this Agreement, the statements contained in the
Parent Disclosure Letter shall also be deemed to be representations and
warranties made and given by the Parent under Article 3 of this Agreement),
including items in the Parent Disclosure Letter referred to as "Items" below,
each of the following representations, warranties and statements in this Article
3 are true and accurate as of the Agreement Date and will be true and accurate
as of the Closing Date:
3.1 Organization and Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under California Law and has
the corporate power and authority to own, operate and lease its properties and
to carry on its business as now conducted and as proposed to be conducted. Newco
is a corporation duly organized, validly existing and in good standing under
Delaware Law and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as proposed to be conducted. Newco
has not engaged in any business activity except for matters relating to its
organization and the approval of this Agreement and the transactions
contemplated herein. Parent has delivered to the Company true and complete
copies of the currently effective Articles of Incorporation and Bylaws of Parent
and Newco. Neither Parent nor Newco is in violation of its Articles of
Incorporation or Bylaws.
3.2 Power, Authorization and Validity.
3.2.1 Power and Authority. Parent has the corporate right,
power, legal capacity and authority to enter into and perform its obligations
under this Agreement and the Parent Ancillary Agreements and the transactions
contemplated hereby and thereby. The execution, delivery and performance of this
Agreement and the Parent Ancillary Agreements have been duly and validly
approved and authorized by all necessary corporate action on the part of Parent.
Newco has the corporate right, power, legal capacity and authority to enter into
and perform its obligations under this Agreement and all agreements to which
Newco is or will be a party that are required to be executed pursuant to this
Agreement (the "Newco Ancillary Agreements") and the transactions contemplated
hereby and thereby. The execution, delivery and performance of this Agreement
and the Newco Ancillary Agreements have been duly and validly approved and
authorized by all necessary corporate action on the part of Newco.
3.2.2 No Consents. No filing, authorization, approval or
consent, governmental or otherwise, is necessary to enable Parent or Newco to
enter into, and to perform their respective obligations under, this Agreement,
the Parent Ancillary Agreements or the Newco Ancillary Agreements, except for
(a) the filing by Parent of such reports and information with the SEC under the
1934 Act and the rules and regulations promulgated by the SEC thereunder, as may
be required in connection with this Agreement, the Merger and other transactions
contemplated by this Agreement, (b) the filing of the Articles of Merger with
the Secretaries of State of the States of Nevada and Delaware, (c) such filings
as may be required to comply with federal and state securities laws, and (d)
filings required under the HSR Act and the expiration of applicable waiting
periods under the HSR Act.
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3.2.3 Enforceability. This Agreement and the Parent Ancillary
Agreements are, or when executed by Parent will be, valid and binding
obligations of Parent, enforceable against Parent in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, and (b)
rules of law governing specific performance, injunctive relief and other
equitable remedies; provided, however, that the Articles of Merger and the
Parent Ancillary Agreements will not be effective until the earlier of the
Effective Time or the date provided for therein. This Agreement and the Newco
Ancillary Agreements are, or when executed by Newco will be, valid and binding
obligations of Newco, enforceable against Newco in accordance with their
respective terms, except as to the effect, if any, of (a) applicable bankruptcy
and other similar laws affecting the rights of creditors generally, and (b)
rules of law governing specific performance, injunctive relief and other
equitable remedies; provided, however, that the Articles of Merger and the Newco
Ancillary Agreements will not be effective until the earlier of the Effective
Time or the date provided for therein.
3.3 No Conflict. Neither the execution and delivery of this
Agreement nor any of the Parent Ancillary Agreements or Newco Ancillary
Agreements by Parent or Newco, nor the consummation of the transactions
contemplated hereby or thereby, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, breach, impairment or
violation of: (i) any provision of the Articles of Incorporation or Bylaws of
Parent or Newco as currently in effect; (ii) any federal, state, local or
foreign Order, statute, rule or regulation applicable to Parent or Newco or any
of their respective assets or properties; or (iii) any material Contract to
which Parent or any of its subsidiaries (if any) is a party or by which Parent
or any of its subsidiaries (if any) or any of their respective assets or
properties are bound where termination, breach, impairment or violation would
have a Material Adverse Effect on Parent or any of its subsidiaries, taken as a
whole.
3.4 SEC Filings.
3.4.1 Parent has made available to the Company true and
complete copies of each report, registration statement (on a form other than
Form S-8) and definitive proxy statement (in each case excluding copies of
exhibits) filed by Parent with the SEC between December 31, 1998 and the
Agreement Date pursuant to the 1933 Act or the 1934 Act, including without
limitation the Parent 1998 10-K (collectively, the "Parent SEC Documents"). As
of the time it was filed with the Securities and Exchange Commission (the "SEC")
(or, if amended or superseded by a subsequent filing prior to the Agreement
Date, then on the date of such subsequent filing): (i) each of the Parent SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act of 1933, as amended (the "1933 Act") or the Securities
Exchange Act of 1934, as amended (the "1934 Act") (as the case may be); and (ii)
none of the Parent SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
3.4.2 The consolidated financial statements (including any
related notes) contained in the Parent SEC Documents: (i) complied as to form in
all material respects with the published rules and regulations of the SEC
applicable thereto; (ii) were prepared in conformity with GAAP applied on a
consistent basis throughout the periods covered (except as may be indicated in
the notes to such financial statements and, in the case of unaudited statements,
as
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permitted by Form 10-Q of the SEC, and except that unaudited financial
statements may not contain footnotes and are subject to normal and recurring
year-end audit adjustments); and (iii) fairly present the consolidated financial
position of Parent and its subsidiaries as of the respective dates thereof and
the consolidated results of operations and cash flows of Parent and its
subsidiaries for the periods covered thereby.
3.5 Proceedings; Orders. There is no pending Proceeding against
Parent or any of its subsidiaries before any Governmental Body that, if
determined adversely to Parent or such subsidiary, would have a Material Adverse
Effect on Parent, or that could prevent, enjoin or materially alter or delay the
consummation of the Merger or any other material transaction contemplated by
this Agreement, nor, to Parent's knowledge, has any such Proceeding been
threatened. There is no Order outstanding against Parent or any of its
subsidiaries that would have a Material Adverse Effect on Parent, or that would
prevent or enjoin Parent from consummating the Merger.
3.6 No Material Adverse Change. Except as set forth in Parent SEC
Documents or Parent press releases filed or issued prior to the date of this
Agreement, since December 31, 1998 there has not been any material adverse
change in the financial condition, properties, assets, liabilities, business,
prospects, results of operations or operations of Parent and its subsidiaries,
taken as a whole. (For purposes of this Section 3.6, the parties agree that a
change in the market price of Parent's common stock shall not, of itself,
constitute a material adverse change of the type described in this Section 3.6).
3.7 No Brokers. Other than Warburg Dillon Read LLC, whose fees and
expenses will be paid by Parent, Parent is not obligated for the payment of fees
or expenses of any investment banker, broker or finder in connection with the
origin, negotiation or execution of this Agreement or the Articles of Merger or
in connection with any transaction provided for herein or therein.
3.8 Disclosure. No statement made by Parent in either this
Agreement, its exhibits and the Parent Disclosure Letter, nor any of the
certificates to be delivered by the Parent to Company under this Agreement,
taken together, contains any untrue statement of a material fact or omits to
state any material fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under which such statements
were made, not misleading.
3.9 Material Adverse Effect. As used with respect to Parent,
Material Adverse Effect shall mean any event, change or effect that is (or will
with the passage of time be) materially adverse to the financial condition,
properties, assets, liabilities, employee base, business, prospects, operations
or results of operations of the Parent and its subsidiaries, taken as a whole,
provided, however, that any change in the market price of Parent's common stock
shall not, of itself, constitute or be considered to cause a Material Adverse
Effect.
3.10 Knowledge of Parent. As used in this Agreement, the term
"knowledge" of Parent shall mean the actual knowledge, without independent
investigation, of any or all of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇
prior to the Agreement Date.
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4. PRE-CLOSING COVENANTS OF THE COMPANY.
During the period from the Agreement Date until the earlier to occur
of the (i) Effective Time or (ii) the termination of this Agreement in
accordance with Article 9, the Company and Stockholders covenant to and agree
with Parent as follows:
4.1 Advice of Changes. The Company and each Stockholder will
promptly advise Parent in writing, to the full extent of such person's
knowledge, (a) of any event occurring subsequent to the Agreement Date that
would render any representation or warranty of the Company or the Stockholders
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect and (b) of any
material adverse change in the Company's financial condition, properties,
assets, liabilities, business, financial performance, results of operations or
prospects. The Company will deliver to Parent within fifteen (15) days after the
end of each fiscal quarter and each monthly accounting period ending after the
Agreement Date and before the Closing Date, an unaudited balance sheet and
statement of operations for such period, which financial statements will be
prepared in the ordinary course of the Company's business, consistent with its
past practices in conformity with the Company's books and records and GAAP, and
will present fairly and accurately in all respects the financial position of the
Company at such dates and for such periods.
4.2 Maintenance of Business. The Company will carry on and preserve
its business and its relationships with creditors, customers, suppliers,
employees and others in substantially the same manner as it has prior to the
Agreement Date. The parties hereto understand and acknowledge that it is their
intent to work closely together during the period from the Agreement Date until
the Closing Date. If the Company or any Stockholder becomes aware of a material
deterioration in the Company's relationship with any creditor, customer,
supplier or key employee, it will promptly bring such information to the
attention of Parent in writing and, if requested by Parent, will exert its
reasonable best efforts to restore such relationship.
4.3 Conduct of Business. Except as otherwise expressly provided in
this Agreement, as listed in Item 4.3, or as approved or recommended by Parent
in writing, the Company will not without the prior written consent of Parent:
(a) borrow any money, or incur any liability or indebtedness
other than in the ordinary course of business;
(b) enter into any Contract or transaction not in the ordinary
course of business or involving current or future payments by the Company
(whether fixed, contingent or otherwise), expenses or capital expenditures in
excess of $100,000;
(c) grant any lien, security interest, mortgage or other
encumbrance on or interest in any of its assets or properties;
(d) except for the Merger, merge, consolidate or reorganize
with, or acquire, or enter into any other business combination with, any
corporation, partnership, limited liability company or any other entity or enter
into any negotiations, discussions or Contract for such purpose;
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(e) sell, transfer or dispose of any of its material assets
except in the ordinary course of business consistent with past practice;
(f) enter into any material Contract for the purchase, sale,
lease or license of any property, real or personal, tangible or intangible,
except in the ordinary course of business consistent with past practice, or
enter into any Contract of the types and applicable dollar thresholds described
in Section 2.11;
(g) fail to maintain its equipment and other assets in good
working condition and repair according to the standards it has maintained to the
Agreement Date, subject only to ordinary wear and tear;
(h) pay any bonus, royalty, increased salary or special
remuneration to any director, officer, employee or consultant (except pursuant
to existing arrangements heretofore disclosed in writing to Parent) or enter
into any new employment or consulting agreement with any officer or key
employee, or enter into any new agreement or plan of the type described in
Section 2.16.4;
(i) change any of its accounting methods, except as required by
GAAP;
(j) declare, set aside or pay any cash or stock dividend or
other distribution in respect of capital stock, or redeem or otherwise acquire
any of its capital stock or securities convertible or exchangeable for its
capital stock;
(k) amend, modify or terminate any Contract to which it is a
party except those amended, modified or terminated in the ordinary course of
business, consistent with past practice, and which are not material in amount or
effect;
(l) lend any amount to any person or entity, other than
advances for travel and expenses that are incurred in the ordinary course of
business consistent with past practice, not material in amount, which travel and
expenses shall be documented by receipts for the claimed amounts;
(m) guarantee or act as a surety for any debt or obligation
except for the endorsement of checks and other negotiable instruments in the
ordinary course of business, consistent with past practice;
(n) waive or release any material right or claim except in the
ordinary course of business, consistent with past practice;
(o) issue or sell any shares of its capital stock of any class
or any other of its securities, or issue or create any warrants, obligations,
subscriptions, options, convertible securities, stock appreciation rights or
other commitments to issue shares of capital stock, or accelerate the vesting of
any outstanding option or other security;
(p) subdivide or split or combine or reverse split the
outstanding shares of its capital stock of any class or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or affecting any other of its securities;
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(q) amend its Articles of Incorporation or Bylaws or other
charter documents;
(r) agree to any audit assessment by any tax authority or
Governmental Body or file any federal or state income or franchise tax return
unless copies of such returns have been delivered to Parent for its review prior
to filing;
(s) grant, sell, license or transfer any of the Company's
technology or any of the Company Intellectual Property, except in the ordinary
course of business consistent with past practice, or take any action which could
have the effect of placing any of the Company Intellectual Property in the
public domain;
(t) change any insurance coverage or issue any certificates of
insurance;
(u) terminate the employment of any key employee listed in Item
2.10(m);
(v) modify or change the exercise or conversion rights or
exercise or purchase prices of any capital stock of the Company, any Company
stock options, warrants or other Company securities, or accelerate or otherwise
modify (i) the right to exercise any option, warrant or other right to purchase
any capital stock or other securities of the Company or (ii) the vesting or
release of any shares of capital stock or other securities of the Company from
any repurchase options or rights of refusal held by the Company or any other
party or any other restrictions unless such accelerations/modifications are
expressly contemplated by this Agreement;
(w) agree, whether orally or in writing, to do any of the
things described in the preceding clauses 4.3(a) through 4.3(v).
4.4 Approval of the Company's Stockholders. The Company shall hold a
stockholders' meeting (the "Company Stockholders' Meeting") as promptly as
reasonable after the date of this Agreement, to submit this Agreement, the
Merger and approval of any related agreements or transactions for the
consideration and approval of the stockholders of the Company, or shall solicit
the written consent of its stockholders at the earliest practicable date, which
approval shall be recommended by the Company's Board of Directors and the
Company shall use its best efforts to obtain such stockholders' approval (the
vote taken at such Company Stockholders' Meeting or by the solicitation of such
written consent of the stockholders of the Company is hereinafter referred to as
the "Company Stockholder Vote"). Such Company Stockholders' Meeting or action by
written consent shall be called, held and conducted, and any proxies or written
consents shall be solicited, in compliance with the Company's Articles of
Incorporation and Bylaws, both as amended, and in compliance with applicable
law. The Company will cause a proxy statement (the "Proxy Statement") to be
delivered to each stockholder of the Company at least ten (10) business days
prior to the taking of the Company Stockholder Vote. The Company will not put
any proposal up for the vote of its stockholders (as part of the Company
Stockholder Vote or otherwise) other than the proposal to approve this Agreement
and the Merger, without obtaining Parent's prior written consent to do so, which
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consent will not be unreasonably withheld, consistent with the provisions,
purposes and intent of this Agreement.
4.5 Proxy Statement. The Company will be solely responsible for any
statement, information or omission in the Proxy Statement relating to the
Company or its affiliates.
4.6 Regulatory Approvals. The Company will promptly execute and
file, or join in the execution and filing, of any application, notification
(including without limitation any notification or provision of information, if
any, that may be required under the HSR Act) or any other document that may be
necessary in order to obtain the authorization, approval or consent of any
Governmental Body, whether federal, state, local or foreign, which may be
required, or which Parent may reasonably request, in connection with the
consummation of the Merger or any other Transactions. The Company will use its
diligent efforts to obtain, and to cooperate with Parent to promptly obtain, all
such authorizations, approvals and consents.
4.7 Acceleration of Company Options. The Company will duly and
validly accelerate all Company Options prior to the Effective Time.
4.8 Necessary Consents. The Company will use its best efforts to
obtain such written consents and take such other actions as may be necessary or
appropriate to facilitate and allow the consummation of the Transactions and to
facilitate and allow Parent to carry on the Company's business after the
Effective Time substantially as such business was conducted by the Company prior
to the Effective Time.
4.9 Proceedings and Orders. The Company will notify Parent in
writing promptly after learning of (i) any Proceeding by or before any court or
other Governmental Body, initiated by or against it, or known by it to be
threatened against the Company or any of its officers, directors, employees or
stockholders in their capacity as such; or (ii) any Order relating to the
Company.
4.10 No Other Negotiations. From and after the Agreement Date until
the earlier of the Effective Time or termination of this Agreement pursuant to
Article 9, the Company and the Stockholders shall not, and will instruct their
respective representatives not to, directly or indirectly, (x) solicit, initiate
or knowingly or recklessly encourage the making, submission or announcement of,
any Acquisition Proposal by any person, entity or group (other than Parent and
its representatives), or (y) participate in any discussions or negotiations
with, or disclose any non-public information concerning the Company to, or
afford any access to the properties, books or records of the Company to, or
otherwise assist or facilitate, or enter into any Contract, agreement or
understanding with, any person, entity or group (other than Parent and its
representatives), in connection with any Acquisition Proposal with respect to
the Company. Without limiting the generality of the foregoing, the Company and
the Stockholders acknowledge and agree that any violation of any of the
restrictions set forth in the preceding sentence by any representative of the
Company or any Stockholder shall be deemed to constitute a breach of this
Section 4.10 by the Company. For the purposes of this Agreement, an "Acquisition
Proposal" with respect to an entity means any proposal or offer relating to (i)
any merger, consolidation, sale of substantial assets or similar transactions
involving the entity or any subsidiaries of the entity (other than sales or
licenses of assets or inventory in the ordinary course
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of business or as permitted under the terms of this Agreement), (ii) sale of 10%
(or 20% for purposes of Section 9.3(c)) or more of the outstanding shares of
capital stock of the entity (including without limitation by way of a tender
offer or an exchange offer), (iii) the acquisition by any person of beneficial
ownership or a right to acquire beneficial ownership of, or the formation of any
"group" (as defined under Section 13(d) of the 1934 Act and the rules and
regulations thereunder) which beneficially owns, or has the right to acquire
beneficial ownership of, 10% (or 20% for purposes of Section 9.3(c)) or more of
the then outstanding shares of capital stock of the entity (except for
acquisitions for passive investment purposes only in circumstances where the
person or group qualifies for and files a Schedule 13G with respect thereto);
(iv) any initial public offering of capital stock or other securities of the
Company pursuant to a registration statement filed under the 1933 Act; or (v)
any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing (any such
transaction listed in (i)-(v) when consummated with an entity other than Parent
to be referred to as an "Alternative Transaction"). The Company and the
Stockholders will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. The Company or a Stockholder will (A) notify Parent as
promptly as practicable if it receives any proposal or written inquiry or
written request for the Company in connection with an Acquisition Proposal or
potential Acquisition Proposal and (B) as promptly as practicable notify Parent
of the significant terms and conditions of any such Acquisition Proposal, as
well as the identity of the third party submitting such Acquisition Proposal. In
addition, from and after the Agreement Date until the earlier of the Effective
Time and termination of this Agreement pursuant to Article 9, the Company will
not, and will instruct its representatives not to, directly or indirectly, make
or authorize any public statement, recommendation or solicitation in support of
any Acquisition Proposal made by any person, entity or group (other than
Parent).
4.11 Access to Information. Until the Closing Date, the Company will
provide Parent and its agents with full access to the files, books, records,
documents, personnel and offices of the Company, including, without limitation,
any and all information relating to the Company's Taxes, Contracts, real,
personal and intangible property, and financial condition, necessary for Parent
to complete its diligence review of the Company's products and technology,
subject to the terms of the Mutual Nondisclosure Agreement between Parent and
Company dated December 15, 1998, as amended to date (the "Mutual Nondisclosure
Agreement"). The Company will cause its accountants to cooperate with Parent and
its agents in making available all financial information requested, including,
without limitation, the right to examine all working papers pertaining to all
financial statements prepared or audited by such accountants.
4.12 Satisfaction of Conditions Precedent. The Company and the
Stockholders will use their reasonable best efforts to satisfy or cause to be
satisfied all the conditions precedent that are set forth in Article 8, and the
Company will use its best efforts to cause the Transactions to be consummated,
and, without limiting the generality of the foregoing, to obtain all consents,
waivers and authorizations of third parties and to make all filings with, and
give all notices to, third parties that may be necessary or required on its part
in order to effect the transactions provided for herein. In particular, the
Company will use its best efforts to cause the Merger to become effective in
accordance with this Agreement not later than May 31, 1999.
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4.13 Securities Laws. The Company and the Stockholders shall assist
Parent to the extent necessary to comply with the securities and blue sky laws
of all jurisdictions applicable in connection with the Merger.
4.14 Notification of Employee Problems. The Company will promptly
notify Parent if any of the Company's directors or officers becomes aware that
any of the employees listed in Item 2.10(m) intends to leave its employ.
4.15 Company Dissenting Shares. As promptly as practicable after the
date of the Company Stockholder Vote and prior to the Closing Date, the Company
will furnish Parent with the name and address of each holder (or potential
holder) of any Company Dissenting Shares and the number of Company Dissenting
Shares (or potential Company Dissenting Shares) owned by each such holder.
4.16 Termination of Registration and Voting Rights. All registration
rights agreements and voting agreements and proxies applicable to or affecting
any outstanding shares or other securities of the Company (other than the Voting
Agreements and the related Proxies referred to in Section 2.24) will be duly
terminated and canceled by no later than immediately prior to the Effective
Time.
4.17 Invention Assignment and Confidentiality Agreements. The
Company will obtain from each employee, contractor and consultant of the Company
who has had access to any software, technology or copyrightable, patentable or
other proprietary works owned or developed by the Company, including but not
limited to Company Intellectual Property, or to any other confidential or
proprietary information of the Company or its clients, an invention assignment
and confidentiality agreement in a form acceptable to Parent, duly executed by
such employee, contractor or consultant and delivered to the Company.
4.18 Company Employee Plans and Benefit Arrangements. The Company
shall take all such actions as contemplated under Section 1.3(b) with respect to
the Company Options. The Company shall not issue any shares of its capital stock
under any employee benefit plan and shall terminate any Company Benefit
Arrangement that is governed by Section 401(k) of the Code immediately prior to
the Effective Time upon the request of Parent. The Company agrees to cooperate
with Parent after the Effective Time to complete any steps necessary to finalize
the plan termination, including but not limited to distribution of plan assets.
In the event that the distribution or rollover of assets from the trust of a
Code Section 401(k) plan that is terminated will trigger liquidation, surrender
or other fees that will be imposed on the terminated plan or any participant or
beneficiary of such terminated plan, the Company shall take such actions as are
necessary to reasonably estimate the amount of such fees and provide such
reasonable estimate in writing to Parent prior to the Effective Time. Any
Company Benefit Arrangement that is governed by Section 401(k) of the Code and
relies on a standardized prototype document shall be amended prior to the
Effective Time so as not to require all corporations that are members of the
same controlled group of corporations as the employer sponsoring such plan to
participate in such plan. The Company shall file any delinquent Form 5500s
through the Department of Labor Delinquent Filer Voluntary Compliance Program
prior to the Effective Time.
4.19 Takeover Statutes. If any fair price, moratorium, control share
acquisition or other similar takeover statute shall become applicable to any of
the Transactions, the
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Company and the members of the Board of Directors of the Company shall grant
such approvals and take such actions as are necessary so that the Merger and the
other Transactions 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 on the Transaction.
4.20 Closing of Merger. The Company and the Significant Stockholders
will not refuse to effect the Merger if, on or before the Closing Date, all the
conditions precedent to the Company's obligations to effect the Merger under
Article 7 hereof have been satisfied or waived by the Company and Parent elects
to consummate the Merger.
4.21 Termination of Management Agreement. The Company will duly and
validly terminate prior to the Effective Time the Management Agreement or any
similar agreements with Teknekron Corporation without any further obligation or
liability to the Company or Parent.
5. COVENANTS OF PARENT.
During the period from the Agreement Date until the earlier to occur
of (i) the Effective Time or (ii) the termination of this Agreement in
accordance with Article 9, Parent covenants to and agrees with the Company as
follows:
5.1 Advice of Changes. Parent will promptly advise the Company in
writing of any event occurring subsequent to the Agreement Date that would
render any representation or warranty of Parent or Newco contained in this
Agreement, if made on or as of the date of such event or the Closing Date, to be
untrue or inaccurate in any material respect.
5.2 Satisfaction of Conditions Precedent. Parent will use its
reasonable best efforts to satisfy or cause to be satisfied all the conditions
precedent that are set forth in Article 7, and Parent will use its best efforts
to cause the Transactions to be consummated, and, without limiting the
generality of the foregoing, to obtain all consents, waivers and authorizations
of third parties and to make all filings with, and give all notices to, third
parties that may be necessary or required on its part in order to effect the
Transactions. In particular, Parent will use its best efforts to cause the
Merger to become effective in accordance with this Agreement not later than May
31, 1999.
5.3 Regulatory Approvals. Parent will promptly execute and file, or
join in the execution and filing, of any application, notification (including
without limitation any notification or provision of information, if any, that
may be required under the HSR Act) or other document that may be necessary in
order to obtain the authorization, approval or consent of any Governmental Body,
whether federal, state, local or foreign, that may be reasonably required, in
connection with the consummation of the Merger or any other Transaction. Parent
will use diligent efforts to obtain all such authorizations, approvals and
consents.
6. CLOSING MATTERS.
6.1 The Closing. Subject to termination of this Agreement as
provided in Article 9 below, the Closing will take place at the offices of ▇▇▇▇▇
▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ at 10:00 a.m.,
Pacific Time, on or before June 11, 1999, or, if all conditions to Closing have
not been satisfied or waived by such date, such other
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place, time and date as the Company and Parent may mutually select (the "Closing
Date"). Prior to or concurrently with the Closing, the Articles of Merger and
such officers' certificates or other documents as may be required to effectuate
the Merger will be filed in the office of the Secretaries of State of the States
of Nevada and Delaware. Accordingly, the Merger will become effective at the
Effective Time.
7. CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The Company's obligations under this Agreement are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by the Company, but only in a
writing signed on behalf of the Company by its Chief Executive Officer):
7.1 Accuracy of Representations and Warranties. The representations
and warranties of Parent set forth in Article 3 (as qualified by the Parent
Disclosure Letter) shall be true and accurate in all material respects on and as
of the Agreement Date and the Closing Date as if made on and as of the Closing
Date, and the Company shall have received a certificate to such effect executed
on behalf of Parent by an executive officer of Parent (except for any such
representations or warranties that, by their terms, speak only of a specific
date or dates, in which case such representations and warranties shall be true
and correct on and as of such specified date or dates).
7.2 Covenants. Parent shall have performed and complied in all
material respects with all of its covenants contained in Article 5 on or before
the Closing Date, and the Company shall have received a certificate to such
effect executed on behalf of Parent by an executive officer of Parent.
7.3 Requisite Approvals. The Merger and the principal terms of this
Agreement shall have been duly and validly approved and adopted by the Company's
stockholders, in accordance with applicable laws and Company's Articles of
Incorporation and Bylaws. The principal terms of this Agreement will have been
duly and validly approved and adopted by Parent's Board of Directors in
accordance with applicable laws and Parent's Articles of Incorporation and
Bylaws. The principal terms of this Agreement will have been approved and
adopted by Newco's Board of Directors and sole stockholder in accordance with
applicable law and Newco's Articles of Incorporation and Bylaws.
7.4 Compliance with Law; No Legal Restraints; No Litigation. No
litigation or Proceeding will be threatened or pending for the purpose or with
the probable effect of enjoining or preventing the consummation of the Merger or
any of the other material transactions contemplated by this Agreement. There
will not be issued or enacted or adopted, or threatened in writing by any
Governmental Body, any Order, legislative enactment, statute, regulation or
Proceeding by any court, arbitrator, arbitration panel or Governmental Body or
any other fact or circumstance, that, directly or indirectly, challenges,
threatens, prohibits, enjoins, restrains, suspends, delays, conditions or
renders illegal or imposes limitations on (or involves a challenge, threat to,
or a prohibition, injunction, restraint, suspension, delay or illegality of, or
to impose limitations on) the Merger or any other material transaction
contemplated by this Agreement.
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7.5 Government Consents; HSR Act Compliance. There shall have been
obtained at or prior to the Closing Date such permits, consents or
authorizations, and there shall have been taken such other actions, as may be
required to consummate the Merger by any regulatory authority or Governmental
Body having jurisdiction over the parties and the actions herein proposed to be
taken, including but not limited to satisfaction of all requirements under
applicable federal and state securities laws and the expiration or termination
of the waiting period under the HSR Act.
7.6 Documents. The Company shall have received all written consents,
assignments, waivers, authorizations or other certificates reasonably deemed
necessary by the Company's legal counsel to consummate the transactions provided
for in this Agreement and the Articles of Merger.
7.7 Opinion of Parent's Counsel. The Company shall have received
from Fenwick & West LLP, counsel to Parent and Newco, an opinion substantially
in the form of Exhibit 7.7.
7.8 Agreements. Parent shall have duly executed and delivered the
Escrow Agreement and the Note and Security Agreement.
7.9 No Material Adverse Change. There will not have been any
material adverse change in the financial condition, properties, assets,
liabilities, business, employee base, results of operations or prospects of
Parent and its subsidiaries, taken as a whole, since the Agreement Date, and the
Company shall have received a certificate to such effect executed on behalf of
Parent by an executive officer of Parent. The parties agree that a change in the
market price of Parent's common stock shall not, of itself, constitute a
material adverse change of the type described in this Section 7.9.
8. CONDITIONS TO OBLIGATIONS OF PARENT AND NEWCO.
The obligations of Parent and Newco under this Agreement are subject
to the fulfillment or satisfaction on, and as of the Closing, of each of the
following conditions (any one or more of which may be waived by Parent, but only
in a writing signed on behalf of Parent by its Chief Executive Officer):
8.1 Accuracy of Representations and Warranties. The representations
and warranties of the Company and the Stockholders set forth in Article 2 (as
qualified by the Company Disclosure Letter) shall be true and accurate in all
material respects on and as of the Agreement Date and the Closing Date as if
made on and as of the Closing Date, and Parent shall have received a certificate
to such effect executed on behalf of the Company by its Chief Executive Officer
(except for any such representations or warranties that, by their terms, speak
only as of a specific date or dates, in which case such representations and
warranties shall be true and correct on and as of such specified date or dates).
8.2 Covenants; No Material Adverse Change. The Company and the
Stockholders shall have performed and complied in all material respects with all
of the covenants contained in Article 4 on or before the Closing and Parent
shall have received a certificate to such effect signed on behalf of the Company
by its Chief Executive Officer. There shall not
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have occurred any material adverse change in the financial condition,
properties, assets, liabilities, business, employee base, results of operations,
operations or prospects of the Company since the Agreement Date, and Parent
shall have received a certificate to such effect executed on behalf of the
Company by its Chief Executive Officer.
8.3 Compliance with Law; No Legal Restraints; No Litigation. There
shall be no Order by any court or other Governmental Body or threat thereof, or
any other fact or circumstance, which would prohibit or render illegal the
transactions provided for in this Agreement. No litigation or Proceeding shall
be pending or threatened which will have the probable effect of enjoining or
preventing the consummation of any of the transactions provided for in this
Agreement. No litigation, Proceeding or Order shall be pending or threatened
that could reasonably be expected to have a Material Adverse Effect on the
Company that has not been previously disclosed to Parent.
8.4 Government Consents; HSR Act Compliance. There shall have been
obtained at or prior to the Closing Date such permits, consents or
authorizations and there shall have been taken such other action, as may be
required to consummate the Merger by any regulatory authority or Governmental
Body having jurisdiction over the parties and the actions herein proposed to be
taken, including but not limited to satisfaction of all requirements under
applicable federal and state securities laws and the expiration or termination
of the waiting period under the HSR Act.
8.5 Opinion of the Company's Counsel. Parent shall have received
from ▇▇▇▇▇ ▇▇▇▇ LLP, counsel to the Company and the Stockholders, an opinion
substantially in the form of Exhibit 8.5.
8.6 Requisite Approvals. The terms of this Agreement and the
Articles of Merger shall have been approved and adopted by: (a) the Company's
Board of Directors and (b) the written consent or affirmative vote of
stockholders of the Company as described in Section 2.25.
8.7 Restriction on Dissenting Shares. The number of the outstanding
shares of Company Common Stock that have not affirmatively voted in favor of the
Merger and are eligible to exercise or perfect any statutory appraisal rights of
dissenting stockholders under applicable law will not exceed that number of such
shares that represented five percent (5%) of the shares of the Company Common
Stock outstanding on the Record Date (as defined in Section 2.25).
8.8 Documents. Parent shall have received duly executed copies of
all written consents, assignments, waivers, authorizations or other certificates
deemed necessary by Parent's legal counsel to provide for the continuation in
full force and effect of any and all material Contracts of the Company and its
subsidiaries, and for Parent to consummate the transactions provided for in this
Agreement and the Articles of Merger.
8.9 Escrow Agreement. The Representatives and the Escrow Agent shall
have duly executed and delivered to Parent the Escrow Agreement.
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8.10 Non-Competition Agreements. Each person or entity listed on
Schedule 8.10 shall have duly executed and delivered to Parent a Non-Competition
Agreement.
8.11 Continued Employment of Certain Personnel. Each of the
employees listed on Schedule 8.11 who are currently employees of the Company,
(a) shall have continued to be employed as full-time employees of the Company at
all times from the Agreement Date through the Effective Time and (b) shall have
accepted offers of continued employment with the Company following the Effective
Time pursuant to written employment offer letters or agreements satisfactory to
Parent in which such persons will have agreed to continue to be full-time
employees of the Company for a period of not less than two (2) years after the
Effective Time except as approved by Parent. Not less than 80% of the Company's
employees as of the Agreement Date shall remain employed by the Company on the
Closing Date.
8.12 Resignation of Directors. The directors of the Company in
office immediately prior to the Effective Time of the Merger will have resigned
as directors in writing effective as of the Effective Time.
8.13 Due Diligence. Parent and its representatives shall have
completed a due diligence review of the condition (financial and otherwise),
operations, customer arrangements, intellectual property, business and prospects
of, and any other matters relating to, the Company, and the results of such due
diligence shall be satisfactory to Parent in its sole discretion.
9. TERMINATION.
9.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after approval of the Merger by the
stockholders of the Company:
(a) by the mutual written agreement of Parent and the Company;
(b) at any time after ninety days after the Agreement Date, by
either Parent or the Company if the Closing shall not have occurred on or before
such date and such failure to consummate is not caused by a breach of this
Agreement by the terminating party;
(c) by the Company, if (i) there has been a breach by Parent of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Parent, or if any representation of Parent will have become
untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on Parent or (ii) the Company reasonably determines that
the timely satisfaction of any condition set forth in Article 7 has become
impossible or impracticable (other than as a result of the Company's or any
Stockholder's failure to comply with or perform its covenants or obligations
under this Agreement or any Company Ancillary Agreement or Stockholder Ancillary
Agreement), provided, however, that if such breach or failure of condition shall
be curable by Parent, then the Company may not terminate this Agreement unless
Parent fails to cure within thirty (30) days after written notice thereof from
the Company (except that no cure period will be provided for a breach by Parent
which by its nature cannot be cured);
(d) by Parent, if (i) there has been a breach by the Company or
a Stockholder of any representation, warranty, covenant or agreement set forth
in this Agreement
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(other than a breach of Section 4.10) on the part of the Company or a
Stockholder, or if any representation of the Company or a Stockholder will have
become untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on the Company or (ii) Parent reasonably determines that
the timely satisfaction of any condition set forth in Article 8 has become
impossible or impracticable (other than as a result of the Parent's failure to
comply with or perform its covenants or obligations under this Agreement or any
Parent Ancillary Agreement); provided, however, that if such breach or failure
of condition shall be curable by the Company or a Stockholder, as the case may
be, then Parent may not terminate this Agreement unless the Company or such
Stockholder fails to cure within thirty (30) days after written notice thereof
(except that no cure period will be provided for a breach by the Company or a
Stockholder which by its nature cannot be cured);
(e) by Parent, if there is a breach of Section 4.10;
(f) by either Parent or the Company, if a permanent injunction
or other Order by any federal or state court that would make illegal or
otherwise restrain, enjoin or prohibit the consummation of the Merger will have
been issued and will have become final and nonappealable;
(g) by either Parent or the Company, if any approval of the
stockholders of the Company required for the consummation of the Merger
submitted for approval shall not have been obtained by reason of the failure to
obtain the required vote at a duly held meeting of stockholders or at any
adjournment thereof;
(h) by Parent, if any of the following shall occur:
(i) the Company shall have failed to include in the Proxy
Statement the unanimous recommendation of the Board of Directors of the Company
in favor of approval and adoption of this Agreement and the Merger, or the Board
of Directors of the Company shall have amended or modified in a manner adverse
to Parent such Board of Directors' unanimous recommendation in favor of the
Merger or approval or adoption of this Agreement;
(ii) the Board of Directors of the Company shall have
approved, publicly endorsed, recommended or executed a letter of intent or
similar document with respect to any Acquisition Proposal other than the Merger;
(iii) a tender or exchange offer relating to securities of
the Company shall have been commenced and the Company shall not have sent to its
stockholders, within ten (10) business days after the commencement of such
tender or exchange offer, a statement that the Company recommends rejection of
such tender or exchange offer; or
(iv) an Acquisition Proposal (other than a tender or
exchange offer relating to the securities of the Company) is publicly announced,
and, upon Parent's request, the Company fails to issue a press release
announcing its opposition to such Acquisition Proposal within five (5) business
days after such request; or
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(i) by Parent, in the event of a tender or an exchange offer
relating to the securities of the Company which is accepted by more than fifty
percent (50%) of the outstanding shares of the Company Common Stock.
Any termination of this Agreement under this Section 9.1 will
be effective by the delivery of written notice of the terminating party to the
other party hereto.
9.2 Effect of Termination. If this Agreement is validly terminated
pursuant to Section 9.1, except as otherwise provided in this Article 9, such
termination shall be without liability or obligation of either party (or any
stockholder, director, officer, employee, agent, consultant or representative of
such party) to the other party to this Agreement (except that the parties to
this Agreement shall under all circumstances remain bound by the terms and
provisions of the Mutual Nondisclosure Agreement); provided that if such
termination shall result from the willful failure of either party to fulfill a
condition to the performance of the obligations of the other party or to perform
a covenant of this Agreement or from a willful breach by either party to this
Agreement, such party shall be fully liable for any and all damages incurred or
suffered by the other party as a result of such failure or breach. The
provisions of this Section 9.2, Sections 9.3 and 9.4 and Article 11 shall
survive any termination hereof pursuant to Section 9.1.
9.3 Termination Fee.
If this Agreement is terminated pursuant to Section 9.1, all further
obligations of the parties under this Agreement shall terminate; provided,
however, that:
(a) the parties shall, in all events, remain bound by and
continue to be subject to the applicable provisions set forth in Section 9.2 and
Article 11;
(b) if this Agreement is terminated by Parent pursuant to
Section 9.1(e), (g), (h) or (i), then the Company shall pay to Parent, in cash,
a non-refundable fee in the amount of $8,000,000 (the "Termination Fee"), within
twenty (20) days of such termination;
(c) if, within 180 days of any termination of this Agreement
pursuant to Section 9.1(d)(i), the Company shall engage in any Alternative
Transaction, as defined in Section 4.10, then the Company shall pay to Parent
the Termination Fee in cash within three (3) business days after the effective
date of such Alternative Transaction;
(d) the parties shall, in all events, remain bound by the terms
and provisions of the Mutual Nondisclosure Agreement; and
(e) both Parent and the Company shall be entitled to announce
the termination of this Agreement.
9.4 Non-Exclusivity of Termination Rights. The termination rights
and obligations provided in this Article 9 shall not be deemed to be exclusive,
provided, however, that the payment of the Termination Fee pursuant to Sections
9.3(b) and (c) hereof shall be Parent's exclusive remedy in the event of a
termination of this Agreement pursuant to Sections 9.3(b) and (c) in which the
Termination Fee is paid.
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10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES,
CONTINUING COVENANTS.
10.1 Survival. The representations, warranties, covenants and
agreements of the parties hereto contained in this Agreement or in any
certificate, document or instrument delivered pursuant hereto or in connection
herewith will remain operative and in full force and effect, regardless of any
investigation made by the parties, until the one year anniversary of the Closing
Date (the "Expiration Date"); provided, however, that the representations and
warranties contained in Sections 2.8 and 2.16 shall survive until the expiration
of the statute of limitations for any claims made thereunder; and provided
further that the representation and warranties made by Parent in Article 3 shall
survive until the later of (i) the Expiration Date or (ii) the payment in full
of the Notes.
10.2 Indemnification by Significant Stockholders. Subject to the
limitations set forth in this Section 10.2, the Significant Stockholders hereby
severally indemnify and hold harmless Parent and its respective officers,
directors, agents and employees, and each person, if any, who controls or may
control Parent within the meaning of the 1933 Act (collectively, "Parent
Indemnified Parties") from and against any and all claims, demands, actions,
causes of action, judgments, fines, penalties, obligations, losses, costs,
damages, liquidated damages, liabilities and expenses including, without
limitation, the reasonable fees and disbursements of legal counsel,
investigators, consultants, accountants and other professionals (collectively,
"Damages") incurred or suffered by any such Parent Indemnified Party arising
from, by reason of or in connection with, any misrepresentation or breach of or
default in connection with any of the representations, warranties, covenants or
agreements given or made by the Company or any Stockholder in this Agreement or
any certificate, document or instrument delivered by or on behalf of the Company
or by a Company stockholder pursuant hereto or in connection herewith; provided,
however, that the maximum aggregate indemnification obligation of the
Significant Stockholders as a group under this Article 10 shall not exceed (a)
the aggregate gross amount of the Per Share Payments payable to the Significant
Stockholders as a group under Sections 1.3(a)(ii) and 1.3(b)(i) for all Damages
arising out of or relating to the breach of any representation or warranty set
forth in Section 2.1, 2.2 or 2.3; (b) $36,000,000 for all Damages arising out of
or relating to the breach of any representation or warranty set forth in Section
2.6; (c) an aggregate of $36,000,000 for all Damages arising out of or relating
to the breach of any representation or warranty set forth in Sections 2.8 or
2.16; (d) $41,000,000 for all Damages arising out of or relating to the breach
of any representation or warranty set forth in Section 2.13; or (e) an aggregate
of $14,400,000 for all Damages arising out of or relating to the breach of any
representation or warranty set forth in any Section of Article 2 other than
those Sections described in the foregoing clauses or Damages covered by the last
sentence of this Section 10.2, the maximum individual indemnification obligation
of each Significant Stockholder shall not exceed the gross consideration payable
under Section 1.3 to such Significant Stockholder, and all indemnification
obligations of the Significant Stockholders under this Article 10 shall be
allocated proportionally among the Significant Stockholders pro rata based on
the gross consideration payable to each Significant Stockholder under Section
1.3. The Significant Stockholders shall settle any claims for indemnification by
first returning to Parent Notes from the Escrow, and if the aggregate amount of
Damages exceeds the value of such escrowed Notes, then the Significant
Stockholders shall severally fulfill such indemnification obligations in cash or
Notes. The indemnification provided for in this Section 10.2 shall not apply
unless and until
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the aggregate Damages for which one or more Indemnified Persons seeks or has
sought indemnification hereunder exceeds a cumulative aggregate of $2,000,000,
in which event the Significant Stockholders shall, subject to the foregoing
limitations, be obligated to indemnify the Parent Indemnified Parties in
accordance with this Section 10.2 for any and all such Damages relating back to
the first dollar of Damages. None of the provisions of this Section 10.2 or of
the Escrow Agreement shall limit liability with respect to (i) claims of
intentional misrepresentation or fraud, (ii) any criminal matters, or (iii) any
claim concerning title to the shares of the Company's capital stock, provided,
however, that by agreement to the Merger, each Company stockholder agrees
severally to indemnify Parent from and against all Damages relating to any
breach of the representations or warranties set forth in Section 2.1.4 with
respect to the shares of Company Common Stock surrendered by such Company
Stockholder at the Closing or concerning title to the Company's capital stock,
and further provided, that the maximum indemnification obligation of any Company
stockholder under this Section 10.2 shall not exceed the gross amount payable
under Section 1.3 to such Company stockholder, and that all such liability for
indemnification under this Article 10 shall be several. Notwithstanding the
foregoing, neither the Company nor any Significant Stockholder shall have any
liability to Parent for Damages arising out of or relating to the breach by any
other Significant Stockholder of an Employment Agreement or a Non-Competition
Agreement to which such breaching stockholder is a party. Any reference herein
to the "gross amount or consideration payable" under Section 1.3 or a specific
subsection thereof, or words to such effect, shall include in determining the
gross amount amounts reduced or offset for Escrow Amounts, Promissory Notes paid
down by the Parent under Section 1.3(a)(iii) or exercise price of Company
Options which are bought out by Parent under Section 1.3(b), as is applicable to
a specific stockholder or group of stockholders.
10.3 Indemnification by Parent. Parent shall indemnify and hold
harmless the Significant Stockholders (collectively, the "Company Indemnified
Parties", which together with the Parent Indemnified Persons are referred to as
the "Indemnified Parties") from and against any and all Damages arising out of
or relating to any misrepresentation or breach or default in connection with any
of the representations, warranties, covenants or agreements given or made by
Parent in this Agreement or in any certificate, document or instrument delivered
by or on behalf of Parent pursuant hereto or in connection herewith; provided,
however, that the maximum aggregate indemnification obligation of Parent under
this Article 10 (the "Parent Cap") shall not exceed $5 million, except for
Damages arising out of or relating to the breach of any representation or
warranty set forth in Sections 3.1, 3.2 or 3.3, as to which the Parent Cap shall
not be applicable. The indemnification provided for in this Section 10.3 shall
not apply unless and until the aggregate Damages for which one or more Company
Indemnified Parties seeks or has sought indemnification hereunder exceeds a
cumulative aggregate of $1,000,000, in which event Parent, subject to the
foregoing limitations, shall be obligated to indemnify the Company Indemnified
Parties in accordance with this Section 10.3 for any and all such Damages
relating back to the first dollar of Damages.
10.4 Procedures. ▇▇▇▇▇▇ ▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇▇▇ shall act as
Representatives of the Significant Stockholders for all purposes of the Escrow
Agreement and the indemnification provisions of this Article 10, are duly
authorized to be such Representatives and may bind the Significant Stockholders
with respect thereto. Promptly after the receipt by an Indemnified Party of
notice or discovery of any claim, damage or legal action or proceeding giving
rise to indemnification rights under this Agreement, such Indemnified Party
shall give the
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party from whom indemnification is sought (the "Indemnifying Party") and the
Escrow Agent written notice of such claim, damage, legal action or proceeding (a
"Claim"). A Parent Indemnified Party shall give notice of a Claim (a "Notice of
Claim") to the Significant Stockholders by delivering such Notice of Claim to
either of the Representatives. An Indemnified Party may assert a Claim at any
time prior to the expiration of the applicable survival period in Section 10.1.
No delay on the part of an Indemnified Party in giving an Indemnifying Party a
Notice of Claim will relieve such Indemnifying Party of any of its obligations
under this Article 10 (provided that such Notice of Claim is timely given prior
to the expiration of the applicable survival period in Section 10.1) unless (and
then only to the extent) that such Indemnifying Party is materially prejudiced
thereby. Within twenty (20) days of delivery of such written notice, the
Indemnifying Party may, at the expense of such Indemnifying Party, elect to take
all necessary steps properly to contest any Claim involving third parties or to
prosecute such Claim to conclusion or settlement satisfactory to the Indemnified
Party, both as set forth in Section 10.5 herein, or notify the Indemnified Party
in writing that it disputes the claim for indemnity.
10.5 Third-Party Claims. The following procedures shall apply to
claims for indemnification by an Indemnified Party with respect to Third Party
Claims (as defined herein).
10.5.1. Following the Closing, promptly following receipt of
verbal or written notice to Parent or to any other Indemnified Party of a Third
Party Claim (as defined below), such Indemnified Party shall give a Notice of
Claim regarding such Third Party Claim to the Indemnifying Party and if
applicable the Escrow Agent. A "Third Party Claim" means any claim, demand,
suit, action, arbitration, investigation, inquiry or proceeding brought by a
third party against such Indemnified Party that is based upon, or includes
assertions that would, if true, constitute: (a) any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by the Company or the Stockholders in this
Agreement or in the Company Disclosure Letter or in any certificate delivered by
or on behalf of the Company or the Stockholders or an officer of the Company
pursuant thereto (if such inaccuracy, misrepresentation, breach or default
existed at the Closing Date); or (b) any untrue statement of a material fact in
the Proxy Statement or omission of any material fact from the Proxy Statement
necessary in order to make the statements in the Proxy Statement, in light of
the circumstances under which such statements were made, not misleading.
10.5.2. If a Third-Party Claim shall be brought or asserted
against Parent or any other Parent Indemnified Party and such Third-Party Claim,
if determined adversely to such Indemnified Party, would entitle such
Indemnified Party to indemnity against any liability, damages and expenses
claimed or reasonably likely to be incurred in or as a result of such
Third-Party Claim pursuant to this Article 10, then, subject to the terms and
conditions of this Agreement, the Representatives will have the right, at the
Representatives' sole option, and at the Significant Stockholders' sole cost and
expense without right of reimbursement from the Escrow Amount, Parent or from
any other Indemnified Parties, to assume and control the defense of all
Indemnified Parties against such Third-Party Claim with reputable legal counsel
of the Representatives' choice that is reasonably satisfactory to Parent and the
affected Indemnified Party(s), so long as: (A) the Representatives notify Parent
and each affected Indemnified Party in writing that Representatives will assume
and control the defense of such Third-Party Claim within twenty (20) days after
Parent has given a Notice of Claim to the Representatives with respect to such
Third-Party Claim; (B) the Representatives conduct the defense of the
Third-
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Party Claim actively and diligently at all times; and (C) the legal counsel
chosen by the Representatives do not have any conflict of interest in
representing the interests of Parent or any of the affected Indemnified
Party(s).
10.5.3. So long as the Representatives are conducting the
defense of the Third-Party Claim in accordance with Section 10.5.2 above: (A)
Parent and each Indemnified Party may retain separate co-counsel and participate
in the defense of the Third-Party Claim at its own cost and expense and shall
have the right to receive copies of all pleadings, notices and communications
with respect to the Third-Party Claim to the extent no attorney-client privilege
is thereby waived; (B) Parent and each Indemnified Party may participate in
settlement negotiations with respect to the Third-Party Claim; and (C) the
Representatives will not consent to the entry of any judgment or enter into any
settlement with respect to the Third-Party Claim unless (1) Parent and each of
the affected Indemnified Parties consent thereto in writing (which consent will
not unreasonably be withheld) or (2) the settlement, compromise or consent
includes an unconditional release from all liability in favor of Parent and each
Indemnified Party. If the Representatives do not elect to assume control of or
otherwise participate in the defense or settlement of any Third-Party Claim, or
if the Representatives so elect but any of the conditions in Section 10.5.2
above is not satisfied or becomes unsatisfied, then: Parent and the affected
Indemnified Parties may control the defense of and consent to the entry of any
judgment or enter into any settlement with respect to the Third-Party Claim,
provided, however, that the Representatives (x) shall have the right to receive
copies of all pleadings, notices and communications with respect to the
Third-Party Claim so long as the receipt of such documents by the
Representatives does not affect any privilege relating to the Indemnified Party,
and (y) may participate in settlement negotiations with respect to the
Third-Party Claim and Parent, and the Indemnified Parties shall not enter into
any settlement of such Third-Party Claim without the prior written consent of
the Representatives (which consent shall not be unreasonably withheld),
provided, that if the Representatives shall have consented to any such
settlement, then the Representatives shall have no power or authority to object
to any claim by any Indemnified Party for indemnity under this Article 10 for
the amount of such settlement; and (3) the Significant Stockholders will remain
responsible (to the extent provided in this Article 10) to indemnify all
Indemnified Parties for all Damages they may incur arising out of, resulting
from or caused by the Third-Party Claim to the fullest extent provided in this
Article 10.
10.6 Resolution of Conflicts; Arbitration. In case an Indemnifying
Party shall dispute any Claim in writing, the Indemnified Party and the
Indemnifying Party shall meet within ten days of notification of such dispute
and attempt to agree upon the rights of the respective parties with respect to
such Claim. The Representatives shall attend any meeting under this Section 10.6
in place of a Significant Stockholder. If the Indemnified Party and the
Indemnifying Party should so agree, a memorandum setting forth such agreement
shall be prepared and signed by both parties and shall be furnished to the
Escrow Agent. The Escrow Agent shall be entitled to rely on any such memorandum
and distribute part of the Escrow Amount in accordance with the terms thereof.
If the Indemnified Party and the Indemnifying Party fail to meet or if no such
agreement can be reached after such meeting, either the Indemnifying Party or
the Indemnified Party may demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is ascertained
or both parties agree to arbitration; and in either such event the matter shall
be settled by arbitration conducted by three
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arbitrators. The Indemnifying Party and the Indemnified Party shall each select
an arbitrator, and the two arbitrators so selected shall select a third
arbitrator, each of which arbitrators shall be independent and have at least ten
years experience both in arbitration and in the telecommunications industry. The
arbitrators shall set a limited time period and establish procedures designed to
reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties (which shall be limited to
reasonable document production) about the subject matter of the dispute. The
arbitrators shall rule upon motions to compel or limit discovery and shall have
the authority to impose sanctions, including attorneys fees and costs, to the
extent of a court of competent law or equity, should the arbitrators determine
the discovery was sought without substantial justification or that discovery was
refused or objected to without substantial justification. The decision of a
majority of the three arbitrators as to the validity and amount of any Claim
shall be binding and conclusive upon the parties to this Agreement, and the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Amount in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact and
conclusions of law which shall set forth the award, judgment, decree or order
awarded by the arbitrators. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction. Any such arbitration shall be
held in Los Angeles, California under the rules then in effect of
J.A.M.S./ENDISPUTE or its successor. For purposes of this Section 10.6, in any
arbitration hereunder in which any Claim is at issue, the Indemnified Party
shall be deemed to be the non-prevailing party in the event that the arbitrators
award the Indemnified Party less than the sum of fifty percent (50%) of the
disputed amount plus any amounts not in dispute; otherwise, the Indemnifying
Party shall be deemed to be the non-prevailing party. The non-prevailing party
to an arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration, and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration.
10.7 Other Indemnification Provisions.
10.7.1 Notwithstanding anything to the contrary in this
Agreement, each of the Significant Stockholders hereby agrees that such
Significant Stockholder will not make any claim for indemnification against
Company or Parent by reason of the fact that such Significant Stockholder was a
director, officer, employee or agent of Company or was serving at the request of
Company as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for Damages or otherwise and whether such claim is
pursuant to any statute, charter document, bylaw, agreement, or otherwise) with
respect to any action, suit, proceeding, complaint, claim, or demand brought by
Parent against Company or such Significant Stockholder. The foregoing shall not
limit or affect any other right of the Significant Stockholders to seek
indemnification or advancement of expenses by Company (whether such right is
pursuant to statute or to the Company's charter documents or bylaws) in
connection with any other proceeding brought by Parent other than under this
Article 10 to which a Significant Stockholder becomes a party.
10.7.2 The amount of any Damages for which indemnification is
provided under Section 10.2 or Section 10.3 shall be (i) net of any amounts
recovered (net of the cost of recovery of such amounts) by any Indemnified Party
under insurance policies with respect to
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58
such Damages and (ii) reduced to take account of any net tax benefit (if any)
actually realized by any Indemnified Party arising from the incurrence or
payment of any such Damages.
10.7.3 Payments for Claims that are determined to be payable by
the Significant Stockholders in accordance with this Section 10 will be deducted
from the Escrow Amount in proportion to each Significant Stockholder's
respective percentage interests in the Escrow Amount.
11. MISCELLANEOUS.
11.1 Governing Law. The internal laws of the State of California
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
11.2 Assignment; Successors and Assigns. No party hereto may assign
any of its rights or obligations hereunder without the prior written consent of
the other parties hereto. Any purported assignment not permitted by this Section
shall be void. This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
11.3 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and 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
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 the void or unenforceable provision.
11.4 Counterparts. This Agreement may be executed in counterparts,
each of which will be an original as regards any party whose name appears
thereon and all of which together will constitute one and the same instrument.
This Agreement will become binding when one or more counterparts hereof,
individually or taken together, bear the signatures of all parties reflected
hereon as signatories.
11.5 Other Remedies. Except as otherwise provided herein, 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 on such
party, and the exercise of any one remedy will not preclude the exercise of any
other.
11.6 Amendment and Waivers. Any term or provision of this Agreement
may be amended only by a writing signed by Parent, the Company and Stockholders
holding at least 50% of the outstanding Company Common Stock. This Agreement may
be amended by the parties hereto at any time before or after approval of the
Company stockholders. The observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only by a writing signed by the party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default.
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11.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
11.8 Expenses. Each party will bear its respective expenses and fees
of its own accountants, attorneys, investment bankers and other professionals
incurred with respect to this Agreement and the transactions contemplated
hereby.
11.9 Attorneys' Fees. Should suit be brought to enforce or interpret
any part of this Agreement, the prevailing party will be entitled to recover, as
an element of the costs of suit and not as damages, reasonable attorneys' fees
to be fixed by the court (including without limitation, costs, expenses and fees
on any appeal). The prevailing party will be entitled to recover its costs of
suit, regardless of whether such suit proceeds to final judgment.
11.10 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally, by mail or express delivery, postage prepaid, or telecopy (confirmed
in writing) and will be deemed given upon actual delivery or, if mailed by
registered or certified mail, on the third business day following deposit in the
mails, addressed as follows:
(i) If to Parent and/or Newco:
Tekelec
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Fax: 818/ ▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
(ii) If to the Company and/or the Significant
Stockholders:
IEX Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: President
Fax: 972/▇▇▇-▇▇▇▇
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with a copy to the Representatives, in case of:
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇, Esq.
Fax: ▇▇▇-▇▇▇-▇▇▇▇
or to such other address as the party in question may have furnished
to the other parties by written notice given in accordance with this Section
11.10.
11.11 Construction of Agreement. The language hereof will not be
construed for or against any party. A reference to an article, Section or
exhibit will mean an Article or Section in, or an exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this Agreement
are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
11.12 No Joint Venture. Nothing contained in this Agreement will be
deemed or construed as creating a joint venture or partnership between the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other, and the parties'
status is, and at all times will continue to be, that of independent contractors
with respect to each other. No party will have any power or authority to bind or
commit any other. No party will hold itself out as having any authority or
relationship in contravention of this Section.
11.13 Further Assurances. Each party agrees to cooperate fully with
the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other parties to evidence and reflect the transactions provided
for herein and to carry into effect the intent of this Agreement.
11.14 Absence of Third Party Beneficiary Rights. No provisions of
this Agreement are intended, nor will be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, partner or employee of any party hereto or any other person
or entity, unless specifically provided otherwise herein, and, except as so
provided, all provisions hereof will be personal solely between the parties to
this Agreement.
11.15 Public Announcement. Parent and the Company will issue a press
release approved by both parties announcing the Merger as soon as practicable
following the execution of this Agreement. Parent may issue such press releases,
and make such other disclosures regarding the Merger, as it determines to be
required or appropriate under applicable securities laws or NASD rules after
reasonable consultation, where possible, with the Company. The Company and the
Stockholders will not make any other public announcement or disclosure of the
transactions contemplated by this Agreement. The Company and the Stockholders
will prevent any trading in the securities of Parent by officers, directors,
employees and agents of the Company having knowledge of any material information
regarding Parent provided hereunder until the information in question has been
publicly disclosed.
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11.16 Confidentiality. The Company and Parent each confirm that they
have entered into the Mutual Nondisclosure Agreement and that they are each
bound by, and will abide by, the provisions of such Mutual Nondisclosure
Agreement (except that Parent will cease to be bound by the Mutual Nondisclosure
Agreement after the Merger becomes effective). If this Agreement is terminated,
all copies of documents containing confidential information of a disclosing
party will be returned by the receiving party to the disclosing party or be
destroyed, as provided in the Mutual Nondisclosure Agreement.
11.17 Time is of the Essence. The parties hereto acknowledge and
agree that time is of the essence in connection with the execution, delivery and
performance of this Agreement, and that they will each utilize their best
efforts to satisfy all the conditions to Closing on or before May 31, 1999.
11.18 Disclosure Letter. The Company Disclosure Letter shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Article 2, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
Section in Article 2, and shall not be deemed to relate to or to qualify any
other representation or warranty unless it is reasonably apparent from the
information set forth in the Company Disclosure Schedule, that such information
qualifies another representation or warranty of the Company in Article 2.
11.19 Entire Agreement. This Agreement and the exhibits hereto
constitute the entire understanding and agreement of the parties hereto with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, between the parties with respect to the subject matter hereof.
The express terms hereof control and supersede any course of performance or
usage of trade inconsistent with any of the terms hereof.
11.20 Submission to Jurisdiction; Waiver of Jury Trial. Subject to
the provisions of Section 10.6 each of the parties to this Agreement hereby
irrevocably submits to the jurisdiction of any California state or federal court
sitting in the county of Los Angeles in respect of any suit, action or
proceeding arising out of or relating to this Agreement and seeking injunctive
or equitable relief, and irrevocably accepts for itself and in respect of its
property, generally and unconditionally, jurisdiction of the aforesaid courts.
Each of the parties to this Agreement hereby irrevocably waives, to the fullest
extent such party may effectively do so under applicable law, trial by jury and
any objection that such party may now or hereafter have to the laying of venue
of any such suit, action or proceeding brought in any such court and any claim
that such suit, action or proceeding has been brought in an inconvenient forum.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
Tekelec
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CEO and President
Eagle ▇▇▇▇▇▇▇▇ Corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: CEO
IEX Corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: CEO
Stockholders:
TEKNEKRON PARTNERS II IEX PARTNERS
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------- ---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: General Partner Title: General Partner
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇
-----------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇
63
Schedule 1.3
Significant Stockholders
Teknekron Partners II
IEX Partners
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ May
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Teknekron Corporation
64
Schedule 2.30
Knowledge
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇
65
Schedule 8.10
Parties Required to Enter into Non-Competition Agreements
Teknekron Partners II
IEX Partners
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ May
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
Teknekron Corporation
▇▇▇▇▇▇ ▇▇▇▇▇▇
66
Schedule 8.11
Company Employees Entering into Employment Agreements with Parent
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ May
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇