Exhibit 2.1
EXECUTION COPY
================================================================================
AGREEMENT AND PLAN OF REORGANIZATION
by and among
THERMA-WAVE, INC.
FND CORP.,
SENSYS INSTRUMENTS CORPORATION,
and
A CERTAIN REPRESENTATIVE OF ALL THE SHAREHOLDERS OF
SENSYS INSTRUMENTS CORPORATION
Dated as of
December 17, 2001
================================================================================
Table of Contents
-----------------
Page
----
1. Definitions. ........................................................................ 1
2. Basic Transaction. .................................................................. 8
(a) The Merger ................................................................. 8
(b) The Closing ................................................................ 8
(c) Actions at the Closing ..................................................... 9
(d) Effect of Merger ........................................................... 9
(e) Procedure for Payment ...................................................... 12
(f) Closing of Transfer Records ................................................ 14
(g) Minimum Working Capital on Closing Date .................................... 14
(h) Escrow Fund ................................................................ 15
3. Representations and Warranties of the Buyer and the Merger Subsidiary ............... 16
(a) Organization ............................................................... 16
(b) Authorization of Transaction ............................................... 16
(c) Noncontravention ........................................................... 16
(d) Continuity of Business Enterprises ......................................... 17
(e) Buyer Shares ............................................................... 17
(f) Eligibility to Use Form S-3 ................................................ 17
4. Representations and Warranties Concerning the Company and Its Subsidiaries .......... 17
(a) Organization, Qualification, and Corporate Power ........................... 17
(b) Capitalization ............................................................. 17
(c) Authorization of Transaction ............................................... 18
(d) Noncontravention ........................................................... 18
(e) Brokers' Fees .............................................................. 18
(f) Title to Assets ............................................................ 18
(g) Subsidiaries ............................................................... 19
(h) Financial Statements ....................................................... 19
(i) Events Subsequent to Most Recent Fiscal Year End ........................... 19
(j) Undisclosed Liabilities .................................................... 21
(k) Legal Compliance ........................................................... 22
(l) Tax Matters ................................................................ 22
(m) Real Property .............................................................. 23
(n) Intellectual Property ...................................................... 27
(o) Tangible Assets ............................................................ 31
(p) Inventory .................................................................. 31
(q) Contracts .................................................................. 32
(r) Notes and Accounts Receivable .............................................. 33
(s) Powers of Attorney ......................................................... 33
(t) Insurance .................................................................. 33
(u) Litigation ................................................................. 34
(v) Product Warranty ........................................................... 34
(w) Product Liability .......................................................... 35
(x) Employees .................................................................. 35
(y) Employee Benefits .......................................................... 35
i
(z) Guaranties ................................................................. 37
(aa) Environmental, Health, and Safety Matters .................................. 37
(bb) Certain Business Relationships with the Company and Its Subsidiaries ....... 39
(cc) Continuity of Business Enterprises ......................................... 39
(dd) Solicitation of Shareholders ............................................... 39
(ee) Disclosure ................................................................. 39
5. Pre-Closing Covenants ............................................................... 39
(a) General .................................................................... 39
(b) Notices and Consents ....................................................... 40
(c) Regulatory Matters and Approvals ........................................... 40
(d) Listing of Buyer Shares .................................................... 43
(e) Operation of Business ...................................................... 43
(f) Preservation of Business ................................................... 43
(g) Access ..................................................................... 43
(h) Notice of Developments ..................................................... 44
(i) Exclusivity ................................................................ 44
(j) Maintenance of Real Property ............................................... 44
(k) Leases ..................................................................... 44
6. Post-Closing Covenants .............................................................. 44
(a) General .................................................................... 44
(b) Litigation Support ......................................................... 44
(c) Transition ................................................................. 45
(d) [Intentionally Deleted.] ................................................... 45
(e) [Intentionally Deleted.] ................................................... 45
(f) Certain Benefit Plans ...................................................... 45
(g) Forms S-8 .................................................................. 45
(h) Form S-3 ................................................................... 45
(i) Indemnification ............................................................ 45
(j) Buyer Securities ........................................................... 46
7. Conditions to Obligation to Close ................................................... 47
(a) Conditions to Obligation of the Buyer and the Merger Subsidiary ............ 47
(b) Conditions to Obligation of the Company .................................... 50
8. Remedies for Breaches of This Agreement. ............................................ 51
(a) Survival of Representations and Warranties ................................. 51
(b) Indemnification Provisions for Benefit of the Buyer ........................ 51
(c) Indemnification Provisions for Benefit of the Shareholders of the Company .. 53
(d) Matters Involving Third Parties. ........................................... 53
(e) Determination of Adverse Consequences ...................................... 54
(f) Exclusive Remedy ........................................................... 54
9. Tax Matters ......................................................................... 55
(a) Tax Periods Ending on or Before the Closing Date ........................... 55
(b) Tax Periods Beginning Before and Ending After the Closing Date ............. 55
(c) [Intentionally Deleted.] ................................................... 55
(d) Tax Sharing Agreements ..................................................... 56
(e) Certain Taxes and Fees ..................................................... 56
ii
10. Termination. ........................................................................ 56
(a) Termination of Agreement ................................................... 56
(b) Effect of Termination ...................................................... 67
11. Miscellaneous. ...................................................................... 57
(a) [Intentionally Deleted.] ................................................... 57
(b) Press Releases and Public Announcements .................................... 57
(c) No Third-Party Beneficiaries ............................................... 57
(d) Entire Agreement ........................................................... 57
(e) Succession and Assignment .................................................. 57
(f) Counterparts ............................................................... 57
(g) Headings ................................................................... 57
(h) Notices .................................................................... 57
(i) Governing Law .............................................................. 58
(j) Amendments and Waivers ..................................................... 59
(k) Severability ............................................................... 59
(l) Expenses ................................................................... 59
(m) Construction ............................................................... 59
(n) Incorporation of Exhibits, Annexes, and Schedules .......................... 59
(o) Specific Performance ....................................................... 60
(p) Submission to Jurisdiction ................................................. 60
(q) Company Representative; Agent of the Shareholders; Power of Attorney ....... 60
Exhibit A--Shareholders Agreement
Exhibit B--Working Capital Worksheet
Exhibit C--Agreement of Merger
Exhibit D--Form of Escrow Agreement
Exhibit E--Historical Financial Statements
Exhibit F--Form of Registration Rights Agreement
Exhibit G--Form of Employment Agreement with ▇▇▇▇▇ ▇. ▇▇▇▇▇
Exhibit H--Form of Opinion of Counsel to the Company
Exhibit I--Form of Opinion of Counsel to the Buyer
Schedule A--Form of Buyer Notes
iii
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
This Agreement and Plan of Reorganization (the "Agreement") is entered into
---------
as of December 17, 2001, by and among Therma-Wave, Inc., a Delaware corporation
(the "Buyer"), FND Corp., a California corporation and a wholly-owned subsidiary
-----
of the Buyer (the "Merger Subsidiary"), Sensys Instruments Corporation, a
-----------------
California corporation (the "Company"), and the Company Representative (as
-------
defined below). The Buyer, the Merger Subsidiary, the Company, and the Company
Representative are referred to collectively herein as the "Parties".
-------
Recitals
--------
This Agreement contemplates a tax-free forward subsidiary merger of the
Company with and into the Merger Subsidiary in a reorganization pursuant to
Section 368 of the Code. The Company's shareholders will receive capital stock
in the Buyer or, in the sole discretion of the Buyer (subject to certain
limitations), a combination of capital stock in the Buyer, cash and Buyer Notes,
in exchange for their capital stock in the Company. The Parties expect that the
Merger will further certain of their business objectives and the Boards of
Directors of each of the Buyer and the Company believe it is in the best
interests of each Person and their respective holders of equity that the Buyer
acquire the Company in a tax-free forward subsidiary merger.
Concurrently with the execution of this Agreement, certain Affiliates of
the Company are entering into a Shareholders Agreement in the form and substance
of Exhibit A attached hereto.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
1. Definitions.
-----------
"Accounting Referee" means a nationally recognized accounting firm (other
------------------
than PricewaterhouseCoopers LLP or KPMG LLP) mutually acceptable to the Buyer
and the Company Representative, and, in the event such Parties cannot mutually
agree, such nationally recognized accounting firm selected by
PricewaterhouseCoopers LLP and KPMG LLP.
"Accredited Investor" has the meaning set forth in Regulation D promulgated
-------------------
under the Securities Act.
"Accredited Investor Statement" has the meaning set forth in (S) 5(c)
-----------------------------
below.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
--------------------
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages (including punitive), dues, penalties, fines,
costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
losses, expenses, and fees, including court costs and reasonable attorneys' fees
and expenses.
1
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
---------
promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
----------------
(S) 1504(a) or any similar group defined under a similar provision of state,
local or foreign law.
"Agreement" has the meaning set forth in the preface above.
---------
"Agreement of Merger" has the meaning set forth in (S) 2(c) below.
-------------------
"Basis" means any past or present fact, situation, circumstance, status,
-----
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could reasonably form the basis for
any specified consequence.
"Buyer" has the meaning set forth in the preface above.
-----
"Buyer Notes" means the Buyer's promissory notes in the form of Schedule A
-----------
attached hereto.
"Buyer Securities" means, collectively, the Buyer Notes and Buyer Shares.
----------------
"Buyer Share" means any share of the Common Stock, $0.01 par value per
-----------
share, of the Buyer.
"Buyer Share Price" shall mean the average closing price per Buyer Share on
-----------------
the Nasdaq National Market over the fifteen (15) consecutive trading days ending
on the date which is two (2) trading days immediately preceding the Closing;
provided, however, in the event such Buyer Share Price is less than $10.50, the
-------- -------
Company's Board of Directors may in its sole discretion agree that for purposes
of this Agreement and the transactions contemplated hereby, the Buyer Share
Price is deemed to be $10.50, notwithstanding the actual average closing price
per Buyer Share on the Nasdaq National Market over such period.
"Buyer-owned Share" means any Company Share that the Buyer or the Merger
-----------------
Subsidiary owns beneficially.
"California Information Statement" has the meaning set forth in (S) 5(c)
--------------------------------
below.
"CERCLA" has the meaning set forth in (S) 4(aa) below.
------
"Certificates" means the certificates representing the Company Shares.
------------
"Closing" has the meaning set forth in (S) 2(b) below.
-------
"Closing Date" has the meaning set forth in (S) 2(b) below.
------------
"COBRA" means the requirements of Part 6 of Subtitle B of Title I of ERISA
-----
and Code (S) 4980B and of any similar state law.
"Code" means the Internal Revenue Code of 1986, as amended.
----
2
"Company" has the meaning set forth in the preface above.
-------
"Company Common Stock" means any share of the Common Stock, no par value
--------------------
per share, of the Company.
"Company Option Plan" has the meaning set forth in (S) 2(d)(vii) below.
-------------------
"Company Preferred Stock" means any share of the Preferred Stock, no par
-----------------------
value per share, of the Company.
"Company Representative" shall mean ▇▇▇▇▇ ▇. ▇▇▇▇▇ (or if such Person
----------------------
declines or is unable to do so, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, or if such Person declines or
is unable to do so, such Person as designated by the Board of Directors of the
Company, or, subsequent to the Merger, a majority of the Persons who comprised
such Board immediately prior to the Merger), as representative of all the
shareholders of the Company, who shall have such powers and authority in
accordance with (S) 11(q) below.
"Company Share" is used to collectively refer to the Company Common Stock,
-------------
Series A Preferred Stock, and Series B Preferred Stock.
"Company Stock Options and Stock Rights" has the meaning set forth in
--------------------------------------
(S) 2(d)(vii) below.
"Company Stock Rights" has the meaning set forth in (S) 4(b) below.
--------------------
"Company Warrants" has the meaning set forth in (S) 2(d)(vii)(E) below.
----------------
"Confidential Information" means any information concerning the businesses
------------------------
and affairs of the Company and its Subsidiaries that is not already generally
available to the public.
"Conversion Number" means the quotient obtained by dividing the Purchase
-----------------
Price by the Buyer Share Price.
"Conversion Ratio" means the quotient obtained by dividing the Conversion
----------------
Number by the aggregate number of Company Shares outstanding (on an as-if
converted basis) as of the Effective Time or issuable upon exercise of all
Company Stock Rights outstanding as of the Effective Time (other than (a) 90,000
Company Shares underlying the Company Stock Rights to ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇ as set forth in Schedule 4(b) of the Disclosure Schedules and (b) the
number of Company Shares underlying the Company Stock Options granted in
November and December 2001 and permitted to be granted after the date hereof but
prior to the Closing Date pursuant to (S) 5(e)), not to exceed 231,298 shares of
Company Common Stock.
"Deferred Intercompany Transaction" has the meaning set forth in
---------------------------------
Reg.(S) 1.1502-13.
"Disclosure Schedule" has the meaning set forth in (S) 4 below.
-------------------
3
"Dissenting Share" means any Company Share which any shareholder who or
----------------
which has exercised his or its appraisal rights under the California General
Corporation Law holds of record.
"Dual Beam Spectroscopy" means integrated metrology technology which splits
----------------------
a beam into two parts and measures both parts simultaneously.
"Effective Time" has the meaning set forth in (S) 2(d)(i) below.
--------------
"Employee Benefit Plan" means any "employee benefit plan" (as such term is
---------------------
defined in ERISA (S) 3(3)) and any other material employee benefit plan, program
or arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in ERIS (S) 3(2).
-----------------------------
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA (S)
-----------------------------
3(1).
"Environmental, Health, and Safety Requirements" shall mean all federal,
----------------------------------------------
state, local and foreign statutes, regulations, ordinances and other provisions
having the force or effect of law, all judicial and administrative orders and
determinations, all contractual obligations and all common law concerning public
health and safety, worker health and safety, and pollution or protection of the
environment, including without limitation all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of any hazardous materials, substances
or wastes, chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise or radiation, each as amended and as now or
hereafter in effect.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended.
"ERISA Affiliate" means each entity which is treated as a single employer
---------------
with the Company for purposes of Code (S) 414.
"Escrow Agent" has the meaning set forth in (S) 2(h)(i) below.
------------
"Escrow Agreement" has the meaning set forth in (S) 2(h)(i) below.
----------------
"Escrow Fund" has the meaning set forth in (S) 2(h)(i) below.
-----------
"Estoppel Certificates" has the meaning set forth in (S) 7(a) below.
---------------------
"Excess Loss Account" has the meaning set forth in Reg. (S) 1.1502-19.
-------------------
"Exchange Agent" has the meaning set forth in (S) 2(e)(i) below.
--------------
"Exchange Fund" has the meaning set forth in (S) 2(e)(i) below.
-------------
"Fiduciary" has the meaning set forth in ERISA (S) 3(21).
---------
4
"Financial Statement" has the meaning set forth in (S) 4(h) below.
-------------------
"FIRPTA Affidavit" has the meaning set forth in (S) 7(a) below.
----------------
"GAAP" means United States generally accepted accounting principles as in
----
effect from time to time.
"Improvements" has the meaning set forth in (S) 4(m)(iv) below.
------------
"Indemnified Party" has the meaning set forth in (S) 8(d) below.
-----------------
"Information Statement" has the meaning set forth in (S) 5(c) below.
---------------------
"Intellectual Property" means all of the following in any jurisdiction
---------------------
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goodwill associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases and related documentation), (g) all advertising and promotional
materials, (h) all other proprietary rights, and (i) all copies and tangible
embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation.
---------
"Lease Consents" has the meaning set forth in (S) 7(a) below.
--------------
"Leased Real Property" means all leasehold or subleasehold estates and
--------------------
other rights to use or occupy any land, buildings, structures, improvements,
fixtures or other interest in real property held by any of the Company or its
Subsidiaries.
"Leases" means all leases, subleases, licenses, concessions and other
------
agreements (written or oral), including all amendments, extensions, renewals,
guaranties and other agreements with respect thereto, pursuant to which any of
the Company or its Subsidiaries holds any Leased Real Property, including the
right to all security deposits and other amounts and instruments deposited by or
on behalf of the Company or its Subsidiaries thereunder.
"Liability" means any liability (whether known or unknown, whether asserted
---------
or unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
5
"Merger" has the meaning set forth in (S) 2(a) below.
------
"Merger Consideration" has the meaning set forth in (S) 2(d)(v) below.
--------------------
"Merger Subsidiary" has the meaning set forth in the preface above.
-----------------
"Minimum Working Capital" has the meaning set forth in (S) 2(g)(i) below.
-----------------------
"Most Recent Balance Sheet" means the balance sheet contained within the
-------------------------
Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth in (S) 4(h)
--------------------------------
below.
"Most Recent Fiscal Month End" has the meaning set forth in (S) 4(h) below.
----------------------------
"Most Recent Fiscal Year End" has the meaning set forth in (S) 4(h) below.
---------------------------
"Multiemployer Plan" has the meaning set forth in ERISA (S) 3(37).
------------------
"Ordinary Course of Business" means the ordinary course of business
---------------------------
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
-----
"PBGC" means the Pension Benefit Guaranty Corporation.
----
"Permit" has the meaning set forth in (S) 5(c) below.
------
"Permitted Encumbrances" means with respect to each parcel of real
----------------------
property: (a) real estate taxes, assessments and other governmental levies, fees
or charges imposed with respect to such Real Property which are not due and
payable as of the Closing Date, or which are being contested in good faith and
for which appropriate reserves have been established in accordance with GAAP;
(b) mechanics liens and similar liens for labor, materials or supplies provided
with respect to such Real Property incurred in the ordinary course of business
for amounts which are not due and payable and which would not, individually or
in the aggregate, have a material adverse effect on the Company's or its
Subsidiaries' business as currently conducted thereon; (c) zoning, building
codes and other land use laws regulating the use or occupancy of such Real
Property or the activities conducted thereon which are imposed by any
governmental authority having jurisdiction over such Real Property which are not
violated by the current use or occupancy of such Real Property or the operation
of the Company's or its Subsidiaries' business as currently conducted thereon;
and (d) easements, covenants, conditions, restrictions and other similar matters
of record affecting title to such Real Property which do not or would not impair
the use or occupancy of such Real Property in the operation of the Company's or
its Subsidiaries' business as currently conducted thereon.
"Person" means an individual, a partnership, a corporation, a limited
------
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a governmental entity (or any
department, agency, or political subdivision thereof).
6
"Prohibited Transaction" has the meaning set forth in ERISA (S) 406 and
----------------------
Code (S) 4975.
"Purchase Price" means, subject to adjustment as set forth in (S) 2(g)
--------------
below, the greater of (a) $75,000,000 or (b) the sum of (i) the product of
4,800,000 Buyer Shares multiplied by the Buyer Share Price and (ii) the product
of the aggregate number of Company Shares (on an as-if converted basis) issuable
upon exercise of all Company Stock Rights outstanding as of the Effective Date
multiplied by the Conversion Ratio and multiplied by the Buyer Share Price;
provided, however, in the event that the Purchase Price under clause (b) above
-------- -------
is greater than $90,000,000, the Purchase Price shall mean $90,000,000.
Notwithstanding anything in this Agreement to the contrary, in no event shall
the Buyer be required to deliver Merger Consideration (including cash, if any,
used to purchase the Company Warrants pursuant to (S) 2(d)(vii)(E)) having a
value, as determined pursuant to this Agreement, in excess of such Purchase
Price.
"Real Property Laws" has the meaning set forth in (S) 4(m) below.
------------------
"Real Property Permits" has the meaning set forth in (S) 4(m) below.
---------------------
"Registration Statement" has the meaning set forth in (S) 6(h) below.
----------------------
"Reportable Event" has the meaning set forth in ERISA (S) 4043.
----------------
"Requisite Shareholders Approval" means the affirmative vote of the holders
-------------------------------
of that number of Company Shares in favor of this Agreement and the Merger and
the affirmative separate class vote or votes of the holders of that number of
the Company Common Stock, Series A Preferred Stock and Series B Preferred Stock,
voting together as one class or separately, each as required by the charter and
bylaws of the Company and the California General Corporation Law, in favor of
this Agreement and the Merger.
"Securities Act" means the Securities Act of 1933, as amended.
--------------
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
-----------------------
amended.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
-----------------
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for Taxes not yet due and payable or for Taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money.
"Series A Preferred Stock" means any share of the Series A Preferred Stock,
------------------------
no par value per share, of the Company.
"Series B Preferred Stock" means any share of the Series B Preferred Stock,
------------------------
no par value per share, of the Company.
"Special Company Meeting" has the meaning set forth in (S) 5(c) below.
-----------------------
7
"Subsidiary" means any corporation with respect to which a specified Person
----------
(or a Subsidiary thereof) owns a majority of the common stock or has the power
to vote or direct the voting of sufficient securities to elect a majority of the
directors.
"Surviving Corporation" has the meaning set forth in (S) 2(a) below.
---------------------
"SWDA" has the meaning set forth in (S) 4(aa) below.
----
"Tax" means any federal, state, local, or foreign income, gross receipts,
---
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code (S) 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Return" means any return, declaration, report, claim for refund, or
----------
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in (S) 8(d) below.
-----------------
"Transaction Agreements" means this Agreement, the Shareholders Agreement
----------------------
attached as Exhibit A, the Escrow Agreement attached as Exhibit D, the
Registration Rights Agreement attached as Exhibit F and the Employment Agreement
attached as Exhibit G.
"Working Capital" means, as of the date of determination, an amount equal
---------------
to the current assets of the Company, less the current liabilities of the
----
Company, in each case determined in accordance with GAAP (except as otherwise
noted in Exhibit B) and the Working Capital Worksheet attached hereto as Exhibit
B, applied in a manner consistent with the preparation of the Financial
Statements (except as otherwise noted in Exhibit B).
2. Basic Transaction.
-----------------
(a) The Merger. On and subject to the terms and conditions of this
----------
Agreement, the Company will merge with and into the Merger Subsidiary (the
"Merger") at the Effective Time. The Merger Subsidiary shall be the corporation
------
surviving the Merger (the "Surviving Corporation").
---------------------
(b) The Closing. The closing of the transactions contemplated by this
-----------
Agreement (the "Closing") shall take place at the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ in
-------
Los Angeles, California, commencing at 9:00 a.m. local time on the second
business day following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take
at the Closing itself) or such other date as the Buyer and the Company may
mutually determine (the "Closing Date"). The Parties currently intend that the
------------
Closing Date will occur on or prior to January 31, 2002.
8
(c) Actions at the Closing. At the Closing, (i) the Company will deliver to
----------------------
the Buyer and the Merger Subsidiary the various certificates, instruments, and
documents referred to in (S) 7(a) below, (ii) the Buyer and the Merger
Subsidiary will deliver to the Company the various certificates, instruments,
and documents referred to in (S) 7(b) below, (iii) the Company and the Merger
Subsidiary will file with the Secretary of State of the State of California an
agreement of merger to effectuate the Merger in substantially the form attached
hereto as Exhibit C (the "Agreement of Merger"), and (iv) the Buyer will deliver
-------------------
to the Exchange Agent in the manner provided below in this (S) 2 the
certificates evidencing the Buyer Shares issued in the Merger.
(d) Effect of Merger.
----------------
(i) General. The Merger shall become effective at the time (the
-------
"Effective Time") the Agreement of Merger as executed by each of the
--------------
Company and the Merger Subsidiary is filed with and accepted by the
Secretary of State of the State of California. The Merger shall have
the effect set forth in the California General Corporation Law. The
Surviving Corporation may, at any time after the Effective Time, take
any action (including executing and delivering any document) in the
name and on behalf of either the Company or the Merger Subsidiary in
order to carry out and effect the transactions contemplated by this
Agreement.
(ii) Articles of Incorporation. The Articles of Incorporation of
-------------------------
the Surviving Corporation shall be the Articles of Incorporation of the
Merger Subsidiary immediately prior to the Effective Time (except that
the name of the Surviving Corporation will be changed to "Sensys
Instruments Corporation").
(iii) Bylaws. The Bylaws of the Surviving Corporation shall be
------
Bylaws of the Merger Subsidiary immediately prior to the Effective Time
(except that the name of the Surviving Corporation will be changed to
"Sensys Instruments Corporation").
(iv) Directors and Officers. The officers of the Company shall
----------------------
become the officers of the Surviving Corporation at and as of the
Effective Time (retaining their respective positions and terms of
office). The directors of the Merger Subsidiary shall become the
directors of the Surviving Corporation at and as of the Effective Time
(retaining their respective positions and terms of office).
(v) Conversion of Shares.
--------------------
(A) At and as of the Effective Time, (i) each Company Share
(on an as-if converted basis) (other than any Dissenting Share or
Buyer-owned Share) shall be automatically converted into the right
to receive a number of Buyer Shares equal to the Conversion Ratio
(such amount referred to in this clause (i) is referred to herein
as the "Merger Consideration"), (ii) each Dissenting Share shall
--------------------
not be converted into the right to receive the Merger
Consideration set forth in clause (i) above, and instead, shall be
converted into the right to receive payment from the
9
Surviving Corporation with respect thereto as provided by the
California General Corporation Law, unless and until the holder of
any such share shall have failed to perfect or shall have
effectively withdrawn or lost his right to appraisal and payment
in accordance with the provisions of the California General
Corporation Law, in which case such share shall not be deemed a
Dissenting Share and shall thereupon be deemed, as of the
Effective Time, to have been cancelled and extinguished and been
converted into the right to receive Merger Consideration as set
forth in clause (i) above, and (iii) each Buyer-owned Share shall
automatically be cancelled and extinguished without any conversion
thereof and no payment shall be made with respect thereto;
provided, however, that the Merger Consideration shall be subject
-------- -------
to equitable adjustment in the event of any stock split, stock
dividend, reverse stock split, or other change in the number of
Company Shares outstanding after the date hereof. No Company Share
shall be deemed to be outstanding or to have any rights other than
those set forth in this(S) 2(d)(v) after the Effective Time. From
and after the Effective Time, no shareholder of the Company who
has demanded appraisal rights shall be entitled to vote his or its
Company Shares for any purpose or to receive payment of dividends
or other distributions on his or its Company Shares (except
dividends or other distributions payable to shareholders of record
at a date prior to the Effective Time). No certificates
representing fractional shares of Buyer Shares shall be issued
upon the surrender for exchange of Certificates. Instead, there
shall be issued one whole Buyer Share for any remaining fraction
of a Buyer Share which otherwise would be issuable with respect to
a Certificate pursuant to application of this subsection. For
purposes of carrying out the intent of the foregoing sentence,
Buyer may aggregate the Certificates of each holder of
Certificates so that fractional Buyer Shares due in exchange for
multiple Certificates may be combined to yield a number of whole
shares thereof plus a single fraction.
(B) The Buyer shall have the right, in its sole discretion, to
substitute cash and/or Buyer Notes in lieu of any portion of the
Buyer Shares to be issued at the Closing (valuing the Buyer Shares
at the Buyer Share Price) if (i) such substitution would not
prevent the Merger from qualifying as a reorganization pursuant to
Section 368 of the Code and (ii) at least 4,800,000 Buyer Shares
(as such number of Buyer Shares is adjusted downward by the number
of Buyer Shares issuable upon the exercise or conversion of the
Company Stock Rights (other than the options under the Company
Option Plan) assumed by the Buyer in the Merger in accordance with
(S) 2(d)(vii) below) are issued as Merger Consideration; provided
--------
that in the event of any such substitution, the Buyer shall be
required to make such substitution in the following priority: (I)
the initial $3,500,000 of any such substitution shall be in the
form of cash (which under certain circumstances shall be payable
to the holders of the Company Warrants which are purchased and
cancelled in accordance with (S) 2(d)(vii)(E)), (II) the following
$7,500,000 of any such substitution
10
shall be in the form of Buyer Notes, and (III) any such
substitution in excess of $11,000,000 shall be in the form of
cash. The Buyer may exercise such right by issuing a notice to the
Company at any time prior to the Effective Time. Any cash or Buyer
Notes substituted as described in this (S) 2(d)(v) shall be pro
rata among all the shareholders of the Company in proportion to
the aggregate Merger Consideration such shareholders would
otherwise be entitled under (S) 2(d)(v)(A). Any cash or Buyer
Notes substituted shall also be considered as "Merger
Consideration" for purposes of this Agreement.
(vi) Conversion of Capital Stock of the Merger Subsidiary. At and
----------------------------------------------------
as of the Effective Time, each share of Common Stock, $0.001 par value
per share, of the Merger Subsidiary shall be converted into one share
of Common Stock, $0.001 par value per share, of the Surviving
Corporation.
(vii) Stock Options and Other Company Stock Rights.
--------------------------------------------
(A) At and as of the Effective Time, each of the then
outstanding options (including each outstanding option granted
under the Company's 1995 Stock Option Plan (the "Company Option
--------------
Plan") and any outstanding individual non-plan options) and other
----
Company Stock Rights to purchase capital stock of the Company
whether vested or unvested (collectively, the "Company Stock
-------------
Options and Stock Rights") shall be assumed by the Buyer in
------------------------
accordance with this (S) 2(d)(vii), other than those Company
Warrants purchased and cancelled in accordance with
(S) 2(d)(vii)(E) below.
(B) At and as of the Effective Time, each Company Stock Option
and Stock Right, whether or not exercisable, will be assumed by
the Buyer. The term, exercisability, vesting schedule, vesting
commencement date, status as an incentive stock option under
Section 422 of the Code, if applicable, and all other terms and
conditions of each Company Stock Option and Stock Right so assumed
by the Buyer under this Agreement will remain unchanged, except
that (i) each Company Stock Option and Stock Right will be
exercisable (or will become exercisable in accordance with its
terms) for that number of whole shares of Buyer Shares equal to
the product of the number of Company Shares that were issuable
upon exercise of such Company Stock Option and Stock Right
(whether or not then exercisable) immediately prior to the
Effective Time multiplied by the Conversion Ratio, rounded to the
nearest whole number of Buyer Shares and (ii) the per share
exercise price for the Buyer Shares issuable upon exercise of such
assumed Company Stock Option and Stock Right will be equal to the
quotient determined by dividing the exercise price per Company
Share at which such Company Stock Option and Stock Right was
exercisable immediately prior to the Effective Time by the
Conversion Ratio, rounded to the nearest whole cent. As soon as
reasonably practicable after the Effective Time, the
11
Buyer will issue to each holder of an outstanding Company Stock
Option and Stock Right a notice describing the foregoing
assumption of such Company Stock Option and Stock Right by the
Buyer.
(C) It is intended that the options constituting the Company
Stock Options and Stock Rights assumed by the Buyer shall qualify
following the Effective Time as incentive stock options as defined
in Section 422 of the Code to the extent such Company Stock
Options and Stock Rights qualified as incentive stock options
immediately prior to the Effective Time and the provisions of this
(S) 2(d)(vii)(C) shall be applied consistent with such intent.
(D) The Buyer will reserve sufficient shares of Buyer Shares
for issuance under this (S) 2(d)(vii).
(E) To the extent (i) cash has been substituted in lieu of any
portion of the Buyer Shares pursuant to (S) 2(d)(v)(B), (ii)
holders of the warrants convertible into Company Shares (the
"Company Warrants") have tendered such Company Warrants for
----------------
purchase by the Company and (iii) the amount of such cash is
sufficient to purchase such Company Warrants tendered by such
holders, such Company Warrants shall be paid from such cash
portion of the Merger Consideration and cancelled, rather than
assumed in accordance with (S) 2(d)(vii). Such tender of Company
Warrants shall only be effective (and cash payment in respect of
such Company Warrants only be required) upon the Effective Time.
The purchase price for each such Company Warrant shall be the
product of the number of Company Shares underlying such Company
Warrant and the difference of the per share Merger Consideration
and the per share exercise price for such Company Share (each as
determined pursuant to (S) 2(d)(vii)(B) as if such Company
Warrant had been assumed pursuant to (S) 2(d)(vii)(A)), assuming
that such Company Warrant had been assumed in accordance with (S)
2(d)(vii). For purposes of this section and calculating such per
share Merger Consideration, the Conversion Ratio shall be
calculated assuming that the Company Shares underlying such
Company Warrants are issued and outstanding, notwithstanding the
purchase and cancellation of such Company Warrants.
(e) Procedure for Payment.
---------------------
(i) Immediately after the Effective Time, (A) other than the
amount of the Merger Consideration withheld and delivered to the Escrow
Agent pursuant to (S) 2(h) below, the Buyer will furnish to EquiServe
Trust Company, N.A. (the "Exchange Agent") a corpus (the "Exchange
-------------- --------
Fund") consisting of any cash or Buyer Notes substituted in lieu of
----
Buyer Shares pursuant to (S) 2(d)(v)(B) above and a stock certificate
(issued in the name of the Exchange Agent or its nominee) representing
that number of Buyer Shares equal to the product of (I) the Conversion
Ratio times (II) the number of outstanding Company Shares (other
12
than any Dissenting Shares and Buyer-owned Shares) and (B) the Buyer
will cause the Exchange Agent to mail a letter of transmittal (with
instructions for its use) reasonably acceptable to the Company, which
form shall include (I) the contractual restrictions against the
transfer of the Buyer Shares described in (S) 6(j), (II) a
representation of the holder of the Buyer Shares as to whether or not
such Person is an Accredited Investor, and (III) a copy of the
Registration Rights Agreement in the form attached hereto as Exhibit
F, to each record holder of outstanding Company Shares for the holder
to use in surrendering the Certificates which represented his or its
Company Shares against payment of the Merger Consideration.
(ii) The Buyer may cause the Exchange Agent to invest any cash
included in the Exchange Fund in a "AAA" rated interest-bearing account
held by a U.S. financial institution; provided, however, that the terms
-------- -------
and conditions of the investments shall be such as to permit the
Exchange Agent to make prompt payment of the Merger Consideration as
necessary. The Buyer may cause the Exchange Agent to pay over to the
Surviving Corporation any net earnings with respect to the investments,
and the Buyer will replace promptly any portion of the Exchange Fund
which the Exchange Agent loses through investments.
(iii) The Buyer will not pay any dividend or make any distribution
on Buyer Shares (with a record date at or after the Effective Time) to
any record holder of outstanding Company Shares until the holder
surrenders for exchange his or its Certificates which represented
Company Shares. The Buyer instead will pay the dividend or make the
distribution to the Exchange Agent in trust for the benefit of the
holder pending surrender and exchange. The Buyer may cause the Exchange
Agent to invest any cash the Exchange Agent receives from the Buyer as
a dividend or distribution in a "AAA" rated interest-bearing account
held by a U.S. financial institution; provided, however, that the terms
-------- -------
and conditions of the investments shall be such as to permit the
Exchange Agent to make prompt payments of cash to the holders of
outstanding Company Shares as necessary. The Buyer may cause the
Exchange Agent to pay over to the Buyer any net earnings with respect
to the investments, and the Buyer will replace promptly any cash which
the Exchange Agent loses through investments. In no event, however,
will any holder of outstanding Company Shares be entitled to any
interest or earnings on the dividend or distribution pending receipt.
(iv) The Buyer may cause the Exchange Agent to return and pay over
to the Surviving Corporation any portion of the Exchange Fund
(including any earnings and dividends and distributions thereon)
remaining unclaimed 360 days after the Effective Time, and thereafter
each remaining record holder of outstanding Company Shares shall be
entitled to look to the Buyer (subject to abandoned property, escheat,
and other similar laws) as a general creditor thereof with respect to
any cash and earnings thereon and the Buyer Shares and dividends and
distributions thereon to which he or it is entitled upon surrender of
his or its Certificates.
13
(v) The Buyer shall pay all charges and expenses of the Exchange
Agent.
(f) Closing of Transfer Records. After the close of business on the Closing
---------------------------
Date, transfers of Company Shares outstanding prior to the Effective Time shall
not be made on the stock transfer books of the Surviving Corporation. If, after
the Effective Time, valid Certificates representing the Company Shares or valid
instruments representing Company Stock Options and Stock Rights are presented to
the Surviving Corporation or the Buyer in accordance with (S) 2(e) above, such
Certificates and instruments shall be cancelled and exchanged for the
consideration provided in (S) 2(d) above.
(g) Minimum Working Capital on Closing Date.
---------------------------------------
(i) As of the close of business on the Closing Date, the Working
Capital of the Company shall be at least the amount of the target
Minimum Working Capital calculated as set forth on Exhibit B ("Minimum
-------
Working Capital").
---------------
(ii) The Working Capital of the Company as of the close of
business on the Closing Date shall be determined in accordance with the
Working Capital Worksheet attached hereto as Exhibit B and in good
faith by the Buyer as soon as practicable after the Closing but, in any
event, within sixty (60) days after the Closing. In the event that the
Buyer determines that Working Capital of the Company as of the close of
business on the Closing Date is less than Minimum Working Capital and
the Buyer decides, in its sole discretion to seek recovery pursuant to
this (S) 2(g), the Buyer shall send such determination (which shall be
prepared in writing and set forth the Buyer's computations in
reasonable detail), along with any workpapers related thereto, to the
Company Representative. The Company Representative shall have a thirty
(30) day period following its receipt of the Buyer's notification to
consider and object to the Buyer's determination of Working Capital of
the Company as of the close of business on the Closing Date. In the
event that the Company Representative objects to such determination of
the Buyer, the Company Representative shall send written notice of such
objection, including a reasonably detailed explanation of the reasons
therefor, to the Buyer within such thirty (30) day period. Thereafter,
the Buyer and the Company Representative shall use their reasonable
efforts to promptly, and, in any event within seven (7) business days,
resolve any differences they may have with respect to such
determination of the Buyer. In the event that such thirty (30) day
period lapses without any written notice of the Company Representative
having been sent to the Buyer, then the Company Representative, on
behalf of all of the shareholders of the Company, shall be deemed to
have finally accepted such determination of the Buyer.
(iii) In the event that the Buyer and the Company Representative
are not able to agree upon Working Capital of the Company as of the
close of business on the Closing Date during the seven (7) business day
period referenced in (S) 2(g)(ii) above, the calculation of such
amounts will be referred for final
14
binding resolution to an Accounting Referee. The Accounting Referee
shall be directed to issue its written determination of such amounts
within thirty (30) days after such submission. One-half of the fees of
the Accounting Referee shall be borne by the Buyer with the remainder
of such fees to be paid from the Escrow Fund in accordance with the
Escrow Agreement.
(iv) Any shortfall of Working Capital of the Company as of the
close of business on the Closing Date below Minimum Working Capital
shall be paid from the Escrow Fund (and only up to the amount of such
Escrow Fund) and in accordance with the Escrow Agreement.
(v) In the event that the Company Representative does not object
to the Buyer's determination of such Working Capital of the Company
during the thirty (30) day period referred to in (S) 2(g)(ii), or, if
the Company Representative does object to such determination within
such prescribed period, upon final determination of such Working
Capital of the Company in accordance herewith, the Company
Representative shall have no power or authority to object under any
provision of the Escrow Agreement to the amount of such shortfall claim
against the Escrow Fund (and release of such amount from the Escrow
Fund).
(vi) The reasonable expenses of the Company Representative
(including reasonable expenses of one legal counsel, accountants and
other necessary consultants) incurred by such person in connection with
this (S) 2(g) shall be paid from the Escrow Fund in accordance with the
terms of the Escrow Agreement.
(h) Escrow Fund.
-----------
(i) Buyer Shares having a value equal to ten percent (10%) of the
Purchase Price (such Buyer Shares being the "Escrow Fund") shall be
-----------
withheld from the amounts issued to the Company's shareholders pro rata
among all shareholders of the Company in proportion to the aggregate
Merger Consideration such shareholders would otherwise be entitled
under (S) 2(d)(v), and shall instead be delivered to an escrow agent
(the "Escrow Agent") pursuant to an escrow agreement substantially in
------------
the form of Exhibit D hereto (the "Escrow Agreement") to satisfy any
--------- ----------------
(A) shortfall of Working Capital of the Company as of the close of
business on the Closing Date below Minimum Working Capital, (B)
indemnification payments to the Buyer pursuant to (S) 8 hereof, and (C)
any other payments or reimbursements to the Buyer pursuant to this
Agreement. Any release of the Buyer Shares from the Escrow Fund shall
be in accordance with the Escrow Agreement.
(ii) For purposes of this (S) 2(h), Buyer Shares shall be valued
at the Buyer Share Price. To the extent cash or Buyer Notes has been
substituted in lieu of any portion of the Buyer Shares pursuant to
(S) 2(d)(v)(B), the allocation of the Escrow Fund between Buyer Shares,
cash and Buyer Notes shall be, to the extent any Buyer Notes have been
substituted, such Buyer Notes and the balance, if any,
15
pro rata between Buyer Shares and cash based on the Merger
Consideration allocation (other than any cash portion of the Merger
Consideration used, if any, to purchase Company Warrants pursuant
to (S) 2(d)(vii)(E)). In addition, the allocation between Buyer Shares,
cash and Buyer Notes in respect of any releases of the Escrow Fund
shall be, to the extent any Buyer Notes have been substituted, first,
from such Buyer Notes and thereafter, pro rata between Buyer Shares
and cash based on the Merger Consideration allocation (other than any
cash portion of the Merger Consideration used, if any, to purchase
Company Warrants pursuant to (S) 2(d)(vii)(E)); provided, further, any
-------- -------
releases of the Buyer Notes shall be reductions pro rata between
principal and accrued interest thereon. To the extent cash
consideration or Buyer Notes has been deposited in the Escrow Fund,
references to Buyer Shares shall include references to such cash
consideration or Buyer Notes.
3. Representations and Warranties of the Buyer and the Merger Subsidiary.
---------------------------------------------------------------------
Each of the Buyer and the Merger Subsidiary represents and warrants to the
Company that the statements contained in this (S) 3 are correct and complete as
of the date of this Agreement and will be correct and complete as of the Closing
Date (as though made then and as though the Closing Date were substituted for
the date of this Agreement throughout this (S) 3).
(a) Organization. Each of the Buyer and the Merger Subsidiary is a
------------
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation.
(b) Authorization of Transaction. Each of the Buyer and the Merger
----------------------------
Subsidiary has full power and authority (including full corporate power and
authority) to execute and deliver this Agreement and the other Transaction
Agreements to which it is a party and to perform its obligations thereunder.
This Agreement and the other Transaction Agreements to which it is a party
constitutes the valid and legally binding obligation of the Buyer and the Merger
Subsidiary, enforceable against it in accordance with its terms and conditions.
Neither the Buyer nor the Merger Subsidiary needs to give any notice to, make
any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement and the other Transaction Agreements to which it is a party, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which either the Buyer or the Merger Subsidiary is subject or any
provision of the charter or bylaws of either the Buyer or the Merger Subsidiary
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material provision of any
agreement, contract, lease, license, instrument, or other arrangement to which
either the Buyer or the Merger Subsidiary is a party or by which it is bound or
to which any of its assets is subject.
16
(d) Continuity of Business Enterprises. It is the present intention of
----------------------------------
the Buyer to continue at least one significant historic business line of the
Company, or to use at least a significant portion of the Company's historic
business assets in a business, in each case within the meaning of
Reg. (S) 1.368-1(d).
(e) Buyer Shares. The Buyer Shares to be issued pursuant to (S) 2 above
------------
upon issuance thereof will be validly issued, fully paid, and nonassessable.
(f) Eligibility to Use Form S-3. The Buyer currently meets the
---------------------------
"registrant eligibility" requirements set forth in Part I.A. of the general
instructions to Form S-3.
4. Representations and Warranties Concerning the Company and Its
-------------------------------------------------------------
Subsidiaries. The Company represents and warrants to the Buyer that the
------------
statements contained in this (S) 4 are correct and complete as of the date of
this Agreement and will be correct and complete as of the Closing Date (as
though made then and as though the Closing Date were substituted for the date of
this Agreement throughout this (S) 4), except as set forth in the disclosure
schedule delivered by the Company to the Buyer on the date hereof (the
"Disclosure Schedule"). The Disclosure Schedule will be arranged in paragraphs
-------------------
corresponding to the lettered and numbered paragraphs contained in this (S) 4.
(a) Organization, Qualification, and Corporate Power. Each of the
------------------------------------------------
Company and its Subsidiaries is a corporation duly organized, validly existing,
and in good standing under the laws of the jurisdiction of its incorporation.
Each of the Company and its Subsidiaries is duly authorized to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have a material adverse effect on the business, financial condition, operation,
or results of operations of any of the Company and its Subsidiaries. Each of the
Company and its Subsidiaries has full corporate power and authority and all
licenses, permits, and authorizations necessary to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it.
(S) 4(a) of the Disclosure Schedule lists the directors and officers of each of
the Company and its Subsidiaries. The Company has delivered to the Buyer correct
and complete copies of the charter and bylaws of each of the Company and its
Subsidiaries (as amended to date). The minute books (containing the records of
meetings of the shareholders, the board of directors, and any committees of the
board of directors), the stock certificate books, and the stock record books of
each of the Company and its Subsidiaries are correct and complete. None of the
Company and its Subsidiaries is in default under or in violation of any
provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of the Company
--------------
consists of 20,000,000 shares of Company Common Stock, 4,790,384 of which are
issued and outstanding, and 10,000,000 shares of Company Preferred Stock of
which 2,000,000 shares are designated as Series A Preferred Stock, 1,905,600 of
which are issued and outstanding, and 5,000,000 shares are designated as Series
B Preferred Stock, 4,348,141 of which are issued and outstanding. All of the
issued and outstanding Company Shares have been duly authorized, are validly
issued, fully paid, and nonassessable, have been offered, issued, and sold by
the Company in compliance with applicable federal and state securities laws, and
are held of record by the respective shareholders as set forth in (S) 4(b) of
the Disclosure Schedule. To the Knowledge of any of the directors and officers
of the Company and its Subsidiaries, no more
17
than 35 of the shareholders of the Company are not Accredited Investors. (S)
4(b) of the Disclosure Schedule lists all of the holders of options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require the Company to issue, sell, or
otherwise cause to become outstanding any of its capital stock (collectively,
the "Company Stock Rights"), and the number and class of shares of Company
--------------------
Shares subject to such Company Stock Rights. Except as set forth in (S) 4(b) of
the Disclosure Schedule, there are no other outstanding or authorized Company
Stock Rights. There are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to the Company. To
the Knowledge of any of the directors and officers of the Company and its
Subsidiaries, there are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of the capital stock of the Company,
other than such agreement under the Shareholders Agreement attached hereto as
Exhibit A.
(c) Authorization of Transaction. The Company has full power and
----------------------------
authority (including full corporate power and authority) to execute and deliver
this Agreement and the other Transaction Agreements to which it is a party and
to perform its obligations thereunder; provided, however, that the Company
cannot consummate the Merger unless and until it receives the Requisite
Shareholders Approval. This Agreement and the other Transaction Agreements to
which it is a party constitute the valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms and
conditions.
(d) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement and the other Transaction Agreements to which it is a party, nor the
consummation of the transactions contemplated hereby, will (i) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which any of the Company and its Subsidiaries is subject or any
provision of the charter or bylaws of any of the Company and its Subsidiaries or
(ii) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material provision of any
agreement, contract, lease, license, instrument, or other arrangement to which
any of the Company and its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). None of the Company and its Subsidiaries needs
to give any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order for the
Company and its Subsidiaries to consummate the transactions contemplated by this
Agreement, other than the filing of the Agreement of Merger with the Secretary
of State of the State of California.
(e) Brokers' Fees. None of the Company and its Subsidiaries has any
-------------
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement.
(f) Title to Assets. The Company and its Subsidiaries have good and
---------------
marketable title to, or a valid leasehold interest in, the properties and assets
used by them, located on their premises, or shown on the Most Recent Balance
Sheet or acquired after the date thereof, free and clear of all Security
Interests, except for properties and assets disposed of in the Ordinary Course
of Business since the date of the Most Recent Balance Sheet.
18
(g) Subsidiaries. (S) 4(g) of the Disclosure Schedule sets forth for
------------
each Subsidiary of the Company (i) its name and jurisdiction of incorporation,
(ii) the number of shares of authorized capital stock of each class of its
capital stock, (iii) the number of issued and outstanding shares of each class
of its capital stock, the names of the holders thereof, and the number of shares
held by each such holder, and (iv) the number of shares of its capital stock
held in treasury. All of the issued and outstanding shares of capital stock of
each Subsidiary of the Company have been duly authorized and are validly issued,
fully paid, and nonassessable. Either the Company or one of its Subsidiaries
holds of record and owns beneficially all of the outstanding shares of each
Subsidiary of the Company, free and clear of any restrictions on transfer (other
than restrictions under the Securities Act and state securities laws), Taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of the Company
and its Subsidiaries to sell, transfer, or otherwise dispose of any capital
stock of any of its Subsidiaries or that could require any Subsidiary of the
Company to issue, sell, or otherwise cause to become outstanding any of its own
capital stock. There are no outstanding stock appreciation, phantom stock,
profit participation, or similar rights with respect to any Subsidiary of the
Company. There are no voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of any Subsidiary
of the Company. None of the Company and its Subsidiaries controls directly or
indirectly or has any direct or indirect equity participation in any
corporation, partnership, trust, or other business association which is not a
Subsidiary of the Company.
(h) Financial Statements. Attached hereto as Exhibit E are the
--------------------
following financial statements (collectively the "Financial Statements"): (i)
--------------------
audited balance sheet and statements of operations, changes in shareholders'
equity, and cash flow as of and for the fiscal year ended December 31, 2000 (the
"Most Recent Fiscal Year End") for the Company and its Subsidiaries; and (ii)
---------------------------
unaudited balance sheet and statements of income, and cash flow (the "Most
----
Recent Financial Statements") as of and for the ten (10) months ended October
---------------------------
31, 2001 (the "Most Recent Fiscal Month End") for the Company and its
----------------------------
Subsidiaries. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby, present fairly the financial condition of the Company
and its Subsidiaries as of such dates and the results of operations of the
Company and its Subsidiaries for such periods, are correct and complete, and are
consistent with the books and records of the Company and its Subsidiaries (which
books and records are correct and complete); provided, however, that the Most
-------- -------
Recent Financial Statements are subject to normal year-end adjustments (which
will not be material individually or in the aggregate) and lack footnotes and
other presentation items.
(i) Events Subsequent to Most Recent Fiscal Year End. Since the Most
------------------------------------------------
Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, results of operations, or future
prospects of any of the Company and its Subsidiaries. Without limiting the
generality of the foregoing, since that date:
(i) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any of its assets, tangible or intangible,
other than for a fair consideration in the Ordinary Course of Business;
19
(ii) none of the Company and its Subsidiaries has entered into any
agreement, contract, lease, or license (or series of related
agreements, contracts, leases, and licenses) either involving more than
$10,000 or outside the Ordinary Course of Business;
(iii) no party (including any of the Company and its Subsidiaries)
has accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases, and licenses) involving more than $10,000 to which
any of the Company and its Subsidiaries is a party or by which any of
them is bound;
(iv) none of the Company and its Subsidiaries has imposed any
Security Interest upon any of its assets, tangible or intangible;
(v) none of the Company and its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either
involving more than $10,000 or outside the Ordinary Course of Business;
(vi) none of the Company and its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments,
loans, and acquisitions) either involving more than $10,000 or outside
the Ordinary Course of Business;
(vii) none of the Company and its Subsidiaries has issued any
note, bond, or other debt security or created, incurred, assumed, or
guaranteed any indebtedness for borrowed money or capitalized lease
obligation either involving more than $10,000 singly or $50,000 in the
aggregate;
(viii) none of the Company and its Subsidiaries has delayed or
postponed the payment of accounts payable and other Liabilities outside
the Ordinary Course of Business;
(ix) none of the Company and its Subsidiaries has cancelled,
compromised, waived, or released any right or claim (or series of
related rights and claims) either involving more than $10,000 or
outside the Ordinary Course of Business;
(x) none of the Company and its Subsidiaries has granted any
license or sublicense of any rights under or with respect to any
Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of any of the Company and its Subsidiaries;
(xii) none of the Company and its Subsidiaries has issued, sold,
or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including
upon conversion, exchange, or exercise) any of its capital stock;
20
(xiii) none of the Company and its Subsidiaries has declared, set
aside, or paid any dividend or made any distribution with respect to
its capital stock (whether in cash or in kind) or redeemed, purchased,
or otherwise acquired any of its capital stock;
(xiv) none of the Company and its Subsidiaries has experienced any
damage, destruction, or loss (whether or not covered by insurance) to
its property, except for ordinary wear and tear;
(xv) none of the Company and its Subsidiaries has made any loan
to, or entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xvi) none of the Company and its Subsidiaries has entered into
any employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement;
(xvii) none of the Company and its Subsidiaries has granted any
increase in the base compensation of any of its directors, officers,
and employees outside the Ordinary Course of Business;
(xviii) none of the Company and its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken any such action
with respect to any other Employee Benefit Plan);
(xix) none of the Company and its Subsidiaries has made any other
change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xx) none of the Company and its Subsidiaries has made or pledged
to make any charitable or other capital contribution outside the
Ordinary Course of Business;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the Ordinary
Course of Business involving any of the Company and its Subsidiaries
other than with the transactions contemplated by this Agreement; and
(xxii) none of the Company and its Subsidiaries has committed to
any of the foregoing.
(j) Undisclosed Liabilities. None of the Company and its Subsidiaries
-----------------------
has any Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) of the type which should be reflected
in the Financial Statements prepared in accordance with GAAP, except for (i)
Liabilities set forth on the face of the Most Recent
21
Balance Sheet (or described in the notes to the Financial Statements for the
Most Recent Fiscal Year End) and (ii) Liabilities which have arisen after the
Most Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by
any breach of contract, breach of warranty, tort, infringement, or violation of
law).
(k) Legal Compliance. Each of the Company and its Subsidiaries has
----------------
complied in all material respects with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
(l) Tax Matters.
-----------
(i) Each of the Company and its Subsidiaries has filed all Tax
Returns that it was required to file. All such Tax Returns were correct
and complete in all material respects. All Taxes owed by any of the
Company and its Subsidiaries (whether or not shown on any Tax Return)
have been paid. None of the Company and its Subsidiaries currently is
the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction
where any of the Company and its Subsidiaries does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the assets of any of the Company
and its Subsidiaries that arose in connection with any failure (or
alleged failure) to pay any Tax.
(ii) Each of the Company and its Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection
with amounts paid or owing to any employee, independent contractor,
creditor, shareholder, or other third party.
(iii) No director or officer (or employee responsible for Tax
matters) of any of the Company and its Subsidiaries expects any
authority to assess any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any
Tax Liability of any of the Company and its Subsidiaries either (A)
claimed or raised by any authority in writing or (B) as to which any of
the directors and officers (and employees responsible for Tax matters)
of the Company and its Subsidiaries has Knowledge based upon personal
contact with any agent of such authority. (S) 4(l) of the Disclosure
Schedule lists all federal, state, local, and foreign income Tax
Returns filed with respect to any of the Company and its Subsidiaries
for taxable periods ended on or after December 31, 1995, indicates
those Tax Returns that have been audited, and indicates those Tax
Returns that currently are the subject of audit. The Company has
delivered to the Buyer correct and complete copies of all federal
income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by any of the Company and its
Subsidiaries since December 31, 1995.
22
(iv) None of the Company and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension
of time with respect to a Tax assessment or deficiency.
(v) None of the Company and its Subsidiaries has filed a consent
under Code (S) 341(f) concerning collapsible corporations. None of the
Company and its Subsidiaries has made any payments, is obligated to
make any payments, or is a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be
deductible under Code (S) 280G. None of the Company and its
Subsidiaries has been a United States real property holding corporation
within the meaning of Code (S) 897(c)(2) during the applicable period
specified in Code (S) 897(c)(1)(A)(ii). Each of the Company and its
Subsidiaries has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial
understatement of federal income Tax within the meaning of Code (S)
6662. None of the Company and its Subsidiaries is a party to any Tax
allocation or sharing agreement. None of the Company and its
Subsidiaries (A) has been a member of an Affiliated Group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Company) or (B) has any Liability for the Taxes
of any Person (other than any of the Company and its Subsidiaries)
under Reg. (S) 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor, by contract, or otherwise.
(vi) [Intentionally Deleted.]
---------------------
(vii) The Company and its Subsidiaries has no reserve for Tax
Liability as of the Most Recent Fiscal Month End and does not expect to
have such a reserve as of the Closing Date.
(viii) None of the Company and its Subsidiaries will be required
to include any item of income in, or exclude any item of deduction
from, taxable income for any taxable period (or portion thereof) ending
after the Closing Date as a result of any: (A) change in method of
accounting for a taxable period ending on or prior to the Closing Date
under Code (S) 481(c) (or any corresponding or similar provision of
state, local or foreign income Tax law); (B) "closing agreement" as
described in Code (S) 7121 (or any corresponding or similar provision
of state, local or foreign income Tax law) executed on or prior to the
Closing Date; (C) deferred intercompany gain or any excess loss account
described in Treasury Regulations under Code (S) 1502 (or any
corresponding or similar provision of state, local or foreign income
Tax law); (D) installment sale or open transaction disposition made on
or prior to the Closing Date; or (E) prepaid amount received on or
prior to the Closing Date.
(m) Real Property.
-------------
(i) The Company and its Subsidiaries do not own any real property.
23
(ii) (S) 4(m)(ii) of the Disclosure Schedule sets forth the
address of each parcel of Leased Real Property, and a true and complete
list of all Leases for each such Leased Real Property (including the
date and name of the parties to such Lease document). Each of the
Company and its Subsidiaries has delivered to the Buyer a true and
complete copy of each such Lease document, and in the case of any oral
Lease, a written summary of the material terms of such Lease. Except as
set forth in (S) 4(m)(ii) of the Disclosure Schedule, with respect to
each of the Leases:
(A) such Lease is legal, valid, binding, enforceable, and in
full force and effect;
(B) the transaction contemplated by this Agreement does not
require the consent of any other party to such Lease (except for
those Leases for which Lease Consents (as hereinafter defined) are
obtained), will not result in a breach of or default under such
Lease, and will not otherwise cause such Lease to cease to be
legal, valid, binding, enforceable and in full force and effect on
identical terms following the Closing;
(C) none of the Company's or its Subsidiaries' possession and
quiet enjoyment of the Leased Real Property under such Lease has
been disturbed and there are no disputes with respect to such
Lease;
(D) none of the Company, its Subsidiaries or, to the Knowledge
of any of the directors and officers of the Company and its
Subsidiaries, any other party to the Lease is in breach or default
under such Lease, and to the Knowledge of any of the directors and
officers of the Company and its Subsidiaries, no event has
occurred or circumstance exists which, with the delivery of
notice, the passage of time or both, would constitute such a
breach or default, or permit the termination, modification or
acceleration of rent under such Lease;
(E) no security deposit or portion thereof deposited with
respect to such Lease has been applied in respect of a breach or
default under such Lease which has not been redeposited in full;
(F) none of the Company or its Subsidiaries owes, or will owe
in the future, any brokerage commissions or finder's fees with
respect to such Lease;
(G) the other party to such Lease is not an affiliate of, and
otherwise does not have any economic interest in, any of the
Company or its Subsidiaries;
(H) none of the Company or its Subsidiaries has subleased,
licensed or otherwise granted any Person the right to use or
occupy such Leased Real Property or any portion thereof;
24
(I) none of the Company or its Subsidiaries has collaterally
assigned or granted any other security interest in such Lease or
any interest therein; and
(J) to the Knowledge of any of the directors and officers of
the Company and its Subsidiaries, there are no liens or
encumbrances on the estate or interest created by such Lease.
(iii) The Leased Real Property identified in (S) 4(m)(ii),
comprise all of the real property used or intended to be used in, or
otherwise related to, the Company's and its Subsidiaries' business; and
none of the Company or its Subsidiaries is a party to any agreement or
option to purchase any real property or interest therein.
(iv) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, all buildings, structures, fixtures,
building systems and equipment, and all components thereof, including
the roof, foundation, load-bearing walls and other structural elements
thereof, heating, ventilation, air conditioning, mechanical,
electrical, plumbing and other building systems, environmental control,
remediation and abatement systems, sewer, storm and waste water
systems, irrigation and other water distribution systems, parking
facilities, fire protection, security and surveillance systems, and
telecommunications, computer, wiring and cable installations, included
in the Leased Real Property (the "Improvements") are in good condition
------------
and repair and sufficient for the operation of the Company's and its
Subsidiaries' busine (S) To the Knowledge of any of the directors and
officers of the Company and its Subsidiaries, there are no structural
deficiencies or latent defects affecting any of the Improvements and,
to the Knowledge of any of the directors and officers of the Company
and its Subsidiaries, there are no facts or conditions affecting any of
the Improvements which would, individually or in the aggregate,
interfere in any material respect with the use or occupancy of the
Improvements or any portion thereof in the operation of the Company's
or its Subsidiaries' business as currently conducted thereon.
(v) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, there is no condemnation, expropriation
or other proceeding in eminent domain, pending or threatened, affecting
any parcel of Leased Real Property or any portion thereof or interest
therein. To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, there is no injunction, decree, order,
writ or judgment outstanding, nor any claims, litigation,
administrative actions or similar proceedings, pending or threatened,
relating to the ownership, lease, use or occupancy of the Leased Real
Property or any portion thereof, or the operation of the Company's or
its Subsidiaries' business as currently conducted thereon.
(vi) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, the Leased Real Property is in compliance
with all
25
applicable building, zoning, subdivision, health and safety and other
land use laws, including The Americans with Disabilities Act of 1990,
as amended, and all insurance requirements affecting the Leased Real
Property (collectively, the "Real Property Laws"), and the current use
------------------
and occupancy of the Leased Real Property and operation of the
Company's and its Subsidiaries' business thereon does not violate any
Real Property Laws. None of the Company or its Subsidiaries has
received any notice of violation of any Real Property Law and, to the
Knowledge of any of the directors and officers of the Company and its
Subsidiaries, there is no basis for the issuance of any such notice or
the taking of any action for such violation.
(vii) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, each parcel of Leased Real Property has
direct vehicular and pedestrian access to a public street adjoining the
Leased Real Property, or has vehicular and pedestrian access to a
public street via an insurable, permanent, irrevocable and appurtenant
easement benefiting such parcel of Leased Real Property, and such
access is not dependent on any land or other real property interest
which is not included in the Leased Real Property. To the Knowledge of
any of the directors and officers of the Company and its Subsidiaries,
none of the Improvements or any portion thereof is dependent for its
access, use or operation on any land, building, improvement or other
real property interest which is not included in the Leased Real
Property.
(viii) To the Knowledge of any of the directors and officers of
the Company and its Subsidiaries, all water, oil, gas, electrical,
steam, compressed air, telecommunications, sewer, storm and waste water
systems and other utility services or systems for the Leased Real
Property have been installed and are operational and sufficient for the
operation of the Company's or its Subsidiaries' business as currently
conducted thereon. To the Knowledge of any of the directors and
officers of the Company and its Subsidiaries, each such utility service
enters the Leased Real Property from an adjoining public street or
valid private easement in favor of the supplier of such utility service
or appurtenant to such Leased Real Property, and is not dependent for
its access, use or operation on any land, building, improvement or
other real property interest which is not included in the Leased Real
Property.
(ix) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, all certificates of occupancy, permits,
licenses, franchises, approvals and authorizations (collectively, the
"Real Property Permits") of all governmental authorities, board of fire
---------------------
underwriters, association or any other entity having jurisdiction over
the Leased Real Property, which are required or appropriate to use or
occupy the Leased Real Property or operate the Company's or its
Subsidiaries' business as currently conducted thereon, have been issued
and are in full force and effect. (S) 4(m)(ix) of the Disclosure
Schedule lists all material Real Property Permits held by any of the
Company and its Subsidiaries with respect to each parcel of Leased Real
Property. The Company has delivered to the Buyer a true and complete
copy of all Real Property Permits
26
held by the Company. None of the Company or its Subsidiaries has
received any notice from any governmental authority or other entity
having jurisdiction over the Leased Real Property threatening a
suspension, revocation, modification or cancellation of any Real
Property Permit of the Company and, to the Knowledge of any of the
directors and officers of the Company and its Subsidiaries, there is
no basis for the issuance of any such notice or the taking of any such
action.
(x) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, the classification of each parcel of
Leased Real Property under applicable zoning laws, ordinances and
regulations permits the use and occupancy of such parcel and the
operation of the Company's and its Subsidiaries' business as currently
conducted thereon, and permits the Improvements located thereon as
currently constructed, used and occupied. To the Knowledge of any of
the directors and officers of the Company and its Subsidiaries, there
are sufficient parking spaces, loading docks and other facilities at
such parcel to comply with such zoning laws, ordinances and
regulations. To the Knowledge of any of the directors and officers of
the Company and its Subsidiaries, the Company's and its Subsidiaries'
use or occupancy of the Leased Real Property or any portion thereof or
the operation of the Company's or its Subsidiaries' business as
currently conducted thereon is not dependent on a "permitted
non-conforming use" or "permitted non-conforming structure" or similar
variance, exemption or approval from any governmental authority.
(xi) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, none of the Improvements encroach on any
land which is not included in the Leased Real Property or on any
easement affecting such Leased Real Property, or violate any building
lines or set-back lines, and there are no encroachments onto any of the
Leased Real Property, or any portion thereof, which encroachment would
interfere with the use or occupancy of such Leased Real Property or the
continued operation of the Company's or its Subsidiaries' business as
currently conducted thereon.
(xii) To the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, none of the Leased Real Property or any
portion thereof is located in a flood hazard area (as defined by the
Federal Emergency Management Agency).
(o) Intellectual Property.
---------------------
(i) The Company and its Subsidiaries own all Intellectual Property
used in the operation of the businesses of the Company and its
Subsidiaries as presently conducted and as presently proposed to be
conducted. Each item of Intellectual Property owned by any of the
Company and its Subsidiaries immediately prior to the Closing hereunder
will be owned by the Company or its Subsidiaries on identical terms and
conditions immediately subsequent to the Closing hereunder.
27
(ii) (S) 4(n)(ii) of the Disclosure Schedule identifies each
patent or registration which has been issued to any of the Company and
its Subsidiaries with respect to any of its Intellectual Property,
identifies each pending patent application or application for
registration which any of the Company and its Subsidiaries has made
with respect to any of its Intellectual Property, and identifies each
license, sublicense, agreement, or other permission which any of the
Company and its Subsidiaries has granted to any third party with
respect to any of its Intellectual Property (together with any
exceptions). The Company has delivered to the Buyer correct and
complete original copies of all such patents, registrations,
applications, licenses, sublicenses, agreements, and permissions (as
amended to date) and have made available to the Buyer correct and
complete copies of all other written documentation evidencing ownership
and prosecution (if applicable) of each such item. (S) 4(n)(ii) of the
Disclosure Schedule also identifies each material unregistered
trademark, service ▇▇▇▇, trade name, corporate name or Internet domain
name, computer software item (other than commercially available
off-the-shelf software purchased or licensed for less than a total cost
of $1,000 in the aggregate) and each material unregistered copyright
used by any of the Company and its Subsidiaries in connection with any
of its businesses. With respect to each item of Intellectual Property
required to be identified in (S) 4(n)(ii) of the Disclosure Schedule:
(A) the Company and its Subsidiaries own and possess all
right, title, and interest in and to the item, free and clear of
any Security Interest, license, or other restriction or limitation
regarding use or disclosure;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or, to the
Knowledge of any of the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company
and its Subsidiaries, is threatened which challenges the legality,
validity, enforceability, use, or ownership of the item and there
are no grounds for the same;
(D) none of the Company and its Subsidiaries has ever agreed
to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to
the item; and
(E) no loss or expiration of the item is threatened, pending,
or, to the Knowledge of any of the directors and officers (and
employees with responsibility for Intellectual Property matters)
of the Company and its Subsidiaries, reasonably foreseeable,
except for patents expiring at the end of their statutory terms
(and not as a result of any act or omission by the Company or its
Subsidiaries, including without limitation, a failure by the
Company or its Subsidiaries to pay any required maintenance fees).
28
(iii) (S) 4(n)(iii) of the Disclosure Schedule identifies each
material item of Intellectual Property that any third party owns and
that any of the Company and its Subsidiaries uses pursuant to license,
sublicense, agreement, or permission. The Company has delivered to the
Buyer correct and complete copies of all such licenses, sublicenses,
agreements, and permissions (as amended to date). With respect to each
item of Intellectual Property required to be identified in (S)
4(n)(iii) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission covering
the item is a legal, valid, binding, enforceable agreement of the
Company, and in full force and effect as to the Company;
(B) the license, sublicense, agreement, or permission will
continue to be a legal, valid, binding, enforceable agreement of
the Company, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby
and on the terms as presently proposed to be conducted;
(C) to the Knowledge of any of the directors and officers (and
employees with responsibility for Intellectual Property matters)
of the Company and its Subsidiaries, no party to the license,
sublicense, agreement, or permission is in breach or default, and,
to the Knowledge of any of the directors and officers (and
employees with responsibility for Intellectual Property matters)
of the Company and its Subsidiaries, no event has occurred which
with notice or lapse of time would constitute a breach or default
or permit termination, modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations and
warranties set forth in subsections (A) through (D) above are true
and correct with respect to the underlying license;
(F) to the Knowledge of any of the directors and officers (and
employees with responsibility for Intellectual Property matters)
of the Company and its Subsidiaries, the underlying item of
Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(G) to the Knowledge of any of the directors and officers (and
employees with responsibility for Intellectual Property matters)
of the Company and its Subsidiaries, no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand is
pending or, to the Knowledge of any of the directors and officers
(and employees with responsibility for Intellectual Property
matters) of the Company and its
29
Subsidiaries, is threatened which challenges the legality,
validity, or enforceability of the underlying item of
Intellectual Property, and there are no grounds for the same; and
(H) none of the Company and its Subsidiaries has granted any
sublicense or similar right with respect to the license,
sublicense, agreement, or permission.
(iv) None of the Company and its Subsidiaries has in the past nor,
to the Knowledge of any of the directors and officers (and employees
with responsibility for Intellectual Property matters) of the Company
and its Subsidiaries, will in the future interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual
Property rights of third parties as a result of the continued operation
of its businesses as presently conducted and as presently proposed to
be conducted. To the Knowledge of any of the directors and officers
(and employees with responsibility for Intellectual Property matters)
of the Company and its Subsidiaries, no third party has in the past nor
will in the future interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Intellectual Property rights of
any of the Company and its Subsidiaries; there are no facts that
indicate a likelihood of any of the foregoing; and none of the
directors and officers (and employees with responsibility for
Intellectual Property matters) of the Company and its Subsidiaries has
ever received a charge, complaint, claim, demand, or notice alleging
any such interference, infringement, misappropriation, or violations
(including any claim that any of the Company and its Subsidiaries must
license or refrain from using any Intellectual Property rights of any
third party.
(v) None of the directors and officers (and employees with
responsibility for Intellectual Property matters) of the Company and
its Subsidiaries has any Knowledge of any new products, inventions,
procedures, or methods of manufacturing or processing that any
competitors or other third parties have developed which reasonably
could be expected to supersede or make obsolete any product or process
of any of the Company and its Subsidiaries or to limit the business of
the Company and its Subsidiaries as presently conducted or as presently
proposed to be conducted.
(vi) The Company has taken all necessary and desirable action to
maintain and protect all of the Intellectual Property of Company and
its Subsidiaries and will continue to maintain and protect all of the
Intellectual Property of Company and its Subsidiaries prior to Closing
so as not to materially adversely affect the validity or enforceability
thereof. To the Knowledge of any of the directors and officers (and
employees with responsibility for Intellectual Property matters) of the
Company and its Subsidiaries, the owners of any of the Intellectual
Property licensed to Company and its Subsidiaries have taken all
necessary and desirable action to maintain and protect the Intellectual
Property covered by such license.
30
(vii) The Company and its Subsidiaries have complied in all
material respects with and are presently in compliance in all material
respects with all foreign, federal, state, local, governmental
(including, but not limited to, the Federal Trade Commission and State
Attorneys General), administrative or regulatory laws, regulations,
guidelines and rules applicable to any Intellectual Property and the
Company and its Subsidiaries shall take all steps necessary to ensure
such compliance until Closing.
(viii) Each person employed or retained by the Company, whether on
a full-time, part-time, independent contractor or other basis, where
such person is engaged in activities that may give such person right to
Intellectual Property has signed a written agreement requiring such
person to disclose and transfer to the Company all right, title and
interest in and to any such Intellectual Property. The Company is not
aware that any of its employees, consultants or officers is in
violation thereof. No current employee, officer or consultant of the
Company has excluded works or inventions made prior to his or her
employment with the Company from his or her assignment of inventions
pursuant to such employee, officer or consultant's agreement regarding
confidential information and invention assignment. The Company does not
believe it is or will be necessary to utilize any inventions of any
employees of the Company (or persons the Company currently intends to
hire) made prior to their employment by the Company. The Company
believes at no time during the conception of or reduction of any of the
Company's Intellectual Property to practice was any developer, inventor
or other contributor to such patents operating under any grants from
any governmental entity or agency or private source, performing
research sponsored by any governmental entity or agency or private
source or subject to any employment agreement or invention assignment
or nondisclosure agreement or other obligation with any third party
that could adversely affect the Company's rights in such Intellectual
Property Rights.
(o) Tangible Assets. The Company and its Subsidiaries own or lease all
---------------
buildings, machinery, equipment, and other tangible assets necessary for the
conduct of their businesses as presently conducted. Each such tangible asset is
free from defects (patent and latent), has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear), and is suitable for the purposes for which it presently
is used.
(p) Inventory. The inventory of the Company and its Subsidiaries
---------
consists of raw materials and supplies, manufactured and purchased parts, goods
in process, and finished goods, all of which is merchantable and fit for the
purpose for which it was procured or manufactured, and, to the Knowledge of any
of the directors and officers of the Company and its Subsidiaries, none of which
is slow-moving, obsolete, damaged, or defective, subject only to the reserve for
inventory writedown set forth on the face of the Most Recent Balance Sheet
(rather than in any notes thereto) as adjusted for the passage of time through
the Closing Date in accordance with the past custom and practice of the Company
and its Subsidiaries.
31
(q) Contracts. (S) 4(q) of the Disclosure Schedule lists the following
---------
contracts and other agreements to which any of the Company and its Subsidiaries
is a party:
(i) any agreement (or group of related agreements) for the lease
of personal property to or from any Person providing for lease payments
in excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services,
the performance of which will extend over a period of more than one
year, result in a material loss to any of the Company and its
Subsidiaries, or involve consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which it
has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money, or any capitalized lease obligation, in excess of
$10,000 or under which it has imposed a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement concerning confidentiality or noncompetition;
(vi) any agreement with any of the Affiliates of the Company and
its Subsidiaries;
(vii) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan
or arrangement for the benefit of its current or former directors,
officers, and employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual
compensation in excess of $10,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future
prospects of any of the Company and its Subsidiaries; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
32
The Company has delivered to the Buyer a correct and complete copy of each
written agreement (as amended to date) listed in (S) 4(q) of the Disclosure
Schedule and a written summary setting forth the terms and conditions of each
oral agreement referred to in (S) 4(q) of the Disclosure Schedule. With respect
to each such agreement: (A) the agreement is legal, valid, binding, enforceable
as to the Company, and in full force and effect; (B) the agreement will continue
to be legal, valid, binding, enforceable as to the Company, and in full force
and effect on identical terms following the consummation of the transactions
contemplated hereby; (C) none of the Company and its Subsidiaries and, to the
Knowledge of any of the directors and officers of the Company and its
Subsidiaries, no other party, is in breach or default, and, to the Knowledge of
any of the directors and officers of the Company and its Subsidiaries, no event
has occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
agreement; and (D) to the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, no party has repudiated any provision of the
agreement.
(r) Notes and Accounts Receivable. All notes and accounts receivable of
-----------------------------
the Company and its Subsidiaries are reflected properly on their books and
records, are valid receivables subject to no setoffs or counterclaims, are
current and collectible, and, to the Knowledge of any of the directors and
officers of the Company and its Subsidiaries, will be collected in accordance
with their terms at their recorded amounts, subject only to the reserve for bad
debts set forth on the face of the Most Recent Balance Sheet (rather than in any
notes thereto) as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Company and its
Subsidiaries.
(s) Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of any of the Company and its Subsidiaries.
(t) Insurance. (S) 4(t) of the Disclosure Schedule sets forth the
---------
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) to which any of the Company and its Subsidiaries
has been a party, a named insured, or otherwise the beneficiary of coverage at
any time within the past 2 years:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including
a description of how deductibles and ceilings are calculated and
operate) of coverage; and
(v) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
33
With respect to each such insurance policy: (A) the policy is legal, valid,
binding, enforceable, and in full force and effect; (B) the policy will continue
to be legal, valid, binding, enforceable, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (C) neither any of the Company and its Subsidiaries nor, to the
Knowledge of any of the directors and officers of the Company and its
Subsidiaries, any other party to the policy is in breach or default (including
with respect to the payment of premiums or the giving of notices), and no event
has occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under
the policy; and (D) to the Knowledge of any of the directors and officers of the
Company and its Subsidiaries, no party to the policy has repudiated any
provision thereof. Each of the Company and its Subsidiaries has been covered
during the past 5 years by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. (S) 4(t) of the Disclosure Schedule describes any self-insurance
arrangements affecting any of the Company and its Subsidiaries.
(u) Litigation. (S) 4(u) of the Disclosure Schedule sets forth each
----------
instance in which any of the Company and its Subsidiaries (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or, to the Knowledge of any of the directors and officers (and employees
with responsibility for litigation matters) of the Company and its Subsidiaries,
is threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and
investigations set forth in (S) 4(u) of the Disclosure Schedule could result in
any material adverse change in the business, financial condition, operations,
results of operations, or future prospects of any of the Company and its
Subsidiaries. None of the directors and officers (and employees with
responsibility for litigation matters) of the Company and its Subsidiaries has
any reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against any of the Company and its
Subsidiaries.
(v) Product Warranty. Each product manufactured, sold, leased, or
----------------
delivered by any of the Company and its Subsidiaries has been in conformity in
all material respects with all applicable contractual commitments and all
express and implied warranties, and none of the Company and its Subsidiaries has
any material Liability (and, to the Knowledge of any of the directors and
officers of the Company and its Subsidiaries, there is no Basis for any present
or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim, or demand against any of them giving rise to any such material Liability)
for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
the passage of time through the Closing Date in accordance with the past custom
and practice of the Company and its Subsidiaries. No product manufactured, sold,
leased, or delivered by any of the Company and its Subsidiaries is subject to
any guaranty, warranty, or other indemnity beyond the applicable standard terms
and conditions of sale or lease. (S) 4(v) of the Disclosure Schedule includes
copies of the standard terms and conditions of sale or lease for each of the
Company and its Subsidiaries (containing applicable guaranty, warranty, and
indemnity provisions).
34
(w) Product Liability. None of the Company and its Subsidiaries has any
-----------------
material Liability (and, to the Knowledge of any of the directors and officers
of the Company and its Subsidiaries, there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against any of them giving rise to any such material Liability) arising
out of any injury to individuals or property as a result of the ownership,
possession, or use of any product manufactured, sold, leased, or delivered by
any of the Company and its Subsidiaries.
(x) Employees. To the Knowledge (without investigation) of any of the
---------
directors and officers (and employees with responsibility for employment
matters) of the Company and its Subsidiaries, no executive, key employee, or
group of employees has any plans to terminate employment with any of the Company
and its Subsidiaries. None of the Company and its Subsidiaries is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. None of the Company and its Subsidiaries has committed any
unfair labor practice. None of the directors and officers (and employees with
responsibility for employment matters) of the Company and its Subsidiaries has
any Knowledge of any organizational effort presently being made or threatened by
or on behalf of any labor union with respect to employees of any of the Company
and its Subsidiaries.
(y) Employee Benefits.
-----------------
(i) (S) 4(y) of the Disclosure Schedule lists each Employee
Benefit Plan that any of the Company and its Subsidiaries maintains, to
which any of the Company and its Subsidiaries contributes or has any
obligation to contribute, or with respect to which any of the Company
and its Subsidiaries has any material Liability or potential Liability.
(A) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) has been maintained, funded and
administered in accordance with the terms of such Employee Benefit
Plan and the terms of any applicable collective bargaining
agreement and complies in form and in operation in all material
respects with the applicable requirements of ERISA, the Code, and
other applicable laws.
(B) All required reports and descriptions (including annual
reports (IRS Form 5500), summary annual reports, and summary plan
descriptions) have been timely filed and/or distributed in
accordance with the applicable requirements of ERISA and the Code
with respect to each such Employee Benefit Plan. The requirements
of COBRA have been met with respect to each such Employee Benefit
Plan which is an Employee Welfare Benefit Plan subject to COBRA.
(C) All contributions (including all employer contributions
and employee salary reduction contributions) which are due have
been made within the time period prescribed by ERISA and the Code
to each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and all
35
contributions for any period ending on or before the Closing Date
which are not yet due have been made to each such Employee
Pension Benefit Plan or accrued in accordance with the past
custom and practice of the Company and its Subsidiaries. All
premiums or other payments for all periods ending on or before
the Closing Date have been paid with respect to each such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is intended to meet
the requirements of a "qualified plan" under Code ss.401(a) has
received a determination from the Internal Revenue Service that
such Employee Benefit Plan is so qualified, and nothing has
occurred since the date of such determination that could adversely
affect the qualified status of any such Employee Benefit Plan.
(E) The market value of assets under each such Employee
Benefit Plan which is an Employee Pension Benefit Plan (other than
any Multiemployer Plan) equals or exceeds the present value of all
vested and nonvested Liabilities thereunder determined in
accordance with PBGC methods, factors, and assumptions applicable
to an Employee Pension Benefit Plan terminating on the date for
determination.
(F) The Company has delivered to the Buyer correct and
complete copies of the plan documents and summary plan
descriptions, the most recent determination letter received from
the Internal Revenue Service, the most recent annual report (IRS
Form 5500, with all applicable attachments), and all related trust
agreements, insurance contracts, and other funding arrangements
which implement each such Employee Benefit Plan.
(ii) With respect to each Employee Benefit Plan that any of the
Company, its Subsidiaries, and any ERISA Affiliate maintains, to which
any of them contributes or has any obligation to contribute, or with
respect to which any of them has any material Liability or potential
Liability:
(A) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan (other than any Multiemployer Plan) has been
completely or partially terminated or been the subject of a
Reportable Event. No proceeding by the PBGC to terminate any such
Employee Pension Benefit Plan (other than any Multiemployer Plan)
has been instituted or, to the Knowledge of any of the directors
and officers (and employees with responsibility for employee
benefits matters) of the Company and its Subsidiaries, threatened.
(B) There have been no Prohibited Transactions with respect to
any such Employee Benefit Plan. No Fiduciary has any Liability for
breach of fiduciary duty or any other failure to act or comply in
36
connection with the administration or investment of the assets of
any such Employee Benefit Plan. No action, suit, proceeding,
hearing, or investigation with respect to the administration or
the investment of the assets of any such Employee Benefit Plan
(other than routine claims for benefits) is pending or, to the
Knowledge of any of the directors and officers (and employees
with responsibility for employee benefits matters) of the Company
and its Subsidiaries, threatened. None of the directors and
officers (and employees with responsibility for employee benefits
matters) of the Company and its Subsidiaries has any Knowledge of
any Basis for any such action, suit, proceeding, hearing, or
investigation.
(C) None of the Company and its Subsidiaries has incurred, and
none of the directors and officers (and employees with
responsibility for employee benefits matters) of the Company and
its Subsidiaries has any reason to expect that any of the Company
and its Subsidiaries will incur, any Liability to the PBGC (other
than with respect to PBGC premium payments not yet due) or
otherwise under Title IV of ERISA (including any withdrawal
liability as defined in ERISA (S) 4201) or under the Code with
respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan, or under COBRA with respect to any such
Employee Benefit Plan which is an Employee Welfare Benefit Plan.
(iii) None of the Company, its Subsidiaries, and any ERISA
Affiliate contributes to, has any obligation to contribute to, or has
any Liability (including withdrawal liability as defined in ERISA
(S) 4201) under or with respect to any Multiemployer Plan.
(iv) None of the Company and its Subsidiaries maintains,
contributes to or has an obligation to contribute to, or has any
material Liability or potential Liability with respect to, any Employee
Welfare Benefit Plan providing medical, health, or life insurance or
other welfare-type benefits for current or future retired or terminated
directors, officers or employees of the Company or any of its
Subsidiaries upon the termination of their employment relationship with
the Company or any of its Subsidiaries (or to any spouse or other
dependent thereof) other than in accordance with COBRA).
(z) Guaranties. None of the Company and its Subsidiaries is a guarantor
----------
or otherwise is liable for any Liability or obligation (including indebtedness)
of any other Person.
(aa) Environmental, Health, and Safety Matters.
-----------------------------------------
(i) Each of the Company, its Subsidiaries, and their respective
predecessors and Affiliates has complied and is in compliance in all
material respects with all Environmental, Health, and Safety
Requirements.
(ii) Without limiting the generality of the foregoing, each of the
Company, its Subsidiaries and their respective Affiliates has obtained
and
37
complied with, and is in compliance in all material respects with, all
permits, licenses and other authorizations that are required pursuant
to Environmental, Health, and Safety Requirements for the occupation
of its facilities and the operation of its business; a list of all
such permits, licenses and other authorizations is set forth on the
attached Disclosure Schedule.
(iii) Neither the Company nor its Subsidiaries has received any
written or oral notice, report or other information regarding any
actual or alleged violation of Environmental, Health, and Safety
Requirements, or any liabilities or potential liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise), including
any investigatory, remedial or corrective obligations, relating to any
of them or its facilities arising under Environmental, Health, and
Safety Requirements.
(iv) To the Knowledge of any of the directors and officers (and
employees with responsibility for Environmental, Health, and Safety
Requirements) of the Company and its Subsidiaries, none of the
following exists at any property or facility owned or operated by the
Company or its Subsidiaries: (1) underground storage tanks, (2)
asbestos-containing material in any form or condition, (3) materials or
equipment containing polychlorinated biphenyls, or (4) landfills,
surface impoundments, or disposal areas.
(v) Neither the Company nor its Subsidiaries has treated, stored,
disposed of, arranged for or permitted the disposal of, transported,
handled, or released any substance, including without limitation any
hazardous substance, or owned or operated any property or facility
(and, to the Knowledge of any of the directors and officers (and
employees with responsibility for Environmental, Health, and Safety
Requirements) of the Company and its Subsidiaries, no such property or
facility is contaminated by any such substance) in a manner that has
given or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury, property
damage, natural resources damages or attorney fees, pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), the Solid Waste Disposal Act, as amended
("SWDA") or any other Environmental, Health, and Safety Requirements.
(vi) Neither this Agreement nor the consummation of the
transaction that is the subject of this Agreement will result in any
obligations on the part of the Company or any of its Subsidiaries for
site investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer"
Environmental, Health, and Safety Requirements.
(vii) Neither the Company nor its Subsidiaries has, either
expressly or by operation of law, assumed or undertaken any liability,
including without limitation any obligation for corrective or remedial
action, of any other Person relating to Environmental, Health, and
Safety Requirements.
38
(viii) To the Knowledge of any of the directors and officers (and
employees with responsibility for Environmental, Health, and Safety
Requirements) of the Company and its Subsidiaries, no facts, events or
conditions relating to the past or present facilities, properties or
operations of the Company or its Subsidiaries will prevent, hinder or
limit continued compliance with Environmental, Health, and Safety
Requirements, give rise to any investigatory, remedial or corrective
obligations pursuant to Environmental, Health, and Safety Requirements,
or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental,
Health, and Safety Requirements, including without limitation any
relating to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal injury, property
damage or natural resources damage.
(bb) Certain Business Relationships with the Company and Its
-------------------------------------------------------
Subsidiaries. None of the Affiliates of the Company and its Subsidiaries have
------------
been involved in any business arrangement or relationship with any of the
Company and its Subsidiaries within the past 12 months, and none of the
Affiliates of the Company and its Subsidiaries owns any asset, tangible or
intangible, which is used in the business of any of the Company and its
Subsidiaries.
(cc) Continuity of Business Enterprises. The Company operates at least
----------------------------------
one significant historic business line, or owns at least a significant portion
of its historic business assets, in each case within the meaning of
Reg. (S) 1.368-1(d).
(dd) Solicitation of Shareholders. None of the information supplied, or
----------------------------
to be supplied by the Company for inclusion or incorporation (or furnished by
the Company for inclusion or incorporation) into any documents mailed or
delivered to the Company's shareholders (including the Information Statement) in
connection with soliciting their consent to this Agreement and the Merger, or
into any document anticipated to be filed with the California Department of
Corporations pursuant hereto, will at the time submitted for inclusion or
incorporation, 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
statements therein, in light of the circumstances under which made, not
misleading. Notwithstanding the foregoing, the Company makes no representation
or warranty with respect to any information, which is not supplied by the
Company or is supplied by the Buyer or any of its Affiliates, which is contained
in any of the said documents.
(ee) Disclosure. To the Knowledge of any of the directors and officers
----------
of the Company and its Subsidiaries, the representations and warranties
contained in this (S) 4 do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements and
information contained in this (S) 4 not misleading.
5. Pre-Closing Covenants. The Parties agree as follows with respect to the
---------------------
period between the execution of this Agreement and the Closing.
(a) General. Each of the Parties will use his or its reasonable best
-------
efforts to take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not
39
waiver, of the closing conditions set forth in (S) 7 below). The Parties will
use his or its reasonable best efforts to facilitate the execution of employment
agreements between the Buyer and such members of the Company's senior management
that the Buyer deems appropriate in its sole discretion, including ▇▇▇▇▇ ▇.
▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇ ▇▇▇▇▇▇.
(b) Notices and Consents. Each of the Company and its Subsidiaries will
--------------------
give any notices to third parties, and each of the Company and its Subsidiaries
will use its reasonable best efforts to obtain any third party consents, that
the Buyer reasonably may request in connection with the matters referred to in
(S) 4(d) above.
(c) Regulatory Matters and Approvals. Each of the Parties will give any
--------------------------------
notices to, make any filings with, and use its reasonable best efforts to obtain
any authorizations, consents, and approvals of governments and governmental
agencies in connection with the matters referred to in (S) 3(b) and (S) 4(d)
above. Without limiting the generality of the foregoing:
(i) Preparation of the Information Statement. As promptly as
----------------------------------------
practicable after the date hereof, the Buyer will prepare an
information statement (the "Information Statement") relating to the
---------------------
offering and issuance of the Buyer Shares and the Special Company
Meeting. The Company will assist and participate in the preparation of
the Information Statement; provided, however, that the final
-------- -------
determination of any issues related thereto shall be made by the Buyer,
in consultation with its counsel. The Information Statement shall
include such disclosure materials as are necessary for the offer and
issuance of Buyer Shares in connection with the Merger, and shall
include information regarding the terms of the Merger and this
Agreement. Each of the Buyer and the Company shall use its reasonable
efforts to cause the Information Statement to comply with applicable
federal and state securities laws. Each of the Buyer and the Company
agrees to provide promptly to the other such information concerning its
business and financial statements and affairs as, in the reasonable
judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Information Statement, or in any
amendments or supplements thereto, and to cause its counsel and
auditors to cooperate with the other's counsel and auditors in
preparation of the Information Statement. The Company will promptly
advise the Buyer, and the Buyer will promptly advise the Company, in
writing if at any time prior to the Effective Time either the Buyer or
the Company shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Information
Statement in order to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law.
Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Information Statement, the Company or
the Buyer, as the case may be, will promptly inform the others of such
occurrence and cooperate in mailing to the Company's shareholders of
record, such amendment or supplement.
(ii) California General Corporation Law. The Company will call a
----------------------------------
special meeting of its shareholders (the "Special Company Meeting") as
-----------------------
soon as reasonably practicable in order that the shareholders may
consider and vote upon
40
the adoption of this Agreement and the approval of the Merger in
accordance with the California General Corporation Law. The Company
will mail the Information Statement to its shareholders as soon as
reasonably practicable. The Information Statement will contain the
affirmative recommendation of the Board of Directors of the Company in
favor of the adoption of this Agreement and the approval of the
Merger.
(iii) Registration Exemption. Promptly following the execution of
----------------------
this Agreement, in connection with the mailing of the Information
Statement or otherwise, the Company will mail to all shareholders of
the Company an "accredited investor" statement (an "Accredited Investor
-------------------
Statement"), in a form mutually acceptable to the Company and the
---------
Buyer, which requires a representation from each such shareholder as to
whether such Person is an Accredited Investor, and the Company will use
its reasonable best efforts to cause such shareholders to return such
Accredited Investor Statements to the Company as promptly as possible.
In addition, the Company will appoint a "purchaser representative"
within the meaning of Rule 501 under the Securities Act so that any
shareholder of the Company that is not an Accredited Investor may
consult with such Person in connection with such shareholder's
investment decision.
(iv) Fairness Hearing and Stockholder Approval.
-----------------------------------------
(A) In the event that the Buyer is not reasonably satisfied
based upon consultation with its counsel and receipt of a
satisfactory number of Accredited Investor Statements from the
shareholders of the Company indicating that the offering and
issuance of the Buyer Shares as contemplated by this Agreement is
in compliance with Rule 506 under the Securities Act, the Buyer
shall prepare a permit application and request a fairness hearing
before the California Department of Corporation and shall take all
other actions required to obtain a permit (a "Permit"), from the
------
Commissioner of Corporations of the State of California pursuant
to Section 25121 of the California Corporate Securities Law of
1968, so that the issuance of Buyer Shares in the Merger shall be
exempt from registration under Section 3(a)(10) of the Securities
Act. The Company shall assist the Buyer in such actions. The Buyer
(with the assistance of the Company) will respond to any comments
from the California Department of Corporations and use its
commercially reasonable efforts to have the Permit granted as soon
as practicable after such filing. As promptly as practicable after
receipt of a Permit, the Company shall distribute to the Company's
shareholders an information statement in form required by
applicable law and this Agreement (the "California Information
----------------------
Statement") and request such shareholders approve and adopt the
---------
matters described therein and the transactions contemplated
hereby. The California Information Statement shall include such
disclosure materials as are necessary for the offer and issuance
of Buyer Shares in connection with the Merger, and shall include,
without limitation, information regarding the terms of the Merger
and this Agreement. Each
41
of the Buyer and the Company shall use its reasonable efforts to
cause the California Information Statement to comply with
applicable federal and state securities laws. Each of the Buyer
and the Company agrees to provide promptly to the other such
information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or
its counsel, may be required or appropriate for inclusion in the
California Information Statement, or in any amendments or
supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in preparation of
the California Information Statement. The Company will promptly
advise the Buyer, and the Buyer will promptly advise the Company,
in writing if at any time prior to the Effective Time either the
Buyer or the Company shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the
California Information Statement in order to make the statements
contained or incorporated by reference therein not misleading or
to comply with applicable law.
(B) The Buyer (with the assistance of the Company) will
respond to any comments of the California Department of
Corporations, and will use its respective commercially reasonable
efforts to have the Permit issued as promptly as practicable after
such fairness hearing, and the Company will cause the California
Information Statement to be mailed to the Company's shareholders
at the earliest practicable time after the Permit is issued by the
California Department of Corporations. Each of the Company and the
Buyer will notify the other promptly upon the receipt of any
comments from the California Department of Corporations or its
staff or any other government officials and of any request by the
California Department of Corporations or its staff or any other
government officials for amendments or supplements to the
California Information Statement or for additional information and
will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the
California Department of Corporations or its staff or any other
government officials, on the other hand, with respect to the
California Information Statement, the Merger or any other
regulatory filing. Each of the Company and the Buyer will cause
all documents that it is responsible for filing with the
California Department of Corporations or other regulatory
authorities under this section to comply in all material respects
with all applicable requirements of law and the rules and
regulations promulgated thereunder.
(C) Whenever any event occurs which is required to be set
forth in an amendment or supplement to the California Information
Statement or any other regulatory filing, the Company or the
Buyer, as the case may be, will promptly inform the other of such
occurrence and cooperate in filing with the California Department
of corporations or its staff or any other government officials,
and/or mailing to the Company's shareholders, such amendment or
supplement.
42
(D) All certificates representing Buyer Shares deliverable to
any shareholder of the Company pursuant to this Agreement and in
connection with the Merger and any certificates subsequently
issued with respect thereto or in substitution therefor (including
any shares issued or issuable in respect of any such shares upon
any stock split stock dividend, recapitalization, or similar
event) also shall bear any legend required by the Commissioner of
Corporations of the State of California or such as are required
pursuant to any federal, state, local, or foreign law governing
such securities.
(d) Listing of Buyer Shares. The Buyer will use its reasonable best
-----------------------
efforts to cause the Buyer Shares that will be issued in the Merger, and those
required to be reserved for issuance in connection with the Merger, to be
approved for listing on the Nasdaq National Market, subject to official notice
of issuance, prior to the Effective Time.
(e) Operation of Business. The Company will not (and will not cause or
---------------------
permit any of its Subsidiaries to) engage in any practice, take any action, or
enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, the Company will not (and will not
cause or permit any of its Subsidiaries to) (i) declare, set aside, or pay any
dividend or make any distribution with respect to its capital stock or redeem,
purchase, or otherwise acquire any of its capital stock, (ii) grant or renew or
modify any license, sell, transfer, assign, grant, or enter into any agreement
relating to any Intellectual Property, or (iii) otherwise engage in any
practice, take any action, or enter into any transaction of the sort described
in (S) 4(i) above, without the express prior written consent of the Buyer, which
shall not be unreasonably withheld. Notwithstanding anything herein to the
contrary, the Company may (A) issue, grant, or award Company Stock Options to
purchase up to but no more than 231,298 shares of Company Common Stock (as such
number of shares is adjusted downward by the number of shares underlying the
options granted to such individuals in November and December 2001 as set forth
in Schedule 4(b) of the Disclosure Schedules), which are expected to be granted
after the date hereof but prior to the Closing Date, (B) issue that number of
shares of Company Shares underlying Company Stock Rights which are outstanding
as of the date hereof and exercised or converted prior to the Closing Date and
(C) offer to purchase Company Warrants pursuant to (S) 2(d)(vii)(E).
(f) Preservation of Business. The Company will (and will cause each of
------------------------
its Subsidiaries to) use its reasonable best efforts to keep its business and
properties substantially intact, including its present operations, physical
facilities, working conditions, and relationships with lessors, licensors,
suppliers, customers, and employees.
(g) Access. The Company will (and will cause each of its Subsidiaries
------
to) permit representatives of the Buyer to have reasonable access at all
reasonable times upon reasonable notice, and in a manner so as not to interfere
with the normal business operations of the Company and its Subsidiaries, to all
premises, properties, personnel, books, records (including Tax records),
contracts, and documents of or pertaining to each of the Company and its
Subsidiaries.
43
(h) Notice of Developments. The Company will give prompt written notice
----------------------
to the Buyer of any material adverse development causing a breach of any of the
representations and warranties in (S) 4 above. The Buyer will give prompt
written notice to the Company of any material adverse development causing a
breach of any of the representations and warranties in (S) 3 above. No
disclosure by any Party pursuant to this (S) 5(i), however, shall be deemed to
amend or supplement Annex I or the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.
(i) Exclusivity. The Company will not (and will not cause or permit any
-----------
of Subsidiaries to) (i) solicit, initiate, or encourage the submission of any
proposal or offer from any Person relating to the acquisition of any capital
stock or other voting securities, or any substantial portion of the assets, of
any of the Company and its Subsidiaries (including any acquisition structured as
a merger, consolidation, or share exchange) or (ii) participate in any
discussions or negotiations regarding, furnish any information with respect to,
assist or participate in, or facilitate in any other manner any effort or
attempt by any Person to do or seek any of the foregoing. The Company will
notify the Buyer immediately if any Person makes any proposal, offer, inquiry,
or contact with respect to any of the foregoing.
(j) Maintenance of Real Property. The Company will (and will cause each
----------------------------
of its Subsidiaries to) use its reasonable best efforts to maintain the Leased
Real Property, including all of the Improvements, in substantially the same
condition as of the date of this Agreement, ordinary wear and tear excepted, and
shall not demolish or remove any of the existing Improvements, or erect new
improvements on the Real Property or any portion thereof, without the prior
written consent of the Buyer.
(k) Leases. The Company will not (and will not cause or permit any of
------
its or its Subsidiaries' Leases) to be amended, modified, extended, renewed or
terminated, nor shall the Company or its Subsidiaries enter into any new lease,
sublease, license or other agreement for the use or occupancy of any real
property, without the prior written consent of Buyer, which shall not be
unreasonably withheld.
6. Post-Closing Covenants. The Parties agree as follows with respect to the
----------------------
period following the Closing.
(a) General. In case at any time after the Closing any further action
-------
is necessary to carry out the purposes of this Agreement, each of the Parties
will take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under (S) 8 below). Each Party
acknowledges and agrees that from and after the Closing the Buyer will be
entitled to possession of all documents, books, records (including Tax records),
agreements, and financial data of any sort relating to the Company and its
Subsidiaries.
(b) Litigation Support. In the event and for so long as any Party
------------------
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
44
occurrence, event, incident, action, failure to act, or transaction which
occurred on or prior to the Closing Date involving any of the Company and its
Subsidiaries, each of the other Parties will cooperate with him or it and his or
its counsel in the contest or defense, make available their personnel, and
provide such testimony and access to their books and records as shall be
reasonably necessary in connection with the contest or defense, all at the sole
cost and expense of the contesting or defending Party (unless the contesting or
defending Party is entitled to indemnification therefor under (S) 8 below).
(c) Transition. The Company will not (and will not cause or permit any
----------
of its Subsidiaries to) take any action that is designed or intended to have the
effect of discouraging any lessor, licensor, customer, supplier, or other
business associate of any of the Company and its Subsidiaries from maintaining
the same business relationships with the Company and its Subsidiaries after the
Closing as it maintained with the Company and its Subsidiaries prior to the
Closing.
(d) [Intentionally Deleted.]
------------------------
(e) [Intentionally Deleted.]
------------------------
(f) Certain Benefit Plans. The Buyer shall take such reasonable actions
---------------------
as are necessary to allow eligible employees of the Company to participate in
the benefit programs of the Buyer or alternative benefits programs substantially
comparable to those applicable to employees of the Buyer on similar terms, as
soon as practicable after the Effective Time. The Buyer and/or the Surviving
Corporation currently intends to hire all employees of the Company as of the
Closing Date; provided, however, nothing herein shall be construed as an
-------- -------
obligation of the Buyer or the Surviving Corporation to retain such employees
after the Closing Date.
(g) Forms S-8. As soon as practicable after the Effective Time but in
---------
no event more than 60 days thereafter, to the extent necessary to provide for
the registration of the Buyer Shares issuable with respect to assumed Company
Stock Options and Stock Rights issued to employees and advisors of the Company,
the Buyer shall file a registration statement on Form S-8 (or any successor
form) with respect to such Buyer Shares and shall use its reasonable best
efforts to maintain such registration statement (or any successor form),
including the current status of any related prospectus or prospectuses, for so
long as such Company Stock Options and Stock Rights remain outstanding.
(h) Form S-3. Pursuant to the terms of the Registration Rights
--------
Agreement in the form attached hereto as Exhibit F, to the extent necessary to
provide for the registration of the Buyer Shares issued in connection with the
Merger and issuable with respect to those assumed Company Stock Options and
Stock Rights ineligible to be registered on Form S-8 (or any successor form)
pursuant to (S) 6(g) above, the Buyer shall file a registration statement (the
"Registration Statement") on Form S-3 (or any successor form) with respect to
----------------------
the Buyer Shares held by the signatories to such Registration Rights Agreement
and shall use its reasonable best efforts to cause such Registration Statement
to become effective.
(i) Indemnification. The Buyer will not take any action to alter or
---------------
impair any exculpatory or indemnification provisions now existing in the
articles of incorporation or bylaws
45
of the Company for the benefit of any individual who served as a director or
officer of the Company at any time prior to the Effective Time and shall satisfy
such exculpatory or indemnification provisions set forth in the articles and
bylaws of the Company as of the date hereof. The Buyer shall (or shall cause the
Surviving Corporation to) satisfy such exculpatory or indemnification
provisions. To the extent any director or officer of the Company has a claim for
exculpation or indemnification in connection with approving this Agreement or
the Merger, the Buyer shall have no claim under (S) 8 of this Agreement.
(j) Buyer Securities.
----------------
(i) Registration Exemption. Except as otherwise set forth in this
----------------------
Agreement, the Buyer Securities have not been, and will not be,
registered under the Securities Act, or under any state securities
laws, are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, and,
consequently, must be held indefinitely unless subsequently registered
or unless an exemption from such registration is available.
(ii) Transfer Restrictions. No shareholder of the Company may,
---------------------
directly or indirectly, offer, sell, contract to sell, pledge, or
otherwise dispose of any of the Buyer Shares to be received by such
shareholder in the Merger (exclusive of such Buyer Shares withheld and
delivered to the Escrow Agent pursuant to (S) 2(h)); provided, however,
-------- -------
that one-third (1/3) of such Buyer Shares received by each such
shareholder shall be released from such transfer restrictions on the
15th day of the second month in each calendar quarter following the
calendar quarter in which the Closing occurs until all such Buyer
Shares are released from such transfer restrictions on the 15th day of
the second month in the third calendar quarter following the calendar
quarter in which the Closing occurs (e.g., if the Closing occurs in
January 2002, one-third (1/3) of such Buyer Shares received by each
such shareholder shall be released from such transfer restrictions on
May 15, 2002, August 15, 2002 and November 15, 2002).
(iii) Restrictive Legends.
-------------------
(A) The certificates representing the Buyer Securities issued
pursuant to this Agreement shall bear restrictive legends (and
stop transfer orders shall be placed against the transfer thereof
with the Buyer's transfer agent), stating substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH
SECURITIES MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT (I) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, (II) IN
COMPLIANCE WITH RULE 144 OR (III) PURSUANT TO AN OPINION OF
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933."
46
(B) The certificates representing the Buyer Shares issued
pursuant to this Agreement shall bear restrictive legends (and
stop transfer orders shall be placed against the transfer thereof
with the Buyer's transfer agent), stating substantially as
follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER, AS SET FORTH IN AN
AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A
COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE
CORPORATION. SUCH TRANSFER RESTRICTIONS ARE BINDING ON
TRANSFEREES OF THESE SHARES."
(C) To the extent that the transfer restrictions with respect
to any portion of such Buyer Shares no longer apply in accordance
with the terms of (S) 6(j)(ii) above, the Buyer shall promptly
request the Buyer's transfer agent to remove the applicable
restrictive legend and stop transfer order relevant to such
shareholder's portion of such Buyer Shares. Furthermore, to the
extent that such Buyer Shares have been registered under the
Registration Statement, at the request of a shareholder of the
Company, the Buyer shall promptly request that the Buyer's
transfer agent remove the applicable restrictive legend and stop
transfer order relevant to such shareholder's portion of such
Buyer Shares.
(iv) Transfer Restrictions. Each holder desiring to transfer Buyer
---------------------
Securities first must furnish the Buyer with (A) a written opinion
reasonably satisfactory to the Buyer in form and substance from counsel
reasonably satisfactory to the Buyer by reason of experience to the
effect that the holder may transfer the Buyer Securities as desired
without registration under the Securities Act and (B) a written
undertaking executed by the desired transferee reasonably satisfactory
to the Buyer in form and substance agreeing to be bound by the
restrictions on transfer contained herein; provided, however, that no
-------- -------
such written opinion or undertaking shall be necessary in connection
with the transfer of Buyer Securities registered under the Registration
Statement or in compliance with Rule 144 under the Securities Act.
7. Conditions to Obligation to Close.
---------------------------------
(a) Conditions to Obligation of the Buyer and the Merger Subsidiary.
---------------------------------------------------------------
The obligation of the Buyer and the Merger Subsidiary to consummate the
transactions to be performed by them in connection with the Closing is subject
to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the
Requisite Shareholders Approval and the number of Dissenting Shares
shall not exceed 5% of the number of outstanding Company Shares;
(ii) the representations and warranties set forth in (S) 4 above
shall be true and correct in all material respects at and as of the
Closing Date;
47
(iii) the Company and its Subsidiaries shall have performed and
complied with all of their covenants hereunder in all material respects
through the Closing;
(iv) the Company and its Subsidiaries shall have procured all of
the consents specified in (S) 5(b) and (c) above;
(v) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, (C) materially
adversely affect the right of the Buyer to own the capital stock of the
Surviving Corporation and to control the Surviving Corporation and its
Subsidiaries, or (D) materially adversely affect the right of any of
the Surviving Corporation and its Subsidiaries to own its assets and to
operate its businesses other than any such action, suit, or proceeding
arising from any claim relating to the matter set forth in paragraph 2
of Schedule 4(u) of the Disclosure Schedules (and no such injunction,
judgment, order, decree, ruling, or charge shall be in effect);
(vi) the Company shall have delivered to the Buyer a certificate
to the effect that each of the conditions specified above in
(S) 7(a)(i)-(v) is satisfied in all respects;
(vii) the Buyer Shares that will be issued in the Merger, and
those required to be reserved for issuance in connection with the
Merger, shall have been approved for listing on the Nasdaq National
Market, subject to official notice of issuance;
(viii) the Company, and its Subsidiaries shall have received all
authorizations, consents, and approvals of governments and governmental
agencies referred to in (S) 4(d) above;
(ix) the relevant parties shall have entered into the Shareholders
Agreement attached hereto as Exhibit A, the Escrow Agreement in form
and substance as set forth in Exhibit D, the Registration Rights
Agreement in form and substance as set forth in Exhibit F, and the
Employment Agreement in form and substance as set forth in Exhibits G
attached hereto, and each of the same shall be in full force and effect
as against such parties;
(x) the Buyer shall have received from counsel to the Company an
opinion in form and substance as set forth in Exhibit H attached
hereto, addressed to the Buyer, and dated as of the Closing Date;
(xi) the Buyer shall not be required to issue more than 4,800,000
Buyer Shares (as such number of Buyer Shares is adjusted downward by
the number of
48
Buyer Shares issuable upon the exercise or conversion of the Company
Stock Rights (other than the options under the Company Option Plan)
assumed by the Buyer in the Merger in accordance with (S) 2(d)(vii)
above) in connection with the transactions contemplated hereby;
(xii) (A)(x) the Buyer shall be reasonably satisfied based upon
consultation with its counsel and receipt of a satisfactory number of
Accredited Investor Statements from the shareholders of the Company
indicating that the offering and issuance of the Buyer Shares as
contemplated by this Agreement is in compliance with Rule 506 under the
Securities Act, or (y) pursuant to (S) 5(c), the Buyer and the Company
shall have received from the California Department of Corporations a
Permit for the solicitation and issuance of the Buyer Shares to the
shareholders of the Company in the Merger in accordance with this
Agreement and the issuance of the Merger Consideration by the Buyer in
accordance with this Agreement will be exempt from registration with
the Securities and Exchange Commission pursuant to Section 3(a)(10) of
the Securities Act, as the case may be, and (B) no other filings,
approvals, registrations, or qualifications (other than post-Closing
filings and registrations) are required under applicable federal or
state securities laws for the consummation of the Merger in accordance
with this Agreement;
(xiii) the Buyer Share Price is equal to or greater than $10.50;
provided, however, this closing condition set forth in this
-------- -------
(S) 7(a)(xiii) shall not apply in the event that the Company's Board of
Directors agrees that for purposes of this Agreement and the
transactions contemplated hereby, the Buyer Share Price is deemed to be
$10.50, notwithstanding the actual average closing price per Buyer
Share on the Nasdaq National Market;
(xiv) all actions to be taken by the Company in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer;
(xv) the Company and its Subsidiaries shall have obtained and
delivered to the Buyer a written consent for the assignment of each of
the Leases if required (the "Lease Consents"), in form and substance
--------------
reasonably satisfactory to the Buyer;
(xvi) the Company and its Subsidiaries shall have obtained and
delivered to the Buyer an estoppel certificate with respect to each of
the Leases, dated no more than 30 days prior to the Closing Date, from
the other party to such Lease, in form and substance reasonably
satisfactory to Buyer (the "Estoppel Certificates");
---------------------
(xvii) the Company and its Subsidiaries shall deliver to Buyer a
non-foreign affidavit dated as of the Closing Date and in form and
substance required
49
under the Treasury Regulations issued pursuant to Section 1445 of the
Internal Revenue Code so that the Buyer is exempt from withholding any
portion of the Merger Consideration hereunder (the "FIRPTA
------
Affidavit");
---------
(xviii) no damage or destruction or other change has occurred with
respect to any of the Leased Real Property or any portion thereof that,
individually or in the aggregate, would have a material adverse effect
on the use or occupancy of the Leased Real Property or the operation of
the Company's or its Subsidiary's business as currently conducted
thereon.
The Buyer may waive any condition specified in this (S) 7(a) for itself and on
behalf of the Merger Subsidiary if it executes a writing so stating at or prior
to the Closing.
(b) Conditions to Obligation of the Company. The obligation of the
---------------------------------------
Company to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
(i) this Agreement and the Merger shall have received the
Requisite Shareholders Approval;
(ii) the representations and warranties set forth in (S) 3 above
shall be true and correct in all material respects at and as of the
Closing Date;
(iii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iv) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement or (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation (and no such
injunction, judgment, order, decree, ruling, or charge shall be in
effect);
(v) the Buyer shall have delivered to the Company a certificate to
the effect that each of the conditions specified above in
(S) 7(b)(ii)-(iv) is satisfied in all respects;
(vi) the Buyer Shares that will be issued in the Merger, and those
required to be reserved for issuance in connection with the Merger,
shall have been approved for listing on the Nasdaq National Market,
subject to official notice of issuance;
(vii) the Buyer shall have received all authorizations, consents,
and approvals of governments and governmental agencies referred to in
(S) 3(b) above;
(viii) the Buyer shall have entered into the Shareholders
Agreement attached hereto as Exhibit A, the Escrow Agreement in form
and substance as set
50
forth in Exhibit D, the Registration Rights Agreement in form and
substance as set forth in Exhibit F, and the Employment Agreement in
form and substance as set forth in Exhibit G attached hereto, and each
of the same shall be in full force and effect as against the Buyer;
(ix) the Buyer shall be eligible to file the Registration
Statement on Form S-3 (or any successor form);
(x) the Company shall have received from counsel to the Buyer an
opinion in form and substance as set forth in Exhibit I attached
hereto, addressed to the Company, and dated as of the Closing Date; and
(xi) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Company.
The Company may waive any condition specified in this (S) 7(b) if it executes a
writing so stating at or prior to the Closing.
8. Remedies for Breaches of This Agreement.
---------------------------------------
(a) Survival of Representations and Warranties
------------------------------------------
(i) All of the representations and warranties of the Company
contained in this Agreement shall survive the Closing hereunder and
continue in full force and effect for a period of eighteen (18) months
thereafter.
(ii) All of the representations and warranties of the Buyer and
the Merger Subsidiary contained in this Agreement shall survive the
Closing hereunder and continue in full force and effect for a period of
eighteen (18) months thereafter.
(iii) Notwithstanding anything in this (S) 8(a) to the contrary,
in the event of any breach of a representation or warranty by a Party
that is intentional or constitutes fraud, such Party's liability for
breach of such representation or warranty shall survive the Closing
hereunder and continue in full force and effect forever thereafter.
(b) Indemnification Provisions for Benefit of the Buyer.
---------------------------------------------------
(i) In the event the Company breaches (or in the event any third
party alleges facts that, if true, would mean the Company has breached
any of the representations, warranties, and covenants contained herein,
and, if there is an applicable survival period pursuant to (S) 8(a)
above, provided that the Buyer makes a written claim for
indemnification to the Company Representative pursuant to (S) 11(h)
below within such survival period, then the Buyer shall be indemnified
51
from and against the entirety of any Adverse Consequences the Buyer
may suffer through and after the date of the claim for indemnification
(including any Adverse Consequences the Buyer may suffer after the end
of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or the alleged
breach), which shall be satisfied from the Escrow Fund in accordance
with the terms of the Escrow Agreement; provided, however, that the
-------- -------
Buyer shall not be indemnified from and against any Adverse
Consequences resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or alleged breach) of any
representation or warranty of the Company contained in this Agreement
(A) until the Buyer has suffered Adverse Consequences by reason of all
such breaches (or alleged breaches) in excess of a $500,000 aggregate
deductible (at which point the Buyer will be indemnified from and
against further such Adverse Consequences) or thereafter (B) to the
extent the Adverse Consequences the Buyer has suffered by reason of
all such breaches (or alleged breaches) exceeds an aggregate ceiling
of the Escrow Fund (after which point the Buyer shall not be
indemnified from and against further such Adverse Consequences).
(ii) Subject to the aggregate ceiling set forth in (S) 8(b)(i) and
if there is an applicable survival period pursuant to (S) 8(a) above
and provided that the Buyer makes a written claim for indemnification
to the Company Representative pursuant to (S) 11(h) below within such
survival period, the Buyer shall be indemnified from and against the
entirety of any Adverse Consequences the Buyer may suffer resulting
from, arising out of, relating to, in the nature of, or caused by any
Liability of any of the Company and its Subsidiaries (x) for any Taxes
of the Company and its Subsidiaries with respect to any Tax year or
portion thereof ending on or before the Closing Date (or for any Tax
year beginning before and ending after the Closing Date to the extent
allocable (determined in a manner consistent with (S) 9(c)) to the
portion of such period beginning before and ending on the Closing
Date), to the extent such Taxes are not reflected in the reserve for
Tax Liability (rather than any reserve for deferred Taxes established
to reflect timing differences between book and Tax income) shown on the
face of the Most Recent Balance Sheet (rather than in any notes
thereto) and (y) for the unpaid Taxes of any Person (other than any of
the Company and its Subsidiaries) under Reg. (S) 1.1502-6 (or any
similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise, which shall be satisfied from the
Escrow Fund in accordance with the terms of the Escrow Agreement.
(iii) Notwithstanding anything herein to the contrary, provided
that the Buyer makes a written claim for indemnification to the Company
Representative pursuant to (S) 11(h) below within the 18-month period
set forth in (S) 8(a)(i), the Buyer shall be indemnified in accordance
with the terms of (S) 8(b)(i) (including the applicable deductible and
ceiling), to the extent of any Adverse Consequences from, arising out
of, relating to, or in the nature of any integrated metrology tools of
the Company not set forth on Schedule 8(b) of the Disclosure Schedules
which utilize Dual Beam Spectroscopy, which shall be satisfied from the
Escrow Fund in accordance with the terms of the Escrow Agreement;
provided that for
--------
52
purposes of determining the allocation of Adverse Consequences under
this section, Adverse Consequences shall be allocated pro rata among
such integrated metrology tools which utilize Dual Beam Spectroscopy
and those tools set forth on Schedule 8(b) of the Disclosure
Schedules.
(c) Indemnification Provisions for Benefit of the Shareholders of the
-----------------------------------------------------------------
Company. In the event the Buyer breaches (or in the event any third party
-------
alleges facts that, if true, would mean the Buyer has breached) any of its
representations, warranties, and covenants contained herein, and, if there is an
applicable survival period pursuant to (S) 8(a) above, provided that the Company
Representative makes a written claim for indemnification against the Buyer
pursuant to (S) 11(h) below within such survival period, then the Buyer agrees
to indemnify each of the shareholders of the Company from and against the
entirety of any Adverse Consequences such shareholder of the Company may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences such shareholder of the Company may suffer after the end of
any applicable survival period) resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or the alleged breach); provided,
--------
however, that the Buyer shall not have any obligation to indemnify any of the
-------
shareholders of the Company from and against any Adverse Consequences resulting
from, arising out of, relating to, in the nature of, or caused by the breach (or
alleged breach) of any representation or warranty of the Buyer (A) until the
shareholders of the Company have suffered Adverse Consequences by reason of all
such breaches (or alleged breaches) in excess of a $500,000 aggregate deductible
(at which point the Buyer will be obligated to indemnify the shareholders of the
Company from and against further such Adverse Consequences) or thereafter (B) to
the extent the Adverse Consequences the shareholders of the Company have
suffered by reason of all such breaches (or alleged breaches) exceeds an
aggregate ceiling of ten percent (10%) of the Purchase Price (after which point
the Buyer will have no obligation to indemnify any of the shareholders of the
Company from and against further such Adverse Consequences).
(d) Matters Involving Third Parties.
-------------------------------
(i) If any third party shall notify the Buyer (the "Indemnified
-----------
Party") with respect to any matter (a "Third Party Claim") which may
----- -----------------
give rise to a claim for indemnification against the Escrow Fund under
this (S) 8, then the Indemnified Party shall promptly notify the
Company Representative thereof in writing; provided, however, that no
delay on the part of the Indemnified Party in notifying the Company
Representative shall lessen the Indemnified Party's right to recovery
under this (S) 8 unless (and then solely to the extent) the persons
indemnifying the Indemnified Party thereby are prejudiced.
(ii) The Company Representative on behalf of the Company's
shareholders will have the right to defend the Indemnified Party
against the Third Party Claim with counsel of its choice reasonably
satisfactory to the Indemnified Party so long as (A) the Company
Representative notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim
that the Indemnified Party will be indemnified from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party
53
Claim, (B) the Company Representative provides the Indemnified Party
with evidence reasonably acceptable to the Indemnified Party that it
will have the financial resources to defend against the Third Party
Claim, (C) the Third Party Claim involves only money damages and does
not seek an injunction or other equitable relief, (D) settlement of,
or an adverse judgment with respect to, the Third Party Claim is not,
in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the
continuing business interests of the Indemnified Party, and (E) the
Company Representative conducts the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Company Representative is conducting the
defense of the Third Party Claim in accordance with (S) 8(d)(ii) above,
(A) the Indemnified Party may retain separate co-counsel at its sole
cost and expense and participate in the defense of the Third Party
Claim, (B) the Indemnified Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party
Claim without the prior written consent of the Company Representative
(not to be withheld unreasonably), and (C) the Company Representative
will not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld
unreasonably).
(iv) In the event any of the conditions in (S) 8(d)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not
consult with, or obtain any consent from, the Company Representative in
connection therewith), (B) the Indemnified Party will be promptly and
periodically reimbursed for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), which
shall be satisfied from the Escrow Fund, and (C) the Indemnified Party
will be indemnified for any Adverse Consequences the Indemnified Party
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by the Third Party Claim to the fullest extent provided
in this (S) 8 (subject to the applicable aggregate deductible and
ceiling and pursuant to the terms of the Escrow Agreement).
(v) In the event that the Company Representative has consented to
any judgment or settlement pursuant to this (S) 8(d), the Company
Representative shall have no power or authority to object under any
provision of the Escrow Agreement to the amount of any claim by the
Indemnified Party against the Escrow Fund (and release of such amount
from the Escrow Fund) with respect to such judgment or settlement to
the extent such amount is consistent with the terms of such judgment or
settlement.
(e) Determination of Adverse Consequences. All indemnification payments
-------------------------------------
under this (S) 8 shall be deemed adjustments to the Merger Consideration.
54
(f) Exclusive Remedy. The Parties acknowledge and agree that with the
----------------
exception of any breach of a representation, warranty or covenant that is
intentional or constitutes fraud, the foregoing indemnification provisions in
this (S) 8 shall be the exclusive remedy of the Buyer and the shareholders of
the Company with respect to the Company and its Subsidiaries or the Buyer and
the Merger Subsidiary, as applicable, and the transactions contemplated by this
Agreement.
9. Tax Matters. The following provisions shall govern the allocation of
-----------
responsibility as between Buyer and the Company Shareholders for certain tax
matters following the Closing Date:
(a) Tax Periods Ending on or Before the Closing Date. Buyer shall
------------------------------------------------
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for the Company and its Subsidiaries for all periods ending on or prior to the
Closing Date which are filed after the Closing Date. Buyer shall permit the
Company Representative to review and comment on each such Tax Return described
in the preceding sentence prior to filing. The Buyer shall be reimbursed for
Taxes of the Company and its Subsidiaries with respect to such periods to the
extent such Taxes are not reflected in the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Most Recent Balance Sheet,
which shall be satisfied from the Escrow Fund in accordance with the terms of
the Escrow Agreement.
(b) Tax Periods Beginning Before and Ending After the Closing Date.
--------------------------------------------------------------
Buyer shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of the Company and its Subsidiaries for Tax periods which begin
before the Closing Date and end after the Closing Date. The Buyer shall be
entitled to payment in an amount equal to the portion of such Taxes which
relates to the portion of such Taxable period ending on the Closing Date to the
extent such Taxes are not reflected in the reserve for Tax Liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Most Recent Balance Sheet,
which shall be satisfied from the Escrow Fund in accordance with the terms of
the Escrow Agreement. For purposes of this Section, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax which
relates to the portion of such Taxable period ending on the Closing Date shall
(x) in the case of any Taxes other than Taxes based upon or related to income or
receipts, be deemed to be the amount of such Tax for the entire Taxable period
multiplied by a fraction the numerator of which is the number of days in the
Taxable period ending on the Closing Date and the denominator of which is the
number of days in the entire Taxable period, and (y) in the case of any Tax
based upon or related to income or receipts be deemed equal to the amount which
would be payable if the relevant Taxable period ended on the Closing Date. Any
credits relating to a Taxable period that begins before and ends after the
Closing Date shall be taken into account as though the relevant Taxable period
ended on the Closing Date. All determinations necessary to give effect to the
foregoing allocations shall be made in a manner consistent with prior practice
of the Company and its Subsidiaries.
(c) [Intentionally Deleted.]
------------------------
55
(d) Tax Sharing Agreements. All tax sharing agreements or similar
----------------------
agreements with respect to or involving the Company and its Subsidiaries shall
be terminated as of the Closing Date and, after the Closing Date, the Company
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
(e) Certain Taxes and Fees. All transfer, documentary, sales, use,
----------------------
stamp, registration and other such Taxes, and all conveyance fees, recording
charges and other fees and charges (including any penalties and interest)
incurred in connection with consummation of the transactions contemplated by
this Agreement, shall be paid by the shareholders of the Company when due, and
the shareholders of the Company will, at their own expense, file all necessary
Tax Returns and other documentation with respect to all such Taxes, fees and
charges, and, if required by applicable law, Buyer will, and will cause its
Affiliates to, join in the execution of any such Tax Returns and other
documentation.
10. Termination.
-----------
(a) Termination of Agreement. Certain of the Parties may terminate this
------------------------
Agreement with the prior authorization of its Board of Directors as provided
below:
(i) the Buyer and the Company may terminate this Agreement by
mutual written consent at any time prior to the Effective Time;
(ii) the Buyer and the Merger Subsidiary may terminate this
Agreement by giving written notice to the Company at any time prior to
the Effective Time (A) in the event the Company has breached any
material representation, warranty, or covenant contained in this
Agreement in any material respect, the Buyer has notified the Company
of the breach, and the breach has continued without cure for a period
of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before January 31, 2002, by reason of the failure
of any condition precedent under (S) 7(a) hereof (unless the failure
results primarily from the Buyer itself breaching any representation,
warranty, or covenant contained in this Agreement); provided, however,
-------- -------
if the Closing shall not have occurred on or before January 31, 2002,
by reason of the failure of the satisfaction of the closing condition
set forth in (S) 7(a)(xii)(A)(x), the Buyer and the Merger Subsidiary
may not terminate this Agreement under clause (b) above until May 31,
2002; and
(iii) the Company may terminate this Agreement by giving written
notice to the Buyer at any time prior to the Effective Time (A) in the
event the Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, the
Company has notified the Buyer of the breach, and the breach has
continued without cure for a period of 30 days after the notice of
breach or (B) if the Closing shall not have occurred on or before
January 31, 2002, by reason of the failure of any condition precedent
under (S) 7(b) hereof (unless the failure results primarily from the
Company itself breaching any representation, warranty, or covenant
contained in this Agreement); provided, however, if the Closing shall
-------- -------
not have occurred on or before January 31, 2002, by
56
reason of the failure of the satisfaction of the closing condition set
forth in (S) 7(a)(xii)(A)(x), the Company may not terminate this
Agreement under clause (b) above until May 31, 2002.
(b) Effect of Termination. If any Party terminates this Agreement
---------------------
pursuant to (S) 10(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party (except
for any Liability of any Party then in breach).
11. Miscellaneous.
-------------
(a) [Intentionally Deleted.]
------------------------
(b) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of the Buyer and the Company;
provided, however, that any Party may make any public disclosure it believes in
-------- -------
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case the disclosing Party
will use its reasonable best efforts to advise the other Parties prior to making
the disclosure).
(c) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(d) Entire Agreement. This Agreement (including the documents referred
----------------
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
(e) Succession and Assignment. This Agreement shall be binding upon and
-------------------------
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of his
or its rights, interests, or obligations hereunder without the prior written
approval of the Buyer and the Company.
(f) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(g) Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(h) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing and addressed to the intended
recipient as set forth below:
57
If to the Company: Copies to:
Sensys Instruments Corporation Tufts ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Suite 1810
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Crosby, Heafey, ▇▇▇▇▇ & May, PC
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
If to the Company Representative:
Sensys Instruments Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇
If to the Buyer or the Merger Subsidiary: Copy to:
Therma-Wave, Inc. ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Attention: ▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇
Such notice, request, demand, claim, or other communication hereunder shall be
effective and be deemed to be given upon (i) the day of transmission as
confirmed by a transmission receipt, if delivered by a facsimile transmission
with a copy by Federal Express or similar reputable overnight courier within 2
business days of the facsimile transmission, (ii) 1 business day after the
business day of the deposit with Federal Express or similar reputable overnight
courier, and (iii) the day it is actually received by the intended recipient, if
delivery is by any other means (including personal delivery, messenger service,
ordinary mail, or electronic mail). Any Party may change the address to which
notices, requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
(i) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction)
58
that would cause the application of the laws of any jurisdiction other than the
State of California.
(j) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer, the Merger Subsidiary, and the Company, and with respect to any provision
relating to the Company Representative, signed by the Company Representative. No
waiver by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
(k) Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(l) Expenses. Each of the Parties will bear his or its own costs and
--------
expenses (including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. Notwithstanding anything
herein to the contrary, expenses of the Company and its Subsidiaries payable to
▇▇▇▇▇▇▇ & Company, Inc. and its Affiliates, Tufts ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP,
Crosby, Heafey, ▇▇▇▇▇ & May, PC, and KPMG LLP in excess of $400,000 (as adjusted
upward by 0.8% of the amount in excess of $75,000,000 if the Purchase Price
exceeds $75,000,000), $70,000, $330,000 (as adjusted upward by an amount not to
exceed $70,000 in the event a fairness hearing is required pursuant to
(S) 5(c)(iv), and $70,000 respectively, with respect to the transactions
contemplated by this Agreement, shall be paid from the Escrow Fund.
(m) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(n) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits,
-------------------------------------------------
Annexes, and Schedules identified in this Agreement are incorporated herein by
reference and made a part hereof.
59
(o) Specific Performance. Each of the Parties acknowledges and agrees
--------------------
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter (subject to the provisions set forth in (S) 10(p) below),
in addition to any other remedy to which they may be entitled, at law or in
equity.
(p) Submission to Jurisdiction. Each of the Parties submits to the
--------------------------
jurisdiction of any state or federal court sitting in Santa Clara, California,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Any
Party may make service on any other Party by sending or delivering a copy of the
process to the Party to be served at the address and in the manner provided for
the giving of notices in (S) 10(h) above. Nothing in this (S) 10(p), however,
shall affect the right of any Party to serve legal process in any other manner
permitted by law or at equity. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.
(q) Company Representative; Agent of the Shareholders; Power of
-----------------------------------------------------------
Attorney.
--------
(i) In the event that the Merger is approved by the Requisite
Shareholders Approval, effective upon such vote, and without any
further act of any shareholder, the Company Representative shall be
appointed and act as agent and attorney-in-fact for each shareholder of
the Company on whose behalf a portion of the Merger Consideration was
deposited into the Escrow Fund, for and on behalf of such shareholders,
to give and receive notices and communications, to authorize delivery
to the Buyer of the Merger Consideration from the Escrow Fund in
satisfaction of claims by the Buyer, to object to such deliveries, to
agree to, negotiate, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate for the accomplishment of the
foregoing. If the Company Representative declines or is unable to act
as such agent and attorney-in-fact, such Person, as designated by the
Board of Directors of the Company, or, subsequent to the Merger, a
majority of the Persons who comprised such Board immediately prior to
the Merger, shall become the Company Representative. The Company
Representative shall not receive compensation for his or her services.
Notices or communications to or from the Company Representative shall
constitute notice to or from each of the shareholders of the Company.
60
(ii) The Company Representative shall not be liable for any act
done or omitted hereunder as the Company Representative while acting in
good faith and in the exercise of reasonable judgment. The shareholders
of the Company on whose behalf the Escrow Fund was contributed to,
shall severally indemnify the Company Representative and hold the
Company Representative harmless against any loss, liability, or expense
incurred without negligence or bad faith on the part of the Company
Representative and arising out of or in connection with the acceptance
or administration of the Company Representative's duties hereunder,
including the reasonable fees and expenses of any legal counsel
retained by the Company Representative.
(iii) A decision, act, consent, or instruction of the Company
Representative shall constitute a decision of all the shareholders for
whom a portion of the Escrow Fund otherwise payable to them are
deposited in the Escrow Fund and shall be final, binding, and
conclusive upon each of such shareholders, and the Escrow Agent and the
Buyer may rely upon any such decision, act, consent, or instruction of
the Company Representative as being the decision, act, consent, or
instruction of each and every such shareholder of the Company. The
Escrow Agent and the Buyer are hereby relieved from any liability to
any person for any acts done by them in accordance with such decision,
act, consent, or instruction of the Company Representative.
(iv) The reasonable expenses of the Company Representative,
including the reasonable fees and expenses of one legal counsel,
accountants and other necessary consultants retained by the Company
Representative, incurred by such Person in connection with performing
such actions as contemplated by this (S) 11(q) shall be paid from the
Escrow Funds in accordance with the terms of the Escrow Agreement.
*****
61
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
THERMA-WAVE, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
FND CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
SENSYS INSTRUMENTS CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President and Chief Executive Officer
COMPANY REPRESENTATIVE
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇
[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]
S-1