AGREEMENT AND PLAN OF MERGER
by and among
ADEPT TECHNOLOGY, INC.;
META CONTROL TECHNOLOGIES, INC.;
MCT ACQUISITION, INC.; and
INFOTECH AG
AUGUST 1, 2002
TABLE OF CONTENTS
Page
----
INDEX OF EXHIBITS ..............................................................................................iv
INDEX OF SCHEDULES .............................................................................................iv
TABLE OF DEFINED TERMS..........................................................................................vi
ARTICLE I THE MERGER.................................................................................1
1.1 The Merger........................................................................1
1.2 Effective Time of the Merger......................................................1
1.3 Effect of the Merger..............................................................2
1.4 Certificate of Incorporation; Bylaws..............................................2
1.5 Directors and Officers............................................................2
1.6 Effect on Capital Stock...........................................................2
1.7 Dissenting Shares.................................................................4
1.8 Exchange of Certificates..........................................................5
1.9 No Further Ownership Rights in Shares.............................................5
1.10 Lost, Stolen or Destroyed Certificates............................................5
1.11 Taking of Necessary Action; Further Action........................................5
1.12 Options; Convertible Securities...................................................6
1.13 Related Transactions..............................................................6
ARTICLE II THE CLOSINGS...............................................................................6
2.1 Initial Closing...................................................................6
2.2 Subsequent Closing(s).............................................................7
2.3 Extension of Final Date for Initial Closing.......................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY......................................................................7
3.1 Organization......................................................................7
3.2 Capital Structure.................................................................8
3.3 Obligations With Respect to Capital Stock.........................................8
3.4 Subsidiaries......................................................................9
3.5 Authority.........................................................................9
3.6 Financial Statements..............................................................9
3.7 Accounts Receivable..............................................................10
3.8 Business Changes.................................................................10
3.9 Title of Properties; Absence of Liens and
Encumbrances; Condition of Equipment.............................................13
3.10 Tax and Other Returns and Reports................................................13
3.11 Restrictions on Business Activities..............................................15
3.12 Intellectual Property............................................................15
3.13 Agreements, Contracts and Commitments............................................20
i
TABLE OF CONTENTS
(continued)
Page
----
3.14 Employees; Compensation..........................................................22
3.15 Employee Matters and Benefit Plans...............................................22
3.16 Business Practices...............................................................26
3.17 Related Party Transactions.......................................................26
3.18 Compliance with Applicable Law; Governmental Authorization.......................26
3.19 Litigation.......................................................................26
3.20 Insurance........................................................................26
3.21 Bank Accounts....................................................................27
3.22 Environmental Matters............................................................27
3.23 Brokers and Finders..............................................................28
3.24 Certain Advances.................................................................28
3.25 Minute Books; Books and Records..................................................28
3.26 Product Warranties; Defects; Liabilities.........................................28
3.27 No Changes In Equity Interests...................................................28
3.28 Representations Complete.........................................................28
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB.....................................................................29
4.1 Organization of Parent...........................................................29
4.2 Authority........................................................................29
ARTICLE V SECURITIES ACT COMPLIANCE; REGISTRATION; TRANSFER RESTRICTIONS............................29
5.1 Securities Act Exemption.........................................................29
5.2 Stock Restrictions...............................................................30
5.3 Registration.....................................................................30
5.4 Additional Restrictions on Transfer..............................................35
5.5 Stock Legend.....................................................................35
ARTICLE VI COVENANTS RELATING TO CONDUCT OF BUSINESS.................................................35
6.1 Conduct of Business of the Company...............................................35
ARTICLE VII ADDITIONAL AGREEMENTS AND COVENANTS.......................................................38
7.1 Stockholder Approval.............................................................38
7.2 Access to Information............................................................38
7.3 Confidentiality..................................................................38
7.4 Public Disclosure................................................................39
7.5 Consents.........................................................................39
7.6 Legal Conditions.................................................................39
7.7 Blue Sky Laws....................................................................39
7.8 Additional Documents and Further Assurances......................................40
-ii-
TABLE OF CONTENTS
(continued)
Page
----
7.9 Notification of Certain Matters..................................................40
7.10 Implementation of Representations and Warranties.................................40
7.11 No Solicitation..................................................................40
7.12 Termination of 401(k) Plan.......................................................41
7.13 Employee Benefit Plans...........................................................41
7.14 Line of Credit...................................................................41
7.15 Loan to the Company..............................................................41
7.16 License Agreement................................................................41
7.17 Discount Agreement; Commissions..................................................41
7.18 Voting Agreement; Board Observer.................................................43
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION; ESCROW.......................45
8.1 Survival of Representations and Warranties.......................................45
8.2 Escrow Arrangements; Indemnity...................................................45
8.3 Limitation.......................................................................50
8.4 Escrow of Commissions and Discounts..............................................50
ARTICLE IX INITIAL CLOSING CONDITIONS................................................................51
9.1 Conditions to Obligations of Each Party..........................................51
9.2 Additional Conditions to Obligations of the Company..............................51
9.3 Additional Conditions to the Obligations of Parent and Merger Sub................52
ARTICLE X TERMINATION, AMENDMENT AND WAIVER.........................................................55
10.1 Termination......................................................................55
10.2 Effect of Termination............................................................56
10.3 Amendment........................................................................57
10.4 Extension; Waiver................................................................57
ARTICLE XI GENERAL...................................................................................57
11.1 Notices..........................................................................57
11.2 Expenses.........................................................................59
11.3 Interpretation...................................................................59
11.4 Counterparts.....................................................................60
11.5 Entire Agreement; Assignment.....................................................60
11.6 Severability.....................................................................60
11.7 Other Remedies...................................................................60
11.8 Governing Law....................................................................60
11.9 Rules of Construction............................................................61
11.10 Specific Performance.............................................................61
11.11 Dispute Resolution...............................................................61
-iii-
INDEX OF EXHIBITS
Exhibit Description
------- -----------
Exhibit A Certificate of Merger
Exhibit B Form of Escrow Agreement
Exhibit C Stockholder Statement
Exhibit D Form of Parent Loan Documents
Exhibit E Form of License Agreement and Conditional License Agreement
Exhibit F Form of Bridge Note, Assumption and Release
Exhibit G Form of Legal Opinion of Counsel to Parent and Merger Sub
Exhibit H Form of Legal Opinion of Counsel to the Company
INDEX OF SCHEDULES
Schedule Description
-------- -----------
3.2 Capital Structure
3.5 Authority
3.6 Financial Statements
3.7 Accounts Receivable
3.8 Business Changes
3.9(a) Leased Real Property
3.9(c) Equipment
3.10 Tax Returns and Other Returns and Reports
3.12(b) Company Registered Intellectual Property
3.12(c) Title to Intellectual Property
3.12(d) Ownership of Intellectual Property
3.12(e) Licenses and Other Transfers of Intellectual Property From the
Company; Licenses and Other Transfers of Intellectual Property
To the Company
3.12(f) Required Intellectual Property; Ownership of Improvements
3.12(g) Intellectual Property Infringement
3.12(j) Disputes Regarding Intellectual Property
3.12(l) Orders, Etc. Relating to Intellectual Property
3.12(p) Company Software
3.13 Agreements, Contracts and Commitments
3.13(h) Personal Property Leases
3.13(l) Agreements Evidencing Company Indebtedness
3.13(m) Confidentiality Agreements
3.14 Employees and Compensation
-iv-
3.15(b) Company Employee Plans and Employee Agreements
3.15(d) Employee Plan Compliance
3.15(e) Pension Plans
3.15(g) No Post-Employment Obligations
3.15(h)(i) No Violation
3.15(h)(ii) Excess Parachute Payments
3.17 Related Party Transactions
3.18 Compliance with Law; Governmental Authorization
3.19 Litigation
3.20 Insurance
3.21 Bank Accounts
3.24 Certain Advances
3.26 Product Warranties; Defects; Liabilities
7.17 Discount Agreement
9.3(q) Quality Evaluation
9.3(r) Company Products Patent Evaluation
-v-
TABLE OF DEFINED TERMS
Defined Terms Section Page
------------- ------- ----
Acquisition Proposal.................................Section 7.11................................................40
Affiliate............................................Section 3.15(a)(i)..........................................22
Agreement............................................Preamble.....................................................1
agreement............................................Section 11.3(a).............................................59
Airvac...............................................Section 1.6(b)...............................................3
applicable law.......................................Section 11.3(b).............................................59
Bridge Lender........................................Section 7.15................................................41
Bridge Loan Agreement................................Section 7.15................................................41
Bylaws...............................................Section 3.1..................................................8
Certificates.........................................Section 1.8(b)...............................................5
Charter..............................................Section 3.1..................................................8
Closings.............................................Section 2.2..................................................7
Code.................................................Section 3.10(b)(viii).......................................14
Commercial Software Rights...........................Section 3.12(a)(i)..........................................15
Commission Statement.................................Section 7.17(c).............................................43
Commissions..........................................Section 7.17(b).............................................42
Company Authorizations...............................Section 3.18................................................26
Company Balance Sheet................................Section 3.6(a)...............................................9
Company Common Stock.................................Recitals.....................................................1
Company Employee Plan................................Section 3.15(a)(iii)........................................22
Company Financial Statements.........................Section 3.6(a)...............................................9
Company Intellectual Property........................Section 3.12(a)(ii).........................................15
Company Preferred Stock..............................Section 1.6(a)...............................................2
Company Registered Intellectual Property.............Section 3.12(b).............................................16
Company Software.....................................Section 3.12(p).............................................19
Company..............................................Preamble.....................................................1
Conflict.............................................Section 3.5..................................................9
Contract.............................................Section 3.13................................................22
DGCL.................................................Section 1.1..................................................1
Discount.............................................Section 7.17(a).............................................41
Dissenting Shares....................................Section 1.7(a)...............................................4
DOL..................................................Section 3.15(c).............................................24
Effective Time.......................................Section 1.2..................................................2
Employee Agreement...................................Section 3.15(a)(v)..........................................23
Employee.............................................Section 3.15(a)(iv).........................................23
Environmental Permits................................Section 3.22(c).............................................27
Equipment............................................Section 3.9(c)..............................................13
ERISA................................................Section 3.15(a)(ii).........................................22
Escrow Agent.........................................Section 1.6(e)...............................................4
-vi-
Escrow Agreement.....................................Section 1.6(e)...............................................4
Escrow Amount........................................Section 1.6(e)...............................................4
Exchange Act.........................................Section 5.3(c)(vii).........................................33
Exchange Consideration...............................Section 1.6(b)...............................................3
Extension Fee........................................Section 2.3..................................................7
Final Date...........................................Section 10.1(b).............................................55
Final Sale Date......................................Section 5.3(b)(i)...........................................31
GAAP.................................................Section 3.6(a)...............................................9
Governmental Entity..................................Section 3.5..................................................9
Hazardous Material...................................Section 3.22(a).............................................27
Hazardous Materials Activities.......................Section 3.22(b).............................................27
Holder...............................................Section 5.3(a)(iv)..........................................31
Inbound License Agreements...........................Section 3.12(e).............................................17
include, includes, including.........................Section 11.3(c).............................................59
Infotech Share Purchase Price........................Section 1.6(b)...............................................3
Infotech Shares......................................Section 1.6(b)...............................................3
Infotech.............................................Preamble.....................................................1
Initial Closing Date.................................Section 1.2..................................................2
Initial Closing......................................Section 1.2..................................................2
Intellectual Property................................Section 3.12(a)(iii)........................................15
IRS..................................................Section 3.15(a)(vi).........................................23
Key Lenders..........................................Section 1.13(c)..............................................6
knowledge of the Company.............................Section 11.3(d).............................................59
License Agreement....................................Section 1.13(d)..............................................6
Liens................................................Section 3.7.................................................10
Losses...............................................Section 8.2(b)..............................................46
Master Purchase Agreements...........................Section 7.17(a).............................................41
Material Adverse Change of the Company...............Section 3.1..................................................8
Material Adverse Effect on the Company...............Section 3.1..................................................8
Maximum Liability for Losses.........................Section 8.3.................................................50
Merger Agreement.....................................Section 1.1..................................................1
Merger Sub...........................................Preamble.....................................................1
Merger...............................................Recitals.....................................................1
Multiemployer Plan...................................Section 3.15(a)(vii)........................................23
NRE..................................................Section 7.17(b)(iii)........................................42
Observer.............................................Section 7.18(b).............................................44
Officer's Certificate................................Section 9.2(d)..............................................46
Operating Notes......................................Section 1.13(b)..............................................6
Other Proprietary Information........................Section 3.12(i).............................................19
Outbound License Agreements..........................Section 3.12(e).............................................17
Parent Common Stock..................................Recitals.....................................................1
Parent Indemnitees...................................Section 8.2(b)..............................................45
Parent Loan Agreement................................Section 1.13(c)..............................................6
Parent Material Adverse Change.......................Section 4.1.................................................29
-vii-
Parent Material Adverse Effect.......................Section 4.1.................................................29
Parent Stock Consideration...........................Section 1.6(a)...............................................2
Parent...............................................Preamble.....................................................1
Patent Rights........................................Section 3.12(a)(iv).........................................16
Pension Plan.........................................Section 3.15(a)(viii).......................................23
Person...............................................Section 11.3(e).............................................60
Prospectus...........................................Section 5.3(a)(iii).........................................30
Proxy Holder.........................................Section 7.18(a).............................................43
PTO..................................................Section 3.12(b).............................................16
Purchase Shares......................................Section 5.3(a)(ii)..........................................30
reasonable steps.....................................Section 3.12(i).............................................19
register, registered and registration................Section 5.3(a)(i)...........................................30
Registered Intellectual Property.....................Section 3.12(a)(v)..........................................16
Registrable Securities...............................Section 5.3(a)(ii)..........................................30
Related Technology...................................Section 3.12(a)(vi).........................................16
Required Filing Date.................................Section 5.3(b)(i)...........................................31
Required Registration................................Section 5.3(b)(i)...........................................31
Returns..............................................Section 3.10(b)(i)..........................................14
Rule 144.............................................Section 5.3(a)(ii)..........................................30
Rules and Regulations................................Section 5.3(c)(vii).........................................33
SEC..................................................Section 5.3(a)(v)...........................................31
Securities Act.......................................Section 3.3(b)...............................................9
Series A Preferred Stock.............................Section 1.6(a)...............................................2
Series B Preferred Stock.............................Section 1.6(a)...............................................2
Shares...............................................Section 1.6(a)...............................................2
Software.............................................Section 3.12(p).............................................20
Stockholder Certificates.............................Section 1.8(a)...............................................5
Stockholder..........................................Section 1.6..................................................2
Sub-Licenses.........................................Section 1.13(d)..............................................6
Subsequent Closing Date..............................Section 2.2..................................................7
Subsequent Closing...................................Section 2.2..................................................7
Surviving Corporation................................Section 1.1..................................................1
Suspension Notice....................................Section 5.3(c)(vii).........................................33
Tax or Taxes.........................................Section 3.10(a).............................................13
Termination Fee......................................Section 10.2................................................56
Third Party Claim....................................Section 8.2(d)(i)...........................................48
Third Party Expenses.................................Section 11.2................................................59
Transaction Documents................................Section 2.1(d)...............................................7
Transfer.............................................Section 5.4(a)..............................................35
▇▇▇▇▇▇/▇▇▇▇▇▇ Consideration..........................Section 8.2(b)..............................................45
Zevac................................................Section 1.6(b)...............................................3
-vii-
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of August 1, 2002, by and among Adept Technology, Inc., a
California corporation (the "Parent"), Meta Control Technologies, Inc., a
Delaware corporation (the "Company"), MCT Acquisition, Inc., a Delaware
corporation ("Merger Sub"), and Infotech AG, a Swiss corporation ("Infotech").
R E C I T A L S
WHEREAS, the boards of directors of each of the Company, Parent and
Merger Sub believe it to be in the best interests of such company and its
respective stockholders that Merger Sub merge with and into the Company with the
Company to continue as the surviving corporation (the "Merger") and have
approved the Merger; and
WHEREAS, pursuant to the Merger, among other things, at the Effective
Time, certain of the outstanding shares of the Company's capital stock will be
converted into a right to receive shares of common stock, no par value per
share, of Parent ("Parent Common Stock"), in the amount set forth herein, and
certain shares of the Company's common stock, $.01 par value per share (the
"Company Common Stock") held by Infotech shall constitute shares of stock of the
surviving corporation to the Merger; and
WHEREAS, concurrently herewith or upon the Initial Closing (as defined
herein), as an essential inducement for Parent and Merger Sub to enter into this
Agreement, certain stockholders of the Company will make loans to the Company
and to Parent upon the terms and conditions hereinafter set forth.
A G R E E M E N T
NOW, THEREFORE, in consideration of the covenants, promises, and
representations set forth herein, and for other good and valuable consideration,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time and subject to and upon the terms
and conditions of this Agreement, the Certificate of Merger attached hereto as
Exhibit A (the "Merger Certificate") and the Delaware General Corporation Law
("DGCL"), Merger Sub will be merged with and into the Company, the separate
corporate existence of Merger Sub will cease, and the Company will continue as
the surviving corporation. The Company as the surviving corporation after the
Merger is sometimes referred to as the "Surviving Corporation." Parent, as the
sole stockholder of Merger Sub, hereby approves the Merger and this Agreement.
1.2 Effective Time of the Merger. Subject to the provisions of this
Agreement, the parties hereto will cause the Merger to be consummated by filing
the Merger Certificate with the Secretary of State of Delaware (and any other
certificates which may be deemed necessary) in
accordance with the DGCL at such time as the Merger Certificate is filed (or
such later time as may be agreed in writing and specified in the Merger
Certificate being the "Effective Time"). Unless this Agreement is earlier
terminated pursuant to Article X, the closing of the Merger (the "Initial
Closing") will take place as promptly as practicable after all conditions
precedent to the obligations of the parties hereto have been satisfied or waived
at the offices of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another place or time is agreed to by Parent
and the Company. The date upon which the Initial Closing actually occurs is the
"Initial Closing Date".
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger will be as provided in the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all rights, privileges,
powers, and franchises of the Company and Merger Sub will vest in the Surviving
Corporation, and all debts, liabilities, and duties of the Company and Merger
Sub will become the debts, liabilities, and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws. The Certificate of
Incorporation attached as Appendix A to the Merger Certificate will be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided in the DGCL. The Bylaws of Merger Sub as in effect
immediately prior to the Effective Time will be the Bylaws of the Surviving
Corporation until thereafter amended as provided in the Surviving Corporation's
Certificate of Incorporation, Bylaws and the DGCL.
1.5 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time will be the directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation. The officers of Merger Sub immediately
prior to the Effective Time will be the officers of the Surviving Corporation,
in each case to serve until their respective successors are duly elected or
appointed and qualified.
1.6 Effect on Capital Stock. As of the Effective Time, by virtue of the
Merger, and without any action on the part of the Parent, Company or any holder
of the Company's capital stock (a "Stockholder"):
(a) Conversion of Certain Company Capital Stock. Other than
(i) 339,846 shares of Company Common Stock held by Infotech and (ii) Dissenting
Shares, each share of Company Common Stock, Series A Preferred Stock, $.01 par
value per share of the Company ("Series A Preferred Stock"), and Series B
Preferred Stock, $.01 par value per share ("Series B Preferred Stock", together
with the Series A Preferred Stock, the "Company Preferred Stock", and
collectively with the Company Common Stock and Series A Preferred Stock, the
"Shares") issued and outstanding immediately prior to the Effective Time will be
converted into the right to receive an aggregate of Seven Hundred Thirty
Thousand (730,000) shares of Parent Common Stock (the "Parent Stock
Consideration"). The total Parent Stock Consideration shall be payable as
follows:
(i) A total of 833 shares of Parent Common Stock
shall be issued to the holders of the Company's Series A Preferred
Stock;
-2-
(ii) A total of 233,333 shares of Parent Common Stock
shall be issued to the holders of the Company's Series B Preferred
Stock; and
(iii) A total of 495,834 shares of Parent Common
Stock shall be issued to the holders of the Company Common Stock (other
than as provided in clause (b) below for the Infotech Shares).
Such distribution of the Parent Stock Consideration shall be adjusted among the
classes of capital stock of the Company as appropriate to reflect any changes in
capitalization of the Company (including any changes due to the exercise of
options or other convertible securities of the Company) prior to the Initial
Closing. The Company hereby waives any right of first refusal or purchase with
respect to the Shares in connection with the transactions contemplated by this
Agreement.
(b) Certain Shares Held by Infotech. Upon the effectiveness of
the Merger, 339,846 shares of Company Common Stock held by Infotech shall not be
entitled to receive the Parent Stock Consideration, and 339,846 shares of common
stock of the Company as the Surviving Corporation shall be payable as the merger
consideration for such shares held by Infotech (the "Infotech Shares", and
together with the Parent Stock Consideration, the "Exchange Consideration") such
that Infotech's aggregate equity interest in the Surviving Corporation
immediately after the Initial Closing equals, when rounded, thirty-three percent
(33%) of the total outstanding stock of the Surviving Corporation, and the
Infotech Shares shall be subject to the purchase and sale described in this
Section 1.6(b). Infotech hereby waives any claim relating to or arising out of
the nature of the consideration for such shares in connection with the Merger or
its treatment varying from that of other Stockholders, but such waiver shall not
apply to the rights created pursuant to the terms of this Agreement or the other
Transaction Documents. Upon the terms and subject to the conditions set forth in
this Agreement, at the Subsequent Closing(s), Infotech shall transfer to Parent,
and Parent shall acquire from Infotech, the Infotech Shares. The purchase price
for the Infotech Shares shall be an amount of up to Five Dollars and Fifteen
cents ($5.15) per Infotech Share, for an aggregate purchase price of up to One
Million Seven Hundred Fifty Thousand Dollars ($1,750,000) (the "Infotech Share
Purchase Price"), payable in the form of Discounts as provided in the Amended
Master Purchase Agreements and Commissions as set forth in Section 7.17 by
Parent to Infotech, for the benefit of Infotech, Airvac Engineering Company,
Inc. ("Airvac") and Zevac AG ("Zevac") as set forth in Section 7.17. Infotech
Shares shall be released from escrow to Parent quarterly in an amount equal to
the portion of the Infotech Share Purchase Price represented by the aggregate
discounts or commission payments made by Parent for such quarter; provided,
however, in the event that such discounts and commission payments do not equal
the Infotech Share Purchase Price on or before the sixth (6th) anniversary of
the Initial Closing, any and all remaining Infotech Shares held in escrow will
be released from escrow to Parent at no further cost to Parent pursuant to the
terms of the Escrow Agreement; and provided, however, further that any Discount
or Commission which is not given or paid, as applicable, in satisfaction of
indemnification obligations pursuant to Article VIII shall be deemed paid
proportionately for purposes of determining Parent's payment of the Infotech
Share Purchase Price. Notwithstanding the foregoing, if deemed necessary or
appropriate by Parent, upon the reasonable request of Parent, the 339,849 shares
owned by Infotech shall be contributed to Merger Sub with a contribution of the
shares of Parent Stock Consideration by Adept, to be converted into the same pro
rata equity
-3-
interests in the Surviving Corporation as otherwise set forth herein upon the
Effective Time. In the event of any termination of this Agreement, such
contributions shall be reversed to the applicable parties making such
contributions.
(c) No Fractional Shares. No fraction of a share of Parent
Common Stock will be issued, but in lieu thereof, each holder of Shares who
would otherwise be entitled to a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to be received
by such holder) will be entitled to receive from Parent an amount of cash
(rounded down to the nearest whole cent) equal to the product of (i) such
fraction multiplied by (ii) the average closing price of Parent Common Stock as
reported by Nasdaq Stock Market for the five (5) business day period immediately
prior to the date hereof ($1.77).
(d) Merger Sub Capital Stock. The outstanding shares of common
stock of Merger Sub not will be converted into 679,692 fully paid and
non-assessable shares of common stock of the Surviving Corporation owned by
Parent or such number of shares equal to, when rounded, sixty-seven percent
(67%) of the total outstanding equity of Merger Sub and, together with the
Infotech Shares, will constitute the only shares of capital stock of the
Surviving Corporation outstanding immediately after the Effective Time.
(e) Escrow. At the Initial Closing, (1) Parent shall deposit
ten percent (10%) of the Parent Stock Consideration, equal to seventy-three
thousand (73,000) shares of Parent Common Stock (the "Escrow Amount") otherwise
payable to the Stockholders at the Initial Closing and (2) Infotech shall
deposit the Infotech Shares, with Paragon Commercial Bank, as escrow agent (the
"Escrow Agent"), pursuant to an escrow agreement (the "Escrow Agreement")
substantially in the form attached as Exhibit B.
1.7 Dissenting Shares. (a) Shares that have not been voted for approval
of this Agreement and with respect to which a demand for payment and appraisal
has been properly made in accordance with Section 262 of the DGCL ("Dissenting
Shares") will not be converted into the right to receive the Exchange
Consideration otherwise payable with respect to such shares but will be
converted into the right to receive such consideration as may be determined to
be due with respect to such Dissenting Shares pursuant to the laws of the State
of Delaware. If a holder of Dissenting Shares withdraws his or her demand for
such payment and appraisal or becomes ineligible for such payment and appraisal,
then, as of the Effective Time or the occurrence of such event of withdrawal or
ineligibility, whichever last occurs, such holder's Dissenting Shares will cease
to be Dissenting Shares and will be converted into the right to receive, and
will be exchangeable for, the Exchange Consideration into which such Dissenting
Shares would have been converted pursuant to Section 1.6. Any Exchange
Consideration that would have been issuable with respect to Dissenting Shares
will be retained by Parent.
(b) The Company will give Parent (i) prompt notice of any
demands received by Company from a holder of Dissenting Shares for appraisal of
Shares, withdrawals of such demands, and any other related instruments received
by the Company and (ii) the opportunity to participate in all negotiations and
proceedings with respect to such demands under the DGCL. The Company will not,
except with the prior written consent of Parent or as required under the DGCL,
voluntarily make any payment with respect to such demands or offer to settle or
settle any such demands for appraisal.
-4-
1.8 Exchange of Certificates. (a) Surrender of Certificates for Parent
Common Stock. At the Initial Closing, each Stockholder will deliver or cause to
be delivered to Parent all certificates representing the Shares other than the
Infotech Shares (the "Stockholder Certificates") held by each Stockholder, duly
endorsed or accompanied by stock powers duly endorsed in blank, and an executed
Stockholder Statement substantially in the form of Exhibit C. Promptly after
receipt of such Stockholder Certificates, Parent will deliver to the
Stockholders the Parent Stock Consideration with certificates registered in each
such Stockholder's name.
(b) Surrender of Certificates for Infotech Shares. In the case
of the Infotech Shares, at the Initial Closing, Infotech shall deliver or cause
to be delivered to the Escrow Agent all certificates representing such Shares,
duly endorsed or accompanied by stock powers duly endorsed in blank.
(c) Escheat. Notwithstanding anything to the contrary herein,
neither of the Surviving Corporation nor any party hereto will be liable to a
holder of shares of Parent Common Stock or Company Common Stock or Company
Preferred Stock for any amount properly paid to a public official pursuant to
any applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Shares. All Exchange Consideration
delivered upon the surrender for exchange of Certificates in accordance with the
terms hereof will be deemed to have been delivered in full satisfaction of all
rights pertaining to such Shares represented by the Certificates. Except with
respect to the Infotech Shares subsequently transferred to Parent, there will be
no further registration of transfers on the stock transfer books of the
Surviving Corporation of the Shares which were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason (except for the Infotech Shares), they
will be cancelled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Stockholder Certificates will have been lost, stolen, or destroyed, Parent (or
its transfer agent) or the Surviving Corporation will issue in exchange for such
lost, stolen, or destroyed Stockholder Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Common Stock
or common stock of the Surviving Corporation, as applicable, as may be required
by Parent (or its transfer agent) or the Surviving Corporation; provided,
however, that Parent or the Surviving Corporation may, in its discretion and as
a condition precedent to the issuance thereof, require the owner of such lost,
stolen, or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Surviving Corporation with respect to the Certificates alleged to have
been lost, stolen or destroyed.
1.11 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, the officers and directors of Parent will
be fully authorized in the name of Parent and the Company to take, and will
take, all such action.
-5-
1.12 Options; Convertible Securities. Neither Parent nor the Surviving
Corporation shall assume (i) any option to purchase Company Common Stock or
Company Preferred Stock or other security convertible into or exercisable for
Company Common Stock or Company Preferred Stock or (ii) any plan or other
agreement and arrangement pursuant to which any such option or other security
has been or may be issued; nor shall any such option or other security
accelerate or become fully vested upon or as a result of the transactions
contemplated by this Agreement. At the Effective Time, all outstanding options
or other such securities which were not exercised or converted prior to the
Effective Time shall be terminated and cancelled.
1.13 Related Transactions. In addition to the transactions set forth
above, at or immediately after the Initial Closing:
(a) Parent shall assume the Company's obligations under its
line of credit with Paragon Commercial Bank as set forth in Section 7.14;
(b) Parent shall pay to certain Stockholders who have made
loans to the Company for payment of its operational expenses, as documented by
promissory notes (the "Operating Notes"), the outstanding balance of such
Operating Notes up to a maximum aggregate payment of One Hundred Seventy-Five
Thousand Dollars ($175,000);
(c) Parent, on behalf of the Surviving Corporation, shall
assume responsibility for payment of outstanding accounts payable of the Company
as set forth on Schedule 3.6 in an amount not to exceed, when aggregate with the
outstanding balance of the Operating Notes, One Hundred Seventy-Five Thousand
Dollars ($175,000);
(d) ▇▇▇▇▇▇ ▇▇▇▇▇▇ (the "Lead Lender") shall make available to
Parent a credit facility in an aggregate amount up to Eight Hundred Thousand
Dollars ($800,000) subject to the terms and conditions of the Loan Agreement
(the "Parent Loan Agreement") in the form attached as Exhibit D; and
(e) Parent and the Company will enter into a License Agreement
substantially in the form attached as Exhibit E (the "License Agreement"), and
the Company and each of Infotech, Airvac and Zevac shall enter into a license
agreement thereunder which shall provide for the grant of a conditional license
by the Company to Infotech, Airvac and Zevac (the "Conditional License
Agreement") in the form of Exhibit E.
ARTICLE II
THE CLOSINGS
2.1 Initial Closing. At the Initial Closing, in addition to the matters
set forth in Article I to occur at the Initial Closing:
(a) Parent and the Lead Lender shall execute and deliver
Parent Loan Agreement;
(b) Parent, Infotech, the Securityholder Agent and the Escrow
Agent shall execute and deliver the Escrow Agreement;
-6-
(c) Parent and the Company shall execute and deliver the
License Agreement and the Company and each of Parent, the Company, Infotech,
Airvac and Zevac shall execute and deliver the Conditional License Agreement
thereunder; and
(d) Each of the Company, Parent, Infotech and other
Stockholders shall have executed and delivered the other Transaction Documents
(other than the Fee Escrow Agreement) to which such Persons are a party.
For purposes of this Agreement "Transaction Documents" shall mean this
Agreement, the Escrow Agreement, the Parent Loan Agreement, the Bridge Note, the
Non-Competition Agreement, the License Agreement, the Conditional License
Agreement, the Fee Escrow Agreement, the Master Purchase Agreements and the
Merger Certificate.
2.2 Subsequent Closing(s). The closings of the transfers of Infotech
Shares contemplated by Section 1.6(b) of this Agreement (each a "Subsequent
Closing", and together with the Initial Closing, the "Closings") shall take
place quarterly on the first day of each quarter following the quarter in which
the Initial Closing Date occurs for which Parent has made (or is deemed to have
made as provided in Section 1.6(b)) Discounts and Commissions as described in
Section 7.17 in payment of the purchase price of Infotech Shares (or as
otherwise agreed by the parties) and, if not all Infotech shares have been
purchased, on the sixth (6th) anniversary of the Initial Closing Date (each, a
"Subsequent Closing Date"). Subject to the terms of the Escrow Agreement, at
each Subsequent Closing, the Escrow Agent shall release to Parent certificates
representing the Infotech Shares duly endorsed in blank or accompanied by duly
executed stock powers in accordance with the terms of the Escrow Agreement in an
amount equal to the portion of the Infotech Share Purchase Price paid (or deemed
paid) by Parent with respect to such Subsequent Closing Date, and all remaining
Infotech Shares held in escrow on such sixth (6th) anniversary of the Initial
Closing Date, if any, will be released from escrow to Parent.
2.3 Extension of Final Date for Initial Closing. In the event that not
all closing conditions set forth in Article IX shall have been satisfied on or
before the Final Date (but are otherwise capable of being satisfied), no later
than five (5) days prior to such Final Date, the Company shall deliver to Parent
an accurate and complete statement of expected cash flows of the Company for the
next preceding month reflecting all accounts payable and other costs and
expenses to be incurred by the Company which shall be reasonably acceptable to
Parent. On or prior to the Final Date, Parent may elect to pay to the Company an
amount equal to the amounts payable by the Company as set forth in such
statement (the "Extension Fee") to extend the Final Date until September 30,
2002.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
REGARDING THE COMPANY
The Company represents and warrants to Parent and Merger Sub as of the
date hereof and as of the Initial Closing Date as follows:
3.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite
-7-
corporate power and authority to own, lease, and operate its properties and to
carry on its Business as now being conducted and as proposed to be conducted and
is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the failure to be so qualified would
have a Material Adverse Effect on the Company. For purposes of this Agreement, a
"Material Adverse Effect on the Company" or "Material Adverse Change of the
Company" means any circumstance, in, or effect on the business of the Company,
or any group of the foregoing circumstances, changes or effects, which (a) is or
are, or is or could in the future be, materially adverse to the business,
operations, assets or liabilities, earnings or results of operations, condition
(financial or otherwise) or prospects, or (b) could reasonably be expected to
prevent or materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement. The Company has delivered a true
and correct copy of its Certificate of Incorporation (the "Charter") and Bylaws
(the "Bylaws"), each as currently in effect, to counsel for Parent.
3.2 Capital Structure. The authorized capital stock of the Company
consists of (i) ten million (10,000,000) shares of Company Common Stock, of
which One Million Twenty Thousand Five Hundred Fifty-Eight (1,020,558) shares
are issued and outstanding or will be at Closing and (ii) five million
(5,000,000) shares of Company Preferred Stock, comprised of one hundred fifty
thousand (150,000) shares designated as Series A Preferred Stock, five hundred
(500) shares of which are outstanding, and three hundred thousand (300,000)
shares designated as Series B Preferred Stock, one hundred forty thousand
(140,000) shares of which are outstanding. All outstanding shares of Company
Common Stock and Company Preferred Stock are duly authorized, validly issued,
fully paid, and nonassessable and not subject to preemptive rights created by
statute, the Charter, or any agreement to which the Company is a party or is
bound. All outstanding shares of Company Common Stock and Company Preferred
Stock and all other outstanding securities of the Company have been issued in
compliance with all applicable federal and state securities laws. Other than as
set forth in Schedule 3.2, there are no outstanding options, warrants or similar
rights to acquire any securities of the Company. Schedule 3.2 also sets forth a
complete and accurate list of all issued and outstanding shares of Company
Common Stock and Company Preferred Stock, identifying the registered holder
thereof and the address of such Stockholder (for purposes of the notice
provisions hereof), the price paid for such securities, the acquisition date,
and the number of shares, if any, subject to the Company's repurchase option (or
similar vesting terms) as of the date of this Agreement and designates such
shares of the Company's capital stock that will be converted into the right to
receive Parent Stock Consideration. Except as set forth in Schedule 3.2, there
are no securities of the Company issued, reserved for issuance, or outstanding.
Schedule 3.2 shall be updated and delivered to Parent in final form immediately
prior to the Initial Closing.
3.3 Obligations With Respect to Capital Stock.
(a) Except as set forth in Schedule 3.2, the Company has no
commitment or obligation of any kind, either firm or conditional, written or
oral, to issue, deliver or sell, or cause to be issued, delivered or sold, under
offers, stock option agreements, stock bonus agreements, stock purchase plans,
incentive compensation plans, warrants, calls, conversion rights or otherwise,
any shares of the capital stock or other securities of the Company. There are no
voting trusts or other agreements or understandings with respect to the shares
of capital stock of the Company.
-8-
(b) Except as otherwise contemplated by this Agreement, at or
before the Initial Closing, any rights of any holder or prospective holder of
the Company's securities to cause such securities to be registered under the
Securities Act of 1933, as amended (the "Securities Act"), and any information
rights, voting rights, rights of co-sale, rights to maintain equity percentage,
rights of first refusal and the like that may exist for the benefit of any such
holder or prospective holder shall have been terminated.
3.4 Subsidiaries. The Company has no subsidiaries or affiliated
companies, has never had any subsidiaries or affiliated companies, and does not
own and has not at any time owned any equity or other interest, directly or
indirectly, in any Person.
3.5 Authority. The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement, the other
Transaction Documents to which the Company is a party the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of the Company. This Agreement and the
other Transaction Documents to which the Company is a party has been duly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and
principles of equity. The execution and delivery of this Agreement by the
Company do not, and as of the Initial Closing, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or to loss of any benefit under (any such event, a "Conflict")
(a) any provision of the Charter or Bylaws or (b) any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, applicable law to the Company or its
properties or assets. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority, instrumentality, agency or
commission of any state, county, local or other jurisdiction (a "Governmental
Entity") or any Person (so as not to trigger a Conflict) is required by or with
respect to the Company in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated hereby, except for such consents, waivers, authorizations, filings,
orders, declarations or approvals as may be required under applicable state
securities laws, and such other consents, waivers, authorizations, filings,
orders, declarations, and approvals set forth on Schedule 3.5.
3.6 Financial Statements.
(a) Except as set forth on Schedule 3.6, the Company's (i)
statements of income (loss), statements of stockholders' equity (deficit), and
statements of cash flow for the fiscal year ended June 30, 2001, (ii) balance
sheet at June 30, 2002 (the "Company Balance Sheet"), and (iii) unaudited
statements of income (loss), statements of stockholders' equity (deficit), and
statements of cash flow for the twelve month period ended June 30, 2002 (all
such financial statements, the "Company Financial Statements") are complete and
correct in all material respects, have been prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods indicated
-9-
(except as expressly indicated therein or in the notes thereto), and accurately
and fairly present the financial condition and results of operations of the
Company as of the respective dates and for the respective periods indicated,
subject, in the case of the unaudited financial statements, to normal year end
adjustments.
(b) The Company has no liabilities or obligations, fixed,
contingent, or otherwise not reflected on the Company Balance Sheet, except for
those incurred in the ordinary and usual course of business since the date of
the Company Balance Sheet, consistent with past practice and contractual
obligations and other liabilities and obligations identified herein or in the
schedules hereto. Other than any Operating Notes, the Company's accounts payable
were incurred in the ordinary course of business consistent with past practice
and are listed in Schedule 3.6, which schedule shall be updated and delivered to
Parent two (2) days prior to the Initial Closing.
3.7 Accounts Receivable. All accounts receivable shown on the Company
Balance Sheet (net of reserves indicated on the Company Balance Sheet) or
thereafter acquired until the Initial Closing (net of reserves accrued in the
ordinary course of business consistent with past practice) arose from valid
transactions in the ordinary and usual course of business and are collectible
within three months of the date of the transaction, except that the value of any
account receivable, the collection of which is doubtful or which is subject to a
defense or set-off, has been written down to an amount not in excess of net
realizable value or adequate reserves or allowances therefor have been provided.
None of the accounts receivable of the Company is subject to any claim of
offset, recoupment, set-off, or counterclaim, and, to the knowledge of the
Company, there are no facts or circumstances (whether asserted or unasserted)
that would give rise to any such claim. Except as described in Schedule 3.7, no
Person has any lien, claim, charge, encumbrance, mortgage, pledge, security
interest, restriction, voting trust arrangement, adverse claim or right of any
kind (collectively, "Liens") on any such receivables, and no agreement for
deduction or discount has been made with respect to any of such receivables.
3.8 Business Changes. Since the date of the Company Balance Sheet (or
such other date specifically set forth herein), except as otherwise contemplated
by this Agreement and except as described on Schedule 3.8, the Company has
conducted its business only in the ordinary and usual course, consistent with
past practice, and, without limiting the generality of the foregoing:
(a) The Company has not sustained any damage, destruction, or
loss by reason of fire, explosion, earthquake, casualty, labor trouble
(including any claim of wrongful discharge or other unlawful labor practice),
requisition or taking of property by any government or agent thereof, windstorm,
embargo, riot, act of God or public enemy, flood, accident, revocation of
license or right to do business, total or partial termination, suspension,
default or modification of contracts, governmental restriction or regulation,
other calamity, or other similar or dissimilar event (whether or not covered by
insurance) that would result in a Material Adverse Effect on the Company.
(b) There have been no changes in the condition, business, net
worth, assets, properties, operations, obligations, or liabilities (fixed or
contingent) of the Company which,
-10-
individually or in the aggregate, have resulted or would reasonably be expected
to result (whether before or after the Initial Closing) in a Material Adverse
Effect on the Company.
(c) The Company has not issued, or authorized for issuance,
any equity security, bond, note or other security of the Company. The Company
has not granted or entered into any commitment or obligation to issue or sell
any such equity security, bond, note or other security of the Company, whether
pursuant to offers, stock option agreements, stock bonus agreements, stock
purchase plans, incentive compensation plans, warrants, calls, conversion rights
or otherwise.
(d) Other than pursuant to the Bridge Note, the Company has
not incurred any additional debt for borrowed money.
(e) The Company has not paid any obligation or liability, or
discharged or satisfied any Lien, or settled any liability, claim, dispute,
proceeding, suit, or appeal, pending or threatened against it or any of its
assets or properties, except for current liabilities included in the Company
Balance Sheet and current liabilities incurred since the date of the Company
Balance Sheet in the ordinary and usual course of the business of the Company,
consistent with past practice.
(f) The Company has not declared, set aside for payment, or
paid any dividend, payment, or other distribution on or with respect to any
share of capital stock of the Company.
(g) The Company has not purchased, redeemed or otherwise
acquired or committed itself to acquire, directly or indirectly, any share or
shares of capital stock or other securities of the Company.
(h) The Company has not mortgaged, pledged, otherwise
encumbered or subjected to Lien any of its assets or properties, tangible or
intangible, nor has it committed itself to do any of the foregoing, except for
Liens for current taxes which are not yet due and payable and purchase money
Liens arising out of the purchase or sale of products or services made in the
ordinary and usual course of business consistent with past practice.
(i) The Company has not disposed of, or agreed to dispose of,
any asset or property, tangible or intangible, with an individual book value in
excess of Ten Thousand Dollars ($10,000), except in the ordinary and usual
course of business consistent with past practice, and in each case for a
consideration at least equal to the fair value of such asset or property, nor
has the Company leased or licensed to others, or agreed so to lease or license,
any such asset or property, nor has the Company discontinued any product line or
the production, sale or other disposition of any of its products or services.
(j) The Company has not purchased or agreed to purchase or
otherwise acquire any debt or equity securities of any Person. The Company has
not made any expenditure or commitment for the purchase, acquisition,
construction or improvement of a capital asset, except in the ordinary and usual
course of business consistent with past practice, and the aggregate amount of
all such expenditures and commitments has not exceeded Ten Thousand Dollars
($10,000).
-11-
(k) The Company has not entered into any transaction or
contract, or made any commitment to do the same, except in the ordinary and
usual course of business consistent with past practice (excluding the Operating
Notes and agreements under which the obligation of payment or performance has
been satisfied in full or which, if not satisfied, do not and will not have a
Material Adverse Effect on the Company). The Company has not waived any right of
value or cancelled any debts or claims or voluntarily suffered any extraordinary
losses other than in the ordinary and usual course of business consistent with
past practice.
(l) The Company has not sold, assigned, transferred or
conveyed, or committed itself to sell, assign, transfer or convey, any Company
Intellectual Property, and the Company has not entered into any product
development, technology or product sharing, or similar strategic arrangement
with any other Person.
(m) The Company has not effected or agreed to effect any
amendment or supplement to any employee profit sharing, stock option, stock
purchase, pension, bonus, incentive, retirement, medical reimbursement, life
insurance, deferred compensation or any other employee benefit plan or
arrangement.
(n) The Company has not paid or committed itself to pay to or
for the benefit of any of its directors, officers, employees or stockholders any
compensation of any kind other than wages, salaries, and benefits at times and
rates in effect prior to the date of the Company Balance Sheet.
(o) The Company has not effected or agreed to effect any
change, including by way of hiring or involuntary termination, in its directors,
executive officers, or key employees.
(p) The Company has not effected or committed itself to effect
any amendment or modification of the Charter or Bylaws.
(q) The Company has not changed its accounting methods or
practices in any material respect (including any change in depreciation or
amortization policies or rates, any changes in policies in making or reversing
accruals, or any change in capitalization of software development costs).
(r) Except as set forth on Schedule 3.8, the Company has not
made any loan to any Person, and the Company has not guaranteed the payment of
any loan or debt of any Person, except for (i) travel or similar advances made
to employees in connection with their employment duties in the usual and
ordinary course of business, consistent with past practice and (ii) accounts
receivable incurred in the usual and ordinary course of business, consistent
with past practice.
(s) The Company has not changed the prices or royalties set or
charged by the Company.
(t) The Company has not negotiated or agreed to do any of the
things described in the preceding clauses (a) through (s) (other than
negotiations with Parent regarding the transactions contemplated hereby).
-12-
3.9 Title of Properties; Absence of Liens and Encumbrances; Condition
of Equipment.
(a) The Company owns no real property, has never owned any
real property and holds no option or other right to purchase any real property.
Schedule 3.9(a) sets forth a true and complete list of all real property
currently leased by the Company, the dates of the lease agreements and any
amendments thereto and the name of the lessors. All such leases are in full
force and effect, are valid and effective in accordance with their respective
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity, and there is not under any of such leases
any existing default or event of default (or event which with notice or lapse of
time, or both, would constitute a default and in respect of which the Company
has not taken adequate steps to prevent such default from occurring). Neither
the Company's operations on any such real property, nor such real property,
including improvements thereon, violate any applicable building code, zoning
requirement, or classification, or pollution control ordinance or statute
relating to the particular property or to such operations, and such
non-violation is not dependent, in any instance, on so-called non-conforming use
exceptions. The Company is not aware of any improvements or corrections that
need to be made prior to returning the property to the lessors at the end of the
leasing period.
(b) The Company holds good and valid title to, or, in the case
of leased properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used in its business,
free and clear of any Liens except as reflected in the Company Financial
Statements.
(c) All equipment currently owned or leased by the Company
(the "Equipment") is listed in Schedule 3.9(c), except individual pieces of
equipment owned by the Company with an individual value of less than Ten
Thousand Dollars ($10,000). Except as set forth in Schedule 3.9(c), the
Equipment is (i) adequate for the conduct of the business of the Company
consistent with its past practice, (ii) suitable for the uses to which it is
currently employed, (iii) in good operating condition, reasonable wear and tear
excepted, (iv) regularly and properly maintained, and (v) not obsolete,
dangerous or in need of material renewal or replacement, except for renewal or
replacement in the ordinary course of business.
3.10 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes" means any and all federal, state, local, and
foreign taxes, assessments, and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other Person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule
3.10:
-13-
(i) The Company has, and as of the Initial Closing
will have, accurately prepared and timely filed all required federal,
state, local, and foreign returns, estimates, information statements,
and reports (collectively, the "Returns") relating to any and all Taxes
of the Company or its operations, and such Returns are true and correct
in all material respects and have been completed in accordance with all
applicable laws.
(ii) As of the Initial Closing, the Company (A) will
have paid or accrued all Taxes it is required to pay or accrue and (B)
will have withheld with respect to its employees all federal, state, or
foreign income Taxes, FICA, FUTA, and other Taxes required to be
withheld.
(iii) The Company has not been delinquent in the
payment of any Tax nor is there any Tax deficiency outstanding,
proposed or assessed against the Company, nor has the Company executed
any waiver of any statute of limitations on or extending the period for
the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of
the Company is presently in progress, nor has the Company been notified
of any request for such an audit or other examination.
(v) The Company has no liability for unpaid federal,
state, local, or foreign Taxes which has not been accrued or reserved
against on the Company Balance Sheet, whether asserted or unasserted,
contingent or otherwise. The accruals for the Taxes of the Company
shown on the Company Balance Sheet are sufficient to discharge the
Taxes for all periods (or the portion of any period) ending on or prior
to the date of the Company Balance Sheet, and no Taxes will be incurred
by the Company between that date and the Initial Closing Date, except
in the ordinary course of business, consistent with past practice.
(vi) The Company has provided or made available to
Parent copies of all federal, state, and foreign income and all state
sales and use Tax Returns of the Company since incorporation.
(vii) There are (and as of immediately following the
Initial Closing there will be) no Liens of any sort on any asset of the
Company relating to or attributable to Taxes, other than Liens for
Taxes not yet due and payable.
(viii) None of the Company's assets are treated as
"tax-exempt use property" within the meaning of Section 168(h) of the
Internal Revenue Code (the "Code").
(ix) The Company is not a party or bound to, and at
the Initial Closing, there will not be any contract, agreement, plan or
arrangement, including the provisions of this Agreement, covering any
employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount that would
not be deductible pursuant to Section 280G, 162, or 404 of the Code.
-14-
(x) The Company has not filed any consent agreement
under Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as defined
in Section 341(f)(4) of the Code) owned by the Company.
(xi) The Company has never been a part of a
consolidated, combined, or affiliated group of corporations for Tax
purposes, is not party to a tax sharing or allocation agreement, nor
does the Company owe any amount under any such agreement.
(xii) The Company is not, and has not been at any
time, a "United States real property holding corporation" within the
meaning of Section 897 of the Code.
3.11 Restrictions on Business Activities. Except as set forth on
Schedule 3.11. there is no agreement (non-competition, field of use or
otherwise), judgment, injunction, order or decree binding upon the Company which
has or reasonably could be expected to have the effect of prohibiting or
impairing any business practice of the Company, any acquisition of property
(tangible or intangible) by the Company or the conduct of business by the
Company. Without limiting the foregoing, except as set forth on Schedule 3.11,
the Company has not entered into any agreement under which the Company is
restricted from selling, licensing, or otherwise distributing any of its
products to any class of customers, in any geographic area, during any period of
time or in any segment of the market.
3.12 Intellectual Property.
(a) For purposes of this Agreement, the following definitions
shall apply:
(i) "Commercial Software Rights" shall mean packaged
commercially available software programs available to the public
through retail dealers in computer software which have been licensed to
the Company pursuant to an end-user license and which are used in the
business of the Company but are in no way a component of the Company's
products and related Company Intellectual Property.
(ii) "Company Intellectual Property" shall mean any
Intellectual Property or Related Technology that is owned by or
purported to be owned by, or exclusively licensed to the Company.
(iii) "Intellectual Property" means any or all of the
following and all rights in, protected, created, arising out of, or
associated therewith anywhere in the world: (A) Patent Rights; (B)
trade secrets and other proprietary information; (C) copyrights, mask
work rights, copyright registrations and applications therefor; (D) all
Internet addresses, sites and domain names; (E) all industrial designs
and any registrations and applications therefor throughout the world;
(F) all trademarks, trade names and service marks (registered and
unregistered), and trade dress rights, and applications (including
intent to use applications) to register any of the foregoing; (G) and
any other proprietary, intellectual or industrial property rights of
any kind or nature that do not comprise or are not protected by any of
the foregoing.
-15-
(iv) "Patent Rights" means (A) all patent
applications and any inventions disclosed in any of the foregoing
patent applications; (B) any and all counterpart United States,
international and foreign patent applications and certificates of
invention based upon or covering any portion of the foregoing patent
applications and inventions; (C) all divisions, continuations,
continuations-in-part, and substitutions of any of the preceding patent
applications; (D) all foreign or international applications
corresponding to any of the preceding applications; (E) all divisions,
continuations, continuations-in-part, and substitutions of any of such
foreign or international applications described in (D); and (F) all
United States, international and foreign patents issuing on any of the
preceding applications, including extensions, reissues,
re-examinations, continuations, divisionals, continuations-in-part, and
rights in respect of utility models or industrial designs.
(v) "Registered Intellectual Property" shall mean all
United States, international and foreign (A) patents and patent
applications (including provisional applications); (B) registered
trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related to
trademarks; (C) registered copyrights and applications for copyright
registration; (D) any mask work registrations and applications to
register mask works; and (E) any other Company Intellectual Property
that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by,
any Governmental Entity.
(vi) "Related Technology" means any or all of the
following and all rights in, protected, created, arising out of, or
associated therewith anywhere in the world: (A) all inventions (whether
patentable or not), invention disclosures, improvements, know how,
technology, technical data; (B) all schematics, drawings, net lists,
notes and notebooks, specifications, bills of material, and tooling;
(C) all computer software, including all source code, object code,
firmware, development tools, flow charts, annotations, files, records
and data, and all media on which any of the foregoing is recorded; (D)
all customer lists; (E) all databases and data collections and all
rights therein throughout the world; (F) all documentation relating to
any of the foregoing; and (G) any Intellectual Property in, arising out
of, or associated with any of the foregoing throughout the world.
(b) Schedule 3.12(b) sets forth a complete and accurate list
of all Registered Intellectual Property (indicating for each the registration or
application number and title thereof) owned by, or filed in the name of, the
Company (the "Company Registered Intellectual Property") and lists any
proceedings or actions before any court, tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property, that
challenge or oppose the validity and subsistence of the Company Registered
Intellectual Property or the Company's ownership thereof.
(c) Except as set forth in Schedule 3.12(c), the Company (i)
owns and has good and exclusive title to each item of Company Intellectual
Property (other than Intellectual Property owned by a third party that is
licensed to the Company pursuant to written agreement and used by the Company
within the scope of such license), including all Company Registered
-16-
Intellectual Property listed on Schedule 3.12(b), free and clear of any Lien,
(ii) has exclusive rights (and is not contractually obligated to pay any
compensation to any third party in respect thereof under any license of rights,
covenant not to ▇▇▇, settlement, or other agreement) to the use thereof or the
material covered thereby in connection with the services or products in respect
of which the Company Intellectual Property is being used, and (iii) is not party
to any contract, license, or agreement (other than those set forth on Schedule
3.12(e)) with respect to any of the Company Intellectual Property. The Company
has not received any notice or claim (whether written, oral or otherwise)
challenging the Company's ownership of any of the Company Intellectual Property
or suggesting that any other Person has any claim of legal or beneficial
ownership with respect thereto, nor to the knowledge of the Company is there a
reasonable basis for any claim that the Company does not so own or exclusively
license any of such Company Intellectual Property.
(d) Except as set forth in Schedule 3.12(d), (i) the Company
is the exclusive owner of all trademarks, service marks, and trade names used in
connection with the operation or conduct of its businesses as currently
conducted, including the sale of any products or technology or the provision of
any services by the Company, and there has been no prior use of any material
Company trademarks, service marks or trade names by any third party that would
confer upon such third party superior rights therein; (ii) the Company is the
exclusive owner of, and has good and valid title to, all copyrighted works that
are the Company's products or other works of authorship which the Company
otherwise purports to own; and (iii) to the extent that any work, invention, or
material has been developed or created by a third party for the Company, the
Company has a written agreement with such third party with respect thereto and
the Company thereby has obtained ownership of, and is the exclusive owner of,
all Intellectual Property in such work, material or invention by operation of
law or by valid assignment.
(e) Except as set forth in Schedule 3.12(e), the Company has
not transferred ownership of or granted any license of or right to use or
authorized the retention of any rights to use any Intellectual Property that is
or was Company Intellectual Property, to any other Person. Schedule 3.12(e) sets
forth a complete and accurate list of all licenses, sublicenses, and other
agreements pursuant to which any Person is authorized to use any Company
Intellectual Property or any trade secret relating to any of the Company's
products or its business, and includes the identity of all parties thereto, the
title thereof, a description of the nature and subject matter thereof, the
applicable royalty, and the term thereof (the "Outbound License Agreements").
The execution and delivery of this Agreement by the Company, and the
consummation of the transactions contemplated hereby, will not cause the Company
to be in violation or default under any such Outbound License Agreement, nor
entitle, any other party thereto to terminate or modify any such Outbound
License Agreement. Schedule 3.12(e) sets forth a complete and accurate list of
all agreements granting to the Company any material right under or with respect
to any Intellectual Property other than Commercial Software Rights
(collectively, the "Inbound License Agreements", and includes the identity of
all parties thereto, the title thereof, a description of the nature and subject
matter thereof, and the term thereof. Schedule 3.12(e) also sets forth a
complete and accurate list of the amount of any future royalty, license fee or
other payments that may become payable by the Company under each such Inbound
License Agreements by reason of the use or exploitation of the Intellectual
Property licensed thereunder. The rights licensed under each Inbound License
Agreement shall be exercisable on and after the Closing to the same extent as by
the Company prior to the Closing. No loss or expiration of any
-17-
material Intellectual Property licensed to the Company under any Inbound License
Agreement is pending or reasonably foreseeable or, to the knowledge of the
Company, threatened.
(f) Except as set forth in Schedule 3.12(f), the Company
Intellectual Property constitutes all of the Intellectual Property and Related
Technology used in or, that is needed in order to conduct the businesses of the
Company as currently conducted, or as reasonably contemplated to be conducted,
including the design, development, distribution, marketing, manufacture, use,
import, license and sale of the products, technology and services of the Company
(including products, technology or services currently under development). Except
as set forth in Schedule 3.12(f), no Person who has licensed Intellectual
Property or Related Technology to the Company has ownership rights or license
rights to improvements made by the Company in such Intellectual Property or
Related Technology which has been licensed to the Company.
(g) Except as set forth in Schedule 3.12(g), the operation of
the business of the Company as currently conducted or as contemplated to be
conducted (including the design, development, distribution, marketing, use,
import, manufacture, license and sale of the products, technology or services
(including products, technology or services currently under development) of the
Company), has not and does not infringe upon, misappropriate, violate, dilute or
constitute the unauthorized use of, the Intellectual Property of any Person,
violate the rights of any Person (including rights to privacy or publicity), or
constitute unfair competition or trade practices under applicable law. The
Company has not received notice, nor have any claims been asserted or threatened
against the Company (in each case, whether in writing or orally) or, to the
knowledge of the Company, any of its customers, from any Person claiming that
such operation or any act, product, technology or service (including products,
technology or services currently under development) of the Company infringes,
misappropriates, violates, dilutes or constitutes the unauthorized use of, the
Intellectual Property of any Person or that the Company has engaged in unfair
competition or trade practices under applicable law (nor to the knowledge of the
Company is there any basis therefor).
(h) Each item of Company Registered Intellectual Property is
valid and subsisting, without any qualification, limitation or restriction
thereon or on the use thereof, and all necessary registration, maintenance, and
renewal fees in connection with such Company Registered Intellectual Property
have been paid, and all necessary documents and certificates in connection with
Company Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purpose of maintaining such
Company Registered Intellectual Property. The Company has not taken any action
or failed to take any action (including the manner in which it has conducted its
business, or used or enforced, or failed to use or enforce, any of the Company
Registered Intellectual Property) that would result in the abandonment,
cancellation, forfeiture, relinquishment, invalidation or unenforceability of
any of the Company Registered Intellectual Property.
(i) The Company has taken all reasonable steps that are
required to (i) protect the Company's rights in the trade secrets and
proprietary information of the Company or those provided by any third party to
the Company, and (ii) maintain the confidentiality of all information that
derives economic value (actual or potential) from not being generally known to
-18-
other persons who can obtain economic value from its disclosure or use ("Other
Proprietary Information"), it being understood that "reasonable steps" shall
include entering into written proprietary information, confidentiality and
assignment agreements with employees, consultants or other third parties having
access to the Company's confidential information, trade secrets and Other
Proprietary Information. The Company has not disclosed, nor is the Company under
any contractual or other obligation to disclose, to another Person any of its
trade secrets or other Proprietary Information, except pursuant to an
enforceable confidentiality agreement or undertaking, and, to the knowledge of
the Company, no Person has materially breached any such agreement or
undertaking.
(j) Except as set forth in Schedule 3.12(j), there are no
contracts, licenses or agreements between the Company and any other Person with
respect to any Company Intellectual Property under which there is any dispute
known to the Company regarding the scope of such agreement, or performance under
such agreement including with respect to any payments to be made or received by
the Company.
(k) No Person is misappropriating, infringing, diluting
violating or making unauthorized use of any Company Intellectual Property.
(l) Except as set forth in Schedule 3.12(l), no Company
Intellectual Property or product, technology or service of the Company is
subject to any proceeding or outstanding decree, order, judgment, agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Company or may affect the validity, use or enforceability of such Company
Intellectual Property.
(m) No (i) product, technology, service or publication of the
Company or (ii) material published or distributed by the Company is defamatory,
or constitutes false advertising, or otherwise violates such applicable law in a
manner that would have a Material Adverse Effect on the Company.
(n) Neither this Agreement nor any transactions contemplated
by this Agreement will, pursuant to the express terms of any contract or
agreement to which the Company is a party, result in the Purchaser's granting
any rights or licenses with respect to the Intellectual Property of the
Purchaser to any Person.
(o) None of the Company's professional services agreements
with its end user customers, its agreements with outside consultants for the
performance of professional services on behalf of the Company or customer of the
Company, nor any agreement or license with any end-user or reseller of the
Company's products confers upon any party any ownership right with respect to
any Intellectual Property or Related Technology developed in connection with
such agreement of license.
(p) Schedule 3.12(p) sets forth a complete and accurate list
of all of the Software that is owned (in whole or in part) by the Company and
that is (i) included in any of the products marketed or distributed by the
Company, (ii) used in the design, development, support or testing of the
Company's products or (iii) that is material to the business of the Company
(collectively, "Company Software"). The Company Software was either (A)
developed by
-19-
employees of Company within the scope of their employment, (B) developed by
independent contractors who have expressly assigned their rights to the Company
pursuant to written agreements, or (C) otherwise acquired by the Company from a
third party pursuant to a written agreement in which the ownership rights
therein were expressly assigned to the Company. The Company Software does not
contain any programming code, documentation or other materials or development
environments that embody Intellectual Property rights of any person other than
the Company, except for such materials or development environments obtained by
the Company from other persons who make such materials or development
environments generally available to all interested purchasers or end-users on
standard commercial terms. No source code of any Company Software has been
licensed or otherwise provided to another person other than an escrow agent
pursuant to the terms of a source code escrow agreement in customary form and
all such source code has been safeguarded and protected as trade secrets of the
Company. For purposes hereof, "Software" means any and all (w) computer
programs, including any and all software implementations of algorithms, models
and methodologies, whether in source code or object code, (x) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (y) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing, and (z)
all documentation, including user manuals and training materials, relating to
any of the foregoing.
(q) Except as set forth on Schedule 3.12(q), each of the
Company's Software products performs in all material respects, free of
significant bugs or programming errors, the functions described in any agreed
specifications or end user documentation or other information provided to
customers of the Company acquiring such products. The Company has taken all
actions customary in the software industry to document the Software and its
operation in a clear and professional manner. The Company Software is free of
any disabling codes or instructions, and any virus or other intentionally
created, undocumented contaminant, that may, or may be used to, access, modify,
delete, damage or disable any of internal computer systems (including hardware,
software, databases and embedded control systems) of the Company. The Company
has taken all reasonable steps to safeguard such systems and restrict
unauthorized access thereto.
(r) The Company has not breached or violated in any material
respect the terms of its license, sublicense, or other agreement relating to any
Commercial Software Rights, and the Company has a valid right to use such
Commercial Software Rights under such licenses and agreements. The Company is
not and will not be as a result of the execution and delivery of this Agreement
or the performance of its obligations hereunder, in violation of any license,
sublicense, or agreement relating to the Commercial Software Rights. No claims
with respect to Commercial Software Rights have been asserted or, to the
knowledge of the Company, are threatened by any Person against the Company in
connection with any Commercial Software Right. To the knowledge of the Company,
there is no material unauthorized use, infringement, or misappropriation of any
Commercial Software Right by the Company or any employee or former employee of
the Company. No Commercial Software Right is subject to any outstanding order,
judgment, decree, stipulation, or agreement restricting in any matter the use
thereof by the Company.
3.13 Agreements, Contracts and Commitments. Except as required by
applicable law, contemplated by this Agreement, or as set forth on Schedule
3.13, the Company is not a party to, and is not bound by:
-20-
(a) any collective bargaining agreements;
(b) any agreements or arrangements that contain any severance
pay or post-employment liabilities or obligations;
(c) any stock option or stock purchase plan or arrangement,
stock appreciation, bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements;
(d) any agreement, contract, or commitment relating to the
disposition or acquisition of material assets or any interest in any business
enterprise;
(e) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement, under
which a firm or other organization provides services to the Company not
terminable by the Company on thirty (30) days notice without liability;
(f) any agreement or plan, including any stock option plan,
stock appreciation rights plan or stock purchase plan, any of the benefits of
which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(g) any fidelity or surety bond or completion bond;
(h) except as listed on Schedule 3.13(h), any agreement or
group of related agreements for the lease of personal property having a value
individually in excess of Ten Thousand Dollars ($10,000) to or from any Person;
(i) any agreement of indemnification or guaranty;
(j) any agreement containing any covenant limiting the freedom
of the Company to engage in any line of business or to compete with any Person;
(k) any agreement relating to the purchase of materials or
capital expenditures and involving future payments not incurred in the ordinary
and usual course of business, consistent with past practice;
(l) except as listed on Schedule 3.13(l), any mortgages,
indentures, loans or credit agreements, security agreements or other agreements
or instruments relating to the borrowing of money by the Company or extension of
credit to the Company;
(m) except as listed on Schedule 3.13(m), any agreement
concerning confidentiality;
(n) any construction contracts;
(o) any distribution, joint marketing or development
agreement;
-21-
(p) any agreement pursuant to which the Company has granted or
may grant in the future, to any party a source-code license or option or other
right to use or acquire source-code; or
(q) to the extent not reported on the Company Balance Sheet,
any other agreement that involves payment by the Company not incurred in the
ordinary and usual course of business, consistent with past practice or which is
not cancelable without penalty within thirty (30) days.
The Company has not breached, violated, or defaulted under, or received notice
that it has breached, violated or defaulted under, any of the terms or
conditions of any agreement, contract or commitment required to be set forth on
Schedule 3.12(c), Schedule 3.12(d), Schedule 3.12(e), Schedule 3.12(f), or
Schedule 3.13 (any such agreement, contract or commitment identified on any of
the foregoing Schedules, a "Contract"). Each Contract is in full force and
effect and, except as otherwise disclosed in Schedule 3.13, is not subject to
any default thereunder of which the Company has knowledge by any party obligated
to the Company pursuant thereto.
3.14 Employees; Compensation. Schedule 3.14 constitutes a full and
complete list of all current directors, officers, employees (full-time or
part-time) or consultants of the Company, specifying their names and job
designations, the total amount paid or payable to such director, officer,
employee, or consultant in the prior fiscal year and from the beginning of the
current fiscal year through the date of the Company Balance Sheet, and the basis
of such compensation, whether fixed or commission or a combination thereof.
Except as otherwise disclosed on Schedule 3.14, since the date of the Company
Balance Sheet, there has been no material change in compensation, by means of
wages, salaries, bonuses, gratuities or otherwise, to any such director,
officer, employee or consultant of the Company, or any change in compensation
either material in amount or other than in the ordinary and usual course of
business to any other director, officer, employee or consultant of the Company.
3.15 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 3.15(a)(i) below (which definition shall only
apply to this Section 3.15), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate shall mean any Person under common
control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations thereunder;
(ii) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(iii) "Company Employee Plan" shall refer to any
plan, program, policy, practice, contract, agreement or other
arrangement excluding those required by applicable law, providing for
bonuses, compensation, severance, termination pay, deferred
compensation, pensions, profit sharing, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether formal or informal, written or
otherwise, funded or unfunded, including each
-22-
"employee benefit plan" within the meaning of Section 3(3) of ERISA
which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate for the benefit of any
"Employee", and pursuant to which the Company or any Affiliate has or
may have any material liability contingent or otherwise;
(iv) "Employee" shall mean any current, former, or
retired employee, officer, or director of the Company or any Affiliate;
(v) "Employee Agreement" shall refer to each
management, employment, severance, consulting, relocation,
repatriation, expatriation, visa, work permit or similar agreement or
contract or any of their amendments, whether written or unwritten and
whether or not legally binding, between the Company or any Affiliate
and any Employee or consultant;
(vi) "IRS" shall mean the Internal Revenue Service;
(vii) "Multiemployer Plan" shall mean any "Pension
Plan" which is a "multiemployer plan", as defined in Section 3(37) of
ERISA; and
(viii) "Pension Plan" shall refer to each Company
Employee Plan which is an "employee pension benefit plan", within the
meaning of Section 3(2) of ERISA.
(b) Employer Plans. Schedule 3.15(b) contains an accurate and
complete list of each Company Employee Plan and each Employee Agreement,
together with a schedule of all liabilities, whether or not accrued, under each
such Company Employee Plan or Employee Agreement. The Company does not have any
stated plan or commitment, whether legally binding or not, to establish any new
Company Employee Plan or Employee Agreement, to modify any Company Employee Plan
or Employee Agreement (except to the extent required by applicable law or to
conform any such Company Employee Plan or Employee Agreement to the requirements
of applicable law, in each case as previously disclosed to Parent in writing, or
as required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement nor does it have any intention or commitment to do any of the
foregoing.
(c) Documents. The Company has made available to Parent (i)
correct and complete copies of all documents embodying or relating to each
Company Employee Plan and each Employee Agreement including all amendments
thereto, copies of all forms of agreement and enrollment used therewith, and
written interpretations thereof; (ii) the most recent annual actuarial
valuations, if any, prepared for each Company Employee Plan; (iii) all taxing or
other Governmental Entity opinions, notifications, or determination letters and
rulings relating to Company Employee Plans and copies of all applications and
correspondence to or from any taxing or other Governmental Entity with respect
to any Company Employee Plan, including the three most recent annual reports
(Series 5500 and all schedules thereto), if any, required under ERISA or the
Code in connection with each Company Employee Plan or related trust; (iv) if the
Company Employee Plan is funded, the most recent annual and periodic accounting
of Company Employee Plan assets; (v) all material agreements and contracts
relating to each Company Employee Plan, including administrative service
agreements, group annuity contracts and group insurance contracts; (vi) the most
recent summary plan description together with the most recent
-23-
summary of material modifications, if any, required under ERISA with respect to
each Company Employee Plan; (vii) all IRS determination letters and rulings
relating to Company Employee Plans and copies of all applications and
correspondence to or from the IRS or the Department of Labor ("DOL") with
respect to any Company Employee Plan; and (viii) all communications material to
any Employee or Employees relating to any Company Employee Plan and any proposed
Company Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company.
(d) Employee Plan Compliance. Except as set forth on Schedule
3.15(d), (i) the Company has performed all obligations required to be performed
by it under each Company Employee Plan, each Employee Agreement and each Company
Employee Plan and each Employee Agreement has been established and maintained in
accordance with its terms and in material compliance with all applicable law,
including ERISA or the Code; (ii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with
respect to any Company Employee Plan; (iii) there are no actions, suits or
claims pending, or, to the knowledge of the Company, threatened or anticipated
(other than routine claims for benefits) against any Company Employee Plan or
against the assets of any Company Employee Plan or under any Employee Agreement;
and (iv) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Initial Closing in accordance with its terms, without
liability to the Company, Parent or any of its Affiliates (other than ordinary
administration expenses typically incurred in a termination event); (v) there
are no inquiries or proceedings pending or, to the knowledge of the Company or
any Affiliates, threatened by any Governmental Entity with respect to any
Company Employee Plan or any Employee Agreement; (vi) neither the Company nor
any Affiliate is subject to any penalty or Tax with respect to any Company
Employee Plan or any Employee Agreement; and (vii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination letter with respect to each such Company Employee Plan from the
IRS or has remaining a period of time under applicable Treasury regulations or
IRS pronouncements in which to apply for such determination letter and make any
amendments necessary to obtain a favorable determination, and nothing has
occurred since the date of such letter that would reasonably be expected to
affect the qualified status of such Company Employee Plan.
(e) Pension Plans. The Company does not now, nor has it ever,
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title
IV of ERISA or Section 412 of the Code. The Company has no retirement or pension
plans other than as set forth on Schedule 3.15(e).
(f) Multiemployer Plans. At no time has the Company
contributed to or been requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 3.15(g), no Company Employee Plan and no agreement with any employee
provides, or has any liability to provide, life insurance, medical or other
employee benefits to any Employee upon his or her retirement or termination of
employment for any reason, except as may be required by applicable law, and the
Company has never legally committed to provide
-24-
such Employee(s) with life insurance, medical or other employee welfare benefits
upon their retirement or termination of employment, except to the extent
required by applicable law. Except to the extent (if any) to which provision or
allowance has been made in the Company Balance Sheet, no liability has been
incurred by the Company to make any redundancy payments or any protective awards
or to pay damages or compensation (for wrongful or unfair dismissal or for
failure to comply with any order for the reinstatement or re-engagement of any
employee), and no gratuitous payments have been made or promised by the Company
in connection with the actual or proposed termination or suspension of
employment or variation of any contract of employment of any present or former
director or employee.
(h) Effect of Transaction.
(i) Except as set forth on Schedule 3.15(h)(i), the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of
any additional or subsequent events) constitute an event under any
Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
(ii) Except as set forth on Schedule 3.15(h)(ii), no
payment or benefit which will or may be made by the Company or Parent
or any of their respective affiliates with respect to any Employee will
be characterized as an "excess parachute payment," within the meaning
of Section 280G(b)(1) of the Code.
(i) No Violations. The Company has not violated any of the
health care continuation requirements of Section 4980B(f) of the Code (and
Sections 600-608 of ERISA) or any similar provisions of any other applicable law
regarding its Employees.
(j) Employment Matters. The Company is in material compliance
with all applicable law respecting health and safety, employment, employment
practices, employment discrimination, immigration or other applicable laws
governing the employment of foreign nationals, terms and conditions of
employment and wages and hours, in each case, with respect to Employees. The
Company has not received any notice in writing from any Governmental Entity, and
there has not been asserted in writing before any Governmental Entity, any
claim, action, or proceeding to which the Company is a party or involving the
Company, and there is neither pending nor, to the knowledge of the Company,
threatened in writing, any investigation or hearing concerning the Company
arising out of or based upon any such applicable law or practices. The Company
has withheld all amounts required by applicable law or by agreement to be
withheld from the wages, salaries and other payments to Employees or other
Persons who by virtue of their activities performed on behalf of the Company or
Affiliate may be deemed employees within the meaning of applicable law. The
Company is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing or liable for any payment to any
trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice).
-25-
(k) Labor. No work stoppage or labor strike against the
Company is pending or threatened. The Company is not involved in or threatened
with, any labor dispute, grievance, or litigation relating to labor, safety or
discrimination matters involving any Employee, including charges of unfair labor
practices or discrimination complaints, which, if adversely determined, would,
individually or in the aggregate, result in material liability to the Company.
The Company has not engaged in any unfair labor practices which would,
individually or in the aggregate, directly or indirectly result in a material
liability to the Company. The Company is not presently, nor has the Company been
in the past, a party to, or bound by, any collective bargaining agreement
negotiated with its Employees. No collective bargaining agreement is being
negotiated by the Company.
3.16 Business Practices. Neither the Company, nor to the knowledge of
the Company, no officer, agent, or employee of the Company has paid any bribe or
provided services in order unlawfully to obtain advantage for any Person or
otherwise taken any action that would result in a violation of the United States
Foreign Corrupt Practices Act of 1977 or any similar applicable law for the
Company or any employee, agent, or affiliate thereof.
3.17 Related Party Transactions. Except as set forth in Schedule 3.17,
no officer, director, or Stockholder (nor any parent, sibling, son, daughter, or
spouse of any of such Persons, or any Person in which any of such Persons has an
economic interest), has, directly or indirectly, (a) an economic interest in any
Person which furnishes or sells services or products that the Company furnishes
or sells, or proposes to furnish or sell, (b) an economic interest in any Person
that purchases from or sells or furnishes to the Company any goods or services,
or (c) a beneficial interest in any Contract; provided, however, that no
officer, director, or stockholder the Company shall be deemed to have such an
interest solely by virtue of holding less than one percent (1%) of the
outstanding voting stock of a corporation whose equity securities are traded on
a recognized stock exchange in the United States or quoted on The Nasdaq Stock
Market.
3.18 Compliance with Applicable Law; Governmental Authorization. The
Company has complied in all material respects with, is not in violation of, and
has not received any notices of violation with respect to, any applicable law,
except where any such non-compliance or violation would not have a Material
Adverse Effect on the Company. Schedule 3.18 lists each material federal, state,
county, local, or foreign governmental consent, license, permit, grant, or other
authorization issued to the Company (a) pursuant to which the Company currently
operates or holds any interest in any of its properties or (b) which is required
for the operation of its business or the holding of any such interest
(collectively, the "Company Authorizations"), which Company Authorizations are
in full force and effect.
3.19 Litigation. Except as set forth in Schedule 3.19, there is no
claim, dispute, action, proceeding, suit or appeal, or investigation, at law or
in equity, pending against the Company, or involving any of its assets or
properties, before any court, agency, authority, arbitration panel or other
tribunal, and, to the knowledge of the Company, none have been threatened in
writing against the Company. The Company is not subject to any order, writ,
injunction or decree of any Governmental Entity, arbitration panel or other
tribunal.
3.20 Insurance. Schedule 3.20 lists all material insurance policies and
fidelity bonds covering the assets, business, equipment, properties, operations,
software errors and omissions,
-26-
employees, officers, and directors of the Company as well as all claims made
under any insurance policy by the Company since incorporation. There is no claim
by the Company pending under any of such policies or bonds as to which coverage
has been questioned, denied, or disputed by the underwriters of such policies or
bonds. All premiums payable under all such policies and bonds have been paid,
and the Company is otherwise in material compliance with the terms of such
policies and bonds. To the knowledge of the Company, such policies of insurance
and bonds are of the type and in amounts customarily carried by Persons
conducting businesses similar to those of the Company in the jurisdictions in
which the Company operates. The Company has no knowledge of any threatened
termination of, or premium increase with respect to, any of such policies. The
Company has never been denied insurance coverage nor has any insurance policy of
the Company ever been cancelled for any reason.
3.21 Bank Accounts. Schedule 3.21 constitutes a full and complete list
of all the bank accounts of the Company, together with the names of the Persons
authorized to draw thereon. All cash in such accounts is held in demand deposits
and is not subject to any restriction or limitation as to withdrawal.
3.22 Environmental Matters.
(a) Hazardous Material. The Company has not (i) operated any
underground storage tanks at any property that the Company has at any time
owned, operated, occupied or leased or (ii) illegally released any substance
that has been designated by any Governmental Entity or by applicable law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
to said laws, (a "Hazardous Material"). No Hazardous Materials are present, as a
result of the deliberate actions of the Company on or under any property,
including the land and the improvements, ground water and surface water thereof,
that the Company has at any time owned, operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed their
employees or others to Hazardous Materials in violation of any applicable law,
nor has the Company disposed of, transported, sold, or manufactured any product
containing a Hazardous Material (collectively, the "Hazardous Materials
Activities") in violation of any applicable law promulgated to prohibit,
regulate, or control Hazardous Materials or any Hazardous Material Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances, and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the Company's knowledge, threatened, concerning any Environmental
Permit, Hazardous Material or any Hazardous
-27-
Materials Activity of the Company. The Company is not aware of any fact or
circumstance which would reasonably be expected to involve the Company in any
environmental litigation or impose upon the Company any environmental liability.
3.23 Brokers and Finders. The Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement, or
any other Transaction Document or any transaction contemplated hereby or
thereby.
3.24 Certain Advances. There are no receivables of the Company owing by
directors, officers, employees, consultants or stockholders of the Company, or
owing by any affiliate of any director or officer of the Company, other than
advances in the ordinary and usual course of business to officers and employees
for reimbursable business expenses, consistent with past practice except as set
forth in Schedule 3.24.
3.25 Minute Books; Books and Records. The minute books of the Company
provided to counsel for Parent contain a summary that is accurate and complete
in all material respects of all meetings of directors and stockholders and
reflect all other material corporate actions taken by the directors and
stockholders of the Company since the time of the Company's incorporation. The
books and records of the Company (a) are accurate in all material respects and
(b) are in the Company's possession or under its control.
3.26 Product Warranties; Defects; Liabilities. Each product
manufactured, sold, licensed, leased, or delivered by the Company has been in
conformity with all applicable contractual commitments and all express and
implied warranties except where the failure to be in such conformity would not
have a Material Adverse Effect on the Company. The Company has no liability, and
to the knowledge of the Company, there is no current reasonable basis for any
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand giving rise to any liability, for replacement or repair of such products
or other damages in connection therewith. Except as set forth in Schedule 3.26,
no product manufactured, sold, licensed, leased, or delivered by the Company is
subject to any guaranty, warranty, or other indemnity beyond the applicable
standard terms and conditions of sale, license, or lease or beyond that implied
or imposed by applicable law. Schedule 3.26 includes a copy of the Company's
standard terms and conditions of sale, license or lease.
3.27 No Changes In Equity Interests. The Company has not effected or
entered any agreement to effect any of the following transactions: (a)
accelerated the exercise or conversion date or otherwise modified the terms of
any outstanding warrant, option, or convertible security, (b) issued any shares
of the Company's capital stock, (c) granted any new stock options or issued any
bonus shares of the Company's capital stock to any employee, (d) induced
conversion or exercise of any outstanding securities, (e) repurchased or
exchanged any outstanding equity securities, or (f) otherwise affected any
material change in the equity interests of the holders of the Company's
outstanding securities.
3.28 Representations Complete. None of the representations or
warranties made by the Company in this Agreement contains, or will contain at
the Effective Time, any untrue statement of a material fact, nor omits, nor will
it omit at the Effective Time, to state any material fact
-28-
necessary in order to make the statements contained herein or therein, in light
of the circumstances under which made, misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as follows:
4.1 Organization of Parent. Parent is a corporation duly organized,
validly existing, and in good standing under the laws of the State of
California. Merger Sub is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has all requisite power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted and as currently
proposed to be conducted and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect on Parent or Merger Sub,
respectively. For purposes of this Agreement, a "Parent Material Adverse Effect"
or "Parent Material Adverse Change" means any circumstance, in, or effect on the
business of Parent, or any group of the foregoing circumstances, changes or
effects, which (a) is or are, or is or could in the future be, materially
adverse to the business, operations, assets or liabilities, earnings or results
of operations, condition (financial or otherwise), or (b) could reasonably be
expected to prevent or materially impair the ability of Parent to consummate the
transactions contemplated by this Agreement.
4.2 Authority. Each of Parent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and Merger
Sub. This Agreement has been duly executed and delivered by each of Parent and
Merger Sub and constitutes the valid and binding obligation of each of Parent
and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and
principles of equity. The Shares issued pursuant to this Agreement, will, when
issued and delivered in accordance with this Agreement, be duly authorized,
validly issued, fully paid, and nonassessable and will be free of any Liens
other than any Liens created by or imposed upon the holders thereof or by this
Agreement; provided, however, that the Shares issued hereunder will be subject
to restrictions on transfer set forth herein and under applicable federal and
state securities laws.
ARTICLE V
SECURITIES ACT COMPLIANCE; REGISTRATION;
TRANSFER RESTRICTIONS
5.1 Securities Act Exemption. Parent Common Stock to be issued pursuant
to this Agreement will not be registered under the Securities Act in reliance on
the exemption set forth in Section 4(2) thereof. Prior to the Initial Closing
Date or a Subsequent Closing Date, each Stockholder as applicable, shall have
provided Parent such information regarding such holder's financial and
investment background and investment intent as Parent may reasonably request to
-29-
ensure the availability of an exemption from the registration requirements of
the Securities Act, including the Stockholder Statement.
5.2 Stock Restrictions. In addition to any legend imposed by applicable
state securities laws, the certificates representing the shares of Parent Common
Stock issued pursuant to this Agreement shall bear a restrictive legend (and
stop transfer orders shall be placed against the transfer thereof with Parent'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 (THE "ACT"). THEY MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO, OR AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT
REQUIRED UNDER THE ACT, OR A NO-ACTION LETTER FROM THE SECURITIES AND
EXCHANGE COMMISSION.
5.3 Registration. (a) Definitions. For purposes of this Section 5.3:
(i) Registration. The terms "register," "registered,"
and "registration" refer to a registration effected by preparing and
filing a Registration Statement in compliance with the Securities Act,
and the declaration or ordering of effectiveness of such Registration
Statement.
(ii) Registrable Securities. The term "Registrable
Securities" means: (1) all shares of Parent Common Stock constituting
Parent Stock Consideration and all shares of Parent Common Stock issued
in consideration of certain loans to Parent pursuant to the Parent Loan
Agreement (collectively, the "Purchase Shares"), and (2) any shares of
Parent Common Stock issued as a dividend or other distribution with
respect to, or in exchange for or in replacement of, the Purchase
Shares; excluding in all cases, however, (i) any Registrable Securities
sold by a person in a transaction in which rights under this Section
5.3 are not assigned in accordance with Section 5.3(g), (ii) any
Registrable Securities sold in a public offering pursuant to a
Registration Statement filed with the SEC or sold to the public
pursuant to Rule 144 promulgated under the Securities Act ("Rule 144");
or (iii) any Registrable Securities held by an individual Holder
representing less than 1% of outstanding Parent Common Stock which may
be sold in the public market in a three-month period without
registration under the Securities Act pursuant to Rule 144.
(iii) Prospectus. The term "Prospectus" means the
prospectus included in any Registration Statement filed pursuant to the
provisions of this Section 5.3 (including a prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective Registration Statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement (including any prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities
covered by such Registration Statement), and all other amendments and
supplements to the Prospectus, including post-
-30-
effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such Prospectus.
(iv) Holder. The term "Holder" means initially, any
Stockholder, and any person owning of record Registrable Securities.
For any Holder that is a partnership, the Holder and the partners and
retired partners of such Holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit
of any of the foregoing persons, and for any Holder that is a
corporation, the Holder and all corporations that are affiliates of
such Holder, shall be deemed to be a single "Holder," and any
calculations with respect to such "Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "Holder."
(v) SEC. The term "SEC" means the U.S. Securities and
Exchange Commission.
(b) Registration.
(i) Parent shall use its best efforts to cause a
registration statement covering the Registrable Securities for which
the Holders thereof have complied with Section 5.3(d) (a "Required
Registration") to be filed with the SEC on or before one hundred twenty
(120) days after the Initial Closing (the "Required Filing Date"), the
same to be declared effective by the SEC as promptly as practicable
after such filing, subject to the provisions hereof. After the
registration statement shall be declared effective by the SEC, such
registration statement shall be maintained effective until all such
Registrable Securities are sold under such registration statement or
could be sold under Rule 144 in a single ninety (90)-day period, (the
"Final Sale Date"), or such shorter period when all Registrable
Securities included therein have been sold. Parent shall be obligated
to effect only one (1) such registration hereunder.
(ii) Parent may defer the filing (but not the
preparation) of a registration statement pursuant to a Required
Registration until a date not later than one hundred twenty (120 days)
after the Required Filing Date if at the time of the Required Filing
Date, Parent or any of its subsidiaries are engaged in confidential
negotiations or other confidential business activities, disclosure of
which would be required in such registration statement, and the Board
of Directors of Parent determines in good faith that such disclosure
would be materially detrimental to Parent and its stockholders or would
have a material adverse effect on any such confidential negotiations or
other confidential business activities. A deferral of the filing of a
registration statement pursuant to this Section 5.3(b)(ii) shall be
lifted, and the requested registration statement shall be filed
forthwith, if the negotiations or other activities are disclosed or
terminated. In order to defer the filing of a registration statement
pursuant to this Section 5.3(b)(ii), Parent shall promptly (but in any
event within ten (10) days), upon determining to seek such deferral,
deliver to each Holder a certificate signed by the Chief Executive
Officer or Chief Financial Officer of Parent stating (i) that Parent is
deferring such filing pursuant to this Section 5.3(b)(ii) and (ii) a
general statement of the reason for such deferral and an approximation
of the anticipated delay. Parent shall give written notice to the
Holders
-31-
immediately after the reason for deferring the filing of the
registration statement has ceased to exist. Parent may defer the filing
of a particular registration statement pursuant to this Section
5.3(b)(ii) up to twice, and may not defer its obligation to file any
registration statement in this manner more than once in any twelve (12)
month period.
(c) Obligations of Parent. Pursuant to the obligations of
Parent set forth in Section 5.3(b) to use its best efforts to effect the
registration of any Registrable Securities, Parent shall:
(i) Prepare and file with the SEC the Registration
Statement as provided in Section 5.3(b), which Registration Statement
(including any amendments or supplements thereto and Prospectuses
contained therein) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein, or
necessary to make the statements therein, in light of the circumstances
in which they were made, not misleading.
(ii) Use its best efforts to cause such Registration
Statement to become effective and to remain effective until the earlier
of the sale of all Registrable Securities and the Final Sale Date.
(iii) Prepare and file with the SEC such amendments
and supplements to such Registration Statement and the Prospectus used
in connection with such Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such Registration Statement
during the Effective Period.
(iv) Furnish to Holders such reasonable number of
copies of a Prospectus in conformity with the requirements of the
Securities Act, and such other documents as reasonably requested to
facilitate the disposition of the Registrable Securities owned by it
that are included in such registration.
(v) Use Parent's best efforts to register and qualify
the securities covered by such Registration Statement under such other
securities or blue sky laws of such jurisdictions within the United
States as shall be reasonably requested by Holders, provided that
Parent shall not be required in connection therewith to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions.
(vi) Notify Holders promptly (A) of any request by
the SEC or any other Governmental Entity during the period of
effectiveness of the Registration Statement for amendments or
supplements to such Registration Statement or related Prospectus or for
additional information, (B) of the issuance by the SEC or any other
Governmental Entity of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for
that purpose, (C) of the receipt by Parent of any notification with
respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, (C) of the happening of any
-32-
event which makes any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect or which requires
the making of any changes in the Registration Statement or Prospectus
so that it will not contain any untrue statement of a material fact
required to be stated therein or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and (E) of Parent's determination that a
post-effective amendment to the Registration Statement would be
appropriate.
(vii) Notwithstanding anything to the contrary in
this Agreement, Parent shall not be required to take any action with
respect to the registration or the declaration of effectiveness of the
registration statement following written notice to the Holders from
Parent (a "Suspension Notice") of the existence of any state of facts
or the happening of any event (including pending negotiations relating
to, or the consummation of, a transaction, or the occurrence of any
event that Parent's Board of Directors believes, in good faith,
requires additional disclosure of material, non-public information by
Parent in the registration statement that Parent's Board of Directors,
with the advice of counsel, believes it has a bona fide business
purpose for preserving confidentiality or that renders Parent unable to
comply with the published rules and regulations of the SEC promulgated
under the Securities Act or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect at any relevant time (the
"Rules and Regulations") that would result in (1) the registration
statement, any amendment or post-effective amendment thereto, or any
document incorporated therein by reference containing an untrue
statement of a material fact or omitting to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (2) the Prospectus issued under the
registration statement, any Prospectus supplement, or any document
incorporated therein by reference including an untrue statement of
material fact or omitting to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under
which they were made, not misleading, provided that Parent (1) shall
not issue a Suspension Notice more than twice in any twelve (12) month
period, (2) shall use its best efforts to remedy, as promptly as
practicable, but in any event within ninety (90) days of the date on
which the Suspension Notice was delivered, the circumstances that gave
rise to the Suspension Notice and deliver to the Holders notification
that the Suspension Notice is no longer in effect and (3) shall not
issue a Suspension Notice for any period during which Parent's
executive officers are not similarly restrained from disposing of
shares of the Common Stock. Upon receipt of a Suspension Notice from
Parent, the Final Sale Date shall be extended by an amount of time
equal to the amount of time the Suspension Notice is in effect, the
Holders will forthwith discontinue disposition of all such shares
pursuant to the registration statement until receipt from Parent of
copies of Prospectus supplements or amendments prepared by or on behalf
of Parent (which Parent shall prepare promptly), together with a
notification that the Suspension Notice is no longer in effect, and if
so directed by Parent, the Holders will deliver to Parent all copies in
their possession of the Prospectus covering such shares current at the
time of receipt of any Suspension Notice.
-33-
(viii) Parent shall pay all reasonable expenses,
other than underwriting discounts and brokers commissions and legal
counsel (except one counsel selected by and representing Parent),
incurred in connection with the Required Registration.
(d) Furnish Information; Compliance with Covenants. It shall
be a condition precedent to the obligations of Parent to take any action (i)
pursuant to Section 5.3(b) that each Holder shall furnish to Parent such
information regarding Holder, the Registrable Securities held by Holder, and the
intended method of disposition of such securities as Parent may reasonably
request to timely effect the registration of Holder's Registrable Securities,
and (ii) pursuant to this Section 5.3 in its entirety, that each Holder comply
with the restrictions on transfer set forth in Section 5.4.
(e) "Market Stand-Off" Agreement. Each Holder hereby agrees
that it shall not, to the extent requested in writing by Parent or the managing
underwriter(s) of securities of Parent and in connection with a public offering
of securities by Parent, sell or otherwise transfer or dispose of any
Registrable Securities or any shares of capital stock of Parent then owned by
such Holder for up to ninety (90) days following the effective date of the
Registration Statement for such underwritten offering. In order to enforce the
foregoing covenant, Parent shall have the right to place restrictive legends on
the certificates representing the shares subject to this Section and to impose
stop transfer instructions with respect to the shares of stock of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction).
(f) Assignment. Notwithstanding anything herein to the
contrary, the registration rights of a Holder under this Section 5.3 may be
assigned only to a party who acquires from Holder at least 10,000 shares of
Registrable Securities (as such number may be adjusted to reflect subdivisions,
combinations and stock dividends) or as a distribution made by a Holder which is
a partnership to the limited partners of such Holder of Registrable Securities;
provided, however that no party may be assigned any of the foregoing rights
until Parent is given written notice by the assigning party at the time of such
assignment stating the name and address of the assignee and identifying the
securities of Parent as to which the rights in question are being assigned;
provided, further that any such assignee shall receive such assigned rights
subject to all the terms and conditions of this Section 5.3.
(g) Notices. Any request, communication, or other notice
required or permitted under this Section 5.3 will be in accordance with Section
11.1, provided that all such notices and other communications under this Section
5.3 shall be given to a Holder at the address for such Holder set forth on
Schedule 3.2.
(h) Amendment or Waiver. Any provision of this Section 5.3 may
be amended and the observance thereof may be waived, only with the written
consent of Parent and Holders of a majority of all Registrable Securities then
outstanding. Any amendment or waiver effected in accordance with this Section
5.3(i) shall be binding upon each Holder, each permitted successor or assignee
of such Holder and Parent.
-34-
5.4 Additional Restrictions on Transfer.
(a) In addition to the other restrictions on transfer set
forth under applicable law and except as provided in Section 5.4(c), no
Stockholder who will receive Parent Stock Consideration may sell, transfer,
assign or otherwise encumber (each, a "Transfer") such Parent Common Stock
except in the following amounts specified for the dates indicated:
(i) During the first ninety (90) days following
declaration of effectiveness by the SEC of a registration statement
filed by Parent pursuant to Section 5.3, up to a maximum amount of (A)
one-third (1/3) of the total number of shares of Parent Common Stock
received by such Stockholder pursuant hereto;
(ii) During the next consecutive calendar quarter
following the period described in (i) above, up to a maximum amount of
an additional one-third (1/3) of the total number of shares of Parent
Common Stock received by such Stockholder pursuant hereto; and
(iii) During the next consecutive calendar quarter
following the period described in (ii) above, up to a maximum amount of
an additional one-third (1/3) of the total number of shares of Parent
Common Stock received by such Stockholder pursuant hereto.
(b) On or before the making of any Transfer, a holder making
such Transfer shall notify Parent in writing of the date of the proposed
Transfer and number of shares of Parent Common Stock involved. Parent shall
instruct its transfer agent not to permit Transfers except in accordance with
this Agreement.
(c) The restrictions set forth in Section 5.4(a) shall not
apply to shares of Parent Common Stock owned by Infotech (but Section 5.4(b)
shall apply to Infotech).
5.5 Stock Legend. In addition to any legends set forth in Section 5.2,
the certificates representing the shares of Parent Common Stock issued pursuant
to this Agreement will bear a restrictive legend, stating substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AGREEMENT WITH THE COMPANY REGARDING TRANSFERS OF THE SHARES OF COMMON
STOCK REPRESENTED HEREBY. THEY MAY NOT BE ASSIGNED, OR HYPOTHECATED
EXCEPT IN COMPLIANCE WITH SUCH AGREEMENT, A COPY OF WHICH MAY BE
OBTAINED FROM THE COMPANY UPON WRITTEN REQUEST.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Initial Closing, the Company agrees (except to the extent that
Parent shall otherwise consent in writing or as contemplated by this Agreement),
to carry on its business in the usual and ordinary course
-35-
in the same manner as heretofore conducted, to pay its debts and Taxes when due,
to pay or perform all other obligations when due, and, to the extent consistent
with such business, use all reasonable efforts consistent with past practice and
policies to preserve intact the Company's present business organization, keep
available the services of its present officers and employees, and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that the Company's goodwill
and ongoing businesses shall not be impaired in any material respect at the
Initial Closing. The Company shall promptly notify Parent of any event or
occurrence or emergency not in the ordinary course of business of the Company
and any event which could have a Material Adverse Effect on the Company. Except
as expressly contemplated by this Agreement, the Company shall not, without the
prior written consent of Parent:
(a) Accelerate, amend or change the period of exercisability
of any outstanding Company capital stock subject to vesting or authorize cash
payments in exchange for any such outstanding stock;
(b) Enter into any commitment or transaction not in the
ordinary course of business;
(c) Transfer to any Person any rights to any Company
Intellectual Property Rights;
(d) Enter into or amend any agreements pursuant to which any
other party is granted marketing, distribution, or similar rights of any type or
scope with respect to any products of the Company;
(e) Amend or otherwise modify (or agree to do so), except in
the ordinary course of business, or materially violate the terms of, any of the
agreements set forth or described in the Company Schedules;
(f) Commence any litigation except to enforce its rights under
or to interpret this Agreement or any other agreement, obligation or arrangement
contemplated hereby or entered into a established in connection herewith;
(g) Declare, set aside, or pay any dividends on or make any
other distributions in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of
capital stock, or repurchase, redeem or otherwise acquire, directly or
indirectly, any shares of its capital stock, except upon termination of
employment at cost;
(h) Issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of the Company's capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities or change any pricing of such subscriptions, rights,
warrants or options to acquire or other agreements or commitments, except for
options to purchase Company Common Stock granted to employees of the Company or
the issuance of Company Common Stock upon
-36-
the exercise or conversion of options outstanding as of the date hereof or
granted prior to the Initial Closing Date;
(i) Purchase or redeem any shares of the Company's outstanding
capital stock;
(j) Cause or permit any amendments to the Charter or Bylaws or
similar governing documents of the Company;
(k) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets in an amount in excess of Five Thousand Dollars ($5,000) in
the case of a single transaction or in excess of Ten Thousand Dollars ($10,000)
in the aggregate in any thirty (30) day period;
(l) Sell, lease, license, or otherwise dispose of any of its
properties or assets, except in the ordinary course of business consistent with
past practice;
(m) Other than pursuant to the Bridge Note, incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities of the Company or guarantee any debt securities of
others which indebtedness will be repaid and all obligations satisfied on or
before Initial Closing, other than the transactions contemplated in this
Agreement;
(n) Grant any severance or termination pay (i) to any director
or officer or (ii) to any other employee except payments made pursuant to
standard written agreements outstanding on the date hereof or payments required
by applicable law;
(o) Adopt or amend any employee benefit plan, or enter into
any employment contract, extend employment offers, pay or agree to pay any bonus
or other non-salary remuneration to any director or employee (other than
standard sales commissions), or increase the salaries or wage rates of its
employees, other than regularly scheduled increases for employees in the
ordinary and usual course of business, consistent with past practice;
(p) Hire or involuntary terminate any director, officer or
employee;
(q) Revalue any of its assets, including writing down the
value of inventory or writing off notes or accounts receivable other than in the
ordinary course of business;
(r) Pay, discharge or satisfy, in an amount in excess of Five
Thousand Dollars ($5,000) in any one case or Ten Thousand Dollars ($10,000) in
the aggregate, any claim, liability or obligation (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction in the ordinary course of business, consistent with past practice,
of liabilities reflected or reserved against in the Company Financial Statements
(or the notes thereto) or that arose in the ordinary and usual course of
business, consistent with past practice, subsequent to the date of the Company
Balance Sheet or expenses consistent with the provisions of this Agreement
incurred in connection with any transaction contemplated hereby;
-37-
(s) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes, provided that Parent shall not
unreasonably withhold its consent to any of the foregoing;
(t) Enter into any strategic alliance, joint development or
joint marketing agreement; or
(u) Take, or agree orally or in writing or otherwise to take,
any of the actions described in Sections 6.1(a) through (t) above, or any other
action that would prevent the Company from performing or cause the Company not
to perform its covenants hereunder.
ARTICLE VII
ADDITIONAL AGREEMENTS AND COVENANTS
7.1 Stockholder Approval. The Company will promptly take all action
necessary in accordance with the DGCL, the Charter and the Bylaws to seek the
approval by the Stockholders of the Merger, this Agreement and the transactions
contemplated hereby. The Company agrees to use all commercially reasonable
efforts and to take all action reasonably necessary or advisable to secure the
necessary votes or written consents required by the DGCL and this Agreement to
effect the Merger. Parent and Merger Sub will use reasonable efforts to
cooperate with the Company in the preparation of a proxy statement for use in
connection with the solicitation of the vote at a meeting or the Stockholders of
the Company or a written consent from the Stockholders with respect to approval
of the Merger.
7.2 Access to Information. The Company shall afford Parent and its
accountants, counsel, and other representatives reasonable access during normal
business hours during the period prior to the Initial Closing to (a) all of its
properties, books, contracts, commitments, and records, and (b) all other
information concerning the business, properties, and personnel of the Company as
Parent may reasonably request. The Company agrees to provide Parent and its
accountants, counsel, and other representatives copies of internal financial
statements promptly upon request. No information or knowledge obtained in any
investigation pursuant to this agreement or otherwise shall affect or be deemed
to limit the effect of any representation or warranty of the Company or Parent
contained herein or the conditions to the obligations of the parties to
consummate the transactions contemplated hereby.
7.3 Confidentiality. Except as may otherwise be agreed by the Company
and Parent in writing, from the date hereof to and including the Initial Closing
Date, the parties hereto shall maintain, and cause their directors, employees,
agents and advisors to maintain, in confidence and not disclose or use for any
purpose, except the evaluation of the transactions contemplated hereby and the
accuracy of the respective representations and warranties of the parties
contained herein, information concerning the other parties and obtained directly
or indirectly from such parties, or their directors, employees, agents or
advisors, without the consent of the party providing such information, except
such information as is or becomes (a) available to the non-disclosing party from
third parties not subject to an undertaking of confidentiality; (b) generally
available to the public other than as a result of a breach by the non-disclosing
party hereunder; or
-38-
(c) required to be disclosed under applicable law; and except such information
as was in the possession of such party prior to obtaining such information from
such other party as to which the fact of prior possession such possessing party
shall have the burden of proof. In the event that the transactions contemplated
hereby shall not be consummated, each party hereto and its respective directors,
employees, agents and advisors shall not (i) use to its commercial advantage any
information concerning the other parties obtained directly or indirectly from
such parties during the course of negotiations of the transactions contemplated
herein concerning products, customers or other information of the other parties
hereto, which reasonably could be presumed to be proprietary and confidential,
or (ii) disclose any such information to any third party (except such
information as is or becomes (a) available to the non-disclosing party from
third parties not subject to an undertaking of confidentiality; (b) generally
available to the public other than as a result of a breach by the non-disclosing
party hereunder; or (c) required to be disclosed under applicable law; and
except such information as was in the possession of such party prior to
obtaining such information from such other party as to which the fact of prior
possession such possessing party shall have the burden of proof); and all such
information which shall be in writing shall be returned to the party furnishing
the same, including to the extent reasonably practicable, copies, reproductions,
abstracts and summaries thereof which may have been prepared. This Section 7.3
shall survive termination of this Agreement.
7.4 Public Disclosure. Unless otherwise required by applicable law,
prior to the Initial Closing, no disclosure of the subject matter of this
Agreement shall be made by the Company or the Stockholders unless approved by
Parent prior to release.
7.5 Consents. Each of Parent and the Company shall promptly apply for
or otherwise seek, and use its best efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the transactions
contemplated hereby, and the Company shall use its best efforts to obtain all
consents, waivers and approvals under any of the Company's agreements,
contracts, licenses or leases in order to preserve the benefits thereunder for
Parent and otherwise in connection with transactions contemplated hereby. All of
such consents and approvals required by the Company are set forth in Schedule
3.5.
7.6 Legal Conditions. Each of Parent and the Company shall take all
reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on such party with respect to the transactions contemplated
hereby and will promptly cooperate with and furnish information to any other
party hereto in connection with any such requirements imposed upon such other
party in connection with the transactions contemplated hereby. Each party will
take all reasonable actions to obtain (and will cooperate with the other parties
in obtaining) any consent, authorization, order or approval of, or any
registration, declaration, or filing with, or any exemption by, any Governmental
Entity, or other Person, required to be obtained or made by such party or its
subsidiaries in connection with the transactions contemplated hereby or the
taking of any action contemplated thereby or by this Agreement.
7.7 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of Parent Common Stock pursuant hereto. The Company
shall use its best efforts to assist Parent as may be necessary to comply with
the securities and blue sky laws of all jurisdictions which are applicable in
connection with the issuance of Parent Common Stock pursuant hereto.
-39-
7.8 Additional Documents and Further Assurances. Each party hereto
shall use all reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the request of another party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be reasonably necessary or desirable for effecting completely
the consummation of this Agreement and the transactions contemplated hereby.
7.9 Notification of Certain Matters. The Company shall give prompt
notice to Parent of (a) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of the Company, contained in this Agreement to be untrue or inaccurate
in any material respect at or prior to the Initial Closing except as
contemplated by this Agreement (including the schedules hereto) and (b) any
failure of the Company or the Stockholders, as the case may be, to comply with
or satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it hereunder; provided, however, that the delivery
of any notice pursuant to this Section 7.9 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
7.10 Implementation of Representations and Warranties. The Company
shall take all reasonable action necessary to render accurate as of the Initial
Closing its representations and warranties contained in this Agreement, and the
Company shall refrain from taking any action which would render inaccurate as of
the Initial Closing any such representations or warranties.
7.11 No Solicitation. From and after the date of this Agreement until
the earlier to occur of the Initial Closing or the termination of this Agreement
pursuant to its terms, the Company will not, and will instruct its directors,
officers, employees, representatives, investment bankers, agents, and affiliates
not to, directly or indirectly (a) solicit or encourage submission of any
Acquisition Proposal by any Person (other than Parent and its affiliates,
agents, and representatives) or (b) initiate or participate in any discussions
or negotiations with, or disclose any non-public information concerning the
Company to, or afford access to the properties, books, or records of the Company
to, or otherwise cooperate with, assist or facilitate, or enter into any
agreement or understanding with, any Person (other than Parent and its
affiliates, agents, and representatives) in connection with any Acquisition
Proposal with respect to the Company. For purposes of this Agreement, an
"Acquisition Proposal" means any proposal or offer relating to (i) any merger,
consolidation, sale or license of substantial assets or similar transactions
involving the Company (other than sales or licenses of assets or inventory in
the ordinary course of business or as permitted by this Agreement) or (ii) sales
by the Company of any shares of its capital stock. The Company will immediately
cease any and all existing activities, discussion, or negotiations with any
parties conducted heretofore with respect to any of the foregoing. The Company
will promptly (i) notify Parent if it receives any proposal or written inquiry
or written request for information in connection with an Acquisition Proposal or
potential Acquisition Proposal and (ii) notify Parent of the significant terms
and conditions of any such Acquisition Proposal. In addition, from and after the
date of this Agreement, until the earlier to occur of the Initial Closing or the
termination of this Agreement pursuant to its terms, the Company will not, and
will instruct its directors, officers, employees, representatives, investment
bankers, agents, and affiliates not to, directly or indirectly, make or
authorize any public statement, recommendation, or solicitation in support of
any Acquisition Proposal made by any Person (other than Parent).
-40-
7.12 Termination of 401(k) Plan. Upon the request of Parent, the
Company agrees to terminate its 401(k) retirement savings plan on the day before
the Initial Closing. Parent shall receive evidence from the Company that the
Company's 401(k) Plan has been terminated pursuant to the terms of such 401(k)
plan and as set forth in the resolutions of each such Person's board of
directors (the form and substance of which resolutions shall be subject to
review and approval of Parent), effective as of the day immediately preceding
the Initial Closing.
7.13 Employee Benefit Plans. Following the Initial Closing, Parent
shall use all commercially reasonable efforts, under each of Parent's Employee
Benefit Plans (as such term is defined in Section 3(3) of ERISA), to grant
employees of the Company with full credit for years of service with the Company
for all purposes for which such service is recognized under Parent's Employee
Benefits Plans including eligibility to participate and vesting; provided,
however, such service with the Company shall be determined, at Parent's sole
discretion, either by utilizing the Company's payroll records or pursuant to the
service crediting records of the comparable Company Employee Benefit Plan.
Notwithstanding the foregoing, none of the provisions contained herein shall
operate to duplicate any benefit provided to any Company employee or the funding
of such benefit.
7.14 Line of Credit. The Company shall obtain written authorization
from Paragon Commercial Bank that Parent assume the Company's line of credit in
the amount of Five Hundred Thousand Dollars ($500,000). Parent shall provide to
Paragon Commercial Bank, as security for such line of credit, collateral deemed
adequate in its discretion such that the Stockholders currently guaranteeing the
Company's obligations under such line of credit will be released from such
guaranty obligations contemporaneously with Initial Closing.
7.15 Loan to the Company. Concurrently with the execution and delivery
of this Agreement, Infotech (the "Bridge Lender") shall assume the obligations
of the Company to ▇▇▇▇▇▇ ▇▇▇▇▇▇ pursuant to that certain promissory note to
▇▇▇▇▇▇ ▇▇▇▇▇▇ by the Company for repayment of a loan in the principal amount of
up to Two Hundred Thousand Dollars ($200,000) (the "Bridge Note") in the form
attached as Exhibit F.
7.16 License Agreement. The Company and Parent shall execute and
deliver the License Agreement and each of Parent, Company, Infotech, Airvac and
Zevac will execute and deliver the Conditional License Agreement granted in
connection therewith.
7.17 Discount Agreement; Commissions.
(a) Parent shall enter into amendments with respect to,
and assume the obligations of the Company under, each of the Master Purchase
Agreements between the Company and each of Infotech, Airvac and Zevac as in
effect on the date hereof (the "Master Purchase Agreements") for the remaining
terms of such Master Purchase Agreements, pursuant to which Parent shall
increase the discount made to the customers under such agreements for the
products listed in Schedule 7.17 from a gross margin of 49% to a gross margin of
38% (the "Discount").
(b) (i) Parent shall pay to Infotech for the benefit of each
of the parties to the Master Purchase Agreements a commission on sales to
Persons other than Infotech, Airvac
-41-
and Zevac and their respective affiliates of the products identified in this
Section 7.18(b) in amount equal to the percentage of the net sales price for
such products identified in (ii) below (the "Commissions"). Such commissions
shall be payable to Infotech in quarterly installments, due and payable within
thirty (30) days after the end of each calendar quarter, and based on the
applicable percentage of net sales for such product during such quarter.
Infotech shall act as agent for Airvac and Zevac with respect to the collection
of such payments.
(ii) In the case of each product listed in this
Section 7.17(b)(ii), the commission payable by Parent to Infotech,
Airvac and Zevac shall be equal to (A) five percent (5%) of the net
sales price for such product for any sales during the period from the
Initial Closing and continuing until the third (3rd) anniversary of the
Initial Closing Date, and (B) three (3%) of the net sales price for
such product for any sales during the period from the third (3rd)
anniversary of the Initial Closing Date and continuing until the sixth
(6th) anniversary of the Initial Closing Date; provided, however, that
for the purposes of calculation of commission, in the case of Fireview
I Color Camera Model number (Company Part #9100) and the Fireview
1-MMonochrome Camera Model number (Prototype), the minimum sales price
for such products shall be deemed to be Four Hundred Dollars ($400),
and in the case of Fireblox 1 and Fireblox 2, the minimum sales price
for such products shall be deemed to be Five Hundred Dollars ($500).
There shall be no aggregate maximum limit of commissions payable under
this Section 7.17. No commissions shall be payable for any sales of
such products following the sixth (6th) anniversary of the Initial
Closing Date. The commissions described in this Section 7.17(b)(ii)
apply to the following products:
Fireview I Color Camera Model number (Company Part #9100)
Fireview 1-M Monochrome Camera Model number (Prototype)
Fireblox 1
Fireblox 2
FirePower Amplifier
and future products developed and sold by the Company prior to the sixth (6th)
anniversary of the Initial Closing Date that both (A) have essentially the same
functionality as one of the Company's products listed above or be an improvement
thereon and (B) at least sixty percent (60%) of which is derived from Company
Intellectual Property as of the date hereof.
(iii) With respect to the General Purpose Smart
Camera with Parent Software; if non-recurring engineering ("NRE")
development dollars (which shall constitute non-recurring engineering
funds provided to develop or upgrade a specific product for a customer,
and which shall include such funds paid by National Instruments) of at
least One Hundred Fifty Thousand Dollars ($150,000) are obtained by the
Company or Parent on or before the first anniversary of the Initial
Closing Date, the commission payable by Parent to Infotech for the
benefit of Infotech, Airvac and Zevac shall be equal to (A) and
aggregate of two and one-half percent (2.5%) of the net sales price for
such product for any sales during the period from the Initial Closing
and continuing until the
-42-
third (3rd) anniversary of the Initial Closing Date and (B) an
aggregate of one and one-half percent (1.5%) of the net sales price for
such product for any sales during the period from the third (3rd)
anniversary of the Initial Closing Date and continuing until the sixth
(6th) anniversary of the Initial Closing Date. No commissions shall be
payable for any sales of such products following the sixth (6th)
anniversary of the Initial Closing Date. If NRE development dollars for
a General Purpose Smart Camera of at least One Hundred Fifty Thousand
Dollars ($150,000) are not obtained by the Company or Parent on or
before the first anniversary of the Initial Closing Date, no
commissions shall be payable on such products.
(c) Each quarter, Parent shall deliver to Infotech a statement
(the "Commission Statement") setting forth a list of the sales of the products
set forth in clause (b) and the calculation of the Commissions due thereon,
together with the applicable Commission payment specified. If Infotech disagrees
with Parent's calculation of Commissions and/or the sales reflected in the
Commission Statement, Infotech may, within thirty (30) business days after
delivery of the Commission Statement, deliver a notice to Parent disagreeing
with Parent's calculation of disputed items, and specifying those items as to
which Infotech disagrees and the basis for such disagreement in reasonable
detail. The resolution of any such dispute shall be as set forth in Section
11.11. In the absence of any notice of dispute delivered to Parent within such
time period, Infotech shall be deemed to have agreed with such Commission
Statement. In addition, Infotech shall have the right during the period
specified in clause (b) for which Commissions are to be paid by Parent, upon
reasonable notice made to Parent and at the cost of Infotech (except as
described below), to examine such records of Parent reasonably relating to
products sales for which Parent is or could be obligated to pay Commissions. If
the examination determines that the Commission Statement understated the
Commissions owed for the period specified to Infotech, Airvac or Zevac by more
than 10% in the aggregate, Parent shall pay, in addition to the additional
amount of Commissions owed, an amount equal to the expenses reasonably incurred
by Infotech in performing the examination of records.
(d) The difference in price resulting from the increase of the
Discount as described in Section 7.17(a) and the Commissions payable pursuant to
Section 7.17(b) shall be credited toward the Infotech Share Purchase Price;
provided; however, that such Discounts and Commissions not actually made or paid
by Parent to satisfy Infotech's, Airvac's and Zevac's indemnification
obligations pursuant to Article IX shall be deemed to made or paid for purposes
of paying the Infotech Share Purchase Price.
7.18 Voting Agreement; Board Observer. (a) From the Initial Closing
until Infotech no longer beneficially owns any Infotech Shares, Infotech shall
vote all Infotech Shares (including any additional shares as may be issued upon
any stock split, stock dividend or recapitalization effected after the Initial
Closing with respect to the Infotech Shares) on all matters for which Infotech
is entitled to vote the Infotech Shares, whether at a meeting or by written
consent or otherwise, in the manner as directed by Parent, and Infotech shall
take all other necessary or desirable actions within its control (whether in its
capacity as a stockholder or otherwise, and including attendance at meetings or
by proxy for purposes of obtaining a quorum and execution of written consents in
lieu of meetings) in order to carry out purposes of the foregoing. Infotech
hereby constitutes and appoints Parent, acting through its board of directors
(the "Proxy Holder"), its true and lawful proxy and attorney-in-fact to vote at
any meeting (and
-43-
any adjournment or postponement thereof) of the Surviving Corporation's
stockholders called for any and all purposes, or to execute a written consent of
stockholders in lieu of any such meeting, all Infotech Shares as of the date of
such meeting or written consent. Such proxy shall include the power to vote on
any and all matters for which Infotech is entitled to vote the Infotech Shares
or provide written consent with respect to the Infotech Shares. The proxy and
power of attorney herein granted shall be irrevocable and shall be deemed to be
coupled with an interest sufficient in law to support an irrevocable proxy and
shall revoke all prior proxies granted by Infotech. Infotech shall not grant any
proxy to any Person which conflicts with the proxy granted herein, and any
attempt to do so shall be void. If Infotech fails for any reason to vote the
Infotech Shares in accordance with this Section 7.18, then Proxy Holder shall
have the right to vote the Infotech Shares at any meeting of the Surviving
Corporation's stockholders and in any action by written consent in lieu of such
meeting in accordance with the provisions of this Section 7.18. The vote of
Proxy Holder shall control in any conflict between its vote of such shares and a
vote by Infotech of such shares.
(b) The Surviving Corporation will permit one (1)
representative of Infotech (the "Observer") to attend all meetings of the
Surviving Corporation's Board of Directors (whether in person, telephonic or
other) in a non-voting, observer capacity and shall provide to Infotech,
concurrently with the members of the Surviving Corporation's Board of Directors,
and in the same manner, notice of any such meeting; provided, however, that a
majority of the Board of Directors shall have the right, after deliberation in a
closed session in which they can exclude the Observer, to exclude the Observer
from portions of meetings of the Board of Directors and/or omit to provide the
Observer with certain information:
(i) If such meeting or information involves
information or analysis which would pose a material conflict of
interest for Infotech;
(ii) In the event that the Board of Directors intends
to discuss or vote upon or distribute any materials with respect to any
matter in which Infotech has a material business or financial interest
(other than by reason of its interest as a stockholder of the Surviving
Corporation);
(iii) If the Board of Directors intends to discuss or
vote upon or distribute materials relative to a matter involving a
strategic relationship with a third party and where the presence of the
Observer during such discussion or vote, or the Observer's receipt of
such materials would, in the opinion of the Surviving Corporation's
legal counsel, result in a breach of the fiduciary obligations of the
Board of Directors to the Surviving Corporation and/or its
stockholders; or
(iv) If access to such information or attendance at
such meeting could adversely affect the attorney-client privilege
between the Surviving Corporation and its counsel.
The Observer agrees to hold in confidence and trust and not use or disclose any
confidential or proprietary information provided to or learned by Observer in
connection with its rights under this Section 7.18, except as permitted by
Section 7.3. The observer rights described in this Section 7.18 shall terminate
and be of no further force and effect upon the earlier of (i) the date
-44-
on which Infotech no longer beneficially owns the Infotech Shares, which date
shall be no later than the sixth (6th) anniversary of the Initial Closing Date
and (ii) the consummation of the sale, transfer or other disposition of all or
substantially all of the Surviving Corporation's property or business, or any
other transaction or series of related transactions in which more than fifty
percent (50%) of the voting power of the Surviving Corporation is disposed
(other than a transaction effected primarily for the purpose of changing the
domicile of the Surviving Corporation). The foregoing observer rights may not be
assigned by Infotech.
7.19 Accounts Payable. The Company shall use its best efforts to ensure
that the aggregate of its outstanding accounts payable and the balance owing
under any Operating Notes shall not exceed One Hundred Seventy-Five Thousand
Dollars ($175,000) as of the Initial Closing Date.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION; ESCROW
8.1 Survival of Representations and Warranties. All of the
representations and warranties, covenants and agreements of the Company in this
Agreement (as modified by the schedules hereto) or in any instrument delivered
at the Initial Closing shall survive the Merger and shall continue for the
period following the Initial Closing Date until 5:00 p.m. (California Time) on
the date that is one (1) year following the Initial Closing Date, provided,
however that any claim for fraud or willful misrepresentation which shall be
subject only to applicable statutes of limitations.
8.2 Escrow Arrangements; Indemnity.
(a) Escrow. At the Initial Closing, the Escrow Amount shall be
withheld from the Stockholders and deposited into escrow with the Escrow Agent
pursuant to the Escrow Agreement in accordance with Section 1.1(c). The Escrow
Amount so deposited shall be held and distributed in accordance with the Escrow
Agreement. The Securityholder Agent shall be appointed as agent and
attorney-in-fact for each Stockholder, for and on behalf of Stockholders, to
have such authority and responsibilities as provided in the Escrow Agreement,
and shall initially be ▇▇▇▇▇▇ ▇▇▇▇▇▇. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the
Stockholders.
(b) Indemnity. The (i) Escrow Amount pursuant to the Escrow
Agreement, the (ii) Parent Stock Consideration issued to each of ▇▇▇▇▇▇ ▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇▇▇▇▇▇ or, at the election of ▇▇▇▇▇▇ and ▇▇▇▇▇▇, respectively,
amounts deemed to be equivalent thereto at a deemed value of $3.00 per Adept
share (collectively, the "▇▇▇▇▇▇/▇▇▇▇▇▇ Consideration") and (iii) the Discounts
and Commissions granted or payable by Parent or the Company to each of Infotech,
Airvac and Zevac, shall be available to compensate Parent and the Surviving
Corporation and their respective officers, directors, stockholders,
representatives and other affiliates for any claims, losses, liabilities,
damages, deficiencies, costs, and expenses, including reasonable attorneys' fees
and expenses and expenses of investigation and defense incurred by Parent, the
Surviving Corporation, their respective officers, directors, stockholders,
representatives or affiliates (collectively, the "Parent Indemnitees") directly
or indirectly as a
-45-
result of any inaccuracy or breach of a representation or warranty of the
Company contained herein (as modified by the schedules hereto) or in the
certificates delivered pursuant to Section 9.3, or any failure by the Company
prior to the Initial Closing to perform or comply with any covenant (except as
Parent may have expressly waived in writing) contained herein (collectively, the
"Losses"). Subject to clause (c) below, claims for Losses will be asserted first
against the Escrow Amount, if available, then against the Discounts and
Commissions, if available, and last against the ▇▇▇▇▇▇/▇▇▇▇▇▇ Consideration;
provided, that no Parent Indemnitee shall be entitled to indemnification for any
Losses until the aggregate amount of all Losses shall exceed Twenty-Five
Thousand Dollars ($25,000), at which time all Losses in excess of such
Twenty-Five Thousand Dollars ($25,000) shall be subject to indemnification
hereunder in full.
(c) Duration. (i) Claims for any Losses to be satisfied from
the Escrow Amount, the ▇▇▇▇▇▇/▇▇▇▇▇▇ Consideration or Discounts and Commissions
must be asserted on or before 5:00 p.m. (California Time) on the date that is
one (1) year following the Initial Closing Date; provided, however, that the
recovery of payments for claims timely made for any Losses to be satisfied from
the Discounts shall extend until the date of expiration of the Master Purchase
Agreements, as amended, and the recovery for claims timely made for any Losses
to be satisfied from the Commissions shall extend until the date which is the
sixth (6th) anniversary of the Initial Closing Date.
(ii) In the event of any claim for Losses, the Adept
Representative (as defined in the Escrow Agreement) shall deliver to
the Stockholder Representative (as defined in the Escrow Agreement) at
any time at or before 5:00 p.m. (California Time) on the last day of
the Escrow Period (as defined below) a certificate signed by the Adept
Representative (a "Notice of Claim"): (A) stating that Parent or other
Parent Indemnitee has paid or properly accrued or reasonably
anticipates that it will have to pay or accrue Losses and (B)
specifying in reasonable detail the individual items of Losses included
in the amount so stated, the date each such item was paid or properly
accrued, or the basis for such anticipated liability, and the nature of
the misrepresentation, breach of warranty, covenant or agreement to
which such item is related. Upon receipt of a Notice of Claim, the
Stockholder Representative shall have thirty (30) days to respond to
such Notice of Claim. In the event Stockholder Representative does not
object to the claim or claims covered in such Notice of Claim,
Stockholder Representative shall deliver a certificate to the Adept
Representative within such thirty (30) day period stating that
Stockholder Representative does not so object, and Stockholder
Representative and Adept Representative shall execute a Joint Written
Direction (as defined in the Escrow Agreement) to Escrow Agent
directing Escrow Agent to distribute to Parent or other Parent
Indemnitee out of the Escrow Amount and/or the Escrowed Funds (as
defined in the Escrow Agreement), as promptly as practicable, shares of
Parent Common Stock and/or Escrowed Funds in an amount equal to such
Losses, for which the number of shares of Parent Common Stock to be
distributed by the Escrow Agent to Parent or other Parent Indemnitee
will be valued at the closing price of such Parent Common Stock on the
Nasdaq National Market on the Initial Closing Date. For purposes of
this Agreement, the term "Escrow Period" means (i) with respect to the
Escrow Amount, the period commencing on the Initial Closing Date and
ending at 5:00 p.m. (California Time) on the date that is one (1) year
following the Initial Closing Date, (ii) with respect to the portion
-46-
of Escrowed Funds consisting of Discounts, the period commencing on the
Initial Closing Date and ending at 5:00 p.m. (California Time) on the
date of expiration of the Master Purchase Agreements, as amended, and
(iii) with respect to the portion of Escrowed Funds consisting of
Commissions, the period commencing on the Initial Closing Date hereof
and ending at 5:00 p.m. (California Time) on the date that is the sixth
(6th) anniversary of the Initial Closing Date.
(iii) In the event Stockholder Representative objects
to such Notice of Claim, Stockholder Representative shall deliver to
the Adept Representative a certificate stating such objection ("Notice
of Objection") within such thirty (30) day period. Upon receipt of such
Notice of Objection by the Adept Representative, the Stockholder
Representative and the Adept Representative shall attempt in good faith
to agree upon the rights of the respective parties with respect to each
of such claims. If the Stockholder Representative and the Adept
Representative should so agree, a Joint Written Direction shall be
furnished to the Escrow Agent instructing Escrow Agent to distribute
Escrow Amount and/or Escrowed Funds in accordance therewith. If no such
agreement can be reached after good faith negotiation for a period of
thirty (30) days after receipt of such Notice of Objection by the Adept
Representative, either the Adept Representative or the Stockholder
Representative may demand mediation of the matter unless the amount of
the Loss is at issue in pending litigation with a third party, in which
event mediation shall not be commenced until such amount is ascertained
or both parties agree to mediation; and in either such even the parties
submit the matter to non-binding mediation in accordance with Section
11.11. The non-prevailing party to a mediation shall pay its own
expenses, the fees of each mediator, the administrative costs of the
mediation, and the expenses, including reasonable attorneys' fees and
costs, incurred by the other party to the mediation. Judgment upon any
award rendered by the mediation may be entered in any court having
jurisdiction. The Stockholder Representative may pay such amounts
payable by the Stockholders under this Section 8.2(c) or other amounts
contemplated in this Section 8.2(c) (including unreimbursed expenses of
counsel for the Stockholders and Parent, mediator fees and
administrative costs) by distributing shares of Parent Common Stock
and/or Escrowed Funds from escrow with respect to which Parent has not
made a claim pursuant to a Joint Written Direction to Escrow Agent with
such shares valued at the closing price of such Parent Common Stock on
the Nasdaq National Market on the Initial Closing Date; provided,
however, that no shares of Parent Common Stock and/or Escrowed Funds
may be distributed prior to the termination of the Escrow Period and
such shares and/or such funds may be distributed only to the extent
that such shares and/or such funds may not be required to satisfy any
claim for Losses.
(iv) Upon termination of the Escrow Period, in the
event there are unsatisfied claims pursuant to any Notice of Claim
delivered to the Stockholder Representative prior to termination of
such Escrow Period, Adept Representative and Stockholder Representative
shall not deliver any Joint Written Direction to Escrow Agent until
resolution of such claim or claims covered by any such Notice of Claim.
As soon as any or all such claims have been resolved as evidenced by
the Joint Written Direction of the Stockholder Representative and the
Adept Representative delivered to the Escrow Agent, the Escrow Agent
shall pursuant to such Joint Written Direction deliver (i) to the
Stockholders the remaining portion of the Escrow Amount and/or (ii) to
Infotech, Airvac
-47-
and Zevac the remaining portion of the Escrowed Funds that is not
expected to be required to satisfy such claims. If no Notice of Claim
pertaining to unsatisfied claims is delivered to the Stockholder
Representative prior to the termination of the Escrow Period, upon
termination of the Escrow Period, Parent and Stockholder Representative
shall deliver a Joint Written Direction to the Escrow Agent to
distribute the remainder of the Escrow Amount to the Stockholders
and/or the Escrowed Funds to Infotech, Airvac and Zevac in accordance
with the provisions of this Section 8.2(c).
(v) Disbursements to the Stockholders pursuant to
this Section 8.2(c) shall be made in proportion to their respective
original contributions to the Escrow Amount, and disbursements to
Infotech, Airvac and Zevac pursuant to this Section 8.2(c) shall be
made in proportion to their respective original contributions to the
Escrowed Funds. To the extent that a Notice of Claim relates to any
Third Party Claims, such Third Party Claims are subject to the
provisions of Section 8.2(d).
(d) Third-Party Claims.
(i) If any Person shall notify Parent or any Parent
Indemnitee with respect to any matter (a "Third Party Claim"), which
may give rise to a claim by a Parent Indemnitee, then Parent shall give
notice to the Securityholder Agent (and, if applicable, Airvac and
Zevac) within fifteen (15) days of Parent's becoming aware of any such
Third Party Claim or of facts upon which any such Third Party Claim may
be based setting forth such material information with respect to the
Third Party Claim as is reasonably available to Parent; provided,
however, that no delay or failure on the part of Parent in notifying
the Securityholder Agent shall relieve the Securityholder Agent and the
Stockholders from any obligation hereunder except to the extent Parent
can prove that the Securityholder Agent and the Stockholders were not
thereby prejudiced (and then solely to the extent of such prejudice).
The Securityholder Agent and the Stockholders shall not be liable for
any attorneys fees and expenses incurred by Parent prior to Parent's
giving notice to the Securityholder Agent of a Third Party Claim. The
notice from Parent to the Securityholder Agent shall set forth such
material information with respect to the Third Party Claim as is then
reasonably available to Parent.
(ii) In case any Third Party Claim is asserted
against Parent or its affiliates, and Parent notifies the
Securityholder Agent thereof pursuant to Section 8.2(d)(i) hereof, the
Securityholder Agent and the Stockholders will be entitled, if the
Securityholder Agent so elects by written notice delivered to Parent
within thirty (30) days after receiving Parent's notice, to assume the
defense thereof, at the expense of the Stockholders independent of the
Escrow Amount, with counsel reasonably satisfactory to Parent so long
as:
(A) Parent has reasonably determined that Losses
which may be incurred as a result of the Third Party Claim do
not exceed either individually, or when aggregated with all
other Third Party Claims, the total dollar value of the Escrow
Amount and the remaining ▇▇▇▇▇▇/▇▇▇▇▇▇ Consideration as
limited pursuant to the terms of this Agreement, including
Section 8.3(b);
-48-
(B) the Third Party Claim involves only money damages
and does not seek an injunction or other equitable relief;
(C) settlement of, or an adverse judgment with
respect to, the Third Party Claim is not, in the good faith
judgment of Parent, likely to establish a precedential custom
or practice adverse to the continuing business interests of
Parent which could have a Parent Material Adverse Effect; and
(D) counsel selected by the Securityholder Agent is
reasonably acceptable to Parent.
If the Securityholder Agent and the Stockholders so assume any such defense, the
Securityholder Agent and the Stockholders shall conduct the defense of the Third
Party Claim actively and diligently. The Securityholder Agent and the
Stockholders shall not compromise or settle such Third Party Claim or consent to
entry of any judgment in respect thereof without the prior written consent of
Parent and/or its affiliates, as applicable, which consent will not be
unreasonably withheld or delayed.
(iii) In the event that the Securityholder Agent
assumes the defense of the Third Party Claim in accordance with Section
8.2(d)(ii) hereof, Parent or its affiliates may retain separate counsel
and participate in the defense of the Third Party Claim, but the fees
and expenses of such counsel shall be at the expense of Parent unless
Parent or its affiliates shall reasonably determine that there is a
material conflict of interest between or among Parent or its affiliates
and the Securityholder Agent and the Stockholders with respect to such
Third Party Claim, in which case the reasonable fees and expenses of
such counsel will be borne by the Securityholder Agent and the
Stockholders out of the Escrow Amount. Parent or its affiliates 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 Securityholder Agent. Parent will cooperate in the defense of
the Third Party Claim and will provide full access to documents,
assets, properties, books and records reasonably requested by
Securityholder Agent and relevant to the claim and will make available
all officers, directors and employees reasonably requested by
Securityholder Agent for investigation, depositions and trial.
(iv) In the event that the Securityholder Agent fails
or elects not to assume the defense of Parent or its affiliates against
such Third Party Claim, which Securityholder Agent had the right to
assume under Section 8.2(d)(ii) hereof, (A) Parent or its affiliates
shall have the right to undertake the defense and (B) Parent shall not
compromise or settle such Third Party Claim or consent to entry of any
judgment in respect thereof without the prior written consent of
Securityholder Agent. In the event that the Securityholder Agent is not
entitled to assume the defense of Parent or its affiliates against such
Third Party Claim pursuant to Section 8.2(d)(ii) hereof, Parent or its
affiliates shall have the right to undertake the defense, consent to
the entry of any judgment or enter into any settlement with respect to
the Third Party Claim in any manner it may deem appropriate (and Parent
or its affiliates need not consult with, or obtain any consent from,
the Securityholder Agent or any Stockholder in connection
-49-
therewith); provided, however, that except with the written consent of
the Securityholder Agent, no settlement of any such claim or consent to
the entry of any judgment with respect to such Third Party Claim shall
alone be determinative of the validity of the claim against the Escrow
Amount. In each case, Parent or its affiliates shall conduct the
defense of the Third Party Claim actively and diligently, and the
Securityholder Agent and the Stockholders will cooperate with Parent or
its affiliates in the defense of that claim and will provide full
access to documents, assets, properties, books and records reasonably
requested by Parent and material to the claim and will make available
all individuals reasonably requested by Parent for investigation,
depositions and trial.
8.3 Limitation. The remedies provided for in this Article VIII are
exclusive and shall be in lieu of all other remedies for breach of any
representation or warranty of the Company or the Stockholders in this Agreement;
provided, however, that the first clause of this sentence shall not be deemed a
waiver by any party of any right to specific performance or injunctive relief or
any remedy arising by reason of any claim of fraud or willful misrepresentation
with respect to this Agreement. The maximum liability for any Losses (the
"Maximum Liability for Losses") incurred by a Parent Indemnitee of each
Stockholder shall be the following:
(a) for each Stockholder other than Infotech, ▇▇▇▇▇▇ ▇▇▇▇▇▇ or
▇▇▇▇▇▇ ▇▇▇▇▇▇, an amount equal to such Stockholder's pro rata portion of the
Escrow Amount held pursuant to the Escrow Agreement;
(b) for ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇, an amount equal to
the value of all of the shares of Parent Common Stock issued to such Stockholder
at the Initial Closing Date, based upon an assumed value per share of Three
Dollars ($3.00), which may be satisfied by such Stockholders at their respective
election either in cash or by transferring to Parent the appropriate number of
shares of Parent Common Stock, provided, that ten percent (10%) of this
liability shall be deemed to have been paid from such Stockholder's portion of
the Escrow Amount pursuant to the Escrow Agreement; and
(c) for Infotech, Airvac and Zevac, an amount equal to such
Stockholder's pro rata portion of the Escrow Amount plus all Discounts and
Commissions payable to such party (which may constitute all of the Infotech
Share Purchase Price); provided, that in the event such Losses relate to an IP
Indemnity not involving fraud and such IP Indemnity relates only to Company
Intellectual Property incorporated in certain, but not all of the, Company
products identified in Section 7.17, the liability for any Losses suffered by
Parent shall be limited to the Discounts and Commissions otherwise allowed or
payable by Parent with respect to the Company products which incorporate such
Company Intellectual Property, e.g., Losses relating to a Controls product(s) to
Controls products generally, and Losses relating to a Camera product(s) to
Camera products.
8.4 Escrow of Commissions and Discounts. In the event that Parent or
any Parent Indemnitee shall make a claim for indemnification of a Loss to be
satisfied by the Discounts and Commissions to be made or paid pursuant to
Section 7.17, all such amounts as accrued shall be deposited by Parent or the
indemnifying party into escrow pursuant to the Escrow Agreement and upon such
deposit any claim for indemnification may then be deemed made against such
-50-
amounts. Such amounts deposited shall be distributed as set forth in the Escrow
Agreement. The parties shall not have rights of off-set pursuant to the terms of
this Agreement.
ARTICLE IX
INITIAL CLOSING CONDITIONS
9.1 Conditions to Obligations of Each Party. The respective obligations
of each party to this Agreement to effect the transactions contemplated hereby,
shall be subject to the satisfaction at or prior to the Initial Closing Date of
the following conditions:
(a) Government Approvals. All authorizations, consents, orders
or approvals of, or declarations or filings with, or expiration of waiting
periods imposed by, any Governmental Entity necessary for the consummation of
the transactions contemplated by this Agreement shall have been filed, occurred
or been obtained, other than filings with and approvals by foreign governments
relating to the transactions contemplated hereby if failure to make such filings
or obtain such approvals would not be materially adverse to the Company or
Parent and its subsidiaries, taken as a whole.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the transactions contemplated hereby shall be in
effect, nor shall any proceeding brought by a Governmental Entity, seeking any
of the foregoing be pending; nor shall there be any action taken, or any
applicable law relating to the transactions contemplated hereby, which makes the
consummation of the transactions contemplated hereby illegal.
(c) Securities Act Exemption. Parent and the Company shall
have determined that the issuance of Parent Common Stock pursuant to this
Agreement is exempt from the registration requirements of Section 5 of the
Securities Act.
(d) No Litigation. There shall be no pending or threatened
litigation regarding the transactions contemplated by this Agreement or
otherwise that could have a Material Adverse Effect on the Company.
(e) Authorization; Dissenters. This Agreement, the Merger and
other transactions contemplated hereby will have been approved and adopted by
the vote or consent of holders of not less than a majority of each series and
class of the outstanding voting securities of the Company. This Agreement, the
Merger and other transactions contemplated hereby shall have been approved and
adopted by the Company's Board of Directors, Parent's Board of Directors and
Merger Sub's Board of Directors, and the Company, Parent and Merger Sub shall
have taken all other corporate actions necessary to authorize the execution,
delivery and performance of this Agreement, and the consummation of the Merger
and other transactions contemplated hereby. All rights of Stockholders to
exercise dissenter's rights will have expired on or before the Initial Closing.
9.2 Additional Conditions to Obligations of the Company. The
obligations of the Company to consummate and effect this Agreement and the
transactions contemplated hereby
-51-
shall be subject to the satisfaction at or prior to the Initial Closing Date of
each of the following conditions, any of which may be waived in writing by the
Company:
(a) Representations, Warranties and Covenants. The
representations and warranties of Parent and Merger Sub in this Agreement shall
be true and correct in all material respects on and as of the Initial Closing
Date as though such representations and warranties were made on and as of such
date, and Parent and Merger Sub shall have performed and complied in all
material respects with all covenants, obligations, and conditions of this
Agreement required to be performed and complied with by each of Parent and
Merger Sub as of the Initial Closing Date.
(b) Certificate of Parent and Merger Sub. The Company shall
have been provided with a certificate executed on behalf of each of Parent and
Merger Sub by two duly authorized executive officers of each to the effect that
as of the Initial Closing Date:
(i) all representations and warranties made by Parent
and Merger Sub under this Agreement are true and complete in all
material respects; and
(ii) all covenants, obligations, and conditions of
this Agreement to be performed by Parent and Merger Sub on or before
such date have been so performed in all material respects.
(c) Satisfactory Initial Closing Matters. The form, scope and
substance of all closing documents and other papers delivered hereunder shall be
reasonably acceptable to the Company.
(d) No Material Adverse Change. There shall have been no
Material Adverse Change of the Parent.
(k) Legal Opinion. The Stockholders shall have received a
legal opinion from ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, legal counsel to Parent and the
Merger Sub, in substantially the form of Exhibit G.
9.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction on
or prior to the Initial Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Parent and Merger Sub:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Company in this Agreement shall be true
and correct in all material respects on and as of the Initial Closing Date as
though such representations and warranties were made on and as of such date, and
the Company shall have performed and complied in all material respects with all
covenants, obligations, and conditions of this Agreement required to be
performed and complied with by it as of the Initial Closing Date.
(b) No Material Adverse Change. There shall have been no
Material Adverse Change of the Company.
-52-
(c) Stockholder Approvals. The Company shall have obtained the
approval of holders of ninety-five percent (95%) of the Series A Preferred Stock
and Series B Preferred Stock and ninety-two percent (92%) of the Company Common
Stock to this Agreement, the Merger and the other transactions contemplated
hereby.
(d) Certificate of the Company. Parent and Merger Sub shall
have been provided with a certificate executed on behalf of the Company by its
Chief Executive Officer and President/Chief Technical Officer to the effect that
as of the Initial Closing Date:
(i) to the best of his personal knowledge, all
representations and warranties made by the Company under this Agreement
(as modified by any disclosures made by the Company in the Schedules)
are true and complete in all material respects; and
(ii) to the best of his personal knowledge, all
covenants, obligations and conditions of this Agreement to be performed
by the Company on or before such date have been so performed in all
material respects.
(e) Secretary's Certificate. Parent and Merger Sub shall have
been provided with a certificate executed by the Company's Secretary certifying
the Charter and Bylaws and resolutions adopted by the Board and Stockholders in
connection with the transactions contemplated by this Agreement.
(f) Financial Statements. The Company shall have delivered to
Parent unaudited financial statements of the Company for its fiscal years ending
2000 and 2001 and unaudited year-to-date financial statements, each prepared in
accordance with GAAP. In addition, the Company shall have delivered to Parent
unaudited statements of income (loss) for the prior eight (8) quarterly periods,
the latest of which shall be the quarterly period ended June 30, 2002, each
prepared in accordance with GAAP and specifying in detail (i) contract revenue
recognition, (ii) warranty expenses and (iii) post-completion expenses.
(g) Balance Sheet. The Company shall have delivered to Parent
unaudited balance sheets for the fiscal quarters ended June 30, 2001 and June
30, 2002, each prepared in accordance with GAAP and reviewed by the Company's
independent accountants, providing detail for (i) accounts receivable, (ii)
customer listings, (iii) all recorded accrued liabilities and (iv) any
contingent recorded or unrecorded liabilities (or furnish a certificate
representing that no such liabilities exist).
(h) Quarterly Revenues and Operating Income. The Company shall
have delivered to Parent a statement of income indicating total revenues of at
least Seventy-Five Thousand Dollars ($75,000) for the quarter ended June 30,
2002. Such income statement shall be acceptable to Parent, in its reasonable
discretion. If the Company does not deliver to Parent a statement of income
indicating total revenues of at least Seventy-Five Thousand Dollars ($75,000)
for the quarter ended June 30, 2002, the Exchange Consideration will be adjusted
in a manner acceptable to Parent or this Agreement may be terminated by Parent
in its sole discretion.
-53-
(i) Third Party Consents. Any and all consents, waivers and
approvals required from third parties relating to the contracts, licenses,
leases, and other agreements and instruments of the Company shall have been
obtained.
(j) Satisfactory Form of Initial Closing Matters. The form,
scope, and substance of all closing documents and other papers delivered
hereunder shall be reasonably acceptable to Parent's counsel.
(k) Legal Opinion. Parent and Merger Sub shall have received a
legal opinion from ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇, legal counsel to the Company, in
substantially the form of Exhibit H.
(l) Noncompetition Agreement. ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall have entered
into a noncompetition agreement with Parent and the Company, and shall not have
challenged the validity or enforceability thereof or expressed his intent not to
perform thereunder.
(m) Employee Offer Letters and Invention
Assignment/Nondisclosure Agreement. Each employee of the Company shall have
executed and delivered and Offer Letter in the form previously provided by
Parent and a Proprietary Information Agreement in the form provided by Parent
and generally used by Parent for its employees.
(n) R&D Valuation. If desirable in Parent's sole discretion,
an independent appraiser shall have completed a valuation of the Company's
in-process research and development.
(o) Due Diligence. Parent shall have completed all due
diligence that it reasonably deems to be necessary or advisable, on or before
August 30, 2002.
(p) Technical Evaluation. Parent shall have determined that
the Company's products can be utilized as part of Parent's product line with
satisfactory performance.
(q) Quality Evaluation. The Company shall have provided
information on the field returns and performance of the Company's products and
conclude a HALT test on the list of Company products contained in Schedule
9.3(q), all of which indicate to Parent's satisfaction that the Company products
are of good industrial quality, subject to Schedule 9.3(q).
(r) Company Products Patent Evaluation. The Company shall have
provided information or statements which verify that the Company products listed
in Schedule 9.3(r) are not infringing upon any patents.
(s) Purchase Orders. Infotech, AirVac and Zevac shall have
placed purchase orders with the Company for an aggregate minimum of $60,000 for
delivery of Company products and payment no later than September 30, 2002, and
an additional aggregate minimum purchase order of $50,000 for delivery of
Company products by December 30, 2002, with payment no later than February 28,
2003.
-54-
(t) Line of Credit. The Company shall have obtained written
authorization from Paragon Commercial Bank to the effect that Parent may assume
the Company's credit line on the terms and conditions provided in Section 7.14.
(u) Cancellation of Options. All outstanding options or other
convertible securities of the Company that have not been exercised prior to the
Effective Time shall have been cancelled as of the Initial Closing Date.
(v) Dissenters Rights. None of the outstanding Shares shall be
Dissenting Shares.
(w) Resignation of Officers and Directors. All of the officers
and directors of the Company shall have resigned effective on or before the
Effective Time.
(x) Stockholder Statement. Each Stockholder shall have
executed and delivered a Stockholder Statement.
ARTICLE X
TERMINATION, AMENDMENT AND WAIVER
10.1 Termination. Except as provided in Section 10.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time:
(a) by mutual consent of the Company, Parent and Merger Sub;
(b) by Parent and Merger Sub or the Company if: (i) the
Initial Closing has not occurred by August 30, 2002 (as may be extended pursuant
to Section 2.3, the "Final Date") (provided that the right to terminate this
Agreement under this clause (b)(i) shall not be available to any party whose
failure to fulfill any obligation hereunder has been the cause of, or resulted
in, the failure of the Initial Closing to occur on or before such date); (ii)
there shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger or other transactions contemplated hereby;
or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger or other transactions
contemplated hereby by any Governmental Entity that would make consummation of
such transactions illegal;
(c) by Parent and Merger Sub if there shall be any action
taken, or any statute, rule, regulation or order enacted, promulgated or issued
or deemed applicable to the Merger or other transactions contemplated hereby, by
any Governmental Entity, which would: (i) prohibit Parent's or the Company's
ownership or operation of any portion of the business of the Company or (ii)
compel Parent or the Company to dispose of or hold separate, as a result of the
transactions contemplated hereby, any portion of the business or assets of the
Company or Parent; in either case, the unavailability of which assets or
business would have a Parent Material Adverse Effect or would reasonably be
expected to have a material adverse effect on Parent's ability to realize the
benefits expected from the Merger or other transactions contemplated hereby;
-55-
(d) by Parent and Merger Sub if each of Parent and Merger Sub
is not in material breach of its obligations under this Agreement and there has
been a breach of any representation, warranty, covenant or agreement contained
in this Agreement on the part of the Company and also, as a result of such
breach the conditions set forth in Section 9.3(a) or 9.3(b), as the case may be,
would not then be satisfied; provided, however, that if such breach is curable
by the Company within ten (10) days through the exercise of its best efforts,
then for so long as the Company continues to exercise such best efforts Parent
and Merger Sub may not terminate this Agreement under this Section 9.1(d) unless
such breach is not cured within ten (10) business days (but no cure period shall
be required for a breach which by its nature cannot be cured);
(e) by Parent on or before August 30, 2002 if the results of
its due diligence investigation of the Company are not satisfactory to Parent
for any reason in its sole discretion; and
(f) by the Company if such termination by the Company's Board
of Directors is necessary to fulfill its fiduciary obligations to the
Stockholders (provided, that in no event may the Company breach Section 7.11),
including, but not limited to, such events or occurrences as delisting of Parent
Common Stock from trading on Nasdaq, its failure to be a publicly-traded
company, liquidation, the announcement of material accounting mistatements or
reports of material management impropriety in the operation of Parent's business
or substantial decreases in the market value of its publicly-traded shares from
the closing price reported by Nasdaq on the date of this Agreement or (2) there
has been a breach of any representation, warranty, covenant or agreement
contained in this Agreement on the part of Parent or Merger Sub and as a result
of such breach the conditions set forth in Section 9.2(a) or 9.2(b), as the case
may be, would not then be satisfied; provided, however, that if such breach is
curable by Parent or Merger Sub within ten (10) business days through the
exercise of its best efforts, then for so long as Parent or Merger Sub continues
to exercise such best efforts the Company may not terminate this Agreement under
this Section 10.1(f) unless such breach is not cured within ten (10) business
days (but no cure period shall be required for a breach which by its nature
cannot be cured).
10.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1 hereof, this Agreement shall forthwith
become void and, there shall be no liability or obligation on the part of
Parent, Merger Sub or the Company, or their respective officers, directors or
stockholders, provided that (i) the provisions of Section 7.3 hereof and this
Article X shall remain in full force and effect and survive any termination of
this Agreement, and (ii) the termination of this Agreement shall not relieve any
party from any liability for any willful and knowing breach of this Agreement.
Notwithstanding the foregoing, if this Agreement is terminated by Parent and
Merger Sub other than pursuant to Section 10.1(a), (c) or (d), and provided that
the Company has not breached any representation or warrants, covenant or other
obligation under this Agreement prior to such termination, Paragon Commercial
Bank, as escrow agent, shall deliver to the Company the sum of Two Hundred
Thousand Dollars ($200,000) previously deposited by Parent and held in escrow
with Paragon Commercial Bank pursuant to that certain escrow agreement between
Parent, the Company and Paragon Commercial Bank, as a termination fee in full
satisfaction of any amounts owed by, or claims against, Parent related to or
arising out of this Agreement (the "Termination Fee"). On or prior to the date
of execution of this Agreement, Parent shall have deposited with Paragon
Commercial Bank, Raleigh, NC as Escrow Agent, the sum of Two Hundred Thousand
Dollars ($200,000) to be held and disbursed
-56-
pursuant to the terms of the Escrow Agreement (Termination Fee) between Paragon
Commercial Bank, Parent and the Company ("Fee Escrow Agreement"). The parties
acknowledge and agree that that the Termination Fee shall constitute liquidated
damages and not a penalty. Upon payment of the Termination Fee, neither Parent
or Merger Sub nor any of their respective affiliates, stockholders, officers,
directors, employees, representatives or agents shall have any further liability
of any kind to the Company or any of its affiliates, stockholders, officers,
directors, employees, representatives and agents in connection with this
Agreement or any of the transactions contemplated hereby.
10.3 Amendment. Except as is otherwise provided herein or as is
otherwise required by applicable law, prior to the Initial Closing, this
Agreement may be amended by the parties hereto at any time by execution of an
instrument in writing signed by Parent, Merger Sub and the Company, and, in
respect of matters under this Agreement that expressly relate to Securityholder
Agent, the Securityholder Agent. Except as is otherwise provided herein or as is
otherwise required by applicable law, after the Initial Closing, this Agreement
may be amended by the parties hereto at any time by execution of an instrument
in writing signed by Parent, the Company and Infotech, and, for any amendment to
Article VIII, the Securityholder Agent on behalf of the Stockholders.
10.4 Extension; Waiver. At any time prior to the Initial Closing,
Parent and Merger Sub on the one hand, and the Company, on the other, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations of the other party hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE XI
GENERAL
11.1 Notices. Except as may be otherwise provided herein, all notices,
requests, waivers and other communications made pursuant to this Agreement shall
be in writing and shall be conclusively deemed to have been duly given (a) when
hand delivered to the other party; (b) when sent by facsimile at the address and
number set forth below; (c) three (3) business days after deposit in the U.S.
mail with first class or certified mail receipt requested postage prepaid and
addressed to the other party as set forth below (or ten (10) business days if
sent by U.S. mail outside the United States); or (d) the next business day after
deposit with a national overnight delivery service, postage prepaid, addressed
to the parties as set forth below with next-business-day delivery guaranteed (or
three (3) business days if outside of the United States).
if to Parent or Merger Sub, to:
Adept Technology, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
-57-
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Company, to:
Meta Control Technologies, Inc.
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Telephone: ▇▇-▇▇-▇▇▇-▇▇▇▇
Facsimile: 41-32-626-3669
with a copy (which shall not constitute notice) to:
Meta Control Technologies, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇
Highwoods Tower One, Suite 500
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇., Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
if to Infotech, to:
Infotech AG
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
-▇▇-
▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telephone: ▇▇-▇▇-▇▇▇-▇▇▇▇
Facsimile: 41-32-626-3669
if to the Securityholder Agent, to:
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇/▇ ▇▇▇▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇
▇▇-▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone: ▇▇-▇▇-▇▇▇-▇▇▇▇
Facsimile: 41-32-626-3669
A party may change or supplement the addresses given above, or
designate additional addresses for purposes of this Section 11.1. by giving the
other party written notice of the new address in the manner set forth above.
11.2 Expenses. In the event the transactions contemplated hereby are
not consummated, all fees and expenses incurred in connection with such
contemplated transactions including all legal, accounting, financial advisory,
investment banking, consulting and all other fees and expenses of third parties
(the "Third Party Expenses") incurred by a party in connection with the
negotiation and effectuation of the terms and conditions of this Agreement and
the transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses; provided, however, that all Third Party
Expenses incurred by the Company shall be incurred and paid by Infotech AG, and
Parent shall have no obligation or liability therefor.
11.3 Interpretation.
(a) "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding.
(b) "applicable law" when used herein shall mean with respect
to any Person, any domestic or foreign, federal, state or local statute, law,
ordinance, rule, regulation, order, writ, injunction, judgment, decree,
directive or other requirement of any Governmental Entity applicable to such
Person or any of its respective properties, assets, officers, directors or
employees.
(c) "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation" or
"but not limited to."
(d) "knowledge of the Company" shall refer to the collective
knowledge of the directors, officers and employees of the Company. Any such
individual will be deemed to have actual knowledge of a particular fact,
circumstance, event or other matter if (i) such fact, circumstance, event or
other matter is reflected in one or more documents (whether written or
-59-
electronic, including e-mails sent to or by such individual) in, or that have
been in, such individual's possession, including personal files of such
individual; or (ii) such fact, circumstance, event or other matter is reflected
in one or more documents (whether written or electronic) contained in books and
records of the Company that would reasonably be expected to be reviewed by an
individual who has the duties and responsibilities of such individual in the
customary performance of such duties and responsibilities.
(e) "Person" means any individual, partnership, corporation,
association, joint stock company, trust, joint venture, unincorporated
organization or Governmental Entity (or any department, agency or political
subdivision thereof).
11.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
11.5 Entire Agreement; Assignment. This Agreement, the schedules and
exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other Person any rights or remedies hereunder; and (c) except as is otherwise
provided herein, shall not be assigned by the Company or any Stockholder by
operation of law or otherwise except with the prior written consent of Parent;
provided, that any Person into which Parent may be merged or converted or with
which it may be consolidated or any Person resulting from any merger, conversion
or consolidation to which it shall be a party or any Person to which Parent may
sell or transfer all or substantially all of its assets shall be the successor
hereunder to Parent without the consent of any party hereto, or the execution or
filing of any paper or any further act.
11.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
11.7 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto agrees
-60-
that process may be served upon them in any manner authorized by the laws of the
State of Delaware for such Persons and waives and covenants not to assert or
plead any objection which they might otherwise have to such jurisdiction and
such process.
11.9 Rules of Construction.
(a) The Company, Parent and Merger Sub hereto agree that they
have been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any applicable law or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
(b) The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.10 Specific Performance. The parties hereto agree that irreparable
damage will occur in the event that any of the provisions of this Agreement are
not performed in accordance with their specific terms or are otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.
11.11 Dispute Resolution. Notwithstanding the foregoing, in the event
of a dispute arising out of or related to this Agreement (including any dispute
related to the Infotech Shares) or otherwise related to the business,
operations, management or affairs of the Surviving Corporation, each party shall
appoint a duly authorized representative to meet with the other party. Such
authorized representatives shall meet and attempt in good faith to resolve such
dispute with respect to such matters as expeditiously as practicable. If no such
resolution can be reached after good faith negotiation for a period of thirty
(30) days, either party may demand mediation of the matter, in which case the
parties shall submit the matter to non-binding mediation in Raleigh, North
Carolina under the North Carolina Rules for Mediated Settlement Conference,
N.C.G.S. ss. 105B-23.1, prior to pursuing other legal remedies.
[Remainder of Page Intentionally Left Blank]
-61-
IN WITNESS WHEREOF, the parties have caused this Agreement to be signed
as of the date first written above.
ADEPT TECHNOLOGY, INC.,
a California corporation
By:
-------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
META CONTROL TECHNOLOGIES, INC.,
a Delaware corporation
By:
-------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Chief Executive Officer
MCT ACQUISITION, INC.,
a Delaware corporation
By:
-------------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
INFOTECH AG,
a Swiss corporation
By:
-------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Chief Executive Officer
[Signature Page to Adept/Meta Merger Agreement]