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EXHIBIT 10.8
[CONFORMED COPY]
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AGREEMENT AND PLAN OF REORGANIZATION
AMONG
FSI INTERNATIONAL, INC.,
BMI INTERNATIONAL, INC.
AND
YIELDUP INTERNATIONAL CORPORATION
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DATED JANUARY 21, 1999
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TABLE OF CONTENTS
ARTICLE I THE MERGER...........................................................1
1.01. EFFECTIVE TIME OF THE MERGER......................................1
1.02. CLOSING...........................................................2
1.03. EFFECTS OF THE MERGER.............................................2
1.05. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION...................3
ARTICLE II CONVERSION OF SECURITIES............................................3
2.01. EFFECT ON CAPITAL STOCK...........................................3
(a) Capital Stock of Sub..............................................4
(b) YieldUP Common Stock..............................................4
(c) Fractional Shares.................................................4
(d) Parent Stock......................................................4
(e) YieldUP Stock Options and Warrants................................4
(f) Dissenters' Rights................................................5
(g) Adjustments.......................................................5
2.02. EXCHANGE OF CERTIFICATES..........................................5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF YIELDUP..........................7
3.01. ORGANIZATION OF YIELDUP...........................................8
3.02. COMPANY CAPITAL STRUCTURE.........................................8
3.03. SUBSIDIARIES......................................................9
3.04. AUTHORITY.........................................................9
3.05. SEC FILINGS; FINANCIAL STATEMENTS................................10
3.06. INVENTORY........................................................11
3.07. NO UNDISCLOSED LIABILITIES.......................................11
3.08. NO CHANGES.......................................................11
3.09 TAXES............................................................13
3.10. RESTRICTIONS ON BUSINESS ACTIVITIES..............................14
3.11. TITLE TO PROPERTIES; ABSENCE OF PERMITTED LIENS AND ENCUMBRANCES;
CONDITION OF EQUIPMENT...........................................14
3.12. INTELLECTUAL PROPERTY............................................15
3.13. PRODUCT WARRANTIES AND CLAIMS....................................17
3.14. AGREEMENTS, CONTRACTS AND COMMITMENTS............................17
3.15. INTERESTED PARTY TRANSACTIONS....................................19
3.16. GOVERNMENTAL AUTHORIZATION.......................................19
3.17. LITIGATION.......................................................19
3.18. ACCOUNTS RECEIVABLE..............................................19
3.19. BANK ACCOUNTS; GUARANTIES; POWERS OF ATTORNEY....................20
3.20. CUSTOMERS........................................................20
3.21. SUPPLIERS........................................................20
3.22. MINUTE BOOKS.....................................................20
3.23. ENVIRONMENTAL MATTERS............................................20
3.24. BROKERS' AND FINDERS' FEES.......................................22
3.25. LABOR MATTER.....................................................22
3.26. EMPLOYEE BENEFIT PLANS...........................................22
3.27. INSURANCE........................................................24
3.28. COMPLIANCE WITH LAWS.............................................24
3.29. THIRD PARTY CONSENTS.............................................24
3.30. REGISTRATION STATEMENTS; PROXY STATEMENT.........................24
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3.31. COMPLETE COPIES OF MATERIALS.....................................25
3.32. YEAR 2000........................................................25
3.33. OPINION OF FINANCIAL ADVISOR.....................................25
3.34. VOTING AGREEMENTS................................................25
3.35 DISCLOSURE.......................................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB...................26
4.01. ORGANIZATION, STANDING AND POWER.................................26
4.02. CAPITAL STRUCTURE................................................26
4.03. AUTHORITY........................................................27
4.04. SEC FILINGS; FINANCIAL STATEMENTS................................28
4.05. NO MATERIAL ADVERSE CHANGE.......................................28
4.06. LITIGATION.......................................................29
4.07. BROKERS' AND FINDERS' FEES.......................................29
4.08. REGISTRATION STATEMENT; PROXY STATEMENT..........................29
4.09. OWNERSHIP AND INTERIM OPERATIONS OF SUB..........................30
ARTICLE V CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME.....................30
5.01. CONDUCT OF BUSINESS OF YIELDUP...................................30
5.02. COOPERATION......................................................33
ARTICLE VI ADDITIONAL AGREEMENTS AND COVENANTS................................33
6.01. NO SOLICITATION..................................................33
6.02. PROXY STATEMENT; REGISTRATION STATEMENT..........................34
6.03. ACCESS TO INFORMATION............................................35
6.04. YIELDUP STOCKHOLDERS' MEETING....................................35
6.05. LEGAL CONDITIONS TO MERGER.......................................35
6.06. PAYMENT OF TAXES.................................................36
6.07. PUBLIC DISCLOSURE................................................36
6.08. TAX-FREE REORGANIZATION..........................................36
6.09. NASDAQ QUOTATION.................................................37
6.10. STOCK PLANS AND WARRANTS.........................................37
6.11. CONSENTS.........................................................38
6.12. EMPLOYEE BENEFITS; EMPLOYEE ISSUES...............................38
6.13. REPORTS..........................................................38
6.14. NOTIFICATION OF CERTAIN MATTERS..................................38
6.15. ADDITIONAL AGREEMENTS; REASONABLE EFFORTS........................39
6.16 DIRECTOR AND OFFICER INSURANCE...................................39
ARTICLE VII CONDITIONS TO MERGER..............................................40
7.01. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.......40
(a) Stockholder Approval.............................................40
(b) Approvals........................................................40
(c) Registration Statement...........................................40
(d) NASDAQ...........................................................40
(e) No Injunctions or Restraints; Illegality.........................40
(f) Tax Opinions.....................................................40
(g) Comfort Letter...................................................40
7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND SUB...........41
(a) Accuracy of Representations and Warranties;
Compliance with Covenants........................................41
(b) Blue Sky Laws....................................................41
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(c) Opinion of YieldUP's Counsel.....................................41
(d) Consents.........................................................42
(e) Dissenting Shares................................................42
(f) 1998 Audit.......................................................42
(g) Employment Agreements............................................42
7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF YIELDUP..................42
(a) Accuracy of Representations and Warranties;
Compliance with Covenants........................................42
(b) Opinion of Parent's Counsel......................................42
ARTICLE VIII TERMINATION AND AMENDMENT........................................43
8.01. TERMINATION......................................................43
8.02. EFFECT OF TERMINATION............................................44
8.03. FEES AND EXPENSES................................................44
8.04. ALTERNATIVE TRANSACTION DEFINITION...............................45
8.05. AMENDMENT........................................................45
8.06. EXTENSION; WAIVER................................................45
ARTICLE IX MISCELLANEOUS......................................................46
9.01. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, AND AGREEMENTS.......46
9.02. NOTICES..........................................................46
9.03. INTERPRETATION...................................................47
9.04. COUNTERPARTS.....................................................47
9.05. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES...................47
9.06. GOVERNING LAW....................................................47
9.07. ASSIGNMENT.......................................................47
ARTICLE X DEFINITIONS.........................................................48
10.01. SUBSIDIARY.......................................................48
10.02. AFFILIATE........................................................48
10.03. KNOWLEDGE........................................................48
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EXHIBITS
Exhibit 3.34(a)...................Form of YieldUP Affiliate Agreement
Exhibit 3.34(b)...................Form of Rule 145 Letter
Exhibit 7.02(c)...................Form of Opinion of Counsel to YieldUP
Exhibit 7.03(b)...................Form of Opinion of Counsel to Parent
Exhibit 7.03(g)(1)................Form of Employment Agreement with Raj Mahindra
Exhibit 7.03(g)(2)................Form of Employment Agreement with Suraj Puri
Exhibit 7.03(g)(3)................Form of Employment Agreement with ▇▇▇▇▇ ▇▇▇▇
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated January
21, 1999, is by and among FSI INTERNATIONAL, INC., a Minnesota corporation
("Parent"), BMI INTERNATIONAL, INC., a Minnesota corporation and a wholly owned
subsidiary of Parent ("Sub"), and YIELDUP INTERNATIONAL CORPORATION, a Delaware
corporation ("YieldUP").
WITNESSETH:
WHEREAS, the Boards of Directors of Parent, Sub and YieldUP deem it
advisable and in the best interests of each corporation and its respective
shareholders that Parent and YieldUP combine in order to advance the long-term
business interests of Parent and YieldUP;
WHEREAS, the strategic combination of Parent and YieldUP shall be effected
by the terms of this Agreement through a transaction in which YieldUP will merge
with and into Sub, and the stockholders of YieldUP will become shareholders of
Parent (the "Merger");
WHEREAS, in furtherance of the Merger, and upon the terms and conditions set
forth herein, each share of YieldUP's Common Stock, $.001 par value, and each
share of YieldUP's Class A Common Stock, $.001 par value (collectively, the
"YieldUP Common Stock"), issued and outstanding at the Effective Time (as
defined in Section 1.01 hereof), shall be converted into shares of Common Stock,
no par value, of Parent ("Parent Common Stock") and cash.
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants, and agreements set forth herein and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, and intending to be legally bound, the parties hereby agree as
follows:
ARTICLE I
THE MERGER
1.01. Effective Time of the Merger. Subject to the provisions of this
Agreement, a Certificate of Merger and Articles of Merger (collectively, the
"Merger Articles"), shall each be duly executed and acknowledged by the
Constituent Corporations (as defined in Section 1.03 hereof), and thereafter
delivered to the Secretary of State of the State of Delaware and to the
Secretary of State of the State of Minnesota, respectively, for filing, as
provided in the General Corporation Law of the State of Delaware (the "Delaware
Law") and the Minnesota Business Corporation Act (the "Minnesota Law"), as soon
as practicable on or after the Closing Date (as defined in Section 1.02 hereof).
The Merger shall become effective at the time at which the Merger Articles shall
have been filed with both the Secretary of State of the State of Delaware
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and the Secretary of State of the State of Minnesota or at such time thereafter
as is provided in the Merger Articles (the "Effective Time").
1.02. Closing. The closing of the Merger (the "Closing") will take place at
9:00 a.m., Minneapolis time, on a date to be specified by Parent and YieldUP,
which shall be no later than the fourth business day after satisfaction or
waiver (to the extent waivable under Article VII) of all conditions to the
consummation of the Merger set forth in this Agreement (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or wavier of those conditions) (the "Closing Date"), at the
offices of Faegre & ▇▇▇▇▇▇ LLP, Minneapolis, Minnesota, unless another date or
place is agreed to in writing by Parent and YieldUP. All actions taken at the
Closing shall be deemed to have been taken simultaneously at the time the last
of any such actions is taken or completed.
1.03. Effects of the Merger.
(a) At the Effective Time, in accordance with this Agreement and
Delaware Law and Minnesota Law, (i) YieldUP shall be merged with and into Sub,
(ii) the separate corporate existence of YieldUP (except as such existence may
be continued by operation of law) shall cease and (iii) Sub shall continue as
the surviving corporation and shall be governed by Minnesota Law (Sub and
YieldUP are sometimes referred to herein as the "Constituent Corporations" and
Sub is sometimes referred to herein as "Surviving Corporation").
(b) At and after the Effective Time, the effect of the Merger shall be
as provided in the applicable provisions of Minnesota Law and Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at and
after the Effective Time, Surviving Corporation shall possess all the rights,
privileges, powers, and franchises of a public as well as of a private nature,
and be subject to all the restrictions, disabilities, and duties of each of the
Constituent Corporations; and all and singular rights, privileges, powers, and
franchises of each of the Constituent Corporations, and all property, real,
personal and mixed, and all debts, liabilities and duties due on whatever
account, and all and every other interest of or belonging to either of the
Constituent Corporations, as well as for stock subscriptions and all other
things in action or belonging to each of the Constituent Corporations, shall be
taken and deemed to be transferred to and vested in Surviving Corporation
without further act or deed, and all property, rights, privileges, powers, and
franchises, and all and every other interest shall be thereafter the property of
Surviving Corporation, and the title to any real estate vested by deed or
otherwise, in either of the Constituent Corporations, shall not revert or be in
any way impaired; but all rights of creditors and all liens upon any property of
either of the Constituent Corporations shall be preserved unimpaired, and all
debts, liabilities, and duties of the Constituent Corporations shall thereafter
attach to Surviving Corporation, and may be enforced against it to the same
extent as if such debts and liabilities had been incurred or contracted by it.
1.04. Articles of Incorporation and By-Laws of Surviving Corporation.
(a) The Articles of Incorporation of Sub as in effect immediately
prior to the Effective Time shall be the Articles of Incorporation of Surviving
Corporation, until duly amended in accordance with the terms thereof and of the
Minnesota Law, except that from and
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after the Effective Time, Article First of the Articles of Incorporation of Sub
shall be amended to be and read as follows:
"First: The name of the Corporation shall be Blue Mountain, Inc."
(b) The By-Laws of Sub in effect immediately prior to the Effective
Time shall be the By-Laws of Surviving Corporation, until duly amended in
accordance with the terms thereof, of the Articles of Incorporation of Surviving
Corporation and of the Minnesota Law.
1.05. Directors and Officers of Surviving Corporation.
(a) The directors of Sub holding office at the Effective Time
shall, from and after the Effective Time, be the directors of Surviving
Corporation, such directors to serve until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with Surviving Corporation's Articles of Incorporation and
By-Laws.
(b) The officers of Surviving Corporation from and after the Effective
Time shall be as at set forth below:
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ Chief Executive Officer
▇▇▇ ▇▇▇▇▇▇▇▇ Vice President
Suraj Puri Chief Technologist
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Vice President
▇▇▇▇▇ ▇. Sand Secretary
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ General Counsel
Such officers shall serve until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with Surviving Corporation's Articles of Incorporation and
By-Laws.
ARTICLE II
CONVERSION OF SECURITIES
2.01. Effect on Capital Stock. Subject to the other provisions of this
Article II, at the Effective Time, by virtue of the Merger and without any
action on the part of Parent, YieldUP, Sub or the holder of any shares of the
following securities:
(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall remain outstanding as one share of common stock of
the Surviving Corporation and shall not be converted into any other securities
or cash pursuant to the Merger. The certificates for such shares shall not be
surrendered or in any way modified by reason of the effectiveness of the Merger.
No stock of Sub will be issued pursuant to the Merger.
(b) YieldUP Common Stock. Each issued and outstanding share of YieldUP
Common Stock (other than Dissenting Shares (as defined in Section 2.01(f)
hereof) and shares of
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YieldUP Common Stock held of record by Parent, Sub, or YieldUP or any other
direct or indirect subsidiary of Parent or YieldUP immediately prior to the
Effective Time) shall be automatically converted into and become the right to
receive (i) .1567 of one share of Parent Common Stock (the "Share
Consideration"), and (ii) cash in the amount of $.7313 (the "Cash Consideration"
and, together with the Share Consideration, the "Merger Consideration"). At the
Effective Time, each share of YieldUP Common Stock held of record by Parent,
Sub, or YieldUP or any direct or indirect subsidiary of Parent or YieldUP shall
be canceled and cease to exist, and no payment shall be made with respect
thereto.
(c) Fractional Shares. No scrip or fractional shares of Parent Common
Stock shall be issued in the Merger. Each fractional share of Parent Common
Stock which a holder of YieldUP Common Stock would otherwise be entitled to
receive (after aggregating all shares of Parent Common Stock to be received by
such holder) shall be automatically converted into the right to receive, after
the later of the Effective Time or the surrender of such stockholder's
Certificate or Certificates (as defined in Section 2.01(d) hereof), from Parent,
an amount in cash in lieu of such fractional share of Parent Common Stock equal
to the product of such fraction multiplied by $1.8806 (rounded up or down to the
nearest $.01). Parent will make available to the Exchange Agent (as defined in
Section 2.02 hereof) the cash necessary for the purpose of paying for fractional
shares.
(d) Parent Stock. All shares of Parent Common Stock into which the
shares of YieldUP Common Stock are converted shall be fully paid and
nonassessable and will have Parent Rights attached thereto in accordance with
the Parent Rights Agreement (as such terms are defined in Section 4.02(a)
hereof). All shares of YieldUP Common Stock, when so converted, shall no longer
be outstanding and shall automatically be canceled and retired and shall cease
to exist, and holders of certificates which immediately prior to the Effective
Time represented shares of YieldUP Common Stock (the "Certificates") shall cease
to have any rights with respect thereto, except the right to receive the shares
of Parent Common Stock and any cash to be issued or paid in consideration
therefor upon the surrender of the Certificates in accordance with Section 2.02
hereof, without interest.
(e) YieldUP Stock Options and Warrants. At the Effective Time, (i) all
outstanding options to purchase YieldUP Common Stock (the "YieldUP Options")
under the YieldUP 1995 Stock Option Plan (the "Prior Plan"), the YieldUP 1995
Stock Option Plan (the "YieldUP Stock Option Plan") and the YieldUP 1995 Outside
Directors Stock Option Plan (the "YieldUP Directors Plan" and, together with the
Prior Plan and the YieldUP Stock Option Plan, the "YieldUP Option Plans") will
become options to purchase Parent Common Stock in accordance with Section 6.10
hereof and (ii) each outstanding warrant to acquire shares of YieldUP Common
Stock will become a warrant to acquire shares of Parent Common Stock and cash,
in accordance with Section 6.10 hereof.
(f) Dissenters' Rights. Notwithstanding any provision of this
Agreement to the contrary, any shares of YieldUP Common Stock outstanding
immediately prior to the Effective Time held by a holder who has demanded and
perfected the right, if any, for appraisal of those shares in accordance with
the provisions of Section 262 of the Delaware Law and as of the Effective Time
has not withdrawn or lost such right to such appraisal ("Dissenting Shares")
shall
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not be converted pursuant to this Article II, but the holder shall only be
entitled to such rights as are granted by the Delaware Law. If a holder of
shares of YieldUP Common Stock who demands appraisal of those shares under the
Delaware Law shall effectively withdraw or lose (through failure to perfect or
otherwise) the right to appraisal, then, as of the Effective Time or the
occurrence of such event, whichever last occurs, such Dissenting Shares shall be
converted into and represent only the right to receive, the Merger Consideration
(and cash in lieu of fractional shares in accordance with Section 2.01(c)
hereof). YieldUP shall give Parent (i) prompt notice of any written demands for
appraisal of any shares of YieldUP Common Stock, attempted withdrawals of such
demands, and any other instruments served pursuant to the Delaware Law and
received by YieldUP relating to stockholders' rights of appraisal, and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the Delaware Law. YieldUP shall not, except with the prior
written consent of Parent, voluntarily make any payment with respect to any
demands for appraisal, offer to settle or settle any such demands or approve any
withdrawal of any such demands.
(g) Adjustments. The Share Consideration and Cash Consideration shall
be appropriately adjusted to reflect any stock split, reverse stock split, stock
dividend, recapitalization, exchange, subdivision, combination of, or other
similar change (including the exercise of any Parent Rights under the Parent
Rights Agreement) in Parent Common Stock or YieldUP Common Stock following the
date of this Agreement.
2.02. Exchange of Certificates.
(a) Parent shall authorize ▇▇▇▇▇▇ Trust and Savings Bank, or such
other firm as is reasonably acceptable to YieldUP, to serve as exchange agent
hereunder (the "Exchange Agent"). Promptly after the Effective Time, Parent
shall deposit or shall cause to be deposited in trust with the Exchange Agent
certificates representing the number of whole shares of Parent Common Stock to
which the holders of YieldUP Common Stock are entitled pursuant to this Article
II, together with cash sufficient to cover the aggregate Cash Consideration to
be paid to holders of YieldUP Common Stock and to pay for fractional shares then
known to Parent (such cash amounts and certificates being hereinafter referred
to as the "Exchange Fund"). The Exchange Agent shall, pursuant to irrevocable
instructions received from Parent, deliver the number of shares of Parent Common
Stock and pay the amounts of cash provided for in this Article II out of the
Exchange Fund. Additional amounts of cash, if any, needed from time to time by
the Exchange Agent shall be provided by Parent and shall become part of the
Exchange Fund. The Exchange Fund shall not be used for any other purpose, except
as provided in this Agreement, or as otherwise agreed to by Parent and YieldUP
prior to the Effective Time.
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall mail and otherwise make available to each recordholder of the
YieldUP Common Stock (except with respect to Dissenting Shares and shares held
by Parent, Sub, and YieldUP) who, as of the Effective Time was a holder of a
Certificate, a letter of transmittal (satisfactory in form and substance to
Parent) and instructions for its use in effecting the surrender of the
Certificate for payment therefor and conversion thereof. Delivery shall be
effected, and risk of loss and title to the Certificate shall pass, only upon
proper delivery of the Certificate to the Exchange Agent and the letter of
transmittal shall so reflect. Upon surrender to the Exchange Agent of a
Certificate,
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together with a letter of transmittal duly executed and properly completed, the
holder of the Certificate shall be entitled to receive in exchange therefore (i)
shares of Parent Common Stock and cash to which that holder of YieldUP Common
Stock is entitled under Section 2.01(b) hereof (with such cash amount being
rounded up or down to the nearest $.01), and (ii) as to any fractional share, a
check representing the cash amount to which the holder is entitled under Section
2.01(c), and the Certificate so surrendered shall be marked "cancelled". No
interest will be paid or accrued on any Cash Consideration or any cash in lieu
of fractional shares payable upon surrender of the Certificate. Parent shall pay
any transfer or other taxes required by reason of the issuance of a certificate
representing shares of Parent Common Stock provided that such certificate is
issued in the name of the person in whose name the Certificate surrendered in
exchange therefor is registered; provided, however, that Parent shall not pay
any transfer or other tax if the obligation to pay such tax under applicable law
is solely that of the stockholder or if payment of any such tax by Parent
otherwise would cause the Merger to fail to qualify as a tax-free reorganization
under the Code. If any portion of the consideration to be received pursuant to
this Article II upon exchange of a Certificate is to be issued or paid to a
person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition of such issuance and
payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
exchange shall pay in advance any transfer or other taxes required by reason of
the issuance of a certificate representing shares of Parent Common Stock or a
check representing the Cash Consideration or any cash for a fractional share to
such other person, or establish to the satisfaction of the Exchange Agent that
such tax has been paid or that no such tax is applicable. From the Effective
Time until surrender in accordance with this Section 2.02, each Certificate
(other than Certificates representing treasury shares of YieldUP) shall be
deemed, for all corporate purposes other than the payment of dividends or other
distributions, to evidence only the right to receive the cash and Parent Common
Stock into which such shares of YieldUP Common Stock shall have been so
converted. No dividends that are otherwise payable on Parent Common Stock will
be paid to persons entitled to receive Parent Common Stock until such persons
surrender their Certificates. After such surrender, there shall be paid to the
person in whose name the Parent Common Stock shall be issued any dividends on
such Parent Common Stock that shall have a record date and payment date on or
after the Effective Time and prior to such surrender. If the payment date for
any such dividend is after the date of such surrender, such payment shall be
made on such payment date. In no event shall the persons entitled to receive
such dividends be entitled to receive interest on such dividends. All payments
in respect of shares of YieldUP Common Stock that are made in accordance with
the terms hereof shall be deemed to have been made in full satisfaction of all
rights pertaining to such securities.
(c) In case of any lost, mislaid, stolen, or destroyed Certificate,
the holder thereof may be required, as a condition precedent to the delivery to
such holder of the consideration described in Section 2.01 hereof and in
accordance with Section 167 of the Delaware Law, to deliver to Parent a bond in
such reasonable sum as Parent may direct as indemnity against any claim that may
be made against the Exchange Agent, Parent, or Surviving Corporation with
respect to the Certificate alleged to have been lost, mislaid, stolen, or
destroyed.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of Surviving Corporation of the shares of YieldUP Common Stock
that were outstanding
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immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to Surviving Corporation for transfer, they shall be
canceled and exchanged for the consideration described in Section 2.01 hereof.
After the Effective Time, the shares of YieldUP Common Stock shall be delisted
from the Nasdaq Small Cap Market.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of YieldUP for one year after the Effective Time shall be returned
to Parent, upon demand, and any holder of YieldUP Common Stock who has not
theretofore complied with Section 2.02(b) hereof shall thereafter look only to
Parent for issuance of the Merger Consideration to which such holder has become
entitled pursuant to Section 2.01 hereof; provided, however, that neither the
Exchange Agent nor any party hereto shall be liable to a holder of shares of
YieldUP Common Stock for any amount required to be paid to a public official
pursuant to any applicable abandoned property, escheat, or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF YIELDUP
YieldUP represents and warrants to Parent and Sub that the statements
contained in this Article III are true and correct as of the date hereof, except
as set forth in the disclosure schedule delivered by YieldUP to Parent on or
before the date of this Agreement (the "YieldUP Disclosure Schedule"). The
YieldUP Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III and the
disclosures in any paragraph, including appropriate cross references, shall
qualify only the corresponding paragraph in this Article III. As used with
respect to YieldUP or Parent, as the case may be, the term "Material Adverse
Effect" means any change or effect that, individually or when taken together
with all changes or effects that have occurred before the determination of the
occurrence of the Material Adverse Effect, has had or is reasonably likely to
have a material adverse effect on the business, operations, assets (including
intangible assets), financial condition or results of operations of the party
and its subsidiaries taken as a whole; provided, however, any disruption of
customer or supplier relationships of a party arising primarily out of or
resulting primarily from actions contemplated by the parties in connection with,
or which is primarily attributable to the announcement of this Agreement or the
transactions contemplated hereby shall not be considered when determining if a
Material Adverse Effect has occurred.
3.01. Organization of YieldUP. YieldUP is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
YieldUP has the corporate power to own its property and to carry on its business
as now being conducted and as proposed to be conducted by YieldUP. YieldUP is
duly qualified to do business and 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 YieldUP. YieldUP has delivered a true and correct copy of its
Certificate of Incorporation and By-Laws, each as amended to date, to Parent.
3.02. Company Capital Structure. The authorized capital stock of YieldUP
consists of (i) 22,229,927 shares of YieldUP Common Stock (including 2,229,927
shares of Class A
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Common Stock), of which, as of the close of business on January 15, 1999,
8,256,476 shares were issued and outstanding (including 1,364,497 shares of
Class A Common Stock), and (ii) 5,000,000 shares of Preferred Stock which are
divisible into such classes and series, with such designations, voting rights,
and other rights and preferences, as the Board of Directors of YieldUP (the
"Board of Directors") may from time to time determine, of which, on the date
hereof, there are no shares issued and outstanding and, except for 2,400 shares
designated as Series A Convertible Preferred Stock, par value $.001 per share,
no shares have been designated by the Board of Directors as to classes or
series. All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights created by statute, the Certificate of Incorporation or By-Laws of
YieldUP or any agreement to which YieldUP is a party or by which it is bound. As
of the date hereof, YieldUP has reserved 1,284,465 shares of Common Stock for
issuance to employees, directors, and consultants pursuant to the YieldUP Option
Plans, of which 1,048,768 shares are subject to outstanding, unexercised options
(the "YieldUP Options"). Schedule 3.02 of the YieldUP Disclosure Schedule sets
forth for each outstanding YieldUP Option the name of the holder of such option,
the number of shares subject to such option, the exercise price of such option,
the vesting schedule of such option, whether or not such option qualifies as an
incentive stock option and, if the exercisability of such option will be
accelerated in any way by the transactions contemplated by this Agreement or for
any other reason, an indication of the extent of such acceleration. Such list
also describes any repricing of options which has taken place since YieldUP's
incorporation. Except for the YieldUP Options and warrants to purchase, under
warrant agreements described in Schedule 3.02 of the YieldUP Disclosure Schedule
(the "Warrant Agreements"), an aggregate of not more than 4,157,860 shares of
YieldUP Common Stock, there are no options, warrants, calls, rights,
commitments, or agreements of any character to which YieldUP is a party or by
which it is bound obligating YieldUP to issue, deliver, sell, repurchase, or
redeem, or cause to be issued, delivered, sold, repurchased, or redeemed, any
shares of capital stock of YieldUP or obligating YieldUP to grant, extend,
accelerate the vesting of, change the price of, or otherwise amend or enter into
any such option, warrant, call, right, commitment, or agreement. Except as set
forth in the YieldUP Disclosure Schedule, no adjustments to the purchase price,
number or type of securities purchasable, or other terms of the Warrant
Agreements or the warrants thereunder have been made or have been required to be
made since the initial effective date of such Warrant Agreements or warrants.
Except as set forth in the YieldUP Disclosure Schedule, YieldUP is not a party
to and is not aware of, any voting agreement, voting trust, proxy, or other
agreements or understandings with respect to the shares of capital stock of
YieldUP or any agreement, arrangement or understanding providing for
registration rights with respect to any shares of capital stock of YieldUP.
3.03. Subsidiaries. YieldUP does not have and has never had any subsidiaries
and does not otherwise own and, except as set forth in the YieldUP Disclosure
Schedule, has never otherwise owned any shares of stock or any interest in, or
control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity (excluding any securities in
any publicly traded company held for investment by YieldUP and comprising less
than one percent of the outstanding stock of such company).
3.04. Authority. YieldUP has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and
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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 YieldUP, subject only to the approval of the Merger by YieldUP's stockholders
as contemplated by Section 6.04 hereof. This Agreement has been duly executed
and delivered by YieldUP and constitutes the valid and binding obligation of
YieldUP, enforceable against YieldUP in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency,
or similar laws affecting the enforcement of creditors' rights generally, and
subject, as to enforceability, to general principles of equity. Except as set
forth in the YieldUP Disclosure Schedule, the execution and delivery of this
Agreement by YieldUP does not, and 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
loss of any benefit under (i) any provision of the Certificate of Incorporation
or By-Laws of YieldUP, (ii) any YieldUP Material Contract (as defined in Section
3.14) or any YieldUP Authorization (as defined in Section 3.16) or (iii) any
judgment, order, decree, statute, law, ordinance, rule, or regulation applicable
to YieldUP or its properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission, or other governmental authority or
instrumentality ("Governmental Entity"), is required by or with respect to
YieldUP in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware and the Articles of Merger with the Secretary of State of the State of
Minnesota, (ii) filings in connection, or in compliance, with the provisions of
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (iii) the filing of the Proxy Statement (as defined in Section 3.30
below) with the Securities and Exchange Commission (the "SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
(iv) such consents, approvals, orders, authorizations, registrations,
declarations, and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country.
3.05. SEC Filings; Financial Statements.
(a) YieldUP has filed and made available to Parent all forms, reports,
and documents required to be filed by YieldUP with the SEC since January 1, 1996
(including all exhibits, notes, and schedules thereto and documents incorporated
by reference therein) (all such forms, reports, and documents, including any
such forms, reports, and documents filed with the SEC after the date hereof,
being collectively called the "YieldUP SEC Reports" and individually called a
"YieldUP SEC Report"). The YieldUP SEC Reports (i) at the time filed, with
respect to all of the YieldUP SEC Reports other than registration statements
filed under the Securities Act of 1933, as amended (the "Securities Act"), or at
the time of their respective effective dates, with respect to registration
statements filed under the Securities Act, complied, and any YieldUP SEC Reports
filed with the SEC after the date hereof will comply, as to form in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as the case may be, and (ii) did not, and any YieldUP SEC Reports filed
after the date hereof will not, at the time filed or at the time of their
respective effective dates, as the case may be (or if amended or superseded by a
filing prior to the date of this Agreement, then on the date of such filing),
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such YieldUP
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SEC Reports or necessary in order to make the statements in such YieldUP SEC
Reports, in the light of the circumstances under which they were made, not
misleading. Since January 1, 1996, YieldUP has filed in a timely manner all
forms, reports, and documents that it was required to file with the SEC under
the Exchange Act and the rules and regulations of the SEC.
(b) Each of the financial statements (including, in each case, any
related notes) contained in the YieldUP SEC Reports at the time filed or at the
time of their respective effective dates, as the case may be, complied, or will
comply, as to form in all material respects with the applicable published rules
and regulations of the SEC with respect thereto, was, or will be, prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted by Form 10-QSB of the SEC) and fairly presented, or will fairly
present, the financial position of YieldUP at the respective dates and the
results of its operations and cash flows for the periods indicated, except that
the unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments and the absence of complete footnote disclosure.
YieldUP has provided Parent with YieldUP's unaudited financial statements as of
and for the period ended December 31, 1998; such financial statements, including
any related notes, are set forth in Schedule 3.05(b) of the YieldUP Disclosure
Schedule (the "Unaudited Statements"). The Unaudited Statements comply as to
form in all material respects with the applicable published rules and
regulations of the SEC with respect to financial statements included in a report
on Form 10-KSB, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis with the consolidated
financial statements of YieldUP contained in the YieldUP SEC Reports (except as
may be indicated in the notes to the Unaudited Statements or as permitted by
Form 10-KSB of the SEC) and fairly present the financial position of YieldUP at
the date and the results of its operations and cash flows for the period
indicated, except that the Unaudited Statements do not contain a statement of
changes in cash flow and for the absence of complete footnote disclosure. The
unaudited balance sheet of YieldUP as of December 31, 1998 is referred to herein
as the "YieldUP Balance Sheet."
3.06. Inventory. All inventories reflected on the YieldUP Balance
Sheet and all inventories that have been acquired or produced since the date of
the YieldUP Balance Sheet are stated in accordance with generally accepted
accounting principles at the lower of cost or market. All raw materials,
finished goods, parts, and work-in-progress inventories are of a quality and
quantity usable by YieldUP in the ordinary course of its business, except for
obsolete items, all of which have been written down on YieldUP's books of
account to net realizable value or have been provided for by adequate reserves.
All finished goods inventories reflected on the YieldUP Balance Sheet and all
such inventories held on the date hereof and on the Closing Date are or are
reasonably expected to be saleable in the ordinary course of YieldUP's business,
net of reserves. Except as set forth in the YieldUP Disclosure Schedule, all
inventories of YieldUP as of the date hereof are located at YieldUP's
headquarters in Mountain View, California or at YieldUP's off-site storage
facility located in Mountain View, California.
3.07. No Undisclosed Liabilities. Except as set forth in the YieldUP
Disclosure Schedule, YieldUP does not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting
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principles), and whether due or to become due, which individually or in the
aggregate, (i) have not been reflected in YieldUP Balance Sheet, (ii) have not
been specifically described in this Agreement, or (iii) are not normal or
recurring liabilities incurred since December 31, 1998 in the ordinary course of
business consistent with past practices.
3.08. No Changes.
(a) Except as set forth in the YieldUP Disclosure Schedule, since the
date of the YieldUP Balance Sheet there has not been, occurred or arisen any:
(i) destruction or loss of any material assets of YieldUP
(whether or not covered by insurance); or
(ii) the commencement, notice, or threat of commencement of any
domestic or foreign governmental proceeding against or investigation of YieldUP
or its affairs.
(b) Except as set forth in the YieldUP Disclosure Schedule, since the
date of YieldUP Balance Sheet through the date of this Agreement YieldUP has
not:
(i) entered into any transaction except in the ordinary course
of business as conducted on the date of YieldUP Balance Sheet;
(ii) amended or changed the Certificate of Incorporation or
By-Laws of YieldUP;
(iii) made capital expenditures exceeding $25,000 individually or
$100,000 in the aggregate;
(iv) changed its accounting methods or practices (including any
change in depreciation or amortization policies or rates);
(v) revalued any of its assets;
(vi) declared, set aside, or paid a dividend or other
distribution with respect to the shares of YieldUP, or any direct or indirect
redemption, purchase, or other acquisition by YieldUP of any of its shares of
capital stock;
(vii) increased the salary or other compensation (including
stock-based compensation) payable or to become payable by YieldUP to any of its
officers, directors, or employees, or the declaration, payment, or commitment or
obligation of any kind for the payment, by YieldUP, of a bonus or other
additional salary or compensation to any such person;
(viii) acquired, sold, or transferred any asset of YieldUP other
than in the ordinary course of business and consistent with past practices;
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(ix) made a loan to any person or entity, or guaranty by YieldUP
of any loan, other than advances to employees for travel and business expenses
in the ordinary course of business and consistent with past practices;
(x) amended or terminated any contract, agreement or license of
the type referred to in Section 3.14(a)-(q) to which YieldUP is a party, except
for any amendments required by law or contemplated by this Agreement;
(xi) waived or released any material right or claim of YieldUP,
including any write-off or other compromise of any account receivable of
YieldUP;
(xii) issued or sold any of its shares of capital stock or any
other of its securities, except for options granted under YieldUP Option Plans
and as disclosed in Schedule 3.02 of the YieldUP Disclosure Schedule and except
for issuance or sales as a result of exercises of stock options granted under
YieldUP Option Plans;
(xiii) experienced any labor trouble or received a claim of or
committed a wrongful discharge or other unlawful labor practice or action;
(xiv) experienced the termination by a third party or received
notice from a third party of the termination of any contract, agreement or
license of the type referred to in Section 3.14(a)-(q) to which YieldUP is a
party;
(xv) experienced a loss of services of any YieldUP personnel
material to the conduct of the business of YieldUP;
(xvi) incurred, assumed, or guaranteed any indebtedness for money
borrowed other than borrowings incurred for working capital purposes under
YieldUP's existing revolving credit facility; or
(xvii) entered into any negotiations or otherwise agreed to do any
of the things described in the preceding clauses (i) through (xv) (other than
negotiations with Parent and its representatives regarding the transactions
contemplated by this Agreement).
3.09 Taxes.
(a) Definitions. For the purposes of this Agreement, the following
definitions shall apply:
(i) "Taxes" means any and all federal, state, local and foreign
(including without limitation Canadian and provincial) taxes, assessments and
other governmental charges, duties, impositions and liabilities, including
without limitation those 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
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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.
(ii) "Returns" means all reports, estimates, declarations of
estimated tax, information statements and returns relating to, or required to be
filed in connection with, any Taxes, including information returns or reports
with respect to backup withholding and other payments to third parties.
(b) Tax Matters. Except as set forth in Schedule 3.09:
(i) All Returns required to be filed by or on behalf of YieldUP
have been duly filed on a timely basis (taking into account extensions) and
such Returns are true, complete and correct in all material respects.
(ii) YieldUP (A) has paid all Taxes required to be paid in full
on a timely basis, and (B) has withheld and paid over all Taxes required to have
been withheld and paid over, and complied with all information reporting and
backup withholding requirements, in connection with amounts paid or owing to any
employee, creditor, independent contractor or other third party.
(iii) To the knowledge of YieldUP, there is no Tax deficiency
outstanding or assessed against YieldUP. Further, YieldUP has not received any
written notice of a proposed assessment of taxes, or executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax which is still in effect. No audit or other examination of
any Return of YieldUP is presently in progress, and YieldUP has not been
notified of any request for such an audit or other examination. There is not
outstanding any power of attorney that is currently in force with respect to any
matter relating to Taxes for which YieldUP could be liable.
(iv) Except for those which have been accrued or reserved against
on YieldUP Balance Sheet and those incurred in the ordinary course of business
since December 31, 1998, YieldUP does not have any liabilities for unpaid Taxes,
whether asserted or unasserted, contingent or otherwise, for or with respect to
all periods prior to and including the Closing Date.
(v) YieldUP has not ever been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code. Further, YieldUP
has not ever been a party to a tax sharing or allocation agreement.
(vi) There are no liens for Taxes (other than for current Taxes
not yet due and payable) upon the assets of YieldUP.
(vii) None of the assets of YieldUP are treated as "tax-exempt use
property" within the meaning of Section 168(h) of the Code. YieldUP is not a
"consenting corporation" under Section 341(f) of the Code. There is no contract,
agreement, plan or arrangement covering any employee or former employee of
YieldUP that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162 of the
Code. YieldUP has never been a "United States real property
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holding corporation" within the meaning of Section 897(c)(2) of the Code, and
the Buyer is not required to withhold tax by reason of Section 1445 of the Code.
All transactions that could give rise to an understatement of federal income tax
within the meaning of Section 6662 of the Code have been disclosed in accordance
with Section 6662 of the Code. No indebtedness of YieldUP is "corporate
acquisition indebtedness" within the meaning of Section 279(b) of the Code.
YieldUP is not required to include in income any adjustment pursuant to Section
481(a) of the Code by reason of a voluntary change in accounting method
initiated by YieldUP nor, to the knowledge of YieldUP, has the IRS proposed any
such adjustment or change in accounting method.
3.10. Restrictions on Business Activities. There is no agreement, judgment,
injunction, order, or decree binding upon YieldUP which has or could reasonably
be expected to have the effect of prohibiting or impairing any business practice
of YieldUP.
3.11. Title to Properties; Absence of Permitted Liens and Encumbrances;
Condition of Equipment.
(a) Schedule 3.11(a) of the YieldUP Disclosure Schedule sets forth a
true and complete list of all real property owned or leased by YieldUP, and, in
the case of leased real property, the name of the lessor, the date of the lease
and each amendment thereto and the aggregate annual rental or other fee payable
under any such lease. All such leases are in good standing, valid, and effective
in accordance with their respective terms, and there is not, under any such
leases, any existing material 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 YieldUP has not taken adequate steps to prevent such default from
occurring).
(b) Except as set forth in YieldUP Disclosure Schedule, YieldUP has
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 mortgages,
liens, pledges, charges, restrictions, encroachments, rights of third parties or
other encumbrances of any kind or character (each a "Lien" and, collectively
"Liens"), except (i) liens for current taxes not yet due and payable, (ii)
inchoate mechanic's, warehousemen's, materialmen's, or similar liens or rights
in the ordinary course of business, (iii) liens, encumbrances, restrictions,
encroachments, and easements, all with respect to tangible properties which were
not incurred with the borrowing of money or the obtaining of advances or credit
and which do not materially detract the value of or materially interfere with
the present use of the property subject thereto or effected thereby, or
otherwise materially impair present business operations at such properties, and
(iv) existing mortgages, liens, and encumbrances disclosed in the YieldUP
Balance Sheet (collectively, "Permitted Liens").
(c) Schedule 3.11(c) of the YieldUP Disclosure Schedule lists all
equipment owned, with either an original purchase price or current book value of
$25,000 or more, and leased by YieldUP, reflecting the location of such items
and whether they are owned or leased. The equipment owned or leased by YieldUP,
taken as a whole, is (i) adequate for the conduct of the business of YieldUP
consistent with its past practice, (ii) suitable for the uses to which it is
currently employed, (iii) in good operating condition subject to normal wear and
tear, (iv)
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reasonably maintained, and (v) not unreasonably dangerous or in need of renewal
or replacement, except for renewal or replacement in the ordinary course of
business.
3.12. Intellectual Property. YieldUP owns, or is licensed or otherwise
possesses legally enforceable rights to use all patents, trademarks, trade
names, service marks, copyrights, and any applications therefor, mask works,
schematics, technology, know-how, computer software programs or applications (in
both source code and object code form), and tangible or intangible proprietary
information or material that are used by YieldUP. Schedule 3.12(a) of the
YieldUP Disclosure Schedule lists all patents, registered trademarks and service
marks, registered copyrights, trade names and any applications therefor, which
relate to or are a part of YieldUP's products (the "YieldUP Intellectual
Property Rights"), and specifies the jurisdictions in which each such YieldUP
Intellectual Property Right has been issued or registered or in which an
application for such issuance and registration has been filed, including the
respective registration or application numbers and the names of all registered
owners. Schedule 3.12(b) includes and specifically identifies all third party
patents, trademarks, or copyrights (including software) (the "Third Party
Intellectual Property Rights") which to YieldUP's knowledge are incorporated in,
or form a part of, any YieldUP product. Schedule 3.12(b) lists (i) any requests
YieldUP has received to make any application or registration for patent,
copyright, trademark, or servicemark protection of YieldUP or Third Party
Intellectual Property Rights, including the identity of the requestor and the
item requested to be so applied for or registered, and the jurisdiction for
which such request has been made; (ii) all licenses, sublicenses, and other
agreements as to which YieldUP is a party and pursuant to which any person is
authorized to use any YieldUP Intellectual Property Right or any trade secret of
YieldUP; and (iii) all licenses, sublicenses, and other agreements as to which
YieldUP is a party and pursuant to which YieldUP is authorized to use any Third
Party Intellectual Property Rights, or other trade secret of a third party in or
as any product, and includes the identity of all parties thereto, a description
of the nature and subject matter thereof, the applicable royalty and the term
thereof (other than non-negotiated licenses of generally available commercial
software).
YieldUP is not, nor will it 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 described on Schedule 3.12(b). Except as
set forth in the YieldUP Disclosure Schedule, no claims with respect to YieldUP
Intellectual Property Rights, any trade secret of YieldUP, or Third Party
Intellectual Property Rights to the extent arising out of any use, reproduction,
or distribution of such Third Party Intellectual Rights by or through YieldUP,
have been asserted or, to the knowledge of YieldUP, are threatened by any
person, nor does YieldUP know of any grounds for any bona fide claims (i) to the
effect that the manufacture, sale, licensing, or use of any product as now used,
sold, or licensed or proposed for use, sale, or license by YieldUP infringes on
any copyright, patent, trademark, service ▇▇▇▇, or trade secret; (ii) against
the use by YieldUP of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how, or computer software programs and applications
used in YieldUP's business as currently conducted or as proposed to be conducted
by YieldUP; (iii) challenging the ownership, validity, or effectiveness of any
of YieldUP Intellectual Property Rights or other trade secret of YieldUP; or
(iv) challenging YieldUP's license or legally enforceable right to use of the
Third Party Intellectual Property Rights.
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All registered trademarks, service marks, and copyrights held by YieldUP are
valid and subsisting. Except as set forth in the YieldUP Disclosure Schedule, to
YieldUP's knowledge, there is no unauthorized use, disclosure, infringement, or
misappropriation of any of YieldUP Intellectual Property Rights, any trade
secret of YieldUP, or any Third Party Intellectual Property Right to the extent
licensed by or through YieldUP, by any third party, including any employee or
former employee of YieldUP. Except as set forth in the YieldUP Disclosure
Schedule, YieldUP (i) has not been sued or charged in writing as a defendant in
any claim, suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, or copyrights or violation of trade
secret or other proprietary right of any third party; (ii) has no knowledge of
any basis for any such charge or claim; and (iii) has no knowledge of any
infringement liability with respect to, or infringement or violation by, YieldUP
of any patent, trademark, service ▇▇▇▇, copyright, trade secret or other
proprietary right of another.
No YieldUP Intellectual Property Right, trade secret material to YieldUP or,
to YieldUP's knowledge, Third Party Intellectual Property Right is subject to
any outstanding order, judgment, decree, stipulation, or agreement restricting
in any manner the licensing thereof by YieldUP. YieldUP has not entered into any
agreement to indemnify any other person against any charge of infringement of
any YieldUP Intellectual Property Right, any trade secret of YieldUP, or any
Third Party Intellectual Property Right. Set forth in Schedule 3.12 of the
YieldUP Disclosure Schedule is a list of all infringement, noninfringement,
validity and invalidity opinions and analyses received or prepared by YieldUP or
its agents or representatives regarding YieldUP Intellectual Property Rights or
Third Party Intellectual Property Rights. Complete copies of all such opinions
and analyses have been provided to Parent.
3.13. Product Warranties and Claims. All products heretofore sold by YieldUP
during the two years preceding the date hereof have been in conformity with all
applicable contractual commitments and all express and implied warranties, and
YieldUP does not have any liability for replacement or repair of such products
or other damages in connection therewith, subject only to the reserve for
product warranty claims set forth in the YieldUP Balance Sheet and to ordinary
course customer servicing (consistent with industry practices). To YieldUP's
knowledge, the accrual for warranty related expenses as of December 31, 1998
contained in the YieldUP Balance Sheet adequately reflects, and at the Closing
Date will adequately reflect, an amount required for satisfaction of warranty
claims due in respect of goods sold or services provided by YieldUP prior to
such date. Such provision has been established in accordance with generally
accepted accounting principles. Except for the matters set forth in the YieldUP
Disclosure Schedule, YieldUP has not received any written complaint (that
remains unresolved) to the effect that (i) goods sold or services supplied by
YieldUP failed to meet the quality standards or warranty obligations applicable
to the agreements, contracts, or purchase orders under which such products or
services were supplied or (ii) YieldUP failed to meet its obligation to service
any products sold or serviced by YieldUP, that if found to be valid would
constitute a liability of YieldUP in excess of $25,000 for parts, labor and
other related expenses.
3.14. Agreements, Contracts and Commitments. As of the date of this
Agreement, except for Employee Plans (as defined in Section 3.26 hereof), as
contemplated by this Agreement or as set forth on the YieldUP Disclosure
Schedule, YieldUP does not have and is not a party to
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the following agreements (or group of related agreements), whether written or
oral (collectively, the "YieldUP Material Contracts"):
(a) any collective bargaining agreement;
(b) any agreements that contain any unpaid severance liabilities or
obligations;
(c) any bonus, deferred compensation, incentive compensation, pension,
profit-sharing or retirement plans, or any other employee benefit plans or
arrangements;
(d) any employment or consulting agreement, contract, or commitment
with an employee or individual consultant or salesperson or consulting or sales
agreement, contract, or commitment with a firm or other organization not
terminable by YieldUP on 30 days' notice without liability except to the extent
of applicable local law and/or general principles of wrongful termination law
may limit YieldUP's ability to terminate such employees;
(e) agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan, or stock purchase plan, any of the benefits
of which will be increased, or the vested 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;
(f) any fidelity or surety bond or completion bond;
(g) any lease of personal property having a value individually in
excess of $25,000;
(h) any agreement of indemnification or guaranty;
(i) any agreement, contract, or commitment containing any covenant
limiting the freedom of YieldUP to engage in any line of business or compete
with any person;
(j) any agreement, contract, or commitment relating to capital
expenditures and involving future obligations in excess of $25,000;
(k) any agreement, contract or commitment relating to the disposition
or acquisition of assets not in the ordinary course of business or any ownership
interest in any corporation, partnership, joint venture, or other business
enterprise;
(l) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit, including guaranties referred to in clause (h) hereof;
(m) any purchase order or contract for the purchase of raw materials
or acquisition of assets involving $50,000 or more;
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(n) any construction contracts;
(o) any distribution, original equipment manufacturing, sales
representation, joint marketing, or development agreement;
(p) any purchase order for the sale of Company products (other than
for spare parts) involving $50,000 or more (identified by invoice number, dollar
amount and scheduled shipment date); or
(q) any other agreement, contract, or commitment which involves
$25,000 or more and is not cancelable without penalty within thirty (30) days.
Schedule 3.14(a) of the YieldUP Disclosure Schedule contains a complete and
accurate description of any of the above that constitute oral agreements or oral
modifications, amendments or interpretations of oral agreements. Except for such
breaches or alleged breaches noted in the YieldUP Disclosure Schedule, YieldUP
has not breached, or received any claim or threat that it has breached, any of
the terms or conditions of any YieldUP Material Contract in such a manner as
would permit any other party to cancel or terminate the same or would permit any
other party to seek damages from YieldUP. Each YieldUP Material Contract is in
full force and effect and, except as otherwise disclosed, is not subject to any
default thereunder of which YieldUP is aware by any party obligated to YieldUP
pursuant thereto. Except as set forth in the YieldUP Disclosure Schedule, no
YieldUP Material Contract of the type referred to in Section 3.14(o) contains
any grant of exclusive territory.
3.15. Interested Party Transactions. Except as set forth on the YieldUP
Disclosure Schedule or in the YieldUP SEC Reports, no officer, director or
stockholder of YieldUP who owns at least 5% of the outstanding YieldUP Common
Stock (nor any ancestor, sibling, descendant or spouse of any of such persons,
or any trust, partnership or corporation in which any of such persons has or has
had an interest), has or has had, directly or indirectly, (i) an interest in any
entity which furnished or sold, or furnishes or sells, services or products that
YieldUP furnishes or sells, or proposes to furnish or sell, or (ii) any interest
in any entity that purchases from or sells or furnishes to, YieldUP, any goods
or services or (iii) a beneficial interest in any YieldUP Material Contract;
provided, that ownership of no more than one percent of the outstanding voting
stock of a publicly traded corporation shall not be deemed an "interest in any
entity" for purposes of this Section 3.15.
3.16. Governmental Authorization. Schedule 3.16 of the YieldUP Disclosure
Schedule sets forth an accurate list of each material federal, state, county,
local, or foreign governmental consent, license, permit, grant, or other
authorization issued to YieldUP by a Governmental Entity (i) pursuant to which
YieldUP currently operates or holds any interest in any of its properties or
(ii) which is required for the operation of its business or the holding of any
such interest (herein collectively called "YieldUP Authorizations"), which
YieldUP Authorizations are in full force and effect and constitute all YieldUP
Authorizations required to permit YieldUP to operate or conduct its business or
hold any interest in its properties.
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3.17. Litigation. Except as disclosed on the YieldUP Disclosure Schedule,
there is no action, suit or legal, administrative, arbitration or other
proceeding pending, filed, initiated or, to YieldUP's knowledge, threatened by
or against YieldUP, its properties or any of its officers or directors, nor, to
the knowledge of YieldUP, is there any basis therefor. To the knowledge of
YieldUP and except as set forth on the YieldUP Disclosure Schedule, there is no
investigation pending or threatened against YieldUP, its properties or any of
its officers or directors (nor is there any basis therefor) before or by any
Governmental Entity (including the National Association of Securities Dealers,
Inc.). No Governmental Entity has at any time challenged or questioned the legal
right of YieldUP to manufacture, offer, or sell any of its products in the
present manner or style thereof.
3.18. Accounts Receivable. All accounts receivable of YieldUP shown on the
YieldUP Balance Sheet arose in the ordinary course of business at the aggregate
amounts thereof, are collectible except to the extent of reserves shown on
YieldUP Balance Sheet (and, for accounts arising after December 31, 1998, to an
extent consistent with past reserve practices) and are carried at values
determined in accordance with generally accepted accounting principles
consistently applied on a reasonable basis. None of the accounts receivable of
YieldUP is subject to any claim of offset, recoupment, setoff, or counter-claim
and, to the knowledge of YieldUP, there are no facts or circumstances (whether
asserted or unasserted) that would give rise to any such claim. No distributor
of YieldUP is entitled, contractually or otherwise, to return any YieldUP
products that are subject of an account receivable for any full or partial
refund or credit. No accounts receivable are contingent upon the performance by
YieldUP of any obligation or contract. No person has any Lien on any of such
accounts receivable, and no agreement for deduction or discount has been made
with respect to any of such receivables.
3.19. Bank Accounts; Guaranties; Powers of Attorney. Schedule 3.19 of the
YieldUP Disclosure Schedule identifies (i) the name of each bank, financial, or
other institution in which YieldUP has an account or safe deposit box or in
which any assets of YieldUP are deposited, including with the names of all
persons authorized to draw thereon or to have access thereto, (ii) all
guaranties, endorsements, or indemnifications by YieldUP of any person, firm or
corporation and (iii) the names of all persons holding powers of attorney for
YieldUP.
3.20. Customers. Schedule 3.20 identifies each of YieldUP's customers which
accounted for at least five percent of total sales for each of the fiscal years
ended December 31, 1996, 1997 and 1998, and sets forth the total dollar volume
of goods and services purchased from YieldUP by such customers during each
period (each customer named on Schedule 3.20, a "Significant Customer"). YieldUP
has not been notified that any customer that was a Significant Customer in 1998
has terminated its relationship with YieldUP or intends not do business with
YieldUP.
3.21. uppliers. Schedule 3.21 of the YieldUP Disclosure Schedule identifies
each of YieldUP's suppliers which accounted for at least five percent of total
goods and services purchased by YieldUP for each of the fiscal years ended
December 31, 1996, 1997 and 1998, and sets forth the total dollar volume of
goods and services purchased by YieldUP from such suppliers during each period
(each supplier named on Schedule 3.21, a "Significant Supplier"). YieldUP
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has not been notified, that any supplier that was a Significant Supplier in 1998
has terminated its relationship with YieldUP or intends not do business with
YieldUP.
3.22. Minute Books. Except as set forth on the YieldUP Disclosure Schedule,
the minute books of YieldUP made available to counsel for Parent contain
complete and accurate minutes of all meetings or actions by written consent of
directors and shareholders of YieldUP since the time of incorporation of
YieldUP, and reflect all transactions referred to in such minutes accurately.
3.23. Environmental Matters.
(a) YieldUP is in compliance as of the date hereof with (and have
been at all times prior to the date hereof in compliance with) all laws, rules,
regulations, orders, ordinances, judgments, decrees and other legal requirements
relating to pollution or the protection of human health or the environment (the
"Environmental Laws").
(b) YieldUP possesses and is in compliance with all permits,
licenses, certificates, franchises and other authorizations relating to the
Environmental Laws necessary to conduct its business. YieldUP has delivered to
Parent correct and complete copies of all such permits, licenses, certificates,
franchises and other authorizations.
(c) Except as authorized by a YieldUP Authorization, the operations
of YieldUP have not resulted in any release of Hazardous Substances (as defined
below) on any real property that has ever been owned, leased or otherwise
operated by YieldUP.
(d) To the knowledge of YieldUP, there are not present in, on or
under any real property that has ever been owned, leased or otherwise operated
by YieldUP any Hazardous Substances (as defined below) in such form or
quantities so as to create any liability or obligation under any Environmental
Law or any other liability for YieldUP. To the knowledge of YieldUP, YieldUP
has no liability or potential liability under any Environmental Law with
respect to the disposal of any Hazardous Substances, whether at any property
owned or leased by the Seller or at any other location.
(e) There are no Environmental Claims (as defined below) pending or,
to the knowledge of YieldUP, threatened against YieldUP. There are no past or
present actions, activities, circumstances, conditions, events or incidents,
that could form the basis of any Environmental Claim against YieldUP or against
any person or entity whose liability for such Environmental Claim YieldUP has or
may have retained or assumed either contractually or by operation of law.
(f) Consummation of the transactions contemplated by this Agreement
will not constitute or result in a violation of any Environmental Law.
(g) (i) There is no asbestos contained in or forming a part of any
building or structure on real property owned or leased by YieldUP that could
result in any material liability for YieldUP or that could have a material
adverse effect on the value or marketability
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of such building or structure; (ii) no polychlorinated biphenyls are used or
stored at any real property owned or leased by YieldUP or contained in any
personal property owned, leased or operated by YieldUP; (iii) YieldUP does not
own or operate (and has never owned or operated) any underground storage tanks
regulated under the Environmental Laws, and (iv) to the knowledge of YieldUP, no
aboveground or underground storage tanks regulated under the Environmental Laws
are located on (or have ever been located on) any real property owned or leased
by YieldUP.
(h) YieldUP has not at any time transported to, or disposed of in, any
landfill or other facility any Hazardous Materials, which transportation or
disposal (under laws presently applicable to the landfill or other facility)
could result in any material liability for YieldUP.
(i) As used in this Section 3.23, the following terms shall have the
following meanings:
(i) "Hazardous Substances" means pollutants, contaminants,
hazardous substances, hazardous wastes, petroleum and fractions thereof, and all
other chemicals, wastes, substances and materials listed in, regulated by any
Environmental Law or defined or designated as hazardous, extremely hazardous or
toxic under any Environmental Law.
(ii) "Environmental Claim" means any notice by a person or entity
alleging potential liability (including, without limitation, potential liability
for any investigatory costs, cleanup costs, governmental response costs, natural
resource damages, property damages, personal injuries, or penalties) arising out
of, based on or resulting from (1) the presence, or release into the
environment, of any Hazardous Substances at any location, whether or not owned
by YieldUP or (2) circumstances forming the basis of a violation, or alleged
violation, of any Environmental Law.
3.24. Brokers' and Finders' Fees. Except as disclosed on the YieldUP
Disclosure Schedule with respect to ▇▇▇▇▇▇▇ & Company, Incorporated, YieldUP 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 transaction contemplated hereby.
3.25. Labor Matters. Schedule 3.25 of the YieldUP Disclosure Schedule lists
all current officers and management level employees of YieldUP (and their
respective titles). Except as set forth in the YieldUP Disclosure Schedule,
there are no material pending claims against YieldUP under any workers
compensation plan or policy or for short term or long term disability. YieldUP
has fully complied with all applicable provisions of COBRA and has no
obligations with respect to any former employees or qualified beneficiaries
thereunder, except as set forth in the YieldUP Disclosure Schedule. YieldUP has
not given to or received from any current employee of YieldUP notice of
termination of employment. There is no collective bargaining unit representing
any of YieldUP's employees. To the knowledge of YieldUP, no petition has been
filed and is
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pending with the National Labor Relations Board by any labor organization or any
group of employees for an election or certification regarding the representation
of any group of employees by a labor organization, nor to the knowledge of
YieldUP is there at present any solicitation or campaign by any labor
organization or employee for the representation of YieldUP's employees by a
labor organization.
3.26. Employee Benefit Plans.
(a) Schedule 3.26(a) of the YieldUP Disclosure Schedule lists all
employee benefit plans (as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, incentive, deferred compensation, supplemental retirement,
severance, and other similar employee benefit plans, programs, or arrangements,
and any current or former employment or executive compensation or severance
agreements, written or otherwise, for the benefit of, or relating to, any
current or former employee of YieldUP or any trade or business (whether or not
incorporated) which is a member or which is under common control with YieldUP
(an "ERISA Affiliate") within the meaning of Section 414(b), (c), (m) or (o) of
the Code, or any subsidiary of YieldUP under which YieldUP or an ERISA Affiliate
has or could have any obligations or liability (together, the "Employee Plans").
(b) Except as disclosed on the YieldUP Disclosure Schedule, (i) none
of the Employee Plans promises or provides retiree medical or other retiree
welfare benefits to any person except as required by applicable law, including
but not limited to COBRA; (ii) all Employee Plans are in compliance in all
material respects with the requirements prescribed by any and all applicable
statutes (including ERISA and the Code, except for the adoption of certain
amendments to conform to changes made by recent legislation provided that the
time period for adopting such amendments has not yet expired), orders, or
governmental rules and regulations currently in effect with respect thereto
(including all applicable requirements for notification to participants or
beneficiaries or the Department of Labor, Internal Revenue Service (the "IRS")
or Secretary of the Treasury), and YieldUP has performed all obligations
required to be performed by it under, is not in default under or violation of,
and has no knowledge of any default or violation by any other party to, any of
the Employee Plans; (iii) no Employee Plan is or within the prior six years has
been subject to, and YieldUP has not incurred, and does not expect to incur, any
liability under, Title IV of ERISA or Section 412 of the Code; and (iv) neither
YieldUP, any ERISA Affiliate nor any Employee Plan is subject to any excise tax
or any similar tax or penalty under the Code or ERISA.
(c) None of the following now exists or has existed within the
six-year period ending on the date hereof with respect to any Employee Plan: (i)
any act or omission by YieldUP constituting a violation of Section 402, 403, 404
or 405 of ERISA; (ii) any act or omission by YieldUP which constitutes a
violation of Sections 406 and 407 of ERISA and is not exempted by Section 408 of
ERISA or which constitutes a violation of Section 4975(c) of the Code and is not
exempted by Section 4975(d) of the Code; (iii) any act or omission by YieldUP
constituting a violation of Section 503, 510 or 511 of ERISA; or (iv) any act or
omission by YieldUP which could give rise to liability under Section 502 of
ERISA.
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(d) Each Employee Plan has been maintained in substantial compliance
with its terms, and all contributions, premiums, or other payments due from
YieldUP to (or under) any such Employee Plan have been fully paid or are
adequately provided for on the YieldUP Balance Sheet. All accruals thereon
(including, where appropriate, proportional accruals for partial periods) have
been made in accordance with generally accepted accounting principles
consistently applied on a reasonable basis. Except as set forth in the YieldUP
Disclosure Schedule, there has been no amendment, written interpretation, or
announcement (whether or not written) by YieldUP with respect to, or change in
employee participation or coverage under, any Employee Plan that would increase
the expense of maintaining such plans or arrangements, individually or in the
aggregate, above the level of expense incurred with respect thereto for the most
recently-ended fiscal year.
(e) YieldUP has made available to Parent complete, accurate and
current copies of all Employee Plans and all amendments, documents,
correspondence and filings relating thereto, including but not limited to any
statements, filings, reports, or returns filed with any Governmental Entity with
respect to the Employee Plans.
3.27. Insurance. Schedule 3.27 of the YieldUP Disclosure Schedule sets forth
an accurate list of all insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers, and
directors of YieldUP. There is no claim by YieldUP pending under any of such
policies or bonds as to which coverage has been questioned, denied, or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and YieldUP is otherwise in
full compliance with the terms of such policies and bonds (or other policies and
bonds providing substantially similar insurance coverage). To YieldUP's
knowledge, such policies of insurance and bonds are of the type and in amounts
customarily carried by persons conducting businesses similar to those of
YieldUP. YieldUP has no knowledge of any threatened termination of, or premium
increase with respect to, any of such policies.
3.28. Compliance With Laws. YieldUP has complied in all material respects
with, is not in material violation of, and has not received any notices of
violation with respect to, any federal, state, local or foreign statute, law, or
regulation with respect to the conduct of its business, or the ownership or
operation of its business.
3.29. Third Party Consents. Except as set forth in the YieldUP Disclosure
Schedule, no consent or approval is needed from any third party in order to
effect the Merger, this Agreement or any of the transactions contemplated
hereby.
3.30. Registration Statements; Proxy Statement. The information concerning
YieldUP supplied by YieldUP for inclusion in the Registration Statement (as
defined in Section 4.08) shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The information concerning YieldUP supplied by
YieldUP for inclusion in the proxy statement/prospectus to be sent to the
stockholders of YieldUP in
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connection with the meeting of YieldUP's stockholders to consider the Merger and
this Agreement (the "YieldUP Stockholders' Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement,") shall not, on the date the Proxy Statement is first mailed
to YieldUP's stockholders, at the time of YieldUP Stockholders' Meeting and at
the Effective Time, contain any statement which, at such time and in light of
the circumstances under which it shall be made, is false or misleading with
respect to any material fact, or omit to state any material fact necessary in
order to make the statements made therein not false or misleading; or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for YieldUP
Stockholders' Meeting which has become false or misleading. If at any time prior
to the Effective Time any event relating to YieldUP or any of its affiliates,
officers or directors should be discovered by YieldUP which should be set forth
in an amendment to the Registration Statement or a supplement to the Proxy
Statement, YieldUP shall promptly inform Parent and Sub. Notwithstanding the
foregoing, YieldUP makes no representation or warranty with respect to any
information concerning Parent or Sub supplied by Parent or Sub which is
contained in any of the foregoing documents.
3.31. Complete Copies of Materials. All documents made available to Parent
or its counsel in connection with their legal and accounting review of YieldUP
are true and complete copies thereof.
3.32. Year 2000. The YieldUP SEC Reports describe the efforts undertaken to
date by YieldUP with a view to assuring that its business is Millennium
Compliant (as hereinafter defined) prior to December 31, 1999. YieldUP has no
reason to believe that YieldUP is not Millennium Compliant. YieldUP has not
received notice from any Significant Customer or Supplier indicating that such
customer or supplier will not be Millennium Compliant and experience problems
related thereto that could have a Material Adverse Effect on YieldUP.
"Millennium Compliant" means that all software, hardware and associated devices
material to the conduct of a company's business will operate without error
relating to date data, including but not limited to any error relating to or
product of date data which represents references to different centuries or more
than one century or utilizes a four digit year code or format.
3.33. Opinion of Financial Advisor. The financial advisor of YieldUP,
▇▇▇▇▇▇▇ & Company, Incorporated, has delivered to the Board of Directors of
YieldUP an opinion dated the date of this Agreement that, from a financial point
of view, the consideration to be offered to the stockholders of YieldUP in the
Merger contemplated hereby is fair.
3.34. Voting Agreements. YieldUP has delivered to Parent an Agreement (the
"YieldUP Affiliate Agreement"), in substantially the form of Exhibit 3.34(a)
hereto, from, and executed by, each of ▇▇▇ ▇▇▇▇▇▇▇▇ and Suraj Puri and any
entity controlled thereby (each a "YieldUP Affiliate"), by which each YieldUP
Affiliate agrees, among other things, (i) to vote any shares of YieldUP Common
Stock for which they have voting power in favor of the Merger in any stockholder
vote to obtain approval to proceed with the Merger, (ii) to not sell or
otherwise dispose of any shares of Parent Common Stock for a period of 180 days
after the Effective Time and (iii) in the event such YieldUP Affiliate is a
representative of an institution that holds any shares of YieldUP Common Stock,
to use his or her best efforts to ensure that such institutions
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comply with the terms and conditions of such YieldUP Affiliate Agreement. In
addition, YieldUP will deliver to Parent prior to the Closing an agreement,
substantially in the form of Exhibit 3.34(b) hereto, from, and executed by, each
officer and director of YieldUP, by which such person agrees to comply with the
applicable requirements of Rule 145 promulgated under the Securities Act.
3.35 Disclosure No representation or warranty of YieldUP in this Agreement
or any document, exhibit, statement, certificate, or schedule furnished or to be
furnished to the Parent pursuant hereto, contains or will contain any untrue
statement of a material fact, or omits or will omit any material fact necessary
to make the statements therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub jointly and severally represent and warrant to YieldUP that
the statements contained in this Article IV are true and correct as of the date
hereof, except as set forth in the disclosure schedule delivered by Parent to
YieldUP on or before the date of this Agreement (the "Parent Disclosure
Schedule"). The Parent Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV and the disclosure in any paragraph, including appropriate cross references,
shall qualify only the corresponding paragraph in this Article IV.
4.01. Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota. Each of Parent and Sub has
the corporate power to own its properties and to carry on its business as now
being conducted and is duly qualified to do business and is in good standing in
each jurisdiction in which the failure to be so qualified would have a Material
Adverse Effect on Parent and its subsidiaries, taken as a whole. Parent has
delivered a true and correct copy of the Articles of Incorporation and By-Laws
of Parent and the Articles of Incorporation and By-Laws of Sub, each as amended
to date, to YieldUP.
4.02. Capital Structure.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of Parent Common Stock, of which, as of the close of business on January
19, 1999, 23,229,905 shares were issued and outstanding, and 10,000,000 shares
of Preferred Stock, no par value, none of which, as of the date hereof, is
issued and outstanding. All of the issued and outstanding shares of capital
stock of Parent and its subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable and were not granted in violation of
any statutory preemptive rights. There are no outstanding subscriptions,
options, warrants, calls, or other agreements or commitments under which Parent
or any subsidiary is or may become obligated to issue, sell, transfer, or
otherwise dispose of, or purchase, redeem, or otherwise acquire, any shares of
capital stock of, or other equity interests in, Parent or any subsidiary, and
there are no outstanding securities convertible into or exchangeable for any
such capital stock or other equity interests,
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except for (i) options to purchase up to an aggregate of 2,345,695 shares (as of
the date hereof) of Parent Common Stock, (ii) shares of Parent Common Stock
issuable in accordance with Parent's Employee Stock Purchase Plan, (iii) up to
100,000 shares of Parent Common Stock issuable under a warrant agreement between
Parent and Aspect, Inc., and (iv) the Rights Agreement dated as of May 22, 1997
between Parent and ▇▇▇▇▇▇ Trust and Savings Bank, as amended (the "Parent Rights
Agreement"), under which each outstanding share of Parent Common Stock has
attached to it certain rights (the "Parent Rights"), including rights under
certain circumstances to purchase one one-hundredth of a share of Parent Series
A Junior Participating Preferred Shares at $90 per share, subject to adjustment.
There are no stock appreciation rights, phantom stock rights, or performance
shares outstanding with respect to Parent or any of its subsidiaries. Except as
set forth in the Parent Disclosure Schedule, Parent owns, directly or
indirectly, all of the issued and outstanding shares of capital stock of every
class of each subsidiary, free and clear of all liens, security interests,
pledges, charges, and other encumbrances. There are no voting trusts or other
agreements or understandings to which Parent or any of its subsidiaries is a
party or of which Parent otherwise has knowledge with respect to the voting of
the capital stock of Parent or its subsidiaries.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued in accordance with this Agreement, the Merger Agreement, and
the applicable provisions of Delaware Law will be duly authorized, validly
issued, fully paid, and nonassessable.
4.03. Authority. Parent and Sub have all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Sub. This Agreement
has been duly executed and delivered by Parent and Sub and constitutes the valid
and binding obligations of Parent and Sub enforceable against Sub in accordance
with its terms, except to the extent that enforceability may be limited by
applicable bankruptcy, insolvency, or similar laws affecting the enforcement of
creditors' rights generally, and subject, as to enforceability, to general
principles of equity. Except as set forth in the Parent Disclosure Schedule, the
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation or breach of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Articles of Incorporation or By-Laws of Parent or the Certificate of
Incorporation or By-Laws of Sub or (ii) any mortgage, indenture, lease, contract
or other agreement or instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Parent or its properties or assets, except in the case of (ii) above, for
such conflicts, violations, breaches, defaults, rights, or losses which would
not prevent or delay consummation of the Merger, or otherwise prevent Parent or
Sub from performing its respective obligations under this Agreement, and which
would not, individually or in the aggregate, have a material adverse effect on
the business, operations, assets (including intangible assets), financial
condition or results of operations of Parent and its subsidiaries, taken as a
whole. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Parent or Sub in connection with
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the execution and delivery of this Agreement by Parent and Sub or the
consummation by Parent or Sub of the transactions contemplated hereby, except
for (i) the filing of the Merger Agreement with the Secretary of State of the
State of Delaware, (ii) filings in connection, or in compliance, with the
provisions of the HSR Act, (iii) the filing of the Registration Statement and
Proxy Statement with the SEC, the filing of a Form 8-K with the SEC after the
Closing Date, or any filings as may be required under applicable state
securities laws and the laws of any foreign country, and (v) where failure to
obtain such consents, approvals, orders, authorizations, registrations, or
declarations, or to make such filings, would not prevent or delay consummation
of the Merger, or otherwise prevent Parent or Sub from performing its respective
obligations under this Agreement, and would not, individually or in the
aggregate, have a Material Adverse Effect on Parent and its subsidiaries, taken
as a whole.
4.04. SEC Filings; Financial Statements.
(a) Parent has filed and made available to YieldUP all forms, reports,
and documents required to be filed by Parent with the SEC since August 27, 1995
(including all exhibits, notes, and schedules thereto and documents incorporated
by reference therein)(all such forms, reports, and documents, including any such
forms, reports, and documents filed with the SEC after the date hereof, being
collectively called the "Parent SEC Reports" and individually called a "Parent
SEC Report"). The Parent SEC Reports (i) at the time filed, with respect to all
of the Parent SEC Reports other than registration statements filed under the
Securities Act, or at the time of their respective effective dates, with respect
to registration statements filed under the Securities Act, complied, and any
Parent SEC Report filed with the SEC after the date hereof will comply, as to
form in all material respects with the applicable requirements of the Securities
Act or the Exchange Act, as the case may be, and (ii) did not, and any Parent
SEC Report filed after the date hereof will not, at the time filed or at the
time of their respective effective dates, as the case may be (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing), contain any untrue statement of a material fact or omit to state a
material fact required to be stated in such Parent SEC Reports or necessary in
order to make the statements in such Parent SEC Reports, in the light of the
circumstances under which they were made, not misleading. Since August 27, 1995,
Parent has filed in a timely manner all forms, reports, and documents that it
was required to file with the SEC under the Exchange Act and the rules and
regulations of the SEC. None of Parent's subsidiaries is required to file any
forms, reports, or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes) contained in the Parent SEC Reports at the time filed
or at the time of their respective effective date, as the case may be, complied,
or will comply, as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was, or will
be, prepared in accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly presented, or will
fairly present, the consolidated financial position of Parent and its
subsidiaries at the respective dates and the consolidated results of its
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements were or are subject to normal and recurring
year-end adjustments.
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4.05. No Material Adverse Change. Except as disclosed in the Parent SEC
Reports or in the Parent Disclosure Schedule, from the date of the balance sheet
included in the Parent's most recently filed report on Form 10-Q through the
date of this Agreement, Parent has conducted its business in the ordinary course
and there has not occurred: (a) any material adverse change in the financial
condition, liabilities, assets, or business of Parent and its subsidiaries,
taken as a whole; (b) any amendments or changes in the Articles of Incorporation
or By-Laws of Parent; (c) any damage to, destruction or loss of any assets of
the Parent (whether or not covered by insurance) that materially and adversely
affects the financial condition or business of Parent and its subsidiaries,
taken as a whole; (d) any sale of a material amount of property of Parent,
except in the ordinary course of business; or (e) any adverse change of a
character that would be required to be disclosed in the next Form 10-Q or Form
10-K required to be filed by Parent.
4.06. Litigation. There is no action, suit, proceeding, claim, arbitration,
or investigation pending, or as to which Parent has received any notice of
assertion nor, to Parent's knowledge, is there a reasonable basis to expect such
notice of assertion, against Parent which in any manner challenges or seeks to
prevent, enjoin, alter, or materially delay any of the transactions contemplated
by this Agreement. Except as disclosed in the Parent SEC Reports or in the
Parent Disclosure Schedule, there is no suit, action or proceeding pending, or,
to the knowledge of Parent, threatened against Parent, which is reasonably
likely to have a Material Adverse Effect on Parent and its subsidiaries, taken
as a whole.
4.07. Brokers' and Finders' Fees. Except for the fee of ▇▇▇▇▇▇ Brothers,
Inc., Parent's financial adviser, Parent has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, the Merger
or any transaction contemplated hereby.
4.08. Registration Statement; Proxy Statement. Subject to the accuracy of
the representations of YieldUP made in Section 3.30, the Registration Statement
on Form S-4 pursuant to which the shares of Parent Common Stock to be issued in
the Merger will be registered with the SEC (the "Registration Statement") shall
not, at the time the Registration Statement (including any amendments or
supplements thereto) is declared effective by the SEC, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements included therein, in light of the circumstances
under which they were made, not misleading. The information concerning Parent
and Sub supplied by Parent for inclusion in the Proxy Statement shall not, on
the date the Proxy Statement is first mailed to YieldUP's stockholders, at the
time of YieldUP Stockholders' Meeting and at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
shall be made, is false or misleading with respect to any material fact, or omit
to state any material fact necessary in order to make the statements therein not
false or misleading; or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for YieldUP Stockholders' Meeting which has become false or misleading.
If at any time prior to the Effective Time any event relating to Parent, Sub or
any of their respective affiliates, officers or directors should be discovered
by Parent or Sub which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement,
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