EXHIBIT 10.01
ADI HOLDING COMPANY, INC.
AGREEMENT AND PLAN OF MERGER
March 15, 2006
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TABLE OF CONTENTS
PAGE
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ARTICLE I - THE MERGER............................................................................... 2
Section 1.1. The Merger............................................................. 2
Section 1.2. Effective Time......................................................... 2
Section 1.3. Certificate of Incorporation and By-Laws............................... 2
Section 1.4. Closing................................................................ 2
Section 1.5. Directors and Officers................................................. 3
Section 1.6. Conversion of Certain Securities Prior to the Merger................... 3
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS............... 3
Section 2.1. Effect on Capital Stock................................................ 3
Section 2.2. Company Stock Options and Related Matters.............................. 5
Section 2.3. Payments at Closing for Outstanding Indebtedness....................... 6
Section 2.4. Payments at Closing for Company Expenses............................... 6
Section 2.5. Payments at Closing for Preferred Dividends............................ 6
Section 2.6. Working Capital Adjustment............................................. 7
Section 2.7. Post Closing Adjustment................................................ 7
Section 2.8. Withholding of Taxes................................................... 10
ARTICLE III - PAYMENT FOR SHARES; DISSENTING SHARES.................................................. 10
Section 3.1. Payment for Shares of Company Stock.................................... 10
Section 3.2. Appraisal Rights....................................................... 13
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................... 14
Section 4.1. Existence; Good Standing; Authority.................................... 14
Section 4.2. Capitalization......................................................... 15
Section 4.3. Subsidiaries........................................................... 16
Section 4.4. No Conflict; Consents.................................................. 17
Section 4.5. Financial Statements and Related Matters............................... 18
Section 4.6. Absence of Certain Changes............................................. 19
Section 4.7. Litigation............................................................. 20
Section 4.8. Taxes.................................................................. 21
Section 4.9. Employee Benefit Plans................................................. 23
Section 4.10. Real and Personal Property............................................. 24
Section 4.11. Labor and Employment Matters........................................... 26
Section 4.12. Contracts and Commitments.............................................. 26
Section 4.13. Intellectual Property.................................................. 28
Section 4.14. Environmental Matters.................................................. 30
Section 4.15. Insurance.............................................................. 31
Section 4.16. No Brokers............................................................. 31
Section 4.17. Compliance with Laws................................................... 31
Section 4.18. Licenses and Permits................................................... 32
Section 4.19. Affiliate Arrangements................................................. 33
Section 4.20. Knowledge.............................................................. 33
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO.................................... 33
Section 5.1. Organization........................................................... 33
Section 5.2. Authorization; Validity of Agreement; Necessary Action................. 33
Section 5.3. No Conflict; Consents.................................................. 34
Section 5.4. Required Financing..................................................... 34
Section 5.5. Brokers................................................................ 34
Section 5.6. Litigation............................................................. 34
ARTICLE VI - CONDUCT OF BUSINESS PENDING THE MERGER.................................................. 35
Section 6.1. Conduct of Business Prior to Closing................................... 35
ARTICLE VII - ADDITIONAL AGREEMENTS.................................................................. 37
Section 7.1. Written Consent........................................................ 37
Section 7.2. Access to Information.................................................. 37
Section 7.3. Confidentiality........................................................ 38
Section 7.4. Regulatory and Other Authorizations; Consents.......................... 38
Section 7.5. Press Releases......................................................... 39
Section 7.6. No Solicitations....................................................... 39
Section 7.7. ▇▇▇▇▇▇▇ Non-Competition................................................ 40
Section 7.8. Officers' and Directors' Indemnification............................... 40
Section 7.9. Employee Benefit Arrangements.......................................... 41
Section 7.10. Notice of Certain Matters.............................................. 43
Section 7.11. Books and Records...................................................... 43
Section 7.12. Termination of Certain Agreements...................................... 43
Section 7.13. Further Action......................................................... 44
Section 7.14. Tax Matters............................................................ 44
ARTICLE VIII - CONDITIONS TO THE MERGER.............................................................. 48
Section 8.1. Conditions to the Obligations of Each Party to Effect the Merger....... 48
Section 8.2. Additional Conditions to Obligations of Parent and MergerCo............ 48
Section 8.3. Additional Conditions to Obligations of the Company.................... 50
ARTICLE IX - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............................ 51
Section 9.1. Survival............................................................... 51
Section 9.2. Indemnification by the Common Equity Holders........................... 51
Section 9.3. Indemnification by Parent and MergerCo................................. 56
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Section 9.4. Treatment of Indemnity Payments........................................ 59
Section 9.5. Remedies Exclusive..................................................... 59
ARTICLE X - TERMINATION, AMENDMENT AND WAIVER........................................................ 60
Section 10.1. Termination............................................................ 60
Section 10.2. Effect of Termination.................................................. 61
Section 10.3. Amendment.............................................................. 61
Section 10.4. Extension; Waiver...................................................... 61
ARTICLE XI - GENERAL PROVISIONS...................................................................... 62
Section 11.1. Notices................................................................ 62
Section 11.2. Disclosure Schedules................................................... 64
Section 11.3. Entire Agreement....................................................... 64
Section 11.4. Assignment............................................................. 64
Section 11.5. Severability........................................................... 64
Section 11.6. No Agreement Until Executed............................................ 64
Section 11.7. Certain Definitions.................................................... 65
Section 11.8. Interpretation......................................................... 68
Section 11.9. Fees and Expenses...................................................... 69
Section 11.10. Choice of Law/Consent to Jurisdiction.................................. 69
Section 11.11. Specific Performance................................................... 69
Section 11.12. Mutual Drafting........................................................ 69
Section 11.13. Miscellaneous.......................................................... 70
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ANNEXES
Annex A Defined Terms
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Indemnification Agreement
SCHEDULES
Schedule 2.2(a) Vested Options
Schedule 2.6(a) Working Capital Accounting Principles
Schedule 4.1(a) Existence; Good Standing; Authority
Schedule 4.2 Capitalization
Schedule 4.3(a) Subsidiaries
Schedule 4.3(b) Foreign Qualification
Schedule 4.4 No Conflicts; Consents
Schedule 4.5(a) Financial Statements
Schedule 4.5(b) Other Indebtedness; Liabilities
Schedule 4.6 Absence of Certain Changes
Schedule 4.7 Litigation
Schedule 4.8 Taxes
Schedule 4.9(a) Employee Benefit Plans
Schedule 4.9(e) Effect of Transaction on Benefits
Schedule 4.9(f) Section 280G
Schedule 4.10(a) Real Property
Schedule 4.10(b) Encumbrances
Schedule 4.11(a) Labor and Employment Matters
Schedule 4.11(c) Labor Claims
Schedule 4.12 Contracts and Commitments
Schedule 4.13(a) Patents, Marks and Copyrights
Schedule 4.13(b) Intellectual Property Encumbrances
Schedule 4.13(e) Intellectual Property Licenses
Schedule 4.14 Environmental Matters
Schedule 4.15 Insurance
Schedule 4.17(a) Compliance with Laws
Schedule 4.18 Licenses and Permits
Schedule 4.19(a) Affiliate Arrangements
Schedule 4.19(b) Terminated Affiliated Arrangements
Schedule 6.1 Conduct of Business
Schedule 7.9(a) Employees
Section 7.9(d) Certain Employee Information
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Schedule 8.2(e) Required Consents
Schedule 9.1 Certain Matters
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of March
15, 2006, by and among ▇▇▇▇▇▇ Scientific International Inc., a Delaware
corporation ("Parent"), Atlas Acquisition Corp., a Delaware corporation
("MergerCo"), ADI Holding Company, Inc., a Delaware corporation (the "Company")
and for purposes of Sections 1.6, 8.2(j) and 9.5 only, ▇▇▇▇▇▇▇ Capital III L.P.,
a Delaware limited partnership ("▇▇▇▇▇▇▇ Capital") and for the purposes of
Sections 7.6, 7.7 and 9.5 only, ▇▇▇▇▇▇▇ Brothers Management Corp., a Delaware
corporation ("▇▇▇▇▇▇▇"). Certain terms used in this Agreement are defined in
Section 11.7 hereof. An index of defined terms used in this Agreement is
attached as Annex A hereto.
WHEREAS, Parent, MergerCo and the Company wish to effect a business
combination through a merger (the "Merger") of MergerCo with and into the
Company on the terms and conditions set forth in this Agreement and in
accordance with the Delaware General Corporation Law, as amended (the "DGCL");
WHEREAS, the Board of Directors of the Company (the "Company Board") has
approved this Agreement, the Merger and the other transactions contemplated by
this Agreement and determined that this Agreement, the Merger and the other
transactions contemplated by this Agreement are advisable and in the best
interest of its stockholders;
WHEREAS, the Boards of Directors of Parent and MergerCo have determined
that this Agreement, the Merger and the other transactions contemplated by this
Agreement are in the best interest of their respective stockholders, and Parent
has approved this Agreement as the sole stockholder of MergerCo;
WHEREAS, as described herein, certain of the Common Equity Holders (as
defined in Section 2.7(d)) shall enter into the Indemnification Agreement (as
defined in Section 11.7) with Parent to be effective at, and subject to the
occurrence of, the Effective Time (as defined in Section 1.2) in respect of the
Common Equity Holders' indemnification obligations set forth in this Agreement
and certain other matters;
WHEREAS, the Stockholders' Representative (as defined in Section 11.7),
Parent and the Escrow Agent (as defined in Section 3.1(a)) shall enter into the
Escrow Agreement (as defined in Section 3.1(a)) to be effective at, and subject
to the occurrence of, the Effective Time; and
WHEREAS, Parent, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger, and also to prescribe various conditions to the Merger.
NOW THEREFORE, in consideration of the mutual agreements and covenants
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I - THE MERGER
SECTION 1.1. THE MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time, the Company and MergerCo shall consummate the
Merger pursuant to which (a) MergerCo shall be merged with and into the Company
and the separate corporate existence of MergerCo shall thereupon cease, (b) the
Company shall be the surviving corporation in the Merger (the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Delaware, and (c) the separate corporate existence of the Company with all its
properties, rights, privileges, immunities, powers and franchises shall continue
unaffected by the Merger. The Merger shall have the effects specified in the
DGCL.
SECTION 1.2. EFFECTIVE TIME. On the Closing Date (as defined in
Section 1.4), MergerCo and the Company shall duly execute a certificate of
merger (the "Certificate of Merger") and file such Certificate of Merger with
the Secretary of State of the State of Delaware in accordance with the DGCL. The
Merger shall become effective at such time as the Certificate of Merger,
accompanied by payment of the filing fee (as provided in the DGCL), has been
examined by and received the endorsed approval of the Secretary of State of the
State of Delaware (the "Effective Time").
SECTION 1.3. CERTIFICATE OF INCORPORATION AND BY-LAWS. At the
Effective Time and without any further action on the part of the Company and
MergerCo, the certificate of incorporation of MergerCo, as in effect immediately
prior to the Effective Time, shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended as provided by law and the terms
of such certificate of incorporation. At the Effective Time and without any
further action on the part of the Company and MergerCo, the by-laws of MergerCo,
as in effect immediately prior to the Effective Time, shall be the by-laws of
the Surviving Corporation until thereafter amended as provided by law, by the
terms of the certificate of incorporation of the Surviving Corporation and by
the terms of such by-laws. Notwithstanding the foregoing, the name of the
Surviving Corporation shall be "Atlas Acquisition Corp." and the certificate of
incorporation and by-laws of the Surviving Corporation shall so provide.
SECTION 1.4. CLOSING. The closing of the Merger (the "Closing")
shall occur no later than the third Business Day (as defined below) after the
conditions set forth in Sections 8.1, 8.2 and 8.3 have been satisfied or waived
(other than conditions required to be satisfied at the Closing); and provided
further, that notwithstanding the foregoing, the Closing may occur on any other
date agreed upon by the parties. The date on which the Closing occurs pursuant
to the foregoing sentence is referred to in this Agreement as the "Closing
Date." The Closing shall take place at the offices of ▇▇▇▇▇▇▇ Procter LLP, ▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other place as agreed to by the
parties hereto. "Business Day"
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means any day other than a day on which the Securities and Exchange Commission
or the office of the Delaware Secretary of State is closed.
SECTION 1.5. DIRECTORS AND OFFICERS. The directors of MergerCo
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation and the officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation, each
to hold office in accordance with the certificate of incorporation and by-laws
of the Surviving Corporation.
SECTION 1.6. CONVERSION OF CERTAIN SECURITIES PRIOR TO THE MERGER.
(a) ▇▇▇▇▇▇▇ Capital hereby agrees to cause all of the
Company's shares of Series A Preferred Stock (as defined in Section 11.7)
issued and outstanding immediately prior to the Effective Time to be
converted into shares of Common Stock (as defined in Section 11.7) in
accordance with Article IV.A.6 of the Certificate of Incorporation (as
defined in Section 11.7), such conversion to be effective immediately
prior to, and contingent upon, the consummation of the Merger.
(b) ▇▇▇▇▇▇▇ Capital hereby agrees to cause all of the
Company's shares of Series B Preferred Stock (as defined in Section 11.7)
issued and outstanding immediately prior to the Effective Time to be
converted into shares of Common Stock and Redeemable Preferred Stock (as
defined in Section 11.7) in accordance with Article IV.B.6 of the
Certificate of Incorporation, such conversion to be effective immediately
prior to, and contingent upon, the consummation of the Merger. Immediately
following the Effective Time, the Surviving Corporation shall pay to the
holders thereof all accrued or declared but unpaid dividends thereon (the
"Preferred Dividends") in full, in cash and in accordance with Article
IV.B.6(a) of the Certificate of Incorporation and Section 2.5 of this
Agreement.
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. EFFECT ON CAPITAL STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders (each a
"Stockholder" and collectively, the "Stockholders") of the shares of the Common
Stock, Class A Common Stock, Series A Preferred Stock, Series B Preferred Stock
or Redeemable Preferred Stock (collectively, the "Company Stock") or any shares
of the capital stock of MergerCo:
(a) Each share of common stock, par value $0.01 per share, of
MergerCo issued and outstanding immediately prior to the Effective Time
shall by virtue of the Merger and without any action on the part of the
holder thereof, be converted into one fully paid and nonassessable share
of common stock, par value $0.01
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per share, of the Surviving Corporation following the Merger, and such
shares shall constitute the only outstanding shares of capital stock of
the Surviving Corporation.
(b) Each share of Company Stock that is owned by the Company,
by any wholly owned Subsidiary (as defined in Section 11.7) of the
Company, by Parent, by MergerCo, or by any other wholly owned subsidiary
of Parent shall automatically be canceled and retired and shall cease to
exist, and no cash or other consideration shall be delivered or
deliverable in exchange therefor.
(c) Each share of Redeemable Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into the right to receive that portion of the Merger Consideration (as
defined in Section 2.1(e)) equal to the Redeemable Liquidation Preference
Amount (as defined in the Certificate of Incorporation), calculated as of
the Effective Time net to the holder thereof in cash, payable to the
holder thereof, without any interest thereon, upon surrender and exchange
of the Certificate (as defined in Section 2.1(f)) representing such share
of Redeemable Preferred Stock or the delivery of an affidavit as described
in Section 3.1(h).
(d) Each share of Common Stock and Class A Common Stock (as
defined in Section 11.7), whether restricted or unrestricted, issued and
outstanding immediately prior to the Effective Time (for the avoidance of
doubt, taking into account the conversion of all shares of Series A
Preferred Stock and Series B Preferred Stock pursuant to Section 1.6),
other than shares to be canceled in accordance with Section 2.1(b) and the
Dissenting Shares (as defined in Section 3.2(a)), shall be converted into
the right to receive an amount equal to (i) the Merger Consideration less
(A) the Escrow Amount (as defined in Section 3.1(a)) and less (B) the
aggregate Redeemable Liquidation Preference Amount paid to the holders of
the Redeemable Preferred Stock, divided by (ii) (A) the aggregate number
of shares of Common Stock and Class A Common Stock outstanding as of the
Effective Time (for the avoidance of doubt, taking into account the
conversion of all shares of Series A Preferred Stock and Series B
Preferred Stock pursuant to Section 1.6), plus (B) the aggregate number of
shares of Class A Common Stock then issuable upon the exercise of all
Vested Options (as defined in Section 2.2(a)) outstanding as of the
Effective Time pursuant to Section 2.2(a) (the "Price Per Common Share"),
subject to any applicable Tax, net to the holder thereof in cash, payable
to the holder thereof, without any interest thereon, upon surrender and
exchange of the Certificate representing such share of Common Stock or
Class A Common Stock or the delivery of an affidavit as described in
Section 3.1(h).
(e) The "Merger Consideration" means the amount equal to
(i) $283,000,000,
(ii) plus the sum of (A) the aggregate amount of the
Company's and each of its Subsidiaries' cash and cash equivalents as
shown on
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the Estimated Closing Balance Sheet (as defined in Section 2.6(a))
(the "Estimated Cash Amount") and (B) the Aggregate Option Exercise
Price Proceeds (as defined in Section 2.2(a)), and
(iii) less the sum of (A) the aggregate amount of all
Outstanding Indebtedness (as defined in Section 11.7) of the Company
and its Subsidiaries outstanding as of the Effective Time, (B) all
Company Expenses (as defined in Section 2.4), (C) the aggregate
amount of Preferred Dividends payable upon the conversion of the
Series B Preferred Stock and (D) the Estimated Underage (as defined
in Section 2.6(b)), if any.
(f) All shares of Company Stock, when converted as provided in
Sections 2.1(c) and (d) above, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
certificate ("Certificate") previously evidencing such shares shall
thereafter represent only the right to receive that portion of the Merger
Consideration applicable to the shares underlying such Certificate. The
holders of Certificates previously evidencing shares of Company Stock
outstanding immediately prior to the Effective Time shall cease to have
any rights with respect to the Company Stock except as otherwise provided
herein or by law and, upon the surrender of Certificates in accordance
with the provisions of Section 3.1, shall only represent the right to
receive the applicable Merger Consideration in exchange for their shares
of Company Stock.
SECTION 2.2. COMPANY STOCK OPTIONS AND RELATED MATTERS.
(a) Vested Options. Any unexercised option to purchase shares
of Class A Common Stock (an "Option") that is outstanding and vested
immediately prior to the Effective Time under the Company's 2002 Stock
Option and Grant Plan, as amended (the "Plan"), shall be converted into
the right to receive cash in accordance with this Section 2.2(a) and shall
not, for the avoidance of doubt, be entitled to receive any Merger
Consideration. The Company hereby agrees that, prior to the Effective
Time, the Company Board will take all actions necessary to accelerate the
vesting of Options held by employees of the Company or any of its
Subsidiaries who have executed a contribution agreement in a form
reasonably acceptable to the Company so that each such employee shall
hold, as of the Effective Time, that number of vested Options set forth
next to such employee's name on Schedule 2.2(a) (all such vested Options
as of the Effective Time, the "Vested Options"). At the Effective Time,
the Company shall pay to each holder of Vested Options (each an
"Optionholder" and collectively, the "Optionholders") an amount in cash
for each share of Class A Common Stock then issuable upon exercise of such
Vested Options equal to the excess, if any, of (i) the Price Per Common
Share over (ii) the exercise price for each such Vested Option. The
aggregate amount of the exercise prices of all Vested Options as of the
Effective Time is referred to herein as the "Aggregate Option Exercise
Price Proceeds." The
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aggregate amount of cash paid to the Optionholders pursuant to this
Section 2.2(a) is referred to herein as the "Total Option Proceeds."
(b) Unvested Options. All Options that are unvested as of the
Effective Time shall terminate at the Effective Time in accordance with
the Plan and the Company shall take all such actions as may be necessary
to effect such termination.
(c) All consideration to be received by the Optionholders
pursuant to this Section 2.2 and Section 2.7 (as well as any amounts paid
to the Optionholders pursuant to Section 3.1) shall be treated as
compensation by the Company and shall be net of any applicable Taxes (as
defined in Section 4.8(f)(ii)).
SECTION 2.3. PAYMENTS AT CLOSING FOR OUTSTANDING INDEBTEDNESS. At
(and subject to the occurrence of) the Effective Time, Parent shall provide, or
cause to be provided, funds to the Surviving Corporation in an amount equal to
the Outstanding Indebtedness to enable the Surviving Corporation to repay all
such Outstanding Indebtedness as of the Effective Time. Parent and MergerCo will
cooperate with any reasonable request of the Company in connection with the
repayment of such Outstanding Indebtedness and shall take such commercially
reasonable actions as may be reasonably requested to facilitate such repayment
and to facilitate the release, in connection with such repayment, of any
mortgage, pledge, lien, conditional sale agreement, security title or other
encumbrance (collectively, "Encumbrances") securing such Outstanding
Indebtedness. The Company shall obtain full and final releases from each Person
who holds any Encumbrance securing any Outstanding Indebtedness or otherwise
related to any assets of the Company and its Subsidiaries, such release to be
reasonably acceptable to Parent and effective as of the Effective Time. No later
than three Business Days prior to the Closing, the Company shall deliver a
calculation, in reasonable detail, to Parent setting forth the amount to be
provided by Parent to the Company pursuant to this Section 2.3.
SECTION 2.4. PAYMENTS AT CLOSING FOR COMPANY EXPENSES. Immediately
following (and subject to the occurrence of) the Effective Time, Parent shall
provide, or cause to be provided, funds to the Surviving Corporation in an
amount equal to all outstanding fees and expenses of the Company and each of its
Subsidiaries in connection with the negotiation and the consummation of the
transactions contemplated by this Agreement that have not been paid on or prior
to the Closing Date (the "Company Expenses") as are set forth in the written
notice described in the immediately following sentence. No later than three
Business Days prior to the Closing, the Company shall notify Parent in writing
of the amount to be provided by Parent pursuant to this Section 2.4 to the
Surviving Corporation and shall provide copies of all supporting invoices and
any other supporting documentation as may be requested by Parent.
SECTION 2.5. PAYMENTS AT CLOSING FOR PREFERRED DIVIDENDS.
Immediately following (and subject to the occurrence of) the Effective Time,
Parent shall provide, or cause to be provided, funds to the Surviving
Corporation to enable the Surviving
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Corporation to pay in cash, immediately following the Effective Time by wire
transfer of immediately available funds, to each holder of Series B Preferred
Stock, such holder's pro rata portion of the aggregate Preferred Dividends. No
later than three Business Days prior to the Closing, the Company shall deliver a
calculation, in reasonable detail, to Parent setting forth the amount to be
provided by Parent pursuant to this Section 2.5.
SECTION 2.6. WORKING CAPITAL ADJUSTMENT.
(a) At least five (5) Business Days prior to the Closing Date,
the Company shall, at the Company's expense, prepare, or cause to be
prepared, in good faith and deliver to Parent (i) an estimated
consolidated balance sheet of the Company and its Subsidiaries (the
"Estimated Closing Balance Sheet") prepared using (i) the accounting
principles, procedures, policies and methods used in preparing the Base
Balance Sheet (as defined in Section 4.5(a)(ii)), including the types of
adjustments used in preparing such Base Balance Sheet as set forth in the
notes thereto and (ii) the accounting principles and methodologies
reflected in Schedule 2.6(a) ((i) and (ii), the "Balance Sheet
Principles") and a calculation, in reasonable detail based upon such
Estimated Closing Balance Sheet, setting forth the estimated amount of Net
Working Capital (as defined in Section 11.7) as of immediately prior to
the scheduled Closing (the "Estimated Net Working Capital"), the Estimated
Cash Amount and the Estimated Underage (as defined in Section 2.6(b)) and
(ii) a certificate of the chief financial officer of the Company
certifying that the Estimated Closing Balance Sheet and such calculations
were prepared in accordance with this Section 2.6(a). The Company shall
give, and shall cause its advisers to give, Parent and its advisers
reasonable access to such books, records and personnel of the Company
(including the work papers of the Company and its accountants relating to
the preparation of the Estimated Closing Balance Sheet and such
calculations) as may be necessary to enable Parent and its advisers to
review the Estimated Closing Balance Sheet and such calculations prior to
the Closing.
(b) The "Estimated Underage" shall mean an amount equal to the
excess of $7,253,000 (the "Working Capital Target") over the Estimated Net
Working Capital; provided, however, that if the amount of any such excess
is less than $1,000,000, then, subject to Section 2.7, the Estimated
Underage shall be deemed to be zero for purposes of calculating the Merger
Consideration in Section 2.1(e).
SECTION 2.7. POST CLOSING ADJUSTMENT.
(a) Within sixty (60) days following the Closing Date, Parent
shall prepare, or cause to be prepared, and deliver, or cause to be
delivered, to the Stockholders' Representative (i) a consolidated balance
sheet of the Company and its Subsidiaries (the "Final Closing Balance
Sheet") prepared using the Balance Sheet Principles and a calculation, in
reasonable detail based upon such Final Closing Balance Sheet, setting
forth the amount of Net Working Capital (the "Closing Working
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Capital"), the amount of cash and cash equivalents reflected thereon (the
"Closing Cash Amount") and the Closing Underage (as defined in Section
2.7(b)), each as of immediately prior to the Closing and (ii) a
certificate of an executive officer of Parent certifying that the Final
Closing Balance Sheet and such calculations were prepared in accordance
with this Section 2.7(a). The Final Closing Balance Sheet and the related
calculations of Closing Working Capital, Closing Cash Amount and Closing
Underage are referred to as the "Closing Statement." Parent shall give,
and shall cause its advisers to give, the Stockholders' Representative and
its advisers reasonable access to such books, records and personnel of
Parent and Surviving Corporation (including the work papers of Parent and
Surviving Corporation and their accountants relating to the preparation of
the Final Closing Balance Sheet and related calculations) as may be
necessary to enable the Stockholders' Representative and its advisers to
review the Final Closing Balance Sheet and such calculations during the
Review Period (as defined below). The preparation of the Closing Statement
shall be for the sole purpose of determining the Closing Underage and
Closing Cash Amount. The Stockholders' Representative shall have fifteen
(15) days following its receipt of the Closing Statement (the "Review
Period") to review the same. On or before the expiration of the Review
Period, the Stockholders' Representative shall deliver to Parent a written
statement accepting or objecting to the calculation of any portion of the
Closing Working Capital, Closing Underage or Closing Cash Amount set forth
on the Closing Statement; provided that the Stockholders' Representative
may dispute the calculation of the Closing Working Capital, Closing
Underage or Closing Cash Amount as set forth in the Closing Statement only
on the basis that such calculation was not made in accordance with the
Balance Sheet Principles or on the basis of arithmetic error. In the event
that the Stockholders' Representative shall object to the Closing
Statement, such statement shall include a detailed itemization of the
Stockholders' Representative's objections and the reasons therefor. If the
Stockholders' Representative does not deliver such statement to Parent
within the Review Period, the Stockholders' Representative shall be deemed
to have accepted the Closing Statement.
(b) The "Closing Underage" shall mean (i) if the Estimated
Underage was deemed to be zero above, then an amount equal to the Working
Capital Target minus the Closing Working Capital; provided, however, that
if the absolute value of such difference is less than $1,000,000, then the
Closing Underage shall be deemed to equal zero and (ii) if the Estimated
Underage was not deemed to be zero in accordance with Section 2.6(b)
above, then the excess of the Working Capital Target over the sum of (A)
the Closing Working Capital and (B) the Estimated Underage.
(c) The Closing Underage and Closing Cash Amount set forth on
the Closing Statement, as accepted or deemed accepted under Section 2.7(a)
or as finally determined in accordance with Section 2.7(d) below, shall
constitute the "Final Closing Underage" and "Final Cash Amount" for
purposes of determining any adjustment to the Merger Consideration for all
purposes under this Agreement and such Closing Underage and Closing Cash
Amount shall be deemed final, binding and non-appealable.
8
(d) In the event that the Stockholders' Representative shall
timely object to the Closing Statement pursuant to Section 2.7(a), Parent
and the Stockholders' Representative shall promptly meet and in good faith
attempt to resolve such objections. In the event that the Stockholders'
Representative and Parent are not able to resolve such objections (or any
portion thereof) as may be raised with respect to the Closing Statement,
within the thirty (30) day period following the receipt by Parent of the
Stockholders' Representative's written statement objecting to Parent's
calculation of the Closing Working Capital, Closing Underage and/or
Closing Cash Amount, as applicable, the unresolved matter(s) shall be
submitted to KPMG LLP (the "Accounting Referee") (provided that the
personnel of KPMG used in the review shall be reasonably acceptable to
Parent) immediately following the expiration of such 30-day period for
review and resolution, with instructions to complete the same as promptly
as practicable, but in any event within thirty (30) days of its
engagement. In making such determination, the Accounting Referee may only
consider those items and amounts as to which Parent and the Stockholders'
Representative have disagreed within the time period and on the terms
specified above and must resolve such matter(s) in accordance with the
terms and provisions of this Agreement; provided that the determination of
the Accounting Referee will neither be more favorable to Parent than
reflected in the Closing Statement nor more favorable to the Stockholders'
Representative than reflected in its dispute notice. Such Accounting
Referee shall deliver a written report setting forth the resolution of
each disputed item on its own calculation of the Closing Working Capital,
Closing Underage and Closing Cash Amount as determined in accordance with
the terms of this Agreement as soon as practicable following the
submission of the matter to such firm, which calculation, absent manifest
error, shall be binding and conclusive on the parties and not subject to
appeal and may be enforced in any court having jurisdiction. The fees and
costs of the Accounting Referee, if one is required, shall be borne
proportionally by (i) the holders of Common Stock and Class A Common Stock
including, for the avoidance of doubt, any holder of any shares of Common
Stock received upon the conversion of the Series A Preferred Stock or
Series B Preferred Stock as contemplated by this Agreement and the
Optionholders (each a "Common Equity Holder" and collectively, the "Common
Equity Holders") and (ii) Parent on the other hand, on the basis, for each
such party, of the ratio of (A) the positive difference between the amount
of Closing Underage submitted by such party and the determination of the
actual Closing Underage made by the Accounting Referee to (B) the
difference between the Closing Underage amounts submitted by each party.
(e) In the event that the Final Closing Underage, as
calculated in accordance with Section 2.7, is a positive amount, (i) the
first $1,000,000 (or such lesser amount equal to the remaining balance in
the Working Capital Escrow Account after deduction for any amounts paid to
Parent out of the Working Capital Escrow Account on account of any Closing
Cash Shortfall) of such amount shall be paid to Parent out of the Working
Capital Escrow Account and (ii) any Final Closing Underage in excess of
$1,000,000 (or such lesser amount paid to Parent out of the Working
Capital Escrow Account) shall be paid by the Common Equity Holders to
Parent in cash pursuant to the
9
Indemnification Agreement. In the event that the Final Cash Amount is less
than the Estimated Cash Amount (such amount, the "Closing Cash
Shortfall"), (i) the first $100,000 of such amount shall be paid to Parent
out of the Working Capital Escrow Account and (ii) any Closing Cash
Shortfall in excess of $100,000 shall be paid by the Common Equity Holders
to Parent in cash pursuant to the Indemnification Agreement. In the event
that the Final Closing Underage, as calculated in accordance with Section
2.7, is a negative amount, then Parent shall pay, or cause to be paid, to
the Exchange Agent (as defined in Section 3.1(a)) an amount in cash equal
to the absolute value of the Final Closing Underage, and the Exchange
Agent shall distribute such amount proportionally to the Common Equity
Holders based on each such Common Equity Holder's proportional interest in
the Aggregate Common Equity Holder Consideration (as defined in Section
11.7). In the event that the Final Cash Amount is greater than the
Estimated Cash Amount, Parent shall pay to the Exchange Agent an amount in
cash equal to such overage, and the Exchange Agent shall distribute such
amount proportionally to the Common Equity Holders based on each such
Common Equity Holder's proportional interest in the Aggregate Common
Equity Holder Consideration. Any payment made under this Section 2.7(e)
shall be made via wire transfer of immediately available funds within five
(5) Business Days of the final determination of the Final Closing Underage
and Final Cash Amount.
SECTION 2.8. WITHHOLDING OF TAXES. Parent and Company shall be
entitled to deduct and withhold from the consideration otherwise payable
pursuant to this Article II amounts as may be required to be deducted and
withheld with respect to the making of such payment under the Code or under any
provision of state, local or foreign Tax law; provided that Parent and the
Company shall give prior written notice to the Stockholders' Representative
before making any such deduction or withholding. To the extent amounts are so
withheld and paid over to the appropriate Governmental Authority, the withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the applicable holder in respect of which such deduction and withholding was
made.
ARTICLE III - PAYMENT FOR SHARES; DISSENTING SHARES
SECTION 3.1. PAYMENT FOR SHARES OF COMPANY STOCK.
(a) At the Effective Time, Parent shall deposit, or shall
cause to be deposited, with a mutually agreeable exchange agent (the
"Exchange Agent"), for the benefit of the holders of shares of Company
Stock for exchange through the Exchange Agent, the Merger Consideration
less (i) the Escrow Amount and less (ii) the sum of (x) the Aggregate
Option Exercise Price Proceeds and (y) the Total Option Proceeds. At the
Effective Time, Parent shall cause to be delivered to a mutually
acceptable nationally recognized escrow agent (the "Escrow Agent") an
amount of cash equal to $15,000,000 (the "Escrow Amount"), such deposit to
constitute an escrow fund (the "Escrow Fund"). The Escrow Fund shall be
governed by the terms of an escrow
10
agreement to be entered into by and among Parent, the Stockholders'
Representative and the Escrow Agent, such escrow agreement to be
substantially in the form attached hereto as Exhibit A (the "Escrow
Agreement"). The Escrow Fund shall be held in escrow and shall be
available to satisfy certain obligations of the Common Equity Holders as
set forth in Sections 2.7 and 9.2 of this Agreement. Each of the parties
to this Agreement hereby acknowledges and agrees that (i) $1,000,000 of
the Escrow Fund will be available solely for the payment to Parent of any
Final Closing Underage due to Parent, if any, under Section 2.7 (the
"Working Capital Escrow Account") and (ii) $100,000 of the Working Capital
Escrow Account will be available for the payment of any Closing Cash
Shortfall, and shall not, under any circumstances, be available to satisfy
any Parent/MergerCo Indemnified Party's (as defined in Section 9.2(a))
claim for any Loss under Article IX. The Parent/MergerCo Indemnified
Parties' right to seek indemnification from the Escrow Fund under Article
IX shall be limited to $14,000,000. No interest shall be paid or shall
accrue on any amount pursuant to this Article III except as earned from
the Escrow Fund itself.
(b) As soon as practicable following the Effective Time,
Parent shall cause the Exchange Agent to deliver or mail to each holder of
record of a Certificate or Certificates that immediately prior to the
Effective Time represented outstanding shares of Company Stock (i) a form
of letter of transmittal reasonably acceptable to the Company which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent and (ii) instructions for use in surrendering the
Certificates in exchange for the applicable portion of the Merger
Consideration.
(c) Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, properly
completed and duly executed, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor the portion of the Merger
Consideration that such holder has the right to receive in respect of the
shares of Company Stock formerly represented by such Certificate. Any
Certificate so surrendered shall forthwith be canceled. No interest will
be paid or accrued on any of the Merger Consideration payable to holders
of Certificates.
(d) Until surrendered in accordance with this Section 3.1,
each such Certificate (other than Certificates representing shares of
Company Stock to be canceled in accordance with Section 2.1(b) and
Dissenting Shares) shall represent solely the right to receive the Merger
Consideration relating thereto. If the Merger Consideration (or any
portion thereof) is to be delivered to any person other than the person in
whose name the Certificate formerly representing shares of Company Stock
surrendered therefor is registered, it shall be a condition to such right
to receive such Merger Consideration that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and
that the person surrendering such shares of Company Stock shall pay to the
Exchange Agent any Transfer Taxes (as defined in Section
11
7.14(e) or other Taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such Tax has been paid or is not applicable.
(e) Promptly following the date that is 180 days after the
Effective Time, the Exchange Agent shall deliver to the Surviving
Corporation all cash, Certificates and other documents in its possession
relating to the Merger, and the Exchange Agent's duties shall terminate.
Thereafter, each holder of a Certificate formerly representing shares of
Company Stock may surrender such Certificate to the Surviving Corporation
and (subject to applicable abandoned property, escheat and similar laws)
receive in consideration therefor the Merger Consideration relating
thereto.
(f) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter, there shall be no further
registration of transfers of shares of Company Stock on the stock transfer
books of the Surviving Corporation of any shares of Company Stock that
were outstanding immediately prior to the Effective Time. On or after the
Effective Time, any Certificates formerly representing shares of Company
Stock presented to the Surviving Corporation or the Exchange Agent shall
be surrendered and canceled in return for the payment of the Merger
Consideration relating thereto, as provided in this Article III.
(g) None of Parent, the Surviving Corporation or the Exchange
Agent or any of their respective Subsidiaries or affiliates shall be
liable to any person in respect of any cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law. If
any Certificate shall not have been surrendered prior to seven years after
the Effective Time, or immediately prior to such earlier date on which any
shares of Redeemable Preferred Stock, Common Stock or Class A Common Stock
would otherwise escheat to or become the property of any governmental
entity, any such shares shall, to the extent permitted by Applicable Laws,
become the property of the Surviving Corporation, free and clear of all
claims or interests of any Person (as defined in Section 11.7) previously
entitled thereto.
(h) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Exchange
Agent will issue the applicable Merger Consideration in exchange for such
lost, stolen or destroyed Certificate.
(i) Upon receipt of any payment from Parent pursuant to
Section 2.7(e), the Exchange Agent shall promptly distribute all such
amounts to the Common Equity Holders based on each such Common Equity
Holder's proportional interest in the Aggregate Common Equity Holder
Consideration.
12
(j) The Exchange Agent, Parent and the Surviving Corporation
shall be entitled to deduct and withhold from the Merger Consideration or
other amounts payable pursuant to this Agreement to any holder of Company
Stock or Options such amounts as the Exchange Agent, Parent or the
Surviving Corporation is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of United
States federal, state or local Tax laws and shall instead pay such amount
to the applicable Governmental Authority (as defined in Section 4.4). To
the extent that amounts are so withheld by the Exchange Agent, Parent or
the Surviving Corporation, such amounts withheld shall be treated for all
purposes of this Agreement as having been paid to the holder of Company
Stock or Options in respect of which such deduction and withholding was
made by the Exchange Agent, Parent or the Surviving Corporation.
(k) The Merger Consideration shall be adjusted to reflect
fully the appropriate effect of any stock split, split-up, reverse stock
split, stock dividend (including any dividend or distribution of
securities convertible into Redeemable Preferred Stock, Common Stock or
Class A Common Stock), reorganization, recapitalization, reclassification
or other like change with respect to the Redeemable Preferred Stock,
Common Stock or Class A Common Stock having a record date occurring on or
after the date hereof and prior to the Effective Time.
SECTION 3.2. APPRAISAL RIGHTS.
(a) Notwithstanding anything in this Agreement to the
contrary, any shares of Company Stock (collectively, the "Dissenting
Shares") that are issued and outstanding immediately prior to the
Effective Time and that are held by stockholders of the Company (i) who
have not executed the Written Consent (as defined in Section 7.1(a)) or
otherwise have not consented to or approved the transactions contemplated
by this Agreement, (ii) who shall have demanded properly in writing
appraisal for such shares in accordance with Section 262 of the DGCL (the
"Appraisal Rights Provisions") and (iii) who have not effectively
withdrawn, lost or failed to perfect their rights to appraisal will not be
converted as described in Section 2.1, but at the Effective Time, by
virtue of the Merger and without any action on the part of the holder
thereof, shall be cancelled and shall cease to exist and shall represent
the right to receive only those rights provided under the Appraisal Rights
Provisions; provided, however, that all shares of Company Stock held by
stockholders who shall have failed to perfect or who effectively shall
have withdrawn or lost their rights to appraisal of such shares of Company
Stock under the Appraisal Rights Provisions shall thereupon be deemed to
have been canceled and retired and to have been converted, as of the
Effective Time, into the right to receive the applicable Merger
Consideration, without interest, in the manner provided in Section 2.1.
Persons who have perfected statutory rights with respect to Dissenting
Shares as aforesaid will not be paid by the Surviving Corporation as
provided in this Agreement and will have only such rights as are provided
by the Appraisal Rights Provisions with respect to such Dissenting Shares.
The Company shall
13
give Parent and MergerCo prompt notice of any demands received by the
Company for the exercise of appraisal rights with respect to shares of
Company Stock, withdrawals of such demands, and any other instruments
served pursuant to the DGCL and received by the Company, and Parent shall
have the right to participate in all negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior
written consent of Parent (which consent shall not be unreasonably
withheld), make any payment with respect to, or settle or offer to settle,
any such demands.
(b) Each dissenting stockholder who becomes entitled under the
Appraisal Rights Provisions to payment for Dissenting Shares shall receive
payment therefor after the Effective Time from the Surviving Corporation
(but only after the amount thereof shall have been agreed upon or finally
determined pursuant to the Appraisal Rights Provisions), and such shares
of Company Stock shall be canceled.
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
The Company hereby makes to Parent and MergerCo the representations and
warranties contained in this Article IV.
SECTION 4.1. EXISTENCE; GOOD STANDING; AUTHORITY.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of Delaware. The Company has
all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as currently conducted. The Company
is duly licensed or qualified to do business as a foreign corporation
under the laws of each jurisdiction listed on Schedule 4.1(a) and each
other jurisdiction in which the character of its properties or in which
the transaction of its business makes such qualification necessary, except
where the failure to be so licensed or qualified would not reasonably be
expected to have, individually or in the aggregate, a Company Material
Adverse Effect (as defined below). The copies of the Company's Certificate
of Incorporation and Amended and Restated By-Laws (the "By-Laws"), each as
amended to date and made available to Parent's and MergerCo's counsel, are
complete and correct and no amendments thereto are pending. The Company is
not, and has not been since January 1, 2003, in violation of any provision
of its Certificate of Incorporation or By-Laws in any material respect.
"Company Material Adverse Effect" means any change, effect,
event, circumstance or condition that has resulted in or results in a
material adverse effect on (x) the business, financial condition, results
of operations or assets (including intangible assets) of the Company and
the Company's Subsidiaries, taken as a whole, except to the extent any
such change, effect, event, circumstance or condition results from (i) the
announcement of this Agreement or the consummation of the transactions
contemplated
14
by this Agreement (provided that this clause (i) shall not apply to the
term "Company Material Adverse Effect" as used in Section 4.4), (ii)
changes in general economic or political conditions or the securities
markets in general (whether as a result of acts of terrorism, war (whether
or not declared), armed conflicts or otherwise) to the extent they do not
disproportionately affect the Company and the Company's Subsidiaries,
taken as a whole, or (iii) changes in conditions generally applicable to
businesses in the industries in which the Company and its Subsidiaries
operate, including, without limitation, (A) changes in laws, regulations,
rules, ordinances, mandates or other requirements of any Governmental
Authority binding upon such businesses or industries or (B) changes in
generally accepted accounting principles as applied in the United States
on a consistent basis ("GAAP") or its application, in either case to the
extent they do not disproportionately effect the Company and the Company's
Subsidiaries, taken as a whole, or (y) on the Company's ability to timely
perform its obligations under this Agreement or to consummate the
transactions contemplated by this Agreement.
(b) The Company has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, the performance by the Company
of its obligations hereunder and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Company
Board, and no other corporate proceeding or approval on the part of the
Company is required to authorize the execution, delivery or performance of
this Agreement (other than, with respect to the Merger, the adoption of
this Agreement by Written Consent. This Agreement has been duly and
validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery of this Agreement by each of Parent
and MergerCo, this Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
SECTION 4.2. CAPITALIZATION. The authorized capital stock of the
Company (the "Capital Stock") as of the date of this Agreement consists of
31,000,000 shares of Series A Preferred Stock of which 25,241,375 shares are
issued and outstanding, 4,000,000 shares of Series B Preferred Stock of which
3,254,596 shares are issued and outstanding, 44,000 shares of Redeemable
Preferred Stock, of which zero (0) shares are issued and outstanding, 41,000,000
shares of Common Stock, of which zero (0) shares are issued and outstanding and
6,000,000 shares of Class A Common Stock, of which 2,591,116 shares are issued
and outstanding. Schedule 4.2 sets forth a true and complete list, as of the
date hereof, of each record and beneficial owner of shares of Common Stock,
Class A Common Stock, Series A Preferred Stock, Series B Preferred Stock and
Redeemable Preferred Stock, together with the number and percentage of such
shares owned by each such Person. All of the issued and outstanding shares of
Capital Stock have been, and with respect to any shares of Capital Stock to be
issued to
15
holders of Series A Preferred Stock and Series B Preferred Stock will be, duly
authorized and validly issued, and are (or will be) fully paid and
nonassessable. All issued and outstanding shares of Capital Stock have been
offered, sold and delivered by the Company in compliance in all material
respects with applicable securities and corporate laws and no such shares have
been issued in violation of any preemptive rights, rights of first refusal or
similar rights. Except as set forth on Schedule 4.2, there are no outstanding
subscriptions, options, warrants, convertible securities, commitments,
preemptive rights, deferred compensation rights, agreements, arrangements or
commitments of any kind to which the Company or any of its Subsidiaries or
Affiliates is a party or by which any of them is bound relating to the issuance
transfer, sale, exchange, repurchase or redemption of, or outstanding securities
convertible into or exercisable or exchangeable for, any shares of Capital Stock
or other equity interests of the Company. Except as set forth on Schedule 4.2,
there are no agreements or understandings to which the Company or any of its
Subsidiaries or Affiliates is a party or by which any of them is bound with
respect to the voting of any shares of Capital Stock of the Company or which
restrict the transfer of any such shares. Except as set forth on Schedule 4.2,
there are no outstanding contractual obligations of the Company or any of its
Subsidiaries or Affiliates to repurchase, redeem or otherwise acquire any shares
of Capital Stock, other equity interests or any other securities of the Company.
SECTION 4.3. SUBSIDIARIES.
(a) The Company's Subsidiaries are listed on Schedule 4.3(a).
Except as set forth on Schedule 4.3(a), the Company owns, directly or
indirectly, beneficially and of record all of the outstanding shares of
capital stock or other equity interest of each of the Company's
Subsidiaries. Except as set forth in Schedule 4.3(a), neither the Company
nor any of its Subsidiary owns (or has any right, obligation, agreement or
understanding to acquire), directly or indirectly, any capital stock,
equity or other economic, voting or ownership interest in any other
Person. All of the capital stock issued by the Company's Subsidiaries has
been duly authorized, validly issued and is fully paid and non-assessable
and was not issued in violation of preemptive rights. All such issued and
outstanding shares have been offered, sold and delivered in compliance in
all material respects with applicable securities and corporate laws and no
such capital stock has been issued in violation of any preemptive rights,
rights of first refusal or similar rights. There are no outstanding
subscriptions, options, warrants, convertible securities, commitments,
preemptive rights, deferred compensation rights, agreements, arrangements
or commitments of any kind to which the Company or any of its Subsidiaries
or Affiliates is a party or by which any of them is bound relating to the
issuance, transfer, sale, exchange, repurchase or redemption of, or
outstanding securities convertible into or exercisable or exchangeable
for, any such shares of capital stock or other equity interests of any
such Subsidiary. There are no agreements or understandings to which the
Company or any of its Subsidiaries or Affiliates is a party or by which
any of them is bound with respect to the voting of any shares of capital
stock of any Subsidiary of the Company or which restrict the transfer of
any such shares. There are no outstanding contractual obligations of the
Company or any of its
16
Subsidiaries or Affiliates to repurchase, redeem or otherwise acquire any
shares of capital stock of any such Subsidiary, other equity interests or
any other securities of any such Subsidiary.
(b) Each of the Company's Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of
Delaware. Each such Subsidiary has all requisite corporate power and
authority to own, operate and lease its properties and carry on its
business as currently conducted. Each such Subsidiary is duly licensed or
qualified to do business as a foreign corporation under the laws of each
jurisdiction listed on Schedule 4.3(b) and each other jurisdiction in
which the character of its properties or in which the transaction of its
business makes such qualification necessary, except where the failure to
be so licensed or qualified would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. The
copies of each such Subsidiary's certificate of incorporation and bylaws,
each as amended to date and made available to Parent's and MergerCo's
counsel, are complete and correct and no amendments thereto are pending.
No such Subsidiary is, or has been since January 1, 2003, in violation of
any provision of its certificate of incorporation or bylaws in any
material respect.
SECTION 4.4. NO CONFLICT; CONSENTS. Except as set forth on Schedule
4.4, the execution, delivery and performance by the Company of this Agreement,
and the consummation by the Company of the transactions in accordance with the
terms hereof, do not (i) violate or conflict with the Certificate of
Incorporation or By-Laws or the certificate of incorporation or bylaws of any of
its Subsidiaries; (ii) violate, breach or conflict with or result in a default
(whether after the giving of notice, lapse of time or both) under, or give rise
to a right of termination of any Contract (as defined in Section 4.12),
agreement, permit (including Company Licenses), lease, license, authorization or
obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or its Subsidiaries or any of their respective assets are
bound; (iii) violate or result in a violation of, conflict with, or constitute a
default (whether after the giving of notice, lapse of time or both) under, any
provision of any Applicable Law (as defined in Section 11.7) or any order of, or
any restriction imposed by, any court or other Governmental Authority applicable
to, binding upon or enforceable against the Company or any of its Subsidiaries
except, in the case of clauses (ii) and (iii), such violations, breaches,
conflicts, defaults or terminations that, individually or in the aggregate,
would not reasonably be expected to have a Company Material Adverse Effect; or
(iv) require from the Company or any of its Subsidiaries any notice to,
declaration or filing with, or consent or approval of any federal, state, local
or foreign government, any governmental, regulatory or administrative authority,
agency, bureau or commission or any court, tribunal, or judicial or arbitral
body (a "Governmental Authority") or other third party except, in the case of
this clause (iv), for notices, declarations, filings, consents or approvals the
failure of which to make or obtain would not, individually or in aggregate,
reasonably be expected to (A) prevent, impair or delay the consummation of the
Merger or (B) have an adverse impact on the Company and its Subsidiaries, taken
as a whole, in any material respect.
17
SECTION 4.5. FINANCIAL STATEMENTS AND RELATED MATTERS.
(a) The Company has delivered to Parent and MergerCo true and
complete copies of the following financial statements, copies of which are
attached hereto as Schedule 4.5(a) (collectively, the "Financial
Statements"):
(i) Audited consolidated balance sheets of the Company
and its Subsidiaries as of December 31, 2003 and December 31, 2004
and consolidated statements of income and retained earnings and
consolidated statements of cash flows for each of the years then
ended;
(ii) An unaudited consolidated balance sheet of the
Company and its Subsidiaries as of December 31, 2005 (the "Base
Balance Sheet"); and
(iii) An unaudited consolidated statement of income and
unaudited statement of cash flows of the Company and its
Subsidiaries for the twelve-month period ended December 31, 2005.
Subject to the absence of footnotes and year-end audit adjustments with
respect to any unaudited Financial Statements, the Financial Statements
have been prepared in accordance with GAAP consistently applied and
present fairly in all material respects the consolidated financial
condition of the Company and consolidated results of the Company's
operations at and for the periods presented. The books and records of the
Company and its Subsidiaries have been maintained in accordance with GAAP
and, in all material respects, all Applicable Laws. The Company and its
Subsidiaries maintain in all material respects internal controls over
financial reporting to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with GAAP, including
policies and procedures that (A) pertain to the maintenance of records
that in reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company and its Subsidiaries, (B)
provide reasonable assurance that transactions are recorded as necessary
to permit preparation of financial statements in accordance with GAAP, and
that receipts and expenditures of the Company and its Subsidiaries are
being made only in accordance with authorizations of management and
directors of the Company and its Subsidiaries and (C) provide reasonable
assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the assets of the Company and its
Subsidiaries that could have a material effect on the financial
statements.
(b) Neither the Company nor any Subsidiary has or is subject
to any Indebtedness, obligations or liabilities of any kind (whether
known, unknown, absolute, accrued, contingent or otherwise) other than
those (i) fully reflected in or reserved against in the Base Balance
Sheet, (ii) immaterial to the Company or any Subsidiary and
18
incurred in the ordinary course of business since December 31, 2005 not in
violation of this Agreement, or (iii) set forth on Schedule 4.5(b).
(c) Upon consummation of the Merger, MergerCo will own,
possess, have a valid license to, have a valid lease in or otherwise have
the right to use all of the Contracts, books and records, rights,
properties and assets (including all Intellectual Property and other
intangible assets) necessary to conduct the business of the Company and
its Subsidiaries in all material respects as currently conducted and as
the same will be conducted on the Closing Date.
(d) The carry-over backlog of the Company and its Subsidiaries
as of December 31, 2005 was $1,904,218.
SECTION 4.6. ABSENCE OF CERTAIN CHANGES. Except as set forth on
Schedule 4.6, since December 31, 2005 (a) the Company and its Subsidiaries have
operated only in the ordinary course of business consistent with past practices,
(b) there has been no event, occurrence, fact, condition, change, development or
effect that has had or resulted in or would reasonably be expected to have or
result in, individually or in the aggregate, a Company Material Adverse Effect
and (c) and neither the Company nor any of its Subsidiaries has (or has
committed or agreed, whether or not in writing, to):
(i) amended, restated or otherwise changed its
certificate of incorporation or bylaws;
(ii) made any distribution or declared, paid or set
aside any dividend (in cash or property) with respect to, or split,
combined, redeemed, reclassified, purchased or otherwise acquired,
directly or indirectly, any equity interests or shares of capital
stock of, or other equity or voting interest in, the Company or any
of its Subsidiaries, or made any other changes in the capital
structure of the Company or any of its Subsidiaries;
(iii) changed any financial or Tax accounting principle,
method or practice, other than changes required to be implemented
during such period by GAAP or Applicable Law;
(iv) terminated the employment of any officer or key
employee;
(v) except as required pursuant to Applicable Law or an
existing Company Plan (as defined in Section 4.9(a)) (A) other than
wage or salary increases in the ordinary course of business
consistent in nature and amount with the past practice not in excess
of 5% on an annual basis, made or agreed to make any increase in
wages, salaries, compensation, pension or other fringe benefits or
perquisites payable to any officer or employee, (B) granted or
agreed to grant any severance or termination pay or entered into any
Contract to
19
make or grant any severance or termination pay or paid or agreed to
pay any bonus or other incentive compensation to any officer or
employee, (C) granted or agreed to grant or accelerated the time of
vesting or payment of any benefits or awards under a Company Plan,
(D) loaned, amended any loan, or advanced money or other property to
any officer or employee or (E) established, adopted, amended,
modified or terminated any Company Plan in any material respect;
(vi) acquired or disposed of, whether by purchase,
merger, consolidation or sale, lease, pledge or other Encumbrance of
stock or assets or otherwise, any (A) material interest in any
corporation, partnership or other Person or (B) material assets
comprising a business or any other material property or assets, in a
single transaction or in a series of transactions;
(vii) entered into any contract, arrangement or
understanding pursuant to which the Company or any of its
Subsidiaries will receive, or is reasonably expected to receive,
payments, or will make, or is reasonably expected to make, payments
of more than $100,000 in the aggregate per annum or $500,000 over
the life of such Contract;
(viii) made or incurred any capital expenditure or other
financial commitment requiring payments in excess of $200,000
individually or $400,000 in the aggregate;
(ix) paid, discharged, settled or satisfied any material
claim, action, proceeding, liability or other obligation or waived
any material rights or material claims; or
(x) (A) made, changed or revoked any Tax election in a
manner that is inconsistent with the past practice of the Company or
any Subsidiary, (B) incurred any liability for Taxes other than in
the ordinary course of business, (C) amended any Tax Return or filed
any claim for refund of Taxes with respect to the Company or any
Subsidiary, (D) settled or compromised any Tax liability of the
Company or any Subsidiary or entered into any closing or similar
agreement with respect to Taxes of the Company or any Subsidiary, or
(E) consented to any extension or waiver of the statute of
limitations period applicable to Taxes or Tax Returns of the Company
or any Subsidiary.
SECTION 4.7. LITIGATION. Except as set forth on Schedule 4.7,
neither the Company or any of its Subsidiaries nor any of their properties,
assets (including any Intellectual Property) or businesses is party to, involved
in any manner (including either as plaintiff or defendant) in or subject to any
pending litigation, action, suit, proceeding, claim, arbitration or
investigation (including any litigation, action, suit, proceeding, claim,
arbitration or investigation by any Governmental Authority) nor, to the
Company's knowledge, is any such litigation, action, suit, proceeding, claim,
arbitration or investigation threatened against the Company or any of its
20
Subsidiaries or any of their properties, assets (including any Intellectual
Property), rights or businesses that would reasonably be expected to (i)
prevent, impair or materially delay the consummation of the Merger or (ii)
result in amounts payable by the Company or any of its Subsidiaries in excess of
$100,000 individually or in the aggregate.
SECTION 4.8. TAXES. Except as set forth on Schedule 4.8 or as would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect:
(a) (i) The Company and its Subsidiaries have duly and timely
filed, or been included in, all Tax Returns required to be filed by them
or in which they are to be included with the appropriate taxing
authorities in all jurisdictions in which such Tax Returns are required to
be filed (after giving effect to any valid extensions of time in which to
make such filings), and all such Tax Returns are true, complete and
correct;
(ii) The Company and its Subsidiaries have timely paid or
caused to be paid all Taxes due and owing (whether or not shown on such
Tax Returns) by or on behalf of the Company and any Subsidiary;
(iii) Neither the IRS nor any other Governmental Authority
has proposed, asserted or assessed in writing any deficiency or claim for
any amount of additional Taxes against the Company or its Subsidiaries
which has not been finally resolved and paid in full;
(iv) No federal, state, local or foreign audits, actions,
suits, proceedings, investigations, claims or other administrative
proceedings or court proceedings ("Tax Proceeding") are pending with
regard to any Taxes or Tax Returns of the Company or any of its
Subsidiaries and neither the Company nor any of its Subsidiaries has
received a written notice of any actual or threatened Tax Proceedings;
(v) All Taxes and other assessments and levies which the
Company and its Subsidiaries were or are required to withhold or collect
have been withheld and collected and have been paid over to the proper
Governmental Authorities;
(vi) There are no outstanding waivers, extensions or
comparable consents regarding the application of the statute of
limitations with respect to any Tax or Tax Return of the Company or any
Subsidiary;
(vii) No written claim has been made by any Governmental
Authority in a jurisdiction where the Company or any Subsidiary does not
file a Tax Return that the Company or such Subsidiary is or may be subject
to taxation in that jurisdiction;
(viii) None of the Company or any of the Subsidiaries is
(or is expected to be) required to include any item of income in, or
exclude any item of
21
deduction from, taxable income for any taxable period (or portion thereof)
ending after the Closing Date as a result of any (A) change in method of
accounting for a taxable period ending on or prior to the Closing Date,
(B) inter-company transaction or excess loss account described in Treasury
Regulations promulgated under Code Section 1502 (or any corresponding or
similar provision of state, local or foreign Tax law), (C) installment
sale or open transaction disposition transaction made on or prior to the
Closing Date, or (D) prepaid amount received on or prior to the Closing
Date;
(ix) Each employee benefit plan which is a nonqualified
deferred compensation plan is in "good faith compliance," in both form and
operation, with Section 409A of the Code and the guidance thereunder; and
(x) None of the Company or any of its Subsidiaries has
participated or engaged in any transaction that gives rise to (x) a
registration obligation under section 6111 of the Code or the Treasury
Regulations thereunder, (y) a list maintenance obligation under section
6112 of the Code or the Treasury Regulations thereunder, or (z) a
disclosure obligation as a "reportable transaction" under section 6011 of
the Code and the Treasury Regulations thereunder (or in each of clauses
(x), (y) or (z) any corresponding or similar provision of state, local or
foreign Tax law).
(b) Neither the Company nor any of its Subsidiaries has ever been a
member of an affiliated group of corporations filing a combined federal income
Tax Return (other than a group the common parent of which is or was the Company)
nor does the Company or any of its Subsidiaries have any liability for Taxes of
any other Person (other than the Company or any of its Subsidiaries) under
Treasury Regulations Section 1.1502-6 (or any similar provision of foreign,
state or local law) or otherwise. Neither the Company nor any of its
Subsidiaries is a party to any agreement or arrangement requiring the
indemnification, sharing or allocation of Taxes;
(c) Neither the Company nor any of its Subsidiaries has distributed
the stock of another entity or had its stock distributed by another entity in a
transaction that was purported or intended to be governed in whole or in part by
Code Sections 355 or 361;
(d) Neither the Company nor any of its Subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code;
(e) There are no Encumbrances for Taxes upon the assets of the
Company or its Subsidiaries, except for Encumbrances relating to current Taxes
not yet due; and
(f) For the purposes of this Agreement:
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended;
22
(ii) "Taxes" shall mean any and all taxes and similar
government charges of any kind whatsoever (including, but not limited to,
taxes on or with respect to net or gross income, franchise, profits, gross
receipts, capital, sales, use, ad valorem, value added, transfer, real
property transfer, transfer gains, inventory, capital stock, license,
payroll, employment, social security, unemployment, severance, occupation,
real or personal property, estimated taxes, rent, excise, occupancy,
recordation, bulk transfer, intangibles, alternative minimum, doing
business, withholding and stamp), together with any interest thereon,
penalties, fines, damages, costs, fees, additions to tax or additional
amounts with respect thereto, imposed by the United States, any state,
local, foreign or other applicable jurisdiction; and
(iii) "Tax Returns" shall mean any report, return,
document, declaration, estimate, information return, statement or other
filing required to be supplied to any taxing authority or jurisdiction
(foreign or domestic) with respect to Taxes.
SECTION 4.9. EMPLOYEE BENEFIT PLANS.
(a) Schedule 4.9(a) sets forth all "employee benefit plans,"
as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and any stock option, stock purchase, stock
appreciation rights, stock-based, deferred compensation, incentive, bonus,
performance award, fringe benefit, change in control, profit sharing,
loan, employment, termination, severance, compensation plan, agreement,
policy or arrangement currently maintained by the Company or any of its
Subsidiaries or that covers current or former employees or directors of
the Company or any of its Subsidiaries (the "Company Plans"). Neither the
Company nor any of its Subsidiaries nor any trade or business (whether or
not incorporated) that would be treated as a single employer with the
Company or any of its Subsidiaries under Section 4001 of ERISA or Section
414(b), (c), (m) or (o) of the Code (an "ERISA Affiliate") sponsors,
maintains or contributes to (or is obligated to contribute to) or has ever
maintained, contributed to or been obligated to contribute to any
"employee pension plan," as defined in Section 3(2) of ERISA, that is
subject to Title IV of ERISA or Section 412 of the Code or any
"multiemployer plan," as defined in Section 3(37) of ERISA. The Company
has made available to Parent correct and complete copies of (i) each
Company Plan (or, in the case of any such Company Plan that is unwritten,
descriptions thereof), (ii) the most recent annual reports on Form 5500
required to be filed with the IRS with respect to each Company Plan (if
such report was required), (iii) the most recent summary plan description
for each Company Plan for which a summary plan description is required and
(iv) each trust agreement and insurance or group annuity contract relating
to any Company Plan. Except as disclosed on Schedule 4.9(a), none of the
Company Plans provide for post-employment life or health insurance
benefits for any participant or any beneficiary of a participant, except
as may be required under the Consolidate Omnibus Budget Reconciliation Act
of 1985, as amended, and at the expense of the participant or the
participant's beneficiary.
23
(b) The Company Plans have been administered, in all material
respects, in accordance with the applicable provisions of ERISA and the
Code and the terms of such Company Plans. Each Company Plan that is
intended to qualify under Section 401(a) of the Code has received a
favorable determination opinion letter from the IRS regarding its
qualification thereunder and, to the Company's knowledge, no event has
occurred since the date of the most recent determination opinion letter
that would have a material adverse effect on the qualification of such
plan. All contributions, premiums and benefit payments under the Company
Plans that are required to have been made in accordance with the terms of
such Company Plans have been timely made.
(c) Neither the Company, any of its Subsidiaries, nor any
ERISA Affiliate or any organization to which any of them is a successor or
parent corporation, within the meaning of Section 4069(b) of ERISA, has
engaged in any transaction, within the meaning of Section 4069 of ERISA.
(d) There are no pending actions, claims or lawsuits which
have been instituted or, to the knowledge of the Company, claims asserted
against the Company Plans (except for routine claims for benefits).
(e) Except as expressly contemplated by this Agreement or as
set forth on Schedule 4.9(e), neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby
either alone or in combination with another event will (i) result in any
payment becoming due to any employee of the Company or any of its
Subsidiaries, including but not limited to any severance payment, (ii)
increase any benefits otherwise payable under any Company Plan, (iii)
result in the acceleration of the time of payment or vesting of any such
benefits under any such plan or (iv) result in any breach or violation of,
or a default under, any Company Plan.
(f) Except as set forth on Schedule 4.9(f), no amount required
to be paid or payable to or with respect to any employee or other service
provider of the Company or any of its Subsidiaries in connection with the
transactions contemplated hereby (either solely as a result thereof or as
a result of such transactions in conjunction with any other event) could
be an "excess parachute payment" within the meaning of Section 280G of the
Code.
SECTION 4.10. REAL AND PERSONAL PROPERTY.
(a) Neither the Company nor any of its Subsidiaries owns any
real property. Schedule 4.10(a) sets forth a list of all real property
leased by the Company or any of its Subsidiaries (the "Leased Real
Property"). All leases relating to Leased Real Property are identified on
Schedule 4.10(a) (each a "Lease" and collectively, the "Leases") and true,
correct and complete copies thereof (including any renewal or
24
default notices delivered thereunder) have been made available to Parent's
and MergerCo's counsel. With respect to each Lease listed on Schedule
4.10(a):
(i) the Company or a Subsidiary of the Company, as
applicable, has a valid and enforceable leasehold interest to the
leasehold estate in the Leased Real Property granted to the Company
or such Subsidiary, as applicable, pursuant to each pertinent Lease,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally and by general equitable principles
(regardless of whether enforcement is sought in a proceeding at law
or in equity);
(ii) each of said Leases has been duly authorized and
executed by the Company or such Subsidiary, as applicable, and is in
full force and effect;
(iii) to the Company's knowledge, neither the Company
nor such Subsidiary is in default under any of said Leases, nor, to
the Company's knowledge, has any event occurred which, with notice
or the passage of time, or both, would give rise to such a default
by the Company or such Subsidiary, as applicable; and
(iv) the Company has not received any notice from the
landlord that the Company or its Subsidiaries will be required to
remove any installations or improvements made to the leased
premises.
(b) To the Company's knowledge, except as set forth on
Schedule 4.10(b) or as specifically disclosed and separately identified in
the Base Balance Sheet, and except with respect to leased personal
property, the Company and each of its Subsidiaries have good title to all
of their tangible personal property and assets shown on the Base Balance
Sheet or acquired after the date of the Base Balance Sheet, free and clear
of any Encumbrances, except for (i) Encumbrances specifically disclosed
and separately identified in the Base Balance Sheet, (ii) Taxes, fees,
assessments or other governmental charges incurred in the ordinary course
of business consistent with past practice and that are not delinquent or
past due, (iii) carriers', warehousemens', mechanics', landlords',
materialmens', repairmens' or other similar Encumbrances arising in the
ordinary course of business consistent with past practice that are not
delinquent or past due, (iv) Encumbrances consisting of pledges or
deposits required in the ordinary course of business consistent with past
practice in connection with workers' compensation, unemployment insurance
and other social security legislation or to secure liability to insurance
carriers, (v) Encumbrances set forth on Schedule 4.10(b) and (vi)
Encumbrances of public record or imperfections of title that would not,
individually or in the aggregate, reasonably be expected to have an
adverse impact on the Company and its Subsidiaries in any material
respect.
25
SECTION 4.11. LABOR AND EMPLOYMENT MATTERS.
(a) Except as set forth on Schedule 4.11(a), the Company and
its Subsidiaries are in compliance in all material respects with all
applicable laws respecting employment and employment practices, including,
without limitation, all laws respecting terms and conditions of
employment, health and safety, wages and hours, child labor, immigration,
employment discrimination, disability rights or benefits, equal
opportunity, plant closures and layoffs, affirmative action, workers'
compensation, labor relations, employee leave issues and unemployment
insurance. Since January 1, 2003, there has been no "mass layoff" or
"plant closing" within the meaning of the Worker Adjustment and Retraining
Notification Act of 1988, as amended ("WARN"), or any similar foreign,
state or local law affecting any site of employment or facility of the
Company or any of its Subsidiaries.
(b) Neither the Company nor any of its Subsidiaries is a party
to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
Neither the Company nor any of its Subsidiaries is subject to any charge,
demand, petition or representation proceeding seeking to compel, require
or demand it to bargain with any labor union or labor organization nor, as
of the date of this Agreement, is there pending or, to the Company's
knowledge, threatened in writing, any material labor strike, dispute,
walkout, work stoppage, slow-down or lockout involving the Company or any
of its Subsidiaries, nor since January 1, 2003 has there been any such
action.
(c) Except as set forth in Schedule 4.11(c), neither the
Company nor any of its Subsidiaries have received since January 1, 2003
(i) written notice of any unfair labor practice charge, complaint,
grievance or arbitration pending or threatened before the National Labor
Relations Board or any other Governmental Authority against them, (ii)
written notice of any charge or complaint with respect to or relating to
them pending before the Equal Employment Opportunity Commission or any
other Governmental Authority responsible for the prevention of unlawful
employment practices, (iii) written notice of the intent of any
Governmental Authority responsible for the enforcement of labor,
employment, wages and hours of work, child labor, immigration, or
occupational safety and health laws to conduct an investigation with
respect to or relating to them or written notice that such investigation
is in progress, or (iv) written notice of any complaint, lawsuit or other
proceeding pending or threatened in any forum by or on behalf of any
present or former employee of such entities, any applicant for employment
or classes of the foregoing alleging breach of any express or implied
contract of employment, any applicable law governing employment or the
termination thereof or other discriminatory, wrongful or tortuous conduct
in connection with the employment relationship.
SECTION 4.12. CONTRACTS AND COMMITMENTS. Except as set forth in
Schedule 4.12, neither the Company nor any Subsidiary of the Company is a party
to or
26
otherwise bound by any of the following contracts, commitments, arrangements or
understandings, whether written or oral (each, a "Contract"):
(a) any partnership, joint venture or strategic alliance
Contract;
(b) any Contract requiring the payment of severance with any
director, officer, employee or consultant;
(c) any Contract (A) prohibiting, limiting or restricting (i)
the conduct of any portion of the business of the Company or any of its
Subsidiaries anywhere in the world or the provision of any products or
services of such business to any Person anywhere in the world, (ii) the
competition by the business with any Person or (iii) the soliciting or
hiring of employees or consultants or the entry into a business
relationship with any prospective client, customer or other Person
anywhere in the world or (B) requiring the Company, any of its
Subsidiaries or any of their respective Affiliates to deal exclusively
with any Person or requiring any Person to deal exclusively with any
Company, any of its Subsidiaries or any of their respective Affiliates;
(d) any Affiliate Arrangement;
(e) any Contract involving the acquisition or disposition (by
merger, consolidation, lease, exchange, acquisition or sale of stock or
assets or otherwise) of any material interest in, or any material amount
of property or assets of, any Person or business since January 1, 2003;
(f) any Contract relating to the provision, incurrence,
assumption, surety or guarantee of any Indebtedness;
(g) any licenses, sublicenses and other agreements to which
the Company or its Subsidiaries are a party (i) granting any other Person
the right to use Intellectual Property (as defined in Section 11.7), (ii)
restricting the right of the Company or its Subsidiaries to use
intellectual property, or (iii) pursuant to which the Company or its
Subsidiaries are authorized to use any third party intellectual property,
which are incorporated in, are, or form a part of any product
manufactured, distributed, or sold by the Company or any Subsidiary or
which are otherwise used (or currently proposed to be used) by the Company
or its Subsidiaries in the business of the Company as currently conducted
(other than readily available commercial off-the-shelf software);
(h) any Contracts with the Company's top ten customers as
measured by the dollar amount of revenue earned for the twelve-month
period ending December 31, 2005;
(i) any material Contracts under which the Company or any
Subsidiary provides or receives laboratory management services or specimen
collection services;
27
(j) any material Contracts with group purchasing
organizations, managed care companies, and third party payors, including
any Contract with Medicare or any other governmental agency;
(k) any material Contracts under which a third party refers
specimens to the Company or any Subsidiary for testing; and
(l) any other contract (or group of related contracts) the
performance of which requires aggregate payments to or from the Company in
excess of $100,000 per year.
The Company has made available or delivered to Parent complete and correct
copies of all written Contracts and accurate and complete descriptions of all
material terms of all oral Contracts. Each of the Contracts is in full force and
effect and is the legal, valid and binding obligation of the Company and/or its
Subsidiaries, enforceable against them, and to the knowledge of the Company,
each other party thereto in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and by general
equitable principles (regardless of whether enforcement is sought in a
proceeding at law or in equity). The Company and/or each of its Subsidiaries has
duly performed all of its material obligations under each such Contract to the
extent that such obligations have accrued. There are no existing material
defaults (or circumstances, occurrences, events or acts that, with the giving of
notice or lapse of time or both would become defaults) of the Company or any of
its Subsidiaries or, to the knowledge of the Company, any other party thereto
under any Contract. Each Contract has been performed by the Company and/or each
of its Subsidiaries in accordance with its terms and Applicable Law in all
material respects. The Company and each of its Subsidiaries has billed the payor
thereunder in accordance with the terms of the applicable third party healthcare
payor agreements in all material respects.
SECTION 4.13. INTELLECTUAL PROPERTY.
(a) Schedule 4.13(a) sets forth an accurate and complete list
of all Intellectual Property, including all Patents (as defined in Section
11.7), applied-for and registered Marks (as defined in Section 11.7),
applications and registered Copyrights (as defined in Section 11.7) owned
or filed by the Company or its Subsidiaries and used or held for use in
connection with the business of the Company and its Subsidiaries. The
Company or its Subsidiaries are the sole and exclusive beneficial owner of
all of the Intellectual Property items set forth in Schedule 4.13(a), and
all such Intellectual Property is subsisting, and to the knowledge of the
Company, valid and enforceable
(b) Except as set forth on Schedule 4.13(b), the Company or a
Subsidiary of the Company is the owner of, or has the right to use, all
Intellectual Property (as defined in Section 11.7) as is necessary in
connection with the business of
28
the Company and its Subsidiaries as currently conducted, free and clear of
all Encumbrances.
(c) The Intellectual Property owned, and to the knowledge of
the Company, the Intellectual Property used, practiced or otherwise
commercially exploited by the Company or its Subsidiaries, and the conduct
of business of the Company and its Subsidiaries as currently conducted,
does not constitute an unauthorized use or misappropriation of any patent,
copyright, trade ▇▇▇▇, trade secret, other intellectual property right of
any Person and does not infringe, constitute an unauthorized use of, or
violate any other right of any Person (including pursuant to any
non-disclosure agreements or obligations to which the Company or its
Subsidiaries or any of their present or former employees or consultants is
a party or otherwise bound).
(d) Neither the Company nor any of its Subsidiaries is, nor
since January 1, 2003, has been a party to any suit, action or proceeding
which involves a claim of infringement, unauthorized use, or violation of
any intellectual property used or owned by any Person against the Company
or its Subsidiaries, or challenging the ownership, use, validity or
enforceability of any Intellectual Property owned or used by the Company
or its Subsidiaries, nor, to the Company's knowledge, are there any facts
or circumstances that would form the basis for any claim by any Person of
infringement, unauthorized use, or violation against the Company and its
Subsidiaries, or challenging the ownership, use, validity or
enforceability of any Intellectual Property owned or used by the Company.
(e) Except as set forth on Schedule 4.13(e), to the knowledge
of the Company, no Person is materially infringing, misappropriating, or
otherwise violating any (i) Intellectual Property owned by the Company or
its Subsidiaries, and no such claims have been asserted or threatened
against any Person by the Company or its Subsidiaries since January 1,
2003, or (ii) material Intellectual Property used or held for use by the
Company or its Subsidiaries.
(f) The Company and its Subsidiaries take reasonable measures
to protect the confidentiality of Trade Secrets, including requiring all
Persons having access thereto to execute written non-disclosure
agreements.
(g) No Affiliate or current or former partner, director,
stockholder, officer, or employee of the Company or its Subsidiaries will,
after giving effect to the transactions contemplated hereby, own or retain
any rights to use (other than in connection with his or her services to
the Company) any of the Intellectual Property owned by the Company or its
Subsidiaries in the conduct of the business.
(h) The Company and its Subsidiaries take reasonable measures
to ensure that all personal information collected, used or held for use by
the Company is protected against unauthorized access, use, modification,
or other misuse.
29
SECTION 4.14. ENVIRONMENTAL MATTERS. Except as set forth on Schedule
4.14:
(a) the Company and the Subsidiaries are in material
compliance with all Environmental Laws (as defined below) applicable to
their operations and use of the Leased Real Property;
(b) neither the Company nor the Subsidiaries has generated,
transported, treated, stored, or disposed of any Hazardous Material (as
defined below), except in material compliance with all applicable
Environmental Laws, and, as of the date of this Agreement, there has been
no Release (as defined below) or threat of Release of any Hazardous
Material by the Company or the Subsidiaries at or on the Leased Real
Property that requires reporting, investigation or, remediation by the
Company or the Subsidiaries pursuant to any Environmental Law;
(c) since January 1, 2003, neither the Company nor the
Subsidiaries have (i) received written notice under the citizen suit
provisions of any Environmental Law; (ii) received any written request for
information, notice, demand letter, administrative inquiry or written
complaint or claim under any Environmental Law; (iii) been subject to or,
to the Company's knowledge, threatened with any governmental or citizen
enforcement action with respect to any Environmental Law; or (iv) received
written notice of or otherwise have knowledge of any unsatisfied liability
under any Environmental Law in excess of $50,000;
(d) the Company or the Subsidiaries have and there currently
are effective all Company Licenses required under any Environmental Law
for the Company's or Subsidiaries' activities and operations at the Leased
Real Property; and
(e) to the Company's knowledge, there are no underground
storage tanks, landfills, current or former waste disposal areas or
polychlorinated biphenyls at or on the Leased Real Property that require
reporting, investigation, cleanup, remediation or any other type of
response action by the Company or the Subsidiaries pursuant to any
Environmental Law.
"Environment" means soil, surface waters, groundwater, land, stream
sediments, surface or subsurface strata and ambient air and biota living in or
on such media.
"Environmental Laws" means all Applicable Laws relating to protection of
the Environment and the possession, operation and/or disposal of radioactive
materials and biological materials (including medical wastes), including,
without limitation, the federal Comprehensive Environmental Response,
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Clean Air Act, the Clean Water Act, the Toxic Substances Control Act, the
Endangered Species Act and similar federal, state and local laws as in effect on
the Closing Date.
30
"Hazardous Material" means any pollutant, toxic substance, hazardous
waste, hazardous materials, hazardous substances, petroleum or
petroleum-containing products, radioactive material, biological and medical
waste as defined in, or listed under, any Environmental Law.
"Release" means any releasing, disposing, discharging, injecting,
spilling, leaking, pumping, dumping, emitting, escaping or emptying of a
Hazardous Material into the Environment.
SECTION 4.15. INSURANCE. Schedule 4.15 sets forth a summary of the
material insurance policies held by, or for the benefit of, the Company and its
Subsidiaries as of the date of this Agreement, including the underwriter of such
policies and the amount of coverage thereunder. All such policies are in full
force and effect, all premiums due and payable have been paid, and no notice of
cancellation or termination has been received by the Company or any Subsidiary
with respect to any such policy. To the knowledge of the Company, there is no
material claim by the Company or any of its Subsidiaries pending under any of
such policies as to which coverage has been denied or disputed by the
underwriters of such policies or bonds.
SECTION 4.16. NO BROKERS Neither the Company nor any of its
Subsidiaries has entered into any contract, arrangement or understanding with
any person or firm that may result in the obligation of such entity or Parent or
MergerCo to pay any finder's fees, brokerage or agent's commissions or other
like payments in connection with the negotiations leading to this Agreement or
consummation of the Merger, except that the Company has retained and will owe
fees to Citigroup Global Markets Inc. and ▇▇▇▇▇▇▇, such fees to be paid by the
Common Equity Holders.
SECTION 4.17. COMPLIANCE WITH LAWS.
(a) Except as set forth in Schedule 4.17(a), the Company and
each of its Subsidiaries are, and at all times since January 1, 2003 have
been, in compliance in all material respects with all Applicable Laws.
Except as set forth in Schedule 4.17(a), since January 1, 2003, neither
the Company nor any of its Subsidiaries has received any written, or, to
the knowledge of the Company, oral notice from (and otherwise does not
have any knowledge of) any Governmental Authority that alleges any
noncompliance (or that the Company or any of its Subsidiaries is under any
investigation, pending, or, to the knowledge of the Company, threatened,
by any such Governmental Authority for such alleged noncompliance) with
any Applicable Law that, individually or in the aggregate, would
reasonably be expected to have an adverse impact on the Company or any of
its Subsidiaries in any material respect.
(b) Neither the Company nor any of its Subsidiaries, nor any
officer, director, employee or agent thereof (i) has engaged in any
activities that are prohibited, or are cause for criminal or civil
penalties or mandatory or permissive exclusion from Medicare, Medicaid, or
any other federal health care program, under Sections 1320a-7, 1320a-7a,
1320a-7b, or 1395nn of Title 42 of the United States Code or the
regulations
31
promulgated pursuant to such statutes or related state or local statutes
or regulations, (ii) has been convicted of, or, to the knowledge of the
Company, charged with a criminal offense as described in Section
1320a-7(a), (b)(1), (2), or (3) of Title 42 of the United States Code,
(iii) has been excluded or suspended from participation in Medicare,
Medicaid or any other federal or state health care program, or (iv) since
January 1, 2003, has been subject to any order of, or any criminal or
civil fine or penalty imposed by, any Governmental Authority with respect
to any such Medicare, Medicaid or any other federal or state health care
program.
(c) There are no pending, concluded since January 1, 2003, or,
to the knowledge of the Company, threatened investigations, or civil,
administrative or criminal proceedings relating to the Company's or any of
its Subsidiaries' participation in any payment program, including without
limitation, Medicare, Medicaid, and private third party payors ("Payment
Programs"). Neither the Company or any of its Subsidiaries is subject to,
nor has the Company or any of its Subsidiaries been subjected to since
January 1, 2003, any pre-payment utilization review or other utilization
review by any Payment Program. No Payment Program is currently requesting
or has requested since January 1, 2003 or, to the knowledge of the
Company, is threatening or has since January 1, 2003 threatened any
recoupment, refund, or set-off from the Company or any of its Subsidiaries
in excess of $10,000. No Payment Program has imposed since January 1, 2003
a fine, penalty or other sanction on the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries has been
excluded since January 1, 2003 from participation in any Payment Program.
SECTION 4.18. LICENSES AND PERMITS. The Company and its Subsidiaries
and the employees thereof hold, and have held at all times since January 1,
2003, all licenses, permits, approvals, authorizations, registrations and
certifications of any Governmental Authority that are required in order to
permit the Company and its Subsidiaries to own or lease its properties and
assets and to conduct its business under and pursuant to all Applicable Laws,
including, without limitation, Medicare, Medicaid and other provider numbers,
state laboratory licenses, permits required under any Environmental Law, or CLIA
(as defined in Section 11.7) and DEA (as defined in Section 11.7)
certifications. Schedule 4.18 sets forth a complete and correct list of all such
Company Licenses currently in effect (the "Company Licenses"). Each Company
License is valid and in full force and effect in all material respects. There is
no investigation or proceeding pending or, to the knowledge of the Company,
threatened in writing that could result in the termination, revocation,
suspension, modification or restriction of any Company License or the imposition
of any fine, penalty or other sanctions for violation of any legal or regulatory
requirements relating to any Company License, except to the extent the
termination, revocation, suspension, or restriction of any Company License or
the imposition of any fine, penalty or other sanctions would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Except as set forth in Schedule 4.18, none of the Company Licenses shall
be affected in any material respect by the consummation of the transactions
contemplated hereby.
32
SECTION 4.19. AFFILIATE ARRANGEMENTS.
(a) Except as set forth on Schedule 4.19(a), there are not,
and have not been since January 1, 2003, any Contracts between the Company
or one of its Subsidiaries, on the one hand, and any current or former
officer, director, employee or stockholder of the Company or one of its
Subsidiaries or any of their respective Affiliates (other than the Company
or any of its Subsidiaries), on the other hand (any such contract,
arrangement or understanding, an "Affiliate Arrangement").
(b) Except as set forth on Schedule 4.19(b), each of the
Affiliate Arrangements shall terminate and be of no further force or
effect at the Effective Time.
(c) No current or former director, officer, employee or
stockholder of the Company or any of its Subsidiaries owns, directly or
indirectly, any economic, financial or ownership interest in (x) any
property or asset, real or personal, tangible or intangible, used in or
held for use in connection with or pertaining to the business of the
Company and its Subsidiaries or (y) any customer, supplier or competitor
of the Company or its Subsidiaries.
SECTION 4.20. KNOWLEDGE. Whenever a representation or warranty made
by the Company herein refers to the knowledge of the Company, such knowledge
shall be deemed to consist only of the actual knowledge (including actual
knowledge that would have been obtained by any individual after due inquiry of
those individuals that such individual would reasonably expect to have knowledge
of the relevant subject matter) on the date hereof and on the Closing Date of
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGERCO
Parent and MergerCo hereby jointly and severally make to the Company the
representations and warranties contained in this Article V.
SECTION 5.1. ORGANIZATION. Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and MergerCo is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and each has all requisite
corporate power and authority to own, operate and lease its properties and to
carry on its respective business as currently conducted.
SECTION 5.2. AUTHORIZATION; VALIDITY OF AGREEMENT; NECESSARY ACTION.
Each of Parent and MergerCo has all requisite corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution, delivery and
performance by Parent and MergerCo of this Agreement and the consummation of the
transactions contemplated hereby
33
have been duly and validly authorized by all necessary action by the board of
directors of Parent and the board of directors of MergerCo and by the
stockholders of MergerCo, and no other action on the part of Parent or MergerCo
is necessary to authorize the execution and delivery by Parent or MergerCo of
this Agreement and the consummation of the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Parent and
MergerCo and, assuming due and valid authorization, execution and delivery
hereof by the Company, is a valid and binding obligation of each of Parent and
MergerCo, as the case may be, enforceable against each of them in accordance
with its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally and by general equitable principles (regardless of whether
enforcement is sought in a proceeding at law or in equity).
SECTION 5.3. NO CONFLICT; CONSENTS. The execution and delivery by
Parent and MergerCo of this Agreement, and the consummation by Parent and
MergerCo of the transactions in accordance with the terms hereof, do not (i)
violate, conflict with or result in a default (whether after the giving of
notice, lapse of time or both) under, or give rise to a right of termination of,
any contract, agreement, permit, license, authorization or obligation to which
Parent or MergerCo is a party or by which its assets are bound, or any provision
of the organizational documents of Parent or any of its Subsidiaries; (ii)
violate or result in a violation of, or constitute a default (whether after the
giving of notice, lapse of time or both) under, any provision of any law,
regulation or rule, or any order of, or any restriction imposed by, any court or
other governmental agency applicable to Parent or MergerCo; or (iii) require
from Parent or MergerCo any notice to, declaration or filing with, or consent or
approval of any Governmental Authority or other third party, except, in each
case, (A) the filing required under the HSR Act (as defined in Section 7.4(a)),
(B) the filing of the Certificate of Merger under the DGCL, (C) filings with the
Securities and Exchange Commission and the New York Stock Exchange and (D) any
such violation, conflict, default, termination or failure to provide notice or
to obtain consent or approval that would not be reasonably be expected to have,
individually or in the aggregate, a Parent Material Adverse Effect (as defined
in Section 11.7).
SECTION 5.4. REQUIRED FINANCING. Parent has, and will cause MergerCo
to have, sufficient funds on hand or available through existing credit
facilities to pay, or cause to be paid, the Merger Consideration pursuant to
Section 3.1(a).
SECTION 5.5. BROKERS. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission from the Company
in connection with the Merger based upon arrangements made by or on behalf of
Parent, MergerCo or any of either of their Affiliates.
SECTION 5.6. LITIGATION. There is no suit, claim, action, proceeding
or investigation pending or, to the knowledge of the senior management of
Parent, threatened against Parent or MergerCo and neither Parent nor MergerCo is
subject to any outstanding order, writ, judgment, injunction or decree of any
Governmental Authority that, in either case, would be reasonably likely,
individually or in the aggregate, to (a) prevent or materially delay the
34
consummation of the Merger or (b) otherwise prevent or materially delay
performance by Parent or MergerCo of any of their material obligations under
this Agreement.
ARTICLE VI - CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 6.1. CONDUCT OF BUSINESS PRIOR TO CLOSING. The Company
agrees that, between the date hereof and the Effective Time, it (i) shall use
its reasonable best efforts to operate in, and shall cause its Subsidiaries to
operate in, the ordinary course of business consistent with past practices and
(ii) shall use its reasonable best efforts to preserve intact the business or
organization of the Company and its Subsidiaries. Except as described in
Schedule 6.1 or as otherwise contemplated by this Agreement, without limiting
the generality of the foregoing, the Company will not, and will not permit any
of its Subsidiaries to:
(a) authorize for issuance, issue or sell or agree or commit
to issue or sell (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities or equity equivalents
(including without limitation, stock appreciation rights) (other than the
issuance of shares of Class A Common Stock upon the exercise of Options
outstanding on the date of this Agreement in accordance with their present
terms);
(b) make any change to the Certificate of Incorporation or
By-Laws or the organizational documents of its Subsidiaries, or change the
authorized capital stock or equity interests of the Company or any
Subsidiary;
(c) other than repaying existing Indebtedness, (i) prepay any
Indebtedness (if any) from its stockholders, officers or directors or any
Person affiliated with any of the foregoing, (ii) make any change in its
borrowing arrangements, (iii) incur any Indebtedness or make any loans or
advances of borrowed money or capital contributions to, or investments in,
any other Person, other than the Company drawing down on its $7,000,000
revolving loan facility pursuant to its Amended and Restated Credit
Agreement, dated as of November 18, 2004, by and among the Company and the
other signatories thereto, (iv) modify, amend or terminate any of its
Contracts, or enter into, become subject to, amend, terminate or modify in
any material respect any contract described in Section 4.12(a) and (b) or
(v) pay, discharge, settle, or satisfy any material claim, action
proceeding, liability or other obligation, or waive, release or assign any
material rights or claims;
(d) materially change accounting policies or procedures,
including tax accounting policies and procedures and internal controls,
except as required by Applicable Law or by GAAP;
35
(e) except for the acceleration of unvested stock options and
restricted stock under the Plan as contemplated in this Agreement, (i)
make or agree to make any increase in wages, salaries, compensation,
pension or other fringe benefits or perquisites payable to any officer or
employee, (ii) grant or agree to grant any severance or termination pay or
entered into any Contract to make or grant any severance or termination
pay or paid or agreed to pay any bonus or other incentive compensation to
any officer or employee, (iii) grant or agree to grant or accelerated the
time of vesting or payment of any benefits or awards under a Company Plan,
(iv) loan, amend any loan, or advance money or other property to any
officer or employee or (v) establish, adopt, amend, modify or terminate
any Company Plan in any material respect;
(f) terminate the employment of any officer or key employee;
(g) make or incur any capital expenditure or other financial
commitment requiring payments in excess of $200,000 individually or
$400,000 in the aggregate;
(h) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of, or split, combine, subdivide, reclassify or
redeem, purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, directly or indirectly, any equity interests or shares
of, capital stock of, or other equity or voting interest in, the Company
or any of its Subsidiaries or otherwise make any payments to stockholders
in their capacity as stockholders, other than any distribution by a
Subsidiary of the Company to the Company, or make any other changes in the
capital structure of the Company or its Subsidiaries;
(i) (i) make, change or revoke any Tax election in a manner
that is inconsistent with the past practice of the Company or any
Subsidiary, (ii) incur any liability for Taxes other than in the ordinary
course of business, (iii) amend any Tax Return or file any claim for
refund of Taxes with respect to the Company or any Subsidiary, (iv) settle
or compromise any material Tax liability of the Company or any Subsidiary
or enter into any closing or similar agreement with respect to Taxes of
the Company or any Subsidiary, or (v) consent to any extension or waiver
of the statute of limitations period applicable to Taxes or Tax Returns of
the Company or any Subsidiary.;
(j) acquire or dispose of, whether by purchase, merger,
consolidation or sale, lease, exchange, pledge or other encumbrance of
stock or assets or otherwise, any (i) material interest in any
corporation, partnership or other Person or (ii) material assets
comprising a business or any other material property or assets, in a
single transaction or in a series of transactions;
36
(k) enter into any Contract pursuant to which the Company or
any of its Subsidiaries will receive, or is reasonably expected to
receive, payments, or will make, or is reasonably expected to make,
payments of more than $100,000 in the aggregate per annum or $250,000 over
the life of such Contract;
(l) dispose of, grant, or obtain, or permit to lapse any
rights to, any Intellectual Property, or dispose of or disclose to any
Person, other than representatives of Parent or MergerCo, any Trade
Secret; or
(m) agree in writing or otherwise to take any of the foregoing
actions.
Notwithstanding the foregoing, prior to the Closing the Company shall be
permitted to pay down existing Indebtednesses.
ARTICLE VII - ADDITIONAL AGREEMENTS
SECTION 7.1. WRITTEN CONSENT.
(a) The Company, acting through the Company Board immediately
following the execution of this Agreement by the Company, shall obtain,
notwithstanding any lesser requirement under Applicable Law or the
Certificate of Incorporation or By-Laws, written consent to approve and
execute this Agreement, the Merger and the transactions contemplated by
this Agreement by Stockholders representing at least 95% (on an
as-converted basis taking into account the conversion of the Series A
Preferred Shares and Series B Preferred Shares) of the outstanding capital
stock of the Company (the "Written Consent"). The Company shall provide
notice of the transactions contemplated by this Agreement to its Common
Equity Holders as required under the Certificate of Incorporation.
(b) Subject to Applicable Law, Parent and MergerCo shall
provide to the Company any publicly available information for inclusion in
preparation for the Written Consent that may be required under Applicable
Law and that is reasonably requested by the Company.
SECTION 7.2. ACCESS TO INFORMATION.
(a) Without undue disruption of its business, between the date
of this Agreement and the Closing Date, the Company shall, and shall cause
each of its Subsidiaries and each of the Company's and Subsidiaries'
officers, employees, representatives and agents to, give Parent and
MergerCo and their representatives reasonable access, upon reasonable
notice and during times mutually convenient to Parent and MergerCo and
senior management of the Company, to the facilities, properties,
employees, books and records of the Company and its Subsidiaries and
financial and operating data and other information with respect to the
business and
37
operations of the Company and its Subsidiaries as from time to time may be
reasonably requested. The Company shall provide such financial or other
information regarding the business that is available and as is reasonably
requested by Parent. Any such investigation by Parent or MergerCo shall
not unreasonably interfere with any of the businesses or operations of the
Company and its Subsidiaries.
(b) Neither Parent nor MergerCo shall, prior to the Closing
Date, have any contact whatsoever with respect to the Company or any of
its Subsidiaries or with respect to the transactions contemplated by this
Agreement with any partner, lender, lessor, vendor, customer, supplier,
employee or consultant of the Company or any of its Subsidiaries, except
in consultation with the Company and then only with the express prior
approval of the Company, which approval shall not be unreasonably
withheld. All requests by Parent or MergerCo for access or information
shall be submitted or directed exclusively to an individual or individuals
to be designated by the Company. Neither Parent nor MergerCo shall be
permitted to conduct any invasive tests on any Leased Real Property
without the prior written consent of the Company.
SECTION 7.3. CONFIDENTIALITY. The parties shall adhere to the terms
and conditions of that certain letter agreement dated July 1, 2005 by and
between the Company and Parent (the "Confidentiality Agreement").
SECTION 7.4. REGULATORY AND OTHER AUTHORIZATIONS; CONSENTS.
(a) The Company, Parent and MergerCo shall use their
reasonable best efforts to obtain or make the authorizations, consents,
orders, approvals and filings from or with or provide notice to any
Governmental Authority or other third party necessary for their execution
and delivery of, and the performance of their obligations pursuant to,
this Agreement. If required by the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
thereunder (the "HSR Act") each party hereto agrees to make an appropriate
filing of a Pre-Merger Notification and Report Form with respect to the
transactions contemplated by this Agreement within five (5) Business Days
after the date hereof, to request early termination of the applicable
waiting period and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the
HSR Act. Subject to Applicable Laws, the parties hereto will not take any
action that will have the effect of delaying, impairing or impeding the
receipt of any required approvals and shall as promptly as practicable
respond to any requests for additional information from any Governmental
Authority or filings in respect thereof. Parent or MergerCo shall pay all
filing and related fees in connection with any such filings that must be
made by any of the parties under the HSR Act. Each of Parent and MergerCo
hereby covenants and agrees to use its commercially reasonable efforts to
secure termination of any waiting periods under the HSR Act or any other
applicable law and to obtain the approval of the Federal Trade Commission,
the Antitrust Division of the United States Department of Justice or any
other Governmental Authority, as applicable, for the Merger and the other
38
transactions contemplated hereby. Notwithstanding the foregoing, nothing
herein shall require Parent, in connection with the receipt of any
regulatory approval, to agree to sell or divest any material assets or
business or agree to restrict in any material way any business conducted
by or proposed to be conducted by Parent, the Company, or any of their
Subsidiaries, or to litigate or formally contest any proceedings relating
to any regulatory approval process in connection with the Merger. The
Company and Parent each shall keep the other apprised of the status of
matters relating to completion of the transactions contemplated hereby.
(b) Each of Parent and MergerCo, on the one hand, and the
Company, on the other hand, shall cooperate with any reasonable request of
the other in connection with the Company obtaining the authorizations,
consents, orders, approvals and filings from or with or providing notice
to any Governmental Authority or other third party, including the consents
listed in Schedule 8.2(e).
SECTION 7.5. PRESS RELEASES. Subject to Applicable Law, the parties
hereto will, and will cause each of their Affiliates and representatives to,
cooperate with the other party in connection with the issuance of their
respective press releases or public announcements announcing the execution of
this Agreement and the transactions contemplated hereby and each party will use
its commercially reasonable efforts to allow the other parties hereto reasonable
time to comment on such press release or public announcement in advance of its
issuance.
SECTION 7.6. NO SOLICITATIONS.
(a) Each of ▇▇▇▇▇▇▇ and its Affiliates will not and the
Company will not, and will not permit any of its Subsidiaries or any of
the directors, officers, employees, advisors, representatives or agents of
the Company or any of its Subsidiaries to, directly or indirectly, (i)
initiate, discuss, negotiate, undertake, authorize, recommend, propose or
enter into, either as the proposed surviving, merged, acquiring or
acquired corporation, any transaction involving a merger, consolidation,
business combination, purchase or disposition of any amount of the assets
of the Company (other than the sale of inventory in the ordinary course of
business) or any of its Subsidiaries or any capital stock of the Company
or any of its Subsidiaries other than the transactions contemplated by
this Agreement (an "Acquisition Transaction"), (ii) facilitate, encourage,
solicit or initiate discussions, negotiations or submissions of proposals
or offers in respect of an Acquisition Transaction, (iii) furnish or cause
to be furnished, to any person or entity, any information concerning the
business, operations, properties or assets of the Company or its
Subsidiaries in connection with an Acquisition Transaction or (iv)
otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person or
entity to do or seek any of the foregoing.
(b) The Company shall, and shall cause its Subsidiaries and
their representatives to, immediately cease and cause to be terminated any
existing
39
discussions or negotiations with any Persons (other than Parent and
MergerCo) conducted heretofore with respect to any of the foregoing. The
Company agrees not to (and to cause its Subsidiaries not to) release any
third party from the confidentiality provisions of any agreement to which
the Company or any of its Subsidiaries is a party.
SECTION 7.7. ▇▇▇▇▇▇▇ NON-COMPETITION.
(a) ▇▇▇▇▇▇▇ hereby covenants and agrees that it will not, and
will not permit any of its controlled Affiliates to, directly or
indirectly and whether by itself or in combination with other Persons (and
whether as owner, shareholder, partner, member or in any other capacity),
for a period of three years following the Closing Date, anywhere in North
America or any other geographic region or location in which the business
of the Company and its Subsidiaries has been conducted in a material
manner during the prior 12 months, engage or participate in, conduct,
advise, own, manage, operate, control or invest in or consult with any
Person whose business (including the business of any subsidiary or
controlled Affiliate of such Person) derives at least 25% of its aggregate
gross revenue from developing, marketing, or providing genetic or
diagnostic testing services that are competitive with the testing services
provided by the Company and its Subsidiaries (i) as of the Closing Date
and (ii) following the Closing Date, also any additional genetic or
diagnostic testing services subsequently developed by the Company in
neurology or endocrinology (a "Competitive Person"); provided that ▇▇▇▇▇▇▇
and its Affiliates shall be permitted to make non-controlling, passive
investments in a Competitive Person if such investment, in the aggregate
for ▇▇▇▇▇▇▇ and its Affiliates, constitutes less than five percent of all
of the outstanding capital stock, equity interests and other securities of
such Person (taking into account any warrants, options, convertible
securities or similar interests and rights to acquire such securities and
interests, whether or not actually exercised or converted).
(b) ▇▇▇▇▇▇▇ acknowledges and agrees that the restrictive
covenants and other agreements contained in this Section 7.7 are an
essential part of this Agreement, the Merger and the other transactions
contemplated hereby. It is the intention of the parties hereto that if any
of the restrictions or covenants contained herein are held to cover a
geographic area or to be for a length of time that is not permitted by
Applicable Laws, or is in any way construed to be too broad or to any
extent invalid, such provision shall not be construed to be null, void and
of no effect, but to the extent such provision would then be valid or
enforceable under Applicable Laws, such provision shall be construed and
interpreted or reformed to provide for a restriction or covenant having
the maximum enforceable geographic area, time period and other provisions
as shall be valid and enforceable under Applicable Laws.
SECTION 7.8. OFFICERS' AND DIRECTORS' INDEMNIFICATION.
(a) Subject to Applicable Laws, Parent and MergerCo agree that
all rights to indemnification or exculpation existing in favor of, and all
limitations on the
40
personal liability of, each present and former director, officer,
employee, fiduciary and agent of the Company and its Subsidiaries on or
prior to the Effective Time provided for in the respective charters or
by-laws as of the date hereof shall continue in full force and effect in
all material respects for a period of six (6) years from the Effective
Time; provided, however, that all rights to indemnification in respect of
any claims asserted or made within such period shall continue until the
disposition of such claim.
(b) At the Effective Time, the Surviving Corporation shall
purchase an extended reporting period endorsement under the Company's
existing directors' and officers' liability insurance coverage (or
otherwise obtain similar insurance) for the Company's directors and
officers at the Effective Time in a form reasonably acceptable to the
Company that shall provide such directors and officers with coverage for
six (6) years following the Effective Time on terms not materially less
favorable to the insured persons than the directors' and officers'
liability insurance coverage presently maintained by the Company, so long
as the aggregate cost is not more than $500,000. In the event that the
cost for such coverage exceeds $500,000, the Surviving Corporation shall
enter into any agreement to spend up to that amount to purchase such
lesser coverage as may be obtained with such amount. Parent shall, and
shall cause the Surviving Corporation to, maintain such policy in full
force and effect, and continue to honor the obligations thereunder.
(c) Subject to Applicable Laws, the obligations under this
Section 7.8 shall not be terminated or modified in such a manner as to
materially adversely affect any Indemnified Party (as defined in Section
7.8(d)) to whom this Section 7.8 applies without the consent of such
Indemnified Party (it being expressly agreed that the Indemnified Parties
to whom this Section 7.8 applies shall be third party beneficiaries of
this Section 7.8 and shall be entitled to enforce the covenants contained
herein).
(d) For the purposes of this Section 7.8, "Indemnified Party"
means any person who is now, or has been at any time prior to the date
hereof, or who becomes prior to the Effective Time, an individual entitled
to indemnification pursuant to the charter or by-laws of the Company or
one of its Subsidiaries or the terms of the existing directors and
officers' insurance policy of the Company as in effect at the Effective
Time.
SECTION 7.9. EMPLOYEE BENEFIT ARRANGEMENTS.
(a) Parent and MergerCo shall ensure that, except as set forth
in Schedule 7.9(a), all persons who were employed by the Company and its
Subsidiaries immediately preceding the Closing Date, including those on
vacation, leave of absence or disability (the "Company Employees"), will
be employed by the Company as an at-will employee immediately after the
Closing Date, at not less than the same base rate of pay in effect for
such employee immediately prior to the Closing Date; provided that such
Company Employee executes Parent's form of Agreement Relating to
Confidential Information, Intellectual Property and Additional Covenants
and agrees to be bound by
41
the Parent Code of Conduct and Corporate Policies applicable to all
employees of Parent. During the period commencing on the date of this
Agreement through the Closing, neither the Company nor any of its
Subsidiaries shall effectuate a "mass layoff" or "plant closing" within
the meaning of WARN or any similar foreign, state or local law affecting
any site of employment or facility of the Company or any of its
Subsidiaries. Within five (5) business days prior to the Closing, the
Company shall provide Parent with a list setting forth the number of
employees terminated from each site of employment of the Company and each
of its Subsidiaries during the 90-day period ending on the Closing Date
for reasons qualifying as an "employment loss" under WARN or any similar
foreign, state or local law, and the date of each such termination. For a
period of 90 days after the Closing, Parent shall not cause the Company to
effectuate a "mass layoff" as that term is defined in WARN, or comparable
conduct under any applicable foreign, state or local law, affecting any
facility, site of employment, operating unit of the Company or any of its
Subsidiaries without complying with WARN or other Applicable Law.
(b) Each of Parent and MergerCo acknowledges that consummation
of the transactions contemplated by this Agreement will constitute a
change in control of the Company (to the extent such concept is
applicable) for purposes of the Company Plans. From and after the Closing,
as applicable, Parent, MergerCo and the Surviving Corporation will honor
in accordance with their terms all cash bonus plans, stock option and
stock incentive plans, employment agreements, consulting agreements,
change-of-control agreements and severance agreements or other plans
between the Company and its Subsidiaries and any officer, director or
employee of the Company or such Subsidiary in effect prior to the Closing
Date. Notwithstanding the foregoing, no provision of this Agreement shall
be deemed to (i) guarantee employment for any period of time for, or
preclude the ability of Parent or any affiliate to terminate the
employment or service of any Company Employee for any reason or (ii)
require Parent or any affiliate to continue any Company Plan or prevent
the amendment, modification or termination thereof after the Closing Date.
(c) For a period of six (6) months following the Effective
Time, Parent shall, and shall cause the Surviving Corporation to, continue
to provide Company Employees with employee benefits, programs and
arrangements (other than deferred compensation plans or equity plans) that
are no less favorable in the aggregate than either (i) those in effect for
Company Employees immediately preceding the Effective Time or (ii) those
provided to similarly situated employees by Parent, as determined in
Parent's sole discretion. Subject to the requirements of Applicable Law
and unless such recognition of service would result in a duplication of
benefits, Parent shall, and shall cause the Surviving Corporation to,
treat, and cause the applicable benefit plans to treat, the service of
Company Employees with the Company or the Subsidiaries of the Company
attributable to any period before the Effective Time as service rendered
to Parent or the Surviving Corporation for purposes of eligibility to
participate, vesting and for other appropriate purposes, including, but
not limited to, applicability of minimum
42
waiting periods for participation, excluding for these purposes benefit
accrual under any defined benefit pension plan. Without limiting the
foregoing, Parent shall not, and shall cause the Surviving Corporation not
to, treat any Company Employee as a "new" employee for purposes of any
exclusions under any health or similar plan of Parent or the Surviving
Corporation for a pre-existing medical condition, and any deductibles and
co-pays paid under any of the Company's or any of the Subsidiaries' health
plans shall be credited towards deductibles and co-pays under the health
plans of Parent or the Surviving Corporation, other than limitation or
waiting periods that are already in effect with respect to such Company
Employee and have not been satisfied as of the Closing Date and to the
extent such co-payments and deductibles would be credited under any
Company Plan. Parent shall, and shall cause the Surviving Corporation, to
make appropriate arrangements with its insurance carrier(s) to ensure such
results.
(d) Within 5 Business Days after the date hereof, the Company
shall deliver to Parent a schedule ("Schedule 7.9(d)") setting forth, with
respect to each employee of the Company and its Subsidiaries that will
exercise or cash out Options pursuant to Section 2.2, (i) such employee's
estimated compensation subject to social security taxes for calendar year
2006, (ii) the portion of such compensation projected to have been paid to
such employee as of the Closing Date, and (iii) the estimated amount of
such employee's proceeds from the exercise or cash out of the Options
pursuant to Section 2.2 , such Schedule 7.9(d) to be reasonably acceptable
to Parent Such Schedule 7.9(d) shall be revised as necessary as part of
the determination of the amount of Net Working Capital.
SECTION 7.10. NOTICE OF CERTAIN MATTERS. From the date hereof to the
Closing Date, Parent and the Company shall promptly advise the other party in
writing upon acquiring knowledge of any event, circumstance, occurrence or fact
that would cause any of the conditions set forth in Sections 8.1 and 8.3, in the
case of Parent, and Sections 8.1 and 8.2, in the case of the Company, not to be
satisfied on or prior to the time in which this Agreement is terminated pursuant
to Section 10.1.
SECTION 7.11. BOOKS AND RECORDS. Parent and MergerCo shall, and
shall cause the Surviving Corporation and each Subsidiary to, until the seventh
anniversary of the Closing Date, retain all books, records and other documents
pertaining to the business of the Company and its Subsidiaries in existence on
the Closing Date and to make the same available for inspection and copying by
the Stockholders or any of the representatives of such Stockholders at the
expense of such Stockholders during the normal business hours of Parent,
MergerCo, the Surviving Corporation or such Subsidiary, as applicable, upon
reasonable request and upon reasonable notice.
SECTION 7.12. TERMINATION OF CERTAIN AGREEMENTS. Immediately prior
to and contingent upon the Effective Time, the Company shall, and shall cause
each of its Subsidiaries to, terminate all Affiliate Arrangements, except for
those set forth on Schedule 4.19(b), and, in each case, any amounts, liabilities
or obligations owed or existing thereunder
43
shall have been terminated or repaid or satisfied and the Company and its
Subsidiaries shall be fully and irrevocably released from any liability or
obligation thereunder, except to the extent any such amounts are Company
Expenses.
SECTION 7.13. FURTHER ACTION. Each of the parties hereto shall use
its respective reasonable best efforts to take or cause to be taken all
appropriate action, do or cause to be done all things necessary, proper or
advisable and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
SECTION 7.14. TAX MATTERS.
(a) Pre Closing Taxes, Tax Returns and Tax Proceedings. From
the date of this Agreement until Closing, the Company and its Subsidiaries
shall: (i) duly and timely file or cause to be filed (taking into account all
valid extensions) all Tax Returns required to be filed on or prior to the
Closing Date, and all such Tax Returns shall be prepared in a manner consistent
with past practice, except as otherwise required by law, (ii) timely pay or
cause to be paid all Taxes required to be paid (taking into account all valid
extensions) on or prior to the Closing Date and (iii) promptly notify Parent of
any Tax Proceeding arising during such period (or any significant developments
with respect to any ongoing Tax Proceeding) with respect to any Tax or Tax
Return.
(b) Closing Date; Straddle Period Tax Returns. To the extent
permitted under applicable law, the Parties shall treat the Closing Date as the
last day of the taxable year of each of the Company and its Subsidiaries for all
Tax purposes. In the case of any taxable period that begins on or prior to and
ends after the Closing Date (a "Straddle Period"), the amount of any Taxes based
on or measured by income or receipts of the Company and any of its Subsidiaries
that is allocable to the pre-Closing portion of such Straddle Period
("Pre-Closing Portion") or the post-Closing portion of such Straddle Period
("Post-Closing Portion") shall be determined based on an interim closing of the
books as of the close of business on the Closing Date, and other Taxes for a
Straddle Period shall be prorated between, and allocated to, the Pre-Closing
Portion and the Post-Closing Portion based on the number of days included in
each such portion relative to the total number of days included in such Straddle
Period.
(c) Tax Return Preparation.
(i) Following the Closing, Parent shall prepare and
file, or shall cause to be prepared and filed, all Tax Returns of the
Surviving Corporation and its Subsidiaries required to be filed after the
Closing Date. To the extent that the Common Equity Holders have an
indemnification obligation pursuant to Section 9.2 of this Agreement, (A)
such Tax Return shall be prepared in a manner consistent with prior
practice unless such prior practice has been determined to be incorrect or
a contrary treatment is required by applicable law (or judicial or
administrative interpretations thereof); (B) Parent shall provide the
Stockholders' Representative with copies of such
44
Tax Return and a statement calculating related indemnification obligation
of and/or amount due from the Common Equity Holders at least 30 days prior
to the due date for filing such Tax Return (giving effect to applicable
extensions); and (C) the Stockholders' Representative shall have the right
to provide comments and proposed amendments in writing for 15 days
following receipt thereof. The failure of the Stockholders' Representative
to propose any changes to any such Tax Return within such 15 days shall be
deemed to be an indication of its approval thereof. Parent and
Stockholders' Representative shall attempt in good faith mutually to
resolve any dispute regarding such Tax Returns prior to such due date for
filing thereof. If Parent and Stockholders' Representative cannot reach an
agreement regarding such dispute, the dispute shall be presented to the
Accounting Referee the determination of which shall be binding upon both
parties, provided, however, that Parent and Stockholders' Representative
shall require the Accounting Referee to use its best effort to ensure that
such determination is made within ten (10) days but in no event later than
five (5) days prior to the due date for the filing of such Tax Return. If
the Accounting Referee cannot make its determination within such time
frame, Parent shall file the Tax Return as originally proposed subject
only to those adjustments mutually agreed by Parent and Stockholders'
Representative. To the extent necessary, amendments to any such Tax Return
shall be filed based on the Accounting Referee determination.
(ii) Notwithstanding anything to the contrary contained
in this Agreement, each party shall be responsible for its own costs and
expenses incurred in connection with this Section 7.14(c); provided,
however, that all costs and expenses of the Accounting Referee shall be
paid 50% by the Common Equity Holders and 50% by Parent.
(iii) With respect to each Tax Return filed following
the Closing by or on behalf of the Surviving Corporation and any of its
Subsidiaries for a Straddle Period (a "Straddle Period Tax Return") or for
any period ending on or before the Closing Date (a "Pre-Closing Tax
Return"), no later than three (3) days prior to the due date of such Tax
Return, the Common Equity Holders shall pay to Parent, in immediately
available funds, an amount equal to the amount of Taxes (including
disputed amounts) for such Straddle Period that are allocable to the
Pre-Closing Portion of the Straddle Period and all Taxes for periods
included in any Pre-Closing Tax Return all as determined in accordance
with the provisions of Section 7.14(h) of this Agreement (but only to the
extent such amounts have not been taken into account in determining Net
Working Capital). Nothing contained in Section 7.14 (including all
subsections thereof) shall be interpreted as (A) limiting the
Parent/MergerCo Indemnified Parties' rights to indemnification from the
Common Equity Holders pursuant to Section 9.2 or (B) increasing the amount
for which the Common Equity Holders are liable pursuant to Section 9.2.
(iv) Except as set forth in Section 7.14(h) with respect
to Special Items, Parent shall not amend any Tax Returns of the Company or
its
45
Subsidiaries filed for any taxable period or portion thereof ending on or
prior to the Closing Date without the prior written consent of the
Stockholders' Representative (which consent shall not be unreasonably
withheld, conditioned or delayed).
(d) Cooperation. Following the Closing, Parent, the Surviving
Corporation and the Stockholders' Representative shall (i) cooperate fully in
preparing for any Tax Proceedings with any Governmental Authority or with
respect to any matters with respect to Taxes of or relating to the Company or
the Subsidiaries and (ii) make available to the other Party and to any
Governmental Authority as reasonably requested all information, records, and
documents relating to Tax matters of or relating to the Company or the
Subsidiaries. Each Party shall keep any information obtained under this Section
7.14(d) confidential except (x) as may be necessary in connection with the
filing of Tax Returns or claims for refund or the conduct of any Tax Proceeding
or (y) with the consent of the other Parties.
(e) Transfer Taxes. Parent shall bear and be liable for and
hold the holders of Company Stock and Options harmless against any transfer,
value added, excise, stock transfer, stamp, recording, registration and any
similar Taxes ("Transfer Taxes") that become payable in connection with the
Merger and other transactions contemplated hereby. The parties hereto shall
cooperate in filing such forms and documents as may be necessary to permit any
such Transfer Tax to be assessed and paid on or prior to the Closing Date in
accordance with any available pre-sale filing procedure, and to obtain any
exemption or refund of any such Transfer Tax.
(f) Tax Proceedings.
(i) Subject to this Section 7.14(f), Parent shall have
the right to control any Tax Proceedings with respect to the Surviving
Corporation and any of its Subsidiaries.
(ii) If a Governmental Authority commences a Tax
Proceeding which, if successful, would result in indemnification
obligation of the Common Equity Holders pursuant to Section 9.2 of this
Agreement (an "Indemnified Tax Claim"), Parent shall, promptly upon
receipt of a written notice regarding such Tax Proceeding, inform the
Stockholders' Representative thereof. The failure of Parent to timely
notify Stockholders' Representative in accordance with the immediately
preceding sentence shall not relieve the Common Equity Holders of their
obligation to pay such liability for Taxes unless and only to the extent
that the failure timely to provide such notification materially prejudices
the ability of Common Equity Holders and the Stockholders' Representative
to contest such liability for Taxes.
(iii) The Stockholders' Representative shall have the
right to control any such Tax Proceeding with respect to a Pre-Closing Tax
Return but only with respect and to the extent of the Indemnified Tax
Claim. The Stockholders' Representative shall notify Parent in writing if
it elects not to so control within ten (10)
46
days of being notified about the Tax Proceeding. The Stockholders'
Representative shall act diligently and in good faith and shall bear its
own costs and expenses with respect thereto; provided that the
Stockholders' Representative shall not enter into any settlement
agreement, compromise or otherwise dispose of such Indemnified Tax Claim
without the prior written consent of Parent (which consent shall not be
unreasonably withheld, conditioned or delayed). Parent shall be entitled
to participate at its own cost and expense in any such Tax Proceeding
(including, without limitation, by attending meetings, reviewing documents
and submissions prior to being made and receiving copies of
correspondences with any Governmental Authority).
(iv) Parent shall diligently and in good faith control
any Tax Proceedings related to an Indemnified Tax Claim with respect to a
Straddle Period Tax Return and with respect to a Pre-Closing Tax Return if
Stockholders' Representative elects not to control pursuant to Section
7.14(f)(iii) including any compromise or settlement thereof; provided that
Parent shall not enter into any settlement agreement, compromise or
otherwise dispose of an Indemnified Tax Claim without the prior written
consent of the Stockholders' Representative (which consent shall not be
unreasonably withheld, conditioned or delayed). Stockholders'
Representative shall be entitled to participate at its own cost and
expense in any such Tax Proceeding (including, without limitation, by
attending meetings, reviewing documents and submissions prior to being
made and receiving copies of correspondences with any Governmental
Authority).
(g) Notwithstanding anything to the contrary contained in this
Agreement in the event of a conflict between the provisions of this
Section 7.14 and any other provision of this Agreement (including, without
limiting to, the provisions of Section 9.2(d)) this Section 7.14 shall
govern and control.
(h) Tax Treatment of Special Items. Notwithstanding anything
to the contrary in this Agreement:
(i) Parent shall have the sole discretion as to the
manner in which the Special Items are reflected in any Tax Return, any
related statement or calculation or any amendment thereof.
(ii) Parent shall have the sole control over any Tax
Proceeding regarding any or all of the Special Items and shall have the
authority to settle, dispose or compromise such Tax Proceeding as it
relates to such Special Items without the consent of Stockholders'
Representative. In addition, the Stockholders' Representative shall not
have the right to participate in any such Tax Proceedings to the extent
related to the Special Items.
(iii) The obligations of the Stockholders'
Representative and/or the Common Equity Holders with respect to the
payment and/or reimbursement of any Taxes pursuant to Sections
7.14(c)(iii) and 9.2(a)(iii) shall be calculated
47
by determining the Taxes for any applicable period without taking
into account the Tax treatment of the Special Items.
(iv) For the for the avoidance of doubt, nothing
contained in this Section 7.14(h) shall be interpreted as limiting
the Parent/MergerCo Indemnified Parties' rights to indemnification
from the Common Equity Holders pursuant to Section 9.2(a)(i) or
Section 9.2(a)(ii) (including, without limitation, breach of the
representation under Section 4.9(f)).
ARTICLE VIII - CONDITIONS TO THE MERGER
SECTION 8.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger are
subject to the fulfillment or waiver by consent of the other party, where
permissible, at or prior to the Effective Time, of each of the following
conditions:
(a) ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act. The waiting period (and any
extension thereof) applicable to the consummation of the Merger under the
HSR Act shall have expired or been terminated.
(b) No Injunctions, Orders or Restraints; Illegality. No
preliminary or permanent injunction or other order, judgment, law,
regulation, decree or ruling or other legal restraint or prohibition
issued, enacted or promulgated by a court or other Governmental Authority
of competent jurisdiction nor any statute, rule, regulation or executive
order promulgated or enacted by any court or Governmental Authority of
competent jurisdiction shall be in effect that would have the effect of
(i) making the consummation of the Merger illegal or (ii) otherwise
prohibiting or preventing the consummation of the Merger.
SECTION 8.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND
MERGERCO. The obligations of Parent and MergerCo to effect the Merger are
further subject to the satisfaction of the following conditions, any one or more
of which may be waived (other than the condition set forth in the first sentence
of Section 8.2(h)) by Parent (on behalf of itself and MergerCo) at or prior to
the Effective Time:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement and the
representations and warranties of the Common Equity Holders set forth in
the Indemnification Agreement shall be true and correct at and as of the
date hereof and at and as of the Closing Date with the same effect as
though each such representation and warranty had been made on and as of
the Closing Date (except to the extent that any such representation or
warranty expressly speaks to a specified date, in which case such
representation or warranty shall be true and correct as of such specified
date) without giving effect to any qualifiers or
48
exceptions relating to materiality or Company Material Adverse Effect;
provided that such representations and warranties shall be deemed to be
true and correct unless the failure or failures of such representations
and warranties to be so true and correct (without giving effect to any
qualifiers or exceptions relating to materiality or Company Material
Adverse Effect) do not have and would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect.
(b) Performance and Obligations of the Company. The
Company, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ Capital shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time and each Common Equity Holder shall have performed or
complied in all material respects with all agreements and covenants
required by the Indemnification Agreement to be performed or complied with
by it on or prior to the Effective Time.
(c) Officer's Certificate. The Company shall have
delivered to Parent a certificate as to the matters contained in
paragraphs (a) and (b) of this Section 8.2, dated as of the Closing Date,
signed by a senior executive officer of the Company.
(d) Secretary's Certificate. The Company shall have
delivered a certificate of the Secretary of the Company, dated as of the
Closing Date, certifying as to (i) the incumbency of officers of the
Company executing documents executed and delivered in connection herewith,
(ii) the copies of the Certificate of Incorporation and By-Laws, each as
in effect from the date of this Agreement until the Closing Date and (iii)
a copy of the votes of the Company Board and the Stockholders authorizing
and approving the applicable matters contemplated hereunder.
(e) Third Party Consents. The consents or approvals of
all Persons set forth in Schedule 8.2(e) shall have been obtained and
shall be in full force and effect.
(f) Terminated Contracts. The Company shall have
terminated all Affiliate Arrangements, except for those set forth on
Schedule 4.19(b), and all amounts or obligations due or owing under such
Affiliate Arrangements will have been fully discharged and released in
accordance with Section 7.12.
(g) Escrow Agreement; Indemnification Agreement. (i) The
Stockholders' Representative shall have executed and delivered the Escrow
Agreement and such agreement shall be in full force and effect and (ii)
Common Equity Holders owning not less than 90% of the outstanding Company
Stock (measured on an as-exercised and as-converted to Common Stock basis)
immediately prior to the Effective Time shall have executed and delivered
the Indemnification Agreement and such Agreement shall be in full force
and effect with respect to each such Common Equity Holder.
49
(h) Written Consent; Stockholder Dissent. The Company
shall have duly and validly obtained, and delivered to Parent a copy of,
the Written Consent, and holders of not more than five percent (5%) of the
shares of the Company shall have exercised and perfected appraisal rights
in accordance with Section 262 of the DGCL.
(i) Excess Parachute Payments. No amount required to be
paid or payable to or with respect to any employee or other service
provider of the Company or any of its Subsidiaries in connection with the
transactions contemplated hereby (either solely as a result thereof or as
a result of such transactions in conjunction with any other event) would
be an "excess parachute payment" within the meaning of Section 280G of the
Code; provided, however, that the Closing shall not be considered a waiver
by Parent/MergerCo Indemnified Parties of their right to indemnification
under Section 9.2(b) with respect to the matters covered by this Section
8.2(i).
(j) FIRPTA Certificate. The Company and/or ▇▇▇▇▇▇▇
Capital shall have delivered to Parent a certificate that complies with
Section 1445 of the Code to the effect that the Company is not a United
States real property holding corporation (the "FIRPTA Certificate");
provided, however, that if the Company and ▇▇▇▇▇▇▇ Capital fail to deliver
the FIRPTA Certificate, Parent shall proceed with the Closing and shall
withhold from the Merger Consideration the amounts so required to be
withheld.
SECTION 8.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to effect the Merger is further subject to the
satisfaction of the following conditions, any one or more of which may be waived
by the Company at or prior to the Effective Time:
(a) Representations and Warranties. The representations
and warranties of Parent and MergerCo set forth in this Agreement shall be
true and correct at and as of the date hereof and at and as of the Closing
Date with the same effect as though each such representation and warranty
had been made on and as of the Closing Date (except to the extent that any
such representation or warranty expressly speaks to a specified date, in
which case such representation or warranty shall be true and correct as of
such specified date) without giving effect to any qualifiers or exceptions
relating to materiality; provided that such representations and warranties
shall be deemed to be true and correct unless the failure or failures of
such representations and warranties to be so true and correct (without
giving effect to any qualifiers or exceptions relating to materiality) do
not have and would not reasonably be expected to have, individually or in
the aggregate, a Parent Material Adverse Effect.
(b) Performance of Obligations of Parent and MergerCo.
Each of Parent and MergerCo shall have performed or complied in all
material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the
Effective Time.
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(c) Officer's Certificate. Parent shall have delivered
to the Company a certificate as to the matters contained in paragraphs (a)
and (b) of this Section 8.3, dated as of the Closing Date, signed by a
senior executive officer of Parent.
(d) Escrow Agreement and Indemnification Agreement.
Parent and MergerCo shall have executed and delivered the Escrow Agreement
and Indemnification Agreement and such agreements shall be in full force
and effect.
ARTICLE IX - SURVIVAL OF REPRESENTATIONS
AND WARRANTIES; INDEMNIFICATION
SECTION 9.1. SURVIVAL. Subject to the limitations and other
provisions of this Agreement, the representations and warranties of the parties
hereto contained herein, as the case may be, shall survive the Closing and shall
remain in full force and effect until the date that is six months after the
Closing Date; provided that such period shall not apply to the representations
and warranties set forth in (a) Sections 4.1(b), 4.2 and 4.3(a) (each an
"Excluded Representation and Warranty" and collectively, the "Excluded
Representations and Warranties"), each of which shall survive forever, and (b)
Section 4.8 (the "Tax Representations and Warranties"), each of which shall
survive until the expiration of the applicable statute of limitations with
respect thereto; provided further, that any claim by a party for indemnification
hereunder prior to such date that has not been completely and finally resolved
prior to such earlier date shall survive until such time as such claim is
resolved, completely and finally. Any covenant or other agreement herein, any
portion of the performance of which may or is specified to occur after the
Closing, shall survive the Closing hereunder indefinitely or for such lesser
period of time as may be specified herein.
SECTION 9.2. INDEMNIFICATION BY THE COMMON EQUITY HOLDERS.
(a) Subject to the other terms and conditions of this
Agreement, each of the Common Equity Holders agrees, severally and not
jointly, to indemnify, defend and hold harmless (through participation in
the Escrow Fund only, except as set forth in Section 9.2(b)(iii) below)
Parent, MergerCo, their respective successors and assigns and their
respective officers, directors, employees, stockholders, agents and
Affiliates (including the Company and its Subsidiaries) (each a
"Parent/MergerCo Indemnified Party") from and against any Losses (as
defined in Section 11.7) arising from, relating to or resulting from (i)
any inaccuracy in or breach of any representation or warranty of the
Company herein or any certificate or document delivered by the Company or
any Common Equity Holder pursuant to this Agreement (to the same extent as
if such representation or warranty was made, or certificate or document
delivered, by the Common Equity Holder) without regard to any Company
Material Adverse Effect or materiality qualifications, (ii) any breach of
or failure to perform any covenant or agreement of the Company, ▇▇▇▇▇▇▇
Capital or ▇▇▇▇▇▇▇ contained herein (to the same extent as if such
covenant or agreement was made by the Common Equity Holder), (iii)
51
Taxes other than Excluded Taxes (as defined below) of the Company or any
of its Subsidiaries in respect of any period or portion thereof
(determined in accordance with Section 7.14(b)) ending, or any transaction
or business occurring, on or before the close of business on the Closing
Date, including for this purpose any Taxes for which the Company or any of
its Subsidiaries are liable pursuant to Section 1.1502-6 of the Treasury
Regulations (or any similar provision of state, local or foreign law),
(iv) acts of fraud by the Company, any of its employees, or any Common
Equity Holder and (v) the matter set forth in Schedule 9.1.
"Excluded Taxes" shall mean (a) any Taxes of the Company or any of
its Subsidiaries arising from transactions (other than transactions
contemplated in this Agreement) outside the ordinary course of business
that occur on the Closing Date but after the Effective Time and (b) the
aggregate amount of the employer's share of payroll taxes payable by the
Company and its Subsidiaries as a result of the exercise or cash out of
the Options pursuant to Section 2.2.
(b) The Parent/MergerCo Indemnified Parties' indemnification
rights pursuant to Section 9.2(a) shall be limited as follows:
(i) The Parent/MergerCo Indemnified Parties shall not be
entitled to any indemnification until the aggregate dollar amount of all
Losses that would otherwise be indemnifiable pursuant to Section 9.2(a)
exceeds $1,400,000 (the "Deductible"), and then only to the extent that
aggregate Losses exceed such Deductible. Notwithstanding the foregoing,
this Section 9.2(b)(i) shall not apply to (x) claims made under Section
9.2(a)(i) with respect to the Excluded Representations and Warranties,
Section 9.2(a)(ii) with respect to claims for a breach of Section 7.7 only
and Section 9.2(a)(iv) and (y) claims in respect of the matter set forth
in Schedule 9.1.
(ii) The Parent/MergerCo Indemnified Parties shall not
be entitled to indemnification for indemnifiable Losses hereunder in
excess of the aggregate amount of the Escrow Fund. Notwithstanding the
foregoing, and subject to Section 9.2(b)(iii) below, this Section
9.2(b)(ii) shall not apply to claims made under Section 9.2(a)(i) with
respect to the Excluded Representations and Warranties, Section 9.2(a)(ii)
with respect to claims for a breach of Section 7.7 only and Section
9.2(a)(iv).
(iii) Notwithstanding any other provision of this
Agreement, and in accordance with the terms of the Indemnification
Agreement, the Common Equity Holders hereby agree to severally indemnify
and hold harmless the Parent/MergerCo Indemnified Parties for
indemnifiable Losses under Section 9.2(a)(i) with respect to Excluded
Representations and Warranties, Section 9.2(a)(ii) with respect to
breaches of Section 7.7 only and Section 9.2(a)(iv) in excess of the
Escrow Fund; provided that, with respect to indemnifiable Losses
52
under such Sections, claims for indemnification shall be made first
against the Escrow Fund, and then only after the Escrow Fund is fully
exhausted or previously released, a Parent/MergerCo Indemnified Party may
seek recourse directly against the Common Equity Holders for
indemnification hereunder.
(iv) In no event shall any Common Equity Holder be
obligated to indemnify a Parent/MergerCo Indemnified Party for any Loss
pursuant to this Article IX in excess of such Common Equity Holder's pro
rata portion of such Loss, which pro rata portion shall, except as set
forth in the Indemnification Agreement, be equal to such Common Equity
Holder's pro rata portion of the Aggregate Common Equity Holder
Consideration, nor shall any Common Equity Holder be obligated to
indemnify a Parent/MergerCo Indemnified Party hereunder for any amount in
excess of such Common Equity Holder's pro rata portion of the Aggregate
Common Equity Holder Consideration.
(v) Except as set forth below, no indemnification shall
be payable to a Parent/MergerCo Indemnified Party with respect to claims
asserted by such Parent/MergerCo Indemnified Party after the date that is
six months after the Closing Date (the "Indemnification Cut-Off Date");
provided that any matter as to which a claim has been asserted by timely
notice that is pending or unresolved at the end of any applicable
limitation period under this Article IX shall continue to be covered by
this Article IX notwithstanding any applicable statute of limitations
(which the parties hereby waive solely with respect to such circumstances)
or the expiration date described in the immediately preceding sentence of
this Section 9.2(b)(v) until such matter is finally terminated or
otherwise resolved by the parties under this Agreement or by a court of
competent jurisdiction and any amounts payable hereunder are finally
determined and paid. Notwithstanding the foregoing, this Section 9.2(b)(v)
shall not apply to claims by a Parent/MergerCo Indemnified Party under (A)
Section 9.2(a)(i) only with respect to the Excluded Representations and
Warranties, for which claims may be made forever, or the Tax
Representations and Warranties, for which claims may be made until the
expiration of the applicable statute of limitations, (B) Section
9.2(a)(ii), for which claims may be made any time during such time as the
particular covenant is required to be performed under this Agreement, (C)
Section 9.2(a)(iii), for which claims may be made until 90 days following
the expiration of the applicable statute of limitations, (D) Section
9.2(a)(iv), for which claims may be made until the expiration of the
applicable statute of limitations, and (E) Section 9.2(a)(v), for which
claims may be made until the date that is three years after the Closing
Date.
(c) The amount of any Loss subject to indemnification under this
Section 9.2 shall be calculated net of any insurance proceeds received by the
Parent/MergerCo Indemnified Party on account of such Loss. The Parent/MergerCo
Indemnified Party shall use commercially reasonable efforts to seek recovery for
such
53
Loss recovery under any insurance policies covering such Loss. In the event
that an insurance recovery is received by any Parent/MergerCo Indemnified Party
with respect to any Loss for which any such Person has been indemnified
hereunder, then a refund equal to the aggregate amount of the recovery shall be
made promptly to the Person or Persons that provided such indemnity payments to
such Parent/MergerCo Indemnified Party. The indemnifying party shall be
subrogated to all rights of the Parent/MergerCo Indemnified Party in respect of
any Loss borne by the indemnifying party.
(d) A Parent/MergerCo Indemnified Party shall give the Stockholders'
Representative written notice of any Third-Party Claim (as defined in Section
11.7) in respect of which such Parent/MergerCo Indemnified Party may request
indemnification hereunder or as to which the Deductible may be applied as soon
as is practicable and in any event within thirty (30) days of the time that such
Parent/MergerCo Indemnified Party receives written notice of such claim or
proceeding; provided, however, that the failure to so notify the Stockholders'
Representative shall not affect the rights of the Parent/MergerCo Indemnified
Parties to indemnification hereunder except to the extent that the Common Equity
Holders are prejudiced by such failure and such failure results in a lack of
actual notice to the Stockholders' Representative. Within 30 days after receipt
of such notice, the Stockholders' Representative shall have the right to elect,
at its option and through counsel of its own choosing, to assume the defense or
settlement of any such Third-Party Claim at its own expense. If the
Stockholders' Representative elects to assume the defense of any such
Third-Party Claim, the Stockholders' Representative shall promptly, but in any
event within 10 Business Days of the receipt of notice from the Parent/MergerCo
Indemnified Party of such Third-Party Claim, notify the Parent/MergerCo
Indemnified Party of its intention to do so; provided that (i) counsel to be
utilized by the Stockholders' Representative in respect of such Third-Party
Claim and related proceeding shall be reasonably acceptable to Parent (it being
agreed that ▇▇▇▇▇▇▇ Procter LLP is reasonably acceptable to Parent), (ii)
subject to the control of the prosecution and defense of such Third-Party Claim
by the Stockholders' Representative and its counsel, the Parent/MergerCo
Indemnified Party and its counsel shall be kept fully informed as to all
material aspects of such Third-Party Claim and related proceedings and shall
have the right to participate fully in the prosecution and defense of such
Third-Party Claim at its own expense, (iii) the Stockholders' Representative and
its counsel shall promptly provide to Parent and its counsel all material
information related to such Third-Party Claim and related proceedings (including
copies of written information), (iv) Parent and MergerCo and their counsel shall
have their views regarding such Third-Party Claim considered in good faith by
the Stockholders' Representative and its counsel and (v) Parent and its counsel
shall have the right to consent, such consent not be unreasonably withheld, to
the settlement or compromise of such Third-Party Claim and related proceedings.
Subject to Applicable Laws, a Parent/MergerCo Indemnified Party shall provide
and shall cause the Company to provide, as applicable, upon reasonable notice,
the Stockholders' Representative and its counsel with reasonable access to its
records and personnel reasonably relating to any such claim, assertion, event or
proceeding during normal business hours and shall
54
otherwise cooperate with any reasonable request of the Stockholders'
Representative in the defense or settlement thereof; provided that (A) that such
cooperation does not unduly interfere with the business of the cooperating
party, (B) the requesting party shall reimburse the other party promptly for all
reasonable and necessary out-of-pocket costs and expenses incurred by such other
party in connection with any such request and (C) such other party shall not be
required to permit any of the foregoing activities that would (x) result in the
disclosure of any trade secrets of third parties, or any trade secrets of either
party or of any of their respective Affiliates unrelated to the transactions
contemplated by this Agreement, unless such disclosed trade secrets are
protected by an agreement of the third party plaintiff or an order of the court,
(y) violate any obligations of either party or their respective Affiliates to
any third party with respect to confidentiality or (z) reasonably be expected,
in the opinion of counsel, to have the effect of causing the waiver of any
attorney-client privilege. Subject to Applicable Laws, if the Stockholders'
Representative elects to direct the defense of any such claim or proceeding, the
Parent/MergerCo Indemnified Party shall not pay, or permit to be paid, any part
of any claim or demand arising from such asserted liability unless the
Stockholders' Representative consents in writing to such payment or unless the
Stockholders' Representative, subject to the last sentence of this Section
9.2(d), withdraws from the defense of such asserted liability or unless a final
judgment from which no appeal may be taken by or on behalf of the Common Equity
Holders is entered against the Parent/MergerCo Indemnified Party for such
liability. If the Stockholders' Representative receiving notice of a Third-Party
Claim does not elect to defend such Third-Party Claim or if the Stockholders'
Representative fails to defend in good faith or if, after commencing or
undertaking any such defense, the Stockholders' Representative fails to
prosecute in good faith or withdraws from such defense, the Parent/MergerCo
Indemnified Party shall have the right, in addition to any other right or remedy
it may have hereunder, to undertake the defense or settlement thereof, at the
Common Equity Holders' expense; provided, however, that the Parent/MergerCo
Indemnified Party shall not settle, compromise or discharge, or admit any
liability with respect to, any such Third-Party Claim without the written
consent of the Stockholders' Representative (which consent will not be
unreasonably withheld or delayed).
(e) No Parent/MergerCo Indemnified Party shall be entitled to
indemnification hereunder for any Loss arising from a breach of any
representation, warranty or covenant set forth herein (and the amount of any
Loss incurred in respect of such breach shall not be included in the calculation
of any limitations on indemnification set forth herein) to the extent that such
liability is accrued in the Estimated Net Working Capital or the Closing Working
Capital.
(f) Subject to Section 9.5, no breach of any representation,
warranty, covenant or agreement contained herein shall give rise to any right on
the part of Parent, MergerCo or a Parent/MergerCo Indemnified Party, after the
consummation of the transactions contemplated hereby, to rescind this Agreement
or any of the transactions contemplated hereby.
55
(g) The Parent/MergerCo Indemnified Parties shall not be
entitled to indemnification for any consequential, exemplary or punitive
damages or any multiple of damages unless such damages are assessed
against any of the Parent/MergerCo Indemnified Parties in a Third-Party
Claim. Parent, MergerCo and each Parent/MergerCo Indemnified Party shall
use commercially reasonable efforts, to the extent within their control,
to mitigate any Losses for which they reasonably believe indemnification
will be available pursuant to this Agreement.
(h) Any Loss for which any Parent/MergerCo Indemnified Party
is entitled to indemnification under this Section 9.2 shall be determined
without duplication of recovery by reason of the state of facts giving
rise to such Loss constitutes a breach of more than one representation,
warranty, covenant or agreement.
SECTION 9.3. INDEMNIFICATION BY PARENT AND MERGERCO.
(a) Subject to the other terms and conditions of this
Agreement, Parent and MergerCo agree, jointly and severally, to indemnify,
defend and hold harmless the holders of any Company Stock or Options and
any of their respective officers, directors, employees, stockholders,
agents and Affiliates (each a "Company Indemnified Party") from and
against any Losses arising from, relating to or resulting from (i) any
inaccuracy in or breach of any representation or warranty of Parent or
MergerCo herein or any certificate or document delivered by Parent or
MergerCo pursuant to this Agreement without regard to any Parent Material
Adverse Effect or materiality qualifications, (ii) any breach of or
failure to perform any covenant or agreement of Parent or MergerCo
contained herein or (iii) acts of fraud by Parent or MergerCo or any of
their employees.
(b) The Company Indemnified Parties' indemnification rights
pursuant to Section 9.3(a) shall be limited as follows:
(i) The Company Indemnified Parties shall not be
entitled to any indemnification until the aggregate dollar amount of
all Losses that would otherwise be indemnifiable pursuant to Section
9.3(a) exceeds the Deductible, and then only to the extent that
aggregate Losses exceed such Deductible. Notwithstanding the
foregoing, this Section 9.3(b)(i) shall not apply to claims made
under Section 9.3(a)(iii).
(ii) The Company Indemnified Parties shall not be
entitled to indemnification for indemnifiable Losses hereunder in
excess of the aggregate amount of the Escrow Fund. Notwithstanding
the foregoing, this Section 9.3(b)(ii) shall not apply to claims
made under Section 9.3(a)(iii).
(iii) No indemnification shall be payable to a Company
Indemnified Party with respect to claims asserted by such Company
Indemnified
56
Party after the Indemnification Cut-Off Date; provided that any
matter as to which a claim has been asserted by timely notice that
is pending or unresolved at the end of any applicable limitation
period under this Article IX shall continue to be covered by this
Article IX notwithstanding any applicable statute of limitations
(which the parties hereby waive solely with respect to such
circumstances) or the expiration date described in the immediately
preceding sentence of this Section 9.3(b)(iii) until such matter is
finally terminated or otherwise resolved by the parties under this
Agreement or by a court of competent jurisdiction and any amounts
payable hereunder are finally determined and paid. Notwithstanding
the foregoing, this Section 9.3(b)(iii) shall not apply to claims by
a Company Indemnified Party under (A) Section 9.3(a)(ii), for which
claims may be made any time during such time as the particular
covenant is required to be performed under this Agreement and (B)
Section 9.3(a)(iii), for which claims may be made until the
expiration of the applicable statute of limitations.
(c) The amount of any Loss subject to indemnification under
this Section 9.3 shall be calculated net of any insurance proceeds
received by the Company Indemnified Party on account of such Loss. The
Company Indemnified Party shall use commercially reasonable efforts to
seek recovery for such Loss recovery under any insurance policies covering
such Loss. In the event that an insurance recovery is received by any
Company Indemnified Party with respect to any Loss for which any such
Person has been indemnified hereunder, then a refund equal to the
aggregate amount of the recovery shall be made promptly to the Person or
Persons that provided such indemnity payments to such Company Indemnified
Party. The indemnifying party shall be subrogated to all rights of the
Company Indemnified Party in respect of any Loss borne by the indemnifying
party.
(d) A Company Indemnified Party shall give Parent and MergerCo
written notice of any Third-Party Claim in respect of which such Company
Indemnified Party may request indemnification hereunder or as to which the
Deductible may be applied as soon as is practicable and in any event
within thirty (30) days of the time that such Company Indemnified Party
receives written notice of such claim or proceeding; provided, however,
that the failure to so notify Parent and MergerCo shall not affect the
rights of the Company Indemnified Parties to indemnification hereunder
except to the extent that Parent and MergerCo are actually prejudiced by
such failure and such failure results in a lack of actual notice to Parent
and Merger Co. Within 30 days after receipt of such notice, Parent and
MergerCo shall have the right to elect, at its option and through counsel
of their own choosing, to assume the defense or settlement of any such
Third-Party Claim at their own expense. If Parent and MergerCo elect to
assume the defense of any such Third-Party Claim, Parent and MergerCo
shall promptly, but in any event within 10 Business Days of the receipt of
notice from the Company Indemnified Party of such Third-Party Claim,
notify the Company Indemnified Party of its intention to do so; provided
that (i) counsel to be utilized by Parent and MergerCo in respect of
57
such Third-Party Claim and related proceeding shall be reasonably
acceptable to the Company Indemnified Party (it being agreed that Skadden,
Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP is reasonably acceptable to the Company
Indemnified Party), (ii) subject to the control of the prosecution and
defense of such Third-Party Claim by Parent and MergerCo and their
counsel, the Company Indemnified Party and its counsel shall be kept fully
informed as to all material aspects of such Third-Party Claim and related
proceedings and shall have the right to participate fully in the
prosecution and defense of such Third-Party Claim at its own expense,
(iii) Parent and MergerCo and their counsel shall promptly provide to the
Company Indemnified Party and its counsel all material information related
to such Third-Party Claim and related proceedings (including copies of
written information), (iv) the Company Indemnified Party and its counsel
shall have their views regarding such Third-Party Claim considered in good
faith by Parent and MergerCo and their counsel and (v) the Company
Indemnified Party and its counsel shall have the right to consent, such
consent not be unreasonably withheld, to the settlement or compromise of
such Third-Party Claim and related proceedings. Subject to Applicable
Laws, a Company Indemnified Party shall provide, upon reasonable notice,
Parent and MergerCo and their counsel with reasonable access to its
records and personnel reasonably relating to any such claim, assertion,
event or proceeding during normal business hours and shall otherwise
cooperate with any reasonable request of Parent and MergerCo in the
defense or settlement thereof; provided that (A) that such cooperation
does not unduly interfere with the business of the cooperating party, (B)
the requesting party shall reimburse the other party promptly for all
reasonable and necessary out-of-pocket costs and expenses incurred by such
other party in connection with any such request and (C) such other party
shall not be required to permit any of the foregoing activities that would
(x) result in the disclosure of any trade secrets of third parties, or any
trade secrets of either party or of any of their respective Affiliates
unrelated to the transactions contemplated by this Agreement, unless such
disclosed trade secrets are protected by an agreement of the third party
plaintiff or an order of the court, (y) violate any obligations of either
party or their respective Affiliates to any third party with respect to
confidentiality or (z) reasonably be expected, in the opinion of counsel,
to have the effect of causing the waiver of any attorney-client privilege.
Subject to Applicable Laws, if Parent and MergerCo elect to direct the
defense of any such claim or proceeding, the Company Indemnified Party
shall not pay, or permit to be paid, any part of any claim or demand
arising from such asserted liability unless Parent and MergerCo consent in
writing to such payment or unless Parent and MergerCo, subject to the last
sentence of this Section 9.3(d), withdraw from the defense of such
asserted liability or unless a final judgment from which no appeal may be
taken by or on behalf of Parent or MergerCo is entered against the Company
Indemnified Party for such liability. If Parent or MergerCo receiving
notice of a Third-Party Claim does not elect to defend such Third-Party
Claim or if Parent and MergerCo fail to defend in good faith or if, after
commencing or undertaking any such defense, Parent and MergerCo fail to
prosecute in good faith or withdraw from such defense, the Company
Indemnified Party shall have the right, in addition to any other
58
right or remedy it may have hereunder, to undertake the defense or
settlement thereof, at Parent's and MergerCo's expense; provided, however,
that the Company Indemnified Party shall not settle, compromise or
discharge, or admit any liability with respect to, any such Third-Party
Claim without the written consent of Parent and MergerCo (which consent
will not be unreasonably withheld or delayed).
(e) No Company Indemnified Party shall be entitled to
indemnification hereunder for any Loss arising from a breach of any
representation, warranty or covenant set forth herein (and the amount of
any Loss incurred in respect of such breach shall not be included in the
calculation of any limitations on indemnification set forth herein) to the
extent that such liability is accrued in the Estimated Net Working Capital
or the Closing Working Capital.
(f) Subject to Section 9.5, no breach of any representation,
warranty, covenant or agreement contained herein shall give rise to any
right on the part of the Company or a Company Indemnified Party, after the
consummation of the transactions contemplated hereby, to rescind this
Agreement or any of the transactions contemplated hereby.
(g) The Company Indemnified Parties shall not be entitled to
indemnification for any consequential, exemplary or punitive damages or
any multiple of damages unless such damages are assessed against any of
the Company Indemnified Parties in a Third-Party Claim. The Company and
each Company Indemnified Party shall use commercially reasonable efforts,
to the extent within their control, to mitigate any Losses for which they
reasonably believe indemnification will be available pursuant to this
Agreement.
(h) Any Loss for which any Company Indemnified Party is
entitled to indemnification under this Section 9.3 shall be determined
without duplication of recovery by reason of the state of facts giving
rise to such Loss constitutes a breach of more than one representation,
warranty, covenant or agreement.
SECTION 9.4. TREATMENT OF INDEMNITY PAYMENTS. Unless otherwise
required by Applicable Law, all payments made by the Common Equity Holders,
Parent or MergerCo (or any of their respective Affiliates), as the case may be,
to or for the benefit of the other parties pursuant to Sections 2.7 or this
Article IX shall be treated as adjustments to the Merger Consideration for tax
purposes, and such agreed treatment shall govern for purposes of this Agreement.
SECTION 9.5. REMEDIES EXCLUSIVE.
(a) The Company, ▇▇▇▇▇▇▇ Capital and ▇▇▇▇▇▇▇ on one hand, and
Parent and MergerCo, on the other hand, hereby acknowledge and agree that
prior to the Closing, none of them shall have any right or remedy to take
any action in respect of,
59
and none of them shall have any liability to the other in respect of, any
breach by the Company, ▇▇▇▇▇▇▇ Capital, ▇▇▇▇▇▇▇, Parent or MergerCo, as
applicable, of any representations or warranties contained herein or any
failure to comply with any of the covenants, conditions or agreements
contained herein, except (i) to terminate this Agreement pursuant to
Section 10.1 hereof, in which event, no party shall thereupon have
obligation or liability to the parties whatsoever hereunder (ii) to seek
specific performance or injunctive relief and (iii) any cause of action or
liability for fraud.
(b) From and after the Closing, the rights of the parties to
indemnification relating to this Agreement or the transactions
contemplated hereby shall be strictly limited to those contained in this
Article IX, and such indemnification rights shall be the sole and
exclusive remedies of the parties subsequent to the Closing Date with
respect to any matter in any way relating to this Agreement or arising in
connection herewith. To the maximum extent permitted by law, the parties
hereby waive all other rights and remedies with respect to any matter in
any way relating to this Agreement or arising in connection herewith,
whether under any laws at common law or otherwise. Except as provided in
this Article IX, no claim, action or remedy shall be brought or maintained
by any party against any other party, and no recourse shall be brought or
granted against any of them, by virtue of or based upon any alleged
misstatement or omission respecting an inaccuracy in or breach of any of
the representations, warranties or covenants of any of the parties hereto
set forth or contained in this Agreement, except to the extent set forth
in Section 11.11; provided, however, that, notwithstanding anything to the
contrary in this Agreement, no party waives any rights to pursue a claim
for fraud or any remedy therefor or to seek specific performance for a
breach of a covenant or agreement to be performed by it before or after
the Effective Time.
ARTICLE X - TERMINATION, AMENDMENT AND WAIVER
SECTION 10.1. TERMINATION. This Agreement may be terminated at any
time prior to the Effective Time, whether before or after the execution of the
Written Consent:
(a) by the mutual written consent of Parent (on behalf of
itself and MergerCo) and the Company;
(b) by either of the Company, on the one hand, or Parent (on
behalf of itself and MergerCo), on the other hand, by written notice to
the other:
(i) if any Governmental Authority of competent
jurisdiction shall have issued an injunction or taken any other
action that permanently restrains, enjoins or otherwise prohibits
the consummation of the Merger, and such injunction shall have
become final and non-appealable; or
60
(ii) if the consummation of the Merger shall not have
occurred on or before the 60th day following the date of this
Agreement; provided, however, that (A) subject to clause (i) above,
such date shall automatically be extended in the event that any
request for additional information is pending on such date in
connection with the required approval under the HSR Act to the date
on which such approval is granted and (B) the right to terminate
this Agreement under this Section 10.1(b)(ii) shall not be available
to any party whose failure to comply with any provision of this
Agreement has been the cause of, or resulted in, the failure of the
Merger to occur on or before such date.
(c) by the Company, if the Company is not then in material
breach of any term of this Agreement, upon written notice to Parent, upon
a material breach of any representation, warranty or covenant of Parent or
MergerCo contained in this Agreement, provided that such breach is not
capable of being cured or has not been cured within thirty (30) days after
the giving of notice thereof by the Company to Parent such that the
conditions set forth in Sections 8.1 or 8.3 cannot be satisfied at or
prior to the date set forth in Section 10.1(b)(ii); or
(d) by Parent (on behalf of itself and MergerCo), if neither
Parent nor MergerCo is then in material breach of any term of this
Agreement, upon written notice to Company, upon a material breach of any
representation, warranty or covenant of the Company contained in this
Agreement, provided that such breach is not capable of being cured or has
not been cured within thirty (30) days after the giving of notice thereof
by Parent or MergerCo to the Company such that the conditions set forth in
Sections 8.1 and 8.2 cannot be satisfied at or prior to the date set forth
in Section 10.1(b)(ii).
SECTION 10.2. EFFECT OF TERMINATION. In the event of the termination
of this Agreement pursuant to Section 10.1, this Agreement shall forthwith
become null and void and have no effect, without any liability on the part of
Parent, MergerCo or the Company and their respective directors, officers,
employees, partners, managers, members or stockholders and all rights and
obligations of any party hereto shall cease, except for the agreements contained
in Sections 7.3, 7.5, Section 9.5(a), this Section 10.2 and Article XI;
provided, however, that nothing contained in this Section 10.2 shall relieve any
party from liabilities or damages arising out of any willful breach by such
party of this Agreement.
SECTION 10.3. AMENDMENT. This Agreement may be amended by the
parties hereto by an instrument in writing signed on behalf of each of the
parties hereto at any time before or after the execution of the Written Consent;
provided, however, that after the execution of the Written Consent, no amendment
shall be made that by law requires further approval by the stockholders without
obtaining the approval of the Stockholders' Representative.
SECTION 10.4. EXTENSION; WAIVER. At any time prior to the Effective
Time, the parties hereto may, to the extent legally allowed, (a) extend the time
for the
61
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance by the other party with any of the agreements or conditions
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of the party against which such waiver or extension is to be
enforced. Waiver of any term or condition of this Agreement by a party shall not
be construed as a waiver of any subsequent breach or waiver of the same term or
condition by such party, or a waiver of any other term or condition of this
Agreement by such party.
ARTICLE XI - GENERAL PROVISIONS
SECTION 11.1. NOTICES. All notices, requests, claims, demands and
other communications under this Agreement will be in writing and will be deemed
given if delivered personally, sent by overnight courier (providing proof of
delivery) or via facsimile to the parties at the following addresses (or at such
other address for a party as specified by like notice):
(a) if to the Company, to:
ADI Holding Company, Inc.
Four Biotech Park
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ Capital, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with copy to:
▇▇▇▇▇▇▇ Procter LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇.▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
62
(b) if to Parent, to:
▇▇▇▇▇▇ Scientific International Inc.
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to MergerCo, to:
c/▇ ▇▇▇▇▇▇ Scientific International Inc.
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to the Stockholders' Representative, to:
▇▇▇▇▇▇▇ Capital III L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
63
with copy to:
▇▇▇▇▇▇▇ Procter LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇.▇. ▇▇▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 11.2. DISCLOSURE SCHEDULES. Information set forth in the
schedules to this Agreement (the "Schedules") is included solely for
informational purposes and may not be required to be disclosed pursuant to this
Agreement. The disclosure of any information shall not be deemed to constitute
an acknowledgment that such information is required to be disclosed in
connection with the representations and warranties made by Parent, MergerCo or
the Company, as applicable, in this Agreement or that such information is
material, nor shall such information be deemed to establish a standard of
materiality, nor shall it be deemed an admission of any liability of, or
concession as to any defense available to, Parent, MergerCo, the Company or the
Common Equity Holders, as applicable. The section number headings in the
Schedules correspond to the Section numbers in this Agreement and any
information disclosed in any section of the Schedules shall be deemed to be
disclosed and incorporated into any other section of the Schedules where such
disclosure would be appropriate and reasonably apparent.
SECTION 11.3. ENTIRE AGREEMENT. This Agreement, together with the
Schedules and certificates referred to herein, and any documents executed by the
parties simultaneously herewith or pursuant thereto, constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, written and oral, among the
parties with respect to the subject matter hereof.
SECTION 11.4. ASSIGNMENT. Except as expressly permitted by the terms
hereof, neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto without the prior
written consent of the other parties; provided that Parent or MergerCo may
assign any of its rights and obligations hereunder to any wholly-owned
Subsidiary of Parent; provided further that no such assignment by Parent or
MergerCo shall relieve Parent or MergerCo of any of its obligations hereunder.
SECTION 11.5. SEVERABILITY. If any provision of this Agreement, or
the application thereof to any person or circumstance is held invalid or
unenforceable, the remainder of this Agreement, and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
SECTION 11.6. NO AGREEMENT UNTIL EXECUTED. Irrespective of
negotiations among the parties or the exchanging of drafts of this Agreement,
this Agreement shall not constitute or be deemed to evidence a contract,
agreement, arrangement or
64
understanding among the parties hereto unless and until (a) the Company Board
has approved, for purposes of Section 151 of the DGCL and any applicable
provision of the Certificate of Incorporation, the terms of this Agreement and
(b) this Agreement is executed by the parties hereto.
SECTION 11.7. CERTAIN DEFINITIONS. For purposes of this Agreement:
(a) An "Affiliate" of any Person means another Person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first Person.
(b) "Aggregate Common Equity Holder Consideration" means the
aggregate amount of cash payable to the Common Equity Holders as of the
Effective Time.
(c) "Applicable Law" means any domestic, foreign, state or
local statute, law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment or decree
applicable to the Company or any of its Subsidiaries or Parent or
MergerCo, as applicable, or any of their respective Affiliates,
properties, assets, officers, directors or employees, including, without
limitations, (i) the Federal Ethics in Patient Referrals Act, 42
U.S.C.Section 1395nn, and all regulations promulgated thereunder, (ii) the
Federal Health Care Program Anti-Kickback ▇▇▇▇▇▇▇, ▇▇ ▇.▇.▇.▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇(▇), and all regulations promulgated thereunder, (iii) the False
Claims Act, 31 U.S.C. Section 3729, (iv) the Occupational Safety and
Health Act and all regulations promulgated under such legislation, (v)
privacy and security regulations promulgated under the Health Insurance
Portability and Accountability Act of 1996 at 42 C.F.R. part 164, (vi) the
Federal Food, Drug and Cosmetic Act, 21 U.S.C.Section 321 et seq., and all
regulations promulgated thereunder, (vii) the Clinical Laboratory
Improvement Amendments, 42 U.S.C.Section 263a, and all regulations
promulgated thereunder ("CLIA") and (viii) applicable laws of the United
States Drug Enforcement Administration and all regulations promulgated
thereunder ("DEA").
(d) "Certificate of Incorporation" means the Company's Amended
and Restated Certificate of Incorporation.
(e) "Class A Common Stock" means the Company's non-voting
class A common stock, par value $.01 per share.
(f) "Common Stock" means the Company's voting common stock,
par value $.01 per share.
(g) "Included Payroll Taxes" shall mean the aggregate amount
of the employer's share of payroll taxes payable by the Company and its
Subsidiaries as a result of the exercise or cash out of the Options
pursuant to Section 2.2, provided that
65
such amount shall not include (x) the amount of any social security taxes
payable in respect of any employee whose compensation subject to social
security taxes for calendar year 2006 will equal or will be greater than
$94,200 (without regard to the exercise or cash out of Options pursuant to
Section 2.2) and (y) with respect to any employee whose compensation
subject to social security taxes for calendar year 2006 will be greater
than $94,200 (as a result of taking into account the exercise or cash out
of Options pursuant to Section 2.2), an amount of social security taxes
equal to such employee's projected total compensation subject to social
security taxes for calendar year 2006 (without regard to the exercise or
cash out of Options pursuant to Section 2.2) not yet paid as of the
Closing Date multiplied by 6.2%. To the extent that any state payroll
taxes "phase out" in a manner similar to federal social security taxes,
the principles of the foregoing proviso shall be applied, with adjustments
to the applicable phaseout threshold for any such state. The foregoing
calculations shall be based upon the information set forth in Schedule
7.9(d) (as may be amended).
(h) "Indebtedness" means, without duplication, (i) all
indebtedness for borrowed money or for the deferred purchase price of
property or services, whether or not evidenced by a writing, (ii) any
other indebtedness that is evidenced by a note, bond, debenture, draft or
similar instrument, (iii) all obligations under financing or capital
leases, (iv) all liabilities secured by any Encumbrance on any property,
(v) letters of credit and any other agreements relating to the borrowing
of money or extension of credit and (vi) any guarantee of any of the
foregoing obligations.
(i) "Indemnification Agreement" means the indemnification
agreement substantially in the form attached hereto as Exhibit B to be
entered into by Parent, MergerCo and the Common Equity Holders who are
parties thereto.
(j) "Intellectual Property" means all intellectual property
rights owned, licensed or used by the Company or any Subsidiary of the
Company arising from or in respect of the following, whether protected,
created or arising under the laws of the United States or any other
jurisdiction: (i) patents and applications therefor, including
continuations, divisionals, continuations-in-part, reissues,
re-examinations, substitutions and extensions therefor (collectively,
"Patents"), (ii) fictional business names, trademarks, service marks,
trade names, service names, brand names, trade dress rights, logos,
Internet domain names and corporate names and general intangibles of a
like nature, together with the goodwill associated with any of the
foregoing, and all applications, registrations and renewals thereof
(collectively, "Marks"), (iii) copyrights and registrations and
applications therefor, works of authorship and mask work rights
(collectively, "Copyrights"), (iv) discoveries, concepts, research and
development, know-how, formulae, inventions, compositions, manufacturing
and production processes and techniques, procedures, designs, drawings,
specifications, and other proprietary and confidential information,
including customer lists, supplier lists, pricing and cost information,
business and marketing plans and proposals of Company, in each case
excluding any rights in respect of any of the foregoing that comprise or
are
66
protected by Copyrights or Patents (collectively, "Trade Secrets"), and
(v) (A) computer programs, including any and all software implementations
of algorithms, models and methodologies, whether in source code or object
code; (B) databases and complications, including any and all data and
collections of data, whether machine readable or otherwise; (C)
descriptions, flow-charts and other work product used to design, plan,
organize and develop any of the foregoing; and (D) all documentation
including user manuals and other training documentation related to any of
the foregoing.
(k) "Losses" of a Person means any and all losses,
liabilities, damages, claims, awards, judgments, settlements, costs and
expenses (including, without limitation, interest, penalties, fines, costs
of investigation and reasonable attorneys' and other professionals' fees)
actually suffered, imposed upon or incurred by such Person, whether or not
involving a Third-Party Claim.
(l) "Net Working Capital" means (a) the Company's current
assets, excluding (i) cash and cash equivalents and (ii) deferred tax
assets, less (b) the Company's current liabilities, including Included
Payroll Taxes, and excluding (i) Taxes, including income tax withholdings
in respect of payments made pursuant to Section 2.2 (other than Included
Payroll Taxes), (ii) amounts included in "Current Portion of Long-Term
Debt including Revolving Loan", (iii) Company Expenses to the extent paid
at the Effective Time pursuant to Section 2.4, (iv) the fair value of the
interest rate swap, if any, (v) any interest payable on Outstanding
Indebtedness and (vi) the amounts of any management retention bonus, if
any. For the avoidance of doubt, the amount of Net Working Capital shall
be determined without taking into account (x) any Tax impact of the
Special Items and (y) the actual payments made pursuant to Section 2.2.
(m) "Outstanding Indebtedness" means all Indebtedness,
including any fees, penalties, prepayment amounts or other amounts due in
connection therewith, as of the Effective Time including such amounts due
under that certain Amended and Restated Credit Agreement, dated as of
November 18, 2004, by and among the Company, various lending institutions
and General Electric Capital Corporation and the notes issued to certain
Stockholders.
(n) "Parent Material Adverse Effect" means any change, effect,
event, circumstance or condition that has or results in a material adverse
effect on Parent's ability to timely perform its obligations under this
Agreement or to consummate the transactions contemplated by this
Agreement.
(o) "Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity or group (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended).
67
(p) "Redeemable Preferred Stock" means the Company's
Redeemable Preferred Stock, par value $.01 per share.
(q) "Series A Preferred Stock" means the Company's Series A
Convertible Preferred Stock, par value $.01 per share.
(r) "Series B Preferred Stock" means the Company's Series B
Convertible Preferred Stock, par value $.01 per share.
(s) "Special Items" means (a) any payments in respect of
Options pursuant to Section 2.2 of this Agreement; (b) the repayment of
the Outstanding Indebtedness at the Closing; (c) the payment of legal,
financial advisory, accounting and other fees and expenses of the Company
in connection with the transactions contemplated hereby; and (d) the
payment of a financial advisory fee to ▇▇▇▇▇▇▇ pursuant to that certain
Financial Advisor Agreement entered into as of February 12, 2004 by and
between ▇▇▇▇▇▇▇ and the Company.
(t) "Stockholders' Representative" means ▇▇▇▇▇▇▇ Capital III
L.P.
(u) "Subsidiary" means any corporation more than 50% of whose
outstanding voting securities, or any partnership, joint venture or other
entity more than 50% of whose total equity interest, is directly or
indirectly owned by Parent or the Company, as the case may be.
(v) "Third-Party Claim" means any claim asserted by a Person
that is not a party to this Agreement or a controlled Affiliate of a party
to this Agreement against a Parent/MergerCo Indemnified Party or a Company
Indemnified Party, as the case may be.
SECTION 11.8. INTERPRETATION. When a reference is made in this
Agreement to an Article, Section, Schedule or Exhibit, such reference will be to
an Article or Section of, or a Schedule or Exhibit to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they will be deemed to be
followed by the words "without limitation." The words "hereof," "herein" and
"hereunder" and words of similar import when used in this Agreement will refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All terms used herein with initial capital letters have the meanings
ascribed to them herein and all terms defined in this Agreement will have such
defined meanings when used in any certificate or other document made or
delivered pursuant hereto unless otherwise defined therein. The definitions
contained in this Agreement are applicable to the singular as well as the plural
forms of such terms and to the masculine as well as to the feminine and neuter
genders of such term. Any agreement, instrument or statute defined or referred
to herein, or in any agreement or instrument that is referred to herein, means
68
such agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. References to a Person are also to its permitted successors and
assigns. Except as otherwise expressly provided in this Agreement, nothing in
any representation or warranty in this Agreement shall in any way limit or
restrict the scope, applicability or meaning of any other representation or
warranty made by the Company or Parent or MergerCo herein. It is the intention
of the parties that, to the extent possible, unless provisions are mutually
exclusive and effect cannot be given to both or all such provisions, the
representations, warranties, covenants and closing conditions in this Agreement
shall be construed to be cumulative and that each representation, warranty,
covenant and closing condition in this Agreement shall be given full separate
and independent effect.
SECTION 11.9. FEES AND EXPENSES. Subject to Section 2.4 above, and
except as otherwise set forth in this Agreement, whether or not the Merger is
consummated, each of Parent (on behalf of Parent and MergerCo), on the one hand,
and the Common Equity Holders, on the other hand, shall bear their own expenses
in connection with the negotiation and the consummation of the transactions
contemplated by this Agreement.
SECTION 11.10. CHOICE OF LAW/CONSENT TO JURISDICTION. All disputes,
claims or controversies arising out of or relating to this Agreement, or the
negotiation, validity or performance of this Agreement, or the transactions
contemplated hereby shall be governed by and construed in accordance with the
laws of the State of New York. Each of the parties hereby consents to personal
jurisdiction, service of process and venue in the federal or state courts of the
State of New York for any claim, suit or proceeding arising under this
Agreement, or in the case of a third party claim subject to indemnification
hereunder, in the court where such claim is brought.
SECTION 11.11. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of proper
jurisdiction, including without limitation the obligation to close the Merger on
the Closing Date pursuant to Section 1.4 hereof. Such remedies shall not be
exclusive and shall be in addition to any other remedies that any party may have
under Article IX of this Agreement.
SECTION 11.12. MUTUAL DRAFTING. The parties hereto are sophisticated
and have been represented by attorneys throughout the transactions contemplated
hereby who have carefully negotiated the provisions hereof. As a consequence,
the parties do not intend that the presumptions of laws or rules relating to the
interpretation of contracts against the drafter of any particular clause should
be applied to this Agreement or any agreement or instrument executed in
connection herewith, and therefore waive their effects.
69
SECTION 11.13. MISCELLANEOUS. This Agreement (a) constitutes,
together with the Confidentiality Agreement and the Schedules, Exhibits and
Annexes attached hereto, the entire agreement and supersedes all of the prior
agreements and understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof, (b) shall be binding upon
and inure to the benefits of the parties hereto and their respective successors
and assigns and is not intended to confer upon any other person (except as set
forth below) any rights or remedies hereunder and (c) may be executed in two or
more counterparts which together shall constitute a single agreement.
[Remainder of page intentionally left blank.]
70
IN WITNESS WHEREOF, the parties hereto have caused this Merger Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
PARENT:
▇▇▇▇▇▇ SCIENTIFIC INTERNATIONAL INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice Chairman
MERGERCO:
ATLAS ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Title: Vice President and Secretary
COMPANY:
ADI HOLDING COMPANY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
▇▇▇▇▇▇▇ CAPITAL:
▇▇▇▇▇▇▇ CAPITAL III L.P.
By: ▇▇▇▇▇▇▇ Brothers III LLC, its general
partner
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Member
▇▇▇▇▇▇▇:
▇▇▇▇▇▇▇ BROTHERS MANAGEMENT CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
ANNEX A
DEFINED TERMS
TERM SECTION REFERENCE
---- -----------------
Accounting Referee 2.7(d)
Acquisition Transaction 7.6(a)
Affiliate(s) 11.7(a)
Affiliate Arrangement 4.19
Aggregate Common Equity Holder Consideration 11.7(b)
Aggregate Option Exercise Price Proceeds 2.2(a)
Agreement Introduction
Applicable Law(s) 11.7(c)
Appraisal Rights Provisions 3.2(a)
Balance Sheet Principles 2.6(a)
Base Balance Sheet 4.5(a)(ii)
▇▇▇▇▇▇▇ Introduction
▇▇▇▇▇▇▇ Capital Introduction
Business Day 1.4
By-Laws 4.1(a)
Capital Stock 4.2
Certificate of Incorporation 11.7(d)
Certificate of Merger 1.2
Certificate 2.1(f)
Class A Common Stock 11.7(e)
CLIA 11.7(c)
Closing 1.4
Closing Cash Amount 2.7(a)
Closing Cash Shortfall 2.7(e)
Closing Date 1.4
Closing Statement 2.7(a)
Closing Underage 2.7(b)
Closing Working Capital 2.7(a)
Code 4.8(f)(i)
Common Equity Holder(s) 2.7(d)
Common Stock 11.7(f)
Company Introduction
Company Board Recitals
Company Employee(s) 7.9(a)
Company Expenses 2.4
Company Indemnified Party 9.3(a)
Company Licenses 4.18
Company Material Adverse Effect 4.1(a)
Company Plan(s) 4.9(a)
Company Stock 2.1
Competitive Person 7.7(a)
Confidentiality Agreement 7.3
Contract 4.12
Copyrights 11.7(i)
DEA 11.7(c)
Deductible 9.2(b)(i)
DGCL Recitals
Dissenting Shares 3.2(a)
Effective Time 1.2
Encumbrances 2.3
Environment 4.14(e)
Environmental Laws 4.14(e)
ERISA 4.9(a)
ERISA Affiliate 4.9(a)
Escrow Agent 3.1(a)
Escrow Agreement 3.1(a)
Escrow Amount 3.1(a)
Escrow Fund 3.1(a)
Estimated Cash Amount 2.1(e)(iii)
Estimated Closing Balance Sheet 2.6(a)
Estimated Net Working Capital 2.6(a)
Estimated Underage 2.6(b)
Exchange Agent 3.1(a)
Excluded Representations and Warranties 9.1
Excluded Taxes 9.2(a)
Final Cash Amount 2.7(c)
Final Closing Balance Sheet 2.7(a)
Final Closing Underage 2.7(c)
Financial Statements 4.5(a)
FIRPTA Certificate 8.2(j)
GAAP 4.1(a)
Governmental Authority 4.4
Hazardous Material 4.14(e)
HSR Act 7.4(a)
Indebtedness 11.7(g)
Indemnification Agreement 11.7(h)
Indemnification Cut-Off Date 9.2(b)(v)
Indemnified Party 7.8(d)
Indemnified Tax Claim 7.14(f)(ii)
Intellectual Property 11.7(i)
Leased Real Property 4.10(a)
Lease(s) 4.10(a)
Losses 11.7(j)
Marks 11.7(i)
Merger Recitals
MergerCo Introduction
Merger Consideration 2.1(e)
Net Working Capital 11.7(k)
Option(s) 2.2(a)
Optionholder(s) 2.2(a)
Outstanding Indebtedness 11.7(l)
Parent Introduction
Parent Material Adverse Effect 11.7(m)
Parent/MergerCo Indemnified Party 9.2(a)
Patents 11.7(i)
Payment Programs 4.17(c)
Person(s) 11.7(n)
Plan 2.2(a)
Post-Closing Portion 7.14(b)
Pre-Closing Portion 7.14(b)
Pre-Closing Tax Return 7.14(c)(iii)
Preferred Dividend 1.6(b)
Price Per Common Share 2.1(d)
Redeemable Preferred Stock 11.7(o)
Release 4.14(e)
Review Period 2.7(a)
Schedules 11.2
Series A Preferred Stock 11.7(p)
Series B Preferred Stock 11.7(q)
Schedule 7.9 7.9(d)
Special Items 11.7(r)
Stockholder(s) 2.1
Stockholders' Representative 11.7(s)
Straddle Period 7.14(b)
Straddle Period Tax Return 7.14(c)(iii)
Subsidiary 11.7(t)
Surviving Corporation 1.1
Tax Returns 4.8(f)(iii)
Tax(es) 4.8(f)(ii)
Tax Proceeding(s) 4.8(a)(iv)
Tax Representations and Warranties 9.1
Third-Party Claim 11.7(u)
Total Option Proceeds 2.2(a)
Trade Secrets 11.7(i)
Transfer Taxes 7.14(e)
Vested Options 2.2(a)
WARN 4.11(a)
Working Capital Escrow Account 3.1(a)
Working Capital Target 2.6(b)
Written Consent 7.1(a)