EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
COGNEX CORPORATION,
TANGO ACQUISITION CORP.,
and
DVT CORPORATION
May 9, 2005
TABLE OF CONTENTS
PAGE
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ARTICLE I - THE MERGER................................................................... 1
Section 1.1. The Merger........................................................... 1
Section 1.2. Effective Time....................................................... 2
Section 1.3. Articles of Incorporation and Bylaws................................. 2
Section 1.4. Closing.............................................................. 2
Section 1.5. Directors and Officers............................................... 2
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS... 2
Section 2.1. Merger Consideration and Related Definitions......................... 2
Section 2.2. Effect on Capital Stock.............................................. 5
Section 2.3. Company Stock Options and Related Matters............................ 6
Section 2.4. Post-Closing Net Working Capital Adjustment.......................... 6
Section 2.5. Post-Closing Determination of Tax Refund Amount...................... 8
ARTICLE III - PAYMENT OF MERGER CONSIDERATION; DISSENTING SHARES......................... 9
Section 3.1. Payment for Shares of Company Common Stock........................... 9
Section 3.2. Payment for In-the-Money Options..................................... 10
Section 3.3. Escrow Account....................................................... 11
Section 3.4. General Provisions Regarding Payment of Merger Consideration......... 11
Section 3.5. Appraisal Rights..................................................... 12
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................... 12
Section 4.1. Organization and Corporate Power..................................... 13
Section 4.2. Authorization, Validity and Effect of Agreement...................... 13
Section 4.3. Capitalization....................................................... 14
Section 4.4. Non-Contravention.................................................... 14
Section 4.5. Corporate Records.................................................... 15
Section 4.6. Subsidiaries; Investments............................................ 15
Section 4.7. Financial Statements................................................. 15
Section 4.8. Absence of Undisclosed Liabilities................................... 16
Section 4.9. Absence of Certain Developments...................................... 16
Section 4.10. Accounts Receivable; Accounts Payable; Inventories................... 16
Section 4.11. Transactions with Affiliates......................................... 17
Section 4.12. Properties........................................................... 17
Section 4.13. Tax Matters.......................................................... 18
Section 4.14. Certain Contracts and Arrangements................................... 19
Section 4.15. Intellectual Property................................................ 20
Section 4.16. Litigation........................................................... 23
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Section 4.17. Labor Matters........................................................ 24
Section 4.18. Permits; Compliance with Laws........................................ 24
Section 4.19. Employee Benefit Programs............................................ 25
Section 4.20. Insurance Coverage................................................... 27
Section 4.21. Investment Banking; Brokerage........................................ 28
Section 4.22. Environmental Matters................................................ 28
Section 4.23. Customers, Distributors and Partners................................. 28
Section 4.24. Suppliers............................................................ 29
Section 4.25. Warranty and Related Matters......................................... 29
Section 4.26. Backlog.............................................................. 29
Section 4.27. Illegal Payments..................................................... 29
Section 4.28. Disclosure........................................................... 29
Section 4.29. No Other Representations............................................. 30
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO........................ 30
Section 5.1. Organization......................................................... 30
Section 5.2. Authorization, Validity and Effect of Agreement...................... 30
Section 5.3. Non-Contravention.................................................... 30
Section 5.4. Required Financing................................................... 31
Section 5.5. Investment Banking; Brokerage........................................ 31
Section 5.6. Litigation........................................................... 31
ARTICLE VI - ADDITIONAL AGREEMENTS....................................................... 31
Section 6.1. Shareholder Consent.................................................. 31
Section 6.2. Confidentiality...................................................... 31
Section 6.3. Employee Benefit Arrangements........................................ 31
Section 6.4. Director and Officer Indemnification................................. 32
Section 6.5. Further Assurances................................................... 32
ARTICLE VII - CONDITIONS TO THE MERGER; CLOSING DELIVERIES............................... 33
Section 7.1. Conditions to the Obligations of Each Party to Effect the Merger..... 33
Section 7.2. Deliveries at Closing by the Company................................. 33
Section 7.3. Delivery at Closing by Parent........................................ 34
Section 7.4. Right to Proceed..................................................... 34
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION............... 34
Section 8.1. Survival............................................................. 34
Section 8.2. Indemnification by the Company Equity Holders........................ 35
Section 8.3. Indemnification by Parent............................................ 38
Section 8.4. Treatment of Indemnity Payments...................................... 39
Section 8.5. Remedies Exclusive................................................... 39
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER........................................... 40
Section 9.1. Termination.......................................................... 40
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Section 9.2. Effect of Termination................................................ 40
Section 9.3. Amendment............................................................ 40
Section 9.4. Extension; Waiver.................................................... 40
ARTICLE X - GENERAL PROVISIONS........................................................... 41
Section 10.1. Notices.............................................................. 41
Section 10.2. Headings............................................................. 42
Section 10.3. Interpretation....................................................... 42
Section 10.4. Assignment........................................................... 42
Section 10.5. Severability......................................................... 42
Section 10.6. No Agreement Until Executed.......................................... 42
Section 10.7. Certain Definitions.................................................. 43
Section 10.8. Shareholders' Representative......................................... 44
Section 10.9. Fees and Expenses.................................................... 45
Section 10.10. Choice of Law........................................................ 45
Section 10.11. Specific Performance................................................. 46
Section 10.12. Mutual Drafting...................................................... 46
Section 10.13. Miscellaneous........................................................ 46
EXHIBITS:
EXHIBIT A-1 - List of Major Shareholders
EXHIBIT A-2 - Form of Shareholder Non-Competition Agreement
EXHIBIT B - Form of Letter of Transmittal for Shareholders
EXHIBIT C - Form of Acknowledgment Letter for Optionholders
EXHIBIT D - Form of Escrow Agreement
EXHIBIT E - Form of Legal Opinion of Company Counsel
EXHIBIT F - Form of Release
ANNEXES:
ANNEX A - Index of Defined Terms
ANNEX B - List of Schedules
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement") is dated as of May 9,
2005, by and among Cognex Corporation, a Massachusetts corporation ("Parent"),
Tango Acquisition Corp., a Georgia corporation and a wholly owned subsidiary of
Parent ("MergerCo"), and DVT Corporation, a Georgia corporation (the "Company").
Certain terms used in this Agreement are defined in Section 10.7 hereof. An
index of defined terms used in this Agreement is attached as Annex A hereto, and
a list of Schedules to this Agreement is attached as Annex B hereto.
WHEREAS, the parties 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 Georgia Business
Corporation Code, as amended (the "GBCC");
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 shareholders;
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 shareholders, and Parent
has approved this Agreement as the sole shareholder of MergerCo;
WHEREAS, as a condition to the willingness of Parent and MergerCo to enter
into this Agreement, certain shareholders of the Company listed on Exhibit A-1
(the "Major Shareholders") are simultaneously herewith entering into
non-competition agreements with the Company in the form attached hereto as
Exhibit A-2 (collectively, the "Non-Competition Agreements"); 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
contained herein, 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 (as defined in Section 1.2), 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 Georgia, and (c) the separate corporate
existence of the
Company with all its rights, privileges, immunities, powers and franchises shall
continue unaffected by the Merger. The Merger shall have the effects specified
in the GBCC.
SECTION 1.2. EFFECTIVE TIME. On the Closing Date (as defined in Section
1.4), 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 Georgia in accordance with the GBCC. The Merger shall become
effective at such time as the Certificate of Merger, accompanied by payment of
the filing fee (as provided in the GBCC), has been filed with the Secretary of
State of the State of Georgia (the "Effective Time").
SECTION 1.3. ARTICLES OF INCORPORATION AND BYLAWS. The articles of
incorporation of the Surviving Corporation shall be amended at the Effective
Time to be identical to the articles of incorporation of MergerCo (except for
any provisions dealing with the incorporator and initial directors, which shall
be omitted, and the name of the Surviving Corporation which shall be as set
forth in the last sentence of this Section 1.3) until thereafter amended as
provided by law and the terms of such articles of incorporation. The bylaws of
MergerCo, as in effect immediately prior to the Effective Time, shall be the
bylaws of the Surviving Corporation until thereafter amended as provided by law,
by the terms of the articles of incorporation of the Surviving Corporation and
by the terms of such bylaws. Notwithstanding the foregoing, the name of the
Surviving Corporation shall be "DVT Corporation" and the articles of
incorporation and bylaws of the Surviving Corporation shall so provide.
SECTION 1.4. CLOSING. Subject to satisfaction or waiver of the conditions
set forth in Article VII, the closing of the Merger (the "Closing") shall occur
as of the date hereof, or on such other date as may be agreed upon by the
parties (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.
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 MergerCo immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation, each to hold office
in accordance with the articles of incorporation and bylaws of the Surviving
Corporation.
ARTICLE II - EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
SECTION 2.1. MERGER CONSIDERATION AND RELATED DEFINITIONS. For purposes of
this Agreement:
(a) "Base Balance Sheet" means the audited consolidated balance
sheet of the Company and its Subsidiaries (as defined in Section 10.7) as
of December 31, 2004.
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(b) "Closing Per Share Payment" means an amount (in dollars per
share) equal to (i) the Initial Per Share Merger Consideration, less (ii)
the amount obtained by dividing $11,000,000 by the Outstanding Shares.
(c) "Company Expenses" means the aggregate amount of all expenses
incurred by or on behalf of, or to be paid by, (whether accrued or
unaccrued) the Company or any of its Subsidiaries relating to the
negotiation, preparation or execution of this Agreement or any documents or
agreements contemplated hereby or the performance or consummation of the
transactions contemplated hereby (excluding any such expenses paid or
accrued by the Company prior to the Effective Time and reflected on the
Base Balance Sheet), including, but not limited to, (i) brokers' or
finders' fees, (ii) fees and expenses of counsel, advisors, consultants,
investment bankers, accountants, auditors and other experts, and (iii) any
expenses of the shareholders or optionholders of the Company incurred by
the Company on their behalf in connection with the transactions
contemplated hereby. Prior to the Closing Date, the Chief Financial Officer
of the Company shall provide Parent with a list of, and supporting
documentation for, all Company Expenses.
(d) "Company Fully Diluted Shares" means the sum of (i) the
Outstanding Shares, plus (ii) the aggregate number of additional shares of
Company Common Stock that would have been issued and outstanding as of the
Effective Time had all of the In-the-Money Options been exercised in full
prior thereto.
(e) "Company Stock Option Plans" means the Company's 1994, 1992
and 1991 Employee Long-Term Stock Investment Plans and 1999 Incentive Stock
Plan.
(f) "Estimated Net Working Capital" means the Company's Net
Working Capital as of the close of business on the Peg Date, as determined
jointly by the Company and Parent prior to the Closing; provided that any
tax provision or tax benefit recorded during the interim period between
January 1, 2005 and the Closing Date shall be excluded from such
calculation. The Estimated Net Working Capital has been calculated by the
parties as set forth on Schedule 2.1(f).
(g) "Estimated Net Working Capital Adjustment" means the amount,
whether positive, negative or zero, equal to (i) the Estimated Net Working
Capital, less (ii) $5,900,000, which amount has been calculated by the
parties to be $5,805,968.
(h) "Estimated Tax Refund Amount" means an estimate of the Tax
Refund Amount as determined jointly by the Company and Parent prior to the
Closing. The Estimated Tax Refund Amount has been calculated by the parties
as set forth on Schedule 2.1(h).
(i) "Final Indemnification Escrow Amount" means the amount of the
Initial Indemnification Escrow Amount remaining on the first (1st)
anniversary of the Closing Date and following the satisfaction of all
claims of the Parent/MergerCo Indemnified Parties with respect thereto as
described in Section 3.3.
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(j) "Final Per Share Merger Consideration" means an amount (in
dollars per share) equal to (i) the Closing Per Share Payment, plus (ii)
the amount obtained by dividing the Final Indemnification Escrow Amount by
the Outstanding Shares.
(k) "In-the-Money Options" means all options granted under the
Company Stock Option Plans which are outstanding immediately prior to the
Effective Time (whether or not then vested or exercisable) and which have
an exercise price per share less than $12.49.
(l) "Initial Indemnification Escrow Amount" means $11,000,000 (as
such amount may be supplemented in accordance with Sections 2.4(d) and
2.5(b)).
(m) "Initial Merger Consideration" means an amount equal to (i)
$110,000,000, less (ii) all Company Expenses, less (iii) the Net Management
Severance Costs, plus (iv) the Estimated Net Working Capital Adjustment,
plus (v) the Estimated Tax Refund Amount, plus (vi) the aggregate exercise
price of all In-the-Money Options. The Initial Merger Consideration has
been calculated by the parties as set forth on Schedule 2.1(m).
(n) "Initial Per Share Merger Consideration" means the amount (in
dollars per share) obtained by dividing the Initial Merger Consideration by
the Company Fully Diluted Shares.
(o) "Management Employment Agreements" means those certain
Employment Agreements, dated as of December 13, 2004, by and between the
Company and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇. ▇▇▇▇▇.
(p) "Management Severance Costs" means all payments to be made as
of the Closing Date under the Management Employment Agreements as described
on Schedule 4.19.
(q) "Net Management Severance Costs" means sixty-five percent
(65%) of the Management Severance Costs (including any employer payroll
taxes thereon), plus $50,000.
(r) "Net Working Capital" means, as of any date, the consolidated
current assets of the Company and its Subsidiaries, reduced by the
consolidated current liabilities, in each case as determined consistent
with the past practice of the Company and in accordance with GAAP (as
defined in Section 10.7) consistently applied.
(s) "Option Consideration" means, for each Option share, (i) the
excess, if any, of the Initial Per Share Merger Consideration over the
exercise price per share of such Option, or (ii) $0.00 if the Initial Per
Share Merger Consideration is less than or equal to the exercise price per
share of such Option.
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(t) "Options" means, collectively, the In-the-Money Options and
the Out-of-the-Money Options.
(u) "Out-of-the-Money Options" means all options granted under
the Company Stock Option Plans which are outstanding immediately prior to
the Effective Time (whether or not then vested or exercisable) and which
have an exercise price per share greater than or equal to the Initial Per
Share Merger Consideration.
(v) "Outstanding Shares" means the total number of shares of
Company Common Stock issued and outstanding as of immediately prior to the
Effective Time, other than shares of Company Common Stock to be canceled in
accordance with Section 2.2(a)(ii).
(w) "Peg Date" means April 30, 2005.
(x) "Tax Refund Amount" means (i) ninety percent (90%) of the Tax
Refund Receivable, less (ii) ninety percent (90%) of all external
accounting and legal fees reasonably incurred by Parent or the Surviving
Corporation to determine and obtain the Tax Refund Receivable.
(y) "Tax Refund Receivable" means the amount, if any, received by
the Surviving Corporation from federal and state taxing authorities with
respect to the carryback net operating losses incurred by the Company for
its taxable year ending on the Closing Date.
SECTION 2.2. EFFECT ON CAPITAL STOCK.
(a) As of the Effective Time, by virtue of the Merger and without
any action on the part of any holder of any shares of common stock, no par
value per share, of the Company ("Company Common Stock") or any shares of
the capital stock of MergerCo:
(i) Each share of common stock, no par value per share, of
MergerCo issued and outstanding immediately prior to the Effective Time
shall be converted into one fully paid and non-assessable share of common
stock, no par value per share, of the Surviving Corporation following the
Merger; and
(ii) Each share of Company Common Stock that is owned by the
Company or by any wholly owned Subsidiary (as defined in Section 10.7) of
the Company immediately prior to the Closing Date 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; and
(iii) Each Outstanding Share (other than Dissenting Shares
as defined in Section 3.4) shall be converted into the right to receive the
Final Per Share Merger Consideration in cash, payable to the holder thereof
in two (2) installments as described below, without any interest thereon,
upon surrender and exchange of the
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Certificate (as defined below) representing such share of Company Common
Stock or the delivery of an affidavit as described in Section 3.1(f). Each
holder of Company Common Stock as of immediately prior to the Effective
Time shall be paid the Closing Per Share Payment for each share owned by
such holder in accordance with the procedures set forth in Section 3.1. The
balance, if any, of the Final Per Share Merger Consideration remaining
after payment of the Closing Per Share Payment, shall be paid to such
holders of Company Common Stock as set forth below in Section 3.3.
(b) All shares of Company Common Stock, when converted into the
right to receive the Final Per Share Merger Consideration as provided in
Section 2.2(a)(iii), 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 the Final Per Share Merger
Consideration applicable to the shares underlying such Certificate. The
holders of Certificates previously evidencing shares of Company Common
Stock outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to the Company Common 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 have the right
to receive the Final Per Share Merger Consideration in exchange for each of
their shares of Company Common Stock.
SECTION 2.3. COMPANY STOCK OPTIONS AND RELATED MATTERS. Each Option shall
be converted at the Effective Time into the right to receive a cash amount equal
to the Option Consideration for each share of Company Common Stock then subject
to the Option. The Option Consideration shall be paid by the Surviving
Corporation to the holder of an In-the-Money Option in accordance with the
procedures set forth in Section 3.2. The Company Stock Option Plans shall
terminate as of the Effective Time and the provisions in any other plan,
agreement, program or arrangement providing for the issuance or grant of any
other interest in respect of the capital stock of the Company or any of its
Subsidiaries shall be of no further force and effect and shall be deemed to be
deleted as of the Effective Time.
SECTION 2.4. POST-CLOSING NET WORKING CAPITAL ADJUSTMENT.
(a) Within sixty (60) days following the Closing Date, Parent
shall prepare and deliver to the Shareholders' Representative (as defined
in Section 10.7) a written statement (the "Closing Statement") of Net
Working Capital as of the close of business on the Peg Date; provided that,
consistent with the Estimated Net Working Capital calculation described in
Section 2.1(f), any tax provision or tax benefit recorded during the
interim period between January 1, 2005 and the Closing Date shall be
excluded from such calculation. The Shareholders' 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 Shareholders' Representative shall deliver to Parent a
written statement accepting or objecting to the calculation of Net Working
Capital set forth on the Closing Statement. In the event that the
Shareholders' Representative shall object to the Closing Statement, such
statement shall include a detailed itemization of the Shareholders'
Representative's objections and the reasons therefor. If the Shareholders'
Representative does not deliver such statement
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to Parent within the Review Period, the Shareholders' Representative shall
be deemed to have accepted the Closing Statement.
(b) In the event that the Shareholders' Representative shall
accept, or shall be deemed to have accepted, the Closing Statement as
prepared and delivered by Parent, the Net Working Capital set forth on the
Closing Statement shall constitute the "Final Net Working Capital." In the
event, however, that the Shareholders' Representative shall object to the
Closing Statement within the Review Period, Parent and the Shareholders'
Representative shall promptly meet and in good faith attempt to resolve
such objections. Any such objections which cannot be resolved between
Parent and the Shareholders' Representative within thirty (30) days
following Parent's receipt of the Shareholders' Representative's statement
of objections shall be resolved in accordance with Section 2.4(c). The Net
Working Capital set forth on the Closing Statement, as adjusted to reflect
any adjustments agreed upon by the parties, or as determined in accordance
with Section 2.4(c), shall constitute the "Final Net Working Capital."
(c) Should the Shareholders' Representative and Parent not be
able to resolve such objections as may be raised with respect to the
Closing Statement, within the thirty (30) day period described in Section
2.4(b), either party may submit the matter to Deloitte & Touche LLP or, if
Deloitte & Touche LLP shall not be independent of both parties at the time
of submission of the matter, another independent nationally recognized
accounting firm mutually agreeable to both parties (the "Arbitrator"), 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,
and to make any calculations in accordance with GAAP and consistent with
the Company's historical practice. The fees and costs of the Arbitrator, if
one is required, shall be paid by the party who submitted the Net Working
Capital amount which was farther away from the Final Net Working Capital
calculated by the Arbitrator and, in the case of the Shareholders'
Representative, shall be paid from the Initial Indemnification Escrow
Amount in accordance with the terms of the Escrow Agreement (as defined in
Section 3.3).
(d) In the event that the Final Net Working Capital is less than
the Estimated Net Working Capital (the amount obtained by subtracting the
Final Net Working Capital from the Estimated Net Working Capital being
referred to herein as the "Net Working Capital Shortfall"), Parent shall be
entitled to receive a refund of an amount equal to the Net Working Capital
Shortfall, which amount shall be paid from the Initial Indemnification
Escrow Amount in accordance with the terms of the Escrow Agreement. In the
event that the Final Net Working Capital is greater than the Estimated Net
Working Capital (the amount obtained by subtracting the Estimated Net
Working Capital from the Final Net Working Capital being referred to herein
as the "Net Working Capital Overage"), within five (5) Business Days of the
determination of the Final Net Working Capital, Parent shall deliver to the
Escrow Agent (as defined in Section 3.3) as a supplement to the Initial
Indemnification Escrow Amount, an amount equal to the Net Working Capital
Overage. In the event that the Final Net Working Capital equals the
Estimated Net Working Capital, no amount shall be deducted from, or added
to, the
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Initial Indemnification Escrow Amount or otherwise paid to any party with
respect thereto.
SECTION 2.5. POST-CLOSING DETERMINATION OF TAX REFUND AMOUNT.
(a) The parties agree that the obligations of the Company to pay
the Aggregate Option Consideration as set forth in Section 3.2(a) and the
Management Severance Costs shall be deemed to have arisen on or prior to
the Closing Date and shall be treated as deductions incurred in the
Company's tax year ending on the Closing Date.
(b) In the event that the actual Tax Refund Receivable as
determined by the applicable regulatory authorities is less than the Tax
Refund Receivable used in the calculation of the Estimated Tax Refund
Amount (the amount obtained by subtracting the actual Tax Refund Receivable
from the Tax Refund Receivable used in the calculation of the Estimated Tax
Refund Amount being referred to herein as the "Tax Refund Shortfall"),
Parent shall be entitled to receive a refund of an amount equal to ninety
percent (90%) of the Tax Refund Shortfall, less the amount of any
additional tax receivable that would have been booked during the interim
period between January 1, 2005 and the Closing Date assuming knowledge of
the Tax Refund Shortfall, which net amount, if positive, shall be paid from
the Initial Indemnification Escrow Amount in accordance with the terms of
the Escrow Agreement. In the event that the actual Tax Refund Receivable as
determined by the applicable regulatory authorities is greater than the Tax
Refund Receivable used in the calculation of the Estimated Tax Refund
Amount (the amount obtained by subtracting the Tax Refund Receivable used
in the calculation of the Estimated Tax Refund Amount from the actual Tax
Refund Receivable being referred to herein as the "Tax Refund Overage"),
within five (5) Business Days of the determination of the Tax Refund
Overage, Parent shall deliver to the Escrow Agent as a supplement to the
Initial Indemnification Escrow Amount, an amount, if positive, equal to
ninety percent (90%) of the Tax Refund Overage, less the amount of any
reduction in the tax receivable that would have been booked during the
interim period between January 1, 2005 and the Closing Date assuming
knowledge of the Tax Refund Overage. In the event that the actual Tax
Refund Receivable as determined by the applicable regulatory authorities is
equal to the Tax Refund Receivable used in the calculation of the Estimated
Tax Refund Amount or the final determination of the Tax Refund Receivable
is made by the applicable regulatory authorities following the first
anniversary of the Closing Date, no amount shall be deducted from, or added
to, the Initial Indemnification Escrow Amount or otherwise paid to any
party with respect thereto.
(c) Parent shall provide to the Shareholders' Representative a
copy of any application for the Tax Refund Receivable, or any amendments or
supplements thereto, proposed to be filed by the Surviving Corporation
within five (5) Business Days prior to the filing thereof and the
opportunity to discuss with Parent the contents of such filing. Parent
shall promptly notify the Shareholders' Representative in writing of the
results of the audit of any such filing by an applicable regulatory
authority. Until the earlier of the first anniversary of the Closing Date
or final determination of the Tax Refund Receivable, Parent shall provide
the Shareholders' Representative with
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reasonable access to the Surviving Corporation's books and records relating
to taxes for periods prior to the Closing Date.
(d) The parties agree that all external accounting and legal fees
incurred by Parent and the Surviving Corporation to determine and obtain
the Tax Refund Receivable shall not be treated as Company Expenses for any
purpose of this Agreement, but shall be allocated ninety percent (90%) to
the Company Equity Holders and ten percent (10%) to Parent as described in
Section 2.1(x). To the extent that the actual expenses so incurred by
Parent and the Surviving Corporation exceed the estimated amount of such
expenses used in the calculation of the Estimated Tax Refund Amount, Parent
shall be entitled to receive a refund of ninety percent (90%) of such
excess, which amount shall be paid from the Initial Indemnification Escrow
Amount in accordance with the terms of the Escrow Agreement.
ARTICLE III - PAYMENT OF MERGER CONSIDERATION; DISSENTING SHARES
SECTION 3.1. PAYMENT FOR SHARES OF COMPANY COMMON STOCK.
(a) At the Effective Time, Parent shall deposit, or shall cause
to be deposited, with a bank or trust company as shall be mutually
acceptable to Parent and the Company (the "Exchange Agent"), for the
benefit of the holders of shares of Company Common Stock for exchange
through the Exchange Agent, an amount in cash (the "Exchange Fund") equal
to (i) the Closing Per Share Payment, multiplied by (ii) the Outstanding
Shares.
(b) As promptly as practicable following the Effective Time, but
in any event within five (5) Business Days (as defined in Section 10.7)
thereof, Parent shall cause the Exchange Agent to deliver or mail to each
holder of record of Outstanding Shares, (i) a letter of transmittal in
substantially the form attached hereto as Exhibit B and (ii) instructions
for use in surrendering the Certificates formerly representing such shares
in exchange for an amount equal to the number of such shares, multiplied by
the Final Per Share 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 Final Per Share Merger Consideration
(payable in accordance with Section 2.2), that such holder has the right to
receive in respect of the shares of Company Common Stock formerly
represented by such Certificate, and the Certificate so surrendered shall
forthwith be canceled. No interest will be paid or accrued on any Final Per
Share Merger Consideration (or portion thereof) 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
Common Stock to be canceled in accordance with Section 2.2(a)(ii) and
Dissenting Shares) shall represent
9
solely the right to receive the Final Per Share Merger Consideration
relating thereto. If the Final Per Share Merger Consideration (or any
portion thereof) is to be delivered to any Person (as defined in Section
10.7) other than the Person in whose name the Certificate formerly
representing shares of Company Common Stock surrendered therefor is
registered, it shall be a condition to such right to receive such Final Per
Share 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 Common Stock shall pay to the
Exchange Agent any transfer or other taxes required by reason of the
payment of the Final Per Share 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) 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 Common Stock on the stock
transfer books of the Surviving Corporation of any shares of Company Common
Stock that were outstanding immediately prior to the Effective Time. On or
after the Effective Time, any Certificates formerly representing shares of
Company Common Stock presented to the Surviving Corporation or the Exchange
Agent shall be surrendered and canceled in return for the payment of the
Final Per Share Merger Consideration relating thereto, as provided in this
Article III.
(f) 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 and, if required by the
Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will issue the applicable portion of the
Exchange Fund in exchange for such lost, stolen or destroyed Certificate.
SECTION 3.2. PAYMENT FOR IN-THE-MONEY OPTIONS.
(a) At the Effective Time, Parent shall deposit, or shall cause
to be deposited, with the Exchange Agent, for the benefit of the holders of
In-the-Money Options, an amount in cash equal to the aggregate Option
Consideration payable with respect thereto in accordance with Section 2.3
(the "Aggregate Option Consideration").
(b) As promptly as practicable following the Effective Time, but
in any event within five (5) Business Days thereof, Parent shall deliver or
mail to each holder of an In-the-Money Option, (i) an optionholder
acknowledgment letter in substantially the form attached hereto as Exhibit
C and (ii) instructions for use in surrendering the original option
agreements formerly representing such In-the-Money Options in exchange for
the Option Consideration relating thereto.
(c) Upon delivery of such acknowledgment letter, properly
completed and duly executed, and such other documents as may be required
pursuant to such instructions, the holder of such In-the-Money Option shall
be entitled to receive in exchange therefor the Option Consideration
(payable in accordance with Section 2.3),
10
and all option agreements so surrendered shall forthwith be marked
canceled. No interest will be paid or accrued on any Option Consideration
(or portion thereof) payable to holders of In-the-Money Options.
(d) Parent shall instruct the Exchange Agent, upon receipt of an
optionholder acknowledgment letter, properly completed and duly executed,
and such other documents as may be required, to remit the Option
Consideration related to the In-the-Money Options of such holder to the
payroll service provider of Parent or the Surviving Corporation. Payment of
the Option Consideration shall be made by the payroll service provider of
Parent or the Surviving Corporation as promptly as practicable thereafter
(but in no event before the next regularly-scheduled payroll payment date)
after receipt by such payroll service provider of the Option Consideration
related to such In-the-Money Options from the Exchange Agent.
SECTION 3.3. ESCROW ACCOUNT. At the Effective Time, Parent shall pay to
HSBC Bank USA (the "Escrow Agent") an amount in cash equal to $11,000,000. The
Initial Indemnification Escrow Amount shall be held by the Escrow Agent in
accordance with the terms of an Escrow Agreement in the form attached hereto as
Exhibit D (the "Escrow Agreement"), for purposes of (i) satisfying any claims of
the Parent/MergerCo Indemnified Parties pursuant to Section 8.2, (ii) paying up
to $350,000 to Parent and/or the Surviving Corporation for certain costs
incurred by them in obtaining non-competition obligations from any or all of the
Company employees listed on Schedule 3.3 (the "Non-Compete Escrow Amount"),
(iii) refunding to Parent any amount due under Section 2.4(d) or Section 2.5(b)
or (d), and (iv) in certain circumstances specifically set forth in this
Agreement, reimbursing the expenses of the Shareholders' Representative, all as
further described in the Escrow Agreement. The Final Indemnification Escrow
Amount shall be paid to the holders of the Company Common Stock as of
immediately prior to the Effective Time (collectively, the "Company Equity
Holders") on a pro rata basis as promptly as practicable following the first
(1st) anniversary of the Closing Date and in accordance with the terms of the
Escrow Agreement.
SECTION 3.4. GENERAL PROVISIONS REGARDING PAYMENT OF MERGER CONSIDERATION.
(a) Promptly following the date that is one hundred twenty (120)
days after the Effective Time, the Exchange Agent shall deliver to the
Surviving Corporation all cash, Certificates, option agreements, and other
documents in its possession relating to the Merger, and the Exchange
Agent's duties shall terminate; provided that Parent may re-engage the
Exchange Agent to distribute the Final Indemnification Escrow Amount in
accordance with the terms of the Escrow Agreement. Thereafter, (i) each
holder of a Certificate formerly representing shares of Company Common
Stock may surrender such Certificate to the Surviving Corporation and
(subject to applicable abandoned property, escheat and similar laws)
receive in consideration therefor (payable as provided in Section 2.2) the
Final Per Share Merger Consideration relating thereto, and (ii) each holder
of a cancelled In-the-Money Option may surrender the original option
agreement related thereto to the Surviving Corporation and (subject to
applicable abandoned property, escheat and similar laws) receive in
consideration therefor (payable as provided in Section 2.3) the Option
Consideration relating thereto.
11
(b) None of Parent, the Surviving Corporation or the Exchange
Agent or any of their respective Subsidiaries or Affiliates (as defined in
Section 10.7) shall be liable to any Person in respect of any cash from the
Exchange Fund or the Aggregate Option Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
law.
(c) Each of the Exchange Agent, the Escrow Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from the
Final Per Share Merger Consideration or the Option Consideration to any
holder of shares of Company Common Stock or In-the-Money Options,
respectively, such amounts as the Exchange Agent, the Escrow Agent, Parent
or the Surviving Corporation is required to deduct and withhold with
respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or any provision of United States federal,
state or local tax laws. To the extent that amounts are so withheld by the
Exchange Agent, the Escrow 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 the shares of Company Common Stock or
In-the-Money Options in respect of which such deduction and withholding was
made by the Exchange Agent, the Escrow Agent, Parent or the Surviving
Corporation, as the case may be.
SECTION 3.5. APPRAISAL RIGHTS. Notwithstanding anything in this Agreement
to the contrary, shares of Company Common Stock that are outstanding immediately
prior to the Effective Time and that are held by a "dissenter" as defined in
Section 14-2-1301 of the GBCC (such shares are referred to herein as "Dissenting
Shares") shall not be converted into the right to receive the Final Per Share
Merger Consideration but, instead, the holder thereof shall be entitled to
receive payment of the fair value of such Dissenting Shares as determined in
accordance with the provisions of Sections 14-2-1301 through 14-2-1332 of the
GBCC (the "GBCC Dissenters' Rights"); provided, however, that if any holder of
Dissenting Shares shall subsequently withdraw his or her demand for the payment
of the fair value of such shares or fails to establish or perfect or otherwise
loses his or her entitlement to payment of the fair value of such shares as
provided in the GBCC Dissenters' Rights, such holder shall not be entitled to
receive payment of the fair value of such shares of Company Common Stock as
contemplated by the GBCC Dissenters' Rights, and each such Dissenting Share
shall thereupon be deemed to have been canceled, extinguished and converted, as
of the Effective Time, into and represent the right to receive from Parent, the
Final Per Share Merger Consideration as provided in Section 2.2(a)(iii).
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE COMPANY
In order to induce Parent and MergerCo to enter into this Agreement and
consummate the transactions contemplated hereby, the Company hereby makes to
Parent and MergerCo the representations and warranties contained in this Article
IV. Such representations and warranties are subject to the qualifications and
exceptions set forth in the Schedules delivered by the Company to Parent
pursuant to this Agreement. References to the knowledge or awareness of the
Company are deemed to mean the actual knowledge of the following officers and
managers
12
of the Company after reasonable inquiry: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇.
SECTION 4.1. ORGANIZATION AND CORPORATE POWER.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Georgia, and is duly
qualified or registered to do business as a foreign corporation and in good
standing in each jurisdiction where the character of its properties, owned,
operated or leased or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified or in good standing
would not reasonably be expected to have, individually or in the aggregate,
a Company Material Adverse Effect (as defined in Section 10.7).
(b) Copies of the Articles of Incorporation, as amended (the
"Articles of Incorporation"), and the Bylaws, as amended (the "Bylaws"), of
the Company have been furnished to Parent by the Company and are correct
and complete as of the date hereof. The Company is not in violation of any
term of the Articles of Incorporation or Bylaws.
SECTION 4.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT.
(a) The Company has all requisite corporate power and authority
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby and perform its obligations hereunder. Subject only to
the approval of this Agreement by the holders of Company Common Stock as
described in clause (b) below, the execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on behalf of
the Company. In connection with the foregoing, the Company Board has
unanimously (i) determined that this Agreement, the Merger and the other
transactions contemplated hereby are advisable and in the best interests of
the Company and its shareholders, (ii) adopted this Agreement in accordance
with the provisions of the GBCC, (iii) directed that this Agreement be
submitted to the shareholders of the Company for their approval and (iv)
resolved to recommend that the shareholders of the Company vote in favor of
the approval of this Agreement. The Company Board has taken such actions
and votes as are necessary to render all applicable takeover statutes
inapplicable to this Agreement. This Agreement, assuming due and valid
authorization, execution and delivery hereof by Parent and MergerCo,
constitutes a valid and legally binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject only
to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
(b) The affirmative vote of the holders of at least a majority of
the outstanding shares of Company Common Stock is the only vote of holders
of any shares of the capital stock of the Company necessary to approve this
Agreement and the transactions contemplated hereby at a meeting of the
Company's shareholders held for that purpose. Approval of this Agreement
and the transactions contemplated hereby by the shareholders of the Company
without a meeting thereof requires action by the written
13
consent of such shareholders having the requisite number of votes necessary
to approve such action at a meeting of shareholders as described in the
preceding sentence.
SECTION 4.3. CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 20,000,000 shares of Company Common Stock, of which 8,439,259.92
shares are issued and outstanding and of which 547,064.03 shares were held by
the Company in treasury, and (b) 1,000,000 shares of preferred stock, no par
value per share, of which no shares are issued and outstanding. All such issued
and outstanding shares of Company Common Stock are duly authorized, validly
issued, fully paid, non-assessable and free of preemptive rights. Schedule 4.3
sets forth a complete and accurate list of (i) all shareholders of the Company,
indicating the number of shares held by each shareholder, (ii) all outstanding
Options, indicating (A) the holder thereof, (B) the number of shares subject to
each Option, and (C) the exercise price, date of grant, vesting schedule and
expiration date for each Option, and (iii) all stock option plans and other
stock or equity related plans of the Company. The Company has taken all actions
necessary to ensure that all Options, to the extent not exercised prior to the
Effective Time, shall terminate and be cancelled immediately following the
Effective Time. Except as set forth on Schedule 4.3, there are no outstanding or
authorized options, warrants, rights, agreements or commitments to which the
Company is a party or which are binding upon the Company providing for the
issuance or redemption of any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock or similar rights with respect to
the Company. Except as set forth on Schedule 4.3, there are no agreements to
which the Company is a party or by which it is bound with respect to the voting
(including, without limitation, voting trusts or proxies) or sale or transfer
(including, without limitation, agreements relating to preemptive rights, rights
of first refusal, co-sale rights or "drag-along" rights) of any securities of
the Company. To the knowledge of the Company, there are no agreements among
other parties, to which the Company is not a party, with respect to the voting
(including, without limitation, voting trusts or proxies) or sale or transfer
(including, without limitation, agreements relating to rights of first refusal,
co-sale rights or "drag-along" rights) of any securities of the Company. All of
the issued and outstanding shares of Company Common Stock were issued in
compliance with applicable federal and state securities laws.
SECTION 4.4. NON-CONTRAVENTION. Except for the filing of the Certificate of
Merger and as otherwise set forth on Schedule 4.4, neither the execution and
delivery of this Agreement by the Company, nor the consummation by the Company
of the transactions contemplated hereby, will: (a) violate or result in a
violation of, conflict with, constitute or result in a default (whether after
the giving of notice, lapse of time or both) under, accelerate any obligation
under, or give rise to a right of termination of, (i) any Contract (as defined
in Section 10.7) listed or required to be listed on Schedule 4.12, Schedule
4.14, or Schedule 4.15(b), (ii) any other Contract to which the Company or any
Subsidiary of the Company is a party or by which its assets are bound, which
violation, conflict, default, acceleration or right of termination, individually
or in the aggregate, would reasonably be expected to have a Company Material
Adverse Effect, or (iii) any Permit (as defined in Section 4.18) of the Company
or any Subsidiary of the Company, or cause the creation of any Encumbrance (as
defined in Section 10.7) upon any of the assets of the Company or any of its
Subsidiaries; (b) violate any provision of the Articles of Incorporation or
Bylaws; (c) violate, conflict with 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
14
law, regulation or rule, or any order of, or any restriction imposed by, any
Governmental Authority (as defined in Section 10.7) applicable to the Company or
any Subsidiary of the Company; or (d) require from the Company or any Subsidiary
of the Company any notice to, declaration or filing with, or consent or approval
of any Governmental Authority or other third party.
SECTION 4.5. CORPORATE RECORDS. The corporate record books of the Company
accurately reflect in all material respects all corporate action taken by its
shareholders and the Company Board and any committees thereof. The copies of the
corporate records of the Company, as delivered to Parent, are true and complete
copies of the originals of such documents.
SECTION 4.6. SUBSIDIARIES; INVESTMENTS. Schedule 4.6 sets forth the name
and jurisdiction of incorporation or organization of each Subsidiary of the
Company. Each Subsidiary of the Company is duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, and has all required corporate or other power and authority to
carry on its business as presently conducted. Each Subsidiary is duly qualified
or registered to do business as a foreign corporation and in good standing in
each jurisdiction where the character of its activities makes its qualification
necessary, except where the failure to be so qualified or in good standing would
not reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect. All issued and outstanding shares or other equity
interests of each such Subsidiary are duly authorized, validly issued, fully
paid and non-assessable, and are owned, directly or indirectly, by the Company
free and clear of all Encumbrances. There are no outstanding subscriptions,
options, warrants, commitments, preemptive rights, agreements, arrangements or
commitments of any kind relating to the issuance or sale of, or outstanding
securities convertible into or exercisable or exchangeable for, any shares of
capital stock or other equity interests of any Subsidiary of the Company. The
Company does not own or control, directly or indirectly, any interest in any
other corporation, partnership, limited liability company, association or other
business entity, except as set forth on Schedule 4.6.
SECTION 4.7. FINANCIAL STATEMENTS. The Company has previously furnished to
Parent and attached hereto on Schedule 4.7, copies of the following financial
statements: (a) the Company's unaudited consolidated balance sheet for the
fiscal quarter ended March 31, 2005 and the related unaudited consolidated
statements of income, retained earnings and cash flows for the fiscal quarter
then ended; (b) the Base Balance Sheet and the Company's audited consolidated
balance sheets for the fiscal years ended December 31, 2003, December 31, 2002
and December 31, 2001; and (c) the related audited consolidated statements of
income, retained earnings and cash flows for the fiscal years ended December 31,
2004, 2003, 2002 and 2001, with a report thereon by the independent certified
public accountants of the Company. Such financial statements were prepared in
conformity with GAAP applied on a consistent basis, are consistent in all
material respects with the books and records of the Company, and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of operations and cash flows of the Company for the
periods shown therein; provided, however, that the unaudited financial
statements do not include all of the disclosures required by GAAP as, by way of
example, certain footnote disclosures have been omitted. Nothing has
15
come to the attention of the Company since such respective dates that would
indicate that such financial statements are not true and correct in all material
respects as of the date thereof.
SECTION 4.8. ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor
any of its Subsidiaries has any liabilities or obligations of any nature,
whether accrued, absolute, contingent, asserted, unasserted or otherwise, except
liabilities or obligations (a) stated, adequately reserved against or otherwise
disclosed in (i) the Base Balance Sheet or other audited consolidated financial
statements of the Company for the fiscal year ended December 31, 2004 as
attached hereto on Schedule 4.7 (including the notes thereto) or (ii) the
Company's unaudited consolidated financial statements for the fiscal quarter
ended March 31, 2005 as attached hereto on Schedule 4.7, (b) incurred in the
ordinary course of business since the date of the Base Balance Sheet or (c) as
set forth in Schedule 4.8.
SECTION 4.9. ABSENCE OF CERTAIN DEVELOPMENTS. Since the date of the Base
Balance Sheet, the Company has conducted its business only in the ordinary
course consistent with past practice and, except as set forth in Schedule 4.9,
there has not been: (a) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of capital stock of
the Company or any redemption, purchase or other acquisition of any securities
of the Company by the Company or any Subsidiary of the Company; (b) any material
commitment, Contract, borrowing, liability, guaranty, capital expenditure or
transaction (each, a "Commitment") entered into by the Company or any of its
Subsidiaries outside the ordinary course of business except for Commitments for
expenses of attorneys, accountants and investment bankers incurred in connection
with the Merger; (c) any material change in the Company's accounting principles,
practices or methods; (d) any change in the financial condition, results of
operations, or business of the Company or any of its Subsidiaries that,
individually or in the aggregate, has had or would reasonably be expected to
have a Company Material Adverse Effect; (e) any increase to, or establishment
of, any severance plan or agreement with any director, officer or employee of
the Company or any of its Subsidiaries; or (f) any incurrence of Indebtedness by
the Company or any of its Subsidiaries.
SECTION 4.10. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLE; INVENTORIES.
(a) All of the accounts receivable of the Company and its
Subsidiaries are valid and enforceable claims consistent with and subject
to the Company's bad debt reserve as set forth on the Base Balance Sheet,
are subject to no set-off or counterclaim, arose in the ordinary course of
business, and are reflected on the Base Balance Sheet in a manner
consistent with past practice. Since the date of the Base Balance Sheet,
the Company and its Subsidiaries have collected their accounts receivable
in the ordinary course of their business and have not accelerated any such
collections.
(b) All accounts payable and notes payable of the Company and its
Subsidiaries arose in bona fide arm's length transactions in the ordinary
course of business. Since the date of the Base Balance Sheet, the Company
and its Subsidiaries have paid their accounts payable in the ordinary
course of their business.
(c) All of the inventory items of the Company and its
Subsidiaries are of a quality and quantity salable in the ordinary course
of business. The values of the
16
inventories stated in the Base Balance Sheet reflect the normal inventory
valuation policies of the Company and were determined in accordance with
GAAP consistently applied. Since the date of the Base Balance Sheet, no
inventory items have been sold or disposed of except through sales in the
ordinary course of business. Since October 1, 2004, neither the Company nor
any Subsidiary of the Company (i) has delivered to any of its distributors,
inventory in excess of the amount that was requested by such distributor,
or (ii) requested that any such distributor take delivery of any amount of
inventory in excess of the amount so requested by such distributor.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES. Except as set forth on Schedule
4.11, there are no loans, leases or other agreements or transactions between the
Company or any Subsidiary of the Company and any present or former shareholder,
director, officer or employee of the Company or any such Subsidiary, or to the
knowledge of the Company, any member of such officer's, director's, employee's
or shareholder's immediate family, or any Person controlled by such officer,
director, employee or shareholder or his or her immediate family. No
shareholder, director, officer or employee of the Company or any Subsidiary of
the Company, or to the knowledge of the Company, any of their respective
immediate family members, owns, directly or indirectly, any interest in, or
serves as an officer or director or in another similar capacity of, any
competitor, customer or supplier of the Company or any Subsidiary of the
Company, or any organization which has a material Contract or arrangement with
the Company or any Subsidiary of the Company.
SECTION 4.12. PROPERTIES.
(a) Neither the Company nor any of its Subsidiaries owns any real
property. Schedule 4.12 lists all real property leased or subleased to or
by the Company or any Subsidiary of the Company. The Company has delivered
to Parent complete and accurate copies of the leases and subleases (as
amended to date) listed in said Schedule. With respect to each lease and
sublease listed in said Schedule: (i) the lease or sublease is, and will be
following the Closing, a legal, valid and binding obligation of the Company
or such Subsidiary of the Company and, to the knowledge of the Company, the
other parties thereto, enforceable in accordance with its terms, subject
only to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity; (ii) no
such lease or sublease has been terminated in full or in part, nor has the
Company or any Subsidiary of the Company received notice of any such
termination and, to the knowledge of the Company, there is no threat of
such termination; (iii) neither the Company nor any Subsidiary of the
Company nor, to the knowledge of the Company, any other party, is in breach
or violation of, or default under, in any material respect, any such lease
or sublease, and no event has occurred, is pending or, to the knowledge of
the Company, is threatened, which, after the giving of notice, with lapse
of time, or otherwise, would constitute a breach or default by the Company
or any Subsidiary of the Company or, to the knowledge of the Company, any
other party under such lease or sublease; (iv) neither the Company nor any
Subsidiary of the Company has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered any interest in the leasehold or
subleasehold; and (v) the Company is not aware of any Encumbrance
applicable to the real property subject to such lease, except for
17
Encumbrances which do not materially impair the current uses or the
occupancy by the Company or the applicable Subsidiary of the property
subject thereto.
(b) The Company and its Subsidiaries have good, valid and (if
applicable) marketable title to all assets material to their businesses and
to those assets reflected on the Base Balance Sheet or acquired by it after
the date thereof (except for properties disposed of since that date in the
ordinary course of business), free and clear of Encumbrances except for
Permitted Exceptions (as defined in Section 10.7). All equipment included
in such properties which is necessary to the business of the Company and
its Subsidiaries is in good condition and repair (ordinary wear and tear
excepted). There are no leases of personal property to which the Company or
any Subsidiary of the Company is a party that are required to be listed on
Schedule 4.14. The property and assets of the Company and its Subsidiaries
are sufficient for the conduct of their respective businesses as presently
conducted. Except as otherwise noted thereon, all of the tangible personal
property and assets of the Company and its Subsidiaries are located at the
leased real property listed on Schedule 4.12.
SECTION 4.13. TAX MATTERS.
(a) The Company and each Subsidiary of the Company has timely and
properly filed all federal, state, local and foreign tax returns required
to be filed by it through the date hereof, and all such tax returns are
true, correct and complete in all material respects. The Company and each
Subsidiary of the Company has paid or caused to be paid all federal, state,
local, foreign and other taxes, including, without limitation, income
taxes, estimated taxes, alternative minimum taxes, excise taxes, sales
taxes, franchise taxes, employment and payroll related taxes, withholding
taxes, transfer taxes, and all deficiencies, or other additions to tax,
interest, fines and penalties owed by it (collectively, "Taxes"), required
to be paid by it through the date hereof whether disputed or not, except
Taxes which have not yet accrued or otherwise become due. The provisions
for Taxes in the Base Balance Sheet are sufficient as of its date for the
payment of any accrued and unpaid Taxes of any nature of the Company and
its Subsidiaries and, since the date of the Base Balance Sheet, neither the
Company nor any Subsidiary of the Company has incurred any Taxes other than
in the ordinary course of business. All Taxes and other assessments and
levies which the Company or any Subsidiary of the Company was or is
required to withhold or collect have been withheld and collected and have
been paid over to the proper Governmental Authorities.
(b) The Company has delivered to Parent correct and complete
copies of all annual tax returns, examination reports, and statements of
deficiencies filed or received by the Company or any Subsidiary of the
Company since December 31, 2001. Neither the Company nor any Subsidiary of
the Company has waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to any Tax payment,
assessment, deficiency or collection. Except as set forth in Schedule 4.13:
(i) neither the Company nor any Subsidiary of the Company has received
notice of any audit or of any proposed deficiencies from the Internal
Revenue Service (the "IRS") or any other taxing authority (other than
routine audits undertaken in the ordinary course and which have been
resolved on or prior to the date hereof); (ii) there are in effect no
18
waivers of applicable statutes of limitations with respect to any Taxes
owed by the Company or any of its Subsidiaries for any year; (iii) neither
the IRS nor any other taxing authority is now asserting or, to the
knowledge of the Company, threatening to assert against the Company or any
Subsidiary of the Company any deficiency or claim for additional Taxes or
interest thereon or penalties in connection therewith; and (iv) the Company
has never been a member of an affiliated group of corporations filing a
combined federal income Tax return nor does the Company have any liability
for Taxes of any other Person.
(c) Neither the Company nor any Subsidiary of the Company has
ever 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. Neither the Company nor
any Subsidiary of the Company is a party to any Tax allocation or sharing
arrangement. Neither the Company nor any Subsidiary of the Company is a
party to any contract, agreement, plan or arrangement covering any employee
or former employee thereof, that, individually or collectively, could give
rise to the payment of any amount that would not be deductible pursuant to
Section 280G or Section 162 of the Code. Neither the Company nor any
Subsidiary of the Company is a "Foreign Person" within the meaning of
Section 1445 of the Code and Treasury Regulations Section 1.1445-2.
SECTION 4.14. CERTAIN CONTRACTS AND ARRANGEMENTS.
(a) Except as set forth in Schedule 4.14 (with true and complete
copies of each Contract or other document referred to therein provided or
made available to Parent), neither the Company nor any Subsidiary of the
Company is a party or subject to or bound by:
(i) any Contract involving a potential commitment or payment
by the Company or any Subsidiary of the Company in excess of $100,000;
(ii) any Contract with a Customer, Distributor or Partner
described in Section 4.23 or a Supplier described in Section 4.24;
(iii) any Contract which is not cancelable by the Company or
the applicable Subsidiary of the Company without penalty on less than
ninety (90) days notice;
(iv) any Contract containing covenants directly or
explicitly limiting in any respect the freedom of the Company or any
Subsidiary of the Company to compete in any line of business or with any
Person;
(v) any Contract relating to the licensing, development or
servicing of its software or hardware products, except to customers and
distributors in the ordinary course of business consistent with past
practices;
19
(vi) any indenture, mortgage, promissory note, loan
agreement, guaranty or other agreement or commitment related to
Indebtedness (as defined in Section 10.7) of the Company or any Subsidiary
of the Company;
(vii) any joint venture, partnership, manufacturer,
development or supply agreement or other agreement which involves a sharing
of revenues, profits, losses, costs or liabilities by the Company or any
Subsidiary of the Company with any other Person;
(viii) any acquisition, merger or similar agreement;
(ix) any Contract with any Governmental Authority;
(x) any Contract with any officer, employee, director or
shareholder of the Company or with any Person controlled by or affiliated
with any of them;
(xi) any Contract not executed in the ordinary course of
business; or
(xii) any other Contract material to the business of the
Company or any of its Subsidiaries.
(b) All Contracts listed on Schedule 4.14 constitute, and will
constitute following the Closing, legal, valid and binding obligations of
the Company or such Subsidiary of the Company and, to the knowledge of the
Company, of the other parties thereto, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. No such Contract has been terminated in full or in
part. Neither the Company nor any Subsidiary of the Company has received
notice of termination with respect to any such Contract, and to the
knowledge of the Company, there is no threat of such termination. No
Termination Date (as defined therein) has occurred or been agreed to by the
Company and either of ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ or ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ under those
certain Consulting Agreements, dated July 22, 2004, between the Company and
each of Drs. Gemen and ▇▇▇▇▇▇▇. Neither the Company or any Subsidiary of
the Company, nor, to the knowledge of the Company, any other party is in
default in complying with any provisions of any such Contract, and no
condition, event or fact exists which, with notice, lapse of time or both,
would constitute a default thereunder on the part of the Company or any
Subsidiary of the Company.
SECTION 4.15. INTELLECTUAL PROPERTY.
(a) Schedule 4.15(a) contains a complete and accurate list of all
Patents owned or purported to be owned by the Company or any Subsidiary of
the Company or otherwise used in the Business ("Company Patents"), Marks
owned or purported to be owned by the Company or any Subsidiary of the
Company or otherwise used in the Business ("Company Marks"), and registered
Copyrights owned or purported
20
to be owned by the Company or any Subsidiary of the Company or otherwise
used in the Business ("Company Copyrights") (each as defined below). Except
as set forth in Schedule 4.15(a):
(i) the Company or such Subsidiary exclusively owns or
possesses adequate and enforceable rights to use and license to others,
without payment to a third party (not including Parent), all of the
Intellectual Property Assets necessary for the operation of the Business,
free and clear of all Encumbrances;
(ii) all Company Intellectual Property Assets are valid and
enforceable, and all Company Patents, Company Marks and Company Copyrights
that are issued by or registered with, as applicable, the U.S. Patent and
Trademark Office, the U.S. Copyright Office or in any similar office or
agency anywhere in the world are currently in compliance in all material
respects with formal legal requirements (including, without limitation, as
applicable, payment of filing, examination and maintenance fees, proofs of
working or use, timely post-registration filing of affidavits of use and
incontestability and renewal applications);
(iii) there are no pending, or, to the knowledge of the
Company, threatened claims against the Company, any Subsidiary of the
Company or any of their respective employees alleging that any of the
Company Intellectual Property Assets or the Business, infringes or
conflicts with the rights of others (not including Parent) under any
Intellectual Property Assets ("Third Party Rights");
(iv) none of the Business, any Company Intellectual Property
Asset, or any of the Products infringes or conflicts with any Third Party
Right (not including Parent);
(v) neither the Company nor any Subsidiary of the Company
has received any communications alleging that the Company or any Subsidiary
of the Company has violated or, by conducting the Business, would violate
any Third Party Rights or that any of the Company Intellectual Property
Assets is invalid or unenforceable;
(vi) no current or former employee or consultant of the
Company or any Subsidiary of the Company owns any rights in or to any of
the Company Intellectual Property Assets;
(vii) the Company is not aware of any violation or
infringement by a third party of any of the Company Intellectual Property
Assets;
(viii) the Company and each of its Subsidiaries has taken
reasonable security measures to protect the secrecy, confidentiality and
value of all Trade Secrets used in the Business (the "Company Trade
Secrets"), including, without limitation, requiring all Company employees
and consultants and all other Persons with access to Company Trade Secrets
to execute a binding confidentiality agreement, copies
21
or forms of which have been provided to Parent and, to the knowledge of the
Company, there has not been any breach of such confidentiality agreements;
(ix) the Products perform in accordance with their
documented specifications and as the Company or any Subsidiary of the
Company has warranted to its customers;
(x) (A) neither the Company nor any Subsidiary of the
Company has directly or indirectly granted any rights, licenses or
interests in the source code of the Products, except in the ordinary course
of business to its customers to the extent necessary to entitle such
customers to use the Products, and (B) since the Company or such Subsidiary
of the Company developed the source code of the Products, neither the
Company nor such Subsidiary has provided or disclosed the source code of
the Products to any Person;
(xi) to the knowledge of the Company, the Products do not
contain any "viruses", "time-bombs", "key-locks", or any other devices that
could disrupt or interfere with the operation of the Products or the
integrity of the data, information or signals they produce in a manner
adverse to the Company or any Subsidiary of the Company or any licensee or
recipient; and
(xii) neither the Company nor any Subsidiary of the Company
has embedded any open source, copy left or community source code in any of
its Products which are generally available or in development, including,
but not limited to, any libraries or code licensed under the GNU General
Public License, GNU Lesser General Public License or similar license
arrangement.
(b) All licenses or other agreements under which (i) the Company
or any Subsidiary of the Company is granted rights by others in Company
Intellectual Property Rights or (ii) the Company has granted rights to
others in Company Intellectual Property Rights are listed in Schedule
4.15(b). All such licenses and other agreements constitute, and will
constitute following the Closing, legal, valid and binding obligations of
the Company or such Subsidiary of the Company and, to the knowledge of the
Company, of the other parties thereto, enforceable in accordance with their
respective terms, subject only to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. No such license or agreement has been terminated in
full or in part. Neither the Company nor any Subsidiary of the Company has
received notice of termination with respect to any such licenses or other
agreements, and to the knowledge of the Company, there is no threat of such
termination. Neither the Company or any Subsidiary of the Company, nor, to
the knowledge of the Company, any other party is in default in complying
with any provisions of any such license or other agreement, and no
condition or event or fact exists that, with notice or lapse of time or
both, would constitute a default thereunder on the part of the Company or
such Subsidiary of the Company or, to the knowledge of the Company, on the
part of any other party thereto. True and complete copies of all such
licenses and other agreements have been provided to Parent.
22
(c) For purposes of this Agreement:
(i) "Business" means the business of the Company and its
Subsidiaries as currently conducted.
(ii) "Company Intellectual Property Assets" means all
Intellectual Property Assets owned or purported to be owned by the Company
or any Subsidiary of the Company or otherwise used in the Business.
"Company Intellectual Property Assets" includes, without limitation, the
Products, Company Patents, Company Marks, Company Copyrights and Company
Trade Secrets.
(iii) "Intellectual Property Assets" means:
(A) patents, patent applications, patent rights, and
inventions and discoveries and invention disclosures (whether or not
patented) (collectively, "Patents");
(B) trade names, trade dress, logos, packaging design,
slogans, Internet domain names, registered and unregistered trademarks
and service marks and related registrations and applications for
registration (collectively, "Marks");
(C) copyrights in both published and unpublished works,
including, without limitation, all compilations, databases and
computer programs, manuals and other documentation and all copyright
registrations and applications, and all derivatives, translations,
adaptations and combinations of the above (collectively,
"Copyrights");
(D) know-how, trade secrets, confidential or proprietary
information, research in progress, algorithms, data, designs,
processes, formulae, drawings, schematics, blueprints, flow charts,
models, strategies, prototypes, techniques, Beta testing procedures
and Beta testing results (collectively, "Trade Secrets"); and
(E) goodwill, franchises, licenses, permits, consents,
approvals, and claims of infringement against third parties.
(iv) "Products" means the hardware, software, systems and/or
services and related documentation designed, manufactured, marketed, sold
and/or distributed by the Company or any Subsidiary of the Company prior to
the Effective Time. A complete list of the Products owned by the Company
and its Subsidiaries is provided in Schedule 4.15(c).
SECTION 4.16. LITIGATION. Except as set forth on Schedule 4.16, there is no
litigation or governmental or administrative proceeding or investigation pending
or, to the knowledge of the Company, threatened against the Company or any
Subsidiary of the Company or affecting the properties or assets of the Company
or any Subsidiary of the Company, nor to the knowledge of
23
the Company, has there occurred any event nor does there exist any condition on
the basis of which any such claim may be asserted.
SECTION 4.17. LABOR MATTERS. The Company and its Subsidiaries generally
enjoy good employer-employee relationships with their respective employees.
Neither the Company nor any Subsidiary is delinquent in payments to any of its
employees for any wages, salaries, commissions, bonuses or other direct
compensation for any services performed for the Company or such Subsidiary of
the Company or amounts required to be reimbursed to such employees. No
collective bargaining agreement is in effect or is currently being negotiated by
the Company or any Subsidiary of the Company. Neither the Company nor any
Subsidiary of the Company has received any information indicating that any of
its employment policies or practices are currently being audited or investigated
by any Governmental Authority. There are no charges or claims from employees of
the Company or any Subsidiary of the Company regarding the terms or conditions
of their employment, including, without limitation, claims or charges of
employment discrimination, sexual harassment or unfair labor practices, nor any
strikes, slowdowns, stoppages of work, or any other concerted interference with
normal operations existing, pending or, to the knowledge of the Company,
threatened against or involving the Company or any Subsidiary of the Company. To
the knowledge of the Company, the Company and its Subsidiaries are, and at all
times have been, in compliance in all material respects with the requirements of
the Immigration Reform Control Act of 1986. The Company has never implemented
any plant closing or mass layoff of employees as those terms are defined in the
Worker Adjustment Retraining and Notification Act of 1988, as amended, or any
similar state or local law or regulation, and no layoffs that would implicate
such laws or regulations are currently contemplated.
SECTION 4.18. PERMITS; COMPLIANCE WITH LAWS.
(a) Schedule 4.18 sets forth a list of all franchises,
authorizations, approvals, orders, consents, licenses, certificates,
permits, registrations, qualifications or other rights and privileges
(collectively "Permits") issued to or held by the Company or any Subsidiary
of the Company. Such listed Permits are the only Permits that are necessary
to permit the Company and its Subsidiaries to conduct their businesses as
they are presently conducted, except for those the absence of which would
not reasonably be expected to have, individually or in the aggregate, a
Company Material Adverse Effect. Each Permit is valid and in full force and
effect. No Permit is subject to termination as a result of the execution of
this Agreement or consummation of the transactions contemplated hereby.
(b) The Company and each of its Subsidiaries is in compliance
with all applicable statutes, ordinances, orders, rules and regulations
promulgated by any Governmental Authority which apply to the conduct of its
business, except where the failure to comply would not reasonably be
expected to have, individually or in the aggregate, a Company Material
Adverse Effect. Neither the Company nor any Subsidiary of the Company is
subject to any judgment, consent decree, compliance order or administrative
order with respect to its business, properties or assets.
24
(c) Notwithstanding the foregoing, this Section 4.18 shall not
apply to any franchises, authorizations, approvals, orders, consents,
licenses, certificates, permits, registrations, qualifications or other
rights and privileges required by any Environmental Laws, as that term is
defined in Section 4.22.
SECTION 4.19. EMPLOYEE BENEFIT PROGRAMS.
(a) Schedule 4.19 sets forth a list of every Employee Program
that has been maintained by the Company or an ERISA Affiliate at any time
during the three-year period ending on the Closing Date (each Employee
Program listed or required to be listed on Schedule 4.19 being referred to
herein as a "Company Employee Program").
(b) Each Company Employee Program which has been intended to
qualify under Section 401(a) or 501(c)(9) of the Code has received a
favorable determination or approval letter from the IRS regarding its
qualification under such section and has, in fact, been qualified under the
applicable section of the Code from the effective date of such Company
Employee Program through and including the Closing Date (or, if earlier,
the date that all of such Company Employee Program's assets were
distributed). To the knowledge of the Company, no event or omission has
occurred which would cause any Company Employee Program to lose its
qualification or otherwise fail to satisfy the relevant requirements to
provide tax-favored benefits under the applicable Code Section (including,
without limitation, Code Sections 105, 125, 401(a) and 501(c)(9)). Each
asset held under any such Company Employee Program may be liquidated or
terminated without the imposition of any redemption fee, surrender charge
or comparable liability. No partial termination (within the meaning of
Section 411(d)(3) of the Code) has occurred with respect to any Company
Employee Program.
(c) Each Company Employee Program has been maintained and
operated in all material respects in accordance with the laws applicable
with respect to such Company Employee Program and all agreements related to
such Company Employee Program. With respect to any Company Employee
Program, there has been no (i) "prohibited transaction," as defined in
Section 406 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), or Code Section 4975, or (ii) non-deductible
contribution, which, in the case of any of (i) or (ii), would subject the
Company or any ERISA Affiliate to liability either directly or indirectly
(including, without limitation, through any obligation of indemnification
or contribution) for any damages, penalties, or taxes, or any other loss or
expense. No litigation or governmental administrative proceeding (or
investigation) or other proceeding (other than those relating to routine
claims for benefits) is pending or, to the knowledge of the Company,
threatened with respect to any Company Employee Program. All payments
and/or contributions required to have been made (under the provisions of
any agreements or other governing documents or applicable law) with respect
to all Company Employee Programs, for all periods prior to the Closing
Date, either have been made or have been accrued (and all such unpaid but
accrued amounts are described on Schedule 4.19).
(d) Except as set forth on Schedule 4.19, neither the Company nor
any ERISA Affiliate (i) has ever maintained any Employee Program which has
been subject
25
to title IV of ERISA or Code Section 412 or ERISA Section 302, including,
but not limited to, any Multiemployer Plan or (ii) has ever provided health
care or any other non-pension benefits to any employees after their
employment is terminated (other than as required by part 6 of subtitle B of
title I of ERISA) or has ever promised to provide such post-termination
benefits.
(e) With respect to each Company Employee Program, complete and
correct copies of the following documents (if applicable to such Company
Employee Program) have previously been delivered, or made available, to
Parent: (i) all documents embodying or governing such Company Employee
Program, and any funding medium for the Company Employee Program
(including, without limitation, trust agreements) as they may have been
amended to the date hereof; (ii) the most recent IRS determination or
approval letter with respect to such Company Employee Program under Code
Section 401(a) or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently
filed IRS Forms 5500, with all applicable schedules and accountants'
opinions attached thereto; (iv) the three most recent actuarial valuation
reports completed with respect to such Company Employee Program; (v) the
summary plan description for such Company Employee Program (or other
descriptions of such Company Employee Program provided to employees) and
all modifications thereto; (vi) any insurance policy (including any
fiduciary liability insurance policy or fidelity bond) related to such
Company Employee Program; (vii) any registration statement or other filing
made pursuant to any federal or state securities law; and (viii) all
correspondence to and from any state or federal agency within the last
three years with respect to such Company Employee Program.
(f) Each Company Employee Program may be amended, terminated, or
otherwise modified by the Company to the greatest extent permitted by
applicable law, including the elimination of any and all future benefit
accruals under any Company Employee Program, and no employee communications
have restricted the rights of the Company or the ERISA Affiliate to so
amend, terminate or otherwise modify such Company Employee Program.
(g) Each Company Employee Program has been maintained in
compliance in all material respects with all applicable requirements of
federal and state securities laws including, without limitation, the
requirements that the offering of interests in such Employee Program be
registered under the Securities Act of 1933, as amended, and/or state "Blue
Sky" laws.
(h) Each Company Employee Program has complied in all material
respects with the applicable notification and other applicable requirements
of the Consolidated Omnibus Budget Reconciliation Act of 1985, Health
Insurance Portability and Accountability Act of 1996, the Newborns' and
Mothers' Health Protection Act of 1996, the Mental Health Parity Act of
1996, and the Women's Health and Cancer Rights Act of 1998.
(i) The Company has terminated its 401(k) plan and fully vested
all participants in such plan. The Company has accrued for the payment of
all amounts
26
payable under the incentive, bonus and retention plans and arrangements of
the Company and its Subsidiaries (a true and complete list of which is set
forth on Schedule 4.19), and all such plans and arrangements shall
terminate as of the Effective Time. Schedule 4.19 sets forth a complete and
accurate listing of all of the Management Severance Costs, and such
Management Severance Costs represent all amounts payable by the Company or
the Surviving Corporation to discharge in full its obligations under the
Management Employment Agreements.
(j) For purposes of this section:
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA; (B) all stock option plans, stock purchase plans,
bonus or incentive award plans, severance pay policies or agreements,
deferred compensation agreements, supplemental income arrangements,
vacation plans, and all other employee benefit plans, agreements, and
arrangements (including any informal arrangements) not described in (A)
above, including, without limitation, any arrangement intended to comply
with Code Section 120, 125, 127, 129 or 137; and (C) all plans or
arrangements providing compensation to employee and non-employee directors.
In the case of an Employee Program funded through a trust described in Code
Section 401(a) or an organization described in Code Section 501(c)(9), or
any other funding vehicle, each reference to such Employee Program shall
include a reference to such trust, organization or other vehicle.
(ii) An entity "maintains" an Employee Program if such
entity sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents or
beneficiaries).
(iii) An entity is an "ERISA Affiliate" of the Company if it
would have ever been considered a single employer with the Company under
ERISA Section 4001(b) or part of the same "controlled group" as the Company
for purposes of ERISA Section 302(d)(8)(C).
(iv) "Multiemployer Plan" means an employee pension or
welfare benefit plan to which more than one unaffiliated employer
contributes and which is maintained pursuant to one or more collective
bargaining agreements.
SECTION 4.20. INSURANCE COVERAGE. Schedule 4.20 contains a list of the
insurance policies currently maintained by the Company and its Subsidiaries.
There are currently no claims pending against the Company or any Subsidiary of
the Company under any insurance policies currently in effect and covering the
property, business or employees of the Company or any Subsidiary of the Company,
and all premiums due and payable with respect to the policies
27
maintained by the Company have been paid to date. To the Company's knowledge,
there is no threatened termination of any such policies or arrangements. Each
such policy will continue to be enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing.
SECTION 4.21. INVESTMENT BANKING; BROKERAGE. Neither the Company nor any
Subsidiary of the Company has any liability or obligation to pay any fees or
commissions to any broker, finder or agent with respect to the transactions
contemplated by this Agreement, except that the Company has engaged ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇") as its financial advisor, the
arrangements with which have been accurately and completely disclosed to Parent.
The parties agree that all fees and expenses payable by the Company to ▇▇▇▇▇▇
▇▇▇▇▇▇▇ shall be included in the Company Expenses. The Company has received the
opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ to the effect that, as of the date hereof, the
consideration to be received by the Company Equity Holders hereunder is fair to
such Company Equity Holders from a financial point of view.
SECTION 4.22. ENVIRONMENTAL MATTERS. Except in material compliance with
applicable Environmental Laws (as defined below), neither the Company or any
Subsidiary of the Company, nor to the knowledge of the Company, any other
Person, has generated, transported, used, handled, processed, disposed, stored
or treated any hazardous waste, substance or material, and no oil, petroleum,
petroleum product, asbestos, toxic substance, pollutant or contaminant
(collectively, "Hazardous Material") on any real property owned, leased or
operated by the Company or any Subsidiary of the Company. Except in material
compliance with applicable Environmental Laws, neither the Company or any
Subsidiary of the Company, nor to the knowledge of the Company, any other
Person, has spilled, released, discharged, disposed, or transported any
Hazardous Material from any real property owned, leased or operated by the
Company or any Subsidiary of the Company, and to the knowledge of the Company,
no Hazardous Material is present in, on, or under any such property. The Company
and each Subsidiary of the Company is, and at all times has been, in compliance
in all material respects with all applicable environmental, health and safety
laws, rules, ordinances, by-laws and regulations, and with all permits,
registrations and approvals required under such laws, rules, ordinances, by-laws
and regulations (collectively, "Environmental Laws"). The Company is not aware
of any fact or circumstance which could involve the Company or any Subsidiary of
the Company in any litigation, or impose upon the Company or any such Subsidiary
any liability, arising under any Environmental Laws.
SECTION 4.23. CUSTOMERS, DISTRIBUTORS AND PARTNERS. Schedule 4.23 sets
forth the name of each customer and distributor of the Company or any Subsidiary
of the Company for any of the fiscal years ended December 31, 2002, 2003 and
2004 and the quarter ended March 31, 2005 (the "Customers" and "Distributors",
respectively), together with the names of any Persons with which the Company or
any Subsidiary of the Company has a material strategic partnership or similar
relationship ("Partners"). Except as set forth on Schedule 4.23, no Customer or
Distributor that accounted for at least $250,000 of revenues during fiscal year
2004, nor any Partner of the Company or any Company Subsidiary, has canceled or
otherwise terminated its relationship with the Company or has materially
decreased its usage or purchase of the services or products of the Company or
such Subsidiary. No such Customer, Distributor or Partner has, to the knowledge
of the Company, any plan or intention to terminate, cancel or
28
otherwise materially and adversely modify its relationship with the Company or
any Subsidiary of the Company or to decrease materially or limit its usage,
purchase or distribution of the services or products of the Company or such
Subsidiary. There are no pending claims against the Company or any of its
Subsidiaries by any Customer or Distributor, nor to the knowledge of the
Company, are any such claims threatened, other than warranty claims for the
return or repair of products in the ordinary course of business consistent with
the Company's past experience.
SECTION 4.24. SUPPLIERS. Within the last twelve months, no supplier that
the Company and its Subsidiaries has paid or is under contract to pay $100,000
or more has canceled, materially modified, or otherwise terminated its
relationship with the Company or any Subsidiary of the Company, or materially
and unilaterally decreased its services, supplies or materials to the Company or
any such Subsidiary, nor to the knowledge of the Company, does any supplier have
any plan or intention to do any of the foregoing. There are no pending claims
against the Company or any of its Subsidiaries by any supplier, nor to the
knowledge of the Company, are any such claims threatened.
SECTION 4.25. WARRANTY AND RELATED MATTERS. Schedule 4.25 sets forth a
complete list of all outstanding product and service warranties and guarantees
on any of the products or services that the Company or any Subsidiary of the
Company distributes, services, markets, sells or produces for itself, a customer
or a third party (each such product or service shall be referred to herein as a
"Company Product"). There are no existing or, to the knowledge of the Company,
threatened, claims against the Company or any Subsidiary of the Company relating
to any work performed by the Company or such Subsidiary, product liability,
warranty or other similar claims against the Company or any Subsidiary of the
Company alleging that any Company Product is defective or fails to meet any
product or service warranties, other than warranty claims for the return or
repair of products in the ordinary course of business consistent with the
Company's past experience. To the knowledge of the Company, there are no
inherent design defects or systemic or chronic problems in any Company Product.
SECTION 4.26. BACKLOG. The Company and its Subsidiaries have a backlog of
firm orders for the sale of their products and services as set forth in Schedule
4.26. None of such orders has been cancelled or materially reduced, and each of
such orders on backlog is at a price and on terms (including margin) consistent
with the Company's past practices and the ordinary course of business.
SECTION 4.27. ILLEGAL PAYMENTS. Neither the Company nor, to the Company's
knowledge, any Person affiliated with the Company has ever offered, made or
received on behalf of the Company any illegal payment or contribution of any
kind, directly or indirectly, including, without limitation, payments, gifts or
gratuities, to any United States or foreign national, state or local government
officials, employees or agents or candidates therefor or other Persons.
SECTION 4.28. DISCLOSURE. None of the representations or warranties made by
the Company in this Agreement nor any statement made in any Company Schedule or
certificate furnished by the Company or an officer of the Company pursuant to
this Agreement, when taken together, contains or will contain any untrue
statement of a material fact or omits or will omit to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which they were made, not misleading.
29
SECTION 4.29. NO OTHER REPRESENTATIONS. Except for the representations and
warranties expressly set forth in this Agreement, the Company Schedules or any
certificates furnished by the Company or an officer of the Company pursuant to
this Agreement, neither the Company nor any other Person makes any express or
implied representation or warranty on behalf of the Company.
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO
In order to induce the Company to enter into this Agreement and consummate
the transactions contemplated hereby, 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 Commonwealth of
Massachusetts and has all required corporate power and authority to carry on its
business as presently conducted. MergerCo is a corporation duly organized,
validly existing and in good standing under the laws of the State of Georgia.
SECTION 5.2. AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENT. Each of
Parent and MergerCo has all requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby and perform its obligations hereunder. The execution and performance by
Parent and MergerCo of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the Boards of Directors of
Parent and MergerCo and by Parent as the sole shareholder of MergerCo. No other
corporate action on the part of Parent or MergerCo is necessary to authorize the
execution and performance by Parent and MergerCo of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement, assuming
due and valid authorization, execution and delivery hereof by the Company,
constitutes a valid and legally binding obligation of Parent and MergerCo, as
the case may be, enforceable against each of them in accordance with its terms,
subject only to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity.
SECTION 5.3. NON-CONTRAVENTION. Except for the filing of the Certificate of
Merger, neither the execution and delivery of this Agreement by Parent and
MergerCo, nor the consummation by Parent and MergerCo of the transactions
contemplated hereby, will: (a) violate or result in a violation of, conflict
with, constitute or result in a default (whether after the giving of notice,
lapse of time or both) under, accelerate any obligation under, or give rise to a
right of termination of, any Contract to which Parent or MergerCo is a party or
by which its assets are bound, or cause the creation of any Encumbrance upon any
of the assets of Parent or MergerCo; (b) violate any provision of the
organizational documents of Parent or MergerCo; (c) violate, conflict with 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 Governmental Authority
applicable to Parent or any Subsidiary of Parent; or (d) require from Parent or
MergerCo any notice to, declaration or filing with, or consent or approval of
any Governmental Authority or other third party, excluding from the
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foregoing clauses (a), (c) and (d), such violations, conflicts, defaults,
notices, declarations, filings, consents and approvals which would not
reasonably be expected to have, individually or in the aggregate, (i) a material
adverse effect on the business, assets, properties, results of operations or
condition (financial or otherwise) of Parent and its Subsidiaries, taken as a
whole, or (ii) a material adverse effect on the ability of Parent or MergerCo to
perform its obligations hereunder or to consummate the transactions contemplated
hereby.
SECTION 5.4. REQUIRED FINANCING. Parent and MergerCo have sufficient funds
to consummate the transactions contemplated by this Agreement.
SECTION 5.5. INVESTMENT BANKING; BROKERAGE. Neither Parent nor MergerCo has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement, except
that Parent has engaged Wachovia Securities as its financial advisor. Parent is
solely responsible for the fees and expenses of Wachovia Securities.
SECTION 5.6. LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or, to the knowledge of
Parent, threatened against Parent or MergerCo that, in either case, would
reasonably be expected to, individually or in the aggregate, (a) prevent or
materially delay the consummation of the Merger or (b) otherwise prevent or
materially delay the performance by Parent or MergerCo of any of their material
obligations under this Agreement.
ARTICLE VI - ADDITIONAL AGREEMENTS
SECTION 6.1. SHAREHOLDER CONSENT. The Company, acting through the Company
Board, immediately following the execution of this Agreement by the Company,
shall request, in accordance with applicable law, that the Company's
shareholders approve this Agreement by written consent (the "Written Consent"),
and take all actions reasonably necessary to approve the performance of the
Company's obligations hereunder, including, without limitation, the Merger. Such
request for the Written Consent shall comply with the applicable requirements of
the GBCC, the Articles of Incorporation and the Bylaws, including, without
limitation, any disclosure requirements.
SECTION 6.2. CONFIDENTIALITY. The parties shall adhere to the terms and
conditions of that certain confidentiality agreement dated November 29, 2004 by
and between the Company and Parent, as amended effective December 14, 2004 and
March 21, 2005 (the "Confidentiality Agreement").
SECTION 6.3. EMPLOYEE BENEFIT ARRANGEMENTS.
(a) After the Effective Time and until the conclusion of a
transition period to be determined by Parent in its sole discretion,
employees of the Surviving Corporation and its Subsidiaries who remain
employed after the Effective Time (the "Company Employees") will continue
to participate in the Company's Employee Programs (other than 401(k) plans,
deferred compensation plans, supplemental retirement plans, incentive or
bonus plans, severances plans, and stock option and stock purchase
31
plans) on substantially similar terms to those in effect as of the
Effective Time. Thereafter, Parent shall, and shall cause the Surviving
Corporation to, provide the Company Employees with such employee benefits
as determined appropriate from time to time by Parent in its sole
discretion. All service with the Company shall be considered service with
Parent for purposes of determining eligibility and vesting (but not with
respect to benefit accruals) under all Employee Programs maintained by
Parent or any Affiliate, including the Surviving Corporation, with respect
to Company Employees. All earnings with the Company prior to the Effective
Time will be taken into account for purposes of any welfare benefit plan or
under any vacation pay, sick pay or paid-time-off policy in which the
Company Employees may participate. For purposes of participation in
Parent's welfare plans, Parent will waive all waiting and pre-existing
condition period requirements (other than those applicable to a Company
Employee immediately prior to the Closing under a Company Employee Program)
and will credit Company Employees with all deductibles and co-payments paid
under the Company welfare plans for the plan year in which the Company
Employees begin participation in Parent's welfare plans.
(b) Subject to plan eligibility rules, the Company Employees will
be eligible to participate in Parent's 401(k) plan in the same manner as
similarly-situated employees of Parent or the Surviving Corporation,
effective as of the first full payroll period following the Effective Time.
Company Employees shall be offered an opportunity to roll over their
Company 401(k) account balance distributions into Parent's 401(k) plan,
subject to the rules of such plan. Parent shall make reasonable efforts to
amend such defined contribution plan to accept rollovers of unpaid loan
balances, if necessary.
SECTION 6.4. DIRECTOR AND OFFICER INDEMNIFICATION.
(a) For a period of six (6) years following the Effective Time,
Parent shall cause the Surviving Corporation to indemnify, defend and hold
harmless the present and former directors and officers of the Company and
its Subsidiaries against all liabilities arising out of actions or
omissions occurring at or prior to the Effective Time (including, solely
with respect to third-party claims, the transactions contemplated by this
Agreement) to the extent such persons are entitled to indemnification under
the Articles of Incorporation and the Bylaws, each as in effect on the date
hereof, including provisions relating to the advancement of expenses
incurred in the defense of any litigation.
(b) The Company shall secure, at Parent's expense, "tail" or
"run-off" coverage under its existing directors' and officers' liability
insurance policy, containing comparable coverage to that currently
provided, prior to the Effective Time covering persons who are currently
covered by such insurance against "wrongful acts" as defined by such
insurance policy, committed prior to the Effective Time. Such "tail" or
"run-off" coverage shall cover a period of six (6) years after the Closing
Date; provided that the aggregate cost of such coverage shall not exceed
$60,750.
SECTION 6.5. FURTHER ASSURANCES. After the Effective Time, the officers of
the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of
32
the Company, any assignments, instruments or other documents and to take and do,
in the name and on behalf of the Company, any other actions and things to vest
the Surviving Corporation with full right, title and possession of all assets,
properties, rights, privileges, powers and franchises of both the Company and
MergerCo.
ARTICLE VII - CONDITIONS TO THE MERGER; CLOSING DELIVERIES
SECTION 7.1. 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) Shareholder Approval. This Agreement shall have been approved
by the affirmative vote (by written consent) of the shareholders of the
Company as required by the GBCC, the Articles of Incorporation and the
Bylaws.
(b) No Injunctions, Orders or Restraints; Illegality. No
preliminary or permanent injunction or other order, decree or ruling issued
by a court or other Governmental Authority of competent jurisdiction nor
any statute, rule, regulation or executive order promulgated or enacted by
any Governmental Authority of competent jurisdiction shall be in effect
which would have the effect of (i) making the consummation of the Merger
illegal or (ii) otherwise prohibiting the consummation of the Merger.
(c) Governmental Consents and Approvals. All consents, approvals
and authorizations of any Governmental Authority required in connection
with the consummation of the transactions contemplated by this Agreement
shall have been obtained and shall be in full force and effect.
SECTION 7.2. DELIVERIES AT CLOSING BY THE COMPANY. At the Closing, the
Company shall deliver or cause to be delivered to Parent the following:
(a) 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 Articles of Incorporation and Bylaws, each as in
effect as of the Closing Date and (iii) a copy of the resolutions of the
Company Board and the Written Consent authorizing and approving the
applicable matters contemplated hereunder;
(b) good standing certificates from all jurisdictions in which
the Company or any Subsidiary of the Company is licensed or qualified to do
business;
(c) the Escrow Agreement executed by the Company and the
Shareholders' Representative;
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(d) an opinion of ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, counsel to the
Company, in form and substance attached hereto as Exhibit E;
(e) all consents or approvals of all Persons (i) required in
connection with the consummation of the transactions contemplated by this
Agreement and (ii) required so that Parent and MergerCo or any of their
Affiliates are not materially restricted from engaging in any business or
activity in, or relating to, the business of the Company and its
Subsidiaries;
(f) the Non-Competition Agreements executed by the Major
Shareholders;
(g) releases from each of the directors and officers of the
Company and the Major Shareholders and their Affiliates in substantially
the form attached hereto as Exhibit F;
(h) resignations of each of the directors and officers of the
Company and those of its Subsidiaries, which resignations shall be
effective as of the Effective Time; and
(i) releases executed by Messrs. ▇▇▇▇▇▇▇ and ▇▇▇▇▇ with regard to
the payment of the Management Severance Costs and the discharge in full of
the Company's obligations under the Management Employment Agreements.
SECTION 7.3. DELIVERY AT CLOSING BY PARENT. At the Closing, Parent shall
deliver to the Shareholders' Representative, the Escrow Agreement executed by
Parent.
SECTION 7.4. RIGHT TO PROCEED. Notwithstanding anything to the contrary set
forth in this Agreement, if any of the closing deliveries specified in Section
7.2 have not been made, Parent and MergerCo shall have the right to proceed with
the transactions contemplated hereby without waiving any of their rights
hereunder, and if the closing delivery specified in Section 7.3 has not been
made, the Company shall have the right to proceed with the transactions
contemplated hereby without waiving any of the rights of the Company Equity
Holders hereunder.
ARTICLE VIII - SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; INDEMNIFICATION
SECTION 8.1. 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 first (1st) anniversary of the Closing Date;
provided that such one (1) year period shall not apply to the representations
and warranties set forth in Sections 4.2, 4.3, 4.13, 4.19 and 4.22
(collectively, the "Excluded Representations and Warranties") and in each such
case such Excluded Representation and Warranty shall survive until the
expiration of the statute of limitations with respect thereto.
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SECTION 8.2. INDEMNIFICATION BY THE COMPANY EQUITY HOLDERS.
(a) The Company Equity Holders, subject to the other terms and
conditions of this Agreement, shall indemnify Parent, the Surviving
Corporation and their respective Affiliates, officers, directors and
employees (each a "Parent/MergerCo Indemnified Party") against and hold
them harmless to the extent of any Losses (as defined in Section 10.7)
resulting from:
(i) the breach of any representation or warranty of the
Company contained herein, in any Company Schedule or in any certificate
delivered in connection herewith;
(ii) any breach of any covenant or agreement of the Company
contained herein;
(iii) Taxes of the Company in respect of any period ending,
or any transaction or business occurring, on or before the close of
business on the Closing Date which have not been properly accrued for on
the Base Balance Sheet;
(iv) any obligations for severance or termination payments
or benefits paid by the Surviving Corporation to directors, officers or
employees at or after the Effective Time pursuant to Contracts between the
Company and any such directors, officers or employees in effect immediately
prior to the Effective Time;
(v) any Company Expenses not included in the calculation of
the Initial Merger Consideration as of the Effective Time;
(vi) the excess, if any, over the Final Per Share Merger
Consideration of any amounts paid per share (including in such amount, all
reasonable out-of-pocket costs of Parent and the Surviving Corporation) as
a result of the exercise and perfection of appraisal rights in accordance
with the GBCC Dissenters' Rights by the holders of more than five percent
(5%) of the shares of the Company's capital stock;
(vii) any adverse change in the Net Working Capital of the
Company from the close of business on the Peg Date to the close of business
on the Closing Date which occurred as a result of the Company or any
Subsidiary of the Company taking any of the actions described in Section
4.9, or any other action or event outside of the ordinary course of
business consistent with the Company's past practice; and
(viii) the items listed on Schedule 8.2(a) and Schedule
8.2(b).
(b) The indemnification obligations of the Company Equity Holders
pursuant to Section 8.2(a) shall be limited as follows:
(i) The Company Equity Holders shall have no obligation to
provide any indemnification for any individual claim for Losses of less
than $10,000 (the
35
"Deductible"), nor until the aggregate dollar amount of all Losses that
individually equal or exceed the Deductible and would otherwise be
indemnifiable pursuant to this Section 8.2 exceeds $500,000 (the "Threshold
Amount"), whereupon the Parent/MergerCo Indemnified Parties shall be
entitled to indemnification pursuant to the terms hereof (on a
dollar-for-dollar basis commencing from the first dollar) for all Losses up
to the Maximum Amount (as defined below). Notwithstanding the foregoing,
the limitations listed in this Section 8.2(b)(i) shall be subject to
Schedule 8.2(b) and shall not apply to (A) Losses resulting from a breach
of any of the Excluded Representations and Warranties or a breach of the
representation set forth in Section 4.9(f), (B) any claims under Section
8.2(a)(iii), (iv), (v), (vi) or (vii) or paragraph 1 or 2 of Schedule
8.2(a), and (C) any Losses resulting from fraud, intentional
misrepresentation or willful breach by the Company.
(ii) The Company Equity Holders shall not be obligated to
indemnify any Parent/MergerCo Indemnified Party pursuant to Section 8.2(a)
for any amount of indemnifiable Losses in excess of $11,000,000 in the
aggregate (the "Maximum Amount"). Notwithstanding the foregoing, this
Section 8.2(b)(ii) shall not apply to (A) Losses resulting from a breach of
any of the Excluded Representations and Warranties or a breach of the
representation set forth in Section 4.9(f), (B) any claims under Section
8.2(a)(iii), (iv), (v), (vi) or (vii) or paragraph 1 or 2 of Schedule
8.2(a), and (C) any Losses resulting from fraud, intentional
misrepresentation or willful breach by the Company; provided that, except
for Losses described in clause (C) above, the aggregate amount of
indemnifiable Losses payable by the Company Equity Holders under Section
8.2(a) shall not exceed the product of (i) the Final Per Share Merger
Consideration, multiplied by (ii) the Outstanding Shares.
(iii) In no event shall any Company Equity Holder be
obligated to indemnify a Parent/MergerCo Indemnified Party for any Losses
pursuant to this Article VIII in excess of such Company Equity Holder's pro
rata portion of such Loss based on such Company Equity Holder's percentage
ownership of the Outstanding Shares immediately prior to the Effective
Time.
(iv) No indemnification shall be payable to a
Parent/MergerCo Indemnified Party with respect to claims asserted by such
Parent/MergerCo Indemnified Party pursuant to Section 8.2(a) after the
first (1st) anniversary of the Closing Date (the "Indemnification Cut-Off
Date") (it being understood that all claims asserted prior to the
Indemnification Cut-Off Date shall continue until the disposition of such
claim). Notwithstanding the foregoing, this Section 8.2(b)(iv) shall not
apply to claims by a Parent/MergerCo Indemnified Party (A) of a breach of
any of the Excluded Representations and Warranties, which shall survive
until the expiration of the statute of limitations with respect thereto,
(B) under Section 8.2(a)(iii) or (vi) or paragraph 1 or 2 of Schedule
8.2(a), or (C) of fraud, intentional misrepresentation or willful breach by
the Company.
(c) A Parent/MergerCo Indemnified Party shall give the
Shareholders' Representative written notice of any claim or proceeding by
or in respect of a third party as to which such Parent/MergerCo Indemnified
Party may request indemnification
36
hereunder as soon as is practicable after such Parent/MergerCo Indemnified
Party learns of such claim or proceeding; provided, however, that the
failure to so notify the Shareholders' Representative shall not affect
rights to indemnification hereunder except to the extent that the Company
Equity Holders are materially prejudiced by such failure. Such notice shall
specify in reasonable detail the amount of the claim and the basis for the
claim, and shall include appropriate documentation evidencing such claim.
Parent shall have the right to direct, through counsel of its own choosing
(with the consent of the Shareholders' Representative, which consent shall
not be unreasonably withheld), the defense or settlement of any third-party
claim or proceeding at the expense of the Company Equity Holders, subject
to Section 8.2(d) below. If Parent elects to assume the defense of any such
third-party claim or proceeding, Parent shall consult with the
Shareholders' Representative for the purpose of allowing the Shareholders'
Representative to participate in such defense, and in such case the
expenses of the Shareholders' Representative shall be paid by the Company
Equity Holders. The Shareholders' Representative shall cooperate with
Parent in the defense or settlement of any third-party claim. If Parent
elects to direct the defense of any such third-party claim or proceeding,
the Shareholders' Representative shall not pay, or permit to be paid, any
part of such third-party claim unless Parent consents in writing to such
payment. If Parent fails to defend or if, after commencing or undertaking
any such defense, Parent fails to prosecute or withdraws from such defense,
the Shareholders' Representative shall have the right to undertake the
defense or settlement thereof, at the Company Equity Holders' expense,
which reasonable expenses the Shareholders' Representative may recover from
the Initial Indemnification Escrow Amount in accordance with the terms of
the Escrow Agreement. If the Shareholders' Representative assumes the
defense of any such third-party claim or proceeding pursuant to this
Section 8.2(c) and proposes to settle such third-party claim or proceeding
prior to a final judgment thereon or to forego any appeal with respect
thereto and such settlement or judgment shall not be paid in full by the
Company Equity Holders in accordance with the terms of this Article VIII,
then the Shareholders' Representative shall give Parent prompt written
notice thereof, and Parent shall have the right to participate in the
settlement or assume or reassume the defense of such third-party claim or
proceeding. The Company Equity Holders shall not be liable for any
settlement of any third-party claim or proceeding effected without the
Shareholders' Representative's prior written consent, which consent shall
not be unreasonably withheld.
(d) Notwithstanding anything to the contrary contained herein,
and in addition to any indemnification claims against the Company Equity
Holders pursuant to this Section 8.2, Parent and the Surviving Corporation
shall be entitled to recover from the Initial Indemnification Escrow
Amount, in accordance with the terms of the Escrow Agreement and on a
dollar-for-dollar basis, (i) the Non-Compete Escrow Amount and (ii) any
amount due to Parent under Section 2.4(d) or Section 2.5(b) or (d). All
indemnification claims made by a Parent/MergerCo Indemnified Party pursuant
to this Section 8.2 shall be made first against the Initial Indemnification
Escrow Amount, and only after the Initial Indemnification Escrow Amount is
exhausted, and/or is the subject of potential or pending claims under
clause (i) of the preceding sentence, and/or pending claims under clause
(ii) of the preceding sentence, may a Parent/MergerCo Indemnified
37
Party seek recourse against any Company Equity Holder for indemnification
hereunder, if permitted. It being agreed that, if a Parent/MergerCo
Indemnified Party has made an indemnification claim against the Initial
Indemnification Escrow Amount in accordance with the terms hereof, but the
Initial Indemnification Escrow Amount is exhausted or otherwise subject to
claims described in the preceding sentence prior to the resolution of such
indemnification claim, the Parent/MergerCo Indemnified Party shall be
entitled at that time to seek recourse directly against the Company Equity
Holders for indemnification hereunder, if permitted.
(e) For the avoidance of doubt, in no event shall the Surviving
Corporation, as successor to the Company, have any obligation to indemnify
for, contribute to or otherwise share in the obligation to indemnify any
Parent/MergerCo Indemnified Party under this Section 8.2.
SECTION 8.3. INDEMNIFICATION BY PARENT.
(a) Parent, subject to the other terms and conditions of this
Agreement, shall indemnify the Company Equity Holders (each a "Company
Indemnified Party") against and hold them harmless from all Losses
resulting from (i) the breach of any representation or warranty of Parent
or MergerCo contained herein or in any certificate delivered in connection
herewith, and (ii) any breach of any covenant or agreement of Parent or
MergerCo contained herein.
(b) The indemnification obligations of Parent pursuant to Section
8.3(a) shall not be effective for any individual claim for Losses of less
than the Deductible, nor until the aggregate dollar amount of all Losses
that individually equal or exceed the Deductible and would otherwise be
indemnifiable pursuant to this Section 8.3 exceeds the Threshold Amount,
whereupon the Company Indemnified Parties shall be entitled to
indemnification pursuant to the terms hereof (on a dollar-for-dollar basis
commencing from the first dollar) for all Losses up to the Maximum Amount.
No indemnification shall be payable to a Company Indemnified Party with
respect to claims asserted by such Company Indemnified Party pursuant to
Section 8.3(a) after the Indemnification Cut-Off Date. Notwithstanding the
foregoing, this Section 8.3(b) shall not apply to Losses resulting from (A)
a breach of any of the representations and warranties of Parent and
MergerCo set forth in Section 5.2 or 5.5, (B) any failure by Parent to make
the payments to the Company Equity Holders and the holders of In-the-Money
Options described under Articles II and III, and (C) a breach of any of the
covenants of Parent contained in Section 6.4.
(c) A Company Indemnified Party shall give Parent written notice
of any claim or proceeding by or in respect of a third party as to which
such Company Indemnified Party may request indemnification hereunder as
soon as is practicable after such Company Indemnified Party learns of such
claim or proceeding; provided, however, that the failure to so notify
Parent shall not affect rights to indemnification hereunder except to the
extent that Parent is materially prejudiced by such failure. Such notice
shall specify in reasonable detail the amount of the claim and the basis
for the claim, and shall include appropriate documentation evidencing such
claim. Parent shall have the right to
38
direct, through counsel of its own choosing, the defense or settlement of
any third-party claim or proceeding at its own expense. If Parent elects to
assume the defense of any such third-party claim or proceeding, Parent
shall consult with the Company Indemnified Party and the Company
Indemnified Party may participate in such defense, but in such case the
expenses of the Company Indemnified Party shall be paid by the Company
Indemnified Party. The Company Indemnified Party shall provide Parent with
access to its records and personnel relating to any such third-party claim,
assertion, event or proceeding during normal business hours and shall
otherwise cooperate with Parent in the defense or settlement thereof, and
Parent shall reimburse the Company Indemnified Party for all reasonable
out-of-pocket expenses of such Company Indemnified Party in connection
therewith. If Parent elects to direct the defense of any third-party claim
or proceeding, the Company Indemnified Party shall not pay, or permit to be
paid, any part of such third-party claim, unless Parent consents in writing
to such payment, or unless a final judgment from which no appeal may be
taken by or on behalf of Parent is entered against the Company Indemnified
Party for such liability. If Parent fails to defend or if, after commencing
or undertaking any such defense, Parent fails to prosecute or withdraws
from such defense, the Company Indemnified Party shall have the right to
undertake the defense or settlement thereof, at Parent's expense. If the
Company Indemnified Party assumes the defense of any such third-party claim
or proceeding pursuant to this Section 8.3(c) and proposes to settle such
third-party claim or proceeding prior to a final judgment thereon or to
forego appeal with respect thereto, then such Company Indemnified Party
shall give Parent prompt written notice thereof and Parent shall have the
right to participate in the settlement or assume or reassume the defense of
such third-party claim or proceeding. Parent shall not be liable for any
settlement of any third-party claim or proceeding effected without its
prior written consent, which consent shall not be unreasonably withheld.
SECTION 8.4. TREATMENT OF INDEMNITY PAYMENTS. All payments made by the
Company Equity Holders or Parent, as the case may be, to or for the benefit of
the other parties pursuant to this Article VIII shall be treated as adjustments
to the Final Per Share Merger Consideration for tax purposes, and such agreed
treatment shall govern for purposes of this Agreement.
SECTION 8.5. REMEDIES EXCLUSIVE. From and after the Closing, the rights of
the parties and their respective Affiliates, equity holders, officers, directors
and employees to indemnification relating to this Agreement shall be limited to
those contained in this Article VIII, and such indemnification rights shall be
the sole and exclusive remedies of such parties subsequent to the Closing Date
with respect to this Agreement. Notwithstanding the foregoing, the parties shall
have, in addition to the remedies set forth in this Article VIII, such equitable
remedies to which such parties may be otherwise entitled, including, without
limitation, the ability to apply to any court of competent jurisdiction for
specific performance or injunctive relief.
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ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after shareholder approval
hereof:
(a) by the mutual written consent of Parent, MergerCo and the
Company;
(b) by Parent or MergerCo, if the Company does not deliver, by
the close of business on the date hereof, signature pages to the Written
Consent of shareholders representing at least eighty-four percent (84%) of
the issued and outstanding Company Common Stock; or
(c) by either of the Company, or Parent or MergerCo, if the
consummation of the Merger shall not have occurred on or before the close
of business on the date hereof for any other reason.
SECTION 9.2. EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 9.1, 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 shareholders and all rights and obligations of
any party hereto shall cease, except for the agreements contained in Section
6.2, this Section 9.2 and Article X; provided, however, that nothing contained
in this Section 9.2 shall relieve any party from liabilities or damages arising
out of any fraud, intentional misrepresentation or willful breach by such party
of any of its representations, warranties, covenants or other agreements
contained in this Agreement.
SECTION 9.3. 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 any approval hereof by the shareholders of the Company
and MergerCo; provided, however, that after any such shareholder approval, no
amendment shall become effective that by law requires further approval by
shareholders without obtaining such approval.
SECTION 9.4. 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 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.
40
ARTICLE X - GENERAL PROVISIONS
SECTION 10.1. 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:
DVT Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Shareholders' Representative, to:
DVT Holdings Limited
▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
in either case, with a copy to:
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to Parent, to:
Cognex Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ Procter LLP
Exchange Place
Boston, MA 02109
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
41
SECTION 10.2. HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.3. 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. 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 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.
SECTION 10.4. 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.
SECTION 10.5. SEVERABILITY. If any provision of this Agreement, or the
application thereof to any Person or circumstance is held invalid or
unenforceable by a court of competent jurisdiction, 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. Upon such determination that any
provision is invalid or unenforceable, the parties hereto give to the court, or
its designee, the right to replace such provision by a provision that is valid
and enforceable and which comes as close as possible to effecting the meaning of
the original provision.
SECTION 10.6. 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 understanding among the parties hereto unless and until (a) the Company Board
and the Board of Directors of MergerCo have approved, for purposes of the GBCC
and any applicable provision of their Articles of Incorporation, the terms of
this Agreement and (b) this Agreement is executed by the parties hereto.
42
SECTION 10.7. 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 (as
defined below).
(b) "Business Day" means any day other than a day on which the
Securities and Exchange Commission or the office of the Georgia Secretary
of State is closed.
(c) "Company Material Adverse Effect" means (i) a material
adverse effect on the business, assets, properties, results of operations
or financial condition of the Company and its Subsidiaries, taken as a
whole; or (ii) a material adverse effect on the ability of the Company to
perform its obligations hereunder or to consummate the transactions
contemplated hereby.
(d) "Contract" means any contract, agreement, indenture, note,
bond, loan, instrument, lease, commitment or other arrangement or
agreement, whether written or oral.
(e) "Encumbrance" means any lien, pledge, mortgage, deed of
trust, security interest, claim, lease, charge, option, right of first
refusal, conditional sale agreement, easement, servitude, proxy, voting
trust or agreement, transfer restriction under any shareholder or similar
agreement or any other restriction on any attribute of ownership.
(f) "GAAP" means generally accepted accounting principles in the
United States.
(g) "Governmental Authority" means any foreign, federal, state,
county, local or other governmental or regulatory agency, authority,
instrumentality, commission, board or body.
(h) "Indebtedness" of any Person means, without duplication, (i)
the principal of and premium (if any) in respect of (A) indebtedness of
such Person for money borrowed and (B) indebtedness evidenced by notes,
debentures, bonds or other similar instruments, the payment of which such
Person is responsible or liable; (ii) all obligations of such Person issued
or assumed as the deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person under any
title retention agreement (but excluding trade accounts payable and other
accrued current liabilities arising in the ordinary course of business), in
each case that would be required, in accordance with GAAP, to be disclosed
on the balance sheet of such Person as of the date Indebtedness is being
measured or calculated; (iii) all obligations of such Person under leases
required to be capitalized in accordance with GAAP; (iv) all obligations of
such Person for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction; (v) all obligations of
the type referred to in clauses (i) through (iv) of any Persons for the
payment of which such Person is
43
responsible or liable, directly or indirectly, as obligor, guarantor,
surety or otherwise, including guarantees of such obligations; and (vi)
interest, premium, penalties and other amounts owing in respect of the
items described in the foregoing clauses (i) through (v).
(i) "Losses" of a Person means any and all losses, liabilities,
damages, claims, awards, judgments, costs and expenses (including, without
limitation, reasonable attorneys' fees) suffered or incurred by such
Person.
(j) "Permitted Exceptions" means (i) all defects, exceptions,
restrictions, easements, rights of way and encumbrances disclosed in
policies of title insurance which have been made available to Parent and
MergerCo; (ii) statutory liens for current Taxes, assessments or other
governmental charges not yet delinquent or the amount or validity of which
is being contested in good faith by appropriate proceedings, provided an
appropriate reserve is established therefor; (iii) mechanics', carriers',
workers', repairers' and similar Encumbrances arising or incurred in the
ordinary course of business that are not material to the business,
operations and financial condition of the real property so encumbered and
that are not resulting from a breach, default or violation by the Company
or any of its Subsidiaries of any contract or law; (iv) zoning, entitlement
and other land use and environmental regulations by any Governmental
Authority, provided that such regulations have not been violated; and (v)
such other imperfections in title, charges, easements, restrictions and
encumbrances which do not materially detract from the value of or
materially interfere with the present use of any real property subject
thereto or affected thereby.
(k) "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).
(l) "Subsidiary" means any corporation more than fifty percent
(50%) of whose outstanding voting securities, or any partnership, joint
venture or other entity more than fifty percent (50%) of whose total equity
interest, is directly or indirectly owned by Parent or the Company, as the
case may be.
SECTION 10.8. SHAREHOLDERS' REPRESENTATIVE. By virtue of the approval of
this Agreement by the shareholders of the Company, each Company Equity Holder
hereby appoints DVT Holdings Limited to act as the attorney-in-fact and agent
for and on behalf of the Company Equity Holders (the "Shareholders'
Representative") with respect to the taking of any and all actions and the
making of any decisions required or permitted to be taken by the Shareholders'
Representative under this Agreement and the Escrow Agreement, including, without
limitation, the power to (i) arbitrate, resolve, settle or compromise any
dispute regarding indemnification claims or matters arising out of this
Agreement and (ii) take all actions necessary in the judgment of the
Shareholders' Representative for the accomplishment of the foregoing. Notices to
or from the Shareholders' Representative shall constitute notice to or from each
Company Equity Holder. A decision, act, consent or instruction of the
Shareholders' Representative in connection with any of the foregoing matters
shall constitute a decision of all of the Company Equity Holders and shall be
final, binding and conclusive upon each of the Company Equity Holders, and
Parent and
44
the Surviving Corporation may rely upon any such written decision, consent or
instruction of the Shareholders' Representative as being the decision, consent
or instruction of each and every Company Equity Holder. The Escrow Agent, Parent
and the Surviving Corporation are hereby relieved from any liability to any
Person for the acts done by them in accordance with such decision, consent or
instruction of the Shareholders' Representative. In performing the functions
specified in this Agreement, the Shareholders' Representative will not be liable
to any Company Equity Holder in the absence of fraud or willful misconduct on
the part of the Shareholders' Representative, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of the
Shareholders' Representative's good faith. If the Shareholders' Representative
shall resign or become unable to fulfill its duties as such, then the
Shareholders' Representative shall be entitled to appoint its replacement and
shall promptly notify the Escrow Agent and Parent of such appointment.
SECTION 10.9. FEES AND EXPENSES. 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 Company, on the other hand,
shall bear its own expenses in connection with the negotiation and the
consummation of the transactions contemplated by this Agreement. The expenses of
the Shareholders' Representative acting on behalf of the Company Equity Holders
hereunder and under the Escrow Agreement shall be borne on a pro rata basis by
the Company Equity Holders. Such expenses of the Shareholders' Representative
may be paid from the Final Indemnification Escrow Amount prior to any
distribution thereof to the Company Equity Holders in accordance with the terms
of the Escrow Agreement.
SECTION 10.10. CHOICE OF LAW. All disputes, claims or controversies arising
out of or relating to this Agreement (including any schedules 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 Commonwealth of Massachusetts without regard to
its rules of conflict of laws (except as to matters related to the procedures
for the Merger, in which case the laws of the State of Georgia shall apply). The
parties hereby submit to the jurisdiction of any court of the State of Delaware
or the United States District Court for the State of Delaware for the purpose of
any suit, action or other proceeding arising out of this Agreement, or any of
the agreements or transactions contemplated hereby, which is brought by or
against such party and (a) hereby irrevocably agree that all claims in respect
to any such suit, action or proceeding may be heard and determined in any such
court; (b) to the extent that such party has acquired, or hereafter may acquire,
any immunity from jurisdiction of any such court or from any legal process
therein, hereby waive, to the fullest extent permitted by law, such immunity;
and (c) hereby agree not to commence any action, suit or proceeding relating to
this Agreement except in such court. Such parties hereby waive, and agree not to
assert in any such suit, action or proceeding, as the case may be, to the
fullest extent permitted by applicable law, any claim that (i) such party is not
personally subject to the jurisdiction of any such court; (ii) such party is
immune from any legal process (whether through service or notice, attachment
prior to judgment, attachment in aid of execution, execution or otherwise) with
respect to it or its property; or (iii) any suit, action or proceeding is
brought in an inconvenient forum. Each of such parties further agrees that
service of any process, summons or notice by U.S. registered mail to its address
set forth herein or otherwise provided in writing to the other party hereto
shall be effective service of process for any suit, action or proceeding brought
against it in such court.
45
SECTION 10.11. 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 courts of competent
jurisdiction. Such remedies shall not be exclusive and shall be in addition to
any other remedies that any party may have under this Agreement or otherwise.
SECTION 10.12. 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.
SECTION 10.13. MISCELLANEOUS. This Agreement (a) constitutes, together with
the Confidentiality Agreement, and the Schedules and Exhibits 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 in Article
VIII) 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]
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
PARENT:
COGNEX CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and
Chief Executive Officer
MERGERCO:
TANGO ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President
COMPANY:
DVT CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇ ▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and
Chief Executive Officer
ANNEX A
DEFINED TERMS
TERM SECTION REFERENCE
---- -----------------
Affiliate 10.7(a)
Aggregate Option Consideration 3.2(a)
Agreement Introduction
Arbitrator 2.4(c)
Articles of Incorporation 4.1(b)
Base Balance Sheet 2.1(a)
Business 4.15(c)(i)
Business Day 10.7(b)
Bylaws 4.1(b)
Certificate 2.2(b)
Certificate of Merger 1.2
Closing 1.4
Closing Date 1.4
Closing Per Share Payment 2.1(b)
Closing Statement 2.4(a)
Code 3.4(c)
Commitment 4.9
Company Introduction
Company Board Recitals
Company Common Stock 2.2(a)
Company Copyrights 4.15(a)
Company Employee Program 4.19(a)
Company Employees 6.3(a)
Company Equity Holders 3.3
Company Expenses 2.1(c)
Company Fully Diluted Shares 2.1(d)
Company Indemnified Party 8.3(a)
Company Intellectual Property Assets 4.15(c)(ii)
Company Material Adverse Effect 10.7(c)
Company Marks 4.15(a)
Company Patents 4.15(a)
Company Product 4.25
Company Stock Option Plans 2.1(e)
Company Trade Secrets 4.15(a)(viii)
Confidentiality Agreement 6.2
Contract 10.7(d)
Copyrights 4.15(c)(iii)(C)
Customers 4.23
Deductible 8.2(b)(i)
TERM SECTION REFERENCE
---- -----------------
Dissenting Shares 3.5
Distributors 4.23
Effective Time 1.2
Employee Program 4.19(j)(i)
Encumbrance 10.7(e)
Environmental Laws 4.22
ERISA 4.19(c)
ERISA Affiliate 4.19(j)(iii)
Escrow Agent 3.3
Escrow Agreement 3.3
Estimated Net Working Capital 2.1(f)
Estimated Net Working Capital Adjustment 2.1(g)
Estimated Tax Refund Amount 2.1(h)
Exchange Agent 3.1(a)
Exchange Fund 3.1(a)
Excluded Representations and Warranties 8.1
Final Indemnification Escrow Amount 2.1(i)
Final Net Working Capital 2.4(b)
Final Per Share Merger Consideration 2.1(j)
GAAP 10.7(f)
GBCC Recitals
GBCC Dissenters' Rights 3.5
Governmental Authority 10.7(g)
Hazardous Material 4.22
In-the-Money Options 2.1(k)
Indebtedness 10.7(h)
Indemnification Cut-Off Date 8.2(b)(iv)
Initial Indemnification Escrow Amount 2.1(l)
Initial Merger Consideration 2.1(m)
Initial Per Share Merger Consideration 2.1(n)
Intellectual Property Assets 4.15(c)(iii)
IRS 4.13(b)
Losses 10.7(i)
maintains 4.19(j)(ii)
Major Shareholders Recitals
Management Employment Agreements 2.1(o)
Management Severance Costs 2.1(p)
Marks 4.15(c)(iii)(B)
Maximum Amount 8.2(b)(ii)
Merger Recitals
MergerCo Introduction
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 4.21
Multiemployer Plan 4.19(j)(iv)
2
TERM SECTION REFERENCE
---- -----------------
Net Management Severance Costs 2.1(q)
Net Working Capital 2.1(r)
Net Working Capital Overage 2.4(d)
Net Working Capital Shortfall 2.4(d)
Non-Compete Escrow Amount 3.3
Non-Competition Agreements Recitals
Option Consideration 2.1(s)
Options 2.1(t)
Out-of-the-Money Options 2.1(u)
Outstanding Shares 2.1(v)
Parent Introduction
Parent/MergerCo Indemnified Party 8.2(a)
Partners 4.23
Patents 4.15(c)(iii)(A)
Peg Date 2.1(w)
Permits 4.18(a)
Permitted Exceptions 10.7(j)
Person 10.7(k)
Products 4.15(c)(iv)
Review Period 2.4(a)
Shareholders' Representative 10.8
Subsidiary 10.7(l)
Surviving Corporation 1.1
Tax Refund Amount 2.1(x)
Tax Refund Overage 2.5(b)
Tax Refund Receivable 2.1(y)
Tax Refund Shortfall 2.5(b)
Taxes 4.13(a)
Third Party Rights 4.15(a)(iii)
Threshold Amount 8.2(b)(i)
Trade Secrets 4.15(c)(iii)(D)
Written Consent 6.1
3
ANNEX B
LIST OF SCHEDULES
2.1(f) Estimated Net Working Capital
2.1(h) Estimated Tax Refund Amount
2.1(m) Initial Merger Consideration
3.3 Company Employees for Non-Compete Obligations
4.3 Capitalization
4.4 Non-Contravention
4.6 Subsidiaries; Investments
4.7 Financial Statements
4.8 Absence of Undisclosed Liabilities
4.9 Absence of Certain Developments
4.11 Transactions with Affiliates
4.12 Properties
4.13 Tax Matters
4.14 Certain Contracts and Arrangements
4.15(a), (b) & (c) Intellectual Property
4.16 Litigation
4.18 Permits; Compliance with Laws
4.19 Employee Benefit Programs
4.20 Insurance Coverage
4.23 Customers, Distributors and Partners
4.25 Warranty and Related Matters
4.26 Backlog
8.2(a) & (b) Additional Indemnification Obligations