EXHIBIT 2.1
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EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 23, 2008
BY AND AMONG
L-1 IDENTITY SOLUTIONS, INC.
DOLOMITE ACQUISITION CO.
AND
DIGIMARC CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER....................................................1
SECTION 1.1 The Merger..............................................1
SECTION 1.2 Closing.................................................2
SECTION 1.3 Effective Time..........................................2
SECTION 1.4 Effects of the Merger...................................2
SECTION 1.5 Certificate of Incorporation and Bylaws of
the Surviving Corporation...............................2
SECTION 1.6 Directors and Officers of the Surviving
Corporation.............................................2
ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES; COMPANY STOCK OPTIONS...........................3
SECTION 2.1 Effect on Capital Stock.................................3
SECTION 2.2 Exchange of Certificates................................5
SECTION 2.3 Company Stock Options; Company Restricted
Stock; Employee Stock Purchase Plan.....................7
SECTION 2.4 Appraisal Rights........................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................9
SECTION 3.1 Organization, Standing and Corporate Power..............9
SECTION 3.2 Capitalization.........................................10
SECTION 3.3 Authority; Noncontravention; Voting
Requirements...........................................11
SECTION 3.4 Governmental Approvals.................................12
SECTION 3.5 Company SEC Documents; Undisclosed
Liabilities............................................12
SECTION 3.6 Absence of Certain Changes or Events...................15
SECTION 3.7 Legal Proceedings......................................15
SECTION 3.8 Compliance With Laws; Permits..........................15
SECTION 3.9 Information Supplied...................................15
SECTION 3.10 Tax Matters............................................16
SECTION 3.11 Employee Benefits and Labor Matters....................18
SECTION 3.12 Environmental Matters..................................20
SECTION 3.13 Contracts..............................................22
SECTION 3.14 Government Contracts...................................24
SECTION 3.15 Properties.............................................26
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SECTION 3.16 Intellectual Property..................................26
SECTION 3.17 Insurance; Claims; Warranties..........................30
SECTION 3.18 Affiliate Transactions.................................31
SECTION 3.19 Opinion of Financial Advisor...........................31
SECTION 3.20 Brokers and Other Advisors.............................31
SECTION 3.21 State Takeover Statutes................................31
SECTION 3.22 Export Controls........................................32
SECTION 3.23 Material Customers and Suppliers.......................32
SECTION 3.24 Foreign Corrupt Practices..............................32
SECTION 3.25 Rights Plan............................................32
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
MERGER SUB...................................................33
SECTION 4.1 Organization, Standing and Corporate Power.............33
SECTION 4.2 Capital Structure......................................33
SECTION 4.3 Authority; Noncontravention............................34
SECTION 4.4 Governmental Approvals.................................34
SECTION 4.5 Parent SEC Documents; Undisclosed Liabilities..........35
SECTION 4.6 Information Supplied...................................37
SECTION 4.7 Ownership and Operations of Merger Sub.................37
SECTION 4.8 Brokers and Other Advisors.............................37
SECTION 4.9 Absence of Certain Changes or Events...................38
SECTION 4.10 Legal Proceedings......................................38
SECTION 4.11 Compliance With Laws; Permits..........................38
SECTION 4.12 Sufficient Funds.......................................38
SECTION 4.13 No Vote Required.......................................38
SECTION 4.14 Ownership of Shares....................................39
SECTION 4.15 Material Customers and Suppliers.......................39
SECTION 4.16 Export Controls........................................39
ARTICLE V ADDITIONAL COVENANTS AND AGREEMENTS..........................39
SECTION 5.1 Preparation of the Form S-4, the Form 10 and
the Proxy Statement; Stockholder Meeting...............39
SECTION 5.2 Company Conduct of Business............................40
SECTION 5.3 Parent Conduct of Business.............................44
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SECTION 5.4 No Solicitation........................................45
SECTION 5.5 Reasonable Best Efforts................................48
SECTION 5.6 Public Announcements...................................49
SECTION 5.7 Access to Information; Confidentiality.................49
SECTION 5.8 Notification of Certain Matters........................50
SECTION 5.9 Securityholder Litigation..............................50
SECTION 5.10 Fees and Expenses......................................51
SECTION 5.11 Spin-Off...............................................51
SECTION 5.12 Rule 16b-3.............................................51
SECTION 5.13 Employee Benefits and Labor Matters....................51
SECTION 5.14 Indemnification, Exculpation and Insurance.............53
SECTION 5.15 Resignation of Directors and Officers..................54
SECTION 5.16 NYSE Listing...........................................54
SECTION 5.17 Rights Plan............................................54
ARTICLE VI CONDITIONS PRECEDENT.........................................54
SECTION 6.1 Conditions to Each Party's Obligation to
Effect the Merger......................................54
SECTION 6.2 Conditions to Obligations of Parent and
Merger Sub.............................................55
SECTION 6.3 Conditions to Obligation of the Company................56
SECTION 6.4 Frustration of Closing Conditions......................57
ARTICLE VII TERMINATION..................................................57
SECTION 7.1 Termination............................................57
SECTION 7.2 Effect of Termination..................................59
SECTION 7.3 Termination Fee........................................59
ARTICLE VIII MISCELLANEOUS................................................61
SECTION 8.1 No Survival............................................61
SECTION 8.2 Amendment or Supplement................................61
SECTION 8.3 Extension of Time; Waiver..............................62
SECTION 8.4 Assignment.............................................62
SECTION 8.5 Counterparts...........................................62
SECTION 8.6 Entire Agreement; No Third-Party
Beneficiaries..........................................62
SECTION 8.7 Governing Law; Jurisdiction; Waiver of Jury
Trial..................................................62
SECTION 8.8 Specific Enforcement...................................63
SECTION 8.9 Notices................................................63
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SECTION 8.10 Severability...........................................64
SECTION 8.11 Definitions............................................65
SECTION 8.12 Interpretive Matters...................................72
EXHIBITS
Exhibit A Form of Support Agreement
Exhibit B-1 Amended Charter
Exhibit B-2 Amended Bylaws
SCHEDULES
Schedule 5.2 Company Conduct of Business
Schedule 5.11 Spin-Off Agreements
Schedule 5.13(e) Employee Allocation
Schedule 5.14(a) Indemnification Agreements
Schedule 8.11(a)(i) Company Knowledge
Schedule 8.11(a)(ii) Parent Knowledge
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of March 23, 2008 (this
"Agreement"), is by and among L-1 IDENTITY SOLUTIONS, INC., a Delaware
corporation ("Parent"), DOLOMITE ACQUISITION CO., a Delaware corporation and a
direct, wholly owned Subsidiary of Parent ("Merger Sub"), and DIGIMARC
CORPORATION, a Delaware corporation (the "Company"). Certain terms used in this
Agreement are used as defined in Section 8.11.
WHEREAS, the parties intend that Merger Sub be merged with and into
the Company, with the Company surviving the merger on the terms and subject to
the conditions set forth in this Agreement (the "Merger");
WHEREAS, the board of directors of the Company has (a) determined
that it is in the best interests of the Company and its stockholders, and
declared it advisable, to enter into this Agreement, (b) approved the execution,
delivery and performance by the Company of this Agreement and the consummation
of the transactions contemplated hereby, including the Merger, and (c) resolved
to recommend adoption of this Agreement by the stockholders of the Company;
WHEREAS, the boards of directors of Parent and Merger Sub have
approved this Agreement and declared it advisable for Parent and Merger Sub,
respectively, to enter into this Agreement;
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent and
Merger Sub to enter into this Agreement, Parent and certain stockholders of the
Company are entering into a support agreement substantially in the form attached
hereto as Exhibit A (the "Support Agreement"), pursuant to which, among other
things, such stockholders have agreed to vote to adopt this Agreement and to
take certain other actions in furtherance of the Merger, in each case, upon the
terms and subject to the conditions set forth therein; and
WHEREAS, in connection with the Merger, prior to the Closing, the
Company shall (a) contribute certain assets relating to the Company's Digital
Watermarking Business to a newly formed subsidiary ("Newco") and (b) effect a
distribution of 100% of the common stock of Newco to the Company's stockholders
in accordance with the conditions of this Agreement and the Separation
Agreement.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, and intending to be
legally bound hereby, Parent, Merger Sub and the Company hereby agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the General
Corporation Law of the State of Delaware (the "DGCL"), at the Effective Time
Merger Sub shall be merged with and into the Company, and the separate corporate
existence of Merger Sub shall thereupon cease, and the Company shall be the
surviving corporation in the Merger (the "Surviving Corporation").
SECTION 1.2 Closing. The closing of the Merger (the "Closing") shall
take place at 9:00 a.m. (Pacific time), on a date to be specified by the parties
(the "Closing Date"), which date shall be no later than the second Business Day
after satisfaction or waiver of the conditions set forth in Article VI (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions at such time), at
the offices of Weil, Gotshal & ▇▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, unless another time, date or place is agreed to in
writing by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date the parties shall file
with the Secretary of State of the State of Delaware a certificate of merger,
executed in accordance with the relevant provisions of the DGCL (the
"Certificate of Merger"). The Merger shall become effective upon the filing of
the Certificate of Merger or at such later time as is agreed to by the parties
hereto and specified in the Certificate of Merger (the time at which the Merger
becomes effective is herein referred to as the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the effects
set forth in the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 1.5 Certificate of Incorporation and Bylaws of the Surviving
Corporation.
(a) At the Effective Time, the Company shall cause its certificate
of incorporation to be amended, as of the Effective Time, to read in its
entirety as set forth in Exhibit B-1 attached hereto and, as so amended, such
certificate of incorporation shall be the certificate of incorporation of the
Surviving Corporation until thereafter amended as provided therein or by
applicable Law.
(b) At the Effective Time, the Company shall cause its bylaws to
be amended, as of the Effective Time, to read in their entirety as set forth in
Exhibit B-2 attached hereto and, as so amended, such bylaws shall be the bylaws
of the Surviving Corporation until thereafter amended as provided therein or by
applicable Law.
SECTION 1.6 Directors and Officers of the Surviving Corporation.
(a) The directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation immediately
following the Effective Time, until their respective successors are duly elected
or appointed and qualified or their earlier death, resignation or removal in
accordance with the certificate of incorporation and bylaws of the Surviving
Corporation.
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(b) The officers of Merger Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation immediately following
the Effective Time until their respective successors are duly appointed and
qualified or their earlier death, resignation or removal in accordance with the
certificate of incorporation and bylaws of the Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES; COMPANY STOCK OPTIONS
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of common stock, par value $0.001 per share, of the Company ("Company
Common Stock") or any shares of capital stock of Merger Sub:
(a) Capital Stock of Merger Sub. Each issued and outstanding share
of capital stock of Merger Sub shall be converted into and become one (1)
validly issued, fully paid and nonassessable share of common stock, par value
$0.001 per share, of the Surviving Corporation. As of the Effective Time, all
such shares of capital stock of Merger Sub shall be cancelled in accordance with
this Section 2.1, and when so cancelled, shall no longer be issued and
outstanding and shall automatically cease to exist, and each holder of a
certificate representing any such shares of capital stock of Merger Sub shall
cease to have any rights with respect thereto, except as set forth in this
Section 2.1(a).
(b) Cancellation of Treasury Stock and Parent-Owned Stock. Any
shares of Company Common Stock that are owned by the Company as treasury stock,
and any shares of Company Common Stock owned by Parent or Merger Sub, shall be
automatically cancelled and shall cease to exist and no consideration shall be
delivered in exchange therefor.
(c) Conversion of Company Common Stock. Each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares to be cancelled in accordance with Section 2.1(b) and
Dissenting Shares) shall be cancelled and converted into the right to receive
the consideration set forth in this Section 2.1(c).
(i) The term "Merger Consideration" shall mean:
(A) the right to receive an amount in cash, without
interest, equal to $120,000,000 divided by the Closing Date Company
Share Number (the "Cash Consideration Per Share"); and
(B) the right to receive a fractional interest in a
share of common stock, par value $0.001 per share, of Parent
("Parent Common Stock") equal to the Exchange Ratio, plus cash in
lieu of fractional shares pursuant to Section 2.2(f).
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(ii) The Exchange Ratio shall be determined in the following
manner:
(A) If the 20-Day Average Price is less than or equal
to $14.00 (the "Cap Price"), and greater than or equal to $11.00
(the "Floor Price"), the Exchange Ratio shall be equal to a
fraction:
(1) the numerator of which is 10,245,902; and
(2) the denominator of which is the number of
shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time (after giving effect to any option
exercises prior to the Spin-Off pursuant to Section 2.3 and the
cancellation of any shares of Company Common Stock that are owned by
the Company (as treasury stock or otherwise) in accordance with
Section 2.1(b), such amount being the "Closing Date Company Share
Number").
(B) If the 20-Day Average Price is greater than the
Cap Price, the Exchange Ratio shall be equal to a fraction:
(1) the numerator of which is the quotient
obtained by dividing (x) $143,442,628 by (y) the Closing Date
Company Share Number; and
(2) the denominator of which is the 20-Day
Average Price.
(C) If the 20-Day Average Price is less than the Floor
Price, the Exchange Ratio shall be equal to a fraction:
(1) the numerator of which is 11,300,000; and
(2) the denominator of which is the Closing Date
Company Share Number;
provided, however, that notwithstanding anything in this Agreement
to the contrary, Parent will not be obligated to issue more than
11,300,000 shares of Parent Common Stock as Merger Consideration.
The Exchange Ratio shall be rounded to the nearest 1/10,000, or if there shall
not be a nearest 1/10,000, to the next highest 1/10,000. If between the date of
this Agreement and the Effective Time the outstanding shares of Parent Common
Stock or Company Common Stock shall have been changed into a different number of
shares or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, rights offering, split, combination or
exchange of shares, the Exchange Ratio correspondingly shall be adjusted to the
extent warranted to reflect such stock dividend, subdivision, reclassification,
recapitalization, rights offering, split, combination or exchange of shares.
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SECTION 2.2 Exchange of Certificates.
(a) Letter of Transmittal. As soon as reasonably practicable after
the Effective Time, a bank or trust company to be designated by Parent (the
"Exchange Agent") shall mail to each holder of record of shares of Company
Common Stock immediately prior to the Effective Time (excluding any shares of
Company Common Stock to be cancelled pursuant to Section 2.1(b) or Dissenting
Shares) (i) a letter of transmittal (the "Letter of Transmittal") which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of such Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent shall
reasonably specify and (ii) instructions for use in effecting the surrender of
the Certificates in exchange for the Merger Consideration with respect to the
shares of Company Common Stock formerly represented thereby.
(b) Deposit of Merger Consideration. Promptly after the Effective
Time, Parent shall deposit with the Exchange Agent, for the benefit of the
holders of shares of Company Common Stock for exchange in accordance with this
Article II, (i) cash in an amount sufficient to pay the aggregate Merger
Consideration that shall take the form of cash and (ii) certificates or other
evidence representing the aggregate Merger Consideration that shall take the
form of shares of Parent Common Stock (such certificates or other evidence,
together with the cash deposited pursuant to clause (i), are referred to herein
as the "Exchange Fund"). The Parent Common Stock into which Company Common Stock
shall be converted pursuant to the Merger shall be deemed to have been issued at
the Effective Time for purposes of entitlement to dividends declared, if any,
after the Effective Time.
(c) Surrender of Certificates. Upon surrender of a Certificate to
the Exchange Agent, together with the Letter of Transmittal, duly executed, and
such other documents as Parent or the Exchange Agent shall reasonably request,
the holder of such Certificate shall be entitled to receive in exchange therefor
(i) a certified or bank cashier's check in the amount equal to the aggregate
amount of the Merger Consideration consisting of cash which such holder has the
right to receive pursuant to the provisions of this Article II (including any
cash in lieu of fractional shares of Parent Common Stock pursuant to Section
2.2(f)) and (ii) certificates for, or other evidence of, the Parent Common Stock
which such holder has the right to receive (in each case without interest and
less the amount of any required withholding taxes, if any, in accordance with
Section 2.2(j)).
(d) Rules Governing Exchange. Parent, in consultation with the
Company prior to the Effective Time, shall have the right to make reasonable
rules, not inconsistent with the terms of this Agreement, governing the validity
of Letters of Transmittal, the issuance and delivery of certificates for, or
other evidence of, Parent Common Stock, and the payment of the Cash
Consideration Per Share.
(e) Distributions With Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions with respect to shares of
Parent Common Stock, with a record date after the Effective Time, shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Parent Common Stock they are entitled to receive until such Certificate is
surrendered by such holder.
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(f) No Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, no dividends or other distributions of Parent shall
relate to such fractional share interests and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a stockholder of
Parent. In lieu of such fractional share interests, Parent shall pay to each
holder of a Certificate (upon surrender thereof as provided in this Article II)
an amount in cash equal to the product obtained by multiplying (i) the
fractional share interest to which such holder (after taking into account all
shares of Company Common Stock held at the Effective Time by such holder) would
otherwise be entitled by (ii) the per share closing price of Parent Common Stock
on the NYSE as of the Closing Date.
(g) Lost, Stolen or Destroyed Certificates. 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 Parent, the posting by such Person of a bond, in
such reasonable amount as Parent may direct, as indemnity against any claim that
may be made against it with respect to such Certificate, the Exchange Agent will
issue, in exchange for such lost, stolen or destroyed Certificate, the Merger
Consideration, any dividends or other distributions to which the holder of such
Certificate would be entitled and cash in lieu of any fractional shares of
Parent Common Stock to which such holder would be entitled pursuant to Section
2.2(f), in each case pursuant to this Agreement.
(h) Termination of Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for one hundred eighty
(180) days after the Effective Time shall be delivered to Parent, upon demand,
and any holders of Certificates who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim for
the Merger Consideration, any dividends or other distributions with respect to
shares of Parent Common Stock and cash in lieu of any fractional shares of
Parent Common Stock in accordance with this Article II. If any Certificate shall
not have been surrendered immediately prior to such date on which any Merger
Consideration (and all dividends or other distributions payable with respect to
such shares and all cash payable in lieu of fractional shares pursuant to
Section 2.2(f)) would otherwise escheat to or become property of any
Governmental Authority, any such Merger Consideration (and all dividends or
other distributions payable with respect to such shares and all cash payable in
lieu of fractional shares pursuant to Section 2.2(f)) shall become, to the
extent permitted by applicable Law, the property of Parent, free and clear of
all claims or interest of any Person previously entitled thereto.
(i) No Liability. Notwithstanding any provision of this Agreement
to the contrary, none of the parties hereto, the Surviving Corporation or the
Exchange Agent shall be liable to any Person in respect of any shares of Parent
Common Stock (or dividends or other distributions with respect thereto) or cash
in lieu of any fractional shares of Parent Common Stock or cash from the
Exchange Fund, in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar Law.
(j) Withholding Taxes. Parent and the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise payable to a
holder of shares of Company Common Stock pursuant to this Agreement such amounts
as may be required to be deducted and withheld with respect to the making of
such payment under the Code, or under any provision of Tax Law. To the extent
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amounts are so withheld and paid over to the appropriate Governmental Authority,
Parent and the Exchange Agent shall be treated as though they withheld from the
type of consideration from which withholding is required an appropriate amount
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock in order to provide for such withholding obligation and such
withheld amounts shall be treated for the purposes of this Agreement as having
been paid to the former holder of the shares of Company Common Stock. If
withholding is required from shares of Parent Common Stock, Parent and the
Exchange Agent shall be treated as having sold such consideration for an amount
of cash equal to the fair market value of such consideration at the time of such
deemed sale and paid such cash proceeds to the appropriate Governmental
Authority.
SECTION 2.3 Company Stock Options; Company Restricted Stock;
Employee Stock Purchase Plan.
(a) All outstanding options to purchase shares of Company Common
Stock (the "Company Stock Options") shall become fully vested and exercisable
immediately prior to the record date for the entitlement to a distribution of
Newco shares in connection with the Spin-Off (the "Spin-Off Record Date").
Holders of Company Stock Options shall be given the opportunity to exercise
their Company Stock Options, effective immediately prior to the Spin-Off Record
Date and conditioned upon the occurrence of the Spin-Off, and thereby to become
stockholders of the Company, entitled to receive the Merger Consideration for
each share of Company Common Stock as provided pursuant to Section 2.1(c) and
the distribution of Newco shares in connection with the Spin-Off. All written
communications distributed generally to employees by or on behalf of the Company
regarding such exercises will be mutually acceptable to Parent and the Company.
(b) All Company Stock Options that are outstanding immediately
prior to the Spin-Off that are not exercised in accordance with Section 2.3(a)
shall be cancelled and null and void as of the Spin-Off.
(c) In connection with the termination of the Company Stock Option
Plans, following the Spin-Off, no holder of Company Stock Options, or any
participant in or beneficiary of the Company Stock Option Plans, will have any
right to acquire or receive any equity securities of the Surviving Corporation,
any Subsidiary thereof, or any consideration other than as contemplated pursuant
to this Section 2.3.
(d) All outstanding shares of Company Common Stock that are
subject to a Contract or other arrangement pursuant to which the Company has the
right to repurchase, redeem or otherwise reacquire such shares of Company Common
Stock, including by forfeiture (the "Company Restricted Stock"), shall become
fully vested immediately prior to the Spin-Off and the holders thereof shall
thereby become entitled to receive the Merger Consideration for each share of
Company Common Stock as provided pursuant to Section 2.1(c). The vesting of all
Company Restricted Stock pursuant to this Section 2.3(d) shall be net of all
applicable withholding Taxes.
(e) All rights outstanding under the Company's 1999 Employee Stock
Purchase Plan (the "Company Purchase Plan") shall be treated as set forth in
Section 5.13.
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(f) Prior to the Spin-Off, the board of directors of the Company
(or, if appropriate, any committee of the board of directors of the Company
administering the Company Stock Option Plans) shall adopt such resolutions or
take such other actions as may be required to effect the provisions of this
Section 2.3.
SECTION 2.4 Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the contrary,
shares of Company Common Stock that are issued and outstanding immediately prior
to the Effective Time and which are held by a stockholder who did not vote in
favor of the Merger (or consent thereto in writing) and who is entitled to
demand and properly demands appraisal of such shares pursuant to, and who
complies in all respects with, the provisions of Section 262 of the DGCL (the
"Dissenting Stockholders") shall not be converted into or be exchangeable for
the right to receive the Merger Consideration (the "Dissenting Shares"), but
instead such holder shall be entitled to payment of the appraised value of such
shares of Company Common Stock as may be determined to be due to such Dissenting
Stockholder pursuant to Section 262 of the DGCL (and at the Effective Time, such
Dissenting Shares shall no longer be outstanding and shall automatically be
cancelled and cease to exist, and such Dissenting Stockholder shall cease to
have any rights with respect thereto, except the right to receive the appraised
value of such Dissenting Shares in accordance with the provisions of Section 262
of the DGCL), unless and until such holder shall have failed to perfect or shall
have effectively withdrawn or lost rights to appraisal under the DGCL. The Proxy
Statement shall include a notice complying with the provisions of Section 262 of
the DGCL concerning the rights of stockholders to exercise appraisal rights and
a copy of the provisions of Section 262 of the DGCL.
(b) Notwithstanding the foregoing, if any Dissenting Stockholder
shall have failed to perfect or shall have effectively withdrawn or lost such
right to seek payment of the appraised value of such Dissenting Shares, such
Dissenting Stockholder's shares of Company Common Stock shall thereupon be
treated as if they had been converted into and become exchangeable for the right
to receive, as of the Effective Time, the Merger Consideration, in accordance
with Section 2.1(c), without any interest thereon. Parent shall promptly deposit
with the Exchange Agent any additional funds necessary to pay in full the Merger
Consideration so due and payable to such Dissenting Stockholders who have failed
to perfect or who shall have effectively withdrawn or lost such right to seek
payment of the appraisal value of such Dissenting Shares.
(c) The Company shall provide Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Common Stock, attempted
withdrawals of such demands and any other instruments served pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct all
negotiations and proceedings with respect to the exercise of appraisal rights
under the DGCL. The Company shall not, except with the prior written consent of
Parent or as otherwise required by applicable Law, make any payment with respect
to any such exercise of appraisal rights or offer to settle or settle any such
rights.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub that
except as disclosed (a) in the Company's Annual Report on Form 10-K for the year
ended December 31, 2007, or the Company's Proxy Statement for its 2008 annual
meeting of stockholders, other than disclosure referred to in the "Risk Factors"
and "Note Regarding Forward Looking Statements" sections thereof, or (b) in the
disclosure schedule (with specific reference to the Section or subsection of
this Agreement to which the information stated in such disclosure schedule
relates) delivered by the Company to Parent simultaneously with the execution of
this Agreement (the "Company Disclosure Schedule"):
SECTION 3.1 Organization, Standing and Corporate Power.
(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of the
jurisdiction in which it is incorporated and has all requisite corporate power
and authority necessary to own or lease all of its properties and assets and to
carry on its business as it is now being conducted and as currently proposed by
its management to be conducted. Each of the Company and its Subsidiaries is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed, qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect.
(b) Section 3.1(b) of the Company Disclosure Schedule lists all
Subsidiaries of the Company together with the jurisdiction of organization of
each such Subsidiary. All the outstanding shares of capital stock of, or other
equity interests in, each Subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable and are owned directly
or indirectly by the Company free and clear of all liens, pledges, charges,
mortgages, encumbrances, transfer restrictions, adverse rights or claims and
security interests of any kind or nature whatsoever (including any restriction
on the right to vote or transfer the same, except for such transfer restrictions
of general applicability as may be provided under the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the "Securities
Act"), and the "blue sky" Laws of the various States of the United States)
(collectively, "Liens"). Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock, voting securities or equity interests in any Person.
(c) The Company has delivered to Parent correct and complete
copies of its certificate of incorporation and bylaws (the "Company Charter
Documents") and correct and complete copies of the certificates of incorporation
and bylaws (or comparable organizational documents) of each of its Subsidiaries
(the "Subsidiary Documents"), in each case as amended to the date of this
Agreement. All such Company Charter Documents and Subsidiary Documents are in
full force and effect and neither the Company nor any of its Subsidiaries is in
violation of any of their respective provisions. The Company has made available
to Parent and its representatives correct and complete copies of the minutes
9
(or, in the case of minutes that have not yet been finalized, drafts thereof) of
all meetings of stockholders, the board of directors and each standing committee
of the board of directors of the Company and each of its Subsidiaries held since
December 31, 2005.
SECTION 3.2 Capitalization.
(a) The authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and 5,000,000 shares of preferred
stock, par value $.001 per share ("Company Preferred Stock"), of which 300,000
shares have been designated Series A Company Preferred Stock, which are issuable
upon exercise of the purchase rights (the "Company Rights") pursuant to the
Company Rights Agreement. At the close of business on March 21, 2008, (i)
22,177,235 shares of Company Common Stock were issued and outstanding, (ii) no
shares of Company Common Stock were held by the Company in its treasury, (iii)
15,888,765 shares of Company Common Stock were reserved for issuance under the
Company Stock Option Plans (of which 6,874,670 shares of Company Common Stock
were subject to outstanding Company Stock Options granted under the Company
Stock Option Plans), (iv) no shares of Company Preferred Stock were issued or
outstanding and (v) 1,928,535 shares of Company Common Stock were reserved for
issuance under the Company Purchase Plan. All outstanding shares of Company
Common Stock have been duly authorized and validly issued and are fully paid,
nonassessable and free of preemptive rights. Included in Section 3.2(a) of the
Company Disclosure Schedule are correct and complete lists, as of March 21,
2008, of (A) all outstanding options or other rights to purchase or receive
shares of Company Common Stock granted under the Company Stock Option Plans or
otherwise, and, for each such option or other right, the number of shares of
Company Common Stock subject thereto, the terms of vesting, the grant and
expiration dates and exercise price thereof and the name of the holder thereof
and (B) all outstanding shares of Company Restricted Stock and, for each such
share of Company Restricted Stock, the terms of vesting, the grant or purchase
dates, the repurchase price thereof and the name of the holder thereof. All
Company Stock Options have an exercise price equal to no less than the fair
market value of the underlying shares of Company Common Stock on the date of
grant. Since March 21, 2008, the Company has not issued any shares of its
capital stock, voting securities or equity interests, or any securities
convertible into or exchangeable or exercisable for any shares of its capital
stock, voting securities or equity interests, other than pursuant to the
outstanding Company Stock Options referred to above in this Section 3.2(a).
Except as set forth above in this Section 3.2(a), and except as permitted by
Section 5.2(b)(i)(A)(2), as of the date of this Agreement there are not, and as
of the Effective Time there will not be, any shares of capital stock, voting
securities or equity interests of the Company issued and outstanding or any
subscriptions, options, warrants, calls, convertible or exchangeable securities,
rights, commitments or agreements of any character providing for the issuance of
any shares of capital stock, voting securities or equity interests of the
Company, including any representing the right to purchase or otherwise receive
any Company Common Stock.
(b) None of the Company or any of its Subsidiaries has issued or
is bound by any outstanding subscriptions, options, warrants, calls, convertible
or exchangeable securities, rights, commitments or agreements of any character
providing for the issuance or disposition of any shares of capital stock, voting
securities or equity interests of any Subsidiary of the Company. Except for
shares of Company Restricted Stock, there are no outstanding obligations of the
10
Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock, voting securities or equity interests (or any
options, warrants or other rights to acquire any shares of capital stock, voting
securities or equity interests) of the Company or any of its Subsidiaries.
SECTION 3.3 Authority; Noncontravention; Voting Requirements.
(a) The Company has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the Company
Stockholder Approval, to perform its obligations hereunder and to consummate the
Transactions. The execution, delivery and performance by the Company of this
Agreement, and the consummation by it of the Transactions, have been duly
authorized and approved by its board of directors, and except for obtaining the
Company Stockholder Approval, no other corporate action on the part of the
Company is necessary to authorize the execution, delivery and performance by the
Company of this Agreement and the consummation by it of the Transactions. This
Agreement has been duly executed and delivered by the Company and, assuming due
authorization, execution and delivery hereof by the other parties hereto,
constitutes a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except that such
enforceability (i) may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar Laws of general
application affecting or relating to the enforcement of creditors' rights
generally and (ii) is subject to general principles of equity, whether
considered in a proceeding at Law or in equity (the "Bankruptcy and Equity
Exception").
(b) The Company's board of directors, at a meeting duly called and
held, has unanimously (i) approved and declared advisable this Agreement and the
Transactions, including the Merger, and (ii) resolved to recommend that the
stockholders of the Company adopt this Agreement.
(c) Neither the execution and delivery of this Agreement by the
Company nor the consummation by the Company of the Transactions, nor compliance
by the Company with any of the terms or provisions hereof, will (i) conflict
with or violate any provision of the Company Charter Documents or any of the
Subsidiary Documents or (ii) assuming that the authorizations, consents and
approvals referred to in Section 3.4 and the Company Stockholder Approval are
obtained and the filings referred to in Section 3.4 are made, (A) violate any
applicable Law, judgment, writ or injunction of any Governmental Authority
applicable to the Company or any of its Subsidiaries or any of their respective
properties or assets or (B) violate, conflict with, result in the loss of any
benefit under, constitute a default (or an event which, with notice or lapse of
time, or both, would constitute a default) under, result in the termination of
or a right of termination or cancellation under, accelerate the performance
required by, or result in the creation of any Lien upon any of the respective
properties or assets of the Company or any of its Subsidiaries under, any of the
terms, conditions or provisions of any written or oral loan or credit agreement,
debenture, note, bond, mortgage, indenture, deed of trust, license, lease,
contract or other agreement, instrument or obligation (each, a "Contract") or
Permit to which the Company or any of its Subsidiaries is a party, or by which
they or any of their respective properties or assets may be bound or affected,
except, in the case of clause (B), (1) solely with respect to state Laws
applicable to Government Contracts, to the Knowledge of the Company, or (2) for
11
such violations, conflicts, losses, defaults, terminations, cancellations,
accelerations or Liens as, individually or in the aggregate, would not
reasonably be expected to have a Company Material Adverse Effect.
(d) The affirmative vote (in person or by proxy) of the holders of
a majority of the outstanding shares of Company Common Stock at the Company
Stockholders Meeting or any adjournment or postponement thereof in favor of the
adoption of this Agreement (the "Company Stockholder Approval") is the only vote
or approval of the holders of any class or series of capital stock of the
Company or any of its Subsidiaries which is necessary to adopt this Agreement
and approve the Transactions.
SECTION 3.4 Governmental Approvals. Except for (a) the filing with
the SEC of a proxy statement relating to the Company Stockholders Meeting (as
amended or supplemented from time to time, the "Proxy Statement"), and other
filings required under, and compliance with other applicable requirements of,
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act"), and the rules of the Nasdaq Stock
Market, (b) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware pursuant to the DGCL, (c) filings required under, and
compliance with other applicable requirements of, the HSR Act and (d) filings
required under, and compliance with other applicable requirements of, non-U.S.
Laws intended to prohibit, restrict or regulate actions or transactions having
the purpose or effect of monopolization, restraint of trade, harm to competition
or effectuating foreign investment (collectively, "Foreign Antitrust Laws"), no
consents or approvals of, or filings, declarations or registrations with, any
Governmental Authority are necessary for the execution, delivery and performance
of this Agreement by the Company and the consummation by the Company of the
Transactions, other than such other consents, approvals, filings, declarations
or registrations that, if not obtained, made or given, would not, individually
or in the aggregate, reasonably be expected to impair in any material respect
the ability of the Company to perform its obligations hereunder, or prevent or
materially impede, interfere with, hinder or delay the consummation of the
Transactions. Notwithstanding the foregoing, solely with respect to state Laws
applicable to Government Contracts, the provisions of this Section 3.4 shall be
to the Knowledge of the Company.
SECTION 3.5 Company SEC Documents; Undisclosed Liabilities.
(a) The Company has filed and furnished all required reports,
schedules, forms, certifications, prospectuses, and registration, proxy and
other statements with the SEC since December 31, 2005 (collectively and together
with all documents filed on a voluntary basis on Form 8-K, and in each case
including all exhibits and schedules thereto and documents incorporated by
reference therein, the "Company SEC Documents"). None of the Company's
Subsidiaries is required to file periodic reports with the SEC pursuant to the
Exchange Act. As of their respective effective dates (in the case of Company SEC
Documents that are registration statements filed pursuant to the requirements of
the Securities Act) and as of their respective SEC filing dates (in the case of
all other Company SEC Documents), the Company SEC Documents complied in all
material respects with the requirements of the Exchange Act or the Securities
Act, as the case may be, applicable to such Company SEC Documents, and none of
the Company SEC Documents as of such respective dates contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order
12
to make the statements therein, in light of the circumstances under which they
were made, not misleading. Except to the extent that information contained in
any Company SEC Document has been reviewed or superseded by a later-filed
Company SEC Document, none of the Company SEC Documents contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary in order to make thestatements therein, in light of
the circumstances under which they were made, not misleading. As of the date of
this Agreement, there are no outstanding or unresolved comments received from
the SEC staff with respect to the Company SEC Documents. To the Knowledge of the
Company, none of the Company SEC Documents is the subject of ongoing SEC review
or investigation.
(b) The consolidated financial statements of the Company included
in the Company SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as of their respective dates, have been prepared in
accordance with GAAP (except, in the case of unaudited quarterly statements, as
permitted by the rules and regulations of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of the Company and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments, none of which has been or will be, individually or
in the aggregate, material to the Company and its Subsidiaries, taken as a
whole). Without limiting the generality of the foregoing, with respect to each
Annual Report on Form 10-K and each Quarterly Report on Form 10-Q included in
the Company SEC Documents, the financial statements and other financial
information included in such reports fairly present (within the meaning of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the "▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act")) in all material respects
the financial condition and results of operations of the Company as of, and for,
the periods presented in such Company SEC Documents.
(c) The Company has established and maintains internal control
over financial reporting and disclosure controls and procedures (as such terms
are defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act); such
disclosure controls and procedures are designed to ensure that material
information relating to the Company, including its consolidated Subsidiaries,
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the Company's
principal executive officer and its principal financial officer to allow timely
decisions regarding required disclosure; and such disclosure controls and
procedures were determined to be effective in all material respects to ensure
that information required to be disclosed by the Company in the reports that it
filed under the Exchange Act since December 31, 2005, was recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms. The Company's principal executive officer and its principal financial
officer have disclosed, based on their most recent evaluation, to the Company's
auditors and the audit committee of the board of directors of the Company (i)
all significant deficiencies in the design or operation of internal controls
which could adversely affect the Company's ability to record, process, summarize
and report financial data and have identified for the Company's auditors any
material weaknesses in internal controls and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the Company's internal controls. The principal executive officer and the
principal financial officer of the Company have made all certifications required
13
by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, the Exchange Act and any related rules and
regulations promulgated by the SEC with respect to the Company SEC Documents,
and the statements contained in such certifications are complete and correct.
The management of the Company has completed its assessment of the effectiveness
of the Company's internal control over financial reporting in compliance with
the requirements of Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act for the year ended
December 31, 2007, and such assessment concluded that such controls were
effective. To the Knowledge of the Company, there are no facts or circumstances
that would prevent its chief executive officer and chief financial officer from
giving the certifications and attestations required pursuant to the rules and
regulations adopted pursuant to Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, without
qualification, when next due.
(d) The Company is in compliance in all material respects with the
provisions of Section 13(b) of the Exchange Act. Neither the Company nor any of
its Subsidiaries nor, to the Company's Knowledge, any director, officer, agent,
employee or other Person acting on behalf of the Company or any of its
Subsidiaries has, in any material respect, (i) used any corporate or other funds
for unlawful contributions, payments, gifts or entertainment, or made any
unlawful expenditures relating to political activity, to government officials or
others or established or maintained any unlawful or unrecorded funds in
violation of Section 30A of the Exchange Act or (ii) accepted or received any
unlawful contributions, payments, gifts or expenditures. The Company is in
compliance, in all material respects, with the applicable listing and corporate
governance rules and regulations of the Nasdaq Stock Market.
(e) Neither the Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise, whether known or unknown) whether or not required, if known, to be
reflected or reserved against on a consolidated balance sheet of the Company
prepared in accordance with GAAP or the notes thereto, except liabilities and
obligations (i) as and to the extent reflected or reserved against on the
audited balance sheet of the Company and its Subsidiaries as of December 31,
2007 (the "Balance Sheet Date") (including the notes thereto) included in the
Company SEC Documents filed by the Company and publicly available prior to the
date of this Agreement (the "Filed Company SEC Documents"), (ii) incurred in
connection with the transactions contemplated by this Agreement, (iii) incurred
after the Balance Sheet Date in the ordinary course of business consistent with
past practice or (iv) that would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect.
(f) Neither the Company nor any of its Subsidiaries is a party to,
or has any commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract or arrangement
relating to any transaction or relationship between or among the Company and any
of its Subsidiaries, on the one hand, and any unconsolidated Affiliate,
including any structured finance, special purpose or limited purpose entity or
Person, on the other hand, or any "off-balance sheet arrangements" (as defined
in Item 303(a) of Regulation S-K of the SEC)), where the result, purpose or
effect of such Contract is to avoid disclosure of any material transaction
involving, or material liabilities of, the Company or any of its Subsidiaries in
the Company's or such Subsidiary's published financial statements or any Company
SEC Documents.
14
SECTION 3.6 Absence of Certain Changes or Events. From the Balance
Sheet Date to the date of this Agreement, there have not been any events,
changes, occurrences or state of facts that, individually or in the aggregate,
have had or would reasonably be expected to have a Company Material Adverse
Effect. Except as disclosed in the Filed Company SEC Documents, since the
Balance Sheet Date (a) the Company and its Subsidiaries have carried on and
operated their respective businesses in all material respects in the ordinary
course of business consistent with past practice and (b) neither the Company nor
any of its Subsidiaries has taken any action that would be prohibited by Section
5.2(b) if taken after the date hereof. Without limiting the foregoing, except as
disclosed in the Filed Company SEC Documents, since the Balance Sheet Date there
has not occurred any damage, destruction or loss (whether or not covered by
insurance) of any material asset of the Company or any of its Subsidiaries which
materially affects the use thereof.
SECTION 3.7 Legal Proceedings. Except as set forth on Section 3.7 of
the Company Disclosure Schedule or as would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, there is no
pending or, to the Knowledge of the Company, threatened, legal, administrative,
arbitral or other proceeding, claim, suit or action against, or governmental or
regulatory investigation of, the Company or any of its Subsidiaries, nor is
there any injunction, order, judgment, ruling or decree imposed (or, to the
Knowledge of the Company, threatened to be imposed) upon the Company, any of its
Subsidiaries or the assets of the Company or any of its Subsidiaries, by or
before any Governmental Authority ("Legal Proceedings").
SECTION 3.8 Compliance With Laws; Permits.
(a) The Company and its Subsidiaries are (and since December 31,
2005 have been) in compliance in all material respects with all laws (including
common law), statutes, ordinances, codes, rules, regulations, decrees and orders
of Governmental Authorities, (collectively, "Laws") applicable to the Company or
any of its Subsidiaries, any of their properties or other assets or any of their
businesses or operations.
(b) The Company and each of its Subsidiaries holds all licenses,
franchises, permits, certificates, approvals and authorizations from
Governmental Authorities, or required by Governmental Authorities to be
obtained, in each case necessary for the lawful conduct of their respective
businesses (collectively, "Permits"). The Company and its Subsidiaries are (and
since December 31, 2005 have been) in compliance with the terms of all Permits,
except for instances of noncompliance that, individually or in the aggregate,
have not had and would not reasonably be expected to have a Company Material
Adverse Effect. Since December 31, 2005, neither the Company nor any of its
Subsidiaries has received written notice to the effect that a Governmental
Authority (i) claimed or alleged that the Company or any of its Subsidiaries was
not in material compliance with any Permit or (ii) was considering the
amendment, termination, revocation or cancellation of any Permit.
SECTION 3.9 Information Supplied. Subject to the accuracy of the
representations and warranties of Parent and Merger Sub set forth in Section
4.6, none of the information supplied (or to be supplied) in writing by or on
behalf of the Company specifically for inclusion or incorporation by reference
in (a) the registration statement on Form S-4 to be filed with the SEC by Parent
15
in connection with the issuance of shares of Parent Common Stock in the Merger
(as amended or supplemented from time to time, the "Form S-4") will, at the time
the Form S-4, or any amendment or supplement thereto, is filed with the SEC or
at the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading, (b) the
registration statement on Form 10 to be filed with the SEC by the Company in
connection with the issuance of shares of Newco common stock in the Spin-Off (as
amended or supplemented from time to time, the "Form 10") will, at the time the
Form 10, or any amendment or supplement thereto, is filed with the SEC or at the
time it becomes effective under the Exchange Act, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in light of
the circumstances under which they are made, not misleading and (c) the Proxy
Statement will, on the date it is first mailed to stockholders of the Company,
and at the time of the Company Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. Each of the Form 10
and Proxy Statement will comply as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act.
Notwithstanding the foregoing, the Company makes no representation or warranty
with respect to information supplied by or on behalf of Parent or Merger Sub for
inclusion or incorporation by reference in any of the foregoing documents.
SECTION 3.10 Tax Matters.
(a) Each of the Company and its Subsidiaries has timely filed, or
has caused to be timely filed on its behalf (taking into account any extension
of time within which to file), all material Tax Returns required to be filed by
it, and all such filed Tax Returns are correct and complete in all material
respects. All material amounts of Tax required to be paid by the Company or any
of its Subsidiaries have been timely paid.
(b) Each of the Company and its Subsidiaries has complied in all
material respects with all applicable Laws relating to the payment and
withholding of Taxes and has duly and timely withheld and paid over to the
appropriate Governmental Authority all material amounts required to be so
withheld and paid under all applicable Laws.
(c) The most recent financial statements contained in the Filed
Company SEC Documents reflect an adequate reserve for all Taxes payable by the
Company and its Subsidiaries for all taxable periods and portions thereof
through the date of such financial statements.
(d) All deficiencies asserted or assessments made as a result of
any examinations by any Governmental Authority of the Tax Returns of, or
including, the Company or any of its Subsidiaries have been fully paid, and
there are no other audits or investigations by any Governmental Authority in
progress, nor has the Company or any of its Subsidiaries received any notice
from any Governmental Authority that it intends to conduct such an audit or
investigation.
16
(e) Neither the Company nor any of its Subsidiaries is subject to
any private letter ruling of the IRS or comparable rulings of any Governmental
Authority.
(f) Neither the Company nor any of its Subsidiaries is a party to
any contract, agreement, plan or other arrangement that, individually or
collectively, could give rise to the payment of any amount which would not be
deductible by reason of Section 162(m) or Section 280G of the Code or would be
subject to withholding under Section 4999 of the Code.
(g) The Company has made available to Parent correct and complete
copies of (i) all income and franchise Tax Returns of the Company and its
Subsidiaries for the preceding three (3) taxable years and (ii) any audit report
issued within the last three (3) years (or otherwise with respect to any audit
or proceeding in progress) relating to income and franchise Taxes of the Company
or any of its Subsidiaries.
(h) Neither the Company nor any of its Subsidiaries nor any other
Person on their behalf has (i) agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of Law or has
any knowledge that any Governmental Authority has proposed any such adjustment,
or has any application pending with any Governmental Authority requesting
permission for any changes in accounting methods that relate to the Company or
any of its Subsidiaries, (ii) executed or entered into a closing agreement
pursuant to Section 7121 of the Code or any similar provision of Law with
respect to the Company or any of its Subsidiaries, (iii) requested any extension
of time within which to file any Tax Return, which Tax Return has since not been
filed, (iv) granted any extension for the assessment or collection of Taxes,
which Taxes have not since been paid, or (v) granted to any Person any power of
attorney that is currently in force with respect to any Tax matter.
(i) As of December 31, 2007, the Company had net operating loss
carryovers for federal income Tax purposes of $114.6 million to offset future
taxable income subject to section 382 of the Code; provided, however, that the
Company makes no representation or warranty concerning the application of any
limitations on the utilization of such net operating loss carryovers.
(j) For purposes of this Agreement: (i) "Tax" or "Taxes" means (A)
all federal, state, local or foreign taxes, charges, fees, imposts, levies or
other assessments, including all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs
duties, fees, assessments and charges of any kind whatsoever, (B) all interest,
penalties, fines, additions to tax or additional amounts imposed by any
Governmental Authority in connection with any item described in clause (A), and
(C) any transferee liability in respect of any items described in clauses (A)
and/or (B) payable by reason of contract, assumption, transferee liability,
operation of Law, Treasury Regulation Section 1.1502-6(a) (or any predecessor or
successor thereof or any analogous or similar provision under Law) or otherwise
and (ii) "Tax Returns" means any return, report, claim for refund, estimate,
information return or statement or other similar document relating to or
required to be filed with any Governmental Authority with respect to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
17
SECTION 3.11 Employee Benefits and Labor Matters.
(a) Section 3.11(a) of the Company Disclosure Schedule sets forth
a correct and complete list of: (i) all "employee benefit plans" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), (ii) all other material employee benefit plans, policies, agreements
or arrangements, and (iii) all material payroll practices, including employment,
consulting, termination, severance, retention, change in control or other
compensation agreements, or retirement, bonus or other incentive compensation,
stock purchase, equity or equity-based compensation, deferred compensation,
change in control, severance pay, sick leave, vacation pay, loans, salary
continuation for disability, life insurance, educational assistance and employee
assistance plans, policies, agreements or arrangements with respect to which the
Company or any of its Subsidiaries has any material obligation or liability,
contingent or otherwise, for current or former employees, consultants or
directors of the Company or any of its Subsidiaries (collectively, the "Company
Plans"). Neither the Company nor any of its Subsidiaries and any trade or
business (whether or not incorporated) which is or at any time during the last
six (6) years was under common control, or which is or during the last six (6)
years was treated as a single employer, with any of them under Section 414(b),
(c), (m) or (o) of the Code has in the last six (6) years (and while treated as
a single employer or as being under common control with the Company or any of
its Subsidiaries) sponsored, maintained, contributed or been obligated to
contribute to any "employee pension plans", as defined in Section 3(2) of ERISA,
subject to Title IV of ERISA or Section 412 of the Code, including any
multiemployer plan, as defined in Section 4001(a)(3) of ERISA.
(b) Except as set forth on Section 3.11(b) of the Company
Disclosure Schedule, correct and complete copies of the following documents with
respect to each of the Company Plans (other than a "multiemployer plan," as
defined in Section 3(37) or 4001(a)(3) of ERISA) have been delivered to Parent
by the Company to the extent applicable: (i) the plan document as currently in
effect and any related trust documents, insurance contracts or other funding
arrangements (all as currently in effect), (ii) the two (2) most recent Forms
5500 and all schedules thereto, (iii) the two (2) most recent actuarial reports,
if any, (iv) the most recent IRS determination letter, (v) the most recent
summary plan description and (vi) written summaries of all non-written Company
Plans.
(c) The Company Plans have been maintained in all material
respects in accordance with their terms and with all applicable provisions of
ERISA, the Code and other Laws (including rules and regulations thereunder), and
the Company and its Subsidiaries have performed and complied in all material
respects with all of their obligations under or with respect to each Company
Plan. To the Knowledge of the Company, except as would not reasonably be
expected to result in a Company Material Adverse Effect, no fiduciary has any
liability for breach of fiduciary duty or any other failure to act or comply in
connection with the administration or investment of the assets of any Company
Plan.
(d) Each of the Company Plans intended to qualify under Section
401 of the Code (i) is the subject of an unrevoked favorable determination
letter from the IRS with respect to such Company Plan's qualified status under
the Code, (ii) has remaining a period of time under the Code or applicable
Treasury regulations or IRS pronouncements in which to request, and make any
amendments necessary to obtain, such a letter from the IRS or (iii) is a
18
prototype plan or volume submitter plan entitled under applicable IRS guidance
to rely on the favorable opinion or advisory letter issued by the IRS to the
sponsor of such prototype or volume submitter plan. To the Knowledge of the
Company, nothing has occurred with respect to the operation of any such Company
Plan that would reasonably be expected to cause the loss of such qualification
or exemption, thereby resulting in a material liability to the Company.
(e) Each Company Plan that is a "nonqualified deferred
compensation plan" (as defined for purposes of Section 409A(d)(1) of the Code)
has been operated since January 1, 2005 in good faith compliance with Section
409A of the Code and all IRS guidance promulgated thereunder, to the extent
applicable to such Company Plan.
(f) Except as would not result in a material liability to the
Company, all contributions (including all employer contributions and employee
salary reduction contributions) required to have been made under any of the
Company Plans (including workers compensation) to any funds or trusts
established thereunder or in connection therewith have been made by the due date
thereof (including any valid extension), and all contributions for any period
ending on or before the Closing Date that are not yet due will have been paid or
sufficient accruals for such contributions and other payments in accordance with
GAAP are duly and fully provided for on the balance sheet.
(g) There are no pending actions, claims or lawsuits (other than
routine benefit claims) that have been asserted or instituted against the
Company Plans, the assets of any of the trusts under the Company Plans, the
sponsor or administrator of any of the Company Plans, or, to the Knowledge of
the Company, any fiduciary of the Company Plans with respect to the operation of
any of the Company Plans (nor, to the Knowledge of the Company, is there a
reasonable basis for any such action, claim or lawsuit), which if decided
adversely to the Company would reasonably be expected to result in a Company
Material Adverse Effect.
(h) None of the Company Plans provides for post-employment life or
health insurance, benefits or coverage for any participant or any beneficiary of
a participant, except as may be required under applicable Law, including,
without limitation, the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended ("COBRA"), or coverage through the last day of the month following
the date of termination of employment.
(i) Except as required by applicable Law, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will, either alone or together with other event(s), (i)
result in any payment becoming due to any Employee, (ii) increase any benefits
otherwise payable under any Company Plan, (iii) result in the acceleration of
the time of payment, funding or vesting of any such benefits under any Company
Plan, (iv) require any contributions or payments to fund any obligations under
any Company Plan or (v) limit the right to merge, amend or terminate any Company
Plan.
(j) To the Knowledge of the Company, the Company and its
Subsidiaries have reasonably classified for all purposes (including for all Tax
purposes and for purposes of determining eligibility and benefits under any
Company Plan) all employees, leased employees, consultants and independent
contractors, and have withheld and paid all applicable Taxes and made all
required filings in connection with services provided by such persons. Each
19
independent contractor under contract with the Company or any of its
Subsidiaries has executed a written independent contractor agreement.
(k) None of the employees of the Company or its Subsidiaries is
represented in his or her capacity as an employee of the Company or any of its
Subsidiaries by any labor organization. Neither the Company nor any of its
Subsidiaries has recognized any labor organization, nor has any labor
organization been elected as the collective bargaining agent of any employees,
nor has the Company or any of its Subsidiaries entered into any collective
bargaining agreement or union contract recognizing any labor organization as the
bargaining agent of any employees. There is no union organization activity
involving any of the employees of the Company or any of its Subsidiaries pending
or, to the Knowledge of the Company, threatened, nor has there ever been union
representation involving any of the employees of the Company or any of its
Subsidiaries. There is no picketing pending or, to the Knowledge of the Company,
threatened, and there are no strikes, slowdowns, work stoppages, other job
actions, lockouts, arbitrations, grievances or other labor disputes involving
any of the employees of the Company or any of its Subsidiaries pending or, to
the Knowledge of the Company, threatened. There are no complaints, charges or
claims against the Company or any of its Subsidiaries pending or, to the
Knowledge of the Company, threatened that could be brought or filed with any
Governmental Authority or arbitrator based on, arising out of, in connection
with, or otherwise relating to the employment or termination of employment or
failure to employ by the Company or any of its Subsidiaries of any individual.
The Company and its Subsidiaries are in compliance with all Laws relating to the
employment of labor, including all such Laws relating to wages, hours, the
Worker Adjustment and Retraining Notification Act and any similar state or local
"mass layoff" or "plant closing" law ("WARN"), collective bargaining,
discrimination, civil rights, safety and health, workers' compensation and the
collection and payment of withholding and/or social security Taxes and any
similar Tax, except for immaterial non-compliance. There has been no "mass
layoff" or "plant closing" (as defined by WARN) with respect to the Company or
any of its Subsidiaries during the six-month period prior to the Closing.
SECTION 3.12 Environmental Matters.
(a) Except for those matters that, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect, (i) each of the Company and its Subsidiaries is, and
has been, in compliance with all applicable Environmental Laws, (ii) there is no
investigation, suit, claim, action or proceeding relating to or arising under
Environmental Laws that is pending or, to the Knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries or any
real property currently or, to the Knowledge of the Company, formerly owned,
operated or leased by the Company or any of its Subsidiaries, (iii) neither the
Company nor any of its Subsidiaries has received any notice of or entered into
or assumed by Contract or operation of Law or otherwise, any obligation,
liability, order, settlement, judgment, injunction or decree relating to or
arising under Environmental Laws and (iv) no facts, circumstances or conditions
exist with respect to the Company or any of its Subsidiaries or any property
currently (or, to the Knowledge of the Company, formerly) owned, operated or
leased by the Company or any of its Subsidiaries or any property to or at which
the Company or any of its Subsidiaries transported or arranged for the disposal
or treatment of Hazardous Materials that would reasonably be expected to result
20
in the Company and its Subsidiaries incurring Environmental Liabilities. The
matters set forth in Section 3.12(a) of the Company Disclosure Schedule,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect.
(b) For purposes of this Agreement:
(i) "Environmental Laws" means all Laws relating in any way
to the environment, preservation or reclamation of natural
resources, the presence, management or Release of, or exposure to,
Hazardous Materials, or to human health and safety, including the
Comprehensive Environmental Response, Compensation and Liability Act
(42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation
Act (49 U.S.C. ss. 5101 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act (33
U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401 et
seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.), the
Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 136
et seq.), and the Occupational Safety and Health Act (29 U.S.C. ss.
651 et seq.), each of their state and local counterparts or
equivalents, each of their foreign and international equivalents,
and any transfer of ownership notification or approval statute
(including the Industrial Site Recovery Act (N.J. Stat. ▇▇▇. ss.
13:1K-6 et seq.), as each has been amended and the regulations
promulgated pursuant thereto.
(ii) "Environmental Liabilities" means, with respect to any
Person, all liabilities, obligations, responsibilities, remedial
actions, losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including all reasonable fees,
disbursements and expenses of counsel, experts and consultants and
costs of investigation and feasibility studies), fines, penalties,
sanctions and interest incurred as a result of any claim or demand
by any other Person or in response to any violation of Environmental
Law, whether known or unknown, accrued or contingent, whether based
in contract, tort, implied or express warranty, strict liability,
criminal or civil statute, to the extent based upon, related to, or
arising under or pursuant to any Environmental Law, environmental
permit, order or agreement with any Governmental Authority or other
Person, which relates to any environmental, health or safety
condition, violation of Environmental Law or a Release or threatened
Release of Hazardous Materials.
(iii) "Hazardous Materials" means any material, substance of
waste that is regulated, classified, or otherwise characterized
under or pursuant to any Environmental Law as "hazardous", "toxic",
a "pollutant", a "contaminant", "radioactive" or words of similar
meaning or effect, including petroleum and its by-products,
asbestos, polychlorinated biphenyls, radon, mold, urea formaldehyde
insulation, chlorofluorocarbons and all other ozone-depleting
substances.
(iv) "Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping, disposing of or migrating into or through the environment
or any natural or man-made structure.
21
SECTION 3.13 Contracts.
(a) Schedule 3.13(a) of the Company Disclosure Schedule sets forth
a list of all of the following Contracts to which the Company or any of its
Subsidiaries is a party or by which the Company, any of its Subsidiaries or any
of their respective properties or assets is bound as of the date of this
Agreement:
(i) Contracts that would be required to be filed as an
exhibit to a Registration Statement on Form S-1 under the Securities
Act or an Annual Report on Form 10-K under the Exchange Act if such
registration statement or report was filed by the Company with the
SEC on the date hereof;
(ii) Contracts that purport to limit, curtail or restrict the
ability of the Company or any of its existing or future Subsidiaries
or Affiliates to compete in any geographic area or line of business
or restrict the Persons to whom the Company or any of its existing
or future Subsidiaries or Affiliates may sell products or deliver
services;
(iii) partnership or joint venture agreements and Contracts
for the acquisition, sale or lease of material properties or assets
(by merger, purchase or sale of stock or assets or otherwise)
entered into since December 31, 2007;
(iv) Contracts with any director or officer of the Company or
any of its Subsidiaries or any Affiliate of the Company;
(v) loan or credit agreements, mortgages, indentures, notes
or other Contracts or instruments evidencing indebtedness for
borrowed money by the Company or any of its Subsidiaries or any
Contract or instrument pursuant to which indebtedness for borrowed
money may be incurred or is guaranteed by the Company or any of its
Subsidiaries;
(vi) financial derivatives master agreements or
confirmations, or futures account opening agreements and/or
brokerage statements, evidencing financial hedging or similar
trading activities;
(vii) voting agreements or registration rights agreements;
(viii) mortgages, pledges, security agreements, deeds of trust
or other Contracts granting a Lien on any material property or
assets of the Company or any of its Subsidiaries;
(ix) customer, client or supply Contracts that involved
consideration in year 2007 in excess of $250,000 or that are
reasonably likely to involve consideration in the current year or
2009 in excess of $250,000, or royalty agreements, Intellectual
Property Licenses or other agreements relating to any Intellectual
Property or Technology (excluding any Intellectual Property or
Technology related primarily to the Digital Watermarking Business
that is not Licensed Intellectual Property or Licensed Technology
and shrink-wrap or click-through licenses pertaining to
22
"off-the-shelf" commercially available Software with reasonable
terms and a license fee of no more than $10,000);
(x) Contracts (other than customer, client or supply
Contracts) that involve consideration (whether or not measured in
cash) in excess of $1,000,000;
(xi) collective bargaining agreements;
(xii) "standstill" or similar agreements;
(xiii) real property leases governing the Company's and its
Subsidiaries' facilities in Beaverton, Oregon, Burlington,
Massachusetts and Fort ▇▇▇▇▇, Indiana, and any other material real
property leases;
(xiv) personal property leases which require payments in
excess of $250,000; and
(xv) to the extent material to the business or financial
condition of the Company and its Subsidiaries, taken as a whole,
other than the Digital Watermarking Business, (1) commitments or
agreements that contain a "most favored nation" clause, (2)
Contracts granting any rights of exclusivity (other than to
Intellectual Property or Technology to be licensed to the Company by
Newco in connection with the Spin-Off, which shall be disclosed) or
(3) Contracts granting a right of first refusal or first negotiation
(other than Contracts which grant a right of first refusal or first
negotiation which would reasonably be expected to impair or delay
the consummation of the Transactions, including the Merger and the
Spin-Off, which shall be disclosed).
The Contracts and other documents required to be listed on Section 3.13(a) of
the Company Disclosure Schedule (except Government Contracts) are each a
"Material Contract". The Company has heretofore made available to Parent correct
and complete copies of each Material Contract in existence as of the date
hereof, together with any and all amendments and supplements thereto and
material "side letters" and similar documentation relating thereto.
(b) Each of the Material Contracts is valid, binding and in full
force and effect and is enforceable in accordance with its terms by the Company
and its Subsidiaries party thereto, subject to the Bankruptcy and Equity
Exception. Neither the Company nor any of its Subsidiaries is in default under
any Material Contract or other Contract to which the Company or any of its
Subsidiaries is a party (collectively, the "Company Contracts"), nor does any
condition exist that, with notice or lapse of time or both, would constitute a
default or breach thereunder by the Company and its Subsidiaries party thereto,
except for such defaults or breaches as, individually or in the aggregate, have
not had and would not reasonably be expected to have a Company Material Adverse
Effect. To the Knowledge of the Company, no other party to any Company Contract
is in default thereunder, nor does any condition exist that with notice or lapse
of time or both would constitute a default or breach by any such other party
thereunder, except for such defaults or breaches as, individually or in the
aggregate, have not had and would not reasonably be expected to have a Company
23
Material Adverse Effect. Neither the Company nor any of its Subsidiaries has
received any notice of termination or cancellation under any Material Contract.
SECTION 3.14 Government Contracts.
(a) As used herein, "Government Contract" means any Contract to
which the Company is a party with any Governmental Authority or any Contract to
which the Company is a party that is a subcontract (at any tier) with another
Person that holds either a prime Contract with any Governmental Authority or a
subcontract (at any tier) under such a prime Contract, except for such Contracts
which relate primarily to the Digital Watermarking Business and will be assumed
by Newco in connection with the Restructuring and Spin-Off.
(b) Section 3.14(b) of the Company Disclosure Schedule contains a
complete and correct list of all Government Contracts (including subcontracts)
that are either currently active in performance or, to the Knowledge of the
Company, have been active in the four-year period prior to the date of this
Agreement but have not been closed after receiving final payment, or have been
active in performance at any time during the four-year period prior to the date
of this Agreement. The Company has not been awarded, nor is there any
outstanding bid by the Company for, any "small business set aside Contract,"
"woman-owned set aside Contract," any other "set aside Contract" or other order
or Contract requiring small business or other special status at any time during
the four-year period prior to the date of this Agreement. No Contract
termination, default notice or show cause notice is, or has been at any time
during the four-year period prior to the date of this Agreement, in effect
pertaining to any Government Contract.
(c) The Company is not and has not been a party to any Government
Contract with a U.S. Governmental Authority.
(d) Neither (i) the Company nor any of its officers or directors,
nor (ii) to the Knowledge of the Company, any of its employees nor any of the
Company's predecessors has been debarred, suspended, deemed non-responsible or
otherwise excluded from participation in the award of any Government Contract,
nor has any debarment, suspension or exclusion proceeding been initiated against
the Company or any of its predecessors, officers, directors or employees.
(e) There have been no Legal Proceedings involving or related to
the Company or, to the Knowledge of the Company, any of its predecessors,
officers, directors or employees with respect to an alleged or potential
violation of a Contract requirement or any applicable Law pertaining to any
Government Contract, since December 31, 2007. No Person has filed or, to the
Knowledge of the Company, threatened to file a protest with any Governmental
Authority challenging a Government Contract award to the Company.
(f) Except as set forth on Section 3.14(f) of the Company
Disclosure Schedule, other than audits conducted by Governmental Authorities for
which the Company has not been provided any notice or which otherwise have not
been made known to the Company and other than routine pre-award audits, there
have been no audits, there are no ongoing audits and, to the Knowledge of the
Company, there are no audits impending or expected under or relating to any
Government Contract. None of the audits (including the pre-award audits and the
24
system review audits) identified on Section 3.14(f) of the Company Disclosure
Schedule has resulted or would reasonably be expected to result in a material
change to any Government Contract or has otherwise identified any actual or
potential non-compliance issue in respect of the Company. All such audits
identified on Section 3.14(f) of the Company Disclosure Schedule constitute
routine audits conducted in the ordinary course of business, and such audits
have not, and, to the Company's Knowledge, will not, result in any liability by
the Company to any Governmental Authority.
(g) The Company has not conducted any internal investigation in
connection with which the Company has engaged any outside legal counsel,
auditor, accountant or investigator, or has made any disclosure to any
Governmental Authority or other customer or prime contractor or higher-tier
subcontractor related to any suspected, alleged or possible violation of a
Contract requirement or violation of any Law with respect to any Government
Contract.
(h) Neither the Company nor, to the Knowledge of the Company, any
of the employees, members, officers or directors of the Company have violated
any legal, administrative or contractual restriction concerning the employment
of (or discussions concerning possible employment with) current or former
officials or employees of a state, local or federal government (regardless of
the branch of government).
(i) All representations, certifications and statements executed,
acknowledged or submitted by or on behalf of the Company to a Governmental
Authority, prime contractor or higher-tier subcontractor in connection with any
Government Contract (or a change or modification thereto) during the four-year
period prior to the date of this Agreement, including any statements made in
connection with Contract clauses, representations or certifications, were true,
complete and correct in all material respects as of their respective effective
dates and, to the Knowledge of the Company, with respect only to any such
representations or certifications (or the portion thereof) that are continuing
in nature, are true, complete and correct in all material respects as of the
date hereof.
(j) Except as would not, individually or in the aggregate, be
material to the Company, the Company does not have any pending or anticipated
claims, requests for equitable adjustment or requests for waiver or deviation
from Contract requirements with respect to any Government Contract, and the
Company has no Knowledge of any claim or threatened claim against the Company by
any customer agency with respect to any Government Contract, including any claim
for a reduction in price under any Government Contract.
(k) Except as set forth on Section 3.14(k) of the Company
Disclosure Schedule, with respect to any Government Contract, (i) there is, as
of the date of this Agreement, no request by any Governmental Authority for a
Contract price adjustment based on a claimed disallowance by the applicable
Governmental Authority or claim of defective pricing and (ii) there has been no
dispute between the Company and a Governmental Authority which, during the
four-year period prior to the date hereof, has resulted in a government
contracting officer's final decision.
25
(l) As of the date hereof, the Company does not have any
outstanding bid that, if accepted or awarded, is expected by the Company to
result in a loss in excess of $100,000 to the Company (or, following the
Closing, Parent or its Subsidiaries), or in excess of $500,000 in the aggregate
with respect to all such bids. To the Knowledge of the Company, the Company is
not a party to any Government Contract which is expected by the Company to
result in a loss in excess of $100,000 to the Company (or, following the
Closing, Parent or its Subsidiaries), or in excess of $500,000 in the aggregate
with respect to all of the Government Contracts. For purposes of this Section
3.14(l), such loss shall be determined by including all direct and indirect
costs, including allocated indirect costs, overheads, general and administrative
costs, bid and proposal costs and research and development costs.
SECTION 3.15 Properties.
(a) Each of the Company and its Subsidiaries has good and valid
title to all properties and other assets which are reflected on the most recent
consolidated balance sheet of the Company included in the Filed Company SEC
Documents as being owned by the Company or one of its Subsidiaries (or acquired
after the date thereof) and which are, individually or in the aggregate,
material to the Company's business or financial condition on a consolidated
basis (except properties sold or otherwise disposed of since the date thereof in
the ordinary course of business consistent with past practice and not in
violation of this Agreement), free and clear of all Liens except (i) statutory
liens securing payments not yet due, (ii) security interests, mortgages and
pledges that are disclosed in the Filed Company SEC Documents that secure
indebtedness that is reflected in the most recent consolidated financial
statements of the Company included in the Filed Company SEC Documents, (iii)
obligations under an Intellectual Property License and (iv) such other
imperfections or irregularities of title or other Liens that, individually or in
the aggregate, do not and would not reasonably be expected to materially affect
the use of the properties or assets subject thereto or otherwise materially
impair business operations as presently conducted or as currently proposed by
the Company's management to be conducted.
(b) Each of the Company and its Subsidiaries is the lessee or
sublessee of all leasehold estates and leasehold interests reflected in the
Filed Company SEC Documents (or acquired after the date thereof) which are,
individually or in the aggregate, material to the Company's business or
financial condition on a consolidated basis (other than any such leaseholds
whose scheduled terms have expired subsequent to the date of such Filed Company
SEC Documents). Each of the Company and its Subsidiaries enjoys peaceful and
undisturbed possession under all such leases in all material respects. Neither
the Company nor any of its Subsidiaries owns real property.
SECTION 3.16 Intellectual Property.
(a) Section 3.16(a) of the Company Disclosure Schedule sets forth
an accurate and complete list of all Patents, registered Marks, pending
applications for registrations of any Marks, registered Copyrights and pending
applications for registration of any Copyrights owned, filed or applied for by
the Company or any of its Subsidiaries related to its business (excluding any of
the foregoing related primarily to the Digital Watermarking Business)
("Registered Intellectual Property") and all material unregistered Marks owned
by the Company or any of its Subsidiaries related to its business (excluding any
26
of such material unregistered Marks related primarily to the Digital
Watermarking Business). Section 3.16(a) of the Company Disclosure Schedule lists
(i) the record owner of each such item of Registered Intellectual Property, (ii)
the jurisdiction in which each such item of Registered Intellectual Property
right has been issued or registered or in which each such application for
issuance and registration has been filed, as applicable, and (iii) the date and
number of each such issuance, registration or application, as applicable. All
necessary registration, maintenance, renewal and other relevant filing fees in
connection with any Registered Intellectual Property (or other Intellectual
Property required to have been listed on Section 3.16(a) of the Company
Disclosure Schedule) have been timely paid, and all necessary documents,
certificates and other relevant filings in connection with such Registered
Intellectual Property (or such other Intellectual Property) have been timely
filed, with the relevant Governmental Authorities and Internet domain name
registrars, as the case may be, for the purpose of maintaining such Registered
Intellectual Property (or such other Intellectual Property) and all issuances,
registrations and applications therefor, excluding applications and claims in
patent applications that the Company has decided to abandon in the exercise of
its reasonable business judgment. Except as set forth on Section 3.16(a) of the
Company Disclosure Schedule, there are no annuities, payments, fees, responses
to office actions or other filings required to be made and having a due date
with respect to any such Registered Intellectual Property (or such other
Intellectual Property) within one hundred twenty (120) days after the date
hereof.
(b) Except as set forth in Section 3.16(b) of the Company
Disclosure Schedule, the Company or one of its Subsidiaries is the sole and
exclusive owner of all Registered Intellectual Property listed or required to be
listed on Section 3.16(a) of the Company Disclosure Schedule, free and clear of
all Liens (other than any obligations under an Intellectual Property License).
The Company and/or one of its Subsidiaries is the sole and exclusive owner of,
or, to the Knowledge of the Company, has valid and continuing rights to use,
sell, license and otherwise commercially exploit, as the case may be, all other
Company Intellectual Property and Company Technology, free and clear of all
Liens (other than any obligations under an Intellectual Property License).
Notwithstanding the foregoing or any provision of this Agreement to the
contrary, the Company and its Subsidiaries make no representation or warranty
that Persons other than the Company or its Subsidiaries have not independently
created information that may be substantially the same or similar to Trade
Secrets owned by or licensed to the Company. The Company Intellectual Property
and Company Technology owned by or licensed to the Company and its Subsidiaries
include all of the Intellectual Property and Technology necessary and sufficient
to enable the Company and its Subsidiaries to conduct their respective
businesses (other than the Digital Watermarking Business) as such businesses are
currently being conducted; provided, however, that the representation and
warranty in this sentence shall not be deemed or construed as a representation
or warranty, express or implied, regarding non-infringement, misappropriation or
violation of any Intellectual Property or Technology of any Person (which is
addressed solely in Section 3.16(c) below). The Company Intellectual Property
owned by or exclusively licensed to the Company or any of its Subsidiaries, and
all of the rights the Company and the Subsidiaries have in or with respect to
the Company Intellectual Property and Company Technology, are valid and
(excluding applications) enforceable, except where the invalidity or
unenforceability, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
27
(c) To the Knowledge of the Company, except as would not,
individually or in the aggregate, reasonably be expected to be material to the
Company and its Subsidiaries, taken as a whole, and except as set forth in
Section 3.16(c) of the Company Disclosure Schedule, neither the use, practice or
other exploitation by the Company or any of its Subsidiaries of any Company
Intellectual Property or Company Technology nor the conduct of the business of
the Company or any of its Subsidiaries (including the manufacturing, licensing,
marketing, importation, exportation, offer for sale, sale, use or other
exploitation of any products or services in connection with the business of the
Company or any of its Subsidiaries) infringes, constitutes or results from an
unauthorized use or misappropriation of or violates any Intellectual Property,
Technology or other proprietary or privacy right of any Person. Neither the
Company nor any of its Subsidiaries is a party to or the subject of any pending
or, to the Knowledge of the Company, threatened claim, suit, action,
investigation or proceeding (i) involving a claim against the Company or any of
its Subsidiaries of infringement, unauthorized use, misappropriation or
violation of any Intellectual Property, Technology or other proprietary or
privacy rights of any Person, (ii) challenging the ownership, use, validity or
enforceability of any Company Intellectual Property or Company Technology or
(iii) contesting the right of the Company or any of its Subsidiaries to use,
sell, exercise, license, transfer or dispose of any Company Intellectual
Property or Company Technology, or any products, services, processes or
materials covered thereby in any manner. The Company has not received written
notice of any such threatened claim, and, to the Knowledge of the Company, there
is no legitimate basis for any such claim.
(d) To the Knowledge of the Company, and except as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect, no Person is infringing, misappropriating, misusing or
violating any Company Intellectual Property or Company Technology (excluding any
Company Intellectual Property or Company Technology related primarily to the
Digital Watermarking Business). Neither the Company nor any of its Subsidiaries
has made any claims of infringement, misappropriation, misuse or violation
against any Person with respect to any Company Intellectual Property or Company
Technology (excluding any Company Intellectual Property or Company Technology
related primarily to the Digital Watermarking Business) and, to the Knowledge of
the Company, there is no basis for any such claims that, individually or in the
aggregate, would reasonably be expected to have a Company Material Adverse
Effect.
(e) No Trade Secret of the Company or any of its Subsidiaries
included in the Company Intellectual Property has been authorized to be
disclosed or has been actually disclosed by the Company or any of its
Subsidiaries to any employee or any other Person other than pursuant to a
confidentiality or non-disclosure agreement restricting the disclosure and use
thereof, except where the failure to do so would not reasonably be expected to
have a Company Material Adverse Effect. The Company and its Subsidiaries have
taken reasonable steps to protect and preserve the confidentiality of all
material Trade Secrets (and any confidential information of any other Person to
whom the Company or any Subsidiary has an obligation of confidentiality). Each
employee, consultant and independent contractor of the Company or any of its
Subsidiaries involved in the creation or development of any products, services,
Intellectual Property or Technology on behalf of the Company or any Subsidiary
has entered into a written non-disclosure and assignment agreement with the
Company or such Subsidiary.
28
(f) Section 3.16(f) of the Company Disclosure Schedule sets forth
an accurate and complete list of all Software that is (i) owned exclusively by
the Company or any of its Subsidiaries or (ii) used by the Company or any of its
Subsidiaries and not exclusively owned by the Company or one of its Subsidiaries
or available on reasonable terms through commercial distributors or through
other commercial or retail outlets, in each case that is material to the
operation of the business of the Company or any of its Subsidiaries (but
excluding any such Software related primarily to the Digital Watermarking
Business).
(g) Neither the Company nor any of its Subsidiaries has licensed
or provided to any Person, or permitted any Person to access or use, any source
code or related materials for any Software developed by or for the Company or
any of its Subsidiaries. Except as set forth in Section 3.16(g) of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is
currently a party to any source code escrow agreement or any other agreement (or
is under any obligation to enter into a source code escrow agreement or other
agreement) requiring the deposit of source code or related materials for any
such Software. Except as set forth in Section 3.16(g) of the Company Disclosure
Schedule, no Publicly Available Software (including any derivative works
thereof) (i) forms part of any Company Intellectual Property or Company
Technology owned by the Company or any of its Subsidiaries, (ii) is or was used
in connection with the development or modification of any Software or products
of the Company or any of its Subsidiaries or (iii) is or has been, in whole or
in part, embedded or incorporated into any Software or products of the Company
or any of its Subsidiaries, in each case in the foregoing (i), (ii) and (iii),
in a manner that would obligate the Company or any of its Subsidiaries to
contribute or disclose to any Person any source code of any proprietary Software
of the Company or any of its Subsidiaries.
(h) Section 3.16(h) of the Company Disclosure Schedule sets forth
the privacy policies with respect to personally identifiable information or
personal data that have been implemented by the Company and its Subsidiaries.
The Company and its Subsidiaries are in compliance with all such policies and
any agreements or contracts to which the Company or any of its Subsidiaries is a
party regarding personally identifiable information or personal data. The
Company and its Subsidiaries have engaged in the collecting, maintaining,
storing, accessing, transferring, processing, receiving, using or disclosing of
personally identifiable information or personal data in a secure manner, using
commercially reasonable technical measures designed to maintain the integrity
and security of such information or data and to prevent the loss, alteration,
corruption or misuse of, or unauthorized access to, such information or data. To
the Knowledge of the Company, there has been no unauthorized use or disclosure
of or access to any personally identifiable information or personal data held by
the Company or any of its Subsidiaries.
(i) The Company and its Subsidiaries own, lease or license all
Information Technology Systems. The Information Technology Systems function in a
manner sufficient for the conduct of the business (other than the Digital
Watermarking Business) of each of the Company and its Subsidiaries. The
Information Technology Systems have not failed in a material manner during the
two (2) years prior to the date hereof. The Company and its Subsidiaries have
taken commercially reasonable steps in accordance with industry standards to
preserve and maintain the performance, security and integrity of the Information
Technology Systems and the data and information (including personally
identifiable information or personal data) stored thereon. The Company and its
Subsidiaries maintain reasonable documentation regarding all Information
29
Technology Systems, their methods of operation, and their support and
maintenance. To the Knowledge of the Company, there has been no unauthorized use
of or access to any personally identifiable information, personal data, source
code of any proprietary Software of the Company or any of its Subsidiaries or
material Trade Secrets of the Company or any of its Subsidiaries, in each case
that is or was stored on or accessible through the Information Technology
Systems.
(j) No funding from any Governmental Authority (excluding any
consideration paid by a Governmental Authority to the Company or any of its
Subsidiaries pursuant to a Government Contract for customization of proprietary
Software of the Company or any of its Subsidiaries) was used in the creation or
development of any Company Intellectual Property or Company Technology owned by
the Company or any of its Subsidiaries where, as a result of such funding, any
Governmental Authority has any rights in such Company Intellectual Property or
Company Technology. No current or former employee or, to the Knowledge of the
Company, consultant or independent contractor of the Company or any of its
Subsidiaries involved in the creation or development of any products, services,
Intellectual Property or Technology has performed services for any Governmental
Authority during a period of time during which such employee, consultant or
independent contractor was also performing services for the Company or any of
its Subsidiaries.
(k) The consummation of the transactions contemplated hereby will
not result in the loss or impairment of the right of the Surviving Corporation
to own or use any Company Intellectual Property or Company Technology as
currently used in the conduct of the Company's business, except for such loss or
impairment that, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.17 Insurance; Claims; Warranties.
(a) Section 3.17(a) of the Company Disclosure Schedule sets forth
a correct and complete list of all insurance policies maintained by the Company
or any of its Subsidiaries (the "Policies"). The Policies (i) have been issued
by insurers which, to the Knowledge of the Company, are reputable and
financially sound, (ii) provide coverage for the operations conducted by the
Company and its Subsidiaries of a scope and coverage consistent in all material
respects with customary practice in the industries in which the Company and its
Subsidiaries operate and (iii) are in full force and effect. Neither the Company
nor any of its Subsidiaries is in material breach or default, and neither the
Company nor any of its Subsidiaries has taken any action or failed to take any
action which, with notice or the lapse of time, would constitute such a breach
or default, or permit termination or modification, of any of the Policies. No
notice of cancellation or termination has been received by the Company with
respect to any of the Policies.
(b) Section 3.17(b) of the Company Disclosure Schedule contains a
correct and complete statement of all warranties, warranty policies, service
agreements and maintenance agreements of the Company and any of its Subsidiaries
in effect as of the date of this Agreement that provide for warranty coverage
for a period in excess of twelve (12) months, other than those relating
primarily to the Digital Watermarking Business and which will be assumed by
Newco in connection with the Spin-Off. All products of each of the Company and
its Subsidiaries manufactured, processed, assembled, distributed, shipped or
30
sold and any services rendered in the conduct of the business of the Company or
any of its Subsidiaries have been in conformity with all applicable contractual
commitments and all express or implied warranties, except where the failure to
be in conformity, individually or in the aggregate, would not reasonably be
expected to have a Company Material Adverse Effect. All warranties of each of
the Company and its Subsidiaries are in conformity with the requirements of
applicable Laws, except where any failure to be in conformity, individually or
in the aggregate, would not reasonably be expected to have a Company Material
Adverse Effect.
SECTION 3.18 Affiliate Transactions. No executive officer or
director of the Company or any of its Subsidiaries or any Person owning five
percent (5%) or more of the Company Common Stock or, to the Company's Knowledge,
any Affiliate or family member of any such officer, director or owner (an
"Affiliated Party") is a party to any Contract with or binding upon the Company
or any of its Subsidiaries or has any material interest in any property or
assets owned by the Company or any of its Subsidiaries or has engaged in any
transaction (other than those related to employment or incentive arrangements)
with the Company that is material to the Company within the last twelve (12)
months, in each case, of the type that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act.
SECTION 3.19 Opinion of Financial Advisor. The board of directors of
the Company has received the opinion of Imperial Capital, LLC ("Imperial
Capital"), dated the date of this Agreement, to the effect that, as of such
date, and subject to the various assumptions and qualifications set forth
therein, the Merger Consideration is fair from a financial point of view to the
holders of shares of Company Common Stock (the "Fairness Opinion"). A correct
and complete copy of the Fairness Opinion has been delivered to Parent. The
Company has been authorized by Imperial Capital to permit the inclusion of the
Fairness Opinion and/or references thereto in the Proxy Statement.
SECTION 3.20 Brokers and Other Advisors. Except for Imperial Capital
and RA Capital Advisors LLC ("RA"), the fees and expenses of which will be paid
by Newco in accordance with Section 5.10, no broker, investment banker,
financial advisor or other Person is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission, or the reimbursement of
expenses, in connection with the Transactions based upon arrangements made by or
on behalf of the Company or any of its Subsidiaries. The Company has heretofore
delivered to Parent correct and complete copies of the Company's engagement
letters with Imperial Capital and RA, which letters describe all fees payable to
Imperial Capital and RA in connection with the Transactions, all agreements
under which any such fees or any expenses are payable and all indemnification
and other agreements related to the engagement of Imperial Capital and RA (the
"Engagement Letters").
SECTION 3.21 State Takeover Statutes. To the Knowledge of the
Company, no "fair price", "moratorium", "control share acquisition" or other
similar antitakeover statute or regulation enacted under state or federal Laws
in the United States (with the exception of Section 203 of the DGCL) applicable
to the Company is applicable to the Merger or the other Transactions. The action
of the board of directors of the Company in approving this Agreement and the
Transactions is sufficient to render inapplicable to this Agreement and the
31
Transactions the restrictions on "business combinations" (as defined in Section
203 of the DGCL) as set forth in Section 203 of the DGCL.
SECTION 3.22 Export Controls. Each of the Company and its
Subsidiaries is conducting, and has conducted, its export transactions in
accordance in all material respects with all applicable U.S. export and
re-export control Laws and, to the Knowledge of the Company, all other
applicable import/export controls in other countries in which the Company and
its Subsidiaries conduct business. Neither the Company nor any of its
Subsidiaries has a customer, supplier or distributor relationship with, or is a
party to any agreement with, any Person (a) organized or domiciled in or that is
a citizen of, the Balkans, Burma (Myanmar), Cuba, Iran, Liberia, North Korea,
Sudan, Syria or Zimbabwe (including any Governmental Authority of any such
country) or (b) that appears on the Specially Designated Nationals and Blocked
Persons List of the Office of Foreign Assets Controls in the United States
Department of the Treasury, or in the Annexes to the United States Executive
Order 13224 - Blocking Property and Prohibiting Transactions with Persons Who
Commit, Threaten to Commit, or Support Terrorism.
SECTION 3.23 Material Customers and Suppliers. Since December 31,
2007, no material customer or supplier of the Company or its Subsidiaries (other
than any customer or supplier exclusively related to the Digital Watermarking
Business), including any Governmental Authority, has given the Company or its
Subsidiaries any written notice terminating, suspending or reducing in any
material respect, or specifying an intention to terminate, suspend or reduce in
any material respect in the future, or otherwise reflecting a material adverse
change in, the business relationship between such customer or supplier and the
Company or its Subsidiaries, and there has not been any materially adverse
change in the business relationship of the Company or its Subsidiaries with any
such customer or supplier.
SECTION 3.24 Foreign Corrupt Practices. Neither the Company nor any
of its Subsidiaries has (a) directly or indirectly used any corporate funds for
unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity, (b) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds, (c) failed to disclose
fully any contribution made by the Company or made by any Person acting on its
behalf and of which the Company is aware in violation of Law or (d) violated in
any respect any provision of the Foreign Corrupt Practices Act of 1977, as
amended.
SECTION 3.25 Rights Plan. The Company has taken all action so that
(a) Parent shall not be an "Acquiring Person" under the Company Rights Agreement
and (b) the entering into of this Agreement and the Merger and the consummation
of the other transactions contemplated hereby will not result in the grant of
any rights to any Person under the Company Rights Agreement or enable or require
the Company Rights to be exercised, distributed or triggered as a result
thereof.
32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company that except as disclosed (a) in Parent's Annual Report on Form 10-K
for the year ended December 31, 2007, or Parent's Proxy Statement for its 2008
annual meeting of stockholders, other than disclosure referred to in the "Risk
Factors" and "Note Regarding Forward Looking Statements" sections thereof or (b)
in the disclosure schedule (with specific reference to the Section or subsection
of this Agreement to which the information stated in such disclosure schedule
relates) delivered by Parent and Merger Sub to the Company simultaneously with
the execution of this Agreement (the "Parent Disclosure Schedule"):
SECTION 4.1 Organization, Standing and Corporate Power. Each of
Parent and Merger Sub is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction in which it is incorporated and
has all requisite corporate power and authority necessary to own or lease all of
its properties and assets and to carry on its business as it is now being
conducted and as currently proposed by its management to be conducted. Each of
Parent and Merger Sub is duly licensed or qualified to do business and is in
good standing in each jurisdiction in which the nature of the business conducted
by it or the character or location of the properties and assets owned or leased
by it makes such licensing or qualification necessary, except where the failure
to be so licensed, qualified or in good standing, individually or in the
aggregate, has not had and would not reasonably be expected to have a Parent
Material Adverse Effect.
SECTION 4.2 Capital Structure. The authorized capital stock of
Parent consists of 125,000,000 shares of Parent Common Stock and 2,000,000
shares of preferred stock, par value $0.001 per share ("Parent Preferred
Stock"). At the close of business on March 17, 2008, (a) 77,837,351 shares of
Parent Common Stock were issued and outstanding, (b) 360,000 shares of Parent
Common Stock were held by Parent in its treasury, (c) 9,742,510 shares of Parent
Common Stock were reserved for issuance under the Parent Stock Plans (of which
7,528,106 shares of Parent Common Stock were subject to outstanding options to
purchase shares of Parent Common Stock granted under the Parent Stock Plans) and
(d) no shares of Parent Preferred Stock were issued or outstanding. All shares
of Parent Common Stock deliverable pursuant to this Agreement have been duly
authorized and, when issued as contemplated by this Agreement, will be (i)
validly issued, fully paid, nonassessable and free of preemptive rights, (ii)
registered under the Securities Act and the Exchange Act and (iii) registered or
exempt from registration under applicable state securities or "blue sky" Laws.
Except as set forth above in this Section 4.2, as of the date of this Agreement
there are not any shares of capital stock, voting securities or equity interests
of Parent issued and outstanding or any subscriptions, options, warrants, calls,
convertible or exchangeable securities, rights, commitments or agreements of any
character providing for the issuance of any shares of capital stock, voting
securities or equity interests of Parent, including any representing the right
to purchase or otherwise receive any Parent Common Stock.
33
SECTION 4.3 Authority; Noncontravention.
(a) Each of Parent and Merger Sub has all necessary corporate
power and authority to execute and deliver this Agreement and to perform its
respective obligations hereunder and to consummate the Transactions. The
execution, delivery and performance by Parent and Merger Sub of this Agreement,
and the consummation by Parent and Merger Sub of the Transactions, have been
duly authorized and approved by their respective boards of directors (and prior
to the Effective Time will be adopted by Parent as the sole stockholder of
Merger Sub) and no other corporate action on the part of Parent and Merger Sub
is necessary to authorize the execution, delivery and performance by Parent and
Merger Sub of this Agreement and the consummation by them of the Transactions.
This Agreement has been duly executed and delivered by Parent and Merger Sub
and, assuming due authorization, execution and delivery hereof by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger
Sub, enforceable against each of them in accordance with its terms, subject to
the Bankruptcy and Equity Exception.
(b) Neither the execution and delivery of this Agreement by Parent
and Merger Sub, nor the consummation by Parent or Merger Sub of the
Transactions, nor compliance by Parent or Merger Sub with any of the terms or
provisions hereof, will (i) conflict with or violate any provision of the
certificate of incorporation or bylaws of Parent or Merger Sub or (ii) assuming
that the authorizations, consents and approvals referred to in Section 4.4 are
obtained and the filings referred to in Section 4.4 are made, (A) violate any
Law, judgment, writ or injunction of any Governmental Authority applicable to
Parent or any of its Subsidiaries or any of their respective properties or
assets, or (B) violate, conflict with, result in the loss of any benefit under,
constitute a default (or an event which, with notice or lapse of time, or both,
would constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of, Parent or Merger Sub or any of their respective Subsidiaries under,
any of the terms, conditions or provisions of any Contract or Parent Permit to
which Parent, Merger Sub or any of their respective Subsidiaries is a party, or
by which they or any of their respective properties or assets may be bound or
affected, except, in the case of clause (B), for such violations, conflicts,
losses, defaults, terminations, cancellations, accelerations or Liens as,
individually or in the aggregate, would not reasonably be expected to have a
Parent Material Adverse Effect or impair in any material respect the ability of
Parent or Merger Sub to perform its obligations hereunder, or prevent or
materially impede, interfere with, hinder or delay the consummation of the
Transactions.
SECTION 4.4 Governmental Approvals. Except for (a) the filing with
the SEC of the Form S-4 and the Proxy Statement and other filings required
under, and compliance with other applicable requirements of, the Securities Act,
the Exchange Act and the rules of the NYSE, (b) the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware pursuant to the DGCL
and (c) filings required under, and compliance with other applicable
requirements of, the HSR Act and Foreign Antitrust Laws, no consents or
approvals of, or filings, declarations or registrations with, any Governmental
Authority are necessary for the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
Transactions, other than such other consents, approvals, filings, declarations
or registrations that, if not obtained, made or given, would not, individually
or in the aggregate, reasonably be expected to impair in any material respect
34
the ability of Parent or Merger Sub to perform its obligations hereunder, or
prevent or materially impede, interfere with, hinder or delay the consummation
of the Transactions.
SECTION 4.5 Parent SEC Documents; Undisclosed Liabilities.
(a) Parent has filed and furnished all required reports,
schedules, forms, certifications, prospectuses, and registration, proxy and
other statements with the SEC since December 31, 2006 (collectively and together
with all documents filed on a voluntary basis on Form 8-K, and in each case
including all exhibits and schedules thereto and documents incorporated by
reference therein, the "Parent SEC Documents"). As of their respective effective
dates (in the case of Parent SEC Documents that are registration statements
filed pursuant to the requirements of the Securities Act) and as of their
respective SEC filing dates (in the case of all other Parent SEC Documents), the
Parent SEC Documents complied in all material respects with the requirements of
the Exchange Act or the Securities Act, as the case may be, applicable to such
Parent SEC Documents, and none of the Parent SEC Documents as of such respective
dates contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Except to the extent that information contained in any Parent
SEC Document has been reviewed or superseded by a later-filed Parent SEC
Document, none of the Parent SEC Documents contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. As of the date of this
Agreement, there are no outstanding or unresolved comments received from the SEC
staff with respect to the Parent SEC Documents. To the Knowledge of Parent, none
of the Parent SEC Documents is the subject of ongoing SEC review or
investigation.
(b) The consolidated financial statements of Parent included in
the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto as of their respective dates, have been prepared in
accordance with GAAP (except, in the case of unaudited quarterly statements, as
permitted by the rules and regulations of the SEC) applied on a consistent basis
during the periods involved (except as may be indicated in the notes thereto)
and fairly present in all material respects the consolidated financial position
of Parent and its consolidated Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods then
ended (subject, in the case of unaudited quarterly statements, to normal
year-end audit adjustments, none of which has been or will be, individually or
in the aggregate, material to Parent and its Subsidiaries, taken as a whole).
Without limiting the generality of the foregoing, with respect to each Annual
Report on Form 10-K and each Quarterly Report on Form 10-Q included in the
Parent SEC Documents, the financial statements and other financial information
included in such reports fairly present (within the meaning of the
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act) in all material respects the financial condition and results
of operations of Parent as of, and for, the periods presented in such Parent SEC
Documents.
(c) Parent has established and maintains internal control over
financial reporting and disclosure controls and procedures (as such terms are
defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act); such disclosure
35
controls and procedures are designed to ensure that material information
relating to Parent, including its consolidated Subsidiaries, required to be
disclosed by Parent in the reports that it files or submits under the Exchange
Act is accumulated and communicated to Parent's principal executive officer and
its principal financial officer to allow timely decisions regarding required
disclosure; and such disclosure controls and procedures were determined to be
effective in all material respects to ensure that information required to be
disclosed by Parent in the reports that it filed under the Exchange Act since
December 31, 2006 was recorded, processed, summarized and reported within the
time periods specified in SEC rules and forms. Parent's principal executive
officer and its principal financial officer have disclosed, based on their most
recent evaluation, to Parent's auditors and the audit committee of the board of
directors of Parent (i) all significant deficiencies in the design or operation
of internal controls which could adversely affect Parent's ability to record,
process, summarize and report financial data and have identified for Parent's
auditors any material weaknesses in internal controls and (ii) any fraud,
whether or not material, that involves management or other employees who have a
significant role in Parent's internal controls. The principal executive officer
and the principal financial officer of Parent have made all certifications
required by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, the Exchange Act and any related rules and
regulations promulgated by the SEC with respect to the Parent SEC Documents, and
the statements contained in such certifications are complete and correct. The
management of Parent has completed its assessment of the effectiveness of
Parent's internal control over financial reporting in compliance with the
requirements of Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act for the year ended
December 31, 2007, and such assessment concluded that such controls were
effective. To the Knowledge of Parent, there are no facts or circumstances that
would prevent its chief executive officer and chief financial officer from
giving the certifications and attestations required pursuant to the rules and
regulations adopted pursuant to Section 404 of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act, without
qualification, when next due.
(d) Parent is in compliance in all material respects with the
provisions of Section 13(b) of the Exchange Act. Neither Parent nor any of its
Subsidiaries nor, to Parent's Knowledge, any director, officer, agent, employee
or other Person acting on behalf of Parent or any of its Subsidiaries has, in
any material respect, (i) used any corporate or other funds for unlawful
contributions, payments, gifts or entertainment, or made any unlawful
expenditures relating to political activity, to government officials or others
or established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Exchange Act or (ii) accepted or received any unlawful
contributions, payments, gifts or expenditures. Parent is in compliance, in all
material respects, with the applicable listing and corporate governance rules
and regulations of the NYSE.
(e) Neither Parent nor any of its Subsidiaries has any liabilities
or obligations of any nature (whether accrued, absolute, contingent or
otherwise, whether known or unknown) whether or not required, if known, to be
reflected or reserved against on a consolidated balance sheet of Parent prepared
in accordance with GAAP or the notes thereto, except liabilities and obligations
(i) as and to the extent reflected or reserved against on the audited balance
sheet of Parent and its Subsidiaries as of December 31, 2007 (including the
notes thereto) included in the Parent SEC Documents filed by Parent and publicly
available prior to the date of this Agreement (the "Filed Parent SEC
Documents"), (ii) incurred in connection with the transactions contemplated by
this Agreement, (iii) incurred after December 31, 2007 in the ordinary course of
36
business consistent with past practice or (iv) that would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect.
(f) Neither Parent nor any of its Subsidiaries is a party to, or
has any commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract or arrangement
relating to any transaction or relationship between or among Parent and any of
its Subsidiaries, on the one hand, and any unconsolidated Affiliate, including
any structured finance, special purpose or limited purpose entity or Person, on
the other hand, or any "off-balance sheet arrangements" (as defined in Item
303(a) of Regulation S-K of the SEC)), where the result, purpose or effect of
such Contract is to avoid disclosure of any material transaction involving, or
material liabilities of, Parent or any of its Subsidiaries in Parent's or such
Subsidiary's published financial statements or any Parent SEC Documents.
SECTION 4.6 Information Supplied. Subject to the accuracy of the
representations and warranties of the Company set forth in Section 3.9, none of
the information supplied (or to be supplied) in writing by or on behalf of
Parent or Merger Sub specifically for inclusion or incorporation by reference in
(a) the Form S-4 will, at the time the Form S-4 or any amendment or supplement
thereto is filed with the SEC or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in light of the circumstances under which they are
made, not misleading, (b) the Form 10 will, at the time the Form 10 or any
amendment or supplement thereto is filed with the SEC or at the time it becomes
effective under the Exchange Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements made therein, in light of the
circumstances under which they are made, not misleading and (c) the Proxy
Statement will, on the date it is first mailed to stockholders of the Company,
and at the time of the Company Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in
light of the circumstances under which they are made, not misleading. The Form
S-4 will comply as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act. Notwithstanding the
foregoing, Parent and Merger Sub make no representation or warranty with respect
to any information supplied by or on behalf of the Company for inclusion or
incorporation by reference in the foregoing documents.
SECTION 4.7 Ownership and Operations of Merger Sub. Parent owns
beneficially and of record all of the outstanding capital stock of Merger Sub.
Merger Sub was formed solely for the purpose of engaging in the Transactions,
has engaged in no other business activities and has conducted its operations
only as contemplated hereby.
SECTION 4.8 Brokers and Other Advisors. Except for ▇▇▇▇▇▇▇▇▇ &
Company, the fees and expenses of which will be paid by Parent, no broker,
investment banker, financial advisor or other Person is entitled to any
broker's, finder's, financial advisor's or other similar fee or commission, or
the reimbursement of expenses, in connection with the Transactions based upon
arrangements made by or on behalf of Parent or any of its Subsidiaries.
37
SECTION 4.9 Absence of Certain Changes or Events. From December 31,
2007 to the date of this Agreement, there have not been any events, changes,
occurrences or state of facts that, individually or in the aggregate, have had
or would reasonably be expected to have a Parent Material Adverse Effect. Except
as disclosed in the Filed Parent SEC Documents, since December 31, 2007, Parent
and its Subsidiaries have carried on and operated their respective businesses in
all material respects in the ordinary course of business consistent with past
practice. Without limiting the foregoing, except as disclosed in the Filed
Parent SEC Documents, since December 31, 2007, there has not occurred any
damage, destruction or loss (whether or not covered by insurance) of any
material asset of Parent or any of its Subsidiaries which materially affects the
use thereof.
SECTION 4.10 Legal Proceedings. Except as would not reasonably be
expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, there is no pending or, to the Knowledge of Parent, threatened legal,
administrative, arbitral or other proceeding, claim, suit or action against, or
governmental or regulatory investigation of, Parent or any of its Subsidiaries,
nor is there any injunction, order, judgment, ruling or decree imposed (or, to
the Knowledge of Parent, threatened to be imposed) upon Parent, any of its
Subsidiaries or the assets of Parent or any of its Subsidiaries, by or before
any Governmental Authority.
SECTION 4.11 Compliance With Laws; Permits.
(a) Parent and its Subsidiaries are (and since December 31, 2005
have been) in compliance in all material respects with all Laws applicable to
Parent or any of its Subsidiaries, any of their properties or other assets or
any of their businesses or operations.
(b) Parent and each of its Subsidiaries holds all licenses,
franchises, permits, certificates, approvals and authorizations from
Governmental Authorities, or required by Governmental Authorities to be
obtained, in each case necessary for the lawful conduct of their respective
businesses (collectively, "Parent Permits"). Parent and its Subsidiaries are
(and since December 31, 2005 have been) in compliance with the terms of all
Parent Permits, except for instances of noncompliance that, individually or in
the aggregate, have not had and would not reasonably be expected to have a
Parent Material Adverse Effect. Since December 31, 2005, neither Parent nor any
of its Subsidiaries has received written notice to the effect that a
Governmental Authority (i) claimed or alleged that Parent or any of its
Subsidiaries was not in material compliance with any Parent Permit or (ii) was
considering the amendment, termination, revocation or cancellation of any Parent
Permit.
SECTION 4.12 Sufficient Funds. Parent will have, as of the Effective
Time, sufficient immediately available funds (through existing credit
arrangements or otherwise) to pay when due the aggregate Merger Consideration
and all of Parent's fees and expenses related to the transactions contemplated
by this Agreement.
SECTION 4.13 No Vote Required. No vote of the stockholders of Parent
is required by Law, Parent's certificate of incorporation or bylaws or otherwise
for Parent to complete the Transactions.
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SECTION 4.14 Ownership of Shares. As of the date of this Agreement,
Parent does not own any shares of Company Common Stock.
SECTION 4.15 Material Customers and Suppliers. Since December 31,
2007, no material customer or supplier of Parent or its Subsidiaries, including
any Governmental Authority, has given Parent or its Subsidiaries any written
notice terminating, suspending or reducing in any material respect, or
specifying an intention to terminate, suspend or reduce in any material respect
in the future, or otherwise reflecting a material adverse change in, the
business relationship between such customer or supplier and Parent or its
Subsidiaries, and there has not been any materially adverse change in the
business relationship of Parent or its Subsidiaries with any such customer or
supplier.
SECTION 4.16 Export Controls. Each of Parent and its Subsidiaries is
conducting, and has conducted, its export transactions in accordance in all
material respects with all applicable U.S. export and re-export control Laws
and, to the Knowledge of the Company, all other applicable import/export
controls in other countries in which Parent and its Subsidiaries conduct
business. Neither Parent nor any of its Subsidiaries has a customer, supplier or
distributor relationship with, or is a party to any agreement with, any Person
(a) organized or domiciled in or that is a citizen of, the Balkans, Burma
(Myanmar), Cuba, Iran, Liberia, North Korea, Sudan, Syria or Zimbabwe (including
any Governmental Authority of any such country) or (b) that appears on the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign
Assets Controls in the United States Department of the Treasury, or in the
Annexes to the United States Executive Order 13224 - Blocking Property and
Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support
Terrorism.
ARTICLE V
ADDITIONAL COVENANTS AND AGREEMENTS
SECTION 5.1 Preparation of the Form S-4, the Form 10 and the Proxy
Statement; Stockholder Meeting.
(a) As soon as practicable after the execution of this Agreement,
the Company shall prepare and file with the SEC the Proxy Statement and the Form
10, and the Company and Parent shall prepare, and Parent shall file with the
SEC, the Form S-4. Each of the Company and Parent shall use its reasonable best
efforts to have the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing and keep the Form S-4 effective for so
long as necessary to consummate the Merger. The Company shall use its reasonable
best efforts to (i) have the Form 10 declared effective under the Exchange Act
as promptly as practicable after such filing and keep the Form 10 effective for
so long as necessary to consummate the Spin-Off and (ii) cause the Proxy
Statement to be mailed to its stockholders as promptly as practicable after the
Form S-4 is declared effective under the Securities Act; provided, however, that
in no event shall the Proxy Statement be mailed to the Company's stockholders
prior to the execution and delivery of the Spin-Off Agreements. No filing of, or
amendment or supplement to, the Form S-4 will be made by Parent, and no filing
of, or amendment or supplement to, the Proxy Statement or the Form 10 will be
made by the Company, in each case without providing the other party a reasonable
opportunity to review and comment thereon. If at any time prior to the Effective
39
Time any information relating to the Company or Parent, or any of their
respective Affiliates, directors or officers, should be discovered by the
Company or Parent which should be set forth in an amendment or supplement to
either the Form S-4 or the Proxy Statement, so that either such document would
not include any misstatement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly filed with
the SEC and, to the extent required by applicable Law, disseminated to the
stockholders of the Company and the stockholders of Parent. The parties shall
(A) notify each other promptly of the receipt of any comments or communications
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement, the Form 10 or the Form S-4,
or for additional information, and shall supply each other with copies of all
correspondence between it or any of its representatives, on the one hand, and
the SEC or its staff, on the other hand, with respect to the Proxy Statement,
the Form 10, the Form S-4 or the Merger and (B) provide the other a reasonable
opportunity to participate in the response to any comments from the SEC or its
staff in connection with the Proxy Statement, the Form 10 or the Form S-4.
(b) Unless this Agreement has been previously terminated pursuant
to Section 7.1, the Company shall, as soon as practicable following the date of
this Agreement, take all action necessary in accordance with the DGCL and the
Company Charter Documents to convene and hold a special meeting of its
stockholders (the "Company Stockholders Meeting") for the purpose of obtaining
the Company Stockholder Approval. Subject to Section 5.4(e) hereof, the Company
shall, through its board of directors, recommend to its stockholders adoption of
this Agreement (the "Company Board Recommendation"). The Proxy Statement shall
include a copy of the Fairness Opinion and (subject to Section 5.4(e) hereof)
the Company Board Recommendation. The obligation of the Company to convene and
hold the Company Stockholders Meeting shall not be affected by a Company Adverse
Recommendation Change unless this Agreement has been terminated pursuant to
Section 7.1.
SECTION 5.2 Company Conduct of Business.
(a) Except as expressly permitted by this Agreement or as required
by applicable Law, during the period from the date of this Agreement until the
earlier of the date on which this Agreement is terminated and the Effective
Time, the Company shall, and shall cause each of its Subsidiaries to:
(i) conduct its business in the ordinary course consistent
with past practice;
(ii) comply in all material respects with all applicable Laws
and the requirements of all Material Contracts, except for
obligations under Material Contracts disputed by the Company in good
faith;
(iii) use commercially reasonable efforts to maintain and
preserve intact its business organization and the goodwill of those
having business relationships with it and retain the services of its
present officers and key employees, in each case, to the end that
40
its goodwill and ongoing business shall be unimpaired at the
Effective Time;
(iv) keep in full force and effect all material insurance
policies maintained by the Company and its Subsidiaries, other than
changes to such policies made in the ordinary course of business;
and
(v) (A) maintain the books, accounts and records of the
Company and its Subsidiaries in the ordinary course of business; (B)
continue to collect accounts receivable and pay accounts payable
utilizing normal procedures and without discounting or accelerating
payment of such accounts, except for discounts made in the ordinary
course of business consistent with past practice; and (C) comply
with all contractual and other obligations applicable to the
operation of the Company and its Subsidiaries, except for
obligations disputed by the Company in good faith.
(b) Without limiting the generality of the foregoing, except as
expressly permitted by this Agreement (including Section 5.11), as set forth on
Schedule 5.2(b), as required by applicable Law or with the prior written consent
of Parent, which consent shall not be unreasonably withheld, delayed or
conditioned, during the period from the date of this Agreement until the earlier
of the date on which this Agreement is terminated and the Effective Time, the
Company shall not, and shall not permit any of its Subsidiaries to:
(i) except in connection with the Restructuring and
Spin-Off, (A) issue, sell, grant, dispose of, pledge or otherwise
encumber any shares of its capital stock, voting securities or
equity interests, or any securities or rights convertible into,
exchangeable or exercisable for, or evidencing the right to
subscribe for, any shares of its capital stock, voting securities or
equity interests, or any rights, warrants, options, calls,
commitments or any other agreements of any character to purchase or
acquire any shares of its capital stock, voting securities or equity
interests or any securities or rights convertible into, exchangeable
or exercisable for, or evidencing the right to subscribe for, any
shares of its capital stock, voting securities or equity interests;
provided that the Company may (1) issue shares of Company Common
Stock upon the exercise of Company Stock Options granted under the
Company Stock Option Plans that are outstanding on the date of this
Agreement and in accordance with the terms thereof and (2) grant
shares of Company Restricted Stock and Company Stock Options, at
fair market value on the date of grant, in the numbers and for the
purposes set forth on Schedule 5.2(b)(i) and in accordance with the
Company Stock Option Plans; (B) redeem, purchase or otherwise
acquire any of its outstanding shares of capital stock, voting
securities or equity interests, or any rights, warrants, options,
calls, commitments or any other agreements of any character to
acquire any shares of its capital stock, voting securities or equity
interests; (C) declare, set aside for payment or pay any dividend
on, or make any other distribution in respect of, any shares of its
capital stock or otherwise make any payments to its stockholders in
their capacity as such (other than dividends by a direct or indirect
wholly owned Subsidiary of the Company to its parent); (D) split,
41
combine, subdivide or reclassify any shares of its capital stock; or
(E) except as set forth in this Agreement, amend (including by
reducing an exercise price or extending a term) or waive any of its
rights under, or accelerate the vesting under, any provision of the
Company Stock Option Plans or any agreement evidencing any
outstanding stock option or other right to acquire capital stock of
the Company or any restricted stock purchase agreement or any
similar or related contract;
(ii) incur or assume any indebtedness for borrowed money or
guarantee any indebtedness (or enter into a "keep well" or similar
agreement) or issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of
the Company or any of its Subsidiaries, other than borrowings from
the Company by a direct or indirect wholly owned Subsidiary of the
Company in the ordinary course of business consistent with past
practice;
(iii) sell, transfer, lease, mortgage, encumber or otherwise
dispose of or subject to any Lien (including pursuant to a
sale-leaseback transaction or an asset securitization transaction)
any of its material properties or assets (including securities of
Subsidiaries), except (A) sales of inventory in the ordinary course
of business consistent with past practice, (B) pursuant to Contracts
in force at the date of this Agreement and listed on Schedule
5.2(b)(iii), correct and complete copies of which have been made
available to Parent, (C) in connection with the Spin-Off or (D)
dispositions of obsolete or worthless assets;
(iv) make any capital expenditure or expenditures which (A)
involves the purchase of real property or (B) are not contemplated
by the Company's 2008 Capital Expenditure Plan set forth in Schedule
5.2(b)(iv), other than capital expenditures in the ordinary course
of business in connection with the performance of Government
Contracts;
(v) directly or indirectly acquire (A) by merging or
consolidating with, or by purchasing all of or a substantial equity
interest in, or by any other manner, any Person or division,
business or equity interest of any Person or, (B) except in the
ordinary course of business consistent with past practice and except
for capital expenditures permitted by clause (b)(iv) of this Section
5.2, any assets that, individually, have a purchase price in excess
of $1,000,000 or, in the aggregate, have a purchase price in excess
of $2,000,000;
(vi) make any investment (by contribution to capital,
property transfers, purchase of securities or otherwise) in, or loan
or advance (other than travel and similar advances to its employees
in the ordinary course of business consistent with past practice)
to, any Person other than a direct or indirect wholly owned
Subsidiary of the Company in the ordinary course of business;
(vii) (A) terminate any Material Contract or, other than in
the ordinary course of business consistent with past practice, (1)
enter into or amend any Material Contract or (2) enter into,
terminate or amend any other Contract that is material to the
42
Company and its Subsidiaries taken as a whole, (B) enter into or
extend the term or scope of any Contract that purports to restrict
the Company, or any existing or future Subsidiary or Affiliate of
the Company, from engaging in any line of business or in any
geographic area, (C) amend or modify any of the Engagement Letters,
(D) enter into any Contract that would be breached by, or require
the consent of any third party in order to continue in full force
following, consummation of the Transactions or (E) release any
Person from, or modify or waive any provision of, any
confidentiality, standstill or similar agreement; provided that the
Company may release the provisions of such agreement only to the
extent required to engage in discussions or provide information as
permitted pursuant to Section 5.4;
(viii) increase in any manner the compensation of any of its
directors, officers or employees or enter into, establish, amend or
terminate any employment, consulting, retention, change in control,
collective bargaining, bonus or other incentive compensation, profit
sharing, health or other welfare, stock option or other equity (or
equity-based), pension, retirement, vacation, severance, deferred
compensation or other compensation or benefit plan, policy,
agreement, trust, fund or arrangement with, for or in respect of,
any stockholder, director, officer, other employee, consultant or
Affiliate, other than (A) as required pursuant to applicable Law or
the terms of the agreements set forth on Schedule 5.2(b)(viii)
(correct and complete copies of which have been made available to
Parent), (B) increases in salaries, wages and benefits of employees
(other than officers) made in the ordinary course of business and in
amounts and in a manner consistent with past practice and (C)
payments of prorated bonuses and contributions to, or benefits
under, the Company Plans in effect on the date of this Agreement;
(ix) make or change any material election concerning Taxes or
Tax Returns, file any amended Tax Return, enter into any closing
agreement with respect to Taxes, settle any material Tax claim or
assessment or surrender any right to claim a refund of Taxes or
obtain any Tax ruling;
(x) make any changes in financial or tax accounting methods,
principles or practices (or change an annual accounting period),
except insofar as may be required by a change in GAAP or applicable
Law;
(xi) amend the Company Charter Documents or the Subsidiary
Documents;
(xii) adopt a plan or agreement of complete or partial
liquidation, dissolution, restructuring, recapitalization, merger,
consolidation or other reorganization (other than transactions
exclusively between wholly owned Subsidiaries of the Company);
(xiii) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
43
discharge, settlement or satisfaction in accordance with their terms
of liabilities, claims or obligations reflected or reserved against
in the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Filed Company SEC Documents
or incurred since the date of such financial statements in the
ordinary course of business consistent with past practice;
(xiv) settle or compromise any litigation, proceeding or
investigation material to the Company and its Subsidiaries taken as
a whole (this covenant being in addition to the Company's agreement
set forth in Section 5.9 hereof); or
(xv) agree, in writing or otherwise, to take any of the
foregoing actions, or take any action or agree, in writing or
otherwise, to take any action which would in any material respect
impede or delay the ability of the parties to satisfy any of the
conditions to the Merger set forth in this Agreement.
SECTION 5.3 Parent Conduct of Business.
(a) Except as expressly permitted by this Agreement, as required
by applicable Law or with the prior written consent of the Company, which
consent shall not be unreasonably withheld, delayed or conditioned, during the
period from the date of this Agreement until the earlier of the date on which
this Agreement is terminated and the Effective Time, Parent shall not, and shall
not permit any of its Subsidiaries to:
(i) amend its certificate of incorporation or bylaws in a
manner adverse to the holders of Parent Common Stock;
(ii) declare, set aside or pay any dividends payable in cash,
stock or property with respect to shares of its capital stock;
(iii) split, combine, subdivide or reclassify any shares of
capital stock of Parent without appropriate adjustment being made to
the Merger Consideration payable to the holders of Company Common
Stock in the Merger;
(iv) adopt a plan of complete or partial liquidation or
dissolution;
(v) acquire (whether pursuant to a merger, stock or asset
purchase or otherwise) in one transaction or a series of related
transactions any equity interests in any Person or any business or
division of any Person or all or substantially all of the assets of
any Person (or business or division thereof), unless such
acquisition or the entering into of a definitive agreement relating
to the completion of such acquisition would not, in the reasonable
judgment of Parent at the time of such determination, (A) impose any
material delay in the obtaining of, or materially increase the risk
of not obtaining, any authorizations, consents, orders, declarations
or approvals of any Governmental Authority necessary to complete the
Merger or the expiration or termination of any applicable waiting
period under the HSR Act or (B) materially increase the risk of any
Governmental Authority entering an order prohibiting the completion
of the Merger; or
44
(vi) authorize or enter into an agreement to do any of the
actions referred to in clauses (i) through (v) above.
SECTION 5.4 No Solicitation.
(a) The Company shall, and shall cause its Subsidiaries and the
Company's and its Subsidiaries' respective directors, officers, employees,
investment bankers, financial advisors, attorneys, accountants, agents and other
representatives (collectively, "Representatives") to, immediately cease and
cause to be terminated any discussions or negotiations with any Person conducted
heretofore with respect to a Takeover Proposal. From the date hereof until the
earlier of the date on which this Agreement is terminated and the Effective
Time, the Company shall not, and shall cause its Subsidiaries and
Representatives not to, directly or indirectly (i) knowingly solicit, knowingly
initiate, cause, facilitate or encourage (including by way of furnishing
information) any inquiries or proposals that constitute, or may reasonably be
expected to lead to, any Takeover Proposal, (ii) participate in any discussions
or negotiations with any third party regarding any Takeover Proposal or (iii)
enter into any agreement related to any Takeover Proposal.
(b) Notwithstanding anything to the contrary in this Section 5.4,
subject to the Company's compliance in all material respects with this Section
5.4, if after the date hereof the board of directors of the Company receives an
unsolicited, bona fide written Takeover Proposal made after the date hereof, and
the board of directors of the Company reasonably determines in good faith that
such Takeover Proposal constitutes or could reasonably be expected to lead to a
Superior Proposal and with respect to which the board of directors determines in
good faith, after consulting with outside legal counsel, that the failure to
take such action would be reasonably likely to be inconsistent with its
fiduciary duties under applicable Law, the Company may, at any time prior to
obtaining the Company Stockholder Approval (but in no event after obtaining the
Company Stockholder Approval) and after providing Parent not less than
twenty-four (24) hours written notice of its intention to take such actions (i)
furnish information with respect to the Company and its Subsidiaries to the
Person making such Takeover Proposal, but only after such Person enters into a
customary confidentiality agreement with the Company (which confidentiality
agreement must be no less favorable to the Company than the Confidentiality
Agreement); provided that (A) such confidentiality agreement may not include any
provision calling for an exclusive right to negotiate with the Company and may
not restrict the Company from complying with this Section 5.4 and (B) the
Company advises Parent of all such non-public information delivered to such
Person concurrently with its delivery to such Person and concurrently with its
delivery to such Person the Company delivers to Parent all such information not
previously provided to Parent, and (ii) participate in discussions and
negotiations with such Person regarding such Takeover Proposal. Without limiting
the foregoing, it is understood that any violation of the foregoing restrictions
by the Company's Subsidiaries or Representatives shall be deemed to be a breach
of this Section 5.4 by the Company. The Company shall provide Parent with a
correct and complete copy of any confidentiality agreement entered into pursuant
to this paragraph within twenty-four (24) hours of the execution thereof.
(c) In addition to the other obligations of the Company set forth
in this Section 5.4, the Company shall promptly advise Parent, orally and in
writing, and in no event later than twenty-four (24) hours after receipt, if any
proposal, offer, inquiry or other contact is received by, any information is
45
requested from, or any discussions or negotiations are sought to be initiated or
continued with, the Company or any of its Representatives in respect of any
Takeover Proposal, and shall, in any such notice to Parent, indicate the
identity of the Person making such proposal, offer, inquiry or other contact and
the terms and conditions of any proposals or offers or the nature of any
inquiries or contacts (and shall include with such notice copies of any written
materials received from or on behalf of such Person relating to such proposal,
offer, inquiry or request), and thereafter shall promptly keep Parent fully
informed of all material developments affecting the status and terms of any such
proposals, offers, inquiries or requests (and the Company shall provide Parent
with copies of any additional written materials received that relate to such
proposals, offers, inquiries or requests) and of the status of any such
discussions or negotiations. None of the Company or any of its Subsidiaries
shall, after the date of this Agreement, enter into any agreement that would
prohibit them from providing such information to Parent.
(d) Except as expressly permitted by Section 5.4(e) and subject to
Section 5.4(f), neither the board of directors of the Company nor any committee
thereof shall (i) (A) withdraw or modify, or propose publicly to withdraw or
modify, in a manner adverse to Parent, the Company Board Recommendation or (B)
approve or recommend, or propose publicly to approve or recommend, any Takeover
Proposal (any action described in this clause (i) being referred to as a
"Company Adverse Recommendation Change") or (ii) cause or authorize the Company
or any of its Subsidiaries to enter into any letter of intent, agreement in
principle, memorandum of understanding, merger, acquisition, purchase or joint
venture agreement or other agreement related to any Takeover Proposal (other
than a confidentiality agreement in accordance with Section 5.4(b)).
(e) Notwithstanding anything to the contrary herein, but subject
to the provisions of Section 5.4(f), prior to obtaining the Company Stockholder
Approval, the board of directors of the Company may make a Company Adverse
Recommendation Change if the board of directors of the Company receives a
Takeover Proposal that has not been withdrawn that the board of directors of the
Company determines in good faith, after consulting with outside legal counsel,
constitutes a Superior Proposal and if the board of directors determines in good
faith, after consulting with outside legal counsel, that the failure to make
such Company Adverse Recommendation Change would reasonably be likely to be
inconsistent with its fiduciary duties under applicable Law; provided, however,
that the Company shall not enter into a definitive agreement providing for the
implementation of a transaction that is a Superior Proposal unless this
Agreement shall have been terminated by the Company in accordance with Section
7.1(d)(iii).
(f) The Company shall not be entitled to effect a Company Adverse
Recommendation Change with respect to a Superior Proposal unless (i) the Company
has complied in all material respects with this Section 5.4, (ii) the Company
has provided written notice (a "Company Adverse Recommendation Notice") to
Parent that the Company intends to take such action and specifying the terms and
conditions of such Superior Proposal, including with such Company Adverse
Recommendation Notice a copy of the relevant proposed transaction agreements
with the party making such Superior Proposal and other material documents, (iii)
during the five (5) Business Day period following Parent's receipt of the
Company Adverse Recommendation Notice, the Company shall, and shall cause its
financial and legal advisors to, negotiate with Parent and Merger Sub in good
46
faith (to the extent Parent and Merger Sub desire to negotiate) to make such
adjustments in the terms and conditions of this Agreement so that such Superior
Proposal ceases to constitute a Superior Proposal and (iv) following the end of
such five (5) Business Day period, the board of directors of the Company shall
have determined in good faith, taking into account any changes to the terms of
this Agreement proposed by Parent to the Company in response to the Company
Adverse Recommendation Notice or otherwise, that the Superior Proposal giving
rise to the Company Adverse Recommendation Notice continues to constitute a
Superior Proposal. Any amendment to the financial terms or any other material
amendment of such Superior Proposal shall require a new Company Adverse
Recommendation Notice and the Company shall be required to comply again with the
requirements of this Section 5.4(f).
(g) Nothing in this Section 5.4 shall prohibit the board of
directors of the Company from taking and disclosing to the stockholders of the
Company a position contemplated by Rule 14e-2(a), Rule 14d-9 or Item 1012(a) of
Regulation M-A promulgated under the Exchange Act if the board of directors of
the Company determines in good faith, after consultation with outside legal
counsel, that disclosing such position is required to comply with such rules and
regulations; provided, however, that in no event shall the Company or the board
of directors of the Company or any committee thereof take, or agree or resolve
to take, any action prohibited by Section 5.4(d), unless in each case the
applicable requirements of Section 5.4(e) and Section 5.4(f) shall have been
satisfied. In addition, it is understood and agreed that, for purposes of this
Agreement (including Article VII), a factually accurate public statement by the
Company that describes the Company's receipt of a Takeover Proposal and the
operation of this Agreement with respect thereto, or any "stop, look and listen"
communication by the board of directors of the Company pursuant to Rule 14d-9(f)
of the Exchange Act or any similar communication to the stockholders of the
Company, shall not constitute a Company Adverse Recommendation Change or an
approval or recommendation with respect to any Takeover Proposal.
(h) For purposes of this Agreement:
"Takeover Proposal" means any inquiry, proposal or offer from any
Person or "group" (as defined in Section 13(d) of the Exchange Act), other than
Parent and its Subsidiaries, relating to any (i) direct or indirect acquisition
(whether in a single transaction or a series of related transactions) of assets
of the Company and its Subsidiaries (including securities of Subsidiaries) equal
to twenty percent (20%) or more of the Company's consolidated assets or to which
twenty percent (20%) or more of the Company's revenues on a consolidated basis
are attributable, (ii) direct or indirect acquisition (whether in a single
transaction or a series of related transactions) of beneficial ownership (within
the meaning of Section 13 under the Exchange Act) of twenty percent (20%) or
more of any class of equity securities of the Company, (iii) tender offer or
exchange offer that if consummated would result in any Person or "group" (as
defined in Section 13(d) of the Exchange Act) beneficially owning twenty percent
(20%) or more of any class of equity securities of the Company or (iv) merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any of
its Subsidiaries; in each case, other than the Transactions.
"Superior Proposal" means a written Takeover Proposal on terms and
conditions which the board of directors of the Company determines in its good
47
faith and reasonable judgment (after consultation with outside legal counsel and
its financial advisor) to be more favorable to the Company's stockholders from a
financial point of view than the Merger and the other Transactions, taking into
account at the time of determination all of the terms and conditions of such
proposal (including the ability of the Person making such proposal to consummate
the transactions contemplated by such proposal (based upon, among other things,
the availability of financing and the expectation of obtaining required
approvals)) and this Agreement (including any changes to the terms of this
Agreement committed to by Parent to the Company in writing in response to such
proposal or otherwise); provided, however, that for purposes of the definition
of "Superior Proposal," the references to "twenty percent (20%)" in the
definition of Takeover Proposal shall be deemed to be references to "fifty
percent (50%).
SECTION 5.5 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement
(including Section 5.4(d)), each of the parties hereto shall cooperate with the
other parties and use (and shall cause their respective Subsidiaries to use)
their respective reasonable best efforts to promptly (i) take, or cause to be
taken, all actions, and do, or cause to be done, all things, necessary, proper
or advisable to cause the conditions to Closing to be satisfied as promptly as
practicable and to consummate and make effective, in the most expeditious manner
practicable, the Transactions, including preparing and filing promptly and fully
all documentation to effect all necessary filings, notices, petitions,
statements, registrations, submissions of information, applications and other
documents (including any required or recommended filings under applicable
Antitrust Laws) and (ii) obtain all approvals, consents, registrations, permits,
authorizations and other confirmations from any Governmental Authority or third
party necessary, proper or advisable to consummate the Transactions. For
purposes hereof, "Antitrust Laws" means the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇
Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, all
applicable Foreign Antitrust Laws and all other applicable Laws issued by a
Governmental Authority that are designed or intended to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade or lessening of competition through merger or acquisition.
(b) In furtherance and not in limitation of the foregoing, (i)
each party hereto agrees to make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act with respect to the Transactions as promptly
as practicable and in any event within fifteen (15) Business Days of the date
hereof and to supply as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and use its
reasonable best efforts to take, or cause to be taken, all other actions
consistent with this Section 5.5 necessary to cause the expiration or
termination of the applicable waiting periods under the HSR Act as soon as
practicable and (ii) the Company and Parent shall each use its reasonable best
efforts to (A) take all action necessary to ensure that no state takeover
statute or similar Law is or becomes applicable to any of the Transactions and
(B) if any state takeover statute or similar Law becomes applicable to any of
the Transactions, take all action necessary to ensure that the Transactions may
be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise minimize the effect of such Law on the Transactions.
48
(c) Each of the parties hereto shall use its reasonable best
efforts to (i) cooperate in all respects with each other in connection with any
filing or submission with a Governmental Authority in connection with the
Transactions and in connection with any investigation or other inquiry by or
before a Governmental Authority relating to the Transactions, including any
proceeding initiated by a private party and (ii) keep the other party informed
in all material respects and on a reasonably timely basis of any material
communication received by such party from, or given by such party to, the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
or any other Governmental Authority and of any material communication received
or given in connection with any proceeding by a private party, in each case
regarding any of the Transactions. Subject to applicable Laws relating to the
exchange of information, each of the parties hereto shall have the right to
review in advance, and to the extent practicable each will consult the other on,
all the information relating to the other parties and their respective
Subsidiaries, as the case may be, that appears in any filing made with, or
written materials submitted to, any third party and/or any Governmental
Authority in connection with the Transactions. No party to this Agreement shall
consent to any voluntary delay of the Closing at the behest of any Governmental
Authority without the consent of the other parties to this Agreement, which
consent shall not be unreasonably withheld.
(d) Notwithstanding the foregoing or any other provision of this
Agreement, the Company shall not, without Parent's prior written consent, commit
to any divestiture transaction or agree to any restriction on its business, and
nothing in this Section 5.5 shall (i) limit any applicable rights a party may
have to terminate this Agreement pursuant to Section 7.1 so long as such party
has up to then complied in all material respects with its obligations under this
Section 5.5 or (ii) require Parent to offer, accept or agree to (A) dispose or
hold separate any part of its or the Company's businesses, operations, assets or
product lines (or a combination of Parent's and the Company's respective
businesses, operations, assets or product lines), (B) not compete in any
geographic area or line of business and/or (C) restrict the manner in which, or
whether, Parent, the Company, the Surviving Corporation or any of their
Affiliates may carry on business in any part of the world.
(e) All filing fees incurred by the parties in connection with
filings required under the HSR Act shall be paid by Parent.
SECTION 5.6 Public Announcements. The initial press release with
respect to the execution of this Agreement shall be a joint press release to be
reasonably agreed upon by Parent and the Company. Neither the Company nor Parent
shall issue or cause the publication of any press release or other public
announcement (to the extent not previously issued or made in accordance with
this Agreement) with respect to the Merger, this Agreement or the other
Transactions without the prior consent of the other party (which consent shall
not be unreasonably withheld or delayed), except as may be required by Law or by
any applicable listing agreement with the NYSE or Nasdaq Stock Market, as
applicable, as determined in the good faith judgment of the party proposing to
make such release (in which case such party shall not issue or cause the
publication of such press release or other public announcement without prior
consultation with the other party).
SECTION 5.7 Access to Information; Confidentiality. Subject to
applicable Law relating to the exchange of information, each party shall afford
the other party and its representatives reasonable access during normal business
49
hours to all of such party's and its Subsidiaries' properties, commitments,
books, Contracts, records and correspondence (in each case, whether in physical
or electronic form), officers, employees, accountants, counsel, financial
advisors and other representatives and each party shall furnish promptly to the
other party (a) a copy of each report, schedule and other document filed or
submitted by it pursuant to the requirements of Federal or state securities Laws
(and a copy of each report, schedule and other document proposed to be filed or
submitted by such party pursuant to the requirements of Federal or state
securities Laws not less than three (3) Business Days prior to such filing,
except for Current Reports on Form 8-K, which shall be provided a reasonable
period of time prior to such filing and, with respect to Parent, only to the
extent relating to the transactions contemplated by this Agreement) and a copy
of any communication (including "comment letters") received by such party from
the SEC concerning compliance with securities Laws and (b) all other information
concerning its and its Subsidiaries' business, properties and personnel as the
other party may reasonably request. In addition, the Company agrees to cooperate
with Parent to the extent Parent engages a third party to study the availability
of the Company's net operating losses to offset any gain resulting from the
Spin-Off. No investigation, or information received, pursuant to this Section
5.7 will modify any of the representations and warranties of the parties hereto.
Except for disclosures permitted by the terms of the Confidentiality Agreement,
dated as of January 29, 2008, between Parent and the Company (as it may be
amended from time to time, the "Confidentiality Agreement"), the receiving party
shall hold information received from the disclosing party pursuant to this
Section 5.7 in confidence in accordance with the terms of the Confidentiality
Agreement.
SECTION 5.8 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(a) any notice or other communication received by such party from any
Governmental Authority in connection with the Transactions or from any Person
alleging that the consent of such Person is or may be required in connection
with the Transactions, if the subject matter of such communication or the
failure of such party to obtain such consent could be material to the Company,
the Surviving Corporation or Parent, (b) any actions, suits, claims,
investigations or proceedings commenced or, to such party's Knowledge,
threatened against, relating to or involving or otherwise affecting such party
or any of its Subsidiaries which relate to the Transactions, (c) the discovery
of any fact or circumstance that, or the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which, would cause any representation
or warranty made by such party contained in this Agreement (i) that is qualified
as to materiality or Company Material Adverse Effect or Parent Material Adverse
Effect, as applicable, to be untrue and (ii) that is not so qualified to be
untrue in any material respect, and (d) any material failure of such party to
comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 5.8 shall not (A) cure any breach of, or non-compliance
with, any other provision of this Agreement or (B) limit the remedies available
to the party receiving such notice.
SECTION 5.9 Securityholder Litigation. The Company shall give Parent
the opportunity to participate in the defense or settlement of any
securityholder litigation against the Company and/or its directors relating to
the Transactions, other than any litigation related solely to the Spin-Off, and
no such settlement shall be agreed to without Parent's prior consent.
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SECTION 5.10 Fees and Expenses. Except as provided in Section 7.3,
all fees and expenses incurred in connection with this Agreement, the Merger and
the Transactions shall be paid by the party incurring such fees or expenses,
whether or not the Merger is consummated; provided, however, that any fees and
expenses of the Company not paid or satisfied immediately prior to the Effective
Time shall be transferred to and assumed by, and shall become the obligations
of, Newco in connection with the Restructuring and the Spin-Off.
SECTION 5.11 Spin-Off.
(a) As soon as practicable following the date hereof but following
the execution and delivery of the Spin-Off Agreements contemplated by Section
5.11(b), the Company shall, in accordance with the terms and conditions of the
Spin-Off Agreements, (i) cause the Spin-Off Assets to be contributed to Newco
(the "Restructuring") and (ii) following the completion of the Restructuring,
but prior to the Effective Time, effect a distribution of 100% of Newco's common
stock to the Company's stockholders (the "Spin-Off"). Parent and the Company
agree to cooperate in good faith to structure the Restructuring and Spin-Off in
a tax efficient manner.
(b) Promptly following the date hereof, Parent and the Company
shall negotiate in good faith the definitive agreements to be entered into in
connection with the Restructuring and the Spin-Off, including the Separation
Agreement, the Transition Services Agreement and the License Agreement
(collectively, the "Spin-Off Agreements"), and shall use their reasonable best
efforts to execute and deliver, and the Company shall cause Newco to execute and
deliver, the Spin-Off Agreements on or before the date that is forty-five (45)
days from the date hereof. The terms and conditions of the Spin-Off Agreements
shall be mutually agreed upon by Parent, the Company, Newco and any other party
thereto; provided, however, that Parent and the Company hereby agree that the
Spin-Off Agreements will contain provisions regarding each of the agreements set
forth on Schedule 5.11 hereto.
SECTION 5.12 Rule 16b-3. Prior to the Effective Time, the Company
and Parent shall take such steps as may be reasonably requested by any party
hereto to cause dispositions of Company equity securities (including derivative
securities) pursuant to the transactions contemplated by this Agreement by each
individual who is a director or officer of the Company to be exempt under Rule
16b-3 promulgated under the Exchange Act in accordance with that certain
No-Action Letter dated January 12, 1999 issued by the SEC regarding such
matters.
SECTION 5.13 Employee Benefits and Labor Matters.
(a) As of the Effective Time, and for a period of at least twelve
(12) months thereafter, Parent shall provide or cause its Subsidiaries
(including the Surviving Corporation) to provide to employees of the Company and
its Subsidiaries who are employed by Parent or any of its Subsidiaries
(including the Surviving Corporation) immediately after the Effective Time (the
"Continuing Employees") employee benefits (excluding any equity-based plan and
retention agreements) that, at Parent's election (i) are the same as those
provided to similarly situated employees of Parent or (ii) in the aggregate, are
no less favorable to the Continuing Employees (and their spouses and dependents)
than those in effect under the Company Plans for such Continuing Employees (and
51
their spouses and dependents) immediately prior to the Effective Time. With
respect to each benefit plan, program, practice, policy and arrangement
maintained by Parent or its Subsidiaries (including the Surviving Corporation)
following the Effective Time and in which any of the Continuing Employees
participate or are eligible to participate (the "Parent Plans"), for purposes of
determining eligibility to participate, vesting, accrual of and entitlement to
benefits and all other purposes (but not for accrual of benefits under any
"defined benefit plan," as defined in Section 3(35) of ERISA), service with the
Company and its Subsidiaries (or predecessor employers to the extent the Company
provides past service credit) shall be treated as service with Parent and its
Subsidiaries. With respect to each Parent Plan that is a welfare benefit plan,
within the meaning of Section 3(1) of ERISA, (A) Parent shall waive or cause to
be waived any and all eligibility waiting periods, evidence of insurability
requirements and pre-existing condition limitations to the extent waived,
satisfied or not included under the corresponding Company Plan, and (B) Parent
shall recognize or cause to be recognized for each Continuing Employee for
purposes of applying annual deductible, co-payment and out-of-pocket maximums
under such Parent Plan any deductible, co-payment and out-of-pocket expenses
paid by such Continuing Employee and his or her spouse and dependents under a
corresponding Company Plan during the calendar year in which occurs the later of
the Effective Time and the date on which such Continuing Employee begins
participation in such Parent Plan.
(b) At and after the Effective Time, Parent and the buying group
(as defined in Treasury Regulation Section 54.4980B-9, Q&A-2(c)) of which it is
a part shall be solely responsible for providing continuation coverage under
COBRA to those individuals who are M&A qualified beneficiaries (as defined in
Treasury Regulation Section 54.4980B-9, Q&A-4(b)) with respect to the
transactions contemplated by this Agreement (collectively, the "M&A Qualified
Beneficiaries"), other than those M&A Qualified Beneficiaries whose most recent
employment with the Company and its Subsidiaries prior to the Effective Time was
related primarily to the Spin-Off Assets.
(c) During the period from the date of this Agreement until the
earlier of the date on which this Agreement is terminated and the Effective
Time, the Company shall not issue any broadly distributed communication of a
general nature to employees (including general communications relating to
benefits and compensation) without first consulting with, and considering in
good faith any comments or suggestions made by, Parent, except for
communications in the ordinary course of business that do not relate to the
Transactions.
(d) Prior to the Spin-Off, the Company shall take all action that
may be necessary to cause all participants' rights under all current offering
periods under the Company Purchase Plan to terminate on or prior to the day
immediately preceding the Spin-Off, and on such date all accumulated payroll
deductions allocated to each participant's account under the Company Purchase
Plan shall thereupon be returned to each participant as provided by the terms of
the Company Purchase Plan and no shares of Company Common Stock shall be
purchased under the Company Purchase Plan for such final offering period. As of
the close of business on the day immediately prior to the Spin-Off, the Company
shall have terminated the Company Purchase Plan and provided such notice of
termination as may be required by the terms of the Company Purchase Plan. The
form and substance of any such notice regarding the Company Purchase Plan
termination shall be subject to the review and approval of Parent, which shall
not be unreasonably withheld.
52
(e) As of the date hereof, Schedule 5.13(e) sets forth a list of
all employees of the Company and its Subsidiaries who will be allocated to (i)
the Surviving Corporation and (ii) Newco, in each case, immediately prior to the
consummation of the Spin-Off. Prior to the consummation of the Spin-Off, Parent
and the Company may mutually agree to amend or supplement such Schedule. The
Company shall provide an updated Schedule to Parent immediately prior to the
consummation of the Spin-Off.
SECTION 5.14 Indemnification, Exculpation and Insurance.
(a) Parent agrees that, and shall cause the Surviving Corporation
to assume the obligations associated with, all rights of the individuals who on
or prior to the Effective Time were directors or officers of the Company or any
of its Subsidiaries (collectively, the "Indemnitees") to indemnification and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time as provided in the respective certificate of incorporation or
bylaws (or comparable organizational documents) of the Company or any of its
Subsidiaries as of the date of this Agreement, and any indemnification
agreements or arrangements of the Company or any of its Subsidiaries set forth
on Schedule 5.14(a), shall survive the Merger and shall continue in full force
and effect in accordance with their terms. Such rights shall not be amended or
otherwise modified in any manner that would adversely affect the rights of the
Indemnitees; provided, however, that the Surviving Corporation shall have no
obligation to provide such indemnification to the extent that such
indemnification is prohibited under applicable Law.
(b) Parent, from and after the Effective Time, shall cause (i) the
certificate of incorporation of the Surviving Corporation to contain provisions
no less favorable to the Indemnitees with respect to limitation of certain
liabilities of directors, officers, employees and agents and indemnification
than are set forth as of the date of this Agreement in the Company Charter
Documents and (ii) the certificate of incorporation and bylaws (or similar
organizational documents) of each Subsidiary of the Surviving Corporation to
contain the current provisions regarding indemnification of directors, officers,
employees and agents which provisions in each case shall not be amended,
repealed or otherwise modified in a manner that would adversely affect the
rights thereunder of the Indemnitees.
(c) For the six-year period commencing immediately after the
Effective Time, the Surviving Corporation shall maintain in effect the Company's
current directors' and officers' liability insurance covering acts or omissions
occurring prior to the Effective Time with respect to those persons who are
currently covered by the Company's directors' and officers' liability insurance
policy on terms with respect to such coverage and amount no less favorable to
the Company's directors and officers currently covered by such insurance than
those of such policy in effect on the date hereof; provided, however, that, if
the Company's current directors' and officers' liability insurance expires, is
terminated or is cancelled, Parent shall, or shall cause the Surviving
Corporation to, obtain directors' and officers' liability insurance covering
such acts or omissions with respect to each such person on terms with respect to
such coverage and amount no less favorable to the Company's directors and
officers currently covered by such insurance than those of such policy in effect
immediately prior to the date of such expiration, termination or cancellation;
provided, further, however, that in no event shall the Surviving Corporation be
required to expend per annum of coverage in excess of 150% of the annual premium
currently paid by the Company for such coverage (or such coverage as is
53
available for 150% of such annual premium). Alternatively, with the consent of
Parent, which consent shall not be unreasonably withheld, the Company may
purchase "tail" insurance coverage covering a period of six (6) years after the
Effective Time, at a cost no greater than that set forth in the preceding
sentence, that provides coverage identical in all material respects to the
coverage described above.
(d) The provisions of this Section 5.14 are intended to be for the
benefit of, and shall be enforceable by, each Indemnitee, his or her heirs and
his or her representatives and are in addition to, and not in substitution for,
any other rights to indemnification or contribution that any such person may
have by contract or otherwise.
(e) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Surviving
Corporation shall assume all of the obligations thereof set forth in this
Section 5.14.
SECTION 5.15 Resignation of Directors and Officers. The Company
shall cause each of the directors and officers of the Company and its
Subsidiaries, in each case, to the extent requested by Parent no less than ten
(10) Business Days prior to the Closing Date, to submit a letter of resignation
or otherwise be removed as a director or an officer, as the case may be,
effective on or before the Closing Date.
SECTION 5.16 NYSE Listing. Parent agrees to use its reasonable best
efforts to cause the shares of Parent Common Stock issuable, and those required
to be reserved for issuance, in connection with the Merger, to be authorized for
listing on the NYSE, subject to official notice of issuance.
SECTION 5.17 Rights Plan. The Company shall not redeem the Company
Rights or amend or modify or terminate the Company Rights Agreement prior to the
Effective Time.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party hereto to effect the Merger
shall be subject to the satisfaction (or waiver, if permissible under applicable
Law) on or prior to the Closing Date of the following conditions:
(a) Company Stockholder Approval. The Company Stockholder Approval
shall have been obtained in accordance with applicable Law and the Company
Charter Documents;
54
(b) Antitrust. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act and any other applicable competition,
merger control, antitrust or similar Law shall have been terminated or shall
have expired;
(c) No Injunctions or Restraints. No Law, injunction, judgment or
ruling enacted, promulgated, issued, entered, amended or enforced by any
Governmental Authority (collectively, "Restraints") shall be in effect
enjoining, restraining, preventing or prohibiting consummation of the Merger or
making the consummation of the Merger illegal;
(d) Form S-4; Proxy Statement. The Form S-4 shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Form S-4 shall have been issued and no proceedings for that
purpose, and no similar proceedings in respect of the Proxy Statement, shall
have been initiated or threatened by the SEC;
(e) Spin-Off. The Company, Newco and any other necessary parties
to the Spin-Off Agreements shall have entered into the Spin-Off Agreements and
shall not have amended, supplemented or otherwise altered the terms of the
Spin-Off Agreements, none of the parties to the Spin-Off Agreements shall have
waived compliance with any term or condition of the Spin-Off Agreements, the
Restructuring and Spin-Off shall have occurred in accordance with the terms and
conditions of the Separation Agreement (including the issuance of the warrants
to Parent as contemplated thereby) and the Company shall have delivered to
Parent prior to the Closing Date evidence reasonably satisfactory to Parent of
the completion of the Restructuring and Spin-Off in accordance with the
Separation Agreement, including evidence of the distribution to the Company's
stockholders; and
(f) NYSE Listing. The shares of Parent Common Stock to be issued
in connection with the Merger shall have been authorized for listing on the
NYSE, subject to official notice of issuance.
SECTION 6.2 Conditions to Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to effect the Merger are further subject to
the satisfaction (or waiver, if permissible under applicable Law) on or prior to
the Closing Date of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company (i) set forth in the second and third sentences of
Section 3.2(a), in the first and last sentences of Section 3.2(b), in the first
sentence of Section 3.6 and in Section 3.20 shall be true and correct in all
respects as of the Closing Date as if made on and as of the Closing Date (or, if
given as of a specific date, at and as of such date) and (ii) set forth in
Article III hereof (other than as described in clause (i) above), disregarding
all qualifications and exceptions contained therein relating to materiality or
Company Material Adverse Effect, shall be true and correct as of the Closing
Date as if made on and as of the Closing Date (or, if given as of a specific
date, at and as of such date), except in this clause (ii) where the failure to
be so true and correct would not have or would not reasonably be expected to
have, individually or in the aggregate, a Company Material Adverse Effect, and
Parent shall have received a certificate signed on behalf of the Company by an
executive officer of the Company as to such effect;
55
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of the Company by an executive
officer of the Company to such effect;
(c) Material Adverse Effect. Since the date of this Agreement, no
Company Material Adverse Effect shall have occurred;
(d) No Litigation. No proceeding shall be pending by any
Governmental Authority (i) challenging or seeking to restrain or prohibit the
consummation of the Merger, (ii) seeking to prohibit or impose any limitations
on the ownership or operation by Parent or any of its Subsidiaries of all or any
portion of the businesses or assets of Parent, the Company or any of their
respective Subsidiaries or (iii) seeking to compel Parent or any of its
Affiliates to dispose of any shares of Company Common Stock or shares of the
Surviving Corporation or to dispose of or hold separate any material portion of
the businesses or assets of the Company and its Subsidiaries, taken as a whole,
or of Parent and its Subsidiaries, taken as a whole; and
(e) Dissenting Shares. The number of shares of Company Common
Stock held by holders who either (i) have exercised their right to dissent and
obtain payment for their shares or (ii) retain the ability to exercise such
right to dissent and obtain payment shall not exceed ten percent (10%) of the
outstanding shares of Company Common Stock.
SECTION 6.3 Conditions to Obligation of the Company. The obligation
of the Company to effect the Merger is further subject to the satisfaction (or
waiver, if permissible under applicable Law) on or prior to the Closing Date of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Merger Sub (i) set forth in the second and third
sentences of Section 4.2, in Section 4.8 and in the first sentence of Section
4.9 shall be true and correct in all respects as of the Closing Date as if made
on and as of the Closing Date (or, if given as of a specific date, at and as of
such date) and (ii) set forth in Article IV hereof (other than as described in
clause (i) above), disregarding all qualifications and exceptions contained
therein relating to materiality or Parent Material Adverse Effect, shall be true
and correct as of the Closing Date as if made on and as of the Closing Date (or,
if given as of a specific date, at and as of such date), except in this clause
(ii) where the failure to be so true and correct would not have or would not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect, and the Company shall have received a certificate
signed on behalf of Parent by an executive officer of Parent to such effect;
(b) Performance of Obligations of Parent and Merger Sub. Parent
and Merger Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of
Parent by an executive officer of Parent to such effect; and
(c) Material Adverse Effect. Since the date of this Agreement, no
Parent Material Adverse Effect shall have occurred.
56
SECTION 6.4 Frustration of Closing Conditions. None of the Company,
Parent or Merger Sub may rely on the failure of any condition set forth in
Section 6.1, 6.2 or 6.3, as the case may be, to be satisfied if such failure was
caused by such party's failure to use its reasonable best efforts to consummate
the Merger and the other Transactions, as required by and subject to Section
5.5.
ARTICLE VII
TERMINATION
SECTION 7.1 Termination. This Agreement may be terminated and the
Transactions abandoned at any time prior to the Effective Time:
(a) by the mutual written consent of the Company and Parent duly
authorized by each of their respective boards of directors;
(b) by either of the Company or Parent:
(i) if the Merger shall not have been consummated on or
before the Walk-Away Date; provided, however, that the parties may
mutually agree, after good faith discussions, to extend such date if
all of the conditions to Closing have been, or are capable of being,
satisfied as of such date other than the condition set forth in
Section 6.1(b); provided, further, however that the right to
terminate this Agreement under this Section 7.1(b)(i) shall not be
available to a party if the failure of the Merger to have been
consummated on or before the Walk-Away Date was primarily due to the
failure of such party to perform any of its obligations under this
Agreement;
(ii) if any Restraint shall be in effect and shall have
become final and nonappealable; provided, however, that the right to
terminate this Agreement under this Section 7.1(b)(ii) shall not be
available to a party if such Restraint was primarily due to the
failure of such party to perform any of its obligations under this
Agreement; or
(iii) if the Company Stockholder Approval shall not have been
obtained at the Company Stockholders Meeting duly convened therefor
or at any adjournment or postponement thereof;
(c) by Parent:
(i) if the Company shall have materially breached or failed
to perform any of its representations, warranties, covenants or
agreements set forth in this Agreement, which breach or failure to
perform (A) would give rise to the failure of a condition set forth
in Section 6.2(a) or Section 6.2(b) and (B) cannot be cured by the
Company by the Walk-Away Date or, if capable of being cured, shall
not have been cured within thirty (30) calendar days following
receipt of written notice from Parent stating Parent's intention to
terminate this Agreement pursuant to this Section 7.1(c)(i) and the
basis for such termination; provided, however, that Parent shall not
57
have the right to terminate this Agreement pursuant to this Section
7.1(c)(i) if it is then in material breach of any of its
representations, warranties, covenants or other agreements hereunder
that would result in the conditions to Closing set forth in Section
6.3(a) or Section 6.3(b) not being satisfied; or
(ii) if (A) the board of directors of the Company shall have
effected a Company Adverse Recommendation Change, (B) a tender offer
or exchange offer for shares of capital stock of the Company that
constitutes a Takeover Proposal is commenced prior to obtaining the
Company Stockholder Approval and the board of directors of the
Company fails to recommend against acceptance of such tender offer
or exchange offer by its stockholders (including, for these
purposes, by taking no position with respect to the acceptance of
such tender offer or exchange offer by its stockholders, which shall
constitute a failure to recommend against acceptance of such tender
offer or exchange offer) within ten (10) Business Days after
commencement, (C) the Company enters into a definitive agreement
with respect to any Takeover Proposal or (D) the Company fails to
include in the Proxy Statement the Company Board Recommendation;
(d) by the Company:
(i) if Parent or Merger Sub shall have materially breached
or failed to perform any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach or
failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.3(a) or Section 6.3(b) and (B) cannot be
cured by Parent or Merger Sub by the Walk-Away Date or, if capable
of being cured, shall not have been cured within thirty (30)
calendar days following receipt of written notice from the Company
stating the Company's intention to terminate this Agreement pursuant
to this Section 7.1(d)(i) and the basis for such termination;
provided, however, that the Company shall not have the right to
terminate this Agreement pursuant to this Section 7.1(d)(i) if it is
then in material breach of any of its representations, warranties,
covenants or other agreements hereunder that would result in the
conditions to Closing set forth in Section 6.2(a) or Section 6.2(b)
not being satisfied;
(ii) if all of the conditions to (A) the consummation of the
Spin-Off pursuant to the Separation Agreement have been satisfied
and (B) Closing set forth in Section 6.1 (other than Sections 6.1(e)
and 6.1(f)) and Section 6.2 have been satisfied (other than those
conditions that by their nature are to be satisfied by actions taken
at the Closing but which conditions would be satisfied if such date
were the Closing Date) and Parent or Merger Sub has failed to
consummate the Merger no later than five (5) Business Days after the
date on which the Company notifies Parent that all conditions to
Closing set forth in Section 6.3 have been satisfied or waived
(other than those conditions that by their nature are to be
satisfied by actions taken at the Closing but which conditions would
be satisfied if such date were the Closing Date); or
58
(iii) in order to enter into a definitive agreement providing
for the implementation of a transaction that is a Superior Proposal,
prior to the receipt of the Company Stockholder Approval, if (A) the
Company has complied with Section 5.4(e) and Section 5.4(f) and (B)
prior to or concurrently with such termination, the Company pays the
Termination Fee.
SECTION 7.2 Effect of Termination. In the event of the termination
of this Agreement as provided in Section 7.1, written notice thereof shall be
given to the other party or parties, specifying the provision hereof pursuant to
which such termination is made, and this Agreement shall forthwith become null
and void (other than the provisions of the first sentence of Section 3.20, the
last sentence of Section 5.7, Sections 5.10, 7.2 and 7.3, and Article VIII, all
of which shall survive termination of this Agreement), and there shall be no
liability on the part of Parent, Merger Sub or the Company or their respective
directors, officers and Affiliates, except (a) Parent or the Company may have
liability as provided in Section 7.3, and (b) nothing shall relieve any party
from liability for fraud or any willful breach of this Agreement.
SECTION 7.3 Termination Fee.
(a) In the event that:
(i) (A) a Takeover Proposal shall have been made known to
the Company or shall have been made directly to its stockholders
generally or any Person shall have publicly announced an intention
(whether or not conditional or withdrawn) to make a Takeover
Proposal, (B) thereafter, this Agreement is terminated by Parent or
the Company pursuant to Section 7.1(b)(i) or Section 7.1(b)(iii) or
Parent pursuant to Section 7.1(c)(i) and (C) the Company enters into
a definitive agreement with respect to, or consummates, a
transaction contemplated by any Takeover Proposal within twelve (12)
months of the date this Agreement is terminated;
(ii) this Agreement is terminated by Parent pursuant to
Section 7.1(c)(ii); or
(iii) this Agreement is terminated by the Company pursuant to
Section 7.1(d)(iii);
then in any such event the Company shall pay to Parent a termination fee in cash
equal to $7,500,000 (the "Termination Fee").
(b) In the event that (i) a Takeover Proposal shall have been made
known to the Company or shall have been made directly to its stockholders
generally or any Person shall have publicly announced an intention (whether or
not conditional or withdrawn) to make a Takeover Proposal and thereafter this
Agreement is terminated by the Company or Parent pursuant to Section 7.1(b)(i)
or Section 7.1(b)(iii) and no Termination Fee is payable in respect thereof
pursuant to Section 7.3(a)(i) or (ii) this Agreement is terminated by Parent
pursuant to Section 7.1(c)(i) and no Termination Fee is payable in respect
thereof pursuant to Section 7.3(a)(i), then in each such case the Company shall
pay to Parent all of the Expenses of Parent and Merger Sub and thereafter the
Company shall be obligated to pay to Parent the Termination Fee (net of the
59
amount of Expenses previously actually paid to Parent pursuant to this sentence)
in the event such fee is payable pursuant to Section 7.3(a)(i); provided,
however, that the Company shall not be obligated to pay to Parent the Expenses
of Parent and Merger Sub pursuant to clause (i) above in connection with a
termination pursuant to Section 7.1(b)(i) unless the condition set forth in
Section 6.1(b) has been satisfied prior to such termination. In the event this
Agreement is terminated by the Company pursuant to Section 7.1(d)(i), Parent
shall pay to the Company all of the Expenses of the Company. As used herein,
"Expenses" means all out-of-pocket fees and expenses (including all fees and
expenses of counsel, accountants, financial advisors and investment bankers to a
party hereto and its Affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of this Agreement, the preparation, printing, filing
and mailing of the Proxy Statement, the Form 10 and the Form S-4 and the
prospectus contained therein, the filing of any required notices under
applicable Antitrust Laws or other regulations and all other matters related to
the Merger and the other Transactions; provided, however, that in no event shall
Expenses exceed $3,000,000.
(c) In the event that the Company shall terminate this Agreement
pursuant to Section 7.1(d)(ii), Parent shall pay to the Company a termination
fee in cash equal to $7,500,000 (the "Parent Termination Fee"). If the Parent
Termination Fee becomes payable pursuant to this Section 7.3(c), such payment
shall be made to the Company no later than two (2) Business Days after the
termination of this Agreement. Any such payment shall be made by wire transfer
of immediately available funds to an account to be designated by the Company.
(d) Any payment required to be made pursuant to Section 7.3(a)(i)
shall be made to Parent promptly following the earlier of the execution of a
definitive agreement with respect to, or the consummation of, any transaction
contemplated by a Takeover Proposal (and in any event not later than two (2)
Business Days after delivery to the Company of notice of demand for payment).
Any payment required to be made pursuant to Section 7.3(a)(ii) shall be made to
Parent promptly following termination of this Agreement by Parent pursuant to
Section 7.1(c)(ii) (and in any event not later than two (2) Business Days after
delivery to the Company of notice of demand for payment). Any payment required
to be made pursuant to Section 7.3(a)(iii) shall be made to Parent prior to or
contemporaneously with the termination of this Agreement by the Company pursuant
to Section 7.1(d)(iii) (and any purported termination pursuant to Section
7.1(d)(iii) or this Section 7.3 shall be void and of no force or effect unless
the Company shall have made such payment). In circumstances in which Expenses of
Parent and Merger Sub or the Company are payable, such payment shall be made to
Parent or the Company, as applicable, not later than two (2) Business Days after
delivery to the Company or Parent, as applicable, of an itemization setting
forth in reasonable detail all Expenses of Parent and Merger Sub or the Company
(which itemization may be supplemented and updated from time to time by such
party until the 60th day after such party delivers such notice of demand for
payment). All such payments shall be made by wire transfer of immediately
available funds to an account to be designated by Parent.
(e) Each of the parties hereto acknowledges that the agreements
contained in this Section 7.3 are an integral part of the transactions
contemplated hereby, and that without these agreements, the other party would
not enter into this Agreement. Accordingly, if the Company or Parent, as the
case may be, fails to timely pay any amount due pursuant to this Section 7.3
60
and, in order to obtain the payment, Parent or the Company, as the case may be,
commences a suit which results in a judgment against the other party for the
payment set forth in this Section 7.3, such payment shall accrue interest for
the period commencing on the date such amount became past due at the annual rate
of eight percent (8%). In addition, the paying party shall pay the other party
its reasonable and documented costs and expenses (including reasonable and
documented attorneys' fees) in connection with such suit.
(f) Except in the event of willful breach or fraud by Parent, (i)
the Company's receipt of payment of the Parent Termination Fee from Parent
pursuant to Section 7.3(c) shall be the sole and exclusive remedy of the Company
and its Affiliates against the Parent Parties for any loss or damage suffered as
a result of the failure of the Merger to be consummated and (ii) upon payment of
the Parent Termination Fee, none of the Parent Parties shall have any further
liability or obligation relating to or arising out of this Agreement or the
transactions contemplated hereby (except that Parent shall also be obligated
with respect to Section 7.3(e)).
(g) Except in the event of willful breach or fraud by the Company,
(i) Parent's receipt of payment of the Termination Fee from the Company pursuant
to Section 7.3(c) shall be the sole and exclusive remedy of Parent and its
Affiliates against the Company Parties for any loss or damage suffered as a
result of the failure of the Merger to be consummated and (ii) upon payment of
the Termination Fee, none of the Company Parties shall have any further
liability or obligation relating to or arising out of this Agreement or the
transactions contemplated hereby (except that the Company shall also be
obligated with respect to Section 7.3(e)).
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 No Survival. Except as otherwise provided in this
Agreement, the representations, warranties and agreements of each party hereto
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any other party hereto, any Person
controlling any such party or any of their officers, directors or
representatives, whether prior to or after the execution of this Agreement, and
no information provided or made available shall be deemed to be disclosed in
this Agreement or in the Company Disclosure Schedule, except to the extent
actually set forth herein or therein. The representations, warranties and
agreements in this Agreement shall terminate at the Effective Time or, except as
otherwise provided in Section 7.2, upon the termination of this Agreement
pursuant to Section 7.1, as the case may be, except that the agreements set
forth in Article II and Sections 5.9 and 5.10 and any other agreement in this
Agreement which contemplates performance after the Effective Time shall survive
the Effective Time indefinitely. The Confidentiality Agreement shall (a) survive
termination of this Agreement in accordance with its terms and (b) terminate as
of the Effective Time.
SECTION 8.2 Amendment or Supplement. At any time prior to the
Effective Time, this Agreement may be amended or supplemented in any and all
respects, whether before or after receipt of the Company Stockholder Approval,
by written agreement of the parties hereto, by action taken by their respective
boards of directors; provided, however, that following approval of the
Transactions by the stockholders of the Company, there shall be no amendment or
61
change to the provisions hereof which by Law would require further approval by
the stockholders of the Company without such approval.
SECTION 8.3 Extension of Time; Waiver. At any time prior to the
Effective Time, any party may, subject to applicable Law, (a) waive any
inaccuracies in the representations and warranties of any other party hereto,
(b) extend the time for the performance of any of the obligations or acts of any
other party hereto or (c) waive compliance by the other party with any of the
agreements contained herein or, except as otherwise provided herein, waive any
of such party's conditions. Notwithstanding the foregoing, no failure or delay
by the Company, Parent or Merger Sub in exercising any right hereunder shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
SECTION 8.4 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned, in whole or in
part, by operation of Law or otherwise, by any of the parties without the prior
written consent of the other parties, except that Merger Sub may assign, in its
sole discretion, any of or all its rights, interests and obligations under this
Agreement to any direct, wholly owned Subsidiary of Parent, but no such
assignment shall relieve Merger Sub of any of its obligations hereunder. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of, and be enforceable by, the parties hereto and their respective
successors and permitted assigns. Any purported assignment not permitted under
this Section 8.4 shall be null and void.
SECTION 8.5 Counterparts. This Agreement may be executed in
counterparts (each of which shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement) and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Company Disclosure Schedule, the Support Agreement and the
Confidentiality Agreement (a) constitute the entire agreement, and supersede all
other prior agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof and thereof
and (b) except as set forth in Section 5.14(d), are not intended to and shall
not confer upon any Person other than the parties hereto any rights or remedies
hereunder.
SECTION 8.7 Governing Law; Jurisdiction; Waiver of Jury Trial.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, applicable to contracts
executed in and to be performed entirely within that State.
(b) All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined in the Chancery Court of the State of
Delaware or any federal court sitting in the State of Delaware, and the parties
hereto hereby irrevocably submit to the exclusive jurisdiction of such courts
62
(and, in the case of appeals, appropriate appellate courts therefrom) in any
such action or proceeding and irrevocably waive the defense of an inconvenient
forum to the maintenance of any such action or proceeding. The consents to
jurisdiction set forth in this paragraph shall not constitute general consents
to service of process in the State of Delaware and shall have no effect for any
purpose except as provided in this paragraph and shall not be deemed to confer
rights on any Person other than the parties hereto. The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by applicable Law.
(c) EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH
RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 8.8 Specific Enforcement. The parties 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, except as set forth in Sections 7.3(f)
and (g), the parties shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in the Chancery Court of the State of Delaware or
any federal court sitting in the State of Delaware, without bond or other
security being required, this being in addition to any other remedy to which
they are entitled at Law or in equity.
SECTION 8.9 Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed given if
delivered personally, facsimiled (which is confirmed), sent by email (with a
return receipt) or sent by overnight courier (providing proof of delivery) to
the parties at the following addresses:
If to Parent or Merger Sub, to:
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
with copies (which shall not constitute notice) to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
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and
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇.▇▇▇
If to the Company, to:
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇.▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇▇▇ Coie LLP
▇▇▇▇ ▇.▇. ▇▇▇▇▇ ▇▇.
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
or such other addresses or facsimile number as such party may hereafter specify
by like notice to the other parties hereto. All such notices, requests and other
communications shall be deemed received on the date of receipt by the recipient
thereof if received prior to 5:00 p.m. in the place of receipt and such day is a
Business Day in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding Business Day in the place of receipt.
SECTION 8.10 Severability. If any term or other provision of this
Agreement is determined by a court of competent jurisdiction to be invalid,
illegal or incapable of being enforced by any rule of Law or public policy, all
other terms, provisions and conditions of this Agreement shall nevertheless
remain in full force and effect. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible to the fullest extent
permitted by applicable Law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
64
SECTION 8.11 Definitions.
(a) As used in this Agreement, the following terms have the
meanings ascribed thereto below:
"20-Day Average Price" means the volume weighted average (rounded to
the nearest 1/10,000, or if there shall not be a nearest 1/10,000, to the next
highest 1/10,000) of the daily volume weighted average price of a share of
Parent Common Stock on the NYSE as reported by Bloomberg Financial Markets (or
such other source as the parties shall agree in writing) for each of the twenty
(20) consecutive trading days ending on the fifth trading day prior to the
Closing Date.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, or is controlled by, or is under common control with,
such Person. For this purpose, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
management or policies of a Person, whether through the ownership of securities
or partnership or other ownership interests, by contract or otherwise.
"Business Day" means a day except a Saturday, a Sunday or other day
on which the SEC or banks in the City of New York are authorized or required by
Law to be closed.
"Certificate" means a certificate which immediately prior to the
Effective Time represented any shares of Company Common Stock.
"Company Intellectual Property" means all Intellectual Property used
in or necessary for the conduct of the business of the Company or any of its
Subsidiaries (including the Licensed Intellectual Property), or owned or held
for use by the Company or any of its Subsidiaries in connection with its
business. Notwithstanding the foregoing sentence, Company Intellectual Property
does not include any Intellectual Property included in the Spin-Off Assets
except for the Licensed Intellectual Property.
"Company Material Adverse Effect" means any change, event,
occurrence or effect that is materially adverse to the business, properties,
assets, results of operations or financial condition of the Company and its
Subsidiaries, taken as a whole; provided, however, that none of the following
shall constitute, or be considered in determining whether there has occurred,
and no change, event, occurrence or effect resulting from, attributable to or
arising out of any of the following shall constitute, a Company Material Adverse
Effect: (a) changes generally affecting (i) the industries in which the Company
and its Subsidiaries operate, or (ii) the economy or the capital markets, in
each case, in the United States, (b) changes after the date hereof in Law or in
GAAP, (c) the negotiation, execution, announcement or performance of this
Agreement or the consummation of the transactions contemplated hereby, (d) acts
of war, sabotage or terrorism, or any escalation or worsening of any such acts
of war, sabotage or terrorism, (c) earthquakes, hurricanes, tornados or other
natural disasters, (f) any decline in the market price, or change in trading
volume, of the capital stock of the Company, or (g) the suspension of trading
generally on the NYSE or the Nasdaq Stock Market; provided, further, however,
(A) that any change, event, occurrence or effect referred to in clauses (a),
(b), (d) and (e) shall be taken into account for purposes of such clause only so
65
long as such change, event, occurrence or effect does not adversely affect the
Company and its Subsidiaries, taken as a whole, in a materially disproportionate
manner relative to other participants in the industries in which the Company and
its Subsidiaries operate and (B) that for purposes of clause (f), any change,
event, occurrence or effect underlying such decline, change or failure not
otherwise excluded in the other exceptions (a) through (g) of this definition
shall be taken into account in determining whether a Company Material Adverse
Effect has occurred. With respect to references to "Company Material Adverse
Effect" in the representations and warranties set forth in Sections 3.3 and 3.4,
the exceptions set forth in clause (c) shall not apply.
"Company Parties" means, collectively, the Company or any of its
former, current or future directors, officers, employees, agents, general or
limited partners, managers, members, stockholders, Affiliates or assignees or
any former, current or future director, officer, employee, agent, general or
limited partner, manager, member, stockholder, Affiliate or assignee of any of
the foregoing.
"Company Rights Agreement" shall mean the Rights Agreement, dated as
of November 16, 2004, by and between the Company and EquiServe Trust Company,
N.A., as Rights Agent.
"Company Stock Option Plans" shall mean the 1995 Stock Incentive
Plan, the Restated 1999 Stock Plan, the 2000 Non-Officer Employee Stock
Incentive Plan and the 1999 Non-Employee Director Option Program.
"Company Technology" means all Technology used in or necessary for
the conduct of the business of the Company or any of its Subsidiaries (including
the Licensed Intellectual Property), or owned or held for use by the Company or
any of its Subsidiaries in connection with its business. Notwithstanding the
foregoing sentence, Company Technology does not include any Technology included
in the Spin-Off Assets except for the Licensed Technology.
"Digital Watermarking Business" means the portion of the Company's
business immediately prior to the Spin-Off engaged in the licensing and sale of
products, services, Intellectual Property and Technology for digital
watermarking, media fingerprinting (pattern recognition but not including
biometric identifiers), digital rights management or other media management
approaches.
"GAAP" means generally accepted accounting principles in the United
States.
"Governmental Authority" means any government, court, arbitrator,
regulatory or administrative agency, commission or authority or other
governmental instrumentality, federal, state or local, domestic, foreign or
multinational.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended.
"Information Technology Systems" means all hardware, computer
equipment, servers and other information technology systems owned or used by the
66
Company or any of its Subsidiaries in its business.
"Intellectual Property" means all intellectual property rights,
industrial property rights and related priority rights arising from or in
respect of the following, whether protected, created or arising under the Laws
of the United States or any foreign jurisdiction or under any international
convention: (i) patents and patent applications and any reissues,
reexaminations, substitutions, provisionals, divisionals, continuations and
continuations-in-part thereof (collectively, "Patents"); (ii) trademarks,
service marks, trade names, service names, corporate names, trade dress rights,
Internet domain names, identifying symbols, logos, emblems, signs or insignia
and other source or business identifiers, and including all goodwill associated
with any of the foregoing (collectively, "Marks"); (iii) copyrights (including
copyrights in Software), works of authorship, moral rights and mask work rights
(collectively, "Copyrights"); (iv) confidential and proprietary information and
non-public processes, designs, specifications, technology, know-how, techniques,
formulas, inventions (whether or not patentable and whether or not reduced to
practice), concepts, trade secrets, discoveries, ideas and technical data and
information, in each case excluding any rights in respect of any of the
foregoing that comprise or are protected by Patents (collectively, "Trade
Secrets") and (v) all applications, registrations, renewals, extensions and
reversions related to any of the foregoing in clauses (i) through (iv).
"Intellectual Property License" means (i) any grant by the Company
or any of its Subsidiaries to another Person of any right, permission, consent
or non-assertion relating to or under any Intellectual Property or (ii) any
grant by another Person to the Company or any of its Subsidiaries of any right,
permission, consent or non-assertion relating to or under any Intellectual
Property owned by another Person.
"IRS" means the Internal Revenue Service.
"Knowledge" means, with respect to any matter in question, (i) with
respect to the Company, the actual knowledge, after due inquiry of such person's
direct reports, of the executive officers set forth on Schedule 8.11(a)(i) and
(ii) with respect to Parent, the actual knowledge, after due inquiry of such
person's direct reports, of the executive officers set forth on Schedule
8.11(a)(ii).
"License Agreement" means the License Agreement to be entered into
by and between Newco and the Company in connection with the Separation
Agreement.
"Licensed Intellectual Property" means the Intellectual Property to
be licensed by Newco to the Company and its Subsidiaries pursuant to the License
Agreement, to the extent such Intellectual Property relates to the Secure ID
Field (as such term will be defined in the License Agreement).
"Licensed Technology" means the Technology to be licensed by Newco
to the Company and its Subsidiaries pursuant to the License Agreement.
"NYSE" means the New York Stock Exchange.
"Parent Material Adverse Effect" means any change, event, occurrence
or effect that is materially adverse to the business, properties, assets,
results of operations or financial condition of Parent and its Subsidiaries,
67
taken as a whole; provided, however, that none of the following shall
constitute, or be considered in determining whether there has occurred, and no
change, event, occurrence or effect resulting from, attributable to or arising
out of any of the following shall constitute, a Parent Material Adverse Effect:
(a) changes generally affecting (i) the industries in which Parent and its
Subsidiaries operate, or (ii) the economy or the capital markets, in each case,
in the United States, (b) changes after the date hereof in Law or in GAAP, (c)
the negotiation, execution, announcement or performance of this Agreement or the
consummation of the transactions contemplated hereby, (d) acts of war, sabotage
or terrorism, or any escalation or worsening of any such acts of war, sabotage
or terrorism, (e) earthquakes, hurricanes, tornados or other natural disasters,
(f) any decline in the market price, or change in trading volume, of the capital
stock of Parent or (g) the suspension of trading generally on the NYSE or the
Nasdaq Stock Market; provided, further, however, (A) that any change, event,
occurrence or effect referred to in clauses (a), (b), (d) and (e) shall be taken
into account for purposes of such clause only so long as such change, event,
occurrence or effect does not adversely affect Parent and its Subsidiaries,
taken as a whole, in a materially disproportionate manner relative to other
participants in the industries in which the Parent and its Subsidiaries operate
and (B) that for purposes of clause (f), any change, event, occurrence or effect
underlying such decline, change or failure not otherwise excluded in the other
exceptions (a) through (g) of this definition shall be taken into account in
determining whether a Parent Material Adverse Effect has occurred. With respect
to references to "Parent Material Adverse Effect" in the representations and
warranties set forth in Sections 4.3 and 4.4, the exceptions set forth in clause
(c) shall not apply.
"Parent Parties" means, collectively, Parent, Merger Sub or any of
their respective former, current or future directors, officers, employees,
agents, general or limited partners, managers, members, stockholders, Affiliates
or assignees or any former, current or future director, officer, employee,
agent, general or limited partner, manager, member, stockholder, Affiliate or
assignee of any of the foregoing.
"Parent Stock Plans" means, collectively, the L-1 Identity
Solutions, Inc. 2005 Long-Term Incentive Plan, as amended (formerly named the
Viisage Technology, Inc. 2005 Long-Term Incentive Plan), Identix Incorporated
1995 Equity Incentive Plan, Identix Incorporated 2000 New Employee Stock
Incentive Plan, Identix Incorporated 2002 Equity Incentive Plan, Identix
Incorporated Non-Employee Directors Stock Option Plan, Imaging Automation, Inc.
1996 Stock Option Plan, Imaging Automation, Inc. 2003 Employee, Director and
Consultant Stock Plan, Visionics Corporation 1990 Stock Option Plan, Visionics
Corporation 1998 Stock Option Plan, Visionics Corporation Stock Incentive Plan,
Viisage Technology, Inc. 2006 Employee Stock Purchase Plan, Viisage Technology,
Inc. 2001 Stock in Lieu of Cash Compensation Plan, Viisage Technology, Inc.
Stock in Lieu of Cash Compensation for Directors Plan, Viisage Technology, Inc.
1999 Stock in Lieu of Cash Compensation for Directors Plan, Viisage Technology,
Inc. 1997 Employee Stock Purchase Plan, as amended, Viisage Technology, Inc.
1996 Director Stock Option Plan, as amended, Viisage Technology, Inc. 1996
Management Stock Option Plan, as amended, ZN Employees Stock Option Plan,
Bioscrypt, Inc. Stock Option Plan and Bioscrypt, Inc. A4 Vision Plan.
"Person" means an individual, a corporation, a limited liability
company, a partnership, an association, a trust or any other entity, including a
Governmental Authority.
68
"Publicly Available Software" means any "open source," "shareware"
and free Software (including any Software licensed pursuant to a GNU public
license) and any Software having similar licensing or distribution models, and
any other Software that requires as a condition of use, modification or
distribution that other Software incorporated into, derived from or distributed
with such Software (i) be disclosed or distributed in source code form, (ii) be
licensed for the purpose of making derivative works or (iii) be redistributable
at no charge.
"Separation Agreement" means the Separation Agreement to be entered
into by and among Parent, the Company and Newco to effect the Restructuring and
Spin-Off. The transactions contemplated by the Separation Agreement are, by the
terms of the Separation Agreement, to be consummated at or prior to the
Effective Time.
"Software" means any and all (i) computer programs, including any
and all software implementations of algorithms, models and methodologies,
whether in source code, object code or other form, (ii) databases and
compilations, including any and all data and collections of data, whether
machine-readable or otherwise, (iii) descriptions, flow-charts and other work
product used to design, plan, organize and develop any of the foregoing and (iv)
documentation, including user manuals and training materials, related to any of
the foregoing.
"Spin-Off Assets" shall mean all assets primarily related to the
Digital Watermarking Business and any other assets contemplated by the Spin-Off
Agreements.
"Subsidiary" when used with respect to any party, means any
corporation, limited liability company, partnership, association, trust or other
entity the accounts of which would be consolidated with those of such party in
such party's consolidated financial statements if such financial statements were
prepared in accordance with GAAP, as well as any other corporation, limited
liability company, partnership, association, trust or other entity of which
securities or other ownership interests representing more than 50% of the equity
or more than 50% of the ordinary voting power (or, in the case of a partnership,
more than 50% of the general partnership interests) are, as of such date, owned
by such party or one or more Subsidiaries of such party or by such party and one
or more Subsidiaries of such party.
"Technology" means all designs, formulas, algorithms, procedures,
techniques, ideas, know-how, Software (whether in source code, object code or
human readable form), databases and data collections, Internet websites and web
content, tools, inventions (whether patentable or unpatentable and whether or
not reduced to practice), invention disclosures, developments, creations,
improvements, works of authorship, other similar materials and all recordings,
graphs, drawings, reports, analyses, other writings and any other embodiment of
the above, in any form or media, whether or not specifically listed herein.
"Transition Services Agreement" means the Transition Services
Agreement to be entered into by and among Parent, the Company and Newco prior to
the consummation of the transactions contemplated by the Separation Agreement.
"Transactions" refers collectively to this Agreement and the
transactions contemplated hereby, including the Merger, the Restructuring and
the Spin-Off, and the Support Agreement and the transactions contemplated
thereby.
69
"Walk-Away Date" means December 31, 2008.
The following terms defined on the page of this Agreement set forth
after such term below shall have the respective meaning therein defined:
Affiliated Party....................................31
Agreement............................................1
Antitrust Laws......................................48
Balance Sheet Date..................................14
Bankruptcy and Equity Exception.....................11
Cap Price............................................4
Cash Consideration Per Share.........................3
Certificate of Merger................................2
Closing..............................................2
Closing Date.........................................2
Closing Date Company Share Number....................4
COBRA...............................................19
Company..............................................1
Company Adverse Recommendation Change...............46
Company Adverse Recommendation Notice...............46
Company Board Recommendation........................40
Company Charter Documents............................9
Company Common Stock.................................3
Company Contracts...................................23
Company Disclosure Schedule..........................9
Company Plans.......................................18
Company Preferred Stock.............................10
Company Purchase Plan................................7
Company Restricted Stock.............................7
Company Rights......................................10
Company SEC Documents...............................12
Company Stock Options................................7
Company Stockholder Approval........................12
Company Stockholders Meeting........................40
Confidentiality Agreement...........................50
Continuing Employees................................51
Contract............................................11
DGCL.................................................1
Dissenting Shares....................................8
Dissenting Stockholder...............................8
Effective Time.......................................2
Engagement Letters..................................31
Environmental Laws..................................21
Environmental Liabilities...........................21
ERISA...............................................18
Exchange Act........................................12
Exchange Agent.......................................5
70
Exchange Fund........................................5
Expenses............................................60
Fairness Opinion....................................31
Filed Company SEC Documents.........................14
Filed Parent SEC Documents..........................36
Floor Price..........................................4
Foreign Antitrust Laws..............................12
Form 10.............................................16
Form S-4............................................16
Government Contract.................................24
Hazardous Materials.................................21
Imperial Capital....................................31
Indemnitees.........................................53
Laws................................................15
Legal Proceedings...................................15
Letter of Transmittal................................5
Liens................................................9
M&A Qualified Beneficiaries.........................52
Material Contract...................................23
Merger...............................................1
Merger Consideration.................................3
Merger Sub...........................................1
Newco................................................1
Parent...............................................1
Parent Common Stock..................................3
Parent Disclosure Schedule..........................33
Parent Permits......................................38
Parent Plans........................................52
Parent Preferred Stock..............................33
Parent SEC Documents................................35
Parent Termination Fee..............................60
Permits.............................................15
Policies............................................30
Proxy Statement.....................................12
RA..................................................31
Registered Intellectual Property....................26
Release.............................................21
Representatives.....................................45
Restraints..........................................55
Restructuring.......................................51
▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act..................................13
Securities Act.......................................9
Spin-Off............................................51
Spin-Off Agreements.................................51
Spin-Off Record Date.................................7
Subsidiary Documents.................................9
71
Superior Proposal...................................47
Support Agreement....................................1
Surviving Corporation................................2
Takeover Proposal...................................47
Tax Returns.........................................17
Taxes...............................................17
Termination Fee.....................................59
WARN................................................20
SECTION 8.12 Interpretive Matters. Unless otherwise expressly
provided, for purposes of this Agreement, the following rules of interpretation
shall apply:
(a) Calculation of Time Period. When calculating the period of
time before which, within which or following which any act is to be done or step
taken pursuant to this Agreement, the date that is the reference date in
calculating such period shall be excluded. If the last day of such period is a
non-Business Day, the period in question shall end on the next succeeding
Business Day.
(b) Dollars. Any reference in this Agreement to $ shall mean U.S.
dollars.
(c) Gender and Number. Any reference in this Agreement to gender
shall include both genders, and words imparting the singular number only shall
include the plural and vice versa.
(d) Headings. The provisions of a Table of Contents, the division
of this Agreement into Articles, Sections and other subdivisions and the
insertion of headings are for convenience of reference only and shall not affect
or be utilized in construing or interpreting this Agreement. When a reference is
made in this Agreement to an Article, Section, Exhibit or Schedule, such
reference shall be to an Article or Section of, or an Exhibit or Schedule to,
this Agreement unless otherwise indicated.
(e) Herein. The words such as "herein," "hereinafter," "hereof,"
and "hereunder" refer to this Agreement as a whole and not merely to a
subdivision in which such words appear unless the context requires otherwise.
(f) Including. The word "including," or any variation thereof
means "including, without limitation" and shall not be construed to limit any
general statement that it follows to the specific or similar items or matters
immediately following it.
(g) Ordinary Course. Any reference in this Agreement to "ordinary
course" or the "ordinary course of business" shall be deemed to mean "ordinary
course of business consistent with past practice."
(h) Negotiation and Drafting. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement and, in the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as jointly drafted by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provision of this Agreement.
72
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the date first above written.
L-1 IDENTITY SOLUTIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and CEO
DOLOMITE ACQUISITION CO.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman and CEO
DIGIMARC CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: CEO