EXHIBIT 4.1
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AGREEMENT AND PLAN OF MERGER
by and among
TEKELEC,
BUCKDANGER, INC.,
STELEUS GROUP, INC.
and
STRATEGIC PARTNERS, INC.
SOFTWARE CONSOLIDATIONS, INC.
THE BEACON GROUP III - FOCUS VALUE FUND, L.P.
JAFCO CO., LTD.
U.S. INFORMATION TECHNOLOGY INVESTMENT ENTERPRISE PARTNERSHIP
U.S. INFORMATION TECHNOLOGY NO. 2 INVESTMENT ENTERPRISE PARTNERSHIP
BANCBOSTON INVESTMENTS INC.
GMT COMMUNICATIONS PARTNERS II, L.P.
GMT COMMUNICATIONS PARTNERS (HOLLAND) II, L.P.
and
GMT COMMUNICATIONS PARTNERS (EXECUTIVE FUND) II, L.P.
Dated as of August 19, 2004
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TABLE OF CONTENTS
Page
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Table of Contents
Page
ARTICLE I THE MERGER................................................................................................... 2
1.1 Merger and Effect of Merger........................................................................ 2
1.2 Method of Effecting Merger; Closing................................................................ 3
1.3 Conversion of Acquisition Subsidiary Capital Stock................................................. 3
1.4 Merger Consideration............................................................................... 3
1.5 Stockholders' Rights upon Merger................................................................... 6
1.6 Waiver of Dissenters' Rights....................................................................... 6
1.7 Net Working Capital Adjustment to Merger Consideration............................................. 6
1.8 Options and Warrants............................................................................... 8
1.9 Deliveries of the Company at Closing............................................................... 8
1.10 Deliveries of Parent at Closing.................................................................... 10
1.11 Escrow............................................................................................. 10
1.12 Certificate of Incorporation and Bylaws of the Surviving Corporation............................... 11
1.13 Directors and Officers of the Surviving Corporation................................................ 11
1.14 Appointment of Preferred Stockholders' Representatives............................................. 11
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY................................................................... 12
2.1 Corporate Organization, Qualification and Power.................................................... 13
2.2 Subsidiaries....................................................................................... 13
2.3 Capitalization and Related Matters................................................................. 14
2.4 Ownership of Stock; Enforceability; Noncontravention.............................................. 15
2.5 Financial Statements............................................................................... 16
2.6 Books and Records.................................................................................. 16
2.7 No Undisclosed Liabilities......................................................................... 17
2.8 Taxes.............................................................................................. 17
2.9 Assets and Real Property........................................................................... 21
2.10 Necessary Property and Transfer of Assets.......................................................... 22
2.11 Accounts Receivable; Inventories................................................................... 22
2.12 Contracts and Commitment........................................................................... 22
2.13 Validity of Contracts.............................................................................. 24
2.14 Intellectual Property.............................................................................. 24
2.15 Litigation......................................................................................... 28
2.16 Insurance.......................................................................................... 28
2.17 Absence of Certain Changes......................................................................... 29
2.18 No Breach of Law or Governing Document; Licenses and Permits....................................... 30
2.19 Transactions with Related Persons; Outside Interests............................................... 31
2.20 Bank Accounts of the Company....................................................................... 32
2.21 Environmental Matters.............................................................................. 32
2.22 Officers, Directors, Employees, Consultants and Agents; Compensation............................... 33
2.23 Labor Matters...................................................................................... 35
2.24 Employee Benefit Matters........................................................................... 35
2.25 Overtime, Back Wages, Vacation and Minimum Wage.................................................... 37
2.26 Occupational Safety and Health..................................................................... 38
2.27 Customers and Suppliers............................................................................ 38
2.28 Product and Service Warranties..................................................................... 38
2.29 Product Liability Claims........................................................................... 38
2.30 Product Safety Authorities......................................................................... 39
2.31 Foreign Operations and Export Control.............................................................. 39
2.32 Brokers, Finders, Other Offers..................................................................... 39
2.33 Information Supplied............................................................................... 40
2.34 Certain Key Employees.............................................................................. 40
2.35 Disclosure......................................................................................... 40
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PREFERRED STOCKHOLDERS................................................... 40
3.1 Preferred Stockholders' Representations and Warranties............................................. 40
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT.................................................................... 41
4.1 Corporate Existence; Authority; No Conflict; Consents.............................................. 41
4.2 Absence of Certain Changes......................................................................... 43
4.3 No Breach of Law or Governing Document............................................................. 43
4.4 Litigation......................................................................................... 44
4.5 Brokers, Finders................................................................................... 44
4.6 Parent SEC Reports................................................................................. 44
4.7 Financial Statements............................................................................... 44
ARTICLE V CERTAIN COVENANTS OF THE COMPANY............................................................................. 44
5.1 Execution of this Agreement; Certain Notices....................................................... 44
5.2 Conduct of Business of the Company................................................................. 45
5.3 Notification of Certain Matters.................................................................... 47
5.4 Access to Information; Confidentiality............................................................. 49
5.5 Diligent Efforts; Cooperation...................................................................... 50
5.6 Company Stockholder Approval....................................................................... 50
5.7 Compliance......................................................................................... 51
5.8 Securities and Stockholder Materials............................................................... 51
5.9 Takeover Statutes.................................................................................. 51
5.10 No Solicitation.................................................................................... 51
5.11 Company Preferred Stock and Company Stock Rights................................................... 53
5.12 Company Stock Rights............................................................................... 54
5.13 Affiliate Letters.................................................................................. 54
5.14 Termination of Special Management Incentive Bonus Plan............................................. 54
5.15 Termination of 401(k) Plan......................................................................... 54
5.16 Software Licenses.................................................................................. 54
5.17 Patent Application Assignment...................................................................... 54
5.18 Customer Register. The Company shall cause Steleus SAS, prior to Closing, to prepare and
maintain the register required under applicable Law confirming that its customers in
France themselves have the appropriate permits..................................................... 54
ARTICLE VI COVENANTS OF PARENT......................................................................................... 54
6.1 Notification of Certain Matters.................................................................... 54
6.2 Diligent Efforts; Cooperation...................................................................... 55
6.3 Compliance......................................................................................... 56
6.4 Company Employee Retention Bonus Program........................................................... 56
6.5 Employee Matters................................................................................... 56
6.6 Parent Grant of Options and/or Restricted Stock Units.............................................. 57
6.7 Nasdaq Stock Market Listing........................................................................ 57
6.8 Maintenance of Directors and Officers Indemnification.............................................. 57
6.9 Registration Statement on Form S-8................................................................. 57
ARTICLE VII ADDITIONAL COVENANTS OF THE PARTIES........................................................................ 58
7.1 Public Announcements............................................................................... 58
7.2 California Fairness Hearing and Permit............................................................. 58
7.3 Alternatives to Fairness Hearing................................................................... 60
7.4 Certain Tax Matters................................................................................ 61
ARTICLE VIII CONDITIONS PRECEDENT...................................................................................... 62
8.1 Conditions to Each Party's Obligations............................................................. 62
8.2 Conditions to Obligations of the Company........................................................... 63
8.3 Conditions to Obligations of Parent and Acquisition Subsidiary..................................... 64
ARTICLE IX INDEMNIFICATION............................................................................................. 66
9.1 Indemnification of Parent.......................................................................... 66
9.2 Survival........................................................................................... 68
9.3 Limitations........................................................................................ 68
9.4 Indemnification of Stockholders.................................................................... 70
9.5 Notice of Claim; Satisfaction of Claim............................................................. 71
9.6 Right to Contest Claims of Third Persons........................................................... 71
9.7 Dispute Concerning Defense of Third Person Claims.................................................. 73
9.8 Recovery Against Escrow Funds First................................................................ 73
9.9 Exclusive Remedies................................................................................. 76
9.10 Treatment of Indemnification....................................................................... 77
9.11 Post-Closing Access................................................................................ 77
9.12 Release of Escrow Funds............................................................................ 77
ARTICLE X TERMINATION.................................................................................................. 78
10.1 Termination........................................................................................ 78
ARTICLE XI MISCELLANEOUS PROVISIONS.................................................................................... 80
11.1 Notice............................................................................................. 80
11.2 Entire Agreement................................................................................... 83
11.3 Assignment; Binding Agreement...................................................................... 83
11.4 Amendment and Modification......................................................................... 83
11.5 Counterparts....................................................................................... 83
11.6 Headings; Interpretation........................................................................... 83
11.7 Expenses........................................................................................... 84
11.8 Remedies Cumulative................................................................................ 85
11.9 Governing Law...................................................................................... 85
11.10 Submission to Jurisdiction; Waivers................................................................ 85
11.11 No Waiver.......................................................................................... 86
11.12 Severability....................................................................................... 86
11.13 No Third Party Beneficiaries....................................................................... 86
INDEX OF DEFINED TERMS
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Accounts Receivable.................................................................................................... 22
Acquired Companies..................................................................................................... 13
Acquired Company ...................................................................................................... 13
Acquisition Subsidiary................................................................................................. 2
Action................................................................................................................. 28
Affiliate Letter ...................................................................................................... 53
Agreement ............................................................................................................. 2
Assets................................................................................................................. 21
Balance Sheet ......................................................................................................... 16
Benchmark Working Capital Statement.................................................................................... 6
Bonus Employees ....................................................................................................... 56
Business Day .......................................................................................................... 3
Cash Merger Consideration.............................................................................................. 4
Cash Retention Bonuses................................................................................................. 56
Certificate of Merger.................................................................................................. 3
Certificates .......................................................................................................... 6
Closing ............................................................................................................... 3
Closing Date .......................................................................................................... 3
Closing Stock Price.................................................................................................... 4
COBRA ................................................................................................................. 36
Company ............................................................................................................... 2
Company Acquisition Proposal........................................................................................... 51
Company Common Stock................................................................................................... 4
Company Entities ...................................................................................................... 31
Company Intellectual Property License.................................................................................. 25
Company Material Adverse Change........................................................................................ 47
Company Material Adverse Effect........................................................................................ 47
Company Options ....................................................................................................... 8
Company Preferred Stock................................................................................................ 3
Company Recommendation................................................................................................. 50
Company Stock Rights................................................................................................... 14
Company Stockholder Approval........................................................................................... 50
Company Subsidiaries................................................................................................... 13
Company Subsidiary..................................................................................................... 13
Company Superior Proposal.............................................................................................. 52
Company Transaction Expenses........................................................................................... 84
Company Warrant........................................................................................................ 8
Confidentiality Agreement.............................................................................................. 49
Contract .............................................................................................................. 24
Contracts ............................................................................................................. 24
D&O Insurance Policies................................................................................................. 57
Dissenter's Rights..................................................................................................... 6
DOJ.................................................................................................................... 63
Effective Time ........................................................................................................ 3
Environmental Law ..................................................................................................... 32
Environmental Permits.................................................................................................. 32
Environmental Property................................................................................................. 32
ERISA.................................................................................................................. 36
Escrow................................................................................................................. 10
Escrow Agent .......................................................................................................... 4
Escrow Deposit ........................................................................................................ 4
Escrow Funds .......................................................................................................... 10
Event.................................................................................................................. 47
Final Working Capital.................................................................................................. 8
Financial Statements................................................................................................... 16
FTC.................................................................................................................... 63
Hazardous Materials.................................................................................................... 32
Indemnified Losses..................................................................................................... 67
Indemnified Party...................................................................................................... 71
Indemnifying Party..................................................................................................... 71
Initial Cash Consideration............................................................................................. 4
Intellectual Property.................................................................................................. 24
Law.................................................................................................................... 31
Liens.................................................................................................................. 13
Losses................................................................................................................. 66
Majority Recipients.................................................................................................... 12
Merger................................................................................................................. 2
Merger Consideration................................................................................................... 3
Net Working Capital.................................................................................................... 6
Notice of Disagreement................................................................................................. 7
Notice Period.......................................................................................................... 7
NYBCL.................................................................................................................. 2
Offer Letter........................................................................................................... 40
Order.................................................................................................................. 28
Ordinary Course of Business............................................................................................ 17
Parent................................................................................................................. 2
Parent Common Stock.................................................................................................... 4
Parent Indemnified Persons............................................................................................. 66
Parent Material Adverse Change......................................................................................... 54
Parent Material Adverse Effect......................................................................................... 54
Parent Special Third Person Claim...................................................................................... 72
Parent Update Schedule................................................................................................. 54
Parties................................................................................................................ 2
Party.................................................................................................................. 2
PBGC................................................................................................................... 37
Person................................................................................................................. 84
Plan................................................................................................................... 36
Plans.................................................................................................................. 36
Preferred Stockholders................................................................................................. 2
Property .............................................................................................................. 21
Real Property ......................................................................................................... 21
Release ............................................................................................................... 44
RSUs................................................................................................................... 57
safe harbor lease ..................................................................................................... 19
Senior Management ..................................................................................................... 13
Statement of Working Capital........................................................................................... 7
Stock Merger Consideration............................................................................................. 4
Stockholders .......................................................................................................... 2
Straddle Period ....................................................................................................... 61
Surviving Corporation.................................................................................................. 2
Tax Return ............................................................................................................ 17
Tax Returns ........................................................................................................... 17
Taxes.................................................................................................................. 20
tax-exempt use property................................................................................................ 20
Third Person .......................................................................................................... 71
Third Person Claim..................................................................................................... 71
Unknown Event ......................................................................................................... 52
Update Schedule ....................................................................................................... 48
Voting Agreements ..................................................................................................... 2
Working Capital Adjustment............................................................................................. 8
Working Papers ........................................................................................................ 7
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into
as of August 19, 2004, by and among TEKELEC, a California corporation
("Parent"), BUCKDANGER, INC., a New York corporation and wholly-owned subsidiary
of Parent ("Acquisition Subsidiary"), STELEUS GROUP, INC., a New York
corporation (the "Company"), and the PREFERRED STOCKHOLDERS of Company
identified on the signature pages hereto (collectively, the "Preferred
Stockholders"). Parent, Acquisition Subsidiary, the Preferred Stockholders, and
the Company are referred to herein each as a "Party" and together as the
"Parties."
RECITALS
A. The respective Boards of Directors of the Company, Parent and
Acquisition Subsidiary have approved the merger (the "Merger") of Acquisition
Subsidiary with and into the Company in accordance with the terms and conditions
of this Agreement and determined that the Merger is advisable and in the best
interests of their respective stockholders (with respect to each Party, its
"Stockholders") and have approved, adopted and declared advisable this Agreement
and the transactions contemplated hereby.
B. The Company, Acquisition Subsidiary, the Preferred Stockholders
and Parent desire to make certain representations, warranties and agreements in
connection with, and establish various conditions precedent to, the Merger.
C. Concurrently with the execution and delivery of this Agreement,
and as a condition and inducement to Parent's willingness to enter into this
Agreement, each of the Preferred Stockholders is executing and delivering to
Parent a Voting Agreement in the form attached hereto as Exhibit A (the "Voting
Agreements").
NOW, THEREFORE, in consideration of the recitals and the mutual
covenants, representations, warranties, conditions, and agreements hereinafter
expressed, the Parties agree as follows:
ARTICLE I
THE MERGER
1.1 Merger and Effect of Merger.
(a) The constituent corporations of the Merger are the Company and
Acquisition Subsidiary.
(b) Upon the terms and subject to the conditions hereof, and in
accordance with the Business Corporation Law of the State of New York (the
"NYBCL"), at the Effective Time (as hereinafter defined), Acquisition Subsidiary
shall be merged into the Company and the separate corporate existence of
Acquisition Subsidiary thereupon shall cease. The Company shall be the surviving
corporation in the Merger (the "Surviving Corporation"), and the separate
corporate existence of the Company, with all its rights, privileges, powers and
franchises, shall continue unaffected and unimpaired by the Merger.
(c) At and after the Effective Time (as hereinafter defined), the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises and be subject to all the restrictions, disabilities and duties of
both Acquisition Subsidiary and the Company, as provided more particularly in
the NYBCL.
1.2 Method of Effecting Merger; Closing. The Merger shall be effected as
follows:
(a) Certificate of Merger. The Company shall execute a Certificate
of Merger in substantially the form set forth in Exhibit B (the "Certificate of
Merger") and shall cause the Certificate of Merger to be filed and recorded on
the Closing Date (as hereinafter defined) with the Secretary of State of New
York in accordance with the applicable provisions of the NYBCL. The Merger shall
thereupon become effective and be consummated immediately upon the later of such
filing or at such later time as may be mutually agreed by Parent, the Company
and Acquisition Subsidiary and specified in the Certificate of Merger in
accordance with the NYBCL (the "Effective Time").
(b) Closing. The closing of the Merger (the "Closing") shall take
place at the offices of ▇▇▇▇▇ ▇▇▇▇ LLP, Santa Monica, California, at 9:00 a.m.,
local time, on December 15, 2004, or such other date as Parent, the Company and
Acquisition Subsidiary may agree in writing (the "Closing Date"). "Business Day"
shall mean any day which is not a Saturday, Sunday or a legal holiday in the
State of New York, United States of America.
1.3 Conversion of Acquisition Subsidiary Capital Stock. At the Effective
Time, by virtue of the Merger and without any action on the part of any holder
thereof, the issued and outstanding shares of the Common Stock, $0.01 par value
per share, of Acquisition Subsidiary shall be converted into one share of the
Common Stock of the Surviving Corporation and, upon surrender of the certificate
or certificates representing such shares of Common Stock of Acquisition
Subsidiary, the Surviving Corporation shall promptly issue to the owner thereof
a certificate representing the share of Common Stock of the Surviving
Corporation into which it has been converted. After the Effective Time such
share shall be the only issued and outstanding capital stock of the Surviving
Corporation and shall be owned by Parent.
1.4 Merger Consideration.
(a) Aggregate Merger Consideration. Subject to the other terms and
provisions of this Agreement, at the Effective Time, by virtue of the Merger and
without any action on the part of any holder thereof, the outstanding shares as
of the date hereof of the Company's Series A Convertible Preferred Shares, par
value $1.00 per share, Series B Convertible Preferred Shares, par value $1.00
per share, Series C Convertible Preferred Shares, par value $1.00 per share,
Series D Convertible Preferred Shares, par value $1.00 per share, Series E
Convertible Preferred Shares, par value $1.00 per share, Series F Convertible
Preferred Shares, par value $1.00 per share, Series G Convertible Preferred
Shares, par value $1.00 per share, and Series H Convertible Preferred Shares,
par value $1.00 per share (collectively, the "Company Preferred Stock") shall be
converted into and become the right to receive consideration (the "Merger
Consideration") comprised of, in the aggregate:
3.
(i) the cash amount of $27,300,000 reduced by the Working
Capital Adjustment (as hereinaftter defined), if any, and further reduced by the
amount, if any, by which the Company Transaction Expenses exceed the aggregate
amount of $1,200,000 as provided in Section 11.7 (the "Cash Merger
Consideration"); and
(ii) that number of shares of Common Stock of Parent, without
par value ("Parent Common Stock"), that results from dividing $27,300,000 by the
average per share closing sales price (the "Closing Stock Price") of Parent
Common Stock, as quoted on the Nasdaq National Market (and as reported by The
Wall Street Journal) for the ten (10) trading days ending on the second trading
day preceding the Closing Date, as rounded up or down to the nearest whole share
(the "Stock Merger Consideration"). For purposes of this Agreement, "trading
day" shall mean any day on which the Nasdaq National Market is open for trading.
Notwithstanding the foregoing, in the event of a Cash Transaction (as
hereinafter defined), the Company Preferred Stock instead be converted into and
become the right to receive the aggregate cash amount of $54,600,000 reduced by
the Working Capital Adjustment, if any, and further reduced by the amount, if
any, by which the Company Transaction Expenses exceed the aggregate amount of
$1,200,000 as provided in Section 11.7, and (i) the Stockholders of the Company
shall have no right to receive the Stock Merger Consideration, (ii) the term
"Merger Consideration" shall then mean $54,600,000 reduced by the Working
Capital Adjustment (as hereinafter defined), if any, and further reduced by the
amount, if any, by which the Company Transaction Expenses exceed the aggregate
amount of $1,200,000 as provided in Section 11.7 and (iii) the term "Cash Merger
Consideration" wherever it appears in this Agreement shall be deemed to be
stricken and replaced with the term "Merger Consideration."
(b) Conversion of Shares. Subject to the other terms and provisions
of this Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of any holder thereof each of the issued and outstanding
shares of the Company Preferred Stock will be converted into and become the
right to receive a portion of the Merger Consideration as set forth in Schedule
1.4(b) which Schedule the Parties shall update prior to the Effective Time to
reflect any additional accruals of dividends on Company Preferred Stock accruing
between the date hereof and the Closing Date.
(c) No Consideration for Common Stock. The holders of the Company's
Class A Common Stock, par value $0.003333 per share, and Class B Common Stock,
par value $0.003333 per share (collectively, the "Company Common Stock"), shall
be entitled to no consideration in the Merger.
(d) Initial Cash Consideration. The portion of the Cash Merger
Consideration payable to the Preferred Stockholders at Closing (the "Initial
Cash Consideration") shall be equal to the Cash Merger Consideration less
$8,700,000 (the "Escrow Deposit"), which amount shall be withheld and paid to
U.S. Bank National Association (the "Escrow Agent") pursuant to the Escrow
Agreement (as hereinafter defined) on the Closing Date and less $1,000,000 (the
"Holdback Amount"), which amount shall be withheld by Parent pending
determination of Final Working Capital and the Working Capital Adjustment, if
any, under Section 1.7.
(e) No Fractional Shares. No fractional shares of Parent Common
Stock shall
4.
be issued in connection with the Merger, but in lieu thereof each holder of
issued and outstanding capital stock of the Company ("Company Shares") who would
otherwise be entitled to receive a fraction of a share of Parent Common Stock
(after aggregating all fractional shares of Parent Common Stock to be received
by such holder at that time) will receive from Parent an amount of cash (rounded
up to the nearest whole cent) equal to the Closing Stock Price multiplied by the
fraction of a share of Parent Common Stock to which such holder would otherwise
be entitled. The parties acknowledge that any payment of cash consideration in
lieu of issuing fractional shares provided for herein was not separately
bargained for consideration, but merely represents a mechanical rounding off for
purposes of simplifying the corporate and accounting complexities that would
otherwise be caused by the issuance of fractional shares.
(f) Stockholder Rights upon Merger. At the Effective Time holders of
Company Shares shall cease to be and shall have no rights as stockholders of the
Company. Company Shares shall not include shares of the Company held by the
Parent at the Effective Time. In addition to the rights of shareholders of the
Company who have elected to receive the fair value of their shares pursuant to
Sections 623 and 910 of the NYBCL, the only right holders of Company Shares
shall have is the right of the Preferred Stockholders to receive the Merger
Consideration provided in this Section 1.4. All consideration delivered upon
surrender of shares of Company Preferred Stock in accordance with the terms
hereof shall be deemed to have been delivered in full satisfaction of all rights
pertaining to Company Shares. Each of the Company Shares held in the treasury of
the Company, if any, shall be canceled as of the Effective Time, and no Merger
Consideration shall be payable with respect thereto. After the date hereof,
there shall be no transfers on the stock transfer books of the Company of
Company Shares that are outstanding on the date hereof.
(g) Withholding. Parent, the Surviving Corporation or the Escrow
Agent shall be entitled to deduct and withhold from the Preferred Stockholders'
Merger Consideration otherwise payable to any Preferred Stockholder hereunder or
under the Escrow Agreement any amounts that it is required to deduct and
withhold with respect to payment under any provision of federal, state, local or
foreign Tax Law. To the extent that amounts are so withheld, the withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to such Person. To the extent that amounts are so withheld, Parent or the Escrow
Agent, as applicable and to the extent reasonably practicable, shall provide
written notice of the fact and amount of any such intended withholding to a
Preferred Stockholder prior to the payment date.
(h) Certain Limitations. In no event shall the Initial Cash
Consideration exceed the aggregate amount of $27,300,000 (or in the event of a
Cash Transaction the aggregate amount of $54,600,000) minus (i) the amount, if
any, by which the Company Transaction Expenses exceed $1,200,000, (ii) the
Escrow Deposit and (iii) the Holdback Amount. In accordance with the terms of
this Agreement and the Escrow Agreement, the Parent Indemnified Persons (as
hereinafter defined) shall have the right in certain circumstances to recover
and be paid back a portion of the Merger Consideration.
(i) Exchange Adjustments. The Merger Consideration shall be subject
to appropriate adjustment in the event of a stock split, stock dividend,
recapitalization or other change in the terms applicable to Parent Common Stock
(other than in the event of a Cash Transaction) or to Company Shares which
occurs on or after the date of this Agreement and prior
5.
to the Effective Time.
(j) Closing Spreadsheet. Prior to the Closing, the Company shall
provide to Parent a spreadsheet (the "Closing Spreadsheet") in form reasonably
satisfactory to Parent, which spreadsheet shall be dated as of the Closing Date
and shall set forth, as of the Closing Date and immediately prior to the
Effective Time, the following factual information relating to the Preferred
Stockholders: (i) the names of all of the Preferred Stockholders and their
respective addresses and taxpayer identification numbers, (ii) the number and
kind of Company Shares held by each Preferred Stockholder and the respective
certificate numbers, (iii) the calculation of the Initial Cash Consideration and
(other than in the event of a Cash Transaction) Stock Merger Consideration
payable to each Preferred Stockholder in exchange for the Company Shares held by
such Preferred Stockholder, (iv) the interest in dollar and percentage terms of
the Preferred Stockholder in the Holdback, if any, and (v) the interest in
dollar and percentage terms of the Preferred Stockholder in the Escrow Deposit.
1.5 Stockholders' Rights upon Merger. Except with respect to the rights of
shareholders of the Company who have elected to receive the fair value of their
shares pursuant to Sections 623 and 910 of the NYBCL, upon consummation of the
Merger, certificates that immediately prior to the Effective Time represented
outstanding Company Shares (the "Certificates") shall cease to represent any
rights with respect thereto and, subject to applicable Law (as hereinafter
defined) and this Agreement, the Certificates shall only represent the right to
receive the Merger Consideration.
1.6 Waiver of Dissenters' Rights. As long as this Agreement has not been
terminated, each Preferred Stockholder hereby unconditionally and irrevocably
waives dissent and appraisal rights that may be available to such Preferred
Stockholder under Sections 623 and 910 of the NYBCL and all similar rights
("Dissenter's Rights") to the fullest extent allowed by applicable Law.
1.7 Net Working Capital Adjustment to Merger Consideration .
(a) Benchmark Working Capital Statement. Attached hereto as Schedule
1.7(a)-1 is the Net Working Capital Statement of the Company as of March 31,
2004 (the "Benchmark Working Capital Statement"). As used herein, "Net Working
Capital" means, as of the specified date, on a consolidated basis, the current
assets of the Company less the current liabilities of the Company. In the
calculation of Net Working Capital as of the last day of the calendar quarter
immediately preceding the Closing Date (the "Reference Date"), (i) Company
Transaction Expenses incurred after March 31, 2004 and prior to or at Closing
shall be added back to Net Working Capital; (ii) the amount of all reductions in
the long-term portion of long-term debt reflected in the Benchmark Working
Capital Statement shall be added back to Net Working Capital; (iii) payments
made between March 31, 2004 and the Reference Date for the acquisition of fixed
assets purchased after March 31, 2004 shall be added back to Net Working
Capital; and (iv) the out-of pocket cost incurred by the Company prior to the
Reference Date to terminate the 401(k) Plan (as hereinafter defined) in
accordance with Section 5.15 shall be added back to Net Working Capital. The
components of Net Working Capital shall be determined in accordance with this
Section 1.7(a) and, except as set forth in this Section 1.7(a), shall be
determined in accordance with United States generally accepted accounting
principles
6.
("GAAP") applied in a manner consistent with the historical practices
of the Company except with respect to a change in the application of percentage
of completion accounting on multi-phase contracts which has previously been
disclosed to the Parent. For the avoidance of doubt, the obligation to pay Cash
Retention Bonuses and Equity Retention Bonuses and any severance payment
obligations of any Acquired Company to any of its employees that may be made
redundant by the Parent after the Closing are obligations of the Parent and will
not be reflected as liabilities of the Company on the determination of Net
Working Capital.
(b) Final Working Capital Statement. Within forty-five (45) days
after the Closing Date, Parent shall prepare and deliver to the Representatives
an unaudited balance sheet of the Company at and as of the Reference Date (the
"Reference Date Balance Sheet") which shall be accompanied by a statement of Net
Working Capital as of the Reference Date as determined in accordance with
Section 1.7(a) (the "Statement of Working Capital").
(c) Disputes Concerning Statement of Working Capital. During the
thirty (30) days immediately following the receipt of the Statement of Working
Capital by the Representatives, the Representatives and their accountants shall,
at the Preferred Stockholders' expense, be entitled to review the Statement of
Working Capital and any working papers, trial balances and similar materials
("Working Papers") relating to the Statement of Working Capital prepared by
Parent. The Statement of Working Capital shall become final and binding upon the
Parties on the thirty-first day following delivery thereof (the "Notice Period")
unless the Representatives give written notice to Parent of the Representatives'
disagreement with the Statement of Working Capital (a "Notice of Disagreement")
prior to such date. The Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted. If a timely Notice of
Disagreement is delivered by the Representatives, then the Statement of Working
Capital (as revised, if at all, in accordance with this Section 1.7(c)) shall
become final and binding upon the Parties on the earlier of (i) the date the
Parties resolve in writing all differences they have with respect to any matter
specified in the Notice of Disagreement or (ii) the date all matters in dispute
are finally resolved by the Independent Accounting Firm (as hereinafter
defined). During the thirty (30) days immediately following the delivery of the
Notice of Disagreement, Parent and the Representatives shall seek in good faith
to resolve in writing any differences which they may have with respect to any
matters specified in the Notice of Disagreement. During such period, Parent and
the Representatives shall have access to the other's Working Papers prepared in
connection with Parent's preparation of the Statement of Working Capital and the
Representatives' preparation of the Notice of Disagreement, as the case may be.
At the end of such thirty (30) day period and if all differences have not been
resolved, Parent and the Representatives shall submit to Ernst & Young LLP (the
"Independent Accounting Firm") for review and resolution of any and all matters
which remain in dispute and which are included in the Notice of Disagreement.
The Independent Accounting Firm shall reach a final resolution of all matters
and shall furnish such resolution in writing to Parent and the Preferred
Stockholders as soon as practicable after such matters have been referred to the
Independent Accounting Firm. The Independent Accounting Firm shall use the same
accounting principles (including all practices and valuation and estimation
methodologies) required by Section 1.7(a). Such resolution shall be made in
accordance with this Agreement and will be conclusive and binding upon the
Parties. The fees and expenses of the Independent Accounting Firm shall be
allocated to be paid by Parent and/or the Preferred Stockholders based upon the
percentage which the portion of the contested amount not awarded to each Party
bears to the
7.
amount actually contested by such Party, as determined by the Independent
Accounting Firm.
(d) Final Working Capital. "Final Working Capital" shall mean the
Net Working Capital as of the Reference Date as finally determined in accordance
with this Section 1.7 either upon agreement by the Parties, by expiration of the
Notice Period without delivery of a Notice of Disagreement or by resolution of a
dispute in accordance with Section 1.7(c). Upon such final determination, the
Cash Merger Consideration will be reduced by the amount, if any, by which
Benchmark Working Capital exceeds the Final Working Capital (the amount of any
such adjustment is referred to herein as the "Working Capital Adjustment"). Upon
such final determination, the parties shall also proceed as follows:
(i) If Final Working Capital is less than Benchmark Working Capital,
then (A) Parent shall retain the Holdback Amount to the extent of such shortfall
and Parent shall pay the remainder, if any, of the Holdback Amount to the
Representatives, which remainder the Representatives shall thereafter distribute
among the Preferred Stockholders in accordance with the allocation set forth on
Schedule 1.7(d) and (B) to the extent such shortfall exceeds the Holdback
Amount, Parent shall satisfy such excess shortfall from the Escrow Funds (as
hereinafter defined), and the Preferred Stockholders agree to take all actions
required to cause the Escrow Agent to release such funds from the Escrow Funds;
(ii) If Final Working Capital is equal to or greater than Benchmark
Working Capital, then Parent shall pay the entire Holdback Amount to the
Representatives, which funds the Representatives shall thereafter distribute
among the Preferred Stockholders in accordance with the allocation on Schedule
1.7(d).
(e) Disposition of Funds. Payments by Parent under Section 1.7(d)
shall be remitted in immediately available funds within three (3) Business Days
after the determination of Final Working Capital. No interest shall be payable
on any amounts so paid.
1.8 Options and Warrants.
(a) Company Warrants. At or before the Effective Time, each
then-outstanding un-exercised warrant to purchase shares of Company Common Stock
or Company Preferred Stock ("Company Warrant") shall, as a condition to the
consummation of the Merger, be terminated without any payment to the holder in
respect thereof being required.
(b) Company Options. At or before the Effective Time, each
then-outstanding un-exercised option to purchase shares of Company Common Stock
("Company Options") shall, as a condition to the consummation of the Merger, be
terminated without any payment to the holder in respect thereof being required.
(c) Common Stock Cancellation. At the Effective Time, each of the
shares of Company Common Stock shall, as a condition to the consummation of the
Merger, be cancelled without any payment to the holder in respect thereof being
required.
1.9 Deliveries of the Company at Closing. At the Closing, the Preferred
Stockholders and/or the Company shall:
8.
(a) deliver to Parent stock certificates representing all of the
Company Preferred Stock, endorsed in blank or accompanied by duly executed
assignment documents and accompanied by Letters of Transmittal in the form
attached hereto as Exhibit C;
(b) deliver to Parent an opinion of Green & Seifter Attorneys, PLLC,
counsel to the Acquired Companies, in substantially the form attached hereto as
Exhibit D, dated the Closing Date, in a final form reasonably satisfactory to
Parent;
(c) deliver to Parent an opinion of Adamas, counsel to the Company
Subsidiary located in France, in substantially the form attached hereto as
Exhibit E, dated the Closing Date, in a final form reasonably satisfactory to
Parent;
(d) deliver to Parent an opinion of counsel from counsel to each
Preferred Stockholder, in the form attached hereto as Exhibit F, dated the
Closing Date, in a final form reasonably satisfactory to Parent;
(e) deliver to Parent the Escrow Agreement (the "Escrow Agreement")
in the form attached hereto as Exhibit G, duly executed by each of the Preferred
Stockholders a party thereto;
(f) deliver to Parent the Certificate of Merger, duly executed by
the Company;
(g) deliver to Parent an executed Release (as hereinafter defined)
from each of the Preferred Stockholders;
(h) deliver to Parent a certified ratification executed by the
President of Steleus SAS, which is in full force and effect, in which the
President of Steleus SAS ratified all of the decisions taken by the Board of
Directors of Steleus SAS and during the meetings of the shareholders of Steleus
SAS held between and including June 26, 1997 and June 26, 2002;
(i) deliver to Parent the written resignations, effective the
Closing Date, of each director and of each officer of each of the Acquired
Companies that is designated by Parent at least three (3) Business Days before
the Closing Date;
(j) deliver to Parent a copy of the audited consolidated balance
sheet of the Acquired Companies as of December 31, 2003 and the related audited
statements of income, retained earnings and cash flows for the fiscal year then
ended, together with notes and schedules thereto and together with a Report of
Independent Auditors signed by Deloitte & Touche LLP confirming that in its
opinion, such financial statements present fairly, in all material respects, the
financial position of the Acquired Companies at December 31, 2003, and the
results of operations and cash flows for the fiscal year then ended in
conformity with GAAP applied in a manner consistent with the historical
practices of the Company except with respect to a change in the application of
percentage of completion accounting on multi-phase contracts which has
previously been disclosed to the Parent;
(k) deliver to Parent the certificates required to be delivered
pursuant to Sections 8.3(a) and 8.3(b);
9.
(l) deliver to Parent evidence reasonably satisfactory to Parent
that any and all agreements between the Company and one or more of its
Stockholders, or by and among the Stockholders of the Company with respect to
the Company or Company Shares have been terminated in full, and that the Company
Warrants, the Company Options, the Bonus Plan (as hereinafter defined) and the
401(k) Plan, subject to Section 5.15 have been terminated;
(m) cause to be paid all of the Company Transaction Expenses in
accordance with the Funds Flow Memorandum (as hereinafter defined); and
(n) deliver to Parent the Closing Spreadsheet; provided that such
receipt shall not be deemed to be an agreement by Parent that the Closing
Spreadsheet is accurate and shall not diminish Parent's remedies hereunder if
the Closing Spreadsheet is not accurate.
1.10 Deliveries of Parent at Closing. At the Closing, Parent shall:
(a) deliver the Initial Cash Consideration in cash by wire transfer
to an account designated by the Representatives at least two (2) Business Days
prior to the Closing Date for distribution pursuant to Section 1.4 and as
allocated on Schedule 1.4(b);
(b) (if other than a Cash Transaction) deliver certificates
representing the number of shares of Parent Common Stock of Parent to be issued
to each Preferred Stockholder as the Stock Merger Consideration pursuant to
Section 1.4 and as allocated on Schedule 1.4(b);
(c) deliver to the Company the Escrow Agreement, duly executed by
Parent;
(d) deliver the Escrow Deposit (i.e., $8,700,000) to the Escrow
Agent, to be held by the Escrow Agent in accordance with the terms of the Escrow
Agreement and Section 1.11;
(e) deliver to the Company the certificates required to be delivered
pursuant to Sections 8.2(a) and 8.2(b);
(f) deliver to the Preferred Stockholders an opinion of ▇▇▇▇▇ ▇▇▇▇,
LLP, counsel to the Parent and the Acquisition Subsidiary, in substantially the
form attached hereto as Exhibit H, dated the Closing Date, in a final form
reasonably satisfactory to counsel for the Company.
1.11 Escrow. On the Closing Date and in addition to the Holdback, if any,
Parent will withhold from the Cash Merger Consideration otherwise payable to the
Preferred Stockholders pursuant to Section 1.4 on such date a cash amount equal
to such holder's portion, as determined in accordance with Schedule 1.11 which
Schedule the Parties shall update prior to the Effective Time to reflect any
additional accruals of dividends on Company Preferred Stock accruing between the
date hereof and the Closing Date, of the Escrow Deposit. Such withheld amounts,
in the aggregate amount of $8,700,000, shall be deposited into escrow (the
"Escrow") in accordance with the Escrow Agreement. The Escrow Deposit, together
with any income earned thereon (collectively, the "Escrow Funds"), shall be
distributed to the Preferred Stockholders in accordance with the terms of such
Escrow Agreement, subject to the right of Parent to have such Escrow Funds
available to it on the terms and conditions set forth herein and in the Escrow
10.
Agreement for the satisfaction of (i) any Indemnified Losses (as hereinafter
defined) which the Parent Indemnified Persons are entitled to under Article IX,
(ii) any Company Transaction Expenses in excess of $1,200,000 (to the extent not
deducted from the Initial Cash Consideration at the Closing) and (iii) the
amount of any Working Capital Adjustment in excess of the Holdback Amount.
Notwithstanding anything herein to the contrary recovery of any such Company
Transaction Expenses and the amount of any Working Capital Adjustment in excess
of the Holdback Amount shall not be subject to the threshold for certain
Indemnified Losses as set forth in Section 9.3(a).
1.12 Certificate of Incorporation and Bylaws of the Surviving Corporation.
The Certificate of Incorporation and Bylaws of the Surviving Corporation shall
be as set forth in Exhibit I and Exhibit J, respectively.
1.13 Directors and Officers of the Surviving Corporation. The directors
and officers set forth on Schedule 1.13 shall be the directors and officers of
the Surviving Corporation, effective at the Effective Time, until their
successors shall have been duly elected and qualified or until their earlier
death, resignation or removal.
1.14 Appointment of Preferred Stockholders' Representatives(a) . Preferred
Stockholders holding the shares of Series A through F of Company Preferred Stock
hereby appoint Software Consolidations, Inc. and The Beacon Group III - Focus
Value Find, L.P. (the "A-F Representatives") and Preferred Stockholders holding
shares of Series G and H of Company Preferred Stock hereby appoint GMT
Communications Partners II, L.P. (the "G-H Representative") as their
representatives (the A-F Representatives and the G-H Representative are referred
to collectively as, the "Representatives"), to be the Preferred Stockholders'
true and lawful attorneys-in-fact for all matters in connection with this
Agreement and the Escrow Agreement (the "Subject Documents"), including without
limitation the acceptance of any claim by Parent and the compromise of any
disputes between Parent and any Preferred Stockholders relating to any Subject
Document; provided, that notwithstanding anything contained in this Section 1.14
to the contrary, the authority granted in this Section 1.14 shall not apply to
matters concerning a claim for Indemnified Losses directly against a Preferred
Stockholder and not Escrow Funds under Section 9.1(b) (an "Excluded Matter").
The Representatives will act on behalf of the Preferred Stockholders with
respect to all matters requiring action by the Preferred Stockholders under the
Subject Documents. The Representatives hereby accept such appointment. The
Representatives shall be entitled to reimbursement from the Preferred
Stockholders on a several, but not joint and several basis of all reasonable
expenses incurred in the performance of their duties as Representatives under
the Subject Documents, including, but not limited to, the right to employ
financial and legal advisors and other agents to undertake or to assist in the
assessment, litigation and/or settlement of any such claims; provided, however,
that Parent shall not have any obligation or liability for such expenses or for
payment of any fees of the Representatives. The Representatives are expressly
authorized to rely upon the advice of such consultants and agents. By giving
notice to the Representatives in the manner provided by Section 11.1, Parent
shall be deemed to have given notice to all of the Preferred Stockholders, and
any action taken by the Representatives may be considered by Parent to be the
action of each Representative and each Preferred Stockholder for whom such
action was taken for all purposes of any Subject Document. In the event that a
Representative is unable or refuses to serve, the
11.
other Representatives shall serve alone unless and until the Preferred
Stockholders appointing such Representative that are or were, in the aggregate,
recipients of a majority of the Merger Consideration received by such group of
Preferred Stockholders (the "Majority Recipients") notify Parent in writing of
the designation of a successor to act as a Representative hereunder. The
Majority Recipients can replace a Representative designated by such group at any
time or from time to time, provided such replacement Representative has prior
thereto agreed to be bound by the terms hereof and the Escrow Agreement in a
writing acceptable to Parent in its sole and absolute discretion.
(b) The Representatives appointed hereunder shall take all actions
required to be taken by any Preferred Stockholders under the Subject Documents
and may take any action contemplated by the Subject Documents.
(c) In the event that a Parent Indemnified Person gives notice to
the Representatives appointed hereunder of a claim for which indemnification may
be sought, the Representatives shall have the authority to determine, in their
judgment, whether to retain counsel (and to select that counsel) to protect the
Preferred Stockholders' interests, whether to assume the defense of or otherwise
to control the handling of the claim, whether to consent to indemnification and
to make all other decisions required to be made by the Preferred Stockholders
pursuant to the Subject Documents, including without limitation whether to
consent or withhold consent to any settlement or compromise of a claim.
(d) The Representatives appointed hereunder shall not be liable to
any Preferred Stockholder for any act or omission taken pursuant to or in
conjunction with the Subject Documents, except for its own gross negligence or
willful misconduct. Preferred Stockholders shall, jointly and severally,
indemnify and hold the Representatives, and each successor thereof, harmless
from any and all liability and expenses (including, without limitation,
attorneys' fees) which may arise out of any action taken or omitted by it as a
Representative in accordance with the Subject Documents, as the same may be
amended, modified or supplemented, except such liability and expense as may
result from the gross negligence or willful misconduct of the Representative.
(e) The Representatives appointed hereunder shall provide the
Preferred Stockholders with notice of any material actions taken by the
Representatives in connection with their duties under the Subject Documents, but
failure of the Representative to do so shall not affect such Representatives'
authority in any respect or result in any liability for the Representatives.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company hereby makes the following representations and warranties to
Parent and the Acquisition Subsidiary, each of which is true and correct on the
date hereof and each of which shall survive the Closing as provided in Article
IX. As used in this Article II and elsewhere in this Agreement, "knowledge" of
the Company or "to the Company's knowledge" or similar expressions with respect
to the Company mean the actual knowledge of ▇▇▇▇▇▇▇ ▇▇▇▇,
12.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇▇ (the "Senior Management"), after due inquiry and review
of the Acquired Companies' books and records and due inquiry of appropriate
employees of the Acquired Companies.
2.1 Corporate Organization, Qualification and Power. Each of the Company
and each Company Subsidiary (as hereinafter defined) (sometimes referred to
herein individually as an "Acquired Company" and collectively as the "Acquired
Companies") is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each of the
Acquired Companies has all requisite corporate power and authority to own, lease
and use its assets and properties and to conduct the business in which it is
engaged. Each of the Acquired Companies is duly licensed and qualified to do
business as a foreign corporation and is in good standing in the jurisdictions
listed on Schedule 2.1. No Acquired Company is required to be registered,
licensed or qualified as a foreign corporation to do business in any other
jurisdiction except for any such jurisdiction where the failure to be so
registered, licensed or qualified will not result in a material liability to any
of the Acquired Companies.
2.2 Subsidiaries.
(a) The Company owns, directly or indirectly, all of the outstanding
shares of capital stock (or other ownership interests having by their terms
ordinary voting power to elect a majority of directors or others performing
similar functions with respect to) of each of Steleus Inc., a Delaware
corporation, Steleus SAS, a company organized under the laws of France, and
Steleus Investments Inc., a Massachusetts corporation, and the Company owns 99.5
percent of the outstanding shares of capital stock of Steleus Group (India)
Private Limited, a company organized under the laws of India (each, a "Company
Subsidiary" and collectively, the "Company Subsidiaries"). Except for the
Company Subsidiaries, the Company does not directly or indirectly own or have
the contractual right or the obligation to acquire any capital stock or other
equity interest in any other corporation, partnership, joint venture or other
entity.
(b) Each of the outstanding shares of capital stock or other
ownership interest of each of the Company Subsidiaries is duly authorized and
validly issued and is fully paid and non-assessable and was not, when issued,
subject to any unwaived preemptive rights, and is owned, directly or indirectly,
by the Company free and clear of any lien, encumbrance, security interest,
charge, pledge, or other restriction (other than restrictions imposed by
applicable securities laws or the NYBCL, if any) or adverse claim of whatever
nature (collectively, "Liens"), except for the Liens contained in the agreements
listed on Schedule 2.2(b). The following information for each Company Subsidiary
is listed on Schedule 2.2(b), if applicable: (a) the location of its principal
executive office, (b) its authorized and outstanding capital stock or other
ownership interests and (c) the registered holder(s) of all issued and
outstanding shares of capital stock or other ownership interests (including the
name and address of the registered holder and the amount and type of capital
stock or other ownership interest held). There are no stock options, warrants,
stock appreciation rights or other rights to acquire any capital stock or other
ownership interest of any Company Subsidiary, and no Company Subsidiary is
subject to any obligation to issue, deliver, redeem or otherwise acquire or
retire any outstanding shares of its capital stock or other ownership interests.
13.
2.3 Capitalization and Related Matters.
(a) The authorized capital stock of the Company consists of
40,000,000 shares of the Company Common Stock and 1,250,000 shares of the
Company Convertible Preferred Stock, of which 48,000 shares have been designated
as Series A Convertible Preferred Stock, 28,000 shares have been designated as
Series B Convertible Preferred Stock, 43,000 shares have been designated as
Series C Convertible Preferred Stock, 80,000 shares have been designated as
Series D Convertible Preferred Stock, 275,000 shares have been designated as
Series E Convertible Preferred Stock, 150,000 shares have been designated as
Series F Convertible Preferred Stock, 485,000 shares have been designated as
Series G Convertible Preferred Stock, and 115,000 shares have been designated as
Series H Convertible Preferred Stock, each of the foregoing having a par value
of $1.00 per share, of the Company. Of such authorized shares, as of the date
hereof, there are issued and outstanding (i) 3,370,215 shares of Company Common
Stock, of which (A) 3,114,615 shares of Class A Common Stock and (B) 255,600
shares of Class B Common Stock are issued and outstanding and (ii) 848,706
shares of Company Convertible Preferred Stock, of which (A) 39,947 shares of
Series A Convertible Preferred Stock, (B) 23,644 shares of Series B Convertible
Preferred Stock, (C) 36,103 shares of Series C Convertible Preferred Stock, (D)
70,445 shares of Series D Convertible Preferred Stock, (E) 203,352 shares of
Series E Convertible Preferred Stock, (F) 93,465 shares of Series F Convertible
Preferred Stock, (G) 293,328 shares of Series G Convertible Preferred Stock and
(H) 88,422 shares of Series H Convertible Preferred Stock are issued and
outstanding. All of the Company Shares were duly authorized and validly issued
and are fully paid and non-assessable and were not, when issued, subject to any
unwaived preemptive rights. All of the Company Shares and all options, warrants
or other securities of the Company have been issued in accordance with
applicable federal and state securities Laws. The transactions contemplated by
this Agreement are not subject to any unwaived preemptive rights.
(b) Except as set forth on Schedule 2.3(b) and except for shares of
Company Common Stock issuable upon conversion of the Company Preferred Stock,
there are no rights, warrants or options to acquire securities of the Company,
and the Company is not subject to any obligation to issue, deliver, redeem, or
otherwise acquire or retire the Company Common Stock or the Company Preferred
Stock. Schedule 2.3(b) sets forth a list of each outstanding and unexercised
warrant and option exercisable for shares of Company Common Stock or Company
Preferred Stock and the exercise price of each such outstanding and unexercised
warrant and option immediately prior to the Effective Time and, separately, at
the Effective Time as a result of the Merger reflecting any acceleration of
vesting or adjustment to purchase price or exercise price of such option or
warrant if such option or warrant had not been terminated at such time. Except
with respect to the rights of shareholders of the Company who may elect to
receive the fair value of their shares pursuant to Sections 623 and 910 of the
NYBCL and except as set forth on Schedule 2.3(b), no Stockholder of the Company
is entitled to the payment of any dividends or other distributions from the
Company after the date hereof on account of such stockholder's ownership of any
Company Shares on or before the date hereof.
(c) The Company has taken or, prior to the Effective Time, will have
taken, all actions reasonably necessary or appropriate to ensure that all stock
options, warrants, stock appreciation rights or other rights to acquire Company
Shares (excluding any conversion rights contained in the terms of Company
Preferred Stock) ("Company Stock Rights") have been
14.
terminated prior to or as of the Effective Time; the provisions in any Plans (as
hereinafter defined) providing for the issuance, transfer or grant of any
capital stock of Company or any interest in respect of any capital stock of
Company have been terminated prior to or as of the date hereof, no Acquired
Company is or will be bound by any Company Stock Rights which would entitle any
party to beneficially own, or receive any payments in respect of, any capital
stock of any Acquired Company.
(d) Except as set forth on Schedule 2.3(d), each of the Company
Options and Company Warrants may, in accordance with their respective terms, be
treated in the manner provided for herein.
2.4 Ownership of Stock; Enforceability; Noncontravention.
(a) Schedule 2.4(a) lists each holder of Company Shares and the
number and type of Company Shares owned by such holder as of the date hereof.
Each such holder is the sole holder of record and, to the knowledge of the
Company, is the beneficial owner of all the Company Shares attributed to such
holder on Schedule 2.4(a), with all rights to vote such Company Shares without
restriction. To the Company's knowledge, each such holder owns such Company
Shares free and clear of any Liens, except for the Liens contained in the
agreements listed on Schedule 2.4(a).
(b) The Company has full power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby, and assuming
due authorization, execution and delivery by the other Parties hereto this
Agreement constitutes the valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforceability hereof may be limited by bankruptcy and other similar
laws affecting the rights and remedies of creditors generally and general
equitable principles.
(c) None of the Acquired Companies or, to the Company's knowledge,
any Preferred Stockholder, is a party to, subject to or bound by any note, bond,
mortgage, indenture, deed of trust, agreement, lien, contract or other
instrument or obligation or any statute, law, rule, regulation, judgment, order,
writ, injunction, or decree of any court, administrative or regulatory body,
governmental agency, arbitrator, mediator or similar body, franchise or license,
which would (i) except as set forth on Schedule 2.4(c), conflict with or be
breached or violated or the obligations thereunder accelerated or increased
(whether or not with notice or lapse of time or both) by the Merger or the
execution, delivery or performance by the Company and each of the Preferred
Stockholders of this Agreement or by each of the Preferred Stockholders of the
Escrow Agreement or the Voting Agreements or (ii) prevent the carrying out of
the transactions contemplated hereby or by the Escrow Agreement or the Voting
Agreements. Except as set forth on Schedule 2.4(c), except for the consents and
approvals required to be obtained in connection with, or filings required to be
made pursuant to, the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and if the Parent Common Stock to be issued in
connection with the Merger is issued pursuant to Section 7.2, except for the
filing of the Permit Application (as hereinafter defined) and receipt of the
Permit or if the Parent Common Stock to be issued in connection with the Merger
is issued pursuant to Section 7.3(a), except for the consents and approvals
required to be obtained in connection with the preparation and filing with
15.
the Securities and Exchange Commission ("SEC") of the Resale Registration
Statement (as hereinafter defined) after the Closing Date covering the resale of
such shares of Parent Common Stock and any necessary amendments or supplements
thereto, no waiver or consent of any third party or Government (as hereinafter
defined) authority is required for the execution by the Company of this
Agreement or, to the Company's knowledge, by each of the Preferred Stockholders
of this Agreement or the Escrow Agreement or the Voting Agreements, or the
consummation by the Company of the transactions contemplated hereby or thereby
or, to the Company's knowledge, the consummation by each of the Preferred
Stockholders of the transactions contemplated hereby or by the Escrow Agreement
or the Voting Agreements. The execution of this Agreement by the Company and the
consummation of the transactions contemplated hereby will not result in the
creation of any Liens against Company Shares, any of the Acquired Companies or
any of the respective assets of any of the Acquired Companies.
2.5 Financial Statements.
(a) Set forth on Schedule 2.5(a) are (i) the unaudited consolidated
balance sheets of the Acquired Companies as of December 31, 2003, (ii) the
unaudited consolidated balance sheet of the Acquired Companies as of June 30,
2004 and (iii) in the case of the fiscal year ended December 31, 2003, the
unaudited consolidated statements of income, retained earnings and cash flows
for the fiscal years then ended, together with notes and schedules thereto, if
any, and, in the case of the six (6) month period ended June 30, 2004, the
unaudited statements of income, retained earnings and cash flows for the six (6)
month period then ended (clauses (i), (ii) and (iii) collectively, the
"Financial Statements"). For purposes of this Agreement, the unaudited
consolidated balance sheet of the Acquired Companies as of June 30, 2004 shall
be considered the "Balance Sheet." Schedule 2.5(a) lists, and the Company has
delivered to Parent, copies of the documentation creating or governing, all
securitization transactions and "off-balance sheet arrangements" (as defined in
Item 303(c) of Regulation S-K under the Securities Act of 1933, as amended (the
"Securities Act") effected by any of the Acquired Companies). Schedule 2.5(a)
lists all non-audit services performed by Deloitte & Touche LLP for any of the
Acquired Companies.
(b) The Financial Statements (i) present fairly the financial
position, results of operations, and cash flows of the Acquired Companies at the
dates and for the periods indicated, and (ii) with respect to the unaudited
Financial Statements, have been prepared in accordance with GAAP applied in a
manner consistent with the historical practices of the Company except with
respect to a change in the application of percentage of completion accounting on
multi-phase contracts which has previously been disclosed to the Parent.
2.6 Books and Records. The stock record books, minute books, bank
accounts, and other corporate records of each of the Acquired Companies are
true, correct, and complete in all material respects. True, complete and correct
copies of the certificate of incorporation and bylaws (or other organizational
documents serving a similar purpose), as currently in effect, for each of the
Acquired Companies are attached as Schedule 2.6. Each Acquired Company maintains
books and records which in all material respects accurately reflect its assets
and liabilities and maintains proper and adequate internal accounting controls
which provide assurance that (a) transactions are executed with management's
authorization; (b) transactions are recorded as necessary to permit preparation
of the financial statements of the Acquired
16.
Companies and to maintain accountability for the Acquired Companies'
consolidated assets; (c) access to such Acquired Company's assets is permitted
only in accordance with management's authorization; (d) the reporting of such
Acquired Company's assets is compared with existing assets at regular intervals;
and (e) accounts, notes and other receivables and inventory are recorded
accurately.
2.7 No Undisclosed Liabilities. The Acquired Companies do not have any
liabilities or obligations whatsoever, whether known or unknown, accrued,
absolute, contingent, unliquidated or otherwise, and there is no basis for any
such liability or obligation or any claim in respect thereof, other than:
(a) to the extent and for the amount reflected as a liability on the
Balance Sheet or a reserve on the Balance Sheet;
(b) liabilities or obligations incurred in the Ordinary Course of
Business (as hereinafter defined) since the date of the Balance Sheet (none of
which will or may reasonably be expected to have an adverse effect upon any of
the Acquired Companies) that are not required to be set forth in a Schedule
hereto;
(c) obligations for performance (but not for breach) under Contracts
(as hereinafter defined); and
(d) other obligations and liabilities specifically disclosed on
Schedule 2.7.
"Ordinary Course of Business" means, with respect to an Acquired
Company or the Acquired Companies in the aggregate, the ordinary course of
commercial operations customarily engaged in by that Acquired Company or the
Acquired Companies, as applicable, consistent with past practices, but
specifically does not include (a) activity (i) involving the purchase or sale of
that Acquired Company or the Acquired Companies, as applicable, or of any
product line or business unit thereof, (ii) involving assumption, adoption, or
modification of any Plan (as hereinafter defined) or (iii) that requires
approval by the board of directors or stockholders of the Company, or (b) the
incurrence of any liability for any tort or any breach or violation of or
default under any Contract or Law (provided, however, that solely for purposes
of this Section 2.7, any breaches or violations of or defaults under Contracts
or Laws which, individually or in the aggregate, are immaterial, shall not be
excluded from the meaning of "Ordinary Course of Business").
2.8 Taxes. Except as set forth on Schedule 2.8 (a)-(z):
(a) Each of the Acquired Companies has timely filed or caused to be
filed, on a timely basis, with the appropriate Government (as hereinafter
defined) entity all returns, reports, estimates, declarations, claims for
refund, information returns or statements relating to, or required to be filed
in connection with any Taxes (as hereinafter defined), including any schedule or
attachment thereto, and including any amendment or supplement thereof (each a
"Tax Return", collectively "Tax Returns"). All Tax Returns are true, correct,
and complete in all material respects. Without limiting the foregoing, none of
the Tax Returns contains any position that is, or would be, subject to penalties
under Section 6662 of the Internal Revenue Code of 1986, as amended ("Code") or
any corresponding provisions of state, local or foreign Tax (as
17.
hereinafter defined) law.
(b) All Taxes (whether or not reflected on any Tax Return) due and
owing by any of the Acquired Companies have been timely and fully paid. There
are no grounds for the assertion or assessment of any additional Taxes against
any of the Acquired Companies or their assets. Schedule 2.8(b) hereto lists all
jurisdictions where any Acquired Company is required to file Tax Returns or is
otherwise subject to Tax.
(c) The unpaid Taxes of each of the Acquired Companies do not exceed
the accruals and reserves for Taxes (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) reflected
on the Balance Sheet of the Acquired Companies, in accordance with GAAP applied
in a manner consistent with the historical practices of the Company, and Taxes
of any of the Acquired Companies arising after such date and before the
Effective Time have been or will be incurred in the Ordinary Course of Business.
(d) There are no Liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of any of the Acquired Companies.
(e) Each of the Acquired Companies has complied with all Laws
relating to the withholding of Taxes and the payment thereof (including, without
limitation, withholding of Taxes under Section 1441 and 1442 of the Code, or any
similar provision under state, local, or foreign Law), and has timely and
properly withheld from the appropriate party and paid over to the proper
Government agency all amounts required to be withheld and paid over under
applicable Law, including any amounts paid or owing to any employee, independent
contractor, creditor, stockholder or other third party.
(f) None of the Acquired Companies is a party to or bound by any Tax
indemnity, Tax sharing or Tax allocation agreement or arrangement.
(g) None of the Acquired Companies (i) is or has ever been a member
of an affiliated group of corporations, within the meaning of Section 1504 of
the Code (other than a group the common parent of which was the Company), and
(ii) has any liability for the Taxes of any Person under Treasury regulation
Section 1.1502-6 (or any similar provision of state, local or foreign Law), as a
transferee or successor, by contract or otherwise.
(h) None of the Acquired Companies is a party to or a partner in any
joint venture, partnership, or other arrangement or contract that could be
treated as a partnership for federal income tax purposes.
(i) None of the Acquired Companies has or has had a permanent
establishment in any foreign country outside of the respective Acquired
Company's country of incorporation, as defined in any applicable Tax treaty or
convention between the United States and such foreign country.
(j) There are no federal, state, local, or foreign Tax audits or
administrative or judicial Tax proceedings being conducted with respect to any
of the Acquired Companies. None of the Acquired Companies has received from any
federal, state, local or foreign Taxing
18.
authority (including jurisdictions where any of the Acquired Companies filed a
Tax Return) any (i) notice indicating an intent to open an audit or other
review; (ii) request for information related to Tax matters; or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any Tax authority against any of the Acquired Companies.
(k) There is no waiver or tolling of any statute of limitations in
effect with respect to any Tax Returns of the Acquired Companies nor have any of
the Acquired Companies agreed to an extension of time with respect to a Tax
assessment or deficiency.
(l) True, correct and complete copies of all material Tax Returns,
tax examination reports and statements of deficiencies assessed against, or
agreed to with respect to any of the Acquired Companies with respect to the
2000, 2001 and 2002 years with the Internal Revenue Service or any taxing
authority have been made available to Parent in the due diligence materials. The
Company has and has retained all records or other information which may be
relevant to Tax Returns, audits or other examinations relating to liability for
Taxes. Each of the other Acquired Companies has and has retained all records or
other information which may be relevant to material Tax Returns, audits or other
examinations relating to liability for Taxes.
(m) Schedule 2.8(m) hereto sets forth as of December 31, 2003 the
amount of any net operating loss, net capital loss, unused foreign tax credits
or unused investment or other credits. Except as set forth in Schedule 2.8(m),
such amounts are not subject to any limitations under the Code, including, but
not limited to, Section 382 or Section 383 of the Code or any United States
Treasury regulation promulgated thereunder (or any similar provision of Law).
(n) All elections with respect to Taxes affecting any of the
Acquired Companies as of the date hereof are reflected on each Tax Return.
(o) There are no material Tax holidays, abatements, incentives and
similar grants made or awarded to any of the Acquired Companies by any
Government authority.
(p) None of the Acquired Companies is a party to any agreement,
contract, arrangement or plan that has resulted or would result, separately or
in the aggregate, in a payment that would not be fully deductible as a result of
Section 162(m) or Section 280G of the Code or an excise tax to the recipient of
such payment pursuant to Section 4999 of the Code or any similar provisions of
foreign, state or local Laws.
(q) All of each Acquired Company's payments to agents, consultants
and other parties have been in payment of bona fide fees and commissions and not
as illegal or improper payments. None of the Acquired Companies made any payment
to any Person or to any entity described in Section 162(c) of the Code or any
similar provision under foreign Law. Neither the Internal Revenue Service nor
any other federal, state, local or foreign government agency or entity has
initiated or threatened any investigation of any payments made by any of the
Acquired Companies alleged to have been of the type covered by this Section
2.8(q).
(r) None of the assets of any of the Acquired Companies is property
that such Acquired Company is required to treat as being a "safe harbor lease"
within the meaning of Section 168(f)(8) of the Code, as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982.
19.
(s) None of the assets of any Acquired Company have been financed
with or directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the Acquired Companies is
the borrower or the guarantor of any outstanding industrial revenue bonds, nor a
tenant, principal user or related Person to any principal user within the
meaning of Section 144(a) of the Code of any property that has been financed or
improved with the proceeds of industrial revenue bonds.
(t) None of the assets of any Acquired Company is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(u) No Acquired Company has agreed to, nor is required to make, any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method, other than a change required on account of the transactions contemplated
by this Agreement, and the Internal Revenue Service has not proposed any such
adjustment or change in accounting method. No Acquired Company has any pending
private letter ruling request with the Internal Revenue Service.
(v) None of the Acquired Companies is, and none of them has ever
been, a United States real property holding company within the meaning of
Section 897(c)(1)(A)(ii) of the Code, and each Acquired Company shall so certify
upon Parent's request.
(w) None of the Acquired Companies has an "overall foreign loss"
within the meaning of Section 904(f) of the Code.
(x) There is no property or obligation of any of the Acquired
Companies, including but not limited to uncashed checks to vendors, customers,
or employees, non-refunded overpayments, or unclaimed subscription balances,
that is escheatable to any state or municipality under any applicable
escheatment laws as of the date hereof or that may at any time after the date
hereof become escheatable to any state or municipality under any applicable
escheatment laws.
(y) Except to the extent necessary to comply with a Taxing
authority, none of the representations in Section 2.8 shall apply with respect
to transactions entered into by any of the Acquired Companies or any election
made with respect to any of the Acquired Companies after the Effective Time or
on account of any transactions entered into or election made by Parent or its
affiliates after the Effective Time.
(z) As used in this Agreement, "Taxes" means all taxes, charges,
fees, levies, or other like assessments, including without limitation income,
profits, gross receipts, ad valorem, value added, premium, excise, real
property, personal property, windfall profit, sales, use, transfer, license,
withholding, employment, payroll, social security (or similar), unemployment,
disability, PBGC premium, franchise, capital, severance, stamp, occupation,
environmental (including taxes under Section 59A of the Code), customs, duties,
capital stock, profits, registration, alternative or add-on minimum, estimated,
and any other governmental charge of the same or similar nature, imposed by: the
United States or any other nation, state, federal or bilateral or multilateral
governmental authority, any possession, territory, local governmental unit or
subdivision thereof, or any branch, agency, or judicial body thereof
20.
("Government"); and shall include any interest, fines, penalties, assessments,
or additions to tax resulting from, attributable to, or incurred in connection
with any such Taxes, whether disputed or not, and including any obligations to
indemnify or otherwise assume or succeed to the Tax liability of any other
Person. Any one of the foregoing shall be referred to sometimes as a "Tax."
2.9 Assets and Real Property.
(a) Except as set forth on Schedule 2.9(a) or except for any
tangible personal property disposed of by any of the Acquired Companies in the
Ordinary Course of Business since the date of the Balance Sheet, the Acquired
Companies are the only owners of all right, title, and interest in and to (i)
all assets reflected as being owned by them on the Balance Sheet and (ii) all
other assets and property, real and personal, tangible and intangible
(including, without limitation, all Intellectual Property), owned by them (items
(i) and (ii) collectively, the "Assets", and together with all property leased
by or licensed to any Company, the "Property"), and, except as set forth on
Schedule 2.9(a), there exists no restriction on the use or transfer of the
Property. Except as set forth on Schedule 2.9(a), no Property is in the
possession of others and none of the Acquired Companies holds any Property on
consignment. Except as set forth on Schedule 2.9(a), each of the Acquired
Companies has good and indefeasible title to, or a valid leasehold interest in,
all of its Property, free and clear of all Liens, other than (i) Liens for Taxes
not yet due, and (ii) easements for public utilities, none of which materially
interfere with or materially adversely affect the operation, use and/or
enjoyment of the Property affected thereby. Immediately following the Closing,
each of the Acquired Companies shall continue to be vested with good and
indefeasible title to, or a valid leasehold interest in, its Property.
(b) All of the tangible Property has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is adequate for the purposes for which it
is presently used.
(c) Set forth on Schedule 2.9(c)(i) is a legal description of each
parcel of real property owned and a municipal address for each parcel of real
property leased or otherwise occupied by each of the Acquired Companies
(collectively, the "Real Property"). There is no pending or, to the knowledge of
the Company, threatened condemnation proceeding, administrative action or
judicial proceeding of any type relating to the Real Property or other matters
affecting adversely the current use, occupancy or value of the Real Property. To
the Company's knowledge, the Real Property does not serve any adjoining property
for any purpose inconsistent with each Acquired Company's use of the Real
Property, and the Real Property is not located within any flood plain or subject
to any similar type of restriction for which any permits or licenses necessary
to the use thereof have not been obtained. No Person (other than an Acquired
Company) is in possession of any of the Real Property. All water, gas,
electrical, steam, compressed air, telecommunication, sanitary and storm sewage
lines and other utilities and systems serving the Real Property are sufficient
to enable the continued operation of the Real Property as currently operated by
the Acquired Companies. All certificates of occupancy, permits, licenses,
approvals and other authorizations required in connection with the current
operation of the Acquired Companies on the Real Property have been lawfully
issued to the relevant Acquired Company and are, as of the date hereof, and will
be following the consummation of the transactions contemplated hereby, in full
force and effect. All Real
21.
Property has adequate access to public roads and utilities.
2.10 Necessary Property and Transfer of Assets. The Property constitutes
all property and property rights now used or necessary for the conduct of each
of the Acquired Companies' businesses in the manner and to the extent presently
conducted by each of the Acquired Companies. There exists no condition,
restriction or reservation affecting the title to or utility of the Property or
that would prevent any of the Acquired Companies from enforcing its rights with
respect to the Property after the Closing to the same full extent that it might
continue to do so if the sale and transfer contemplated hereby did not take
place.
2.11 Accounts Receivable; Inventories.
(a) Set forth on Schedule 2.11(a) are a list of all the accounts
receivable of the Acquired Companies and an aging schedule relating thereto,
each as of June 30, 2004. Such accounts receivable and any accounts receivable
arising between such date and the Closing Date (collectively, the "Accounts
Receivable") are valid and subsisting. All such Accounts Receivable arose in the
Ordinary Course of Business. Except to the extent of the allowance for doubtful
accounts on the Balance Sheet, no Account Receivable is subject to any
counterclaim, set off, defense or Lien. No agreement for deduction, free goods,
discount or other deferred price or quantity adjustment has been made with
respect to any Account Receivable.
(b) All inventories held by the Acquired Companies at any location
are valued on the Financial Statements at the lower of cost or market on a
weighted average cost basis. Except as set forth on Schedule 2.11(b) and only to
the extent reflected as a reserve on the Balance Sheet, such inventories consist
of a quantity and quality usable and salable in the Ordinary Course of Business,
and are not physically damaged, previously used, obsolete (i.e., no longer
offered for sale by the Acquired Companies) or discontinued.
2.12 Contracts and Commitment. Except as set forth on Schedule 2.12(a)-(p)
and Schedule 2.14(c), none of the Acquired Companies is a party to or otherwise
obligated under any of the following, whether written or oral:
(a) Any single contract or purchase order with vendors providing for
an expenditure by the Acquired Companies, or any of them, in excess of $100,000
or any contracts or purchase orders with the same or affiliated vendor(s)
providing for an expenditure by any of the Acquired Companies in excess of
$100,000.
(b) Any contract or commitment providing for an expenditure by the
Acquired Companies, or any of them, for the purchase or lease of any real
property in excess of $25,000.
(c) Any contract, bid or offer to sell products or to provide
services to third parties which contains terms or conditions the Acquired
Companies cannot reasonably expect to satisfy or fulfill in whole or in part.
(d) Any purchase commitment for materials, supplies, component parts
or other items or services in excess of the normal, ordinary, usual and current
requirements of the Acquired Companies, or any of them, or at a price in excess
of the current reasonable market price at the time of such commitment.
22.
(e) Any contract pursuant to which the Acquired Companies, or any of
them, is the lessee or sublessee of, or holds or operates, any personal property
owned or leased by any other Person (other than leases of personal property
leased in the Ordinary Course of Business with annual lease payments no greater
than $25,000).
(f) Any contract pursuant to which any Acquired Companies permits
any third party to operate any property owned or leased by an officer, employee
or stockholder of any of the Acquired Companies or any affiliate thereof or any
arrangement pursuant to which any Acquired Company is a lessor or lessee or
sublessor or sublessee of any property owned or leased by an officer, employee
or stockholder of any of the Acquired Companies or any affiliate thereof.
(g) Any revocable or irrevocable power of attorney granted to any
Person for any purpose whatsoever.
(h) Any loan agreement, indenture, promissory note, conditional
sales agreement, mortgage, security agreement, letter of credit arrangement,
guarantee, endorsement, assumption, indemnity, surety, foreign exchange
contract, accommodation or other similar type of agreement.
(i) Any arrangement or other agreement which involves (i) a sharing
of profits, (ii) future required payments of $25,000 or more per annum to other
Persons, or (iii) any joint venture, partnership or similar contract or
arrangement.
(j) Any sales agency, sales representation, distributorship or
franchise agreement not terminable in thirty (30) days or less without cost or
penalty.
(k) Any contract providing for the payment of any cash or other
benefits upon the sale or change of control of any of the Acquired Companies, or
any of them, or a substantial portion of the assets of any Acquired Company.
(l) Any contract prohibiting competition, prohibiting the Acquired
Companies, or any of them, or its employees from freely engaging in any business
anywhere in the world, or prohibiting the disclosure of trade secrets or other
confidential or proprietary information.
(m) Any contract or commitment not made in the Ordinary Course of
Business.
(n) Any contract or commitment pursuant to which the Acquired
Companies, or any of them, has acquired or disposed of or has agreed to acquire
or dispose of any securities or any business or product line.
(o) Any other contract or commitment of $100,000 or more which is
not cancelable without penalty on thirty (30) days' notice or less and which is
not specifically described on any other Schedule to this Agreement.
(p) Any agreement or arrangement relating to the employment,
23.
engagement or retainer of employees.
The Company is not required to list on Schedule 2.12(a)-(p) or Schedule 2.14(c)
or make any representation or warranty with respect to, nor does the defined
term "Contract" in Section 2.13 include, any contracts, agreements,
arrangements, commitments, powers of attorney, bids, offers, or any other
instrument that have been fully performed and under which no Acquired Company
has any further rights or obligations, actual, contingent or otherwise.
2.13 Validity of Contracts. Each written or oral contract, agreement,
commitment, license, lease, indenture or evidence of indebtedness required to be
disclosed on Schedule 2.12(a)-(p) to which any of the Acquired Companies is a
party or is otherwise obligated (individually, a "Contract" and collectively,
the "Contracts") is a valid, binding and enforceable obligation of the Acquired
Company that is a party thereto and, to the knowledge of the Acquired Company,
the other parties thereto in accordance with its terms and conditions, except to
the extent that enforceability thereof may be limited by bankruptcy and other
similar laws affecting the rights and remedies of creditors generally and
general equitable principles and, except as set forth in Schedule 2.13, no
Acquired Company has received notice that any Contract is unenforceable. Except
as set forth on Schedule 2.13, none of the Acquired Companies nor, to the
knowledge of the Company, any other party to any of the Contracts is in default
under or in violation of such Contract, and the Company has no disputes with
regard to any Contract and, to the knowledge of the Company, no other party to
any of the Contracts had a dispute with regard to any Contract. Except as set
forth on Schedule 2.13, neither the execution of this Agreement nor the Closing
hereunder do or will constitute or result in, and, no event has occurred which,
with the passage of time or the giving of notice, or both, would constitute, a
default under or a violation of any Contract by any of the Acquired Companies or
any other party to such Contract or would cause the acceleration of any
obligation of any party thereto or the creation of a Lien upon any Property or
Company Shares or, except as set forth on Schedule 2.13, would require any
consent thereunder. The Acquired Companies have made available to Parent in
their due diligence materials a true, complete and accurate copy of each written
Contract required to be disclosed on Schedule 2.12(a)-(p) and a true, complete
and accurate description of each oral Contract required to be disclosed on
Schedule 2.12(a)-(p), and none of such Contracts has been modified or amended in
any respect, except as reflected in such disclosure to Parent.
2.14 Intellectual Property.
(a) Definitions. For purposes of this Agreement, "Intellectual
Property" shall mean patents and patent applications (including, but not limited
to, continuations, continuations in part, provisionals, divisionals,
reexaminations, reissues, foreign counterparts, and the like); trademarks,
service marks, trade names, brand names, logos and corporate names,
registrations thereof and applications therefor; copyrights and registrations
thereof and applications therefor, and works of authorship, including copyrights
under the French Intellectual Property Code and derivative works, within the
meaning of the United States Copyright Act, 17 U.S.C. Sections 101 et seq.;
trade secrets and know how; shop rights; inventions, discoveries, domain names,
ideas, developments, concepts, information, data, processes, techniques,
methods, formulae, designs, software, firmware, programs, databases, algorithms,
mask works, prospect lists, customer lists, projections analyses, and market
studies; and any other intellectual property rights anywhere in the world; all
modifications, renewals, extensions and reissues of any thereof, all common law,
24.
statutory, treaty and convention rights with respect to any thereof; all
property rights, moral rights, ownership and other proprietary rights in any
thereof; and all worldwide forms of protection and rights in, to and under all
of the foregoing; and the right and power to assert, defend and recover title
thereto and the right to ▇▇▇ for and recover damages for past, present and
future infringement, misuse, misappropriation or other violation thereof, both
in the same manner and to the same extent as any Acquired Company could, or
could cause to be done, if the transactions contemplated hereby did not occur.
"Company Intellectual Property" shall mean all Intellectual Property that is
used or held by any Acquired Company for use, or that has been used by any
Acquired Company, in connection with its business or operations, and including
the Company's interest, if any, in the goodwill associated therewith.
(b) Registered Company Intellectual Property. Schedule 2.14(b)
contains a true, complete and accurate list of each of the following items of
Company Intellectual Property that, as of the date hereof, are registered in the
name of any Acquired Company or for which an application in the name of any
Acquired Company is currently pending: patents, patent applications and
invention disclosures, trademarks, service marks, trade names, corporate names,
copyrights, and domain names ("Registered Company Intellectual Property"), and
enumerates for each such item, as applicable, the patent number, application
number, registration number, filing date, date of issuance, registration or
grant, applicant, classification of goods or services covered (for trademarks
and service marks), ▇▇▇▇ or name, owner, country of origin and subject matter.
Except as set forth on Schedule 2.14(b), all Registered Company Intellectual
Property is currently in compliance with formal legal requirements (including
payment of filing, examination and maintenance fees and proofs of use) and no
Registered Company Intellectual Property is subject to any unpaid maintenance
fees or taxes or actions due within 90 days after the Closing Date. There are no
proceedings or actions known to the Company before any court or tribunal
(including the United States Patent and Trademark Office or equivalent authority
anywhere in the world) related to any such Registered Company Intellectual
Property other than those set forth in Schedule 2.14(b). No Acquired Company has
claimed any status in the application for or registration of any Registered
Company Intellectual Property, including "Small business status", that would not
be applicable to the Surviving Corporation. The Company is not aware of any
facts that cause the Company to believe, or any assertions by any third party,
that any Registered Company Intellectual Property is not valid and enforceable,
other than as set forth in Schedule 2.14(b).
(c) Company Intellectual Property Licenses. Schedule 2.14(c)
identifies each agreement (each a "Company Intellectual Property License")
pursuant to which rights to any item of Company Intellectual Property that is
owned by a Person other than an Acquired Company is licensed to any Acquired
Company (excluding off the shelf software programs licensed by an Acquired
Company pursuant to "shrink wrap" or "click wrap" licenses, but including all
software licensed by an Acquired Company pursuant to the GNU general public
license or limited general public license or any other open source licenses)
("Licensed Company Intellectual Property") Schedule 2.14(c) accurately
identifies, for each such agreement, the licensor, licensee, license date and
the Company Intellectual Property covered by such agreement. Except as set forth
in Schedule 2.14(c), no Company Intellectual Property owned by an Acquired
Company is required under the terms of a Company Intellectual Property License
to be licensed at no charge to any third party and no Acquired Company is
required under the terms of any Company Intellectual Property License to provide
or to offer to any third party a machine
25.
readable copy of the source code for any Company Intellectual Property owned by
an Acquired Company.
(d) Title to Company Intellectual Property. Except with respect to
Licensed Company Intellectual Property and any off-the-shelf software programs
licensed by an Acquired Company pursuant to "shrink wrap" or "click wrap"
licenses, and except as described on Schedule 2.14(d), the Acquired Companies
have good, valid and legal title to, and is the sole and exclusive owner of all
right, title and interest in and to, the Company Intellectual Property, free and
clear of all Liens.
(e) Representations and Warranties Regarding Company Intellectual
Property. Except with respect to Licensed Company Intellectual Property and any
off the shelf software programs licensed by an Acquired Company pursuant to
"shrink wrap" or "click wrap" licenses, the total fees associated with which are
less than $2,500, and except as set forth in Schedules 2.14(e)(i) through (ix),
(i) there are no obligations (including royalty obligations),
covenants or restrictions from third parties or Orders (as hereinafter defined)
affecting either the use, disclosure, enforcement, transfer or licensing of the
Company Intellectual Property;
(ii) each item of Company Intellectual Property encompasses
all proprietary rights necessary for or used in the conduct of each Acquired
Company's business as presently conducted or as proposed to be conducted and is,
to the Company's knowledge, valid and enforceable;
(iii) no Acquired Company has granted to any entity and no
entity other than an Acquired Company possesses any current or contingent rights
to any of the Company Intellectual Property (including, without limitation,
through any escrow account);
(iv) each Acquired Company has secured from all Persons who
have created or otherwise have any rights in or to, any item of Company
Intellectual Property, valid enforceable written assignments of, or licenses to,
any such Company Intellectual Property;
(v) the Acquired Companies own all right, title and interest
in and to all Company Intellectual Property;
(vi) no Acquired Company has transferred and, as of the date
of this Agreement, no Acquired Company is obligated to transfer, to any third
party any Company Intellectual Property;
(vii) there is no action, suit, arbitration or other
proceeding pending or, to the knowledge of the Company, threatened, which
involves any Company Intellectual Property;
(viii) no Acquired Company is in material breach of any
Company Intellectual Property License; and
26.
(ix) no Acquired Company is subject to any Order and is party
to any Contract which restricts or impairs the use of any Company Intellectual
Property.
(f) Non-Disclosure Obligations. Each Acquired Company has imposed
written non disclosure obligations on all third parties that have received any
confidential information or trade secrets of such Acquired Company.
(g) Confidential Information and Trade Secrets. Each Acquired
Company has exercised reasonable care, including taking all reasonable steps, to
protect its rights in its confidential information and trade secrets.
(h) No Infringement, Misappropriation or Other Violation. There is
not and has not been any infringement, misappropriation or other violation of
any Intellectual Property of a third party by any Acquired Company, and there
are no facts raising a likelihood of any such violation.
(i) Infringement, Misappropriation, or other Violation of Company
Intellectual Property. To the knowledge of the Company, there is not and has not
been any infringement, misappropriation or other violation of any of the Company
Intellectual Property owned by any Acquired Company, and there are no facts
raising a likelihood of any such violation. There has been no claim made by any
Acquired Company of any infringement, misappropriation or other violation of any
of the Company Intellectual Property owned by any Acquired Company.
(j) Claims. The Company Intellectual Property owned by any of the
Acquired Companies and its products or services have not been the subject of a
claim against any of the Acquired Companies of infringement, interference or
unfair competition or other claim against any of the Acquired Companies. There
has been no claim made against any Acquired Company asserting the invalidity,
misuse or unenforceability of any of the Company Intellectual Property or
challenging any Acquired Company's right to use, transfer, or ownership of, any
of the Company Intellectual Property, and there are no grounds for any such
claim or challenge, including without limitation any such claim or challenge
based upon any Acquired Company's use or enforcement of, or any failure by any
Acquired Company to use or enforce, any of the Company Intellectual Property.
(k) Open Source, Public Source, or Freeware. Except as set forth in
Schedule 2.14(k), no Intellectual Property of a third party, including without
limitation open source, public source or freeware, or any modification or
derivative thereof, including any version of any software licensed pursuant to
any open source license, was or is used in, incorporated into, embedded in,
integrated or bundled with, or used in the development or compilation (other
than generally available commercial compilers) of, any Company Intellectual
Property other than Licensed Company Intellectual Property and any off the shelf
software programs licensed by the Company pursuant to "shrink wrap" or "click
wrap" licenses.
(l) No Loss and Protection of Company Intellectual Property. No loss
of any Company Intellectual Property is pending, reasonably foreseeable, or, to
the Company's knowledge, threatened. Except as set forth on Schedule 2.14(l),
each Acquired Company has
27.
taken all action necessary to maintain and protect the Company Intellectual
Property owned by it, except that it has not filed any patent applications or
obtained any patents with respect to such Company Intellectual Property other
than as disclosed on Schedule 2.14(b).
(m) Effect of Consummation of Transactions. The consummation of the
transactions contemplated by this Agreement will not alter, impair or extinguish
any of the Company Intellectual Property or subject the Surviving Corporation's
use of the Company Intellectual Property to restrictions or limitations other
than those to which any Acquired Company's use thereof would be subject if the
transactions contemplated hereby did not occur.
(n) No Warranties or Indemnifications. No Acquired Company has given
to any third party in any Contract any warranty or indemnification related to
Company Intellectual Property, except for (i) statutory warranties given in the
Ordinary Course of Business in connection with the sale or license of products
or services, (ii) warranties given by third parties that an Acquired Company
passes through or assigns to its customers in connection with the sale or
license of products or services and/or (iii) contractual warranties in the forms
or agreements set forth on Schedule 2.28 given in the Ordinary Course of
Business in connection with the sale or license of products or services.
2.15 Litigation. Except as set forth on Schedule 2.15 and except for
administrative proceedings pursuant to the prosecution or registration of
Intellectual Property undertaken in the Ordinary Course of Business (other than
reexamination, opposition and interference proceedings that may affect an
Acquired Company's rights in Intellectual Property), (a) there is no, and since
January 1, 2000, there has not been any suit, claim, litigation, proceeding
(administrative, judicial, or in arbitration, mediation or alternative dispute
resolution), Government or grand jury investigation, or other action (any of the
foregoing, "Action") pending or, to the knowledge of the Company, threatened
against any of the Acquired Companies or involving its business, employees or
employment relationships or any of their Property or employees, including
without limitation any Action challenging, enjoining, or preventing this
Agreement or the consummation of the transactions contemplated hereby or, to the
knowledge of the Company, pending or threatened against any of its stockholders,
owners, directors, officers, agents or other personnel in connection with any
Acquired Company or their businesses, employees or employment relationships,
including without limitation any Action challenging, enjoining, or preventing
this Agreement or the consummation of the transactions contemplated hereby; and
(b) none of the Acquired Companies is and, since January 1, 2000 none of the
Acquired Companies has been subject to any judgment, order, writ, injunction, or
decree of any court or other Government entity ("Order") other than Orders of
general applicability.
2.16 Insurance.
(a) Set forth on Schedule 2.16(a) is a list of all insurance
policies and bonds currently in force covering or relating to the properties,
operations or personnel of each of the Acquired Companies and, with respect to
insurance policies covering product liability and similar occurrence based
risks, in force at any time since January 1, 2000. Such schedule clearly
indicates which of such policies are claims made and which of such policies are
occurrence based. All of such insurance policies are in full force and effect
(with respect to the applicable
28.
coverage periods), and none of the Acquired Companies is in default with respect
to any of its obligations under any of such insurance policies.
(b) Since January 1, 2000, each of the Acquired Companies has at all
times maintained insurance as required by Law or under any Contract, including,
without limitation, unemployment and workers' compensation coverage.
2.17 Absence of Certain Changes. Since December 31, 2003, except as set
forth on Schedule 2.17(a)-(t), there has not been with respect to any Acquired
Company or the Property:
(a) Any Company Material Adverse Change (as hereinafter defined),
and to the knowledge of the Company, no such change will arise from the
consummation of the transactions contemplated hereby;
(b) Any declaration, setting aside, or payment of any dividend or
any distribution (in cash or in kind) to any Person with respect to any
securities of any Acquired Company, or any direct or indirect redemption,
purchase, or other acquisition by any Acquired Company of any of its securities;
(c) Any increase in compensation or other remuneration payable to or
for the benefit of or committed to be paid to or for the benefit of any
stockholder, director, officer, agent, or employee of any Acquired Company, or
in any benefits granted under any Plan with or for the benefit of any such
stockholder, director, officer, agent, or employee (other than increases in
wages or salaries required under existing Contracts listed on Schedule 2.12(p)
or otherwise not unusual in timing, character or amount made in the Ordinary
Course of Business to employees);
(d) Any change with respect to its management, supervisory or other
key personnel;
(e) Any significant change in the size of its workforce;
(f) Any transaction entered into or carried out by any Acquired
Company other than in the Ordinary Course of Business;
(g) Any borrowing or incurrence of any other indebtedness (other
than accounts payable in the Ordinary Course of Business) contingent or
otherwise, by or on behalf of any Acquired Company (it being understood that the
foregoing is not intended to describe obligations of any Acquired Company under
Contracts to sell products to others) in excess of $25,000;
(h) Any modification or termination of any Contract disclosed on
Schedules 2.12(a)-(p) or 2.14(c) or any material term thereof or any Government
license, permit or other authorization;
(i) Any purchase in excess of $25,000 by any Acquired Company of
capital assets or any interests in real property or any lease arrangement
(whether as a lessor or lessee or sublessor or sublessee) entered into by an
Acquired Company with respect to real property;
29.
(j) Any abandonment, lapse or infringement of any Intellectual
Property owned by or licensed to an Acquired Company;
(k) Any acquisition of or investment in (by merger, exchange,
consolidation, purchase or otherwise) any Person or interest in any business
organization or entity;
(l) Any acquisition of any assets (whether through capital spending
or otherwise) outside of the Ordinary Course of Business or which are material,
individually or in the aggregate, to any Acquired Company;
(m) Any waiver of any claims or rights that are material or
otherwise involve amounts individually or in the aggregate in excess of $25,000;
(n) Any disclosure of any confidential or proprietary information to
any Person other than to Parent and Parent's representatives, agents, attorneys
and accountants or the respective employees, representatives, agents, attorneys
and accountants of an Acquired Company, potential purchasers of the Company
identified on Schedule 2.17(n) or the customers, potential customers, suppliers
and potential suppliers in the Ordinary Course of Business, provided such
potential purchasers, customers, potential customers, suppliers and potential
suppliers have entered into customary written non-disclosure agreements with an
Acquired Company with respect thereto;
(o) Any charitable contributions or commitments therefore in excess
of $10,000 in the aggregate;
(p) Any material change in the conduct of any Acquired Company's
business, or any material change in its methods of purchase, sale, lease,
management, marketing, promotion or operation, or any material delay or
postponement of the payment of accounts payable or other liabilities;
(q) Any material change in any method of accounting or accounting
policies of an Acquired Company, except with respect to a change in the
application of percentage of completion accounting on multi-phase contracts
which has previously been disclosed to the Parent, and other than those required
by GAAP applied in a manner consistent with the historical practices of the
Company, or any write-down in the accounts receivable or inventories of any
Acquired Company;
(r) Any action taken by any Acquired Company or the stockholders of
any Acquired Company or by another Person on behalf of the stockholders or
owners of any Acquired Company that will or may reasonably be expected to cause
or constitute a breach of any provision of this Agreement;
(s) Any change in Tax elections; or
(t) Any binding commitment or agreement by any Acquired Company or a
stockholder of any Acquired Company to do any of the foregoing items (b) through
(s).
2.18 No Breach of Law or Governing Document; Licenses and Permits.
30.
(a) None of the Acquired Companies is currently and has not since
January 1, 2000 been in default under or in breach or violation of any
applicable statute, law, treaty, convention, ordinance, decree, order,
injunction, rule, directive, or regulation of any Government ("Law") or the
provisions of any Government permit, franchise, or license, including without
limitation any authorization granted by the French Prime Minister acting through
the intermediary of the General Secretary of the National Defense to
manufacture, offer or sell Supervision System process code 7, Portable
Supervision System process code 7 or SMS Welcome Roamer. Except as set forth at
Schedule 2.18, none of the Acquired Companies is currently or has ever been in
default under or in breach or violation of any provision of its organizational
documents. None of the Acquired Companies has received any notice alleging such
default, breach or violation. Neither the execution of this Agreement nor the
Closing do or will constitute or result in any such default, breach or
violation. The Company, in its capacity as the sole shareholder of Steleus SAS,
executed a written ratification, which is in full force and effect, in which the
Company ratified all of the decisions taken by the Board of Directors of Steleus
SAS and during the meetings of the shareholders of Steleus SAS held between and
including June 26, 1997 and June 26, 2002 and the Company delivered to Parent a
true, correct, and complete copy of such ratification.
(b) Each Acquired Company holds all Government authorizations,
licenses and permits required to conduct its business as presently conducted by
it (other than those Government authorizations, licenses and permits the failure
of which to hold would not result in a material liability to an Acquired
Company), and each such authorization, license or permit held by an Acquired
Company is valid, in full force and effect, and listed on Schedule 2.18. Neither
the execution of this Agreement nor the Closing do or will constitute or result
in a default under or violation of any such authorization, permit or license.
The clients and suppliers of each Acquired Company hold all Government
authorizations, licenses and permits required under Law, the failure of which
could result in a material liability to any Acquired Company or result in a
default under or in a breach or violation of Law by any Acquired Company.
2.19 Transactions with Related Persons; Outside Interests.
(a) No current director, officer or affiliate of an Acquired Company
or, to the knowledge of the Company, any individual related by blood, marriage
or adoption to any such Person in which any such Person owns a beneficial
interest greater than five percent (5%) (collectively, the "Company Entities")
and, to the knowledge of the Company, no Stockholder of the Company or employee
of any Acquired Company or any individual related by blood, marriage or adoption
to any such Person, in any such case, is a party to any agreement, contract,
commitment or other form of transaction or arrangement with any Acquired Company
under which any party may have remaining rights or obligations, executory,
contingent or otherwise, written or oral, or has any interest in any of the
Property.
(b) No director, officer or affiliate of any Acquired Company and,
to the knowledge of the Company, no Stockholder of the Company or employee of
any Acquired Company has any direct or indirect financial interest in any
competitor with or supplier or customer of any Acquired Company; provided,
however, that for this purpose ownership of corporate securities having no more
than 5% of the outstanding voting power of any competitor, supplier or customer,
which securities are listed on any national securities exchange or
31.
authorized for quotation on the Nasdaq National Market, shall not be deemed to
be such a financial interest, provided that such Person has no other connection
or relationship with such competitor, supplier or customer.
2.20 Bank Accounts of the Company. Set forth on Schedule 2.20 is a list of
the locations and numbers of all bank accounts, investment accounts and safe
deposit boxes maintained by the each of the Acquired Companies, together with
the names of all Persons who are authorized signatories or have access thereto
or control thereunder.
2.21 Environmental Matters.
(a) To the knowledge of the Company, all assets and property
currently or previously owned, leased, operated, or used by each of the Acquired
Companies or in connection with the business of each of the Acquired Companies
("Environmental Property"), all current and previous conditions on and uses of
the Environmental Property, and all current and previous ownership and
operations of the Environmental Property and of each of the Acquired Companies
(including without limitation transportation and disposal of Hazardous Materials
(as hereinafter defined) by or for an Acquired Company) comply and have at all
times complied, and do not cause, have not caused, and will not cause liability
to be incurred by an Acquired Company under any current or past Law relating to
the protection of health or the environment, including without limitation: the
Clean Air Act, the Federal Water Pollution Control Act, the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Toxic Substance Control Act, any comparable
state or foreign Law, and the common law, including the law of nuisance and
strict liability (collectively, "Environmental Law"). None of the Acquired
Companies is in violation of and, to the knowledge of the Company, has ever
violated any Environmental Law.
(b) Each Acquired Company has properly obtained and is in compliance
with all necessary permits, registrations, approvals, and licenses required by
any Environmental Law ("Environmental Permits"), and has properly made all
filings with and submissions to any Government or other authority required by
any Environmental Law. To the knowledge of the Company, no deficiencies have
been asserted by any such Government or authority with respect to such items.
(c) To the knowledge of the Company there has been no spill,
discharge, leak, leaching, emission, migration, injection, disposal, escape,
dumping, or release of any kind on, beneath, above, or into the Environmental
Property or into the environment surrounding the Environmental Property of any
(i) pollutants or contaminants, (ii) hazardous, toxic, infectious or radioactive
substances, chemicals, materials or wastes (including without limitation those
defined as hazardous under any Environmental Law), (iii) petroleum including
crude oil or any derivative or fraction thereof, (iv) asbestos fibers, or (v)
solid wastes ((i)-(v), collectively, "Hazardous Materials").
(d) To the knowledge of the Company, other than in the Ordinary
Course of Business, there are and have been no (i) Hazardous Materials stored,
disposed of, generated, manufactured, refined, transported, produced, or treated
at, upon, or from the Environmental Property; (ii) ceramic or asbestos fibers or
materials or polychlorinated biphenyls on, in or
32.
beneath the Environmental Property, or (iii) underground storage tanks on or
beneath the Environmental Property.
(e) Each Acquired Company has made available in its due diligence
materials to Parent, prior to the execution and delivery of this Agreement,
complete copies of any and all (i) documents received by each Acquired Company
from, or submitted by any of the stockholders of the Company or any Acquired
Company to, the Environmental Protection Agency and/or any foreign, state,
county or municipal environmental or health agency concerning the environmental
condition of the Environmental Property or the effect of the operations of any
Acquired Company on the environmental condition of the Environmental Property
and (ii) reviews, audits, reports, or other analyses concerning the
Environmental Property in the possession of any Acquired Company.
(f) There never has been pending or, to the knowledge of the
Company, threatened against any Acquired Company in connection with the
Environmental Property, any civil, criminal or administrative action, suit,
summons, citation, complaint, claim, notice, demand, request, judgment, order,
lien, proceeding, hearing, study, inquiry or investigation based on or related
to any Environmental Permits or any Environmental Law.
(g) None of the Acquired Companies has ever received from any Person
any written or express notice of any past, present or anticipated future events,
conditions, circumstances, activities, practices, incidents, actions, agreements
or plans that could be reasonably expected to: (i) interfere with, prevent, or
increase the costs of compliance or continued compliance with any Environmental
Permits or any renewal or transfer thereof or any Environmental Law; (ii) make
more stringent any restriction, limitation, requirement or condition under any
Environmental Law or any Environmental Permits in connection with the operations
on the Environmental Property; or (iii) give rise to any material liability,
loss or expense, or form the basis of any civil, criminal or administrative
action, suit, summons, citation, complaint, claim, notice, demand, request,
judgment, order, lien, proceeding, hearing, study, inquiry or investigation
involving the Environmental Property, or any Acquired Company based on or
related to any Environmental Permits or an Environmental Law or to the presence,
manufacture, generation, refining, processing, distribution, use, sale,
treatment, recycling, receipt, storage, disposal, transport, handling, emission,
discharge, release or threatened release of any Hazardous Materials.
(h) To the knowledge of the Company, no Hazardous Materials have
been sent by any Acquired Company since its inception, or are currently being
sent for disposal, treatment, recycling or storage, including the address of
each such site, and a description and estimate of the amount of the Hazardous
Materials disposed of, treated, recycled or stored at each such site. There are
no Persons involved in the transportation and disposal of Hazardous Materials on
behalf of any Acquired Company or from the Environmental Property since its
inception and an estimate of the amount of such Hazardous Materials handled by
each such Person.
2.22 Officers, Directors, Employees, Consultants and Agents; Compensation.
33.
(a) Set forth on Schedule 2.22(a) is a complete list as of July 27,
2004, of: (i) all current directors of each Acquired Company, (ii) all current
officers (with office held) of each Acquired Company, (iii) all current
employees (active or other) of each Acquired Company employed in the United
States, (iv) all current employees (active or other) of each Acquired Company
employed outside of the United States, and (v) all current paid consultants to
each Acquired Company; together, in each case, with the current job title and/or
job description, rate of compensation, any paid vacation time accrued with
respect to such person, any incentive or bonus plan participation and all bonus
and/or incentive payments owed to such person as of June 30, 2004, and the date
of hire, leave status (including type of leave) and visa status of each such
person.
(i) All employees of each Acquired Company are legally
permitted to be employed by such Acquired Company in the jurisdiction in which
such employee is employed in their current job capacities. Except as set forth
in Schedule 2.12(o)-(p), no Acquired Company has any employment or consulting
contracts currently in effect that are not terminable within thirty (30) days
without penalty (other than agreements with the sole purpose of providing for
the confidentiality of proprietary information or assignment of inventions).
(ii) Except as set forth on Schedule 2.22(a)(ii), as of the
date hereof, no employee of the Acquired Company has given to the Company oral
or written notice of termination, nor has any Acquired Company given notice of
termination or notice of any workforce reduction or plant closure to any
employee or governmental entity.
(iii) Except as set forth on Schedule 2.22(a)(iii), there are
no claims, demand letters, civil rights charges, suits or other controversies
pending, or to the best knowledge of Company, threatened between any Acquired
Company and any of its current or former employees.
(iv) To the knowledge of Company, no employee of any Acquired
Company is obligated under any agreement or subject to any judgment, decree or
order of any court or administrative agency that would materially interfere with
such employee's efforts to promote the interests of each Acquired Company's
business or that would materially interfere with the business of any Acquired
Company. To the knowledge of any Acquired Company, neither the execution nor
delivery of this Agreement, nor the carrying on of the business as presently
conducted by Company or as proposed to be conducted, nor any activity of the
employees of any Acquired Company in connection with the carrying on of the
business as presently conducted or as proposed to be conducted by any Acquired
Company will conflict with or result in a breach of any material term, condition
or provision of, or constitute a default under, any agreement under which any of
such employees is now bound.
(v) Each Acquired Company is in compliance in all material
respects with all Applicable Law and Contracts relating to employment,
employment practices, immigration, wages, hours, and terms and conditions of
employment, including without limitation employee compensation matters, fair
labor standards, equal employment opportunity and affirmative action
obligations.
34.
(b) Except as set forth on Schedule 2.22(b)(i): (i) none of the
Acquired Companies is indebted to any of its officers, directors, employees or
consultants except for amounts due as normal salaries, wages, employee benefits
and bonuses and in reimbursement of ordinary business expenses on a basis
consistent with past practices; and (ii) no officer, director, employee or
consultant of any Acquired Company is indebted to any Acquired Company except
for advances for ordinary business expenses on a basis consistent with past
practices.
(c) All payments to agents, consultants and others made by an
Acquired Company or by a stockholder in connection with an Acquired Company have
been in payment of bona fide fees and commissions and not as bribes or as
otherwise illegal or improper payments. All such payments have been made
directly to the parties providing the services for which such payments were
made, and no such payment has been paid in a manner intended to avoid currency
controls or any party's tax reporting or payment obligations. Each Acquired
Company has properly and accurately reflected on its books and records: (i) all
compensation paid to and perquisites provided to or on behalf of its agents and
employees; and (ii) all compensation and perquisites that are due and payable to
such Persons, but which have not been paid or provided at the Closing Date. Such
compensation and perquisites have been properly and accurately disclosed in the
Financial Statements and other public or private reports, records or filings of
each Acquired Company, to the extent required by Law.
2.23 Labor Matters. Set forth on Schedule 2.23 is each collective
bargaining, works council, union representation or similar agreement or
arrangement to which any Acquired Company is or has been a party or by which it
is or has been bound. Except as set forth on Schedule 2.23(a)-(d):
(a) There is no organized labor strike, dispute, slowdown, or
stoppage pending or, to the knowledge of the Company, threatened against any
Acquired Company;
(b) No right of representation exists respecting any Acquired
Company's employees;
(c) No collective bargaining agreement is currently being negotiated
and, to the knowledge of the Company, no organizing effort is currently being
made with respect to the employees of any Acquired Company; and
(d) No Acquired Company nor any of its agents, representatives or
employees has committed any unfair labor practice, as defined in the National
Labor Relations Act of 1947, as amended. There is not now pending or, to the
knowledge of the Company, threatened any formal charge or complaint against any
Acquired Company by the National Labor Relations Board, any state or local labor
or employment agency or any representative thereof, and the execution or
consummation of this Agreement will not result in any such charge or complaint.
2.24 Employee Benefit Matters.
(a) Except as set forth on Schedule 2.24(a), no Acquired Company has
outstanding and is a party to or subject to liability under any plan or policy,
whether or not written and whether or not considered legally binding, that
involves (A) any pension, retirement, profit sharing, deferred compensation,
bonus, stock option, stock purchase, phantom stock,
35.
health, welfare, or incentive plan; or (B) welfare or "fringe" benefits,
including without limitation vacation, severance, disability, medical,
hospitalization, dental, life and other insurance, tuition, company car, club
dues, sick leave, maternity, paternity or family leave, or other benefits
(together the "Plans" and each item thereunder a "Plan"). True, correct, and
complete copies of all documents creating or evidencing any Plan listed on
Schedule 2.24(a) have been made available in its due diligence materials to
Parent. There are no negotiations, demands or proposals which are pending or, to
the knowledge of the Company, threatened or which have been made since any
Acquired Company's inception which concern matters now covered, or that would be
covered, by the foregoing types of Plans.
(b) Each Plan complies with, has been administered, operated and
maintained in material compliance with its terms and in material compliance
with, and none of the Acquired Companies has any direct or indirect liability
for non-compliance under, the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") or any other Law applicable to any Plan. To the extent
applicable with respect to each Plan, true, correct and complete copies of the
most recent Forms 5500 have been made available in its due diligence materials
to Parent. Each Plan that is intended to qualify under Section 401(a) or Section
509(c)(9) of the Code has received a favorable determination letter from the
Internal Revenue Service (a copy of which has been made available in its due
diligence materials to Parent) and related trusts have been determined to be
exempt from taxation. Nothing has occurred that would cause, and no Action is
pending or threatened, which could result in the loss of such exemption or
qualification.
(c) No Acquired Company (i) has made or has had an obligation to
make any contributions to any multi-employer plan (as defined in ERISA) or to
any pension plan subject to the minimum funding standards of ERISA or Title IV
of ERISA, (ii) has ever been a member of a controlled group which contributed to
or has had an obligation to contribute to any such plans and (iii) has ever been
under common control with an employer which contributed to or has ever had an
obligation to contribute to any such plans.
(d) Except as set forth in Schedule 2.24(d), none of the Acquired
Companies has terminated or taken action to terminate any employee benefit plan,
and no "reportable event" (as defined in ERISA) or "prohibited transaction" (as
defined in the Code or ERISA) has occurred or, to the knowledge of the Company,
is threatened to occur with respect to any Plan.
(e) No Acquired Company is required under Law to engage an
independent auditor to render an opinion on statements of assets and liabilities
of any of the Plans.
(f) All of the Plans, to the extent applicable, are in material
compliance with the continuation of health benefit provisions contained in the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"),
and with Section 1862(b)(4)(A)(i) of the Social Security Act, and none of the
Acquired Companies has any liability for any excise tax imposed by Code Section
5000. True, correct and complete copies of the most recent notification to
employees of their COBRA rights and form of letter(s) distributed upon the
occurrence of a qualifying event have been made available in its due diligence
materials to Parent. Other than as required by COBRA, none of the Acquired
Companies has any liability or obligation to provide life, medical or other
welfare benefits to former or retired employees.
36.
(g) With respect to any Plan which is a welfare plan as defined in
Section 3(1) of ERISA: (i) each such welfare plan which is intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of the
Code meets such requirements; and (ii) there is no disqualified benefit (as such
term is defined in Code Section 4976(b)) which would subject any Acquired
Company or Parent to a tax under Code Section 4976(a).
(h) Full payment has been made of all amounts due under each of the
Plans and to each Person employed or formerly employed by any Acquired Company
that are required under the terms of the Plans, and full payment will be made of
all amounts that are required to be so paid through the Closing Date.
(i) Except as set forth on Schedule 2.24(i), all contributions with
respect to the Plans for all periods ending prior to the Closing Date (including
periods from the first day of the current plan year to the Closing Date) will be
made prior to the Closing Date by the Acquired Companies and all members of the
controlled group in accordance with past practice and the recommended
contribution in the applicable actuarial report.
(j) All insurance premiums (including premiums to the Pension
Benefit Guaranty Corporation (the "PBGC") have been paid in full, subject only
to normal retrospective adjustments in the "Ordinary Course of Business" to the
extent applicable to the Plans for policy years or other applicable policy
periods ending on or before the Closing Date.
(k) Except as described on Schedule 2.24(k), there will be no
incidence of severance payments or any other termination benefits for which
Parent or any Acquired Company will be responsible as a consequence of the
transactions contemplated hereby.
(l) There is no pending or, to the knowledge of the Company,
threatened legal action, proceeding or investigation against or involving any
Plan described in Schedule 2.24(a) hereof and there is no basis for any such
legal action, proceeding or investigation.
(m) All expenses and liabilities relating to all of the Plans
described on Schedule 2.24(a) have been, and will be on the Closing Date, fully
and properly accrued on each Acquired Company's books and records and the
Financial Statements reflect all of such liabilities in a manner satisfying the
requirements of Financial Accounting Standards 87 and 88.
(n) Except as described on Schedule 2.24(n), each Plan (including
any Plan covering former employees of any Acquired Companies) may be
unilaterally amended, varied, modified or terminated in whole or in part by the
relevant Acquired Company or Parent on or at any time after the Closing Date,
subject to the requirements of applicable Law and any contractual commitments,
and any such contractual commitments are described on Schedule 2.24.
2.25 Overtime, Back Wages, Vacation and Minimum Wage. Except as set forth
in Schedule 2.25, no present or former employee of any Acquired Company has
given notice to any Acquired Company of, and there is no valid basis for, any
claim against any Acquired Company (whether under Law, any employment agreement
or otherwise) on account of or for (a) overtime pay, other than overtime pay for
the current payroll period, (b) wages or salary (excluding current bonus,
accruals and amounts accruing under "employee benefit plans," as defined in
37.
Section 3(3) of ERISA) for any period other than the current payroll period or
(c) vacation, time off or pay in lieu of vacation or time off, other than that
earned in respect of the current fiscal year.
2.26 Occupational Safety and Health. No Acquired Company has received any
written notice from any Government entity alleging a violation of occupational
safety or health standards. There have been no workers compensation claims
against any Acquired Company made over the three (3) years preceding the date
hereof.
2.27 Customers and Suppliers. Schedule 2.27 sets forth a true, complete
and correct list of the ten (10) largest customers of the Acquired Companies and
the ten (10) largest suppliers of the Acquired Companies, by volume of sales and
purchases, respectively (by dollar volume) for each of the years ended December
31, 2002 and 2003. Except as disclosed on Schedule 2.27, no Acquired Company has
received any written or express notice from any material supplier of any
Acquired Company (including those listed on Schedule 2.27) to the effect that,
and has no reason to believe that, any such supplier will stop or materially
decrease the rate of supplying materials, products or services to any Acquired
Company. Except as disclosed on Schedule 2.27, no Acquired Company has received
any written or other notice from any material customer of any Acquired Company
(including those listed on Schedule 2.27) to the effect that such customer will
cease doing business with any Acquired Company.
2.28 Product and Service Warranties. Set forth on Schedule 2.28(a) are the
standard forms of product and service warranties and guarantees used by each
Acquired Company and copies of all other outstanding product and service
warranties and guarantees. Except as disclosed on Schedule 2.28(b), no oral
product or service warranties or guarantees have been authorized or made
containing terms less favorable to an Acquired Company in any material respect
than the terms of the forms of product and service warranties and guarantees set
forth on Schedule 2.28(a). No product or service warranty or similar claims have
been made against an Acquired Company and, to the Company's knowledge, there is
no basis for any such claim after the date hereof. No Acquired Company has
received any notice from any Person asserting any valid claim, or asserting any
valid basis for any action or proceeding, and no Person has any valid claim
against any Acquired Company under any Law relating to unfair competition, false
advertising or other similar claims arising out of product or service
warranties, guarantees, specifications, manuals or brochures or other
advertising materials. The aggregate loss and expense (including out-of-pocket
expenses) attributable to all product and service warranties and guarantees and
similar claims now pending or asserted against any Acquired Company hereafter
with respect to products manufactured prior to the Effective Time (which, for
the avoidance of doubt, shall include only those products which have been
shipped or delivered prior to the Effective Time (including without limitation
those products engaged in customer trials) or which constitute finished goods
inventory prior to the Effective Time) or services rendered on or prior to the
Effective Time will not exceed $200,000.
2.29 Product Liability Claims. None of the Acquired Companies has received
written or other notice or written or other information as to any claim or
allegation of, and no Acquired Company has been a party or subject to any Action
or Order relating to, bodily or personal injury, death, or property or economic
damages, any claim for punitive or exemplary damages, any claim for contribution
or indemnification, or any claim for injunctive relief in connection
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with any product manufactured, sold or distributed by, or in connection with any
service provided by any Acquired Company or its employees. The uninsured portion
of aggregate loss and expense (including out-of-pocket expenses) attributable to
all product liability and similar claims now pending or hereafter asserted
against any Acquired Company with respect to products manufactured prior to the
Effective Time (which, for the avoidance of doubt, shall include only those
products which have been shipped or delivered prior to the Effective Time
(including without limitation those products engaged in customer trials) or
which constitute finished goods inventory prior to the Effective Time) or
services rendered on or prior to the Effective Time will not exceed $200,000.
2.30 Product Safety Authorities. No Person affiliated with or on behalf of
any Acquired Company has been required to file any notification or other report
with or provide information to any Government entity or product safety standards
group concerning actual or potential defects or hazards with respect to any
product manufactured, sold, distributed or put in commerce by any Acquired
Company or in connection with its business, and there exist no grounds for the
recall of any such product.
2.31 Foreign Operations and Export Control. At all times, each of the
Acquired Companies has acted:
(a) pursuant to valid qualifications to do business in all
jurisdictions outside the United States where such qualification is required by
local Law;
(b) in compliance with all applicable foreign Laws, including
without limitation Laws relating to foreign investment, foreign exchange
control, immigration, employment and Taxation;
(c) without notice of violation of and in compliance with all
relevant anti-boycott Laws, including without limitation Section 999 of the Code
and regulations and guidelines issued pursuant thereto and the Export
Administration Regulations administered by the U.S. Department of Commerce, as
amended from time to time, including all reporting requirements;
(d) without violation of any export control or sanctions Laws,
including without limitation the Export Administration Regulation administrated
by the U.S. Department of Commerce and sanctions and embargo executive orders
and regulations administered by the Office of Foreign Assets Control of the U.S.
Treasury Department, as amended from time to time; and
(e) without violation of the Foreign Corrupt Practices Act of 1977,
as amended.
2.32 Brokers, Finders, Other Offers. Except as set forth in Schedule 2.32,
no finder, broker, agent, or other intermediary, acting on behalf of any
Acquired Company, is entitled to a commission, fee, or other compensation or
obligation in connection with the negotiation or consummation of this Agreement
or any of the transactions contemplated hereby. None of the Acquired Companies
or any of the Stockholders of the Company is subject to any letter of intent,
agreement, understanding or commitment with any third party (other than Parent)
or its agents
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representatives, written or unwritten, regarding any offer, proposal, or
indication of interest involving the purchase, sale or transfer (including but
not limited to, by means of a merger, recapitalization, joint venture or the
like) of all or a controlling portion of the capital stock or other ownership
interest in any Acquired Company or all or a material portion of the business or
assets of any Acquired Company.
2.33 Information Supplied. None of the information supplied or to be
supplied by any of the Acquired Companies, or to the knowledge of the Company,
by the Preferred Stockholders or any of their affiliates, directors, officers,
employees, agents or representatives, in writing specifically for inclusion or
incorporation by reference in, and which is included or incorporated by
reference in: (i) the Hearing Notice, the Permit Application and any
Informational Documents; or (ii) any document filed or to be filed by Parent
with the SEC or any Government authority in connection with the transactions
contemplated hereby, will, at the time such documents are filed, and, in the
case of any Resale Registration Statement or any amendment or supplement
thereto, when the same becomes effective, at the Effective Time, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
2.34 Certain Key Employees. Each of the employees of the Acquired
Companies listed on Schedule 2.34 has executed and delivered to the Company an
employment agreement or has accepted in writing an employment offer letter (with
respect to each such employee, such employment agreement or offer letter being
hereinafter referred to as an "Offer Letter"), each dated as of the date of this
Agreement, to be effective at the Effective Time, and the Acquired Company
employing such employee has executed and delivered to Parent a true and complete
copy of each such fully executed Offer Letter.
2.35 Disclosure. Neither this Agreement nor any of the schedules,
attachments or the exhibits hereto or any agreements contemplated hereby contain
any untrue statement of material fact or omit a material fact necessary to make
each statement contained herein or therein, in light of the circumstances under
which they were made, not misleading. There is no fact which has not been
disclosed to Parent of which the Company has knowledge and which has had or
could reasonably be anticipated to have a Company Material Adverse Effect (as
hereinafter defined) or Company Material Adverse Change (as hereinafter
defined).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PREFERRED STOCKHOLDERS
Each of the Preferred Stockholders hereby severally, and not
jointly and severally, makes (with respect to itself only) the following
representations and warranties to Parent and the Acquisition Subsidiary, each of
which is true and correct on the date hereof and each of which shall survive the
Closing as provided in Article IX.
3.1 Preferred Stockholders' Representations and Warranties.
(a) Such Preferred Stockholder has the full power and authority to
execute, enter into and deliver this Agreement and the Escrow Agreement, to
perform its obligations
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hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.
(b) No permit, consent, waiver, approval or authorization of, or
declaration to or filing or registration with, any Government authority or third
party is required in connection with the execution, delivery or performance of
this Agreement or the Escrow Agreement or a Voting Agreement by such Preferred
Stockholder or the consummation of the transactions contemplated hereby and
thereby.
(c) This Agreement and the Escrow Agreement and the Voting
Agreements have been duly executed and delivered by such Preferred Stockholder
and each constitutes a legal, valid and binding obligation of such Preferred
Stockholder, enforceable against such Preferred Stockholder in accordance with
its terms, except to the extent that enforceability hereof and thereof may be
limited by bankruptcy and other similar laws affecting the rights and remedies
of creditors generally and general equitable principles.
(d) Such Preferred Stockholder owns beneficially and of record the
number and type of Company Shares as are set forth next to such Preferred
Stockholder's name on Schedule 2.4, free and clear of all Liens, except for
Liens contained in the agreements listed on Schedule 2.4.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby makes the following representations and warranties to
Company and the Preferred Stockholders, each of which is true and correct on the
date hereof and each of which shall survive the Closing as provided in Article
IX; provided, however, that in the event of a Cash Transaction, the
representations and warranties set forth in the second sentence of Section
4.1(a) and in Sections 4.1(b), 4.2, 4.6, 4.7 and 4.8 shall be deemed cancelled
and of no force and effect and shall not be deemed to have been made by Parent
as of the date hereof or as of the Closing. As used in this Article IV and
elsewhere in this Agreement, "knowledge" of the Parent or "to the Parent's
knowledge" or similar expressions with respect to the Parent mean the actual
knowledge of ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ after due
inquiry and review of the Parent's books and records and due inquiry of
appropriate employees of the Parent.
4.1 Corporate Existence; Authority; No Conflict; Consents.
(a) Parent is a corporation, duly organized, validly existing and in
good standing under the Laws of the State of California. The entire authorized
capital stock of Parent consists solely of 200,000,000 shares of Common Stock,
without par value, of which 63,157,380 shares were issued and outstanding as of
August 13, 2004.
(b) All of the shares of Parent Common Stock to be issued in the
Merger have been duly authorized and, upon consummation of the Merger, will be
validly issued, fully paid and nonassessable and issued in compliance with and
not subject to or issued in violation of any purchase option, call option, right
of first refusal, preemptive right, subscription right or any similar right
under any provision of applicable state law, the Parent's Articles of
Incorporation or Bylaws or any agreement to which Parent is a party or is
otherwise bound.
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(c) Acquisition Subsidiary is a corporation, duly organized, validly
existing and in good standing under the Laws of the State of New York. The
entire authorized capital stock of Acquisition Subsidiary consists solely of
1,000 shares of Common Stock, par value $0.01 per share, of which 1,000 shares
are issued and outstanding. Parent owns all issued and outstanding capital stock
of Acquisition Subsidiary, free and clear of any and all Liens. Acquisition
Subsidiary was formed by Parent solely for the purpose of engaging in and
facilitating the transactions contemplated by this Agreement, has engaged in no
other business activities except in connection therewith and has conducted its
operations only as contemplated by this Agreement.
(d) Each of Parent and Acquisition Subsidiary has all requisite
power and authority to execute and deliver this Agreement and the Escrow
Agreement, to perform its respective obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby.
(e) The execution and delivery of this Agreement and the Escrow
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized and approved by all necessary corporate action
on the part of Parent and Acquisition Subsidiary.
(f) Assuming due authorization, execution and delivery by the other
parties hereto, this Agreement and the Escrow Agreement constitute the valid and
binding obligation of each of Parent and Acquisition Subsidiary (to the extent a
party thereto), enforceable against each such party in accordance with its
terms, except to the extent that enforceability may be limited by bankruptcy and
other similar Laws affecting the rights and remedies of creditors generally and
general equitable principles.
(g) The execution and delivery of this Agreement and the Escrow
Agreement, and the consummation of the transactions contemplated hereby and
thereby, do not conflict with or violate (i) their respective organizational
documents; (ii) in any material respect any Law applicable to Parent or
Acquisition Subsidiary or by which any material property or asset of Parent or
Acquisition Subsidiary is bound or affected; or (iii) except as set forth on
Schedule 4.1(g), in any material respect any material note, bond, mortgage,
indenture, deed of trust, agreement, lien, contract or other material instrument
or material obligation to which Parent or Acquisition Subsidiary is a party or
by which any material property or asset of Parent or Acquisition Subsidiary is
bound.
(h) The execution and delivery of this Agreement by each of Parent
and Acquisition Subsidiary do not, and the performance of this Agreement by each
of Parent and Acquisition Subsidiary will not, require any consent, approval,
order, authorization, registration or permit of, or filing with or notification
to, any Government authority, except (i) for the pre- merger notification
requirements of the HSR Act, (ii) for the filing and recordation of Certificate
of Merger, (iii) if the Parent Common Stock to be issued in connection with the
Merger is issued as contemplated by Section 7.2, the filing of the Permit
Application and receipt of the Permit, (iv) if the Parent Common Stock to be
issued in connection with the Merger is issued as contemplated by Section
7.3(a), the consents and approvals required to be obtained in connection with
the preparation and filing with the SEC of the Resale Registration Statement and
any
42.
necessary amendments or supplements thereto; (v) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal and state securities Laws; (vi) if applicable,
the filing with The Nasdaq Stock Market, Inc. a "Notification Form: Listing of
Additional Shares" with respect to the shares of Parent Common Stock issuable in
connection with the Merger and (vii) other applicable requirements, if any, of
Federal and state securities laws and the Nasdaq National Market.
(i) Except as set forth on Schedule 4.1(i), no consent of any third
party is required for the execution by the Parent of this Agreement or the
Escrow Agreement or the consummation by the Parent or the Acquisition Subsidiary
of the transactions contemplated hereby.
4.2 Absence of Certain Changes. Since the date of the most recent Form
10-Q filed by Parent with the SEC, except as contemplated by or as disclosed in
this Agreement, there has not been a Parent Material Adverse Change (as
hereinafter defined).
4.3 No Breach of Law or Governing Document. Neither Parent nor any of its
significant subsidiaries is in default under or in breach or violation of any
Law, except to the extent that any such default, breach or violation would not
result in a Parent Material Adverse Effect. Neither Parent nor any of its
material subsidiaries is in default under or in breach or violation of any
provision of its Articles of Incorporation or its Bylaws, or other applicable
governing documents, in either case, as currently in effect, except where any
such default or breach would not be material to the ability of Parent or
Acquisition Subsidiary to consummate the merger or to perform its respective
obligations under this Agreement.
4.4 Litigation. There is no Action or Order pending or, to the knowledge
of Parent, threatened against Parent or Acquisition Subsidiary challenging,
enjoining or preventing this Agreement or the consummation of the transactions
contemplated hereby. There are no injunctions, decrees or unsatisfied judgments
outstanding against or related to Parent or any of its subsidiaries which could
or could reasonably expected to materially interfere with Parent's ability to
consummate the transactions contemplated by this Agreement.
4.5 Brokers, Finders. Except as set forth on Schedule 4.5, no finder,
broker, agent, or other intermediary, acting on behalf of Parent, any of its
subsidiaries, or any of its shareholders, is entitled to a commission, fee, or
other compensation or obligation in connection with the negotiation or
consummation of the transactions contemplated by this Agreement.
4.6 Parent SEC Reports. Since January 1, 2003, Parent has filed all
reports, schedules, forms, statements (including without limitation registration
statements) and other documents (including exhibits and other information
incorporated therein) required to be filed with the SEC. All registration
statements, forms, reports and other documents filed by Parent with or furnished
to the SEC since January 1, 2003 (including those that Parent may file after the
date hereof until the Closing) are referred to herein as the "Parent SEC
Documents." The Parent SEC Documents (a) were or will be filed on a timely basis
and (b) at the time filed, were or will be prepared in compliance in all
material respects with the applicable requirements of the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as applicable,
and the rules and regulations of the SEC thereunder applicable to such Parent
SEC
43.
Documents. Except to the extent corrected by a Parent SEC Document filed
subsequently (but prior to the date hereof), the Parent SEC Documents did not at
the time they were filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated in such Parent SEC Documents or
necessary in order to make the statements in such Parent SEC Documents, in light
of the circumstances under which they were made, not misleading. No subsidiary
of Parent is subject to the reporting requirements of Sections 13(a) or 15(d) of
the Exchange Act.
4.7 Financial Statements. Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Parent SEC
Documents was prepared in accordance with GAAP applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q or
8-K promulgated by the SEC) and each presented fairly, in all material respects,
the consolidated financial position of Parent and its consolidated subsidiaries
as at the respective dates thereof and for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring year end adjustments which would not,
individually or in the aggregate, have a Parent Material Adverse Effect).
ARTICLE V
CERTAIN COVENANTS OF THE COMPANY
5.1 Execution of this Agreement; Certain Notices.
(a) Releases. The Company hereby agrees to use diligent efforts to
deliver to Parent an executed signature page to the Release in the form attached
hereto as Exhibit K (the "Release") from the Preferred Stockholders as soon as
practicable after the date hereof but in no event later than seven (7) days
after the date hereof.
(b) Notices to Holders of Options and Warrants. The Company hereby
agrees to cause to be delivered to each holder of a Company Option or Company
Warrant a notice in such form or forms as shall reasonably satisfactory to
Parent as soon as practicable after the date hereof (but in any event within ten
(10) Business Days hereafter) pursuant to which such holders shall be advised of
this Agreement and the termination of such Company Options or Company Warrants,
as applicable, prior to or at the Effective Time.
(c) Notices to Stockholders. The Company also hereby agrees that it
shall transmit to the Company's Stockholders all notices, including notices
relating to Dissenter's Rights, required under the NYBCL in connection with the
Company Stockholder Approval and any other actions of the Preferred Stockholders
required under this Agreement. The Company shall give Parent prompt written
notice of any demand received by the Company regarding Dissenter's Rights or the
exercise of Dissenter's Rights. Except with the prior written consent of Parent
(which consent shall not be unreasonably withheld) or as may otherwise be
required under applicable Law, the Company shall not make any payment with
respect to, or settle or offer to settle, any such demands.
5.2 Conduct of Business of the Company. Except as set forth in Schedule
5.2 or as otherwise expressly permitted by this Agreement or as Parent may
otherwise consent to or
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approve in writing on and after the date hereof and prior to the Closing Date,
during the period from the date of this Agreement to the Effective Time, the
Company shall, and shall cause each of the other Acquired Companies to, operate
in the Ordinary Course of Business and in compliance with all applicable Laws
and regulations and, to the extent consistent therewith, use diligent efforts to
preserve intact its current business organization, to keep available the
services of its current officers and other key employees and to preserve its
relationships with those Persons having business dealings with it to the end
that its goodwill and ongoing business shall be unimpaired at the Effective
Time. Furthermore, the Company covenants, represents and warrants that from and
after the date hereof, unless Parent shall otherwise expressly consent in
writing, the Company shall, and shall cause each of the other Acquired Companies
to, use its commercially reasonable efforts to: (i) keep in full force and
effect insurance comparable in amount and scope of coverage to insurance now
carried by each Acquired Company; and (ii) pay all accounts payable and other
obligations, when they become due and payable, in the Ordinary Course of
Business of each Acquired Company and the provisions of this Agreement, except
if the same are contested in good faith, and, in the case of the failure to pay
any material accounts payable or other obligations which are contested in good
faith, only after consultation with Parent. Without limiting the generality of
the foregoing (but subject to the above exceptions), during the period from the
date of this Agreement to the Effective Time, the Company shall not, and shall
ensure that each of the other Acquired Companies does not, except as set forth
at Schedule 5.2:
(a) (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of, any of its capital stock or other ownership
interests, (ii) split, combine or reclassify any of its capital stock or other
ownership interests or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for shares of its capital stock or
other ownership interests, (iii) purchase, redeem or otherwise acquire any
shares of capital stock or other ownership interests of any Acquired Company or
any other securities thereof or any rights, warrants or options to acquire any
such shares or other securities or (iv) make any other actual, constructive or
deemed distribution in respect of any shares of capital stock or other ownership
interests of any Acquired Company or otherwise make any payments to any holder
of any Acquired Company's securities in their capacity as such;
(b) issue, deliver, sell, pledge or otherwise encumber or subject to
any Lien any shares of its capital stock or other ownership interests of any
Acquired Company, any Company Stock Rights or any other voting securities or any
securities convertible into any such shares, voting securities or convertible
securities;
(c) amend any Acquired Company's Certificate of Incorporation or
Bylaws or similar governing documents;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the stock or assets of, or by any other
manner, any business or any Person;
(e) sell, lease, license, mortgage or otherwise encumber or subject
to any Lien or otherwise dispose of, any of its assets (including
securitizations), other than (i) in the Ordinary Course of Business and (ii)
pursuant to the proposed amendment to any Acquired Company's
45.
relationship, which has been fully disclosed to Parent;
(f) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible for
the obligations of any Person, or make any loans, advances or capital
contributions to, or investments in, any Person, except in the Ordinary Course
of Business and in amounts not material to the maker of such loan, advance,
capital contribution or investment;
(g) take, or agree to commit to take, any action that would or is
reasonably likely to result in any of the conditions to the Merger set forth in
Article VIII not being satisfied, or that would impair the ability of the
Company, Parent or the Stockholders of the Company to consummate the Merger in
accordance with the terms hereof or delay such consummation;
(h) make any capital expenditure or capital expenditures that exceed
$50,000 in the aggregate;
(i) make or revoke any Tax election, settle or compromise any Tax
liability material to any Acquired Company or any of its subsidiaries, or change
(or make a request to any taxing authority to change) its Tax or accounting
methods, policies, practice or procedures, except in each case as required by
applicable Law or GAAP;
(j) except as required under an existing Plan, (i) grant or commit
to grant any employee, shareholder, officer, director or agent of any Acquired
Company, any increase in wages, bonus, severance, profit sharing, retirement,
insurance or other compensation or benefits (other than an increase in wages in
the Ordinary Course of Business for any individual other than a director or
officer of the Company), (ii) amend or terminate any Plan, except to the extent
necessary to comply with applicable Law, (iii) establish any new compensation or
benefit plan or arrangement, or (iv) enter into any employment, consulting,
retention, termination, severance or collective bargaining agreement;
(k) take, or agree to commit to take, any action that would or is
reasonably likely to result in the acceleration of any of the Company Stock
Rights, including any action which would or is reasonably likely to cause the
Merger or the transactions contemplated thereby to accelerate any of the Company
Stock Rights;
(l) revalue any Acquired Company's assets, including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the Ordinary Course of Business or as required by GAAP
applied in a manner consistent with the historical practices of the Company;
(m) (i) enter into any contract, agreement, commitment or
arrangement (whether written or oral), other than in the Ordinary Course of
Business, or amend in any material respect any of the Contracts other than in
the Ordinary Course of Business; or (ii) enter into any written or oral
contract, agreement, commitment or arrangement providing for, or amend any
written or oral contract, agreement, commitment or arrangement to provide for,
the taking of any action that would be prohibited hereunder;
(n) pay, discharge or satisfy any claims, liabilities or obligations
(absolute,
46.
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the Ordinary Course of Business of
liabilities reflected or reserved against in the Balance Sheet or incurred in
the Ordinary Course of Business;
(o) settle or compromise any pending or threatened suit, action or
claim relating to the transactions contemplated hereby;
(p) enter into any contract, agreement, commitment or arrangement
(whether written or oral) that would limit or restrict the Surviving Corporation
and its affiliates (including Parent) or any successor thereto, from engaging or
competing in any line of business or in any geographic area;
(q) enter into any contract, bid or offer to sell products or to
provide services to third parties (whether written or oral) of $25,000 or more
that the Company knows is at a price which would result in a gross profit margin
of less than fifty percent (50%) on such contract, bid or offer to the Acquired
Companies, or any of them, on the sale of such products or provision of such
services; or
(r) authorize, or commit or agree to take, any of the foregoing
actions.
5.3 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent if any of the
following occur after the date of this Agreement: (i) any written notice of, or
other express communication relating to, a default or event, occurrence, fact,
condition, change, development or effect ("Event") which, with notice or lapse
of time or both, would become a material default under any Contract listed on
Schedule 2.12(a)-(p); (ii) receipt of any written notice or other express
communication from any third party alleging that the consent, approval, waiver
or authorization of, notice to or declaration or filing with, such third party
is or may be required in connection with the transactions contemplated by this
Agreement; (iii) receipt of any material written notice or other express
communication from any Government authority in connection with the transactions
contemplated by this Agreement; (iv) the occurrence of an event which would have
a Company Material Adverse Effect or Company Material Adverse Change; (v) the
commencement or threat of any Action involving or affecting any Acquired
Company, or any of its property or assets which, if pending on the date hereof,
would have been required to have been disclosed in or pursuant to this Agreement
or which relates to the consummation of the Merger or any material development
in connection with any Action disclosed by the Company in or pursuant to this
Agreement; (vi) the occurrence of any Event after the date hereof that would
cause a breach by the Company of any provision of this Agreement, including such
a breach that would occur if such Event had taken place on or prior to the date
of this Agreement and (vii) the discovery by the Company that any of its
representations and warranties contained herein were inaccurate in any respect
on the date hereof. "Company Material Adverse Change" and "Company Material
Adverse Effect" mean, respectively, any change or effect that is or could
reasonably be expected to be materially adverse to the business, operations,
assets, liabilities, employee relationships, earnings or results of operations,
or the condition (business, financial or otherwise), of the Acquired Companies,
taken as a whole, but shall not be deemed to include: (i) any adverse change or
effect to the extent resulting from matters, which are not of a general
47.
economic nature, that generally affect the industry in which the Acquired
Companies operate or (ii) any matters resulting from or arising in connection
with this Agreement or the transactions contemplated by this Agreement or the
announcement hereof.
(b) In addition to, and not in lieu of, the foregoing, the Company
shall deliver to Parent no later than the end of the second Business Day prior
to the Closing Date a true and complete schedule of changes (the "Update
Schedule") to any of the information contained in the Company's schedules to
this Agreement (including changes to any other representations or warranties of
the Company in Article II hereof as to which no schedules have been created as
of the date hereof but as to which a schedule would have been required hereunder
to have been created on or before the date hereof if such changes had existed on
the date hereof), which changes are required as a result of events or
circumstances occurring subsequent to the date hereof (it being understood that
the mere discovery of events or circumstances following the date hereof shall
not constitute a basis for any such change to the extent that the event occurred
or the circumstance existed prior to the date hereof) which would render any
representation or warranty inaccurate or incomplete at any time after the date
of this Agreement until the Closing Date, which Update Schedule shall be dated
as of the Closing Date (and for avoidance of doubt may be updated by the Company
in writing to reflect any additional changes which occur between the date of
initial delivery of the Update Schedule through the Closing Date, subject to
Parent having a reasonable period of time thereafter in which to review such
changes not to exceed two (2) Business Days).
(c) Except as provided in this paragraph, no such supplemental
information shall be deemed to avoid or cure any misrepresentation or breach of
warranty or constitute an amendment of any representation, warranty or statement
in this Agreement or negate any indemnity hereunder. If such supplemental
information relates to an event or circumstance occurring subsequent to the date
hereof (other than events or circumstances which arise from violation of Section
5.2) and if Parent would have the right to not consummate the transactions
contemplated by this Agreement as a result of the failure of the condition
contained in Section 8.3 on the basis of the information so disclosed and it
does not exercise such right prior to the Closing, then such supplemental
information shall constitute an amendment of the representation, warranty or
statement to which it relates for purposes of Article IX of this Agreement.
(d) For avoidance of doubt, any additions or changes appearing on
the Update Schedule which are identified by the Company as a Company Material
Adverse Effect or Company Material Adverse Change shall be identified as such in
the certificate to be delivered to Parent pursuant to Section 8.3(b). Any
changes or effects which are not identified by Company as a Company Material
Adverse Effect or Company Material Adverse Change in Company's certificate
delivered pursuant to Section 8.3(b) shall not constitute an amendment of the
representation, warranty or statement to which it relates for purposes of
Article IX of this Agreement and shall be subject to the indemnification
provisions of Article IX unless and only to the extent that Parent has, at the
request of the Company pursuant to Section 5.2, expressly consented to the
action giving rise to such changes or effects. If any such change and its effect
are reflected in the calculation of Final Working Capital, such change shall, to
the extent its effect is reflected in the calculation of Final Working Capital,
constitute an amendment of the representation, warranty or statement to which it
relates for purposes of Article IX of this
48.
Agreement and shall not be subject to the indemnification provisions of Article
IX.
5.4 Access to Information; Confidentiality. To the extent permitted by
applicable Law and subject to the Confidentiality Agreement dated April 21,
2004, between Parent and the Company (the "Confidentiality Agreement"), the
Company shall afford to Parent and to the officers, employees, accountants,
counsel, financial advisors and other representatives of Parent, reasonable
access during normal business hours during the period prior to the Effective
Time, to the Acquired Companies' properties, books, contracts, commitments,
personnel and records and, during such period, the Company shall furnish
promptly to Parent all other information concerning each Acquired Company's
business, properties and personnel as Parent may reasonably request; provided
that no investigation pursuant to this Section 5.4 shall affect or modify any
representation or warranty given by the Company. Parent agrees that it shall
coordinate its contacts with the Company's personnel (other than the Senior
Management) with a member of Senior Management, but in any event such personnel
shall be made available for such contacts at reasonable times as requested by
Parent prior to the Effective Time. Parent shall hold, and shall cause its
respective officers, employees, accountants, counsel, financial advisors and
other representatives and affiliates to hold, any nonpublic information in
accordance with the terms of the Confidentiality Agreement. Notwithstanding
anything herein to the contrary herein or in the Confidentiality Agreement,
Parent (and any employee, representative or other agent of Parent) may disclose
to any and all parties, without limitation of any kind, the Tax treatment and
Tax structure of the transactions contemplated by this Agreement and all
materials of any kind (including opinions or other Tax analyses) that are
provided to it relating to such Tax treatment and Tax structure. However, any
such information relating to the Tax treatment or Tax structure is required to
be kept confidential to the extent necessary to comply with any applicable
federal or state securities Laws.
5.5 Diligent Efforts; Cooperation. Upon the terms and subject to the
conditions set forth in this Agreement, the Company agrees to use diligent
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with Parent and Acquisition Subsidiary in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated hereby, including, but not limited to, (i) the
obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Government authorities and the making of all necessary
registrations and filings and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Government authority, (ii) timely making all necessary filings and responding to
any request for additional information and documentary materials issued under
the HSR Act, (iii) the obtaining of all necessary consents, approvals or waivers
from third parties, (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Government authority vacated or reversed, (v) the preparation and filing with
the California Commissioner (as hereinafter defined) by Parent of the Permit
Application and any necessary amendments or supplements thereto, (vi) seeking to
have the Permit obtained as soon as is reasonably practicable after filing; (vi)
in the event the Parties proceed under Section 7.3(a), the preparation and
filing with the SEC by Parent of the Resale Registration Statement and any
necessary amendments or supplements thereto, (vii) in the event the Parties
proceed under Section 7.3(a), seeking to have the Resale
49.
Registration Statement filed by Parent declared effective by the SEC as soon as
reasonably practicable after filing, (viii) (other than in a Cash Transaction)
taking such actions as may be required under applicable state securities or
"Blue Sky" Laws in connection with the issuance of the Parent Common Stock
pursuant to the Merger and (ix) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated hereby and to
fully carry out the purposes of this Agreement.
5.6 Company Stockholder Approval. Contemporaneous with the signing of this
Agreement, the Company shall deliver the Voting Agreements of the Preferred
Stockholders in the form attached as Exhibit A. The vote of the Preferred
Stockholders as described in the Voting Agreements is the requisite vote of the
Company's Stockholders in accordance with the NYBCL, the Company's Restated
Certificate of Incorporation and Bylaws and any agreement or instrument by which
the Company is bound and for such other purposes as may be necessary or
desirable in connection with effectuating the transactions contemplated hereby
(the "Company Stockholder Approval"). The Board of Directors of the Company has
adopted a resolution recommending the adoption of this Agreement by the
Company's Stockholders (the "Company Recommendation") and, subject to Section
5.10, the Board of Directors of the Company (i) will continue to recommend to
the Stockholders of the Company that they adopt this Agreement and approve the
transactions contemplated hereby and (ii) will use its diligent efforts to
obtain any necessary adoption and approval by the Company's Stockholders of this
Agreement and the transactions contemplated hereby. The Company shall take all
action necessary in accordance with this Agreement, New York Law and the
Articles of Incorporation and Bylaws of the Company to call, notice, convene,
hold and conduct a meeting of the Company's Stockholders or to secure the
written consent of the Company's Stockholders for the purpose of voting upon
approval of the Merger and the adoption of this Agreement. The Company shall
hold the a meeting of the Company's Stockholders or solicit a written consent of
the Company's Stockholders providing for the Company Stockholder Approval, as
the case may be, as soon as practicable and in no event later than fifteen (15)
days following the date the California Commissioner issues the Permit or, in the
event that the Parties proceed under Section 7.3, as soon as practicable (and in
any event no later than fifteen (15) days) after Parent notifies the Company of
its election to proceed with an alternative transaction. If the Company will
call a meeting of the Company's Stockholders, the Company will consult with
Parent regarding the date of the meeting and shall not postpone or adjourn the
meeting (other than for the absence of a quorum and postponements and
adjournments not to exceed five (5) Business Days in the aggregate necessary for
the sole purpose of obtaining additional votes in order to obtain the requisite
vote of the Company's Stockholders necessary to approve the Merger and this
Agreement). The Company's obligation with regard to a meeting shall not be
affected by the commencement, disclosure, announcement or submission to the
Company of any Company Acquisition Proposal (as hereinafter defined). The
Company shall exercise diligent efforts to take all other action necessary to
secure the vote or consent of the Company Stockholders required to effect each
of the transactions contemplated by this Agreement.
5.7 Compliance. In consummating the Merger and the other transactions
contemplated hereby, the Company shall, and shall cause each other Acquired
Company to, comply with all applicable Laws, including without limitation with
respect to the information and consultation of Steleus SAS Work's Council.
50.
5.8 Securities and Stockholder Materials. The Company shall send to Parent
a copy of all material reports and materials as and when it sends the same to
its Stockholders or it or any other Acquired Company sends any material reports
and materials to any Government authority, subject to restrictions required by
Law.
5.9 Takeover Statutes. If any "business combination," "fair price,"
"moratorium," "control share acquisition" or other similar anti-takeover statute
or regulation enacted under state or federal Law in the United States (each a
"Takeover Statute") is or may become applicable to the Merger or any of the
other transactions contemplated hereby, the Company will grant approvals
required by any Takeover Statute, and will take such other actions as are
necessary so that the Merger or any the other transactions contemplated hereby
may be consummated as promptly as practicable on the terms contemplated hereby
or thereby and will otherwise act to eliminate or minimize the effects of any
Takeover Statute on the Merger or any of the other transactions contemplated
hereby.
5.10 No Solicitation.
(a) The Company shall, and shall direct and use its commercially
reasonable efforts to cause its and all other Acquired Company's officers,
directors, employees, representatives and agents to, immediately cease any
discussions or negotiations with any parties that may be ongoing with respect to
a Company Acquisition Proposal. The Company shall not authorize or permit any of
its or any other Acquired Company's officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any other Acquired Company to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action designed or reasonably likely to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Company Acquisition Proposal, (ii)
participate in any discussions or negotiations regarding any Company Acquisition
Proposal or (iii) enter into any agreement or agreement in principle with any
Person that has made a Company Acquisition Proposal or such a proposal, inquiry
or request or any such Person's affiliates; provided, however, that prior to
obtaining the Company Stockholder Approval the Company may engage in discussions
or negotiations with, and furnish information concerning the Company and its
businesses, properties and assets to, any Person which makes a Company
Acquisition Proposal if, and only if, (A) such Person made a Company Acquisition
Proposal which did not result from a violation by the Company of its obligations
under this Section 5.10 and at such time the Company has complied with its
obligations under this Section 5.10, and the Company is proceeding in good faith
with respect to its obligations under Section 5.6, (B) such Company Acquisition
Proposal constitutes a Company Superior Proposal (as hereinafter defined) and
(C) a majority of the Board of Directors of the Company concludes in good faith
after consultation with its outside counsel that the failure to take such action
would violate the fiduciary obligations of such Board of Directors to the
Company or to the Company's Stockholders under applicable Law. For purposes of
this Agreement, "Company Acquisition Proposal" means any inquiry, proposal or
offer from any Person relating to any direct or indirect acquisition or purchase
of 15% or more of the assets of any Acquired Company or 15% or more of any class
of equity securities of any Acquired Company, any tender offer or exchange offer
that if consummated would result in any Person beneficially owning 15% or more
of any class of equity securities of any Acquired Company, any merger,
consolidation, share exchange, business combination,
51.
recapitalization, liquidation, dissolution or similar transaction involving any
Acquired Company other than the transactions contemplated by this Agreement, or
any other transaction the consummation of which would reasonably be expected to
impede, interfere with, prevent or materially delay the Merger. For purposes of
this Agreement, "Company Superior Proposal" shall mean a bona fide written
Company Acquisition Proposal (with all of the percentages included in the
definition of Company Acquisition Proposal increased to 100% for purposes of
this definition) that a majority of the members of the Board of Directors of the
Company determine in good faith, after consultation with its outside legal
counsel and financial advisors (w) provides to the Company's Stockholders
consideration with a value per share of each Company Share that exceeds the
value per share of each Company Share provided for in this Agreement (after
taking into account any revisions made or proposed by Parent or Acquisition
Subsidiary), (x) would result in a transaction, if consummated, that would be
more favorable to the Company's Stockholders (taking into account all facts and
circumstances, including all legal, financial, regulatory and other aspects of
the proposal and the identity of the offeror) than the transactions contemplated
hereby, (y) is reasonably likely to be consummated in a timely manner (taking
into account all legal, financial, regulatory and other relevant
considerations), and (z) is made by a Person or group of Persons who have
provided the Company with reasonable evidence that such Person or group has or
will have sufficient funds to complete such Company Acquisition Proposal.
(b) Except as provided in the next sentence, the Board of Directors
of the Company shall not withdraw or modify the Company Recommendation. The
Board of Directors of the Company shall only be permitted to (i) withdraw or
modify in a manner adverse to Parent and Acquisition Subsidiary (or not to
continue to make) the Company's Recommendation as a result of a Company Superior
Proposal or an Unknown Event (as hereinafter defined) or (ii) cause the Company
to enter into an agreement relating to a Company Superior Proposal if, but only
if, (A) the Company Stockholder Approval has not then been obtained, (B) a
majority of the Board of Directors of the Company has reasonably determined,
following consultation with outside counsel, that the failure to take such
action would result in a failure of the Board of Directors to comply with its
fiduciary duties imposed by applicable Law, (C) the Company has given Parent and
Acquisition Subsidiary five (5) Business Days' prior written notice of its
intention to withdraw or modify such recommendation or enter into such
agreement, (D) the Company has complied with its obligations under this Section
5.10, and (E) simultaneously with entering into any such agreement, the Company
shall have terminated this Agreement pursuant to Section 10.1(a)(ix) and paid
Parent the breakup fee in accordance with Section 10.1(c). Nothing contained in
this Section 5.10 shall prohibit the Company from taking and disclosing to its
Stockholders a position contemplated by Rule 14-e(2)(a) promulgated under the
Exchange Act or from making any disclosure to the Company or the Company's
Stockholders if, in the good faith judgment of a majority of the Board of
Directors of the Company, after consultation with outside counsel, failure so to
disclose would be inconsistent with its fiduciary duties to the Company or the
Company's Stockholders under applicable Law; provided, that unless and until
this Agreement is terminated in accordance with Section 10.1 hereof, nothing in
this sentence shall affect the obligations of the Company or the rights of
Parent or Acquisition Subsidiary under any other provision of this Agreement.
For purposes of this Agreement, the term "Unknown Event" means any event that
occurs after the date of this Agreement other than a Company Acquisition
Proposal that does not constitute a Company Superior Proposal, that a majority
of the Board of Directors of the Company determine in good faith, after
consultation
52.
with its outside legal and financial advisors (but without the requirement that
such consultation form the basis for such determination) evidences clearly and
convincingly that the fiduciary duties of the Board of Directors requires a
change to the Company Recommendation.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.10, the Company shall promptly (but in
any case later than one calendar day) advise Parent orally and in writing of any
Company Acquisition Proposal, the material terms and conditions of such request
or Company Acquisition Proposal and the identity of the Person making such
request or Company Acquisition Proposal. The Company will keep Parent fully
informed of the status and details (including amendments or proposed amendments)
of any such request or Company Acquisition Proposal. In addition, the Company
will promptly (but in any case later than one calendar day) notify Parent of any
determination by the Company's Board of Directors that a Company Superior
Proposal has been made.
5.11 Company Preferred Stock and Company Stock Rights. During the period
from the date of this Agreement to the Effective Time, the Company agrees that
it will not without the prior written consent of Parent (i) issue or (ii)
authorize the issuance of or (iii) except as expressly provided herein, permit
the conversion or exercise of, or take any action that would require or permit
the conversion or exercise of, any shares of its capital stock or Company Stock
Rights.
5.12 Company Stock Rights. Except as otherwise provided herein, the
Company shall not purchase, redeem, cancel, terminate, amend or otherwise change
in any respect any Company Stock Rights that exist on the date hereof.
5.13 Affiliate Letters. Unless the Parties proceed under Section 7.3, at
least ten (10) days prior to the Closing Date, the Company shall deliver to
Parent a list of names and addresses of those Persons who were or will be, at
the time Company Stockholder Approval is granted, an "Affiliate" of the Company
within the meaning of Rule 145 of the rules and regulations promulgated under
the Securities Act. The Company shall deliver or cause to be delivered to
Parent, prior to the Closing Date, from each of the Affiliates of the Company
identified in the foregoing list, an Affiliate Letter in substantially the form
attached hereto as Exhibit L (an "Affiliate Letter").
5.14 Termination of Special Management Incentive Bonus Plan. The Company
shall unconditionally and irrevocably terminate the Special Management Incentive
Bonus Plan (the "Bonus Plan") adopted at the meeting of the Company's Board of
Directors on February 25, 2004 and any other similar plan of any Acquired
Company prior to Closing. The Company will not pay out any bonuses under the
Bonus Plan in connection with the transactions contemplated by this Agreement.
5.15 Termination of 401(k) Plan. To the extent permitted under applicable
Law, the Company shall terminate the Steleus Inc. 401(k) Plan (the "401(k)
Plan") effective on the day prior to Closing and shall execute or cause to be
executed appropriate documentation to effect the termination.
53.
5.16 Software Licenses. The Company shall cause Steleus SAS, prior to
Closing, to obtain a valid fully paid up license for each item of operating
software disclosed on Schedule 2.14(e)(viii) for which Steleus SAS does not own
a valid license (the "End User Licenses").
5.17 Patent Application Assignment. The Company shall cause ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ to execute an assignment in form and substance reasonably satisfactory
to Parent assigning to the Company all of his right, title and interest in and
to the U.S. Provisional Patent Application Serial No. 60/537,117, "Configurable
Network Analysis," filed with the U.S. Patent and Trademark Office on January
16, 2004.
5.18 Customer Register. The Company shall cause Steleus SAS, prior to
Closing, to prepare and maintain the register required under applicable Law
confirming that its customers in France themselves have the appropriate permits.
ARTICLE VI
COVENANTS OF PARENT
6.1 Notification of Certain Matters.
(a) For purposes of this Agreement, "Parent Material Adverse Change"
and "Parent Material Adverse Effect" mean, respectively, any change or effect
that is materially adverse to the business operations, financial condition,
assets, liabilities, or results of operations of the Parent, but shall not be
deemed to include: (i) any adverse change or effect to the extent resulting from
matters, which are not of a general economic nature, that generally affect the
industry in which Parent operates, (ii) any matters resulting from or arising in
connection with this Agreement or the transactions contemplated by this
Agreement or the announcement hereof or (iii) any change in stock price or
trading volume, provided that this clause (iii) shall not exclude any underlying
effect that may have caused such change in stock price or trading volume.
(b) Parent shall deliver to Company no later than the end of the
second Business Day prior to the Closing Date a true and complete schedule of
changes (the "Parent Update Schedule") to any of the information contained in
the Parent's schedules to this Agreement (including changes to any other
representations or warranties of the Company in Article IV hereof as to which no
schedules have been created as of the date hereof but as to which a schedule
would have been required hereunder to have been created on or before the date
hereof if such changes had existed on the date hereof), which changes are
required as a result of events or circumstances occurring subsequent to the date
hereof (it being understood that the mere discovery of events or circumstances
following the date hereof shall not constitute a basis for any such change to
the extent that the event occurred or the circumstance existed prior to the date
hereof) which would render any representation or warranty inaccurate or
incomplete at any time after the date of this Agreement until the Closing Date,
which Parent Update Schedule shall be dated as of the Closing Date (and for
avoidance of doubt may be updated by the Parent in writing to reflect any
additional changes which occur between the date of initial delivery of the
Parent Update Schedule through the Closing Date, subject to Company having a
reasonable period of time thereafter in which to review such changes not to
exceed two (2) Business Days).
54.
(c) Except as provided in this paragraph, no such supplemental
information shall be deemed to avoid or cure any misrepresentation or breach of
warranty or constitute an amendment of any representation, warranty or statement
in this Agreement or negate any indemnity hereunder. If such supplemental
information relates to an event or circumstance occurring subsequent to the date
hereof and if Company would have the right to not consummate the transactions
contemplated by this Agreement as a result of the failure of the condition
contained in Section 8.2 on the basis of the information so disclosed and it
does not exercise such right prior to the Closing, then such supplemental
information shall constitute an amendment of the representation, warranty or
statement to which it relates for purposes of Article IX of this Agreement.
(d) For avoidance of doubt, any additions or changes appearing on
the Parent Update Schedule which are identified by the Parent as a Parent
Material Adverse Effect or Parent Material Adverse Change shall be identified as
such in the certificate to be delivered to Company pursuant to Section 8.2(b).
Any changes or effects which are not identified by Parent as a Parent Material
Adverse Effect or Parent Material Adverse Change in Parent's certificate
delivered pursuant to Section 8.2(b) shall not constitute an amendment of the
representation, warranty or statement to which it relates for purposes of
Article IX of this Agreement and shall be subject to the indemnification
provisions of Article IX unless and only to the extent that Company has, at the
request of the Parent, expressly consented to the action giving rise to such
changes or effects.
6.2 Diligent Efforts; Cooperation. Upon the terms and subject to the
conditions set forth in this Agreement, Parent agrees to use diligent efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the Company in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated hereby,
including, but not limited to, (i) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Government authorities and the
making of all necessary registrations and filings and the taking of all steps as
may be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Government authority, (ii) timely making all necessary
filings and responding to any request for additional information and documentary
materials issued under the HSR Act, (iii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iv) the defending of any
lawsuits or other legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Government authority vacated or reversed, (v) the
preparation and filing with the California Commissioner by Parent of the Permit
Application and any necessary amendments or supplements thereto, (vi) seeking to
have the Permit obtained as soon as is reasonably practicable after filing; (vi)
in the event the Parties proceed under Section 7.3(a), the preparation and
filing with the SEC by Parent of the Resale Registration Statement and any
necessary amendments or supplements thereto, (vii) in the event the Parties
proceed under Section 7.3(a), seeking to have the Resale Registration Statement
filed by Parent declared effective by the SEC as soon as reasonably practicable
after filing, (viii) (other than in a Cash Transaction) taking such actions as
may be required under applicable state securities or "Blue Sky" Laws in
connection with the issuance of the Parent Common Stock pursuant to the Merger
and (ix) the execution and delivery of any additional instruments
55.
necessary to consummate the transactions contemplated hereby and to fully carry
out the purposes of this Agreement.
6.3 Compliance. In consummating the Merger and the other transactions
contemplated hereby, Parent shall comply with all applicable Laws.
6.4 Company Employee Retention Bonus Program.
(a) Employee Cash Bonuses. As soon as administratively practicable
following the Effective Time and in accordance with Section 6.4(c), Parent shall
pay or cause the Surviving Corporation to pay cash retention bonuses
(collectively, the "Cash Retention Bonuses") in the aggregate amount of
$1,700,000 to the employees of the Acquired Companies identified on Schedule
6.4(a) who are employed by the Company on the date hereof and remain employed by
the Company through the Effective Time (the "Bonus Employees").
(b) Employee Equity Bonuses. As soon as practicable following the
Effective Time and in accordance with Section 6.4(c), Parent shall grant to the
Bonus Employees, under Parent's 2003 Equity Incentive Plan for New Employees
equity retention bonuses in the form of restricted stock units for Parent Common
Stock ("RSUs") covering an aggregate number of shares of Parent Common Stock
that results from dividing $1,700,000 by the Closing Stock Price. All such RSUs
shall vest in full on the one-year anniversary of the Closing Date, provided the
Bonus Employee remains an employee of the Company (or of any affiliate,
including Parent) through such date.
(c) Allocation. The allocation of the Cash Retention Bonuses and
Equity Retention Bonuses payable under Sections 6.4(a) and 6.4(b) shall be
determined in accordance with Schedule 6.4(c), and the payment of such Cash
Retention Bonuses and Equity Retention Bonuses shall be made in accordance with
all applicable Laws and withholding requirements.
6.5 Employee Matters. After the Closing, Parent will cause the Surviving
Corporation to initially maintain the employment of the employees of the
Acquired Companies; provided, that Parent and/or Surviving Corporation shall
have the right and authority to terminate, at its sole cost and expense, the
employment of any such employee at any time thereafter or modify the wages,
hours or other terms and conditions of employment of any such employee subject
to any applicable contractual or other legal restrictions in its sole and
absolute discretion. After the Closing, Parent shall likewise cause the
Surviving Corporation to initially maintain in effect for the benefit of such
employees all of the Acquired Companies' existing benefit plans; it being
agreed, however, that notwithstanding the foregoing, it is the intention of
Parent to take any and all action in its sole and absolute discretion with
respect to the Acquired Companies' existing benefit plans, including terminating
same, and to transfer all such employees who so remain in the employ of the
Surviving Corporation to Parent's benefit plans at such time and under such
circumstances as Parent shall deem appropriate and advisable. Parent agrees that
to the extent it transfers any such employees to Parent's benefit plans, such
employees shall be credited, to the extent such crediting is permitted under
such plans, for their years of service or periods of creditable coverage with
the Company prior to the Closing in determining eligibility and vesting
thereunder and in determining the amount of benefits under any applicable sick
leave, vacation or severance plan but for no other purpose.
56.
6.6 Parent Grant of Options and/or Restricted Stock Units. As soon as
administratively practicable after the Effective Time, but no later than thirty
(30) days after the Closing Date, and in addition to the retention bonuses
payable under Section 6.4, Parent shall grant, under Parent's equity incentive
plans, to certain persons who are employees of the Company immediately prior to
and following the Effective Time and who remain employed by the Company on the
date of grant, options to purchase shares of Parent Common Stock and/or RSUs.
Such options and RSUs shall be in such amounts and shall be allocated by Parent
among such employees in such manner as Parent may determine in its sole and
absolute discretion.
6.7 Nasdaq Stock Market Listing. Parent shall cause the Parent Common
Stock to be issued pursuant to this Agreement to the Preferred Stockholders in
connection with the Merger to be authorized for trading upon the Effective Time
on The Nasdaq Stock Market, Inc. and shall, if required by the rules of The
Nasdaq Stock Market, Inc., file timely with The Nasdaq Stock Market, Inc. a
Notification Form Listing of Additional Shares with respect to the Parent Common
Stock to be issued pursuant to the transactions contemplated in this Agreement.
6.8 Maintenance of Directors and Officers Indemnification.
(a) Parent shall, to the fullest extent permitted by law, cause the
Surviving Corporation from and after the Effective Time to honor all the
Company's obligations to indemnify, defend and hold harmless (including any
obligations to advance funds for expenses) the current and former directors and
officers of the Company against all losses, claims, damages or liabilities
arising out of acts or omissions by any such directors and officers occurring
prior to the Effective Time to the maximum extent that such obligations of the
Company exist on the date of this Agreement, whether pursuant to the Articles of
Incorporation or Bylaws, as amended to date and such obligations shall survive
the Merger and shall continue in full force and effect in accordance with the
terms of the Articles of Incorporation or Bylaws, as amended to date, or
contract, from the Effective Time until the expiration of the applicable statute
of limitations with respect to any claims against such directors or officers
arising out of such acts or omissions.
(b) From and after the Effective Time and for a period of six (6)
years thereafter, subject to the limitations set forth herein, Parent shall
maintain or shall cause the Company to maintain in effect policies of directors'
and officers' liability insurance with respect to claims arising from facts or
events which occurred at or before the Effective Time ("D&O Insurance Policies")
for the benefit of those persons who are currently covered by the current
policies of directors' and officers' liability insurance maintained by the
Company, with such D&O Insurance Policies providing terms and conditions which
are at least comparable to those provided on Schedule 6.8(b) and which are
maintained with reputable and financially sound carriers. Notwithstanding the
foregoing, Parent may substitute or cause the Surviving Corporation to
substitute for the initial D&O Insurance Policies maintained in accordance with
this Section 6.8 other policies with reputable and financially sound carriers,
which policies provide coverage of the types, in the amounts and containing
terms and conditions which are no less advantageous than such initial policies,
as long as any such substitution does not result in gaps or lapses in coverage
with respect to any claims arising from or matters related to events occurring
prior to the Effective Time for which coverage is required pursuant to this
Section 6.8.
6.9 Registration Statement on Form S-8. The shares of Parent Common Stock
subject
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to the stock options and RSUs contemplated by Sections 6.4(b) and 6.6 shall,
upon issuance, be registered under the Securities Act on Form S-8 or a similar
form.
ARTICLE VII
ADDITIONAL COVENANTS OF THE PARTIES
7.1 Public Announcements. Upon execution of this Agreement, Parent and the
Company shall issue a press release approved by both parties announcing the
Merger. Thereafter, the Parties hereto will not make any public disclosure of
the terms hereof or issue any press release with respect to the transactions
contemplated by this Agreement or otherwise issue any written public statements
with respect to such transactions without the prior written consent of the
Company, Parent, and Acquisition Subsidiary, not to be unreasonably withheld,
delayed or conditioned, except as may be required by applicable requirements of
Laws or by obligations pursuant to any listing agreement with any national
securities exchange or quotation system. Nothing herein shall be interpreted to
limit the Company's ability to communicate with its Stockholders or holders of
Company Stock Rights or other securities, or its lenders, as may be necessary in
order to consummate the Merger; provided that the Company shall provide Parent
with a copy of any such written communication and with a summary of any material
oral communication. The Company shall use its reasonable efforts to prevent any
trading in shares of Parent Common Stock by the officers, directors, employees,
stockholders and agents of the Acquired Companies prior to the Effective Time.
7.2 California Fairness Hearing and Permit.
(a) Permit Application. As soon as reasonably practicable after the
execution of this Agreement, (i) Parent shall prepare, with the cooperation of
the Company, the application for permit (the "Permit Application") in connection
with the Hearing (as hereinafter defined) and the notice sent to all holders of
Company Shares, Company Options and/or Company Warrants pursuant to, and meeting
the requirements of Article 2 of Subchapter 1 of the California Administrative
Code, Title 10, Chapter 3, Subchapter 2, as amended (the "Hearing Notice"),
requesting a hearing (the "Hearing") to be held by the California Commissioner
of Corporations (the "California Commissioner") to consider the terms and
conditions of this Agreement and the Merger and the fairness of such terms and
conditions pursuant to Section 25142 of the California Corporate Securities Law
of 1968, as amended, and the rules promulgated thereunder ("California
Securities Law"). Each of the Company and Parent shall use its diligent efforts
to cause the Permit Application and the Hearing Notice to comply with all
requirements of applicable Law (including federal and state securities Laws and
the Code and regulations promulgated thereunder). Each of the Company and Parent
shall provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the Permit
Application or the Hearing Notice, or in any amendments or supplements thereto,
and to cause its counsel and accountants to cooperate with the other's counsel
and accountants in the preparation of the Permit Application and the Hearing
Notice. Whenever any event occurs that is required to be set forth in an
amendment or supplement to the Hearing Notice or the Informational Documents,
the Company and Parent shall cooperate in delivering any such amendment or
supplement to all the holders of the Company Shares, Company Options and/or
Company Warrants and/or in filing any such amendment or supplement with the
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California Commissioner or its staff and/or any other Government officials to
the extent required by applicable Law. Anything to the contrary contained herein
notwithstanding, the Company shall not include in any additional informational
disclosures and documentation ("Informational Documents") provided to its
stockholders any information with respect to Parent or its affiliates or
associates unless the form and content of such information has been approved by
Parent prior to such inclusion; provided, however, that Parent shall not delay,
condition or withhold approval of any information required to be included by
federal or state Law or the California Commissioner.
(b) Permit. Each of Parent and the Company shall use its diligent
efforts (i) to cause to be filed with the California Commissioner, as soon as
reasonably practicable following the execution of this Agreement, and in any
event within thirty (30) days after the date hereof, the Permit Application and
the Hearing Notice and (ii) to obtain, as soon as practicable following the
execution of this Agreement, the permit approving the fairness of this Agreement
and the Merger pursuant to Section 25121 of California Securities Law such that
the issuance of the Parent Common Stock in connection with the Merger shall be
exempt pursuant to Section 3(a)(10) of the Securities Act from the registration
requirements of Section 5 of the Securities Act (the "Permit"). The Company and
Parent shall notify each other promptly of the receipt of any comments from the
California Commissioner or its staff and of any request by the California
Commissioner or its staff or any other Government officials for amendments or
supplements to any of the documents filed therewith or any other filing or for
additional information and shall provide each other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the California Commissioner, or its staff or any other government
officials, on the other hand, with respect to the filing.
(c) Hearing Notice. As soon as permitted by the California
Commissioner, the Company shall deliver by personal delivery or reputable
overnight courier the Hearing Notice to all holders of Company Shares, Company
Options and/or Company Warrants, as applicable, entitled to receive such notice
under California Securities Law. The Company shall not, and shall prohibit the
Preferred Stockholders from, directly or indirectly, soliciting the vote of any
holder of Company Shares, Company Options and/or Company Warrants in connection
with the Merger in violation of any applicable federal or state securities Laws.
(d) Amendment of Hearing Materials. Each of the Company and Parent
shall use its diligent efforts to cause the information relating to the Company
and Parent included in the Hearing Notice and the Permit Application and any
Informational Documents to not, at the time the Hearing Notice is delivered to
holders of the Company Shares and/or Company Options and/or Company Warrants, at
the time the Informational Documents are delivered to holders of the Company
Shares and/or Company Options and/or Company Warrants and at all times
subsequent thereto (through and including the Effective Time), contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
Company shall promptly advise Parent, and Parent shall promptly advise the
Company, in writing if at any time prior to the Effective Time either the
Company or Parent shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Hearing Notice, the Permit
Application, and/or any Informational Documents, in order to make the statements
contained or incorporated by reference therein not misleading or to
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comply with applicable Law. The Company and Parent shall cooperate in delivering
any such amendment or supplement to all the holders of the Company Shares,
Company Options and/or Company Warrants, as applicable, and/or in filing any
such amendment or supplement with the California Commissioner or its staff
and/or any other Government officials to the extent required by applicable Law.
(e) Restrictive Legends. Parent will be authorized to give stop
transfer instructions to its transfer agent with respect to any Parent Common
Stock received pursuant to the Merger by any "affiliate" of the Company for
purposes of Rule 145 promulgated under the Securities Act, and there will be
placed on the certificates representing such Parent Common Stock, or any
substitutions therefor, a legend stating in substance that the shares were
issued in a transaction to which Rule 145 promulgated under the Securities Act
applies and may only be transferred (i) in conformity with Rule 145 or (ii) in
accordance with a written opinion of counsel, reasonably acceptable to Parent,
in form and substance that such transfer is exempt from registration under the
Securities Act. In addition, Parent may cause to be placed on the certificates
representing Parent Common Stock issued pursuant to the Merger to all Company
Stockholders such legends, if any, as are necessary to comply with applicable
federal and state securities Laws.
7.3 Alternatives to Fairness Hearing. In the event that the Permit has not
been obtained by December 1, 2004 (the "Permit Deadline"), then Parent may elect
by written notice to the Representatives given within five (5) days thereafter
to either:
(a) issue the Stock Merger Consideration in a transaction exempt
from registration under the Securities Act under Section 4(2) thereof and/or
Regulation D promulgated under the Securities Act and the exemptions from
qualification under applicable state securities Laws. If the Stock Merger
Consideration issued pursuant to Section 4(2) and/or Regulation D, the Parent
Common Stock received in the Merger may not be reoffered or resold other than
pursuant to the registration requirements of the Securities Act or an exemption
therefrom. The certificates representing such Parent Common Stock shall, if
issued pursuant to Section 4(2) and/or Regulation D, be legended to the effect
described above and shall include such additional legends as necessary to comply
with all applicable federal and state securities Laws, and such other
restrictions as shall be deemed necessary and appropriate by Parent. If Parent
issues the Stock Merger Consideration pursuant to Section 4(2) and/or Regulation
D, then Parent agrees to prepare and file as soon as practicable and in any
event within ten (10) days following the Closing a registration statement on
Form S-3 with the SEC covering the resale under the Securities Act of such
Parent Common Stock received by the Preferred Stockholders in the Merger (the
"Resale Registration Statement"). Parent shall use its diligent efforts to cause
the Resale Registration Statement to become effective as promptly as practicable
after filing and to keep it continuously effective, subject to customary and
reasonable suspension or deferral periods, for a period of one year after the
Closing Dates. In the event of the issuance of the Stock Merger Consideration
pursuant to Section 4(2) and/or Regulation D, Parent may also request that the
Preferred Stockholders make such investment representations to Parent as may
reasonably be requested by Parent.
(b) not issue the Stock Merger Consideration at the Effective Time
and instead pay all of the Merger Consideration in cash at the Effective Time in
accordance with the
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last sentence of Section 1.4(a). Such alternative transaction is sometimes
referred to in this Agreement as the "Cash Transaction";
provided, however, that the Preferred Stockholders shall have the right to
extend the Permit Deadline by one period of ten (10) days by giving written
notice (from the Representatives) to Parent on or before December 1, 2004. In
the event such notice is given to Parent and the Permit is not obtained by the
end of such ten-day period, Parent shall be required to make the election
described above no later than five (5) days after the end of such ten-day
period.
7.4 Certain Tax Matters.
(a) All transfer, documentary, sales, use, stamp and other such
Taxes (including any penalties and interest) incurred in connection with
consummation of the transactions contemplated by this Agreement shall be paid by
the Preferred Stockholders when due, and the Preferred Stockholders will, at
their own expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees and charges, and if required by applicable Law,
Parent will, and will cause its affiliates to, join in the execution of any such
Tax Returns and other documentation.
(b) Parent shall prepare or cause to be prepared, and file or cause
to be filed, all Tax Returns of the Company for any Taxable year or period
ending on or before the Closing Date that are filed after the Closing Date. Such
Tax Returns for the Company shall be prepared in a manner consistent with past
Tax accounting practices, unless such past practices are no longer permissible
under the applicable Tax Law. Parent shall permit the Preferred Stockholders to
review and comment on all such Tax Returns prior to filing, and ▇▇▇▇▇▇▇ ▇▇▇▇,
the President of the Company post-Closing, shall sign the Tax Returns. All Taxes
payable with respect to these Tax Returns shall be borne by the Preferred
Stockholders except to the extent and in such amount as such Taxes are reflected
on the Statement of Working Capital as finalized in accordance with Section 1.7
and, to the extent the Preferred Stockholders have any liability for any such
Taxes, Parent shall seek recovery first against Escrow Funds in accordance with
the Escrow Agreement and then against the Preferred Stockholders.
(c) Parent shall prepare or cause to be prepared, and file or cause
to be filed, all Tax Returns of the Company commencing prior to the Closing Date
and ending after the Closing Date (a "Straddle Period"). Such Tax Returns for
the Company shall be prepared in a manner consistent with past Tax accounting
practices, unless such past practices are no longer permissible under the
applicable Tax Law. Parent shall permit the Preferred Stockholders to review and
comment on all such Tax Returns prior to filing. All Taxes payable with respect
to these Tax Returns to the extent and in such amount as such Taxes are
reflected on the Statement of Working Capital as finalized in accordance with
Section 1.7 shall be borne by the Surviving Corporation and otherwise by the
Preferred Stockholders and, to the extent the Preferred Stockholders have any
liability for any such Taxes, Parent shall seek recovery first against Escrow
Funds in accordance with the Escrow Agreement and then against the Preferred
Stockholders. For the purposes of this Section 7.4, in the case of any Taxes
that are imposed on a periodic basis and are payable for a Taxable period that
includes (but does not end on) the Closing Date, the portion of such Tax that
relates to the portion of such Taxable period ending on the Closing Date shall
(i) in the case of any Taxes other than Taxes imposed upon or related to
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income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction, the numerator of which is the number of
days in the Taxable period ending on the Closing Date, and the denominator of
which is the number of days in the entire taxable period, and (ii) in the case
of any Tax based upon or related to income or receipts, be deemed to be equal to
the amount that would be payable if the relevant Taxable period ended on the
Closing Date. Any credits relating to a Taxable period that begin before and end
after the Closing Date shall be taken into account as though the relevant
Taxable period ended on the Closing Date. All determinations necessary to give
effect to the allocations described in this Section 7.4 shall be made in a
manner consistent with the prior practice of the Company, except for changes
required by Law or fact.
(d) Parent and the Preferred Stockholders agree to furnish or cause
to be furnished to each other, upon request, as promptly as practical, such
information (including reasonable access to books and records, Tax Returns and
Tax filings) and assistance as is reasonably necessary for the filing of any Tax
Return, the conduct of any Tax audit, and for the prosecution or defense of any
claim, suit or proceeding relating to any Tax matter. Parent and the Preferred
Stockholders shall cooperate with each other in the conduct of any Tax audit or
other Tax proceedings and each shall execute and deliver such powers of attorney
and other documents as are necessary to carry out the intent of this Section
7.4. Any Tax audit or proceeding of any Acquired Company for periods ending on
or before or including the Closing Date shall be deemed a Parent Third Person
Claim under Section 9.5.
(e) Each of the Parties agree to use their diligent efforts to
minimize the potential that any transfer, documentary, sales, use, stamp or
other similar Taxes would become payable as a result of the consummation of the
transactions contemplated hereby.
(f) The Preferred Stockholders shall have no obligation under this
Agreement or the Escrow Agreement for any Taxes arising from an election under
Section 338 of the Code, or any comparable election under state or local law
filed by Parent or its affiliates.
(g) The Company shall, as a condition to the consummation of the
Merger, prepare or cause to be prepared, and file or cause to be filed, all
Forms 5471 and 926 that it is required to file under the Code and all United
States Tax forms relating to the royalty payment made by the Company or Steleus
Inc. to Steleus SAS during 2002. The Company shall provide Parent with a true,
complete and accurate copy of each such Tax form promptly after filing.
ARTICLE VIII
CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligations. The respective obligations of
each Party to effect the Merger shall be subject to the fulfillment or waiver by
the Company and the Parent at or prior to the Effective Time of the following
conditions:
(a) Stockholder Approval. The Company shall have received the
Company Stockholder Approval at or prior to the Effective Time which shall be in
full force and effect.
(b) No Injunction or Action. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or
62.
enforced by any court or other Government authority, which prohibits or prevents
the consummation of the Merger and which has not been vacated, dismissed or
withdrawn by the Effective Time. The Company and Parent shall use their
commercially reasonable efforts to have any of the foregoing vacated, dismissed
or withdrawn by the Effective Time.
(c) Governmental Approvals. All consents as set forth on Schedule
2.4(c) of any Government authority required for the consummation of the Merger
and the transactions contemplated by this Agreement shall have been obtained and
shall be in full force and effect.
(d) HSR Act. Any waiting period applicable to the Merger under the
HSR Act shall have expired or earlier termination thereof shall have been
granted and no action shall have been instituted by either the United States
Department of Justice ("DOJ") or the Federal Trade Commission ("FTC") to prevent
the consummation of the transactions contemplated by this Agreement or to modify
or amend such transactions in any material manner, or if any such action shall
have been instituted, it shall have been withdrawn or a final judgment shall
have been entered against such DOJ or FTC, as the case may be.
(e) Permit. Unless the Parties proceed under Section 7.3, the
California Commissioner shall have issued the Permit and no stop order
suspending the effectiveness of the Permit or any part thereof shall have been
issued, and no proceeding in respect of the Permit shall have been initiated or
threatened by the Department of Corporations of the State of California.
8.2 Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following additional conditions, any one or more of
which may be waived by the Company:
(a) Performance of Obligations; Representations and Warranties.
Parent shall have performed in all material respects each of its agreements
contained in this Agreement and the Escrow Agreement required to be performed on
or prior to the Closing Date; each of the representations and warranties of
Parent contained in this Agreement that is qualified by materiality, Parent
Material Adverse Effect or Parent Material Adverse Change shall be true and
correct on and as of the Closing Date as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date), and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Closing Date as if made on and
as of such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct in all material
respects as of such certain date), except as contemplated or permitted by this
Agreement, and the Company shall have received a certificate, dated the Closing
Date, from Parent, signed on behalf of Parent, by a duly authorized officer of
Parent, to such effect.
(b) No Parent Material Adverse Change. Since the date of this
Agreement, there shall have been no Parent Material Adverse Change, and the
Company shall have received a certificate dated the Closing Date, signed on
behalf of Parent by the Chief Executive Officer and Chief Financial Officer of
Parent that, to the knowledge of such officers, there has been no Parent
Material Adverse Change.
63.
(c) Required Consents. All material consents and approvals relating
to Parent required to be obtained by Government authorities prior to the Closing
in connection with the transaction contemplated hereby shall have been obtained
and be in full force and effect, and copies thereof shall have been delivered to
the Company.
(d) Secretary Certificate. The Company shall have received
certificates executed by the Secretary of each of Parent and Acquisition
Subsidiary certifying:
(i) resolutions duly adopted by the Board of Directors of each
entity authorizing the execution of this Agreement and the Escrow
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby or thereby; and
(ii) the incumbency of the officers of each entity executing
this Agreement and the Escrow Agreement and all agreements and documents
contemplated hereby or thereby.
(e) Deliveries. Parent shall have made and tendered, or caused to be
made and tendered, delivery of all of the items required by Section 1.10 or
otherwise hereunder, and such other customary documents, instruments or
certificates as shall be reasonably requested by the Company and as shall be
consistent with the terms of this Agreement.
(f) Parent Common Stock and Nasdaq Notification. Unless the Parties
proceed under Section 7.3, the Parent Common Stock to be issued in connection
with the Merger shall have been authorized for trading on the Nasdaq National
Market and, if required by the rules of The Nasdaq Stock Market, Inc., Parent
shall have submitted to The Nasdaq Stock Market, Inc. a Notification Form:
Listing of Additional Shares with respect to the Parent Common Stock to be
issued pursuant to the transactions contemplated by this Agreement.
8.3 Conditions to Obligations of Parent and Acquisition Subsidiary. The
obligations of Parent and Acquisition Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Time of the following
additional conditions, any one or more of which may be waived by Parent:
(a) Performance of Obligations; Representations and Warranties. Each
of the Parties hereto other than Parent or Acquisition Subsidiary shall have
performed in all material respects each of its agreements contained in this
Agreement required to be performed on or prior to the Closing Date; each of the
representations and warranties of each of such other Parties hereto contained in
this Agreement that is qualified by materiality, Company Material Adverse Change
or Company Material Adverse Effect shall be true and correct on and as of the
Closing Date as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be true
and correct as of such certain date) and each of the representations and
warranties that is not so qualified shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such certain
date), in each case, except as contemplated or permitted by this Agreement, and
Parent shall have received certificates, dated the Closing
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Date, from each of such other Parties hereto, signed on behalf of each such
other Party, by a duly authorized officer of such other Party, to such effect.
(b) No Company Material Adverse Change. Since the date of this
Agreement, there shall have been no Company Material Adverse Change, and Parent
shall have received a certificate dated the Closing Date, signed on behalf of
the Company by the Chief Executive Officer and Chief Financial Officer of the
Company that, to the knowledge of such officers, there has been no Company
Material Adverse Change.
(c) Required Consents. All consents and approvals relating to any
Acquired Company required to be obtained from Government authorities and from
third parties under Contracts, including but not limited to those consents
listed and described on Schedule 2.13 shall have been obtained on terms and
conditions reasonably acceptable to Parent and be in full force and effect.
Parent shall have received a copy of all such consents and approvals. Parent
shall have received all consents and approvals listed and described on Schedule
4.1(i) which shall be in full force and effect.
(d) No Pending Action. There shall not be instituted, pending or
threatened any action, investigation or proceeding by any Government authority,
and there shall not be instituted, pending or threatened any action or
proceeding by any other Person, domestic or foreign, before any Government
authority, mediator or arbitrator, which is reasonably likely to be determined
adversely to Parent or Acquisition Subsidiary, (i) challenging or seeking to
make illegal, to delay materially or otherwise, directly or indirectly, to
restrain or prohibit the consummation of the Merger, seeking to obtain material
damages or imposing any material adverse conditions in connection therewith or
otherwise, directly or indirectly relating to the transactions contemplated by
the Merger, (ii) seeking to restrain, prohibit or delay the exercise of full
rights of ownership or operation by Parent or Acquisition Subsidiary or their
affiliates of all or any portion of the business or assets of the Acquired
Companies, taken as a whole, or of Parent or Acquisition Subsidiary or any of
their affiliates, or to compel Parent or Acquisition Subsidiary or any of their
affiliates to dispose of or hold separate all or any material portion of the
business or assets of the Acquired Companies, or of Parent or Acquisition
Subsidiary or any of their affiliates, (iii) seeking to impose or confirm
material limitations on the ability of Parent or Acquisition Subsidiary or any
of their affiliates to exercise full rights of the ownership of the shares of
the Company, including, without limitation, the right to vote the shares of the
Company acquired or owned by Parent or Acquisition Subsidiary or any of their
affiliates on all matters properly presented to the holders of such stock, (iv)
seeking to require divestiture by Parent or Acquisition Subsidiary or any of
their affiliates of the shares of stock of the Company, or (v) that otherwise
would reasonably be expected to have a Company Material Adverse Effect.
(e) Appraisal Rights. The Company shall not have received notice of
demand for appraisal of Company Shares from holders of more than eleven percent
(11%) of Company Shares calculated on an "as if converted to common" basis. The
applicable time period under Section 623 of the NYBCL for holders of the Company
Shares to demand the appraisal of such holders' Company Shares shall have
expired.
(f) Releases. Each of the Preferred Stockholders shall have executed
a Release, and all such Releases shall remain in full force and effect.
65.
(g) Audited Financial Statements. The audited consolidated balance
sheet of the Acquired Companies as of December 31, 2003 and the related audited
statements of income, retained earnings and cash flows for the fiscal year then
ended, together with notes and schedules thereto, shall not differ in any
material respect from the unaudited consolidated balance sheet of the Company as
of December 31, 2003 and the related audited statements of income, retained
earnings and cash flows for the fiscal year then ended, together with notes and
schedules thereto.
(h) Key Employees. The employees listed on Schedule 2.34: (i) shall
have agreed to the terms and conditions of an Offer Letter, dated as of the date
of this Agreement, in form and substance acceptable to Parent, to be effective
at the Effective Time, and (ii) shall be bound by the terms of such Offer Letter
on the Closing Date, which Offer Letter shall be in full force and effect; and
at least eleven (11) of the thirteen (13) employees listed on Schedule 8.3(h)
including all of the members of Senior Management, shall be employed by the
Acquired Companies on the Closing Date, other than where such employee is no
longer employed by the Company due to death or total disability.
(i) End User Licenses. The Company shall have delivered evidence
reasonably satisfactory to Parent demonstrating that the End User Licenses have
been obtained
(j) Secretary Certificate. Parent shall have received certificates
executed by the Secretary of the Company certifying:
(i) resolutions duly adopted by the Board of Directors of the
Company and by the Stockholders of the Company authorizing the execution
of this Agreement and the Escrow Agreement and the execution, performance
and delivery of all agreements, documents and transactions contemplated
hereby and thereby; and
(ii) the incumbency of the officers of each entity executing
this Agreement and the Escrow Agreement and all agreements and documents
contemplated hereby and thereby.
(k) Deliveries. The Company shall have made and tendered, or caused
to be made and tendered, delivery of all of the items required under Section 1.9
or otherwise hereunder at or prior to Closing and such other customary
documents, instruments or certificates as shall be reasonably requested by
Parent and as shall be consistent with the terms of this Agreement.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnification of Parent.
(a) Pursuant to this Agreement and the Escrow Agreement and subject
to the limitations contained in this Article IX, each of Parent and the
Surviving Corporation, and the directors, officers, successors, assigns, and
agents of each of them (collectively, the "Parent Indemnified Persons"), shall
be indemnified and held harmless by the Preferred Stockholders on the terms and
conditions provided in this Article IX, from and against and in respect of any
and all loss, liability, claim, damage, expense or diminution of value, whether
or not involving a Parent Third Person Claim (as hereinafter defined)
("Losses"), plus costs of investigation and
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defense and reasonable attorneys' fees and expenses incurred in connection with
Losses and/or enforcement of this Agreement or the Escrow Agreement, plus
interest (collectively, "Indemnified Losses") incurred or to be incurred by any
of them resulting from, arising out of, or directly or indirectly connected or
related to:
(i) any breach or violation of any of the Company's
representations and warranties or of the Company's covenants or agreements
contained in this Agreement or any document delivered pursuant hereto,
including the provisions of this Article IX, except that Indemnified
Losses arising solely as a result of a breach after the Effective Time by
the Surviving Corporation of an agreement or covenant of the Company under
this Agreement shall not be covered by this indemnity, unless such breach
is caused in whole or in part by actions or inactions of the Company's
Stockholders or the Company occurring prior to the Effective Time;
(ii) any Action or threatened Action against the Company,
whether arising prior to or after the Effective Time, by any Stockholder
of the Company concerning the exercise or threatened exercise of
Dissenter's Rights or which seeks to challenge, enjoin, prevent, obtain
damages as a result of or otherwise delay or frustrate this Agreement or
the Escrow Agreement or the consummation of the transactions contemplated
hereby or thereby or which relates to or arises out of any event, fact or
circumstance existing prior to the Effective Time, including, without
limitation the Indemnified Losses incurred by the Company, Parent or the
Acquisition Subsidiary in connection with the defense, settlement or other
resolution thereof; or
(iii) all transfer, documentary, sales, use, stamp and other
similar Taxes and all conveyance fees, recording charges and other similar
fees and charges (including any penalties and interest) that are incurred
or become payable as a result of or in connection with the consummation of
the transactions contemplated by this Agreement.
(b) Pursuant to this Agreement and the Escrow Agreement and subject
to the limitations contained in this Article IX, each Preferred Stockholder will
severally, and not jointly and severally, indemnify and hold harmless the Parent
Indemnified Persons against and in respect of any and all Indemnified Losses
arising from any breach of (i) any of the representations and warranties made by
such Preferred Stockholder in this Agreement or in any Letter of Transmittal
executed by such Preferred Stockholder or any document delivered pursuant
hereto; or (ii) any breach or violation by such Preferred Stockholder of the
covenants made in this Agreement or the Escrow Agreement by such Preferred
Stockholder or in any Letter of Transmittal executed by such Preferred
Stockholder.
(c) No information or knowledge acquired, or investigations
conducted, by Parent or its representatives (whether conducted or acquired prior
to the date hereof or between the date hereof and the Closing Date) of any
Acquired Company or otherwise shall in any way limit, or constitute a waiver of,
or a defense to, any right of Parent or any Parent Indemnified Person to assert
a claim for indemnification under this Agreement or the Escrow Agreement.
(d) Each of the Company, Parent and each Parent affiliate shall be
indemnified and held harmless by the Preferred Stockholders on the terms and
conditions
67.
provided in this Article IX from any Acquired Company's Taxes or its liability,
if any (for example, by reason of transferee liability or application of
Treasury regulation Section 1.1502-6) for Taxes of others, including, but not
limited to, the Preferred Stockholders or Indemnified Losses payable with
respect to Taxes claimed or assessed against any Acquired Company (i) for any
Taxable period (or portion thereof) ending on or before the Closing Date or as a
result of this transaction (except to the extent and in such amount as such
Taxes are reflected on the Statement of Working Capital as finalized in
accordance with Section 1.7) or (ii) for any Taxable period resulting from a
breach of any of the representations or warranties or the covenants contained in
Sections 2.8 and 7.4. Parent shall also be indemnified and held harmless from
and against all Indemnified Losses sustained in a Taxable period of the Company
ending after the Closing Date arising out of the settlement or other resolution
(without the written consent of Parent) of a proposed Tax adjustment that
relates to a Taxable period ending on or before the Closing Date; provided
however Taxes arising as a result of this transaction shall not include any
post-Closing Tax liability of Parent or any Acquired Company payable with
respect to taxable income in excess of the Acquired Companies' annual
limitations under Sections 382 and 383 of the Code, which limitations resulted
from the Merger.
9.2 Survival. The respective representations and warranties made in
Articles II and III and the covenants and agreements contained in this
Agreement, and all rights to indemnification (including, without limitation, all
rights to indemnification with respect to fraudulent misrepresentations;
fraudulent warranties; willful breaches of representations or warranties; or
fraudulent or willful breaches of covenants or agreements) as contemplated by
Sections 9.1(a) and 9.1(b) shall survive the Closing Date but, anything to the
contrary herein notwithstanding, expire at 11:59 p.m. on such date which is
thirteen (13) months following the Closing Date except (i) with respect to a
claim made pursuant to Section 9.5 or Section 9.6 (or otherwise under the Escrow
Agreement) prior to such date, (ii) that the representations and warranties
under Section 2.8 and the covenants and agreements under Section 7.4 and all
rights to indemnification with respect thereto as contemplated by Section 9.1(d)
shall expire at 11:59 p.m. on such date which is thirty-six (36) months
following the Closing Date (except with respect to a claims made pursuant to
Sections 9.5 or 9.6 prior to that date). The representations and warranties made
by Parent in Article IV, and all rights to indemnification with respect thereto
shall survive the Closing Date but, anything to the contrary herein
notwithstanding, expire at 11:59 p.m. on such date which is six (6) months
following the Closing Date except with respect to a claim made prior to such
date.
9.3 Limitations.
(a) The Parent Indemnified Persons shall not be entitled to
indemnification for Indemnified Losses under Section 9.1(a), 9.1(b) and 9.1(d)
for breaches of the Company's or any Preferred Stockholder's representations and
warranties made in Articles II or III and for breaches of the Preferred
Stockholders' covenants contained in Section 7.4, until Indemnified Losses
exceed $580,000 in the aggregate (at which point the Preferred Stockholders,
subject to the terms and conditions provided in this Article IX will be
obligated to indemnify the Parent Indemnified Persons from and against all
Indemnified Losses relating back to the first dollar).
(b) Except as provided in Section 9.3(g), the Parent Indemnified
Persons shall not be entitled to indemnification for Indemnified Losses under
Sections 9.1(a), 9.1(b) and 9.1(d)
68.
to the extent such Indemnified Losses exceed $8,700,000.
(c) The Parent Indemnified Persons shall be entitled to
indemnification for Indemnified Losses from a Preferred Stockholder, severally,
and not jointly and severally, under Section 9.1(b)(ii) from the first dollar of
Indemnified Loss relating to the exercise or threatened exercise of Dissenters'
Rights.
(d) All materiality qualifications contained in an Acquired
Company's representations and warranties in this Agreement or any document
delivered pursuant hereto, including without limitation the terms "Company
Material Adverse Effect" and "Company Material Adverse Change," shall be taken
into account under this Article IX solely for purposes of determining whether a
breach or violation has occurred for which an indemnity obligation exists.
Without limiting the generality of the foregoing, with respect to any
representation or warranty that is breached, all such qualifications shall be
ignored and not given effect for purposes of determining the amount of any
Indemnified Losses resulting from any such breach or violation and for the
purpose of determining whether the $580,000 threshold under Section 9.3(a) has
been exceeded.
(e) With respect to any claim for any breach of a representation and
warranty in Section 2.28 or Section 2.29, Indemnified Losses shall not include
losses and expenses that in the aggregate are less than the threshold dollar
amounts (i.e., $200,000 in each such instance) set forth in Section 2.28 and
Section 2.29. Without limiting the foregoing, the thresholds shall neither be
considered materiality qualifications for purposes of Section 9.3(d) nor in any
event shall any losses or expenses up to such aggregate threshold amounts be
applied against the $580,000 threshold amount set forth in Section 9.3(a).
(f) Notwithstanding any other term or condition of this Agreement to
the contrary, no Preferred Stockholder shall be required to indemnify Parent
Indemnified Persons under this Article IX to the extent Indemnified Losses
exceed the aggregate amount of Merger Consideration paid or payable to such
Stockholder. For such purpose the Stock Merger Consideration received by a
Preferred Stockholder shall be valued at an amount equal to the number of shares
comprising such Stock Merger Consideration multiplied by the Closing Stock
Price.
(g) Notwithstanding anything to the contrary contained in this
Agreement but subject to Section 9.3(f), the limitations contained in this
Section 9.3 shall not apply in any respect for Indemnified Losses arising,
directly or indirectly, out of fraudulent misrepresentations; fraudulent
warranties; willful breaches of representations or warranties; or fraudulent or
willful breaches of covenants or agreements, and in each case the indemnity
obligations related thereto. Without limiting the generality of the foregoing,
in no instance shall any such Indemnified Losses be included for purposes of
crediting such Indemnified Losses against the $8,700,000 limitation in Section
9.3(b).
(h) Notwithstanding anything herein to the contrary but subject to
Section 9.3(f) and for purposes of clarification, it is understood that if, as a
result of Parent Indemnified Losses subject to Section 9.3(g) ("Special
Losses"), there are insufficient remaining unclaimed Escrow Funds to fully
indemnify the Parent Indemnified Parties for any Indemnified Losses
69.
which are not subject to Section 9.3(g) ("Regular Losses"), the Preferred
Stockholders will be severally, and not jointly and severally, liable for (and
the $8,700,000 limitation in Section 9.3(b) shall not be deemed to limit the
recovery of) such Regular Losses in an amount equal to the lesser of (i) the
amount of Special Losses previously paid out of the Escrow or (ii) the excess of
such Regular Losses over the amount of the remaining unclaimed Escrow Funds.
(i) Notwithstanding anything herein to the contract by subject to
Section 9.3(f) and for purposes of clarification, it is understood that if,
after the release of all Escrow Funds, there are Parent Indemnified Losses for
which Parent is entitled to indemnification under Section 9.1(d), the Preferred
Stockholders will be severally, and not jointly and severally, liable for such
Indemnified Losses in an amount of up to $8,700,000 less all other Regular
Losses previously paid to Parent Indemnified Parties.
(j) Parent Indemnified Losses shall be reduced by the amount of any
insurance proceeds actually received by Parent Indemnified Persons or the
Surviving Corporation as compensation for such Parent Indemnified Losses under
any insurance policy listed on Schedule 2.16 which is an "occurrence-based"
policy and for which all premiums and other costs have been paid prior to the
Effective Time; provided, however, that Parent may in its reasonable discretion
determine whether to submit any such claim under any such insurance coverage and
that such proceeds shall be deemed reduced by the costs to Parent of making any
such insurance claim and recovering any such insurance proceeds.
(k) Notwithstanding any other term or condition of this Agreement,
Parent Indemnified Persons shall not be entitled to indemnification for
Indemnified Losses to the extent and in such amount as Indemnified Losses are
reflected on the Statement of Working Capital as finalized in accordance with
Section 1.7.
9.4 Indemnification of Stockholders.
(a) Pursuant to this Agreement, Parent shall indemnify and hold
harmless each Preferred Stockholder and its directors, officers, members,
managers, partners, successors, assigns and agents (collectively, the
"Stockholder Indemnified Persons") from and against any and all Indemnified
Losses incurred or to be incurred by any of them resulting from, arising out of,
or directly or indirectly connected or related to any breach or violation of any
of the Parent's representations, warranties, covenants or agreements contained
in this Agreement or in the Escrow Agreement delivered pursuant hereto,
including the provisions of this Article, except that Indemnified Losses arising
solely as a result of a breach prior to the Effective Time by the Company or the
Stockholder Indemnified Persons shall not be covered by this indemnity.
(b) The Stockholder Indemnified Persons shall not be entitled to
indemnification for Indemnified Losses under Section 9.4(a) for breaches of the
representations and warranties made in Article IV until Indemnified Losses
exceed $580,000 in the aggregate (at which point the Parent will be obligated to
indemnify the Stockholder Indemnified Persons from and against all Indemnified
Losses relating back to the first dollar).
(c) Except as provided in Section 9.4(d), the Stockholder
Indemnified Persons shall not be entitled to indemnification for Indemnified
Losses under this Section 9.4 to the
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extent such Indemnified Losses exceed $4,095,000 in the aggregate.
(d) Notwithstanding anything to the contrary contained in this
Agreement but subject to Section 9.4(c), the limitations contained in Sections
9.4(b) and (c) shall not apply in any respect in the event of Indemnified Losses
arising, directly or indirectly, out of fraudulent misrepresentations;
fraudulent warranties; willful breaches of representations or warranties; or
fraudulent or willful breaches of covenants or agreements, and in each case the
indemnity obligations related thereto. Without limiting the generality of the
foregoing, in no instance shall any such Indemnified Losses be included for
purposes of crediting such Indemnified Losses against the $4,095,000 limitation
in Section 9.4(c).
9.5 Notice of Claim; Satisfaction of Claim. In the event that a party
seeking indemnification (an "Indemnified Party") seeks indemnification hereunder
or under the Escrow Agreement at any time, such Indemnified Party shall give
written notice to the Representatives and otherwise to the Person from whom such
indemnity is sought (in all cases, an "Indemnifying Party") specifying the facts
constituting the basis for such claim and the amount, to the extent known, of
the claim asserted. The Indemnifying Party shall pay or cause to be paid the
amount of any undisputed, valid and determinable claim not more than twenty (20)
calendar days after the Indemnified Party provides notice to the Indemnifying
Party of such amount. If the Indemnifying Party disputes the validity or amount
of any such claim, the Indemnifying Party shall so notify the Indemnified Party
in writing within fourteen (14) calendar days after the Indemnifying Party
receives notice from the Indemnified Party of such claim and the amount thereof,
specifying in reasonable detail the points of disagreement. Upon receipt of such
notice of dispute, the Indemnified Party shall promptly consult with the
Indemnifying Party with respect to such points of disagreement in an effort to
resolve the dispute. If any such dispute cannot be resolved by the Indemnified
Party and Indemnifying Party within thirty (30) calendar days after the
Indemnified Party receives the notice of dispute, then any of such parties can
▇▇▇ the other allegedly liable parties in a court of competent jurisdiction in
accordance with Section 11.10. The Parties shall reasonably promptly following
request therefor make available to each other all relevant information in their
possession relating to such claim, subject to reasonable protection of attorney
client and attorney work product privileges.
9.6 Right to Contest Claims of Third Persons(a) .
(a) If an Indemnified Party believes that it is entitled to
indemnification because of a claim (a "Third Person Claim") asserted by any
claimant other than an Indemnified Party (a "Third Person"), the Indemnified
Party shall give the Indemnifying Party or Parties prompt notice thereof after
such assertion is actually known to the Indemnified Party; provided, however,
that the right of a Person to be indemnified in respect of Third Person Claims
for which such notice is required shall not be adversely affected by a failure
to give such notice unless, and then only to the extent that, the Indemnifying
Party or Parties from whom such indemnity is sought is prejudiced thereby.
(b) If with respect to a Third Person Claim (including, without
limitation, any exercise of Dissenter's Rights by a Stockholder of the Company)
for which a Parent Indemnified Person seeks recovery of Indemnified Losses in an
amount which is less than the remaining amount of Escrow Funds which do not
represent Claimed Amounts (as defined in the Escrow
71.
Agreement) or Disputed Amounts (hereinafter referred to as a "Parent Special
Third Person Claim"), then the Representatives (or the Preferred Stockholder
with respect to an Excluded Matter) shall have the right, upon written notice to
the Parent Indemnified Party, to assume the defense, prosecution, settlement or
compromise of such Parent Special Third Person Claim; provided that the
Representatives, on behalf of the Indemnifying Party or Parties (or the
Preferred Stockholder with respect to an Excluded Matter) have unconditionally
acknowledged to Parent in writing the obligation of the Indemnifying Party or
Parties to indemnify the Persons to be indemnified hereunder with respect to
such Parent Special Third Person Claim. Thereafter, Parent may participate in
(but not control) the defense of any Parent Special Third Person Claim with its
own counsel at its own expense; provided, however, that if separate
representation of the Parent Indemnified Party in connection with any such
Parent Special Third Person Claim is necessary to avoid a conflict of interest,
such representation shall be at the expense of the Indemnifying Party or
Parties; provided further, that if injunctive relief is being sought by the
Third Person against the Parent Indemnified Party in connection with such Parent
Special Third Person Claim, then that portion of the Parent Special Third Person
Claim for which injunctive relief is being sought shall, at the option of
Parent, be controlled by Parent at the expense of the Indemnifying Party or
Parties. To the extent the proposed settlement of any Parent Special Third
Person Claim involves amounts in excess of the Escrow Funds which do not
represent Claimed Amounts or Disputed Amounts or otherwise does not provide the
Parent Indemnified Party with a complete release with respect to such matter and
does not otherwise restrict the ownership and operation of the Acquired
Companies' assets and businesses, such settlement shall be subject to the
written consent of Parent. The failure of the Representatives, on behalf of the
Indemnifying Party or Parties (or the Preferred Stockholder with respect to an
Excluded Matter) to respond in writing to the aforesaid notice of the Parent
Indemnified Party with respect to any Parent Special Third Person Claim within
twenty (20) days after receipt thereof shall be deemed an election not to defend
the same. If the Representatives, on behalf of the Indemnifying Party or Parties
(or the Preferred Stockholder with respect to an Excluded Matter) do not so
acknowledge the obligation of the Indemnifying Party or Parties to indemnify and
assume the defense of any such Parent Special Third Person Claim in the manner
set forth above, and with respect to all Parent Third Person Claims which are
not Parent Special Third Person Claims, (i) Parent may assume and control the
defense of such claim, in such manner as it may deem appropriate, including, but
not limited to, settling such claim on such terms as Parent may deem
appropriate, after, with respect to Parent Special Third Person Claims only,
first giving notice of the proposed terms of any such settlement to the
Representatives (or the Preferred Stockholder with respect to an Excluded
Matter) and providing the Representatives (or the Preferred Stockholder with
respect to an Excluded Matter) with an opportunity to assume at that time the
defense of the same by providing the unconditional acknowledgment and
reimbursement described above, and, subject to the procedures set forth in
Section 9.5, the applicable Indemnifying Party or Parties shall be responsible
for paying the full amount of the costs of defense for any Parent Third Person
Claim or Parent Special Third Person Claim, and (ii) the Representatives (or the
Preferred Stockholder with respect to an Excluded Matter) or the Indemnifying
Party or Parties may participate in (but not control) the defense of such
action, with its own counsel at its own expense.
(c) If with respect to a Third Person Claim for which a Stockholder
Indemnified Person seeks recovery of Indemnified Losses, then the Parent on
behalf of itself and/or the Surviving Corporation shall have the right, upon
written notice to the Stockholder Indemnified Party, to assume the defense,
prosecution, settlement or compromise of such Third
72.
Person Claim; provided that the Parent has unconditionally acknowledged to the
Stockholder Indemnified Party in writing the obligation of the Parent to
indemnify the Persons to be indemnified hereunder with respect to such Third
Person Claim. Thereafter, the Stockholder Indemnified Party may participate in
(but not control) the defense of such Third Person Claim with its own counsel at
its own expense; provided, however, that if separate representation of the
Stockholder Indemnified Party in connection with any such Third Person Claim is
necessary to avoid a conflict of interest, such representation shall be at the
expense of the Parent; provided further, that if injunctive relief is being
sought by the Third Person against the Stockholder Indemnified Party in
connection with such Third Person Claim, then that portion of the Third Person
Claim for which injunctive relief is being sought shall, at the option of the
Stockholder Indemnified Party, be controlled by the Stockholder Indemnified
Party at the expense of the Parent. To the extent the proposed settlement of any
such Third Person Claim does not provide the Stockholder Indemnified Party with
a complete release with respect to such matter, such settlement shall be subject
to the written consent of the Stockholder Indemnified Party. The failure of the
Parent to respond in writing to the aforesaid notice of the Stockholder
Indemnified Party with respect to any such Third Person Claim within twenty (20)
days after receipt thereof shall be deemed an election not to defend the same.
The failure of Parent to respond in writing to the aforesaid notice of the
Stockholder Indemnified Party with respect to any such Third Person Claim within
twenty (20) days after receipt thereof shall be deemed an election not to defend
the same. If Parent does not so acknowledge the obligation to indemnify and
assume the defense of any such Third Person Claim in the manner set forth above
(i) the Stockholder Indemnified Party may assume and control the defense of such
claim, in such manner as it may deem appropriate, including, but not limited to,
settling such claim on such terms as the Stockholder Indemnified Party may deem
appropriate, after first giving notice of the proposed terms of any such
settlement to Parent and providing Parent with an opportunity to assume at that
time the defense of the same by providing the unconditional acknowledgment and
reimbursement described above, and, subject to the procedures set forth in
Section 9.5, Parent shall be responsible for paying the full amount of the costs
of defense for any such Third Person Claim, and (ii) the Stockholder Indemnified
Party may participate in (but not control) the defense of such action, with its
own counsel at its own expense.
9.7 Dispute Concerning Defense of Third Person Claims. If any party seeks
to question the manner in which a defense of a Third Person Claim was provided
under this Agreement or the amount or nature of settlement of a Third Person
Claim, the Representatives (or the Preferred Stockholder with respect to an
Excluded Matter) or the Parent, as applicable (i.e., the challenging Party),
shall have the burden to prove by clear and convincing evidence that conduct of
the defense and/or settlement of such Third Person Claim constituted gross
negligence or willful misconduct. The parties to this Agreement shall reasonably
promptly following request therefor make available to each other all relevant
information in their possession relating to any Third Person Claim, subject to
reasonable protection of attorney client and attorney work product privileges,
and shall cooperate in the defense thereof.
9.8 Recovery Against Escrow Funds First(a) .
(a) To the extent that at any time there are unclaimed amounts
remaining in the Escrow, the Parent Indemnified Persons shall seek payment for
Indemnified Losses under this Article IX first from the Escrow Funds in
accordance with this Agreement and the Escrow
73.
Agreement (other than, if Parent so elects in its sole discretion, for
Indemnified Losses arising under Section 9.1(b)). To the extent that at any time
there are insufficient unclaimed amounts remaining in the Escrow or in the event
and to the extent that any portion of the Escrow Agreement is deemed invalid or
unenforceable, then the Preferred Stockholders shall in all cases be severally,
and not jointly and severally, liable for any indemnification obligations to
Parent Indemnified Parties under this Article IX. In the event that a Parent
Indemnified Person in its sole discretion elects to seek to satisfy a claim for
indemnification under Section 9.1(b) directly against an allegedly breaching
Preferred Stockholder, following such election the Parent Indemnified Person may
elect not to pursue such direct claim and instead seek to satisfy all or any
portion of such claim from the Escrow Funds.
(b) In all instances under this Agreement and other than as provided
in Section 9.1(b), in the case of Parent Indemnified Losses not recovered from
the Escrow Funds, the Preferred Stockholders shall severally, and not jointly
and severally, indemnify and hold harmless each of the Parent Indemnified Person
from and against, and each Preferred Stockholder shall thereby waive any claim
for contribution or indemnity from any of the Parent Indemnified Persons in the
manner provided in this Section 9.8(b). The Restated Certificate of
Incorporation of the Company filed February 18, 2004, established an order of
priority for distributions of Merger Consideration to the holders of each series
of Preferred Stock (the "Priority Order"). The Parent Indemnified Persons shall
make claims for Indemnified Losses not recovered from Escrow Funds against the
Preferred Stockholders in inverse Priority Order, so each Preferred Stockholder
bears liability for such Indemnified Losses based on the Pro Rata Portion
determined on a group-by-group basis (i.e. Series A-F Company Preferred Stock,
Series G Company Preferred Stock and Series H Company Preferred Stock) with
respect to each such group of Company Preferred Stock. To the extent a Preferred
Stockholder in a particular series or group is unable or unwilling to pay all or
any portion of its liability, as determined in good faith by Parent in its
reasonable discretion, then the other Preferred Stockholders in such group or
series shall satisfy the entire amount of such deficiency based on their Pro
Rata Portions (excluding from such calculation the Pro Rata Portion of such
non-paying Preferred Stockholder, i.e. not including the non-paying Preferred
Stockholder's Initial Merger Consideration with respect to the relevant Company
Preferred Stock in the numerator and denominator of the applicable Pro Rata
Portions calculations) and to the extent any deficiency remains then Parent
Indemnified Persons shall be entitled to recover the entire amount of such
deficiency from the senior groups or series of Preferred Stockholders in the
Priority Order. Nothing in this Article IX shall be deemed to limit the Parent
Indemnified Persons' right to a full recovery of all Indemnified Losses from the
Preferred Stockholders, subject to Section 9.3, to the extent Parent Indemnified
Persons are entitled to seek recovery of Indemnified Losses from the Preferred
Stockholders in accordance with this Section 9.8(b). For purposes of this
Agreement, the term "Pro Rata Portion" means with respect to a Preferred
Stockholder, the percentage of Initial Merger Consideration such Preferred
Stockholder is entitled to receive hereunder in respect of a particular group or
series (i.e. Series A-F Company Preferred Stock, Series G Company Preferred
Stock and Series H Company Preferred Stock) of Company Preferred Stock as set
forth below:
(i) Series A-F Company Preferred Stock
74.
PREFERRED STOCKHOLDER PRO RATA PORTION
----------------------------------------------------- ----------------
Strategic Partners, Inc. 2.62%
Software Consolidations, Inc. 36.60%
The Beacon Group III - Focus Value Fund, L.P. 43.67%
JAFCO Co., Ltd. 3.42%
U.S. Information Technology Investment Partnership 11.61%
U.S. Information Technology No. 2 Investment Enterprise
Partnership 2.08%
(ii) Series G Company Preferred Stock
PREFERRED STOCKHOLDER PRO RATA PORTION
----------------------------------------------------- ----------------
Software Consolidations, Inc. 12.50%
The Beacon Group III - Focus Value Fund, L.P. 12.50%
BancBoston Investments, Inc. 37.50%
GMT Communications Partners II, L.P. 34.34%
GMT Communications Partners (Holland) II, L.P. 2.57%
GMT Communications Partners (Executive Fund) II, L.P. 0.59%
(iii) Series H Company Preferred Stock
PREFERRED STOCKHOLDER PRO RATA PORTION
----------------------------------------------------- ----------------
Software Consolidations, Inc. 36.96%
The Beacon Group III - Focus Value Fund, L.P. 28.01%
BancBoston Investments, Inc. 17.51%
GMT Communications Partners II, L.P. 16.04%
GMT Communications Partners (Holland) II, L.P. 1.20%
GMT Communications Partners (Executive Fund) II, L.P. 0.28%
(c) By way of example only for purposes of illustrating the
application of the Priority Order, if after full release of the Escrow in the
amount of $8.7 million, the Parent Indemnified Persons have a valid claim
against the Preferred Stockholders for $5,000,000 of Indemnified Losses under
Section 9.1(d) (Taxes), then:
(i) the Series A-F Preferred Stockholders shall be liable for
the Indemnified Losses up to the amount of the Stock Merger Consideration
received by each
75.
of the Series A-F Preferred Stockholders based on each Series A-F
Preferred Stockholder's Pro Rata Portion;
(ii) in the event any Series A-F Preferred Stockholder is
unable or unwilling to pay all or any portion of the amount due by the
Series A-F Preferred Stockholder, as determined in good faith by Parent in
its reasonable discretion, then, and only then, would the other Series A-F
Preferred Stockholders be required to satisfy the amount of the nonpaying
Series A-F Preferred Stockholder's deficiency (subject to the limitations
set forth in Section 9.3);
(iii) to the extent any amount of the Series A-F Preferred
Stockholder's deficiency remains, then, and only then, would the Series G
Preferred Stockholders be liable for the entire amount of the remaining
deficiency based on the Series G Preferred Stockholders' respective Pro
Rata Portions (subject to the limitations set forth in Section 9.3);
(iv) in the event any Series G Preferred Stockholder is unable
or unwilling to pay all or any portion of the amount due by the Series G
Preferred Stockholder, as determined in good faith by Parent in its
reasonable discretion, then, and only then, would the other Series G
Preferred Stockholders be required to satisfy the amount of the nonpaying
Series G Preferred Stockholder's deficiency (subject to the limitations
set forth in Section 9.3);
(v) to the extent any amount of the Series G Preferred
Stockholder's deficiency remains, then, and only then, would the Series H
Preferred Stockholders be liable for the entire amount of the remaining
deficiency based on the Series H Preferred Stockholders' respective Pro
Rata Portions (subject to the limitations set forth in Section 9.3); and
(vi) in the event any Series H Preferred Stockholder is unable
or unwilling to pay all or any portion of the amount due by the Series H
Preferred Stockholder, as determined in good faith by Parent in its
reasonable discretion, then, and only then, would the other Series H
Preferred Stockholders be required to satisfy the amount of the nonpaying
Series H Preferred Stockholder's deficiency (subject to the limitations
set forth in Section 9.3).
9.9 Exclusive Remedies. Anything contained in this Agreement to the
contrary notwithstanding, the indemnification rights set forth in this Article
IX, all of which are subject to the terms, limitations, and restrictions of this
Article IX, shall be the exclusive remedy after Closing for monetary damages
sustained as a result of a breach of a representation, warranty, covenant, or
agreement under this Agreement, except that the foregoing shall not apply to any
remedies for monetary damages that an Indemnified Party may have for fraud or
for any willful breach of any provision of this Agreement (subject, however to
the restrictions and limitations on such claims contained in Sections 9.2 and
9.3). In addition, such limitations set forth in this Article IX shall not
impair the rights of any of the Parties: (a) to seek non-monetary equitable
relief, including (without limitation) specific performance or injunctive relief
to redress any default or breach of this Agreement, including for the provisions
of Articles V, VI and VII; or (b)
76.
to seek enforcement, collection, damages, or such non-monetary equitable relief
to redress any default or breach of any employment agreement or other agreement
to be delivered at or prior to Closing hereunder. In connection with the seeking
of any non-monetary equitable relief, each of the Parties acknowledges and
agrees that the other Parties hereto would be damaged irreparably in the event
any of the provisions of this Agreement are not performed in accordance with
their specific terms or otherwise are breached. Accordingly, each of the Parties
hereto agrees that the other Parties hereto shall be entitled to an injunction
or injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and provisions hereof in
accordance with Section 11.10. Nothing in this Section shall be deemed to limit
the application of the limitations contained in Section 9.3 to any claim made by
any Parent Indemnified Person against the Preferred Stockholders or the
limitations contained in Sections 9.4(b) and (c) to any claim made by any
Stockholder Indemnified Person against Parent.
9.10 Treatment of Indemnification. With respect to any indemnity payment
under Section 9.1, the Parties agree to treat, to the extent permitted by Law,
all such payments as an adjustment to the consideration paid for the sale and
transfer of the capital stock of the Company.
9.11 Post-Closing Access. To the extent permitted by applicable Law,
Parent shall, and shall cause the Surviving Corporation to, afford to the
Representatives and to the officers, employees, accountants, counsel, financial
advisors and other representatives of the Representatives, reasonable access
during normal business hours and upon reasonable prior written notice, to
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ (so long as they are employed
by the Surviving Corporation) during the thirteen (13) month period after
Closing for the sole purpose of assisting the Representatives in reviewing and
responding to any Release Notice (as defined in the Escrow Agreement). The
Representatives agree that they shall coordinate their contacts with either
Parent's Chief Executive Officer, Chief Financial Officer or General Counsel and
shall not contact any of Messrs. ▇▇▇▇, ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇ without first
requesting such access from any of the aforementioned officers and receiving
written permission to contact the same. Notwithstanding the foregoing, no such
assistance shall interfere with the performance by such persons of their duties
as employees of Parent, and Parent shall be entitled to require that such
persons keep parent fully informed as to their communications with the
Representatives regarding any such matters.
9.12 Release of Escrow Funds. In accordance with the terms and conditions
of the Escrow Agreement, on 11:59 p.m. (California time) on the date which is
thirteen (13) months following the Closing Date, the entire remaining unclaimed
amount held in Escrow shall be released from the Escrow in accordance with the
terms and conditions of the Escrow Agreement and subject to a reserve in the
amount equal to 120% of all Disputed Amounts (as defined in the Escrow
Agreement) outstanding on such date which have not been resolved in accordance
with the terms and conditions of the Escrow Agreement and all Claimed Amounts
(as defined in the Escrow Agreement) that have not then been paid to Parent or
disputed by the Representatives in accordance with the terms and conditions of
the Escrow Agreement; provided, however, that any such release of Escrow Funds
shall not affect the continuing liability of Preferred Stockholders for certain
Indemnified Losses or the survival periods set forth in this Article IX and,
provided further, that if as of such final release date there has been no
payment of Parent Indemnified Losses under this Agreement and the Escrow
Agreement and the amount of 120% of the
77.
aggregate amount of all then pending claims is less than $580,000, all Escrow
Funds shall be released on such final release date.
ARTICLE X
TERMINATION
10.1 Termination.
(a) This Agreement may be terminated and the Merger contemplated
hereby may be abandoned at any time prior to the Effective Time only as follows:
(i) by mutual consent of the Company and Parent;
(ii) by either the Company, on the one hand, or Parent, on the
other hand, if the Closing shall not have occurred on or before January
15, 2005, or such other date, if any, as the Company and Parent shall
agree upon; provided that no Party may terminate this Agreement pursuant
to this clause (ii) if such Party's failure to fulfill any of its
obligations under this Agreement shall have directly or indirectly
resulted in the failure of the Closing to occur on or before said date;
provided further, that if any waiting periods (that prevent consummation
of the Merger) imposed by a Government authority have not expired as of
the Closing Date, such date shall automatically be extended until two (2)
Business Days after such waiting period expires (which shall be in no
event later than February 1, 2005);
(iii) by Parent if (A) there shall have been a breach in any
material respect (individually or in the aggregate) of any representation
or warranty on the part of the Company or any Preferred Stockholder set
forth in this Agreement, or (B) there shall have been a breach in any
material respect by the Company or any Preferred Stockholder of any of its
covenants or agreements hereunder, and the Company and/or such Preferred
Stockholder has not cured such breach within twenty (20) Business Days
after notice by Parent thereof, provided that, with respect to clauses (A)
and (B) above, Parent has not materially breached any of its obligations
hereunder and failed to timely cure such breach or such breach cannot be
cured within twenty (20) days following notice from the Company of such
breach;
(iv) by Parent, at any time after 5:00 p.m. Eastern Standard
Time on the date that is fifteen (15) days following the date the
California Commissioner issues the Permit or, in the event that the
Parties proceed under Section 7.3, no later than fifteen (15) days after
Parent notifies the Company of its election to proceed with an alternative
transaction, if the Company has not obtained the Company Stockholder
Approval by such time and delivered to Parent by such time a copy of such
Company Stockholder Approval and a certificate certifying that the same
has been obtained;
(v) by the Company if (A) there shall have been a breach in
any material respect (individually or in the aggregate) of any
representation or warranty on the part of Parent set forth in this
Agreement, or (B) there shall have been a breach in any material respect
by Parent of any of its covenants or agreements hereunder, and Parent has
not cured such breach within twenty (20) Business Days after notice by the
Company
78.
thereof, provided that, with respect to clauses (A) and (B) above, the
Company has not materially breached any of its obligations hereunder and
failed to timely cure such breach or such breach cannot be cured within
twenty (20) days following notice from the Parent of such breach;
(vi) by Parent upon the occurrence of any event described in
Section 8.3(d);
(vii) by Parent if the Company suffers a Company Material
Adverse Effect or Company Adverse Material Change;
(viii) by Parent if (i) the Company shall have breached any of
its obligations under Section 5.6 or 5.10 of this Agreement or (ii) the
Board of Directors of the Company shall (A) amend, withdraw, modify,
change, condition or qualify the Company Recommendation in a manner
adverse to Parent or Acquisition Subsidiary (including as a result of the
occurrence of an Unknown Event), (B) approve or recommend to the
Stockholders of the Company a Company Acquisition Proposal (other than by
Parent, Acquisition Subsidiary or their affiliates), (C) approve or
recommend that the Stockholders of the Company tender their Company Shares
in any tender or exchange offer that is a Company Acquisition Proposal
(other than by Parent, Acquisition Subsidiary or their affiliates) or (D)
approve a resolution or agree to do any of the foregoing; and
(ix) by either Parent or the Company (provided, if it is by
the Company such termination must occur prior to the Company obtaining the
Company Stockholder Approval) if the Board of Directors of the Company
reasonably determines that a Company Acquisition Proposal constitutes a
Company Superior Proposal; provided, however, that the Company may not
terminate this Agreement pursuant to this Section 10.1(a)(ix) unless and
until five (5) Business Days have elapsed following delivery to Parent of
a written notice of such determination by the Board of Directors of the
Company (which notice must be delivered in all cases prior to the Company
obtaining the Company Stockholder Approval) and during such five (5)
Business Day period the Company (A) informs Parent of the terms and
conditions of the Company Acquisition Proposal and the identity of the
Person making the Company Acquisition Proposal and (B) otherwise fully
cooperates with the Parent with respect thereto (subject, in the case of
this clause (B), to the condition that the Company Board of Directors
shall not be required to take any action that it believes, after
consultation with outside legal counsel, would violate its fiduciary
obligations to the Company or the Company's Stockholders under applicable
law) with the intent of enabling Parent to agree to a modification of the
terms and conditions of this Agreement so that the transactions
contemplated hereby may be effected; provided further, that the Company
may not terminate this Agreement pursuant to this Section 10.1(a)(ix)
unless at the end of such five (5) Business Day period the Board of
Directors of the Company continues reasonably to believe that the Company
Acquisition Proposal constitutes a Company Superior Proposal; or
(x) by Company, if the Parent suffers a Parent Material
Adverse Effect or Parent Adverse Material Change.
79.
The Party desiring to terminate this Agreement pursuant to the
preceding clauses (ii) through (x) shall give written notice of such termination
to the other Party in accordance with Section 11.1.
(b) Procedure Upon Termination. In the event of termination pursuant
to this Article X, the Merger shall be abandoned without further action by the
Parties hereto, provided that the agreements contained in Sections 5.4, 10.1(b),
10.1(c) and 11.7 hereof shall remain in full force and effect. If this Agreement
is terminated as provided herein, each Party shall use its diligent efforts to
return all documents, work papers and other material (including any copies
thereof) of any other Party relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the Party furnishing
the same. Nothing contained in this Agreement shall relieve any party from any
liability for any inaccuracy, misrepresentation or breach of this Agreement
prior to termination.
(c) Breakup Fee. In connection with the negotiation and signing of
this Agreement, the Company acknowledges and agrees that Parent, its
representatives and advisors have devoted significant time and efforts and have
incurred significant expenses in reviewing and analyzing the business, assets
and operations of the Company. The Company and Parent further agree that (i) in
the event that (A) Parent terminates this Agreement pursuant to Section
10.1(a)(viii), (B) this Agreement is terminated pursuant to Section 10.1(a)(ix),
(C) Parent terminates this Agreement pursuant to Section 10.1(a)(iv) and prior
thereto the Company had received a Company Acquisition Proposal, or (D) Parent
terminates this Agreement pursuant to Section 10.1(a)(ii), (iii), or (iv) and
within twelve (12) months of such termination the Company enters into a
definitive acquisition, merger or similar agreement to effect a Company
Acquisition Proposal, the Company shall promptly (and in any event within one
Business Day after the occurrence giving rise to such payment obligation) pay
Parent a fee equal to $2,900,000.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1 Notice. All notices, requests, demands, and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given and made upon being delivered either by courier
or fax delivery to the Party for whom it is intended, provided that a copy
thereof is deposited, postage prepaid, certified or registered mail, return
receipt requested, in the United States mail, bearing the address shown in this
Section 11.1 for, or such other address as may be designated in writing
hereafter by, such Party:
If to Parent or Acquisition Subsidiary:
Tekelec
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
Facsimile No.:(▇▇▇) ▇▇▇-▇▇▇▇
and
80.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Company:
Steleus Group Inc.
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Green & Seifter, Attorneys, PLLC
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Representatives:
Software Consolidations, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
and
The Beacon Group III - Focus Value Fund, L.P.
1211 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Managing Director
81.
and
GMT Communications Partners II, L.P.
c/o GMT Communications Partners Limited
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ODR
United Kingdom
Attention: Managing Partner
If to the Preferred Stockholder:
Software Consolidations, Inc.
Strategic Partners, Inc.
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
and
The Beacon Group III - Focus Value Fund, L.P.
1211 Avenue of the ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Managing Director
and
GMT Communications Partners II, L.P.
GMT Communications Partners (Holland) II, L.P.
GMT Communications Partners (Executive Fund) II, L.P.
c/o GMT Communications Partners Limited
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ODR
United Kingdom
Attention: Managing Partner
and
JAFCO Co., Ltd.
U.S. Information Technology Investment Enterprise Partnership
U.S. Information Technology No. 2 Investment Enterprise Partnership
c/o JAFCO America Ventures, Inc.
82.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President
and
BancBoston Investments Inc.
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Attention: President
11.2 Entire Agreement. This Agreement, the Confidentiality Agreement, the
Voting Agreements, the Escrow Agreement, the Releases and the schedules,
exhibits and attachments hereto embody the entire agreement and understanding of
the Parties with respect to the subject matter hereof and supersede all prior
and contemporaneous agreements and understandings relative to such subject
matter.
11.3 Assignment; Binding Agreement. This Agreement and the various rights
and obligations arising hereunder shall inure to the benefit of and be binding
upon the Parties and their respective successors and permitted assigns. Neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be transferred, delegated or assigned (by operation of Law or otherwise) by
Parent, without the prior written consent of the Preferred Stockholders (which
consent shall not be unreasonably withheld), or by the Company, without the
prior written consent of Parent (which consent shall not be unreasonably
withheld); provided, however, that Parent shall have the right to transfer and
assign its and Acquisition Subsidiary's rights hereunder to any entity which at
the time of such transfer and assignment is controlled by Parent, but Parent
shall not be relieved of any liability or obligation hereunder as a result of
such transfer and assignment.
11.4 Amendment and Modification. This Agreement may be amended, modified
or supplemented only by a written agreement among the Company and the Preferred
Stockholders. Any amendment or waiver effected in accordance with this Section
11.4 shall be binding upon Parent, the Acquisition Subsidiary, the Company and
each of the Preferred Stockholders and the other Stockholders of the Company.
11.5 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
11.6 Headings; Interpretation. The Article and Section headings contained
in this Agreement are inserted for convenience only and shall not affect in any
way the meaning or interpretation of the Agreement. Each reference in this
Agreement to an Article, Section, Schedule or Exhibit, unless otherwise
indicated, shall mean an Article or a Section of this Agreement or a Schedule or
Exhibit attached to this Agreement, respectively. The parties hereto
83.
have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to any Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Whenever required by the context, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa. The use of the words "or", "either" and "any" shall not be exclusive.
"Person" shall mean and include an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an association, an
unincorporated organization, a Government authority and any other entity.
Nothing in the schedules hereto shall be deemed adequate to disclose an
exception to a representation or warranty made herein unless the schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). The term "affiliate" shall
mean, except to the extent such term is otherwise expressly defined herein, in
which case such other definition shall apply to such occurrence, with respect to
a Person (a "Specified Person") means any other Person controlling, controlled
by or under common control with such Specified Person.
11.7 Expenses. The Company shall pay all costs and expenses incurred on
behalf of the Company and each other Acquired Company in connection with the
negotiation, preparation and execution of this Agreement and the consummation of
the transactions contemplated hereby, including, without limitation, the fees
and expenses of its attorneys, accountants, advisors and other representatives,
whether in connection with consultation or communication with, or other
assistance to, Parent or its advisors or representatives or otherwise
(collectively, the "Company Transaction Expenses") but only to the extent that
such advisors have presented the Company and Parent, on or prior to the second
(2nd) Business Day prior to Closing, with a final ▇▇▇▇ reflecting all such
amounts due and owing. To the extent that the aggregate amount of the Company
Transaction expenses exceeds $1,200,000, such amount in excess of $1,200,000
shall reduce the Cash Merger Consideration as provided in Section 1.4. Any such
costs and expenses not reflected in the Funds Flow Memorandum shall be deducted
from the Escrow and paid to Parent and the Preferred Stockholders agree to take
all actions required to cause the Escrow Agent to release such funds from the
Escrow Funds. Any such payment from the Escrow Funds shall not, however, be
deemed "Indemnified Losses" as defined in Article IX. Parent shall pay all costs
and expenses incurred on its behalf and the Acquisition Subsidiary in connection
with the negotiation, preparation and execution of this Agreement and the
consummation of the transactions contemplated hereby, including, without
limitation, the fees and expenses of its attorneys and accountants. All of the
costs and expenses incurred in connection with the preparation and filing of the
Permit Application, the Hearing Notice and, if applicable, the Resale
Registration Statement, including, without limitation, reasonable fees of the
Company's counsel and accountants, filing fees relating to the Permit and, if
applicable, registration fees associated with the filing of the Resale
Registration Statement, shall be the sole cost and expense
84.
of the Parent, provided that in the case of attorneys' and accountants' fees and
expenses, the Company provides Parent with reasonably detailed documentation of
such fees and expenses. Prior to the Closing, the Company agrees to deliver to
Parent (i) a certificate from each service provider listed on Schedule 11.7
hereto stating that such service provider has provided a final ▇▇▇▇ to the
Company and Parent reflecting all amounts payable by the Company to such service
provider in connection with and/or as a result of the consummation of the
transactions contemplated hereby and (ii) a certificate of the Company
certifying that there are no additional Company Transaction Expenses other than
those reflected in the Funds Flow Memorandum. For the avoidance of doubt,
attached hereto as Exhibit M is a flow of funds memorandum which shall be
completed immediately prior to Closing in substantially the form attached hereto
(the "Funds Flow Memorandum") reflecting the payment of the Company Transaction
Expenses, the deposit of the Escrow Deposit with the Escrow Agent, the payment
of the Initial Cash Merger Consideration and the payment of the Cash Retention
Bonuses. The Parties agree to cooperate to prepare and deliver the Funds Flow
Memorandum immediately prior to the Closing.
11.8 Remedies Cumulative. Except as otherwise expressly provided herein,
all rights and remedies of the Parties under this Agreement are cumulative and
without prejudice to any other rights or remedies under Law.
11.9 Governing Law. This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws of the State of New York,
without giving effect to the conflicts of laws principles thereof.
11.10 Submission to Jurisdiction; Waivers. Each of the Preferred
Stockholders, the Company and Parent irrevocably agrees that any legal action or
proceeding with respect to this Agreement or for recognition and enforcement of
any judgment in respect hereof brought by a party or its successors or assigns
and determined in the federal courts sitting in the Southern District of New
York. Each of the Preferred Stockholders, the Company and Parent, by execution
and delivery of this Agreement, hereby expressly and irrevocably consents and
submits with regard to any such action or proceeding for itself and in respect
to its property, generally and unconditionally, to the non-exclusive personal
jurisdiction of the aforesaid courts. Each of the Preferred Stockholders, the
Company and Parent hereby irrevocably waives, and agrees not to assert, by way
of motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally subject
to the jurisdiction of the above named court for any reason other than the
failure to serve process in accordance with this Section 11.10, (b) that it or
its property is exempt or immune from jurisdiction of any such court or from any
legal process commenced in such court (whether through judgment or otherwise),
and (c) to the fullest extent permitted by applicable Law that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper or (iii) this Agreement
or the Escrow Agreement or the subject matter hereof or thereof may not be
enforced in or by such court. Each such party hereto waives all personal service
of any and all process upon such party related to this Agreement or the Escrow
Agreement and consents to service of any complaint, summons, notice or other
process upon such party that is made by hand delivery, certified mail or
confirmed facsimile directed to such party at the address specified in Section
11.1 hereof; and service made by certified mail shall be complete seven (7) days
after the same shall have been posted.
85.
11.11 No Waiver. Any failure by any of the Parties hereto to comply with
any of the obligations, agreements or conditions set forth herein may be waived
by the other Party or Parties; provided, however, that any such waiver shall not
be deemed a waiver of any other obligation, agreement or condition.
11.12 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule or law, or public
policy, all other conditions and provisions 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 in a mutually acceptable
manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible.
11.13 No Third Party Beneficiaries. The Parties hereby agree that there
are no third party beneficiaries to this Agreement, other than parties entitled
to indemnification under Article IX.
* * * *
86.
IN WITNESS WHEREOF, each of the Parties hereto has executed and
delivered this Agreement and Plan of Merger to be legally binding and effective
as of the date first above written.
PARENT:
TEKELEC
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: President and Chief Executive Officer
ACQUISITION SUBSIDIARY:
BUCKDANGER, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇
Title: President and Chief Executive Officer
COMPANY:
STELEUS GROUP INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: President and Chief Executive Officer
PREFERRED STOCKHOLDERS:
STRATEGIC PARTNERS, INC.
SOFTWARE CONSOLIDATIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
[SIGNATURES ON NEXT PAGE]
THE BEACON GROUP III - FOCUS VALUE
FUND, L.P.
By: Beacon Focus Value Investors, LLC,
Its general partner
By: Focus Value GP, Inc.,
a Member
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
JAFCO CO., LTD.
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer,
JAFCO America
Ventures, Inc., Attorney-in-Fact
U.S. INFORMATION TECHNOLOGY
INVESTMENT ENTERPRISE
PARTNERSHIP U.S. INFORMATION
TECHNOLOGY NO. 2
INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer,
JAFCO America
Ventures, Inc., Its Executive Partner
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BANCBOSTON INVESTMENTS INC.
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Director
GMT COMMUNICATIONS PARTNERS II, L.P
By: GMT II General Partner, L.P.,
its general partner
By: GMT II General Partner, LLC,
its general partner
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Partner
GMT COMMUNICATIONS PARTNERS
(HOLLAND) II, L.P.
By: GMT II General Partner, L.P.,
its general partner
By: GMT II General Partner, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Partner
GMT COMMUNICATIONS PARTNERS
(EXECUTIVE FUND) II, L.P.
By: GMT II General Partner, L.P.,
its general partner
By: GMT II General Partner, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Managing Partner