SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 31, 1999
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ATMI, INC.
(Exact name of registrant as specified in its charter)
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<CAPTION>
<S> <C> <C> <C>
Delaware 0-22756 06-1481060
(State or other jurisdiction of (Commission file number) (I.R.S. employer
incorporation or organization) identification no.)
7 Commerce Drive
Danbury, Connecticut 06810
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (203) 794-1100
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Item 2. Acquisition or Disposition of Assets.
ACSI Merger Agreement
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On May 31, 1999 pursuant to an Agreement and Plan of Merger dated as of
May 31, 1999 (the "ACSI Merger Agreement") by and among Advanced Chemical
Systems International, Inc., a Delaware corporation ("ACSI"), ATMI, Inc., a
Delaware corporation ("ATMI"), and Strip Acquisition Corp., a newly-formed,
wholly-owned Delaware subsidiary of ATMI ("Strip"), Strip merged (the "ACSI
Merger") with and into ACSI, with ACSI being the surviving corporation. As a
result of the ACSI Merger, ACSI became a wholly-owned subsidiary of ATMI.
Pursuant to the ACSI Merger, each outstanding share of ACSI Common
Stock was converted into .030276219 shares of ATMI Common Stock and each
outstanding share of ACSI Series C Preferred Stock was converted into .065589328
shares of ATMI Common Stock. A total of 1,202,312 shares of ATMI Common Stock
were issued in this transaction.
The ACSI Merger is intended to be a tax-free transaction under the
Internal Revenue Code of 1986, as amended (the "Code"), and will be accounted
for as a pooling of interests. ACSI manufactures photolithography and chemical
mechanical polishing materials for use in the semiconductor manufacturing
industry. ATMI intends to continue the business currently performed by ACSI as a
subsidiary of ATMI.
The foregoing description of the terms and provisions of the ACSI
Merger Agreement is qualified in its entirety by reference to the full text of
the ACSI Merger Agreement which is filed herewith and incorporated by reference.
Delatech Merger Agreement
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On May 31, 1999 pursuant to an Agreement and Plan of Merger dated as of
May 31, 1999 (the "Delatech Merger Agreement") by and among Delatech
Incorporated, a California corporation ("Delatech"), ATMI, Napa Acquisition
Corp., a newly-formed, wholly-owned Delaware subsidiary of ATMI ("Napa"), and
certain shareholders of Delatech, Napa merged (the "Delatech Merger") with and
into Delatech, with Delatech being the surviving corporation. As a result of the
Delatech Merger, Delatech became a wholly-owned subsidiary of ATMI.
Pursuant to the Delatech Merger, each outstanding share of Delatech
Common Stock was converted into .5721393 shares of ATMI Common Stock. Pursuant
to the Delatech Merger, a total of 2,347,499 shares of ATMI Common Stock were
issued.
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The Delatech Merger is intended to be a tax-free transaction under the
Code, and will be accounted for as a pooling of interests. Delatech provides
environmental abatement equipment to the semiconductor industry. ATMI intends to
continue the business currently performed by Delatech, in combination with
ATMI's other environmental abatement equipment subsidiary, ATMI EcoSys
Corporation.
The foregoing description of the terms and provisions of the Delatech
Merger Agreement is qualified in its entirety by reference to the full text of
the Delatech Merger Agreement which is filed herewith and incorporated by
reference.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(a) Financial statements of business acquired. It is presently
impracticable to provide the financial statements required to be included in
this Current Report on Form 8-K with respect to the businesses acquired. Such
financial statements will be filed by amendment as soon as practicable.
(b) Pro forma financial information. It is presently impracticable to
provide the pro forma financial information required to be included in this
Current Report on Form 8-K. ATMI intends to file the financial statements as an
exhibit to ATMI's Quarterly Report on Form 10-Q for the quarter ended June 30,
1999.
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(c) Exhibits
Exhibit No. Description
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2.1 Agreement and Plan of Merger dated as of May 31, 1999
by and among Advanced Chemical Systems International,
Inc., ATMI, Inc. and Strip Acquisition Corp.
2.2 Agreement and Plan of Merger dated as of May 31, 1999
by and among Delatech Incorporated, ATMI, Inc., Napa
Acquisition Corp. and certain shareholders of Delatech
Incorporated
99.1 Form of Press Release issued by ATMI dated June 1,
1999.
99.2 Form of Press Release issued by ATMI dated June 1,
1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
ATMI, Inc. has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 14, 1999 ATMI, INC.
By: /s/ Daniel P. Sharkey
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Daniel P. Sharkey
Vice President, Chief Financial Officer
and Treasurer (Chief Accounting
Officer)
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EXHIBIT INDEX
Exhibit No. Description
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2.1 Agreement and Plan of Merger dated as of May 31, 1999
by and among Advanced Chemical Systems International,
Inc., ATMI, Inc. and Strip Acquisition Corp.
2.2 Agreement and Plan of Merger dated as of May 31, 1999
by and among Delatech Incorporated, ATMI, Inc., Napa
Acquisition Corp. and certain shareholders of Delatech
Incorporated
99.1 Form of Press Release issued by ATMI dated June 1, 1999.
99.2 Form of Press Release issued by ATMI dated June 1, 1999.
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
May 31, 1999, among (i) ATMI, Inc. ("Parent"), a Delaware corporation and a
party to this Agreement but not a constituent corporation in the Merger (as
hereinafter defined); (ii) Strip Acquisition Corp. ("Merger Sub"), a Delaware
corporation all of whose capital stock is owned directly by Parent; and (iii)
Advanced Chemical Systems International, Inc. (the "Company"), a Delaware
corporation.
RECITALS:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company, deeming it advisable and for the respective benefit of Parent, Merger
Sub and the Company, and their stockholders, have approved the Merger (as
hereinafter defined) of Merger Sub with and into the Company upon the terms and
subject to the conditions hereinafter set forth, and have approved this
Agreement and authorized the transactions contemplated hereby; and
WHEREAS, the Board of Directors of the Company has determined
to recommend to all of the Company's stockholders that the Merger and this
Agreement be approved; and
WHEREAS, Parent, Merger Sub and the Company intend to adopt
this Agreement as a plan of reorganization within the meaning of Section 368 of
the Code (as hereinafter defined) and the regulations promulgated thereunder;
and
WHEREAS, Parent, Merger Sub and the Company intend that the
Merger be accounted for as a pooling-of-interests for financial reporting and
accounting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share of the
Company's (i) Common Stock, par value $0.01 per share (the "Company Common
Stock"), (ii) Series A Preferred Stock, par value $0.01 per share (the "Series A
Preferred Stock"), (iii) Series C1 Preferred Stock, par value $0.01 per share
(the "Series C1 Preferred Stock"), (iv) Series C2 Preferred Stock, par value
$0.01 per share (the "Series C2 Preferred Stock") and (v) Series C3 Preferred
Stock, par value $0.01 per share (the "Series C3 Preferred Stock") shall be
automatically converted into the right to receive the respective consideration
specified in Section 2.7 upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, upon consummation of the Merger, the Company will be
a wholly-owned subsidiary of Parent; and
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WHEREAS, Parent, Merger Sub and the Company desire to make
certain representations, warranties and agreements in connection with, and
establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Accounts Receivable"-- as defined in Section 4.9.
"Affiliate Agreement"-- as defined in Section 6.1.
"Affiliate Letters"-- as defined in Section 6.1.
"Agreement"-- as defined in the first paragraph of this Agreement.
"AMT" -- as defined in Section 2.7(f).
"AMT Conversion" -- as defined in Section 2.7(f).
"Average Closing Price"--the average closing price of a share of Parent
Common Stock for the ten (10) consecutive Trading Days ending on the Trading Day
that is two (2) Trading Days immediately prior to the Closing Date, as reported
on the Nasdaq National Market (subject to appropriate adjustment for any stock
split, reverse split, stock dividend, reorganization, recapitalization or other
like change with respect to the Parent Common Stock occurring after the date
hereof and prior to the Effective Time).
"Certificate of Merger"--as defined in Section 2.2.
"Certificates"--as defined in Section 2.8(c).
"Claim"--as defined in Section 11.5(a)
"Closing"--as defined in Section 2.1(b).
"Closing Date"--the date and time as of which the Closing actually
takes place.
"Code"--the Internal Revenue Code of 1986, as amended, or any successor
law.
"Commission"--the United States Securities and Exchange Commission.
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"Common Stock Exchange Ratio"--as defined in Section 2.7(a)(v).
"Company"--as defined in the first paragraph of this Agreement.
"Company Capital Stock"--the Company Common Stock and Company Preferred
Stock.
"Company Common Stock"--as defined in the recitals to this Agreement.
"Company Indemnitee"--as defined in Section 11.3.
"Company Option"--as defined in Section 2.7(d).
"Company Preferred Stock"--the Series A Preferred Stock, Series C1
Preferred Stock, Series C2 Preferred Stock and Series C3 Preferred Stock.
"Company Stockholders"--the holders of the Company Common Stock and the
Company Preferred Stock.
"Confidentiality Agreement"--means the Confidentiality Agreement dated
December 7, 1998 between the Company and Parent.
"Continuing Employee"--as defined in Section 7.4(a).
"Contract"--any agreement, contract, obligation, promise, commitment or
undertaking (whether written or oral and whether express or implied).
"Copyrights"--as defined in Section 4.21(a).
"Customers"--as defined in Section 4.32.
"DGCL"--as defined in Section 2.1(a).
"Disclosure Schedule"--the disclosure schedule delivered by the Company
to Parent and Merger Sub concurrently with the execution and delivery of this
Agreement.
"Dissenting Stockholders"--as defined in Section 2.7(c).
"Effective Time"--as defined in Section 2.2.
"Employee Benefit Plan"--as defined in Section 4.19(a).
"Employment Agreement"--as defined in Section 8(i).
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"Encumbrance"--any mortgage, charge, claim, community property
interest, condition, equitable interest, lien, option, pledge, security
interest, right of first refusal or restriction of any kind, including any
restriction on use, voting, transfer, receipt of income or exercise of any other
attribute of ownership; and the verb "Encumber" shall be construed accordingly.
"Environmental Claim"--any accusation, allegation, notice of violation,
action, claim, Lien, demand, abatement or other Order or direction (conditional
or otherwise) by any Governmental Authority or any Person for personal injury
(including sickness, disease or death), tangible or intangible property damage,
damage to the environment, nuisance, pollution, contamination or other adverse
effects on the environment, or for fines, penalties or restrictions resulting
from or based upon (i) the existence, or the continuation of the existence, of a
Release (including, without limitation, sudden or non-sudden accidental or
non-accidental Releases) of, or exposure to, any Hazardous Material or other
substance, clinical, material, pollutant, contaminant, odor, audible noise, or
other Release in, into or onto the environment (including, without limitation,
the air soil, soil, surface water or groundwater) at, in, by, from or related to
the Facilities or any activities conducted thereon; (ii) the environmental
aspects of the transportation, storage, treatment or disposal of Hazardous
Materials in connection with the operation of the Facilities; or (iii) the
violation, or alleged violation, of any Environmental Laws, Orders or
Governmental Permits of or from any Governmental Authority relating to
environmental matters connected with the Facilities.
"Environmental, Health, and Safety Liabilities"--any cost, damage,
expense, liability, obligation or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to: (a) any environmental, health or safety matter or condition
(including on-site or off-site contamination, generation, handling and disposal
of Hazardous Materials, occupational safety and health, and regulation of
chemical and Hazardous Materials); (b) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, litigation,
including civil and criminal claims, demands and responses, investigative,
remedial, response or inspection costs and expenses arising under Environmental
Law or Occupational Safety and Health Law; (c) financial responsibility under
Environmental Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup, removal, containment or
other remediation or response actions required by applicable Environmental Law
or Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative or remedial measures
required under Environmental Law or Occupational Safety and Health Law. The
terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Law concerning the environment, or activities
that might threaten or result in damage to the environment or human health, or
any Law that is concerned in whole or in part with the environment and with
protecting or improving the quality of the environment and human and employee
health and safety and includes, but is not limited to, CERCLA, the Hazardous
Materials Transportation Act (49 U.S.C. ss. 1801 et
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seq.), the Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 et seq.),
the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean Air Act (33 U.S.C.
ss. 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 et
seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136
et seq.) and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et seq.)
("OSHA"), as such laws have been amended or supplemented, and the regulations
promulgated pursuant thereto, and any and all analogous state or local statutes,
and the regulations promulgated pursuant thereto.
"ERISA"--the Employee Retirement Income Security Act of 1974, as
amended, or any successor law.
"ERISA Affiliate"--as defined in Section 4.19(b).
"Escrow Agent"--as defined in Section 2.8(i).
"Escrow Agreement"--as defined in Section 2.8(i).
"Escrow Amount"--(i) that number of shares of Parent Common Stock
issuable pursuant to Section 2.7 upon conversion of all of the shares of Company
Capital Stock issued and outstanding immediately prior to the Effective Time
plus the Koch Option Consideration multiplied by (ii) 0.10.
"Escrow Fund"--as defined in Section 2.8(i).
"Exchange Act"--the Securities Exchange Act of 1934, as amended, or any
successor law.
"Exchange Agent"--as defined in Section 2.8(a).
"Exchange Ratio"--with respect to the Series A Preferred Stock, the
Series A Exchange Ratio; with respect to the Series C1 Preferred Stock, the
Series C1 Exchange Ratio; with respect to the Series C2 Preferred Stock, the
Series C2 Exchange Ratio; with respect to the Series C3 Preferred Stock, the
Series C3 Exchange Ratio; and with respect to the Company Common Stock, the
Common Stock Exchange Ratio.
"Expiration Date"--as defined in Section 11.1(b).
"Facilities"--any real property, leaseholds or other real property
interests therein currently or formerly owned or operated by the Company and any
buildings, plants, structures or equipment (including motor vehicles) currently
or formerly owned or operated by the Company thereon.
"Financial Statements"--as defined in Section 4.5(a).
"Form 10-K"-- as defined in Section 5.4(a).
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"Form 10-Q"-- as defined in Section 5.4(a).
"GAAP"--generally accepted United States accounting principles applied
on a basis consistent with the basis on which the Financial Statements were
prepared.
"Governmental Authority"--any court, tribunal, authority, agency,
commission, bureau, department, official or other instrumentality of the United
States, any foreign country or any domestic, foreign, state, local, county, city
or other political subdivision.
"Governmental Permit"--any license, franchise, permit or other
authorization of any Governmental Authority.
"Hazardous Materials"--any substance, material or waste which is
regulated by Environmental Law, including, without limitation, any material or
substance which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste" or "restricted hazardous
waste," "subject waste," "contaminant," "toxic waste" or "toxic substance" under
any provision of Environmental Law, including but not limited to, petroleum
products, asbestos and polychlorinated biphenyls.
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or any successor law.
"Indemnitee"--as defined in Section 11.5(a).
"Indemnitor"--as defined in Section 11.5(a).
"Intellectual Property Assets" --as defined in Section 4.21(a).
"Interim Financial Statements"--as defined in Section 4.5(a).
"ISO"--as defined in Section 4.19(i).
"Key Employees"--as defined in Section 4.15(a).
"Koch" -- as defined in Section 2.7(e).
"Koch Conversion" -- as defined in Section 2.7(e)
"Koch Option Consideration" -- as defined in Section 2.7(h)
"Koch Options" -- as defined in Section 2.7(h)
"Law"--any federal, state, local or foreign law (including common law),
statute, code, ordinance, rule, regulation or other requirement or guideline.
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"Lien"--any lien, pledge, hypothecation, levy, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, or other real estate declaration, covenant, condition, restriction or
servitude, transfer restriction under any stockholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Losses"--as defined in Section 11.2.
"Marks"--as defined in Section 4.21(a).
"Material Adverse Effect"--as defined in Section 4.7.
"Merger"--as defined in Section 2.1(a).
"Merger Sub"--as defined in the first paragraph of this Agreement.
"Noncompetition Agreement" -- as defined in Section 8(m).
"Occupational Safety and Health Law"--any legal or governmental
requirement or obligation relating to safe and healthful working conditions or
to reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
"Option Plan"--as defined in Section 2.7(d).
"Order"--any order, consent, consent order, injunction, judgment,
decree, consent decree, ruling, writ, assessment or arbitration award.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the by-laws or code of regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the articles or certificate of formation and
operating agreement of a limited liability company; (e) any charter or similar
document adopted or filed in connection with the creation, formation or
organization of a Person; and (e) any and all amendments to any of the
foregoing.
"Parent"--as defined in the first paragraph of this Agreement.
"Parent Common Stock"--the Common Stock, $0.01 par value per share, of
Parent.
"Parent Indemnitee"--as defined in Section 11.2.
"Parent SEC Reports"--as defined in Section 5.4.
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"Parent Shares"--the shares of Parent Common Stock to be issued to the
Company Stockholders in connection with the Merger.
"Patents"--as defined in Section 4.21(a).
"Pension Plan"--as defined in Section 4.19(f).
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body or Governmental Authority.
"Pooling Rules"--as defined in Section 6.1.
"Proceeding"--as defined in Section 4.13.
"Products Liability"-- as defined in Section 4.36(b).
"Proxy Statement"-- as defined in Section 5.4(a).
"Registration Rights Agreement"--as defined in Section 7.3(a).
"Related Person"--as defined in Section 4.23.
"Release"--any release, spill, effluent, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the indoor or outdoor environment of any Hazardous Material through or in the
air, soil, surface water or groundwater.
"Remedial Action"--all actions, including, without limitation, any
expenditures, required or voluntarily undertaken to (i) clean up, remove, treat,
or in any other way address any Hazardous Material or other substance in the
indoor or outdoor environment; (ii) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Material or other substance so it
does not migrate or endanger or threaten to endanger public health or welfare of
the indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (iv) bring any Facility
into compliance with all Environmental Laws and Environmental Permits.
"Returns"--as defined in Section 4.8(b).
"Rule 145"--as defined in Section 6.1.
"Securities Act"--the Securities Act of 1933, as amended, or any
successor law.
"Securityholder Representative" -- as defined in Section 7.3(b).
"Series A Exchange Ratio"--as defined in Section 2.7(a).
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"Series A Preferred Stock"--as defined in the recitals.
"Series C1 Exchange Ratio"--as defined in Section 2.7(a).
"Series C1 Preferred Stock"--as defined in the recitals.
"Series C2 Exchange Ratio"--as defined in Section 2.7(a).
"Series C2 Preferred Stock"--as defined in the recitals.
"Series C3 Exchange Ratio"--as defined in Section 2.7(a).
"Series C3 Preferred Stock"--as defined in the recitals.
"Series C3 Preferred Stock Dividend Issuance" -- as defined in section
2.7(g).
"Stockholder Representative"--as defined in Section 2.8(i).
"Subsidiary"--with respect to any Person, any corporation, joint
venture, limited liability company, partnership, association or other business
entity of which more than 50% of the total voting power of stock or other equity
entitled to vote generally in the election of directors or managers or
equivalent persons thereof is owned or controlled, directly or indirectly, by
such Person.
"Surviving Corporation"--as defined in Section 2.1(a).
"Systems"--as defined in Section 4.33.
"Tax Authority"--as defined in Section 4.8(a).
"Taxes"--as defined in Section 4.8(a).
"Trade Secrets"--as defined in Section 4.21(a).
"Trading Day"--means any day on which the Nasdaq National Market is
open for business.
"Transaction Documents"--means the Employment Agreement,
Non-Competition Agreement, Registration Rights Agreement, the Escrow Agreement
and the other agreements, documents or instruments executed and delivered by a
party hereto as contemplated under this Agreement.
"WARN"--as defined in Section 4.18(d).
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"Year 2000"--as defined in Section 4.33.
"Year 2000 Compliance Plan" -- as defined in Section 4.33.
2. THE MERGER; CLOSING
2.1 THE MERGER
(a) Upon the terms set forth in this Agreement, and in accordance with
the Delaware General Corporation Law (the "DGCL"), Merger Sub shall be merged
with and into the Company at the Effective Time (the "Merger"). Following the
Merger, the separate corporate existence of Merger Sub shall cease, and the
Company shall continue as the surviving corporation (the "Surviving
Corporation") under the name "Advanced Chemical Systems International, Inc."
(b) The consummation of the Merger will take place on the date of
execution and delivery of this Agreement at the offices of Kramer Levin Naftalis
& Frankel LLP, 919 Third Avenue, New York, New York (the "Closing"), unless
another date, time or place is agreed to in writing by the Company, Merger Sub
and Parent.
2.2 EFFECTIVE TIME
As soon as practicable following the Closing, the parties hereto shall
cause the Merger to be consummated by (i) filing a certificate of merger (the
"Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the DGCL, and (ii) making all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Certificate of Merger is duly filed with the Secretary of
State of the State of Delaware or at such subsequent time as the Company, Merger
Sub and Parent shall agree and shall be specified in the Certificate of Merger
(the date and time the Merger becomes effective being the "Effective Time").
2.3 EFFECTS OF THE MERGER
At and after the Effective Time, the Merger will have the effects set
forth in this Agreement, the Certificate of Merger and the applicable provisions
of the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
2.4 CERTIFICATE OF INCORPORATION OF SURVIVING CORPORATION
Unless otherwise determined by Parent prior to the Effective Time, at
the Effective Time, the certificate of incorporation of the Company, as in
effect immediately prior to the Effective Time, shall be the certificate of
incorporation of the Surviving Corporation, unless and until thereafter changed
or amended as provided therein or by applicable Law.
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2.5 BY-LAWS OF SURVIVING CORPORATION
At the Effective Time, the by-laws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the by-laws of the Surviving
Corporation, unless and until thereafter changed or amended as provided therein
or in the certificate of incorporation of the Surviving Corporation or by
applicable Law.
2.6 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
The officers of Merger Sub immediately prior to the Effective Time
(which are set forth on Schedule 2.6 hereto) shall be the initial officers of
the Surviving Corporation, in each case until the earliest of their resignation
or removal from office or their otherwise ceasing to be officers or until their
respective successors are duly elected and qualified. The directors of Merger
Sub immediately prior to the Effective Time (which are set forth on Schedule 2.6
hereto) shall be the initial directors of the Surviving Corporation, each to
hold office in accordance with the certificate of incorporation and by-laws of
the Surviving Corporation.
2.7 CONVERSION OR CANCELLATION OF CAPITAL STOCK OF THE COMPANY
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of any party hereto or any holder thereof:
(i) Series A Preferred Stock. Subject to the provisions of Sections
2.7(c), 2.8 and 2.9, each share of Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time and not theretofore
converted into Company Common Stock shall be converted into the right
to receive that portion of a share of Parent Common Stock which is
equal to $0.15 divided by the Average Closing Price (the "Series A
Exchange Ratio").
(ii) Series C1 Preferred Stock. Subject to the provisions of Sections
2.7(c), 2.8 and 2.9, each share of the Company's Series C1 Preferred
Stock issued and outstanding immediately prior to the Effective Time
and not theretofore converted into Company Common Stock shall be
converted into the right to receive that portion of a share of Parent
Common Stock which is equal to $1.47289034 divided by the Average
Closing Price (the "Series C1 Exchange Ratio").
(iii) Series C2 Preferred Stock. Subject to the provisions of Sections
2.7(c), 2.8 and 2.9, each share of the Company's Series C2 Preferred
Stock issued and outstanding immediately prior to the Effective Time
and not theretofore converted into Company Common Stock shall be
converted into the right to receive that portion of a share of Parent
Common Stock which is equal to $1.47289034 divided by the Average
Closing Price (the "Series C2 Exchange Ratio").
(iv) Series C3 Preferred Stock. Subject to the provisions of Sections
2.7(c), 2.8 and 2.9, each share of the Company's Series C3 Preferred
Stock issued and out-
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standing immediately prior to the Effective Time and not theretofore
converted into Company Common Stock shall be converted into the right
to receive that portion of a share of Parent Common Stock which is
equal to $1.47289034 divided by the Average Closing Price (the "Series
C3 Exchange Ratio").
(v) Company Common Stock. Subject to the provisions of Sections 2.7(c),
2.8 and 2.9, each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the
right to receive that portion of a share of Parent Common Stock which
is equal to $0.67989034 divided by the Average Closing Price (the
"Common Stock Exchange Ratio").
(vi) Unissued Shares. Each authorized but unissued share of Company
Preferred Stock and Company Common Stock shall cease to exist without
payment of any consideration therefor.
(vii) Merger Sub's Common Stock. Each share of Merger Sub's Common
Stock, $0.01 par value per share, issued and outstanding immediately
prior to the Effective Time shall be cancelled and extinguished and
automatically converted into one (1) validly issued, fully paid and
nonassessable share of Common Stock, $0.01 par value per share, of the
Surviving Corporation.
(b) Parent Common Stock. The aggregate number of shares of Parent
Common Stock issuable pursuant to Section 2.7(a) (which includes the conversion
pursuant to Section 2.7(a) of any shares of Company Capital Stock resulting from
the conversions and issuance referred to in Sections 2.7(e), (f) and (g)) and
2.7(h) shall not exceed the number of shares of Parent Common Stock obtained by
dividing (i) 27,000,000 by (ii) the Average Closing Price.
(c) Dissenters. Shares of Company Preferred Stock and shares of Company
Common Stock owned by a holder who (i) shall not have voted in favor of the
Merger, and (ii) shall have delivered to the Company a written notice of his
intent to demand payment for his shares if the Merger is effectuated in the
manner provided in Section 262 of the DGCL (collectively, the "Dissenting
Stockholders") shall not be cancelled, extinguished and converted as provided
above in this Section 2.7, but shall be entitled to receive such consideration
as shall be provided in such section of the DGCL, except that shares of any
Dissenting Stockholder who shall thereafter not perfect such holder's right to
appraisal as provided in such section of the DGCL shall thereupon be deemed to
have been cancelled, extinguished and converted, as of the Effective Time, into
Parent Common Stock, as provided in clauses (i) through (v) of Section 2.7(a),
as the case may be. The Company shall notify Parent and Merger Sub in writing of
the details of the Dissenting Stockholders and the number of shares of Company
Preferred Stock or shares of Company Common Stock that they own. The Company
shall not enter into any agreement or settlement with any Dissenting Stockholder
without the prior written consent of Parent.
(d) Stock Options. As of the Effective Time, each option outstanding at
the Effective Time to purchase shares of Company Common Stock (a "Company
Option") under the Advanced Chemical Systems International, Inc. 1997 Stock
Option Plan (the "Option
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Plan"), which Company Options are listed on Section 4.3 of the Disclosure
Schedule, shall become fully vested pursuant to the terms of the Option Plan and
shall constitute an option to purchase, on the same terms and conditions set
forth in the Option Plan and/or as provided in the respective option agreements
governing such Company Option immediately prior to the Effective Time, the
number of whole shares of Parent Common Stock which the holder of such Company
Option would have been eligible to receive pursuant to Section 2.7(a)(v), had
such Company Option then been fully vested prior to the effective time and such
holder exercised such Company Option in full immediately prior to the Effective
Time, rounded down to the nearest whole number of shares of Parent Common Stock,
at a price per share equal to the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Company Option was
exercisable immediately prior to the Effective Time by the Common Stock Exchange
Ratio, rounded up to the nearest whole cent. As soon as practicable following
the Effective Time, Parent will cause to be delivered to each holder of an
outstanding Company Option an appropriate notice setting forth such holder's
rights pursuant thereto and that such Company Option shall continue in effect on
the same terms and conditions.
(e) Conversion By Koch of Series C1 Preferred Stock. Koch Chemical Co.
("Koch"), a division of Koch Petroleum Group, L.P., shall have converted
4,865,808 of its shares of Series C1 Preferred Stock into shares of Company
Common Stock (the "Koch Conversion") in accordance with the certificate of
incorporation of the Company immediately prior to the Effective Time, which
shares of Company Common Stock shall be converted into the right to receive
shares of Parent Common Stock in accordance with Section 2.7(a)(v).
(f) Conversion By AMT of Series C2 Preferred Stock. Advanced Materials
Technologies Venture Partners Ltd., JHAM Limited Partnership and AMT Capital,
Ltd. (collectively, "AMT") shall have converted an aggregate of 4,817,662 of
their shares of Series C2 Preferred Stock into shares of Company Common Stock
(the "AMT Conversion") in accordance with the certificate of incorporation of
the Company immediately prior to the Effective Time, which shares of Company
Common Stock shall be converted into the right to receive shares of Parent
Common Stock in accordance with Section 2.7(a)(v).
(g) Issuance of Series C3 Preferred Stock Dividend. An aggregate of
1,030,176 shares of Series C3 Preferred Stock which have accrued as dividends
under Section A(1)(c)(iii) of Article Fourth of the certificate of incorporation
of the Company, shall be issued (the "Series C3 Preferred Stock Dividend
Issuance") to Advanced Materials Technologies Venture Partners Ltd., JHAM
Limited Partnership and AMT Capital, Ltd. in accordance with the certificate of
incorporation of the Company, which shares of Series C3 Preferred Stock shall be
converted into the right to receive shares of Parent Common Stock in accordance
with Section 2.7(a)(iv).
(h) Transfer of Koch Option Agreement. Immediately prior to the
Effective Time, Koch shall exchange all of its options to purchase shares of
Series C1 Preferred Stock (the "Koch Options") under the Stock Option Agreement,
dated October 3, 1997 between Koch and the Company, with Parent in return for
the number of shares of Parent Common Stock
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which is equal to $1,828,323 divided by the Average Closing Price (the "Koch
Option Consideration").
2.8 SURRENDER OF CERTIFICATES, ESCROW, ETC.
(a) Exchange Agent. Parent or the transfer agent for the Parent Common
Stock, or a bank or trust company designated by Parent prior to the Effective
Time, shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent, for exchange
in accordance with this Section 2, (i) the aggregate number of shares of Parent
Common Stock issuable pursuant to Section 2.7 in exchange for (A) the issued and
outstanding shares of Company Capital Stock and (B) the Koch Options and (ii)
the cash to be paid in lieu of fractional shares pursuant to Section 2.9;
provided that, on behalf of the Company Stockholders, Parent shall deposit into
the Escrow Fund pursuant to Section 2.8(i) that number of shares of Parent
Common Stock equal to the Escrow Amount out of (x) the aggregate number of
shares of Parent Common Stock otherwise issuable pursuant to Section 2.7(a) upon
conversion of all of the shares of Company Capital Stock issued and outstanding
immediately prior to the Effective Time and (y) the Koch Option Consideration.
The portion of the Escrow Amount contributed on behalf of each holder of Company
Capital Stock shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive under (q)
Section 2.7(a) by virtue of ownership of issued and outstanding shares of
Company Capital Stock and (r) Section 2.7(h) as more fully specified in Section
2.8(i).
(c) Exchange Procedures. Promptly after the Effective Time, the
Exchange Agent shall cause to be delivered to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time evidenced outstanding shares of Company Preferred Stock or
Company Common Stock whose shares were converted into the right to receive
shares of Parent Common Stock pursuant to Section 2.7(a) and, if applicable,
cash in lieu of fractional shares pursuant to Section 2.9 (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions to effect the
surrender of the Certificates in exchange for certificates evidencing shares of
Parent Common Stock. Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly completed and validly executed in
accordance with the instructions thereto, and such other documents as may be
required by such instructions, the holder of such Certificates shall be entitled
to receive in exchange therefor a certificate evidencing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock
to be deposited in the Escrow Fund on such holder's behalf pursuant to Section
2.8(i)) to which such holder is entitled pursuant to Section 2.7(a) and 2.7(h),
plus cash in lieu of fractional shares in accordance with Section 2.9, and the
Certificate so surrendered shall forthwith be cancelled. Until so surrendered,
each
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outstanding Certificate that, prior to the Effective Time, evidenced shares of
Company Preferred Stock or Company Common Stock will be deemed from and after
the Effective Time, for all corporate purposes, other than the payment of
dividends or other distributions, to evidence the ownership of the number of
whole shares of Parent Common Stock into which such shares of Company Preferred
Stock or Company Common Stock shall have been so converted and the right to
receive an amount in cash in lieu of the issuance of any fractional shares in
accordance with Section 2.9.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
shares of Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock evidenced thereby until the holder of record of
such Certificate shall surrender such Certificate pursuant to Section 2.8(c).
Subject to applicable Law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates evidencing whole shares
of Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer, accompanied by all documents required
to evidence and effect such transfer pursuant to this Section 2.8(e), and that
the Person requesting such transfer will have paid to Parent or any agent
designated by it any transfer or other Taxes required by reason of the issuance
of a certificate for shares of Parent Common Stock in any name other than that
of the registered holder of the Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such Taxes have been
paid or are not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 2.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any holder of shares of Company Capital Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar Law.
(g) No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Capital Stock or Koch Options in accordance with the terms hereof (including any
cash paid in respect thereof in accordance with Section 2.9) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such shares of
Company Capital Stock or Koch Options, and there shall be no further
registration of transfers on the records of the Surviving Corporation of shares
of Company Capital Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be cancelled and exchanged as
provided in this Section 2.8.
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(h) Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent may require, before issuing certificates
in respect of the shares of Parent Common Stock evidenced thereby, such
affidavits and indemnities and bonds in support thereof, as it may reasonably
require with respect to such loss, theft or destruction.
(i) Escrow. Notwithstanding any provision of this Agreement to the
contrary, in lieu of delivering to holders of shares of Company Capital Stock
certificates for the full number of shares of Parent Common Stock provided for
in Section 2.7(a), Parent shall deliver or cause to be delivered (A) to each
such holder one or more certificates, registered in the name of such holder
(subject to Section 2.8(e)), for a number of shares of Parent Common Stock equal
to 90% of the aggregate number of shares of Parent Common Stock otherwise
issuable to such holder pursuant to Section 2.7(a) and 2.7(h); and (B) to State
Street Bank and Trust Company, as escrow agent (the "Escrow Agent"), for deposit
into the escrow fund (the "Escrow Fund") provided for in the escrow agreement in
the form attached as Exhibit 2.8 hereto (the "Escrow Agreement"), to secure the
indemnity obligations under Section 11.2, one or more certificates, registered
in the name of the Escrow Agent, for a number of shares of Parent Common Stock
equal to the Escrow Amount out of the aggregate number of shares of Parent
Common Stock otherwise issuable pursuant to (x) Section 2.7(a) upon conversion
of all of the shares of Company Capital Stock issued and outstanding immediately
prior to the Effective Time and (y) Section 2.7(h) in exchange for the Koch
Options, all of which will be held as part of the Escrow Fund and disposed of by
the Escrow Agent in accordance with the provisions of the Escrow Agreement. Such
shares shall be beneficially owned by the holders on whose behalf such shares
were deposited in the Escrow Fund and shall be available to compensate the
Parent Indemnitees as provided in Section 11. The Escrow Agreement is
incorporated herein by reference and shall be considered part of this Agreement.
By voting for or failing to dissent from the approval of this Agreement, each
Company Stockholder automatically and without any further act or deed
irrevocably agrees that:
(A) such Company Stockholder accepts and shall be
bound by the terms and provisions of the Escrow Agreement; and
(B) Peter Walmsley (or his successor as provided in
the Escrow Agreement) is appointed Stockholder Representative
(the "Stockholder Representative") for purposes of the Escrow
Agreement with all rights, powers and authority provided for
in the Escrow Agreement and that any action taken by the
Stockholder Representative pursuant to the Escrow Agreement
shall be conclusive, valid, binding and enforceable with
respect to each such Company Stockholder.
(j) Withholding Rights. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Capital Stock or Koch Options such amounts as
Parent or the Exchange Agent is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of state, local or
foreign Tax Law. To the extent that amounts
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are so deducted and withheld by Parent or the Exchange Agent, such deducted and
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of the Company Capital Stock in respect of which such
deduction and withholding was made by Parent or the Exchange Agent.
2.9 NO FRACTIONAL SHARES; MULTIPLE CERTIFICATES
Notwithstanding any provision of this Agreement to the contrary,
neither certificates nor scrip for fractional shares of Parent Common Stock
shall be issued in connection with the Merger, but in lieu thereof each holder
of shares of Company Common Stock, Company Preferred Stock or Koch Options
otherwise entitled to a fraction of a share of Parent Common Stock pursuant to
the provisions of Section 2.7 shall be paid in cash in accordance with Section
2.8 an amount equal to such fraction multiplied by the Average Closing Price. No
such holder shall be entitled to dividends or interest on or, except for the
cash payment referred to in the preceding sentence, other rights in respect of
any such fractional interest. If more than one Certificate shall be surrendered
for the account of the same Company Stockholder, the number of whole shares of
Parent Common Stock for which such Certificates shall be exchanged pursuant to
Section 2.8 shall be computed on the basis of the aggregate number of shares of
Company Preferred Stock or Company Common Stock evidenced by such Certificates.
2.10 STOCK TRANSFER BOOKS
At the close of business on the day prior to the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Preferred Stock or Company Common Stock shall thereafter be made on such stock
transfer books.
2.11 TAX AND ACCOUNTING CONSEQUENCES
It is intended by the parties hereto that the Merger shall (i)
constitute a tax-free plan of reorganization within the meaning of Section 368
of the Code, and (ii) subject to applicable accounting standards, qualify for
accounting treatment as a pooling-of-interests. The parties hereto adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
3. [Intentionally Omitted.]
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
4.1 ORGANIZATION AND GOOD STANDING
(a) Section 4.1 of the Disclosure Schedule contains a complete and
accurate list of the jurisdictions in which the Company is authorized to do
business. The Company is a corporation duly organized, validly existing and in
good standing under the Laws of its
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jurisdiction of incorporation, with full corporate power and authority to
conduct its business as it is now being conducted and to own or use the assets
and properties that it purports to own or use. The Company is duly qualified to
do business as a foreign corporation and is in good standing under the Laws of
each state or other jurisdiction in which either the ownership or use of the
assets or properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification, except where the failure to be so
qualified could not reasonably be expected to have a Material Adverse Effect on
the Company. The Company does not have, and has never had, any Subsidiaries.
(b) The Company has delivered to Parent correct and complete copies of
the Organizational Documents of the Company.
4.2 AUTHORITY; NO CONFLICT
(a) The Company has the right, power, authority and capacity to execute
and deliver this Agreement and the Transaction Documents to which it is a party,
to consummate the Merger and the other transactions contemplated hereby and
thereby and to perform its obligations under this Agreement and the Transaction
Documents to which it is a party. This Agreement has been duly authorized and
approved, executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms. Upon the authorization and approval, execution and
delivery by the Company of the Transaction Documents to which it is a party,
such Transaction Documents will constitute legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms.
(b) Except as set forth in Section 4.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Transaction Document
by the Company nor the consummation or performance by the Company of the Merger
or any of the other transactions contemplated hereby or thereby will, directly
or indirectly (with or without notice or lapse of time or both):
(i) contravene, conflict with or result in a violation or
breach of (A) any provision of the Organizational Documents of the Company, (B)
any resolution adopted by the board of directors or the stockholders of the
Company, (C) any legal requirement or any Order, award, decision, settlement,
process or ruling to which the Company or any of the assets or properties owned
or used by the Company may be subject, or (D) any Governmental Permit, which is
held by the Company or that otherwise relates to the business of, or any of the
assets or properties owned or used by, the Company;
(ii) result in a breach of or constitute a default, give rise
to a right of termination, cancellation or acceleration, create any entitlement
to any payment or benefit, or require the consent, authorization or approval of
or any notice to or filing with any third Person under any Contract to which the
Company is a party or to which its assets or properties are bound, or require
the consent, authorization or approval of or any notice to or filing with any
Governmental Authority to which the Company or its assets or properties is
subject; or
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(iii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets or properties owned or used by the
Company.
4.3 CAPITALIZATION
The authorized equity securities of the Company consist solely of
64,301,642 shares of common stock, $0.01 par value per share, of which 7,860,880
shares are issued and outstanding; 4,328,745 shares of Series A Preferred Stock,
$0.01 par value per share, of which 4,328,745 shares are issued and outstanding;
16,000,000 shares of Series C1 Preferred Stock, $0.01 par value per share, of
which 6,305,170 shares are issued and outstanding; 9,000,000 shares of Series C2
Preferred Stock, $0.01 par value per share, of which 8,584,809 shares are issued
and outstanding; 20,000,000 shares of Series C3 Preferred Stock, $0.01 par value
per share, of which 756,618 shares are issued and outstanding and of which
1,030,176 shares have accrued as dividends on the outstanding shares of Series
C2 Preferred Stock for issuance pursuant to Section A(1)(c)(iii) of Article
Fourth of the certificate of incorporation of the Company and shall be issued
pursuant to Section 2.7(g). All of the outstanding equity securities of the
Company have been duly authorized and validly issued and are (except as set
forth in Section 4.3 of the Disclosure Schedule) fully paid and nonassessable.
Section 4.3 of the Disclosure Schedule sets forth a complete and correct list of
all of the Company Stockholders and the number of shares of Company Common Stock
and/or Company Preferred Stock owned, of record and beneficially, by each such
Company Stockholder. Section 4.3 of the Disclosure Schedule sets forth a
complete and correct list of all warrants, options or similar rights, including
as to each holder thereof, the number of shares of Company Common Stock and/or
Company Preferred Stock subject thereto and the exercisability, exercise price
and termination date thereof. Section 4.3 of the Disclosure Schedule sets forth
all outstanding securities of the Company, including but not limited to all debt
securities, Company Common Stock, Company Preferred Stock, options, warrants,
rights and all other securities convertible or exercisable into, or exchangeable
for, Company capital stock. Except as listed on Section 4.3 of the Disclosure
Schedule, there are no voting trusts or other agreements or understandings to
which the Company or any Company Stockholder is a party with respect to the
transfer, voting or registration of the capital stock of the Company. Except as
listed on Section 4.3 of the Disclosure Schedule, there are no Contracts
relating to the issuance, sale or transfer of any equity securities or other
securities of the Company. None of the outstanding equity securities or other
securities of the Company were issued in violation of the Securities Act or any
other legal requirement. The Company does not own or have any Contract to
acquire, any equity securities or other securities of any Person or any, direct
or indirect, equity or ownership interest in any other business. No Person has
any pre-emptive rights with respect to any security of the Company.
4.4 BOOKS AND RECORDS
Except as disclosed in Section 4.4 of the Disclosure Schedule, the
books of account and other records of the Company, all of which have been made
available to Parent, are true, complete and correct. Except as disclosed in
Section 4.4 of the Disclosure Schedule, the minute books of the Company contain
true, accurate and complete records of all meetings
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held of, and corporate action taken by, the stockholders, the board of
directors, and committees of the board of directors of the Company. The stock
books of the Company are true, complete and correct. At the Closing, all of such
books and records will be in the possession of the Company.
4.5 FINANCIAL STATEMENTS
(a) For purposes of this Agreement: "Financial Statements" shall mean
(i) the audited balance sheets of the Company as of December 31, 1997 and 1998,
and the related income statements for the years then ended (including all
footnotes thereto) and (ii) the unaudited balance sheet of the Company as of
April 30, 1999 and the related income statement for the four months ended on
such date (including all footnotes thereto) (the "Interim Financial
Statements"). The Company has delivered to Parent true and complete copies of
the Financial Statements.
(b) The Financial Statements for the years ended December 31, 1997 and
1998 (i) have been prepared from the books and records of the Company in
accordance with GAAP, (ii) fully reflect all liabilities and contingent
liabilities of the Company required to be reflected therein on such basis as at
the date thereof, and (iii) fairly present the financial position of the Company
as of the date of the balance sheet included in the Financial Statements and the
results of its operations for the period indicated. The Interim Financial
Statements (i) have been prepared from the books and records of the Company in
accordance with GAAP on a basis consistent with the Financial Statements for the
years ended December 31, 1997 and 1998, and (ii) fairly present the financial
position of the Company as at the date of the balance sheet included therein and
the results of its operations for the period indicated; provided, however, the
Interim Financial Statements (x) are subject to normal year-end adjustments and
(y) do not include footnotes.
4.6 NO UNDISCLOSED LIABILITIES
Except as set forth in Section 4.6 of the Disclosure Schedule, the
Company does not have any liabilities or obligations of any nature (whether
absolute, accrued, contingent, or otherwise) except for (i) liabilities or
obligations reflected or reserved against in the Financial Statements, (ii)
current liabilities incurred in the ordinary course of business since the date
of the Financial Statements, consistent with past practices, which will not,
individually or in the aggregate, have a Material Adverse Effect on the Company
and (iii) other liabilities and obligations expressly disclosed in this
Agreement or the Disclosure Schedule.
4.7 NO MATERIAL ADVERSE CHANGE
Since December 31, 1998, there has not been any material adverse change
in the business, operations, properties, assets, prospects, liabilities, results
of operations or condition (financial or otherwise) (a "Material Adverse
Effect") of the Company (except for differences in explicit line items on the
unaudited balance sheet of the Company as of April 30, 1999 as compared to such
line items on the audited balance sheet of the Company as of
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December 31, 1998) and no event has occurred or circumstance exists that could
reasonably be expected to result in a Material Adverse Effect on the Company.
4.8 TAXES
(a) "Taxes" shall mean all taxes, charges, fees, Encumbrances, Liens,
customs, duties or other assessments, however denominated, including any
interest, penalties, additions to tax or additional taxes that may become
payable in respect thereof, imposed by the United States government, any state,
local or foreign government, or any agency or political subdivision of any such
government (a "Tax Authority"), which taxes shall include, without limiting the
generality of the foregoing, all income taxes, payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, capital taxes, franchise taxes, gross receipt taxes, occupation taxes,
real and personal property taxes, value added taxes, stamp taxes, transfer
taxes, workers' compensation taxes, taxes relating to benefit plans and other
obligations of the same or similar nature.
(b) (i) The Company has filed or caused to be filed with the
appropriate Taxing Authorities in a timely manner all Tax returns, reports and
forms ("Returns") required to be filed by them; (ii) the information on such
Returns is complete and accurate in all material respects; (iii) the Company has
paid in full on a timely basis all Taxes (whether or not shown on any Return)
required to be paid by them; (iv) there are no Encumbrances for Taxes upon the
assets or properties of the Company other than for Taxes not yet due and
payable; and (v) no deficiencies for Taxes have been claimed, proposed, or
assessed by any Tax Authority or other Governmental Authority with respect to
the Company, and there are no pending or, to the Company's knowledge, threatened
audits, investigations or claims for or relating to any liability in respect of
Taxes of the Company.
(c) There are no outstanding Contracts or waivers with respect to the
Company extending the statutory period of limitation applicable to any Taxes
and, except as set forth in Section 4.8 of the Disclosure Schedule, the Company
has not requested any extension of time within which to file any Return, which
has not yet been filed.
(d) (i) The Company has made provision for all Taxes payable by it and
such provision is reflected on the Financial Statements with respect to any
period covered thereby as to Taxes which are not payable prior to the date of
such Financial Statements; (ii) the provisions for Taxes with respect to the
Company for any period prior to the Closing (excluding any reserve for deferred
Taxes established to reflect timing differences between book and Tax income) are
adequate to cover all Taxes with respect to such period; (iii) the Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third Person; (iv) all material elections with
respect to Taxes made by the Company as of the date hereof are set forth in
Section 4.8 of the Disclosure Schedule; (v) there are no private letter rulings
in respect of any Tax pending between the Company and any Tax Authority, or
between any Controlling Stockholder and any Tax Authority, if such ruling would
affect the Company; (vi) the Company has never been a member of an affiliated
group within the meaning of Section 1504 of the Code, or filed or been included
in a
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combined, consolidated or unitary return of any Person; (vii) the Company is not
liable for Taxes of any other Person, and the Company is not currently under any
contractual obligation to indemnify any Person with respect to Taxes, or a party
to any tax sharing agreement or any other agreement providing for payments by
the Company with respect to Taxes; (viii) the Company is not, nor has been, a
United States real property holding corporation (as defined in section 897(c)(2)
of the Code), during the applicable period specified in section 897(c)(1)(A)(ii)
of the Code; (ix) the Company is not a "collapsible corporation" under Section
341 of the Code; (x) the Company is not a personal holding company within the
meaning of Section 542 of the Code; (xi) the Company is not a party to any joint
venture, partnership or other arrangement or Contract which could be treated as
a partnership for Tax purposes; (xii) the Company has not agreed to nor is
required, as a result of a change in method of accounting or otherwise, to
include any adjustment under Section 481 of the Code (or any corresponding
provision of state, local or foreign Law) in taxable income; (xiii) the Company
is not a party to any Contract, arrangement or plan that could result (taking
into account the transactions contemplated by this Agreement), separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code; and (xiv) Section 4.8 of the Disclosure
Schedule contains a list of all jurisdictions to which any Tax is properly
payable or in which any Return is required to be filed by the Company, and no
written claim has ever been made by any Tax Authority in any other jurisdiction
that the Company is subject to taxation in such jurisdiction.
4.9 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Financial Statements or on the accounts receivable ledger of the Company as of
the Closing Date (collectively, the "Accounts Receivable") represent or will
represent valid obligations arising from sales actually made or services
actually performed in the ordinary course of business. All of the Accounts
Receivable are collectible at the full recorded amount thereof, less any
applicable reserves established in accordance with GAAP, in the ordinary course
of business without resort to litigation, except for such Accounts Receivable,
the failure of which to be collected will not have a Material Adverse Effect on
the Company.
4.10 TITLE TO PROPERTIES; ENCUMBRANCES
Section 4.10 of the Disclosure Schedule contains a complete and
accurate list of all real property, leaseholds or other interests therein owned
or held by the Company. The Company does not own, and has not owned, any real
property. The Company has delivered or made available to Parent true, correct
and complete copies of the real property leases to which the Company is party or
pursuant to which it uses or occupies any real property. Except as set forth in
Section 4.10 of the Disclosure Schedule, the Company has good title to all of
the material assets and properties, real and personal, tangible and intangible,
it owns or purports to own, or uses in its business, including those reflected
on its books and records and in the Financial Statements (except for accounts
receivable collected and materials and supplies disposed of in the ordinary
course of business consistent with past practice after the date of the most
recent Financial Statements). The Company has a valid leasehold, license or
other interest in all of the other tangible assets or properties, real or
personal, which are
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used in the operation of its business. Except as set forth in Section 4.10 of
the Disclosure Schedule, all assets and properties owned, leased or used by the
Company are free and clear of all Encumbrances, except for (a) liens for current
Taxes not yet due, (b) workmen's, common carrier and other similar liens arising
in the ordinary course of business, none of which materially detracts from the
value or impairs the use of the asset or property subject thereto, or impairs
the operations of the Company, (c) Encumbrances disclosed in the Financial
Statements, and (d) with respect to real property, (i) minor imperfections of
title, if any, none of which is substantial in amount, materially detracts from
the value or impairs the use of the property subject thereto, or impairs the
operations of the Company, and (ii) zoning Laws and other land use restrictions
that do not impair the present or anticipated use of the property subject
thereto.
4.11 CONDITION AND SUFFICIENCY OF ASSETS
Except as set forth in Section 4.11 of the Disclosure Schedule, the
Facilities and other material assets and property owned or used by the Company
are structurally sound, are in good operating condition and repair, and are
adequate for the uses to which they are being put, and none of such Facilities
or other material property and assets owned or used by the Company is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The Facilities and other material assets and
property owned or used by the Company are sufficient for the continued conduct
of its business after the Closing in substantially the same manner as conducted
prior to the Closing.
4.12 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Section 4.12 of the Disclosure Schedule, the
Company is in compliance with all Laws, licenses and Orders affecting the assets
or properties owned or used by the Company and the business or operations of the
Company including federal, state, local and foreign: (i) Occupational Safety and
Health Laws; (ii) securities laws, rules and regulations; and (iii) the Fair
Credit Reporting Act and similar state, local and foreign laws, except for such
non-compliance which would not have a Material Adverse Effect on the Company.
The Company has not been charged with violating, nor to the knowledge of the
Company, threatened with a charge of violating, nor is the Company under
investigation with respect to a possible violation of, any provision of any
federal, state, local or foreign Law, Order or administrative ruling, license or
regulation relating to any of its assets or properties or any aspect of its
business.
(b) Section 4.12 of the Disclosure Schedule contains a complete and
accurate list of each Governmental Permit that is held by the Company or that
otherwise relates to the business of, or to any of the assets or properties
owned or used by, the Company. Each Governmental Permit listed or required to be
listed in Section 4.12 of the Disclosure Schedule is valid and in full force and
effect and is not subject to any Proceedings for suspension, modification or
revocation.
4.13 LEGAL PROCEEDINGS
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Except as set forth in Section 4.13 of the Disclosure Schedule, there
is no pending claim, action, investigation, arbitration, litigation or other
proceeding ("Proceeding"):
(i) that has been commenced by or against the Company or that
otherwise relates to the business of, or any of the assets owned or used by, the
Company; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby.
To the knowledge of the Company, no such Proceeding has been
threatened. The Company has made available to Parent true, correct and complete
copies of all pleadings, correspondence and other documents relating to each
Proceeding listed in Section 4.13 of the Disclosure Schedule. The Proceedings
listed in Section 4.13 of the Disclosure Schedule could not reasonably be
expected to have a Material Adverse Effect on the Company.
4.14 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Section 4.14 of the Disclosure Schedule, since
December 31, 1998, the Company has conducted its business only in the ordinary
course, consistent with past practice, and there has not been any:
(a) declaration, setting aside, making or payment of any dividend or
other distribution or repurchase or payment in respect of shares of capital
stock, other than the Series C3 Preferred Stock Dividend Issuance;
(b) issuance, sale, disposition or Encumbrance of, or authorization for
issuance, sale, disposition or Encumbrance of, or grant or issue any options,
warrants or rights to acquire with respect to, any shares of its capital stock
or any other of its securities or any security convertible or exercisable into
or exchangeable for any such shares or securities, or any change in its
outstanding securities or shares of capital stock or its capitalization, whether
by reason of a reclassification, recapitalization, stock split, combination,
exchange or readjustment of shares, stock dividend or otherwise, other than the
Koch Conversion and the AMT Conversion;
(c) Encumbrance of its assets or properties;
(d) payment or increase of any bonuses, salaries or other compensation
to any stockholder, director, officer, consultant, agent or sales representative
or (except in the ordinary course of business consistent with past practice)
employee or entry into any employment, severance or similar Contract with any
director, officer or employee;
(e) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees;
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(f) damage to or destruction or loss of any asset or property, whether
or not covered by insurance, or loss of any Customer, which could reasonably be
expected to have a Material Adverse Effect on the Company;
(g) entry into, termination of, or receipt of notice of termination of
any Contract or transaction involving a total remaining commitment by or to the
Company of at least $25,000 including the entry into (i) any document evidencing
any indebtedness; (ii) any capital or other lease; or (iii) any guaranty;
(h) sale, lease or other disposition (other than in the ordinary course
of business consistent with past practice) of any asset or property;
(i) cancellation, compromise, release or waiver of any debt, claim or
right with a value to the Company in excess of $25,000;
(j) creation, incurrence or assumption of any indebtedness for borrowed
money or guarantee of any obligation or the net worth of any Person in an
aggregate amount in excess of $25,000, except for endorsements of negotiable
instruments for collection in the ordinary course of business;
(k) discharge or satisfaction of any Encumbrance other than those which
are required to be discharged or satisfied during such period in accordance with
their original terms;
(l) payment, discharge or satisfaction of any material obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, except for any current liabilities, and the current portion of any long
term liabilities, shown on the Financial Statements (or not required as of the
date thereof to be shown thereon in accordance with GAAP) or incurred since the
date of the most recent balance sheet in the ordinary course of business
consistent with past practice;
(m) loan or advance to any Person other than travel and other similar
routine advances in the ordinary course of business consistent with past
practice, or acquisition of any capital stock or other securities of or any
ownership interest in, or a significant portion of the assets of, any other
business enterprise;
(n) capital investment or expenditure or capital improvement, addition
or betterment in amounts which exceed $25,000 in the aggregate;
(o) institution or settlement of any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(p) except in the ordinary course of business consistent with past
practice, commitment to provide services or goods for an indefinite period or a
period of more than six (6) months;
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(q) change in the method of accounting or the accounting principles or
practices used by the Company in the preparation of the Financial Statements
except as required by GAAP;
(r) entry into other Contracts, except Contracts made in the ordinary
course of business consistent with past practice;
(s) amendment or other modification of any of the Organizational
Documents of the Company;
(t) transfer or grant of any rights or licenses under, or entry into
any settlement regarding the infringement of, any Intellectual Property Assets,
or entry into any licensing or similar agreements or arrangements; or
(u) agreement, whether oral or written, by the Company to do any of the
foregoing.
4.15 CONTRACTS; NO DEFAULTS
(a) Section 4.15(a) of the Disclosure Schedule contains a complete and
accurate list, and the Company has delivered to Parent true, correct and
complete copies, of:
(i) each Contract involving payments of at least $25,000
within one calendar year that involves performance of services or delivery of
goods or materials by the Company;
(ii) each Contract involving payments of at least $25,000
within one calendar year that involves performance of services or delivery of
goods or materials to the Company;
(iii) each material lease, license and other Contract
affecting any leasehold or other interest in any real or personal property;
(iv) each licensing agreement or other Contract with respect
to patents, trademarks, copyrights, trade secrets or other intellectual
property, including agreements with current or former employees, consultants or
contractors regarding the appropriation or the non-disclosure of any
intellectual property;
(v) each collective bargaining agreement and other Contract to
or with any labor union or other employee representative of a group of
employees;
(vi) each joint venture, partnership and other Contract
involving a sharing of profits, losses, costs or liabilities by the Company with
any other Person or requiring the Company to make a capital contribution;
(vii) each Contract to which the Company is a party containing
covenants that in any way purport to restrict the business activity of the
Company or any of the key employees of the Company (collectively, the "Key
Employees") or limit the freedom of the
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Company or any of the Key Employees to engage in any line of business or to
compete with any Person or hire any Person;
(viii) each employment or consulting agreement between the
Company and its employees and consultants;
(ix) each agreement between the Company and an officer or
director of the Company or any affiliate of any of the foregoing;
(x) each power of attorney granted by the Company that is
currently effective and outstanding;
(xi) each Contract for capital expenditures by the Company in
excess of $25,000 within one calendar year;
(xii) each agreement of the Company under which any money has
been or may be borrowed or loaned or any note, bond, factoring agreement,
indenture or other evidence of indebtedness has been issued or assumed (other
than those under which there remain no ongoing obligations of the Company), and
each guaranty (including "take-or-pay" and "keepwell" agreements) of any
evidence of indebtedness or other obligation, or of the net worth, of any Person
(other than endorsements for the purpose of collection in the ordinary course of
business);
(xiii) each agreement of the Company containing restrictions
with respect to the payment of dividends or other distributions in respect of
the Company's capital stock;
(xiv) each stock purchase, merger or other agreement pursuant
to which the Company acquired any material amount of assets, and all relevant
documents and agreements delivered in connection therewith;
(xv) each agreement to which the Company is a party containing
a change of control provision;
(xvi) each other agreement to which the Company is a party
having an indefinite term or a fixed term of more than one (1) year (other than
those that are terminable at will or upon not more than thirty (30) days' notice
by the Company without penalty) or requiring payments by the Company of more
than $25,000 per year; and
(xvii) each standard form of agreement pursuant to which the
Company provides services or goods to Customers.
(b) Except as set forth in Section 4.15(b) of the Disclosure Schedule,
each Contract identified or required to be identified in Section 4.15(a) of the
Disclosure Schedule is in full force and effect and is valid and enforceable
against the Company and, to the knowledge of the Company, against the other
parties thereto in accordance with its terms.
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(c) Except as set forth in Section 4.15(c) of the Disclosure Schedule:
(i) the Company is in full compliance with all applicable
terms and requirements of each Contract under which the Company has any
obligation or liability or by which the Company or any of the assets or
properties owned or used by the Company is or was bound, except for such
noncompliance that would not have a Material Adverse Effect on the Company;
(ii) to the knowledge of the Company, each other Person that
has or had any obligation or liability under any Contract under which the
Company has any rights is in full compliance with all applicable terms and
requirements of such Contract; and
(iii) no event has occurred and, to the knowledge of the
Company, no circumstance exists that (with or without notice or lapse of time or
both) is likely to result in a violation or breach of any Contract.
4.16 INSURANCE
Section 4.16 of the Disclosure Schedule sets forth the premium payments
and describes all the insurance policies of the Company, which policies are now
in full force and effect in accordance with their terms and expire on the dates
shown on Section 4.16 of the Disclosure Schedule. There has been no default in
the payment of premiums on any of such policies, and there is no ground for
cancellation or avoidance of any such policies, or any increase in the premiums
thereof, or for reduction of the coverage provided thereby. Such policies shall
not terminate nor fail to continue in full force and effect as a result of the
consummation of the Merger and the other transactions contemplated by this
Agreement. True, correct and complete copies of all insurance policies listed in
Section 4.16 have been previously furnished to Parent.
4.17 ENVIRONMENTAL MATTERS
(a) To the knowledge of the Company, the Company is in compliance with
all applicable Environmental Laws which compliance includes, but is not limited
to, the possession by the Company of all Governmental Permits required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof. Except as set forth in Section 4.17(a) of the Disclosure Schedule, the
Company has not received notice of, and, neither the Company, nor any
predecessor of the Company is the subject of, any Environmental Claim or
Remedial Action. To the knowledge of the Company, there are no circumstances or
conditions related to the Company, the Company's operations or any of the
Company's Facilities that are reasonably likely to prevent or interfere with
such compliance or give rise to an Environmental Claim or Remedial Action in the
future.
(b) There are no Environmental Claims that are pending or, to the
knowledge of the Company, threatened against the Company, the Company's
Facilities or against any Person whose liability for any Environmental Claim the
Company has retained or assumed either contractually or by operation of law.
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(c) Neither the Company nor any other Person on behalf of the Company
has (a) disposed of, transported or arranged for the disposal of any Hazardous
Materials to, at or upon: (i) any location other than a site lawfully permitted
to receive such Hazardous Materials, (ii) any Facilities (except for
transportation to any Facility to the extent that such Facility contained a site
lawfully permitted to receive such Hazardous Materials); or (iii) any site
which, pursuant to CERCLA or any similar state law, has been placed on the
National Priorities List, CERCLIS or their state equivalents, and (b) the
Company has not caused and is not causing, and, to the knowledge of the Company,
there has not occurred or is presently occurring a Release, or threatened
Release, of any Hazardous Materials on, into or beneath the surface of, or
adjacent to, any Facilities.
(d) Section 4.17 of the Disclosure Schedule identifies (a) all
environmental audits, assessments, or occupational health studies undertaken by
the Company or its agents on its behalf, or undertaken by any Governmental
Authority, or any third Person, relating to the Facilities; (b) the results of
any groundwater, soil, air or asbestos monitoring undertaken by the Company or
its agents on its behalf, or, to the knowledge of the Company, undertaken by any
Governmental Authority or any third Person, relating to the Facilities; and (c)
all written communications between the Company and any Governmental Authority
arising under or related to Environmental Laws.
4.18 EMPLOYEES
(a) Section 4.18 of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee of the Company:
name; job title; base salary; bonus; vacation accrued; and service credited for
purposes of vesting and eligibility to participate under any employee benefit
plan of any nature.
(b) No officer or Key Employee of the Company is a party to, or is
otherwise bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such officer or Key
Employee and, to the knowledge of the Company, any other Person that could
adversely affect (i) the performance of his duties as an officer or employee of
the Company, or (ii) the ability of the Company to conduct its business.
(c) No Key Employee of the Company is bound by any agreement with any
other Person that is violated or breached by such employee performing the
services he is performing for the Company.
(d) Except as listed on Section 4.18 of the Disclosure Schedule, the
Company has not had a "Plant Closing" or a "Mass Layoff" within the meaning of
the federal Workers Adjustment and Retraining Notification Act of 1988 ("WARN")
and with respect to any such Plant Closing or Mass Layoff, the Company has
complied in all respects with the requirements of WARN.
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4.19 EMPLOYEE BENEFITS
(a) Except as listed on Section 4.19(a) of the Disclosure Schedule, the
Company does not maintain, have an obligation to contribute to or could have any
liability with respect to any Employee Benefit Plan. "Employee Benefit Plan"
means any "employee benefit plan" as defined in Section 3(3) of ERISA and any
other plan, policy, program, practice, agreement, understanding or arrangement
(whether written or oral) providing compensation or other benefits to any
current or former director, officer, employee or consultant (or to any dependent
or beneficiary thereof), of the Company, which are now, or were within the past
six years, maintained by the Company, or under which the Company has or could
have any obligation or liability, whether actual or contingent, including,
without limitation, all incentive, bonus, deferred compensation, vacation,
holiday, cafeteria, medical, disability, stock purchase, stock option, stock
appreciation, phantom stock, restricted stock or other stock-based compensation
plans, policies, programs, practices or arrangements.
The Company has delivered to Parent or its counsel prior to the date
hereof true and complete copies of (i) any employment agreements and any
procedures and policies relating to the employment of employees of the Company
and the use of temporary employees and independent contractors by the Company
(including summaries of any procedures and policies that are unwritten), (ii)
plan instruments and amendments thereto for all Employee Benefit Plans (or
written summaries of any Employee Benefit Plans that are unwritten) and related
trust agreements, insurance and other contracts, summary plan descriptions, and
summaries of material modifications, and material communications distributed to
the participants of each Plan, (iii) to the extent annual reports on Form 5500
are required with respect to any Employee Benefit Plan, the three most recent
annual reports and attached schedules for each Employee Benefit Plan as to which
such report is required to be filed and (iv) where applicable, the most recent
(A) opinion, notification and determination letters, (B) audited financial
statements, (C) actuarial valuation reports and (D) nondiscrimination tests
performed under the Code (including 401(k) and 401(m) tests) for each Employee
Benefit Plan.
(b) The Company does not have and has never had an ERISA Affiliate.
"ERISA Affiliate" means any entity (whether or not incorporated) other than the
Company that, together with the Company, is a member of (i) a controlled group
of corporations within the meaning of Section 414(b) of the Code; (ii) a group
of trades or businesses under common control within the meaning of Section
414(c) of the Code; or (iii) an affiliated service group within the meaning of
Section 414(m) of the Code.
(c) The Company does not maintain and has never maintained or
contribute to or has ever contributed to an Employee Benefit Plan subject to
Title IV of ERISA (including a multiemployer plan) and no facts exist under
which the Company could incur any liability under Title IV of ERISA.
(d) To the knowledge of the Company and to the extent that such matter
could reasonably be expected to have a Material Adverse Effect on the Company,
with respect to each Employee Benefit Plan, (i) no party in interest or
disqualified person (as defined in Section 3(14) of ERISA and Section 4975 of
the Code, respectively) has at any time engaged
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in a transaction which could subject Parent, Merger Sub or the Company, directly
or indirectly, to a tax, penalty or liability for prohibited transactions
imposed by ERISA or the Code and (ii) no fiduciary (as defined in Section 3(21)
of ERISA) with respect to any Employee Benefit Plan, or for whose conduct the
Company could have any liability (by reason of indemnities or otherwise), has
breached any of the responsibilities or obligations imposed upon the fiduciary
under Title I of ERISA.
(e) Except as disclosed in Section 4.19(e) of the Disclosure Schedule,
each Employee Benefit Plan which is a "welfare plan" within the meaning of
Section 3(1) of ERISA and which provides health, disability or death benefits is
fully insured; the Company is not obligated to directly pay any such benefits or
to reimburse any third Person payor for the payment of such benefits.
(f) Each Employee Benefit Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and which
is subject to Sections 201, 301 or 401 of ERISA has received a favorable
determination letter from the Internal Revenue Service covering all amendments
required by the Tax Reform Act of 1986 and prior legislation and, to the
knowledge of the Company, there are no circumstances that are likely to result
in revocation of any such favorable determination letter. Each Employee Benefit
Plan is and has been operated in material compliance with its terms and all
applicable Laws, Orders or governmental rules and regulations currently in
effect with respect thereto, and by its terms can be amended and/or terminated
at any time. As of and including the Closing Date, the Company and each ERISA
Affiliate (i) shall have performed all obligations required to be performed by
it under, and shall not be in default under or in violation of any Employee
Benefit Plan and (ii) shall have made all contributions or payments required to
be made by it up to and including the Closing Date with respect to each Employee
Benefit Plan, or adequate accruals therefor will have been provided for and will
be reflected on the Financial Statements provided to Parent by the Company. All
notices, filings and disclosures required by ERISA or the Code (including
notices under Section 4980B of the Code and certifications under the Health
Insurance Portability and Accountability Act) have been timely made.
(g) The Company has not received and is not aware of any Proceeding
(other than routine claims for benefits) pending or, to the knowledge of the
Company, threatened with respect to any Employee Benefit Plan or against any
fiduciary of any Employee Benefit Plan, and, to the knowledge of the Company,
there are no facts that could give rise to any such Proceeding. To the knowledge
of the Company, there has not occurred any circumstances by reason of which the
Company may be liable for an act, or a failure to act, by a fiduciary with
respect to any Employee Benefit Plan.
(h) There are no complaints, charges or claims against the Company
pending or, to the Company's knowledge, threatened to be brought by or filed
with any Governmental Authority and no facts exist as a result of which the
Company could have any liability based on, arising out of, in connection with or
otherwise relating to the classification of any individual by the Company as an
independent contractor or "leased employee" (within the meaning of Section
414(n) of the Code) rather than as an employee.
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(i) Section 4.19(i) of the Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company who holds (i) any option to purchase Company Capital Stock, together
with the number of shares of Company Capital Stock subject to such option, the
option price of such option (to the extent determinable), whether such option is
intended to qualify as an incentive stock option within the meaning of Section
422(b) of the Code (an "ISO"), and the expiration date of such option; (ii) any
shares of Company Capital Stock that are restricted as a result of an agreement
with the Company or the stock plan of the Company; and (iii) any other right,
directly or indirectly, to receive Company Capital Stock or any other
compensation based in whole or in part on the value of Company Capital Stock,
together with the number of shares of Company Capital Stock subject to such
right.
(j) Section 4.19(j) of the Disclosure Schedule sets forth a true and
complete list of (i) all employment agreements with officers or employees of the
Company; (ii) all agreements with consultants who are individuals obligating the
Company to make annual cash payments in an amount exceeding $25,000; (iii) all
agreements with respect to the services of independent contractors or leased
employees who are individuals or individuals doing business in a corporate form
whether or not they participate in any of the Employee Benefit Plans; and (iv)
all officers and employees of the Company who have executed a non-competition
agreement with the Company.
(k) (i) No Employee Benefit Plan is an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in
Company Stock; and (ii) except as set forth on Section 4.19(k) of the Disclosure
Schedule, the consummation of the transactions contemplated by this Agreement
will not, alone or together with any other event, (A) entitle any employee or
former employee of the Company or any Subsidiaries of the Company to any
payment, (B) result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable in respect of any employee or former employee or (C) result in any
parachute payment under Section 280G of the Code, whether or not such payment is
considered reasonable compensation for services rendered. The Company will take
all actions within its control to ensure that all actions required to be taken
by a fiduciary of any Employee Benefit Plan in order to effectuate the
transaction contemplated by this Agreement shall comply with the terms of such
Plan, ERISA and other applicable Laws. The Company will take all actions within
its control to ensure that all actions required to be taken by a trustee of any
Employee Benefit Plan that owns Company Stock shall have been duly authorized by
the appropriate fiduciaries of such Plan and shall comply with the terms of such
Plan, ERISA and other applicable Laws.
(l) The Company maintains no Employee Benefit Plan covering non-U.S.
employees.
(m) No Employee Benefit Plan provides benefits, including, without
limitation, death or medical benefits (through insurance or otherwise) with
respect to any employee or former employee of the Company beyond their
retirement or other termination of service other than (i) coverage mandated by
applicable Law, (ii) retirement or death benefits under any employee pension
plan, (iii) disability benefits under any employee welfare plan that have
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been fully provided for by insurance or otherwise, (iv) deferred compensation
benefits accrued as liabilities on the books of the Company or (v) benefits in
the nature of severance pay.
(n) No Employee Benefit Plan is a "multiple employer plan" as described
in Section 3(40) of ERISA or Section 413(c) of the Code.
(o) No Employee Benefit Plan, other than a Pension Plan, is funded
through a trust intended to be exempt from tax pursuant to Section 501 of the
Code.
(p) The Company has not proposed, agreed to or announced any changes to
any Employee Benefit Plan that would cause an increase in benefits under any
such Employee Benefit Plan (or the creation of new benefits or plans) or to
change any employee coverage which would cause an increase in the expense of
maintaining any such plan.
(q) No Employee Benefit Plan provides for the payment of severance
benefits. No "leased employee" (within the meaning of Section 414(n) or (o) of
the Code) performs any services for the Company.
4.20 LABOR RELATIONS
Except as set forth in Section 4.20 of the Disclosure Schedule:
(a) To the knowledge of the Company, no employee is considering
terminating his or her employment with the Company.
(b) No condition or state of facts or circumstances exists to the
knowledge of the Company which are reasonably likely to have a Material Adverse
Affect on the Company's relations with its employees, including the consummation
of the transactions contemplated by this Agreement.
(c) The Company is in compliance in all material respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours and none of them is engaged in any
unfair labor practice.
(d) No collective bargaining agreement with respect to the business of
the Company is currently in effect or being negotiated. Since January 1, 1996,
the Company has not encountered any labor union or collective bargaining
organizing activity with respect to its employees. The Company has no obligation
to negotiate any such collective bargaining agreement and, to the knowledge of
the Company, there is no indication that the employees of the Company desire to
be covered by a collective bargaining agreement.
(e) There are no strikes, slowdowns, work stoppages or other labor
trouble pending or, to the knowledge of the Company, threatened with respect to
the employees of the Company, nor has any of the above occurred or, to the
knowledge of the Company, been threatened.
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(f) There is no representation claim or petition pending before the
National Labor Relations Board or any state or local labor agency and, to the
knowledge of the Company, no question concerning representation has been raised
or threatened respecting the employees of the Company.
(g) There are no complaints or charges against the Company pending
before the National Labor Relations Board or any state or local labor agency
and, to the knowledge of the Company, no complaints or charges have been filed
or threatened to be filed against the Company with any such board or agency.
(h) To the knowledge of the Company, no charges with respect to or
relating to the business of the Company are pending before the Equal Employment
Opportunity Commission or any state or local agency responsible for the
prevention of unlawful employment practices.
(i) Section 4.20 of the Disclosure Schedule accurately sets forth all
unpaid severance which, as of the date hereof, is due or claimed, in writing, to
be due from the Company to any Person whose employment with the Company was
terminated.
(j) The Company has not received notice of the intent of any government
body responsible for the enforcement of labor or employment Laws to conduct an
investigation of the Company and no such investigation is in progress.
(k) The Company is not and, to the knowledge of the Company, no
employee of the Company is, in violation in any material respect of any
employment agreement, non-disclosure agreement, non-compete agreement or any
other agreement regarding an employee's employment with the Company.
(l) The Company has paid all wages which are due and payable to each
employee and each independent contractor.
4.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--As used herein, the term
"Intellectual Property Assets" shall mean all worldwide intellectual property
rights including without limitation: (i) all trademarks, service marks, trade
names and Internet domain names and the goodwill associated therewith, and all
registrations or applications therefor (collectively, "Marks"); (ii) all
patents, patent applications and inventions and discoveries under consideration
for possible patenting (collectively, "Patents"); (iii) all copyrights in both
published works and unpublished works, including training manuals, marketing and
promotional materials, internal reports, business plans and any other
expressions, mask works and software and videos, whether registered or
unregistered, and all registrations or applications in connection therewith
(collectively, "Copyrights"); and (iv) all trade secrets and other confidential
information of a proprietary nature, whether tangible or intangible and whether
or how stored, compiled, or memorialized physically, electronically,
photographically, or otherwise (collectively, "Trade Secrets"); owned, used or
licensed by the Company as licensee or licensor. The Intellectual Property
Assets are all those used in or material to the conduct of
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the business of the Company as it is currently conducted or as proposed to be
conducted. The Company owns all right, title and interest in and to each of the
Intellectual Property Assets, free and clear of all Encumbrances and Liens and
without conflict with the rights of others, or licenses or otherwise possesses
legally enforceable rights to each of the Intellectual Property Assets, and may
transfer such rights as contemplated by this Agreement. Except as set forth on
Section 4.21(a) of the Disclosure Schedule, the Company has made all necessary
filings and recordations to protect and maintain its interest in the
Intellectual Property Assets.
(b) Agreements--Section 4.21(b) of the Disclosure Schedule contains a
true, correct and complete list and summary description, including any royalties
paid or received by the Company, of all Contracts relating to the Intellectual
Property Assets to which the Company is a party or by which the Company is
bound. Each license of Intellectual Property Assets listed in Section 4.21(b) is
valid, subsisting, and enforceable, and shall continue in effect on its current
terms upon consummation of the transactions contemplated by this Agreement.
(c) Patents--(i) Section 4.21(c) of the Disclosure Schedule contains a
true, correct and complete list of all Patents; (ii) the Company owns all right,
title and interest in and to the Patents free and clear of all Encumbrances and
Liens and without conflict with the rights of others, or has licenses or
otherwise possesses legally enforceable rights under the Patents, and may
transfer such rights as contemplated by this Agreement; (iii) all Patents are
valid and subsisting and all maintenance fees, annuities and the like have been
paid; (iv) none of the Patents is infringed or has been challenged or threatened
in any way by any Person, and none of the products or technology used, sold or
licensed or proposed for use, sale or license by the Company infringes or is
alleged to infringe any rights of any Person; and (v) all products covered by
the Patents distributed by or with the authorization of the Company have been
marked with appropriate patent notices.
(d) Marks--(i) Section 4.21(d) of the Disclosure Schedule contains a
true, correct and complete list of all Marks; (ii) the Company owns all right,
title and interest in and to the Marks free and clear of all Encumbrances and
Liens and without conflict with the rights of others, or has licenses or
otherwise possesses legally enforceable rights to use the Marks, and may
transfer such rights as contemplated by this Agreement; (iii) all Marks are
valid and subsisting; (iv) none of the Marks is infringed or has been challenged
or threatened in any way by any Person, and no claims exist against the use by
the Company of any Marks used in the business of the Company as currently
conducted or as proposed to be conducted; and (v) all materials published by the
Company bearing its Marks have been marked with appropriate trademark and
registration notices.
(e) Copyrights--(i) Section 4.21(e) of the Disclosure Schedule contains
a true, correct and complete list of all copyright registrations and
applications; (ii) the Company owns all right, title and interest in and to each
of the Copyrights free and clear of all Encumbrances and Liens and without
conflict with the rights of others, or has licenses or otherwise possesses
legally enforceable rights to use the Copyrights, and may transfer such rights
as contemplated by this Agreement; (iii) all the Copyrights owned by the
Company, whether or not registered, are valid and enforceable; (iv) none of the
Copyrights is infringed or has been challenged or threatened in any way, and no
claims exist against the use by the Company of
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any writings or other expressions used in the business of the Company as
currently conducted or as proposed to be conducted; and (v) all works
encompassed by the Copyrights published by the Company have been marked with
appropriate copyright notices.
(f) Trade Secrets--(i) The Company has taken all reasonable precautions
to protect the secrecy, confidentiality and value of its Trade Secrets; and (ii)
the Company has good title and an absolute right to use its Trade Secrets and
may transfer such rights as contemplated by this Agreement. To the knowledge of
the Company, the Trade Secrets have not been used, divulged or appropriated
either for the benefit of any Person (other than the Company) or to the
detriment of the Company. None of the Trade Secrets is subject to any material
adverse claim or has been challenged or threatened in any way.
4.22 CERTAIN PAYMENTS
Neither the Company nor any stockholder, director, officer, agent or
employee of the Company, or to the knowledge of the Company, any other Person
associated with or acting for or on behalf of the Company, has directly or
indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, whether in money, property or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions, or for special concessions already
obtained, for or in respect of the Company or any affiliate of the Company, or
(iv) in violation of any legal requirement, or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
4.23 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Section 4.23 or Section 4.15(a) of the
Disclosure Schedule (or solely as a result of their role as described), no
Person owning ten percent (10%) or more of the Company Capital Stock nor any
affiliate, officer, director or employee of the Company, nor any spouse or child
of any of them or any Person associated with any of them ("Related Person"), has
any interest in any assets or properties used in or pertaining to the business
of the Company. Except as set forth in Section 4.23 of the Disclosure Schedule,
no Person owning ten percent (10%) or more of the Company Capital Stock nor any,
affiliates, officers, directors or employees of the Company nor any Related
Person has owned, directly or indirectly, and whether on an individual, joint or
other basis, any equity interest or any other financial or profit interest in a
Person that has (i) had business dealings with the Company, or (ii) engaged in
competition with the Company. Except as set forth in Section 4.23 or Section
4.15(a) of the Disclosure Schedule, no Person owning ten percent (10%) or more
of the Company Capital Stock nor any affiliate, officer, director or employee of
the Company nor any Related Person is a party to any Contract with, or has any
claim or right against, or owes any amounts to, the Company.
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4.24 BROKERS OR FINDERS
Neither the Company nor any Controlling Stockholder or any of their
agents has incurred any obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or financial advisory services
or other similar payment in connection with this Agreement.
4.25 DEPOSIT ACCOUNTS
Section 4.25 of the Disclosure Schedule contains a true, correct and
complete list of (a) the name of each financial institution in which the Company
has an account or safe deposit box, (b) the names in which each account or box
is held, (c) the type account, and (d) the name of each Person authorized to
draw on or have access to each account or box.
4.26 POOLING-OF-INTERESTS
To the knowledge of the Company, the Company has not taken or agreed to
take any action, or caused any event or condition to occur, which would affect
the ability of Parent to account for the transactions contemplated hereby as a
pooling-of-interests for financial reporting and accounting purposes.
4.27 CUSTOMER RELATIONSHIPS
There are no facts or circumstances, including the consummation of the
transactions contemplated by this Agreement, that to the knowledge of the
Company are reasonably likely to result in the loss of any Customer of the
Company or a material change in the relationship of the Company with such a
Customer.
4.28 CONDUCT OF BUSINESS; USE OF NAME
The business carried on by the Company has been conducted by the
Company directly and not through any affiliate or any stockholder, officer,
director or employee of the Company or through any other Person. No Person has
objected to the Company's use of the name "Advanced Chemical Systems
International, Inc."
4.29 RESTRICTIONS ON BUSINESS ACTIVITIES.
There is no Contract or Order binding upon the Company or, to the
knowledge of the Company, threatened that has or could reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
the Company (either individually or in the aggregate), any acquisition of
property by the Company (either individually or in the aggregate), providing of
any service by the Company or the hiring of employees or the conduct of business
by the Company (either individually or in the aggregate) as currently conducted
or proposed to be conducted.
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4.30 OUTSTANDING INDEBTEDNESS
Section 4.30 of the Disclosure Schedule sets forth as of May 25, 1999
(a) the amount of all indebtedness for borrowed money of the Company then
outstanding and the interest rate applicable thereto, (b) any Encumbrances which
relate to such indebtedness and (c) the name of the lender or the other payee of
each such indebtedness.
4.31 SUPPLIERS; RAW MATERIALS; CONTRACTORS
Section 4.31 of the Disclosure Schedule sets forth for the year ended
December 31, 1998 and the four months ended April 30, 1999, (i) the names and
addresses of the twenty-five (25) largest suppliers, contractors and
subcontractors of the Company based on the aggregate value of raw materials,
supplies, merchandise and other goods and services ordered by the Company from
such suppliers, contractors and subcontractors during such period and (ii) the
amount for which each such supplier, contractor or subcontractor invoiced the
Company during such period. The Company has not received any notice or have any
reason to believe that there has been any material adverse change in the price
of such raw materials, supplies, merchandise or other goods or services, or that
any such supplier, contractor or subcontractor will not sell raw materials,
supplies, merchandise and other goods and services to the Company at any time
after the Closing Date on terms and conditions substantially the same as those
used in its current sales to the Company, subject to general or customary price
increases.
4.32 CUSTOMERS
Section 4.32 of the Disclosure Schedule sets forth (a) a true, complete
and correct listing of all existing customers (the "Customers") of the Company
and (b) the amount for which each such Customer was invoiced during the year
ended December 31, 1998 and the four months ended April 30, 1999.
4.33 YEAR 2000 COMPLIANCE
Section 4.33 of the Disclosure Schedule contains the compliance plan of
the Company (the "Year 2000 Compliance Plan") with respect to the use of Systems
prior to, during and after calendar year 2000 ("Year 2000") and describes any
Year 2000 compliance audit or similar audit conducted by the Company and the
identity of any consultants or other Persons engaged in connection therewith.
The Company has delivered true, correct and complete copies of the reports or
results of any such audits to Parent. Upon implementation of the Year 2000
Compliance Plan, all hardware, software, and embedded systems used by the
Company, including any hardware, software, and embedded systems used in
connection with product and service development, operations and production,
financial operations, office and administration operations, human resources
functions, and legal and audit functions (the "Systems") will be designed to be
used prior to, during and after the Year 2000 and will operate during each such
time periods without error relating to date data, other than such errors which
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
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4.34 PAYABLES
There has been no adverse change since December 31, 1998 in the amount
or delinquency of accounts payable of the Company (either individually or in the
aggregate) which would have a Material Adverse Effect on the Company.
4.35 INVENTORIES.
All inventories of raw materials, supplies, work in progress and
finished goods of the Company are of good, usable and merchantable quality in
all material respects and do not include obsolete or discontinued items. Except
as set forth in Section 4.35 of the Disclosure Schedule, (a) all such
inventories are of such quality as to meet the quality control standards of the
Company and any applicable governmental quality control standards, (b) all such
finished goods are saleable as current inventories at the current prices of the
Company in the ordinary course of business, (c) all such inventories are
recorded on the books at the lower of cost or market value determined in
accordance with GAAP and (d) no write-down in inventory has been made or should
have been made pursuant to GAAP during the past two years.
4.36 PRODUCT WARRANTIES; PRODUCT LIABILITY.
(a) The Company has delivered to the Parent complete and correct copies
of the standard terms and conditions of sale or lease for each of the products
or services of the Company (containing applicable guaranty, warranty and
indemnity provisions). Except as required by Law or as set forth in Section 4.36
of the Disclosure Schedule, no product manufactured, sold, leased or delivered
by, or service rendered by or on behalf of, the Company is subject to any
guaranty, warranty or other indemnity, express or implied, beyond such standard
terms and conditions.
(b) There exists, to the knowledge of the Company, no defect in the
design or manufacture of any of the Company's products. There is no pending or,
to the knowledge of the Company, threatened action, suit, inquiry, proceeding or
investigation by or before any Person relating to any product alleged to have
been manufactured, distributed or sold by the Company to others, and alleged to
have been defective or improperly designed or manufactured or in breach of any
express or implied product warranty ("Products Liability"). There exists no
pending or, to the knowledge of the Company, threatened, Products Liability
claims. To the knowledge of the Company, there is no valid basis for any such
suit, inquiry, action, proceeding, investigation or claim. The Company does not
have, to the knowledge of the Company, any liability arising out of any injury
to individuals or property as a result of the ownership, possession, or use of
any product manufactured, sold, leased or delivered by the Company. The Company
is insured, and has been insured continuously for the past five years against
product liabilities, in accordance with the insurance policies identified on
Section 4.16 of the Disclosure Schedule.
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4.37 DISCLOSURE
No representation or warranty of the Company in this Agreement as
modified by statements in the Disclosure Schedule is inaccurate in any material
respect or omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances under which they were made, not
misleading.
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company as follows:
5.1 ORGANIZATION AND GOOD STANDING
Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Parent is a corporation
duly organized, validly existing, and in good standing under the laws of the
State of Delaware. Each of Parent and Merger Sub has full corporate power and
authority to conduct its business as it is now being conducted and to own or use
the assets and properties that it purports to own or use. Each of Parent and
Merger Sub is duly qualified to do business as a foreign corporation and is in
good standing under the Laws of each state or other jurisdiction in which either
the ownership or use of the assets or properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification, except
where the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect on Parent and its Subsidiaries, taken as a whole.
5.2 AUTHORITY; NO CONFLICT
(a) Parent and Merger Sub each has the right, power, authority and
capacity to execute and deliver this Agreement and the Transaction Documents to
which Parent or Merger Sub is a party, to consummate the Merger and the other
transactions contemplated hereby and thereby and to perform their respective
obligations under this Agreement and the Transaction Documents to which Parent
or Merger Sub is a party. This Agreement has been duly authorized and approved,
executed and delivered by Parent and Merger Sub and constitutes the legal, valid
and binding obligation of Parent and Merger Sub, enforceable against them in
accordance with its terms. Upon the execution and delivery by Parent and Merger
Sub of the Transaction Documents to which Parent or Merger Sub is a party, such
Transaction Documents will constitute the legal, valid and binding obligations
of Parent and Merger Sub, enforceable against them in accordance with their
respective terms.
(b) Except as set forth in Section 5.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Transaction Document
by Parent or Merger Sub nor the consummation or performance by Parent or Merger
Sub of the Merger or any of the other transactions contemplated hereby or
thereby will, directly or indirectly (with or without notice or lapse of time or
both):
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(i) contravene, conflict with, or result in a violation or
breach of (A) any provision of the Organizational Documents of Parent or Merger
Sub, (B) any resolution adopted by the board of directors or the stockholders of
Parent or Merger Sub, (C) any legal requirement or any Order to which Parent or
Merger Sub or any of the assets or properties owned or used by them may be
subject, or (D) any Governmental Permit held by Parent or Merger Sub;
(ii) result in a breach of or constitute a default, give rise
to a right of termination, cancellation or acceleration, create any entitlement
to any payment or benefit, or require the consent or approval of or any notice
to or filing with any third Person, under any Contract to which Parent or Merger
Sub is a party or by which their respective assets or properties are bound, or
require the consent or approval of or any notice to or filing with any
Governmental Authority to which either Parent, Merger Sub or their respective
assets or properties are subject; or
(iii) result in the imposition or creation of any Encumbrance
upon or with respect to any of the assets or properties owned or used by Parent
or Merger Sub.
5.3 CAPITALIZATION; PARENT SHARES
(a) The authorized capital stock of Parent consists of 2,000,000 shares
of preferred stock, $.01 par value per share, of which as of the date of this
Agreement no shares are issued or outstanding, and 50,000,000 shares of Parent
Common Stock, of which as of April 30, 1999, 22,271,457 shares were issued and
outstanding. All of the authorized and issued capital stock of Merger Sub is
owned of record and beneficially by Parent.
(b) The Parent Shares issuable as a result of the Merger have been duly
authorized and upon the Effective Time will be validly issued, fully paid and
nonassessable.
5.4 FILINGS WITH THE COMMISSION
(a) Parent has delivered or made available to the Company true, correct
and complete copies of its Annual Report on Form 10-K for the year ended
December 31, 1998 (the "Form 10-K"), its Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 (the "Form 10-Q") and its Proxy Statement dated
April 28, 1999 (the "Proxy Statement"). The Form 10-K, Form 10-Q and Proxy
Statement (collectively, the "Parent SEC Reports") have been timely filed
pursuant to the Exchange Act.
(b) The Parent SEC Reports complied as to form in all material respects
with the requirements of the Exchange Act, in effect on the date thereof. The
Parent SEC Reports, when filed pursuant to the Exchange Act, did not contain any
untrue statement of a material fact or omitted 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.
(c) Each of the Parent financial statements (including the related
notes) included in the Parent SEC Reports presents fairly, in all material
respects, the consolidated financial
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position and consolidated results of operations and cash flows of Parent as of
the respective dates or for the respective periods set forth therein, all in
conformity with GAAP consistently applied during the periods involved except as
otherwise noted therein, and subject, in the case of any unaudited interim
financial statements included therein, to normal year-end adjustments and to
absence of complete footnotes.
5.5 NO MATERIAL ADVERSE CHANGE
Except as disclosed in writing to the Company or otherwise publicly
disclosed by Parent or any of its Subsidiaries, since December 31, 1998, there
has not been any material adverse change in the business, operations,
properties, prospects, liabilities, results of operations, assets or condition
(financial or otherwise) of Parent and its Subsidiaries taken as a whole and no
event has occurred or circumstances exist that could reasonably be expected to
result in a Material Adverse Effect on Parent and its Subsidiaries taken as a
whole.
5.6 LEGAL PROCEEDINGS
There is no pending Proceeding against Parent or Merger Sub that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the transactions contemplated hereby, or
that otherwise could reasonably be expected to result in a Material Adverse
Effect on Parent and its Subsidiaries taken as whole. To the knowledge of
Parent, no such Proceeding has been threatened.
5.7 BROKERS OR FINDERS
Neither Parent nor Merger Sub nor any of their agents has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or financial advisory services or other similar payment
in connection with this Agreement or the Transaction Documents or the
transactions contemplated hereby or thereby.
5.8 POOLING-OF-INTERESTS
To its knowledge, Parent and Merger Sub have not taken or agreed to
take any action, or caused any event or condition to occur, which would affect
the ability of Parent to account for the transactions contemplated hereby as a
pooling-of-interests for financial reporting and financial reporting and
accounting purposes.
5.9 DISCLOSURE
No representation or warranty of Parent or Merger Sub in this Agreement
is inaccurate in any material respect or omits to state a material fact
necessary to make the statements herein in light of the circumstances under
which they were made, not misleading.
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6. COVENANTS
The parties, as applicable, hereby covenant and agree as follows:
6.1 AGREEMENTS WITH RESPECT TO AFFILIATES
The Company shall deliver to Parent, and Parent shall deliver to the
Company, prior to the Effective Time, letters (the "Affiliate Letters")
identifying all Persons who are, at the time of the action by the Company
Stockholders or immediately prior to the Effective Time, anticipated to be
"Affiliates" of the Company or Parent, as the case may be, for purposes of Rule
145 under the Securities Act ("Rule 145"), or the rules and regulations of the
Commission relating to pooling-of-interests accounting treatment for merger
transactions (the "Pooling Rules"). The Company and Parent shall use their
respective best efforts to cause each Person who is identified as an "affiliate"
in the Affiliate Letter to deliver to Parent and the Company as promptly as
practicable a written agreement (an "Affiliate Agreement") in connection with
restrictions on affiliates under Rule 145 and the Pooling Rules, in form
mutually agreeable to the Company and Parent. Parent shall be entitled to place
appropriate legends on the certificates evidencing any Parent Common Stock to be
received by Company affiliates (or to be deposited in the Escrow Fund on behalf
of any such Person), and to issue appropriate stop transfer instructions to the
transfer agent for Parent Common Stock, consistent with the terms of such
Affiliate Agreements.
6.2 CERTAIN FILINGS
Without limiting the generality of Section 6.5, the Company shall
cooperate with Parent with respect to all filings with Governmental Authorities
that are required to be made by the Company to carry out the transactions
contemplated by this Agreement. The Company shall assist Parent and Merger Sub
in making all such filings, applications and notices as may be necessary or
desirable in order to obtain the authorization, approval or consent of any
Governmental Authority which may be reasonably required or which Parent may
reasonably request in connection with the consummation of the transactions
contemplated hereby.
6.3 NOTIFICATION OF CERTAIN MATTERS
The Company shall promptly notify Parent of (i) the occurrence or
non-occurrence of any fact or event of which the Company has knowledge which
would be reasonably likely to cause any covenant or agreement of the Company in
this Agreement not to be complied with or satisfied in any material respect and
(ii) any failure of the Company to comply with or satisfy any covenant, or
agreement to be complied with or satisfied by it hereunder in any material
respect; provided, however, that no such notification shall affect the
representations or warranties of the Company, or the right of Parent and Merger
Sub to rely thereon, or the conditions to the obligations of Parent and Merger
Sub, or the remedies available hereunder to Parent or Merger Sub.
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6.4 POOLING ACCOUNTING TREATMENT
Each party hereto shall use its best efforts to cause the business
combination to be effected by the Merger to be accounted for as a
pooling-of-interests. Each party hereto shall use its best efforts to cause its
respective employees, officers, directors, stockholders and affiliates not to
take any action that would adversely affect the ability of Parent to account for
the business combination to be effected by the Merger as a pooling-of-interests.
Neither Parent nor the Company shall take any action, including the acceleration
of vesting of any options, restricted stock or other rights to acquire shares of
the capital stock of the Company, which reasonably would be expected to (i)
interfere with Parent's ability to account for the Merger as a
pooling-of-interests or (ii) jeopardize the tax-free nature of the
reorganization hereunder.
6.5 BEST EFFORTS; FURTHER ACTION
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its best efforts (exercised diligently and in good
faith) to take, or cause to be taken, all actions and to do, or cause to be
done, all other things reasonably necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement, to obtain in a timely manner all necessary waivers, consents,
authorizations and approvals and to effect all necessary registrations and
filings, and otherwise to satisfy or cause to be satisfied all conditions
precedent to its obligations under this Agreement.
(b) Notwithstanding any provision of this Agreement to the contrary,
Parent shall not be obligated to divest, abandon, license, dispose of, hold
separate or take similar action with respect to any portion of the business,
assets or properties (tangible or intangible) of Parent, any of its Subsidiaries
or the Company in connection with seeking to obtain or obtaining any waiver,
consent, authorization or approval of any Person associated with the
consummation of the transitions contemplated hereby or otherwise.
(c) If, at any time after the Effective Time, any such further action
is necessary or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company and
Merger Sub, the officers and directors of the Company and Merger Sub immediately
prior to the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
or desirable action.
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7. COVENANTS OF PARENT AND MERGER SUB
Each of Parent and Merger Sub, jointly and severally, hereby covenants
and agrees as follows:
7.1 CERTAIN FILINGS
Without limiting the generality of Section 6.5, Parent and Merger Sub
agree to make or cause to be made all filings with Governmental Authorities that
are required to be made by Parent or Merger Sub to carry out the transactions
contemplated by this Agreement.
7.2 NOTIFICATION OF CERTAIN MATTERS
Parent and Merger Sub shall promptly notify the Company of (i) the
occurrence or non-occurrence of any fact or event of which Parent or Merger Sub
has knowledge which would be reasonably likely to cause any covenant or
agreement of Merger Sub or Parent in this Agreement not to be complied with or
satisfied in any material respect and (ii) any failure of Merger Sub or Parent
to comply with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder in any material respect; provided, however, that no
such notification shall affect the representations or warranties of Merger Sub
or Parent, or the right of the Company to rely thereon, or the conditions to the
obligations of the Company, or the remedies available hereunder to the Company.
Parent and Merger Sub shall give prompt notice to the Company of any notice or
other communication from any third Person alleging that the consent of such
third Person is or may be required in connection with the transactions
contemplated by this Agreement.
7.3 REGISTRATION RIGHTS AGREEMENT
(a) At the Closing, Parent and (on behalf of, and as representative
for, the Company Stockholders) the Securityholder Representative will enter into
the Registration Rights Agreement (the "Registration Rights Agreement") in
substantially the form attached as Exhibit 7.3 hereto.
(b) The Registration Rights Agreement is incorporated herein by
reference and shall be considered part of this Agreement. By voting for or
failing to dissent from the approval of this Agreement, each Company Stockholder
automatically and without any further act or deed irrevocably agrees that:
(i) such Company Stockholder accepts and shall be
bound by the terms and provisions of the Registration Rights
Agreement; and
(ii) Peter Walmsley is appointed Securityholder
Representative (the "Securityholder Representative") for
purposes of the Registration Rights Agreement with all rights,
powers and authority provided for in the Registration Rights
Agreement and that any action taken by the Securityholder
Representative pursuant to the Registration Rights Agreement
shall be
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conclusive, valid, binding and enforceable with respect to
each such Company Stockholder.
7.4 EMPLOYMENT MATTERS
(a) For purposes of eligibility, vesting and, except with
respect to any pension benefit plan, calculation of benefits (except to the
extent crediting such service would result in the duplication of benefits) under
each of Parent's employee benefit plans, programs and arrangements in which an
employee of the Company who is employed as of the Closing Date and who becomes
an employee of Parent or the Surviving Corporation immediately following the
Closing ("Continuing Employee") participates, Parent shall grant, or shall cause
the Surviving Corporation to grant, each such Continuing Employee with credit
for all service with the Company.
(b) As soon as practicable following the Effective Time, each
Continuing Employee shall be eligible to participate in Parent's 401(k) plan,
subject to the terms of such plan.
(c) Parent shall provide, or shall cause the Surviving
Corporation to provide, to each Continuing Employee (and each such Continuing
Employee's beneficiaries and dependents) immediate coverage under a health
benefit plan maintained by the Surviving Corporation or Parent. Parent shall
waive, or cause the Surviving Corporation to waive, any applicable pre-existing
condition exclusion (to the extent such exclusion did not apply to a
pre-existing condition under the Company's plan) under any such health benefit
plan, and, for purposes of any applicable deductibles, co-payments or
out-of-pocket maximums under any such health benefit plan, each Continuing
Employee shall receive credit under such health benefit plan for all amounts
paid by them under the Company's health benefit plan.
(d) Each Continuing Employee shall enter into Parent's
standard agreements for employees relating to confidentiality, proprietary
information, inventions and non-competition.
(e) It is expressly agreed that the provisions of this Section
7.4 are not intended to be for the benefit of or otherwise enforceable by any
third Person, including, without limitation, any employee of the Company, or any
collective bargaining unit or employee organization.
(f) Nothing herein shall prevent Parent, Merger Sub, the
Company or the Surviving Corporation from amending or modifying any employee
benefit plan, program or arrangement in any respect or terminating or modifying
the terms and conditions of employment or other service of any particular
employee or any other person. Nothing contained in this Agreement shall create
or imply any obligation on the part of Parent, Merger Sub, the Company or the
Surviving Corporation to provide any continuing employment right to any
individual.
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8. DOCUMENTS TO BE DELIVERED BY THE COMPANY
Simultaneously with the execution and delivery of this Agreement, the
Company shall deliver, or cause to be delivered, to Parent and Merger Sub the
following:
(a) (i) the Affiliate Letter of the Company and (ii) from each Person
who is identified in the Affiliate Letter of the Company as an "affiliate" of
the Company, an Affiliate Agreement which is in full force and effect;
(b) an opinion of Sheppard, Mullin, Richter & Hampton LLP, dated the
Closing Date and addressed to Parent and Merger Sub, as to the matters set forth
on Exhibit 8(b) hereto;
(c) written consents of Company Stockholders owning, of record and
beneficially, at least 90% of the issued and outstanding Company Capital Stock
duly approving this Agreement, the Merger and the other transactions
contemplated hereby in accordance with the DGCL;
(d) the Escrow Agreement duly executed and delivered by the Escrow
Agent, the Company and the Stockholder Representative;
(e) a letter from Ernst & Young LLP, independent certified public
accountants of the Company, and a letter from Ernst & Young LLP, independent
certified public accountants of Parent, regarding the appropriateness of
pooling-of-interests accounting for the Merger under APB 16 if closed and
consummated in accordance with this Agreement. Such letters shall be in form and
substance reasonably satisfactory to Parent;
(f) with respect to each current Facility, a satisfactory Phase I
environmental audit report and such other satisfactory environmental-based
documentation and studies as Parent may have reasonably requested;
(g) evidence of termination (or amendment with respect to clause (iv))
of the following agreements:
(i) the Sales Account Cooperation Agreement dated October
3, 1997 between the Company and Koch;
(ii) the Preferred Stockholders Agreement dated October 3,
1997 between the Company and the holders of Series C1
Preferred Stock and Series C2 Preferred Stock,
subject to the occurrence of the Closing;
(iii) the Registration Rights Agreement dated October 3,
1997 between the Company, Koch and AMT, subject to
the occurrence of the Closing; and
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(iv) the Shareholder's Agreement dated March 27, 1998
between the Company and Steve Fine.
(h) conversion notices with respect to:
(i) conversion of shares of Series C2 Preferred Stock
into shares of Company Common Stock in the AMT
Conversion; and
(ii) conversion of shares of Series C1 Preferred Stock
into shares of Company Common Stock in the Koch
Conversion.
(i) the Employment Agreement executed by Richard Brewer (the
"Employment Agreement") with the Parent to be effective on the Closing Date in
substantially the form attached as Exhibit 8(i) hereto;
(j) an amendment to the Company's 401(k) Plan to restrict eligibility
to participate therein, effective no later than the Closing Date, to employees
of the Company, by replacing the standardized prototype form of plan with a
non-standardized prototype form of plan, in form and substance reasonably
satisfactory to Parent;
(k) the Registration Rights Agreement executed by the Securityholder
Representative;
(l) a Stockholder Questionnaire in substantially the form of Exhibit
8(l) hereto duly completed by each Company Stockholder which has delivered a
written consent referred to in Section 8(c);
(m) the Noncompetition Agreement between the Parent and Richard Brewer
in substantially the form of Exhibit 8(m) (the "Noncompetition Agreement")
executed by Richard Brewer;
(n) the Certificate of Merger;
(o) resignation letters from each of the directors and officers of the
Company;
(p) good standing certificates for the Company from the State of
Delaware and each other jurisdiction where the Company is authorized to do
business;
(q) a certificate of the Secretary of the Company certifying as to (i)
the certificate of incorporation of the Company, (ii) the by-laws of the
Company, (iii) the resolutions of the Board of Directors of Merger Sub approving
this Agreement, the Merger and the transactions contemplated hereby and (iv) the
incumbency of certain officers of the Company;
(r) evidence of the transfer of the Koch Options to Parent; and
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(s) all material consents, waivers, approvals, authorizations or Orders
required to be obtained, and all filings required to be made, by the Company for
the authorization, execution and delivery of this Agreement, the consummation by
it of the transactions contemplated hereby and the continuation in full force
and effect of any and all rights, documents, instruments or Contracts of the
Company, including, without limitation, evidence that all waiting periods
applicable to the consummation of the Merger and the other transactions
contemplated hereby under the HSR Act have expired or terminated.
9. DOCUMENTS TO BE DELIVERED BY PARENT AND MERGER SUB
Simultaneously with the execution and delivery of this Agreement,
Parent and Merger Sub shall deliver, or cause to be delivered, to the Company
the following:
(a) (i) the Affiliate Letter of the Parent and (ii) from each Person
who is identified in the Affiliate Letter of the Parent as an "affiliate" of the
Parent, an Affiliate Agreement which is in full force and effect;
(b) an opinion of Kramer Levin Naftalis & Frankel LLP, dated the
Closing Date and addressed to Parent and Merger Sub, as to the matters set forth
on Exhibit 9(b) hereto;
(c) the Employment Agreement, the Noncompetition Agreement, the
Registration Rights Agreement and the Escrow Agreement, in each case executed by
the Parent;
(d) the Certificate of Merger;
(e) evidence that all waiting periods applicable to the consummation of
the Merger and the other transactions contemplated hereby under the HSR Act have
expired or terminated;
(f) good standing certificates for the Parent and Merger Sub from the
State of Delaware;
(g) a certificate of the Secretary of the Merger Sub certifying as to
(i) the certificate of incorporation of the Merger Sub, (ii) the by-laws of the
Merger Sub, (iii) the resolutions of the Board of Directors of Merger Sub
approving this Agreement, the Merger and the transactions contemplated hereby
and (iv) the incumbency of certain officers of the Merger Sub.
(h) a certificate of the Secretary of the Company certifying as to (i)
the certificate of incorporation of the Company, (ii) the by-laws of the
Company, (iii) the resolutions of the Board of Directors of the Company
approving this Agreement, the Merger and the transactions contemplated hereby
and (iv) the incumbency of certain officers of the Company.
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<PAGE>
10. [Intentionally omitted.]
11. INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) Except as otherwise provided in this Section 11.1, the
representations, warranties, covenants and agreements of each party hereto shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any other party hereto, any affiliate of such party or
any of their officers, directors or representatives, whether prior to or after
the execution of this Agreement.
(b) The parties' representations and warranties in this Agreement or in
any document or instrument delivered pursuant to this Agreement shall survive
the Merger and the Closing and continue until 5:00 p.m., California time, on the
date that is one (1) year following the Effective Time (the "Expiration Date").
Notwithstanding the preceding sentence, any representation or warranty in
respect of which indemnity may be sought under Section 11.2 or 11.3 shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if notice of the inaccuracy or breach thereof shall have been given to
the party against whom such indemnity may be sought prior to such time.
(c) The Confidentiality Agreement between Parent and the Company shall
survive termination of this Agreement as provided therein. Sections 11.1(a) and
(c), 11.2, 11.3, 11.5 and 12 shall survive termination of this Agreement.
11.2 OBLIGATION OF THE COMPANY TO INDEMNIFY, REIMBURSE, ETC.
Subject to the provisions of Section 11.4, the Company and its
successors and permitted assigns, jointly and severally, shall indemnify,
reimburse, defend and hold harmless Parent and Merger Sub and each of their
respective successors and permitted assigns and each of their respective
directors, officers, employees, affiliates, and their respective successors and
permitted assigns (each a "Parent Indemnitee") from and against (i) all Losses
resulting from, imposed upon, incurred or suffered by any of them, directly or
indirectly, based upon, arising out of or otherwise in respect of any inaccuracy
in or any breach of any representation, warranty, covenant or agreement of the
Company and (ii) all Environmental, Health and Safety Liabilities arising out
of, or attributable or relating to, the operations of the Company prior to the
Closing Date and the Facilities. For purpose of this Agreement, "Losses" shall
mean any claims, losses, liabilities, damages, causes of action, costs and
expenses (including reasonable attorneys', accountants', consultants' and
experts' fees and expenses), net of (x) any Tax benefits, savings or reductions
and (y) any insurance proceeds, in either case which the indemnitee actually
receives by virtue of such claims, losses, liabilities, damages, causes of
action, costs and expenses.
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<PAGE>
11.3 OBLIGATION OF PARENT TO INDEMNIFY, REIMBURSE, ETC.
Parent and Merger Sub and their respective successors and permitted
assigns, jointly and severally, shall indemnify, reimburse, defend and hold
harmless the Company and the Company Stockholders and each of their respective
successors and permitted assigns and each of their respective directors,
officers, employees, affiliates, and their respective successors and assigns
(each a "Company Indemnitee") from and against any Losses resulting from,
imposed upon, incurred or suffered by any of them, directly or indirectly, based
upon, arising out of or otherwise in respect of any inaccuracy in or breach of
any representation, warranty, covenant or agreement of Parent or Merger Sub;
provided that the obligations of Parent and Merger Sub under this Section 11.3
(including all related costs, risks and expenses under Section 11.5) shall not
exceed product of the Escrow Amount multiplied by the Average Closing Price.
11.4 ESCROW ARRANGEMENTS
Concurrent with the Effective Time, the Escrow Amount shall be placed
in the Escrow Fund, to be governed by the terms of the Escrow Agreement. The
Escrow Fund shall be available to compensate the Parent Indemnitees for Losses
and Environmental, Health and Safety Liabilities in accordance with Section
11.2. The Escrow Fund shall be the exclusive remedy for all indemnification
claims by any Parent Indemnitee for Losses and Environmental, Health and Safety
Liabilities pursuant to Section 11.2 (including all costs, risks and expenses
relating to such claims incurred under Section 11.5); provided that any Parent
Indemnitee shall be permitted to pursue (i) any other remedies pursuant to any
claim of fraudulent, criminal or wilful misconduct; (ii) specific performance,
and (iii) temporary restraining orders and temporary and permanent injunctive
relief or other equitable relief. The terms and conditions of the Escrow Fund
shall be set forth more fully in the Escrow Agreement. The Escrow Fund shall
terminate at the Expiration Date, unless an indemnification claim under Section
11.2 is then pending, in which case the Escrow Fund shall terminate upon
resolution and payment in full of such claim or claims. Absent fraud of any
party (for which there shall be no limitations of liability of any party), no
Parent Indemnitee shall have any right to seek indemnification, reimbursement or
defense under this Agreement or the Escrow Agreement in respect of Losses and/or
Environmental, Health, and Safety Liabilities after the date of issuance of the
first independent audit report with respect to the financial statements of
Parent after the Effective Time if a claim in respect of such Losses and/or
Environmental, Health, and Safety Liabilities is of a type expected to be
encountered in the course of an audit performed in accordance with generally
accepted auditing standards.
11.5 INDEMNIFICATION PROCEDURES
(a) Notice. Whenever any third Person claim shall arise for which
indemnification may be sought hereunder (a "Claim"), the party entitled to
indemnification (the "Indemnitee") shall promptly give notice to the party
obligated to provide indemnity (the "Indemnitor") with respect to the Claim
after the receipt by the Indemnitee of reliable information as to the facts
constituting the basis for the Claim; but the failure to timely give
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<PAGE>
such notice shall not relieve the Indemnitor from any obligation under this
Agreement, except to the extent, if any, that the Indemnitor is materially
prejudiced thereby.
(b) Defense. Upon delivery of notice from the Indemnitee of a Claim,
the Indemnitee shall assume the defense of such Claim by selecting counsel to
defend the Indemnitee against the matter from which the Claim arose, at the
Indemnitor's sole cost, risk and expense, subject to the proviso in Section 11.3
and Section 11.4. The Indemnitor shall cooperate in all reasonable respects, at
the Indemnitor's sole cost, risk and expense, with the Indemnitee and its
counsel in the investigation, trial, defense and any appeal arising from the
matter from which the Claim arose and shall deliver to the Indemnitee or its
counsel copies of all pleadings and other information within the Indemnitor's
knowledge or possession reasonably requested by the Indemnitee or its counsel
that are relevant to the defense of the subject of any such Claim and that will
not prejudice the Indemnitor's position, claims or defenses. The Indemnitor
shall not be liable for any settlement effected without its prior consent, such
consent not to be unreasonably withheld. If the subject of any Claim results in
a judgment or settlement consistent with the terms of this Section 11.5(b), the
Indemnitor shall promptly pay such judgment or settlement, subject to the
proviso in Section 11.3 and Section 11.4.
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective fees, costs and expenses incurred in
connection with the preparation, execution, delivery and performance of this
Agreement, including all fees, costs and expenses of agents, representatives,
counsel and accountants, provided that the Company's expenses shall not exceed
$150,000 in the aggregate.
12.2 CONVEYANCE TAXES
Parent, Merger Sub and the Company shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications, or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp taxes, any transfer, recording,
registration and other fees, and any similar taxes which become payable in
connection with the transactions contemplated hereby that are required or
permitted to be filed on or before the Effective Time, and the Company and
Parent shall each be responsible for the payment of one-half of all such taxes
and fees.
12.3 PUBLIC ANNOUNCEMENTS
Unless required by Law, any public announcement or similar publicity
with respect to this Agreement, the Closing, the Merger or the other
transactions contemplated hereby will be issued, if at all, at such time and in
such manner as Parent determines with the concurrence of the Company, which
concurrence shall not be unreasonably withheld or delayed by the Company. Unless
disclosure is consented to by Parent in advance or required
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<PAGE>
by Law, the Company shall keep this Agreement and the transactions contemplated
hereby strictly confidential and may not make any disclosure of this Agreement
or such transactions to any Person other than its or their directors, officers,
employees or agents who need to know such information to enable the Company to
comply with this Agreement, provided that each such director, officer, employee
or agent shall agree, for the benefit of Parent, to maintain the confidentiality
of such information as provided in this Section 12.3. The Company and Parent
will consult with each other concerning the means by which the Company's
employees, customers and suppliers and other Persons having dealings with the
Company will be informed of this Agreement, the Closing, the Merger and the
other transactions contemplated hereby, and representatives of Parent may at its
option be present for any such communication.
12.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by fax (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses or fax numbers set forth below (or to
such other address, person's attention or fax number as a party may designate by
notice to the other parties given in accordance with this Section 12.4):
(a) If to Parent or Merger Sub:
ATMI, Inc.
7 Commerce Drive
Danbury, CT 06810
Telecopier No.: (203) 797-2546
Telephone No.: (203) 794-1600
Attention: Daniel Sharkey
With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 715-8000
Telephone No.: (212) 715-9100
Attention: Mark B. Segall
(b) If to the Company:
Advanced Chemical Systems International, Inc.
510 Alder Drive
Milpitas, CA 95035
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Telecopier No.: (408) 321-9321/9360
Telephone No.: (408) 321-8900
Attention: Richard Brewer
With a copy to:
Sheppard, Mullin, Richter & Hampton LLP
Four Embarcadero Center, 17th Floor
San Francisco, CA 94111
Telecopier No.: (415) 434-3947
Telephone No.: (415) 434-9100
Attention: William T. Manierre
12.5 JURISDICTION; SERVICE OF PROCESS
Any Proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Delaware or the United States District Court for
the District of Delaware, and each of the parties consents to the jurisdiction
of such courts (and of the appropriate appellate courts) in any such Proceeding
and waives any objection to venue laid therein. Service of process or any other
papers in any such Proceeding may be made by registered or certified mail,
return receipt requested, pursuant to the provisions of Section 12.4.
12.6 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other right. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies otherwise available.
12.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements (other than the
Confidentiality Agreement between Parent and the Company and each of the letters
dated April 16, 1999 addressed to the Company from each of Koch, AMT and Richard
Brewer relating to the acquisition of the Company by Parent), whether written or
oral, between or among the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) the entire
agreement among the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by each party hereto.
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<PAGE>
12.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement without the
prior written consent of the other parties except that Parent may assign any of
its rights, but not its obligations, under this Agreement to any direct
wholly-owned Subsidiary of Parent. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties and their
respective heirs and personal representatives. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the parties to
this Agreement and the Persons contemplated by Section 11 any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement.
12.9 SEVERABILITY
(a) If any provision of this Agreement or the application of any such
provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to such party
or circumstances other than those to which it is so determined to be invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
enforced to the fullest extent permitted by law. If the final judgment of a
court of competent jurisdiction declares that any item or provision hereof is
invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power, and is
hereby directed, to reduce the scope, duration or area of the term or provision,
to delete specific words or phrases and to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified.
12.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. In this Agreement
(i) words denoting the singular include the plural and vice versa, (ii) "it" or
"its" or words denoting any gender include all genders, (iii) the word
"including" shall mean "including without limitation," whether or not expressed,
(iv) any reference to a statute shall mean the statute and any regulations
thereunder in force as of the date of this Agreement or the Effective Time, as
applicable, unless otherwise expressly provided, (v) any reference herein to a
Section, Article, Schedule or Exhibit refers to a Section or Article of or a
Schedule or Exhibit to this Agreement, unless otherwise stated, and (vi) when
calculating the period of time within or following which any act is to be done
or steps taken, the date which is the reference day in calculating such period
shall be excluded and if the last day of such period is not a business day, then
the period shall end on the next day which is a business day. Each party
acknowledges that he, she or it has been advised and represented by counsel in
the negotiation, execution and delivery of this Agreement and accordingly agrees
that if an ambiguity exists with respect to any provision of this Agreement,
such provision shall not be construed against any party because such party or
its representatives drafted such provision.
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12.11 GOVERNING LAW
This Agreement will be governed by the internal laws of the State of
Delaware without regard to principles of conflict of laws.
12.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
12.13 CONFLICTS WAIVER
The Parent acknowledges that the Company has been represented by
Sheppard, Mullin, Richter & Hampton LLP in connection with this transaction and
in other matters. The Parent hereby waives on behalf of itself and the Company
any and all conflicts of interest that may apply to any future representation by
such firm of any of the current Company Stockholders in connection with disputes
arising from the transactions contemplated hereby. The Parent agrees that
following the Closing, it and the Company will not be deemed to hold or to have
acquired the attorney-client privilege (as related to the transactions
contemplated by this Agreement) held by the Company prior to Closing.
12.14 KNOWLEDGE
For purposes of this Agreement, the term "knowledge" of the Company,
Parent and Merger Sub shall mean the actual knowledge of the officers, directors
and Key Employees of the Company, Parent and Merger Sub, respectively.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
ATMI, INC.
By: /s/ Daniel P. Sharkey
-------------------------------------
Name: Daniel P. Sharkey
Title: Vice President,
Chief Financial Officer
and Treasurer
STRIP ACQUISITION CORP.
By: /s/ Daniel P. Sharkey
-------------------------------------
Name: Daniel P. Sharkey
Title: Vice President and Secretary
ADVANCED CHEMICAL SYSTEMS
INTERNATIONAL, INC.
By: /s/ Richard Brewer
-------------------------------------
Name: Richard Brewer
Title: President and Chief
Executive Officer
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Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
May 31, 1999, among (i) ATMI, Inc. ("Parent"), a Delaware corporation and a
party to this Agreement but not a constituent corporation in the Merger (as
hereinafter defined), (ii) Napa Acquisition Corp. ("Merger Sub"), a Delaware
corporation all of whose capital stock is owned directly by Parent, (iii)
Delatech Incorporated (the "Company"), a California corporation, and (iv)
Timothy L.F. Herman and Margaret "Peggy" E. Herman, and Roger J.B. McKinley, Sr.
and Corenne M. McKinley (collectively, the "Controlling Shareholders"), who
together own of record and beneficially at least 98.5% of the issued and
outstanding shares of Company Common Stock (as hereinafter defined).
RECITALS:
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company, deeming it advisable and for the respective benefit of Parent, Merger
Sub and the Company, and their shareholders, have approved the Merger of Merger
Sub with and into the Company upon the terms and subject to the conditions
hereinafter set forth, and have approved this Agreement and authorized the
transactions contemplated hereby; and
WHEREAS, the Board of Directors of the Company has determined
to recommend to all of the Company's shareholders that the Merger and this
Agreement be approved; and
WHEREAS, Parent, Merger Sub, the Company and the Controlling
Shareholders intend to adopt this Agreement as a plan of reorganization within
the meaning of Section 368 of the Code (as hereinafter defined) and the
regulations promulgated thereunder; and
WHEREAS, Parent, Merger Sub, the Company and the Controlling
Shareholders intend that the Merger be accounted for as a pooling-of-interests
for financial reporting and accounting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share of the
Company's Common Stock, no par value per share (the "Company Common Stock"),
shall be automatically converted into the right to receive the consideration
specified in Section 2.7 upon the terms and subject to the conditions
hereinafter set forth; and
WHEREAS, upon consummation of the Merger, the Company will be
a wholly-owned subsidiary of Parent; and
<PAGE>
WHEREAS, Parent, Merger Sub, the Company and the Controlling
Shareholders desire to make certain representations, warranties and agreements
in connection with, and establish various conditions precedent to, the Merger.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements hereinafter set forth, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"Accounts Receivable"--as defined in Section 4.9.
"Affiliate Agreement"--as defined in Section 6.4.
"Affiliate Letters"--as defined in Section 6.4.
"Agreement"--as defined in the first paragraph of this Agreement.
"Agreement of Merger"--as defined in Section 2.2.
"Alternative Acquisition"--as defined in Section 6.10(a).
"Certificates"--as defined in Section 2.8(c).
"CGCL"--as defined in Section 2.1(a).
"Claim"--as defined in Section 11.6(a).
"Closing"--as defined in Section 2.1(b).
"Closing Date"--the date and time as of which the Closing actually
takes place.
"Closing Exchange Price"--the average closing price of a share of
Parent Common Stock for the twenty (20) consecutive Trading Days ending on the
Trading Day that is three (3) Trading Days immediately prior to the Closing
Date, as reported on the Nasdaq National Market (subject to appropriate
adjustment for any stock split, reverse split, stock dividend, reorganization,
recapitalization or other like change with respect to the Parent Common Stock
occurring after the date hereof and prior to the Effective Time).
"Code"--the Internal Revenue Code of 1986, as amended, or any successor
law.
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<PAGE>
"Commission"--the United States Securities and Exchange Commission.
"Common Stock Exchange Ratio"--as defined in Section 2.7(a).
"Company"--as defined in the first paragraph of this Agreement.
"Company Common Stock"--as defined in the recitals to this Agreement.
"Company Indemnitee"--as defined in Section 11.3.
"Company Shareholders"--the holders of the Company Common Stock,
including but not limited to the Controlling Shareholders.
"Company Subsidiaries"--each of Delatech Foreign Sales Corporation
(Barbados), Delatech Korea, Ltd. and DEGC Systems Limited (Scotland).
"Confidentiality Agreement"--the Confidentiality Agreement dated March
25, 1999 between the Company and Parent.
"Continuing Employee"--as defined in Section 7.4(a).
"Contract"--any agreement, contract, obligation, promise, commitment or
undertaking (whether written or oral and whether express or implied), other than
those that have been terminated.
"Controlling Shareholders"--as defined in the first paragraph of this
Agreement.
"Copyrights"--as defined in Section 4.21(a).
"Customers"--as defined in Section 4.32.
"DGCL"--as defined in Section 2.1(a).
"Disclosure Schedule"--the disclosure schedule delivered by the Company
and the Controlling Shareholders to Parent and Merger Sub concurrently with the
execution and delivery of this Agreement.
"Dissenting Shareholders"--as defined in Section 2.7(b).
"Effective Time"--as defined in Section 2.2.
"Employee Benefit Plan"--as defined in Section 4.19(a).
"Employment Agreements"--as defined in Section 6.8.
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"Encumbrance"--any mortgage, charge, claim, community property
interest, equitable interest, lien, option, pledge, security interest, right of
first refusal or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership; and the verb "Encumber" shall be construed accordingly.
"Environmental Claim"--any accusation, allegation, notice of violation,
action, claim, Encumbrance, Lien, demand, abatement or other Order or direction
(conditional or otherwise) by any Governmental Authority or any Person for
personal injury (including sickness, disease or death), tangible or intangible
property damage, damage to the environment, nuisance, pollution, contamination
or other adverse effects on the environment, or for fines, penalties or
restrictions resulting from or based upon (i) the existence, or the continuation
of the existence, of a Release (including, without limitation, sudden or
non-sudden accidental or non-accidental Releases) of, or exposure to, any
Hazardous Material or other substance, clinical, material, pollutant,
contaminant, odor, audible noise, or other Release in, into or onto the
environment (including, without limitation, the air soil, soil, surface water or
groundwater) at, in, by, from or related to the Facilities or any activities
conducted thereon; (ii) the environmental aspects of the transportation,
storage, treatment or disposal of Hazardous Materials in connection with the
operation of the Facilities; or (iii) the violation, or alleged violation, of
any Environmental Laws, Orders or Governmental Permits of or from any
Governmental Authority relating to environmental matters connected with the
Facilities.
"Environmental, Health, and Safety Liabilities"--any cost, damage,
expense, liability, obligation or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to: (a) any environmental, health or safety matter or condition
(including on-site or off-site contamination, generation, handling and disposal
of Hazardous Materials, occupational safety and health, and regulation of
chemical and Hazardous Materials); (b) fines, penalties, judgments, awards,
settlements, legal or administrative proceedings, damages, losses, litigation,
including civil and criminal claims, demands and responses, investigative,
remedial, response or inspection costs and expenses arising under Environmental
Law or Occupational Safety and Health Law; (c) financial responsibility under
Environmental Law or Occupational Safety and Health Law for cleanup costs or
corrective action, including any investigation, cleanup, removal, containment or
other remediation or response actions required by applicable Environmental Law
or Occupational Safety and Health Law and for any natural resource damages; or
(d) any other compliance, corrective, investigative or remedial measures
required under Environmental Law or Occupational Safety and Health Law. The
terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended
("CERCLA").
"Environmental Law"--any Law concerning the environment, or activities
that might threaten or result in damage to the environment or human health, or
any Law that is concerned in whole or in part with the environment and with
protecting or improving the
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quality of the environment and human and employee health and safety and
includes, but is not limited to, CERCLA, the Hazardous Materials Transportation
Act (49 U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42
U.S.C. ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the
Clean Air Act (33 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. ss. 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide
Act (7 U.S.C. ss. 136 et seq.) and the Occupational Safety and Health Act (29
U.S.C. ss. 651 et seq.) ("OSHA"), as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and any and all
analogous state or local statutes, and the regulations promulgated pursuant
thereto.
"ERISA"--the Employee Retirement Income Security Act of 1974, as
amended, or any successor law.
"ERISA Affiliate"--as defined in Section 4.19(b).
"Escrow Agent"--as defined in Section 2.8(i).
"Escrow Agreement"--as defined in Section 2.8(i).
"Escrow Amount"--(i) that number of shares of Parent Common Stock
issuable pursuant to Section 2.7 upon conversion of all of the shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time
multiplied by (ii) 0.10.
"Escrow Fund"--as defined in Section 2.8(i).
"Exchange Act"--the Securities Exchange Act of 1934, as amended, or any
successor law.
"Exchange Agent"--as defined in Section 2.8(a).
"Expiration Date"--as defined in Section 11.1(b).
"Facilities"--any real property, leaseholds or other interests
currently or formerly owned or operated by the Company and any buildings,
plants, structures or equipment (including motor vehicles) currently or formerly
owned or operated by the Company.
"Financial Statements"--as defined in Section 4.5(a).
"GAAP"--generally accepted United States accounting principles applied
on a basis consistent with the basis on which the Financial Statements were
prepared.
"Governmental Authority"--any court, tribunal, authority, agency,
commission, bureau, department, official or other instrumentality of the United
States, any foreign country or any domestic, foreign, state, local, county, city
or other political subdivision.
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"Governmental Permit"--any license, franchise, permit or other
authorization of any Governmental Authority.
"Hazardous Materials"--any substance, material or waste which is
regulated by Environmental Law, including, without limitation, any material or
substance which is defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste" or "restricted hazardous
waste," "subject waste," "contaminant," "toxic waste" or "toxic substance" under
any provision of Environmental Law, including but not limited to, petroleum
products, asbestos and polychlorinated biphenyls.
"Herman"--as defined in Section 6.8.
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or any successor law.
"Indemnitee"--as defined in Section 11.6(a).
"Indemnitor"--as defined in Section 11.6(a).
"Intellectual Property Assets" --as defined in Section 4.21(a).
"Interim Financial Statements"--as defined in Section 4.5(a).
"ISO"--as defined in Section 4.19(i).
"Key Employees"--as defined in Section 4.15(a).
"Law"--any federal, state, local or foreign law (including common law),
statute, code, ordinance, rule, regulation or other requirement or guideline.
"Lien"--any lien, pledge, hypothecation, levy, mortgage, deed of trust,
security interest, claim, lease, charge, option, right of first refusal,
easement, or other real estate declaration, covenant, condition, restriction or
servitude, transfer restriction under any shareholder or similar agreement,
encumbrance or any other restriction or limitation whatsoever.
"Losses"--as defined in Section 11.2.
"Marks"--as defined in Section 4.21(a).
"Material Adverse Effect"--as defined in Section 4.7.
"McKinley"--as defined in Section 6.8.
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"Merger"--as defined in Section 2.1(a).
"Merger Sub"--as defined in the first paragraph of this Agreement.
"Occupational Safety and Health Law"--any legal or governmental
requirement or obligation relating to safe and healthful working conditions or
to reduce occupational safety and health hazards, and any program, whether
governmental or private (including those promulgated or sponsored by industry
associations and insurance companies), designed to provide safe and healthful
working conditions.
"Order"--any order, consent, consent order, injunction, judgment,
decree, consent decree, ruling, writ, assessment or arbitration award.
"Organizational Documents"--(a) the articles or certificate of
incorporation and the by-laws or code of regulations of a corporation; (b) the
partnership agreement and any statement of partnership of a general partnership;
(c) the limited partnership agreement and the certificate of limited partnership
of a limited partnership; (d) the articles or certificate of formation and
operating agreement of a limited liability company; (e) any charter, trust
certificate or document or similar document adopted or filed in connection with
the creation, formation or organization of a Person; and (e) any and all
amendments to any of the foregoing.
"Parent"--as defined in the first paragraph of this Agreement.
"Parent Common Stock"--the Common Stock, $0.01 par value per share, of
Parent.
"Parent Indemnitee"-- as defined in Section 11.2.
"Parent SEC Report"--as defined in Section 5.4.
"Parent Shares"--the shares of Parent Common Stock to be issued to the
Company Shareholders in connection with the Merger.
"Patents"--as defined in Section 4.21(a).
"Pension Plan"--as defined in Section 4.19(f).
"Person"--any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body or Governmental Authority.
"Pooling Rules"--as defined in Section 6.4.
"Proceeding"--as defined in Section 4.13.
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<PAGE>
"Registration Rights Agreement"--as defined in Section 7.3.
"Related Person"--as defined in Section 4.23.
"Release"--any release, spill, effluent, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, or migration into
the indoor or outdoor environment of any Hazardous Material through or in the
air, soil, surface water or groundwater.
"Remedial Action"--all actions, including, without limitation, any
expenditures, required or voluntarily undertaken to (i) clean up, remove, treat,
or in any other way address any Hazardous Material or other substance in the
indoor or outdoor environment; (ii) prevent the Release or threat of Release, or
minimize the further Release of any Hazardous Material or other substance so it
does not migrate or endanger or threaten to endanger public health or welfare of
the indoor or outdoor environment; (iii) perform pre-remedial studies and
investigations or post-remedial monitoring and care; or (iv) bring any Facility
into compliance with all Environmental Laws and Environmental Permits.
"Returns"--as defined in Section 4.8(b).
"Rule 145"--as defined in Section 6.4.
"Securities Act"--the Securities Act of 1933, as amended, or any
successor law.
"Shareholder Representative"--as defined in Section 2.8(i).
"Subsidiary"--with respect to any Person, any corporation, joint
venture, limited liability company, partnership, association or other business
entity of which more than 50% of the total voting power of stock or other equity
entitled to vote generally in the election of directors or managers or
equivalent persons thereof is owned or controlled, directly or indirectly, by
such Person.
"Surviving Corporation"--as defined in Section 2.1(a).
"Systems"--as defined in Section 4.34(a).
"Tax Authority"--as defined in Section 4.8(a).
"Taxes"--as defined in Section 4.8(a).
"Trade Secrets"--as defined in Section 4.21(a).
"Trading Day"--means any day on which the Nasdaq National Market is
open for business.
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"Transaction Documents"--means the Registration Rights Agreement, the
Escrow Agreement and the other agreements, documents or instruments executed and
delivered by a party hereto as contemplated under this Agreement.
"WARN"--as defined in Section 4.18(d).
"Year 2000"--as defined in Section 4.34(a).
2. THE MERGER; CLOSING
2.1 THE MERGER
(a) Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the California General Corporation Law (the
"CGCL") and the Delaware General Corporation Law (the "DGCL"), Merger Sub shall
be merged with and into the Company at the Effective Time (the "Merger").
Following the Merger, the separate corporate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation (the
"Surviving Corporation") under the name "Delatech Incorporated."
(b) Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Section
10 and subject to the satisfaction or waiver of the conditions set forth in
Sections 8 and 9, the consummation of the Merger will take place on or as
promptly as practicable (and in any event within two business days) after
satisfaction or waiver of the conditions set forth in Sections 8 and 9 at the
offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New York, New
York (the "Closing"), unless another date, time or place is agreed to in writing
by the Company and Parent.
2.2 EFFECTIVE TIME
As soon as practicable following the Closing, the parties hereto shall
cause the Merger to be consummated by (i) filing an agreement of merger (the
"Agreement of Merger") in such form as is required by and executed in accordance
with the relevant provisions of the CGCL and the DGCL, and (ii) making all other
filings or recordings required under the CGCL and the DGCL. The Merger shall
become effective at such time as the Agreement of Merger, having previously been
duly filed with the Secretary of State of the State of Delaware, is duly filed
with the Secretary of State of the State of California or at such subsequent
time as the Company, Merger Sub and Parent shall agree and shall be specified in
the Agreement of Merger (the date and time the Merger becomes effective being
the "Effective Time").
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2.3 EFFECTS OF THE MERGER
At and after the Effective Time, the Merger will have the effects set
forth in this Agreement, the Agreement of Merger and the applicable provisions
of the CGCL and the DGCL. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time all the assets, property, rights,
privileges, powers and franchises of the Company and Merger Sub shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
2.4 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION
Unless otherwise determined by Parent prior to the Effective Time, at
the Effective Time, the articles of incorporation of the Company, as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
of the Surviving Corporation, unless and until thereafter changed or amended as
provided therein or by applicable Law.
2.5 BY-LAWS OF SURVIVING CORPORATION
Unless otherwise determined by Parent prior to the Effective Time, at
the Effective Time, the by-laws of the Company, as in effect immediately prior
to the Effective Time, shall be the by-laws of the Surviving Corporation, unless
and until thereafter changed or amended as provided therein or in the articles
of incorporation of the Surviving Corporation or by applicable Law.
2.6 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
The officers of Merger Sub immediately prior to the Effective Time
(which are identified in Section 2.6 of the Disclosure Schedule) shall be the
initial officers of the Surviving Corporation, in each case until the earliest
of their resignation or removal from office or their otherwise ceasing to be
officers or until their respective successors are duly elected and qualified.
The directors of Merger Sub immediately prior to the Effective Time (which are
identified in Section 2.6 of the Disclosure Schedule) shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the articles of incorporation and by-laws of the Surviving Corporation.
2.7 CONVERSION OR CANCELLATION OF CAPITAL STOCK OF THE COMPANY
At the Effective Time, by virtue of the Merger and without any action
on the part of any party hereto or any holder thereof:
(a) Company Common Stock. Subject to the provisions of Sections 2.7(b)
and (e), 2.8 and 2.9, each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall be cancelled
and extinguished and automatically converted into the right to receive
the number of shares of Parent
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Common Stock based on the Closing Exchange Price (the "Common Stock
Exchange Ratio") as follows: (i) if the Closing Exchange Price is not
less than $14.1875 and not greater than $24.1875, .5721393 of a share
of Parent Common Stock, (ii) if the Closing Exchange Price is greater
than $24.1875, subject to Section 9.10, that number of shares of Parent
Common Stock equal to (x) $55,631,250 divided by the Closing Exchange
Price divided by (y) 4,020,000, and (iii) if the Closing Exchange Price
is less than $14.1875, subject to Section 8.13, that number of shares
of Parent Common Stock equal to (x) $32,631,250 divided by the Closing
Exchange Price divided by (y) 4,020,000.
(b) Dissenters. Shares of Company Common Stock owned by a holder who
(i) shall not have voted in favor of the Merger, and (ii) shall have
delivered to the Company a written notice of his intent to demand
payment for his shares if the Merger is effectuated in the manner
provided in Section 1300 et seq. of the CGCL and is otherwise a
"dissenting shareholder" as such term is used in such sections of the
CGCL (collectively, the "Dissenting Shareholders") shall not be
cancelled, extinguished and converted as provided in Section 2.7(a),
but shall be entitled to receive such consideration as shall be
provided in such sections of the CGCL, except that shares of any
Dissenting Shareholder who shall thereafter cease to be a "dissenting
shareholder" as provided in such sections of the CGCL shall thereupon
be deemed to have been cancelled, extinguished and converted, as of the
Effective Time, into Parent Common Stock, as provided in Section
2.7(a). The Company shall notify Parent in writing of the details of
the Dissenting Shareholders and the number of shares of Company Common
Stock that they own. The Company shall not enter into any agreement or
settlement with any Dissenting Shareholder without the prior written
consent of Parent.
(c) Unissued Shares. Each authorized but unissued share of Company
Common Stock shall cease to exist without payment of any consideration
therefor.
(d) Merger Sub's Common Stock. Each share of Merger Sub's Common Stock,
$0.01 par value per share, issued and outstanding immediately prior to
the Effective Time shall be cancelled and extinguished and
automatically converted into one (1) validly issued, fully paid and
nonassessable share of Common Stock, no par value per share, of the
Surviving Corporation.
(e) Adjustments to Common Stock Exchange Ratio Computation. The Common
Stock Exchange Ratio computation pursuant to Section 2.7(a) shall be
appropriately adjusted for any stock split, reverse split, stock
dividend, reorganization, recapitalization or other like change with
respect to the Parent Common Stock occurring after the date hereof and
prior to the Effective Time.
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2.8 SURRENDER OF CERTIFICATES, ESCROW, ETC.
(a) Exchange Agent. Parent or the transfer agent for the Parent Common
Stock, or a bank or trust company designated by Parent prior to the Effective
Time, shall act as exchange agent (the "Exchange Agent") in the Merger.
(b) Parent to Provide Common Stock and Cash. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent, for exchange
in accordance with this Section 2, the aggregate number of shares of Parent
Common Stock issuable pursuant to Section 2.7 in exchange for the issued and
outstanding shares of Company Common Stock and the cash to be paid in lieu of
fractional shares pursuant to Section 2.9; provided that, on behalf of the
Company Shareholders, Parent shall deposit into the Escrow Fund pursuant to
Section 2.8(i) that number of shares of Parent Common Stock equal to the Escrow
Amount out of the aggregate number of shares of Parent Common Stock otherwise
issuable pursuant to Section 2.7 upon conversion of all of the shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time. The
portion of the Escrow Amount contributed on behalf of each holder of Company
Common Stock shall be in proportion to the aggregate number of shares of Parent
Common Stock which such holder would otherwise be entitled to receive under
Section 2.7 by virtue of ownership of issued and outstanding shares of Company
Common Stock as more fully specified in Section 2.8(i).
(c) Exchange Procedures. Within two (2) days after the Effective Time,
the Exchange Agent shall cause to be delivered to each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock whose shares
were converted into the right to receive shares of Parent Common Stock pursuant
to Section 2.7 and, if applicable, cash in lieu of fractional shares pursuant to
Section 2.9 (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon proper delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Parent may reasonably specify) and
(ii) instructions to effect the surrender of the Certificates in exchange for
certificates evidencing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Parent, together with such letter of transmittal,
duly completed and validly executed in accordance with the instructions thereto,
and such other documents as may be required by such instructions, the holder of
such Certificates shall be entitled to receive in exchange therefor a
certificate evidencing the number of whole shares of Parent Common Stock (less
the number of shares of Parent Common Stock to be deposited in the Escrow Fund
on such holder's behalf pursuant to Section 2.8(i)) to which such holder is
entitled pursuant to Section 2.7, plus cash in lieu of fractional shares in
accordance with Section 2.9, and the Certificate so surrendered shall forthwith
be cancelled. Until so surrendered, each outstanding Certificate that, prior to
the Effective Time, evidenced shares of Company Common Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends or other distributions, to evidence the ownership of the number of
whole shares of Parent Common
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Stock into which such shares of Company Common Stock shall have been so
converted and the right to receive an amount in cash in lieu of the issuance of
any fractional shares in accordance with Section 2.9.
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
shares of Parent Common Stock with a record date after the Effective Time will
be paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock evidenced thereby until the holder of record of
such Certificate shall surrender such Certificate pursuant to Section 2.8(c).
Subject to applicable Law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates evidencing whole shares
of Parent Common Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate for shares of Parent
Common Stock is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer, accompanied by all documents required
to evidence and effect such transfer pursuant to this Section 2.8(e), and that
the Person requesting such transfer will have paid to Parent or any agent
designated by it any transfer or other Taxes required by reason of the issuance
of a certificate for shares of Parent Common Stock in any name other than that
of the registered holder of the Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such Taxes have been
paid or are not payable.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 2.8, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any holder of shares of Company Common Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar Law.
(g) No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash paid in
respect thereof in accordance with Section 2.9) shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Company
Common Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Company Common Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be cancelled and exchanged as provided in this Section 2.8.
(h) Lost, Stolen or Destroyed Certificates. In the event any
Certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, the Exchange Agent may require, before issuing certificates
in respect of the shares of Parent
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<PAGE>
Common Stock evidenced thereby, such affidavits and indemnities and bonds in
support thereof, as it may reasonably require with respect to such loss, theft
or destruction.
(i) Escrow. Notwithstanding any provision of this Agreement to the
contrary, in lieu of delivering to holders of shares of Company Common Stock
certificates for the full number of shares of Parent Common Stock provided for
in Section 2.7, Parent shall deliver or cause to be delivered (A) to each such
holder one or more certificates, registered in the name of such holder (subject
to Section 2.8(e)), for a number of shares of Parent Common Stock equal to 90%
of the aggregate number of shares of Parent Common Stock otherwise issuable to
such holder pursuant to Section 2.7; and (B) to State Street Bank and Trust
Company as escrow agent (the "Escrow Agent") for deposit into the escrow fund
(the "Escrow Fund") provided for in the escrow agreement in the form attached as
Exhibit 2.8 hereto (the "Escrow Agreement"), to secure the indemnity obligations
under Section 11.2, one or more certificates, registered in the name of the
Escrow Agent, for a number of shares of Parent Common Stock equal to the Escrow
Amount out of the aggregate number of shares of Parent Common Stock otherwise
issuable pursuant to Section 2.7 upon conversion of all of the shares of Company
Common Stock issued and outstanding immediately prior to the Effective Time, all
of which will be held as part of the Escrow Fund and disposed of by the Escrow
Agent in accordance with the provisions of the Escrow Agreement. Such shares
shall be beneficially owned by the holders on whose behalf such shares were
deposited in the Escrow Fund and shall be available to compensate the Parent
Indemnitees as provided in Article 11. The Escrow Agreement is incorporated
herein by reference and shall be considered part of this Agreement. By voting
for or failing to dissent from the approval of this Agreement, each Company
Shareholder automatically and without any further act or deed irrevocably agrees
that:
(A) such Company Shareholder accepts and shall be
bound by the terms and provisions of the Escrow Agreement; and
(B) Eugene Bernosky (or his successor as provided in
the Escrow Agreement) is appointed Shareholder Representative
(the "Shareholder Representative") for purposes of the Escrow
Agreement with all rights, powers and authority provided for
in the Escrow Agreement and that any action taken by the
Shareholder Representative pursuant to the Escrow Agreement
shall be conclusive, valid, binding and enforceable with
respect to each such Company Shareholder.
(j) Withholding Rights. Parent or the Exchange Agent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Common Stock such amounts as Parent or the
Exchange Agent is required to deduct and withhold with respect to the making of
such payment under the Code, or any provision of state, local or foreign Tax
Law. To the extent that amounts are so deducted and withheld by Parent or the
Exchange Agent, such deducted and withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder
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<PAGE>
of the Company Common Stock in respect of which such deduction and withholding
was made by Parent or the Exchange Agent.
2.9 NO FRACTIONAL SHARES; MULTIPLE CERTIFICATES
Notwithstanding any provision of this Agreement to the contrary,
neither certificates nor scrip for fractional shares of Parent Common Stock
shall be issued in connection with the Merger, but in lieu thereof each holder
of shares of Company Common Stock otherwise entitled to a fraction of a share of
Parent Common Stock pursuant to the provisions of Section 2.7 shall be paid in
cash in accordance with Section 2.8 an amount equal to such fraction multiplied
by the Closing Exchange Price. No such holder shall be entitled to dividends or
interest on or, except for the cash payment referred to in the preceding
sentence, other rights in respect of any such fractional interest. If more than
one Certificate shall be surrendered for the account of the same Company
Shareholder, the number of whole shares of Parent Common Stock for which such
Certificates shall be exchanged pursuant to Section 2.8 shall be computed on the
basis of the aggregate number of shares of Company Common Stock evidenced by
such Certificates.
2.10 STOCK TRANSFER BOOKS
At the close of business on the day prior to the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Company
Common Stock shall thereafter be made on such stock transfer books.
2.11 TAX AND ACCOUNTING CONSEQUENCES
It is intended by the parties hereto that the Merger shall (i)
constitute a tax-free plan of reorganization within the meaning of Section 368
of the Code, and (ii) subject to applicable accounting standards, qualify for
accounting treatment as a pooling-of-interests. The parties hereto adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
3. REPRESENTATIONS AND WARRANTIES FROM THE RESPECTIVE
CONTROLLING SHAREHOLDERS
Each Controlling Shareholder separately for itself, himself or herself,
as applicable, but not jointly, represents and warrants to Parent and Merger Sub
as to itself, himself or herself, as applicable, as follows:
3.1 AUTHORITY; NO CONFLICT
(a) Except as set forth in Section 3.1 of the Disclosure Schedule, such
Controlling Shareholder has the right, power, authority and capacity to execute
and deliver this Agreement and the other Transaction Documents to which such
Controlling Shareholder is a
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party and to perform his obligations hereunder and thereunder; this Agreement
has been duly authorized and approved, executed and delivered by such
Controlling Shareholder and constitutes a legal, valid, binding and enforceable
obligation of such Controlling Shareholder in accordance with its terms, and, at
the Closing, each of the Transaction Documents to which such Controlling
Shareholder is a party will have been duly authorized and approved, executed and
delivered by such Controlling Shareholder and will then constitute a legal,
valid, binding and enforceable obligation of such Controlling Shareholder in
accordance with their respective terms.
(b) Except as set forth in Section 3.1 of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any other Transaction
Document by such Controlling Shareholder nor the consummation or performance by
such Controlling Shareholder of any of the transactions contemplated hereby or
thereby will, directly or indirectly (with or without notice or lapse of time or
both) contravene, conflict with, or result in a violation or breach of or a
default under (i) any provision of the Organizational Documents of such
Controlling Shareholder (if applicable), (ii) any resolution adopted by the
board of directors or the shareholders of such Controlling Shareholder (if
applicable), or (iii) any legal requirement or any Order or any Contract to
which such Controlling Shareholder may be subject.
3.2 OWNERSHIP OF SHARES
Such Controlling Shareholder owns, of record and beneficially, and has
good, valid and indefeasible title to and the right to transfer that number of
the shares of Company Common Stock set forth opposite his name in Section 4.3 of
the Disclosure Schedule, free and clear of any and all Encumbrances and Liens of
any kind or nature whatsoever. Such Controlling Shareholder, together with the
other Controlling Shareholders, own at least 98.5% of the outstanding Company
Common Stock. Except as set forth in Section 3.2 of the Disclosure Schedule,
there are no voting trusts, shareholder agreements or any other Contracts or
understandings to which such Controlling Shareholder is a party with respect to
the sale, transfer, voting or registration of the capital stock of the Company.
3.3 LEGAL PROCEEDINGS
There is no pending Proceeding against such Controlling Shareholder
that challenges, or may have the effect of preventing, delaying or making
illegal, or otherwise interfering with, any of the transactions contemplated
hereby and by the Transaction Documents and, to the knowledge of such
Controlling Shareholder, no such Proceeding has been threatened, and no event or
circumstance exists that may give rise to or serve as a basis for the
commencement of any such Proceeding.
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3.4 INVESTMENT REPRESENTATIONS OF CONTROLLING SHAREHOLDER
(a) The Parent Shares are being acquired by such Controlling
Shareholder for his own account, and not for any other Person, for investment
only and with no intention of distributing or reselling (and such Controlling
Shareholder will not distribute or resell) such Parent Shares or any part
thereof or interest therein in any transaction that would violate the securities
Laws of the United States of America, or any state, without prejudice, however,
to the rights of such Controlling Shareholder at all times to sell or otherwise
dispose of all or any part of the Parent Shares under an effective registration
statement or applicable exemption from registration under the Securities Act and
any applicable state securities Law, subject to this Agreement and any other
Contract to which such Controlling Shareholder is a party. Such Controlling
Shareholder has no Contract or arrangement with any Person to sell, transfer or
pledge to such Person the Parent Shares, any interest therein, or any part
thereof, and such Controlling Shareholder has no present plans to enter into any
such Contract or arrangement.
(b) Such Controlling Shareholder is either (i) an accredited investor
as that term is defined in Rule 501 under the Securities Act, or (ii) has,
either alone or with his, her or its purchaser representative or representatives
(as that term is defined in Rule 501 under the Securities Act), such knowledge
and experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the Parent Shares. Such
Controlling Shareholder is able to bear the risks associated with an investment
in the Parent Shares.
(c) Such Controlling Shareholder has read this Agreement and all other
documents provided by Parent in connection herewith, including the Parent SEC
Report, and fully understands the terms under which the Parent Shares are being
issued to him pursuant hereto. Parent and Merger Sub have made available to such
Controlling Shareholder the opportunity to ask questions of and receive answers
from Parent or Merger Sub concerning Parent and the terms and conditions under
which Parent Shares will be issued to him and to obtain any additional
information which Parent or Merger Sub possesses or can acquire without
unreasonable effort or expense that is necessary to verify the accuracy of
information furnished in connection with this Agreement or in response to any
request for information. Such Controlling Shareholder is satisfied with such
answers and information.
(d) Such Controlling Shareholder agrees that, so long as required by
Law, certificates evidencing the Parent Shares and any securities issued in
exchange for or in respect thereof shall bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
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PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS."
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company and the Controlling Shareholders hereby, jointly and
severally, represent and warrant to Parent and Merger Sub as follows:
4.1 ORGANIZATION AND GOOD STANDING
(a) Section 4.1 of the Disclosure Schedule contains a complete and
accurate list of the jurisdictions in which the Company or any Company
Subsidiary is authorized to do business. Each of the Company and each Company
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or formation, with
full corporate power and authority to conduct its business as it is now being
conducted and to own or use the assets and properties that it purports to own or
use. Each of the Company and each Company Subsidiary is duly qualified to do
business as a foreign corporation and is in good standing under the Laws of each
state or other jurisdiction in which either the ownership or use of the assets
or properties owned or used by it, or the nature of the activities conducted by
it, requires such qualification, except where the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect on the
Company and the Company Subsidiaries, taken as a whole. The Company does not
have, and has never had, any Subsidiaries, except for the Company Subsidiaries.
(b) The Company has delivered to Parent correct and complete copies of
the Organizational Documents of the Company and each Company Subsidiary.
4.2 AUTHORITY; NO CONFLICT
(a) The Company has the right, power, authority and capacity to execute
and deliver this Agreement and the Transaction Documents to which it is a party,
to consummate the Merger and the other transactions contemplated hereby and
thereby and to perform its obligations under this Agreement and the Transaction
Documents to which it is a party. This Agreement has been duly authorized and
approved, executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms. Upon the authorization and approval, execution and
delivery by the Company of the Transaction Documents to which it is a party,
such Transaction Documents will constitute legal, valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms.
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(b) Except as set forth in Section 4.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Transaction Document
by the Company nor the consummation or performance by the Company of the Merger
or any of the other transactions contemplated hereby or thereby will, directly
or indirectly (with or without notice or lapse of time or both):
(i) contravene, conflict with or result in a violation or
breach of (A) any provision of the Organizational Documents of the Company or
any Company Subsidiary, (B) any resolution adopted by the board of directors or
the shareholders of the Company or any Company Subsidiary, (C) any legal
requirement or any Order, award, decision, settlement or process to which the
Company or any Company Subsidiary or any of the assets or properties owned or
used by the Company or any Company Subsidiary may be subject, or (D) any
Governmental Permit, which is held by the Company or any Company Subsidiary;
(ii) result in a breach of or constitute a default, give rise
to a right of termination, cancellation or acceleration, create any entitlement
to any payment or benefit, or require the consent, authorization or approval of
or any notice to or filing with any third Person under any material Contract to
which the Company or any Company Subsidiary is a party or to which its or their
assets or properties are bound, or require the consent, authorization or
approval of or any notice to or filing with any Governmental Authority to which
the Company or any Company Subsidiary or its or their assets or properties is
subject; or
(iii) result in the imposition or creation of any Encumbrance
or Lien upon or with respect to any of the assets or properties owned or used by
the Company or any Company Subsidiary.
4.3 CAPITALIZATION
(a) The authorized equity securities of the Company consist solely of
10,000,000 shares of common stock, no par value per share, of which 4,020,000
shares are issued and outstanding. All of the outstanding equity securities of
the Company have been duly authorized and validly issued and are fully paid and
nonassessable. Section 4.3 of the Disclosure Schedule sets forth a complete and
correct list of all of the Company Shareholders and the number of shares of
Company Common Stock owned, of record and beneficially, by each such Company
Shareholder. Section 4.3 of the Disclosure Schedule sets forth a complete and
correct list of all warrants, options or similar rights, including as to each
holder thereof, the number of shares of Company Common Stock subject thereto and
the exercisability, exercise price and termination date thereof. Section 4.3 of
the Disclosure Schedule sets forth all outstanding securities of the Company and
each Company Subsidiary, including but not limited to all debt securities,
Company Common Stock, options, warrants, rights and all other securities
convertible or exercisable into, or exchangeable for, capital stock. Except as
set forth in Section 4.3 of the Disclosure Schedule, there are no voting trusts
or other Contracts or understandings to which the Company, any Company
Subsidiary
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or any Company Shareholder is a party with respect to the transfer, voting or
registration of the capital stock of the Company or any Company Subsidiary.
There are no Contracts relating to the issuance, sale or transfer of any equity
securities or other securities of the Company or any Company Subsidiary. Neither
the Company nor any Company Subsidiary owns or has any Contract to acquire any
equity securities or other securities of any Person or any, direct or indirect,
equity or ownership interest in any other business, except for the Company
Subsidiaries (with respect to the Company). No Person has any pre-emptive rights
with respect to any security of the Company or any Company Subsidiary.
(b) The Company directly owns, of record and beneficially, and has
good, valid and indefeasible title to and the right to transfer all of the
issued and outstanding capital stock of each of the Company Subsidiaries, free
and clear of any and all Encumbrances and Liens of any kind or nature
whatsoever. There are no voting trusts, shareholder agreements or any other
Contracts or understandings to which the Company is a party with respect to the
capital stock of any Company Subsidiary. All of the outstanding capital stock of
each Company Subsidiary has been duly authorized and validly issued and is fully
paid and nonassessable.
4.4 BOOKS AND RECORDS
Except as disclosed in Section 4.4 of the Disclosure Schedule, the
books of account and other records of the Company and each Company Subsidiary,
all of which have been made available to Parent, are true, complete and correct
in all material respects. Except as disclosed in Section 4.4 of the Disclosure
Schedule, the minute books of the Company and each Company Subsidiary contain
true, accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the board of directors, and committees of the
board of directors of the Company and each Company Subsidiary, respectively. The
stock books of the Company and each Company Subsidiary are true, complete and
correct. At the Closing, all of such books and records will be in the possession
of the Company.
4.5 FINANCIAL STATEMENTS
(a) For purposes of this Agreement: "Financial Statements" shall mean
(i) the audited consolidated balance sheet of the Company as of November 30,
1998, and the related consolidated income statement for the year then ended, as
set forth in Section 4.5 of the Disclosure Schedule and (ii) the unaudited
unconsolidated balance sheet of the Company as of April 30, 1999 and the related
unconsolidated income statement for the five (5) months ended on such date (the
"Interim Financial Statements"). The Company has delivered to Parent true and
complete copies of the Financial Statements.
(b) The Financial Statements for the year ended November 30, 1998 (i)
have been prepared from the books and records of the Company in accordance with
GAAP, (ii) fully reflect all liabilities and contingent liabilities of the
Company (on a consolidated basis) required to be reflected therein on such basis
as at the date thereof, and (iii) fairly present the financial position of the
Company (on a consolidated basis) as of the date of the balance sheet
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included in the Financial Statements and the results of its operations (on a
consolidated basis) for the period indicated. The Interim Financial Statements
(i) have been prepared from the books and records of the Company on a basis
consistent with the Company's historical practices, and (ii) fairly present the
financial position of the Company (on a consolidated basis) as at the date of
the balance sheet included therein and the results of its operations (on a
consolidated basis) for the period indicated; provided, however, the Interim
Financial Statements (x) are subject to normal year-end adjustments, (y) do not
include footnotes, and (z) are not consolidated.
4.6 NO UNDISCLOSED LIABILITIES
Except as set forth in Section 4.6 of the Disclosure Schedule, the
Company and the Company Subsidiaries do not have any liabilities or obligations
of any nature (whether known or unknown, absolute, accrued, contingent or
otherwise, and whether due or to become due), except for liabilities or
obligations reflected or reserved against in the Financial Statements and
current liabilities incurred in the ordinary course of business since the date
of the Financial Statements, consistent with past practices, which will not,
individually or in the aggregate, have a Material Adverse Effect on the Company
and the Company Subsidiaries, taken as a whole, provided that this
representation and warranty shall not be deemed to apply with respect to those
matters specified in Section 4.13(i).
4.7 NO MATERIAL ADVERSE CHANGE
Since November 30, 1998, there has not been any material adverse change
in the business, operations, properties, assets, liabilities, results of
operations or condition (financial or otherwise) (a "Material Adverse Effect")
of the Company or any Company Subsidiary, and no event has occurred or
circumstance exists that could reasonably be expected to result in a Material
Adverse Effect on the Company and the Company Subsidiaries, taken as a whole,
provided that the effect of any of the following shall not be considered a
Material Adverse Effect: (A) general economic or financial conditions or (B)
other developments that are not unique to the Company and/or the Company
Subsidiaries but also affect other Persons who participate or are engaged in the
lines of business in which the Company and/or the Company Subsidiaries
participate or are engaged.
4.8 TAXES
(a) "Taxes" shall mean all taxes, charges, fees, Encumbrances, Liens,
customs, duties or other assessments, however denominated, including any
interest, penalties, additions to tax or additional taxes that may become
payable in respect thereof, imposed by the United States government, any state,
local or foreign government, or any agency or political subdivision of any such
government (a "Tax Authority"), which taxes shall include, without limiting the
generality of the foregoing, all income taxes, payroll and employee withholding
taxes, unemployment insurance, social security, sales and use taxes, excise
taxes, capital taxes, franchise taxes, gross receipt taxes, occupation taxes,
real and personal property taxes,
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value added taxes, stamp taxes, transfer taxes, workers' compensation taxes,
taxes relating to benefit plans and other obligations of the same or similar
nature.
(b) Except as set forth in Section 4.8 of the Disclosure Schedule, (i)
each of the Company and each Company Subsidiary has filed or caused to be filed
with the appropriate Taxing Authorities in a timely manner all Tax returns,
reports and forms ("Returns") required to be filed by them; (ii) the information
on such Returns is complete and accurate in all material respects; (iii) each of
the Company and each Company Subsidiary has paid in full on a timely basis all
Taxes or made adequate provision in the Financial Statements for all Taxes
(whether or not shown on any Return) required to be paid by them; (iv) there are
no Encumbrances or Liens for Taxes upon the assets or properties of the Company
or any Company Subsidiary other than for Taxes not yet due and payable; and (v)
no deficiencies for Taxes have been claimed, proposed, or assessed by any Tax
Authority or other Governmental Authority with respect to the Company or any
Company Subsidiary, and there are no pending or, to the Company's and the
Controlling Shareholders' knowledge, threatened audits, investigations or claims
for or relating to any liability in respect of Taxes of the Company or any
Company Subsidiary.
(c) There are no outstanding Contracts or waivers with respect to the
Company extending the statutory period of limitation applicable to any Taxes and
neither the Company nor any Company Subsidiary has requested any extension of
time within which to file any Return, which has not yet been filed.
(d) (i) Each of the Company and each Company Subsidiary has made
provision for all Taxes payable by it and such provision is reflected on the
Financial Statements with respect to any period covered thereby as to Taxes
which are not payable prior to the date of such Financial Statements; (ii) the
provisions for Taxes with respect to the Company (on a consolidated basis) for
any period prior to the Closing (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) are
adequate to cover all Taxes with respect to such period; (iii) each of the
Company and each Company Subsidiary has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, shareholder or other third Person;
(iv) all material elections with respect to Taxes made by the Company or any
Company Subsidiary as of the date hereof are set forth in Section 4.8 of the
Disclosure Schedule; (v) there are no private letter rulings in respect of any
Tax pending between the Company or any Company Subsidiary and any Tax Authority,
or between any Controlling Shareholder and any Tax Authority, if such ruling
would affect the Company or any Company Subsidiary; (vi) neither the Company nor
any Company Subsidiary has ever been a member of an affiliated group within the
meaning of Section 1504 of the Code, or filed or been included in a combined,
consolidated or unitary return of any Person (other than with respect to the
Company and its Subsidiaries); (vii) neither the Company nor any Company
Subsidiary is liable for Taxes of any other Person except with respect to sales
taxes, and neither the Company nor any Company Subsidiary is currently under any
contractual obligation to indemnify any Person with respect to Taxes, or a party
to any tax
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sharing agreement or any other agreement providing for payments by the Company
or any Company Subsidiary with respect to Taxes; (viii) neither the Company nor
any Company Subsidiary is, or has been, a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code), during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code; (ix) neither the
Company nor any Company Subsidiary is a "collapsible corporation" under Section
341 of the Code; (x) neither the Company nor any Company Subsidiary is a
personal holding company within the meaning of Section 542 of the Code; (xi)
neither the Company nor any Company Subsidiary is a party to any joint venture,
partnership or other arrangement or Contract which could be treated as a
partnership for Tax purposes; (xii) neither the Company nor any Company
Subsidiary has agreed to or is required, as a result of a change in method of
accounting or otherwise, to include any adjustment under Section 481 of the Code
(or any corresponding provision of state, local or foreign Law) in taxable
income; (xiii) neither the Company nor any Company Subsidiary is a party to any
Contract, arrangement or plan that could result (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; and (xiv) Section 4.8 of the Disclosure Schedule contains a
list of all jurisdictions to which any Tax is properly payable or in which any
Return is required to be filed by the Company or any Company Subsidiary, and no
written claim has ever been made by any Tax Authority in any other jurisdiction
that the Company or any Company Subsidiary is subject to taxation in such
jurisdiction.
4.9 ACCOUNTS RECEIVABLE
All accounts receivable of the Company that are reflected on the
Financial Statements or on the accounts receivable ledger of the Company or any
Company Subsidiary as of the Closing Date (collectively, the "Accounts
Receivable") represent or will represent valid obligations arising from sales
actually made or services actually performed in the ordinary course of business.
All of the Accounts Receivable are or will be collectible at the full recorded
amount thereof, less any applicable reserves established in accordance with GAAP
(except, with respect to the Interim Financial Statements, such reserves have
been established in accordance with the Company's historical practices), in the
ordinary course of business, except for such Accounts Receivable, the failure of
which to be collected will not have a Material Adverse Effect on the Company and
the Company Subsidiaries, taken as a whole.
4.10 TITLE TO PROPERTIES; ENCUMBRANCES
Section 4.10 of the Disclosure Schedule contains a complete and
accurate list of all real property, leaseholds or other interests therein owned
or held by the Company or any Company Subsidiary. Neither the Company nor any
Company Subsidiary owns, and has ever owned, any real property other than as
specified in Section 4.10 of the Disclosure Schedule and, for each such
property, Section 4.10 of the Disclosure Schedule sets forth the owner thereof,
a brief description thereof (including approximate square footage), when
purchased or acquired and the approximate purchase price thereof, the use made
of such
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property and the approximate annual costs, fees and taxes associated with such
property. The Company has delivered or made available to Parent true, correct
and complete copies of the real property leases to which the Company or any
Company Subsidiary is party or pursuant to which it or they use or occupy any
real property. Except as set forth in Section 4.10 of the Disclosure Schedule,
each of the Company and each Company Subsidiary has good title to all of the
assets and properties, real and personal, tangible and intangible, it owns or
purports to own, or uses in its business, including those reflected on its books
and records and in the Financial Statements (except for accounts receivable
collected and inventories, materials and supplies disposed of in the ordinary
course of business consistent with past practice after the date of the most
recent Financial Statements). Each of the Company and each Company Subsidiary
has a valid leasehold, license or other interest in all of the other tangible
assets or properties, real or personal, which are used in the operation of its
business. Except as set forth in Section 4.10 of the Disclosure Schedule, all
assets and properties owned, leased or used by the Company or any Company
Subsidiary are free and clear of all Encumbrances and Liens, except for (a)
liens for current Taxes not yet due, (b) workmen's, common carrier and other
similar liens arising in the ordinary course of business, none of which
materially detracts from the value or impairs the use of the asset or property
subject thereto, or impairs the operations of the Company or any Company
Subsidiary, (c) Encumbrances or Liens disclosed in the Financial Statements, and
(d) with respect to real property, (i) minor imperfections of title, if any,
none of which is substantial in amount, materially detracts from the value or
impairs the use of the property subject thereto, or impairs the operations of
the Company or any Company Subsidiary, and (ii) zoning Laws and other land use
restrictions that do not impair the present or anticipated use of the property
subject thereto.
4.11 CONDITION AND SUFFICIENCY OF ASSETS
The Facilities and other assets and property owned or used by the
Company or any Company Subsidiary are structurally sound, are in good operating
condition and repair (normal wear and tear excepted), and are adequate for the
uses to which they are being put, and none of such Facilities or other property
and assets owned or used by the Company or any Company Subsidiary is in need of
maintenance or repairs except for ordinary, routine maintenance and repairs that
are not material in nature or cost. The Facilities and other assets and property
owned or used by the Company and/or each Company Subsidiary are sufficient for
the continued conduct of its or their business after the Closing in
substantially the same manner as conducted prior to the Closing.
4.12 COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Section 4.12 of the Disclosure Schedule,
each of the Company and each Company Subsidiary is in compliance in all material
respects with all Laws, licenses and Orders affecting the assets or properties
owned or used by the Company or a Company Subsidiary or the business or
operations of the Company or a Company Subsidiary including federal, state,
local and foreign: (i) Occupational Safety and Health
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Laws; (ii) securities Laws; and (iii) the Fair Credit Reporting Act and similar
state, local and foreign Laws. Neither the Company nor any Company Subsidiary
has been charged with violating, or to the knowledge of the Company or the
Controlling Shareholders, threatened with a charge of violating, nor is the
Company or any Company Subsidiary under investigation with respect to a possible
violation of, any provision of any federal, state, local or foreign Law, Order
or administrative ruling or license relating to any of its or their assets or
properties or any aspect of its or their business.
(b) Section 4.12 of the Disclosure Schedule contains a complete and
accurate list of each Governmental Permit that is held by the Company or any
Company Subsidiary or that otherwise relates to the business of, or to any of
the assets or properties owned or used by, the Company or any Company
Subsidiary. Each Governmental Permit listed or required to be listed in Section
4.12 of the Disclosure Schedule is valid and in full force and effect and is not
subject to any Proceedings for suspension, modification or revocation.
4.13 LEGAL PROCEEDINGS
Except as set forth in Section 4.13 of the Disclosure Schedule, there
is no pending claim, action, investigation, arbitration, litigation or other
judicial, regulatory or administrative proceeding ("Proceeding"):
(i) to the knowledge of the Company and the Controlling
Shareholders, that has been commenced by or against the Company or any Company
Subsidiary or that otherwise relates to the business of, or any of the assets or
properties owned or used by, the Company or any Company Subsidiary; or
(ii) that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any of the
transactions contemplated hereby.
To the knowledge of the Company and the Controlling Shareholders, no
such Proceeding has been threatened. The Company has made available to Parent
true, correct and complete copies of all pleadings, correspondence and other
documents in its possession relating to each Proceeding listed in Section 4.13
of the Disclosure Schedule. The Proceedings listed in Section 4.13 of the
Disclosure Schedule could not reasonably be expected to have a Material Adverse
Effect on the Company and the Company Subsidiaries, taken as a whole.
4.14 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Section 4.14 of the Disclosure Schedule, since
November 30, 1998, each of the Company and each Company Subsidiary has conducted
its business only in the ordinary course, consistent with past practice, and
there has not been any:
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(a) declaration, setting aside, making or payment of any dividend or
other distribution or repurchase or payment in respect of shares of capital
stock;
(b) issuance, sale, disposition or Encumbrance of, or authorization for
issuance, sale, disposition or Encumbrance of, or grant or issue of any options,
warrants or rights to acquire with respect to, any shares of its capital stock
or any other of its securities or any security convertible or exercisable into
or exchangeable for any such shares or securities, or any change in its
outstanding securities or shares of capital stock or its capitalization, whether
by reason of a reclassification, recapitalization, stock split, combination,
exchange or readjustment of shares, stock dividend or otherwise;
(c) Encumbrance of its assets or properties;
(d) payment or increase of any bonuses, salaries or other compensation
to any shareholder, director, officer, consultant, agent or sales representative
or (except in the ordinary course of business consistent with past practice)
employee or entry into any employment, severance or similar Contract with any
director, officer or employee;
(e) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement or other employee benefit plan for or with any employees, except in
the ordinary course of business consistent with past practice;
(f) damage to or destruction of any asset or property, whether or not
covered by insurance, or loss of any Customer, which could reasonably be
expected to have a Material Adverse Effect on the Company and the Company
Subsidiaries, taken as a whole;
(g) entry into, termination of, or receipt of notice of termination of
any Contract or transaction involving a total remaining commitment by or to the
Company or any Company Subsidiary of at least $100,000 including the entry into
(i) any document evidencing any indebtedness; (ii) any capital or other lease;
or (iii) any guaranty;
(h) sale, lease or other disposition (other than in the ordinary course
of business consistent with past practice) of any asset or property;
(i) cancellation, compromise, release or waiver of any debt, claim or
right with a value to the Company or any Company Subsidiary in excess of
$25,000;
(j) creation, incurrence or assumption of any indebtedness for borrowed
money or guarantee of any obligation or the net worth of any Person in an
aggregate amount in excess of $25,000, except for endorsements of negotiable
instruments for collection in the ordinary course of business;
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(k) discharge or satisfaction of any Encumbrance or Lien other than
those which are required to be discharged or satisfied during such period in
accordance with their original terms;
(l) payment, discharge or satisfaction of any material obligation or
liability, absolute, accrued, contingent or otherwise, whether due or to become
due, except for any current liabilities, and the current portion of any long
term liabilities, shown on the Financial Statements (or not required as of the
date thereof to be shown thereon in accordance with GAAP) or incurred since the
date of the most recent balance sheet in the ordinary course of business
consistent with past practice;
(m) loan or advance to any Person other than travel and other similar
routine advances in the ordinary course of business consistent with past
practice, or acquisition of any capital stock or other securities of or any
ownership interest in, or a significant portion of the assets of, any other
business enterprise;
(n) capital investment or capital expenditure or capital improvement,
addition or betterment in amounts which exceed $25,000 in the aggregate;
(o) institution or settlement of any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(p) except in the ordinary course of business consistent with past
practice, commitment to provide services or goods for an indefinite period or a
period of more than six (6) months;
(q) change in the method of accounting or the accounting principles or
practices used by the Company or any Company Subsidiary in the preparation of
the Financial Statements except as required by GAAP;
(r) entry into other Contracts, except Contracts made in the ordinary
course of business consistent with past practice;
(s) amendment or other modification of any of the Organizational
Documents of the Company or any Company Subsidiary;
(t) transfer or grant of any rights or licenses under, or entry into
any settlement regarding the infringement of, any Intellectual Property Assets,
or entry into any licensing or similar agreements or arrangements; or
(u) agreement, whether oral or written, by the Company or any Company
Subsidiary to do any of the foregoing.
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4.15 CONTRACTS; NO DEFAULTS
(a) Section 4.15(a) of the Disclosure Schedule contains a complete and
accurate list, and the Company has delivered to Parent true, correct and
complete copies, of:
(i) each Contract involving payments of at least $100,000 that
involves performance of services or delivery of goods or materials by the
Company or any Company Subsidiary;
(ii) each Contract involving payments of at least $100,000
that involves performance of services or delivery of goods or materials to the
Company or any Company Subsidiary;
(iii) each lease, license and other Contract affecting any
leasehold or other interest in any real or personal property to which the
Company or any Company Subsidiary is a party;
(iv) each licensing agreement or other Contract to which the
Company or any Company Subsidiary is a party with respect to patents,
trademarks, copyrights, trade secrets or other intellectual property, including
agreements with current or former employees, consultants or contractors
regarding the use or disclosure of any intellectual property;
(v) each collective bargaining agreement and other Contract to
or with any labor union or other employee representative of a group of employees
involving or affecting the Company or any Company Subsidiary;
(vi) each joint venture, partnership and other Contract
involving a sharing of profits, losses, costs or liabilities by the Company or
any Company Subsidiary with any other Person or requiring the Company or any
Company Subsidiary to make a capital contribution;
(vii) each Contract to which the Company or any Company
Subsidiary is a party containing covenants that in any way purport to restrict
the business activity of the Company or any Company Subsidiary or any of the key
employees of the Company or any Company Subsidiary (collectively, the "Key
Employees") or limit the freedom of the Company or any Company Subsidiary or any
of the Key Employees to engage in any line of business or to compete with any
Person or hire any Person;
(viii) each employment or consulting agreement between the
Company or any Company Subsidiary and its employees and consultants;
(ix) each agreement between the Company or any Company
Subsidiary and an officer or director of the Company or any Company Subsidiary
or any affiliate of any of the foregoing;
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(x) each power of attorney granted by the Company or any
Company Subsidiary that is currently effective and outstanding;
(xi) each Contract for capital expenditures by the Company or
any Company Subsidiary in excess of $25,000;
(xii) each agreement of the Company or any Company Subsidiary
under which any money has been or may be borrowed or loaned or any note, bond,
factoring agreement, indenture or other evidence of indebtedness has been issued
or assumed (other than those under which there remain no ongoing obligations of
the Company or any Company Subsidiary), and each guaranty (including
"take-or-pay" and "keepwell" agreements) by the Company or any Company
Subsidiary of any evidence of indebtedness or other obligation, or of the net
worth, of any Person (other than endorsements for the purpose of collection in
the ordinary course of business);
(xiii) each agreement of the Company or any Company Subsidiary
containing restrictions with respect to the payment of dividends or other
distributions in respect of its capital stock;
(xiv) each stock purchase, merger or other agreement pursuant
to which the Company or any Company Subsidiary acquired any material amount of
assets (other than capital expenditures), and all relevant documents and
agreements delivered in connection therewith;
(xv) each agreement to which the Company or any Company
Subsidiary is a party containing a change of control provision;
(xvi) each other agreement to which the Company or any Company
Subsidiary is a party having an indefinite term or a fixed term of more than one
(1) year (other than those that are terminable at will or upon not more than
thirty (30) days' notice by the Company or such Company Subsidiary without
penalty) or requiring payments by the Company or any Company Subsidiary of more
than $100,000 per year; and
(xvii) each standard form of agreement pursuant to which the
Company provides services or goods to customers.
(b) Except as set forth in Section 4.15(b) of the Disclosure Schedule,
each Contract identified or required to be identified in Section 4.15(a) of the
Disclosure Schedule is in full force and effect and is valid and enforceable
against the Company or such Company Subsidiary and, to the knowledge of the
Company and the Controlling Shareholders, against the other parties thereto in
accordance with its terms.
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(c) Except as set forth in Section 4.15(c) of the Disclosure Schedule:
(i) each of the Company and each Company Subsidiary is in full
compliance with all applicable terms and requirements of each Contract under
which the Company or such Company Subsidiary has any obligation or liability or
by which the Company or such Company Subsidiary or any of the assets or
properties owned or used by the Company or such Company Subsidiary is or was
bound, except for such noncompliance that could not reasonably be expected to
have a Material Adverse Effect on the Company and the Company Subsidiaries,
taken as a whole;
(ii) to the knowledge of the Company and the Controlling
Shareholders, each other Person that has or had any obligation or liability
under any Contract under which the Company or any Company Subsidiary has any
rights is in full compliance with all applicable terms and requirements of such
Contract; and
(iii) to the knowledge of the Company and the Controlling
Shareholders, no event has occurred and no circumstance exists that (with or
without notice or lapse of time or both) is likely to result in a violation or
breach of any Contract.
4.16 INSURANCE
Section 4.16 of the Disclosure Schedule sets forth the premium payments
and describes all the insurance policies of the Company and the Company
Subsidiaries, which policies are now in full force and effect in accordance with
their terms and expire on the dates shown on Section 4.16 of the Disclosure
Schedule. There has been no default in the payment of premiums on any of such
policies, and there is no ground for cancellation or avoidance of any such
policies, or any increase in the premiums thereof, or for reduction of the
coverage provided thereby. Such policies shall continue in full force and effect
up to the expiration dates shown in Section 4.16 of the Disclosure Schedule.
True, correct and complete copies of all insurance policies listed in Section
4.16 of the Disclosure Schedule have been previously furnished to Parent.
4.17 ENVIRONMENTAL MATTERS
(a) Each of the Company and each Company Subsidiary is in compliance
with all applicable Environmental Laws which compliance includes, but is not
limited to, the possession by the Company and each Company Subsidiary of all
Governmental Permits required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Neither the Company nor any
Company Subsidiary has received notice of, and neither the Company nor any
Company Subsidiary, nor any predecessor of any of them is the subject of, any
Environmental Claim or Remedial Action. There are no circumstances or conditions
related to the Company or any Company Subsidiary, the Company's or any Company
Subsidiary's operations or any of the Company's or any Company Subsidiary's
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Facilities that are reasonably likely to prevent or interfere with such
compliance or give rise to an Environmental Claim or Remedial Action in the
future.
(b) There are no Environmental Claims that are pending or, to the
knowledge of the Company and the Controlling Shareholders, threatened against
the Company or any Company Subsidiary, the Company's or any Company Subsidiary's
Facilities or against any Person whose liability for any Environmental Claim the
Company or any Company Subsidiary has retained or assumed either contractually
or by operation of Law.
(c) Neither the Company, nor any Company Subsidiary, nor any other
Person acting on behalf of the Company or any Company Subsidiary (solely with
respect to any such other Person, with the Company's, any Company Subsidiary's
or any Controlling Shareholder's knowledge) has (A) disposed of, transported or
arranged for the disposal of any Hazardous Materials to, at or upon: (i) any
location other than a site lawfully permitted to receive such Hazardous
Materials, (ii) any Facilities or (iii) any site which, pursuant to CERCLA or
any similar state Law, has been placed on the National Priorities List, CERCLIS
or their state equivalents, and (B) there has not occurred during the period the
Company or any Company Subsidiary operated or possessed any Facility or is
presently occurring a Release, or threatened Release, of any Hazardous Materials
on, into or beneath the surface of, or adjacent to, any Facilities.
(d) Section 4.17 of the Disclosure Schedule identifies (a) all
environmental audits, assessments, or occupational health studies undertaken by
the Company, any Company Subsidiary or its or their agents on its or their
behalf, or undertaken by any Governmental Authority, or any third Person,
relating to the Facilities; (b) the results of any groundwater, soil, air or
asbestos monitoring undertaken by the Company, any Company Subsidiary or its or
their agents on its or their behalf, or, to the knowledge of the Company and the
Controlling Shareholders, undertaken by any Governmental Authority or any third
Person, relating to the Facilities; and (c) all written communications between
the Company or any Company Subsidiary and any Governmental Authority arising
under or related to Environmental Laws.
4.18 EMPLOYEES
(a) Section 4.18 of the Disclosure Schedule contains a complete and
accurate list of the following information for each employee of the Company or
any Company Subsidiary: name; job title; base salary; bonus; vacation accrued;
service credited for purposes of vesting and eligibility to participate under
any employee benefit plan of any nature; and whether such employee is a party to
a non-competition agreement with the Company or such Company Subsidiary.
(b) No officer or Key Employee of the Company or any Company Subsidiary
is a party to, or is otherwise bound by, any agreement or arrangement, including
any confidentiality, noncompetition, or proprietary rights agreement, between
such officer or Key
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Employee and any other Person that could adversely affect (i) the performance of
his duties as an officer or employee of the Company or such Company Subsidiary,
or (ii) the ability of the Company or such Company Subsidiary to conduct its
business. To the knowledge of the Company and the Controlling Shareholders, no
officer or other Key Employee of the Company or any Company Subsidiary intends
to terminate his or her employment with the Company or such Company Subsidiary.
(c) No Key Employee of the Company or any Company Subsidiary is bound
by any agreement with any other Person that is violated or breached by such
employee performing the services he is performing for the Company or such
Company Subsidiary.
(d) Except as listed on Section 4.18 of the Disclosure Schedule,
neither the Company nor any Company Subsidiary has had a "Plant Closing" or a
"Mass Layoff" within the meaning of the federal Workers Adjustment and
Retraining Notification Act of 1988 ("WARN") and with respect to any such Plant
Closing or Mass Layoff, the Company or such Company Subsidiary has complied in
all respects with the requirements of WARN.
(e) The Company has delivered to Parent or its counsel prior to the
date hereof true and complete copies of any employment agreements and any
procedures and policies relating to the employment of employees of the Company
or any Company Subsidiary and the use of temporary employees and independent
contractors by the Company or any Company Subsidiary (including summaries of any
procedures and policies that are unwritten).
4.19 EMPLOYEE BENEFITS
(a) Except as listed on Section 4.19(a) of the Disclosure Schedule, the
Company and the Company Subsidiaries (either individually or collectively) do
not maintain, have an obligation to contribute to or have any actual or
contingent liability with respect to any Employee Benefit Plan. "Employee
Benefit Plan" means any "employee benefit plan" as defined in Section 3(3) of
ERISA and any other plan, policy, program, practice, agreement, understanding or
arrangement (whether written or oral) providing compensation or other benefits
(other than ordinary cash compensation) to any current or former director,
officer, employee or consultant (or to any dependent or beneficiary thereof), of
the Company or any Company Subsidiary, which are now, or were within the past
six years, maintained by the Company or any Company Subsidiary, or under which
the Company or any Company Subsidiary has or could have any obligation or
liability, whether actual or contingent, including, without limitation, all
incentive, bonus, deferred compensation, vacation, holiday, cafeteria, medical,
disability, stock purchase, stock option, stock appreciation, phantom stock,
restricted stock or other stock-based compensation plans, policies, programs,
practices or arrangements.
The Company has delivered to Parent or its counsel prior to the date
hereof true and complete copies of (i) plan instruments and amendments thereto
for all Employee Benefit Plans (or written summaries of any Employee Benefit
Plans that are unwritten) and related
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trust agreements, insurance and other contracts, summary plan descriptions, and
summaries of material modifications, and material communications distributed to
the participants of each Plan, (ii) to the extent annual reports on Form 5500
are required with respect to any Employee Benefit Plan, the three most recent
annual reports and attached schedules for each Employee Benefit Plan as to which
such report is required to be filed and (iii) where applicable, the most recent
(A) opinion, notification and determination letters, (B) audited financial
statements, (C) actuarial valuation reports and (D) nondiscrimination tests
performed under the Code (including 401(k) and 401(m) tests) for each Employee
Benefit Plan.
(b) Except as set forth in Section 4.19(b) of the Disclosure Schedule,
the Company and the Company Subsidiaries do not have and have never had an ERISA
Affiliate. "ERISA Affiliate" means any entity (whether or not incorporated)
other than the Company or a Company Subsidiary that, together with the Company
and the Company Subsidiaries, is a member of (i) a controlled group of
corporations within the meaning of Section 414(b) of the Code; (ii) a group of
trades or businesses under common control within the meaning of Section 414(c)
of the Code; or (iii) an affiliated service group within the meaning of Section
414(m) of the Code.
(c) Neither the Company nor any Company Subsidiary maintains or has
ever maintained or contributes to or has ever contributed to an Employee Benefit
Plan subject to Title IV of ERISA (including a multiemployer plan) and no facts
exist under which the Company or any Company Subsidiary could incur any
liability under Title IV of ERISA.
(d) With respect to each Employee Benefit Plan, (i) no party in
interest or disqualified person (as defined in Section 3(14) of ERISA and
Section 4975 of the Code, respectively) has at any time engaged in a transaction
which could subject Parent, Merger Sub or the Company or any Company Subsidiary,
directly or indirectly, to a tax, penalty or liability for prohibited
transactions imposed by ERISA or the Code and (ii) no fiduciary (as defined in
Section 3(21) of ERISA) with respect to any Employee Benefit Plan, for whose
conduct the Company or any Company Subsidiary could have any liability (by
reason of indemnities or otherwise), has breached any of the responsibilities or
obligations imposed upon the fiduciary under Title I of ERISA.
(e) Except as disclosed in Section 4.19(e) of the Disclosure Schedule,
each Employee Benefit Plan which is a "welfare plan" within the meaning of
Section 3(1) of ERISA and which provides health, disability or death benefits is
fully insured; neither the Company nor any Company Subsidiary is obligated to
directly pay any such benefits or to reimburse any third Person payor for the
payment of such benefits.
(f) Each Employee Benefit Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and which
is subject to Sections 201, 301 or 401 of ERISA has received a favorable
determination letter from the Internal Revenue Service covering all amendments
required by the Tax Reform Act of 1986 and prior legislation and there are no
circumstances that are likely to result in revocation of
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any such favorable determination letter. Each Employee Benefit Plan is and has
been operated in material compliance with its terms and all applicable Laws,
Orders or governmental rules and regulations currently in effect with respect
thereto, and by its terms can be amended and/or terminated at any time. As of
and including the Closing Date, the Company, each Company Subsidiary and each
ERISA Affiliate (i) shall have performed all material obligations required to be
performed by it under, and shall not be in material default under or in material
violation of any Employee Benefit Plan and (ii) shall have made all
contributions or payments required to be made by it up to and including the
Closing Date with respect to each Employee Benefit Plan, or adequate accruals
therefor will have been provided for and will be reflected on the Financial
Statements provided to Parent by the Company. All notices, filings and
disclosures required by ERISA or the Code (including notices under Section 4980B
of the Code and certifications under the Health Insurance Portability and
Accountability Act) have been timely made.
(g) Neither the Company nor any Company Subsidiary has received or is
aware of any Proceeding (other than routine claims for benefits) pending or, to
the knowledge of the Company and the Controlling Shareholders, threatened with
respect to any Employee Benefit Plan or against any fiduciary of any Employee
Benefit Plan, and there are no facts that could give rise to any such
Proceeding. There has not occurred any circumstances by reason of which the
Company or any Company Subsidiary may be liable for an act, or a failure to act,
by a fiduciary with respect to any Employee Benefit Plan.
(h) There are no complaints, charges or claims against the Company or
any Company Subsidiary pending or, to the Company's and the Controlling
Shareholders' knowledge, threatened to be brought by or filed with any
Governmental Authority and no facts exist as a result of which the Company or
any Company Subsidiary could have any liability based on, arising out of, in
connection with or otherwise relating to the classification of any individual by
the Company or any Company Subsidiary as an independent contractor or "leased
employee" (within the meaning of Section 414(n) of the Code) rather than as an
employee.
(i) Section 4.19(i) of the Disclosure Schedule sets forth a true and
complete list of each current or former employee, officer or director of the
Company or any Company Subsidiary who holds (i) any option to purchase Company
Common Stock, together with the number of shares of Company Common Stock subject
to such option, the option price of such option (to the extent determinable),
whether such option is intended to qualify as an incentive stock option within
the meaning of Section 422(b) of the Code (an "ISO"), and the expiration date of
such option; (ii) any shares of Company Common Stock that are restricted as a
result of an agreement with the Company or the stock plan of the Company; and
(iii) any other right, directly or indirectly, to receive Company Common Stock
or any other compensation based in whole or in part on the value of Company
Common Stock, together with the number of shares of Company Common Stock subject
to such right.
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(j) Section 4.19(j) of the Disclosure Schedule sets forth a true and
complete list of (i) all agreements with consultants who are individuals
obligating the Company or any Company Subsidiary to make annual cash payments in
an amount exceeding $25,000; and (ii) all agreements with respect to the
services of independent contractors or leased employees who are individuals or
individuals doing business in a corporate form whether or not they participate
in any of the Employee Benefit Plans.
(k) (i) No Employee Benefit Plan is an employee stock ownership plan
(within the meaning of Section 4975(e)(7) of the Code) or otherwise invests in
Company Common Stock; and (ii) the consummation of the transactions contemplated
by this Agreement will not, alone or together with any other event, (A) entitle
any employee or former employee of the Company or any Company Subsidiary to any
payment, (B) result in an increase in the amount of compensation or benefits or
accelerate the vesting or timing of payment of any benefits or compensation
payable in respect of any employee or former employee or (C) result in any
parachute payment under Section 280G of the Code, whether or not such payment is
considered reasonable compensation for services rendered. The Company will take
all actions within its control to ensure that all actions required to be taken
by a fiduciary of any Employee Benefit Plan in order to effectuate the
transaction contemplated by this Agreement shall comply with the terms of such
Plan, ERISA and other applicable Laws.
(l) Except as required by foreign law and disclosed in Section 4.19(l)
of the Disclosure Schedule, neither the Company nor any Company Subsidiary
maintains any Employee Benefit Plan covering non-U.S. employees.
(m) No Employee Benefit Plan provides benefits, including, without
limitation, death or medical benefits (through insurance or otherwise) with
respect to any employee or former employee of the Company or any Company
Subsidiary beyond their retirement or other termination of service other than
(i) coverage mandated by applicable Law, (ii) retirement or death benefits under
any Pension Plan, (iii) disability benefits under any welfare plan that have
been fully provided for by insurance or otherwise, (iv) deferred compensation
benefits accrued as liabilities on the consolidated books of the Company or (v)
benefits in the nature of severance pay.
(n) No Employee Benefit Plan is a "multiple employer plan" as described
in Section 3(40) of ERISA or Section 413(c) of the Code.
(o) No Employee Benefit Plan, other than a Pension Plan, is funded
through a trust intended to be exempt from tax pursuant to Section 501 of the
Code.
(p) Neither the Company nor any Company Subsidiary has proposed, agreed
to or announced any changes to any Employee Benefit Plan that would cause an
increase in benefits under any such Employee Benefit Plan (or the creation of
new benefits or plans) or to change any employee coverage which would cause an
increase in the expense of maintaining any such plan.
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(q) Except as disclosed in Section 4.19(q) of the Disclosure Schedule,
no Employee Benefit Plan provides for the payment of severance benefits and no
"leased employee" (within the meaning of Section 414(n) or (o) of the Code)
performs any services for the Company or any Company Subsidiary.
4.20 LABOR RELATIONS
Except as set forth in Section 4.20 of the Disclosure Schedule:
(a) To the knowledge of the Company and the Controlling Shareholders,
no employee is considering terminating his or her employment with the Company or
any Company Subsidiary.
(b) No condition or state of facts or circumstances exists which could
materially adversely affect the Company's or any Company Subsidiary's relations
with its employees, including the consummation of the transactions contemplated
by this Agreement.
(c) Each of the Company and each Company Subsidiary is in compliance in
all material respects with all applicable Laws respecting employment and
employment practices, terms and conditions of employment and wages and hours and
none of them is engaged in any unfair labor practice.
(d) No collective bargaining agreement with respect to the business of
the Company or any Company Subsidiary is currently in effect or being
negotiated. Neither the Company nor any Company Subsidiary has encountered any
labor union or collective bargaining organizing activity with respect to its
employees. Neither the Company nor any Company Subsidiary has any obligation to
negotiate any such collective bargaining agreement, and, to the knowledge of the
Company and the Controlling Shareholders, there is no indication that the
employees of the Company or any Company Subsidiary desire to be covered by a
collective bargaining agreement.
(e) There are no strikes, slowdowns, work stoppages or other labor
trouble pending or, to the knowledge of the Company and the Controlling
Shareholders, threatened with respect to the employees of the Company or any
Company Subsidiary, nor has any of the above occurred or, to the knowledge of
the Company and the Controlling Shareholders, been threatened.
(f) There is no representation claim or petition pending before the
National Labor Relations Board or any state or local labor agency and, to the
knowledge of the Company and the Controlling Shareholders, no question
concerning representation has been raised or threatened respecting the employees
of the Company or any Company Subsidiary.
(g) There are no complaints or charges against the Company or any
Company Subsidiary pending before the National Labor Relations Board or any
state or local labor
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agency and, to the knowledge of the Company and the Controlling Shareholders, no
complaints or charges have been filed or threatened to be filed against the
Company or any Company Subsidiary with any such board or agency.
(h) To the knowledge of the Company and the Controlling Shareholders,
no charges with respect to or relating to the business of the Company or any
Company Subsidiary are pending before the Equal Employment Opportunity
Commission or any state or local agency responsible for the prevention of
unlawful employment practices.
(i) Section 4.20 of the Disclosure Schedule accurately sets forth all
unpaid severance which, as of the date hereof, is due or claimed, in writing, to
be due from the Company or any Company Subsidiary to any Person whose employment
with the Company or such Company Subsidiary was terminated.
(j) Neither the Company nor any Company Subsidiary has received notice
of the intent of any government body or Governmental Authority responsible for
the enforcement of labor or employment Laws to conduct an investigation of the
Company or such Company Subsidiary and no such investigation is in progress.
(k) Neither the Company nor any Company Subsidiary is and, to the
knowledge of the Company and the Controlling Shareholders, no employee of the
Company or any Company Subsidiary is, in violation in any material respect of
any employment agreement, non-disclosure agreement, non-compete agreement or any
other agreement regarding an employee's employment with the Company or any
Company Subsidiary.
(l) Each of the Company and each Company Subsidiary has paid all wages
which are due and payable to each of its employees and each of its independent
contractors.
4.21 INTELLECTUAL PROPERTY
(a) Intellectual Property Assets--As used herein, the term
"Intellectual Property Assets" shall mean all worldwide intellectual property
rights including without limitation: (i) all trademarks, service marks, trade
names, common law trademarks, business names, Internet domain names, trade
dress, slogans, and the goodwill associated therewith, and all registrations or
applications therefor (collectively, "Marks"); (ii) all patents, patent
applications and inventions and discoveries that may be patentable
(collectively, "Patents"); (iii) all copyrights in both published works and
unpublished works, including training manuals, marketing and promotional
materials, internal reports, business plans and any other expressions, mask
works and software and videos, whether registered or unregistered, and all
registrations or applications in connection therewith (collectively,
"Copyrights"); and (iv) all trade secrets, know-how, confidential information,
customer lists, technical information, proprietary information, technologies,
processes and formulae, source code, algorithms, architecture, structure,
display screens and development tools, data, plans, drawings and blue prints,
whether tangible or intangible and whether or how stored, compiled, or
memorialized
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physically, electronically, photographically, or otherwise (collectively, "Trade
Secrets"); owned, used or licensed by the Company or any Company Subsidiary as
licensee or licensor and that are used in or material to the conduct of the
business of the Company or any Company Subsidiary as it is currently conducted
or as proposed to be conducted.
(b) Rights--The Company or a Company Subsidiary, as applicable, (i)
owns all right, title and interest in and to each of the Intellectual Property
Assets, free and clear of all Encumbrances and Liens, or (ii) licenses or
otherwise possesses legally enforceable rights to use each of the Intellectual
Property Assets, and, in each case of clause (i) or (ii), the Company and/or
Company Subsidiary may transfer such rights as contemplated by this Agreement.
Each of the Company and each Company Subsidiary has made all necessary filings
and recordations to protect and maintain its interest in the Intellectual
Property Assets, except where the failure to so protect or maintain (x) does not
relate to a material Intellectual Property Asset and (y) could not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect on
the Company and the Company Subsidiaries, taken as a whole.
(c) Agreements--Section 4.21(c) of the Disclosure Schedule contains a
true, correct and complete list and summary description, including any royalties
paid or received by the Company or any Company Subsidiary, of all Contracts
relating to the Intellectual Property Assets to which the Company or any Company
Subsidiary is a party or by which the Company or any Company Subsidiary is
bound. Each license of Intellectual Property Assets listed in Section 4.21(c) is
valid, subsisting, and enforceable, and shall continue in effect on its current
terms upon consummation of the transactions contemplated by this Agreement.
(d) Patents--(i) Section 4.21(d) of the Disclosure Schedule contains a
true, correct and complete list of all Patents; (ii) all Patents are valid and
subsisting and all maintenance fees, annuities and the like have been paid;
(iii) to the knowledge of the Company and the Controlling Shareholders, none of
the Patents is infringed or has been challenged or threatened in any way by any
Person, and none of the products or technology used, sold or licensed or
proposed for use, sale or license by the Company or any Company Subsidiary
infringes or is alleged to infringe any rights of any Person; and (iv) all
products covered by the Patents have been marked with appropriate patent
notices.
(e) Trademarks--(i) Section 4.21(e) of the Disclosure Schedule contains
a true, correct and complete list of all Marks; (ii) all Marks are valid and
subsisting; (iii) to the knowledge of the Company and the Controlling
Shareholders, none of the Marks is infringed or has been challenged or
threatened in any way by any Person, and no claims exist against the use by the
Company or any Company Subsidiary of any trademarks, service marks, trade names,
or trade dress used in the business of the Company or any Company Subsidiary as
currently conducted or as proposed to be conducted; and (iv) all materials
encompassed by the Marks have been marked with appropriate trademark and
registration notices.
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(f) Copyrights--(i) Section 4.21(f) of the Disclosure Schedule contains
a true, correct and complete list of all Copyrights; (ii) all the Copyrights
owned by the Company or any Company Subsidiary, whether or not registered, are
valid and enforceable; (iii) to the knowledge of the Company and the Controlling
Shareholders, none of the Copyrights is infringed or has been challenged or
threatened in any way, and no claims exist against the use by the Company or any
Company Subsidiary of any writings or other expressions used in the business of
the Company or any Company Subsidiary as currently conducted or as proposed to
be conducted; and (iv) all works encompassed by the Copyrights have been marked
with appropriate copyright notices.
(g) Trade Secrets--Each of the Company and each Company Subsidiary has
taken reasonable precautions to protect the secrecy, confidentiality and value
of its Trade Secrets. To the knowledge of the Company and the Controlling
Shareholders, the Trade Secrets have not been used, divulged or appropriated
either for the benefit of any Person (other than the Company or a Company
Subsidiary) or to the detriment of the Company or any Company Subsidiary. None
of the Trade Secrets is subject to any material adverse claim or, to the
knowledge of the Company and the Controlling Shareholders, has been challenged
or threatened in any way.
4.22 CERTAIN PAYMENTS
Neither the Company nor any Company Subsidiary nor any shareholder,
director, officer, agent or employee of the Company or any Company Subsidiary,
or to the knowledge of the Company and the Controlling Shareholders, any other
Person associated with or acting for or on behalf of the Company or any Company
Subsidiary, has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback or other payment to any Person,
private or public, regardless of form, whether in money, property or services in
violation of the Foreign Corrupt Practices Act or any similar Law (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, or (iii) to obtain special concessions, or for special
concessions already obtained, for or in respect of the Company or any Company
Subsidiary or any affiliate of the Company or any Company Subsidiary, or (b)
established or maintained any fund or asset of the Company or any Company
Subsidiary that has not been recorded in the consolidated books and records of
the Company and the Company Subsidiaries.
4.23 RELATIONSHIPS WITH RELATED PERSONS
Except as set forth in Section 4.23 of the Disclosure Schedule, no
Controlling Shareholder, shareholder, affiliate, officer, director or employee
of the Company or any Company Subsidiary, nor any spouse or child of any of them
or any Person associated with any of them ("Related Person"), has any interest
in any assets or properties used in or pertaining to the business of the Company
or any Company Subsidiary. Except as set forth in Section 4.23 of the Disclosure
Schedule, none of the Controlling Shareholders, shareholders, affiliates,
officers, directors or employees of the Company or any Company
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Subsidiary nor any Related Person has owned, directly or indirectly, and whether
on an individual, joint or other basis, any equity interest or any other
financial or profit interest in a Person (other than less than two percent (2%)
of the outstanding capital stock of a Person subject to the reporting
requirements of the Exchange Act) that has (i) had business dealings with the
Company or any Company Subsidiary, or (ii) engaged in competition with the
Company or any Company Subsidiary. Except as set forth in Section 4.23 of the
Disclosure Schedule, no Controlling Shareholder, shareholder, affiliate,
officer, director or employee of the Company or any Company Subsidiary nor any
Related Person is a party to any Contract with, or has any claim or right
against, or owes any amounts to, the Company or any Company Subsidiary, except
employment or consulting agreements listed in Section 4.15(a) of the Disclosure
Schedule. All loans, payables and other amounts due to or from the Company or
any Company Subsidiary and its affiliates are listed in Section 4.23 of the
Disclosure Schedule.
4.24 BROKERS OR FINDERS
Except as set forth in Section 4.24 of the Disclosure Schedule, neither
the Company nor any Company Subsidiary nor any Controlling Shareholder or any of
their agents has incurred any obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or financial advisory
services or other similar payment in connection with this Agreement or the
Transaction Documents or the transactions contemplated hereby or thereby.
4.25 DEPOSIT ACCOUNTS
Section 4.25 of the Disclosure Schedule contains a true, correct and
complete list of (a) the name of each financial institution in which the Company
or any Company Subsidiary has an account or safe deposit box, (b) the names in
which each account or box is held, (c) the type account, and (d) the name of
each person authorized to draw on or have access to each account or box.
4.26 POOLING-OF-INTERESTS
The Company, the Company Subsidiaries and the Controlling Shareholders
have not taken or agreed to take any action, or caused any event or condition to
occur, which would affect the ability of Parent to account for the transactions
contemplated hereby as a pooling-of-interests for financial reporting and
accounting purposes.
4.27 CUSTOMER RELATIONSHIPS
Except as set forth in Section 4.27 of the Disclosure Schedule, to the
knowledge of the Company and the Controlling Shareholders, there are no facts or
circumstances, including the consummation of the transactions contemplated by
this Agreement, that are reasonably likely to result in the loss of any material
Customer of the Company or any Company
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Subsidiary or a material change in the relationship of the Company or any
Company Subsidiary with such a Customer.
4.28 CONDUCT OF BUSINESS; USE OF NAME
The Company owns and has the exclusive right, title and interest in and
to the name "Delatech Incorporated" and the Company has not licensed to any
other Person the right to use the same, or any confusing derivative thereof, as
its corporate name or otherwise in connection with the operation of any business
similar or related to the business conducted by the Company and the Company
Subsidiaries or any of them.
4.29 RESTRICTIONS ON BUSINESS ACTIVITIES.
There is no Contract or Order binding upon the Company or any Company
Subsidiary or, to the knowledge of the Company and the Controlling Shareholders,
threatened that has or could reasonably be expected to have the effect of
prohibiting or materially impairing any business practice of the Company or any
Company Subsidiary (either individually or in the aggregate), any acquisition of
property by the Company or any Company Subsidiary (either individually or in the
aggregate), providing of any service by the Company or any Company Subsidiary or
the hiring of employees or the conduct of business by the Company or any Company
Subsidiary (either individually or in the aggregate) as currently conducted or
proposed to be conducted.
4.30 OUTSTANDING INDEBTEDNESS
Section 4.30 of the Disclosure Schedule sets forth as of May 21, 1999
(a) the amount of all indebtedness for borrowed money of the Company or any
Company Subsidiary then outstanding and the interest rate applicable thereto,
(b) any Encumbrances or Liens which relate to such indebtedness and (c) the name
of the lender or the other payee of each such indebtedness.
4.31 SUPPLIERS; RAW MATERIALS CONTRACTORS
Section 4.31 of the Disclosure Schedule sets forth for the year ended
November 30, 1998 and the five (5) months ended April 30, 1999, (i) the names
and addresses of the three (3) largest suppliers, contractors and subcontractors
of the Company and the Company Subsidiaries based on the aggregate value of raw
materials, supplies, merchandise and other goods and services ordered by the
Company and the Company Subsidiaries from such suppliers, contractors and
subcontractors during such period and (ii) the amount for which each such
supplier, contractor or subcontractor invoiced the Company or a Company
Subsidiary during such period. The Company, the Company Subsidiaries and the
Controlling Shareholders have not received any notice or have no reason to
believe that there has been any material adverse change in the price of such raw
materials, supplies, merchandise or other goods or services, or that any such
supplier, contractor or subcontractor will not sell
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raw materials, supplies, merchandise and other goods and services to the Company
or any Company Subsidiary at any time after the Closing Date on terms and
conditions substantially the same as those used in its current sales to the
Company or a Company Subsidiary subject to general and customary price
increases.
4.32 CUSTOMERS
Section 4.32 of the Disclosure Schedule sets forth (a) a true, complete
and correct listing of the ten (10) largest customers (the "Customers") of the
Company and the Company Subsidiaries (based upon the amounts specified in clause
(b) below) and (b) the amount for which each such Customer was invoiced during
the year ended November 30, 1998 and the five (5) months ended April 30, 1999.
4.33 PROJECTIONS
The Company has delivered to Parent and Merger Sub written projections
for the Company and the Company Subsidiaries dated March 31, 1999 entitled "peer
group comparisons." Such projections were prepared in good faith by the officers
and directors of the Company and the assumptions underlying such projections,
taken as whole, are reasonable as of the date of such projections.
4.34 YEAR 2000 COMPLIANCE
(a) All hardware, software and embedded systems used by the Company
and/or any Company Subsidiary, including any hardware, software and embedded
systems used in connection with product and service development, operations and
production, financial operations, office and administration operations, human
resources functions, and legal and audit functions (the "Systems") are, to the
knowledge of the Company and the Controlling Shareholders, designed to be used
prior to, during, and after the calendar year 2000 ("Year 2000"). The Systems
operate and will operate during each such time periods without error relating to
date data that could reasonably be expected to result in a Material Adverse
Effect on the Company and the Company Subsidiaries, taken as a whole. Without
limiting the generality of the foregoing, except as could not reasonably be
expected to result, individually or in the aggregate, in a Material Adverse
Effect on the Company and the Company Subsidiaries, taken as a whole:
(i) the Systems will not provide invalid or incorrect
results as a result of date data, specifically including date data
which represents or references different centuries or more than one
century;
(ii) the Systems have been designed to ensure Year
2000 compatibility, including date data century recognition,
calculations which accommodate same century and multi-century formulas
and date values, and date data interface values that reflect the
century;
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(iii) the Systems are designed to be used prior to,
during and after the Year 2000, and the Systems will operate during
each such time period without error relating to date data specifically
including any error relating to, or the product of, date data which
represents or references different centuries;
(iv) the date rollovers will not cause erroneous
processing;
(v) manipulation of date data will be free of error
over the range of dates that the Systems are expected to handle;
(vi) explicit century values will be correctly stored
and passed across all applicable interfaces (including user
interfaces);
(vii) all leap year values will be correctly
calculated and processed across all applicable interfaces (including
user interfaces); and
(viii) the Systems will handle the date September 9,
1999, as well as store and pass such date across all interfaces
(including user interfaces).
(b) Section 4.34 of the Disclosure Schedule describes any Year 2000
compliance audit or similar audit conducted by the Company or any Company
Subsidiary and the identity of any consultants or other Persons engaged in
connection therewith. The Company has delivered true, correct and complete
copies of the reports or results of any such audits to Parent.
4.35 PAYABLES
There has been no adverse change since the date of the Financial
Statements in the amount or delinquency of accounts payable of the Company or
any Company Subsidiary (either individually or in the aggregate) which could
reasonably be expected to have a Material Adverse Effect on the Company and the
Company Subsidiaries, taken as a whole.
4.36 INVENTORIES
All inventories of raw materials, supplies, work in progress and
finished goods of each of the Company and each Company Subsidiary are of good,
usable and merchantable quality in all material respects and do not include
obsolete or discontinued items. Except as set forth in Section 4.36 of the
Disclosure Schedule, (a) all such inventories are of such quality as to meet the
quality control standards of the Company and the Company Subsidiaries and any
applicable governmental quality control standards, (b) all such finished goods
are saleable as current inventories at the current prices of the Company and the
Company Subsidiaries in the ordinary course of business, (c) all such
inventories are recorded on the books at the lower of cost or market value
determined in accordance with GAAP (except, with respect to the Interim
Financial Statements, such determinations were
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made in accordance with the Company's historical practices) and (d) no
write-down in inventory has been made or should have been made pursuant to GAAP
(or, with respect to the Interim Financial Statements, consistent with the
Company's historical practices) during the past two years.
4.37 PRODUCT WARRANTIES; PRODUCT LIABILITY
The Company has delivered to the Parent complete and correct copies of
the standard terms and conditions of sale or lease for each of the products or
services of the Company and/or each Company Subsidiary (containing applicable
guaranty, warranty and indemnity provisions). Except as required by Law or as
set forth in Section 4.37 of the Disclosure Schedule, no product manufactured,
sold, leased or delivered by, or service rendered by or on behalf of, the
Company or any Company Subsidiary is subject to any guaranty, warranty or other
indemnity, express or implied, beyond such standard terms and conditions.
4.38 DISCLOSURE
No representation or warranty of the Company or any Controlling
Shareholder in this Agreement as modified by statements in the Disclosure
Schedule is inaccurate in any material respect or omits to state a material fact
necessary to make the statements herein or therein, in light of the
circumstances under which they were made, not misleading.
5. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby, jointly and severally, represent and
warrant to the Company and the Controlling Shareholders as follows:
5.1 ORGANIZATION AND GOOD STANDING
Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Parent is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Each of Parent and Merger Sub has full corporate power and
authority to conduct its business as it is now being conducted and to own or use
the assets and properties that it purports to own or use. Each of Parent and
Merger Sub is duly qualified to do business as a foreign corporation and is in
good standing under the Laws of each state or other jurisdiction in which either
the ownership or use of the assets or properties owned or used by it, or the
nature of the activities conducted by it, requires such qualification, except
where the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect on Parent and its Subsidiaries, taken as a whole.
5.2 AUTHORITY; NO CONFLICT
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(a) Parent and Merger Sub each has the right, power, authority and
capacity to execute and deliver this Agreement and the Transaction Documents to
which Parent or Merger Sub is a party, to consummate the Merger and the other
transactions contemplated hereby and thereby and to perform their respective
obligations under this Agreement and the Transaction Documents to which Parent
or Merger Sub is a party. This Agreement has been duly authorized and approved,
executed and delivered by Parent and Merger Sub and constitutes the legal, valid
and binding obligation of Parent and Merger Sub, enforceable against them in
accordance with its terms. Upon the execution and delivery by Parent and Merger
Sub of the Transaction Documents to which Parent or Merger Sub is a party, such
Transaction Documents will constitute the legal, valid and binding obligations
of Parent and Merger Sub, enforceable against them in accordance with their
respective terms.
(b) Except as set forth in Section 5.2 of the Disclosure Schedule,
neither the execution and delivery of this Agreement or any Transaction Document
by Parent or Merger Sub nor the consummation or performance by Parent or Merger
Sub of the Merger or any of the other transactions contemplated hereby or
thereby, including issuance of the Parent Shares pursuant to this Agreement,
will, directly or indirectly (with or without notice or lapse of time or both):
(i) contravene, conflict with, or result in a violation or
breach of (A) any provision of the Organizational Documents of Parent or Merger
Sub, (B) any resolution adopted by the board of directors or the shareholders of
Parent or Merger Sub, (C) any legal requirement or any Order, award, decision,
settlement or process to which Parent or Merger Sub or any of the assets or
properties owned or used by them may be subject, or (D) any Governmental Permit
held by Parent or Merger Sub;
(ii) result in a breach of or constitute a default, give rise
to a right of termination, cancellation or acceleration, create any entitlement
to any payment or benefit, or require the consent or approval of or any notice
to or filing with any third Person, under any material Contract to which Parent
or Merger Sub is a party or by which their respective assets or properties are
bound, or require the consent or approval of or any notice to or filing with any
Governmental Authority to which either Parent, Merger Sub or their respective
assets or properties are subject; or
(iii) result in the imposition or creation of any Encumbrance
or Lien upon or with respect to any of the assets or properties owned or used by
Parent or Merger Sub.
5.3 CAPITALIZATION; PARENT SHARES
(a) The authorized capital stock of Parent consists of 2,000,000 shares
of preferred stock, $.01 par value per share, of which as of the date of this
Agreement no shares are issued or outstanding, and 50,000,000 shares of Parent
Common Stock, of which as of May 26, 1999, 22,292,257 shares were issued and
outstanding. All of the authorized and issued capital stock of Merger Sub is
owned of record and beneficially by Parent.
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(b) The Parent Shares issuable as a result of the Merger have been duly
authorized and upon the Effective Time will be validly issued, fully paid and
nonassessable.
5.4 FILINGS WITH THE COMMISSION
(a) Parent has delivered or made available to the Company a true,
correct and complete copy of its Annual Report on Form 10-K for the year ended
December 31, 1998 and Quarterly Report on Form 10-Q for the quarter ended March
31, 1999 (collectively, the "Parent SEC Report"). The Parent SEC Report has been
timely filed pursuant to the Exchange Act.
(b) The Parent SEC Report complied as to form in all material respects
with the requirements of the Exchange Act in effect on the date thereof. The
Parent SEC Report, when filed pursuant to the Exchange Act, did not contain any
untrue statement of a 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.
(c) Each of the Parent financial statements (including the related
notes) included in the Parent SEC Report presents fairly, in all material
respects, the consolidated financial position and consolidated results of
operations and cash flows of Parent as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP consistently
applied during the periods involved except as otherwise noted therein, and
subject, in the case of any unaudited interim financial statements included
therein, to normal year-end adjustments and to absence of complete footnotes.
5.5 NO MATERIAL ADVERSE CHANGE
Except as disclosed in writing to the Company or otherwise publicly
disclosed by Parent or any of its Subsidiaries, since December 31, 1998, there
has not been any material adverse change in the business, operations,
properties, liabilities, results of operations, assets or condition (financial
or otherwise) of Parent and its Subsidiaries, taken as a whole, and no event has
occurred or circumstance exists that could reasonably be expected to result in a
Material Adverse Effect on Parent and its Subsidiaries, taken as a whole,
provided that the effect of any of the following shall not be considered a
Material Adverse Effect: (A) general economic or financial conditions or (B)
other developments that are not unique to Parent and/or its Subsidiaries but
also affect other Persons who participate or are engaged in the lines of
business in which Parent and/or its Subsidiaries participate or are engaged.
5.6 LEGAL PROCEEDINGS
There is no pending Proceeding against Parent or Merger Sub that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the transactions contemplated hereby, or
that otherwise could reasonably be expected
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to result in a Material Adverse Effect on Parent and its Subsidiaries, taken as
whole. To the knowledge of Parent, no such Proceeding has been threatened.
5.7 BROKERS OR FINDERS
Neither Parent nor Merger Sub nor any of their agents has incurred any
obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or financial advisory services or other similar payment
in connection with this Agreement or the Transaction Documents or the
transactions contemplated hereby or thereby.
5.8 POOLING-OF-INTERESTS
Parent and Merger Sub have not taken or agreed to take any action, or
caused any event or condition to occur, which would affect the ability of Parent
to account for the transactions contemplated hereby as a pooling-of-interests
for financial reporting and accounting purposes.
5.9 DISCLOSURE
No representation or warranty of Parent or Merger Sub in this Agreement
is inaccurate in any material respect or omits to state a material fact
necessary to make the statements herein in light of the circumstances under
which they were made, not misleading.
6. COVENANTS
The parties, as applicable, hereby covenant and agree as follows:
6.1 NORMAL COURSE
From the date hereof until the Effective Time, the Company shall, and
shall cause each Company Subsidiary to, and the Controlling Shareholders shall
use their commercially reasonable efforts to cause the Company to: (a) maintain
its corporate existence in good standing; (b) maintain the general character of
its business; (c) maintain in effect all of its presently existing insurance
coverage (or substantially equivalent insurance coverage); (d) preserve intact
in all material respects its business organization, preserve its goodwill and
the confidentiality of its business know-how, exercise best efforts to keep
available to the Company or such Company Subsidiary the services of its current
officers and employees and preserve its present material business relationships
with its collaborators, licensor, customers, suppliers and other Persons with
which the Company has material business relations; and (e) in all respects
conduct its business only in the usual and ordinary manner consistent with past
practice and perform all Contracts.
6.2 CONDUCT OF BUSINESS
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Without limiting the provisions of Section 6.1, from the date hereof
until the Effective Time, the Company shall not, and the Company shall not
permit any Company Subsidiary to, and the Controlling Shareholders shall not,
except as contemplated by this Agreement, permit the Company to, directly or
indirectly, do, or propose to do, any of the following without the prior written
consent of Parent, which consent shall not be unreasonably withheld:
(a) amend or otherwise modify its Organizational Documents;
(b) issue, sell, dispose of or Encumber or authorize the issuance,
sale, disposition or Encumbrance of, or grant or issue any option, warrant or
other right to acquire or make any agreement of the type referred to in Section
4.3 with respect to, any shares of its capital stock or any other of its
securities or any security convertible or exercisable into or exchangeable for
any such shares or securities, or alter any term of any of its outstanding
securities or make any change in its outstanding shares of capital stock or its
capitalization, whether by reason of a reclassification, recapitalization, stock
split, combination, exchange or readjustment of shares, stock dividend or
otherwise;
(c) Encumber any material assets or properties of the Company or any
Company Subsidiary;
(d) declare, set aside, make or pay any dividend or other distribution
to any shareholder with respect to its capital stock;
(e) redeem, purchase or otherwise acquire any capital stock or other
securities of the Company or any Company Subsidiary;
(f) increase the compensation or other remuneration or benefits payable
or to become payable to any director or executive officer of the Company or any
Company Subsidiary, or increase the compensation or other remuneration or
benefits payable or to become payable to any of its other employees or agents,
except, with respect to such other employees or agents only, for increases in
the ordinary course of business consistent with past practice;
(g) adopt or (except as otherwise required by law) amend or make any
unscheduled contribution to any employee benefit plan for or with employees, or
enter into any collective bargaining agreement;
(h) terminate or modify any Contract requiring future payments to or
from the Company or any Company Subsidiary, individually or in the aggregate, in
excess of $100,000, except for terminations of Contracts upon their expiration
during such period in accordance with their terms;
(i) create, incur, assume or otherwise become liable for any
indebtedness in an aggregate amount (among the Company and all Company
Subsidiaries) in excess of
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$100,000, except for blanket inventory purchases where the Company and each
Company Subsidiary shall not make any payment or commitment in an aggregate
amount (among the Company and all Company Subsidiaries) in excess of $250,000
(for purposes of this part of Section 6.2(i), obligations or liabilities that
are paid, discharged or satisfied under Section 6.2(j) shall be included in
determining whether the foregoing basket amounts have been reached), or
guarantee or endorse any obligation or the net worth of any Person, except for
endorsements of negotiable instruments for collection in the ordinary course of
business;
(j) pay, discharge or satisfy any obligation or liability, absolute,
accrued, contingent or otherwise, whether due or to become due, in an aggregate
amount (among the Company and all Company Subsidiaries) in excess of $100,000,
except for liabilities incurred in the ordinary course of business prior to the
date hereof and blanket inventory purchases where the Company and each Company
Subsidiary shall not make any payment or commitment in an aggregate amount
(among the Company and all Company Subsidiaries) in excess of $250,000 (for
purposes of this Section 6.2(j), indebtedness that is created, incurred, assumed
or for which the Company or any Company Subsidiary is otherwise liable under
Section 6.2(i) shall be included in determining whether the foregoing basket
amounts have been reached);
(k) sell, transfer, lease or otherwise dispose of any of its assets or
properties, except in the ordinary course of business consistent with past
practice and for a cash consideration equal to the fair value thereof at the
time of such sale, transfer, lease or other disposition;
(l) cancel, compromise, release or waive any material debt, claim or
right;
(m) make any loan or advance to any Person other than travel and other
similar routine advances in the ordinary course of business consistent with past
practice, or acquire any capital stock or other securities or any ownership
interest in, or substantially all of the assets of, any other business
enterprise;
(n) make any material capital investment or expenditure or capital
improvement, addition or betterment;
(o) change its method of accounting or the accounting principles or
practices utilized in the preparation of the Financial Statements, other than as
required by GAAP;
(p) institute or settle any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(q) adopt a plan of dissolution or liquidation with respect to the
Company or any Company Subsidiary;
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(r) enter into any Contract, except Contracts made in the ordinary
course of business consistent with past practice;
(s) make any new election with respect to Taxes or any change in
current elections with respect to Taxes, or settle or compromise any federal,
state, local or foreign Tax liability or agree to an extension of a statute of
limitations; or
(t) enter into any commitment to do any of the foregoing, or any action
which would make any of the representations or warranties of the Company or any
of the Controlling Shareholders contained in this Agreement untrue or incorrect
in any material respect (subject to the knowledge and materiality limitations
set forth therein) or cause any covenant, condition or agreement of the Company
or any Controlling Shareholder in this Agreement not to be complied with or
satisfied in any material respect.
6.3 COMPANY SHAREHOLDERS ACTION
The Company shall solicit written consents of the Company Shareholders
as promptly as practicable for the purpose of consenting to the approval of this
Agreement, the Merger and the other transactions contemplated hereby. The
Company shall take all such reasonable action that is necessary or advisable to
secure the consent of the Company Shareholders in favor of such approval as soon
as practicable and shall not take any action that could reasonably be expected
to prevent the consent of the Company Shareholders in favor of such approval.
The Controlling Shareholders agree to consent to the approval of this Agreement,
the Merger and the other transactions contemplated hereby. From the date hereof
until the Effective Time, the Controlling Shareholders shall not sell, transfer,
dispose of or Encumber any of their shares of Company Common Stock. The Company
and the Controlling Shareholders shall exercise reasonable best efforts to cause
each Company Shareholder to execute a representation letter substantially in the
form of Exhibit 6.3 hereto.
6.4 AGREEMENTS WITH RESPECT TO AFFILIATES
The Company shall deliver to Parent, and Parent shall deliver to the
Company, prior to the Effective Time, letters (the "Affiliate Letters")
identifying all Persons who are, at the time of the action by the Company
Shareholders or immediately prior to the Effective Time, anticipated to be
"Affiliates" of the Company or Parent, as the case may be, for purposes of Rule
145 under the Securities Act ("Rule 145"), or the rules and regulations of the
Commission relating to pooling-of-interests accounting treatment for merger
transactions (the "Pooling Rules"). The Company and Parent shall use their
respective best efforts to cause each Person who is identified as an "affiliate"
in the Affiliate Letter to deliver to Parent and the Company as promptly as
practicable a written agreement in the form attached hereto as Exhibit 6.4 (an
"Affiliate Agreement") in connection with restrictions on affiliates under Rule
145 and the Pooling Rules. Parent shall be entitled to place appropriate legends
on the certificates evidencing any Parent Common Stock to be received by Company
affiliates (or to be deposited in the Escrow Fund on behalf of any such Person),
and to issue appropriate stop
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transfer instructions to the transfer agent for Parent Common Stock, consistent
with the terms of such Affiliate Agreements.
6.5 CERTAIN FILINGS
Without limiting the generality of Section 6.12, the Company and the
Controlling Shareholders shall cooperate with Parent with respect to all filings
with Governmental Authorities that are required to be made by the Company or any
Company Subsidiary to carry out the transactions contemplated by this Agreement.
The Company and the Controlling Shareholders shall assist Parent and Merger Sub
in making all such filings, applications and notices as may be necessary or
desirable in order to obtain the authorization, approval or consent of any
Governmental Authority which may be reasonably required or which Parent may
reasonably request in connection with the consummation of the transactions
contemplated hereby. Without limiting the generality of the foregoing (but
subject to Section 6.12(b)), if the Merger and the transactions contemplated
hereby are subject to the HSR Act, the parties hereto shall promptly and in good
faith file or cause to be filed the appropriate notifications with respect to
the Merger and such transactions, respond to any requests for additional
information and documents and provide the necessary information and make the
necessary filings under such Act.
6.6 NOTIFICATION OF CERTAIN MATTERS
The Company and the Controlling Shareholders shall promptly notify
Parent of (i) the occurrence or non-occurrence of any fact or event of which the
Company or any Controlling Shareholder has knowledge which would be reasonably
likely (A) to cause any representation or warranty of the Company or any
Controlling Shareholder contained in this Agreement to be untrue or incorrect in
any material respect at any time from the date hereof to the Effective Time or
(B) to cause any covenant, condition or agreement of the Company or any
Controlling Shareholder in this Agreement not to be complied with or satisfied
in any material respect and (ii) any failure of the Company or any Controlling
Shareholder to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder in any material respect; provided,
however, that no such notification shall affect the representations or
warranties of the Company or any Controlling Shareholder, or the right of Parent
and Merger Sub to rely thereon, or the conditions to the obligations of Parent
and Merger Sub, or the remedies available hereunder to Parent or Merger Sub. The
Company and the Controlling Shareholders shall give prompt notice to Parent of
any notice or other communication from any third Person alleging that the
consent of such third Person is or may be required in connection with the
transactions contemplated by this Agreement.
6.7 POOLING ACCOUNTING TREATMENT
Each party hereto shall use its best efforts to cause the business
combination to be effected by the Merger to be accounted for as a
pooling-of-interests. Each party hereto shall use its best efforts to cause its
respective employees, officers, directors, shareholders,
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Subsidiaries and affiliates not to take any action that would adversely affect
the ability of Parent to account for the business combination to be effected by
the Merger as a pooling-of-interests. Neither Parent nor the Company, any
Company Subsidiary or any Controlling Shareholder shall take any action,
including the acceleration of vesting of any options, restricted stock or other
rights to acquire shares of the capital stock of the Company, which reasonably
would be expected to (i) interfere with Parent's ability to account for the
Merger as a pooling-of-interests or (ii) jeopardize the tax-free nature of the
reorganization hereunder.
6.8 EMPLOYMENT AGREEMENTS
The Company and the Controlling Shareholders shall use their best
efforts to cause Roger J.B. McKinley, Sr. ("McKinley") and Timothy L.F. Herman
("Herman") to (or, with respect to Roger J.B. McKinley, Sr. and Timothy L.F.
Herman (in their respective capacities as Controlling Shareholders) each such
individual shall) enter into employment agreements (together, the "Employment
Agreements") with Parent or the Surviving Corporation to be effective on the
Closing Date. The Employment Agreements will be in substantially the forms
attached as Exhibits 6.8(a) and (b) hereto, respectively.
6.9 COVENANT NOT TO COMPETE AND OTHER COVENANTS
(a) The parties understand and acknowledge that the provisions of this
Section 6.9 are necessary to protect the legitimate business interests of
Parent, the Surviving Corporation and Parent's other Subsidiaries and affiliates
and are fair and reasonable for numerous reasons, including:
(1) each of McKinley and Herman were substantial shareholders of the
Company prior to the Merger and, as a result, each of them received
significant economic benefit from the Merger and the other transactions
contemplated hereby;
(2) each of McKinley's and Herman's agreement to be bound by this
Section 6.9 was a substantial condition to Parent and Merger Sub to
enter into this Agreement; the restrictions contained in this Section
6.9 are necessary to protect the goodwill of the Company, all of which
is being transferred to the Surviving Corporation pursuant to the
Merger and the other transactions contemplated hereby; and
(3) as a result of each of McKinley's and Herman's position with the
Company prior to the Merger and each of McKinley's and Herman's
prospective executive position with Parent and/or the Surviving
Corporation, each of McKinley and Herman has had, and will continue to
have, access to significant confidential, proprietary or trade secret
information of the Company, Parent, the Surviving Corporation and/or
Parent's other Subsidiaries and affiliates so that, if McKinley or
Herman were employed by a competitor of Parent or any of its
Subsidiaries or affiliates, there would be a substantial risk to
Parent, the Surviving Corporation and/or Parent's other
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Subsidiaries and affiliates of McKinley's or Herman's use of its or
their confidential, proprietary or trade secret information.
Based on the foregoing, for a period of the later of (i) sixty
(60) months from the Effective Time or (ii) thirty-six (36) months
after the termination of McKinley's or Herman's (as applicable)
employment with Parent or the Surviving Corporation (such period
specified in this clause (ii) shall be reduced to twenty-four (24)
months if McKinley or Herman (as applicable) is employed by Parent or
the Surviving Corporation for sixty (60) months after the Effective
Time), absent Parent's Board of Directors' prior written approval, each
of McKinley and Herman will not directly or indirectly:
(i) render any services to, or engage in any activities for,
any other Person with respect to any product, process, technology or
service, in existence or under development which substantially competes
with a product, process, technology or service of (x) the Company prior
to or as of the Closing Date; or (y) the Surviving Corporation, Parent,
any Subsidiary or affiliate thereof or any successor thereto, to the
extent such product, process, technology or service is related to,
arises out of, or evolved from the business or goodwill of the Company
prior to or as of the Closing Date;
(ii) recruit, solicit or encourage employees, agents,
consultants, and representatives of Parent or any of its Subsidiaries
(including the Surviving Corporation) or any of their affiliates to
terminate his, her or its relationship with Parent or any of its
Subsidiaries (including the Surviving Corporation) or any of their
affiliates or offer or caused to be offered employment to any Person
who is or was employed by Parent or any of its Subsidiaries (including
the Surviving Corporation) or any of their affiliates at any time
during the six (6) months prior to the termination of McKinley's or
Herman's (as applicable) employment with Parent or the Surviving
Corporation;
(iii) entice, induce or encourage any employee, agent,
consultant, or representative of Parent or any of its Subsidiaries
(including the Surviving Corporation) or any of their affiliates to
engage in any activity which, were it done by McKinley or Herman (as
applicable), would violate any provision of this Section 6.9; or
(iv) otherwise attempt to interfere with or disrupt the
business or activities of Parent or any of its Subsidiaries (including
the Surviving Corporation) or any of their affiliates after written
notice and a 30-day cure period.
If McKinley or Herman (as applicable) act in violation of this Section
6.9, the number of days that McKinley or Herman is in violation will be added to
the time period during which this Section 6.9 is to be effective.
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(b) Upon McKinley's or Herman's (as applicable) written request to
Parent specifying the activities proposed to be conducted by McKinley or Herman
(as applicable), Parent shall give McKinley or Herman (as applicable) written
approval(s) to engage personally in any activity or render services referred to
in Section 6.9(a) upon receipt of written assurances (satisfactory to Parent and
its counsel in their discretion) from McKinley or Herman (as applicable) and
from his prospective employer(s) that the integrity of the provisions of Section
6.9(a) and the applicable Employment Agreement will not in any way be
jeopardized or violated by such activities; provided, however, that the burden
of so establishing the foregoing to the satisfaction of Parent and said counsel
shall be upon McKinley or Herman (as applicable) and his prospective
employer(s).
(c) McKinley's and Herman's (as applicable) duties under this Section
6.9 shall survive termination of his employment with Parent or the Surviving
Corporation for the period of time specified herein. Each of McKinley and Herman
acknowledges and agrees that any breach by him of any of the provisions of this
Section 6.9 will result in irreparable and continuing damage to Parent and/or
the Surviving Corporation and that a remedy at law for any breach or threatened
breach by McKinley or Herman of the provisions of this Section 6.9 would be
inadequate, and McKinley and Herman therefore agree that Parent or the Surviving
Corporation shall be entitled, without the posting of a bond, to temporary,
preliminary and permanent injunctive relief in case of any such breach or
threatened breach. Nothing in this Agreement shall be construed to prohibit the
Parent or the Surviving Corporation from pursuing any other remedy available to
it, whether at law or in equity or otherwise, the parties having agreed that all
remedies are cumulative.
6.10 NO SOLICITATION
(a) From the date hereof until the Effective Time, if the Company or
any of the Controlling Shareholders shall, or shall permit any Subsidiary,
officer, director, shareholder, employee, investment banker or other agent of
the Company, any Company Subsidiary or any Controlling Shareholder to, directly
or indirectly, (i) solicit, engage in discussions or negotiate with any Person
(whether such discussions or negotiations are initiated by the Company, a
Controlling Shareholder or otherwise) or take any other action intended or
designed to facilitate the efforts of any Person, other than Parent, relating to
the possible acquisition of the Company or any Company Subsidiary (whether by
way of merger, purchase of capital stock, purchase of assets or otherwise) or
any significant portion of its capital stock or assets (with any such efforts by
any such Person to make such an acquisition referred to as an "Alternative
Acquisition"), (ii) provide information with respect to the Company or any
Company Subsidiary to any Person, other than Parent, relating to a possible
Alternative Acquisition by any Person, other than Parent, (iii) enter into an
agreement with any Person, other than Parent, providing for a possible
Alternative Acquisition or (iv) make or authorize any statement, recommendation
or solicitation in support of any possible Alternative Acquisition by any
Person, other than by Parent, then, in any such case, payment shall be made to
Parent as provided in Section 6.10(b).
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(b) If the Company or a Controlling Shareholder engages in any conduct
or takes any action concerning an Alternative Acquisition as provided in Section
6.10(a), in lieu of all other remedies available to Parent and Merger Sub under
this Agreement in respect of such conduct or action, the Company and the
Controlling Shareholders shall pay Parent on a joint and several basis a fee in
the amount of $4,000,000 and all reasonable, actual and documented costs and
expenses (including reasonable attorneys' fees and expenses) incurred by Parent
and/or Merger Sub in connection with this Agreement and the transactions
contemplated hereby. Such amounts payable to Parent shall be paid one business
day after Parent's written demand therefor.
6.11 ACCESS TO INFORMATION; CONFIDENTIALITY
Upon reasonable written notice, the Company and Parent each shall
afford to the officers, employees, accountants, counsel and other
representatives of the other reasonable access, during the period prior to the
Effective Time, to all its and its Subsidiaries' Facilities, properties, assets,
books, Contracts and records and, during such period, the Company and Parent
each shall furnish promptly to the other all information concerning its and its
Subsidiaries' business, Facilities, properties, assets and personnel as such
other party may reasonably request, and each shall make available to the other
the appropriate individuals (including officers, employees, accountants, counsel
and other professionals) for discussion of the other's and its Subsidiaries'
business, Facilities, properties, assets and personnel as either Parent or the
Company may reasonably request. Each party shall keep such information
confidential in accordance with the terms of the Confidentiality Agreement.
6.12 BEST EFFORTS; FURTHER ACTION
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts (exercised diligently and
in good faith) to take, or cause to be taken, all actions and to do, or cause to
be done, all other things reasonably necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement, to obtain in a timely manner all necessary
waivers, consents, authorizations and approvals and to effect all necessary
registrations and filings, and otherwise to satisfy or cause to be satisfied all
conditions precedent to its obligations under this Agreement.
(b) Notwithstanding any provision of this Agreement to the contrary,
Parent shall not be obligated to divest, abandon, license, dispose of, hold
separate or take similar action with respect to any portion of the business,
assets or properties (tangible or intangible) of Parent, any of its Subsidiaries
or the Company in connection with seeking to obtain or obtaining any waiver,
consent, authorization or approval of any Person associated with the
consummation of the transactions contemplated hereby or otherwise.
(c) If, at any time after the Effective Time, any such further action
is necessary or desirable to carry out the purposes of this Agreement and to
vest the Surviving Corporation
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with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company and Merger Sub, the officers
and directors of the Company and Merger Sub immediately prior to the Effective
Time are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary or desirable
action.
6.13 CONTROLLING SHAREHOLDERS
The Controlling Shareholders shall use best efforts to cause the
Company to perform and comply with the covenants, conditions and agreements
applicable to the Company as set forth in this Agreement.
7. ADDITIONAL COVENANTS OF PARENT AND MERGER SUB
Each of Parent and Merger Sub, jointly and severally, hereby covenants
and agrees as follows:
7.1 CERTAIN FILINGS
Without limiting the generality of Section 6.12, Parent and Merger Sub
agree to make or cause to be made all filings with Governmental Authorities that
are required to be made by Parent or Merger Sub to carry out the transactions
contemplated by this Agreement.
7.2 NOTIFICATION OF CERTAIN MATTERS
Parent and Merger Sub shall promptly notify the Company of (i) the
occurrence or non-occurrence of any fact or event of which Parent or Merger Sub
has knowledge which would be reasonably likely (A) to cause any representation
or warranty of Merger Sub or Parent contained in this Agreement to be untrue or
incorrect in any material respect at any time from the date hereof to the
Effective Time or (B) to cause any covenant, condition or agreement of Merger
Sub or Parent in this Agreement not to be complied with or satisfied in any
material respect and (ii) any failure of Merger Sub or Parent to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder in any material respect; provided, however, that no such
notification shall affect the representations or warranties of Merger Sub or
Parent, or the right of the Company and the Controlling Shareholders to rely
thereon, or the conditions to the obligations of the Company and the Controlling
Shareholders, or the remedies available hereunder to the Company or the
Controlling Shareholders. Parent and Merger Sub shall give prompt notice to the
Company of any notice or other communication from any third Person alleging that
the consent of such third Person is or may be required in connection with the
transactions contemplated by this Agreement.
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7.3 REGISTRATION RIGHTS AGREEMENT
At the Closing, Parent will enter into the Registration Rights
Agreement (the "Registration Rights Agreement") in substantially the form
attached as Exhibit 7.3 hereto.
7.4 EMPLOYMENT MATTERS
(a) For purposes of eligibility, vesting and, except with respect to
any pension benefit plan, calculation of benefits (except to the extent
crediting such service would result in the duplication of benefits) under each
of Parent's employee benefit plans, programs and arrangements in which an
employee of the Company who is employed as of the Closing Date and who becomes
an employee of Parent or the Surviving Corporation immediately following the
Closing (each, a "Continuing Employee") participates, Parent shall grant, or
shall cause the Surviving Corporation to grant, each Continuing Employee with
credit for all service with the Company.
(b) Intentionally Omitted.
(c) Parent shall provide, or shall cause the Surviving Corporation to
provide, to each Continuing Employee (and each Continuing Employee's
beneficiaries and dependents) immediate coverage under a health benefit plan
maintained by the Surviving Corporation or Parent. Parent shall waive, or cause
the Surviving Corporation to waive, any applicable pre-existing condition
exclusion (to the extent such exclusion did not apply to a pre-existing
condition under the Company's plan) under any such health benefit plan, and, for
purposes of any applicable deductibles, co-payments or out-of-pocket maximums
under any such health benefit plan, each Continuing Employee shall receive
credit under such health benefit plan for all amounts paid by them under the
Company's health benefit plan.
(d) Each Continuing Employee shall enter into Parent's standard
agreements for employees relating to confidentiality, proprietary information,
inventions and non-competition (without limiting Section 6.9).
(e) It is expressly agreed that the provisions of this Section 7.4 are
not intended to be for the benefit of or otherwise enforceable by any third
Person, including, without limitation, any employee of the Company, or any
collective bargaining unit or employee organization.
(f) Nothing herein shall prevent Parent, Merger Sub, the Company or the
Surviving Corporation from amending or modifying any employee benefit plan,
program or arrangement as permitted thereby in any respect or terminating or
modifying the terms and conditions of employment or other service of any
particular employee or any other Person. Nothing contained in this Agreement
shall create or imply any obligation on the part of Parent, Merger Sub, the
Company or the Surviving Corporation to provide any continuing employment right
to any individual.
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(g) On or promptly following the Closing Date, subject to the approval
of Parent's Compensation Committee of the Board of Directors on or before May
26, 1999, Parent shall issue non-qualified stock options to those Continuing
Employees in those amounts specified by McKinley and Herman consistent with
Parent's guidelines associated with incentive compensation and option grants;
provided that such options shall not exceed that number which is exercisable
into 200,000 shares of Parent Common Stock (subject to adjustment pursuant to
the applicable Non-Qualified Stock Option Agreement); such options shall vest
yearly over a period of five (5) years and have an exercise price reflecting the
fair market value of the Parent Common Stock as of the date of grant, all as
more specifically set forth in, and subject to, that certain Non-Qualified Stock
Option Agreement by and between Parent and each Continuing Employee, which shall
be based on Parent's standard form thereof for similarly situated employees of
Parent; and the Continuing Employees shall not be eligible to receive any other
options exercisable into shares of Parent Common Stock (for which they might
otherwise be eligible but for this Section 7.4(g)) during the one-year period
following the Closing Date. The parties acknowledge and agree that the issuance
of options to the specified Continuing Employees pursuant to this Section 7.4(g)
is being made solely as incentive compensation for services to be rendered by
such Continuing Employees to Parent or the Surviving Corporation.
7.5 INSURANCE
From the Closing Date through the Expiration Date, Parent shall procure
and maintain insurance policies in relation to the Surviving Corporation's
business with coverages and deductibles that are substantially similar to the
types and amounts of the Company's existing insurance policies identified in
Section 4.16 of the Disclosure Schedule (or insurance policies that are more
favorable to the insured), which insurance policies shall include, where
applicable, coverage for the five (5) year period preceding the Closing Date
(subject to customary exclusions).
8. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub under this Agreement to
consummate the Merger and the other transactions contemplated hereby shall be
subject to the satisfaction, at or prior to the Effective Time, of each of the
following conditions:
8.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of the Company and the Controlling
Shareholders contained in this Agreement or in the Disclosure Schedule or any
certificate delivered pursuant hereto shall be complete and correct as of the
date when made, shall be deemed repeated at and as of the Closing Date as if
made on the Closing Date and, without giving effect to any qualification as to
materiality (or any variation of such term) contained in any representation or
warranty, shall then be complete and correct in all material respects.
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8.2 PERFORMANCE OF COVENANTS
The Company and the Controlling Shareholders shall have taken all
necessary corporate or other actions to consummate the transactions contemplated
hereby and shall have performed and complied in all material respects with each
covenant, agreement and condition required by this Agreement to be performed or
complied with by them at or prior to the Effective Time.
8.3 LACK OF ADVERSE CHANGE
Since November 30, 1998, there shall not have occurred any incident or
event which, individually or in the aggregate, has had or is reasonably likely
to result in a Material Adverse Effect on the Company or any Company Subsidiary
as determined by Parent. For purposes of this condition, the following shall not
be considered a Material Adverse Effect: any effect or change occurring as a
result of any or any combination of any (A) general economic or financial
conditions or (B) other developments that are not unique to such Person and/or
its Subsidiaries but also affect other Persons who participate or are engaged in
the lines of business in which such Person and/or its Subsidiaries participate
or are engaged or (C) any action taken in compliance with this Agreement.
8.4 UPDATE CERTIFICATE
Parent and Merger Sub shall have received favorable certificates, dated
the Closing Date, signed by the Company and the Controlling Shareholders as to
the matters set forth in Sections 8.1, 8.2 and 8.3.
8.5 NO GOVERNMENTAL OR OTHER PROCEEDING; ILLEGALITY
No Order of any Governmental Authority shall be in effect that
restrains or prohibits any transaction contemplated hereby or that would limit
or affect Parent's or Merger Sub's ownership or operation of the business or
assets of the Company or any Company Subsidiary; no suit, action, investigation,
inquiry or Proceeding by any Governmental Authority shall be pending or
threatened against Parent, Merger Sub or the Company or any Company Subsidiary
or any director or officer of any thereof, as such, that challenges the validity
or legality, or that restrains or seeks to restrain the consummation, of the
transactions contemplated hereby, or that limits or otherwise affects or seeks
to limit or otherwise affect Parent's or Merger Sub's right to own or operate
the business or assets of the Company or any Company Subsidiary, or that compels
or seeks to compel Parent or any of its Subsidiaries to divest, abandon,
license, dispose of, hold separate or take similar action with respect to any
portion of the business, assets or properties (tangible or intangible) of Parent
or any of its Subsidiaries (including the Surviving Corporation) or the Company
or any Company Subsidiary; and no written advice shall have been received by
Parent, Merger Sub, the Company or any Company Subsidiary or by any of their
respective counsel from any Governmental Authority, and remain in effect,
stating that an action or Proceeding will, if the
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Merger is consummated or sought to be consummated, be filed seeking to
invalidate or restrain the Merger or limit or otherwise affect Parent's or
Merger Sub's ownership or operation of the business or assets of the Company or
any Company Subsidiary. No Law or Order shall be enacted, entered, enforced or
deemed applicable to the Merger or the other transactions contemplated hereby
which makes the consummation of the Merger or the other transactions
contemplated hereby illegal.
8.6 APPROVALS AND CONSENTS
All material waivers, approvals, authorizations or Orders required to
be obtained, and all filings required to be made, by the Company or the
Controlling Shareholders, for the authorization, execution and delivery of this
Agreement, the consummation by it or them of the transactions contemplated
hereby and the continuation in full force and effect of any and all material
rights, documents, instruments or Contracts of the Company and the Company
Subsidiaries shall have been obtained and made, including all consents or
approvals of any Person which may be required under any lease for real property
to which the Company or any Company Subsidiary is a party. The Company and the
Controlling Shareholders shall use reasonable best efforts to obtain landlord
consents and estoppel certificates reasonably satisfactory in form and substance
to Parent from the lessors/owners of the real property leased by the Company in
Milpitas, California and Napa, California. In addition, all waiting periods
applicable to the consummation of the Merger and the other transactions
contemplated hereby under the HSR Act shall have expired or terminated.
8.7 OPINION OF COUNSEL
The Company shall have delivered to Parent and Merger Sub an opinion of
Heller Ehrman White & McAuliffe, dated the Closing Date and addressed to Parent
and Merger Sub, as to the matters set forth on Exhibit 8.7 hereto.
8.8 SHAREHOLDER APPROVAL
This Agreement, the Merger and the other transactions contemplated
hereby shall have been duly approved by Company Shareholders owning, of record
and beneficially, at least 90% of the issued and outstanding Company Common
Stock in accordance with the CGCL.
8.9 ESCROW AGREEMENT
The Escrow Agreement shall have been duly executed and delivered by the
Escrow Agent, the Company, Parent and the other parties thereto.
8.10 OPINIONS OF ACCOUNTANTS; POOLING
Parent and Merger Sub shall have received a letter from Ernst & Young
LLP, independent certified public accountants of the Company, and a letter from
Ernst & Young
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LLP, independent certified public accountants of Parent, regarding the
appropriateness of pooling-of-interests accounting for the Merger under APB 16
if closed and consummated in accordance with this Agreement. Such letters shall
be in form and substance reasonably satisfactory to Parent.
8.11 AFFILIATE AGREEMENTS
Parent shall have received from each Person who is identified in the
Affiliate Letter as an "affiliate" of the Company, an Affiliate Agreement, and
such Affiliate Agreement shall be in full force and effect.
8.12 EMPLOYMENT AGREEMENTS
The Employment Agreements shall have been executed by McKinley and
Herman.
8.13 CLOSING EXCHANGE PRICE
If the Closing Exchange Price is less than $14.1875, Parent shall have
elected in its sole discretion to consummate the Merger and the other
transactions contemplated hereby, which election shall be made, if at all, by a
written notice delivered to the Company.
8.14 ENVIRONMENTAL REPORTS
With respect to each current Facility, Parent shall have received a
satisfactory Phase I environmental audit report and, if a Phase I environmental
audit report shall not be deemed reasonably sufficient by Parent, such other
reasonably satisfactory environmental-based documentation and studies as Parent
may reasonably request, including a Phase II environmental audit report.
9. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND CONTROLLING
SHAREHOLDERS
The obligations of the Company and the Controlling Shareholders under
this Agreement to consummate the Merger and the other transactions contemplated
hereby shall be subject to the satisfaction, at or prior to the Effective Time,
of each of the following conditions:
9.1 REPRESENTATIONS AND WARRANTIES
The representations and warranties of Parent and Merger Sub contained
in this Agreement or in the Disclosure Schedule or any certificate delivered
pursuant hereto shall be complete and correct as of the date when made, shall be
deemed repeated at and as of the Closing Date as if made on the Closing Date
and, without giving effect to any qualification as
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to materiality (or any variation of such term) contained in any representation
or warranty, shall then be complete and correct in all material respects.
9.2 PERFORMANCE OF COVENANTS
Parent and Merger Sub shall have taken all necessary corporate actions
to consummate the transactions contemplated hereby and shall have performed and
complied in all material respects with each covenant, agreement and condition
required by this Agreement to be performed or complied with by them at or prior
to the Effective Time.
9.3 LACK OF ADVERSE CHANGE
Since December 31, 1998, there shall not have occurred any incident or
event which, individually or in the aggregate, has had or is reasonably likely
to result in a Material Adverse Effect on Parent as determined by the Company.
For purposes of this condition, the following shall not be considered a Material
Adverse Effect: any effect or change occurring as a result of any or any
combination of any (A) general economic or financial conditions or (B) other
developments that are not unique to such Person and/or its Subsidiaries but also
affect other Persons who participate or are engaged in the lines of business in
which such Person and/or its Subsidiaries participate or are engaged or (C) any
action taken in compliance with this Agreement or (D) a Material Adverse Effect
caused solely by reason of a decline in the price per share of Parent Common
Stock as reported on the Nasdaq National Market.
9.4 UPDATE CERTIFICATE
The Company and the Controlling Shareholders shall have received
favorable certificates, dated the Closing Date, signed by Parent and Merger Sub
as to the matters set forth in Sections 9.1, 9.2 and 9.3.
9.5 NO GOVERNMENTAL OR OTHER PROCEEDING; ILLEGALITY
No Order of any Governmental Authority shall be in effect that
restrains or prohibits the Merger; and no written advice shall have been
received by Parent, Merger Sub, the Company or any Company Subsidiary or by any
of their respective counsel from any Governmental Authority, and remain in
effect, stating that an action or Proceeding will, if the Merger is consummated
or sought to be consummated, be filed seeking to invalidate or restrain the
Merger. No Law or Order shall be enacted, entered, enforced or deemed applicable
to the Merger or the other transactions contemplated hereby which makes the
consummation of the Merger or the other transactions contemplated hereby
illegal.
9.6 HSR ACT
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All waiting periods applicable to the consummation of the Merger and
the other transactions contemplated hereby under the HSR Act shall have expired
or terminated.
9.7 OPINION OF COUNSEL
Parent and Merger Sub shall have delivered to the Company and the
Controlling Shareholders an opinion of Kramer Levin Naftalis & Frankel LLP,
dated the Closing Date and addressed to the Company and the Controlling
Shareholders, as to the matters set forth on Exhibit 9.7 hereto.
9.8 SHAREHOLDER APPROVAL
This Agreement, the Merger and the other transactions contemplated
hereby shall have been duly approved by the requisite consent of the Company
Shareholders in accordance with the CGCL.
9.9 TRANSACTION DOCUMENTS
Parent shall have executed and delivered, or caused to be executed and
delivered, the Employment Agreements, the Registration Rights Agreement and the
Escrow Agreement.
9.10 CLOSING EXCHANGE PRICE
If the Closing Exchange Price is greater than $24.1875, the Company
shall have elected in its sole discretion to consummate the Merger and the other
transactions contemplated hereby, which election shall be made, if at all, by a
written notice delivered to Merger Sub and Parent.
9.11 CHANGE IN CONTROL OF PARENT
Since the date hereof, no Person shall have acquired beneficial
ownership of more than 50% of the outstanding voting capital stock of Parent,
and Parent shall not have entered into any agreement to effect any such
transaction.
10. TERMINATION OF AGREEMENT
This Agreement may be terminated at any time prior to the Effective
Time, notwithstanding approval thereof by the Company Shareholders:
10.1 MUTUAL CONSENT
By mutual written consent of Parent, Merger Sub and the Company.
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10.2 TRANSACTION DATE
By Parent, Merger Sub or the Company if the Effective Time shall not
have occurred by September 30, 1999 (subject to extension, but not to exceed
sixty (60) days, as necessary to permit all waiting periods (and any extensions
thereof) applicable to the consummation of the Merger and the other transactions
contemplated hereby under the HSR Act to expire or terminate), unless such
failure shall be due to a material breach of any representation or warranty, or
the nonfulfillment in a material respect, and failure to cure such
nonfulfillment, of any covenant or agreement contained herein on the part of the
party or parties seeking to terminate.
10.3 FINAL ORDER OF GOVERNMENTAL AUTHORITY
By Parent or the Company if a Governmental Authority shall have issued
a nonappealable final Order or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the Merger and the
other transactions contemplated hereby (provided that the right to terminate
this Agreement under this Section 10.3 shall not be available to any party who
has not complied with its obligations under Section 6.12 and such noncompliance
materially contributed to the issuance of any such Order or the taking of such
action).
10.4 BREACH
By Parent or Merger Sub if there has been a material misrepresentation
by the Company or any Controlling Shareholder, or a material breach on the part
of the Company or any Controlling Shareholder of any of their warranties,
covenants or agreements set forth herein, or a material failure on the part of
the Company or any Controlling Shareholder to comply with any of their other
obligations hereunder; or by the Company if there has been a material
misrepresentation by Parent or Merger Sub, or a material breach on the part of
Parent or Merger Sub of any of their warranties, covenants or agreements set
forth herein, or a material failure on the part of Parent or Merger Sub to
comply with any of their other obligations hereunder; provided, however, that if
such breach is curable by a party within thirty (30) days through the exercise
of its best efforts, then for so long as such party continues to exercise such
best efforts the other parties may not terminate this Agreement under this
Section 10.4 unless such breach is not cured within thirty (30) days (but no
cure period shall be required for a breach which by its nature cannot be cured).
10.5 EFFECT OF TERMINATION
In the event of the termination of this Agreement pursuant to Section
10.1, 10.2, 10.3 or 10.4, this Agreement shall forthwith become void and there
shall be no liability on the part of any party hereto or of any of its
affiliates, Subsidiaries, directors, officers or shareholders, except (i) the
Confidentiality Agreement and certain provisions of this Agreement shall survive
such termination as set forth in Section 11.1(c), (ii) nothing herein
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shall relieve any party from liability for any misrepresentation, breach of or
failure to comply with this Agreement and (iii) each party shall indemnify the
other parties and hold them harmless from and against any claim for brokers' or
finders' fees arising out of the transactions contemplated hereby by any Person
claiming to have been engaged by such party.
11. INDEMNIFICATION
11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) Except as otherwise provided in this Section 11.1, the
representations, warranties, covenants and agreements of each party hereto shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any other party hereto, any affiliate of such party or
any of their officers, directors or representatives, whether prior to or after
the execution of this Agreement.
(b) The parties' representations and warranties in this Agreement or in
any document or instrument delivered pursuant to this Agreement shall survive
the Merger and the Closing and continue until 5:00 p.m., California time, on the
date that is the earlier of (i) one (1) year following the Effective Time or
(ii) when the Escrow Fund has been depleted in its entirety and the Escrow
Agreement has been terminated in accordance with its terms (the "Expiration
Date"). Notwithstanding the preceding sentence, any representation or warranty
in respect of which indemnity may be sought under Section 11.2 or 11.3 shall
survive the time at which it would otherwise terminate pursuant to the preceding
sentence, if the Escrow Fund has not been depleted in the entirety and notice of
the inaccuracy or breach thereof shall have been given to the party against whom
such indemnity may be sought prior to such time.
(c) The Confidentiality Agreement shall survive termination of this
Agreement as provided therein. Sections 6.10(b) (only with respect to any
payment obligations thereunder), 10.5, 11.1(a) and (c), 11.2, 11.3, 11.4, 11.6
and 12 shall survive termination of this Agreement, provided that Sections 11.2,
11.3, 11.4 and 11.6 shall survive termination of this Agreement only if such
termination is pursuant to Section 10.4.
11.2 OBLIGATION OF THE COMPANY AND THE CONTROLLING
SHAREHOLDERS TO INDEMNIFY, REIMBURSE, ETC.
Subject to the provisions of Section 11.4, the Company and the
Controlling Shareholders, and their respective successors and permitted assigns,
jointly and severally, shall indemnify, reimburse, defend and hold harmless
Parent, Merger Sub and the Surviving Corporation and each of their successors
and permitted assigns and each of their respective directors, officers,
employees, affiliates, Subsidiaries and their respective successors and
permitted assigns (each a "Parent Indemnitee") from and against (i) all Losses
resulting from, imposed upon, incurred or suffered by any of them, directly or
indirectly, based upon,
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arising out of or otherwise in respect of any inaccuracy in or any breach of any
representation, warranty, covenant or agreement of the Company or any
Controlling Shareholder, (ii) all Environmental, Health, and Safety Liabilities
arising out of, or attributable or relating to, the operations of the Company or
any Company Subsidiary prior to the Closing Date, and the Facilities and (iii)
all Losses and/or Environmental, Health, and Safety Liabilities resulting from,
imposed upon, incurred or suffered by any of them, directly or indirectly, based
upon, arising out of or otherwise in respect of the liabilities or obligations
identified in item 8 of Section 4.6 of the Disclosure Schedule. For purpose of
this Agreement, "Losses" shall mean any claims, losses, liabilities, damages,
causes of action, costs and expenses (including reasonable attorneys',
accountants', consultants' and experts' fees and expenses), net of (x) any Tax
benefits, savings or reductions and (y) any insurance proceeds (which Parent or
the Controlling Shareholders, as applicable, shall use reasonable best efforts
to pursue), in either case which the indemnitee actually receives by virtue of
such claims, losses, liabilities, damages, causes of action, costs and expenses.
11.3 OBLIGATION OF PARENT TO INDEMNIFY, REIMBURSE, ETC.
Subject to the provisions of Section 11.4, Parent and Merger Sub and
their respective successors and permitted assigns, jointly and severally, shall
indemnify, reimburse, defend and hold harmless the Company and the Controlling
Shareholders and each of their successors and permitted assigns and each of
their respective directors, officers, employees, affiliates, Subsidiaries and
their respective successors and assigns (each a "Company Indemnitee") from and
against any Losses resulting from, imposed upon, incurred or suffered by any of
them, directly or indirectly, based upon, arising out of or otherwise in respect
of any inaccuracy in or breach of any representation, warranty, covenant or
agreement of Parent or Merger Sub.
11.4 LIMITS ON INDEMNIFICATION, REIMBURSEMENT, ETC.
(a) Absent fraud of any party (for which there shall be no limitation
of liability of any party), no Parent Indemnitee or Company Indemnitee shall
have any right to seek indemnification, reimbursement or defense under this
Agreement or the Escrow Agreement until Losses and/or Environmental, Health, and
Safety Liabilities which would otherwise be indemnifiable hereunder, and have
been incurred by such party and other indemnitees associated with or related to
such party, exceed $250,000 in the aggregate, at which point only such Losses
and/or Environmental, Health, and Safety Liabilities in excess of $250,000 in
the aggregate shall be fully indemnifiable subject to Section 11.4(c) hereof,
provided that this Section 11.4(a) shall not apply with respect any Losses
and/or Environmental, Health, and Safety Liabilities specified in Section
11.2(iii), which Losses and/or Environmental, Health, and Safety Liabilities, if
any, shall not be counted towards the $250,000 deductible provided in this
Section 11.4(a) but shall be subject to Section 11.4(b) hereof.
(b) Absent fraud of any party (for which there shall be no limitation
of liability of any party), no Parent Indemnitee shall have any right to seek
indemnification, reimbursement
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<PAGE>
or defense under this Agreement or the Escrow Agreement in respect of Losses
and/or Environmental, Health, and Safety Liabilities specified in Section
11.2(iii) until such Losses and/or Environmental, Health, and Safety Liabilities
which would otherwise be indemnifiable hereunder, and have been incurred by such
party and other indemnitees associated with or related to such party, exceed
$250,000 in the aggregate, at which point only such Losses and/or Environmental,
Health, and Safety Liabilities in excess of $250,000 in the aggregate shall be
fully indemnifiable subject to Section 11.4(c) hereof.
(c) Absent fraud of any party (for which there shall be no limitation
of liability of any party), the Parent Indemnitees' sole right and remedy for
indemnification and reimbursement under this Agreement and the Escrow Agreement
shall be limited to the shares and other assets in the Escrow Fund. Absent fraud
of any party (for which there shall be no limitation of liability of any party),
the Company Indemnitees' sole right and remedy for indemnification and
reimbursement under this Agreement, the Registration Rights Agreement and the
Escrow Agreement shall be limited to the value of the shares and other assets in
the Escrow Fund as the Closing Date (as determined in accordance with the Escrow
Agreement).
(d) Absent fraud of any party (for which there shall be no limitations
of liability of any party), no Parent Indemnitee shall have any right to seek
indemnification, reimbursement or defense under this Agreement or the Escrow
Agreement in respect of Losses and/or Environmental, Health, and Safety
Liabilities after the date of issuance of the first independent audit report
with respect to the financial statements of Parent after the Effective Time if a
claim in respect of such Losses and/or Environmental, Health, and Safety
Liabilities is of a type expected to be encountered in the course of an audit
performed in accordance with generally accepted auditing standards.
11.5 ESCROW ARRANGEMENTS
Concurrent with the Effective Time, the Escrow Amount shall be placed
in the Escrow Fund, to be governed by the terms of the Escrow Agreement. The
Escrow Fund shall be available to compensate the Parent Indemnitees for Losses
and/or Environmental, Health, and Safety Liabilities in accordance with Section
11.2. The terms and conditions of the Escrow Fund shall be set forth more fully
in the Escrow Agreement. The Escrow Fund shall terminate in accordance with the
Escrow Agreement.
11.6 INDEMNIFICATION PROCEDURES
(a) Notice. Whenever any third Person claim shall arise for which
indemnification may be sought hereunder (a "Claim"), the party entitled to
indemnification (the "Indemnitee") shall promptly give notice to the party
obligated to provide indemnity (the "Indemnitor") with respect to the Claim
after the receipt by the Indemnitee of reliable information as to the facts
constituting the basis for the Claim; but the failure to timely give such notice
shall not relieve the Indemnitor from any obligation under this Agreement,
except to the extent, if any, that the Indemnitor is materially prejudiced
thereby.
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<PAGE>
(b) Defense. (i) Upon delivery of notice from the Indemnitee of a
Claim, the Indemnitee may elect to assume the defense of such Claim by selecting
counsel to defend the Indemnitee against the matter from which the Claim arose,
at the Indemnitor's sole cost, risk and expense. The Indemnitor shall cooperate
in all reasonable respects, at the Indemnitor's sole cost, risk and expense,
with the Indemnitee and its counsel in the investigation, trial, defense and any
appeal arising from the matter from which the Claim arose and shall deliver to
the Indemnitee or its counsel copies of all pleadings and other information
within the Indemnitor's knowledge or possession reasonably requested by the
Indemnitee or its counsel that are relevant to the defense of the subject of any
such Claim and that will not prejudice the Indemnitor's position, claims or
defenses. The Indemnitor shall not be liable for any settlement effected without
its prior consent, such consent not to be unreasonably withheld. If the subject
of any Claim results in a judgment or settlement consistent with the terms of
this Section 11.6(b), the Indemnitor shall promptly pay such judgment or
settlement. The Indemnitee shall consult with the Indemnitor in good faith and
in a commercially reasonable manner, including providing notice of any
significant development in the defense of any Claim, in connection with the
defense of any Claim under this Section 11.6(b)(i).
(ii) In the event that the Indemnitee elects not to assume the
defense of such Claim, the Indemnitor shall assume the defense of such Claim by
providing counsel (such counsel subject to the reasonable approval of the
Indemnitee) to defend the Indemnitee against the matter from which the Claim
arose, at the Indemnitor's sole cost, risk and expense. The Indemnitee shall
cooperate in all reasonable respects, at the Indemnitor's sole cost, risk and
expense, with the Indemnitor and its counsel in the investigation, trial,
defense and any appeal arising from the matter from which the Claim arose. The
Indemnitor shall have the right to elect to settle any claim for monetary
damages without the Indemnitee's consent only if the settlement includes a
complete release of the Indemnitee. Any other settlement will be subject to the
consent of the Indemnitee. The Indemnitor may not admit any liability of the
Indemnitee or waive any of the Indemnitee's rights without the Indemnitee's
prior consent.
12. GENERAL PROVISIONS
12.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective fees, costs and expenses incurred in
connection with the preparation, execution, delivery and performance of this
Agreement, including all fees, costs and expenses of agents, representatives,
counsel and accountants.
12.2 CONVEYANCE DOCUMENTS AND TAXES
The parties shall cooperate in the preparation, execution and filing of
all returns, questionnaires, applications, or other documents regarding any real
or personal property transfer or any gains, sales, use, transfer, value added,
stock transfer and stamp taxes, any transfer, recording, registration and other
fees, and any similar taxes which become payable
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in connection with the transactions contemplated hereby that are required or
permitted to be filed, whether before, on or after the Effective Time, and the
Company and Parent shall each be responsible for the payment of one-half of all
such taxes and fees.
12.3 PUBLIC ANNOUNCEMENTS
Unless required by law, any public announcement or similar publicity
with respect to this Agreement, the Closing, the Merger or the other
transactions contemplated hereby will be issued, if at all, at such time and in
such manner as Parent determines with the concurrence of the Company, which
concurrence shall not be unreasonably withheld or delayed by the Company. Unless
disclosure is consented to by Parent in advance or required by law or disclosure
has otherwise already been made, the Company and the Controlling Shareholders
shall keep this Agreement and the transactions contemplated hereby strictly
confidential and may not make any disclosure of this Agreement or such
transactions to any Person other than its or their directors, officers,
employees or agents who need to know such information to enable the Company and
the Controlling Shareholders to comply with this Agreement, provided that each
such director, officer, employee or agent shall agree, for the benefit of
Parent, to maintain the confidentiality of such information as provided in this
Section 12.3. The Company and Parent will consult with each other concerning the
means by which the Company's and the Company Subsidiaries' employees, customers
and suppliers and other Persons having dealings with the Company and/or the
Company Subsidiaries will be informed of this Agreement, the Closing, the Merger
and the other transactions contemplated hereby, and representatives of Parent
may at its option be present for any such communication.
12.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by fax (with
written confirmation of receipt), provided that a copy is mailed by registered
mail, return receipt requested, or (c) when received by the addressee, if sent
by a nationally recognized overnight delivery service (receipt requested), in
each case to the appropriate addresses or fax numbers set forth below (or to
such other address, person's attention or fax number as a party may designate by
notice to the other parties given in accordance with this Section 12.4):
(a) If to Parent or Merger Sub:
ATMI, Inc.
7 Commerce Drive
Danbury, CT 06810
Telecopier No.: (203) 792-8040
Telephone No.: (203) 794-1100
Attention: Daniel P. Sharkey
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<PAGE>
With a copy to:
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Telecopier No.: (212) 715-8000
Telephone No.: (212) 715-9100
Attention: Mark B. Segall
(b) If to the Company or the Controlling Shareholders:
Delatech Incorporated
830 Latour Court
Napa, CA 94558
Telecopier No.: (707) 257-1964
Telephone No.: (707) 257-1960
Attention: Tamara J. Rix
With a copy to:
Heller Ehrman White & McAuliffe
2500 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Telecopier No.: (650) 234-4299
Telephone No.: (650) 234-4200
Attention: August J. Moretti
12.5 JURISDICTION; SERVICE OF PROCESS
Any Proceeding seeking to enforce any provision of, or based on any
right arising out of, this Agreement may be brought against any of the parties
in the courts of the State of Delaware or the United States District Court for
the State of Delaware, and each of the parties consents to the jurisdiction of
such courts (and of the appropriate appellate courts) in any such Proceeding and
waives any objection to venue laid therein. Service of process or any other
papers in any such Proceeding may be made by registered or certified mail,
return receipt requested, pursuant to the provisions of Section 12.4.
12.6 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE
No failure or delay on the part of any party hereto in the exercise of
any right hereunder shall impair such right or be construed to be a waiver of,
or acquiescence in, any breach of any representation, warranty, covenant or
agreement herein, nor shall any single or partial exercise of any such right
preclude other or further exercise thereof or of any other
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<PAGE>
right. All rights and remedies existing under this Agreement are cumulative to,
and not exclusive of, any rights or remedies otherwise available.
12.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements (other than the
Confidentiality Agreement), whether written or oral, between or among the
parties with respect to its subject matter and constitutes (along with the
documents referred to in this Agreement) the entire agreement among the parties
with respect to its subject matter. This Agreement may not be amended except by
a written agreement executed by each party hereto.
12.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
No party may assign any of its rights under this Agreement without the
prior written consent of the other parties except that Parent may assign any of
its rights, but not its obligations, under this Agreement to any direct
wholly-owned Subsidiary of Parent. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties and their
respective heirs and personal representatives. Nothing expressed or referred to
in this Agreement will be construed to give any Person other than the parties to
this Agreement and the Persons contemplated by Article 11 any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement.
12.9 SEVERABILITY
(a) If any provision of this Agreement or the application of any such
provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid or unenforceable to any extent, the
remainder of this Agreement, or the application of such provision to such party
or circumstances other than those to which it is so determined to be invalid or
unenforceable, shall not be affected thereby, and each provision hereof shall be
enforced to the fullest extent permitted by law. If the final judgment of a
court of competent jurisdiction declares that any item or provision hereof is
invalid or unenforceable, the parties hereto agree that the court making the
determination of invalidity or unenforceability shall have the power to reduce
the scope, duration or area of the term or provision, to delete specific words
or phrases and to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified.
(b) The parties agree that the fees and other amounts provided in
Section 6.10(b) are fair and reasonable in the circumstances. If a court of
competent jurisdiction shall nonetheless, by a final, non-appealable judgment,
determine that such amounts exceed the maximum amount permitted by law, then
such amounts shall be reduced to the maximum
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amount permitted by law in the circumstances, as determined by such court of
competent jurisdiction.
12.10 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. In this Agreement
(i) words denoting the singular include the plural and vice versa, (ii) "it" or
"its" or words denoting any gender include all genders, (iii) the word
"including" shall mean "including without limitation," whether or not expressed,
(iv) any reference to a statute shall mean the statute and any regulations
thereunder in force as of the date of this Agreement or the Effective Time, as
applicable, unless otherwise expressly provided, (v) any reference herein to a
Section, Article, Schedule or Exhibit refers to a Section or Article of or a
Schedule or Exhibit to this Agreement, unless otherwise stated, and (vi) when
calculating the period of time within or following which any act is to be done
or steps taken, the date which is the reference day in calculating such period
shall be excluded and if the last day of such period is not a business day, then
the period shall end on the next day which is a business day. Each party
acknowledges that he, she or it has been advised and represented by counsel in
the negotiation, execution and delivery of this Agreement and accordingly agrees
that if an ambiguity exists with respect to any provision of this Agreement,
such provision shall not be construed against any party because such party or
its representatives drafted such provision.
12.11 GOVERNING LAW
This Agreement will be governed by the internal laws of the State of
Delaware without regard to principles of conflict of laws.
12.12 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
ATMI, INC.
By /s/ Daniel P. Sharkey
---------------------------------------------
Name: Daniel P. Sharkey
Title: Vice President, Chief Financial
Officer and Treasurer
NAPA ACQUISITION CORP.
By /s/ Daniel P. Sharkey
---------------------------------------------
Name: Daniel P. Sharkey
Title: Vice President and Secretary
DELATECH INCORPORATED
By /s/ Roger J.B. McKinley, Sr.
---------------------------------------------
Name: Roger J.B. McKinley, Sr.
Title: Chairman and Chief Executive Officer
/s/ Timothy L.F. Herman
---------------------------------------------
TIMOTHY L.F. HERMAN
/s/ Margaret E. Herman
---------------------------------------------
MARGARET "PEGGY" E. HERMAN
/s/ Roger J.B. McKinley, Sr.
----------------------------------------------
ROGER J.B. McKINLEY, SR.
/s/ Corenne M. McKinley
----------------------------------------------
CORENNE M. McKINLEY
[Signature page to Agreement and Plan of Merger]
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Exhibit 99.1
ATMI Completes ACSI Acquisition
$27 Million Deal Puts ATMI into Photolithography and CMP Materials
DANBURY, CT--(BUSINESS WIRE)--June 1, 1999--ATMI, Inc. (Nasdaq: ATMI - news),
today announced it has completed its acquisition of Advanced Chemical Systems
International, Inc. (ACSI) of Milpitas, California. Under the pooling of
interests transaction, ATMI issued 1.2 million common shares for all ACSI
interests. ACSI joins ATMI's other specialty materials products under the ATMI
Materials banner.
Doug Neugold, Executive Vice-President of ATMI Materials, said, "Adding ACSI's
photolithography and CMP (chemical mechanical polishing) materials expertise to
ATMI moves us closer to our goal - becoming the first company semiconductor
manufacturers turn to for all their front-end specialty materials requirements.
ATMI's innovative materials portfolio now encompasses materials for chemical
vapor deposition (CVD), CMP, ion implant, photolithography, and high-purity
materials packaging."
Richard Brewer, President of ACSI, commented, "ACSI's innovative CMP and
photolithography materials are complementary to ATMI's leading edge
semiconductor materials. Together, with ATMI Materials, we are looking to expand
our abilities - in variety and geography - to serve our customers with an ever
more comprehensive set of specialty materials for the global semiconductor
industry."
Dan Sharkey, ATMI CFO, said, "ATMI will take an one-time charge in the second
quarter of 1998 to cover the costs of completing the TeloSense, ACSI, and
Delatech transactions. We anticipate these transactions will be accretive."
Advanced Chemical Systems International, Inc. offers the semiconductor industry
photolithography chemicals and novel, high-purity CMP materials that ensure
greater surface planarity. ACSI has 85 employees and had revenues more than $17
million in 1998.
ATMI provides products and services for semiconductor device manufacture through
its Materials and Technologies units. ATMI Materials includes ADCS thin film
materials and delivery systems, NovaSource sub-atmospheric gas delivery systems,
and NOW high-purity materials packaging systems. ATMI Technologies includes
EcoSys process and environmental solutions, Epitronics thin film deposition
services, Emosyn smart card solutions, and other ATMI ventures.
Statements which are not historical information are forward looking, and involve
risks and uncertainties, including, but not limited to: changes in semiconductor
industry growth or ATMI's markets; competition, problems, or delays developing
and commercializing new products, and other factors discussed in ATMI's filings
with the Securities and Exchange Commission. Such risks and uncertainties could
cause actual results to differ from those projected.
<PAGE>
http://web.atmi.com
http://www.answerman.com
Contact:
Dean Hamilton
ATMI
203/794-1100
[email protected]
Exhibit 99.2
ATMI Acquires Delatech in $50 Million Deal
Solidifies EcoSys Semiconductor Environmental Unit as Global Leader
DANBURY, CT--(BUSINESS WIRE)--June 1, 1999--ATMI, Inc. (Nasdaq: ATMI - news),
today announced it acquired Delatech Incorporated (Milpitas, California) on May
31st. ATMI issued 2.3475 million common shares in exchange for all Delatech
shares in this pooling of interests deal. Delatech, a semiconductor
environmental equipment supplier, becomes part of ATMI's EcoSys semiconductor
process and environmental controls business.
Jim Burns, President of EcoSys, said, "EcoSys's goal is to be able to supply
every semiconductor manufacturing customer with all the environmental and
process gas monitoring solutions they need. Adding Delatech's products and
expertise to our existing product line enables EcoSys to offer our customers
complete applications coverage while strengthening our position as the
technology leader in effluent abatement."
Roger McKinley, CEO of Delatech, commented, "Delatech and EcoSys are both
excited by the prospects before us. Combining Delatech and EcoSys creates a
global organization with the critical mass in sales and service to be the
semiconductor industry's true leader in comprehensive environmental solutions."
Peter Kirlin, Executive Vice President of ATMI Technologies, said, "ATMI intends
to become the company the semiconductor industry turns to for innovative,
integrated materials, equipment, and service solutions. Together, EcoSys and
Delatech environmental solutions and services are second to none in the
semiconductor gas sensor and abatement market."
Delatech Incorporated, a private company, was founded in 1991 to provide
environmental abatement equipment to the semiconductor industry. Based in
Milpitas, California, it has approximately 110 employees and 1998 revenues in
excess of $20 million. Major customers of Delatech products include Applied
Materials, United Microelectronics Corp. (UMC), and Taiwan Semiconductor
Manufacturing Corporation (TSMC).
ATMI provides products and services for semiconductor device manufacture through
its Materials and Technologies units. ATMI Materials includes ADCS thin film
materials and delivery systems, NovaSource sub-atmospheric gas delivery systems,
and NOW high-purity materials packaging systems. ATMI Technologies includes
EcoSys environmental and process solutions, Epitronics thin film deposition
services, Emosyn smart card solutions, and other ATMI ventures.
Statements which are not historical information are forward looking, and involve
risks and uncertainties, including, but not limited to: changes in semiconductor
industry growth or ATMI's markets; competition, problems, or delays developing
and commercializing new products, and other factors discussed in ATMI's filings
with the Securities and Exchange Commission. Such risks and uncertainties could
cause actual results to differ from those projected.
<PAGE>
http://web.atmi.com
Contact:
Dean Hamilton
ATMI
203/794-1100
[email protected]
