SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): November 29, 1999
ATMI, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-30130 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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ATMI, INC.
FORM 8-K
CURRENT REPORT
TABLE OF CONTENTS
Page
Item 2 Acquisition or Disposition of Assets.................................3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits...4
Signature......................................................................5
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Item 2. Acquisition or Disposition of Assets.
MST Merger Agreement
On November 29, 1999 pursuant to an Agreement and Plan of Merger
dated as of November 29, 1999 (the "MST Merger Agreement") by and among ATMI,
Inc. ("ATMI"), Fog Acquisition Corporation, a wholly-owned Delaware subsidiary
of ATMI ("Fog"), MST Analytics, Inc., a Delaware corporation ("MST"), and the
Controlling Stockholders of MST as defined in the MST Merger Agreement, Fog
merged (the "MST Merger") with and into MST, with MST being the surviving
corporation. As a result of the MST Merger, MST became a wholly-owned subsidiary
of ATMI.
Pursuant to the MST Merger, each outstanding share of MST capital
stock was converted into .95280 (the "Exchange Ratio") shares of ATMI common
stock. Pursuant to the MST Merger, a total of 1,074,601 shares of ATMI common
stock were issued (after accounting for the conversion of options and warrants
exercisable into MST capital stock into similar options exercisable into ATMI
common stock based upon the Exchange Ratio).
The MST 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. MST manufactures gas sensing products, liquid
analyzers and process control systems which are used in the manufacture of
semiconductors. ATMI intends to continue the business currently performed by MST
as a wholly-owned subsidiary of ATMI.
The foregoing description of the terms and provisions of the MST
Merger Agreement is qualified in its entirety by reference to the full text of
the MST Merger Agreement which is filed herewith and incorporated by reference.
Other Acquisitions
On November 24, 1999, ATMI acquired all of the capital stock of
Newform, N.V., a Belgian corporation ("Newform"), in exchanges for 550,000
shares of ATMI common stock (the "Newform Acquisition"). The Newform Acquisition
is intended to be a tax-free transaction under the Code and will be accounted
for as a pooling of interests. Newform provides high-purity flexible ultra-clean
CleansteamTM packaging to the semiconductor and pharmaceutical industries.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of business acquired. Filing financial
statements with this report is not required since the transactions described in
this report do not comprise a significant acquisition of assets by ATMI. ATMI
does, however, plan to file such statements by amendment to this report.
(b) Pro forma financial information. Filing pro forma financial
information with this report is not required since the transactions described in
this report do not comprise a significant acquisition of assets by ATMI. ATMI
does, however, plan to file such information by amendment to this report.
(c) Exhibits
Exhibit No. Description
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2.1 Agreement and Plan of Merger dated as of November
29, 1999 by and among ATMI, Inc., Fog Acquisition
Corporation, MST Analytics, Inc., and the
Controlling Stockholders of MST Analytics, Inc. as
identified therein.
99.1 Press Release issued by ATMI dated October 15,
1999.
99.2 Press Release issued by ATMI dated November 29,
1999.
99.3 Press Release issued by ATMI dated November 30,
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: December 13, 1999
ATMI, INC.
By: /s/ Daniel P. Sharkey
------------------------------------------
Daniel P. Sharkey
Vice President, Chief Financial Officer
and Treasurer (Chief Accounting Officer)
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
November 29, 1999, among ATMI, Inc. ("Parent"), a Delaware corporation and a
party to this Agreement but not a constituent corporation in the Merger (as
hereinafter defined), Fog Acquisition Corporation ("Merger Sub"), a Delaware
corporation all of whose capital stock is owned directly by Parent, MST
Analytics, Inc. (the "Company"), a Delaware corporation, and Byron A. Denenberg
and KB Partners, L.L.C., a Delaware limited liability company (together, the
"Controlling Stockholders"), who together own of record and beneficially 55.73%
of the Company Capital 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 stockholders, have approved the Merger of Merger
Sub with and into the Company upon the terms hereinafter set forth, and have
approved this Agreement and authorized the transactions contemplated hereby; and
WHEREAS, the Company's stockholders have approved the Merger
and this Agreement; and
WHEREAS, Parent, Merger Sub, the Company and the Controlling
Stockholders adopt this Agreement as a plan of reorganization within the meaning
of Section 368 of the Code (as hereinafter defined) and the Treasury Regulations
(as hereinafter defined) promulgated thereunder; and
WHEREAS, Parent, Merger Sub, the Company and the Controlling
Stockholders desire that the Merger be accounted for as a pooling-of-interests
for accounting purposes; and
WHEREAS, pursuant to the Merger, each outstanding share of the
Company's Voting Common Stock, par value $0.01 per share, Nonvoting Common
Stock, par value $0.01 per share, Series A Convertible Preferred Stock, par
value $0.01 per share and Preferred Stock, par value $0.01 per share (together,
the "Company Capital Stock"), shall be automatically converted into the right to
receive the consideration specified in Section 2.7 upon the terms hereinafter
set forth; and
WHEREAS, upon consummation of the Merger, the Company will be
a wholly-owned subsidiary of Parent; and
WHEREAS, Parent, Merger Sub, the Company and the Controlling
Stockholders desire to make certain representations, warranties and agreements
in connection with 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:
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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 Article 8.
"Affiliate Letters"--as defined in Article 8.
"Agreement"--as defined in the first paragraph of this Agreement.
"Agreement of Merger"--as defined in Section 2.2.
"CERCLA" --the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss. 9601 et. seq., as amended.
"Certificates"--as defined in Section 2.8(c).
"Claim"--as defined in Section 10.6(a).
"Closing"--as defined in Section 2.1(b).
"Closing Date"--November 29, 1999, which is the date as of which the
Closing actually takes place.
"Closing Exchange Price"--the average closing sales 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.
"Code"--the Internal Revenue Code of 1986, as amended, or any successor
law.
"Commission"--the United States Securities and Exchange Commission.
"Company"--as defined in the first paragraph of this Agreement.
"Company Capital Stock"--as defined in the recitals to this Agreement.
"Company Indemnitee"--as defined in Section 10.3.
"Company Stockholders"--the holders of the Company Capital Stock,
including but not limited to the Controlling Stockholders.
"Company Subsidiaries"--each of FPM Analytics, Inc., MST
Micro-Sensor-Technologie GmbH Entwicklung, Produktion Vertrieb ("MST GmbH"),
Sensoric Gesellschaft fuer angewandte Elektrochemie mbH & Co. KG, EMT
Environmental Monitoring Technology Ltd., MST Measurement Systems, Inc. and MST
Micro-Sensor-Technology PTE Ltd.
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"Contract"--any agreement, contract, obligation, promise, commitment or
undertaking (whether written or oral and whether express or implied).
"Controlling Stockholders"--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 Materials"--as defined in Section 4.37.
"Disclosure Schedule"--the disclosure schedule delivered by the Company
and the Controlling Stockholders to Parent and Merger Sub concurrently with the
execution and delivery of this Agreement, which disclosure schedule sets forth,
among other things, exceptions to the representations and warranties of the
parties as indicated in each such representation and warranty and, for purposes
of this Agreement, shall be deemed a part of each such representation and
warranty (where so indicated).
"Dissenting Stockholders"--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 Article 8.
"Encumbrance"--any mortgage, charge, claim, community property
interest, condition, equitable interest, 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 written 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 Release in, into or onto the environment
(including, without limitation, the air, 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.
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"Environmental Law"--any Law (effective at the time of Closing)
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 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 as of
the time of Closing, and the regulations promulgated pursuant thereto, and any
and all analogous foreign, 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(a).
"Escrow Agent"--as defined in Section 2.8(i).
"Escrow Agreement"--as defined in Section 2.8(i).
"Escrow Amount"--that number of whole 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
multiplied by 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"--as defined in Section 2.7(a).
"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.
"HSR Act"--the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or any successor law.
"Indemnitee"--as defined in Section 10.6(a).
"Indemnitor"--as defined in Section 10.6(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(j).
"Key Employees"--as defined in Section 4.15(a)(vii).
"Law"--any federal, state, local or foreign law (including common law),
statute, code, ordinance, rule, regulation or other requirement or guideline.
"Lien"--any lien, hypothecation, levy, deed of trust, easement or other
real estate declaration, covenant, condition, restriction or servitude, transfer
restriction under any stockholder or similar agreement, or any other restriction
or limitation whatsoever.
"Losses"--as defined in Section 10.2.
"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.
"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.
"Options"--as defined in Section 2.7(d).
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"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, certificate of
incorporation or similar formation document and the by-laws, code of regulations
or similar governing document 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, articles of
association, trust certificate or document, commercial register extract or
excerpt or similar document adopted or filed in connection with the creation,
formation or organization of a Person; and (f) 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 10.2.
"Parent SEC Reports"--as defined in Section 5.4(a).
"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(g).
"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 Article 8.
"Proceeding"--as defined in Section 4.13.
"Qualified Group"--shall have the meaning as set forth in Section
1.368-1(d)(4)(ii) of the Treasury Regulations.
"Registration Rights Agreement"--as defined in Article 8.
"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.
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"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 Governmental Permits issued
pursuant to Environmental Laws.
"Returns"--as defined in Section 4.8(b).
"Rule 145"--as defined in Article 8.
"Securities Act"--the Securities Act of 1933, as amended, or any
successor law.
"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(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.
"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.
"Treasury Regulation"--means the Income Tax Regulations, including
temporary regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"WARN"--as defined in Section 4.18(d).
"Year 2000"--as defined in Section 4.33(a).
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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 "MST Analytics, Inc.".
(b) The consummation of the Merger is taking place on the date hereof
at the offices of Kramer Levin Naftalis & Frankel LLP, 919 Third Avenue, New
York, New York (the "Closing").
2.2 EFFECTIVE TIME
Concurrently with the Closing, the parties hereto shall cause the
Merger to be consummated by (a) 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 DGCL, and (b) making all other filings or recordings
required under the DGCL. The Merger shall become effective at such time as the
Agreement 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 Agreement 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 Agreement 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
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.
2.5 BY-LAWS OF SURVIVING CORPORATION
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 certificate of incorporation of the Surviving Corporation or by
applicable Law.
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2.6 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION
The officers of Merger Sub immediately prior to the Effective Time
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
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 Capital Stock. Subject to the provisions of Sections 2.7(b)
and (f), 2.8 and 2.9, each share of Company Capital Stock issued and
outstanding immediately prior to the Effective Time shall be cancelled
and extinguished and automatically converted into the right to receive
.95280 shares of Parent Common Stock (the "Exchange Ratio"). The
aggregate number of shares of Parent Common Stock to be issued to each
holder of Company Capital Stock pursuant to this Section 2.7(a) shall
be set forth opposite such holder's name in Schedule 2.7(a) of the
Disclosure Schedule.
(b) Dissenters. Shares of Company Capital 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 in Section 2.7(a) of this Agreement, but the holder of such
shares shall be entitled to receive such consideration as shall be
provided in Section 262 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
Section 2.7(a) of this Agreement. To the extent the Company or any
Controlling Stockholder knows the identity of any Dissenting
Stockholder at the Closing, the Company shall notify Parent and Merger
Sub in writing of the details of the Dissenting Stockholders and the
number of shares of Company Capital 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.
(c) Unissued Shares. Each authorized but unissued share of Company
Capital Stock shall cease to exist without payment of any consideration
therefor.
(d) Stock Options and Warrants. As of the Effective Time, each option,
warrant or similar right outstanding at the Effective Time to purchase
shares of Company Capital Stock ("Options") under the Company's
Incentive Stock Plan (the "Option Plan") or an agreement, instrument or
certificate identified in Section 2.7(d) of the Disclosure Schedule,
which Options are listed in Section 4.3 of the Disclosure Schedule,
shall
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become fully vested pursuant to the terms of the Option Plan or the
respective agreement, instrument or certificate governing such Option
if so provided therein 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 agreement, instrument or certificate
governing such Option immediately prior to the Effective Time, the
number of whole shares of Parent Common Stock which the holder of such
Option would have been eligible to receive pursuant to Section 2.7(a),
had such Option then been fully vested prior to the Effective Time and
such holder exercised such 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 Capital
Stock at which such Option was exercisable immediately prior to the
Effective Time by the 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 Option an
appropriate notice setting forth such holder's rights pursuant thereto
and that such Option shall continue in effect on the same terms and
conditions in accordance with this Section 2.7(d).
(e) 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 Voting Common Stock, $0.01 par value per share,
of the Surviving Corporation.
(f) Adjustments to Exchange Ratio Computation. The Exchange Ratio
computation pursuant to Sections 2.7(a) and (d) shall be appropriately
adjusted for any stock split, reverse stock 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.
2.8 SURRENDER OF CERTIFICATES, ESCROW, ETC.
(a) Exchange Agent. 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. At the Effective Time,
Parent shall make available to the Exchange Agent, for exchange in accordance
with this Article 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 Capital Stock and 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 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 Capital
Stock issued and outstanding immediately prior to the Effective Time. 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 whole shares of
Parent Common Stock which such holder would otherwise be entitled to receive
under Section 2.7 by
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virtue of ownership of issued and outstanding shares of Company Capital Stock as
more fully specified in Section 2.8(i).
(c) Exchange Procedures. At the Effective Time, the Exchange Agent
shall cause to be delivered to each holder of record of a certificate or
certificates which immediately prior to the Effective Time evidenced outstanding
shares of Company Capital Stock whose shares were converted into the right to
receive shares of Parent Common Stock pursuant to Section 2.7 (the
"Certificates") 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 customary 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 Capital 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 Capital 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
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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 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, 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.
(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 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, 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 10.2, 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
Capital 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 10. 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:
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(A) such Company Stockholder accepts and shall be
bound by the terms and provisions of the Escrow Agreement; and
(B) Byron Denenberg 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) Tax 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 any holder
of an Option 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 of the Company Capital Stock or the holder of an Option,
as applicable, 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 Capital 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 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 Capital 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
Capital 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 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 agree to
report the Merger as a tax-free reorganization within the meaning of Section 368
of the Code on their respective Tax Returns. The parties hereto adopt this
Agreement as a "plan
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of reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of
the Treasury Regulations.
3. REPRESENTATIONS AND WARRANTIES FROM THE RESPECTIVE CONTROLLING
STOCKHOLDERS
Each Controlling Stockholder separately for itself or himself, as
applicable, and severally but not jointly, represents and warrants to Parent and
Merger Sub as to itself or himself, as applicable, as follows:
3.1 AUTHORITY; NO CONFLICT
(a) Such Controlling Stockholder has the right, power, authority and
capacity to execute and deliver this Agreement and the other Transaction
Documents to which such Controlling Stockholder is a party and to perform his or
its obligations hereunder and thereunder; this Agreement has been duly
authorized and approved, executed and delivered by such Controlling Stockholder
and constitutes a legal, valid, binding and enforceable obligation of such
Controlling Stockholder in accordance with its terms, and each of the
Transaction Documents to which such Controlling Stockholder is a party has been
duly authorized and approved, executed and delivered by such Controlling
Stockholder and constitutes a legal, valid, binding and enforceable obligation
of such Controlling Stockholder in accordance with its 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 Stockholder nor the consummation or performance by
such Controlling Stockholder of any of the transactions contemplated hereby or
thereby, directly or indirectly (with or without notice or lapse of time or
both) contravenes, conflicts with, or results in a violation or breach of or a
default under (i) any provision of the Organizational Documents of such
Controlling Stockholder (if applicable), (ii) any resolution adopted by the
board of directors or the stockholders or members or managers of such
Controlling Stockholder (if applicable), or (iii) any legal requirement or any
Order or any Contract to which such Controlling Stockholder may be subject.
3.2 OWNERSHIP OF SHARES
Except as set forth in Section 3.2 of the Disclosure Schedule, such
Controlling Stockholder 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 Capital 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 Stockholder, together with the other
Controlling Stockholders, beneficially own at least 55.73% of the Company
Capital Stock. Except as set forth in Section 3.2 of the Disclosure Schedule,
there are no voting trusts, stockholder agreements or any other Contracts or
understandings to which such Controlling Stockholder is a party with respect to
the sale, transfer, voting or registration of the capital stock of the Company.
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3.3 LEGAL PROCEEDINGS
There is no pending Proceeding against such Controlling Stockholder
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 Stockholder, 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.
3.4 INVESTMENT REPRESENTATIONS OF CONTROLLING STOCKHOLDERS
(a) The Parent Shares are being acquired by such Controlling
Stockholder for his own account, and not for any other Person, for investment
only and with no intention of distributing or reselling (and such Controlling
Stockholder 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 Stockholder 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 Stockholder is a party. Such Controlling
Stockholder 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 Stockholder has no present plans to enter into any
such Contract or arrangement.
(b) Such Controlling Stockholder 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 Stockholder is able to bear the risks associated with an investment
in the Parent Shares.
(c) Such Controlling Stockholder has read this Agreement and all other
documents provided by Parent in connection herewith, including the Parent SEC
Reports, 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 Stockholder 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 Stockholder is satisfied with such
answers and information.
(d) Such Controlling Stockholder 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:
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"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 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."
Such Controlling Stockholder further agrees that 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 such Person), and to issue appropriate stop transfer instructions to
the transfer agent for Parent Common Stock, consistent with the terms of the
Affiliate Agreements.
4. REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY
The Company and the Controlling Stockholders 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, limited partnership or analogous entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or formation, with full corporate or company 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 or limited partnership, as the case may be, 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.
Except as set forth in Section 4.1 of the Disclosure Schedule, 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.
(c) The Organizational Documents as filed and amended in the public
record are correct and since the date as of which they are dated, no resolutions
of the stockholders or partners have been passed which are required to be
registered in the commercial register where
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applicable. All events that need to be registered in the commercial register of
the Company subsidiaries have been duly registered where applicable.
(d) There has been no notice filed, proposal made or resolution adopted
by the shareholders of any of the Company Subsidiaries for the dissolution or
liquidation of any of the Company Subsidiaries, nor do any circumstances exist
which may result in the dissolution or liquidation of any Company Subsidiary and
no proposal has been made or resolution adopted for the statutory merger of any
Company Subsidiary with any other entity or for a split of any Company
Subsidiary or any other act of transformation. No Company Subsidiary has
suspended operations. None of the Company Subsidiaries is a party to any
agreement within the meaning of ss. 291 292 Stock Corporation Act (Aktiengeselz)
correspondingly. All such contracts concluded in the past have been validly
terminated. No party of such agreement has a claim vis-a-vis another party. All
such contracts have been admitted by Tax Authorities for Tax purposes.
4.2 AUTHORITY; NO CONFLICT
(a) The Company has the corporate power and authority 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 except as enforcement thereof may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights in general, or by general principles of equity.
Each of the Transaction Documents to which the Company is a party constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights in general, or by general principles of
equity.
(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, directly or
indirectly (with or without notice or lapse of time or both):
(i) contravenes, conflicts with or results 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 stockholders 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 or
that otherwise relates to the business of, or any of the assets or properties
owned or used by, the Company;
(ii) results in a breach of or constitutes a default, gives
rise to a right of termination, cancellation or acceleration, creates any
entitlement to any payment or benefit, or
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requires the consent, authorization or approval of or any notice to or filing
with any third Person under any Contract to which the Company or any Company
Subsidiary is a party or to which its or their assets or properties are bound,
or requires 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) results 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
1,000,000 shares of Voting Common Stock, $0.01 par value per share, of which
490,000 shares are issued and outstanding, 500,000 shares of Nonvoting Common
Stock, $0.01 par value per share, of which 254,999 shares are issued and
outstanding, 300,000 shares of Series A Convertible Preferred Stock, $0.01 par
value per share, of which 297,500 shares are issued and outstanding and 50,000
shares of preferred stock, $0.01 par value per share, of which no shares are
issued and outstanding. There are no accrued dividends on any shares of such
Series A Convertible Preferred Stock. 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 Options, including as to each holder thereof, the number
of shares of Company Capital Stock subject thereto and the exercisability,
exercise price and termination date thereof. Section 4.3 of the Disclosure
Schedule sets forth a complete and correct list of all of the Company
Stockholders and the number and type of shares of Company Capital Stock owned,
of record and beneficially, by each of them and all outstanding securities of
the Company and each Company Subsidiary, including but not limited to all debt
securities, Company Capital 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 or any Company Stockholder or Option holder 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. None of the outstanding equity securities or
other securities of the Company or any Company Subsidiary were issued in
violation of the Securities Act or any other legal requirement. 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). Except as set forth in Section 4.3
of the Disclosure Schedule, no Person has any pre-emptive rights with respect to
any security of the Company or any Company Subsidiary.
(b) Except as provided in Section 4.3 of the Disclosure Schedule, 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 or share capital or partnership interest, as the case
may be, interests 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,
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stockholder agreements or any other Contracts or understandings to which the
Company is a party with respect to the capital stock or share interests of any
Company Subsidiary. All of the outstanding capital stock or share capital or
partnership interest, as the case may be, of each Company Subsidiary has been
duly authorized and validly issued, validly subscribed to 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 or
company action taken by, the stockholders, the partners, the board of directors,
and committees of the board of directors of the Company and each Company
Subsidiary, respectively. The stock books or equivalent records of the Company
and each Company Subsidiary are true, complete and correct in all material
respects. At the Closing, all of such books and records will be in the
possession of the Company or the appropriate Company Subsidiary.
4.5 FINANCIAL STATEMENTS
(a) For purposes of this Agreement, "Financial Statements" shall mean
(i) the audited consolidated balance sheets of the Company as of December 31,
1997 and 1998, and the related consolidated income statements for the years then
ended, as set forth in Section 4.5 of the Disclosure Schedule and (ii) the
unaudited consolidated balance sheet of the Company as of September 30, 1999 and
the related consolidated income statement for the nine months ended on such date
(the "Interim Financial Statements"). The Company has delivered to Parent true
and complete copies of the Financial Statements.
(b) Except as set forth in Section 4.5 of the Disclosure Schedule, 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 (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 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 (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 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 and the Company Subsidiaries do not have any liabilities or obligations
of any nature (whether known or
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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.
4.7 NO MATERIAL ADVERSE CHANGE
Except as disclosed in Section 4.7 of the Disclosure Schedule, 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 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 generally affect the Company and/or the Company
Subsidiaries and all 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 (or taxes based on income),
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) Each of the Company and each Company Subsidiary has filed or
caused to be filed with the appropriate Tax 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 or for Taxes that are being contested in good faith; and (v)
no deficiencies for Taxes have been overtly 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 Stockholders' knowledge, threatened audits, investigations or claims
for or relating to any liability in respect of Taxes of the Company or any
Company Subsidiary.
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(c) Except as set forth on Section 4.8 of the Disclosure Schedule,
there are no outstanding Contracts or waivers with respect to the Company or any
Company Subsidiary 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) Except as set forth on Section 4.8 of the Disclosure Schedule, (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, stockholder 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 Stockholder
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 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 has filed a consent under Section 341(f) 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 federal income 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; (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; (xv) neither the
Company nor any Company Subsidiary has entered
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into any sale leaseback or any leveraged lease transactions that fails to
satisfy the requirements of Revenue Procedure 75-21 (or similar provisions of
foreign law); (xvi) none of the assets owned by the Company or any Company
Subsidiary is property that is required to be treated as owned by any other
Person pursuant to Section 168 of the Internal Revenue Code of 1954, as amended,
as in effect immediately prior to the enactment of the Tax Reform Act of 1986,
or is "tax-exempt use property" within the meaning of Section 168(h) of the
Code; and (xvii) neither the Company nor any Company Subsidiary has entered into
any gain recognition agreements under Section 367 of the Code and the Treasury
Regulations promulgated thereunder.
4.9 ACCOUNTS RECEIVABLE
All accounts receivable of the Company or any Company Subsidiary 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, 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 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, or has ever owned, any real property other than as
specified in Section 4.10 of the Disclosure Schedule, provided that, for periods
prior to July 15, 1997, the foregoing representation and warranty is made to the
Company's and the Controlling Stockholders' knowledge. For each such property
presently owned by the Company or any Company Subsidiary, 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 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, 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,
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none of which materially detracts from the value or materially impairs the use
of the asset or property subject thereto, or materially 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 materially impairs the use of the property
subject thereto, or materially 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 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 material 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 and the business or
operations of the Company or a Company Subsidiary including federal, state,
local and foreign: (i) Occupational Safety and Health 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
Stockholders, 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
proceeding ("Proceeding"):
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(i) 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 Stockholders, 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 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
December 31, 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:
(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 partnership interests) or any security (or
partnership interest) 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 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
Employment Benefit Plan or any other profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, welfare or other employee
benefit plan, program or arrangement for or with any employees;
(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;
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(g) except for purchase orders entered into in the ordinary course of
business consistent with past practice, 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
$50,000 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 or disposition of obsolete assets) 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
$50,000;
(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 $50,000, except for endorsements of negotiable
instruments for collection in the ordinary course of business;
(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 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 in the ordinary
course of business consistent with past practice or except for liabilities or
obligations in amounts aggregating $50,000;
(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 $50,000 in the aggregate;
(o) institution or settlement of any Proceeding before any Governmental
Authority relating to it or its assets or properties;
(p) 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;
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(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.
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 $50,000 that
involves performance of services or delivery of goods or materials by the
Company or any Company Subsidiary, except for standard orders entered into in
the ordinary course of business consistent with past practice;
(ii) each Contract involving payments of at least $50,000 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 with respect to any real or personal property to
which the Company or any Company Subsidiary is a party or by which any of its
assets or properties is bound involving aggregate payments of at least $50,000;
(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"), which Key Employees are identified on Schedule 1 to this Agreement,
or limit the freedom of the Company or any Company
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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, severance, independent contractor or
consulting agreement between the Company or any Company Subsidiary and its
directors, officers, employees, leased employees and consultants entered into
since July 15, 1997 or of which the Company or the Controlling Stockholders are
aware;
(ix) each agreement (other than any agreement under subsection
(viii) above) 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;
(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 $50,000;
(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 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 $50,000 per year; and
(xvii) each standard form of agreement pursuant to which the
Company provides services or goods to Customers.
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(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, except as enforcement thereof
may be limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights in general, or by general
principles of equity, and, to the knowledge of the Company and the Controlling
Stockholders, against the other parties thereto in accordance with its terms.
(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 in all material respects 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;
(ii) to the knowledge of the Company and each Controlling
Stockholder, 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) 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 by the Company or any Company Subsidiary or,
to the knowledge of the Company and the Controlling Stockholders, by any other
Person.
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 insure the Company and/or the Company
Subsidiaries in amounts and against losses and risks customary and sufficient
for businesses similar to the Company and/or the Company Subsidiaries and 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 (or applications therefor) required under applicable
Environmental Laws, and compliance with the terms and conditions thereof, except
where the failure to comply could not reasonably be expected to have
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a Material Adverse Effect. Neither the Company nor any Company Subsidiary has
received written 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 Facilities that are
reasonably likely to prevent or interfere with such compliance or give rise to a
future Environmental Claim or Remedial Action that could reasonable be expected
to result in a Material Adverse Effect.
(b) There are no Environmental Claims that are pending or, to the
knowledge of the Company and the Controlling Stockholders, 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 and that could reasonably be expected to result in a
Material Adverse Effect.
(c) Neither the Company, nor any Company Subsidiary, nor any other
Person acting on behalf of the Company or any Company Subsidiary has disposed
of, transported or arranged for the disposal of any Hazardous Materials to, at
or upon: (a) any location other than a site lawfully permitted to receive such
Hazardous Materials, (b) any Facilities or (c) 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 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, 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 (other than third parties acting on behalf of the Company) undertaken
by any Governmental Authority, or any third Person (other than third parties
acting on behalf of the Company), 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 Stockholders, 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 Pension Plan, and whether such employee is a party to a non-competition
agreement with the Company or such Company Subsidiary.
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(b) To the knowledge of the Company and the Controlling Stockholders,
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 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 Stockholders, no employee of the Company or any Company Subsidiary
intends to terminate his or her employment with the Company or such Company
Subsidiary during the one (1) year period following the Effective Time.
(c) To the knowledge of the Company and the Controlling Stockholders,
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 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 material
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 sample employment, severance,
consulting or independent contractor agreements between itself or any Company
Subsidiary and any director, officer, employee, consultant or leased employee of
the Company or Company Subsidiary 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 agreements, procedures and policies that
are unwritten), in each case to the extent the same have existed subsequent to
July 15, 1997 or of which the Company or the Controlling Stockholders are aware.
4.19 EMPLOYEE BENEFITS
(a) Section 4.19(a) of the Disclosure Schedule sets forth a true and
complete list of each and every Employee Benefit Plan. "Employee Benefit Plan"
means each "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, any Company Subsidiary or any ERISA
Affiliate, which is or was ever maintained by the Company, any Company
Subsidiary or any ERISA Affiliate, or, with respect to which the Company, any
Company Subsidiary or any ERISA Affiliate has or could have any obligation or
liability (whether actual or contingent, direct or indirect) 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, agreements, understandings or
arrangements. "ERISA Affiliate" means any entity
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(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.
(b) 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 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.
(c) No Employee Benefit Plan is subject to Title IV of ERISA (including
a multiemployer plan) and no facts exist under which it could reasonably be
expected that the Company, any Company Subsidiary or any ERISA Affiliate could
incur any liability under Title IV of ERISA.
(d) No Employee Benefit Plan is subject to Section 412 of the Code or
Section 302 of ERISA, and no facts exist under which it could reasonably be
expected that the Company, any Company Subsidiary or any ERISA Affiliate could
incur liability under either such provision.
(e) With respect to each Employee Benefit Plan, (i) no employee,
officer or director of the Company or any Company Subsidiary nor the Company
itself or any Company Subsidiary, nor, to the knowledge of the Company and the
Controlling Stockholders, any other party in interest or disqualified person (as
defined in Section 3(14) of ERISA or Section 4975 of the Code, respectively) has
at any time engaged or participated in a transaction which could subject Parent,
Merger Sub or the Company, any Company Subsidiary or any ERISA Affiliate,
directly or indirectly, to a tax, penalty or liability for prohibited
transactions imposed by ERISA or the Code and (ii) no employee, officer or
director of the Company or any Company Subsidiary nor the Company itself or any
Company Subsidiary, nor, to the knowledge of the Company and the Controlling
Stockholders, any other fiduciary (as defined in Section 3(21) of ERISA) with
respect to any Employee Benefit Plan, for whose conduct the Company, any Company
Subsidiary or any ERISA Affiliate 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.
(f) Except as disclosed in Section 4.19(f) 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.
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(g) 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 intended to be a tax-qualified plan under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
covering all amendments required by the Tax Reform Act of 1986 and the
Unemployment Compensation Amendments Act of 1992, the Omnibus Budget
Reconciliation Act of 1993 and all prior legislation and to the knowledge of the
Company and the Controlling Stockholders, 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 compliance in all material
respects with its terms and all applicable Laws, Orders or governmental rules
and regulations 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 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.
(h) There is no Proceeding (other than routine claims for benefits)
pending or, to the knowledge of the Company, any Company Subsidiary or any of
the Controlling Stockholders, threatened with respect to any Employee Benefit
Plan or against any fiduciary of any Employee Benefit Plan, and there are no
facts that could reasonably be expected to give rise to any such Proceeding. To
the knowledge of the Company and the Controlling Stockholders, 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.
(i) There are no complaints, charges or claims against the Company or
any Company Subsidiary pending or, to the Company's, any Company Subsidiary or
any of the Controlling Stockholders' knowledge, threatened to be brought by or
filed with any Governmental Authority. Neither the Company nor any Company
Subsidiary has any current 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, and, to the knowledge of the Company and the Controlling Stockholders,
no facts exist as a result of which the Company or any Company Subsidiary could
have any such liability.
(j) Section 4.19(j) 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
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 any 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
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of Company Capital Stock, together with the number of shares of Company Capital
Stock subject to such right.
(k) Section 4.19(k) 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.
(l) 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 Capital Stock.
(m) Except as set forth in Section 4.19(m) of the Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement, either
alone or in combination with another event, will not result in (i) any payment
(including, without limitation, severance, unemployment compensation or bonus
payments or otherwise) becoming due to any current or former director, officer,
employee or consultant of the Company or any Company Subsidiary, (ii) any
increase in the amount of compensation or benefits payable in respect of any
director, officer, employee or consultant of the Company or Company Subsidiary,
(iii) any acceleration in the vesting or timing of payment of any benefits or
compensation payable in respect of any director, officer, employee or consultant
of the Company or Company Subsidiary, or (iv) result in any "parachute payment"
under Section 280G of the Code, whether or not such amount may be considered
reasonable compensation for personal services rendered.
(n) Section 4.19(a) of the Disclosure Schedule sets forth each and
every Employee Benefit Plan covering or providing benefits with respect to
non-U.S. directors, officers, employees or consultants ("Non-U.S. Plans"). Each
Non-U.S. Plan has been maintained in compliance in all material respects with
its terms and with the requirements of any applicable Laws, Orders, rules or
regulations in effect with respect thereto (including any special provision
relating to registered or qualified plans where such Non-U.S. Plan was intended
to so qualify) and has been maintained in good standing with applicable
regulatory authorities. Each Non-U.S. Plan which is required by contract or
under applicable Law to be funded has been funded at least to the extent so
required; if and to the extent any Non-U.S. Plan is not funded, the obligations
under such Non-U.S. Plan are reflected on the books and records of the entity
maintaining such plan and on the Financial Statements.
(o) 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.
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(p) No Employee Benefit Plan is a "multiple employer plan" as described
in Section 3(40) of ERISA or Section 413(c) of the Code.
(q) 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.
(r) Neither the Company nor any Company Subsidiary has within the past
year 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.
(s) Except as disclosed in Section 4.19(s) 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 Stockholders,
no condition or state of facts or circumstances exists related to the
consummation of the transactions contemplated by this Agreement which could
adversely affect the Company's or any Company Subsidiary's relations with its
employees.
(b) The Company and each Company Subsidiary is in compliance in all
material respects with all applicable Laws, agreements and contracts relating to
employment, termination of employment, employment practices, wages, hours,
collective bargaining, immigration, disability, civil rights, safety and health,
workers' compensation and pay equity, or otherwise relating to the terms and
conditions of employment, including, but not limited to, any obligation to
engage in affirmative action, all Laws relating to employee compensation
matters, and any obligation of the Company or a Company Subsidiary to file all
appropriate forms (including Immigration and Naturalization Service Form I-9)
required by any relevant Governmental Authority.
(c) 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, provided that, for periods prior to October 29, 1996, the foregoing
representation and warranty is made to the Company's and the Controlling
Stockholders' knowledge. 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 Stockholders, there is no
indication that the employees of the Company or any Company Subsidiary desire to
be covered by a collective bargaining agreement.
(d) There are no strikes, slowdowns, work stoppages or other labor
trouble pending or, to the knowledge of the Company and the Controlling
Stockholders, threatened with respect
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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
Stockholders, been threatened, provided that, for periods prior to October 29,
1996, the foregoing representation and warranty is made to the Company's and the
Controlling Stockholders' knowledge.
(e) 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 or
the Controlling Stockholders, no question concerning representation has been
raised or threatened respecting the employees of the Company or any Company
Subsidiary, provided that, for periods prior to October 29, 1996, the foregoing
representation and warranty is made to the Company's and the Controlling
Stockholders' knowledge.
(f) 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 agency and, to the knowledge of the Company and the
Controlling Stockholders, 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, provided that, for periods prior to October 29, 1996, the foregoing
representation and warranty is made to the Company's and the Controlling
Stockholders' knowledge.
(g) 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.
(h) 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.
(i) 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.
(j) Neither the Company nor any Company Subsidiary is and, to the
knowledge of the Company and the Controlling Stockholders, no employee of the
Company or any Company Subsidiary is, in material violation 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.
(k) 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
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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 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 have been used or are used
in or are material to the conduct of the business of the Company or any Company
Subsidiary.
(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.
(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 and
licenses 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 with respect to the
Company or a Company Subsidiary and, to the knowledge of the Company and the
Controlling Stockholders, each other Person that is a party thereto, 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 or the Controlling Stockholders, none of
the Patents is infringed or has been challenged or threatened in any way by any
Person, and to the knowledge of the Company or the Controlling Stockholders,
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) 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
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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.
(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 or the Controlling
Stockholders, none of the Copyrights is infringed or has been challenged or
threatened in any way, and to the knowledge of the Company or the Controlling
Stockholders, 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. 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 adverse claim or has
been challenged or threatened in any way.
4.22 CERTAIN PAYMENTS
Neither the Company nor any Company Subsidiary nor, to the knowledge of
the Company or the Controlling Stockholders, any stockholder, director, officer,
agent or employee of the Company or any Company Subsidiary, 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 Stockholder, stockholder, affiliate, officer, director or employee
of the Company or any Company Subsidiary, nor, to the knowledge of the Company
or the Controlling Stockholders, 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 Stockholders, stockholders, affiliates,
officers, directors or
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employees of the Company or any Company 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
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
Stockholder, stockholder, 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 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 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 Stockholders
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 accounting purposes.
4.27 CUSTOMER RELATIONSHIPS
Except as set forth in Section 4.27 of the Disclosure Schedule, there
are no facts or circumstances known to the Company or the Controlling
Stockholders, including the consummation of the transactions contemplated by
this Agreement, that are reasonably likely to result in the loss of any Customer
of the Company or any Company 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 business carried on by the Company and each of the Company
Subsidiaries has been conducted directly by the Company and each of the Company
Subsidiaries, respectively, and not through any affiliate or any stockholder,
officer, director or employee of the Company or any
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Company Subsidiary or through any other Person. The Company owns and has the
exclusive right, title and interest in and to the name "MST Analytics, Inc." for
corporate law purposes in the States of Delaware and Illinois and, to the
Company's and the Controlling Stockholders' knowledge, no other Person has the
right to use the same, or any confusing derivative thereof, 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 Stockholders,
any Order threatened that has or could reasonably be expected to have the effect
of prohibiting or 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 September 30,
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 twelve
months ended September 30, 1999, (i) the names and addresses of the ten largest
suppliers, vendors, 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, vendors, contractors and subcontractors during
such period and (ii) the amount for which each such supplier, vendor, contractor
or subcontractor invoiced the Company or a Company Subsidiary during such
period. The Company, the Company Subsidiaries and the Controlling Stockholders
have not received any written 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, vendors,
contractor or subcontractor will not sell 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
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Subsidiaries (based upon the amounts specified in clause (b) below) and (b) the
amount for which each such Customer was invoiced during the twelve months ended
September 30, 1999.
4.33 YEAR 2000 COMPLIANCE
(a) The Company has taken reasonable measures to ensure that all
hardware and software 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, whether owned or licensed by the Company, a Company
Subsidiary or a contractor providing such functions and whether operated by the
Company, a Company Subsidiary or a contractor providing such functions (the
"Systems") are materially able to be used prior to, during, and after January 1,
2000 ("Year 2000"). The Systems operate and will operate in all material
respects during each such time periods without material error relating to date
data ("Y2K Readiness"). Without limiting the generality of the foregoing Y2K
Readiness shall mean:
(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 date rollovers will not cause erroneous
processing;
(iii) calculating using date data will be free of
material errors over the range of dates that the Systems are expected
to handle;
(iv) explicit century values will be correctly stored
and passed across all applicable interfaces (including user
interfaces);
(v) all leap year values will be correctly calculated
and processed across all applicable interfaces (including user
interfaces);
(vi) two-digit century designations are assigned an
appropriate century; and
(vii) the Systems have handled the date September 9,
1999, as well as store and pass such date across all interfaces
(including user interfaces).
(b) Section 4.33 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 materially true, correct and
complete copies of the reports or results of any such audits to Parent.
4.34 PAYABLES
There has been no material 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).
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4.35 INVENTORIES
Except to the extent of reserves and allowances in the Financial
Statements, 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 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 in all material respects 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 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
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 4.36 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.
4.37 CONSENT SOLICITATION AND OTHER MATTERS
The Company and the Controlling Stockholders arranged for the delivery
of the materials identified in Schedule 2 hereto to the Company Stockholders in
the form previously approved by Parent (the "Disclosure Materials") in
connection with obtaining the Company Stockholders' consent to this Agreement
and the Transaction Documents and the transactions contemplated by this
Agreement and by the Transaction Documents. The Disclosure Materials contain no
material misstatement of fact and do not omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that this representation and
warranty shall not apply to any information regarding Parent, Merger Sub or the
Merger provided to the Company by Parent specifically for inclusion in the
Disclosure Materials. Neither the Company nor any Controlling Stockholder (nor,
to the knowledge of the Company and the Controlling Stockholders, any other
Person) has made any general solicitation or any general advertising as
described in Rule 502(c) under the Securities Act in connection with the Parent
Common Stock and the transactions contemplated under this Agreement and the
Transaction Documents.
4.38 DISCLOSURE
No representation or warranty of the Company or any Controlling
Stockholder 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.
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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 Stockholders as follows:
5.1 ORGANIZATION AND GOOD STANDING
(a) 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.
(b) Merger Sub has been organized for the specific purpose of engaging
in the Merger and the other transactions contemplated hereby and has not
incurred any liabilities, conducted any business, or entered into any contracts
or commitments, in each case except such as are in furtherance of or incidental
to such transactions.
5.2 AUTHORITY; NO CONFLICT
(a) Parent and Merger Sub each has the corporate power and authority 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 except as enforcement thereof may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting the enforcement of
creditors' rights in general, or by general principles of equity. Each of the
Transaction Documents to which Parent or Merger Sub is a party constitutes the
legal, valid and binding obligations of Parent and Merger Sub, enforceable
against them in accordance with its terms except as enforcement thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
the enforcement of creditors' rights in general, or by general principles of
equity.
(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,
directly or indirectly (with or without notice or lapse of time or both):
(i) contravenes, conflicts with, or results in a violation or
breach of (A) any provision of the Organizational Documents of Parent or Merger
Sub, (B) any resolution adopted
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by the board of directors or the stockholders 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) results in a breach of or constitutes a default, gives
rise to a right of termination, cancellation or acceleration, creates any
entitlement to any payment or benefit, or requires 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 requires 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) results 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 November 4, 1999, 26,028,526 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 and, immediately after the Effective Time, will be entitled to one
vote per share on all matters on which stockholders are entitled to vote under
the DGCL.
5.4 FILINGS WITH THE COMMISSION
(a) Parent has delivered or made available to the Company and each
Company Stockholder a true, correct and complete copy of its Annual Report on
Form 10-K for the year ended December 31, 1998 and Quarterly Reports on Form
10-Q for the quarter ended September 30, 1999 (collectively, the "Parent SEC
Reports"). The Parent SEC Reports have been timely filed pursuant to the
Exchange Act. Parent shall make available to the Company and each Company
Stockholder true, correct and complete copies of each report filed by Parent
with the Commission prior to Closing.
(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 of filing. The
Parent SEC Reports, 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 Reports 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
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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.
(d) The Parent SEC Reports, together with any other information
provided by Parent specifically for inclusion in the materials delivered to the
Company Stockholders in connection with the approval of the Transaction
Documents, as a whole and when read together, 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.
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 the Parent and/or its Subsidiaries participate or are engaged.
5.6 LEGAL PROCEEDINGS
Except as set forth in Section 5.6 of the Disclosure Schedule or
otherwise publicly disclosed by Parent or any of its Subsidiaries, 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
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 accounting purposes.
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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.
5.10 OWNERSHIP OF COMPANY STOCK
Except for the Letter of Intent, as amended, between Parent, the
Company and the Controlling Stockholders, none of Parent, Merger Sub, or any
other Subsidiary of Parent beneficially owns, directly or indirectly, or is a
party to any agreement, arrangement, or understanding with respect to the
acquisition, holding, voting or disposition of any shares of the capital stock
or other securities of the Company.
5.11 CONTINUITY OF BUSINESS ENTERPRISE
It is the present intention of Parent and Merger Sub to continue at
least one significant historic business line of the Company, or to use at least
a significant portion of the Company's historic business assets in a business,
in each case within the meaning of Section 1.368-1(d) of the Treasury
Regulations.
5.12 PRIVATE PLACEMENT
The issuance of the Parent Shares to the Company Stockholders pursuant
to the Merger shall, when consummated in accordance with the provisions of the
Transaction Documents, constitute a valid private placement under either Section
4(2) of the Securities Act or Regulation D of the rules promulgated under the
Securities Act, assuming that (i) the representations and warranties of the
Company and the Controlling Stockholders made to Parent and Merger Sub in
connection with this Agreement and the Transaction Documents and the
transactions contemplated by this Agreement and the Transaction Documents, and
the representations and warranties contained in the Company Stockholder
Representation Letters presented at the Closing, are true, complete and accurate
(upon which assumption Parent and Merger Sub have relied without independent
investigation); and (ii) each Company Stockholder complies with its agreements
and covenants set forth in its respective Representation Letter presented at the
Closing.
6. COVENANTS
The parties, as applicable, hereby covenant and agree as follows:
6.1 COVENANT NOT TO COMPETE AND OTHER COVENANTS
(a) The parties understand and acknowledge that the provisions of this
Section 6.1 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:
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(1) Mr. Byron Denenberg was a substantial stockholder of the Company
prior to the Merger and, as a result, he received significant economic
benefit from the Merger and the other transactions contemplated hereby;
(2) Mr. Denenberg's agreement to be bound by this Section 6.1 was a
substantial condition to Parent and Merger Sub to enter into this
Agreement; the restrictions contained in this Section 6.1 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 Mr. Denenberg's ownership of Company Capital Stock
prior to the Merger, Mr. Denenberg has had, and may continue to have,
access to significant confidential, proprietary or trade secret
information of the Company and the Company Subsidiaries, so that, if
Mr. Denenberg was 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 Subsidiaries
and affiliates of Mr. Denenberg's use of its or their confidential,
proprietary or trade secret information.
Based on the foregoing, for a period of five years from the
Effective Time, absent Parent's Board of Directors' prior written
approval, Mr. Denenberg 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, except that Mr.
Denenberg may remain on the Board of Directors of Fiberchem, Inc.;
(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,
except that the provisions of this subsection (ii) shall not apply if
any such employees, agents, consultants or representatives initiates
contact with Mr. Denenberg or any entity controlled by or affiliated
with Mr. Denenberg for the purpose of exploring employment
opportunities with Mr. Denenberg or an entity controlled by Mr.
Denenberg; or
(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 Mr. Denenberg, would
violate any provision of this Section 6.1.
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If Mr. Denenberg acts in violation of this Section 6.1, the number of
days that Mr. Denenberg is in violation will be added to the time period during
which this Section 6.1 is to be effective.
(b) Mr. Denenberg acknowledges and agrees that any breach by him of any
of the provisions of this Section 6.1 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 Mr. Denenberg of the provisions of this
Section 6.1 would be inadequate, and Mr. Denenberg 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.
6.2 BEST EFFORTS; FURTHER ACTION
(a) Upon the terms hereof, each of the parties hereto shall use its
reasonable best efforts (exercised diligently and in good faith), at Parent's
expense, 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.
(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 reasonably necessary 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.
6.3 POOLING ACCOUNTING AND TAX 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, 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. None of Parent, Merger Sub, the Company, any Company
Subsidiary or any Controlling Stockholder shall take any action, including,
without limitation, the acceleration of vesting of any options, restricted stock
or other rights to acquire shares of the capital stock of the Company, which
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reasonably would be expected to (i) interfere with Parent's ability to account
for the Merger as a pooling-of-interests or (ii) cause the Merger to fail to
qualify as a tax-free reorganization under Section 368 of the Code.
6.4 LASALLE BANK
Concurrently with the Closing, Parent either shall (A) pay to LaSalle
Bank National Association (the "Bank"), by wire transfer of immediately
available funds, an amount to satisfy the Company's debt obligations to the Bank
and cause the Bank to release all Liens on the Company Capital Stock and all
other collateral and deliver all collateral in its possession to Parent (for
purposes of exchange by the applicable beneficial owner thereof for the Parent
Shares under this Agreement) or (B) release the pledges of Company Capital Stock
or stock of any of the Company Subsidiaries by Byron A. Denenberg, KB Partners,
L.L.C. and the Company and cause the Bank to release all Liens on the Company
Capital Stock or stock of any Company Subsidiary that relates to such pledges
and deliver the certificates evidencing Company Capital Stock or stock of any
Company Subsidiary in its possession to Parent (for purposes of exchange by the
applicable beneficial owner thereof for the Parent Shares under this Agreement).
In the case of clause (A) above, concurrently with the Closing, the Company
shall cause the Bank to provide Parent with a pay-off letter satisfactory to
Parent. In the case of clause (B) above, concurrently with the Closing, the
Company shall cause the Bank to provide Parent with a consent to the Merger and
the other transactions contemplated by this Agreement and a waiver with respect
to any default that may otherwise exist by reason thereof, in each case, as
approved by Parent.
6.5 LABOR MATTERS
The Parent shall, and shall cause the Surviving Corporation to, comply
in all material respects with WARN after the Closing.
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 EMPLOYMENT MATTERS
(a) As soon as reasonably practicable following the Effective Time, and
subject to applicable law, each employee of the Company or any Company
Subsidiary who is employed in the United States as of the Closing Date and who
becomes an employee of Parent or the Surviving Corporation in the United States
immediately following the Closing (each, a "Continuing Employee") shall be
eligible to participate in Parent's employee benefit plans subject to the terms
and conditions of such plans.
(b) For purposes of eligibility, vesting and, except with respect to
any pension benefit plan, calculation of benefits under each of Parent's
employee benefit plans, programs and arrangements in which a Continuing Employee
becomes a participant, Parent shall grant, or shall cause the Surviving
Corporation to grant, each such Continuing Employee credit for all service with
the Company or a Company Subsidiary to the extent such service was credited
under the
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corresponding Company or Company Subsidiary Employee Benefit Plan, if
any, provided no credit will be given for any service that would result in a
duplication of benefits under any such plan.
(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
that is an "employee welfare benefit plan" within the meaning of Section 3(1) of
ERISA that is maintained by the Surviving Corporation or Parent solely for the
benefit of its employees. 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 corresponding
Company or Company Subsidiary Employee Benefit Plan, if any) 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 or Company Subsidiary's health benefit
plan.
(d) Intentionally omitted.
(e) It is expressly agreed that the provisions of this Section 7.1 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
Company Subsidiary, 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.
(g) On or promptly following the Closing Date, Parent shall issue
non-qualified stock options to those Continuing Employees in those amounts
specified by Peter Kirlin and Jim Burns (or any other Parent officer designated
by Parent) 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 150,000 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 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 7.1(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 7.1(g) is being made solely as incentive compensation for services
to be rendered by such Continuing Employees to Parent or the Surviving
Corporation.
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7.2 NASDAQ LISTING
The shares of Parent Common Stock issuable to the Company Stockholders
pursuant to this Agreement shall be approved for listing on the Nasdaq National
Market subject to issuance at the Effective Time.
7.3 RECERTIFICATION
Promptly upon the written request of KB Partners, L.L.C. or High Street
Capital, L.L.C., Parent shall cause the shares of Parent Common Stock issued to
such Persons to be recertificated into the names of the beneficial owners of
such Persons in proportion to their respective percentage interest ownership in
such entities; provided, however, that Parent shall not be obligated to
recertificate such shares unless and until all such Persons execute
documentation in form acceptable to Parent making customary representations and
warranties and subjecting such Persons to the same limitations and restrictions
with respect to such shares as KB Partners, L.L.C. and High Street Capital,
L.L.C., and any recertification of shares under this Section 7.3 shall be
subject to the conditions specified in Section 2.8(e) of this Agreement and to
the provisions of any applicable laws.
7.4 TAX MATTERS
(a) Parent and Surviving Corporation will continue at least one
significant historic business line of the Company, or use at least a significant
portion of the Company's historic business assets in a business, in each case
within the meaning of Section 1.368-1(d) of the Treasury Regulations.
(b) Parent or any "related party" to Parent (as defined under Section
1.368-1(e)(3) of the Treasury Regulations) has (i) no plan or intention to, and
except as expressly set forth herein will not, acquire, directly or indirectly
(as set forth under Section 1.368-1(e)(6), examples 4 and 5), any of the
Company's stock prior to the Closing (ii) no plan or intention to acquire
directly or indirectly (as set forth under Section 1.368-1(e)(6), examples 4 and
5) from holders of Company Capital Stock any Parent Common Stock issued in the
Merger (other than as part of an ongoing stock repurchase program of Parent
meeting the requirements of Treasury Regulation Section 1.368-1(e)(6), example 8
or consistent with the Escrow Agreement).
8. DELIVERABLES OF THE COMPANY AND THE CONTROLLING STOCKHOLDERS
The Company and the Controlling Stockholders shall deliver to Parent
and Merger Sub the following items at the Closing:
(a) Favorable certificates, dated the Closing Date, signed by the
Company and the Controlling Stockholders as to the matters set forth below:
(i) The representations and warranties of the Company and the
Controlling Stockholders contained in this Agreement or in the
Disclosure Schedule or any certificate delivered pursuant hereto,
without giving effect to any qualification as to materiality (or
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any variation of such term) contained in any representation or
warranty, are complete and correct in all material respects as of the
Closing Date.
(ii) The Company and the Controlling Stockholders have taken
all necessary corporate or other actions to consummate the transactions
contemplated hereby and 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.
(b) All waivers, approvals, authorizations or Orders required to be
obtained, and all filings required to be made, by the Company or the Controlling
Stockholders, 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.
(c) The employment agreements with Parent or the Surviving Corporation
to be effective on the Closing Date (the "Employment Agreements"), executed by
Gordon Frank and Dr. Peter Robertson, substantially in the form of Exhibits
8(c)(i) and 8(c)(ii), respectively, to this Agreement.
(d) An opinion of Vedder, Price, Kaufman & Kammholz, dated the Closing
Date and addressed to Parent and Merger Sub, as to the matters set forth on
Exhibit 8(d) hereto.
(e) The Escrow Agreement, duly executed and delivered by the Escrow
Agent, the Company and the other parties thereto excepting Parent.
(f) A letter from Arthur Andersen, LLP, independent certified public
accountants of the Company, regarding the appropriateness of
pooling-of-interests accounting for the Merger under APB 16 if closed and
consummated in accordance with this Agreement. Such letter shall be in form and
substance reasonably satisfactory to Parent.
(g) A written agreement in the form attached hereto as Exhibit 8(g) (an
"Affiliate Agreement"), which shall be in full force and effect, from each
Person who is identified in the Affiliate Letter as an "affiliate" of the
Company, in connection with restrictions on "affiliates" (as defined for
purposes of Rule 145) under the Pooling Rules from each Person who is identified
as an "affiliate" of the Company in the Affiliate Letter.
(h) Not used.
(i) With respect to the following Facilities, Buffalo Grove, Il. and
Hohenschaeftlarn, Germany, a satisfactory Phase I environmental audit report
and, if a Phase I environmental audit report is not deemed sufficient by Parent,
such other satisfactory environmental-based documentation and studies as Parent
may request, including a Phase II environmental audit report.
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(j) Representation Letters, in the form of Exhibit 8(j) to this
Agreement, executed by each holder of Company Capital Stock, together will all
applicable purchaser representative letters and spouse's consents as provided in
such Representation Letters.
(k) Letters (together with the affiliate letters delivered by Parent,
the "Affiliate Letters") identifying all Persons who are, immediately prior to
the Effective Time, "Affiliates" of the Company 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").
(l) A Registration Rights Agreement (the "Registration Rights
Agreement") in the form attached as Exhibit 8(l) hereto.
(m) Evidence in form satisfactory to Parent and Merger Sub that this
Agreement, the Merger and the other transactions contemplated hereby shall have
been duly approved by Company Stockholders owning, of record and beneficially,
at least 90% of the issued and outstanding Company Capital Stock in accordance
with the DGCL.
(n) All documents required to be delivered by the Company in accordance
with Section 6.4. In addition, each of Bayerische LfA, Dresdner Bank and
Commerzbank shall have consented to the Merger and the other transactions
contemplated by this Agreement and shall have waived any default that may
otherwise exist by reason thereof, in each case, as approved by Parent.
(o) A copy of the Certificate of Incorporation of the Company,
certified by the Secretary of State of the State of Delaware, and a Certificate
of Good Standing from the Secretary of its State of the State of Delaware, and
certified copies of all Organizational Documents of each Company Subsidiary and,
where available, Certificates of Good Standing for each Company Subsidiary from
the jurisdiction of its formation.
(p) All certificates and documents evidencing all of the Company
Capital Stock, together with all documents pursuant to Section 2.7.
(q) Agreements terminating the employment agreements set forth on
Schedule 8(q) of this Agreement.
9. DELIVERABLES OF PARENT AND MERGER SUB
Parent and Merger Sub shall deliver to the Company and the Controlling
Stockholders the following items at the Closing:
(a) A favorable certificate, dated the Closing Date, signed by Parent
and Merger Sub as to the matters set forth below:
(i) The representations and warranties of Parent and Merger
Sub contained in this Agreement or in the Disclosure Schedule or any
certificate delivered pursuant hereto, without giving effect to any
qualification as to materiality (or any variation of such term)
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contained in any representation or warranty, are complete and correct
in all material respects as of the Closing Date.
(ii) The Parent and Merger Sub have taken all necessary
corporate or other actions to consummate the transactions contemplated
hereby and 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.
(b) Executed copies of the Employment Agreements, the Registration
Rights Agreement and the Escrow Agreement.
(c) Not used.
(d) An opinion of Kramer Levin Naftalis & Frankel LLP, dated the
Closing Date and addressed to the Company and the Controlling Stockholders, as
to the matters set forth on Exhibit 9(d) hereto.
(e) Affiliate Letters identifying all Persons who are, immediately
prior to the Effective Time, anticipated to be "affiliates" of the Parent, as
the case may be, for purposes of the Pooling Rules.
(f) An Affiliate Agreement executed by each Person who is identified as
an "affiliate" of the Parent in the Affiliate Letters in connection with
restrictions on affiliates under the Pooling Rules.
(g) A copy of the Certificate of Incorporation of Parent and Merger
Sub, certified by the Secretary of State of the State of Delaware, and a
Certificate of Good Standing from the Secretary of State of the State of
Delaware.
(h) Stock certificates of Parent in the name of each Company
Stockholder representing the number of shares of Parent Common Stock issuable to
such stockholder pursuant to the terms of this Agreement.
(i) A written tax opinion of Ernst & Young LLP (the "Tax Opinion"),
dated as of the Closing Date, addressed to Parent and reasonably acceptable to
the Company, together with a letter from Ernst & Young LLP addressed to and
reasonably acceptable to the Company stating that the Tax Opinion may be relied
upon by the Company, substantially to the effect that (i) the Merger will
constitute a "reorganization" within the meaning of Section 368(a) of the Code,
and Parent, Merger Sub and the Company will each be a "party to a
reorganization" with respect to the Merger within the meaning of Section 368(b)
of the Code; (ii) neither the Company nor Parent will recognize any gain or loss
as a result of the Merger; (iii) no gain or loss will be recognized by a holder
of Company Capital Stock who receives shares of Parent Common Stock as set forth
in the Agreement upon the conversion of such holder's shares of Company Capital
Stock into Parent Common Stock. A holder of Company Capital Stock who receives
cash in lieu of a fractional interest in a share of Parent Common Stock will
recognize gain or loss, which will be capital gain or loss provided that the
shares of Company Capital stock were held as capital assets, equal to the
difference between the amount of cash received and the ratable portion of the
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holder's tax basis in the shares of Company Capital Stock being converted
pursuant to the Merger that is allocated to such fractional interest; (iv) the
tax basis of the shares of Parent Common Stock received by a former holder of
Company Capital Stock pursuant to the Merger in the aggregate will be the same
as the holder's tax basis in the shares of Company Capital Stock being converted
pursuant to the Merger, reduced by the ratable portion of such tax basis that is
allocable to any fractional interest in a share of Company Capital Stock with
respect to which cash is being received; (v) the holding period of the shares of
Parent Common Stock received by a former holder of Company Capital Stock
pursuant to the Merger will include the holder's holding period with respect to
the shares of Company Capital Stock being converted pursuant to the Merger,
provided that the shares of Company Capital Stock converted pursuant to the
Merger were held as capital assets in the hands of the former holder of Company
Capital Stock on the date of the conversion; and (vi) no gain or loss will be
recognized by a holder of warrants to purchase Company Capital Stock who
receives warrants to purchase Parent Common Stock in exchange therefor pursuant
to the Agreement. Each of the Company, Parent, and Merger Sub agrees to provide
all customary and necessary representations to Ernst & Young LLP as are
reasonably requested to allow it to prepare and issue the Tax Opinion.
(j) All documents required to be delivered by Parent in accordance with
Section 6.4.
10. INDEMNIFICATION
10.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
(a) Except as otherwise provided in this Section 10.1, 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., New York 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 10.2 or 10.3 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 Expiration Date.
10.2 OBLIGATION OF THE COMPANY AND THE CONTROLLING STOCKHOLDERS TO
INDEMNIFY, REIMBURSE, ETC.
Subject to the provisions of Section 10.4, the Company and its
stockholders, including but not limited to the Controlling Stockholders, 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
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respective successors and permitted assigns (each a "Parent Indemnitee") from
and against 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 or any Controlling Stockholder. 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) actually incurred,
net of any insurance proceeds which the indemnitee actually receives by virtue
of such claims, losses, liabilities, damages, causes of action, costs and
expenses.
10.3 OBLIGATION OF PARENT TO INDEMNIFY, REIMBURSE, ETC.
Subject to the provisions of Section 10.4, 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
Stockholders 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.
10.4 LIMITS ON INDEMNIFICATION, REIMBURSEMENT, ETC.
(a) 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 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 the
entire amount of such Losses shall be fully indemnifiable subject to this
Section 10.4.
(b) 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. 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 of the Closing Date
(as determined in accordance with the Escrow Agreement).
(c) No Parent Indemnitee shall have any right to seek indemnification,
reimbursement or defense under this Agreement or the Escrow Agreement in respect
of Losses 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 is of a type expected to be encountered in the
course of an audit performed in accordance with generally accepted auditing
standards.
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10.5 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
in accordance with Section 10.2. 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.
10.6 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, and in any event within
fifteen days, 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, the
amount of the Claim and copies of all information provided to the Indemnitee by
the third party making the Claim with respect thereto; 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. Nothing herein shall preclude the Indemnitor from disputing
any indemnification request associated with a Claim.
(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, subject to Indemnitor's right
of dispute as set forth in clause (a) above. 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 10.6(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 10.6(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
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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.
11. GENERAL PROVISIONS
11.1 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, however, that the reasonable fees, costs and
expenses of the Controlling Stockholders shall be paid by the Company, as the
Company has determined that such items are in furtherance of the Company's
interest and primarily benefit the Company; provided further that the Company
shall not pay any such fees, costs and expenses of the Controlling Stockholders
relating to any legal services provided by any entity other than Vedder, Price,
Kaufman & Kammholz.
11.2 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 in connection with the
transactions contemplated hereby that are required or permitted to be filed,
whether before, on or after the Effective Time.
11.3 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 Stockholders
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 Stockholders 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 11.3. 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.
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11.4 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 11.4):
(a) If to Parent or Merger Sub:
ATMI, Inc.
7 Commerce Drive
Danbury, CT 06810
Telecopier No.: (203) 797-2546
Telephone No.: (203) 794-1100
Attention: Daniel P. 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: Howard T. Spilko
(b) If to the Company or the Controlling Stockholders:
MST Analytics, Inc.
c/o KB Partners, LLC
500 Skokie Boulevard
Suite 446
Northbrook, IL 60062
Telecopier No.: (847) 714-0446
Telephone No.: (847) 714-0445
Attention: Mr. Byron Denenberg
With a copy to:
Vedder, Price, Kaufman & Kammholz
222 North La Salle Street
Chicago, IL 60601
Telecopier No.: (312) 609-5005
Telephone No.: (312) 609-7500
Attention: Michael A. Nemeroff
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11.5 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 11.4.
11.6 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.
11.7 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements, 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.
11.8 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 10 any legal or equitable
right, remedy or claim under or with respect to this Agreement or any provision
of this Agreement.
11.9 SEVERABILITY
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
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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.
11.10 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.
11.11 GOVERNING LAW
This Agreement will be governed by the internal laws of the State of
Delaware without regard to principles of conflict of laws.
11.12 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.
11.13 STOCKHOLDER REPRESENTATIVE
(a) The Stockholder Representative, on behalf of the Company
Stockholders, shall be authorized to take any action and to make and deliver any
certificate, notice, consent or instrument required or permitted to be made or
delivered under this Agreement or the Escrow Agreement or under the documents
referred to in this Agreement (an "Instrument") which the Stockholder
Representative determines in his discretion to be necessary, appropriate or
desirable, and, in connection therewith, to hire or retain, at the sole expense
of the Company Stockholders, such counsel, investment bankers, accountants,
representatives and other professional advisors as he determines in his sole and
absolute discretion to be necessary, advisable or appropriate in order to carry
out and perform his rights and obligations hereunder. Any party receiving an
Instrument from the Stockholder Representative shall have the right to rely in
good faith upon such Instrument, and to act in accordance with the Instrument
without independent investigation.
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(b) During the period from the date of this Agreement and ending upon
the date when all obligations under this Agreement have been discharged
(including all indemnification obligations under Section 10 of this Agreement),
the Controlling Stockholders may, from time to time, upon written notice to the
Stockholder Representative and Parent, remove the Stockholder Representative.
Furthermore, if the Stockholder Representative dies, becomes incapacitated,
resigns or is removed by the Controlling Stockholders, the Controlling
Stockholders shall appoint a successor Stockholder Representative to fill the
vacancy so created. If the Controlling Stockholders are required to but have not
appointed a successor Stockholder Representative within fifteen business days,
Parent shall have the right to appoint a successor Stockholder Representative
and shall advise all those who were Company Stockholders immediately prior to
the Effective Time of such appointment by written notice. A copy of any
appointment by the Controlling Stockholders of any successor Stockholder
Representative shall be provided to Parent promptly after it shall have been
effected.
(c) The parties acknowledge and agree that the Stockholder
Representative is acting as such as a matter of convenience to the Company
Stockholders and shall have no liability whatsoever under this Agreement or the
Escrow Agreement for his actions taken in furtherance of the authority granted
in this Agreement except to the extent of his obligations as a Company
Stockholder or Controlling Stockholder.
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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:
--------------------------------
Name:
Title:
FOG ACQUISITION CORPORATION
By:
--------------------------------
Name:
Title:
MST ANALYTICS, INC.
By:
--------------------------------
Name:
Title:
CONTROLLING STOCKHOLDERS
-------------------------------------
Byron A. Denenberg
KB PARTNERS, L.L.C.
By:
--------------------------------
Name:
Title:
<PAGE>
Exhibits:
Exhibit 2.8: Form of Escrow Agreement
Exhibit 8(c)(i): Employment Agreement with Gordon Frank
Exhibit 8(c)(ii): Employment Agreement with Dr. Peter Robertson
Exhibit 8(d): Matters to be Addressed in Opinion of the Company's Counsel
Exhibit 8(g): Form of Affiliate Agreement
Exhibit 8(j): Form of Stockholder Representation Letter
Exhibit 8(l): Form of Registration Rights Agreement
Exhibit 9(d): Matters to be Addressed in Opinion of Parent's Counsel
Schedules:
Schedule 1: Key Employees
Schedule 2: Disclosure Materials
Schedule 8(q): Employment Agreements
Disclosure Schedule:
Section 2.7(a): Conversion Shares Received by Company Stockholders
Section 2.7(d): Option and Warrant Agreements and Instruments
Section 3.1: Authority; No Conflict
Section 3.2: Ownership of Shares; Stockholder Agreements
Section 4.1: Organization and Good Standing
Section 4.2: Authority; No Conflict
Section 4.3: Capitalization; Voting Agreements
Section 4.4: Books and Records
Section 4.5: Financial Statements
Section 4.6: Undisclosed Liabilities
Section 4.7: Material Adverse Change
Section 4.8: Taxes
Section 4.10: Title to Properties; Encumbrances; Liens
Section 4.12: Compliance with Laws; Governmental Authorizations
Section 4.13: Legal Proceedings
Section 4.14: Absence of Certain Changes and Events
Section 4.15(a): Contracts
Section 4.15(b): Validity of Contracts
Section 4.15(c): Compliance with Terms of Contracts
Section 4.16: Insurance
Section 4.17: Environmental Matters
Section 4.18: Employees
Section 4.19(a): Employee Benefits
Section 4.19(f): Welfare Plans
Section 4.19(j): Certain Employees, Officers and Directors of the
Company and Company Subsidiaries
Section 4.19(k): Certain Agreements
<PAGE>
Section 4.19(m): No Payments of Certain Benefits
Section 4.19(s): No Severance Benefits or Leased Employees
Section 4.20: Labor Relations
Section 4.21(c): Intellectual Property Contracts
Section 4.21(d): Patents
Section 4.21(e): Trademarks
Section 4.21(f): Copyrights
Section 4.23: Relationships with Related Persons
Section 4.24: Brokers or Finders
Section 4.25: Deposit Accounts
Section 4.27: Customer Relationships
Section 4.30: Outstanding Indebtedness
Section 4.31: Suppliers; Raw Materials Contractors
Section 4.32: Customers
Section 4.33: Year 2000 Compliance
Section 4.35: Inventories
Section 4.36: Product Warranties
Section 5.2: Authority; No Conflict
Section 5.6: Legal Proceedings
<PAGE>
SCHEDULE 1
Key Employees
Christoph Braden
Tom Chatterton
Paul Decker
Gordon Frank
Gerhard Hoog
Peter Koller
Renate Merkel
Nelson Rivera
Peter Robertson.
Vining Sherman
Ernesto Szombach
<PAGE>
SCHEDULE 2
Disclosure Materials
1. Disclosure/Consent Solicitation Statement, together with cover letter
2. Form of Agreement and Plan of Merger
3. Written Consent of MST Stockholders
4. ATMI's Annual Report on Form 10-K for the year ended December 31, 1998
5. ATMI's latest Quarterly Report on Form 10-Q for the period ended
June 30, 1999
6. Form 8-K of ATMI, filed on June 15, 1999
7. Form 8-K/A of ATMI, filed on July 1, 1999
8. Annual Report of ATMI to Stockholders for the year ended December 31, 1998,
with the definitive proxy statement filed in connection with that
Annual Report
9. Certificate of Incorporation of ATMI, as amended
10. Restated By-laws of ATMI
11. Description of Certain Risk Factors Regarding an Investment in ATMI
12. Form of Registration Rights Agreement
13. Form of Escrow Agreement
14. MST Stockholder Representation Letter, with attachments
15. Dissenter's Rights under Delaware Law
16. Fairness Opinion of Duff & Phelps
17. Internal Revenue Service Forms W-8, W-9, and 1001
<PAGE>
SCHEDULE 8(q)
Employment Agreements
1. Employment Agreement between MST Analytics, Inc. and Byron A. Denenberg
dated June 25, 1997;
2. Management Consulting Agreement between MST Micro-Sensor-Technologies
GmbH and Byron A. Denenberg dated December 20, 1997;
3. Employment Agreement between FPM Analytics, Inc. and MST Analytics,
Inc. and Dr. Peter Robertson dated July 2, 1997;
4. Employment Agreement between FPM Analytics, Inc. and MST Analytics,
Inc. and Gordon Frank dated October 30, 1997;
5. Employment Agreement between MST Measurement Systems, Inc. and MST
Analytics, Inc. and Paul F. Decker dated September 18, 1997;
6. Employment Agreement between MST Measurement Systems, Inc. and Vining
Sherman dated March 8, 1999;
7. Employment Agreement between MST Measurement Systems, Inc. and MST
Analytics, Inc. and Nelson Rivera dated June 30, 1997; and
8. Employment Agreement between FPM Analytics, Inc. and MST Analytics,
Inc. and Thomas Chatterton dated June 30, 1997
A T M I TO ACQUIRE NEWFORM
Adds High Purity Solids Packaging Technology
DANBURY, CT, USA and Hoegaarden, Belgium -- October 15, 1999 -- ATMI,
Inc. (Nasdaq: ATMI), today announced that it has signed a definitive agreement
to acquire Newform N.V. of Hoegaarden, Belgium for 550,000 common shares of A T
M I common stock in a pooling-of-interests share exchange transaction. The
completion of the transaction is subject to regulatory approvals and other
closing conditions. Following the transaction, expected to close during the
fourth quarter of 1999, Newform's products will join A T M I's specialty
materials packaging product lines that include the SDS(r) Gas Source and the
NOWPak(r) liquid delivery systems.
Doug Neugold, Executive Vice President, A T M I Materials, said, "With
the addition of Newform to A T M I, we'll be a comprehensive single source for
high purity gas, liquid, or solid materials packaging. A T M I will gain new
facilities centrally located in the European Community, while Newform will add
access to A T M I's US-and Asian-based manufacturing and sales operations."
Terry Nagel, President of A T M I's NOWPak liquid packaging business,
said, "With the packaging technology Newform brings to the table, A T M I will
be able to package critical solids -- sputter targets, wafer and disc shippers,
cleanroom parts, container overwraps, and more -- for all facets of the
microelectronics market. Newform's pharmaceutical sales nicely complement NOW's
emerging sales into this industry."
Stephane Huynen, Newform's Managing Director, said, "Newform is well
known and respected for its premium purity, flexible packaging products. We see
enhanced sales and marketing opportunities, with greater opportunities to
present our products to current and potential A T M I customers. We believe we
will also be able to provide select A T M I operations with lower cost, higher
quality packaging products."
Newform provides high-purity flexible ultra clean Cleansteam(tm)
packaging to the semiconductor and pharmaceutical industries. ISO 9002
certified, Newform is based in Hoegaarden, Belgium, and employs about 40 people.
Its 70,000 square foot facility includes 15,000 square feet of Class 100
cleanroom space.
A T M I provides products and services for semiconductor device
manufacture through its Materials and Technologies units. A T M I Materials
includes thin film materials and delivery systems, sub-atmospheric gas delivery
systems, high-purity materials packaging systems, and photolithography and
chemical-mechanical polishing materials. A T M I Technologies includes process
and environmental solutions, thin film deposition services, 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 A T M I's markets; competition, problems, or
delays developing and commercializing new products; problems or delays in
integrating acquired operations and businesses into A T M I; and other
<PAGE>
factors discussed in A T M I's filings with the Securities and Exchange
Commission. Such risks and uncertainties could cause actual results to differ
from those projected.
# # # #
For more information contact:
Dean Hamilton
A T M I
203/794-1100
[email protected]
A T M I COMPLETES NEWFORM ACQUISITION
$16.5 Million Deal Adds High-Purity Solids Packaging
Technology
DANBURY, CT -- November 29, 1999 -- A T M I, Inc. (Nasdaq: ATMI), today
announced it has completed its acquisition of Newform N.V. of Hoegaarden,
Belgium. A T M I previously announced it had signed a definitive agreement to
acquire Newform in October 1999. Under the pooling of interests transaction, A T
M I issued 550,000 common shares for all Newform interest. Newform's products
join A T M I's specialty materials packaging product lines that include the SDS
Gas Source and the NOWPak high purity liquid packaging systems.
Newform provides high-purity flexible ultra clean Cleansteam(tm)
packaging to the semiconductor and pharmaceutical industries. ISO 9002
certified, Newform is based in Hoegaarden, Belgium, and employs about 40 people.
Its 70,000 square foot facility includes 15,000 square feet of Class 100
cleanroom space.
A T M I provides products and services for semiconductor device
manufacture through its Materials and Technologies units. A T M I Materials
includes thin film materials and delivery systems, sub-atmospheric gas delivery
systems, high-purity materials packaging systems, and photolithography and
chemical-mechanical polishing materials. A T M I Technologies includes process
and environmental solutions, thin film deposition services, smart card
solutions, and other ATMI ventures.
HTTP://WEB.ATMI.COM
# # # #
For more information contact:
Dean Hamilton
A T M I
203/794-1100
[email protected]
A T M I ACQUIRES MST ANALYTICS Extends A T M I's Sensing Capabilities
in Semiconductor Materials Management
DANBURY, CT and Buffalo Grove, IL -- November 30, 1999 -- A T M I, Inc.
(Nasdaq: ATMI), today announced that it has acquired MST Analytics, Inc. (MST)
of Buffalo Grove, Illinois in a deal valued at approximately $32 million. A T M
I issued 1,075,000 common shares for MST interests in this pooling-of-interests
merger. MST's semiconductor gas monitoring system products will join A T M I's
EcoSys subsidiary, which sells A T M I's environmental abatement and sensing
product lines.
Peter Kirlin, Executive Vice President, A T M I Technologies, said,
"MST has two primary product lines, both of which are excellent strategic fits
for A T M I. MST's gas sensing products monitor the toxic gases widely used in
manufacturing semiconductors, on both a fab-wide and personal basis. This
product line complements EcoSys's rapidly growing monitoring business, added
through our TeloSense acquisition in May this year."
"MST's range of liquid analyzers and process control systems are used
in CMP (chemical mechanical planarization), wet cleaning of wafers, and copper
ECD (electro-chemical deposition). These products are increasingly required to
help optimize the use of chemicals, enabling tighter process control and
repeatability of yield-improving process parameters. We believe these systems
create a strategic entry point for ATMI into these important wafer fabrication
processes."
Byron Denenberg, Chairman of MST said, "A T M I's strategy of supplying
integrated materials solutions to its semiconductor customers via specialty
materials, materials delivery systems, materials sensing, and abatement is very
appealing to MST. We believe our production-proven Satellite(tm) gas sensing
technologies, together with our liquid analytical and process control
capabilities, are a natural extension of A T M I's solution-based strategy."
Dan Sharkey, ATMI CFO, said, "MST's 1998 revenues were $19.7 million,
with net income of about $700,000. They are on track for similar revenues in
1999 with a net income that should make this deal neutral to A T M I's earnings
this year. Based on the strategic synergies between the companies, we expect
this transaction to be accretive in 2000. Because we completed two acquisitions
during the fourth quarter, we expect to take a one-time charge of up to $2.5
million during the quarter. This charge is for customary investment banking,
legal, and accounting fees for these transactions."
A T M I provides products and services for semiconductor device
manufacture through its Materials and Technologies units. A T M I Materials
includes thin film materials and delivery systems, sub-atmospheric gas delivery
systems, high-purity materials packaging systems, and photolithography and
chemical-mechanical polishing materials. A T M I Technologies includes process
and environmental solutions, thin film deposition services, 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 A T
<PAGE>
M I's markets; competition, problems, or delays developing and commercializing
new products; problems or delays in integrating acquired operations and
businesses into A T M I; and other factors discussed in A T M I's filings with
the Securities and Exchange Commission. Such risks and uncertainties could cause
actual results to differ from those projected.
http://web.atmi.com
# # # #
For more information contact:
Dean Hamilton
A T M I
203/794-1100
[email protected]
