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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER
among
NEW FOCUS, INC.,
a Delaware corporation,
JCA ACQUISITION CORPORATION,
a California corporation,
JCA TECHNOLOGY, INC.,
a California corporation,
JAMES CHAO,
an individual,
and
each of the SHAREHOLDERS of
JCA TECHNOLOGY, INC. set forth on Exhibit A
Dated as of October 25, 2000
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
October 25, 2000, is entered into by and among New Focus, Inc., a Delaware
corporation ("Parent"), JCA Acquisition Corporation, a California corporation
and wholly-owned subsidiary of Parent ("Merger Sub"), JCA Technology, Inc., a
California corporation (the "Company"), James Chao (the "Principal Shareholder")
and each of the other shareholders of the Company set forth on Exhibit A hereto
(together with the Principal Shareholder, the "Company Shareholders"). Parent,
Merger Sub, the Company, the Principal Shareholder and the Company Shareholders
are sometimes referred to herein, individually, as a "Party," and, collectively,
as the "Parties."
RECITALS
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have each determined that the merger of Merger Sub with and into the
Company upon the terms and conditions set forth in this Agreement (the "Merger")
is advisable, fair to and in the best interests of their respective companies
and shareholders and presents an opportunity for their respective companies to
achieve long-term strategic and financial benefits, and accordingly have
approved the Merger;
WHEREAS, each of the Company Shareholders owns that number of shares of
Common Stock (as defined below) set forth opposite his or her name on Exhibit A,
which shares in the aggregate constitute all of the issued and outstanding
shares of capital stock of the Company;
WHEREAS, as consideration for, and an inducement to, Parent and Merger
Sub to enter into this Agreement, the Principal Shareholder has concurrently
entered into a Support Agreement in the form attached hereto as Exhibit B (the
"Support Agreement"); and
WHEREAS, for United States Federal income tax purposes, it is intended
that the Merger qualify as a reorganization, and this Agreement constitute a
plan of reorganization, within the meaning of Section 368(a) of the Code (as
defined hereinafter).
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Parties hereby agree as follows:
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ARTICLE I.
DEFINITIONS
For purposes of this Agreement, the term:
"Acquisition Proposal" shall mean, with respect to the Company,
any proposal or offer from any Person (other than Parent or any of its
Affiliates) relating to any (a) direct or indirect acquisition or purchase of a
business of the Company that constitutes 15% or more of the net revenues, net
income or Assets of the Company, (b) direct or indirect acquisition or purchase
of 15% or more of any class of equity securities of the Company, (c) tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 15% or more of any class of equity securities of the capital
stock of the Company, or (d) merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company.
"Action" shall mean any action, order, writ, injunction,
judgment or decree outstanding or suit, litigation, proceeding, arbitration,
audit or investigation by or before any Governmental Entity.
"Affiliate" shall mean, with respect to any Person, any other
Person that directly, or through one or more intermediaries, controls or is
controlled by or is under common control with such Person.
"Ancillary Agreements" shall mean the Escrow Agreement, the
Agreement of Merger, the Support Agreement, each Non-Competition Agreement, the
Lock-up Agreement, the officers' certificates delivered pursuant to Sections
7.2(c) and 7.3(c), and each employment agreement provided for in Section 6.11.
"Assets" shall mean, with respect to any Person, the right,
title and interest of such Person, in their properties, assets and rights of any
kind, whether tangible or intangible, real or personal, including without
limitation the right, title and interest in the following:
(a) all Contracts;
(b) all Fixtures and Equipment;
(c) all Facilities;
(d) all inventory;
(e) all Books and Records;
(f) all Proprietary Rights;
(g) all Permits;
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(h) all return and other rights under or pursuant to all
warranties, representations and guarantees made by suppliers and other third
parties in connection with the Assets or services furnished to such Person;
(i) all cash, accounts receivable, deposits and prepaid
expenses; and
(j) all goodwill.
"Average Stock Price" shall mean the average of the Daily Per
Share Prices for the ten consecutive trading days ending on the trading day two
days prior to the date on which such price is to be determined.
"Benefit Arrangement" shall mean any employment, consulting or
severance arrangement or policy and each plan, arrangement, program, agreement
or commitment providing for insurance coverage, workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health, disability or accident benefits or for
deferred compensation, profit-sharing bonuses, stock options, stock appreciation
rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (a) is not a Welfare
Plan, Pension Plan or Multiemployer Plan, (b) is or has been entered into,
maintained, contributed to or required to be contributed to by the Company or an
ERISA Affiliate or under which the Company or any ERISA Affiliate may incur any
liability or obligation, and (c) covers any employee, former employee,
consultant or director of the Company or any ERISA Affiliate (with respect to
their relationship with such entities).
"Blue Sky Laws" shall mean state securities "blue sky laws."
"Books and Records" shall mean, with respect to any Person, (a)
all product, business and marketing plans, sales and promotional literature and
artwork relating to the Assets or the business of such Person and (b) all books,
records, lists, ledgers, financial data, files, reports, product and design
manuals, plans, drawings, technical manuals and operating records of every kind
relating to the Assets or the business of such Person, in each case whether
maintained as hard copy or stored in computer memory.
"Business Day" shall mean each day other than Saturdays, Sundays
and days when commercial banks are authorized to be closed for business in Los
Angeles, California.
"California Securities Law" shall mean the California Corporate
Securities Law of 1968, as amended.
"CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601, et seq., as amended.
"Certificate" shall mean an outstanding certificate or
certificates which immediately prior to the Effective Time represented shares of
Company Common Stock.
"CCC" shall mean the California Corporations Code.
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"Code" shall mean the Internal Revenue Code of 1986, as amended,
or any successor law.
"Company Board" shall mean the board of directors of the
Company.
"Company Common Stock" shall mean the common shares, no par
value, of the Company.
"Company Contract" shall mean the following Contracts of the
Company :
(a) all written management, compensation, employment or other
Contracts entered into with any executive officer, director or key employee of
the Company;
(b) all Contracts which provide for Liability to the Company in
excess of $50,000.00 which are not terminable by the Company on less than 30
days notice;
(c) all contracts under which the Company has any outstanding
indebtedness, obligation or liability for borrowed money or the deferred
purchase price of property or has the right or obligation to incur any such
indebtedness, obligation or liability, in each case in an amount greater than
$50,000.00 and in the aggregate more than $150,000.00;
(d) all Contracts providing for indemnification of any Person
with respect to Liabilities relating to any current or former business of the
Company, other than customary indemnification provisions contained in Contracts
for the purchase of supplies or the sale of inventory in the ordinary course of
business, in an individual amount or potential amount greater than $50,000.00 or
in the aggregate more than $100,000.00;
(e) all Contracts under which the Company has directly or
indirectly guaranteed any Liabilities of any Person in an individual amount or
potential amount greater than $50,000.00 or in the aggregate more than
$150,000.00;
(f) all Contracts which limit the ability of the Company to
compete in any line of business or with any Person or in any geographic area or
which limit the ability of the Company with respect to the development,
manufacture, marketing, sale or distribution of, or other rights with respect
to, any products or services;
(g) all Contracts concerning a partnership, joint venture or
joint development;
(h) all Contracts relating to acquisitions or dispositions of
any business or product line;
(i) all material Contracts pursuant to which the Company has
agreed to pay a rebate other than any such Contracts entered in the ordinary
course of business consistent with past practice;
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(j) all material Contracts pursuant to which the Company has
licensed from or to a third party any Proprietary Rights (except any such
agreements relating to commercially available off the shelf software);
(k) all Contracts providing for or granting an Encumbrance upon
any material Asset of the Company (other than a Permitted Encumbrance);
(l) all Contracts providing for or containing confidentiality
and non-disclosure obligations (other than standard non-disclosure forms signed
by employees generally, copies of which have been provided to the Purchaser);
and
(m) all other material Contracts.
"Company Shareholder Representative" shall mean James Chao, an
individual, until such time as he resigns or his successor is appointed in
accordance with Section 2.15 hereof.
"Contracts" means, with respect to any Person, all agreements,
contracts, obligations, binding commitments and binding arrangements (a) to
which such Person is a party, (b) under which such Person has any rights, (c)
under which such Person has any Liability or (d) by which such Person or any
Asset of such Person is bound, including, in each case, all amendments,
modifications and supplements thereto.
"Daily Per Share Price" shall mean, for any trading day, the
last reported sale price per share of Parent Common Stock as reported on the
NASDAQ National Market (or such successor exchange upon which the Parent Common
Stock is listed) for that day.
"Damages" shall mean the amount of any loss, claim, demand,
liability, obligations, damage, diminution in value, deficiency, assessment,
judgment, penalty, cost or expense (including reasonable attorneys' fees,
accountants' and other experts' fees and expenses, incurred in investigating,
preparing for or defending against any Action or other legal matters or in
asserting, preserving or enforcing a Party's rights hereunder), net of any
insurance proceeds or tax benefits received with respect thereto.
"Employee Plans" shall mean all Benefit Arrangements,
Multiemployer Plans, Pension Plans, Welfare Plans and Employment Agreements.
"Employment Agreements" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, contract or understanding between the Company or any
Affiliate and any Employee.
"Encumbrances" shall mean any lien, pledge, option, right of
first refusal, charge, easement, security interest, deed of trust, mortgage,
right-of-way, covenant, condition, restriction or encumbrance of third parties.
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"Environmental Laws" shall mean any federal, state or local law,
statute, ordinance, order, decree, rule or regulation relating to: (a) the
preservation or reclamation of natural resources, (b) releases, discharges,
emissions or disposals to air, water, land or groundwater of Hazardous
Materials; (c) the use, handling or disposal of polychlorinated biphenyls,
asbestos or urea formaldehyde or any other Hazardous Material; (d) the
treatment, storage, disposal or management of Hazardous Materials; (e) exposure
to toxic, hazardous or other controlled, prohibited or regulated substances; or
(f) the transportation, release or any other use of Hazardous Materials,
including CERCLA, EPCRA, HTMA, RCRA, TSCA, the Occupational, Safety and Health
Act, 29 U.S.C. 651, et seq., the Clean Air Act, 42 U.S.C. 7401, et seq., the
Federal Water Pollution Control Act, 33 U.S.C. 1251, et seq., and the Safe
Drinking Water Act, 42 U.S.C. 300f, et seq., and other comparable state and
local laws and all rules and regulations promulgated pursuant thereto or
published thereunder.
"EPCRA" shall mean the Emergency Planning and Community Right to
Know Act, 42 U.S.C. 11001, et seq., as amended.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"ERISA Affiliate" shall mean, with respect to the Company, any
entity which is (or at any relevant time was) a member of a "controlled group of
corporations" with, under "common control" with, or a member of "affiliated
service group" with, the Company as defined in Section 414(b) or (c) of the Code
or, solely for the purposes of potential liability under Section 302(c)(11) of
ERISA and Section 412(c)(11) of the Code and the lien created under Section
302(f) of ERISA and Section 412(n) of the Code, as defined in Section 414(m) or
(o) of the Code.
"Escrow Shares" shall mean that number of shares of Parent
Common Stock that is equal to 9% of the aggregate number of Issued Parent Shares
received by the Company Shareholders.
"Excess Expenses" shall mean any fees and expenses, including
those of financial advisors, accountants and counsel, incurred by the Company in
connection with this Agreement and the transactions contemplated hereby,
exceeding the estimated amounts set forth in Section 6.15 of the Company
Disclosure Schedule.
"Exchange Act" shall mean the Securities and Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Exchange Ratio" shall mean a fraction (expressed as a decimal
and rounded to the nearest ten-thousandth of a share), determined by dividing:
(a) the number of Issuable Parent Shares; by
(b) the fully diluted number of shares of Company Common Stock
outstanding immediately prior to the Merger after giving effect to the
conversion of all
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outstanding options, warrants, and other rights to acquire Company Common Stock,
into shares of Company Common Stock.
"Facilities" shall mean, as to any Person, all plants, offices,
manufacturing facilities, stores, warehouses, administration buildings and all
real property and related facilities owned, leased or used by such Person.
"Fixtures and Equipment" shall mean, with respect to any Person,
all of the furniture, fixtures, furnishings, machinery and equipment owned,
leased or used by such Person and located in, at or upon the Facilities of such
Person.
"GAAP" shall mean generally accepted accounting principles in
the United States of America, as in effect from time to time, consistently
applied.
"Governmental Entities" shall mean all courts, regulatory or
administrative agencies, commissions or other governmental authorities, bodies
or instrumentalities, domestic or foreign.
"Hazardous Materials" shall mean each and every element,
compound, chemical mixture, contaminant, pollutant, material, waste or other
substance which is defined, determined or identified as hazardous or toxic under
applicable Environmental Laws or the release of which is regulated under
applicable Environmental Laws. Without limiting the generality of the foregoing,
the term includes: "hazardous substances" as defined in CERCLA; "extremely
hazardous substances" as defined in EPCRA; "hazardous waste" as defined in RCRA;
"hazardous materials" as defined in HMTA; a "chemical substance or mixture" as
defined in TSCA; crude oil or petroleum products; radioactive materials,
including source, byproduct or special nuclear materials; asbestos or
asbestos-containing materials; chlorinated fluorocarbons; and radon.
"HTMA" shall mean the Hazardous Materials Transportation Act, 49
U.S.C. 1802 et seq., as amended.
"IRS" shall mean the United States Internal Revenue Service or
any successor agency.
"Issuable Parent Shares" shall mean the number of shares of
Parent Common Stock obtained by dividing (a) the difference between Six Hundred
Million Dollars ($600,000,000) less the amount of the Excess Expenses, by (b)
the Average Stock Price as of the Closing Date if such number of Issuable Parent
Shares is greater than or equal to 5,234,899 (the "Low Share Number") and less
than or equal to 10,469,799 (the "High Share Number"). If such number of
Issuable Parent Shares is less than the Low Share Number, the "Issuable Parent
Shares" shall mean that number of shares of Parent Common Stock equal to the Low
Share Number. If such number of Issuable Parent Shares is greater than the High
Share Number, the "Issuable Parent Shares" shall mean that number of shares of
Parent Common Stock equal to the High Share Number, subject to Section 8.1(e).
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"Issued Parent Shares" shall mean that number of Issuable Parent
Shares issued at Closing pursuant to Section 2.7(a) after giving effect to any
Cash Election made pursuant to Section 2.7(b).
"Knowledge" shall mean with respect to any Person, the actual
knowledge of such Person after the due inquiry of a prudent individual in
similar circumstances. The Company shall be deemed to have "Knowledge" of a
particular fact or other matter if any of its directors or the following
officers or management employees has Knowledge of such fact or other matter:
James Chao, Joanne Chao, Matt Chao, Glen Wasylewski, and Jerad Chao.
"Liability" shall mean any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute,
contingent, matured, unmatured or other.
"Material Adverse Effect" shall mean, with respect to a Person,
any event, fact or circumstance that has significant or substantial adverse
effect or significant or substantial adverse change in the assets, liabilities,
business, operations, results of operations or condition (financial or
otherwise) of such Person, taken as a whole, or, if such Person is a Party, on
the ability of such Person to consummate the transactions contemplated hereby;
provided, however, that any such change or effect related to the economy or
securities markets of the United States in general or such Person's industry in
general shall not in and of itself constitute, or otherwise be considered in
determining whether there exists, a Material Adverse Effect.
"Multiemployer Plan" shall mean any "multiemployer plan," as
defined in Section 3(37) of ERISA, (a) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or,
after September 25, 1980, maintained, administered, contributed to or was
required to contribute to, or under which the Company or any ERISA Affiliate may
incur any liability or obligation and (b) which covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
"Parent Board" shall mean the board of directors of Parent.
"Parent Common Stock" shall mean the Common Stock, par value
$0.001 per share, of Parent.
"Pension Plan" shall mean any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) (a) which the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or has been maintained, administered or contributed
to or required to be contributed to, or under which the Company or any ERISA
Affiliate may incur any liability and (b) which covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such entities).
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"Permits" means all consents, licenses, permits, certificates,
variances, exemptions, franchises and other approvals issued, granted, given, or
otherwise made available by any Governmental Entity.
"Permitted Encumbrances" shall mean (a) those Encumbrances that
result from all statutory or other liens for Taxes or assessments (1) which are
not yet due and payable or (2) the validity of which is being contested in good
faith by appropriate proceedings and for which adequate reserves are being
maintained in accordance with GAAP; (b) those Encumbrances that result from any
cashiers', landlords', workers', mechanics', carriers', materialmen's,
suppliers' or repairers' lien and other similar Encumbrances imposed by law or
incurred in the ordinary course of business in respect of obligations which are
not overdue; (c) those Encumbrances imposed by any law, rule, regulation,
ordinance or restriction promulgated by any Governmental Entity, other than
those created by agreement with a Governmental Entity; (d) those Encumbrances
that result from all leases, subleases or licenses to which the Company is a
party; (e) any title exception set forth on Section 1(a) of the Company
Disclosure Schedule; and (f) all other Encumbrances which, individually, or in
the aggregate, do not detract from or interfere with or impair the use, value or
marketability of the Asset subject thereto or affected thereby or the conduct of
the Company's business.
"Person" shall mean any individual, corporation, partnership,
limited liability company, joint venture, governmental agency or
instrumentality, or any other entity.
"Pro Rata Portion to be Paid" shall mean, as to a Company
Shareholder, the number of shares of Parent Common Stock determined by
multiplying (a) the number of shares of Parent Common Stock to be delivered to
the Company Shareholders at the end of the Escrow Period pursuant to the terms
of the Escrow Agreement, by (b) a fraction, the numerator of which is (i) the
number of shares of Company Common Stock owned by such Company Shareholder
immediately prior to the Merger, and the denominator of which is (ii) the
aggregate number of shares of Company Common Stock outstanding immediately prior
to the Merger held by the Company Shareholders.
"Pro Rata Portion Withheld" shall mean, with respect the Parent
Common Stock issuable to any Company Shareholder, that number of Escrow Shares
determined by multiplying (a) the aggregate number of Escrow Shares, by (b) a
fraction, the numerator of which is (i) the number of shares of Company Common
Stock owned by such Company Shareholder immediately prior to the Merger, and the
denominator of which is (ii) the aggregate number of shares of Company Common
Stock outstanding immediately prior to the Merger held by the Company
Shareholders.
"Proprietary Rights" shall mean all (a) U.S. and foreign
patents, patent applications, patent disclosures and improvements thereto,
including petty patents and utility models and applications therefor, (b) U.S.
and foreign trademarks, service marks, trade dress, logos, trade names and
corporate names and the goodwill associated therewith and registrations and
applications, extensions or renewals for registration thereof, (c) U.S. and
foreign copyrights and registrations and applications, extensions or renewals
for registration thereof, (d) U.S. and
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foreign mask work rights and registrations and applications, extensions or
renewals for registration thereof, (e) trade secrets, (f) inventions, formulae,
tools, methods, processes, designs, know-how or other data or information, (g)
works of authorship including, without limitation, computer programs, source
code and executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (h)
World Wide Web addresses, domain names and sites; (i) copies and tangible
embodiments of any of the items described in the foregoing (a) through (g) and
(j) licenses of any rights with respect to any of the items described in the
foregoing (a) through (i).
"RCRA" shall mean the Resource Conservation and Recovery Act, 42
U.S.C. 6901, et seq., as amended.
"Representative" shall mean, with respect to any Person, that
Person's officers, directors, employees, financial advisors, agents or other
representatives.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership, limited liability company, joint venture, association
or other entity, of which (a) such Person directly or indirectly owns or
controls at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the board of directors
or others performing similar functions; (b) such Person is a general partner,
manager or managing member or (c) such Person holds a majority of the equity
economic interest.
"Tax" or "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not.
"Tax Return" shall mean any return, declaration, report, claim
for refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TSCA" shall mean the Toxic Substances Control Act, 15 U.S.C.
2601, et seq., as amended.
"Welfare Plan" shall mean any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, (a) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability or obligation
and (b) which covers any employee or former
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employee, consultant or director of the Company or any ERISA Affiliate (with
respect to their relationship with such entities).
Table of Other Defined Terms
<TABLE>
<CAPTION>
Cross Reference
Terms in Agreement
----- ------------
<S> <C>
2000 Restricted Stock Plan.................................................. Section 6.16
Agreement .................................................................. Preamble
Agreement of Merger ........................................................ Section 2.3
Balance Sheet............................................................... Section 3.12(a)
Benefits Date............................................................... Section 6.13
Cash Consideration.......................................................... Section 2.7(a)
Cash Consideration Requested................................................ Section 2.7(b)
Cash Election............................................................... Section 2.7(b)
Cash Election Shares........................................................ Section 2.7(b)
Cash Share Price............................................................ Section 2.7(a)
Claim....................................................................... Section 9.2(c)
Claim Notice................................................................ Section 9.2(c)
Closing .................................................................... Section 2.2
Closing Date ............................................................... Section 2.2
COBRA....................................................................... Section 3.17(a)
Company .................................................................... Preamble
Company Disclosure Schedule ................................................ Article III
Company Indemnified Parties................................................. Section 6.7(a)
Company Leased Real Property ............................................... Section 3.10(c)
Company Owned Real Property ................................................ Section 3.10(b)
Company Shareholders........................................................ Preamble
Competing Proposed Transaction.............................................. Section 6.3
Confidentiality Agreement .................................................. Section 6.4
Deadline Date............................................................... Section 6.1(b)
Department.................................................................. Section 6.1(a)
Effective Time ............................................................. Section 2.3
Engagement Letter........................................................... Section 3.19
Escrow Agent................................................................ Section 2.14
Escrow Agreement............................................................ Section 2.14
Escrow Period............................................................... Section 2.14
Expenses.................................................................... Section 6.15
Fairness Hearing............................................................ Section 6.1(a)
FMLA........................................................................ Section 3.17(b)
Governmental Approvals ..................................................... Section 6.5(a)
HIPAA....................................................................... Section 3.17(b)
HSR Act..................................................................... Section 3.5(b)
Indemnified Party .......................................................... Section 9.2(c)
Indemnifying Party.......................................................... Section 9.2(c)
</TABLE>
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<TABLE>
<S> <C>
Insurance Policies.......................................................... Section 3.21(a)
Merger ..................................................................... Recitals
Merger Consideration........................................................ Section 2.7(a)
Merger Sub ................................................................. Preamble
Non-Competition Agreement................................................... Section 6.14
Notifying Party ............................................................ Section 6.5(a)
Occupancy Agreements........................................................ Section 3.10(b)
Parent...................................................................... Preamble
Parent Disclosure Schedule ................................................. Article IV
Parent SEC Reports.......................................................... Section 4.5
Party or Parties ........................................................... Preamble
Permit...................................................................... Section 6.1(a)
Permit Application.......................................................... Section 6.1(a)
Proceeding.................................................................. Section 10.10
Reference Balance Sheet..................................................... Section 3.12(b)
Registration Statement Filing Deadline...................................... Section 6.1(b)
Registration Statement...................................................... Section 6.1(b)
Restricted Stock............................................................ Section 6.16
Restricted Stock Grants..................................................... Section 6.16
Stock Consideration......................................................... Section 2.7(a)
Surviving Corporation ...................................................... Section 2.1
Support Agreement........................................................... Recitals
Termination Date............................................................ Section 8.1(b)
Termination Share Number.................................................... Section 8.1(e)
</TABLE>
ARTICLE II.
THE MERGER
SECTION 2.1 THE MERGER. At the Effective Time and subject to and upon
the terms and conditions of this Agreement and in accordance with the CCC,
Merger Sub shall be merged with and into the Company and the separate corporate
existence of Merger Sub shall cease. The Company shall continue as the surviving
corporation (sometimes referred to herein as the "Surviving Corporation") in the
Merger and as of the Effective Time shall be a wholly-owned subsidiary of
Parent.
SECTION 2.2 CLOSING AND CLOSING DATE. Unless this Agreement shall have
been terminated and the transactions herein contemplated shall have been
abandoned pursuant to the provisions of Section 8.1, the closing (the "Closing")
of the Merger shall take place (a) at 10:00 a.m., Los Angeles time, on the
second Business Day after all of the conditions to the respective obligations of
the Parties set forth in Article VII hereof shall have been satisfied or waived
or (b) at such other time and date as Parent and the Company shall mutually
agree (such date and time on and at which the Closing occurs being referred to
herein as the "Closing Date"). The Closing shall take place at the offices of
Latham & Watkins, 633 West Fifth Street, Los
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Angeles, California 90071. At the Closing the documents, certificates, opinions
and instruments referred to in Article VII shall be executed and delivered.
SECTION 2.3 EFFECTIVE TIME. On the Closing Date, the Parties
shall cause a merger agreement in such form as is required by Sections 1101,
1102 and 1103 of the CCC (the "Agreement of Merger") to be properly executed and
acknowledged, and filed with the Secretary of State of the State of California
as provided in the CCC. The Merger shall become effective at such time at which
such Agreement of Merger shall be duly filed with the Secretary of State of the
State of California or at the time specified in the Agreement of Merger, if any
(the time that the Merger becomes effective, the "Effective Time").
SECTION 2.4 EFFECTS OF THE MERGER. The Merger shall have the
effects specified in the CCC. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all properties, rights, privileges,
powers and franchises of Merger Sub and the Company shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Merger Sub and the Company
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.5 ARTICLES OF INCORPORATION; BYLAWS.
(a) At the Effective Time and without any further action on the
part of the Company or Merger Sub, the articles of incorporation of the Company
shall be amended and restated to be identical to those in effect for the Merger
Sub at the Effective Time.
(b) At the Effective Time and without any further action on the
part of the Company or Merger Sub, the bylaws of the Company shall be amended
and restated to be identical to those in effect for the Merger Sub at the
Effective Time.
SECTION 2.6 DIRECTORS AND OFFICERS. The directors and officers
of Merger Sub immediately prior to the Effective Time shall become the initial
directors and officers, respectively, of the Surviving Corporation from and
after the Effective Time, each to hold office in accordance with the Articles of
Incorporation and the Bylaws until their successors are elected or appointed and
qualified or until their resignation or removal.
SECTION 2.7 CONVERSION OF SECURITIES.
(a) Subject to Section 2.13, at the Effective Time, by virtue of
the Merger and without any action on the part of Parent, Merger Sub, the Company
or the holders of the shares of Company Common Stock, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(including, without limitation, the Restricted Stock) shall be converted into
and represent the right to receive (i) that number of validly issued, fully paid
and nonassessable shares of Parent Common Stock, which is equal to the Exchange
Ratio (the "Stock Consideration") and (ii) any cash in lieu of fractional shares
of such Parent Common Stock to be paid pursuant to Section 2.8; provided,
however, that, in lieu of the foregoing and subject to the limitations set forth
in Section 2.7(b) below, any such holder may elect that a stated number of such
holder's Company Common Stock be converted into the right to receive cash
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from Parent in an amount per share (the "Cash Share Price") equal to the
quotient of (x) $600,000,000, divided by (y) the number of shares of Company
Common Stock issued and outstanding as of the Closing (the "Cash Consideration")
(such Stock Consideration, cash in lieu of fractional shares, if any, and Cash
Consideration, if any, being referred to herein as the "Merger Consideration").
(b) In order to make a valid election to have shares of Company
Common Stock converted into the right to receive Cash Consideration in lieu of
Stock Consideration for any shares of Company Common Stock (a "Cash Election"),
a holder of shares of Company Common Stock must give notice of such holder's
Cash Election on a form prescribed for such purpose (which form shall be
provided to each holder of Company Common Stock) setting forth the number of
such holder's shares of Company Common Stock for which a Cash Election is being
made ("Cash Election Shares"), which notice must be received by the Company and
Parent no later than 5 P.M. on the date which is three (3) days prior to the
Closing Date. Any holder who fails to make a valid Cash Election shall be deemed
to have elected to receive no Cash Consideration for such holder's Company
Common Stock. In no case shall any holder of Company Common Stock be entitled to
elect to receive Cash Consideration exceeding $25,000,000, and in no case shall
the product of (i) the aggregate number of Cash Election Shares of all of the
holders of Company Common Stock and (ii) the Cash Consideration per share (such
product, the "Cash Consideration Requested") exceed $25,000,000. If the
aggregate Cash Consideration Requested exceeds $25,000,000, the Cash Election
Shares, if any, of each holder electing to receive Cash Consideration shall be
converted into (i) Cash Consideration with respect to that number of such
holder's Cash Election Shares equal to the product of (A) a number equal to (x)
$25,000,000 divided by (y) the Cash Share Price, and (B) a fraction, the
numerator of which is the aggregate number of such holder's shares of Company
Common Stock held as of the Closing for which such holder has elected Cash
Consideration and the denominator of which is the aggregate number of shares of
Company Common Stock held as of the Closing for which the holders thereof have
elected to receive Cash Consideration and (ii) Stock Consideration, with respect
to the balance of such holder's Cash Election Shares.
(c) Upon surrender of a Certificate at the Closing, the holder
of such Certificate shall be entitled to receive the Merger Consideration for
each share of Company Common Stock represented by such Certificate less, for the
Company Shareholders, a number of shares constituting the Pro Rata Portion
Withheld with respect to such Company Shareholder's Company Common Stock. The
Escrow Shares shall be deposited with the Escrow Agent and retained in escrow as
provided in Section 2.14.
(d) Each share of Company Common Stock that is held in the
treasury of the Company immediately prior to the Effective Time shall be
canceled and retired without any conversion thereof and no payment or
distribution shall be made with respect thereto.
(e) Each share of common, preferred or other capital stock of
Merger Sub issued and outstanding immediately prior to the Effective Time shall,
by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into and thereafter represent one (1)
validly issued, fully paid and nonassessable common share, no par
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value, of the Surviving Corporation, so that thereafter Parent will be the sole
and exclusive owner of the capital stock of the Surviving Corporation.
SECTION 2.8 FRACTIONAL INTERESTS. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued in
connection with the Merger or the payment of the Escrow Shares, and such
fractional interests will not entitle the owner thereof to any rights of a
stockholder of Parent. In lieu of any such fractional interests, each holder of
shares of Company Common Stock exchanged pursuant to Section 2.7(a) who would
otherwise have been entitled to receive a fraction of a share of Parent Common
Stock at the Closing or upon payment by Parent of the Escrow Shares, as the case
may be, shall in each case receive cash in an amount equal to such fraction
multiplied by the Average Stock Price as of the Effective Time. As soon as
practicable after the determination of the amount of cash to be paid to Company
Shareholders in lieu of any fractional interests, Parent shall pay such amount
to the Company Shareholders.
SECTION 2.9 SURRENDER OF SHARES OF COMPANY COMMON STOCK; STOCK
TRANSFER BOOKS.
(a) At the Closing, each holder of a Certificate shall surrender
his or her Certificates and shall thereupon be entitled to receive in exchange
therefor the consideration described in Section 2.7(a), after giving effect to
any required Tax withholdings, and the Certificate so surrendered shall
forthwith be canceled. The shares of Parent Common Stock comprising the Escrow
Shares shall be deposited with the Escrow Agent in accordance with Section 2.14.
If the exchange of certificates representing shares of Parent Common Stock is to
be made to a Person other than the Person in whose name the surrendered
Certificate is registered, it shall be a condition of exchange that the
Certificate so surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Person requesting such exchange shall have
paid any transfer and other Taxes required by reason of the exchange of
certificates representing shares of Parent Common Stock to a Person other than
the registered holder of the Certificate surrendered or shall have established
to the satisfaction of the Surviving Corporation that such Tax either has been
paid or is not applicable.
(b) At the Effective Time, the stock transfer books of the
Company shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock except as otherwise provided for
herein or by applicable law.
(c) No dividends or other distributions declared or made after
the Effective Time with respect to shares of Parent Common Stock shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
Parent Common Stock the holder is entitled to receive and no Closing Merger
Consideration shall be paid to such holder until the holder of such Certificate
shall surrender such Certificate in accordance with the provisions of this
Agreement. Upon such surrender, Parent shall cause to be paid to the Person in
whose name
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the Certificates shall be issued, any dividends or distributions with respect to
such shares of Parent Common Stock which have a record date after the Effective
Time and shall have become payable between the Effective Time and the time of
such surrender. In no event shall the Person entitled to receive such dividends
or distributions be entitled to receive interest thereon.
SECTION 2.10 AUTHORIZATION TO ACT ON BEHALF OF MERGER SUB AND
THE COMPANY. If, at any time after the Effective Time, the Surviving Corporation
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving Corporation its
right, title or interest in, to or under any of the rights or Assets of either
Merger Sub or the Company or otherwise to carry out this Agreement, the officers
of the Surviving Corporation shall be authorized to execute and deliver, in the
name and on behalf of each of Merger Sub and the Company or otherwise, all such
deeds, bills of sale, assignments and assurances and to take and do, in such
names and on such behalves or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights or Assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
SECTION 2.11 LOST, STOLEN OR DESTROYED CERTIFICATES. In the
event any Certificates shall have been lost, stolen or destroyed, Parent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact and the provision of an indemnity by the
holder thereof reasonably satisfactory to Parent, such shares of Parent Common
Stock, cash in lieu of any fractional shares of Parent Common Stock and
dividends or distributions, if any, in respect thereof as may be required
pursuant to Section 2.7(a) and Section 2.8 and Section 2.9(c).
SECTION 2.12 WITHHOLDING RIGHTS. Parent or Merger Sub shall be
entitled to deduct and withhold from the Closing Merger Consideration otherwise
payable pursuant to this Agreement to any holder of a Certificate such amounts
as Parent or Merger Sub are 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 withheld by Parent or Merger
Sub, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Company Common Stock in
respect of which such deduction and withholding was made by the Company or
Merger Sub.
SECTION 2.13 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary,
shares of Company Common Stock which are "dissenting shares" (as defined in
Section 1300(b) of the CCC), if any, shall not be converted into or represent a
right to receive any shares of Parent Common Stock, but the holders thereof
shall be entitled only to such rights as are granted by the CCC. Each holder of
dissenting shares who becomes entitled to payment therefor pursuant to the CCC
shall receive payment from the Company in accordance with the CCC; provided,
however, that (i) if any such holder of dissenting shares shall have failed to
establish his entitlement to appraisal rights as provided in the CCC, (ii) if
any such holder of dissenting shares shall have
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effectively withdrawn his demand for appraisal thereof or lost his right to
appraisal and payment therefor under the CCC or (iii) if neither any holder of
dissenting shares which are shares of Company Common Stock nor the Surviving
Corporation shall have filed a petition demanding a determination of the fair
value of all dissenting shares of Company Common Stock within the time provided
in the CCC, such holder or holders (as the case may be) of Company Common Stock
shall forfeit the right to appraisal of such shares of Company Common Stock.
(b) Notwithstanding the foregoing, if any holder of Dissenting
Shares shall effectively withdraw or lose (through failure to perfect or
otherwise) such holder's appraisal rights under the CCC, then, as of the later
of the Effective Time and the occurrence of such event, such holder's shares
shall automatically be converted into and represent only the right to receive
Merger Consideration pursuant to Section 2.7(a) hereof, upon surrender of the
certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demand for appraisal received by the Company pursuant to the applicable
provisions of California Law, and (ii) the opportunity to participate in all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of Parent, make any payment with
respect to any such demands or offer to settle or settle any such demands.
SECTION 2.14 ESCROW SHARES. Prior to the Effective Date, Parent
shall appoint a bank or trust company or other entity reasonably satisfactory to
the Company Shareholder Representative to act as the escrow agent (the "Escrow
Agent"), and shall execute and deliver an escrow agreement in substantially the
form attached hereto as Exhibit C (the "Escrow Agreement"). On the Closing Date,
Parent shall deliver to the Escrow Agent a certificate representing the Escrow
Shares. The Escrow Shares shall be held by the Escrow Agent exclusively for the
purpose of satisfying, on an exclusive basis, the Company Shareholders'
indemnity obligations pursuant to Section 9.2(a) hereof. Except to the extent
such shares are to be released pursuant to the terms and conditions of the
Escrow Agreement, the Escrow Shares shall be held by the Escrow Agent for a
period of twelve (12) months after the Closing Date (the "Escrow Period"). The
Escrow Shares that have not been released pursuant to the Escrow Agreement prior
to the termination of the Escrow Period shall be delivered to Company
Shareholders promptly following the expiration of the Escrow Period, such that
each Company Shareholder will receive its Pro Rata Portion to be Paid of the
remaining Escrow Shares. All Escrow Shares that are not released to Company
Shareholders at the expiration of the Escrow Period shall be promptly released
by the Escrow Agent upon the final determination of Claims by Parent pursuant to
Section 9.2(a) that are outstanding at the end of the Escrow Period and payment
of shares due to the Company Shareholder Representative pursuant to Section
2.15(e). During the period in which the Escrow Shares are retained in escrow,
the Company Shareholders shall be entitled to vote the Escrow Shares, and shall
be entitled to receive cash dividends, if any, paid thereon pursuant to the
terms of the Escrow Agreement.
SECTION 2.15 COMPANY SHAREHOLDER REPRESENTATIVE.
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(a) Each Company Shareholder hereby appoints the Company
Shareholder Representative as agent and attorney-in-fact of each Company
Shareholder, for and on behalf of such Company Shareholders (i) to give and
receive notices and communications, (ii) to have authority to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to any
disputes involving any Parent Indemnity Claims made by Parent related to the
Escrow Shares held by the Escrow Agent, (iii) to sign receipts, consents, or
other documents to effect the transactions contemplated hereby; and to take all
actions necessary or appropriate in the judgment of the Company Shareholder
Representative for the accomplishment of the foregoing. If the Company
Shareholder Representative ceases to act as Company Shareholder Representative
for any reason, such Company Shareholder Representative or his agent shall
notify Parent of the Company Shareholder Representative's intent to resign as
Company Shareholder Representative. Notice or communications to or from any
Company Shareholder Representative shall constitute notice to or from each of
the Company Shareholders.
(b) In the event of (i) the death or permanent disability of the
Company Shareholder Representative, (ii) his, her or its resignation as a
Company Shareholder Representative, or (iii) removal of the Company Shareholder
Representative by Company Shareholders entitled to receive a majority of the
Escrow Shares (assuming no claim by Parent has been made for any such Escrow
Shares), a successor Company Shareholder Representative shall be elected by
Company Shareholders entitled to receive a majority of the Escrow Shares
(assuming no claim by Parent has been made for any such Escrow Shares) within 30
days thereafter. Each successor Company Shareholder Representative shall have
all of the power, authority, rights and privileges conferred by this Agreement
upon the original Company Shareholder Representative, and the term "Company
Shareholder Representative" as used herein shall be deemed to include any
successor Company Shareholder Representative.
(c) The Company Shareholder Representative may, in all questions
arising under this Agreement, rely on the advice of counsel, and shall not be
liable for any action taken or not taken as a Company Shareholder Representative
in the absence of such Company Shareholder Representative's gross negligence or
willful misconduct.
(d) A decision, act, consent or instruction of the Company
Shareholder Representative shall constitute a decision of all the Company
Shareholders, and shall be final, binding and conclusive upon each of the
Company Shareholders, and Parent and the Surviving Corporation may rely upon any
decision, act, consent or instruction of the Company Shareholder Representative
as being the decision, act, consent or instruction of each and all of the
Company Shareholders. Parent, the Surviving Corporation and the Company are
relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction. Although the Company
Shareholder Representative shall not be obligated to obtain instructions from
the Company Shareholders prior to any decision, act, consent or instruction, if,
and to the extent that, the Company Shareholder Representative receives any
lawful written instructions from Company Shareholders entitled to receive a
majority of the Escrow Shares (assuming no claim by Parent has been made for any
such Escrow Shares), the Company Shareholder Representative shall comply with
such instructions to the extent such instructions
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<PAGE> 21
are within the Company Shareholder Representative's capacity under this
Agreement. The Company Shareholder Representative shall be entitled to rely upon
directions or instructions received from the Company Shareholders entitled to
receive a majority of the Escrow Shares; provided that he shall be under no
obligation to take any action in his capacity as the Company Shareholder
Representative unless he has been provided with funds, security, indemnities,
insurance policies or other assurances which, in the sole determination of the
Company Shareholder Representative, are sufficient to protect the Company
Shareholder Representative against the costs, expenses and liabilities which may
be incurred by the Company Shareholder Representative in responding to such
direction, instruction or taking such action.
(e) Any costs incurred by the Company Shareholder
Representative, including the cost of any attorneys, accountants or other
advisors retained by the Company Shareholder Representative in connection with
any action taken or not taken as a Company Shareholder Representative, shall be
borne by the Company Shareholders and shared in accordance with their Pro Rata
Portion to be Paid. With respect to such costs, the Company Shareholder
Representative shall be entitled to request in writing, and the Escrow Agent
shall withhold from any escrow payments to the Company Shareholders upon such
request, a number of shares satisfactory in the Company Shareholder
Representative's reasonable discretion to satisfy amounts payable to such
attorneys, accountants or other advisors, which amounts shall be set forth in
the request submitted by the Company Shareholder Representative. Upon receipt of
such shares, the Company Shareholder Representative shall be entitled to sell
such shares and apply the proceeds to the payment of the amounts due to such
attorneys, accountants or other advisors.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL SHAREHOLDER
Each of the Company and Principal Shareholder, jointly and severally,
represents and warrants to Parent and Merger Sub that the statements contained
in this Article III are true and correct except as set forth herein and in the
disclosure schedule delivered by the Company to Parent and Merger Sub on or
before the date of this Agreement (the "Company Disclosure Schedule"). The
Company Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article III
to the extent that it is apparent that such disclosure qualifies or applies to
such other paragraphs.
SECTION 3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority,
and all material governmental licenses, authorizations, consents and approvals
required, to own and operate its Assets and to carry on its business as
presently conducted. The Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure to so qualify would
have a Material Adverse Effect on the Company. Section 3.1 of the Company
Disclosure Schedule sets forth a list of the jurisdictions in which the Company
is qualified to transact business.
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SECTION 3.2 CAPITALIZATION.
(a) The authorized capital of the Company consists of 5,000,000
shares of Company Common Stock, 4,060,000 shares of which are issued and
outstanding as of the date of this Agreement. Exhibit A sets forth a list of the
Company Shareholders and the number of shares of Company Common Stock held by
each such Company Shareholder. Except as set forth in this Section 3.2(a) and
except for the Restricted Stock to be issued, no shares of capital stock or
other securities of the Company are issued, reserved for issuance or
outstanding. All of the outstanding shares of Company Common Stock are owned of
record and beneficially by the holders thereof as set forth in Section 3.2(a) of
the Company Disclosure Schedule, free and clear of any Encumbrances.
(b) The outstanding shares of Company Common Stock are all duly
and validly authorized and issued, are fully paid and are nonassessable, have
been issued in compliance with all applicable federal and state securities laws,
and were not issued in violation of any preemptive rights.
(c) Except for the Restricted Stock Plan, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which the Company is a party or by
which it is bound obligating the Company to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of Company Common Stock or any
other capital stock of the Company or other voting securities of the Company, or
obligating the Company to issue, grant, extend or enter into any such security,
option, warrant, call, right, commitment, agreement, arrangement or undertaking,
and the Company has not granted any stock appreciation rights or any other
contractual rights the value of which is derived from the financial performance
of the Company or the value of shares of Company Common Stock or any other
capital stock of the Company.
(d) There are no obligations, contingent or otherwise, of the
Company to repurchase, redeem or otherwise acquire any shares of Company Common
Stock or any other capital stock of the Company or to provide funds to or make
any material investment (in the form of a loan, capital contribution or
otherwise) in any other entity.
(e) There are no bonds, debentures, notes or other indebtedness
having voting rights (or convertible into securities having such rights) of the
Company issued and outstanding.
SECTION 3.3 SUBSIDIARIES; INTERESTS IN OTHER ENTITIES. The
Company has no Subsidiaries. The Company does not own or have the right or
option to acquire, directly or indirectly, any interest or investment in
(whether equity or debt) any corporation, partnership, limited liability
company, joint venture, business, trust or other Person.
SECTION 3.4 AUTHORIZATION.
(a) The Company has the requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement and the
Ancillary Agreements to which
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the Company is party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which the Company is a party by the Company and the performance by
the Company of its obligations hereunder and thereunder and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
the Company Board and, except for the approval of the Company Shareholders, no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement and the Ancillary Agreements to which the Company is a
party and the transactions contemplated hereby and thereby.
(b) This Agreement and the Ancillary Agreements to which the
Company is a party have been (or, when executed and delivered, will have been)
duly and validly executed and delivered by the Company and constitute (or, when
executed and delivered, will constitute) legal, valid and binding obligations of
the Company, enforceable against it in accordance with their terms, subject to
the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
SECTION 3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in Section 3.5(a) of the Company
Disclosure Schedule, neither the execution and delivery of this Agreement or the
Ancillary Agreements nor the performance by the Company of its obligations
hereunder or thereunder, nor the consummation of the transactions contemplated
hereby or thereby, will: (i) conflict with the Company's articles of
incorporation or bylaws, (ii) assuming satisfaction of the requirements set
forth in Section 3.5(b) below, violate any statute, law, ordinance, rule,
regulation or judgment, decree or order of any Governmental Entity, applicable
to the Company or any of its Assets, (iii) violate, breach, be in conflict with
or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, or permit the termination of any
provision of, or result in the termination of, the acceleration of the maturity
of, or the acceleration of the performance of any obligation of the Company
under, or result in the creation or imposition of any Encumbrance upon any
Assets or business of the Company under, any Company Contract, permit,
authorization, or any order, judgment or decree to which the Company is a party
or by which the Company or any of its Assets are bound or encumbered, or (iv)
give any Person the right to require the Company to purchase or repurchase any
notes, bonds or instruments of any kind.
(b) Except as set forth in Section 3.5(a) of the Company
Disclosure Schedule and except (i) for the filing of the Agreement of Merger
pursuant to the CCC, (ii) for applicable requirements under the premerger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and (iii) with respect to matters set forth in
Section 3.5(b) of the Company Disclosure Schedule, no consent, approval or
authorization of, permit from, or declaration, filing or registration with, any
Governmental Entity, or any other Person is required to be made or obtained by
the Company in connection with the execution, delivery and performance of this
Agreement or the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby.
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SECTION 3.6 PROPRIETARY RIGHTS.
(a) The Proprietary Rights owned, used or licensed by the
Company constitute all the Proprietary Rights used in and/or necessary to the
conduct of the business of the Company as it currently is conducted, and, to the
Knowledge of the Company, as it is currently planned or contemplated to be
conducted by the Company, including, without limitation, the design,
development, manufacture, use, import and sale of products, technology and
performance of services (including products, technology or services currently
under development).
(b) All material Proprietary Rights used by the Company are
owned by the Company free and clear of any Encumbrances other than those
Permitted Encumbrances set forth in clauses (a), (b), (c) and (e) of the
definition of Permitted Encumbrances set forth in Article I hereof.
(c) In each case in which the Company has acquired any material
Proprietary Rights from any person, the Company has obtained a valid and
enforceable assignment sufficient to irrevocably transfer all rights in such
Proprietary Rights (including the right to seek past and future damages with
respect thereto) to the Company.
(d) All material Proprietary Rights of the Company are fully
transferable, alienable or licensable by the Company without restriction and
without payment of any kind to any third party.
(e) The Company has never made a filing with a Governmental
Entity with respect to any Proprietary Rights.
(f) Except as set forth in Section 3.6(f) of the Company
Disclosure Schedule, there are no contracts, licenses and agreements to which
the Company is a party with respect to any Proprietary Rights owned or used by
the Company. The Company is not in breach of, nor has the Company failed to
perform under, any contract, license or agreement listed in Section 3.6(f) of
the Disclosure Schedule and, to the Company's Knowledge, no other party to any
such contract, license or agreement, is in breach thereof or has failed to
perform thereunder. The Company has not transferred ownership of, or granted any
license of or right to use, or authorized the retention of any rights to use or
joint ownership of, any material Proprietary Rights, to any other person.
(g) The operation of the business of the Company as it currently
is conducted or is contemplated to be conducted by the Company does not and will
not and will not when conducted by the Surviving Corporation in substantially
the same manner following the Closing, infringe or misappropriate any
Proprietary Rights of any person, violate any right of any person (including any
right to privacy or publicity) or constitute unfair competition or trade
practices under the laws of any jurisdiction, and the Company has not received
notice from any person claiming that such operation or any act, product,
technology or service (including products, technology or services currently
under development) of the Company infringes or misappropriates any Proprietary
Rights of any person or constitutes unfair competition or trade
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practices under the laws of any jurisdiction (nor does the Company have
Knowledge of any basis therefor).
(h) To the Company's Knowledge, no person is infringing or
misappropriating any material Proprietary Rights of the Company.
(i) No material Proprietary Rights of the Company are subject to
any proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Company or may affect the validity, use or enforceability of such
Proprietary Rights.
(j) Except as set forth in Section 3.6(j) of the Company
Disclosure Schedule, no material Proprietary Rights owned or used by the Company
have been developed or created by a third party for the Company. Except as set
forth in Section 3.6(j) of the Company Disclosure Schedule, all material
Proprietary Rights used in or necessary to the conduct of Company's business as
presently conducted or currently contemplated to be conducted by the Company
were created solely by employees of the Company acting within the scope of their
employment, and no third party owns or has any rights to any of the material
Proprietary Rights of the Company.
(k) Neither this Agreement nor the transactions contemplated by
this Agreement or any contracts or agreements to which the Company is a party,
will result in (i) either Parent's or the Surviving Corporation's granting to
any third party any right to or with respect to any Proprietary Rights owned by,
or licensed to, either of them, (ii) either the Parent's or the Surviving
Corporation's being bound by, or subject to, any non-compete or other
restriction on the operation or scope of their respective businesses, or (iii)
either the Parent's or the Surviving Corporation's being obligated to pay any
royalties or other amounts to any third party in excess of those payable by
Parent or Surviving Corporation, respectively, prior to the Closing, in each
case other than as a result of any Contract to which either Parent or Surviving
Corporation is a party (other than this Agreement or the Ancillary Agreements).
(l) Except as set forth in Section 3.6(l) of the Company
Disclosure Schedule, all employees of the Company have entered into a valid and
binding written agreement with the Company sufficient to vest title in the
Company of all Proprietary Rights, created by such employee in the scope of his
or her employment with the Company.
SECTION 3.7 LITIGATION. There are no Actions instituted, pending
or, to the Knowledge of the Company, threatened, against the Company or the
Principal Shareholder, nor are there any outstanding judgments, decrees or
injunctions against the Company or any of its Assets or any rule or order of any
Governmental Entity applicable to the Company, in each case which, individually
or in the aggregate, could reasonably be expected to result in a Material
Adverse Effect on the Company.
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SECTION 3.8 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is
not in violation or default of any provisions of (a) its articles of
incorporation or bylaws or (b) in all material respects, any judgment, order,
writ or decree to which it is a party or by which it is bound.
SECTION 3.9 CORPORATE DOCUMENTS. The articles of incorporation
and bylaws of the Company are in the form previously made available to Parent by
the Company and have not been amended.
SECTION 3.10 PROPERTY.
(a) Personal Property. The Company has good and valid title to,
or a valid leasehold interest in, the Company's Assets, except for such Assets
as are no longer used in the conduct of the business of the Company or as have
been disposed of in the ordinary course of business, free and clear of all
Encumbrances except Permitted Encumbrances.
(b) Owned Real Property. Section 3.10(b) of the Company
Disclosure Schedule sets forth a list of all real properties owned by the
Company (the "Company Owned Real Property"). The Company has good and valid fee
title to, and enjoys peaceful and undisturbed possession of, the Company Owned
Real Property free and clear of any and all Encumbrances other than any
Permitted Encumbrances. Except as set forth in Section 3.10(b) of the Company
Disclosure Schedule, the Company has not received written notice of any pending
or threatened special assessment relating to the Company Owned Real Property.
Section 3.10(b) of the Company Disclosure Schedule sets forth a list of all
leases, licenses or other occupancy rights affecting the Company Owned Real
Property ("Occupancy Agreements"). The Occupancy Agreements are in full force
and effect and there has been no material default under such Occupancy
Agreements by the Company, or to the Knowledge of the Company, by any other
party thereto, and, to the Knowledge of the Company, there is no existing event
or circumstance that with the passage of time or the giving of notice, or both,
would constitute a default under such Occupancy Agreements.
(c) Leased Real Property. Section 3.10(c) of the Company
Disclosure Schedule sets forth a list of all material leased real property used
by the Company (the "Company Leased Real Property"). The Company has good and
valid leasehold title to, and enjoys peaceful and undisturbed possession of, all
of the Company Leased Real Property, free and clear of any and all Encumbrances
other than any Permitted Encumbrances. There has been no material default under
any lease relating to the Company Leased Real Property by the Company or, to the
Knowledge of the Company, by any other party and, to the Knowledge of the
Company, there is no existing event or circumstance that with the passage of
time or the giving of notice, or both, would constitute a default under such
lease. Except as set forth in Section 3.10(c) of the Company Disclosure
Schedule, the Company has not received written notice of any pending or
threatened special assessment relating to the Company Leased Real Property.
(d) There are no restrictions imposed by any Contract which
preclude or restrict in any material respect the ability of the Company to use
any of the Company Owned
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Real Property or the Company Leased Real Property for the purposes for which it
is currently being used.
SECTION 3.11 CONTRACTS.
(a) Section 3.11(a) of the Company Disclosure Schedule sets
forth a list of the Company Contracts.
(b) Except as set forth on Section 3.11(b) of the Company
Disclosure Schedule, each Company Contract is in full force and effect and is
legal, valid, binding and enforceable in accordance with its terms against the
Company and, to the Knowledge of the Company, against all other parties thereto.
(c) Except as set forth on Section 3.11(c) of the Company
Disclosure Schedule, the Company (and, to the Knowledge of the Company, each of
the other party or parties thereto), has performed in all material respects all
obligations required to be performed by it under each Company Contract. Except
as set forth on Section 3.11(c) of the Company Disclosure Schedule, to the
Knowledge of the Company, no event has occurred or circumstance exists with
respect to the Company or, to the Knowledge of the Company, any other Person
that (with or without lapse of time or the giving of notice or both)
contravenes, conflicts with or results in, or presents a reasonable probability
of contravening, conflicting with or resulting in, a violation or breach of or
give the Company or any other Person the right to declare a default or exercise
any remedy under, or to accelerate the maturity of, or to cancel, terminate or
modify, any right, obligation or remedy under any Company Contract, except where
such violation, breach, default, exercise, acceleration, cancellation,
termination or modification would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company has heretofore delivered or made
available to Parent true and complete copies of all written Company Contracts
and, to the Knowledge of the Company, a true and complete written summary of all
oral Company Contracts.
SECTION 3.12 FINANCIAL INFORMATION.
(a) The audited balance sheet of the Company as of January 31,
2000 (the "Balance Sheet"), and the related audited statements of income and
retained earnings and cash flows of the Company, including the notes to such
financial statements, which financial statements have been included in Section
3.12(a) of the Company Disclosure Schedule, are complete and correct in all
material respects, fairly present the financial condition and results of
operations of the Company as of such date or for the period covered thereby, and
were prepared in accordance with GAAP.
(b) The unaudited compiled balance sheet of the Company as of
August 31, 2000 (the "Reference Balance Sheet"), and the related unaudited
compiled statement of income of the Company, which financial statements have
been included in Section 3.12(b) of the Company Disclosure Schedule, are
complete and correct in all material respects, fairly present the financial
condition and results of operations of the Company as of such date or for the
period
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covered thereby, and were prepared in accordance with GAAP applied on a
consistent basis; provided, however, that the financial statements referred to
in this Section 3.12(b) are subject to normal recurring year-end adjustments
(which will not be material) and do not include footnotes.
SECTION 3.13 ABSENCE OF CERTAIN CHANGES. Except as set forth in
Section 3.13 of the Company Disclosure Schedule, since January 31, 2000, the
Company has conducted its business in the ordinary course consistent with past
practices and there has not been:
(a) any change in the business, financial condition,
liabilities, assets, operations or results of operations of the Company that has
had, or would reasonably be expected to have, a Material Adverse Effect on the
Company;
(b) any split, combination, reclassification or other amendment
of any material term of any outstanding security of the Company or payment or
other distribution in respect of any of the Company's securities or any direct
or indirect redemption, purchase, or other acquisition of any of the Company's
securities;
(c) any material incidence, assumption or guarantee by the
Company of any indebtedness for borrowed money;
(d) any creation or assumption by the Company of any
Encumbrance, other than a Permitted Encumbrance, on any material Asset;
(e) any making of any material loan, advance or capital
contribution to any Person;
(f) any compromise, relinquishment, settlement or waiver by the
Company of a valuable right or material debt owed to it in excess of $50,000;
(g) any material change to, or termination of (other than by
completion thereof) a Company Contract;
(h) any sale, assignment, transfer or other disposition by the
Company of any material Proprietary Right;
(i) any resignation or termination of employment of any key
employee or executive officer of the Company and, to the Knowledge of the
Company, the Company has not received written notice of any such pending
resignation or termination, or, except as contemplated hereby, the entry by the
Company into any employment, severance or termination agreement with any such
key employee or executive officer;
(j) except for regularly scheduled increases in compensation or
bonuses for non-professional level employees, in each case in the ordinary
course of business consistent with past practice, any change in the rate of
compensation, commission, bonus or other direct or indirect remuneration payable
or to become payable to any director, officer or employees or agreement or
binding promise (orally or otherwise) to pay, conditionally or otherwise, any
bonus
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or extra compensation or other employee benefit to any of such directors,
officers or employees or severance;
(k) any employment or severance agreement with or for the
benefit of any director, officer or employee of the Company;
(l) the purchase or acquisition by the Company of capital Assets
costing more than $500,000 in any one instance;
(m) incurred, assumed, borrowed under or created any
indebtedness or guaranteed any indebtedness or other Liability of any other
Person;
(n) made, incurred, assumed, created or guaranteed any loan or
made any advance (other than the making of employee advances for travel and
entertainment in the ordinary course of business consistent with past practices)
or capital contribution to or investment in any Person;
(o) any change in accounting methods, principles or practices of
the Company affecting its Assets, liabilities or business, except immaterial
changes permitted by GAAP;
(p) any destruction of, damage to or loss of any material assets
or business of the Company (whether or not covered by insurance);
(q) any labor trouble or claim of wrongful discharge or other
unlawful labor practice or action with respect to the Company;
(r) any revaluation by the Company of any of its Assets;
(s) any material sale, lease, license or other disposition of
any of the Assets of the Company except for sales of (i) inventory and (ii)
obsolete equipment with a book value of not more than $50,000 in the aggregate;
(t) any material change or modification of any of the credit,
collection or payment policies, procedures or practices of the Company,
including acceleration of collections of receivables, failure to make or delay
in making collections of receivables, acceleration of payment of payables or
other Liabilities or failure to pay or delay in payment of payables or other
Liabilities;
(u) any material discount activity with customers of the Company
that has accelerated or would accelerate to pre-Closing periods sales that would
otherwise in the ordinary course of business consistent with past practices be
expected to occur in post-Closing periods;
(v) any settlement or compromise of any Action involving in
excess of $50,000; or
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(w) any agreement by the Company or any officer or employees
thereof to do any of the things described in the preceding clauses (a) through
(v) (other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
SECTION 3.14 COMPLIANCE WITH LAWS; NO DEFAULTS. The Company is
not in violation of, nor has it since the date of its formation violated, in any
material respect, any applicable provisions of any material laws, statutes,
ordinances or regulations.
SECTION 3.15 ENVIRONMENTAL MATTERS. Except as set forth on
Section 3.15 of the Company Disclosure Schedule, none of the Facilities has been
used by the Company or, to the Knowledge of the Company, by any other Person at
any time: (i) as a site for the storage, except as authorized under applicable
Environmental Laws, or disposal of any Hazardous Material or (ii) so as to cause
a violation of or to give rise to a removal, restoration or reimbursement
Liability under any Environmental Law, except in each case where such use could
not reasonably be expected to have a Material Adverse Effect on the Company.
Except as set forth on Section 3.15 of the Company Disclosure Schedule, the
Company does not have any Liability under any applicable Environmental Law or
under any Contract with respect to or as a result of (A) the presence or Release
of any Hazardous Material at, under or from any Facility, (B) the disposition of
Hazardous Materials removed from a Facility, (C) the presence of Hazardous
Materials in the soil or groundwater at any location or (D) the exposure of any
Person to Hazardous Materials, except in each case where such Liability could
not reasonably be expected to have a Material Adverse Effect on the Company. The
Company is in compliance in all material respects with and has complied in all
material respects at all times with all Environmental Laws, and Permits
promulgated pursuant to Environmental Laws, related to or affecting the Company,
including in connection with the acquisition, storage, handling, transportation,
processing, use or disposal of any goods or materials, whether as raw materials,
work-in-process, finished goods or otherwise, except where noncompliance could
not reasonably be expected to have a Material Adverse Effect on the Company.
Except as set forth on Section 3.15 of the Company Disclosure Schedule, to the
Knowledge of the Company, while any Facility has been owned or occupied by the
Company, no underground tanks, asbestos-containing materials, lead-based paint
or polychlorinated biphenyls are or have been present at any Facility.
SECTION 3.16 TAXES. Except as set forth in Section 3.16 of the
Company Disclosure Schedule:
(a) Filing of Tax Returns. The Company has duly and timely filed
with the appropriate Tax authorities all Tax Returns required to be filed
through the Closing Date, except to the extent any failure to so file would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
All such Tax Returns are complete, correct and accurate in all material
respects. All Taxes owed by the Company (whether or not shown on such Tax
Returns) have been paid or provided for, except to the extent any failure to so
pay or provide for such Taxes would not, individually or in the aggregate, have
a Material Adverse Effect on the Company. The Company is not currently the
beneficiary of any extension of time within which to file any Tax Returns.
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(b) Payment of Taxes. The unpaid Taxes of the Company (i) did
not, as of the date of the Balance Sheet, exceed the reserve for Tax liability
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Balance
Sheet (rather than in any notes thereto), and (ii) will not exceed that reserve
as adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of the Company in filing its Tax
Returns.
(c) Audit History. No deficiency with respect to material Taxes
has been proposed, asserted or assessed in writing against the Company, and
there are no outstanding agreements or waivers extending the statutory period of
limitations applicable to any Tax Returns required to be filed with respect to
the Company, except to the extent such deficiency or waiver would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
The Company has previously delivered to Parent correct and complete copies of
all federal and state Income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company since December 31,
1995. The Company has not agreed to any extension of time with respect to a Tax
assessment or deficiency.
(d) Asset Liens. There are no liens for Taxes (other than for
current Taxes not yet due and payable) on any Assets of the Company.
(e) Prior Affiliated Groups. The Company has never been a member
of an affiliated group of companies within the meaning of Section 1504 of the
Code. The Company has no liability for Taxes of any Person other than the
Company (i) under Section 1.1502-6 of the Treasury regulations (or any similar
provision of state, local or foreign law), or (ii) as a transferee or successor.
(f) Withholding. The Company is not a "United States real
property holding Company" within the meaning of Section 897 of the Code. The
Company has withheld and paid all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, shareholders or other third party.
(g) S Corporation Status. The Company has been an S corporation
within the meaning of Section 1361 of the Code since February 1, 2000 and will
continue to be an S corporation at all times up to and including the day before
the Closing Date. The Company was a C corporation within the meaning of Section
1361(a)(2) of the Code for all periods during which it existed prior to February
1, 2000.
(h) No claim or legal proceeding is pending or, to the Company's
Knowledge, has been threatened against or with respect to Company in respect of
any material Tax.
(i) The Company has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code.
(j) The Company is not a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract,
and the Company does not have, nor, by reason of the consummation of the
transactions contemplated under this
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Agreement, will it have, any liability or obligation under any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract
entered into by it prior to the Effective Time in connection with a transaction
not related to the Merger or any transaction contemplated under this Agreement.
(k) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company entered into prior to the Effective Time
and not in connection with the Merger (including, without limitation, the
Restricted Stock Plan) that, considered individually or considered collectively
with any other such Contracts, will, or could reasonably be expected to, give
rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162(m) of the Code.
(l) The Company is not a party to any Contract entered into
prior to the Effective Time and not in connection with the Merger to compensate
any individual for excise taxes paid pursuant to Section 4999 of the Code.
(m) The Company has not made any distribution of stock of any
"controlled corporation," as that term is defined by Section 355(a)(1) of the
Code in a transaction intended to qualify as a distribution described in Section
355(a)(1) of the Code.
(n) For the Company's fiscal year ended January 31, 1998 and
thereafter, the Company has not been and will not be required to include any
adjustment in taxable income for any tax period (or portion thereof) pursuant to
Section 481 or 263A of the Code or any comparable provision under state or
foreign Tax laws as a result of transactions or events occurring, or accounting
methods employed, prior to the Closing.
SECTION 3.17 EMPLOYEE BENEFIT PLANS.
(a) Disclosure; Delivery of Copies of Relevant Documents and
Other Information. Section 3.17(a) of the Company Disclosure Schedule contains a
complete list of the Employee Plans. True and complete copies of each of the
following documents have been made available to Parent: (i) each Welfare Plan
and Pension Plan (and, if applicable, related trust agreements) and all
amendments thereto and all annuity contracts or other funding instruments, (ii)
each Benefit Arrangement, (iii) the most recent determination, opinion, advisory
and/or notification letter issued by the Internal Revenue Service with respect
to each Pension Plan and each Welfare Plan, (iv) for the most three (3) recent
plan years, Annual Reports on Form 5500 Series required to be filed with any
Governmental Entity for each Pension Plan, (v) if the Employee Plan is funded,
the most recent annual and periodic accounting of Employee Plan assets, (vi) the
most recent summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each
Employee Plan, (vii) all communications material to any current or former
employee, consultant or director relating to any Employee Plan and any proposed
Employee Plan, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any material liability
to the Company or
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any Affiliate, (viii) all correspondence to or from any governmental agency
relating to any Employee Plan, (ix) all forms and related notices (or such forms
and notices as required under comparable law) pursuant to the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), and (x) the
three (3) most recent plan years discrimination tests for each Employee Plan, if
applicable.
(b) Representations. Except as set forth in Section 3.17(b) of
the Company Disclosure Schedule:
(i) Pension Plans. No Pension Plan is subject to the
minimum funding requirements of ERISA or the Code or to Title IV of ERISA. Each
Pension Plan is the subject of a favorable determination letter from the IRS
with respect to its qualified status under Section 401(a) of the Code.
(ii) Multiemployer Plans. At no time has the Company
contributed to, or been obligated to, contribute to any Multiemployer Plan.
Neither the Company, nor any Affiliate has at any time ever maintained,
established, sponsored, participated in, or contributed to any multiple employer
plan, or to any plan described in Section 413 of the Code.
(iii) Welfare Plans. Neither the Company nor any Welfare
Plan has any present or future liability or obligation to make any payment to or
with respect to any person of the Company pursuant to any retiree health benefit
plan or other retiree Welfare Plan except to the extent required by the Code,
ERISA or any other applicable law.
(iv) Health Care Compliance. Neither the Company nor any
Affiliate has, prior to the Effective Time and in any material respect, violated
any of the health care continuation requirements of COBRA, the requirements of
Family Medical Leave Act of 1993, as amended ("FMLA"), the requirements of the
Health Insurance Portability and Accountability Act of 1996, as amended
("HIPAA"), the requirements of the Women's Health and Cancer Rights Act of 1998,
the requirements of the Newborns' and Mothers' Health Protection Act of 1996, or
any amendment to each such act, or any similar provisions of state law
applicable to its Employees.
(v) Compliance. Each Employee Plan has been established
and maintained in material compliance with its terms and is in material
compliance with the requirements prescribed by any and all statutes, orders,
rules and regulations which are applicable to such Employee Plan, including but
not limited to the Code and ERISA. No "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 4975 of the Code or Section 408 of ERISA (or any
administrative class exemption issued thereunder), has occurred with respect to
any Company Employee Plan. There are no actions, suits or claims pending, or, to
the Knowledge of the Company, threatened or reasonably anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan. Each Company Employee Plan (other than any
stock option plan) can be amended, terminated or otherwise discontinued after
the Effective Time, without material liability to the Parent,
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Company or any of its Affiliates (other than ordinary administration expenses).
There are no audits, inquiries or proceedings pending or, to the Knowledge of
the Company or any Affiliates, threatened by the IRS or DOL with respect to any
Company Employee Plan. Neither the Company nor any Affiliate is subject to any
penalty or tax with respect to any Company Employee Plan under Section 502(i) of
ERISA or Sections 4975 through 4980 of the Code.
(vi) No Amendments. Except for the Restricted Stock
Plan, the Company has no announced plan or commitment to create any additional
Employee Plans or to amend or modify any existing Employee Plan.
(vii) No ERISA Affiliates. The Company has no ERISA
Affiliates.
(c) Effect of Transaction. The execution of this Agreement and
the consummation of the transactions contemplated hereby will not (either alone
or upon the occurrence of any additional or subsequent events) constitute an
event under any Employee Plan trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any current or former employee, director or consultant.
(d) No International Employee Plan. The Company does not now,
nor has it ever had the obligation to, maintain, establish, sponsor, participate
in, or contribute to any Employee Plan that has been adopted or maintained by
the Company or any Affiliate, whether informally or formally, or with respect to
which the Company or any Affiliate will or may have any liability, for the
benefit of Employees who perform services outside the United States.
(e) Employment Matters. The Company: (i) is in compliance in all
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to current or former
employees, consultants or directors; (ii) has withheld and reported all amounts
required by law or by agreement to be withheld and reported with respect to
wages, salaries and other payments to current or former employees, consultants
or directors; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not liable
for any payment to any trust or other fund governed by or maintained by or on
behalf of any governmental authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for current or former
employees, consultants and directors (other than routine payments to be made in
the normal course of business and consistent with past practice). There are no
pending, threatened or reasonably anticipated claims or actions against the
Company under any worker's compensation policy or long-term disability policy.
(f) Labor. No work stoppage or labor strike against the Company
is pending, threatened or reasonably anticipated. The Company does not know of
any activities or proceedings of any labor union to organize any current or
former employees, directors or consultants. There are no actions, suits, claims,
labor disputes or grievances pending, or, to the Knowledge of the Company,
threatened or reasonably anticipated relating to any labor, safety or
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discrimination matters involving any current or former employee, consultant or
director, including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in any material liability to the Company. Neither
the Company nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. The Company is
not presently, nor has it been in the past, a party to, or bound by, any
collective bargaining agreement or union contract with respect to current or
former employees, consultants or directors and no collective bargaining
agreement is being negotiated by the Company.
SECTION 3.18 AFFILIATE TRANSACTIONS. Except as set forth on
Section 3.18 of the Company Disclosure Schedule, there is no, and since January
31, 2000, there has not been any:
(a) indebtedness, Contract, arrangement, transaction or payment
or transfer, directly or indirectly, of any funds or other property, between the
Company, on the one hand, and any Affiliate, officer, director or shareholder of
the Company or any member of such individual's immediate family (or for their
benefit), on the other hand, except for (i) regularly scheduled cash
compensation paid to employees and directors of the Company and amounts paid to
employees of the Company pursuant to existing employee benefit plans listed in
Section 3.17(a) of the Company Disclosure Schedule, (ii) reimbursements of
ordinary and necessary business expenses of employees and directors of the
Company incurred in connection with their employment and director duties
consistent with written policies of the Company, (iii) transactions conducted in
the ordinary course of business with the Company at prevailing market prices and
on prevailing market terms or (iv) transactions embodied in any Contract set
forth on Schedule 3.11(a) of the Company Disclosure Schedule;
(b) interest of any Affiliate, officer, director or shareholder
of the Company or any member of such individual's immediate family (or for their
benefit) in any material assets or material properties (whether real, personal
or mixed and whether tangible or intangible) owned or used by or relating to the
Company;
(c) ownership (of record or as a beneficial owner) by any
Affiliate, officer, director or shareholder of the Company or any member of such
individual's immediate family (or for their benefit) of an equity interest or
any other financial or profit interest in a Person that has had business
dealings or a financial interest in any material transaction with the Company
(other than business dealings or transactions conducted in the ordinary course
of business with the Company at prevailing market prices and on prevailing
market terms); or
(d) ownership (of record or as a beneficial owner) by any
Affiliate, officer, director or shareholder of the Company or any member of such
individual's immediate family (or for their benefit) of an equity interest or
any other financial or profit interest in a Person that has engaged in
competition with the Company with respect to any products or services of the
Company in any market presently served by the Company (except for ownership of
less than two percent of the outstanding capital stock of any corporation that
is publicly traded on any recognized exchange or in the over-the-counter
market).
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SECTION 3.19 BROKERS. Except for fees payable to CIBC World
Markets pursuant to the Engagement Letter and fees payable to Latham & Watkins,
no broker, finder, investment banker or other intermediary, has been retained by
or is authorized to act on behalf of the Company or any of its Affiliates, or is
entitled to or could reasonably be expected to be entitled to any brokerage,
finder's or other fee or commission from the Company in connection with the
negotiation, preparation, execution or delivery of this Agreement or any
Ancillary Agreement or the transactions contemplated by this Agreement or any
Ancillary Agreement. A copy of the engagement letter, dated June 1, 2000 (the
"Engagement Letter"), retaining CIBC World Markets has been provided to Parent.
SECTION 3.20 NO OTHER AGREEMENTS TO SELL THE COMPANY OR ITS
ASSETS; NO EXISTING DISCUSSIONS. The Company has no legal obligation, absolute
or contingent, to any other Person to sell any Assets (other than inventory or
obsolete equipment in the ordinary course of business consistent with past
practices) of the Company, except pursuant to the Restricted Stock Plan, to sell
any of the capital stock or other ownership interests of the Company, or to
effect any merger, consolidation or other reorganization of the Company or to
enter into any agreement with respect thereto. As of the date hereof, the
Company is not engaged, directly or indirectly, in any discussions or
negotiations with any other party with respect to an Acquisition Proposal.
SECTION 3.21 INSURANCE.
(a) Section 3.21(a) of the Company Disclosure Schedule sets
forth a complete and accurate list of all insurance policies and surety bonds
which the Company maintains with respect to its Assets, Liabilities, employees,
officers or directors or the Business (the "Insurance Policies"). The Company
has previously delivered or made available to the Parent true and complete
copies of all the Insurance Policies.
(b) Except as set forth on Section 3.21(b) of the Company
Disclosure Schedule, the Insurance Policies: (i) are in full force and effect
and will not lapse or be subject to suspension, modification, revocation,
cancellation, termination or nonrenewal by reason of the execution, delivery or
performance of any this Agreement or any Ancillary Agreement or consummation of
the transactions contemplated hereby or thereby; and (ii) are sufficient for
compliance with all requirements of Law and the Company Contracts. The Company
is current in all premiums or other payments due under each of the Insurance
Policies and has otherwise performed in all material respects all of its
obligations thereunder.
(c) The Company has not received during the past two years from
any insurance carrier with which it has carried any insurance any refusal of
coverage or notice of material limitation of coverage or any notice that a
defense will be afforded with reservation of rights.
SECTION 3.22 PERMITS. Section 3.22 of the Company Disclosure
Schedule contains a complete and accurate list of all material Permits that are
held by the Company. Except as set forth on Section 3.22 of the Company
Disclosure Schedule, the Permits listed on Section 3.22 of the Company
Disclosure Schedule constitute all the material Permits that are
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necessary for the Company to conduct its business and to own and use their
assets in compliance with all Laws applicable to such operation, ownership and
use. All material Permits of the Company are validly held by the Company and are
in full force and effect. Except as set forth on Section 3.22 of the Company
Disclosure Schedule, no material Permits of the Company will be subject to
suspension, modification, revocation, cancellation, termination or nonrenewal as
a result of the execution, delivery or performance of this Agreement or any
Ancillary Agreement or the consummation by the Company of the transactions
contemplated by this Agreement or any Ancillary Agreement. The Company has
complied in all material respects with all of the terms and requirements of the
material Permits of the Company.
SECTION 3.23 RESTRICTIONS ON BUSINESS ACTIVITIES. There is no
agreement (noncompete or otherwise), commitment, judgment, injunction, order or
decree to which the Company is a party or otherwise binding upon the Company
which has or may have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company. Without limiting the
foregoing, except as set forth on Section 3.23 of the Company Disclosure
Schedule, the Company has not entered into any agreement under which the Company
is restricted from selling, licensing or otherwise distributing any of its
technology or products to or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market.
SECTION 3.24 MAJOR CUSTOMERS AND SUPPLIERS. Section 3.24(a) of
the Company Disclosure Schedule lists the ten (10) largest customers of the
Company as of October 18, 2000, on the basis of revenues for the current fiscal
year. The Company has provided to Parent the projected list of the ten (10)
largest customers of the Company for the calendar year 2001, including projected
orders from such customers; provided, however, that the Company makes no
representation or warranty with respect to such order projections, other than
that the projections were based on information provided to the Company by such
customers, and to the Knowledge of the Company (without inquiry), the
projections provided by such customers were prepared in good faith. Section
3.24(b) of the Company Disclosure Schedule lists the ten (10) largest suppliers
as of October 18, 2000 of the Company on the basis of cost of goods or services
purchased for the current fiscal year. Except as disclosed in Section 3.24(c) of
the Company Disclosure Schedule, no such customer or supplier has ceased or
materially reduced its purchases from or sales or provision of services to the
Company since January 1, 2000 or, to the Knowledge of the Company, has
threatened to cease or materially reduce such purchases or sales or provision of
services after the date hereof. To the Knowledge of the Company (without
inquiry), no such customer or supplier is threatened with bankruptcy or
insolvency.
SECTION 3.25 SUFFICIENCY OF ASSETS. The assets and properties of
the Company constitute all of the material assets and rights that are used by
the Company in the operation of its business as it is being conducted as of the
date hereof.
SECTION 3.26 NO UNDISCLOSED LIABILITIES. Except as set forth in
Section 3.26 of the Company Disclosure Schedule, the Company does not have any
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued,
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absolute, contingent, matured, unmatured or other (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles), which individually or in the aggregate, (i) has not been
reflected in the Reference Balance Sheet, or (ii) has not arisen in the ordinary
course of business since August 31, 2000, consistent with past practices.
ARTICLE IIIA.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY SHAREHOLDERS
Each of the Company Shareholders severally, but not jointly, represents
and warrants to each of Parent and Merger Sub that the statements contained in
this Article IIIA are true and correct.
SECTION 3A.1 INDIVIDUAL STATUS; AUTHORIZATION; DELIVERY.
(a) Except for the Chao Family Trust dated June 8, 2000, each
such Company Shareholder is an individual.
(b) Such Company Shareholder has the requisite power and
authority to execute, deliver and perform his, her or its obligations under this
Agreement and the Ancillary Agreements to which he, she or it is a party and to
consummate the transactions contemplated hereby and thereby.
(c) This Agreement and the Ancillary Agreements to which such
Company Shareholder (and if such Company Shareholder is a married individual and
his or her Company Common Stock constitutes community property, his or her
spouse) is a party has been (or, when executed and delivered, will have been)
duly and validly executed and delivered by such Company Shareholder and
constitutes (or, when executed and delivered, will constitute) a legal, valid
and binding obligation of such Company Shareholder (and, if applicable, his or
her spouse), enforceable against him or her (and, if applicable, his or her
spouse) in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general equitable
principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
SECTION 3A.2 TITLE. Such Company Shareholder has good and
marketable title to, and is the record and beneficial owner of, the number of
shares of Company Common Stock set forth opposite such Company Shareholder's
name on Exhibit A (and on the Closing Date will have good and marketable title
to, and will be the record and beneficial owner of, such Company Common Stock
set forth on Exhibit A), free and clear of any Encumbrances. The number of
shares of Company Common Stock set forth opposite such Company Shareholder's
name on Exhibit A constitute all of the shares of Company Common Stock over
which any voting or dispositive power is held by such Company Shareholder.
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SECTION 3A.3 NO BROKERS. Except for CIBC World Markets under the
Engagement Letter, no investment banker, broker or finder has been retained by
or is authorized to act on behalf of such Company Shareholder or any Affiliate
of such Shareholder (other than the Company) which is or could reasonably be
expected to be entitled to any fee, commission or payment from the Company
Shareholders in connection with the negotiation, preparation, execution or
delivery of this Agreement or any Ancillary Agreement or the consummation of the
transaction contemplated hereby or thereby, nor is there any basis for any such
fee, commission or payment to be claimed by any Person against such Company
Shareholder.
SECTION 3A.4 NO BREACH. None of the execution, delivery or
performance by such Company Shareholder (and, if applicable, his or her spouse)
of this Agreement or any Ancillary Agreement delivered or to be delivered by
such Company Shareholder (and, if applicable, his or her spouse) or the
consummation of the transactions contemplated hereby and thereby by such Company
Shareholder does or will, with or without the giving of notice or the lapse of
time or conflict with, or result in a breach or violation of or a default under,
or give rise to a right of amendment, termination, cancellation or acceleration
of any obligation or to a loss of a benefit under (i) any Contract of such
Company Shareholder or any of its Affiliates (other than Contracts of the
Company) or (ii) any Law or other requirement to which such Company Shareholder
or its properties or assets are subject.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF
PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company and the Company Shareholders that the statements contained in this
Article IV are true and correct except as set forth herein and in the disclosure
schedule delivered by Parent to the Company on or before the date of this
Agreement (the "Parent Disclosure Schedule"). The Parent Disclosure Schedule
shall be arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this Article IV and the disclosure in any paragraph
shall qualify other paragraphs in this Article IV only to the extent that it is
reasonably apparent that such disclosure qualifies or applies to such other
paragraphs.
SECTION 4.1 ORGANIZATION AND QUALIFICATION. Each of Parent and
Merger Sub is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization and has all corporate power and
authority to own and operate its Assets and to carry on its businesses as
presently conducted. Each of Parent and Merger Sub is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify would have a Material Adverse Effect on Parent.
SECTION 4.2 CAPITALIZATION.
(a) The authorized capital of Parent consists of 250,000,000
shares of Parent Common Stock, 63,912,295 shares of which are issued and
outstanding as of the date of October
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24, 2000, and 10,000,000 shares of preferred stock, $0.001 par value, none of
which is issued and outstanding as of the date of this Agreement.
(b) The authorized capital stock of Merger Sub consists of 100
shares of common stock, par value $0.01 per share, all of which are duly
authorized, validly issued and outstanding, fully paid and nonassessable and
owned by parent free and clear of all liens, claims and encumbrances. Merger Sub
was formed solely for the purpose of engaging in a business combination
transaction with the Company.
SECTION 4.3 AUTHORIZATION.
(a) Each of Parent and Merger Sub has the requisite corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the Ancillary Agreements to which Parent or Merger Sub, as the
case may be, is a party and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Ancillary
Agreements to which Parent is a party by Parent, and to which Merger Sub is a
party by Merger Sub, and the performance by them of their respective obligations
hereunder and thereunder and the consummation by them of the transactions
contemplated hereby and thereby have been duly authorized by the Parent Board
and the board of directors of Merger Sub and all other necessary corporate
action on the part of Parent or Merger Sub (including the approval of the Merger
by Parent as sole stockholder of Merger Sub) has been taken, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement and the Ancillary Agreements to which Parent or Merger
Sub, as the case may be, is a party and the transactions contemplated hereby and
thereby.
(b) This Agreement and the Ancillary Agreements to which Parent
or Merger Sub is a party have been (or, when executed and delivered, will have
been) duly and validly executed and delivered by Parent and Merger Sub, as the
case may be, and constitutes (or, when executed and delivered, will constitute)
a legal, valid and binding obligation of Parent and Merger Sub, as the case may
be, enforceable against them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally, general equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and fair dealing.
SECTION 4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Neither the execution and delivery of this Agreement or the
Ancillary Agreements nor the performance by Parent and Merger Sub of their
obligations hereunder or thereunder, nor the consummation of the transactions
contemplated hereby or thereby, will: (i) conflict with Parent's certificate of
incorporation of Merger Sub's articles of incorporation or their bylaws or the
comparable charter or organizational documents of any of Parent's Subsidiaries,
(ii) assuming satisfaction of the requirements set forth in Section 4.4(b)
below, violate any statute, law, ordinance, rule, regulation or judgment, decree
or order of any Governmental Entity, applicable to the Parent or any of its
Subsidiaries or any of their Assets.
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(b) Except (i) for the filing of the Agreement of Merger
pursuant to the CCC, (ii) applicable requirements under the premerger
notification requirements of the HSR Act, (iii) the filing of the Permit
Application and the issuance of a Permit by the Department and (iv) applicable
requirements of Blue Sky Laws, no consent, approval or authorization of, permit
from, or declaration, filing or registration with, any Governmental Entity, or
any other Person is required to be made or obtained by Parent or any of its
Subsidiaries in connection with the execution, delivery and performance of this
Agreement or the Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby.
SECTION 4.5 SEC DOCUMENTS. Parent has filed true and complete
copies of each registration statement, proxy or information statement, form,
report and other documents required to be filed by it with the SEC since March
1, 2000 (collectively, the "Parent SEC Reports"). As of their respective dates,
the Parent SEC Reports and any registration statements, reports, forms, proxy or
information statements and other documents filed by Parent with the SEC after
the date of this Agreement (i) complied, or, with respect to those not yet
filed, will comply, in all material respects with the applicable requirements of
the Securities Act and the Exchange Act and (ii) did not, or, with respect to
those not yet filed, will not, contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading, except with respect to Parent SEC Reports which
were amended or superseded by subsequently filed documents, filed with the SEC
prior to the date hereof.
SECTION 4.6 ABSENCE OF CERTAIN CHANGES. Except as set forth in
the Parent SEC Reports and except for the transactions expressly contemplated
hereby, since July 2, 2000, there has not been any change in Parent's business,
operations, condition (financial or otherwise), results of operations, Assets or
liabilities, except for changes contemplated hereby or changes which have not,
individually or in the aggregate, had a Material Adverse Effect on Parent.
SECTION 4.7 BROKERS. Except Credit Suisse First Boston
Corporation, no broker, finder, investment banker or other intermediary has been
retained by or is authorized to act on behalf of Parent, Merger Sub or any of
their respective Affiliates, or is entitled to or could reasonably be expected
to be entitled to any brokerage, finder's or other fee or commission in
connection with the negotiation, preparation, execution or delivery of this
Agreement or any Ancillary Agreement or the transactions contemplated by this
Agreement or any Ancillary Agreement. A copy of the engagement letter retaining
Credit Suisse First Boston Corporation has been provided to the Company.
SECTION 4.8 INTERIM OPERATION OF MERGER SUB. Merger Sub is not a
party to any material agreements and has not conducted any activities other than
in connection with the organization of Merger Sub, the negotiation and execution
of this Agreement and the consummation of the transactions contemplated hereby.
Merger Sub has no Subsidiaries.
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ARTICLE V.
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY PENDING THE
MERGER. During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Effective Time, the
Company agrees (except to the extent that Parent shall otherwise consent in
writing) (i) to carry on its business in the ordinary course in substantially
the same manner as previously conducted, to pay its debts and Taxes, subject to
good faith disputes over such debts or Taxes, in the ordinary course in
substantially the same manner as previously paid (Parent acknowledges that it is
the Company's practice to pay the taxes of the Company and the Company
Shareholders (directly or indirectly by dividend or otherwise, as such Taxes
relate to the operations of the Company) and agrees that no provision of this
Agreement shall prevent Company from adhering to such practice through the
Effective Time) and to pay or perform its other obligations when due in the
ordinary course in substantially the same manner as previously paid or
performed, (ii) to use commercially reasonable efforts to preserve intact the
business organization and Permits of the Company, (iii) to use commercially
reasonable efforts to keep available to the Purchaser the services of the
present officers and key employees of the Company and (iv) to use commercially
reasonable efforts to further good business relationships of the Company with
their respective customers, suppliers, distributors and other persons with which
the Company have significant business relationships. Without limiting the
generality of the foregoing and except as expressly contemplated by this
Agreement, during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Effective Time,
without the written consent of Parent, the Company shall not:
(a) adopt or propose any amendment to its articles of
incorporation, its bylaws or comparable charter or organizational documents;
(b) (i) except for the issuance of the Restricted Stock, issue,
pledge or sell, or propose or authorize the issuance, pledge or sale of
additional shares of capital stock of any class or any security convertible into
or exercisable or any security convertible into or exercisable for capital stock
of the Company, (ii) amend, waive or otherwise modify any of the terms of any
option, warrant or stock option plan of the Company, or authorize cash payments
in exchange for any options granted under any of such plans, or (iii) adopt or
implement any stockholder rights plan;
(c) declare, set aside or pay any dividend or other distribution
(whether in cash, securities or property or any combination thereof) in respect
of any class or series of its capital stock (other than for the purpose of
paying the Taxes of the Company or the Company Shareholders; provided, however,
the amount of such Taxes shall have been demonstrated to Parent to its
reasonable satisfaction), or purchase, redeem or otherwise acquire or propose to
redeem or purchase or otherwise acquire, directly or indirectly, any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock;
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(d) split (including reverse split), combine, subdivide or
reclassify any shares of its capital stock, or any of its other securities;
(e) except for the issuances of the Restricted Stock, increase
the compensation or fringe benefits payable or to become payable to its
directors, officers or employees, or pay any material benefit not required by
any existing plan or arrangement (including, without limitation, the granting of
stock options, stock appreciation rights, shares of restricted stock or
performance units) or grant any severance or termination pay to (except pursuant
to existing Company Contracts, which Company Contracts shall be interpreted and
implemented in a manner consistent with past practice), or enter into or adopt
any Employee Plan or any employment or severance agreement with, any director,
officer or, except as it relates to the hiring of new non-management or
non-professional level employees in the ordinary course of business, employee of
the Company or establish, adopt, enter into, or amend any bonus, profit sharing,
thrift, compensation, stock option, restricted stock, pension, retirement,
savings, welfare, deferred compensation, employment, termination, severance or
other employee benefit plan, agreement, trust, fund, policy or arrangement for
the benefit or welfare of any directors, officers or current or former
employees, including any Employee Plan, except (i) to the extent required by
applicable law or regulation, (ii) for salary and benefit increases in the
ordinary course of business consistent with past practice to employees other
than executive officers of the Company, or (iii) as contemplated by this
Agreement;
(f) (i) sell, pledge, lease, dispose of, grant, encumber, or
otherwise authorize the sale, pledge, disposition, grant or encumbrance of any
Assets of the Company, other than Permitted Encumbrances (other than the sale of
inventory or obsolete equipment in the ordinary course of business consistent
with past practices, or (ii) acquire any real property, any other material
Assets (other than supplies and raw materials) or any interest (including,
without limitation, by merger, consolidation, lease or acquisition of stock or
Assets) in a corporation, partnership, other business organization or any
division thereof (or a substantial portion of the Assets thereof);
(g) (i) incur, assume or pre-pay any debt for borrowed money,
other than amounts borrowed from existing credit facilities to pay Taxes of the
Company and Company Shareholders in amounts reasonably satisfactory to Parent,
(ii) assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
Person, (iii) make any loans, advances or capital contributions to, or
investments in, any other Person or with respect to any other material Assets,
(iv) enter into any "keep well" or other agreement to maintain the financial
condition of another entity, (v) enter into any derivative contracts or make
investments in marketable securities, or (vi) enter into any contract or
agreement that would be a Company Contract other than in the ordinary course of
business consistent with past practices;
(h) make or rescind any material express or deemed election
relating to Taxes, settle or compromise any material Action relating to Taxes,
amend any material Tax Return except in the ordinary course of business
consistent with past practice, or except as may be required by applicable law,
make any change to any of its material methods of reporting income
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or deductions (including, without limitation, any change to its methods or basis
or write-offs of accounts receivable) for federal income Tax purposes from those
employed in the preparation of its federal income Tax return for the taxable
year ending January 31, 2000;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted, unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities to the extent
reflected or reserved against in the Reference Balance Sheet;
(j) waive any rights of substantial value or make any payment,
direct or indirect, of any liability of the Company before the same comes due in
accordance with its terms;
(k) fail to maintain its existing insurance coverage of all
types in effect or, in the event any such coverage shall be terminated or lapse,
procure substantially similar substitute insurance policies which in all
material respects provide coverage in at least such amounts and insure against
such risks as are currently covered by such policies;
(l) enter into, or amend any collective bargaining agreement
(other than as required by law or extensions of existing agreements in the
ordinary course of business);
(m) change its methods of accounting as in effect on January 31,
2000 except as required by GAAP, or take any action, other than reasonable and
usual actions in the ordinary course of business and consistent with past
practice, with respect to accounting policies or procedures, unless required by
GAAP;
(n) modify, amend or terminate any of the Company Contracts or
waive, release or assign any material rights or claims thereunder;
(o) engage in any transaction with, or enter into any agreement,
arrangement, or understanding with, directly or indirectly, any Affiliates of
the Company which involves the transfer of consideration or has a financial
impact on the Company, other than pursuant to such agreements, arrangements, or
understandings existing on the date of this Agreement or disclosed in Section
5.1(o) of the Company Disclosure Schedule;
(p) close, shut down, or otherwise eliminate any facility or
office;
(q) materially exceed the Company's schedule of capital
expenditures for the period commencing on the date hereof and ending on the
Termination Date, a copy of which schedule is attached hereto as Schedule 5.1(q)
of the Company Disclosure Schedule;
(r) initiate, compromise, or settle any material litigation or
arbitration proceeding;
(s) dispose of, license or transfer to any Person any
Proprietary Rights other than non-exclusive licenses in connection with the sale
of the Company's products in the ordinary course of business consistent with
past practice;
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(t) enter into or amend any agreement pursuant to which any
other party is granted exclusive marketing, distribution or other exclusive
rights of any type or scope with respect to any of the Company's products or
technology;
(u) take, or agree to commit to take, any action that could
reasonably be expected to result in the (i) representations and warranties of
the Company contained herein that are qualified by materiality, not to be true
and correct and (ii) representations and warranties of the Company contained
herein that are not so qualified to not be true and correct in all material
respects; and
(v) enter into an agreement, contract, commitment or arrangement
to do any of the foregoing, or to authorize, recommend, propose or announce an
intention to do any of the foregoing.
SECTION 5.2 S STATUS. The Company shall maintain its tax status
as an S Corporation up to the day prior to the date of the Effective Time and
the Company Shareholders shall not revoke or otherwise terminate the election of
the Company to be treated as an S Corporation during such period.
ARTICLE VI.
ADDITIONAL AGREEMENTS
SECTION 6.1 FAIRNESS HEARING; 3(a)(10) EXEMPTION AND/OR
REGISTRATION STATEMENT.
(a) Subject to the provisions of Section 6.1(b) below, the
issuance of the shares of Parent Common Stock to be issued in the Merger will be
qualified by a permit (the "Permit") to be issued under Sections 25121 and 25142
of the California Securities Law, after a fairness hearing (the "Fairness
Hearing") before the California Commissioner of Corporations pursuant to Section
25142 of the California Securities Law, with the intent that the issuance of the
shares of Parent Common Stock in the Merger will, to the extent permitted by
applicable law, thereby be exempt under Section 3(a)(10) of the Securities Act
from the registration requirements of the Securities Act. As promptly as
practicable after the date of this Agreement (but in no event later than fifteen
(15) Business Days after the date hereof), Parent (with the Company's full and
prompt best efforts cooperation) will prepare and file with the California
Department of Corporations (the "Department") an application for qualification
of the shares of Parent Common Stock to be issued in the Merger and an
application for the Fairness Hearing to be held in connection therewith
(collectively, the "Permit Application"), and any other documents required by
the California Securities Law in connection with the Merger, in each case with
the Company's full and prompt cooperation. Parent and the Company will use their
respective commercially reasonable best efforts to have the Permit issued under
the California Law as promptly as practicable after such filing. Parent and the
Company shall also take any action required to be taken under any applicable
state securities or "blue sky" laws in connection with the issuance of the
shares of Parent Common Stock in the Merger. Each of Parent and the Company
shall timely
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furnish to the other all information concerning Parent or the Company, as the
case may be, its financial condition, its officers, directors, shareholders,
option holders and other security holders, as may be reasonably requested in
connection with any action contemplated by this Section 6.1. Parent will pay all
expenses incurred with respect to the Permit Application or the Fairness
Hearing, including, without limitation, (i) any filing fees or other fees
payable to the Department with respect to the Permit Application and the
Fairness Hearing and (ii) the costs of any court reporter or stenographer
selected by Parent's counsel incurred in connection with the Permit Application
and the Fairness Hearing; provided, however, Parent shall not pay any expenses
incurred by the Company.
(b) Notwithstanding the provisions of Section 6.1(a) above, if
despite Parent's and the Company's respective commercially reasonable best
efforts to obtain the Permit as a result of the Application and the Fairness
Hearing:
(i) the Department refuses to hold the Fairness Hearing,
affirmatively denies the Permit Application and refuses to issue the Permit; or
(ii) the Permit has not been issued by the date which is sixty (60) days from
the date hereof (the "Deadline Date"), as such date may be extended by mutual
agreement of Parent and the Company;
then Parent will (A) use its commercially reasonable best efforts to cause to be
filed a registration statement on Form S-4 (or an appropriate successor form)
with the SEC (the "Registration Statement") registering the Issuable Parent
Shares under the Act within thirty days of the Deadline Date (the "Registration
Statement Filing Deadline"), which Registration Statement shall provide for the
issuance of such Parent Common Stock, and (B) use its commercially reasonable
best efforts to cause such Registration Statement to be declared effective by
the SEC as soon as practicable after the Registration Statement Filing Deadline.
All of the costs, fees and expenses related to the Registration Statement,
including, without limitation, the legal fees of one counsel to the Company
Shareholders (which fees shall not exceed $25,000), shall be for the account of
Parent.
(c) If despite Parent's and the Company's commercially
reasonable best efforts to obtain the Permit as a result of the Application and
Fairness Hearing or to register the Issued Parent Shares pursuant to the
Registration Statement, then Parent and the Company shall use their commercially
reasonable best efforts to qualify and register the offer or issuance of the
Issuable Parent Shares under the Securities Act and in compliance with all
requirements of state securities or other "blue sky" laws of any applicable
jurisdiction.
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SECTION 6.2 COOPERATION; NOTICE; CURE. Subject to compliance
with applicable law, from the date hereof until the Effective Time, each of
Parent and the Company shall confer on a regular and frequent basis with one or
more Representatives of the other Party to report on the general status of
ongoing operations. Each of Parent and the Company shall promptly notify the
other in writing of, and will use all commercially reasonable efforts to cure
before the Closing Date, any event, transaction or circumstance, as soon as
practical after it becomes known to such Party, that causes or will cause any
covenant or agreement of Parent or the Company, as the case may be, under this
Agreement to be breached in any material respect or that renders or will render
untrue in any material respect any representation or warranty of Parent or the
Company contained in this Agreement. The Company will notify promptly Parent of
its becoming aware of any Action commenced or overtly threatened against the
Company or any of its Affiliates relating to the consummation of the
transactions contemplated hereby. No notice pursuant to this Section 6.2 will
affect any representations or warranties, covenants, obligations, agreements or
conditions set forth herein or otherwise affect any available remedies.
SECTION 6.3 NO SOLICITATION. Until the earlier of the Effective
Time and the date of termination of this Agreement pursuant to the provisions of
Section 8.1, each of the Company and the Company Shareholders will not take, nor
will the Company permit any of the Company's Representatives to (directly or
indirectly), take any of the following actions with any Person other than Parent
and its designees: (a) solicit, encourage or initiate any proposals or offers
from, or participate in or conduct discussions with or engage in negotiations
with, any Person relating to any offer or proposal, oral, written or otherwise,
formal or informal (a "Competing Proposed Transaction"), with respect to any
proposed Acquisition Proposal with the Company, (b) provide information with
respect to the Company to any Person, other than Parent, relating to, or
otherwise assist, cooperate with, facilitate or encourage any effort or attempt
by any such Person with regard to, any possible Acquisition Proposal with the
Company, (c) agree to, enter into a Contract with any Person, other than Parent,
providing for, or approve an Acquisition Proposal with the Company, (d) make or
authorize any statement, recommendation, solicitation or endorsement in support
of any possible Acquisition Proposal with the Company other than by Parent, or
(e) authorize or permit any of the Company's Representatives to take any such
action. Each of the Company and the Company Shareholders shall immediately cease
and cause to be terminated any such contacts or negotiations with any Person
relating to any such transaction or Acquisition Proposal. In addition to the
foregoing, if the Company or any Company Shareholder receives prior to the
Effective Time or the termination of this Agreement any offer or proposal
(formal or informal, oral, written or otherwise) relating to, or any inquiry or
contact from any Person with respect to, a Competing Proposed Transaction, the
Company or such Company Shareholder shall immediately notify Parent thereof and
provide Parent with the details thereof, including the identity of the Person or
Persons making such offer or proposal, and will keep Parent fully informed on a
current basis of the status and details of any such offer or proposal and of any
modifications to the terms thereof; provided, however, that this provision shall
not in any way be deemed to limit the obligations of the Company and its
Representatives set forth in the previous sentence. Each of the Company and
Parent acknowledge that this Section 6.3 was a significant inducement for Parent
to enter into this Agreement and the absence of such provision would have
resulted in either (i) a material reduction in the consideration to be
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paid to the stockholders of the Company in the Merger or (ii) a failure to
induce Parent to enter into this Agreement.
SECTION 6.4 ACCESS TO INFORMATION. Upon reasonable notice, the
Company shall afford to Parent and its Representatives reasonable access, during
normal business hours during the period prior to the Effective Time, to all its
personnel, properties, books, contracts, commitments and records and all other
information concerning its business, Assets, personnel and tax status as Parent
may reasonably request. Each of Parent and the Company shall hold any such
information furnished to it by the other party or its Representatives, which is
nonpublic, in confidence in accordance with the Confidentiality Agreement, dated
as of October 13, 2000, between Parent and the Company (the "Confidentiality
Agreement").
SECTION 6.5 GOVERNMENTAL APPROVALS.
(a) The Parties shall cooperate with each other and use their
commercially reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits and authorizations of all third
parties and Governmental Entities which are necessary to consummate the
transactions contemplated by this Agreement ("Governmental Approvals"), and to
comply with the terms and conditions of all such Governmental Approvals. Each of
the Parties shall use their reasonable best efforts to, and shall use their
reasonable best efforts to cause their respective Representatives and other
Affiliates to, file within 20 days after the date hereof, and in all events
shall file within 60 days after the date hereof, all required initial
applications and documents in connection with obtaining the Governmental
Approvals and shall act reasonably and promptly thereafter in responding to
additional requests in connection therewith. Without limiting the foregoing,
within 20 days from the date hereof, the Company and Parent shall make their
respective filings under the HSR Act with respect to the Merger and thereafter
shall promptly make any other required submissions under the HSR Act. The filing
fee that is required to be submitted with the Company's and Parent's filing
under the HSR Act in connection with the Merger shall be split evenly, by Parent
and the Company. Parent and the Company shall have the right to review in
advance, and to the extent practicable, each will consult the other on, in each
case subject to applicable laws relating to the exchange of information, all the
information relating to Parent and the Company, as the case may be, and any of
Parent's Subsidiaries, directors, officers and stockholders which appear in any
filing made with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by this
Agreement. Without limiting the foregoing, each of Parent and the Company (the
"Notifying Party") will notify the other promptly of the receipt of comments or
requests from Governmental Entities relating to Governmental Approvals, and will
supply the other Party with copies of all correspondence between the Notifying
Party or any of its Representatives and Governmental Entities with respect to
Governmental Approvals.
(b) Parent and the Company shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such Party to believe that there is a reasonable
likelihood that any approval needed from a Governmental
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Entity will not be obtained or that the receipt of any such approval will be
materially delayed. Parent and the Company shall take any and all actions
reasonably necessary to vigorously defend, lift, mitigate and rescind the effect
of any litigation or administrative proceeding adversely affecting this
Agreement or the transactions contemplated hereby or thereby, including, without
limitation, promptly appealing any adverse court or administrative order or
injunction to the extent reasonably necessary for the foregoing purposes.
(c) Notwithstanding the foregoing or any other provision of this
Agreement, Parent shall have no obligation or affirmative duty under this
Section 6.5 to cease or refrain from the ownership of any Assets, or the
association with any Person which association is material to the operations of
Parent, whether on the date hereof or at any time in the future.
SECTION 6.6 PUBLICITY. Parent and the Company shall consult with
the other and obtain the prior written consent of the other before issuing any
press release or otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby, provided that any Party may
make any public disclosure it believes in good faith is required by applicable
law, regulation or stock market rule without the consent of the other Party.
SECTION 6.7 INDEMNIFICATION.
(a) From and after the Effective Time, Parent agrees that it
will, and will cause the Surviving Corporation to, indemnify and hold harmless
each present and former director and officer of the Company (the "Company
Indemnified Parties"), against any damages paid in settlement incurred in
connection with any Action whether civil, criminal, administrative or
investigative, arising out of or pertaining to matters existing or occurring at
or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent that the Company would have been
permitted under the CCC and its articles of incorporation or bylaws in effect on
the date hereof to indemnify such Company Indemnified Party.
(b) For a period of five years after the Effective Time, Parent
shall (i) establish and maintain or shall cause the Surviving Corporation to
establish and maintain a directors' and officers' liability insurance policy
covering those Persons who are currently serving as the Company's directors and
officers with such insurance policy having at least $10,000,000 worth of
coverage and having a commercially reasonable scope; and (ii) assume the
obligations with respect to indemnification existing at the Effective Time
related to indemnification between the Company and its officers and directors
under the Company's bylaws and articles of incorporation.
(c) The provisions of this Section 6.7 are intended to be an
addition to the rights otherwise available to the current officers and directors
of the Company by law, charter, statute, bylaw or agreement, and shall operate
for the benefit of, and shall be enforceable by, each of the Company Indemnified
Parties, their heirs and their Representatives.
SECTION 6.8 REORGANIZATION MATTERS.
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(a) The Parties intend the Merger to qualify as a reorganization
under Section 368(a) of the Code. Each of the Company, the Company Shareholders
and Parent shall not take any action and shall not fail to take any action which
action or failure to act could reasonably be expected to prevent the Merger from
qualifying, as a reorganization under Section 368(a) of the Code.
(b) Each of the Company, the Company Shareholders and Parent
shall report the Merger as a reorganization within the meaning of Section 368 of
the Code, unless otherwise required pursuant to a "determination" within the
meaning of Section 1313(a) of the Code.
SECTION 6.9 FURTHER ASSURANCES AND ACTIONS.
(a) Subject to the terms and conditions herein, each of the
Parties agrees to use commercially reasonable efforts to take, or cause to be
taken, all appropriate action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) using their respective commercially
reasonable best efforts to obtain all permits and qualifications of Governmental
Entities and parties to contracts with each Party as are necessary for
consummation of the transactions contemplated by this Agreement, and (ii) to
fulfill all conditions precedent applicable to such Party pursuant to this
Agreement.
(b) In case at any time after the Effective Date any further
action is necessary to carry out the purposes of this Agreement or to vest the
Surviving Corporation with full title to all Assets, rights, approvals,
immunities, franchises of any of the Parties, the proper officers and/or
directors of Parent, the Company and the Surviving Corporation shall take all
such necessary action.
SECTION 6.10 OBTAINING CONSENTS. Each of Parent and the Company
shall give any notices to third parties and use their commercially reasonable
best efforts to obtain any third party consents related to or required in
connection with the Merger that are (a) necessary to consummate the transactions
contemplated hereby, (b) disclosed or required to be disclosed in the Company
Disclosure Schedule or the Parent Disclosure Schedule, as the case may be, or
(c) required to prevent a Material Adverse Effect on the Company or Parent from
occurring prior to or after the Effective Time.
SECTION 6.11 EMPLOYMENT AGREEMENTS. The Company shall cause each
of the key employees of the Company identified on Exhibit D to enter into (a) an
employment agreement with the Surviving Corporation in the form set forth on
Exhibit E having the terms relating to such employee set forth on Exhibit D and
(b) a Confidentiality Agreement and Invention Assignment Agreement in
substantially the form executed by each employee of Parent (other than that the
invention assignment will include inventions from the date of hire of such
employee by the Company). The Company shall cause each employee hired after the
date hereof, and the Company shall use its commercially reasonable best efforts
to cause each employee of the Company as of the date hereof, to enter into a
Confidentiality Agreement and Invention Assignment Agreement in substantially
the form executed by each employee of Parent.
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SECTION 6.12 RULE 16B-3 EXEMPTION. The Parent Board, upon
approving the Merger but prior to the consummation of the Merger, shall approve,
in such form as is required by Rule 16b-3 promulgated by the SEC under the
Exchange Act, the deemed acquisition of shares of Parent Common Stock issued in
connection with the Merger by the directors or officers of the Company, if any,
who will be (a) exchanging Company Common Stock for Parent Common Stock, and (b)
functioning as directors or officers of Parent following the Merger.
SECTION 6.13 EMPLOYEE MATTERS. As soon as administratively
practicable after the Effective Time (the "Benefits Date"), Parent shall
provide, or cause to be provided, vacation and leave, employee benefit plans,
programs and arrangements to the employees of the Company that are substantially
the same in the aggregate as those made generally available to similarly
situated employees of the Parent. From the Effective Time to the Benefits Date
(which the parties acknowledge may occur on different dates with respect to
different plans, programs or arrangements of the Company), the Parent shall make
commercially reasonable efforts to provide or cause to be provided, the vacation
and leave, benefit plans, programs and arrangements of the Company provided to
employees of the Company as of the date hereof. Each Company employee who
continues to be employed by Parent or any of its Subsidiaries immediately
following the Effective Time shall, to the extent permitted by law and
applicable tax qualification requirements, and subject to any generally
applicable break in service or similar rule, receive credit for all services
with the Company for all purposes, including without limitation, for eligibility
to participate and vesting under any plans of the Parent for years of service
with the Company (or, if applicable, predecessor entities) prior to the
Effective Time. Parent shall make commercially reasonable efforts to cause any
and all pre-existing condition (or actively-at-work or similar) limitations,
eligibility waiting periods and evidence of insurability requirements under any
group health plans to be waived with respect to the Company participants in such
plans and their eligible dependents and shall make commercially reasonable
efforts to provide them with credit for any co-payments, deductibles, offsets
(or similar payments) prior to the Effective Time for purposes of satisfying any
applicable deductible, out-of-pocket, or similar requirements under any Parent
plans in which they are eligible to participate after the Effective Time.
SECTION 6.14 NON-COMPETITION/NON-SOLICITATION AGREEMENT. Prior
to the Effective Time, the Principal Shareholder shall enter into a
Non-Competition/Non-Solicitation Agreement with the Company in the form set
forth on Exhibit F (a "Non-Competition Agreement").
SECTION 6.15 EXPENSES. Except as otherwise expressly provided
for herein, whether or not the Merger is consummated, all fees and expenses
incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of (including the
fees and expenses of third parties) ("Expenses") incurred by a Party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be for the
account of the respective Party incurring such fees and expenses; provided,
however, that the Expenses incurred by the Company Shareholders shall be for the
account of the Company. Section 6.15 of the Company
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Disclosure Schedule sets forth an estimate of the Expenses to be incurred by the
Company. Any Expenses exceeding such estimates shall be Excess Expenses.
SECTION 6.16 THE COMPANY'S 2000 RESTRICTED STOCK PLAN. Prior to
the Closing, the Company shall adopt a restricted stock plan which shall include
a form of restricted stock agreement (the "2000 Restricted Stock Plan"), which
plan shall be provided to Parent for review prior to its adoption and shall be
in a form reasonably acceptable to Parent. The 2000 Restricted Stock Plan shall
provide for grants ("Restricted Stock Grants") of restricted Company Common
Stock ("Restricted Stock") to the employees, officers of directors of the
Company set forth on Schedule 6.16 of the Company Disclosure Schedule in the
amounts set forth on such schedule. The material terms of the 2000 Restricted
Stock Plan and the Restricted Stock Grants are set forth on Schedule 6.16 of the
Company Disclosure Schedule. Effective as of the Effective Time, Parent shall
assume the Restricted Stock Plan and the Company's obligations with respect to
the Restricted Stock Grants, the shares of the Company Common Stock subject to
the Restricted Stock Grants shall be converted into shares of Parent Common
Stock pursuant to Section 2.7(a) and such shares of Parent Common Stock shall be
subject to all terms and conditions of the Restricted Stock Grants as in effect
immediately prior to the Effective Time. Parent shall file, promptly after the
Effective Time, a registration statement on Form S-8 (or any successor or other
appropriate form) registering a number of shares of Parent Common Stock to be
issued upon the exchange of Restricted Stock for Parent Common Stock
contemplated by Section 2.7(a).
SECTION 6.17 TAX MATTERS. The Company Shareholders shall be
responsible for timely filing all federal and state income tax returns of the
Company for taxable periods ending on or prior to the Effective Time of the
Merger and have paid or will pay all income taxes attributable to the income of
the Company for such periods. Such returns will be prepared and filed in
accordance with applicable law and in a manner consistent with past practices.
Parent and the Company, on the one hand, and the Company Shareholders, on the
other hand, will make available to the other, as reasonably requested, all
information, records or documents relating to the liability for Taxes of the
Company for all periods ending on or prior to the Effective Time and will
preserve such information, records or documents until the expiration of any
applicable statute of limitations or extensions thereof.
SECTION 6.18 401(K) PLAN AND SEVERANCE PLANS. Company and its
Affiliates, as applicable, shall each terminate, effective as of the day
immediately preceding the Effective Time: (i) any and all group severance,
separation or salary continuation plans, programs, or arrangements, and (ii) any
and all 401(k) plans, unless Parent provides notice to Company that such 401(k)
plan(s) shall not be terminated. Parent shall receive from Company evidence that
Company's and each Affiliate's, as applicable, plan(s) and/or program(s) have
been terminated pursuant to resolutions of each such entity's Board of Directors
(the form and substance of such resolutions shall be subject to review and
reasonable approval of Parent), effective as of the day immediately preceding
the Effective Time. In the event that distribution or rollover of assets from
the trust of a 401(k) plan which is terminated is reasonably anticipated to
trigger liquidation charges, surrender charges, or other fees to be imposed upon
the account of any participant or beneficiary of such terminated plan or upon
the Company or plan sponsor, then the Company
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shall take such actions as are necessary to reasonably estimate the amount of
such charges and/or fees and provide such estimate in writing to Parent prior to
the Effective Time. Parent shall pay such fees with respect to which Company
provides a reasonable estimate up to $5,000.
SECTION 6.19 LEASE AMENDMENT. Prior to the Effective Time, the
Principal Shareholder shall enter into a First Amendment to Lease with the
Company relating to the Company's facility at 4000 Via Pescador, Camarillo,
California, in the form set forth on Exhibit H.
ARTICLE VII.
CONDITIONS OF MERGER
SECTION 7.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE
MERGER. The respective obligations of each Party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) this Agreement and the Merger shall have been approved by
the Company Shareholders in the manner required under the CCC and the articles
of incorporation of the Company;
(b) the waiting period (for extension thereof) under the HSR Act
applicable to the Merger shall have expired or been terminated;
(c) no statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or permanent)
shall have been enacted, entered, promulgated or enforced by any Governmental
Entity of competent jurisdiction and no other legal restraint or prohibition
shall be in effect which prohibits, restrains, enjoins or restricts the
consummation of the Merger; provided, however, that the Parties shall use their
commercially reasonable best efforts to cause any such decree, ruling,
injunction or other order to be vacated or lifted;
(d) no Government Entity shall have commenced proceedings, or
overtly threatened to commence proceedings, to restrain or prohibit the
transactions contemplated hereby or force rescission, unless such Governmental
Entity shall have withdrawn such notice and abandoned any such proceedings prior
to the time which otherwise would have been the Closing Date;
(e) all filings required to be made prior to the Closing by any
Party or any of its respective Subsidiaries with, and all consents, approvals
and authorizations required to be obtained prior to the Closing by any Party or
any of its respective Subsidiaries from, any Governmental Entity in connection
with the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby shall have been made or obtained, except where
the failure to obtain such consents is not reasonably likely to have a Material
Adverse Effect on Parent or Company, as the case may be, and could not
reasonably be expected to
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subject the Parties or their Affiliates or any directors, trustees or officers
of any of the foregoing to the risk of criminal liability;
(f) the shares of Parent Common Stock issuable to the holders of
Company Common Stock pursuant to this Agreement shall have been approved for
listing on the NASDAQ National Market, subject to official notice of issuance;
and
(g) Parent and the Company shall each have received written
opinions from their respective tax counsel (Wilson Sonsini Goodrich & Rosati and
Latham & Watkins, respectively), in form and substance reasonably satisfactory
to them, to the effect that the Merger will constitute a tax-free reorganization
within the meaning of Section 368(a) of the Code and such opinions shall not
have been withdrawn. The Parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
SECTION 7.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY TO EFFECT
THE MERGER. The obligation of the Company to effect the Merger shall be subject
to the fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) each of the representations and warranties of Parent and
Merger Sub contained in this Agreement that is qualified by materiality shall be
true and correct at and as of the Effective Time as if made at and as of the
Effective Time and each of such representations and warranties of Parent and
Merger Sub that is not so qualified shall be true and correct in all material
respects at and as of the Effective Time as if made as of the Effective Time;
(b) Parent and Merger Sub shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the Effective
Time;
(c) the Company shall have received a certificate executed on
behalf of Parent and Merger Sub by the Chief Executive Officer or Chief
Financial Officer of Parent to the effect set forth in clauses (a) and (b) of
this Section 7.2; and
(d) (i) the Permit shall have been issued by the California
Commissioner of Corporations and shall remain in full force and effect or (ii)
the Registration Statement shall have been declared effective by the SEC and
shall remain in full force and effect.
SECTION 7.3 CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
TO EFFECT THE MERGER. The obligations of Parent and Merger Sub to effect the
Merger shall be subject to the fulfillment at or prior to the Closing Date of
the following additional conditions:
(a) each of the representations and warranties of the Company
and the Company Shareholders contained in this Agreement that is qualified by
materiality shall be true and correct at and as of the Effective Time as if made
at and as of the Effective Time and each of such representations and warranties
of the Company and the Company Shareholders that is not so
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qualified shall be true and correct in all material respects at and as of the
Effective Time as if made as of the Effective Time;
(b) the Company shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it at or prior to the Effective Time;
(c) Parent shall have received a certificate executed on behalf
of the Company by the Chief Executive Officer of the Company to the effect set
forth in clauses (a), (b), (g) and (h) of this Section 7.3;
(d) the Company Shareholders (other than David Biddle) shall
have entered into a Lock-Up Agreement in the form attached hereto as Exhibit G;
(e) each of the individuals set forth on Exhibit D shall have
executed and delivered to Parent a Non-Competition Agreement and such
Non-Competition Agreement shall be in full force and effect;
(f) no Company Shareholder shall have exercised, nor shall they
have any continued right to exercise, appraisal, dissenters' or similar rights
under applicable law with respect to their shares by virtue of the Merger;
(g) there shall have not occurred any events, facts or
circumstances that could reasonably be expected to result in a Material Adverse
Effect on the Company since the date hereof; and
(h) no litigation or proceeding shall be pending or, to the
Knowledge of the Company, currently threatened, that could reasonably be
expected to result in a Material Adverse Effect on the Company since the date
hereof.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any
time before the Effective Time (except as otherwise provided) as follows:
(a) by mutual written consent of each of Parent and the Company;
(b) by either the Company or Parent, if the Effective Time shall
not have occurred on or before the date which is ninety (90) days from the date
hereof, provided that either Party may elect to extend such date to the date
which is one hundred and eighty (180) days from the date hereof in the event the
only conditions to the Parties obligation to proceed to the Closing that remain
unsatisfied as of such date are those conditions described in Sections 7.1(b)
and (d) or Section 7.2(d) (the "Termination Date"); provided, further, that the
right to terminate this Agreement under this Section 8.1(b) shall not be
available to any Party whose failure to fulfill
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any obligation under this Agreement has been the cause of, or resulted in, the
failure of the Merger to occur on or before the Termination Date;
(c) by either the Company or Parent, if a Governmental Entity
shall have issued an order, decree or injunction having the effect of making the
Merger illegal or permanently prohibiting the consummation of the Merger, and
such order, decree or injunction shall have become final and nonappealable (but
only if the terminating Party shall have used its reasonable best efforts to
cause such order, decree or injunction to be lifted or vacated);
(d) by either the Company or Parent, if there shall have been a
material breach by the other of any of its (i) representations or warranties
contained in this Agreement, which breach would result in the failure to satisfy
one or more of the conditions set forth in Section 7.2(a) (in the case of a
breach by Parent) or Section 7.3(a) (in the case of a breach by the Company), or
(ii) covenants or agreements contained in this Agreement, which breach would
result in the failure to satisfy one or more of the conditions set forth in
Section 7.2(b) (in the case of a breach by Parent) or Section 7.3(b) (in the
case of a breach by the Company), and in any such case such breach shall be
incapable of being cured or, if capable of being cured, shall not have been
cured within 30 days after written notice thereof shall have been received by
the Party alleged to be in breach, provided, however, that the right to
terminate this Agreement under this Section 8.1(d) shall not be available to any
Party who is also in material breach of this Agreement; or
(e) by Company if (i) the difference of (A) $600,000,000 less
(B) the amount of the Excess Expenses, divided by (ii) the Average Stock Price
as of the Closing Date (the "Termination Share Number") exceeds 11,275,168;
provided, however, that the Company may not terminate this Agreement pursuant to
this Section 8.1(e) if Parent agrees to substitute the Termination Share Number
for the original number of Issuable Parent Shares.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination
of this Agreement pursuant to this Article VIII, this Agreement shall become
void and of no effect with no liability under the terms of the Agreement on the
part of any Party hereto; provided, however, that no such termination shall
relieve any party hereto from any liability for breach of this Agreement.
ARTICLE IX.
SURVIVAL AND INDEMNIFICATION
SECTION 9.1 SURVIVAL OF REPRESENTATIONS, ETC. The
representations and warranties of the Company contained in Sections 3.1, 3.4,
the first two sentences of Section 3.10(b), and 3.16, the representations and
warranties of the Company Shareholders contained in Section 3A.1 and the
representations and warranties of Parent and Merger Sub contained in Sections
4.1 and 4.3 shall survive the Closing Date and shall terminate
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only when the applicable statutes of limitations with respect to the liabilities
in question expire. All other representations and warranties of the Parties
contained herein shall survive the Closing Date and shall terminate twelve (12)
months after the Closing Date. Upon the termination of a representation or
warranty in accordance with the foregoing, such representation or warranty shall
have no further force or effect for any purpose under this Agreement, including
Section 9.2 hereof, except to the extent a claim was made prior to the
termination of such representation or warranty.
SECTION 9.2 INDEMNIFICATIONS.
(a) By the Company Shareholders. The Company Shareholders shall
indemnify Parent and its Representatives and Affiliates, and hold each of them
harmless from and against any and all Damages incurred by any of them in
connection with, arising out of, or resulting from (i) any breach of any
representation or warranty made by Company or the Company Shareholders in this
Agreement or any Ancillary Agreement, including, without limitation, the
inaccuracy, if any, of the officer's certificate delivered pursuant to Section
7.3(c) (ignoring qualifications or limitations based on knowledge, materiality
or Material Adverse Effect); or (ii) any failure by Company or the Company
Shareholders to perform in a timely manner any agreement, covenant or obligation
of Company or the Company Shareholders pursuant to this Agreement or any
Ancillary Agreement.
(b) By Parent. Parent shall indemnify the Company and the
Company Shareholders and their respective Representatives and Affiliates, and
hold each of them harmless from and against any and all Damages incurred by any
of them in connection with, arising out of or resulting from (i) any breach or
inaccuracy of any representation or warranty made by Parent or Merger Sub in
this Agreement or (ii) any failure by Parent or Merger Sub to perform in a
timely manner any agreement, covenant or obligation of Parent or Merger Sub
pursuant to this Agreement.
(c) Defense of Claims. If a claim for Damages (a "Claim") is to
be made by a party entitled to indemnification hereunder (the "Indemnified
Party") against the party from whom indemnification is claimed (the
"Indemnifying Party"), the Indemnified Party shall give written notice (a "Claim
Notice") to the Indemnifying Party as soon as practicable after the Indemnified
Party becomes aware of any fact, condition or event which may give rise to
Damages for which indemnification may be sought under this Section 9.2. If any
lawsuit or enforcement action is filed against any party entitled to the benefit
of indemnity hereunder, written notice thereof shall be given to the
Indemnifying Party as promptly as practicable (and in any event within ten (10)
business days after the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the Indemnifying Party
demonstrates actual damage caused by such failure. Notwithstanding the
foregoing, a Claim Notice that relates to a representation or warranty that is
subject to a survival period set forth in Section 9.1 must be made within such
survival period, whether or not the Indemnifying Party is prejudiced by any
failure to give the Claim Notice. The Claim Notice shall describe in reasonable
detail the nature of the Claim, including an estimate of the amount of Damages
that have been or may be suffered or incurred by the Indemnified Party
attributable to such Claim, the basis of the Indemnified Party's request for
indemnification under the Agreement and all information in the Indemnified
Party's possession relating to such Claim. After receipt of such Claim Notice,
the Indemnifying Party shall be
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entitled, if it so elects and acknowledges its obligation to indemnify the
Indemnified Party, at its own cost, risk and expense, (i) to take control of the
defense and investigation of such lawsuit or action and (ii) to employ and
engage attorneys of its own choice to handle and defend the same; provided,
however, that in any event the Indemnified Party may participate in such defense
at its own expense. If the Indemnifying Party fails to assume the defense of
such Claim within ten (10) business days after receipt of the Claim Notice, the
Indemnified Party against which such Claim has been asserted will (upon
delivering notice to such effect to the Indemnifying Party) have the right to
undertake, at the Indemnifying Party's cost and expense, the defense, compromise
or settlement of such Claim on behalf of and for the account and risk of the
Indemnifying Party; provided, however, that such Claim shall not be compromised
or settled without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. In the event the Indemnified Party assumes
the defense of the Claim, the Indemnified Party will keep the Indemnifying Party
reasonably informed of the progress of any such defense, compromise or
settlement. Notwithstanding the foregoing, the Indemnified Party shall be
entitled to conduct its own defense at the cost and expense of the Indemnifying
Party if the Indemnified Party establishes that the conduct of its defense by
the Indemnifying Party would reasonably be likely to prejudice materially the
Indemnified Party due to a conflict of interest between the Indemnified Party
and the Indemnifying Party; provided however, that in such event the
Indemnifying Party may participate in such defense at its own expense.
(d) Settlement. In the event that the Indemnified Party settles
any Claim without the prior written consent of the Indemnifying Party, the
Indemnifying Party shall have no further indemnification obligations under this
Section 9.2 with respect to such Claim; provided, however, that if the
Indemnifying Party refuses to defend or otherwise handle such Claim and it is
subsequently determined that the Indemnifying Party is or was obligated to
defend or indemnify the Indemnified Party with respect to such Claim, then the
Indemnifying Party shall remain obligated with respect to such settlement
amount. If the Indemnifying Party shall control the defense of any such Claim,
the Indemnifying Party shall obtain the prior written consent of the Indemnified
Party (which shall not be unreasonably withheld) before entering into any
settlement of a Claim or ceasing to defend such Claim if, pursuant to or as a
result of such settlement or cessation, injunctive or other equitable relief
shall be imposed against the Indemnified Party or if such settlement or
cessation does not expressly and unconditionally release the Indemnified Party
from all liabilities and obligations with respect to such Claim.
(e) Mitigation. Each Indemnified Party shall have an obligation
to mitigate Damages under this Agreement, and to that end each party shall use
its reasonable efforts and shall consult and cooperate with each other with a
view towards mitigating claims, losses, liabilities, Damages, deficiencies,
costs and expenses that may give rise to claims for indemnification under this
Section 9.2.
(f) Cooperation. In the event that any action, suit, proceeding
or investigation relating hereto or to the transactions contemplated by this
Agreement is commenced, whether before or after the Closing, the Parties hereto
agree to cooperate and use reasonable efforts to vigorously defend against and
respond thereto and make available to each other such personnel, witnesses,
books, records, documents or other information within its control that are
necessary or
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appropriate for such defense (except for trade secrets and such items which may
not be made available pursuant to a court order or similar Action); provided
that, subject to Section 9.2(c), the Indemnifying Party shall reimburse the
Indemnified Party for its out-of-pocket expenses incurred in connection
therewith.
(g) Satisfaction of Indemnity Claims by Parent and Merger Sub.
Except for Claims by Parent and/or Merger Sub related to (i) fraud or willful
misconduct by the Company or any Company Shareholder (as and to the extent such
fraud relates to this Agreement, the Ancillary Agreements or the transactions
contemplated hereby or thereby), (ii) the representation and warranty related to
Taxes made in Section 3.16 and (iii) the Company Shareholders' title to the
Company Common Stock, the exclusive remedy for Claims by Parent or Merger Sub
pursuant to this Section 9.2 shall be recourse to the Escrow Shares pursuant to
the terms and conditions set forth in the Escrow Agreement. The Company
Shareholders shall not have any liability under this Agreement of any sort
whatsoever in excess of the Escrow Shares for breach by the Company of any of
its representations or warranties contained in this Agreement, the Ancillary
Agreements or in any other instrument or document required to be delivered
pursuant to this Agreement in connection herewith, except for Claims by Parent
and/or Merger Sub related to (i) fraud or willful misconduct by the Company or
any Company Shareholder (as and to the extent such fraud relates to this
Agreement, the Ancillary Agreements or the transactions contemplated hereby or
thereby), (ii) the representation and warranty related to Taxes made in Section
3.16 and (iii) the Company Shareholders' title to the Company Common Stock. In
the event of such a fraudulent or willful breach, Parent shall have all remedies
available at law or in equity (including for tort) with respect to such breach.
For purposes of satisfying indemnity claims pursuant to this Section 9.2, each
of the Escrow Shares shall be valued at the Average Stock Price as of the
Closing Date.
SECTION 9.3 LIMITATIONS ON INDEMNITY.
(a) Deductible. No Indemnified Party shall be entitled to
indemnification by an Indemnifying Party pursuant to this Article IX unless and
until the aggregate amount of Damages arising out of the Claims of such
Indemnified Party against such Indemnifying Party exceeds $750,000.00. Once the
aggregate amount of Damages arising out of the foregoing Claims exceeds
$750,000.00, the Indemnified Party shall be entitled to indemnification for all
Damages incurred in excess of such $750,000.00.
(b) Maximum Liability of the Company Shareholders. Except for
Claims by Parent and/or Merger Sub related to (i) fraud or willful misconduct by
the Company or any Company Shareholder (as and to the extent such fraud or
willful misconduct relates to this Agreement, the Ancillary Agreement or the
transactions contemplated hereby or thereby), (ii) the representation and
warranty related to Taxes made in Section 3.16 and (iii) the Company
Shareholders' title to the Company Common Stock, the maximum aggregate amount of
Damages for which the Company Shareholders shall be liable for Claims by Parent
or Merger Sub pursuant to Section 9.2(a) (as to all of which such liability
shall be several) shall be limited to the Escrow Shares. For Claims by Parent
and/or Merger Sub related to (i) fraud or willful misconduct by the Company or
any Company Shareholder (as and to the extent such fraud relates to the Merger),
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<PAGE> 60
(ii) the representation and warranty related to Taxes made in Section 3.16 and
(iii) the Company Shareholders' title to the Company Common Stock, the maximum
aggregate amount of Damages for which the Company Shareholders shall be liable
shall be limited to the value of the Closing Merger Consideration (which, for
purposes of the calculation of the value thereof for this purpose, shall be
valued at the Average Stock Price as of the Closing Date).
(c) Individual Liability. Notwithstanding any other provision
set forth in this Agreement, no Company Shareholder shall be liable for Damages
arising from Claims for an amount greater than the pro rata share of the Merger
Consideration received by such Company Shareholder, except in the event of fraud
or willful misconduct on the part of such Company Shareholder.
(d) No Consequential Damages. In no event shall any Party be
liable for any incidental, consequential, indirect or special losses or damages
(including, without limitation, lost profits, lost revenues and loss of
business), whether foreseeable or not, whether occasioned by any failure to
perform or the breach of any representation, warranty, covenant or other
obligation under this Agreement for any cause whatsoever, except in the event
that such losses or damages are awarded in connection with a Claim by a Third
Party.
SECTION 9.4 INSURANCE PROCEEDS. With respect to any Claim
required to be indemnified pursuant to this Agreement, so long as the
Indemnifying Party has complied with its indemnification obligations on such
Claim, (a) to the extent possible, the Indemnified Party shall take reasonable
steps to insure that the Indemnifying Party obtains the benefits of such policy,
including (i) by reducing the recourse to the Escrow Shares by any applicable
proceeds under any insurance policy which covers the matter which is the subject
of the indemnification and (ii) providing any notices as required under such
policy; provided, however, that the failure to take such steps shall not relieve
the Indemnifying Party of its indemnification obligations; and (b) if the
Indemnified Party receives insurance proceeds with respect to any Damages paid
by the Indemnifying Party, then the Indemnified Party shall (i) if the
Indemnifying Party paid the Indemnified Party in cash, reimburse the
Indemnifying Party in an amount equivalent to such proceeds up to the amount
actually paid by the Indemnifying Party, or (ii) if the Indemnified Party
received Escrow Shares as compensation for Damages, restore the number of Escrow
Shares to the Escrow in an amount equivalent to such proceeds up to the number
of Escrow Shares received.
SECTION 9.5 EXCLUSIVE REMEDY. The rights of Parent under Section
9.2 shall be the exclusive remedy of Parent with respect to claims based upon a
breach or alleged breach of the representations, warranties and covenants of the
Company and the Company Shareholders contained herein, except in the case of
fraud or willful misconduct. The rights of the Company and the Company
Shareholders under Section 9.2 shall be the exclusive remedy of the Company and
the Company Shareholders with respect to claims based upon a breach or alleged
breach of the representations, warranties and covenants of Parent and Merger Sub
contained herein, except in the case of fraud or willful misconduct. In the
event of fraud or willful misconduct, each Party shall have all remedies
available at law or in equity (including for tort) with respect to such breach.
Except as expressly set forth in this Agreement, neither the Company nor the
Company
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<PAGE> 61
Shareholders nor any of their respective Representatives or Affiliates makes or
has made any representations or warranties, express or implied, in connection
with the transactions contemplated by this Agreement.
ARTICLE X.
GENERAL PROVISIONS
SECTION 10.1 NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex, by registered or certified mail (postage prepaid,
return receipt requested), or by overnight courier, to the respective Parties at
the following addresses (or at such other address for a Party as shall be
specified by like notice):
If to Parent, Merger Sub or the Company (post-Closing):
New Focus, Inc.
2630 Walsh Avenue
Santa Clara, California 95051
Attention: President
Fax No.: (408) 980-8883
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
One Market, Spear Tower
San Francisco, California 94105
Attention: Steve L. Camahort, Esq.
Fax No.: (415) 947-2099
with an additional copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: Alisande Rozynko, Esq.
Fax No.: (650) 493-6811
60
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If to the Company, the Company Shareholders or the Company
Shareholder Representative (pre-Closing):
JCA Technology, Inc.
4000 Via Pescador
Camarillo, California 93012
Attention: James Chao
Fax No.: (805) 987-6990
with a copy to:
Latham & Watkins
633 West Fifth Street
Los Angeles, California 90071
Attention: James Beaubien, Esq.
Fax No.: (213) 891-8763
If to the Company Shareholders or the Company Shareholder
Representative (post-Closing):
James Chao
P.O. Box 147
Camarillo, California 93011-0147
with a copy to:
Latham & Watkins
633 West Fifth Street
Los Angeles, California 90071
Attention: James Beaubien, Esq.
Fax No.: (213) 891-8763
SECTION 10.2 SEVERABILITY. If any term or other provision of
this agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any
manner adverse to any Party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 10.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement
(including the Company Disclosure Schedule and the Parent Disclosure Schedule),
together with the Ancillary Agreements and the Confidentiality Agreement,
constitute the entire agreement among the
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Parties with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the Parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned by any Party by operation of law or otherwise without the express
written consent of each of the other Parties.
SECTION 10.4 PARTIES IN INTEREST. This Agreement shall be
binding upon and inure solely to the benefit of each Party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 10.5 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with, the laws of the State of California without
regard, to the fullest extent permitted by law, to the conflicts of laws
provisions thereof which might result in the application of the laws of any
other jurisdiction. Each of the Parties submits to the exclusive jurisdiction of
the state and federal courts of the United States located in the County of Los
Angeles, California with respect to any claim or cause of action arising out of
this Agreement or the transactions contemplated hereby.
SECTION 10.6 AMENDMENT. This Agreement may not be amended except
by an instrument in writing signed by the Parties.
SECTION 10.7 WAIVER. At any time prior to the Closing Date, any
Party may (a) extend the time for the performance of any of the obligations or
other acts of the other Parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other Parties contained herein or in any
document delivered pursuant hereto and (c) waive compliance by any other Party
with any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
Party or Parties to be bound thereby. The failure of any Party to this Agreement
to assert any of its rights under this Agreement or otherwise shall not
constitute a waiver of such rights.
SECTION 10.8 HEADINGS. The descriptive headings contained in
this Agreement are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 10.9 SPECIFIC PERFORMANCE. Each of the Parties hereto
acknowledges and agrees that the other Parties would be irreparably damaged in
the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. Accordingly,
each of the Parties agrees that they each shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and to
enforce specifically this Agreement and the terms and conditions hereof in any
Action instituted in any court of the United States or any state having
competent jurisdiction, in addition to any other remedy to which such Party may
be entitled, at law or in equity.
SECTION 10.10 ATTORNEYS' FEES. In the event any litigation,
arbitration, mediation, or other proceeding ("Proceeding") is initiated by any
party against any other party to
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enforce, interpret or otherwise obtain judicial or quasi judicial relief in
connection with this Agreement, the prevailing party in such Proceeding shall be
entitled to recover from the unsuccessful party all costs, expenses, and actual
attorneys' fees relating to or arising out of such Proceeding (whether or not
such Proceeding proceeds to judgment), and any post judgment or post award
proceeding including without limitation one to enforce any judgment or award
resulting from such Proceeding. Any such judgment or award shall contain a
specific provision for the recovery of all such subsequently incurred costs,
expenses, and actual attorneys' fees.
SECTION 10.11 COUNTERPARTS. This Agreement may be executed in
two or more counterparts, and by the different Parties in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
SECTION 10.12 ANTIDILUTION. Any reference to a specific number
of Parent Common Shares contained herein (including such numbers obtained by the
application of a formula after the date hereof) shall be adjusted to reflect
fully the effect of any stock split, reverse split, stock dividend (including
any dividend or distribution of securities convertible into Parent Common
Stock), reorganization, recapitalization or other like change with respect to
Parent Common Stock occurring after the date hereof and prior to the Effective
Time.
Signature page follows.
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<PAGE> 65
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
"Parent" "Merger Sub"
NEW FOCUS, INC. JCA ACQUISITION CORPORATION
By: By:
--------------------------------- ---------------------------------
Name: Name:
Title: Title:
"Company" "Principal Shareholder"
JCA TECHNOLOGY, INC.
By:
---------------------------------
Name: James Chao
By:
---------------------------------
Name: James Chao
Title: Chief Executive Officer
"Company Shareholders"
JAMES CHAO AND JOANNE CHAO AS
TRUSTEES OF THE CHAO FAMILY
TRUST DATED JUNE 8, 2000
By:
---------------------------------
Name: Justin Chao
By:
---------------------------------
Name: James Chao
Title: Trustee By:
---------------------------------
Name: Janna Chao
By:
---------------------------------
Name: Joanne Chao By:
Title: Trustee ---------------------------------
Name: Jerad Chao
By:
---------------------------------
Name: David Biddle
(Agreement and Plan of Merger)
<PAGE> 66
EXHIBIT A
Company Shareholders
<PAGE> 67
EXHIBIT B
Form of Support Agreement
<PAGE> 68
EXHIBIT C
Form of Escrow Agreement
<PAGE> 69
EXHIBIT D
Schedule of Key Employees and Terms
<PAGE> 70
EXHIBIT E
Form of Employment Agreement
<PAGE> 71
EXHIBIT F
Form of Non-Competition/Non-Solicitation Agreement
<PAGE> 72
EXHIBIT G
Form of Lock-up Agreement
<PAGE> 73
EXHIBIT H
Form of First Amendment to Lease
<PAGE> 74
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. DEFINITIONS.......................................................................3
ARTICLE II. THE MERGER......................................................................13
Section 2.1 The Merger............................................................13
Section 2.2 Closing and Closing Date..............................................13
Section 2.3 Effective Time........................................................14
Section 2.4 Effects of the Merger.................................................14
Section 2.5 Articles of Incorporation; Bylaws.....................................14
Section 2.6 Directors and Officers................................................14
Section 2.7 Conversion of Securities..............................................14
Section 2.8 Fractional Interests..................................................16
Section 2.9 Surrender of Shares of Company Common Stock; Stock Transfer
Books.................................................................16
Section 2.10 Authorization to Act on behalf of Merger Sub and the Company..........17
Section 2.11 Lost, Stolen or Destroyed Certificates................................17
Section 2.12 Withholding Rights....................................................17
Section 2.13 Dissenting Shares.....................................................18
Section 2.14 Escrow Shares.........................................................18
Section 2.15 Company Shareholder Representative....................................19
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL
SHAREHOLDER................................................................21
Section 3.1 Organization, Good Standing and Qualification.........................21
Section 3.2 Capitalization........................................................21
Section 3.3 Subsidiaries; Interests in Other Entities.............................22
Section 3.4 Authorization.........................................................22
Section 3.5 No Conflict; Required Filings and Consents............................23
Section 3.6 Proprietary Rights....................................................23
Section 3.7 Litigation............................................................25
Section 3.8 Compliance with Other Instruments.....................................25
Section 3.9 Corporate Documents...................................................25
Section 3.10 Property..............................................................25
Section 3.11 Contracts.............................................................26
Section 3.12 Financial Information.................................................27
Section 3.13 Absence of Certain Changes............................................27
Section 3.14 Compliance with Laws; No Defaults.....................................29
Section 3.15 Environmental Matters.................................................29
Section 3.16 Taxes.................................................................30
Section 3.17 Employee Benefit Plans................................................32
Section 3.18 Affiliate Transactions................................................34
Section 3.19 Brokers...............................................................35
</TABLE>
i
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<TABLE>
<S> <C>
Section 3.20 No Other Agreements to Sell the Company or its Assets; No
Existing Discussions..................................................36
Section 3.21 Insurance.............................................................36
Section 3.22 Permits...............................................................36
Section 3.23 Restrictions on Business Activities...................................37
Section 3.24 Major Customers and Suppliers.........................................37
Section 3.25 Sufficiency of Assets.................................................38
Section 3.26 No Undisclosed Liabilities............................................38
ARTICLE IIIA. REPRESENTATIONS AND WARRANTIES OF THE COMPANY SHAREHOLDERS.................39
Section 3A.1 Individual Status; Authorization; Delivery............................39
Section 3A.2 Title.................................................................39
Section 3A.3 No Brokers............................................................40
Section 3A.4 No Breach.............................................................40
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.........................40
Section 4.1 Organization and Qualification........................................40
Section 4.2 Capitalization........................................................41
Section 4.3 Authorization.........................................................41
Section 4.4 No Conflict; Required Filings and Consents............................41
Section 4.5 SEC Documents.........................................................42
Section 4.6 Absence of Certain Changes............................................42
Section 4.7 Brokers...............................................................42
Section 4.8 Interim Operation of Merger Sub.......................................43
ARTICLE V. CONDUCT OF BUSINESS PENDING THE MERGER...........................................43
Section 5.1 Conduct of Business of the Company Pending the Merger.................43
Section 5.2 S Status..............................................................46
ARTICLE VI. ADDITIONAL AGREEMENTS...........................................................46
Section 6.1 Fairness Hearing; 3(a)(10) Exemption and/or Registration
Statement.............................................................46
Section 6.2 Cooperation; Notice; Cure.............................................48
Section 6.3 No Solicitation.......................................................48
Section 6.4 Access to Information.................................................49
Section 6.5 Governmental Approvals................................................49
Section 6.6 Publicity.............................................................50
Section 6.7 Indemnification.......................................................50
Section 6.8 Reorganization Matters................................................51
Section 6.9 Further Assurances and Actions........................................51
Section 6.10 Obtaining Consents....................................................51
Section 6.11 Employment Agreements.................................................52
Section 6.12 Rule 16b-3 Exemption..................................................52
Section 6.13 Employee Matters......................................................52
</TABLE>
ii
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<TABLE>
<S> <C>
Section 6.14 Non-Competition/Non-Solicitation Agreement............................53
Section 6.15 Expenses..............................................................53
Section 6.16 The Company's 2000 Restricted Stock Plan..............................53
Section 6.17 Tax Matters...........................................................53
Section 6.18 401(k) Plan and Severance Plans.......................................54
Section 6.19 Lease Amendment.......................................................54
ARTICLE VII. CONDITIONS OF MERGER...........................................................54
Section 7.1 Conditions to Obligation of each Party to Effect the Merger...........54
Section 7.2 Conditions to Obligations of the Company to Effect the Merger.........55
Section 7.3 Conditions to Obligations of Parent and Merger Sub to Effect
the Merger............................................................56
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER.............................................57
Section 8.1 Termination...........................................................57
Section 8.2 Effect of Termination.................................................58
ARTICLE IX. SURVIVAL AND INDEMNIFICATION....................................................58
Section 9.1 Survival of Representations, Etc......................................58
Section 9.2 Indemnifications......................................................58
Section 9.3 Limitations on Indemnity..............................................61
Section 9.4 Insurance Proceeds....................................................62
Section 9.5 Exclusive Remedy......................................................62
ARTICLE X. GENERAL PROVISIONS...............................................................63
Section 10.1 Notices...............................................................63
Section 10.2 Severability..........................................................64
Section 10.3 Entire Agreement; Assignment..........................................64
Section 10.4 Parties in Interest...................................................65
Section 10.5 Governing Law.........................................................65
Section 10.6 Amendment.............................................................65
Section 10.7 Waiver................................................................65
Section 10.8 Headings..............................................................65
Section 10.9 Specific Performance..................................................65
Section 10.10 Attorneys' Fees.......................................................66
Section 10.11 Counterparts..........................................................66
Section 10.12 Antidilution..........................................................66
</TABLE>
Exhibits
iii
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Exhibit A Company Shareholders
Exhibit B Form of Support Agreement
Exhibit C Form of Escrow Agreement
Exhibit D Schedule of Key Employees and Terms
Exhibit E Form of Employment Agreement
Exhibit F Form of Non-Competition/Non-Solicitation Agreement
Exhibit G Form of Lock-up Agreement
Exhibit H Form of First Amendment to Lease
Company Disclosure Schedule
iv
