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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
MCK COMMUNICATIONS, INC.
OMNI ACQUISITION CORPORATION
DTI HOLDINGS INC.
DIGITAL TECHNIQUES, INC.
AND
THE STOCKHOLDERS OF DTI HOLDINGS INC.
DATED AS OF JUNE 14, 2000
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ARTICLE I THE MERGER..........................................................................................1
1.1 The Merger.....................................................................................1
1.2 Effective Time; Closing........................................................................2
1.3 Effect of the Merger...........................................................................2
1.4 Certificate of Incorporation; Bylaws...........................................................2
1.5 Directors and Officers.........................................................................2
1.6 Effect on Capital Stock........................................................................2
1.7 Surrender of Certificates......................................................................3
1.8 No Further Ownership Rights in Holdings Common Stock...........................................4
1.9 Lost, Stolen or Destroyed Certificates.........................................................4
1.10 Accounting Consequences........................................................................5
1.11 Taking of Necessary Action; Further Action.....................................................5
1.12 Options........................................................................................5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF HOLDINGS, TARGET AND THE STOCKHOLDERS.............................5
2.1 Organization and Qualification; Subsidiaries...................................................5
2.2 Certificate of Incorporation and Bylaws; Corporate Records.....................................6
2.3 Capitalization and Beneficial Ownership........................................................6
2.4 Authority Relative to this Agreement...........................................................7
2.5 No Conflict; Required Filings and Consents.....................................................8
2.6 Compliance; Permits............................................................................8
2.7 Financial Statements...........................................................................9
2.8 Absence of Certain Changes or Events...........................................................9
2.9 Absence of Litigation.........................................................................13
2.10 Customers; Suppliers..........................................................................14
2.11 Product and Service Warranties................................................................14
2.12 Employee Benefit Plans........................................................................14
2.13 Labor Matters.................................................................................16
2.14 Key Employees.................................................................................17
2.15 Material Contracts............................................................................17
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2.16 Guaranties, Intercompany Contracts; Transactions with Affiliates..............................17
2.17 Restrictions on Business Activities...........................................................18
2.18 Title to Properties...........................................................................18
2.19 Environmental Matters.........................................................................18
2.20 Intellectual Property.........................................................................18
2.21 Board Approval................................................................................21
2.22 Collectibility of Accounts Receivable.........................................................22
2.23 Ordinary Course...............................................................................22
2.24 Banking Relations.............................................................................22
2.25 Hart-Scott-Rodino Act.........................................................................22
2.26 Directors and Officers........................................................................22
2.27 Disclosure....................................................................................22
2.28 Holding Company...............................................................................22
2.29 Inventories...................................................................................23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS...................................................23
3.1 Organization..................................................................................23
3.2 Authority Relative to this Agreement..........................................................23
3.3 No Conflict; Required Filings and Consents....................................................24
3.4 Brokers.......................................................................................24
3.5 Accredited Investor...........................................................................24
3.6 Knowledge and Experience......................................................................24
3.7 Distribution..................................................................................24
3.8 Unregistered Securities.......................................................................24
3.9 Beneficial Ownership..........................................................................25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB.......................................25
4.1 Organization and Qualification; Subsidiaries..................................................25
4.2 Capitalization................................................................................25
4.3 Authority Relative to this Agreement..........................................................26
4.4 No Conflict; Required Filings and Consents....................................................26
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4.5 SEC Filings; Financial Statements.............................................................27
4.6 Absence of Litigation.........................................................................27
4.7 Board Approval................................................................................27
4.8 Absence of Certain Changes or Events..........................................................28
4.9 Offering Valid................................................................................28
4.10 Lucent........................................................................................28
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME................................................................28
5.1 Conduct of Business by Company................................................................28
ARTICLE VI ADDITIONAL AGREEMENTS.............................................................................30
6.1 Confidentiality; Access to Information........................................................30
6.2 Public Disclosure.............................................................................31
6.3 Reasonable Efforts; Notification..............................................................31
6.4 Employee Benefits.............................................................................32
6.5 Third Party Consents..........................................................................32
6.6 Nasdaq Listing................................................................................32
6.7 Non-Competition...............................................................................32
6.8 Intercompany Account..........................................................................33
6.9 License Agreement.............................................................................33
6.10 Employment Agreement..........................................................................33
6.11 Registration Rights...........................................................................34
6.12 Releases......................................................................................34
6.13 Exchange Act Filings..........................................................................34
6.14 Loan Guarantees...............................................................................34
ARTICLE VII CONDITIONS TO THE MERGER.........................................................................34
7.1 Conditions to Obligations of Each Party to Effect the Merger..................................34
7.2 Additional Conditions to Obligations of Company...............................................34
7.3 Additional Conditions to the Obligations of Purchaser and Merger Sub..........................35
ARTICLE VIII TAX MATTERS.....................................................................................36
8.1 Definition of Taxes...........................................................................36
8.2 Tax Representations...........................................................................37
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8.3 Tax Responsibility............................................................................38
8.4 Tax Returns...................................................................................38
8.5 Refunds and Credits...........................................................................38
8.6 Assistance and Cooperation....................................................................38
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................................................39
9.1 Termination...................................................................................39
9.2 Notice of Termination; Effect of Termination..................................................40
9.3 Fees and Expenses.............................................................................40
9.4 Amendment.....................................................................................41
9.5 Extension; Waiver.............................................................................41
ARTICLE X GENERAL PROVISIONS.................................................................................41
10.1 Survival of Representations and Warranties....................................................41
10.2 Indemnification by the Holders................................................................41
10.3 Limitations on Indemnification by the Holders.................................................43
10.4 Indemnification by the Purchaser..............................................................44
10.5 Limitations on Indemnification by the Purchaser...............................................45
10.6 Notices.......................................................................................45
10.7 Interpretation; Knowledge.....................................................................46
10.8 Counterparts..................................................................................47
10.9 Entire Agreement; Third Party Beneficiaries...................................................47
10.10 Severability..................................................................................47
10.11 Other Remedies; Specific Performance..........................................................47
10.12 Dispute Resolution............................................................................48
10.13 Governing Law.................................................................................48
10.14 Rules of Construction.........................................................................48
10.15 Assignment....................................................................................48
10.16 Amendments....................................................................................49
10.17 Stockholder Representative....................................................................49
10.18 WAIVER OF JURY TRIAL..........................................................................50
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INDEX OF EXHIBITS
Exhibit A Consideration
Exhibit B Form of Option Agreement
Exhibit C Form of Non-Competition and Non-Solicitation Agreement
Exhibit D Form of License Agreement
Exhibit E Form of Employment Agreement
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of General Release
Exhibit H Form of Opinion of McCarthy Tetrault
Exhibit I Form of Termination of Employment Agreement
Exhibit J Form of Opinion of Jenkens & Gilchrist, P.C.
Exhibit K Form of Opinion of McDermott, Will & Emery
Exhibit L Indemnification
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is made and entered into as of June
14, 2000 among MCK Communications, Inc., a Delaware corporation ("PURCHASER"),
Omni Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Purchaser ("MERGER SUB"), Troy Holdings International, Inc., an
Ontario Corporation ("PARENT"), DTI Holdings Inc., a Texas corporation and a
majority-owned subsidiary of Parent ("HOLDINGS"), Digital Techniques, Inc., a
Texas corporation and a wholly-owned subsidiary of Holdings ("TARGET"), the
stockholders of Holdings listed under the heading "Major Stockholders" on the
signature pages hereto (the "MAJOR STOCKHOLDERS"), and the stockholders of
Holdings listed under the heading "Other Stockholders" on the signature pages
hereto (the "OTHER STOCKHOLDERS" and together with Parent and the Major
Stockholders, the "STOCKHOLDERS").
RECITALS
WHEREAS, upon the terms and subject to the conditions of this Agreement
(as defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("DELAWARE LAW") and the Texas Business Corporation Act ("TEXAS
LAW"), Purchaser, Merger Sub and Holdings intend to enter into a business
combination transaction;
WHEREAS, the Boards of Directors of Purchaser, Merger Sub and Holdings
(i) have determined that the Merger (as defined in Section 1.1) is consistent
with and in furtherance of their respective long-term business strategies and is
fair to, and in the best interests of their respective stockholders and (ii)
have approved this Agreement, the Merger and the other transactions contemplated
by this Agreement; and
WHEREAS, for purposes of this Agreement, the term "COMPANY" shall refer
to both Holdings and Target.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law and Texas Law, Merger Sub shall be merged
with and into Holdings (the "MERGER"), the separate corporate existence of
Merger Sub shall cease and Holdings shall continue as the surviving corporation.
Holdings as the surviving corporation after the Merger is hereinafter sometimes
referred to as the "SURVIVING CORPORATION."
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1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
(i) a Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the relevant provisions of Delaware Law and (ii) Articles of
Merger with the Secretary of State the State of Texas in accordance with the
relevant provisions of Texas Law (together, the "MERGER DOCUMENTS") (the time of
such filing (or such later time as may be agreed in writing by Company and
Purchaser and specified in the Merger Documents) being the "EFFECTIVE TIME") as
soon as practicable on or after the Closing Date (as herein defined). Unless the
context otherwise requires, the term "AGREEMENT" as used herein refers
collectively to this Agreement and Plan of Merger and the Merger Documents. The
closing of the Merger (the "CLOSING") shall take place at the offices of
McDermott, Will & Emery, 28 State Street, Boston Massachusetts, at a time and
date to be specified by the parties, which shall be no later than the second
business day after the satisfaction or waiver of the conditions set forth in
Article VII, or at such other time, date and location as the parties hereto
agree in writing (the "CLOSING DATE").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
Delaware Law and Texas Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of Holdings and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Holdings and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
Holdings, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation of the
Surviving Corporation.
(b) The Bylaws of Holdings, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time.
1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
(a) CONVERSION OF HOLDINGS COMMON STOCK. Each share of Holdings
common stock, par value $.01 per share (the "HOLDINGS COMMON STOCK"), issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive the applicable Per Share Stock Payment (as defined below) and
the applicable Per Share Cash Payment (as defined below), without interest
thereon, and only upon surrender of the certificate (in
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accordance with the provisions of Section 1.7) formerly representing shares of
Holdings Common Stock.
(b) CONSIDERATION. The applicable "Per Share Cash Payment" and "Per
Share Stock Payment" for each Stockholder shall be as set forth on EXHIBIT A
attached hereto.
(c) CANCELLATION OF PURCHASER-OWNED STOCK. Each share of Holdings
Common Stock held by Target or owned by Merger Sub, Purchaser or any direct or
indirect wholly-owned subsidiary of Holdings or of Purchaser immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) CAPITAL STOCK OF MERGER SUB. Each certificate evidencing
ownership of shares of Common Stock, par value $.001 per share, of Merger Sub
shall evidence ownership of such shares of capital stock of the Surviving
Corporation.
(e) ADJUSTMENTS TO MERGER CONSIDERATION. The Merger Consideration
shall be adjusted to reflect appropriately the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution of
securities convertible into Purchaser Common Stock or Holdings Common Stock),
extraordinary cash dividends, reorganization, recapitalization,
reclassification, combination, exchange of shares or other like change with
respect to Purchaser Common Stock or Holdings Common Stock occurring on or after
the date hereof and prior to the Effective Time, or in the event that the number
of shares of Holdings Common Stock on a fully diluted basis is different from
that specified in Section 2.3 of this Agreement and disclosed in SECTION 2.3 OF
THE DISCLOSURE SCHEDULE (regardless of whether such difference is a result of an
additional issuance or cancellation of capital stock or a correction to such
Section).
(f) FRACTIONAL SHARES. No fraction of a share of Purchaser Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Holdings Common Stock who would otherwise be entitled to a fraction of
a share of Purchaser Common Stock (after aggregating all fractional shares of
Purchaser Common Stock that otherwise would be received by such holder) shall,
upon surrender of such holder's Certificates(s) (as defined in Section 1.7(b))
receive from Purchaser an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction, multiplied by (ii)
$26.7931.
1.7 SURRENDER OF CERTIFICATES.
(a) PURCHASER TO PROVIDE COMMON STOCK. At the Closing the Purchaser
shall make available all cash issuable pursuant to Section 1.6 in exchange for
outstanding shares of Holdings Common Stock, and cash in an amount sufficient
for payment in lieu of fractional shares pursuant to Section 1.6(e) and any
dividends or distributions to which holders of shares of Holdings Common Stock
may be entitled pursuant to Section 1.7(b), and as soon practicable following
the Effective Time, Purchaser shall make available for exchange in accordance
with this Article I, the shares of Purchaser Common Stock.
(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends
or other distributions declared or made with respect to Purchaser Common Stock
with a record date after the Effective Time will be paid to the holders of any
unsurrendered certificate or certificates of Holdings Common Stock (the
"CERTIFICATES") with respect to the shares of Purchaser Common
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Stock represented thereby until the holders of record of such Certificates shall
surrender such Certificates. Subject to applicable law, following surrender of
any such Certificates, the Purchaser shall deliver to the record holders
thereof, without interest, certificates representing whole shares of Purchaser
Common Stock issued in exchange therefor along with payment in lieu of
fractional shares pursuant to Section 1.6(e) hereof and the amount of any such
dividends or other distributions with a record date after the Effective Time
payable with respect to such whole shares of Purchaser Common Stock.
(c) TRANSFERS OF OWNERSHIP. If certificates representing shares of
Purchaser Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Purchaser or any agent designated by
it any transfer or other taxes required by reason of the issuance of
certificates representing shares of Purchaser Common Stock in any name other
than that of the registered holder of the Certificates surrendered, or
established to the satisfaction of Purchaser or any agent designated by it that
such tax has been paid or is not payable.
(d) NO LIABILITY. Notwithstanding anything to the contrary in this
Section 1.7, neither the Purchaser nor the Surviving Corporation shall be liable
to a holder of shares of Purchaser Common Stock or Holdings Common Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law following the passage of time specified
therein.
1.8 NO FURTHER OWNERSHIP RIGHTS IN HOLDINGS COMMON STOCK. All shares of
Purchaser Common Stock and cash issued in accordance with the terms hereof
(including any cash paid in respect thereof pursuant to Section 1.6(e) and
1.7(c)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Holdings Common Stock, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Holdings Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificates shall have been lost, stolen or destroyed, Purchaser shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, certificates representing the
shares of Purchaser Common Stock and cash into which the shares of Holdings
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.6(e) and any dividends or distributions payable pursuant to Section 1.7(b);
PROVIDED, HOWEVER, that Purchaser may, in its sole and absolute discretion and
as a condition precedent to the issuance of such certificates representing
shares of Purchaser Common Stock, cash and other distributions, require the
owner of such lost, stolen or destroyed Certificates to deliver an indemnity
against any claim that may be made against Purchaser or the Surviving
Corporation with respect to the Certificates alleged to have been lost, stolen
or destroyed.
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1.10 ACCOUNTING CONSEQUENCES. It is intended by the parties hereto that
the Merger be treated as a purchase for accounting purposes.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Holdings and Merger Sub, the officers and directors of
Holdings, Target and Merger Sub immediately prior to the Effective Time will
take all such lawful and necessary action.
1.12 OPTIONS. At the Effective Time, the 1,137,826 outstanding options
to purchase Holdings Common Stock (each a "Holdings Option") from Parent with
exercise prices of $.10 per share issued pursuant to the Employee Incentive
Share Option Plan (the "Holdings Option Plan"), each of which is fully vested,
shall be canceled and a replacement option shall be issued by Purchaser and
shall constitute an option to acquire the number of shares of Purchaser Common
Stock, rounded down to the nearest whole share, being equal to the product
obtained by multiplying the number of Holdings Common Stock subject to such
Holdings Option immediately prior to the Effective Time multiplied by .0895753,
at an exercise price per share of Purchaser Common Stock (increased to the
nearest whole cent) equal to the quotient of the exercise price per share of
Holdings Common Stock immediately prior to the Effective Time divided by
.0895753, such option to be substantially in the form set forth on EXHIBIT B.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF HOLDINGS, TARGET AND THE STOCKHOLDERS
As a material inducement to Purchaser and Merger Sub to enter into this
Agreement and consummate the transactions contemplated hereby, Holdings, Target,
Parent and the Major Stockholders severally hereby make to Purchaser and Merger
Sub the representations and warranties contained in this Article II; PROVIDED,
HOWEVER, that the Stockholders or any other securityholder of Holdings
immediately prior to the Effective Time shall have no right of indemnity or
contribution from the Company or the Surviving Corporation with respect to any
breach of the representations and warranties hereunder. Such representations and
warranties are subject to such exceptions as are disclosed in the disclosure
schedules supplied by Holdings, Target and the Stockholders to Purchaser and
Merger Sub dated as of the date hereof (the "DISCLOSURE SCHEDULE").
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation as
specified on SECTION 2.1(a) OF THE DISCLOSURE SCHEDULE and has the requisite
corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Except as
set forth in SECTION 2.1(a) OF THE DISCLOSURE SCHEDULE, Company is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
consents, certificates, approvals and orders ("APPROVALS") necessary to own,
lease and operate the assets it purports to own,
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operate or lease and to carry on its business as it is now being conducted,
except where the failure to have such Approvals would not have a Material
Adverse Effect on the Company.
(b) Except as set forth in SECTION 2.1(b) OF THE DISCLOSURE
SCHEDULE, Holdings has no direct or indirect subsidiaries. Company has not
agreed nor is obligated to make nor is bound by any written, oral or other
agreement, contract, subcontract, lease, binding understanding, instrument,
note, option, warranty, purchase order, license, sublicense, insurance policy,
benefit plan, commitment or undertaking of any nature, as of the date hereof or
as may hereafter be in effect (a "CONTRACT") under which it may become obligated
to make, any future investment in or capital contribution to any other entity.
Company does not directly or indirectly own any equity or similar interest in or
any interest convertible, exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business,
association or entity.
(c) Company is qualified or licensed to do business as a foreign
corporation, and is in good standing, in each jurisdiction where the nature of
their business makes such qualification or licensing necessary and where the
failure to be so duly qualified or licensed would either individually or in the
aggregate have a Material Adverse Effect on the Company. Each such jurisdiction
is listed in SECTION 2.1(c) OF THE DISCLOSURE SCHEDULE.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS; CORPORATE RECORDS. Company
has previously furnished to Purchaser a complete and correct copy of its
Certificate of Incorporation and Bylaws as amended to date (together, the
"COMPANY CHARTER DOCUMENTS"). Such Company Charter Documents are in full force
and effect. Company is not in violation of any of the provisions of the Company
Charter Documents. The corporate record books of the Company accurately record
all corporate action taken by its stockholders, board of directors, and
committees thereof. The copies of the corporate records of the Company, as made
available to the Purchaser for review, are true and complete copies of the
originals of such documents.
2.3 CAPITALIZATION AND BENEFICIAL OWNERSHIP.
(a) The authorized capital stock of Target consists of 1,000,000
shares of common stock, par value of $0.01 per share ("TARGET COMMON STOCK"). At
the close of business on the date of this Agreement (i) 455,057 shares of Target
Common Stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable; (ii) no shares of Target Common Stock were available or
reserved for issuance pursuant to any employee stock plan or upon conversion of
any warrants; and (iii) all 455,057 shares of issued and outstanding Target
Common Stock were held by Holdings. All outstanding shares of Target Common
Stock have been issued and granted in compliance with (i) all applicable federal
and state securities laws and other applicable Legal Requirements (as defined
below) and (ii) all requirements set forth in applicable contracts, agreements,
and instruments. For the purposes of this Agreement, "LEGAL REQUIREMENTS" means
any federal, state, local, municipal, foreign or other law, statute,
constitution, principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, ruling or requirement issues, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity (as defined in Section 2.5(b)).
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(b) As of the date of this Agreement, there are no equity
securities, partnership interests or similar ownership interests of any class of
equity security of Target, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. There are no
subscriptions, options, warrants, equity securities, partnership interests or
similar ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which Target is a party or by
which it is bound obligating Target to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of Target or obligating
Target to grant, extend, accelerate the vesting of or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated by this
Agreement, there are no registration rights and there is no voting trust, proxy,
rights plan, anti takeover plan or other agreement or understanding to which
Target is a party or by which they are bound with respect to any equity security
of any class of Target.
(c) The authorized capital stock of Holdings consists of 30,000,000
shares of Holdings Common Stock. At the close of business on the date of this
Agreement (i) 10,000,000 shares of Holdings Common Stock were issued and
outstanding to the individuals or entities set forth on SECTION 2.3(c) OF THE
DISCLOSURE SCHEDULE, all of which are validly issued, fully paid and
nonassessable; and (ii) no shares of Holdings Common Stock were available or
reserved for issuance pursuant to any plan, agreement or arrangement for stock
or stock-related awards of any kind, whether written, unwritten or otherwise.
All outstanding shares of Holdings Common Stock and stock options therefor have
been issued and granted in compliance with (i) all applicable federal and state
securities laws and other applicable Legal Requirements and (ii) all
requirements set forth in applicable contracts, agreements, and instruments.
(d) As of the date of this Agreement, there are no equity
securities, partnership interests or similar ownership interests of any class of
equity security of Holdings, or any security exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as set
forth in SECTION 2.3(d) OF THE DISCLOSURE SCHEDULE or as set forth in Section
2.3(c) hereof, there are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Holdings
is a party or by which it is bound obligating Holdings to issue, deliver or
sell, or cause to be issued, delivered or sold, or repurchase, redeem or
otherwise acquire, or cause the repurchase, redemption or acquisition of, any
shares of capital stock, partnership interests or similar ownership interests of
Holdings or obligating Holdings to grant, extend, accelerate the vesting of or
enter into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. As of the date of this Agreement, except as
contemplated by this Agreement, there are no registration rights and there is no
voting trust, proxy, rights plan, anti takeover plan or other agreement or
understanding to which Holdings is a party or by which they are bound with
respect to any equity security of any class of Holdings.
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Company has all necessary
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery
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of this Agreement by Company and the consummation by Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Company and no other corporate proceedings on
the part of Company are necessary to authorize this Agreement or to consummate
the transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Company and, assuming the due authorization, execution
and delivery by Purchaser and Merger Sub, constitutes a legal and binding
obligation of Company, enforceable against Company in accordance with its terms.
The Stockholders have unanimously approved the Merger and this Agreement in
accordance with Texas Law and no Stockholder is eligible to assert "dissenter's"
rights with respect to the transaction pursuant to Section 5.11 of the Texas
Business Corporation Act.
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in SECTION 2.5(a) OF THE DISCLOSURE
SCHEDULE, the execution and delivery of this Agreement by Company do not, and
the performance of this Agreement by Company shall not, (i) conflict with or
violate the Company Charter Documents, (ii) subject to compliance with the
requirements set forth in Section 2.5(b) below, to the knowledge of Company,
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Company or by which its or any of their respective properties is
bound or affected, or (iii) result in any breach of or constitute a default (or
an event that with notice or lapse of time or both would become a default)
under, or materially impair Company's rights or alter the rights or obligations
of any third party under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of the properties or assets of Company pursuant to, any
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Company is a party
or by which Company or its properties are bound or affected, except in any case
for such conflicts, violations, breaches, defaults or other occurrences that
could not reasonably be expected to have a Material Adverse Effect on the
Company.
(b) Except as set forth in SECTION 2.5(b) OF THE DISCLOSURE
SCHEDULE, the execution and delivery of this Agreement by Company do not, and
the performance of this Agreement by Company shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
court, administrative agency, commission, governmental or regulatory authority,
domestic or foreign (a "GOVERNMENTAL ENTITY"), except for the filing of the
Merger Documents as required by Delaware Law and Texas Law.
2.6 COMPLIANCE; PERMITS.
(a) Except as set forth in SECTION 2.6(A) OF THE DISCLOSURE
SCHEDULE, to the knowledge of the Company, Company is not in conflict with, or
in default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Company or by which its properties are bound or affected,
or (ii) any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Company is a party or by which Company or its properties are bound or affected,
except for any conflicts, defaults or violations that (individually or in the
aggregate) would not cause the Company to lose any material benefit or incur any
material liability. No investigation or review by any governmental or regulatory
body or authority is pending or, to the knowledge of Company, threatened against
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Company, nor has any governmental or regulatory body or authority indicated to
the Company an intention to conduct the same, other than, in each such case,
those the outcome of which could not, individually or in the aggregate,
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of the Company, any acquisition of material property by
the Company or the conduct of business by the Company.
(b) Except as set forth in SECTION 2.6(b) OF THE DISCLOSURE
SCHEDULE, to the knowledge of the Company, Company holds all permits, licenses,
variances, exemptions, orders and approvals from governmental authorities which
are material to operation of the business of Company taken as a whole as it is
now being conducted (collectively, the "COMPANY PERMITS"). Company is in
compliance in all material respects with the terms of the Company Permits.
2.7 FINANCIAL STATEMENTS.
(a) The Company has provided to Purchaser (i) audited consolidated
financial statements for each of Holdings and Target for the fiscal years ended
December 31, 1998, and 1999, and (ii) unaudited financial statements for each of
Holdings and Target for the period ended March 31, 2000, (collectively and as
amended, the "COMPANY REPORTS"). Such December 31, 1999 and March 31, 2000
Company Reports state that (i) the Company's revenues for the twelve (12) month
period ended December 31, 1999 were at least $11,300,00 and (ii) the Tangible
Net Assets (as defined below) as of December 31, 1999 and March 31, 2000 for
Target were equal to or greater than $3,800,000 and for Holdings were equal to
or greater than $550,000. "NET TANGIBLE ASSETS" shall mean tangible assets less
liabilities and shall exclude capitalized software and deferred acquisition
costs.
(b) Except as set forth in SECTION 2.7(b) OF THE DISCLOSURE
SCHEDULE, each of the financial statements (including, in each case, any notes
thereto) contained in the Company Reports was prepared in accordance with U.S.
generally accepted accounting principles ("U.S. GAAP") applied on a consistent
basis throughout the periods indicated (except as may be indicated in the notes
thereto) and each presented fairly, in all material respects, the financial
position of the Company as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein (subject
to normal and recurring year-end adjustments which did not have and could not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company).
(c) Except as and to the extent set forth or reserved against on
the balance sheet of the Company as reported in the March 31, 2000 Company
Report, including the notes thereto, the Company has no liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise),
except (i) liabilities provided for in Company's balance sheet as of March 31,
2000; (ii) liabilities incurred since March 31, 2000 in the ordinary course of
business; or (iii) liabilities set forth in SECTION 2.7(c) OF THE DISCLOSURE
SCHEDULE.
2.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since March 31, 2000 (the
"BASE BALANCE SHEET DATE"), except (i) as disclosed in SECTION 2.8 OF THE
DISCLOSURE SCHEDULE, or (ii) provided for in or disclosed pursuant to
subsections (i) - (xxiii) below, the business of the Company has been conducted
in the ordinary course and consistent with past practice. As amplification and
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not limitation of the foregoing, except as disclosed in SECTION 2.8 OF THE
DISCLOSURE SCHEDULE, since the Base Balance Sheet Date, the Company has not:
(i) transferred to any person or entity, including Parent, any
rights to its Intellectual Property (as defined in Section 2.20) other than
transfers consistent with past practice necessary to conduct development and
manufacturing activities and sell products in the ordinary course of business;
(ii) knowingly permitted or allowed any of the assets or
properties (whether tangible or intangible) of the Company to be subjected to
any security interest, pledge, mortgage, lien (including, without limitation,
environmental and tax liens), charge, encumbrance, adverse claim, preferential
arrangement or restriction of any kind, including, without limitation, any
restriction on the use, voting, transfer, receipt of income or other exercise of
any attributes of ownership ("ENCUMBRANCE"), other than such of the following as
to which no enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) liens for taxes, assessments and governmental
charges or levies not yet due and payable which are not in excess of $50,000 in
the aggregate and (b) Encumbrances imposed by law, such as materialmen's,
mechanics', carriers', workmen's and repairmen's liens and other similar liens
arising in the ordinary course of business securing obligations that (i) are not
overdue for a period of more than 30 days and (ii) are not in excess of $5,000
in the case of a single property or $50,000 in the aggregate at any time
("PERMITTED ENCUMBRANCES");
(iii) discharged or otherwise obtained the release of any
Encumbrance or paid or otherwise discharged any liability, other than current
liabilities reflected on the Company Reports and current liabilities incurred in
the ordinary course of business consistent with past practice since the Base
Balance Sheet Date;
(iv) made any loan to, guaranteed any indebtedness for
borrowed money of or otherwise incurred any indebtedness for borrowed money on
behalf of any individual, corporation, partnership, limited partnership, limited
liability company, syndicate, person (including, without limitation, a "person"
as defined in Section 13(d)(3) of the Exchange Act), trust, association, entity
or government or political subdivision, agency or instrumentality of a
government ("PERSON") other than payroll, travel guaranties and other advances
made in the ordinary course of business;
(v) failed to pay any creditor any material amount owed to
such creditor when due except as may be in accordance with the ordinary course
of business consistent with past practice;
(vi) redeemed any of the capital stock or declared, made or
paid any dividends or distributions (whether in cash, securities or other
property) to the holders of capital stock of the Company or otherwise;
(vii) made any material changes in the customary methods of
operations of the Company, including, without limitation, practices and policies
relating to manufacturing, purchasing, Inventories (as defined below),
marketing, selling and pricing;
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(viii) merged with, entered into a consolidation with or
acquired an interest of 5% or more in any Person or acquired a substantial
portion of the assets or business of any Person or any division or line of
business thereof, or otherwise acquired any material assets other than in the
ordinary course of business consistent with past practice;
(ix) made any capital expenditure or commitment of any capital
expenditure in excess of $50,000 individually or $200,000 in the aggregate;
(x) issued any sales orders or otherwise entered into an
agreement that requires the Company to make any purchases involving payments by
the Company in excess of $200,000 individually or $500,000 in the aggregate;
(xi) sold, transferred, leased, subleased, licensed or
otherwise disposed of any material properties or assets, real, personal or mixed
(including, without limitation, leasehold interests and intangible assets),
other than the sale of Inventories in the ordinary course of business consistent
with past practice;
(xii) issued or sold any capital stock, notes, bonds or other
securities, or any option, warrant or other right to acquire the same, of, or
any other interest in, the Company;
(xiii) entered into any agreement, arrangement or transaction
with any of its directors, officers, employees or shareholders (or with any
relative, beneficiary, spouse or Affiliate of such Person);
(xiv) (A) granted any increase, or announced any increase, in
the wages, salaries, compensation, bonuses, incentives, pension or other
benefits payable by the Company to any of its employees, consultants or
directors or (B) established or increased or promised to increase any benefits
under any employee benefit or option plans, in either case except as required by
law or any collective bargaining agreement or involving ordinary increases in
the ordinary course of business consistent with the past practices of the
Company;
(xv) written down or written up the value of any Inventories
or receivables or revalued any assets of the Company other than in the ordinary
course of business consistent with past practice, and in accordance with U.S.
GAAP;
(xvi) amended, terminated, cancelled or compromised any
material claims of the Company or waived any other rights of substantial value
to the Company or settled any material litigation;
(xvii) made any change in any method of accounting or
accounting practice or policy used by the Company, other than such changes
required by U.S. GAAP or disclosed in SECTION 2.8 OF THE DISCLOSURE SCHEDULE;
(xviii) amended or modified in any material respect, or
consented to the termination of, any Material Contract (as defined below) or the
Company's rights thereunder;
(xix) amended or restated the certificate of incorporation or
the bylaws (or other organizational documents) of the Company;
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(xx) knowingly disclosed any secret or confidential
Intellectual Property (except by way of issuance of a patent or a valid
confidentiality agreement or license agreement); or knowingly permitted to lapse
or go abandoned any Intellectual Property (or any registration or grant thereof
or any application relating thereto) to which, or under which, the Company has
any right, title, interest or license;
(xxi) made any express or deemed election (other than as set
forth on the Company's tax returns) or settled or compromised any material
liability, with respect to Taxes (as defined in Section 8.1) of the Company;
(xxii) suffered any casualty loss or damage with respect to
any of the assets which in the aggregate have a replacement cost of more than
$100,000, and which is not covered by insurance; or
(xxiii) agreed, whether in writing or otherwise, to take any
of the actions specified in this Section 2.8 or granted any options to purchase,
rights of first refusal, rights of first offer or any other similar rights or
commitments with respect to any of the actions specified in this Section 2.8,
except as expressly contemplated by this Agreement.
For purposes of this Agreement, the term "INVENTORIES" shall mean all
inventory, merchandise, finished goods, raw materials, packaging and supplies of
the Company.
For purposes of this Agreement, the term "MATERIAL CONTRACTS" shall
mean the following contracts and agreements (including, without limitation, oral
and informal arrangements) of the Company:
(i) each contract, agreement, invoice, purchase order and
other arrangement, for the purchase of Inventory, spare parts, other materials
or personal property with any supplier or for the furnishing of services to the
Company under the term of which the Company (A) is likely to pay or otherwise
give consideration of more than $100,000 in the aggregate during the calendar
year ended December 31, 2000, (B) is likely to pay or otherwise give
consideration of more than $200,000 in the aggregate over the remaining term of
such contract, or (C) cannot be cancelled by the Company without penalty or
further payment and without more than 30 days' notice;
(ii) all broker, distributor, label group, dealer,
manufacturer's representative, franchise, agency, sales promotion, market
research, marketing consulting and advertising contracts and agreements to which
the Company is a party involving the payment of more than $100,000 during the
calendar year ended December 31, 2000 and which are not cancelable without
penalty or further payment and without more than 30 days' notice;
(iii) all management contracts, and contracts with independent
contractors or consultants (or similar arrangements) to which the Company is a
party involving payments in excess of $75,000 per annum and which are not
cancelable without penalty or further payment and without more than 30 days'
notice;
(iv) all contracts and agreements relating to indebtedness of
the Company;
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(v) all agreements relating to Intellectual Property,
including all licenses and sublicenses thereof, but excluding shrink wrap,
standard license/sales contracts and other commodity type licenses;
(vi) all contracts and agreements with any Governmental Entity
to which the Company is a party;
(vii) all contracts and agreements that limit or purport to
limit the ability of the Company to compete in any line of business or with any
Person or in any geographic area or during any period of time;
(viii) all contracts and agreements between or among the
Company and any Affiliate of the Company, including any shareholder agreements;
(ix) all contracts and agreements for providing benefits to
Company employees, consultants or directors under any Company employee benefit
or option plans;
(x) all contracts and agreements of indemnification or any
guaranty other than an agreement of indemnification entered into in connection
with the sale or license of products in the ordinary course of business;
(xi) all dealer, distributor, joint marketing or development
contracts and agreements currently in force under which Company has continuing
material obligations to jointly market any product, technology or service and
which may not be canceled without penalty upon notice of thirty (30) days or
less, and all contracts and agreements pursuant to which Company has continuing
material obligations to jointly develop any Intellectual Property that will not
be owned, in whole or in part, by Company and which may not be canceled without
penalty upon notice of thirty (30) days or less; and
(xii) all contracts, agreement and commitments currently in
force to license any third party to manufacture or reproduce any Company
product, service or technology or any contract, agreement and commitment
currently in force to sell or distribute any Company products, service or
technology except agreements with distributors or sales representative in the
normal course of business cancelable without penalty upon notice of thirty (30)
days or less and substantially in the form previously provided to Purchaser.
For purposes of this Agreement, the term "REGULATIONS" means the
Treasury Regulations (including Temporary Regulations) promulgated by the United
States Department of Treasury with respect to the Code or other federal tax
statutes.
2.9 ABSENCE OF LITIGATION. Except as set forth in SECTION 2.9 OF THE
DISCLOSURE SCHEDULE, there are no claims, actions, suits or proceedings pending
or, to the knowledge of Company, threatened (or, to the knowledge of Company,
any governmental or regulatory investigation pending or threatened) against
Company or any properties or rights of Company, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign.
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2.10 CUSTOMERS; SUPPLIERS.
(a) Listed in SECTION 2.10(a) OF THE DISCLOSURE SCHEDULE are the
names and addresses of all the customers of the Company which ordered goods or
merchandise from the Company with an aggregate value of $200,000 or more during
the twelve-month period ended March 31, 2000, and the amount for which each such
customer was invoiced during such period. Except as disclosed in SECTION 2.10(a)
OF THE DISCLOSURE SCHEDULE, the Company has not received any notice written or
oral that any Significant Customer of the Company has ceased, or will cease, to
use the products, equipment, goods or services of the Company, or has
substantially reduced, or will substantially reduce, the use of such products,
equipment, goods or services at any time.
(b) Listed in SECTION 2.10(b) OF THE DISCLOSURE SCHEDULE are the
names and addresses of all the suppliers from which the Company ordered raw
materials, supplies, merchandise and other goods for the Company with an
aggregate purchase price of $200,000 or more during the twelve-month period
ended March 31, 2000 and the amount for which each such supplier invoiced the
Company during such period. Except as disclosed in SECTION 2.10 OF THE
DISCLOSURE SCHEDULE, the Company has not received any notice written or oral
that any such supplier will not sell raw materials, supplies, merchandise and
other goods to the Company at any time after the Closing Date on terms and
conditions substantially similar to those used in its current sales to the
Company, subject only to general and customary price increases.
2.11 PRODUCT AND SERVICE WARRANTIES. Set forth on SECTION 2.11 OF THE
DISCLOSURE SCHEDULE are the standard written forms of product and service
warranties and guarantees utilized by the Company as of the date of this
Agreement. Except as set forth on SECTION 2.11 OF THE DISCLOSURE SCHEDULE,
during a period of one (1) year prior to the Closing Date, the Company has not
made any other written material warranties (which remain in effect) with regard
to products and/or services supplied by the Company. There are not existing or
threatened in writing, product liability, warranty or other similar claims
against the Company alleging that any Company product is defective or fails to
meet any product or service warranty. Except as set forth on SECTION 2.11 OF THE
DISCLOSURE SCHEDULE, there are (a) no inherent design defects or systemic or
chronic problems in any Company Product that are known to the Company and (b) no
liabilities that are known to the Company for warranty or other claims or
returns with respect to any Company Product relating to any such defects or
problems.
2.12 EMPLOYEE BENEFIT PLANS. Except as set forth in SECTION 2.12 OF THE
DISCLOSURE SCHEDULE:
(a) For purposes of this Section 2.12, the following terms shall
have the meanings set forth below:
(i) "AFFILIATE" shall mean any person or entity under common
control with the Company within the meaning of Code Section 414(b), (c), (m) or
(o).
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
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(iii) "CODE" shall mean the Internal Revenue Code of 1986, as
amended.
(iv) "EMPLOYEE" shall mean any former or active employee,
consultant, or director of the Company.
(v) "EMPLOYEE PLAN" shall mean each plan, program, policy,
practice, contract, agreement or other arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of ERISA Section 3(3) which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any Employee or for which the Company has or may have any liability or
obligation.
(vi) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
(b) (i) Each Employee Plan has been maintained in all material
respects in compliance with its terms and with all applicable requirements of
law (including the Code and ERISA); the Company has performed in all material
respects all obligations required to be performed by it under, is not in default
or violation of, and has no knowledge of any default or violation by any other
party to each Employee Plan; (ii) no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course) has been brought, or to the
knowledge of the Company is threatened against or with respect to any Employee
Plan; (iii) there are no audits, inquiries or proceedings pending or, to the
knowledge of the Company, threatened by the Internal Revenue Service ("IRS") or
the Department of Labor with respect to any Employee Plan; (iv) each Employee
Plan intended to qualify under Code Section 401(a) and each trust intended to
qualify under Code Section 501(a) has either received a favorable determination,
opinion, notification or advisory letter from the IRS with respect to each such
Employee Plan as to its qualified status under the Code, including all
amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Employee Plan; (v) the Company has no plan or commitment,
whether legally binding or not, to establish any new Employee Plan solely for
Employees of the Company prior to Closing Date; and (vi) each Employee Plan can
be amended, terminated or otherwise discontinued by the Company after the
Closing Date in accordance with its terms, without liability to Company or
Purchaser or any Affiliate of Company or Purchaser.
(c) (i) No "prohibited transaction," within the meaning of Code
Section 4975 or ERISA Sections 406 and 407, and not otherwise exempt under Code
Section 4975 or ERISA Section 408 (or any administrative class exemption issued
thereunder), has occurred with respect to any Company Employee Plan; (ii)
neither Company nor any Affiliate has at any time maintained, established,
sponsored, participated in, or contributed to any Employee Plan subject to Title
IV of ERISA or Code Section 412; (iii) neither Company nor any Affiliate has
been required to contribute or contributed to any "multiemployer plan," as
defined in ERISA Section
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3(37); and (iv) neither Company nor any Affiliate has ever maintained,
established, sponsored, participated in, or contributed to any "multiple
employer plan," as defined in Code Section 413(c).
(d) (i) Neither Company nor any Affiliate has in any material
respect violated any of the health care continuation requirements of COBRA with
respect to any Employee, the requirements of the Family Medical Leave Act of
1993, as amended, the requirements of the Health Insurance Portability and
Accountability Act of 1996, as amended, the requirements of the Women's Health
and Cancer Rights Act, as amended, the requirements of the Newborns' and
Mothers' Health Protection Act of 1996, as amended, or any similar provision of
state law applicable to the Employees; and (ii) none of the Employee Plans
provides, reflects or represents any liability to provide retiree health to any
person for any reason, except as may be required by COBRA or other applicable
statute, and the Company have never represented, promised, or contracted
(whether in oral or written form) to any Employee (either individually or to
Employees as a group) that such Employee(s) would be provided with retiree
health, except to the extent required by statute.
(e) Except as disclosed on SCHEDULE 2.12(e) OF THE DISCLOSURE
SCHEDULE, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any stockholder, director or employee of Company
under any Plan or otherwise, (ii) materially increase any benefits otherwise
payable under any Plan, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
(f) Each International Employee Plan (as defined below) has been
established, maintained and administered in all material respects in compliance
with its terms and conditions and with the requirements prescribed by any and
all statutory or regulatory laws that are applicable to such International
Employee Plan. Furthermore, no International Employee Plan has unfunded
liabilities that, as of the Effective Time, will not be offset by insurance or
fully accrued. Except as required by law, no condition exists that would prevent
the Company or Purchaser from terminating or amending any International Employee
Plan at any time for any reason. For purposes of this Section "International
Employee Plan" shall mean each Plan that has been adopted or maintained by the
Company, whether informally or formally, for the benefit of current or former
employees of the Company outside the United States.
2.13 LABOR MATTERS. (i) There are no material work-related disputes
pending or, to the knowledge of Company, threatened, between Company and any of
its respective employees; (ii) as of the date of this Agreement, Company is not
a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by Company nor does Company know of any
activities or proceedings of any labor union to organize any such employees; and
(iii) as of the date of this Agreement, Company has no knowledge of any strikes,
slowdowns, work stoppages or lockouts, or threats thereof, by or with respect to
any employees of Company. The Company and its subsidiaries are in compliance in
all material respects with all applicable material foreign, federal, state and
local laws, rules and regulations respecting employment, employment practices,
terms and conditions of employment and wages and hours.
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2.14 KEY EMPLOYEES.
(a) SECTION 2.14 OF THE DISCLOSURE SCHEDULE lists the name, place
of employment, the current annual salary rates, bonuses, deferred or contingent
compensation, pension, accrued vacation, "golden parachute" and other like
benefits paid or payable (in cash or otherwise) in 1999 and 2000 and the date of
employment and job title of each current salaried employee, officer, director,
consultant or agent of the Company whose annual compensation exceeded (or, in
2000, is expected to exceed) $100,000.
(b) Except as disclosed in SECTION 2.14(b) OF THE DISCLOSURE
SCHEDULE all officers, management employees, and technical and professional
employees of the Company are under written obligation to the Company to maintain
in confidence all information that is confidential or proprietary acquired by
them in the course of their employment and to assign to Target all inventions
made by them within the scope of their employment during such employment.
2.15 MATERIAL CONTRACTS.
(a) Except as disclosed in SECTION 2.15(a) OF THE DISCLOSURE
SCHEDULE, each Material Contract: (i) is legal, valid and binding on the Company
and, to the knowledge of the Company, on the other respective parties thereto
and is in full force and effect, and (ii) upon consummation of the transactions
contemplated by this Agreement, except to the extent that any consents set forth
in SECTION 2.15(a) OF THE DISCLOSURE SCHEDULE are not obtained, shall continue
in full force and effect without penalty or other adverse consequence except in
a situation where the failure to be in full force and effect could not
reasonably be expected to have a Material Adverse Effect on the Company. The
Company is not in breach of, or default under, any Material Contract, except in
any such case for breaches or defaults that could not reasonably be expected to
have a Material Adverse Effect on the Company.
(b) Except as disclosed IN SECTION 2.15(b) OF THE DISCLOSURE
SCHEDULE, to the best knowledge of the Company, no other party to any Material
Contract is in material breach thereof or default thereunder.
2.16 GUARANTIES, INTERCOMPANY CONTRACTS; TRANSACTIONS WITH AFFILIATES.
Except as set forth IN SECTION 2.16 OF THE DISCLOSURE SCHEDULE, the Company is
not a party to any guaranty, and no Person is a party to any guaranty for the
benefit of the Company. Set forth in SECTION 2.16 OF THE DISCLOSURE SCHEDULE is
a complete and accurate list of all contracts and agreements between Target,
Holdings, Parent and/or any affiliate of Parent. Except for their ongoing,
regular employment relationships with the Company and as set forth in SECTION
2.16 OF THE DISCLOSURE SCHEDULE, there are no loans, leases or other
transactions or continuing transactions between the Company and any present or
former stockholder, director, officer or employee of the Company, or any member
of such officer's, director's, employee's or stockholder's immediate family, or
any person controlled by such officer, director, employee or stockholder or his
or her immediate family. Except as set forth in SECTION 2.16 OF THE DISCLOSURE
SCHEDULE, no stockholder, director, officer or employee of the Company, any of
their respective spouses or family members, owns directly or indirectly on an
individual or joint basis any interest in, or serves as an officer or director
or in another similar capacity of, any competitor, customer, distributor or
supplier of the
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Company, or any organization which has a contract or arrangement with the
Company except for passive investments of less than 2% in publicly-traded
companies.
2.17 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in
SECTION 2.17 OF THE DISCLOSURE SCHEDULE, there is no agreement, commitment,
judgment, injunction, order or decree binding upon Company or to which the
Company is a party which has or could reasonably be expected to have the effect
of prohibiting or materially impairing any business practice of Company, any
acquisition of property by Company or the conduct of business by Company as
currently conducted, except for any prohibition or impairment that could not
reasonably be expected to have a Material Adverse on the Company.
2.18 TITLE TO PROPERTIES. SECTION 2.18 OF THE DISCLOSURE SCHEDULE sets
forth the addresses and uses of all real property that the Company owns, leases
or subleases. Except as set forth in SECTION 2.18 OF THE DISCLOSURE SCHEDULE,
the Company has good, valid and (if applicable) marketable title to all of the
assets it purports to own, free and clear of all liens, restrictions or
encumbrances and none of such assets is subject to any mortgage, pledge, lien or
conditional sale agreement. Such assets together with the assets leased by the
Company constitute all property, equipment and other tangible assets which are
necessary to the business of the Company as it was operated prior to the Closing
Date and all equipment included therein is in good condition and repair
(ordinary wear and tear excepted) and all leases of real or personal property to
which the Company is a party are fully effective and afford the Company peaceful
possession of the subject matter of the lease and true and complete copies
thereof have been delivered or made available to the Purchaser or its counsel.
The Company is not in violation of any zoning, building or safety ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties which violation would have a Material Adverse
Effect, nor has it received any notice of such violation. There are no defaults
by the Company, or, to the Company's knowledge by any other party, which might
curtail in any material respect the present use of the property of the Company.
The performance by the Company of this Agreement and the transactions
contemplated hereby will not result in the termination of, or in any increase of
any amounts payable under, any of its leases for real property or material liens
for personal property or will require the consent or approval from any other
party to such leases.
2.19 ENVIRONMENTAL MATTERS. Except as disclosed in SECTION 2.19 OF THE
DISCLOSURE SCHEDULE, (i) the Company is in material compliance with all
applicable laws relating to the protection of the environment ("ENVIRONMENTAL
LAWS"); all past noncompliance, if any, of the Company with respect to
Environmental Laws, known to the Company has been resolved without any pending,
ongoing or future obligation, cost or liability; and (iii) the Company has not
released any hazardous materials to or from any real property currently, or
within the two year period preceding the date hereof, owned, leased or occupied
by the Company, except in compliance with all Environmental Laws.
2.20 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
worldwide common law and statutory rights in, arising out of, or associated
therewith: (i) patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and
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continuations-in-part thereof ("Patents"); (ii) inventions (whether patentable
or not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and all
documentation relating to any of the foregoing; (iii) copyrights, copyright
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (iv) domain names, uniform resource locators
("URLS") and other names and locators associated with the Internet ("DOMAIN
NAMES"); (v) industrial designs and any registrations and applications therefor;
(vi) trade names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor; (vii) all databases and
data collections and all rights therein; (viii) all moral and economic rights of
authors and inventors, however denominated, and (ix) any similar or equivalent
rights to any of the foregoing (as applicable).
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property
that is owned by, or exclusively licensed to, Company.
"REGISTERED INTELLECTUAL PROPERTY" means all Intellectual Property that
is the subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any private, state, government or
other legal authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company.
(a) SECTION 2.20(a) OF THE DISCLOSURE SCHEDULE is a complete and
accurate list of (i) all Company Registered Intellectual Property and specifies,
where applicable, the jurisdictions in which each such item of Company
Registered Intellectual Property has been issued or registered and lists any
proceedings or actions before any court or tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property; and (ii)
all other trademarks and tradenames used by the Company in the operation of its
business over the last three years.
(b) SECTION 2.20(b) OF THE DISCLOSURE SCHEDULE is a complete and
accurate list (by name and version number or other identifying code) of all
products or service offerings of the Company ("COMPANY PRODUCTS") that have been
distributed or provided in the one year period preceding the date hereof or
which the Company currently intends to distribute or provide in the future,
including any products or service offerings under development.
(c) No Company Intellectual Property or Company Product (exclusive
of third-party products ("Third Party Products") distributed by the Company) is
subject to any proceeding or outstanding decree, order, judgment, contract,
license, agreement, or stipulation restricting in any manner the use, transfer,
or licensing thereof by Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property or Company Product. To the
Company's knowledge no Third Party Product distributed by the Company is subject
to any proceeding or outstanding decree, order, judgment, contract, license,
agreement, or stipulation restricting in any manner the use, transfer, or
licensing thereof by Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property or Company Product.
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(d) Each material item of Company Registered Intellectual Property
is valid and subsisting, all necessary registration, maintenance and renewal
fees currently due in connection with such Company Registered Intellectual
Property have been made and all necessary documents, recordations and
certificates in connection with such Company Registered Intellectual Property
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Company Registered Intellectual Property in
the jurisdictions noted in SECTION 2.20(A) OF THE DISCLOSURE SCHEDULE.
(e) SECTION 2.20(e) OF THE DISCLOSURE SCHEDULE is a complete and
accurate list of the filing date and status as of the date hereof with respect
to any of the foregoing Registered Intellectual Property.
(f) Except as disclosed on SECTION 2.20(f) OF THE DISCLOSURE
SCHEDULE, the Company owns and has good and exclusive title to, each material
item of Company Intellectual Property owned by it free and clear of any lien or
encumbrance (excluding non-exclusive licenses and related restrictions granted
in the ordinary course).
(g) To the extent that any material technology, software or
Intellectual Property has been developed or created independently or jointly by
a third party for Company and is incorporated into any of the Company Products,
Company has a written agreement with such third party with respect thereto and
Company thereby either (i) has obtained ownership of, and is the exclusive owner
of, or (ii) has obtained a perpetual, non-terminable license (sufficient for the
conduct of its business as currently conducted and as proposed to be conducted)
to all such third party's Intellectual Property in such work, material or
invention by operation of law or by valid assignment, to the fullest extent it
is legally possible to do so.
(h) Company has not transferred ownership of, or granted any
exclusive license with respect to, any Intellectual Property that is or was in
the last year material Company Intellectual Property, to any third party, or
knowingly permitted Company's rights in such material Company Intellectual
Property to lapse or enter the public domain.
(i) SECTION 2.20(i) OF THE DISCLOSURE SCHEDULE lists all material
contracts, licenses and agreements to which the Company is a party: (i) with
respect to Company Intellectual Property licensed or transferred to any third
party (other than end-user licenses in the ordinary course); or (ii) pursuant to
which a third party has licensed or transferred any material Intellectual
Property to the Company (other than commercially available off-the-shelf
software).
(j) All material contracts, licenses and agreements relating to
either (i) Company Intellectual Property or (ii) between the Company and a third
party relating to Intellectual Property of a third party licensed to Company,
are in full force and effect. Except as set forth on SECTION 2.20(j) OF THE
DISCLOSURE SCHEDULE, the consummation of the transactions contemplated by this
Agreement will neither violate nor result in the breach, modification,
cancellation, termination or suspension of such contracts, licenses and
agreements. Company is in material compliance with, and has not materially
breached any term of any such contracts, licenses and agreements and, to the
knowledge of Company, all other parties to such contracts, licenses and
agreements are in compliance with, and have not materially breached any term of,
such
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contracts, licenses and agreements. Except as set forth on SECTION 2.20(j) OF
THE DISCLOSURE SCHEDULE, the Company is not aware of any fact that would prevent
the Surviving Corporation following the Closing Date from exercising all of
Company's rights under such contracts, licenses and agreements to the same
extent Company would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which Company would
otherwise be required to pay. Neither this Agreement nor the transactions
contemplated by this Agreement, including the assignment to Purchaser or Merger
Sub by operation of law or otherwise of any contracts or agreements to which the
Company is a party, will result in (i) either Company's or the Merger Sub's
granting to any third party any right to or with respect to any material
Intellectual Property right owned by, or licensed to, either of them, (ii)
either the Company's or the Merger Sub's being bound by, or subject to, any
non-compete or other material restriction on the operation or scope of their
respective businesses, or (iii) either the Company's or the Merger Sub's being
obligated to pay any royalties or other material amounts to any third party in
excess of those payable by Company or Merger Sub, respectively, prior to the
Closing.
(k) The operation of the business of the Company as such business
currently is conducted, including (i) Company's design, development,
manufacture, distribution, reproduction, marketing or sale of the products or
services of Company (including Company Products) and (ii) the Company's use of
any product, device or process in connection with the foregoing, to the
Company's knowledge has not and does not at the time of the Closing infringe or
misappropriate the Intellectual Property of any third party or constitute unfair
competition or trade practices under the laws of the United States or Canada.
(l) Company has not received notice from any third party that the
operation of the business of Company or any product or service of Company,
infringes or misappropriates the Intellectual Property of any third party or
constitutes unfair competition or trade practices under the laws of any
jurisdiction.
(m) To the knowledge of Company, no person has or is infringing or
misappropriating any Company Intellectual Property.
(n) Company has taken reasonable steps to protect Company's rights
in Company's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to Company, and, without limiting the foregoing, Company has and uses
its reasonable efforts to enforce a policy requiring each employee and
contractor to execute a proprietary information/confidentiality agreement
substantially in the form provided to Purchaser and all current and former
employees and contractors of Company have executed such an agreement, except
where the failure to do so is not reasonably expected to be material to Company.
2.21 BOARD APPROVAL. The Stockholders and Board of Directors of the
Company have, as of the date of this Agreement (i) approved this Agreement and
the transactions contemplated hereby and (ii) determined that the Merger is in
the best interests of the stockholders of Company and is on terms that are fair
to such stockholders.
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2.22 COLLECTIBILITY OF ACCOUNTS RECEIVABLE. All of the accounts
receivable of the Company reflected on the Company Reports or existing at the
date hereof (less the reserve for bad debts set forth on the Company Reports)
are or will be at the Closing valid and enforceable claims and subject to no set
off or counterclaim, and to the knowledge of the Company, will be fully
collectible in the ordinary course of business; PROVIDED that the foregoing
shall not be construed to constitute a guaranty of full collectibility. Except
as set forth on SECTION 2.22 OF THE DISCLOSURE SCHEDULE, the Company has no
accounts or loans receivable from any person, firm or corporation which is
affiliated with the Company or from any director, officer or employee of the
Company.
2.23 ORDINARY COURSE. Since the Base Balance Sheet Date, the Company
has conducted its business only in the ordinary course and consistently with its
prior practices.
2.24 BANKING RELATIONS. All of the arrangements which the Company has
with any banking institutions are described in SECTION 2.24 OF THE DISCLOSURE
SCHEDULE indicating with respect to each such arrangements the type of
arrangement maintained (such as checking account, borrowing arrangement, safe
deposit box, etc.) and the person or persons authorized in respect thereof.
2.25 HART-SCOTT-RODINO ACT. Under 15 U.S.C. Section 18a and the
regulations promulgated thereunder, (i) Parent is not, and at the Effective Time
Parent will not be, a "person" which has total assets or annual net sales of
$100,000,000 or more and (ii) no Person other than Parent is Holdings' "ultimate
parent entity".
2.26 DIRECTORS AND OFFICERS. Except as disclosed in SECTION 2.26 OF THE
DISCLOSURE SCHEDULE, to the knowledge of the Company, none of the officers or
directors of the Company during the previous five years has been (a) subject to
voluntary or involuntary petition under the federal bankruptcy laws or any state
insolvency law or the appointment of a receiver, fiscal agent or similar officer
by a court for his business or property; (b) convicted in a criminal proceeding
or named as a subject of a pending criminal proceeding (excluding traffic
violations and other minor offenses); (c) subject to any order, judgment, or
decree (not subsequently reversed, suspended or vacated) of any court of
competent jurisdiction permanently or temporarily enjoining him from, or
otherwise imposing limits or conditions on his, engaging in any securities,
investment advisory, banking, insurance or other type of business or acting as
an officer or director of a public company; or (d) found by a court of competent
jurisdiction in a civil action or by the Securities and Exchange Commission or
the Commodity Futures Trading Commission to have violated any federal or state
commodities, securities or unfair trade practices law, which such judgment or
finding has not been subsequently reversed, suspended, or vacated.
2.27 DISCLOSURE. This Agreement, the Disclosure Schedule and the
certificates furnished at the Closing by or on behalf of the Company, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading in
the light of the circumstances under which they were made.
2.28 HOLDING COMPANY. Holdings has no assets other than shares of
Target common stock, which except as set forth on SECTION 2.28 OF THE DISCLOSURE
SCHEDULE, Holdings owns free
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and clear of all liens, claims and encumbrances. Except as set forth on SECTION
2.28 OF THE DISCLOSURE SCHEDULE, Holdings has no liabilities of any nature,
whether accrued, absolute, contingent or otherwise, asserted or unasserted,
known or unknown (including, without limitation, liabilities as guarantor or
otherwise with respect to obligations of others, or liabilities for taxes due or
accrued or to become due or potential liabilities relating to activities at the
Company or the conduct of its business prior to the date hereof or the Closing
Date.
2.29 INVENTORIES. Except as disclosed in SECTION 2.29 OF THE DISCLOSURE
SCHEDULE, all of the Company's inventory items are of a quality and quantity
salable in the ordinary course of its business at profit margins consistent with
Seller's experience in prior years. All inventory items shown on SECTION 2.29 OF
THE DISCLOSURE SCHEDULE reflect write-downs to realizable values in the case of
items which have become obsolete or unsaleable (except at prices less than cost)
through regular distribution channels in the ordinary course of the business of
the Company. Except as set forth on SECTION 2.29 OF THE DISCLOSURE SCHEDULE the
values of the inventories stated in the Company Reports and any subsequent
financial statements of the Company reflect the normal inventory valuation
policies of the Company and were determined in accordance with generally
accepted accounting principles, practices and methods consistently applied.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS
As a material inducement to Purchaser and Merger Sub to enter into this
Agreement and consummate the transactions contemplated hereby, each Stockholder
hereby makes to Purchaser and Merger Sub the representations and warranties
contained in this Article III; PROVIDED, HOWEVER, that no Stockholder shall have
a right of indemnity or contribution from the Company or the Surviving
Corporation with respect to any breach of the representations and warranties
hereunder.
3.1 ORGANIZATION. If the Stockholder is a corporate entity, the
Stockholder is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. If the Stockholder is a
corporate entity: (i) the Stockholder has all necessary corporate power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby; and (ii) the
execution and delivery of this Agreement by Stockholder and the consummation by
Stockholder of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Stockholder and no
other corporate proceedings on the part of Stockholder are necessary to
authorize this Agreement or to consummate the transactions so contemplated. This
Agreement has been duly and validly executed and delivered by Stockholder and,
assuming the due authorization, execution and delivery by Purchaser and Merger
Sub, constitutes legal and binding obligations of Stockholder, enforceable
against Stockholder in accordance with their respective terms.
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3.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Stockholder do
not, and the performance of this Agreement by Stockholder shall not, (i)
conflict with or violate the Stockholder organizational documents, (ii) subject
to compliance with the requirements set forth in Section 3.3(b) below, to the
knowledge of Stockholder, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Stockholder or by which its or any of
their respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or materially impair Stockholder rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of
Stockholder pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Stockholder is a party or by which Stockholder or its properties are
bound or affected, except in any case for such conflicts, violations, breaches,
defaults or other occurrences that could not reasonably be expected to have a
Material Adverse Effect on the Company.
(b) The execution and delivery of this Agreement by Stockholder do
not, and the performance of this Agreement by Stockholder shall not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity, except for the filing and recordation of the Merger
Documents as required by Delaware Law and Texas Law and except where the failure
to obtain such consents, approvals, authorizations or permits, or to make such
filings or notifications would not otherwise have a Material Adverse Effect on
the Company.
3.4 BROKERS. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of Stockholder.
3.5 ACCREDITED INVESTOR. Except as set forth on SECTION 3.5 OF THE
DISCLOSURE SCHEDULE, each Stockholder is an "accredited investor" within the
meaning of Rule 501(a) or Regulation D promulgated under the Securities Act and,
if not a natural person, was not organized for the specific purpose of acquiring
the Purchaser Common Stock.
3.6 KNOWLEDGE AND EXPERIENCE. Each Stockholder has sufficient knowledge
and experience in investing in companies similar to Purchaser so as to be able
to evaluate the risks and merits of its investment in Purchaser and such
Stockholder is able financially to bear the risks thereof, including a complete
loss of its investment therein.
3.7 DISTRIBUTION. The Purchaser Common Stock being issued to each
Stockholder is being acquired by such Stockholder for its own account for the
purpose of investment and not with a present view to the resale or distribution
thereof or any interest therein.
3.8 UNREGISTERED SECURITIES. Each Stockholder understands that (i) the
shares of Purchaser Common Stock issued hereby have not been registered under
the Securities Act by reason of their issuance in a transaction exempt from the
registration requirements of the
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Securities Act pursuant to Section 4(2) thereof or Rule 505 or 506 promulgated
under the Securities Act, (ii) the shares of Purchaser Common Stock issued
hereby must be held indefinitely unless a subsequent disposition thereof its
registered under the Securities Act or is exempt from such registration under
the Securities Act or is exempt from such registration and agrees not to
transfer or dispose of any of the Purchaser Common Stock, or any interest
therein, except in accordance with all applicable federal and state laws, and
(iii) the Purchaser Common Stock will bear a legend to such effect.
3.9 BENEFICIAL OWNERSHIP. Each Stockholder owns beneficially and of
record that number of shares of Holdings Common Stock set forth beside such
Stockholders name on SECTION 3.9 OF THE DISCLOSURE SCHEDULE full and clear of
any liens, restrictions or encumbrances.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERGER SUB
As a material inducement to Holdings, Target and the Stockholders to
enter into this Agreement and consummate the transactions contemplated hereby,
Purchaser and Merger Sub jointly and severally hereby make to Holdings, Target
and the Stockholders the representations and warranties contained in this
Article IV. Such representations and warranties are subject to such exceptions
as are disclosed in the disclosure schedules supplied by Purchaser and Merger
Sub dated as of the date hereof (the "PURCHASER SCHEDULE").
4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Purchaser and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease and operate its assets and properties and to
carry on its business as it is now being conducted, except where the failure to
do so would not, individually or in the aggregate, have a Material Adverse
Effect on Purchaser and Merger Sub. Each of Purchaser and Merger Sub is in
possession of all approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such approvals would not,
individually or in the aggregate, have a Material Adverse Effect on Purchaser.
Each of Purchaser and Merger Sub is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except for such
failures to be so duly qualified or licensed and in good standing that would
not, either individually or in the aggregate, have a Material Adverse Effect on
Purchaser.
4.2 CAPITALIZATION. The authorized capital stock of Purchaser consists
of (i) 40,000,000 shares of Purchaser Common Stock, par value $0.001 per share,
and (ii) 2,000,000 shares of preferred stock, par value $0.001 per share (the
"PURCHASER PREFERRED STOCK"). At the close of business on April 30, 2000, (i)
19,357,369 shares of Purchaser Common Stock were issued and outstanding, and
(ii) as of April 30, 2000, 4,307,084 shares of Purchaser Common
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Stock were reserved for issuance, under the Purchaser's 1996 Stock Option Plan
and 1999 Stock Option and Grant Plan. No shares of Purchaser Preferred Stock are
outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares
of common stock, par value $.001 per share, all of which, as of the date hereof,
are issued and outstanding and held by Purchaser. All of the outstanding shares
of Purchaser's and Merger Sub's respective capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. All shares
of Purchaser Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall, and the shares of Purchaser Common Stock to be issued pursuant
to the Merger will be, duly authorized, validly issued, fully paid and
nonassessable. As of the date of this Agreement, except as set forth in SECTION
4.2 OF THE PURCHASER SCHEDULE and except as contemplated by this Agreement,
there are no registration rights and there is no voting trust, proxy, rights
plan, antitakeover plan or other agreement or understanding to which the
Purchaser or Merger Sub is a party or by which they are bound with respect to
any equity security of any class of Purchaser or with respect to any equity
security, partnership interest or similar ownership interest of any class of
Merger Sub.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Purchaser and Merger
Sub has all necessary corporate power and authority to execute and deliver this
Agreement, and to perform its obligations hereunder and, to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by Purchaser and Merger Sub and the consummation by Purchaser and Merger Sub of
the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Purchaser and Merger Sub, and no
other corporate proceedings on the part of Purchaser or Merger Sub are necessary
to authorize this Agreement, or to consummate the transactions so contemplated.
This Agreement has been duly and validly executed and delivered by Purchaser and
Merger Sub and, assuming the due authorization, execution and delivery by
Company, constitute legal and binding obligations of Purchaser and Merger Sub,
enforceable against Purchaser and Merger Sub in accordance with their respective
terms.
4.4 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Purchaser and
Merger Sub do not, and the performance of this Agreement by Purchaser and Merger
Sub shall not, (i) conflict with or violate the Certificate of Incorporation,
Bylaws or equivalent organizational documents of Purchaser or any of its
subsidiaries, (ii) subject to compliance with the requirements set forth in
Section 4.4(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Purchaser or any of its subsidiaries or by
which it or their respective properties are bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or impair Purchaser's or any such
subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Purchaser or any of its subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Purchaser
or any of its subsidiaries is a party or by which Purchaser or any of its
subsidiaries or its or any of their respective properties are bound or affected,
except to the extent such conflict, violation, breach, default, impairment or
other effect could not in the case of clauses (ii) or (iii)
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individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Purchaser.
(b) The execution and delivery of this Agreement by Purchaser and
Merger Sub do not, and the performance of this Agreement by Purchaser and Merger
Sub shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except for the filing
of the Merger Documents as required by Delaware Law and Texas Law.
4.5 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Each report, schedule, registration statement and definitive
proxy statement filed by Purchaser with the SEC on or after October 22, 1999
(the "Purchaser SEC Reports"), which are all the forms, reports and documents
required to be filed by Purchaser with the SEC since October 22, 1999 (A) were
prepared in accordance with the requirements of the Securities Act or the
Exchange Act and the rules and regulations of the SEC promulgated thereunder, as
the case may be, and (B) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of Purchaser's subsidiaries is required to file any reports
or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in
each case, any related notes thereto) contained in the Purchaser SEC Reports was
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited statements, do not contain footnotes as permitted by Form 10-Q
of the Exchange Act) and each presented fairly in all material respects the
consolidated financial position of Purchaser and its subsidiaries at the
respective dates thereof and the consolidated results of its operations and cash
flows for the periods indicated, except that the unaudited interim financial
statements were or are subject to normal adjustments which were not or are not
expected to be material in amount.
4.6 ABSENCE OF LITIGATION. Except as set forth in SECTION 4.6 OF THE
PURCHASER SCHEDULE, there are no claims, actions, suits or proceedings pending
or, to the knowledge of each of Purchaser and Merger Sub, threatened (or, to the
knowledge of each of Purchaser and Merger Sub, any governmental or regulatory
investigation pending or threatened) against Purchaser, Merger Sub or any other
subsidiary of Purchaser or any properties or rights of Purchaser, Merger Sub or
any other subsidiary of Purchaser, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign.
4.7 BOARD APPROVAL. The Boards of Directors of each of Purchaser and
Merger Sub have, as of the date of this Agreement unanimously (i) approved this
Agreement and the transactions contemplated hereby and (ii) determined that the
Merger is in the best interests of the stockholders of each of Purchaser and
Merger Sub and is on terms that are fair to such stockholders.
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4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since April 30, 2000, the
business of the Purchaser and its subsidiaries has been conducted in the
ordinary course of business consistent with past practice.
4.9 OFFERING VALID. Assuming the accuracy of the Stockholders
representations and warranties contained in Article III hereof, the issuance of
the Purchaser Common Stock will be exempt from the registration requirements of
the Securities Act.
4.10 LUCENT. The term of Purchaser's Agreement with Lucent Technologies
dated April 30, 1999 is through April 30, 2002, and the Agreement has not been
terminated.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF BUSINESS BY COMPANY . During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company except to the
extent that Purchaser shall otherwise consent in writing, carry on its business,
in the usual, regular and ordinary course, in substantially the same manner as
heretofore conducted and in compliance with all applicable laws and regulations,
pay its debts and taxes when due subject to good faith disputes over such debts
or taxes, pay or perform other material obligations when due, and use its
commercially reasonable efforts consistent with past practices and policies to
(i) preserve intact its present business organization, (ii) keep available the
services of its present officers and employees and (iii) preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others with which it has significant business dealings.
In addition, except as permitted by the terms of this Agreement, and
the transactions contemplated hereby, and except as provided in SECTION 5.1 OF
THE DISCLOSURE SCHEDULE, without the prior written consent of Purchaser, during
the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms or the Effective Time,
Company shall not, and with respect to Section (a) below, Parent shall not
permit the Company or any of the Company's subsidiaries to, do any of the
following:
(a) With respect to Parent, waive any stock repurchase rights,
accelerate, amend or change the period of exercisability of options or
restricted stock, or reprice options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans to any employee, consultant or director
of the Company, except as provided for under this Agreement or the attached
exhibits;
(b) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding, or policies
existing, on the date hereof and as previously disclosed in writing or made
available to Purchaser, or adopt any new severance plan, or amend or modify or
alter in any manner any severance plan, agreement or arrangement existing on the
date hereof;
(c) Transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Company Intellectual Property, or
enter into grants to transfer or license
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to any person future patent rights, other than in the ordinary course of
business consistent with past practices, provided that in no event shall Company
license on an exclusive basis or sell any Company Intellectual Property;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company or its subsidiaries;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber
or propose any of the foregoing with respect to any shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares;
(g) Cause, permit or propose any amendments to the Company Charter
Documents;
(h) Acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
enter into any joint ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except sales of inventory in the ordinary course of
business consistent with past practice;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing other than in connection with the financing of ordinary course trade
payables consistent with past practice;
(k) Adopt or amend any material employee policy or arrangement, or
enter into any employment contract or collective bargaining agreement (other
than offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable "at
will"), pay any special bonus or special remuneration to any director or
employee, or, except in the ordinary course of business consistent with past
practice, increase the salaries or wage rates or fringe benefits (including
rights to severance or indemnification) of its directors, officers, employees or
consultants;
(l) (i) pay, discharge, settle or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) other than the payment, discharge, settlement or satisfaction, in the
ordinary course of business consistent with past practice or in accordance with
their terms, of liabilities recognized or disclosed in the most recent
consolidated financial
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statements (or the notes thereto) of Company as provided to the Purchaser or
incurred since the date of such financial statements, or (ii) waive the benefits
of, agree to modify in any manner, terminate, release any person from or
knowingly fail to enforce any confidentiality or similar agreement to which
Company or any of its subsidiaries is a party or of which Company or any of its
subsidiaries is a beneficiary;
(m) Make any individual or series of related payments outside of
the ordinary course of business in excess of $100,000;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any Material Contract or agreement to which
Company or any subsidiary thereof is a party or waive, delay the exercise of,
release or assign any material rights or claims thereunder; (o) Enter into,
renew or materially modify any contracts, agreements, or obligations relating to
the distribution, sale, license or marketing by third parties of Company's
products or products licensed by Company other than renewals of existing
nonexclusive contracts, agreements or obligations;
(p) Except as required by U.S. GAAP, revalue any of its assets or
make any change in accounting methods, principles or practices;
(q) Incur or enter into any agreement, contract or commitment
requiring Company or any of its subsidiaries to pay in excess of $100,000,
excluding routine purchase orders consistent with past practices;
(r) Settle any material litigation; or
(s) Agree in writing or otherwise to take any of the actions
described in Section 5.1(a) through (r) above.
Notwithstanding anything to the contrary contained in this Section 5.1,
the parties agree that DTIH will make cash payments in an aggregate amount not
to exceed $1,100,000 to management employees of Target prior to the Closing.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) CONFIDENTIALITY. The parties acknowledge that Parent and
Purchaser have previously executed a Mutual Confidentiality Agreement, between
Parent and the Purchaser (the "CONFIDENTIALITY AGREEMENT"), which
Confidentiality Agreement will continue in full force and effect in accordance
with its terms.
(b) ACCESS TO INFORMATION. Company will afford Purchaser and its
accountants, counsel and other representatives, reasonable access to the
properties, books, records and
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personnel of Company during the period prior to the Effective Time to obtain all
information concerning the business of the Company, including the status of
product development efforts, properties, results of operations and personnel of
Company, as Purchaser may reasonably request. No information or knowledge
obtained by Purchaser in any investigation pursuant to this Section 6.1 will
affect or be deemed to modify any representation or warranty contained herein or
the conditions to the obligations of the parties to consummate the Merger.
6.2 PUBLIC DISCLOSURE. Purchaser, Parent and Company will attempt to
consult with each other before issuing any press release or otherwise making any
public statement with respect to the Merger or this Agreement, and will not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange.
6.3 REASONABLE EFFORTS; NOTIFICATION.
Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article VII to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all consents, approvals or waivers
from third parties required as a result of the transactions contemplated in this
Agreement, (iv) the defending of any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) the execution or delivery of any
additional instruments reasonably necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
(a) Parent and Company shall give prompt notice to Purchaser upon
becoming aware that any representation or warranty made by it contained in this
Agreement has become untrue or inaccurate, or of any failure of Company or
Parent to comply with or satisfy in any material respect any covenant, condition
or agreement to be complied with or satisfied by it under this Agreement, in
each case, such that the conditions set forth in Section 7.3(a) or 7.3(b) would
not be satisfied; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
(b) Purchaser shall give prompt notice to Company upon becoming
aware that any representation or warranty made by it or Merger Sub contained in
this Agreement has
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become untrue or inaccurate, or of any failure of Purchaser or Merger Sub to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Section 7.2(a) or 7.2(b) would not
be satisfied; PROVIDED, HOWEVER, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
6.4 EMPLOYEE BENEFITS.
(a) Target shall, prior to the Closing Date, terminate the Target
401(k) Plan (the "PLAN") and, except for any contributions to the Plan made with
respect to compensation earned prior to the Closing Date, no further
contributions shall be made to the Plan. Target shall provide to Purchaser: (i)
executed resolutions of the Board of Directors of Target authorizing the Plan
termination, effective prior to the Closing Date, and (ii) an executed amendment
to the Plan sufficient to ensure compliance with all applicable requirements of
the Code and the regulations issued thereunder so that the tax-qualified status
of the Plan will be maintained at the time of Plan termination.
(b) Parent and the Major Stockholders agree to assume any and all
liability relating to, arising out of, or resulting from, COBRA, and any state
statute similar to COBRA, attributable to any and all "Qualified Beneficiaries"
of Target (as such term is defined in COBRA) with respect to qualifying events
occurring at or prior to the Closing Date (including, without limitation, by
reason of the transactions contemplated by this Agreement).
6.5 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Purchaser and Company will each use its commercially reasonable efforts
to obtain any consents, waivers and approvals under any of its respective
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby.
6.6 NASDAQ LISTING. Purchaser agrees to cause the listing on Nasdaq the
shares of Purchaser Common Stock issuable hereunder, and those required to be
reserved for issuance, in connection with the Merger, subject to official notice
of issuance.
6.7 NON-COMPETITION.
(a) Each Stockholder set forth on SECTION 6.7(a) OF THE DISCLOSURE
SCHEDULE agrees that for a period of three years after the Effective Time, that
he or she (i) will not, directly or indirectly, whether as owner, partner,
shareholder, consultant, agent, employee, co-venturer or otherwise, engage,
participate or invest in any business activity which develops, manufactures or
markets equipment or software competitive with the existing products or products
under development, or which are the subject of active planning by the Company at
the time of Closing; (ii) will refrain from directly or indirectly employing,
attempting to employ, recruiting or otherwise soliciting, inducing or
influencing any person to leave the employment of the Company; and (iii) will
refrain from soliciting or encouraging any customer or supplier to terminate or
otherwise modify adversely its business relationship with the Company.
Notwithstanding the foregoing, a Stockholder may hold stock in a competitor if
the stock is
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publicly traded and the amount of stock held is less than 1% of the outstanding
capital stock of the competitor.
(b) Each Stockholder set forth on SECTION 6.7(b) OF THE DISCLOSURE
SCHEDULE agrees that for a period of two years after the Effective Time, that he
or she (i) will not, directly or indirectly, whether as owner, partner,
shareholder, consultant, agent, employee, co-venturer or otherwise, engage,
participate or invest in any business activity which develops, manufactures or
markets equipment or software competitive with the existing products or products
under development, or which are the subject of active planning by the Company at
the time of Closing; (ii) will refrain from directly or indirectly employing,
attempting to employ, recruiting or otherwise soliciting, inducing or
influencing any person to leave the employment of the Company; and (iii) will
refrain from soliciting or encouraging any customer or supplier to terminate or
otherwise modify adversely its business relationship with the Company.
Notwithstanding the foregoing, a Stockholder may hold stock in a competitor if
the stock is publicly traded and the amount of stock held is less than 1% of the
outstanding capital stock of the competitor.
(c) Each Stockholder set forth on SECTION 6.7(c) OF THE DISCLOSURE
SCHEDULE agrees that for a period of one year after the Effective Time, that he
or she (i) will not, directly or indirectly, whether as owner, partner,
shareholder, consultant, agent, employee, co-venturer or otherwise, engage,
participate or invest in any business activity which develops, manufactures or
markets equipment or software competitive with the existing products or products
under development, or which are the subject of active planning by the Company at
the time of Closing; (ii) will refrain from directly or indirectly employing,
attempting to employ, recruiting or otherwise soliciting, inducing or
influencing any person to leave the employment of the Company; and (iii) will
refrain from soliciting or encouraging any customer or supplier to terminate or
otherwise modify adversely its business relationship with the Company.
Notwithstanding the foregoing, a Stockholder may hold stock in a competitor if
the stock is publicly traded and the amount of stock held is less than 1% of the
outstanding capital stock of the competitor.
(d) Each of Hugh Crook, Mark Leonard and Purchaser, shall have
entered into the Non-Competition and Non-Solicitation Agreement attached hereto
as EXHIBIT C.
6.8 INTERCOMPANY ACCOUNT. At the Effective Time (i) all intercompany
payables or liabilities of the Company to Parent shall be cancelled and
extinguished and (ii) all intercompany payables or liabilities of Parent to the
Company shall be cancelled and extinguished. At the Effective Time, all
indemnification and similar obligations of Company in favor of Parent between
Parent and the Company shall be cancelled and extinguished.
6.9 LICENSE AGREEMENT. Purchaser agrees, and Parent agrees to cause
Datapulse PLC, to enter into the License Agreement attached hereto as EXHIBIT D
at the Closing.
6.10 EMPLOYMENT AGREEMENT. The Surviving Corporation and at least
thirteen (13) of the employees listed on SECTION 6.10 OF THE DISCLOSURE
SCHEDULE, including Ross LaBarbera, shall execute employment agreements in the
form of EXHIBIT E hereto.
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6.11 REGISTRATION RIGHTS. The Purchaser and each of the stockholders of
Holdings shall have entered into a Registration Rights Agreement substantially
in the form attached hereto as EXHIBIT F.
6.12 RELEASES. Each Stockholder shall execute and deliver a general
release of all claims which he, she or it may have (in any capacity) in the form
attached hereto as EXHIBIT G.
6.13 EXCHANGE ACT FILINGS. Purchaser agrees to use commercially
reasonable efforts to file all materials required by the Securities Exchange Act
of 1934, as amended, as may be necessary to enable the Purchaser to register
securities on a Form S-3 Registration Statement.
6.14 LOAN GUARANTEES. Purchaser shall indemnify and hold harmless
Parent from and against any and all liability arising out of or in connection
with the Parent's guarantees of the loan and related obligations of Holdings and
Target to Bank of America, N.A., pursuant to the Loan Agreement between Target
and Bank of America, N.A., as successor by merger to NationsBank, N.A., dated as
of September 30, 1998, as amended on October 13, 1999.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) NO ORDER; HSR ACT. No Governmental Entity shall have enacted,
issued, promulgated, enforced or entered any statute, rule, regulation,
executive order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and which has the effect of making
the Merger illegal or otherwise prohibiting consummation of the Merger. All
waiting periods, if any, under the HSR Act relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the transactions contemplated hereby shall have been obtained.
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY . The obligation of
Company and the Stockholders to consummate and effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Company:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of Purchaser and Merger Sub contained in this Agreement (i) shall have
been true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as if
made on the Closing Date except (A) in each case, or in the aggregate, as does
not constitute a Material Adverse Effect on Purchaser and Merger Sub, (B) for
changes contemplated by this Agreement and (C) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and
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correct (subject to the qualifications as set forth in the preceding clause A)
as of such particular date). Company shall have received a certificate with
respect to the foregoing signed on behalf of Purchaser by an authorized officer
of Purchaser.
(b) AGREEMENTS AND COVENANTS. Purchaser 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 on or prior
to the Closing Date, and Company shall have received a certificate to such
effect, and to the effect set forth in Section 7.2(a), signed on behalf of
Purchaser by an authorized officer of Purchaser.
(c) NASDAQ LISTING. The shares of Purchaser Common Stock issuable
to the stockholders of Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on Nasdaq upon official notice of issuance.
(d) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with
respect to Purchaser and its subsidiaries shall have occurred since the date of
this Agreement; PROVIDED, HOWEVER, that the trading price of Purchaser Common
Stock shall not be considered in evaluating whether a Material Adverse Effect
with respect to Purchaser shall have occurred.
(e) REGISTRATION RIGHTS. Purchaser shall have executed and
delivered to the Stockholders a Registration Rights Agreement substantially in
the form attached hereto as EXHIBIT F.
(f) OPINION OF COUNSEL. The Stockholders shall have received from
McDermott, Will & Emery an opinion as of the Closing Date in the form attached
hereto as EXHIBIT K.
(g) LICENSE AGREEMENT. Purchaser and Datapulse PLC shall have
entered into the License Agreement in substantially the form attached hereto as
EXHIBIT D.
7.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PURCHASER AND MERGER
SUB. The obligations of Purchaser and Merger Sub to consummate and effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which may be waived, in writing,
exclusively by Purchaser:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and
warranty of the Stockholders and the Company contained in this Agreement (i)
shall have been true and correct as of the date of this Agreement and (ii) shall
be true and correct on and as of the Closing Date with the same force and effect
as if made on and as of the Closing Date except (A) in each case, or in the
aggregate, as does not constitute a Material Adverse Effect on Company, (B) for
changes contemplated by this Agreement and (C) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct (subject to the qualifications
as set forth in the preceding clause A) as of such particular date). Purchaser
shall have received a certificate with respect to the foregoing signed on behalf
of Company by an authorized officer of Company.
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(b) AGREEMENTS AND COVENANTS. 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 Closing
Date, and Purchaser shall have received a certificate to such effect, and to the
effect set forth in Section 7.3(c), signed on behalf of Company by the Chief
Executive Officer and the Chief Financial Officer of Company.
(c) MATERIAL ADVERSE EFFECT. No Material Adverse Effect with
respect to Company and its subsidiaries shall have occurred since the date of
this Agreement.
(d) CONSENTS. Company shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses or
leases set forth on SECTION 7.3(d) OF THE DISCLOSURE SCHEDULE.
(e) EMPLOYMENT AGREEMENT. The Surviving Corporation and at least
thirteen (13) of the employees listed on SECTION 6.10 OF THE DISCLOSURE
SCHEDULE, including Ross LaBarbera, shall execute employment agreements in the
form of EXHIBIT E hereto on or about the Closing Date. Each employee of Target
or Holdings which currently has an employment agreement or letter in effect
shall have executed an agreement in substantially the form attached hereto as
EXHIBIT I to terminate such agreement or letter.
(f) LICENSE AGREEMENT. Purchaser and Datapulse PLC shall have
entered into the License Agreement in substantially the form attached hereto as
EXHIBIT B.
(g) OPINIONS OF COUNSEL.
(i) The Purchaser and Merger Sub have received from McCarthy
Tetrault, counsel for Parent, Holdings and Target, an opinion as of the Closing
Date in form attached hereto as EXHIBIT H.
(ii) The Purchaser and Merger Sub shall have received from
Jenkens & Gilchrist, P.C., special counsel for Holdings and Target, an opinion
as of the Closing Date in the form attached hereto as EXHIBIT I.
(h) STOCKHOLDER LIST. The Company shall deliver to the Purchaser a
certificate, certified by Secretary of Holdings, listing the total number of
shares of Holdings Common Stock authorized, issued and outstanding and setting
forth the name and address of each beneficial owner thereof.
(i) OPTION EXERCISE. Holders of options to purchase shares of
Holdings Common Stock shall have exercised options to purchase 1,652,174 shares
of Holdings Common Stock prior to the Effective time.
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ARTICLE VIII
TAX MATTERS
8.1 DEFINITION OF TAXES. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges constituting taxes, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
8.2 TAX REPRESENTATIONS. Each of the Stockholders and Company severally
represents and warrants to the Purchaser and Merger Sub as set forth below:
(a) The Company has (i) timely filed within the time period for
filing or any extension granted with respect thereto all applicable federal,
state, local, foreign and other returns, declarations, reports, claims for
refund, or information statements relating to Taxes including any schedule
attached thereto and any amendment thereto ("RETURNS") required to be filed
relating to or pertaining to any and all Taxes attributable to, levied or
imposed upon, or incurred in connection with the Company and (ii) paid all of
the Taxes due and payable prior to the date hereof.
(b) With respect to the Company, (i) there are not pending or
threatened in writing any audits, examinations, assessments, asserted
deficiencies or written claims for Taxes and (ii) there are (and immediately
after the Closing there will be) no Encumbrances for Taxes upon any assets of
the Company other than for Taxes not yet due and payable.
(c) No Tax deficiencies, assessments or audit adjustments have been
proposed in writing, assessed or asserted against the Company).
(d) Except as set forth in SECTION 8.2(d) OF THE DISCLOSURE
SCHEDULE, the Company is not delinquent in the payment of its Taxes.
(e) The Company has not requested any extension of time within
which to file any Returns related to the Company in respect of any taxable
period which have not since been filed and no request for waivers of the time to
assess any Taxes are pending or outstanding.
(f) Except as set forth in SECTION 8.2(f) OF THE DISCLOSURE
SCHEDULE, the Company has complied in all material respects with all applicable
laws, rules and regulations relating to the payment and withholding of Taxes and
have, within the time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental authorities all
employment, FICA, FUTA and other Taxes and similar amounts required to be so
withheld and paid over under all applicable laws.
(g) No power of attorney for Taxes has been granted with respect to
the Company.
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(h) The accruals and reserves for Taxes reflected in the balance
sheet of the Company as of March 31, 2000 are in all material respects adequate
to cover all Taxes required to be accrued through the date thereof (including
interest and penalties, if any, thereon and Taxes being contested) in accordance
with U.S. GAAP applied on a consistent basis with the balance sheet included in
the Company Reports, and the accrual and reserves for Taxes reflected in the
books and records of the Company as of the last day of the Company's most
recently complete fiscal month end are in all material respects adequate to
cover all Taxes required to be accrued through such date (including interest and
penalties, if any, thereon and Taxes being contested) in accordance with GAAP
applied on a consistent basis with the balance sheet included in the Company
Reports.
8.3 TAX RESPONSIBILITY.
(a) The Stockholders shall be responsible for and shall timely pay
or cause to be paid (i) any and all Taxes whensoever arising with respect to or
relating to the Stockholders or the Company that are attributable to any taxable
period ending on or prior to the Closing Date, including any Taxes attributable
to the Merger (collectively, "COMPANY'S TAXES").
(b) Purchaser shall be responsible for and shall timely pay or
cause to be paid any and all Taxes with respect to the Company that are
attributable to any taxable period commencing after the Closing Date
(collectively, "PURCHASER'S TAXES")
8.4 TAX RETURNS.
(a) Subject to the parties' respective obligations to make payments
pursuant to Sections 8.3(a) and 8.3(b) of this Agreement, Purchaser shall
prepare and file (or cause to be prepared and filed) on a timely basis all
Returns with respect to the Company ("COMPANY TAX RETURNS") for all taxable
periods ending on or before and after the Closing Date. Such Returns for all
taxable periods ending on or before the Closing Date shall be prepared in a
manner consistent with past practice.
(b) Each Stockholder shall timely provide to Purchaser all
information and documents within the possession of such Stockholders (or their
auditors, advisors or affiliates) and signatures and consents necessary for
Purchaser to properly prepare and file the Company Tax Returns or in connection
with the determination of any Tax liability or any audit, examination or
proceeding. Purchaser shall timely provide to a requesting Stockholder all
information and documents within its possession or the possession of its
auditors, advisors or affiliates in connection with the determination of any Tax
liability or any audit, examination or proceeding. Each party hereto shall
reasonably cooperate with the other (at their own expense) parties to obtain
other information or documents necessary or appropriate to prepare and file
Returns or elections or necessary or appropriate in connection with the
determination of any Tax liability or any audit, examination or proceeding.
8.5 REFUNDS AND CREDITS. All refunds or credits of Company's Taxes or
Purchaser's Taxes (including refunds or credits of Taxes shown on the Closing
Balance Sheet) shall be the property of Purchaser. Following the Closing, each
Stockholder shall promptly forward (or
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cause to be forwarded) to Purchaser any refunds or credits due to Purchaser
pursuant to this section after receipt or realization thereof by any
Stockholder.
8.6 ASSISTANCE AND COOPERATION. Each of the Stockholders and Purchaser
(and their respective Affiliates) shall, with respect to items (a) and (b)
below, at the expense of the requesting party, otherwise at their own expense:
(a) assist the other party in preparing any Returns which such
other party is responsible for preparing and filing in accordance with this
Article VIII;
(b) cooperate fully in preparing for any audits of, or disputes
with Taxing authorities regarding, any Returns relating to the Company;
(c) make available to the other and to any Taxing authority as
reasonably requested all information, records, and documents relating to Taxes
concerning the Company;
(d) make available to the other and to any Taxing authority as
reasonably requested employees and independent auditors to provide explanations
and additional information relating to Taxes concerning the Company;
(e) provide timely notice to the other in writing of any pending or
threatened Tax audits, assessments or Tax Proceedings with respect to the
Company for taxable periods for which the other may have a liability under this
Article VIII;
(f) furnish the other with copies of all correspondence received
from any Taxing authority in connection with any Tax audit or Tax proceedings
with respect to any taxable period for which the other may have a liability
under this Article VIII; and
(g) retain any books and records that could reasonably be expected
to be necessary or useful in connection with Purchaser's preparation of any
Return, or for any audit, examination, or proceeding relating to Taxes. Such
books and records shall be retained until the expiration of the applicable
statute of limitations (including extensions thereof to the extent the party has
been notified thereof); PROVIDED, HOWEVER, that in the event of an audit,
examination, investigation or proceeding has been instituted prior to the
expiration of the applicable statute of limitations (or in the event of any
claim under this Agreement), the books and records shall be retained until there
is a final determination thereof (and the time for any appeal has expired).
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to
the Effective Time:
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(a) by mutual written consent duly authorized by the Boards of
Directors of Purchaser and Company;
(b) by either Holdings or Purchaser if the Merger shall not have
been consummated by June 30, 2000 for any reason; PROVIDED, HOWEVER, that the
right to terminate this Agreement under this Section 9.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by either Holdings or Purchaser if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
nonappealable;
(d) by Holdings, upon a breach of any representation, warranty,
covenant or agreement on the part of Purchaser set forth in this Agreement, or
if any representation or warranty of Purchaser shall have become untrue, in
either case such that the conditions set forth in Section 7.2(a) or Section
7.2(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue; PROVIDED, that if such
inaccuracy in Purchaser's representations and warranties or breach by Purchaser
is curable by Purchaser through the exercise of its commercially reasonable
efforts, then Holdings may not terminate this Agreement under this Section
9.1(d) for thirty (30) days after delivery of written notice from Holdings to
Purchaser of such breach, PROVIDED Purchaser continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Holdings may
not terminate this Agreement pursuant to this Section 9.1(d) if it shall have
materially breached this Agreement or if such breach by Purchaser is cured
during such thirty (30)-day period); or
(e) by Purchaser, upon a breach of any representation, warranty,
covenant or agreement on the part of either a Stockholder or Company set forth
in this Agreement, or if any representation or warranty of either a Stockholder
or Company shall have become untrue, in either case such that the conditions set
forth in Section 7.3(a) or Section 7.3(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall have
become untrue; PROVIDED, that if such inaccuracy in such representations and
warranties or breach is curable by either a Stockholder or Company through the
exercise of its commercially reasonable efforts, then Purchaser may not
terminate this Agreement under this Section 9.1(e) for thirty (30) days after
delivery of written notice from Purchaser to such breaching party of such
breach, PROVIDED such breaching party continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Purchaser may
not terminate this Agreement pursuant to this Section 9.1(e) if it shall have
materially breached this Agreement or if such breach by such breaching party is
cured during such thirty (30)-day period).
9.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of
this Agreement under Section 9.1 above will be effective immediately upon (or,
if the termination is pursuant to Section 9.1(d) or Section 9.1(e) and the
proviso therein is applicable, thirty (30) days after) the delivery of written
notice of the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 9.2,
Section 9.3 and Article X (General Provisions), each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any breach of its representations and covenants contained in
this Agreement. No termination of this Agreement shall affect the obligations of
the
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parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
9.3 FEES AND EXPENSES. Except as set forth in this Section 9.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby by the Purchaser and Merger Sub shall be paid
by the Purchaser whether or not the Merger is consummated and all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby by the Stockholders and the Company shall be paid by the
Stockholders whether or not the Merger is consummated; PROVIDED, however, that
Holdings shall pay up to $15,000 of reasonable fees of Jackson Walker, L.L.P. to
advise on matters relating uniquely to the Stockholders who are employees of
Target; PROVIDED FURTHER that, as between Parent and the other Stockholders, the
fees and expenses of McCarthy Tetrault, Jenkens & Gilchrist, P.C. and KPMG Peat
Marwick LLP shall be paid by Parent and Parent shall not be responsible for the
fees and expenses of Jackson Walker, L.L.P.
9.4 AMENDMENT. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of Purchaser Holdings and each of the Stockholder
Representatives (as defined in Section 10.17).
9.5 EXTENSION; WAIVER. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE X
GENERAL PROVISIONS
10.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Company, the Stockholders, Merger Sub and the Purchaser
contained in this Agreement, the Disclosure Schedule and any certificate
delivered pursuant to this Agreement or in connection with the transactions
contemplated by this Agreement (collectively, the "ACQUISITION DOCUMENTS"),
shall survive the Closing by one year; PROVIDED, HOWEVER, that (i) the
representations and warranties contained in Section 2.7(a) shall survive the
Closing for a period of six months, (ii) the representations and warranties
contained in Sections 2.3, 2.9, 3.9 and Article VIII shall survive until the
fifth anniversary of the Closing Date, and (iii) the information delivered
pursuant to Section 7.3(h) shall remain true and accurate for a period of six
months after the Closing. If written notice of a claim has been given prior to
the expiration of the applicable representations and warranties, then the
relevant representations and warranties shall survive as to such claim, until
such claim has been finally resolved. In addition, each Stockholder hereby
agrees that until the expiration of each representation and warranty it shall
not to adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing
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such a liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or reorganization without the prior written consent of
Purchaser.
10.2 INDEMNIFICATION BY THE HOLDERS.
(a) From and after the Closing, Purchaser and its Affiliates,
officers, directors, employees, agents, successors and assigns (each a
"PURCHASER INDEMNIFIED PARTY") shall be indemnified and held harmless,
severally, and not jointly and severally, by Parent and each Major Stockholder
(each a "HOLDER") for any and all liabilities, losses, damages, claims, costs
(including business interruption costs) and expenses, interest, awards,
judgments and penalties (including, without limitation, attorneys' and
consultants' fees and expenses) actually suffered or incurred by them
(including, without limitation, any action brought or otherwise initiated by any
of them) (hereinafter a "LOSS" and in the aggregate the "LOSSES"), arising out
of or resulting from the breach of any representation or warranty made by the
Company or the Stockholders contained in the Acquisition Documents.
(b) A Purchaser Indemnified Party shall give the Stockholders'
Representatives notice of any matter which a Purchaser Indemnified Party has
determined has given or could give rise to a right of indemnification under this
Agreement, within 60 days of such determination, stating the amount of the Loss,
if known, and method of computation thereof, and containing a reference to the
provisions of this Agreement in respect of which such right of indemnification
is claimed or arises. The obligation and liabilities of the Holders under this
Article X with respect to Losses arising from claims of any third party which
are subject to the indemnification provided for in this Article X ("THIRD PARTY
CLAIMS") shall be governed by and contingent upon the following additional terms
and conditions: if a Purchaser Indemnified Party shall receive notice of any
Third Party Claim, the Purchaser Indemnified Party shall give the Stockholders'
Representatives notice of such Third Party Claim within 30 days of the receipt
by the Purchaser Indemnified Party of such notice; PROVIDED, HOWEVER, that the
failure to provide such notice shall not release the Holders from any of its
obligations under this Article X except to the extent the Holders are materially
prejudiced by such failure and shall not relieve the Holders from any other
obligation or liability that it may have to any Purchaser Indemnified Party
otherwise than under this Article X. If the Stockholders' Representatives
acknowledge in writing the Holders' obligation to indemnify the Purchaser
Indemnified Party hereunder against any Losses that may result from such Third
Party Claim, then the Stockholders' Representatives shall be entitled to assume
and control the defense of such Third Party Claim on behalf of the Holders at
its expense and through counsel of its choice if it gives notice of its
intention to do so to the Purchaser Indemnified Party within ten days of the
receipt of such notice from the Purchaser Indemnified Party; PROVIDED, HOWEVER,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate under applicable standards of professional
conduct for the same counsel to represent both the Purchaser Indemnified Party
and the Holders, then the Purchaser Indemnified Party shall be entitled to
retain its own counsel at the expense of the Holders. In any event the
Stockholders' Representatives exercise the right to undertake any such defense
against any such Third Party Claim on behalf of the Holders as provided above,
the Purchaser Indemnified Party shall cooperate with the Stockholders'
Representatives in such defense and make available to the Stockholders'
Representatives, at the Holders' expense, all witnesses, pertinent records,
materials and information in the Purchaser Indemnified Party's possession or
under the Purchaser Indemnified Party's control relating
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thereto as is reasonably required by the Stockholders' Representatives.
Similarly, in the event the Purchaser Indemnified Party is, directly or
indirectly, conducting the defense against any such Third Party Claim, the
Holders shall cooperate with the Purchaser Indemnified Party in such defense and
make available to the Purchaser Indemnified Party, at the Holders' expense, all
such witnesses, records, materials and information in the Holders' possession or
under the Holders' control relating thereto as is reasonably required by the
Purchaser Indemnified Party. No such Third Party Claim may be settled by the
Holders without the prior written consent of the Purchaser Indemnified Party,
which consent shall not be unreasonably withheld.
(c) From and after the Closing, except with respect to a breach of
Sections 6.1, 6.2 or 6.7, in the absence of fraud, willful misconduct or bad
faith breach ("EXCEPTED CLAIMS"), the sole and exclusive remedy of Purchaser and
its Affiliates, officers, directors, employees, agents, successors and assigns
against a Stockholder or any of its Affiliates, officers, directors, employees,
agents, successors and assigns with respect to any breach of the representation
and warranties contained in the Acquisition Documents shall be pursuant to the
indemnification provisions set forth in this Section 10.2.
10.3 LIMITATIONS ON INDEMNIFICATION BY THE HOLDERS. Notwithstanding the
foregoing, the right of a Purchaser Indemnified Party to indemnification under
Section 10.2, Section 6.4(b) or Article VIII shall be subject to the following
provisions:
(a) No indemnification shall be payable pursuant to Section 10.2,
Section 6.4(b) or Article VIII to any Purchaser Indemnified Party unless the
total of all claims for indemnification pursuant to Section 10.2, Section 6.4(b)
or Article VIII shall exceed $750,000 in the aggregate, whereupon the full
amount of such claims shall be recoverable in accordance with the terms hereof;
(b) With respect to breaches of the representations and warranties
contained in Article III hereof each Holder shall be responsible solely for such
Holder's individual representations and warranties contained in Article III as
limited by Section 10.3(c) below;
(c) No indemnification shall be payable by a Holder pursuant to
Section 10.2, Section 6.4(b) or Article VIII after the cumulative amount of any
claims paid by such Holder to or on behalf of the Purchaser Indemnified Parties
exceeds fifty percent (50%) of the proceeds received by such Holder pursuant to
the terms of this Agreement, with the Purchaser Common Stock having the value of
$26.7931 per share.
(d) Subject to the aggregate maximum liability specified for each
Holder in Section 10.3(c) hereof, each Stockholder shall be liable only for a
portion of each claim suffered by a Purchaser Indemnified Party determined by
multiplying the total amount of such claim by the percentage set forth opposite
such Holder's name on EXHIBIT L attached hereto; PROVIDED, that, the limitation
contained in this Section 10.3(d) shall not apply with respect to breaches of
the representations and warranties contained in Article III hereof.
(e) Except for claims made for breaches of the representations and
warranties under Article III, the Purchaser Indemnified Parties agree that they
may only bring an indemnity claim against a Holder who is not an employee of
Target as of the Closing Date if such Purchaser
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Indemnified Parties also include in the same claim an indemnity claim against
each of the Major Stockholders;
(f) The amount of indemnification pursuant to Section 10.2 shall be
reduced by the amount of insurance proceeds and payments from third parties, if
any, received by a Purchaser Indemnified Party; and
(g) The limitations contained in Sections 10.3(a), 10.3(c) and
10.3(d) shall not apply to any claims related to ownership of Holdings Common
Stock or such Holder's authority to enter into this Agreement and consummate the
transactions contemplated hereby.
10.4 INDEMNIFICATION BY THE PURCHASER.
(a) From and after the Closing, Parent and each Major Stockholder
(each a "SELLER INDEMNIFIED PARTY") shall be indemnified and held harmless by
the Purchaser for any and all Losses, arising out of or resulting from the
breach of any representation or warranty made by Purchaser or Merger Sub
contained in the Acquisition Documents.
(b) A Seller Indemnified Party shall give the Purchaser notice of
any matter which a Seller Indemnified Party has determined has given or could
give rise to a right of indemnification under this Agreement, within 60 days of
such determination, stating the amount of the Loss, if known, and method of
computation thereof, and containing a reference to the provisions of this
Agreement in respect of which such right of indemnification is claimed or
arises. The obligation and liabilities of the Purchaser under this Article X
with respect to Third Party Claims shall be governed by and contingent upon the
following additional terms and conditions: if a Seller Indemnified Party shall
receive notice of any Third Party Claim, the Seller Indemnified Party shall give
the Purchaser notice of such Third Party Claim within 30 days of the receipt by
the Seller Indemnified Party of such notice; PROVIDED, HOWEVER, that the failure
to provide such notice shall not release the Purchaser from any of its
obligations under this Article X except to the extent the Purchaser is
materially prejudiced by such failure and shall not relieve the Purchaser from
any other obligation or liability that it may have to any Seller Indemnified
Party otherwise than under this Article X. If the Purchaser acknowledges in
writing the Purchaser's obligation to indemnify the Seller Indemnified Party
hereunder against any Losses that may result from such Third Party Claim, then
the Purchaser shall be entitled to assume and control the defense of such Third
Party Claim on behalf of the Seller Indemnified Party at its expense and through
counsel of its choice if it gives notice of its intention to do so to the Seller
Indemnified Party within ten days of the receipt of such notice from the Seller
Indemnified Party; PROVIDED, HOWEVER, that if there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate under
applicable standards of professional conduct for the same counsel to represent
both the Seller Indemnified Party and the Purchaser, then the Seller Indemnified
Party shall be entitled to retain its own counsel at the expense of the
Purchaser. In any event the Purchaser exercises the right to undertake any such
defense against any such Third Party Claim on behalf of the Seller Indemnified
Parties as provided above, the Seller Indemnified Party shall cooperate with the
Purchaser in such defense and make available to the Purchaser, at the
Purchaser's expense, all witnesses, pertinent records, materials and information
in the Seller Indemnified Party's possession or under the Seller Indemnified
Party's control relating thereto as is reasonably required by the Purchaser.
Similarly, in the event the Seller
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Indemnified Party is, directly or indirectly, conducting the defense against any
such Third Party Claim, the Purchaser shall cooperate with the Seller
Indemnified Party in such defense and make available to the Seller Indemnified
Party, at the Purchaser's expense, all such witnesses, records, materials and
information in the Purchaser's possession or under the Purchaser's control
relating thereto as is reasonably required by the Seller Indemnified Party. No
such Third Party Claim may be settled by the Purchaser without the prior written
consent of the Seller Indemnified Party, which consent shall not be unreasonably
withheld.
(c) From and after the Closing, the sole and exclusive remedy of
each Stockholder with respect to any breach of the representation and warranties
contained in the Acquisition Documents shall be pursuant to the indemnification
provisions set forth in this Section 10.4.
10.5 LIMITATIONS ON INDEMNIFICATION BY THE PURCHASER. Notwithstanding
the foregoing, the right of an Indemnified Party to indemnification under
Section 10.4 shall be subject to the following provisions:
(a) No indemnification shall be payable pursuant to Section 10.4 to
any Seller Indemnified party unless the total of all claims for indemnification
pursuant to Section 10.4 shall exceed $750,000 in the aggregate, whereupon the
full amount of such claims shall be recoverable in accordance with the terms
hereof;
(b) No indemnification shall be payable by the Purchaser pursuant
to Section 10.4 after the cumulative amount of any claims paid by the Purchaser
to or on behalf of the Seller Indemnified Parties exceeds fifty percent (50%) of
the proceeds paid by the Purchaser pursuant to the terms of this Agreement, with
the Purchaser Common Stock having the value as set forth in Section 1.6(b);
(c) The amount of indemnification payable pursuant to Section 10.4
shall be reduced by the amount of insurance proceeds and payments from third
parties, if any, received by a Seller Indemnified Party; and
(d) The limitations contained in Sections 10.5(a) and 10.5(b) shall
not apply to any claims relating to the due and valid issuance of the Purchaser
Common Stock.
10.6 NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Purchaser or Merger Sub, to:
MCK Communications, Inc.
117 Kendrick Street
Newton, MA 02494-0708
Attention: Paul Zurlo
Telephone No.: (617) 454-6100
Telecopy No.: (617) 454-6103
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with a copy to:
McDermott, Will & Emery
28 State Street
Boston, MA 02109-1775
Attention: John B. Steele, Esq.
Telephone No.: (617) 535-4000
Telecopy No.: (617) 535-3800
(b) if to Troy Holdings International Inc. to:
191 The West Mall
Suite 360
Toronto, Ontario M9C 5K8
Attn: Hugh Crook
Telephone No.: (416) 626-0064
Telecopy No.: (416) 626-7226
with a copy to:
McCarthy Tetrault
Suite 4700
Toronto Dominion Bank Tower
Toronto-Dominion Centre
Toronto, Ontario
M5K 1E6
Attention: George Takach
Telephone No.: (416) 601-7662
Telecopy No.: (416) 601-8249
(c) if to Ross LaBarbera:
Digital Techniques, Inc.
402 West Bethany
Allen, Texas 75013
Attn: Rosy LaBarbera
Telephone No.: (975) 727-1200
Telecopy No.: (972) 727-4243
10.7 INTERPRETATION; KNOWLEDGE.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in
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each case to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. When reference is made herein to "the business of" an entity, such
reference shall be deemed to include the business of all direct and indirect
subsidiaries of such entity. Reference to the subsidiaries of an entity shall be
deemed to include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "MATERIAL ADVERSE
EFFECT" when used in connection with an entity means any change, event,
violation, inaccuracy, circumstance or effect, individually or when aggregated
with other changes, events, violations, inaccuracies, circumstances or effects,
that is materially adverse to the business, assets (including intangible
assets), capitalization, financial condition or results of operations of such
entity and its subsidiaries taken as a whole; PROVIDED that a decline in a
Person's stock price shall not in and of itself constitute a Material Adverse
Effect.
(c) For purposes of this Agreement, the term "PERSON" shall mean
any individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
(d) For purposes of this agreement, the Company shall be deemed to
have "KNOWLEDGE" of a particular fact or other matter if a Stockholder or other
executive officer of the Company is actually aware, after due inquiry, of such
fact or other matter.
10.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
10.9 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement and
the documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure Schedule
and the Purchaser Disclosure Schedule (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder.
10.10 SEVERABILITY. In the event that any provision of this Agreement,
or the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will
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achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
10.11 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
10.12 DISPUTE RESOLUTION.
(a) All disputes, claims, or controversies arising out of or
relating to this Agreement or any other agreement executed and delivered
pursuant to this Agreement or the negotiation, validity or performance hereof
and thereof or the transactions contemplated hereby and thereby that are not
resolved by mutual agreement shall be resolved solely and exclusively by binding
arbitration to be conducted by a single arbitrator before the American
Arbitration Association ("AAA"). If AAA ceases operation, then parties shall
select a comparable organization that provides qualified arbitration services.
The arbitration shall be held in New York, New York before a single arbitrator
and shall be conducted in accordance with the rules and regulations promulgated
by AAA unless specifically modified herein. If the parties cannot agree on the
arbitrator within 20 days of one party indicating its desire to commence
arbitration, the AAA office in New York, New York will select the arbitrator.
Unless otherwise ordered by the arbitrator, the parties shall bear
their own attorneys' fees, costs and expenses in connection with the
arbitration. The parties will share equally in the fees and expenses charged by
AAA.
(b) Each of the parties hereto irrevocably and unconditionally
consents to the exclusive use of AAA to resolve all disputes, claims or
controversies arising out of or relating to this Agreement or any other
agreement executed and delivered pursuant to this Agreement or the negotiation,
validity or performance hereof and thereof or the transactions contemplated
hereby and thereby and further consents to the jurisdiction of the federal
courts of the State of New York for the purposes of enforcing the arbitration
provisions of Section 10.12(a) of this Agreement. Each party further irrevocably
waives any objection to proceeding before AAA based upon lack of personal
jurisdiction or to the laying of venue and further irrevocably and
unconditionally waives and agrees not to make a claim in any court that
arbitration before AAA has been brought in an inconvenient forum. Each of the
parties hereto hereby consents to service of process by registered mail at the
address to which notices are to be given. Each of the parties hereto agrees that
its or his submission to jurisdiction and its or his consent to service of
process by mail is made for the express benefit of the other parties hereto.
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10.13 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles of conflicts of law
thereof.
10.14 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
10.15 ASSIGNMENT. No party may assign either this Agreement or any of
its rights, interests, or obligations hereunder without the prior written
approval of the other parties. Subject to the preceding sentence, this Agreement
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns.
10.16 AMENDMENTS. This Agreement may not be amended or modified except
by a writing duly and validly executed by Buyer, the Company and the
Stockholders. Compliance with any condition or covenant set forth herein may be
waived only by a writing duly executed by the party(s) for whose benefit the
condition or covenant is stabilized.
10.17 STOCKHOLDER REPRESENTATIVE.
(a) Each of the undersigned Stockholders hereby constitutes and
appoints Parent and Ross LaBarbera to serve as the stockholder representatives
(the "STOCKHOLDERS' REPRESENTATIVES") for and on behalf of all of the
Stockholders, to give and receive notices and communications, 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 such
claims, to take all other actions on behalf of the Stockholders as is explicitly
contemplated by this Agreement or the related documents and to take all actions
necessary or appropriate in the judgment of the Stockholders' Representatives
for the accomplishment of the foregoing. No bond shall be required of the
Stockholders' Representatives, and the Stockholders' Representatives shall
receive no compensation for its services. Notices or communications to or from
the Stockholders' Representatives shall constitute notice to or from each
Stockholder. If either of the persons or entities named in the first sentence of
this Section 10.17(a) as constituting the Stockholders' Representatives submits
his or its resignation as such, to Purchaser and the other person constituting
the Stockholders' Representatives, the remaining person and/or entity shall
thereafter be the Stockholders' Representatives for all purposes of this
Agreement.
(b) The Stockholders' Representatives shall not be liable for any
act done or omitted hereunder as Stockholders' Representatives while acting in
good faith and in the exercise of reasonable judgment. Notwithstanding the
foregoing, any act done or omitted pursuant to the advice of counsel or with the
consent of stockholders holding two-thirds of the Purchaser Common Stock issued
to all of the Stockholders shall be conclusive evidence of such good faith. The
Stockholders shall severally indemnify the Stockholders' Representatives and
hold them harmless against any loss, liability or expense incurred without gross
negligence or bad faith on the part of the Stockholders' Representatives and
arising out of or in connection with the acceptance or administration of his or
its duties hereunder.
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(c) A decision, act, consent or instruction of the Stockholders'
Representatives shall require the consent of both of the Stockholder's
Representatives, subject to the last sentence of Section 10.17(a) above, and
shall constitute a decision of all Stockholders and shall be final, binding and
conclusive upon each such Stockholder, and the Purchaser may rely upon any
decision, act, consent or instruction of the Stockholders' Representatives as
being the decision, act, consent or instruction of each and every such
Stockholder. Purchaser is hereby relieved from any liability to any Person for
any acts done by them in accordance with such decision, act, consent or
instruction of the Stockholders' Representatives.
(d) Purchaser will afford the Stockholders' Representatives
reasonable access to the properties, books and records of Company as the
Stockholders' Representatives may reasonably request to perform their duties as
set forth in this Section 10.17.
10.18 WAIVER OF JURY TRIAL. EACH OF THE STOCKHOLDERS, HOLDINGS, TARGET,
PURCHASER AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF A
STOCKHOLDER, COMPANY, PURCHASER OR MERGER SUB IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
[Signature Pages Follow]
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<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
MCK COMMUNICATIONS, INC.
By: /s/ Woody Benson
-----------------------------------
Name: Woody Benson
Title: Chief Executive Officer
OMNI ACQUISITION CORPORATION
By: /s/ Woody Benson
------------------------------------
Name: Woody Benson
Title: President
DTI HOLDINGS INC.
By: /s/ Ross J. LaBarbera
------------------------------------
Name: Ross J. LaBarbera
Title: President
DIGITAL TECHNIQUES, INC.
By: /s/ Ross J. LaBarbera
------------------------------------
Name: Ross J. LaBarbera
Title: President
TROY HOLDINGS INTERNATIONAL INC.
By: /s/ H.C.R. Crook
------------------------------------
Name: H.C.R. Crook
Title: Chairman
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MAJOR STOCKHOLDERS
/s/ Ross LaBarbera
---------------------------------
Ross LaBarbera
/s/ Keith Ervin
---------------------------------
Keith Ervin
/s/ Wes Throgmorton
---------------------------------
Wes Throgmorton
/s/ Dan Cervantes
---------------------------------
Dan Cervantes
/s/ Dan Ptak
---------------------------------
Dan Ptak
/s/ Roy Greer
---------------------------------
Roy Greer
/s/ Ginny Tavakoli
---------------------------------
Ginny Tavakoli
/s/ Tim Gingerich
---------------------------------
Tim Gingerich
/s/ Rick Manning
---------------------------------
Rick Manning
/s/ Dan Steffen
---------------------------------
Dan Steffen
OTHER STOCKHOLDERS
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/s/ Bill Bassett
---------------------------------
Bill Bassett
/s/ Dave Bentsen
---------------------------------
Dave Bentsen
/s/ Billy Bishop
---------------------------------
Billy Bishop
/s/ Lynda Chaney
---------------------------------
Lynda Chaney
/s/ Cheryl Davidson
---------------------------------
Cheryl Davidson
/s/ Darryl Edwards
---------------------------------
Darryl Edwards
/s/ Darlene Ervin
---------------------------------
Darlene Ervin
/s/ Pat Eubanks
---------------------------------
Pat Eubanks
/s/ Mike Fodor
---------------------------------
Mike Fodor
/s/ Rose Harwell
---------------------------------
Rose Harwell
/s/ Bonnie Hinz
---------------------------------
Bonnie Hinz
53
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/s/ Lois LaBove
---------------------------------
Lois LaBove
/s/ Todd Lindstrom
---------------------------------
Todd Lindstrom
/s/ David Mackey
---------------------------------
David Mackey
/s/ Chuck Marshall
---------------------------------
Chuck Marshall
/s/ Thomas Mayberry
---------------------------------
Thomas Mayberry
/s/ Fay Moore
---------------------------------
Fay Moore
/s/ Helen O'Toole
---------------------------------
Helen O'Toole
/s/ John Ralston
---------------------------------
John Ralston
/s/ Kevin Scott
---------------------------------
Kevin Scott
/s/ Randy Smith
---------------------------------
Randy Smith
/s/ Michael Spurlin
---------------------------------
Michael Spurlin
/s/ Moira Varlames
---------------------------------
Moira Varlames
54
<PAGE> 61
/s/ John Walton
---------------------------------
John Walton
/s/ Debbie Warren
---------------------------------
Debbie Warren
/s/ Greg Smith
---------------------------------
Greg Smith
/s/ Bob Alexander
---------------------------------
Bob Alexander
55
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CERTIFICATE OF THE SECRETARY OF OMNI ACQUISITION CORPORATION
I, Paul Zurlo, the duly appointed Secretary of Omni
Acquisition Corporation, a Delaware corporation ("OMNI"), hereby certify that
the Agreement and Plan of Merger to which this certificate is attached, signed
on behalf of Omni by its President, was duly approved and adopted by (i) consent
resolution of the sole shareholder of Omni effective as of June 14, 2000
pursuant to the written consent of the holder of all of the outstanding stock
entitled to vote thereon; and (ii) consent resolution of the Board of Directors
of Omni.
WITNESS my hand this 14th day of June, 2000.
/s/ Paul Zurlo
---------------------
Paul Zurlo, Secretary
1
