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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
FLEXTRONICS INTERNATIONAL LTD.,
CHATHAM ACQUISITION CORP.,
AND
CHATHAM TECHNOLOGIES, INC.
JULY 31, 2000
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AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (this "AGREEMENT") is entered
into as of July 31, 2000 by and among Flextronics International Ltd., a
Singapore company ("PARENT"), Chatham Acquisition Corp., a Delaware corporation
and an indirect wholly-owned subsidiary of Parent ("MERGER SUB"), and Chatham
Technologies, Inc., a Delaware corporation ("COMPANY").
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Merger Sub will merge with and into Company (the
"MERGER"), with Company to be the surviving corporation of the Merger, all
pursuant to the terms and conditions of this Agreement and the Certificate of
Merger on terms and conditions consistent with the terms and conditions of this
agreement (the "CERTIFICATE OF MERGER") and the applicable provisions of the
laws of the State of Delaware. The parties intend for the Merger to be treated
as a non-taxable reorganization within the meaning of Section 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended (the "CODE"), and to be accounted
for as a pooling-of-interests transaction for financial accounting purposes.
B. The Boards of Directors of Parent, Merger Sub and Company have
determined that the Merger is in the best interests of their respective
companies and stockholders, have approved the Merger and, accordingly, have
agreed to effect the Merger provided for herein upon the terms and conditions of
this Agreement.
C. Concurrently with the execution of this Agreement, the stockholders
of Company listed on Exhibit A (collectively, the "SIGNIFICANT STOCKHOLDERS" and
each individually, a "SIGNIFICANT STOCKHOLDER") and Parent are entering into the
Voting Agreement, dated the date hereof, in the form of Exhibit B (the "VOTING
AGREEMENT") and are executing Investment Representation Letters, dated the date
hereof, in the form of Exhibit C (the "INVESTMENT REPRESENTATION LETTERS").
D. Upon the effectiveness of the Merger, (i) all of the outstanding
Class A common stock of Company, $0.01 par value per share (the "COMPANY COMMON
STOCK") will be automatically converted into the right to receive, and shall be
exchangeable for, Parent ordinary shares, $0.01 par value per share ("PARENT
ORDINARY SHARES") in the manner and on the basis determined herein, (ii)
options, warrants and other rights to purchase Company capital stock that are
outstanding immediately prior to the effectiveness of the Merger will be
converted into options, warrants and other rights to purchase Parent Ordinary
Shares, and (iii) Merger Sub will be merged with and into Company, in each case,
as provided in this Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. PLAN OF REORGANIZATION
1.1 The Merger. The Certificate of Merger will be filed with the
Secretary of State of the State of Delaware as soon as practicable after the
Closing (as defined in Section 6.1). The effective time of the Merger (the
"EFFECTIVE TIME") will occur on the Closing Date (as
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defined in Section 6.1) at 10:00 a.m. or at such other date or time as Parent
and Company may mutually agree. Subject to the terms and conditions of this
Agreement, Merger Sub will be merged with and into Company in a statutory merger
pursuant to the Certificate of Merger and in accordance with applicable
provisions of Delaware law.
1.2 Conversion and Exchange of Shares.
(a) Conversion of Merger Sub Stock. At the Effective Time,
each share of Merger Sub common stock that is issued and outstanding immediately
prior to the Effective Time will be converted into one validly issued, fully
paid and nonassessable share of common stock of the Surviving Corporation (as
defined below). Each certificate evidencing ownership of shares of Merger Sub
common stock will evidence ownership of such shares of common stock of the
Surviving Corporation.
(b) Company. Each share of Company Common Stock that is
issued and outstanding immediately prior to the Effective Time will, by virtue
of the Merger, and without further action on the part of any holder thereof, be
automatically converted into the right to receive, and shall be exchangeable for
(subject to Sections 1.2(d), 1.2(f) and 1.3), (i) at the Effective Time, that
number of fully paid and nonassessable Parent Ordinary Shares obtained by
multiplying each such share of Company Common Stock by the Company Exchange
Ratio (the "COMPANY NUMBER") and then subtracting from the Company Number the
Company Hold-Back Number (determined in accordance with Section 1.2(c) hereof),
and (ii) on the first annual anniversary of the Closing Date (the "RELEASE
DATE"), the Company Hold-Back Number of Parent Ordinary Shares, subject to
Section 10.3 hereof; provided, however, that each share of Company Common Stock
that is held in the treasury of Company shall not be so converted but shall be
cancelled and retrieved and no consideration shall be delivered in exchange
therefor. The Parent Ordinary Shares will be allotted and issued to the
stockholders of Company (collectively, the "COMPANY STOCKHOLDERS"), in each case
in exchange for all of the issued and outstanding Company Capital Stock (as
defined below).
(c) Definitions. The "COMPANY EXCHANGE RATIO" equals the
quotient obtained by dividing (i) 8,331,893 Parent Ordinary Shares, less the
number of Parent Ordinary Shares necessary to equal the aggregate cost of any
Refinancing Fees (as defined in Section 4.1(c)(i)) payable pursuant to this
transaction (to be determined by dividing any Refinancing Fees by the Parent
Average Price Per Share, rounded down to the nearest whole Parent Ordinary
Share), divided by (ii) the total number of shares of Company Capital Stock as
of the Effective Time; provided, however, that the quotient shall not be reduced
by such Refinancing Fees if the Closing has not occurred by August 31, 2000 due
to a failure of Parent to fulfill any obligation under this Agreement and such
failure is the cause or results in the failure of the Closing to occur on or
prior to August 31, 2000. The term "PARENT AVERAGE PRICE PER SHARE" equals the
average of the closing price per share of Parent Ordinary Shares (in U.S.
dollars) as quoted on the Nasdaq National Market (or such other exchange or
quotation system on which Parent Ordinary Shares are then traded or quoted) and
reported in The Wall Street Journal averaged over the twenty (20) trading days
prior to the date that is five (5) trading days before the Closing Date. The
term "COMPANY CAPITAL STOCK" means the outstanding shares of Company Common
Stock and any other classes and series of common and preferred stock of Company,
in each case on a fully diluted, as-converted basis and as of the Effective
Time, including, without limitation or
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duplication, all shares of such stock that are issuable upon the exercise of any
outstanding convertible stock, options, warrants and other rights thereto
(whether or not such rights are vested or exercisable as of the Effective Time).
Subject to adjustment pursuant to Section 1.2(d) below, the "COMPANY HOLD-BACK
NUMBER" equals ten percent (10%) of the Company Number. The term "COMPANY
HOLD-BACK SHARES" means the total number of Parent Ordinary Shares to be issued
to Company Stockholders on the Release Date pursuant to Section 1.2(b), reduced
as, and to the extent, set forth in Section 10.3.
(d) Adjustments for Capital Changes. If, between the date
hereof and the Effective Time (as to the Parent Ordinary Shares to be issued at
the Effective Time), or between the date hereof and the Release Date (as to the
Hold-Back Shares), Parent (i) recapitalizes either through a split-up of its
outstanding shares into a greater number of shares, or through a combination of
its outstanding shares into a lesser number of shares, (ii) reorganizes,
reclassifies or otherwise changes its outstanding shares into the same or a
different number of shares of other classes (other than through a split-up or
combination of shares provided for in the previous clause), or (iii) declares a
dividend on its outstanding shares payable in shares or securities convertible
into shares, the calculation of the Company Exchange Ratio will be adjusted
appropriately.
(e) Continuation Of Vesting And Repurchase Rights. If any
shares of Company Capital Stock that are outstanding immediately prior to the
Effective Time are unvested or are subject to a repurchase option, risk of
forfeiture or other condition providing that such shares may be forfeited or
repurchased by Company, upon any termination of the stockholders' employment,
directorship or other relationship with Company (and/or any affiliate of
Company), as the case may be, under the terms of any restricted stock purchase
agreement or other agreement with Company that does not by its terms provide
that such repurchase option, risk of forfeiture or other condition lapses upon
consummation of the Merger, then the Parent Ordinary Shares issued upon the
conversion of such shares of Company Capital Stock in the Merger will, subject
to compliance with applicable laws, continue to be unvested and subject to the
same repurchase options, risks of forfeiture or other conditions following the
Effective Time, and the certificates representing such Parent Ordinary Shares
may accordingly be marked with appropriate legends noting such repurchase
options, risks of forfeiture or other conditions. Company shall take all actions
that may be necessary to ensure that, from and after the Effective Time, Parent
is entitled to exercise any such repurchase option or other right set forth in
any such restricted stock purchase agreement or other agreement.
(f) Fractional Shares. No fractional Parent Ordinary
Shares will be issued in connection with the Merger, but in lieu thereof, the
holder of any shares of Company Common Stock who would otherwise be entitled to
receive a fraction of a Parent Ordinary Share (after aggregating all fractional
Parent Ordinary Shares that otherwise would be received by such holder) will
receive from Parent, promptly after the Effective Time or the Release Date (as
the case may be), an amount of cash equal to the last sale price on the Nasdaq
National Market of Parent Ordinary Shares on the last trading day prior to the
Effective Time (the "CONVERSION PRICE"), multiplied by the fraction of a Parent
Ordinary Share to which such holder would otherwise be entitled at the Effective
Time or the Release Date (as the case may be).
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1.3 Dissenting Shares. Holders of Dissenting Shares (if any) will
be entitled to their appraisal rights under Section 262 of the Delaware General
Corporation Law ("DELAWARE LAW") with respect to such Dissenting Shares and such
Dissenting Shares will not be converted into Parent Ordinary Shares in the
Merger; provided, however, that nothing in this Section 1.3 is intended to
remove, release, waive, alter or effect any of the conditions to Parent's and
Merger Sub's obligations to consummate the Merger set forth in Section 8.11, or
any other provision of this Agreement relating to Dissenting Shares. Shares of
Company Common Stock that are outstanding immediately prior to the Effective
Time of the Merger and with respect to which dissenting stockholders' rights of
appraisal under Delaware Law have either (a) not been properly exercised and
perfected or (b) with the consent of Company, been withdrawn, will, when such
dissenting stockholders' rights can no longer be legally exercised under
Delaware Law, be converted into Parent Ordinary Shares as provided in Section
1.2(b). "DISSENTING SHARES" means any shares of Company Capital Stock that (i)
are outstanding immediately prior to the Effective Time and (ii) with respect to
which dissenters' rights to obtain payment for such dissenting shares in
accordance with Section 262 of Delaware Law have been duly and properly
exercised and perfected in connection with the Merger.
1.4 Company Stock Options.
(a) At the Effective Time, each of the then outstanding
Company Options shall by virtue of the Merger, and without any further action on
the part of any holder thereof, be assumed by Parent and converted into an
option to purchase that number of Parent Ordinary Shares (a "PARENT OPTION")
obtained by multiplying each share of Company Common Stock in the relevant
Company Option by the Company Exchange Ratio. If the foregoing calculation
results in a Company Option being exercisable for a fraction of a Parent
Ordinary Share, then the number of Parent Ordinary Shares subject to such option
shall be rounded down to the nearest whole number of shares. The exercise price
of each Parent Option shall be equal to the exercise price of the Company Option
from which such Parent Option was converted divided by the Company Exchange
Ratio, rounded up to the nearest whole cent, provided that if such calculation
would result in the exercise price of any Parent Option being less than the par
value of a Parent Ordinary Share, the exercise price shall be the par value of
such Parent Ordinary Share. Except as otherwise set forth in this Section 1.4,
the term and vesting schedule, status as an "INCENTIVE STOCK OPTION" under
Section 422 of the Code, if applicable, and all the terms and conditions of
Company Options will, to the extent permitted by law, be unchanged. An
optionholder's continuous employment with Company shall be credited as
employment with Parent for purposes of vesting of the Parent Options. Other than
Company Options that shall become vested and exercisable pursuant to
acceleration provisions not entered into in contemplation of the Merger, no
Company Options shall become vested or exercisable solely as a result of the
Merger. Company and Parent will take or cause to be taken, all actions that are
necessary, proper, or advisable under the Stock Plans to make effective the
transactions contemplated by this Section 1.4. "COMPANY OPTIONS" means any
option or warrant granted and not exercised or expired, to a current or former
employee, director or independent contractor of Company or any of its
subsidiaries or any predecessor thereof or to any other party to purchase
Company Common Stock pursuant to any stock option, warrant, stock bonus, stock
award or stock purchase plan, program or arrangement of Company or any of its
subsidiaries or any predecessor thereof (collectively, the "STOCK PLANS") or any
other contract or agreement entered into by Company or any of its subsidiaries.
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(b) Parent shall take all corporate action necessary to
reserve for issuance a sufficient number of Parent Ordinary Shares for delivery
pursuant to the terms set forth in this Section 1.4. Parent shall promptly cause
the Parent Ordinary Shares issuable upon exercise of the assumed Company Options
to be registered, or to be issued pursuant to an effective registration
statement on Form S-8 (or successor form) promulgated by the U.S. Securities and
Exchange Commission ("SEC") under the Securities Act of 1933, as amended (the
"1933 ACT") and shall use reasonable efforts to maintain the effectiveness of
such registration statement or registration statements for so long as such
Parent Options remain outstanding and Parent Ordinary Shares are registered
under the Securities Exchange Act of 1934, as amended (the "1934 ACT").
Notwithstanding the foregoing, Parent shall not be obligated to register or
maintain the registration under the 1933 Act of the issuance of any Parent
Ordinary Shares that are subject to a Parent Option held by a person who is
ineligible to have such person's securities registered on Form S-8 (or successor
form).
1.5 Effects of the Merger. At the Effective Time: (a) the
separate existence of Merger Sub will cease and Merger Sub will be merged with
and into Company and Company will be the surviving corporation in the Merger
(the "SURVIVING CORPORATION") pursuant to the terms of the Certificate of
Merger; (b) the Certificate of Incorporation and Bylaws of Merger Sub will
continue unchanged and be the Certificate of Incorporation and Bylaws of the
Surviving Corporation; (c) each share of Company Common Stock outstanding
immediately prior to the Effective Time will be converted into the right to
receive, and shall be exchangeable for Parent Ordinary Shares as provided in
Section 1.2(b) and subject to Section 1.3; (d) the directors and executive
officers of Merger Sub will become the directors and executive officers of the
Surviving Corporation; (e) the Surviving Corporation will become a wholly-owned
subsidiary of Parent; and (f) the Merger will, at and after the Effective Time,
have all of the effects provided by applicable law.
1.6 Further Assurances. Company agrees that if, at any time after
the Effective Time, Parent considers or is advised that any further deeds,
assignments or assurances are reasonably necessary or desirable to vest,
perfect, confirm or continue in the Surviving Corporation, Merger Sub or Parent,
title to any property or rights of Company as provided herein, Parent and any of
its officers are hereby authorized by Company to execute and deliver all such
proper deeds, assignments and assurances and do all other things necessary or
desirable to vest, perfect, confirm or continue title to such property or rights
in the Surviving Corporation, Merger Sub or Parent, and otherwise to carry out
the purposes of this Agreement, in the name of Company or otherwise. The parties
further agree that, upon Parent's request, the parties will amend this Agreement
to cause Company to merge into Merger Sub, or to cause Company to merge into a
different direct or indirect subsidiary of Parent, provided that such amendment
does not adversely affect the nature of the Merger as a non-taxable
reorganization under the Code.
1.7 Securities Law Issues; Registration Rights. Based in part on
the representations of Company Stockholders made in the Investment
Representation Letters, the Parent Ordinary Shares to be issued in the Merger
will be issued pursuant to an exemption from registration under Section 4(2) of
the 1933 Act and/or Regulation D promulgated under the 1933 Act and exemptions
from qualification under applicable state securities laws. Parent and Company
Stockholders will enter into the Registration Rights Agreement in the form of
Exhibit D with respect to the Parent Ordinary Shares to be issued to Company
Stockholders.
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1.8 Tax-Free Reorganization. The parties intend that the Merger
shall constitute a non-taxable reorganization within the meaning of Section
368(a)(1)(B) of the Code.
1.9 Pooling Accounting. The parties intend that the Merger be
treated as a pooling-of-interests transaction for financial accounting purposes.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as set forth in the Disclosure Schedule attached hereto
(which, subject to Section 11.17, shall specifically reference the Sections of
this Agreement to which the specific items of disclosure therein constitute an
exception), and subject to the limitations of liability set forth in Section
10.2, Company hereby represents and warrants that:
2.1 Organization and Good Standing; Subsidiaries. Company is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, has the corporate power and authority to own, operate
and lease its properties and to carry on its business as now conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction where the character of its properties owned or
leased or the nature of its activities make such qualification necessary (each
such jurisdiction being listed on Schedule 2.1), except to the extent that any
such failure to qualify would not individually or in the aggregate have a
Material Adverse Effect (as defined in Section 2.5).
2.2 Power, Authorization and Validity.
(a) Company has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement and all
agreements to which Company is or will be a party that are required to be
executed pursuant to this Agreement (the "COMPANY ANCILLARY AGREEMENTS"). This
Agreement and the Company Ancillary Agreements have been duly and validly
approved by Company.
(b) No filing, authorization, consent or approval,
governmental or otherwise, or filing with any governmental authority or court is
necessary to enable Company to enter into, and to perform their respective
obligations under, this Agreement, the Company Ancillary Agreements except for
(i) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware; (ii) such filings and notifications as may be required to be
made by Company in connection with the Merger under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT") and the
expiration of applicable waiting periods under the HSR Act; and (iii) consents
required under contracts disclosed in Schedule 2.5.
(c) This Agreement and the Company Ancillary Agreements
are, or when executed by Company will be, valid and binding obligations of
Company enforceable against Company in accordance with their respective terms,
subject only to the effect, if any, of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (iii) the enforceability of provisions requiring indemnification in
connection with the offering, issuance or sale of securities; provided, however,
that the Company Ancillary Agreements will not be effective until the date
provided for therein.
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2.3 Capitalization.
(a) Authorized/Outstanding Capital Stock of Company. The
authorized capital stock of Company consists solely of 33,805,000 shares of
Company Common Stock and 1,000,000 shares of preferred stock. A total of
7,327,565 shares of Class A Common Stock and a total of 195,000 shares of Class
B Common Stock are issued and outstanding as of the date of this Agreement, all
of which are held of record and owned by Company Stockholders on the date of
this Agreement. A total of 37,508 shares of Series A Preferred Stock, par value
$0.01 per share, 12,000 shares of Series B Preferred Stock, par value $0.01 per
share, 4,680 shares of Series C Preferred Stock, par value $0.01 per share, and
18,000 shares of Series D Preferred Stock, par value $0.01 per share (together
with the Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, the "COMPANY PREFERRED STOCK"), are issued and outstanding as
of the date of this Agreement, all of which are held of record and owned by
Company Stockholders on the date of this Agreement. The numbers of issued and
outstanding shares of Company Common Stock and Company Preferred Stock held by
each of the Company Stockholders are set forth in Schedule 2.3(a) to this
Agreement. All issued and outstanding shares of Company Preferred Stock (except
the Series C Preferred Stock which shall be contribution to the capital of
Company at or prior to the Closing) shall be converted into Company Common Stock
immediately prior to the Effective Time, in accordance with Company's
Certificate of Incorporation, as currently in effect. No equity securities of
Company shall be issued and outstanding at the Effective Time other than Company
Common Stock and outstanding Company Options disclosed in Schedule 2.3(b). All
issued and outstanding shares of Company Capital Stock have been duly authorized
and validly issued, are fully paid and nonassessable, are not subject to any
right of rescission and have been offered, issued, sold and delivered by Company
in compliance with all requirements of applicable laws. There is no liability
for dividends accrued and unpaid by Company. The vote required to approve this
Agreement, the Merger and the transactions contemplated hereby is a majority of
the Common Stock and Preferred Stock, voting together.
(b) Options/Rights. Company has reserved an aggregate of
3,500,000 shares of Company Common Stock for issuance pursuant to the Stock
Plans (including shares subject to outstanding Company Options). A total of
2,164,531 shares of Company Common Stock are subject to Company Options as of
the date of this Agreement and will be subject to outstanding options as of the
Closing Date, subject to the exercise of outstanding Company Options. Schedule
2.3(b) sets forth for each holder of Company Options (i) the name of such
holder, (ii) the exercise price of the Company Options, (iii) the vesting
schedule for the Company Options, and (iv) whether the exercisability of the
Company Options will be accelerated in any way by the transactions contemplated
by this Agreement and the extent of acceleration, if any. The Merger will not
result in the termination of any Company Options. Except for Company Options and
the conversion rights of the Company Preferred Stock, there are no stock
appreciation rights, options, warrants, calls, rights, commitments, conversion
privileges or preemptive or other rights or agreements outstanding to purchase
or otherwise acquire any shares of Company Capital Stock or any securities or
debt convertible into or exchangeable for Company Capital Stock or obligating
Company to grant, extend or enter into any such option, warrant, call,
commitment, conversion privileges or preemptive or other right or agreement.
There are no voting agreements, registration rights, rights of first refusal,
preemptive rights, co-sale rights, or other restrictions applicable to any
outstanding securities of Company.
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2.4 Subsidiaries. Except as set forth in Schedule 2.4, Company
has no Subsidiaries (as defined below) or any equity interest, direct or
indirect, in, or loans to, any corporation, partnership, joint venture, limited
liability company or other business entity. Company is not obligated to make,
nor bound by any agreement or obligation to make, any investment in or capital
contribution in or on behalf of any other entity. "SUBSIDIARY" of an entity
means a corporation or other business entity in which such entity owns, directly
or indirectly, at least a 50% interest or that is otherwise, directly or
indirectly, controlled by such entity. Each of the Subsidiaries listed on
Schedule 2.4 is duly organized, validly existing, and in good standing (or
appropriately recognized as legally in existence and active under the laws of
its jurisdiction) under the laws of the jurisdiction identified on Schedule 2.4,
and has the requisite power and authority to conduct its business as it is
presently being conducted. No other corporate proceedings on the part of any
Subsidiary of Company are necessary to authorize this Agreement and the
transactions contemplated hereby. Schedule 2.4 contains a true, correct and
complete list of all jurisdictions in which each Subsidiary of Company is
qualified to do business. Each of the Subsidiaries of Company is duly qualified
to do business and is in good standing in each jurisdiction where the character
of its properties owned or leased or the nature of its activities make such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect on such Subsidiary. Company owns of record and
beneficially all of the issued and outstanding capital or other stock of each
Subsidiary set forth on Schedule 2.4 free and clear of any encumbrances.
2.5 No Violation of Certificate of Incorporation or Existing
Agreements. Neither the execution and delivery of this Agreement nor the Company
Ancillary Agreements, as contemplated hereby, nor the consummation of the
transactions provided for herein, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, breach, impairment or
violation of, (a) any provision of the Certificate of Incorporation or Bylaws of
Company, as currently in effect, (b) any material instrument, contract,
agreement, permit, mortgage or license to which Company or any of its
Subsidiaries is a party or by which Company or any of its Subsidiaries or any of
their assets is bound, or (c) any judgment, writ, decree, order, statute, rule
or regulation applicable to Company or any of its Subsidiaries or any of their
assets or properties. Except as set forth in Schedule 2.5, the Merger will not
require the consent of any third party and will not have any Material Adverse
Effect (as defined below) upon any such rights, licenses, franchises, leases or
agreements pursuant to the terms of those agreements. "MATERIAL ADVERSE EFFECT"
or "MATERIAL ADVERSE CHANGE" with respect to an entity means any circumstance,
change in or effect on such entity and its Subsidiaries, taken as a whole, that,
individually or in aggregate with any other circumstances, changes in, or
effects on such entity and its Subsidiaries taken as a whole, (i) is or is
reasonably likely to be materially adverse to the financial condition, business,
properties or results of operations of such entity and its Subsidiaries, taken
as a whole, or (ii) is reasonably likely to adversely effect the ability of such
entity to consummate the transactions contemplated hereby, except to the extent
that any such circumstance, change in or effect on such entity results solely
from changes in the trading price for such entity's capital stock.
2.6 Litigation. There is no action or proceeding pending or, to
the Company's knowledge (as defined below), investigation pending or action,
proceeding or investigation threatened against Company or any of its
Subsidiaries before any court or administrative agency that if determined
adversely to Company or such Subsidiary, as applicable, may reasonably be
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expected to have a Material Adverse Effect on Company and its Subsidiaries,
taken as a whole, or in which the adverse party or parties seek to recover in
excess of $250,000 against Company or any of its Subsidiaries. To the Company's
knowledge, there is no basis for any person, firm, corporation or entity to
assert a claim against Company (or Parent, Merger Sub or the Surviving
Corporation as a successor in interest to Company) based upon: (a) ownership or
rights to ownership of any shares of Company Capital Stock, (b) any rights as a
securities holder of Company, including, without limitation, any option or other
right to acquire any shares of Company Capital Stock, any preemptive rights or
any rights to notice or to vote, or (c) any rights under any agreement between
Company and any securities holder or former securities holder in such holder's
capacity as such. "KNOWLEDGE" or any derivation thereof, when used with
reference to (a) an individual, means the actual knowledge after due inquiry of
such individual, or (b) a person that is not an individual, means the collective
actual knowledge of the officers and directors of such party after due inquiry
of such officers and directors of such party.
2.7 Company Financial Statements. Company has delivered to Parent
its audited balance sheets as of October 2, 1999 and its audited income
statement and statement of cash flows for the years then ended, and its
unaudited balance sheet as of July 1, 2000 and its unaudited income statement
and statement of cash flows for the nine-month period then ended (collectively,
the "FINANCIAL STATEMENTS"), a copy of each of which is included as Schedule
2.7. The Financial Statements (a) are in accordance with the books and records
of Company and (b) fairly and accurately represent the financial condition of
Company at the respective dates specified therein and the results of operations
for the respective periods specified therein in conformity with generally
accepted accounting principles ("GAAP") applied on a consistent basis, except,
in the case of unaudited Financial Statements, for the absence of notes and
immaterial year-end adjustments. Company has not incurred any debt, liability or
obligation of any nature, whether accrued, absolute or contingent, and whether
due or to become due, except for those reflected in the Financial Statements or
those incurred after July 1, 2000 (the "BALANCE SHEET DATE") in the ordinary
course of Company's business, consistent with past practice.
2.8 Company Financial Projections. Company has delivered to
Parent financial projections for each quarter in the period from July 2, 2000 to
March 31, 2001 (the "FINANCIAL PROJECTIONS"), a copy of each of which is
included as Schedule 2.8. The Financial Projections have been prepared in good
faith by Company based upon reasonable assumptions at the time made and
represent Company's best good faith estimates at the time made as to its future
results of operations.
2.9 Taxes. Company and each of its Subsidiaries has filed all tax
and information returns required to be filed prior to the date of this
Agreement, has paid all taxes required to be paid in respect of all periods
prior to the date hereof for which returns have been filed, has made all
necessary estimated tax payments, and has no liability for taxes in excess of
the amount so paid, except to the extent adequate reserves have been established
in the Financial Statements or, with respect to taxes that are not yet due on or
prior to July 1, 2000 and which have become due thereafter, adequate reserves
have been established by Company prior to the Closing. Neither Company nor any
of its Subsidiaries is delinquent in the payment of any tax or in the filing of
any tax returns, and no deficiencies for any tax have been threatened, claimed,
proposed or assessed which have not been settled or paid except to the extent
adequate reserves have been established in the Financial Statements. As of the
date of this Agreement, no tax
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return of Company or any Subsidiary thereof has ever been audited by the
Internal Revenue Service or any other taxing agency or authority. For the
purposes of this Section 2.9, the terms "TAX" and "TAXES" include all income,
gains, franchise, excise, property, sales, use, employment, license, payroll,
services, occupation, recording, value added or transfer taxes, governmental
charges, fees, levies or assessments (whether payable directly or by
withholding), and, with respect to such taxes, any estimated tax, interest and
penalties or additions to tax and interest on such penalties and additions to
tax. Neither Company nor any of its Subsidiaries is obligated to make any excess
parachute payment, as defined in Section 280G(b)(1) of the Code, nor will any
excess parachute payment be deemed to have occurred as a result of or arising
out of the Merger to the extent Section 280G of the Code is applicable to
Company.
2.10 Title to Properties; Condition of Equipment and Property.
Company and its Subsidiaries have good and marketable title to all of the assets
used in their business or shown on the balance sheet as of the Balance Sheet
Date included in the Financial Statements, free and clear of all liens, charges,
encumbrances or restrictions (other than for taxes not yet due and payable and
Permitted Liens as defined below), other than (a) such assets, set forth on
Schedule 2.10, as were sold in the ordinary course of business consistent with
past practice since the Balance Sheet Date, (b) assets sold after the date of
this Agreement in compliance with Section 4.1 hereof, and (c) assets which are
subject to capitalized leases or otherwise leased by Company or one of its
Subsidiaries. In the opinion of Company, such assets are sufficient for the
continued operation of the business of Company and its Subsidiaries consistent
with current practice. "PERMITTED LIENS" means any lien, mortgage, encumbrance
or restriction which does not materially detract from the value or materially
interfere with the use, as currently utilized, of the properties subject thereto
or affected thereby or otherwise materially impair the business operations being
conducted thereon or is listed on Schedule 2.10 or liens incurred after the date
of this Agreement that are permitted under Section 4.1(c)(iii). All leases of
real or personal property to which Company or any of its Subsidiaries is a party
are fully effective and afford Company or a Subsidiary thereof peaceful and
undisturbed possession of the subject matter of the lease in all material
respects. Neither Company nor any Subsidiary thereof is in material violation of
any zoning, building, safety or environmental ordinance, regulation or
requirement or other law or regulation applicable to the operation of owned or
leased properties, and Company has not received any notice of such violation
with which it has not complied in all material respects. All of the buildings
and fixtures on owned real property were constructed in accordance with all
applicable laws and Company or a Subsidiary thereof has adequate rights of
ingress and egress into the owned real property for the operation of its
business. The machinery and equipment (the "EQUIPMENT") owned or leased by
Company and its Subsidiaries are (a) suitable for the uses to which they are
currently employed, (b) in generally good operating condition, normal wear and
tear excepted, (c) regularly and properly maintained, and (d) not obsolete or in
need of renewal or replacement, except for renewal or replacement in the
ordinary course of business consistent with past practice.
2.11 Absence of Certain Changes. Since the Balance Sheet Date,
Company and its Subsidiaries have carried on their business in the ordinary
course substantially in accordance with the procedures and practices in effect
on the Balance Sheet Date, and since the Balance Sheet Date there has not been
with respect to Company or any of its Subsidiaries, (except, with respect to
Section 2.11 (b), (c), (d), (k) or (l), actions that occur after the date of
this Agreement that are permitted under Section 4.1(c)):
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(a) any change in the financial condition, properties,
assets, liabilities, business or results of operations, which change by itself
or in conjunction with all other such changes, whether or not arising in the
ordinary course of business consistent with past practice, has had or can
reasonably be expected to have a Material Adverse Effect on Company and its
Subsidiaries taken as a whole or on their ability to conduct their business as
presently conducted, or that is reasonably likely to impede the execution,
delivery or performance by Company of this Agreement and/or the Company
Ancillary Agreements;
(b) any contingent liability incurred as guarantor or
surety with respect to the obligations of others, except for the endorsement of
checks and other investments in the ordinary course of business not in excess of
$250,000 individually or $500,000 in the aggregate;
(c) any mortgage, encumbrance or lien placed on any of its
properties or granted with respect to any of its assets which exceeds $250,000;
(d) any purchase or sale or other disposition, or any
agreement or other arrangement for the purchase, sale or other disposition, of
any of the properties or assets of Company or any of its Subsidiaries other than
sales of inventory and purchase of raw materials in the ordinary course of
business consistent with past practice;
(e) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the properties, assets
or business of Company or its Subsidiaries;
(f) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in respect of, the capital
stock of Company, any split, stock dividend, combination or recapitalization of
the capital stock of Company or any direct or indirect redemption, purchase or
other acquisition by Company of its capital stock;
(g) any material labor dispute or claim of unfair labor
practices;
(h) any significant change with respect to employees of
Company and its Subsidiaries with the title of vice president (or any position
senior thereto) or any employee who is the general manager (or in a position
with similar responsibilities) of a facility ("MANAGEMENT EMPLOYEES");
(i) any material modification of the benefits payable or
to become payable to any of Company's and its Subsidiaries' directors or
employees, or any increase in the compensation payable or to become payable to
any of Company's and its Subsidiaries' directors or employees, or any bonus
payment or arrangement made to or with any of such directors or employees,
except (1) in the case of employees who are not officers or directors of
Company, salary increases (not in excess of 10% for any individual) and/or bonus
payments in the ordinary course of business consistent with past practice, and
(2) any changes in any law or regulation governing the foregoing;
(j) any increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement (including, but
not limited to, the granting of stock options, restricted stock awards or stock
appreciation rights) made to, for or with any of
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Company's or its Subsidiaries' employees except with respect to any changes in
any law or regulation governing the foregoing;
(k) any making of any loan, advance or capital
contribution to, or investment in, any person other than (i) travel loans or
advances made in the ordinary course of business consistent with past practice
of Company and its Subsidiaries and (ii) other loans and advances to persons who
are not officers, directors, stockholders or affiliates of the Company in an
aggregate amount which does not exceed $250,000 outstanding at any time;
(l) any entry into, amendment of, relinquishment,
termination or nonrenewal by Company or any of its Subsidiaries of any contract,
lease transaction, commitment or other right or obligation other than in the
ordinary course of business consistent with past practice, but in no event
involving obligations (contingent or otherwise) of, or payments to Company or
any of its Subsidiaries in excess of $250,000 individually or $500,000 in the
aggregate other than purchases of raw materials and sales of products and
inventory in the ordinary course of business;
(m) any payment or discharge of a material lien or
liability thereof, which lien or liability was not either (i) shown on the
balance sheet as of the Balance Sheet Date included in the Financial Statements
or (ii) incurred in the ordinary course of business consistent with past
practice after the Balance Sheet Date; or
(n) any obligation or liability incurred by Company to any
of its officers, directors or stockholders, except normal compensation and
expense allowances payable to officers in the ordinary course of business or
agreements entered into with officers disclosed to Parent in Schedule 2.12 and
except normal expense allowances payable to directors in the ordinary course of
business.
2.12 Agreements and Commitments. Except as set forth on Schedule
2.12 and except for any agreement that is permitted by Section 4.1(c) and
entered into after the date of this Agreement, neither Company nor any of its
Subsidiaries is a party or subject to any oral or written executory agreement,
contract, obligation or commitment that is material to Company or its
Subsidiaries, its financial condition or business, including but not limited to
the following:
(a) any contract, commitment, letter agreement, quotation
or purchase order providing for payments by or to Company or its Subsidiaries
with a Significant Customer (as defined in Section 2.24) or a Significant
Supplier (as defined in Section 2.25);
(b) any license agreement under which Company or its
Subsidiaries is licensor; or under which Company or its Subsidiaries is licensee
(except for standard "SHRINK WRAP" licenses for off-the-shelf software
products);
(c) any agreement by Company or its Subsidiaries to
encumber, transfer or sell rights in or with respect to any Intellectual
Property (as defined in Section 2.13 below);
(d) any agreement for the sale or lease of real or
personal property other than sales of inventory in the ordinary course of
business consistent with past practice;
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(e) any dealer, distributor, sales representative,
original equipment manufacturer, value added remarketer, volume purchase
agreement or other agreement for the distribution or sale of Company's or its
Subsidiaries' products (other than individual purchase orders in the ordinary
course of business consistent with past practice);
(f) any franchise agreement;
(g) any stock redemption or purchase agreement;
(h) any joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other persons or the payment
of royalties to any other person;
(i) any instrument evidencing indebtedness for borrowed
money or guarantees thereof;
(j) any contract containing covenants purporting to limit
Company's freedom to compete in any line of business in any geographic area;
(k) any agreement of indemnification other than standard
warranties in connection with the sale of products and/or services in the
ordinary course of business consistent with past practice;
(l) any agreement, contract or commitment relating to
capital expenditures and which involves future payments in excess of $250,000;
(m) any agreement, contract or commitment relating to the
disposition or acquisition of any assets (other than Inventory, as defined in
Section 2.26) by Company or its Subsidiaries or any Intellectual Property, which
involves payments individually in excess of $250,000 or in the aggregate in
excess of $500,000 in the ordinary course of business consistent with past
practice; or
(n) any purchase order or contract for the purchase of raw
materials which involves payments individually in excess of $250,000 or in the
aggregate in excess of $500,000 in the ordinary course of business consistent
with past practice.
All agreements, contracts, obligations and commitments
listed in Schedules 2.12, 2.13 and 2.16. (collectively "MATERIAL AGREEMENTS"),
are valid and in full force and effect. Neither the Company nor any of its
Subsidiaries is in breach of or default under any material term of any Material
Agreement, nor will Company or any of its Subsidiaries be in breach of or
default under any such term after giving effect to the Merger. To the knowledge
of the Company, as of the date of this Agreement, no other party is in breach of
or default under any material term of any Material Agreement, nor will any other
party be in breach of or default under any such term after giving effect to the
Merger. To the knowledge of Company, no party to any such Material Agreement
intends to cancel, withdraw, modify or amend such Material Agreement. A true and
complete copy of each Material Agreement has been delivered to Parent or
Parent's counsel.
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Neither Company nor any of its Subsidiaries is a party to
any Material Agreement or any other agreement, contract or instrument with any
customer, supplier, landlord or labor union or association that (i) contains any
provision that is or could reasonably be expected to become materially
burdensome to Company or such Subsidiary, other than provisions that are in the
ordinary course of Company's businesses and are consistent with industry
practice; (ii) provides for the reduction of prices charged by Company or any of
its Subsidiaries to any Significant Customer (as defined in Section 2.24) for
its products or services other than price reductions that are substantially
proportionate to reductions in the related costs (but including, without
limitation, any "MOST FAVORED CUSTOMER" provisions); (iii) provides for any
increases in the prices to be paid by Company or any of its Subsidiaries to any
Significant Supplier (as defined in Section 2.25) for any products or services;
or (iv) provides for any warranty or similar obligations with respect to
products or services other than an obligation to repair or replace products in
the event of defective workmanship or materials provided by Company or any of
its Subsidiaries.
2.13 Intellectual Property. Company and its Subsidiaries own all
right, title and interest in, or have the right to use, sell or license all
patent applications, patents, trademark applications, trademarks, service marks,
trade names, copyright applications, copyrights, trade secrets, know-how,
technology, customer lists, proprietary processes and formulae, all source and
object code, algorithms, inventions, development tools and all documentation and
media constituting, describing or relating to the above, including, without
limitation, manuals, memoranda and records and other intellectual property and
proprietary rights used in or reasonably necessary or required for the conduct
of their respective business as presently conducted ("INTELLECTUAL PROPERTY").
Set forth on Schedule 2.13 is a true and complete list of all copyright and
trademark registrations and applications and all patents and patent applications
for Intellectual Property owned by Company or its Subsidiaries. Company is not
aware of any material loss, cancellation, termination or expiration of any such
registration or patent. The business of Company and its Subsidiaries does not
cause Company or any of its Subsidiaries to infringe or violate any of the
patents, trademarks, service marks, trade names, mask works, copyrights, trade
secrets, proprietary rights or other intellectual property of any other person,
and Company has not received any written or oral claim or notice of infringement
or potential infringement of the intellectual property of any other person.
There are no royalties, fees or other payments payable by Company or any of its
Subsidiaries to any person by reason of the ownership, use, license, sale or
disposition of the Intellectual Property. Neither the manufacture, marketing,
sale or intended use of any product currently licensed or sold by Company or any
of its Subsidiaries or currently under development by Company or any of its
Subsidiaries violates any license or agreement between Company or any of its
Subsidiaries and any third party. Company has taken reasonable and practicable
steps designed to safeguard and maintain the secrecy and confidentiality of, and
its proprietary rights in, all material Intellectual Property. Company is not
aware of any infringement of any Intellectual Property by any third party.
2.14 Compliance with Laws. Company and each of its Subsidiaries
is in compliance with and will be as of the Closing Date in compliance in all
material respects with all applicable laws, ordinances, regulations and rules,
and all orders, writs, injunctions, awards, judgments and decrees, applicable to
Company or any of its Subsidiaries or to any of their Subsidiaries. Each of
Company and its Subsidiaries has received all material permits and approvals
from, and has made all filings with, third parties, including government
agencies and
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authorities, that are necessary to the conduct of its business as presently
conducted, and there exists no current default under or violation of any such
permit or approval. Schedule 2.14 includes a summary of all violations of, or
conflicts with, any applicable statute, law, rule, regulation, ruling, order,
judgment or decree, and all allegations of any such violations, of which Company
or any of its Subsidiaries has received notice from each such governmental
entity since the Company's inception.
2.15 Certain Transactions and Agreements. No person who is an
officer, director of Company or any Subsidiary thereof, or a beneficial owner of
more than five percent of the capital stock of the Company on a fully-diluted,
as converted basis, and no member of any officer's, director's or five percent
stockholder's immediate family or affiliate of any such five percent
stockholder, (a) has any direct or indirect ownership interest in or any
employment or consulting agreement with any firm or corporation that competes
with Company or Parent (except with respect to any interest held by any
institutional investor in publicly traded securities held for investment
purposes), (b) is directly or indirectly interested in any material contract or
informal arrangement with Company or any Subsidiary thereof, except for
compensation for services as an officer, director or employee of Company or any
Subsidiary thereof as listed in Schedule 2.15, (c) has any interest in any
property, real or personal, tangible or intangible, used in the business of
Company or any of its Subsidiaries, except for the normal rights of a
stockholder, or (d) has, either directly or indirectly, a material interest in:
(i) any person or entity which purchases from or sells, licenses or furnishes to
Company or any of its Subsidiaries any goods, property, technology or
intellectual or other property rights or services; or (ii) any contract or
agreement to which Company or any Subsidiary thereof is a party or by which it
may be bound or affected.
2.16 Employees.
(a) Neither Company nor any of its Subsidiaries is subject
to any collective bargaining agreements. Company and it Subsidiaries each has
good labor relations, and Company has no knowledge of any facts indicating that
the consummation of the transactions provided for herein will have a material
adverse effect on its labor relations or those of any Subsidiary, and Company
has no knowledge that any of the Management Employees, or any significant number
of other employees, intends to leave Company's employ or the employ of any of
its Subsidiaries. Between January 1, 2000 and the date of this Agreement, to
Company's knowledge, no Management Employee of Company or any of its
Subsidiaries, or significant number of other employees of Company or any of its
Subsidiaries, has given notice that such employee intends to terminate his or
her employment with Company or any Subsidiary. To the Company's knowledge, there
are no activities or proceedings of any labor union to organize any employees of
Company or any of its Subsidiaries and there are no strikes, material slowdowns,
work stoppages or lockouts, or threats thereof by or with respect to any
employees of Company. Company is in compliance in all material respects with all
applicable laws regarding employment practices, terms and conditions of
employment, and wages and hours (including without limitation, ERISA (as defined
below), the Worker Adjustment and Retraining Notification Act, as amended, or
any similar state or local law).
(b) Schedule 2.16 contains a list of all employment and
consulting agreements, pension, retirement, disability, medical, dental or other
health plans, life insurance
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or other death benefit plans, profit sharing, deferred compensation agreements,
stock, option, bonus or other incentive plans, vacation, sick, holiday or other
paid leave plans, severance plans or other similar employee benefit plans
maintained by Company and its Subsidiaries (the "EMPLOYEE PLANS"), including,
without limitation, all "EMPLOYEE BENEFIT PLANS" as defined in Section 3(3) of
the Employment Retirement Income Security Act of 1974, as amended ("ERISA").
Company has delivered true and complete copies or descriptions of all the
Employee Plans to Parent's counsel. Each of the Employee Plans and its operation
and administration are in all material respects in compliance with all
applicable laws and ordinances, orders, rules and regulations, including the
requirements of ERISA and the Code. Company has made available to Parent a true
and complete copy of, to the extent applicable, (a) the most recent annual
report (Form 5500) with respect to each Employee Plan that is subject to ERISA
reporting requirements, (b) each trust agreement related to the Employee Plans,
(c) the most recent summary plan description for each Employee Plan for which
such a description is required, (d) the most recent actuarial report relating to
any Employee Plan subject to Title IV of ERISA, and (e) the most recent United
States Internal Revenue Service determination letter issued with respect to any
Employee Plan. In addition, within the past five (5) years, neither Company nor
any of its Subsidiaries has ever been a participant in any "PROHIBITED
TRANSACTION," within the meaning of Section 406 of ERISA with respect to any
employee pension benefit plan (as defined in Section 3(2) of ERISA) which it
sponsors as employer or in which it participates as an employer, which was not
otherwise exempt pursuant to Section 408 of ERISA (including any individual
exemption granted under Section 408(a) of ERISA), or which could result in an
excise tax under the Code. No assets held under any Employee Plans will be
subject to any surrender fees or service fees upon termination other than the
normal and reasonable administrative fees associated with the termination of
benefit plans. All Employee Plans, to the extent applicable, are in material
compliance, with (a) the continuation coverage requirements of Section 4980B of
the Code and Sections 601 through 608 of ERISA, (b) the Americans with
Disabilities Act of 1990, as amended, and (c) the Family Medical Leave Act of
1993, as amended, and the regulations thereunder. All individuals who, pursuant
to the terms of any Employee Plans, are entitled to participate in the Employee
Plans, currently are participating in such Employee Plans or have been offered
an opportunity to do so. No employee of Company or any of its Subsidiaries, and
no person subject to any health plan of Company or any of its Subsidiaries has
made medical claims through such health plan during the twelve (12) months
preceding the date hereof for more than $250,000 or more in the aggregate for
which Company is responsible, or has any catastrophic illness.
(c) No employee of Company or any of its Subsidiaries is
in material violation of any term of any employment contract or any other
contract or agreement, or any restrictive covenant, relating to the right of any
such employee to be employed by Company or any Subsidiary or to use trade
secrets or proprietary information of others, and the employment of any employee
of Company or any Subsidiary does not subject it to any material liability to
any third party.
(d) Except as set forth in Schedule 2.16, neither Company
nor any of its Subsidiaries is a party to any (i) agreement with any of its
executive officer or other key employee of (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving Company in the nature of any of the transactions
contemplated by this Agreement, (B) providing any term of employment or
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compensation guarantee, or (C) providing severance benefits or other benefits
after the termination of employment of such employee regardless of the reason
for such termination of employment, or (ii) agreement or plan, including,
without limitation, any stock option plan, stock appreciation rights plan or
stock purchase plan, any of the benefits of which will be materially increased,
or the vesting of benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Neither Company nor any of its Subsidiaries has
any obligations to pay any amounts, or provide any benefits, to any former
employees or officers, other than obligations for which the Company has
established a reserve on its balance sheet as of July 1, 2000 included in the
Financial Statements, which reserve is in an amount equal to the amount of such
obligations, and other than obligations pursuant to agreements entered into
after the Balance Sheet Date and disclosed on Schedule 2.11.
(e) A list of all employees and officers of Company and
its Subsidiaries and their current compensation as of the date of this Agreement
is set forth on Schedule 2.16(e).
(f) All contributions due from Company or any of its
Subsidiaries with respect to any of the Employee Plans and all employee social
security contributions have been made or accrued on the Financial Statements,
and no further contributions will be due or will have accrued thereunder as of
the Closing Date, other than contributions accrued in the ordinary course of
business consistent with past practice after the Balance Sheet Date as a result
of operations of Company and its Subsidiaries after the Balance Sheet Date, all
of which have been paid or will be paid in the ordinary course of business
consistent with past practice.
2.17 Corporate Documents. Company has provided to Parent's
counsel complete and correct copies of all documents as of the date of this
Agreement identified in the Disclosure Schedule to this Agreement including,
without limitation, the following: (a) copies of its Certificate of
Incorporation and Bylaws as currently in effect; (b) copies of its minute book
containing records of all proceedings, consents, actions and meetings of
Company's directors, committees of the board of directors and stockholders; (c)
copies of its stock ledger, journal and other records reflecting all stock
issuances and transfers and all stock option grants and agreements; (d) copies
of the Material Agreements and all amendments thereto; and (e) all material
permits, orders and consents issued by any regulatory agency with respect to
Company, or any securities of Company, and all applications for such permits,
orders and consents.
2.18 No Brokers. Neither Company nor any of its Subsidiaries is
obligated for the payment of fees or expenses of any investment banker, broker
or finder in connection with the origin, negotiation or execution of this
Agreement or in connection with any transaction provided for herein.
2.19 Disclosure. This Agreement, its exhibits and schedules, and
any of the certificates or documents to be delivered by Company to Parent and
are specifically referenced in this Agreement, taken together, 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 herein and therein, in light
of the circumstances under which such statements were made, not misleading.
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2.20 Books and Records. The books, records and accounts of
Company and its Subsidiaries (a) are in all material respects true and complete,
(b) have been maintained in accordance with reasonable business practices on a
basis consistent with prior years, (c) are stated in reasonable detail and
accurately and fairly reflect the transactions and dispositions of the assets of
Company and its Subsidiaries, and (d) accurately and fairly reflect in all
material respects the basis for the Financial Statements. Company has devised
and maintains a system of internal accounting controls sufficient to provide
reasonable assurances that (a) transactions are executed in accordance with
management's general or specific authorization; (b) transactions are recorded as
necessary (i) to permit preparation of financial statements in conformity with
GAAP, and (ii) to maintain accountability for assets; and (c) the amount
recorded for assets on the books and records of Company and its Subsidiaries is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
2.21 Insurance. Company and each of its Subsidiaries maintain
fire, casualty and liability insurance as listed on Schedule 2.21. Company and
each of its Subsidiaries has maintained such insurance coverage at all times
since the later of August 18, 1997 and in the case of a Subsidiary acquired
thereafter, the date on which it became a Subsidiary of Company. All premiums
heretofore payable under all such policies and bonds have been paid and Company
and each Subsidiary thereof is in compliance in all material respects with the
terms of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage) and all such policies are in full
force and effect. Company knows of no threatened termination of, or premium
increase with respect to, any of such policies.
2.22 Environmental, Health, and Safety Matters.
(a) Company and its predecessors and affiliates and
Subsidiaries have complied and are in compliance with all Environmental, Health,
and Safety Requirements. For purposes of this Agreement, "ENVIRONMENTAL, HEALTH,
AND SAFETY REQUIREMENTS" shall mean all applicable statutes, regulations,
ordinances and other provisions having the force or effect of applicable law,
all judicial and administrative orders and determinations, all contractual
obligations and all law concerning public health and safety, worker health and
safety, and pollution or protection of the environment, including without
limitation all those relating to the presence, use, production, generation,
handling, transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control, or cleanup
of any hazardous materials, substances or wastes, chemical substances or
mixtures, pesticides, pollutants, contaminants, toxic chemicals, petroleum
products or byproducts, asbestos, polychlorinated biphenyls, noise or radiation,
each as amended and as now or hereafter in effect.
(b) No Site is a treatment, storage or disposal facility,
as defined in and regulated under the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq., is in or ever was listed or is proposed for listing
on the National Priorities List pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Section 9601 et seq., or any
similar state list of sites requiring investigation or cleanup. "SITE" means any
of the real properties currently or previously owned, leased, used or operated
by Company, any Subsidiary of Company, any prior Subsidiary of Company, any
predecessors of Company or any entities previously owned by Company, including
all soil, subsoil, surface waters and groundwaters thereat.
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(c) Company and predecessors or affiliates have not
received any written or oral notice, report or other information regarding any
actual or alleged violation of Environmental, Health, and Safety Requirements,
or any liabilities or potential liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise), including any investigatory, remedial or
corrective obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
(d) None of the following exists at any Site: (i)
underground storage tanks, (ii) asbestos-containing material in any form or
condition, (iii) materials or equipment containing polychlorinated biphenyls, or
(iv) landfills, surface impoundments, or disposal areas.
(e) Company and its predecessors or affiliates and
Subsidiaries have not treated, stored, disposed of, arranged for or permitted
the disposal of, transported, handled, or released any substance, including
without limitation any hazardous substance, or owned or operated any property or
facility (and no such property or facility is contaminated by any such
substance) in a manner that has given or would give rise to liabilities,
including any liability for response costs, corrective action costs, personal
injury, property damage, natural resources damages or attorney fees, pursuant to
any Environmental, Health, and Safety Requirements. To Company's knowledge,
neither this Agreement nor the consummation of the transactions that are the
subject of this Agreement will result in any obligations of Company for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so called "TRANSACTION TRIGGERED" or
"RESPONSIBLE PROPERTY TRANSFER" or Environmental, Health and Safety
Requirements.
(f) Company and its predecessors or affiliates and
Subsidiaries have not either expressly or by operation of law, assumed or
undertaken any liability, including without limitation any obligation for
corrective or remedial action, of any other person or entity relating to
Environmental, Health, and Safety Requirements.
(g) To Company's knowledge, no facts, events or conditions
relating to any Site will prevent, hinder or limit continued compliance with
Environmental, Health, and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental, Health, and Safety
Requirements, or give rise to any other liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental, Health, and
Safety Requirements, including without limitation any relating to onsite or
offsite releases or threatened releases of hazardous materials, substances or
wastes, personal injury, property damage or natural resources damage.
(h) Company has provided to Parent complete copies of each
of the environmental studies, reports and documents listed on Schedule 2.22(h),
which to Company's knowledge are the only written studies, compliance reviews,
audits and reports prepared for Company by environmental consulting or
engineering firms with respect to any Site.
2.23 Product and Service Warranties. Between October 2, 1999 and
the date of this Agreement, Company and its Subsidiaries have not experienced
any product or service warranty claims materially greater than the same type of
claims reflected in the Financial Statements for a comparable period in the
previous fiscal year ended October 2, 1999.
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Company's and its Subsidiaries' obligations with respect to defects in materials
or workmanship is limited to an obligation to repair or replace the product in
question. There is not presently nor has there been since October 2, 1999 any
failure or defect in any product sold by Company or any of its Subsidiaries that
has required, or that may require, a general recall or replacement campaign or
similar action with respect to such product or a reformulation or change of such
product.
2.24 Customers; Backlog; Returns and Complaints. Neither Company
nor any of its Subsidiaries has any outstanding material disputes concerning its
goods and/or services with any customer who, in the year ended October 2, 1999
or the nine (9) months ended July 1, 2000, was one of the twenty (20) largest
sources of revenues for Company and its Subsidiaries, based on amounts paid (a
"SIGNIFICANT CUSTOMER") and Company has no knowledge of any material complaint
on the part of any Significant Customer. Company has not received any
information from any current Significant Customer that the customer will not
continue as a customer of Company (or the Surviving Corporation) or its
Subsidiary (as applicable) after the Closing or that any such customer intends
to terminate or materially modify existing contracts or arrangements with
Company (or the Surviving Corporation) or its Subsidiary (as applicable).
Neither Company nor any of its Subsidiaries has had any of its products returned
by a purchaser thereof except for normal warranty returns consistent with past
history and those returns that would not result in a reversal of any revenue by
Company or any of its Subsidiaries.
2.25 Suppliers. Neither Company nor any of its Subsidiaries has
any outstanding material disputes concerning goods or services provided by any
supplier who, in the year ended October 2, 1999 or the nine (9) months ended
July 1, 2000, was one of the twenty (20) largest suppliers of goods and services
to Company and its Subsidiaries, based on amounts paid ("SIGNIFICANT SUPPLIER").
Company has not received any material notice of a termination or interruption of
any existing contracts or arrangements with any Significant Supplier. Company
and its Subsidiaries have access, on commercially reasonable terms, to all goods
and services reasonably necessary to them to carry on their business as
currently conducted and Company has no knowledge of any reason (other than
changes in general economic conditions) why it and its Subsidiaries will not
continue to have such access on commercially reasonable terms.
2.26 Inventory. The inventory of Company and its Subsidiaries
reflected in the Financial Statements (the "INVENTORY") was valued at cost
(determined on a first-in, first-out basis) or market, whichever is lower. The
Inventory is in all material respects of good and merchantable quality and is
readily usable and salable in the ordinary course of Company's and its
Subsidiaries' business, except for items of obsolete materials and materials of
below standard quality, substantially all of which have been written down to
realizable market value, or for which adequate reserves have been provided, in
the Financial Statements. All items included in such Inventory are owned by
Company or a Subsidiary thereof, free and clear of all liens and encumbrances
(except Permitted Liens), except for inventory sold by Company and its
Subsidiaries in the ordinary course of business consistent with past practice
subsequent to the Balance Sheet Date. All Inventory materially in excess of
reasonable estimated requirements for Company and its Subsidiaries based on
current operations for the next twelve (12) months are set forth on Schedule
2.26. For Inventory manufactured to customer specifications effectively
rendering the Inventory salable only to that customer, the terms of the sales
contracts applicable thereto require the customer to acquire such Inventory (to
the extent of the quantity limits
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specified in such sales contracts) if it is manufactured and delivered in
accordance with such sales contracts.
2.27 Accounts Receivable. The receivables shown on the balance
sheet of Company on the Balance Sheet Date arose in the ordinary course of
business consistent with past practice and have been collected or are
collectible in the book amounts thereof, less an amount not in excess of the
allowance for doubtful accounts provided for in the balance sheet of Company on
the Balance Sheet Date. Allowances for doubtful accounts and warranty returns
are adequate and have been prepared in accordance with GAAP consistently applied
and in accordance with the past practices of Company and its Subsidiaries. The
receivables of Company and its Subsidiaries arising after the Balance Sheet Date
and prior to the Closing Date arose or will arise in the ordinary course of
business consistent with past practice and have been collected or are
collectible in the book amounts thereof, less allowances for doubtful accounts
and warranty returns determined in accordance with the past practices of Company
and its Subsidiaries. To the best knowledge of Company, none of its receivables
is subject to any material claim of offset, recoupment, setoff or counter-claim
and it has no knowledge of any specific facts or circumstances (whether asserted
or unasserted) that could give rise to any such claim. No material amount of
receivables are contingent upon the performance by Company or any of its
Subsidiaries of any obligation or contract other than normal warranty repair and
replacement and other than products' progress bills in the ordinary course of
business consistent with past practice. No person has any lien on any of such
receivables (except Permitted Liens) and no agreement for deduction or discount
has been made with respect to any of such receivables. Schedule 2.27 sets forth
an aging of accounts receivable of Company and its Subsidiaries in the aggregate
and by customer, and indicates the amounts of allowances for doubtful accounts
and warranty returns and the amounts of accounts receivable which are subject to
asserted warranty claims. Schedule 2.27 sets forth such amounts of accounts
receivable which are subject to asserted warranty claims known to Company by
customers and reasonably detailed information regarding asserted warranty claims
known to Company made within the last year, including the type and amounts of
such claims.
2.28 Accounting Matters. Company is autonomous and, since May 31,
1998, has not been a subsidiary or division or another corporation or other
entity. Company has not (a) issued any shares of its capital stock since May 31,
1998, (b) paid any dividends or effected any other distributions to its
stockholders since May 31, 1998, (c) reacquired or purchased any shares of its
capital stock since May 31, 1998, (d) changed any of its equity interests after
May 31, 1998, or (e) sold significant assets since May 31, 1998; and the
Significant Stockholders do not have any controlling interest or significant
influence in a business similar to Parent or which is dependent on employees,
assets or other resources of Company.
2.29 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Company or any of its
Subsidiaries or which has or could reasonably be expected to have the effect of
prohibiting or impairing any business practice of Company or any of its
Subsidiaries, any acquisition of property by Company or any of its Subsidiaries
or the conduct of business of Company or any of its Subsidiaries as currently
conducted or as currently proposed to be conducted in any material respect.
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2.30 Certain Payments. Since Company's inception, neither Company
nor any Subsidiary thereof nor any officer or director thereof, has offered,
paid, promised to pay, or authorized payment of, or given any money, gift or
anything of value to (a) any governmental official or employee, (b) political
party or candidate thereof, or (c) any person while knowing that all or a
portion of such money or thing of value will be given or offered to any
governmental official or employee or political party or candidate thereof; with
the purpose of influencing any act or decision of the recipient in his or her
official capacity or to induce the recipient to use his or her influence to
affect an act or decision of a government official or employee.
2.31 Bank Accounts. Schedule 2.31 sets forth the names and
locations of all banks, trust companies, savings and loan associations, and
other financial institutions at which Company and each of its Subsidiaries
maintains as of the date hereof accounts of any nature and the names of all
persons authorized to draw thereon or make withdrawals therefrom.
2.32 Debt. Schedule 2.32 accurately lists as of the date hereof
all of Company's indebtedness for money borrowed ("DEBT"). All Debt may be
prepaid at the Closing without penalty or other fees payable to the lenders
under the terms of agreements governing the Debt.
2.33 Amendments to Employment Agreements. Each of the persons
listed on Schedule 2.33 has entered into an amendment to any employment
agreement with Company or any of its Subsidiaries to which such person is a
party (the "EMPLOYMENT AGREEMENT AMENDMENTS") providing that the Merger and
related transactions do not constitute "Good Reason" or trigger any severance
obligations on the part of Company under such agreement, and to amend the
definition of "Cause" in such agreement.
3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant as follows:
3.1 Organization. Parent is a company duly organized and validly
existing under the laws of Singapore and has the corporate power and authority
to own, operate and lease its properties and to carry on its business as now
conducted and as proposed to be conducted, and is qualified to do business in
each jurisdiction in which such qualification is required. Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Merger Sub has the corporate power and authority to
own, operate and lease its properties and to carry on its business as now
conducted and as proposed to be conducted.
3.2 Power, Authorization and Validity.
(a) Parent has the right, power, legal capacity and
authority to enter into and perform its obligations under this Agreement and all
agreements to which Parent is or will be a party that are required to be
executed pursuant to this Agreement (the "PARENT ANCILLARY AGREEMENTS"). The
execution, delivery and performance of this Agreement and the Parent Ancillary
Agreements have been duly and validly approved and authorized by all
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necessary corporate and shareholder action on the part of Parent. Merger Sub has
the right, power, legal capacity and authority to enter into and perform its
obligations under this Agreement, and all agreements to which Merger Sub is or
will be a party that are required to be executed pursuant to this Agreement (the
"MERGER SUB ANCILLARY AGREEMENTS"). The execution, delivery and performance of
this Agreement and the Sub Ancillary Agreements have been duly and validly
approved and authorized by all necessary corporate and stockholder action on the
part of Merger Sub.
(b) No filing, authorization, consent or approval,
governmental or otherwise, is necessary to enable Parent and Merger Sub to enter
into, and to perform their respective obligations under, this Agreement, the
Parent Ancillary Agreements or the Merger Sub Ancillary Agreements, except for:
(i) such post-closing filings as may be required to comply with Singapore,
federal and state securities laws; (ii) such filings and notifications as may be
necessary under the HSR Act and the expiration of applicable waiting periods
under the HSR Act; (iii) the filing with the Nasdaq National Market of a
Notification Form for Listing of Additional Shares with respect to the Parent
Ordinary Shares to be issued in the Merger; and (iv) the filing with the SEC and
the effectiveness of any registration statement under the 1933 Act that is
required to be filed by Parent after the Effective Time pursuant to the terms
and conditions of this Agreement or the Registration Rights Agreement.
(c) This Agreement and the Parent Ancillary Agreements
are, or when executed by Parent, will be, valid and binding obligations of
Parent enforceable in accordance with their respective terms, subject only to
the effect, if any, of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally, (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies, and (iii)
the enforceability of provisions requiring indemnification in connection with
the offering, issuance or sale of securities; provided, however, that the Parent
Ancillary Agreements will not be effective until the later of the Effective Time
or the date provided for therein. This Agreement and the Merger Sub Ancillary
Agreements are, or when executed by Merger Sub, will be, valid and binding
obligations of Merger Sub enforceable in accordance with their respective terms,
subject only to the effect, if any, of (i) applicable bankruptcy and other
similar laws affecting the rights of creditors generally, (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies,
and (iii) the enforceability of provisions requiring indemnification in
connection with the offering, issuance or sale of securities; provided, however,
that the Merger Sub Ancillary Agreements will not be effective until the later
of the Effective Time or the date provided for therein.
3.3 No Violation of Articles or Existing Agreements. Neither the
execution and delivery of this Agreement nor any Parent Ancillary Agreement, nor
the consummation of the transactions contemplated herein or therein, will
conflict with or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of (a) any provision of the
Memorandum and Articles of Association of Parent, as currently in effect, (b) in
any material respect, any material agreement, instrument, permit, mortgage,
license or contract to which Parent is a party or by which Parent is bound, or
(c) except as would not have a Material Adverse Effect on Parent, any national,
provincial, local or foreign judgment, writ, decree, order, statute, rule or
regulation applicable to Parent or its respective assets or properties. Neither
the execution and delivery of this Agreement nor any Merger Sub Ancillary
Agreement, nor the
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consummation of the transactions contemplated herein or therein, will conflict
with or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of (a) any provision of the
Certificate of Incorporation or Bylaws of Merger Sub, as currently in effect, or
(b) except as would not have a Material Adverse Effect on Merger Sub, any
national, provincial, local or foreign judgment, writ, decree, order, statute,
rule or regulation applicable to Merger Sub or its assets or properties.
3.4 Litigation. Except as set forth in the Parent Disclosure
Package (as defined below), there is no action, claim, proceeding or
investigation pending or, to Parent's knowledge, threatened against Parent or
any of its Subsidiaries before any court or administrative agency that, if
determined adversely to Parent or any Subsidiary thereof, may reasonably be
expected to have a Material Adverse Effect on Parent.
3.5 Absence of Certain Changes. Since March 31, 2000, there has
not been any change in the financial condition, properties, assets, liabilities,
business or results of operations of Parent, which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business consistent with past practice, has had or can reasonably be
expected to have a Material Adverse Effect on Parent or Merger Sub, or that
could impede the execution, delivery or performance by Parent or Merger Sub of
this Agreement and/or the Parent Ancillary Agreements or the Merger Sub
Ancillary Agreements.
3.6 Disclosure. Parent has furnished to Company an investor
disclosure package consisting of Parent's annual report on Form 10-K, for the
fiscal year ending March 31, 2000, all Forms 10-Q and 8-K, as amended, filed by
Parent with the U.S. Securities and Exchange Commission (the "SEC") since March
31, 2000 and up to the date of this Agreement and all proxy materials
distributed to Parent's shareholders since March 31, 2000 and up to the date of
this Agreement, in each case excluding any exhibits or attachments thereto (the
"PARENT DISCLOSURE PACKAGE"). The documents in the Parent Disclosure Package (a)
conformed, as of the dates of their respective filing with the SEC, in all
material respects, to the requirements of the 1933 Act and the 1934 Act, as
amended, and (b) when taken together, do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading. The financial statements of Parent, including the
notes thereto, included in the documents in the Parent Disclosure Package (the
"PARENT FINANCIAL STATEMENTS") fairly and accurately represented in all material
respects the consolidated financial condition of Parent as of their respective
dates and Parent's consolidated results of operations for the respective periods
specified therein in conformity with GAAP (except as may be indicated in the
notes thereto or, in the case of unaudited statements included in Quarterly
Reports on Form 10-Qs, as permitted by Form 10-Q of the SEC and subject, in the
case of unaudited statements, to normal, immaterial year-end audit adjustments).
3.7 Parent Ordinary Shares. The Parent Ordinary Shares to be
allotted and issued pursuant to the Merger will be duly authorized, and when the
share certificates in respect of such Parent Ordinary Shares are issued in
accordance with the terms hereof, will be validly issued and credited as fully
paid-up.
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4. PRECLOSING COVENANTS OF COMPANY
4.1 During the period from the date of this Agreement until the
Closing, Company covenants to and agree with Parent and Merger Sub as follows:
(a) Advice of Changes. Company will promptly advise Parent
in writing, to the extent of the knowledge of its Chief Executive Officer or
Chief Financial Officer, (i) of any event occurring subsequent to the date of
this Agreement that would render any representation or warranty of Company
contained in this Agreement, if made on or as of the date of such event or the
Closing Date, untrue or inaccurate in any material respect and (ii) of any
Material Adverse Effect.
(b) Maintenance of Business. The parties hereto understand
and acknowledge that it is their intent to work closely together during the
period from the date hereof until the Closing Date. If Company becomes aware of
a material deterioration in the relationship with any Significant Customer,
Significant Supplier, officer or other Management Employee or significant number
of other employees, it will promptly bring such information to the attention of
Parent in writing and, if requested by Parent, will exert all reasonable efforts
to restore and retain the relationship. To the extent permitted by law, Company
shall use all reasonable efforts to optimize its operations, including
production and logistics, with Parent prior to the Closing. Following the
expiration or early termination of the HSR Act waiting period, at Parent's
request such cooperation may include joint customer calls and cooperation in
setting sales, marketing and manufacturing strategies.
(c) Conduct of Business. Prior to the Closing, Company
will (and will cause each of its Subsidiaries to) continue to conduct its
business in the ordinary course consistent with the manner as heretofore
conducted and, to the extent consistent therewith, use all reasonable efforts to
preserve intact its current business organization and use all reasonable efforts
to keep available the services of its current officers and employees and
preserve its relationship with customers, suppliers, licensors, licensees,
distributors and others having business dealings with it. Without limiting the
foregoing, prior to the Closing, Company will not (and will cause its
Subsidiaries to not) enter into any transaction or agreement, make any payment,
or take any action, out of the ordinary course of business consistent with its
past practices, without the prior written consent of an authorized
representative of Parent (not to be unreasonably withheld), including, without
limitation:
(i) borrow any money, except up to $50,000,000 (net
of any repayments) under Company's existing credit line with Parent (in
accordance with its terms and conditions as in effect on the date hereof) for
working capital and capital expenditures in the ordinary course of business,
consistent with past practice; provided, however, that if the Closing does not
occur by August 31, 2000, Company shall be able to borrow money to refinance its
Debt, provided that any and all fees, costs and expenses related to such
refinancing or the repayment of debt incurred in connection with such
refinancing ("REFINANCING FEES") shall reduce the number of Parent Ordinary
Shares issuable in connection with the Merger in the manner provided in Section
1.2(c).
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(ii) enter into any transaction not in the ordinary
course of business consistent with past practices, or enter into any transaction
in excess of $250,000, or make any commitment involving an expense of Company or
any of its Subsidiaries or capital expenditure by Company or any of its
Subsidiaries in excess of $250,000, or in excess of $500,000 in the aggregate,
other than (A) purchases of raw materials in the ordinary course of business
consistent with its past practice and on standard terms and (B) sales of
inventory in the ordinary course of business consistent with past practices;
(iii) encumber or permit to be encumbered any of
its assets except in the ordinary course of its business consistent with past
practice and to an extent which is not material;
(iv) dispose of any of its assets that have an
aggregate book value of $250,000 or more, except sales of inventory in the
ordinary course of business consistent with past practice;
(v) enter into any material lease or contract for
the purchase or sale of any property, real or personal, tangible or intangible,
except in the ordinary course of business consistent with past practice except
transactions permitted by Section 4.1(c)(ii) or Section 4.1(c)(iv);
(vi) fail to maintain its equipment and other
assets in good working condition and repair according to the standards it has
maintained to the date of this Agreement, subject only to ordinary wear and
tear;
(vii) pay or enter into any agreements or
commitments to pay any bonus, royalty, increased salary or special remuneration
to any officer, employee or consultant (except as is already accrued or pursuant
to existing arrangements heretofore disclosed in writing to Parent and except
salary increases (not in excess of 10% for any individual) who are not officers
or directors of Company and/or bonus payments in the ordinary course of business
consistent with past practice) or enter into any new employment or consulting
agreement with any such person, or enter into any new agreement or plan of the
type described in Section 2.16(b), or amend any such agreement or plan or any
Employment Agreement Amendment;
(viii) change accounting methods or policies, or
revalue, write off or write up the value of any inventory, accounts receivable
or other assets except as required by GAAP;
(ix) declare, set aside or pay any cash or stock
dividend (except the issuance of shares of Common Stock to holders of Company's
Preferred Stock in accordance with Company's Certificate of Incorporation as
currently in effect) or other distribution in respect of capital stock, or
redeem or otherwise acquire any of its capital stock;
(x) amend or terminate any contract, agreement or
license to which it is a party except those amended or terminated in the
ordinary course of business, consistent with past practice, and which are not
material in amount or effect;
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(xi) lend any amount to any person or entity, other
than advances for travel and expenses which are incurred in the ordinary course
of business consistent with past practice, not material in amount, which travel
and expenses shall be documented by receipts for the claimed amounts in
accordance with past practice;
(xii) guarantee or act as a surety for any
obligation except for the endorsement of checks and other negotiable instruments
in the ordinary course of business consistent with past practice;
(xiii) waive or release any material right or claim
except in the ordinary course of business, consistent with past practice;
(xiv) issue or sell any shares of Company Capital
Stock of any class or any other of its securities (other than pursuant to the
conversion or exercise (as the case may be) of any existing security in
accordance with the terms of such security, if permitted or required by this
Agreement), or issue, grant or create any warrants, obligations, subscriptions,
options, convertible securities, stock appreciation rights or other commitments
to issue shares of capital stock, or accelerate the vesting of any outstanding
option or other security;
(xv) split or combine the outstanding shares of its
capital stock of any class or enter into any recapitalization affecting the
number of outstanding shares of its capital stock of any class or affecting any
other of its securities;
(xvi) except for the Merger, merge, consolidate or
reorganize with, or acquire, any entity;
(xvii) amend its Certificate of Incorporation or
Bylaws;
(xviii) file any federal or state income or
franchise tax return unless copies of such returns have been delivered to Parent
for its review prior to filing, or agree to any audit assessment by any tax
authority, or make any tax election;
(xix) license any of the Intellectual Property,
except in the ordinary course of business consistent with past practice;
(xx) change any insurance coverage or issue any
certificates of insurance (except for the planned renewal of existing policies
on terms not materially different from those in effect on the date of this
Agreement);
(xxi) terminate the employment of any Management
Employee;
(xxii) make or agree to make any new capital
expenditure or expenditures which are outside the ordinary course of business or
inconsistent with past practice, or acquire any assets with a book value in
excess of $250,000 individually or $500,000 in the aggregate other than
acquisitions of inventory in the ordinary course of business consistent with
prior practice;
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(xxiii) make any material payments outside the
ordinary course of business consistent with past practice;
(xxiv) commence a lawsuit other than (A) for the
routine collection of bills, or (B) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with Parent
prior to the filing of such a suit; or
(xxv) agree to do any of the things described in
the preceding clauses 4.1(c)(i) through 4.1(c)(xxiv).
(d) Regulatory Approvals. Company will execute and file,
or join in the execution and filing, of any application, notification (including
without limitation any notification or provision of information, if any, that
may be required under the HSR Act) or other document that may be necessary in
order to obtain the authorization, approval or consent of any governmental body,
federal, state, local or foreign, which may be reasonably required, or which
Parent may reasonably request, in connection with the consummation of the
transactions provided for in this Agreement and will use all reasonable efforts
to obtain, or assist Parent in obtaining, all such authorizations, approvals and
consents.
4.2 Necessary Consents. Company will use all reasonable efforts
to obtain such written consents and take such other actions as may be necessary
or appropriate, in addition to those set forth in Section 4.1(d), to facilitate
and allow the consummation of the transactions provided for herein and to
facilitate and allow Parent and Merger Sub to carry on Company's business after
the Closing Date.
4.3 Litigation. Company will notify Parent in writing promptly
after learning of any action, suit, proceeding or investigation by or before any
court, board or governmental agency, initiated by or against Company or
threatened against it.
4.4 (a) No Other Negotiations. From and after the date of this
Agreement until the Effective Time or termination of this Agreement pursuant to
Section 9, Company and its Subsidiaries will not, nor will they authorize or
permit any of their respective officers, directors, affiliates or employees or
any investment banker, attorney or other advisor or representative retained by
any of them to, directly or indirectly, (i) solicit, initiate, encourage or
induce the making, submission or announcement of any Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any person any non-public information with respect to,
or take any other action to facilitate any inquiries or the making of any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into
any letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Acquisition Proposal;
provided, however, that notwithstanding the foregoing, prior to the approval of
this Agreement and the Merger by the Company Stockholders, this Section 4.4(a)
shall not prohibit Company from furnishing nonpublic information regarding
Company and its subsidiaries to, or entering into discussions or negotiations
with, any person or group who has submitted (and not withdrawn) to Company an
unsolicited, written, bona fide Acquisition
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Proposal that the Board of Directors of Company reasonably concludes (based on
the written advice of a financial advisor of national standing) may constitute a
Superior Offer if (A) neither Company nor any representative of Company and its
Subsidiaries shall have violated any of the restrictions set forth in this
Section 4.4, (B) the Board of Directors of Company concludes in good faith,
after consultation with its outside legal counsel, that such action is required
in order for the Board of Directors of Company to comply with its fiduciary
obligations to Company Stockholders under applicable law, (C) prior to
furnishing any such nonpublic information to, or entering into any such
discussions with, such person or group, Company gives Parent written notice of
the identity of such person or group and all of the material terms and
conditions of such Acquisition Proposal and of Company's intention to furnish
nonpublic information to, or enter into discussions with, such person or group,
and Company receives from such person or group an executed confidentiality
agreement containing customary terms reasonably acceptable to Parent, (D)
Company gives Parent at least two (2) business days advance notice of its intent
to furnish such nonpublic information or enter into such discussions, and (E)
contemporaneously with furnishing any such nonpublic information to such person
or group, Company furnishes such nonpublic information to Parent (to the extent
such nonpublic information has not been previously furnished by Company to
Parent). Company and its Subsidiaries will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding two sentences by any officer, director or employee of Company or
any of its subsidiaries or any investment banker, attorney or other advisor or
representative of Company or any of its Subsidiaries shall be deemed to be a
breach of this Section 4.4 by Company.
(b) For purposes of this Agreement, "ACQUISITION PROPOSAL"
shall mean any offer or proposal by a third party relating to: (i) any
acquisition or purchase from Company by any person or "group" (as defined under
Section 13(d) of the 1934 Act and the rules and regulations thereunder) of more
than a 20% interest in the total outstanding voting securities of Company or any
of its subsidiaries or any tender offer or exchange offer that if consummated
would result in any person or "group" (as defined under Section 13(d) of the
1934 Act and the rules and regulations thereunder) beneficially owning 20% or
more of the total outstanding voting securities of Company or any of its
subsidiaries or any merger, consolidation, business combination or similar
transaction involving Company pursuant to which the stockholders of Company
immediately preceding such transaction hold less than 80% of the equity
interests in the surviving or resulting entity of such transaction; (ii) any
sale, lease (other than in the ordinary course of business), exchange, transfer,
license (other than in the ordinary course of business), acquisition, or
disposition of more than 50% of the assets of Company; (iii) any sale, lease,
exchange, transfer, license or disposition to a third party of either of the
"registry" or "registrar" businesses of Company; or (iv) any liquidation or
dissolution of Company.
(c) In addition to the obligations of Company set forth in
paragraph (a) of this Section 4.4, Company as promptly as reasonably practicable
shall advise Parent orally and in writing of any request for non-public
information of which Company has knowledge which Company reasonably believes
would lead to an Acquisition Proposal or of any Acquisition Proposal, or any
inquiry of which Company has knowledge with respect to or which Company
reasonably should believe would lead to any Acquisition Proposal, the material
terms and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the person or
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group making any such request, Acquisition Proposal or inquiry. Company will
keep Parent informed as promptly as reasonably practicable in all material
respects of the status and details (including material amendments or proposed
amendments) of any such request, Acquisition Proposal or inquiry.
(d) Nothing in this Agreement shall prevent the Board of
Directors of Company from withholding, withdrawing, amending or modifying its
recommendation in favor of the Merger if (i) a Superior Offer (as defined below)
is made to Company and is not withdrawn, (ii) Company shall have provided
written notice to Parent (a "NOTICE OF SUPERIOR OFFER") advising Parent that
Company has received a Superior Offer, specifying all of the material terms and
conditions of such Superior Offer and identifying the person or entity making
such Superior Offer, (iii) Parent shall not have, within three (3) business days
of Parent's receipt of the Notice of Superior Offer, made an offer that
Company's Board of Directors by a majority vote determines in its good faith
judgment (based on the written advice of a financial advisor of national
standing) to be at least as favorable to Company's stockholders as such Superior
Offer (it being agreed that the Board of Directors of Company shall convene a
meeting to consider any such offer by Parent promptly following the receipt
thereof), (iv) the Board of Directors of Company concludes in good faith, after
consultation with its outside counsel, that, in light of such Superior Offer,
the withholding, withdrawal, amendment or modification of such recommendation is
required in order for the Board of Directors of Company to comply with its
fiduciary obligations to Company's stockholders under applicable law and (v)
Company shall not have violated any of the restrictions set forth in Section
4.4(a) or this Section 4.4(d). Company shall provide Parent with at least two
(2) business days prior notice (or such lesser prior notice as provided to the
members of Company's Board of Directors but in no event less than twenty-four
(24) hours) of any meeting of Company's Board of Directors at which Company's
Board of Directors is reasonably expected to consider any Acquisition Proposal
to determine whether such Acquisition Proposal is a Superior Offer. Nothing
contained in this Section 4.4(d) shall limit Company's obligation to hold and
convene the Stockholders Meeting (as defined in Section 4.12) (regardless of
whether the recommendation of the Board of Directors of Company shall have been
withdrawn, amended or modified).
For purposes of this Agreement, "SUPERIOR OFFER" shall
mean an unsolicited, bona fide written offer made by a third party to consummate
any of the following transactions: (i) a merger or consolidation involving
Company pursuant to which the stockholders of Company immediately preceding such
transaction hold less than 50% of the equity interest in the surviving or
resulting entity of such transaction, (ii) the acquisition by any person or
group (including by way of a tender offer or an exchange offer or a two (2) step
transaction involving a tender offer followed with reasonable promptness by a
merger involving Company), directly or indirectly, of ownership of 100% of the
then outstanding shares of Company Capital Stock, on terms that the Board of
Directors of Company determines, in its reasonable judgment (based on the
written advice of a financial advisor of national standing) to be more favorable
to Company Stockholders than the terms of the Merger, or (iii) the transfer of
all or substantially all of Company's assets; provided, however, that any such
offer shall not be deemed to be a "SUPERIOR OFFER" if any financing required to
consummate the transaction contemplated by such offer is not committed and is
not likely in the reasonable judgment of Company's Board of Directors (based on
the advice of its financial advisor) to be obtained by such third party on a
timely basis.
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4.5 Access to Information. Until the Closing Date, and subject to
the terms and conditions hereof relating to the confidentiality and use of
confidential and proprietary information, Company will provide Parent and its
agents with full access at reasonable times and upon reasonable notice to the
files, books, records and offices of Company, including, without limitation, any
and all information relating to taxes, commitments, contracts, leases, licenses,
real, personal and intangible property, liabilities (contingent and
non-contingent) and financial condition reasonably necessary for Parent to
complete its diligence review of the products and business to the extent that it
does not materially impede the operations of Company and its Subsidiaries.
Company will cause their accountants to cooperate with Parent and its agents in
making available all financial information reasonably requested, including,
without limitation, all working papers pertaining to all financial statements
prepared or audited by such accountants.
4.6 Satisfaction of Conditions Precedent. Company will use all
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8, and will use all reasonable efforts
to cause the transactions provided for in this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain all consents and
authorizations of third parties and to make all filings with, and give all
notices to, third parties that may be necessary or reasonably required on its
part in order to effect the transactions provided for herein.
4.7 Blue Sky Laws. Company shall use all reasonable efforts to
assist Parent, to the extent necessary, to comply with the securities and Blue
Sky laws of all jurisdictions applicable in connection with the Merger;
provided, however, that Parent shall be responsible for all costs and expenses
associated with such compliance.
4.8 Pooling of Interests Accounting. Company shall use all
reasonable efforts not to take any action that would adversely affect the
ability of Parent to account for the business combination effected by the Merger
as a "POOLING OF INTERESTS." Company shall use all reasonable efforts to cause
its affiliates not to take any action that would adversely affect the ability of
Parent to account for the business combination to be effected by the Merger as a
"POOLING OF INTERESTS."
4.9 Retention of Employees. Company will use all reasonable
efforts to retain the employment of the Management Employees and to secure their
continued employment after the Closing by Parent, and Company will promptly
notify Parent if any of Company's officers becomes aware that any of the
Management Employees, or any significant number of other employees, intends to
leave its employ.
4.10 Securities Laws. Company and the Company Stockholders shall
use all reasonable efforts to assist Parent, to the extent necessary, to comply
with the securities laws of all jurisdictions applicable in connection with the
Merger; provided, however, that Parent shall be responsible for all costs and
expenses associated with such compliance.
4.11 Information Statement. Company will deliver to counsel for
Parent a draft of an information statement on the date of the execution of this
Agreement and within two (2) business days following such date, will send to
Company Stockholders such information statement for the purpose of considering
and approving this Agreement, the Merger
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and the transactions contemplated hereby. The information statement, other than
information relating to Parent provided by Parent, shall 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, in light of the circumstances under
which such statements were made, not misleading.
4.12 Stockholders Meeting. (a) Company will take all action
necessary in accordance with Delaware law and its Certificate of Incorporation
and Bylaws to call, notice, convene and hold a meeting of the Company
Stockholders (the "STOCKHOLDERS MEETING") to be held as promptly as practicable,
and in no event after August 25, 2000, for the purpose of voting upon approval
of this Agreement and the Merger. Company will solicit from the Company
Stockholders proxies in favor of the approval of this Agreement and the Merger,
and will use all reasonable efforts to take all other action necessary or
advisable to secure the vote or consent of the Company Stockholders required by
Delaware law to obtain such approvals. Company shall ensure that the
Stockholders Meeting is called, noticed, convened, held and conducted prior to
and separate from any meeting of the Company Stockholders at which any
Acquisition Proposal (as defined in Section 4.4) is considered or voted upon.
Company will use all reasonable efforts to ensure that all proxies solicited by
Company in connection with the Stockholders Meeting are solicited in compliance
with the Delaware law, its Certificate of Incorporation and Bylaws, and all
other applicable legal requirements. Company's obligation to call, give notice
of, convene, hold and conduct the Stockholders Meeting in accordance with this
Section 4.12 shall not be limited to or otherwise affected by the commencement,
disclosure, announcement or submission to Company of any Acquisition Proposal
(including a Superior Offer (as defined in Section 4.4), or by any withdrawal,
amendment or modification of the recommendation of the Board of Directors of
Company to the Company Stockholders to approve this Agreement and the Merger.
(b) The Board of Directors of Company shall recommend that
the Company Stockholders vote in favor of and approve this Agreement and the
Merger at the Stockholders Meeting, subject to Section 4.4; and the information
statement shall include a statement to the effect that the Board of Directors of
the Company has recommended that the Company Stockholders vote in favor of and
approve this Agreement and the Merger at the Stockholders Meeting.
4.13 Employee Plans. Upon the request of Parent, Company will
terminate any Employee Plan immediately prior to the Effective Time.
4.14 Company Affiliates Agreements. As the Merger is intended to
accounted for as a "POOLING OF INTERESTS," Company will cause each of its
affiliates (including each of its executive officers and directors and each
holder of more than ten percent of its capital stock) to sign and deliver to
Parent, on or prior to the Closing Date, a written agreement (the "COMPANY
AFFILIATES AGREEMENT"), in the form of Exhibit E.
4.15 Confirmation of Equity Interests. Prior to the Effective
Time (and, in the case of any convertible securities which are to be converted,
or warrants which are to be exercised, prior to the Effective Time, prior to
such conversion or exercise), Company will provide Parent with such information
and documents as Parent may from time to time reasonably request with respect to
the calculations of antidilution adjustments, dividends and share and warrant
issuances that are reflected in the Disclosure Schedule, including written
confirmation
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by the holder of any Company Capital Stock that such holder concurs with such
calculations insofar as they apply to such holder. If any person shall notify
Company of its election to exercise any warrants or convert any convertible
securities of Company prior to the Effective Time, Company shall notify Parent
in writing of such exercise or conversion prior to issuing or delivering any
shares of Company Capital Stock upon such exercise or conversion, and, if
requested by Parent, shall not deliver any such shares of Company Capital Stock
until the holder of the warrant being exercised, or the security being
converted, has confirmed to Company and Parent that such holder concurs with
such calculation.
5. COVENANTS OF PARENT
During the period from the date of this Agreement until the
Closing, Parent covenants to and agrees with Company as follows:
5.1 Advice of Changes. Parent will promptly advise Company in
writing, to the extent of the knowledge of Parent's Chief Executive Officer or
President, Systems Group and Chief Financial Officer, (a) of any event occurring
subsequent to the date of this Agreement that would render any representation or
warranty of Parent contained in this Agreement, if made on or as of the date of
such event or the Closing Date, untrue or inaccurate in any material respect and
(b) of any material adverse change in Parent's financial condition, properties,
assets, liabilities, business or results of operations.
5.2 Regulatory Approvals. Parent will execute and file, or join
in the execution and filing, of any application, notification (including without
limitation any notification or provision of information, if any, that may be
required under the HSR Act) or other document that may be necessary in order to
obtain the authorization, approval or consent of any governmental body, federal,
state, local or foreign, which may be reasonably required, or which Company may
reasonably request, in connection with the consummation of the transactions
provided for in this Agreement. Parent will use all reasonable efforts to obtain
all such authorizations, approvals and consents.
5.3 Necessary Consents. Parent shall use all reasonable efforts
to obtain such written consents and take such other actions as may be necessary
or appropriate, in addition to those set forth in Section 5.2, to facilitate and
allow the consummation of the transactions provided for herein.
5.4 Satisfaction of Conditions Precedent. Parent will use all
reasonable efforts to satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 7, and Parent will use all reasonable
efforts to cause the transactions provided for in this Agreement to be
consummated, and, without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make all filings with,
and give all notices to, third parties that may be necessary or reasonably
required on its part in order to effect the transactions provided for herein.
5.5 Securities Laws. Parent shall use all reasonable efforts to
comply with the securities and Blue Sky laws of all jurisdictions applicable in
connection with the Merger.
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5.6 Litigation. Parent will notify Company in writing promptly
after learning of any action, suit, proceeding or investigation by or before any
court, board or governmental agency, initiated by or against Parent or
threatened against it that, if determined adversely to Parent, may reasonably be
expected to have a material adverse effect on Parent.
5.7 Pooling of Interests Accounting. Parent shall use all
reasonable efforts to cause the business combination to be effected by the
Merger to be accounted for as a "POOLING OF INTERESTS." Parent shall use all
reasonable efforts to cause its affiliates not to take any action that would
adversely affect the ability of Parent to account for the business combination
to be effected by the Merger as a "POOLING OF INTERESTS."
5.8 Nasdaq Quotation. Parent will cause the Parent Ordinary
Shares to be issued to the Company Stockholders hereunder to be authorized for
quotation on the Nasdaq National Market.
5.9 Parent Affiliates Agreements. As the Merger is intended to
accounted for as a "POOLING OF INTERESTS," Parent will cause each of its
affiliates to sign and deliver to Parent, on or prior to the Closing Date, a
written agreement (the "PARENT AFFILIATES AGREEMENT"), in the form of Exhibit F.
5.10 Registration Rights Agreement. Parent will sign and deliver
to Company Stockholders, on or prior to the Closing Date, the Registration
Rights Agreement.
5.11 Company Employee Matters; Stock Options.
(a) Following the Effective Time, Parent shall, subject to
compliance with applicable law, arrange for each employee of Company or any
Subsidiary of Company to participate in any counterpart Parent Employee Plan
(which shall mean all plans, programs and arrangements that are maintained by
Parent or its Subsidiaries at the Effective Time) in accordance with the
eligibility criteria thereof, provided that (i) such participants shall receive
full credit for years of service with Company or any of its Subsidiaries (and
service otherwise credited by Company or any Company Subsidiary) prior to the
Effective Time for all purposes for which services was recognized under Company
Employee Plans including, but not limited to, eligibility to participate,
vesting and to the extent not duplicative, of benefits received under such
Company Employee Plan, the amount of benefits, (ii) such participants and their
dependents (to the extent that the terms and conditions of each Company Employee
Plan provided for coverage and/or benefits of eligible employees' dependents)
shall participate in Parent Employee Plans on terms no less favorable to those
offered by Parent to employees of Parent, and (iii) Parent shall cause any and
all pre-existing condition limitations, eligibility waiting periods and evidence
of insurability requirements under any group plans to be waived with respect to
such Company participants and their eligible dependents and shall provide each
such participant with credit for any co-payments and deductibles prior to the
Effective Time for purposes of satisfying any applicable deductible,
out-of-pocket, or similar requirements under all Parent Employee Plans in which
such participants are eligible to participate after the Effective Time.
Notwithstanding any of the foregoing provisions of this Section 5.10, none of
the provisions of this Section shall operate to duplicate any benefit provided
to any employee of Company or the funding of any such benefit.
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(b) Following the date of this agreement, the executive
officers of Parent and Company shall consult in good faith with each other with
a view to determining an appropriate number of Parent Ordinary Shares to be
subject to options that would granted to employees of Company who remain
employed with Company after the Closing; provided that Parent shall be entitled
to condition the grant of such options on the execution by each employee of an
amendment to such employee's employment agreement or severance agreement (if
such employee shall be a party to any such agreement) to confirm that the Merger
and the transactions contemplated thereby do not constitute "Good Reason" or
trigger any severance obligations on the part of Company under such agreement
and/or to amend the definition of "Cause" in such agreement, in each case on
terms consistent with those set forth in the Employment Agreement Amendments.
Such options shall be allocated among such employees of Company after the
Closing in such manner as Parent shall determine on or before the Closing as set
forth in Exhibit 5.10(b) to be added at the Closing to this Agreement, but such
allocation shall take into account Parent's compensation and share option
guidelines, including size of grant and customary vesting restrictions, for like
positions, and have a per share exercise price equal to the fair market value of
one Parent Ordinary Share as of the date of grant.
6. CLOSING MATTERS
6.1 The Closing. Subject to termination of this Agreement as
provided in Section 9 below, the closing of the transactions provided for herein
(the "CLOSING") will take place at the offices of Fenwick & West LLP, Two Palo
Alto Square, Palo Alto, California 94306 on August 31, 2000 at 10:00 a.m.,
Pacific Time, or, if all conditions to Closing have not been satisfied or waived
by such date, on November 30, 2000 or at such other place, time and date as
Company and Parent may mutually select (the "CLOSING DATE"). As soon as
practicable after the Closing, the Certificate of Merger will be filed in the
office of the Delaware Secretary of State. Accordingly, the Merger will become
effective at the Effective Time.
6.2 Conversion of Shares.
(a) As of the Effective Time, all shares of Company Common
Stock that are outstanding immediately prior thereto will, by virtue of the
Merger and without further action, cease to exist, and all such shares will be
automatically converted into the right to receive from Parent, and shall be
exchangeable for, the number of Parent Ordinary Shares and cash determined as
set forth in Section 1.2, subject to Section 1.2(d), 1.2(f) and 1.3 hereof.
(b) Exchange of Certificates. At the Effective Time, each
certificate representing outstanding shares of Company Common Stock will
represent the right to receive share certificates covering the number of Parent
Ordinary Shares as determined pursuant to Section 1.2 hereof, subject to
Sections 1.2(d), 1.2(f) and 1.3, for which such shares of Company Common Stock
have been exchanged, and such Parent Ordinary Shares will be registered in the
name of the holder of such certificate at the Effective Time. Parent shall make
available to EquiServe L.P. (the "EXCHANGE AGENT") certificates representing
Parent Ordinary Shares to be issued in exchange for outstanding shares of
Company Common Stock and cash in an amount sufficient to permit the payment of
cash in lieu of fractional shares pursuant to Section 1.2(f). As soon as
practicable after the Effective Time (and in any event no later than ten (10)
business days after the Effective Time), the Surviving Corporation shall cause
to be mailed to each holder of
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record of a certificate or certificates which immediately prior to the Effective
Time represented outstanding shares of Company Common Stock (the "CERTIFICATES")
and which shares were converted into Parent Ordinary Shares pursuant to Section
1.2, (i) a letter of transmittal in substantially the form attached hereto as
Exhibit G, and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing Parent Ordinary Shares
and cash in lieu of fractional shares. Upon surrender of a Certificate for
cancellation or upon delivery of an affidavit of lost certificate and an
indemnity in form and substance satisfactory to Parent (the "AFFIDAVIT") to the
Exchange Agent or to such other agent or agents as may be appointed by Parent
and reasonably satisfactory to Company, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, Parent or its transfer agent will deliver to each
tendering holder of a Certificate or an Affidavit (a "TENDERING COMPANY
HOLDER"), certificates for the number of Parent Ordinary Shares to which such
holder is entitled pursuant to Section 1.2, subject to the provisions of Section
1.2(f); and (b) Parent or its transfer agent will pay by check to each Tendering
Company Holder cash in the amounts payable in accordance with Section 1.2(f).
(c) All share certificates covering the number of Parent
Ordinary Shares as determined pursuant to Section 1.2, subject to Section
1.2(d), 1.2(f) and 1.3 hereof (and, if applicable, cash in lieu of fractional
shares) to be delivered upon the surrender of Certificates in accordance with
the terms hereof will be delivered to the registered holder of such Certificate.
After the Effective Time, there will be no further registration of transfers of
the shares of Capital Stock on the stock transfer books of Company.
(d) Subject to Section 6.2(c) hereof, until Certificates
representing Company Common Stock, outstanding prior to the Merger are
surrendered pursuant to Section 6.2(b) above, such Certificates will be deemed,
for all purposes, to evidence only ownership of (i) the right to receive share
certificates covering the number of Parent Ordinary Shares for which the shares
of Company Common Stock have been exchanged, and (ii) if applicable, cash in
lieu of fractional shares.
6.3 Appraisal Rights. If holders of Company Common Stock are
entitled to appraisal rights pursuant to Delaware Law in connection with the
Merger, any Dissenting Shares will not be converted into the right to receive
Parent Ordinary Shares, but shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to Delaware Law. Company shall give Parent prompt notice (and in
no event more than two (2) business days) of any demand received by Company for
appraisal of Company Common Stock, and Parent shall have the right to control
all negotiations and proceedings with respect to such demand and, except with
the prior written consent of Parent, Company will not voluntarily make any
payment with respect to, or settle or offer to settle, any such demand for
appraisal. In the event that any Company Stockholder fails to make an effective
demand for payment or otherwise loses his status as a holder of Dissenting
Shares (a "DISSENTING STOCKHOLDER"), Parent shall, as of the later of the
Effective Time or ten (10) business days from the occurrence of such event,
allot, issue and deliver, upon surrender by such Dissenting Stockholder of its
Certificate(s), the Parent Ordinary Shares and any cash payment in lieu of
fractional shares, in each case without interest, thereon, to which such
Dissenting Shareholder would have been entitled to under Section 1.3 hereof.
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7. CONDITIONS TO OBLIGATIONS OF COMPANY
The obligations of Company hereunder are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Company, but only in
writing signed on behalf of Company by Company's President or Chief Financial
Officer):
7.1 Accuracy of Representations and Warranties. The
representations and warranties of Parent set forth in Section 3 shall be true
and accurate in all material respects on and as of the Closing Date with the
same force and effect as if they had been made at the Closing (except for any
failure to be true and accurate solely as a result of the occurrence of any
facts or circumstances that could not reasonably be expected to have a Material
Adverse Effect on Company), and Company shall have received a certificate dated
the Closing Date to such effect executed on behalf of Parent by a duly
authorized officer.
7.2 Covenants. Parent shall have performed and complied in all
material respects with all of its covenants contained in Section 5 on or before
the Closing Date, and Company shall have received a certificate dated the
Closing Date to such effect executed on behalf of Parent by a duly authorized
officer.
7.3 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
contemplated by this Agreement.
7.4 Government Consents; HSR Compliance. There shall have been
obtained at or prior to the Closing Date such permits or authorizations, and
there shall have been taken such other actions, as may be required to consummate
the Merger by any regulatory authority having jurisdiction over the parties and
the actions herein proposed to be taken, including but not limited to
satisfaction of all requirements under applicable federal and state securities
laws. All applicable waiting periods under the HSR Act shall have expired or
early termination of such waiting periods shall have been granted by both the
Federal Trade Commission and the United States Department of Justice without any
condition or requirement requiring or calling for the disposition or divestiture
of any product or other asset of Company by Parent or Company.
7.5 No Litigation. No litigation or proceeding shall be pending
which could reasonably be expected to have the effect of enjoining or preventing
the consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a Material Adverse Effect on Parent that has not been previously disclosed
to Company prior to the date of this Agreement.
7.6 Absence of Material Change. There shall not have been any
Material Adverse Change with respect to Parent.
7.7 Opinion of Parent's Counsel. Company shall have received from
Allen & Gledhill, Singapore counsel to Parent, an opinion substantially in the
form of Exhibit H.
7.8 Registration Rights Agreement. Parent shall have executed and
delivered to the Company Stockholders the Registration Rights Agreement.
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7.9 Debt. All Debt shall have been satisfied and paid in full in
the amounts specified in the pay off letters specified in Section 8.13 (except
that Parent shall not be required to pay any prepayment fees or penalties in
connection with the payment of such Debt in excess of the amounts set forth in
Schedule 8.14).
8. CONDITIONS TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub hereunder are subject to
the fulfillment or satisfaction on, and as of the Closing, of each of the
following conditions (any one or more of which may be waived by Parent and
Merger Sub, but only in writing signed on behalf of Parent and Merger Sub by
Parent's Chief Executive Officer, President, Systems Group or Chief Financial
Officer):
8.1 Accuracy of Representations and Warranties. Subject to
Section 10.2(a), the representations and warranties of Company set forth in
Section 2 shall be true and accurate in all material respects as of the Closing
with the same force and effect as if they had been made at the Closing (except
for any failure to be true and accurate solely as a result of the occurrence of
any facts or circumstances that could not reasonably be expected to have a
Material Adverse Effect on Company) and Parent shall have received a certificate
to such effect executed on behalf of Company by its President.
8.2 Covenants. Company shall have performed and complied in all
material respects with all of their covenants contained in Section 4 on or
before the Closing and Parent shall have received a certificate to such effect
signed on behalf of Company by its President.
8.3 Absence of Material Adverse Change. There shall not have been
any Material Adverse Change with respect to Company.
8.4 Compliance with Law. There shall be no order, decree, or
ruling by any court or governmental agency or threat thereof, or any other fact
or circumstance, which would prohibit or render illegal the transactions
provided for in this Agreement.
8.5 Government Consents; HSR Compliance. There shall have been
obtained at or prior to the Closing Date such permits or authorizations, and
there shall have been taken such other action, as may be required to consummate
the Merger by any regulatory authority having jurisdiction over the parties and
the actions herein proposed to be taken, including but not limited to
satisfaction of all requirements under applicable federal and state securities
laws. All applicable waiting periods under the HSR Act shall have expired or
early termination of such waiting periods shall have been granted by both the
Federal Trade Commission and the United States Department of Justice without any
condition or requirement requiring or calling for the disposition or divestiture
of any product or other asset of Company by Parent or Company.
8.6 Documents. Parent shall have received all written consents,
assignments, waivers, authorizations or other certificates necessary to provide
for the continuation in full force and effect of any and all material contracts
and leases of Company, and for Parent to consummate the transactions
contemplated hereby, including consents to the transactions contemplated hereby
from each party identified on Schedule 8.5.
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8.7 No Litigation. No litigation or proceeding shall be pending
which could reasonably be expected to have the effect of enjoining or preventing
the consummation of any of the transactions provided for in this Agreement. No
litigation or proceeding shall be pending which could reasonably be expected to
have a Material Adverse Effect on Company that has not been previously disclosed
to Parent herein.
8.8 Opinion of Company Counsel. Parent shall have received from
Parker Chapin LLP, counsel to Company, an opinion substantially in the form of
Exhibit I.
8.9 Requisite Approvals; Dissenting Shares Limitation. The
principal terms of this Agreement and the Certificate of Merger shall have been
approved and adopted by the requisite vote or written consent or vote of the
Company Stockholders and the number of dissenting shares of Company shall not
exceed 3% of the total number of outstanding shares of Company Common Stock.
8.10 Opinion of Parent's and Company's Accountants. Parent shall
have received (a) from Arthur Andersen LLP a "POOLING LETTER" in form reasonably
acceptable to Parent as to the availability of pooling of interest accounting
for the Merger, and (b) from Ernst & Young LLP a "POOLABILITY LETTER," in form
reasonably acceptable to Parent (and which may be addressed to Company),
concerning the absence of circumstances pertaining to Company that could prevent
the Merger from qualifying for pooling of interests accounting.
8.11 Employment Agreement Amendments. Parent shall have received
executed Employment Agreement Amendments from each individual identified in
Schedule 2.33, and such Employment Agreement Amendments shall remain in full
force and effect.
8.12 Investment Representation Letters; Exemptions Available.
Parent shall have received an executed counterpart of the Investment
Representation Letter executed by each Company Stockholder other than dissenting
stockholders.
8.13 Debt. Company shall have received payoff letters from each
holder of Debt stating that such Debt may be paid in full without penalty
(except as disclosed in the Disclosure Schedule) and the amount of such Debt due
to such holder at the Effective Time, and acknowledging that, upon payment, such
Debt shall be paid in full and all liens shall be released.
8.14 Conversion of Preferred Stock. All Company Preferred Stock
shall have converted into Company Common Stock in accordance with the terms of
Company's Certificate of Incorporation (except the Series C Preferred Stock, all
of which shall be contributed to the capital of Company at or prior to the
Closing).
8.15 Exercise or Redemption of Warrants. All holders of
nonredeemable warrants to purchase shares of Company Capital Stock shall have
exercised such warrants, and Company shall have redeemed all redeemable warrants
to purchase shares of Company Capital Stock.
8.16 Termination of Stockholders Agreements and Registration
Rights Agreements. Company and each Company Stockholder who is a party to a
stockholders agreement, registration rights agreement or similar agreement shall
have amended such
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agreements to terminate the rights of Company Stockholders and the obligations
of Company under such agreements.
8.17 Company Affiliates Agreements. Each affiliate of Company
shall have signed and delivered to Parent a Company Affiliates Agreement.
8.18 Exemptions Available. Parent must be reasonably satisfied
that there are not more than thirty-five (35) Company Stockholders who are not
"accredited investors" within the meaning of Regulation D promulgated under the
Securities; and must be reasonably satisfied that the issuance of Parent
Ordinary Shares pursuant to this Agreement is exempt from the registration
requirements of the Securities Act by virtue of the exemptions provided by
Section 4(2) of the Securities and/or Regulation D under the Securities Act and
any exemptions from the registration and/or qualification requirements of all
applicable state "blue sky" securities laws.
9. TERMINATION OF AGREEMENT
9.1 Termination. This Agreement may be terminated at any time
prior to the Closing, whether before or after approval of the Merger by the
stockholders of Company:
(a) by the mutual written consent of Parent and Company;
(b) by either Parent or Company if all conditions to such
party's obligations to consummate the transactions contemplated hereby have not
been satisfied or waived, and the Closing has not occurred, on or before
November 30, 2000; provided, however, that this provision shall not be available
to any party whose failure to fulfill any obligation under this Agreement shall
have been the cause of, or shall have resulted in, the failure of the Closing to
occur on or prior to such date;
(c) By Parent (at any time prior to the adoption and
approval of this Agreement and the Merger by the required vote of Company
Stockholders) if a Triggering Event (as defined below) shall have occurred;
(d) by Company, if there has been a breach by Parent of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Parent, or if any representation of Parent will have become
untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on Parent and which Parent fails to cure within a
reasonable time, not to exceed ten (10) days, after written notice thereof
(except that no cure period will be provided for a breach by Parent which by its
nature cannot be cured);
(e) by Parent, if there has been a breach by Company of
any representation, warranty, covenant or agreement set forth in this Agreement
on the part of Company, or if any representation of Company will have become
untrue, in either case which has or can reasonably be expected to have a
Material Adverse Effect on Company and which such Company fails to cure within a
reasonable time, not to exceed ten (10) days, after written notice thereof
(except that no cure period will be provided for a breach by a Company which by
its nature cannot be cured);
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(f) by either Company or Parent, if the approval and
adoption of this Agreement, and the approval of the Merger, by the Company
Stockholders shall not have been obtained by reason of the failure to obtain the
required vote at a meeting of Company Stockholders duly convened therefore or at
any adjournment thereof; provided, however, that the right to terminate this
Agreement under this Section 9.1(f) shall not be available to Company where the
failure to obtain the Company Stockholder approval shall have been caused by (i)
the action or failure to act of Company and such action or failure to act
constitutes a material breach by Company of this Agreement or (ii) a breach of
the Voting Agreement by any party thereto other than Parent;
(g) by Company or Parent, if (i) the Certificate of Merger
is not filed in the office of the Delaware Secretary of State by November 30,
2000 for any reason; provided, however, that the right to terminate this
Agreement under this Section 9.1(g)(i) 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 such events to occur on or before such date if such action or failure
to act constitutes a breach of this Agreement; or (ii) a permanent injunction or
other order by any federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the Merger will have been issued and
will have become final and nonappealable.
Any termination of this Agreement under clauses (b)
through (g) of this Section 9.1 will be effective by the delivery of written
notice of the terminating party to the other party hereto. For the purposes of
this Agreement, a "TRIGGERING EVENT" shall be deemed to have occurred if: (i)
the Board of Directors of Company or any committee thereof shall for any reason
have withdrawn or shall have amended or modified in a manner adverse to Parent
its recommendation in favor of the adoption and approval of this Agreement or
the approval of the Merger; (ii) Company shall have failed to include in the
information statement the recommendation of the Board of Directors of Company in
favor of the adoption and approval of this Agreement and the approval of the
Merger; (iii) the Board of Directors of Company fails to reaffirm its
recommendation in favor of adoption and approval of this Agreement and the
approval of the Merger within ten (10) business days after Parent requests in
writing that such recommendation be reaffirmed at any time following the public
announcement of an Acquisition Proposal; and (iv) Company shall have materially
breached any of the provisions of Section 4.4.
9.2 Effect of Termination. 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; provided, however, that (a) this Section 9.2, Section 9.3 and
Section 11 shall survive the termination of this Agreement and shall remain in
full force and effect, and (b) the termination of this Agreement shall not
relieve any party from any liability for any breach of any covenant or any
willful breach of any representation or warranty of this Agreement.
9.3 Company Payments. In the event that this Agreement is
terminated by Parent or Company, as applicable, pursuant to Sections 9.1(c),
9.1(e) or 9.1(f) Company shall promptly, but in no event later than two (2) days
after the date of such termination, pay Parent a fee equal to $29.0 million in
immediately available funds (the "TERMINATION FEE"); provided, that in the case
of a termination under Sections 9.1(e) or 9.1(f) prior to which no Triggering
Event has occurred, (a) such payment shall be made only if (i) following the
date of this
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Agreement and prior to the termination of this Agreement, a person has publicly
announced an Acquisition Proposal and (ii) within twelve (12) months following
the termination of this Agreement, either a Company Acquisition (as defined
below) is consummated, or Company enters into an agreement providing for a
Company Acquisition and such Company Acquisition is later consummated with the
person (or another person controlling, controlled by, or under common control
with, such person) with whom such agreement was entered into (regardless of when
such consummation occurs if Company has entered into such an agreement within
such nine-month period), and (b) such payment shall be made promptly, but in no
event later than two (2) days after the consummation of such Company Acquisition
(regardless of when such consummation occurs if Company has entered into such an
agreement within such twelve-month period). Company acknowledges that the
agreements contained in this Section 9.3 are an integral part of the
transactions contemplated by this Agreement, and that, without these agreements,
Parent would not enter into this Agreement. Accordingly, if Company fails to pay
in a timely manner the amounts due pursuant to this Section 9.3, and, in order
to obtain such payment, Parent makes a claim that results in a judgment against
Company for the amounts set forth in this Section 9.3, Company shall pay to
Parent its reasonable costs and expenses (including reasonable attorneys' fees
and expenses) in connection with such suit, together with interest on the
amounts set forth in this Section 9.3 at the prime rate of The Chase Manhattan
Bank in effect on the date such payment was required to be made. Payment of the
fees described in this Section 9.3 shall not be in lieu of damages incurred in
the event of breach of this Agreement.
For the purposes of this Agreement, "COMPANY ACQUISITION" shall
mean any of the following transactions (other than the transactions contemplated
by this Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Company pursuant to which the Company Stockholders immediately preceding such
transaction hold less than 50% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by Company of assets representing in excess of 50% of the aggregate
fair market value of Company's business immediately prior to such sale, or (iii)
the acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by Company), directly or indirectly, of beneficial
ownership or a right to acquire beneficial ownership of shares representing in
excess of 50% of the voting power of the then outstanding shares of Company
Capital Stock.
10. SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION AND REMEDIES
10.1 Survival of Representations. All representations and
warranties of Company contained in this Agreement will remain operative and in
full force and effect, regardless of any investigation or disclosure made by or
on behalf of the parties to this Agreement, until the Release Date; provided,
however, that the representations and warranties of Company under Sections 2.7,
2.9, 2.20, 2.26, 2.27 and 2.28 will remain operative and in full force and
effect until the earlier of (a) the date of the completion of the first audit of
financial statements following the Effective Time containing combined operations
to the extent that the representations and warranties of such Sections relates
to an item expected to be encountered in the audit process (in view of the scope
of the audit actually conducted with respect to the Financial Statements) or (b)
the Release Date. Parent acknowledges and agrees that, from and
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after the Closing, except for fraud and deliberate malfeasance, its sole remedy
against the Company Stockholders for any breach of any representation or
warranty set forth in Section 2 of this Agreement is set forth in this Section
10. Parent's representations and warranties set forth in this Agreement shall
terminate as of the Closing (without prejudice to any rights the Company
Stockholders may have for any violations of applicable law).
10.2 Agreement to Indemnify.
(a) Indemnification by the Company Stockholders.
(i) Subject to the limitations set forth in this
Section 10.2, the Company Stockholders will severally indemnify and hold
harmless Parent and its respective officers, directors, agents and employees,
and each person, if any, who controls or may control Parent within the meaning
of the Securities Act (hereinafter in this Section 10.2 referred to individually
as an "INDEMNIFIED PERSON" and collectively as "INDEMNIFIED PERSONS") from and
against any and all claims, demands, actions, causes of action, losses,
reductions in value, costs, damages, liabilities and expenses including, without
limitation, reasonable legal fees (collectively, "DAMAGES") directly or
indirectly caused by or arising out of the failure of any of the representations
and warranties of Company in Section 2 of this Agreement or in any certificate,
document or instrument delivered by or on behalf of Company pursuant hereto or
in connection herewith to be true and correct as of the Effective Time or the
failure of Company to comply with its covenants pursuant to Section 4 of this
Agreement; provided, however, that if the representations and warranties made in
the last sentence of Section 2.14, the last sentence of Section 2.21 and Section
2.22(c) are true and correct as of the date of this Agreement but are not true
and correct as of the Closing Date, Parent shall have such rights as may be
provided under Section 8.1 and Section 9 but shall not have the right to receive
indemnification for Damages under this Section 10.2. Subject to the limitations
set forth in this Section 10.2, each Company Stockholder with respect to such
Stockholder will indemnify and hold harmless Indemnified Persons from and
against any and all claims, demands, actions, causes of action, losses,
reductions in value, costs, damages, liabilities and expenses including, without
limitation, reasonable legal fees directly or indirectly caused by or arising
out of an Ownership Loss (as defined in Section 10.2(a)(ii)) (collectively,
"STOCKHOLDER DAMAGES").
(ii) In seeking indemnification for Damages under
this Section 10.2 the Indemnified Persons shall make no claim for Damages unless
and until such Damages aggregate at least $500,000, inclusive of legal fees (the
"BASKET"), in which event such Indemnified Person may make claims for Damages in
excess of the Basket. To determine the amount of Damages and to determine
whether a breach of a representation or warranty has occurred for purposes of
this Section 10, and not purposes of determining whether a breach of a
representation or warranty has occurred for purposes of Section 8.1, references
to the terms "material" and "in all material respects" in Section 2 (except
Sections 2.11(a) and 2.12 other than the last two (2) paragraphs of Section
2.12) of this Agreement shall be disregarded, and references to the term
"knowledge" in Section 2.22 shall be disregarded. The aggregate liability of
each Company Stockholder pursuant to this Section 10.2 other than for
Stockholder Damages shall be limited to the Hold-Back Shares to be received by
such Company Stockholder in the Merger, with each Hold-Back Share valued at the
Closing Price (as defined below), and the aggregate liability of each Company
Stockholder pursuant to this Section 10.2 for Stockholder
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Damages shall be limited to the Parent Ordinary Shares received by such Company
Stockholder in the Merger, with each such Parent Ordinary Share valued at the
Closing Price (in each case absent fraud or deliberate malfeasance by Company or
such Company Stockholder). As used herein, the term "OWNERSHIP LOSS" means any
Stockholder Damages, specified by Parent in the applicable Notice of Claim as
being an ownership loss, resulting directly or indirectly from any inaccuracy or
misrepresentation in the Investment Representation Letters as to the ownership
of shares of Company Capital Stock at the Effective Time. Notwithstanding
anything herein to the contrary, the Basket shall not be applicable to any claim
by any Indemnified Person for indemnification for any Stockholder Damages or for
fraud or deliberate malfeasance.
(b) Survival of Claims. Notwithstanding anything to the
contrary, if, prior to the Release Date, an Indemnified Person makes a claim for
indemnification under this Agreement with respect to a breach of any
representation or warranty, then the Indemnified Person's rights to
indemnification under this Section 10.2 for such claim shall survive any
expiration of such representation or warranty.
(c) Indemnification Procedures. Andrew Lipman shall act as
representative (the "REPRESENTATIVE") of all Company Stockholders for purposes
of the indemnification provisions of this Section 10.2, and is duly authorized
to be such Representative and may bind Company Stockholders. Promptly after the
receipt by Parent of notice or discovery of any claim, damage or legal action or
proceeding giving rise to indemnification rights under this Agreement, Parent
will give the Representative written notice of such claim, damage, legal action
or proceeding (a "CLAIM") in accordance with Section 10.2.5. Parent may assert a
Claim at any time prior to the Release Date. Within twenty (20) days of delivery
of such written notice, the Representative may, at the expense (and on behalf
of) the Company Stockholders, elect to dispute any Claim and, in the case of any
Claim involving third parties, prosecute such Claim to conclusion or settlement
satisfactory to the Representative using counsel reasonably acceptable to
Parent.
If the Representative makes the foregoing election with
respect to Claims of third parties, Parent will have the right to participate at
its own expense in all proceedings. If the Representative does not make such
election with respect to Claims of third parties, Parent shall be free to
handle, subject to the last sentence of this paragraph, the prosecution or
defense of any such Claim, will take all necessary steps to contest the Claim
involving third parties or to prosecute such Claim to conclusion or settlement
satisfactory to Parent, and will provide regular written progress reports to the
Representative regarding any such Claim, will permit the Representative at the
sole cost of the Representative to participate in such prosecution or defense
and will provide the Representative with reasonable access to all relevant
information and documentation relating to the Claim and Parent's prosecution or
defense thereof. In any case, the party not in control of the Claim will use
reasonable efforts to cooperate with the other party in the conduct of the
prosecution or defense of such Claim. Neither party will compromise or settle
any such Claim without the written consent of either Parent (if the
Representative defends the Claim) or the Representative (if Parent defends the
Claim).
In the event that any party to this Agreement elects to
contest a Claim against any other party to this Agreement under this Section
10.2, such contest shall be conducted in accordance with Section 11.1 hereof.
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(i) The Representative shall have the power to act
for Company Stockholders with respect to all transactions contemplated by this
Agreement, and in connection with any dispute, litigation or arbitration
involving this Agreement, and to do or refrain from doing all such further acts
and things, and execute all such documents as the Representative shall deem
necessary or appropriate in connection with transactions contemplated by this
Agreement, including without limitation, the power (A) to act for Company
Stockholders with regard to matters pertaining to the indemnification referred
to in this Agreement, including the power to compromise any claim on behalf of
Company Stockholders and to transact matters of litigation; (B) to do or refrain
from doing any further act or deed on behalf of Company Stockholders which the
Representative deems necessary or appropriate in his sole discretion relating to
the subject matter of this Agreement, as fully and completely as each Company
Stockholder could do if personally present; and (C) to receive all notices and
service of process on behalf of Company Stockholders in connection with any
claims or matters under this Agreement.
(ii) The Representative or any successor
Representative shall have the power to substitute any other Company Stockholder
(with such stockholder's consent) as a successor Representative hereunder,
acting with the written consent of each person that, immediately prior to the
Effective Time, held more than ten percent of the capital stock of Company (on
an as-converted, fully-diluted basis). In the event that the Representative is
unable to perform his duties hereunder and unable to substitute a successor
Representative by reason of the death or incapacity of the Representative and no
substitute Representative has previously been appointed, a substitute
Representative shall be appointed by Company Stockholders holding a majority of
the voting power of the shares of Company Common Stock as of the date of this
Agreement acting with the written consent of each person that, immediately prior
to the Effective Time, held more than ten percent of the capital stock of
Company (on an as-converted, fully-diluted basis).
(iii) The Representative shall act for the Company
Stockholders on all matters set forth in this Agreement in a manner the
Representative believes to be in the best interests of Company Stockholders and
consistent with his obligations under this Agreement, but the Representative
shall not be responsible to Company Stockholders for any loss or damages Company
Stockholders may suffer by reason of the performance by the Representative of
his duties under the Agreement, other than loss or damage arising from willful
violation of the law or gross negligence in the performance of his duties under
this Agreement. Company Stockholders agree to indemnify and hold harmless the
Representative for any loss or damage arising from the performance of his duties
as Representative hereunder, including, without limitation, the cost of any
accounting firm or legal counsel retained by the Representative on behalf of
Company Stockholders, but excluding any loss or damage arising from willful
violation of the law or gross negligence in the performance of his duties under
this Agreement.
(iv) All actions, decisions and instructions of the
Representative taken, made or given pursuant to the authority granted to the
Representative hereunder shall be conclusive and binding upon all of Company
Stockholders and no Company Stockholder shall have the right to object, dissent,
protest or otherwise contest the same. Parent hereby
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acknowledges that the Representative may with respect to any particular action,
decision or instruction, solicit the consent of Company Stockholders before
acting.
(v) The provisions of this Section are independent
and severable, shall constitute an irrevocable power of attorney coupled with an
interest and shall be binding upon the executors, heirs, legal representatives,
successors and assigns of each Company Stockholder.
(d) Subrogation. In the event that any Company Stockholder
shall be obligated to indemnify any Indemnified Person pursuant to this
Agreement, Company Stockholder shall, upon payment of such indemnity in full, be
subrogated to all rights of such Indemnified Person with respect to the claim to
which such indemnification relates.
(e) Notice of Claim. Each notice of a Claim by Parent
pursuant to this Section 10.2 (the "NOTICE OF CLAIM") will be in writing and
will contain the following information:
(i) Parent's good faith estimate of the reasonably
foreseeable maximum amount of the alleged Damages or Stockholder Damages (which
amount may be the amount of damages claimed by a third party plaintiff in an
action brought against Parent, Company or the Surviving Corporation based on
alleged facts, which if true, would constitute a breach of Company's or Company
Stockholder's representations and warranties); and
(ii) A brief description, in reasonable detail (to
the extent reasonably available to Parent), of the facts, circumstances or
events giving rise to the alleged Damages or Stockholder Damages based on
Parent's good faith belief thereof, including, without limitation, the identity
and address of any third-party claimant (to the extent reasonably available to
Parent), copies of any formal demand or complaint, and a statement as to whether
the Damages relate to Company.
(f) Notice of Disputed Claim. Each notice by
Representative that he or it disputes, or elects to contest, a Claim by Parent
pursuant to this Section 10.2 (the "NOTICE OF DISPUTE") will be in writing and
will contain a description, in reasonable detail of the elements of the Claim
that the Representative is disputing and the basis for such objection based on
Representative's good faith belief thereof.
10.3 Reduction of Company Hold-Back Shares.
(a) Any Damages for which an Indemnified Person shall be
entitled to indemnification pursuant to Section 10.2 will be immediately payable
to such Indemnified Person by the reduction of the number of Company Hold-Back
Shares by a number equal to the amount of such Damages divided by the closing
price of Parent Ordinary Shares as quoted on the Nasdaq National Market on the
Closing Date (the "CLOSING PRICE"). Any Stockholder Damages for which an
Indemnified Person shall be entitled to indemnification pursuant to Section 10.2
will be immediately payable to such Indemnified Person by the reduction of the
number of Company Hold-Back Shares to a Company Stockholder by a number equal to
the amount of such Stockholder Damages divided by the Closing Price. In the
event of any Claim which the Representative shall, on the Release Date, be
disputing pursuant to Sections 10.2(c) and 10.2(f),
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Parent shall reduce the number of Company Hold-Back Shares to be issued to
Company Stockholders on the Release Date by the Estimated Claim Amount (as
defined below) with respect thereto. Upon resolution of such dispute, Parent
will issue to each Company Stockholder the number of Hold-Back Shares, if any,
that such Company Stockholder would have been entitled to receive had such
dispute been resolved prior to the Release Date, but which were not issued to
such Company Stockholder on the Release Date as a result of the preceding
sentence. All indemnification obligations of Company Stockholders under this
Section 10 shall be allocated proportionately among Company Stockholders pro
rata based on the gross consideration payable to each Company Stockholder under
Section 1.1, subject to the limitations contained in this Section 10, and except
that Stockholder Damages shall be allocated entirely and solely to the Company
Stockholder or Stockholders obligated to indemnify the Indemnified Persons
therefore. "ESTIMATED CLAIM AMOUNT" means (i) Parent's good faith estimate of
the Damages or Stockholder Damages claimed under any disputed Claim unresolved
as of the Release Date, divided by (ii) the Closing Price.
(b) An Indemnified Person may reduce the number of Company
Hold-Back Shares in accordance with the terms of this Agreement, without first
making any other Claims directly against Company Stockholders, without
rescinding or attempting to rescind any transaction consummated by this
Agreement and without first exhausting any other remedies that may be available
to it with respect to the subject matter of any Claim. The assertion of any
single Claim for indemnification hereunder will not bar an Indemnified Person
from asserting any other Claim or Claims hereunder.
(c) Parent will allot and issue the Company Hold-Back
Shares (reduced as provided in Section 10.3(a) above, if applicable) to Company
Stockholders on the Release Date (or such later date as provided in Section
10.3(a) in the event of any Claim which the Representative shall, on the Release
Date, be disputing pursuant to Section 10.2(c), and which is subsequently
determined in favor of the Company Stockholders) in accordance with Section 1.1,
and Parent will take such action as may be necessary to cause share certificates
to be issued in the name of Company Stockholders and deliver such share
certificates to Company Stockholders promptly, and in any event within twenty
(20) days, after the Release Date. Cash will be paid in lieu of fractions of
Parent Ordinary Shares as provided in Section 1.2. It is hereby acknowledged and
agreed that the Company Hold-Back Shares will not be represented by share
certificates and will remain as unissued Parent Ordinary Shares until the
Release Date (or such later time as such shares are issued pursuant to this
Section).
11. MISCELLANEOUS
11.1 Governing Law; Dispute Resolution. The internal laws of the
State of California (irrespective of its choice of law principles) will govern
the validity of this Agreement, the construction of its terms, and the
interpretation and enforcement of the rights and duties of the parties hereto.
Any dispute hereunder ("DISPUTE") shall be settled by arbitration in Denver,
Colorado, and, except as herein specifically stated, in accordance with the
commercial arbitration rules of the American Arbitration Association ("AAA
RULES") then in effect. However, in all events, these arbitration provisions
shall govern over any conflicting rules which may now or hereafter be contained
in the AAA Rules. Any judgment upon the award rendered by the arbitrator may be
entered in any court having jurisdiction over the subject matter thereof.
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The arbitrator shall have the authority to grant any equitable and legal
remedies that would be available in any judicial proceeding instituted to
resolve a Dispute.
(a) Compensation of Arbitrator. Any such arbitration will
be conducted before a single arbitrator who will be compensated for his or her
services at a rate to be determined by the parties or by the American
Arbitration Association, but based upon reasonable hourly or daily consulting
rates for the arbitrator in the event the parties are not able to agree upon his
or her rate of compensation.
(b) Selection of Arbitrator. The American Arbitration
Association will have the authority to select an arbitrator from a list of
arbitrators who are lawyers familiar with California contract law; provided,
however, that such lawyers cannot work for a firm then performing services for
either party, that each party will have the opportunity to make such reasonable
objection to any of the arbitrators listed as such party may wish and that the
American Arbitration Association will select the arbitrator from the list of
arbitrators as to whom neither party makes any such objection. In the event that
the foregoing procedure is not followed, each party will choose one person from
the list of arbitrators provided by the American Arbitration Association
(provided that such person does not have a conflict of interest), and the two
persons so selected will select from the list provided by the American
Arbitration Association the person who will act as the arbitrator.
(c) Payment of Costs. Parent and Company Stockholders will
bear the expense of deposits and advances required by the arbitrator in equal
proportions, but either party may advance such amounts, subject to recovery as
an addition or offset to any award. The arbitrator will award to the prevailing
party, as determined by the arbitrator, all costs, fees and expenses related to
the arbitration, including reasonable fees and expenses of attorneys,
accountants and other professionals incurred by the prevailing party.
(d) Burden of Proof. For any Dispute submitted to
arbitration, the burden of proof will be as it would be if the claim were
litigated in a judicial proceeding.
(e) Award. Upon the conclusion of any arbitration
proceedings hereunder, the arbitrator will render findings of fact and
conclusions of law and a written opinion setting forth the basis and reasons for
any decision reached and will deliver such documents to each party to this
Agreement along with a signed copy of the award. The arbitrator may not award
punitive damages.
(f) Terms of Arbitration. The arbitrator chosen in
accordance with these provisions will not have the power to alter, amend or
otherwise affect the terms of these arbitration provisions or the provisions of
this Agreement.
(g) Exclusive Remedy. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the parties for any Dispute arising out of this Agreement.
(h) Specific Performance. Notwithstanding the provisions
contained in this Section 11.1 to the contrary, any party hereunder may seek
equitable relief in connection with any dispute or Claim it may have under this
Agreement or under any agreement or
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instrument delivered in connection with this Agreement pending the determination
of such dispute or Claim, including, without limitation, the right of specific
performance and injunctive relief giving effect to its rights under this
Agreement or such other agreement or instrument. The parties agree that the
resolution of such dispute or Claim shall be enforceable by a court of equity by
a decree of specific performance or as otherwise directed.
11.2 Assignment; Binding Upon Successors and Assigns. No party
hereto may assign any of its rights or obligations hereunder without the prior
written consent of the other parties hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.3 Severability. If any provision of this Agreement, or the
application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Agreement and 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
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
11.4 Counterparts. This Agreement may be executed in
counterparts, each of which will be an original as regards any party whose name
appears thereon and all of which together will constitute one and the same
instrument. This Agreement will become binding when one or more counterparts
hereof, individually or taken together, bear the signatures of all parties
reflected hereon as signatories.
11.5 Other Remedies. Except as otherwise provided herein, and
subject to Section 9.3 and Section 10.1, 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 on such party, and the exercise of any
one remedy will not preclude the exercise of any other.
11.6 Amendment and Waivers. Any term or provision of this
Agreement may be amended, and the observance of any term of this Agreement may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by writing signed by each party to be bound thereby. The
waiver by a party of any breach hereof or default in the performance hereof will
not be deemed to constitute a waiver of any other default or any succeeding
breach or default. This Agreement may be amended by the parties hereto at any
time before or after approval of Company Stockholders.
11.7 No Waiver. The failure of any party to enforce any of the
provisions hereof will not be construed to be a waiver of the right of such
party thereafter to enforce such provisions. The waiver by any party of the
right to enforce any of the provisions hereof on any occasion will not be
construed to be a waiver of the right of such party to enforce such provision on
any other occasion.
11.8 Expenses. Each party will bear its respective expenses and
fees of its own accountants, attorneys, investment bankers and other
professionals incurred with respect to this Agreement and the transactions
contemplated hereby. If the Merger is consummated, Parent will
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pay at the Closing the reasonable investment banking, accounting and attorneys'
fees and expenses and other fees and expenses incurred by Company that is solely
related to the Merger, not to exceed a total of $3.0 million. If for any reason
Parent pays any amounts in excess of the foregoing limit, Parent will be
entitled to be reimbursed by Company Stockholders for such payment and, if not
so reimbursed, Parent will be entitled to treat the amount of payment as Damages
recoverable under Section 10.2, without giving effect to the first sentence of
Section 10.2(a)(ii).
11.9 Notices. Any notice or other communication required or
permitted to be given under this Agreement will be in writing, will be delivered
personally or by mail or express delivery, postage prepaid, and will be deemed
given upon actual delivery or, if mailed by registered or certified mail, on the
fifth business day following deposit in the U.S. mails, addressed as follows:
(a) If to Parent:
Flextronics International Ltd.
2090 Fortune Drive
San Jose, CA 95131
Attention: President, Systems Group and
Chief Financial Officer
Phone: (408) 576-7000
Fax: (408) 526-9215
with a copy to:
Fenwick & West LLP
275 Battery, Suite 1500
San Francisco, CA 94111
Attention: David K. Michaels, Esq.
Phone: (415) 875-2300
Fax: (415) 281-1350
(b) If to Company:
Chatham Technologies, Inc.
One Westbrook Corporate Center
Suite 500
Westchester, IL 60154
Attention: Mr. Daniel L. Timm
Phone: (708) 836-4952
Fax: (708) 492-0358
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with a copy to:
Parker Chapin LLP
405 Lexington Avenue
New York, NY 10174
Attention: Edward R. Mandell, Esq.
Phone: (212) 704-6000
Fax: (212) 704-6288
(c) If to the Representative:
Mr. Andrew Lipman
c/o Kidd & Company, LLC
Three Pickwick Plaza
Greenwich, CT 06830
Phone: (203) 661-0070
Fax: (203) 661-1839
with a copy to:
Parker Chapin LLP
405 Lexington Avenue
New York, NY 10174
Attention: Edward R. Mandell, Esq.
Phone: (212) 704-6000
Fax: (212) 704-6288
or to such other address as the party in question may have furnished to the
other party by written notice given in accordance with this Section 11.9.
11.10 Stamp Duty. Any stamp duty, transfer tax or similar tax
payable in connection with the transfer of Company Common Stock by any Company
Stockholder shall be payable by such Stockholder.
11.11 Construction of Agreement. The language hereof will not be
construed for or against either party. A reference to a section, schedule or
exhibit will mean a section in, schedule to, or an exhibit to, this Agreement,
unless otherwise explicitly set forth. The titles and headings in this Agreement
are for reference purposes only and will not in any manner limit the
construction of this Agreement. For the purposes of such construction, this
Agreement will be considered as a whole.
11.12 Further Assurances. Each party agrees to cooperate fully
with the other party and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by another party to evidence and reflect the transactions provided for
herein and to carry into effect the intent of this Agreement.
11.13 Absence of Third-Party Beneficiary Rights. No provisions of
this Agreement are intended, nor will be interpreted, to provide or create any
third-party beneficiary
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rights or any other rights of any kind in any client, customer, affiliate,
partner or employee of any party hereto or any other person or entity, unless
specifically provided otherwise herein, and, except as so provided, all
provisions hereof will be personal solely between the parties to this Agreement.
Notwithstanding the provisions in this Section 11.13 to the contrary, following
the Effective Time, (a) Company Stockholders shall be third-party beneficiaries
of the obligations of Parent under this Agreement; provided that, in enforcing
such rights, each Company Stockholder may act only through the Representative,
and (b) holders of Company Options at the Effective Time shall be third-party
beneficiaries of the obligations of Parent under Section 1.4 of this Agreement.
11.14 Public Announcement. Upon or following execution of this
Agreement, Parent may issue a press release, previously reviewed by Company and
with Company's consent, announcing the Merger, it being understood, however,
that Company may make such private announcements to its employees and such
customers as may be approved in writing by Parent concerning the subject matter
of this Agreement that it deems are reasonably necessary or advisable to carry
into effect the transactions contemplated hereby. Thereafter, Parent may issue
such press releases, and make such other disclosures regarding the Merger, as it
reasonably and in good faith determines are required under applicable securities
laws or regulatory rules; provided, however, that Company and its counsel will
have a reasonable opportunity to review any such disclosure to be made before
the Effective Time prior to its issuance.
11.15 Time is of the Essence. The parties hereto acknowledge and
agree that time is of the essence in connection with the execution, delivery and
performance of this Agreement, and that they will each utilize all reasonable
efforts to satisfy all the conditions to Closing on or before August 31, 2000.
11.16 Entire Agreement. This Agreement, the Company Ancillary
Agreements, the Parent Ancillary Agreements, the Merger Sub Ancillary Agreements
and the exhibits and schedules hereto and thereto constitute the entire
understanding and agreement of the parties hereto with respect to the subject
matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect to the subject matter hereof. The express terms
hereof control and supersede any course of performance or usage of trade
inconsistent with any of the terms hereof.
11.17 Effect of Schedules. Notwithstanding anything to the
contrary contained in this Agreement or in any of the Schedules, any information
disclosed in one of such Schedules shall be deemed to be disclosed in any other
Schedules to which such information is relevant, to the extent it is reasonably
apparent from the information disclosed that it is relevant to such other
Schedules.
11.18 Mutual Drafting. This Agreement is the joint product of
Parent, Company and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of Parent and Company and shall not be
construed for or against any party thereto.
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11.19 No Joint Venture. Nothing contained in this Agreement will
be deemed or construed as creating a joint venture or partnership between the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other, and the parties'
status is, and at all times, will continue to be, that of independent
contractors with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold itself out as having
any authority or relationship in contravention of this Section.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
FLEXTRONICS INTERNATIONAL LTD. CHATHAM TECHNOLOGIES, INC.
By: /s/ Robert R.B. Dykes By: /s/ Ross Manire
-------------------------------- -------------------------------------
Name: Robert R.B. Dykes Name: Ross Manire
Title: President, Systems Group Title: Chief Executive Office
and Chief Financial Officer
CHATHAM ACQUISITION CORP.
By: /s/ Timothy Stewart
---------------------------------
Name: Timothy Stewart
Title: Secretary
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
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