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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DIGITAL BIOMETRICS, INC.,
VC ACQUISITION CORP.
AND
VISIONICS CORPORATION
OCTOBER 18, 2000
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TABLE OF CONTENTS
ARTICLE 1 TERMS OF THE MERGER..................................................2
1.1 The Merger.......................................................2
1.2 Effective Time...................................................2
1.3 Merger Consideration.............................................2
1.4 Dissenting Shares................................................4
1.5 Shareholders' Rights upon Merger.................................4
1.6 Surrender and Exchange of Shares.................................5
1.7 The Escrow Account...............................................7
1.8 Options..........................................................9
1.9 Certificate of Incorporation and Bylaws of the
Surviving Corporation...........................................10
1.10 Directors and Officers of the Surviving Corporation.............10
1.11 Directors and Executive Officers of Purchaser...................10
1.12 Other Effects of Merger.........................................10
1.13 Registration Statement Prospectus/Proxy Statement...............10
1.14 Tax-Free Reorganization.........................................12
1.15 Voting Agreements...............................................13
1.16 Corporate Name of Purchaser.....................................13
1.17 Additional Actions..............................................13
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................13
2.1 Due Incorporation and Good Standing.............................13
2.2 Capitalization..................................................14
2.3 Subsidiaries....................................................14
2.4 Authorization; Binding Agreement................................15
2.5 Governmental Approvals..........................................15
2.6 No Violations...................................................16
2.7 Company Financial Statements....................................16
2.8 Absence of Certain Changes or Events;
No Undisclosed Liabilities......................................17
2.9 Compliance with Laws............................................17
2.10 Permits.........................................................17
2.11 Litigation......................................................18
2.12 Contracts.......................................................18
2.13 Employee Benefit Plans..........................................18
2.14 Taxes and Returns...............................................19
2.15 Intellectual Property...........................................20
2.16 Finders and Investment Bankers..................................21
2.17 Pooling of Interests Accounting.................................21
2.18 Insurance.......................................................21
2.19 Title to Properties.............................................21
2.20 Accounts Receivable.............................................22
2.21 Employees.......................................................22
2.22 Affiliate Transactions..........................................23
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2.23 Customers and Suppliers.........................................24
2.24 Officers and Directors; Bank Accounts...........................24
2.25 Professional Fees...............................................24
2.26 Disclosure......................................................24
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF PURCHASER.........................24
3.1 Organization and Good Standing..................................25
3.2 Capitalization..................................................25
3.3 Subsidiaries....................................................25
3.4 Authorization; Binding Agreement................................26
3.5 Governmental Approvals..........................................27
3.6 No Violations...................................................27
3.7 Securities Filings..............................................27
3.8 Purchaser Financial Statements..................................28
3.9 No Undisclosed Liabilities......................................28
3.10 Litigation......................................................29
3.11 Compliance with Laws............................................29
3.12 Taxes and Returns...............................................29
3.13 Intellectual Property...........................................30
3.14 Employee Benefit Plans..........................................31
3.15 Finders and Investment Bankers..................................31
3.16 No Prior Activities.............................................31
3.17 Pooling of Interests Accounting.................................31
3.18 Insurance.......................................................31
ARTICLE 4 ADDITIONAL COVENANTS OF THE COMPANY.................................32
4.1 Conduct of Business of the Company and the
Company Subsidiaries............................................32
4.2 Notification of Certain Matters.................................34
4.3 Access and Information..........................................34
4.4 Shareholder Approval............................................34
4.5 Reasonable Commercial Efforts...................................35
4.6 Public Announcements............................................35
4.7 Professional Fees...............................................35
4.8 No Solicitation.................................................36
ARTICLE 5 ADDITIONAL COVENANTS OF PURCHASER...................................37
5.1 Conduct of Business of Purchaser and the
Purchaser Subsidiaries..........................................37
5.2 Notification of Certain Matters.................................38
5.3 Access and Information..........................................38
5.4 Reasonable Commercial Efforts...................................38
5.5 Public Announcements............................................39
5.6 Compliance......................................................39
5.7 SEC and Stockholder Filings.....................................39
5.8 Tax Opinion Certificate.........................................39
5.9 Letter of Accountants...........................................39
5.10 Indemnification.................................................39
5.11 Stockholder Approval............................................40
5.12 No Solicitation.................................................41
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5.13 Plan of Reorganization..........................................42
5.14 Fairness Opinion................................................42
ARTICLE 6 CONDITIONS..........................................................42
6.1 Conditions to Each Party's Obligations..........................42
6.2 Conditions to Obligations of the Company........................44
6.3 Conditions to Obligations of Purchaser..........................45
6.4 Frustration of Conditions.......................................47
ARTICLE 7 TERMINATION AND ABANDONMENT.........................................47
7.1 Termination.....................................................48
7.2 Effect of Termination and Abandonment...........................49
ARTICLE 8 SURVIVAL; INDEMNIFICATION...........................................49
8.1 Survival of Representations and Warranties......................49
8.2 Indemnification of Purchaser....................................50
8.3 Procedure for Indemnification of Purchaser......................51
8.4 Indemnification Threshold; Maximum
Indemnification Liability.......................................52
ARTICLE 9 MISCELLANEOUS ......................................................52
9.1 Confidentiality.................................................52
9.2 Amendment and Modification......................................53
9.3 Waiver of Compliance; Consents..................................53
9.4 Notices.........................................................54
9.5 Binding Effect; Assignment......................................55
9.6 Expenses........................................................55
9.7 Governing Law...................................................55
9.8 Counterparts....................................................55
9.9 Interpretation..................................................55
9.10 Entire Agreement................................................56
9.11 Severability....................................................56
9.12 Specific Performance............................................56
9.13 Third Parties...................................................56
9.14 Disclosure Letters..............................................56
EXHIBITS:
Exhibit A: Form of Escrow Agreement
Exhibit B: Form of Voting Agreement
Exhibit C: Form of Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and
entered into as of October 18, 2000, by and among Visionics Corporation, a
corporation organized under the laws of the State of New Jersey (the "Company"),
Digital Biometrics, Inc., a Delaware corporation ("Purchaser"), VC Acquisition
Corp., a New Jersey corporation and wholly owned subsidiary of Purchaser
("Merger Sub") and, for the purpose of Sections 1.7(a), 8.2, 8.3 and 8.4 only,
certain shareholders of the Company identified on the signature pages of this
Agreement (collectively, the "Major Shareholders").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of the Company, Merger Sub
and Purchaser have approved the merger (the "Merger") of Merger Sub with and
into the Company in accordance with the laws of the State of New Jersey and the
provisions of this Agreement;
WHEREAS, the Company, Merger Sub and Purchaser desire to make certain
representations, warranties and agreements in connection with, and establish
various conditions precedent to, the Merger;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, simultaneously with the execution and delivery of this
Agreement, Purchaser and the Company are entering into a lending arrangement,
pursuant to Purchaser has agreed to lend to the Company up to $1 million (the
Working Capital Facility"), and the Company has executed and delivered to
Purchaser a promissory note, security agreement and patent security agreement;
and
WHEREAS, for financial reporting purposes, it is intended that the
Merger shall be accounted for as a "pooling of interests."
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements hereinafter set forth in
the parties hereto agree as follows:
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A G R E E M E N T:
ARTICLE 1
TERMS OF THE MERGER
1.1. The Merger. Upon the terms and subject to the conditions of this
Agreement, the Merger shall be consummated in accordance with the New Jersey
Business Corporation Act (the "NJBCA"). At the Effective Time (as defined
below), upon the terms and subject to the conditions of this Agreement, Merger
Sub shall be merged with and into the Company in accordance with the NJBCA and
the separate existence of Merger Sub shall thereupon cease, and the Company, as
the surviving corporation in the Merger (the "Surviving Corporation"), shall
continue its corporate existence under the laws of the State of New Jersey as a
subsidiary of Purchaser under a name mutually agreeable to the parties. The
parties shall prepare and execute a certificate of merger (the "Certificate of
Merger") in order to comply in all respects with the requirements of the NJBCA
and with the provisions of this Agreement.
1.2. Effective Time. The Merger shall become effective at the time of
the filing of the executed original and copy of the Certificate of Merger with
the Department of Treasury of the State of New Jersey as required by Section
14A:10-4.1 of the NJBCA or at such later time as may be specified in the
Certificate of Merger. No later than the business day immediately following the
satisfaction and/or waiver by the party or parties entitled to the benefit of
the same of all of the conditions set forth in Article 6 of this Agreement, the
parties hereto shall cause the Merger to become effective. Purchaser and the
Company shall mutually determine the time of such filing and the place where the
closing of the Merger (the "Closing") shall occur. The time when the Merger
shall become effective is herein referred to as the "Effective Time" and the
date on which the Effective Time occurs is herein referred to as the "Closing
Date."
1.3. Merger Consideration.
(a) Subject to the provisions of this Agreement, each of the issued and
outstanding shares (the "Company Shares") of common stock, no par value, of the
Company (the "Company Stock"), exclusive of Dissenting Shares as defined in
Section 1.4, as of the Effective Time shall be converted into a number of fully
paid, validly issued and nonassessable shares of the common stock of Purchaser,
par value $.01 per share (the "Purchaser Stock"), equal to the result of
dividing: (a) the
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quotient derived from dividing (i) The Aggregate Merger Consideration by (ii)
the Fully Diluted Company Shares by (b) the Closing Share Price (the "Exchange
Ratio"), subject to payment of cash in lieu of any fractional share as
hereinafter provided (the "Merger Consideration"). For purposes of this
Agreement:
o The "Aggregate Merger Consideration" shall mean the sum of: (a) the
product of (i) the Closing Share Price by (ii) 7,000,000 plus (b) the product of
(i) the number of Company Options (as defined in Section 1.8 hereof) outstanding
on the Closing Date multiplied by the average exercise price (rounded to the
nearest one cent) of the Company Options.
o "Fully Diluted Company Shares" shall mean the number of shares of
Company Stock outstanding on the Closing Date assuming the exercise of all
outstanding Company Options.
o The "Closing Share Price" shall mean the average closing share price
of Purchaser's Stock during the 20 consecutive trading days ending on the
trading day immediately preceding the Closing Date as reported by The Nasdaq
National Market.
The Exchange Ratio shall be subject to appropriate adjustment in the
event of a stock split, stock dividend or recapitalization after the date of
this Agreement applicable to shares of Purchaser Stock or Company Stock.
(b) No fractional shares of Purchaser Stock shall be issued pursuant to
the Merger nor will any fractional share interest involved entitle the holder
thereof to vote, to receive dividends or to exercise any other rights of a
stockholder of Purchaser. In lieu thereof, any holder of Company Stock (each a
"Company Shareholder") who would otherwise be entitled to a fractional share of
Purchaser Stock pursuant to the provisions hereof shall receive an amount in
cash pursuant to Section 1.6(d) hereof.
(c) Subject to the provisions of this Agreement, at the Effective Time,
the shares of Merger Sub common stock outstanding immediately prior to the
Merger shall be converted, by virtue of the Merger and without any action on the
part of the holder thereof, into one share of the common stock of the Surviving
Corporation (the "Surviving Corporation Common Stock"), which one share of the
Surviving Corporation Common Stock shall constitute all of the issued and
outstanding capital stock of the Surviving Corporation and shall be owned by
Purchaser.
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1.4. Dissenting Shares. Notwithstanding any provision of this Agreement
to the contrary, each outstanding Company Share, the holder of which has
demanded and perfected such holder's right to dissent from the Merger and to be
paid the fair value of such shares in accordance with Section 14A:11 of the
NJBCA and, as of the Effective Time, has not effectively withdrawn or lost such
dissenters' rights ("Dissenting Shares"), shall not be converted into or
represent a right to receive the Merger Consideration into which Company Shares
are converted pursuant to Section 1.3 hereof, but the holder thereof shall be
entitled only to such rights as are granted by the NJBCA. Notwithstanding the
immediately preceding sentence, if any holder of Company Shares who demands
dissenters' rights with respect to such shares under the NJBCA effectively
withdraws or loses (through failure to perfect or otherwise) its dissenters'
rights, then as of the Effective Time or the occurrence of such event, whichever
later occurs, such holder's Company Shares will automatically be converted into
and represent only the right to receive the Merger Consideration as provided in
Section 1.3 hereof, without interest thereon, upon surrender of the certificate
or certificates formerly representing such Shares. After the Effective Time,
Purchaser shall cause the Company to make all payments to holders of Dissenting
Shares with respect to such demands in accordance with the NJBCA. The Company
shall give Purchaser (i) prompt written notice of any notice of intent to demand
fair value for any Company Shares, withdrawals of such notices, and any other
instruments served pursuant to the NJBCA and received by the Company, and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for fair value for Company Shares under the NJBCA. The Company shall
not, except with the prior written consent of Purchaser, voluntarily make any
payment with respect to any demands for fair value for Company Shares or offer
to settle or settle any such demands.
1.5. Shareholders' Rights upon Merger. Upon consummation of the Merger,
the certificates which theretofore represented the Company Shares (the
"Certificates") shall cease to represent any rights with respect thereto, and,
subject to applicable Law (as defined in Section 2.6 below) and this Agreement,
shall only represent the right to receive the Merger Consideration, including
the amount of cash, if any, payable in lieu of fractional shares of Purchaser
Stock into which the Company Shares have been converted pursuant to this
Agreement.
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1.6. Surrender and Exchange of Shares.
(a) Maslon Edelman Borman & Brand, LLP, counsel to Purchaser, shall act
as exchange agent (the "Exchange Agent") for the Merger. Promptly after the
Effective Time, Purchaser shall make available, or cause to be made available,
to the Exchange Agent such certificates evidencing such number of shares of
Purchaser Stock, as and when necessary, in order to enable the Exchange Agent to
affect the exchange of certificates and make the cash payments in respect of
fractional shares contemplated by Section 1.3(b) hereof. Purchaser shall also
make available, or cause to be made available, certificates representing 10
percent of the aggregate Merger Consideration (the "Escrow Shares") and cause
the same to be deposited into the Escrow Account (as defined in Section 1.7
hereof) as partial security for the Company Shareholders' indemnification
obligations as set forth in Article 8 hereof.
(b) On the Closing Date, Purchaser shall instruct the Exchange Agent to
mail to each holder of record of a Certificate, within five business days of
receiving from the Company a list of such holders of record, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such other
provisions as Purchaser may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Certificate in exchange for certificates
representing the applicable number of shares of Purchaser Stock.
(c) After the Effective Time, each holder of a Company Share (other
than holders of Dissenting Shares) shall surrender and deliver the Certificates
to the Exchange Agent together with a duly completed and executed transmittal
letter. Upon such surrender and delivery, the holder shall receive a certificate
representing the number of whole shares of Purchaser Stock into which such
holder's Company Shares have been converted pursuant to this Agreement, subject
to payment of cash in lieu of any fractional share. Until so surrendered and
exchanged, each outstanding Certificate after the Effective Time shall be deemed
for all purposes to evidence the right to receive that number of whole shares of
Purchaser Stock into which the Company Shares have been converted pursuant to
this Agreement, subject to payment of cash in lieu of any fractional share;
provided, however, that no dividends or other distributions, if any, in respect
of the shares of Purchaser Stock, declared after the Effective Time and payable
to holders
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of record after the Effective Time shall be paid to the holders of any
unsurrendered Certificates until such Certificates and transmittal letters are
surrendered and delivered are provided herein. Subject to applicable Law, after
the surrender and exchange of Certificates, the record holders thereof will be
entitled to receive any such dividends or other distributions without interest
thereon, which theretofore have become payable with respect to the number of
shares of Purchaser Stock for which such Certificates were exchangeable. Holders
of any unsurrendered Certificates shall not be entitled to vote Purchaser Stock
until such Certificates are exchanged pursuant to this Agreement.
(d) Any holder of Company Shares who would otherwise be entitled to a
fractional share of Purchaser Stock pursuant to the provisions hereof shall
receive cash (without interest) in an amount equal to such holder's
proportionate interest in the net proceeds from the sale or sales in the open
market by the Exchange Agent, on behalf of all such holders, of the shares of
Purchaser Stock constituting the excess of (i) the number of whole shares of
Purchaser Stock delivered to the Exchange Agent by Purchaser over (ii) the
aggregate number of whole shares of Purchaser Stock to be distributed to holders
of Company Stock (such excess being herein called the "Excess Shares"). As soon
as practicable following the Effective Time, the Exchange Agent shall determine
the number of Excess Shares and, as agent for the former holders of Company
Stock, shall sell the Excess Shares at the prevailing prices on The Nasdaq Stock
Market. The Exchange Agent shall deduct from the proceeds of the sale of the
Excess Shares all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of Excess Shares. Until the net
proceeds of such sale have been distributed to the former holders of Company
Stock, the Exchange Agent will hold such proceeds in trust for such former
holders. As soon as practicable after the determination of the amount of cash to
be paid to such former holders in lieu of any fractional interests, the Exchange
Agent shall make available in accordance with this Agreement such amounts to
such former holders.
(e) At the Effective Time, the stock transfer books of the Company
shall be closed and no transfer of Company shares shall be made thereafter,
other than transfers of Company Shares that have occurred prior to the Effective
Time. In the event that, after the Effective Time, Certificates are presented to
the Surviving Corporation, they shall be canceled and exchanged for shares of
Purchaser Stock or cash as provided in Section 1.3 hereof.
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(f) If consideration in respect of Company Shares is to be made to a
person other than the person in whose name a Certificate is registered, it shall
be a condition to such payment that such Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of such payment in a name other than that of the registered
holder of the Certificate surrendered or shall have established to the
satisfaction of Purchaser or the Exchange Agent that such tax either has been
paid or is not payable.
(g) None of the Company, Purchaser or the Exchange Agent shall be
liable to any holder of Company Shares for any such shares of Purchaser Stock
(or dividends or distributions with respect thereto), or cash delivered to a
public official pursuant to any abandoned property, escheat or similar law,
rule, regulation, statute, order, judgment or decree.
1.7. The Escrow Account.
(a) As partial security for the performance of the Company
Shareholders' indemnification obligations set forth in Article 8 hereof, the
Escrow Shares shall be placed in an escrow account (the "Escrow Account")
pursuant to the terms of an escrow agreement to be entered into by and among
Purchaser, a the representative of the Company Shareholders on behalf of the
Company Shareholders (the "Attorney-in-Fact"), and an escrow agent (the "Escrow
Agent") to be mutually acceptable to the Attorney-in-Fact and Buyer, in form and
substance substantially as set forth in Exhibit A (the "Escrow Agreement"). By
their execution of this Agreement the Major Shareholders, and by their approval
of the Merger, the other Company Shareholders, will be conclusively deemed to
have consented to, approved and agreed to be bound by the Escrow Agreement and
the employment of Joseph Atick as the Attorney-in-Fact under the Escrow
Agreement. The Company Shareholders will also be conclusively deemed to have
consented to, approved and agreed to the taking by the Attorney-in-Fact of any
and all actions and the making of any decisions required or permitted to be
taken by such Attorney-in-Fact under this Agreement and/or the Escrow Agreement,
including, without limitation, the exercise of the power to (i) authorize
delivery to Purchaser of Escrow Shares (and proceeds from any sale of the Escrow
Shares) and satisfaction of indemnity claims by Purchaser pursuant to Article 8,
(ii) agree to negotiate, enter into
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settlements and compromises of, comply with orders of courts and awards of
arbitrators with respect to, such claims, (iii) arbitrate results, settle or
compromise any claim for indemnity made pursuant to Article 8 and (iv) take all
actions necessary in the judgment of the Attorney-in-Fact for the accomplishment
of the foregoing. The Company Shareholders will be bound by all actions taken
and documents executed by the Attorney-in-Fact in connection with the Escrow
Agreement. In performing the functions specified in this Agreement and Escrow
Agreement, the Attorney-in-Fact will not be liable to any Company Shareholders
in absence of gross negligence or willful misconduct on the part of the
Attorney-in-Fact. Any out-of-pocket costs and expenses reasonably incurred by
the Attorney-in-Fact in connection with the actions taken by the
Attorney-in-Fact pursuant to the terms of the Escrow Agreement (including,
without limitation, the hiring of legal counsel and the incurring of legal fees
and costs) will be paid by the Company Shareholders to the Attorney-in-Fact pro
rata in proportion to their respective percentage interests in the Escrow Shares
(and proceeds from any sale of the Escrow Shares).
(b) The relative interests of each Company Shareholder in the Escrow
Shares and the proceeds from any sale of Escrow Shares will be based upon his or
her relative contribution to the escrow account as provided in Sections 1.3 and
1.6 and certificates representing each Company Shareholder's Escrow Shares shall
be issued in the name of each Company Shareholder upon consummation of the
Closing and the execution and delivery by each Company Shareholder of a stock
power endorsed in blank. Upon the consummation of the Closing, each Company
Shareholder shall become a stockholder of Purchaser with respect to such Company
Shareholder's portion of the Escrow Shares and shall have all of the rights of a
stockholder with respect to all such shares, including the right to vote the
shares, to receive all dividends and other distributions paid with respect
thereto, and the right to sell all or a portion of such shares at any time
following the public disclosure of Purchasers' consolidated results of
operations for a period commencing on the Closing Date and not less than 30
days; provided, however, that during the term of the escrow, no Company
Shareholder may pledge, hypothecate or otherwise encumber any Escrow Shares, and
the proceeds from any sale of the Escrow Shares shall be retained in the Escrow
Account pending any payout pursuant to the provisions of Article 8 hereof or
delivery to the Attorney-in-Fact as set forth below. The Attorney-in-Fact shall
be entitled to delivery of certificates representing the Escrow Shares, together
with
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proceeds from any sale of Escrow Shares, on the one-year anniversary of the
Closing Date, subject to a pro rata holdback of Escrow Shares (and proceeds from
any sale of Escrow Shares) then equal in value to 100 percent of any then
existing indemnification claims as measured by the closing share price of
Purchaser Stock on the Closing Date as reported by The Nasdaq National Market.
1.8. Options. At the Effective Time, Purchaser shall cause each holder
of a then outstanding and unexercised option (the "Company Options") exercisable
for shares of Company Stock to receive, by virtue of the Merger and without any
action on the part of the holder thereof, options exercisable for shares of
Purchaser Stock (a "Purchaser Option") in a share denomination equal to the
product of: (a) the Exchange Ratio determined pursuant to Section 1.3(a)
multiplied by (b) the number of shares of Company Stock purchasable under the
Company Option and with an exercise price equal to the quotient of: (a) the
exercise price stated in the Company Option divided by (b) the Exchange Ratio.
Each Purchaser Option shall contain such other terms and conditions as are
contained in the agreements evidencing the Company Options, exclusive of share
denomination and exercise price. Purchaser shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Purchaser
Stock for delivery upon the exercise of Company Options after the Effective
Time. Immediately after the Effective Time, Purchaser shall file or cause to be
filed all registration statements on Form S-8 or other appropriate form as may
be necessary in connection with the purchase and sale of Purchaser Stock
contemplated by such Company Options subsequent to the Effective Time, and shall
maintain the effectiveness of such registration statements (and maintain the
current. status of the prospectus or prospectuses contained therein) for so long
as any of the Company Options registered thereunder remain outstanding. As soon
as practicable after the Effective Time, Purchaser shall qualify under
applicable state securities laws the issuance of such shares of Purchaser Stock
issuable, upon exercise of Company Options. Purchaser shall use reasonable
commercial efforts to cause to be taken any actions necessary on the part of
Purchaser to enable subsequent transactions in Purchaser Stock after the
Effective Time pursuant to the Company Options held by persons subject to the
reporting requirements of Section 16(a) of the Securities Exchange Act (as
defined below) to be exempt from the application of Section 16(b) of the
Securities Exchange Act, to the extent permitted thereunder.
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1.9. Certificate of Incorporation and Bylaws of the Surviving
Corporation. At and after the Effective Time, the Certificate of Incorporation
and the Bylaws of the Surviving Corporation shall be identical to the Articles
of Incorporation and the Bylaws of the Company in effect at the Effective Time
(subject to any subsequent amendments).
1.10. Directors and Officers of the Surviving Corporation. At and after
the Effective Time the directors of Merger Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation, and
the officers of the Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until their
successors are elected or appointed and qualified. If, at the Effective Time, a
vacancy shall exist on the Board of Directors or in any office of the Surviving
Corporation, such vacancy may thereafter be filled in the manner provided by
law.
1.11. Directors and Executive Officers of Purchaser. At and after the
Effective Time Purchaser's Board of Directors shall be increased by two members,
Purchaser shall cause Joseph Atick and Jason Choo to be appointed to serve in
the newly created positions and James Granger shall be designated Chairman of
the Board. At and after the Effective Time, Joseph Atick and John Metil,
respectively, will be designated as Chief Executive Officer and President of
Purchaser, and each will report directly to Purchaser's Board of Directors.
1.12. Other Effects of Merger. The Merger shall have all further
effects as specified in the applicable provisions of the NJBCA.
1.13. Registration Statement Prospectus/Proxy Statement.
(a) For the purposes of (i) registering Purchaser Stock for issuance to
holders of the Company Shares in connection with the Merger with the Securities
and Exchange Commission ("SEC") under the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), and complying
with applicable state securities Laws, (ii) holding the meeting of the Company's
shareholders to vote upon the adoption of this Agreement and the Merger and the
transactions contemplated hereby and thereby (the "Company Proposals") and (iii)
holding the meeting of Purchaser's stockholders to vote upon issuance of
Purchaser Stock to the Company Shareholders in the Merger and the change in the
name of Purchaser to "Visionics Corporation" as contemplated by Section 1.16 of
this Agreement (the "Purchaser Proposals"), Purchaser
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and the Company will cooperate in the preparation of a registration statement on
Form S-4 (such registration statement, together with any and all amendments and
supplements thereto, being herein referred to as the "Registration Statement"),
including a prospectus/proxy statement satisfying all requirements of applicable
state securities Laws, the Securities Act and the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder (the "Securities
Exchange Act"). Such prospectus/ proxy statement in the form mailed by the
Company and Purchaser to their respective shareholders and stockholders,
together with any and all amendments or supplements thereto, is herein referred
to as the "Prospectus/Proxy Statement."
(b) The Company will furnish Purchaser with such information concerning
the Company and its subsidiaries as is necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to the Company and its
subsidiaries, to comply with applicable Law. None of the information relating to
the Company and its subsidiaries supplied by the Company for inclusion in the
Prospectus/Proxy Statement will contain any untrue statement of a material fact
or will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Company agrees promptly to advise
Purchaser if, at any time prior to the meeting of the shareholders of the
Company referenced herein, any information provided by it in the
Prospectus/Proxy Statement is or becomes incorrect or incomplete in any material
respect and to provide Purchaser with the information needed to correct such
inaccuracy or omission, The Company will furnish Purchaser with such
supplemental information as may be necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to the Company and its
subsidiaries, to comply with applicable Law after the mailing thereof to the
shareholders of the Company.
(c) Purchaser will furnish the Company with such information concerning
Purchaser and its subsidiaries as is necessary in order to cause the
Prospectus/Proxy statement, insofar as it relates to Purchaser and its
subsidiaries, to comply with applicable Law. None of the information relating to
Purchaser and its subsidiaries supplied by Purchaser for inclusion in the
Prospectus/Proxy Statement will contain any untrue statement of a material fact
or will omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
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circumstances under which they were made, not misleading. Purchaser agrees
promptly to advise the Company if, at any time prior to the meeting of
stockholders of the Company referenced herein, any information provided by it in
the Prospectus/Proxy Statement is or becomes incorrect or incomplete in any
material respect and to provide the Company with the information needed to
correct such inaccuracy or omission. Purchaser will furnish the Company with
such supplemental information as may be necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to Purchaser and its
subsidiaries, to comply with applicable Law after the mailing thereof to the
shareholders of the Company and Purchaser.
(d) The Company and Purchaser agree to cooperate in making any
preliminary filings of the Prospectus/Proxy Statement with the SEC, as promptly
as practicable, pursuant to Rule 14a-6 under the Securities Exchange Act.
(e) Purchaser will file the Registration Statement with the SEC and
appropriate materials with applicable state securities agencies as promptly as
practicable after the date hereof and will use its reasonable best efforts to
cause the Registration Statement to become effective under the Securities Act
and all such state filed materials to comply with applicable state securities
Laws. Purchaser shall, provide the Company for its review a copy of the
Registration Statement at least such amount of time prior to each filing thereof
as is customary in transactions of the type contemplated hereby and shall not
make any filing with the SEC without the prior written consent of the Company,
which consent shall not be unreasonably withheld or delayed. The Company
authorizes Purchaser to utilize the Registration Statement and in all such state
filed materials, the information concerning the Company and its subsidiaries
provided to Purchaser in connection with, or contained in, the Prospectus/Proxy
Statement. Purchaser promptly will advise the Company when the Registration
Statement has become effective and, of any supplements or amendments thereto,
and Purchaser will furnish the Company with copies of all documents. Except for
the Prospectus/Proxy Statement or the preliminary prospectus/proxy statement,
neither Purchaser nor the Company shall distribute any written material that
might constitute a "prospectus" relating to the Merger or the Company Proposals
within the meaning of the Securities Act or any applicable state securities Law
without the prior written consent of the other party.
1.14. Tax-Free Reorganization. The parties intend that the Merger
qualify as a reorganization within the meaning of
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Section 368(a) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder (the "Code"). None of the parties will knowingly take any
action that would cause the Merger to fail to qualify as a reorganization within
the meaning of Section 368 (a) of the Code.
1.15. Voting Agreements. As a condition to the effectiveness to this
Agreement, each of the Major Shareholders shall have executed and delivered to
Purchaser a voting agreement substantially in the form attached hereto as
Exhibit B.
1.16. Corporate Name of Purchaser. At the Effective Time, the
Certificate of Incorporation of Purchaser shall be amended to change Purchaser's
name to "Visionics Corporation."
1.17. Additional Actions. If, at any time after the Effective Time, the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of Merger Sub or the Company or otherwise carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Merger Sub or
the Company, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of Merger Sub or the Company, all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under such rights,
properties or assets in the Surviving Corporation or otherwise to carry out this
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure letter from the Company to
Purchaser to be delivered upon the execution of this Agreement, which sets forth
certain disclosures concerning the Company and its business (the "Company
Disclosure Letter"), each section of which qualifies the correspondingly
numbered representation or warranty, the Company hereby represents and warrants
to Purchaser and Merger Sub as follows:
2.1. Due Incorporation and Good Standing. The Company and each of the
Company Subsidiaries (as defined below) is a
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corporation duly incorporated, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. The Company and each of the Company
Subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not be reasonably likely to
have a material adverse effect on the business, assets, condition (financial or
otherwise), liabilities or the results of operations of the Company and its
subsidiaries taken as a whole ("Company Material Adverse Effect"). The Company
has heretofore made available to Purchaser accurate and complete copies of the
Certificate of Incorporation and Bylaws, as currently in effect, of the Company.
For purposes of this Agreement, the term "Company Subsidiary" shall mean any
"Significant Subsidiary" (as such term is defined in Rule 1-02 of Regulation S-X
of the SEC) of the Company.
2.2. Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of 20,000,000 shares of Company Stock. As of the
date hereof, 12,106,250 shares of Company Stock were issued and outstanding. No
other capital stock of the Company is authorized or issued. All issued and
outstanding shares of the Company Stock are duly authorized, validly issued,
fully paid and non-assessable. As of the date hereof there are no outstanding
rights, subscriptions, warrants, puts, calls, unsatisfied preemptive rights,
options or other agreements of any kind relating to any of the outstanding,
authorized but unissued or unauthorized shares of the capital stock or any other
security of the Company, and there is no authorized or outstanding security of
any kind convertible into or exchangeable, for any such capital stock or other
security.
2.3. Subsidiaries. Section 2.3 of the Company Disclosure Letter sets
forth the name and jurisdiction of incorporation or organization of each Company
Subsidiary, each of which is wholly owned by the Company except as otherwise
indicated in said Section 2.3 of the Company Disclosure Letter. All of the
capital stock and other interests of the Company Subsidiaries so held by the
Company are owned by it or a Company Subsidiary as indicated in said Section 2.3
of the Company Disclosure Letter,
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free and clear of any claim, lien, encumbrance, security interest or agreement
with respect thereto. All of the outstanding shares of capital stock in each of
the Company Subsidiaries directly or indirectly held by the Company are duty
authorized, validly issued, fully paid and non-assessable and were issued free
of preemptive rights and in compliance with applicable Laws. No equity
securities or other interests of any of the Company Subsidiaries are or may
become required to be issued or purchased by reason of any options, warrants,
rights to subscribe to, puts, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Company
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares.
2.4. Authorization; Binding Agreement. The Company has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby,
including, but not limited to, the Merger, have been duly and validly authorized
by the Company's Board of Directors and no other corporate proceedings on the
part of the Company or any Company Subsidiary are necessary to authorize the
execution and delivery of this Agreement or to consummate the transactions
contemplated hereby (other than the adoption of this Agreement by the
shareholders of the Company in accordance with the NJBCA). This Agreement has
been duly and validly executed and delivered by the Company and constitutes the
legal, valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization or
other similar laws affecting the enforcement of creditors' rights generally and
by principles of equity regarding the availability of remedies ("Enforceability
Exceptions").
2.5. Governmental Approvals. No consent, approval, waiver or
authorization of, notice to or declaration or filing with ("Consent"), any
nation or government, any state or other political subdivision thereof, any
entity, authority or body exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government,
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including, without limitation, any governmental or regulatory authority, agency,
department, board, commission, administration or instrumentality, any court,
tribunal or arbitrator and any self regulatory organization ("Governmental
Authority") on the part of the Company or any of the Company subsidiaries is
required in connection with the execution or delivery by the Company of this
Agreement or the consummation by the Company of the transactions contemplated
hereby other than (i) the filing of the Certificate of Merger with the
Department of Treasury of the State of New Jersey in accordance with the NJBCA,
(ii) filings and approvals under the Securities Act, Exchange Act and state
securities laws, (iii) such filings as may be required in any jurisdiction where
the Company is qualified or authorized to do business as a foreign corporation
in order to maintain such qualification or authorization and (iv) those consents
that, if they were not obtained or made, would not be reasonably likely to have
a Company Material Adverse Effect.
2.6. No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by the
Company with any of the provisions hereof will not (i) conflict with or result
in any breach of any provision of the Certificate of Incorporation or Bylaws or
other governing instruments of the Company or any of the Company Subsidiaries,
(ii) require any Consent under or result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under any
of the terms, conditions or provisions of any Company Material Contract (as
defined below), (iii) result in the creation or imposition of any lien or
encumbrance of any kind upon any of the assets of the Company or any Company
Subsidiary or (iv) subject to obtaining the Consents from Governmental
Authorities referred to in Section 2.5 hereof, contravene any applicable
provision of any statute, law, rule or regulation or any order, decision,
injunction, judgment, award or decree ("Law") to which the Company or any
Company Subsidiary or its or any of their respective assets or properties are
subject, except, in the case of clauses (ii), (iii) and (iv) above, for any
deviations from the foregoing which would not be reasonably likely to have a
Company Material Adverse Effect.
2.7. Company Financial Statements. The audited consolidated financial
statements for the year ended December 31, 1999 (the "Annual Financial
Statements") and unaudited interim financial statements of the Company for the
nine month period ended September 30, 2000 (the "Latest Financial
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<PAGE> 21
Statements"), each of which has been delivered to Purchaser, have been prepared
in accordance with accounting principles generally accepted in the United States
of America ("GAAP") applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and present fairly, in all material respects,
the financial position of the Company and its subsidiaries as at the dates
thereof and the results of their operations and cash flows for the periods then
ended subject, in the case of the unaudited interim financial statements, to the
absence of footnotes and to normal year-end audit adjustments and any other
adjustments described therein.
2.8. Absence of Certain Changes or Events; No Undisclosed Liabilities.
Except as set forth in the Latest Financial Statements, during the period from
December 31, 1999 to the date of this Agreement, there has not been: (i) any
event that has had or would reasonably be expected to have a Company Material
Adverse Effect, (ii) any declaration, payment or setting aside for payment of
any dividend or other distribution or any redemption or other acquisition of any
shares of capital stock or securities of the Company by the Company, (iii) any
material damage or loss to any material asset or property, whether or not
covered by insurance, or (iv) any change by the Company in accounting principles
or practices other than as required by GAAP. Except for those liabilities that
are fully reflected or reserved against on the balance sheet of the Company
included in the Latest Financial Statements and for liabilities incurred in the
ordinary course of business consistent with past practice, since [date of Annual
Financial Statements], neither the Company nor any of its Subsidiaries has
incurred any liability of any nature whatsoever (whether absolute, accrued,
contingent or otherwise and whether due or to become due) that, either
individually or in the aggregate, has had or would be reasonably likely to have,
a Company Material Adverse Effect.
2.9. Compliance with Laws. The business of the Company and each of its
Subsidiaries has been operated in compliance with all Laws applicable thereto,
except for any instances of non-compliance which would not be reasonably likely
to have a Company Material Adverse Effect.
2.10. Permits. (i) The Company and its subsidiaries have all permits,
certificates, licenses, approvals and other authorizations required in
connection with the operation of their respective businesses (collectively,
"Company Permits"); (ii) neither the Company nor any of its Subsidiaries is in
violation of any Company Permit and (iii) no proceedings are pending or
threatened, to revoke or limit any Company Permit,
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except, in the case of clauses (i) through (iii), those the absence or violation
of which would not be reasonably likely to have a Company Material Adverse
Effect.
2.11. Litigation. Except as disclosed in the Annual Financial
Statements and the Latest Financial Statements, there is no suit, action or
proceeding ("Litigation") pending or, to the Company's Knowledge (as defined
below), threatened against the Company or any of its Subsidiaries, nor is there
any judgment, decree, injunction, rule or order of any Governmental Authority
outstanding against the Company or any of its Subsidiaries. For purposes of this
Agreement, the term "Knowledge" shall include the actual knowledge of the
person's officers and directors after due inquiry.
2.12. Contracts. Section 2.12 of the Company Disclosure Letter set
forth a complete and accurate listing of each agreement to which the Company or
any of its Subsidiaries is a party with respect to which the value of
performance required thereunder equals or exceeds the sum of $10,000 (each, a
"Company Material Contract"). All Company Material Contracts are valid and
binding and are in full force and effect and enforceable against the Company or
such Subsidiary in accordance with their respective terms, subject to the
Enforceability Exceptions. Neither the Company nor any of its Subsidiaries is in
violation or breach of or default under any such Company Material Contract where
such violation or breach would be reasonably likely to have a Company Material
Adverse Effect.
2.13. Employee Benefit Plans. Section 2.13 of the Company Disclosure
Letter contains a complete and accurate list of all material Benefit Plans (as
defined below) maintained or contributed to by the Company or any of its
Subsidiaries ("Company Benefit Plan"). A "Benefit Plan" shall include (i) an
employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended, together with all regulations
thereunder ("ERISA"), and (ii) whether or not described in the preceding clause,
any pension, profit sharing, stock bonus, deferred or supplemental compensation,
retirement, thrift, stock purchase or stock option plan or any other
compensation, welfare, fringe benefit or retirement plan, program, policy or
arrangement providing for benefits for or the welfare of any or all of the
current or former employees or agents of the Company or any of its subsidiaries
or their beneficiaries or dependents; provided, however, that Benefit Plans
shall not include any multiemployer plan, as defined in Section 3(37) of ERISA
(a "Multiemployer Plan"). Each of the Company Benefit Plans has been maintained
in compliance with its
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terms and all applicable Law, except where the failure to do so would not be
reasonably likely to result in a Company Material Adverse Effect. Neither the
Company nor any of its Subsidiaries contributes to, or has any outstanding
liability with respect to, any Multiemployer Plan.
2.14. Taxes and Returns.
(a) The Company and each of its subsidiaries has timely filed, or
caused to be timely filed all material Tax Returns (as defined below) required
to be filed by it, and has paid, collected or withheld, or caused to be paid,
collected or withheld, all material amounts of Taxes (as defined below) required
to be paid, collected or withheld, other than such Taxes for which adequate
reserves in the Company Financial Statements have been established or which are
being contested in good faith. There are no material claims or assessments
pending against the Company or any of its Subsidiaries for any alleged
deficiency in any Tax, and the Company has not been notified in writing of any
proposed Tax claims or assessments against the Company or any of its
Subsidiaries (other than in each case, claims or assessments for which adequate
reserves in the Latest Financial Statements have been established or which are
being contested in good faith or are immaterial in amount). Neither the Company
nor any of its Subsidiaries has any waivers or extensions of any applicable
statute of limitations to assess any material amount of Taxes. There are no
outstanding requests by the Company or any of its Subsidiaries for any extension
of time within which to file any Material Tax Return or within which to pay any
material amounts of Taxes shown to be due on any return. There are no liens for
material amounts of Taxes on the assets of the Company or any of its
Subsidiaries except for statutory liens for current Taxes not yet due and
payable.
(b) For purposes of this Agreement, the term "Tax" shall mean any
federal, state, local, foreign or provincial income, gross receipts, property,
sales, use, license, excise, franchise, employment, payroll, alternative or
added minimum, ad valorem, transfer or excise tax, or any other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Authority. The term "Tax Return" shall mean a report, return or other
information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
governmental entity with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
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2.15. Intellectual Property.
(a) The Company or its Subsidiaries own, or are licensed or otherwise
possess legal enforceable rights to use all: (i) trademarks and service marks
(registered or unregistered), trade dress, trade names and other names and
slogans embodying business goodwill or indications of origin, all applications
or registrations in any jurisdiction pertaining to the foregoing and all
goodwill associated therewith; (ii) patentable inventions, technology, computer
programs and software (including password unprotected interpretive code or
source code, object code, development documentation, programming tools,
drawings, specifications and data) and all applications and patents in any
jurisdiction pertaining to the foregoing, including re-issues, continuations,
divisions, continuations-in-part, renewals or extensions; (iii) trade secrets,
including confidential and other non-public information (iv) copyrights in
writings, designs, software programs, mask works or other works, applications or
registrations in any jurisdiction for the foregoing and all moral rights related
thereto; (v) databases and all database rights; and (vi) Internet Web sites,
domain names and applications and registrations pertaining thereto ("Company
Intellectual Property") that are used in the respective businesses of the
Company and its Subsidiaries as currently conducted except for any such failures
to own, be licensed or process that would not be reasonably likely to have a
Company Material Adverse Effect.
(b) Except as may be evidenced by patents issued after the date hereof,
there are no conflicts with or infringements of any material Company
Intellectual Property by any third party and the conduct of the businesses as
currently conducted does not conflict with or infringe any proprietary right of
a third party.
(c) Section 2.15(c) of the Company Disclosure Letter sets forth a
complete list of all patents, registrations and applications pertaining to the
Company Intellectual Property owned by the Company and its Subsidiaries. All
such Company Intellectual Property listed is owned by the Company and/or its
Subsidiaries, free and clear of liens or encumbrances of any nature.
(d) Section 2.15(d) of the Company Disclosure Letter sets forth a
complete list of all material licenses, sublicenses and other agreements in
which the Company and its Subsidiaries have granted rights to any person to use
the Company Intellectual Property. The Company will not, as a result of the
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execution and delivery of this Agreement or the performance of its obligations
under this Agreement, be in breach of any license, sublicense or other agreement
relating to the Company Intellectual Property.
(e) The Company and its Subsidiaries own or have the right to use all
computer software currently used in and material to the businesses.
2.16. Finders and Investment Bankers. Neither the Company nor any of
its officers or directors has employed any broker or finder or otherwise
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby.
2.17. Pooling of Interests Accounting. Neither the Company nor any of
its affiliates, has through the date hereof, taken or agreed to take any action
that would prevent Purchaser from accounting for the business combination to be
effected by the Merger as a "pooling of interests."
2.18. Insurance. Section 2.18 of the Company Disclosure Letter sets
forth a true and complete list, in all material respects, of all insurance
policies carried by, or covering the Company and its Subsidiaries with respect
to their businesses, assets and properties and with respect to which records are
maintained at the Company's principal executive offices, together with, in
respect of each such policy, the amount of coverage and the deductible. The
Company and its subsidiaries maintain insurance policies against all risk of a
character, including without limitation, business interruption insurance, and in
such amounts as are usually insured against by similarly situated companies in
the same or similar businesses. Each insurance policy set forth on Section 2.18
of the Company Disclosure Letter is in full force and effect and all premiums
due thereon have been paid in full.
2.19. Title to Properties.
(a) The Company does not own any real property. The real property
demised by the leases (the "Leases") described under the caption referencing
this Section 2.19 in the Disclosure Letter constitutes all of the real property
used or occupied by the Company (the "Real Property"). The Real Property has
access, sufficient for the conduct of the Company's business as now conducted.
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(b) The Leases are in full force and effect, and the Company holds a
valid and existing leasehold interest under each of the Leases for the term set
forth under such caption in the Company Disclosure Letter. The Company has
delivered to Purchaser complete and accurate copies of each of the Leases, and
none of the Leases has been modified in any respect, except to the extent that
such modifications are disclosed by the copies delivered to Purchaser. The
Company is not in default, and no circumstances exist which, if unremedied,
would, either with or without notice or the passage of time or both, result in
such default under any of the Leases; nor is any other party to any of the
Leases in default.
(c) The Company owns good and marketable title to each of the tangible
properties and tangible assets reflected on the Latest Financial Statements or
acquired since the date thereof, free and clear of all liens and encumbrances,
except for (i) liens for current taxes not yet due and payable, (ii) the
properties subject to the Leases, (iii) liens imposed by law and incurred in the
ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers and materialmen; and (iv) liens that would not reasonably
be likely to have a Company Material Adverse Effect.
(d) All of the machinery, equipment and other tangible assets necessary
for the conduct of the Company's business are in good condition and repair,
ordinary wear and tear excepted, and are usable in the ordinary course of
business. The Company owns, or leases under valid leases, all machinery,
equipment and other tangible assets necessary for the conduct of its business.
2.20. Accounts Receivable. The accounts receivable reflected on the
Latest Financial Statements are valid receivables, are not subject to valid
counterclaims or setoffs, and are collectible in accordance with their terms,
except as otherwise described in the Disclosure Letter under the caption
referencing this Section 2.20, and except to the extent of the bad debt reserve
reflected on the Latest Financial Statements.
2.21. Employees. (a) No executive employee of the Company and, to the
Knowledge of the Company, no group of the Company's employees has any plans to
terminate his, her or its employment; (b) except for such violations which are
not, individually or in the aggregate, reasonably likely to result in a Company
Material Adverse Effect, the Company has complied with all laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective
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bargaining and the payment of social security and other taxes; (c) the Company
has no material labor relations problem pending and its labor relations are
satisfactory; (d) there are no workers' compensation claims pending against the
Company nor, to the Company's Knowledge, have any such claims been threatened
against the Company; (e) to the Company's Knowledge, no employee of the Company
is subject to any secrecy or noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of the Company; and (f) no employee or former employee of the
Company has any claim with respect to any intellectual property rights of the
Company set forth under the caption referencing Section 2.21 hereof in the
Company Disclosure Letter. Section 2.21 of the Company Disclosure Letter sets
forth a complete and accurate listing of all collective bargaining agreements,
employment agreements, consulting agreements, noncompetition agreements,
material nondisclosure agreements, executive compensation plans, profit sharing
plans, bonus plans, deferred compensation plans, employee pension retirements
plans and employee benefit stock option or stock purchase plans and other
employee benefit plans entered into or adopted by the Company.
2.22. Affiliate Transactions. No officer, director or employee of the
Company or any member of the immediate family of any such officer, director or
employee, or any entity in which any of such persons owns any beneficial
interest (other than any publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than one
percent of the stock of which is beneficially owned by any of such persons)
(collectively "Insiders"), has any agreement with the Company (other than normal
employment arrangements) or any interest in any property, real, personal or
mixed, tangible or intangible, used in or pertaining to the business of the
Company (other than ownership of capital stock of the Company). None of the
Insiders has any direct or indirect interest in any competitor, supplier or
customer of the Company or in any person, firm or entity from whom or to whom
the Company leases any property, or in any other person, firm or entity with
whom the Company transacts business of any nature. For purposes of this Section
2.22, the members of the immediate family of an officer, director or employee
shall consist of the spouse, parents, children, siblings, mothers- and
fathers-in-law, sons- and daughters-in-law, and brothers- and sisters-in-law of
such officer, director or employee.
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2.23. Customers and Suppliers. The Company Disclosure Letter, under the
caption referencing this Section 2.23, lists the 10 largest customers and
suppliers of the Company for the year ended December 31, 1999, and for the
nine-month period ended September 30, 2000, and sets forth opposite the name of
each such customer or supplier the approximate percentage of net sales or
purchases by the Company attributable to such customer or supplier for each such
period. Since the date of the Latest Financial Statements, no customer or
supplier listed on the Disclosure Letter under the caption referencing this
Section 2.23 has indicated that it will stop or decrease, in any material
respect, the rate of business done with the Company except for changes in the
ordinary course of the Company's business.
2.24. Officers and Directors; Bank Accounts. The Company Disclosure
Letter, under the caption referencing this Section 2.24, lists all officers and
directors of the Company and all of the Company's bank accounts (designating
each authorized signer).
2.25. Professional Fees. The Company has not incurred aggregate legal,
accounting and brokerage fees and commissions in connection with the
transactions contemplated by this Agreement in excess of $250,000.
2.26. Disclosure. Neither this Agreement nor any of the Exhibits hereto
or as set forth in the Prospectus/Proxy Statement (to the extent such
information pertains to the Company), nor the Company Disclosure Letter contain
any untrue statement of a material fact regarding the Company or its business or
any of the other matters dealt with in this Article 2 relating to the Company or
the transactions contemplated by this Agreement or omit to state any material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Except as set forth in the Purchaser Securities Filings (as defined
below) filed prior to the date of this Agreement and except as set forth in the
disclosure letter from Purchaser to the Company to be delivered upon the
execution of this Agreement, which sets forth certain disclosures concerning
Purchaser and its business (the "Purchaser Disclosure Letter"), each section of
which qualifies the correspondingly numbered
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representation or warranty, Purchaser hereby represents and warrants to the
Company as follows:
3.1. Organization and Good Standing. Purchaser, Merger Sub and each of
the Purchaser Subsidiaries in a corporation or partnership duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite corporate or partnership
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted. Purchaser and each of the Purchaser
Subsidiaries is duly qualified or licensed and in good standing to do business
in each jurisdiction in which the character of the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing would not be reasonably likely to
have a material adverse effect on the business, assets, condition (financial or
otherwise), liabilities or the results of operations of Purchaser and its
subsidiaries taken as a whole ("Purchaser Material Adverse Effect"). Purchaser
has heretofore made available to the Company accurate and complete copies of the
Certificate of Incorporation and Bylaws, as currently in effect, of Purchaser.
For purposes of this Agreement, the term "Purchaser Subsidiary" shall mean any
"Significant Subsidiary" (as such term is defined in Rule 1-02 of Regulation S-X
of the SEC) of Purchaser.
3.2. Capitalization. As of the date hereof, the authorized capital
stock of Purchaser consists of 40,000,000 shares of common stock and 5,000,000
shares of preferred stock. As of September 30, 2000, 16,851,725 shares of common
stock and no shares of preferred stock were issued and outstanding. No other
capital stock of Purchaser is authorized or issued. All issued and outstanding
shares of the Purchaser Stock are duly authorized, validly issued, fully paid
and non-assessable. Except as set forth in the Purchaser Securities Filings (as
defined in Section 3.7) or as otherwise contemplated by this Agreement, as of
the date hereof, there are no outstanding rights, subscriptions, warrants, puts,
calls, unsatisfied preemptive rights, options or other agreements of any kind
relating to any of the outstanding, authorized but unissued, unauthorized shares
of the capital stock or any other security of Purchaser, and there is no
authorized or outstanding security of any kind convertible into or exchangeable
for any such capital stock or other security.
3.3. Subsidiaries. Section 3.3 of the Purchaser Disclosure Letter sets
forth the name and jurisdiction of
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incorporation or organization of each Purchaser Subsidiary. Each Purchaser
Subsidiary is wholly owned by Purchaser, except that TRAK 21 Development LLC is
51 percent owned by Purchaser. All of the capital stock and other interests of
the Purchaser Subsidiaries so held by Purchaser are owned by it or a Purchaser
Subsidiary as indicated in said Section 3.3 of the Purchaser Disclosure Letter,
free and clear of any claim, lien, encumbrance, security interest or agreement
with respect thereto. All of the outstanding shares of capital stock in each of
the Purchaser Subsidiaries directly or indirectly held by Purchaser are duly
authorized, validly issued, fully paid and non-assessable and were issued free
of preemptive rights and in compliance with applicable laws. No equity
securities or other interests of any of the Purchaser Subsidiaries are or may
become required to be issued or purchased by reason of any options, warrants,
rights to subscribe to, puts, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into or exchangeable for,
shares of any capital stock of any Purchaser Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Purchaser
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares. All of the
shares of Purchaser Stock issuable in accordance with this Agreement in exchange
for Company Stock will be, when so issued, duly authorized, validly issued,
fully paid and non-assessable and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any holder of capital stock of Purchaser.
3.4. Authorization; Binding Agreement. Purchaser and Merger Sub have
all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby, including, but not limited to, the Merger, have been duly
and validly authorized by the respective Boards of Directors of Purchaser and
Merger Sub, as appropriate, and no other corporate proceedings on the part of
Purchaser, Merger Sub or any Purchaser Subsidiary are necessary to authorize the
execution and delivery of this Agreement or to consummate the transactions
contemplated hereby (other than the requisite approval of the Purchaser Proposal
by the stockholders of Purchaser and the requisite approval by the sole
stockholder of Merger Sub of this Agreement and the Merger). This Agreement has
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been duly and validly executed and delivered by each of Purchaser and Merger
Sub and constitutes the legal, valid and binding agreements of Purchaser and
Merger Sub, enforceable against each of Purchaser and Merger Sub in accordance
with its terms, subject to the Enforceability Exceptions.
3.5. Governmental Approvals. No Consent from or with any Governmental
Authority on the part of Purchaser or any of the Purchaser Subsidiaries is
required in connection with the execution or delivery by Purchaser of this
Agreement or the consummation by Purchaser of the transactions contemplated
hereby other than (i) filings with the SEC, state securities laws administrators
and the NASD, (ii) filings and approvals under the Securities Act, Exchange Act
and state securities laws, (iii) such filings as may be required in any
jurisdiction where Purchaser is qualified or authorized to do business as a
foreign corporation in order to maintain such qualification or authorization and
(iv) those Consents that, if they were not obtained or made, would not be
reasonably likely to have a Purchaser Material Adverse Effect.
3.6. No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Purchaser
with any of the provisions hereof will not (i) conflict with or result in any
breach of any provision of the Certificate of Incorporation or Bylaws or other
governing instruments of Purchaser or any of the Purchaser Subsidiaries, (ii)
require any Consent under or result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under any of the terms,
conditions or provisions of any Purchaser Material Contract (as defined below),
(iii) result in the creation or imposition of any lien or encumbrance of any
kind upon any of the assets of Purchaser or any Purchaser Subsidiary or (iv)
subject to obtaining the Consents from Governmental Authorities referred to in
Section 3.5 hereof, contravene any Law to which Purchaser or any Purchaser
Subsidiary or its or any of their respective assets or properties are subject,
except, in the case of clauses (ii), (iii) and (iv) above, for any deviations
from the foregoing which would not be reasonably likely to have a Purchaser
Material Adverse Effect.
3.7. Securities Filings. Purchaser has made available to the Company
true and complete copies of (i) its Annual Reports on Form 10-K for the years
ended September 30, 1999, 1998 and 1997, as filed with the SEC, (ii) its proxy
statements relating to all of the meetings of stockholders (whether annual or
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special) of Purchaser since October 1, 1999, as filed with the SEC, and (iii)
all other reports, statements and registration statements and amendments thereto
(including, without limitation, Quarterly Reports on Form 10-Q and Current
Reports on Form 8-K, as amended) filed by Purchaser with the SEC since October
1, 1999, The reports and statements set forth in clauses (i) through (iii)
above, and those subsequently provided or required to be provided pursuant to
this Section 3.7, are referred to collectively herein as the "Purchaser
Securities Filings." As of their respective dates, or as of the date of the last
amendment thereof, if amended after filing, to Purchaser's Knowledge, all such
Purchaser Securities Filings complied in all material respects with the Exchange
Act and none of the Purchaser Securities Filings, contained or, as to Purchaser
Securities Filings subsequent to the date hereof, will contain, any untrue
statement of a material fact or omitted or, as to Purchaser Securities Filings
subsequent to the date hereof, will omit, to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the Purchaser
Securities Filings at the time of filing or as of the date of the last amendment
thereof, if amended after filing, complied or, as to Purchaser Securities
Filings subsequent to the date hereof, will comply in all material respects with
the Securities Exchange Act or the Securities Act, as applicable.
3.8. Purchaser Financial Statements. The audited consolidated financial
statements and unaudited consolidated interim financial statements of Purchaser
included in the Purchaser Securities Filings (the "Purchaser Financial
Statements") have been prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and present
fairly, in all material respects, the financial position of Purchaser and its
subsidiary as at the dates thereof and the results of their operations and cash
flows for the periods then ended subject, in the case of the unaudited interim
financial statements, to normal year-end audit adjustments, any other
adjustments described therein and the fact that certain information and notes
have been condensed or omitted in accordance with the Securities Exchange Act.
3.9. No Undisclosed Liabilities. Except for those liabilities that are
fully reflected or reserved against on the balance sheet of the Purchaser
included in the Purchaser Securities Filings and for liabilities incurred in the
ordinary course of business consistent with past practice, neither
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Purchaser nor any of its subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued, contingent or otherwise and whether due
or to become due) that, either individually or in the aggregate, has had or
would be reasonably likely to have, a Purchaser Material Adverse Effect.
3.10. Litigation. Except as disclosed in the Purchaser securities
Filings, there is no Litigation pending or threatened against, Purchaser or any
of its subsidiaries which, individually or in the aggregate, would be reasonably
likely to have a Purchaser Material Adverse Effect, nor is there any judgment,
decree, injunction, rule or order of any Governmental Authority outstanding
against Purchaser or any of its subsidiaries which, individually or in the
aggregate, would be reasonably likely to have a Purchaser Material Adverse
Effect.
3.11. Compliance with Laws. The business of Purchaser and each of its
subsidiaries has been operated in compliance with all Laws applicable thereto,
except for any instances of non-compliance which would not be reasonably likely
to have a Purchaser Material Adverse Effect.
3.12. Taxes and Returns. Purchaser and each of its subsidiaries has
timely filed, or caused to be timely filed all material Tax Returns required to
be filed by it, and has paid, collected or withheld, or caused to be paid,
collected or withheld, all material amounts of Taxes required to be paid,
collector Withheld, other than such Taxes for which adequate reserves in the
Purchaser Financial Statements have been established or which are being
contested in good faith. There are no material claims or assessments pending
against Purchaser or any of its subsidiaries for any alleged deficiency in any
Tax, and Purchaser has not been notified in writing of any proposed Tax claims
or assessment against Purchaser or any of its subsidiaries (other than in each
case, claims or assessments for which adequate reserves in the Purchaser
Financial Statements have been established or which are being contested in good
faith or are immaterial in amount). Neither Purchaser nor any of its
subsidiaries has any waivers or extensions of any applicable statute of
limitations to assess any material amount of Taxes. There are no binding
requests by Purchaser or any of its subsidiaries or any extension of time within
which to file any material Tax Return or within which to pay any material
amounts of Taxes shown to be due on any return. There are no liens for material
amounts of Taxes on the assets of Purchaser or any of its subsidiaries except
for statutory liens for current Taxes not yet due aid payable.
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3.13. Intellectual Property.
(a) Purchaser or its subsidiaries own, or are licensed or otherwise
possess legal enforceable rights to use all; (i) trademarks and service marks
(registered or unregistered), trade dress, trade names and other names and
slogans embodying business goodwill or indications of origin, all applications
or registrations in any jurisdiction pertaining to the foregoing and all
goodwill associated therewith; (ii) patentable inventions, technology, computer
programs and software (including password unprotected interpretive code or
source code, object code, development documentation, programming tools,
drawings, specifications and data) and all applications and patents in any
jurisdiction pertaining to the foregoing, including reissues continuations,
divisions, continuations-in-part, renewals or extensions; (iii) trade secrets,
including confidential and other non-public information; (iv) copyrights in
writings, designs, software programs, mask works or other works, applications or
registrations in any jurisdiction for the foregoing and all moral rights related
thereto; (v) databases and all database rights; and (vi) Internet Web sites,
domain names and applications and registrations pertaining thereto ("Purchaser
Intellectual Property") that are used in the respective businesses of Purchaser
and its subsidiaries as currently conducted, except for any such failures to
own, be licensed or possess that would not be reasonably likely to have a
Purchaser Material Adverse Effect.
(b) There are no conflicts with or infringements of any material
Purchaser intellectual Property by any third party and the conduct of the
businesses as currently conducted does not conflict with or infringe any
proprietary right of a third party.
(c) Section 3.13(c) of the Purchaser Disclosure Letter sets forth a
complete list of all patents, registrations and applications pertaining to the
Purchaser Intellectual Property owned by Purchaser and its subsidiaries. All
such Purchaser Intellectual Property listed is owned by Purchaser and/or its
subsidiaries, free and clear of liens or encumbrances of any nature.
(d) Section 3.13(d) of the Purchaser Disclosure Letter, sets forth a
complete list of all material licenses, sublicenses and other agreements in
which Purchaser and its subsidiaries have granted rights to any person to use
the Purchaser Intellectual Property. Purchaser will not, as a result of the
execution and delivery of this Agreement or the
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performance of its obligations under this Agreement, be in breach of any
license, sublicense or other agreement relating to the Purchaser Intellectual
Property.
(e) Purchaser and its subsidiaries own or have the right to use all
computer software currently used in and material to the businesses.
3.14. Employee Benefit Plans. Section 3.14 of the Purchaser Disclosure
Letter contains a complete and accurate list of all material Benefit Plans (as
defined below) maintained or contributed to by Purchaser or any of its
subsidiaries ("Purchaser Benefit Plan"). Each of the Purchaser Benefit Plans has
been maintained in compliance with its terms and all applicable Law, except
where the failure to do so would not be reasonably likely to result in a
Purchaser Material Adverse Effect.
3.15. Finders and Investment Bankers. Neither Purchaser nor any of its
officers or directors has employed any broker or finder or otherwise incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby, other than pursuant to an agreement
with SunTrust Equitable Securities, the material terms of which have been
disclosed to the Company.
3.16. No Prior Activities. Except for obligations or liabilities
incurred in connection with its incorporation or organization or the negotiation
and consummation of this Agreement and the transactions contemplated hereby,
Merger Sub has not incurred any obligations or liabilities, and has not engaged
in any business or activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person or entity.
3.17. Pooling of Interests Accounting. Neither Purchaser nor any of its
affiliates has, through the date hereof, taken or agreed to take any action that
would prevent the Company from accounting for the business combination to be
effected by the Merger as a "pooling of interests."
3.18. Insurance. Section 3.18 of the Purchaser Disclosure Letter sets
forth a true and complete list of all insurance policies carried by, or covering
Purchaser and its subsidiaries with respect to their businesses, assets and
properties and with respect to which records are maintained at Purchaser's
principal executive offices, together with, in respect of each such policy, the
name of the insurer, the policy number, the type of
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policy, the amount of coverage and the deductible Purchaser and its subsidiaries
maintain insurance policies against all risks of a character, including without
limitation, business interruption insurance, and in such amounts as are usually
insured against by similarly situated companies in the same or similar
businesses. Each insurance policy set forth on Section 3.18 of the Purchaser
Disclosure Letter is in full force and effect and all premiums due thereon have
been paid in full.
ARTICLE 4
ADDITIONAL COVENANTS OF THE COMPANY
The Company covenants and agrees as follows:
4.1. Conduct of Business of the Company and the Company Subsidiaries.
a) Unless Purchaser shall otherwise agree in writing and except as
expressly contemplated by this Agreement or in the Company Disclosure Letter,
during the period from the date of this Agreement to the Effective Time, (i) the
Company shall conduct, and it shall cause its subsidiaries to conduct, its or
their businesses in the ordinary course and consistent with past practice, and
the Company shall, and it shall cause its subsidiaries to, use its or their
reasonable commercial efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
satisfactory relationships with all persons with whom it does business and (ii)
without limiting the generality of the foregoing, neither the Company nor any of
its subsidiaries will:
A. amend or propose to amend its Certificate of Incorporation
or Bylaws (or comparable governing instruments) in any material
respect;
B. authorize for issuance, issue, grant, sell, pledge, dispose
of or propose to issue, grant, sell, pledge or dispose of any shares
of, or any options, warrants, commitments, subscriptions or rights of
any kind to acquire or sell any shares of, the capital stock or other
securities of the Company or any of its subsidiaries including, but not
limited to, any securities convertible into or exchangeable for shares
of stock of any class of the Company or any of its subsidiaries, except
for the issuance of Company Shares pursuant to the exercise of stock
options outstanding on the date of this Agreement in accordance with
their present terms;
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C. split, combine or reclassify any shares of its capital
stock or declare, pay or set aside any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, other than dividends or distributions to
the Company or a subsidiary of the Company, or directly or indirectly
redeem, purchase or otherwise acquire or offer to acquire any shares of
its capital stock or other securities;
D. (a) except for the Working Capital Facility, create, incur
or assume any debt, except refinancing of existing obligations on terms
that are no less favorable to the Company or its subsidiaries than the
existing terms; (b) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, indirectly, contingently or
otherwise) for the obligations of any person; (c) other than in the
ordinary course of business consistent with past practice, make any
capital expenditures or make any loans, advances or capital
contributions to, or investments in, any other person (other than to a
Company subsidiary and customary travel, relocation or business
advances to employees); (d) acquire the stock or assets of, or merge or
consolidate with, any other person; (e) voluntarily incur any material
liability or obligation (absolute, accrued, contingent or otherwise);
or (f) sell, transfer, mortgage, pledge or otherwise dispose of, or
encumber, or agree to sell, transfer, mortgage, pledge or otherwise
dispose of or encumber, any assets or properties, real, personal or
mixed material to the Company and its subsidiaries taken as a whole;
E. increase in any manner the compensation of any of its
officers or enter into, establish, amend or terminate any employment,
noncompete, consulting, retention, change in control, collective
bargaining, bonus or other incentive compensation, profit sharing,
health or other welfare, stock option or other equity, pension,
retirement, vacation, severance, deferred compensation or other
compensation or benefit plan, policy, agreement, trust, fund or
arrangement with, for or in respect of, any shareholder, officer,
director, other employee, agent, consultant or affiliate other than as
required pursuant to the terms of agreements in effect on the date of
this Agreement; or, except in the ordinary course of business
consistent with past practices, increase the compensation of the
Company's employees who are not officers; or
F. take or cause to be taken any action, whether before or
after the Effective Time, which would disqualify the Merger as a
"pooling of interests" for accounting
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purposes or as a "reorganization" within the meaning of Section 368(a)
of the Code.
(b) The Company shall, and the Company shall cause each of its
subsidiaries to, use its or their reasonable commercial efforts to comply in all
material respects with all Laws applicable to it or any of its properties,
assets or business and maintain in full force and effect all the Company Permits
necessary for, or otherwise material to, such business.
4.2. Notification of Certain Matters. The Company shall give prompt
notice to Purchaser if any of the following occur after the date of this
Agreement: (i) receipt of any notice or other communication in writing from any
third party alleging that the Consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement, provided
that such Consent would have been required to have been disclosed in this
Agreement; (ii) receipt of any material notice or other communication from any
Governmental Authority in connection with the transactions contemplated by this
Agreement; (iii) the occurrence of an event which would be reasonably likely to
have a Company Material Adverse Effect or (iv) the commencement or threat of any
Litigation involving or affecting the Company or any of its subsidiaries, or any
of their respective properties or assets, or, to its knowledge, any employee,
agent, director or officer, in his or her capacity as such, of the Company or
any of its subsidiaries which, if pending on the date hereof, would have been
required to have been disclosed in this Agreement or which relates to the
consummation of the Merger.
4.3. Access and Information. Between the date of this Agreement and the
Effective Time, the Company will give, and shall direct its accountants and
legal counsel to give, Purchaser and its respective authorized representatives
(including, without limitation, its financial advisors, accountants and legal
counsel), at all reasonable times, access as reasonably requested to all offices
and other facilities and to all contracts, agreements, commitments, books and
records of or pertaining to the Company and its subsidiaries, will permit the
foregoing to make such reasonable inspections as they may require and will cause
its officers promptly to furnish Purchaser with such financial and operating
data and other information with respect to the business and properties of the
Company and its subsidiaries as Purchaser may from time to time reasonably
request.
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4.4. Shareholder Approval. As soon as practicable, the Company will
take all steps necessary to duly call, give notice of, convene and hold a
meeting of its shareholders for the purpose of approving the Company Proposals
and for such other purposes as may be necessary or desirable in connection with
effectuating the transactions contemplated hereby. Except as otherwise
contemplated by this Agreement, the Board of Directors of the Company will use
its best efforts to obtain any necessary approval by the Company's shareholders
of the Company Proposals. Notwithstanding the foregoing, unless the Board of
Directors of the Company, after consultation with outside legal counsel to the
Company, determines that to do so would likely breach the fiduciary duties of
the Board of Directors under applicable law, the Company, acting through its
Board of Directors, shall include in the Prospectus/Proxy Statement the
recommendation of the Board of Directors that shareholders of the Company vote
in favor of the Company Proposals.
4.5. Reasonable Commercial Efforts. Subject to the terms and conditions
herein provided, the Company agrees to use its reasonable commercial efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the Merger and the transactions contemplated by this
Agreement, including, but not limited to obtaining all Consents from
Governmental Authorities and other third parties required for the consummation
of the Merger and the transactions contemplated thereby. Upon the terms and
subject to the conditions hereof, the Company agrees to use reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary to satisfy the other conditions of the
closing set forth herein.
4.6. Public Announcements. So long as this Agreement is in affect, the
Company shall not, and shall cause its affiliates not to issue or cause the
publication of any press release or any other announcement with respect to the
Merger or the transactions contemplated hereby without the consent of Purchaser,
except where such release or announcement is required by applicable Law, in
which case the Company, prior to making such announcement, will consult with
Purchaser regarding the same.
4.7. Professional Fees. The Company shall not incur aggregate legal,
accounting and brokerage, consulting and other fees and commissions in
connection with the transactions contemplated by this Agreement in excess of
$250,000.
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4.8. No Solicitation.
(a) The Company shall, and shall direct and use reasonable efforts to
cause its officers, directors, employees, representatives and agents to,
immediately cease any discussions or negotiations with any parties that may be
ongoing with respect to a Company Takeover Proposal (as defined below). The
Company shall not, nor shall it permit any of its subsidiaries to, nor shall it
authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries, directly or
indirectly, to knowingly (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed or reasonably likely
to facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Company Takeover Proposal or (ii)
participate in any discussion or negotiations regarding any Company Takeover
Proposal; "Company Takeover Proposal" means any inquiry, proposal or offer from
any person relating to any direct or indirect acquisition or purchase of the
assets of the Company and its subsidiaries or of any class of debt or equity
securities of the Company or any Company Subsidiary, any tender offer or
exchange offer that if consummated would result in any person beneficially
owning 5 percent or more of any class of equity securities of the Company or any
Company Subsidiary, any merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any Company Subsidiary, other than the transactions
contemplated by this Agreement.
(b) Except as set forth in this Section 4.8, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Purchaser, the
approval or recommendation by such Board of Directors or such committee of the
Company Proposals, (ii) approve or recommend, or propose publicly to approve or
recommend, any Company Takeover Proposal or (iii) cause the Company to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement (each, a "Company Acquisition Agreement") related to any
Company Takeover Proposal.
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 4.8, the Company shall promptly advise
Purchaser orally and in writing of any request for information or of any Company
Takeover Proposal, the material terms and conditions of such request or the
Company
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Takeover Proposal and the identity of the person making such request or Company
Takeover Proposal.
ARTICLE 5
ADDITIONAL COVENANTS OF PURCHASER
Purchaser covenants and agrees as follows:
5.1. Conduct of Business of Purchaser and the Purchaser Subsidiaries.
(a) Unless the Company shall otherwise agree in writing and except as
expressly contemplated by this Agreement or in the Purchaser Disclosure Letter,
during the period from the date of this Agreement to the Effective Time, (i)
Purchaser shall conduct, and it shall cause its subsidiaries to conduct, its or
their businesses in the ordinary course and consistent with past practice, and
Purchaser shall, and it shall cause its subsidiaries to, use its or their
reasonable commercial efforts to preserve intact its business organization, to
keep available the services of its officers and employees and to maintain
satisfactory relationships with all persons with whom it does business and (ii)
without limiting the generality of the foregoing, neither Purchaser nor any of
its subsidiaries will:
A. amend or propose to amend its Certificate of Incorporation
or Bylaws (or comparable governing instruments) in any material
respect;
B. take or cause to be taken any action, whether before or
after the Effective Time, which would disqualify the Merger as a
"pooling of interests," for accounting purposes or as a
"reorganization" within the meaning of Section 368(a) of the Code; or
C. purchase, redeem or otherwise acquire or offer to purchase,
redeem or otherwise acquire or retire any shares of its capital stock
or declare, set aside, make or pay any dividend or other distribution
payable in cash, stock, property or otherwise with respect to any of
its capital stock other than dividends or distributions by any
Purchaser Subsidiary.
(b) Purchaser shall, and Purchaser shall cause each of its subsidiaries
to, use its or their reasonable commercial efforts to comply in all material
respects with all Laws applicable to it or any of its properties, assets or
business
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and maintain in full force and effect all the Purchaser Permits necessary for,
or otherwise material to, such business.
5.2. Notification of Certain Matters. Purchaser shall give prompt
notice to the Company if any of the following occur after the date of this
Agreement: (i) receipt of any notice or other communication in writing from any
third party alleging that the Consent of such third party is or may be required
in connection with the transactions contemplated by this Agreement, provided
that such Consent would have been required to have been disclosed in this
Agreement; (ii) receipt of any material notice or other communication from any
Governmental Authority (including, but not limited to, the NASD or any
securities exchange) in connection with the transactions contemplated by this
Agreement; (iii) the occurrence of an event which would be reasonably likely to
have a Purchaser Material Adverse Effect or (iv) the commencement or threat of
any Litigation involving or affecting Purchaser or any of its subsidiaries, or
any of their respective properties or assets, or, to its knowledge, any
employee, agent, director or officer, in his or her capacity as such, of
Purchaser or any of its subsidiaries which, if pending on the date hereof, would
have been required to have been disclosed in this Agreement or which relates to
the consummation of the Merger.
5.3. Access and Information. Between the date of this Agreement and the
Effective Time, Purchaser will give, and shall direct its accountants and legal
counsel to give, the Company and its respective authorized representatives
(including, without limitation, its financial advisors, accountants and legal
counsel), at all reasonable times, access as reasonably requested to all offices
and other facilities and to all contracts, agreements, commitments, books and
records of or pertaining to Purchaser and its subsidiaries, will permit the
foregoing to make such reasonable inspections as they may require and will cause
its officers promptly to furnish Purchaser with such financial and operating
data and other information with respect to the business and properties of
Purchaser and its subsidiaries as the Company may from time to time reasonably
request.
5.4. Reasonable Commercial Efforts. Subject to the terms and conditions
herein provided, Purchaser agrees to use its reasonable commercial efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper advisable to consummate and make effective as promptly
as practicable the Merger and the transactions contemplated by this Agreement.
including, but not limited to obtaining all Consents
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from Governmental Authorities and other third parties required for the
consummation of the Merger and the transactions contemplated thereby. Upon the
terms and subject to the conditions hereof, Purchaser agrees to use reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary to satisfy the other conditions of the
Closing set forth herein.
5.5. Public Announcements. So long as this Agreement is in effect,
Purchaser shall not, and shall cause its affiliates not to, issue or cause the
publication of any press release or any other announcement with respect to the
Merger or the transactions contemplated hereby without the consent of the
Company, except where such release or announcement is required by applicable Law
or pursuant to any applicable listing agreement with, or rules or regulations
of, the NASD, in which case Purchaser, prior to making such announcement, will
consult with the Company regarding the same.
5.6. Compliance. In consummating the Merger and the transactions
contemplated hereby, Purchaser shall comply in all material respects with the
provisions of the Securities Exchange Act and the Securities Act and shall
comply, and/or cause its subsidiaries to comply or to be in compliance, in all
material respects, with all other applicable Laws.
5.7. SEC and Stockholder Filings. Purchaser shall send to the Company a
copy of all material public reports and materials as and when it sends the same
to its stockholders, the SEC or any state or foreign securities commission.
5.8. Tax Opinion Certificate. Purchaser shall execute and deliver a
certificate in a form satisfactory to the counsel of Purchaser, signed by an
officer of Purchaser setting forth factual representations and covenants that
will serve as a basis for the tax opinions required pursuant to Section 6.2(e)
and Section 6.3(d) of this Agreement ("Purchaser Tax Opinion Certificate").
5.9. Letter of Accountants. Purchaser shall use its commercial
reasonable efforts to cause KPMG LLP to issue to Purchaser the letter described
in Section 6.1(i) of this Agreement.
5.10. Indemnification. As of the Effective Time, the indemnification
provisions contained in the Bylaws, and the Articles of Incorporation of the
Surviving Corporation shall be at least as favorable to individuals who
immediately prior to
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the Closing Date were directors, officers, agents, employers of the Company or
otherwise entitled to indemnification under the Company's Bylaws or Certificate
of Incorporation (an "Indemnified Party") as those contained in the Bylaws and
the Certificate of Incorporation of the Company, respectively, and shall not be
amended, repealed or otherwise modified for a period of six years after the
Closing Date in any manner that would adversely affect the rights thereunder of
any Indemnified Party. The Company and Purchaser shall, jointly and severally,
to the fullest extent permitted under New Jersey law and regardless of whether
the Merger becomes effective, indemnify defend and hold harmless, and after the
Effective Time, Purchaser and the Surviving Corporation shall jointly and
severally, to the fullest extent permitted under Delaware law, indemnify, defend
and hold harmless, each Indemnified Party against any costs or expenses
(including reasonable attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation, including, without limitation,
liabilities arising out of this Agreement or under the Securities Exchange Act,
occurring through the Closing Date, and in the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the Effective
Time), (i) the Company or the Surviving Corporation shall pay the reasonable
fees and expenses of counsel selected by the Indemnified Parties, which counsel
shall be reasonably satisfactory to the Company or the Surviving Corporation,
promptly as statements therefor are received, and (ii) the Company and the
Surviving Corporation will cooperate in the defense of any such matter;
provided, however, that neither the Company nor the Surviving Corporation shall
be liable for any settlement affected without its written consent (which consent
shall not be unreasonably withheld); and further, provided, that neither the
Company nor the Surviving Corporation shall he obliged pursuant to this Section
5.10 to pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any single action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Indemnified
Parties have conflicting interests in the outcome of such action. Purchaser
shall cause Surviving Corporation to reimburse all expenses, including
reasonable attorney's fees and expenses, incurred by any person to enforce the
obligations of Purchaser and the Surviving Corporation under this Section 5.10.
5.11. Stockholder Approval. As soon as practicable, Purchaser will take
all steps necessary to duly call, give notice
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of, convene and hold a meeting of its stockholders for the purpose of approving
the Purchaser Proposals and for such other purposes as may be necessary or
desirable in connection with effectuating the transactions contemplated hereby.
Except as otherwise contemplated by this Agreement, the Board of Directors of
Purchaser will use its best efforts to obtain any necessary approval by
Purchaser's stockholders of the Purchaser Proposals. Notwithstanding the
foregoing, unless the Board of Directors of Purchaser, after consultation with
outside legal counsel to Purchaser, determines that to do so would likely breach
the fiduciary duties of the Board of Directors under applicable law, Purchaser,
acting through its Board of Directors, shall include in the Prospectus/Proxy
Statement the recommendation of the Board of Directors that stockholders of
Purchaser vote in favor of the Purchaser Proposals.
5.12. No Solicitation. Purchaser shall, and shall direct and use
reasonable efforts to cause its officers, directors, employees, representatives
and agents to, immediately cease any discussions or negotiations with any
parties that may be ongoing with respect to a Proposed Transaction (as defined
below). Purchaser shall not, nor shall it permit any of its subsidiaries to, nor
shall it authorize or permit any of its officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by it or any of its subsidiaries, directly or
indirectly, to knowingly (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed or reasonably likely
to facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Proposed Transaction or (ii)
participate in any discussion or negotiations regarding any Proposed
Transaction; provided, however, that if, at any time prior to the Effective
Time, the Board of Directors of Purchaser determines in good faith that the
failure to do so could reasonably be expected to result in a breach of its
fiduciary duties to Purchaser's stockholders under applicable law, Purchaser
may, in response to any proposal relating to a Proposed Transaction, (i) furnish
information with respect to Purchaser to any person pursuant to a customary
confidentiality agreement (as determined by Purchaser after consultation with
its outside counsel) and (ii) participate in negotiations regarding such
Proposed Transaction. "Proposed Transaction" means any inquiry, proposal or
offer from any person relating to any form of business combination involving
Purchaser, the issuance and sale of any Purchaser debt securities, or the any
direct or indirect acquisition or purchase of the assets of Purchaser and its
subsidiaries or 10 percent or more of any class
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of equity securities of Purchaser or any Purchaser Subsidiary, any tender offer
or exchange offer that if consummated would result in any person beneficially
owning 10 or more of any class of equity securities of Purchaser or any
Purchaser Subsidiary, any merger, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Purchaser or any Purchaser Subsidiary, other than the transactions
contemplated by this Agreement; provided, however, that the foregoing
restrictions shall not apply to any proposed transaction involving the issuance
and sale of debt or equity securities of Purchaser in furtherance of the
transactions contemplated by this Agreement.
5.13. Plan of Reorganization. This Agreement is intended to constitute
a "plan of reorganization" within the meaning of Section 1.368-2(g) of the
income tax regulations promulgated under the Code. From and after the date of
this Agreement and until the Effective Time, each party to this Agreement shall
use its reasonable best efforts to cause the Merger to qualify, and will not,
without the prior written consent of the parties to this Agreement, knowingly
take any actions or cause any actions to be taken which could prevent the Merger
from qualifying, as a reorganization under the provisions of Section 368(a) of
the Code. Following the Effective Time, and consistent with any such consent,
none of the Surviving Corporation, Purchaser or any of their affiliates shall
knowingly take any action or knowingly cause any action to be taken which would
cause the Merger to fail to so qualify as a reorganization under Section 368(a)
of the Code.
5.14. Fairness Opinion. Purchaser shall solicit from Purchaser's
financial advisor, SunTrust Equitable Securities, a written opinion addressed to
Purchaser's Board of Directors to the effect that the Merger is fair to
Purchaser's stockholders from a financial point of view.
ARTICLE 6
CONDITIONS
6.1. Conditions to Each Party's Obligations. The respective obligations
of each party to effect the Merger shall be subject to the fulfillment or waiver
at or prior to the Effective Time of the following conditions:
(a) Shareholder/Stockholder Approval. The Company Proposals shall have
been approved at or prior to the Effective Time by the requisite vote of the
shareholders of the Company.
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The Purchaser Proposals shall have been approved at or prior to the Effective
Time by the requisite vote of the stockholders of Purchaser.
(b) No injunction or Action. No order, statute, rule, regulation,
executive order, stay, decree, judgment or injunction shall have been enacted,
entered, promulgated or enforced by any court or other Governmental Authority
since the date of this Agreement which prohibits or prevents the consummation of
the Merger which has not been vacated, dismissed or withdrawn prior to the
Effective Time. The Company and Purchaser shall use their reasonable best
efforts to have any of the foregoing vacated, dismissed or withdrawn by the
Effective Time.
(c) Governmental Approval. All Consents of any Governmental Authority
required for the consummation of the Merger and the transactions contemplated by
this Agreement shall have been obtained, except as may be waived by Purchaser
and the Company or those Consents the failure or which to obtain will not have a
Surviving Corporation Material Adverse Effect (as defined below).
(d) Required Consents. Any required Consents of any person to the
Merger or the transactions contemplated hereby shall have been obtained and be
in full force and effect, except for those the failure of which to obtain will
not have a material adverse effect on the business, assets, condition (financial
or otherwise), liabilities or the results of operations of the Surviving
Corporation and its subsidiaries taken as a whole ("Surviving Corporation
Material Adverse Effect").
(e) Registration Statement. The Registration Statement shall have been
declared effective and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no action, suit, proceeding or
investigation for that purpose shall have been initiated or threatened by any
Governmental Authority.
(f) Blue Sky. Purchaser shall have received all state securities law
authorizations necessary to consummate the transactions contemplated hereby.
(g) Quotation of Purchaser Stock. The shares of Purchaser Stock
comprising the Merger Consideration shall have been approved for quotation on
The Nasdaq National Market.
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(h) Pooling of Interests. Purchaser shall have received a letter from
KPMG LLP to the effect that the Merger qualifies for "pooling of interests"
accounting treatment if consummated in accordance with this Agreement.
(i) Minimum Closing Share Price. The Closing Share Price shall not be
less than $4.00.
6.2. Conditions to Obligations of the Company. The obligation of the
Company to effect the Merger shall be subject to the fulfillment at or prior to
the Effective Time of the following additional conditions, any one or more of
which may be waived by the Company:
(a) Purchaser Representations and Warranties. The representations and
warranties of Purchaser and Merger Sub set forth in this Agreement (excluding
any representation or warranty that refers specifically to "the date of this
Agreement" "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects as of the Closing Date as if made on
and as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) any update
of or modification to the Purchaser Disclosure Letter made or purported to have
been made after the date of this Agreement shall be disregarded, (ii) any
inaccuracy that does not have a Material Adverse Effect on Purchaser shall be
disregarded, and (iii) any inaccuracy that results from: (x) changes in the
economy generally, (y) changes in the industry in which Purchaser operates or
(z) changes resulting from the public announcement of this Agreement and the
transactions contemplated hereby shall be disregarded).
(b) Performance by Purchaser. Purchaser shall have performed and
complied with all the covenants and agreements in all material respects and
satisfied in all material respects all the conditions required by this Agreement
to be performed or complied with or satisfied by Purchaser at or prior to the
Effective Time.
(c) No Material Adverse Change. There shall have been no material
adverse change in the financial condition or results of operations of Purchaser
since the date of this Agreement; provided, however, that for purposes of
determining whether there shall have been any such material adverse change, (i)
any adverse change resulting from or relating to general business or economic
conditions shall be disregarded, (ii) any adverse change resulting from or
relating to conditions generally
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affecting the industry in which Purchaser competes shall be disregarded, (iii)
any adverse change resulting from or relating to the taking of any action
contemplated by this Agreement shall be disregarded, and (iv) any change in
Purchaser's results of operations reasonably consistent with Purchaser's
historical trends, including without limitation the effects of seasonality,
shall be disregarded.
(d) Certificates and Other Deliveries. Purchaser shall have delivered,
or caused to be delivered, to the Company (i) a certificate executed on its
behalf by its Chief Operating Officer or another authorized officer to the
effect that the conditions set forth in Sections 6.2(a), (b) and (c) hereof have
been satisfied; (ii) a certificate of good standing from the Secretary of State
of the State of Delaware stating that Purchaser is a validly existing
corporation in good standing (iii) a certificate of good standing from the
Secretary of State of New Jersey stating that Merger Sub is a validly existing
corporation in good standing (iv) duly adopted resolutions of the Board of
Directors of Purchaser and the Board of Directors and the stockholder of Merger
Sub approving the execution, delivery and performance of this Agreement and the
instruments contemplated hereby, and of Purchaser's stockholders approving the
Purchaser Proposal, each certified by its respective Secretary; (v) the duly
executed Purchaser Tax Opinion certificate and (vi) such other documents and
instruments as the Company reasonably may request.
(e) Tax Opinion. The Company shall have received an opinion from Paul,
Weiss, Rifkind, Wharton & Garrison based on the representation letters and
certificates substantially in the form previously agreed upon by the Purchaser
and the Company and dated the Closing Date, to the effect that the Merger will
qualify as a reorganization under the provisions of Sections 368(a) of the Code.
6.3. Conditions to Obligations of Purchaser. The obligations of
Purchaser to effect the Merger shall be subject to the fulfillment at or prior
to the Effective Time of the following additional conditions, any one or more of
which may be waive by Purchaser:
(a) Company Representations and Warranties. The representations and
warranties of the Company set forth in this Agreement (excluding any
representation or warranty that refers specifically to "the date of this
Agreement," "the date hereof" or any other date other than the Closing Date)
shall be accurate in all material respects as of the Closing Date as if made on
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and as of the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) any update
of or modification to the Company Disclosure Letter made or purported to have
been made after the date of this Agreement shall be disregarded, (ii) any
inaccuracy that does not have a Material Adverse Effect on the Company shall be
disregarded, and (iii) any inaccuracy that results from: (x) changes in the
economy generally, (y) changes in the industry in which the Company operates or
(z) changes resulting from the public announcement of this Agreement and the
transactions contemplated hereby shall be disregarded).
(b) Performance by the Company. The Company shall have performed and
complied with all the covenants and agreements in all material respects and
satisfied in all material respects all the conditions required by this Agreement
to be performed or complied with or satisfied by the Company at or prior to the
Effective Time.
(c) No Material Adverse Change. There shall have been no material
adverse change in the financial condition or results of operations of the
Company and its subsidiaries, taken as a whole, since the date of this
Agreement; provided, however, that for purposes of determining whether there
shall have been any such material adverse change, (i) any adverse change
resulting from or relating to general business or economic conditions shall be
disregarded, (ii) any adverse change resulting from or relating to conditions
generally affecting the industry in which the Company competes shall be
disregarded, (iii) any adverse change resulting from or relating to the taking
of any action contemplated by this Agreement shall be disregarded, and (iv) any
change in the Company's results of operations reasonably consistent with the
Company's historical trends, including without limitation the effects of
seasonality, shall be disregarded.
(d) Tax Opinion. Purchaser shall have received an opinion from Maslon
Edelman Borman & Brand, LLP substantially to the effect that, if the Merger is
consummated in accordance with the provisions of this Agreement, under current
Law, for federal income tax purposes, the Merger will qualify as a
reorganization within the meaning of Section 368(a) of the Code.
(e) Certificates and Other Deliveries. The Company shall have
delivered, or caused to be delivered, to Purchaser (i) a certificate executed on
its behalf by its Chief Executive Officer to the effect that the conditions set
forth in Sections 6.3 (a), (b) and (c) hereof have been satisfied; (ii) a
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certificate of good standing from the Secretary of State of the State of New
Jersey stating that the Company is a validly existing corporation in good
standing; (iii) duly adopted resolutions of the Board of Directors of the
Company approving the execution, delivery and performance of this Agreement and
the instruments contemplated hereby, and of the Company's Stockholders approving
the Company Proposals, each certified by the Secretary of the Company; (iv) a
true and complete copy of the Certificate of Incorporation certified by the
Secretary of State of the State of New Jersey, and a true and complete copy of
the Bylaws of the Company certified by the Secretary thereof; and (v) other
documents and instruments as Purchaser reasonably may request.
(f) Affiliate Agreement. Each person who is or may be an "affiliate" of
the Company within the meaning of Rule 145 of the rules and regulations of the
SEC promulgated under the Securities Act shall have entered into an agreement in
the form attached hereto as Exhibit C.
(g) Maximum Dissenting Shares. The holders of no more than 1 percent of
the Company Shares shall have provided the Company with notice of their intent
to dissent with respect to the Merger.
(h) Termination of Shareholder Agreements. That certain Shareholder
Agreement, dated January 30, 1998, by and among the Company, Joseph J. Atick, A.
Norman Redlich, Paul A. Griffin and Lonsdale Group Limited, together with any
and all other agreements by and among the Company's shareholders with respect to
their shares of Company Stock, shall have been terminated and will be of no
further force or effect.
6.4. Frustration of Conditions.
Neither Purchaser nor the Company may rely on the failure of any
condition set forth in this Article 6 to be satisfied if such failure was caused
by such party's failure to comply with or perform any of its covenants or
obligations set forth in this Agreement.
ARTICLE 7
TERMINATION AND ABANDONMENT
7.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after
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approval of the stockholders of the Company and the stockholders of Purchaser
described herein:
(a) by mutual written consent of Purchaser and the Company;
(b) by either Purchaser or the Company if:
(i) the Merger shall not have been consummated on or prior to
March 31, 2001, provided, however, that the right to terminate this
Agreement pursuant to this Section 7.1(b) (i) shall not be available to
any party whose failure to perform any of its obligations under this
Agreement results in the failure of the Merger to be consummated by
such time;
(ii) the approval of the Company's shareholders required by
Section 6.1(a) shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof;
(iii) the approval of Purchaser's stockholders required by
Section 6.1(a) shall not have been obtained at a meeting duly convened
therefor or at any adjournment or postponement thereof; or
(iv) any Governmental Authority shall have issued an order,
decree or ruling or taken any other action permanently enjoining,
restraining or otherwise prohibiting the consummation of the Merger and
such order, decree or ruling or other action shall have become final
and nonappealable;
(c) by Purchaser if the Closing Share Price is less than $4.00, or if
the Company shall have breached in any material respect any of its
representations or warranties (except where such breach is solely attributable
to: (i) changes in the economy generally, (ii) changes in the industry in which
the Company operates or (iii) changes resulting from the public announcement of
this Agreement and the transactions contemplated hereby), or the Company shall
have breached any of its covenants or other agreements contained in this
Agreement, which breach or failure to perform is incapable of being cured or has
not been cured within 20 business days after the giving of written notice to the
Company; or
(d) by the Company if the Closing Share Price is less than $4.00, or if
Purchaser shall have breached in any material respect any of its representations
or warranties (except where such breach is solely attributable to: (i) changes
in the
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economy generally, (ii) changes in the industry in which Purchaser
operates or (iii) changes resulting from the public announcement of this
Agreement and the transactions contemplated hereby), or Purchaser shall have
breached any of its covenants or other agreements contained in this Agreement,
which breach or failure to perform is incapable of being cured or has not been
cured within 20 business days after the giving of written notice to Purchaser.
The party desiring to terminate this Agreement pursuant to the
preceding paragraphs shall give written notice of such termination to the other
party in accordance with Section 9.5 hereof.
7.2. Effect of Termination and Abandonment.
In the event of termination of this Agreement and the abandonment of
the Merger pursuant to this Article 7, this Agreement (other than Sections 7.2,
9.1, 9.3, 9.5, 9.6, 9.7, 9.8, 9.10, 9.11, 9.12, 9.13 and 9.14 hereof) shall
become void and of no effect with no liability on the part of any party hereto
(or of any of its directors, officers, employees, agents, legal or financial
advisors or other representatives); provided, however, that no such termination
shall relieve any party hereto from any liability for any breach of this
Agreement prior to termination. If this Agreement is terminated as provided
herein, each party shall use its reasonable best efforts to redeliver all
documents, work papers and other material (including any copies thereof) of any
other party relating to the transactions contemplated hereby, whether obtained
before or after the execution hereof, to the party furnishing the same.
ARTICLE 8
SURVIVAL; INDEMNIFICATION
8.1. Survival of Representations and Warranties. Notwithstanding any
investigation made by or on behalf of Purchaser or the results of any such
investigation and notwithstanding the participation of Purchaser in the Closing,
those representations and warranties contained in Article 2 hereof which are
susceptible to confirmation and resolution through the audit process shall
survive the Closing until the filing with the SEC of Purchaser's Annual Report
on Form 10-K for the year ending September 30, 2001 (the "Audit Completion
Date") and all other representations and warranties contained in Article 2
hereof shall survive the Closing for a period of one year following the Closing
Date (the "Anniversary Date").
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Notwithstanding the foregoing provision: (i) claims specifically raised by
Purchaser in one or more written notices given to the Company Shareholders or
their Attorney-in-Fact prior to the Audit Completion Date or the Anniversary
Date (as the case may be) may continue to be asserted by Purchaser after such
date, and (ii) claims based on fraud or intentional misrepresentation (as
defined below) may be brought at any time. For purposes of this Agreement, the
phrase "fraud or intentional misrepresentation" shall mean any fraudulent or
intentional misrepresentation, or reckless disregard, of a material fact or
condition existing on or prior to the Closing Date, or the intentional or
reckless omission of a material fact or condition existing on or prior to the
Closing Date.
8.2. Indemnification of Purchaser. As of the Effective Time, each
Company Shareholder, by virtue of the approval of the Merger and this Agreement
by the requisite vote of the Company Shareholders, agrees, severally and not
jointly, that the Escrow Shares to which such Company Shareholder becomes
entitled upon consummation of the Merger (disregarding for this purpose any
fractional shares) shall be placed in escrow, as partial security for the
performance of the Company Shareholder's indemnification obligations hereunder,
as provided for in the Escrow Agreement. The form of letter of transmittal to be
signed by each Company Shareholder contemplated by Section 1.6 shall
specifically authorize the Escrow Agent from time to time to transfer all or any
portion of the certificates so deposited, together with the proceeds from any
sale of Escrow Shares, in satisfaction of such Company Shareholder's
indemnification obligation hereunder. In connection therewith, Purchaser, and
each of Purchaser's subsidiaries, and their respective officers, directors,
employees, agents, affiliates and shareholders (referred to collectively herein
as the "Purchaser") will be entitled to be indemnified and held harmless against
and in respect of: (i) any and all losses, damages or deficiencies (whether as a
result of a direct claim by Purchaser against the Company Shareholders, a third
party claim against Purchaser or otherwise) resulting to Purchaser from any and
all breaches of representations, warranties, covenants or other terms of this
Agreement by the Company made or contained in this Agreement, the Company
Disclosure Letter or in any exhibit to this Agreement; and (ii) all costs and
expenses incident to any and all actions, suits, proceedings, claims, demands,
assessments, settlements or judgments in respect of the foregoing, regardless of
the merit thereof, including Purchaser's reasonable legal and accounting fees
and expenses (whether incident to the foregoing or to Purchaser's enforcement of
said rights of defense and
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indemnity) (items (i) and (ii) above shall be referred to herein collectively as
"Purchaser's Damages"). Except for claims of fraud or intentional
misrepresentation, the indemnification provided pursuant to this Section 8.2
shall be Purchaser's sole remedy for the breach of any representation or
warranty set forth in this Agreement.
8.3. Procedure for Indemnification of Purchaser. If any action, suit or
proceeding shall be commenced against Purchaser or any claim, demand or
assessment be asserted against Purchaser in respect of which Purchaser proposes
to demand indemnification, Purchaser shall notify the Attorney-in-Fact to that
effect with reasonable promptness. The Attorney-in-fact may assume the defense
of any such claim, demand or assessment and Purchaser will have the right to
cause the Attorney-in-Fact, on behalf of the Company Shareholders, to assume the
entire control of the defense, compromise or settlement thereof, including, at
the expense of the Company Shareholders, employment of counsel satisfactory to
Purchaser and, in connection therewith, Purchaser shall cooperate fully to make
available to the Attorney-in-Fact all pertinent information under its control.
In the event that the Attorney-in-Fact assumes or Purchaser causes the
Attorney-in-Fact to assume control of the defense of any action, suit,
proceeding claim, demand or assessment (each a "Third-Party Claim") made against
Purchaser, all amounts incurred by the Attorney-in-Fact on behalf of the Company
Shareholders in connection with the defense, compromise or settlement thereof
shall be credited against the Escrow Account described in Section 1.7 hereof
pursuant to the provisions of the Escrow Agreement attached hereto as Exhibit A.
With respect to any Third-Party Claim as to which Purchaser does not cause the
Attorney-in-Fact to assume control of the defense thereof, the Company
Shareholders shall thereafter, severally, but not jointly, reimburse Purchaser
for all of Purchaser's Damages, as and when they are incurred, and Purchaser
shall have recourse to the Escrow Shares and the proceeds from any sale of
Escrow Shares pursuant to the terms of the Escrow Agreement for reimbursement of
all such amounts or, in the event the total value of Escrow Shares and proceeds
from sales thereof then remaining in the Escrow Account is less than the amount
of Purchaser's Damages, by direct claim against the Major Shareholders on a
joint, but not several, basis.
In the event of any claim by Purchaser under the foregoing
indemnification provisions (or any others provided herein), Purchaser shall
notify the Attorney-in-Fact as provided above and in the event Purchaser does
not cause the Attorney-in-Fact
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to assume control of any related Third-Party Claim, Purchaser shall assert its
right to reimbursement of such amount by release of Escrow Shares and proceeds
from any sale of Escrow Shares pursuant to the Escrow Agreement having an
aggregate value, calculated on the basis of the Closing Share Price, equal to
the amount of Purchaser's Damages. In the event that the amount of Purchaser's
right of reimbursement exceeds the total value of Escrow Shares and proceeds
from any sale of Escrow Shares then remaining in the Escrow Account, Purchaser
may recover the amount of such excess by direct claim against the Major
Shareholders on a joint, but not several, basis.
8.4. Indemnification Threshold; Maximum Indemnification Liability. The
Company Shareholders shall not incur indemnification obligations under this
Article 8 unless and until the aggregate amount of Purchaser's Damages reaches
$50,000 (the "Indemnification Threshold"), at which time the Company
Shareholders shall be liable in full for all such Purchaser's Damages. The Major
Shareholders shall not be obligated under this Article 8 to pay an amount in
excess of 20 percent of the Aggregate Merger Consideration, less the amounts
paid to Purchaser from the Major Shareholders' pro rata portion of the Escrow
Account.
ARTICLE 9
MISCELLANEOUS
9.1. Confidentiality. Unless (i) otherwise expressly provided in this
Agreement, (ii) required by applicable Law or any listing agreement with, or the
rules and regulations of, any applicable securities exchange or the NASD, (iii)
necessary to secure any required Consents as to which the other party has been
advised or (iv) consented to in writing by Purchaser and the Company, any
information or documents furnished in connection herewith shall be kept strictly
confidential by the Company, Purchaser and their respective officers, directors,
employees and agents. Prior to any disclosure pursuant to the preceding
sentence, the party intending to make such disclosure shall consult with the
other party regarding the nature and extent of the disclosure. Nothing contained
herein shall preclude disclosures to the extent necessary to comply with
accounting, SEC and other disclosure obligations imposed by applicable Law. To
the extent required by such disclosure obligations, Purchaser after consultation
with the Company, may file with the SEC a Report on Form 8-K pursuant to the
Securities Exchange Act with respect to the Merger, which report may include,
among other things, financial statements and pro forma financial information
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with respect to the other party. In connection with any filing with the SEC of a
registration statement or amendment thereto under the Securities Act, the
Company or Purchaser, after consultation with the other party, may include a
prospectus containing any information required to be included therein with
respect to the Merger, including, but not limited to, financial statements and
pro forma financial information with respect to the other party, and thereafter
distribute said prospectus. Purchaser and the Company shall cooperate with the
other and provide such information and documents as may be required in
connection with any such filings. In the event the Merger is not consummated,
each party shall return to the other any documents furnished by the other and
all copies thereof any of them may have made and will hold in absolute
confidence any information obtained from the other party except to the extent
(i) such party is required to disclose such information by Law or such
disclosure is necessary or desirable in connection with the pursuit or defense
of a claim, (ii) such information was known by such party prior to such
disclosure or was thereafter developed or obtained by such party independent of
such disclosure as evidenced by such party's business records maintained in the
ordinary course of its business, or (iii) such information becomes generally
available to the public other than by breach of this Section 9.1. Prior to any
disclosure of information pursuant to the exception in clause (i) of the
preceding sentence, the party intending to disclose the same shall so notify the
party which provided the same in order that such party may seek a protective
order or other appropriate remedy should it choose to do so. Upon the execution
and delivery of this Agreement by the parties hereto, that certain Reciprocal
Non-Disclosure Agreement, dated July 12, 2000, by and between the Company and
Purchaser shall be terminated and of no further force or effect; provided,
however, that all confidential information disclosed thereunder shall continue
to be deemed confidential information for purposes hereof.
9.2. Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written agreement among the Company,
Purchaser and Merger Sub.
9.3. Waiver of Compliance; Consents. Any failure of the Company on the
one hand, or Purchaser on the other hand, to comply with any obligation,
covenant, agreement or condition herein may be waived by Purchaser on the one
hand, or the Company on the other hand, only by a written instrument signed by
the party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement
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or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing in a
manner consistent with the requirements for a waiver of compliance as set forth
in this Section 9.3.
9.4. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in person,
by facsimile, receipt confirmed, or on the next business day when sent by
overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
(i) if to the Company, to:
Visionics Corporation
One Exchange Place, Suite 800
Jersey City, NJ 07302
Attention: Mr. Joseph Atick
Telecopy:
with a copy to:
Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Attention: Douglas Cifu, Esq.
Telecopy: 212.757.3990
(ii) if to Purchaser or Merger Sub, to:
Digital Biometrics, Inc.
5600 Rowland Road
Minnetonka, MN 55343
Attention: Mr. John Metil
Telecopy: 952.932.7181
with copies to:
Maslon Edelman Borman & Brand, LLP
90 South Seventh Street
Minneapolis, MN 55402
Attention: Joseph Alexander, Esq.
Telecopy: 612.672.8397
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9.5. Binding Effect; Assignment. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns. Neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto prior to the Effective Time without the
prior written consent of the other party hereto.
9.6. Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs or expenses.
9.7. Governing Law. This Agreement shall be deemed to be made in, and
in all respects shall be interpreted, construed and governed by and in
accordance with the internal laws of, the State of Delaware.
9.8. Counterparts. This Agreement may be executed in one or more
counterparts, each of which together be deemed an original, but all of which
together shall constitute one and the same instrument.
9.9. Interpretation. The article and section headings contained in this
Agreement are solely for the purpose of reference, are not part of the agreement
of the parties and shall not in any way affect the meaning or interpretation of
this Agreement. As used in this Agreement, (i) the term "Person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a limited
liability company, a trust, an association, an unincorporated organization, a
Governmental Authority and any other entity, (ii) unless otherwise specified
herein, the term "affiliate," with respect to any person, shall mean and include
any person controlling, controlled by or under common control with such person
and (iii) the term "subsidiary" of any specified person shall mean any
corporation 50 percent or more of the outstanding voting power of which, or any
partnership, joint venture, limited liability company or other entity 50 percent
or more of the total equity interest of which, is directly or indirectly owned
by such specified person.
9.10. Entire Agreement. This Agreement and the documents or instruments
referred to herein including, but not limited to, the Exhibit(s) attached hereto
and the Disclosure Letters referred to herein, which Exhibit(s) and Disclosure
Letters are
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incorporated herein by reference, embody the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants, or
undertakings, other than those expressly set forth or referred to herein. This
Agreement supersedes all prior agreements and the understandings between the
parties with respect to such subject matter.
9.11. Severability. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other jurisdiction.
9.12. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. Accordingly, the parties further agree that each party shall be
entitled to an injunction or restraining order to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United states or any state having jurisdiction., this being in
addition to any other right or remedy to which such party may be entitled under
this Agreement, at law or in equity.
9.13. Third Parties. Except for the provisions contained in Sections
1.8, 1.11 and 5.10, nothing contained in this Agreement or in any instrument or
document executed by any party in connection with the transactions contemplated
hereby shall create any rights in, or be deemed to have been executed for the
benefit of, any that is not a party hereto or thereto or a successor or
permitted assign of such a party.
9.14. Disclosure Letters. The Company and Purchaser acknowledge that
the Company Disclosure Letter and the Purchaser Disclosure Letter (i) relate to
certain matters concerning the disclosures required and transactions
contemplated by this Agreement, (ii) are qualified in their entirety by
reference to specific provisions of this Agreement, (iii) are not intended to
constitute and shall not be construed as indicating that such matter is required
to be disclosed, nor shall such disclosure be construed as an admission that
such information is material with
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respect to the Company or Purchaser, as the case may be, except to the extent
required by this Agreement, and (iv) disclosure of the information contained in
one section of the Company Disclosure Letter, or Purchaser Disclosure Letter
shall be deemed proper disclosure for all the sections thereof, as the case may
be.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, Purchaser, Merger Sub, the Company and each of the
Major Shareholders have caused this Agreement to be signed and delivered by
their respective duly authorized officers as of the date first above written.
DIGITAL BIOMETRICS, INC.
By: /s/ John J. Metil
--------------------------------------
Name: John J. Metil
Title: President
VC ACQUISITION CORP.
By: /s/ John J. Metil
--------------------------------------
Name: John J. Metil
Title: Chief Executive Officer
VISIONICS CORPORATION
By: /s/ Joseph J. Atick
--------------------------------------
Name: Joseph J. Atick
Title: Chief Executive Officer
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For the purpose of Sections 1.7(a), 8.2, 8.3 and 8.4 only.
MAJOR SHAREHOLDERS:
/s/ Joseph J. Atick
-----------------------------------------
Joseph J. Atick
/s/ A. Norman Redlich
-----------------------------------------
A. Norman Redlich
/s/ Paul A. Griffin
-----------------------------------------
Paul A. Griffin
LONSDALE GROUP LIMITED
By: /s/ Jason Choo
--------------------------------------
Its: Managing Director
59
