MERGER AGREEMENT
among
LIGHTPATH TECHNOLOGIES, INC.,
GELTECH, INC.
and
LPI TWO MERGER CORPORATION
Dated August 9, 2000
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TABLE CONTENTS
Page
ARTICLE 1.................................................................... 5
1.1 The Merger........................................................... 5
1.2 Effect of the Merger................................................. 5
1.3 Consummation of the Merger........................................... 6
1.4 Articles of Incorporation and Bylaws; Directors and Officers......... 6
1.5 Conversion of Securities............................................. 6
1.6 Closing of Company Transfer Books.................................... 9
1.7 Exchange of Certificates............................................. 9
1.8 Dissenting Shares.................................................... 10
1.9 Tax Consequences..................................................... 11
1.10 Taking of Necessary Action; Further Action........................... 11
1.11 Stock Options........................................................ 11
1.12 Indemnification; Payment of Note..................................... 12
ARTICLE 2.................................................................... 13
2.1 Organization and Qualification....................................... 13
2.2 Authority Relative to This Agreement................................. 13
2.3 Capital Structure.................................................... 14
2.4 SEC Filings; Financial Statements.................................... 14
2.5 Valid Issuance....................................................... 15
2.6 Accuracy of Information.............................................. 15
2.7 Title to Properties.................................................. 15
2.8 Accounts Receivable.................................................. 16
2.9 Employment Matters................................................... 16
2.10 Affiliate Transactions............................................... 16
2.11 Compliance with Laws; Permits; Certain Operations.................... 16
2.12 Non-Contravention; Consents.......................................... 17
2.13 Brokerage............................................................ 17
2.14 No Material Adverse Changes.......................................... 17
2.15 Legal Proceedings.................................................... 18
ARTICLE 3.................................................................... 18
3.1 Organization and Qualification....................................... 18
3.2 Authority Relative to this Agreement................................. 18
3.3 Capitalization....................................................... 19
3.4 Financial Statements................................................. 21
3.5 No Subsidiaries...................................................... 21
3.6 Absence of Undisclosed Liabilities................................... 21
3.7 No Material Adverse Changes.......................................... 22
3.8 Absence of Certain Developments...................................... 22
3.9 Title to Properties.................................................. 24
3.10 Accounts Receivable.................................................. 25
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3.11 Inventories.......................................................... 25
3.12 Tax Matters.......................................................... 25
3.13 Contracts and Commitments............................................ 28
3.14 Proprietary Rights................................................... 30
3.15 Litigation........................................................... 31
3.16 Brokerage............................................................ 31
3.17 Employment Matters................................................... 31
3.18 Employee Benefit Plans............................................... 32
3.19 Insurance............................................................ 33
3.20 Affiliate Transactions............................................... 34
3.21 Suppliers............................................................ 34
3.22 Officers and Directors; Bank Accounts................................ 34
3.23 Compliance with Laws; Permits; Certain Operations.................... 34
3.24 Disclosure........................................................... 35
3.25 Non-Contravention; Consents.......................................... 35
3.26 Stockholder Vote Required............................................ 36
ARTICLE 4.................................................................... 36
4.1 Conduct of Business Pending the Merger............................... 36
4.2 Notification; Updates to Disclosure Schedule......................... 39
ARTICLE 5.................................................................... 40
5.1 Shareholders Meeting................................................. 40
5.2 Expenses............................................................. 40
5.3 Additional Agreements................................................ 40
5.4 No Negotiations, etc................................................. 40
5.5 Notification of Certain Matters...................................... 40
5.6 Access to Information; Confidentiality............................... 41
5.7 Shareholder Claims................................................... 41
5.8 Consents............................................................. 41
5.9 State Securities Law Compliance...................................... 41
5.10 Notification; Updates to Parent Disclosure Letter.................... 42
5.11 Commercially Reasonable Efforts...................................... 42
5.12 Tax Matters.......................................................... 42
5.13 Indemnification...................................................... 43
5.14 Nasdaq National Market Listing....................................... 44
5.15 Employees............................................................ 44
5.16 Future Employment Incentives......................................... 44
5.17 Funding Commitment................................................... 45
ARTICLE 6.................................................................... 45
6.1 Conditions to Obligations of Each Party To Effect the Merger......... 45
6.2 Additional Conditions to Obligation of the Company................... 47
6.3 Additional Conditions to Obligations of Parent and the Merger Sub.... 49
ARTICLE 7.................................................................... 52
7.1 Termination.......................................................... 52
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7.2 Termination Procedures............................................... 53
7.3 Effect of Termination................................................ 53
ARTICLE 8.................................................................... 54
8.1 Amendment............................................................ 54
8.2 Waiver............................................................... 54
8.3 Public Statements.................................................... 54
8.4 Notices.............................................................. 54
8.5 Interpretation....................................................... 55
8.6 Severability......................................................... 55
8.7 Miscellaneous........................................................ 55
8.8 Non-survival of Representations and Warranties....................... 56
8.9 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership.. 56
8.10 Fax Signatures....................................................... 56
SCHEDULES
Schedule 1.4 Officers and Directors of Surviving Corporation
Schedule 1.5(a) Shareholder Ownership
COMPANY DISCLOSURE SCHEDULES
Schedule 3.2 Authority Relative to this Agreement
Schedule 3.3(b) Company Options and Warrants
Schedule 3.3(c) Rights to Acquire Company Stock
Schedule 3.3(e) Repurchase of Stock
Schedule 3.3(f) Registration of Securities
Schedule 3.5 Subsidiaries
Schedule 3.6 Undisclosed Liabilities
Schedule 3.7 Adverse Changes
Schedule 3.8 Certain Developments
Schedule 3.9(a) Liens
Schedule 3.9(b) Real Estate
Schedule 3.9(c) Leases
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Schedule 3.11 Inventory
Schedule 3.12 Tax Matters
Schedule 3.12(d) Tax Returns
Schedule 3.12(e) Tax Elections
Schedule 3.13(a) Contracts
Schedule 3.13(b) Breach of Contract
Schedule 3.14 Proprietary Rights
Schedule 3.15 Litigation
Schedule 3.16 Brokerage
Schedule 3.18(a) Pension Plans
Schedule 3.18(b) Welfare Plans
Schedule 3.18(c) Compensation Programs
Schedule 3.18(j) Extended Benefits
Schedule 3.19 Insurance
Schedule 3.20 Affiliate Transactions
Schedule 3.21 Suppliers
Schedule 3.22 Officers and Directors; Bank Accounts
Schedule 3.23 Compliance with Laws; Permits; Certain Operations
Schedule 3.25 Non-Contravention; Consents
Schedule 5.16 Future Employment Incentives
Schedule 5.17 Funding Commitment
EXHIBITS
Exhibit A Form of Employment Agreement
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MERGER AGREEMENT
This MERGER AGREEMENT is dated August 9, 2000 (this "Agreement"), by and
among LightPath Technologies, Inc., a Delaware corporation ("Parent"), LPI Two
Merger Corporation, a Delaware corporation wholly owned directly by Parent (the
"Merger Sub"), and Geltech, Inc., a Delaware corporation (the "Company").
RECITALS
I. Parent and the Company are parties to a letter of intent dated June 15,
2000 (the "Letter of Intent"), which contemplates the merger described in
Article 1 (the "Merger").
II. The respective boards of directors of the Merger Sub and the Company
have determined that it is advisable to consummate the Merger, as a result of
which all of the outstanding common stock, $.01 par value per share, of the
Company ("Company Common Stock") will be converted into shares of the Class A
Common Stock, $.01 par value per share, of Parent ("Parent Class A Common
Stock") and the Company will be wholly owned directly by Parent; all on the
terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows: ARTICLE 1
THE MERGER
The respective boards of directors of Parent, the Merger Sub and the
Company have, by resolutions duly adopted, approved the following provisions of
this Article 1 as the plan of merger required by the laws of the State of
Delaware in connection with the Merger:
1.1 THE MERGER. At the Effective Time (as defined in Section 1.3), in
accordance with this Agreement and applicable law, the Merger Sub shall be
merged with and into the Company, the separate existence of the Merger Sub
(except as may be continued by operation of law) shall cease, and the Company
shall continue as the surviving corporation under the name "Geltech, Inc." as
provided in the Amended Articles of Incorporation of the Company pursuant to
Section 1.4 of this Agreement. The Company, in its capacity as the corporation
surviving the Merger, sometimes is referred to herein as the "Surviving
Corporation."
1.2 EFFECT OF THE MERGER. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of the Merger Sub and the Company (collectively, the
"Constituent Corporations"); and all property, real, personal, and mixed, and
all debts due on whatever account, including subscriptions to shares, and all
other choses in action, and all and every other interest of or belonging to or
due to each of the Constituent Corporations, shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
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deed; and the Surviving Corporation shall be responsible and liable for all
liabilities and obligations of each of the Constituent Corporations.
1.3 CONSUMMATION OF THE MERGER. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Squire, Sanders & Dempsey L.L.P., 40 North Central Avenue, Suite 2700,
Phoenix, Arizona 85004 at 10:00 a.m. on a date to be mutually agreed upon by
Parent and the Company, which date shall be no later than the third business day
following the satisfaction or waiver of the conditions set forth in Article 6 of
this Agreement (the "Scheduled Closing Time") and no later than the Final Date
(as defined in Section 7.1). The date on which the Closing actually takes place
is referred to in this Agreement as the "Closing Date." On the Closing Date, the
parties hereto will cause articles of merger relating to the Merger to be
delivered to the Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with, the relevant provisions of
applicable law. The Merger shall be effective at such time as such articles of
merger are duly filed with and accepted by the Secretary of State of the State
of Delaware in accordance with applicable law (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. The
Articles of Incorporation and Bylaws of the Company, as in effect immediately
prior to the Effective Time, shall be the Articles of Incorporation and Bylaws
of the Surviving Corporation immediately after the Effective Time and shall
thereafter continue to be its Articles of Incorporation and Bylaws until amended
as provided therein and under the applicable law. The directors and officers of
the Surviving Corporation immediately following the Effective Time shall be the
persons identified on SCHEDULE 1.4 attached hereto.
1.5 CONVERSION OF SECURITIES; CASH CONSIDERATION. Subject to Sections
1.7(b) and 1.8, at the Effective Time, the following events shall occur by
virtue of the Merger and without any action on the part of the Merger Sub, the
Company or the holder of any of the following securities:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be canceled
pursuant to Section 1.5(b)) shall, without any action on the part of the
holders thereof, automatically be canceled and extinguished and the total
number of outstanding shares of Company Common Stock shall be converted
into and become a right to receive an aggregate number of shares of Parent
Class A Common Stock determined as set forth in the following sentence (the
"Share Consideration"), payable to the shareholders of the Company (the
"Shareholders") on a PRO RATA basis in the manner reflected on SCHEDULE
1.5(A) attached hereto. The actual aggregate number of shares of Parent
Class A Common Stock constituting the Share Consideration issued by Parent,
subject to subsequent adjustment as contemplated by Section 1.5(f) below,
will be a number of shares equal to the quotient of $27,500,000 DIVIDED BY
the average of the last reported sale price of the Parent Class A Common
Stock for the five (5) consecutive trading days ending on the trading day
prior to the date of this Agreement (the "Execution Price"), which the
parties hereby acknowledge and agree is $33.425 per share. For purposes of
this Agreement, "last reported sale price" shall be the last reported sale
price as reported by the Nasdaq National Market or such other primary
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securities market or exchange on which the Parent Class A Common Stock is
listed or traded on the date of determination.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time and held in the treasury of the
Company shall automatically be canceled and extinguished and no payment
shall be made with respect thereto.
(c) Each share of Merger Sub Common Stock, par value $.001 per share,
issued and outstanding immediately prior to the Effective Time shall
automatically be converted into and become one validly issued, fully paid
and nonassessable share of common stock, par value $.001 per share, of the
Surviving Corporation.
(d) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase
option, risk of forfeiture or other condition under any applicable
restricted stock purchase agreement or other agreement with the Company,
then the shares of Parent Class A Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the
same repurchase option, risk of forfeiture or other condition, and the
certificates representing such shares of Parent Class A Common Stock may
accordingly be marked with appropriate legends.
(e) Parent will use its best efforts to cause the Share Consideration
issued pursuant to this Agreement to be registered under the Securities Act
of 1933, as amended (the "Securities Act"), on Form S-3 or if the Company
is ineligible therefore, Form S-2 or S-1, or any successor form of any such
registration to such form, promulgated by the Securities and Exchange
Commission (the "SEC") and to be registered or qualified (or to have
established that an exemption from such registration or qualification is
available) under the "blue sky" laws of all states which the holders of
such shares reasonably request, as soon as practicable after the Effective
Time, subject to receipt by the Parent of any required audited financial
statements of the Company or other information pertaining to the Company
and its business, and Parent shall use its best efforts to maintain the
effectiveness of such registration statement or registration statements for
so long as the Share Consideration remains outstanding.
(f) The Share Consideration given to the Shareholders shall be
adjusted, as set forth below, on the Closing Date:
(i) Should the average of the last reported sale price of the
Parent Class A Common Stock for the five (5) consecutive trading days
ending on the trading day prior to the Closing Date (the
"Recalculation Price") have decreased by any amount less than or equal
to ten percent (10%) as compared to the Execution Price, the actual
aggregate number of shares of Parent Class A Common Stock constituting
the Share Consideration will be increased to the number of shares,
rounded to the nearest whole share, equal to the quotient of
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$27,500,000 divided by the Recalculation Price; provided, however,
that if, on the Closing Date, the Recalculation Price has dropped by
an amount greater than ten percent (10%) as compared to the Execution
Price, then the actual aggregate number of shares of Parent Class A
Common Stock constituting the Share Consideration will be increased
only by 91,416 shares of Parent Class A Common Stock (the "Downside
Collar"); and provided, further, that should the Recalculation Price
have decreased by an amount greater than or equal to thirty percent
(30%) as compared to the Execution Price, Parent shall have the right
to terminate this Agreement and the transactions contemplated hereby,
as set forth in Section 7.1(j) hereof. For example, if the Execution
Price is $40 per share, the total number of shares issued to the
Shareholders as of the Execution Date would be 687,500 ($27,500,000 /
$40). If on the Closing Date the Recalculation Price is $36 (which
would be 10% less than the $40 Execution Price), then Parent would
issue the Shareholders an additional 76,389 shares so that the total
number of shares issued to the Shareholders would be 763,889
($27,500,000 / $36). If on the Closing Date the Recalculation Price is
$20 (which would be greater than 30% less than the Execution Price),
then Parent, assuming Parent does not elect to terminate the Agreement
and the transactions contemplated hereby pursuant to Section 7.1(j),
as a result of the Downside Collar, would only issue the Shareholders
an additional 76,389 shares so that the total number of shares issued
to the Shareholders would be 763,889 ($27,500,000 / $36).
(ii) Should the Recalculation Price remain unchanged or have
increased by any amount less than or equal to sixty percent (60%) as
compared to the Execution Price, then the actual aggregate number of
shares of Parent Class A Common Stock constituting the Share
Consideration will remain unchanged, with such number determined as
set forth in Section 1.5(a) above.
(iii) Should the Recalculation Price have increased by more than
sixty percent (60%) as compared to the Execution Price, then the
actual aggregate number of shares of Parent Class A Common Stock
constituting the Share Consideration will be decreased to the number
of shares, rounded to the nearest whole share, that, based on the
Recalculation Price, create value in excess of 60% more than the
Execution Price (the "Upside Collar"); provided however, that in no
event shall the number of shares constituting the Share Consideration
be decreased by more than 50% of the number of shares constituting the
Share Consideration as of the Closing Date pursuant to Section 1.5(a),
prior to giving effect to any adjustment under this Section 1.5(f).
For example, if the Execution Price is $40 per share, the total number
of shares issued to the Shareholders on the Closing Date would be
687,500 ($27,500,000 / $40). If on the Closing Date the Recalculation
Price is $64, then the total number of shares issued to the
Shareholders would remain at 687,500 because $64 would be a 60%
increase of the $40 Execution Price. At a $64 Recalculation Price, the
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maximum aggregate value of the Share Consideration would be
$44,000,000 (687,500 x $64) (the "Maximum Upside Value"). If on the
Closing Date the Recalculation Price is $70, then, as a result of the
Upside Collar, the total number of shares issued to the Shareholders
would be reduced by the number of shares that is equal to the amount
by which the aggregate value of the Share Consideration exceeds the
Maximum Upside Value. In this case such aggregate value would be
$48,125,000 (687,500 x $70) which would result in $4,125,000 of excess
value above the Maximum Upside Value ($48,125,000 - $44,000,000).
Therefore, the total number of shares of Parent Class A Common Stock
issued to the Shareholders would be reduced by 58,929 shares
($4,125,000 / $70), thereby reducing the Share Consideration to
628,571 shares (687,500 - 58,929) which would not exceed the Maximum
Upside Value. If on the Closing Date the Recalculation Price is $140,
then, as a result of the Upside Collar and the limitations set forth
above, the total number of shares of Parent Class A Common Stock
issued to the Shareholders would be reduced by the lesser of (i) the
number of shares that is equal to the amount by which the aggregate
value of the Share Consideration exceeds the Maximum Upside Value, or
(ii) fifty percent (50%) of the number of shares constituting the
Share Consideration as of the Closing Date. In this example, the
amount determined pursuant to clause (i) of the previous sentence
would be 373,214 shares (((687,500 x 140) - 44,000,000) / 140), and
the amount determined pursuant to clause (ii) of the previous sentence
would be 343,750 shares (687,500 x 50%). Therefore, the total number
of shares of Parent Class A Common Stock issued to the Shareholders
would be reduced by 343,750 shares, thereby reducing the Share
Consideration to 343,750 shares (687,500 - 343,750).
1.6 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
Shareholders shall cease to have any further rights as shareholders of the
Company, and the stock transfer books of the Company shall be closed and no
transfer of shares of Company Common Stock issued and outstanding immediately
prior to the Effective Time shall thereafter be made.
1.7 EXCHANGE OF CERTIFICATES.
(a) At the Closing, the Shareholders and the Company shall deliver to
the Parent stock certificates evidencing all the Company Common Stock, each
in form suitable for transfer, endorsed in blank or with executed blank
stock transfer powers, along with stock book, stock transfer ledger, minute
book and any corporate seal of the Company. Upon the surrender and exchange
of a certificate theretofore representing shares of Company Common Stock,
each Shareholder shall be issued a certificate representing the number of
shares of Parent Class A Common Stock to which such person is entitled
pursuant to Section 1.5(a), and the certificate theretofore representing
shares of Company Common Stock shall forthwith be canceled. Until so
surrendered and exchanged, each certificate theretofore representing shares
of Company Common Stock shall represent solely the right to receive the
Parent Class A Common Stock into which the shares it theretofore
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represented shall have been converted pursuant to Section 1.5(a), and the
Surviving Corporation shall not be required to pay the Shareholder thereof
the Parent Class A Common Stock to which such Shareholder otherwise would
be entitled; provided that procedures allowing for payment against lost or
destroyed certificates against receipt of customary and appropriate
certifications and indemnities shall be provided. All certificates of
Parent Class A Common Stock issued pursuant hereto, issued prior to their
registration pursuant to Section 1.5(e) above, shall bear the following
legend:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended, and have been taken for
investment purposes only and not with a view to the distribution
thereof, and, except as stated in an agreement between the holder of
this certificate, or its predecessor in interest, and the issuer
corporation, such securities may not be sold or transferred unless
there is an effective registration statement under said Act covering
such securities or such sale or transfer is exempt from the
registration and prospectus delivery requirements of said Act."
(b) No fractional shares of Parent Class A Common Stock shall be
issued in connection with the Merger, including but not limited to, any
shares issued as a result of an adjustment as provided in Section 1.5(f),
and no certificates for any such fractional shares shall be issued. In lieu
of such fractional shares, any fractional share interest in Parent Class A
Common Stock which a holder of Company Common Stock would otherwise be
entitled to receive in the Merger (after aggregating all fractional shares
of Parent Class A Common Stock that would otherwise be issuable to such
holder) shall be rounded up to the nearest whole share if such fraction is
0.5 or greater and shall be rounded down to the nearest whole share if such
fraction is less than 0.5.
1.8 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of Company Common Stock that, as of the Effective
Time, are or may become entitled to exercise statutory appraisal rights
under Section 262 of the Delaware General Corporation Law (the "Delaware
Law") (such shares being referred to herein as "dissenting shares") shall
not be converted into or represent the right to receive Parent Class A
Common Stock in accordance with Section 1.5, and the holder or holders of
such shares shall be entitled only to such rights as may be granted to such
holder or holders under applicable Delaware Law; PROVIDED, HOWEVER, that if
the status of any such shares as "dissenting shares" shall not be
perfected, or if any such shares shall lose their status as "dissenting
shares," then, as of the later of the Effective Time or the time of the
failure to perfect such status or the loss of such status, such shares
shall automatically be converted into and shall represent only the right to
receive (upon the surrender of the certificate or certificates representing
such shares) Parent Class A Common Stock in accordance with Section 1.5.
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(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to
Delaware Law and of any other demand, notice or instrument delivered to the
Company prior to the Effective Time pursuant to the Delaware Law, and (ii)
the opportunity to participate in all negotiations and proceedings with
respect to any such demand, notice or instrument. The Company shall not
make any payment or settlement offer prior to the Effective Time with
respect to any such demand unless Parent shall have consented in writing to
such payment or settlement offer.
1.9 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the parties to this
Agreement agree to report the Merger and all related transactions consistently
therewith. The parties also agree to take such actions as may be reasonably
required to cause the Merger to be treated as a qualifying reorganization and to
take no action which would disqualify the Merger from reorganization status
under Section 368 of the Code. The parties to this Agreement hereby adopt this
Agreement as a "plan of reorganization" within the meaning of Sections
1.368-2(g) and 1.368-3(a) of the United States Treasury Regulations.
1.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. Parent and the Merger Sub,
on the one hand, and the Company, on the other hand, shall use all reasonable
efforts to take all such action (including, without limitation, action to cause
the satisfaction of the conditions of the other to effect the Merger) as may be
necessary or appropriate in order to effectuate the Merger as promptly as
possible. If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation and Parent with full possession of all the rights,
privileges, immunities and franchises of the Constituent Corporations, the
officers and directors of the Surviving Corporation and Parent are fully
authorized in the name of the Constituent Corporations or otherwise to take, and
shall take, all such action.
1.11 STOCK OPTIONS.
(a) At the Effective Time, each option, whether vested or unvested (a
"Company Option"), that is then outstanding under any of the Company's
Stock Option Plans (collectively, the "Stock Plan") shall automatically and
without further action by the holder of a Company Option become fully
vested and shall be assumed by Parent in accordance with the terms (as in
effect on the date hereof) of the Stock Plan and the stock option
agreement, if any, by which such Company Option is evidenced. All rights
with respect to Company Common Stock under outstanding Company Options
shall thereupon be converted, subject to the provisions hereof, into rights
with respect to Parent Class A Common Stock. From and after the Effective
Time, (i) each Company Option assumed by Parent (collectively, the "Assumed
Options") may be exercised solely for shares of Parent Class A Common
Stock, (ii) the number of shares of Parent Class A Common Stock subject to
each such Assumed Option shall be equal to the number of shares of Parent
Class A Common Stock which the holder of such Assumed Option would have
received pursuant to Section 1.5, without giving effect to any adjustment
to the Share Consideration pursuant to Section 1.5(f), in exchange for the
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shares of Company Common Stock subject to such Assumed Option if such
Assumed Option had been exercised immediately prior to the Effective Time,
(iii) the per share exercise price for the Parent Class A Common Stock
issuable upon exercise of each such Assumed Option shall be determined by
dividing the exercise price per share of Company Common Stock subject to
such Assumed Option, as in effect immediately prior to the Effective Time,
by a fraction the numerator of which is the number of shares of Parent
Class A Common Stock subject to such Assumed Option immediately after the
Effective Time, and the denominator of which is the number of shares of
Company Common Stock subject to such Assumed Option immediately prior to
the Effective Time, and rounding the resulting exercise price up to the
nearest whole cent, and (iv) all restrictions on the exercise of each such
Assumed Option shall continue in full force and effect and the term,
exercisability, status as an incentive or nonqualified option, and other
provisions of such Company Option, except the vesting schedule, shall
otherwise remain unchanged; provided, however, that each such Assumed
Option shall, in accordance with its terms, be subject to further
adjustment as appropriate to reflect any stock split, reverse stock split,
stock dividend, recapitalization or other similar transaction effected by
Parent after the Effective Time but without giving effect to any adjustment
to the Share Consideration pursuant to Section 1.5(f). Notwithstanding the
foregoing, the parties acknowledge that it may be necessary to amend the
Parent's stock option plan to increase the number of shares available for
grant thereunder in order to permit the issuance of stock options as
contemplated by this Section 1.11, and the provisions hereof are subject to
shareholder approval of any such amendment. The Company and Parent shall
take all action that may be necessary (under the Stock Plan and otherwise)
to effectuate the provisions of this Section 1.11.
(b) As soon as practicable after the Effective Time, Parent will use
its best efforts to register the shares of Parent Class A Common Stock
underlying the Assumed Options after the Effective Time on Form S-8
promulgated by the SEC, and Parent shall use its best efforts to maintain
the effectiveness of such registration statement or registration statements
for so long as such Assumed Options remain outstanding. With respect to any
Company employee or director who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), with respect to the
securities of Parent beneficially owned by such person, Parent shall
administer the Assumed Options in a manner that complies with the
disinterested administration requirements of Rule 16b-3 promulgated by the
SEC under the Exchange Act.
1.12 WARRANTS. At the Effective Time, each warrant to purchase shares of
Company Common Stock that is then outstanding (the "Company Warrants") shall be
assumed by Parent in accordance with the terms (as in effect on the date hereof)
of the agreement or instrument by which such Company Warrant is evidenced. All
rights with respect to Company Common Stock under outstanding Company Warrants
shall thereupon be converted, subject to the provisions hereof, into rights with
respect to Parent Class A Common Stock. From and after the Effective Time, (i)
each Company Warrant assumed by Parent (collectively, the "Assumed Warrants")
may be exercised solely for shares of Parent Class A Common Stock, (ii) the
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number of shares of Parent Class A Common Stock subject to each such Assumed
Warrant shall be equal to the number of shares of Parent Class A Common Stock
which the holder of such Assumed Warrant would have received pursuant to Section
1.5, without giving effect to any adjustment to the Share Consideration pursuant
to Section 1.5(f), in exchange for the shares of Company Common Stock subject to
such Assumed Warrant if such Assumed Warrant had been exercised immediately
prior to the Effective Time, (iii) the per share exercise price for the Parent
Class A Common Stock issuable upon exercise of each such Assumed Warrant shall
be determined by dividing the exercise price per share of Company Common Stock
subject to such Assumed Warrant, as in effect immediately prior to the Effective
Time, by a fraction the numerator of which is the number of shares of Parent
Class A Common Stock subject to such Assumed Warrant immediately after the
Effective Time, and the denominator of which is the number of shares of Company
Common Stock subject to such Assumed Warrant immediately prior to the Effective
Time, and rounding the resulting exercise price up to the nearest whole cent,
and (iv) all restrictions on the exercise of each such Assumed Warrant shall
continue in full force and effect and the term, exercisability, limitations, and
other provisions of such Company Warrant shall otherwise remain unchanged;
provided, however, that each such Assumed Warrant shall, in accordance with its
terms, be subject to further adjustment as appropriate to reflect any stock
split, reverse stock split, stock dividend, recapitalization or other similar
transaction effected by Parent after the Effective Time but without giving
effect to any adjustment to the Share Consideration pursuant to Section 1.5(f).
The Company and Parent shall take all action that may be necessary (under the
agreements and instruments evidencing the Assumed Warrants and otherwise) to
effectuate the provisions of this Section 1.12.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE MERGER SUB
Parent and the Merger Sub hereby represent and warrant to the Company that,
except as otherwise disclosed in Parent's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999 (the "Parent's Latest 10-K") or Parent's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2000 (the
"Parent's Latest 10-Q"), each of the following:
2.1 ORGANIZATION AND QUALIFICATION. Each of Parent and the Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation and has the requisite corporate power to
carry on its business as now conducted.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and the Merger Sub
has the requisite corporate power and authority to enter into this Agreement and
to carry out its obligations hereunder. The execution and delivery of this
Agreement by Parent and the Merger Sub and the consummation by Parent and the
Merger Sub of the transactions contemplated hereby have been duly authorized by
Parent and by the Board of Directors and sole shareholder of the Merger Sub, and
no other corporate proceedings on the part of Parent or the Merger Sub are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by Parent and the Merger Sub and constitutes a
valid and binding obligation of each, enforceable in accordance with its terms.
Neither Parent nor the Merger Sub is subject to, or obligated under, any
provision of (a) their respective Certificates of Incorporation or Bylaws, (b)
any agreement, arrangement or understanding, (c) any license, franchise or
permit or (d) subject to compliance with the statutes referred to in the next
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sentence, any law, regulation, order, judgment or decree, which would be
breached, or violated, or in respect of which a right of termination or
acceleration or any encumbrance on any of its or any of its subsidiaries' assets
would be created, by its execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated hereby, other than
any such breaches or violations which will not, individually or in the
aggregate, have a material adverse effect on the business, operations or
financial condition of Parent and its subsidiaries, taken as a whole. Other than
authorizations, consents and approvals of or filings or registrations with the
Delaware Law, the SEC and other applicable federal and state governmental
authorities, no authorization, consent or approval of, or filing with, any
public body, court or authority is necessary on the part of Parent or the Merger
Sub for the consummation by Parent and the Merger Sub of the transactions
contemplated by this Agreement, except for such authorizations, consents,
approvals and filings as to which the failure to obtain or make would not,
individually or in the aggregate, have a material adverse effect on the
business, operations or financial condition of Parent and its subsidiaries,
taken as a whole.
2.3 CAPITAL STRUCTURE. The authorized capital stock of Parent consists of
(i) 40,000,000 shares of common stock, $.01 par value per share, of which (A)
34,500,000 shares have been designated as Class A Common Stock, 18,215,442
shares of which were issued and outstanding as of July 31, 2000 (the
"Capitalization Date"), (B) 2,000,000 shares have been designated as Class E-1
Common Stock, 1,508,267 shares of which were issued and outstanding as of the
Capitalization Date, (C) 2,000,000 shares have been designated as Class E-2
Common Stock, 1,508,267 shares of which were issued and outstanding as of the
Capitalization Date, and (D) 1,500,000 shares have been designated as Class E-3
Common Stock, 1,005,503 shares of which were issued and outstanding as of the
Capitalization Date and (ii) 5,000,000 shares of preferred stock, $.01 par value
per share, of which (A) 250 shares have been designated as Series A Preferred
Stock, of which no shares were outstanding as of the Capitalization Date, (B)
300 shares have been designated as Series B Preferred Stock, of which no shares
were outstanding as of the Capitalization Date, (C) 500 shares have been
designated as Series C Preferred Stock, of which no shares were outstanding as
of the Capitalization Date, (D) 100,000 shares have been designated as Series D
Preferred Stock, of which no shares were outstanding as of the Capitalization
Date, and (E) 500 shares have been designated as Series F Preferred Stock, of
which 127 shares were issued and outstanding as of the Capitalization Date. All
outstanding shares of capital stock of Parent are validly issued, fully paid and
nonassessable and not subject to preemptive rights contained in Parent's charter
documents or in any contract or agreement to which Parent is a party. All
outstanding shares of the capital stock of each of Parent's subsidiaries are
validly issued, fully paid and nonassessable and are owned by Parent or one of
its subsidiaries free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances.
2.4 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company accurate and complete copies
(excluding copies of exhibits) of each report, registration statement (on a
form other than Form S-8) and definitive proxy statement filed by Parent
with the SEC between July 1, 1999 and the date of this Agreement (the
"Parent SEC Documents"). As of the time it was filed with the SEC (or, if
amended or superseded by a filing prior to the date of this Agreement, then
on the date of such filing): (i) each of the Parent SEC Documents complied
in all material respects with the applicable requirements of the Securities
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Act or the Exchange Act (as the case may be); and (ii) as of their
respective dates, or as of the date of any amendment thereto, none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
(b) The audited financial statements and unaudited interim financial
statements of Parent included (or incorporated by reference) in the Parent
SEC Documents have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), are accurate
and complete in all material respects and fairly present the consolidated
financial position of Parent as of the dates thereof and the consolidated
results of Parent's operations and the changes in Parent's consolidated
financial position for the periods then ended, in the case of the unaudited
interim financial statements subject to year-end audit adjustments which
will not, individually or in the aggregate, be material in magnitude. Such
unaudited interim financial statements reflect all adjustments necessary to
present a fair statement of the results for the interim periods presented.
2.5 VALID ISSUANCE. Subject to Section 1.5(d), the Parent Class A Common
Stock to be issued in the Merger will be, when issued in accordance with the
provisions of this Agreement, validly issued, fully paid and nonassessable.
2.6 ACCURACY OF INFORMATION. No representation or warranty by Parent or the
Merger Sub in this Agreement, and no exhibit, document, statement, certificate
or schedule furnished or to be furnished to the Company pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained herein or
therein not misleading or necessary to provide the Company with adequate
information as to Parent and the Merger Sub and their affairs. There is no fact
which has not been disclosed to the Company that materially affects adversely or
could reasonably be anticipated to materially affect adversely the assets,
financial condition or operating results, customer, employee or supplier
relations, business condition or prospects, or financing arrangements of Parent
or the Merger Sub.
2.7 TITLE TO PROPERTIES.
(a) Parent or one of Parent's subsidiaries owns good and marketable
title to each of the tangible properties and tangible assets reflected on
the balance sheet included in Parent's Latest 10-Q or acquired since the
date thereof, free and clear of all material liens and encumbrances, except
for (A) liens for current taxes not yet due and payable, (B) liens or
mortgages described in Parent's Latest 10-Q, (C) the properties subject to
the leases described in Parent's Latest 10-Q, (D) liens securing
indebtedness described in Parent's Latest 10-Q and (E) assets disposed of
since the date of the balance sheet included in Parent's Latest 10-Q in the
ordinary course of business.
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(b) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of Parent's and its subsidiaries'
businesses are in good condition and repair (except where the failure to be
in such condition and repair, either individually or in the aggregate,
would not have a material adverse effect on Parent or any subsidiary of
Parent and except for ordinary wear and tear), and are usable in the
ordinary course of business. Parent and its subsidiaries own, or lease
under valid leases which afford peaceful and undisturbed possession of the
subject matter of the lease, all buildings, machinery, equipment and other
tangible assets necessary for the conduct of their businesses.
2.8 ACCOUNTS RECEIVABLE. Parent's and its subsidiaries' notes and accounts
receivable recorded on the balance sheet included in Parent's Latest 10-Q and
those arising since the date thereof are valid receivables (subject to a
reasonable allowance for doubtful accounts as set forth in Parent's Latest 10-Q)
arising from bona fide transactions entered into in the ordinary course of
business and are current and collectible in full in accordance with their terms,
subject to no valid counterclaims or setoffs.
2.9 EMPLOYMENT MATTERS. To the knowledge of Parent, (i) no key executive
employee of Parent or any subsidiary of Parent, and no group of Parent's or any
subsidiary's employees, has any plans to terminate his or its employment, (ii)
Parent and the subsidiaries have complied with all laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes, and (iii) Parent and its subsidiaries have no material labor
relations problems pending and their labor relations are satisfactory.
2.10 AFFILIATE TRANSACTIONS. Except as set forth or incorporated by
reference in Parent's Latest 10-K or Parent's Latest 10-Q, no officer or
director of Parent or any subsidiary of Parent or any member of the immediate
family of any such officer or director, or any entity in which any of such
persons owns any beneficial interest (other than a publicly-held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than five percent (5%) of the stock of which is
beneficially owned by any of such persons) (collectively "Insiders"), (a) has
any material agreement with Parent or any subsidiary of Parent (other than
normal employment arrangements) or any material interest in any property, real,
personal or mixed, tangible or intangible, used in or pertaining to the business
of Parent or any subsidiary of Parent, or (b) has been indebted to Parent in
amounts in excess of $60,000 in the aggregate at any time (other than for
purchases subject to usual trade terms, for ordinary travel and expense payments
and for other transactions in the ordinary course of business). For purposes of
the preceding sentence, the members of the immediate family of an officer or
director 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 or director.
2.11 COMPLIANCE WITH LAWS; PERMITS; CERTAIN OPERATIONS. Parent, each of
Parent's subsidiaries and their respective officers, directors, agents and
employees have complied in all material respects, and currently are in
compliance in all material respects, with all applicable laws and regulations of
foreign, federal, state and local governments and all agencies thereof which
affect the businesses or any owned or leased properties of Parent and its
subsidiaries and to which Parent or any of its subsidiaries may be subject, and
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no claims have been filed against Parent or any of its subsidiaries alleging a
material violation of any such law or regulation. Parent and its subsidiaries
hold all material permits, licenses, certificates and other authorizations of
foreign, federal, state and local governmental agencies required for the conduct
of their businesses. Parent has not received any notice or other communication
from any governmental authority regarding any actual or possible violation of,
or failure to comply with, any legal requirement, except where failure to comply
with such legal requirement has not had and could not reasonably be expected to
have a material adverse effect on Parent.
2.12 NON-CONTRAVENTION; CONSENTS. Neither the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor the consummation of the Merger or any of the other transactions
contemplated by this Agreement, will directly or indirectly (with or without
notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Parent's or Merger Sub's certificate of incorporation or
bylaws, or (ii) any resolution adopted by Parent's or Merger Sub's
stockholders or board of directors or committee of such board of directors;
(b) contravene, conflict with or result in a violation of the terms or
requirements of, or give any governmental authority the right to revoke,
withdraw, suspend, cancel, terminate or modify, any material governmental
authorization that is held by Parent or Merger Sub or that otherwise
relates to Parent's business or to any of the assets owned or used by
Parent;
(c) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any material contract of
Parent or Merger Sub, or give any Person the right to (i) declare a default
or exercise any remedy under any such material contract, (ii) accelerate
the maturity or performance of any such material contract, or (iii) cancel,
terminate or modify any such material contract; or
(d) result in the imposition or creation of any lien or other
encumbrance upon or with respect to any asset owned or used by Parent or
Merger Sub (except for minor liens and encumbrances that will not, in any
case or in the aggregate, materially detract from the value of the assets
subject thereto or materially impair the operations of Parent or Merger
Sub).
2.13 BROKERAGE. There are no claims for investment banking fees, brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of Parent, Merger Sub or any other subsidiary of
Parent for which the Shareholders will be responsible.
2.14 NO MATERIAL ADVERSE CHANGES. Since June 30, 1999, there has been no
material adverse change, and no event has occurred that will or that would
reasonably be expected to result in a material adverse change, in the
consolidated assets, financial condition, operating results, customer, employee,
supplier or franchise relations, business condition or prospects, or financing
arrangements of Parent.
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2.15 LEGAL PROCEEDINGS. Except as disclosed in Parent's Latest 10-K or
Parent's Latest 10-Q, there are no actions, suits, claims, proceedings, orders
or other investigations pending or threatened against Parent that challenges or
may have the effect or preventing, delaying, making illegal or otherwise
interfering with the Merger or any other transactions contemplated by this
Agreement or that could reasonably be expected to have a material adverse effect
on the business, properties, assets, condition (financial or otherwise) or
business prospects of Parent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and the Merger Sub
upon delivery of the Company's disclosure schedules by the Company to the Parent
and the Merger Sub within ten (10) calendar days following the date of this
Agreement (the "Company Disclosure Schedules") that, as of the date such Company
Disclosure Schedules are delivered, and again at the Effective Time (subject to
any changes permitted or contemplated hereby), except as otherwise disclosed in
the Company Disclosure Schedules, with all schedules updated as necessary and
redelivered on the Closing Date, each of the following:
3.1 ORGANIZATION AND QUALIFICATION. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and has the requisite corporate and other power and authority
(including all licenses, permits and authorizations) to own and operate its
properties and to carry on its business as now conducted and presently proposed
to be conducted and to perform its obligations under all contracts, instruments,
notes or other binding commitments to which it is or may become a party or by
which it or its assets is or may become bound. The copies of the Company's
Articles of Incorporation and Bylaws which have been furnished by the Company to
Parent prior to the date of this Agreement reflect all amendments made thereto
through the date hereof and are correct and complete. The Company is qualified
to do business and is in good standing as a foreign corporation in every
jurisdiction in which the nature of its business or its ownership of property
requires it to be qualified. The Company has not conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or other name.
3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the requisite
corporate and other power and authority to enter into and perform this Agreement
and to carry out its obligations hereunder (it being understood that the
Company's obligations hereunder to effect the Merger is subject to the approval
of its shareholders as set forth in Section 3.26). The execution and delivery of
this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by the Board of
Directors of the Company and, except for the approval of its shareholders as set
forth in Section 3.26, no other corporate proceedings on the part of the Company
are necessary to authorize this Agreement and such transactions. This Agreement
has been duly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable in accordance with its terms.
Except as disclosed on SCHEDULE 3.2 of the Company Disclosure Schedules, neither
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the Company nor any of its Subsidiaries (as defined in Section 3.5(b)) is
subject to, or obligated under, any provision of (a) its Articles of
Incorporation or Bylaws, (b) any agreement, arrangement or understanding, (c)
any license, franchise or permit or (d) subject to compliance with any of the
statutes referred to in the next sentence, any law, regulation, order, judgment
or decree, which would be breached or violated, or in respect of which a right
of termination or acceleration or any encumbrance on any of its assets or any of
its Subsidiaries' would be created, by its execution, delivery and performance
of this Agreement and the consummation by it of the transactions contemplated
hereby, and the Company has not taken any action that is inconsistent in any
material respect with any resolution adopted by the Company's shareholders, its
board of directors or any committee of its board of directors. The books of
account, stock records, minute books and other records of the Company are
accurate, up-to-date and complete in all material respects and have been
maintained in accordance with prudent business practices. Other than in
connection with or in compliance with provisions of the Delaware Law and the
SEC, no authorization, consent or approval of, or filing with, any public body,
court or authority is necessary on the part of the Company for the consummation
by the Company of the transactions contemplated by this Agreement.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 18,000,000
shares of Company Common Stock, 7,470,032 shares of which are issued and
outstanding as of the date hereof, and 9,000,000 shares of convertible
preferred stock, 7,158,845 shares of which are issued and outstanding as of
the date hereof. All of the issued and outstanding shares of capital stock
of the Company are validly issued, fully paid and nonassessable. The
Company's and each Subsidiary's capital structure as of the date hereof is
disclosed to Parent on Schedule 3.3(a) of the Company Disclosure Schedule.
(b) The Company has reserved 4,545,256 shares of Company Common Stock
for issuance under the Stock Plan, of which vested and unvested options to
purchase 1,491,832 shares are outstanding as of the date of this Agreement.
SCHEDULE 3.3(B) of the Company Disclosure Schedules, under the caption
"Company Options," accurately sets forth, with respect to each Company
Option that is outstanding as of the date of this Agreement: (i) the name
of the holder of such Company Option; (ii) the total number of shares of
Company Common Stock that are subject to such Company Option and the number
of shares of Company Common Stock with respect to which such Company Option
is immediately exercisable; (iii) the date on which such Company Option was
granted and the term of such Company Option; (iv) the vesting schedule for
such Company Option; (v) the exercise price per share of Company Common
Stock purchasable under such Company Option; and (vi) whether such Company
Option has been designated an "incentive stock option" as defined in
Section 422 of the Code. SCHEDULE 3.3(B) of the Company Disclosure
Schedules, under the caption "Company Warrants," accurately sets forth,
with respect to each Company Warrant that is outstanding as of the date of
this Agreement: (i) the name of the holder of such Company Warrant; (ii)
the total number of shares of Company Common Stock that are subject to such
Company Warrant; (iii) the date on which such Company Warrant was granted
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and the expiration date of such Company Warrant; (iv) the exercise price
per share of Company Common Sock subject to such Company Warrant; and (v) a
description of any registration or other rights granted to the holder of
such Company Warrant.
(c) Except as specifically referred to in Sections 3.3(a) and (b)
above, or as described in SCHEDULE 3.3(C) of the Company Disclosure
Schedules there is no: (i) outstanding subscription, option, call, warrant
or right (whether or not currently exercisable) to acquire any shares of
the capital stock or other securities of the Company; (ii) outstanding
security, instrument or obligation that is or may become convertible into
or exchangeable for any shares of the capital stock or other securities of
the Company; (iii) contract or agreement under which the Company is or may
become obligated to sell or otherwise issue any shares or its capital stock
or any other securities; or (iv) condition or circumstance that may give
rise to or provide a basis for the assertion of a claim by any person or
entity to the effect that such person or entity is entitled to acquire or
receive any shares of capital stock or other securities of the Company.
(d) All outstanding shares of capital stock of the Company and all
outstanding Company Options and Company Warrants have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable laws and regulations, and (ii) all requirements set forth in
applicable contracts and agreements.
(e) Except as disclosed on SCHEDULE 3.3(E) of the Company Disclosure
Schedules, the Company has never repurchased, redeemed or otherwise
reacquired shares of capital stock or other securities of the Company. All
securities so reacquired, if any, by the Company were reacquired in
compliance with (i) the applicable provisions of Delaware Law and all other
applicable laws and regulations, and (ii) all requirements set forth in
applicable restricted stock purchase agreements and other applicable
contracts and agreements.
(f) Except as disclosed on SCHEDULE 3.3(F) of the Company Disclosure
Schedules, the Company is not under any obligation to register under the
Securities Act any of its presently outstanding securities or any
securities that may be subsequently issued, and no person or entity holds
any right to participate in new issuances of securities by the Company.
(g) Except as disclosed on SCHEDULE 3.3(G) of the Company Disclosure
Schedules, the Company is not a party to or obligated under any agreement,
arrangement or understanding, contingent or otherwise, (i) involving the
repurchase or redemption of any amount of Company Common Stock, (ii)
requiring the Company to issue any amount of Company Common Stock to any
person at any time, or (iii) contemplating the issuance at any time of
shares of Company Common Stock or other consideration to any person as a
guarantee by the Company of a minimum market price for Company Common
Stock.
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3.4 FINANCIAL STATEMENTS. The audited financial statements of the Company
and its Subsidiaries for fiscal years ended December 31, 1999, 1998 and 1997
(the "Company's Financial Statements"), and the unaudited financial statements
of the Company and its Subsidiaries for the interim period ended June 30, 2000
(the "Company's Interim Financial Statements"), have been delivered to Parent
and the Merger Sub, have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto), and are accurate and complete
in all material respects and present fairly and accurately the consolidated
financial position of the Company and its Subsidiaries as of the dates thereof
and the consolidated results of their operations and the changes in their
consolidated financial position for the periods then ended, in the case of the
unaudited interim financial statements subject to year-end audit adjustments
which will not, individually or in the aggregate, be material in magnitude. Such
unaudited interim financial statements reflect all adjustments necessary to
present a fair statement of the results for the interim periods presented.
3.5 NO SUBSIDIARIES.
(a) Except as set forth on SCHEDULE 3.5 of the Company Disclosure
Schedules, the Company does not own, beneficially or otherwise, any stock
or other equity interest, partnership interest, joint venture interest, or
any other security issued by any other corporation, organization or entity,
and the Company has not agreed and is not obligated to make any future
investment in or capital contribution to any such corporation, organization
or entity. The Company owns all of the outstanding capital stock of each
Subsidiary, free and clear of all liens, charges and encumbrances, and
there are no subscription rights, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire any
shares of capital stock of any Subsidiary or any securities or obligations
of any kind convertible into or exchangeable for any such shares of capital
stock. Each Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation,
and has the requisite corporate and other power and authority (including
all authorizations, licenses and permits) necessary to own and operate its
properties and to carry on its business as now conducted and presently
proposed to be conducted. The copies of the charter documents and bylaws of
each Subsidiary which have been furnished by the Company to Parent prior to
the date of this Agreement reflect all amendments made thereto through the
date hereof and are correct and complete. Each Subsidiary is qualified to
do business as a foreign corporation and is in good standing in all
jurisdictions in which the nature of its business or its ownership of
property requires it to be qualified.
(b) For purposes of this Agreement, the term "Subsidiary" means any
corporation of which securities having a majority of the ordinary voting
power in electing directors are, at the time of determination, owned by the
Company directly or through another Subsidiary.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
Subsidiary of the Company has any obligations or liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether due or to become due
and regardless of when asserted) arising out of transactions heretofore entered
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into, or any action or inaction, or any state of facts existing, including taxes
with respect to or based upon transactions or events heretofore occurring,
except (a) obligations under contracts or commitments described in SCHEDULE 3.6
of the Company Disclosure Schedules, or under contracts and commitments which
are not required to be disclosed thereunder (but not liabilities for breaches
thereof), (b) liabilities reflected on the balance sheet included in the
Company's Interim Financial Statements, (c) liabilities which have arisen after
the date of the balance sheet included in the Company's Interim Financial
Statements in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit), and (d) liabilities otherwise disclosed in the
Company Disclosure Schedules.
3.7 NO MATERIAL ADVERSE CHANGES. Except as disclosed on SCHEDULE 3.7 of the
Company Disclosure Schedules, there has been no material adverse change, and no
event has occurred that will or that would reasonably be expected to result in a
material adverse change, in the consolidated assets, financial condition,
operating results, customer, employee, supplier or franchise relations, business
condition or prospects, or financing arrangements of the Company and its
Subsidiaries, taken as a whole.
3.8 ABSENCE OF CERTAIN DEVELOPMENTS. Except as disclosed in SCHEDULE 3.8 of
the Company Disclosure Schedules, since December 31, 1999, the Company has not
and since the date of acquisition by the Company, each Subsidiary has not:
(a) redeemed or purchased, directly or indirectly, any shares of its
capital stock, or declared, accrued, set aside or paid any dividends or
distributions with respect to any shares of its capital stock;
(b) other than upon the exercise of outstanding warrants or options,
issued or sold any of its equity securities, securities convertible into or
exchangeable for its equity securities, warrants, options or other rights
to acquire its equity securities, or its bonds or other securities;
(c) borrowed any amount or incurred, guaranteed or become subject to
any material liability, except current liabilities incurred in the ordinary
course of business;
(d) discharged or satisfied any material lien or encumbrance or paid
any material liability, other than current liabilities paid in the ordinary
course of business;
(e) mortgaged, pledged or subjected to, or otherwise permitted to
become subject to, any lien, charge or other encumbrance, any of the assets
of the Company with a fair market value in excess of $10,000, except liens
for current property taxes not yet due and payable;
(f) sold, assigned or transferred (including without limitation
transfers to any employees, shareholders or affiliates of the Company or
any Subsidiary) any tangible assets, except for fair value in the ordinary
course of business, or canceled any debts or claims;
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(g) sold, assigned or transferred (including without limitation
transfers to any employees, shareholders or affiliates of the Company or
any Subsidiary) any patents, trademarks, trade names, copyrights, trade
secrets or other intangible assets, except for fair value in the ordinary
course of business, or disclosed any proprietary confidential information
to any person other than Parent or the Merger Sub;
(h) suffered any extraordinary loss or waived any rights of material
value, whether or not in the ordinary course of business or consistent with
past practice;
(i) taken any other action or entered into any other transaction other
than in the ordinary course of business and in accordance with past custom
and practice, or entered into any transaction with any Insider (as defined
in Section 3.20);
(j) suffered any material theft, damage, destruction or loss of or to,
or any material interruption in the use of, any property or properties
owned or used by it, whether or not covered by insurance;
(k) made or granted any bonus or any wage, salary or compensation
increase, or made or granted any increase in any employee benefit plan or
arrangement, or amended or terminated any existing employee benefit plan or
arrangement or adopted any new employee benefit plan or arrangement, with
respect to any director, officer or consultant of the Company or, except in
the ordinary course of the Company's business and consistent with the
Company's historical compensation practices, any other employee or group of
employees;
(l) amended or waived any of its rights under, or permitted the
acceleration of vesting under, (i) any provision of its Stock Plan or (ii)
any provision of any agreement evidencing any outstanding Company Option or
Company Warrant;
(m) made any capital expenditures or commitments therefor (other than
any such expenditures or commitments made in the ordinary course of
business for leasehold improvements at, or the furnishing or equipping of,
the facilities operated by the Company as of the date of this Agreement)
that aggregate in excess of $10,000;
(n) made any loans or advances to, or guarantees for the benefit of,
any persons that aggregate in excess of $10,000;
(o) effected or been a party to any acquisition transaction,
recapitalization, reclassification of shares, stock split, reverse stock
split or similar transaction;
(p) formed any subsidiary or acquired any equity interest or other
interest in any other entity;
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(q) written off as uncollectible, or established any reserve with
respect to, any account receivable or other indebtedness in excess of a
total of $10,000;
(r) changed any of its methods of accounting or accounting practices
in any material respect;
(s) made any tax election;
(t) commenced or settled any legal proceeding;
(u) waived or agreed to waive any applicable statute of limitations or
any similar statutory or judicial doctrine benefiting the Company or any
Subsidiary;
(v) entered into any material transaction or taken any other material
action outside the ordinary course of business or inconsistent with its
past practices; or
(w) made charitable contributions or pledges which in the aggregate
exceed $10,000.
3.9 TITLE TO PROPERTIES.
(a) The Company or one of its Subsidiaries owns good and marketable
title to each the tangible properties and tangible assets reflected on the
balance sheet included in the Company's Interim Financial Statements or
acquired since the date thereof, free and clear of all liens and
encumbrances, except for (A) liens for current taxes not yet due and
payable, (B) liens disclosed in SCHEDULE 3.9(A) of the Company Disclosure
Schedules, (C) the properties subject to the leases disclosed in SCHEDULE
3.9(C) of the Company Disclosure Schedules and (D) assets disposed of since
the date of the balance sheet included in the Company's Interim Financial
Statements in the ordinary course of business consistent with past
practices.
(b) (i) the real estate described in SCHEDULE 3.9(B) of the Company
Disclosure Schedules and the demised leases described in SCHEDULE 3.9(C) of
the Company Disclosure Schedules constitutes all of the real estate used or
occupied by the Company (the "Real Estate") and (ii) the Real Estate has
access, sufficient for the conduct of the Company's and the Subsidiaries
businesses as now conducted or as presently proposed to be conducted, to
public roads and to all utilities, including electricity, sanitary and
storm sewer, potable water, natural gas and other utilities, used in the
operations of the Company ad the Subsidiaries.
(c) The leases described in SCHEDULE 3.9(C) of the Company Disclosure
Schedules are in full force and effect, and the Company or one of the
Subsidiaries, as the case may be, has a valid and existing leasehold
interest under each such lease for the term set forth therein. The Company
has delivered to Parent complete and accurate copies of each of the leases
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described under such caption and none of such leases has been modified in
any respect, except to the extent that such modifications are disclosed by
the copies delivered to Parent. Neither the Company nor any Subsidiary is
in default, and no circumstances exist which could result in such default,
under any of such leases; nor, to the best knowledge of the Company or any
Subsidiary, is any other party to any of such leases in default.
(d) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Company's or the Subsidiaries'
businesses are in good condition and repair (except where the failure to be
in such condition and repair, either individually or in the aggregate,
would not have a material adverse effect on the Company or any Subsidiary
and except for ordinary wear and tear), and are usable in the ordinary
course of business. The Company and the Subsidiaries own, or lease under
valid leases which afford peaceful and undisturbed possession of the
subject matter of the lease, all buildings, machinery, equipment and other
tangible assets necessary for the conduct of their businesses.
(e) Neither the Company nor any of the Subsidiaries is in violation of
any applicable zoning ordinance or other law, regulation or requirement
relating to the operation of any properties used in the operation of its
business, including without limitation applicable environmental protection
and occupational health and safety laws and regulations, and neither the
Company nor any Subsidiary has received any notice of any such violation,
or of the existence of any condemnation proceeding with respect to any
properties owned or leased by the Company or any Subsidiary.
3.10 ACCOUNTS RECEIVABLE. The Company's and the Subsidiaries' notes and
accounts receivable recorded on the balance sheet included in the Company's
Interim Financial Statements and those arising since the date thereof are valid
receivables (subject to a reasonable allowance for doubtful accounts as set
forth in the Company's Interim Financial Statements) arising from bona fide
transactions entered into in the ordinary course of business and are current and
collectible in full in accordance with their terms, subject to no valid
counterclaims or setoffs.
3.11 INVENTORIES. Except as disclosed in SCHEDULE 3.11 of the Company
Disclosure Schedules, the inventories of the Company and the Subsidiaries
recorded on the balance sheet included in the Company's Interim Financial
Statements, and the inventory created or purchased since the date thereof,
consists of a quantity and quality usable and salable in the ordinary course of
business, is not slow-moving as determined in accordance with past practices,
obsolete or damaged, is merchantable and fit for its particular use, and is not
defective.
3.12 TAX MATTERS. Except as disclosed on SCHEDULE 3.12 of the Company
Disclosure Schedules:
(a) The Company and its Subsidiaries have (i) filed all Tax Returns
required to be filed by any jurisdiction to which any of them is subject,
(ii) paid in full on a timely basis all Taxes due and claimed to be due by
each such jurisdiction, (iii) duly collected or withheld and timely paid
all Taxes required to be collected from others or deducted and withheld
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from any amounts paid to employees or others, and (iv) properly completed
and filed all sales tax exemption certificates for sales where Tax was not
charged. Such Tax Returns accurately and completely set forth all relevant
items and accurately reflect the Tax Liabilities for such periods. No Tax
deficiency or penalty has been asserted or threatened by any such
jurisdiction against the Company or any of its Subsidiaries. "Tax" or
"Taxes" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not. "Tax Return" or "Tax Returns" means any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
(b) There is no audit of any Tax Return of the Company or any of its
Subsidiaries in progress. There is no threatened action, suit, proceeding,
investigation, audit, or claim for or relating to Taxes, there are no
matters under discussion with any governmental authorities with respect to
Taxes that could result in an additional amount of Taxes, and no
governmental authority has indicated that it intends to audit any Tax
Return of the Company or its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries have (i) waived
any statute of limitations with respect to Tax obligations or agreed to any
extension of time with respect to a Tax assessment or deficiency, (ii) has
been a party to any Tax allocation or sharing agreement, (iii) has been a
member of an affiliated group (other than the affiliated group of which the
Company is the common parent) filing a consolidated federal income tax
return, nor taken any other action that could result in Liability for Taxes
of an affiliated group (other than the affiliated group of which the
Company is the common parent) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local, or foreign law), including as a
transferee or successor, by contract, or otherwise, or (iv) is currently
the beneficiary of any extensions of time within which to file any Tax
Return. "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes. No claim has ever been made by an
authority in a jurisdiction where the Company or any of its Subsidiaries
does not file Tax Returns that it is or may be subject to taxation by that
jurisdiction, nor is there any material factual or legal basis for any such
claim.
(d) SCHEDULE 3.12(D) of the Company Disclosure Schedules lists all
federal, state, local, and foreign income Tax Returns filed with respect to
the Company or any of its Subsidiaries for all taxable periods for which
the statute of limitations is still open, and indicates those income Tax
Returns that have been audited and those that are currently the subject of
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an audit. The Company has delivered to the Purchaser correct and complete
copies of all state, federal, and foreign income tax returns with respect
to all taxable periods for which the statute of limitations is still open,
and copies of all examination reports and statements of deficiencies that
have been assessed against or agreed to by the Company or any of its
Subsidiaries and that may have a material effect on the tax liability of
the Company or any of its Subsidiaries for any present or future taxable
period or for any past taxable period for which the statute of limitations
is still open.
(e) All material Tax elections that have been made by the Company or
its Subsidiaries are shown on SCHEDULE 3.12(E) of the Company Disclosure
Schedules. Neither the Company nor any of its Subsidiaries has any net
operating losses or other tax attributes that are subject to limitation
under Code Sections 382, 383, or 384, or the federal consolidated return
regulations.
(f) Neither the Company nor any of its Subsidiaries has been a United
States real property holding corporation within the meaning of Code Section
897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii).
(g) Neither the Company nor any of its Subsidiaries (i) has agreed or
consented at any time under Section 341(f) of the Code to have the
provisions of Section 341(f)(2) of the Code apply to any disposition of any
assets, (ii) has agreed, or is required, to make any adjustment under
Section 481(a) of the Code by reason of a change in accounting method or
otherwise that will affect the liability of the Company for Taxes, (iii)
has made an election, nor is it required, to treat any asset as owned by
another person pursuant to the provisions of Section 168(f) of the Code or
as tax-exempt bond financed property or tax-exempt use property within the
meaning of Section 168 of the Code, (iv) has made any of the foregoing
elections or is required to apply any of the foregoing rules under any
comparable state or local tax provision, or (v) owns any material assets
that were financed directly or indirectly with, or that directly or
indirectly secure, debt the interest on which is tax-exempt under Section
103(a) of the Code.
(h) The Company is not a party to any "Gain Recognition Agreements" as
such term is used in the Treasury Regulations promulgated under Section 367
of the Code.
(i) Neither the Company nor any of its Subsidiaries has made or become
obligated to make, nor will the Parent, Merger Sub, the Company, or any of
its Subsidiaries, as a result of any event connected with any transaction
contemplated herein and/or any termination of employment related to such
transaction, make or become obligated to make, any "excess parachute
payment," as defined in Section 280G of the Code (without regard to
subsection (b)(4) thereof).
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(j) There are no liens for Taxes (other than for current Taxes that
are not yet due and payable or are being contested in good faith) upon the
assets of the Company or any of the Subsidiaries.
(k) There are no joint ventures, partnerships, limited liability
companies, or other arrangements or contracts to which the Company is a
party and that could be treated as a partnership for federal income tax
purposes.
(l) The Company has no excess loss account, as such term is used in
Section 1.1502 of the Treasury Regulations, with respect to the stock of
any Subsidiary.
(m) Neither the Company nor any of its Subsidiaries has outstanding
any "deferred gain" resulting from any "deferred intercompany transaction,"
as both such terms were used in Section 1.1502-13 of the Treasury
Regulations as such was in effect for taxable years beginning before July
12, 1995.
(n) Neither the Company nor any Subsidiary has outstanding any
"intercompany items" or any "corresponding items" from any "intercompany
transactions," as such terms are used in Section 1.1503-13 of the Treasury
Regulations as such is in effect for taxable years beginning on or after
July 12, 1995, that have not previously been taken into account under the
terms of such regulation.
(o) Neither the Company nor any Subsidiary has or has had a "permanent
establishment" in any foreign country, as such term is defined in any
applicable Tax treaty or convention between the United States and such
foreign country or has otherwise taken steps that have exposed, or will
expose, it to the taxing jurisdiction of a foreign country.
(p) The unpaid Taxes of the Company and its Subsidiaries (A) did not,
as of the most recent fiscal month end prior to the date hereof, exceed the
reserve for Tax Liability (not including any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set
forth on the face of the most recent balance sheet (other than in any notes
thereto) that has been made available to the Purchaser and (B) will not, as
of the Closing Date, exceed such reserve in the Closing Balance Sheet.
3.13 CONTRACTS AND COMMITMENTS.
(a) Except as disclosed in SCHEDULE 3.13(A) of the Company Disclosure
Schedules, neither the Company nor any Subsidiary is a party or bound to
any (collectively, the "Material Contracts"):
(i) collective bargaining agreement or contract with any labor
union;
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(ii) bonus, pension, profit sharing, retirement, or other form
of deferred compensation plan;
(iii) hospitalization insurance or similar plan or practice,
whether formal or informal;
(iv) contract for the employment of any officer, individual
employee, or other person on a full-time or consulting
basis or relative to severance pay for any such person;
(v) agreement or indenture relating to the borrowing of money
in excess of $10,000 or to mortgaging, pledging or
otherwise placing a lien on any of the assets of the
Company;
(vi) guaranty of any obligation for borrowed money or otherwise,
other than endorsements made for collection;
(vii) lease or agreement under which it is lessor of, or permits
any third party to hold or operate, any property, real or
personal, for an annual rental in excess of $10,000;
(viii) contract or group of related contracts with the same party
for the purchase of products or services, under which the
undelivered balance of such products and services has a
purchase price in excess of $10,000;
(ix) contract or group of related contracts with the same party
for the sale of products or services under which the
undelivered balance of such products or services has a
sales price in excess of $10,000;
(x) other contract or group of related contracts with the same
party continuing over a period of more than six months from
the date or dates thereof, either not terminable by it on
30 days' or less notice without penalty or involving more
than $10,000;
(xi) contract which prohibits the Company or any Subsidiary from
freely engaging in business anywhere in the world;
(xii) contract relating to the distribution of the Company's or
any Subsidiary's products;
(xiii) franchise agreement;
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(xiv) contract, agreement or understanding with any shareholder
who beneficially owns five percent (5%) or more of the
Company Common Stock or with any officer, director or
employee (other than for employment on customary terms);
(xv) license agreement or agreement providing for the payment or
receipt of royalties or other compensation by the Company
or any Subsidiary in connection with the proprietary rights
as disclosed on SCHEDULE 3.14 of the Company Disclosure
Schedules; or
(xvi) other agreement material to the Company's or any
Subsidiary's business or not entered into in the ordinary
course of business.
(b) Except as specifically disclosed on SCHEDULE 3.13(B) of the
Company Disclosure Schedules, (i) no contract or commitment required to be
disclosed under such caption has been breached or canceled by the other
party; (ii) since the date of the balance sheet included in the Company's
Interim Financial Statements, no customer or supplier has indicated that it
will stop or decrease the rate of business done with the Company or any
Subsidiary, except for changes in the ordinary course of the Company's and
the Subsidiaries' businesses; (iii) the Company and the Subsidiaries have
performed all obligations required to be performed by them in connection
with the contracts or commitments required to be disclosed under such
caption and are not in receipt of any claim of default under any contract
or commitment required to be disclosed under such caption; (iv) neither the
Company nor any Subsidiary has any present expectation or intention of not
fully performing any obligation pursuant to any contract or commitment or
commitment set forth under such caption; and (v) neither the Company nor
any Subsidiary has any knowledge of any breach or anticipated breach by any
other party to any contract or commitment set forth under such caption.
(c) Prior to the date of this Agreement, Parent has been supplied with
a true and correct copy of each written contract or commitment, and a
written description of each oral contract or commitment, disclosed on
SCHEDULE 3.13 of the Company Disclosure Schedules, together with all
amendments, waivers or other changes thereto.
3.14 PROPRIETARY RIGHTS. Except as disclosed on SCHEDULE 3.14 of the
Company Disclosure Schedules, there are no patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights, trade
secrets or other proprietary rights owned by the Company or any Subsidiary or
necessary to the conduct of the Company's or any Subsidiary's business as now
conducted. The Company or a Subsidiary owns and possesses all rights, titles and
interest, or a valid license, in and to the proprietary rights set forth under
such caption. The Company Disclosure Schedules describes under such caption all
proprietary rights which have been licensed to third parties and all proprietary
rights which are licensed from third parties by the Company or any Subsidiary.
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The Company and the Subsidiaries have taken all necessary action necessary to
protect the proprietary rights set forth under such caption. Neither the Company
nor any Subsidiary has received any notice of, nor is it aware of any facts
which indicate a likelihood of, any infringement, misappropriation, or conflict
from any third party with respect to the proprietary rights which are listed
under such caption; neither the Company nor any Subsidiary has not infringed,
misappropriated or otherwise conflicted with any proprietary rights of any third
parties, nor is it aware of any infringement, misappropriation or conflict which
will occur in the continued operation of the Company or any Subsidiary; and no
claim by any third party contesting the validity of any proprietary rights
listed under such caption has been made, is currently outstanding, or to the
best knowledge of the Company or any Subsidiary is threatened.
3.15 LITIGATION. Except as disclosed on SCHEDULE 3.15 of the Company
Disclosure Schedules, there are no actions, suits, claims, proceedings, orders
or investigations pending or threatened against the Company or any Subsidiary or
otherwise affecting any of their respective properties or assets, or that
challenges or may have the effect of preventing, delaying, making illegal or
otherwise interfering with the Merger or any other transactions contemplated by
this Agreement, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign (collectively, "Governmental Authority"),
or that could reasonably be expected to have a material adverse effect on the
business, properties, assets, condition (financial or otherwise) or business
prospects of the Company and there is no basis known to the Company or any
Subsidiary for any of the foregoing. There is no order, writ, injunction,
judgment or decree:
(a) to which the Company or any Subsidiary or any of the assets owned
or used by the Company or any Subsidiary is subject, or
(b) to which any officer or employee of the Company or any Subsidiary
is subject that prohibits such officer or employee from engaging in or
continuing any conduct, activity or practice relating to the Company's or
any Subsidiary's business. Except as set forth under such caption, neither
the Company nor any Subsidiary has received any opinion or legal advice to
the effect that the Company or any Subsidiary is exposed from a legal
standpoint to any liability or disadvantage which may be material to it or
its prospects.
3.16 BROKERAGE. Except as disclosed on SCHEDULE 3.16 of the Company
Disclosure Schedules, there are no claims for investment banking fees, brokerage
commissions, finders' fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company for which any other party will be
responsible.
3.17 EMPLOYMENT MATTERS. To the best knowledge of the Company and the
Subsidiaries, (i) no key executive employee of the Company or any Subsidiary,
and no group of the Company's or any Subsidiary's employees, has any plans to
terminate his or its employment, (ii) the Company and the Subsidiaries have
complied with all laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining and
the payment of social security and other taxes, and (iii) the Company and the
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Subsidiaries have no material labor relations problems pending and their labor
relations are satisfactory.
3.18 EMPLOYEE BENEFIT PLANS.
With respect to the employee benefits provided to current and former
employees, officers and directors of the Company and the Subsidiaries:
(a) The Company and the Subsidiaries currently maintain only the
employee pension benefit plans, as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), as are listed
on SCHEDULE 3.18(A) of the Company Disclosure Schedules (the "Pension
Plans").
(b) The Company and the Subsidiaries currently maintain only the
employee welfare benefit plans, as defined in Section 3(1) of ERISA
(including but not limited to, life insurance, medical, hospitalization,
holiday, vacation, disability dental and vision plans) as are listed on
SCHEDULE 3.18(B) of the Company Disclosure Schedules (the "Welfare Plans").
(c) The Company and the Subsidiaries currently maintain, or have
entered into, only the compensation programs and/or employment
arrangements, (including but not limited to, incentive compensation, bonus,
stock option, stock purchase, severance, sick pay, salary continuation,
deferred compensation, supplemental executive compensation plans, and
employment and consulting agreements) as are listed on SCHEDULE 3.18(C) of
the Company Disclosure Schedules (the "Compensation Programs").
(d) The Company and the Subsidiaries do not contribute, have not
contributed within the last ten years, to any multiemployer plan, as
defined in Sections 3(37) and 4001 of ERISA, and have not incurred any
withdrawal liability within the meaning of Section 4201 of ERISA.
(e) Each Pension Plan and Welfare Plan is in compliance with ERISA;
each Pension Plan which is intended to be qualified under Section 401(a) of
the Code has been determined by the Internal Revenue Service to be so
qualified or a request for such determination has been timely filed with
the Internal Revenue Service (and to Company's best knowledge nothing has
occurred between the date of the last such determination and the Closing
Date to cause the Internal Revenue Service to revoke such determination).
(f) Any Pension Plan or any Welfare Plan designed to satisfy the
requirements of Section 125, Section 401, Section 401(k), Section 409,
Section 501(c)(9), Section 4975(e)(7), and/or Section 4980B of the Code,
complies with the requirements of such section and applicable regulations
thereunder.
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(g) Neither the Company nor any Subsidiary nor any other employer that
is, or at any relevant time was, together with the Company nor any
Subsidiary, treated as a "single employer" under Section 414 of the Code,
has at any time on or after January 1, 1998 maintained or contributed to a
defined benefit plan as defined in Section 3(35) of ERISA, that is or was
subject to Title IV of ERISA; and no accumulated funding deficiency, as
defined in Section 302(a)(2) of ERISA, exists (whether or not waived) with
respect to any Pension Plan as of the date hereof.
(h) All amounts required to be paid by the Company or any Subsidiary
with respect to each Pension Plan, Welfare Plan and Compensation Program on
or before the Closing Date have been paid.
(i) None of the Pension Plans or the Company or any party in interest
or disqualified person has engaged in any non-exempt "prohibited
transactions" as defined in Section 406 of ERISA or Section 4975 of the
Code.
(j) Except as disclosed on SCHEDULE 3.18(J) of the Company Disclosure
Schedules, no Pension Plan or Welfare Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law,
(ii) retirement benefits under a Pension Plan, (iii) death benefits under a
Welfare Plan, (iv) deferred compensation accrued on the books of the
Company or any Subsidiary, or (v) benefits the full cost of which is borne
by the current or former employee (or his or her beneficiary).
(k) No "leased employee," as that term is defined in Section 414(n) of
the Code, performs or has performed services for the Company or any
Subsidiary.
(l) No liability has been, or is expected by the Company or any
Subsidiary to be, incurred by the Company or a Subsidiary under Title IV
(including, without limitation, Section 4062) of ERISA with respect to any
Pension Plan.
(m) No reportable event within the meaning of Title IV of ERISA has
occurred with respect to any Pension Plan.
(n) The Company has furnished Parent with correct and complete copies
of each Pension Plan, Welfare Plan, and Compensation Program, together with
any trust agreements, summary plan descriptions, employee informational
material, financial statements relating thereto and participant listings.
3.19 INSURANCE. SCHEDULE 3.19 of the Company Disclosure Schedules lists and
briefly describes (including name of insurer, agent, coverage and expiration
date) each insurance policy maintained by, at the expense of or for the benefit
of the Company or any of the Subsidiaries with respect to its properties and
assets and describes any material claims made thereunder. All of such insurance
policies are in full force and effect and neither the Company nor any Subsidiary
is in default with respect to its obligations under any of such insurance
policies. Except as disclosed on SCHEDULE 3.19 of the Company Disclosure
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Schedules, the Company is the sole beneficiary of each such policy. The
insurance coverage of the Company and the subsidiaries is customary for
corporations of similar size engaged in similar lines of businesses. The Company
has not received any notice or other communication regarding any actual or
possible (a) cancellation or invalidation of any insurance policy, (b) refusal
of any coverage or rejection of any claim under any insurance policy or (c)
material adjustment in the amount of premiums payable with respect to any
insurance policy.
3.20 AFFILIATE TRANSACTIONS. Except as disclosed on SCHEDULE 3.20 of the
Company Disclosure Schedules, no officer or director of the Company or any
Subsidiary or any member of the immediate family of any such officer or
director, or any entity in which any of such persons owns any beneficial
interest (other than a publicly-held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than 5%
of the stock of which is beneficially owned by any of such persons)
(collectively "Insiders"), (a) has any agreement with the Company or any
Subsidiary (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 or any Subsidiary, (b) has been indebted to the
Company or any Subsidiary in amounts in excess of $10,000 in the aggregate at
any time, (c) has at any time competed, directly or indirectly, with the Company
or any Subsidiary, or (d) has any claim or right against the Company or any
Subsidiary (other than rights under Company Options and rights to receive
compensation for services performed as an employee of the Company). For purposes
of the preceding sentence, the members of the immediate family of an officer or
director 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 or director.
3.21 SUPPLIERS. SCHEDULE 3.21 of the Company Disclosure Schedules lists the
ten (10) largest suppliers of the Company and the Subsidiaries (on a
consolidated basis) for the fiscal year (transaction period) ended December 31,
1999, and sets forth opposite the name of each such supplier the total amount of
purchases from such supplier by the Company and the Subsidiaries during such
period.
3.22 OFFICERS AND DIRECTORS; BANK ACCOUNTS. SCHEDULE 3.22 of the Company
Disclosure Schedules lists all officers and directors of the Company and the
Subsidiaries, and all of the Company's and the Subsidiaries' accounts and safe
deposit boxes at any bank or other financial institution (designating each
authorized signer).
3.23 COMPLIANCE WITH LAWS; PERMITS; CERTAIN OPERATIONS. The Company, each
of the Subsidiaries and their respective officers, directors, agents and
employees have complied in all respects, and currently are in compliance in all
respects, with all applicable laws and regulations of foreign, federal, state
and local governments and all agencies thereof which affect the businesses or
any owned or leased properties of the Company and the Subsidiaries and to which
the Company or any of the Subsidiaries may be subject, and no claims have been
filed against the Company or any of the Subsidiaries alleging a violation of any
such law or regulation, except as disclosed on SCHEDULE 3.23 of the Company
Disclosure Schedules. Neither the Company nor any Subsidiary has given or agreed
to give any money, gift or similar benefit (other than incidental gifts of
articles of nominal value, gifts and prizes awarded pursuant to promotional
programs approved by the Company's management and non-extraordinary
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entertainment expenditures) to any actual or potential customer, supplier,
foreign or domestic governmental employee or any other person in a position to
assist or hinder the Company or any of the Subsidiaries in connection with any
actual or proposed transaction. The Company and the Subsidiaries hold all of the
permits, licenses, certificates and other authorizations of foreign, federal,
state and local governmental agencies required for the conduct of their
businesses. Without limiting the generality of the foregoing, neither the
Company nor any Subsidiary has violated, or received a notice or charge
asserting any violation of, the Occupational Safety and Health Act of 1970 or
any other state or federal acts or laws (including rules and regulations
thereunder) regulating or otherwise affecting employee health and safety or the
environment.
3.24 DISCLOSURE.
(a) Neither this Agreement nor any other agreement or instrument
executed in connection with the transactions contemplated hereby nor any of
the attachments or exhibits hereto nor the Company Disclosure Schedules
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading, and there is no
fact which has not been disclosed in writing to Parent of which any officer
or director of the Company or any Subsidiary is aware which materially
affects adversely or could reasonably be anticipated to materially affect
adversely the business, including operating results, assets, customer
relations, employee relations and business prospects, of the Company and
the Subsidiaries, taken as a whole.
3.25 NON-CONTRAVENTION; CONSENTS. Except as disclosed on SCHEDULE 3.25 of
the Company Disclosure Schedules, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's or any Subsidiary's Articles of
Incorporation or Bylaws, or (ii) any resolution adopted by the Company's or
any Subsidiary's shareholders, the Company's board of directors or any
committee of such board of directors;
(b) contravene, conflict with or result in a violation of, or give any
governmental authority or other person or entity the right to challenge any
of the transactions contemplated by this Agreement or to exercise any
remedy or obtain any relief under, any legal requirement or any order,
writ, injunction, judgment or decree to which the Company or any
Subsidiary, or any of the assets owned or used by the Company or any
Subsidiary, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any governmental authority the right to
revoke, withdraw, suspend, cancel, terminate or modify, any governmental
permit or authorization that is held by the Company or any Subsidiary that
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otherwise relates to the Company's business or to any of the assets owned
or used by the Company or any Subsidiary;
(d) contravene, conflict with or result in a violation or breach of,
require consent under, or result in a default under, any provision of any
contract or agreement to which the Company or any Subsidiary is a party, or
give any person or entity the right to (i) declare a default or exercise
any remedy under any such contract or agreement, (ii) accelerate the
maturity or performance of any such contract or agreement, or (iii) cancel,
terminate or modify any such contract or agreement; or
(e) result in the imposition or creation of any lien or other
encumbrance upon or with respect to any asset owned or used by the Company
or any Subsidiary (except for minor liens that will not, in any case or in
the aggregate, materially detract from the value of the assets subject
thereto or materially impair the operations of the Company).
Except as disclosed on SCHEDULE 3.25 of the Company Disclosure Schedules,
the Company is not and will not be required to make any filing with or give any
notice to, or to obtain any consent from, any person or entity in connection
with (x) the execution, delivery or performance of this Agreement or any of the
other agreements referred to in this Agreement, or (y) the consummation of the
Merger or any of the other transactions contemplated by this Agreement.
3.26 STOCKHOLDER VOTE REQUIRED. The affirmative vote of a majority of the
votes entitled to be cast by holders of the outstanding shares of Company Common
Stock (voting as a class) are the only votes of the holders of any class or
series of the Company's capital stock necessary to approve this Agreement and
the Merger under Delaware Law.
ARTICLE 4
CONDUCT OF BUSINESS PENDING THE MERGER
4.1 CONDUCT OF BUSINESS PENDING THE MERGER. The Company covenants and
agrees that, prior to the Effective Time, unless Parent shall otherwise consent
in writing (which consent shall not be unreasonably withheld) or as otherwise
expressly contemplated or permitted by this Agreement:
(a) The businesses of the Company and the Subsidiaries shall be
conducted only in, and the Company shall not take any action except in, the
ordinary course, on an arm's-length basis and in accordance in all material
respects with all applicable laws, rules and regulations and past custom
and practice; and the Company and the Subsidiaries shall maintain their
facilities in good condition and repair and in accordance with the
Company's policies and procedures relating thereto as in effect prior to
the execution of this Agreement;
(b) The Company shall not, directly or indirectly, do or permit to
occur any of the following: (i) issue, sell, pledge, dispose of or encumber
(or permit any of the Subsidiaries to issue, sell, pledge, dispose of or
encumber) (A) any additional shares of, or any options, warrants,
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conversion privileges or rights of any kind to acquire any shares of, any
of its capital stock, except for issuances upon the exercise of options or
warrants outstanding on the date hereof, or (B) any of its assets, except
for fair value in the ordinary course of business; (ii) amend or propose to
amend its Articles of Incorporation or Bylaws; (iii) split, combine or
reclassify any outstanding shares of Company Common Stock or other
securities of the Company, or declare, set aside or pay any dividend or
other distribution payable in cash, stock, property or otherwise with
respect to shares of Company Common Stock or other securities of the
Company; (iv) redeem, purchase or acquire or offer to acquire any shares of
Company Common Stock or other securities of the Company; (v) acquire (by
merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership, joint venture or other business
organization or division or material assets thereof; (vi) incur or
guarantee any indebtedness for borrowed money or issue any debt securities
except the borrowing of working capital in the ordinary course of business
and consistent with past practice or (vii) enter into or propose to enter
into, or modify or propose to modify, any agreement, arrangement or
understanding with respect to any of the matters set forth in this Section
4.1(b);
(c) The Company shall not (and shall not permit any Subsidiary to),
directly or indirectly, (i) enter into or modify any Material Contract,
agreement or understanding to which the Company is a party; (ii) enter into
or modify any employment, severance or similar agreements or arrangements
with, or grant any bonuses, salary increases, severance or termination pay
to, any officers or directors or consultants; (iii) make any capital
expenditures, including any capitalizable lease obligations, other than
expenditures necessary to maintain existing assets in good repair and other
capital expenditures in amounts not exceeding $10,000 in the aggregate; or
(iv) in the case of employees who are not officers or directors or
consultants, grant or take any action with respect to the granting of any
salary increases, severance or termination pay or increases in other
benefits, other than grants or such actions as are in the ordinary course
of the Company's business and are consistent with the Company's historic
compensation practices, or grant or take any actions with respect to the
granting of any bonuses;
(d) The Company shall not (and shall not permit any Subsidiary to)
adopt or amend any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other employee
benefit plan, trust, fund or group arrangement for the benefit or welfare
of any employees or any bonus, profit sharing, compensation, stock option,
pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or arrangements for the benefit or
welfare of any director;
(e) The Company shall use its best efforts to cause its and the
Subsidiaries' current insurance (or reinsurance) policies not to be
canceled or terminated or reduced in coverage amount or any of the coverage
thereunder to lapse, unless simultaneously with such termination,
cancellation, reduction in coverage amount or lapse, replacement policies
providing coverage equal to or greater than the coverage under the
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canceled, terminated, reduced or lapsed policies for substantially similar
premiums are in full force and effect;
(f) The Company and each Subsidiary (i) shall use its best efforts to
preserve intact its business organization and good will, keep available the
services of its officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having
business relationships with it; (ii) shall not take any action which would
render, or which reasonably may be expected to render, any representation
or warranty made by it in this Agreement or in any other agreement or
instrument executed in connection with the transactions contemplated hereby
untrue at, or at any time prior to, the Effective Time; (iii) shall notify
Parent of any emergency or other change in the normal course of its
business or in the operation of its properties and of any governmental or
third party complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency, change,
complaint, investigation or hearing would be material, individually or in
the aggregate, to the business, operations or financial condition of the
Company and the Subsidiaries or to the Company's, Parent's or the Merger
Sub's ability to consummate the transactions contemplated by this
Agreement; and (iv) shall notify Parent if the Company shall discover that
any representation or warranty made by it in this Agreement was when made,
or has subsequently become, untrue;
(g) Neither the Company nor any Subsidiary shall not change any of its
methods of accounting or accounting practices in any material respect;
(h) Neither the Company nor any Subsidiary will waive or agree to
waive any applicable statute of limitations or any similar statutory or
judicial doctrine benefiting the Company;
(i) Neither the Company nor any Subsidiary shall commence or settle
any material legal action or proceeding, PROVIDED, that the Company may
settle any legal actions or proceedings which were pending as of the date
of the Company's Interim Financial Statements so long as the consideration
paid or agreed to be paid by the Company in connection with such
settlements does not exceed $10,000 in any individual case or $10,000 in
the aggregate for all such settlements (in the case of cash settlements) or
cause the number of shares of Company Common Stock issued and outstanding,
after taking into account any shares issued or canceled in connection with
such settlement, to exceed the number of shares of Company Common Stock
issued and outstanding on the date of this Agreement;
(j) The Company shall cause its officers to report at Parent's request
(but in no event less frequently than weekly) to Parent concerning the
status of the Company's business; and
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(k) Subject to the fiduciary obligations of its directors as advised
by counsel, the Company shall not, except as required by law, call any
meeting of its shareholders other than the meeting contemplated in Section
5.1.
(1) Neither the Company nor any Subsidiary shall make or amend any
federal, state, or local Tax election, agree to waive or extend any statute
of limitations, or resolve or agree to resolve any audit or proceeding
relating to Taxes.
4.2 NOTIFICATION; UPDATES TO DISCLOSURE SCHEDULE.
(a) During the period subsequent to the execution of this Agreement
and prior to the Effective Time (the "Pre-Closing Period"), the Company
shall promptly notify Parent in writing of:
(i) the discovery by the Company of any event, condition,
fact or circumstance that occurred or existed on or
prior to the date of this Agreement and that caused or
constitutes an inaccuracy in or breach of any
representation or warranty made by the Company in this
Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and
that would cause or constitute an inaccuracy in or
breach of any representation or warranty made by the
Company in this Agreement if (A) such representation or
warranty had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior
to the date of this Agreement;
(iii) any breach of any covenant or obligation of the Company;
and
(iv) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions
set forth in Sections 6.1, 6.2 or 6.3 impossible or
unlikely.
(b) If any event, condition, fact or circumstance that is required to
be disclosed pursuant to Section 4.2(a) requires any change in the Company
Disclosure Schedules, or if any such event, condition, fact or circumstance
would require such a change assuming the Company Disclosure Schedules were
dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then the Company shall promptly
deliver to Parent an update to the Company Disclosure Schedules specifying
such change. No such update shall be deemed to supplement or amend the
Company Disclosure Schedules for the purpose of (i) determining the
accuracy of any of the representations and warranties made by the Company
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in this Agreement, or (ii) determining whether any of the conditions set
forth in Sections 6.1, 6.2 or 6.3 has been satisfied.
ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 SHAREHOLDERS MEETING. The Company shall call and hold a meeting of its
Shareholders (the "Company Shareholders' Meeting) to submit this Agreement, the
Merger and related matters for the consideration and approval of the Company's
Shareholders or, in the alternative, obtain the unanimous written consent of its
Shareholders. In the case of a Company Shareholders' Meeting, the Company
Shareholders' Meeting will be called, held and conducted, and any proxies will
be solicited, in compliance with applicable law.
5.2 EXPENSES. Each party to this Agreement shall bear their own costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
5.3 ADDITIONAL AGREEMENTS. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement,
including using reasonable efforts to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings, including, but
not limited to, any submissions of information requested by governmental
authorities.
5.4 NO NEGOTIATIONS, ETC. The Company shall not (nor shall it permit any of
its Subsidiaries to), directly or indirectly, through any officer, director,
agent or otherwise, solicit, initiate or encourage submission of any inquiry,
proposal or offer from any person or entity (including any of its or their
officers or employees) other than Parent relating to any liquidation,
dissolution, recapitalization, merger, consolidation or acquisition or purchase
of all or any portion of the assets of, or any equity interest in, the Company
or any Subsidiary or other similar transaction or business combination involving
the Company or any Subsidiary, or, unless the Company's Board of Directors
receives a written opinion from the Company's outside counsel (which opinion
shall also be addressed to Parent) stating that there would be a material and
substantial risk of liability on the part of the members of the Company's Board
of Directors to the Company's shareholders for failure to do so, participate in
any discussions or negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by, or
consider, entertain or accept any proposal or offer from, any other person or
entity to do or seek any of the foregoing. The Company shall promptly notify
Parent and the Merger Sub if any such proposal or offer, or any inquiry from or
contact with any person with respect thereto, is made and shall promptly provide
Parent with such information regarding such proposal, offer, inquiry or contact
as Parent may request.
5.5 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice to
each other party of (a) the occurrence or failure to occur of any event,
conditions, fact or circumstance which occurrence or failure would be likely to
cause any representation or warranty on its part contained in this Agreement to
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be untrue or inaccurate at, or at any time prior to, the Effective Time, and (b)
any material failure of such party, or any officer, director, shareholder,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.6 ACCESS TO INFORMATION; CONFIDENTIALITY. Parent and its attorneys,
accountants, consultants and representatives shall continue to have access to
the books and records of the Company and such other information pertaining to
the business and assets of the Company as Parent shall reasonably request, and
the Company and its attorneys, accountants, consultants and representatives
shall continue to have access to the books and records of Parent and such other
information pertaining to the business and assets of Parent as the Company shall
reasonably request, and each of Parent and the Company shall provide the other
with reasonable access to its officers and other personnel, as provided in Part
5, paragraph (b) of the Letter of Intent. The terms of Part 5, paragraph (b) of
the Letter of Intent shall apply, in the event of a termination of this
Agreement, to information obtained as a result of such access and assistance.
5.7 SHAREHOLDER CLAIMS. The Company shall not settle or compromise any
claim brought by any present, former or purported holder or owner of any
securities of the Company in connection with the Merger without the prior
written consent of Parent.
5.8 CONSENTS. As promptly as practicable after the execution of this
Agreement, each party to this Agreement (a) shall make all filings (if any) and
give all notices (if any) required to be made and given by such party in
connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
consents (if any) required to be obtained (pursuant to any applicable law,
regulation, contract or agreement, or otherwise) by such party in connection
with the Merger and the other transactions contemplated by this Agreement.
Parent shall (upon request) promptly deliver to the Company a copy of each such
filing made, each such notice given and each such consent obtained by Parent or
Merger Sub during the period subsequent to the date hereof and prior to the
Effective Time; and the Company shall (upon request) promptly deliver to Parent
a copy of each such filing made, each such notice given and each such consent
obtained by the Company during the period subsequent to the date hereof and
prior to the Effective Time.
5.9 STATE SECURITIES LAW COMPLIANCE. Parent shall use commercially
reasonable efforts to (a) qualify, as soon as practicable after the Closing Date
(or as earlier required under applicable law), the Parent Class A Common Stock
to be issued pursuant to the Merger under state "blue sky" laws of every
jurisdiction of the United States in which (i) any registered shareholder of the
Company has an address on the records of the Company as of the date of this
agreement, and (ii) an exemption from the qualification requirements under such
laws is unavailable with respect to the issuance of Parent Class A Common Stock
in the Merger, and (b) qualify, as soon as practicable after the Closing Date
(or as earlier required under applicable law), the Assumed Options and Assumed
Warrants under the state "blue sky" laws of every jurisdiction of the United
States in which (i) the records of the Company, as of the date of this
Agreement, indicate that a holder of such Assumed Options and Assumed Warrants
resides, and (ii) an exemption from the qualification requirements under such
laws is unavailable.
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5.10 NOTIFICATION. (a) During the Pre-Closing Period, Parent shall promptly
notify the Company in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the
date of this Agreement and that caused or constituted an
inaccuracy in or breach of any representation or
warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and
that would cause or constitute an inaccuracy in or
breach of any representation or warranty made by Parent
in this Agreement if (A) such representation or warranty
had been made as of the time of the occurrence,
existence or discovery of such event, condition, fact or
circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior
to the date of this Agreement;
(iii) any breach of any covenant or obligation of Parent; and
(iv) any event, condition, fact or circumstance that would
make the timely satisfaction of any of the conditions
set forth in Sections 6.1, 6.2 or 6.3 impossible or
unlikely.
5.11 COMMERCIALLY REASONABLE EFFORTS. During the Pre-Closing Period, (a)
the Company shall use all commercially reasonable efforts to cause the
conditions set forth in Sections 6.1 and 6.3 to be satisfied on a timely basis,
and (b) Parent and Merger Sub shall each use all commercially reasonable efforts
to cause the conditions set forth in Sections 6.1 and 6.2 to be satisfied on a
timely basis.
5.12 TAX MATTERS. Prior to the Closing:
(a) The Company shall give the Parent and its authorized
representatives full access to all properties, books, records and Tax
Returns of or relating to the Company and its Subsidiaries, whether in the
possession of the Company, its Subsidiaries, or third-party representatives
in order that the Parent may have full opportunity to make such
investigations as it shall desire to make of the affairs of the Company and
its Subsidiaries. The Company and its Subsidiaries shall ensure that all
third-party representatives of the Company and its Subsidiaries, including
without limitation accountants and attorneys, fully cooperate and be
available to the Parent in connection with such investigation.
(b) The Company and its Subsidiaries shall terminate all tax
allocation agreements and tax sharing agreements with respect to the
Company and its Subsidiaries and shall ensure that such agreements are of
no further force or effect as to the Company and its Subsidiaries on and
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after the Closing and there shall be no further liability of the Company or
its Subsidiaries under any such agreements.
5.13 INDEMNIFICATION.
(a) From and after the Effective Time, the Surviving Corporation shall
indemnify, defend and hold harmless the present and former officers,
directors and employees of the Company (collectively, the "Indemnified
Parties") against all losses, expenses, claims, damages, liabilities or
amounts that are paid in settlement of (with approval of Parent and the
Surviving Corporation), or otherwise in connection with, any claim, action,
suit, proceeding or investigation (a "Claim"), based in whole or in part on
the fact that such person is or was such a director, officer or employee
and arising out of actions or omissions occurring at or prior to the
Effective Time, in each case to the fullest extent permitted under the
General Corporation Law of the State of Delaware (the "DGCL"), (and shall
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under
the DGCL, upon receipt from the Indemnified Party to whom expenses are
advanced of the undertaking to repay such advances contemplated by Section
145(e) of the DGCL).
(b) Any Indemnified Party wishing to claim indemnification under this
Section 5.13, upon learning of any such Claim, shall notify Parent and the
Surviving Corporation (although the failure so to notify Parent and the
Surviving Corporation shall not relieve the Surviving Corporation from any
liability that it may have under this Section 5.13, except to the extent
such failure materially prejudices such party), and shall deliver to the
Surviving Corporation the undertaking contemplated by Section 145(e) of the
DGCL. Parent and the Surviving Corporation shall have the right to assume
the defense thereof and the Surviving Corporation, including its
affiliates, shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by
such Indemnified Parties in connection with the defense thereof, except
that if Parent and the Surviving Corporation elect not to assume such
defense or there is a conflict of interest between, or different defenses
exist for Parent and the Surviving Corporation and the Indemnified Parties,
the Indemnified Parties may retain counsel satisfactory to them (and
reasonably satisfactory to Parent) and the Surviving Corporation shall pay
all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; PROVIDED, HOWEVER,
that (i) the Surviving Corporation, including its affiliates, shall not, in
connection with any one such action or proceeding or separate but
substantially similar actions or proceedings arising out of the same
general allegations, be liable for the fees and expenses of more than one
separate firm of attorneys at any time for all Indemnified Parties except
to the extent that local counsel, in addition to such parties' regular
counsel, is necessary or desirable in order to effectively defend against
such action or proceeding, (ii) Parent, the Surviving Corporation and the
Indemnified Parties will cooperate in the defense of any such matter, and
(iii) the Surviving Corporation, including its affiliates, shall not be
liable for any settlement effected without Parent's prior written consent,
which consent will not be unreasonably withheld or delayed, and PROVIDED,
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FURTHER, however, that the Surviving Corporation, including its affiliates,
shall not have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and not subject to further appeal,
that the indemnification of such Indemnified Party in the manner
contemplated hereby is prohibited by applicable law. No Indemnified Party
shall consent to entry of judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release, in form and substance
reasonably satisfactory to such Indemnified Party, from all liability in
respect of such claim or litigation for which such Indemnified Party would
be entitled to indemnification hereunder.
(c) This Section 5.13 is intended to be for the benefit of, and shall
be enforceable by, the Indemnified Parties referred to herein, their heirs
and personal representatives and shall be binding on Parent and Merger Sub
and the Surviving Corporation and their respective successors and assigns.
5.14 NASDAQ NATIONAL MARKET LISTING. Parent shall use all reasonable
efforts to cause the shares of Parent Class A Common Stock to be issued in the
Merger and the shares of Parent Class A Common Stock to be reserved for issuance
under the Assumed Options and Assumed Warrants to be approved for listing on the
Nasdaq National Market, subject to official notice of issuance, as soon as
practicable after the Closing Date.
5.15 EMPLOYEES; EMPLOYMENT AGREEMENTS.
(a) Following the Effective Time, the Surviving Corporation shall
honor in accordance with their terms all employee benefit plans disclosed
by the Company under the caption "Employee Benefit Plans" in the Company
Disclosure Schedules, and all accrued benefits vested thereunder. Parent
agrees to provide, after the Effective Time, or cause the Surviving
Corporation to provide, employees of the Company, not otherwise covered by
collective bargaining agreements, with employee benefits in the aggregate
substantially no less favorable than those benefits provided to Parent's
similarly situated employees for a period ending on the first anniversary
of the Effective Time.
(b) Parent shall enter into an employment agreement (the "Employment
Agreement"), the form of which is attached hereto as EXHIBIT A, with each
of Dr. Jean-Luc Nogues and Todd Childress.
5.16 FUTURE EMPLOYMENT INCENTIVES. In addition to the treatment of the
Company's Stock Plan under Section 1.11(a) above, at the Closing the officers
and employees of the Surviving Corporation (or, in the event of a subsequent
merger, consolidation or other restructuring, the officers and employees of the
business formerly conducted by the Company prior to the Effective Time) will be
allocated stock options for not less than 200,000 shares of Parent Class A
Common Stock representing approximately eleven percent (11%) of the total number
of shares reserved under the Amended LightPath Technologies, Inc. Omnibus
Incentive Plan dated November 12, 1997 (the "Omnibus Plan") as disclosed on
SCHEDULE 5.16; provided that such number of available option shares shall be
increased, as necessary, from time to time following the Merger to provide for
an allocation of eleven percent (11%) of any increase in option shares under the
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Omnibus Plan or any successor thereto. All such stock options will be granted
and managed in accordance with existing policies of Parent and the Omnibus Plan.
The parties acknowledge and agree that if and to the extent that Parent is
required to obtain any shareholder approval of an amendment to its existing
stock option plans in order to implement the provisions of this Section 5.16
(including, without limitation, any amendment increasing the number of shares
available for grant thereunder), the stock options contemplated hereby may be
granted subject to and contingent upon receipt of such shareholder approval.
5.17 FUNDING COMMITMENT; FACILITY. Following the Closing Date, the Parent
shall fund $5,000,000 to the Surviving Corporation to provide for facility
expansion, equipment acquisitions, recruitment and retention of key personnel,
product development and strategic supply arrangements in accordance with the
budget set forth on SCHEDULE 5.17, which budget has been approved by the
Parent's board of directors and which budget shall be implemented in accordance
with Parent's existing policies and procedures. Following the Closing Date, the
Parent currently intends to continue operations of the Surviving Corporation at
the Company's current facility located in Orlando, Florida for the foreseeable
future.
ARTICLE 6
CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) this Agreement (including without limitation the plan of merger
contained herein) and the Merger shall have been approved and adopted by
the requisite vote or unanimous written consent of the Shareholders as may
be required by law and by any applicable provisions of the Company's
Articles of Incorporation and Bylaws;
(b) the materials distributed with respect to the Company
Shareholders' Meeting, if held, shall not contain any untrue statement of a
material fact and shall not omit any statement required to be contained
therein or necessary to make any statement contained therein, in the light
in which made, not misleading;
(c) there shall have been no law, statute, rule or regulation,
domestic or foreign, enacted or promulgated which would make consummation
of the Merger illegal;
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(d) no injunction or other order entered by a United States (state or
federal) court of competent jurisdiction shall have been issued and remain
in effect which would prohibit consummation of the Merger;
(e) there shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic
or foreign, (i) challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly to restrain or prohibit, the consummation
of the Merger, or seeking to obtain material damages in connection with the
Merger, (ii) seeking to prohibit direct or indirect ownership or operation
by Parent of all or a material portion of the business or assets of the
Company and the Subsidiaries or of Parent and its subsidiaries, or to
compel Parent or any of its subsidiaries or the Company or any of the
Subsidiaries to dispose of or to hold separately all or a material portion
of the business or assets of Parent and its subsidiaries or of the Company
and the Subsidiaries, as a result of the Merger, (iii) seeking to impose or
confirm limitations on the ability of Parent effectively to exercise
directly or indirectly full rights of ownership of any shares of Company
Common Stock on all matters properly presented to the Company's
shareholders, (iv) seeking to require direct or indirect divestiture by
Parent of any shares of Company Common Stock or any shares of the Surviving
Corporation to be issued in the Merger, (v) seeking or causing any material
diminution in the direct or indirect benefits expected to be derived by
Parent a result of the transactions contemplated by this Agreement, (vi)
invalidating or rendering unenforceable any material provision of this
Agreement (including without limitation any of the exhibits or attachments
hereto) or the Letter of Intent, (vii) which otherwise might materially
adversely affect the Company and the Subsidiaries or Parent and its
subsidiaries, or (viii) otherwise relating to the Letter of Intent or the
Merger;
(f) there shall not be any action taken, or any injunction issued, or
any order, statute, rule or regulation proposed, enacted, promulgated,
issued or deemed applicable to the Merger by any federal, state or foreign
court, government or governmental authority or agency, which may, directly
or indirectly, result in any of the consequences referred to in (e) above;
(g) there shall not have occurred (i) any general suspension of, or
limitation on prices for, trading in securities on the Nasdaq National
Market, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any limitation by
United States authorities on the extension of credit by lending
institutions, (iii) a commencement of war, armed hostilities or other
international or national calamity directly or indirectly involving the
United States, (iv) any limitation by any governmental authority on, or any
other event which, in the sole judgment of Parent, might affect the
extension of credit by banks or other lending institutions in the United
States, or (v) in the case of any of the foregoing existing at the date
hereof, a material acceleration or worsening thereof;
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(h) the Company and its Subsidiaries shall have obtained each consent
and approval necessary in order that the Merger and the transactions
contemplated herein not constitute a breach or violation of, or result in a
right of termination or acceleration or any encumbrance on any of the
Company's or the Subsidiaries' assets pursuant to the provisions of, any
agreement, arrangement or understanding or any license, franchise or
permit;
(i) there shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company or any of the
Subsidiaries, whether or not covered by insurance, which in the aggregate
has a material adverse effect on the Company and the Subsidiaries, taken as
a whole;
(j) the principal terms of this Agreement and the Merger shall have
been approved and adopted by the Company's shareholders in accordance with
all applicable laws and regulations and the Company's Articles of
Incorporation and Bylaws;
(k) no party hereto shall have terminated this Agreement as permitted
herein;
(l) Parent shall have completed its due diligence review of the
Company and its business, including but not limited to, the matters set
forth on the Company Disclosure Schedules, and shall in all respects be
satisfied (in its sole and absolute discretion) with the findings and
results thereof; and
(m) The Board of Directors of each of the Company and Parent shall
have approved this Agreement and the transactions contemplated hereby.
6.2 ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY. The obligation of
the Company to effect the Merger is also subject to the following conditions:
(a) the representations and warranties of Parent and the Merger Sub
set forth in Article 2 shall be true and correct in all material respects
as of the Effective Time as if made at and as of the Effective Time, and
each of Parent and the Merger Sub shall in all material respects have
performed each obligation and agreement and complied with each covenant to
be performed and complied with by it hereunder at or prior to the Effective
Time. A representation or warranty that is expressly subject to a
materiality limitation shall not be subject to a further materiality
limitation as a result of the use of the phrase "in all material respects"
in the preceding sentence;
(b) Parent shall have furnished to the Company a certificate in which
Parent shall certify that Parent has no reason to believe that the
conditions set forth in Section 6.2(a) have not been fulfilled;
(c) Parent shall have furnished to the Company (i) a copy of the text
of the resolutions by which the corporate action on the part of Parent and
the Merger Sub necessary to approve this Agreement and the Merger were
taken, (iii) certificates executed on behalf of Parent and the Merger Sub
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by their respective corporate secretaries or one of their respective
assistant corporate secretaries certifying to the Company, in each case,
that such copy is a true, correct and complete copy of such resolutions and
that such resolutions were duly adopted and have not been amended or
rescinded, and (iii) an incumbency certificate executed on behalf of Parent
and the Merger Sub by their respective corporate secretaries or one of
their respective assistant corporate secretaries certifying, in each case,
the signature and office of each officer executing this Agreement or any
other agreement, certificate or other instrument executed pursuant hereto;
(d) the Company shall have received a letter addressed to the Company
from Squire, Sanders & Dempsey L.L.P. based on customary reliance and
subject to customary qualifications, to the effect that:
(i) Each of Parent and the Merger Sub is a corporation
validly existing and in good standing under the laws of
the State of Delaware.
(ii) Parent has the corporate power to consummate the
transactions on its part contemplated by this Agreement.
Parent has duly taken all requisite corporate action to
authorize this Agreement; and this Agreement has been
duly executed and delivered by Parent and constitutes
the valid and binding obligation of Parent.
(iii) The Merger Sub has the corporate power to consummate the
transactions on its part contemplated by this Agreement.
The Merger Sub has duly taken all requisite corporate
action to authorize this Agreement and the articles of
merger contemplated in Section 1.3; and this Agreement
and such articles of merger have been duly executed and
delivered by the Merger Sub and constitute valid and
binding obligations of the Merger Sub.
(e) the Company shall not have discovered any fact or circumstance
existing as of the date of this Agreement which has not been publicly
disclosed by Parent as of the date of this Agreement regarding the
business, assets, properties, condition (financial or otherwise), results
of operations or prospects of Parent and its subsidiaries which is,
individually or in the aggregate with other such facts and circumstances,
materially adverse to Parent and its subsidiaries taken as a whole, or to
the value of the shares of Parent Class A Common Stock.
(f) The holders of all of the shares of convertible preferred stock
of the Company shall have agreed to convert such stock into Company Common
Stock and to waive any unpaid dividends effective at or prior to the
Effective Time.
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(g) Nations Bank, the provider of the Company's line of credit,
shall have consented to the Merger.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT AND THE MERGER SUB. The
obligations of Parent and the Merger Sub to effect the Merger are also subject
to the following conditions:
(a) the representations and warranties of the Company set forth in
Article 3 of this Agreement shall be true and correct in all material
respects as of the Effective Time as if made at and as of the Effective
Time, and the Company shall in all material respects have performed each
obligation and agreement and complied with each covenant to be performed
and complied with by it hereunder at or prior to the Effective Time. A
representation or warranty that is expressly subject to a materiality
limitation shall not be subject to a further materiality limitation as a
result of the use of the phrase "in all material respects" in the
preceding sentence;
(b) the Company shall have furnished to Parent a certificate,
executed by an appropriate executive officer, certifying that (A) an
appropriate inquiry has been made of the executive officers and employees
of the Company and the Subsidiaries, and after completion of such inquiry,
neither the Company nor any of the Subsidiaries nor any of the individuals
executing such certificate has any reason to believe that the conditions
set forth in Section 6.3(a) have not been fulfilled, and (B) the
representations and warranties made by the Company in this Agreement are
true and correct as of the Effective Time and that the Company has
complied with all of the covenants of the Company set forth in this
Agreement;
(c) the Company shall have furnished to Parent (i) a copy of the
text of the resolutions by which the board of Directors and shareholders
of the Company approved this Agreement (including, without limitation, the
plan of merger contained herein) and the Merger; (ii) a certificate
executed on behalf of the Company by its corporate secretary certifying to
Parent that such copy is a true, correct and complete copy of such
resolutions and that such resolutions were duly adopted and have not been
amended or rescinded; and (iii) an incumbency certificate executed on
behalf of the Company by its corporate secretary certifying the signature
and office of each officer executing this Agreement or any other
agreement, certificate or other instrument executed pursuant hereto;
(d) Parent shall have received a letter addressed to Parent from the
law firm of Gray, Harris and Robinson, Professional Association, based on
customary reliance and subject to customary qualifications, to the effect
that:
(i) The Company is a corporation validly existing with the
corporate authority to own, pledge, mortgage and operate
its properties, to lease any properties it operates
under lease, to conduct its business as it is presently
conducted and is in good standing under the laws of the
State of Delaware.
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(ii) The authorized capital of the Company consists of shares
of capital stock, designated "Common Stock," having a
par value of $.01 per share, of which the number of
shares indicated in such letter are outstanding, all of
which were duly authorized, validly issued, fully paid
and non-assessable, with no personal liability attaching
to the ownership thereof, and have not been issued in
violation of any preemptive rights under Delaware Law or
any Material Contract.
(iii) Each of the Subsidiaries is a corporation validly
existing and in good standing under the laws of its
jurisdiction if incorporation.
(iv) The Company owns all of the outstanding capital stock of
each of the Subsidiaries, free and clear of any lien,
claim or encumbrance.
(v) The Company has the corporate power to consummate the
transactions on its part contemplated by this Agreement;
the Company has duly taken all requisite corporate
action to authorize this Agreement and each document
constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in
accordance with its terms, and the articles of merger
contemplated in Section 1.3; and this Agreement and such
articles of merger have been duly executed and delivered
by the Company and constitute valid and binding
obligations of the Company.
(vi) No actions are required to be taken in order to make the
Merger effective which have not been taken on or prior
to the delivery of such letter except the delivery of
the articles of merger contemplated in Section 1.3 to
the Secretary of State of the State of Delaware in
accordance with Delaware Law.
(vii) Neither the execution and delivery by the Company of
this Agreement, nor the consummation by the Company of
the transactions contemplated hereby (a) violates or
contravenes any of the Company's organizational
documents; (b) violates or contravenes any applicable
law; (c) violates or contravenes any order, writ,
injunction or decree of any court or governmental
instrumentality; (d) results in the breach of, or
constitutes a default under, or requires any consent
under, any Material Contract; (e) results in the
creation or imposition of any lien, mortgage, security
interest, charge or encumbrance under any Material
Contract; or (f) except to the extent already obtained,
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requires the consent or approval of, or any filing or
registration with, the Shareholders or any Governmental
Authority.
(viii) There are no judgments, orders, injunctions, or other
restraints issued or filed against the Company, nor is
there any pending or threatened litigation, arbitration
proceeding or governmental or administrative proceedings
against or involving the Company.
(ix) The Company is not an "investment company" registered or
required to be registered under the Investment Company
Act of 1940, as amended (the "1940 ACT") nor is the
Company "controlled" by such a company, within the
meaning of the 1940 Act.
(x) The Company is not a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a
"holding company" within the meaning of The Public
Utility Holding Company Act of 1935, as amended;
(e) Parent shall not have discovered any fact or circumstance existing
as of the date of this Agreement which has not been disclosed in writing to
Parent by the Company as of the date of this Agreement regarding the
business, assets, properties, condition (financial or otherwise), results
of operations or prospects of the Company and the Subsidiaries which is,
individually or in the aggregate with other such facts and circumstances,
materially adverse to the Company and the Subsidiaries taken as a whole, or
to the value of the shares of Company Common Stock;
(f) Parent shall have entered into an Employment Agreement with each
of Dr. Jean-Luc Nogues and Todd Childress;
(g) the Company shall not have received written objections to the
Merger pursuant to applicable Delaware Law covering more than 5% of the
shares of Company Common Stock outstanding immediately prior to the
Effective Time; and
(h) on the Closing Date, the Board of Directors of Parent shall have
received from Carmichael & Company LLC a written update, dated as of such
date, confirming that, from a financial point of view, the consideration to
be offered to the Shareholders of the Company in the Merger contemplated
hereby is fair to Parent.
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ARTICLE 7
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. Subject to the provisions hereof, this Agreement may be
terminated prior to the Effective Time:
(a) by Parent, if there has been a material breach by the Company or
any of the Designated Persons of any covenant or agreement of the Company
or any of the Designated Persons set forth in this Agreement or in any
other agreement or instrument delivered to Parent, which breach has not
been cured within 30 days of the date on which written notice of such
breach was first given to the Company or which is not capable of being
cured by the Scheduled Closing Time;
(b) by the Company, if there has been a material breach by Parent of
any covenant or agreement of Parent in this Agreement, which breach has not
been cured within 30 days of the date on which written notice of such
breach was first given to Parent or which is not capable of being cured by
the Scheduled Closing Time;
(c) by Parent, if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6.1 or 6.3 by the
Scheduled Closing Time has become impossible (other than as a result of any
failure on the part of Parent or Merger Sub to comply with or perform any
covenant or obligation of Parent or Merger Sub set forth in this
Agreement);
(d) by the Company, if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 6.1 or 6.2 by the
Scheduled Closing Time has become impossible (other than as a result of any
failure on the part of the Company or any of the Designated Persons to
comply with or perform any covenant or obligation set forth in this
Agreement or in any other agreement or instrument delivered to Parent);
(e) by Parent, at or after the Scheduled Closing Time, if any
condition set forth in Section 6.1 or 6.3 has not been satisfied by the
Scheduled Closing Time (other than as a result of any failure on the part
of Parent or Merger Sub to comply with or perform any covenant or
obligation of Parent or Merger Sub set forth in this Agreement);
(f) by the Company, at or after the Scheduled Closing Time, if any
condition set forth in Section 6.1 or 6.2 has not been satisfied by the
Scheduled Closing Time (other than as a result of any failure on the part
of the Company or any of the Designated Persons to comply with or perform
any covenant or obligation set forth in this Agreement or in any other
agreement or instrument delivered to Parent);
(g) by Parent, if the Closing has not taken place on or before the
Final Date (other than as a result of any failure on the part of Parent to
comply with or perform any covenant or obligation of Parent set forth in
this Agreement);
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(h) by the Company, if the Closing has not taken place on or before
the Final Date (other than as a failure on the part of the Company or any
of the Designated Persons to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or
instrument delivered to Parent); or
(i) by the mutual consent of Parent and the Company.
(j) by Parent, if the Recalculation Price shall have decreased by an
amount greater than thirty percent (30%) as compared to the Execution
Price; or
(k) by Parent, if the Board of Directors of Parent or the Company
shall have failed to approve the transactions contemplated hereby or if
Parent shall have made the determination (in its sole and absolute
discretion) that the findings and results of its due diligence
investigation are unsatisfactory.
As used herein, the Final Date shall be September 30, 2000, except that if
a temporary, preliminary or permanent injunction or other order by any Federal
or state court that would prohibit or otherwise restrain consummation of the
Merger shall have been issued and shall remain in effect on September 30, 2000,
and such injunction shall not have become final and nonappealable, either party,
by giving the other written notice thereof on or prior to September 30, 2000,
may extend the time for consummation of the Merger up to and including the
earlier of the date such injunction shall become final and nonappealable or
October 31, 2000, so long as such party shall, at its own expense, use its best
efforts to have such injunction dissolved.
7.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to Section 7.1(a), Section 7.1(c), Section 7.1(e) or Section 7.1(g),
Parent shall deliver to the Company a written notice stating that Parent is
terminating this Agreement and setting forth a brief description of the basis on
which Parent is terminating this Agreement. If the Company wishes to terminate
this Agreement pursuant to Section 7.1(b), Section 7.1(d), Section 7.1(f) or
Section 7.1(h), the Company shall deliver to Parent a written notice stating
that the Company is terminating this Agreement and setting forth a brief
description of the basis on which the Company is terminating this Agreement.
7.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 7.1, all further obligations of the parties under this Agreement shall
terminate. If this Agreement is terminated pursuant to Section 7.1 as a result
of the inaccuracy of any representation or warranty of Parent or the Merger Sub
set forth in Article 2 or the inaccuracy of any representation or warranty of
the Company set forth in Article 3, the party making such inaccurate
representation or warranty shall be subject to liability for the termination of
this Agreement as a result thereof only if and to the extent that any
Responsible Officer (as defined below) of such party had actual knowledge of
such inaccuracy. For purposes hereof, "Responsible Officer" of any party shall
mean the chairman of the board of directors, the chief executive officer, the
chief operating officer, the chief financial officer, any executive vice
president, the treasurer or the secretary of such party.
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ARTICLE 8
GENERAL PROVISIONS
8.1 AMENDMENT. This Agreement may not be amended except by an instrument in
writing approved by the parties to this Agreement and signed on behalf of each
of the parties hereto; provided, however, that, after approval of the Merger by
the shareholders of the Company, no amendment may be made which changes the
amount into which each share of Company Common Stock will be converted in the
Merger or effects any change which would materially and adversely affect the
shareholders of the Company without the further approval of the shareholders of
the Company.
8.2 WAIVER. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any of the obligations or other acts
of any other party hereto or (b) waive compliance with any of the agreement of
any other party or with any conditions to its own obligations, in each case only
to the extent such obligations, agreements and conditions are intended for its
benefit. No failure on the part of any party hereto to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
party hereto in exercising any power, right, privilege or remedy under this
agreement, shall operate as a waiver of such power, right, privilege or remedy,
and no single or partial exercise of any such power, right, privilege or remedy
shall preclude any other or future exercise thereof or of any other power,
right, privilege or remedy. No party hereto shall be deemed to have waived any
claim arising out of this Agreement, or any power, right, privilege or remedy
under this Agreement, unless the waiver of such claim, power, right, privilege
or remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such party, and any such waiver shall not be applicable
or have any effect except in the specific instance in which it was given.
8.3 PUBLIC STATEMENTS. Except as required by applicable law, no party shall
make any public announcement or statement with respect to the Merger, this
Agreement or any related transaction without the approval of the other parties,
which approval will not be unreasonably withheld. Moreover, each party agrees to
consult with the other parties prior to issuing any such public announcement or
statement.
8.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by telex, by
telecopier, or by registered or certified mail (postage prepaid and return
receipt requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by it by like notice):
If to Parent or
the Merger Sub: LightPath Technologies, Inc.
6820 Academy Parkway East, N.E.
Albuquerque, New Mexico 87109
Telecopy: (505) 342-1115
Attn.: Chief Executive Officer
With a copy to: Squire, Sanders & Dempsey L.L.P.
40 N. Central Avenue
Phoenix, Arizona 85004
Telecopy: (602) 253-8129
Attn.: Joseph M. Crabb, Esq.
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If to the Company: Geltech, Inc.
3267 Progress Drive
Orlando, Florida 32826
Telecopy: (407) 382-4007
Attn.: Chief Executive Officer
With a copy to: Gray, Harris and Robinson, Professional Association
201 East Pine Street, Suite 1200
Orlando, Florida 32802
Telecopy: (407) 244-5690
Attn: William A. Grimm
All such notices and other communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if delivered by mail; when
answered back, if telexed; and when receipt acknowledged, if telecopied.
8.5 INTERPRETATION. When a reference is made in this Agreement to
subsidiaries of Parent, the word "subsidiary" means any "majority-owned
subsidiary" (as defined in Rule 12b-2 under the Exchange Act) of Parent;
provided, however, that the Company shall in no event and at no time be
considered a subsidiary of Parent for purposes of this Agreement. The headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. References to
Sections and Articles refer to sections and articles of this Agreement unless
otherwise stated. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," and words of like import, unless the context requires
otherwise, refer to this Agreement (including the exhibits and attachments
hereto). As used in this Agreement, the masculine, feminine and neuter genders
shall be deemed to include the others if the context requires.
8.6 SEVERABILITY. If term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
8.7 MISCELLANEOUS. This Agreement (together with all other documents and
instruments referred to herein): (a) constitutes the entire agreement, and
supersedes all other prior agreements and undertakings, both written and oral,
among the parties, with respect to the subject matter hereof; (b) is not
intended to confer upon any other person any rights or remedies hereunder; (c)
shall not be assigned by operation of law or otherwise, except that Parent and
the Merger Sub may assign all or any portion of their rights under this
Agreement to any wholly owned subsidiary, but no such assignment shall relieve
Parent and the Merger Sub of their obligations hereunder, and except that this
Agreement may be assigned by operation of law to any corporation with or into
which Parent may be merged; and (d) shall be governed in all respects, including
validity, interpretation and effect, by the internal laws of the State of
Delaware, without giving effect to any principles of conflict of laws or choice
of law; provided, however, that the Letter of Intent shall remain in full force
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and effect notwithstanding the execution and delivery of this Agreement and
nothing in this Agreement shall supersede any of the provisions of the Letter of
Intent. This Agreement may be executed in two or more counterparts which
together shall constitute a single agreement.
8.8 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties set forth herein shall terminate as of the Effective
Time. Notwithstanding this provision, nothing in this Section 8.8 shall prohibit
the Company or any shareholder of the Company from obtaining a remedy if
applicable securities laws have been violated by the Parent in the issuance of
the Share Consideration to the Company's shareholders pursuant to this
Agreement.
8.9 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP.
This Agreement (including the documents and the instruments referred to herein)
(a) constitutes the entire agreement among the parties and supercedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, other than the confidentiality provision
of the Letter of Intent, which should survive the execution and delivery of this
Agreement and (b) except as provided in Sections 5.13 and 5.15, is not intended
to confer upon any person other than the parties hereto any rights or remedies
hereunder. The parties acknowledge that no party shall have the right to acquire
or shall be deemed to have acquired shares of common stock of the other party
pursuant to the Merger until consummation thereof.
8.10 FAX SIGNATURES This Agreement and any other document or instrument
relating hereto may be executed by a party's signature transmitted by facsimile
("fax"), and copies of this Agreement and any such document or instrument
executed and delivered by means of faxed signatures shall have the same force
and effect as copies hereof executed and delivered with original signatures. All
parties hereto may rely upon faxed signatures as if such signatures were
originals. Any party executing and delivering this Agreement and any such
document or instrument by fax shall promptly thereafter deliver a counterpart
signature page of this Agreement and the fully executed original or counterpart
original of any such document or instrument containing said party's original
signature. All parties hereto agree that a faxed signature may be introduced
into evidence in any proceeding arising out of or related to this Agreement or
any such document or instrument as if it were an original signature.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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MERGER AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, Parent, the Merger Sub and the Company have caused this
Agreement to be executed on the date first written above by their respective
officers thereunder duly authorized.
LIGHTPATH TECHNOLOGIES, INC.
By: /s/ Donald E. Lawson
------------------------------------
Name: Donald E. Lawson
Title: President and Chief Executive
Officer
LPI TWO MERGER CORPORATION
By: /s/ Donald E. Lawson
------------------------------------
Name: Donald E. Lawson
Title: President
GELTECH, INC.
By: /s/ D. Todd Childress
------------------------------------
Name: D. Todd Childress
Title: Chief Financial Officer and
Secretary
By: /s/ Jean-Luc Nogues
------------------------------------
Name: Jean-Luc Nogues
Title: Chief Operating Officer
57
