AGREEMENT AND PLAN OF
MERGER
BY AND
AMONG
SYS,
SHADOW IV,
INC.,
AI
METRIX, INC.,
THE MAJORITY
STOCKHOLDERS,
SOLELY FOR PURPOSES OF
SECTIONS 4.32, 5.2(c) AND 5.3(d)
AND ARTICLES VII, IX AND
X
AND
VICTOR E.
PARKER,
AS THE STOCKHOLDER
REPRESENTATIVE
Dated as of October 17,
2006
TABLE OF
CONTENTS
1.3 Effects of the Merger
1.4 Certificate of Incorporation and
Bylaws
1.5 Directors and Officers of the Surviving
Corporation
ARTICLE II CONVERSION OF SECURITIES
2.1
Merger Consideration; Conversion of
Capital Stock; Deposit to Escrow
2.2 Conversion of Merger Sub Stock
2.4 Exchange of Certificates.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
SYS AND MERGER SUB
3.1
Organization and
Standing
3.2 Corporate Power and Authority
3.3 Conflicts; Consents and Approvals
3.6 Capitalization of SYS.
3.7 Brokerage and Finders’ Fees
3.8 Board Recommendation; Required Vote
3.10 Undisclosed Liabilities
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF AI
METRIX
4.1
Organization and
Standing
4.3 Corporate Power and Authority
4.4 Capitalization of Ai Metrix.
4.5 Conflicts; Consents and Approvals
4.6 Brokerage and Finders’ Fees
4.7 Books and Records; Financial
Statements.
4.10 No Material Adverse Change
4.12 Intellectual Property.
4.13 Title to Assets and Properties
4.14 Employee Benefit Plans.
4.17 Undisclosed Liabilities
4.18 Operation of Ai Metrix’s
Business.
4.21 Environmental Matters
4.24 Product or Service Warranty
4.25 Data Protection Matters.
4.26 Foreign Corrupt Practices Act.
4.27 Government Contracts
4.28 Relations with Governments
4.29 No Existing Discussions
4.30 Review of SYS SEC Documents
4.31 Interested Party Transactions
ARTICLE V COVENANTS OF THE PARTIES
5.3 Covenants of Ai Metrix and the Ai Metrix
Stockholders
6.1
Conditions to the Obligations of
Each Party
6.2 Conditions to Obligations of Ai Metrix and the
Majority Stockholders
6.3 Conditions to Obligations of SYS and Merger
Sub
ARTICLE VII STOCKHOLDER
REPRESENTATIVE
7.1
Election and Replacement
ARTICLE VIII TERMINATION AND
AMENDMENT
8.2 Effect of Termination
ARTICLE IX GENERAL SURVIVAL;
INDEMNIFICATION
9.1
Survival of Representations and
Warranties
9.3 No Right of Indemnification or
Contribution
9.5 Computation of Damages; Mitigation
9.7 Consequential Damages
10.5 Third-Party Beneficiaries
10.6 Governing Law; Venue.
10.7 Specific Performance
10.9 Expenses and Transfer Taxes
EXHIBITS
Exhibit
A Form of Voting Agreement
Exhibit
B Form of Investment Representation
Certificate
Exhibit
C Form of Escrow Agreement
Exhibit
D Form of Carrai Employment Agreement
Exhibit
E Form of Opinion of Counsel to Ai
Metrix
SCHEDULES
Schedule
1 Merger Consideration Allocation per Ai Metrix
Stockholder
Schedule
2 Ai Metrix Employees Signing Non-Compete
Agreements
Schedule
3 Ai Metrix Stockholder Addresses; Wire Transfer
Instructions
Schedule
4 Unaccredited Ai Metrix Stockholders
Attached
Ai Metrix Disclosure
Schedule
Attached
SYS Disclosure Schedule
AGREEMENT AND PLAN OF
MERGER
This Agreement and Plan of Merger (this “
Agreement ”) is made and entered into as of
October 17, 2006, by and among SYS, a California corporation
(“ SYS ”); Shadow IV, Inc., a Delaware
corporation and a wholly-owned subsidiary of SYS (“
Merger Sub ”); Ai Metrix, Inc., a Delaware
corporation (“ Ai Metrix ”); the
following stockholders of Ai Metrix (collectively, the “
Majority Stockholders , ” and each
individually, a “ Majority Stockholder
”): General Atlantic Partners 74, L.P., GAP Coinvestment
Partners II, L.P., GAPCO GmbH & Co. KG, GapStar, LLC, Spectrum
Equity Investors II, L.P., SEA 1998 II, L.P., Spectrum Equity
Investors III, L.P., SEI III Entrepreneurs’ Fund, L.P.,
Spectrum III Investment Managers’ Fund, L.P., and Phil
Carrai, solely for purposes of Sections 4.32, 5.2(c) and
5.3(d) and Articles VII , IX and X; and
Victor E. Parker, as the Stockholder Representative (the “
Stockholder Representative ”).
RECITALS
WHEREAS, the respective Boards of Directors of
SYS, Merger Sub and Ai Metrix have determined that the merger of
Merger Sub with and into Ai Metrix, in the manner contemplated
herein (the “ Merger ”), is desirable
and in the best interests of their respective stockholders and, by
resolutions duly adopted, have approved and adopted this
Agreement;
WHEREAS, SYS, Merger Sub, Ai Metrix and the
Majority Stockholders desire to make certain representations,
warranties, covenants and agreements in connection with the Merger
and also to prescribe various conditions to the Merger;
and
WHEREAS, certain stockholders of SYS have
executed and delivered to Ai Metrix a voting agreement (the “
Voting Agreement ”), in substantially the
form attached as Exhibit A hereto (with such stockholders
listed on Schedule A to the Voting Agreement), as an inducement to
Ai Metrix to enter into this Agreement.
NOW, THEREFORE, in consideration of these
premises and their promises hereinafter set forth, the parties
hereto agree as follows:
ARTICLE
I
THE
MERGER
1.1
The Merger.
Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
Delaware General Corporation Law (the “ DGCL
”), Merger Sub shall be merged with and into Ai Metrix at the
Effective Time (as defined below). As a result of the Merger, the
separate corporate existence of Merger Sub shall cease and Ai
Metrix shall continue its existence under the laws of the State of
Delaware as a wholly-owned subsidiary of SYS. Ai Metrix, in its
capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the “ Surviving
Corporation .”
1.2
Effective Time
. As promptly as practicable on the
Closing Date (as defined below), the parties shall cause the Merger
to be consummated by filing with the Secretary of State of the
State of Delaware (the “ Delaware Secretary of
State ”) a certificate of merger (the “
Certificate of Merger ”) in such form as is
required by and executed in accordance with the DGCL. The Merger
shall become effective (the “ Effective Time
”) when the Certificate of Merger has been filed with the
Delaware Secretary of State or at such later time as shall be
agreed upon by SYS and Ai Metrix and specified in the Certificate
of Merger. Prior to the filing referred to in this
Section 1.2 , a closing (the “
Closing ”) shall be held at the offices of
SYS’s legal counsel, Latham & Watkins LLP, 12636 High
Bluff Drive, Suite 400, San Diego, California 92130, or such other
place as the parties may agree upon, as soon as practicable (but in
any event within ten (10) business days) following the date upon
which all conditions set forth in Article VI that are
capable of being satisfied prior to the Closing have been satisfied
or waived, or at such other date as SYS and Ai Metrix may agree;
provided that the conditions set forth in
Article VI have been satisfied or waived at or prior to
such date. The date on which the Closing takes place is referred to
herein as the “ Closing Date .” For all
purposes, the Closing shall be effective as of 11:59 p.m. on
the Closing Date.
1.3
Effects of the
Merger. At and after the
Effective Time, the separate existence of Merger Sub will cease,
and Ai Metrix, as the Surviving Corporation and successor, shall
succeed to all of the rights and property of Merger Sub and Ai
Metrix, and shall be subject to all the debts and liabilities of
Merger Sub and Ai Metrix except as otherwise expressly provided in
reference to this Agreement.
1.4
Certificate of Incorporation and
Bylaws .
(a) Subject to Section 5.2(d) , the Certificate of
Incorporation of the Surviving Corporation shall be amended in its
entirety to contain the provisions set forth in the Certificate of
Incorporation of Merger Sub, as in effect immediately prior to the
Effective Time (the “ Merger Sub Certificate
”), and (b) the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time (the “ Merger
Sub Bylaws ”), shall be the Bylaws of the Surviving
Corporation; in each case, until amended in accordance with the
DGCL.
1.5
Directors and Officers of the
Surviving Corporation. On the Closing Date, Ai Metrix shall deliver to
SYS evidence satisfactory to SYS of the resignations of the
directors and officers of Ai Metrix and any subsidiary of Ai
Metrix, with such resignations to be effective immediately after
the Effective Time. SYS shall cause the election of new directors
and officers, as determined by SYS, for Ai Metrix and any
subsidiary to be effective as of the resignation of the former
directors and officers of Ai Metrix and any subsidiary.
ARTICLE
II
CONVERSION OF
SECURITIES
2.1
Merger Consideration; Conversion
of Capital Stock; Deposit to Escrow.
(a) At the Effective Time, by virtue of the Merger
and without any action on the part of SYS, Merger Sub or Ai Metrix
or their respective stockholders, each share of Ai Metrix Capital
Stock (as defined below) issued and outstanding immediately prior
to the Effective Time shall in accordance with
Section 2.1(a) be converted into, and shall represent
the right to receive, that portion of 3,075,705 shares of SYS
Common Stock (as defined below) to which such share is entitled, as
specified in Section 2.1(a) below (such aggregate number of shares,
the “ Merger Consideration ”), such
number of shares equaling 19.9% of the issued and outstanding
shares of SYS Common Stock. Pursuant to Section 2.4(f) , all
outstanding options, warrants and other securities (other than Ai
Metrix Preferred Stock) convertible into Ai Metrix Capital Stock
shall be exercised or cancelled prior to the Closing Date, so that
as of the Effective Time no person shall have any options, warrants
or other rights to buy, or convert into, any securities of the
Surviving Corporation. The Merger Consideration shall be allocated
and distributed as set forth on Schedule 1 , which has been
determined in accordance with the following (and after conversion
of all options and warrants in accordance with Section
2.4(f) below):
(i) Each issued share of Ai Metrix Common Stock
shall, at the Effective Time, be converted into 0.18979119 shares
of SYS Common Stock; and
(ii) Each issued share of Ai Metrix Series C
Preferred Stock shall, at the Effective Time, be converted into
0.18979119 shares of SYS Common Stock.
Ai Metrix shall
deliver to SYS at the Closing an updated Schedule 1 ,
revised to set forth the amount of cash to be received by each
Other Stockholder following the Effective Time, and the amount of
cash constituting the Escrow Consideration that is allocated to
each such Other Stockholder.
(b) As soon as practicable after the Effective Time,
but no later than the close of business on the third business day
immediately following the Closing Date (the “ Payment
Deadline ”), the following shall be delivered
directly by SYS from the Merger Consideration to the Escrow Agent,
for deposit into the Escrow Account, as set forth in Section
2.6 , in lieu of being delivered to the stockholders of Ai
Metrix (the “ Ai Metrix Stockholders
”):
(i) the sum of (A) the number of shares of SYS
Common Stock equal to the difference between (x) 307,571 minus (y)
the Indemnity Equivalent (as hereinafter defined), plus (B) the
amount of cash equal to the product of 0.10 multiplied by the
amount of cash paid to the Other Stockholders pursuant Section
2.4(h) (such sum, the “ Indemnity Escrow
”); and
(ii) the sum of (A) the number of shares of SYS
Common Stock equal to the difference between (x) 550,000 minus (y)
the Clawback Equivalent (as hereinafter defined), plus (B) the
amount of cash equal to the product of 0.17882079 multiplied by the
amount of cash paid to the Other Stockholders pursuant Section
2.4(h) (such sum, the “ Clawback Escrow
” and together with the Indemnity Escrow, the “
Escrow Consideration ”).
(c) The allocation of the Indemnity Escrow and the
allocation of the Clawback Escrow among the Ai Metrix Stockholders
shall be as set forth on Schedule 1 .
(d) “ Indemnity Equivalent
” means the number of shares of SYS Common Stock (rounded to
the nearest whole number) equal to the product of (i) 0.10
multiplied by (ii) a fraction, the numerator of which is the amount
of cash paid to the Other Stockholders pursuant Section
2.4(h) and the denominator of which is the SYS Average Price
per share (as defined below).
(e) “ Clawback Equivalent
” means the number of shares of SYS Common Stock (rounded to
the nearest whole number) equal to the product of (i) 0.17882079
multiplied by (ii) a fraction, the numerator of which is the amount
of cash paid to the Other Stockholders pursuant Section
2.4(h) and the denominator of which is the SYS Average Price
per share.
2.2
Conversion of Merger Sub
Stock. Each share of
capital stock of Merger Sub outstanding at the Effective Time shall
be converted into and become one validly issued, fully paid and
non-assessable share of common stock of the Surviving
Corporation.
(a) No certificates for fractional shares of SYS
Common Stock shall be issued as a result of the conversion provided
for in Section 2.1 , and such fractional share
interests will not entitle the owner thereof to vote or have any
rights of a holder of shares of SYS Common Stock.
(b) In lieu of any such fractional shares of SYS
Common Stock, the holder of a certificate or certificates (the
“ Certificates ”) that immediately
prior to the Effective Time represented outstanding shares of Ai
Metrix Capital Stock whose shares were converted into the right to
receive the Merger Consideration pursuant to
Section 2.1(a) , upon presentation of such fractional
interest represented by an appropriate Certificate for Ai Metrix
Capital Stock to SYS pursuant to Section 2.4 , shall be
entitled to receive a cash payment therefor, in an amount equal to
the value of such fractional interest, with a share of SYS Common
Stock being valued for this purpose at the value of the average
closing price of SYS Common Stock on the American Stock Exchange
over the ten (10) consecutive trading days immediately preceding
October 16, 2006 (the “ SYS Average Price
”). Such payment with respect to fractional shares is
intended to avoid the expense and inconvenience of issuing
fractional shares and to provide a mechanical rounding off of, and
is not a separately bargained for, consideration. If more than one
Certificate shall be surrendered for the account of the same
holder, the number of shares of Ai Metrix Capital Stock for which
Certificates have been surrendered shall be appropriately adjusted
to provide to the Ai Metrix Stockholders the same economic effect
as contemplated by this Agreement. The fractional share interests
of each Ai Metrix Stockholder will be aggregated, and no Ai Metrix
Stockholder will receive cash in an amount greater than the value
of one full share of SYS Common Stock for such fractional share
interest.
2.4
Exchange of
Certificates.
(a)
Exchange Procedures
.
(i) At the Closing, each (A) Majority Stockholder
and (B) other Ai Metrix Stockholder (but excluding the individuals
listed on Schedule 4 hereto, which individuals have
represented to Ai Metrix that they are not accredited investors)
that is the record owner of shares of Ai Metrix Capital Stock that
are equal to or convertible into more than 5,000 shares of Ai
Metrix Common Stock in the aggregate, shall deliver (all of such
Majority Stockholders and Ai Metrix Stockholders being collectively
referred to herein as the “ Closing
Stockholders ”): (x) the Certificate or
Certificates representing such Closing Stockholder’s shares
of Ai Metrix Capital Stock (or affidavits of lost certificates in
lieu thereof), duly endorsed in blank or accompanied by stock
powers duly executed in blank (or, in the event of Closing
Stockholders who exercised options immediately prior to the Closing
Date and have not received a Certificate representing such Closing
Stockholder’s Ai Metrix Capital Stock by the Closing, an
executed acknowledgement that such Closing Stockholder has
exercised such Closing Stockholder’s options and paid the
consideration therefor, and has not received a Certificate
representing its Ai Metrix Capital Stock) (collectively, the
“ Required Deliveries ”), (y) duly
executed stock powers with respect to that Closing
Stockholder’s shares of SYS Common Stock which are to be
deposited with the Escrow Agent, and (z) a duly executed Investment
Representation Certificate substantially in the form of
Exhibit B hereto (the “ Investment
Representation Certificate ”), and in exchange for
such delivery shall receive, as soon as practicable after the
Effective Time, but no later than the Payment Deadline, (A) subject
to Section 2.4(h) , the Merger Consideration to which such
Closing Stockholder is entitled as set forth on Schedule 1 ,
payable by delivery of a stock certificate naming such Closing
Stockholder as the holder thereof, and (B) payment by check or
wire transfer of funds in U.S. dollars representing the amount of
cash in lieu of fractional shares, if any, which such holder has
the right to receive pursuant to the provisions of this
Article II .
(ii) Promptly after the Closing, the Surviving
Corporation shall send to all Ai Metrix Stockholders who were not
Closing Stockholders (such stockholders, the “ Other
Stockholders ”) a notice informing such Other
Stockholders of the consummation of the Merger, instructing such
Other Stockholders to deliver the Required Deliveries to the
Surviving Corporation within the twenty (20) day period following
the date of such notice (the “ Delivery
Period ”), and notifying such Other Stockholders
that in the event that the Required Deliveries are not received by
the Surviving Corporation during such time period, then all rights
of such Ai Metrix Stockholder to the Merger Consideration will be
forfeited. In exchange for such delivery of the Required Deliveries
by the Other Stockholders, such Other Stockholder shall receive, as
soon as practicable after the end of the Delivery Period, payment
by check or wire transfer of funds in U.S. dollars representing (A)
the Merger Consideration to which such Other Stockholder is
entitled pursuant to Section 2.4(h) , as set forth on
Schedule 1 , and (B) the amount of cash in lieu of
fractional shares, if any, which such holder has the right to
receive pursuant to the provisions of this Article II
.
(iii) No interest will be paid or accrued on the cash
in lieu of fractional shares, if any, and unpaid dividends and
distributions, if any, payable to holders of shares of Ai Metrix
Capital Stock. In the event of a transfer of ownership of shares of
Ai Metrix Capital Stock that is not registered on the transfer
records of Ai Metrix, a certificate representing the proper number
of shares of SYS Common Stock, if any, together with a check for
the cash to be paid in lieu of fractional shares, if any, unpaid
dividends and distributions, if any, and cash in lieu of SYS Common
Stock pursuant to Section 2.4(h) , if any, may be issued to
such transferee if the Certificate representing such shares of Ai
Metrix Capital Stock held by such transferee is presented to SYS,
accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes
have been paid. Until surrendered as contemplated by this
Section 2.4 , each Certificate shall be deemed at any
time after the Effective Time to represent only the right to
receive the appropriate amount of Merger Consideration upon
surrender. If any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by SYS, the posting by such
person of a bond in such reasonable amount as SYS may direct as
indemnity against any claim that may be made against it with
respect to such Certificate, SYS will deliver in exchange for such
lost, stolen or destroyed Certificate, the Merger Consideration,
payable at Closing, with respect to the shares of Ai Metrix Capital
Stock that were represented by such Certificate, as provided in
this Article II .
(b)
Distributions with Respect to
Unexchanged Shares. Notwithstanding any other provisions of this
Agreement, no dividends or other distributions declared or made
after the Effective Time with respect to shares of SYS Common Stock
having a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate, and no cash payment in
lieu of fractional shares shall be paid to any such holder, until
the holder shall surrender such Certificate (or affidavit) as
provided in this Section 2.4(a) . Subject to the effect
of all applicable constitutions, laws, statutes, treaties, orders,
rules, regulations, ordinances, notices, approvals, policies or
guidelines promulgated, or judgments, decisions, decrees, or orders
of any Governmental Authority (as defined below) (collectively,
“ Applicable Laws ”), following
surrender of any such Certificate, there shall be paid to the
holder of the Merger Consideration issued in exchange therefor,
without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after
the Effective Time theretofore payable with respect to such whole
shares of SYS Common Stock and not paid, less the amount of any
withholding taxes that may be required thereon, and (ii) at
the appropriate payment date subsequent to surrender, the amount of
dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date subsequent
to surrender payable with respect to such whole shares of SYS
Common Stock, less the amount of any withholding taxes which may be
required thereon.
(c)
No Further Ownership Rights in
Ai Metrix Capital Stock. All Merger Consideration issued and/or paid and
any cash payments in lieu of fractional shares upon surrender of
Certificates (or affidavits) in accordance with the terms hereof
shall be deemed to have been issued and/or paid in full
satisfaction of all rights pertaining to such shares of Ai Metrix
Capital Stock represented thereby, and, as of the Closing, the
stock transfer books of Ai Metrix shall be closed and there shall
be no further registration of transfers on the stock transfer books
of Ai Metrix of shares of Ai Metrix Capital Stock outstanding
immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in
this Section 2.4 .
(d)
No Liability.
Neither SYS nor the Surviving
Corporation shall be liable to any person in respect of any Merger
Consideration (or any dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law. If any Certificates
shall not have been surrendered (A) prior to seven (7) years after
the Effective Time or (B) immediately prior to such earlier date on
which any Merger Consideration (or any dividends or distributions
with respect thereto) would otherwise escheat to or become the
property of any Governmental Authority, then, at such time, any
such Merger Consideration (or any dividends or distributions with
respect thereto) shall, to the extent permitted by Applicable Law,
become the property of SYS, free and clear of all claims or
interest of any person previously entitled thereto. For purposes of
this Agreement, “ Governmental Authority
” means any (i) nation, region, state, county, city,
town, village, district or other jurisdiction, (ii) federal,
state, local, municipal, foreign or other government,
(iii) federal, state, local municipal, foreign or
multi-national court, arbitral tribunal, administrative agency or
commission, (iv) other governmental, quasi-governmental,
public, or regulatory body, agency, instrumentality or authority of
any nature, (v) multi-national organization, (vi) body
exercising, or entitled to exercise, any administrative, executive,
judicial, legislative, policy, regulatory or taxing authority or
power of any nature or (vii) official of any of the
foregoing.
(e)
Withholding.
Upon any exercise of options prior
to the Closing Date in accordance with Section 2.4(f) , Ai
Metrix agrees that, to the extent it is required to do so under the
U.S. Internal Revenue Code of 1986, as amended (the “
Code ”), or any provision of state, local or
foreign tax law, it will deduct and withhold such amounts as it is
required to deduct and withhold with respect to such exercise. Each
of the Surviving Corporation and SYS shall be entitled to deduct
and withhold from any cash otherwise payable pursuant to this
Agreement to any holder of shares of Ai Metrix Capital Stock such
amounts as it is required to deduct and withhold with respect to
the making of such payment under the Code, or any provision of
state, local or foreign tax law. Notwithstanding the foregoing, no
withholding shall be required to the extent that any holder of Ai
Metrix Capital Stock delivers to SYS or the Surviving Corporation a
validly executed Form W-8 and/or Form W-9 as requested by either
SYS or the Surviving Corporation with respect to such payment prior
to or at the time that any such payment is made. To the extent that
amounts are so withheld by the Surviving Corporation or SYS, as the
case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the
shares of Ai Metrix Capital Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or
SYS, as the case may be.
(f)
Options, Warrants and Other
Convertible Securities .
Prior to the Closing Date, the Board of Directors of Ai Metrix
shall take all actions necessary and appropriate to cause each
outstanding option or warrant to acquire, and each issued note or
other security (other than Ai Metrix Preferred Stock) convertible
into, Ai Metrix Common Stock, whether or not exercisable, vested or
converted, to have been exercised or cancelled so that as of the
Effective Time no person shall have any options, warrants, or other
rights to buy, or convert into, any securities of the Surviving
Corporation. In connection with any such exercise, the holders of
such options and warrants may elect whether to convert by (i)
paying Ai Metrix in cash for the exercise price of all such
options, or (ii) a cash-free exercise such that, in lieu of paying
the exercise price or other consideration required to be paid by
such holder to exercise the options or warrants, such holders will
not make any cash payment, but will receive that number of shares
of Ai Metrix Common Stock to which it is entitled upon exercise,
less the number of shares whose value equals the aggregate
consideration or exercise price that such holder would have been
required to pay in order to exercise or convert such options or
warrants. Shares of Ai Metrix Common Stock will be valued for
purposes of this conversion at the SYS Average Price.
(g)
Restrictive Legend.
Each certificate evidencing shares
of SYS Common Stock issued pursuant to this Agreement shall bear
the following legend in conspicuous type:
THE SHARES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED
UNDER ANY STATE SECURITIES LAWS. THE SHARES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
QUALIFICATION WITHOUT AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION OR QUALIFICATION IS NOT
REQUIRED.
(h)
Cash in Lieu of Securities
. Notwithstanding anything to the contrary
contained herein, in lieu of Merger Consideration and Earnout
Consideration, if any, consisting of SYS Common Stock, SYS shall
pay each Other Stockholder that delivers the Required Deliveries to
the Surviving Corporation within the Delivery Period an equivalent
amount of cash; it being agreed that (i) such shares of SYS Common
Stock will be valued for this purpose: (A) with respect to Merger
Consideration, at the SYS Average Price per share and (B) with
respect to Earnout Consideration, at the SYS Average Earnout Price,
and (ii) a portion of such cash shall be paid into the Escrow
Account as provided in Section 2.1(b) in lieu of the SYS
Common Stock that would have been delivered to the Escrow Account
if such Ai Metrix Stockholder had received Merger Consideration in
the form of SYS Common Stock.
(a)
EBITDA Calculations
. “ EBITDA Period ”
shall mean the period commencing on the Closing Date and ending on
December 31, 2007. No later than forty-five (45) days following the
end of the EBITDA Period, SYS shall in good faith calculate,
prepare and deliver to the Stockholder Representative a statement
showing the earnings before interest, taxes, depreciation and
amortization, calculated in accordance with U.S. generally accepted
accounting principles (“ GAAP ”)
applied on a consistent basis during the periods involved,
generated by the Surviving Corporation
during the EBITDA Period (“ EBITDA ”),
and showing in reasonable detail the Earnout Consideration or
Clawback Consideration, as applicable, calculated in accordance
with Section 2.5(b) . The statement of calculations referred
to in this Section 2.5(a) shall be referred to herein as the
“ EBITDA Calculations .” Any products
of Ai Metrix sold during the EBITDA Period in conjunction with
products or services of other segments of SYS’s business
shall be taken into account in calculating EBITDA based on the
proportional value of such products or services. For the avoidance
of doubt, for the purpose of determining the EBITDA Calculations
only, (i) 90% of all deferred maintenance revenue booked by Ai
Metrix prior to the Closing that, but for the consummation of the
Merger and the application of purchase price accounting with
respect thereto, would otherwise have been recognized as revenue
during the EBITDA Period, shall be taken into account in
calculating EBITDA, (ii)
10% of all deferred maintenance revenue
booked by Ai Metrix during the last three months of the EBITDA
Period that have not, as of the end of the EBITDA Period, been
recognized as revenue shall constitute revenue for purposes of
calculating EBITDA to the extent that such bookings are reasonably
likely to be recognized during the 12-month period following the
later of (A) the date of booking such revenue and (B) the end of
the EBITDA Period, and (iii) software
license bookings received during the 45-day period following the
EBITDA Period that are invoiced and that can be recognized as
revenue during that 45-day period shall constitute revenue for
purposes of calculating EBITDA to the extent that such bookings are
reasonably likely to be collected upon the terms on which such
bookings were made. All Transaction Expenses (as defined in Section
5.3(e) below) shall be excluded from the calculation of EBITDA,
regardless of when incurred.
(b)
Earnout/Clawback
Consideration. If the
Surviving Corporation generates EBITDA in excess of US$2,500,000,
SYS shall issue to the Ai Metrix Stockholders (subject to
Sections 2.4(h) and 2.5(c) ) one additional share of
SYS Common Stock for each dollar of EBITDA over US$2,500,000, up to
a maximum of 1,950,000 shares of SYS Common Stock; provided that,
if for any reason, SYS is no longer a public company at the time
that such SYS Common Stock is to be issued due to a merger,
consolidation or other acquisition by another company, then,
instead of receiving SYS Common Stock as Earnout Consideration, the
Ai Metrix Stockholders shall receive shares or equity of such
successor entity of equivalent value (the “ Earnout
Consideration ”). The Earnout Consideration, if any,
shall be allocated among the Ai Metrix Stockholders in accordance
with the percentages set forth on Schedule 1 . If the
Surviving Corporation generates EBITDA of less than US$1,500,000
(the “ Clawback Threshold ”), the
Escrow Agent (i) shall return to SYS from the Clawback Escrow a
combination of shares of SYS Common Stock and cash in an amount
equal to one share of SYS Common Stock for each dollar of EBITDA
less than the Clawback Threshold, up to a maximum of the total
amount of the Clawback Escrow (the “ Clawback
Consideration ”) and (ii) the shares and cash
remaining in the Clawback Escrow after returning the Clawback
Consideration to SYS shall remain in the Escrow Account until
released in accordance with the Escrow Agreement. In the event that
the Clawback Threshold is not achieved solely due to the fact that
the Surviving Corporation is unable to recognize 100% of the
deferred maintenance revenues on Ai Metrix’s books as of the
Closing Date due to the requirements of GAAP purchase price
accounting, then, for the sole purpose of determining whether the
Clawback Threshold has been achieved, then such deferred
maintenance revenues shall be deemed to constitute revenue (for
this purpose only) to the extent not so recognized under Section
2.5(a) . The cash in the Clawback Escrow shall be deemed to
equal the number of shares of SYS Common Stock equal to a fraction,
the numerator of which is the amount of such cash and the
denominator is the average closing price of SYS Common Stock on the
principal national securities exchange or principal national
securities quotation system on which the SYS Common Stock is then
listed over the ten (10) consecutive trading days immediately
preceding the date of disbursement of any such cash in the Clawback
Escrow in accordance with this Agreement and the Escrow Agreement.
The Clawback Consideration, if any, shall be obtained from the
Escrow Account pro rata between SYS Common Stock and cash and
allocated among the Ai Metrix Stockholders (subject to Section
2.4(h) ) as set forth on Schedule 1 . If the Surviving
Corporation generates EBITDA between US$1,500,000 to US$2,500,000,
then neither Earnout Consideration nor Clawback Consideration shall
be payable hereunder, and the shares of SYS Common Stock and cash
constituting the Clawback Escrow shall remain in the Escrow Account
until released in accordance with the Escrow
Agreement.
(c)
Acceptance of Earnout
Calculations . If the
Stockholder Representative does not dispute the EBITDA
Calculations, it shall promptly, within thirty (30) days after
receipt of such calculations, notify SYS in writing thereof. The
date on which the Stockholder Representative so notifies SYS, or
the date on which the EBITDA Calculations are otherwise agreed
between SYS and the Stockholder Representative or otherwise
resolved pursuant to Section 2.5(d) , is referred to herein
as the “ EBITDA Determination Date .”
If any Earnout Consideration is required to be paid, SYS shall
convene the SYS Stockholders Meeting in accordance with Section
5.2(b) to seek the SYS Stockholder Approval (as defined below)
in accordance with the terms of the Voting Agreement. If SYS
obtains the SYS Stockholder Approval at the SYS Stockholders
Meeting, SYS shall (subject to Section 2.4(h) ) promptly,
within ten (10) business days after the SYS Stockholders Meeting,
issue to each Ai Metrix Stockholder his, her or its applicable
percentage of the Earnout Consideration. If, for any reason, SYS
does not obtain the SYS Stockholder Approval within one hundred
eighty (180) days after the EBITDA Determination Date, it shall
promptly, within ten (10) business days after the earlier of the
last day of such 180-day period and the date of the SYS
Stockholders Meeting at which the SYS Stockholder Approval is not
obtained, pay the Ai Metrix Stockholders an equivalent amount of
cash, where every one share of SYS Common Stock that constitutes
Earnout Consideration shall represent an amount in cash equal to
the average closing price of SYS Common Stock on the principal
national securities exchange or principal national securities
quotation system on which the SYS Common Stock is then listed over
the ten (10) consecutive trading days immediately preceding the
date of payment of such cash (the “ SYS Average
Earnout Price ”). If any Clawback Consideration is
required to be paid, SYS shall be entitled to obtain the requisite
shares of SYS Common Stock and cash from the Escrow Account and the
Stockholder Representative shall promptly take all actions and
execute and deliver all documents reasonably necessary to
facilitate the return of such shares of SYS Common Stock and cash
from the Clawback Escrow.
(d)
Dispute Resolution
. If the Stockholder Representative disagrees
with the EBITDA Calculations, it shall notify SYS of such
disagreement in writing, setting forth in reasonable detail the
particulars of such disagreement, within thirty (30) days after his
receipt of the EBITDA Calculations. If any such notice of
disagreement is timely provided, SYS and the Stockholder
Representative shall use commercially reasonable efforts for a
period of thirty (30) days to resolve any disagreement. If SYS and
the Stockholder Representative have been unable to resolve the
disagreement by the end of such period, Ernst & Young (the
“ Arbitrator ”), shall be retained to
make a determination on the matter in dispute. The determination of
the Arbitrator shall be final, binding and conclusive on the
parties and the appropriate payment shall be made by the parties
based upon the final determination of the Arbitrator. The fees and
expenses of the Arbitrator shall be borne equally by SYS, on the
one hand, and the Stockholder Representative, on behalf of the Ai
Metrix Stockholders, on the other hand. Each party shall pay its
own costs and expenses (including attorneys’ fees) incurred
in connection with any such disagreement. The date on which the
EBITDA Calculations are finally determined in accordance with this
Section 2.5(d) shall be deemed to be acceptance by the
Stockholder Representative for purposes of Section 2.5(c)
.
(e)
Conduct of Business During EBITDA
Period . SYS
acknowledges and agrees that the ability of the Surviving
Corporation to meet EBITDA objectives and the ability of the
parties to calculate fairly and measure the performance of the
Surviving Corporation relative to EBITDA objectives will depend to
a significant degree upon maintaining the business of Ai Metrix
(the “ Business ”) as a whole and as a
discrete operating unit. SYS and the Surviving Corporation (and any
acquirer of or successor to SYS or the Surviving Corporation
pursuant to a merger, consolidation or other acquisition by another
company) shall, after the Closing Date (i) act in good faith at all
times during the EBITDA Period, (ii) not fail to take any action
that would be required by reasonable, skillful, prudent and
diligent business persons engaged in the independent operation of a
business similar to the Business, and (iii) not take any action
that would be prejudicial or discriminatory to the Business, the
Surviving Corporation or the interests of the Ai Metrix
Stockholders in receiving the Earnout Consideration. Without
limiting the foregoing, during the EBITDA Period after the Closing
Date:
(i)
SYS shall act in good faith and, acting as a
reasonable, skillful, prudent and diligent person engaged in the
independent operation of a business similar to the Business, use
commercially reasonable efforts to enable the Surviving Corporation
to achieve the targets contemplated by this Agreement, including
providing the Surviving Corporation with sufficient liquidity and
working capital funds as required in SYS’s reasonable
business judgment for the operation of the
Business;
(ii)
SYS shall provide the Surviving
Corporation’s management team reasonable authority to
participate in the management and operation of the Business
throughout the EBITDA Period, including reasonable authority to
direct business strategy, pricing, sales and marketing during the
EBITDA Period in a manner consistent with the current plans of the
Business;
(iii)
SYS shall use reasonable efforts to retain the
services of the officers and key employees of the Business and to
maintain relationships with customers, suppliers, lessees,
licensees and other relevant third parties, to the extent
reasonably required for the operation of the
Business;
(iv)
SYS shall cause or permit the Surviving
Corporation to engage in the Business and such other and further
business lines as the Surviving Corporation’s management team
may from time to time determine, subject in the case of additional
business lines to SYS’s prior approval (not to be
unreasonably withheld or delayed);
(v)
Except as required or appropriate in SYS’s
reasonable business judgment, SYS shall not sell, abandon, lease,
assign, transfer, license or otherwise dispose of any of the assets
of the Business, or amend, modify or provide for the early
termination of any material agreement or license to which the
Surviving Corporation is a party, if any of the foregoing would
reasonably be expected to have a material adverse effect on the
Business, the financial condition of the Surviving Corporation, its
assets or properties, or the likelihood of the Ai Metrix
Stockholders receiving the maximum Earnout Consideration otherwise
attainable in the circumstances then prevailing;
(vi)
Neither the Surviving Corporation nor the
Business shall be wound up, dissolved, or merged, amalgamated, or
otherwise reorganized in such a manner that either the Surviving
Corporation or the Business is no longer readily identifiable as a
discrete business entity;
(vii)
Separate books and records will be maintained
related to the Surviving Corporation and the Business sufficient to
allow independent verification of the results of operations of the
Surviving Corporation throughout the EBITDA Period, including for
purposes of calculating EBITDA; and
(viii)
For purposes of the EBITDA Calculations, SYS
shall allocate to the Surviving Corporation or the Business
corporate overhead charges not to exceed the same ratio that
general and administrative charges incurred by Ai Metrix during the
first nine (9) months of fiscal year 2006 had to net revenue
recorded by Ai Metrix during such period.
(a)
Escrow Agreement . On or
prior to the Closing Date, SYS and the Stockholder Representative
shall establish an escrow account (the “ Escrow
Account ”) at Union Bank of California, N.A., by the
execution and delivery of an Escrow Agreement substantially in the
form attached as Exhibit C hereto (the “
Escrow Agreement ”). The Escrow Account shall
contain the shares of SYS Common Stock and cash representing the
Indemnity Escrow and the shares of SYS Common Stock and cash
representing the Clawback Escrow.
(b)
Deposit of Escrow
Consideration . As
soon as practicable after the Effective Time, but no later than the
Payment Deadline, SYS shall deliver the Escrow Consideration to the
Escrow Agent (as defined in the Escrow Agreement), for immediate
deposit into the Escrow Account.
(c)
Disbursement of Escrow
Consideration . (i)
The Clawback Consideration deposited in the Escrow Account shall be
available, in accordance with this Agreement and the Escrow
Agreement, to provide recourse for SYS for any Clawback
Consideration and for any breach of the representations,
warranties, covenants and agreements of Ai Metrix in the manner
provided in Article IX hereof, and (ii) the Indemnity
Escrow deposited in the Escrow Account shall be available, in
accordance with this Agreement and the Escrow Agreement, to provide
recourse for SYS for any breach of the representations, warranties,
covenants and agreements of Ai Metrix in the manner provided in
Article IX hereof, and shall be paid to the Ai Metrix
Stockholders or returned to SYS only in accordance with and subject
to the terms and conditions set forth herein and in the Escrow
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SYS AND MERGER
SUB
In order
to induce Ai Metrix and the Majority Stockholders to enter into
this Agreement, SYS and Merger Sub, jointly and severally, hereby
represent and warrant to Ai Metrix and the Ai Metrix Stockholders
that the statements contained in this Article III are
true, correct and complete, except as otherwise expressly set forth
in this Article III as of the date hereof and as of the
Closing Date unless another date is expressly stated
below.
3.1
Organization and
Standing.
(a)
Each of SYS, Merger Sub and each other
subsidiary of SYS is a corporation duly organized, validly existing
and, where applicable, in good standing under the laws of its state
of incorporation with corporate power and authority to own, lease,
use and operate its properties and to conduct its business as and
where now owned, leased, used, operated and
conducted.
(b)
Each of SYS, Merger Sub and each other
subsidiary of SYS is duly qualified to do business and in good
standing in each jurisdiction in which the nature of the business
conducted by it or the property it owns, leases or operates,
requires it to so qualify, except where the failure to be so
qualified or in good standing in such jurisdiction would not have a
Material Adverse Effect (as defined below) on SYS and its
subsidiaries, taken as a whole. SYS is not in default in the
performance, observance or fulfillment of any provision of the SYS
Articles of Incorporation, as amended (the “ SYS
Articles ”), or the SYS Amended and Restated Bylaws,
as amended, as in effect on the date hereof (the “ SYS
Bylaws ”), and Merger Sub and each other subsidiary
of SYS is not in default in the performance, observance or
fulfillment of any provisions of its Certificate of Incorporation
or Bylaws. SYS has heretofore furnished to the Ai Metrix
Stockholders complete and correct copies of the SYS Articles and
the SYS Bylaws, the Merger Sub Certificate and Merger Sub Bylaws
and the governing documents of each other subsidiary of
SYS.
3.2
Corporate Power and
Authority. Each of
SYS and Merger Sub has all requisite corporate power and authority
to enter into and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby by SYS and Merger Sub have been duly authorized by all
necessary corporate action on the part of each of SYS and Merger
Sub, other than as provided in Section 3.8 . This Agreement
has been duly executed and delivered by each of SYS and Merger Sub
and constitutes the legal, valid and binding obligation of each of
SYS and Merger Sub enforceable against each of them in accordance
with its terms, except to the extent that such enforceability may
be subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of
creditors’ rights generally or by general equitable
principles.
3.3
Conflicts; Consents and
Approvals. Neither
the execution and delivery of this Agreement by SYS and Merger Sub
nor the consummation of the transactions contemplated hereby
will:
(a)
conflict with, or result in a breach of any
provision of, the SYS Articles or the SYS Bylaws, the Merger Sub
Certificate or the Merger Sub Bylaws or the governing documents of
any other subsidiary of SYS;
(b)
except as set forth in Section 3.3(b) of
the SYS Disclosure Schedule, materially violate, or conflict with,
or result in a material breach of any provision of, or constitute a
material default (or an event that, with the giving of notice, the
passage of time or otherwise, would constitute a default) under, or
entitle any party (with the giving of notice, the passage of time
or otherwise) to terminate, accelerate, modify or call a material
default under, or result in the creation of any material
Encumbrance (as defined below) upon any of the properties or assets
of SYS or any of its subsidiaries under, any of the terms,
conditions or provisions of any material note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which SYS or
any of its subsidiaries is a party (for purposes of this Agreement,
“ Encumbrance ” means any charge,
claim, mortgage, servitude, easement, right of way, equitable
interest, lease or other possessory interest, conditional sale or
other title retention arrangement, lien, pledge, security interest,
preference, priority, right of first refusal or similar
restriction);
(c)
materially violate any (i) order, writ,
injunction, decree, statute, ruling, assessment, or arbitration or
award of any Governmental Authority or (ii) Applicable Laws
relating to SYS or any of its subsidiaries or their respective
properties or assets; or
(d)
require any action or consent or approval of, or
review by, or registration or filing by SYS or any of its
affiliates with, any third party or any Governmental Authority,
other than (i) registrations or other actions required under
federal and state securities laws or the rules and regulations of
the national securities exchange or national securities quotation
system on which the SYS Common Stock is then listed, and (ii) the
filing of the Certificate of Merger with the Delaware Secretary of
State. Based on the representations and warranties made by Ai
Metrix hereunder and assuming that each Closing Stockholder
executes and delivers to SYS prior to the Closing an Investment
Representation Certificate in the form attached hereto as
Exhibit B , no registration of the SYS Common Stock to be
issued as Merger Consideration hereunder is required under federal
or state securities laws.
3.4
Actions. Except
as set forth in Section 3.4 of the SYS Disclosure Schedule,
there are no material Actions pending or, to the knowledge of SYS,
threatened against SYS or Merger Sub, including any Action which
questions the validity of this Agreement or the Merger or any
action taken or to be taken pursuant hereto or pursuant to the
Merger, or relating to its method of doing business or its
relationship with past or existing users or purchasers of any goods
or services, and there is no outstanding order, writ, injunction or
decree of any Governmental Authority against SYS or Merger Sub. For
purposes of this Agreement, “ Action ”
means any action, arbitration, audit, examination, suit,
proceeding, hearing or litigation, whether formal or informal, and
whether public or private, commenced, brought, conducted or heard
by or before any court or Governmental Authority.
3.5
Financial Ability.
At the Effective Time, SYS will have a
sufficient number of shares of SYS Common Stock and sufficient cash
funds to pay the Merger Consideration, any cash in lieu of
fractional shares and all related fees and expenses of
SYS.
3.6
Capitalization of SYS.
(a)
The authorized capital stock of SYS consists of
48,000,000 common shares (the “ SYS Common
Stock ”), 250,000 preferred shares (the “
SYS Preferred Stock ”), and 2,000,000
preference shares (the “ SYS Preference Stock
”). At October 16, 2006, (i) 15,455,805 shares of SYS
Common Stock were issued and outstanding, (ii) 6,249,582
shares of SYS Common Stock were reserved for issuance upon the
exercise or conversion of options, warrants or convertible
securities granted or issuable by SYS, including pursuant to
SYS’s stock option and stock purchase plans, (iii) no
shares of SYS Preferred Stock were issued and outstanding, and
(iv) no shares of SYS Preference Stock were issued and
outstanding. The SYS Common Stock, the SYS Preferred Stock, and the
SYS Preference Stock are referred to herein collectively as the
“ SYS Capital Stock .” Each outstanding
share of SYS Capital Stock is duly authorized and validly issued,
fully paid and nonassessable and has not been issued in violation
of any preemptive or similar rights. The issuance and sale of all
of the shares of SYS Capital Stock described in this
Section 3.6 have been in compliance in all material
respects with applicable federal and state securities
laws.
(b)
At October 16, 2006, other than as set forth in
clause (a)(ii) above or as set forth in Section
3.6(b) of the SYS Disclosure Schedule, there are no outstanding
subscriptions, options, warrants, puts, calls, agreements,
understandings, claims or other commitments or rights of any type
relating to the issuance, sale, repurchase or transfer by SYS of
any securities of SYS, nor are there outstanding any securities
which are convertible into or exchangeable for any shares of SYS
Capital Stock, and SYS has no obligation of any kind to issue any
additional securities or to pay for or repurchase any securities of
SYS or any predecessor.
(c)
The shares of SYS Common Stock to be issued at
the Effective Time have been duly authorized and will, at the
Effective Time, be fully paid and nonassessable and issued in
reliance on exceptions from the registration and qualification
requirements of federal and state securities laws. The Escrow
Consideration has been duly authorized and will, if issued pursuant
to this Agreement, be fully paid and nonassessable and issued in
reliance on exceptions from the registration and qualification
requirements of federal and state securities
laws.
(d)
The transactions contemplated by this Agreement,
including without limitation, the issuance of SYS Common Stock and
the ownership of the SYS Common Stock by the Ai Metrix
Stockholders, will not create any obligation by SYS to sell or
otherwise issue any shares of SYS Common Stock or any other
securities, or otherwise cause the application of, any control
share acquisition, shareholder approval requirement (other than the
SYS Stockholder Approval), poison pill (including any distribution
under a rights agreement) or other similar anti-takeover provision
under the SYS Articles or the laws of the state of its
incorporation or other Applicable Law.
3.7
Brokerage and Finders’
Fees. Other
than USBX Advisory Services, LLC, whose fees will be paid by SYS,
neither SYS nor any stockholder, director, officer or employee
thereof has incurred or will incur on behalf of SYS or any of its
affiliates, any brokerage, finders’ or similar fee in
connection with the transactions contemplated by this
Agreement.
3.8
Board Recommendation; Required
Vote. The
Board of Directors of SYS, at a meeting duly called and held, has
by the requisite vote of those directors present and constituting a
quorum of the directors then in office (a) determined that this
Agreement and the transactions contemplated hereby, including the
Merger, are fair to and in the best interests of SYS and its
stockholders, and (b) resolved to recommend that the
stockholders of SYS vote for approval of the issuance of SYS Common
Stock in payment of the Earnout Consideration, if such payment is
required under Section 2.5 and if such approval is required
by the rules and regulations of the national securities exchange or
national securities quotation system on which the SYS Common Stock
is then listed. The affirmative vote of a majority of the total
votes cast by the holders of SYS Common Stock, excluding any such
holders who received SYS Common Stock in connection with the
transactions contemplated by this Agreement, in favor of the
issuance of SYS Common Stock as Earnout Consideration, if any, is
the only vote of the SYS stockholders necessary to approve the
issuance of the Earnout Consideration (the “ SYS
Stockholder Approval ”). No vote or approval of the
holders of SYS Capital Stock is necessary for SYS to issue the
Merger Consideration.
(a)
Except as set forth in Section 3.9(a) of
the SYS Disclosure Schedule, SYS has timely filed with the U.S.
Securities and Exchange Commission (the “
Commission ”) all forms, reports, schedules,
statements and other documents (including exhibits and other
information incorporated therein) required to be filed by it since
July 1, 2004 under the Securities Act of 1933, as amended (the
“ Securities Act ”), or the Securities
Exchange Act of 1934, as amended (the “ Exchange
Act ”) (such documents, as supplemented and amended
since the time of filing, collectively, the “ SYS SEC
Documents ”). No subsidiary of SYS is required to
file any form, report, registration statement, prospectus or other
document with the Commission.
(b)
The SYS SEC Documents, including any financial
statements or schedules included in the SYS SEC Documents, at the
time filed (and, in the case of registration statements and proxy
statements, on the dates of effectiveness and the dates of mailing,
respectively and, in the case of any SYS SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on
the date of such amending or superseding filing): (i) did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) complied in all
material respects with the applicable requirements of the Exchange
Act and the Securities Act, as the case may be.
(c)
The financial statements of SYS (including the
related notes) included in the SYS SEC Documents at the time filed
(and, in the case of registration statements and proxy statements,
on the dates of effectiveness and the dates of mailing,
respectively, and, in the case of any SYS SEC Document amended or
superseded by a filing prior to the date of this Agreement, then on
the date of such amending or superseding filing) complied in all
material respects with applicable accounting requirements and with
the published rules and regulations of the Commission with respect
thereto, were prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q or Form 10-QSB of the
Commission), and fairly present (subject, in the case of unaudited
statements, to normal, recurring audit adjustments not material in
amount) in all material respects the consolidated financial
position of SYS and its consolidated subsidiaries as at the dates
thereof and the consolidated results of their operations and cash
flows for the periods then ended.
3.10
Undisclosed Liabilities
. As of the date of this Agreement, neither SYS
nor Merger Sub has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that,
individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect on SYS and its subsidiaries, taken
as a whole, other than (a) liabilities disclosed on SYS’s
consolidated financial statements or in the notes thereto, (b)
liabilities contemplated by this Agreement and/or set forth in the
SYS Disclosure Schedule, and (c) liabilities incurred or accrued
after the date hereof in the ordinary course of business consistent
with past practice.
3.11
No Other Warranties
. There are no representations or warranties
made by the Ai Metrix Stockholders and no representations or
warranties made by Ai Metrix, other than the representations and
warranties set forth in Article IV and in the other documents and
instruments delivered by Ai Metrix on the date hereof or at the
Closing. SYS and Merger Sub are not relying upon any
representations or warranties, other than the representations and
warranties set forth in Article IV of this Agreement and in the
other documents and instruments delivered by Ai Metrix on the date
hereof or at the Closing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF AI
METRIX
In order
to induce SYS to enter into this Agreement, Ai Metrix hereby
represents and warrants to SYS and Merger Sub that the statements
contained in this Article IV are true, correct and
complete, except as otherwise expressly set forth in this
Article IV , as of the date hereof and as of the
Closing Date unless another date is expressly stated below or in
the Ai Metrix Disclosure Schedule.
4.1
Organization and
Standing.
(a)
Ai Metrix is a corporation duly organized and
validly existing under the laws of the State of Delaware with full
corporate power and authority to own, lease, use and operate its
properties and to conduct its business as and where now owned,
leased, used, operated and conducted.
(b)
Ai Metrix is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the
nature of the business conducted by it or the property it owns,
leases, uses, or operates requires it to so qualify, except where
the failure to be so qualified or in good standing in such
jurisdiction would not have a Material Adverse Effect on Ai Metrix.
Ai Metrix is not in default in the performance, observance or
fulfillment of any provision of its Certificate of Incorporation
(the “ Ai Metrix Certificate ”) or its
Bylaws (the “ Ai Metrix Bylaws ”), as
in effect on the date hereof. Ai Metrix has previously furnished to
SYS complete and correct copies of the Ai Metrix Certificate and
the Ai Metrix Bylaws, each as in effect on the date hereof. Listed
in Section 4.1 of the Ai Metrix Disclosure Schedule is
each jurisdiction in which Ai Metrix is qualified or licensed to do
business and whether Ai Metrix is in good standing in each
applicable jurisdiction as of the date of this
Agreement.
4.2
Subsidiaries. Ai
Metrix does not own, directly or indirectly, any equity or other
ownership interest in any corporation, partnership, joint venture
or other entity or enterprise. Ai Metrix is not subject to any
obligation or requirement to provide funds to or make any
investment (in the form of a loan, capital contribution or
otherwise) in any person.
4.3
Corporate Power and
Authority. Ai
Metrix has all requisite corporate power and authority to enter
into and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by Ai Metrix
have been duly authorized by all necessary corporate action on the
part of Ai Metrix, including all requisite approvals of its Board
of Directors and the holders of the Ai Metrix Capital Stock. This
Agreement has been duly executed and delivered by Ai Metrix and
constitutes the legal, valid and binding obligation of Ai Metrix,
enforceable against Ai Metrix in accordance with its terms, except
to the extent that such enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors’ rights generally or
by general equitable principles.
4.4
Capitalization of Ai
Metrix.
(a)
The authorized capital stock of Ai Metrix
consists of 17,353,900 common shares (the “ Ai Metrix
Common Stock ”) and 16,213,403 preferred shares (the
“ Ai Metrix Preferred Stock ”). At the
date of this Agreement, (i) 2,022,328 shares of Ai Metrix
Common Stock are issued and outstanding and (ii) 14,183,403
shares of Ai Metrix Preferred Stock designated Series C
Preferred Stock are issued and outstanding. The Ai Metrix Common
Stock and the Ai Metrix Preferred Stock are referred to herein
collectively as the “ Ai Metrix Capital Stock
. ” Each outstanding share of Ai Metrix Capital Stock is
duly authorized and validly issued, fully paid and nonassessable,
and has not been issued in violation of any preemptive or similar
rights. The issuance and sale of all of the shares of Ai Metrix
Capital Stock described in this Section 4.4 have been in
compliance in all material respects with applicable federal and
state securities laws.
(b)
As of the date hereof, other than as set forth
in clause (a)(ii) above or as set forth in Section
4.4(b) of the Ai Metrix Disclosure Schedule, there are no
outstanding subscriptions, options, warrants, puts, calls,
agreements, understandings, claims or other commitments or rights
of any type relating to the issuance, sale, repurchase or transfer
by Ai Metrix of any securities of Ai Metrix, nor are there
outstanding any securities which are convertible into or
exchangeable for any shares of Ai Metrix Capital Stock, and Ai
Metrix has no obligation of any kind to issue any additional
securities or to pay for or repurchase any securities of Ai Metrix
or any predecessor. Set forth in Section 4.4 of the Ai
Metrix Disclosure Schedule is an accurate and complete list of the
names of all holders of Ai Metrix Capital Stock, and the number and
class of shares held by each such Ai Metrix Stockholder. Set forth
in Section 4.4 of the Ai Metrix Disclosure Schedule is
an accurate and complete list of the names of all holders of
options, warrants or convertible instruments to purchase Ai Metrix
Capital Stock, the number of shares issuable to each such holder
upon exercise of such option or warrant, and the exercise price and
vesting schedule with respect thereto.
(c)
Ai Metrix has not agreed to register any
securities of Ai Metrix under the Securities Act or under any
applicable securities law or granted registration rights to any
person or entity (other than agreements with respect to
registration rights that are no longer in effect as of the date of
this Agreement); complete and correct copies of all such agreements
have previously been provided to SYS.
4.5
Conflicts; Consents and
Approvals. Except
as set forth on Section 4.5 of the Ai Metrix Disclosure
Schedule, neither the execution and delivery of this Agreement by
Ai Metrix, nor the consummation of the transactions contemplated
hereby, will:
(a)
conflict with, or result in a breach of any
provision of, the Ai Metrix Certificate or the Ai Metrix
Bylaws;
(b)
materially violate or conflict with, or result
in a material breach of any provision of, or constitute a material
default (or an event that, with the giving of notice, the passage
of time or otherwise, would constitute a default) under, or entitle
any party (with the giving of notice, the passage of time or
otherwise) to terminate, accelerate, modify or call a default
under, or result in the creation of any material Encumbrance upon
any of the properties or assets of Ai Metrix under, any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, deed of trust, license, contract, undertaking,
agreement, lease or other instrument or obligation to which Ai
Metrix is a party, including without limitation, any Contract (as
defined below);
(c)
materially violate any (i) order, writ,
injunction, decree, ruling, assessment, arbitration, or award of
any Governmental Authority or arbitrator or (ii) Applicable
Laws relating to Ai Metrix or any of its properties or assets;
or
(d)
require any action or consent or approval of, or
review by, or registration or filing by Ai Metrix or any of its
affiliates with, any third party or any Governmental Authority,
other than (i) registrations or other actions required under
federal and state securities laws and (ii) the filing of the
Certificate of Merger with the Delaware Secretary of
State.
4.6
Brokerage and Finders’
Fees. Other
than C.E. Unterberg, Towbin, whose fees will be paid by Ai Metrix
prior to the Closing Date, neither Ai Metrix nor any stockholder,
director, officer or employee thereof has incurred or will incur on
behalf of Ai Metrix any brokerage, finders’ or similar fee in
connection with the transactions contemplated by this
Agreement.
4.7
Books and Records; Financial
Statements.
(a)
From its date of incorporation, the minute
books, stock books and stock ledgers of Ai Metrix (the “
Books of Account ”) have been maintained, in
all material respects, in accordance with Applicable Law. The
signatures of Ai Metrix personnel appearing on all documents
contained in such Books of Account are the true signatures of the
persons purporting to have signed the same, and complete and
correct copies in all material respects of such Books of Account
have been provided to SYS.
(b)
Attached to Section 4.7(b) of the Ai
Metrix Disclosure Schedule, as previously delivered to SYS, are
complete and correct copies of (i) the audited balance sheets
of Ai Metrix as of December 31, 2004 and December 31, 2005, the
related statements of income for the three (3) years then ended,
and the related sources and uses of cash for the 12-month periods
then ended, and (ii) the unaudited balance sheet of Ai Metrix
as of September 30, 2006, and the related statements of income and
sources and uses of cash for the nine (9)-month period then ended
and (collectively, the “ Ai Metrix Financial
Statements ”). The Ai Metrix Financial Statements
(including the related notes) were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present
(subject, in the case of unaudited statements, to normal, recurring
audit adjustments not material in amount and to the absence of
footnotes) in all material respects the consolidated financial
position of Ai Metrix and its consolidated subsidiaries as at the
dates thereof and the consolidated results of their operations and
cash flows for the periods then ended.
(c)
Attached to Section 4.7(c) of the Ai
Metrix Disclosure Schedule is a pro forma estimated unaudited
balance sheet of Ai Metrix as of the Closing Date (the “
Closing Date Balance Sheet ”). Except as
otherwise disclosed on Section 4.7(c) of the Ai Metrix
Disclosure Schedule, the Closing Date Balance Sheet was prepared by
Ai Metrix in good faith in accordance with GAAP applied on a
consistent basis and, to the best of Ai Metrix’s knowledge,
fairly presents in all material respects the consolidated financial
position of Ai Metrix and its consolidated subsidiaries as of the
Closing Date. The Closing Date Balance Sheet sets forth Ai
Metrix’s good faith estimate of Ai Metrix’s costs and
expenses incurred in connection with the transactions contemplated
hereby.
4.8
Compliance with Law.
Except with respect to Applicable Laws discussed
elsewhere in this Article IV including, without
limitation, those relating to Taxes (as set forth in
Section 4.11 ), employee benefit plans (as set forth in
Section 4.14 ), labor matters (as set forth in
Section 4.16 ), Permits (as set forth in Section 4.19 ),
Environmental Laws (as set forth in Section 4.21 ),
product warranties (as set forth in Section 4.24 ),
Data Protection Laws (as set forth in Section 4.25 )
and the Foreign Corrupt Practices Act (as set forth in
Section 4.26 ), Ai Metrix is in compliance, in all
material respects, and at all times since January 1, 2004 has been
in compliance, in all material respects, with all Applicable Laws
relating to Ai Metrix or its businesses or properties. Ai Metrix
has received no written notice of any pending investigation or
review by any Governmental Authority with respect to Ai Metrix, and
to the knowledge of Ai Metrix, no such investigation or review is
threatened, nor has any Governmental Authority indicated an
intention to conduct the same.
4.9
Actions.
Except as set forth in
Section 4.9 of the Ai Metrix Disclosure
Schedule, there are no material Actions pending or, to the
knowledge of Ai Metrix, threatened against Ai Metrix, including any
Action which questions the validity of this Agreement or the Merger
or any action taken or to be taken pursuant hereto or pursuant to
the Merger, or relating to its method of doing business or its
relationship with users or purchasers of any goods or services, and
there is no outstanding order, writ, injunction or decree of any
Governmental Authority against Ai Metrix.
4.10
No Material Adverse
Change. Since June 30,
2006, there has been no Material Adverse Effect (as defined in
Section 10.2(b) ) on Ai Metrix.
(i) Ai Metrix has filed all Tax Returns (as defined
below) (including, but not limited to, those filed on a
consolidated, combined or unitary basis) required to have been
filed by Ai Metrix prior to the date hereof;
(ii) All such Tax Returns referred to in
clause (a)(i) above were true and correct in all material
respects and Ai Metrix has paid or, prior to the Effective Time,
will pay within the time and manner prescribed by Applicable Law,
all Taxes, interest and penalties required to be paid in respect of
the periods covered by such Tax Returns due to any federal, state,
foreign, local or other Tax authority;
(iii) Ai Metrix has and will have no liability for
Taxes due or accruing on or prior to the Closing Date that is in
excess of the amount reserved on the Ai Metrix Financial Statements
therefor;
(iv) Ai Metrix has not requested or filed any
document having the effect of causing any extension of time within
which to file any returns in respect of any fiscal year which have
not since been filed;
(v) Ai Metrix has not received written notice of any
currently due and payable deficiency for any Tax from any Tax
authority;
(vi) Ai Metrix has not received written notice that
it is the subject of any currently ongoing Tax audit;
(vii) As of the date of this Agreement, Ai Metrix has
not received written notice from any Tax authority of any pending
requests for waivers of the time to assess any Tax, other than
those made in the ordinary course and for which payment has been
made;
(viii) Ai Metrix has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency;
(ix) There are no recorded Encumbrances with respect
to Taxes upon any of the properties or assets, real or personal,
tangible or intangible of Ai Metrix (other than liens for Taxes not
yet due and/or delinquent);
(x) No written claim has ever been received by Ai
Metrix from a Governmental Authority in a jurisdiction where Ai
Metrix files Tax Returns that Ai Metrix is or may be subject to
taxation by that jurisdiction;
(xi) Neither Ai Metrix nor any predecessor is or was
on or prior to the Closing Date a member of any affiliated,
consolidated, combined or unitary tax group; and
(xii) Ai Metrix has retained and will retain through
the Closing Date all relevant books and records with respect to Tax
matters pertinent to Ai Metrix relating to any taxable period
beginning before the Closing Date until the expiration of the
statute of limitations of the respective taxable periods, and has
abided by all record retention agreements entered into with any
taxing authority.
(b) Ai Metrix is not obligated by any Contract or
other arrangement to indemnify any other person with respect to
Taxes. Ai Metrix is not now, and during the past six (6) years has
not been, a party to or bound by any agreement or arrangement
(whether or not written and including, without limitation, any
arrangement required or permitted by law) binding Ai Metrix that
(i) requires Ai Metrix to make any Tax payment to or for the
account of any other person, (ii) affords any other person the
benefit of any net operating loss, net capital loss, investment Tax
credit, foreign Tax credit, charitable deduction or any other
credit or Tax attribute which could reduce Taxes (including,
without limitation, deductions and credits related to alternative
minimum Taxes) of Ai Metrix, or (iii) requires or permits the
transfer or assignment of income, revenues, receipts or gains to Ai
Metrix, from any other person.
(c) Ai Metrix has withheld and paid over all Taxes
required to have been withheld and paid over in connection with
amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party.
(d) Ai Metrix has not agreed to make, or has
received any written notice from the Internal Revenue Service
proposing that Ai Metrix make, any adjustments pursuant to Sections
263A or 481(a) of the Code or any similar provision of state, local
or foreign law by reason of a change in accounting method initiated
by Ai Metrix, and Ai Metrix has no application pending with any
Governmental Authority requesting permission for any changes in
accounting methods that relate to the business or operations of Ai
Metrix.
(e) Ai Metrix has not requested any private letter
ruling of the Internal Revenue Service or comparable ruling of
other Governmental Authorities.
(f) The Tax Returns of Ai Metrix for the years ended
December 31, 2004 and December 31, 2005, complete and correct
copies of which have been provided to SYS prior to the date hereof,
list all deductions giving rise to any current-year Tax loss set
forth on the applicable Tax Returns and the amount of each such Tax
loss in each jurisdiction.
(g) Except for the group for which Ai Metrix is
presently a member, if any, Ai Metrix has never been a member of an
affiliated group of corporations, within the meaning of
Section 1504 of the Code, other than as a common parent
corporation, within the meaning of Section 1504 of the Code
(or any similar provision of state or local law), except where Ai
Metrix was the common parent corporation of such affiliated
group.
(h) Ai Metrix has no liability for the Taxes of any
person other than any of Ai Metrix under Regulation
Section 1.1502-6 (or any similar provision of state, local or
foreign law), as a transferee or successor, by contract or
otherwise.
(i) All elections with respect to the Tax Returns
are reflected in the Tax Returns.
(j) Ai Metrix is not and has not been a United
States real property holding corporation (as defined in
section 897(c)(2) of the Code) during the applicable period
specified in section 897(c)(1)(A)(ii) of the
Code.
(k) Ai Metrix is not and has not been a party to any
joint venture, partnership, or other agreement that would be
treated as a partnership for U.S. federal income tax
purposes.
(l) Ai Metrix has not participated in an
international boycott as defined in Section 999 of the Code
(or any similar provision of state, local or foreign
law).
(m) Ai Metrix is not a party to any agreement,
contract, arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any “excess
parachute payment” within the meaning of Code Section 280G
(or any corresponding provision of state, local or foreign
law).
(n) Ai Metrix is not a party to or bound by any tax
allocation or sharing agreement.
(o) Ai Metrix will not be required to include any
item of income in, or exclude any item of deduction from, taxable
income for any taxable period (or portion thereof) ending after the
Closing Date as a result of any:
(i) “ Closing Agreement
” as described in Code Section 7121 (or any corresponding or
similar provision of state, local or foreign law) executed on or
prior to the Closing Date;
(ii) Intercompany transactions or any excess loss
account described in Treasury Regulations under Code Section 1502
(or any corresponding or similar provision of state, local or
foreign law);
(iii) Installment sale or open transaction disposition
made on or prior to the Closing Date; or
(iv) Prepaid amount received on or prior to the
Closing Date.
(p) Ai Metrix has not distributed stock of another
corporation, or has had its stock distributed by another
corporation, in a transaction that was purported or intended to be
governed in whole or in part by Code Section 355.
(q) As used in this Agreement, “ Tax
Returns ” means all federal, state, local and
foreign Tax returns, declarations, schedules, information returns,
reports and forms, and any amendments to any of the foregoing
relating to Taxes, required to be filed with any Governmental
Authority responsible for the imposition or collection of
Taxes.
(r) As used in this Agreement, “
Tax ” or “ Taxes
” means any federal, state, county, local or foreign taxes,
charges, fees, levies or other assessments, including all net
income, gross income, premium, sales and use, ad valorem, transfer,
gains, profit, windfall profits, excise, franchise, real and
personal property, gross receipts, capital stock, production,
business and occupation, employment, disability, payroll, license,
estimated, customs duties, severance or withholding taxes, other
taxes or similar charges of any kind imposed by a Governmental
Authority and includes any interest and penalties (civil or
criminal) on or additions to any such taxes or in respect of a
failure to comply with any requirement relating to any Tax Return
and any expenses incurred in connection with the determination,
settlement or litigation of any tax liability.
4.12
Intellectual
Property.
(a) Set forth in Section 4.12 of the Ai
Metrix Disclosure Schedule is an accurate and complete list of
(i) all foreign and domestic patents, patent applications,
invention disclosures, trademarks, service marks, trade names,
internet domain names (and any registrations or applications for
registration for any of the foregoing trademarks, service marks,
trade names and internet domain names) and all copyright
applications and registrations and all other material Intellectual
Property rights owned or used by Ai Metrix, and (ii) other
than as set forth in Section 4.15 of the Ai Metrix
Disclosure Schedule, all non-customer agreements to which Ai Metrix
is a party which concern any of its Intellectual
Property.
(b) With regard to Intellectual Property:
(i) Ai Metrix owns, free and clear of any
Encumbrances, or has sufficient rights to, the Intellectual
Property;
(ii) No written claim of invalidity or ownership with
respect to the Intellectual Property has been received by Ai Metrix
from any third party and no Intellectual Property is the subject of
any pending or, to the knowledge of Ai Metrix, threatened
Action;
(iii) No person or entity has asserted that, with
respect to any Intellectual Property, Ai Metrix or any licensee of
Ai Metrix is infringing or has infringed any domestic or foreign
patent, trademark, service mark, trade name, or copyright or design
right, or has misappropriated or improperly used or disclosed any
trade secret, confidential information or know-how;
(iv) All fees, annuities, royalties, honoraria and
other payments which are due from Ai Metrix on or before the date
of this Agreement for any of the Intellectual Property or under any
agreement related to the Intellectual Property have been paid or
reserved for on the Ai Metrix Financial Statements;
(v) Except as limited by the terms of any license
relating thereto, the making, using, selling, manufacturing,
marketing, licensing, reproduction, distribution, disposal,
modification, display, transmission or publishing of any process,
machine, manufacture, composition of matter, or material related to
any part of the Intellectual Property, does not infringe in any
mate
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