AGREEMENT AND PLAN OF MERGER

 

TABLE OF CONTENTS

		Page
	ARTICLE I
	DEFINED TERMS
1.1	Definitions	2
1.2	List of Defined Terms	15
	ARTICLE II
	THE MERGER
2.1	Merger	16
2.2	Effective Time	17
2.3	Effects of the Merger	17
2.4	Certificate of Incorporation and Bylaws	17
2.5	Directors and Officers	17
2.6	Conversion of Outstanding Shares	17
2.7	Treatment of Options	18
2.8	Dissenters’ Rights	18
2.9	Closing of Transfer Books	19
2.10	Payments	19
2.11	Closing Adjustment Amount	22
2.12	Final Adjustment Amount	22
2.13	Post-Closing Employee Retention Payments	24
2.14	Earnout	24
2.15	Escrow	26
2.16	Representative Holdback	27
2.17	Gilmore Escrow Amount	27
2.18	Mexico Lawsuit Escrow Amount	28
	ARTICLE III
	REPRESENTATIONS AND WARRANTIES
3.1	Representations and Warranties of the Company	29
3.2	Representations and Warranties of Parent and Merger Subsidiary	52
3.3	Representations and Warranties of Representative	54
	ARTICLE IV
	COVENANTS OF THE COMPANY
4.1	Company Transaction Costs	56
4.2	Pay-Off Letters	56
4.3	Stockholder Written Consent	56
4.4	Communications With Securityholders	56

 

i

 

 

4.5	Organizational Conflicts of Interest	56
	ARTICLE V
	COVENANTS OF PARENT AND MERGER SUBSIDIARY
5.1	Employee Matters	57
5.2	Access to Information	58
5.3	Indemnification of Directors and Officers	58
5.4	WARN Act	59
	ARTICLE VI
	MUTUAL COVENANTS
6.1	Investigation and Agreement by Parent and Merger Subsidiary; No Other Representations or Warranties	59
6.2	Waiver	60
6.3	U.S. Export Controls	61
6.4	Cooperation on Tax Matters	61
6.5	Certain Taxes	61
	ARTICLE VII
	CLOSING
7.1	Closing	62
7.2	Actions to Occur at Closing	62
	ARTICLE VIII
	INDEMNIFICATION
8.1	Survival of Representations, Warranties and Agreements	64
8.2	Indemnification of the Parent Indemnified Persons	64
8.3	Indemnification of the Securityholder Indemnified Persons	65
8.4	Limitations	66
8.5	Third-Party Claims	67
8.6	Direct Claims	69
8.7	Other Claims; Mitigation	69
8.8	Exceptions for Fundamental Representations, Fraud and Tax Claims; Joint Liability of Eos Securityholders	70
	ARTICLE IX
	GENERAL PROVISIONS
9.1	Reasonable Efforts; Further Assurances	71
9.2	Amendment and Modification	71
9.3	Waiver of Compliance	71
9.4	Severability	72
9.5	Expenses and Obligations	72

 

ii

 

 

9.6	Parties in Interest	72
9.7	Notices	72
9.8	Counterparts	74
9.9	Time	74
9.10	Entire Agreement	74
9.11	Public Announcements	74
9.12	Attorneys’ Fees	74
9.13	Assignment	75
9.14	Rules of Construction	75
9.15	Securityholder Liability	76
9.16	Governing Law	77
9.17	Waiver of Jury Trial	77
9.18	Consent to Jurisdiction; Venue	77
	ARTICLE X
	THE REPRESENTATIVE
10.1	Authorization of the Representative	78
10.2	Compensation; Exculpation; Indemnity	80

 

iii

 

EXHIBITS :

Exhibit A	Form of Escrow Agreement
Exhibit B	Form of Certificate of Merger
Exhibit C	Form of Certificate of Incorporation
Exhibit D	Form of Bylaws
Exhibit E	Form of Letter of Transmittal
Exhibit F	Form of Option Surrender Agreement
Exhibit G	Form of Stockholder Written Consent
Exhibit H	Form of Mutual Release
Exhibit I	Form of Noncompetition Agreement
Exhibit J	Form of Opinion of Counsel to the Company
Exhibit K	List of Material Actions

 

iv

 

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”), dated as of November    , 2006, is made by and among Symtx, Inc., a Delaware corporation (the “ Company ”), AAI Corporation, a Maryland corporation (“ Parent ”), Symtx Merger Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“ Merger Subsidiary ”), and Eos Symtx Sellers’ Representative, LLC, a Delaware limited liability company, solely in its capacity as Representative (as hereinafter defined).

PRELIMINARY STATEMENTS

WHEREAS, the Boards of Directors of the Company, Parent and Merger Subsidiary deem it advisable and in the best interest of their respective stockholders to consummate the transactions contemplated by this Agreement on the terms and subject to the conditions provided for herein;

WHEREAS, in furtherance thereof it is proposed that the acquisition be accomplished by the merger of Merger Subsidiary with and into the Company, with the Company being the surviving corporation, in accordance with the General Corporation Law of the State of Delaware (the “ DGCL ”);

WHEREAS, the Boards of Directors of the Company, Parent (on its own behalf and as sole stockholder of Merger Subsidiary) and Merger Subsidiary have each approved and adopted this Agreement, the Merger (as hereinafter defined) and the other transactions contemplated hereby;

WHEREAS, the holders of the requisite number of shares of Common Stock (as hereinafter defined), Series A Preferred Stock (as hereinafter defined) and Series B Preferred Stock (as hereinafter defined) outstanding on the date of this Agreement shall, immediately after the execution hereof, by written consent, approve and adopt this Agreement, the Merger and the other transactions contemplated hereby; and

WHEREAS, the Company, Parent and Merger Subsidiary desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

AGREEMENTS

NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and upon the terms and subject to the conditions hereinafter set forth, the parties hereto, intending to be legally bound hereby, agree as follows:

1

 

ARTICLE I

DEFINED TERMS

1.1            Definitions .   The following terms shall have the following meanings in this Agreement:

“ Actual Knowledge ” means, with respect to the Company, the actual knowledge, without any duty of inquiry, of Leonard Gilmore, Mike Clem, Paul Hiller, Mark First and Brian D. Young.

“ Affiliate ” means, with respect to any Person, any other Person controlling, controlled by or under common control with such Person; provided , that none of Eos Partners, L.P., Eos Partners (Offshore), L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II, L.P. or any of their Affiliates will be deemed to be Affiliates of the Company or its Subsidiaries.  For purposes of this definition, the term “control” (and correlative terms) means the possession, directly or indirectly, of the power, whether by contract, equity ownership or otherwise, to direct the policies or management of a Person.

“ Antitrust Laws ” means, collectively, (a) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended; (b) the Sherman Antitrust Act of 1890, as amended; (c) the Clayton Act of 1914, as amended; (d) the Federal Trade Commission Act of 1914, as amended; and (e) any other Applicable Law designed to prohibit, restrict, or regulate actions for the purpose or effect of monopolization or restraint of trade.

“ Applicable Laws ” means, with respect to any Person, all laws, statutes, rules, regulations, ordinances, judgments, orders, decrees, injunctions and writs of any Governmental Authority applicable to the business or operations of such Person or any of its properties, assets, officers, directors, employees, consultants or agents (in connection with such officer’s, director’s, employee’s, consultant’s or agent’s activities on behalf of such Person).

“ Applicable Percentage ” means:

(a)            with respect to each Stockholder, a percentage equivalent of a fraction (as set forth on the Closing Capitalization Schedule), the numerator of which is the aggregate number of Outstanding Common Shares, Converted Outstanding Series A Preferred Shares and Converted Outstanding Series B Preferred Shares held by such Stockholder and the denominator of which is the aggregate number of all Outstanding Common Shares, Converted Outstanding Series A Preferred Shares, Converted Outstanding Series B Preferred Shares and Outstanding Option Shares; and

(b)            with respect to each Optionholder, a percentage equivalent of a fraction (as set forth on the Closing Capitalization Schedule), the numerator of which is the aggregate number of Outstanding Option Shares issuable immediately prior to the Effective Time for all Options held by such Optionholder and the denominator of which is the aggregate number of all Outstanding Common Shares, Converted Outstanding Series A Preferred Shares, Converted Outstanding Series B Preferred Shares and Outstanding Option Shares.

2

 

“ Bookings ” means the contractually stated value, net of any applicable discounts, of all customer Contracts for products and services provided by the Surviving Corporation that were entered into and not terminated during the Earnout Period.  If a new Contract replaces or substitutes a prior Contract or series of Contracts, only the additional contractually stated value added by such Contract shall be considered part of Bookings.  Bookings shall include the contractually stated value, net of any applicable discounts, of that portion of a Contract involving the sale of products or services of Surviving Corporation made by Parent or any Affiliate of Parent, as well as the contractually stated value, net of any applicable discounts, of that portion of a Contract involving sales based primarily on the utilization of the Surviving Corporation’s Intellectual Property, know-how, expertise, products and/or services which are offered or provided to customers or prospective customers of Surviving Corporation, but shall not include the value of any sales of any products or services of Parent or any Affiliate of Parent (other than the Surviving Corporation) that are sold by or through the Surviving Corporation.  Bookings may only arise from Contracts (a) that are for the sale of products or services and (b) that are legally binding, authorized, funded and non-contingent.  Notwithstanding the foregoing, for purposes of calculating Bookings, the term “Contracts” shall include purchase orders and letters of authorization with a specific term of funding to the extent funded.

“ Business Day ” means any day other than (a) a Saturday, Sunday or federal holiday or (b) a day on which commercial banks in Austin, Texas, are authorized or required to be closed.

“ Cash ” means all cash and cash equivalents of the Company.

“ Certificate ” means a certificate representing Outstanding Common Shares, Outstanding Series A Preferred Shares or Outstanding Series B Preferred Shares, as the case may be.

“ Closing Adjustment Amount ” means an amount equal to (a) any Estimated Working Capital Surplus (not to exceed Four Hundred Thousand Dollars ($400,000)), plus (b) Estimated Cash, minus (c) Estimated Debt, minus (d) any Estimated Working Capital Deficiency.

“ Closing Common Merger Consideration ” means an amount (not less than zero) equal to (a) the Gross Enterprise Value, plus (b) the Closing Adjustment Amount (which amount will be subtracted if a negative number), minus (c) the Escrow Amount, minus (d) the Supplemental Escrow Amount, minus (e) the Gilmore Escrow Amount, minus (f) the Mexico Lawsuit Escrow Amount, minus (g) the Paid Company Transaction Costs, minus (h) the Employee Retention Payments paid on the Closing Date pursuant to Section 2.10(a)(v) , minus (i) the aggregate amount of all Series A Liquidation Preferences and Series B Liquidation Preferences for all Outstanding Series A Preferred Shares and Outstanding Series B Preferred Shares, minus (j) the Representative Holdback.

“ Closing Date ” means the date on which the Closing occurs.

“ Code ” means the United States Internal Revenue Code of 1986, as amended.  All references to the Code, U.S. Treasury regulations or other governmental pronouncements

3

 

shall be deemed to include references to any applicable successor regulations or amending pronouncement.

“ Common Stock ” means the common stock of the Company, par value $0.001 per share.

“ Common Stockholders ” means the holders of shares of Common Stock.

“ Company Disclosure Schedule ” means the disclosure letter of even date with this Agreement from the Company to Parent delivered concurrently with the execution and delivery of this Agreement.

“ Company Transaction Costs ” means all fees, costs and expenses of any brokers, financial advisors, consultants, accountants, attorneys or other professionals engaged by the Company or the Representative in connection with the structuring, negotiation or consummation of the transactions contemplated by this Agreement and the other Transaction Documents, and any bonuses payable at Closing to the outside directors of the Company that are authorized by the Stockholders and are in an amount not to exceed Three Hundred Thousand Dollars ($300,000).

“ Confidentiality Agreement ” means the Confidentiality Agreement, dated as of March 28, 2006, by and between Jefferies Quarterdeck on behalf of the Company, and United Industrial Corporation.

“ Consents ” means all authorizations, consents, orders or approvals of, or registrations, declarations or filings with, or expiration of waiting periods imposed by, any Governmental Authority, in each case that are necessary in order to consummate the transactions contemplated by this Agreement and the other Transaction Documents, and all consents and approvals of or notices to third parties necessary to prevent any conflict with, violation or breach of, or default under, the Contracts in effect on the date hereof or the Closing Date.

“ Contracts ” means all contracts, agreements, binding arrangements, bonds, notes, indentures, mortgages, debt instruments, licenses (and all other contracts, agreements or binding arrangements concerning Intellectual Property), franchises, leases and other instruments or obligations of any kind, written or oral (including any amendments and other modifications thereto), to which Company is a party or which are binding upon Company, and which are in effect on the date hereof or the Closing Date (and shall include any Government Contract that has not been closed or terminated), including those listed on Company Disclosure Schedule 3.1(m) .

“ Converted Outstanding Series A Preferred Shares ” means the aggregate number of shares of Common Stock issuable immediately prior to the Effective Time if the Outstanding Series A Preferred Shares were converted into shares of Common Stock immediately prior to the Effective Time.

“ Converted Outstanding Series B Preferred Shares ” means the aggregate number of shares of Common Stock issuable immediately prior to the Effective Time if the

4

 

Outstanding Series B Preferred Shares were converted into shares of Common Stock immediately prior to the Effective Time.

“ Current Assets ” means, as of 11:59 p.m. on the date immediately prior to the Effective Time, the sum of all current assets of the Company as determined in accordance with this Agreement and GAAP applied on a basis consistent with the preparation of the Balance Sheet; provided , however , that Current Assets shall not include, in whole or in part, (a) Cash, or (b) current and deferred income tax assets; provided , further , that Current Assets shall include current and deferred income tax assets to the extent such tax assets offset or may be applied to reduce any income tax liabilities included in Current Liabilities.

“ Current Liabilities ” means, as of 11:59 p.m. on the date immediately prior to the Effective Time, the sum of all current liabilities of the Company as determined in accordance with this Agreement and GAAP applied on a basis consistent with the preparation of the Balance Sheet; provided , however , that Current Liabilities shall not include, in whole or in part, (a) Company Transaction Costs paid on or before the Closing Date, including the Paid Company Transaction Costs, (b) Debt, including the current portion of Debt, accrued and unpaid interest on Debt and all premiums, penalties, fees and other amounts included in the Debt Pay-Off Amount, (c) accrued and unpaid dividends on the Preferred Stock, (d) state or federal income Tax liabilities of the Company for the 2006 calendar year that are due and payable after the Closing Date that would have otherwise been accrued on the balance sheet of the Company on the Closing Date, (e) Sales and Use Tax liabilities, (f) liabilities arising from the Alvarado Suit, or (e) the Employee Retention Payments paid on the Closing Date pursuant to Section 2.10(a)(v) ; provided , further , however , that Current Liabilities shall include the employer portion of any Medicare, social security or unemployment Taxes payable by the Company in respect of (i) Employee Retention Payments paid on the Closing Date and (ii) payments to Optionholders pursuant to Section 2.10(a)(vii) .

“ D&O Indemnification Agreements ” means the following, as may be amended after the date hereof:  (a) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and Leonard Gilmore, (b) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and Paul Hiller, (c) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and Mark First, (d) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and William H. Cunningham, (e) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and David Sargent, (f) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and Ron Shelly, (g) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and Brian D. Young and (h) Amended and Restated Indemnification Agreement, dated on or about the date hereof, between the Company and L. Dana Weaver, Jr.

“ D&O Indemnified Person ” means Leonard Gilmore, Paul Hiller, Mark First, William H. Cunningham, David Sargent, Ron Shelly, L. Dana Weaver, Jr. and Brian D. Young.

“ DCAA ” means the Defense Contract Audit Agency of the United States Government.

5

 

“ Debt ” means, without duplication, (a) all indebtedness of the Company for the repayment of borrowed money, whether or not represented by bonds, debentures, notes or similar instruments, all accrued and unpaid interest thereon, and all premiums, penalties, fees and other amounts included in the Debt Pay-Off Amount; (b) all other indebtedness of the Company evidenced by bonds, debentures, notes or similar instruments, including all accrued and unpaid interest thereon; (c) all obligations of the Company as lessee under leases that have been recorded as capital leases in accordance with GAAP; (d) all obligations of the Company to pay the deferred purchase or acquisition price of property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (e) all obligations of the Company under the Management Consulting Agreement; and (f) all obligations of the Company under each of the New York Lease and the Mexico Lease (or any agreements terminating such Contracts).

“ Delegation of Authority ” means the Delegation of Authority with an authorization date of the Closing Date, issued by Parent with respect to Company, a copy of which has been delivered to Company and Representative.

“ Disclosure Schedules ” means the Company Disclosure Schedule and the Parent Disclosure Schedule.

“ Employee Benefit Plan ” means any “employee benefit plan” within the meaning of Section 3(3) of ERISA and any bonus, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, vacation, severance, disability, death benefit, hospitalization insurance, or other plan, program or fringe benefit plan providing benefits to any present or former employee or contractor of the Company or any member of the Aggregated Group or maintained, sponsored or contributed to by the Company or any member of the Aggregated Group.

“ Employee Retention Payments ” means, with respect to each employee of the Company, (a) the cash payments payable to such employee at Closing in the amount, if any, set forth opposite such Person’s name on Company Disclosure Schedule 1.1 in the column entitled “Closing Retention Payment Amount”, plus (b) the cash payments payable to such employee on the six (6) month anniversary of the Closing Date in the amount, if any, set forth opposite such Person’s name on Company Disclosure Schedule 1.1 in the column entitled “Post-Closing Retention Payment Amount”.

“ Environmental Laws ” means the Applicable Laws and the common law pertaining to the environment, natural resources and human health and safety, including:  (a) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (“ CERCLA ”); (b) the Emergency Planning and Community Right to Know Act, as amended; (c) the Solid Waste Disposal Act, as amended; (d) the Clean Air Act, as amended; (e) the Clean Water Act, as amended; (f) the Toxic Substances Control Act, as amended; (g) the Occupational Safety and Health Act of 1970, as amended; (h) the Oil Pollution Act of 1990, as amended; (i) the Hazardous Materials Transportation Act, as amended; and (j) comparable state laws.

6

 

“ Eos Securityholder ” means Eos Partners, L.P., Eos Partners (Offshore) L.P., Eos Partners SBIC, L.P., Eos Partners SBIC II, L.P. and any of their Affiliates that are Securityholders.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Escrow Account ” has the meaning set forth in the Escrow Agreement.

“ Escrow Agent ” means JPMorgan Chase Bank, N.A.

“ Escrow Agreement ” means the escrow agreement in substantially the form of Exhibit A entered into on or prior to the Closing by and among Parent, the Representative and the Escrow Agent.

“ Escrow Distribution ” means the amount of any distribution out of the Escrow Account to the Representative for the benefit of the Securityholders.

“ Excluded Contract ” means any Contract (a) that (i) has no continuing performance, delivery or payment obligations (other than indemnification obligations), (ii) is more than two (2) years old and (iii) if a Government Contract, has been closed or terminated, (b) that (i) has no continuing performance, delivery or payment obligations (other than indemnification obligations), (ii) had a stated value of less than Fifty Thousand Dollars ($50,000), and (iii) if a Government Contract, has been closed or terminated, and (c) for third-party standard, generally commercially available “off the shelf” software products that (i) have an aggregate acquisition cost or licensing fee of Five Thousand Dollars ($5,000) or less or (ii) are imbedded in hardware products acquired by Company.

“ Final Adjustment Amount ” means an amount equal to (a) any Working Capital Surplus based on the Final Working Capital, plus (b) Final Cash, minus (c) Final Debt, minus (d) any Working Capital Deficiency based on the Final Working Capital.

“ Foreign Export and Import Laws ” means the laws and regulations of a foreign government regulating exports, imports or re-exports to or from the foreign country, including the export or re-export of any goods, services or technical data.

“ GAAP ” means generally accepted accounting principles in the United States, consistently applied.

“ Governmental Authority ” means any governmental department, commission, board, bureau, agency, court or other instrumentality, whether foreign or domestic, of any country, nation, republic, federation or similar entity or any state, county, parish or municipality, jurisdiction or other political subdivision thereof.

“ Government Bid ” means any offer made by the Company prior to the Closing Date which, if accepted, would result in a Government Contract.

7

 

“ Government Contract ” means any prime contract, subcontract, basic ordering agreement, pricing agreement, preliminary contractual relationship relating to a prime contract or subcontract or other similar arrangement, between the Company, on the one hand, and (a) any Governmental Authority, (b) any prime contractor of a Governmental Authority in its capacity as a prime contractor, or (c) any subcontractor with respect to any contract of a type described in clauses (a) or (b) above, on the other hand.  A task, purchase or delivery order under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which it relates.

“ Gross Enterprise Value ” means Thirty Four Million Three Hundred Thousand Dollars ($34,300,000).

“ Hazardous Substances ” means (a) any hazardous materials, hazardous wastes, hazardous substances, toxic wastes and toxic substances as those or similar terms are defined under or could result in the imposition of liability under, any Environmental Laws; (b) any asbestos or any material that contains any hydrated mineral silicate, including chrysolite, amosite, crocidolite, tremolite, anthophylite and/or actinolite, whether friable or non-friable; (c) PCBs or PCB-containing materials or fluids; (d) radon; (e) any other hazardous, radioactive, toxic or noxious substance, material, pollutant, contaminant, constituent, or solid, liquid or gaseous waste, including medical wastes, regulated under any Environmental Law; (f) any petroleum, petroleum hydrocarbons, petroleum products, crude oil and any fractions or derivatives thereof, any oil or gas exploration or production waste and any natural gas, synthetic gas and any mixtures thereof; and (g) any substance that, whether by its nature or its use, is subject to regulation under any Environmental Laws or which could give rise to liability or responsibility under any Environmental Law or with respect to which any Environmental Laws or Governmental Authority requires environmental investigation, monitoring or remediation.

“ Indemnification Claim ” means a Parent Indemnification Claim or a Securityholder Indemnification Claim, as the case may be.

“ Indemnified Persons ” means the Parent Indemnified Persons or the Securityholder Indemnified Persons, as the case may be.

“ Indemnifying Person ” means Parent and Surviving Corporation, jointly and severally, in the case of any Securityholder Indemnification Claim, or the Securityholders, acting through the Representative, in the case of any Parent Indemnification Claim.

“ Intellectual Property ” means any of the following:  (a) U.S. and non-U.S. patents, and with respect to either, applications and statutory invention registrations, including reissues, divisions, continuations, continuations in part, extensions and reexaminations thereof; (b) registered and unregistered trademarks, service marks and other indicia of origin, pending trademark and service mark registration applications, and intent-to-use registrations or similar reservations of marks, trade names, trade dress and brand names; (c) registered and unregistered copyrights and mask works, and applications for registration of either, including, without limitation, source codes, object codes, computer software programs, modules and tools; (d) internet domain names, applications and reservations therefor, universe resource locators and the corresponding Internet sites and webpages and all intellectual property related thereto

8

 

(collectively, “ Sites ”); (e) trade secrets and proprietary information not otherwise listed in (a) through (d) above, including proprietary unpatented inventions, invention disclosures, moral and economic rights of authors and inventors (however denominated), confidential information, technical data, customer lists, corporate and business names, know-how, formulae, methods, designs, processes, procedures, technology, databases, data collections and other proprietary information or material of any type, and all derivatives, improvements and refinements thereof, howsoever recorded, or unrecorded; and (f) any good will associated with any of the foregoing.

“ Knowledge ” means (a) with respect to the Company:  (i) the actual knowledge of Leonard Gilmore, Michael Clem and Paul Hiller, each an officer of the Company, after reasonable inquiry of such officer of the Company, (ii) the actual knowledge of Mark First, a director of the Company, after reasonable inquiry of such director of the Company and (iii) the actual knowledge of Brian D. Young, a director of the Company and (b) with respect to Parent:  (i) the actual knowledge of Fred Strader, James Perry, Jonathan Greenberg and Thomas Kubik, each an officer of the Parent, after reasonable inquiry of such officer of the Parent and (ii) the actual knowledge of Ed Buffington, an officer of the Company.

“ Leased Real Property ” means all of the real property leased by the Company.

“ Liens ” means liens, pledges, voting agreements, voting trusts, proxy agreements, security interests, mortgages, and other possessory interests, conditional sale or other title retention agreements, assessments, easements, rights-of-way, covenants, restrictions, rights of first refusal, encroachments, and other burdens, options or encumbrances of any kind.

“ Loan Agreements ” means, collectively, the Debt documents set forth in Company Disclosure Schedule 1.2 .

“ Losses ” means any and all claims, demands, suits, proceedings, judgments, losses, charges, Taxes, penalties, and fees, costs and expenses (including reasonable attorneys’ fees and expenses and reasonable costs of mitigation) sustained, suffered or incurred by any Indemnified Person in connection with, or related to, any matter which is the subject of indemnification under ARTICLE VIII ; provided , however , that in computing the amount of any Losses for purposes of determining the liability of any Indemnifying Person under ARTICLE VIII , the amount of any Losses in the form of incidental, indirect, consequential or punitive Losses, Losses for lost profits, revenue or income, diminution in value or loss of business reputation or opportunity shall not be included in Losses for which an Indemnified Person may seek indemnification under ARTICLE VIII , other than incidental, indirect, consequential and punitive Losses actually paid to a third party that is not an Indemnified Person pursuant to an Asserted Liability.  “Losses” shall not include any increased operational costs incurred as a result of any compliance obligations agreed to in Settlement of any such matter.

“ Management Consulting Agreement ” means the Management Consulting Agreement, dated as of March 2, 2001, by and between the Company and Eos Management, Inc., as amended.

“ Material Adverse Effect ” means any change, circumstance, effect, event or fact that, individually or in the aggregate, has a material and adverse effect on (a) the business,

9

 

financial condition, assets, liabilities, prospects or results of operations of the Company and its Subsidiaries as a whole; or (b) the ability of the Company and the Securityholders to timely consummate the transaction contemplated hereby; provided , however , that no change, circumstance, effect, event or fact shall be deemed (individually or in the aggregate) to constitute, nor shall any of the foregoing be taken into account in determining whether there has been a Material Adverse Effect, to the extent that such change, circumstance, effect, event or fact results from, arises out of, or relates to (i) a general deterioration in the economy or in the economic conditions prevalent in the industry in which the Company operates, which in each case do not have a materially disproportionate effect on the Company; (ii) the outbreak or escalation of hostilities involving the United States, the declaration by the United States of a national emergency or war or the occurrence of any other calamity or crisis, including acts of terrorism, which in each case do not have a materially disproportionate effect on the Company; (iii) any change in accounting requirements or principles imposed upon the Company or its business by Applicable Law or GAAP or any change in Applicable Laws, or the interpretation thereof; (iv) actions taken by Parent or any of its Affiliates; or (v) compliance with the terms of, or the taking of any action required by, this Agreement or any other Transaction Document.

“ Material Contract ” means:

(a)            each Contract that is executory in whole or in part, and that involves expenditures or receipts of the Company for goods or services of an amount in excess of Twenty Five Thousand Dollars ($25,000) after the date of this Agreement (an “Expenditure Material Contract” ) other than purchase orders issued by the Company to purchase goods or services in the ordinary course of business;

(b)            each lease, rental or occupancy agreement, installment and conditional sale agreement, and any other Contract affecting the ownership of, leasing of, title to or use of any (i) Leased Real Property or (ii) other property used by the Company involving payments by the Company in excess of Ten Thousand Dollars ($10,000) per year;

(c)            each joint venture, partnership or any other Contract or agreement involving a sharing of profits, losses, costs or liabilities by the Company with any other Person;

(d)            each Contract containing covenants that in any way purport to restrict or prohibit the business activity of the Company or limit the freedom of the Company to engage in any line of business, own or sell assets or to compete with any Person;

(e)            each Contract with any director, officer, consultant or employee of the Company (including the Mutual Releases and the Non-Competition Agreements);

(f)             any Contract presently in effect for the license of any patent, copyright, trade secret or other proprietary information involving the payment by or to the Company in excess of Five Thousand Dollars ($5,000) per year other than Excluded Contracts;

(g)            any power of attorney;

10

 

(h)            any Contract entered into outside the ordinary course of business and presently in effect, involving payment to or obligations of in excess of Five Thousand Dollars ($5,000);

(i)             any Contract under which the Company has directly or indirectly made any advance, loan, extension of credit or capital contribution to, or other investment in, any Person (other than extensions of credit to customers in the ordinary course of business);

(j)             any Contract between or among the Company and (i) any of its Affiliates or (ii) any Eos Securityholder;

(k)            any sole source or exclusive supplier Contracts;

(l)             any currency or interest rate swap, collar or hedge Contract; and

(m)           the Loan Agreements and each other indenture, mortgage, promissory note, guarantee, security agreement or other Contract or commitment for Debt, the borrowing of money, for a line of credit or for any capital leases.

“ Mexican Lawsuits ” means (a) Lopez Alvarado et al. v. Symtx de Mexico, S. de R.L., Symmtrix, Inc. [sic] and Paul Hiller , No. 09617/i/12/2002, in the 12th Conciliation and Arbitration Labor Court in Nuevo Leon, Mexico and (b) Luna Zermeno v. Symtx de Mexico, S. de R.L., International Symtx, LLC, Symmetrix, Inc. and Mr. Paul Hiller , before the 11th Conciliation and Arbitration Labor Court (Junta Especial No. 11 de Conciliacion y Arbitraje) in Nuevo Leon, Mexico, file number 09602/i/11/2002.

“ Mexico Lease ” means the Lease Agreement, dated December 5, 2000, by and between Apodaca Industrial Partners III, L.P. and Symtx de Mexico, S. de R.L. de C.V., as may be amended.

“ New York Lease ” means the Lease Agreement, dated July 16, 1999, by and between JSJL Development Group, LLC and Symmetrix, Inc. dba Symtx (as amended by that certain Amendment to Lease Agreement, dated March 23, 2000, by and between JSJL Development Group, LLC and Symmetrix, Inc. dba Symtx; Amendment to the Lease Agreement, dated August 30, 2000, by and between JSJL Development Group, LLC and Symmetrix, Inc. dba Symtx; Second Amendment to Lease Agreement, dated October 10, 2000, by and between JSJL Development Group, LLC and Symmetrix, Inc. dba Symtx; and Revised Second Amendment to Lease Agreement, dated March 16, 2001, by and between JSJL Development Group, LLC and Symmetrix, Inc. dba Symtx).

“ Options ” means the collective reference to all options (vested or unvested) to purchase shares of Common Stock issued pursuant to the Stock Option Plans and any and all other options to purchase shares of Common Stock.

“ Outstanding Option Shares ” means the number of shares of Common Stock issuable immediately prior to the Effective Time with respect to all Outstanding Options (whether vested or unvested) held by Optionholders who have executed and delivered an Option Surrender Agreement.

11

 

“ Outstanding Shares ” means the Outstanding Common Shares, Outstanding Series A Preferred Shares and Outstanding Series B Preferred Shares.

“ Parent Disclosure Schedule ” means the disclosure letter of even date with this Agreement from Parent to the Company delivered concurrently with the execution and delivery with this Agreement.

“ Parent Indemnified Persons ” means (a) Parent; (b) the Surviving Corporation; (c) with respect to the Persons set forth in clauses (a) and (b) , each of their respective Affiliates, assigns and successors in interest; and (d) with respect to the Persons set forth in clauses (a) through (c) , each of their respective stockholders, members, partners, directors, officers, employees, agents, attorneys and representatives.

“ Pay-Off Letters ” means the letters, and any updates thereto, to be sent by each of the payees under the Loan Agreements to the Company prior to Closing, which letters shall specify the aggregate amount of Debt that will be outstanding as of the Effective Time under each Loan Agreement, wire transfer information for each such payee to be paid at Closing and provisions for the termination of the underlying Debt documents and any related security interests and financing statements upon the payment of such amounts.

“ Permitted Liens ” means (a) statutory Liens for current Taxes either (i) not yet due and payable or (ii) being contested in good faith by appropriate proceedings, and for which adequate reserves (as determined in accordance with GAAP, consistently applied) have been established on the Company’s books with respect thereto, (b) mechanics’, carriers’, workers’, repairers’ and other similar Liens imposed by Applicable Law arising or incurred in the ordinary course of business and consistent with past practices of the Company that do not materially detract from the value of the property subject thereto or materially interfere with the manner in which it is currently used, (c) in the case of leases of vehicles, rolling stock and other personal property, encumbrances that do not interfere with the use or impair the value of such assets or the operation of the business at the facility at which such leased equipment or other personal property is located, (d) zoning, entitlement, building, business licenses, use permits or other land use regulations imposed by any Governmental Authority having jurisdiction over the real property leased or used by the Company which are not violated by the current or contemplated use and operation of such real property, (e) restrictive covenants and easements of record that do not detract in any material respect from the value of the real property leased or used by the Company and do not adversely affect, impair or interfere with the occupancy, use or marketability of such real property which they encumber for the purposes for which it is currently used by the Company in connection with its business, (f) landlords’ liens in favor of landlords under the Leases with respect to the Leased Real Property, (g) mortgages and deeds of trust, and ground leases or underlying leases covering the title, interest or estate of such landlords with respect to the Leased Real Property and to which the leases with respect to the Leased Real Property are subordinate and (h) Liens granted pursuant to the Security Agreement, dated as of May 22, 2003, by and between Company and Agilent Technologies, Inc.

“ Person ” means an individual, corporation, partnership, limited liability company, Governmental Authority, association, trust, unincorporated organization or other entity.

12

 

“ Preferred Stock ” means the Series A Preferred Stock and Series B Preferred Stock.

“ Preferred Stockholders ” means the holders of shares of Preferred Stock

“ Representative ” means Eos Symtx Sellers’ Representative, LLC, a Delaware limited liability company, and any successor representative appointed to act on his or its behalf.

“ Sales and Use Tax ” means any and all sales, use or similar Taxes imposed on the Company or for which the Company may otherwise be liable with respect to any taxable period (or portion thereof) ending on or prior to the Closing Date, or any transaction occurring on or prior to the Closing Date, together with any charges, interest or penalties imposed thereon, but excluding any such Taxes that are not yet due and payable and are included in the calculation of Working Capital.

“ Securityholder Indemnified Persons ” means (a) the Securityholders; (b) each of the Securityholders’ respective Affiliates, assigns and successors in interest; and (c) with respect to the Persons set forth in clauses (a) and (b) , each of their respective stockholders, members, partners, directors, officers, employees, agents, attorneys and representatives.

“ Securityholders ” means, collectively, the Stockholders and the Optionholders.

“ Series A Liquidation Preference ” means, with respect to each Outstanding Series A Preferred Share, $0.55 plus all accrued or declared but unpaid dividends on such share to and including the Closing Date.

“ Series A Preferred Stock ” means the Company’s Series A Convertible Participating Preferred Stock, $0.001 par value per share to and including the Closing Date.

“ Series A Preferred Stockholders ” means the holders of the Series A Preferred Stock.

“ Series B Liquidation Preference ” means, with respect to each Outstanding Series B Preferred Share, $0.10 plus all accrued or declared but unpaid dividends on such share.

“ Series B Preferred Stock ” means the Company’s Series B Convertible Participating Preferred Stock, $0.001 par value per share.

“ Series B Preferred Stockholders ” means the holders of the Series B Preferred Stock.

“ Settlement ” or “ Settled ” means the occurrence of any of the following events (or a combination thereof):  (a) an oral or written agreement in principle on financial arrangements with the relevant Governmental Authorities; (b) a written settlement agreement with the relevant Governmental Authorities; (c) receipt of a closed file or cold comfort letter describing the government’s present intention not to pursue the matter; or (d) a court or administrative ruling constituting final action in the matter.

13

 

“ Stock Option Plans ” means the Symtx, Inc. 2003 Stock Incentive Plan and the Symmetrix, Inc. 2000 Stock Incentive Plan.

“ Stockholders ” means, collectively, the Common Stockholders and the Preferred Stockholders.

“ Subsidiary ” means, with respect to any Person, another Person in which such first Person owns or controls, directly or indirectly, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, fifty percent (50%) or more of the equity interests of such Person).

“ Taxes ” means taxes, charges, fees, imposts, levies, interest, penalties, additions to tax or other assessments or fees of any kind, including, but not limited to, income, corporate, gross receipts, capital, excise, property, sales, use, transfer, stamp, windfall profit, social security, unemployment, disability, payroll, turnover, value added and franchise taxes, deductions, withholdings and customs duties, imposed by any Governmental Authority, whether disputed or not, together with any charges, interest or penalties imposed thereon.

“ Tax Returns ” means any return, report, statement, information return or other document (including any related or supporting information) filed or required to be filed with any Governmental Authority in connection with the determination, assessment, collection or administration of any Taxes or the administration of any laws, regulations or administrative requirements relating to any Taxes.

“ Transaction Documents ” means, collectively, this Agreement, the Escrow Agreement, and each other agreement, document and instrument required to be executed in accordance herewith.

“ U.S. Export and Import Laws ” means the Arms Export Control Act (22 U.S.C. 2778), the International Traffic in Arms Regulations (ITAR) (22 CFR 120-130), the Export Administration Act of 1979, as amended (50 U.S.C. 2401-2420), the Export Administration Regulations (EAR) (15 CFR 730-774), the Foreign Assets Control Regulations (31 CFR Parts 500-598), the laws and regulations administered by Customs and Border Protection (19 CFR Parts 1-199) and all other U.S. laws and regulations regulating exports, imports or re-exports to or from the United States, including the export or re-export of goods, services or technical data from the United States of America.

“ Working Capital ” means Current Assets minus Current Liabilities.

“ Working Capital Deficiency ” means the amount, if any, by which Eight Hundred Thousand Dollars ($800,000) exceeds the Working Capital as of the Effective Time; provided, however, that the Working Capital Deficiency shall not be less than zero.

“ Working Capital Surplus ” means the amount, if any, by which Working Capital as of the Effective Time exceeds One Million Eight Hundred Thousand Dollars ($1,800,000); provided, however, that the Working Capital Surplus shall not be less than zero.

14

 

1.2            List of Defined Terms .

 

15

 

 

ARTICLE II

THE MERGER

2.1            Merger .   Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time, Merger Subsidiary shall be merged with and into the Company (the “ Merger ”) in accordance with the terms of, and subject to the conditions set forth in, this Agreement and the DGCL.  Following the Merger, the Company shall continue as the

16

 

surviving corporation in the Merger (sometimes hereinafter referred to as the “ Surviving Corporation ”) and the separate corporate existence of Merger Subsidiary shall cease.

2.2            Effective Time .  As a part of the Closing, the Company, Parent and Merger Subsidiary shall cause a Certificate of Merger in the form attached hereto as Exhibit B meeting the requirements of Section 251 of the DGCL (the “ Certificate of Merger ”) to be properly executed and filed with the Secretary of State of the State of Delaware in accordance with the terms and conditions of the DGCL.  The Merger shall become effective at the time of filing of the Certificate of Merger with the Secretary of State of the State of Delaware or at such other time as the parties agree shall be specified in the Certificate of Merger in accordance with the DGCL (the “ Effective Time ”).

2.3            Effects of the Merger .  At and after the Effective Time, the effect of the Merger shall be the effects as provided in this Agreement, the Certificate of Merger and the applicable provisions of the DGCL.  Without limiting the generality of the foregoing and subject thereto, at the Effective Time all the property, rights, privileges, immunities, powers and franchises of the Company and Merger Subsidiary shall vest in the Surviving Corporation, and all debts, liabilities, obligations and duties of the Company and Merger Subsidiary shall become the debts, liabilities, obligations and duties of the Surviving Corporation.

2.4            Certificate of Incorporation and Bylaws .  The Certificate of Incorporation of the Company shall be amended in its entirety as set forth in Exhibit C as of the Effective Time and shall be the certificate of incorporation of the Surviving Corporation, until the same shall thereafter be altered, amended or repealed in accordance with Applicable Law or such certificate of incorporation.  The bylaws of the Company shall be amended in their entirety as set forth on Exhibit D as of the Effective Time and shall be the bylaws of the Surviving Corporation, until the same shall thereafter be altered, amended or repealed in accordance with Applicable Law, the certificate of incorporation of the Surviving Corporation or such bylaws.

2.5            Directors and Officers .  The directors and officers of Merger Subsidiary immediately prior to the Effective Time shall be the directors and officers of the Surviving Corporation as of the Effective Time in each case until their respective successors are duly elected or appointed and qualified or until their earlier death, resignation or removal.

2.6            Conversion of Outstanding Shares .  At the Effective Time, by virtue of the Merger and without any action on the part of any party:

(a)            Each share of common stock, par value $0.001 per share, of Merger Subsidiary issued and outstanding immediately prior to the Effective Time shall remain outstanding and shall represent one share of common stock, par value $0.001 per share, of the Surviving Corporation, so that, after the Effective Time, Parent shall be the sole holder of all of the issued and outstanding shares of the Surviving Corporation’s common stock.

(b)            Each share of Common Stock outstanding immediately prior to the Effective Time (each, an “ Outstanding Common Share ” and collectively, the “ Outstanding Common Shares ”) (i) shall be converted into the right to receive the amount(s) set forth in this Agreement and (ii) shall otherwise cease to be outstanding, shall be canceled and retired and

17

 

cease to exist; provided , that Dissenting Shares shall not be so converted or represent the right to receive the foregoing consideration, but the holders of such Dissenting Shares shall only be entitled to such rights as are set forth in Section 2.8 .

(c)            Each share of Common Stock held in the treasury of the Company immediately prior to the Effective Time shall be canceled and retired without any conversion thereof, and no payment or distribution shall be made with respect thereto.

(d)            Each share of Series A Preferred Stock outstanding immediately prior to the Effective Time (each, an “ Outstanding Series A Preferred Share ” and collectively, the “ Outstanding Series A Preferred Shares ”) (i) shall be converted into the right to receive the amount(s) set forth in this Agreement and (ii) shall otherwise cease to be outstanding, shall be canceled and retired and cease to exist; provided , that any Dissenting Shares shall not be so converted or represent the right to receive the foregoing consideration, but the holders of such Dissenting Shares shall only be entitled to such rights as are set forth in Section 2.8 .

(e)            Each share of Series B Preferred Stock outstanding immediately prior to the Effective Time (each, an “ Outstanding Series B Preferred Share ” and collectively, the “ Outstanding Series B Preferred Shares ”) (i) shall be converted into the right to receive the amount(s) set forth in this Agreement, and (ii) shall otherwise cease to be outstanding, shall be canceled and retired and cease to exist; provided , that any Dissenting Shares shall not be so converted or represent the right to receive the foregoing consideration, but the holders of such Dissenting Shares shall only be entitled to such rights as are set forth in Section 2.8 .

2.7            Treatment of Options .  At least ten (10) days prior to the date hereof, the Company sent to each holder (each, an “ Optionholder ” and collectively, the “ Optionholders ”) of an Option, whether vested or unvested, outstanding as of the date hereof (each, an “ Outstanding Option ” and collectively, the “ Outstanding Options ”) an Option Surrender Agreement and related information package, the form of which has been approved by the Parent, stating that (i) each Optionholder who properly executes and delivers the Option Surrender Agreement in accordance with the terms thereof and the accompanying instructions will receive the consideration set forth in this Agreement and (ii) any Optionholder who fails to so execute and deliver the Option Surrender Agreement must exercise their vested Options and pay the exercise price payable with respect to such Options prior to the Effective Time, or their Options will terminate at the Effective Time without consideration.  The Company has taken all actions required to effectuate the foregoing.

2.8            Dissenters’ Rights .

(a)            Promptly following the execution of this Agreement, the Company shall provide each record holder of Common Stock, Series A Preferred Stock and/or Series B Preferred Stock who shall not have voted in favor of the Merger or consented thereto in writing, with notice of such holder’s appraisal rights pursuant to Section 262 of the DGCL.  The Company shall give Parent prompt notice of any demands for appraisal pursuant to Section 262 of the DGCL received by the Company from any Stockholders, withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company in connection therewith.  The Company shall not, except with the prior written consent of Parent

18

 

(not to be unreasonably withheld), make any payment with respect to any such demands for appraisal or offer to settle or settle any such demands.  No later than ten (10) days following the date on which the Effective Time occurs, Parent and the Surviving Corporation shall provide notice of the Effective Time to each Stockholder who has neither voted in favor of the Merger nor consented thereto in writing and has not withdrawn or lost the right to the appraisal pursuant to Section 262 of the DGCL.

(b)            Notwithstanding any provision of this Agreement to the contrary, Outstanding Shares that are held immediately prior to the Effective Time by holders who have neither voted in favor of the Merger nor consented thereto in writing and who have demanded and perfected the right, if any, for appraisal of such Outstanding Shares in accordance with the provisions of Section 262 of the DGCL and have not withdrawn or lost such right to appraisal (collectively, the “ Dissenting Shares ”) shall not be converted into or represent a right to receive the consideration for such shares set forth in this Agreement, but the holder of such Dissenting Shares shall only be entitled to such appraisal rights as are granted by the DGCL.  If a holder of Outstanding Shares who demands appraisal of such Outstanding Shares under the DGCL shall thereafter effectively withdraw or lose (through failure to perfect or otherwise) the right to appraisal with respect to such Outstanding Shares, then, as of the occurrence of such withdrawal or loss, each such Outstanding Share shall be deemed to have been converted into and represent only the right to receive, in accordance with Sections 2.6 and 2.10 , the consideration for such shares set forth in this Agreement, without any interest thereon.

(c)            No payment of the Closing Common Merger Consideration, Series A Liquidation Preference or Series B Liquidation Preference under this ARTICLE II shall be payable to holders of Dissenting Shares.  Any payments allocable or due to the holders of Dissenting Shares greater than what such holders would have received pursuant to this Agreement shall be deducted from the Escrow Amount and distributed to Parent by the Escrow Agent.

2.9            Closing of Transfer Books .  From and after the Effective Time, the stock transfer books of the Company shall be closed and no transfer of Common Stock or Preferred Stock shall thereafter be made.  From and after the Effective Time, the holders of Certificates evidencing ownership of Outstanding Shares immediately prior to the Effective Time shall cease to have any rights with respect to such Outstanding Shares, except as otherwise provided for in this Agreement or by Applicable Law.

2.10          Payments .

(a)            Closing Payments .  At the Closing, Parent shall pay or cause to be paid the following amounts:

(i)             Parent shall pay or cause to be paid to each payee under the Loan Agreements, to an account designated by such payee in writing, the amount of Debt specified in such payee’s Pay-Off Letter (collectively, the sum of such Debt amounts for all such payees being hereinafter referred to as the “ Debt Pay-Off Amount ”);

19

 

(ii)            Parent shall deposit or cause to be deposited the Escrow Amount, the Supplemental Escrow Amount, the Gilmore Escrow Amount and the Mexico Lawsuit Escrow Amount with the Escrow Agent;

(iii)           Parent shall pay or cause to be paid to the Representative the Representative Holdback;

(iv)           Parent shall pay or cause to be paid all Company Transaction Costs that remain outstanding as of the Closing Date to such account or accounts as are designated by the Company in accordance with Section 4.1 (collectively, the sum of such payments for all payees of Company Transaction Costs being hereinafter referred to as the “ Paid Company Transaction Costs ”);

(v)            Parent shall pay or cause to be paid, in a single lump sum payment, to each employee who is employed by the Company as of 5:00 p.m. on the date immediately preceding the Closing Date, the amount of the Employee Retention Payments set forth opposite such employee’s name on Company Disclosure Schedule 1.1 in the column entitled “Closing Retention Payment Amount”, net of any applicable withholding Taxes;

(vi)           Parent shall pay or cause to be paid to each Stockholder that delivers a completed and duly executed a letter of transmittal in the form attached hereto as Exhibit E (each, a “ Letter of Transmittal ”) and all applicable Certificates for cancellation to Parent at least two (2) Business Days prior to the Closing Date, an amount to be set forth on the Closing Capitalization Schedule equal to the sum of:

(A)           such Stockholder’s Applicable Percentage of the Closing Common Merger Consideration; plus

(B)            with respect to each such Stockholder holding Outstanding Series A Preferred Shares, the product of the Series A Liquidation Preference multiplied by the number of Outstanding Series A Preferred Shares held by such Stockholder; plus

(C)            with respect to each such Stockholder holding Outstanding Series B Preferred Shares, the product of the Series B Liquidation Preference multiplied by the number of Outstanding Series B Preferred Shares held by such Stockholder; and

(vii)          Parent shall pay or cause to be paid to each Optionholder that delivers a completed and duly executed Option Surrender Agreement in the form attached hereto as Exhibit F (each, an “ Option Surrender Agreement ”) to Parent prior to the Closing Date, an amount to be set forth on the Closing Capitalization Schedule equal to such Optionholder’s Applicable Percentage of the Closing Common Merger Consideration.

All of the forgoing payments shall be made by wire transfer of immediately available funds, except for those payment identified in Sections 2.10(a)(v) and (vii) , which shall be delivered by Parent to Payroll Agent and distributed to such recipients by the Payroll Agent in accordance with Section 2.10(c) .

20

 

(b)            Post-Closing Payments .  From and after the Closing, Parent shall promptly (and in any event within five (5) Business Days after receipt) pay or cause to be paid to each Stockholder that delivers a completed and duly executed Letter of Transmittal and all applicable Certificates for cancellation to Parent at any time on or after the Closing Date, the amount (without interest) that would have been payable to such Stockholder pursuant to Section 2.10(a)(vi) if such Stockholder had delivered such Letter of Transmittal and all applicable Certificates prior to the Closing Date.  Following the Closing, any payments (including Escrow Distributions, payments of any Final Adjustment Surplus and any Earnout Payment) to be made to the Securityholders shall be made to the Representative for the benefit of the Securityholders.

(c)            Payroll Agent .  All payments required to be made under Section 2.10(a)(v) or (a)(vii) shall be made by Parent to the Surviving Corporation’s payroll processing company, Automatic Data Processing, Inc. (the “ Payroll Agent ”).

(d)            Withholding .  Each of the Payroll Agent, Surviving Corporation and Parent shall be entitled to deduct and withhold from the consideration otherwise payable to the Representative, any employee of the Company or Securityholder pursuant to this ARTICLE II any amounts the Payroll Agent, Surviving Corporation or Parent, as the case may be, is required to deduct and withhold with respect to payment under any provision of federal, state, local or foreign income Tax law.  If the Payroll Agent, Surviving Corporation or Parent, as the case may be, so withholds amounts, such amounts shall be treated for all purposes of this Agreement as having been paid to the employee of the Company or Securityholder in respect of which the Payroll Agent, Surviving Corporation or the Parent, as the case may be, made such deduction or withholding.  No interest shall accrue or be paid on the cash payable upon the delivery of Certificates or Option Surrender Agreements.

(e)            Dissenting Share Payments .  Any amounts to be paid to a Stockholder that is attributable to a Dissenting Share shall be available to pay the fair value of such Dissenting Share for which appraisal rights are perfected pursuant to Section 262 of the DGCL.  With respect to any amounts that are attributable to a Dissenting Share, such amounts shall be withheld by Parent for distribution to the holder thereof in accordance with Sections 2.6 and 2.8 following the first to occur, with respect to such Dissenting Share, of either (i) the withdrawal or loss of the right to appraisal pursuant to Section 262 of the DGCL or (ii) the perfection of appraisal rights pursuant to Section 262 of the DGCL.

(f)             Consideration Allocation .  Notwithstanding anything to the contrary contained herein or in any other Transaction Document, on no date shall the Aggregate Cash Payments with respect to Outstanding Common Shares (including Dissenting Shares) and Outstanding Options be less than twenty percent (20%) of the total Aggregate Cash Payments on such date.  If on any date the foregoing sentence would be violated by the consideration payable to the Securityholders on such date, then all payments on and after such date shall be made as follows until the Aggregate Cash Payments payable with respect to Outstanding Common Shares and Outstanding Options would exceed twenty percent (20%) of all Aggregate Cash Payments absent this Section 2.10(f) :  (a) eighty percent (80%) allocated to the holders of Outstanding Series A Preferred Shares and Outstanding Series B Preferred Shares (pro rata in accordance with the Series A Liquidation Preference and Series B Liquidation Preference of each such

21

 

Preferred Stockholder until payment in full of the Series A Liquidation Preference and Series B Liquidation Preference, and thereafter pro rata in accordance with each such Preferred Stockholder’s Applicable Percentage (excluding the Applicable Percentage of each Common Stockholder and Optionholder)) and (b) twenty percent (20%) allocated to the holders of Outstanding Common Shares and Outstanding Options (pro rata in accordance with each such Securityholder’s Applicable Percentage (excluding the Applicable Percentage of each Preferred Stockholder)).  From and after the time that the Aggregate Cash Payments payable with respect to Outstanding Common Shares and Outstanding Options would exceed twenty percent (20%) of all Aggregate Cash Payments absent Section 2.10(f) , all further payments shall be made to the Securityholders pro rata in accordance with each Securityholder’s Applicable Percentage.  As used herein, “ Aggregate Cash Payments ” means, as of any date, the aggregate cash amounts payable pursuant to this Agreement to the Securityholders (or to the Representative on behalf of the Securityholders) on such date with respect to Outstanding Shares and Outstanding Options (assuming that all Stockholders delivered a completed and duly executed Letter of Transmittal and all applicable Certificates for cancellation at least two (2) Business Days prior to the Closing Date).  The Company shall ensure that the Closing Capitalization Schedule completely and correctly reflects such consideration allocation.  The Representative shall ensure that all payments (including Escrow Distributions, payment of any Final Adjustment Surplus and any Earnout Payment) to be made after the Closing Date to the Representative on behalf of the Securityholders, to the extent distributed to the Securityholders, shall be distributed to the Securityholders in strict accordance with such consideration allocation.

2.11          Closing Adjustment Amount .  Not more than seven (7) Business Days, but in no event less than three (3) Business Days, before the Closing Date, the Company shall deliver to Parent and the Representative an estimated balance sheet of the Company prepared as of 11:59 p.m. on the date immediately prior to the Closing Date (the “ Closing Balance Sheet ”), which sets forth a good faith estimate of the following:  (a) the amount of Cash (“ Estimated Cash ”) and Debt (“ Estimated Debt ”) and (b) the components of Working Capital to enable the Representative to calculate the Working Capital Surplus or Working Capital Deficiency (the “ Estimated Working Capital Surplus ” or “ Estimated Working Capital Deficiency ,” as applicable).  The Closing Balance Sheet shall be prepared by the Company in accordance with this Agreement and GAAP applied in a manner consistent with the preparation of the Audited 2005 Financial Statements.  The Parent and its representatives shall have the right to participate in the preparation of the Closing Balance Sheet, and to object to the Closing Balance Sheet if it is materially incorrect or incomplete.

2.12          Final Adjustment Amount .

(a)            As promptly as practicable after the Closing Date (but in no event later than sixty (60) days after the Closing Date), Parent shall cause the Company to prepare and deliver to the Representative a balance sheet of the Company as of 11:59 p.m. on the date immediately prior to the Closing Date (the “ Final Balance Sheet ”), which shall set forth the following:  (i) the amount of Cash (“ Closing Cash ”) and Debt (“ Closing Debt ”) and (ii) the components of Working Capital (“ Closing Working Capital ”).  The Final Balance Sheet shall be prepared in accordance with this Agreement and GAAP applied in a manner consistent with the preparation of the Audited 2005 Financial Statements.  Following the delivery of the Final Balance Sheet to the Representative, Parent and the Surviving Corporation shall afford the

22

 

Representative and its representatives the opportunity to examine the Final Balance Sheet, and such supporting schedules, analyses, workpapers, and other underlying records or documentation as are reasonably necessary and appropriate.  Parent and the Surviving Corporation shall cooperate fully and promptly with the Representative and its representatives in such examination, including providing answers to questions asked by the Representative and its representatives, and Parent and the Surviving Corporation shall promptly make available to the Representative and its representatives any records under their reasonable control that are requested by the Representative and its representatives.

(b)            If within sixty (60) days following delivery of the Final Balance Sheet to the Representative, the Representative has not delivered to Parent written notice (the “ Objection Notice ”) of its objections to the Final Balance Sheet (such Objection Notice must contain a statement describing the basis of such objections), then Closing Cash, Closing Debt and Closing Working Capital, as applicable, as set forth in or derived from such Final Balance Sheet shall be deemed final and conclusive and shall be “ Final Cash ,” “ Final Debt ” and “ Final Working Capital ,” respectively.  If the Representative delivers the Objection Notice within such sixty (60)-day period, then Parent and the Representative shall endeavor in good faith to resolve the objections, for a period not to exceed fifteen (15) days from the date of delivery of the Objection Notice.  If at the end of the fifteen (15)-day period there are any objections that remain in dispute, then the remaining objections in dispute shall be submitted for resolution to a nationally known independent accounting firm to be selected jointly by the Representative and Parent within the following five (5) days or, if the Representative and Parent are unable to mutually agree within such five (5)-day period, such accounting firm shall be PricewaterhouseCoopers (such jointly selected accounting firm or PricewaterhouseCoopers, the “ Referee ”).  The Referee shall determine any unresolved items of Final Cash, Final Debt and Final Working Capital within thirty (30) days after the objections that remain in dispute are submitted to it.  If any remaining objections are submitted to the Referee for resolution, (i) each party shall furnish to the Referee such workpapers and other documents and information relating to such objections as the Referee may request and are available to that party or its Subsidiaries (or its independent public accountants) and will be afforded the opportunity to present to the Referee any material relating to the determination of the matters in dispute and to discuss such determination with the Referee; (ii) to the extent that a value has been assigned to any objection that remains in dispute, the Referee shall not assign a value to such objection that is greater than the greatest value for such objection claimed by either party or less than the smallest value for such objection claimed by either party; (iii) the determination by the Referee of Final Cash, Final Debt and Final Working Capital, as set forth in a written notice delivered to both parties and the Escrow Agent by the Referee, shall be made in accordance with this Agreement and shall be binding and conclusive on the parties and shall constitute an arbitral award that is final, binding and unappealable and upon which a judgment may be entered by a court having jurisdiction thereof; and (iv) fifty percent (50%) of the fees and expenses of the Referee shall be paid by the Parent and the remaining fifty percent (50%) of the fees and expenses of the Referee shall be paid by the Representative out of the Representative Holdback.

(c)            To the extent that the Final Adjustment Amount exceeds the Closing Adjustment Amount, such excess (the “ Final Adjustment Surplus ”) shall be paid by Parent to the Representative, on behalf of the Securityholders, within five (5) days of any such determination.  To the extent that the Final Adjustment Amount is less than the Closing

23

 

Adjustment Amount, such deficiency (the “ Final Adjustment Deficiency ”) shall be distributed to Parent from the Escrow Account.  Parent acknowledges and agrees that, to the extent that any differences between the Closing Balance Sheet and Final Balance Sheet are included in the determination of the Final Adjustment Surplus or Final Adjustment Deficiency, then such items may not form the basis for any claims for indemnification by any Parent Indemnified Person hereunder.  For all Tax purposes, any payment under this Section 2.12(c) shall be treated by Parent, the Surviving Corporation, the Securityholders and their respective Affiliates as an adjustment to the Merger consideration payable to the Securityholders pursuant to this Agreement.  The right of Parent to receive funds from the Escrow Account shall be the sole and exclusive remedy of Parent and the Surviving Corporation in the event that the Closing Adjustment Amount is greater than the Final Adjustment Amount.

2.13          Post-Closing Employee Retention Payments .  Promptly after the date that is six (6) months after the Closing Date (but in no event later than thirty (30) days thereafter), the Surviving Corporation shall prepare and deliver to the Representative a true and correct statement of (a) the amount of all Employee Retention Payments made on or prior to the six (6) month anniversary of the Closing Date (excluding Employee Retention Payments made on the Closing Date pursuant to Section 2.10(a)(v) ), and (b) the amount, if any, by which such amount is less than the amount of the accrual therefor on the Final Balance Sheet.  The amount, if any, determined by clause (b) above shall be paid by Parent to the Representative promptly (and in any event within five (5) days after the determination thereof).  For all Tax purposes, any payment under this Section 2.13 shall be treated by Parent, the Surviving Corporation, the Securityholders and their respective Affiliates as an adjustment to the Merger consideration payable to the Securityholders pursuant to this Agreement.

2.14          Earnout .  For the period from and including January 1, 2007 to and including December 31, 2007 (the “ Earnout Period ”), the Parent shall pay or cause to be paid to the Representative for the benefit of the Securityholders an amount to be calculated in accordance with the provisions of this Section 2.14 .

(a)            Determination of Bookings .  Promptly after the necessary documentation is available (but in no event later than March 31, 2008), the Parent will deliver to Representative a schedule of the Bookings for the Earnout Period (the “ Bookings Schedule ”), together with reasonable supporting documentation thereof.

(b)            Review of Bookings .  The Representative shall have sixty (60) days after receiving the Bookings Schedule to review and notify Parent of its approval or disapproval of same.  The Representative and Representative’s accountants shall have reasonable access during normal business hours of the Surviving Corporation to the Bookings Schedule working papers of Surviving Corporation and Surviving Corporation’s independent accountants, in accordance with and adhering to the reasonable policy and procedures of Surviving Corporation’s independent accountants for such requests, as well as such other information to the extent reasonably required to complete their timely review of the Bookings Schedule.  Parent and the Surviving Corporation shall cooperate fully and promptly with the Representative and its representatives in such examination, including providing answers to questions asked by the Representative and its representatives, and Parent and the Surviving Corporation shall promptly make available to the Representative and its representatives any records under their reasonable control that are

24

 

reasonably requested by the Representative and its representatives.  If within sixty (60) days following delivery of the Bookings Schedule to the Representative, the Representative has not delivered to Parent written notice of its objections to the Bookings Schedule (including a statement describing the basis of such objections), then Parent’s calculation of the Bookings Schedule shall be deemed final and conclusive.  If the Representative delivers an objection notice within such sixty (60) day period, then Parent and the Representative shall endeavor in good faith to resolve the objections, for a period not to exceed fifteen (15) days from the date of delivery of such objection notice.  If at the end of the fifteen (15) day period there are any objections that remain in dispute, then the remaining objections in dispute shall be submitted for resolution to the Referee in accordance with the procedures set forth in Section 2.12(b) and the determination of the Referee shall be binding and conclusive on the parties and shall constitute an arbitral award that is final, binding and unappealable and upon which a judgment may be entered by a court having jurisdiction thereof.

(c)            Calculation and Payment of Earnout .  Upon the determination of the final Bookings Schedule for the Earnout Period in accordance with the procedures set forth above, the Parent shall pay or cause to be paid to the Representative an amount equal to Five Million Dollars ($5,000,000) multiplied by a fraction (i) the numerator of which is the amount of Bookings during the Earnout Period less Fifty Five Million Dollars ($55,000,000) and (ii) the denominator of which is Fifteen Million Dollars ($15,000,000) (the “Earnout Payment” ); provided , that in no event shall such amount exceed Five Million Dollars ($5,000,000) or be less than Zero Dollars ($0).  Any payment made to the Representative pursuant to this Section 2.14(c) shall be made within seven (7) Business Days after determination of the final Bookings Schedule by wire transfer of immediately available funds to an account that is designated in writing by the Representative.

(d)            Separate Subsidiary .  During the Earnout Period, the Parent shall maintain sufficient records to account for all Bookings of the Surviving Corporation, and shall include in such records the Bookings from all relevant contracts of Parent and its Affiliates.  Parent shall use such records to calculate the Surviving Corporation’s Bookings, and shall include in calculating the Surviving Corporation’s Bookings (and any resulting Earnout Payment) any Bookings generated by the Surviving Corporation, and Bookings generated by Parent or Parent’s Affiliates (but only to the extent specifically provided in the definition of “Bookings”).

(e)            Earn-Out Covenants .  From and after the Closing and through the Earnout Period:  (i) the Parent shall maintain adequate records to account for the Bookings of the Surviving Corporation; (ii) the Parent, subject to the Delegation of Authority, shall cause the Surviving Corporation to operate the Surviving Corporation’s business in a manner reasonably consistent with Parent’s Standard Policies and Procedures (a copy of which is posted on the Parent’s intranet website); (iii) the Parent shall, and shall make reasonable commercial efforts to cause the Surviving Corporation to, remain in material compliance with all Applicable Laws (including but not limited to the FAR); (iv) the Parent shall refer (or cause to be referred) to the Surviving Corporation all new projects and contracts of Parent and its Subsidiaries that primarily utilize (A) the Surviving Corporation’s areas of specialized expertise or (B) the Surviving Corporation’s Intellectual Property; (v) the Parent shall maintain a reporting system that will account for the Bookings of the Surviving Corporation; (vi) the Parent shall make available to the Surviving Corporation during the Earnout Period (y) the sum of Two Hundred Sixty Two

25

 

Thousand Eight Hundred Eighty Eight Dollars ($262,888) for the Surviving Corporation to make reasonable and necessary capital expenditures (as calculated in accordance with the Company’s capitalization policy prior to Closing) during the Earnout Period and (z) normalized levels of working capital, assets and facilities; (vii) the Parent shall not cause the Surviving Corporation to reduce the number of its business development managers during the Earnout Period below the number of business development managers retained by the Company on September 1, 2006; (viii) the Parent shall cause the Surviving Corporation to structure the compensation package of such business development managers so it is, on a whole, not less favorable than the compensation package of such business development managers as of September 1, 2006; and (xi) the Parent shall not change the Surviving Corporation’s line of business during the Earnout Period in such a manner that would materially reduce the likelihood of the Company making Bookings.  From the date hereof, the Surviving Corporation shall not take any actions prior to the Earnout Period to delay what would otherwise be Bookings if they were entered into during the Earnout Period.

(f)             Sale of Surviving Corporation .  The Parent shall pay Five Million Dollars ($5,000,000) to the Representative if at any time after the Effective Time and on or prior to December 31, 2007 more than fifty percent (50%) of the voting securities or economic interests of the Surviving Corporation ceases to be owned by Parent or its Affiliates, the Surviving Corporation is otherwise no longer an Affiliate of Parent or all or substantially all of the assets of the Surviving Corporation are transferred or sold to any other Person; provided , however , that such amount shall not be due and payable to the extent that the Representative has consented in writing to such occurrence.  For the avoidance of doubt, it is the intent of the parties that a merger by Parent or United Industrial Corporation or the sale of any stock or substantially all of the assets of Parent or United Industrial Corporation shall not require a payment described in this Section 2.14(f) if at least fifty percent (50%) of the voting securities or economic interests of the Surviving Corporation continues to be owned by Parent or its Affiliates.

(g)            Delegation of Authority .  The Company and Representative acknowledge that they have received and reviewed a copy of the Delegation of Authority.  The Company and Representative acknowledge that the Delegation of Authority provides, among other things, for minimum profit thresholds with respect to Contracts and bids for Contracts of the Surviving Corporation.  Notwithstanding any other provision contained herein, the parties acknowledge and agree that after the Effective Time, the Surviving Corporation may not enter into any Contract or make any bid for any Contract that does not meet the parameters set forth in the Delegation of Authority without the express written consent of the chief executive officer of Parent.  From the date hereof until December 31, 2007, the Delegation of Authority may not be amended without the written consent of the Representative.

2.15          Escrow .

(a)            Escrow Amount .  On or prior to the Closing, the Representative, Parent and the Escrow Agent shall enter into the Escrow Agreement, subject only to the comments, if any, of the Escrow Agent as to its rights and obligations thereunder.  The sum of (i) Three Million Five Hundred Thousand Dollars ($3,500,000) (including all interest, dividends and other income earned thereon, the “ Escrow Amount ”), (ii) Four Hundred Thousand Dollars ($400,000) (the “Supplemental Escrow Amount” ), (iii) Four Hundred Twenty Thousand Dollars

26

 

($420,000) (including all interest, dividends and other income earned thereon, the “ Gilmore Escrow Amount ”) and (iv) Two Hundred Thousand Dollars ($200,000) (including all interest, dividends and other income earned thereon, the “ Mexico Lawsuit Escrow Amount ”) shall be deposited in escrow at Closing pursuant to Section 2.10(a)(ii) and shall be held in escrow pursuant to the terms of this Agreement and the Escrow Agreement.

(b)            Instructions to Escrow Agent .

(i)             The Representative and Parent covenant and agree to jointly instruct the Escrow Agent in writing, promptly (within five (5) Business Days) after the determination thereof, to make any disbursement required by Section 2.12(c) .

(ii)            The Representative covenants and agrees that at any time (A) a distribution to Parent is required pursuant to Section 2.12(c) or (B) the Securityholders are obligated to indemnify a Parent Indemnified Person for Parent Indemnification Claims under ARTICLE VIII , if requested by Parent, the Representative shall execute and deliver to the Escrow Agent joint written instructions with Parent to release to the Parent Indemnified Person such portion of the Escrow Amount as is necessary to satisfy such obligations.

2.16          Representative Holdback .  One Million Dollars ($1,000,0000) (the “ Representative Holdback ”) shall be paid at Closing pursuant to Section 2.10(a)(iii) to the Representative, and shall be held, used and disbursed by or at the direction of the Representative pursuant to the Representative Agreement, dated as of the date hereof, among the Representative and certain of the Stockholders.

2.17          Gilmore Escrow Amount .  If Mr. Leonard Gilmore becomes entitled to or is reasonably expected to become entitled to severance payments pursuant to Section 3 of the Executive Severance Agreement, effective as of April 16, 2006, as amended the date hereof (the “ Severance Agreement ”), between the Company and Mr. Gilmore after the date that is one hundred eighty (180) days after the Closing Date and on or prior to the date that is eighteen (18) months from the Closing Date, then Parent shall promptly send a notice to such effect to the Representative and the Escrow Agent.  If Parent does not send such a notice on or prior to the date that is eighteen (18) months after the Closing Date, Parent and the Representative will promptly (within five (5) Business Days) jointly instruct the Escrow Agent to make an Escrow Distribution of the entire Gilmore Escrow Amount to the Representative for the benefit of the Securityholders.  If Parent sends such a notice and Mr. Gilmore is entitled to severance payments under Section 3 of the Severance Agreement after the date that is one hundred eighty (180) days after the Closing Date and on or prior to the date that is eighteen (18) months from the Closing Date, then Parent and the Representative will promptly (within five (5) Business Days) jointly instruct the Escrow Agent to make a distribution of the entire Gilmore Escrow Amount to Parent; provided, however, that if the value of the aggregate payments made by Surviving Corporation to Leonard Gilmore pursuant to Section 3 of the Severance Agreement is less than the Gilmore Escrow Amount distributed to Parent, Parent shall promptly pay such difference to Representative for the benefit of the Securityholders.  Each of Parent and the Representative agree to execute and deliver joint written instructions to the Escrow Agent to give effect to the distributions set forth in this Section 2.17 .  Notwithstanding anything to the

27

 

contrary contained in this Agreement or the Escrow Agreement, the Gilmore Escrow Amount shall not be available to satisfy any other obligations of any party to this Agreement, except as expressly set forth in this Section 2.17 .

2.18          Mexico Lawsuit Escrow Amount .  At or prior to the Closing, the Company shall change the name of Symtx de Mexico, S.A. de C.V. so that it does not reference “Symtx” or any Affiliate of the Company or Parent, and shall transfer all of its ownership interests in such entity to a third party or parties, and such transferee(s) shall indemnify Company for all losses arising from or related to such entity.  The Mexico Lawsuit Escrow Amount shall be held by the Escrow Agent pursuant to the Escrow Agreement until the earlier to occur of the following, and then shall be distributed as follows:

(a)            If the Mexican Lawsuit entitled Lopez Alvarado et al. v. Symtx de Mexico, S.A. de C.V., International Symtx, LLC, Symmtrix, Inc. and Mr. Paul Hiller , before the 12th Conciliation and Arbitration Labor Court (Junta Especial No. 12 de Conciliacion y Arbitraje) in Nuevo Leon, Mexico, file number 09617/i/12/2002 (the “ Alvarado Suit ”) is forfeited or dismissed or prescribed as the result of the failure of the plaintiffs to take action within the required time period for the applicable statute of limitations, and the Representative or the Surviving Corporation obtains an opinion of local counsel confirming the forfeiture or dismissal or prescription of the Alvarado Suit (with both the identity of the counsel and the contents of the opinion being reasonably acceptable to Parent), then Parent and the Representative will promptly (within five (5) Business Days) jointly instruct the Escrow Agent to make a distribution of the entire Mexico Lawsuit Escrow Amount to the Representative for the benefit of the Securityholders;

(b)            If all claims against the Surviving Corporation brought in the Alvarado Suit are released pursuant to a settlement among all of the plaintiffs in the Alvarado Suit and the Surviving Corporation, then Parent and the Representative will promptly (within five (5) Business Days) jointly instruct the Escrow Agent to make distributions from the Mexico Lawsuit Escrow Amount (i) to Parent of the amount of all Losses of Parent and Surviving Corporation related to the Alvarado Suit and its settlement, and (ii) to the Representative on behalf of the Securityholders, the remaining amount, if any, of the Mexico Lawsuit Escrow Amount; and

(c)            If the judgment entered in the Alvarado Lawsuit is paid or otherwise satisfied in full, then Parent and the Representative will promptly (within five (5) Business Days) jointly instruct the Escrow Agent to make distributions from the Mexico Lawsuit Escrow Amount (i) to Parent of the amount of all Losses of Parent and Surviving Corporation related to the Alvarado Suit and the payment or satisfaction of its judgment, and (ii) to the Representative on behalf of the Securityholders, the remaining amount, if any, of the Mexico Lawsuit Escrow Amount.

Any action or claim by the plaintiffs made with respect to the Alvarado Suit, and any settlement thereof, shall be treated as a third party claim pursuant to Section 8.5 .   If Parent can make a claim for Losses under both this Section 2.18 and ARTICLE VIII, Parent agrees to have any such Losses satisfied pursuant to the terms of this Section 2.18 .  Each of Parent and the Representative agree to execute and deliver joint written instructions to the Escrow Agent to give effect to the distributions set forth in this Section 2.18 .  Notwithstanding anything to the contrary

28

 

contained in this Agreement or the Escrow Agreement, unless otherwise agreed to by Parent and the Representative in writing, the Mexico Lawsuit Escrow Amount shall not be available to satisfy any other obligations of any party to this Agreement, except as expressly set forth in this Section 2.18 .

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1            Representations and Warranties of the Company .  As of the date of this Agreement and as of the Effective Time (except to the extent such representations and warranties speak expressly as of an earlier date), the Company represents and warrants to Parent and the Merger Subsidiary as follows:

(a)            Good Standing and Other Matters .  The Company is validly existing and in good standing under the laws of the State of Delaware, has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, and is duly qualified to do business as a foreign corporation, in good standing to conduct business in each jurisdiction in which the business it is conducting, or the operation, ownership or leasing of its properties, makes such qualification necessary, other than in such jurisdictions where the failure so to qualify would not be reasonably likely to have a Material Adverse Effect.  Company Disclosure Schedule 3.1(a) contains a true and correct list of the jurisdictions in which the Company is qualified or registered to do business as a foreign corporation.  Copies of (i) the certificate of incorporation of the Company, including all amendments from the date of incorporation (the “ Certificate of Incorporation ”), (ii) the bylaws and minute books of the Company (containing the records of meetings of the stockholders and the board of directors), and (iii) the stock certificate books, stock transfer books and similar records of the Company have been made available for review by Parent and are true, correct and complete in all material respects.

(b)            Capitalization of the Company .  As of the date of this Agreement, the authorized capital stock of the Company consists of 200,000,000 shares of Common Stock and 30,000,000 shares of Preferred Stock, 14,589,552 shares of which are designated as Series A Preferred Stock, and 12,500,001 shares of which are designated as Series B Preferred Stock.  As of the date of this Agreement, (i) 53,486,820.5 shares of Common Stock are issued and outstanding; (ii) 14,589,552 shares of Series A Preferred Stock are issued and outstanding; and (iii) 12,500,001 shares of Series B Preferred Stock are issued and outstanding.  No bonds, debentures, notes or other instruments or evidence of indebtedness having the right to vote (or convertible into, or exercisable or exchangeable for, securities having the right to vote) on any matters on which the Company’s stockholders may vote are issued or outstanding.  All outstanding shares of Common Stock and Preferred Stock (i) are duly authorized, validly issued, fully paid and nonassessable, (ii) are held, to the Actual Knowledge of the Company, by their respective stockholders free and clear of any Liens and defects of title whatsoever, (iii) were issued on the date and are held of record by the Persons as set forth on Company Disclosure Schedule 3.1(b) , (iv) were not issued in violation of the preemptive rights of any Person or any Contract, Applicable Law (including federal and state securities laws) or judgment, decree or order of any Governmental Authority by which the Company at the time of issuance was bound,

29

 

and (v) are not subject to preemptive rights created by statute, the Certificate of Incorporation or bylaws of the Company or any agreement to which the Company is a party or is otherwise bound.  Except as set forth above or as set forth on Company Disclosure Schedule 3.1(b) or 3.1(c) as of the date of this Agreement, and except as set forth above or stated on the Closing Capitalization Schedule, on the Closing Date, (i) there are no outstanding shares of capital stock or other voting securities of the Company; (ii) there are no outstanding securities of the Company convertible into, or exchangeable or exercisable for, shares of capital stock or other voting securities of the Company; (iii) there are no outstanding options, warrants, calls, rights, commitments or agreements to which the Company is a party or by which it is bound, in any case obligating the Company to issue, deliver, sell, purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased, redeemed or acquired, shares of capital stock or other voting securities of the Company, or obligating the Company to grant, extend or enter into any such option, warrant, call, right, commitment or agreement; (iv) there are no outstanding contracts or other agreements of the Company, and to the Actual Knowledge of Company, any Stockholder or any other Person, to purchase, redeem or otherwise acquire any outstanding shares of the capital stock of the Company, or securities or obligations of any kind convertible into any shares of the capital stock of the Company; (v) except for dividends accrued with respect to the Preferred Stock in accordance with the Certificate of Incorporation, there are no dividends which have accrued or been declared but are unpaid on the capital stock of the Company; (vi) there are no outstanding or authorized stock appreciation, phantom stock, stock plans or similar rights with respect to the Company; and (vii) there are no voting trusts, proxies or other agreements or understandings with respect to the voting of the capital stock of the Company to which the Company, and to the Actual Knowledge of Company, any Stockholder or any other Person, is a party.  The Conversion Price (as defined in the Certificate of Incorporation) of each share of Preferred Stock is $0.10.  Since the issuance of any share of Preferred Stock, the Company has not taken any action, and no event has occurred, that could result in or has resulted in an adjustment of the Conversion Price of any share of Preferred Stock.  The Closing Capitalization Schedule shall be true, correct and complete as of the Closing Date.  The provisions of Section 2.10(f) comply in all respects with, and satisfies (and will satisfy) all obligations of the Company under, the Consideration Allocation Agreement, dated as of May 15, 2006, among the Company and certain Stockholders.

(c)            Options .  As of the date of this Agreement, there are 22,357,876 shares of Common Stock reserved for issuance under the Stock Option Plans of the Company.  Of those shares reserved for issuance, as of the date of this Agreement 11,360,500 shares are subject to outstanding Options and 10,447,376 shares are reserved for future grants.  As of the date of this Agreement, Company Disclosure Schedule 3.1(c) sets forth a true and complete list of the outstanding Options, listing thereon the respective vesting schedules and exercise prices.  Except as set forth on Company Disclosure Schedule 3.1(c) , all of the Options were issued pursuant to or are subject to the terms of the Stock Option Plans, and none of the Options are incentive stock options.  The Company never adopted the Symtx, Inc. 2002 Stock Option Plan, and no options were ever granted by the Company under such plan.  The cancellation and termination of all of the Options pursuant to this Agreement is in accordance with the terms and conditions of the Stock Option Plans and any other relevant option agreement or plan and no further action, other than that contemplated in this Agreement, shall be required for the cancellation and termination of the Options.  All of the Options have been granted with an exercise price per share no lower than the “fair market value” (as defined in the applicable plan) of one share of Common Stock on

30

 

the date of grant.  On the Closing Date, all Options that have not been previously exercised shall be terminated, void and of no further effect or consequence.  At least ten (10) days prior to the date hereof, Company delivered to each Optionholder an Option Surrender Agreement and related information package, the form of which had previously been approved by the Parent.

(d)            Authority .  At a meeting duly called and held on November 20, 2006, the board of directors of the Company (i) determined that this Agreement and the transactions contemplated hereby are advisable, fair to and in the best interests of the Company and the Stockholders, (ii) approved this Agreement and the transactions contemplated hereby (including the Merger) and (iii) recommended that this Agreement and the transactions contemplated hereby be approved and adopted by the Stockholders.  The Company has the requisite power and authority to execute and deliver this Agreement and the other Transaction Documents to which it is a party and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated herein and therein.  Upon the receipt of the consent of the Stockholders, as contemplated in the Recitals to this Agreement, the execution, delivery and performance of this Agreement and the other Transaction Documents by the Company and the consummation by the Company of the transactions contemplated herein or therein will have been duly authorized by all necessary corporate action on the part of the Company.  This Agreement and each of the other Transaction Documents to which the Company is or will be a party has been, or upon execution and delivery thereof will be, duly and validly executed and delivered by the Company and, assuming that this Agreement and the other Transaction Documents to which the Company is a party constitute the valid and binding agreement of the other parties hereto and thereto, constitute, or upon execution and delivery will constitute, the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms and conditions, except that the enforcement hereof and thereof may be limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors’ rights generally and (ii) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity).  The information contained in the cover letter to the Option Surrender Agreement and in the information package sent to the Stockholders pursuant to Section 4.4 (other than the information concerning Parent and Merger Subsidiary) is true and accurate.

(e)            No Conflict; Required Filings and Consents .  The execution, delivery and performance by the Company of this Agreement and the other Transaction Documents to which it is a party do not, and the consummation by the Company of the transactions contemplated herein and therein will not, (i) violate, conflict with or result in any breach of any provision of the Certificate of Incorporation or bylaws of the Company; (ii) except for Excluded Contracts and the Contracts set forth on, or incorporated by reference into, Company Disclosure Schedule 3.1(e) , violate, conflict with, require the Consent of any Person (other than a Governmental Authority) or result in a violation or breach of, or constitute a default (with or without due notice or lapse of time or both) under, any of the terms, conditions or provisions of any such Contract; (iii) subject to obtaining the Consents or making the registrations, declarations or filings set forth in the next sentence, violate in any respect any Applicable Law binding upon the Company or by which or to which a portion of the Company’s assets is bound; (iv) result in the imposition or creation of any Lien on any asset or capital stock of the Company.  No Consent of any Governmental Authority is required by the Company in connection with the execution, delivery and performance by the Company of this Agreement and the other

31

 

Transaction Documents to which it is a party or the consummation by the Company of the transactions contemplated herein or therein (including the Merger), except for (i) the filing of a Certificate of Merger with the Secretary of State of Delaware, (ii) notification requirements to Stockholders pursuant to the DGCL, (iii) the consent of the Stockholders as provided in the Certificate of Incorporation, and (iv) such other Consents, the failure of which to be obtained or made would not be reasonably likely to have a Material Adverse Effect.  Neither Company nor any of its agents, employees or representatives has issued any press release or made any public statement with respect to this Agreement or the transactions contemplated hereby.

(f)             Financial Statements; Absence of Certain Changes or Events .

(i)             Attached as Company Disclosure Schedule 3.1(f)(i) are (A) the audited consolidated balance sheet of the Company as of December 31, 2004, together with the audited consolidated statement of income, cash flows and stockholders’ equity of the Company for the year then ended, and the related notes thereto, accompanied by the reports thereon of Ernst & Young LLP, independent public accountants, (B) the audited consolidated balance sheet of the Company as of December 31, 2005, together with the audited consolidated statement of income, cash flows and stockholders’ equity of the Company for the year then ended, and the related notes thereto, accompanied by the reports thereon of BDO Seidman, LLP, independent public accountants (the “ Audited 2005 Financial Statements ”), and (C) the unaudited consolidated balance sheet of the Company as of October 31, 2006 (the “ Balance Sheet ”), together with the related unaudited consolidated statements of income, cash flows and stockholders’ equity of the Company for the nine (9)-month period then ended, certified by the chief financial officer or controller of the Company (such audited and unaudited financial statements collectively being referred to herein as the “ Financial Statements ”).  The Financial Statements, together with the notes thereto, have been prepared in accordance with GAAP (except that the unaudited Financial Statements do not contain all notes required by GAAP and are subject to normal year-end audit adjustments) applied on a consistent basis throughout the periods covered thereby (except to the extent disclosed therein or required by changes in GAAP) and fairly present in all material respects the consolidated financial position of the Company as of the dates thereof and the consolidated results of the operations of the Company for the respective periods indicated.  Except as described in the Financial Statements, there have been no changes in accounting polices (including revenue recognition policies), practices or procedures of the Company since December 31, 2004.

(ii)            Except as set forth on Company Disclosure Schedule 3.1(f)(ii) , there is no liability, contingent or otherwise, of the Company that is not reflected or reserved against in the Balance Sheet, other than liabilities that are either (A) liabilities incurred in the ordinary course of business and consistent with past practices of the Company since October 31, 2006 (the “ Balance Sheet Date ”); (B) contingent immaterial liabilities incurred in the ordinary course of business and consistent with past practices of the Company after the Balance Sheet Date other than claims, investigations or litigation;  or (C) Company Transaction Costs that will be paid on or before the Closing Date.

(iii)           Except as set forth on Company Disclosure Schedule 3.1(f)(iii), on the Closing Date there shall be no liability, contingent or otherwise, of the Company that is not reflected or reserved against in the Closing Balance Sheet, other than (A) Company Transaction

32

 

Costs that will be paid on the Closing Date and (B) contingent immaterial liabilities incurred in the ordinary course of business and consistent with past practices of the Company after the date hereof other than claims, investigations or litigation.

(iv)           Except as set forth on Company Disclosure Schedule 3.1(f)(iv) , since the Balance Sheet Date and prior to the execution of this Agreement, the Company has conducted its business in accordance with the historical and customary operating practices relating to the conduct of its business and there has not been:  (A) any material adverse change, or events which could reasonably be expected to result in a materially adverse change, in the assets, liabilities, business, financial condition or results of operations of the Company, (B) any damage, destruction, loss or casualty to material property or material assets of the Company or (C) any action taken of the type described in Exhibit K hereto

(v)            Except as set forth on Company Disclosure Schedule 3.1(f)(v) , from December 31, 2004 and through the Balance Sheet Date, there has not been any action taken of the type described in Sections (d) , (i) , (j) , (k) , (m) , (n) , (o) , (p) , (t) , (u) , (w) and (aa) of Exhibit K hereto, or any authorization, commitment or agreement to take any of the foregoing actions.

(vi)           The accounts payable of the Company are properly reflected on the Financial Statements and Closing Balance Sheet arose from bona fide transactions with unaffiliated third parties in the ordinary course of business consistent with past practice.  Each financial transaction is properly and accurately recorded on the books and records of the Company, and each document upon which entries in the Company’s books and records are based is complete and accurate in all respects.

(g)            Compliance with Applicable Laws .  Except as set forth on Company Disclosure Schedule 3.1(g) , the Company (i) has complied with, is in compliance with and has operated its business and maintained its assets in compliance with all Applicable Laws, and (ii) holds all permits, licenses, variances, exemptions, orders, franchises and approvals of all Governmental Authorities necessary for the lawful conduct of its business (the “ Company Permits ”).  Except as set forth on Company Disclosure Schedule 3.1(g) , the Company is in compliance with the terms of the Company Permits.  Except as set forth on Company Disclosure Schedule 3.1(g) , no investigation or review by any Governmental Authority with respect to the Company is pending or, to the Knowledge of the Company, threatened.  For purposes of this Section 3.1(g) , the term “Applicable Laws,” as used in clause (i) above, shall not include any Environmental Laws, any Applicable Laws relating to Taxes or the subject matters of Sections 3.1(h) , (k) , (l) or (n) .  The Company is not a party to or, to the Knowledge of the Company, bound by any order, judgment, decree or injunction of any Governmental Authority.

(h)            Absence of Litigation .  Except as set forth on Company Disclosure Schedule 3.1(h) , there is no claim, action, suit, inquiry, judicial or administrative proceeding, grievance or arbitration pending or, to the Knowledge of the Company, threatened against the Company by or before any arbitrator or Governmental Authority, nor are there any reviews or investigations relating to the Company pending or, to the Knowledge of the Company, threatened by or before any arbitrator or any Governmental Authority.

33

 

(i)             Owned Real Property .  The Company does not own or have any interest in any Real Property, other than interests in the Leased Real Property.

(j)             Leased Real Property .  Set forth on Company Disclosure Schedule 3.1(j) is a list of all Leased Real Property.  The Company has a valid leasehold interest in the Leased Real Property, free and clear of any Liens other than Permitted Liens.  Each lease set forth on Company Disclosure Schedule 3.1(j) is a valid and binding obligation of the Company and is in full force and effect.  Except as otherwise set forth on Company Disclosure Schedule