EXHIBIT 2.1
-----------
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
DATED AS OF MARCH 23, 2008
BY AND AMONG
L-1 IDENTITY SOLUTIONS, INC.
DOLOMITE ACQUISITION CO.
AND
DIGIMARC CORPORATION
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TABLE OF CONTENTS
PAGE
ARTICLE I THE
MERGER....................................................1
SECTION
1.1 The
Merger..............................................1
SECTION
1.2
Closing.................................................2
SECTION
1.3
Effective Time..........................................2
SECTION
1.4
Effects of the Merger...................................2
SECTION
1.5
Certificate of Incorporation and Bylaws of
the Surviving Corporation...............................2
SECTION
1.6
Directors and Officers of the Surviving
Corporation.............................................2
ARTICLE II EFFECT OF THE
MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES; COMPANY STOCK OPTIONS...........................3
SECTION
2.1 Effect
on Capital Stock.................................3
SECTION
2.2
Exchange of Certificates................................5
SECTION
2.3
Company Stock Options; Company Restricted
Stock; Employee Stock Purchase Plan.....................7
SECTION
2.4
Appraisal Rights........................................8
ARTICLE III REPRESENTATIONS AND
WARRANTIES OF THE COMPANY.................9
SECTION
3.1
Organization, Standing and Corporate Power..............9
SECTION
3.2
Capitalization.........................................10
SECTION
3.3
Authority; Noncontravention; Voting
Requirements...........................................11
SECTION
3.4
Governmental Approvals.................................12
SECTION
3.5
Company SEC Documents; Undisclosed
Liabilities............................................12
SECTION
3.6
Absence of Certain Changes or Events...................15
SECTION
3.7 Legal
Proceedings......................................15
SECTION 3.8
Compliance
With Laws; Permits..........................15
SECTION
3.9
Information Supplied...................................15
SECTION
3.10 Tax
Matters............................................16
SECTION
3.11 Employee
Benefits and Labor Matters....................18
SECTION
3.12
Environmental Matters..................................20
SECTION
3.13
Contracts..............................................22
SECTION
3.14 Government
Contracts...................................24
SECTION
3.15
Properties.............................................26
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SECTION
3.16
Intellectual Property..................................26
SECTION 3.17
Insurance;
Claims; Warranties..........................30
SECTION
3.18 Affiliate
Transactions.................................31
SECTION
3.19 Opinion of
Financial Advisor...........................31
SECTION
3.20 Brokers and
Other Advisors.............................31
SECTION
3.21 State
Takeover Statutes................................31
SECTION
3.22 Export
Controls........................................32
SECTION
3.23 Material
Customers and Suppliers.......................32
SECTION
3.24 Foreign
Corrupt Practices..............................32
SECTION
3.25 Rights
Plan............................................32
ARTICLE IV REPRESENTATIONS
AND WARRANTIES OF PARENT AND
MERGER SUB...................................................33
SECTION
4.1
Organization, Standing and Corporate Power.............33
SECTION
4.2
Capital Structure......................................33
SECTION
4.3
Authority; Noncontravention............................34
SECTION
4.4
Governmental Approvals.................................34
SECTION
4.5 Parent
SEC Documents; Undisclosed Liabilities..........35
SECTION
4.6
Information Supplied...................................37
SECTION
4.7
Ownership and Operations of Merger Sub.................37
SECTION
4.8
Brokers and Other Advisors.............................37
SECTION
4.9
Absence of Certain Changes or Events...................38
SECTION
4.10 Legal
Proceedings......................................38
SECTION
4.11 Compliance
With Laws; Permits..........................38
SECTION
4.12 Sufficient
Funds.......................................38
SECTION
4.13 No Vote
Required.......................................38
SECTION
4.14 Ownership
of Shares....................................39
SECTION
4.15 Material
Customers and Suppliers.......................39
SECTION
4.16 Export
Controls........................................39
ARTICLE V ADDITIONAL
COVENANTS AND AGREEMENTS..........................39
SECTION
5.1
Preparation of the Form S-4, the Form 10 and
the Proxy Statement;
Stockholder Meeting...............39
SECTION
5.2
Company Conduct of Business............................40
SECTION
5.3 Parent
Conduct of Business.............................44
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SECTION
5.4 No
Solicitation........................................45
SECTION
5.5
Reasonable Best Efforts................................48
SECTION
5.6 Public
Announcements...................................49
SECTION
5.7 Access
to Information; Confidentiality.................49
SECTION
5.8
Notification of Certain Matters........................50
SECTION
5.9
Securityholder Litigation..............................50
SECTION
5.10 Fees and
Expenses......................................51
SECTION
5.11
Spin-Off...............................................51
SECTION
5.12 Rule
16b-3.............................................51
SECTION
5.13 Employee
Benefits and Labor Matters....................51
SECTION
5.14
Indemnification, Exculpation and Insurance.............53
SECTION
5.15 Resignation
of Directors and Officers..................54
SECTION
5.16 NYSE
Listing...........................................54
SECTION
5.17 Rights
Plan............................................54
ARTICLE VI CONDITIONS
PRECEDENT.........................................54
SECTION
6.1
Conditions to Each Party's Obligation to
Effect the Merger......................................54
SECTION
6.2
Conditions to Obligations of Parent and
Merger Sub.............................................55
SECTION
6.3
Conditions to Obligation of the Company................56
SECTION
6.4
Frustration of Closing Conditions......................57
ARTICLE VII
TERMINATION..................................................57
SECTION
7.1
Termination............................................57
SECTION
7.2 Effect
of Termination..................................59
SECTION
7.3
Termination Fee........................................59
ARTICLE VIII
MISCELLANEOUS................................................61
SECTION
8.1 No
Survival............................................61
SECTION
8.2
Amendment or Supplement................................61
SECTION
8.3
Extension of Time; Waiver..............................62
SECTION 8.4
Assignment.............................................62
SECTION
8.5
Counterparts...........................................62
SECTION
8.6 Entire
Agreement; No Third-Party
Beneficiaries..........................................62
SECTION
8.7
Governing Law; Jurisdiction; Waiver of Jury
Trial..................................................62
SECTION
8.8
Specific Enforcement...................................63
SECTION
8.9
Notices................................................63
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SECTION
8.10
Severability...........................................64
SECTION
8.11
Definitions............................................65
SECTION
8.12
Interpretive Matters...................................72
EXHIBITS
Exhibit A Form
of Support Agreement
Exhibit B-1 Amended Charter
Exhibit B-2 Amended Bylaws
SCHEDULES
Schedule 5.2
Company Conduct of Business
Schedule 5.11
Spin-Off Agreements
Schedule 5.13(e)
Employee Allocation
Schedule 5.14(a)
Indemnification Agreements
Schedule 8.11(a)(i)
Company Knowledge
Schedule 8.11(a)(ii)
Parent Knowledge
iv
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of March 23, 2008
(this
"Agreement"), is by and among L-1 IDENTITY SOLUTIONS, INC., a
Delaware
corporation ("Parent"), DOLOMITE ACQUISITION CO., a Delaware
corporation and a
direct, wholly owned Subsidiary of Parent ("Merger Sub"), and
DIGIMARC
CORPORATION, a Delaware corporation (the "Company"). Certain terms
used in this
Agreement are used as defined in Section 8.11.
WHEREAS, the parties intend that Merger Sub be merged with and
into
the Company, with the Company surviving the merger on the terms and
subject to
the conditions set forth in this Agreement (the "Merger");
WHEREAS, the board of directors of the Company has (a)
determined
that it is in the best interests of the Company and its
stockholders, and
declared it advisable, to enter into this Agreement, (b) approved
the execution,
delivery and performance by the Company of this Agreement and the
consummation
of the transactions contemplated hereby, including the Merger, and
(c) resolved
to recommend adoption of this Agreement by the stockholders of the
Company;
WHEREAS, the boards of directors of Parent and Merger Sub have
approved this Agreement and declared it advisable for Parent and
Merger Sub,
respectively, to enter into this Agreement;
WHEREAS, simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of
Parent and
Merger Sub to enter into this Agreement, Parent and certain
stockholders of the
Company are entering into a support agreement substantially in the
form attached
hereto as Exhibit A (the "Support Agreement"), pursuant to which,
among other
things, such stockholders have agreed to vote to adopt this
Agreement and to
take certain other actions in furtherance of the Merger, in each
case, upon the
terms and subject to the conditions set forth therein; and
WHEREAS, in connection with the Merger, prior to the Closing,
the
Company shall (a) contribute certain assets relating to the
Company's Digital
Watermarking Business to a newly formed subsidiary ("Newco") and
(b) effect a
distribution of 100% of the common stock of Newco to the Company's
stockholders
in accordance with the conditions of this Agreement and the
Separation
Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties,
covenants and agreements contained in this Agreement, and intending
to be
legally bound hereby, Parent, Merger Sub and the Company hereby
agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
General
Corporation Law of the State of Delaware (the "DGCL"), at the
Effective Time
Merger Sub shall be merged with and into the Company, and the
separate corporate
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existence of Merger Sub shall thereupon cease, and the Company
shall be the
surviving corporation in the Merger (the "Surviving
Corporation").
SECTION 1.2 Closing. The closing of the Merger (the "Closing")
shall
take place at 9:00 a.m. (Pacific time), on a date to be specified
by the parties
(the "Closing Date"), which date shall be no later than the second
Business Day
after satisfaction or waiver of the conditions set forth in Article
VI (other
than those conditions that by their nature are to be satisfied at
the Closing,
but subject to the satisfaction or waiver of those conditions at
such time), at
the offices of Weil, Gotshal & Manges LLP, 201 Redwood Shores
Parkway, Redwood
Shores, California 94065, unless another time, date or place is
agreed to in
writing by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date the parties
shall file
with the Secretary of State of the State of Delaware a certificate
of merger,
executed in accordance with the relevant provisions of the DGCL
(the
"Certificate of Merger"). The Merger shall become effective upon
the filing of
the Certificate of Merger or at such later time as is agreed to by
the parties
hereto and specified in the Certificate of Merger (the time at
which the Merger
becomes effective is herein referred to as the "Effective
Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects
set forth in the DGCL. Without limiting the generality of the
foregoing, and
subject thereto, at the Effective Time, all the properties, rights,
privileges,
powers and franchises of the Company and Merger Sub shall vest in
the Surviving
Corporation, and all debts, liabilities and duties of the Company
and Merger Sub
shall become the debts, liabilities and duties of the Surviving
Corporation.
SECTION 1.5 Certificate of Incorporation and Bylaws of the
Surviving
Corporation.
(a) At the
Effective Time, the Company shall cause its certificate
of incorporation to be amended, as of the Effective Time, to read
in its
entirety as set forth in Exhibit B-1 attached hereto and, as so
amended, such
certificate of incorporation shall be the certificate of
incorporation of the
Surviving Corporation until thereafter amended as provided therein
or by
applicable Law.
(b) At the
Effective Time, the Company shall cause its bylaws to
be amended, as of the Effective Time, to read in their entirety as
set forth in
Exhibit B-2 attached hereto and, as so amended, such bylaws shall
be the bylaws
of the Surviving Corporation until thereafter amended as provided
therein or by
applicable Law.
SECTION 1.6 Directors and Officers of the Surviving
Corporation.
(a) The
directors of Merger Sub immediately prior to the Effective
Time shall be the initial directors of the Surviving Corporation
immediately
following the Effective Time, until their respective successors are
duly elected
or appointed and qualified or their earlier death, resignation or
removal in
accordance with the certificate of incorporation and bylaws of the
Surviving
Corporation.
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(b)
The officers of
Merger Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation immediately
following
the Effective Time until their respective successors are duly
appointed and
qualified or their earlier death, resignation or removal in
accordance with the
certificate of incorporation and bylaws of the Surviving
Corporation.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK; EXCHANGE OF
CERTIFICATES; COMPANY STOCK OPTIONS
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the
holder of any
shares of common stock, par value $0.001 per share, of the Company
("Company
Common Stock") or any shares of capital stock of Merger Sub:
(a) Capital
Stock of Merger Sub. Each issued and outstanding share
of capital stock of Merger Sub shall be converted into and become
one (1)
validly issued, fully paid and nonassessable share of common stock,
par value
$0.001 per share, of the Surviving Corporation. As of the Effective
Time, all
such shares of capital stock of Merger Sub shall be cancelled in
accordance with
this Section 2.1, and when so cancelled, shall no longer be issued
and
outstanding and shall automatically cease to exist, and each holder
of a
certificate representing any such shares of capital stock of Merger
Sub shall
cease to have any rights with respect thereto, except as set forth
in this
Section 2.1(a).
(b) Cancellation
of Treasury Stock and Parent-Owned Stock. Any
shares of Company Common Stock that are owned by the Company as
treasury stock,
and any shares of Company Common Stock owned by Parent or Merger
Sub, shall be
automatically cancelled and shall cease to exist and no
consideration shall be
delivered in exchange therefor.
(c) Conversion
of Company Common Stock. Each share of Company
Common Stock issued and outstanding immediately prior to the
Effective Time
(other than shares to be cancelled in accordance with Section
2.1(b) and
Dissenting Shares) shall be cancelled and converted into the right
to receive
the consideration set forth in this Section 2.1(c).
(i) The term
"Merger Consideration" shall mean:
(A) the right to
receive an amount in cash, without
interest, equal to $120,000,000 divided by the Closing Date
Company
Share Number (the "Cash Consideration Per Share"); and
(B) the right to
receive a fractional interest in a
share of common stock, par value $0.001 per share, of Parent
("Parent Common Stock") equal to the Exchange Ratio, plus cash
in
lieu of fractional shares pursuant to Section 2.2(f).
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(ii) The Exchange
Ratio shall be determined in the following
manner:
(A) If the
20-Day Average Price is less than or equal
to $14.00 (the "Cap Price"), and greater than or equal to
$11.00
(the "Floor Price"), the Exchange Ratio shall be equal to a
fraction:
(1) the
numerator of which is 10,245,902; and
(2) the
denominator of which is the number of
shares of Company Common Stock issued and outstanding
immediately
prior to the Effective Time (after giving effect to any option
exercises prior
to the Spin-Off pursuant to Section 2.3 and the
cancellation of any shares of Company Common Stock that are owned
by
the Company (as treasury stock or otherwise) in accordance with
Section 2.1(b), such amount being the "Closing Date Company
Share
Number").
(B) If the
20-Day Average Price is greater than the
Cap Price, the Exchange Ratio shall be equal to a fraction:
(1) the
numerator of which is the quotient
obtained by dividing (x) $143,442,628 by (y) the Closing Date
Company Share Number; and
(2) the
denominator of which is the 20-Day
Average Price.
(C) If the
20-Day Average Price is less than the Floor
Price, the Exchange Ratio shall be equal to a fraction:
(1) the
numerator of which is 11,300,000; and
(2) the denominator of which is
the Closing Date
Company Share Number;
provided, however, that notwithstanding anything in this
Agreement
to the contrary, Parent will not be obligated to issue more
than
11,300,000 shares of Parent Common Stock as Merger
Consideration.
The Exchange Ratio shall be rounded to the nearest 1/10,000, or if
there shall
not be a nearest 1/10,000, to the next highest 1/10,000. If between
the date of
this Agreement and the Effective Time the outstanding shares of
Parent Common
Stock or Company Common Stock shall have been changed into a
different number of
shares or a different class, by reason of any stock dividend,
subdivision,
reclassification, recapitalization, rights offering, split,
combination or
exchange of shares, the Exchange Ratio correspondingly shall be
adjusted to the
extent warranted to reflect such stock dividend, subdivision,
reclassification,
recapitalization, rights offering, split, combination or exchange
of shares.
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SECTION 2.2 Exchange of Certificates.
(a) Letter of
Transmittal. As soon as reasonably practicable after
the Effective Time, a bank or trust company to be designated by
Parent (the
"Exchange Agent") shall mail to each holder of record of shares of
Company
Common Stock immediately prior to the Effective Time (excluding any
shares of
Company Common Stock to be cancelled pursuant to Section 2.1(b) or
Dissenting
Shares) (i) a letter of transmittal (the "Letter of Transmittal")
which shall
specify that delivery shall be effected, and risk of loss and title
to the
Certificates shall pass, only upon delivery of such Certificates to
the Exchange
Agent and shall be in such form and have such other provisions as
Parent shall
reasonably specify and (ii) instructions for use in effecting the
surrender of
the Certificates in exchange for the Merger Consideration with
respect to the
shares of Company Common Stock formerly represented thereby.
(b) Deposit of
Merger Consideration. Promptly after the Effective
Time, Parent shall deposit with the Exchange Agent, for the benefit
of the
holders of shares of Company Common Stock for exchange in
accordance with this
Article II, (i) cash in an amount sufficient to pay the aggregate
Merger
Consideration that shall take the form of cash and (ii)
certificates or other
evidence representing the aggregate Merger Consideration that shall
take the
form of shares of Parent Common Stock (such certificates or other
evidence,
together with the cash deposited pursuant to clause (i), are
referred to herein
as the "Exchange Fund"). The Parent Common Stock into which Company
Common Stock
shall be converted pursuant to the Merger shall be deemed to have
been issued at
the Effective Time for purposes of entitlement to dividends
declared, if any,
after the Effective Time.
(c) Surrender of
Certificates. Upon surrender of a Certificate to
the Exchange Agent, together with the Letter of Transmittal, duly
executed, and
such other documents as Parent or the Exchange Agent shall
reasonably request,
the holder of such Certificate shall be entitled to receive in
exchange therefor
(i) a certified or bank cashier's check in the amount equal to the
aggregate
amount of the Merger Consideration consisting of cash which such
holder has the
right to receive pursuant to the provisions of this Article II
(including any
cash in lieu of fractional shares of Parent Common Stock pursuant
to Section
2.2(f)) and (ii) certificates for, or other evidence of, the Parent
Common Stock
which such holder has the right to receive (in each case without
interest and
less the amount of any required withholding taxes, if any, in
accordance with
Section 2.2(j)).
(d) Rules
Governing Exchange. Parent, in consultation with the
Company prior to the Effective Time, shall have the right to make
reasonable
rules, not inconsistent with the terms of this Agreement, governing
the validity
of Letters of Transmittal, the issuance and delivery of
certificates for, or
other evidence of, Parent Common Stock, and the payment of the
Cash
Consideration Per Share.
(e)
Distributions With Respect to Unexchanged Shares of Parent
Common Stock. No dividends or other distributions with respect to
shares of
Parent Common Stock, with a record date after the Effective Time,
shall be paid
to the holder of any unsurrendered Certificate with respect to the
shares of
Parent Common Stock they are entitled to receive until such
Certificate is
surrendered by such holder.
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(f) No
Fractional Shares. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the
surrender for
exchange of Certificates, no dividends or other distributions of
Parent shall
relate to such fractional share interests and such fractional share
interests
will not entitle the owner thereof to vote or to any rights of a
stockholder of
Parent. In lieu of such fractional share interests, Parent shall
pay to each
holder of a Certificate (upon surrender thereof as provided in this
Article II)
an amount in cash equal to the product obtained by multiplying (i)
the
fractional share interest to which such holder (after taking into
account all
shares of Company Common Stock held at the Effective Time by such
holder) would
otherwise be entitled by (ii) the per share closing price of Parent
Common Stock
on the NYSE as of the Closing Date.
(g) Lost, Stolen
or Destroyed Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the making of an
affidavit of
that fact by the Person claiming such Certificate to be lost,
stolen or
destroyed and, if required by Parent, the posting by such Person of
a bond, in
such reasonable amount as Parent may direct, as indemnity against
any claim that
may be made against it with respect to such Certificate, the
Exchange Agent will
issue, in exchange for such lost, stolen or destroyed Certificate,
the Merger
Consideration, any dividends or other distributions to which the
holder of such
Certificate would be entitled and cash in lieu of any fractional
shares of
Parent Common Stock to which such holder would be entitled pursuant
to Section
2.2(f), in each case pursuant to this Agreement.
(h) Termination
of Fund. Any portion of the Exchange Fund that
remains undistributed to the holders of the Certificates for one
hundred eighty
(180) days after the Effective Time shall be delivered to Parent,
upon demand,
and any holders of Certificates who have not theretofore complied
with this
Article II shall thereafter look only to Parent for payment of
their claim for
the Merger Consideration, any dividends or other distributions with
respect to
shares of Parent Common Stock and cash in lieu of any fractional
shares of
Parent Common Stock in accordance with this Article II. If any
Certificate shall
not have been surrendered immediately prior to such date on which
any Merger
Consideration (and all dividends or other distributions payable
with respect to
such shares and all cash payable in lieu of fractional shares
pursuant to
Section 2.2(f)) would otherwise escheat to or become property of
any
Governmental Authority, any such Merger Consideration (and all
dividends or
other distributions payable with respect to such shares and all
cash payable in
lieu of fractional shares pursuant to Section 2.2(f)) shall become,
to the
extent permitted by applicable Law, the property of Parent, free
and clear of
all claims or interest of any Person previously entitled
thereto.
(i) No
Liability. Notwithstanding any provision of this Agreement
to the contrary, none of the parties hereto, the Surviving
Corporation or the
Exchange Agent shall be liable to any Person in respect of any
shares of Parent
Common Stock (or dividends or other distributions with respect
thereto) or cash
in lieu of any fractional shares of Parent Common Stock or cash
from the
Exchange Fund, in each case delivered to a public official pursuant
to any
applicable abandoned property, escheat or similar Law.
(j) Withholding
Taxes. Parent and the Exchange Agent shall be
entitled to deduct and withhold from the consideration otherwise
payable to a
holder of shares of Company Common Stock pursuant to this Agreement
such amounts
as may be required to be deducted and withheld with respect to the
making of
such payment under the Code, or under any provision of Tax Law. To
the extent
6
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amounts are so withheld and paid over to the appropriate
Governmental Authority,
Parent and the Exchange Agent shall be treated as though they
withheld from the
type of consideration from which withholding is required an
appropriate amount
otherwise payable pursuant to this Agreement to any holder of
shares of Company
Common Stock in order to provide for such withholding obligation
and such
withheld amounts shall be treated for the purposes of this
Agreement as having
been paid to the former holder of the shares of Company Common
Stock. If
withholding is required from shares of Parent Common Stock, Parent
and the
Exchange Agent shall be treated as having sold such consideration
for an amount
of cash equal to the fair market value of such consideration at the
time of such
deemed sale and paid such cash proceeds to the appropriate
Governmental
Authority.
SECTION 2.3 Company Stock Options; Company Restricted Stock;
Employee Stock Purchase Plan.
(a) All
outstanding options to purchase shares of Company Common
Stock (the "Company Stock Options") shall become fully vested and
exercisable
immediately prior to the record date for the entitlement to a
distribution of
Newco shares in connection with the Spin-Off (the "Spin-Off Record
Date").
Holders of Company Stock Options shall be given the opportunity to
exercise
their Company Stock Options, effective immediately prior to the
Spin-Off Record
Date and conditioned upon the occurrence of the Spin-Off, and
thereby to become
stockholders of the Company, entitled to receive the Merger
Consideration for
each share of Company Common Stock as provided pursuant to Section
2.1(c) and
the distribution of Newco shares in connection with the Spin-Off.
All written
communications distributed generally to employees by or on behalf
of the Company
regarding such exercises will be mutually acceptable to Parent and
the Company.
(b) All Company
Stock Options that are outstanding immediately
prior to the Spin-Off that are not exercised in accordance with
Section 2.3(a)
shall be cancelled and null and void as of the Spin-Off.
(c) In
connection with the termination of the Company Stock Option
Plans, following the Spin-Off, no holder of Company Stock Options,
or any
participant in or beneficiary of the Company Stock Option Plans,
will have any
right to acquire or receive any equity securities of the Surviving
Corporation,
any Subsidiary thereof, or any consideration other than as
contemplated pursuant
to this Section 2.3.
(d) All
outstanding shares of Company Common Stock that are
subject to a Contract or other arrangement pursuant to which the
Company has the
right to repurchase, redeem or otherwise reacquire such shares of
Company Common
Stock, including by forfeiture (the "Company Restricted Stock"),
shall become
fully vested immediately prior to the Spin-Off and the holders
thereof shall
thereby become entitled to receive the Merger Consideration for
each share of
Company Common Stock as provided pursuant to Section 2.1(c). The
vesting of all
Company Restricted Stock pursuant to this Section 2.3(d) shall be
net of all
applicable withholding Taxes.
(e) All rights
outstanding under the Company's 1999 Employee Stock
Purchase Plan (the "Company Purchase Plan") shall be treated as set
forth in
Section 5.13.
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(f) Prior to the
Spin-Off, the board of directors of the Company
(or, if appropriate, any committee of the board of directors of the
Company
administering the Company Stock Option Plans) shall adopt such
resolutions or
take such other actions as may be required to effect the provisions
of this
Section 2.3.
SECTION 2.4 Appraisal Rights.
(a)
Notwithstanding anything in this Agreement to the contrary,
shares of Company Common Stock that are issued and outstanding
immediately prior
to the Effective Time and which are held by a stockholder who did
not vote in
favor of the Merger (or consent thereto in writing) and who is
entitled to
demand and properly demands appraisal of such shares pursuant to,
and who
complies in all respects with, the provisions of Section 262 of the
DGCL (the
"Dissenting Stockholders") shall not be converted into or be
exchangeable for
the right to receive the Merger Consideration (the "Dissenting
Shares"), but
instead such holder shall be entitled to payment of the appraised
value of such
shares of Company Common Stock as may be determined to be due to
such Dissenting
Stockholder pursuant to Section 262 of the DGCL (and at the
Effective Time, such
Dissenting Shares shall no longer be outstanding and shall
automatically be
cancelled and cease to exist, and such Dissenting Stockholder shall
cease to
have any rights with respect thereto, except the right to receive
the appraised
value of such Dissenting Shares in accordance with the provisions
of Section 262
of the DGCL), unless and until such holder shall have failed to
perfect or shall
have effectively withdrawn or lost rights to appraisal under the
DGCL. The Proxy
Statement shall include a notice complying with the provisions of
Section 262 of
the DGCL concerning the rights of stockholders to exercise
appraisal rights and
a copy of the provisions of Section 262 of the DGCL.
(b)
Notwithstanding the foregoing, if any Dissenting Stockholder
shall have failed to perfect or shall have effectively withdrawn or
lost such
right to seek payment of the appraised value of such Dissenting
Shares, such
Dissenting Stockholder's shares of Company Common Stock shall
thereupon be
treated as if they had been converted into and become exchangeable
for the right
to receive, as of the Effective Time, the Merger Consideration, in
accordance
with Section 2.1(c), without any interest thereon. Parent shall
promptly deposit
with the Exchange Agent any additional funds necessary to pay in
full the Merger
Consideration so due and payable to such Dissenting Stockholders
who have failed
to perfect or who shall have effectively withdrawn or lost such
right to seek
payment of the appraisal value of such Dissenting Shares.
(c) The Company
shall provide Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Common
Stock, attempted
withdrawals of such demands and any other instruments served
pursuant to the
DGCL and received by the Company and (ii) the opportunity to direct
all
negotiations and proceedings with respect to the exercise of
appraisal rights
under the DGCL. The Company shall not, except with the prior
written consent of
Parent or as otherwise required by applicable Law, make any payment
with respect
to any such exercise of appraisal rights or offer to settle or
settle any such
rights.
8
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub
that
except as disclosed (a) in the Company's Annual Report on Form 10-K
for the year
ended December 31, 2007, or the Company's Proxy Statement for its
2008 annual
meeting of stockholders, other than disclosure referred to in the
"Risk Factors"
and "Note Regarding Forward Looking Statements" sections thereof,
or (b) in the
disclosure schedule (with specific reference to the Section or
subsection of
this Agreement to which the information stated in such disclosure
schedule
relates) delivered by the Company to Parent simultaneously with the
execution of
this Agreement (the "Company Disclosure Schedule"):
SECTION 3.1 Organization, Standing and Corporate Power.
(a) Each of the
Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of
the
jurisdiction in which it is incorporated and has all requisite
corporate power
and authority necessary to own or lease all of its properties and
assets and to
carry on its business as it is now being conducted and as currently
proposed by
its management to be conducted. Each of the Company and its
Subsidiaries is duly
licensed or qualified to do business and is in good standing in
each
jurisdiction in which the nature of the business conducted by it or
the
character or location of the properties and assets owned or leased
by it makes
such licensing or qualification necessary, except where the failure
to be so
licensed, qualified or in good standing, individually or in the
aggregate, has
not had and would not reasonably be expected to have a Company
Material Adverse
Effect.
(b) Section
3.1(b) of the Company Disclosure Schedule lists all
Subsidiaries of the Company together with the jurisdiction of
organization of
each such Subsidiary. All the outstanding shares of capital stock
of, or other
equity interests in, each Subsidiary of the Company have been duly
authorized
and validly issued and are fully paid and nonassessable and are
owned directly
or indirectly by the Company free and clear of all liens, pledges,
charges,
mortgages, encumbrances, transfer restrictions, adverse rights or
claims and
security interests of any kind or nature whatsoever (including any
restriction
on the right to vote or transfer the same, except for such transfer
restrictions
of general applicability as may be provided under the Securities
Act of 1933, as
amended, and the rules and regulations promulgated thereunder (the
"Securities
Act"), and the "blue sky" Laws of the various States of the United
States)
(collectively, "Liens"). Except as set forth in Section 3.1(b) of
the Company
Disclosure Schedule, the Company does not own, directly or
indirectly, any
capital stock, voting securities or equity interests in any
Person.
(c) The Company
has delivered to Parent correct and complete
copies of its certificate of incorporation and bylaws (the "Company
Charter
Documents") and correct and complete copies of the certificates of
incorporation
and bylaws (or comparable organizational documents) of each of its
Subsidiaries
(the "Subsidiary Documents"), in each case as amended to the date
of this
Agreement. All such Company Charter Documents and Subsidiary
Documents are in
full force and effect and neither the Company nor any of its
Subsidiaries is in
violation of any of their respective provisions. The Company has
made available
to Parent and its representatives correct and complete copies of
the minutes
9
<PAGE>
(or, in the case of minutes that have not yet been finalized,
drafts thereof) of
all meetings of stockholders, the board of directors and each
standing committee
of the board of directors of the Company and each of its
Subsidiaries held since
December 31, 2005.
SECTION 3.2 Capitalization.
(a) The
authorized capital stock of the Company consists of
100,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred
stock, par value $.001 per share ("Company Preferred Stock"), of
which 300,000
shares have been designated Series A Company Preferred Stock, which
are issuable
upon exercise of the purchase rights (the "Company Rights")
pursuant to the
Company Rights Agreement. At the close of business on March 21,
2008, (i)
22,177,235 shares of Company Common Stock were issued and
outstanding, (ii) no
shares of Company Common Stock were held by the Company in its
treasury, (iii)
15,888,765 shares of Company Common Stock were reserved for
issuance under the
Company Stock Option Plans (of which 6,874,670 shares of Company
Common Stock
were subject to outstanding Company Stock Options granted under the
Company
Stock Option Plans), (iv) no shares of Company Preferred Stock were
issued or
outstanding and (v) 1,928,535 shares of Company Common Stock were
reserved for
issuance under the Company Purchase Plan. All outstanding shares of
Company
Common Stock have been duly authorized and validly issued and are
fully paid,
nonassessable and free of preemptive rights. Included in Section
3.2(a) of the
Company Disclosure Schedule are correct and complete lists, as of
March 21,
2008, of (A) all outstanding options or other rights to purchase or
receive
shares of Company Common Stock granted under the Company Stock
Option Plans or
otherwise, and, for each such option or other right, the number of
shares of
Company Common Stock subject thereto, the terms of vesting, the
grant and
expiration dates and exercise price thereof and the name of the
holder thereof
and (B) all outstanding shares of Company Restricted Stock and, for
each such
share of Company Restricted Stock, the terms of vesting, the grant
or purchase
dates, the repurchase price thereof and the name of the holder
thereof. All
Company Stock Options have an exercise price equal to no less than
the fair
market value of the underlying shares of Company Common Stock on
the date of
grant. Since March 21, 2008, the Company has not issued any shares
of its
capital stock, voting securities or equity interests, or any
securities
convertible into or exchangeable or exercisable for any shares of
its capital
stock, voting securities or equity interests, other than pursuant
to the
outstanding Company Stock Options referred to above in this Section
3.2(a).
Except as set forth above in this Section 3.2(a), and except as
permitted by
Section 5.2(b)(i)(A)(2), as of the date of this Agreement there are
not, and as
of the Effective Time there will not be, any shares of capital
stock, voting
securities or equity interests of the Company issued and
outstanding or any
subscriptions, options, warrants, calls, convertible or
exchangeable securities,
rights, commitments or agreements of any character providing for
the issuance of
any shares of capital stock, voting securities or equity interests
of the
Company, including any representing the right to purchase or
otherwise receive
any Company Common Stock.
(b) None of the
Company or any of its Subsidiaries has issued or
is bound by any outstanding subscriptions, options, warrants,
calls, convertible
or exchangeable securities, rights, commitments or agreements of
any character
providing for the issuance or disposition of any shares of capital
stock, voting
securities or equity interests of any Subsidiary of the Company.
Except for
shares of Company Restricted Stock, there are no outstanding
obligations of the
10
<PAGE>
Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire
any shares of capital stock, voting securities or equity interests
(or any
options, warrants or other rights to acquire any shares of capital
stock, voting
securities or equity interests) of the Company or any of its
Subsidiaries.
SECTION 3.3 Authority; Noncontravention; Voting Requirements.
(a) The Company
has all necessary corporate power and authority to
execute and deliver this Agreement and, subject to obtaining the
Company
Stockholder Approval, to perform its obligations hereunder and to
consummate the
Transactions. The execution, delivery and performance by the
Company of this
Agreement, and the consummation by it of the Transactions, have
been duly
authorized and approved by its board of directors, and except for
obtaining the
Company Stockholder Approval, no other corporate action on the part
of the
Company is necessary to authorize the execution, delivery and
performance by the
Company of this Agreement and the consummation by it of the
Transactions. This
Agreement has been duly executed and delivered by the Company and,
assuming due
authorization, execution and delivery hereof by the other parties
hereto,
constitutes a legal, valid and binding obligation of the Company,
enforceable
against the Company in accordance with its terms, except that
such
enforceability (i) may be limited by bankruptcy, insolvency,
fraudulent
transfer, reorganization, moratorium and other similar Laws of
general
application affecting or relating to the enforcement of creditors'
rights
generally and (ii) is subject to general principles of equity,
whether
considered in a proceeding at Law or in equity (the "Bankruptcy and
Equity
Exception").
(b) The
Company's board of directors, at a meeting duly called and
held, has unanimously (i) approved and declared advisable this
Agreement and the
Transactions, including the Merger, and (ii) resolved to recommend
that the
stockholders of the Company adopt this Agreement.
(c) Neither the
execution and delivery of this Agreement by the
Company nor the consummation by the Company of the Transactions,
nor compliance
by the Company with any of the terms or provisions hereof, will (i)
conflict
with or violate any provision of the Company Charter Documents or
any of the
Subsidiary Documents or (ii) assuming that the authorizations,
consents and
approvals referred to in Section 3.4 and the Company Stockholder
Approval are
obtained and the filings referred to in Section 3.4 are made, (A)
violate any
applicable Law, judgment, writ or injunction of any Governmental
Authority
applicable to the Company or any of its Subsidiaries or any of
their respective
properties or assets or (B) violate, conflict with, result in the
loss of any
benefit under, constitute a default (or an event which, with notice
or lapse of
time, or both, would constitute a default) under, result in the
termination of
or a right of termination or cancellation under, accelerate the
performance
required by, or result in the creation of any Lien upon any of the
respective
properties or assets of the Company or any of its Subsidiaries
under, any of the
terms, conditions or provisions of any written or oral loan or
credit agreement,
debenture, note, bond, mortgage, indenture, deed of trust, license,
lease,
contract or other agreement, instrument or obligation (each, a
"Contract") or
Permit to which the Company or any of its Subsidiaries is a party,
or by which
they or any of their respective properties or assets may be bound
or affected,
except, in the case of clause (B), (1) solely with respect to state
Laws
applicable to Government Contracts, to the Knowledge of the
Company, or (2) for
11
<PAGE>
such violations, conflicts, losses, defaults, terminations,
cancellations,
accelerations or Liens as, individually or in the aggregate, would
not
reasonably be expected to have a Company Material Adverse
Effect.
(d) The
affirmative vote (in person or by proxy) of the holders of
a majority of the outstanding shares of Company Common Stock at the
Company
Stockholders Meeting or any adjournment or postponement thereof in
favor of the
adoption of this Agreement (the "Company Stockholder Approval") is
the only vote
or approval of the holders of any class or series of capital stock
of the
Company or any of its Subsidiaries which is necessary to adopt this
Agreement
and approve the Transactions.
SECTION 3.4 Governmental Approvals. Except for (a) the filing
with
the SEC of a proxy statement relating to the Company Stockholders
Meeting (as
amended or supplemented from time to time, the "Proxy Statement"),
and other
filings required under, and compliance with other applicable
requirements of,
the Securities Exchange Act of 1934, as amended, and the rules and
regulations
promulgated thereunder (the "Exchange Act"), and the rules of the
Nasdaq Stock
Market, (b) the filing of the Certificate of Merger with the
Secretary of State
of the State of Delaware pursuant to the DGCL, (c) filings required
under, and
compliance with other applicable requirements of, the HSR Act and
(d) filings
required under, and compliance with other applicable requirements
of, non-U.S.
Laws intended to prohibit, restrict or regulate actions or
transactions having
the purpose or effect of monopolization, restraint of trade, harm
to competition
or effectuating foreign investment (collectively, "Foreign
Antitrust Laws"), no
consents or approvals of, or filings, declarations or registrations
with, any
Governmental Authority are necessary for the execution, delivery
and performance
of this Agreement by the Company and the consummation by the
Company of the
Transactions, other than such other consents, approvals, filings,
declarations
or registrations that, if not obtained, made or given, would not,
individually
or in the aggregate, reasonably be expected to impair in any
material respect
the ability of the Company to perform its obligations hereunder, or
prevent or
materially impede, interfere with, hinder or delay the consummation
of the
Transactions. Notwithstanding the foregoing, solely with respect to
state Laws
applicable to Government Contracts, the provisions of this Section
3.4 shall be
to the Knowledge of the Company.
SECTION 3.5 Company SEC Documents; Undisclosed Liabilities.
(a) The Company
has filed and furnished all required reports,
schedules, forms, certifications, prospectuses, and registration,
proxy and
other statements with the SEC since December 31, 2005 (collectively
and together
with all documents filed on a voluntary basis on Form 8-K, and in
each case
including all exhibits and schedules thereto and documents
incorporated by
reference therein, the "Company SEC Documents"). None of the
Company's
Subsidiaries is required to file periodic reports with the SEC
pursuant to the
Exchange Act. As of their respective effective dates (in the case
of Company SEC
Documents that are registration statements filed pursuant to the
requirements of
the Securities Act) and as of their respective SEC filing dates (in
the case of
all other Company SEC Documents), the Company SEC Documents
complied in all
material respects with the requirements of the Exchange Act or the
Securities
Act, as the case may be, applicable to such Company SEC Documents,
and none of
the Company SEC Documents as of such respective dates contained any
untrue
statement of a material fact or omitted to state a material fact
required to be
stated therein or necessary in order
12
<PAGE>
to make the statements therein, in light of the circumstances under
which they
were made, not misleading. Except to the extent that information
contained in
any Company SEC Document has been reviewed or superseded by a
later-filed
Company SEC Document, none of the Company SEC Documents contains
any untrue
statement of a material fact or omits to state any material fact
required to be
stated therein or necessary in order to make thestatements therein,
in light of
the circumstances under which they were made, not misleading. As of
the date of
this Agreement, there are no outstanding or unresolved comments
received from
the SEC staff with respect to the Company SEC Documents. To the
Knowledge of the
Company, none of the Company SEC Documents is the subject of
ongoing SEC review
or investigation.
(b) The
consolidated financial statements of the Company included
in the Company SEC Documents comply as to form in all material
respects with
applicable accounting requirements and the published rules and
regulations of
the SEC with respect thereto as of their respective dates, have
been prepared in
accordance with GAAP (except, in the case of unaudited quarterly
statements, as
permitted by the rules and regulations of the SEC) applied on a
consistent basis
during the periods involved (except as may be indicated in the
notes thereto)
and fairly present in all material respects the consolidated
financial position
of the Company and its consolidated Subsidiaries as of the dates
thereof and the
consolidated results of their operations and cash flows for the
periods then
ended (subject, in the case of unaudited quarterly statements, to
normal
year-end audit adjustments, none of which has been or will be,
individually or
in the aggregate, material to the Company and its Subsidiaries,
taken as a
whole). Without limiting the generality of the foregoing, with
respect to each
Annual Report on Form 10-K and each Quarterly Report on Form 10-Q
included in
the Company SEC Documents, the financial statements and other
financial
information included in such reports fairly present (within the
meaning of the
Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act")) in all
material respects
the financial condition and results of operations of the Company as
of, and for,
the periods presented in such Company SEC Documents.
(c) The Company
has established and maintains internal control
over financial reporting and disclosure controls and procedures (as
such terms
are defined in Rule 13a-15 and Rule 15d-15 under the Exchange Act);
such
disclosure controls and procedures are designed to ensure that
material
information relating to the Company, including its consolidated
Subsidiaries,
required to be disclosed by the Company in the reports that it
files or submits
under the Exchange Act is accumulated and communicated to the
Company's
principal executive officer and its principal financial officer to
allow timely
decisions regarding required disclosure; and such disclosure
controls and
procedures were determined to be effective in all material respects
to ensure
that information required to be disclosed by the Company in the
reports that it
filed under the Exchange Act since December 31, 2005, was recorded,
processed,
summarized and reported within the time periods specified in SEC
rules and
forms. The Company's principal executive officer and its principal
financial
officer have disclosed, based on their most recent evaluation, to
the Company's
auditors and the audit committee of the board of directors of the
Company (i)
all significant deficiencies in the design or operation of internal
controls
which could adversely affect the Company's ability to record,
process, summarize
and report financial data and have identified for the Company's
auditors any
material weaknesses in internal controls and (ii) any fraud,
whether or not
material, that involves management or other employees who have a
significant
role in the Company's internal controls. The principal executive
officer and the
principal financial officer of the Company have made all
certifications required
13
<PAGE>
by the Sarbanes-Oxley Act, the Exchange Act and any related rules
and
regulations promulgated by the SEC with respect to the Company SEC
Documents,
and the statements contained in such certifications are complete
and correct.
The management of the Company has completed its assessment of the
effectiveness
of the Company's internal control over financial reporting in
compliance with
the requirements of Section 404 of the Sarbanes-Oxley Act for the
year ended
December 31, 2007, and such assessment concluded that such controls
were
effective. To the Knowledge of the Company, there are no facts or
circumstances
that would prevent its chief executive officer and chief financial
officer from
giving the certifications and attestations required pursuant to the
rules and
regulations adopted pursuant to Section 404 of the Sarbanes-Oxley
Act, without
qualification, when next due.
(d) The Company
is in compliance in all material respects with the
provisions of Section 13(b) of the Exchange Act. Neither the
Company nor any of
its Subsidiaries nor, to the Company's Knowledge, any director,
officer, agent,
employee or other Person acting on behalf of the Company or any of
its
Subsidiaries has, in any material respect, (i) used any corporate
or other funds
for unlawful contributions, payments, gifts or entertainment, or
made any
unlawful expenditures relating to political activity, to government
officials or
others or established or maintained any unlawful or unrecorded
funds in
violation of Section 30A of the Exchange Act or (ii) accepted or
received any
unlawful contributions, payments, gifts or expenditures. The
Company is in
compliance, in all material respects, with the applicable listing
and corporate
governance rules and regulations of the Nasdaq Stock Market.
(e) Neither the
Company nor any of its Subsidiaries has any
liabilities or obligations of any nature (whether accrued,
absolute, contingent
or otherwise, whether known or unknown) whether or not required, if
known, to be
reflected or reserved against on a consolidated balance sheet of
the Company
prepared in accordance with GAAP or the notes thereto, except
liabilities and
obligations (i) as and to the extent reflected or reserved against
on the
audited balance sheet of the Company and its Subsidiaries as of
December 31,
2007 (the "Balance Sheet Date") (including the notes thereto)
included in the
Company SEC Documents filed by the Company and publicly available
prior to the
date of this Agreement (the "Filed Company SEC Documents"), (ii)
incurred in
connection with the transactions contemplated by this Agreement,
(iii) incurred
after the Balance Sheet Date in the ordinary course of business
consistent with
past practice or (iv) that would not, individually or in the
aggregate,
reasonably be expected to have a Company Material Adverse
Effect.
(f) Neither the
Company nor any of its Subsidiaries is a party to,
or has any commitment to become a party to, any joint venture,
off-balance sheet
partnership or any similar Contract (including any Contract or
arrangement
relating to any transaction or relationship between or among the
Company and any
of its Subsidiaries, on the one hand, and any unconsolidated
Affiliate,
including any structured finance, special purpose or limited
purpose entity or
Person, on the other hand, or any "off-balance sheet arrangements"
(as defined
in Item 303(a) of Regulation S-K of the SEC)), where the result,
purpose or
effect of such Contract is to avoid disclosure of any material
transaction
involving, or material liabilities of, the Company or any of its
Subsidiaries in
the Company's or such Subsidiary's published financial statements
or any Company
SEC Documents.
14
<PAGE>
SECTION 3.6 Absence of Certain Changes or Events. From the
Balance
Sheet Date to the date of this Agreement, there have not been any
events,
changes, occurrences or state of facts that, individually or in the
aggregate,
have had or would reasonably be expected to have a Company Material
Adverse
Effect. Except as disclosed in the Filed Company SEC Documents,
since the
Balance Sheet Date (a) the Company and its Subsidiaries have
carried on and
operated their respective businesses in all material respects in
the ordinary
course of business consistent with past practice and (b) neither
the Company nor
any of its Subsidiaries has taken any action that would be
prohibited by Section
5.2(b) if taken after the date hereof. Without limiting the
foregoing, except as
disclosed in the Filed Company SEC Documents, since the Balance
Sheet Date there
has not occurred any damage, destruction or loss (whether or not
covered by
insurance) of any material asset of the Company or any of its
Subsidiaries which
materially affects the use thereof.
SECTION 3.7 Legal Proceedings. Except as set forth on Section 3.7
of
the Company Disclosure Schedule or as would not reasonably be
expected to have,
individually or in the aggregate, a Company Material Adverse
Effect, there is no
pending or, to the Knowledge of the Company, threatened, legal,
administrative,
arbitral or other proceeding, claim, suit or action against, or
governmental or
regulatory investigation of, the Company or any of its
Subsidiaries, nor is
there any injunction, order, judgment, ruling or decree imposed
(or, to the
Knowledge of the Company, threatened to be imposed) upon the
Company, any of its
Subsidiaries or the assets of the Company or any of its
Subsidiaries, by or
before any Governmental Authority ("Legal Proceedings").
SECTION 3.8 Compliance With Laws; Permits.
(a) The Company
and its Subsidiaries are (and since December 31,
2005 have been) in compliance in all material respects with all
laws (including
common law), statutes, ordinances, codes, rules, regulations,
decrees and orders
of Governmental Authorities, (collectively, "Laws") applicable to
the Company or
any of its Subsidiaries, any of their properties or other assets or
any of their
businesses or operations.
(b) The Company
and each of its Subsidiaries holds all licenses,
franchises, permits, certificates, approvals and authorizations
from
Governmental Authorities, or required by Governmental Authorities
to be
obtained, in each case necessary for the lawful conduct of their
respective
businesses (collectively, "Permits"). The Company and its
Subsidiaries are (and
since December 31, 2005 have been) in compliance with the terms of
all Permits,
except for instances of noncompliance that, individually or in the
aggregate,
have not had and would not reasonably be expected to have a Company
Material
Adverse Effect. Since December 31, 2005, neither the Company nor
any of its
Subsidiaries has received written notice to the effect that a
Governmental
Authority (i) claimed or alleged that the Company or any of its
Subsidiaries was
not in material compliance with any Permit or (ii) was considering
the
amendment, termination, revocation or cancellation of any
Permit.
SECTION 3.9 Information Supplied. Subject to the accuracy of
the
representations and warranties of Parent and Merger Sub set forth
in Section
4.6, none of the information supplied (or to be supplied) in
writing by or on
behalf of the Company specifically for inclusion or incorporation
by reference
in (a) the registration statement on Form S-4 to be filed with the
SEC by Parent
15
<PAGE>
in connection with the issuance of shares of Parent Common Stock in
the Merger
(as amended or supplemented from time to time, the "Form S-4")
will, at the time
the Form S-4, or any amendment or supplement thereto, is filed with
the SEC or
at the time it becomes effective under the Securities Act, contain
any untrue
statement of a material fact or omit to state any material fact
required to be
stated therein or necessary in order to make the statements made
therein, in
light of the circumstances under which they are made, not
misleading, (b) the
registration statement on Form 10 to be filed with the SEC by the
Company in
connection with the issuance of shares of Newco common stock in the
Spin-Off (as
amended or supplemented from time to time, the "Form 10") will, at
the time the
Form 10, or any amendment or supplement thereto, is filed with the
SEC or at the
time it becomes effective under the Exchange Act, contain any
untrue statement
of a material fact or omit to state any material fact required to
be stated
therein or necessary in order to make the statements made therein,
in light of
the circumstances under which they are made, not misleading and (c)
the Proxy
Statement will, on the date it is first mailed to stockholders of
the Company,
and at the time of the Company Stockholders Meeting, contain any
untrue
statement of a material fact or omit to state any material fact
required to be
stated therein or necessary in order to make the statements
therein, in light of
the circumstances under which they are made, not misleading. Each
of the Form 10
and Proxy Statement will comply as to form in all material respects
with the
applicable requirements of the Securities Act and the Exchange
Act.
Notwithstanding the foregoing, the Company makes no representation
or warranty
with respect to information supplied by or on behalf of Parent or
Merger Sub for
inclusion or incorporation by reference in any of the foregoing
documents.
SECTION 3.10 Tax Matters.
(a) Each of the
Company and its Subsidiaries has timely filed, or
has caused to be timely filed on its behalf (taking into account
any extension
of time within which to file), all material Tax Returns required to
be filed by
it, and all such filed Tax Returns are correct and complete in all
material
respects. All material amounts of Tax required to be paid by the
Company or any
of its Subsidiaries have been timely paid.
(b) Each of the
Company and its Subsidiaries has complied in all
material respects with all applicable Laws relating to the payment
and
withholding of Taxes and has duly and timely withheld and paid over
to the
appropriate Governmental Authority all material amounts required to
be so
withheld and paid under all applicable Laws.
(c) The most
recent financial statements contained in the Filed
Company SEC Documents reflect an adequate reserve for all Taxes
payable by the
Company and its Subsidiaries for all taxable periods and portions
thereof
through the date of such financial statements.
(d) All
deficiencies asserted or assessments made as a result of
any examinations by any Governmental Authority of the Tax Returns
of, or
including, the Company or any of its Subsidiaries have been fully
paid, and
there are no other audits or investigations by any Governmental
Authority in
progress, nor has the Company or any of its Subsidiaries received
any notice
from any Governmental Authority that it intends to conduct such an
audit or
investigation.
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(e) Neither the
Company nor any of its Subsidiaries is subject to
any private letter ruling of the IRS or comparable rulings of any
Governmental
Authority.
(f) Neither the
Company nor any of its Subsidiaries is a party to
any contract, agreement, plan or other arrangement that,
individually or
collectively, could give rise to the payment of any amount which
would not be
deductible by reason of Section 162(m) or Section 280G of the Code
or would be
subject to withholding under Section 4999 of the Code.
(g) The Company
has made available to Parent correct and complete
copies of (i) all income and franchise Tax Returns of the Company
and its
Subsidiaries for the preceding three (3) taxable years and (ii) any
audit report
issued within the last three (3) years (or otherwise with respect
to any audit
or proceeding in progress) relating to income and franchise Taxes
of the Company
or any of its Subsidiaries.
(h) Neither the
Company nor any of its Subsidiaries nor any other
Person on their behalf has (i) agreed to or is required to make any
adjustments
pursuant to Section 481(a) of the Code or any similar provision of
Law or has
any knowledge that any Governmental Authority has proposed any such
adjustment,
or has any application pending with any Governmental Authority
requesting
permission for any changes in accounting methods that relate to the
Company or
any of its Subsidiaries, (ii) executed or entered into a closing
agreement
pursuant to Section 7121 of the Code or any similar provision of
Law with
respect to the Company or any of its Subsidiaries, (iii) requested
any extension
of time within which to file any Tax Return, which Tax Return has
since not been
filed, (iv) granted any extension for the assessment or collection
of Taxes,
which Taxes have not since been paid, or (v) granted to any Person
any power of
attorney that is currently in force with respect to any Tax
matter.
(i) As of
December 31, 2007, the Company had net operating loss
carryovers for federal income Tax purposes of $114.6 million to
offset future
taxable income subject to section 382 of the Code; provided,
however, that the
Company makes no representation or warranty concerning the
application of any
limitations on the utilization of such net operating loss
carryovers.
(j) For purposes
of this Agreement: (i) "Tax" or "Taxes" means (A)
all federal, state, local or foreign taxes, charges, fees, imposts,
levies or
other assessments, including all net income, gross receipts,
capital, sales,
use, ad valorem, value added, transfer, franchise, profits,
inventory, capital
stock, license, withholding, payroll, employment, social security,
unemployment,
excise, severance, stamp, occupation, property and estimated taxes,
customs
duties, fees, assessments and charges of any kind whatsoever, (B)
all interest,
penalties, fines, additions to tax or additional amounts imposed by
any
Governmental Authority in connection with any item described in
clause (A), and
(C) any transferee liability in respect of any items described in
clauses (A)
and/or (B) payable by reason of contract, assumption, transferee
liability,
operation of Law, Treasury Regulation Section 1.1502-6(a) (or any
predecessor or
successor thereof or any analogous or similar provision under Law)
or otherwise
and (ii) "Tax Returns" means any return, report, claim for refund,
estimate,
information return or statement or other similar document relating
to or
required to be filed with any Governmental Authority with respect
to Taxes,
including any schedule or attachment thereto, and including any
amendment
thereof.
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SECTION 3.11 Employee Benefits and Labor Matters.
(a) Section
3.11(a) of the Company Disclosure Schedule sets forth
a correct and complete list of: (i) all "employee benefit plans"
(as defined in
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended
("ERISA")), (ii) all other material employee benefit plans,
policies, agreements
or arrangements, and (iii) all material payroll practices,
including employment,
consulting, termination, severance, retention, change in control or
other
compensation agreements, or retirement, bonus or other incentive
compensation,
stock purchase, equity or equity-based compensation, deferred
compensation,
change in control, severance pay, sick leave, vacation pay, loans,
salary
continuation for disability, life insurance, educational assistance
and employee
assistance plans, policies, agreements or arrangements with respect
to which the
Company or any of its Subsidiaries has any material obligation or
liability,
contingent or otherwise, for current or former employees,
consultants or
directors of the Company or any of its Subsidiaries (collectively,
the "Company
Plans"). Neither the Company nor any of its Subsidiaries and any
trade or
business (whether or not incorporated) which is or at any time
during the last
six (6) years was under common control, or which is or during the
last six (6)
years was treated as a single employer, with any of them under
Section 414(b),
(c), (m) or (o) of the Code has in the last six (6) years (and
while treated as
a single employer or as being under common control with the Company
or any of
its Subsidiaries) sponsored, maintained, contributed or been
obligated to
contribute to any "employee pension plans", as defined in Section
3(2) of ERISA,
subject to Title IV of ERISA or Section 412 of the Code, including
any
multiemployer plan, as defined in Section 4001(a)(3) of ERISA.
(b) Except as
set forth on Section 3.11(b) of the Company
Disclosure Schedule, correct and complete copies of the following
documents with
respect to each of the Company Plans (other than a "multiemployer
plan," as
defined in Section 3(37) or 4001(a)(3) of ERISA) have been
delivered to Parent
by the Company to the extent applicable: (i) the plan document as
currently in
effect and any related trust documents, insurance contracts or
other funding
arrangements (all as currently in effect), (ii) the two (2) most
recent Forms
5500 and all schedules thereto, (iii) the two (2) most recent
actuarial reports,
if any, (iv) the most recent IRS determination letter, (v) the most
recent
summary plan description and (vi) written summaries of all
non-written Company
Plans.
(c) The Company
Plans have been maintained in all material
respects in accordance with their terms and with all applicable
provisions of
ERISA, the Code and other Laws (including rules and regulations
thereunder), and
the Company and its Subsidiaries have performed and complied in all
material
respects with all of their obligations under or with respect to
each Company
Plan. To the Knowledge of the Company, except as would not
reasonably be
expected to result in a Company Material Adverse Effect, no
fiduciary has any
liability for breach of fiduciary duty or any other failure to act
or comply in
connection with the administration or investment of the assets of
any Company
Plan.
(d) Each of the
Company Plans intended to qualify under Section
401 of the Code (i) is the subject of an unrevoked favorable
determination
letter from the IRS with respect to such Company Plan's qualified
status under
the Code, (ii) has remaining a period of time under the Code or
applicable
Treasury regulations or IRS pronouncements in which to request, and
make any
amendments necessary to obtain, such a letter from the IRS or (iii)
is a
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<PAGE>
prototype plan or volume submitter plan entitled under applicable
IRS guidance
to rely on the favorable opinion or advisory letter issued by the
IRS to the
sponsor of such prototype or volume submitter plan. To the
Knowledge of the
Company, nothing has occurred with respect to the operation of any
such Company
Plan that would reasonably be expected to cause the loss of such
qualification
or exemption, thereby resulting in a material liability to the
Company.
(e) Each Company
Plan that is a "nonqualified deferred
compensation plan" (as defined for purposes of Section 409A(d)(1)
of the Code)
has been operated since January 1, 2005 in good faith compliance
with Section
409A of the Code and all IRS guidance promulgated thereunder, to
the extent
applicable to such Company Plan.
(f) Except as
would not result in a material liability to the
Company, all contributions (including all employer contributions
and employee
salary reduction contributions) required to have been made under
any of the
Company Plans (including workers compensation) to any funds or
trusts
established thereunder or in connection therewith have been made by
the due date
thereof (including any valid extension), and all contributions for
any period
ending on or before the Closing Date that are not yet due will have
been paid or
sufficient accruals for such contributions and other payments in
accordance with
GAAP are duly and fully provided for on the balance sheet.
(g) There are no
pending actions, claims or lawsuits (other than
routine benefit claims) that have been asserted or instituted
against the
Company Plans, the assets of any of the trusts under the Company
Plans, the
sponsor or administrator of any of the Company Plans, or, to the
Knowledge of
the Company, any fiduciary of the Company Plans with respect to the
operation of
any of the Company Plans (nor, to the Knowledge of the Company, is
there a
reasonable basis for any such action, claim or lawsuit), which if
decided
adversely to the Company would reasonably be expected to result in
a Company
Material Adverse Effect.
(h) None of the
Company Plans provides for post-employment life or
health insurance, benefits or coverage for any participant or any
beneficiary of
a participant, except as may be required under applicable Law,
including,
without limitation, the Consolidated Omnibus Budget Reconciliation
Act of 1985,
as amended ("COBRA"), or coverage through the last day of the month
following
the date of termination of employment.
(i) Except as
required by applicable Law, neither the execution
and delivery of this Agreement nor the consummation of the
transactions
contemplated hereby will, either alone or together with other
event(s), (i)
result in any payment becoming due to any Employee, (ii) increase
any benefits
otherwise payable under any Company Plan, (iii) result in the
acceleration of
the time of payment, funding or vesting of any such benefits under
any Company
Plan, (iv) require any contributions or payments to fund any
obligations under
any Company Plan or (v) limit the right to merge, amend or
terminate any Company
Plan.
(j) To the
Knowledge of the Company, the Company and its
Subsidiaries have reasonably classified for all purposes (including
for all Tax
purposes and for purposes of determining eligibility and benefits
under any
Company Plan) all employees, leased employees, consultants and
independent
contractors, and have withheld and paid all applicable Taxes and
made all
required filings in connection with services provided by such
persons. Each
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<PAGE>
independent contractor under contract with the Company or any of
its
Subsidiaries has executed a written independent contractor
agreement.
(k) None of the
employees of the Company or its Subsidiaries is
represented in his or her capacity as an employee of the Company or
any of its
Subsidiaries by any labor organization. Neither the Company nor any
of its
Subsidiaries has recognized any labor organization, nor has any
labor
organization been elected as the collective bargaining agent of any
employees,
nor has the Company or any of its Subsidiaries entered into any
collective
bargaining agreement or union contract recognizing any labor
organization as the
bargaining agent of any employees. There is no union organization
activity
involving any of the employees of the Company or any of its
Subsidiaries pending
or, to the Knowledge of the Company, threatened, nor has there ever
been union
representation involving any of the employees of the Company or any
of its
Subsidiaries. There is no picketing pending or, to the Knowledge of
the Company,
threatened, and there are no strikes, slowdowns, work stoppages,
other job
actions, lockouts, arbitrations, grievances or other labor disputes
involving
any of the employees of the Company or any of its Subsidiaries
pending or, to
the Knowledge of the Company, threatened. There are no complaints,
charges or
claims against the Company or any of its Subsidiaries pending or,
to the
Knowledge of the Company, threatened that could be brought or filed
with any
Governmental Authority or arbitrator based on, arising out of, in
connection
with, or otherwise relating to the employment or termination of
employment or
failure to employ by the Company or any of its Subsidiaries of any
individual.
The Company and its Subsidiaries are in compliance with all Laws
relating to the
employment of labor, including all such Laws relating to wages,
hours, the
Worker Adjustment and Retraining Notification Act and any similar
state or local
"mass layoff" or "plant closing" law ("WARN"), collective
bargaining,
discrimination, civil rights, safety and health, workers'
compensation and the
collection and payment of withholding and/or social security Taxes
and any
similar Tax, except for immaterial non-compliance. There has been
no "mass
layoff" or "plant closing" (as defined by WARN) with respect to the
Company or
any of its Subsidiaries during the six-month period prior to the
Closing.
SECTION 3.12 Environmental Matters.
(a) Except for
those matters that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Company
Material Adverse Effect, (i) each of the Company and its
Subsidiaries is, and
has been, in compliance with all applicable Environmental Laws,
(ii) there is no
investigation, suit, claim, action or proceeding relating to or
arising under
Environmental Laws that is pending or, to the Knowledge of the
Company,
threatened against or affecting the Company or any of its
Subsidiaries or any
real property currently or, to the Knowledge of the Company,
formerly owned,
operated or leased by the Company or any of its Subsidiaries, (iii)
neither the
Company nor any of its Subsidiaries has received any notice of or
entered into
or assumed by Contract or operation of Law or otherwise, any
obligation,
liability, order, settlement, judgment, injunction or decree
relating to or
arising under Environmental Laws and (iv) no facts, circumstances
or conditions
exist with respect to the Company or any of its Subsidiaries or any
property
currently (or, to the Knowledge of the Company, formerly) owned,
operated or
leased by the Company or any of its Subsidiaries or any property to
or at which
the Company or any of its Subsidiaries transported or arranged for
the disposal
or treatment of Hazardous Materials that would reasonably be
expected to result
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<PAGE>
in the Company and its Subsidiaries incurring Environmental
Liabilities. The
matters set forth in Section 3.12(a) of the Company Disclosure
Schedule,
individually or in the aggregate, have not had and would not
reasonably be
expected to have a Company Material Adverse Effect.
(b) For purposes
of this Agreement:
(i)
"Environmental Laws" means all Laws relating in any way
to the environment, preservation or reclamation of natural
resources, the presence, management or Release of, or exposure
to,
Hazardous Materials, or to human health and safety, including
the
Comprehensive Environmental Response, Compensation and Liability
Act
(42 U.S.C. ss. 9601 et seq.), the Hazardous Materials
Transportation
Act (49 U.S.C. ss. 5101 et seq.), the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.), the Clean Water Act
(33
U.S.C. ss. 1251 et seq.), the Clean Air Act (42 U.S.C. ss. 7401
et
seq.), the Safe Drinking Water Act (42 U.S.C. ss. 300f et seq.),
the
Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.), the
Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss.
136
et seq.), and the Occupational Safety and Health Act (29 U.S.C.
ss.
651 et seq.), each of their state and local counterparts or
equivalents, each of their foreign and international
equivalents,
and any transfer of ownership notification or approval statute
(including the Industrial Site Recovery Act (N.J. Stat. Ann.
ss.
13:1K-6 et seq.), as each has been amended and the regulations
promulgated pursuant thereto.
(ii) "Environmental
Liabilities" means, with respect to any
Person, all liabilities, obligations, responsibilities,
remedial
actions,
losses, damages, punitive damages, consequential damages,
treble damages, costs and expenses (including all reasonable
fees,
disbursements and expenses of counsel, experts and consultants
and
costs of investigation and feasibility studies), fines,
penalties,
sanctions and interest incurred as a result of any claim or
demand
by any other Person or in response to any violation of
Environmental
Law, whether known or unknown, accrued or contingent, whether
based
in contract, tort, implied or express warranty, strict
liability,
criminal or civil statute, to the extent based upon, related to,
or
arising under or pursuant to any Environmental Law,
environmental
permit, order or agreement with any Governmental Authority or
other
Person, which relates to any environmental, health or safety
condition, violation of Environmental Law or a Release or
threatened
Release of
Hazardous Materials.
(iii) "Hazardous Materials" means any material, substance of
waste that is regulated, classified, or otherwise characterized
under or pursuant to any Environmental Law as "hazardous",
"toxic",
a "pollutant", a "contaminant", "radioactive" or words of
similar
meaning or effect, including petroleum and its by-products,
asbestos, polychlorinated biphenyls, radon, mold, urea
formaldehyde
insulation, chlorofluorocarbons and all other ozone-depleting
substances.
(iv) "Release" means
any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching,
dumping,
disposing of or migrating into or through the environment
or any natural or man-made structure.
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<PAGE>
SECTION 3.13 Contracts.
(a) Schedule
3.13(a) of the Company Disclosure Schedule sets forth
a list of all of the following Contracts to which the Company or
any of its
Subsidiaries is a party or by which the Company, any of its
Subsidiaries or any
of their respective properties or assets is bound as of the date of
this
Agreement:
(i) Contracts
that would be required to be filed as an
exhibit to a Registration Statement on Form S-1 under the
Securities
Act or an Annual Report on Form 10-K under the Exchange Act if
such
registration statement or report was filed by the Company with
the
SEC on the date hereof;
(ii) Contracts that
purport to limit, curtail or restrict the
ability of the Company or any of its existing or future
Subsidiaries
or Affiliates to compete in any geographic area or line of
business
or restrict the Persons to whom the Company or any of its
existing
or future Subsidiaries or Affiliates may sell products or
deliver
services;
(iii) partnership or joint venture agreements and Contracts
for the acquisition, sale or lease of material properties or
assets
(by merger, purchase or sale of stock or assets or otherwise)
entered into since December 31, 2007;
(iv) Contracts with
any director or officer of the Company or
any of its Subsidiaries or any Affiliate of the Company;
(v) loan or
credit agreements, mortgages, indentures, notes
or other Contracts or instruments evidencing indebtedness for
borrowed money by the Company or any of its Subsidiaries or any
Contract or instrument pursuant to which indebtedness for
borrowed
money may be incurred or is guaranteed by the Company or any of
its
Subsidiaries;
(vi) financial
derivatives master agreements or
confirmations, or futures account opening agreements and/or
brokerage statements, evidencing financial hedging or similar
trading activities;
(vii) voting agreements or registration rights agreements;
(viii) mortgages, pledges, security agreements, deeds of trust
or other Contracts granting a Lien on any material property or
assets of the Company or any of its Subsidiaries;
(ix) customer, client
or supply Contracts that involved
consideration in year 2007 in excess of $250,000 or that are
reasonably likely to involve consideration in the current year
or
2009 in excess of $250,000, or royalty agreements, Intellectual
Property Licenses or other agreements relating to any
Intellectual
Property or Technology (excluding any Intellectual Property or
Technology related primarily to the Digital Watermarking
Business
that is not Licensed Intellectual Property or Licensed
Technology
and shrink-wrap or click-through licenses pertaining to
22
<PAGE>
"off-the-shelf" commercially available Software with reasonable
terms and a license fee of no more than $10,000);
(x) Contracts
(other than customer, client or supply
Contracts) that involve consideration (whether or not measured
in
cash) in excess of $1,000,000;
(xi) collective
bargaining agreements;
(xii) "standstill" or similar agreements;
(xiii) real property leases governing the Company's and its
Subsidiaries' facilities in Beaverton, Oregon, Burlington,
Massachusetts and Fort Wayne, Indiana, and any other material
real
property leases;
(xiv) personal property leases which require payments in
excess of $250,000; and
(xv) to the extent
material to the business or financial
condition of the Company and its Subsidiaries, taken as a
whole,
other than the Digital Watermarking Business, (1) commitments
or
agreements that contain a "most favored nation" clause, (2)
Contracts granting any rights of exclusivity (other than to
Intellectual Property or Technology to be licensed to the Company
by
Newco in connection with the Spin-Off, which shall be disclosed)
or
(3) Contracts granting a right of first refusal or first
negotiation
(other than Contracts which grant a right of first refusal or
first
negotiation which would reasonably be expected to impair or
delay
the consummation of the Transactions, including the Merger and
the
Spin-Off,
which shall be disclosed).
The Contracts and other documents required to be listed on Section
3.13(a) of
the Company Disclosure Schedule (except Government Contracts) are
each a
"Material Contract". The Company has heretofore made available to
Parent correct
and complete copies of each Material Contract in existence as of
the date
hereof, together with any and all amendments and supplements
thereto and
material "side letters" and similar documentation relating
thereto.
(b) Each of the
Material Contracts is valid, binding and in full
force and effect and is enforceable in accordance with its terms by
the Company
and its Subsidiaries party thereto, subject to the Bankruptcy and
Equity
Exception. Neither the Company nor any of its Subsidiaries is in
default under
any Material Contract or other Contract to which the Company or any
of its
Subsidiaries is a party (collectively, the "Company Contracts"),
nor does any
condition exist that, with notice or lapse of time or both, would
constitute a
default or breach thereunder by the Company and its Subsidiaries
party thereto,
except for such defaults or breaches as, individually or in the
aggregate, have
not had and would not reasonably be expected to have a Company
Material Adverse
Effect. To the Knowledge of the Company, no other party to any
Company Contract
is in default thereunder, nor does any condition exist that with
notice or lapse
of time or both would constitute a default or breach by any such
other party
thereunder, except for such defaults or breaches as, individually
or in the
aggregate, have not had and would not reasonably be expected to
have a Company
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Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has
received any notice of termination or cancellation under any
Material Contract.
SECTION 3.14 Government Contracts.
(a) As used
herein, "Government Contract" means any Contract to
which the Company is a party with any Governmental Authority or any
Contract to
which the Company is a party that is a subcontract (at any tier)
with another
Person that holds either a prime Contract with any Governmental
Authority or a
subcontract (at any tier) under such a prime Contract, except for
such Contracts
which relate primarily to the Digital Watermarking Business and
will be assumed
by Newco in connection with the Restructuring and Spin-Off.
(b) Section
3.14(b) of the Company Disclosure Schedule contains a
complete and correct list of all Government Contracts (including
subcontracts)
that are either currently active in performance or, to the
Knowledge of the
Company, have been active in the four-year period prior to the date
of this
Agreement but have not been closed after receiving final payment,
or have been
active in performance at any time during the four-year period prior
to the date
of this Agreement. The Company has not been awarded, nor is there
any
outstanding bid by the Company for, any "small business set aside
Contract,"
"woman-owned set aside Contract," any other "set aside Contract" or
other order
or Contract requiring small business or other special status at any
time during
the four-year period prior to the date of this Agreement. No
Contract
termination, default notice or show cause notice is, or has been at
any time
during the four-year period prior to the date of this Agreement, in
effect
pertaining to any Government Contract.
(c) The Company
is not and has not been a party to any Government
Contract with a U.S. Governmental Authority.
(d) Neither (i)
the Company nor any of its officers or directors,
nor (ii) to the Knowledge of the Company, any of its employees nor
any of the
Company's predecessors has been debarred, suspended, deemed
non-responsible or
otherwise excluded from participation in the award of any
Government Contract,
nor has any debarment, suspension or exclusion proceeding been
initiated against
the Company or any of its predecessors, officers, directors or
employees.
(e) There have
been no Legal Proceedings involving or related to
the Company or, to the Knowledge of the Company, any of its
predecessors,
officers, directors or employees with respect to an alleged or
potential
violation of a Contract requirement or any applicable Law
pertaining to any
Government Contract, since December 31, 2007. No Person has filed
or, to the
Knowledge of the Company, threatened to file a protest with any
Governmental
Authority challenging a Government Contract award to the
Company.
(f) Except as
set forth on Section 3.14(f) of the Company
Disclosure Schedule, other than audits conducted by Governmental
Authorities for
which the Company has not been provided any notice or which
otherwise have not
been made known to the Company and other than routine pre-award
audits, there
have been no audits, there are no ongoing audits and, to the
Knowledge of the
Company, there are no audits impending or expected under or
relating to any
Government Contract. None of the audits (including the pre-award
audits and the
24
<PAGE>
system review audits) identified on Section 3.14(f) of the Company
Disclosure
Schedule has resulted or would reasonably be expected to result in
a material
change to any Government Contract or has otherwise identified any
actual or
potential non-compliance issue in respect of the Company. All such
audits
identified on Section 3.14(f) of the Company Disclosure Schedule
constitute
routine audits conducted in the ordinary course of business, and
such audits
have not, and, to the Company's Knowledge, will not, result in any
liability by
the Company to any Governmental Authority.
(g) The Company
has not conducted any internal investigation in
connection with which the Company has engaged any outside legal
counsel,
auditor, accountant or investigator, or has made any disclosure to
any
Governmental Authority or other customer or prime contractor or
higher-tier
subcontractor related to any suspected, alleged or possible
violation of a
Contract requirement or violation of any Law with respect to any
Government
Contract.
(h) Neither the
Company nor, to the Knowledge of the Company, any
of the employees, members, officers or directors of the Company
have violated
any legal, administrative or contractual restriction concerning the
employment
of (or discussions concerning possible employment with) current or
former
officials or employees of a state, local or federal government
(regardless of
the branch of government).
(i) All
representations, certifications and statements executed,
acknowledged or submitted by or on behalf of the Company to a
Governmental
Authority, prime contractor or higher-tier subcontractor in
connection with any
Government Contract (or a change or modification thereto) during
the four-year
period prior to the date of this Agreement, including any
statements made in
connection with Contract clauses, representations or
certifications, were true,
complete and correct in all material respects as of their
respective effective
dates and, to the Knowledge of the Company, with respect only to
any such
representations or certifications (or the portion thereof) that are
continuing
in nature, are true, complete and correct in all material respects
as of the
date hereof.
(j) Except as
would not, individually or in the aggregate, be
material to the Company, the Company does not have any pending or
anticipated
claims, requests for equitable adjustment or requests for waiver or
deviation
from Contract requirements with respect to any Government Contract,
and the
Company has no Knowledge of any claim or threatened claim against
the Company by
any customer agency with respect to any Government Contract,
including any claim
for a reduction in price under any Government Contract.
(k) Except as
set forth on Section 3.14(k) of the Company
Disclosure Schedule, with respect to any Government Contract, (i)
there is, as
of the date of this Agreement, no request by any Governmental
Authority for a
Contract price adjustment based on a claimed disallowance by the
applicable
Governmental Authority or claim of defective pricing and (ii) there
has been no
dispute between the Company and a Governmental Authority which,
during the
four-year period prior to the date hereof, has resulted in a
government
contracting officer's final decision.
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(l) As of the
date hereof, the Company does not have any
outstanding bid that, if accepted or awarded, is expected by the
Company to
result in a loss in excess of $100,000 to the Company (or,
following the
Closing, Parent or its Subsidiaries), or in excess of $500,000 in
the aggregate
with respect to all such bids. To the Knowledge of the Company, the
Company is
not a party to any Government Contract which is expected by the
Company to
result in a loss in excess of $100,000 to the Company (or,
following the
Closing, Parent or its Subsidiaries), or in excess of $500,000 in
the aggregate
with respect to all of the Government Contracts. For purposes of
this Section
3.14(l), such loss shall be determined by including all direct and
indirect
costs, including allocated indirect costs, overheads, general and
administrative
costs, bid and proposal costs and research and development
costs.
SECTION 3.15 Properties.
(a) Each of the
Company and its Subsidiaries has good and valid
title to all properties and other assets which are reflected on the
most recent
consolidated balance sheet of the Company included in the Filed
Company SEC
Documents as being owned by the Company or one of its Subsidiaries
(or acquired
after the date thereof) and which are, individually or in the
aggregate,
material to the Company's business or financial condition on a
consolidated
basis (except properties sold or otherwise disposed of since the
date thereof in
the ordinary course of business consistent with past practice and
not in
violation of this Agreement), free and clear of all Liens except
(i) statutory
liens securing payments not yet due, (ii) security interests,
mortgages and
pledges that are disclosed in the Filed Company SEC Documents that
secure
indebtedness that is reflected in the most recent consolidated
financial
statements of the Company included in the Filed Company SEC
Documents, (iii)
obligations under an Intellectual Property License and (iv) such
other
imperfections or irregularities of title or other Liens that,
individually or in
the aggregate, do not and would not reasonably be expected to
materially affect
the use of the properties or assets subject thereto or otherwise
materially
impair business operations as presently conducted or as currently
proposed by
the Company's management to be conducted.
(b)
Each of the
Company and its Subsidiaries is the lessee or
sublessee of all leasehold estates and leasehold interests
reflected in the
Filed Company SEC Documents (or acquired after the date thereof)
which are,
individually or in the aggregate, material to the Company's
business or
financial condition on a consolidated basis (other than any such
leaseholds
whose scheduled terms have expired subsequent to the date of such
Filed Company
SEC Documents). Each of the Company and its Subsidiaries enjoys
peaceful and
undisturbed possession under all such leases in all material
respects. Neither
the Company nor any of its Subsidiaries owns real property.
SECTION 3.16 Intellectual Property.
(a) Section
3.16(a) of the Company Disclosure Schedule sets forth
an accurate and complete list of all Patents, registered Marks,
pending
applications for registrations of any Marks, registered Copyrights
and pending
applications for registration of any Copyrights owned, filed or
applied for by
the Company or any of its Subsidiaries related to its business
(excluding any of
the foregoing related primarily to the Digital Watermarking
Business)
("Registered Intellectual Property") and all material unregistered
Marks owned
by the Company or any of its Subsidiaries related to its business
(excluding any
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of such material unregistered Marks related primarily to the
Digital
Watermarking Business). Section 3.16(a) of the Company Disclosure
Schedule lists
(i) the record owner of each such item of Registered Intellectual
Property, (ii)
the jurisdiction in which each such item of Registered Intellectual
Property
right has been issued or registered or in which each such
application for
issuance and registration has been filed, as applicable, and (iii)
the date and
number of each such issuance, registration or application, as
applicable. All
necessary registration, maintenance, renewal and other relevant
filing fees in
connection with any Registered Intellectual Property (or other
Intellectual
Property required to have been listed on Section 3.16(a) of the
Company
Disclosure Schedule) have been timely paid, and all necessary
documents,
certificates and other relevant filings in connection with such
Registered
Intellectual Property (or such other Intellectual Property) have
been timely
filed, with the relevant Governmental Authorities and Internet
domain name
registrars, as the case may be, for the purpose of maintaining such
Registered
Intellectual Property (or such other Intellectual Property) and all
issuances,
registrations and applications therefor, excluding applications and
claims in
patent applications that the Company has decided to abandon in the
exercise of
its reasonable business judgment. Except as set forth on Section
3.16(a) of the
Company Disclosure Schedule, there are no annuities, payments,
fees, responses
to office actions or other filings required to be made and having a
due date
with respect to any such Registered Intellectual Property (or such
other
Intellectual Property) within one hundred twenty (120) days after
the date
hereof.
(b) Except as
set forth in Section 3.16(b) of the Company
Disclosure Schedule, the Company or one of its Subsidiaries is the
sole and
exclusive owner of all Registered Intellectual Property listed or
required to be
listed on Section 3.16(a) of the Company Disclosure Schedule, free
and clear of
all Liens (other than any obligations under an Intellectual
Property License).
The Company and/or one of its Subsidiaries is the sole and
exclusive owner of,
or, to the Knowledge of the Company, has valid and continuing
rights to use,
sell, license and otherwise commercially exploit, as the case may
be, all other
Company Intellectual Property and Company Technology, free and
clear of all
Liens (other than any obligations under an Intellectual Property
License).
Notwithstanding the foregoing or any provision of this Agreement to
the
contrary, the Company and its Subsidiaries make no representation
or warranty
that Persons other than the Company or its Subsidiaries have not
independently
created information that may be substantially the same or similar
to Trade
Secrets owned by or licensed to the Company. The Company
Intellectual Property
and Company Technology owned by or licensed to the Company and its
Subsidiaries
include all of the Intellectual Property and Technology necessary
and sufficient
to enable the Company and its Subsidiaries to conduct their
respective
businesses (other than the Digital Watermarking Business) as such
businesses are
currently being conducted; provided, however, that the
representation and
warranty in this sentence shall not be deemed or construed as a
representation
or warranty, express or implied, regarding non-infringement,
misappropriation or
violation of any Intellectual Property or Technology of any Person
(which is
addressed solely in Section 3.16(c) below). The Company
Intellectual Property
owned by or exclusively licensed to the Company or any of its
Subsidiaries, and
all of the rights the Company and the Subsidiaries have in or with
respect to
the Company Intellectual Property and Company Technology, are valid
and
(excluding applications) enforceable, except where the invalidity
or
unenforceability, individually or in the aggregate, would not
reasonably be
expected to have a Company Material Adverse Effect.
27
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(c) To the
Knowledge of the Company, except as would not,
individually or in the aggregate, reasonably be expected to be
material to the
Company and its Subsidiaries, taken as a whole, and except as set
forth in
Section 3.16(c) of the Company Disclosure Schedule, neither the
use, practice or
other exploitation by the Company or any of its Subsidiaries of any
Company
Intellectual Property or Company Technology nor the conduct of the
business of
the Company or any of its Subsidiaries (including the
manufacturing, licensing,
marketing, importation, exportation, offer for sale, sale, use or
other
exploitation of any products o
