AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

 

BY AND AMONG

 

INTEGRATED DEVICE TECHNOLOGY, INC.

 

COLONIAL MERGER SUB I, INC.

 

AND

 

INTEGRATED CIRCUIT SYSTEMS, INC.

 

D ATED AS OF J UNE 15, 2005

TABLE OF CONTENTS

 

 

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AGREEMENT AND PLAN OF MERGER

 

This Agreement and Plan of Merger, dated as of June 15, 2005 (this “ Agreement ”), is by and among Integrated Device Technology, Inc., a Delaware corporation (“ Parent ”), Colonial Merger Sub I, Inc., a Pennsylvania corporation and a direct, wholly-owned subsidiary of Parent (“ Merger Sub ”), and Integrated Circuit Systems, Inc., a Pennsylvania corporation (the “ Company ”).

 

WHEREAS, the respective boards of directors of the Company and Parent deem it advisable and in the best interests of each corporation and its respective stockholders that the Company and Parent engage in a business combination in order to, among other reasons, advance the long-term strategic business interests of the Company and Parent;

 

WHEREAS, the respective boards of directors of the Company, Parent and Merger Sub have approved the merger of the Company with and into Merger Sub (the “ Merger ”) upon the terms and subject to the conditions of this Agreement and in accordance with the Pennsylvania Business Corporation Law (the “ PBCL ”);

 

WHEREAS, as a condition and inducement to the willingness of the Company and Parent to enter into this Agreement, simultaneously with the execution of this Agreement, certain stockholders of the respective companies are entering into Voting Agreements (the “ Voting Agreements ”) which Voting Agreements provide for certain actions relating to the transactions contemplated by this Agreement, including the agreement of such stockholders to vote shares of capital stock of the respective companies held by them in favor of the Merger;

 

WHEREAS, for U.S. federal income tax purposes, Parent, Merger Sub and the Company intend that the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “ Code ”); and

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE 1.

THE MERGER

 

Section 1.1 The Merger . Upon the terms and subject to satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the PBCL, at the Effective Time, the Company shall be merged with and into Merger Sub. As a result of the Merger, the separate corporate existence of the Company shall cease, and Merger Sub shall continue as the surviving corporation of the Merger (the “ Surviving Corporation ”).

 

Section 1.2 Closing . The closing of the Merger (the “ Closing ”) shall take place on the first Business Day after the satisfaction or waiver of the conditions (excluding conditions that, by their nature, cannot be satisfied until the Closing Date) set forth in Article 7, unless this Agreement has been theretofore terminated pursuant to its terms or unless another time or date is agreed to in writing by the parties hereto (the actual date of the Closing being referred to herein as the “ Closing Date ”). The Closing shall be held at the offices of Latham & Watkins LLP, 135 Commonwealth Drive, Menlo Park, California 94025, unless another place is agreed to in

 

writing by the parties hereto. As of the Closing, the parties hereto shall cause the Merger to be consummated by filing articles of merger relating to the Merger (the “ Articles of Merger ”) with the Secretary of State of the State of Pennsylvania, in such form as required by, and executed in accordance with the relevant provisions of, the PBCL (the date and time of such filing, or if another date and time is specified in such filing as the effective time of the Merger, such specified date and time, being the “ Effective Time ”).

 

Section 1.3 Effect of the Merger . At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of the PBCL. Without limiting the generality of the foregoing, at the Effective Time, except as otherwise provided herein, all the property, 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 1.4 Articles of Incorporation; Bylaws .

 

(a) At the Effective Time, the articles of incorporation of Merger Sub, as in effect on the date hereof, shall be the articles of incorporation of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable Law.

 

(b) At the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation, until thereafter changed or amended as provided therein or by applicable Law.

 

Section 1.5 Directors and Officers of the Surviving Corporation . The directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation at the Effective Time, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation. The officers of Merger Sub immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation at the Effective Time, each to hold office in accordance with the articles of incorporation and bylaws of the Surviving Corporation.

 

Section 1.6 Directors of Parent .

 

(a) Prior to the Effective Time the parties will exercise their best efforts such that as of the Effective Time (i) the board of directors of Parent shall consist of nine (9) members, as set forth on Exhibit 1.6(a) hereto, which Exhibit shall designate the class of directors to which each member shall belong and the applicable committees of the board of directors on which such director will serve, of whom (A) five (5) directors shall have been designated by Parent (each a “ Parent Designated Director ,” and collectively, the “ Parent Designated Directors ”); provided that Parent shall have the right to change the Parent Designated Directors designated on Exhibit 1.6(a) prior to the Effective Time only with the prior written consent of the Company, and (B) four (4) directors shall have been designated by the Company, one of which shall include Hock Tan unless he shall be unable to serve (each a “ Company Designated Director ,” and collectively, the “ Company Designated Directors ”); provided that the Company shall have the right to change the Company Designated Directors designated on Exhibit 1.6(a) prior to the Effective Time only with the prior written consent of Parent, and (ii) Hock Tan shall be the Chairman of the board of directors of Parent.

 

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(b) Prior to the Effective Time, the parties will exercise their best efforts such that as of the Effective Time the committees of the board of directors of Parent shall be comprised of such members as contemplated by Exhibit 1.6(a), including that at least one (1) Company Designated Director shall serve on each committee of the board of directors of Parent; provided , however , that such Company Designated Director is determined to be “independent” under applicable rules and regulations of Nasdaq and the SEC.

 

(c) Prior to the Effective Time, Parent will exercise its best efforts such that as of the Effective Time Parent’s bylaws shall have been amended as set forth on Exhibit 1.6(c) to provide that:

 

(i) (A) for a period beginning at the Effective Time and ending immediately following the annual meeting of Parent’s stockholders held with respect to the fiscal year ending in the year 2007, the board of directors of Parent shall include at least five (5) Parent Designated Directors, (B) for a period beginning at the Effective Time and ending immediately following the annual meeting of Parent’s stockholders held with respect to the fiscal year ending in the year 2008, the board of directors of Parent shall include at least four (4) Parent Designated Directors, (C) for a period beginning at the Effective Time and ending immediately following the annual meeting of Parent’s stockholders held with respect to the fiscal year ending in the year 2009, the board of directors of Parent shall include at least three (3) Parent Designated Directors, (D) for a period beginning at the Effective Time and ending immediately following the annual meeting of Parent’s stockholders held with respect to the fiscal year ending in the year 2010, the board of directors of Parent shall include at least two (2) Parent Designated Directors (the periods referred to in clauses (A) through (D) collectively, the “ Parent Designated Director Period ”);

 

(ii) (A) for a period beginning at the Effective Time and ending immediately following the annual meeting of Parent’s stockholders held with respect to the fiscal year ending in the year 2007, the board of directors of Parent shall include at least four (4) Company Designated Directors, (B) for a period beginning at the Effective Time and ending immediately following the annual meeting of Parent’s stockholders held with respect to the fiscal year ending in the year 2008, the board of directors of Parent shall include at least three (3) Company Designated Directors, (C) for a period beginning at the Effective Time and ending immediately following the annual meeting of Parent’s stockholders held with respect to the fiscal year ending in the year 2009, the board of directors of Parent shall include at least two (2) Company Designated Directors, (the periods referred to in clauses (A) through (C) collectively, the “ Company Designated Director Period ”);

 

(iii) in the event that during the Parent Designated Director Period, any Parent Designated Director contemplated by Section 1.6(c)(i) to serve as a director during such period ceases to serve as such for any reason, or upon the expiration of the term of office of a Parent Designated Director such that the number of Parent Designated Directors is less than the number contemplated by Section 1.6(c)(i) to serve as a director during such period, Parent’s nominating committee of the board of directors shall nominate for appointment or election, as the case may be, the person designated by a majority of the Parent Designated Directors to fill such directorship following consultation and discussion with the Company Designated Directors as to such person’s qualifications for service as a director (a “ Parent Director Nominee ”), which Parent Director Nominee shall be (A) appointed by the board of directors of Parent in accordance with applicable provisions of Parent’s bylaws and certificate of incorporation, or (B) if such

 

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appointment is not permitted by Parent’s bylaws and certificate of incorporation, slated for election by Parent’s stockholders at the next annual meeting of Parent stockholders, and such person so appointed or elected pursuant to this Section 1.6(c)(iii) shall upon such appointment or election be deemed a Parent Designated Director to serve in the appropriate class of directors contemplated on Exhibit 1.6(a) hereto;

 

(iv) in the event that during the Company Designated Director Period, any Company Designated Director contemplated by Section 1.6(c)(ii) to serve as a director during such period ceases to serve as such for any reason, or upon the expiration of the term of office of a Company Designated Director such that the number of Company Designated Directors is less than the number contemplated by Section 1.6(c)(ii) to serve as a director during such period, Parent’s nominating committee of the board of directors shall nominate for appointment or election, as the case may be, the person designated by a majority of the Company Designated Directors to fill such directorship following consultation and discussion with the Parent Designated Directors as to such person’s qualifications for service as a director (a “ Company Director Nominee ”), which Company Director Nominee shall be (A) appointed by the board of directors of Parent in accordance with applicable provisions of Parent’s bylaws and certificate of incorporation, or (B) if such appointment is not permitted by Parent’s bylaws and certificate of incorporation, slated for election by Parent’s stockholders at the next annual meeting of Parent stockholders, and such person so appointed or elected pursuant to this Section 1.6(c)(iv) shall upon such appointment or election be deemed a Company Designated Director to serve in the appropriate class of directors contemplated on Exhibit 1.6(a) hereto;

 

(v) Hock Tan shall serve as the Chairman of the board of directors of Parent until the second anniversary of the Effective Time, so long as he serves as a member of the board of directors of Parent;

 

(vi) during the Company Designated Director Period, Parent’s board of directors and the nominating committee thereof shall maintain and, as applicable, appoint at least one (1) Company Designated Director to serve on each committee of the board of directors of Parent; provided , however , that such Company Designated Director may only serve on such committee if the board of directors of Parent determines, based at least in part on advice of outside legal counsel, that such director is “independent” under applicable rules and regulations of Nasdaq and the SEC (an “ Independent Director ”);

 

(vii) during the Parent Designated Director Period, Parent shall have no more than two (2) Parent Designated Directors who are not Independent Directors; during the Company Designated Director Period, Company shall have no more than two (2) Company Designated Directors who are not Independent Directors; and

 

(viii) during the Company Designated Director Period and/or the Parent Designated Director Period, any increase or decrease the size of the board of directors of Parent or amendment to the other bylaw provisions in this Section 1.6(c) shall require the affirmative vote, at a duly convened meeting of the board of directors of Parent, of at least a majority of each of (A) the Company Designated Directors and (B) the Parent Designated Directors;

 

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provided , however that in the event of any disagreement between the terms set forth in this Section 1.6(c)(i)-(viii) and Parent’s bylaws as amended as contemplated by this Section 1.6(c), then Parent’s bylaws amended as set forth on Exhibit 1.6(c) shall control.

 

ARTICLE 2.

CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

 

Section 2.1 Conversion of Securities . At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holders of any of the following securities:

 

(a) Conversion Generally . Each share of common stock, par value $0.01 per share, of the Company (“ Company Common Stock ”) issued and outstanding immediately prior to the Effective Time (other than any shares of Company Common Stock to be canceled pursuant to Section 2.1(b) or 2.1(e)) shall be converted, subject to Section 2.2(e), into the right to receive (i) $7.25 in cash (the “ Cash Consideration ”) and (ii) 1.3 (the “ Exchange Ratio ”) shares of common stock, par value $0.001 per share, of Parent (“ Parent Common Stock ”), together with the associated Parent Rights (unless the context otherwise required, all references to Parent Company Stock shall include the associated Parent Rights) (the “ Stock Consideration ” and together with the Cash Consideration, the “ Merger Consideration ”). Upon such conversion, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each certificate previously representing any such shares shall thereafter represent the right to receive the Merger Consideration payable in respect of such shares of Company Common Stock.

 

(b) Parent-Owned Shares . All shares of Company Common Stock owned by Parent or any of its wholly-owned Subsidiaries shall be canceled and retired and shall cease to exist, and no Merger Consideration or other consideration shall be delivered in exchange therefor.

 

(c) Merger Sub . Each share of common stock of Merger Sub issued and outstanding immediately prior to the Effective Time shall be converted into and exchanged for one newly and validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation.

 

(d) Change in Shares . 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, or exchanged for, a different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, reorganization, recapitalization, split, combination, contribution or exchange of shares, the Exchange Ratio and Cash Consideration, as applicable, shall be correspondingly adjusted to provide the holders of Company Common Stock and Company Options the same economic effect as contemplated by this Agreement prior to such event.

 

(e) Cancellation of Treasury Shares . Each share of Company Common Stock held in the Company treasury and each share of Company Common Stock, if any, owned by any wholly-owned subsidiary of the Company immediately prior to the Effective Time shall be canceled and extinguished without any conversion thereof.

 

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(f) Adjustments to Preserve Tax Treatment .

 

(i) If the amount obtained by dividing (x) the Aggregate Parent Stock Value by (y) the Closing Transaction Value is less than 0.4500, the following shall occur:

 

(A) the Exchange Ratio shall be adjusted to a number, rounded to the nearest fourth decimal place, equal to (x) the product of 0.4500 and the Closing Transaction Value, divided by (y) the product of the Aggregate Company Share Number and the Closing Parent Stock Price, and

 

(B) the Cash Consideration shall be adjusted to an amount, rounded to the nearest cent, equal to the quotient obtained by dividing (x) the product of 0.5500 and the Closing Transaction Value, by (y) the Aggregate Company Share Number.

 

(ii) In the event that the Exchange Ratio and the Cash Consideration are adjusted as provided for in this Section 2.1(f), all references in this Agreement to the “ Exchange Ratio ” and the “ Cash Consideration ” shall refer to the Exchange Ratio and the Cash Consideration as adjusted in this Section 2.1(f) except as may be otherwise specified herein.

 

(iii) For purposes of this Section 2.1(f), the following terms shall have the following meanings:

 

(A) “ Aggregate Cash Amount ” means the product of (x) the Cash Consideration (before any adjustment pursuant to Section 2.1(f)) and (y) the Aggregate Company Share Number.

 

(B) “ Aggregate Company Share Number ” means the number obtained by subtracting (x) the aggregate number of shares of Company Common Stock to be canceled in the Merger pursuant to Section 2.1(b) or 2.1(e) from (y) the aggregate number of shares of Company Common Stock outstanding as of the Effective Time.

 

(C) “ Aggregate Parent Share Number ” means the product of (x) the Exchange Ratio (before any adjustment pursuant to Section 2.1(f)) and (y) the Aggregate Company Share Number.

 

(D) “ Aggregate Parent Stock Value ” means the product of (x) the Aggregate Parent Share Number (before any adjustment pursuant to Section 2.1(f)) and (y) the Closing Parent Stock Price.

 

(E) “ Closing Parent Stock Price ” means the mean between the high and low selling prices, regular way, of the Parent Common Stock on Nasdaq on the trading day immediately preceding the Effective Time.

 

(F) “ Closing Transaction Value ” means the sum of (x) the Aggregate Cash Amount and (y) the Aggregate Parent Stock Value.

 

(iv) Notwithstanding anything in this Agreement to the contrary, this Section 2.1(f) shall have no force and effect, if, prior to the Effective Time, final or temporary Treasury Regulations are promulgated or other guidance is issued by the United States Internal Revenue

 

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Service (the “ IRS ”) upon which the parties to this Agreement can rely, with an effective date prior to the Effective Time, in substantially the same form or with substantially the same effect of Proposed Treasury Regulations Section 1.368-1(e)(2) (REG-129706-04; August 10, 2004).

 

Section 2.2 Exchange of Certificates .

 

(a) Exchange Agent . At or prior to the Closing Date, Parent shall appoint Equiserve or another bank or trust company designated by Parent and reasonably satisfactory to the Company to act as the exchange agent hereunder (the “ Exchange Agent ”). As of the Closing, Parent shall deposit, or cause to be deposited, with the Exchange Agent, in trust for the benefit of the holders of shares of Company Common Stock, converted pursuant to Section 2.1, for exchange, in accordance with this Article 2, through the Exchange Agent, sufficient cash and certificates representing shares of Parent Common Stock to make all deliveries pursuant to this Article 2; provided , however , that if the Exchange Fund (as defined below) shall for any reason not include sufficient cash or certificates to make all such deliveries, upon notice thereof from the Exchange Agent to Parent, Parent shall from time to time promptly deposit with the Exchange Agent sufficient cash and certificates to make all such deliveries. The Exchange Agent shall, pursuant to irrevocable instructions, deliver the Merger Consideration contemplated to be paid for shares of Company Common Stock pursuant to this Agreement out of the Exchange Fund. Except as contemplated by Sections 2.2(c), 2.2(e) and 2.2(i) hereof, the Exchange Fund shall not be used for any other purpose. Any cash and certificates representing Parent Common Stock deposited with the Exchange Agent shall be referred to as the “ Exchange Fund .”

 

(b) Exchange Procedures . As promptly as reasonably practicable (and in any event no more than ten (10) Business Days) after the Effective Time, Parent shall instruct the Exchange Agent to mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the “ Certificates ”) (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent and shall be in customary form) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificates. Upon surrender of a Certificate for cancellation to the Exchange Agent together with such letter of transmittal, properly completed and duly executed, and such other documents as may be required pursuant to such instructions, the holder of such Certificate shall be entitled to receive in exchange therefor the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificate, cash in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.2(c), and the Certificate so surrendered shall forthwith be canceled. No interest shall be paid or shall accrue on any Cash Consideration, cash in lieu of fractional shares or unpaid dividends and distributions payable to holders of Certificates. In the event of a transfer of ownership of shares of Company Common Stock which is not registered in the transfer records of the Company, the Merger Consideration payable in respect of such shares of Company Common Stock may be paid to a transferee if the Certificate representing such shares of Company Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer Taxes have been paid. Until surrendered as

 

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contemplated by this Section 2.2, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificate, cash in lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e) and any dividends or other distributions to which such holder is entitled pursuant to Section 2.2(c), in each case, without any interest thereon.

 

(c) Distributions with Respect to Unexchanged Shares of Parent Common Stock . No dividends or other distributions declared or made 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, and no cash payment in lieu of fractional shares of Parent Common Stock shall be paid to any such holder pursuant to Section 2.2(e), unless and until the holder of such Certificate shall surrender such Certificate. Subject to the effect of escheat, Tax or other applicable Laws, following surrender of any such Certificate, there shall be paid to such holder of the certificates representing whole shares of Parent Common Stock issuable in exchange therefor, without interest, (i) promptly, the amount of any cash payable in lieu of fractional shares of Parent Common Stock to which such holder is entitled pursuant to Section 2.2(e) and the amount of dividends or other distributions with a record date at or after the Effective Time theretofore paid with respect to such whole shares of Parent Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions, with a record date at or after the Effective Time but prior to such surrender and a payment date subsequent to such surrender, payable with respect to such whole shares of Parent Common Stock.

 

(d) Further Rights in Company Common Stock . The Merger Consideration issued upon conversion of a share of Company Common Stock in accordance with the terms hereof (including any payments pursuant to Section 2.2(c) or Section 2.2(e)) shall be deemed to have been issued in full satisfaction of all rights pertaining to such share of Company Common Stock.

 

(e) Fractional Shares . No certificates or scrip representing fractional shares of Parent Common Stock will be issued upon the surrender for exchange of Certificates, but in lieu thereof each holder of Company Common Stock who would otherwise be entitled to a fraction of a share upon surrender for exchange of Parent Common Stock (after aggregating all fractional shares of Parent Common Stock to be received by such holder) shall receive from Parent an amount of cash (rounded down to the nearest whole cent), without interest, equal to the product of such fraction multiplied by the Market Value (as defined below) of the Parent Common Stock. The “Market Value” of the Parent Common Stock means the average closing price per share of Parent Common Stock (rounded to the nearest cent) on Nasdaq for the twenty (20) consecutive trading days ending on the second trading day immediately prior to the Effective Time (as reported in the New York City edition of The Wall Street Journal for each such trading day, or, if not reported therein, any other authoritative source reasonably selected by Parent). Such payment shall occur as soon as reasonably practicable after the determination of the amount of cash, if any, to be paid to each holder of Company Common Stock with respect to any fractional shares and following compliance by such holder with the exchange procedures set forth in Section 2.2(b) hereof and in the letter of transmittal. No dividend or distribution with respect to Parent Common Stock shall be payable on or with respect to any fractional share and such fractional share interests shall not entitle the owner thereof to any rights of a stockholder of Parent.

 

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(f) Termination of Exchange Fund . Any portion of the Exchange Fund which remains undistributed to the holders of Company Common Stock for nine (9) months after the Effective Time shall be delivered to Parent, upon demand, and, from and after such delivery to Parent, any holders of Company Common Stock who have not theretofore complied with this Article 2 shall thereafter look only to Parent for the Merger Consideration payable in respect of such shares of Company Common Stock, any cash in lieu of fractional shares of Parent Common Stock to which they are entitled pursuant to Section 2.2(e) and any dividends or other distributions with respect to Parent Common Stock to which they are entitled pursuant to Section 2.2(c), in each case, without any interest thereon.

 

(g) No Liability . None of Parent, the Surviving Corporation or the Company shall be liable to any holder of shares of Company Common Stock for any such shares of Parent Common Stock (or dividends or distributions with respect thereto) or cash from the Exchange Fund delivered to a public official pursuant to any abandoned property, escheat or similar Law.

 

(h) Lost 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 shall pay in exchange for such lost, stolen or destroyed Certificate the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificate, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.2(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.2(c), in each case, without any interest thereon.

 

(i) Investment . Parent may direct the Exchange Agent to invest any funds (including any interest received with respect thereto) included in the Exchange Fund which has not been distributed to holders of Certificates on its behalf in interest-bearing securities; provided , however , that no such gain or loss thereon shall affect the amounts payable to the holders of shares of the Company Common Stock represented by Certificates hereunder.

 

(j) Withholding . Parent or the Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Company Common Stock such amounts as Parent or the Exchange Agent are required to deduct and withhold under the Code, or any Tax Law, with respect to the making of such payment. To the extent that amounts are so withheld by Parent or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Common Stock in respect of whom such deduction and withholding was made by Parent or the Exchange Agent.

 

Section 2.3 Stock Transfer Books . At the Effective Time, the stock transfer books of the Company shall be closed and thereafter, there shall be no further registration of transfers of shares of Company Common Stock theretofore outstanding on the records of the Company. From and after the Effective Time, the holders of Certificates representing shares of Company Common Stock outstanding immediately prior to the Effective Time shall cease to have any rights with respect to such shares of Company Common Stock except as otherwise provided herein or by Law. On or after the Effective Time, any Certificates presented to the Exchange

 

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Agent or Parent for any reason shall be exchanged for the Merger Consideration payable in respect of the shares of Company Common Stock represented by such Certificates, any cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to Section 2.2(e) and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 2.2(c), in each case, without any interest thereon.

 

Section 2.4 Stock Options .

 

(a) Treatment of Company Options and Company Restricted Stock Generally . Prior to the Effective Time, the Company shall take all action necessary such that:

 

(i) Each Company Option outstanding under the Company Stock Option Plans immediately prior to the Effective Time with an exercise price per share equal to or greater than the Total Purchase Price Per Share shall be canceled and the holder thereof shall have no right to receive any consideration therefor;

 

(ii) Each Company Option outstanding under the Company Stock Option Plans immediately prior to the Effective Time with an exercise price per share less than the Total Purchase Price Per Share, whether or not vested or exercisable, shall be cancelled and the holder thereof shall be entitled to receive an amount of cash, without interest, equal to the product of (x) the total number of Shares subject to such Company Option multiplied by (y) the excess, if any, of the Total Purchase Price Per Share over the exercise price per share subject to such Company Option (with the aggregate amount of such payment to the holder to be rounded to the nearest cent), less applicable withholding taxes, required to be withheld with respect to such payment; and

 

(iii) As of the Effective Time, each outstanding share of Restricted Company Common Stock (as defined below), the restrictions of which have not lapsed immediately prior to the Effective Time shall become fully vested and, subject to Section 2.1(a), converted into the right to receive the Merger Consideration under Section 2.1(a). “ Restricted Company Common Stock ” shall mean a share of restricted Company Common Stock granted pursuant to the terms of the Company’s 2000 Long-Term Equity Incentive Plan (the “ 2000 Plan ”) and an accompanying Restricted Stock Award Notice under the 2000 Plan.

 

(b) Replacement Option Grants . Prior to the Closing Date, Parent shall take all action necessary to facilitate Parent’s ability to, promptly following the Closing Date, grant two (2) Parent Option Grants for each Company Option outstanding immediately prior to the Effective Time that is cancelled pursuant to Section 2.4(a)(i) or (ii), whether or not then exercisable (a “ Replaced Option ”), to each holder of a Replaced Option who is an officer, director or employee of Parent or any of its Subsidiaries (including the Company or any of its Subsidiaries) immediately following the Closing, which Parent Option Grants shall have an exercise price equal to the fair market value of the Parent’s common stock on the date of grant, collectively, the “ Replacement Option Grants ”) and promptly following the Closing Date, Parent shall make such Replacement Option Grants. One of the Replacement Option Grants shall be for the same number of shares, and shall be vested to the same extent and vest according to the same vesting schedule as such person’s Replaced Option, and shall have the same term as set forth in Parent’s standard form of stock option agreement as of the date hereof (the “ First Replacement Option Grant ”). The second of the Replacement Option Grants shall be for that number of

 

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shares calculated by multiplying the number of shares subject to each Replaced Option by the Implied All Stock Exchange Ratio and subtracting the number of shares subject to the First Replacement Option Grant and shall vest according to the vesting schedule and shall have the same term as set forth in Parent’s standard form of stock option agreement as of the date hereof (the “ Second Replacement Option Grant ”). Except as provided herein, all of the Replacement Option Grants shall be subject to the terms and conditions of Parent’s stock option plan under which they are granted and Parent’s standard form of stock option agreement as of the date hereof (including without limitation with regard to the duration of exercisability following termination of employment).

 

(c) Reservation of Shares; Registration . Parent shall take all corporate action necessary to reserve for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of Parent Options granted pursuant to Section 2.4(b). As promptly as reasonably practicable after the Effective Time, but in no event later than ten (10) Business Days thereafter, Parent shall file a registration statement on Form S-8 (or any successor or other appropriate forms) with respect to the shares of Parent Common Stock subject to such options to the fullest extent permitted by law and shall use its commercially reasonable efforts to maintain the effectiveness of such registration statement or registration statements (and maintain the current status of the prospectus or prospectuses contained therein) for so long as such options remain outstanding.

 

(d) Company ESPP . Each outstanding purchase right under the Company’s Employee Stock Purchase Plan (the “ Company ESPP ”) shall be exercised for the purchase of shares of Company Common Stock at the price per share determined pursuant to the Company ESPP on the date immediately prior to the Closing Date, pursuant to Section 19(b) of the Company ESPP (the “ Final Offering Period ”). Immediately following the Final Offering Period and upon or prior to the Effective Time, the Company shall take all action necessary to provide that the Company ESPP shall be terminated immediately prior to the Effective Time and that no person will have any further right to purchase Company Common Stock under the Company ESPP.

 

(e) Parent Options and Parent ESPP Generally . At the Effective Time, each Parent Option then outstanding under the Parent Stock Option Plans or otherwise (other than Parent Options granted pursuant to Section 2.4(b)), whether or not then exercisable, shall continue to have, and be subject to, the same terms and conditions (including vesting schedule) as set forth in the Parent Option and, if applicable, the Parent Stock Option Plans and any agreements thereunder immediately prior to the Effective Time. At and following the Effective Time, Parent’s 1984 Employee Stock Purchase Plan (the “ Parent ESPP ”) shall remain in effect and each Parent Option outstanding thereunder shall remain outstanding and be subject to the same terms and conditions as set forth in the Parent ESPP and any agreements thereunder immediately prior to the Effective Time.

 

ARTICLE 3.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the corresponding section of the Disclosure Letter delivered by the Company to Parent prior to the execution of this Agreement (the “ Company Disclosure

 

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Letter ”) (and subject to Section 9.14 hereof), the Company hereby represents and warrants to Parent as follows:

 

Section 3.1 Organization and Qualification; Subsidiaries . Each of the Company and its Subsidiaries (the “ Company Subsidiaries ”) is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so organized, qualified or in good standing, or to have such power or authority, would not, individually or in the aggregate, have a Company Material Adverse Effect. The Company has made available to Parent a complete and correct copy of the articles of incorporation and bylaws (or other organizational documents) of the Company and the Company Subsidiaries, each as amended to date. Except with respect to securities of non-affiliates held for investment purposes which do not constitute more than a 1% interest in any such non-affiliate and with respect to the capital stock of wholly-owned Company Subsidiaries, neither the Company nor any Company Subsidiary holds an Equity Interest in any other person. The articles of incorporation and bylaws (or other organizational documents) of the Company and the Company Subsidiaries made available are in full force and effect. Section 3.1 of the Company Disclosure Letter contains a correct and complete list of each jurisdiction where the Company and each of its Subsidiaries is organized and qualified to do business.

 

Section 3.2 Capitalization .

 

(a) As of the date hereof, the authorized capital stock of the Company consists of 300,000,000 shares of Company Common Stock and 5,000,000 shares of preferred stock, par value $0.01 per share (the “ Company Preferred Stock ”). As of June 13, 2005 (i) 70,061,481 shares of Company Common Stock were issued and outstanding, all of which were validly issued and fully paid, nonassessable and free of preemptive rights, and (ii) 8,546,595 shares of Company Common Stock were issuable (and such number was reserved for issuance) upon exercise of Company Options outstanding as of such date. As of the date hereof, no shares of Company Preferred Stock are issued or outstanding.

 

(b) Except for outstanding Company Options and outstanding purchase rights under the Company ESPP, as of the date hereof, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which the Company or any Company Subsidiary is a party or by which the Company or any Company Subsidiary is bound relating to the issued or unissued capital stock or other Equity Interests of the Company or any Company Subsidiary, or obligating the Company or any Company Subsidiary to issue or sell any shares of its capital stock or other Equity Interests. From June 13, 2005 to the date of this Agreement, the Company has not issued any Equity Interests with respect to Company Common Stock, other than Company Common Stock issued upon exercise of Company Stock Options and Company Common Stock issued in the ordinary course of business pursuant to the Company ESPP. Section 3.2(b) of the Company Disclosure Letter sets forth a true and complete list, as of June 13, 2005, of the prices at which outstanding Company Options may be exercised under the Company Stock Option Plans, the number of Company Options outstanding at each such price and the vesting schedule of the Company Options. All shares of Company Common Stock

 

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subject to issuance under the Company Stock Option Plans, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights.

 

(c) There are no outstanding contractual obligations of the Company or any Company Subsidiary (i) restricting the transfer of, (ii) affecting the voting rights of, (iii) requiring the repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (iv) requiring the registration for sale of, or (v) granting any preemptive or antidilutive right with respect to, any Company Common Stock or any capital stock of, or other Equity Interests in, any Company Subsidiary. Each outstanding share of capital stock of each Company Subsidiary is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and is owned, beneficially and of record, by the Company free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on the Company’s voting rights, charges and other encumbrances of any nature whatsoever. There are no outstanding contractual obligations of the Company or any Company Subsidiary to make any loan to, or any equity or other investment (in the form of a capital contribution or otherwise) in, any Company Subsidiary or any other person, other than guarantees by the Company of any indebtedness or other obligations of any wholly-owned Company Subsidiary and other than loans made in the ordinary course consistent with past practice to employees of the Company and its Subsidiaries. The Company has not adopted a stockholder rights plan.

 

(d) Neither the Company nor any Company Subsidiary has outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of the Company or any Company Subsidiary on any matter.

 

Section 3.3 Authority .

 

(a) The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement, subject in the case of the consummation of the Merger to the approval of this Agreement by the holders of a majority of the votes cast by all holders of Company Common Stock entitled to vote thereon (the “ Company Stockholder Approval ”). The execution and delivery of this Agreement by the Company and the consummation by the Company of such transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company and no stockholder votes are necessary to authorize this Agreement or to consummate such transactions, subject only to obtaining the Company Stockholder Approval. This Agreement is the valid and binding agreement of the Company enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

 

(b) The Company has duly and validly taken all necessary corporate action on the part of the Company to render inapplicable to the Company the provisions of Subchapters E, G, H, I and J of Chapter 25 of the PBCL.

 

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(c) The board of directors of the Company, by resolutions duly adopted by unanimous vote at a meeting duly called and held and, except to the extent contemplated by Section 6.4, not subsequently rescinded or modified in any way (the “ Company Board Approval ”), has duly (i) determined that this Agreement and the Merger are advisable and fair to and in the best interests of the Company and its stockholders, (ii) approved this Agreement and the Voting Agreements and the transactions contemplated hereby and thereby, including the Merger, and (iii) recommended that the stockholders of the Company adopt this Agreement (the “ Company Recommendation ”) and directed that this Agreement and the transactions contemplated hereby be submitted for consideration by the Company’s stockholders in accordance with this Agreement. The Company Board Approval constitutes or includes approval of this Agreement and the Voting Agreements and the transactions contemplated hereby and thereby, including the Merger, as required under any applicable “moratorium,” “control share,” “fair price” or other applicable anti-takeover Laws or Laws that purport to restrict business combinations, including, without limitation, Section 203 of the Delaware General Corporation Law (the “ DGCL ”) and Section 2538 of Subchapter 25D and Subchapter 25F (§§ 2551-2556) of the PBCL (each a “ Takeover Law ”), and no such Takeover Law is applicable to this Agreement or the Voting Agreements or the transactions contemplated hereby or thereby, including the Merger.

 

(d) The board of directors of the Company has received the opinion of each of its financial advisors, Lehman Brothers Inc and Piper Jaffray & Co. (the “ Company Financial Advisors ”), dated the date, or shortly prior to the date, of this Agreement, to the effect that, as of the date of such opinion, the Merger Consideration is fair, from a financial point of view, to the stockholders of the Company.

 

Section 3.4 No Conflict; Required Filings and Consents .

 

(a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate any provision of (A) the Amended and Restated Articles of Incorporation of the Company as in effect on the date hereof (the “ Company Articles ”), (B) the Bylaws of the Company as in effect on the date hereof (the “ Company Bylaws ”), or (C) any equivalent organizational documents of any Company Subsidiary, or (ii) require any consent or approval under, violate, result in any breach of, any loss of any benefit under or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance (other than a Permitted Lien) on any property or asset of the Company or any Company Subsidiary pursuant to, any Law, Contract, Company Permit or other instrument or obligation, except, with respect to clause (i)(C) or clause (ii), for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(b) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, require any consent, approval, authorization or permit of, or filing with or notification to, any domestic or foreign Governmental Entity, except (i) under the Exchange Act, the Securities Act, any applicable Blue Sky Law, the rules and regulations of Nasdaq and pursuant to Section 1.2 hereof, the filing of the Articles of Merger with the Pennsylvania Secretary of State, (ii) any filings necessary under the

 

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HSR Act or foreign antitrust laws and regulations, and (iii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

Section 3.5 Permits; Compliance With Law . Each of the Company and the Company Subsidiaries is in possession of all authorizations, licenses, permits, certificates, approvals and clearances, and has submitted notices to, all Governmental Entities necessary for the Company or any Company Subsidiary to own, lease and operate its properties or other assets and to carry on their respective businesses in the manner described in the Company SEC Filings filed prior to the date hereof and as it is being conducted as of the date hereof (the “ Company Permits ”), and all such Company Permits are valid, and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of the Company Permits would not, individually or in the aggregate, have a Company Material Adverse Effect. Neither the Company nor any Company Subsidiary is in conflict with, or in default or violation of, (a) any Law (including the Foreign Corrupt Practices Act) applicable to the Company or any Company Subsidiary or by which any property or asset of the Company or any Company Subsidiary is bound or affected or (b) any Company Permits, except, with respect to clauses (a) and (b), for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a Company Material Adverse Effect. No investigation or review by any Governmental Entity with respect to the Company or any of the Company Subsidiaries is, to the Knowledge of the Company, pending or threatened, nor has any Governmental Entity indicated an intention to conduct the same.

 

Section 3.6 SEC Filings; Financial Statements .

 

(a) The Company has timely filed all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules and documents required to be filed by it under the Securities Act or the Exchange Act, as the case may be, since June 29, 2003 (collectively, the “ Company SEC Filings ”). Each Company SEC Filing (i) as of its date, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, (ii) did not at the time of filing, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (iii) with respect to each Company SEC Filing filed for fiscal periods ending after July 30, 2002, at the time filed included or was accompanied by the certifications required by the Sarbanes-Oxley Act of 2002 (“ SOXA ”) to be filed or submitted by the Company’s principal executive officer and principal financial officer (each of which certification was true and correct and fully complied with the SOXA) and otherwise complied in all material respects with the applicable requirements of the SOXA.

 

(b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Company SEC Filings was prepared in all material respects in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q under the Exchange Act) on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and each presented fairly the consolidated financial position, results of operations and cash flows of the Company and the consolidated Company Subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited

 

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statements, to normal and recurring year-end adjustments which did not and would not, individually or in the aggregate, have a Company Material Adverse Effect). The books and records of the Company and the Company Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and all other applicable legal and accounting requirements. The Company has made available to Parent complete and correct copies of all documents governing all material “off balance arrangements” (as defined by item 303(a)(4) of Regulation S-K promulgated by the SEC) in respect of the Company or any Company Subsidiary.

 

(c) Except as and to the extent set forth on the consolidated balance sheet of the Company and the consolidated Company Subsidiaries as of July 3, 2004 included in the Company’s Form 10-K for the year ended July 3, 2004, including the notes thereto (the “ Company Form 10-K ”), neither the Company nor any consolidated Company Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on a balance sheet or in notes thereto prepared in accordance with GAAP, except for (i) liabilities or obligations incurred in the ordinary course of business consistent with past practice since July 3, 2004, (ii) liabilities and obligations incurred in connection with this Agreement and the transactions contemplated hereby, and (iii) liabilities and obligations that taken individually, or in the aggregate, are not material in amount or significance.

 

(d) The Company has in place the “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) required in order for the Chief Executive Officer and Chief Financial Officer of the Company to engage in the review and evaluation process mandated by Section 302 of the SOXA. The Company’s “disclosure controls and procedures” are designed to ensure at a reasonable assurance level that material information (both financial and non-financial) relating to the Company and its consolidated Subsidiaries required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to the Company’s principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of the Company required by Section 302 of SOXA with respect to such reports.

 

Section 3.7 Absence of Certain Changes or Events . Since July 3, 2004, except as disclosed in the Company Form 10-K or in Company SEC Filings since July 3, 2004 through to the date of this Agreement, including the notes thereto, and except as specifically contemplated by, or as disclosed in, this Agreement, the Company and the Company Subsidiaries have conducted their businesses in the ordinary course consistent with past practice and, since such date, there has not been (a) any change, circumstance or event that has had a Company Material Adverse Effect; (b) any material change by the Company or the Company Subsidiaries in its accounting methods not required pursuant to generally accepted accounting principles or practices; (c) any declaration, setting aside or payment of any dividend or other distribution with respect to the Company’s or any non-wholly-owned Company Subsidiary’s capital stock; (d) any split, combination or reclassification of the Company’s or any non-wholly-owned Company Subsidiary’s capital stock or any issuance of or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for, shares of its respective capital stock; (e)

 

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any material revaluation by the Company or any Company Subsidiary of any of their assets; or (f) any material loss of the Company Intellectual Property taken as a whole that is owned by the Company or any Company Subsidiary.

 

Section 3.8 Employee Benefit Plans .

 

(a) Section 3.8(a) of the Company Disclosure Letter sets forth a true and complete list of each “employee benefit plan” as defined in Section 3(3) of ERISA and any other material plan, policy, program, practice, agreement, understanding or arrangement providing compensation or other benefits to any current or former director, officer, employee or consultant (or to any dependent or beneficiary thereof) of the Company, any Company Subsidiary or any Company ERISA Affiliate, which are now, or with respect to any plan intended to be qualified under Section 401(a) of the Code, were within the past 6 years, maintained, sponsored or contributed to by the Company, any Company Subsidiary or any Company ERISA Affiliate, or under which the Company, any Company Subsidiary or any Company ERISA Affiliate has any material obligation or liability, whether actual or contingent, including, without limitation, all material incentive, bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability, stock purchase, stock option, stock appreciation, phantom stock, restricted stock or other stock-based compensation plans, policies, programs, practices or arrangements. Each “employee benefit plan” as defined in Section 3(3) of ERISA and each other material plan, policy, program, practice, agreement, understanding or arrangement providing compensation or other benefits to any current or former director, officer, employee or consultant (or to any dependent or beneficiary thereof) of the Company, any Company Subsidiary or any Company ERISA Affiliate, which are now, or were within the past 6 years, maintained, sponsored or contributed to by the Company, any Company Subsidiary or any Company ERISA Affiliate, or under which the Company, any Company Subsidiary or any Company ERISA Affiliate has any material obligation or liability, whether actual or contingent, including, without limitation, all material incentive, bonus, deferred compensation, vacation, holiday, cafeteria, medical, disability, stock purchase, stock option, stock appreciation, phantom stock, restricted stock or other stock-based compensation plans, policies, programs, practices or arrangements is hereinafter referred to as a “ Company Benefit Plan ”. Neither the Company, nor to the Knowledge of the Company, any other person, has any express or implied commitment, whether legally enforceable or not, to modify, change or terminate any Company Benefit Plan, other than with respect to a modification, change or termination required by ERISA, the Code, the Health Insurance Portability and Accountability Act of 1996 or any other applicable Law. The Company has delivered or made available to Parent true, correct and complete copies of all Company Benefit Plans (or, if not so delivered, has delivered or made available to Parent a written summary of their material terms), and, with respect thereto, all amendments, trust agreements, insurance Contracts, other funding vehicles, determination letters issued by the IRS, the most recent annual reports (Form 5500 series) filed with the IRS, and the most recent actuarial report or other financial statement relating to such Company Benefit Plan.

 

(b) Each Company Benefit Plan has been maintained, funded and administered in all material respects in accordance with its terms and all applicable Laws, including ERISA and the Code, and contributions and premium payments required to be made under the terms of any of the Company Benefit Plans as of the date of this Agreement have been timely made. With respect to the Company Benefit Plans, no event has occurred and, to the Knowledge of the Company, there exists no condition or set of circumstances in connection with which the

 

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Company or any Company Subsidiary could reasonably be expected to be subject to any material liability (other than for routine benefit claim liabilities) under the terms of, or with respect to, such Company Benefit Plans, ERISA, the Code or any other applicable Law, and neither the Company nor any ERISA Affiliate has any actual or contingent material liability under ERISA Section 502.

 

(c) Each Company Benefit Plan that is intended to be qualified under Section 401(a) of the Code has obtained or is the subject of a favorable determination letter from the IRS that the Company Benefit Plan is so qualified and all related trusts are exempt from U.S. federal income taxation under Section 501(a) of the Code, and, to the Knowledge of the Company, nothing has occurred, whether by action or by failure to act, which could be reasonably expected to cause the loss of such qualification or exemption. Except as would not reasonably be expected to result in material liability to the Company or a Company Subsidiary, (i) there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code and other than a transaction that is exempt under a statutory or administrative exemption) with respect to any Company Benefit Plan, and no fiduciary of any Company Benefit Plan has any actual or contingent 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 Benefit Plan, (ii) no suit, administrative proceeding, action, claim or litigation has been brought, or to the Knowledge of the Company is threatened, against or with respect to any such Company Benefit Plan, including any audit or inquiry by the IRS or United States Department of Labor (other than routine benefits claims) and, to the Knowledge of the Company, there is no basis for any such suit, administrative proceeding, action, claim or litigation, (iii) none of the assets of the Company, any Company Subsidiary or any Company ERISA Affiliate are, or may reasonably be expected to become, the subject of any lien arising under ERISA or Section 412(n) of the Code, (iv) all Tax, annual reporting and other governmental filings required by ERISA and the Code with respect to a Company Benefit Plan have been timely filed with the appropriate Governmental Entity and all notices and disclosures have been timely provided to participants, (v) all contributions and payments to each Company Benefit Plan are deductible under applicable Code sections including, as applicable, Sections 162 or 404, and (vi) no material excise Tax could be imposed upon the Company or any Company Subsidiary under Chapter 43 of the Code with respect to any Company Benefit Plan.

 

(d) None of the Company, any Company Subsidiary or any Company ERISA Affiliate sponsors, maintains, contributes to or has an obligation to contribute to, or has any actual or contingent liability with respect to, any “employee pension benefit plan” (as defined in Section 3(2) of ERISA) that is subject to Title IV of ERISA or Section 412 of the Code, or any “multiemployer plan” as defined in Section 3(37) of ERISA.

 

(e) No amount that would be reasonably expected to be received (whether in cash or property or the vesting of property), in connection with the consummation of the transactions contemplated by this Agreement, by any employee, officer or director of the Company or any of its Subsidiaries who is a “disqualified individual” (as such term is defined in proposed Treasury Regulation Section 1.280G-1) under any Company Benefit Plan or otherwise may be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code).

 

(f) Except as required under COBRA, no Company Benefit Plan provides any of the following retiree or post-employment benefits to any person: medical, disability or life insurance

 

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or other welfare-type benefits. The Company, the Company Subsidiaries and each Company ERISA Affiliate are in compliance with (i) the requirements of COBRA, and (ii) the applicable requirements of the Health Insurance Portability and Accountability Act of 1996 and the regulations (including the proposed regulations) thereunder, except as would not be reasonably expected to result in material liability to the Company, any Company Subsidiary or a Company ERISA Affiliate.

 

(g) Except as set forth on Section 3.8(g) of the Company Disclosure Letter, neither the Company nor any Company Subsidiary maintains sponsors, contributes to or has any material liability with respect to any employee benefit plan, program or arrangement that provides benefits to non-resident aliens with no United States source income outside of the United States (each, a “ Company Foreign Benefit Plan ”). Each Company Foreign Benefit Plan has been maintained, funded and administered in compliance in all material respects with all Laws applicable thereto and the respective requirements of such Company Foreign Benefit Plan’s governing documents, and no Company Foreign Benefit Plan has any unfunded or underfunded liabilities.

 

(h) Neither the Company nor any Company Subsidiary is a party to or otherwise bound by any collective bargaining Contract with a labor union or labor organization, nor is any such Contract presently being negotiated.

 

(i) The Company has identified in Section 3.8(i) of the Company Disclosure Letter and has made available to Parent true and complete copies of (i) all severance and employment agreements currently in effect with directors, officers or employees of or consultants to the Company or any Company Subsidiary, (ii) all severance programs and policies of each of the Company and each Company Subsidiary with or relating to its employees, and (iii) all plans, programs, agreements and other arrangements of each of the Company and each Company Subsidiary with or relating to its directors, officers, employees or consultants which contain change in control provisions. Neither the execution and delivery of this Agreement or other related agreements, nor the consummation of the transactions contemplated hereby or thereby will (either alone or in conjunction with any other event, such as termination of employment) (i) result in any payment (including, without limitation, severance, unemployment compensation, parachute or otherwise) becoming due to any director or any employee of the Company or any Company Subsidiary or Affiliate from the Company or any Company Subsidiary or Affiliate under any Company Benefit Plan or otherwise, (ii) significantly increase any benefits otherwise payable under any Company Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any benefits, except as may be required by applicable Law.

 

(j) The Company and the Company Subsidiaries have, for purposes of each relevant Company Benefit Plan, correctly classified those individuals performing services for the Company or any Company Subsidiary as common law employees, leased employees, independent contractors or agents.

 

Section 3.9 Contracts . Except as filed as exhibits to the Company SEC Filings filed prior to the date of this Agreement, or as disclosed in Section 3.9 of the Company Disclosure Letter, as of the date of this Agreement neither the Company nor any Company Subsidiary is a party to or bound by any Contract (each a “ Company Material Contract ”) that (i) is a “material contract” (as such term is defined in Item 601(b)(10) of Regulation S-K of the SEC), (ii) is with

 

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any Affiliate of the Company, other than any Contract (A) which is or has been fully performed and under which the Company has no continuing right, liability or obligation, or (B) that is otherwise disclosed on the Company Disclosure Letter and marked with a footnote indicating that it is a Contract with an Affiliate of the Company, or (iii) limits or otherwise restricts the Company or any Company Subsidiary or that would, after the Effective Time, limit or restrict Parent or any of its Subsidiaries (including the Surviving Corporation and its Subsidiaries) or any successor thereto, from engaging or competing in any line of business or in any geographic area. To the Company’s Knowledge, none of the contracts or agreements referred to in the foregoing clause (iii) would preclude the Company, the Surviving Corporation or Parent after Closing from engaging in any of its current activities, or presently planned material activities of which the Company is aware. All Company Material Contracts are valid and in full force and effect except to the extent they have previously expired in accordance with their terms, and neither the Company nor any Company Subsidiary has violated any provision of, or committed or failed to perform any act which, with or without notice, lapse or time, or both, could reasonably be expected to constitute a material default under the provisions of any such Company Material Contract. To the Knowledge of the Company, no counterparty to any such Company Material Contract has violated any provision of, or committed or failed to perform any act which, with our without notice, lapse of time, or both, could reasonably be expected to constitute a material default or other breach under the provisions of any such Company Material Contract. Copies of all the Contracts set forth in the Company Disclosure Letter have heretofore been made available to Parent and such copies are accurate and complete.

 

Section 3.10 Litigation . Except as and to the extent disclosed in the Company SEC Filings, including the notes thereto, filed prior to the date of this Agreement or as set forth on Section 3.10 of the Company Disclosure Letter, (a) to the Knowledge of the Company, there is no suit, claim, action, proceeding or investigation pending or threatened against the Company or any Company Subsidiary or for which the Company or any Company Subsidiary is obligated to indemnify a third party, and (b) neither the Company nor any Company Subsidiary is subject to any outstanding and unsatisfied order, writ, injunction, decree or arbitration ruling, award or other finding.

 

Section 3.11 Environmental Matters . Except as disclosed in the Company Form 10-K or in Company SEC Filings, including the notes thereto:

 

(a) The Company and the Company Subsidiaries (i) have complied and are in compliance with all applicable Environmental Laws, (ii) hold all Environmental Permits necessary to conduct their current operations, and (iii) have complied and are in compliance with their respective Environmental Permits, except, in each case, as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

(b) Neither the Company nor any Company Subsidiary has received within the past five (5) years any written notice, demand, letter, claim or request for information alleging that the Company or any Company Subsidiary is or may be in material violation of, or has any material liability under, any Environmental Law.

 

(c) Neither the Company nor any Company Subsidiary (i) has entered into any consent decree or order, is a party to litigation or other proceeding, or is subject to any judgment, decree or judicial order, relating to Environmental Laws, Environmental Permits or the

 

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investigation, sampling, monitoring, treatment, remediation, removal or cleanup of Hazardous Materials and, to the Knowledge of the Company, no such consent decree, order, litigation or other proceeding, judgment, decree or judicial order is pending or threatened or (ii) has any contractual obligation to indemnify, hold harmless or insure any other person with respect to any claim actually threatened or asserted against the Company or any Company Subsidiary and relating to any Environmental Law or any Hazardous Materials.

 

(d) None of the real property owned or leased by the Company or any Company Subsidiary is listed or, to the Knowledge of the Company, proposed for listing on the “National Priorities List” under CERCLA, as of the date hereof, or any similar state or foreign list of sites requiring investigation or cleanup.

 

(e) Neither the Company nor any of the Company Subsidiaries has ever treated, stored, transported, disposed of, arranged for or permitted the disposal of, handled, released, or exposed any person to, any Hazardous Materials, or owned or operated any property or facility (and no such property or facility is contaminated by any Hazardous Materials) in a manner that has given or could reasonably be expected to give rise to any liabilities pursuant to any Environmental Law for fines, penalties, injuries or damages to persons or the environment, or costs of environmental investigation, cleanup or monitoring, in each case as would, individually or in the aggregate, have a Company Material Adverse Effect.

 

Section 3.12 Intellectual Property . Except as would not, individually or in the aggregate, have a Company Material Adverse Effect, (a) no Company Intellectual Property owned by the Company or any Company Subsidiary is subject to any outstanding injunction, judgment, order or settlement, and the Company and its Subsidiaries have fully complied with, paid and otherwise satisfied all such obligations, (b) to the Company’s Knowledge, the Company Patents owned by the Company or any Company Subsidiary are valid and enforceable, in whole or in part, and no allegation of invalidity or conflicting ownership or inventorship rights with respect to any such Company Patent has been received by the Company or any Company Subsidiary from a third party, (c) no Company Intellectual Property that is owned by the Company or any Company Subsidiary is to the Company’s Knowledge the subject of any pending or threatened action, suit, claim, investigation, arbitration, validity or enforceability challenge or other proceeding, (d) to the Company’s Knowledge, no Company Intellectual Property that is licensed by the Company or any Company Subsidiary is the subject of any pending or threatened action, suit, claim, investigation, arbitration, validity or enforceability challenge or other proceeding, (e) no person has given written notice to the Company or any Company Subsidiary in the past three (3) years that the Company or any Company Subsidiary is infringing or misappropriating or has infringed or misappropriated any patent, trademark, service mark, trade name, or copyright or design right or other intellectual property right of any third party, or that the Company or any Company Subsidiary has misappropriated or improperly used or disclosed any trade secret, confidential information or know-how, (f) to the Company’s Knowledge, the conduct of the business of the Company and the Company Subsidiaries as currently conducted does not infringe or misappropriate any Intellectual Property right of any third party, (g) there exists no prior act or omission or current conduct or use by the Company, any Company Subsidiary or, to the Knowledge of the Company, any third party that would invalidate, reduce or eliminate the enforceability or scope of any Company Intellectual Property owned by the Company or any Company Subsidiary, and (h) the Company and the Company

 

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Subsidiaries own or have the right to use all Intellectual Property necessary for the conduct of their business as currently conducted.

 

Section 3.13 Taxes .

 

(a) Each of the Company and the Company Subsidiaries has duly and timely filed with the appropriate Tax authorities or other Governmental Entities all material Tax Returns that it was required to file through the date hereof. All such Tax Returns are complete and accurate in all material respects. All material Taxes due and owing by any of the Company and its Subsidiaries (whether or not shown on any Tax Returns) have been paid or provided for. Neither the Company nor any Company Subsidiary currently is the beneficiary of any extension of time within which to file any material Tax Return. No written claim has ever been made by an authority in a jurisdiction where any of the Company and the Company Subsidiaries does not file Tax Returns that it is or may be subject to taxation by that jurisdiction.

 

(b) The unpaid Taxes of the Company and the Company Subsidiaries did not, as of the dates of the most recent financial statements contained in the Company SEC Filings, exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the face of the balance sheets (rather than in any notes thereto) contained in such financial statements by a material amount. Since the date of the most recent financial statements, none of the Company and the Company Subsidiaries has incurred any liability for Taxes outside the ordinary course of business or otherwise inconsistent with past custom and practice.

 

(c) No unresolved deficiencies for Taxes with respect to any of the Company and the Company Subsidiaries have been claimed, proposed or assessed by a Tax authority. To the knowledge of the Company, there are no pending, proposed or threatened audits, investigations, disputes or claims or other actions for or relating to any liability for Taxes with respect to any of the Company and the Company Subsidiaries. No issues relating to Taxes of any of the Company and the Company Subsidiaries were raised by the relevant Tax authority in any completed audit or examination that would reasonably be expected to recur in a later Tax period. The Company has delivered or made available to Parent complete and accurate copies of federal, state and local income Tax Returns of each of the Company and the Company Subsidiaries and their predecessors for the previous four fiscal years, and complete and accurate copies of all examination reports and statements of deficiencies assessed against or agreed to by any of the Company and the Company Subsidiaries or any predecessors since December 31, 2000, with respect to Taxes of any type. Neither the Company nor any of the Company Subsidiaries nor any predecessor has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency. There are no Liens for Taxes upon the assets of any of the Company or the Company Subsidiaries, other than Permitted Liens.

 

(d) Each of the Company and the Company Subsidiaries has withheld and paid all material Taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stockholder or other third party, and all Tax Returns required with respect thereto have been properly completed and timely filed in all material respects.

 

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(e) Except for the affiliated group of which the Company is the common parent, each of the Company and the Company Subsidiaries is not and has never been a member of an affiliated group of corporations within the meaning of Section 1504 of the Code or any group that has filed a combined, consolidated or unitary Tax Return. Neither the Company nor any of the Company Subsidiaries has liability for the Taxes of any person (other than the Company and the Company Subsidiaries) (i) under Treasury Regulations Section 1.1502-6 (or any similar provision of state, local or foreign law), (ii) as a transferee or successor, (iii) by contract or (iv) otherwise.

 

(f) There are no Tax sharing agreements or similar arrangements (including indemnity arrangements) with respect to or involving any of the Company and the Company Subsidiaries and, after the Effective Time, none of the Company and the Company Subsidiaries shall be bound by any such Tax sharing agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Effective Time.

 

(g) None of the Company and the Company Subsidiaries: (i) has consented at any time under former Section 341(f)(1) of the Code to have the provisions of former Section 341(f)(2) of the Code apply to any disposition of the assets of the Company (or under any similar provision of state, local or foreign Law); (ii) has agreed, or is or was required, to make any adjustment under Section 481(a) of the Code by reason of a change in accounting method or otherwise (or by reason of any similar provision of state, local or foreign law), except for adjustments the resulting Tax consequences of which have been fully and completely taken into account in previously filed Tax Returns; or (iii) has ever been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

 

(h) Neither the Company nor any Company Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” in a distribution of stock qualifying under Section 355 of the Code (i) in the two (2) years prior to the date of this Agreement or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) that includes the Merger.

 

(i) Neither the Company nor any Company Subsidiary has been a party to a “reportable transaction,” as such term is defined in Treasury Regulations Section 1.6011-4(b)(1) or to a transaction that is or is substantially similar to a “listed transaction,” as such term is defined in Treasury Regulations Section 1.6011-4(b)(2), or any other transaction requiring disclosure under analogous provisions of state, local or foreign Tax Law. The Company has disclosed on its federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income Tax within the meaning of Code Section 6662.

 

(j) Neither the Company nor any Company Subsidiary has taken any action or knows of any fact that could reasonably be expected to prevent the Merger from qualifying as a reorganization within the meaning of Section 368 of the Code.

 

(k) Neither the Company nor any Company Subsidiary has taken any action or knows of any fact that could reasonably be expected to prevent the Singapore tax holiday from surviving the Merger or expiring prior to its expiration date of December 2007.

 

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Section 3.14 Insurance . Section 3.14 of the Company Disclosure Letter sets forth a summary of all material insurance policies maintained by the Company, including fire and casualty, general liability, product liability, business interruption and professional liability policies. Such coverage, or substantially similar coverage, has been in force without interruption throughout the five-year period preceding the date hereof.

 

Section 3.15 Properties . Each of the Company and the Company Subsidiaries has good and valid title to or a valid leasehold interest in all its properties and assets reflected on the most recent balance sheet contained in the Company Form 10-K or acquired after the date thereof, except for properties and assets sold or otherwise disposed of in the ordinary course of business since the date of such balance sheet. All of such tangible properties and assets have been maintained in the ordinary course of business and are in operable condition (normal wear and tear excepted), except as would not, individually or in the aggregate, have a Company Material Adverse Effect. All real property owned by the Company or any Company Subsidiary is owned free and clear of all Liens, other than Permitted Liens.

 

Section 3.16 Labor and Employment Matters . With respect to the Company and each Company Subsidiary, (i) there are no controversies, charges of unlawful harassment or discrimination, or complaints or allegations of unlawful harassment or discrimination pending or, to the Knowledge of the Company, threatened, in each case except as would not, individually or in the aggregate, have a Company Material Adverse Effect, (ii) there is no collective bargaining agreement or other labor union contract applicable to persons employed by the Company or any Company Subsidiary, (iii) there are no unfair labor practice charges or complaints, grievances, or arbitration proceedings pending, or to the Knowledge of the Company, threatened, in each case except as would not, individually or in the aggregate, have a Company Material Adverse Effect, (iv) there is no strike, slowdown, work stoppage or lockout, or, to the Knowledge of the Company, any threat thereof, in each case except as would not, individually or in the aggregate, have a Company Material Adverse Effect, and (v) within the past three (3) years there has been no plant closing or layoff of employees by the Company or any of its Subsidiaries in violation of the Workers Adjustment and Retraining Notification Act or any similar Law (collectively, the “ WARN Act ”) except as would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

Section 3.17 Brokers . No broker, finder or investment banker (other than the Company Financial Advisors) is entitled to any brokerage, finder’s or other fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Company or any Company Subsidiary or any of their respective Affiliates or Representatives, whether orally or in writing. Prior to the date hereof, the Company has provided, or made available to, Parent with copies of all written agreements between the Company or any Company Subsidiary and such parties and accurately described to Parent any oral agreements between the Company or any Company Subsidiary and any financial or similar advisor relating to the Merger.

 

Section 3.18 Company Government Contracts

 

For purposes of this Section 3.18, “Company Government Contracts” shall mean all contracts, agreements, bids, proposals and offers fitting the following descriptions: (i) contracts or other agreements to which the Company or any Company Subsidiary is or during the past

 

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three (3) years has been a party to with any U.S. federal, state or local Governmental Entity; and (ii) all bids, proposals or other offers that the Company or any Company Subsidiary has submitted during the past two (2) years for a contract or agreement of the type described in (i) immediately above. With respect to each Company Government Contract:

 

(a) with respect to each Company Government Contract: (i) the Company and each of the Company Subsidiaries have complied with all material terms and conditions of such Company Government Contract, including all clauses, provisions and requirements incorporated expressly, by reference or by operation of law therein; (ii) the Company and each of the Company Subsidiaries have complied with all material requirements of applicable laws pertaining to such Company Government Contract; (iii) all representations and certifications executed, acknowledged or set forth in or pertaining to such Company Government Contract were complete and correct in all material respects as of their effective date, and the Company and each of the Company Subsidiaries have complied in all material respects with all such representations and certifications; (iv) neither the United States nor any prime contractor, subcontractor or other person has notified the Company or any of the Company Subsidiaries, either orally or in writing, that the Company or any of the Company Subsidiaries has breached or violated any applicable law, or any material certification, representation, clause, provision or requirement pertaining to such Company Government Contract; and (v) no termination for convenience, termination for default, cure notice or show cause notice is in effect as of the date hereof pertaining to any Company Government Contract;

 

(b) (i) neither the Company nor any of the Company Subsidiaries nor any of their respective directors, officers or employees is (or during the last three (3) years has been) under administrative, civil or criminal investigation, or indictment or audit by any Governmental Authority with respect to any alleged irregularity, misstatement or omission arising under or relating to any Company Government Contract (other than routine DCAA audits, in which no such irregularities, misstatements or omissions were identified); and (ii) during the last three (3) years, neither the Company nor any of the Company Subsidiaries has conducted or initiated any internal investigation or made a voluntary disclosure to the United States, with respect to any alleged irregularity, misstatement or omission arising under or relating to any Company Government Contract;

 

(c) there exist (i) no outstanding claims against the Company or any of the Company Subsidiaries, either by the United States or by any prime contractor, subcontractor, vendor or other third party, arising under or relating to any Company Government Contract; and (ii) no disputes between the Company or any of the Company Subsidiaries and the United States under the Contract Disputes Act or any other Federal statute or between the Company or any of the Company Subsidiaries and any prime contractor, subcontractor or vendor arising under or relating to any Company Government Contract;

 

(d) neither the Company nor any of the Company Subsidiaries nor, to the Company’s Knowledge, any of its or the Company Subsidiary’s directors, officers or employees is (or during the last three (3) years has been) suspended or debarred from doing business with the United States or is (or during such period was) the subject of a finding of nonresponsibility or ineligibility for United States contracting; and

 

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(e) there is no suit or investigation pending and, to the Company’s Knowledge, no suit or investigation threatened against the Company or any of the Company Subsidiaries with respect to any Company Government Contract;

 

except to the extent that any such circumstance would not, individually or in the aggregate, have a Company Material Adverse Effect.

 

ARTICLE 4.

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

 

Except as set forth in the corresponding section of the Disclosure Letter delivered by Parent to the Company prior to the execution of this Agreement (the “ Parent Disclosure Letter ”) (and subject to Section 9.14 hereof), Parent and Merger Sub hereby represent and warrant to the Company as follows:

 

Section 4.1 Organization and Qualification; Subsidiaries . Each of Parent and its Subsidiaries (the “ Parent Subsidiaries ”) is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction of incorporation and has all requisite corporate power and authority to own, lease and operate its properties and assets and to carry on its business as it is now being conducted, and is qualified to do business and is in good standing as a foreign corporation in each jurisdiction where the ownership or operation of its assets or properties or conduct of its business requires such qualification, except where the failure to be so organized, qualified or in good standing, or to have such power or authority, would not, individually or in the aggregate, have a Parent Material Adverse Effect. Parent has made available to the Company a complete and correct copy of the certificates of incorporation and bylaws (or other organizational documents) of Parent and the Parent Subsidiaries, each as amended to date. Except with respect to securities of non-affiliates held for investment purposes which do not constitute more than a 1% interest in any such non-affiliate and with respect to the capital stock of wholly-owned Parent Subsidiaries, neither Parent nor any Parent Subsidiary holds an Equity Interest in any other person. The certificates of incorporation and bylaws (or other organizational documents) of Parent and the Parent Subsidiaries made available are in full force and effect. Section 4.1 of the Parent Disclosure Letter contains a correct and complete list of each jurisdiction where Parent and each of its Subsidiaries is organized and qualified to do business.

 

Section 4.2 Capitalization .

 

(a) As of the date hereof, the authorized capital stock of Parent consists of 350,000,000 shares of Parent Common Stock and 10,000,000 shares of preferred stock, par value $0.001 per share (the “ Parent Preferred Stock ”), of which 1,000,000 shares have been designated as Series A Junior Participating Preferred Stock. As of June 13, 2005, (i) 106,822,919 shares of Parent Common Stock were issued and outstanding, all of which were validly issued and fully paid, nonassessable and free of preemptive rights, and (ii) 19,606,373 shares of Parent Common Stock were issuable (and such number was reserved for issuance) upon exercise of Parent Options outstanding as of such date. As of the date hereof, (i) 1,000,000 shares of Series A Junior Participating Preferred Stock have been reserved for issuance in connection with the Parent Rights, and (ii) no shares of Parent Preferred Stock are issued or outstanding.

 

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(b) Except for outstanding Parent Options, outstanding purchase rights under Parent’s Employee Stock Purchase Plan and outstanding Parent Rights under the Parent Rights Agreement, as of the date hereof, there are no options, warrants or other rights, agreements, arrangements or commitments of any character to which Parent or any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary is bound relating to the issued or unissued capital stock or other Equity Interests of Parent or any Parent Subsidiary, or obligating Parent or any Parent Subsidiary to issue or sell any shares of its capital stock or other Equity Interests. From June 13, 2005 to the date of this Agreement, Parent has not issued any Equity Interests with respect to Parent Common Stock, other than Parent Common Stock issued upon exercise of Parent Stock Options and Parent Common Stock issued in the ordinary course of business pursuant to the Parent ESPP. Section 4.2(b) of the Parent Disclosure Letter sets forth a true and complete list, as of June 13, 2005, of the prices at which outstanding Parent Options may be exercised under the applicable Parent Stock Option Plans, the number of Parent Options outstanding at each such price and the vesting schedule of the Parent Options. All shares of Parent Common Stock subject to issuance under the Parent Stock Option Plans, upon issuance prior to the Effective Time on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights.

 

(c) There are no outstanding contractual obligations of Parent or any Parent Subsidiary (i) restricting the transfer of, (ii) affecting the voting rights of, (iii) requiring the repurchase, redemption or disposition of, or containing any right of first refusal with respect to, (iv) requiring the registration for sale of, or (v) granting any preemptive or antidilutive right with respect to, any Parent Common Stock or any capital stock of, or other Equity Interests in, any Parent Subsidiary. Each outstanding share of capital stock of each Parent Subsidiary is duly authorized, validly issued, fully paid, nonassessable and free of preemptive rights and is owned, beneficially and of record, by Parent free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on Parent’s voting rights, charges and other encumbrances of any nature whatsoever. There are no outstanding contractual obligations of Parent or any Parent Subsidiary to make any loan to, or any equity or other investment (in the form of a capital contribution or otherwise) in, any Parent Subsidiary or any other person, other than guarantees by Parent of any indebtedness or other obligations of any wholly-owned Parent Subsidiary and other than loans made in the ordinary course consistent with past practice to employees of Parent and its Subsidiaries.

 

(d) Neither Parent nor any Parent Subsidiary has outstanding any bonds, debentures, notes or other obligations the holders of which have the right to vote (or convertible into or exercisable for securities having the right to vote) with the stockholders of Parent or any Parent Subsidiary on any matter.

 

Section 4.3 Authority .

 

(a) Parent has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement, subject to the approval by the stockholders of Parent, by a majority of the votes cast by all holders of Parent Common Stock entitled to vote thereon at the Parent Stockholders Meeting, of the Share Issuance (the “ Parent Stockholder Approval ”). The execution and delivery of this Agreement by Parent and the consummation by Parent of such

 

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transactions have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of Parent and no stockholder votes are necessary to authorize this Agreement or to consummate such transactions, subject only to obtaining the Parent Stockholder Approval. This Agreement is the valid and binding agreement of Parent enforceable against Parent in accordance with its terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights and to general principles of equity.

 

(b) The board of directors of Parent, by resolutions duly adopted by unanimous vote at a meeting duly called and held and, except to the extent contemplated by Section 6.4, not subsequently rescinded or modified in any way (the “ Parent Board Approval ”), has duly (i) determined that this Agreement and the Merger are advisable and fair to and in the best interests of Parent and its stockholders, (ii) approved this Agreement, the Voting Agreements and the transactions contemplated hereby and thereby, including, the Merger and the Share Issuance, and (iii) recommended that the stockholders of Parent approve the Share Issuance (the “ Parent Recommendation ”) and directed that the Share Issuance be submitted for consideration by Parent’s stockholders in accordance with this Agreement. The Parent Board Approval constitutes or includes approval of this Agreement and the Voting Agreements and the transactions contemplated hereby and thereby, including the Merger and the Share Issuance, as required under any applicable Takeover Law, and no such Takeover Law is applicable to this Agreement or the Voting Agreements or the transactions contemplated hereby or thereby, including the Merger and the Share Issuance.

 

(c) The board of directors of Parent has received the opinion of its financial advisor, Morgan Stanley & Co. Incorporated (the “ Parent Financial Advisor ”), dated the date, or shortly prior to the date, of this Agreement, to the effect that, as of the date of such opinion, the Merger Consideration is fair, from a financial point of view, to Parent.

 

Section 4.4 No Conflict; Required Filings and Consents .

 

(a) The execution and delivery of this Agreement by Parent do not, and the performance of this Agreement by Parent will not, (i) conflict with or violate any provision of (A) the Parent Certificate, (B) the bylaws of Parent as in effect on the date hereof, or (C) any equivalent organizational documents of any Parent Subsidiary, or (ii) require any consent or approval under, violate, result in any breach of, any loss of any benefit under or constitute a change of control or default (or an event which with notice or lapse of time or both would become a default) under, or give to others any right of termination, vesting, amendment, acceleration or cancellation of, or result in the creation of a lien or other encumbrance (other than a Permitted Lien) on any property or asset of Parent or any Parent Subsidiary pursuant to, any Law, Contract, Parent Permit or other instrument or obligation, except, with respect to clause (i)(C) or clause (ii), for any such conflicts, violations, breaches, defaults or other occurrences which would not, individually or in the aggregate, have a Parent Material Adverse Effect.

 

(b) The execution and delivery of this Agreement by Parent do not, and the performance of this Agreement by Parent will not, require any consent, approval, authorization or permit of, or filing with or notification to, any domestic or foreign Governmental Entity, except (i) under the Exchange Act, the Securities Act, any applicable Blue Sky Law, the rules and regulations of Nasdaq and pursuant to Section 1.2 hereof, the filing of the Articles of Merger

 

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with the Pennsylvania Secretary of State (ii) any filings necessary under the HSR Act or foreign antitrust laws and regulations, and (iii) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not, individually or in the aggregate, have a Parent Material Adverse Effect.

 

Section 4.5 Permits; Compliance With Law . Each of Parent and the Parent Subsidiaries is in possession of all authorizations, licenses, permits, certificates, approvals and clearances, and has submitted notices to, all Governmental Entities necessary for Parent or any Parent Subsidiary to own, lease and operate its properties or other assets and to carry on their respective businesses in the manner described in the Parent SEC Filings filed prior to the date hereof and as it is being conducted as of the date hereof (the “ Parent Permits ”), and all such Parent Permits are valid, and in full force and effect, except where the failure to have, or the suspension or cancellation of, or failure to be valid or in full force and effect of, any of the Parent Permits would not, individually or in the aggregate, have a Parent Material Adverse Effect. Neither Parent nor any Parent Subsidiary is in conflict with, or in default or violation of, (a) any Law (including the Foreign Corrupt Practices Act) applicable to Parent or any Parent Subsidiary or by which any property or asset of Parent or any Parent Subsidiary is bound or affected or (b) any Parent Permits, except, with respect to clauses (a) and (b), for any such conflicts, defaults or violations that would not, individually or in the aggregate, have a Parent Material Adverse Effect. No investigation or review by any Governmental Entity with respect to Parent or any of the Parent Subsidiaries is, to the Knowledge of Parent, pending or threatened, nor has any Governmental Entity indicated an intention to conduct the same.

 

Section 4.6 SEC Filings; Financial Statements .

 

(a) Parent has timely filed all registration statements, prospectuses, forms, reports, definitive proxy statements, schedules and documents required to be filed by it under the Securities Act or the Exchange Act, as the case may be, since March 31, 2003 (collectively, the “ Parent SEC Filings ”). Each Parent SEC Filing (i) as of its date, complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, (ii) did not, at the time of filing, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and (iii) with respect to each Parent SEC Filing filed for fiscal periods ending after July 30, 2002, at the time filed included or was accompanied by the certifications required by the SOXA to be filed or submitted by Parent’s principal executive officer and principal financial officer (each of which certification was true and correct and fully complied with the SOXA) and otherwise complied in all material respects with the applicable requirements of the SOXA.

 

(b) Each of the consolidated financial statements (including, in each case, any notes thereto) contained in the Parent SEC Filings was prepared in all material respects in accordance with GAAP applied (except as may be indicated in the notes thereto and, in the case of unaudited quarterly financial statements, as permitted by Form 10-Q under the Exchange Act) on a consistent basis throughout the periods indicated (except as may be indicated in the notes thereto), and each presented fairly the consolidated financial position, results of operations and cash flows of Parent and the consolidated Parent Subsidiaries as of the respective dates thereof and for the respective periods indicated therein (subject, in the case of unaudited statements, to normal and recurring year-end adjustments which did not and would not, individually or in the

 

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aggregate, have a Parent Material Adverse Effect). The books and records of Parent and the Parent Subsidiaries have been, and are being, maintained in a