EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF
MERGER
among
SYMBOL TECHNOLOGIES,
INC.,
MARVIN ACQUISITION
CORP.
and
MATRICS, INC.
Dated as of
July 26, 2004
1
TABLE OF
CONTENTS
Page
EXHIBITS
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Exhibit A –
Exhibit B –
Exhibit C –
Exhibit D –
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Certificate of Incorporation of the Surviving
Corporation
Escrow Agreement
Interim Financing Note
Sales Forecasts
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2
AGREEMENT AND PLAN
OF MERGER
AGREEMENT AND PLAN OF MERGER, dated
as of July 26, 2004 (the “ Agreement ”),
among SYMBOL TECHNOLOGIES, INC., a Delaware corporation (“
Parent ”), MARVIN ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of Parent (“
Sub ”), MATRICS, INC., a Delaware corporation (the
“ Company ”), and, as to Article IX and
Section 10.2 of the Agreement only, Mark Ein, as the
Shareholder Representative (the “ Shareholder
Representative ”).
WHEREAS, the Boards of Directors of
Sub and the Company have declared this Agreement to be advisable,
and the Boards of Directors of Sub and the Company have each
approved the merger of Sub with and into the Company and the
Company becoming a wholly owned direct subsidiary of Parent (the
“ Merger ”) in accordance with the General
Corporation Law of the State of Delaware (“ DGCL
”) upon the terms and subject to the conditions set forth
herein;
WHEREAS, contemporaneously with the
execution and delivery of this Agreement, the Company has received
irrevocable written consents (the “ Written Consents
”) from the Principal Stockholders, who in the aggregate hold
a majority of the voting power represented by all of the
outstanding shares of the Company’s capital stock, pursuant
to which the Principal Stockholders have (i) adopted this
Agreement, (ii) approved of the transactions contemplated
hereby and (iii) appointed the Shareholder Representative in
accordance with Section 10.2 hereof; and
WHEREAS, as an essential inducement
for Parent and Sub to enter into the Agreement, certain employees
of the Company have entered into amendments to their existing
nondisclosure agreements with the Company, each of which contains a
noncompetition provision;
NOW, THEREFORE, in consideration of
the foregoing and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, Parent, Sub
and the Company hereby agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Certain
Definitions . For purposes of this Agreement, the term:
“ Acquisition Proposal
” shall have the meaning ascribed to such term in
Section 6.3.
“ Affiliate ”
shall have the meaning under Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended (the “
Exchange Act ”).
“ Agreement ”
shall mean this Agreement and Plan of Merger, and all Schedules and
Exhibits hereto, as amended, modified or supplemented, from time to
time in accordance with the terms hereof.
“ Applicable Escrow
Remainder ” shall mean, with respect to any Shareholder,
the percentage of the Escrowed Funds remaining in the Escrow
Account, if any, that such Shareholder shall be entitled to receive
from the Shareholder Representative pursuant to the Escrow
Agreement upon termination of the Escrow Agreement.
“ Balance Sheet ”
shall mean the unaudited balance sheet of the Company as of the
Balance Sheet Date.
“ Balance Sheet Date
” shall mean April 30, 2004.
“ beneficial owner
” with respect to any shares of Company Stock means a person
who shall be deemed to be the beneficial owner of such shares of
Company Stock (i) which such person or any of its affiliates
or associates beneficially owns, directly or indirectly,
(ii) which such person or any of its affiliates or associates
(as such term is defined in Rule 12b-2 of the Exchange Act)
has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the
passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange
rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding, or
(iii) which are beneficially owned, directly or indirectly, by
any other persons with whom such person or any of its affiliates or
person with whom such person or any of its affiliates or associates
has any agreement, arrangement or understanding for the purpose of
acquiring, holding, voting or disposing of any shares.
“ By-laws ” shall
have the meaning ascribed to such term in Section 3.2.
“ CERCLA ” shall
have the meaning ascribed to such term in the definition of
“Environmental Laws.”
“ Certificate of
Incorporation ” shall have the meaning ascribed to such
term in Section 3.2.
“ Certificate of Merger
” shall have the meaning ascribed to such term in
Section 2.2.
“ CFCs ” shall
have the meaning ascribed to such term in the definition of
“Hazardous Materials.”
“ Closing ” shall
have the meaning ascribed to such term in Section 2.12.
“ Closing Date ”
shall have the meaning ascribed to such term in
Section 2.12.
“ Code ” shall
mean the Internal Revenue Code of 1986, as amended.
“ Common Stock ”
shall have the meaning ascribed to such term in
Section 2.8(a).
“ Company ” shall
have the meaning ascribed to such term in the recitals to this
Agreement.
“ Company Audited Financial
Statements ” shall have the meaning ascribed to such term
in Section 6.9(b).
“ Company Disclosure
Schedule ” shall mean the disclosure letter supplied by
Company to Parent, dated as of the date hereof, which disclosure
shall provide an exception to or otherwise qualify the
representations, warranties or covenants or other agreements of the
Company contained in the section of this Agreement corresponding by
number to such disclosure.
“ Company Financial
Statements ” shall have the meaning ascribed to such term
in Section 6.9(b).
“ Company Material Adverse
Effect ” shall mean any change, event or effect that is
or would be materially adverse to (i) the business, assets
(including intangible assets), liabilities (including contingent
liabilities), condition (financial or otherwise) or results of
operations of the Company, but shall not include any change, event
or effect attributable to (a) conditions affecting the EPC
RFID industry as a whole, (b) the United States economy,
(c) the United States securities or financial or capital
markets or (d) the execution and announcement of this
Agreement and the transactions contemplated hereby so long as in
the case of each of (a), (b) and (c) the impact on the
Company is not materially disproportionate to the effect on
similarly situated Persons or (ii) the ability of the Company
to perform its obligations hereunder.
“ Company Officer’s
Certificate ” shall have the meaning ascribed to such
term in Section 7.3(a).
“ Company Option
” shall mean have the meaning ascribed to such term in
Section 2.9(a).
“ Company Owned
Intellectual Property ” shall mean all of the
Intellectual Property owned by, under obligation or assignment to,
or filed in the name of, the Company.
“ Company Registered
Intellectual Property ” shall have the meaning ascribed
to such term in Section 3.18(a).
“ Company Stock ”
shall have the meaning ascribed to such term in
Section 2.8(a).
“ Company Stock
Certificates ” shall have the meaning ascribed to such
term in Section 2.10.
“ Company Unaudited
Financial Statements ” shall have the meaning ascribed to
such term in Section 6.9(b).
“ Confidentiality
Agreement ” shall have the meaning ascribed to such term
in Section 6.1(b).
“ Contingent Shares
” shall have the meaning ascribed to such term in
Section 2.6.
“ Contracts ”
shall have the meaning ascribed to such term in
Section 3.16.
“ Control ”
(including the terms “ controlled by ” and
“ under common control with ”) shall have the
meaning under Rule 12b-2 promulgated under the Exchange
Act.
“ Damages ” shall
include any loss, damage, injury, liability, claim, demand,
settlement, judgment, award, fine, penalty, fee (including
reasonable attorneys’ fees), royalty, license, concession,
charge, cost or reasonable out-of-pocket cost or expense of any
nature (including costs of investigation), in each case, net of
(i) any Tax benefit actually realized with respect to such
amounts in the taxable year in which such amounts were incurred or
in the reasonable discretion of the Purchaser, the reasonable value
of any Tax benefits realized thereafter, and (ii) any cash
insurance proceeds actually received by the Indemnitees, which
proceeds actually received will be reimbursed by the Indemnitees by
delivery of such proceeds to the Shareholder Representative (after
deducting reasonable costs and expenses incurred in connection with
recovery of such proceeds, including premium increases) for
distribution to the Shareholders; provided that Damages
shall not include exemplary, punitive, special, indirect,
consequential, remote, or speculative damages (including, without
limitation, any damages on account of lost profits or
opportunities).
“ Deposit Amount
” shall have the meaning ascribed to such term in
Section 2.6.
“ DGCL ” shall
have the meaning ascribed to such term in the recitals to this
Agreement.
“ Dissenting Shares
” shall have the meaning ascribed to such term in
Section 2.8(d).
“ Effective Tim
e” shall have the meaning ascribed to such term in
Section 2.2.
“ Environmental Laws
” shall mean any federal, state or local law, statute,
ordinance, order, decree, rule or regulation relating to pollution
or the preservation and protection of human health and the
environment, including the manufacture, processing, distribution,
use, treatment, storage, transport, handling, Release or threatened
Release of, or exposure to, Hazardous Materials. Without
limitation, the term “Environmental Laws” includes the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. 9601, et seq. (“ CERCLA ”), the
Resource Conservation and Recovery Act, 42 U.S.C. 6901, et seq.
(“ RCRA ”), the Toxic Substances Control Act, 15
U.S.C. 2601, et seq. (“ TSCA ”), the
Occupational, Safety and Health Act, 29 U.S.C. 651, et seq., the
Clean Air Act, 42 U.S.C. 7401, et seq., the Federal Water Pollution
Control Act, 33 U.S.C. 1251, et seq., the Safe Drinking Water Act,
42 U.S.C. 300f, et seq., the Hazardous Materials Transportation
Act, 49 U.S.C. 1802, et seq. (“ HMTA ”) and the
Emergency Planning and Community Right to Know Act, 42 U.S.C.
11001, et seq. (“ EPCRA ”), and other comparable
state and local laws and all rules and regulations promulgated
pursuant thereto or published thereunder.
“ EPCRA ” shall
have the meaning ascribed to such term in the definition of
“Environmental Laws.”
“ ERISA ” shall
have the meaning ascribed to such term in Section 3.10(a).
“ Escrow Account
” shall have the meaning ascribed to such term in
Section 2.6.
“ Escrow Agent ”
shall have the meaning ascribed to such term in
Section 2.6(a).
“ Escrow Agreement
” shall have the meaning ascribed to such term in
Section 2.7.
“ Escrowed Funds
” shall mean the Deposit Amount and the Indemnifification
Escrow Amount, together with any interest or other income earned
thereon, net of any expenses and costs associated therewith.
“ Exchange Act ”
shall have the meaning ascribed to such term in the definition of
“Affiliate.”
“ Fee Real Property
” shall have the meaning ascribed to such term in
Section 3.27(a).
“ Financial Statements
” shall have the meaning ascribed to such term in
Section 3.7.
“ Financing Commitment
Letter ” shall have the meaning ascribed to such term in
Section 4.5.
“ generally accepted
accounting principles ” or “ GAAP ”
means the generally accepted accounting principles and practices in
the United States.
“ Governmental Body
” shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; or (c) governmental
authority of any nature (including any governmental division,
department, agency, commission, instrumentality, official,
organization, unit, body and any court or other tribunal).
“ Hazardous Materials
” shall mean each and every element, compound, chemical
mixture, material, waste or other substance which is defined,
determined or identified as hazardous or toxic under Environmental
Laws or the generation, use, handling or Release of which is
regulated under Environmental Laws. Without limiting the generality
of the foregoing, the term includes: “hazardous
substances” as defined in CERCLA; “extremely hazardous
substances” as defined in EPCRA; “hazardous
waste” as defined in RCRA; “hazardous materials”
as defined in HMTA; “chemical substance or mixture” as
defined in TSCA; crude oil, petroleum products or any fraction
thereof; radioactive materials including source, byproduct or
special nuclear materials; polychlorinated byphenyls, asbestos or
asbestos-containing materials; urea formaldehyde, mold, chlorinated
fluorocarbons (“ CFCs ”); and radon.
“ HMTA ” shall
have the meaning ascribed to such term in the definition of
“Environmental Laws.”
“ HSR Act ” shall
mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
“ Indebtedness ”
of any Person shall mean, without duplication, (a) all
indebtedness for borrowed money or issued in exchange or
substitution for borrowed money (including amounts drawn against
overdraft lines of credit), (b) all liabilities of such Person
evidenced by any note, bond, debenture or other debt security,
(c) all liabilities of such Person for the deferred purchase
price of property with respect to which such Person is liable,
contingently or otherwise, (d) all liabilities under
capitalized or synthetic leases with respect to which such person
is liable, contingently or otherwise, as obligor, guarantor or
otherwise, or with respect to which obligations another Person
ensures a creditor against loss, and (e) all liabilities
described in clauses (a) through (d) that are guaranteed in
any manner by such Person (including guarantees in the form of an
agreement to repurchase or reimburse) and any fees, penalties or
accrued and unpaid interest on the foregoing, including any
pre-payment penalties and costs associated with pre-payment.
“ Indemnification Escrow
Amount ” shall have the meaning ascribed to such term in
Section 2.6.
“ Indemnitees ”
shall mean the following persons: (a) Parent;
(b) Parent’s current and future affiliates (including
the Surviving Corporation); (c) the respective representatives
of the persons referred to in clauses (a) and (b) above;
and (d) the respective successors and assigns of the persons
referred to in clauses (a), (b) and (c) above;
provided , however , that no holders of Company Stock
shall be deemed to be “Indemnitees.”
“ Indemnitors ”
shall have the meaning ascribed to such term in
Section 9.2(a).
“ Indemnity Deductible
” shall have the meaning ascribed to such term in
Section 9.2(b).
“ Intellectual Property
” shall mean all U.S. and foreign intellectual property,
including without limitation (i) all patents, patent
applications, together with all provisionals, reissues,
continuations, continuations-in-part, divisions, revisions,
extensions, and reexaminations thereof, (ii) all trademarks,
service marks, trade dress, logos, brand names, trade names, domain
names and corporate names, together with all derivations and
combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in
connection therewith, (iii) all copyrightable works, all
copyrights, and all applications, registrations, and renewals in
connection therewith, (iv) all mask works and all
applications, registrations, and renewals in connection therewith,
and (v) all trade secrets and confidential business
information (including confidential ideas, research and
development, know-how, unpatented inventions, formulas,
compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications,
research records, records of inventions, test information, customer
and supplier lists, pricing and cost information, and business and
marketing plans and proposals).
“ Interim Financing
Note ” shall have the meaning ascribed to such term in
Section 6.12.
“ IP Contested Matters
” shall have the meaning ascribed to such term in
Section 6.14.
“ IP Licenses ”
shall have the mean all licenses, sublicenses, agreements, and
permissions (as amended to date) pursuant to which the Company has
the right to use the Intellectual Property of any third party.
“ Knowledge ”
shall mean, with respect to the Company, the actual knowledge of
Piyush Sodha, Larry Blue, Rick Mora and Mohammad Solemani, and with
respect to Parent, the actual knowledge of Mark Greenquist, John
Bruno, Todd Hewlin and Peter Lieb.
“ Leased Real Property
” shall have the meaning ascribed to such term in Section
3.27(b).
“ Legal Proceeding
” shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard
by or before, or otherwise involving, any court or other
Governmental Body or any arbitrator or arbitration panel.
“ Merger ” shall
have the meaning ascribed to such term in the recitals of this
Agreement.
“ Parent ” shall
have the meaning ascribed to such term in the preamble to this
Agreement.
“ Parent Material Adverse
Effect ” shall mean any change, event or effect that is
or would be materially adverse to (i) the business, assets
(including intangible assets), liabilities (including contingent
liabilities), condition (financial or otherwise) or results of
operations of Parent, but shall not include any change, event or
effect attributable to (a) conditions affecting the industries
in which Parent participates, (b) the United States economy,
(c) the United States securities or financial or capital
markets or (d) the execution and announcement of this
Agreement and the transactions contemplated hereby so long as in
the case of each of (a), (b) and (c) the impact on Parent
is not materially disproportionate to the effect on similarly
situated Persons or (ii) the ability of Parent to perform its
obligations hereunder.
“ Parent Officer’s
Certificate ” shall have the meaning ascribed to such
term in Section 7.2(a).
“ Payment Schedule
” shall have the meaning ascribed to such term in
Section 6.8.
“ Permitted
Encumbrances ” shall mean, with respect to the Company,
(a) liens for Taxes not yet due and payable and Taxes that are
being contested in good faith, (b) statutory liens of
landlords, liens of carriers, warehouse persons, mechanics and
material persons and other liens imposed by law incurred in the
ordinary course of business for sums (i) not yet due and
payable or (ii) being contested in good faith, (c) liens
incurred or deposits made in connection with workers’
compensation, unemployment insurance and other types of social
security programs or to secure the performance of tenders,
statutory obligations, surety and appeal bonds, bids, leases,
government contracts, performance and return of money bonds and
similar obligations, in each case in the ordinary course of
business consistent with past practice, (d) purchase money
liens incurred in the ordinary course of business consistent with
past practice and (e) easements, rights-of-way, restrictions
and other similar charges or encumbrances imposed on real property,
in each case, which do not interfere with the ordinary conduct of
business of the Company and do not materially detract from the
value of the property upon which such encumbrance exists.
“ Person ” means
an individual, corporation, limited liability company, partnership,
association, trust, unincorporated organization, other entity or
group (as defined in Section 13(d)(3) of the Exchange Act).
“ Plans ” shall
have the meaning ascribed to such term in Section 3.10(a).
“ Present Value ”
shall have the meaning ascribed to such term in
Section 6.14.
“ Principal
Stockholders ” shall mean Novak Biddle Venture Partners;
Carlyle Venture Partners II, L.P.; Polaris Venture Partners III
L.P.; Venturehouse Group; William Bandy, Michael Arneson and Piyush
Sodha.
“ Property ”
shall mean all property owned and/or leased by the Company.
“ Public Documents
” shall have the meaning ascribed to such term in
Section 4.7.
“ Purchase Price
” shall have the meaning ascribed to such term in
Section 2.6.
“ PWC ” shall
have the meaning ascribed to such term in Section 6.9.
“ RCRA ” shall
have the meaning ascribed to such term in the definition of
“Environmental Laws.”
“ Real Property ”
shall have the meaning ascribed to such term in
Section 3.27(b).
“ Release ” shall
mean and include any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, migrating,
dumping or disposing into the environment or the workplace of any
Hazardous Materials, and otherwise as defined in any Environment
Law.
“ Representatives
” shall have the meaning ascribed to such term in
Section 6.3.
“ SEC ” shall
have the meaning ascribed to such term in Section 4.7.
“ Securities Act
” shall have the meaning ascribed to such term in
Section 4.7.
“ Series D
Documents ” shall have the meaning ascribed to such term
in the Escrow Agreement.
“ Share ” shall
mean one share of Company Stock issued and outstanding immediately
prior to the Effective Time.
“ Shareholder ”
shall mean an owner of shares of Company Stock issued and
outstanding immediately prior to the Effective Time.
“ Shareholder
Representative ” shall mean Mark Ein.
“ SoleNet ” shall
have the meaning ascribed to such term in Section 3.10(f).
“ SoleNet Employees
” shall have the meaning ascribed to such term in
Section 7.3(f).
“ Stock Plans ”
shall have the meaning ascribed to such term in
Section 2.9(b).
“ Stock Rights ”
shall have the meaning ascribed to such term in
Section 2.9(b)
“ Sub ” shall
have the meaning ascribed to such term in the preamble to this
Agreement.
“ Subsidiary ” or
“ subsidiaries ” of the Company, the Surviving
Corporation, Parent or any other person means any corporation,
partnership, joint venture or other legal entity of which the
Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock
or other voting or economic equity interests.
“ Surviving Corporation
” shall have the meaning ascribed to such term in
Section 2.1.
“ Taxes ” shall
mean (i) all federal, state, local or foreign income,
business, gross receipts, windfall or excess profits, severance,
property, production, sales, use, license, excise, franchise,
employment, withholding, , customs duty, capital stock, stamp,
transfer or recording, payroll, unemployment, disability, excise,
production, value added, occupancy or other taxes, or similar
governmental charge imposed by any taxing authority of any kind
whatsoever, whether computed on a separate, consolidated, unitary,
combined or any other basis, together with any interest, additions
or penalties with respect thereto and any interest in respect of
such additions or penalties and (ii) any liability for amounts
described in clause (i) under Treasury Regulation
Section 1.1502-6, as a result of transferee liability, as a
result of being a member of an affiliated, combined, consolidated
or unitary group or as a result of any agreement, implied or
express, to indemnify any Person for amounts described in clause
(i).
“ Tax Returns ”
shall mean all federal, state, local or foreign tax returns, tax
reports, information statements and declarations of estimated tax
required to be filed by or on behalf of the Company.
“ Termination Date
” shall have the meaning ascribed to such term in
Section 9.1(a).
“ Transaction Documents
” means all agreements, documents and instruments required to
be executed by Parent, Sub or the Company in accordance with the
provisions of this Agreement.
“ TSCA ” shall
have the meaning ascribed to such term in the definition of
“Environmental Laws.”
“ Written Consents
” shall have the meaning ascribed to such term in the
recitals of this Agreement.
ARTICLE II.
THE MERGER
SECTION 2.1 The Merger . Upon
the terms and subject to the conditions of this Agreement and in
accordance with the DGCL, at the Effective Time (as defined in
Section 2.2), Sub shall be merged with and into the Company.
As a result of the Merger, the separate existence of Sub shall
cease and the Company shall continue as the surviving corporation
of the Merger (the “ Surviving Corporation
”).
SECTION 2.2 Effective Time .
As soon as practicable after the satisfaction or waiver of the
conditions set forth in Article VII, the parties hereto shall
cause the Merger to be consummated by filing a certificate of
merger (the “ Certificate of Merger ”) with the
Secretary of State of the State of Delaware, in such form as
required by and executed in accordance with the relevant provisions
of the DGCL (the date and time of the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware (or
such later time as is specified in the Certificate of Merger and
agreed upon by the parties hereto) being the “ Effective
Time ”).
SECTION 2.3 Effects of the
Merger . The Merger shall have the effects as set forth herein
and in the applicable provisions of the DGCL. Without limiting the
generality of the foregoing and subject thereto, at the Effective
Time all the property, rights, privileges, immunities, powers and
franchises of the Company and Sub shall vest in the Surviving
Corporation, and all debts, obligations, liabilities and duties of
the Company and Sub shall become the debts, liabilities and duties
of the Surviving Corporation.
SECTION 2.4 Certificate of
Incorporation; By-Laws (a) . (a) At the Effective Time and
without any further action on the part of the Company and Sub, the
Certificate of Incorporation of the Surviving Corporation shall be
as set forth on Exhibit A hereto until thereafter and further
amended as provided therein and under the DGCL; provided
that the name set forth in the Certificate of Incorporation shall
be Matrics, Inc.
(b) At the Effective Time and
without any further action on the part of the Company and Sub, the
By-Laws of Sub shall be the By-Laws of the Surviving Corporation
and thereafter may be amended or repealed in accordance with their
terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
SECTION 2.5 Directors and
Officers . The directors of Sub immediately prior to the
Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate
of Incorporation and By-Laws of the Surviving Corporation. The
officers of Sub immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed (as
the case may be) and qualified.
SECTION 2.6 Purchase Price
(a) . (a) The consideration for the Merger, subject to the
provisions herein, shall be Two-Hundred-Thirty-Million Dollars
($230,000,000) (the “ Purchase Price ”).
(b) Upon the execution of this
Agreement, (i) Parent shall deposit into an account (the
“ Escrow Account ”) with JPMorganChase, or such
similar financial services company as Parent and the Shareholder
Representative may mutually agree, as Escrow Agent (the “
Escrow Agent ”), pursuant to the Escrow Agreement,
$15,000,000 (the “ Deposit Amount ”), and (ii)
the Company shall deposit with the Escrow Agent pursuant to the
Escrow Agreement, the Series D Documents, including an
unsigned stock certificate evidencing 2,691,355 shares of the
Company’s Series D Preferred Stock (the “
Contingent Shares ”).
(c) In the event the Merger is
consummated:
(i) the Deposit Amount shall be
released from the Escrow Account in accordance with the terms and
conditions of the Escrow Agreement and returned to Parent;
(ii) the Series D
Documents, including the Contingent Shares, shall be released from
the Escrow Account in accordance with the terms and conditions of
the Escrow Agreement and returned to the Company;
(iii) following receipt of the
Deposit Amount from the Escrow Agent, Parent shall deposit with the
Escrow Agent $16 million (the “ Indemnification
Escrow Amount ”) of the Purchase Price in cash to be held
in accordance with the terms and conditions of the Escrow
Agreement; and
(iv) the outstanding principal
plus accrued and unpaid interest on the Interim Financing Note (the
“ Note Outstanding Balance ”) shall be deducted
from the Purchase Price; provided that (i) if a
termination right pursuant to Section 8.1(f) has arisen, this
Agreement is not terminated and the Merger is thereafter
consummated, then the Note Outstanding Balance shall not be
deducted from the Purchase Price and (ii) in the event either
(A) a termination right pursuant to Section 8.1(g) has
arisen or (B) the Merger is not consummated within five
business days after the condition with respect to the HSR Act set
forth in Section 7.1(c) shall have been satisfied, but, in
either case this Agreement is not terminated and the Merger is
thereafter consummated, then only fifty percent (50%) of the Note
Outstanding Balance shall be deducted from the Purchase Price.
(d) In the event this Agreement
is terminated pursuant to Section 8.1(a), (b), (c), (d), (e)
or (h):
(i) the Deposit Amount shall be
released from the Escrow Account in accordance with the terms and
conditions of the Escrow Agreement and returned to Parent;
(ii) the Series D
Documents, including the Contingent Shares, shall be released from
the Escrow Account in accordance with the terms and conditions of
the Escrow Agreement and returned to the Company; and
(iii) the Note Outstanding
Balance shall be repaid in full in cash to Parent within ninety
(90) days of such termination.
(e) In the event this Agreement
is terminated pursuant to Section 8.1(f):
(i) the Deposit Amount shall be
released from the Escrow Account in accordance with the terms and
conditions of the Escrow Agreement and delivered to the Company;
and
(ii) the Series D
Documents, including the Contingent Shares, shall be released from
the Escrow Account in accordance with the terms and conditions of
the Escrow Agreement and delivered to Parent; and
(iii) the Note Outstanding
Balance shall be repaid in full in cash to Parent within ninety
(90) days of such termination.
(f) In the event this Agreement
is terminated pursuant to Section 8.1(g):
(i) the Deposit Amount shall be
either:
(A) released from the Escrow
Account in accordance with the terms and conditions of the Escrow
Agreement and returned to Parent if Parent does not notify the
Company within 5 days of such termination that Parent will
acquire the Contingent Shares in consideration for the Deposit
Amount; or
(B) released from the Escrow
Account in accordance with the terms and conditions of the Escrow
Agreement and delivered to the Company if Parent notifies the
Company within 5 days of such termination that Parent will
acquire the Contingent Shares in consideration for the Deposit
Amount; and
(ii) the Series D
Documents, including the Contingent Shares, shall be either:
(A) released from the Escrow
Account in accordance with the terms and conditions of the Escrow
Agreement and returned to the Company if Parent does not notify the
Company within 5 days of such termination that Parent will
acquire the Contingent Shares in consideration for the Deposit
Amount; or
(B) released from the Escrow
Account in accordance with the terms and conditions of the Escrow
Agreement and delivered to the Parent if Parent notifies the
Company within 5 days of such termination that Parent will
acquire the Contingent Shares in consideration for the Deposit
Amount; and
(iii) the Note Outstanding
Balance shall be repaid in full in cash to Parent within ninety
(90) days of such termination.
SECTION 2.7 Escrow . The
Indemnification Escrow Amount, together with any interest or other
income earned thereon, net of any expenses and costs associated
therewith shall be applied for the payment of any indemnification
obligations of the Indemnitors (as defined herein) pursuant to this
Agreement and otherwise administered pursuant to the Escrow
Agreement of even date herewith by and among the Company, the
Shareholder Representative, Parent and the Escrow Agent, attached
hereto as Exhibit B (the “ Escrow Agreement
”). The parties hereby acknowledge and agree that the
Escrowed Funds shall be treated as an installment obligation for
purposes of Section 453 of the Internal Revenue Code of 1986,
as amended, and no party shall take any action or filing position
inconsistent with such characterization. For tax purposes, the
Escrowed Funds and all earnings thereon shall be considered owned
by Parent until distributed pursuant to the terms of this Agreement
and the Escrow Agreement and reported as such for all tax reporting
purposes, provided that that the Escrow Agent shall disburse
to Parent out of the Indemnification Escrow Amount at such times as
reasonably requested by Parent but in no event later than the
Termination Date (as defined in the Escrow Agreement), an amount
sufficient to pay taxes on such earnings (as reasonably determined
by Parent and the Shareholder Representative), but in no event less
than an amount equal to the product of 40% and the total amount of
such earnings. The parties also agree, for all federal, state and
local tax purposes, to treat all payments from the Indemnification
Escrow Amount to the Indemnitees as an adjustment to, and reduction
of, the Purchase Price paid in the Merger.
SECTION 2.8 Conversion of
Securities . At the Effective Time, by virtue of the Merger and
without any action on the part of Parent, Sub, the Company or the
holders of any of the following securities:
(a) Conversion of the
Company Stock . Subject to and in accordance with
Sections 2.6 and 2.10 hereof, (i) each share of the
Company’s common stock, $0.001 par value per share (the
“ Common Stock ”), issued and outstanding
immediately prior to the Effective Time (other than Dissenting
Shares (as hereinafter defined) or any shares of Common Stock to be
cancelled pursuant to Section 2.8(b)) shall be cancelled and
extinguished and be converted into the right, upon the surrender of
the certificate representing such Common Stock, to receive the per
share amount set forth on the Payment Schedule without any interest
thereon, plus the Applicable Escrow Remainder, if any, upon
termination of the Escrow Agreement; (ii) each share of the
Company’s Series A Preferred Stock, $0.001 par value per
share (the “ Series A Preferred Stock ”),
issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares (as hereinafter defined) or any
shares of Series A Preferred Stock to be cancelled pursuant to
Section 2.8(b)) shall be cancelled and extinguished and be
converted into the right, upon the surrender of the certificate
representing such Series A Preferred Stock, to receive the per
share amount set forth on the Payment Schedule without any interest
thereon, plus the Applicable Escrow Remainder, if any, upon
termination of the Escrow Agreement; (iii) each share of the
Company’s Series B Preferred Stock, $0.001 par value per
share (the “ Series B Preferred Stock ”),
issued and outstanding immediately prior to the Effective Time
(other than Dissenting Shares (as hereinafter defined) or any
shares of Series B Preferred Stock to be cancelled pursuant to
Section 2.8(b)) shall be cancelled and extinguished and be
converted into the right, upon the surrender of the certificate
representing such Series B Preferred Stock, to receive the per
share amount set forth on the Payment Schedule without any interest
thereon, plus the Applicable Escrow Remainder, if any, upon
termination of the Escrow Agreement; and (iv) each share of
the Company’s Series C Preferred Stock, $0.001 par value
per share (the “ Series C Preferred Stock
”), issued and outstanding immediately prior to the Effective
Time (other than Dissenting Shares (as hereinafter defined) or any
shares of Series C Preferred Stock to be cancelled pursuant to
Section 2.8(b)) shall be cancelled and extinguished and be
converted into the right, upon the surrender of the certificate
representing such Series C Preferred Stock, to receive the per
share amount set forth on the Payment Schedule without any interest
thereon, plus the Applicable Escrow Remainder, if any, upon
termination of the Escrow Agreement. The Common Stock,
Series A Preferred Stock, Series B Preferred Stock and
Series C Preferred Stock shall together mean “
Company Stock .” As of the Effective Time, all shares
of Company Stock shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist, and each
holder of a certificate representing any such shares of Company
Stock shall cease to have any rights with respect thereto, except
the right, upon the surrender of such certificate, to receive the
Purchase Price for each share of such Company Stock in accordance
with this Section 2.8, without interest.
(b) Cancellation of
Treasury Stock . Each share of Company Stock that is
(i) held in the treasury of the Company or (ii) owned by
Parent or Sub, in each case immediately prior to the Effective
Time, shall be cancelled and retired and shall cease to exist
without any conversion thereof and no payment or distribution shall
be made with respect thereto.
(c) Sub Common Stock .
Each share of common stock of Sub issued and outstanding
immediately prior to the Effective Time shall be converted into one
fully paid and nonassessable share of common stock of the Surviving
Corporation and such shares shall immediately thereafter constitute
all of the issued and outstanding capital stock of the Surviving
Corporation.
(d) Dissenting Shares .
Notwithstanding anything in this Agreement to the contrary, shares
of Company Stock outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger
and who has demanded appraisal for such shares in accordance with
Section 262 of the DGCL, if the DGCL provides for appraisal
rights for such shares of Company Stock in the Merger (“
Dissenting Shares ”), shall not be converted into a
right to receive the Purchase Price unless such holder fails to
perfect or withdraws or otherwise loses such holder’s right
to appraisal (or, if applicable, dissenter’s rights). If,
after the Effective Time, such holder fails to perfect or withdraws
or loses such holder’s right to appraisal (or, if applicable,
dissenters’ rights), such Dissenting Shares shall be treated
as if they had been converted as of the Effective Time into a right
to receive the Purchase Price without interest or dividends
thereon. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of shares of Company Stock,
and, prior to the Effective Time, Parent shall have the right to
participate in all negotiations and proceedings with respect to
such demands. Prior to the Effective Time, the Company shall not,
except with the prior written consent of Parent or as required
under the DGCL, make any payment with respect to, or settle or
offer to settle, any such demands.
SECTION 2.9 Treatment of Options
and Other Equity Rights (a) . (a) At the Effective Time,
all options to purchase Common Stock issued by the Company pursuant
to the Stock Plans (as defined in Section 2.9(b)), whether
vested or unvested and whether exercisable or unexercisable (each a
“ Company Option ”) shall, by virtue of the
Merger and without any action on the part of the Company or the
holder thereof, be cancelled. Neither Parent nor the Surviving
Corporation shall assume any of the Company Options in connection
with the transactions contemplated by this Agreement.
(b) Prior to the Effective
Time, the Board of Directors of the Company (or, if appropriate,
any committee thereof) shall adopt appropriate resolutions and take
all other actions necessary to provide for the cancellation without
payment or consideration therefor, effective at the Effective Time,
of all the outstanding stock options, stock appreciation rights,
phantom shares, awards of restricted or deferred stock, warrants or
other rights related to or denominated with reference to the
securities of the Company (the “ Stock Rights ”)
heretofore granted under any stock option, restricted stock or
similar agreement, performance unit or similar plan, program,
agreement or arrangement related to or denominated with reference
to the securities of the Company (the “ Stock Plans
”).
(c) As provided herein, the
Stock Plans and any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of the
capital stock of the Company or its subsidiary shall terminate as
of the Effective Time and the Company shall ensure that following
the Effective Time no holder of a Stock Right or any participant in
any Stock Plans shall have any right thereunder to acquire capital
stock of the Company, Sub, the Surviving Corporation or any of
their respective subsidiaries. The Company will take all necessary
steps to ensure that, as of the Effective Time, none of Sub, the
Company, the Surviving Corporation or any of their respective
subsidiaries is or will be bound by any Stock Rights, other
options, warrants, rights or agreements which would entitle any
person, other than Sub or its affiliates, to own any capital stock
of the Company, Sub, the Surviving Corporation or any of their
respective subsidiaries or to receive any payment in respect
thereof.
SECTION 2.10 Surrender of Shares
of Company Stock; Stock Transfer Books (a) . (a) As soon
as practicable (but no later than 10 days) after the Effective
Time, Parent shall mail to each record holder of certificates
representing Company Stock (the “ Company Stock
Certificates ”) a letter of transmittal in a form
approved by Parent and reasonably acceptable to the Shareholder
Representative with instructions for use in surrendering the
Company Stock Certificates to Parent in exchange for the right to
receive cash pursuant to Sections 2.6, 2.7 and 2.8 above. Upon
surrender to Parent of such Company Stock Certificates (or
affidavit of loss or destruction in lieu thereof, including any
suitable bond or indemnity that may be reasonably required by
Parent), duly executed and completed to Parent’s reasonable
satisfaction, Parent shall make payment to the persons entitled
thereto by check or wire transfer, as set forth in the delivery
instructions delivered by the Company, in the amount equal to the
price to which such person is entitled pursuant to Section 2.8
hereof If payment is to be made to a person other than the
registered holder of the Company Stock Certificate surrendered, it
shall be a condition of such payment that the Company Stock
Certificate so surrendered shall be properly endorsed or otherwise
in proper form for transfer and that the person requesting such
payment shall pay any transfer or other taxes required by reason of
the payment to a person other than the registered holder of the
Company Stock Certificate surrendered or establish to the
reasonable satisfaction of the Surviving Corporation or Parent that
such tax has been paid or is not applicable.
(b) After the Effective Time,
there shall be no transfers on the stock transfer books of the
Surviving Corporation of shares of capital stock of the Company
that were outstanding immediately prior to the Effective Time.
(c) Notwithstanding the
foregoing, neither Parent nor any party hereto shall be liable to
any holder of Company Stock Certificates formerly representing
securities of the Company for any amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar
law.
(d) If, at any time after the
Effective Time, the Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments, assurances or
any other actions or things are reasonably necessary or desirable
to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either Sub or the Company acquired
or to be acquired by the Surviving Corporation as a result of, or
in connection with, the Merger or otherwise to carry out this
Agreement, the officers of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of
each of Sub and the Company or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in such names
and on such behalves or otherwise, all such other actions and
things as may be reasonably necessary or desirable to vest, perfect
or confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the purposes of this Agreement.
SECTION 2.11 Withholding
Rights . Parent and the Escrow Agent shall be entitled to
deduct and withhold from any amount otherwise payable pursuant to
this Agreement to the holders of securities of the Company such
amounts as Parent and the Escrow Agent are required to deduct and
withhold with respect to the making of such payment under the Code
or any provision of state, local or foreign Tax law. To the extent
that amounts are so withheld by Parent and the Escrow Agent, such
withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holders of securities of the
Company.
SECTION 2.12 Closing and Closing
Date . Unless this Agreement shall have been terminated and the
Merger contemplated hereby shall have been abandoned pursuant to
the provisions of Section 8.1, the closing (the “
Closing ”) of this Agreement shall take place
(a) at 10:00 a.m. (New York time) no later than the fifth
business day after the condition with respect to the HSR Act set
forth in Section 7.1(c) shall have been satisfied;
provided that if such condition shall have been satisfied
subject to contingencies imposed by any Governmental Body, then no
later than the thirtieth (30 th ) day following the
satisfaction of such condition or (b) at such other time and
date as Parent and the Company shall agree (in either case, such
date and time on and at which the Closing occurs being referred to
herein as the “ Closing Date ”). The Closing
shall take place at the offices of Latham & Watkins LLP, 885
Third Avenue, New York, New York 10022 or such other location as
Parent and the Company shall agree.
ARTICLE III.
REPRESENTATIONS AND
WARRANTIES OF THE COMPANY
The Company hereby represents and
warrants to Parent and Sub that:
SECTION 3.1 Organization and
Qualification . Except as set forth in Section 3.1 of the
Company Disclosure Schedule, the Company is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction of its incorporation and has the requisite
corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being
conducted. The Company is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary, except in any such
jurisdiction where the failure to be so qualified or in good
standing would not, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect.
SECTION 3.2 Certificate of
Incorporation and By-Laws . The Company has heretofore
furnished to Parent complete and correct copies of its certificate
of incorporation (as amended, the “ Certificate of
Incorporation ”) and by-laws (the “ By-laws
”). Such organizational documents are in full force and
effect and no other organizational documents are applicable to or
binding upon the Company. The Company has heretofore furnished to
Parent copies of the minutes of all meetings or other actions of
the Board of Directors (and all committees thereof) of the Company
held or taken since July 1999 and, to the extent such minutes
are not complete and correct, there have been no meetings or other
actions of the Board of Directors (or any committees thereof) of
the Company held or taken since July 1999 that are material
and not reflected in such minutes.
SECTION 3.3 Capitalization
(a) . The authorized capital stock of the Company consists of
104,206,256 shares, consisting of 62,000,000 shares of Common Stock
of which 10,136,132 are issued and outstanding; 2,050,000 shares of
Series A Preferred Stock of which 1,938,882 are issued and
outstanding; 15,013,398 shares of Series B Preferred Stock of
which 14,998,043 are issued and outstanding; 12,571,429 shares of
Series C Preferred Stock of which 12,571,429 are issued and
outstanding; 12,571,429 shares of Series C-1 Preferred Stock
of which 0 are issued and outstanding and, upon the filing of the
Eighth Amended and Restated Certificate of Incorporation, 2,691,355
shares of Series D Preferred Stock of which none are issued
and outstanding. The outstanding Company Stock has been duly
authorized, validly issued, fully paid and nonassessable and is not
subject to preemptive (or similar) rights that have not been
waived. Except as set forth in Section 3.3(a) of the Company
Disclosure Schedule, (x) there are no outstanding obligations
of the Company to repurchase, redeem or otherwise acquire any
Company Stock or any voting or equity securities or interests of
the Company, (y) there is no voting trust or other agreement
or understanding to which the Company is a party or is bound with
respect to the voting of the capital stock or other voting
securities of the Company and (z) there are no other options,
calls, warrants or other rights, agreements, arrangements or
commitments of any character relating to the issued or unissued
capital stock of the Company to which the Company is a party.
(b) Except as set forth in
Section 3.3(b) of the Company Disclosure Schedule, as of the
date hereof, the Company does not, directly or indirectly, own or
have the right to acquire any equity securities, or any securities
convertible or exchangeable into equity securities, in any other
corporation, partnership, joint venture or other business
organization.
SECTION 3.4 Authority Relative to
This Agreement . Except as set forth in Section 3.4 of the
Company Disclosure Schedule: (i) 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 hereby and (ii) the execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate
and stockholder action and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than the filing
of the appropriate merger documents as required by the DGCL). This
Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery
hereof by the other parties hereto, constitutes a legal, valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms (subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors’ rights
generally, general equitable principles (whether considered on a
proceeding in equity or at law) and an implied covenant of good
faith and fair dealing).
SECTION 3.5 No Conflict; Required
Filings and Consents . Except as set forth in Section 3.5
of the Company Disclosure Schedule:
(a) The execution, delivery and
performance of this Agreement by the Company do not and will not:
(i) conflict with or violate the Certificate of Incorporation
or By-Laws of the Company, (ii) conflict with or violate in any
material respect any law, rule, regulation, order, judgment or
decree of any Governmental Body applicable to the Company or by
which its properties are subject (assuming that all consents,
approvals and authorizations contemplated by clauses (i) and
(ii) of subsection (b) below have been obtained and all
filings described in such clauses have been made), or
(iii) result in any material breach or violation of or
constitute a material default (or an event which with notice or
lapse of time or both could become a material default) or result in
the loss of a material benefit under, or give rise to any material
right of termination, amendment, acceleration or cancellation of,
or require the consent of any third party, or result in the payment
of any additional amounts or consideration that is material
individually or in the aggregate other than fees, royalties or
payments which the Company would otherwise have been required to
pay had the transactions contemplated by this Agreement not
occurred, or result in the creation of a material lien or
encumbrance on any of the properties or assets of the Company,
other than Permitted Encumbrances, pursuant to any Contract.
(b) The execution, delivery and
performance of this Agreement by the Company and the consummation
of the Merger by the Company do not and will not require the
Company to obtain or make any consent, approval, authorization or
permit of, action by, filing with or notification to, any
Governmental Body, except for (i) filings required in
connection with or in compliance with the provisions of the HSR Act
and (ii) the filing and recordation of appropriate merger or
other documents as required by the DGCL.
SECTION 3.6 Compliance .
Except as set forth in Section 3.6 of the Company Disclosure
Schedule, the Company is in compliance with, and is not in default
or violation of, the Certificate of Incorporation and By-Laws of
the Company, and is, in material compliance with, and is not in
material default or violation of, all laws, rules, regulations,
orders, judgments and decrees of any Governmental Body applicable
to it or by which any of its properties are subject. The Company
has all material permits, licenses, authorizations, consents,
approvals and franchises from governmental agencies required to
conduct its businesses as now being conducted and the Company has
not received notice of any revocation or material modification of
any such permit, license, authorization, consent or approval.
SECTION 3.7 Financial
Statements (a) . (a) Section 3.7(a) of the Company
Disclosure Schedule contains copies of the Company’s
consolidated audited and unaudited financial statements
(hereinafter collectively called the “ Financial
Statements ”), which have been prepared in accordance
with GAAP consistently applied and maintained throughout the
periods indicated, as follows: the audited balance sheets of the
Company for the fiscal years ended 2001, 2002 and 2003 and the
Balance Sheet, and, in each case, the related statements of
operations and cash flows for the periods then ended. The Financial
Statements fairly present the financial condition of the Company as
at their respective dates and the results of its operations for the
periods covered thereby (subject to normal year-end adjustments and
except that any unaudited financial statements do not contain all
required footnotes, which will not be material, individually or in
the aggregate), and correctly reflect and disclose all
extraordinary items. Subject to the foregoing, and except
(i) as set forth in Section 3.7 of the Company Disclosure
Schedule, or (ii) as is necessary and required by new
generally accepted accounting principles, there have been no
material changes in accounting policies, practices or procedures of
the Company since December 31, 2003. The books and records of
the Company have been, and are being, maintained in accordance with
applicable legal and accounting requirements.
(b) Except as set forth in
Section 3.7(b) of the Company Disclosure Schedule, the Company
does not have any outstanding Indebtedness for borrowed money.
SECTION 3.8 Absence of Certain
Changes or Events . Since April 30, 2004, except as set
forth in Section 3.8 of the Company Disclosure Schedule or as
contemplated by this Agreement, the Company has conducted its
businesses only in the ordinary course and in a manner consistent
with past practice and there has not been, with respect to the
Company:
(i) any
change, event or effect that, individually or in the aggregate, has
had or would reasonably be expected to have a Company Material
Adverse Effect;
(ii) any
material loss, damage or destruction to, or any material
interruption in the use of, the Company’s assets, taken as a
whole (in each case, whether or not covered by insurance);
(iii) any material loss, damage
or destruction to the PICA machinery;
(iv) except
in the ordinary course of business, any lien or encumbrance of any
kind on any of its properties or assets (whether tangible or
intangible), other than Permitted Encumbrances;
(v) any
general increase, or any announcement of any general increase, in
the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by the Company to its employees, or any
specific increase, or any announcement of any specific increase, in
the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable by the Company to any director or any
employee who, as of the date hereof, receives from the Company in
excess of $50,000 base salary on an annual basis;
(vi) any
payment of or any agreement to pay pensions, retirement allowances
or other employee benefits to any director or employee, whether
past or present;
(vii) the
execution of any new employment, severance, consulting or other
compensation agreement with any (a) director of the Company or
(b) employee, consultant or other individual providing
services to or on behalf of the Company who is entitled to receive
$50,000 or more in compensation, annually;
(viii) any
commitment to any additional pension, profit-sharing, deferred
compensation, group insurance, severance pay, retirement or other
employee benefit plan, fund or similar arrangement or any amendment
or commitment to amend any of such plans, funds or similar
arrangements in existence on the date hereof;
(ix) any
termination, discontinuance, closing or disposition of any facility
or business operation, any layoffs of employees or implementation
of any early retirement, separation or window program or
announcement of any such action or program for the future;
(x) any
declaration of a dividend or any payment or distribution in respect
of, or any reclassification of, shares of its capital stock;
(xi) any
amendment to its Certificate of Incorporation or By-laws, or any
recapitalization, stock split, reverse stock split or similar
transaction;
(xii) except in the ordinary course of business consistent
with past practice: (a) other than pursuant to an agreement set
forth in Section 3.16 of the Company Disclosure Schedule, any
license, sale, assignment, pledge, or abandonment of any Company
Owned Intellectual Property, in whole or in part, or
(b) termination of any IP Licenses that would have otherwise
been required to be disclosed on Section 3.16(l) of the
Company Disclosure Schedule, in whole or in part;
(xiii) any
capital expenditures, except those made in the ordinary course of
business consistent with past practice which did not exceed $50,000
in the aggregate at any time;
(xiv) any
premature termination of, material amendment to, or waiver of any
material right or remedy under, any Contract set forth in
Section 3.16 of the Company Disclosure Schedule or any
Contract that would, if in effect as the date hereof, be required
to be set forth in Section 3.16 of the Company Disclosure
Schedule;
(xv) the
making or rescinding of any material election relating to Taxes,
the settlement or compromise of any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or
controversy relating to Taxes, or except as required by applicable
law or GAAP, the making of any material change to any of the
Company’s methods of accounting or methods of reporting
income or deductions for Tax or accounting practice or policy from
those employed in the preparation of its most recent federal income
Tax Return; or
(xvi) any agreement to do any of
the foregoing.
SECTION 3.9 Absence of
Litigation . Except as set forth in Section 3.9 of the
Company Disclosure Schedule, there are no suits, claims,
arbitrations, actions, proceedings or investigations pending or, to
the Knowledge of the Company, threatened against the Company, or
any properties or rights of the Company, before any court,
arbitrator or administrative, governmental or regulatory authority
or body, domestic or foreign that could reasonably be expected to
result in a liability to the Company in excess of $100,000 or that
in any way restrict the operation of the Company or that seek to
prevent, enjoin, alter or delay any of the transactions
contemplated hereby. The Company and its properties are not subject
to any order, writ, judgment, injunction, decree, determination or
award that in any way restricts the operation of the Company or
that seeks to prevent, enjoin, alter or delay any of the
transactions contemplated hereby.
SECTION 3.10 Employee Benefit
Plans (a) (a) Section 3.10(a) of the Company
Disclosure Schedule contains a true and complete list of each
“employee benefit plan” (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended (“ ERISA ”), (including without
limitation multiemployer plans within the meaning of ERISA
Section 3(37)), stock purchase, stock option, severance,
employment, change-of-control, material fringe benefit, collective
bargaining, bonus, incentive, deferred compensation and all other
material compensation and benefit plans, agreements, programs,
policies or other arrangements, whether or not subject to ERISA,
whether formal or informal, oral or written, under which any
current or former employee, consultant or director of the Company
has any present or future right to benefits or under which the
Company has any present or future liability. All such plans,
agreements, programs, policies and arrangements shall be
collectively referred to as the “ Plans ”.
(b) With respect to each Plan,
the Company has delivered or made available to Parent a current,
accurate and complete copy (or, to the extent no such copy exists,
an accurate description) thereof and, to the extent applicable,
(i) any related trust agreement, annuity contract or other
funding instrument; (ii) the most recent determination letter;
(iii) any summary plan description and other material written
communications by the Company to its employees, consultants or
directors in general concerning the extent of the benefits provided
under a Plan; and (iv) for the two most recent years (as filed
with any Governmental Body), the Form 5500.
(c) Each Plan has been
established and administered in all material respects in accordance
with its terms, and in all material respects in compliance with the
applicable provisions of ERISA, the Code and other applicable laws,
rules and regulations and if intended to be qualified within the
meaning of section 401(a) of the Code is so qualified, and no Plan
is currently under audit by the Internal Revenue Service, the
Department of Labor or the Pension Benefit Guaranty Corporation.
With respect to any Plan, no actions, suits or claims (other than
routine claims for benefits in the ordinary course) are pending or,
to the Knowledge of the Company, threatened. To the Knowledge of
the Company, neither the Company nor any other party has engaged in
a prohibited transaction, as such term is defined under section
4975 of the Code or section 406 of ERISA, which would subject the
Company, the Surviving Corporation, any of their subsidiaries, Sub
or Parent to any material taxes, penalties or other material
liabilities under section 4975 of the Code or sections 409 or
502(i) of ERISA. No Plan provides for an increase in benefits on or
after the Closing Date.
(d) No Plan is, or at any time
was, subject to Title IV of ERISA, and neither the Company, nor any
member of its “Controlled Group” (defined as any
organization which is a member of a controlled group of
organizations within the meaning of sections 414(b), (c),
(m) or (o) of the Code), has incurred any liability under
Title IV of ERISA and no condition exists that presents a material
risk of incurring any such liability. Neither the Company, nor any
member of its Controlled Group, has incurred any liability, and no
condition exists that presents a risk of incurring such liability,
in connection with any multiemployer plan (within the meaning of
section 4001(a)(3) of ERISA). Except as required by
Section 4980B of the Code, no Plan provides medical or death
benefits with respect to any employees of the Company beyond their
retirement or other termination of employment. Any group health
plan continuation coverage provided under any Plan is in material
compliance with Section 4980B of the Code. No condition exists
that would prevent the Company from amending any Plan. The Company
does not maintain or otherwise have any liability with respect to
any deferred compensation, excess benefit or other non-qualified
supplemental retirement plan, program or arrangement.
(e) Except as set forth in
Section 3.10(e) of the Company Disclosure Schedule, no Plan
exists which could result in the payment to any employee of the
Company of any money or other property or rights or accelerate or
provide any other rights or benefits to any such employee in
connection with or as a result of the transactions contemplated by
this Agreement, whether or not subject to Section 280G of the
Code, and whether or not any further or subsequent event or action
is required therefor. Except as set forth in Section 3.10(e)
of the Company Disclosure Schedule, no amount that could be
received (whether in cash or property or the vesting of property)
as a result of any transaction contemplated hereby by any em
