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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADVANCED PHOTONIX, INC.,
MICHIGAN ACQUISITION SUB, LLC,
PICOTRONIX, INC.,
ROBIN RISSER, &
STEVEN WILLIAMSON
Dated as of March 8, 2005
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Article 1 CERTAIN
DEFINITIONS....................................................................................1
Article 2 THE
MERGER.............................................................................................4
2.1 The
Merger.....................................................................................4
2.2 Consent of
Stockholders........................................................................4
2.3 Effective Time;
Closing........................................................................4
2.4 Effect of the
Merger...........................................................................5
2.5 Articles of Organization; Operating
Agreement..................................................5
2.6 Merger
Consideration...........................................................................5
2.7 Withholding
Taxes..............................................................................6
2.8 Stockholder
Loans..............................................................................6
2.9 Shares Subject to
Repurchase...................................................................6
2.10 No Assumption of Company
Options...............................................................6
2.11 Subsequent
Parties.............................................................................6
Article 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
STOCKHOLDERS.....................................7
3.1 Organization of the
Company....................................................................7
3.2 Company Capital
Structure......................................................................7
3.3
Subsidiaries...................................................................................8
3.4
Authority......................................................................................8
3.5 No
Conflict....................................................................................9
3.6
Consents.......................................................................................9
3.7 Company Financial
Statements..................................................................10
3.8 No Undisclosed
Liabilities....................................................................10
3.9 No
Changes....................................................................................10
3.10 Tax
Matters...................................................................................12
3.11 Restrictions on Business
Activities...........................................................13
3.12 Title to Properties; Absence of Liens and Encumbrances;
Condition of Equipment;
Customer
Information..........................................................................14
3.13 Intellectual
Property.........................................................................15
3.14 Agreements, Contracts and
Commitments.........................................................19
3.15 Interested Party
Transactions.................................................................19
3.16 Governmental
Authorizations...................................................................20
3.17
Litigation....................................................................................20
3.18 Accounts
Receivable...........................................................................20
3.19 Minute
Books..................................................................................20
3.20 Environmental
Matters.........................................................................20
3.21 Brokers and Finders;
Fees.....................................................................22
3.22 Employee Benefit Plans and
Compensation.......................................................22
3.23
Insurance.....................................................................................26
3.24 Foreign Corrupt Practices
Act.................................................................27
3.25 Complete
Copies...............................................................................27
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Article 4 ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE
STOCKHOLDERS.........................................27
4.1 Ownership of Company Capital
Stock............................................................27
4.2 Absence of Claims by the
Stockholders.........................................................27
4.3 No
Conflict...................................................................................27
4.4
Authority.....................................................................................27
4.5 Securities Law
Matters........................................................................28
Article 5 REPRESENTATIONS AND WARRANTIES OF
API.................................................................29
5.1 Organization, Standing and
Power..............................................................29
5.2
Authority.....................................................................................29
5.3 No
Conflict...................................................................................30
5.4
Consents......................................................................................30
5.5
Litigation....................................................................................30
5.6 Securities
Compliance.........................................................................30
5.7 Brokers or
Finders............................................................................30
5.8 API
Stock.....................................................................................31
5.9 Entity
Classification.........................................................................31
Article 6 COMPANY CONDUCT PRIOR TO THE CLOSING
DATE.............................................................31
6.1 Conduct of Business of the
Company............................................................31
6.2 No
Solicitation...............................................................................33
6.3 Disclosure of
Solicitation....................................................................34
6.4 Injunctive
Relief.............................................................................34
6.5 Procedures for Requesting API
Consent.........................................................34
Article 7 ADDITIONAL
AGREEMENTS.................................................................................35
7.1 Termination of Options
.......................................................................35
7.2 Due
Diligence.................................................................................35
7.3
Confidentiality...............................................................................35
7.4
Expenses......................................................................................36
7.5 Public
Disclosure.............................................................................36
7.6
Consents......................................................................................36
7.7 FIRPTA
Compliance.............................................................................36
7.8 Reasonable
Efforts............................................................................36
7.9 Notification of Certain
Matters...............................................................37
7.10 Additional Documents and Further
Assurances...................................................37
7.11 Closing Date Balance
Sheet....................................................................37
7.12 Statement of
Expenses.........................................................................37
7.13 Proprietary Information and Inventions Assignment
Agreement...................................37
7.14 Release of
Liens..............................................................................37
7.15 Stockholder
Information.......................................................................37
7.16 DP1
Debt......................................................................................38
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Article 8 CONDITIONS TO THE
CLOSING.............................................................................38
8.1 Conditions to Obligations of API, the Sub, the Company and
the Stockholders...................38
8.2 Conditions to the Obligations of API and the
Sub..............................................38
8.3 Conditions to Obligations of the Company and
Stockholders.....................................41
Article 9
INDEMNITY.............................................................................................42
9.1 Survival of Representations and
Warranties....................................................42
9.2 Stockholders
Indemnification..................................................................42
9.3 API
Indemnification...........................................................................43
9.4
Deductibles...................................................................................43
9.5 Claims for Indemnification; Objections to
Claims..............................................44
9.6 Claims Among the
Parties......................................................................44
9.7 Third-Party
Claims............................................................................46
9.8 Stockholder
Representative....................................................................47
9.9 Maximum Payments; Remedy; Method of
Payment...................................................48
9.10 API's Right of
Offset.........................................................................48
Article 10 TERMINATION, AMENDMENT AND
WAIVER....................................................................49
10.1
Termination...................................................................................49
10.2 Effect of
Termination.........................................................................50
10.3
Amendment.....................................................................................50
10.4 Extension;
Waive..............................................................................50
Article 11 GENERAL
PROVISIONS...................................................................................51
11.1
Notices.......................................................................................51
11.2
Interpretation................................................................................52
11.3
Counterparts..................................................................................52
11.4 Entire Agreement;
Assignment..................................................................52
11.5
Severability..................................................................................52
11.6 Other
Remedies................................................................................52
11.7 Governing
Law.................................................................................52
11.8 Rules of
Construction.........................................................................52
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EXHIBITS
Exhibit A Certificates of Merger
Exhibit B Form of API Promissory Note
Exhibit C Form of Security Agreement
Exhibit D Form of Note for API Loan
Exhibit D-1 Form of Security Agreement
Exhibit E Form of Intercreditor Agreement
Exhibit F Form of Risser Employment Agreement
Exhibit G Form of Williamson Employment Agreement
SCHEDULES
Schedule 2.1 List of Stockholders and Company Common Stock
Held
Schedule 6.1 Conduct of Business Exceptions
Schedule 8.2.3 Liens to be Released
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THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered
into as of March 8th, 2005 by and among ADVANCED PHOTONIX, INC.,
a Delaware
corporation ("API"), Michigan Acquisition Sub, LLC, a Delaware
limited liability
company and a wholly-owned subsidiary of API (the "Sub"),
PICOTRONIX, INC., a
Michigan corporation, doing business as Picometrix, Inc. (the
"Company"), ROBIN
RISSER ("Risser"), STEVEN WILLIAMSON ("Williamson" and together
with Risser, the
"Stockholders").
The Boards of Directors of each of API and the Company and the
sole member
of Sub have determined that it is in the best interests of each
company and its
respective stockholders and owners that API acquire the Company
through the
statutory merger of the Company with and into the Sub (the
"Merger") and, in
furtherance thereof, have approved the Merger.
The Board of Directors of the Company unanimously approved the
Merger and
has recommended that the Stockholders approve the Merger as
required by Section
703a of the Michigan Business Corporation Act, as amended (the
"MBCA").
Pursuant to the Merger, among other things, all of the issued
and
outstanding Company Capital Stock shall be converted into the
right to receive
the Merger Consideration (as the terms Company Capital Stock and
Merger
Consideration are hereinafter defined).
The Stockholders own all of the issued and outstanding capital
stock of the
Company, and by their signatures below, hereby approve the
Merger.
API, the Company and the Stockholders intend for the Merger to
qualify as a
reorganization under Section 368(a)(1)(A) of the Code.
NOW, THEREFORE, in consideration of the mutual agreements,
covenants and
other promises set forth herein, the mutual benefits to be
gained by the
performance thereof, and for other good and valuable
consideration, the receipt
and sufficiency of which are hereby acknowledged and accepted,
the parties
hereby agree as follows:
Article 1
CERTAIN DEFINITIONS
Capitalized terms used herein and not otherwise defined shall
have the
following meanings:
1.1 "Bloomberg" means Bloomberg Financial Markets.
1.2 "Closing Date" means that term as it is defined in Section
2.3 hereof.
1.3 "Market Price" means $1.66, being the price of API's Class A
Common
Stock as of the close of business on the business day
immediately preceding the
date hereof.
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1.4 "Code" means the Internal Revenue Code of 1986, as
amended.
1.5 "Coherent Debt" means the indebtedness in the original
principal amount
of $6 million issued by the Company to Coherent, Inc. (a) as
evidenced by (i)
that certain Loan Agreement, dated as of August 28, 2002, and
(ii) that certain
Promissory Note (the "Original Note") made by the Company in
favor of Coherent,
Inc. in the original principal amount of $6 million, and (b)
secured pursuant to
that certain Security Agreement, dated as of August 28, 2002,
all as
subsequently assigned by Coherent, Inc. to DP1, LLC ("DP1")
pursuant to that
certain Assignment and Assumption Agreement, dated as of
September 30, 2004,
among the Company, Coherent, Inc. and DP1 which assignment
resulted in the
Original Note being replaced by that certain Amended and
Restated Promissory
Note dated as of September 30,2004, in the initial aggregate
principal amount of
$4,000,000 made by the Company in favor of DP1 (the
"DP1Debt").
1.6 "Company Capital Stock" means, collectively, the Company's
Class A,
non-voting Common Shares and the Company's Class B, voting
Common Shares.
1.7 "Company Options" means all options to acquire the Company's
Class A
Common Stock issued and outstanding under the Plan.
1.8 "Company Unvested Common Stock" means any shares of Company
Common
Stock that are subject to unvested Company Options or are
subject to a
repurchase option in favor of the Company, risk of forfeiture or
other condition
under any applicable stock restriction agreement or other
agreement with the
Company.
1.9 "Estimated Third Party Expenses" means the amount of Third
Party
Expenses (as defined in Section 7.4 hereof) paid or payable by
the Company,
estimated by the Company in good faith and based on reasonable
assumptions as of
the Closing Date or other relevant date.
1.10 "GAAP" means accounting principles generally accepted in
the United
States consistently applied.
1.11 "Knowledge" or "Known" means, with respect to the Company
or the
Stockholders, the actual knowledge of the Stockholders.
1.12 "Lien" means any lien, pledge, charge, claim, mortgage,
security
interest or other encumbrance of any sort.
1.13 "Material Adverse Effect" means any change, event or effect
that is
materially adverse to the business, assets (whether tangible or
intangible),
condition (financial or otherwise), prospects or results of
operations of the
Company and its subsidiaries, taken as a whole, other than any
such change,
event or effect that results or arises from: (a) changes or
conditions affecting
the industry in which the Company markets its products and
services generally,
except to the extent such changes or conditions
disproportionately affect the
Company and its subsidiaries, taken as a whole; or (b) changes
in general
economic, regulatory or political conditions, except to the
extent such changes
or conditions disproportionately affect the Company and its
subsidiaries, taken
as a whole.
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1.14 "Ordinary Course of Business" means an action taken by a
Person only
if:
1.14.1 such action is consistent with the past practices of
such
Person and is taken in the ordinary course of the normal
day-to-day
operations of such Person;
1.14.2 such action is not required to be authorized by the board
of
directors of such Person (or by any Person or group of Persons
exercising
similar authority); and
1.14.3 such action is similar in nature and magnitude to
actions
customarily taken, without any authorization by the board of
directors (or
by any Person or group of Persons exercising similar authority),
in the
ordinary course of the normal day-to-day operations of other
Persons that
are in the same line of business as such Person.
1.15 "Person" means any individual, corporation (including any
non-profit
corporation), general or limited partnership, limited liability
company, joint
venture, estate, trust, association, organization, labor union
or other entity.
1.16 "Plan" means the Picometrix, Inc. 2000 Incentive Stock
Option Plan, as
amended.
1.17 "Prime Rate" means as of a particular date, the prime rate
of interest
as published on that date in The Wall Street Journal (Eastern
Edition), and
generally defined therein as "the base rate on corporate loans
posted by at
least 75% of the nation's 30 largest banks." If The Wall Street
Journal is not
published on a date for which the Prime Rate must be determined,
the Prime Rate
shall be the prime rate published in The Wall Street Journal on
the
nearest-preceding date on which The Wall Street Journal was
published.
1.18 "Pro Rata Portion" means, with respect to each Stockholder
(or each
share of Company Capital Stock), an amount equal to the quotient
obtained by
dividing (a) a number of shares of Company Capital Stock owned
by such
Stockholder as at the Closing Date (or such share of Company
Capital Stock), by
(b) the aggregate number of shares of Company Capital Stock
issued and
outstanding immediately prior to the Closing Date.
1.19 "Related Agreements" means and includes any of the
Agreements and
promissory notes attached hereto as an Exhibit or any other
agreement that the
parties may enter in to in connection with the consummation of
the transactions
contemplated hereby.
1.20 "Stockholder" means any holder of any Company Capital
Stock.
1.21 "Stockholder Representative" means the representative of
the
Stockholders for certain purposes under this Agreement, who
shall be a
Stockholder and shall initially be Risser.
1.22 "Taxes" means (a) any and all federal, state, local and
foreign taxes,
assessments and other governmental charges, duties, impositions
and liabilities,
including taxes based upon or measured by gross receipts,
income, profits,
sales, use and occupation, and value added, ad valorem,
transfer, franchise,
withholding, payroll, recapture, employment, excise and property
taxes as well
as public imposts, fees and social security charges (including,
without
limitation, health, unemployment and pension insurance),
together with all
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interest, penalties and additions imposed with respect to such
amounts, (a) any
liability for the payment of any amounts of the type described
in Section
3.10.11 hereof as a result of being a member of an affiliated,
consolidated,
combined or unitary group for any period, and (b) any liability
for the payment
of any amounts of the type described in the forgoing clauses (a)
or (b) as a
result of any express or implied obligation to indemnify any
other Person or as
a result of any obligation under any agreement or arrangement
with any other
Person with respect to such amounts and including any liability
for taxes of a
predecessor entity.
Article 2
THE MERGER
2.1 The Merger. At the Effective Time (as defined in Section 2.3
hereof)
and subject to and upon the terms and conditions of this
Agreement and the
provisions of Chapter 7 of the MBCA and Subchapter IX of the
Delaware General
Corporation Law, as amended the "DGCL"), the Company shall be
merged with and
into the Sub, the separate corporate existence of the Company,
shall cease, the
Sub shall succeed to all rights, assets, liabilities,
properties, privileges,
powers, franchises and obligations of the Company in accordance
with the MBCA
and the DGCL, and the Sub shall continue as the surviving entity
and as a
wholly-owned subsidiary of API. The Sub, as surviving entity
after the Merger,
is sometimes referred to hereinafter as the "Surviving
Entity."
2.2 Consent of Stockholders. The Stockholders own all of the
issued and
outstanding capital stock of the Company, and by execution of
this Agreement, do
hereby consent to the Merger and approve this Agreement for
purposes of Section
703a of the MBCA and do further hereby waive the dissenters'
rights without a
meeting for purposes of Section 764(2) of the MBCA.
2.3 Effective Time; Closing. Unless this Agreement is earlier
terminated
pursuant to Section 10.1 hereof, the closing of the Merger (the
"Closing") will
take place as promptly as practicable after the execution and
delivery hereof by
the parties hereto and satisfaction or waiver of the conditions
set forth in
Article 8 hereof (other than those conditions which, by their
terms, are to be
satisfied or waived at Closing), at 10:00 a.m., local time, at
the offices of
API, unless another time or place is mutually agreed upon in
writing by parties
hereto. The date upon which the Closing actually occurs shall be
referred to
herein as the "Closing Date." On the Closing Date, the parties
hereto shall
cause the Merger to be consummated by filing Certificates of
Merger in
substantially the forms attached hereto as Exhibit A (the
"Certificates of
Merger"), with the Michigan Department of Labor and Economic
Growth (the
"Department") and with the Secretary of State of the State of
Delaware (the
"Secretary"), in accordance with the applicable provisions of
Michigan and
Delaware law (the time that the latter of such filings has been
endorsed by both
the Department or the Secretary, as applicable, shall be
referred to herein as
the "Effective Time").
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2.4 Effect of the Merger. At the Effective Time, the effect of
the Merger
shall be as provided in the applicable provisions of Michigan
and Delaware law.
Without limiting the generality of the foregoing, and subject
thereto, at the
Effective Time, except as otherwise agreed to pursuant to the
terms of this
Agreement, all of the property, rights, privileges, powers and
franchises of the
Company and Sub shall vest in the Surviving Entity, and all
debts, liabilities
and duties of the Company and Sub shall become the debts,
liabilities and duties
of the Surviving Entity.
2.5 Articles of Organization; Operating Agreement.
2.5.1 Unless otherwise determined by API prior to the Effective
Time,
the articles of organization of the Surviving Entity shall be
the articles
of organization of the Sub as in effect as in effect immediately
prior to
the Effective Time and until thereafter amended in accordance
with Michigan
Law and as provided in such articles of incorporation; provided,
however,
that the articles of organization of the Sub shall be amended as
at the
Effective Time to change the name of the Surviving Entity to
Picometrix,
LLC.
2.5.2 Unless otherwise determined by API prior to the Effective
Time,
the operating agreement of the Surviving Entity shall be the
operating
agreement of the Sub as in effect immediately prior to the
Effective Time
and until thereafter amended as provided therein and in
accordance with
Delaware Law; provided, however, that the operating agreement of
the Sub
shall be amended as at the Effective Time to reflect the change
of the name
of the Surviving Entity to Picometrix, LLC.
2.6 Merger Consideration. At the Effective Time, by virtue of
the Merger
and without any action on the part of Sub, the Company or the
Stockholders, each
outstanding share of Company Capital Stock, upon the terms and
subject to
conditions set forth in this Section 2.6 and throughout this
Agreement, will be
cancelled and extinguished and be converted automatically into
the right to
receive, upon surrender of the certificate representing such
shares of Company
Capital Stock the following described consideration (the
"Merger
Consideration"):
2.6.1 each Stockholder's Pro Rata Portion of $3,500,000 (the
"Cash
Payment"), to be paid by wire transfer of immediately available
funds to
such account or accounts as such as may be designated to API in
writing by
the Stockholders not less than one (1) business day prior to the
Closing.
2.6.2 one or more certificates for each Stockholder's Pro Rata
Portion
of 2,575,000 shares of API's Class A Common Stock (the
"Stock
Consideration").
2.6.3 A promissory note in the form attached hereto as Exhibit B
in an
original principal amount for each Stockholder equal to such
Stockholder's
Pro Rata Portion of $2,900,500 (each an "API Promissory Note"
and,
collectively, the "API Promissory Notes").
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2.7 Withholding Taxes. API, on behalf of the Surviving Entity,
shall be
entitled to deduct and withhold from the Cash Payment due to
each Stockholder
(or if the Stockholder's Pro Rata Portion of the Cash Payment is
insufficient
for such purpose, any other consideration payable to such
Stockholder hereunder)
such amounts as may be required to be deducted or withheld
therefrom by the
Surviving Entity under any provision of federal, state, local or
foreign tax law
or under any other applicable legal requirement; provided,
however, prior to
Closing, API shall give the Company notice of its determination
that such
deductions and withholdings are required. To the extent such
amounts are so
deducted or withheld, such amounts shall be treated for all
purposes under this
Agreement as having been paid to the Person to whom such amounts
would otherwise
have been paid; provided, however, that if any such amounts are
not paid over to
the appropriate governmental entity within ninety (90) days
following the
Closing Date, API shall immediately thereafter pay such amounts
over to the
Stockholder from whom they were withheld.
2.8 Stockholder Loans. In the event that either Stockholder has
outstanding
loans from the Company as of the Closing Date, the amount of the
Cash Payment
(or if the Stockholder's Pro Rata Portion of the Cash Payment is
insufficient
for such purpose, any other consideration) payable hereunder to
such Stockholder
shall be reduced by an amount equal to the outstanding principal
of, and accrued
interest on, such any such loan as of the Closing Date. Such
loans shall be
deemed satisfied as to the amount by which the consideration is
reduced pursuant
to this Section.
2.9 Shares Subject to Repurchase. If any shares of Company
Capital Stock
issued and outstanding immediately prior to the Closing Date are
subject to a
repurchase option, risk of forfeiture or other condition under
any applicable
stock restriction agreement or other agreement with the Company,
then the
Company shall repurchase such shares of Company Capital Stock
and cause the same
to be cancelled not later than the close of business as at the
day prior to the
Closing.. On or before the Closing, the Company shall cause each
holder of
Company Capital Stock to have waived and amended all rights
regarding
acceleration or lapsing of repurchase rights upon a change of
control,
termination without cause or constructive termination, to the
extent such
provisions exist.
2.10 No Assumption of Company Options. API shall not assume any
outstanding
Company Options (whether vested or unvested), including any
outstanding Company
Options issued under the Plan. Prior to the Closing, the Company
shall take all
actions necessary to effect the termination, effective no later
than the
Closing, of all Company Options (whether vested or unvested)
outstanding under
the Plan, including, without limitation, the giving of any
notice required under
any agreements relating to the stock options.
2.11 Subsequent Parties. The Company and the Shareholders shall
use their
commercially reasonable best efforts to cause any Person
acquiring capital stock
of the Company between the date hereof and the Closing to become
a party to this
Agreement (and a Stockholder hereunder) by executing and
delivering a copy of
this Agreement, whereupon Schedule 2.1 shall be amended to
include the share
ownership and other data relevant to such Person.
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Article 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE STOCKHOLDERS
Except as set forth on that section of the "Disclosure
Schedule"
corresponding to the relevant subsection of this Article 3
delivered by the
Company to API as of the date hereof, the Company and the
Stockholders hereby
represent and warrant to API as of the date of this Agreement,
and as of the
date of the Closing, as hereinafter set forth in this Article 3.
The section
numbers in the Disclosure Schedule correspond to the Section
numbers in this
Article 3; provided, however, that any information disclosed in
the Disclosure
Schedule under any such Section shall be deemed to be disclosed
and incorporated
in any other Section of this Agreement and the Disclosure
Schedule where such
disclosure would be appropriate and reasonably apparent without
further inquiry
or investigation and without reference to any imputed or actual
knowledge of
API, except as expressly set forth herein and/or in the
Disclosure Schedule. The
disclosure of any particular fact or time in the Disclosure
Schedule shall not
be deemed any admission as to whether the fact or item disclosed
is "material"
or would constitute a Material Adverse Effect.
3.1 Organization of the Company. The Company is a corporation
duly
organized and validly existing in good standing under the laws
of the State of
Michigan. The Company has the corporate power to own its
properties and to carry
on its business as currently conducted and as currently
contemplated to be
conducted. The Company is duly qualified or licensed to do
business and in good
standing as a foreign corporation in each jurisdiction in which
it is required
to be so qualified or licensed except where the failure to be so
qualified or
licensed could not reasonably be expected to have a Material
Adverse Effect. The
Company has delivered to API a true and correct copy of its
articles of
incorporation and bylaws, each as amended to date and in full
force and effect
on the date hereof (collectively, the "Charter Documents").
Section 3.1 of the
Disclosure Schedule lists the directors and officers of the
Company as of the
date hereof. The operations now being conducted by the Company
are not now and
have never been conducted by the Company under any other name;
provided,
however, that the Company operates under the assumed name of
"Picometrix, Inc."
Section 3.1 of the Disclosure Schedule also lists every state or
foreign
jurisdiction in which the Company has employees or facilities or
otherwise
carries on business.
3.2 Company Capital Structure.
3.2.1 As of the date hereof, the authorized capital stock of
the
Company consists of 2,520,000 shares of Class A Common Stock,
none of which
are issued and outstanding, and 15,480,000 shares of Class B
Common Stock,
all of which are issued and outstanding. The Company Capital
Stock is held
by the Persons with the domicile addresses and in the amounts
set forth in
Schedule 2.1. All outstanding shares of Company Capital Stock
are duly
authorized, validly issued, fully paid and non-assessable and
not subject
to preemptive rights created by statute, the Charter Documents,
or any
agreement to which the Company is a party or by which it is
bound, and have
been issued in compliance with federal and state securities
laws, except
where the failure to have complied with such laws could not
reasonably be
expected to have a Material Adverse Effect. There are no
declared or
accrued but unpaid dividends with respect to any shares of
Company Capital
Stock. As of the date hereof, there are fewer than 35
shareholders of
record of Company Capital Stock and, to the Knowledge of the
Company, there
are fewer than 35 beneficial owners of the Company Capital
Stock.
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3.2.2 Except for the Plan, the Company has never adopted,
entered
into, sponsored or maintained any stock option plan or any other
plan or
agreement (whether written or oral, formal or informal)
providing for
equity compensation to any Person. The Company has reserved
2,520,000
shares of Class A Common Stock for issuance to employees and
directors of,
and consultants to, the Company upon the issuance of stock or
the exercise
of options or other grants under the Plan. The Company has
granted options
to purchase 1,238,000 shares of Class A Common Stock under the
Plan.
Section 3.2.2 of the Disclosure Schedule sets forth for each
outstanding
Company Option or other grant made under the Plan, the name of
the grantee,
the domicile address of such grantee, the number of shares of
Class A
Common Stock issuable upon the exercise of such Company Option
or other
grant, the exercise price of such Company Option or other
material terms
thereof, the vesting schedule for such Company option or grant,
including
the extent vested to date, and whether such option is a
non-statutory
option or intended to qualify as an incentive stock option as
defined in
Section 422 of the Code.
3.2.3 Except for the Company Options and as provided in the Plan
and
except as set forth in Section 3.2.3 of the Disclosure Schedule
with
respect to the conversion rights of the Michigan Economic
Development
Corporation in respect of certain indebtedness issued to such
entity by the
Company, there are no options, warrants, calls, rights,
convertible
securities, commitments or agreements of any character, written
or oral, to
which the Company is a party or by which it is bound obligating
the Company
to issue, deliver, sell, repurchase or redeem, or cause to be
issued,
delivered, sold, repurchased or redeemed, any shares of the
capital stock
of the Company or obligating the Company to grant, extend,
accelerate the
vesting of, change the price of, otherwise amend or enter into
any such
option, warrant, call, right, commitment or agreement. There are
no
outstanding or authorized stock appreciation, phantom stock,
profit
participation or other similar rights with respect to the
Company. There
are no voting trusts, proxies, or other agreements or
understandings with
respect to the voting stock of the Company to which the Company
or any
Stockholder is a party or of which the Company or any
Stockholder has
Knowledge.
3.2.4 Section 3.2.4 of the Disclosure Schedule sets forth
the
outstanding principal, accrued interest and applicable rate of
interest of
all outstanding loans from any Stockholder to the Company.
3.3 Subsidiaries. The Company does not have any
subsidiaries.
3.4 Authority. The Company has all requisite power and authority
and each
Stockholder has capacity to enter into this Agreement and any
Related Agreements
to which such Stockholder is a party, and to consummate the
transactions
contemplated hereby and thereby. The execution and delivery of
this Agreement
and any Related Agreements to which the Company or either of the
Stockholders is
a party and the consummation of the transactions contemplated
hereby and thereby
have been duly authorized by all necessary corporate action on
the part of the
Company and no further action is required on the part of the
Company or the
Stockholders to authorize the Agreement and any Related
Agreements to which the
Company or either of the Stockholders is a party or to
consummate the
transactions contemplated hereby and thereby. The Board of
Directors of the
Company has unanimously approved this Agreement. This Agreement
and each of the
Related Agreements to which the Company and/or either of the
Stockholders is a
party have been duly executed and delivered by the Company and
each of the
Stockholders, as the case may be, and assuming the due
authorization, execution
and delivery by the other parties hereto and thereto, constitute
the valid and
binding obligations of the Company and each of the Stockholders,
enforceable
against each such party in accordance with their respective
terms, except as
such enforceability may be subject to the laws of general
application relating
to bankruptcy, insolvency, and the relief of debtors and rules
of law governing
specific performance, injunctive relief, or other equitable
remedies.
8
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3.5 No Conflict. Except as set forth in Section 3.5 of the
Disclosure
Schedule (including, without limitation, the United States
Government contracts
discussed in such Section that will be novated upon consummation
of the
transactions contemplated hereby), the execution and delivery by
the Company of
this Agreement and the consummation of the transactions
contemplated hereby,
will not conflict with or result in any violation of or default
under (with or
without notice or lapse of time, or both) or give rise to a
right of
termination, cancellation, modification or acceleration of any
obligation or
loss of any benefit (each, a "Conflict") under (a) any provision
of the Charter
Documents, (b) any mortgage, indenture, lease, contract,
covenant or other
agreement, instrument or commitment, permit, concession,
franchise or license
(each a "Contract" and collectively the "Contracts") to which
the Company or any
of the Company's properties or assets (whether tangible or
intangible) are
subject, or (c) any judgment, order, decree, statute, law,
ordinance, rule or
regulation applicable to, the Company or any or any of the
Company's properties
(whether tangible or intangible) or assets. To the Knowledge of
the Company, it
has not breached, violated or defaulted under, or received
notice that it has
breached, violated or defaulted under, any of the terms or
conditions of any
Contract, nor is the Company or either Stockholder aware of the
occurrence of
any such default or of any event that would constitute such a
breach, violation
or default with the lapse of time, giving of notice or both.
3.6 Consents.
3.6.1 Except as set forth in Section 3.6 of the Disclosure
Schedule
and excepting all Contracts between the Company and the United
States
Government or its instrumentalities set forth in Section 3.5 of
the
Disclosure Schedule that will be novated upon or after
consummation of the
transactions contemplated hereby, to the Knowledge of the
Company, no party
obligated to the Company pursuant to any Contract is in default
thereunder.
Section 3.6 of the Disclosure Schedule sets forth all necessary
consents,
waivers and approvals of parties to any Contracts to which the
Company is a
party or any of its properties or assets (whether tangible or
intangible)
are subject (collectively, the "Third Party Consents") as are
required
thereunder in connection with the transactions contemplated
hereby, or for
any such Contract to remain in full force and effect without
limitation,
modification or alteration after the Closing Date so as to
preserve all
rights of, and benefits to, the Company under such Contracts
from and after
the Closing Date. Following the Closing Date, assuming all Third
Party
Consents shall have been obtained, the Company will be permitted
to
exercise all of its rights under the Contracts without the
payment of any
additional amounts or consideration other than ongoing fees,
royalties or
payments which the Company would otherwise be required to pay
pursuant to
the terms of such Contracts had the transactions contemplated by
this
Agreement not occurred.
3.6.2 No consent, notice, waiver, approval, order or
authorization of,
or registration, declaration or filing with any court,
administrative
agency or commission or other federal, state, county, local or
other
foreign governmental authority, instrumentality, agency or
commission
(each, a "Governmental Entity") is required by, or with respect
to, the
Company or the Stockholders in connection with the execution and
delivery
of this Agreement and any Related Agreement to which the Company
or a
Stockholder is a party or the consummation of the transactions
contemplated
hereby and thereby, except for such consents, notices, waivers,
approvals,
orders, authorizations, registrations, declarations and filings
as may be
required under applicable securities laws, or as provided in
Section 3.6 of
the Disclosure Schedule with respect to certain contracts with
the United
States Government or its instrumentalities.
9
<PAGE>
3.7 Company Financial Statements. Section 3.7 of the Disclosure
Schedule
sets forth the Company's (a) audited financial statements for
the twelve (12)
months ended December 31, 2003 (the "Year-End Financials"), and
(b) an unaudited
consolidated balance sheet (the "Interim Balance Sheet") as of
December 31, 2004
(the "Interim Balance Sheet Date"), and the related unaudited
statement of
income, cash flow and stockholders' equity for the twelve months
then ended
(collectively, the "Interim Financials"; together with the
Year-End Financials,
the "Financials"). The Financials have been prepared in
accordance with GAAP
consistently applied on a consistent basis throughout the
periods indicated and
consistent with each other (except that the unaudited Interim
Financials are
subject to normal year-end adjustments that are not material in
amount or
significance in any individual case or in the aggregate and do
not contain
footnotes and other presentation items that may be required by
GAAP). The
Financials present fairly the Company's financial condition,
operating results
and cash flows as of the dates and during the periods indicated
therein, subject
in the case of the Interim Financials to normal year-end
adjustments, which are
not material in amount or significance in the aggregate.
3.8 No Undisclosed Liabilities. Except as otherwise disclosed in
Section
3.8 of the Disclosure Schedule, the Company has no liability,
indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement
of any type,
whether accrued, absolute, contingent, matured, unmatured or
other (whether or
not required to be reflected in financial statements in
accordance with GAAP),
which individually or in the aggregate (a) is not reflected in
the Interim
Balance Sheet, or (b) has not arisen in the Ordinary Course of
Business since
the Interim Balance Sheet Date.
3.9 No Changes. Since the Interim Balance Sheet Date and except
as set
forth in Section 3.9 of the Disclosure Schedule and other than
in the Ordinary
Course of Business, there has not been, occurred or arisen
any:
3.9.1 amendments or changes to the Charter Documents;
3.9.2 capital expenditure or commitment by the Company
exceeding
$100,000 individually or $250,000 in the aggregate;
3.9.3 payment, discharge or satisfaction, in any amount in
excess of
$100,000 in any one case, or $250,000 in the aggregate, of any
claim,
liability or obligation (absolute, accrued, asserted or
unasserted,
contingent or otherwise), other than payment, discharge or
satisfaction in
the Ordinary Course of Business of liabilities;
3.9.4 destruction of, damage to, or loss of any material
assets
(whether tangible or intangible), material business or material
customer of
the Company (whether or not covered by insurance);
3.9.5 change in accounting methods or practices (including any
change
in depreciation or amortization policies or rates) by the
Company other
than as required by GAAP;
3.9.6 change in any material election in respect of Taxes,
adoption or
change in any accounting method in respect of Taxes, agreement
or
settlement of any claim or assessment in respect of Taxes, or
extension or
waiver of the limitation period applicable to any claim or
assessment in
respect of Taxes;
3.9.7 revaluation by the Company of any of its assets
(whether
tangible or intangible);
10
<PAGE>
3.9.8 declaration, setting aside or payment of a dividend or
other
distribution (whether in cash, stock or property) in respect of
any Company
Common Stock, or any split, combination or reclassification in
respect of
any shares of Company Common Stock, or any issuance or
authorization of any
issuance of any other securities in respect of, in lieu of or
in
substitution for shares of Company Common Stock, or any direct
or indirect
repurchase, redemption, or other acquisition by the Company of
any shares
of Company Common Stock (or options, warrants or other rights
convertible
into, exercisable or exchangeable therefor), except in
accordance with the
agreements evidencing Company Options;
3.9.9 except merit increases and bonus payments made in the
Ordinary
Course of Business or as required under existing employment
agreements,
increase in the salary or other compensation payable or to
become payable
by the Company to any of its officers, directors, employees or
advisors, or
the declaration, payment or commitment or obligation of any kind
for the
payment (whether in cash or equity) by the Company of a
severance payment,
termination payment, bonus or other additional salary or
compensation to
any such Person;
3.9.10 agreement, contract, covenant, instrument, lease, license
or
commitment to which the Company is a party or by which it or any
of its
assets (whether tangible or intangible) are bound that is in
excess of
$100,000 in any one case, or any termination, extension,
amendment or
modification of the terms of any agreement, contract, covenant,
instrument,
lease, license or commitment to which the Company is a party or
by which it
or any of its assets are bound that is in excess of $100,000 in
any one
case;
3.9.11 sale, lease, license or other disposition of any of the
assets
(whether tangible or intangible) or properties of the Company,
including,
without limitation, the sale of any accounts receivable of the
Company, or
any creation of any security interest in such assets or
properties other
than the sale, lease, license, or other disposition of inventory
in the
Ordinary Course of Business;
3.9.12 loan by the Company to any Person, incurring by the
Company of
any indebtedness, guaranteeing by the Company of any
indebtedness, issuance
or sale of any debt securities of the Company or guaranteeing of
any debt
securities of others, except for advances to employees for
travel and
business expenses in the Ordinary Course of Business;
3.9.13 waiver or release of any right or claim of the Company
having a
value in excess of $100,000, including any write-off or other
compromise of
any account receivable of the Company;
3.9.14 commencement or settlement of any lawsuit by or against
the
Company; or
3.9.15 agreement by the Company, or any officer or employees on
behalf
of the Company, to do any of the things described in the
preceding
subsections of this Section, other than negotiations with API
and its
representatives regarding the transactions contemplated by this
Agreement
and the Related Agreements.
11
<PAGE>
3.10 Tax Matters. Except as set forth in Section 3.10 of the
Disclosure
Schedule:
3.10.1 As of the Closing Date, the Company will have (a)
prepared and
timely (excepting permitted extensions that are timely filed)
filed
all required federal, state, local and foreign returns,
estimates, information
statements and reports (collectively, the "Returns") relating to
any and all
Taxes concerning or attributable to the Company or its
operations and such
returns will, to the Knowledge of the Company, be true and
correct and completed
in accordance with applicable law, and (b) timely paid all Taxes
it is required
to pay as evidenced by the Returns.
3.10.2 As of the Closing Date, the Company will have withheld
with
respect to its employees (and timely paid over to the
appropriate taxing
authority) all federal, state and foreign income taxes and
social security
charges and similar fees, Federal Insurance Contribution Act,
Federal
Unemployment Tax Act and other Taxes required to be withheld
(and so paid).
3.10.3 To its Knowledge, the Company is not delinquent in the
payment
of any Tax. The Company has not received any notice not is it
otherwise
aware that there is any Tax deficiency outstanding, assessed or
proposed
against the Company. The Company has not executed any waiver of
any statute
of limitations on, or extending the period for, the assessment
or
collection of any Tax.
3.10.4 Excepting an ongoing audit being conducted by the State
of
Michigan in respect of Michigan sales and use, withholding and
Single
Business Tax for the calendar years 1999 through 2003, no audit
or other
examination of any Return of the Company is presently in
progress, nor has
the Company been notified of any request for such an audit or
other
examination.
3.10.5 To its Knowledge, the Company does not have any
liabilities for
unpaid federal, state, local or foreign Taxes which have not
been accrued
or reserved on the Interim Balance Sheet, whether asserted or
unasserted,
contingent or otherwise. The Company has not incurred any
liability for
Taxes since the date of the Interim Balance Sheet other than in
the
Ordinary Course of Business.
3.10.6 The Company has made available to API or its legal
counsel,
copies of all foreign, federal, state and local income, payroll
and
unemployment Returns and all state and local property and sales
and use
Returns for the Company that have been filed for three full
fiscal years
preceding the date hereof.
3.10.7 There are no Liens on the assets of the Company relating
to or
attributable to Taxes other than Liens for Taxes not yet due and
payable.
12
<PAGE>
3.10.8 The Company has no Knowledge of any basis for the
assertion of
any claim relating or attributable to Taxes that, if adversely
determined,
would result in any Lien on the assets of the Company.
3.10.9 None of the Company's assets is treated as "tax-exempt
use
property," within the meaning of Section 168(h) of the Code.
3.10.10 The Company has not filed any consent agreement under
Section
341(t) of the Code or agreed to have Section 341(t)(4) of the
Code apply to
any disposition of a subsection (t) asset (as defined in Section
341(t)(4)
of the Code) owned by the Company.
3.10.11 The Company has (a) never been a member of an affiliated
group
(within the meaning of Code ss.1504(a)) filing a consolidated
federal
income Tax Return, (b) never been a party to any Tax
sharing,
indemnification or allocation agreement, (c) no liability for
the Taxes of
any Person (other than Company or any of its subsidiaries) under
Treasury
Regulation ss.1.1502-6 (or any similar provision of state, local
or foreign
law), as a transferee or successor, by contract or agreement, or
otherwise
and (d) never been a party to any joint venture, partnership or
other
arrangement that could be treated as a partnership for Tax
purposes.
3.10.12 The Company has not been, at any time, a "United States
Real
Property Holding Corporation" within the meaning of Section
897(c)(2) of
the Code.
3.10.13 No adjustment relating to any Return filed by the
Company has
been proposed formally or, to the Knowledge of the Company or
any
Stockholder, informally by any tax authority to the Company or
any
representative thereof.
3.10.14 There is no contract, agreement, plan or arrangement to
which
the Company is a party, including, without limitation, the
provisions of
this Agreement, covering any employee or former employee of the
Company,
which, individually or collectively, could give rise to the
payment of any
amount that would not be deductible pursuant to Sections 2800,
404 or
162(m) of the Code.
3.11 Restrictions on Business Activities. Except as set forth in
Section
3.11 of the Disclosure Schedule, there is no agreement
(non-competition or
otherwise), commitment, judgment, injunction, order or decree to
which the
Company is a party or otherwise binding upon the Company which
has or may
reasonably be expected to have the effect of prohibiting or
impairing any
business practice of the Company, any acquisition of property
(tangible or
intangible) by the Company, the conduct of business by the
Company, or otherwise
limiting the freedom of the Company to engage in any line of
business or to
compete with any Person. Without limiting the generality of the
foregoing and
except as set forth in Section 3.11 of the Disclosure Schedule,
the Company has
not entered into any agreement under which the Company is
restricted from
selling, licensing, manufacturing or otherwise distributing any
of its
technology or products or from providing services to customers
or potential
customers or any class of customers, in any geographic area,
during any period
of time, or in any segment of the market.
13
<PAGE>
3.12 Title to Properties; Absence of Liens and Encumbrances;
Condition of
Equipment; Customer Information.
3.12.1 The Company does not own any real property, nor has the
Company
ever owned any real property. The only leased real property of
the Company
is its company headquarters located at 2925 Boardwalk, Ann
Arbor, Michigan
48113-0243 (the "Leased Real Property"). The Company has
provided API true,
correct and complete copies of the lease and all amendments
thereto related
to the Leased Real Property (the "Lease"). The Lease is in full
force and
effect and the landlord is not in default thereunder. The
Company has not
received: any notice of a default, alleged failure to perform,
or any
offset or counterclaim with respect to the Lease that has not
been fully
remedied and withdrawn. Subject to the consent of the landlord,
the Closing
will not affect the enforceability of the Lease or the continued
use and
possession of the Leased Real Property for the conduct of the
Company's
business as presently conducted. The Company currently occupies
all of the
Leased Real Property for the operation of its business. There
are no other
parties occupying, or with a right to occupy, the Leased Real
Property.
3.12.2 To the Knowledge of the Company, the Leased Real Property
is in
good operating condition and repair, free from structural,
physical and
mechanical defects, is maintained in a manner consistent with
the Lease,
and is structurally sufficient and otherwise suitable for the
conduct of
the Company's business as presently conducted therein. To the
Knowledge of
the Company, neither the operation of the Company on the Leased
Real
Property nor the improvements thereon, violate in any material
respect any
material applicable building code, zoning requirement or statute
relating
to such Leased Real Property or operations thereon, and any
such
non-violation is not dependent on any conditional use permit
issued by the
City of Ann Arbor, Michigan.
3.12.3 The Company has not assigned, transferred, conveyed,
mortgaged,
deeded in trust or encumbered any interest in the Leased Real
Property.
3.12.4 The Company has not received any notice from any
insurance
company of any defects or inadequacies in any Leased Real
Property or any
part thereof that could materially and adversely affect the
insurability of
such property or the premiums for the insurance thereof, nor has
any notice
been given by any insurer of any such property requesting the
performance
of any repairs, alterations or other work that has not been
completed.
3.12.5 There are no outstanding written or oral contracts made
by the
Company for any alterations or improvements on or to the Leased
Real
Property that have not been fully paid, and the Company shall
cause to be
discharged all mechanics' and materialmen's liens arising from
any labor or
materials provided to, for, or at the request of the Company and
furnished
to or for the Lease Real Property prior to the Closing.
3.12.6 The Company has good and valid title to, or, in the case
of
leased properties and assets, valid leasehold interests in, all
of its
tangible properties and assets, real, personal and mixed,
including,
without limitation, the Leased Real Property, used or held for
use in its
business, free and clear of any Liens, except (a) as reflected
in the
Interim Balance Sheet, (b) Liens for Taxes not yet due and
payable, and (c)
such imperfections of title and encumbrances, if any, which do
not detract
from the value or interfere with the present use of the property
subject
thereto or affected thereby.
14
<PAGE>
3.12.7 All items of equipment material to the operation of the
Company
owned or leased by the Company are (a) adequate for the conduct
of the
business of the Company as currently conducted, and (b) in good
operating
condition, regularly and properly maintained, subject to normal
wear and
tear.
3.12.8 The Company has sole and exclusive ownership, free and
clear of
any Liens, of all of its customer lists, customer contact
information,
customer correspondence and customer licensing and purchasing
histories
relating to its current and former customers (the "Customer
Information").
No Person other than the Company possesses any claims or rights
with
respect to use of the Customer Information.
3.13 Intellectual Property.
3.13.1 For purposes of this Section, the following capitalized
terms
shall have the following respective meanings:
(a) "Company Intellectual Property" means any and all
Intellectual Property and Intellectual Property Rights that are
owned
by or exclusively licensed to the Company.
(b) "Intellectual Property" means proprietary (i) works of
authorship including, without limitation, computer programs,
source
code, and executable code, whether embodied in software,
firmware or
otherwise, architecture, documentation, designs, files, records,
and
data, (ii) inventions (whether or not patentable),
discoveries,
improvements, and technology, (iii) proprietary and
confidential
information, trade secrets and know how, (iv) databases,
data
compilations and collections and technical data, (v) logos,
trade
names, trade dress, trademarks and service marks, (vi)
registered
domain names, web addresses and sites, (vii) tools, methods
and
processes, (viii) proprietary devices, prototypes,
schematics,
breadboards, netlists, maskworks, test methodologies, verilog
files,
emulation and simulation reports, test vectors and hardware
development tools, and (ix) any and all instances of the
foregoing in
any form and embodied in any media.
(c) "Intellectual Property Rights" means common law and
statutory
rights associated with (i) patents and patent applications,
(ii)
copyrights, copyright registrations and copyright
applications,
"moral" rights and mask work rights, (iii) the protection of
trade and
industrial secrets and confidential information, (iv) other
proprietary rights relating to intangible intellectual property,
(v)
trademarks, trade names and service marks, and (vi)
divisions,
continuations, renewals, reissuances and extensions of the
foregoing
(as applicable).
(d) "Registered Intellectual Property" means Company
Intellectual
Property that has been registered, filed, certified or
otherwise
perfected or recorded with or by any state, government or other
public
legal authority under authority of applicable statute or
regulation.
15
<PAGE>
3.13.2 Section 3.13.2 of the Disclosure Schedule (a) lists all
Company
Intellectual Property, and (b) lists any pending applications,
proceedings
or actions before any court, tribunal (including the United
States Patent
and Trademark Office (the "PTO") or equivalent authority
anywhere in the
world) related to any of the Company Registered Intellectual
Property. The
Company Intellectual Property constitutes all Intellectual
Property
necessary to conduct its business as presently being
conducted.
3.13.3 The Company has paid necessary registration, maintenance
and
renewal fees in connection with the Registered Intellectual
Property. The
Company has filed all necessary documents and certificates in
connection
with the Registered Intellectual Property with the relevant
patent,
copyright, trademark or other authorities in the United States
or such
foreign jurisdictions as the Company has elected to register the
Registered
Intellectual Property, as the case may be, for the purposes of
maintaining
the Registered Intellectual Property. Except as set forth in
Section 3.13.3
of the Disclosure Schedule, there are no actions that must be
taken by the
Company within sixty (60) days of the date hereof, including the
payment of
any registration, maintenance or renewal fees or the filing of
any
documents, applications or certificates for the purposes of
maintaining,
perfecting or preserving or renewing any Registered Intellectual
Property.
3.13.4 For each product, technology or service of the Company
that
constitutes or includes Company Intellectual Property owned by
the Company
that the Company has determined to make Registered Intellectual
Property,
the Company has taken commercially reasonable measures to make
such
elements of such Company Intellectual Property Registered
Intellectual
Property.
3.13.5 In each case in which the Company has acquired ownership
of any
Intellectual Property from any Person, the Company has obtained
a valid and
enforceable assignment sufficient to irrevocably transfer all
rights in
such Intellectual Property to the Company. Where appropriate,
the Company
has recorded each such assignment with the relevant
governmental
authorities, including the PTO, the U.S. Copyright Office or
their
respective equivalents in any relevant foreign jurisdiction, as
the case
may be.
3.13.6 Except as set forth in Section 3.13.6 of the
Disclosure
Schedule and subject to any required consents set forth in
Section 3.6 of
the Disclosure Schedule, all Company Intellectual Property will
be fully
transferable, alienable or licensable by API without restriction
and
without payment of any kind to any third party.
3.13.7 Except as set forth in Section 3.13.7 of the
Disclosure
Schedule, each item of Company Intellectual Property is free and
clear of
any Liens.
3.13.8 Except as set forth in Section 3.13.8 of the
Disclosure
Schedule with respect to jointly owned Intellectual Property or
other
Intellectual Property to which the Company does not have
exclusive
Intellectual Property Rights, to the extent that any Company
Intellectual
Property has been developed or created independently or jointly
by any
Person other than the Company for which the Company has,
directly or
indirectly, provided consideration for such development or
creation, the
Company has a written agreement with such Person with respect
thereto, and
the Company thereby has obtained ownership of, and is the
exclusive owner
of, all such Intellectual Property therein and associated
Intellectual
Property Rights by operation of law or by valid assignment, and
has
required the waiver of all non-assignable rights, including
without
limitation, all author or moral rights.
16
<PAGE>
3.13.9 Except as set forth in Section 3.13.9 of the
Disclosure
Schedule, the Company has not (a) transferred ownership of, or
granted any
exclusive license of or exclusive right to use, or authorized
the retention
of any exclusive rights to use or joint ownership of, any
Intellectual
Property Rights or, except in the Ordinary Course of Business of
sales of
the Company's products, any Company Intellectual Property, to
any other
Person, or (b) permitted Company's rights in such Company
Intellectual
Property to lapse or to enter into the public domain.
3.13.10 Except as set forth in Section 3.13.8 of the
Disclosure
Schedule with respect to jointly owned Intellectual Property or
other
Intellectual Property to which the Company does not have
exclusive
Intellectual Property Rights, all Intellectual Property (other
than
off-the-shelf, readily available, non-customized software or
hardware) used
in or necessary to the conduct of the Company's business as
presently
conducted or currently contemplated to be conducted by the
Company was
created solely by either (a) employees of the Company acting
within the
scope of their employment who have validly and irrevocably
assigned all of
their rights, including all Intellectual Property Rights
therein, to the
Company, or (b) by third parties who have validly and
irrevocably assigned
all of their rights, including all Intellectual Property Rights
therein, to
the Company, and no third party owns or has any rights to any of
the
Company Intellectual Property.
3.13.11 Other than (a) "shrink-wrap" and similar widely
available
binary code and commercial end-user licenses and public or open
technology,
and (b) other non-exclusive licenses of the Company's products
to end-users
entered into in the Ordinary Course of Business, Section 3.13.11
of the
Disclosure Schedule lists all contracts, licenses and agreements
by which
the Company has secured third-party Intellectual Property and
Intellectual
Property Rights. Except as set forth in Section 3.13.11 of the
Disclosure
Schedule, no third party that has licensed Intellectual Property
or
Intellectual Property Rights to the Company has ownership rights
or license
rights to improvements made by the Company in such licensed
Intellectual
Property.
3.13.12 Other than (a) "shrink-wrap" and similar widely
available
binary code and commercial end-user licenses and public or open
technology,
and (b) other non-exclusive licenses of the Company's products
to end-users
entered into in the Ordinary Course of Business, Section 3.13.12
of the
Disclosure Schedule lists all contracts, licenses and agreements
between
the Company and any other Person wherein or whereby the Company
has agreed
to, or assumed, any obligation or duty to warrant, indemnify,
reimburse,
hold harmless, guaranty or otherwise assume or incur any
obligation or
liability or provide a right of rescission with respect to the
infringement
or misappropriation by such other Person of the Intellectual
Property
Rights of such Person.
3.13.13 There are no contracts, licenses or agreements between
the
Company and any other Person with respect to Company
Intellectual Property
or other Intellectual Property used in and/or necessary to the
conduct of
the business of the Company as it is currently conducted under
which there
is any dispute regarding the scope of such agreement, or
performance under
such agreement including with respect to any payments to be made
or
received by the Company thereunder.
3.13.14 To the Knowledge of the Company, the operation of the
business
of the Company as it is currently conducted, or is currently
contemplated
to be conducted, by the Company, including, without limitation,
the design,
development, use, import, branding, advertising, promotion,
marketing,
manufacture and sale of any product, technology or service
(including
products, technology or services currently under development) of
the
Company does not infringe or misappropriate, and will not
infringe or
misappropriate, any Intellectual Property Rights of any Person,
violate any
right of any Person (including any right to privacy or
publicity), and the
Company has not received notice from any Person claiming that
such
operation or any act, any product, technology or service
(including
products, technology or services currently under development)
or
Intellectual Property of the Company infringes or
misappropriates any
Intellectual Property Rights of any Person or constitutes
unfair
competition or trade practices under the laws of any
jurisdiction, nor does
the Company have Knowledge of any basis therefor.
17
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3.13.15 Except as set forth in Section 3.13.15 of the
Disclosure
Schedule, neither this Agreement nor the transactions
contemplated by this
Agreement, will result in (a) the Company granting to any third
party any
right to or with respect to any Company Intellectual Property,
(b) the
Company being bound by, or subject to, any non-compete or other
material
restriction on the operation or scope of its business, or (c)
the Company
being obligated to pay any royalties or other material amounts
to either
third party in excess of those payable by the Company as of the
date
hereof.
3.13.16 Except as set forth in Section 3.13.16 of the
Disclosure
Schedule, to the Knowledge of the Company, no Person is
infringing or
misappropriating any Company Intellectual Property.
3.13.17 The Company has taken all commercially reasonable steps
to
protect the Company's rights in its own confidential information
and trade
secrets or confidential information of any third party provided
by any
other Person to the Company under an obligation of
confidentiality. Without
limiting the foregoing, the Company has, and enforces to the
extent
practicable, a policy requiring each employee, consultant, and
contractor
to execute proprietary information, confidentiality and
assignment
agreements pursuant to a standard form, and all such current and
former
employees, consultants and contractors of the Company have
executed such an
agreement in substantially the Company's standard form.
3.13.18 No Company Intellectual Property is subject to any
proceeding
or outstanding decree, order, judgment or settlement agreement
or
stipulation that restricts in any manner the use, transfer or
licensing
thereof by the Company or may affect the validity, use or
enforceability of
such Company Intellectual Property.
3.13.19 Except as required by law with respect to ownership
of
Intellectual Property created, developed or reduced to practice
using
funding from any Governmental Entity and as set forth in Section
3.13.2 of
the Disclosure Schedule, no government funding, facilities or
resources of
a university, college, other educational institution or research
center or
funding from third parties was used in the development of the
Company
Intellectual Property, and no Governmental Entity, university,
college,
other educational institution or research center has any claim
or right in
or to the Company Intellectual Property.
18
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3.14 Agreements, Contracts and Commitments. Except as set forth
in Section
3.14 of the Disclosure Schedule, the Company is not a party to,
nor is it bound
by:
3.14.1 any fidelity or surety bond or completion bond;
3.14.2 any lease of Personal property having a value in excess
of
$100,000 individually or $250,000 in the aggregate;
3.14.3 any agreements, contracts or commitments relating to
capital
expenditures and involving future payment in excess of
$100,000
individually or $250,000 in the aggregate;
3.14.4 any agreements, contracts or commitments relating to
the
disposition or acquisition of assets or the acquisition of any
interest in
any business enterprise outside the Ordinary Course of
Business;
3.14.5 except (a) as set forth in Section 3.2.3 of the
Disclosure
Schedule, and (b) the Coherent Debt, any mortgages, indentures,
guarantees,
loans or credit
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