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Exhibit 10.1
FINAL
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ECHO HEALTHCARE ACQUISITION CORP.,
PET DRX ACQUISITION COMPANY,
AND
XLNT VETERINARY
CARE, INC.
DATED AS OF FEBRUARY 16, 2007
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TABLE OF CONTENTS
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ARTICLE I THE
MERGER.....................................................................................
2
1.1 The
Merger...................................................................................
2
1.2 Effective
Time;
Closing......................................................................
2
1.3 Effect of
the
Merger.........................................................................
3
1.4
Certificate of Incorporation; Bylaws; Directors;
Officers....................................
3
1.5 Conversion
of Capital
Stock..................................................................
3
1.6 Exchange
Ratio; Fractional Shares;
Adjustments...............................................
4
1.7 Exchange
of
Certificates.....................................................................
5
1.8 Treatment
of Stock Options;
Warrants.........................................................
7
1.9 Taking of
Necessary Action; Further
Action...................................................
8
1.10
Escrow.......................................................................................
8
1.11
Committee and Stockholders' Representatives for Purposes of Escrow
Agreement.................
8
1.12
Notice to Holders of Derivative
Securities...................................................
10
1.13
Shares Subject to Appraisal
Rights...........................................................
10
1.14
Tax
Consequences.............................................................................
10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE
COMPANY.................................................
10
2.1
Organization and
Qualification...............................................................
10
2.2
Subsidiaries.................................................................................
11
2.3
Capitalization...............................................................................
11
2.4 Authority
Relative to this
Agreement.........................................................
12
2.5 No
Conflict; Required Filings and
Consents...................................................
12
2.6
Compliance...................................................................................
13
2.7 Financial
Statements.........................................................................
13
2.8 No
Undisclosed
Liabilities...................................................................
14
2.9 Absence of
Certain Changes or
Events.........................................................
14
2.10
Litigation...................................................................................
14
2.11
Employee Benefit Plans and
Compensation......................................................
14
2.12
Labor
Matters................................................................................
17
2.13
Restrictions on Business
Activities..........................................................
17
2.14
Owned and Leased Real
Properties.............................................................
17
2.15
Taxes........................................................................................
18
2.16
Environmental
Matters........................................................................
19
2.17
Brokers; Third Party
Expenses................................................................
19
2.18
Intellectual
Property........................................................................
20
2.19
Agreements, Contracts and
Commitments........................................................
20
2.20
Insurance....................................................................................
21
2.21
Governmental
Actions/Filings.................................................................
22
2.22
Interested Party
Transactions................................................................
22
2.23
Corporate
Approvals..........................................................................
22
2.24
Proxy
Statement/Prospectus...................................................................
22
2.25
No
Reliance..................................................................................
23
2.26
Survival of Representations and
Warranties...................................................
23
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER
SUB...................................... 24
3.1
Organization and
Qualification...............................................................
24
3.2
Subsidiaries.................................................................................
24
3.3
Capitalization...............................................................................
24
3.4 Authority
Relative to this
Agreement.........................................................
25
3.5 No
Conflict; Required Filing and
Consents....................................................
25
3.6
Compliance...................................................................................
25
3.7 SEC
Filings; Financial
Statements............................................................
26
3.8 No
Undisclosed
Liabilities...................................................................
26
3.9 Absence of
Certain Changes or
Events.........................................................
26
3.10
Litigation...................................................................................
27
3.11
Employee Benefit
Plans.......................................................................
27
3.12
Restrictions on Business
Activities..........................................................
27
3.13
Title to
Property............................................................................
27
3.14
Taxes........................................................................................
27
3.15
Brokers......................................................................................
28
3.16
Intellectual
Property........................................................................
28
3.17
Agreements, Contracts and
Commitments........................................................
28
3.18
Insurance....................................................................................
29
3.19
Interested Party
Transactions................................................................
29
3.20
Indebtedness.................................................................................
29
3.21
Over-the-Counter Bulletin Board
Quotation....................................................
29
3.22
Board
Approval...............................................................................
29
3.23
Trust
Fund...................................................................................
29
3.24
No
Reliance..................................................................................
30
3.25
Company Proxy
Materials......................................................................
30
3.26
Survival of Representations and
Warranties...................................................
30
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME
..........................................................
30
4.1 Conduct of
Business by Company, Parent and Merger
Sub........................................ 30
4.2
Acquisitions.................................................................................
33
4.3 Officers
of the
Company......................................................................
33
ARTICLE V ADDITIONAL AGREEMENTS
.........................................................................
34
5.1 Proxy
Statement/Prospectus; Parent Stockholders' Meeting
.................................... 34
5.2 Company
Stockholder
Approval.................................................................
34
5.3 Directors
and Officers of Parent and the Surviving Corporation After
Merger.................. 35
5.4 Voting
Agreements............................................................................
35
5.5 HSR
Act......................................................................................
35
5.6 Other
Actions................................................................................
36
5.7 Required
Information.........................................................................
36
5.8
Confidentiality; Access to
Information.......................................................
37
5.9 Charter
Protections; Directors' and Officers' Liability
Insurance............................ 37
5.10
Public
Disclosure............................................................................
38
5.11
Reasonable Best
Efforts......................................................................
38
5.12
Certain
Claims...............................................................................
38
5.13
No
Securities
Transactions...................................................................
39
5.14
No
Claim Against Trust Fund; Sole Remedy For Termination of
Agreement........................ 39
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5.15
Disclosure of Certain
Matters................................................................
39
5.16
No
Solicitation..............................................................................
39
5.17
Parent Option
Plan...........................................................................
41
5.18
Benefit
Arrangements.........................................................................
41
5.19
Delivery of Lock-Up
Agreements...............................................................
41
5.20
Special Management Bonus
Plan................................................................
42
5.21
Fees
and
Expenses............................................................................
42
5.22
Tax-Free
Reorganization......................................................................
42
5.23
Consulting
Services..........................................................................
42
ARTICLE VI CONDITIONS TO THE TRANSACTION
................................................................
42
6.1 Conditions
to Obligations of Each Party to Effect the Merger
................................ 42
6.2 Additional
Conditions to Obligations of the
Company.......................................... 43
6.3 Additional
Conditions to the Obligations of
Parent........................................... 44
ARTICLE VII
INDEMNIFICATION..............................................................................
45
7.1
Indemnification..............................................................................
45
7.2
Indemnification of Third Party
Claims........................................................
46
7.3 Insurance
Effect.............................................................................
48
7.4
Limitations on
Indemnification...............................................................
48
7.5 Exclusive
Remedy.............................................................................
49
7.6 Damages;
Adjustment to Merger
Consideration..................................................
49
7.7
Representative Capacities; Application of Escrow
Fund........................................ 49
ARTICLE VIII
TERMINATION.................................................................................
50
8.1
Termination..................................................................................
50
8.2 Notice of
Termination; Limited
Remedy........................................................
51
8.3
Intentionally
Omitted........................................................................
51
8.4
Termination
Fee..............................................................................
51
ARTICLE IX GENERAL
PROVISIONS............................................................................
51
9.1
Notices......................................................................................
51
9.2
Interpretation...............................................................................
52
9.3
Counterparts; Facsimile
Signatures...........................................................
54
9.4 Entire
Agreement; Third Party
Beneficiaries..................................................
54
9.5
Severability.................................................................................
54
9.6 Other
Remedies; Specific
Performance.........................................................
54
9.7 Governing
Law................................................................................
54
9.8 Rules of
Construction........................................................................
54
9.9
Assignment...................................................................................
55
9.10
Amendment....................................................................................
55
9.11
Extension;
Waiver............................................................................
55
9.12
Dispute
Resolution...........................................................................
55
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AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER is made
and
entered into as of February 16, 2007, by and among Echo Healthcare
Acquisition
Corp., a Delaware corporation ("PARENT"), Pet DRx Acquisition
Company, a
Delaware corporation and a wholly-owned subsidiary of Parent
("MERGER SUB"), and
XLNT Veterinary Care, Inc., a Delaware corporation (the
"COMPANY").
RECITALS
A. Parent,
Merger Sub and the Company entered into an Agreement and
Plan of Merger dated as of September 11, 2006, which the parties
hereto are
amending and restating as set forth in this Agreement (as herein
defined).
B. Parent,
Merger Sub and the Company intend to enter into a
business combination transaction by means of a merger (the
"Merger") of Merger
Sub with and into the Company in accordance with this Agreement and
the Delaware
General Corporation Law (the "DGCL"), with the Company to be the
surviving
corporation of the Merger.
C. It is
intended that the Merger qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code
of 1986, as amended (the "CODE").
D. Pursuant
to the Merger, each outstanding share of common stock,
par value $.0001 per share of the Company ("COMPANY COMMON STOCK"),
Series A
preferred stock, par value $.0001 per share of the Company
("COMPANY SERIES A
PREFERRED") and Series B preferred stock, par value $.0001 per
share of the
Company ("COMPANY SERIES B PREFERRED" and together with the Company
Series A
Preferred, the "COMPANY PREFERRED STOCK"), shall be converted into
the right to
receive the Merger Consideration (as determined by and defined in
Section
1.5(b)), upon the terms and subject to the conditions set forth
herein.
E. The Board
of Directors of the Company (the "COMPANY BOARD"),
based upon the recommendation to the Company Board by the Special
Committee of
the Board of Directors (the "COMPANY SPECIAL COMMITTEE") has
unanimously (i)
determined that the Merger on the terms and subject to the
conditions set forth
in this Agreement is advisable and is in the best interest of the
Company and
the Company's stockholders, (ii) approved this Agreement, the
Merger, and the
other transactions contemplated by this Agreement and (iii)
determined to
recommend that the stockholders of the Company adopt and approve
this Agreement,
the Merger and the other transactions contemplated by this
Agreement.
F. The
respective Boards of Directors of Parent (the "PARENT
BOARD") and Merger Sub, based upon the recommendation by the
Special Committee
of the Parent Board (the "PARENT SPECIAL COMMITTEE") have (i)
determined that
the Merger on the terms and subject to the conditions set forth in
this
Agreement is advisable and in the best interest of Parent and
Merger Sub and
their respective stockholders, (ii) approved this Agreement, the
Merger and the
other transactions contemplated by this Agreement and (iii)
determined to
recommend that the stockholders of Parent and Merger Sub adopt and
approve this
Agreement, the Merger and the other transactions contemplated by
this Agreement.
NOW, THEREFORE , in consideration of the covenants, promises
and
representations set forth herein, and for other good and valuable
consideration,
the receipt and sufficiency of which are hereby acknowledged, the
parties agree
as follows (certain defined terms used in this Agreement are
listed
alphabetically in Section 9.2).
ARTICLE I
THE MERGER
1.1
THE MERGER.
At the Effective Time (as defined in Section 1.2) and subject
to
and upon the terms and conditions of this Agreement and the
applicable
provisions of the DGCL, Merger Sub shall be merged with and into
the Company,
the separate corporate existence of Merger Sub shall cease and the
Company shall
continue as the surviving corporation. The Company as the surviving
corporation
after the Merger is hereinafter sometimes referred to as the
"SURVIVING
CORPORATION."
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1.2
EFFECTIVE TIME; CLOSING.
Subject to the conditions of this Agreement, the parties hereto
shall cause the Merger to be consummated by filing with the
Secretary of State
of the State of Delaware a properly executed Certificate of Merger
(the
"CERTIFICATE OF MERGER") in such form as may be agreed by the
parties hereto and
as required by the relevant provisions of the DGCL (the time of
such filing with
the Secretary of State of the State of Delaware, or such later time
as may be
agreed in writing by the Company and Parent and specified in the
Certificate of
Merger, being the "EFFECTIVE TIME") as soon as practicable on or
after the
Closing Date (as herein defined). The term "AGREEMENT" as used
herein refers to
this Amended and Restated Agreement and Plan of Merger, as the same
may be
further amended from time to time, and all schedules hereto
(including the
Company Disclosure Schedule and the Parent Disclosure Schedule, as
defined in
the preambles to Articles II and III hereof, respectively). Unless
this
Agreement shall have been terminated pursuant to Section 8.1, the
closing of the
Merger (the "CLOSING") shall take place at the offices of Powell
Goldstein LLP
("POWELL GOLDSTEIN"), counsel to Parent, at 1201 West Peachtree St.
NE, 14th
Floor, Atlanta, Georgia 30309, at a time and date to be specified
by the
parties, which shall be no later than the second business day after
the
satisfaction or waiver of the conditions set forth in Article VI,
or at such
other time, date and location as the parties hereto agree in
writing (the
"CLOSING DATE"). Closing signatures may be transmitted by
facsimile.
1.3
EFFECT OF THE MERGER.
At the Effective Time, the effect of the Merger shall be as
provided in this Agreement and Section 259 of the DGCL. Without
limiting the
generality of the foregoing, and subject thereto, at the Effective
Time all the
property, rights, privileges, powers and franchises of the Company
and Merger
Sub shall vest in the Surviving Corporation, and all debts,
liabilities and
duties of the Company and Merger Sub shall become the debts,
liabilities and
duties of the Surviving Corporation.
1.4
CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS.
(a)
The Certificate of Merger shall provide that, at the
Effective Time, the certificate of incorporation of the Merger Sub,
as in effect
immediately prior to the Effective Time, which shall be in a form
reasonably
acceptable to Parent and the Company, shall become the certificate
of
incorporation of the Surviving Corporation, until thereafter
amended in
accordance with the provisions thereof and as provided by
applicable law.
(b)
At the Effective Time, the by-laws of the Merger Sub, as
in effect immediately prior to the Effective Time, which shall be
in a form
reasonably acceptable to Parent and the Company, shall become the
by-laws of the
Surviving Corporation until thereafter amended as provided by
applicable law,
the certificate of incorporation of the Surviving Corporation and
such by-laws.
(c)
At the Effective Time, the directors of Parent and the
Surviving Corporation shall be as set forth in SCHEDULE 1.4(c),
each to hold
office in accordance with the certificate of incorporation and
by-laws of Parent
and the Surviving Corporation, as applicable.
(d)
At the Effective Time, the officers of Parent and the
Surviving Corporation shall be as set forth in SCHEDULE 1.4(d),
each to hold
office in accordance with the certificate of incorporation and
by-laws of Parent
and the Surviving Corporation, as applicable.
1.5
CONVERSION OF CAPITAL STOCK.
At the Effective Time, by virtue of the Merger and without any
additional action on the part of Parent, Merger Sub or the Company
or their
respective shareholders:
(a)
Each share of common stock, par value $.01 per share, of
Merger Sub (" MERGER SUB COMMON STOCK") issued and outstanding
immediately prior
to the Effective Time shall be converted into one share of common
stock, without
par value, of the Surviving Corporation. Such newly issued shares
shall
thereafter constitute all of the issued and outstanding capital
stock of the
Surviving Corporation.
(b)
Subject to the other provisions of this Article I, (i)
each share of Company Common Stock issued and outstanding
immediately prior to
the Effective Time (including Company Common Stock issued upon
conversion of
Company Preferred Stock, as contemplated by clause (ii) below)
shall be
converted into and represent the right to receive such number of
shares of
common stock of Parent (the "PARENT COMMON STOCK") as is
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determined by multiplying such share by the Exchange Ratio (as
defined in
Section 1.6) (the "MERGER CONSIDERATION") and (ii) each share of
Company
Preferred Stock issued and outstanding immediately prior to the
Effective Time
shall be converted into shares of Company Common Stock pursuant to
and in
accordance with the terms of the Company Preferred Stock and shall
thereafter
represent the right to receive the Merger Consideration; provided,
however, that
the amounts to be determined pursuant to Section 1.6(a)(1)(C) and
(D) shall be
excluded from the calculation of the Exchange Ratio and Merger
Consideration
pursuant to Section 1.6(a) as of the Closing Date prior to and
until the
determinations are made pursuant to Section 1.6(e), following which
the amounts
to be determined pursuant to Section 1.6(a)(1)(C) and (D) shall be
included in
the calculation of the Exchange Ratio and Merger Consideration, and
any
additional amounts that may be payable in accordance with Section
1.6(e) shall
be payable in accordance therewith.
(c)
Each share of capital stock of the Company held in the
treasury of the Company or held by Parent, Merger Sub or any other
wholly owned
Subsidiary of Parent shall be cancelled and retired and no payment
shall be made
in respect thereof.
1.6
EXCHANGE RATIO; FRACTIONAL SHARES; ADJUSTMENTS.
(a) The aggregate
Merger Consideration payable by Parent in
connection with the consummation of the Merger (the "AGGREGATE
MERGER
CONSIDERATION") shall be a number of shares of Parent Common Stock
equal to the
quotient obtained by dividing (1) the sum of (A) the product of (i)
the lesser
of (x) the consolidated gross revenues of the Company for the year
ended
December 31, 2006, determined on a pro forma basis to include the
revenues for
the year ended December 31, 2006 attributable to hospitals or
clinics
("COMPLETED ACQUISITIONS") that are acquired by the Company
subsequent to
December 31, 2006 and prior to the Closing Date, and (y) $60.0
million, but in
no event less than $57.5 million ("BASELINE REVENUES"), multiplied
by (ii) 2.00,
plus (B) the excess over $60.0 million of the Company's Baseline
Revenues
("INCREMENTAL REVENUES"), multiplied by 1.15 (the sum of Baseline
Revenues and
Incremental Revenues being hereinafter referred to as the "ADJUSTED
BASELINE
REVENUES"), plus (C) in the event the Threshold Requirements for
the Management
Performance Bonus Pool are met, an amount equal to the excess of
the
consolidated gross revenues of the Company for the period beginning
on January
1, 2007 and ending on the last day of the fiscal quarter (based on
the calendar
year, annualized in the event such period is less than 12 months)
immediately
preceding the Closing Date, determined on a pro forma basis to
include the
revenues for such period attributable to the Completed
Acquisitions, over 105%
of the Adjusted Baseline Revenues multiplied by (i) 1.15 in the
event the
Company's 2007 Consolidated EBITDA margin for the period beginning
on January 1,
2007 and ending on the last day of the fiscal quarter (based on the
calendar
year) immediately preceding the Closing Date (the "2007
YEAR-TO-DATE EBITDA
MARGIN") has increased by at least 100 basis points over the
greater of (x) the
Company's 2006 Adjusted EBITDA margin for the trailing twelve month
period ended
December 31, 2006, determined on a pro forma basis to include the
revenues for
such period attributable to the Completed Acquisitions and (y)
16.2% (the "2006
PRO FORMA EBITDA MARGIN") or (ii) 1.33 in the event that the
Company's 2007
Year-To-Date EBITDA Margin has increased by at least 250 basis
points over the
Company's 2006 Pro Forma EBITDA Margin plus (D) the Net Cash
Amount; by (2) the
product of (a) the amount of cash in Parent's trust fund at the
Closing (without
deduction for amounts paid in connection with obtaining a fairness
opinion from
a nationally recognized financial advisor and the conversion by
public
stockholders of Parent voting against the Merger of up to 19.9% of
the shares of
Parent Common Stock issued in Parent's initial public offering (the
"IPO") into
a pro rata share of the funds held in Parent's Trust Fund
established in
connection with the IPO) divided by the number of shares of
Parent's Common
Stock then issued and outstanding (excluding therefrom any shares
of Parent
Common Stock issuable upon the exercise or exchange of other Parent
securities
which by their terms are convertible into or exercisable or
exchangeable for
Parent Common Stock) multiplied by (b) 1.25, provided, however,
that in no event
will the product determined in accordance with this clause (2)
exceed $7.20 (as
adjusted for (i) any events set forth in Section 1.6(d) or (ii) any
issuances of
any additional shares of Parent Common Stock or any securities
convertible into
or exercisable or exchangeable for shares of Parent Common Stock)
(the amount
determined pursuant to this clause (2) being the "PARENT COMMON
STOCK PER SHARE
ISSUE Price"). The "EXCHANGE RATIO" shall be equal to the quotient
of (x) the
Aggregate Merger Consideration, divided by the sum of (y) (i) the
total number
of outstanding shares of Company Common Stock immediately prior to
the Effective
Time (assuming for purposes of the foregoing calculation that all
of the Company
Preferred Stock has been converted into Company Common Stock), plus
(ii) the
number of shares of Company Common Stock issuable upon exercise of
all vested
and unvested Company Options and Company Warrants immediately prior
to the
Effective Time, determined using the Treasury Method. For purposes
hereof, the
term "TREASURY METHOD" shall mean the treasury stock method which
assumes that
all outstanding Company Options and Company Warrants to be assumed
by Parent are
exercised, with the proceeds from such exercises being used to
purchase as many
shares of Company Common Stock as possible, at the Parent
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Common Stock Per Share Issue Price. If at the Closing the amount of
the
Company's Indebtedness exceeds $16,500,000 in principal amount of
Indebtedness
(excluding (i) accounts payable incurred in the ordinary course of
business and
(ii) any Company Convertible Notes (as defined in Section 2.3(a))
that are
converted into Company Common Stock on or prior to the Closing
Date) (the amount
of such excess being the "EXCESS INDEBTEDNESS"), the Aggregate
Merger
Consideration shall be reduced (on a pro rata basis among those
Company
stockholders entitled to receive such Merger Consideration) by an
amount equal
to the quotient (expressed as a whole number) of (A) the amount of
Excess
Indebtedness, divided by (B) the Parent Common Stock Per Share
Issue Price.
(b)
No certificates for fractional shares of Parent Common
Stock shall be issued as a result of the conversion provided for in
Section
1.5(b) and such fractional share interest will not entitle the
owner thereof to
vote or have any rights as a holder of Parent Common Stock.
(c)
In lieu of any such fractional share of Parent Common
Stock, the holder of a certificate or certificates (the
"CERTIFICATES") that
immediately prior to the Effective Time represented outstanding
shares of
Company Common Stock or Company Preferred Stock whose shares were
converted into
the right to receive shares of Parent Common Stock pursuant to
Section 1.5(b),
upon presentation of such fractional interest represented by an
appropriate
certificate for Company Common Stock to the Exchange Agent (as
defined in
Section 1.7) pursuant to Section 1.7, shall be entitled to receive,
without
interest, a cash payment therefor in an amount equal to the Parent
Common Stock
Per Share Issue Price multiplied by such fractional interest. Such
payment with
respect to any fractional share is merely intended to provide a
mechanical
rounding off of, and is not a separately bargained for,
consideration. If more
than one Certificate shall be surrendered for the account of same
holder, the
number of shares of Parent Common Stock that shall be deliverable
with respect
to such surrendered Certificates shall be computed on the basis of
the aggregate
number of shares represented by the Certificates so
surrendered.
(d)
In the event that prior to the Effective Time Parent or
the Company shall declare a stock dividend or other distribution
payable in
Parent Common Stock, Company Common Stock or securities convertible
into or
exercisable or exchangeable for Parent Common Stock or Company
Common Stock, as
appropriate, or effect a stock split, reclassification, combination
or other
change with respect to Parent Common Stock or Company Common Stock,
the Exchange
Ratio set forth in this Section 1.6 shall be adjusted to reflect
such dividend,
distribution, stock split, reclassification, combination or other
change.
(e)
(i) No later than 30 business days following the Closing
Date of the Merger, unless extended by mutual agreement of the
Parent and
Stockholders' Representatives, Parent will deliver to the
Stockholders'
Representatives schedules showing the calculation of the Final
Working Capital
and Net Cash Amount as of the Closing Date and the amounts to be
determined
pursuant to Section 1.6(a)(1)(C) and (D) (the "ADDITIONAL MERGER
CONSIDERATION
SCHEDULES").
(ii) The
calculation of the Final Working Capital,
the Net Cash Amount and the other amounts shown on the Additional
Merger
Consideration Schedules shall become final and binding on Parent,
the
Stockholders' Representatives and the former stockholders of the
Company unless
the Stockholders' Representatives give a written notice of
disagreement ("NOTICE
OF DISAGREEMENT") within 30 days following delivery by Parent of
the Additional
Merger Consideration Schedules to the Stockholders'
Representatives. Any such
Notice of Disagreement shall specify in reasonable detail the
nature of any
disagreement so asserted. If Parent and the Stockholders'
Representatives are
unable to resolve the disagreement with respect to any of the
foregoing items
within 30 days following the issuance of the Notice of
Disagreement, they shall
refer the remaining differences to a mutually agreeable accounting
firm ("CPA
FIRM"), which acting as experts and not as arbitrators, shall
determine only
with respect to the remaining differences so submitted, whether and
to what
extent, if any, the items submitted to the CPA Firm for review
require
adjustment. Parent and the Stockholders' Representatives shall
direct the CPA
Firm to use its best efforts to render its determination within 45
days. The CPA
Firm's determination shall be conclusive and binding upon Parent,
the
Stockholders' Representatives and the former stockholders of the
Company. The
fees and disbursements of the CPA Firm shall be paid by Parent.
(iii) If the
Final Working Capital shown on the
Additional Merger Consideration Schedules is positive, then Parent
shall issue
to the Exchange Agent (as defined below) such number of additional
shares of
Parent Common Stock as is equal to the quotient determined by
dividing the Net
Cash Amount by the Parent Common Stock Per Share Issue Price. In
addition, if
any positive amounts are determined pursuant to Section
1.6(a)(1)(C), then
Parent shall issue to the Exchange Agent such number of additional
shares of
Parent Common Stock as is equal to the quotient determined by
dividing such
amount by the Parent Common Stock Per Share Issue
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Price. Certificates for any additional shares of Parent Common
Stock that shall
be issuable as a result of the foregoing provisions (or any cash in
lieu of
fractional shares), less such number of shares of Parent Common
Stock to be
delivered to the Escrow Agent (as defined below) pursuant to
Section 1.10, shall
be deposited with the Exchange Agent concurrently with the delivery
of the
Additional Merger Consideration Schedules to the Stockholders'
Representatives
for distribution by the Exchange Agent to the Company's
stockholders pursuant to
the provisions of Section 1.7 hereof in an amount equal to each
such
stockholder's pro rata interest in such amount. If any additional
amounts are
determined to be owing following the delivery of a Notice of
Disagreement in
accordance with Section 1.6(e)(ii), then certificates for the
additional shares
of Parent Common Stock (or any cash in lieu of fractional shares)
shall be
deposited with the Exchange Agent within 30 days of such
determination, less
such number of shares of Parent Common Stock to be delivered to the
Escrow Agent
(as defined below) pursuant to Section 1.10, for distribution by
the Exchange
Agent to the Company's stockholders pursuant to the provisions of
Section 1.7
hereof in an amount equal to each such stockholder's pro rata
interest in such
amount.
1.7
EXCHANGE OF CERTIFICATES.
(a)
EXCHANGE AGENT. Prior to the Effective Time, Parent
shall deposit with Corporate Stock Transfer, Inc. or such other
exchange agent
as may be designated by Parent (subject to approval by the Company,
not to be
unreasonably withheld or delayed) (the "EXCHANGE AGENT"), for the
benefit of the
Company's stockholders, for exchange in accordance with this
Section 1.7,
certificates representing shares of Parent Common Stock issuable
pursuant to
Section 1.5 and Section 1.6 hereof in exchange for outstanding
shares of Company
Common Stock and shall, from time to time, deposit cash in an
amount required to
be paid pursuant to Section 1.6 with respect to any fractional
interest in any
share of Parent Common Stock (such Parent Common Stock and cash,
together with
any dividends or distributions with respect thereto, the "EXCHANGE
FUND"). At
the time of such deposit, Parent shall irrevocably instruct the
Exchange Agent
to deliver the Exchange Fund to the Company's stockholders in
accordance with
the terms and procedures set forth in this Section 1.7.
(b)
EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of
record of a
Certificate, (i) a letter of transmittal (which shall specify that
delivery
shall be effected, and risk of loss and title to the Certificates
shall pass,
only upon delivery of the Certificates to the Exchange Agent, and
shall be in
such form and have such other customary provisions as Parent may
reasonably
specify) and (ii) instructions for effecting the surrender of the
Certificates
in exchange for certificates representing Parent Common Stock or
for payments in
exchange for fractional shares. Upon surrender of a Certificate for
cancellation
to the Exchange Agent, together with a duly executed letter of
transmittal, the
holder of such Certificate shall receive in exchange therefor (i) a
certificate
or certificates representing that whole number of shares of Parent
Common Stock
which such holder has the right to receive pursuant to Section 1.5
in such
denominations and registered in such names as such holder may
request and (ii) a
check representing the amount of cash in lieu of any fractional
shares, if any,
and unpaid dividends and distributions on Parent Common Stock, if
any, which
such holder has the right to receive pursuant to the provisions of
this Article
I, after giving effect to any required withholding tax. The shares
represented
by Certificates so surrendered shall forthwith be cancelled. No
interest will be
paid or accrued on the cash in lieu of fractional shares, if any,
and unpaid
dividends and distributions on Parent Common Stock, if any, payable
to holders
of shares of Company Common Stock or Company Preferred Stock. In
the event of a
transfer of ownership of shares of Company Common Stock or Company
Preferred
Stock that is not registered on the transfer records of Company, a
certificate
representing the proper number of shares of Parent Common Stock,
together with a
check for the cash to be paid in lieu of fractional shares, if any,
and unpaid
dividends and distributions on Parent Common Stock, if any, may be
issued to
such transferee if the Certificate representing such shares of
Company Common
Stock or Company Preferred Stock held by such transferee is
presented to the
Exchange Agent, accompanied by all documents required to evidence
and effect
such transfer and to evidence that any applicable stock transfer
taxes have been
paid. Until surrendered as contemplated by this Section 1.7, each
Certificate
shall be deemed at any time after the Effective Time to represent
only the right
to receive upon surrender thereof a certificate representing shares
of Parent
Common Stock and cash in lieu of fractional shares, if any, and
unpaid dividends
and distributions on Parent Common Stock, if any, as provided in
this Article I.
If any Certificate shall have been lost, stolen or destroyed, upon
the making of
an affidavit of that fact by the Person claiming such Certificate
to be lost,
stolen or destroyed and, if required, by Parent, the posting by
such Person of a
bond in such reasonable amount as Parent may direct as indemnity
against any
claim that may be made against it with respect to such Certificate,
the Exchange
Agent will deliver in exchange for such lost, stolen or destroyed
Certificate, a
certificate representing the proper number of shares of Parent
Common Stock,
together with a check for the cash to be paid in lieu of fractional
shares, if
any, and unpaid dividends and distributions on shares of Parent
Common Stock, if
any, as provided in this Article I.
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(c)
DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.
Notwithstanding any other provisions of this Agreement, no
dividends or other
distributions declared or made with respect to Parent Common Stock
having a
record date after the Effective Time shall be paid to the holder of
any
unsurrendered Certificate, and no cash payment in lieu of
fractional shares
shall be paid to any such holder, until the holder shall surrender
such
Certificate as provided in this Section 1.7. Subject to the effect
of applicable
Legal Requirements, following surrender of any such Certificate,
there shall be
paid to the holder of the certificates representing whole shares of
Parent
Common Stock issued in exchange therefor, without interest, (i) at
the time of
such surrender, the amount of dividends or other distributions with
a record
date after the Effective Time theretofore payable with respect to
such whole
shares of Parent Common Stock and not paid, less the amount of any
withholding
taxes that may be required thereon, and (ii) at the appropriate
payment date
subsequent to surrender, the amount of dividends or other
distributions with a
record date after the Effective Time but prior to surrender and a
payment date
subsequent to surrender payable with respect to such whole shares
of Parent
Common Stock, less the amount of any withholding taxes which may be
required
thereon.
(d)
NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
Parent Common Stock issued upon surrender of Certificates in
accordance with the
terms hereof (including any cash paid pursuant to this Article I)
shall be
deemed to have been issued in full satisfaction of all rights
pertaining to such
shares of Company Common Stock or Company Preferred Stock
represented thereby,
and, as of the Effective Time, the stock transfer books of Company
shall be
closed and there shall be no further registration of transfers on
the stock
transfer books of Company of shares of Company Common Stock or
Company Preferred
Stock outstanding immediately prior to the Effective Time. If,
after the
Effective Time, Certificates are presented to the Surviving
Corporation for any
reason, they shall be cancelled and exchanged as provided in this
Section 1.7.
Certificates surrendered for exchange by any Person (i)
constituting an
"affiliate" of the Company for purposes of Rule 145(c) under the
Securities Act
of 1933, as amended (together with the rules and regulations
thereunder, the
"SECURITIES ACT"), shall not be exchanged until Parent has received
written
undertakings from such Person in respect of the resale restrictions
under Rule
145 under the Securities Act, which written undertakings shall be
in a form
reasonably acceptable to Parent and the Company (ii) constituting a
Significant
Stockholder (as defined in Section 6.1(e)) shall not be exchanged
until Parent
has received a signed Significant Stockholder Lock-Up Agreement (as
defined in
Section 6.1(e)).
(e)
TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund that remains undistributed to the Company's
stockholders six
months after the last deposit with the Exchange Agent shall be
delivered to
Parent, upon demand thereby, and holders of Certificates who have
not
theretofore complied with this Section 1.7 shall thereafter look
only to Parent
for payment of any claim to Parent Common Stock, cash in lieu of
fractional
shares thereof, or dividends or distributions on Parent Common
Stock, if any, in
respect thereof. Parent hereby agrees to timely make such payments
of Parent
Common Stock, cash in lieu of fractional shares thereof, or
dividends or
distributions on Parent Common Stock, upon receipt of a proper
claim from any of
the Company's stockholders pursuant to the terms hereof.
(f)
NO LIABILITY. None of Parent, the Surviving Corporation
or the Exchange Agent shall be liable to any Person in respect of
any shares of
Company Common Stock or Company Preferred Stock (or dividends or
distributions
with respect thereto) or cash from the Exchange Fund properly
delivered to a
public official pursuant to any applicable abandoned property,
escheat or
similar law. If any Certificates shall not have been surrendered
prior to seven
years after the Effective Time (or immediately prior to such
earlier date on
which any cash, any cash in lieu of fractional shares or any
dividends or
distributions with respect to whole shares of the Company's Common
Stock in
respect of such Certificate would otherwise escheat to or become
the property of
any Governmental Entity), any such cash, dividends or distributions
in respect
of such Certificate shall, to the extent permitted by applicable
Legal
Requirements, become the property of Parent, free and clear of all
claims or
interest of any Person previously entitled thereto.
(g)
INVESTMENT OF EXCHANGE FUND. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by
Parent (but
subject to the approval of the Company (prior to the Effective
Time) or the
Stockholders' Representatives (following the Effective Time), not
to be
unreasonably withheld or delayed), on a daily basis. Any interest
and other
income resulting from such investments shall be paid to Parent upon
termination
of the Exchange Fund pursuant to Section 1.7(e).
(h)
WITHHOLDING RIGHTS. Prior to the Effective Time, each of
the holders of shares of Company Common Stock shall provide to the
Company and
Parent certificates as to the exempt status of such holder from
withholding
pursuant to Code sections 1441 and 3406(a). With respect to any
holder of shares
of Company
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<PAGE>
Common Stock that fails to provide such certificates, each of the
Surviving
Corporation and Parent shall be entitled to deduct and withhold
from the
consideration otherwise payable pursuant to this Agreement to any
such holder of
shares of Company Common Stock or Company Preferred Stock such
amounts as it is
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 the Surviving Corporation or
Parent, as the case
may be, such withheld amounts shall be treated for all purposes of
this
Agreement as having been paid to the holder of the shares of
Company Common
Stock or Company Preferred Stock in respect of which such deduction
and
withholding was made by the Surviving Corporation or Parent, as the
case may be.
Any amounts so withheld shall be paid by reducing the number of
shares of Parent
Common Stock otherwise issuable to such holder in exchange for
shares of Company
Common Stock or Company Preferred Stock so surrendered by such
number of shares
that when multiplied by the Parent Common Stock Per Share Issue
Price equals (as
nearly as possible) the amount of such withholding with any
resulting fractional
share settled in cash.
1.8
TREATMENT OF STOCK OPTIONS; WARRANTS.
(a)
Prior to the Effective Time, Parent shall take all such
actions as may be necessary to cause each unexpired and unexercised
outstanding
option granted or issued under stock option plans of the Company ("
COMPANY
STOCK OPTION PLANS") in effect on the date hereof (each, a "COMPANY
OPTION") and
each unexercised and outstanding warrant to acquire Company Common
Stock (a
"COMPANY WARRANT") to be automatically converted at the Effective
Time into an
option (a "PARENT EXCHANGE OPTION") or warrant (a "PARENT EXCHANGE
WARRANT"), as
appropriate, to purchase that number of shares of Parent Common
Stock equal to
the number of shares of Company Common Stock subject to the Company
Option or
Company Warrant, as appropriate, immediately prior to the Effective
Time
multiplied by the Exchange Ratio (and rounded to the nearest share
in accordance
with established mathematical principles), with an exercise price
per share
equal to the exercise price per share that existed under the
corresponding
Company Option or Company Warrant, as appropriate, divided by the
Exchange Ratio
(and rounded to the nearest cent in accordance with established
mathematical
principles), and with other terms and conditions that are the same
as the terms
and conditions of such Company Option or Company Warrant, as
appropriate,
immediately before the Effective Time; PROVIDED that, with respect
to any
Company Option that is an "incentive stock option" within the
meaning of Section
422 of the Code, the foregoing conversion shall be carried out in a
manner
satisfying the requirements of Section 424(a) of the Code,
including, without
limitation that the adjustments to such Company Options set forth
above shall be
determined such that (a) the aggregate intrinsic value of the new
options to
purchase Parent Common Stock is not greater than the aggregate
intrinsic value
of the Company Options immediately prior to the assumption and (b)
the ratio of
the exercise price per option to market value per share is
unchanged. The
parties agree that Parent will permit holders of vested Company
Options to
elect, on an individual basis, to either exercise such Company
Options and
participate in the Merger or have those Company Options assumed, on
the same
basis as the unvested Company Options, by Parent. The parties will
make such
determination on or before the date the Proxy Statement/Prospectus
(as defined
in Section 2.24) is first filed with the SEC.
(b)
In connection with the issuance of Parent Exchange
Options and Parent Exchange Warrants, Parent shall (i) reserve for
issuance the
number of shares of Parent Common Stock that will become subject to
Parent
Exchange Options and Parent Exchange Warrants pursuant to this
Section 1.8 and
(ii) from and after the Effective Time, upon exercise of Parent
Exchange Options
and Parent Exchange Warrants, make available for issuance all
shares of Parent
Common Stock covered thereby, subject to the terms and conditions
applicable
thereto. Immediately following the Effective Time, Parent will send
to each
holder of Parent Exchange Options or Parent Exchange Warrants a
written notice
setting forth (i) the number of shares of Parent Common Stock that
are subject
to such Parent Exchange Options or Parent Exchange Warrants, and
(ii) the
exercise price per share of Parent Common Stock issuable upon
exercise of such
Parent Exchange Options or Parent Exchange Warrants. Each Parent
Exchange Option
shall be subject to the same terms and conditions set forth in the
Company
Option Plan as in effect immediately prior to the Effective
Time.
(c)
The Company agrees to issue treasury shares of the
Company, to the extent available, upon the exercise of Company
Options prior to
the Effective Time.
(d)
Parent agrees to file with the Securities and Exchange
Commission (the "SEC") within five business days after the Closing
Date a
registration statement on Form S-8 or other appropriate form under
the
Securities Act to register Parent Common Stock issuable upon
exercise of the
Parent Exchange Options and to use
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<PAGE>
its reasonable best efforts to cause such registration statement to
remain
effective until the exercise or expiration of such Parent Exchange
Options.
(e)
Prior to the Effective Time, the Board of Directors of
Parent, or the Compensation Committee thereof, shall adopt a
resolution
consistent with the interpretive guidance of the SEC so that the
acquisition by
any officer or director of the Company who may become a covered
person of Parent
for purposes of Section 16 (together with the rules and regulations
thereunder,
"SECTION 16") of the Securities Exchange Act of 1934, as amended
(together with
the rules and regulations thereunder, the "EXCHANGE ACT") of Parent
Common Stock
or Parent Exchange Options pursuant to this Agreement and the
Merger shall be an
exempt transaction for purposes of Section 16.
1.9
TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement
and to vest
the Surviving Corporation with full right, title and possession to
all assets,
property, rights, privileges, powers and franchises of the Company
and Merger
Sub, the officers and directors of the Company and Merger Sub will
take all such
lawful and necessary action.
1.10
ESCROW.
As the sole and exclusive remedy for the indemnity obligations
set forth in Article VII, at the Effective Time, Parent will cause
to be
delivered to, and directly deposited with JPMorgan Chase Bank or
such other
escrow agent that is mutually agreeable to the parties (the "ESCROW
AGENT"), for
the account and future potential benefit of the Company's
stockholders, a stock
certificate representing ten percent (10%) of the shares of Parent
Common Stock
to be issued at Closing otherwise issuable to such holders pursuant
to Section
1.6, which certificate shall be registered in the name of the
Escrow Agent f/b/o
the Former Holders of Capital Stock of XLNT Veterinary Care, Inc.
In the event
any additional shares of Parent Common Stock are issued in
accordance with the
requirements of Section 1.6(e), a stock certificate representing
ten percent
(10%) of the shares of Parent Common Stock to be so issued shall be
delivered to
and directly deposited with the Escrow Agent, which certificate
shall be
registered in the name of the Escrow Agent f/b/o the Former Holder
of Capital
Stock of XLNT Veterinary Care, Inc. All such shares of Parent
Common Stock so
delivered to the Escrow Agent, together with all subsequent
dividends or
distributions of cash, other shares of Parent Common Stock or
property received
in respect of such shares while deposited with the Escrow Agent
shall be
referred to as "ESCROW SHARES" and such account containing the
Escrow Shares
shall be referred to as the "ESCROW FUND." A pro rata number of the
Escrow
Shares (determined on the basis of the respective pro rata
ownership interest of
each holder of Company Common Stock immediately prior to the
Effective Time,
subject to adjustments by the Escrow Agent to eliminate fractional
shares) shall
be subtracted from the number of shares of Parent Common Stock each
holder of
Company Common Stock (including Company Common Stock issued upon
conversion of
Company Preferred Stock) at the Effective Time is entitled to
receive pursuant
to the Merger. The Escrow Shares shall be held by the Escrow Agent
pursuant to
the terms and conditions of an Escrow Agreement, the form of which
shall be
reasonably acceptable to Parent and the Company (the "ESCROW
AGREEMENT") among
the Escrow Agent, Parent and the Stockholders' Representatives (as
hereinafter
defined) or the successors thereto pursuant to the terms of the
Escrow
Agreement. Subject to the provisions of Article VII, the Escrow
Shares shall be
promptly delivered to the applicable Company stockholders upon
expiration of the
Survival Period (as defined in Section 7.4(a)).
1.11
COMMITTEE AND STOCKHOLDERS' REPRESENTATIVES FOR PURPOSES OF
ESCROW AGREEMENT.
(a)
PARENT COMMITTEE. Prior to the Closing, the Board of
Directors of Parent shall appoint a committee consisting of two of
its then
members to act on behalf of Parent to take all necessary actions
and make all
decisions pursuant to the Escrow Agreement regarding Parent's right
to
indemnification pursuant to Article VII hereof. In the event of a
vacancy in
such committee, the Board of Directors of Parent shall appoint as a
successor a
Person who was a director of Parent prior to the Closing Date or
some other
Person who would qualify as an "independent" director of Parent and
who has not
had any relationship with the Company prior to the Closing. Such
committee is
intended to be the "Committee" referred to in Articles V and VII
hereof, and the
Escrow Agreement and the Significant Stockholder Lock-Up
Agreement.
(b)
STOCKHOLDERS' REPRESENTATIVES.
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<PAGE>
(i)
In order to administer efficiently (i) the
implementation of this Agreement on behalf of the holders of
Company Common
Stock, Company Preferred Stock, Company Options, Company Warrants
and other
equity securities of the Company prior to the Effective Time (the
"FORMER
STOCKHOLDERS") and (ii) the settlement of any dispute with respect
to this
Agreement, the Company shall, prior to the Effective Time,
designate three
Persons to act as representatives on behalf of the Former
Stockholders
(collectively, the "STOCKHOLDERS' REPRESENTATIVES"). By approving
this
Agreement, the Company's stockholders authorize and empower the
Company to make
such designation, approve and ratify all of the rights, powers and
authorities
provided to the Stockholders' Representatives under the terms of
this Agreement,
and agree to be bound by all decisions and other actions taken by
the
Stockholders' Representatives.
(ii) From
and after the Effective Time, the Former
Stockholders hereby authorize the Stockholders' Representatives (i)
to take all
action necessary in connection with the implementation of the
Agreement on
behalf of the Former Stockholders or the settlement of any dispute,
including,
without limitation, with regard to matters pertaining to the
indemnification
provisions of this Agreement and the Escrow Agreement, (ii) to give
and receive
all notices required to be given under this Agreement and the
Escrow Agreement,
and (iii) to take any and all additional action as is contemplated
to be taken
by or on behalf of the Former Stockholders by the terms of this
Agreement and
the Escrow Agreement.
(iii) If any
Stockholders' Representative dies,
becomes legally incapacitated or resigns from such position,
another Person
designated by the remaining Stockholders' Representatives, or if
none remain, by
the Former Stockholders holding the right to receive more than 50%
in interest
of the Escrow Fund (the "REQUISITE FORMER STOCKHOLDERS"), who shall
be
identified to Parent as soon as practicable, shall fill such
vacancy and shall
be deemed to be the Stockholders' Representative(s) for all
purposes of this
Agreement; provided, however, that no change in the
Stockholders'
Representatives shall be effective until Parent is given written
notice of such
change. If no Stockholders' Representative is then currently
serving, the
Stockholders' Representative shall be deemed to be the Requisite
Former
Stockholders.
(iv) All
decisions and actions by the Stockholders'
Representatives as provided in this Section 1.11 or under the
Escrow Agreement
shall be binding upon all of the Former Stockholders, and no Former
Stockholder
shall have the right to object, dissent, protest or otherwise
contest the same.
(v)
By their execution and/or approval of this
Agreement and the Merger, the Company and its stockholders agree
that:
(A)
Parent shall be able to rely
conclusively on the instructions and decisions of the
Stockholders' Representatives as to any actions required or
permitted to be taken by the Stockholders' Representatives
hereunder and under the Escrow Agreement, and no party
hereunder
shall have any cause of action against Parent for any action
taken by Parent in reliance upon the instructions or decisions
of the Stockholders' Representatives.
(B)
All actions, decisions and instructions
of the Stockholders' Representatives shall be conclusive and
binding upon all of the Former Stockholders and no Former
Stockholder shall have any cause of action against the
Stockholders' Representatives for any action taken, decision
made or instruction given by the Stockholders' Representatives
under this Agreement, the Escrow Agreement, except for fraud or
willful breach of this Agreement by the Stockholders'
Representatives.
(C) The provisions of this
Section 1.11 are
independent and severable, shall constitute an irrevocable
power
of attorney, coupled with an interest and surviving death,
granted by the Former Stockholders to each of the Stockholders'
Representatives and shall be binding upon the executors, heirs,
legal representatives and successors of each Former
Stockholder.
(D)
Each Former Stockholder shall be
responsible to pay his, her or its pro rata share, based on the
relative percentage of the payments in respect of the Merger
Consideration that are allocable and payable to such Former
Stockholder hereunder (his, her or its "PRO RATA SHARE"), of
all
fees and expenses, including, without limitation, all
attorney's
fees and expenses incurred in connection with defending or
settling any claim under this Agreement, and any amounts under
subsection (E) below, incurred by the Stockholders'
Representatives.
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<PAGE>
(E)
By approving this Agreement, each Former
Stockholder agrees to severally indemnify and hold harmless the
Stockholders' Representatives and their respective Affiliates
and their respective officers, directors, stockholders,
partners, employees and agents (collectively, the "STOCKHOLDER
REPRESENTATIVE PARTIES") from and against any Losses (except
Losses caused by such parties' fraud or willful breach) that
such Stockholder Representative Parties may suffer or incur in
connection with any action or omission taken or omitted to be
taken by the Stockholders' Representatives hereunder. Each
Former Stockholder shall be responsible to pay his, her or its
Pro Rata Share of such Losses.
(F)
The Stockholders' Representatives shall
have the right to recover from the Escrow Fund, prior to any
distribution to the Former Stockholders, an amount equal to any
reasonable fees, costs and expenses in connection with the
acceptance and administration of the Stockholders'
Representatives' duties hereunder.
In taking any action hereunder and under the Escrow Agreement,
the Stockholders' Representatives shall be protected in relying
upon any notice
or other document reasonably believed by it to be genuine, or upon
any evidence
reasonably deemed by it, in its good faith judgment, to be
sufficient; provided,
however, that the Stockholders' Representatives shall not waive any
rights with
respect to any individual Former Stockholder(s)' interest(s) if
such waiver
would have the effect of disproportionately and adversely affecting
such
individual Former Stockholders(s) as compared to the interests of
the other
Former Stockholders, without the prior consent of the affected
Former
Stockholder(s). No Stockholders' Representative shall be liable to
Parent or the
Former Stockholders for any act performed or omitted to be
performed by it in
the good faith exercise of its duties and shall be liable only in
the case of
fraud or willful breach of this Agreement by such Stockholders'
Representative.
The Stockholders' Representatives may consult with counsel in
connection with
its duties hereunder and shall be fully protected in any act taken,
suffered or
permitted by it in good faith in accordance with the advice of
counsel. The
Stockholders' Representatives shall not be responsible for
determining or
verifying the authority of any Person acting or purporting to act
on behalf of
any party to this Agreement.
1.12
NOTICE TO HOLDERS OF DERIVATIVE SECURITIES.
As promptly as practicable after the execution of this
Agreement, the Company, after consultation with Parent, shall give
the holders
of Company Options, Company Warrants and Company Preferred Stock
any required
notices pursuant to the terms thereof.
1.13
SHARES SUBJECT TO APPRAISAL RIGHTS.
(a)
Notwithstanding any provisions of this Agreement to the
contrary, Dissenting Shares (as defined in Section 1.13(b)) shall
not be
entitled to receive the Merger Consideration and the holders
thereof shall be
entitled only to such rights as are granted by the DGCL. Each
holder of
Dissenting Shares who becomes entitled to payment for such shares
pursuant to
the DGCL shall receive payment therefor from the Surviving
Corporation in
accordance with the DGCL, provided, however, that (i) if any
stockholder of the
Company who asserts appraisal rights in connection with the Merger
(a
"DISSENTER") shall have failed to establish his or its entitlement
to such
rights as provided in the DGCL, or (ii) if any such Dissenter shall
have
effectively withdrawn his or its demand for payment for such shares
or waived or
lost his or its right to payment for his or its shares under the
appraisal
rights process under the DGCL, the shares of Company Common Stock
held by such
Dissenter shall be treated as if they had been converted, as of the
Effective
Time, into a right to receive the Merger Consideration (net of the
pro rata
amounts deposited in the Escrow Account) as provided in Section
1.5, and the
right to participate pro rata in distributions of any remaining
amounts of
Escrow Shares. The Company shall give Parent prompt notice of any
demands for
payment received by the Company from a Person asserting appraisal
rights, and
Parent shall have the right to participate in all negotiations and
proceedings
with respect to such demands. The Company shall not, except with
the prior
written consent of Parent (not to be unreasonably withheld or
delayed), make any
payment with respect to, or settle or offer to settle, any such
demands.
(b) As used herein,
"DISSENTING SHARES" means any shares of
Company Common Stock held by stockholders of the Company who are
entitled to
appraisal rights under the DGCL, and who have properly exercised,
perfected and
not subsequently withdrawn or lost or waived their rights to demand
payment with
respect to their shares in accordance with the DGCL.
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1.14 TAX
CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of
Section 368(a) of
the Code. The parties to this Agreement hereby adopt this Agreement
as a "plan
of reorganization" within the meaning of Sections 1.368-2(g) and
1.368-3(a) of
the United States Treasury Regulations.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to the exceptions and other disclosures set forth in a
disclosure schedule of the Company to be delivered by the
Company
contemporaneously with execution of this Agreement (the "COMPANY
DISCLOSURE
SCHEDULE"), the Company hereby represents and warrants to Parent
and Merger Sub,
as follows:
2.1
ORGANIZATION AND QUALIFICATION.
(a)
The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware and has
the requisite corporate power and authority to own, lease and
operate its assets
and properties and to carry on its business as it is now being
conducted. The
Company is in possession of all franchises, grants, authorizations,
licenses,
permits, easements, consents, certificates, approvals and orders
("APPROVALS")
necessary to own, lease and operate the properties it purports to
own, operate
or lease and to carry on its business as it is now being conducted,
except where
the failure to have such Approvals would not, individually or in
the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Company.
Complete and correct copies of the certificate of incorporation and
by-laws
(collectively referred to herein as "CHARTER DOCUMENTS") of the
Company, as
amended and currently in effect, have been heretofore delivered or
made
available to Parent or Parent's counsel. The Company is not in
violation of any
of the provisions of the Company's Charter Documents.
(b)
The Company is duly qualified or licensed to do business
as a foreign corporation and is in good standing in each
jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its
activities makes such qualification or licensing necessary, except
for such
failures to be so duly qualified or licensed and in good standing
that would
not, individually or in the aggregate, reasonably be expected to
have a Material
Adverse Effect on the Company. As of the date hereof, each
jurisdiction in which
the Company is so qualified or licensed is listed in SECTION 2.1 of
the Company
Disclosure Schedule.
2.2
SUBSIDIARIES.
As of the date hereof, (i) except as set forth in SECTION 2.2
of
the Company Disclosure Schedule, the Company has no subsidiaries
(the "COMPANY
SUBSIDIARIES"), and (ii) except as set forth in SECTION 2.2 of the
Company
Disclosure Schedule, the Company does not own, directly or
indirectly, any
ownership, equity, profits or voting interest in any Person or have
any
agreement or commitment to purchase any such interest, and has not
agreed and is
not obligated to make nor is bound by any agreement, contract,
binding
understanding, instrument, note, option, commitment or undertaking
of any
nature, under which it may become obligated to make, any future
investment in or
capital contribution to any other entity.
2.3
CAPITALIZATION.
(a)
As of the date hereof, the authorized capital stock of
the Company consists of (i) 50,000,000 shares of Company Common
Stock, $.0001
par value per share, and (ii) 10,000,000 shares of Company
Preferred Stock,
$.0001 par value per share, of which 9,925,000 shares have been
designated as
Company Series A Preferred and 36,000 shares have been designated
as Company
Series B Preferred. SECTION 2.3(A) of the Company Disclosure
Schedule sets forth
the issued and outstanding shares of Company Common Stock and
Company Preferred
Stock as of the date hereof. As of the date hereof and except as
set forth on
SECTION 2.3(A) of the Company Disclosure Schedule, no other shares
of Company
Common Stock and Company Preferred Stock are issued or outstanding
and no shares
of capital stock are held in the Company's treasury. Except as set
forth in
SECTION 2.3(A) of the Company Disclosure Schedule, all outstanding
shares of
Company Common Stock and Company Preferred Stock (collectively, the
"COMPANY
CAPITAL STOCK") are duly authorized, validly issued, fully paid
and
non-assessable and are not subject to preemptive rights created by
statute, the
Charter Documents or any agreement or document to which the Company
is a party
or by which it is bound, and were issued in compliance with all
applicable
federal and state securities laws. SECTION 2.3(A) of the Company
Disclosure
Schedule sets forth the number of shares of Company Common Stock
that have been
reserved for issuance, as of the date hereof, upon the exercise,
conversion or
exchange of (i) the Company Options, (ii) Company Warrants, (iii)
any
convertible notes issued by the Company
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<PAGE>
("COMPANY CONVERTIBLE NOTES"), and (iv) any other options,
warrants, convertible
securities or derivatives of the Company Capital Stock. All shares
of Company
Common Stock subject to issuance as aforesaid, upon issuance on the
terms and
conditions specified in the instruments pursuant to which they are
issuable,
will be duly authorized, validly issued, fully paid and
non-assessable. SECTION
2.3(A) of the Company Disclosure Schedule lists, as of the date
hereof, the name
of each holder of Company Common Stock, Company Preferred Stock,
Company
Convertible Note, each outstanding Company Option and each
outstanding Company
Warrant to acquire shares of Company Common Stock or Company
Preferred Stock, as
applicable, the number of shares of Company Common Stock issuable
upon
conversion of such Company Preferred Stock or Company Convertible
Notes
(including the number of shares of Company Common Stock issued upon
conversion
in payment of any accrued interest if permitted by such Convertible
Notes) or
subject to such Company Option or Company Warrant, the per share
conversion
price of such Convertible Notes, the exercise price of such option
or warrant,
the number of shares as to which such option or warrant will have
vested at such
date, the interest rate and maturity date of each Company
Convertible Note and
the vesting schedule and termination date of such Company Option or
Company
Warrant and whether the convertibility of any Company Convertible
Note or the
exercisability of such option or warrant will be accelerated in any
way by the
transactions contemplated by this Agreement or for any other
reason, indicating
the extent of acceleration, if any. Except as set forth in SECTION
2.3(A) of the
Company Disclosure Schedule, the Company has no obligation
(contingent or
otherwise) to pay any dividend with respect to any shares of
Company Capital
Stock or to make any other distribution in respect thereof. The
Company has
delivered or made available to Parent or Parent's counsel true and
accurate
copies of the forms of documents used for the issuance of Company
Capital Stock,
Company Convertible Notes, Company Options and Company
Warrants.
(b)
Except as contemplated by this Agreement and except as
set forth in SECTION 2.3(A) hereof or in SECTION 2.3(B) of the
Company
Disclosure Schedule, there are no subscriptions, options, warrants,
equity
securities, partnership interests or similar ownership interests,
calls, rights
(including preemptive rights), commitments or agreements of any
character to
which the Company is a party or by which it is bound obligating the
Company to
issue, deliver or sell, or cause to be issued, delivered or sold,
or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition
of, any shares of capital stock, partnership interests or similar
ownership
interests of the Company or obligating the Company to grant,
extend, accelerate
the vesting of or enter into any such subscription, option,
warrant, equity
security, call, right, commitment or agreement.
(c)
Except as contemplated by this Agreement and except as
set forth in SECTION 2.3(C) of the Company Disclosure Schedule,
there are no
registration rights, and there is no voting trust, proxy, rights
plan,
anti-takeover plan or other agreement or understanding to which the
Company is a
party or by which the Company is bound with respect to the voting
of any equity
security of any class of the Company.
(d)
Except as set forth in Section 2.3(a) of the Company
Disclosure Schedule, all issuances, sales and repurchases of
Company Capital
Stock, Company Convertible Notes, Company Options and Company
Warrants and any
other equity interests by the Company and its Subsidiaries have
been effected in
compliance with all applicable laws, including, without limitation,
applicable
foreign, federal and state securities laws and all requirements set
forth in any
applicable Company Contracts, except where non-compliance would not
reasonably
be expected to have a Material Adverse Effect on the Company.
2.4
AUTHORITY RELATIVE TO THIS AGREEMENT.
The Company has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder and
to consummate the transactions contemplated hereby (including the
Merger). The
execution and delivery of this Agreement and the consummation by
the Company of
the transactions contemplated hereby (including the Merger), will
upon approval
by the Company's stockholders, be duly and validly authorized by
all necessary
corporate action on the part of the Company (including the approval
by its Board
of Directors), subject in all cases to the satisfaction of the
terms and
conditions of this Agreement, including the conditions set forth in
Article VI),
and no other corporate proceedings on the part of the Company are
necessary to
authorize this Agreement or to consummate the transactions
contemplated hereby
pursuant to the DGCL and the terms and conditions of this
Agreement. This
Agreement has been duly and validly executed and delivered by the
Company and,
assuming the due authorization, execution and delivery thereof by
the other
parties hereto, constitutes the legal and binding obligation of the
Company,
enforceable against the Company in accordance with its terms,
except as may be
limited by bankruptcy, insolvency, reorganization or other similar
laws
affecting the enforcement of creditors' rights generally and by
general
principles of equity.
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<PAGE>
2.5
NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a)
The execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the
Company shall not,
(i) conflict with or violate the Company's Charter Documents, (ii)
subject to
obtaining the approval of this Agreement and the Merger by the
stockholders of
the Company, conflict with or violate any Legal Requirements (as
defined in
Section 9.2), (iii) except as set forth in SECTION 2.5 of the
Company Disclosure
Schedule, result in any breach of or constitute a default (or an
event that with
notice or lapse of time or both would become a default) under, or
materially
impair the Company's rights or alter the rights or obligations of
any third
party under, or give to others any rights of termination,
amendment,
acceleration or cancellation of, or result in the creation of a
lien or
encumbrance on any of the properties or assets of the Company
pursuant to, any
Material Company Contracts or (iv) except as set forth in SECTION
2.5 of the
Company Disclosure Schedule, result in the triggering, acceleration
or increase
of any payment to any Person pursuant to any Material Company
Contract,
including any "change in control" or similar provision of any
Material Company
Contract; except, with respect to clauses (ii), (iii) or (iv), for
such
conflicts, violations, breaches, defaults, triggerings,
cancellations, increases
or other occurrences that would not have a Material Adverse Effect
on the
Company.
(b)
The execution and delivery of this Agreement by the
Company do not, and the performance of its obligations hereunder
will not,
require any consent, approval, authorization or permit of, or
filing with or
notification to, any Governmental Entity, except (i) for the filing
of any
notifications required under the Hart-Scott-Rodino Antitrust
Improvements Act of
1976, as amended (the "HSR ACT") and the expiration of the required
waiting
period thereunder, (ii) applicable requirements, if any, under the
Securities
Act, the Exchange Act or state securities or "blue sky" laws, and
the rules and
regulations thereunder, and appropriate documents received from or
filed with
the relevant authorities of other jurisdictions in which the
Company is licensed
or qualified to do business, and (iii) where the failure to obtain
such
consents, approvals, authorizations or permits, or to make such
filings or
notifications, would not, individually or in the aggregate,
reasonably be
expected to have a Material Adverse Effect on the Company, or
prevent
consummation of the Merger or otherwise prevent the Company from
performing its
obligations under this Agreement.
2.6
COMPLIANCE.
Except as set forth in SECTION 2.6 of the Company Disclosure
Schedule, (a) the Company and each Company Subsidiary has complied
with, and is
not in violation of, any Legal Requirements with respect to the
conduct of its
business, or the ownership or operation of its business, and (b) no
written
notice of non-compliance with any Legal Requirements has been
received by the
Company or any of the Company Subsidiaries, except, in each case,
for any
non-compliance, failure to comply or violation that would not
reasonably be
expected to have a Material Adverse Effect on the Company and the
Company's
Subsidiaries, taken as a whole. Neither the Company nor any Company
Subsidiary
is in default or violation of any term, condition or provision of
its Charter
Documents.
2.7
FINANCIAL STATEMENTS.
(a)
The Company has provided or made available to Parent the
unaudited consolidated financial statements (including any related
notes
thereto) of the Company for the nine-month period ending September
30, 2006 (the
"UNAUDITED FINANCIAL STATEMENTS"). The Unaudited Financial
Statements were
prepared in accordance with generally accepted accounting
principles of the
United States ("U.S. GAAP") applied on a consistent basis
throughout the periods
involved (except as may be indicated in the notes thereto, if any),
and each
fairly presents in all material respects the financial position of
the Company
at the respective dates thereof and the results of its operations
and cash flows
for the periods indicated in accordance with U.S. GAAP, except that
such
statements do not contain notes and are subject to normal year-end
adjustments
and adjustments resulting from purchase price reallocation based on
post-closing
valuation reports that will not have a Material Adverse Effect on
the Company.
(b)
The Historical Audits and each Significant Acquisition
Audit (each as defined in Section 5.6), when delivered or made
available in
accordance with Section 5.6, shall be prepared in accordance with
U.S. GAAP
applied on a consistent basis throughout the periods involved
(except as may be
indicated in the notes thereto, if any), and each Historical Audit
and each
Significant Acquisition Audit shall fairly present, when delivered,
in all
material respects the financial position of the Company (or the
subject of the
Significant Acquisition Audit) at the respective dates thereof and
the results
of its operations and cash flows for the periods indicated in
accordance with
U.S. GAAP, except that any Unaudited Financial Statements do not
contain notes
and are subject to normal year-end adjustments and adjustments
resulting from
purchase price reallocation based on post-closing valuation reports
that will
not have a Material Adverse Effect on the Company.
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<PAGE>
(c)
The books of account, minute books, stock certificate
books and stock transfer ledgers and other similar books and
records of the
Company have been maintained in accordance with good business
practice, are
complete and correct in all material respects and there have been
no material
transactions that are required to be set forth therein and which
are not so set
forth.
(d)
Except as otherwise noted in the Audited Financial
Statements or the Unaudited Financial Statements, or as set forth
in SECTION
2.7(D) of the Company Disclosure Schedule, the accounts and notes
receivable of
the Company reflected on the balance sheets included in the Audited
Financial
Statements and the Unaudited Financial Statements (i) arose from
bona fide
transactions in the ordinary course of business and are payable on
ordinary
trade terms, (ii) to the knowledge of the Company, are legal, valid
and binding
obligations of the respective debtors enforceable in accordance
with their
terms, except as such may be limited by bankruptcy, insolvency,
reorganization,
or other similar laws affecting creditors' rights generally, and by
general
equitable principles, (iii) to the knowledge of the Company, are
not subject to
any valid set-off or counterclaim except to the extent set forth in
such balance
sheet contained therein, and (iv) except as set forth in SECTION
2.7(D) of the
Company Disclosure Schedule, as of the date hereof, are not the
subject of any
actions or proceedings brought by or on behalf of the Company.
(e)
To the knowledge of the Company, the Company has
established adequate internal controls for a privately held company
for purposes
of preparing the Company's periodic financial statements.
2.8
NO UNDISCLOSED LIABILITIES.
Except as set forth in SECTION 2.8 of the Company Disclosure
Schedule, to the knowledge of the Company, as of the date hereof,
the Company
has no liabilities (absolute, accrued, contingent or otherwise) of
a nature
required to be disclosed on a balance sheet in accordance with U.S.
GAAP which
are, individually or in the aggregate, material to the business,
results of
operations or financial condition of the Company, except: (i)
liabilities
provided for in or otherwise disclosed in the balance sheet
included (or which
will be included when delivered) in the Unaudited Financial
Statements or the
Audited Financial Statements, and (ii) such liabilities arising in
the ordinary
course of the Company's business since January 1, 2006, none of
which would have
a Material Adverse Effect on the Company.
2.9
ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as set forth in SECTION 2.9 of the Company Disclosure
Schedule or in the Audited Financial Statements or the Unaudited
Financial
Statements when delivered, or as otherwise provided in this
Agreement, since
January 1, 2006 to the date of this Agreement, there has not been:
(i) any
Material Adverse Effect on the Company; (ii) any declaration,
setting aside or
payment of any dividend on, or other distribution (whether in cash,
stock or
property) in respect of, any of the Company's stock, or any
purchase, redemption
or other acquisition by the Company of any of the Company Capital
Stock or any
options, warrants, calls or rights to acquire any such shares or
other
securities; (iii) any split, combination or reclassification of any
of the
Company's Capital Stock; (iv) any granting by the Company of any
increase in
compensation or fringe benefits, except for normal increases of
cash
compensation in the ordinary course of business consistent with
past practice,
or any payment by the Company of any bonus, except for bonuses made
in the
ordinary course of business consistent with past practice, or any
granting by
the Company of any increase in severance or termination pay or any
entry by
Company into any currently effective employment, severance,
termination or
indemnification agreement or any agreement the benefits of which
are contingent
or the terms of which are materially altered upon the occurrence of
a
transaction involving the Company of the nature contemplated by
this Agreement;
(v) entry by the Company into any licensing or other agreement with
regard to
the acquisition or disposition of any Intellectual Property (as
defined in
Section 2.18 hereof) other than licenses in the ordinary course of
business
consistent with past practice or any amendment or consent with
respect to any
licensing agreement filed or required to be filed by the Company
with respect to
any Governmental Entity; (vi) any material change by the Company in
its
accounting methods, principles or practices; (vii) any change in
the auditors of
the Company; (viii) any issuance of capital stock of the Company,
other than
pursuant to the Company Stock Option Plans in the ordinary course;
(ix) any
revaluation by the Company of any of its material assets,
including, without
limitation, writing down the value of capitalized inventory or
writing off notes
or accounts receivable or any sale of assets of the Company other
than in the
ordinary course of business; or (x) any agreement to do any of the
foregoing.
2.10
LITIGATION.
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<PAGE>
Except as disclosed in SECTION 2.10 of the Company Disclosure
Schedule, as of the date hereof, there are no claims, suits,
actions or
proceedings pending which have been served on the Company,
threatened in writing
or, to the knowledge of the Company, otherwise pending, against the
Company
before any court, governmental department, commission, agency,
instrumentality
or authority, or any arbitrator that seeks to restrain or enjoin
the
consummation of the transactions contemplated by this Agreement or
which could
reasonably be expected, either singularly or in the aggregate with
all such
claims, actions or proceedings, to have a Material Adverse Effect
on the Company
or have a Material Adverse Effect on the ability of the Company to
consummate
the Merger.
2.11
EMPLOYEE BENEFIT PLANS AND COMPENSATION.
(a)
DEFINITIONS. With the exception of the definition of
"Affiliate" set forth in Section 2.11(a) below (which definition
shall apply
only to this Section 2.11(a)), for purposes of this Agreement, the
following
terms shall have the following respective meanings:
" AFFILIATE" shall mean any other Person that is treated as a
single
employer with the Company under Section 414(b), (c), (m) or (o) of
the Code and
the regulations issued thereunder.
" COMPANY EMPLOYEE PLAN" shall mean any plan, program, policy,
practice,
contract, agreement or other arrangement providing for
compensation, severance,
termination pay, deferred compensation, performance awards, stock
or
stock-related awards, fringe benefits or other employee benefits or
remuneration
of any kind, whether written, unwritten or otherwise, funded or
unfunded,
including without limitation, each "employee benefit plan," within
the meaning
of Section 3(3) of ERISA which is or has been maintained,
contributed to, or
required to be contributed to, by the Company or any Affiliate for
the benefit
of any Employee.
"COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of
1985, as amended.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"DOL" shall mean the United States Department of Labor.
"EMPLOYEE" shall mean any current, former or rehired employee,
consultant, officer or director of the Company or any
Affiliate.
"EMPLOYEE AGREEMENT" shall mean each employment, consulting or
similar
agreement not terminable at will by the Company, each agreement
providing for
severance, relocation, repatriation, expatriation or similar
agreement
(including, without limitation, any offer letter or any agreement
providing for
acceleration of Company Stock Options) between the Company or any
Affiliate and
any Employee.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974,
as amended.
"FMLA" shall mean the Family Medical Leave Act of 1993, as
amended.
"HIPAA" shall mean the Health Insurance Portability and
Accountability
Act of 1996, as amended.
"IRS" shall mean the United States Internal Revenue Service.
"PBGC" shall mean the United States Pension Benefit Guaranty
Corporation.
"PENSION PLAN" shall mean each Company Employee Plan that is an
"employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b)
SECTION 2.11(B) of the Company Disclosure Schedule sets
forth a complete and accurate list of each material Company
Employee Plan and
Employee Agreement as of the date hereof. As of the date hereof,
neither the
Company nor an Affiliate has made any plan or commitment to
establish any new
Company Employee Plan or Employee Agreement, to modify any Company
Employee Plan
or Employee Agreement (except to the extent required by law or to
conform any
such Company Employee Plan or Employee Agreement to the
requirements of any
applicable law, or as required by this Agreement), or to enter into
any Company
Employee Plan or Employee Agreement, nor does it have any intention
or
commitment to do any of the foregoing. The Company has previously
made available
to Parent a true and complete table setting forth the name,
position and
compensation of each Employee (or other similar summary).
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<PAGE>
(c)
DOCUMENTS. The Company has provided or made available to
Parent or its counsel: (i) correct and complete copies of all
documents
embodying each Company Employee Plan and each Employee Agreement
including,
without limitation, all amendments thereto and written
interpretations thereof
and all related trust documents; (ii) the three (3) most recent
annual reports
(Form Series 5500 and all schedules and financial statements
attached thereto),
if any, filed under ERISA or the Code in connection with each
Company Employee
Plan; (iii) if the Company Employee Plan is funded, the most recent
annual and
periodic accounting of Company Employee Plan assets; (iv) the most
recent
summary plan description together with the summary(ies) of
material
modifications thereto, if any, required under ERISA with respect to
each Company
Employee Plan; (v) all material written agreements and contracts
relating to
each Company Employee Plan, including, without limitation,
administrative
service agreements and group insurance contracts; (vi) all
correspondence to or
from any governmental agency relating to any Company Employee Plan
received by
the Company or an Affiliate within the prior three (3) years; (vii)
all forms of
COBRA notices; (viii) all policies pertaining to fiduciary
liability insurance
covering the fiduciaries for each Company Employee Plan; (ix) all
discrimination
tests for each Company Employee Plan for the three (3) most recent
plan years;
and (x) the most recent IRS determination or opinion letter issued
with respect
to each Company Employee Plan, if any, that is intended to satisfy
or be subject
to Code Section 401(a). There have been no communications in the
past three (3)
years by the Company or any Affiliate to any Employee relating to
any Company
Employee Plan or any proposed Company Employee Plan, in each case,
relating to
any amendments, terminations, establishments, increases or
decreases in
benefits, acceleration of payments or vesting schedules or other
events that are
not reflected in the terms of the Company Employee Plan.
(d)
EMPLOYEE PLAN COMPLIANCE. The Company and each Affiliate
have performed all obligations required to be performed by it
under, is not in
default or violation of, and have no knowledge of any default or
violation by
any other party to, any Company Employee Plan, and each Company
Employee Plan
has been established and maintained in accordance with its terms
and in
compliance with all applicable laws, statutes, orders, rules and
regulations,
including but not limited to ERISA or the Code, except for such
failure to
perform, default, violation or non-compliance that would not
reasonably be
expected to have a Material Adverse Effect. Any Company Employee
Plan intended
to be qualified under Section 401(a) of the Code and any trust
intended to
qualify under Section 501(a) of the Code has obtained a favorable
determination
letter (or opinion letter, if applicable) as to its qualified
status under the
Code. No "prohibited transaction," within the meaning of Section
4975 of the
Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section
408 of ERISA, has occurred with respect to any Company Employee
Plan. There are
no actions, suits or claims pending which have been served on the
Company or an
Affiliate or, to the knowledge of the Company, otherwise pending or
threatened
in writing or reasonably anticipated (other than routine claims for
benefits)
against any Company Employee Plan or against the assets of any
Company Employee
Plan. Other than as set forth in Section 2.11(h) below, each
Company Employee
Plan can be amended, terminated or otherwise discontinued after the
Effective
Time in accordance with its terms, without liability to Parent, the
Company or
any Affiliate (other than accrued benefits and ordinary
administration
expenses). There are no audits, inquiries or proceedings pending
or, to the
knowledge of the Company or any Affiliates, threatened in writing
by the IRS,
DOL, or any other Governmental Entity with respect to any Company
Employee Plan.
Neither the Company nor any Affiliate is subject to any material
penalty or tax
with respect to any Company Employee Plan under Section 402(i) of
ERISA or
Sections 4975 through 4980 of the Code. The Company and its
Affiliates have made
all material contributions and other payments required by and due
under the
terms of each Company Employee Plan. Neither the Company nor an
Affiliate
maintains or has any obligation under a nonqualified deferred
compensation plan
within the meaning of Code Section 409A that fails to meet the
requirements of
paragraph (2), (3), or (4) of Code Section 409A or that is not
operated in
accordance with a good faith interpretation of such requirements or
with respect
to which assets are subject to Code Section 409A(b). Neither the
Company nor an
Affiliate has any obligation to make a nondeductible contribution
to any Company
Employee Plan.
(e)
NO PENSION PLAN. Neither the Company nor any Affiliate
has ever maintained, established, sponsored, participated in, or
contributed to,
any Pension Plan that is subject to Title IV of ERISA or Section
412 of the
Code.
(f)
NO SELF-INSURED PLAN. Neither the Company nor any
Affiliate has ever maintained, established sponsored, participated
in or
contributed to any self-insured plan that provides healthcare, life
or long-term
disability benefits to employees (including, without limitation,
any such plan
pursuant to which a stop-loss policy or contract applies).
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<PAGE>
(g)
COLLECTIVELY BARGAINED, MULTIEMPLOYER AND
MULTIPLE-EMPLOYER PLAN. At no time has the Company or any Affiliate
contributed
to or been obligated to contribute to any multiemployer plan within
the meaning
of Section 3(37) of ERISA. Neither the Company nor any Affiliate
has at any time
ever maintained, established, sponsored, participated in or
contributed to any
multiple employer welfare arrangement within the meaning of Section
3(40) of
ERISA or to any plan described in Section 413 of the Code.
(h)
NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in
SECTION 2.11(H) of the Company Disclosure Schedule, no Company
Employee Plan or
Employee Agreement provides, or reflects or represents any
liability to provide,
retiree or post-employment life insurance, retiree or
post-employment health or
other retiree or post-employment employee welfare benefits to any
person for any
reason, except as may be required by COBRA or other applicable
statute, and the
Company has not represented, promised or contracted (whether in
oral or written
form) to any Employee (either individually or to Employees as a
group) or any
other person that such Employee(s) or other person would be
provided with
retiree or post-employment life insurance, or post-employment
retiree health or
other or post-employment retiree employee welfare benefits, except
to the extent
required by statute.
(i)
COBRA; FMLA; HIPAA. The Company and each Affiliate have,
prior to the Effective Time, complied with COBRA, FMLA, HIPAA, and
any similar
provisions of state law applicable to its Employees in all material
respects.
The Company does not have material unsatisfied obligations to any
Employees or
qualified beneficiaries pursuant to COBRA, HIPAA or any state law
governing
health care coverage or extension.
(j)
EFFECT OF TRANSACTION. Except as set forth in SECTION
2.11(J) of the Company Disclosure Schedule, the execution of this
Agreement and
the consummation of the transactions contemplated hereby will not
(either alone
or upon the occurrence of any additional or subsequent events)
constitute an
event under any Company Employee Plan, Employee Agreement, trust or
loan that
will or may result in any payment (whether of severance pay or
otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in
benefits or obligation to fund benefits or be deemed a "parachute
payment" under
Section 280G of the Code with respect to any Employee.
(k)
EMPLOYMENT MATTERS. Except as set forth in SECTION
2.11(K) of the Company Disclosure Schedule and except in each case
where
non-compliance, failure to withhold or report, failure to comply or
liability
would not have a Material Adverse Effect, the Company and each
Affiliate: (i)
are in compliance with all applicable foreign, federal, state and
local laws,
rules and regulations respecting employment, employment practices,
terms and
conditions of employment, termination of employment, employee
safety and wages
and hours, and in each case, with respect to Employees; (ii) have
withheld and
reported all amounts required by law or by agreement to be withheld
and reported
with respect to wages, salaries and other payments to Employees;
(iii) are not
liable for any arrears of wages, severance pay or any taxes or any
penalty for
failure to comply with any of the foregoing; and (iv) are not
liable for any
payment to any trust or other fund governed by or maintained by or
on behalf of
any governmental authority, with respect to unemployment
compensation benefits,
social security or other benefits or obligations for Employees
(other than
routine payments to be made in the normal course of business and
consistent with
past practice). As of the date hereof, there are no actions, suits,
claims or
administrative matters pending which have been served on the
Company or an
Affiliate, or to the Company's or an Affiliate's knowledge,
otherwise pending or
threatened in writing against the Company relating to any Employee,
Employee
Agreement or Company Employee Plan, except where such actions,
suits, claims or
administrative matters would not have a Material Adverse Effect. As
of the date
hereof, there are no pending claims or actions which have been
served on the
Company or an Affiliate, or to the Company's or an Affiliate's
knowledge,
otherwise threatened in writing against the Company, or an
Affiliate under any
worker's compensation policy of the Company or an Affiliate, except
where such
pending claims would not have a Material Adverse Effect. To the
Company's and
the Affiliates' knowledge, no Employee has violated any employment
contract,
nondisclosure agreement, non-competition or non-solicitation
agreement by which
such Employee is bound. As of the date hereof, except as set forth
in SECTION
2.11(K) of the Company Disclosure Schedule, the services provided
by each of the
Company's and its Affiliate's Employees is terminable at the will
of the Company
and its Affiliates and any such termination would result in no
liability to the
Company, any Affiliate or Parent.
(l)
NO INTERFERENCE OR CONFLICT. To the knowledge of the
Company, no Employee of the Company or any Affiliate is obligated
under any
contract or agreement, subject to any judgment, decree, or order of
any court or
administrative agency that would interfere with such person's
efforts to promote
the interests of the Company or an Affiliate or that would
interfere with the
Company's or an Affiliate's business.
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<PAGE>
2.12 LABOR
MATTERS.
Neither the Company nor any Subsidiary is a party to any
collective bargaining agreement or other labor union contract
applicable to
persons employed by the Company nor does the Company know of any
activities or
proceedings of any labor union to organize any such employees. To
the Company's
knowledge (i) there are no employees of the Company working in the
United States
who are not U.S. citizens and (ii) all employees of the Company who
are
performing services for the Company in the United States are
legally able to
work in the United States and will be able to continue to work in
the United
States following the Acquisition.
2.13
RESTRICTIONS ON BUSINESS ACTIVITIES.
Except as disclosed in SECTION 2.13 of the Company Disclosure
Schedule, to the Company's knowledge, as of the date hereof, there
is no
agreement, commitment, judgment, injunction, order or decree
binding upon the
Company or its assets or to which the Company or any Subsidiary is
a party which
has or could reasonably be expected to have the effect of
prohibiting or
materially impairing any business practice of the Company or any
Subsidiary, any
acquisition of property by the Company or any Subsidiary or the
conduct of
business by the Company or any Subsidiary as currently conducted,
other than
such effects, individually or in the aggregate, which would not
reasonably be
expected to have a Material Adverse Effect on the Company.
2.14 OWNED
AND LEASED REAL PROPERTIES.
(a)
SECTION 2.14(A) of the Company Disclosure Schedule sets
forth a complete and accurate list as of the date of this Agreement
of all real
property and interests in real property owned in fee by the Company
or any of
its Subsidiaries (collectively, the "OWNED REAL PROPERTY") and the
address and
owner of each parcel of Owned Real Property. Except as set forth in
SECTION
2.14(B) of the Company Disclosure Schedule, to the Company's
knowledge, the
Company or one of its Subsidiaries has good and valid fee simple
title to each
parcel of Owned Real Property listed in SECTION 2.14(A) of the
Company
Disclosure Schedule free and clear of all Liens, except for such
Permitted Liens
and Liens that, individually or in the aggregate, are not
reasonably likely to
result in a Material Adverse Effect on the Company and the
Company's
Subsidiaries, taken as a whole. To the extent in the possession and
control of
the Company, the Company has made available to Merger Sub prior to
the date
hereof copies of all existing vesting deeds, title policies and
surveys and all
other material documents, instruments and agreements directly
affecting title to
the Company's or the Company's Subsidiaries' property rights to
ownership, use
and possession of, the Owned Real Property.
(b)
SECTION 2.14(B)(I) of the Company Disclosure Schedule
sets forth a complete and accurate list as of the date of this
Agreement of all
real property leased, subleased or licensed by the Company or any
of its
Subsidiaries (the "LEASED REAL PROPERTY") pursuant to lease
agreements having an
annual base rent in excess of $35,000 (collectively, the "LEASES").
Except as
set forth in SECTION 2.14(B)(II) of the Company Disclosure
Schedule, (A) the
Company or one of its Subsidiaries has good and valid leasehold
interest in the
Leased Real Property and (B) neither the Company nor any of its
Subsidiaries
leases, subleases or licenses any real property to any Person other
than the
Company and its Subsidiaries. The Company has made available to
Parent or its
counsel complete and accurate copies of all Leases.
(c)
Each Lease is in full force and effect, is a valid and
binding obligation of, and is legally enforceable against, the
Company or its
Subsidiary party thereto and, to the knowledge of the Company, the
respective
counterparties thereto.
(d)
Neither the Company nor any of its Subsidiaries nor, to
the Company's knowledge, any other party to any Lease is in default
or material
breach under any of the Leases (or has taken or has failed to take
any action
which, with notice, lapse of time, or both, would constitute a
default) that
would be likely to result in a Material Adverse Effect on the
Company and the
Company's Subsidiaries, taken as a whole.
(e)
Except as set forth in SECTION 2.14(E) of the Company
Disclosure Schedule, neither the Company nor any of its
Subsidiaries is
obligated under or bound by any option, right of first refusal,
purchase
contract or other contractual right to sell or purchase any Owned
Real Property
or Leased Real Property or any portions thereof or interests
therein.
2.15
TAXES.
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<PAGE>
(a)
DEFINITION OF TAXES. For the purposes of this Agreement,
"TAX" or "TAXES" refers to any and all federal, state, local and
foreign taxes,
including, without limitation, gross receipts, income, profits,
sales, use,
occupation, value added, ad valorem, transfer, franchise,
withholding, payroll,
recapture, employment, excise and property taxes, assessments,
governmental
charges and duties together with all interest, penalties and
additions imposed
with respect to any such amounts and any obligations under any
agreements or
arrangements with any other person with respect to any such amounts
and
including any liability of a predecessor entity for any such
amounts.
(b)
TAX RETURNS AND AUDITS. Except as set forth in SECTION
2.15 of the Company Disclosure Schedule:
(i)
The Company has timely filed all federal, state,
local and foreign returns, estimates, information statements
and
reports relating to Taxes ("RETURNS") required to be filed by
the Company with any Tax authority prior to the date hereof,
except such Returns which are not material to the Company. To
the Company's knowledge, all such Returns are true, correct and
complete in all material respects. The Company has paid all
Taxes shown to be due on such Returns. The Company is not a
"United States real property holding corporation," as defined
in
section 897 of the Internal Revenue Code of 1986, as amended,
and Section 1.897-2(b) of the regulations promulgated
thereunder.
(ii) All
material Taxes that the Company is required
by law to withhold or collect have been duly withheld or
collected, and have been timely paid over to the proper
governmental authorities to the extent due and payable.
(iii) The
Company is not delinquent in the payment of
any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against the Company, nor has
the Company executed any unexpired waiver of any statute of
limitations on or extending the period for the assessment or
collection of any material Tax.
(iv) As of
the date hereof, to the Company's
knowledge, no audit or other examination of any material Return
of the Company by any Tax authority is in progress and the
Company has not been notified of any request for such an audit
or other examination.
(v)
As of the date hereof, no adjustment relating to
any material Taxes has been proposed in writing, formally or
informally, by any Tax authority to the Company or any
representative thereof.
(vi)
The
Company has no liability for any material
unpaid Taxes which have not been accrued for or reserved on the
Company's balance sheets included in the Audited Financial
Statements or the Unaudited Financial Statements, whether
asserted or unasserted, contingent or otherwise, which is
material to the Company, other than any liability for unpaid
Taxes that may have accrued since the end of the most recent
fiscal year in connection with the operation of the business of
the Company in the ordinary course of business.
(vii) The
Company has not taken any action and does
not know of any fact, agreement, plan or other circumstance
that
is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the
Code.
2.16
ENVIRONMENTAL MATTERS.
(a)
Except as disclosed in SECTION 2.16 of the Company
Disclosure Schedule, to the knowledge of the Company: (i) the
Company has
complied with all applicable Environmental Laws; (ii) the
properties currently
operated by the Company (including soils, groundwater, surface
water, buildings
or other structures) have not been contaminated with any Hazardous
Substances by
any action of the Company; (iii) the properties formerly owned by
the Company
were not contaminated with Hazardous Substances during the period
of ownership
or operation by the Company or, to the Company's knowledge, during
any prior
period; (iv) the Company is not subject to liability for any
Hazardous Substance
disposal or contamination on any third party property; (v) the
Company has not
been associated with any release of any Hazardous Substance; (vi)
as of the date
hereof, the Company has not received any notice, demand, letter,
claim or
request for information alleging that the Company may be in
violation of or
liable under any Environmental Law; and (vii) the Company is not
subject to any
orders, decrees or injunctions with any Governmental Entity or
subject to any
indemnity or other agreement with any third party relating to
liability under
any Environmental Law or relating to Hazardous Substances.
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<PAGE>
(b)
As used in this Agreement, the term "ENVIRONMENTAL LAW"
means any federal, state, local or foreign law, regulation, order,
decree,
permit, authorization, opinion, common law or agency requirement
relating to:
(A) the protection, investigation or restoration of the
environment, health and
safety, or natural resources; (B) the handling, use, presence,
disposal, release
or threatened release of any Hazardous Substance; or (C) noise,
odor, wetlands,
pollution, contamination or any injury or threat of injury to
persons or
property.
(c)
As used in this Agreement, the term "HAZARDOUS
SUBSTANCE" means any substance that is: (i) listed, classified or
regulated
pursuant to any Environmental Law; (ii) any petroleum product or
by-product,
asbestos-containing material, lead-containing paint or plumbing,
polychlorinated
biphenyls, radioactive materials or radon; or (iii) any other
substance which is
the subject of regulatory action by any Governmental Entity
pursuant to any
Environmental Law.
(d)
Except as set forth on SECTION 2.16 of the Company
Disclosure Schedule, there are no environmental investigations,
studies or
audits with respect to any of the Properties or Leased Real
Property owned or
commissioned by, or in the possession of, the Company.
2.17
BROKERS; THIRD PARTY EXPENSES.
Except as set forth in SECTION 2.17 of the Company Disclosure
Schedule, the Company has not incurred, nor will it incur, directly
or
indirectly, any liability for brokerage, finders' fees, agent's
commissions or
any similar charges in connection with this Agreement or any
transactions
contemplated hereby. No shares of Company Capital Stock and no
Company Options
or Company Warrants or other securities of the Company are payable
to any third
party by the Company as brokerage, finders' fees, agent's
commissions or any
similar charge as a result of the Merger.
2.18
INTELLECTUAL PROPERTY.
For the purposes of this Agreement, the following terms have
the
following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following
and all worldwide common law and statutory rights in, arising out
of, or
associated therewith: (i) patents and applications therefor and all
reissues,
divisions, renewals, extensions, provisionals, continuations
and
continuations-in-part thereof ("PATENTS"); (ii) inventions (whether
patentable
or not), invention disclosures, improvements, trade secrets,
proprietary
information, know how, technology, technical data and customer
lists, and all
documentation relating to any of the foregoing; (iii) copyrights,
copyrights
registrations and applications therefor, and all other rights
corresponding
thereto throughout the world; (iv) software and software programs;
(v) domain
names, uniform resource locators and other names and locators
associated with
the Internet; (vi) industrial designs and any registrations and
applications
therefor; (vii) trade names, logos, common law trademarks and
service marks,
trademark and service mark registrations and applications
therefor
(collectively, "TRADEMARKS"); (viii) all databases and data
collections and all
rights therein; (ix) all moral and economic rights of authors and
inventors,
however denominated; and (x) any similar or equivalent rights to
any of the
foregoing (as applicable).
"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual
Property that is owned by, or exclusively licensed to, the Company,
including
software and software programs developed by or exclusively licensed
to the
Company (specifically excluding any off the shelf or shrink-wrap
software).
"REGISTERED INTELLECTUAL PROPERTY" means all Intellectual
Property that is the subject of an application, certificate,
filing,
registration or other document issued, filed with, or recorded by
any private,
state, government or other legal authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the
Registered Intellectual Property owned by, or filed in the name of,
the Company.
(a)
Except as disclosed in SECTION 2.18(A) of the Company
Disclosure Schedule, as of the date hereof, no Company Intellectual
Property is
subject to any material proceeding or outstanding decree, order,
judgment,
contract, license, agreement or stipulation which has been served
on the
Company, or to the Company's knowledge, otherwise pending,
restricting in any
manner the use, transfer or licensing thereof by the Company, or
which may
affect the validity, use or enforceability of such Company
Intellectual
Property, which in any such case could reasonably be expected to
have a Material
Adverse Effect on the Company.
-20-
<PAGE>
(b)
Except as disclosed in SECTION 2.18(B) of the Company
Disclosure Schedule, the Company owns and has good and marketable
title to each
material item of Company Intellectual Property owned by it free and
clear of any
liens and encumbrances (excluding non-exclusive licenses and
related
restrictions granted by it in the ordinary course of business); and
the Company
is the exclusive owner of all material registered Trademarks used
in connection
with the operation or conduct of the business of the Company as now
conducted,
including the sale of any products or the provision of any services
by the
Company.
(c)
To the Company's knowledge, the operation of the
business of the Company, as such business currently is conducted,
including the
Company's use of any product, device or process, has not and does
not infringe
or misappropriate the Intellectual Property of any third party or
constitute
unfair competition or trade practices under the laws of any
jurisdiction.
2.19
AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a)
SECTION 2.19(A) of the Company Disclosure Schedule sets
forth a complete and accurate list of all Material Company
Contracts (as
hereinafter defined) as of the date hereof, specifying the parties
thereto. For
purposes of this Agreement, (i) the term "COMPANY CONTRACTS" shall
mean all
contracts, agreements, leases, mortgages, indentures, notes, bonds,
franchises,
purchase orders, sales orders, and other understandings,
commitments and
obligations of any kind, whether written or oral, to which the
Company is a
party or by or to which any of the properties or assets of Company
may be bound,
subject or affe
