EMCORE CORP. 8-K EX-2.1 K2 MERGER AGREEMENT
Published on January 19, 2006
EXHIBIT
2.1
AGREEMENT
AND PLAN OF MERGER
BY
AND
AMONG
EMCORE
CORPORATION,
EMCORE
OPTOELECTRONICS ACQUISITION CORPORATION
AND
K2
OPTRONICS, INC.
Dated
as
of January 12, 2006
TABLE
OF CONTENTS
ARTICLE
I
DEFINITIONS
|
1.1
|
Definitions.
|
ARTICLE
II
THE
MERGER
|
2.1
|
The
Merger
|
|
2.2
|
The
Closing
|
|
2.3
|
Company
Closing Deliverables
|
|
2.4
|
Parent
Closing Deliverables
|
|
2.5
|
Effective
Time.
|
|
2.6
|
Effect
of the Merger on Constituent Corporations.
|
|
2.7
|
Certificate
of Incorporation and Bylaws of Surviving Corporation.
|
|
2.8
|
Directors
and Officers of Surviving Corporation
|
|
2.9
|
Merger
Consideration; Effect of Merger
|
|
2.10
|
Fractional
Shares
|
|
2.11
|
Dissenting
Shares
|
|
2.12
|
Surrender
of Company Certificates, Exchange Agent
|
|
2.13
|
Taking
of Necessary Action; Further Action
|
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
3.1
|
Organization
and Qualification
|
|
3.2
|
Authorization
and Validity of this Agreement
|
|
3.3
|
Capital
Stock.
|
|
3.4
|
No
Subsidiaries
|
|
3.5
|
Directors
and Officers
|
|
3.6
|
No
Conflicts
|
|
3.7
|
Approvals.
|
|
3.8
|
Compliance
|
|
3.9
|
Takeover
Statutes
|
|
3.10
|
Company
Financial Statements.
|
|
3.11
|
Books
and Records; Organizational Documents
|
|
3.12
|
Absence
of Changes
|
|
3.13
|
Taxes.
|
|
3.14
|
Legal
Proceedings
|
|
3.15
|
Employee
Benefit Plans.
|
|
3.16
|
Real
Property.
|
|
3.17
|
Tangible
Personal Property
|
|
3.18
|
Intellectual
Property.
|
|
3.19
|
Contracts.
|
|
3.20
|
Insurance.
|
|
3.21
|
Affiliate
Transactions.
|
|
3.22
|
Employees;
Labor Relations.
|
|
3.23
|
Environmental
Matters.
|
|
3.24
|
Substantial
Customers and Suppliers.
|
|
3.25
|
Accounts
Receivable.
|
|
3.26
|
Inventory
|
|
3.27
|
Other
Negotiations; Brokers; Third-Party Expenses
|
|
3.28
|
Banks
and Brokerage Accounts
|
|
3.29
|
Warranty
Obligations.
|
|
3.30
|
Foreign
Corrupt Practices Act
|
|
3.31
|
Financial
Projections/Operating Plan.
|
|
3.32
|
Prepayment
of Company Debt
|
|
3.33
|
Potential
Conflict of Interest
|
|
3.34
|
Propriety
of Payments
|
|
3.35
|
Section
280G Payments
|
|
3.36
|
Cancellation
of Options, Warrants and other Rights to Purchase Company Capital
Stock.
|
|
3.37
|
Disclosure
|
|
3.38
|
Internal
Controls
|
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
|
4.1
|
Organization
and Qualification
|
|
4.2
|
Authorization
and Validity of this Agreement
|
|
4.3
|
Capital
Stock
|
|
4.4
|
Issuance
of Parent Common Stock
|
|
4.5
|
SEC
Documents; Financial Statements
|
|
4.6
|
No
Conflicts
|
|
4.7
|
Approvals.
|
|
4.8
|
Ownership
of Merger Sub; No Prior Activities
|
|
4.9
|
Takeover
Statutes
|
ARTICLE
V
MISCELLANEOUS
PROVISIONS
|
5.1
|
Notices
|
|
5.2
|
Nonsurvival
of Company Representations and Warranties
|
|
5.3
|
Entire
Agreement
|
|
5.4
|
Further
Assurances; Post-Closing Cooperation
|
|
5.5
|
Waiver
|
|
5.6
|
Third-Party
Beneficiaries
|
|
5.7
|
No
Assignment; Binding Effect
|
|
5.8
|
Headings
|
|
5.9
|
Invalid
Provisions
|
|
5.10
|
Governing
Law, Submission to Jurisdiction
|
|
5.11
|
WAIVER
OF TRIAL BY JURY
|
|
5.12
|
Negotiation
|
|
5.13
|
Counterparts
|
|
5.14
|
Specific
Performance
|
|
5.15
|
Construction.
|
|
5.16
|
Indemnification
of Directors and Officers.
|
Exhibit
A Form
of
Certificate of Merger
Exhibit
B Allocation
of Merger Consideration
Exhibit
C Form
of
Shareholder Certificate
MERGER
AGREEMENT
This
AGREEMENT AND PLAN OF MERGER (this “Agreement”),
dated
as of January 12, 2006, by and among EMCORE Corporation, a New Jersey
corporation (“Parent”),
EMCORE OPTOELECTRONICS Acquisition Corporation, a Delaware corporation
and a
wholly-owned subsidiary of Parent (“Merger
Sub”),
and
K2 Optronics, Inc., a Delaware corporation (the “Company").
Capitalized terms used and not otherwise defined herein have the meanings
set
forth in Article I.
RECITALS
A. The
board
of directors of each of Parent, Merger Sub and the Company believe it is
in the
best interests of Parent, Merger Sub and the Company, as applicable, and
their
respective shareholders or stockholders, as applicable, that Parent acquire
the
Company through the merger of Merger Sub with and into the Company (the
“Merger”)
and,
in furtherance thereof, have approved the Merger, this Agreement and the
transactions contemplated hereby.
B. The
Company’s stockholders have approved and adopted this agreement and the
transactions contemplated hereby.
C. The
Company, Parent and Merger Sub desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW,
THEREFORE, in consideration of the covenants, promises, representations
and
warranties set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby, the parties agree as follows:
ARTICLE
I
DEFINITIONS
1.1 Definitions.
As
used
in this Agreement, the following defined terms shall have the respective
meanings specified therefor below:
“Actions
or Proceedings” means any action, suit, lawsuit, demand, inquiry, complaint,
petition, investigation, proceeding, arbitration, litigation or Governmental
or
Regulatory Authority investigation, audit or other proceeding, whether
civil or
criminal, administrative or otherwise in law or in equity, or before any
arbitrator or Governmental Regulatory Authority.
“Affiliate”
means, as applied to any Person, (a) any other Person directly or indirectly
controlling, controlled by or under common control with, that Person, (b)
any
other Person that owns or controls ten percent (10%) or more of the total
aggregate voting power of all classes of equity securities (including any
equity
securities issuable upon the exercise of any Option or convertible security)
of
that Person, (c) as to a corporation, each director thereof and corporation’s
chief executive officer, president, and chief financial officer, and as
to a
partnership, each general partner thereof, and as to a limited liability
company, each managing member or similarly authorized person thereof (including
officers comparable to a corporation’s chief executive officer, president, and
chief financial officer), and as to any other entity, each Person exercising
similar authority to those of a director, chief executive officer, president,
or
chief financial officer of a corporation or (d) as to any of the foregoing
Persons in (a) through (c), any Person related by blood, marriage or adoption
and sharing the same household and any Person owned by such Persons. For
the
purposes of this definition, “control” (including with correlative meanings, the
terms “controlling,” “controlled by,” and “under common control with”) as
applied to any Person, means the possession, directly or indirectly, of
the
power to direct or cause the direction of the management and policies of
that
Person, whether through ownership of voting securities or by contract or
otherwise.
“Aggregate
Share Number” means the number of shares of Parent Common Stock obtained by
dividing (i) $5,425,000.00 less any Transaction Expenses that Parent and
the
Company mutually agree will be borne by the Company after the Closing by
(ii)
the Closing Price.
“Agreement”
means this Agreement and Plan of Merger, including (unless the context
otherwise
requires) the exhibits, the Company Disclosure Schedule, Parent Disclosure
Schedule and the certificates and instruments delivered in connection herewith,
or incorporated by reference, as the same may be amended or supplemented
from
time to time in accordance with the terms hereof.
“Ancillary
Agreements” has the meaning ascribed to it in Section 3.2.
“Approval”
means any approval, authorization, consent, permit, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from or made with, or any notice, statement or other communication required
to
be filed with or delivered to, any Governmental or Regulatory Authority
or any
other Person.
“Assets
and Properties” of any Person means all assets and properties of every kind,
nature, character and description (whether real, personal or mixed, whether
tangible or intangible, whether absolute, accrued, contingent, fixed or
otherwise and wherever situated), including the goodwill related thereto,
operated, owned, licensed or leased by such Person, including cash, cash
equivalents, Investment Assets, accounts and notes receivable, chattel
paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
“Associate”
means, with respect to any Person, any corporation or other business
organization of which such Person is an officer or partner or is the beneficial
owner, directly or indirectly, of ten percent (10%) or more of any class
of
equity securities, any trust or estate in which such Person has a substantial
beneficial interest or as to which such Person serves as a trustee or in
a
similar capacity and any relative or spouse of such Person, or any relative
of
such spouse, who has the same home as such Person.
“Audited
Financial Statement Date” means December 31, 2003.
“Audited
Financial Statements” means the audited consolidated balance sheets of the
Company as of each of the fiscal years ended 2002, 2003, respectively,
and the
related audited consolidated statements of operations, stockholders’ equity and
cash flows for each of the fiscal years then ended, in each case, together
with
the notes thereto and the unqualified report of the Company’s independent
accountants with respect thereto.
“Books
and Records” means all files, documents, instruments, papers, books and records
relating to the business or condition (financial or otherwise), results
of
operations, Assets and Properties of the Company, including financial
statements, internal reports, Tax Returns and related work papers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds,
title
policies, minute books, stock certificates and books, stock transfer ledgers,
Contracts, Licenses, customer lists, computer files and programs (including
data
processing files and records), retrieval programs, operating data and plans
and
environmental studies and plans, excluding, however, in all cases any materials
that contain any confidential information of any third party (other than
the
Company or Parent) that is restricted by Contract or applicable Law from
being
disclosed to Parent and/or Persons.
“Business
Combination” means, with respect to any Person, (a) any merger, consolidation,
share exchange, reorganization or other business combination transaction
to
which such Person is a party, (b) any sale, or other disposition of any
capital
stock or other equity interests of such Person (except for issuances of
common
stock upon conversion of preferred stock outstanding on the date hereof
or the
exercise of Options or warrants outstanding on the date hereof or issued
in
accordance with this Agreement), (c) any tender offer (including a self
tender),
exchange offer, recapitalization, restructuring, liquidation, dissolution
or
similar or extraordinary transaction, (d) any sale, dividend or other
disposition of all or a substantial portion of the Assets and Properties
of such
Person (including by way of exclusive License or joint venture formation)
other
than sales of inventory and license in the ordinary course of such Person’s
business and consistent with past practice, or (e) the entering into of
any
Contract or understanding, the granting of any rights or Options, or the
acquiescence of such Person, to do any of the foregoing.
“Business
Day” means a day other than Saturday, Sunday or any day on which banks located
in the State of New York or California are authorized or obligated to
close.
"California
Law" means the California General Corporations Law and all amendments and
additions thereto.
“Certificate
of Merger” has the meaning ascribed to it in Section 2.5.
“Closing”
means the closing of the transactions contemplated by Section 2.5.
“Closing
Date” has the meaning ascribed to it in Section 2.5.
“Closing
Price” means the volume weighted average closing sales price of Parent Common
Stock as traded on the Nasdaq National Market and reported by Bloomberg
L.P. for
the twenty (20) trading days commencing on the twenty-second (22nd) market
trading day prior to the Closing Date and ending on the third (3rd) market
trading day prior to the Closing Date.
“Company”
has the meaning ascribed to it in the forepart of this Agreement.
“Company
Capital Stock” means the Company Common Stock and the Company Preferred
Stock.
“Company
Certificate” means a certificate which immediately prior to the Effective Time
represents outstanding shares of Company Capital Stock.
“Company
Common Stock” means shares of common stock of the Company, with $.001 par value,
issued and outstanding as of the Effective Time.
“Company
Convertible Securities” means the Company Options, the Company Warrants, and any
other Options, warrants, convertible notes, stock purchase rights or other
rights to acquire or receive shares of Company Capital Stock.
“Company
Disclosure Schedule” means the schedules delivered to Parent by or on behalf of
the Company, containing all lists, descriptions, exceptions and other
information and materials as are required to be included therein in connection
with the representations and warranties made by the Company in Article
III or
otherwise.
“Company
Financials” means the Audited Financial Statements and the Interim Financial
Statements.
“Company
Intellectual Property” shall mean any Intellectual Property that (a) is owned
by; (b) is licensed to; (c) was developed or created by or for the Company
or
any of its Subsidiaries or (d) is used in or necessary for the conduct
of the
business of the Company as presently or heretofore conducted or as proposed
to
be conducted in the Company’s Operating Plan, including (x) any Intellectual
Property created by any of the Company’s founders, employees, independent
contractors or consultants for or on behalf of the Company or any of its
Subsidiaries and (y) currently used or reasonably usable in the Company’s
business (except to the extent owned by a third party under “work for hire” or
similar doctrines) created by any of the Company’s founders prior to the
creation of the Company or any of its Subsidiaries.
“Company
Options” means all issued and outstanding Options to purchase or otherwise
acquire Company Capital Stock, excluding the Company Warrants.
“Company
Preferred Stock” has the meaning ascribed to it in Section 3.3.
“Company
Registered Intellectual Property” means all Registered Intellectual Property
owned by, filed in the name of, assigned to or applied for by, the
Company.
“Company
Stock Plans” means the K2 Optronics, Inc. 2000 Equity Incentive
Plan.
“Company
Stock Purchase Right” means a right to purchase Company Restricted Stock granted
pursuant to a Company Stock Plan or otherwise.
“Company
Stockholders” means all Persons who are the record holders of shares of Company
Capital Stock and Company Convertible Securities immediately prior to the
Effective Time.
“Company
Subsidiary” means a Subsidiary of the Company.
“Company
Warrants” mean any and all warrants to purchase Company Capital Stock, including
the warrants listed in Section 3.3
of the
Company Disclosure Schedule.
“Contract”
means any contract, agreement, business arrangement, commitment, instrument,
document, certificate or other binding arrangement or understanding, whether
written or oral.
“Copyrights”
has the meaning set forth in Section 3.18(c).
“Delaware
Law” or “DGCL” means the Delaware General Corporation Law and all amendments and
additions thereto.
“Effective
Time” has the meaning ascribed to it in Section 2.5.
“Employee
Benefit Plans” has the meaning ascribed to it in Section 3.15(a).
“Environment”
means air, surface water, ground water, or land, including land surface
or
subsurface, and any receptors such as persons, wildlife, fish, biota or
other
natural resources.
“Environmental
Clean-up Site” means any location which is listed or proposed for listing on the
National Priorities List, the Comprehensive Environmental Response, Compensation
and Liability Information System, or on any similar state list of sites
relating
to investigation or cleanup, or which is the subject of any pending or
threatened action, suit, proceeding, or investigation related to or arising
from
any location at which there has been a Release or threatened or suspected
Release of a Hazardous Material.
“Environmental
Law” shall mean any Regulation, Order, settlement agreement or Governmental
or
Regulatory Authority requirement, which relates to or otherwise imposes
liability or standards of conduct concerning the Environment, health, safety
or
Hazardous Materials, including without limitation, discharges, emissions,
releases or threatened releases of noises, odors or any Hazardous Materials,
whether as matter or energy, into ambient air, water, or land, or otherwise
relating to the manufacture, processing, generation, distribution, use,
treatment, storage, disposal, cleanup, transport or handling of Hazardous
Materials, including but not limited to CERCLA, the Superfund Amendments
and
Reauthorization Act of 1986, the Hazardous Material Transportation Act,
the
Resource Conservation and Recovery Act of 1976, the Toxic Substances Control
Act, the Federal Water Pollution Control Act, the Clean Water Act, the
Clean Air
Act, the Occupational Safety and Health Act, any so called “Superlien” Law, all
as now or hereafter amended or supplemented, and the Regulations promulgated
thereunder, and any other similar Federal, state or local
Regulations.
“Environmental
Permit” shall mean Permits, certificates, Approvals, Licenses, decrees,
consents, Orders and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Company’s
business.
“ERISA”
means the Employee Retirement Income Security Act of 1974, as amended,
and the
rules and regulations promulgated thereunder.
“Exchange
Agent” has the meaning ascribed to it in Section 2.12.
“GAAP”
means generally accepted accounting principles in the United States, as
in
effect from time to time.
“Governmental
or Regulatory Authority” means any court, tribunal, arbitrator, authority,
agency, bureau, board, commission, department, official or other instrumentality
of the United States, any foreign country or any domestic or foreign state,
county, city or other political subdivision, and shall include any stock
exchange, quotation service and the National Association of Securities
Dealers.
“Hazardous
Material” shall be construed broadly to include any toxic or hazardous
substance, material, or waste, any petroleum or petroleum products, radioactive
materials, asbestos in any form that has become friable, urea formaldehyde
foam
insulation, dielectric fluid containing levels of polychlorinated biphenyls,
and
radon gas, any chemicals, materials or substances defined or included in
the
definition of “hazardous substances,” “restricted hazardous wastes,” “toxic
substances,” “toxic pollutants,” or words of similar import, under any
applicable Environmental Law, any other chemical, material or substance,
exposure to which is prohibited, limited, or regulated by any Governmental
or
Regulatory Authority and any other contaminant, pollutant or constituent
thereof, whether liquid, solid, semi solid, sludge and/or gaseous, including
without limitation, chemicals, compounds, by products, pesticides, asbestos
containing materials, petroleum or petroleum products or by products, and
polychlorinated biphenyls, the presence of which requires investigation
or
remediation under any Environmental Law or which are or could reasonably
be
expected to become regulated, listed or controlled by, under or pursuant
to any
Environmental Law, or which has been or shall be determined or interpreted
at
any time by any Governmental or Regulatory Authority to be a hazardous
or toxic
substance regulated under any other Law or Order.
“Indebtedness”
with respect to any Person means (a) any obligation of such Person for
borrowed
money, but in any event shall include: (i) any obligation or Liabilities
incurred for all or any part of the purchase price of property or other
assets
or for the cost of property or other assets constructed or of improvements
thereto, other than accounts payable included in current Liabilities and
incurred in respect of property purchased in the ordinary course of business,
(whether or not such Person has assumed or become liable for the payment
of such
obligation) (whether accrued, absolute, contingent, unliquidated or otherwise,
known or unknown, whether due or to become due); (ii) the face amount of
all
letters of credit issued for the account of such Person and all drafts
drawn
thereunder; (iii) obligations incurred for all or any part of the purchase
price
of property or other assets or for the cost of property or other assets
constructed or of improvements thereto, other than accounts payable included
in
current Liabilities and incurred in respect of property purchased in the
ordinary course of business (whether or not such Person has assumed or
become
liable for the payment of such obligation) secured by Liens; (iv) capitalized
lease obligations; and (v) all Guarantees of such Person; (b) accounts
payable
of such Person that have not been paid within sixty (60) days of their
due date
and are not being contested; (c) annual employee bonus obligations that
are not
accrued on the Financial Statements; and (d) retroactive insurance premium
obligations.
“Indemnified
Persons” has the meaning ascribed to it in Section 5.16.
“Intellectual
Property” means all foreign and domestic, registered and unregistered trademarks
and trademark rights, trade names and trade name rights, service marks,
service
names and service name rights, patents and patent rights, utility models
and
utility model rights, registered and unregistered copyrights, mask works,
brand
names, trade dress, product designs, product packaging, business and product
names, logos, slogans, rights of publicity, trade secrets, inventions (whether
or not patentable or reduced to practice), invention disclosures, improvements,
processes, formulae, industrial models, designs, specifications, technology,
methodologies, computer software (including all source code and object
code),
firmware, development tools, flow charts, annotations, all Web addresses,
sites
and domain names, all data bases and data collections and all rights therein,
any other confidential and proprietary right or information, whether or
not
subject to statutory registration, and all related technical information,
manufacturing, engineering and technical drawings, know-how, the goodwill
associated with any of the foregoing, and all pending applications for
and
registrations of patents, utility models, trademarks, service marks and
copyrights, and the right to sue for past infringement, if any, in connection
with any of the foregoing, and all documents, disks, records, lab notebooks,
files and other media on which any of the foregoing is stored.
“Interim
Financial Statements” means the unaudited consolidated balance sheet of the
Company as of September 30, 2005, and the related unaudited consolidated
statement of operations and consolidated statement of cash flows for the
three-month period ended on such date.
“Internal
Revenue Code” means the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder.
“Investment”
shall mean (a) any direct or indirect ownership, purchase or other acquisition
by a Person of any notes, obligations, instruments, capital stock, Options,
securities or ownership interests (including partnership interests and
joint
venture interests) of any other Person; and (b) any capital contribution
or
similar obligation by a Person to any other Person.
“Investment
Assets” means all debentures, notes and other evidences of Indebtedness, stocks,
securities (including rights to purchase and securities convertible into
or
exchangeable for other securities), interests in joint ventures and general
and
limited partnerships, mortgage loans and other Investment or portfolio
assets
owned of record or beneficially by the Company.
“IRS”
means the United States Internal Revenue Service or any successor
entity.
“Law”
or
“Laws” means any law, code, statute, Order, decree, consent decree, judgment,
rule, regulation, rule of common law, ordinance or other pronouncement
having
the effect of law whether in the United States, any foreign country, or
any
domestic or foreign state, county, city or other political subdivision
or of any
Governmental or Regulatory Authority.
“Lease
Documents” has the meaning ascribed to it in Section 3.16(d).
“Leased
Real Property(ies)” has the meaning ascribed to it in Section 3.16(a).
“Liabilities”
means all Indebtedness, obligations and other liabilities of a Person,
whether
absolute, accrued, contingent (or based upon any contingency), known or
unknown,
fixed or otherwise, or whether due or to become due.
“License”
means any Contract that grants a Person the right to use or otherwise enjoy
the
benefits of any Intellectual Property (including any covenants not to sue
with
respect to any Intellectual Property).
“Liens”
means any (a) mortgage, pledge, assessment, security interest, lease, lien,
easement, License, covenant, condition, restriction, adverse claim, levy,
charge, option, equity, adverse claim or restriction or other encumbrance
of any
kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities Law;
(b)
filing or Contract to file a financing statement as debtor under the Uniform
Commercial Code or any similar statute; and (c) subordination arrangement
in
favor of another Person.
“Loss(es)”
means (i) any and all damages, fines, fees, Taxes, penalties, amounts paid
in
respect of indemnification obligations, deficiencies, losses, (ii) special
damages, incidental damages, consequential damages or punitive damages,
whether
or not foreseeable, (except special damages, incidental damages, consequential
damages or punitive damages of Parent, the Company or the Surviving Corporation)
and (iii) expenses, including interest, reasonable expenses of investigation,
court costs, reasonable fees and expenses of attorneys, accountants and
other
experts or other reasonable expenses of litigation or other proceedings
or of
any claim, default or assessment (such fees and expenses to include all
reasonable fees and expenses, including reasonable fees and expenses of
attorneys, incurred in connection with asserting or disputing any rights
under
this Agreement against any party hereto), net of any insurance proceeds
actually
received (offset by the present value any adverse effect on the premiums
paid
for such insurance) or proceeds received by virtue of third-party
indemnification.
“Management
and Employee Carveout” means the amount of money to be paid to Company
management and employees pursuant to the K2 Optronics, Inc. 2005 Management
Employee Retention Plan and the K2 Optronics, Inc. 2005 Non-Management
Employee
Retention Plan.
“Material
Adverse Effect,” with respect to any Person, shall mean any event, change,
occurrence, effect, fact or circumstance having a material adverse effect
on (i)
the ability of such Person to perform its obligations under this Agreement,
or
to consummate the transactions contemplated hereby on a timely basis, or
(ii)
the business, properties, assets, Liabilities, operations, results of operations
or condition (financial or otherwise) of such Person and its Subsidiaries,
taken
as a whole.
“Merger”
has the meaning ascribed to it in Recital A to this Agreement.
“Merger
Consideration” means the Aggregate Share Number.
“Merger
Sub” has the meaning ascribed to it in the forepart of this
Agreement.
“NASD”
means the National Association of Securities Dealers, Inc.
“Operating
Plan” has the meaning ascribed to it in Section 3.31(b).
“Option”
with respect to any Person means any security, right, subscription, warrant,
option, “phantom” stock right, stock appreciation right, profit participation or
arrangement or other Contract that gives the right to (a) purchase or otherwise
receive or be issued any shares of capital stock or other equity interests
of
such Person or any security of any kind convertible into or exchangeable
or
exercisable for any shares of capital stock or other equity interests of
such
Person or (b) receive any benefits or rights similar to any rights enjoyed
by or
accruing to the holder of shares of capital stock or other equity interests
of
such Person, including any rights to participate in the equity, income
or
election of directors or officers of such Person.
“Order”
means any writ, judgment, decree, injunction, rule, ruling, consent or
similar
order of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
“Parent”
has the meaning ascribed to in the forepart of this Agreement.
“Parent
Capital Stock” has the meaning ascribed to it in Section 4.3.
“Parent
Certificate” has the meaning ascribed to it in Section 2.12(b).
“Parent
Common Stock” means shares of common stock, no par value, of
Parent.
“Parent
Disclosure Schedule” has the meaning ascribed to it in Article IV.
“Parent
Financials” has the meaning ascribed to it in Section 4.5(b).
“PBGC”
means the Pension Benefit Guaranty Corporation established under
ERISA.
“Permit”
means any License, permit, franchise, authorization, registrations,
certificates, Orders, qualifications or Approvals required by any Governmental
or Regulatory Authority or other Person.
“Person”
means any natural person, corporation, general partnership, limited partnership,
limited liability company or partnership, proprietorship, other business
organization, trust, union, association or Governmental or Regulatory
Authority.
“Pre-Closing
Period” has the meaning ascribed to it in Section 3.13(b).
“PTO”
means the United States Patent and Trademark Office.
“Registered
Intellectual Property” shall mean all United States, international and foreign:
(a) patents and patent applications (including provisional applications);
(b)
registered trademarks and servicemarks, applications to register trademarks
and
servicemarks, intent-to-use applications, other registrations or applications
to
trademarks or servicemarks, or trademarks or servicemarks in which common
law
rights are owned or otherwise controlled; (c) registered copyrights and
applications for copyright registration; (d) any mask work registrations
and
applications to register mask works; and (e) any other Intellectual Property
that is the subject of an application, certificate, filing, registration
or
other document issued by, filed with, or recorded by, any state, government
or
other public legal authority.
“Release”
means any spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing of a Hazardous Material
into
the Environment.
“Securities
Act” means the Securities Act of 1933, as amended.
“Site”
means any of the real properties currently or previously owned, leased,
occupied, used or operated by the Company or Subsidiary of the Company,
any
predecessors of the Company or Subsidiary of the Company, or any entities
previously owned by the Company or Subsidiary of the Company, including
all
soil, subsoil, surface waters and groundwater.
“Subsidiary”
means any Person in which the Company or Parent, as the context requires,
directly or indirectly through subsidiaries or otherwise, beneficially
owns at
least fifty percent (50%) of either the equity interest in, or the voting
control of, such Person, whether or not existing on the date
hereof.
“Surviving
Corporation” has the meaning ascribed to it in Section 2.1.
“Takeover
Statute” means a “fair price,” “moratorium,” “control share acquisition” or
other similar antitakeover statute or regulation enacted under state or
federal
laws in the United States.
“Tax”
or
“Taxes” means all taxes, assessments, charges, duties, fees, levies or other
governmental charges, including, without limitation, all federal, state,
local,
foreign and other income, franchise, profits, gross receipts, capital gains,
capital stock, transfer, property, sales, use, value-added, occupation,
property, excise, severance, windfall profits, stamp, License, payroll,
social
security, withholding and other taxes, assessments, charges, duties, fees,
levies or other governmental charges of any kind whatsoever (whether payable
directly or by withholding and whether or not requiring the filing of a
Tax
Return), all estimated taxes, deficiency assessments, additions to tax,
penalties and interest and shall include any liability for such amounts
as a
result either of being a member of a combined, consolidated, unitary or
affiliated group or of a contractual obligation to indemnify any person
or other
entity.
“Tax
Returns” means any tax return, report, form, information return, election,
schedule, certificate, statement or other document (including elections,
declarations, disclosures and estimates) and any amendments thereto, for
Taxes
or filed or required to be filed with a Taxing Authority.
“Taxing
Authority” means any governmental agency, board, bureau, body, department or
authority of any United States federal, state or local jurisdiction or
any
foreign jurisdiction, having or purporting to exercise jurisdiction with
respect
to any Tax.
“Transaction
Expenses” means the Management and Employee Carveout and all fees and expenses
payable by or on behalf of the Company or any of its Subsidiaries to RidgeCrest
Capital Partners and Latham & Watkins LLP in connection with this Agreement,
the transactions contemplated hereby and any similar potential or proposed
transactions.
“Warranty
Obligations” has the meaning ascribed to it in Section 3.29(a).
“WARN
Act” has the meaning ascribed to it in Section 3.22(f).
ARTICLE
II
THE
MERGER
2.1 The
Merger
At
the
Effective Time and upon the terms and subject to the conditions of this
Agreement and the applicable provisions of Delaware Law and California
Law,
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 it shall exist after the Effective
Time,
is sometimes referred to herein as the “Surviving
Corporation.”
2.2 The
Closing
The
closing of the Merger (the “Closing”)
will
take place at 10:00 a.m. local time, concurrently with the execution and
delivery of this Agreement, at the offices of Skadden, Arps, Slate, Meagher
& Flom LLP, 525 University Avenue, Suite 1100, Palo Alto, California 94301,
unless another place or time is agreed to by Parent and the Company. The
date
upon which the Closing actually occurs is referred to herein as the
“Closing
Date.”
2.3 Company
Closing Deliverables
At
the
Closing, the Company is delivering, or causing to be delivered, to Parent
each
of the following:
(a) acceptances
to the
offers
of employment extended by the Surviving Corporation to each of the employees
of
the Company listed on Schedule 2.3(a) executed by each such employee along
with
signed copies of the non-disclosure and invention assignment agreements
that
accompany such offers;
(b) counterparts
to the Registration Rights Agreement, by and among Parent, the Company
and each
of the Holders (as defined therein), executed by the Company and each of
the
Holders;
(c) release
agreements executed by RidgeCrest Capital Partners and Latham & Watkins LLP
waiving all liability of Parent and the Surviving Corporation for any fees
and
expenses payable to the Company or any of its Subsidiaries in connection
with
this Agreement, the transactions contemplated hereby and any similar potential
or proposed transactions;
(d) a
release
agreement executed by each employee and manager of the Company entitled
to
payment pursuant to the Management and Employee Carveout waiving all liability
of Parent and the Surviving Corporation for any payments thereunder;
(e) a
termination agreement executed by each of the Company Stockholders entitled
to
receive a portion of the Merger Consideration terminating each of the Series
C
Stock Purchase Agreement, the Investor Rights Agreement, the Voting Agreement,
the Co-Sale Agreement, the Change in Control Agreement, and the Management
Rights Letter;
(f) release
agreements executed by each holder of Company Options or Company Warrants
waiving all liability of Parent and the Surviving Corporation in connection
with
the termination of the Company Option and Company Warrant
agreements;
(g) certificates
representing as many shares of the outstanding Company Capital Stock as
the
Company can reasonably obtain before the Closing;
(h) Section
228 written consent of Company Stockholders approving the Merger;
(i) certificates
issued by the appropriate Governmental or Regulatory Authorities evidencing
the
good standing, with respect to both the conduct of business and the payment
of
all Taxes, of the Company, as of a date not more than fifteen (15) days
prior to
the Closing Date, under the laws of the State of Delaware and as a foreign
company authorized to do business under the laws of the jurisdictions listed
in
the schedules hereto;
(j) a
Company
officer’s certificate;
(k) a
Company
secretary’s certificate;
(l) letters
of resignation from the Company’s directors;
(m) an
investment representation letter from each of the Company Stockholders
entitled
to receive a portion of the Merger Consideration; and
(n) a
statement of fees, costs and expenses (including, without limitation, fees
and
expenses of legal counsel and financial advisors and accountants, if any)
incurred by the Company in connection with the transactions contemplated
hereby;
in
each
case, in form and substance reasonably satisfactory to Parent.
2.4 Parent
Closing Deliverables
At
the
Closing, Parent is delivering, or causing to be delivered, to the Company
each
of the following:
(a) counterparts
to the
employment agreements between the Surviving Corporation and each of the
employees of the Company listed on Schedule 2.3(a) executed by the Surviving
Corporation;
(b) counterparts
to the Registration Rights Agreement, by and among Parent, the Company
and each
of the Holders (as defined therein), executed by Parent;
(c) an
officer’s certificate from each of Parent and Merger Sub;
(d) a
secretary’s certificate from each of Parent and Merger Sub; and
(e) Section
228 written consent of Parent (as sole stockholder of Merger Sub) approving
the
Merger;
2.5 Effective
Time.
On
the
Closing Date, the parties hereto shall cause the Merger to be consummated
by
filing a Certificate of Merger, in substantially the form attached hereto
as
Exhibit
A
(the
“Certificate
of Merger”),
with
the Secretary of State of the State of Delaware, in accordance with the
relevant
provisions of Delaware Law (the time of acceptance by the Secretary of
State of
the State of Delaware of such filing or such later time as may be agreed
to by
the parties and set forth in the Certificate of Merger being referred to
herein
as the “Effective
Time”)
and
shall make all other filings, recordings or publications required by California
Law in connection with the Merger.
2.6 Effect
of the Merger on Constituent Corporations.
At
the
Effective Time, the effect of the Merger shall be as provided in the applicable
provisions of Delaware Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Merger Sub and the Company shall vest
in
the Surviving Corporation, and all debts, Liabilities, obligations and
duties of
Merger Sub and the Company shall become the debts, Liabilities, obligations
and
duties of the Surviving Corporation.
2.7 Certificate
of Incorporation and Bylaws of Surviving Corporation.
(a) Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time, the Certificate of Incorporation of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Certificate of Incorporation
of the
Surviving Corporation from and after the Effective Time until thereafter
amended
in accordance with Delaware Law and as provided in such Certificate of
Incorporation; provided,
however,
that at
the Effective Time, Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended and restated in its entirety to
read as
follows: “The name of the Corporation is K2 Optronics, Inc.”
(b) Unless
otherwise determined by Parent prior to the Effective Time, the Bylaws
of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the
Bylaws
of the Surviving Corporation until thereafter amended in accordance with
Delaware Law and as provided in the Certificate of Incorporation of the
Surviving Corporation and such Bylaws.
2.8 Directors
and Officers of Surviving Corporation
Unless
otherwise determined by Parent prior to the Effective Time, the directors
of
Merger Sub immediately prior to the Effective Time shall be the directors
of the
Surviving Corporation, each to hold office in accordance with the Certificate
of
Incorporation and Bylaws of the Surviving Corporation. Unless otherwise
determined by Parent prior to the Effective Time, the officers of Merger
Sub
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation, each to hold office in accordance with the Bylaws of the Surviving
Corporation. In furtherance thereof, the Company shall secure, effective
at the
Effective Time of the Merger, such resignations of its incumbent directors
as is
necessary to enable the designees of Parent to be elected or appointed
to the
Board of Directors of the Company (the "Company
Board"),
and
the Company shall take all actions available to the Company to cause such
designees of Parent to be so elected or appointed at the Effective
Time.
2.9 Merger
Consideration; Effect of Merger
On
the
terms and subject to the conditions of this Agreement, at the Effective
Time, by
virtue of the Merger and without any action on the part of Parent, Merger
Sub,
the Company or the holder of any shares of the Company Capital Stock or
Company
Convertible Securities, the following shall occur:
(a) Each
issued and outstanding share of common stock of Merger Sub shall be converted
into one validly issued, fully paid and non assessable share of common
stock of
the Surviving Corporation.
(b) Each
share of Company Capital Stock issued and outstanding immediately prior
to the
Effective Time (other than any Dissenting Shares (as provided in Section
2.11))
shall
automatically be canceled, extinguished and cease to exist, and no cash,
Parent
Common Stock or other consideration shall be delivered or deliverable in
exchange therefor except for the right to receive, upon surrender of the
Company
Certificate therefor, a portion of the Merger Consideration, which shall
be
calculated and paid in accordance with the terms of the Certificate of
Incorporation of the Company as in effect immediately prior to the Effective
Time. An allocation of the Merger Consideration among holders of Company
Capital
Stock in accordance with this Section 2.9(b) is set forth on Exhibit
B
hereto.
(c) Parent
shall fund the Merger Consideration entirely in Parent Common Stock. When
so
issued, each share of Parent Common Stock shall be validly issued, fully
paid
and non-assessable.
(d) Parent
will reserve sufficient shares of Parent Common Stock for issuance pursuant
to
this Section 2.9.
2.10 Fractional
Shares
No
fraction of a share of Parent Common Stock shall be issued in the Merger,
but in
lieu thereof, each holder of shares of Company Capital Stock who would
otherwise
be entitled to a fraction of a share of Parent Common Stock (after aggregating
all fractional shares of Parent Common Stock to be received by such holder)
shall be entitled to receive from Parent an amount of cash (rounded to
the
nearest whole cent) equal to the product of (a) such fraction, multiplied
by (b)
the Closing Price.
2.11 Dissenting
Shares
Notwithstanding
anything in this Agreement to the contrary, shares of Company Capital Stock
issued and outstanding immediately prior to the Effective Time, which are
held
of record by stockholders who shall not have voted in favor of the Merger
or
consented thereto in writing, and who shall have demanded properly in writing
appraisal of such shares in accordance with Section 1300 of California
Law or
Section 262 of Delaware Law (“Dissenting
Shares”)
shall
not be converted into the right to receive the Merger Consideration as
set forth
in Section 2.9,
but the
holders thereof instead shall be entitled to, and the Dissenting Shares
shall
only represent the right to receive, payment of the fair value of such
shares in
accordance with the provisions of Section 1300 of California Law or Section
262
of the DGCL; provided,
however,
that
(i) if such a holder fails to demand properly in writing from the Surviving
Corporation the appraisal of his or its shares in accordance with Section
1300
of California Law or Section 262(d) of the DGCL or, after making such demand,
subsequently delivers an effective written withdrawal of such demand, or
fails
to establish his or its entitlement to appraisal rights as provided in
Section
1300 of California Law or Section 262 of the DGCL, if so required, or (ii)
if a
court shall determine that such holder is not entitled to receive payment
for
his or its shares or such holder shall otherwise lose his or its appraisal
rights, then, in any such case, each share of Company Capital Stock, together
with the associated rights, held of record by such holder or holders shall
automatically be cancelled, extinguished and cease to exist and no cash
or other
consideration shall be delivered or deliverable therefor. The Company shall
give
Parent and Merger Sub prompt notice of any demands received by the Company
for
appraisal of such shares, and Parent and Merger Sub shall have the right
to
participate in all negotiations and proceedings with respect to such demands
except as required by applicable law. The Company shall not, except with
the
prior written consent of Parent, voluntarily make any payment with respect
to
any demands for fair value for Dissenting Shares or offer to settle, settle
or
negotiate in respect of any such demands.
2.12 Surrender
of Company Certificates, Exchange Agent
The
transfer agent of Parent (or another entity reasonably acceptable to Parent
and
the Company) shall serve as exchange agent (the “Exchange
Agent”)
in the
Merger.
(a) Parent
to Provide Parent Common Stock or Cash Equivalent.
At the
Closing, Parent shall (A) make available to the Exchange Agent, for exchange
for
the Company Capital Stock outstanding immediately preceding the Effective
Time
in accordance with this Article II the Aggregate Share Number of shares
of
Parent Common Stock (and cash in lieu of fractional shares pursuant to
Section
2.7).
(b) Exchange
Procedures.
As
soon
as reasonably practicable following the Effective Time, the Surviving
Corporation shall cause to be mailed to each Company Stockholder whose
shares of
Company Capital Stock were converted into the right to receive the Merger
Consideration (i) a letter of transmittal in customary form (which shall
specify
that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of the Company Certificates
to the
Exchange Agent at the Closing, and which shall be in such form and shall
have
such other provisions as Parent may reasonably specify), and (ii) instructions
for use in effecting the surrender of the Company Certificates in exchange
for
certificates representing shares of Parent Common Stock and cash in lieu
of
fractional shares, and (iii) a shareholder certificate (a “Shareholder
Certificate”)
in
form specified by Parent and approved prior to the Closing by the Company,
as
set forth in Exhibit
C
attached
hereto, for execution by the Company Stockholder. Upon surrender of a Company
Certificate to the Exchange Agent or to such other agent or agents as may
be
appointed by Parent, together with such letter of transmittal and Shareholder
Certificate, duly completed and validly executed in accordance with the
instructions thereto, the Company Stockholder shall be entitled to receive,
and
the Exchange Agent shall promptly deliver in exchange therefor, a certificate
for Parent Common Stock (“Parent
Certificate”)
representing the number of whole shares of Parent Common Stock to which
such
holder is entitled pursuant to Section 2.9
(and
cash in lieu of fractional shares of Parent Common Stock pursuant to Section
2.10),
and
the Company Certificate so surrendered shall forthwith be canceled. Until
so
surrendered, each outstanding Company Certificate that, prior to the Effective
Time, represented shares of Company Capital Stock will be deemed from and
after
the Effective Time, for all corporate purposes, other than the payment
of
dividends, to evidence the right to receive the number of full shares of
Parent
Common Stock into which such shares of Company Capital Stock shall have
been so
converted and the right to receive any dividends or distributions payable
pursuant to Section 2.12(c)
and any
cash in lieu of fractional shares.
(c) Distributions
With Respect to Unexchanged Shares.
No
dividends or other distributions declared or made after the Effective Time
with
respect to Parent Common Stock with a record date after the Effective Time
will
be paid to the holder of any unsurrendered Company Certificate with respect
to
the shares of Parent Common Stock represented thereby until the holder
of record
of such Company Certificate shall surrender such Company Certificate. Subject
to
applicable Law, following surrender of any such Company Certificate, there
shall
be paid to the record holder of Parent Certificates representing whole
shares of
Parent Common Stock issued in exchange therefor, plus the amount of dividends
or
other distributions (without interest) with a record date after the Effective
Time theretofore paid with respect to such whole shares of Parent Common
Stock.
(d) Transfers
of Ownership.
If any
Parent Certificate is to be issued pursuant to the Merger in a name other
than
that in which the Company Certificate surrendered in exchange therefor
is
registered, it will be a condition of the issuance thereof that the Company
Certificate so surrendered will be properly endorsed, together with the
signature thereon guaranteed and otherwise in proper form for transfer
and that
the person requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the
issuance
of a Parent Certificate for shares of Parent Common Stock in any name other
than
that of the registered holder of the Company Certificate surrendered, or
established to the satisfaction of Parent or any agent designated by it
that
such tax has been paid or is not payable.
(e) No
Further Ownership Rights in Company Capital Stock.
All
shares of Parent Common Stock issued upon the surrender of shares of Company
Capital Stock in accordance with the terms hereof (including any cash in
lieu of
fractional shares) shall be deemed to have been issued in full satisfaction
of
all rights pertaining to such shares of Company Capital Stock, and there
shall
be no further registration of transfers on the records of the Company of
shares
of Company Capital Stock. If, after the Effective Time, Company Certificates
are
presented to Parent or the Surviving Corporation for any reason, they shall
be
canceled and exchanged as provided in this Article II.
(f) Lost,
Stolen or Destroyed Company Certificates.
In the
event any Company Certificate evidencing shares of Company Capital Stock
shall
have been lost, stolen or destroyed, the Exchange Agent shall issue a
certificate representing such shares of Parent Common Stock and cash in
lieu of
fractional shares in exchange for such lost, stolen or destroyed Company
Certificate, upon the delivery to the Exchange Agent of an affidavit of
that
fact by the holder thereof, together with the signature thereon guaranteed;
provided,
however,
that
Parent or the Exchange Agent may, in its discretion and as a condition
precedent
to the issuance thereof, require the owner of such lost, stolen or destroyed
Company Certificate to provide an indemnity or deliver a bond in such sum
as it
may reasonably direct as indemnity against any claim that may be made against
Parent or the Exchange Agent with respect to the Company Certificate alleged
to
have been lost, stolen or destroyed.
(g) No
Liability.
Notwithstanding anything to the contrary in this Section 2.12,
neither
Parent nor any party hereto shall be liable to a holder of shares of Parent
Common Stock, or Company Capital Stock for any amount properly paid to
a public
official pursuant to any applicable abandoned property, escheat or similar
Law.
2.13 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 or to vest the Surviving Corporation
with full right, title and possession to all assets, property, rights,
privileges, powers and franchises of the Company, Parent or Merger Sub,
or to
perfect the Surviving Corporation’s ownership of any and all Company
Intellectual Property, or to complete and prosecute all domestic and foreign
patent and trademark filings related to Company Intellectual Property,
the
officers and directors of Parent and the Surviving Corporation are fully
authorized to take, and will take, all such lawful and necessary
action.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company hereby represents and warrants to each of Parent and Merger Sub,
subject
to such exceptions as are disclosed in the Company Disclosure Schedule
delivered
herewith and dated as of the date hereof, which exceptions shall qualify
the
corresponding section of the representations and warranties set forth in
this
Agreement and any other section to the extent that it is readily apparent
that
such disclosure is relevant, that the following are true and correct as
at the
Closing, except where the following is expressly stated to be true as of
a
specified date prior to the Closing, in which case it shall, as of the
Closing,
continue to be true as of such specified date:
3.1 Organization
and Qualification
.
The
Company and each of its Subsidiaries is a corporation or partnership duly
organized, validly existing and in good standing under the Laws of the
state of
its incorporation or formation, as the case may be, and has full corporate
or
partnership power and authority, as the case may be, to conduct its business
as
now conducted and as currently proposed to be conducted and to own, use,
license
and lease its Assets and Properties. The Company and each of its Subsidiaries
is
duly qualified, licensed or admitted to do business and is in good standing
as a
foreign corporation in each jurisdiction in which the ownership, use, licensing
or leasing of its Assets and Properties, or the conduct or nature of its
business, makes such qualification, licensing or admission necessary, except
for
such failures to be so duly qualified, licensed or admitted and in good
standing
that do not and could not reasonably be expected to have a Material Adverse
Effect on the Company. Section 3.1(a) of the Company Disclosure Schedule
sets
forth each jurisdiction where the Company or any of its Subsidiaries (as
applicable) is so qualified, licensed or admitted to do business and separately
lists each other jurisdiction in which the Company and each of its Subsidiaries
(as applicable) owns, uses or leases from third parties substantial tangible
Assets and Properties, or has employees. Section 3.1(b) of the Company
Disclosure Schedule contains complete and accurate copies of the Company’s
Amended and Restated Certificate of Incorporation and Bylaws and the
organizational documents of each of its Subsidiaries, in each case as amended
and in full force and effect as of the date of this Agreement. The
organizational documents of the Subsidiaries do not contain any provision
limiting or otherwise restricting the ability of the Company to control
its
Subsidiaries.
3.2 Authorization
and Validity of this Agreement
.
The
Company has full corporate power and authority to execute and deliver this
Agreement and the other agreements which are attached (or forms of which
are
attached) as exhibits hereto (the “Ancillary
Agreements”)
to
which the Company is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby.
This Agreement was duly approved by the Company Stockholders in accordance
with
Delaware Law and the Company’s charter on January 11, 2006. The Company’s board
of directors approved the Merger and this Agreement on January 8, 2006,
and
declared its advisability. The execution and delivery by the Company of
this
Agreement and the Ancillary Agreements to which the Company is or will
become a
party, the consummation by the Company of the transactions contemplated
hereby
and thereby, and the performance by the Company of its obligations hereunder
and
thereunder, have been duly and validly authorized by all necessary action
by the
board of directors of the Company. No other action on the part of the board
of
directors of the Company, or any corporate action on the part of the Company
(other than the filing of the Certificate of Merger as required by Delaware
Law), is required to authorize the execution, delivery and performance
of this
Agreement and the Ancillary Agreements to which the Company is or will
become a
party and the consummation by the Company of the transactions contemplated
hereby and thereby. This Agreement and the Ancillary Agreements to which
the
Company is or will become a party have been or will be, in the case of
the
Ancillary Documents, as applicable, duly and validly executed and delivered
by
the Company and, assuming the due authorization, execution and delivery
hereof
(and, in the case of the Ancillary Agreements to which Parent is a party,
thereof) by Parent, assuming enforceability against Parent and Merger Sub,
each
constitutes or will constitute, as applicable, a legal, valid and binding
obligation of the Company enforceable against the Company in accordance
with its
respective terms, except as enforceability may be limited by bankruptcy
laws,
other similar laws affecting creditors’ rights and general principles of equity
effecting the availability of specific performance and other equitable
remedies.
3.3 Capital
Stock.
(a) The
authorized capital stock of the Company consists of (i) 102,057,758 shares
of
authorized Company Common Stock, of which 3,477,853 shares are issued and
outstanding, and (ii) 82,057,758 shares of authorized Company Preferred
Stock,
$0.001 par value per share (the "Company
Preferred Stock"):
(A)
7,432,241 of which are designated Series A Preferred Stock, of which 6,945,158
shares are issued and outstanding, (B) 3,625,519 of which are designated
Series
B Preferred Stock, of which 3,044,131 shares are issued and outstanding,
and (C)
70,999,998 of which are designated Series C Preferred Stock, of which 24,481,800
shares are issued and outstanding. Such outstanding Company Capital Stock
is
held of record by the persons, and in the amounts set forth in Section
3.3(a) of
the Company Disclosure Schedule, and is subject only to those restrictions,
repurchase rights, limitations, and preferences on distributions, mergers,
acquisitions, liquidations and other similar corporate events described
in the
Company’s Amended and Restated Certificate of Incorporation. Section 3.3(a) of
the Company Disclosure Schedule sets forth the name and address for each
holder
of Company Capital Stock as contained in the Company’s stock records on the date
hereof. All of the issued and outstanding shares of Company Capital Stock
are
duly authorized, validly issued, fully paid and non-assessable, have been
issued
in compliance with all applicable Laws, and are not subject to preemptive
rights
created by statute, the Amended and Restated Certificate of Incorporation
or
Bylaws of the Company or any Contract to which the Company is a party or
by
which it is bound.
(b) With
respect to any Company Capital Stock that has been issued subject to a
repurchase option or buy-back Contract on the part of the Company, Section
3.3(b) of the Company Disclosure Schedule sets forth the name and address
of
each holder thereof, the number and type of securities covered thereby,
and the
vesting schedule thereof (including a description of the circumstances
under
which such vesting schedule can or will be accelerated). Except for the
Company
Restricted Stock set forth in Section 3.3(b) of the Company Disclosure
Schedule,
there are no outstanding Restricted Stock Purchase Agreements or shares
of
Company Restricted Stock or Contracts obligating the Company to issue any
Company Restricted Stock.
(c) Except
for the Company Options and Company Warrants set forth in Sections 3.3(c)
of the
Company Disclosure Schedule, there are no outstanding Company Convertible
Securities, Company Options, Company Warrants, Company Stock Purchase Rights,
Restricted Stock Purchase Agreements or shares of Company Restricted Stock
or
Contracts, or arrangements or understandings to which the Company is a
party
(written or oral) or by which it is bound obligating the Company to issue
any
Company Options or Company Restricted Stock. With respect to each Company
Option, Company Warrant and each Contract, arrangement or understanding
to which
the Company is a party (written or oral) to issue any Options or any other
equity securities with respect to the Company, Section 3.3(c) of the Company
Disclosure Schedule sets forth the name and address of each holder thereof,
the
number and type of securities issuable thereunder, and, if applicable,
the
exercise price therefor, the exercise period and vesting schedule thereof
(including a description of the circumstances under which such vesting
schedule
can or will be accelerated) and a delineation between vested and unvested
securities as of the Effective Time. All of the Company Options, Company
Restricted Stock and Company Warrants were issued in compliance with all
applicable federal, state and foreign Laws.
(d) Except
as
set forth in Section 3.3(d) of the Company Disclosure Schedule, there are
no
preemptive rights or Contracts, arrangements or understandings to issue
preemptive rights with respect to the issuance or sale of Company Capital
Stock
created by statute, the Amended and Restated Certificate of Incorporation
or
bylaws of the Company, or any Contract or other arrangement to which the
Company
is a party (written or oral) or to which it is bound and there are no Contracts,
arrangements or understandings to which the Company is a party (written
or oral)
pursuant to which the Company has the right to elect to satisfy any Liability
by
issuing Company Capital Stock or Company Options.
(e) Each
Company Stock Plan and each stock option agreement pursuant to which any
Person
holds options to purchase Company Common Stock has been amended and/or
waived in
writing as necessary, prior to the date of this Agreement, to permit the
cancellation of any and all options thereunder, whether vested or unvested,
in
accordance with Section 2.9
of this
Agreement, without any further consent or approval of such Person. Any
such
amendment and/or waiver, or any consent thereto, obtained by the Company,
has
been obtained without undue influence and is enforceable against the parties
thereto. True and complete copies of all Contracts and instruments relating
to
or issued under the Company Stock Plans have been provided to Parent and
such
Contracts and instruments have not been amended, modified or supplemented
other
than to cancel or permit, pursuant to Section 2.9
of this
Agreement, the cancellation of, all options outstanding, and there are
no
Contracts to amend, modify or supplement such Contracts or instruments
from the
form provided to Parent. The Company is not a party or subject to any Contract
or understanding, and, to the Company’s knowledge, there is no Contract,
arrangement or understanding between or among any Persons which affects,
restricts or relates to voting, giving of written consents, dividend rights
or
transferability of shares with respect to the Company Capital Stock, including
any voting trust agreement or proxy. Except as set forth in Section 3.3(e)
of
the Company Disclosure Schedule, no debt securities of the Company are
issued
and outstanding.
3.4 No
Subsidiaries
Except
as
set forth in Section 3.4 of the Company Disclosure Schedule, the Company
has no
Subsidiaries and does not otherwise own or hold, directly or indirectly,
any
equity, membership, partnership, joint venture or other ownership interest
or
Investment in, or control directly or indirectly, any Person.
3.5 Directors
and Officers
The
names
of each director and officer of the Company and its Subsidiaries (as applicable)
on the date hereof, and his or her position with the Company or any Subsidiary
are listed in Section 3.5 of the Company Disclosure Schedule.
3.6 No
Conflicts
The
execution and delivery by the Company of this Agreement and the Ancillary
Agreements to which the Company is a party does not, the performance by
the
Company of its obligations under this Agreement and the Ancillary Agreements
to
which the Company is a party and the consummation of the transactions
contemplated hereby and thereby do not, and will not:
(a) conflict
with or result in a violation or breach of, or default under (with or without
notice or lapse of time or both), any of the terms, conditions or provisions
of
the Amended and Restated Certificate of Incorporation or Bylaws of the
Company
or the organizational documents of any of its Subsidiaries;
(b) subject
to obtaining the consents, Approvals and actions, making the filings and
giving
the notices disclosed in Section 3.6(b) of the Company Disclosure Schedule,
if
any, conflict with or result in a violation or breach of any Law or Order
applicable to the Company, its Subsidiaries or any of their respective
Assets
and Properties; or
(c) except
as
disclosed in Section 3.6(c) of the Company Disclosure Schedule, (i) conflict
with or result in a violation or breach of, (ii) constitute a default (or
an
event that, with or without notice or lapse of time or both, would constitute
a
default) under, (iii) require the Company or any of its Subsidiaries to
obtain
any consent, Approval or action of, make any filing with or give any notice
to,
any Person as a result of, or under (except for (A) the filing of the
Certificate of Merger; and (B) such consents Approvals, Orders, authorizations,
registrations, declarations and filings as may be required under applicable
state or federal securities Laws), (iv) result in or give to any Person
any
right of termination, cancellation, acceleration or modification in or
with
respect to, (v) result in or give to any Person any additional rights or
entitlement to increased, additional, accelerated or guaranteed payments
or
performance under, (vi) result in the creation or imposition of (or the
obligation to create or impose) any Lien upon the Company or any of its
Assets
and Properties under, or (vii) result in the loss of any material benefit
under,
any of the terms, conditions or provisions of any Contract or License to
which
the Company or any of its Subsidiaries is a party or by which any of the
Assets
and Properties of the Company or its Subsidiaries are bound.
3.7 Approvals.
(a) Section
3.7(a) of the Company Disclosure Schedule sets forth a list of all Approvals
of
Governmental or Regulatory Authorities relating to the business conducted
by the
Company and its Subsidiaries that are required to be given to or obtained
by the
Company or any of its Subsidiaries from any and all Governmental or Regulatory
Authorities in connection with the consummation of the transactions contemplated
by this Agreement and the Ancillary Agreements (other than the filing of
the
Certificate of Merger, together with the required officers’ certificates, and
such consents, Approvals, Orders, authorizations, registrations, declarations
and filings as may be required under state or federal securities
Laws).
(b) Section
3.7(b) of the Company Disclosure Schedule sets forth a list of all material
Approvals that are required to be given to or obtained by the Company or
any of
its Subsidiaries from any and all third parties other than Governmental
or
Regulatory Authorities in connection with the consummation of the transactions
contemplated by this Agreement and the Ancillary Agreements.
(c) Except
as
set forth in Section 3.7(c)(i) of the Company Disclosure Schedule, the
Company
and each of its Subsidiaries has obtained all material Approvals from
Governmental or Regulatory Authorities necessary to conduct the business
conducted by the Company or any of its Subsidiaries and there has been
no
written notice received by the Company or any of its Subsidiaries of any
material violation or material non-compliance with any such Approvals.
All
material Approvals from Governmental or Regulatory Authorities necessary
to
conduct the business conducted by the Company or any of its Subsidiaries
as it
is currently being conducted are set forth in Section 3.7(c)(ii) of the
Company
Disclosure Schedule.
3.8 Compliance
Except
as
set forth in Section 3.8 of the Company Disclosure Schedule, the Company,
each
of its Subsidiaries and their Affiliates, officers, directors, agents and
employees have been and are in compliance with all applicable Laws and
Orders of
any Governmental or Regulatory Authorities applicable to the business conducted
by the Company or any of its Subsidiaries, and neither the Company, its
Subsidiaries nor any of its Affiliates is aware of any claim of violation,
or of
any actual violation, of any such Laws and Orders by the Company or its
Subsidiaries.
3.9 Takeover
Statutes
No
Takeover Statute applicable to the Company or its Subsidiaries is applicable
to
the Merger or the transactions contemplated hereby.
3.10 Company
Financial Statements.
(a)
Section
3.10(a)(1) of the Company Disclosure Schedule sets forth a complete and
accurate
copy of the Company Financials. The Company Financials have been prepared
in
accordance with GAAP applied on a basis consistent throughout the periods
indicated and consistent with each other except (i) as may be indicated
in the
notes thereto, and (ii) in the case of the Interim Financial Statements,
for the
absence of required footnotes and subject to normal year-end adjustments,
which
adjustments will not be material in amount or significance. The Company
Financials present fairly the financial condition and operating results
of the
Company as of the dates and during the periods indicated therein, except,
in the
case of the Interim Financial Statements, for the absence of required footnotes
and subject to normal year-end adjustments, which adjustments will not
be
material in amount or significance. Since December 31, 2004, there has
been no
change in any accounting policies, principles, methods or practices, including
any change, except as disclosed in the Company Financials, with respect
to
reserves (whether for bad debts, contingent Liabilities or otherwise) of
the
Company. The Company does not utilize any percentage of completion or similar
method of accounting for revenue, income or cost recognition purposes.
The
Company has not since its inception written off any research and development
costs, incurred any reorganization, restructuring or similar costs or changed
the book value of any assets, Liabilities or goodwill of any Subsidiary
or
business acquired by the Company. Except as set forth in Schedule 3.10(a)(3)
of
the Company Disclosure Schedule hereto, the Company does not have any obligation
to make any additional Investments in any Person. All properties used in
the
Company’s business operations during the period covered by the foregoing
financial statements are reflected in the Company Financials in accordance
with
and to the extent required by GAAP.
(b) Except
as
reflected or reserved against in the Company Financials or as disclosed
in
Section 3.10(b) of the Company Disclosure Schedule, the Company does not
have
any Indebtedness or Liabilities of, relating to or affecting the Company,
any of
its Subsidiaries, or any of their respective Assets and Properties, other
than
Liabilities incurred in the ordinary course of business consistent with
past
practice since the Audited Financial Statement Date and in accordance with
the
provisions of this Agreement which do not, and could not reasonably be
expected
to, exceed $25,000, and are not for tort or for breach of Contract, Law
or
Order.
(c) There
is
no Person that has guaranteed, or provided any financial accommodation
of, any
Indebtedness, obligation or liability of the Company or for the benefit
of the
Company for the periods covered by the Company Financials other than as
set
forth in the Company Financials. The management of the Company has disclosed
to
the Company’s independent auditors all facts and circumstances known to them
that are material and bear upon the accuracy of the audited financial
statements. The Company’s accounting systems and controls are sufficient to
detect material fraud and inaccuracies in the financial reporting processes
and
reports.
3.11 Books
and Records; Organizational Documents
The
minute books and stock record books and other similar records of the Company
and
each of its Subsidiaries (a) have been provided or made available to Parent
or
its counsel prior to the execution of this Agreement, (b) are complete
and
correct in all respects and (c) have been maintained in accordance with
business
practices appropriate for companies similarly situated to the Company.
Such
minute books contain a true and complete record of all actions taken at
all
meetings and by all written consents in lieu of meetings of the directors,
stockholders and committees of the board of directors of the Company and
its
Subsidiaries from the applicable date of incorporation through the date
hereof.
Neither the Company nor any Subsidiary has any of its records, systems,
controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including
any
electronic, mechanical or photographic process, whether computerized or
not)
which (including all means of access thereto and therefrom) are not under
the
exclusive ownership and direct control of the Company or a wholly-owned
Subsidiary.
3.12 Absence
of Changes
Since
the
Audited Financial Statement Date, except as set forth in Section 3.12 of
the
Company Disclosure Schedule, there has not been any Material Adverse Effect
upon
the Company or any occurrence or event which, individually or in the aggregate,
could be reasonably expected to have any Material Adverse Effect upon the
Company. In addition, without limiting the generality of the foregoing,
except
as expressly contemplated by this Agreement and except as disclosed in
Section
3.12 of the Company Disclosure Schedule, since the Audited Financial Statement
Date:
(a) neither
the Company nor any of its Subsidiaries has, other than with Parent or
its
Affiliates, entered into any Contract, commitment or transaction or incurred
any
Liabilities outside of the ordinary course of business consistent with
past
practice;
(b) neither
the Company nor any of its Subsidiaries has entered into any Contract,
other
than with Parent or its Affiliates, in connection with any transaction
involving
a Business Combination;
(c) neither
the Company nor any of its Subsidiaries has altered or entered into any
Contract
or other commitment to alter, its interest in any corporation, association,
joint venture, partnership or business entity in which the Company or its
Subsidiaries directly or indirectly holds any interest on the date
hereof;
(d) neither
the Company nor any of its Subsidiaries has entered into any strategic
alliance,
joint development or joint marketing Contract;
(e) there
has
not been any material amendment or other material modification (or Contract
to
do so) or violation of the terms of, any of the Contracts set forth or
described
in Sections 3.19(a)(1), 3.19(a)(2) or 3.19(a)(3) of the Company Disclosure
Schedule;
(f) neither
the Company nor any of its Subsidiaries has entered into any material
transaction with any officer, director, stockholder, Affiliate or Associate
of
the Company or, as applicable, its
Subsidiaries, other than pursuant to any Contract in effect on the Audited
Financial Statement Date and disclosed to Parent pursuant to (and so identified
in) Section 3.12(f) or Section 3.21(a) of the Company Disclosure Schedule
or
other than pursuant to any contract of employment listed pursuant to Section
3.19(a)(1) of the Company Disclosure Schedule;
(g) neither
the Company nor any of its Subsidiaries has entered into or amended any
Contract
pursuant to which any other Person is granted manufacturing, marketing,
distribution, licensing or similar rights of any type or scope with respect
to
any products of the Company or its Subsidiaries or Company Intellectual
Property, other than as contemplated by the Contracts and Licenses disclosed
in
Section 3.18(e) of the Company Disclosure Schedule;
(h) no
Action
or Proceeding has been commenced or, to the knowledge of the Company, threatened
by or against the Company or any of its Subsidiaries;
(i) neither
the Company nor any of its Subsidiaries has (i) declared or set aside or
paid
any dividends on or made any other distributions (whether in cash, stock
or
property) in respect of any Company Capital Stock, capital stock (however
denominated) of any Company Subsidiary or Options, (ii) effected or approved
any
split, combination or reclassification of any Company Capital Stock, capital
stock (however denominated) of any Company Subsidiary or Options, (iii)
issued
or authorized the issuance of any other securities in respect of, in lieu
of or
in substitution for shares of Company Capital Stock, capital stock (however
denominated) of any Company Subsidiary or Options, or (iv) repurchased,
redeemed
or otherwise acquired, directly or indirectly, any shares of Company Capital
Stock, capital stock (however denominated) of any Company Subsidiary or
Options,
except repurchases of Company Capital Stock pursuant to Contracts of the
Company
or any Company Subsidiary with employees, officers, directors and consultants
relating to repurchases at cost upon termination of service with the Company
or
the applicable Company Subsidiary;
(j) (i)
neither the Company nor any of its Subsidiaries has issued, granted, delivered
or sold, or authorized or proposed to issue, grant, deliver or sell, or
purchased or proposed to purchase, any shares of Company Capital Stock,
capital
stock (however denominated) of any Company Subsidiaries or Options, (ii)
neither
the Company nor any of its Subsidiaries has modified or amended the rights
of
any holder of any outstanding shares of Company Capital Stock, capital
stock
(however denominated) of any Company Subsidiaries or Options (including
to
reduce or alter the consideration to be paid to the Company upon the exercise
of
any outstanding Company Options, Company Warrants, Company Stock Purchase
Rights
or other Options), (iii) there have not been any Contracts, arrangements,
plans
or understandings with respect to any such modification or amendment; and
(iv)
the Company has not granted any Company Options with an exercise price
of less
than the fair market value of the Company Capital Stock for which such
Company
Option was exercisable on the date the Company Option was granted (as determined
in good faith by the board of directors of the Company);
(k) there
has
not been any amendment to the Company’s Amended and Restated Certificate of
Incorporation or Bylaws or the organizational documents of any of the Company’s
Subsidiaries;
(l) there
has
not been any transfer (by way of a License or otherwise) to any Person
of rights
to any Company Intellectual Property;
(m) neither
the Company nor any of its Subsidiaries has made or agreed to make any
disposition or sale of, waiver of rights to, License or lease of, or incurrence
of any Lien on, any Assets and Properties of the Company or any Company
Subsidiary, other than dispositions of inventory, or nonexclusive licenses
of
products to Persons to whom the Company or, as applicable, a Subsidiary
of the
Company had granted licenses of its products as of the Audited Financial
Statement Date, in the ordinary course of business of the Company and its
Subsidiaries consistent with past practice;
(n) neither
the Company nor any of its Subsidiaries has made or agreed to make any
purchase
of any Assets and Properties of any Person other than (i) acquisitions
of
inventory, or Licenses of products, in the ordinary course of business
of the
Company and its Subsidiaries consistent with past practice and (ii) other
acquisitions in an amount not exceeding twenty-five thousand dollars ($25,000)
in the case of any individual item or fifty thousand dollars ($50,000)
in the
aggregate;
(o) neither
the Company nor any of its Subsidiaries has made or agreed to make any
capital
expenditures or commitments for additions to property, plant or equipment
of the
Company or, as applicable, its Subsidiaries, constituting capital assets
individually or in the aggregate in an amount exceeding twenty-five thousand
dollars ($25,000);
(p) neither
the Company nor any of its Subsidiaries has made or agreed to make any
write-off
or write-down, any determination to write off or write-down, or revalue,
any of
the Assets and Properties of the Company or, as applicable, its Subsidiaries,
or
change any reserves or Liabilities associated therewith, individually or
in the
aggregate in an amount exceeding twenty-five thousand dollars
($25,000);
(q) neither
the Company nor any of its Subsidiaries has made or agreed to make payment,
discharge or satisfaction, in an amount in excess of twenty-five thousand
dollars ($25,000), in any one case, or fifty thousand dollars ($50,000)
in the
aggregate, of any claim, Liability or obligation (whether absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business of Liabilities
reflected or reserved against in the Company Financials and other than
Liabilities incurred in the ordinary course of business since the Audited
Financial Statement Date;
(r) neither
the Company nor any of its Subsidiaries has failed to pay or otherwise
satisfy
any Liabilities presently due and payable of the Company or any Subsidiary
of
the Company (other than immaterial delays in the ordinary course of the
Company’s business consistent with past practices), except such Liabilities
which are being contested in good faith by appropriate means or procedures
and
which, individually or in the aggregate, are immaterial in amount;
(s) neither
the Company nor any of its Subsidiaries has incurred any Indebtedness or
guaranteed any Indebtedness in an aggregate amount exceeding twenty-five
thousand dollars ($25,000) or issued or sold any debt securities of the
Company
or its Subsidiaries or guaranteed any debt securities of others;
(t) neither
the Company nor any of its Subsidiaries has granted any severance or termination
pay to any director, officer employee or consultant, except payments made
pursuant to written Contracts outstanding on the date hereof, copies of
which
have been delivered to Parent and the terms of which are disclosed in Section
3.12(t) of the Company Disclosure Schedule;
(u) neither
the Company nor any of its Subsidiaries has granted or approved any increase
of
greater than five percent (5%) in salary, rate of commissions, rate of
consulting fees or any other compensation of any current or former officer,
director, stockholder, employee, independent contractor or consultant of
the
Company or, as applicable, its Subsidiaries;
(v) neither
the Company nor any of its Subsidiaries has paid or approved the payment
of any
consideration of any nature whatsoever (other than salary, commissions
or
consulting fees and customary benefits paid to any current or former officer,
director, stockholder, employee or consultant of the Company or, as applicable,
its Subsidiaries) to any current or former officer, director, stockholder,
employee, independent contractor or consultant of the Company or, as applicable,
its Subsidiaries;
(w) neither
the Company nor any of its Subsidiaries has established or modified any
(i)
targets, goals, pools or similar provisions under any Employee Benefit
Plan,
employment Contract or other employee compensation arrangement or independent
contractor Contract or other compensation arrangement or (ii) salary ranges,
increased guidelines or similar provisions in respect of any Employee Benefit
Plan, employment Contract or other employee compensation arrangement or
independent contractor Contract or other compensation arrangement;
(x) neither
the Company nor any of its Subsidiaries has adopted, entered into, amended,
modified or terminated (partially or completely) any Employee Benefit
Plan;
(y) neither
the Company nor any of its Subsidiaries has paid or agreed or made any
commitment to pay any discretionary or stay bonus other than fiscal year
end
bonuses approved by Parent;
(z) neither
the Company nor any of its Subsidiaries has made or changed any material
election in respect of Taxes, adopted or changed any accounting method
in
respect of Taxes, entered into any tax allocation agreement, tax sharing
agreement, tax indemnity agreement or closing agreement, settlement or
compromise of any claim or assessment in respect of Taxes, or consented
to any
extension or waiver of the limitation period applicable to any claim or
assessment in respect of Taxes with any Taxing Authority or otherwise;
(aa) neither
the Company nor any of its Subsidiaries has made any change in accounting
policies, principles, methods, practices or procedures (including for bad
debts,
contingent Liabilities or otherwise, respecting capitalization or expense
of
research and development expenditures, depreciation or amortization rates
or
timing of recognition of income and expense);
(bb) other
than in the ordinary course of business, neither the Company nor any of
its
Subsidiaries has made any representation or proposal to, or engaged in
substantive discussions with, any of the holders (or their representatives)
of
any Indebtedness, or to or with any party which has issued a letter of
credit
which benefits the Company or, as applicable, any of its
Subsidiaries;
(cc) neither
the Company nor any of its Subsidiaries has commenced or terminated, or
made any
change in, any line of business;
(dd) neither
the Company nor any of its Subsidiaries has failed to renew any insurance
policy; no insurance policy of the Company or any of its Subsidiaries has
been
canceled or materially amended; and the Company and each of its Subsidiaries
has
given all notices and presented all claims (if any) under all such policies
in a
timely fashion;
(ee) there
has
been no material amendment or non-renewal of any of the Company’s Approvals, and
the Company and its Subsidiaries have used commercially reasonable efforts
to
maintain such Approvals and have observed in all material respects all
Laws and
Orders applicable to the conduct of the Company’s or any of its Subsidiaries’
business or the Company’s or its Subsidiaries’ Assets and
Properties;
(ff) the
Company and its Subsidiaries have taken all action required to procure,
maintain, renew, extend or enforce any Company or Subsidiary Intellectual
Property, including, without limitation, submission of required documents
or
fees during the prosecution of patent, trademark or other applications
for
Registered Intellectual Property rights;
(gg) there
has
been no physical damage, destruction or other casualty Loss (whether or
not
covered by insurance) affecting any of the real or personal property or
equipment of the Company or any of its Subsidiaries individually or in
the
aggregate in an amount exceeding twenty-five thousand dollars
($25,000);
(hh) neither
the Company nor any of its Subsidiaries has entered into or approved any
Contract, arrangement or understanding or acquiesced in respect of any
arrangement or understanding, to do, engage in or cause or having the effect
of
any of the foregoing, including with respect to any Business Combination
not
otherwise restricted by the foregoing paragraphs;
(ii) neither
the Company nor its Subsidiaries has cancelled any debts or waived any
claims or
rights of substantial value;
(jj) neither
the Company nor its Subsidiaries sold, transferred, or otherwise disposed
of any
of its Assets and Properties (real, personal or mixed, tangible or intangible),
except in the ordinary course of business consistent with past
practice.
3.13 Taxes.
(a) Tax
Returns.
(i)
The
Company and its Subsidiaries have timely filed or caused to be timely filed
with
the appropriate taxing authorities all Tax Returns that are required to
be filed
by, or with respect to, the Company and its Subsidiaries on or prior to
the
Closing Date. The Tax Returns have accurately reflected and will accurately
reflect all liability for Taxes of the Company and its Subsidiaries for
the
periods covered thereby.
(b) Payment
of Taxes.
(i)
All
Taxes and Tax Liabilities due by or with respect to the income, assets
or
operations of the Company and its Subsidiaries for all taxable years or
other
taxable periods that end on or before the Closing Date and, with respect
to any
taxable year or other taxable period beginning on or before and ending
after the
Closing Date, for the portion of such taxable year or period ending on
and
including the Closing Date and any transactions contemplated by this Agreement
in connection with the Closing (“Pre-Closing
Period”)
have
been timely paid on or prior to the Closing Date or accrued and adequately
disclosed and fully provided for on the Books and Records of the Company
and its
Subsidiaries as of the Closing Date in accordance with GAAP.
(c) Other
Tax Matters.
(i) (A)
Neither the Company nor any of its Subsidiaries has been the subject of
an audit
or other examination of Taxes by any Taxing Authority; (B) no such audit
is
contemplated or pending; and (C) neither the Company nor any of its Subsidiaries
has received any notices, orally or in writing, from any Taxing Authority
relating to any issue which could affect the Tax liability of the Company
or any
of its Subsidiaries.
(ii) Neither
the Company nor any of its Subsidiaries, as of the Closing Date, (A) has
entered
into a Contract or waiver or been requested to enter into a Contract or
waiver
extending any statute of limitations relating to the payment or collection
of
Taxes of the Company or any of its Subsidiaries, (B) is the beneficiary
of any
extension of time to file any Tax Return or pay any Tax, (C) is presently
contesting the Tax liability of the Company or any of its Subsidiaries
before
any court, tribunal or agency, (D) has granted a power-of-attorney relating
to
Tax matters to any person or (E) has applied for and/or received a ruling
or
determination from a Taxing Authority regarding a past or prospective
transaction of the Company or any of its Subsidiaries.
(iii) Neither
the Company nor any of its Subsidiaries has been included in any “consolidated,”
“unitary” or “combined” Tax Return provided for under the Law of the United
States, any foreign jurisdiction or any state or locality other than such
Tax
Returns that include only the Company and any of its Subsidiaries and no
other
entities.
(iv) All
Taxes
which the Company and each of its Subsidiaries is (or was) required by
Law to
withhold or collect in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party have
been
duly withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable and have been correctly and timely
included in the appropriate Tax Return.
(v) No
claim
has ever been made, orally or in writing, by any Taxing Authority in a
jurisdiction where the Company or any of its Subsidiaries does not file
Tax
Returns that the Company or any of its Subsidiaries is or may be subject
to
taxation by that jurisdiction.
(vi) There
are
no tax sharing, allocation, indemnification or similar Contracts in effect
as
between the Company or any of its Subsidiaries or any predecessor or affiliate
thereof and any other party (including the Company stockholders and any
predecessors or affiliates thereof) under which Merger Sub, the Company
or any
of its Subsidiaries could be liable for any Taxes or other claims of any
party
after the Closing Date.
(vii) Neither
the Company nor any of its Subsidiaries has applied for, been granted,
or agreed
to any accounting method change for which it will be required to take into
account any adjustment under Section 481 of the Internal Revenue Code or
any
similar provision of the Internal Revenue Code or the corresponding tax
Laws of
any nation, state or locality.
(viii) No
election under Section 341(f) of the Internal Revenue Code has been made
or
shall be made prior to the Closing Date to treat the Company or any of
its
Subsidiaries as a consenting corporation, as defined in Section 341 of
the
Internal Revenue Code.
(ix) Neither
the Company nor any of its Subsidiaries is a party to any Contract that
would
require the Company or any of its Subsidiaries or any affiliate thereof
to make
any payment that would constitute an “excess parachute payment” for purposes of
Sections 280G and 4999 of the Internal Revenue Code.
(x) There
are
no security interests on any of the assets of the Company or any Subsidiary
that
arose, or as a result of the transactions contemplated by this Agreement
could
arise, in connection with any failure (or alleged failure) to pay any
Taxes.
(xi) (A)
There
are no deferred intercompany transactions between the Company and any of
its
Subsidiaries or between its Subsidiaries and there is no excess loss account
(within the meaning of Treasury Regulations Section 1.1502-19 with respect
to
the stock of the Company or any of its Subsidiaries) which will or may
result in
the recognition of income upon the consummation of the transaction contemplated
by this Agreement, and (B) there are no other transactions or facts existing
with respect to the Company and/or its Subsidiaries which by reason of
the
consummation of the transaction contemplated by this Agreement or otherwise
will
result in the Company and/or its Subsidiaries recognizing income or reducing
any
deduction in periods following the Closing Date.
(xii) No
Indebtedness of the Company or any of its Subsidiaries consists of “corporate
acquisition indebtedness” within the meaning of Section 279 of the Internal
Revenue Code. The transactions contemplated in connection with this Agreement
will not result in any cancellation of indebtedness realized by the Company,
any
of its Subsidiaries, Merger Sub or Parent.
(xiii) Neither
the Company nor any of its Subsidiaries has been a “United States real property
holding corporation” within the meaning of Section 897(c)(2) of the Internal
Revenue Code at any time during the five-year period ending on the date
hereof.
(xiv) There
is
currently no limitation on the utilization of the net operating losses,
built-in
losses, capital losses, Tax credits or other tax attributes of the Company
or
its Subsidiaries under Sections 382, 383 or 384 of the Internal Revenue
Code.
3.14 Legal
Proceedings
Except
as
set forth in Section 3.14 of the Company Disclosure Schedule:
(a) there
have not been and there are no Actions or Proceedings pending or, to the
knowledge of the Company or its Subsidiaries, threatened against, relating
to or
affecting the Company or its Subsidiaries or any of their respective Assets
and
Properties;
(b) there
are
no facts or circumstances known to the Company or its Subsidiaries that
could
reasonably be expected to give rise to any Action or Proceeding against,
relating to or affecting the Company or its Subsidiaries or any of their
respective Assets and Properties;
(c) neither
the Company nor any of its Subsidiaries has received notice, and do not
otherwise have knowledge of any Orders outstanding against the Company
or, as
applicable, its Subsidiaries; and
(d) neither
the Company nor any of its Subsidiaries has received notice of, and neither
the
Company nor any of its Subsidiaries have knowledge of, any defects, or
dangerous
or substandard conditions in the products or materials sold, distributed,
or
currently proposed to be sold or distributed by the Company or its Subsidiaries
that could cause bodily injury, sickness, disease, death or damage to property,
or result in loss of use of property, or any claim, suit, demand for arbitration
or notice seeking damages for bodily injury, sickness, disease, death,
or damage
to property, or loss of use of property. Prior to the execution of this
Agreement, the Company has delivered to Parent all responses of counsel
for the
Company and its Subsidiaries to auditor’s requests for information for the
preceding three years (together with any updates provided by such counsel)
regarding Actions or Proceedings pending or threatened against, relating
to or
affecting the Company or any of its Subsidiaries. Section 3.14 of the Company
Disclosure Schedule sets forth all Actions or Proceedings relating to or
affecting, or, to the knowledge of the Company and its Subsidiaries, threatened
against, the Company, any Company Subsidiaries or any of their respective
Assets
and Properties during the three-year period prior to the date
hereof.
3.15 Employee
Benefit Plans.
(a) List
of Plans.
Set
forth in Section 3.15(a) of the Company Disclosure Schedule is an accurate
and
complete list of all domestic and foreign (i) “employee benefit plans,” within
the meaning of Section 3(3) of ERISA; (ii) bonus, stock option, stock purchase,
restricted stock, incentive, fringe benefit, “voluntary employees’ beneficiary
associations” (“VEBAs”)
under
Section 501(c)(9) of the Internal Revenue Code, profit-sharing, pension
or
retirement, deferred compensation, medical, life insurance, disability,
accident, salary continuation, severance, accrued leave, vacation, sick
pay,
sick leave, supplemental retirement and unemployment benefit plans, programs,
arrangements, commitments and/or practices (whether or not insured); and
(iii)
employment, consulting, termination, and severance Contracts; in each case
for
active, retired or former employees or directors, whether or not any such
plans,
programs, arrangements, commitments, Contracts and/or practices (referred
to in
(i), (ii) or (iii) above) are in writing or are otherwise exempt from the
provisions of ERISA; that have been established, maintained or contributed
to
(or with respect to which an obligation to contribute has been undertaken)
or
with respect to which any potential liability is borne by the Company or
any of
its Subsidiaries (including, for this purpose and for the purpose of all
of the
representations in this Section 3.15, any predecessors to the Company or
to any
of its Subsidiaries and all employers (whether or not incorporated) that
would
be treated together with the Company or any of its Subsidiaries as a single
employer (1) within the meaning of Section 414 of the Internal Revenue
Code, or
(2) as a result of the Company or any Subsidiary having been a general
partner
of any such employer), since September 2, 1974 (“Employee
Benefit Plans”).
(b) Status
of Plans.
Each
Employee Benefit Plan (including any related trust) complies in form with
the
requirements of all applicable Laws, including, without limitation, ERISA
and
the Internal Revenue Code, and has at all times been maintained and operated
in
substantial compliance with its terms and the requirements of all applicable
Laws, including, without limitation, ERISA and the Internal Revenue Code.
No
complete or partial termination of any Employee Benefit Plan has occurred
or is
expected to occur. Neither the Company nor any of its Subsidiaries has
any
commitment, intention or understanding to create, modify or terminate any
Employee Benefit Plan. Except as required to maintain the tax-qualified
status
of any Employee Benefit Plan intended to qualify under Section 401(a) of
the
Internal Revenue Code, no condition or circumstance exists that would prevent
the amendment or termination of any Employee Benefit Plan. No event has
occurred
and no condition or circumstance has existed that could result in a material
increase in the benefits under or the expense of maintaining any Employee
Benefit Plan from the level of benefits or expense incurred for the most
recent
fiscal year.
(c) No
Pension Plans.
No
Employee Benefit Plan is an “employee pension benefit plan” (within the meaning
of Section 3(2) of ERISA) subject to Section 412 of the Internal Revenue
Code or
Section 302 or Title IV of ERISA. Neither the Company nor any of its
Subsidiaries has ever maintained or contributed to, or had any obligation
to
contribute to (or borne any liability with respect to) any “multiple employer
plan” (within the meaning of the Internal Revenue Code or ERISA) or any
“multiemployer plan” (as defined in Section 4001(a)(3) of ERISA).
(d) Liabilities.
(i) Neither
the Company nor any of its Subsidiaries maintains any Employee Benefit
Plan
which is a “group health plan” (as such term is defined in Section 607(1) of
ERISA or Section 5000(b)(1) of the Internal Revenue Code) that has not
been
administered and operated in all respects in compliance with the applicable
requirements of Part 6 of Subtitle B of Title I of ERISA and Section 4980B
of
the Internal Revenue Code and neither the Company nor any of its Subsidiaries
is
subject to any material liability, including, without limitation, additional
contributions, fines, taxes, penalties or loss of tax deductions as a result
of
such administration and operation. No Employee Benefit Plan which is such
a
group health plan is a “multiple employer welfare arrangement,” within the
meaning of Section 3(40) of ERISA. Each Employee Benefit Plan that is intended
to meet the requirements of Section 125 of the Internal Revenue Code meets
such
requirements, and each program of benefits for which employee contributions
are
provided pursuant to elections under any Employee Benefit Plan meets the
requirements of the Internal Revenue Code applicable thereto. Neither the
Company nor any of its Subsidiaries maintains any Employee Benefit Plan
which is
an “employee welfare benefit plan” (as such term is defined in Section 3(1) of
ERISA) that has provided any “disqualified benefit” (as such term is defined in
Section 4976(b) of the Internal Revenue Code) with respect to which an
excise
tax could be imposed.
(ii) Neither
the Company nor any of its Subsidiaries maintains any Employee Benefit
Plan
(whether qualified or non-qualified under Section 401(a) of the Internal
Revenue
Code) providing for post-employment or retiree health, life insurance and/or
other welfare benefits and having unfunded Liabilities, and neither the
Company
nor any of its Subsidiaries have any obligation to provide any such benefits
to
any retired or former employees or active employees following such employees'
retirement or termination of service. Neither the Company nor any of its
Subsidiaries has any unfunded Liabilities pursuant to any Employee Benefit
Plan
that is not intended to be qualified under Section 401(a) of the Internal
Revenue Code. No Employee Benefit Plan holds as an asset any interest in
any
annuity contract, guaranteed investment contract or any other investment
or
insurance contract, policy or instrument issued by an insurance company
that, to
the knowledge of the Company, is or may be the subject of bankruptcy,
conservatorship, insolvency, liquidation, rehabilitation or similar
proceedings.
(iii) Neither
the Company nor any of its Subsidiaries has incurred any liability for
any tax
or excise tax arising under Chapter 43 of the Internal Revenue Code, and
no
event has occurred and no condition or circumstance has existed that could
give
rise to any such liability.
(iv) There
are
no actions, suits, claims or disputes pending, or, to the knowledge and
belief
of the Company, threatened, anticipated or expected to be asserted against
or
with respect to any Employee Benefit Plan or the assets of any such plan
(other
than routine claims for benefits and appeals of denied routine claims).
No civil
or criminal action brought pursuant to the provisions of Title I, Subtitle
B,
Part 5 of ERISA is pending, threatened, anticipated, or expected to be
asserted
against the Company or any of its Subsidiaries or any fiduciary of any
Employee
Benefit Plan, in any case with respect to any Employee Benefit Plan. No
Employee
Benefit Plan or any fiduciary thereof has been the direct or indirect subject
of
an audit, investigation or examination by any governmental or quasi-governmental
agency.
(e) Contributions.
Full
payment has been timely made of all amounts which the Company or any of
its
Subsidiaries is required, under applicable Law or under any Employee Benefit
Plan or any Contract relating to any Employee Benefit Plan to which the
Company
or any of its Subsidiaries is a party, to have paid as contributions or
premiums
thereto as of the last day of the most recent fiscal year of such Employee
Benefit Plan ended prior to the date hereof. All such contributions and/or
premiums have been fully deducted for income tax purposes and no such deduction
has been challenged or disallowed by any governmental entity, and to the
knowledge and belief of the Company and its Subsidiaries no event has occurred
and no condition or circumstance exists or has existed that could give
rise to
any such challenge or disallowance. The Company has made adequate provision
for
reserves to meet contributions and premiums and any other Liabilities that
have
not been paid or satisfied because they are not yet due under the terms
of any
Employee Benefit Plan, applicable Law or related Contracts. Benefits under
all
Employee Benefit Plans are as represented and have not been increased subsequent
to the date as of which documents have been provided.
(f) Tax
Qualification.
Each
Employee Benefit Plan intended to be qualified under Section 401(a) of
the
Internal Revenue Code has, as currently in effect, been determined to be
so
qualified by the Internal Revenue Service. Each trust established in connection
with any Employee Benefit Plan which is intended to be exempt from federal
income taxation under Section 501(a) of the Internal Revenue Code has,
as
currently in effect, been determined to be so exempt by the Internal Revenue
Service. Each VEBA has been determined by the Internal Revenue Service
to be
exempt from federal income tax under Section 501(c)(9) of the Internal
Revenue
Code. Since the date of each most recent determination referred to in this
paragraph 3.15(f), no event has occurred and no condition or circumstance
has
existed that resulted or is likely to result in the revocation of any such
determination or that could adversely affect the qualified status of any
such
Employee Benefit Plan or the exempt status of any such trust or
VEBA.
(g) Transactions.
Neither
the Company nor any of its Subsidiaries nor any of their respective directors,
officers, employees or, to the knowledge and belief of the Company, other
persons who participate in the operation of any Employee Benefit Plan or
related
trust or funding vehicle, has engaged in any transaction with respect to
any
Employee Benefit Plan or breached any applicable fiduciary responsibilities
or
obligations under Title I of ERISA that would subject any of them to a
tax,
penalty or liability for prohibited transactions or breach of any obligations
under ERISA or the Internal Revenue Code or would result in any claim being
made
under, by or on behalf of any such Employee Benefit Plan by any party with
standing to make such claim.
(h) Triggering
Events.
The
execution of this Agreement and the consummation of the transactions
contemplated hereby, do not constitute a triggering event under any Employee
Benefit Plan, policy, arrangement, statement, commitment or Contract, whether
or
not legally enforceable, which (either alone or upon the occurrence of
any
additional or subsequent event) will or may result in any payment (whether
of
severance pay or otherwise), “parachute payment” (as such term is defined in
Section 280G of the Internal Revenue Code), acceleration, vesting or increase
in
benefits to any employee, former employee or director of the Company or
any of
its Subsidiaries. No Employee Benefit Plan provides for the payment of
severance, termination, change in control or similar-type payments or
benefits.
(i) Documents.
The
Company has delivered or caused to be delivered to Parent and its counsel
true
and complete copies of all material documents in connection with each Employee
Benefit Plan, including, without limitation (where applicable): (i) all
Employee
Benefit Plans as in effect on the date hereof, together with all amendments
thereto, including, in the case of any Employee Benefit Plan not set forth
in
writing, a written description thereof; (ii) all current summary plan
descriptions, summaries of material modifications, and material communications;
(iii) all current trust agreements, declarations of trust and other documents
establishing other funding arrangements (and all amendments thereto and
the
latest financial statements thereof); (iv) the most recent Internal Revenue
Service determination letter obtained with respect to each Employee Benefit
Plan
intended to be qualified under Section 401(a) of the Internal Revenue Code
or
exempt under Section 501(a) or 501(c)(9) of the Internal Revenue Code;
(v) the
annual report on Internal Revenue Service Form 5500-series or 990 for each
of
the last three years for each Employee Benefit Plan required to file such
form;
(vi) the most recently prepared financial statements for each Employee
Benefit
Plan for which such statements are required; and (vii) all Contracts relating
to
each Employee Benefit Plan, including, without limitation, service provider
agreements, insurance contracts, annuity contracts, investment management
agreements, subscription agreements, participation agreements, and recordkeeping
agreements and collective bargaining agreements.
(j) Litigation.
Other
than routine claims for benefits under the Plans, there are no pending,
or, to
the knowledge of the Company or its Subsidiaries, threatened, Actions or
Proceedings involving the Plans, or the fiduciaries, administrators, or
trustees
of any of the Plans or the Company, any Subsidiary or any of their respective
ERISA Affiliates as the employer or sponsor under any Plan, with any of
the IRS,
the Department of Labor, the PBGC, any participant in or beneficiary of
any Plan
or any other person. Neither the Company nor any of its Subsidiaries know
of any
reasonable basis for any such Action or Proceeding.
3.16 Real
Property.
(a) Section
3.16(a) of the Company Disclosure Schedule contains a true and correct
list of
(i) each parcel of real property leased, utilized and/or operated by the
Company
or any of its Subsidiaries (as lessor or lessee or otherwise) (the “Leased
Real Property”)
and
(ii) all Liens relating to or affecting any parcel of real property referred
to
in clause (i) to which the Company or any of its Subsidiaries is a party.
Neither the Company nor any of its Subsidiaries owns any real property
other
than Company or Subsidiary owned leasehold improvements, if any, on Leased
Real
Property.
(b) Subject
to the terms of its respective leases, the Company or any of its Subsidiaries,
as applicable, has a valid and subsisting leasehold estate in and the right
to
enjoyment of each of the Leased Real Properties for the full term of the
leases
(including renewal periods) relating thereto. Each lease referred to in
Section
3.16(a) is a legal, valid and binding Contract, enforceable in accordance
with
its terms, of the Company or its Subsidiary, as applicable, and of each
other
Person that is a party thereto, and except as set forth in Section 3.16(b)
of
the Company Disclosure Schedule, there is no, and neither the Company nor
any of
its Subsidiaries has received notice of any, default (or any condition
or event
which, after notice or lapse of time or both, would constitute a default)
thereunder. Neither the Company nor any of its Subsidiaries owes brokerage
commissions or finder's fees with respect to any such Leased Real Property,
except to the extent that the Company or its Subsidiary, as applicable,
may
renew the term of any such lease, in which case, any such commissions and
fees
would be in amounts that are reasonable and customary for the spaces so
leased,
given their intended use and terms.
(c) Except
as
disclosed in Section 3.16(c) of the Company Disclosure Schedule, all
improvements on the Leased Real Property (A) comply with and are operated
in
accordance with applicable Laws (including Environmental Laws) and all
applicable Liens, Approvals, Contracts, covenants and restrictions and
(B) are
in all material respects in good operating condition and in a state of
good
maintenance and repair, ordinary wear and tear excepted, and such improvements
are in all material respects adequate and suitable for the purposes for
which
they are presently being used and there are no condemnation or appropriation
proceedings pending or, to the knowledge of the Company or its Subsidiaries,
threatened against any of such real property or the improvements
thereon.
(d) True
and
correct copies of the documents under which the Leased Real Property is
leased,
subleased (to or by the Company, any of its Subsidiaries, or otherwise),
utilized, and/or operated (the “Lease
Documents”)
have
been delivered to Parent. The Lease Documents are unmodified and in full
force
and effect, and there are no other Contracts between the Company, any of
its
Subsidiaries, and any third party(ies), or by and among any third party(ies),
claiming an interest in the interest of the Company or any of its Subsidiaries
in the Leased Real Property or otherwise relating to the use and occupancy
of
the Leased Real Property.
3.17 Tangible
Personal Property
The
Company and each of its Subsidiaries is in possession of and has good and
marketable title to, or has valid leasehold interests in or valid rights
under
Contract to use, all tangible personal property used in the conduct of
its
business, including all tangible personal property reflected on the Company
Financials and tangible personal property acquired since the Audited Financial
Statement Date, other than property disposed of since such date in the
ordinary
course of business consistent with past practice. Section 3.17(a)(1) of
the
Company Disclosure Schedule lists all tangible personal property used by
the
Company, which the Company has valid leasehold interests in or valid rights
under Contract to use. Except (i) for purchase money liens on equipment
purchases or product purchases in the ordinary course of the Company’s or any of
its Subsidiaries’ business for which the purchase price is not yet due and
payable, or (ii) as disclosed in Section 3.17(a)(2) of the Company Disclosure
Schedule, all such tangible personal property (including plant, property
and
equipment) is free and clear of all Liens and is adequate and suitable
in all
material respects for the conduct by the Company or its Subsidiary, as
applicable, of its respective business as presently conducted, and is in
good
working order and condition in all material respects, ordinary wear and
tear
excepted, and its use complies in all material respects with all applicable
Laws.
3.18 Intellectual
Property.
(a) Section
3.18 of the Company Disclosure Schedule sets forth a complete and accurate
list
(i) in subsection 1, of all letters patent owned by the Company and each
of its
Subsidiaries; (ii) in subsection 2, of all U.S. federal copyright, trademark,
and service mark registrations owned by the Company and each of its
Subsidiaries; (iii) in subsection 3, of all U.S. common law copyrights,
trademarks, and service marks owned by the Company and each of its Subsidiaries;
(iv) in subsection 4, of all U.S. letters patent owned by the Company and
each
of its Subsidiaries which are, as of the date hereof, subject to a reissue
or
reexamination proceeding in the U.S. Patent and Trademark Office (the
“PTO”);
(v)
in subsection 5, of all applications for U.S. letters patent filed by and
subject to ongoing prosecution by the Company and each of its Subsidiaries;
(vi)
in subsection 6, of all applications for letters patent in jurisdictions
other
than the United States filed by and subject to ongoing prosecution by the
Company and each of its Subsidiaries, including PCT applications; (vii)
in
subsection 7, of all applications for U.S. federal copyright, trademark,
or
service mark registrations filed by and subject to ongoing prosecution
by the
Company and each of its Subsidiaries; (viii) in subsection 8, of all
applications for copyright, trademark, or service mark registrations in
jurisdictions other than the United States filed by and subject to ongoing
prosecution by the Company and each of its Subsidiaries; and (ix) in subsection
9, of all patent interference and similar proceedings in which the Company
and
each of its Subsidiaries are involved, including, but not limited to,
interferences and the like asserted against the Company and each of its
Subsidiaries and interferences and the like which the Company and each
of its
Subsidiaries have provoked.
(b) (i)The
Company represents and warrants that it has received no claims that the
Company
is infringing the intellectual property rights of a third party or offers
to
license from a third party, and that it has no knowledge that the Company’s
products and technologies sold or used infringe the intellectual property
rights
of any third party;
(ii) The
Company has the right to use, sell and license all trademarks and service
marks
set forth on Section 3.18 of the Company Disclosure Schedule, and all
registrations and applications for registrations thereof, both foreign
and
domestic; to the knowledge of the Company, all such marks are owned by
the
Company and no party has rights in such marks superior to the Company’s, and the
Company’s use of such marks as source identifiers has been
continuous;
(iii) The
Company has the right to reproduce, prepare derivative works of, distribute
copies of, perform, display, transfer and license works in which the Company
has
registered a copyright in the United States Copyright Office or in the
copyright
office of foreign countries; the Company represents all such works that
it has
created, its employees created, or which were created by another as a work
for
hire to be original works of authorship to which it has the entire right,
title
and interest; The Company has obtained all necessary assignments or promises
to
make such assignments from all authors of all works of authorship to be
transferred under this Agreement; and
(iv) The
Company has the right to use, sell and license its trade secrets, including
know-how, methods, processes, protocols, methodologies, designs, computer
software (including, but not limited to, source code and object code),
specifications (including design, functional, operational, quality assurance,
technical and other specifications of the Company).
(c) The
Company represents that all software and related documentation purchased
from
any third party are owned by and/or licensed to the Company, and such ownership
and any applicable license provides the Company the right to transfer the
ownership of such purchased software, including any applicable license,
to the
Purchaser. The Company either owns or has sufficient license rights to
all
software to be transferred hereunder and is able to transfer ownership
of such
software or said license rights.
(d) Section
3.18(d) of the Company Disclosure Schedule sets forth a complete and accurate
list of (i) the Contracts, including, but not limited to, license agreements,
and of all parties thereto, under which the Company obtains or is the
beneficiary of any license or right to use any Intellectual Property right
of
any third party (the “Licensed-In
Agreements”)
and
(ii) the Contracts, including, but not limited to, license agreements,
to which
the Company is a party and pursuant to which a third party is authorized
to use
or is granted a license (including have made rights and reserve manufacturing
rights) to any of the Intellectual Property of the Company.
(e) The
Company has the right to sell, license, assign, or otherwise transfer the
patents, patent applications, trademarks, copyrights, and other Intellectual
Property listed in Section 3.18 of the Company Disclosure Schedule.
(f) The
Company represents that each item of Intellectual Property listed in Section
3.18 of the Company Disclosure Schedule (i) is free and clear of any
encumbrances; (ii) is not subject to any outstanding judicial order, decree,
judgment, stipulation, agreement, including any agreement restricting the
scope
of the Company’s use thereof or rights therein; and (iii) the Company has no
knowledge of any of the aforementioned affecting the use of or rights in
any
Intellectual Property listed in Section 3.18 of the Company Disclosure
Schedule
that the Company has purchased, licensed or otherwise obtained from any
third
party except as set forth in the agreements relating to such purchase or
license.
(g) (i)
The
Company has not received any written notice, demand, correspondence, cease
and
desist request, or any other communication in writing from any third party
indicating that any product, software, service, or apparatus, made, used,
offered for sale, sold, imported or distributed by or on behalf of the
Company
infringes upon, misappropriates or otherwise violates the intellectual
property
rights of any third party; (ii) The Company has no knowledge of any unauthorized
use, unauthorized disclosure to or by, or infringement, misappropriation
or any
other violation of any of its Intellectual Property by, any third party
or any
current or former officer, employee, independent contractor, consultant
or any
other agent of the Company (each, a “Seller
Agent”);
(iii)
The Company has not entered into any agreement to indemnify any third party
against any claim of infringement, misappropriation or other violation
of
Intellectual Property rights other than indemnification provisions contained
in
purchase orders, customer agreements, Licensed-In Agreements, or software
licenses listed in Section 3.18 of the Company Disclosure Schedule; and
(iv) in
the last two years, the Company has not been charged in any suit, action
or
proceeding with, and the Company has not charged others with, unfair
competition, infringement, misappropriation, wrongful use of or any other
violation or improper or illegal activity with respect to or affecting
Intellectual Property or with claims contesting the validity, ownership
or right
to make, use, offer to sell, sell, import, license or otherwise dispose
of its
Intellectual Property.
(h) (i)
Subject to applicable Laws, all rights in all inventions and discoveries
made,
developed or conceived by Seller Agents during the course of their employment
(or other retention) by the Company or made, written, developed or conceived
with the use or assistance of the Company’s facilities or resources which are
the subject of one or more issued letters patent or applications for letters
patent have been assigned in writing to the Company; (ii) to the extent
permitted by applicable Law, the policy of the Company requires, and since
the
Company’s formation has required, each Seller Agent to sign documents confirming
that he or she assigns to the Company all Intellectual Property rights
made,
written, developed or conceived by him or her during the course of his
or her
employment (or other retention) by the Company or made, written, developed
or
conceived with the use or assistance of the Company’s facilities or resources;
(iii) to the extent that ownership of any such Intellectual Property rights
does
not vest in the Parent by operation of law, and to the extent that any
employee
of Seller Agent has not executed such documents, the Company will require
Seller
Agent to execute such documents at or before the Closing; and (iv) all
Intellectual Property made, written, developed or conceived by any Seller
Agent
during the course of his or her employment (or retention) by the Company
has
been assigned to the Company.
(i) The
Intellectual Property owned by or licensed to the Company prior to the
execution
of this Agreement constitutes all of the Intellectual Property necessary
or
useful to conduct the business as conducted by the Company prior to the
Closing
or (to the Company’s knowledge) as planned to be conducted by the Company after
the Closing. The Company has not sold or licensed outward any Intellectual
Property. Furthermore, the Company has not received any infringement claim
or
notice, or offer to license, from a third party that would give the Company
reason to believe that additional inward licenses would be necessary for
the
lawful conduct of its business as conducted prior to the Closing.
(j) The
Company has taken reasonable and practicable steps to protect and preserve
the
confidentiality of its valuable Intellectual Property (including, without
limitation, trade secrets, but excluding letters patent, source code, inventory,
copyrights, trademarks and service marks and registrations and applications
for
registration thereof) (“Confidential
IP Information”).
The
Company believes that all use by the Company of Confidential IP Information
not
owned by the Company has been and is pursuant to, and in compliance with,
the
terms of a written agreement between the Company and the owner of such
Confidential IP Information, or is otherwise lawful.
(k) All
Intellectual Property, licenses and other rights necessary or useful to
conduct
the business as currently conducted or as planned to be conducted will
be
transferred to the Parent at Closing In the event that there is Intellectual
Property which has been omitted from Section 3.18 of the Company Disclosure
Schedule, the Company hereby transfers and assigns such Intellectual
Property.
3.19 Contracts.
(a) Section
3.19(a)(1) of the Company Disclosure Schedule contains a true and complete
list
of each material Contract (including, without limitation, all joint development
agreements) or other arrangement (true and complete copies or, if none,
reasonably complete and accurate written descriptions of which, together
with
all amendments and supplements thereto and all waivers of any terms thereof,
have been made available to Parent prior to the execution of this Agreement),
to
which the Company or any of its Subsidiaries is a party or by which any
of their
respective Assets and Properties are bound. Section 3.19(a)(2) of the Company
Disclosure Schedule contains a true and complete list of each Contract
of the
Company or any of its Subsidiaries (i) not terminable by the Company or,
as
applicable, any of its Subsidiaries upon thirty (30) days (or less) notice,
without penalty or obligation to make payments based on such termination
or (ii)
which provides for continuing design, Intellectual Property Licenses or
other
services (including engineering and research and development services)
by the
Surviving Corporation after the Closing Date. Section 3.19(a)(3) of the
Company
Disclosure Schedule contains a true and complete list and description of
all
contract
manufacturing arrangements of the Company or its Subsidiaries.
(b) Each
Contract required to be disclosed in Section 3.19(a)(1), 3.19(a)(2) or
3.19(a)(3) of the Company Disclosure Schedule is in full force and effect
and
constitutes a legal, valid and binding Contract, enforceable in accordance
with
its terms, and no other party to such Contract is, nor has received notice
that
it is, in violation or breach of or default under any such Contract (or
with
notice or lapse of time or both, would be in violation or breach of or
default
under any such Contract).
(c) Neither
the Company nor any of its Subsidiaries is a party to or bound by any Contract
that has or could reasonably be expected to have, individually or in the
aggregate with any other similar Contracts, a Material Adverse Effect on
the
Company or, as applicable, its Subsidiaries, or that has resulted or could
reasonably be expected to result, individually or in the aggregate with
any such
other Contracts, in Losses to the Company or, as applicable, its Subsidiaries,
which have a Material Adverse Effect on the Company.
(d) Except
as
disclosed in Sections 3.19(a)(1) or 3.19(a)(2) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries is a party to
or bound
by
(i) any
collective bargaining agreements;
(ii) any
Contract that contains any severance pay or post-employment Liabilities
or
obligations;
(iii) any
bonus, deferred compensation, pension, profit sharing or retirement plans,
or
any other employee benefit plans or arrangements;
(iv) any
employment or consulting Contract or commitment with an employee, director
or
officer of the Company or any of its Subsidiaries or individual consultant
or
salesperson or any consulting or sales Contract or commitment under which
any
firm or other organization provides services to the Company or any of its
Subsidiaries;
(v) any
Contract or plan, including, without limitation, any stock option plan,
stock
appreciation rights plan or stock purchase plan, any of the benefits of
which
will be increased, or the vesting of benefits of which will be accelerated,
by
the occurrence of any of the transactions contemplated by this Agreement
or the
value of any of the benefits of which will be calculated on the basis of
any of
the transactions contemplated by this Agreement;
(vi) any
fidelity or surety bond or completion bond;
(vii) any
lease
of personal property having a value in excess of $12,500 individually or
$25,000
in the aggregate;
(viii) any
Contract of indemnification or guaranty;
(ix) any
Contract or commitment containing any covenant limiting the freedom of
the
Company or any of its Subsidiaries from engaging in any line of business
or
competing with any Person in any geographical area, or which materially
restricts any other Person from competing with the Company or any of its
Subsidiaries in any line of business or geographical area;
(x) Contracts
which restrict the Company or any of its Subsidiaries from disclosing any
information concerning or obtained from any other Person, or which restrict
any
other Person from disclosing any information concerning or obtained from
the
Company or any of its Subsidiaries (other than Contracts entered into in
the
ordinary course of business consistent with past practice);
(xi) any
confidentiality, nondisclosure or similar Contract which contains any
“standstill” provisions or similar restrictions on acquisitions or acquisition
proposals by any third party (other than Parent or its Affiliates);
(xii) Contracts
involving (i) the acquisition, merger or purchase of all or substantially
all of
the assets or business of a third party, involving aggregate consideration
of
$25,000 or more, or (ii) the purchase or sale of assets, or a series of
purchases and sales of assets, involving aggregate consideration of $25,000
or
more;
(xiii) Contracts
with any Affiliate that would be required to be disclosed under Item 404
of
Regulation S-K under the Securities Act;
(xiv) Contracts
which are material to the Company and contain a “change in control” or similar
provision;
(xv) any
Contract or commitment relating to capital expenditures and involving future
payments in excess of $12,500 individually or $25,000 in the
aggregate;
(xvi) any
Contract or commitment relating to the disposition or sale of any material
amount of assets (other than in the ordinary course of business consistent
with
past practices) or any interest in any business enterprise or for the grant
to
any Person of any preferential rights to purchase of any material amount
of
assets;
(xvii) any
mortgages, indentures, loans or credit agreements, security agreements
or other
Contracts or instruments relating to the borrowing of money or extension
of
credit, including guaranties referred to in clause (viii) hereof and notes
or
the granting of any security interests;
(xviii) any
purchase order or Contract for the purchase of raw materials and/or supplies
involving $25,000 or more;
(xix) any
dealer, distribution, joint marketing or development Contract;
(xx) any
sales
representative, original equipment manufacturer, value added, remarketer,
reseller or independent software vendor or other Contract for use or
distribution of the Company’s products, technology or services;
(xxi) Contracts
relating to any joint venture, partnership, strategic alliance or similar
arrangement;
(xxii) any
Contract pursuant to which the Company has granted or may grant in the
future,
to any party, a source-code License or option or other right to use or
acquire
source-code;
(xxiii) any
Contract that automatically terminates or allows termination by the other
party
thereto upon consummation of the transactions contemplated by this
Agreement.
3.20 Insurance.
(a) Section
3.20(a) of the Company Disclosure Schedule contains a true and complete
list
(including the names and addresses of the insurers, the expiration dates
thereof, the annual premiums and payment terms thereof, the period of time
covered thereby and a brief description of the interests insured thereby)
of all
liability, property, workers’ compensation, directors’ and officers’ liability
and other insurance policies currently in effect that insure any of the
business, operations or employees of the Company and its Subsidiaries or
affect
or relate to the ownership, use or operation of any of the Assets and Properties
of the Company and that (a) have been issued to the Company or its Subsidiaries
or (b) to the knowledge of the Company or its Subsidiaries, have been issued
to
any Person (other than the Company) for the benefit of the Company or any
of its
Subsidiaries. The insurance coverage provided by the policies set forth
in
Section 3.20(a) of the Company Disclosure Schedule will not terminate or
lapse
by reason of any of the transactions contemplated by this Agreement or
any of
the Ancillary Agreements and are fully assignable to Parent. Each policy
listed
in Section 3.20(a) of the Company Disclosure Schedule is valid and binding
and
in full force and effect, all premiums due thereunder have been paid when
due
and neither the Company, the applicable Subsidiary of the Company or the
Person
to whom such policy has been issued has received any notice of cancellation
or
termination in respect of any such policy or is in default thereunder,
and the
Company has no knowledge of any reason or state of facts that could reasonably
be expected to lead to the cancellation of such policies or of any threatened
termination of, or material premium increase with respect to, any of such
policies. The insurance policies listed in Section 3.20(a) of the Company
Disclosure Schedule, (i) in light of the business, operations and Assets
and
Properties of the Company and of its Subsidiaries are in amounts and have
coverages that are reasonable and customary for Persons engaged in similar
businesses and operations and having similar Assets and Properties and
(ii) are
in amounts and have coverages as required by any Contract to which the
Company
or any of its Subsidiaries is a party or by which any of their respective
Assets
and Properties is bound.
(b) Section
3.20(b) of the Company Disclosure Schedule contains a list of all claims
made
under any insurance policies covering the Company or any of its Subsidiaries
in
the last two years. Neither the Company nor any of its Subsidiaries has
received
notice that any insurer under any policy listed (or required to be listed)
in
Section 3.20(a) of the Company Disclosure Schedule is denying, disputing
or
questioning liability with respect to a claim thereunder or defending under
a
reservation of rights clause. The Company and its Subsidiaries have, in
the
reasonable judgment of the Company, in light of their respective business,
location, operations and Assets and Properties, maintained, at all times,
without interruption, appropriate insurance, both in scope and amount of
coverages.
3.21 Affiliate
Transactions.
(a) Except
as
disclosed in Section 3.21(a) of the Company Disclosure Schedule, (i) there
are
no Contracts or Liabilities between the Company or its Subsidiaries, on
the one
hand, and (A) any current or former officer, director, stockholder, or
to the
Company’s knowledge, any past or current Affiliate or Associate of the Company
or its Subsidiaries or (B) any Person who, to the Company’s knowledge, is an
Associate of any such officer, director, stockholder or Affiliate, on the
other
hand, (ii) neither the Company nor any of its Subsidiaries provides or
causes to
be provided any assets, services or facilities to any such current or former
officer, director, stockholder, Affiliate or Associate, (iii) neither the
Company, its Subsidiaries nor any such current or former officer, director,
stockholder, Affiliate or Associate provides or causes to be provided any
assets, services or facilities to the Company and (iv) neither the Company
nor
any of its Subsidiaries beneficially owns, directly or indirectly, any
Investment Assets of any such current or former officer, director, stockholder,
Affiliate or Associate.
(b) Except
as
disclosed in Section 3.21(b) of the Company Disclosure Schedule, each of
the
Contracts and Liabilities listed in Section 3.21(a) of the Company Disclosure
Schedule were entered into or incurred, as the case may be, on terms no
less
favorable to the Company or its Subsidiaries (in the reasonable judgment
of the
Company) than if such Contract or Liability was entered into or incurred
on an
arm’s-length basis on competitive terms.
3.22 Employees;
Labor Relations.
(a) Neither
the Company nor any of its Subsidiaries is a party to any collective bargaining
agreement and there are no unfair labor practice or labor arbitration
proceedings pending with respect to the Company or any of its Subsidiaries,
or,
to the knowledge of the Company, threatened, and there are no facts or
circumstances known to the Company or any of its Subsidiaries that could
reasonably be expected to give rise to such complaint or claim. To the
knowledge
of the Company or any of its Subsidiaries, there are no organizational
efforts
presently underway or threatened involving any employees of the Company
or any
of its Subsidiaries or any of the employees performing work for the Company
or
any of its Subsidiaries but provided by an outside employment agency, if
any.
There has been no work stoppage, strike or other concerted action by employees
of the Company or any of its Subsidiaries.
(b) Each
Person who is an employee of the Company or any of its Subsidiaries is
employed
at will, and no employee of the Company or any of its Subsidiaries is
represented by a union. Each Person who is an independent contractor of
the
Company or any of its Subsidiaries is properly classified as an independent
contractor for purposes of all employment related Laws and all Laws concerning
the status of independent contractors. Section 3.22(b)(1) of the Company
Disclosure Schedule sets forth, individually and by category, the name
of each
officer, employee, independent contractor and consultant, together with
such
person’s position or function, annual base salary or wage and any incentive,
severance or bonus arrangements with respect to such person. Except as
described
in Section 3.22(b)(2) of the Company Disclosure Schedule, the completion
of the
transactions contemplated by this Agreement will not result in any payment
or
increased payment becoming due from the Company or any of its Subsidiaries
to
any current or former officer, director, or employee of, or consultant
to, the
Company, and to the knowledge of the Company no employee of the Company
or any
of its Subsidiaries has made any threat, or otherwise revealed an intent,
to
terminate such employee’s relationship with the Company or, as applicable, any
of its Subsidiaries, for any reason, including because of the consummation
of
the transactions contemplated by this Agreement. Neither the Company nor
any of
its Subsidiaries is a party to any Contract for the provision of labor
from any
outside agency. To the knowledge of the Company, since December 31, 2003
there
have been no claims by employees of such outside agencies, if any, with
regard
to employees assigned to work for the Company and its Subsidiaries, and
no
claims by any governmental agency with regard to such employees.
(c) Except
as
described in Section 3.22(c) of the Company Disclosure Schedule, since
December
31, 2003, there have been no federal or state claims, Actions or Proceedings
based on sex, sexual or other harassment, age, disability, race or other
discrimination or common law claims, including claims of wrongful termination,
by any employees of the Company or any of its Subsidiaries or by any of
the
employees performing work for the Company or any of its Subsidiaries but
provided by an outside employment agency, and there are no facts or
circumstances known to the Company that could reasonably be expected to
give
rise to any such complaint, claim, Action or Proceeding. The Company and
each of
its Subsidiaries has complied with all Laws related to the employment of
employees and, except as set forth in Section 3.22(c) of the Company Disclosure
Schedule, since December 31, 2003 neither the Company nor any of its
Subsidiaries has received notice of any claim that it has not complied
in any
material respect with any Laws relating to the employment of employees,
including any provisions thereof relating to wages, hours, collective
bargaining, the payment of social security and similar taxes, equal employment
opportunity, employment discrimination, employee safety, or that it is
liable
for any arrearages of wages or any taxes or penalties for failure to comply
with
any of the foregoing.
(d) Neither
the Company nor any of its Subsidiaries has any written policies and/or
employee
handbooks or manuals except as described in Section 3.22(d) of the Company
Disclosure Schedule.
(e) To
the
knowledge of the Company, no officer, employee or consultant of the Company
or
any its Subsidiaries is obligated under any Contract or subject to any
Order or
Law that would interfere with the Company’s, or as applicable, any of its
Subsidiaries’ business as currently conducted. None of the execution nor
delivery of this Agreement, the carrying on of the Company’s or any of its
Subsidiaries’ business as presently conducted or any activity of such officers,
employees or consultants in connection with the carrying on of the Company’s, or
as applicable, any of its Subsidiaries’, business as presently conducted, will
conflict with or result in a breach of the terms, conditions or provisions
of,
constitute a default under, or trigger a condition precedent to any rights
under
any Contract under which any such officers, employees or consultants are
now
bound.
(f) Since
the
enactment of the Workers Adjustment Retraining and Notification Act (the
“WARN
Act”),
neither the Company nor any of its Subsidiaries has effectuated a (i) “plant
closing” (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any of its Subsidiaries; or (ii) a “mass layoff” (as
defined in the WARN Act) affecting any site of employment or facility of
the
Company or any of its Subsidiaries, nor has the Company or any of its
Subsidiaries been affected by any transaction or engaged in layoffs or
employment terminations sufficient in number to trigger application of
any
similar state or local law; and (iii) none of the employees of the Company
or
any of its Subsidiaries has suffered an “employment loss” (as defined in the
WARN Act) since six (6) months prior to the date hereof.
3.23 Environmental
Matters.
(a) The
Company and each of its Subsidiaries possess any and all Environmental
Permits
necessary to or required for the operation of their respective businesses.
The
Company and its Subsidiaries will obtain, prior to the Closing, any
Environmental Permits that must be obtained as of or immediately after
the
Closing in order for the Surviving Corporation, and its Subsidiaries to
conduct
their respective businesses as was conducted prior to the Closing.
(b) The
Company and each of its Subsidiaries is in compliance with (i) all terms,
conditions and provisions of its Environmental Permits; and (ii) all
Environmental Laws.
(c) None
of
the Company, any Subsidiary of the Company, or any predecessor thereof
or any
entity previously owned thereby has received any notice of alleged, actual
or
potential responsibility for, or any inquiry regarding, (i) any Release
or
threatened or suspected Release of any Hazardous Material, or (ii) any
violation
of Environmental Law.
(d) None
of
the Company, any Subsidiary of the Company, or any predecessor thereof
or any
entity previously owned thereby has any obligation or liability with respect
to
any Hazardous Material, including any Release or threatened or suspected
Release
of any Hazardous Material, and there have been no events, facts or circumstances
which could form the basis of any such obligation or liability.
(e) No
Releases of Hazardous Material(s) have occurred at, from, in, to, on, or
under
any Site and no Hazardous Material is present in, on, about or migrating
to or
from any Site.
(f) None
of
the Company, any Subsidiary of the Company, or any predecessor thereof
or any
entity previously owned thereby has transported or arranged for the treatment,
storage, handling, disposal or transportation of any Hazardous Material
at or to
any location.
(g) No
Site
is a current or proposed Environmental Clean-up Site.
(h) There
are
no Liens under or pursuant to any Environmental Law on any Site.
(i) There
is
no (i) underground storage tank, active or abandoned, (ii) polychlorinated
biphenyl containing equipment, (iii) asbestos-containing material, (iv)
radon,
(v) lead-based paint or (vi) urea formaldehyde at any Site. Any underground
storage tank meets all upgrade requirements.
(j) There
have been no environmental investigations, studies, audits, tests, reviews
or
other analyses conducted with respect to any Site which have not been delivered
to Parent prior to execution of this Agreement.
(k) Neither
the Company nor any of its Subsidiaries is a party, whether as a direct
signatory or as successor, assign, third-party beneficiary, guarantor or
otherwise, to, and is not otherwise bound by, any lease or other Contract
under
which the Company or any of its Subsidiaries is obligated or may be obligated
by
any representation, warranty, covenant, restriction, indemnification or
other
undertaking respecting Hazardous Materials or under which any other person
is or
has been released respecting Hazardous Materials.
(l) The
Company, any Subsidiary of the Company, and any predecessor thereof or
any
entity previously owned thereby have provided all notifications and warnings,
made all reports, and kept and maintained all records required pursuant
to
Environmental Laws.
3.24 Substantial
Customers and Suppliers.
Section
3.24(a) of the Company Disclosure Schedule lists the ten (10) largest customers
of the Company and its Subsidiaries, collectively, on the basis of revenues
collected or accrued for the most recent complete fiscal year. Section
3.24(b)
of the Company Disclosure Schedule lists the ten (10) largest suppliers
of the
Company and its Subsidiaries on the basis of cost of goods or services
purchased
for the most recent fiscal year. Except as disclosed in Section 3.24(c)
of the
Company Disclosure Schedule, no such customer or supplier has ceased or
materially reduced its purchases from or sales or provision of services
to the
Company and its Subsidiaries since December 31, 2003 or, to the knowledge
of the
Company or its Subsidiaries, has threatened to cease or materially reduce
such
purchases or sales or provision of services after the date hereof. Except
as
disclosed in Section 3.24(d) of the Company Disclosure Schedule, to the
knowledge of the Company or its Subsidiaries, no such customer or supplier
is
threatened with bankruptcy or insolvency or has indicated to the Company
that it
is unable to pay its Indebtedness when due.
3.25 Accounts
Receivable.
All
of
the Company’s accounts and notes receivable have arisen from bona fide sales
transactions in the ordinary course of business, are carried at values
determined in accordance with GAAP consistently applied, to the knowledge
of the
Company are legal, valid and binding obligations of the respective debtors,
and
are collectible except to the extent of the reasonable reserves therefor
set
forth in the Company Financials or, for receivables arising subsequent
to the
Audited Financial Statement Date which are accounted for in accordance
with
GAAP, consistently applied, including without limitation the taking of
a
reasonable reserve for uncollectable receivables. To the knowledge of the
Company, no person has any Lien on, valid set-off or counterclaim against
any of
the Company’s accounts or notes receivable and no request or Contract for
deductions or discount has been made or is contemplated with respect to
any of
the Company’s accounts or notes receivable. No account or note receivable has
been collected prior to the due date thereof except in a manner consistent
with
past practices in the ordinary course of business.
3.26 Inventory
Except
as
disclosed in the notes to the Financial Statements or in Section 3.26 of
the
Company Disclosure Schedule, all inventory of the Company and its Subsidiaries
reflected on the balance sheet included in the Company Financials consisted,
and
all such inventory acquired since the Audited Financial Statement Date
consists,
of a quality and quantity usable and salable in the ordinary course of
business.
All inventory of the Company and its Subsidiaries reflected on the balance
sheet
included in the Company Financials is carried at the lower of cost or market.
Except as disclosed in the notes to the Financial Statements or in Section
3.26
of the Company Disclosure Schedule, all items included in the inventory
of the
Company and its Subsidiaries are the property of the Company or its Subsidiaries
free and clear of any Lien, have not been pledged as collateral, are not
held by
the Company or its Subsidiaries on consignment from others and conform
in all
material respects to all standards and specifications applicable to such
inventory or its use or sale imposed by Governmental or Regulatory Authorities.
Except as disclosed in the notes to the Financial Statements or in Section
3.26
of the Company Disclosure Schedule, there are no goods held by the Company
on
consignment or other goods in the possession of the Company which goods
are not
owned by the Company. The Company is not under any Liability with respect
to the
return of inventory or merchandise in the possession of wholesalers,
distributors, retailers or other customers of the Company.
3.27 Other
Negotiations; Brokers; Third-Party Expenses
Neither
the Company’s nor any of its Subsidiaries’ officers, directors, employees,
agents, or, to the knowledge of the Company, any of its or its Subsidiaries'
stockholders or Affiliates (nor any investment banker, financial advisor,
attorney, accountant or other Person retained by or acting for or on behalf
of
the Company, any of its Subsidiaries or any such Affiliate) (a) has entered
into
any Contract that conflicts with any of the transactions contemplated by
this
Agreement or (b) has entered into any Contract or had any discussions with
any
Person, other than RidgeCrest Capital Partners, regarding any transaction
involving the Company or its Subsidiaries which could result in Parent,
the
Company, any of its Subsidiaries or any general partner, limited partner,
manager, officer, director, employee, agent or Affiliate of any of them
being
subject to any claim for liability to said Person as a result of entering
into
this Agreement or consummating the transactions contemplated hereby. No
broker,
investment banker, financial advisor or other Person, other than RidgeCrest
Capital Partners, is entitled to any broker’s, finder’s, financial advisor’s or
similar fee or commission in connection with this Agreement and the transactions
contemplated hereby based on arrangements made by or on behalf of the Company
or
its Subsidiaries.
3.28 Banks
and Brokerage Accounts
Section
3.28 of the Company Disclosure Schedule sets forth (a) a true and complete
list
of the names and locations of all banks, trust companies, securities brokers
and
other financial institutions at which the Company or any of its Subsidiaries
has
an account or safe deposit box or maintains a banking, custodial, trading
or
other similar relationship, (b) a true and complete list and description
of each
such account, box and relationship, indicating in each case the account
number
and the names of the respective officers, employees, agents or other similar
representatives of the Company or any Subsidiary having signatory power
with
respect thereto and (c) a list of each Investment Asset, the name of the
record
and beneficial owner thereof, the location of the certificates, if any,
therefor, the maturity date, if any, and any stock or bond powers or other
authority for transfer granted with respect thereto.
3.29 Warranty
Obligations.
(a) Section
3.29(a) of the Company Disclosure Schedule sets forth (i) a list of all
forms of
written warranties, guarantees and written warranty policies of the Company
and
its Subsidiaries in respect of any of the Company’s and, as applicable, its
Subsidiaries’ products and services, which are currently in effect (the
“Warranty
Obligations”),
and
the duration of each such Warranty Obligation, (ii) each of the Warranty
Obligations which is subject to any dispute or, to the knowledge of the
Company,
threatened dispute and (iii) each claim exceeding $10,000 made or, to the
Company’s knowledge, threatened against Company during the two years immediately
preceding the date of this Agreement by a customer or other user of products
of
the Business manufactured by Company alleging that such product did not
comply
with any express or implied warranty regarding such product or was otherwise
defective or off-specification. True and correct copies of the Warranty
Obligations have been delivered to Parent prior to the execution of this
Agreement.
(b) Except
as
disclosed in Section 3.29(b) of the Company Disclosure Schedule, (i) there
have
not been any material deviations from the Warranty Obligations, and no
salesperson, employee or agent of the Company or any of its Subsidiaries
are
authorized to undertake obligations to any customer or other Person in
excess of
such Warranty Obligations and (ii) the balance sheet included in the Interim
Financial Statements reflects adequate reserves for Warranty Obligations.
All
products manufactured, designed, licensed, leased, rented or sold by the
Company
or any of its Subsidiaries (A) are and were free from material defects
in
construction and design and (B) satisfy any and all Contract or other
specifications related thereto to the extent stated in writing in such
Contracts
or specifications, in each case, in all material respects.
3.30 Foreign
Corrupt Practices Act
Neither
the Company, nor to the knowledge of the Company or its Subsidiaries, any
agent,
employee or other Person associated with or acting on behalf of the Company
or
any of its Subsidiaries has, directly or indirectly, used any corporate
funds
for unlawful contributions, gifts, entertainment or other unlawful expenses
relating to political activity, made any unlawful payment to foreign or
domestic
government officials or employees or to foreign or domestic political parties
or
campaigns from corporate funds, violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended, or made any bribe, rebate, payoff, influence
payment, kickback or other similar unlawful payment.
3.31 Financial
Projections/Operating Plan.
(a) The
Company has made available to Parent certain financial projections with
respect
to the Company’s business which projections were prepared for internal use only.
The Company makes no representation or warranty regarding the accuracy
of such
projections or as to whether such projections will be achieved, except
that the
Company represents and warrants that such projections were prepared in
good
faith and are based on assumptions believed by the Company to be reasonable
as
of the date of the preparation of said projections and the circumstances
then
prevailing.
(b) The
Company has made available to Parent and Parent has reviewed and approved
the
written budget or other written operating plan for fiscal year 2006 (the
“Operating
Plan”).
The
Company makes no representation or warranty regarding its ability to
successfully execute the Operating Plan, except that the Company represents
and
warrants that the Operating Plan was prepared in good faith and is based
on
assumptions believed by it to be reasonable as of the date of the preparation
of
said Operating Plan and the circumstances then prevailing.
3.32 Prepayment
of Company Debt
No
Indebtedness of the Company contains any restriction upon (i) the prepayment
of
any Indebtedness of the Company, (ii) the incurrence of Indebtedness by
the
Company or (iii) the ability of the Company to grant any Lien on the Assets
of
Properties of the Company. Section 3.32 of the Company Disclosure Schedule
sets
forth the amount of principal and unpaid interest outstanding under each
instrument evidencing Indebtedness of the Company, if any, that will accelerate
or become due or result in a right on the part of the holder of such
Indebtedness (with or without due notice or lapse of time) to require
prepayment, redemption or repurchase as a result of the execution of this
Agreement or the consummation of any of the transactions contemplated
hereby.
3.33 Potential
Conflict of Interest
To
the
knowledge of the Company, no officer or director of the Company owns or
holds,
directly or indirectly, any interest in (excepting holdings solely for
passive
investment purposes of securities of publicly held and traded entities
constituting less than five percent (5%) of the equity of any such entity),
or
is an officer, director, employee or consultant of any Person that is,
a
competitor, lessor, lessee, customer or supplier of the Company or which
conducts a business similar to any business conducted by the Company. To
the
knowledge of the Company, no officer or director of the Company (a) owns
or
holds, directly or indirectly, in whole or in part, any Company Intellectual
Property, (b) has any claim, charge, action or cause of action against
the
Company, except for claims for reasonable unreimbursed travel or entertainment
expenses, accrued vacation pay or accrued benefits under any employee benefit
plan existing on the date hereof, (c) has made, on behalf of the Company,
any
payment or commitment to pay any commission, fee or other amount to, or
to
purchase or obtain or otherwise contract to purchase or obtain any goods
or
services from, any other Person of which an officer or director of the
Company
(or, to the knowledge of the Company, a relative of any of the foregoing)
is a
partner or shareholder (except holdings solely for passive investment purposes
of securities of publicly held and traded entities constituting less than
five
percent (5%) of the equity of any such entity), (d) owes any money to the
Company or (e) has any material interest in any property, real or personal,
tangible or intangible, used in or pertaining to the business of the
Company.
3.34 Propriety
of Payments
(a)
No
unrecorded fund or asset of the Company has been established for any purpose,
(b) no accumulation or use of corporate funds of the Company has been made
without being properly accounted for in the books and records of the Company,
(c) to the knowledge of the Company, no payment has been made by or on
behalf of
the Company with the understanding that any part of such payment is to
be used
for any purpose other than that described in the documents supporting such
payment and (d) to the knowledge of the Company, neither the Company nor
any
director, officer, employee or agent of the Company or any other Person
associated with or acting for or on behalf of the Company has, directly
or
indirectly, made an, illegal contribution, gift, bribe, rebate, payoff,
influence payment, kickback or other payment to any Person, private or
public,
regardless of form, whether in money, property or services, (i) to obtain
favorable treatment for the Company or any Affiliate of the Company in
securing
business, (ii) to pay for favorable treatment for business secured for
the
Company or any Affiliate of the Company, (iii) to obtain special concessions,
or
for special concessions already obtained, for or in respect of the Company
or
any Affiliate of the Company or (iv) otherwise for the benefit of the Company
or
any Affiliate of the Company in violation of any federal, state, local,
municipal, foreign, international, multinational or other administrative
order,
constitution, law, ordinance, principle of common law, regulation, statute,
or
treaty (including existing site plan approvals, zoning or subdivision
regulations or urban redevelopment plans relating to Real Property). Neither
the
Company nor, to the knowledge of the Company, any current director, officer,
agent, employee or other Person acting on behalf of any the Company has
accepted
or received any unlawful contribution, payment, gift, kickback, expenditure
or
other item of value.
3.35 Section
280G Payments
All
agreements or arrangements of the Company that may result in the payment
of any
amount that would not be deductible by reason of Section 280G of the Code
have
been approved by such number of shareholders of the Company as is required
by
the terms of Section 280G(b)(5)(B) and have been obtained in a manner that
satisfies all applicable requirements of such Code Section 280(G)(b)(5)(B)
and
the applicable Treasury Regulations thereunder.
3.36 Cancellation
of Options, Warrants and other Rights to Purchase Company Capital
Stock.
The
holders of all options, warrants and other rights to purchase Company Capital
Stock have consented in writing to the cancellation of such Options, Warrants
and other rights to Purchase Company Capital Stock and have released the
Company
and its successors for any liability in connection therewith or all such
Options, Warrants and other Rights to Purchase Company Capital Stock have
been
accelerated and have been exercised or lapsed on or before the Closing.
Such
options, warrants and other rights to purchase Company Capital Stock have
been
cancelled on or before the Closing. Any waivers and consents obtained by
the
Company have been obtained without undue influence and to the knowledge
of the
Company are enforceable against the parties thereto.
3.37 Disclosure
No
representation or warranty made by the Company contained in this Agreement,
and
no statement contained in the Company Disclosure Schedule or in any certificate,
list or other writing furnished to Parent pursuant to any provision of
this
Agreement (including the Company Financials and the notes thereto), when
considered together with all other such statements, contains any untrue
statement of a material fact or omits to state a material fact necessary
in
order to make the statements herein or therein, in the light of the
circumstances under which they were made, not misleading. The Company has
provided Parent with all of the Contracts and Licenses heretofore requested
on
behalf of Parent in writing, and all other material information concerning
the
Company or its Subsidiaries in the possession, custody or control of the
Company
or its Subsidiaries.
3.38 Internal
Controls
The
Company maintains a system of internal accounting controls that management
reasonably believes is sufficient to provide reasonable assurance that
(a)
transactions are executed in accordance with management's general or specific
authorizations; (b) transactions are recorded as necessary to permit preparation
of financial statements in conformity with GAAP and to maintain asset
accountability; and (c) access to assets is permitted only in accordance
with
management's general and specific authorization. Except as disclosed on
Section
3.38 of the Company Disclosure Schedule, since January 1, 2002, neither
the
Company nor, to the knowledge of the Company, any director, officer, employee,
auditor, accountant or representative of the Company has received or has
otherwise become aware of any complaint, allegation, assertion or claim,
whether
written or oral, regarding the accounting or auditing practices, procedures,
methodologies, or methods of the Company or of its internal controls over
financial reporting, including any complaint, allegation, assertion or
claim
that the Company has engaged in questionable accounting or auditing practices.
There have been no instances of fraud, whether or not material, that occurred
during any period covered by the Company Financials involving the management
of
the Company or other employees of the Company who have a role in preparation
of
the Company's financial statements.
ARTICLE
IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub each hereby represents and warrants to the Company, subject
to
such exceptions as are clearly disclosed (referencing the specific numbered
and
lettered sections and subsections of this Article IV) in the disclosure
schedule
and schedule of exceptions (the “Parent
Disclosure Schedule”)
delivered herewith and dated as of the date hereof, and numbered with
corresponding numbered and lettered sections and subsections, that the
following
are true and correct as of the date hereof and shall be true and correct
as at
the Closing:
4.1 Organization
and Qualification
Parent
is
a corporation duly organized, validly existing and in good standing under
the
Laws of the State of New Jersey. Merger Sub is a corporation duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
Each of Parent and Merger Sub has full corporate power and authority to
conduct
its business as now conducted and as currently proposed to be conducted
and to
own, use, license and lease its Assets and Properties. Each of Parent and
Merger
Sub is duly qualified, licensed or admitted to do business and is in good
standing as a foreign corporation in each jurisdiction in which the ownership,
use, licensing or leasing of its Assets and Properties, or the conduct
or nature
of its business, makes such qualification, licensing or admission necessary,
except for such failures to be so duly qualified, licensed or admitted
and in
good standing that do not and could not reasonably be expected to have
a
Material Adverse Effect on Parent.
4.2 Authorization
and Validity of this Agreement
Each
of
Parent and Merger Sub has full corporate power and authority to execute
and
deliver this Agreement and the Ancillary Agreements to which it is a party,
to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The boards of directors of
Parent
and of Merger Sub approved the Merger and this Agreement on January 10,
2006.
The execution and delivery by Parent and Merger Sub of this Agreement and
the
Ancillary Agreements to which it is a party, the consummation by Parent
and
Merger Sub of the transactions contemplated hereby and thereby, and the
performance by the Parent and by Merger Sub of their respective obligations
hereunder and thereunder, have been duly and validly authorized by all
necessary
action by the board of directors of Parent and Merger Sub, and no other
action
on the part of the board of directors of Parent and Merger Sub, or any
corporate
action on the part of Parent or Merger Sub (other than the filing of the
Certificate of Merger as required by Delaware Law), is required to authorize
the
execution, delivery and performance of this Agreement and the Ancillary
Agreements to which it is a party and the consummation by Parent and Merger
Sub
of the transactions contemplated hereby and thereby. This Agreement and
the
Ancillary Agreements to which Parent and Merger Sub is a party have been
or will
be, as applicable, duly and validly executed and delivered by Parent and
Merger
Sub, as applicable, and, assuming the due authorization, execution and
delivery
hereof by the Company and/or the other parties thereto, constitutes or
will
constitute, as applicable, a legal, valid and binding obligation of Parent
and
Merger Sub, as applicable, enforceable against Parent and Merger Sub in
accordance with its respective terms, except as enforceability may be limited
by
bankruptcy laws, other similar laws affecting creditors’ rights and general
principles of equity effecting the availability of specific performance
and
other equitable remedies.
4.3 Capital
Stock
The
authorized capital stock of Parent consists of (i) 100,000,000 shares of
Parent
Common Stock, of which 48,243,280 shares were issued and outstanding as
of
December 2, 2005, and (ii) 5,882,352 shares of preferred stock, no par
value, of
which no shares are issued and outstanding (the "Parent
Capital Stock").
The
Parent Capital Stock is duly authorized, validly issued, fully paid and
non-assessable.
4.4 Issuance
of Parent Common Stock
The
shares of Parent Common Stock to be issued pursuant to the Merger have
been duly
authorized and, when issued pursuant to the Merger, will be validly issued,
fully paid, non-assessable and issued in compliance with applicable federal
and
state securities Laws subject to the truth and accuracy of the representations
made by the Company in Section 3.3.
4.5 SEC
Documents; Financial Statements
(a) Parent
has timely filed with the Securities and Exchange Commission (the "SEC")
and
NASDAQ and made available to the Company each statement, report, registration
statement (with the prospectus in the form filed pursuant to Rule 424(b)
of the
Securities Act), definitive proxy statement, and other publicly available
filings required to be filed by Parent prior to the Effective Time
(collectively, the "Parent SEC Documents"). As of their respective filing
dates,
the Parent SEC Documents comply in all material respects with the requirements
of the Exchange Act and the Securities Act. Parent is in compliance in
all
material respects with the provisions of the Sarbanes Oxley Act and the
rules
and regulations thereunder.
(b) The
audited consolidated balance sheets of Parent as of each of the fiscal
years
ended 2003, 2004 and 2005 and the related audited consolidated statements
of
operations, stockholders’ equity and cash flows for each of the fiscal years
then ended, in each case, together with the notes thereto and the unqualified
report of the Parent’s independent accountants with respect thereto (the
"Parent
Financials"),
have
been made available to the Company. The Parent Financials present fairly
the
financial condition and operating results of the Parent as of the dates
and
during the periods indicated therein.
4.6 No
Conflicts
The
execution and delivery by Parent and Merger Sub of this Agreement and the
Ancillary Agreements to which it is a party does not, and the performance
by
Parent and Merger Sub of its obligations under this Agreement and the Ancillary
Agreements to which it is a party and the consummation of the transactions
contemplated hereby and thereby do not, and will not:
(a) conflict
with or result in a violation or breach of, or default under (with or without
notice or lapse of time or both), any of the terms, conditions or provisions
of
(i) the articles of incorporation or bylaws of Parent or (ii) the certificate
of
incorporation or bylaws of Merger Sub.
(b) subject
to obtaining the consents, Approvals and actions, making the filings and
giving
the notices disclosed in Section 4.6(b) of Parent Disclosure Schedule,
conflict
with or result in a violation or breach of any Law or Order applicable
to Parent
and Merger Sub or its Assets or Properties; or
(c) except
as
would not have a Material Adverse Effect on Parent, (i) conflict with or
result
in a violation or breach of, (ii) constitute a default (or an event that,
with
or without notice or lapse of time or both, would constitute a default)
under,
(iii) require Parent to obtain any consent, Approval or action of, make
any
filing with or give any notice to any Person as a result of the terms of
(except
for (A) the filing of the Certificate of Merger; and (B) such consents,
Approvals, Orders, authorizations, registrations, declarations and filings
as
may be required under applicable state or federal securities Laws), (iv)
result
in or give to any Person any right of termination, cancellation, acceleration
or
modification in or with respect to, (v) result in or give to any person
any
additional rights or entitlement to increased, additional, accelerated
or
guaranteed payments or performance under, (vi) result in the creation or
imposition of (or the obligation to create or impose) any Lien upon Parent
or
Merger Sub or any of their respective Assets or Properties, or (vii) result
in
the loss of a material benefit under, any of the terms, conditions or provisions
of any Contract or License to which Parent or Merger Sub is a party or
by which
any of its Assets and Properties are bound.
4.7 Approvals.
(a) No
Approvals of Governmental or Regulatory Authorities relating to the business
conducted by Parent are required to be given to or obtained by Parent from
any
and all Governmental or Regulatory Authorities in connection with the
consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements (other than (i) the filing of the Certificate of Merger,
(ii) such consents, Approvals, Orders, authorizations, registrations,
declarations and filings as may be required under state or federal securities
Laws, (iii) filing with the NASD of a listing of additional shares with
respect
to the shares of Parent Common Stock issuable under this Agreement and
(iv)
Approvals of Governmental or Regulatory Authorities which could not reasonably
be expected to have a Material Adverse Effect on Parent).
(b) No
Approvals are required to be given to or obtained by Parent from any and
all
third parties (other than Governmental or Regulatory Authorities) in connection
with the consummation of the transactions contemplated by this Agreement
and the
Ancillary Agreements, other than such Approvals the failure of which to
make or
obtain as could not reasonably be expected to have a Material Adverse Effect
on
Parent.
4.8 Ownership
of Merger Sub; No Prior Activities
(a) As
of the
date hereof and the Effective Time, except for obligations or Liabilities
incurred in connection with its incorporation or organization and the
transactions contemplated by this Agreement and except for this Agreement
and
any other Contracts or arrangements contemplated by this Agreement, Merger
Sub
has not and will not have incurred, directly or indirectly, through any
subsidiary or affiliate, any obligations or Liabilities or engaged in any
business activities of any type or kind whatsoever or entered into any
Contracts
or arrangements with any Person.
4.9 Takeover
Statutes
(a) No
Takeover Statute applicable to Parent or its Subsidiaries is applicable
to the
Merger or the transactions contemplated hereby.
ARTICLE
V
MISCELLANEOUS
PROVISIONS
5.1 Notices
Any
and
all notices or other communications or deliveries required or permitted
to be
given or made pursuant to any of the provisions of this Agreement shall
be
deemed to have been duly given or made for all purposes if (i) hand delivered,
(ii) sent by a nationally recognized overnight courier for next Business
Day
delivery, or (iii) sent by confirmed facsimile transmission or email
transmission of a scanned PDF file (provided that the original is sent
by
overnight courier for next Business Day delivery) as follows:
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If
to Buyer:
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If
to Seller:
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EMCORE
Corporation
Attn:
Legal Department
145
Belmont Drive
Somerset,
NJ 08873
Fax
No.: (732) 302-9783
|
K2
OPTRONICS, Inc.
1288
Hammerwood Avenue
Sunnyvale,
CA 94089
Telephone:
408-747-4521
Facsimile:
408-747-5921
Attention:
Chief Financial Officer
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with
a copy to:
|
with
a copy to:
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Skadden,
Arps, Slate, Meagher & Flom LLP
525
University Avenue, Suite 1100
Palo
Alto, California 94301
Telephone:
(650) 470-4630
Facsimile:
(650) 470-4570
Attn:
Marc R. Packer, Esq.
|
Latham
& Watkins LLP
135
Commonwealth Drive
Menlo
Park, California 94025
Telephone:
(650) 463-2606
Facsimile:
(650) 463-2600
Attn:
Christopher L. Kaufman, Esq.
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or
at
such other address as any party may specify by notice given to the other
party
in accordance with this Section 5.1. The date of giving of any such notice
shall
be the date of hand delivery, the next Business Day after delivery to the
overnight courier service, the date sent by confirmed facsimile transmission,
or
the date sent by email transmission of a scanned PDF file.
5.2 Nonsurvival
of Company Representations and Warranties
For
the
avoidance of doubt, the parties understand and agree that none of the
representations and warranties of the Company or Parent shall survive the
Closing and none of the stockholders of the Company shall have any
responsibility with respect to such representations and warranties.
5.3 Entire
Agreement
This
Agreement and the Exhibits and Schedules hereto, including the Company
Disclosure Schedule and Parent Disclosure Schedule, (a) constitute the
entire
Agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral,
among
the parties with respect to the subject matter hereof, except for the
Confidentiality Agreement (which shall continue in full force and effect
and
shall survive any termination of this Agreement or the Closing in accordance
with its terms), and (b) shall be deemed to have the same effect on construction
or interpretation of this Agreement as if set forth herein.
5.4 Further
Assurances; Post-Closing Cooperation
At
any
time or from time to time after the Closing, the parties shall execute
and
deliver to the other parties such other documents and instruments, provide
such
materials and information and take such other actions as the other parties
may
reasonably request to consummate the transactions contemplated by this
Agreement
and otherwise to cause the other parties to fulfill their obligations under
this
Agreement and the transactions contemplated hereby. Each party agrees to
use
commercially reasonable efforts to cause the conditions to its obligations
to
consummate the Merger to be satisfied.
5.5 Waiver
Any
term
or condition of this Agreement may be waived at any time by the party that
is
entitled to the benefit thereof, but no such waiver shall be effective
unless
set forth in a written instrument duly executed by or on behalf of the
party
waiving such term or condition. No waiver by any party of any term or condition
of this Agreement, in any one or more instances, shall be deemed to be
or
construed as a waiver of the same or any other term or condition of this
Agreement on any future occasion. All remedies, either under this Agreement
or
by Law or otherwise afforded, will be cumulative and not
alternative.
5.6 Third-Party
Beneficiaries
Except
as
provided in Section 5.15, the terms and provisions of this Agreement are
intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties
to
confer third-party beneficiary rights, and this Agreement does not confer
any
such rights, upon any other Person other than the Company stockholders
entitled
to receive Merger Consideration pursuant to Article II.
5.7 No
Assignment; Binding Effect
Neither
this Agreement nor any right, interest or obligation hereunder may be assigned
(by operation of law or otherwise) by any party without the prior written
consent of the other parties and any attempt to do so will be void. Subject
to
the preceding sentence, this Agreement is binding upon, inures to the benefit
of
and is enforceable by the parties hereto and their respective successors
and
assigns.
5.8 Headings
The
headings and table of contents used in this Agreement have been inserted
for
convenience of reference only and do not define or limit the provisions
hereof.
5.9 Invalid
Provisions
If
any
provision of this Agreement is held to be illegal, invalid or unenforceable
under any present or future Law, and if the rights or obligations of any
party
hereto under this Agreement will not be materially and adversely affected
thereby, (a) such provision will be fully severable, (b) this Agreement
will be
construed and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part hereof, (c) the remaining provisions of this
Agreement will remain in full force and effect and will not be affected
by the
illegal, invalid or unenforceable provision or by its severance herefrom
and (d)
in lieu of such illegal, invalid or unenforceable provision, there will
be added
automatically as a part of this Agreement a legal, valid and enforceable
provision as similar in terms to such illegal, invalid or unenforceable
provision as may be possible.
5.10 Governing
Law, Submission to Jurisdiction
This
Agreement, any Ancillary Agreements and any other closing documents shall
be
governed by and construed in accordance with the Laws of the State of Delaware
as applied to Contracts entered into by Delaware residents and performed
entirely in Delaware. Each party hereto irrevocably agrees that any legal
action
or proceeding with respect to this Agreement or for recognition and enforcement
of any judgment in respect hereof brought by another party hereto or its
successors or assigns may be brought and determined by either a state court
or
federal court sitting in Los Angeles, California and each party hereto
hereby
irrevocably submits with regard to any such action or proceeding for itself
and
in respect to its property, generally and unconditionally, to the nonexclusive
jurisdiction of the aforesaid courts. Each party hereto hereby irrevocably
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any action or proceeding with respect to this Agreement,
(a)
any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason other than the failure to serve process
in
accordance with this Article V, (b) that it or its property is exempt or
immune
from jurisdiction of any such court or from any legal process commenced
in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable Law, that (i) the
suit,
action or proceeding in any such court is brought in an inconvenient forum,
(ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
5.11 WAIVER
OF TRIAL BY JURY
IN
ANY
ACTION OR PROCEEDING ARISING HEREFROM, THE PARTIES HERETO CONSENT TO TRIAL
WITHOUT A JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY
PARTY
HERETO AGAINST THE OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT, REGARDLESS OF THE FORM OF
ACTION OR
PROCEEDING.
5.12 Negotiation
The
parties hereto agree that this Agreement is the product of negotiation
between
sophisticated parties and individuals, all of whom were represented by
counsel,
and each of whom had an opportunity to participate in and did participate
in,
the drafting of each provision hereof. Accordingly, ambiguities in this
Agreement, if any, shall not be construed strictly or in favor of or against
any
party hereto but rather shall be given a fair and reasonable construction
without regard to the rule of contra proferentem.
5.13 Counterparts
This
Agreement may be executed in any number of counterparts, each of which
will be
deemed an original, but all of which together will constitute one and the
same
instrument. The facsimile transmission (or email transmission of a scanned
PDF
file) of any original signed counterpart of this Agreement (or any amendment
hereto or any other document delivered pursuant hereto) shall be treated
for all
purposes as the delivery of an original signed counterpart; provided that
the
original signed counterpart is sent by overnight courier for next Business
Day
delivery.
5.14 Specific
Performance
The
parties hereto agree that irreparable damage would occur in the event that
any
of the provisions of this Agreement were not performed in accordance with
their
specific terms or were otherwise breached. Notwithstanding any other provision
to the contrary herein, it is agreed that the parties shall be entitled
to an
injunction or injunctions to prevent breaches of this Agreement and to
enforce
specifically the terms and provisions hereof without the requirement of
a
posting of a bond or other indemnity in any court of the United States
or any
state having jurisdiction, this being in addition to any other remedy to
which
they are entitled at law or in equity.
5.15 Construction.
(a) Unless
the context of this Agreement otherwise requires, (i) words of any gender
include each other gender and the neuter, (ii) words using the singular
or
plural number also include the plural or singular number, respectively,
(iii)
the terms “hereof,” “herein,” “hereby” and derivative or similar words refer to
this entire Agreement as a whole and not to any particular Article, Section
or
other subdivision, (iv) the terms “Article” or “Section” or other subdivision
refer to the specified Article, Section or other subdivision of the body
of this
Agreement, (v) the phrases “ordinary course of business” and “ordinary course of
business consistent with past practice” refer to the business and practice of
the Company, (vi) the words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without limitation,” and (vii) when a
reference is made in this Agreement to Exhibits, such reference shall be
to an
Exhibit to this Agreement unless otherwise indicated. All accounting terms
used
herein and not expressly defined herein shall have the meanings given to
them
under GAAP. When used herein, the terms “party” or “parties” refer to Parent and
Merger Sub, on the one hand, and the Company, on the other, and the terms
“third
party” or “third parties” refers to Persons other than Parent, Merger Sub or the
Company.
(b) When
used
herein, the phrase “to the knowledge of” any Person, “known to” any Person or
any similar phrase, means (i) with respect to any Person who is an individual,
the actual knowledge of such Person, (ii) with respect to any other Person,
the
actual knowledge of the directors and officers of such Person and other
individuals that have a similar position or have similar powers and duties
as
the officers and senior management of such Person, and (iii) in the case
of each
of (i) and (ii), the knowledge of facts that such individuals should have
after
due inquiry. For this purpose, “due inquiry” with respect to any matter means
inquiry of and consultations with (A) the directors and officers of such
Person
and other individuals that have a similar position or have similar powers
and
duties as such officers and directors, (B) other employees of and the advisors
to such Person, including legal counsel and outside auditors, who have
principal
responsibility for the matter in question or are otherwise likely to have
information relevant to the matter, and (C) the stockholders owning more
than
ten percent (10%) of the equity interests, by vote or value, of such Person.
(c) When
a
reference is made to “material” or any derivative or similar words in connection
with the Company and such reference is not defined, material shall mean
an
amount equal to individually or in the aggregate twenty-five thousand dollars
($25,000).
5.16 Indemnification
of Directors and Officers.
Parent
shall cause the Surviving Corporation to continue to honor all rights to
indemnification and limitations on liability existing in favor of those
persons
who are or were directors and officers of the Company or any of its Subsidiaries
(the “Indemnified
Persons”)
as
provided in the Company bylaws or any agreement in effect as of the Effective
Time providing for indemnification by the Company or any of its Subsidiaries
of
any Indemnified Person.
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement
to be signed by their duly authorized representatives, all as of the date
first
written above.
|
K2
OPTRONICS, INC.
|
EMCORE
CORPORATION
|
|
By:
/s/ Raj Kapany
|
By:
/s/ Howard Brodie
|
|
Name:
Raj Kapany
Title:
President and Chief Executive Officer
|
Name:
Howard Brodie
Title:
Executive Vice President
|
|
EMCORE
OPTOELECTRONICS ACQUISITION CORPORATION
|
|
|
By:
/s/ Howard Brodie
|
|
|
Name:
Howard Brodie
Title:
Vice President
|