Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PLUG POWER INC. ("PARENT"),
MONMOUTH ACQUISITION CORP. ("MERGERCO"),
AND
H POWER CORP. (THE "COMPANY")
Dated as of November 11, 2002
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER.........................................................2
1.1. The Merger........................................................2
1.2. Effective Time....................................................2
1.3. Closing...........................................................2
1.4. Tax Consequences..................................................2
1.5. Taking of Necessary Action; Further Action........................3
ARTICLE II DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION................3
2.1. Directors of the Surviving Corporation and the Company
Subsidiaries......................................................3
2.2. Officers of the Surviving Corporation.............................3
ARTICLE III EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS..................................................4
3.1. Effect on Capital Stock............................................4
3.2. Company Stock Options and Related Matters..........................9
ARTICLE IV PAYMENT OF SHARES.................................................10
4.1. Payment for Shares of Company Common Stock........................10
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................13
5.1. Existence; Good Standing; Authority; Compliance With Law..........13
5.2. Authorization, Validity and Effect of Agreements..................14
5.3. Capitalization....................................................15
5.4. Subsidiaries......................................................16
5.5. Other Interests...................................................17
5.6. No Violation; Governmental Consents...............................17
5.7. Commission Documents..............................................18
5.8. Litigation........................................................18
5.9. Absence of Certain Changes........................................19
5.10. No Undisclosed Liabilities........................................19
5.11. Taxes.............................................................20
5.12. Properties........................................................22
5.13. Intellectual Property.............................................23
5.14. Environmental Matters.............................................26
5.15. Employee Benefit Plans............................................28
5.16. Labor Relations and Employment Matters............................30
5.17. No Brokers........................................................32
5.18. Opinion of Financial Advisor......................................33
5.19. Vote Required.....................................................33
5.20. Takeover Laws.....................................................33
5.21. Material Contracts................................................33
5.22. Collectibility of Accounts Receivable.............................35
(i)
5.23. Accounting Policies...............................................35
5.24. Customers, Distributors and Suppliers.............................36
5.25. Product Liability.................................................36
5.26. Certain Business Practices; Transactions in Securities............37
5.27. Insurance.........................................................37
5.28. Reorganization....................................................38
5.29. Ownership of Parent Common Stock; Affiliates and Associates.......38
5.30. No Contracts with Affiliates......................................38
5.31. Disclosure........................................................38
5.32. Board Approval....................................................38
5.33. Registration Statement; Proxy Statement...........................38
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO.............39
6.1. Existence; Good Standing; Authority; Compliance with Law..........39
6.2. Authorization, Validity and Effect of Agreements..................41
6.3. Capitalization....................................................41
6.4. Subsidiaries......................................................42
6.5. Other Interests...................................................43
6.6. No Violation; Governmental Consents...............................43
6.7. Commission Documents..............................................44
6.8. Litigation........................................................44
6.9. Absence of Certain Changes........................................44
6.10. No Undisclosed Liabilities........................................45
6.11. Taxes.............................................................45
6.12. Intellectual Property.............................................45
6.13. Environmental Matters.............................................47
6.14. Material Contracts................................................48
6.15. Labor Relations and Employee Matters..............................49
6.16. No Brokers........................................................49
6.17. Ownership of Company Common Stock; Affiliates and Associates......50
6.18. Board Approval....................................................50
6.19. Opinion of Financial Advisor......................................50
6.20. Registration Statement; Proxy Statement...........................50
6.21. Disclosure........................................................51
ARTICLE VII COVENANTS.........................................................51
7.1. No Solicitations..................................................51
7.2. Conduct of Business by the Company................................53
7.3. Meetings of Stockholders..........................................56
7.4. Proxy Statement; Registration Statement; Filing Cooperation.......57
7.5. Nasdaq Listing Application........................................59
7.6. Additional Agreements; Regulatory Filings.........................59
7.7. Affiliates........................................................60
(ii)
7.8. Fees and Expenses.................................................61
7.9. Officers' and Directors' Indemnification..........................61
7.10. Access to Information; Confidentiality............................62
7.11. Financial and Other Statements....................................62
7.12. Advise of Change..................................................63
7.13. Public Announcements..............................................63
7.14. Employee Benefit Arrangements.....................................63
7.15. Delisting.........................................................63
7.16. Further Assurances................................................63
7.17. Third Party Consents..............................................64
7.18. Director..........................................................64
7.19. WARN Act Notices..................................................64
7.20. Canadian Investment Tax Credit....................................64
7.21. Additional Liabilities, Purchases, Asset Acquisitions and
Dispositions......................................................64
7.22. Transfer Act Compliance...........................................64
7.23. Preliminary Net Cash Statement....................................65
7.24. Chief Restructuring Officer.......................................65
7.25. Parachute Agreements..............................................65
ARTICLE VIII CONDITIONS TO THE MERGER.........................................65
8.1. Conditions to the Obligations of Each Party to Effect the
Merger............................................................65
8.2. Conditions to Obligations of the Company..........................66
8.3. Conditions to Obligations of Parent...............................67
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.................................68
9.1. Termination.......................................................68
9.2. Effect of Termination.............................................70
9.3. Amendment.........................................................72
9.4. Extension; Waiver.................................................72
ARTICLE X GENERAL PROVISIONS................................................72
10.1. Notices...........................................................72
10.2. Interpretation....................................................73
10.3. Non-Survival of Representations and Warranties....................73
10.4. Miscellaneous.....................................................74
10.5. Assignment........................................................74
10.6. Severability......................................................74
10.7. Choice of Law/Consent to Jurisdiction.............................74
10.8. Rules of Construction.............................................75
10.9. Defined Terms.....................................................75
(iii)
EXHIBITS
Exhibit A - Form of Voting Agreement
Exhibit B - Form of Affiliate Letter
Exhibit C - Form of Sofinov Voting Agreement
COMPANY DISCLOSURE SCHEDULE
Section 3.1(D) Severance
Section 3.1(E) Company Bonus Arrangements
Section 3.2 Stock Options
Section 5.1(d) Organizational Documents
Section 5.3 Capitalization
Section 5.4 Subsidiaries
Section 5.5 Other Interests
Section 5.6 No Violation; Governmental Consents
Section 5.8 Litigation
Section 5.9 Absence of Certain Changes
Section 5.10(a) Undisclosed Liabilities
Section 5.10(b) Products Under Warranty
Section 5.11(b) Taxes
Section 5.11(c) Taxes
Section 5.11(d) Taxes
Section 5.11(e) Taxes
Section 5.11(f) Taxes
Section 5.11(g) Taxes
Section 5.11(i) Taxes
Section 5.12(a) Real Property
Section 5.12(b) Encumbrances
Section 5.13(a) Intellectual Property
Section 5.13(b) Intellectual Property
Section 5.13(c) Intellectual Property
Section 5.13(d)(iv) Products
Section 5.14(c) Environmental Laws
Section 5.14(f) Hazardous Materials
Section 5.14(g) Environmental Laws
Section 5.15(a) Employee Programs
Section 5.15(c) Employee Programs
Section 5.15(f) Employee Programs
Section 5.16 Labor Relations and Employment Matters
Section 5.21(a) Material Contracts
Section 5.21(b) Third Party Consents
Section 5.21(c) Employment Agreements
(iv)
Section 5.21(d) Liabilities to ECO and EFC
Section 5.22 Accounts Receivable
Section 5.23(a) Accounting Policies
Section 5.23(b) Management Letters
Section 5.24(a) Customers, Distributors and Suppliers
Section 5.24(b) Customers, Distributors and Suppliers
Section 5.25 Product Liability
Section 5.26(b) Cash Investment Policy
Section 5.27 Insurance
Section 5.30 Contracts with Affiliates
Section 7.2 Conduct of Business
Section 7.2(iv) Conduct of Business
Section 7.7 Affiliates
Section 7.25 Parachute Agreements
PARENT DISCLOSURE SCHEDULE
Section 6.1(d) Organizational Documents
Section 6.3 Capitalization
Section 6.4 Subsidiaries
Section 6.5 Other Interests
Section 6.6 No Violation; Government Consents
Section 6.7 Commission Documents
Section 6.8 Litigation
Section 6.9 Absence of Certain Changes
Section 6.10 Undisclosed Liabilities
Section 6.12(a) Intellectual Property
Section 6.12(b) Intellectual Property
Section 6.12(c) Intellectual Property
Section 6.12(d) Intellectual Property
Section 6.13(b) Environmental Laws
Section 6.13(e) Hazardous Materials
Section 6.14(a) Material Contracts
Section 6.14(b) Third Party Consents
Section 6.15 Labor Relations and Employee Matters
Section 6.17 Ownership of Company Common Stock; Affiliates and Associates
(v)
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of
November 11, 2002, by and among PLUG POWER INC., a Delaware corporation
("Parent"), MONMOUTH ACQUISITION CORP., a Delaware corporation and a
wholly-owned subsidiary of Parent ("MergerCo"), and H POWER CORP., a Delaware
corporation (the "Company").
RECITALS
WHEREAS, the respective Boards of Directors of Parent, MergerCo and the
Company have approved the merger of MergerCo with and into the Company (the
"Merger") in accordance with the Delaware General Corporation Law (the "DGCL")
and, upon the terms and subject to the conditions set forth in this Agreement,
holders of shares of common stock, par value $0.001 per share, of the Company
(the "Company Common Stock") issued and outstanding immediately prior to the
Effective Time (as defined in Section 1.2) will be entitled, subject to the
terms and conditions hereof, to the right to receive shares of common stock, par
value $0.01 per share, of Parent (the "Parent Common Stock") (plus cash in lieu
of fractional shares);
WHEREAS, the Board of Directors of the Company (the "Company Board") has,
in light of and subject to the terms and conditions set forth herein, (a)
determined that (i) the Exchange Ratio in the Merger is fair to the stockholders
of the Company, and (ii) the Merger is in the best interests of the Company and
its stockholders, and (b) resolved to approve and adopt this Agreement and the
transactions contemplated or required by this Agreement, including the Merger
(collectively, the "Transactions"), and to recommend approval and adoption by
the stockholders of the Company of this Agreement and the Transactions;
WHEREAS, the Board of Directors of Parent has, in light of and subject to
the terms and conditions set forth herein, (a) determined that (i) the Exchange
Ratio in the Merger is fair from a financial point of view to Parent and (ii)
the Merger is in the best interests of Parent and its stockholders and (b)
resolved to approve and adopt this Agreement and the Transactions;
WHEREAS, as a condition to the willingness of Parent and MergerCo to enter
into this Agreement, certain stockholders of the Company (the "Voting Agreement
Stockholders") have entered into a Voting Agreement (the "Voting Agreement"),
dated as of the date hereof, with Parent and MergerCo, substantially in the form
attached hereto as Exhibit A, pursuant to which each Voting Agreement
Stockholder has agreed, among other things, to vote such Voting Agreement
Stockholder's shares of Company Common Stock in favor of the approval of the
Transactions, upon the terms and subject to the conditions set forth in the
Voting Agreement;
WHEREAS, for federal income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions of Sections 368(a)(1)(A)
and 368(a)(2)(E) of the Internal Revenue Code of 1986, as amended, (the "Code"),
and this Agreement is intended to be and is adopted as a plan of reorganization
for purposes of Sections 354, 361 and 368 of the Code; and
WHEREAS, Parent, MergerCo and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Transactions, and also to prescribe various conditions to the Transactions.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein
and other valuable consideration, the receipt and adequacy whereof are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1. The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time, the Company and MergerCo shall consummate the Merger
pursuant to which (a) MergerCo shall be merged with and into the Company and the
separate corporate existence of MergerCo shall thereupon cease, (b) the Company
shall be the successor or surviving corporation in the Merger (sometimes
hereinafter referred to as the "Surviving Corporation"), shall continue to be
governed by the laws of the State of Delaware and the DGCL, and (c) the separate
corporate existence of the Company with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger. The Merger shall
have the effects specified in Section 259 of the DGCL. The Certificate of
Incorporation of MergerCo (the "MergerCo Certificate"), as in effect at the
Effective Time, shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter amended as provided therein or by applicable law.
The Bylaws of MergerCo (the "MergerCo Bylaws"), as in effect at the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter amended
as provided therein or by applicable law.
1.2. Effective Time. Subject to the provisions of this Agreement, as soon
as practicable after all of the conditions set forth in Article VIII shall have
been satisfied or, if permissible, waived, the parties will file a certificate
of merger (the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and will make all other filings or recordings required
under the DGCL in order to effect the Merger. The Merger will become effective
at such time as the Certificate of Merger has been duly filed with the Secretary
of State of the State of Delaware, or at such subsequent date or time as
MergerCo and the Company agree and specify in the Certificate of Merger (the
time the Merger becomes effective being herein referred to as the "Effective
Time").
1.3. Closing. The closing of the Merger (the "Closing") shall take place
at such time and on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or, if permissible, waiver
of all of the conditions set forth in Article VIII hereof (the "Closing Date"),
at the offices of Goodwin Procter LLP, Exchange Place, Boston, Massachusetts
02109, unless another date or place is agreed to by the parties hereto.
1.4. Tax Consequences. It is intended that the Merger will constitute a
reorganization within the meanings of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code and that this Agreement constitutes a "plan of reorganization" for
purposes of Sections 354 and 361 of the Code. Parent, MergerCo and the Company
will be a party, within the meaning of Section 368(b) of the Code, to such
reorganization. Each of Parent, MergerCo and the Company will treat the
2
Merger as such reorganization and report consistently therewith for federal,
state, local and foreign income tax purposes.
1.5. Taking of Necessary Action; Further Action. Each of Parent, MergerCo
and the Company shall use its reasonable best efforts to take all such actions
as may be necessary or appropriate in order to effectuate the Merger under the
DGCL as promptly as practicable following the requisite approval by the
stockholders of the Company. If at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, properties, rights, privileges, powers and franchises of both the
Company and MergerCo, the officers of such corporations are fully authorized in
the name of their corporation or otherwise to take, and shall take, all such
lawful and necessary action.
ARTICLE II
DIRECTORS AND OFFICERS
OF THE SURVIVING CORPORATION
2.1. Directors of the Surviving Corporation and the Company Subsidiaries.
The directors of MergerCo immediately prior to the Effective Time shall be the
directors of the Surviving Corporation immediately after the Effective Time
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation. The
Company will cause each director of any Company Subsidiary to resign as of the
Effective Time, unless otherwise directed by Parent. Such resignation will
include the termination of (a) any indemnification agreement between the Company
and/or any Company Subsidiary and such director and (b) any registration rights
with respect to any Company Common Stock held by such director. Simultaneously
with the receipt of each resignation, Parent shall provide such director with a
letter confirming Parent's acknowledgement that the recipient is a third party
beneficiary, in accordance with Section 10.4 of this Agreement, of the
indemnification provisions of section 7.9 of this Agreement.
2.2. Officers of the Surviving Corporation. The officers of MergerCo
immediately prior to the Effective Time shall be the officers of the Surviving
Corporation immediately after the Effective Time until their successors shall
have been duly elected or appointed and qualified or until their earlier death,
resignation or removal in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation. The Company will cause each officer of each
Company Subsidiary to resign as of the Effective Time, unless otherwise directed
by Parent. Such resignation will include the termination of (a) any
indemnification agreement between the Company and/or any Company Subsidiary and
such officer and (b) any registration rights with respect to Company Common
Stock held by such officer. Simultaneously with the receipt of each resignation,
Parent shall provide such officer with a letter confirming Parent's
acknowledgement that the recipient is a third party beneficiary, in accordance
with Section 10.4 of this Agreement, of the indemnification provisions of
section 7.9 of this Agreement.
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ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK
OF THE CONSTITUENT CORPORATIONS
3.1. Effect on Capital Stock.. As of the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any shares of Company
Common Stock or any shares of capital stock of MergerCo:
(a) Each issued and outstanding share of Company Common Stock owned
by Parent, MergerCo or any other direct or indirect Subsidiary (as defined in
Section 10.2 hereof) of Parent (each, a "Parent Subsidiary" and collectively,
the "Parent Subsidiaries") or by the Company or any other direct or indirect
Subsidiary of the Company (each, a "Company Subsidiary" and collectively, the
"Company Subsidiaries"), including, without limitation, shares of Company Common
Stock in the treasury of the Company immediately prior to the Effective Time,
shall be canceled and retired and cease to exist without any conversion thereof
and no payment or distribution shall be made with respect thereto.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time, other than those shares referred to in
Section 3.1(a), shall be canceled and shall be converted automatically into and
represent the right to receive that number (the "Exchange Ratio") of shares of
fully paid and non-assessable shares of Parent Common Stock equal to the
quotient obtained by dividing (i) (A) the Transaction Value Price (as defined in
Section 3.1(c)(ii) below) divided by (B) the Average Parent Common Stock Price
by (ii) the number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (collectively, the "Merger
Consideration") plus cash in lieu of fractional shares of Parent Common Stock,
if any, pursuant to Section 4.1(e). The Exchange Ratio shall be subject to
adjustment as provided in Section 3.1(c) and Section 9.1(e) below.
(c) The Exchange Ratio shall be adjusted as follows:
(i) If the Average Parent Common Stock Price is:
(A) less than or equal to $6.47 and greater than or equal to
$5.29, then the Exchange Ratio shall equal the Exchange Ratio that
would be determined pursuant to Section 3.1(b) using the Average
Parent Common Stock Price;
(B) greater than $6.47, then the Exchange Ratio shall equal
the Exchange Ratio that would be determined pursuant to Section
3.1(b) assuming the Average Parent Common Stock Price is $6.47,
4
(C) less than $5.29, then the Exchange Ratio shall equal the
Exchange Ratio that would be determined pursuant to Section 3.1(b)
assuming the Average Parent Common Stock Price is $5.29
The "Average Parent Common Stock Price" shall mean the Daily Volume
Weighted Average Price of Parent Common Stock for the Random Trading Days.
"Random Trading Days" means the ten (10) trading days selected by lot out of the
twenty (20) trading days ending on and including the second trading day
preceding the Effective Time. The Random Trading Days shall be selected by lot
by designated representatives of Parent and the Company at 5:00 p.m. Boston time
on the second trading day preceding the Effective Time. "Daily Volume Weighted
Average Price" shall mean the daily volume weighted average price based on
trading between 9:30 a.m. and 4:00 p.m. Eastern Time as reported by Bloomberg
Financial L.P. For purposes of this Agreement, if after the date of this
Agreement and on or prior to the Closing Date the outstanding shares of Parent
Common Stock or Company Common Stock shall be changed into a different number of
shares by reason of any reclassification, recapitalization, stock split, reverse
stock split, combination or exchange of shares or any dividend within such
period, or any similar event shall occur, the Exchange Ratio shall be adjusted
accordingly to provide to the shareholders of the Company the same economic
effect as contemplated by this Agreement absent such reclassification,
recapitalization, stock split, reverse stock split, combinations, exchange,
dividend or similar event.
(ii) The "Transaction Value Price" shall initially be
$50,675,000; provided, that the Transaction Value Price shall be adjusted
as follows if the Net Cash, as of the Effective Time, is:
(A) less than $36,675,000, in which case the Transaction
Value Price shall be adjusted to equal (x) $50,675,000 minus (y) the
difference between (I) $36,675,000 and (II) the Net Cash;
(B) equal to $36,675,000, then there shall be no adjustment
to the Transaction Value Price;
(C) greater than $36,675,000, in which case the Transaction
Value Price shall be adjusted to equal (x) $50,675,000 plus (y) the
difference between (I) the Net Cash and (II) $36,675,000; and
"Net Cash" is defined as, as of the Effective Time, with respect to the
Company and the Company Subsidiaries,
(i) the sum of:
(A) cash, cash equivalents and short term investments; plus
5
(B) 15% of the amount by which the aggregate value of
inventories exceeds $2,174,000 (subject to a maximum addition to Net
Cash of $30,000); plus
(C) $500,000, but only in the event Parent has received
written confirmation of payment to ECO or EFC of $500,000 with respect
to the sustainable fuel cell community payment required under Section
3(a) of the ECO Termination Agreement; plus
(D) the aggregate amounts, if any, of severance paid by the
Company from the date hereof through the Effective Time to any
Employee listed on Section 3.1(D) of the Company Disclosure Schedule
in connection with the termination of an Employee, up to a maximum
amount with respect to any individual Employee of the amount set forth
on Section 3.1(D) of the Company Disclosure Schedule next to the name
of such Employee; plus
less
(ii) the sum of:
(A) current liabilities (including, without limitation,
warranty reserves), excluding the amount of any current liability to
the extent such amount is otherwise included in the Net Cash Statement
pursuant to clauses (B) through (M) of Section (ii) of this definition
of Net Cash; plus
(B) amounts payable to ECO and EFC including, without
limitation, under the ECO Termination Agreement, other than (i) the
sustainable fuel cell community payment of $500,000 and (ii) the
$3,715,000 payment upon closing of the Merger; plus
(C) Intentionally Omitted; plus
(D) the aggregate amount of any and all Liabilities of the
Company and the Company Subsidiaries that are not a Company Signing
Liability, including without limitation, fees payable to the Company's
legal, financial and accounting advisors and other fees incurred in
connection with the Transactions (assuming consummation of the
Transactions); but excluding (1) payment obligations to Millenium
Capital (for amounts less than or equal to $180,000), pursuant to the
Consulting Agreement dated as of March 15, 2000 between the Company
and Millenium Capital Resources, LLC, without giving effect to any
default thereunder by the Company, (2) any and all severence
obligations as listed in Section 3.1(D) of the Company Disclosure
Schedules and (3) lease obligations for periods after the Closing for
existing facilities as listed on Section 5.12(a) of the Company
Disclosure Schedules, without giving effect to any default under the
applicable leases by the Company; plus
6
(E) to the extent not accrued on the Net Cash Statement,
any amounts which may be payable by the Company or Parent under the
Stay Bonus Agreements and under those certain Company bonus
arrangements with management set forth on Section 3.1(E) of the
Company Disclosure Schedule; plus
(F) the amounts, if any, that accounts receivable
(including unbilled receivables and tax credit receivable), net of
allowance for doubtful accounts, are less than $533,229 on the Net
Cash Statement (up to a maximum amount of $293,000); provided, that,
for purposes of this Section (ii)(D) of the definition of Net Cash,
any and all accounts receivable with respect to Peugeot Citroen
Automobiles S.A ("Peugeot") shall be excluded from such calculations;
plus
(G) $360,000, unless at or prior to the delivery of the Net
Cash Statement Parent has received correspondence from an authorized
individual at Peugeot stating that the existing Peugeot account
receivable in the amount of approximately $360,000 is valid and not in
dispute, and that Peugeot fully intends to pay the entire amount
thereof; plus
(H) the amounts, if any, that the prepaid and other current
assets, are less than $1,191,359 (up to a maximum amount of $449,000);
plus
(I) to the extent that the Company's service, maintenance
and warranty obligations relating to the four fuel cell installations
at the locations described in Section 3(c) of the ECO Termination
Agreement have not been terminated in full at or prior to the delivery
of the Net Cash Statement by the Company, $35,000 for each unit for
which such obligations have not been terminated; plus
(J) 15% of the amount by which the aggregate value of
inventories is less than $2,174,000; plus
(K) any amounts which may be paid by the Company or Parent
for the directors' and officers' "tail policy" in accordance with
Section 7.9 of this Agreement, to the extent such amounts have either
not (i) been paid by the Effective Time or (ii) resulted in an
equivalent reduction in the total amount of cash and cash equivalents
in this definition of Net Cash; plus
(L) the amounts of Liabilities existing as of the date of
this Agreement that also exist as of the date of delivery of the Net
Cash Statement attributable to binding obligations or commitments of
the Company and its Subsidiaries to purchase materials, components
(including sub-systems) and replacement parts; plus
7
(M) $180,284, unless at or prior to the delivery of the Net
Cash Statement correspondence from an authorized person at the
National Institute of Standards and Technology has been delivered to
Parent stating that the Company and its Subsidiaries have no payment
obligations to the National Institute of Standards and Technology,
including any obligation with respect to the refund request referred
to in Section 5.10(a) of the Company Disclosure Schedule.
Notwithstanding anything to the contrary contained herein, none of the
items in Sections (ii)(A-M) of the definition of Net Cash shall be deemed to be
a Company Signing Liability.
To facilitate the determination of the Net Cash, at least ten (10) Business
Days prior to the date of the meeting of Parent's stockholders contemplated in
Section 7.3, the Company shall deliver to Parent and MergerCo a statement
prepared by the Company with consultation of its outside advisors, as necessary
(hereinafter the "Net Cash Statement"), which shall be prepared in accordance
with GAAP applied consistently with the past practices of the Company (except
for "Liabilities," which includes non-GAAP liabilities pursuant to Section 5.10
herein and except to the extent that items in the definition of Net Cash
contemplate the inclusion of non-GAAP items) and which (i) shall explain in
reasonable detail the calculation of the anticipated Net Cash as of the
Effective Time and (ii) shall include, as attachments thereto, reasonable
supporting documentation, including invoices or other correspondence from the
Company's legal, financial and accounting advisors in support of any and all
amounts payable to such advisors, including, without limitation, all amounts
payable in connection with the Transactions.
The Company shall provide Parent (and Parent's advisors) the reasonable
access to all personnel of the Company and Parent and Parent's accountants shall
have the right to review all books, accounting records and other materials of
the Company and its auditors that such party deems reasonably relevant for
purposes of reviewing the Net Cash Statement and to make copies of relevant
portions thereof. In the event that Parent disagrees with the Net Cash amount on
the Net Cash Statement, Parent shall deliver to the Company, within two (2)
Business Days after delivery by the Company of the Net Cash Statement, a written
notice (the "Objection Notice") specifying the basis for its disagreement
(together with any authority or documentation supporting its position) and its
determination of the Net Cash. In the event that no Objection Notice is timely
received by the Company, the Net Cash Statement and the Net Cash reflected
therein shall be final, conclusive and binding on all parties hereto.
In the event that an Objection Notice is timely delivered to the Company
and the parties are able to resolve through mutual agreement the disagreement,
the parties shall prepare a Net Cash Statement reflecting such resolution which
shall be (and the Net Cash reflected therein shall be), final, conclusive and
binding on all parties hereto. In the event that an Objection Notice is timely
delivered to the Company and the parties are unable to resolve through mutual
agreement the disagreement specified in the Objection Notice within two (2)
Business Days after receipt by the Company thereof, the disagreement shall be
submitted to an independent public accounting firm mutually agreeable to both of
Parent and the Company (the "Net Cash
8
Accountant"). The parties shall provide reasonable access to the Net Cash
Accountant to obtain the necessary information in considering the respective
positions of the Company and Parent. The Net Cash Accountant shall have the
right to review all records relevant to the previous determinations of the Net
Cash Statement and the Net Cash. The Net Cash Accountant shall render its
determinations on the disagreement submitted to it within four (4) Business Days
of submission of the disagreement by the Company and Parent. The Net Cash
Accountant's determination of the Net Cash Statement and the Net Cash (with such
adjustments, if any, as reflect such determination) shall be final, conclusive
and binding upon all parties hereto. Fees and expenses for the Net Cash
Accountant shall be paid by the Company if the Net Cash Accountant determines
that Net Cash is less than as indicated on the Net Cash Statement initially
delivered by the Company to Parent by more than $50,000, and by Parent in all
other instances.
(d) Each share of common stock, par value $0.01 per share, of
MergerCo (the "MergerCo Common Stock") issued and outstanding immediately prior
to the Effective Time shall remain outstanding and shall represent one validly
issued, fully paid and non-assessable share of common stock, par value $0.01 per
share, of the Surviving Corporation.
(e) All shares of Company Common Stock, when converted as provided
in Section 3.1(b), shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each certificate previously
evidencing such shares shall thereafter represent only the right to receive the
Merger Consideration and cash in lieu of fractional shares of Parent Common
Stock in accordance with Sections 3.1(b) and 4.1(e) and any distribution or
dividend as provided under Section 4.1(c), in each case without interest. After
the Effective Time, the holders of certificates previously evidencing shares of
Company Common Stock outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to the Company Common Stock except as
otherwise provided herein or by law and, upon the surrender of such certificates
in accordance with the provisions of Article III hereof, shall only represent
the right to receive for their shares of Company Common Stock, the relevant
portion of the Merger Consideration and cash in lieu of fractional shares of
Parent Common Stock in accordance with Sections 3.1(b) and 4.1(e) and any
distribution or dividend as provided under 4.1(c), in each case without
interest.
3.2. Company Stock Options and Related Matters.
(a) At the Effective Time, each option to purchase shares of Company
Common Stock (collectively, the "Company Options") granted under the Company's
June 6, 1989 Stock Option Plan, 2000 Stock Option Plan and the stock option
awards listed on Section 3.2 of the Company Disclosure Schedule (collectively,
the "Company Stock Option Plans") which is then outstanding immediately prior to
the Effective Time and which has not been exercised or canceled prior thereto,
whether or not then vested and exercisable, shall cease to represent a right to
acquire shares of Company Common Stock and shall be converted automatically into
an option to purchase shares of Parent Common Stock, and Parent shall assume
each Company Option, in accordance with the terms of the applicable Company
Stock Option Plan and stock option or other agreement by which it is evidenced,
including, without limitation, exercisable on the same terms as were applicable
under the Company Stock Options,
9
except that from and after the Effective Time, (i) Parent and its Board of
Directors shall be substituted for the Company and the committee of the Board of
Directors of the Company (including, if applicable, the entire Board of
Directors of the Company) administering such Company Stock Option Plan, (ii)
each Company Option assumed by Parent may be exercised solely for shares of
Parent Common Stock, (iii) the number of shares of Parent Common Stock subject
to such Company Option shall be equal to the number of shares of Company Common
Stock subject to such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, provided that any fractional shares of Parent
Common Stock resulting from such multiplication shall be rounded down to the
nearest share, and (iv) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price under each
such Company Option by the Exchange Ratio, provided that such exercise price
shall be rounded up to the nearest cent. Notwithstanding clauses (iii) and (iv)
of the preceding sentence, each Company Option which is an "incentive stock
option" shall be adjusted as required by Section 424 of the Code, and the
regulations promulgated thereunder, so as not to constitute a modification,
extension or renewal of the option within the meaning of Section 424(h) of the
Code. Parent and the Company agree to take all necessary steps to effect the
foregoing provisions of this Section 3.2.
(b) At or prior to the Effective Time, Parent shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Parent Common Stock for delivery upon exercise of Company Stock Options. As
soon as practicable after the Effective Time, Parent shall file, or ensure that
there has been filed, a Registration Statement on Form S-8 (or any successor
forms), with respect to the shares of Parent Common Stock subject to such
Company Stock Options and which are eligible for registration on Form S-8 (or
any successor form), and shall maintain the effectiveness of such registration
statement and the current status of the prospectus or prospectuses contained
therein, for so long as such Company Stock Options remain outstanding.
ARTICLE IV
PAYMENT OF SHARES
4.1. Payment for Shares of Company Common Stock.
(a) At or prior to the Effective Time, Parent shall deposit, or
otherwise take all steps necessary to cause to be deposited, with such bank or
trust company designated by Parent (the "Exchange Agent") (i) certificates
representing the shares of Parent Common Stock, and (ii) the cash in lieu of
fractional shares (such cash and certificates for shares of Parent Common Stock
being hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 3.1 and paid pursuant to this Article IV in exchange for all of the
outstanding shares of Company Common Stock.
(b) Promptly after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
previously evidencing shares of Company Common Stock outstanding other than the
Company, Parent, MergerCo, any Company
10
Subsidiary or any Parent Subsidiary (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to such
certificates shall pass, only upon delivery of such certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify and (ii) instructions for use in effecting the surrender of
such certificates previously evidencing shares of Company Common Stock in
exchange for the Merger Consideration and cash in lieu of fractional shares of
Parent Common Stock in accordance with Sections 3.1(b), 4.1(a) and 4.1(e). Upon
surrender of a certificate previously evidencing shares of Company Common Stock
to the Exchange Agent together with such letter of transmittal, duly executed
and completed in accordance with the instructions thereto, the holder of such
certificate shall be entitled to receive in exchange therefor (x) a certificate
representing the number of whole shares of Parent Common Stock to which such
holder shall be entitled (as adjusted for any stock splits, reverse stock
splits, stock dividends or the like with respect to the shares of Parent Common
Stock with a record date after the Effective Time), plus (y) the amount of cash
in lieu of fractional shares, if any, plus the amount of any dividends, or
distributions, if any, pursuant to paragraph (c) below, in all cases after
giving effect to any required withholding tax. No interest will be paid or
accrued on the cash in lieu of fractional shares or on the dividend or
distribution, if any, payable to holders of certificates previously evidencing
shares of Company Common Stock pursuant to this Section 4.1. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the proper number of
whole shares of Parent Common Stock, together with a check for the cash to be
paid in lieu of fractional shares of Parent Common Stock plus, to the extent
applicable, the amount of any dividend or distribution, if any, payable pursuant
to paragraph (c) below, in all cases after giving effect to any required
withholding tax may be issued to a transferee if the certificate representing
shares of such Company Common Stock is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer,
including signature medallion guarantee, and to evidence that any applicable
stock transfer taxes have been paid.
(c) Notwithstanding any other provisions of this Agreement, no
dividends or other distributions on Parent Common Stock shall be paid with
respect to any shares of Company Common Stock represented by a certificate until
such certificate is surrendered for exchange as provided herein; provided,
however, that subject to the effect of applicable laws, following surrender of
any such certificate, there shall be paid to the holder of the certificates
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time and a payment
date prior to surrender theretofore payable with respect to such whole shares of
Parent Common Stock and not paid, less the amount of any withholding taxes which
may be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Parent Common Stock, less the amount of any
withholding taxes which may be required thereon.
(d) At and after the Effective Time, there shall be no transfers on
the stock transfer books of the Company of any of the shares of Company Common
Stock. If, after the
11
Effective Time, certificates previously evidencing shares of Company Common
Stock are presented to the Surviving Corporation, they shall be canceled and
exchanged for the Merger Consideration in accordance with Section 3.1(b) and
cash in lieu of fractional shares, if any, in accordance with this Section 4.1
(plus dividends and distributions to the extent set forth in Section 4.1(c), if
any).
(e) No fractional shares of Parent Common Stock shall be issued upon
the surrender for exchange of certificates previously evidencing shares of
Company Common Stock, and such fractional share interest shall not entitle its
owner to vote, to receive dividends, or to any other rights as a stockholder of
Parent. In lieu of the issuance of any fractional share of Parent Common Stock
pursuant to Section 3.1(b), each holder of Company Common Stock upon surrender
of a certificate previously evidencing shares of Company Common Stock for
exchange shall be paid an amount in cash (without interest), rounded to the
nearest cent, determined by multiplying (i) the Average Parent Common Stock
Price by (ii) the fraction of a share of Parent Common Stock which such holder
would otherwise be entitled to receive under this Section 4.1.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof, which shall accrue solely for the account of Parent, and
any shares of Parent Common Stock) that remains unclaimed by the former
stockholders of the Company one (1) year after the Effective Time shall be
delivered to the Surviving Corporation. Any former stockholders of the Company
who have not theretofore complied with this Article IV shall thereafter look
only to the Surviving Corporation for payment of their Merger Consideration and
cash in lieu of fractional shares, (plus dividends and distributions to the
extent set forth in Section 4.1(c), if any), as determined pursuant to this
Agreement, without any interest thereon. Notwithstanding any of the foregoing,
none of Parent, MergerCo, the Company, the Exchange Agent or any other person
shall be liable to any former holder of shares of Company Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws. In the event any certificate previously
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such certificate to be lost, stolen or destroyed in form acceptable to Parent
and its transfer agent and registrar and, if reasonably required by the by-laws
of the Surviving Corporation and/or Parent's transfer agent and registrar, the
posting by such person of a bond in such amount as the Surviving Corporation may
direct as indemnity against any claim that may be made against it with respect
to such certificate or in such amount as the transfer agent and registrar of
Parent Common Stock reasonably requires, the Exchange Agent or the Surviving
Corporation will issue in exchange for such lost, stolen or destroyed
certificate the Merger Consideration and cash in lieu of fractional shares
(plus, to the extent applicable, dividends and distributions payable pursuant to
Section 4.1(c)), as determined pursuant to this Agreement, in each case without
interest.
(g) Taking of Necessary Action. If, at any time after the Effective
Time, any further action is necessary or desirable to carry out the purposes of
this Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises of
the Company and MergerCo, the officers and directors of the Company and MergerCo
will take all such lawful and necessary action.
12
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the disclosure schedules delivered at the execution
hereof to Parent and MergerCo and certified by a duly authorized officer of the
Company, which shall refer to the relevant Sections of this Agreement (the
"Company Disclosure Schedule"), as of the date hereof and as of the Closing Date
the Company represents and warrants to Parent and MergerCo as follows:
5.1. Existence; Good Standing; Authority; Compliance With Law.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has the requisite
corporate or other power and authority to own, operate, lease and encumber its
properties and to carry on its business as it is now being conducted. The
Company is duly licensed or qualified to do business as a foreign corporation
and, to the extent applicable, is in good standing under the laws of any other
jurisdiction in which the character of the properties owned, leased or operated
by it therein or in which the transaction of its business makes such license or
qualification necessary, except where the failure to be so licensed or qualified
or to be in good standing would not, individually or in the aggregate,
reasonably be expected to have a Company Material Adverse Effect (as hereinafter
defined). For purposes of this Agreement, a "Company Material Adverse Effect"
means any change, effect, event, violation, occurrence, inaccuracy, condition or
development that is or is reasonably likely to be materially adverse to (i) the
business, operations, assets (including intangible assets), liabilities, results
of operations, or condition (financial or otherwise) of the Company and each
Company Subsidiary, taken as a whole, or (ii) the ability of the Company to
perform its obligations under this Agreement.
(b) Each of the Company Subsidiaries is a corporation, partnership or
limited liability company (or similar entity or association in the case of those
Company Subsidiaries organized and existing other than under the laws of a state
of the United States) duly incorporated or organized, validly existing and, to
the extent applicable, in good standing under the laws of its jurisdiction of
incorporation or organization, has the requisite corporate or other power and
authority to own, operate, lease and encumber its properties and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such license or
qualification, except for jurisdictions in which such failure to be so licensed
or qualified or to be in good standing could not, individually or in the
aggregate, reasonably be expected to have a Company Material Adverse Effect.
(c) Neither the Company nor any of the Company Subsidiaries is in
conflict with, or in default or violation of, (i) any order of any court,
governmental authority or arbitration board or tribunal, or any law, ordinance,
bylaw, judgment, decree, order, arbitration, concession, grant, governmental
rule or regulation to which the Company or any Company Subsidiary or any of
their respective properties or assets is subject, bound or affected, or (ii) any
13
material note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Company or any of
the Company Subsidiaries is a party or by which Company or any Company
Subsidiary or any of their respective properties or assets is subject, bound or
affected where such violations, conflicts or defaults, alone or together with
all other violations, conflicts or defaults could reasonably be expected to have
a Company Material Adverse Effect or cause the Company to lose any material
benefit or incur any material liability. No investigation or review by any
governmental or regulatory body or authority is pending or, to the knowledge of
the Company, threatened against the Company or any Company Subsidiary, nor has
any governmental or regulatory body or authority indicated to the Company an
intention to conduct the same, other than, in each such case, those the outcome
of which could not, individually or in the aggregate, reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
the Company or any Company Subsidiaries, any acquisition of material property by
the Company or any Company Subsidiary or the conduct of any business by the
Company or any Company Subsidiary. The Company and the Company Subsidiaries have
obtained all licenses, permits, approvals, variances, exemptions, orders and
other authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their businesses as currently
conducted, except where the failure to obtain any such license, permit, approval
or authorization or to take any such action, alone or together with all other
failures, could not reasonably be expected to have a Company Material Adverse
Effect. All licenses, permits, approvals, variances, exemptions, orders and
other authorizations required under such laws and regulations or which are
material to the operation of the business of the Company and the Company
Subsidiaries taken as a whole (collectively the "Company Permits") are in full
force and effect. No violations are or have been recorded in respect of any such
Company Permits; to the knowledge of the Company, no event has occurred that
would allow revocation or termination or that would result in the impairment of
the Company's or any Company Subsidiary's rights with respect to any such
Company Permits; and no proceeding is pending or, to the knowledge of the
Company, threatened to revoke, limit or enforce any such Company Permits.
(d) True, complete and accurate copies of the Certificate of
Incorporation of the Company (the "Company Certificate") and the Bylaws of the
Company (the "Company Bylaws") and the other charter documents, bylaws,
organizational documents and partnership, limited liability company and joint
venture agreements (and in each such case, all amendments thereto) of the
Company and each of the Company Subsidiaries have been delivered to Parent prior
to the date of this Agreement, and no amendments thereto are pending. Such
charter documents, bylaws, organizational documents and agreements are listed in
Section 5.1(d) of the Company Disclosure Schedule and are in full force and
effect. The Company is not in violation of any provisions of the Company
Certificate or the Company Bylaws, and no Company Subsidiary is in violation of
any of the provisions of its equivalent organizational documents.
5.2. Authorization, Validity and Effect of Agreements. The Company has the
requisite power and authority to enter into and consummate the Transactions and
to execute and deliver this Agreement. The Company Board has approved this
Agreement and the Transactions and has resolved to recommend that the holders of
Company Common Stock adopt and approve
14
this Agreement at the stockholders' meeting of the Company to be held in
accordance with the provisions of Section 7.3. Subject only to the adoption of
this Agreement by the holders of a majority of the outstanding shares of Company
Common Stock, the execution and delivery by the Company of this Agreement and
the consummation of the Transactions have been duly authorized by all requisite
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and, assuming due and valid authorization,
execution and delivery hereof by Parent and MergerCo, constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws relating to creditors' rights and general principles of
equity.
5.3. Capitalization. The authorized capital stock of the Company consists
of 50,000,000 shares of Company Common Stock, par value $0.001 per share. As of
the date of this Agreement, (a) 10,776,548 shares of Company Common Stock were
issued and outstanding, (b) 1,250,000 shares of Company Common Stock were
authorized and reserved for issuance pursuant to the Company Stock Option Plans,
subject to adjustment on the terms set forth in the Company Stock Option Plans,
(c) 916,689 Options were outstanding under the Company Stock Option Plans, (d)
no Company Options were outstanding other than under the Company Stock Option
Plans and 916,689 shares of Company Common Stock were authorized and reserved
for issuance upon the exercise of such Company Options, subject to adjustment on
the terms set forth in the relevant option agreements, and (e) no shares of
Company Common Stock were held in the treasury of the Company. As of the date of
this Agreement, the Company had no shares of Company Common Stock reserved for
issuance or outstanding other than as described above. All issued and
outstanding shares of capital stock of the Company are, and all shares of
capital stock of the Company which may be issued pursuant to the exercise of
outstanding Company Options will be, duly authorized, validly issued, fully
paid, nonassessable and free of any preemptive rights. All issued and
outstanding shares of capital stock of the Company were, and all shares of
capital stock of the Company which may be issued pursuant to the exercise of
outstanding Company Options will be, issued in compliance with and in accordance
with the applicable requirements of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Securities Act of 1933, as amended, (the
"Securities Act") and the rules and regulations promulgated thereunder (the
"Securities Laws") and applicable state securities and "Blue Sky" laws. The
Company has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. Section 5.3 of the Company Disclosure Schedule sets
forth a complete and accurate list of the Company Options, including the name
and address of the person to whom each Company Option has been granted, the date
such Company Option was granted the number of shares subject to each Company
Option, the per share exercise price for each Company Option, the vesting
schedule for each Company Option, the date on which such Company Stock Option
expires and the Company Stock Option Plan, if applicable, under which each
Company Option has been issued. Except as set forth in Section 5.3 of the
Company Disclosure Schedule, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company to issue, transfer or sell any shares of
capital stock
15
or equity equivalents of the Company. Except as set forth in Section 5.3 of the
Company Disclosure Schedule, the vesting schedule of all Company Options shall
not be changed or affected by the execution of this Agreement or the
consummation of the Transactions, including acceleration of such Company
Options. The Company has previously made available to Parent true, complete and
accurate copies of all option agreements with respect to the Company Options
(and has previously provided Parent with true, complete and accurate copies of
all option agreements set forth on Schedule 3.2 of the Company Disclosure
Schedule). Except as set forth in Section 5.3 of the Company Disclosure
Schedule, there are no agreements or understandings to which the Company or any
Company Subsidiary is a party with respect to the voting of any shares of
capital stock of the Company or which restrict the transfer of any such shares,
nor does the Company have knowledge of any third-party agreements or
understandings with respect to the voting of any such shares or which restrict
the transfer of any such shares. Except as set forth in Section 5.3 of the
Company Disclosure Schedule, there are no outstanding contractual obligations of
the Company or any Company Subsidiary to repurchase, redeem or otherwise acquire
any shares of capital stock, partnership interests or any other securities of
the Company or any Company Subsidiary. Except as set forth in Section 5.3 of the
Company Disclosure Schedule, neither the Company nor any Company Subsidiary is
under any obligation, contingent or otherwise, by reason of any agreement to
register the offer and sale or resale of any of their securities under the
Securities Act. Except as set forth on Schedule 5.3 of the Company Disclosure
Schedule, there are no registration rights and there is, except for the Voting
Agreements, no voting trust, proxy, rights plan, anti-takeover plan or other
agreement or understanding to which the Company or any Company Subsidiary is a
party or by which they are bound with respect to any equity security of any
class of the Company or with respect to any equity security, partnership
interest or similar ownership interest of any class of any Company Subsidiaries.
Stockholders of the Company will not be entitled to dissenters' rights under
applicable state law in connection with the Merger.
5.4. Subsidiaries. Section 5.4 of the Company Disclosure Schedule contains
a complete and accurate list of all of the Company Subsidiaries. Except as set
forth in Section 5.4 of the Company Disclosure Schedule, the Company owns
directly or indirectly all of the outstanding shares of capital stock or other
equity interests of each of the Company Subsidiaries. Each of the outstanding
shares of capital stock of each of the Company Subsidiaries having corporate
form is duly authorized, validly issued, fully paid, nonassessable and free of
any preemptive rights. Except as set forth in Section 5.4 of the Company
Disclosure Schedule, each of the outstanding shares of capital stock or other
equity interest of each of the Company Subsidiaries is owned, directly or
indirectly, by the Company free and clear of all liens, pledges, security
interests, claims, infringements, interferences, options, rights of first
refusals, preemption rights, restrictions of any nature (including any
restriction on the voting of any security, any restrictions on the transfer of
any security or other asset, any restriction on the possession, exercise or
transfer of any other attribute of ownership of any security ) or other
encumbrances. Except as set forth in Section 5.4 of the Company Disclosure
Schedule, there are no options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate any
Company Subsidiary to issue, transfer or sell any shares of its capital stock or
other equity interests. The following information for each Company Subsidiary
16
as of the date of this Agreement is set forth in Section 5.4 of the Company
Disclosure Schedule: (a) its name and jurisdiction of incorporation or
organization; (b) its authorized capital stock, share capital or other equity
interest; and (c) the name of each stockholder or equity interest holder and the
number of issued and outstanding shares of capital stock, share capital or other
equity interest held by each such holder.
5.5. Other Interests. Except as set forth in Section 5.5 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, limited liability company, joint venture,
business, trust or other entity (other than investments in short-term investment
securities). Except as set forth in Section 5.5 of the Company Disclosure
Schedule, there are no outstanding contractual obligations of the Company or any
Company Subsidiary to acquire any shares of capital stock, partnership interests
or other securities of any such entity in which it owns an interest or holds an
investment. To the knowledge of the Company, there is no dispute among the
equity holders of any entity in which the Company and the Company Subsidiaries
own less than all of the equity interests therein.
5.6. No Violation; Governmental Consents. Except as set forth in Section
5.6 of the Company Disclosure Schedule, none of the execution, delivery or
performance of this Agreement by the Company, the consummation by the Company of
the Transactions, or the compliance by the Company with any of the provisions
hereof, will conflict with or result in a breach of any provision of the Company
Certificate or the Company Bylaws or any equivalent organizational documents of
any Company Subsidiary. Except as set forth in Section 5.6 of the Company
Disclosure Schedule, the execution, delivery and performance of this Agreement
by the Company, the consummation by the Company of the Transactions, and the
compliance by the Company with the provisions hereof, will not violate, or
conflict with, or result in a breach of any provision of, or constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, or result in the termination or in a right of
termination or cancellation of, or accelerate the performance required by, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties of the Company or the Company Subsidiaries under, or
result in being declared void, voidable or without further binding effect, any
of the terms, conditions or provisions of (a) any note, bond, mortgage,
indenture or deed of trust to which the Company or any of the Company
Subsidiaries is a party, or by which the Company or any of the Company
Subsidiaries or any of their properties or assets is bound, (b) any license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which the Company or any of the Company Subsidiaries is a party,
or by which the Company or any of the Company Subsidiaries or any of their
properties or assets is bound, or (c) any order, writ, judgment, injunction,
decree, law (including common law), statute, rule or regulation applicable to
the Company or any Company Subsidiary or any of their properties or assets (or
by which any such properties or assets are bound or affected), except as
otherwise could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Other than the filings provided
for in Section 1.2 or required pursuant to the Exchange Act or applicable state
securities and "Blue Sky" laws, and based upon the accuracy of Parent's
representations and warranties contained in Section 6.19 hereof, the
17
execution and delivery of this Agreement by the Company does not, and the
performance of and compliance with this Agreement by the Company and
consummation of the Transactions does not, require any authorization, consent or
approval of, permit from, or declaration, filing, notification or registration
with, any court, administrating agency, commission, governmental or regulatory
authority, domestic or foreign (a "Governmental Entity"), except where the
failure to obtain any such authorization, consent or approval of, permit from,
or declaration, filing, notification or registration with, any Governmental
Entity could not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect or otherwise prevent the parties
hereto from performing their obligations under the Agreement.
5.7. Commission Documents. The Company has filed all required forms,
reports, exhibits, schedules, statements and other documents with the Commission
since the date the Company became subject to the reporting requirements of the
Exchange Act (as such documents may have been amended since the time of filing,
collectively, the "Company SEC Reports"), all of which were prepared in
accordance with the applicable requirements of the Securities Laws. As of their
respective dates, the Company SEC Reports (a) complied as to form in all
material respects with the applicable requirements of the Securities Laws and
(b) did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
made therein, in the light of the circumstances under which they were made, not
misleading. Each of the consolidated balance sheets of the Company included in
or incorporated by reference into the Company SEC Reports (including the related
notes and schedules) fairly presents the consolidated financial position of the
Company and the Company Subsidiaries as of its date and each of the consolidated
statements of income, changes in stockholders' equity (deficit) and
comprehensive net loss, and cash flows of the Company included in or
incorporated by reference into the Company SEC Reports (including any related
notes and schedules) fairly presents the results of operations, changes in
stockholders' equity (deficit) and comprehensive net loss, or cash flows, as the
case may be, of the Company and the Company Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments which would not be material in amount or effect), in each case
in accordance with generally accepted accounting principles ("GAAP")
consistently applied during the periods involved, except as may be noted therein
and except, in the case of the unaudited statements, as permitted by Form 10-Q
pursuant to Section 13 or 15(d) of the Exchange Act. As of October 31, 2002, the
Company and the Company Subsidiaries had cash, cash equivalents and short term
investments in the aggregate amount of $47,541,879 as determined on a
consolidated basis and in accordance with GAAP. No Company Subsidiary is
required to file any form, report or document with the Commission.
5.8. Litigation. Except as set forth in Section 5.8 of the Company
Disclosure Schedule, there are (a) no continuing orders, injunctions or decrees
of any court, arbitrator or governmental authority to which the Company or any
Company Subsidiary is a party or by which any of its properties or assets are
bound or to which any of its directors, officers, employees or agents, in such
capacities, is a party or by which any of its properties or assets are bound,
and (b) no claims, actions, suits or proceedings pending against the Company or
any Company Subsidiary or against any of its directors, officers, employees or
agents, in such
18
capacities, or, to the knowledge of the Company, threatened against the Company
or any Company Subsidiary or against any of its directors, officers, employees
or agents, at law or in equity, or before or by any federal or state commission,
board, bureau, agency or instrumentality, including any governmental or
regulatory investigation, or any arbitration or other private dispute resolution
mechanism.
5.9. Absence of Certain Changes. Except as set forth in Section 5.9 of the
Company Disclosure Schedule, since May 31, 2002, (a) the Company and the Company
Subsidiaries have conducted their businesses only in the ordinary course of
business, (b) neither the Company nor any of the Company Subsidiaries has taken
any of the actions or permitted to occur any of the events specified in Section
7.2 hereof, and (c) there has not been any change, effect, event, occurrence,
non-occurrence, condition or development which has had or could be expected to
have, individually or in the aggregate, a Company Material Adverse Effect.
5.10. No Undisclosed Liabilities. For purposes of this Agreement,
"Liabilities" means any liabilities or obligations of any nature (whether known
or unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, whether due or
to become due, and whether or not such liabilities or obligations are of the
nature or type required to be disclosed under GAAP, including any liability for
Taxes (as defined in Section 5.11), any off-balance sheet arrangements and
contractual obligations and commitments); provided, however, Liabilities shall
not include any such liability or obligation of an amount less than $10,000
individually and which, in the aggregate, do not exceed $100,000. For purposes
of this Agreement, "Company Signing Liabilities" means any Liabilities (i) as
explicitly and specifically set forth in Section 5.10(a) of the Company
Disclosure Schedule, but only to the extent of the stated amounts of such
Liabilities as set forth on such Schedule; and (ii) as explicitly set forth on
the Company's balance sheet as of August 31, 2002 contained on Section 5.10(a)
of the Company's Disclosure Schedule, but only to the extent of the stated
amounts of such liabilities as set forth on such balance sheet; provided, that,
with respect to (i) and (ii), such Liability shall only have such scope and
monetization as indicated on Section 5.10(a) of the Company Disclosure Schedule,
if so indicated, and, provided further, that with respect to contracts,
agreements and understandings listed on such Company Disclosure Schedules,
Company Signing Liabilities shall not include liabilities and obligations
arising or resulting from any default or violation or other change in
circumstance thereunder. To the knowledge of the Company, neither the Company
nor any of the Company Subsidiaries has any Liabilities except (i) Company
Signing Liabilities, (ii) as set forth in Section (ii)(B) of the definition of
Net Cash in Section 3.1, (iii) as set forth in Section (ii)(D)(1-3) of the
definition of Net Cash in Section 3.1, and (iv) fees payable to the Company's
legal, financial and acocunting advisors and other fees incurred in connection
with the Transactions (assuming consummation of the Transactions). The Company's
and Company Subsidiaries' liabilities and obligations with respect to product
and service warranties has been appropriately valued and reserved for, in
accordance with GAAP and the Company's historical warranty reserve policies, at
$273,040 as of May 31, 2002 and at $236,081 as of August 31, 2002. Set forth in
Section 5.10(b) of the Company Disclosure Schedule is: (i) a list of all
individual Company products under warranty, (ii) the shipping date of such
product, (iii) a product description, (iv) the name and address of the
19
relevant customer, (v) the warranty amount reserved by the Company and (vi) a
copy of the applicable warranty provision.
5.11. Taxes.
(a) The Company and each of the Company Subsidiaries has paid or
caused to be paid or reserved for, or adequate provision will be made therefore
as of the Closing Date and disclosed to Parent within five (5) Business Days
prior to the Effective Time, all federal, state, provincial local and foreign
taxes, fees, levies, duties, tariffs, imposts and other charges of any kind
(together with any and all interest, penalties, additions to tax and additional
amounts imposed with respect thereto) imposed by any government or taxing
authority, including, without limitation: taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross receipts, gross
assets, property, sales, use, capital stock, payroll, employment, social
security, worker's compensation, disability, unemployment compensation or net
worth; taxes or other charges in the nature of excise, withholding, ad valorem,
stamp, transfer, value added or gains taxes; license, registration and
documentation fees; and duties, tariffs and similar charges (collectively,
"Taxes"), required to be paid by it whether disputed or not and including any
obligations to indemnify or otherwise assume or succeed to another's Tax
liability.
(b) Except as set forth in Section 5.11(b) of the Company Disclosure
Schedule, the Company and each of the Company's Subsidiaries has withheld and
paid all Taxes required to have been withheld and paid in connection with any
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(c) To the Company's knowledge, the Company and each of the Company
Subsidiaries has in accordance with applicable law timely filed (taking into
account any extensions of time to file before the date hereof) all reports,
returns, declarations, statements or other information required to be supplied
to any taxing authority in connection with Taxes (collectively, "Tax Returns"),
and all such Tax Returns correctly and accurately set forth the amount of any
Taxes relating to the applicable period. A complete and accurate list of all Tax
Returns filed with respect to the Company and the Company Subsidiaries for
taxable periods ended on or after May 31, 2000, is set forth in Section 5.11(c)
of the Company Disclosure Schedule. The Company has delivered to Parent true,
complete and accurate copies of all Tax Returns filed by the Company and any
Company Subsidiary within the last 2 years, and of all examination reports and
statements of deficiencies assessed against or agreed to by the Company or any
Company Subsidiary with respect to such Tax Returns.
(d) Except as set forth in Section 5.11(d) of the Company Disclosure
Schedule, neither the Internal Revenue Service ("IRS") nor any other
governmental authority is now asserting in writing or, to the knowledge of the
Company, asserting or threatening to assert against the Company or any Company
Subsidiary any deficiency or claim for additional Taxes. To the Company's
knowledge, no claim has ever been made by an authority in a jurisdiction where
the Company or a Company Subsidiary does not file reports and returns that the
Company or such Company Subsidiary is or may be subject to taxation by that
jurisdiction. There are no
20
security interests on any of the assets of the Company and the Company
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Taxes.
(e) Except as set forth in Section 5.11(e) of the Company Disclosure
Schedule, to the Company's knowledge there has not been any audit of any Tax
Return filed by the Company or any Company Subsidiary, no audit of any Tax
Return of the Company or any Company Subsidiary is in progress, and neither the
Company nor any Company Subsidiary has been notified by any tax authority that
any such audit is contemplated or pending. Except as set forth in Section
5.11(e) of the Company Disclosure Schedule, no extension of time with respect to
any date on which a Tax Return was or is to be filed by the Company or any
Company Subsidiary is in force, and no waiver or agreement by the Company or any
Company Subsidiary is in force for the extension of time for the assessment or
payment of any Taxes.
(f) Except as set forth in Section 5.11(f) of the Company Disclosure
Schedule, the most recent audited financial statements contained in the Company
SEC Reports (i) reflect an adequate reserve for all Taxes payable by the Company
and the Company Subsidiaries for all taxable periods and portions thereof
through the date of such financial statements in accordance with GAAP, whether
or not shown as being due on any Tax Returns and (ii) to the Company's
knowledge, the Taxes payable do not exceed that reserve as adjusted for the
passage of time through the Closing Date in accordance with the past practice of
the Company and the Company Subsidiaries in filing their Tax Returns. Since the
date of the most recent audited financial statements, neither the Company nor
any Company Subsidiary has incurred any liability for Taxes arising from
extraordinary gains or losses, as the term is used in GAAP, outside the ordinary
course of business consistent with past custom and practice.
(g) Except as set forth in Section 5.11(g) of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary is a party to any
agreement providing for the allocation, indemnification or sharing of Taxes with
any person other than the Company or the Company Subsidiaries. The Company has
provided Parent with true, complete and accurate copies of any such agreements.
There are no outstanding rulings or ruling requests with any taxing authority
that would be binding on the Company.
(h) To the Company's Knowledge, neither the Company nor any Company
Subsidiary has ever been (or has ever had any liability for unpaid Taxes under
Treasury Regulations Section 1.1502-6 (or comparable provisions of federal,
state or local law) because it once was) a member of an "affiliated group" (as
defined in Section 1504(a) of the Code), except for any group of which the
Company and the Company Subsidiaries are the only members.
(i) Except as set forth in Section 5.11(i) of the Company Disclosure
Schedule, none of the Company and the Company Subsidiaries (i) has made any
payments, is obligated to make any payments or is a party to any agreement that
under certain circumstances (including the consummation of the Transactions)
could give rise directly or indirectly to the payment of any amount, or obligate
it to make any payments that, individually or considered collectively with such
other agreements, will not be deductible under Section 280G or 162(m) of the
Code (or any similar provision of state, local or foreign law), (ii) has filed a
consent under
21
Section 341(f) of the Code concerning collapsible corporations or (iii) was, at
any time during the period specified in Section 897(c)(1)(A)(ii) of the Code, a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code.
(j) Neither the Company nor any Company Subsidiary will be required
to include any item of income in, or exclude any deduction from, taxable income
for any taxable period (or portion thereof) ending after the Closing Date as a
result of any: (i) change in method of accounting for a taxable period ending on
or prior to the Closing Date; (ii) "closing agreement" as described in Section
7121 of the Code (or any corresponding or similar provision of state, local or
foreign income Tax law) executed on or prior to the Closing Date; (iii)
intercompany transactions or any excess loss account described in Treasury
Regulations under Section 1502 of the Code (or any corresponding or similar
provision of state, local or foreign income Tax law); (iv) installment sale or
open transaction disposition made on or prior to the Closing Date; or (v)
prepaid amount received on or prior to the Closing Date.
(k) To the Company's knowledge, neither the Company nor any Company
Subsidiary has ever participated in any way in any confidential corporate tax
shelter within the meaning of temporary Treasury Regulations Section
301.6111-2T(a)(2).
(l) Neither the Company nor any Company Subsidiary has constituted
either a "distributing corporation" or a "controlled corporation" in a
distribution of stock qualifying or intended to qualify for tax-free treatment
under Section 355 of the Code in the two years prior to the date of this
Agreement.
5.12. Properties.
(a) Neither the Company nor any Company Subsidiary owns any real
property. Section 5.12(a) of the Company Disclosure Schedule lists all real
property leased or subleased to or by the Company or any of the Company
Subsidiaries and lists the dates of and parties to each such lease, the dates
and parties to each amendment, modification and supplement to each such lease,
the term of such lease, any extension and expansion options, and the rent
payable thereunder. The Company has delivered to Parent true, complete and
accurate copies of the leases and subleases (each as amended to date) listed in
Section 5.12(a) of the Company Disclosure Schedule. With respect to each such
lease and sublease:
(i) the lease or sublease is a valid, binding and enforceable
obligation of the Company or the Company Subsidiary, as the case may be,
subject to applicable bankruptcy, insolvency, moratorium or other similar
laws relating to creditors' rights and general principles of equity;
(ii) to the knowledge of the Company, neither the Company nor
any Company Subsidiary, or to the knowledge of the Company, any other
party, is in breach or violation of, or default under, any such lease or
sublease, and no event has occurred, is pending or is threatened, which,
after the giving of notice or the lapse of time or both,
22
would constitute a breach or default by the Company or a Company
Subsidiary, or to the knowledge of the Company, any other party under such
lease or sublease;
(iii) neither the Company nor any Company Subsidiary has
assigned, transferred, conveyed, mortgaged, deeded in trust or encumbered
any interest in the leasehold or subleasehold;
(iv) to the knowledge of the Company, there are no liens,
mortgages, pledges, charges, security interests or other encumbrances
(collectively, "Encumbrances"), easements, covenants or other restrictions
applicable to the real property subject to such lease or sublease, except
for recorded easements, covenants and other restrictions which do not,
individually or in the aggregate, materially impair the current uses or the
occupancy by the Company or the Company Subsidiary, as the case may be, of
the property subject thereto;
(v) to the knowledge of the Company there are no material
structural or other defects of the buildings and structures on or
comprising any of the leasehold or sublease hold properties; and
(vi) except as set forth in Section 5.12(a), to the knowledge of
the Company, there are no restrictions, prohibitions or Encumbrances on the
Company (or any successor) from retaining the full amounts of any payments
made by such sublessee.
(b) Except as set forth in Section 5.12(b) of the Company Disclosure
Schedule, the Company and the Company Subsidiaries own good title, free and
clear of all Encumbrances, to all property and assets necessary to conduct the
business of the Company as currently conducted, except for (i) Encumbrances
reflected in the Company's consolidated balance sheet at May 31, 2002 included
in the Company SEC Reports, (ii) Encumbrances or imperfections of title which do
not detract from the value or interfere with the present or presently
contemplated use of the assets subject thereto or affected thereby, and (iii)
Encumbrances for current Taxes not yet due and payable. The Company and the
Company Subsidiaries, as lessees, have the right under valid and subsisting
leases to use, possess and control all property and assets personally leased by
the Company or the Company Subsidiaries as now used, possessed and controlled by
the Company or the Company Subsidiaries, as applicable. All of the material
plants, structures, machinery, equipment and other tangible personal property
and assets owned or used by the Company and the Company Subsidiaries are in
materially good condition, maintenance and repair, except as such may be under
construction and for ordinary wear and tear, are useable in the ordinary course
of business, and are adequate and suitable for the uses to which they are being
put.
5.13. Intellectual Property.
(a) Section 5.13(a) of the Company Disclosure Schedule contains a
complete and accurate list of all Patents (as hereinafter defined) owned by the
Company or any Company Subsidiary or otherwise used in the Business (as
hereinafter defined) ("Company Patents"),
23
Marks (as hereinafter defined) owned by the Company or any Company Subsidiary or
otherwise used in the Business ("Company Marks") and Copyrights (as hereinafter
defined) owned by the Company or any Company Subsidiary or otherwise used in the
Business ("Company Copyrights"). Except as set forth in Section 5.13(a) of the
Company Disclosure Schedule, and to the knowledge of the Company:
(i) the Company or one of the Company Subsidiaries exclusively
owns or possesses adequate and enforceable rights to use, without payment
to a third party, all of the Intellectual Property Assets necessary for the
operation of the Business, free and clear of all Encumbrances;
(ii) all Company Patents, Company Marks and Company Copyrights
which are issued by or registered with, as applicable, the U.S. Patent and
Trademark Office, the U.S. Copyright Office or in any similar office or
agency anywhere in the world are currently in compliance with formal legal
requirements (including, without limitation, as applicable, payment of
filing, examination and maintenance fees, proofs of working or use, timely
post-registration filing of affidavits of use and incontestability and
renewal applications) and are valid and enforceable;
(iii) there are no pending, or, to the Company's knowledge,
threatened claims against the Company, any Company Subsidiary or any of
their respective employees alleging that (A) any of the Company
Intellectual Property Assets or the Business infringes the rights of others
under any Intellectual Property Assets ("Third Party Rights") or (B) the
Company, any Company Subsidiary or any of their respective employees have
misappropriated any Third Party Right;
(iv) neither the Business nor any Company Intellectual Property
Asset infringes any Third Party Right, and none of the Company, the Company
Subsidiaries or any of their respective employees have misappropriated any
Third Party Right;
(v) neither the Company nor any Company Subsidiary has
received any communications alleging any of the Company Intellectual
Property Assets is invalid or unenforceable;
(vi) no current or former employee or consultant of the Company
or any Company Subsidiary owns any rights in or to any of the Company
Intellectual Property Assets;
(vii) the Company is not aware of any violation or infringement
by a third party of any of the Company Intellectual Property Assets;
(viii) the Company and each Company Subsidiary has taken
reasonable security measures to protect the secrecy, confidentiality and
value of all Trade Secrets used by the Company and/or any Company
Subsidiary (the "Company Trade Secrets"), including, without limitation,
requiring all employees and consultants of the Company
24
and each Company Subsidiary and all other persons with access to Company
Trade Secrets to execute a binding confidentiality agreement (copies of
which have been previously been made available to Parent), and, to the
Company's knowledge, there has not been any breach by any party to such
confidentiality agreements;
(ix) (A) neither the Company nor any Company Subsidiary has
directly or indirectly granted any rights, licenses or interests in the
source code of any of the Products, and (B) since the Company or one of the
Company Subsidiaries, as applicable, developed the source code of the
Products, neither the Company nor any Company Subsidiary has provided or
disclosed the source code of any of the Products to any person or entity;
(x) the Products perform in accordance with their documented
specifications and as the Company and/or the Company Subsidiaries have
warranted to its customers;
(xi) none of the Products intentionally contain any "viruses",
"time-bombs", "key-locks", or any other devices intentionally created that
could disrupt or interfere with the operation of the Products or the
integrity of the data, information or signals they produce in a manner
adverse to the Company, any Company Subsidiary or any licensee or
recipient;
(b) All licenses or other agreements under which the Company and/or
any Company Subsidiary is granted rights by others in Company Intellectual
Property Assets are listed in Section 5.13(b) of the Company Disclosure
Schedule. All such licenses or other agreements are in full force and effect,
and, to the knowledge of the Company there is no material default by any party
thereto. All of the rights of the Company and the Company Subsidiaries under
such licenses or other agreements are freely assignable. The Company has made
available to Parent true and complete copies of all such licenses or other
agreements, and any amendments thereto, and to the knowledge of the Company, the
licensors under the licenses and other agreements under which the Company and/or
any Company Subsidiary is granted rights have all requisite power and authority
to grant the rights purported to be conferred thereby; and
(c) All licenses or other agreements under which the Company and/or
any Company Subsidiary has granted rights to others in Company Intellectual
Property Assets are listed in Section 5.13(c) of the Company Disclosure
Schedule. All such licenses or other agreements are in full force and effect,
and, to the knowledge of the Company there is no material default by any party
thereto. All of the rights of the Company and/or any Company Subsidiary under
such licenses or other agreements are freely assignable. The Company has made
available to Parent true and complete copies of all such licenses or other
agreements, and any amendments thereto, and the Company and/or a Company
Subsidiary has all requisite power and authority to grant the rights purported
to be conferred thereby.
25
(d) For purposes of this Agreement,
(i) "Business" means the business of the Company and/or the
Company Subsidiaries as currently conducted and proposed to be conducted.
(ii) "Company Intellectual Property Assets" means all
Intellectual Property Assets owned by the Company or any Company Subsidiary
or otherwise used in the Business. "Company Intellectual Property Assets"
includes, without limitation, the Products, Company Patents, Company Marks,
Company Copyrights and Company Trade Secrets.
(iii) "Intellectual Property Assets" means:
(A) patents, patent applications, patent rights, and
inventions and discoveries and invention disclosures (whether or not
patented) (collectively, "Patents");
(B) trade names, trade dress, logos, packaging design,
slogans, Internet domain names, registered and unregistered
trademarks and service marks and related registrations and
applications for registration (collectively, "Marks");
(C) copyrights in both published and unpublished works and
all copyright registrations and applications (collectively,
"Copyrights");
(D) know-how, trade secrets, confidential or proprietary
information, research in progress, algorithms, data, designs,
processes, formulae, drawings, schematics, blueprints, flow charts,
models, strategies, prototypes, techniques, Beta testing procedures
and Beta testing results (collectively, "Trade Secrets"); and
(E) goodwill, franchises, licenses, permits, consents,
approvals, and claims of infringement against third parties.
(iv) "Products" means those instruments, software, licenses,
consumables, other products and services designed, manufactured, marketed,
sold and/or distributed by the Company and/or any Company Subsidiary and
any other sources from which the Company and/or any Company Subsidiary
derives revenues. A complete list of the Products from which the Company or
any Company Subsidiaries derives revenues is provided on Section
5.13(d)(iv) of the Company Disclosure Schedule attached hereto.
5.14. Environmental Matters.
(a) As used in this Agreement, (i) "Environmental Laws" shall mean
all environmental or health and safety-related federal, state and local laws,
rules, regulations, bylaws, ordinances and orders, and (ii) "Hazardous
Materials" means any pollutant, contaminant, toxic substance, hazardous waste,
hazardous material, or hazardous substance, or any oil,
26
petroleum, or petroleum product, as defined in or pursuant to the United States
Resource Conservation and Recovery Act, the United States Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), the Federal
Clean Water Act and any other federal, state or local Environmental Law, all as
amended, as well as any regulations promulgated pursuant thereto, and, to the
extent not included in the foregoing, any medical waste.
(b) To the knowledge of the Company, the Company and the Company
Subsidiaries are in compliance with all Environmental Laws.
(c) Except as set forth in Section 5.14(c) of the Company Disclosure
Schedule, (i) neither the Company nor any Company Subsidiary has entered into or
been subject to any consent decree, compliance order, or administrative order
under any Environmental Law, (ii) there is no administrative or judicial
enforcement proceeding pending, or to the knowledge of the Company, threatened,
against the Company or any Company Subsidiary under any Environmental Law, (iii)
neither the Company nor any Company Subsidiary has received notice under the
citizen suit provision of any Environmental Law, (iv) neither the Company nor
any Company Subsidiary or, to the knowledge of the Company, any legal
predecessor of the Company or any Company Subsidiary, has received any notice
that it is potentially responsible under any Environmental Law for costs of
response or for damages to natural resources, as those terms are defined under
the Environmental Laws, at any location, (v) neither the Company nor any Company
Subsidiary or, to the knowledge of the Company, any legal predecessor of the
Company or any Company Subsidiary, has received any request for information,
notice, demand letter, or formal or informal complaint or claim under any
Environmental Law or with respect to environmental matters, and (vi) the Company
and the Company Subsidiaries have no reason to believe that any of the above
will be forthcoming.
(d) To the knowledge of the Company, neither the Company nor any
Company Subsidiary has generated, manufactured, refined, transported, treated,
stored, handled, disposed, transferred, produced or processed any Hazardous
Materials, except in compliance with all applicable Environmental Laws.
(e) To the knowledge of the Company, neither the Company nor any
Company Subsidiary has transported or disposed of, or allowed or arranged for
any third party to transport or dispose of, any waste containing Hazardous
Materials to or at any location included on the National Priorities List, as
defined under CERCLA, or any location proposed for inclusion on that list or at
any location on any analogous state list.
(f) To the knowledge of the Company, except as set forth in Section
5.14(f) of the Company Disclosure Schedule, (i) neither the Company nor any
Company Subsidiary has released (as that term is defined in CERCLA) any
Hazardous Material on, in, under or at any real property owned or leased by the
Company or any Company Subsidiary, and (ii) the Company has no knowledge of any
release (as that term is defined in CERCLA) on, in, under or at the real
property owned or leased by the Company or any Company Subsidiary or predecessor
entity of Hazardous Materials.
27
(g) Except as provided in Section 5.14(g) of the Company Disclosure
Schedule, to the knowledge of the Company, there is no hazardous waste
treatment, storage or disposal facility, underground storage tank, landfill,
surface impoundment, underground injection well, friable asbestos or
polychlorinated biphenyls (PCBs), as those terms are defined under any
Environmental Laws, located at any of the real property owned or leased by the
Company or any Company Subsidiary or predecessor entity or facilities utilized
by the Company or the Company Subsidiaries.
(h) No lien has been imposed on any real property owned or leased by
the Company or any Company Subsidiary by any governmental agency at the federal,
state or local level in connection with the presence on or off such property of
any Hazardous Material.
(i) The Company has delivered to Parent copies of all documents,
records, and information available to the Company concerning any environmental
or health and safety matter relevant to the Company and its Subsidiaries,
whether generated by the Company or others, including, without limitation,
environmental audits, environmental risk assessments, site assessments,
documentation regarding off-site disposal of Hazardous Materials, spill control
plans, and reports, correspondence, permits, licenses, approvals, consents, and
other authorizations related to environmental or health and safety matters
issued by any governmental agency.
5.15. Employee Benefit Plans.
(a) Section 5.15(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of every Employee Program (as hereinafter defined)
that has been maintained by the Company or an Affiliate (as hereinafter defined)
at any time during the three-year period prior to the date hereof.
(b) Each Employee Program maintained by the Company or an Affiliate
and which is intended to qualify under Section 401(a) or 501(c)(9) of the Code
has received a favorable determination, opinion, notification or approval letter
from the IRS regarding its qualification under such section (or has time
remaining to apply therefor under applicable regulations or IRS pronouncements).
To the knowledge of the Company, no event or omission has, since the date of
such letter, occurred which would cause any Employee Program to lose its
qualification or otherwise fail, to satisfy the relevant requirements to provide
tax-qualified benefits under Code Section 401(a) or tax-favored benefits under
Code Section 501(c)(9). Each asset held under any such Employee Program may be
liquidated or terminated without the imposition of any redemption fee, surrender
charge or comparable liability. No partial termination (within the meaning of
Section 411(d)(3) of the Code) has occurred with respect to any Employee
Program.
(c) With respect to each Employee Program maintained by the Company
or any Affiliate, to the knowledge of the Company, there has been no (i)
"prohibited transaction" as defined in Section 406 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), or Code Section 4975 or (ii)
non-deductible contribution, which, in the case of either
28
of (i) or (ii), could subject the Company or any Affiliate to liability either
directly or indirectly (including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties or taxes, or any
other loss or expense. No litigation or governmental administrative proceeding
(or, to the Company's knowledge, investigation) or other proceeding (other than
those relating to routine claims for benefits) is pending or, to the knowledge
of the Company, threatened with respect to any such Employee Program. To the
Company's knowledge, all payments and/or contributions required to have been
made (under the provisions of any agreements or other governing documents or
applicable law) with respect to all Employee Programs maintained by the Company
or any Affiliate, either have been made or have been accrued (and all such
unpaid but accrued amounts are described in Section 5.15(c) of the Company
Disclosure Schedule).
(d) Neither the Company nor any Affiliate has incurred any liability
under Title IV of ERISA which has not been paid in full. There has been no
"accumulated funding deficiency" (whether or not waived) with respect to any
Employee Program maintained by the Company or any Affiliate and subject to Code
Section 412 or ERISA Section 302. Neither the Company nor any Affiliate has at
any time in the six years prior to the Closing Date maintained an Employee
Program that is subject to Title IV of ERISA. None of the Employee Programs
maintained by the Company or any Affiliate provides health care or any other
non-pension benefits to any employees after their employment is terminated
(other than as required by part 6 of subtitle B of Title I of ERISA or
applicable state healthcare continuation laws) or has ever promised to provide
such post-termination benefits.
(e) With respect to each Employee Program maintained by the Company,
true, complete and accurate copies of the following documents (if applicable to
such Employee Program) have previously been made available to Parent: (i) all
documents embodying or governing such Employee Program, and any funding medium
for the Employee Program (including, without limitation, trust agreements) as
they may have been amended to the date hereof; (ii) the most recent IRS
determination or approval letter with respect to such Employee Program under
Code Section 401(a) or 501(c)(9), and any applications for determination or
approval subsequently filed with the IRS; (iii) the three most recently filed
IRS Forms 5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the three most recent actuarial valuation reports completed with
respect to such Employee Program; (v) the summary plan description for such
Employee Program (or other written descriptions of such Employee Program
provided to employees) and all modifications thereto; (vi) any insurance policy
(including any fiduciary liability insurance policy or fidelity bond) related to
such Employee Program; and (vii) any registration statement or other filing made
pursuant to any federal or state securities laws; and (vii) all material
correspondence to and from any state or federal agency within the last three
years with respect to such Employee Program.
(f) Each Employee Program required to be listed in Section 5.15(a) of
the Company Disclosure Schedule (other than individual agreements which are
listed on Section 5.15(f) of the Company Disclosure Schedule) may be amended,
terminated, or otherwise modified by the Company, including, without limitation,
to eliminate any and all future benefit accruals thereunder.
29
(g) Each Employee Program maintained by the Company has been
maintained in material compliance with all applicable requirements of federal
and state laws, including federal and state securities laws, the Consolidated
Omnibus Budget Reconciliation Act of 1985, Health Insurance Portability and
Accountability Act of 1996, the Newborns' and Mothers' Health Protection Act of
1996, the Mental Health Parity Act of 1996, and the Women's Health and Cancer
Rights Act of 1998.
(h) For purposes of this Section
(i) "Employee Program" means (A) all employee benefit plans
within the meaning of ERISA Section 3(3), including, but not limited to,
multiple employer welfare arrangements (within the meaning of ERISA Section
3(40)), plans to which more than one unaffiliated employer contributes and
employee benefit plans (such as foreign or excess benefit plans) which are
not subject to ERISA [(other than workers compensation plans)]; (B) all
stock option plans, stock purchase plans, bonus or incentive award plans,
severance pay policies or agreements, deferred compensation agreements,
supplemental income arrangements, vacation plans, and all other employee
benefit plans, agreements, and arrangements (including any informal
arrangements not described in (A) above, including without limitation, any
arrangement intended to comply with Code Section 120, 125, 127, 129 or 137;
and (C) all plans or arrangements providing compensation to employee and
non-employee directors. In the case of an Employee Program funded through a
trust described in Code Section 401(a) or an organization described in Code
Section 501(c)(9), or any other funding vehicle, each reference to such
Employee Program shall include a reference to such trust, organization or
other vehicle.
(ii) An entity "maintains" an Employee Program if such entity
sponsors, contributes to, or provides benefits under or through such
Employee Program, or has any obligation (by agreement or under applicable
law) to contribute to or provide benefits under or through such Employee
Program, or if such Employee Program provides benefits to or otherwise
covers employees of such entity (or their spouses, dependents, or
beneficiaries).
(iii) An entity is an "Affiliate" of the Company if it is
considered a single employer with the Company under ERISA Section 4001(b)
or part of the same "controlled group" as the Company for purposes of ERISA
Section 302(d)(8)(C).
5.16. Labor Relations and Employment Matters.
(a) Section 5.16 of the Company Disclosure Schedule ("Schedule 5.16")
contains a complete and materially accurate list of: (i) all employees of the
Company and Company Subsidiaries ("Employees") as of the date specified on such
list, showing the position, annual base salary, date of hire, date of birth,
full/part-time status, and bonus potential for each Employee; (ii) all
independent contractors, consultants, temporary employees, leased employees or
other servants or agents classified by the Company and any Company Subsidiary as
other than Employees or compensated other than through wages paid by the Company
and the Company
30
Subsidiaries and reported on a form W-4 (collectively, "Contingent Workers")
employed or used with respect to the operation of the Company and the Company
Subsidiaries as of the date specified on such list, showing for each Contingent
Worker such individual's role in the business, and such individual's fee or
compensation arrangements and other contractual terms with the Company and any
Company Subsidiary; and (iii) all current directors and officers, whether or not
Employees, of the Company and any Company Subsidiary.
(b) Except as set forth in Section 5.16 of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is a party to,
or bound by, any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. There is no pending or,
to the knowledge of the Company, threatened (i) union organizational campaign
effort, collective bargaining negotiations, bargaining impasse, implementation
of final offer, work-to-rule or intermittent strike or (ii) labor dispute,
grievance or arbitration matter, economic or unfair labor practice strike,
boycott, work stoppage or slowdown involving, in each case of this clause (ii),
a material number of employees of the Company and its Subsidiaries, against the
Company or any of its Subsidiaries, no lockout is in effect and no permanent or
temporary strike replacements are currently employed at any Company facility.
Neither the Company nor any of its Subsidiaries, nor their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of the Company or any
of its Subsidiaries, and there is no pending or, to the knowledge of the
Company, threatened charge, complaint, decision, order, notice-posting
requirement, settlement agreement or injunctive action or order against the
Company or any of its Subsidiaries by the National Labor Relations Board or any
similar governmental or adjudicatory agency or court, except in each case as
would not reasonably be expected to have a Company Material Adverse Effect. The
Company and its Subsidiaries have in the past been and are in compliance in all
respects with all applicable laws respecting employment, employment practices,
employee classification, labor relations (including, without limitation the
Occupational Safety and Health Act of 1970, 29 U.S.C. Sections 553, 651 et
seq.), family and medical leaves, military leaves, leaves of absence generally,
safety and health, wages, hours and terms and conditions of employment, except
where the failure to be in compliance would not reasonably be expected to have a
Company Material Adverse Effect. The Company and the Company Subsidiaries are,
and at all times since November 23, 1999, have been, in material compliance with
the requirements of the Immigration Reform Control Act of 1986. The Company has
complied in all respects or accrued for or will pay or accrue for (including an
appropriate accrual on the Net Cash Statement) all wages, salaries, commissions,
bonuses, benefits and other compensation due and payable to all employees of the
Company and its Subsidiaries under any Company or Company Subsidiary policy,
practice, agreement, plan, program or any statute or other law for services
performed through the Effective Time. All Employees are employed at-will. There
is no policy, plan or program of paying severance pay or any form of severance
compensation in connection with the termination of any Employee or Contingent
Worker.
(c) Except as set forth on Section 5.16 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary experienced a "plant
closing," "business
31
closing," or "mass layoff" (as defined in the Worker Adjustment and Retraining
Act of 1986 ("WARN Act") or any similar state, local or foreign law or
regulation (collectively, with the WARN Act, "Plant Closing Laws") affecting any
site of employment of the Company or any Company Subsidiary or one or more
facilities or operating units within any site of employment or facility of the
Company or any Company Subsidiary, without complying with any applicable Plant
Closing Laws, and, during the 90-day period preceding the date hereof, no
Employee has suffered an "employment loss" (as defined in the WARN Act).
Schedule 5.16 sets forth for each Employee who has suffered an "employment loss"
during the 90-day period preceding the date hereof (i) the name of such employee
(ii) the date of hire of such employee, (iii) such employee's regularly
scheduled hours over the six month period prior to such "employment loss", and
(iv) such employee's last job title(s), location, assignment(s) and
department(s).
(d) Except as set forth on Section 5.16 of the Company Disclosure
Schedule, neither the Company nor any Company Subsidiary is subject to any
affirmative action obligations under any law, including, without limitation,
Executive Order 11246. Nor is either a government contractor for purposes of any
law with respect to the terms and conditions of employment, including without
limitation, the Service Contracts Act or prevailing wage laws.
(e) To the Company's knowledge, to the extent that any Contingent
Workers are employed or retained by the Company and the Company Subsidiaries,
the Company and the Company Subsidiaries have properly classified and treated
them in accordance with applicable laws and for purposes of all employee benefit
plans and perquisites.
(f) The employment agreements set forth in Section 5.16 of the
Company Disclosure Schedule ("Employment Agreements") are in full force and
effect and are valid and binding obligations enforceable against each Employee
thereto. No party to any Employment Agreement has breached his, her or its
obligations thereunder. Consummation of the transaction contemplated hereby
shall not affect the enforceability of any Employment Agreement. Any payments
made to an Employee or Contingent Worker pursuant to an Employment Agreement or
any other understanding, promise, or agreement, in the event of a termination of
employment following the Closing Date, will not exceed for each Employee or
Contingent Worker the amount set forth for each Employee or Contingent Worker in
Section 5.16 of the Company Disclosure Schedule.
5.17. No Brokers. Neither the Company nor any of the Company Subsidiaries
has entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of such entity or Parent or MergerCo to
pay any finder's fees, brokerage or agent's commissions or other like payments
in connection with the negotiations leading to this Agreement or consummation of
the Transactions, except that the Company has retained Lehman Brothers Inc.
("Lehman Brothers") as its financial advisor in connection with the
Transactions. The Company has provided to Parent true, complete and accurate
copies of all agreements (including any amendments thereto) between the Company
and Lehman Brothers pursuant to which Lehman Brothers would be entitled to any
payment relating to the Transactions, subject to redaction of certain
non-pricing and non-fee related information contained therein, and no oral or
other understandings with Lehman Brothers exist except as set forth therein.
Other than the
32
foregoing arrangements, the Company is not aware of any possible claim for
payment of any finder's fees, brokerage or agent's commissions or other like
payments in connection with the negotiations leading to this Agreement or
consummation of the Transactions.
5.18. Opinion of Financial Advisor. The Company has received the opinion of
Lehman Brothers to the effect that, as of the date of this Agreement, the
Exchange Ratio is fair to the Company's stockholders from a financial point of
view, and a true, complete and accurate signed copy of such opinion has been, or
promptly upon receipt thereof will be, delivered to Parent. The Company has been
authorized by Lehman Brothers to permit the inclusion of such opinion in its
entirety in the Proxy Statement (as defined in Section 7.4).
5.19. Vote Required. The affirmative vote of the holders of a majority of
the outstanding shares of Company Common Stock outstanding on the record date
for the meeting of the Company's stockholders is the only vote of the holders of
any class or series of the Company's capital stock necessary to approve the
Transactions and adopt this Agreement.
5.20. Takeover Laws. The Company Board has taken appropriate actions and
votes such that the provisions of Section 203 of the DGCL will not apply to this
Agreement, the Voting Agreements or any of the Transactions. No "control share
acquisition" "business combination moratorium," "fair price" or other form of
antitakeover statute or regulation is applicable to this Agreement and the
Transactions contemplated hereby and thereby.
5.21. Material Contracts.
(a) Section 5.21(a) of the Company Disclosure Schedule lists all
Material Contracts (as hereinafter defined) of the Company and the Company
Subsidiaries, and except as set forth in Section 5.21(a) of the Company
Disclosure Schedule, each Material Contract is valid and binding on the Company
or such Company Subsidiary and is in full force and effect and enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. Except as set forth in Section 5.21(a) of the Company
Disclosure Schedule, to the Company's knowledge, neither the Company nor any
Company Subsidiary is in default or has received notice of any violation or
default under any such Material Contract and, to the knowledge of the Company,
no other party is in default under any of the Material Contracts, and no such
violations or defaults will be triggered by the execution, delivery and
performance of this Agreement by the Company or the consummation of the
Transactions. For purposes of this Agreement, "Material Contracts" shall mean
(i) all contracts, agreements or understandings of a party and the Subsidiaries
of such party involving any payments in an amount, individually or in the
aggregate, in excess of $50,000, (ii) all acquisition, merger, asset purchase or
sale agreements entered into by a party or any Subsidiary of such party, (iii)
all non-competition agreements and other agreements or obligations which purport
to limit in any respect the manner in which, or the localities in which, all or
any material portion of the business of a party or any Subsidiary of such party
may be conducted, (iv) all transactions, agreements, arrangements or
understandings with any affiliate of a party or any Subsidiary of such party
that would be required to be disclosed under Item 404 of Regulation S-K of Title
17, Part 229 of the Code of Federal
33
Regulations ("Regulation S-K"), (v) all voting or other agreements to which a
party is a party governing how any shares of such party's Common Stock shall be
voted, (vi) all agreements which provide for, or relate to, the incurrence by a
party or any Subsidiary of such party of indebtedness for borrowed money
(including any interest rate or foreign currency swap, cap, collar, hedge or
insurance agreements, or options or forwards on such agreements, or other
similar agreements for the purpose of managing the interest rate or foreign
exchange risk associated with its financing), (vii) all contracts or other
agreements which would prohibit or materially delay the consummation of the
Transactions, (viii) all joint venture agreements to which a party or any
Subsidiary of such party is a party, (ix) all agreements or other arrangements
related to the licensing of assets by or to a party or any Subsidiary of such
party, (x) all material agreements of indemnification or any guaranty, (xi) any
contracts or agreements which may not be canceled without penalty upon notice of
ninety (90) days or less, or any material agreement pursuant to which a party or
any Subsidiaries of such party have continuing material obligations to jointly
develop any intellectual property that will not be owned, in whole or in part,
by such party or any Subsidiary of such party and which may not be canceled
without penalty upon notice of ninety (90) days or less, (xii) any agreement,
contract or commitment currently in force to license any third party to
manufacture or reproduce any party's product, service or technology or any
agreement, contract or commitment currently in force to sell or distribute any
party's products, service or technology except agreement with distributors or
sales representatives in the normal course of business cancelable without
penalty upon notice of ninety (90) days or less and substantially in the form
previously provided to the other party; (xiii) any material settlement agreement
entered into within five (5) years prior to the date of this Agreement; and
(xii) all other agreements within the meaning set forth in Item 601(b)(10) of
Regulation S-K. The Company has made available to Parent and MergerCo true and
correct copies of the Material Contracts.
(b) Except as set forth in Section 5.21(b) of the Company Disclosure
Schedule, the execution and delivery of this Agreement by the Company does not,
and the performance of and compliance with this Agreement by the Company and
consummation of the Transactions does not, require any authorization, consent or
approval of any third party.
(c) Except as set forth in Section 5.21(c) of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is a party to
any oral or written (i) employment, severance, retention or termination
agreements or consulting agreements not terminable on less than thirty (30) days
notice, (ii) union or collective bargaining agreement, (iii) agreement with any
executive officer or other key employee of the Company or any of the Company
Subsidiaries the benefits of which are contingent or vest, or the terms of which
are materially altered, upon the occurrence of a transaction involving the
Company or any of the Company Subsidiaries of the nature contemplated by this
Agreement, (iv) agreement with respect to any executive officer or other key
employee of the Company or any of the Company Subsidiaries providing any term of
employment or compensation guarantee (including upon the termination of such
employee at or after the Effective Time) or (v) agreement or plan, including any
stock option, stock appreciation right, restricted stock or stock purchase plan,
any of the benefits of which will be increased, or the vesting of the benefits
of which will be accelerated, by
34
the occurrence of any of the Transactions (including upon the termination of
such employee at or after the Effective Time) or the value of any of the
benefits of which will be calculated on the basis of any of the Transactions.
Neither the Company nor any of the Company Subsidiaries maintains or has
otherwise set forth a formal or informal oral or written employee severance
policy.
(d) Except as set forth on Section 5.21(d) of the Company Disclosure
Schedule or as addressed pursuant to the ECO Termination Agreement, neither the
Company nor any Company Subsidiaries have any Liabilities of any nature to
Energy Co-Opportunity Inc. ("ECO") and/or ECO Fuel Cells, LLC ("EFC"), whether
arising under or with respect to that certain Second Amended and Restated Fuel
Cell Products Operating Agreement by and among the Company, H Power Enterprises
of Canada, Inc. ("HPEC"), ECO and EFC, that certain Memorandum of Agreement by
and between the Company, HPEC, EFC and ECO, that certain Sales and Marketing
Services Agreement between the Company, HPEC and EFC and that certain Test
Reporting, Engineering Services and Field Services Agreement among the Company,
HPEC, EFC and ECO, all dated April 10, 2002 or otherwise with respect to
deposits or prepayments pursuant to purchase and sale contracts with ECO or EFC.
5.22. Collectibility of Accounts Receivable. To the Company's knowledge,
all of the accounts receivable of the Company and the Company Subsidiaries shown
in the consolidated financial statements included or incorporated by reference
in the Company SEC Reports or acquired thereafter are valid and enforceable
claims, fully collectible and subject to no setoff or counterclaim, less
appropriate allowances for uncollectable accounts to the extent reflected in the
Company SEC Reports. Except as set forth in Section 5.22 of the Company
Disclosure Schedule, the Company has no accounts or loans receivable from any
person, firm or corporation which is affiliated with the Company or any Company
Subsidiary or from any director, officer or employee of the Company or any
Company Subsidiary.
5.23. Accounting Policies.
(a) The accounting policies, including without limitation, those
policies related to revenue recognition, utilized by the Company and the Company
Subsidiaries in preparing the Company's financial statements are as set forth in
Section 5.23(a) of the Company Disclosure Schedule and are in conformity with
GAAP. All estimates made by management in connection with the preparation of
such financial statements in accordance with these accounting policies are set
forth in Section 5.23(a) of the Company Disclosure Schedule. The financial
statements included or incorporated by reference in the Company SEC Reports were
prepared in accordance with such accounting policies and management estimates.
(b) Except as set forth on Section 5.23(b) of the Company Disclosure
Schedule, since January 1, 2002, the Company has not received, and has no
knowledge of the existence of, whether in draft form or otherwise, any
"management letters", accountants' reports or other letters, reports or
documents related to the internal controls of the Company and its Subsidiaries,
and no such letters, reports or documents have been provided to, or are intended
to be provided to, the Company's management, Board of Directors or audit
committee.
35
5.24. Customers, Distributors and Suppliers.
(a) Section 5.24(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all customers, representatives and distributors
(whether pursuant to a commission, royalty or other arrangement) who accounted
for any of the sales of the Company and the Company Subsidiaries for the fiscal
year ended May 31, 2002, showing, with respect to each, the name, address and
dollar amount involved (collectively, the "Customers and Distributors"). Section
5.24(a) of the Company Disclosure Schedule is a complete and accurate list of
the suppliers of the Company and the Company Subsidiaries to whom during the
fiscal year ended May 31, 2002, the Company and the Company Subsidiaries made
payments showing, with respect to each, the name, address and dollar amount
involved (the "Suppliers"). Except as provided on Section 5.24(a)A of the
Company Disclosure Schedule, the relationships of the Company and the Company
Subsidiaries with their Customers, Distributors and Suppliers are good
commercial working relationships and, to the knowledge of the Company, neither
the announcement of the Transactions nor the consummation thereof will adversely
affect any of such relationships. No Customer, Distributor or Supplier has
cancelled, materially modified, or otherwise terminated its relationship with
the Company or any Company Subsidiary, or has decreased materially its usage or
purchase of the services or products of the Company or any Company Subsidiary or
its services, supplies or materials furnished to the Company or any Company
Subsidiary, nor, to the knowledge of the Company, does any Customer, Distributor
or Supplier have any plan or intention to do any of the foregoing.
(b) Except as set forth in Section 5.24(b) of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is a party to
any oral or written agreement or arrangement with any customer, supplier or
distributor related to the offering of discounts, extended warranties, service
contracts, bundling of any Products, rights of return or any other similar
agreements or arrangements.
5.25. Product Liability. To the Company's knowledge, there are no events,
conditions, circumstances, activities, practices, incidents, actions, omissions
or plans which could reasonably be expected to give rise to any liability or
obligation or otherwise form the basis of any claim based on or related to any
product that is or was designed, formulated, manufactured, processed,
distributed, sold or placed in the stream of commerce by the Company or any
Company Subsidiary or any service provided by or on behalf of the Company or any
Company Subsidiary. All products, including the packaging and advertising
related thereto, which were designed, formulated, manufactured, processed,
distributed, sold or placed in the stream of commerce by the Company or any
Company Subsidiary or any services provided by or on behalf of the Company or
any Company Subsidiary complied with applicable permits, applicable laws or
applicable industry or customer standards, except as otherwise could not have a
Company Material Adverse Effect, and there have not been and there are no
defects or deficiencies in such services or products. Section 5.25 of the
Company Disclosure Schedule sets forth the Company's standard product and
service warranties on each of the products or services that the Company
distributes, services, markets, sells or produces for itself, a customer or a
third party. Other than such warranties, the Company provides no other
warranties, guarantees or rights of return on any product or service.
36
5.26. Certain Business Practices; Transactions in Securities.
(a) To the Company's knowledge, no director, officer, agent or
employee of the Company or any Company Subsidiary, has, directly or indirectly,
(i) made or agreed to make any contribution, payment or gift to any government
official, employee or agent where either the contribution, payment or gift or
the purpose thereof was illegal under the laws of any federal, state, local or
foreign jurisdiction, (ii) established or maintained any unrecorded fund or
asset for any purpose or made any false entries on the books and records of the
Company or any of the Company Subsidiaries for any reason, (iii) made or agreed
to make any contribution, or reimbursed any political gift or contribution made
by any other person, to any candidate for federal, state, local or foreign
public office or (iv) paid or delivered any fee, commission or any other sum of
money or item of property, however characterized, to any finder, agent,
government official or other party, in the United States or any other country,
which in any manner relates to the assets, business or operations of the Company
or the Company Subsidiaries, which the Company, such Company Subsidiary or each
officer, director, agent or employee knew or had reason to believe to have been
illegal under any federal, state or local laws (or any rules or regulations
thereunder) of the United States or any other country having jurisdiction. The
Company has questioned its directors and executive officers concerning known
stock transfers since December 31, 1999 and based upon that investigation the
Company has not, and to the Company's knowledge (i) no director or officer of
the Company or the Company Subsidiaries, (ii) no person related to any such
director or officer by blood, marriage or adoption and residing in the same
household and (iii) no person who has been knowingly provided material nonpublic
information by any one or more of these persons, has purchased or sold, or
caused to be purchased or sold, any shares of Company Common Stock or other
securities issued by the Company (x) during any period when the Company was in
possession of material nonpublic information or (y) in violation of any
applicable provision of the Exchange Act.
(b) The Company and the Company Subsidiaries have invested all of
their cash and cash equivalents in a manner consistent with the Company's cash
investment policy, a copy of which is attached as Section 5.26(b) of the Company
Disclosure Schedule.
5.27. Insurance. The Company and the Company Subsidiaries maintain
insurance policies (the "Insurance Policies") covering the assets, business
equipment, properties, operations, employees, officers and directors of the
Company and the Company Subsidiaries. Section 5.27 of the Company Disclosure
Schedule contains a complete and accurate list of all Insurance Policies. Each
Insurance Policy is in full force and effect and is valid, outstanding and
enforceable, and all premiums due thereon have been paid in full. None of the
Insurance Policies will terminate or lapse (or be affected in any other
materially adverse manner) by reason of the Transactions. The Company and the
Company Subsidiaries have complied in all material respects with provisions of
each Insurance Policy under which any of them is the insured party. No insurer
under any Insurance Policy has canceled or generally disclaimed liability under
any such policy or, to the knowledge of the Company, indicated any intent to do
so or not to renew any such policy. All material claims under the Insurance
Policies have been filed in a timely fashion. There is no material claim by the
Company or any of its subsidiaries pending under any
37
of the Insurance Policies as to which coverage has been questioned, denied or
disputed by the underwriters of such policies.
5.28. Reorganization. Neither the Company nor any of its Subsidiaries has
disposed of any assets that would (i) prevent MergerCo from acquiring at least
90 percent of the fair market value of the net assets and 70 percent of the fair
market value of the gross assets held by the Company and its Subsidiaries within
the meaning of Revenue Procedure 86-42 or (ii) violate the "substantially all"
rule under Section 368(a)(2)(E) of the Code and corresponding Treasury
Regulations.
5.29. Ownership of Parent Common Stock; Affiliates and Associates. As of
the date of this Agreement, neither the Company nor any of its affiliates or
associates (as such terms are defined under the Exchange Act) (a) beneficially
owns, directly or indirectly, or (b) is a party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of any
shares of capital stock of Parent.
5.30. No Contracts with Affiliates. Neither the Company nor any Company
Subsidiary has entered into any agreement, contract, subcontract, lease,
understanding, instrument, note, option, warranty, purchase order, license,
sublicense, insurance policy or legally binding commitment or undertaking of any
nature with any of its officers, directors or stockholders, except pursuant to
the Stock Option Plans and employment agreements, or consulting agreements in
each case as set forth in Section 5.30 of the Company Disclosure Schedule. The
Company has no accounts or loans receivable from any person, firm or corporation
which is affiliated with the Company or any Company Subsidiary or from any
director, officer or employee of the Company or any Company Subsidiary.
5.31. Disclosure. The representations, warranties and statements by the
Company in this Agreement, the Company Disclosure Schedule and the certificates
delivered pursuant hereto do not contain any untrue statement of a material fact
and, when taken together with each other, do not omit to state a material fact
necessary to make such representations, warranties and statements, in the light
of the circumstances under which they are made, not misleading.
5.32. Board Approval. The Board of Directors of the Company has, as of the
date of this Agreement unanimously (i) approved, subject to stockholder
approval, this Agreement and the Transactions contemplated hereby, (ii)
determined that the Merger is the best interests of the stockholders of the
Company and is on terms that are fair to such stockholders and (iii) recommended
that the stockholders of the Company approve this Agreement and the Merger.
5.33. Registration Statement; Proxy Statement. None of the information
supplied or to be supplied by the Company for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 (as defined in Section
7.4) to be filed with the SEC by Parent in connection with the issuance of
Parent Common Stock in or as a result of the Merger will, at the time the Form
S-4 becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not
38
misleading; and (ii) the Proxy Statements to be filed with the SEC by each of
the Company and Parent pursuant to Section 7.4 hereof will not, at the dates
mailed to the stockholders of the Company and Parent, respectively, at the times
of the stockholders meeting of the Company in connection with the Transactions
contemplated hereby and the stockholders meeting of the Parent in connection
with the approval of the issuance of Parent Common Stock pursuant to the Merger,
and as of the Effective Time, contain any untrue material statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy Statement
filed by the Company will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by the
SEC thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by Parent or
MergerCo which is contained in any of the foregoing documents.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGERCO
Except as set forth in the disclosure schedules delivered at the execution
hereof to the Company and certified by a duly authorized officer of the Company,
which shall refer to the relevant Sections of this Agreement (the "Parent
Disclosure Schedule"), each of Parent and MergerCo represents and warrants to
the Company as follows:
6.1. Existence; Good Standing; Authority; Compliance with Law.
(a) Each of Parent and MergerCo is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the requisite corporate or other power and authority to own, operate,
lease and encumber its properties and to carry on its business as it is now
being conducted. Each of Parent and MergerCo is duly licensed or qualified to do
business as a foreign corporation and, to the extent applicable, is in good
standing under the laws of any other jurisdiction in which the character of the
properties owned, leased or operated by it therein or in which the transaction
of its business makes such license or qualification necessary, except where the
failure to be so licensed or qualified would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect (as
hereinafter defined). For purposes of this Agreement, a "Parent Material Adverse
Effect" means any change, effect, event, violation, occurrence, inaccuracy,
condition or development that is or is reasonably likely to be materially
adverse to (i) the business, operations, assets (including intangible assets),
liabilities, results of operations, or condition (financial or otherwise) of
Parent and each Parent Subsidiary, taken as a whole, or (ii) the ability of
Parent and MergerCo to perform their respective obligations under this
Agreement.
(b) Each of Parent Subsidiaries is a corporation, partnership or
limited liability company (or similar entity or association in the case of those
Parent Subsidiaries organized and existing other than under the laws of a state
of the United States) duly incorporated or organized, validly existing and in
good standing under the laws of its jurisdiction
39
of incorporation or organization, has the requisite corporate or other power and
authority to own, operate, lease and encumber its properties and to carry on its
business as it is now being conducted, and is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the ownership of
its property or the conduct of its business requires such license or
qualification, except for jurisdictions in which such failure to be so licensed
or qualified or to be in good standing could not, individually or with
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
(c) Neither Parent nor any of Parent Subsidiaries is in conflict
with, or in default or violation of, (i) any order of any court, governmental
authority or arbitration board or tribunal, or any law, ordinance, bylaw,
judgment, decree, order, arbitration, concession, grant, governmental rule or
regulation to which Parent or any Parent Subsidiary or any of their respective
properties or assets is subject, bound or affected or (ii) any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of Parent
Subsidiaries is a party or by which Parent or any Parent Subsidiaries or any of
their respective properties or assets is subject, bound or affected where such
violations, conflicts or defaults, alone or together with all other violations,
conflicts or defaults could reasonably be expected to have a Parent Material
Adverse Effect or cause Parent to lose any material benefit or incur any
material liability. No investigation or review by any governmental or regulatory
body or authority is pending or, to the knowledge of Parent, threatened against
Parent or any Parent Subsidiary, nor has any governmental or regulatory body or
authority indicated to Parent an intention to conduct the same, other than, in
each such case, those the outcome of which could not, individually or in the
aggregate, reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of Parent or any Parent Subsidiaries,
any acquisition of material property by Parent or any Parent Subsidiary or the
conduct of any business by Parent or any Parent Subsidiary. Parent and Parent
Subsidiaries have obtained all licenses, permits, approvals, variances,
exemptions, orders and other authorizations and have taken all actions required
by applicable law or governmental regulations in connection with their
businesses as currently conducted, except where the failure to obtain any such
license, permit, approval or authorization or to take any such action, alone or
together with all other failures, could not reasonably be expected to have a
Parent Material Adverse Effect. All licenses, permits, approvals, variances,
exemptions, orders and other authorizations required under such laws and
regulations or which are material to the operation of the business of Parent and
Parent Subsidiaries taken as a whole (collectively, the "Parent Permits") are in
full force and effect. No violations are or have been recorded in respect of any
Parent Permits; to the knowledge of Parent, no event has occurred that would
allow revocation or termination or that would result in the impairment of
Parent's or any Parent Subsidiary's rights with respect to any such Parent
Permits; and no proceeding is pending or, to the knowledge of Parent, threatened
to revoke, limit or enforce any such Parent Permits.
(d) True, complete and accurate copies of the Certificate of
Incorporation of Parent (the "Parent Certificate") and the Bylaws of Parent (the
"Parent Bylaws") and the other charter documents, bylaws, organizational
documents and partnership, limited liability company and joint venture
agreements of the Parent and each of the Parent Subsidiaries (and in each such
40
case, all amendments thereto) have been delivered to the Company prior to the
date of this Agreement, and no amendments thereto are pending. Such charter
documents, bylaws, organizational documents and agreements are listed in Section
6.1(d) of the Parent Disclosure Schedule and are in full force and effect.
Parent is not in violation of any provisions of the Parent Certificate or the
Parent Bylaws and no Parent Subsidiary is in violation of any of the provisions
of its equivalent organizational documents.
6.2. Authorization, Validity and Effect of Agreements. Each of Parent and
MergerCo has the requisite power and authority to enter into and consummate the
Transactions and to execute and deliver this Agreement. The Board of Directors
of Parent (the "Parent Board") has approved this Agreement and the Transactions.
The Board of Directors of MergerCo and the sole stockholder of MergerCo have
approved this Agreement and the Transactions. The execution and delivery by
Parent and MergerCo of this Agreement and the consummation of the Transactions
have been duly authorized by all requisite corporate action on the part of
Parent and MergerCo. This Agreement has been duly executed and delivered by
Parent and MergerCo and, assuming due and valid authorization, execution and
delivery thereof by the Company, is a valid and binding obligation of Parent and
MergerCo, enforceable against Parent and MergerCo in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
6.3. Capitalization.
(a) The authorized capital stock of Parent consists of 245,000,000
shares of Parent Common Stock, par value $0.01 per share, and 5,000,000 shares
of preferred stock, par value $0.01 per share (the "Parent Preferred Stock"). As
of the date of this Agreement, (a) 50,865,304 shares of Parent Common Stock were
issued and outstanding, (b) 8,444,876 shares of Parent Common Stock were
authorized and reserved for issuance pursuant to Parent's 1997 Stock Option Plan
or 1999 Stock Option and Incentive Plan (the "Parent Stock Option Plans"),
subject to adjustment on the terms set forth in the Parent Stock Option Plans,
(c) 1,000,000 shares of Parent Common Stock were authorized and reserved for
issuance pursuant to Parent's 1999 Employee Stock Purchase Plan, (d) options to
purchase 5,684,293 shares of Parent Common Stock (the "Parent Options") were
outstanding under Parent Stock Option Plans, (e) no shares of Parent Preferred
Stock were issued and outstanding, and (f) no shares of Parent Common Stock and
no shares of Parent Preferred Stock were held in the treasury of the Company. As
of the date of this Agreement, Parent had no shares of Parent Common Stock or
Parent Preferred Stock reserved for issuance or outstanding other than as
described above. All issued and outstanding shares of capital stock of Parent
are, and all shares of capital stock of Parent which may be issued pursuant to
the exercise of outstanding Parent Options will be, duly authorized, validly
issued, fully paid, nonassessable and free of any preemptive rights. All issued
and outstanding shares of capital stock of Parent were, and all shares of
capital stock of Parent which may be issued pursuant to the exercise of
outstanding Parent Options will be, issued in compliance with and in accordance
with the applicable requirements of the Securities Laws and applicable state
securities and "Blue Sky" laws. Parent has no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote (or which
are convertible into or exercisable for securities having the right to vote)
with the stockholders of
41
Parent on any matter. Except for the Parent Options (all of which have been
issued under the Parent Stock Option Plans) and Parent's Employee Stock Purchase
Plan, there are no options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate Parent to
issue, transfer or sell any shares of capital stock of Parent. Except as set
forth in Section 6.3 of the Parent Disclosure Schedule, there are no agreements
or understandings to which Parent or any Parent Subsidiary is a party with
respect to the voting of any shares of capital stock of Parent or which restrict
the transfer of any such shares, nor does Parent have knowledge of any
third-party agreements or understandings with respect to the voting of any such
shares or which restrict the transfer of any such shares. Except as set forth in
Section 6.3 of the Parent Disclosure Schedule, there are no outstanding
contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem
or otherwise acquire any shares of capital stock, partnership interests or any
other securities of Parent or any Parent Subsidiary. Except as set forth in
Section 6.3 of the Parent Disclosure Schedule, neither Parent nor any Parent
Subsidiary is under any obligation, contingent or otherwise, by reason of any
agreement to register the offer and sale or resale of any of their securities
under the Securities Act.
(b) The authorized capital stock of MergerCo consists of 1,000 shares
of MergerCo Common Stock, of which 1 share was outstanding as of the date of
this Agreement and owned by Parent. MergerCo is a direct wholly owned subsidiary
of Parent, was formed solely for the purpose of engaging in the Transactions,
has engaged in no other business activities and has conducted its operations
only as contemplated by this Agreement.
6.4. Subsidiaries. Section 6.4 of the Parent Disclosure Schedule contains
a complete and accurate list of all of Parent Subsidiaries. Except as set forth
in Section 6.4 of the Parent Disclosure Schedule, Parent owns directly or
indirectly all of the outstanding shares of capital stock or other equity
interests of each of Parent Subsidiaries. Each of the outstanding shares of
capital stock of each of Parent Subsidiaries having corporate form is duly
authorized, validly issued, fully paid, nonassessable and free of any preemptive
rights. Except as set forth in Section 6.4 of the Parent Disclosure Schedule,
each of the outstanding shares of capital stock or other equity interest of each
of Parent Subsidiaries is owned, directly or indirectly, by Parent free and
clear of all liens, pledges, security interests, claims, infringements,
interferences, options, rights of first refusals, preemption rights,
restrictions of any nature (including any restriction on the voting of any
security, any restrictions on the transfer of any security or other asset, any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any security) or other encumbrances. Except as set forth in Section
6.4 of the Parent Disclosure Schedule, there are no options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate any Parent Subsidiary to issue, transfer or sell any
shares of its capital stock or other equity interests. The following information
for each Parent Subsidiary as of the date of this Agreement is set forth in
Section 6.4 of the Parent Disclosure Schedule: (a) its name and jurisdiction of
incorporation or organization; (b) its authorized capital stock, share capital
or other equity interest; and (c) the name of each stockholder or equity
interest holder and the number of issued and outstanding shares of capital
stock, share capital or other equity interest held by each such holder.
42
6.5. Other Interests. Except as set forth in Section 6.5 of the Parent
Disclosure Schedule, neither Parent nor any Parent Subsidiary owns directly or
indirectly any interest or investment (whether equity or debt) in any
corporation, partnership, limited liability company, joint venture, business,
trust or other entity (other than investments in short-term investment
securities). Except as set forth in Section 6.5 of the Parent Disclosure
Schedule, there are no outstanding contractual obligations of Parent or any
Parent Subsidiary to acquire any shares of capital stock, partnership interests
or other securities of any such entity in which it owns an interest or holds an
investment. To the knowledge of Parent, there is no dispute among the equity
holders of any entity in which Parent and the Parent Subsidiaries own less than
all of the equity interests therein.
6.6. No Violation; Governmental Consents. Except as set forth in Section
6.6 of the Parent Disclosure Schedule, none the execution, delivery or
performance by Parent and MergerCo of this Agreement, the consummation by Parent
and MergerCo of the Transactions, or the compliance by Parent and MergerCo with
any of the provisions hereof, will conflict with or result in a breach of any
provisions of the Parent Certificate, the Parent Bylaws, the MergerCo
Certificate or the MergerCo Bylaws or any equivalent organizational documents of
any Parent Subsidiary. Except as set forth in Section 6.6 of the Parent
Disclosure Schedule, the execution, delivery and performance by Parent and
MergerCo of this Agreement, the consummation by Parent and MergerCo of the
Transactions, and the compliance by Parent and MergerCo with any of the
provisions hereof, will not violate, or conflict with, or result in a breach of
any provision of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
termination or in a right of termination or cancellation of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties of Parent or the
Parent Subsidiaries under, or result in being declared void, voidable or without
further binding effect, any of the terms, conditions or provisions of (a) any
note, bond, mortgage, indenture or deed of trust to which the Parent or any of
the Parent Subsidiaries is a party, or by which the Parent or any of the Parent
Subsidiaries or any of their properties or assets is bound, (b) any license,
franchise, permit, lease, contract, agreement or other instrument, commitment or
obligation to which Parent or any of the Parent Subsidiaries is a party, or by
which Parent or any of the Parent Subsidiaries or any of their properties or
assets is bound, or (c) any order, writ, judgment, injunction, decree, law
(including common law), statute, rule or regulation applicable to Parent or any
Parent Subsidiary or any of their properties or assets, (or by which any such
properties or assets are bound or affected) except as otherwise could not
reasonably be expected to have, individually or in the aggregate, a Parent
Material Adverse Effect. Other than the filings provided for in Section 1.2 of
this Agreement or required pursuant to the Exchange Act or applicable state
securities and "Blue Sky" laws, and based upon the accuracy of the Company's
representations and warranties contained in Section 5.33 hereof, the execution
and delivery of this Agreement by Parent and MergerCo does not, and the
performance of and compliance with this Agreement by Parent and MergerCo and
consummation of the Transactions does not, require any authorization, consent or
approval of, permit from, or declaration, filing, notification or registration
with, any Governmental Entity or regulatory authority, except where the failure
to obtain any such authorization, consent or approval of, permit from, or
declaration, filing, notification or
43
registration with, any Governmental Entity could not reasonably be expected to
have, individually or in the aggregate, a Parent Material Adverse Effect or
otherwise prevent the parties hereto from performing their obligations under the
Agreement.
6.7. Commission Documents. Parent has filed all required forms, reports,
exhibits, schedules, statements and other documents with the Commission since
the date Parent became subject to the reporting obligations of the Exchange Act
(as such documents may have been amended since the time of filing, collectively,
the "Parent SEC Reports"), all of which were prepared in accordance with the
applicable requirements of the Securities Laws. As of their respective dates,
the Parent SEC Reports (a) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (b) did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets of Parent included in or incorporated by reference
into the Parent SEC Reports (including the related notes and schedules) fairly
presents the consolidated financial position of Parent and the Parent
Subsidiaries as of its date and each of the consolidated statements of
operations, stockholders' equity and cash flows of Parent included in or
incorporated by reference into the Parent SEC Reports and the statement of
operations for the period ended September 30, 2002 set forth on Schedule 6.7 of
the Parent Disclosure Schedule (including any related notes and schedules)
fairly presents the results of operations, stockholders' equity or cash flows,
as the case may be, of Parent and the Parent Subsidiaries for the periods set
forth therein (subject, in the case of unaudited statements, to normal year-end
audit adjustments which would not be material in amount or effect), in each case
in accordance with GAAP consistently applied during the periods involved, except
as may be noted therein and except, in the case of the unaudited statements, as
permitted by Form 10-Q pursuant to Section 13 or 15(d) of the Exchange Act. No
Parent Subsidiary is required to file any form, report or document with the
Commission.
6.8. Litigation. Except as set forth in Section 6.8 of the Parent
Disclosure Schedule, there are (a) no continuing orders, injunctions or decrees
of any court, arbitrator or governmental authority to which Parent or any Parent
Subsidiary is a party or by which any of its properties or assets are bound or
to which any of its directors, officers, employees or agents, in such
capacities, is a party or by which any of its properties or assets are bound,
and (b) no claims, actions, suits or proceedings pending against Parent or any
Parent Subsidiary or against any of its directors, officers, employees or
agents, in such capacities, or, to the knowledge of Parent, threatened against
Parent or any Parent Subsidiary or against any of its directors, officers,
employees or agents, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality, including any governmental
or regulatory investigation, or any arbitration or other private dispute
resolution mechanism.
6.9. Absence of Certain Changes. Except as set forth in Section 6.9 of the
Parent Disclosure Schedule or as disclosed in the Parent SEC Reports or third
fiscal quarter earnings press release of Parent dated October 29, 2002, since
December 31, 2001 (a) the Parent and the Parent Subsidiaries have conducted
their businesses only in the ordinary course of business and (b) there has not
been any change, effect, event, occurrence, non-occurrence, condition or
44
development which has had or could be expected to have, individually or in the
aggregate, a Parent Material Adverse Effect.
6.10. No Undisclosed Liabilities. Except as set forth in Section 6.10 of
the Parent Disclosure Schedule, neither the Parent nor any of the Parent
Subsidiaries has any Liabilities which are, individually or in the aggregate,
material to the business, results of operations, assets or financial condition
of the Parent and the Parent Subsidiaries, taken as a whole, other than such
liabilities or obligations that have been specifically disclosed or specifically
provided in the Parent SEC Reports or third fiscal quarter earnings press
release of Parent dated October 29, 2002.
6.11. Taxes. To Parent's knowledge, Parent and Parent Subsidiaries have
timely filed all Tax Returns required to be filed by it, or requests for
extensions to file such Tax Returns have been timely filed and granted and have
not expired, and all such filed Tax Returns are complete and accurate in all
respects, except for such failures to (i) file, (ii) have extensions granted
that remain in effect or (iii) be complete and accurate in all respects, as
applicable, as would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect. Parent and each of the Parent
Subsidiaries has paid (or Parent has paid on its behalf) all Taxes required to
be paid by it, except for such failures to pay as would not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
The most recent financial statements contained in the Parent SEC Reports reflect
an adequate reserve for all Taxes payable by Parent and the Parent Subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements, except for such failures to reflect such reserves as would
not, individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
6.12. Intellectual Property.
(a) Section 6.12(a) of the Parent Disclosure Schedule contains a
complete and accurate list of all Patents owned by Parent or any Parent
Subsidiary or otherwise used in the Parent Business (as hereinafter defined)
("Parent Patents"), Marks owned by the Parent or any Parent Subsidiary or
otherwise used in the Parent Business ("Parent Marks") and Copyrights owned by
the Parent or any Parent Subsidiary or otherwise used in the Parent Business
("Parent Copyrights"). Except as set forth in Section 6.12(a) of the Parent
Disclosure Schedule and to the Parent's knowledge:
(i) the Parent or one of the Parent Subsidiaries exclusively
owns or possesses adequate and enforceable rights to use, without payment
to a third party, all of the Parent Intellectual Property Assets necessary
for the operation of the Parent Business, free and clear of all
Encumbrances;
(ii) to Parent's knowledge, all Parent Patents, Parent Marks
and Parent Copyrights which are issued by or registered with, as
applicable, the U.S. Patent and Trademark Office, the U.S. Copyright Office
or in any similar office or agency anywhere in the world are currently in
compliance with formal legal requirements (including,
45
without limitation, as applicable, payment of filing, examination and
maintenance fees, proofs of working or use, timely post-registration filing
of affidavits of use and incontestability and renewal applications) and are
valid and enforceable;
(iii) to Parent's knowledge, there are no pending, threatened
claims against the Parent, any Parent Subsidiary or any of their respective
employees alleging that (A) any of the Parent Intellectual Property Assets
or the Parent Business infringes the rights of others under any Parent
Intellectual Property Assets ("Parent Third Party Rights") or (B) the
Parent, any Parent Subsidiary or any of their respective employees have
misappropriated any Parent Third Party Right;
(iv) to Parent's knowledge, neither the Parent Business nor any
Parent Intellectual Property Asset infringes any Parent Third Party Right,
and none of the Parent, the Parent Subsidiaries or any of their respective
employees have misappropriated any Parent Third Party Right;
(v) neither the Parent nor any Parent Subsidiary has received
any communications alleging any of the Parent Intellectual Property Assets
is invalid or unenforceable;
(vi) to Parent's knowledge, no current or former employee or
consultant of the Parent or any Parent Subsidiary owns any rights in or to
any of the Parent Intellectual Property Assets;
(vii) the Parent is not aware of any violation or infringement
by a third party of any of the Parent Intellectual Property Assets;
(viii) the Parent and each Parent Subsidiary has taken reasonable
security measures to protect the secrecy, confidentiality and value of all
Trade Secrets used by the Parent and/or any Parent Subsidiary (the "Parent
Trade Secrets"), including, without limitation, requiring all employees and
consultants of the Parent and each Parent Subsidiary and all other persons
with access to Parent Trade Secrets to execute a binding confidentiality
agreement (copies of which have been made available to the Company), and,
to the Parent's knowledge, there has not been any breach by any party to
such confidentiality agreements; and
(ix) (A) neither the Parent nor any Parent Subsidiary has
directly or indirectly granted any rights, licenses or interests in the
source code of any of the Products, and (B) since the Parent or one of the
Parent Subsidiaries, as applicable, developed the source code of the
Products, neither the Parent nor any Parent Subsidiary has provided or
disclosed the source code of any of the Products to any person or entity.
(b) All licenses or other agreements under which the Parent and/or
any Parent Subsidiary is granted rights by others in Parent Intellectual
Property Assets are listed in Section 6.12(b) of the Parent Disclosure Schedule.
All such licenses or other agreements are in full force
46
and effect, and, to the knowledge of the Parent there is no material default by
any party thereto. Parent has made available to the Company true and complete
copies of all such licenses or other agreements, and any amendments thereto,
have been provided to the Company, and to the knowledge of the Parent, the
licensors under the licenses and other agreements under which the Parent and/or
any Parent Subsidiary is granted rights have all requisite power and authority
to grant the rights purported to be conferred thereby; and
(c) All licenses or other agreements under which the Parent and/or
any Parent Subsidiary has granted rights to others in Parent Intellectual
Property Assets are listed in Section 6.12(c) of the Parent Disclosure Schedule.
All such licenses or other agreements are in full force and effect, and, to the
knowledge of the Parent there is no material default by any party thereto.
Parent has made available to the Company true and complete copies of all such
licenses or other agreements, and any amendments thereto, have been provided to
the Company, and the Parent and/or a Parent Subsidiary has all requisite power
and authority to grant the rights purported to be conferred thereby.
(d) For purposes of this Agreement,
(i) "Parent Business" means the business of the Parent and/or
the Parent Subsidiaries as currently conducted and proposed to be
conducted.
(ii) "Parent Intellectual Property Assets" means all Intellectual
Property Assets owned by the Parent or any Parent Subsidiary or otherwise
used in the Parent Business. "Parent Intellectual Property Assets"
includes, without limitation, the Parent Products, Parent Patents, Parent
Marks, Parent Copyrights and Parent Trade Secrets.
(iii)"Parent Products" means those instruments, software,
licenses, consumables, other products and services designed, manufactured,
marketed, sold and/or distributed by the Parent and/or any Parent
Subsidiary and any other sources from which the Parent and/or any Parent
Subsidiary derives revenues. A complete list of the Products from which the
Parent or any Parent Subsidiaries derives revenues is provided on Section
6.12(d) of the Parent Disclosure Schedule attached hereto.
6.13. Environmental Matters.
(a) To the knowledge of Parent, the Parent and the Parent
Subsidiaries are in compliance with all Environmental Laws, except for any
noncompliance that, either individually or in the aggregate, could not
reasonably be expected to have a Parent Material Adverse Effect.
(b) Except as set forth in Section 6.13(b) of the Parent Disclosure
Schedule, (i) neither the Parent nor any Parent Subsidiary has entered into or
been subject to any consent decree, compliance order, or administrative order
under any Environmental Law, (ii) there is no administrative or judicial
enforcement proceeding pending, or to the knowledge of the Parent, threatened,
against the Parent or any Parent Subsidiary under any Environmental Law, (iii)
47
neither the Parent nor any Parent Subsidiary has received notice under the
citizen suit provision of any Environmental Law, (iv) neither the Parent nor any
Parent Subsidiary or, to the knowledge of the Parent, any legal predecessor of
the Parent or any Parent Subsidiary, has received any notice that it is
potentially responsible under any Environmental Law for costs of response or for
damages to natural resources, as those terms are defined under the Environmental
Laws, at any location, (v) neither the Parent nor any Parent Subsidiary or, to
the knowledge of the Parent, any legal predecessor of the Parent or any Parent
Subsidiary, has received any request for information, notice, demand letter, or
formal or informal complaint or claim under any Environmental Law or with
respect to environmental matters, and (vi) the Parent and the Parent
Subsidiaries have no reason to believe that any of the above will be
forthcoming.
(c) To the knowledge of Parent, neither the Parent nor any Parent
Subsidiary has generated, manufactured, refined, transported, treated, stored,
handled, disposed, transferred, produced or processed any Hazardous Materials,
except in compliance with all applicable Environmental Laws.
(d) To the knowledge of Parent, neither the Parent nor any Parent
Subsidiary has transported or disposed of, or allowed or arranged for any third
party to transport or dispose of, any waste containing Hazardous Materials to or
at any location included on the National Priorities List, as defined under
CERCLA, or any location proposed for inclusion on that list or at any location
on any analogous state list.
(e) To the knowledge of Parent, except as set forth in Section
6.13(e) of the Parent Disclosure Schedule, (i) neither the Parent nor any Parent
Subsidiary has released (as that term is defined in CERCLA) any Hazardous
Material on, in, under or at any real property owned or leased by the Parent or
any Parent Subsidiary, and (ii) the Parent has no knowledge of any release (as
that term is defined in CERCLA) on, in, under or at the real property owned or
leased by the Parent or any Parent Subsidiary or predecessor entity of Hazardous
Materials.
(f) To the knowledge of the Parent, there is no hazardous waste
treatment, storage or disposal facility, underground storage tank, landfill,
surface impoundment, underground injection well, friable asbestos or
polychlorinated biphenyls (PCBs), as those terms are defined under any
Environmental Laws, located at any of the real property owned or leased by the
Parent or any Parent Subsidiary or predecessor entity or facilities utilized by
the Parent or the Parent Subsidiaries.
(g) No lien has been imposed on any real property owned or leased by
the Parent or any Parent Subsidiary by any governmental agency at the federal,
state or local level in connection with the presence on or off such property of
any Hazardous Material.
6.14. Material Contracts.
(a) Section 6.14(a) of the Parent Disclosure Schedule lists all
agreements within the meaning set forth in Item 601(b)(10) of Regulation S-K
("Parent Material Contracts") of the Parent and the Parent Subsidiaries, and
except as set forth in Section 6.14 (a) of the Parent
48
Disclosure Schedule, each Parent Material Contract is valid and binding on the
Parent or such Parent Subsidiary and is in full force and effect and enforceable
in accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights and general
principles of equity. Except as set forth in Section 6.14(a) of the Parent
Disclosure Schedule, neither the Parent nor any Parent Subsidiary is in default
or has received notice of any violation or default under any such Parent
Material Contract and, to the knowledge of the Parent, no other party is in
default under any of the Parent Material Contracts, and no such violations or
defaults will be triggered by the execution, delivery and performance of this
Agreement by the Parent or the consummation of the Transactions, except in each
case for violations or defaults that individually or in the aggregate would not
reasonably be expected to have a Parent Material Adverse Effect. The Parent has
made available to the Company true and correct copies of the Parent Material
Contracts.
(b) Except as set forth in Section 6.14(b) of the Parent Disclosure
Schedule, the execution and delivery of this Agreement by the Parent does not,
and the performance of and compliance with this Agreement by the Parent and
consummation of the Transactions does not, require any authorization, consent or
approval of any third party.
6.15. Labor Relations and Employee Matters. Except as set forth on Schedule
6.15, neither Parent nor any of its Subsidiaries, nor their respective
representatives or employees, has committed any unfair labor practices in
connection with the operation of the respective businesses of Parent or any of
its Subsidiaries, and there is no pending or, to the knowledge of Parent,
threatened charge, complaint, decision, order, notice-posting requirement,
settlement agreement or injunctive action or order against Parent or any of its
Subsidiaries by the National Labor Relations Board or any similar governmental
or adjudicatory agency or court, except in each case as would not reasonably be
expected to have a Parent Material Adverse Effect. Parent and its Subsidiaries
have in the past been and are in compliance in all respect with all applicable
laws respecting employment, employment practices, employee classification, labor
relations (including, without limitation, the Occupational Safety and Health Act
of 1970, 29 U.S.C. Sections 553, 651 et seq.), family and medical leaves,
military leaves, leaves of absence generally, safety and health, wages, hours
and terms and conditions of employment, except where the failure to be in
compliance would not reasonably be expected to have a Parent Material Adverse
Effect. Parent and the Parent Subsidiaries are, and at all times since November
23, 1999, have been, in material compliance with the requirements of the
Immigration Reform Control Act of 1986. Parent has complied in all material
respects with its payment obligations to all employees of Parent and its
Subsidiaries in respect of all wages, salaries, commissions, bonuses, benefits
and other compensation due and payable to such employees under any Parent or
Parent Subsidiary policy, practice, agreement, plan, program and statue or other
law.
6.16. No Brokers. Other than the arrangements with Stephens Inc., neither
Parentnor any of the Parent Subsidiaries has entered into any contract,
arrangement or understanding with any person or firm which may result in the
obligation of such entity or the Company to pay any finder's fees, brokerage or
agent's commissions or other like payments in connection with the negotiations
leading to this Agreement or consummation of the Transactions. Other than the
Parent's arrangements with Stephens Inc., Parent is not aware of any claim for
payment of any
49
finder's fees, brokerage or agent's commissions or other like payments in
connection with the negotiations leading to this Agreement or consummation of
the Transactions.
6.17. Ownership of Company Common Stock; Affiliates and Associates. Except
as set forth in Section 6.17 of the Parent Disclosure Schedule, as of the date
of the Agreement, neither Parent nor any of its affiliates or associates (as
such terms are defined under the Exchange Act) (a) beneficially owns, directly
or indirectly, or (b) is a party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any shares of
capital stock of the Company.
6.18. Board Approval. The Board of Directors of Parent has, as of the date
of this Agreement unanimously (i) approved, subject to stockholder approval,
this Agreement and the Transactions contemplated hereby and (ii) determined that
the Merger is the best interests of the stockholders of Parent and is on terms
that are fair to such stockholders.
6.19. Opinion of Financial Advisor. Parent has received the opinion of
Stephens Inc. to the effect that, as of the date of this Agreement, the Exchange
Ratio is fair from a financial point of view to Parent, and a true, complete and
accurate signed copy of such opinion has been, or promptly upon receipt thereof
will be, delivered to the Company. Parent has been authorized by Stephens Inc.
to permit the inclusion of such opinion in its entirety in the Proxy Statement.
6.20. Registration Statement; Proxy Statement. None of the information
supplied or to be supplied by the Parent for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 (as defined in Section
7.4) to be filed with the SEC by Parent in connection with the issuance of
Parent Common Stock in or as a result of the Merger will, at the time the Form
S-4 becomes effective under the Securities Act, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; and (ii) the Proxy
Statement to be filed with the SEC by each of the Company and Parent pursuant to
Section 7.4 hereof will, at the dates mailed to the stockholders of the Company
and Parent, respectively, at the times of the stockholders meeting of the
Company in connection with the Transactions contemplated hereby and the
stockholders meeting of the Parent in connection with the approval of the
issuance of Parent Common Stock pursuant to the Merger, and as of the Effective
Time, contain any untrue material statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are made,
not misleading. The registration statement on Form S-4 will comply as to form in
all material respects with the provisions of the Securities Act and the rules
and regulations promulgated by the SEC thereunder. The Proxy Statement filed by
Parent will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations promulgated by the SEC
thereunder. Notwithstanding the foregoing, Parent makes no representation or
warranty with respect to any information supplied by the Company contained in
any of the foregoing documents.
50
6.21. Disclosure. The representations, warranties and statements by the
Parent in this Agreement, the Parent Disclosure Schedule and the certificates
delivered pursuant hereto do not contain any untrue statement of a material fact
and, when taken together with each other and the third fiscal quarter earnings
press release of Parent dated October 29, 2002, do not omit to state a material
fact necessary to make such representations, warranties and statements, in the
light of the circumstances under which they are made, not misleading.
ARTICLE VII
COVENANTS
7.1. No Solicitations.
(a) The Company represents and warrants that it has terminated, and
caused its Subsidiaries and affiliates, and their respective officers,
directors, employees, investment bankers, attorneys, accountants and other
advisors or representatives to terminate, any discussions or negotiations
relating to, or that could reasonably be expected to lead to, any Acquisition
Proposal (as hereinafter defined). Except as permitted by this Agreement, the
Company shall not, and shall not authorize or permit any Company Subsidiary or
any of its or their respective officers, directors or employees or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any Company Subsidiary to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
non-public information), or take any other action to facilitate, any inquiries,
discussions or the making of any proposal that constitutes, or could reasonably
be expected to lead to, an Acquisition Proposal, (ii) participate in any
discussions or negotiations, or otherwise communicate in any way with any person
(other than Parent or MergerCo), regarding an Acquisition Proposal or (iii)
enter into any agreement, arrangement or understanding regarding an Acquisition
Proposal or requiring it to abandon, terminate or fail to consummate the
Transactions. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by any
officer, director or employee of the Company or any Company Subsidiary or any
investment banker, financial advisor, attorney, accountant or other
representative retained by the Company or any Company Subsidiary shall be deemed
to be a breach of this Section 7.1 by the Company; provided, however, that if an
employee of the Company who is not an officer and not a member of management,
without authority, permission or direction from, or prior notice to, the Company
or any of its officers or directors, takes an action that violates clause (i) or
(ii) of the preceding sentence, and such action does not lead, directly or
indirectly, to the making of an Acquisition Proposal, which is, publicly
announced or otherwise communicated to the Company Board of Directors (or such
action does not lead any Person to have publicly announced, communicated or made
known an intention, whether or not conditional, to make an Acquisition
Proposal), then such violation will not constitute a breach by the Company of
this Section 7.1. Notwithstanding the foregoing, at any time prior to the date
on which this Agreement is approved by the stockholders of the Company at the
meeting referred to in Section 7.3, in response to an unsolicited Superior
Proposal (as hereinafter defined) that did not result from a breach of this
Section 7.1, the Company may (x) furnish non-public information with respect to
the Company and the Company Subsidiaries
51
to the person who made such Superior Proposal pursuant to a confidentiality
agreement on terms no more favorable to such person than the Confidentiality
Agreement (as hereinafter defined) and (y) participate in discussions or
negotiations with such person regarding such Superior Proposal, if the Company
Board determines in good faith (based on the advice of its outside legal
counsel) that failing to take such action would constitute a breach of its
fiduciary duties under applicable law.
(b) The Company Board shall not (i) withdraw or modify, or propose
to withdraw or modify, in a manner adverse to Parent or MergerCo, its approval
or recommendation of this Agreement or the Merger, (ii) approve or recommend, or
propose to approve or recommend, any Acquisition Proposal, (iii) approve or
recommend, or propose to approve or recommend, or execute or enter into a letter
of intent, agreement in principle, definitive agreement or other agreement
relating to an Acquisition Proposal (other than a confidentiality agreement
described in the last sentence of Section 7.1(a) hereof), or (iv) resolve to do
any of the foregoing. Notwithstanding the foregoing, the Company Board may
withdraw or modify, in a manner adverse to Parent or MergerCo, its approval or
recommendation of this Agreement or the Merger if, in response to a Superior
Proposal that has not been withdrawn and that did not otherwise result from a
breach of this Section 7.1, the Company Board shall have determined in good
faith (based on advice of its outside legal counsel) that failing to take such
action would constitute a breach of its fiduciary duties under applicable law;
provided, however, that prior to taking any such action, the Company shall have
given Parent at least forty-eight (48) hours written notice of the Company
Board's intention to take such action and the opportunity to meet with the
Company, its financial advisors and its legal counsel. Nothing contained in this
Section 7.1(b) shall limit the Company's obligation to hold and convene the
meeting of the Company's stockholders referred to in Section 7.3 (including,
without limitation, regardless of whether the recommendation or approval of the
Company Board of this Agreement or the Merger shall have been withdrawn or
modified).
(c) The Company shall promptly (and in any event within 24 hours)
advise Parent and MergerCo orally and in writing of any Acquisition Proposal
(including any amendments or proposed amendments thereof), or any request or
inquiry received by the Company or any Company Subsidiary with respect to, or
that could reasonably be expected to lead to, an Acquisition Proposal,
including, in each case, the identity of the person making any such Acquisition
Proposal, request or inquiry and the terms and conditions thereof, and shall
provide to Parent and MergerCo any written materials received by the Company or
any Company Subsidiary in connection therewith. The Company shall keep Parent
and MergerCo fully informed of the status of the discussions related to such
Acquisition Proposal, request or inquiry, including, without limitation, by
promptly (and in any event within 12 hours) providing Parent with all written
materials that it receives in connection with any such Acquisition Proposal. The
Company agrees not to release any person from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party (other
than the Confidentiality Agreement).
52
(d) Nothing contained in this Section 7.1 shall prohibit the Company
from at any time taking and disclosing to its stockholders a position
contemplated by Rule 14d-9 or Rule 14e-2 under the Exchange Act.
(e) As used in this Agreement, the term "Acquisition Proposal" shall
mean any proposed or actual tender offer, merger, consolidation or other
business combination involving the Company, or sale, lease or other disposition,
directly or indirectly, by merger, consolidation, share exchange or otherwise,
of any material assets of the Company or the Company Subsidiaries or any
securities of the Company or the Company Subsidiaries, or any transaction which
is similar in form, substance or purpose to any of the foregoing transactions;
provided, however, that the term "Acquisition Proposal" shall not include the
Merger and the other Transactions.
(f) As used in this Agreement, the term "Superior Proposal" shall
mean an unsolicited, bona fide written offer made by a third party to consummate
an Acquisition Proposal, which Acquisition Proposal is likely to be consummated,
and that (i) the Company Board determines in good faith, after consulting with
its outside legal counsel and its financial advisor, would, if consummated,
result in a transaction that is more favorable to the stockholders of the
Company than the transactions contemplated hereby (taking into account all
legal, financial, regulatory and other aspects of the proposal and the person
making the proposal), and (ii) is for one hundred percent (100%) of the Company
Common Stock.
7.2. Conduct of Business by the Company. During the period from the
date of this Agreement to the Effective Time, except as otherwise contemplated
by this Agreement or to the extent that Parent shall otherwise consent in
writing (which consent, to the extent it pertains to any action, activity, event
or occurrence that is consistent with long term cash preservation, taking into
account Parent's expectations of realizable cash following the integration of
Parent and the Company, shall not be unreasonably withheld), the Company shall
and shall cause each of the Company Subsidiaries to carry on their respective
businesses in the usual, regular and ordinary course, consistent with past
practice. Following a written request by the Company to Parent to provide
consent pursuant to this Section 7.2, Parent agrees to provide the Company with
a response within a reasonably practicable time. Except as expressly permitted
by this Agreement, as or in Section 7.2 of the Company Disclosure Schedule or to
the extent that Parent shall otherwise consent in writing (which consent shall
not be unreasonably withheld assuming it meets the same standards required for
consent in the parenthetical in the immediately preceding sentence), neither the
Company nor any of the Company Subsidiaries shall:
(i) split, combine or reclassify or redeem, purchase or
otherwise acquire any shares of its capital stock or other securities or
declare, set aside or pay any dividend or other distribution (whether in
cash, stock, or property or any combination thereof) in respect of any
shares of its capital stock or other securities, except for dividends paid
by any Company Subsidiary to the Company or any Company Subsidiary that is,
directly or indirectly, wholly owned by the Company;
53
(ii) authorize for issuance, issue or sell or agree or commit
to issue or sell (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities or equity equivalents
(including, without limitation, stock appreciation rights) (other than the
issuance of shares of Company Common Stock upon the exercise of Company
Options outstanding on the date of this Agreement in accordance with their
present terms);
(iii) authorize, commit to or make any equipment purchases or
capital expenditures other than in the ordinary course of business and
consistent with past practice and in an aggregate amount in excess of
$10,000;
(iv) (A) acquire, sell, lease, license, encumber, transfer or
dispose of any assets outside the ordinary course of business (whether by
asset acquisition, stock acquisition or otherwise), except pursuant to
obligations in effect on the date hereof as set forth in Section 7.2(iv) of
the Company Disclosure Schedule, or (B) enter into, modify or amend any
agreement or other arrangement related to the licensing of assets by or to
the Company or any Company Subsidiary;
(v) incur any amount of indebtedness for borrowed money,
guarantee any indebtedness, issue or sell debt securities, make any loans,
advances or capital contributions, mortgage, pledge or otherwise encumber
any material assets, or create or suffer any material lien thereupon;
(vi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than any payment, discharge or satisfaction (A) in the
ordinary course of business consistent with past practice, (B) in
connection with the Transactions which is not an aggregate amount in excess
of $5,000;
(vii) change any of the accounting principles or practices used
by it (except as required by GAAP, in which case written notice shall be
provided to Parent and MergerCo prior to any such change);
(viii) with respect to Taxes in an aggregate amount greater than
$10,000 of or affecting the Company or any Company Subsidiary, make, change
or revoke any election, change any accounting period, adopt or change any
accounting method, file any amended Tax return, enter into any closing
agreement, settle any Tax claim or assessment relating to the Company or
any Company Subsidiary, surrender any right to claim a refund of Taxes,
consent to any extension or waiver of the limitation period applicable to
any Tax claim or assessment, fail to timely file any Tax return, take a
position on a Tax return not in keeping with prior practice or take or omit
to take any other action, if such election, adoption, change, amendment,
agreement, settlement, surrender, consent or other action or omission is
outside the ordinary course of business or could have the
54
effect of increasing the present or future Tax liability or decreasing any
present or future Tax asset of the Company or any Company Subsidiary;
(ix) except as required by law and except pursuant to employee
retention agreements entered into with such employees upon such terms and
with such compensation amounts as approved by both the Company and Parent
("Stay Bonus Agreements"), (A) enter into, adopt, amend or increase
benefits under any Employee Program, (B) enter into, adopt, amend or renew
any agreement, arrangement, plan or policy between the Company or any of
the Company Subsidiaries and one or more of their respective directors,
officers, employees, agents or consultants, (C) increase in any manner the
compensation or fringe benefits of any director, officer, employee, agent
or consultant or (D) pay any benefit not required by any Employee Program
or arrangement as in effect on the date hereof;
(x) adopt any amendments to the Certificate of Incorporation
or the Bylaws or any of the organizational documents of the Company or the
Company Subsidiaries, except as expressly provided by the terms of this
Agreement;
(xi) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization;
(xii) settle or compromise any pending or threatened litigation
related to the Transactions or settle or compromise any in excess of
$15,000 in the aggregate other litigation (whether or not commenced prior
to the date of this Agreement);
(xiii) amend any term of any outstanding security of the Company
or any Company Subsidiary;
(xiv) enter into, modify or amend any Material Contract or
waive, delay the exercise of, release or assign any rights or claims under
any Material Contract or otherwise subject the Company or any Company
Subsidiary to any material commitment, obligation or liability;
(xv) enter into any agreement or other arrangement that is
material to the business of the Company or any Company Subsidiary or which
requires the Company or any Company Subsidiary to pay in excess of $10,000;
(xvi) license, assign or otherwise transfer to any person or
entity any rights to the Intellectual Property Assets (except as pursuant
to the terms of Material Contracts in effect as of the date hereof) or fail
to maintain or enforce any of the Intellectual Property Assets;
(xvii) permit any insurance policy naming the Company or any
Company Subsidiary as a beneficiary or a loss payable payee to be canceled
or terminated without
55
obtaining a replacement insurance policy in a comparable amount and against
comparable risks and losses;
(xviii) enter into any oral or written agreement or arrangement
with any customer or distributor related to the offering of discounts,
extended warranties, service contracts, bundling of any products, rights of
return or any other agreements or arrangements, other than agreements or
arrangements (A) with a term of less than ninety (90) days, (B) entered
into in the ordinary course of business consistent with past practices and
(C) recorded in accordance with GAAP;
(xix) amend or restate any of the Company SEC Reports or any
financial statements contained therein, except to the extent advised by the
Company's legal or accounting advisors that such amendment or restatement
is required;
(xx) take or agree to take any action which would make any of
the representations and warranties of the Company contained in this
Agreement untrue or incorrect as of the date when made in any material
respect if such action had then been taken; or
(xxi) enter into any agreement, contract, commitment or
arrangement with respect to, or authorize, recommend, propose or announce
an intention to do, any of the foregoing.
7.3. Meetings of Stockholders.
(a) Promptly after the date hereof, (i) the Company will take all
action necessary in accordance with the DGCL and the Company Certificate and
Company Bylaws to convene a meeting of its stockholders to be held as promptly
as practicable, for the purpose of voting upon this Agreement and the Merger and
(ii) Parent will take all action necessary in accordance with the DGCL, the
Parent Certificate and the Parent Bylaws to convene a meeting of its
stockholders to be held as promptly as practicable, for the purpose of
considering and voting upon approval of the issuance of Parent Common Stock to
be issued pursuant to the Merger. Subject to Section 7.1, the Company will use
its reasonable best efforts to solicit from its stockholders proxies in favor of
the adoption and approval of this Agreement and the approval of the Merger,
including, without limitation, engaging the services of a nationally recognized
proxy solicitation firm, and will take all other action necessary or advisable
to secure the vote or consent of its stockholders as required by the rules of
Nasdaq or the DGCL to obtain such approvals. Parent will use its reasonable best
efforts to solicit from its Stockholders proxies in favor of the issuance of
Parent Common Stock to be issued in the Merger. Notwithstanding anything to the
contrary contained in this Agreement, the Company and Parent, respectively, may
adjourn or postpone the meeting of its stockholders (i) to the extent necessary
to ensure that any necessary supplement or amendment to the Proxy Statement is
provided to the Company's or Parent's stockholders, as the case may be, in
advance of a vote on the Merger and this Agreement, or issuance of Parent Common
Stock to be issued in the Merger, (ii) if as of the time for which the meeting
of the Company's stockholders is originally scheduled (as set forth in the
56
Proxy Statement) there are insufficient shares of Company Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the meeting of the Company's stockholders, or (iii) if
as of the time for which the meeting of Parent's stockholders is originally
scheduled (as set forth in the Proxy Statement) there are insufficient shares of
Parent Common Stock represented (either in person or by proxy) to constitute a
quorum necessary to conduct the business of the meeting of the Parent's
stockholders. The Company shall ensure that the meeting of the Company's
stockholders is called, noticed, convened, held and conducted, and that all
proxies solicited by the Company in connection with the meeting of the Company's
stockholders are solicited, in compliance with DGCL, the Company Certificate and
the Company Bylaws, the rules of Nasdaq and all other applicable legal
requirements. The Company's obligation to call, give notice of, convene and hold
the meeting of its stockholders in accordance with this Section 7.3(a) shall not
be limited to or otherwise affected by the commencement, disclosure,
announcement or submission to the Company of any Acquisition Proposal. Parent
shall ensure that the meeting of Parent's stockholders is called, noticed,
convened, held and conducted, and that all proxies solicited by the Parent in
connection with the meeting of Parent's stockholders are solicited, in
compliance with DGCL, the Parent Certificate and the Parent Bylaws, the rules of
Nasdaq and all other applicable legal requirements. Parent and the Company shall
coordinate and cooperate with each other with respect to the timing of their
respective stockholders' meetings and shall use their reasonable best efforts to
hold such meetings on the same day.
(b) Subject to Section 7.1: (i) the Board of Directors of Company
shall unanimously recommend that Company's stockholders vote in favor of and
adopt and approve this Agreement and the Merger at the meeting of the Company's
stockholders; (ii) the Proxy Statement shall include a statement to the effect
that the Board of Directors of the Company has unanimously recommended that the
Company's stockholders vote in favor of and adopt and approve this Agreement and
the Merger at the meeting of the Company's stockholders; and (iii) neither the
Board of Directors of the Company nor any committee thereof shall withdraw,
amend or modify, or propose or resolve to withdraw, amend or modify in a manner
adverse to Parent, the unanimous recommendation of the Board of Directors of the
Company that the Company's stockholders vote in favor of and adopt and approve
this Agreement and the Merger.
7.4. Proxy Statement; Registration Statement; Filing Cooperation.
(a) As promptly as practicable after the execution of this Agreement,
the Company and Parent shall prepare (and each of Company and Parent shall
instruct their legal, financial and accounting advisors to assist in such prompt
preparation) and Parent shall file with the Commission, under the Exchange Act
and the Securities Act, a registration statement on Form S-4 (such registration
statement, together with any amendments or supplements thereto, the "Form S-4")
which shall include a joint proxy statement/prospectus and form of proxies (such
joint proxy statement/prospectus together with any amendments or supplements
thereto, the "Proxy Statement") relating to the stockholders' meetings of the
Company and the Parent and the vote of the stockholders of Parent and the
Company with respect to this Agreement and the Transactions. Parent will cause
the Proxy Statement and Form S-4 to comply as to form in all material respects
with the applicable provisions of the Securities Act, Exchange Act and the rules
57
and regulations thereunder, and the Company will cause the Proxy Statement to
comply as to form in all material respects with the applicable provisions of the
Exchange Act and the rules and regulations thereunder. Each of Parent and the
Company shall promptly furnish all information about itself and its business and
operations and all necessary financial information to the other as the other may
reasonably request in connection with the preparation of the Proxy Statement and
the Form S-4. Parent shall use its reasonable best efforts, and the Company will
cooperate with Parent, to have the Form S-4 declared effective by the Commission
as promptly as practicable (including clearing the Proxy Statement with the
Commission ). Each of Parent and the Company agrees promptly to correct any
information provided by it for use in the Proxy Statement and the Form S-4 if
and to the extent that such information shall have become false or misleading in
any material respect, and each of the parties further agrees to take all steps
necessary to amend or supplement the Proxy Statement and, in the case of Parent,
the Form S-4, and each of the parties further agrees to take all steps necessary
to cause the Proxy Statement and, in the case of Parent, the Form S-4, as so
amended or supplemented, to be filed with the Commission and to be disseminated
to the Company's and Parent's stockholders as and to the extent required by
applicable federal and state securities laws. Each of Parent and the Company
agrees that the information provided by it for inclusion in the Proxy Statement
or the Form S-4 and each amendment or supplement thereto, at the time of mailing
thereof and at the time of the meetings of stockholders of the Company and
Parent, will not include an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the Company and Parent will advise the other, and
deliver copies (if any) to the other, promptly after either receives notice
thereof, of any request by the Commission for amendment of the Proxy Statement
or the Form S-4 or comments thereon and responses thereto or requests by the
Commission for additional information, or notice of the time when the Form S-4
or Proxy Statement has become effective or any supplement or amendment has been
filed, the issuance of any stop order or the suspension of the qualification of
the securities issuable in connection with the Merger for offering or sale in
any jurisdiction.
(b) The Proxy Statement shall include (i) the recommendation of the
Company Board in favor of the adoption and approval of this Agreement and the
approval of the Merger (subject to the terms of Section 7.1) and (ii) the
recommendation of the Parent Board in favor of the issuance of shares of Parent
Common Stock to be issued in the Merger.
(c) Each of Parent and the Company shall use its reasonable best
efforts to promptly mail the Proxy Statement to its stockholders.
(d) Each of the Company and Parent shall cooperate with the other
party and its advisors in connection with any filings to be made by such other
party, including, without limitation, filings under the Securities Act and the
Exchange Act or pursuant to state securities laws, and shall furnish all
information required in connection therewith. Such cooperation shall include,
but not be limited to, obtaining any consent to inclusion of the Company's
financial statements and the reports of the Company's independent public
accountants with respect thereto in any filing made pursuant to any federal or
state securities laws (and any public disclosure related thereto), as well as
using its reasonable best effort to cause its independent public
58
accountants to prepare and deliver a comfort letter or letters reasonably
acceptable to any placement agent or underwriter retained by Parent in
connection with the placement or offering of the securities registered pursuant
to any such registration statement.
7.5. Nasdaq Listing Application. Parent shall promptly prepare and submit
to Nasdaq all reports, applications and other documents that may be necessary or
desirable to enable all of the shares of Parent Common Stock that will be
outstanding or will be reserved for issuance at the Effective Time to be listed
on Nasdaq, subject to official notice of issuance. Each of Parent and the
Company shall furnish all information about itself and its business and
operation and all necessary financial information to the other as the other may
reasonably request in connection with such Nasdaq listing process. Each of
Parent and the Company agrees promptly to correct any information provided by it
for use in the Nasdaq listing process if and to the extent that such information
shall have become false or misleading in any material respect. Each of Parent
and the Company will advise and deliver copies (if any) to the other party,
promptly after it receives notice thereof, of any request by Nasdaq for
amendment of any submitted materials or comments thereon and responses thereto
or requests by Nasdaq for additional information.
7.6. Additional Agreements; Regulatory Filings.
(a) Subject to the terms and conditions herein provided, each of the
parties hereto agrees to use its best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
Transactions and to cooperate with each other in connection with the foregoing,
including the taking of such actions as are necessary to obtain any necessary
consents, approvals, orders, exemptions and authorizations by or from any public
or private third party, including, without limitation, any that are required to
be obtained under any federal, state or local law or regulation or any contract,
agreement or instrument to which the Company or any Company Subsidiary is a
party or by which any of their respective properties or assets are bound, to
defend all lawsuits or other legal proceedings challenging this Agreement or the
consummation of the Transactions, to cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the Transactions, and to effect all necessary
registrations and submissions of information requested by governmental
authorities. In connection with and without limiting the foregoing, Company and
its Board of Directors shall, if any state takeover statute or similar statute
or regulation is or becomes applicable to the Merger, this Agreement or any of
the Transactions contemplated by this Agreement, use its best efforts to ensure
that the Merger and the other Transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger, this Agreement and the Transactions contemplated hereby. For
purposes of the foregoing sentence, the obligation of the Company, Parent and
MergerCo to use their respective "best efforts" to obtain waivers, consents and
approvals to loan agreements, leases and other contracts shall not include any
obligation to agree to an adverse modification of the terms of such documents or
to prepay or incur additional obligations to such other parties, and the
obligation of Parent and MergerCo to use their respective "best efforts" to take
all
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actions to do all things necessary, proper or advisable to consummate the
Transactions shall not include any obligation to divest any of their respective
assets.
(b) Without limiting the generality of the foregoing, as promptly as
practicable, but in no event more than fifteen (15) days from the date of this
Agreement, Parent and the Company each shall properly prepare and file any
filings required under federal or state law (other than the filings contemplated
by Section 7.4 hereto) relating to the Merger and the other Transactions
(including filings, if any, required under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended or under state securities laws)
(collectively, "Regulatory Filings"). Each of Parent and the Company shall
promptly notify the other of the receipt of any comments on, or any request for
amendments or supplements to, any Regulatory Filings by any Governmental Entity
or official, and each of Parent and the Company shall supply the other with
copies of all correspondence between it and each of its Subsidiaries and
representatives, on the one hand, and any other appropriate governmental
official, on the other hand, with respect to any Regulatory Filings. The Company
and Parent shall keep the other apprised of the status of matters relating to
the completion of the Transactions and work cooperatively in connection with
obtaining any consents from Governmental Entities, including, without
limitation: (i) promptly notifying the other of, and if in writing, furnishing
the other with copies of (or, in the case of material oral communications,
advise the other orally of) any communications from or with any Governmental
Entity with respect to the Merger or any of the other Transactions; (ii)
permitting the other party to review and discuss in advance, and considering in
good faith the views of one another in connection with, any proposed written (or
any material proposed oral) communication with any Governmental Entity; (iii)
not participating in any meeting with any Governmental Entity unless it consults
with the other party in advance and to the extent permitted by such Governmental
Entity gives the other party the opportunity to attend and participate thereat;
(iv) furnishing the other party with copies of all correspondence, filings and
communications (and memoranda setting forth the substance thereof) between it
and any Governmental Entity with respect to this Agreement and the Transactions;
and (v) furnishing the other party with such necessary information and
assistance as such other party may reasonably request in connection with its
preparation of necessary filings or submissions of information to any
Governmental Entity. The Company and Parent may, as each deems advisable and
necessary, reasonably designate any competitively sensitive material provided to
the other under this Section 7.3(b) as "outside counsel only." Such materials
and the information contained therein shall be given only to the outside legal
counsel of the recipient and shall not be disclosed by such outside counsel to
employees, officers or directors of the recipient unless express written
permission is obtained in advance from the source of the materials (the Company
or Parent, as the case may be) or its legal counsel.
7.7. Affiliates. Section 7.7 of the Company Disclosure Schedule contains a
complete and accurate list of names and addresses of those persons who may be
deemed to be in the Company's reasonable judgment, "affiliates" (each such
person, an "Affiliate") of the Company within the meaning of Rule 145
promulgated under the Securities Act. The Company shall provide Parent such
information and documents as Parent reasonably requests for purposes of
reviewing such list. The Company shall advise the persons identified on the list
of the resale
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restrictions imposed by applicable securities laws and shall use its reasonable
best efforts to deliver or cause to be delivered to Parent, prior to the date of
the Company shareholders meeting contemplated in Section 7.3, from each of the
Affiliates, an Affiliate Letter in the form attached as Exhibit B. Parent shall
be entitled to place appropriate legends on the certificates evidencing any
shares of Parent Common Stock to be received by such Affiliates pursuant to the
terms of this Agreement, and to issue appropriate stop transfer instructions to
the transfer agent for such shares of Parent Common Stock, consistent with the
terms of such legends.
7.8. Fees and Expenses. Subject to Sections 7.23 and 9.2 hereof and except
as otherwise expressly provided herein, whether or not the Merger is
consummated, all fees, costs and expenses incurred in connection with this
Agreement and the Transactions shall be paid by the party incurring such fees,
costs or expenses, provided, however, whether or not the Merger is consummated,
all fees, costs and expenses (other than legal and accounting fees) incurred in
connection with the printing, filing (including SEC filing fees) and mailing of
the Proxy Statement and the Form S-4, shall be paid 50% by the Company, on the
one hand, and 50% by Parent, on the other hand.
7.9. Officers' and Directors' Indemnification. The Surviving Corporation
agrees that all rights to indemnification existing in favor of, and all
limitations on the personal liability of, the directors, officers, employees and
agents of the Company and the Company Subsidiaries (collectively, the
"Indemnified Parties") provided for in the Certificate of Incorporation or
Bylaws as in effect as of the date hereof with respect to matters occurring
prior to the Effective Time, and including the Merger and the other
Transactions, shall continue in full force and effect for a period of not less
than six (6) years from the Effective Time. Prior to the Effective Time, the
Company shall purchase and fully pay for prior to the Effective Time an extended
reporting period endorsement (a so called "tail policy") under the Company's
existing directors' and officers' liability insurance coverage for the Company
and the Company's directors and officers in a form acceptable to the Company and
Parent which shall provide the Company and such directors and officers with
coverage for six (6) years following the Effective Time of not less than the
existing coverage under, and have other terms not materially less favorable on
the whole to, the insured persons than the directors' and officers' liability
insurance coverage presently maintained by the Company so long as the aggregate
cost of the directors' and officers' liability insurance for such six (6) year
period is less than $750,000 (the "Maximum Insurance Premium"); provided,
however, that (i) the Company agrees to cooperate in good faith with Parent in
order to obtain the lowest premium for the above-referenced coverage and (ii) in
the event that the Maximum Insurance Premium is insufficient for the
above-referenced coverage, the Company may spend up to the Maximum Insurance
Premium to purchase such lesser coverage and/or for such shorter period that may
be obtained for the Maximum Insurance Premium; provided further, that, the
Company shall be permitted to spend more than the Maximum Insurance Premium if,
after using all reasonable best efforts, it determines that the Maximum
Insurance Premium is insufficient to obtain the above-referenced coverage for a
three (3) year period, in which case the Company shall use its reasonable best
efforts to obtain such coverage for a three (3) year period for the lowest
obtainable premium cost. This Section 7.9 is
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intended for the benefit of, and to grant third-party rights to, the Indemnified
Parties and shall be binding on all successors and assigns of Parent, the
Company and the Surviving Corporation.
7.10. Access to Information; Confidentiality. From the date hereof until
the Effective Time, each party shall, and shall cause each of its Subsidiaries
and its' and its Subsidiaries, respective officers, employees and agents to,
afford the other party and to the officers, employees, representatives and
agents of the other party reasonable access at all reasonable times to such
officers, employees, agents, properties, books, records and contracts, and shall
furnish to the other party such financial, operating and other data and
information as such other party may reasonably request. Prior to the Effective
Time, the Company shall hold in confidence all such information on the terms and
subject to the conditions contained in that certain mutual confidentiality
agreement between Parent and the Company dated August 12, 2002 (the
"Confidentiality Agreement"). The Company and Parent hereby waive the provisions
of the Confidentiality Agreement as and to the extent necessary to permit the
making and consummation of the Transactions.
7.11. Financial and Other Statements. During the term of this Agreement,
the Company shall also provide to Parent the following documents and
information:
(a) Contemporaneously therewith, the Company shall furnish to Parent
a copy of each Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and
Current Report on Form 8-K filed by the Company with the Commission and each
such report shall be in compliance with the federal Securities Laws and with all
representations and warranties contained in this Agreement applicable to Company
SEC Reports.
(b) As soon as practicable, the Company shall furnish to Parent
copies of all such financial statements and reports as it or any Company
Subsidiary shall send to its stockholders, the Commission or any other
regulatory authority, to the extent any such reports furnished to any such
regulatory authority are not confidential and except as legally prohibited
thereby.
(c) Promptly upon receipt thereof, the Company shall furnish to
Parent copies of all internal control reports submitted to the Company or any
Company Subsidiary by its independent accountants in connection with each
annual, interim or special audit of the books of the Company or any such Company
Subsidiary made by such accountants.
(d) As soon as practicable, the Company shall furnish to Parent (i)
monthly profit and loss statements, (ii) monthly a listing of accounts
receivable, including aging, as of the end of each two week period, (iii)
inventory analysis as of the end of each month, (iv) monthly a listing of
accounts payable, including aging, as of the end of each two week period, (v)
bi-weekly, a detailed report of current employee headcount, (vi) bi-weekly, a
report of Net Cash as of the end of each two-week period and projected for each
subsequent two-week period and as of the Closing Date and (vii) such additional
financial data as Parent may reasonably request.
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7.12. Advise of Change. Each party shall promptly advise the other of (i)
any change, effect, event, occurrence, non-occurrence, condition or development
which could reasonably be expected to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect,
and (ii) any material failure of such party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. The Company shall promptly advise Parent and MergerCo of any
change, effect, event, occurrence, non-occurrence, condition or development that
has had or could reasonably be expected to have a Company Material Adverse
Effect, and Parent shall promptly advise the Company of any change, effect,
event, occurrence, non-occurrence, condition or development that has had or
could reasonably be expected to have a Parent Material Adverse Effect.
7.13. Public Announcements. The Company and Parent shall consult with each
other before issuing any press release or otherwise making any public statements
with respect to this Agreement or any of the Transactions or any Acquisition
Proposal and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which consent shall not
be unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party, issue such press release or make such public
statement as may be required by law or the applicable rules of any stock
exchange if it has used its best efforts to consult with the other party and to
obtain such party's consent but has been unable to do so in a timely manner. In
this regard, the parties shall make a joint public announcement of this
Agreement and the Transactions no later than (i) the close of trading on the
Nasdaq National Market on the day this Agreement is signed, if such signing
occurs during a business day or (ii) the opening of trading on the Nasdaq
National Market on the business day following the date on which this Agreement
is signed, if such signing does not occur during a business day.
7.14. Employee Benefit Arrangements. Unless otherwise directed in writing
by Parent at least five days prior to the Effective Time, the Company shall take
(or cause to be taken) all actions necessary or appropriate to terminate,
effective immediately prior to the Effective Time, any Employee Program
sponsored by the Company or any Company Subsidiary (or in which the Company or
any Company Subsidiary participate) that contains a cash or deferred arrangement
intended to qualify under Section 401(k) of the Code. The Company shall also
take (or cause to be taken) such other action in furtherance of terminating such
401(k) plans as Parent may reasonably require.
7.15. Delisting. Each of the parties hereto agrees to cooperate with each
other in taking, or causing to be taken, all actions necessary to delist the
Company Common Stock from Nasdaq, provided that such delisting shall not be
effective until after the Effective Time.
7.16. Further Assurances. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of the Company or MergerCo, any deeds, bills
of sale, assignments or assurances and to take and do, in the name and on behalf
of the Company or MergerCo, any other actions and things to vest, perfect or
confirm on record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets of
the Company acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger.
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7.17. Third Party Consents. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waiver and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the Transactions contemplated hereby.
7.18. Director. Parent agrees to take all action necessary to appoint or
elect, effective as of the Effective Time, one non-employee director of the
Company as of the date of this Agreement who is reasonably acceptable to Parent
as a director of Parent.
7.19. WARN Act Notices. As soon as practicable following the date hereof,
and to any event no more than 15 days from that date of this Agreement, the
Company will (i) deliver a notice of "plant closing," compliant with the WARN
Act and expressly approved in writing by the Parent, to each Employee and any
other individual entitled to specific notice of the Company's or any Company
Subsidiary's implementation of a "plant closing" under 20 C.F.R. 639.3. and (ii)
deliver appropriate and effective notices of the closing of the Company's
Canadian facility, compliant with any and all Canadian or Quebec provincial laws
similar to the WARN Act and expressly approved in writing by Parent, to the
Quebec Ministry of Labor, to each affected Employee, and to any other entity
with respect to which such notice is required or recommended under applicable
law.
7.20. Canadian Investment Tax Credit. Prior to November 30, 2002, the
Company shall file with the appropriate tax authorities Quebec Tax Forms RD-222
and RD-1029.7, which pertain to Canadian Investment tax credits.
7.21. Additional Liabilities, Purchases, Asset Acquisitions and
Dispositions. The Company agrees, during the period between the date of delivery
of the Net Cash Statement and the Effective Time to use its best efforts to
conduct the business of the Company and to preserve Company assets in such a
manner as to ensure that the amount of Net Cash at the Effective Time is equal
to or greater than Net Cash as provided for on the Net Cash Statement. Between
the date of delivery of the Net Cash Statement and the Effective Time, neither
the Company nor any Company Subsidiary will (a) incur or become subject to any
Liabilities, (b) authorize, commit to or make any equipment purchases or capital
expenditures or (c) acquire, sell, lease, license, encumber, transfer or dispose
of any assets other than in the case of each of (a), (b) and (c), as explicitly
included and accounted for in the Net Cash Statement.
7.22. Transfer Act Compliance. The Company will, as soon as reasonably
practicable, but in no event later than 30 days prior to the date of the meeting
of the Parent's stockholders as contemplated in Section 7.3 hereto, comply with
any notice, filing, investigation, remediation, consent, approval,
authorization, and any other requirements of any environmental governmental
authority or regulatory agency in connection with the execution and delivery of
this Agreement or the consummation of the Transactions including those
requirements imposed by the Industrial Site Recovery Act, P.L. 1993 c. 139
(N.J.S.A. 13:1K-6 et. Seq.), as amended, and its regulations, N.J.A.C. 7:26B-1
et seq.
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7.23. Preliminary Net Cash Statement. In connection with the preparation of
the Company's Quarterly Report on Form 10-Q for the period ending November 30,
2002, the Company shall prepare a preliminary Net Cash Statement, consistent in
form and substance with the Net Cash Statement as contemplated herein (the
"Preliminary Net Cash Statement"). The Company shall prepare the Preliminary Net
Cash Statement as soon as practicable after November 30, 2002 with the
consultation of its outside advisors, as necessary. The Preliminary Net Cash
Statement shall be delivered to Parent no later than December 31, 2002. The
Company shall provide Parent and its outside accounting and legal advisors with
any and all information (including working papers) utilized in the preparation
and in support of the Preliminary Net Cash Statement, and following receipt of
the Preliminary Net Cash Statement, the Company will cooperate fully with Parent
in making any inquiries to Company's outside advisors. The Preliminary Net Cash
Statement will be reviewed by Parent, and in connection therewith, Parent's
auditors may be requested to perform certain agreed-upon procedures which shall
be mutually agreed upon by Parent and the Company. The cost of the Parent's
auditor in connection with such agreed-upon procedures shall be paid equally by
Parent and the Company, provided that the Company shall not be responsible for
any such costs it would be required to pay in excess of $25,000.
7.24. Chief Restructuring Officer. The Company will engage, as soon as
reasonably practicable and in any event within twenty-one (21) days after the
date of this Agreement, a chief restructuring officer who (i) will report
directly to the Company's board of directors, (ii) will be authorized up through
the Closing Date to take any and all actions, as directed by the Company's Board
of Directors, to implement cost saving measures and take other actions
consistent with the objective of maximizing long term cash preservation, taking
into account Parent's expectations of realizable cash following the integration
of Parent and the Company, and (iii) shall be acceptable to Parent.
7.25. Parachute Agreements. Parent acknowledges that for purposes of each
of the agreements listed on Section 7.25 of the Company Disclosure Schedules
(the "Parachute Agreements"), a "change-in-control" shall have occurred as of
the Effective Time. Parent further acknowledges that any resignation pursuant to
Article II hereof by a party to any such Parachute Agreement shall be
disregarded for purposes of determining such party's eligibility for
change-in-control benefits under such party's Parachute Agreement. Parent
acknowledges that from and after the date hereof, if any employee who is a party
to the Parachute Agreements is either terminated or resigns from employment
prior to the Effective Time, the Company intends to honor the severance
obligations under the Parachute Agreements that would otherwise be paid to such
employee upon termination within one year of a "Change in Control."
ARTICLE VIII
CONDITIONS TO THE MERGER
8.1. Conditions to the Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver, where permissible, at or prior to the Closing Date,
of each of the following conditions:
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(a) Stockholders' Approval. This Agreement and the Transactions,
including the Merger, shall have been approved and adopted by the affirmative
vote of the stockholders of the Company to the extent required by the DGCL and
Nasdaq and the Company Certificate and the issuance of shares of Parent Common
Stock in the Merger shall have been duly approved by the affirmative vote of the
stockholders of Parent to the extent required by Nasdaq.
(b) No Injunctions, Orders or Restraints; Illegality. No statute,
order, decree, ruling or injunction (whether temporary, preliminary or
permanent) ( an "Injunction") shall have been enacted, entered, issued,
promulgated or enforced by any Governmental Entity which makes the Merger
illegal or otherwise prohibits the consummation of the Merger on the terms
contemplated by this Agreement; provided that the party seeking to rely upon
this condition has fully complied with and performed its obligations pursuant to
Section 7.6 hereof. All waiting periods, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, relating to the transactions
contemplated hereby will have expired or terminated early and all material
foreign antitrust approvals required to be obtained prior to the Merger in
connection with the Transactions contemplated hereby shall have been obtained.
(c) Form S-4. The Form S-4 shall have been declared effective by the
Commission under the Securities Act, and no stop order suspending the
effectiveness of the Form S-4 shall have been issued by the Commission, and no
proceeding for that purpose shall have been initiated or, to the knowledge of
Parent or the Company, threatened by the Commission.
(d) Nasdaq Listing. Parent shall have obtained the approval for the
listing of the shares of Parent Common Stock issuable in the Merger on Nasdaq,
subject to official notice of issuance.
8.2. Conditions to Obligations of the Company. The obligations of the
Company to consummate and effect the Merger are further subject to the
fulfillment or waiver, where permissible, at or prior to the Closing Date, of
each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and MergerCo set forth herein shall be true and correct
both when made and at and as of the Effective Date, as if made at and as of such
time (except to the extent expressly made as of a specified date, which shall be
true and correct as of such date), except, with respect to the Effective Date,
where the failure of such representations and warranties to be so true and
correct (without giving effect to any limitation as to materiality or material
adverse effect set forth therein), individually or in the aggregate, does not
have, and could not reasonably be expected to have a Parent Material Adverse
Effect.
(b) Performance of Obligations of Parent. Parent shall have performed
or complied in all material respects all obligations required to be performed by
it under this Agreement.
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(c) Absence of Parent Changes. Except as otherwise contemplated by
this Agreement, from the date of this Agreement through the Closing Date, there
shall not have occurred any change (not including changes to the Parent Common
Stock trading price) that individually or in the aggregate has or could
reasonably be expected to have a Parent Material Adverse Effect.
(d) Officers' Certificate. The Company shall have received a
certificate of the Chief Executive Officer or President and the Chief Financial
Officer of Parent, dated the Closing Date, to the effect that the statements set
forth in paragraphs (a) and (b) of this Section 8.2 are true and correct.
(e) Consents, Approvals, Etc. All consents, orders and approvals of
(or filings or registrations with) any governmental commission, board, other
regulatory body or third party is required to be made or obtained by Parent and
affiliated entities in connection with the execution, delivery and performance
of this Agreement shall have been obtained or made, including, without
limitation, those set forth in Section 6.14(b) of the Parent Disclosure
Schedule.
8.3. Conditions to Obligations of Parent. The obligation of Parent to
effect the Merger is further subject to the fulfillment or waiver, where
permissible, at or prior to the Closing Date, of each of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of the Company set forth herein shall be true and correct both when
made and at and as of the Effective Date, as if made at and as of such time
(except to the extent expressly made as a specified date, which shall be true
and correct as of such date), except, with respect to the Effective Date, where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to materiality or material adverse
effect set forth therein), individually or in the aggregate, does not have, and
could not reasonably be expected to have a Company Material Adverse Effect.
(b) Performance of Obligations of the Company. The Company shall have
performed or complied in all material respects all obligations required to be
performed by it under this Agreement.
(c) Absence of Company Changes. From the date of this Agreement
through the Closing Date, there shall not have occurred any change (not
including changes to the Company Common Stock trading price) that individually
or in the aggregate has or could reasonably be expected to have a Company
Material Adverse Effect.
(d) Officers' Certificate. Parent shall have received a certificate
of the Chief Executive Officer and the Chief Financial Officer of the Company to
the effect that the statements set forth in paragraphs (a), (b) and (c) of this
Section 8.3 are true and correct.
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(e) Consents, Approvals, Etc. All consents, authorizations, orders
and approvals of (or filings or registrations with) any governmental commission,
board, other regulatory body or third parties required to be made or obtained by
the Company and affiliated entities in connection with the execution, delivery
and performance of this Agreement shall have been obtained or made, including
without limitation those set forth in Section 5.21(b) of the Company Disclosure
Schedule.
(f) Affiliate Letters. Parent shall have received an executed copy of
an Affiliate Letter from each Affiliate of the Company and each such Affiliate
Letter will be in full force and effect as of the Effect in Time.
(g) Treatment of Company Options, Company Stock Purchase Plan. The
Company shall have taken any and all action necessary to cause the Company
Options to be treated as provided for in Section 3.3.
(h) No Additional Liabilities, Purchases, Asset Acquisitions or
Dispositions. At the Effective Time, there shall be no Liabilities of the
Company and the Company Subsidiaries shall have no Liabilities other than the
Liabilities (including reserves for contingent Liabilities) included and
accounted for in the Net Cash Statement to the extent of the amounts therein and
there shall have been no breach of Section 7.22(b) or (c) of this Agreement.
(i) Net Cash. At the Effective Time, the Company shall have Net Cash
of at least $27,500,000.
(j) ECO Termination Agreement. At the Effective Time (and assuming
consummation of the Transactions), that certain Termination Agreement by and
among Parent, Company, ECO, EFC and H Power Enterprises of Canada, Inc. dated
November 8, 2002(the "ECO Termination Agreement"), shall be in full force and
effect and no party shall be in default thereof.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1. Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the Company stockholders' approval
hereof:
(a) by the mutual written consent duly authorized by the Board of
Directors of Parent or MergerCo and the Company.
(b) by either of the Company or Parent or MergerCo:
(i) if the required approval of the stockholders of Parent or
the Company that is a condition to the obligations of Parent, MergerCo or
the Company under Section 8.1 of this Agreement shall not have been
obtained by reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders of the
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Company or Parent or at any adjournment thereof, provided, however, that
the right to terminate this Agreement under this Section 9.1(b)(i) shall
not be available to the Company where the failure to obtain Company
stockholder approval shall have been caused by the action or failure to act
of the Company and such action or failure to act constitutes a breach by
the Company of this Agreement and the right to terminate this Agreement
under this Section 9.1(b)(i) shall not be available to Parent or MergerCo
where the failure to obtain Parent stockholder approval shall have been
caused by the action or failure to act of Parent and such action or failure
to act constitutes a breach by Parent of this Agreement; or
(ii) if any Governmental Entity shall have enacted, entered,
issued, promulgated or enforced a final and nonappealable Injunction (which
Injunction the parties hereto shall have used their reasonable best efforts
to lift), which prohibits the consummation of the Merger or the other
Transactions on the terms contemplated by this Agreement (provided that the
party seeking to rely upon this condition has fully complied with and
performed its obligations pursuant to Section 7.6 hereof), or permanently
enjoins the acceptance for payment of, or payment for, shares of Company
Common Stock pursuant to the Merger;
(iii) if, the Merger shall not have occurred on or before March
31, 2003; provided, however, that none of Parent, MergerCo or the Company
shall terminate this Agreement prior to March 31, 2003 if the Merger has
not occurred by reason of the pendency of a non-final Injunction, and
Parent, MergerCo and the Company shall use their reasonable best efforts to
have any such Injunction stayed or reversed; provided further, that the
right to terminate this Agreement under this Section 9.1(iii) shall not be
available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before
such date and such action or failure to act constitute a breach of this
Agreement.
(c) by the Company, if Parent or MergerCo shall have breached any of
their respective representations, warranties, covenants or other agreements
contained in this Agreement, which breach cannot be or has not been cured within
thirty (30) business days after the giving of written notice to Parent or
MergerCo, except, in any case, for such breaches which, individually or in the
aggregate, are not reasonably likely to have a Parent Material Adverse Effect.
(d) by Parent or MergerCo if:
(i) the Company shall have breached any representation,
warranty, covenant or other agreement contained in this Agreement (other
than those set forth in Section 7.1 hereof), which breach cannot be or has
not been cured within thirty (30) business days after the giving of written
notice to the Company, except, in any case, for such breaches which,
individually or in the aggregate, are not reasonably likely to have a
Company Material Adverse Effect;
69
(ii) the Company shall have (A) breached any representation,
warranty, covenant or other agreement contained in Section 7.1 of this
Agreement or (B) either of H. Frank Gibbard or Arthur Kaufman shall have
breached any representation, warranty, covenant or agreement contained in
Sections 1, 2, 3 or 4.4 of his Voting Agreement;
(iii) if (A) the Company Board shall have withdrawn or modified
in a manner adverse to Parent or MergerCo its approval or recommendation of
this Agreement or the Transactions, approved or recommended any Acquisition
Proposal, or approved, recommended, executed or entered into an agreement
in principle or definitive agreement relating to an Acquisition Proposal
(other than a confidentiality agreement described in the last sentence of
Section 7.1(a) hereof), or proposed or resolved to do any of the foregoing,
or (B) a tender or exchange offer relating to securities of the Company
shall have been commenced by a third party and the Company shall not have
sent to its securityholders pursuant to Rule 14e-2 under the Exchange Act,
within ten business days after such tender or exchange offer is first
published, sent or given, a statement disclosing that the Company
recommends rejection of such tender or exchange offer.
(e) by the Company, upon written notice to Parent at any time during
the period commencing five Business Days prior to the date of the meetings of
shareholders of Parent and Company (as contemplated in Section 7.3) and ending
on the second Business Day prior to such meetings, if the product of (i) the
anticipated number of shares of Parent Common Stock to be issued in the Merger
and (ii) the reasonably anticipated Average Parent Common Stock Price is less
than $29,675,000; provided that such termination will not be effective if Parent
provides written notice to the Company no later than the Business Day
immediately preceding the Effective Time that it will increase the number of
shares of Parent Common Stock to be received by the holders of Company Common
Stock hereunder by adjusting the Exchange Ratio such that the product of (i) the
anticipated number of shares of Parent Common Stock to be issued in the Merger
(applying the adjusted Exchange Ratio) and (ii) the Average Parent Common Stock
Price is equal to or greater than $29,675,000 in which case the Exchange Ratio
will be so adjusted.
9.2. Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to
Section 9.1 hereof, this Agreement shall forthwith become null and void and have
no effect, without any liability on the part of any party hereto or its
affiliates, directors, officers or stockholders and all rights and obligations
of any party hereto shall cease except for the agreements contained in Sections
7.8 and 7.10, this Section 9.2 and Article X; provided, however, that nothing
contained in this Section 9.2 shall relieve any party from liability for fraud
or willful breach of this Agreement.
(b) The Company shall pay Parent the sum of $2,000,000 (the
"Liquidated Amount") if this Agreement is terminated as follows:
70
(i) if this Agreement is terminated by Parent or MergerCo
pursuant to Section 9.1(d)(ii)(A) or (iii) or;
(ii) if this Agreement is terminated by (x) the Company or Parent
or MergerCo pursuant to Section 9.1(b)(i) as a result of the failure to
obtain the required vote of the stockholders of the Company or by (y)
Parent or MergerCo pursuant to Section 9.1(d)(i) and in the case of any
termination pursuant to clause (x) or (y) an Acquisition Proposal shall
have been publicly announced or otherwise communicated or made known to the
Company Board of Directors (or any Person shall have publicly announced,
communicated or made known an intention, whether or not conditional, to
make an Acquisition Proposal) at any time after the date of this Agreement
and prior to, in the case of clause (x), the taking of a vote of the
shareholders of the Company contemplated by this Agreement at the special
meeting of Company shareholders and in the case of clause (y), the date of
termination; provided, however, if within 5 days from the date of this
Agreement the Voting Agreement exactly in the form attached hereto as
Exhibit C is executed by all Voting Agreement Stockholders thereto, then
the Company shall only be obligated to pay the Liquidated Amount pursuant
to this Section 9.2(b)(ii), if, within 12 months after such termination of
the Company or a Company Subsidiary enters into an agreement, arrangement
or understanding, including, without limitation, an agreement in principle
or letter of intent with respect to, or consummates, an Acquisition
Proposal.
(c) (i) Upon the termination of this Agreement by Parent or MergerCo
pursuant to Section 9.1(d)(i) or 9.1(d)(ii)(B) hereof, the Company shall
pay to Parent an amount in cash equal to the aggregate amount of Parent's
and MergerCo's out-of-pocket expenses incurred in connection with pursuing
the transactions contemplated hereby (including, without limitation, legal,
accounting, investment banking and printing fees) (collectively, the
"Reimbursable Expenses") (as such Reimbursable Expenses may be estimated by
Parent and MergerCo in good faith prior to the date of such payment,
subject to an adjustment payment between the parties upon Parent's
definitive determination of such Reimbursable Expenses). Notwithstanding
the foregoing, if, the Company pays to Parent the Liquidated Amount, the
Parent shall pay to the Company an amount in cash equal to the amount of
Reimbursable Expenses, if any, paid by the Company to Parent.
(ii) Upon the termination of this Agreement by Company pursuant
to Section 9.1(c) hereof, Parent shall pay to Company any amount in cash
equal to the aggregate amount of Company's Reimbursable Expenses (as such
Reimbursable Expenses may be estimated by Company in good faith prior to
the date of such payment, subject to an adjustment payment between the
parties upon the Company's definitive determination of such Reimbursable
Expenses).
(d) Any payment required by this Section 9.2 shall be payable by the
Company to Parent by wire transfer of immediately available funds to an account
designated by Parent. Such payments shall be made no later than three (3)
business days after the termination of this Agreement by Parent or MergerCo or
the Company, as the case may be. Any adjustment
71
payment between the parties upon Parent's or Company's definitive determination
of the Reimbursable Expenses pursuant to Section 9.2(c) hereof shall be made no
later than three (3) business days after notice to the Company or Parent, as the
case may be, of such determination.
9.3. Amendment. This Agreement may be amended by the parties hereto by an
instrument in writing signed on behalf of each of the parties hereto at any time
before or after any approval hereof by the stockholders of the Company and the
stockholders of Parent; provided, however, that after any such stockholder
approval, no amendment shall be made which by law requires further approval by
the stockholders of the Company or the stockholders of Parent without obtaining
such approval.
9.4. Extension; Waiver. At any time prior to the Closing, the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. Delay in
exercising a right under this Agreement shall not constitute a waiver of such
right.
ARTICLE X
GENERAL PROVISIONS
10.1. Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or sent if delivered personally or sent by cable,
telegram, telecopier or telex or sent by prepaid overnight carrier to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
(a) if to Parent or MergerCo:
Plug Power Inc.
968 Albany-Shaker Rd.
Latham, NY 12110
Attention: Roger Saillant, President
Facsimile: (518) 782-7884
with a copy to:
Goodwin Procter LLP
Exchange Place
Boston, Massachusetts 02109
Attention: Stuart M. Cable, P.C.
Facsimile: (617) 523-1231
72
(b) if to the Company:
H Power Corp.
60 Montgomery Street
Belleville, NJ 07109
Attention: William L. Zang, Chief Financial Officer
Facsimile: (973) 450-8439
with a copy to:
Fulbright & Jaworski L.L.P.
666 Fifth Avenue
New York, NY 10103
Attention: Merrill M. Kraines, Esq.
Facsimile: (212) 318-3400
10.2. Interpretation. When a reference is made in this Agreement to
subsidiaries of Parent, Merger Co or the Company, the word "Subsidiary" means
any corporation more than fifty percent (50% ) of whose outstanding voting
securities, or any partnership, joint venture or other entity more than fifty
percent (50% ) of whose total equity interest, is directly or indirectly owned
by Parent, MergerCo or the Company, as the case may be. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. When a reference is made in
this Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise indicated. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement. Unless
otherwise indicated, the words "include," "includes" and "including" when used
herein shall be deemed in each case to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When reference is made herein to "the business
of" an entity, such reference shall be deemed to include the business of all
direct and indirect subsidiaries of such entity. For purposes of this Agreement,
the term "knowledge" means with respect to (i) the Company, with respect to any
matter in question, the actual knowledge of H. Frank Gibbard, Robert Smith,
William Zang, Paul McNeill, Arthur Kaufman and Dudley Wass, after due inquiry,
and (ii) Parent, with respect to any matter in question, Roger Saillant, W. Mark
Schmitz, Gregory A. Silvestri, Mark A. Sperry, David Neumann and Ana-Maria
Galeano, after due inquiry. For purposes of this Agreement, all references to
cash or dollars shall mean U.S. Dollars
10.3. Non-Survival of Representations and Warranties. None of the
representations and warranties contained in this Agreement shall survive the
Effective Time, and thereafter there shall be no liability on the part of either
Parent, MergerCo or the Company or any of their respective officers, directors
or stockholders in respect thereof and only the covenants and agreements that by
their terms survive the Effective Time shall survive the Effective Time.
73
10.4. Miscellaneous. This Agreement (a) constitutes, together with the
Confidentiality Agreement, the Voting Agreements, the ECO Termination Agreement,
the Company Disclosure Schedule, and the Parent Disclosure Schedule, the entire
agreement and supersedes all of the prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, (b) shall be binding upon and inure to the benefits of the
parties hereto and their respective successors and assigns and is not intended
to confer upon any other person (except as set forth below) any rights or
remedies hereunder and (c) may be executed in two or more counterparts which
together shall constitute a single agreement. Section 7.9 hereof is intended to
be for the benefit of those persons described therein and the covenants
contained therein may be enforced by such persons. 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. It is accordingly 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 in the Delaware Courts (as
hereinafter defined), this being in addition to any other remedy to which they
are entitled at law or in equity.
10.5. Assignment. Except as expressly permitted by the terms hereof,
neither this Agreement nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties hereto without the prior written consent
of the other parties, except that MergerCo may assign, in its sole discretion
and without the consent of any other party, any and all of its rights, interests
and obligations hereunder to Parent and/or one or more direct or indirect wholly
owned Subsidiaries of Parent.
10.6. Severability. If any provision of this Agreement, or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
10.7. Choice of Law/Consent to Jurisdiction. All disputes, claims or
controversies arising out of this Agreement, or the negotiation, validity or
performance of this Agreement, or the Transactions shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
its rules of conflict of laws. Each of the Company, Parent and MergerCo hereby
irrevocably and unconditionally consents to submit to the sole and exclusive
jurisdiction of the courts of the State of Delaware and of the United States
District Court for the District of Delaware (the "Delaware Courts") for any
litigation arising out of or relating to this Agreement, or the negotiation,
validity or performance of this Agreement, or the Transactions (and agrees not
to commence any litigation relating thereto except in such courts), waives any
objection to the laying of venue of any such litigation in the Delaware Courts
and agrees not to plead or claim in any Delaware Court that such litigation
brought therein has been brought in an inconvenient forum. Each of the parties
hereto agrees, (a) to the extent such party is not otherwise subject to service
of process in the State of Delaware, to appoint and maintain an agent in the
State of Delaware as such party's agent for acceptance of legal process, and (b)
that service of process may also be made on such party by prepaid certified mail
with a proof of mailing receipt validated by the United States Postal Service
constituting evidence of valid
74
service. Service made pursuant to (a) or (b) above shall have the same legal
force and effect as if served upon such party personally within the State of
Delaware. For purposes of implementing the parties' agreement to appoint and
maintain an agent for service of process in the State of Delaware, each party
does hereby appoint CT Corporation, Corporation Trust Center, 1209 Orange
Street, Wilmington, Delaware 19801, as such agent.
10.8. Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
10.9. Defined Terms. As used in this Agreement, the following defined terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Acquisition Proposal".......................................Section 7.1
"Affiliate".................................................Section 5.15
"Affiliate"..................................................Section 7.8
"Agreement".....................................................Recitals
"Average Parent Common Stock Price........................Section 3.1(c)
"Business"..................................................Section 5.13
"CERCLA"....................................................Section 5.14
"Certificate of Merger"......................................Section 1.2
"Closing Date"...............................................Section 1.3
"Closing"....................................................Section 1.3
"Code"..........................................................Recitals
"Company Board"..............................................Section 1.4
"Company Bylaws".............................................Section 5.1
"Company Certificate"........................................Section 5.1
"Company Common Stock"..........................................Recitals
"Company Copyrights"........................................Section 5.13
"Company Disclosure Schedule"..................................Section 5
"Company Intellectual Property Assets"......................Section 5.13
"Company Intellectual Property Assets"......................Section 5.13
"Company Marks".............................................Section 5.13
"Company Material Adverse Effect"............................Section 5.1
"Company Options"............................................Section 3.3
"Company Patents"...........................................Section 5.13
"Company Permits"............................................Section 5.1
"Company SEC Reports"........................................Section 5.7
"Company Stock Option Plans..................................Section 3.2
"Company Subsidiaries".......................................Section 3.1
"Company Subsidiary".........................................Section 3.1
"Company Trade Secrets".....................................Section 5.13
75
"Company".......................................................Recitals
"Confidentiality Agreement".................................Section 7.10
"Contingent Workers"........................................Section 5.16
"Copyrights"................................................Section 5.13
"Customers and Distributors"................................Section 5.24
"Daily Volume Weighted Average Price".....................Section 3.1(c)
"Delaware Courts"...........................................Section 10.7
"DGCL"......................................................Introduction
"ECO".......................................................Section 5.21
"ECO Termination Agreement"...............................Section 8.3(j)
"EFC".......................................................Section 5.21
"Effective Time".............................................Section 1.2
"Employees".................................................Section 5.16
"Employee Program"..........................................Section 5.15
"Employment Agreement"......................................Section 5.16
"Encumbrances"..............................................Section 5.12
"Environmental Laws"........................................Section 5.14
"ERISA".....................................................Section 5.15
"Exchange Act"...............................................Section 5.3
"Exchange Agent".............................................Section 4.1
"Exchange Fund"..............................................Section 4.1
"Exchange Ratio".............................................Section 3.1
"Final Determination of Net Cash"............................Section 3.1
"Form S-4"...................................................Section 7.4
"GAAP".......................................................Section 5.7
"Hazardous Materials".......................................Section 5.14
"Indemnified Parties"........................................Section 7.9
"Injunction".................................................Section 8.1
"Insurance Policies"........................................Section 5.28
"Intellectual Property Assets"..............................Section 5.13
"IRS".......................................................Section 5.11
"Lehman Brothers"...........................................Section 5.17
"Liabilities"...............................................Section 5.10
"Liquidated Amount"..........................................Section 9.2
"maintains".................................................Section 5.15
"Marks".....................................................Section 5.13
"Material Contracts"........................................Section 5.21
"Maximum Insurance Premium".................................Section 7.10
"Merger Consideration".......................................Section 3.1
"Merger"........................................................Recitals
"MergerCo Bylaws"............................................Section 1.1
"MergerCo Certificate".......................................Section 1.1
"MergerCo Common Stock"......................................Section 3.1
"MergerCo"......................................................Recitals
76
"Multiemployer Plan"........................................Section 5.15
"Net Cash"................................................Section 8.3(i)
"Net Cash Accountant".....................................Section 3.1(c)
"Net Cash Target Amount"..............................Section 3.1(c)(ii)
"Objection Notice"....................................Section 3.1(c)(ii)
"Parent"........................................................Recitals
"Parachute Agreements"......................................Section 7.25
"Parent"........................................................Recitals
"Parent Board"...............................................Section 6.2
"Parent Bylaws"..............................................Section 6.1
"Parent Business:...........................................Section 6.12
"Parent Certificate".........................................Section 6.1
"Parent Common Stock"...........................................Recitals
"Parent Copyrights".........................................Section 6.12
"Parent Intellectual Property Assets........................Section 6.12
"Parent Disclosure Schedule".................................Section 6.0
"Parent Material Adverse Effect".............................Section 6.1
"Parent Material Contracts".................................Section 6.14
"Parent Options".............................................Section 6.3
"Parent Patents.............................................Section 6.12
"Parent Permits".............................................Section 6.1
"Parent Preferred Stock".....................................Section 6.3
"Parent Products"...........................................Section 6.12
"Parent SEC Reports".........................................Section 6.5
"Parent Stock Option Plans"..................................Section 6.3
"Parent Subsidiaries"........................................Section 3.1
"Parent Subsidiary"..........................................Section 3.1
"Parent Third Party Rights..................................Section 6.12
"Parent Trade Secrets"......................................Section 6.12
"Patents"...................................................Section 5.13
"Peugoet"....................................................Section 3.1
"Plant Closing Laws"........................................Section 5.16
"Preliminary Net Cash Statement"............................Section 7.23
"Products"..................................................Section 5.13
"Proxy Statement"............................................Section 7.4
"Random Trading Days".................................Section 3.1(c)(i)
"Regulation S-K"............................................Section 5.21
"Regulatory Filings".........................................Section 7.4
"Reimbursable Expenses"......................................Section 9.2
"Restructuring Plan"........................................Section 5.27
"Securities Act".............................................Section 5.3
"Securities Act".............................................Section 5.3
"Securities Laws"............................................Section 5.3
"Securities Laws"............................................Section 5.7
77
"Stay Bonus Agreements"..................................Section 7.2(ix)
"Subsidiary"................................................Section 10.2
"Superior Proposal"..........................................Section 7.1
"Suppliers".................................................Section 5.24
"Surviving Corporation"......................................Section 1.1
"tail policy"...............................................Section 7.10
"Tax Returns"...............................................Section 5.11
"Taxes".....................................................Section 5.11
"Third Party Rights"........................................Section 5.13
"Trade Secrets".............................................Section 5.13
"Transaction Value Price".............................Section 3.1(c)(ii)
"Transactions"..................................................Recitals
"Voting Agreement Stockholders".................................Recitals
"Voting Agreement"..............................................Recitals
"WARN Act"..................................................Section 5.16
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IN WITNESS WHEREOF, Parent, MergerCo and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
PLUG POWER INC.
By: /s/ Roger B. Saillant
-----------------------------------------
Name: Roger B. Saillant
Title: President & CEO
MONMOUTH ACQUISITION CORP.
By: /s/ Roger B. Saillant
-----------------------------------------
Name: Roger B. Saillant
Title: President & CEO
H POWER CORP.
By: /s/ H. Frank Gibbard
-----------------------------------------
Name: H. Frank Gibbard
Title: Chief Executive Officer