CONFIDENTIAL TREATMENT REQUESTED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DAOU SYSTEMS, INC.,
DAOU-TMI, INC.,
TECHNOLOGY MANAGEMENT, INC.
AND
THE STOCKHOLDERS OF TECHNOLOGY MANAGEMENT, INC.
LISTED ON THE SIGNATURE PAGE HERETO
Dated as of June 16, 1998
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
TABLE OF CONTENTS
PAGE
----
ARTICLE I THE MERGER . . .. . . . . . . . . . . . . . . . . . . . . . . . -2-
SECTION 1.01 THE MERGER . . . . . . . . . . . . . . . . . . . -2-
SECTION 1.02 EFFECTIVE TIME . . . . . . . . . . . . . . . . . -2-
SECTION 1.03 EFFECT OF THE MERGER . . . . . . . . . . . . . . -2-
SECTION 1.04 CERTIFICATE OF INCORPORATION; BY-LAWS. . . . . . -2-
SECTION 1.05 DIRECTORS AND OFFICERS . . . . . . . . . . . . . -2-
ARTICLE II CONVERSION OF SECURITIES; EXCHANGE
OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . -3-
SECTION 2.01 CONVERSION OF SECURITIES . . . . . . . . . . . . -3-
SECTION 2.02 EXCHANGE OF CERTIFICATES . . . . . . . . . . . . -4-
SECTION 2.03 STOCK TRANSFER BOOKS . . . . . . . . . . . . . . -6-
SECTION 2.04 DISSENTING SHARES. . . . . . . . . . . . . . . . -6-
ARTICLE IIA VOTING RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . -6-
SECTION 2.01A CONSENT AND VOTING AGREEMENT . . . . . . . . . . -6-
SECTION 2.02A [[RESERVED]] . . . . . . . . . . . . . . . . . . -7-
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING
THE COMPANY AND ITS SUBSIDIARIES. . . . . . . . . . . . . . . . -7-
SECTION 3.01 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES . . -7-
SECTION 3.02 ARTICLES OF INCORPORATION AND BY-LAWS. . . . . . -7-
SECTION 3.03 CAPITALIZATION . . . . . . . . . . . . . . . . . -7-
SECTION 3.04 AUTHORITY. . . . . . . . . . . . . . . . . . . . -8-
SECTION 3.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . . -8-
SECTION 3.06 PERMITS; COMPLIANCE. . . . . . . . . . . . . . . -9-
SECTION 3.07 FINANCIAL STATEMENTS . . . . . . . . . . . . . . -9-
SECTION 3.08 NO UNDISCLOSED LIABILITIES . . . . . . . . . . .-10-
SECTION 3.09 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . .-10-
SECTION 3.10 ABSENCE OF LITIGATION. . . . . . . . . . . . . .-12-
SECTION 3.11 VOTE REQUIRED. . . . . . . . . . . . . . . . . .-12-
SECTION 3.12 BROKERS. . . . . . . . . . . . . . . . . . . . .-12-
SECTION 3.13 COMPANY ACTION . . . . . . . . . . . . . . . . .-13-
SECTION 3.14 TAX MATTERS; "POOLING OF INTERESTS". . . . . . .-13-
SECTION 3.15 REAL PROPERTY. . . . . . . . . . . . . . . . . .-14-
SECTION 3.16 INTELLECTUAL PROPERTY. . . . . . . . . . . . . .-15-
SECTION 3.17 TANGIBLE ASSETS. . . . . . . . . . . . . . . . .-17-
SECTION 3.18 INVENTORY. . . . . . . . . . . . . . . . . . . .-17-
SECTION 3.19 CONTRACTS. . . . . . . . . . . . . . . . . . . .-17-
SECTION 3.20 NOTES AND ACCOUNTS RECEIVABLE. . . . . . . . . .-18-
SECTION 3.21 POWERS OF ATTORNEY . . . . . . . . . . . . . . .-18-
SECTION 3.22 INSURANCE. . . . . . . . . . . . . . . . . . . .-18-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
i
TABLE OF CONTENTS PAGE
(CONTINUED) ----
SECTION 3.23 EMPLOYEES. . . . . . . . . . . . . . . . . . . .-19-
SECTION 3.24 EMPLOYEE BENEFITS. . . . . . . . . . . . . . . .-19-
SECTION 3.25 GUARANTIES . . . . . . . . . . . . . . . . . . .-21-
SECTION 3.26 ENVIRONMENT, HEALTH AND SAFETY . . . . . . . . .-21-
SECTION 3.27 CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY.-22-
SECTION 3.28 [[RESERVED]] . . . . . . . . . . . . . . . . . .-22-
SECTION 3.29 PRODUCT AND SERVICE WARRANTIES . . . . . . . . .-22-
SECTION 3.30 PRODUCT AND SERVICE LIABILITY. . . . . . . . . .-22-
SECTION 3.31 CUSTOMER/SUPPLIER RELATIONSHIPS. . . . . . . . .-22-
SECTION 3.32 CERTAIN BUSINESS PRACTICES . . . . . . . . . . .-22-
SECTION 3.33 DISCLOSURE . . . . . . . . . . . . . . . . . . .-23-
SECTION 3.34 LIMITATION ON REPRESENTATIONS AND WARRANTIES . .-23-
ARTICLE IIIA REPRESENTATIONS AND WARRANTIES OF
EACH STOCKHOLDER. . . . . . . . . . . . . . . . . . . . . . . .-23-
SECTION 3.01A AUTHORIZATION OF TRANSACTION . . . . . . . . . .-23-
SECTION 3.02A NONCONTRAVENTION . . . . . . . . . . . . . . . .-23-
SECTION 3.03A BROKERS. . . . . . . . . . . . . . . . . . . . .-23-
SECTION 3.04A COMPANY SHARES . . . . . . . . . . . . . . . . .-24-
SECTION 3.05A ACCREDITED INVESTOR. . . . . . . . . . . . . . .-24-
SECTION 3.06A INVESTMENT INTENTION . . . . . . . . . . . . . .-24-
SECTION 3.07A EMPLOYMENT . . . . . . . . . . . . . . . . . . .-00-
XXXXXXX 0.00X XXXXXXXXXX XX REPRESENTATIONS AND WARRANTIES . .-24-
SECTION 3.09A DELIVERY OF INFORMATION. . . . . . . . . . . . .-24-
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND
PARENT SUB . . .. . . . . . . . . . . . . . . . . . . . . . . .-25-
SECTION 4.01 ORGANIZATION AND QUALIFICATION . . . . . . . . .-25-
SECTION 4.02 CERTIFICATES OF INCORPORATION AND BY-LAWS. . . .-25-
SECTION 4.03 PARENT COMMON STOCK; CAPITALIZATION. . . . . . .-25-
SECTION 4.04 AUTHORITY. . . . . . . . . . . . . . . . . . . .-26-
SECTION 4.05 NO CONFLICT; REQUIRED FILINGS AND CONSENTS . . .-26-
SECTION 4.06 REPORTS; FINANCIAL STATEMENTS. . . . . . . . . .-27-
SECTION 4.07 ABSENCE OF CERTAIN CHANGES OR EVENTS . . . . . .-27-
SECTION 4.08 OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES . .-27-
SECTION 4.09 BROKERS. . . . . . . . . . . . . . . . . . . . .-28-
SECTION 4.10 [[RESERVED]] . . . . . . . . . . . . . . . . . .-28-
SECTION 4.11 LIMITATION ON REPRESENTATIONS AND WARRANTIES . .-28-
SECTION 4.12 ***. . . . . . . . . . . . . . . . . . . . . . .-28-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
ii
TABLE OF CONTENTS PAGE
(CONTINUED) ----
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . .-29-
SECTION 5.01 AFFIRMATIVE COVENANTS OF THE COMPANY . . . . . .-29-
SECTION 5.02 NEGATIVE COVENANTS OF THE COMPANY. . . . . . . .-29-
SECTION 5.03 NEGATIVE COVENANTS OF PARENT . . . . . . . . . .-31-
SECTION 5.04 ACCESS AND INFORMATION . . . . . . . . . . . . .-32-
SECTION 5.05 ESCROW AGREEMENT . . . . . . . . . . . . . . . .-32-
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . .-33-
SECTION 6.01 APPROPRIATE ACTION; CONSENTS; FILINGS. . . . . .-33-
SECTION 6.02 TAX TREATMENT; "POOLING OF INTERESTS";
AFFILIATES. . . . . . . . . . . . . . . . . . .-34-
SECTION 6.03 PUBLIC ANNOUNCEMENTS . . . . . . . . . . . . . .-34-
SECTION 6.04 OBLIGATIONS OF PARENT SUB. . . . . . . . . . . .-35-
SECTION 6.05 RESTRICTIVE LEGEND . . . . . . . . . . . . . . .-35-
SECTION 6.06 ***. . . . . . . . . . . . . . . . . . . . . . .-35-
SECTION 6.07 DELIVERY OF SEC FILINGS. . . . . . . . . . . . .-38-
SECTION 6.08 TERMINATION OF STOCKHOLDERS' AGREEMENT . . . . .-38-
SECTION 6.09 BEST EFFORTS . . . . . . . . . . . . . . . . . .-39-
SECTION 6.10 ***. . . . . . . . . . . . . . . . . . . . . . .-39-
SECTION 6.11 ***. . . . . . . . . . . . . . . . . . . . . . .-39-
SECTION 6.12 ***. . . . . . . . . . . . . . . . . . . . . . .-39-
ARTICLE VII CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . .-40-
SECTION 7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY
UNDER THIS AGREEMENT . . . . . . . . . . . . . .-40-
SECTION 7.02 ADDITIONAL CONDITIONS TO OBLIGATIONS
OF PARENT. . . . . . . . . . . . . . . . . . . .-40-
SECTION 7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF
THE COMPANY. . . . . . . . . . . . . . . . . . .-42-
ARTICLE VIII TERMINATION, AMENDMENT, WAIVER AND
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .-42-
SECTION 8.01 TERMINATION. . . . . . . . . . . . . . . . . . .-42-
SECTION 8.02 INVESTIGATION. . . . . . . . . . . . . . . . . .-43-
SECTION 8.03 AMENDMENT. . . . . . . . . . . . . . . . . . . .-43-
SECTION 8.04 WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . .-43-
SECTION 8.05 ***. . . . . . . . . . . . . . . . . . . . . . .-44-
SECTION 8.06 STOCKHOLDER INDEMNIFICATION, HOLD BACK
AND ESCROW . . . . . . . . . . . . . . . . . . .-44-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
iii
TABLE OF CONTENTS PAGE
(CONTINUED) ----
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . .-47-
SECTION 9.01 EFFECTIVENESS OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS. . . . . . . . . . . .-47-
SECTION 9.02 NOTICES. . . . . . . . . . . . . . . . . . . . .-48-
SECTION 9.03 CERTAIN DEFINITIONS. . . . . . . . . . . . . . .-49-
SECTION 9.04 HEADINGS; CONSTRUCTION . . . . . . . . . . . . .-56-
SECTION 9.05 SEVERABILITY . . . . . . . . . . . . . . . . . .-56-
SECTION 9.06 ENTIRE AGREEMENT; AMENDMENT. . . . . . . . . . .-56-
SECTION 9.07 ASSIGNMENT . . . . . . . . . . . . . . . . . . .-56-
SECTION 9.08 PARTIES IN INTEREST. . . . . . . . . . . . . . .-56-
SECTION 9.09 FURTHER ASSURANCES . . . . . . . . . . . . . . .-57-
SECTION 9.10 GOVERNING LAW. . . . . . . . . . . . . . . . . .-57-
SECTION 9.11 BINDING ARBITRATION. . . . . . . . . . . . . . .-57-
SECTION 9.12 WAIVER; REMEDIES CUMULATIVE. . . . . . . . . . .-58-
SECTION 9.13 COUNTERPARTS . . . . . . . . . . . . . . . . . .-58-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
iv
INDEX TO EXHIBITS
Exhibit 2.01A Written Consent of the Stockholders of the Company
Exhibit 5.05 Form of Escrow Agreement
Exhibit 7.02(f) Legal Opinion of Counsel to the Company
Exhibit 7.02(g) Form of Affiliate Agreement
Exhibit 7.02(h)(i) Form of Xxxxxxx X. Xxxxx Employment Agreement
Exhibit 7.02(h)(ii) Form of Xxxx X. Xxxx Employment Agreement
Exhibit 7.02(i) Form of Noncompetition Agreement
Exhibit 7.02(j) Form of Spousal Consent
Exhibit 7.03(d) Legal Opinion of Counsel to Parent
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
v
INDEX TO SCHEDULES
SCHEDULE
NUMBER DESCRIPTION
-------- -----------
3.02 Officers and Directors and Certificates of Incorporation and By-Laws
3.03(a) Capitalization, Stockholders *** of the Company
3.03(b) Encumbrances
3.05 Filings and Consents of the Company
3.07 Financial Statements of the Company
3.08 Liabilities of the Company
3.09 Certain Changes or Events of the Company
3.10 Litigation Matters
3.14(c) Tax Returns and Tax Related Information of the Company
3.14(f) Gains and Losses of the Company
3.15(b) Real Property Leased or Subleased by the Company
3.16(c) Intellectual Property Owned by the Company
3.16(d) Intellectual Property Agreements or Permission
3.17 Tangible Assets of the Company
3.19 Contracts of the Company
3.20 Notes and Accounts Receivable of the Company
3.22 Insurance Policies of the Company
3.23 Employees
3.24 Employee Benefit Plans of the Company
3.27 Certain Business Relationships with the Company
3.29 Standard Sale, Lease and Performance Terms and Conditions of the
Company
3.31 Customer/Supplier Relationships
5.02 Negative Covenants
6.10 ***
7.02(d) Contracts or Agreements Requiring Consents or Waivers with respect to
the Company
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
vi
THIS AGREEMENT AND PLAN OF MERGER, dated as of June 16, 1998 (this
"AGREEMENT"), by and among DAOU Systems, Inc., a Delaware corporation
("PARENT"), DAOU-TMI, Inc., a Delaware corporation and a wholly-owned subsidiary
of Parent ("PARENT SUB"), Technology Management, Inc., an Indiana corporation
(the "COMPANY"), and all of the stockholders of the Company listed on the
signature page hereto (collectively, the "STOCKHOLDERS").
W I T N E S S E T H:
WHEREAS, upon the terms and subject to the conditions of this Agreement and
in accordance with the General Corporation Law of the State of Delaware
("DELAWARE LAW") and the Indiana Business Corporation Law ("INDIANA LAW"), the
Company will merge with and into Parent Sub (the "MERGER");
WHEREAS, the Board of Directors of the Company has determined that the
Merger is in the best interests of the Company and the Stockholders, has
approved and adopted this Agreement and the transactions contemplated hereby,
and has recommended that the Stockholders approve and adopt this Agreement and
the transactions contemplated hereby;
WHEREAS, the Stockholders hold one hundred percent (100%) of the
outstanding voting power of the Company, have irrevocably consented to the
execution and delivery of this Agreement and the consummation of the Merger and
have irrevocably agreed to vote in favor of the Merger at a meeting of
Stockholders or by a written consent executed by each Stockholder, and such
consent and agreement is an essential condition and inducement to Parent and
Parent Sub to enter into this Agreement;
WHEREAS, the Boards of Directors of Parent and Parent Sub have determined
that the Merger is in the best interests of Parent and Parent Sub and their
respective stockholders, and have approved and adopted this Agreement and the
transactions contemplated hereby;
WHEREAS, the Company, Parent and Parent Sub intend that the Merger shall
constitute a "reorganization" under Section 368(a)(1)(A) of the Code, by
application of Section 368(a)(2)(D) of the Code, and that this Agreement shall
constitute a "plan of reorganization" for the purposes of Section 368 of the
Code;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a "pooling of interests"; and
WHEREAS, certain capitalized terms used in this Agreement are defined in
Section 9.03;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
1
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with Delaware Law and Indiana
Law, at the Effective Time (as defined in Section 1.02), the Company shall be
merged with and into Parent Sub. As a result of the Merger, the separate
corporate existence of the Company shall cease and Parent Sub shall continue as
the surviving corporation in the Merger (the "SURVIVING CORPORATION"). The name
of the Surviving Corporation shall be DAOU-TMI, Inc.
SECTION 1.02. EFFECTIVE TIME. As promptly as practicable after the
satisfaction or, if permissible, waiver of the closing conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing (a) a certificate of merger (the "CERTIFICATE OF MERGER") with the
Secretary of State of the State of Delaware, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law and (b) the
articles of merger (the "ARTICLES OF MERGER") with the Secretary of State of the
State of Indiana, in such form as required by, and executed in accordance with
the relevant provisions of, Indiana Law (the later of the date and time of the
Delaware filing or the Indiana filing, or such later time as may be agreed to in
writing by Parent, Parent Sub and the Company and specified in the Certificate
of Merger and the Articles of Merger, being the "EFFECTIVE TIME").
SECTION 1.03. EFFECT OF THE MERGER. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law and
Indiana Law. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time, except as otherwise provided herein, all of the
property, rights, privileges, powers and franchises of Parent Sub and the
Company shall vest in the Surviving Corporation, and all debts, Liabilities and
duties of Parent Sub and the Company shall become the debts, Liabilities and
duties of the Surviving Corporation.
SECTION 1.04. CERTIFICATE OF INCORPORATION; BY-LAWS. At the Effective
Time, the Certificate of Incorporation of Parent Sub as in effect immediately
prior to the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation, and the By-Laws of Parent Sub shall be the By-Laws of the
Surviving Corporation.
SECTION 1.05. DIRECTORS AND OFFICERS. The directors of Parent Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Parent Sub immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
2
ARTICLE II
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 2.01. CONVERSION OF SECURITIES.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent Sub, the Company or the holders of any of the
following securities, each share of the Company's common stock, no par value per
share ("COMPANY COMMON STOCK"), issued and outstanding immediately prior to the
Effective Time, excluding any treasury shares held by the Company, shares held
by Parent and the Dissenting Shares, if any, shall be converted into the right
to receive that number of fully paid, nonassessable shares of Parent's common
stock, par value $0.001 per share ("PARENT COMMON STOCK"), equal to the Exchange
Ratio, subject to adjustment as set forth in Section 2.01(b) and subject to pro
rata withholding of shares to be held in escrow pursuant to Section 5.05.
(b) If between the date of this Agreement and the Effective Time the
outstanding shares of Parent Common Stock or Company Common Stock shall have
been changed into a different number of shares of a different class, by reason
of any stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares, the Exchange Ratio shall be correspondingly
adjusted to reflect such stock dividend, subdivision, reclassification,
recapitalization, split, combination or exchange of shares.
(c) At the Effective Time, all of the shares of Company Common Stock
shall no longer be outstanding and shall automatically be canceled and retired
and shall cease to exist, and each Certificate previously evidencing any such
shares shall thereafter represent only the right to receive the Merger
Consideration (as defined in Section 2.02(b)). The holders of such Certificates
previously evidencing such shares of Company Common Stock outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such shares of Company Common Stock, except as otherwise provided
herein or by Law. Such Certificates previously evidencing shares of Company
Common Stock shall be exchanged for certificates evidencing whole shares of
Parent Common Stock issued in consideration therefor in accordance with the
allocation procedures of this Section 2.01 and upon the surrender of such
Certificates in accordance with the provisions of Section 2.02. No fractional
shares of Parent Common Stock shall be issued, and, in lieu thereof, a cash
payment shall be made pursuant to Section 2.02(e).
(d) Each share of Company Common Stock held in the treasury of the
Company and each share of Company Common Stock owned by Parent or any direct or
indirect wholly-owned Subsidiary of Parent or of the Company, if any,
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof and no payment shall be made with respect
thereto.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
3
SECTION 2.02. EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time, Parent shall deposit,
or shall cause to be deposited, with Xxxxx & XxXxxxxx or such other Person
designated by Parent and reasonably satisfactory to the Company (the "EXCHANGE
AGENT"), for the benefit of the Stockholders and for exchange in accordance with
this Article II through the Exchange Agent (i) certificates evidencing such
number of whole shares of Parent Common Stock equal to the Exchange Ratio
multiplied by the number of shares of Company Common Stock outstanding and (ii)
cash in consideration of fractional shares as provided in Section 2.02(e) (such
Parent Common Stock and cash being hereinafter referred to as the "EXCHANGE
FUND"). The Exchange Agent shall, pursuant to irrevocable instructions, deliver
the shares of Parent Common Stock (except that *** of such shares of Parent
Common Stock shall be delivered to an escrow agent pursuant to Sections 5.05 and
8.06) and cash out of the Exchange Fund. Except as contemplated by Section
2.02(f), the Exchange Fund shall not be used for any other purpose.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, Parent will instruct the Exchange Agent to mail to each holder
of record of a certificate or certificates which immediately prior to the
Effective Time evidenced outstanding shares of Company Common Stock (other than
Dissenting Shares, if applicable) (collectively, the "CERTIFICATES"), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the 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 the Certificates in exchange for
certificates evidencing shares of Parent Common Stock. Upon surrender of a
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed, and such other customary documents as may be
required pursuant to such instructions, the holder of such Certificate shall be
entitled to receive in exchange therefor (A) certificates evidencing that number
of whole shares of Parent Common Stock which such holder has the right to
receive in respect of the shares of Company Common Stock formerly evidenced by
such Certificate in accordance with Section 2.01, less that holder's pro rata
portion of the shares (rounded to the nearest whole share) to be held in escrow
pursuant to Sections 5.05 and 8.06 and (B) cash in lieu of fractional shares of
Parent Common Stock to which such holder is entitled pursuant to Section 2.02(e)
(such shares of Parent Common Stock and cash, if any, being collectively, the
"MERGER CONSIDERATION"), and the Certificate so surrendered shall forthwith be
canceled. In the event of a transfer of ownership of shares of Company Common
Stock which is not registered in the transfer records of the Company, a
certificate evidencing the proper number of shares of Parent Common Stock may be
issued in accordance with this Article II to a transferee if the Certificate
evidencing such shares of Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.02, each of the
Certificates shall be deemed at any time after the Effective Time to evidence
only the right to receive, upon such surrender, the Merger Consideration.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
4
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES OF PARENT COMMON
STOCK. No dividends or other distributions declared or made after the Effective
Time with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Parent Common Stock evidenced thereby, and no other part of the
Merger Consideration shall be paid to any such holder, until the holder of such
Certificate shall surrender such Certificate, at which time, subject to the
effect of applicable Laws, there shall be issued to the holder (i) certificates
evidencing whole shares of Parent Common Stock issued in exchange therefor, and
the amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 2.02(e) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions (without interest thereon), with a record date after the
Effective Time but prior to surrender and a payment date occurring after
surrender, payable with respect to such whole shares of Parent Common Stock. No
interest shall be paid on the Merger Consideration.
(d) NO FURTHER RIGHTS IN COMPANY COMMON STOCK. All shares of Parent
Common Stock issued and cash paid upon exchange of the shares of Company Common
Stock in accordance with the terms hereof shall be deemed to have been issued or
paid in full satisfaction of all rights pertaining to such shares of Company
Common Stock.
(e) NO FRACTIONAL SHARES.
(i) No certificates or scrip evidencing fractional shares of
Parent Common Stock shall be issued upon the surrender for exchange of the
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights of a stockholder of Parent.
(ii) Each holder of a Certificate having a fractional interest
arising upon the conversion of such Certificate shall, at the time of surrender
of such Certificate, be paid by the Exchange Agent an amount in cash equal to
the value of such fractional interest based on a price per share equal to the
Market Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the holders of Company Common Stock for two (2)
years after the Effective Time shall be delivered to Parent, upon demand, and
any holders of Company Common Stock who have not theretofore complied with this
Article II shall thereafter look only to Parent for the Merger Consideration to
which they are entitled.
(g) NO LIABILITY. Neither Parent nor the Surviving Corporation shall
be liable to any holder of shares of Company Common Stock for any shares of
Parent Common Stock, cash or
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
5
dividends or distributions with respect thereto delivered to a public official
pursuant to any applicable abandoned property, escheat or similar Law.
SECTION 2.03. STOCK TRANSFER BOOKS. On the date hereof, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any Certificates
presented to the Exchange Agent for any reason shall be converted into the
Merger Consideration.
SECTION 2.04. DISSENTING SHARES. If required under Delaware Law,
notwithstanding any other provisions of this Agreement to the contrary, shares
of Company Common Stock that are outstanding immediately prior to the Effective
Time and which are held by stockholders who shall have not voted in favor of the
Merger or consented thereto in writing and who shall have demanded properly, in
writing, appraisal for such shares in accordance with Section 262 of Delaware
Law (collectively, the "DISSENTING SHARES") shall not be converted into or
represent the right to receive the Merger Consideration. Such stockholders
shall be entitled to receive payment of the appraised value of such shares of
Company Common Stock held by them in accordance with the provisions of Section
262 of Delaware Law, except that all Dissenting Shares held by stockholders who
have failed to perfect or who effectively have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under Section 262 of Delaware
Law shall thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration, upon surrender, in the manner
provided in Section 2.02, of the Certificate or Certificates that formerly
evidenced such shares of Company Common Stock. Any payments required to be made
to the holders of any Dissenting Shares shall be funded by Parent or the
Surviving Corporation.
ARTICLE IIA
VOTING RIGHTS
SECTION 2.01A. CONSENT AND VOTING AGREEMENT. Each Stockholder hereby (a)
irrevocably consents to the execution and delivery of this Agreement and to the
consummation of the Merger and shall contemporaneously herewith execute the
written consent attached hereto as EXHIBIT 2.01A (the "CONSENT"), and (b) as
long as this Agreement has not been terminated prior to the date specified in
Section 8.01(f), further irrevocably agrees to vote all Company Common Stock as
to which such Stockholder is entitled to vote at a meeting of the stockholders
of the Company if any meeting is so held, or by written consent without a
meeting as follows: (i) in favor of approval and adoption of this Agreement and
the transactions contemplated hereby; (ii) against any action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of the Company or such Stockholder under this
Agreement; (iii) against any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
6
action or agreement (other than this Agreement or the transactions contemplated
by this Agreement or the termination of this Agreement in accordance with its
terms), that would, directly or indirectly, impede, interfere with, delay,
postpone or attempt to discourage the Merger, including, without limitation:
(A) any extraordinary corporate transaction, such as a merger, consolidation or
other business combination involving the Company and its Subsidiaries; (B) a
sale or transfer of a material amount of Assets of the Company and its
Subsidiaries or a reorganization, recapitalization or liquidation of the Company
and its Subsidiaries; (C) any change in the management or board of directors of
the Company or any Competing Transaction, except as otherwise agreed to in
writing by Parent; (D) any material change in the present capitalization or
dividend policy of the Company; or (E) any other material change in the
Company's corporate structure or business.
SECTION 2.02A. [[Reserved]]
ARTICLE III
REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY AND ITS SUBSIDIARIES
Each of the Company and the *** Stockholders hereby represents and warrants
jointly and severally *** to Parent and Parent Sub as follows:
SECTION 3.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the Laws of the jurisdiction of its incorporation or
organization, has all requisite corporate or other power and authority to own,
lease and operate its properties and to carry on its business as it is now being
conducted, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of the business conducted by it or the
ownership or leasing of its properties makes such qualification necessary.
Notwithstanding anything herein to the contrary, the Company does not, directly
or indirectly, own or have an economic interest in any Subsidiary or other
Person.
SECTION 3.02. ARTICLES OF INCORPORATION AND BY-LAWS. SCHEDULE 3.02
contains (i) a list of the officers and directors of the Company and its
Subsidiaries and (ii) complete and correct copies of the Articles of
Incorporation and By-Laws or equivalent organizational documents, in each case
as amended or restated, of the Company. The Company is not in violation of any
of the provisions of its Articles of Incorporation or By-Laws or equivalent
organizational documents, in each case as amended or restated.
SECTION 3.03. CAPITALIZATION.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
7
(a) The authorized capital stock of the Company consists of One
Thousand (1,000) shares of Company Common Stock. As of May 31, 1998, (i) Four
Hundred Forty-One (441) shares of Company Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute, the
Company's Articles of Incorporation or By-Laws or any agreement to which the
Company is a party or bound, (ii) except as set forth on SCHEDULE 3.03(a), no
shares of Company Common Stock were held in treasury of the Company and
(iii) SCHEDULE 3.03(a) sets forth the name and address of each holder of Company
Common Stock and the number of shares of Company Common Stock held by such
holder ***. There are no bonds, debentures, notes or other indebtedness, issued
or outstanding, having the right to vote on any matters on which the
Stockholders may vote. Except as set forth on SCHEDULE 3.03(a), there are no
options, warrants, calls or other rights (including registration rights),
agreements, arrangements or commitments of any character, presently outstanding,
which (x) obligate the Company to issue, deliver or sell shares of its capital
stock or debt securities, (y) obligate the Company to grant, extend or enter
into any such option, warrant, call or other such right, agreement, arrangement
or commitment, or (z) obligate the Company to repurchase, redeem or otherwise
acquire any shares of Company Common Stock.
(b) All the outstanding shares of capital stock of, or other equity
interests in, each Subsidiary of the Company are duly authorized, validly
issued, fully paid and nonassessable and except as set forth in SCHEDULE
3.03(b), such shares or other equity interests are owned solely by the Company
free and clear of any Security Interests, Liens, claims, pledges, agreements,
limitations on voting rights, charges or other Encumbrances of any nature
whatsoever. Except as set forth on SCHEDULE 3.03(b), there are no options,
warrants, calls or other rights (including registration rights), agreements,
arrangements or commitments of any character to which the Company or any of its
Subsidiaries is a party relating to the issued or unissued capital stock of, or
other equity interests in, any of the Subsidiaries of the Company. The Company
does not directly or indirectly own any interest in any other corporation,
partnership, joint venture or other business association or entity.
SECTION 3.04. AUTHORITY. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
(including, with respect to the Merger, the approval and adoption of this
Agreement by the Stockholders who hold one hundred percent (100%) of the
outstanding shares of Company Common Stock) and no other corporate proceeding on
the part of the Company is necessary to authorize the execution, delivery and
performance of this Agreement or to consummate the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery thereof by the
Stockholders, Parent and Parent Sub, constitutes the legal, valid and binding
obligation of the Company enforceable in accordance with its terms.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
8
SECTION 3.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) Except as set forth in SCHEDULE 3.05, the execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not (i) conflict with or violate the Articles of
Incorporation or By-Laws or the equivalent organizational documents, in each
case as amended or restated, of the Company or any of its Subsidiaries, (ii)
conflict with or violate any federal, state, foreign or local law, statute,
ordinance, rule, regulation, order, judgment or decree (collectively, "LAWS") in
effect as of the date of this Agreement and applicable to the Company or any of
its Subsidiaries or by which any of their respective properties is bound or
subject to, or (iii) result in any breach of or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or require payment under, or result in the creation of an
Encumbrance on, any of the properties or Assets of the Company or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, Contract,
agreement, lease, license, permit, franchise, stock option or other instrument
or obligation to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound or subject.
(b) The execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will not, require the
Company to obtain any consent, approval, authorization or permit of, or to make
any filing with or notification to, any governmental or regulatory authority,
domestic or foreign ("GOVERNMENTAL ENTITIES") based on Laws and other
requirements of Governmental Entities in effect as of the date of this
Agreement, except for applicable requirements, if any, of the state securities
or blue sky laws ("BLUE SKY LAWS"), and the Xxxx-Xxxxx Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), and the filing and
recordation of appropriate merger documents as required by Delaware Law and
Indiana Law.
SECTION 3.06. PERMITS; COMPLIANCE. Each of the Company and its
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"), and there is no action, proceeding or investigation pending or ***
threatened regarding suspension or cancellation of any of the Company Permits.
Neither the Company nor any of its Subsidiaries is in conflict with, or in
default or violation of (a) any Law applicable to the Company or any of its
Subsidiaries or which any of their respective properties is bound by or subject
to or (b) any of the Company Permits. Since December 31, 1996, neither the
Company nor any of its Subsidiaries has received from any Governmental Entity
any written notification with respect to possible conflicts, defaults or
violations of Laws.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
9
SECTION 3.07. FINANCIAL STATEMENTS. SCHEDULE 3.07 contains true,
correct and complete copies of (i) the unaudited balance sheet of the Company
as of December 31, 1997 (the "BALANCE SHEET") and as of December 31, 1996 and
1995, and the related statements of operations for the fiscal years then
ended (collectively, the "FINANCIAL STATEMENTS"), and (ii) the unaudited
balance sheet of the Company as of March 31, 1998 (the "INTERIM BALANCE
SHEET"), and the related unaudited statement of operations of the Company for
the three months ended March 31, 1998, excluding any adjustments (which will
not individually or in the aggregate have a Company Material Adverse Effect)
and notes (that, if presented, would not differ materially from those
included in the Balance Sheet), which would be included in a year-end
financial statement (collectively, the "INTERIM FINANCIAL STATEMENTS"). For
purposes of this Agreement and except with respect to the representations and
warranties made in this Section 3.07, references to the Balance Sheet and the
Interim Balance Sheet shall not include any notes and schedules in the
Financial Statements and the Interim Financial Statements, respectively. The
Financial Statements and the Interim Financial Statements are attached hereto
as SCHEDULE 3.07 and have been prepared from books and records of the Company
*** consistent with preceding years and throughout the periods involved
(except as otherwise noted therein). The Financial Statements and the
Interim Financial Statements fairly present the financial condition and
results of operations of the Company as at the dates thereof and for the
periods indicated in the statements of operations, except, in the case of the
Interim Financial Statements, subject to normal year-end adjustments. No
financial statement of any Person other than the Company is required to be
included in the Financial Statements.
SECTION 3.08. NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE
3.08, there are no liabilities or other obligations of the Company or any
Subsidiary of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise ("LIABILITIES"), and there is no existing
condition, situation or set of circumstances which could reasonably be expected
to result in such Liabilities (other than Liabilities set forth on Schedule
3.08) through the Effective Time, and (b) Liabilities under this Agreement and
fees and expenses related hereto.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31,
1997, there has not been any material adverse change in the business, financial
condition, operations, results of operations or future prospects of the Company
or any of its Subsidiaries. Without limiting the generality of the foregoing,
since that date and except as otherwise disclosed in SCHEDULE 3.09:
(a) none of the Company and its Subsidiaries has sold, leased,
transferred, or assigned any of its Assets, tangible or intangible, other than
sales to its customers for fair consideration in the Ordinary Course of Business
or other than as fully reflected on the face of the Interim Balance Sheet;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
10
(b) none of the Company and its Subsidiaries has entered into any
agreement, Contract, lease or license (or series of related agreements,
Contracts, leases and licenses) outside the Ordinary Course of Business;
(c) there is no fact, condition or event relating to (i) the
potential loss of the benefit of, or any *** change in, any relationship with
any customers, clients, suppliers, key employees or insurers, or (ii) price
increases for parts, raw materials, supplies, services or equipment purchased
from present suppliers or vendors which is, with the lapse of time or the
occurrence of such event or condition, reasonably likely to be materially
adverse to the financial condition, business, Assets, properties or operations
of the Company;
(d) no party (including any of the Company and its Subsidiaries) has
accelerated, terminated, modified or canceled any agreement, Contract, lease or
license (or series of related agreements, Contracts, leases and licenses) to
which any of the Company and its Subsidiaries is a party or by which any of them
is bound;
(e) none of the Company and its Subsidiaries has imposed any Security
Interest upon any of its Assets, tangible or intangible;
(f) none of the Company and its Subsidiaries has made any capital
expenditure (or series of related capital expenditures) either involving more
than *** or outside the Ordinary Course of Business;
(g) none of the Company and its Subsidiaries has made any capital
investment in, any loan to, or any acquisition of the securities or Assets of,
any other Person (or series of related capital investments, loans, and
acquisitions);
(h) none of the Company and its Subsidiaries has issued any note,
bond, or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;
(i) none of the Company and its Subsidiaries has delayed or
postponed the payment of accounts payable or other Liabilities outside the
Ordinary Course of Business;
(j) none of the Company and its Subsidiaries has canceled,
compromised, waived or released any right or claim (or series of related rights
and claims);
(k) none of the Company and its Subsidiaries has granted any license
or sublicense of any rights under or with respect to any Intellectual Property;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
11
(l) there has been no change made or authorized in the Articles of
Incorporation or By-Laws or equivalent organizational documents, in each case as
amended or restated, of the Company or any of its Subsidiaries;
(m) none of the Company and its Subsidiaries has issued, sold or
otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange, or exercise) any of its capital stock;
(n) none of the Company and its Subsidiaries has declared, set aside,
or paid any dividend or made any distribution with respect to its capital stock
(whether in cash or in kind) or redeemed, purchased, or otherwise acquired any
of its capital stock;
(o) none of the Company and its Subsidiaries has experienced any
damage, destruction or Loss (whether or not covered by insurance) to its
property;
(p) none of the Company and its Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors, officers or
employees;
(q) none of the Company and its Subsidiaries has entered into any
employment Contract or collective bargaining agreement, written or oral, or
modified the terms of any such Contract or agreement existing as of the date
hereof;
(r) none of the Company and its Subsidiaries has granted any increase
in the base compensation of any of its directors, officers or employees;
(s) none of the Company and its Subsidiaries has adopted, amended,
modified or terminated any bonus, profit-sharing, incentive, severance or other
plan, Contract or commitment for the benefit of any of its directors, officers
and employees (or taken any such action with respect to any other Employee
Benefit Plan);
(t) none of the Company and its Subsidiaries has made any other
change in employment terms for any of its directors, officers or employees
outside the Ordinary Course of Business;
(u) none of the Company and its Subsidiaries has made or pledged to
make any charitable or other capital contribution;
(v there has not been any other occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of Business
involving the Company; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
12
(w) none of the Company and its Subsidiaries has committed to any of
the foregoing.
SECTION 3.10. ABSENCE OF LITIGATION. Except as set forth on SCHEDULE
3.10, (a) there is no claim, action, suit, litigation, proceeding, arbitration
or investigation of any kind, at law or in equity (including actions or
proceedings seeking injunctive relief), pending or *** threatened against the
Company or any of its Subsidiaries or any properties or rights of the Company or
any of its Subsidiaries, and (b) neither the Company nor any of its Subsidiaries
is subject to any continuing order of, consent decree, settlement agreement or
other similar written agreement with or continuing investigation by, any
Governmental Entity, or any judgment, order, writ, injunction, decree or award
of any Governmental Entity or arbitrator. In respect of the matters relating to
or arising in connection with the actions set forth in SCHEDULE 3.10, there is
no fact, event, condition, circumstance or other matter which either has, or is
reasonably likely to have resulted in, an event or determination having a
Company Material Adverse Effect. The Company has delivered to Parent copies of
all pleadings, correspondence and other documents relating to each matter
disclosed in SCHEDULE 3.10.
SECTION 3.11. VOTE REQUIRED. The affirmative vote of the holders of at
least a majority of the outstanding shares of Company Common Stock is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the Merger. The Stockholders, by executing this Agreement,
have irrevocably consented to the Merger and have irrevocably agreed to vote in
favor of the Merger. Such action by the Stockholders is sufficient to
constitute stockholder approval of the Merger.
SECTION 3.12. BROKERS. The Company has no Liability or obligation to pay
any fees or commissions to any broker, finder or agent (excluding attorneys and
accountants) with respect to the transactions contemplated by this Agreement or
for which Parent or Parent Sub could become liable or obligated.
SECTION 3.13. COMPANY ACTION. The Board of Directors of the Company (at a
meeting duly called and held in compliance with Indiana Law or by written
consent) has (a) determined that the Merger is in the best interests of the
Company and fair to the Stockholders, (b) approved the Merger in accordance with
the provisions of Indiana Law, and (c) recommended the approval of this
Agreement and the Merger by the holders of the Company Common Stock.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
13
SECTION 3.14. TAX MATTERS; "POOLING OF INTERESTS".
(a) *** neither the Company nor any of its Subsidiaries or Affiliates
has taken or agreed to take any action that would prevent the Merger from
constituting (i) a "reorganization" under Section 368(a)(1)(A) of the Code, by
application of Section 368(a)(2)(D) of the Code, or (ii) a "pooling of
interests" in accordance with GAAP and applicable SEC rules, including, without
limitation, the sale of any shares of Company Common Stock or Parent Common
Stock during the period commencing on the date which is thirty (30) days prior
to the Effective Time and ending on the Financial Result Date. The Company has
timely filed or will timely file all Tax Returns that it was or is required to
file. All such Tax Returns were correct and complete ***. Except as set forth
on SCHEDULE 3.14(c), all Taxes owed by the Company (whether or not shown on any
Tax Return) have been paid. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return. *** no claim has ever
been made by an authority in a jurisdiction where the Company does not file Tax
Returns that it is or may be subject to taxation by that jurisdiction. There
are no Security Interests on any of the Assets of the Company that arose in
connection with any failure (or alleged failure) to pay any Tax.
(b) Except as set forth on SCHEDULE 3.14(c), the Company has withheld
and paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party.
(c) Except as set forth on SCHEDULE 3.14(c), there is no dispute or
claim concerning any Tax Liability of the Company claimed or raised by any
Governmental Entity. SCHEDULE 3.14(c) lists all federal, state, local and
foreign income Tax Returns filed with respect to the Company for taxable periods
ended on or after December 31, 1995, and indicates those Tax Returns that have
been audited and those Tax Returns that currently are the subject of audit by
any Governmental Entity. The Company has delivered to Parent correct and
complete copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company for
taxable periods ended on or after December 31, 1995.
(d) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(e) The Company has not made any payments, or is not obligated to
make any payments, and is not a party to any agreement that under certain
circumstances could obligate it to make any payments that will not be deductible
under Section 280G of the Code.
(f) SCHEDULE 3.14(f) sets forth the following information with
respect to the Company, as of the most recent practicable date: (i) the tax
basis of the Company in its Assets; (ii) the amount of any net operating loss,
net capital loss, unused investment or other credit, unused foreign tax, or
excess charitable contribution allocable to the Company; and (iii) the amount of
any
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
14
intercompany items or any deferred gain or loss allocable to the Company with
respect to any intercompany transaction.
SECTION 3.15. REAL PROPERTY.
(a) The Company does not own any real property.
(b) SCHEDULE 3.15(b) lists and describes briefly all real property
leased or subleased to the Company. The Company has delivered to Parent correct
and complete copies of the leases and subleases listed in SCHEDULE 3.15(b).
With respect to each lease and sublease listed in SCHEDULE 3.15(b):
(i) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect ***;
(ii) except as set forth on SCHEDULE 3.15(b), the lease or
sublease will continue to be legal, valid, binding, enforceable and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(iii) no party to the lease or sublease is in breach or default,
and no event has occurred which, with notice or lapse of time, would constitute
a breach or default or permit termination, modification of a *** term or
condition, or acceleration thereunder, except as disclosed in SCHEDULE 3.15(b);
(iv) no party to the lease or sublease has repudiated any
provision thereof;
(v) there are no disputes, oral agreements or forbearance
programs in effect as to the lease or sublease;
(vi) The Company has not assigned, transferred, conveyed,
mortgaged, deeded in trust or encumbered any interest in the leasehold or
subleasehold;
(vii) *** all facilities leased or subleased thereunder have
received all approvals of Governmental Entities (including licenses and permits)
required in connection with the operation thereof and have been operated and
maintained in accordance with applicable Laws; and
(viii) all facilities leased or subleased thereunder are supplied
with utilities and other services necessary for the operation of said
facilities.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
15
SECTION 3.16. INTELLECTUAL PROPERTY.
(a) The Company owns or has the right to use pursuant to license,
sublicense, agreement or permission all Intellectual Property necessary for the
operation of the Company's business as presently conducted. Each item of
Intellectual Property owned or used by the Company is owned or available for use
by the Company on identical terms and conditions immediately subsequent to the
Effective Time. The Company has taken all reasonably necessary and desirable
action to maintain and protect each item of Intellectual Property that it owns
or uses.
(b) *** the Company has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Stockholders and none of the directors
and officers of the Company has ever received any oral or written charge,
complaint, claim, demand or notice alleging any such interference, infringement,
misappropriation or violation (including any claim that the Company must license
or refrain from using any Intellectual Property rights of any third party). ***
no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Intellectual Property rights of the
Company.
(c) SCHEDULE 3.16(c) identifies each patent or trademark and
copyright registration which has been issued to the Company or any Affiliate
with respect to any of its Intellectual Property, identifies each pending patent
application or application for registration which the Company or any Affiliate
has made with respect to any of its Intellectual Property, and identifies each
license, sublicense, agreement, or other permission which the Company or any
Affiliate has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Company has delivered to Parent
correct and complete copies of all such patents, registrations, applications,
licenses, sublicenses, agreements and permissions (as amended to date).
SCHEDULE 3.16(c) also identifies each trade name or unregistered trademark used
by the Company or any Affiliate in connection with any of its businesses. With
respect to each item of Intellectual Property required to be identified in
SCHEDULE 3.16(c):
(i) the Company possesses all right, title, and interest in and
to the item, free and clear of any Security Interest, license or other
restriction;
(ii) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
16
(iii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or *** threatened which challenges the
legality, validity, enforceability, use or ownership of such item; and
(iv) the Company has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation or other conflict with
respect to such item.
(d) SCHEDULE 3.16(d) identifies each item of Intellectual Property
that any third party owns and that the Company or any Affiliate uses pursuant to
any license, sublicense, agreement or permission, other than shrink-wrap
licenses for personal computer software. The Company has delivered to Parent
correct and complete copies of all such licenses, sublicenses, agreements, and
permissions (as amended to date). With respect to each item of Intellectual
Property required to be identified in SCHEDULE 3.16(d):
(i) the license, sublicense, agreement or permission covering
such item is legal, valid, binding, enforceable and in full force and effect;
(ii) the license, sublicense, agreement or permission will
continue to be legal, valid, binding, enforceable and in full force and effect
on identical terms following the Effective Time;
(iii) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification or acceleration thereunder;
(iv) no party to the license, sublicense, agreement or permission
has repudiated any provision thereof;
(v) with respect to each sublicense, the representations and
warranties set forth in items (i) through (iv) above are true and correct with
respect to the underlying license;
(vi) the underlying item of Intellectual Property is not subject
to any outstanding injunction, judgment, order, decree, ruling or charge;
(vii) no action, suit, proceeding, hearing, investigation, charge,
complaint, claim or demand is pending or threatened which challenges the
legality, validity or enforceability of the underlying item of Intellectual
Property; and
(viii) the Company has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
17
SECTION 3.17. TANGIBLE ASSETS. Except as set forth on SCHEDULE 3.17, the
Company and its Subsidiaries own and have good and marketable title to the
tangible property and Assets necessary for the conduct of their businesses as
presently conducted. Except as set forth on SCHEDULE 3.17, the tangible Assets
are free from defects ***, have been maintained in accordance with normal
industry practice and are in good operating condition and repair (subject to
normal wear and tear).
SECTION 3.18. INVENTORY. The Company and its Subsidiaries have no
inventory.
SECTION 3.19. CONTRACTS. SCHEDULE 3.19 lists the following Contracts and
other agreements to which the Company or any of its Subsidiaries is a party as
of the date hereof:
(a) any agreement (or group of related agreements) for the lease of
personal property to or from any Person providing for lease payments in excess
of *** per annum or a term of more than one (1) year;
(b) any agreement (or group of related agreements) for the purchase
or sale of raw materials, commodities, supplies, products or other personal
property, which involves consideration in excess of ***, or for the furnishing
or receipt of services, the performance of which has a term more than six
months, or involves consideration in excess of ***;
(c) any partnership or joint venture agreement;
(d) any agreement (or group of related agreements) under which it has
created, incurred, assumed or guaranteed any indebtedness for borrowed money, or
any capitalized lease obligation, in excess of ***, or under which it has
imposed a Security Interest on any of its Assets, tangible or intangible;
(e) any agreement concerning confidentiality or noncompetition;
(f) any agreement with any of the Stockholders and their respective
Affiliates;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance or other *** plan or arrangement
(including any Employee Benefit Plan) for the benefit of its current or former
directors, officers and employees;
(h) any collective bargaining agreement;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting or other basis providing annual compensation in
excess of ***, or providing severance benefits;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
18
(j) any agreement under which the consequences of a default or
termination could have a Company Material Adverse Effect; or
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of ***.
The Company has delivered to Parent a correct and complete copy of each
written agreement listed in SCHEDULE 3.19 and a written summary setting forth
the material terms and conditions of each oral agreement referred to in SCHEDULE
3.19. With respect to each such agreement, and except as otherwise disclosed in
SCHEDULE 3.19: (i) such agreement is legal, valid, binding, enforceable and in
full force and effect in all material respects; (ii) such agreement will
continue to be legal, valid, binding, enforceable and in full force and effect
in all material respects following the consummation of the transactions
contemplated hereby; (iii) no party is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification of any material term or condition
or acceleration, under such agreement; and (iv) no party has repudiated any
provision of such agreement.
SECTION 3.20. NOTES AND ACCOUNTS RECEIVABLE. Except as set forth on
SCHEDULE 3.20, all notes and accounts receivable of the Company are reflected
properly on its books and records and are valid receivables subject to no
setoffs or counterclaims, are current and collectible and will be collected in
accordance with their terms at their recorded amounts.
SECTION 3.21. POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of the Company or any of its Subsidiaries.
SECTION 3.22. INSURANCE. SCHEDULE 3.22 sets forth the following
information with respect to each current insurance policy (including policies
providing property, casualty, liability and workers' compensation coverage and
bond and surety arrangements) to which the Company has been a party, a named
insured, or otherwise the beneficiary of coverage:
(a) the name, address, and telephone number of the agent;
(b) the name of the insurer, the name of the policyholder and the
name of each covered insured;
(c) the policy number and the period of coverage;
(d) the scope (including an indication of whether the coverage was on
a claims made, occurrence or other Basis) and amount (with a summary of the
amount of any deductibles and ceilings) of coverage; and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
19
(e) a description of any retroactive premium adjustments or other
loss-sharing arrangements.
With respect to each such insurance policy: (i) such policy is legal, valid,
binding, enforceable and in full force and effect ***; (ii) such policy will
continue to be legal, valid, binding, enforceable and in full force and
effect *** following the consummation of the transactions contemplated
hereby; (iii) neither the Company nor any other party to the policy is in
breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse
of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under such policy; and (iv) no party to the
policy has repudiated any provision thereof. The Company has been covered
during the past three (3) years by insurance in scope and amount customary
and reasonable for the business in which it has engaged during the
aforementioned period. SCHEDULE 3.22 also describes any self-insurance
arrangements affecting the Company.
SECTION 3.23. EMPLOYEES. The Company has delivered to Parent a true and
complete list of all employees of the Company and its Subsidiaries, their
respective positions, locations, salaries or hourly wages and severance
arrangements, each as of the date hereof. *** no executive, key employee or
group of employees has any plans to terminate employment with any of the Company
and its Subsidiaries. Except as set forth on SCHEDULE 3.23, each employee of
the Company and its Subsidiaries is employed on an "at will" basis and has no
right to any *** compensation following termination of employment. Except as
set forth on SCHEDULE 3.23, each employee of the Company and its Subsidiaries
has executed a proprietary information and inventions agreement in the form
provided to counsel to Parent. The Company is not a party to or bound by any
collective bargaining agreement, nor has it experienced any strikes, grievances,
claims of unfair labor practices or other collective bargaining disputes. ***
the Company has not committed any unfair labor practice and there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
SECTION 3.24. EMPLOYEE BENEFITS.
(a) Except as set forth on SCHEDULE 3.24, with respect to all
employees, former employees, directors and independent contractors of the
Company and its Subsidiaries and their dependents and beneficiaries, neither the
Company, its Subsidiaries nor any ERISA Affiliate presently maintains,
contributes to or has any Liability under or with respect to any Employee
Benefit Plan. The plans, programs and arrangements set forth on SCHEDULE 3.24
are herein referred to as the "COMPANY EMPLOYEE BENEFIT PLANS." *** each Company
Employee Benefit Plan (and each related trust, insurance Contract or other
funding arrangement) complies in form and in operation *** with the applicable
requirements of ERISA, the Code, other applicable Laws and governing documents
and agreements. With respect to each Company Employee Benefit Plan *** there
has been no act or omission by the Company or any of its Subsidiaries or any
ERISA Affiliate that
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
20
would impair the right or ability of the Company or any of its Subsidiaries or
ERISA Affiliate to unilaterally amend in whole or part or terminate such Company
Employee Benefit Plan at any time, subject to the terms of any insurance
Contract or other contractual arrangements with third parties, and the Company
has delivered to Parent true and complete copies of: (i) the plan documents,
including any related trust agreements, insurance Contracts or other funding
arrangements and all amendments thereto, or a written summary of the terms and
conditions of the plan if there is no written plan document; (ii) the most
recent IRS Form 5500; (iii) the most recent financial statement and, if
applicable, actuarial valuation; (iv) all correspondence with the Internal
Revenue Service, the Department of Labor and other Governmental Entities with
respect to the past three (3) plan years other than IRS Form 5500 filings; and
(v) the most recent summary plan description with a summary of material
modifications to such plan.
(b) *** neither the Company nor any of its Subsidiaries and none of
their respective directors, officers or employees has any Liability with respect
to any Company Employee Benefit Plan for failure to comply with ERISA, the Code,
any other applicable Laws or any governing documents or agreements.
(c) Except as set forth on SCHEDULE 3.24, no Company Employee Benefit
Plan is an Employee Pension Benefit Plan, and no Company Employee Benefit Plan
has any unfunded Liability. With respect to the Company Employee Benefit Plans,
all applicable contributions and premium payments for all periods ending prior
to the Effective Time (including periods from the first day of the then current
plan year to the Effective Time) shall be made prior to the Effective Time in
accordance with past practice or as expressly agreed to in advance by Parent.
(d) Neither the Company, any of its Subsidiaries nor any ERISA
Affiliate maintains, maintained, contributes to, or has any Liability
(including, but not limited to, current or potential withdrawal Liability) with
respect to any Multiemployer Plan or Employee Pension Benefit Plan.
(e) With respect to all employees and former employees of the Company
and its Subsidiaries, neither the Company, any of its Subsidiaries nor any ERISA
Affiliate presently maintains, contributes to or has any Liability under any
funded or unfunded medical, health or life insurance plan or arrangement for
present or future retirees or present or future terminated employees except as
required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, or state continuation coverage Laws. There has been no act or acts or
failure or failures to act which would result in a disallowance of a deduction
or the imposition of a Tax pursuant to Section 4980B, or any predecessor
provision, of the Code or any related regulations. No event has occurred with
respect to which the Company or any of its Subsidiaries or Affiliates could be
liable for a Tax imposed by any of Sections 4972, 4976, 4977, 4979 or 4980 of
the Code, or for a civil penalty under Section 502(c) of ERISA.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
21
(f) There is no pending, or *** threatened legal action, proceeding,
audit, examination or investigation against or involving any Company Employee
Benefit Plan maintained by the Company or any ERISA Affiliate (other than
routine claims for benefits). *** there is no Basis for, and there are no facts
which could give rise to, any such condition, legal action, proceeding or
investigation. Any bonding required with respect to any Company Employee
Benefit Plans in accordance with applicable provisions of ERISA has been
obtained and is in full force and effect.
SECTION 3.25. GUARANTIES. None of the Company and its Subsidiaries is a
guarantor or otherwise is liable for any Liability or obligation (including
indebtedness) of any other Person.
SECTION 3.26. ENVIRONMENT, HEALTH AND SAFETY.
(a) *** the Company and its Subsidiaries have complied with all
Environmental, Health and Safety Laws, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand or notice has been filed or
commenced against any of them alleging any failure so to comply. Without
limiting the generality of the preceding sentence, the Company and its
Subsidiaries have obtained and been in compliance with all of the terms and
conditions of all permits, licenses, and other authorizations which are required
under, and have complied with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and timetables
which are contained in, all Environmental, Health and Safety Laws.
(b) *** the Company and its Subsidiaries have no Liability (and the
Company and its Subsidiaries have not handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any property or
facility in any manner that could form the Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against the Company or its Subsidiaries giving rise to any Liability) for
damage to any site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health and Safety Law.
(c) *** all properties owned or leased and equipment used in the
business of the Company and its Subsidiaries, and their respective predecessors
and Affiliates, have been free of asbestos, PCB's, methylene chloride,
trichloroethylene, 1,2-transdichloroethylene, dioxins, dibenzofurans, and
Extremely Hazardous Substances.
SECTION 3.27. CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY. Except as
described in SCHEDULE 3.27, none of the Stockholders and their Affiliates has
been involved in any business arrangement or relationship with the Company or
any of its Subsidiaries (other than in an employment or consulting capacity)
within the past twelve (12) months, and none of the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
22
Stockholders and their Affiliates owns any Asset, tangible or intangible, which
is used in the business of the Company or any of its Subsidiaries.
SECTION 3.28. [[RESERVED]]
SECTION 3.29. PRODUCT AND SERVICE WARRANTIES. Each product sold or
delivered, and each service performed, by the Company and its Subsidiaries has
been in conformity with all applicable contractual commitments and all express
and implied warranties, and none of the Company and its Subsidiaries has any
Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim or demand against
any of them giving rise to any Liability) for the replacement or repair of any
product, the substandard performance of any service, or other damages in
connection with the products sold or services performed by the Company and its
Subsidiaries. No product sold or delivered, or service performed, by the
Company and its Subsidiaries is subject to any guaranty, warranty or other
indemnity beyond the applicable standard terms and conditions of sale, lease or
performance. SCHEDULE 3.29 includes copies of the standard terms and conditions
of sale, lease or performance for each of the Company and its Subsidiaries
(containing applicable guaranty, warranty and indemnity provisions).
SECTION 3.30. PRODUCT AND SERVICE LIABILITY. None of the Company and its
Subsidiaries has any Liability (and there is no Basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim or
demand against any of them giving rise to any Liability) arising out of any
injury or damages (whether actual or alleged) to any Person or its property or
its business operations or prospects as a result of the ownership, possession or
use of any product sold, leased or delivered or any service performed by the
Company and its Subsidiaries.
SECTION 3.31. CUSTOMER/SUPPLIER RELATIONSHIPS. Except as set forth on
SCHEDULE 3.31, the Company and its Subsidiaries enjoy good commercial
relationships with each of their customers and suppliers. Since December 31,
1996, neither the Company nor any of its Subsidiaries has received any
communication from any of their customers or suppliers expressing significant
dissatisfaction with its commercial relationship with the Company and its
Subsidiaries.
SECTION 3.32. CERTAIN BUSINESS PRACTICES. Neither the Company, any of its
Subsidiaries nor any director, officer, stockholder, agent or employee
(excluding independent contractors) of the Company or its Subsidiaries has (i)
used any funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any unlawful payment
to foreign or domestic government officials or employees or to foreign or
domestic political parties or campaigns or violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or (iii) made any other unlawful
payment.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
23
SECTION 3.33. DISCLOSURE. No representation or warranty made by the
Company and/or the Stockholders, nor any document, written information,
statement, financial statement, certificate, schedule or exhibit prepared and
furnished or to be prepared and furnished by the Company, its Subsidiaries, or
its representatives pursuant hereto or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a ***
fact, or omits or will omit to state a *** fact necessary to make the statements
of facts contained herein or therein not misleading in light of the
circumstances under which they were furnished.
SECTION 3.34. LIMITATION ON REPRESENTATIONS AND WARRANTIES. The Company
makes no representation or warranty to the Parent regarding the probable success
or profitability of the Surviving Corporation.
ARTICLE IIIA
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder hereby represents and warrants *** to Parent and Parent
Sub as follows:
SECTION 3.01A. AUTHORIZATION OF TRANSACTION. Such Stockholder has full
power and authority to execute and deliver this Agreement and the Consent and to
perform its obligations hereunder and thereunder. This Agreement constitutes
the valid and legally binding obligation of such Stockholder, enforceable in
accordance with its terms and conditions. Such Stockholder is a natural person,
is over 21 years of age and has not had a legal representative appointed by a
court of law or otherwise act in his or her behalf or with respect to any of his
or her property. Such Stockholder need not give any notice to, make any filing
with, or obtain any authorization, consent or approval of any Governmental
Entity in order to consummate the transactions contemplated by this Agreement.
SECTION 3.02A. NONCONTRAVENTION. Neither the execution and the delivery of
this Agreement and the Consent, nor the consummation of the transactions
contemplated hereby and thereby, will (a) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge or other
restriction of any government, Governmental Entity, or court to which such
Stockholder is subject or (b) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
agreement, Contract, lease, license, instrument or other arrangement to which
such Stockholder is a party, by which it is bound or to which any of its Assets
is subject.
SECTION 3.03A. BROKERS. Such Stockholder has no Liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement or for which Parent or Parent Sub
could become liable or obligated.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
24
SECTION 3.04A. COMPANY SHARES. Such Stockholder holds of record and owns
beneficially the number of shares of Company Common Stock set forth next to his
name on the signature page hereto, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws and the restrictions in the Stockholders' Agreement (as defined
herein) that is to be terminated pursuant to Section 6.08), Encumbrances,
Security Interests, options, warrants, purchase rights, Contracts, commitments
and/or equities. Except for the Stockholders' Agreement, such Stockholder is
not a party to any option, warrant, purchase right or other Contract or
commitment that could require such Stockholder to sell, transfer or otherwise
dispose of any capital stock of the Company or any of its Subsidiaries (other
than this Agreement). Such Stockholder is not a party to any voting trust,
proxy or other agreement or understanding with respect to the voting of any
capital stock of the Company (other than this Agreement).
SECTION 3.05A. ACCREDITED INVESTOR. Such Stockholder (a) is an "accredited
investor" as that term is defined in Regulation D of the Securities Act or (b)
hereby designates Xxxxxxx X. Xxxxx as his or her purchaser representative (the
"Purchaser Representative") and, either alone or together with the Purchaser
Representative, has sufficient knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the transactions contemplated by this Agreement and making an informed business
decision. Such Stockholder represents and warrants that he or she has had the
opportunity to ask questions and receive answers concerning the terms and
conditions of the Merger and this Agreement and to obtain any additional
information that is necessary to verify the accuracy of the information
furnished pursuant to Section 3.09A. In addition, Purchaser Representative
acknowledges that Parent has informed him that Parent is pursuing potential
acquisitions of other companies, some of which are larger than the Company, and
the consummation or success of such potential acquisitions cannot be assured.
SECTION 3.06A. INVESTMENT INTENTION. Such Stockholder has no present
intention to dispose of any shares of Parent Common Stock to be issued in the
Merger, except for sales of shares of Parent Common Stock *** pursuant to
Rule 144 promulgated under the Securities Act.
SECTION 3.07A. EMPLOYMENT. In the event that such Stockholder is entering
into an Employment Agreement pursuant to Section 7.02(h), such Stockholder
currently intends to remain in the employ of the Surviving Corporation (and/or
Parent and its Subsidiaries) and has no intention to seek other employment
opportunities. Each of the Stockholders has no intention to compete with the
Surviving Corporation (and/or Parent and its Subsidiaries).
SECTION 3.08A. LIMITATION ON REPRESENTATIONS AND WARRANTIES. The
Stockholders make no representation or warranty to the Parent regarding the
probable success or profitability of the Surviving Corporation.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
25
SECTION 3.09A. DELIVERY OF INFORMATION. Each of the Stockholders has
received a copy of the following documents relating to Parent: (i) the Annual
Report on Form 10-KSB for the year ended December 31, 1997; and (ii) the
Quarterly Report on Form 10-Q for the quarter March 31, 1998. Such Stockholder
acknowledges that he has reviewed carefully the risk factors contained in the
above referenced annual report.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PARENT SUB
Parent and Parent Sub hereby represent and warrant, jointly and severally,
to the Company and each Stockholder that:
SECTION 4.01. ORGANIZATION AND QUALIFICATION. Each of Parent and Parent
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted, and Parent is duly qualified
and in good standing to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its properties makes
such qualification necessary, except for such failures to be so qualified or
licensed and in good standing as would not, individually or in the aggregate,
have a Parent Material Adverse Effect.
SECTION 4.02. CERTIFICATES OF INCORPORATION AND BY-LAWS. Neither Parent
nor Parent Sub is in violation of any of the provisions of its Certificate of
Incorporation or By-Laws, respectively, in each case as amended or restated.
SECTION 4.03. PARENT COMMON STOCK; CAPITALIZATION.
(a) The shares of Parent Common Stock to be issued pursuant to the
Merger *** will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute,
Parent's Certificate of Incorporation or By-Laws or any agreement to which
Parent is a party or is bound ***
(b) The authorized capital stock of Parent consists of Fifty Million
(50,000,000) shares of Parent Common Stock and Five Million (5,000,000) shares
of preferred stock, par value $.001 per share (the "PARENT PREFERRED STOCK").
As of May 13, 1998, (i) Thirteen Million Four Hundred Five Thousand Four Hundred
Forty-Seven (13,405,447) shares of Parent Common Stock were issued and
outstanding, all of which are duly authorized, validly issued, fully paid and
nonassessable, (ii) no shares of Parent Preferred Stock were outstanding, (iii)
no shares of Parent Common Stock were held in treasury of Parent and (iv) Four
Million (4,000,000) shares of Parent
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
26
Common Stock were reserved for issuance pursuant to option and employee benefit
plans and in connection with the exercise of outstanding warrants.
(c) The authorized capital stock of Parent Sub consists of one
thousand (1,000) shares of Parent Sub Common Stock, of which one hundred (100)
shares are issued and outstanding and held by Parent.
SECTION 4.04. AUTHORITY. Each of Parent and Parent Sub has all requisite
corporate power and authority to execute and deliver this Agreement, to perform
its respective obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action and no other corporate proceeding on the part
of Parent or Parent Sub is necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Parent Sub and, assuming the due
authorization, execution and delivery thereof by the Stockholders and the
Company, constitutes the legal, valid and binding obligations of Parent and
Parent Sub enforceable in accordance with its terms.
SECTION 4.05. NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and Parent
Sub do not, and the performance of this Agreement by Parent and Parent Sub will
not, (i) conflict with or violate the Certificate of Incorporation or By-Laws,
as amended or restated, of Parent or Parent Sub, (ii) conflict with or violate
any Laws in effect as of the date of this Agreement applicable to Parent or
Parent Sub or by which any of their respective properties is bound, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or require
payment under, or result in the creation of a Lien or Encumbrance on, any of the
properties or Assets of Parent or Parent Sub pursuant to, any note, bond,
mortgage, indenture, Contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Parent or Parent Sub is a party or by
which Parent or Parent Sub or any of their respective properties is bound by or
subject to, except for breaches, defaults, events, rights of termination,
amendment, acceleration or cancellation, payment obligations or Liens or
Encumbrances that would not have a Parent Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Parent
Sub do not, and the performance of this Agreement by Parent and Parent Sub will
not, require Parent or Parent Sub to obtain any consent, approval, authorization
or permit of, or to make any filing with or notification to, any Governmental
Entities, except (i) for applicable requirements, if any, of the Securities Act,
the Exchange Act, Blue Sky Laws, the Nasdaq and the filing and recordation of
appropriate merger documents as required by Delaware Law and Indiana Law and
(ii) where the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
27
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, either individually or in the
aggregate, prevent Parent or Parent Sub from performing its obligations under
this Agreement.
SECTION 4.06. REPORTS; FINANCIAL STATEMENTS.
(a) Since February 12, 1997, Parent has timely filed all forms,
reports, statements and other documents required to be filed by it with the SEC
(collectively, the "PARENT SEC REPORTS"). The Parent SEC Reports, including all
Parent SEC Reports filed after the date of this Agreement and prior to the
Effective Time, were or will be prepared in all material respects in accordance
with the requirements of the Securities Act and the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Parent SEC Reports. As of their respective dates, the Parent SEC Reports 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.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports filed prior
to, on or after the date of this Agreement (i) have been or will be prepared in
accordance with, and complied or will comply as to form with, the published
rules and regulations of the SEC and GAAP applied on a consistent basis
throughout the periods involved (except as otherwise noted therein) and (ii)
fairly present or will fairly present the consolidated financial position of
Parent and its Subsidiaries as of the respective dates thereof and the
consolidated results of their operations and their cash flows for the periods
indicated, except that any unaudited interim financial statements were or will
be subject to normal and recurring year-end adjustments.
SECTION 4.07. ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as and to
the extent disclosed in the Parent SEC Reports filed prior to the date of
this Agreement or as contemplated in this Agreement or as otherwise disclosed
in writing by Parent to the Stockholders prior to the Effective Time, since
March 31, 1998, there has not been *** any significant change by Parent in
its accounting methods, principles or practices.
SECTION 4.08. OWNERSHIP OF PARENT SUB; NO PRIOR ACTIVITIES.
(a) Parent Sub was formed solely for the purpose of engaging in the
transactions contemplated by this Agreement. All of the outstanding capital
stock of Parent Sub is owned directly by Parent.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
28
(b) Except for obligations or liabilities incurred in connection with
its incorporation or organization and the transactions contemplated by this
Agreement and except for this Agreement and any other agreements or arrangements
contemplated by this Agreement, Parent Sub has not and will not have incurred,
directly or indirectly, through any Subsidiary or Affiliate, any obligations or
liabilities or engaged in any business activities or any type or kind whatsoever
or entered into any agreements or arrangements with any Person.
SECTION 4.09. BROKERS. There is no broker, finder or investment banker
which is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Parent or Parent Sub. Notwithstanding
anything herein to the contrary, the Stockholders shall not be liable or
obligated for any such brokerage, finder's or other fee or commission.
SECTION 4.10. [[RESERVED]]
SECTION 4.11. LIMITATION ON REPRESENTATIONS AND WARRANTIES.
(a) Except as and to the extent expressly set forth in this Article
IV, included on any schedule hereto or included in any writing delivered by
Parent to the Company concurrently herewith or subsequent hereto expressly
pursuant to this Agreement, each of Parent and Parent Sub makes no other
representation or warranty and disclaims all Liability and responsibility for
any representation, warranty, statement or information (financial or otherwise)
made or communicated (orally or in writing) to the Company or any of its
stockholders, employees, agents, consultants or representatives.
(b) Parent makes no representation or warranty to the Company or the
Stockholders regarding the probable success or profitability of Parent.
SECTION 4.12. ***
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
29
ARTICLE V
COVENANTS
SECTION 5.01. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Parent,
the Company will, and will cause each of its Subsidiaries to: (a) operate only
in the Ordinary Course of Business; and (b) use its best efforts to (i) preserve
and/or maintain, in all material respects and consistent with past custom and
practice, its business and properties, including its present operations,
physical facilities, working conditions and relationships with its present
employees and Persons having significant business relations with it, including,
without limitation, suppliers and customers, (ii) maintain and keep its
properties and Assets in as good repair and condition as at present, ordinary
wear and tear excepted, and (iii) keep in full force and effect insurance and
bonds comparable in amount and scope of coverage to that currently maintained.
SECTION 5.02. NEGATIVE COVENANTS OF THE COMPANY. Except as expressly
contemplated by this Agreement or as previously disclosed to Parent in writing
on SCHEDULE 5.02, or otherwise consented to in writing by Parent, from the date
of this Agreement until the Effective Time, the Company shall not, directly or
indirectly through any Affiliate or otherwise (and the Stockholders shall not
and shall not cause the Company to), and shall not permit any Affiliate to
directly or indirectly, do any of the following:
(a) (i) increase the compensation payable to, or to become payable
to, any employee, director or executive officer; (ii) grant any severance or
termination pay to, or enter into any employment or severance agreement with,
any director, officer or employee; (iii) establish, adopt, enter into, amend,
modify or terminate any Employee Benefit Plan or arrangement except as may be
required by applicable Law; or (iv) hire any salaried person earning annual
compensation, including salary, cash bonuses and commissions, in excess of ***;
(b) declare or pay any dividend on or make any other distribution in
respect of, outstanding shares of capital stock;
(c) (i) redeem, purchase or otherwise acquire any shares of its or
any of its Subsidiaries' capital stock or any securities or obligations
convertible into or exchangeable for any shares of its or its Subsidiaries'
capital stock, or any options, warrants or conversion or other rights to acquire
any shares of its or its Subsidiaries' capital stock or any such securities or
obligations; (ii) effect any reorganization or recapitalization; or (iii) split,
combine or reclassify any of its or its Subsidiaries' capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu
of or in substitution for, shares of its or its Subsidiaries' capital stock;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
30
(d) (i) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
Security Interests, Liens, claims, pledges, limitations in voting rights,
charges or other Encumbrances) of, any shares of any class of its or its
Subsidiaries' capital stock (including shares held in treasury), any securities
convertible into or exercisable or exchangeable for any other shares, or any
rights, warrants or options to acquire, any such shares; and (ii) amend or
otherwise modify the terms of any such rights, warrants or options the effect of
which shall be to make such terms more favorable to the holders thereof;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in, all or a portion of the Assets of, or by any
other manner, any corporation, partnership, association or other business,
organization or division thereof, or otherwise acquire or agree to acquire any
Assets of any other Person (other than the purchase of Assets from suppliers or
vendors in the Ordinary Course of Business)***;
(f) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any of its *** Assets or any *** Assets of any of its
Subsidiaries;
(g) initiate, solicit or encourage (including by way of furnishing
information or assistance), respond to, or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to, any Competing Transaction, or enter into discussions or
negotiate with any person or entity in furtherance of such inquiries to obtain a
Competing Transaction, or enter into an agreement with respect to any Competing
Transaction or agree to or endorse any Competing Transaction, or authorize or
permit any of the officers, directors or employees of the Company or any of its
Subsidiaries or any investment banker, financial advisor, attorney, accountant
or other representative retained by the Company or any of its Subsidiaries to
take any such action, and the Company shall promptly notify Parent of all
relevant terms of any such inquiries and proposals received by the Company or
any of its Subsidiaries or by any such officer, director, employee, investment
banker, financial advisor or attorney, and if such inquiry or proposal is in
writing, the Company shall deliver or cause to be delivered to Parent a copy of
such inquiry or proposal.
(h) propose or adopt any amendments to its Articles of Incorporation
or its By-Laws;
(i) (A) change any of its methods of accounting in effect at December
31, 1997, or (B) make or rescind any material election relating to Taxes, settle
or compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes (except where the amount
of such settlements or controversies, individually or in the aggregate, does not
exceed ***), or change in any material respect any of its methods of reporting
income or deductions for federal income Tax purposes from those employed in the
preparation of the federal
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
31
income Tax Return for the taxable year ended December 31, 1997, except, in the
case of clause (A) or clause (B), as may be required by Law or GAAP;
(j) enter into any Contract outside the Ordinary Course of Business;
(k) create, or permit the creation of, any Lien upon any Assets
outside the Ordinary Course of Business;
(l) enter into any employment Contract or collective bargaining
agreement, or modify the terms of any existing such Contract or agreement;
(m) sell, lease, exchange, mortgage, pledge, transfer, assign or
otherwise dispose of, or agree to sell, lease, exchange, mortgage, pledge,
transfer, assign or otherwise dispose of, any Assets with a Fair Market Value of
*** or more, or Assets with an aggregate Fair Market Value of *** or more, in
each case tangible or intangible;
(n) make any capital expenditures other than in the Ordinary Course
of Business, or make any capital expenditures in the aggregate in excess of ***;
(o) amend or renew, or enter into any Contract involving operations
outside of the United States;
(p) take or agree to take any action that would or is reasonably
likely to result in any of the Company's representations and warranties set
forth in this Agreement being untrue or in any of the conditions to the Merger
not being satisfied; or
(q) agree in writing or otherwise to do any of the foregoing.
SECTION 5.03. NEGATIVE COVENANTS OF PARENT. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by the
Company, from the date of this Agreement until the Effective Time, Parent will
not do any of the following:
(a) amend any of the terms or provisions of the Parent Common Stock
which amendment would have a material adverse effect on the Stockholders;
(b) knowingly take any action which would result in a failure to
maintain the quotation of the Parent Common Stock on Nasdaq;
(c) declare or pay any dividends or other distribution (whether in
cash, stock or other property) on outstanding shares of capital stock;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
32
(d) take or agree to take any action that would or is reasonably
likely to result in any of Parent's representations and warranties set forth in
this Agreement being untrue in any material respect or in any of the conditions
to the Merger not being satisfied in any material respect; or
(e) agree in writing or otherwise to do any of the foregoing.
SECTION 5.04. ACCESS AND INFORMATION. The Company shall, and shall cause
its Subsidiaries to, provide Parent and its officers, directors, employees,
agents, counsel, accountants, financial advisors, consultants and other
representatives (collectively, the "PARENT REPRESENTATIVES"), with full access,
upon reasonable prior notice, to all officers, employees and accountants of the
Company and its Subsidiaries and to their Assets, properties, Contracts, books,
records and all such other information and data concerning the business and
operations of the Company and its Subsidiaries as Parent or any of the Parent
Representatives reasonably may request in connection with such investigation.
Such investigation will involve, among other things, Parent's review and
confirmation of the Company's Financial Statements, the legal review of the
Contracts and leases of the Company and its Subsidiaries, the review of the
client lists of the Company and its Subsidiaries and reference checks of the
Company and its Subsidiaries. Parent will provide the Stockholders with all
information reasonably requested by them to enable them to evaluate the merits
of the Merger.
SECTION 5.05. ESCROW AGREEMENT. At or before the Effective Time, Xxxx X.
Xxxx, as representative and attorney-in-fact for the Stockholders (the
"STOCKHOLDERS' REPRESENTATIVE"), Parent, and a third party acceptable to Parent
and the Stockholders' Representative, as escrow agent, shall execute and deliver
the escrow agreement, substantially in the form of EXHIBIT 5.05 hereof (the
"ESCROW AGREEMENT"). Each Stockholder hereby authorizes and appoints the
Stockholders' Representative to serve as its attorney-in-fact to execute the
Escrow Agreement, and agrees to be bound by the provisions thereof.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. APPROPRIATE ACTION; CONSENTS; FILINGS.
(a) The Company, Parent and Parent Sub shall each use its best
efforts to: (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under applicable Law
or otherwise to consummate and make effective the transactions contemplated by
this Agreement; (ii) obtain from any Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Parent, Parent Sub or the Company or any of their
Subsidiaries in connection with the authorization,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
33
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein, including, without limitation, the Merger;
(iii) make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
Delaware Law and Indiana Law (including holding a stockholders meeting and/or
sending notice of merger and appraisal rights) and the federal securities laws
and the rules and regulations thereunder, if any, and any other applicable
federal or state securities laws, and (B) the HSR Act, and (C) any other
applicable Law; provided that Parent, Parent Sub and the Company shall cooperate
with each other in connection with the making of all such filings, including
providing copies of all such documents to the non-filing party and its advisors
prior to filing and, if requested, accepting all reasonable additions, deletions
or changes suggested in connection therewith. The Company, Parent and Parent
Sub shall furnish all information required for any application or other filing
to be made pursuant to the rules and regulations of any applicable Law in
connection with the transactions contemplated by this Agreement.
(b) (i) Each of the Company, Parent and Parent Sub shall give, and
shall cause each of their respective Subsidiaries to give, any notices to third
parties, and use, and cause each of their respective Subsidiaries to use, its
best efforts to obtain any third party consents (A) necessary, proper or
advisable to consummate the transactions contemplated in this Agreement, (B)
disclosed or required to be disclosed in the schedules contained herein, (C)
otherwise required under any Contracts, licenses, leases or other agreements in
connection with the consummation of the transactions contemplated herein or (D)
required to prevent a Company Material Adverse Effect from occurring prior to or
after the Effective Time or a Parent Material Adverse Effect from occurring
prior to or after the Effective Time.
(ii) In the event that any party shall fail to obtain any third
party consent described in subsection (b) (i) above, such party shall use its
best efforts, and shall take any such actions reasonably requested by the
other party hereto, to minimize any adverse effect upon the Company, Parent,
Parent Sub, their respective Subsidiaries and their respective businesses
resulting, or which could reasonably be expected to result after the
Effective Time, from the failure to obtain such consent.
SECTION 6.02. TAX TREATMENT; "POOLING OF INTERESTS"; AFFILIATES. The
Company, Parent and Parent Sub shall use their best efforts, and shall cause
their respective Subsidiaries and Affiliates to use their best efforts, to cause
the Merger to qualify, and will not take any actions which would prevent the
Merger from qualifying, as a "reorganization" under Section 368(a)(1)(A) of the
Code, by application of Section 368(a)(2)(D) of the Code. The Company, Parent
and the Stockholders shall, and shall cause each of their respective
Subsidiaries and Affiliates to, use their best efforts not to take any action
(regardless of whether such action would otherwise be permitted or not
prohibited hereunder) that would prevent Parent from accounting for the Merger
as a "pooling of interests." Each Stockholder agrees and undertakes that from
the date hereof until such time as financial results (including combined sales
and net income) covering at least thirty (30) days of post-
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
34
Merger operations have been published (the date on which such financial results
are published shall be the "FINANCIAL RESULT DATE"), such Stockholder shall not
sell or in any other way alter his risk relative to any shares of Parent Common
Stock received in the Merger (within the meaning of the Codification of
Financial Reporting Policies 201.01 (reprinted in 7 Fed. Sec. L. Rep. (CCH)
72,951)). Each Stockholder understands that Parent will advise it when the
Financial Result Date shall have occurred. Each Stockholder undertakes to
inform the Company and Parent of any transactions involving Company Common Stock
or Parent Common Stock that he may wish to consummate during any time prior to
the Financial Result Date and will not consummate such transaction unless Parent
shall consent thereto in writing.
SECTION 6.03. PUBLIC ANNOUNCEMENTS.
(a) Any public announcement or similar publicity with respect to this
Agreement or the transactions contemplated hereby will be issued, if at all, at
such time and in such manner as Parent determines. Subject to Section 6.03(b)
below and prior to the Effective Time, each of the Stockholders and Parent
shall, and the Stockholders shall cause the Company and its Subsidiaries to,
keep this Agreement and the transactions contemplated hereby strictly
confidential and shall not make any disclosure of this Agreement or the
transactions contemplated hereby to any Person. The parties hereto shall
consult with each other concerning the means by which the Company's employees,
customers and suppliers and other Persons having dealings with the Company will
be informed of the transactions contemplated hereby and Parent will have the
right to be present for any such communication.
(b) Each party hereto acknowledges that, as a publicly traded
company, Parent has disclosure obligations under the federal securities laws
and, depending on the facts and circumstances, may be required to announce the
existence of this Agreement and/or the Merger prior to the Effective Time. If
so required, Parent will first consult with the Company regarding the timing and
contents of any such announcement. Each of the parties hereto further
acknowledges that this Agreement and/or the Merger may constitute material,
non-public information and agrees that it or he shall not, and shall cause its
respective representatives or Affiliates to not, engage in or effect any
transaction of Parent's securities until the Effective Time, subject to the
additional restrictions imposed by the federal securities laws concerning the
purchase or sale of securities.
SECTION 6.04. OBLIGATIONS OF PARENT SUB. Parent shall take all action
necessary to cause Parent Sub to perform its obligations under this Agreement
and to consummate the Merger on the terms and conditions set forth in this
Agreement.
SECTION 6.05. RESTRICTIVE LEGEND. Each of the Stockholders acknowledges
and agrees that the certificates of Parent Common Stock issued to the
Stockholders pursuant to the Merger shall bear a restrictive legend in
substantially the following form and a stop-transfer order may be placed against
their transfer:
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
35
The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended.
The securities have been acquired for investment and may not
be sold, transferred or assigned in the absence of an
effective registration statement for the securities under
the Securities Act of 1933, as amended, or an opinion of
counsel that registration is not required under said Act or
unless sold pursuant to Rule 144.
The legend set forth above shall be removed and Parent shall issue a
certificate without such legend to the holder of the shares of Parent Common
Stock upon which it is stamped, if, unless otherwise required by applicable
state securities laws, (a) the such shares are included in an effective
registration statement under the Securities Act covering the resale thereof, or
(b) such holder provides Parent with an opinion of legal counsel, in form,
substance and scope reasonably acceptable to Parent and its legal counsel, to
the effect that a public sale or transfer of such shares may be made without
registration under the Securities Act and such shares are being sold or
transferred in accordance with the method described therein, or (c) such holder
provides Parent with reasonable assurances that such shares can be sold pursuant
to Rule 144 under the Securities Act (or a successor rule thereto) without any
restriction as to the number of shares acquired as of a particular date that can
then be immediately sold. Each of the Stockholders agrees to sell all of the
shares of Parent Common Stock acquired pursuant to the Merger, including those
represented by a certificate(s) from which the legend has been removed, (x) in
compliance with the prospectus delivery requirements, if any, under applicable
securities Laws, (y) through an investment bank designated by Parent and (z) in
a manner reasonably designed not to affect adversely the market price of the
Parent Common Stock.
SECTION 6.06. ***
SECTION 6.07. DELIVERY OF SEC FILINGS. Parent shall promptly deliver to
the Company or to the Company's counsel a copy of all filings of the Parent SEC
Reports with the SEC, from the date hereof to the Effective Time, or any other
document which Parent deems to be appropriate for provision to the Stockholders.
Upon delivery of any such document by Parent to the Company, the Company shall
promptly deliver to each holder of capital stock of the Company a copy of such
document, including all exhibits thereto, and an officer of the Company shall
promptly provide to Parent an affidavit of delivery of such copies.
SECTION 6.08. TERMINATION OF STOCKHOLDERS' AGREEMENT. Each of the
Stockholders (as applicable) and the Company hereby agree to and approve of the
termination, effective as of immediately before the Effective Time, of: (a) that
certain Amended Stock Transfer Agreement, effective July 1, 1997, by and among
the Company and the Stockholders named therein (as so executed and amended from
time to time, the "STOCKHOLDERS' AGREEMENT"); and (b) any buy-sell or stock
transfer agreement or other agreement or arrangement similar to the
Stockholders' Agreement
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
36
between and among such parties (including, without limitation, the Restrictive
Stock Transfer Agreement dated December 7, 1983, the Stock Transfer Agreement
dated January 2, 1987 and the Amended Stock Transfer Agreement, effective
January 1, 1994).
SECTION 6.09. BEST EFFORTS. The parties hereto shall use their best
efforts to consummate the Merger and the other transactions contemplated hereby
as soon as reasonably practicable after the date of this Agreement. The parties
hereto agree to execute such amendments to this Agreement, the Escrow Agreement
and any other document as may be necessary to enable the Merger to qualify for
"pooling of interests" accounting treatment; provided that such amendments or
documents do not adversely affect such party.
SECTION 6.10. ***
SECTION 6.11. ***
SECTION 6.12. ***
ARTICLE VII
CLOSING CONDITIONS
SECTION 7.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY UNDER THIS
AGREEMENT. The respective obligations of each party to effect the Merger and
the other transactions contemplated herein shall be subject to the satisfaction
at or prior to the Effective Time of the following conditions, any or all of
which may be waived, in whole or in part, to the extent permitted by applicable
Law:
(a) NO ORDER. No Governmental Entity or federal or state court of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(b) CONSENTS AND APPROVALS. All material consents, approvals and
authorizations legally required to be obtained to consummate the Merger shall
have been obtained from all required Governmental Entities.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT. The
obligations of Parent to effect the Merger and the other transactions
contemplated herein are also subject to the
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
37
following conditions, each of which may be waived by Parent, in whole or in
part, to the extent permitted by applicable Law:
(a) REPRESENTATIONS AND WARRANTIES.
(i) Notwithstanding any due diligence performed by Parent and
the Parent Representatives, each of the representations and warranties of the
Company contained in this Agreement shall be true and correct when made and on
and as of the Effective Time, as if made on and as of such date, except where
failure to be so true and correct would not have a Company Material Adverse
Effect, individually or in the aggregate, and except that those representations
and warranties which address matters only as of a particular date shall remain
true and correct as of such date, except where the failure to be so true and
correct would not have a Company Material Adverse Effect. Parent shall have
received a certificate of the President of the Company to such effect; and
(ii) Notwithstanding any due diligence performed by Parent and
the Parent Representatives, each of the representations and warranties of the
Stockholders contained in this Agreement shall be true and correct when made and
on and as of the Effective Time, as if made on and as of such date, except that
those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date.
(b) AGREEMENTS AND COVENANTS. The Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. Parent shall have received a certificate of the President or
Chief Financial Officer of the Company to that effect.
(c) "POOLING OF INTERESTS". The Merger shall qualify for "pooling of
interests" accounting treatment and Parent shall have received a letter, dated
as of the Effective Time, from Ernst & Young LLP regarding such firm's
concurrence with Parent's conclusion as to the appropriateness of "pooling of
interests" accounting treatment for the Merger under Accounting Principles Board
Opinion No. 16 if the Merger is closed and consummated in accordance with this
Agreement.
(d) THIRD PARTY CONSENTS AND WAIVERS. The Company shall have
obtained consents and waivers, in form and substance reasonably satisfactory to
Parent, in respect of the Contracts or agreements set forth on SCHEDULE 7.02(d).
(e) COMPANY MATERIAL ADVERSE EFFECT. The Company shall not have
become subject to any action or event which resulted in or may likely result in
a Company Material Adverse Effect.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
38
(f) LEGAL OPINION. Parent shall have received the legal opinion of
Xxxx Xxxx Xxxxxx & Darko, LLP, covering the matters set forth on EXHIBIT
7.02(f)
hereto.
(g) AFFILIATE AGREEMENTS. Parent shall have received from each
Affiliate of the Company and any other Person who may be deemed to have become
an Affiliate of the Company (under Rule 145 under the Securities Act or
otherwise under applicable SEC accounting releases with respect to "pooling of
interests" accounting treatment) after the date of this Agreement and or prior
to the Effective Time a signed Affiliate Agreement in the form of EXHIBIT
7.02(g). Each such Affiliate agrees to execute and deliver similar Affiliate
Agreements upon the reasonable request of Parent (or any of its Subsidiaries or
Affiliates) in connection with future business transactions of Parent (or any of
its Subsidiaries or Affiliates).
(h) EMPLOYMENT AGREEMENTS. Xxxxxxx X. Xxxxx and Xxxx X. Xxxx shall
execute the employment agreements (the "EMPLOYMENT AGREEMENTS") in the
respective forms attached hereto as EXHIBIT 7.02(h)(i) and EXHIBIT 7.02(h)(ii).
(i) NONCOMPETITION AGREEMENTS. Each of Xxxxxxx X. Xxxxx and
Xxxx X. Xxxx shall execute the noncompetition agreement in the form attached
hereto as EXHIBIT 7.02(i).
(j) SPOUSAL CONSENTS. Parent shall have obtained from each of the
spouses of the Stockholders, respectively, the executed consent, in the form
attached hereto as EXHIBIT 7.02(j), in respect of the consummation of the Merger
and the transactions contemplated by this Agreement.
(k) ***
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger and the other transactions
contemplated in this Agreement is subject to the following conditions, each of
which may be waived, in whole or in part, to the extent permitted by applicable
Law, by the Company:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties of Parent and Parent Sub contained in this Agreement shall be true
and correct when made and on and as of the Effective Time as if made on and as
of such date, except where the failure to be so true and correct would not have
a Parent Material Adverse Effect, and except that those representations and
warranties which address matters only as of a particular date shall remain true
and correct as of such date, except where the failure to be so true and correct
would not have a Parent Material
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
39
Adverse Effect. The Company shall have received a certificate of the President
of Parent to such effect.
(b) AGREEMENTS AND COVENANTS. Parent shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it on or prior to the
Effective Time. The Company shall have received a certificate of the President
of Parent to that effect.
(c) PARENT MATERIAL ADVERSE EFFECT. Parent shall not have become
subject to any action or event which resulted in or may likely result in a
Parent Material Adverse Effect.
(d) LEGAL OPINION. The Company shall have received the legal opinion
of Xxxxx & XxXxxxxx, covering the matters set forth on EXHIBIT 7.03(d).
ARTICLE VIII
TERMINATION, AMENDMENT, WAIVER AND INDEMNIFICATION
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of Parent and the Company;
(b) by Parent, upon a material breach of any covenant or agreement on
the part of the Company set forth in this Agreement;
(c) by the Company, upon a material breach of any covenant or
agreement on the part of Parent or Parent Sub set forth in this Agreement;
(d) by either Parent or the Company, if there shall be any order of a
Governmental Entity which is final and nonappealable preventing the consummation
of the Merger;
(e) by Parent, upon a material breach of a representation and
warranty made by the Company or the Stockholders which has resulted in a Company
Material Adverse Effect, or which constitutes a material breach of any
representation and warranty set forth in Article IIIA; or
(f) by the Company, upon a material breach of a representation and
warranty made by Parent which has resulted in a Parent Material Adverse Effect.
SECTION 8.02. INVESTIGATION. Notwithstanding any of the foregoing, the
right of any party hereto to terminate this Agreement pursuant to Section 8.01
shall remain operative and in full
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
40
force and effect regardless of any investigation made by or on behalf of any
party hereto, any Person controlling any such party or any of their respective
officers or directors, whether prior to or after the execution of this
Agreement.
SECTION 8.03. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto (in the case of the
Stockholders, by a number of Stockholders who are entitled to receive or have
received, in the aggregate, *** of the shares of Parent Common Stock to be
issued hereby at the Effective Time if prior to the Effective Time, or a
majority of the shares of Parent Common Stock issued hereby if subsequent to the
Effective Time).
SECTION 8.04. WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party hereto, in whole or in part, by a
waiver or renunciation of the claim or right unless in writing signed by the
other party or parties hereto (in the case of the Stockholders, by a number of
Stockholders who are entitled to receive or have received, in the aggregate, ***
of the shares of Parent Common Stock to be issued hereby at the Effective Time
if prior to the Effective Time, or a majority of the shares of Parent Common
Stock issued hereby if subsequent to the Effective Time); (b) no waiver that may
be given by a party hereto will be applicable except in the specific instance
for which it is given; and (c) no notice to or demand on one party will be
deemed to be a waiver of any obligation of such party or of the right of the
party giving such notice or demand to take further action without notice or
demand as provided in this Agreement or the documents referred to in this
Agreement. All rights and remedies existing under this Agreement are in
addition to, and not exclusive of, any rights or remedies otherwise available.
SECTION 8.05. ***
SECTION 8.06. STOCKHOLDER INDEMNIFICATION, HOLD BACK AND ESCROW.
(a) Each of the *** Stockholders jointly and severally shall ***
indemnify and defend each of Parent and Parent Sub, and hold it harmless,
from and against any and all losses, damages, Liabilities, claims, demands,
judgments,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
41
settlements, costs and expenses of any nature whatsoever (including
reasonable attorneys' fees) (collectively, "LOSS"), resulting from or arising
out of any: (i) breach of any representation or warranty or agreement of the
Company or any Stockholder contained herein; or (ii) Liability of the
Company, whether or not addressed by a representation or warranty, which was
*** created incurred or arose from facts, events, conditions or circumstances
existing on or before the Effective Time (provided that the items listed on
SCHEDULE 3.08 shall be deemed to be incurred in the Ordinary Course of
Business) *** no claim for indemnification pursuant to this Section 8.06(a)
may be made subsequent to the date which is *** after the Effective Time or
in respect of a Loss in respect of accounts receivable or for which Parent
has otherwise been previously reimbursed by the Stockholders.
(b) (i) If any third party shall notify Parent with respect to any
third party claim (a "THIRD PARTY CLAIM") that may give rise to a Loss, then
Parent shall promptly notify the Stockholders' Representative thereof in
writing; PROVIDED, HOWEVER, that no delay on the part of Parent in notifying the
Stockholders' Representative shall relieve the Stockholders from any obligation
hereunder unless (and then solely to the extent) such Stockholders thereby are
prejudiced.
(ii) The Stockholders will have the right to defend Parent
against the Third Party Claim with counsel of their choice reasonably
satisfactory to Parent, so long as: (A) the Stockholders so notify Parent in
writing within fifteen (15) days, acknowledging that such claim is in respect of
a Loss described in Section 8.06(a); (B) the Third Party Claim involves only
money damages and does not seek an injunction or other equitable relief; (C)
settlement of, or an adverse judgment with respect to, the Third Party Claim is
not, in the good faith judgment of Parent, likely to establish a precedential
custom or practice materially adverse to the continuing business interests of
Parent; and (D) the Stockholders conduct the defense of the Third Party Claim
actively and diligently.
(iii) So long as the Stockholders are conducting the defense of
the Third Party Claim in accordance with Section 8.06(b)(ii), (A) Parent may
retain separate co-counsel at its sole cost and expense and participate in the
defense of the Third Party Claim, (B) Parent will not consent to the entry of
any judgment or enter into any settlement with respect to the Third Party Claim
without the prior written consent of the Stockholders' Representative (which
consent will not be withheld unreasonably); and (C) the Stockholders will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of Parent (which
consent will not be withheld unreasonably).
(iv) In the event that any of the conditions in Section
8.06(b)(ii) is or becomes unsatisfied, (A) Parent may defend against the Third
Party Claim in any manner it reasonably may deem appropriate; PROVIDED, HOWEVER,
that Parent shall not consent to the entry of any judgment or enter into any
settlement or agreement to settle a Third Party Claim without the prior written
consent of the Stockholders' Representative, which consent will not be withheld
unreasonably; (B) Parent shall be reimbursed from the Escrow Account promptly
and periodically for the costs of defending against the Third Party Claim
(including reasonable attorneys' fees and expenses); and (C) the Stockholders
will remain responsible for any Loss that Parent actually suffers resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim to the fullest extent provided in this Section 8.06.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
42
(c) (i) Each Stockholder of the Company hereby agrees that, at the
Effective Time, Parent shall hold back and place into escrow pursuant to the
Escrow Agreement (the "ESCROW ACCOUNT"), a number of Parent Shares equal to ***,
rounded up to the next whole share, of the total number of shares of Parent
Common Stock to be received by such Stockholder (the total value of all such
shares as valued at the Market Price to be collectively referred to as the
"INDEMNIFICATION AMOUNT"), as partial security for such Stockholder's indemnity
obligations herein.
(ii) At any time Parent shall have a claim for indemnification,
Parent shall submit such claim to the Stockholders' Representative and within
thirty (30) calendar days thereof the Stockholders' Representative shall notify
Parent, in writing, whether he agrees with such claim; PROVIDED, HOWEVER, that
in the event that the Stockholders' Representative fails to so notify Parent,
the Stockholders' Representative shall be deemed to have agreed to the release
of securities or cash from the Escrow Account. In the event that the
Stockholders' Representative notifies Parent that he disagrees with such claim,
the Stockholders' Representative shall provide Parent with a written notice
specifying the Basis for such disagreement and, if the Stockholders'
Representative and Parent shall be unable to reach agreement within thirty (30)
days, the matter will be submitted to arbitration pursuant to the terms of
Section 9.11.
(iii) For purposes of calculating quantities of shares to be paid
to Parent pursuant to this Section 8.06, each share of Parent Common Stock shall
be valued at the Market Price at the time described in Section 8.06(c)(iv). Any
and all distributions to and from the Escrow Account shall be allocated among
the Stockholders in accordance with the terms and conditions of this Agreement
(based on each Stockholder's interest in shares of Parent Common Stock to be
issued pursuant to the Merger), as separate subaccounts for each holder.
(iv) ***
(d) For the purposes of this Section 8.06, holders of a majority of
the shares of Parent Common Stock in the Escrow Account may, by written notice
signed by them and delivered to Parent, appoint any other individual to act in
the place and stead of the Stockholders' Representative. In the event of the
death, incapacity or resignation of the Stockholders' Representative, if no such
replacement is appointed within thirty (30) days, Parent may designate an
interim replacement to serve until such appointment.
(e) In connection with this Agreement and the Escrow Agreement and
the transactions contemplated hereby and thereby, respectively, the Company and
the Stockholders agree that the Stockholders' Representative shall not be liable
for any error of judgment or for any act done or omitted by the Stockholders'
Representative in good faith or for any mistake in fact or law, except its own
willful misconduct or gross negligence.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
43
(f) The right to indemnification, payment of damages or other remedy
based on the representations, warranties, covenants and obligations of the
Company and the Stockholders contained herein will not be affected by any
investigation conducted by Parent or the Parent Representatives with respect to,
or any Knowledge acquired (or capable of being acquired) by Parent or the Parent
Representatives, at any time whether before or after the execution and delivery
of this Agreement or the Effective Time, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant or
obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants
and obligations.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
(a) Except as set forth below in Section 9.01(b), the
representations, warranties and agreements of each party hereto shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any other party hereto, any Person controlling any such party or
any of its officers or directors, whether prior to or after the execution of
this Agreement.
(b) The representations, warranties and agreements in this Agreement
shall terminate (i) with respect to the Stockholders and the Company, on the ***
anniversary of the Effective Time and (ii) with respect to Parent and Parent
Sub, *** the Effective Time; PROVIDED, HOWEVER, that the representations,
warranties and agreements set forth in *** shall not so terminate.
SECTION 9.02. 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, mailed or transmitted, and shall be effective
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
changes of address) or sent by electronic transmission to the facsimile number
specified below:
(a) If to Parent or Parent Sub:
DAOU Systems, Inc.
0000 Xxxxxxxx Xxxxx
Xxx Xxxxx, XX 00000
ATTENTION: President and Chief Financial Officer
Facsimile No.: (000) 000-0000
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
44
with a copy to:
Xxxxx & XxXxxxxx
000 Xxxx Xxxxxxxx, Xxxxxxx Xxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
ATTENTION: Xxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
(b) If to the Company:
Technology Management, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000-X
Xxxxxxxxxxxx, XX 00000
ATTENTION: Xxxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Xxxx Xxxx Xxxxxx & Darko, LLP
Bank One Tower
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxxx, XX 00000-0000
ATTENTION: Sydney X. Xxxxxx, Esq.
Facsimile No.: (000) 000-0000
(c) If to the Stockholders:
Technology Management, Inc.
000 Xxxx Xxxxxxxxxx Xxxxxx, Xxxxx 0000-X
Xxxxxxxxxxxx, XX 00000
ATTENTION: Xxxxxxx X. Xxxxx
Facsimile No.: (000) 000-0000
SECTION 9.03. CERTAIN DEFINITIONS. For purposes of this Agreement, the
term:
"AAA" as defined in Section 9.11;
"AFFILIATE" means a Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned Person, except that, in the case of the Company and the
Stockholders, "Affiliate" does not mean any of Systems Integration, Inc.,
MSO/USA, Inc. and The Kent Group, Inc.;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
45
"AGREEMENT" as defined in the preamble to this Agreement;
"ASSETS" means any and all properties and assets (real, personal or mixed,
tangible or intangible) of any Person;
"BALANCE SHEET" as defined in Section 3.07;
"BASIS" means any past or present fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action,
failure to act, or transaction that forms or could form the basis for any
specified consequence;
"BLUE SKY LAWS" as defined in Section 3.05(b);
"BUSINESS DAY" means any day other than a day on which banks in the State
of California are authorized or obligated to be closed;
"CERTIFICATE OF MERGER" as defined in Section 1.02;
"CERTIFICATES" as defined in Section 2.02(b);
"CODE" means the Internal Revenue Code of 1986, as amended;
"COMPANY" as defined in the preamble to this Agreement;
"COMPANY COMMON STOCK" as defined in Section 2.01(a);
"COMPANY EMPLOYEE BENEFIT PLAN" as defined in Section 3.24(a);
"COMPANY MATERIAL ADVERSE EFFECT" means any change or effect that,
individually or when taken together with all other such changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), liabilities, operations or prospects
of the Company at the time of such change or effect. A Company Material Adverse
Effect shall be deemed to exist if there shall occur any event which causes or
may reasonably be expected to cause or result in estimable monetary loss which,
individually or when aggregated with all other events, exceeds ***;
"COMPANY PERMITS" as defined in Section 3.06;
"COMPETING TRANSACTION" means any of the following involving the Company or
any Subsidiary or Affiliate of the Company: (i) any merger, consolidation, share
exchange, business combination, or other similar transaction (other than the
transactions contemplated by this
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
46
Agreement); (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of ten percent (10%) or more of the Assets of the Company in a
single transaction or series of transactions; (iii) any offer (whether cash or
securities) for ten percent (10%) or more of the outstanding shares of capital
stock of the Company; or (iv) any public announcement of a proposal, plan or
intention to do any of the foregoing;
"CONSENT" as defined in Section 2.01A;
"CONTRACT" of any Person means any contract, agreement or instrument of any
type whatsoever (i) to which such Person is a party and by which such Person
either has made a binding undertaking to perform an obligation or is entitled to
any property or right, or (ii) by which any of the Assets of such Person is
bound;
"CONTROL" (including the terms "CONTROLLING," "CONTROLLED," "CONTROLLED BY"
and "UNDER COMMON CONTROL WITH") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of stock or as
trustee or executor, by Contract or credit arrangement or otherwise;
"DELAWARE LAW" as defined in the recitals to this Agreement;
"DISSENTING SHARES" as defined in Section 2.04;
***;
"EFFECTIVE TIME" as defined in Section 1.02;
"EMPLOYEE BENEFIT PLAN" means (a) any bonus, incentive compensation, profit
sharing, retirement, pension, group insurance, death benefit, group health,
medical expense reimbursement, workers' compensation, dependent care, flexible
benefits or cafeteria, stock option, stock purchase, stock appreciation rights,
savings, deferred compensation, consulting, severance pay or termination pay,
vacation pay, life insurance, disability, welfare or other employee benefit or
fringe benefit plan, program or arrangement; or (b) any plan, program or
arrangement which is an Employee Pension Benefit Plan, Employee Welfare Benefit
Plan or Multiemployer Plan.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA Section
3(2);
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA Section
3(1);
"EMPLOYMENT AGREEMENTS" as defined in Section 7.02(h);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
47
"ENCUMBRANCES" means any Security Interests, Liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature whatsoever;
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Occupational Safety and Health
Act of 1970, each as amended, together with all other Laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), concerning pollution or protection of the environment, public
health and safety, or employee health and safety, including Laws relating to
emissions, discharges, releases, or threatened releases of pollutants,
contaminants, or chemical, industrial, hazardous, or toxic materials or wastes
into ambient air, surface water, ground water, or lands or otherwise relating to
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling of pollutants, contaminants, or chemical, industrial,
hazardous, or toxic materials or wastes;
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended;
"ERISA AFFILIATE" means each person (as defined in Section 3(9) of ERISA)
that together with the Company (or any person whose Liabilities the Company has
assumed or is otherwise subject to) would be considered or has been a single
employer under Section 4001(b) of ERISA or would be considered or has been a
member of the same "controlled group," under common control, a member of the
same affiliated service group or otherwise a single employer within the meaning
of Section 414(b), (c), (m) and (o) of the Code (PROVIDED, HOWEVER, that when
the subject of the provision is a Multiemployer Plan only subsections (b) and
(c) of Section 414 of the Code shall be taken into account).
"ESCROW ACCOUNT" as defined in Section 8.06(c);
"ESCROW AGREEMENT" as defined in Section 5.05;
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended;
"EXCHANGE AGENT" as defined in Section 2.02(a);
"EXCHANGE FUND" as defined in Section 2.02(a);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
48
"EXCHANGE RATIO" means, subject to adjustment as set forth in Sections
2.01(b), the quotient obtained from dividing (i) as the numerator of such
quotient, One Million Seventy-Eight Thousand Nine Hundred Sixty-Three shares
of Parent Common Stock, by (ii) as the denominator of such quotient, the
total number of shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time (excluding any Dissenting Shares, if
applicable). All calculations made to determine the Exchange Ratio shall be
made through the fourth decimal place (i.e., rounded to the closest
ten-thousandth);
"EXTREMELY HAZARDOUS SUBSTANCE" has the meaning set forth in Section 302 of
the Emergency Planning and Community Right-to-Know Act of 1986, as amended;
"FAIR MARKET VALUE" of any Asset means the value that would be obtained in
an arm's length transaction between an informed and willing buyer and an
informed and willing seller;
"FINANCIAL RESULT DATE" as defined in Section 6.02;
"FINANCIAL STATEMENTS" as defined in Section 3.07;
"GAAP" means United States generally accepted accounting principles as in
effect from time to time;
"GOVERNMENTAL ENTITIES" as defined in Section 3.05(b);
"HSR ACT" as defined in Section 3.05(b);
***
"INDEMNIFICATION AMOUNT" as defined in Section 8.06(c);
"INDIANA LAW" as defined in the recitals to this Agreement;
"INTELLECTUAL PROPERTY" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all mask works and all
applications, registrations, and renewals in connection therewith, (e) all trade
secrets and confidential business information (including ideas, research and
development, know-how, formulas,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
49
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals), (f) all
computer software (including data and related documentation), (g) all other
proprietary rights, and (h) all copies and tangible embodiments thereof (in
whatever form or medium);
"INTERIM BALANCE SHEET" as defined in Section 3.07;
"INTERIM FINANCIAL STATEMENTS" as defined in Section 3.07;
"KNOWLEDGE" or "KNOWN" means, with respect to a particular fact or other
matter, that (i) an individual should be aware of such fact or other matter or
(ii) such individual could reasonably be expected to discover or otherwise
become aware of such fact or other matter; a Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving, or who has at any time served, as a director,
officer, partner, executor or trustee of such Person (or in any similar
capacity) has, or at any time had, Knowledge of such fact or other matter;
"LAWS" as defined in Section 3.05(a);
"LIABILITIES" as defined in Section 3.08;
"LIEN" means any lien, charge, Encumbrance, mortgage, conditional sale
agreement, title retention agreement, financing lease, pledge or Security
Interest of any kind or type and whether arising by Contract or under Law;
"LOSS" as defined in Section 8.06(a);
***
***
"MARKET PRICE" means the average of the closing prices of the Parent Common
Stock as reported on the Nasdaq National Market Quotation System for the ten
(10) trading days prior to the Effective Time or other date, as applicable;
"MERGER" as defined in the recitals to this Agreement;
"MERGER CONSIDERATION" as defined in Section 2.02(b);
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA Section 3(37);
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
50
"NASDAQ" means The Nasdaq Stock Market, Inc.;
"ORDINARY COURSE OF BUSINESS" with respect to any entity, means the
ordinary course of business consistent with past custom and practice (including
with respect to quantity and frequency) of that entity;
"PARENT" as defined in the preamble to this Agreement;
"PARENT COMMON STOCK" as defined in Section 2.01(a);
"PARENT MATERIAL ADVERSE EFFECT" shall mean any change or effect that,
individually or when taken together with all such other changes or effects, is
or is reasonably likely to be materially adverse to the business, properties,
Assets, condition (financial or otherwise), Liabilities, operations or prospects
of Parent and its Subsidiaries, taken as a whole at the time of such change or
effect. A Parent Material Adverse Effect shall be deemed to exist if there
shall occur any event which causes or may reasonably be expected to cause or
result in estimable monetary loss which, individually or when aggregated with
all other events, exceeds ***;
"PARENT PREFERRED STOCK" as defined in Section 4.03(b);
"PARENT REPRESENTATIVES" as defined in Section 5.04;
"PARENT SEC REPORTS" as defined in Section 4.06(a);
"PARENT SUB" as defined in the preamble to this Agreement;
"PARENT SUB COMMON STOCK" means Parent Sub's common stock, par value $.001
per share;
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, a Governmental Entity (or any
department, agency, or political subdivision thereof) or any other entity;
***;
***;
"RULES" as defined in Section 9.11;
"SEC" means the Securities and Exchange Commission;
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
51
"SECURITIES ACT" means the Securities Act of 1933, as amended;
"SECURITY INTEREST" means any mortgage, pledge, Lien, Encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar Liens, (b) Liens for Taxes not yet due and payable, (c) purchase money
Liens and Liens securing rental payments under capital lease arrangements, and
(d) other Liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money;
***;
"STOCKHOLDERS" as defined in the preamble to this Agreement;
"STOCKHOLDERS' AGREEMENT" as defined in Section 6.08;
"STOCKHOLDERS' REPRESENTATIVE" as defined in Section 5.05;
"SUBSIDIARY" or "SUBSIDIARIES" of the Company, Parent, the Surviving
Corporation or any other Person, means any corporation, partnership, joint
venture or other legal entity of which the Company, Parent, the Surviving
Corporation or such other Person, as the case may be (either alone or through or
together with any other subsidiary), owns, directly or indirectly, fifty percent
(50%) or more of the capital stock or other equity interests which the holders
thereof are generally entitled to vote for the election of the board of
directors or other governing body of such corporation or other legal entity;
"SURVIVING CORPORATION" as defined in Section 1.01;
"TAX" or "TAXES" shall mean any and all taxes, charges, fees or levies,
payable to any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits, gross receipts,
minimum, alternative minimum, estimated, AD VALOREM, value added, sales, use,
service, real or personal property, capital stock, license, payroll,
withholding, disability, employment, social security, workers compensation,
unemployment compensation, utility, severance, excise, stamp, windfall profits,
transfer and capital gains taxes, (ii) custom duties, imposts, charges, levies
or other similar assessments of any kind, and (iii) interest, penalties and
additions to tax imposed with respect thereto;
"TAX RETURN" shall mean any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof;
"THIRD PARTY CLAIM" as defined in Section 8.06(b); and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
52
***
SECTION 9.04. HEADINGS; CONSTRUCTION. 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. All words used in this Agreement
will be construed to be of such gender or number as the circumstances require.
Unless otherwise expressly provided, the word "including" does not limit the
preceding words or terms.
SECTION 9.05. SEVERABILITY. If any term or other provision of this
Agreement is determined to be invalid, illegal or incapable of being enforced by
any rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such determination
that any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties hereto as closely
as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the extent possible.
SECTION 9.06. ENTIRE AGREEMENT; AMENDMENT. This Agreement (together with
the exhibits and schedules) constitutes the entire agreement of the parties and
supersedes all prior agreements and undertakings, both written and oral, between
the parties hereto, or any of them, with respect to the subject matter hereof.
This Agreement may not be amended except by a written agreement executed by the
party to be charged with the amendment.
SECTION 9.07. ASSIGNMENT. This Agreement shall not be assigned by
operation of
law or otherwise except Parent Sub may, without the Company's approval, assign
its interests to a wholly-owned Subsidiary of Parent.
SECTION 9.08. PARTIES IN INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.09. FURTHER ASSURANCES. The parties hereto agree (a) to furnish
upon request to each other such further information, (b) to execute and deliver
to each other such other documents, and (c) to do such other acts and things,
all as another party hereto may reasonably request for the purpose of carrying
out the intent of this Agreement and the documents referred to in this
Agreement.
SECTION 9.10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA,
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
53
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW.
SECTION 9.11. BINDING ARBITRATION. Subject to the arbitration provisions
set forth below, the parties hereto agree that all disputes arising out of or
related to the terms and conditions of this Agreement or to the performance,
breach or termination thereof, shall be submitted to binding arbitration
pursuant to the Expedited Procedures of the Commercial Arbitration Rules (the
"RULES") of the American Arbitration Association (the "AAA"). The arbitration
will take place in San Diego, California at the offices of the AAA. The dispute
will be resolved by a single arbitrator appointed by the AAA in accordance with
the list procedure described in Paragraph 13 of the Rules, except that the AAA
will transmit the list within ten (10) Business Days of the filing of the demand
for arbitration, and the parties thereto will have five (5) Business Days to
return the list to the AAA with their objections and preferences. Discovery
will be limited to no more than seven (7) depositions by each side and written
document requests, requesting the production of specific documents. The parties
to the dispute will voluntarily produce any and all documents that they intend
to use at the hearing before the close of discovery, subject to supplementation
for purposes of rebuttal or good cause shown. The period for taking discovery
will be sixty (60) Business Days, commencing upon the day that the answer is due
under the Rules. The arbitrator will hold a pre-hearing conference within three
(3) Business Days of the close of discovery and will schedule the hearing within
thirty (30) Business Days of the close of discovery. After the arbitrator is
selected, the arbitrator will have sole jurisdiction to hear such applications,
except that any measure ordered by the arbitrator may be immediately and
specifically enforced by a court otherwise having jurisdiction over the parties.
All fees and costs will be allocated to the parties to the arbitration as
determined by the arbitrator. Each party will pay its own fees and costs
associated with the arbitration and each party will pay one-half the estimated
arbitrator's fees up front and if either party fails to do so a default will be
entered against such party solely with respect to such fees. Any determination
of the arbitrator shall be final and binding on the parties hereto. Nothing in
this Agreement will prevent a party hereto from applying to a court that would
otherwise have jurisdiction for provisional or interim injunctive or other
equitable measures.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
54
SECTION 9.12. WAIVER; REMEDIES CUMULATIVE. No failure or delay on the
part of any party hereto in the exercise of any right hereunder shall impair
such right or be construed to be a waiver of, or acquiescence in, any breach of
any representation, warranty or agreement herein, nor shall any single or
partial exercise of any such right preclude other or further exercise thereof or
of any other right. To the maximum extent permitted by applicable Law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
party; (b) no waiver that may be given by a party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one party will be deemed to be a waiver of any obligation of such party or of
the right of the party giving notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement. All rights and remedies existing under this Agreement are in
addition to, and not exclusive of, any rights or remedies otherwise available.
SECTION 9.13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
55
IN WITNESS WHEREOF, the parties hereto have executed or caused this
Agreement to be executed as of the date first written above by their respective
officer thereunto duly authorized.
TECHNOLOGY MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx, President
STOCKHOLDERS OF TECHNOLOGY
MANAGEMENT, INC.
/s/ Xxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxx X. Xxxxx, 190 shares
/s/ Xxxx X Xxxx
--------------------------------------
Xxxx X Xxxx, 190 shares
/s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxx, 25 shares
/s/ Xxxxx X. Xxxxxx
--------------------------------------
Xxxxx X. Xxxxxx, 16 shares
/s/ Xxxxxxx X. Xxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxx, 12 shares
/s/ Xxxxxxxx XxXxxxxx-Xxxx
--------------------------------------
Xxxxxxxx XxXxxxxx-Xxxx, 7 shares
/s/ Xxxx X. Xxxxx
--------------------------------------
Xxxx X. Xxxxx, 1 share
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
56
DAOU SYSTEMS, INC.
By: /s/ Xxxxxx X. Xxxx
--------------------------------------
Xxxxxx X. Xxxx, President
DAOU-TMI, INC.
By: /s/ Xxxxxx X. Xxxx
--------------------------------------
Xxxxxx X. Xxxx, President
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH A *** AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
57