EXHIBIT 2.1
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (THE "MERGER AGREEMENT")
CONTAINS CERTAIN REPRESENTATIONS AND WARRANTIES (THE "REPRESENTATIONS") BY
STARSYS RESEARCH CORPORATION ("STARSYS") AND A KEY SHAREHOLDER OF STARSYS IN
FAVOR OF SPACEDEV, INC. ("SPACEDEV"), AND BY SPACEDEV AND ITS WHOLLY-OWNED
SUBSIDIARY IN FAVOR OF STARSYS. NO PERSON, OTHER THAN THE PARTIES TO THE
AGREEMENT, ARE ENTITLED TO RELY ON THE REPRESENTATIONS CONTAINED IN THE MERGER
AGREEMENT. THE MERGER AGREEMENT IS FILED IN ACCORDANCE WITH THE RULES OF THE
SECURITIES AND EXCHANGE COMMISSION AS A MATERIAL PLAN OF ACQUISITION, AND IS
INTENDED BY SPACEDEV SOLELY AS A RECORD OF THE AGREEMENT REACHED BY THE PARTIES
THERETO. THE FILING OF THE MERGER AGREEMENT IS NOT INTENDED AS A MECHANISM TO
UPDATE, SUPERSEDE OR OTHERWISE MODIFY PRIOR DISCLOSURES OF INFORMATION AND RISKS
CONCERNING SPACEDEV WHICH SPACEDEV HAS MADE TO ITS SHAREHOLDERS.
INVESTORS AND POTENTIAL INVESTORS SHOULD ALSO BE AWARE THAT THE REPRESENTATIONS
ARE QUALIFIED BY INFORMATION IN CONFIDENTIAL DISCLOSURE SCHEDULES THAT STARSYS
HAS DELIVERED TO THE SPACEDEV, AND DISCLOSURE SCHEDULES THAT SPACEDEV HAS
DELIVERED TO STARSYS (THE "DISCLOSURE SCHEDULES"). THE DISCLOSURE SCHEDULES
CONTAIN INFORMATION THAT MODIFIES, QUALIFIES AND CREATES EXCEPTIONS TO THE
REPRESENTATIONS.
INVESTORS AND POTENTIAL INVESTORS SHOULD ALSO BE AWARE THAT CERTAIN
REPRESENTATIONS MADE IN THE MERGER AGREEMENT ARE NOT INTENDED TO BE AFFIRMATIVE
REPRESENTATIONS OF FACTS, SITUATIONS OR CIRCUMSTANCES, BUT ARE INSTEAD DESIGNED
AND INTENDED TO ALLOCATE CERTAIN RISKS BETWEEN SPACEDEV AND ITS WHOLLY-OWNED
SUBSIDIARY, ON THE ONE HAND, AND STARSYS AND ITS KEY SHAREHOLDER, ON THE OTHER
HAND. THE USE OF REPRESENTATIONS AND WARRANTIES TO ALLOCATE RISK IS A STANDARD
DEVICE IN MERGER AGREEMENTS.
ACCORDINGLY, SHAREHOLDERS SHOULD NOT RELY ON THE REPRESENTATIONS AS AFFIRMATIONS
OR CHARACTERIZATIONS OF INFORMATION CONCERNING SPACEDEV OR STARSYS AS OF THE
DATE OF THE MERGER AGREEMENT, OR AS OF ANY OTHER DATE.
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_________________________________________________________
Project Spirit
Acquisition of
Starsys Research Corporation
_________________________________________________________
Agreement and Plan of Merger and Reorganization,
by and among
SpaceDev, Inc.,
Monoceros Acquisition Corp.,
Starsys Research Corporation,
Xxxxx Xxxxxxxx, a Key Shareholder,
And
Xxxxx Xxxxxxxx, as Shareholder Agent
___________________________________
October 24, 2005
___________________________________
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TABLE OF CONTENTS
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Page
----
ARTICLE I THE MERGER 1
Section 1.1 The Merger 1
Section 1.2 Effective Time 2
Section 1.3 Closing 2
Section 1.4 Effects of the Merger 2
Section 1.5 Articles of Incorporation and Bylaws 2
Section 1.6 Directors and Officers 2
ARTICLE II MERGER CONSIDERATION; CANCELLATION OF COMPANY STOCK 2
Section 2.1 Certain Definitions. 2
Section 2.2 Effect on Capital Stock 4
Section 2.3 Loan Repayments. 4
Section 2.4 Shareholder Consideration 5
Section 2.5 Calculation of Performance Consideration 6
Section 2.6 Protective Provisions 8
Section 2.7 Allocation and Distribution of Shareholder Consideration 8
Section 2.8 Adjustments to Parent Common Stock 9
Section 2.9 No Fractional Shares 9
Section 2.10 Surrender of Certificates; Lost, Stolen or Destroyed
Certificates 9
Section 2.11 Stock Options; Stock Bonus Plan 10
Section 2.12 Treasury Stock 10
Section 2.13 Shares of Dissenting Shareholders 10
Section 2.14 Tax Consequences 10
Section 2.15 Accounting Treatment 11
Section 2.16 Withholding Rights 11
Section 2.17 Escrow Account. 11
Section 2.18 Expense Fund. 12
Section 2.19 Company Expense Payments. 12
Section 2.20 Closing Working Capital Deficit Adjustment 13
Section 2.21 Transfer Of Contingent Rights. 13
Section 2.22 Taking of Necessary Action; Further Action 14
ARTICLE III REPRESENTATIONS AND WARRANTIES CONCERNING THE COMPANY 14
Section 3.1 Organization and Qualification. 14
Section 3.2 Subsidiaries. 15
Section 3.3 Capital Structure. 15
Section 3.4 Approval of Transactions. 15
Section 3.5 Authority. 16
Section 3.6 No Conflict. 16
Section 3.7 Consents. 17
Section 3.8 Books and Records. 17
Section 3.9 Company Financial Statements. 17
Section 3.10 No Undisclosed Liabilities. 18
Section 3.11 No Off-Balance Sheet Arrangements. 18
Section 3.12 No Changes. 18
Section 3.13 Tax Matters. 21
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Section 3.14 Restrictions on Business Activities. 22
Section 3.15 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment. 23
Section 3.16 Intellectual Property. 23
Section 3.17 Agreements, Contracts and Commitments. 26
Section 3.18 Government Contracts. 28
Section 3.19 Related Party Transactions. 30
Section 3.20 Compliance with Law; Governmental Authorization. 30
Section 3.21 Litigation. 30
Section 3.22 Accounts Receivable, Customers and Inventory. 30
Section 3.23 Environmental Matters. 31
Section 3.24 Brokers' and Finders' Fees. 32
Section 3.25 Employee Benefit Plans and Compensation. 32
Section 3.26 Insurance. 36
Section 3.27 Relations With Governmental Entities. 36
Section 3.28 Warranties. 36
Section 3.29 Complete Copies of Materials. 36
Section 3.30 Customer Relations. 36
Section 3.31 Equity Ownership. 37
Section 3.32 Form S-4 Information. 37
Section 3.33 Expenses of Sale. 37
Section 3.34 Representations Complete. 37
ARTICLE IV PARENT AND MERGER SUB REPRESENTATIONS AND WARRANTIES 38
Section 4.1 Organization and Qualification. 38
Section 4.2 Subsidiaries. 38
Section 4.3 Power and Authority; Enforceability. 38
Section 4.4 No Conflict. 38
Section 4.5 Consents. 39
Section 4.6 Capitalization. 39
Section 4.7 SEC Filings; Financial Statements. 39
Section 4.8 Form S-4 Information. 40
Section 4.9 No Undisclosed Liabilities. 40
Section 4.10 Valid Issuance. 40
Section 4.11 Merger Sub. 40
Section 4.12 SpaceDev Oklahoma. 41
Section 4.13 Suspension and Trading. 41
Section 4.14 Government Contracts. 41
Section 4.15 Agreements, Contracts and Commitments. 42
Section 4.16 Representations Complete. 43
ARTICLE V COVENANTS RELATED TO CONDUCT OF BUSINESS 43
Section 5.1 Conduct of Business of the Company Until Closing. 43
Section 5.2 Reasonable Efforts and Further Assurances. 45
Section 5.3 Certain Tax Matters. 46
Section 5.4 Access to Information. 46
Section 5.5 No Solicitation. 47
Section 5.6 Public Announcements; Employee Announcements. 47
Section 5.7 Notification of Certain Matters. 47
Section 5.8 Pre-Approval of Certain Transactions. 48
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Section 5.9 Consents to Merger. 48
Section 5.10 Export Licenses. 49
Section 5.11 Petercsak Release. 49
Section 5.12 Preparation of Form S-4 and Proxy Statement. 49
Section 5.13 Parent Shareholders Meeting. 50
Section 5.14 Company Shareholders Meeting. 51
Section 5.15 Financial Statements. 51
Section 5.16 Repayment of Certain Loans and Advances. 51
Section 5.17 Private Financing. 51
ARTICLE VI CONDITIONS TO CLOSING 52
Section 6.1 Conditions to Obligations of Each Party Under This Agreement 52
Section 6.2 Additional Conditions to the Obligations of Parent 52
Section 6.3 Additional Conditions to the Obligations of the Company 55
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 56
Section 7.1 Survival of Representations, Warranties and Covenants. 56
Section 7.2 Indemnification; Escrow Account; Expense Fund. 58
Section 7.3 Limitation on Indemnification. 59
Section 7.4 Indemnification Procedures. 60
Section 7.5 Shareholder Agent. 63
Section 7.6 Resolution of Conflicts. 63
Section 7.7 No Contribution. 64
Section 7.8 Fraud; Willful Misrepresentation. 64
Section 7.9 Exclusive Remedies. 64
Section 7.10 Purchase Price Adjustment. 64
ARTICLE VIII POST-CLOSING COVENANTS 64
Section 8.1 Parent Board of Directors 64
Section 8.2 Separate Books and Records. 64
Section 8.3 Operation of Surviving Corporation. 64
Section 8.4 Sale of Surviving Corporation. 65
Section 8.5 Stock Options. 65
Section 8.6 Capital Investments. 65
Section 8.7 Continuity of Business Enterprise. 66
Section 8.8 Attorney-Client Privilege. 66
ARTICLE IX EMPLOYEES 66
Section 9.1 Retaining Employees. 66
Section 9.2 Employee Benefit Arrangements. 66
Section 9.3 No Benefit to the Company Employees Intended. 66
ARTICLE X TERMINATION 66
Section 10.1 Circumstances for Termination. 66
Section 10.2 Effect of Termination. 67
ARTICLE XI MISCELLANEOUS 67
Section 11.1 Entire Agreement. 67
Section 11.2 Parties In Interest. 68
Section 11.3 Assignment; Amendment. 68
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Section 11.4 Notices 68
Section 11.5 Specific Performance. 69
Section 11.6 Submission to Jurisdiction; No Jury Trial; Service of
Process. 69
Section 11.7 Time. 70
Section 11.8 Counterparts. 70
Section 11.9 Governing Law. 70
Section 11.10 Expenses. 70
Section 11.11 Certain Taxes. 70
Section 11.12 Extensions; Waiver. 70
Section 11.13 Severability. 71
Section 11.14 Incorporation of Exhibits and Disclosure Schedules. 71
Section 11.15 Titles and Headings. 71
Section 11.16 Facsimile Execution. 71
Section 11.17 Construction. 71
Section 11.18 Definitions. 72
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TABLE OF EXHIBITS AND SCHEDULES
-------------------------------
EXHIBIT A-1 Form of Company Voting Agreement
EXHIBIT A-2 Form of Parent Voting Agreement
EXHIBIT B Form of Statement of Merger
EXHIBIT C Form of Letter of Transmittal
EXHIBIT D-1 Form of Legal Opinion of Holland & Xxxx LLP
EXHIBIT D-2 Form of Legal Opinion of Sheppard, Mullin, Xxxxxxx &
Hampton, LLP
EXHIBIT E-1 Form of Officers' Certificate - Company
EXHIBIT E-2 Form of Key Shareholder's Certificate
EXHIBIT E-3 Form of Officer's Certificate - Parent
EXHIBIT F Form of Non-Competition Agreement
EXHIBIT G Form of Xxxxxxxx Executive Employment Agreement
EXHIBIT H Form of Standstill and Lock-Up Agreement
EXHIBIT I Form of Executive Officer Release
EXHIBIT J Form of Parent Approval of Proposed Transaction
SCHEDULE 2.20(a) Sample Working Capital Deficit Calculation
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INDEX OF DEFINED TERMS
----------------------
ACCOUNTING DISPUTE . . . . . . . . . . . . . 7
ACCOUNTING REFEREE . . . . . . . . . . . . . 7
ACCOUNTS RECEIVABLE. . . . . . . . . . . . . 72
ACTION . . . . . . . . . . . . . . . . . . . 73
ACTUAL KNOWLEDGE . . . . . . . . . . . . . . 73
AFFILIATE. . . . . . . . . . . . . . . . . . 73
AGREEMENT. . . . . . . . . . . . . . . . . . 1
AMEND. . . . . . . . . . . . . . . . . . . . 73
APPLICABLE TIME. . . . . . . . . . . . . . . 73
APPROVED CONTRACT. . . . . . . . . . . . . . 53
APPROVED TRANSACTION . . . . . . . . . . . . 48
BASKET AMOUNT. . . . . . . . . . . . . . . . 59
BEST EFFORTS . . . . . . . . . . . . . . . . 73
BREACH . . . . . . . . . . . . . . . . . . . 73
CAPITAL INVESTMENTS. . . . . . . . . . . . . 65
CAPITAL LEASE OBLIGATION . . . . . . . . . . 73
CAPITALIZATION ADJUSTMENT. . . . . . . . . . 2
CASH EARNOUT . . . . . . . . . . . . . . . . 2
CBCA . . . . . . . . . . . . . . . . . . . . 1
CERCLA . . . . . . . . . . . . . . . . . . . 74
CERTIFICATES . . . . . . . . . . . . . . . . 9
CLAIM NOTICE . . . . . . . . . . . . . . . . 57
CLOSING. . . . . . . . . . . . . . . . . . . 2
CLOSING BALANCE SHEET. . . . . . . . . . . . 13
CLOSING CONSIDERATION. . . . . . . . . . . . 74
CLOSING DATE . . . . . . . . . . . . . . . . 2
CLOSING DEBT . . . . . . . . . . . . . . . . 74
CODE . . . . . . . . . . . . . . . . . . . . 74
COMMITMENT . . . . . . . . . . . . . . . . . 74
COMPANY. . . . . . . . . . . . . . . . . . . 1
COMPANY AUTHORIZATIONS . . . . . . . . . . . 30
COMPANY BOARD RESOLUTIONS. . . . . . . . . . 15
COMPANY COMMON STOCK . . . . . . . . . . . . 74
COMPANY CONTRACT . . . . . . . . . . . . . . 74
COMPANY EMPLOYEE PLAN. . . . . . . . . . . . 74
COMPANY EXPENSE PAYMENTS . . . . . . . . . . 74
COMPANY INFORMATION. . . . . . . . . . . . . 74
COMPANY INTELLECTUAL PROPERTY. . . . . . . . 74
COMPANY LICENSES . . . . . . . . . . . . . . 74
COMPANY OPTION HOLDERS . . . . . . . . . . . 10
COMPANY OPTION PLAN. . . . . . . . . . . . . 15
COMPANY OPTIONS. . . . . . . . . . . . . . . 15
COMPANY PRODUCTS . . . . . . . . . . . . . . 75
COMPANY SHAREHOLDERS MEETING . . . . . . . . 51
COMPANY SOFTWARE . . . . . . . . . . . . . . 75
COMPANY TRANSACTION EXPENSES . . . . . . . . 37
COMPANY VOTING AGREEMENTs. . . . . . . . . . 1
COMPENSATION COMMITTEE . . . . . . . . . . . 65
COMPETING PARTY. . . . . . . . . . . . . . . 47
COMPETING TRANSACTION. . . . . . . . . . . . 47
CONFIDENTIAL INFORMATION . . . . . . . . . . 75
CONFLICT . . . . . . . . . . . . . . . . . . 16
CONSENT. . . . . . . . . . . . . . . . . . . 75
CONSIDERATION RECEIVED . . . . . . . . . . . 59
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CONTRACT . . . . . . . . . . . . . . . . . . 75
COPYRIGHTS . . . . . . . . . . . . . . . . . 75
CURRENT BALANCE SHEET. . . . . . . . . . . . 75
CURRENT BALANCE SHEET DATE . . . . . . . . . 75
CUSTOMER INFORMATION . . . . . . . . . . . . 23
DEBT . . . . . . . . . . . . . . . . . . . . 75
DEFENDING PARTY. . . . . . . . . . . . . . . 63
DISCLOSING PARTY . . . . . . . . . . . . . . 76
DISSENTING SHAREHOLDER . . . . . . . . . . . 76
DISSENTING SHARES. . . . . . . . . . . . . . 76
EARNOUT PERIOD . . . . . . . . . . . . . . . 64
EBITDA . . . . . . . . . . . . . . . . . . . 3
EBITDA RATIO . . . . . . . . . . . . . . . . 3
EBITDA TARGET. . . . . . . . . . . . . . . . 3
EFFECTIVE TIME . . . . . . . . . . . . . . . 2
EMPLOYEE . . . . . . . . . . . . . . . . . . 76
EMPLOYEE AGREEMENT . . . . . . . . . . . . . 76
EMPLOYEE BENEFIT PLAN. . . . . . . . . . . . 76
EMPLOYEE PENSION PLAN. . . . . . . . . . . . 76
ENCUMBRANCE. . . . . . . . . . . . . . . . . 76
ENFORCEABLE. . . . . . . . . . . . . . . . . 76
ENTITY . . . . . . . . . . . . . . . . . . . 76
ENVIRONMENT. . . . . . . . . . . . . . . . . 77
ENVIRONMENTAL LAW. . . . . . . . . . . . . . 77
ENVIRONMENTAL PROPERTY . . . . . . . . . . . 77
ENVIRONMENTAL RELEASE. . . . . . . . . . . . 77
ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES 77
EQUIPMENT. . . . . . . . . . . . . . . . . . 23
EQUITY INTEREST. . . . . . . . . . . . . . . 77
ERISA. . . . . . . . . . . . . . . . . . . . 78
ESCROW ACCOUNT . . . . . . . . . . . . . . . 11
ESCROW AGENT . . . . . . . . . . . . . . . . 78
ESCROW AGREEMENT . . . . . . . . . . . . . . 11
ESCROW PERIOD. . . . . . . . . . . . . . . . 11
ESCROW STOCK . . . . . . . . . . . . . . . . 11
ESCROW TERMINATION DATE. . . . . . . . . . . 78
EVENT. . . . . . . . . . . . . . . . . . . . 78
EXCHANGE ACT . . . . . . . . . . . . . . . . 78
EXCHANGE AGENT . . . . . . . . . . . . . . . 9
EXCLUDED SOFTWARE. . . . . . . . . . . . . . 78
EXECUTIVE EMPLOYMENT AGREEMENT . . . . . . . 55
EXPENSE FUND . . . . . . . . . . . . . . . . 12
EXPENSES . . . . . . . . . . . . . . . . . . 70
FACILITIES . . . . . . . . . . . . . . . . . 78
FIDUCIARY. . . . . . . . . . . . . . . . . . 78
FINANCIAL PROJECTIONS. . . . . . . . . . . . 38
FINANCIALS . . . . . . . . . . . . . . . . . 78
FOREIGN EXPORT AND IMPORT LAWS . . . . . . . 78
FORM S-4 . . . . . . . . . . . . . . . . . . 78
FY 2005. . . . . . . . . . . . . . . . . . . 78
FY 2006. . . . . . . . . . . . . . . . . . . 78
FY 2007. . . . . . . . . . . . . . . . . . . 78
GAAP . . . . . . . . . . . . . . . . . . . . 78
GOVERNMENT . . . . . . . . . . . . . . . . . 78
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GOVERNMENT CONTRACT. . . . . . . . . . . . . 79
GOVERNMENTAL BODY. . . . . . . . . . . . . . 79
GOVERNMENTAL PERMIT. . . . . . . . . . . . . 79
GUARANTEE. . . . . . . . . . . . . . . . . . 79
HAZARDOUS ACTIVITY . . . . . . . . . . . . . 79
HAZARDOUS MATERIALS. . . . . . . . . . . . . 79
INDEBTEDNESS . . . . . . . . . . . . . . . . 79
INDEMNIFIED PARTY. . . . . . . . . . . . . . 57
INDEMNIFYING PARTY . . . . . . . . . . . . . 58
INTELLECTUAL PROPERTY RIGHTS . . . . . . . . 79
INTERCREDITOR AGREEMENT. . . . . . . . . . . 79
INVENTORIES. . . . . . . . . . . . . . . . . 31
IRS. . . . . . . . . . . . . . . . . . . . . 79
JAMS . . . . . . . . . . . . . . . . . . . . 63
KEY SHAREHOLDERS . . . . . . . . . . . . . . 1
KNOWLEDGE. . . . . . . . . . . . . . . . . . 80
LAW. . . . . . . . . . . . . . . . . . . . . 80
LEASE. . . . . . . . . . . . . . . . . . . . 80
LETTER OF TRANSMITTAL. . . . . . . . . . . . 9
LIABILITY. . . . . . . . . . . . . . . . . . 80
LIABLE . . . . . . . . . . . . . . . . . . . 80
LICENSE. . . . . . . . . . . . . . . . . . . 80
LIEN . . . . . . . . . . . . . . . . . . . . 80
LOSSES . . . . . . . . . . . . . . . . . . . 80
XXXX . . . . . . . . . . . . . . . . . . . . 80
MASK WORK. . . . . . . . . . . . . . . . . . 81
MATERIAL . . . . . . . . . . . . . . . . . . 81
MATERIAL ADVERSE EFFECT. . . . . . . . . . . 81
MATERIAL COMPANY CONTRACT. . . . . . . . . . 81
MATERIAL COUNTERPARTY. . . . . . . . . . . . 48
MATERIAL CUSTOMERS . . . . . . . . . . . . . 36
MATERIAL EXCLUDED SOFTWARE . . . . . . . . . 81
MATERIAL INTELLECTUAL PROPERTY RIGHTS. . . . 81
MATERIAL INTEREST. . . . . . . . . . . . . . 81
MATERIALS OF ENVIRONMENTAL CONCERN . . . . . 81
MERGER . . . . . . . . . . . . . . . . . . . 1
MERGER CONSENT . . . . . . . . . . . . . . . 48
MERGER CONSIDERATION . . . . . . . . . . . . 82
MERGER SUB . . . . . . . . . . . . . . . . . 1
MULTIEMPLOYER PLAN . . . . . . . . . . . . . 82
NET REVENUES . . . . . . . . . . . . . . . . 3
NET REVENUES RATIO . . . . . . . . . . . . . 3
NET REVENUES TARGET. . . . . . . . . . . . . 3
NON-COMPETITION AGREEMENT. . . . . . . . . . 55
OCCUPATIONAL SAFETY AND HEALTH LAW . . . . . 82
OPTION ELIGIBLE EMPLOYEE . . . . . . . . . . 65
ORDER. . . . . . . . . . . . . . . . . . . . 82
ORDINARY COURSE OF BUSINESS. . . . . . . . . 82
ORGANIZATIONAL DOCUMENTS . . . . . . . . . . 82
OTCBB. . . . . . . . . . . . . . . . . . . . 82
OTHER IP . . . . . . . . . . . . . . . . . . 82
OUTSIDE DATE . . . . . . . . . . . . . . . . 67
OWNED RIGHTS . . . . . . . . . . . . . . . . 82
PARENT . . . . . . . . . . . . . . . . . . . 1
PARENT COMMON STOCK. . . . . . . . . . . . . 82
PARENT DISCLOSURE SCHEDULES. . . . . . . . . 38
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PARENT FORM 10-Q . . . . . . . . . . . . . . 39
PARENT INDEMNIFIED PARTY . . . . . . . . . . 58
PARENT INDEMNIFYING PARTY. . . . . . . . . . 58
PARENT SHAREHOLDERS MATTERS. . . . . . . . . 49
PARENT SHAREHOLDERS MEETING. . . . . . . . . 50
PARENT VOTING AGREEMENTs . . . . . . . . . . 1
PARTY. . . . . . . . . . . . . . . . . . . . 1
PATENTS. . . . . . . . . . . . . . . . . . . 82
PERFORMANCE CONSIDERATION. . . . . . . . . . 5
PERFORMANCE CONSIDERATION TABLE. . . . . . . 3
PERFORMANCE DISPUTE NOTICE . . . . . . . . . 6
PERFORMANCE PERIODS. . . . . . . . . . . . . 3
PERSON . . . . . . . . . . . . . . . . . . . 82
POST SIGNING RETURNS . . . . . . . . . . . . 46
PRINCIPAL MARKET . . . . . . . . . . . . . . 3
PRIVATE FINANCING. . . . . . . . . . . . . . 82
PROHIBITED TRANSACTION . . . . . . . . . . . 82
PROPERTY . . . . . . . . . . . . . . . . . . 83
PROPOSED TRANSACTION . . . . . . . . . . . . 48
PROPRIETARY INFORMATION. . . . . . . . . . . 83
PRORATION PERCENTAGE . . . . . . . . . . . . 3
PROSECUTING PARTY. . . . . . . . . . . . . . 63
PROXY STATEMENT. . . . . . . . . . . . . . . 83
RECEIVING PARTY. . . . . . . . . . . . . . . 83
REGISTERED INTELLECTUAL PROPERTY RIGHTS. . . 83
REJECTED CONTRACT. . . . . . . . . . . . . . 53
RELATED AGREEMENT. . . . . . . . . . . . . . 83
RELATED PARTY. . . . . . . . . . . . . . . . 83
REMEDIAL ACTION. . . . . . . . . . . . . . . 83
REPRESENTATIVE . . . . . . . . . . . . . . . 84
RESTRICTED TERRITORY . . . . . . . . . . . . 84
SEC. . . . . . . . . . . . . . . . . . . . . 84
SECURITIES . . . . . . . . . . . . . . . . . 84
SECURITIES ACT . . . . . . . . . . . . . . . 84
SECURITY INTEREST. . . . . . . . . . . . . . 84
SHARE AUTHORIZATION. . . . . . . . . . . . . 49
SHAREHOLDER. . . . . . . . . . . . . . . . . 85
SHAREHOLDER AGENT. . . . . . . . . . . . . . 1
SHAREHOLDER CLOSING CONSIDERATION. . . . . . 84
SHAREHOLDER CONSIDERATION. . . . . . . . . . 84
SHAREHOLDER INDEMNIFIED PARTY. . . . . . . . 58
SHAREHOLDER LOAN . . . . . . . . . . . . . . 84
SHAREHOLDER PERFORMANCE CONSIDERATION. . . . 5
SHAREHOLDER TABLE. . . . . . . . . . . . . . 17
SOFTWARE . . . . . . . . . . . . . . . . . . 85
SPACEDEV . . . . . . . . . . . . . . . . . . 1
SPACEDEV LOAN. . . . . . . . . . . . . . . . 85
STANDSTILL AND LOCK-UP AGREEMENT . . . . . . 55
STARSYS. . . . . . . . . . . . . . . . . . . 1
STARSYS FINANCIAL STATEMENTS . . . . . . . . 6
STOCK BONUS PLAN . . . . . . . . . . . . . . 85
STOCK EARNOUT. . . . . . . . . . . . . . . . 3
SUBSIDIARY . . . . . . . . . . . . . . . . . 85
TANGIBLE PERSONAL PROPERTY . . . . . . . . . 85
TAX. . . . . . . . . . . . . . . . . . . . . 85
TAX RETURN . . . . . . . . . . . . . . . . . 86
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TECHNOLOGY . . . . . . . . . . . . . . . . . 86
THIRD-PARTY LICENSE. . . . . . . . . . . . . 86
THREAT OF RELEASE. . . . . . . . . . . . . . 86
TRADE SECRET . . . . . . . . . . . . . . . . 86
TRADEMARK. . . . . . . . . . . . . . . . . . 86
TRADING DAY. . . . . . . . . . . . . . . . . 3
TRANSACTION. . . . . . . . . . . . . . . . . 87
TRANSACTION DOCUMENT . . . . . . . . . . . . 87
TRANSACTION EXPENSE PAYMENT SCHEDULE . . . . 12
TRANSFER . . . . . . . . . . . . . . . . . . 86
TREASURY REGULATION. . . . . . . . . . . . . 87
TRIGGER CONDITIONS . . . . . . . . . . . . . 4
TWENTY DAY VWAP. . . . . . . . . . . . . . . 4
U.S. EXPORT AND IMPORT LAWS. . . . . . . . . 87
UPDATED DISCLOSURE SCHEDULES . . . . . . . . 87
UPDATED PARENT DISCLOSURE SCHEDULES. . . . . 87
VECTRA . . . . . . . . . . . . . . . . . . . 87
VECTRA LOAN. . . . . . . . . . . . . . . . . 87
VWAP . . . . . . . . . . . . . . . . . . . . 4
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (together with all
Schedules and Exhibits hereto, this "AGREEMENT") is made and entered into as of
October 24, 2005, by and among (i) SpaceDev, Inc., a Colorado corporation
(together with its successors and permitted assigns, "PARENT" or "SPACEDEV"),
(ii) Monoceros Acquisition Corp., a Colorado corporation and a wholly-owned
subsidiary of Parent (together with its successors and permitted assigns,
"MERGER SUB"), (iii) Starsys Research Corporation, a Colorado corporation
(together with its successors, the "COMPANY" or "STARSYS"), (iv) Xxxxx Xxxxxxxx,
an individual resident of the State of Colorado, and any other key shareholder
of the Company identified on the signature pages hereof (collectively, the "KEY
SHAREHOLDERS"), and (v) Xxxxx Xxxxxxxx, as agent for the shareholders of the
Company (including the Key Shareholders) (together with its successors in such
capacity, the "SHAREHOLDER AGENT"). Parent, Merger Sub, the Company, the
Shareholder Agent and the Key Shareholders are individually referred to as a
"PARTY" and collectively as the "PARTIES". Capitalized terms shall have the
respective meanings ascribed thereto in Section 11.18 or elsewhere in this
Agreement.
R E C I T A L S
---------------
A. This Agreement contemplates a merger of the Company with and into Merger
Sub (the "MERGER"), with Merger Sub being the surviving corporation. In such
Merger, one hundred percent (100%) of the issued and outstanding shares of
capital stock of the Company will be converted into the right to receive cash
and shares of Common Stock of Parent (as set forth in Article II), on the terms
and subject to the conditions set forth in this Agreement.
B. The Parties desire to make certain representations and warranties and
other agreements in connection with the Merger as set forth in this Agreement.
C. Concurrently with the execution and delivery of this Agreement, as
material inducements of the several Parties to enter into this Agreement, (i)
each Key Shareholder is executing and delivering to Parent a (1) Voting
Agreement, substantially in the form attached hereto as Exhibit A-1 (the
"COMPANY VOTING AGREEMENTS"), (2) a Proxy relating to shares of Company Common
Stock, substantially in the form attached to the Company Voting Agreement, and
(3) a Proxy relating to shares of Parent Common Stock, substantially in the form
attached to the Company Voting Agreement, and (ii) each director of Parent
holding not less than 1% of the outstanding shares of Parent Common Stock is
executing and delivering to the Company a (x) Voting Agreement, substantially in
the form attached hereto as Exhibit A-2 (the "PARENT VOTING AGREEMENTS"), and
(y) a Proxy, substantially in the form attached to the Parent Voting Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants contained herein, the Parties, intending to be legally bound,
hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. At the Effective Time, subject to and upon the
terms and conditions of this Agreement and in accordance with the applicable
provisions of the Colorado Business Corporation Act (the "CBCA"), the Company
shall be merged with and into Merger Sub, the separate corporate existence of
the Company shall cease, and Merger Sub shall continue as the surviving
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corporation and as a wholly-owned Subsidiary of Parent (together with its
successors, the "SURVIVING CORPORATION").
Section 1.2 Effective Time. Subject to the provisions of this Agreement,
the Company, Parent and Merger Sub shall cause the Merger to be consummated by
filing a Statement of Merger in substantially the form attached hereto as
Exhibit B (the "STATEMENT OF MERGER"), in accordance with the relevant
provisions of the CBCA, as soon as practicable after the Closing Date, such
filing to be made no later than three business days after the Closing). The
Merger shall become effective upon the filing of the Statement of Merger with
the Secretary of State of the State of Colorado (the "EFFECTIVE TIME").
Section 1.3 Closing. The closing of the Merger (the "CLOSING") shall take
place at the offices of Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP, 00000 Xxxx
Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx, 00000-0000, commencing at 10:00
a.m. local time on December 12, 2005, or such other later date which shall not
be more than two (2) business days after the date on which the last of the
conditions in Article VI has been satisfied or waived or at such other time,
date and place as Parent and Company may mutually determine (the "CLOSING
DATE"), and in no event later than the Outside Date specified in Section
10.1(d)(2).
Section 1.4 Effects of the Merger. The Merger shall have the effects set
forth in this Agreement, the Statement of Merger and the applicable provisions
of the CBCA. Without limiting the generality of the foregoing, subject to any
provisions hereof expressly disclaiming the assumption of any Liabilities, at
the Effective Time, all of the properties, rights, privileges and powers of
Merger Sub and the Company shall vest in the Surviving Corporation, and all
Liabilities of Merger Sub and the Company shall become the Liabilities of the
Surviving Corporation.
Section 1.5 Articles of Incorporation and Bylaws. The Articles of
Incorporation and Bylaws of Merger Sub immediately prior to the Effective Time
shall be the Articles of Incorporation and Bylaws of the Surviving Corporation
after the Effective Time (except that the name of the Surviving Corporation
shall be "Starsys Research Corporation") until thereafter amended.
Section 1.6 Directors and Officers. Unless otherwise determined by Parent
prior to the Effective Time, Merger Sub's directors and officers immediately
prior to the Effective Time shall be the Surviving Corporation's initial
directors and officers and shall hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until their successors are
duly elected or appointed and qualified or until their earlier death,
resignation or removal.
ARTICLE II
MERGER CONSIDERATION;
CANCELLATION OF COMPANY STOCK
Section 2.1 Certain Definitions. The following terms, whenever used in this
Article II, shall have the meanings ascribed to them below or in the referenced
Sections of this Article II:
"CAPITALIZATION ADJUSTMENT" means an adjustment based on any stock split,
reverse stock split, combination, consolidation or reclassification of, or any
stock dividend on, the Parent Common Stock, the recapitalization of Parent, or
any like change.
"CASH EARNOUT" means, with respect to any Performance Period, an amount of
cash calculated as set forth in the "Cash Earnout" column in the Performance
Consideration Table for such Performance Period.
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"EBITDA" means, subject to Section 2.6, consolidated net income before
interest income, interest expense, income Taxes, depreciation and amortization
of the Surviving Corporation.
"EBITDA RATIO" means, with respect to any Performance Period, the lesser of
(a) 1.0, and (b) the quotient of (x) EBITDA of the Surviving Corporation for
such Performance Period, divided by (y) the EBITDA Target for such Performance
Period.
"EBITDA TARGET" means, with respect to any Performance Period, the amount
listed in the "EBITDA Target" column in the Performance Consideration Table for
such Performance Period.
"NET REVENUES" means, with respect to any Performance Period and subject to
Section 2.6, gross sales revenues of the Surviving Corporation in such
Performance Period, after adjustment for normal and customary trade, quantity
and cash discounts and sales returns and allowances, consistent with past
practices of the Company or approved by the Shareholder Agent (such approval not
to be unreasonably withheld or conditioned), including (A) those granted on
account of price adjustments, billing errors, rejected goods, returns, rebates
or similar payments, (B) administrative and other fees and xxxx-xxxxx-ments and
similar payments to wholesalers and other distributors, buying groups and other
institutions, (C) allowances, rebates and fees paid to distributors, and (D)
chargebacks.
"NET REVENUES RATIO" means, with respect to any Performance Period, the
lesser of (a) 1.0, and (b) the quotient of (x) Net Revenues of the Surviving
Corporation for such Performance Period, divided by (y) the Net Revenues Target
for such Performance Period.
"NET REVENUES TARGET" means, with respect to any Performance Period, the
amount listed in the "Net Revenues Target" column in the Performance
Consideration Table for such Performance Period.
"PERFORMANCE CONSIDERATION TABLE" means the table set forth immediately
succeeding Section 2.4(c).
"PERFORMANCE PERIODS" means each of FY 2005, FY 2006 and FY 2007.
"PRINCIPAL MARKET" means the Nasdaq National Market, the Nasdaq Capital
Market, the OTCBB, the American Stock Exchange or the New York Stock Exchange,
whichever is at the time the principal trading exchange, market or inter-dealer
or automated quotation system for the Parent Common Stock and, for purposes of
calculating VWAP, for which Bloomberg Financial, L.P. publishes the necessary
reports.
"PRORATION PERCENTAGE" means, with respect to any Performance Period, a
percentage equal to:
[ 60% (EBITDA Ratio for such Performance Period - 0.8) x 5 ] +
[ 40% (Net Revenues Ratio for such Performance Period - 0.8 ) x 5 ] .
"STOCK EARNOUT" means, with respect to any Performance Period, a number of
shares of Parent Common Stock calculated as set forth in the "Stock Earnout"
column in the Performance Consideration Table for such Performance Period.
"TRADING DAY" means any day other than a Saturday or a Sunday on which the
Principal Market is open for trading in equity securities.
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"TRIGGER CONDITIONS" means, with respect to any
Performance Period, each of the following conditions: (i) the Net Revenues of
the Surviving Corporation for such Performance Period is equal to or greater
than 80% of the Net Revenues Target for such Performance Period, and (ii) the
EBITDA of the Surviving Corporation for such Performance Period is equal to or
greater than 80% of the EBITDA Target for such Performance Period.
"TWENTY DAY VWAPTWENTY DAY VWAP" means, with respect to any date of
determination, the arithmetic mean of the VWAP for the twenty (20) consecutive
Trading Days ending on such date or, if such date is not a Trading Day, the next
preceding Trading Day.
"VWAP" means, with respect to any Trading Day, the volume weighted average
price of the Parent Common Stock on such Trading Day (equal to the aggregate
sales price of all trades of Parent Common Stock during such Trading Day on the
Principal Market divided by the total number of shares of Common Stock traded
during such Trading Day on the Principal Market), as reported by Bloomberg
Financial, L.P. using the AQR function.
Section 2.2 Effect on Capital Stock. At the Effective Time, because of the
Merger and without any further action on the part of Parent, Merger Sub or the
Company:
(a) Common Stock of Merger Sub. Each share of the common stock of Merger
Sub issued and outstanding immediately prior to the Effective Time shall remain
a validly issued, fully paid, and non-assessable share of common stock of Merger
Sub.
(b) Common Stock of the Company. At the Effective Time and subject to the
Dissenting Shareholders' rights set forth in Section 2.13, each share of the
Company Common Stock, issued and outstanding immediately prior to the Effective
Time shall automatically be canceled and retired and shall cease to exist, and
the holder of a stock certificate that, immediately prior to the Effective Time,
represented outstanding shares of Company Common Stock shall cease to have any
rights with respect thereto, except the right to receive, upon the surrender of
such certificates (or delivery of the affidavit and bond, if any, specified in
Section 2.10(e)) and upon the terms and subject to the conditions set forth in
this Article II and elsewhere in this Agreement, the Shareholder Consideration
to be distributed to holders of Company Common Stock as provided in this Article
II and elsewhere in this Agreement (including the deposit of a portion of such
Shareholder Consideration into the Escrow Account and the Expense Fund, as
provided in Section 2.17 and Section 2.18, respectively).
(c) Stock Transfer Books. After the Effective Time, the Company's stock
transfer books shall be closed and there shall be no further Transfers of
Company Common Stock. If, at or after the Effective Time, certificates
represented outstanding shares of Company Common Stock are presented to the
Surviving Corporation, they shall be canceled and exchanged in accordance with
this Agreement.
Section 2.3 Loan Repayments. At Closing, Parent shall (i) pay off the
remaining principal and interest of the Vectra Loans and any other amounts due
and owing to Vectra, (ii) cancel and terminate the SpaceDev Loan and related
Secured Promissory Note; provided that any representations, warranties or
agreements therein which by their terms survive the termination of the SpaceDev
Loan or such Secured Promissory Note, as the case may be, shall survive such
cancellation and termination, and (iii) pay off each Shareholder Loan in full;
provided that Parent shall have no obligation to pay more than $4,600,000 in the
aggregate to pay off in full all of the Vectra Loans and Shareholder Loans,
including all Liabilities in respect thereof; and, provided, further, that if
Parent shall not have paid off the Vectra Loans at Closing as required, Parent
shall tender Vectra a guaranty of the Vectra Loans, in form and substance
reasonably satisfactory to Vectra, in exchange for Vectra releasing the Xxxxx
Xxxxxxxx guaranty.
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Section 2.4 Shareholder Consideration. In consideration for 100% of the
issued and outstanding Company Common Stock, Parent shall, subject to the terms
and conditions of this Article II and elsewhere in this Agreement, including the
Dissenting Shareholders proviso and retention rights of Section 2.7, the
withholding provisions of Section 2.16, if applicable, the escrow provisions of
Section 2.17, the expense fund provisions of Section 2.18 and the retention and
set-off rights provided with respect to Key Shareholders in Article VII, pay and
distribute the following Shareholder Consideration:
(a) $1,500,000 (subject to reduction pursuant to Section 2.20) in cash,
less the aggregate amount of funds payable to the Shareholder Agent at Closing
for the payment of Company Transaction Expenses in accordance with Section 2.19;
to be delivered at Closing by wire transfer of immediately available funds to
the Exchange Agent;
(b) a number of shares of Parent Common Stock equal to the quotient of (x)
$7,500,000 (subject to reduction pursuant to Section 2.20), divided by (y) the
greater of (1) $1.40 (subject to Capitalization Adjustments, if any), and (2)
the lesser of (A) $1.90 (subject to Capitalization Adjustments, if any), and (B)
the Twenty Day VWAP as of the Trading Day next preceding the Closing Date; less
the number of shares deliverable to the Shareholder Agent at Closing for the
satisfaction of Company Transaction Expenses in accordance with Section 2.19, to
be delivered at Closing by delivery of appropriate share certificates evidencing
such number of shares to the Exchange Agent; and
(c) subject to the Surviving Corporation satisfying each Trigger Condition
for a Performance Period (it being understood and agreed that, except to the
extent set forth in Section 2.5(d), no performance consideration shall be earned
or paid in respect of such Performance Period if any of the Trigger Conditions
is not fully satisfied), performance consideration in respect of such
Performance Period, as provided in Section 2.5, consisting of Cash Earnout and
Stock Earnout (the "Performance Consideration"), less the number of shares
deliverable to the Shareholder Agent in respect of such Performance Period for
the satisfaction of Company Transaction Expenses in accordance with Section 2.19
(the Performance Consideration, as so reduced, the "Shareholder Performance
Consideration"); to be delivered within ten (10) days after Parent and the
Shareholder Agent agree on the calculation thereof, or if no agreement is
reached, after the conclusion of any dispute resolution pursuant to Section
2.5(c), by wire transfer of Cash Earnout (if any), and by delivery of
appropriate share certificates evidencing the Stock Earnout (if any), to the
Exchange Agent.
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PERFORMANCE CONSIDERATION TABLE
-------------------------------
PERFORMANCE PERIOD NET REVENUES TARGET EBITDA TARGET CASH EARNOUT STOCK EARNOUT
FY 2005 $21,500,000 $250,000 $350,000 x The number of shares of Parent Common Stock
Proration equal to $3,000,000 multiplied by the Proration
Percentage Percentage and divided by the greater of (a)
Twenty Day VWAP as of the Trading Day immediately
preceding the date of the audit opinion for the
Starsys Financial Statements for FY 2005, and
(b) $2.00 per share (subject to Capitalization
Adjustments, if any).
FY 2006 $22,500,000 $2,000,000 $350,000 x The number of shares of Parent Common Stock
Proration equal to $7,500,000 multiplied by the Proration
Percentage Percentage and divided by the greater of (a) Twenty
Day VWAP as of the Trading Day immediately
preceding the date of the audit opinion for the
Starsys Financial Statements for FY 2006, and
(b) $2.50 per share (subject to Capitalization
Adjustments, if any).
FY 2007 $24,000,000 $2,500,000 $350,000 x The number of shares of Parent Common Stock equal
Proration to $7,500,000 multiplied by the Proration Percentage
Percentage and divided by the greater of (a) Twenty Day VWAP as
of the Trading Day immediately preceding the
date of the audit opinion for the Starsys Financial
Statements for FY 2007, and (b) $3.00 per share
(subject to Capitalization Adjustments, if any).
Section 2.5 Calculation of Performance Consideration. The determination of
Performance Consideration (if any) for any Performance Period, shall be subject
to the following provisions:
(a) Following the end of each Performance Period, Parent shall have
separate audited financial statements for the Surviving Corporation (or a
successor Person or business unit contemplated by Section 8.2) prepared in
accordance with GAAP, subject to the guidelines set forth in Section 2.6 (the
"Starsys Financial Statements"). Upon receipt of the Starsys Financial
Statements, Parent shall promptly calculate the Performance Consideration (if
any) for such Performance Period and shall promptly (and in no event later than
the date Parent files its annual report on Form 10-KSB or Form 10-K (or
successor form thereto) with the SEC covering the end of such Performance
Period) deliver the Starsys Financial Statements and such calculation to the
Shareholder Agent.
(b) If within thirty (30) days following receipt of the Starsys Financial
Statements and the Performance Calculation, the Shareholder Agent has not given
Parent a written notice setting forth in reasonable detail its objection to
Parent's calculation of the Performance Consideration and the reasons therefor
(the "Performance Dispute Notice"), then the Shareholder Agent shall be deemed
to agree thereto and such calculation shall be binding and conclusive on the
Parties and all Shareholders. The Shareholder Agent may waive this thirty (30)
day period by providing Parent with written notice of its agreement with
Parent's calculation of the Performance Consideration, whereupon such
calculation shall be binding and conclusive on the Parties and all Shareholders.
(c) If the Shareholder Agent delivers to Parent a Performance Dispute
Notice within the thirty (30) day period specified in Section 2.5(b), Parent and
Shareholder Agent shall use their respective commercially reasonable efforts for
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a period of ten (10) days after Parent's receipt of the Performance Dispute
Notice (or such longer period as Parent and Shareholder Agents shall mutually
agree) to resolve any disputes raised by Shareholder Agent. If at the end of
such period the Shareholder Agent and Parent fail to agree on the calculation of
the Performance Consideration:
(1) if the dispute relates solely to the calculation of EBITDA, the
Net Revenues, Cash Earnout, the Stock Earnout or other accounting matters,
and not to any other matters (an "Accounting Dispute"), the Shareholder
Agent shall promptly engage an independent accounting firm to review the
disputed calculations and to propose what such firm determines to be the
correct calculations, based on the terms and provisions of this Agreement,
to Parent and the Shareholder Agent. If the Shareholder Agent and Parent
still fail to agree on the calculation of the Performance Consideration,
Parent and the Shareholder Agent shall negotiate in good faith to select a
reputable independent auditing firm, other than Parent's independent public
accounting firm, the Company's accounting firm prior to the Closing or the
independent accounting firm engaged by the Shareholder Agent as aforesaid
(the "ACCOUNTING REFEREE"); provided that if Parent and the Shareholder
Agent are unable to agree on an Accounting Referee, the Accounting Referee
shall be selected by the Audit Committee of the Board of Directors of
Parent (subject to the aforesaid qualifications and disqualifications).
Parent and the Shareholder Agent shall engage the Accounting Referee
promptly to review the remaining disputed calculations and to deliver a
report containing what the Accounting Referee determines to be the correct
calculations, based on the terms and provisions of this Agreement, to
Parent and the Shareholder Agent. The fees and costs of the Accounting
Referee shall be borne by (i) Parent, if the Accounting Referee's
calculations increase the aggregate value of the Cash Earnout and the Stock
Earnout by more than 5%; and (ii) the Shareholder Agent, otherwise; or
(2) if the dispute is not solely an Accounting Dispute, the
calculation of the Performance Consideration shall be submitted to dispute
resolution under Section 7.6 (as if the dispute had arisen under Section
7.4(b)(1) and Parent were the Indemnified Party) (it being agreed that the
arbitrator in any arbitration shall consider applying the procedures
applicable to Accounting Disputes to resolve any disputed accounting
matters brought before such arbitrator).
(d) Notwithstanding anything to the contrary in this Section 2.5, in the
event that in any Performance Period Parent materially breaches any of the
covenants applicable to it in Section 8.2, Section 8.4 or Section 8.5 (it being
agreed that any reduction in the number of shares of Parent Common Stock to be
reserved or granted pursuant to Section 8.5 shall be deemed to be material), or
breaches any of the covenants applicable to it Section 8.6 (any of the foregoing
breaches, an "Earn-Out Breach"), and such breach shall not have been cured
within 30 days of written notice thereof by the Shareholder Agent, specifying in
reasonable detail the nature thereof, the Performance Consideration for such
Performance Period shall be the full amount available to the Shareholders in
respect of such Performance Period (that is, all Trigger Conditions will be
deemed satisfied and the Proration Percentage will be deemed to be 1.0, but the
payment date therefor and the denominator used in the Performance Consideration
Table to calculate the Stock Earnout shall not be affected thereby; provided
that in the event of a material breach of Section 8.4, (i) the payment date for
all remaining Performance Periods shall be accelerated to the date 90 days after
the closing of the applicable sale, and (ii) the denominator used in the
Performance Consideration Table to calculate the Stock Earnout shall be based on
the date of the closing, except that the minimum per-share price for calculating
the Stock Earnout for each remaining Performance Period shall be the respective
minimum per-share price applicable to such Performance Period, as set forth in
the Performance Consideration Table). The remedy set forth in this Section
2.5(d) (i) shall not be available with respect to any particular Earn-Out Breach
if the Shareholder Agent brings a claim pursuant to Section 7.4(b)(2) for such
Earn-Out Breach, and (ii) if obtained, shall be the sole and exclusive remedies
of the Parties, the Shareholder Agent and the Shareholders (including the Key
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Shareholders) with respect to any claim relating to any Earn-Out Breaches,
including any previous or subsequent Earn-Out Breaches (it being understood and
agreed that Parent shall be entitled to recover, including by set-off against
amounts otherwise to be paid under this Section 2.5(d), any amounts previously
paid on account of any prior Earn-Out Breaches).
(e) The amount of the Performance Consideration (if any) determined
pursuant to this Section 2.5 shall be binding and conclusive on the Parties and
all Shareholders.
Section 2.6 Protective Provisions. The Parties hereto agree that, following
the Closing and until the end of the final Performance Period, the determination
of Net Revenues and EBITDA shall be computed in accordance with the following
guidelines:
(a) there shall be no charge to EBITDA for any transactional costs of
Parent in completing this Merger, other than expenses incurred by Parent in
respect of the review by Parent's independent public accounting firm of the
Company's interim financial statements for FY 2005;
(b) Parent corporate, management, compliance and other general
administrative overhead shall be allocated to the Surviving Corporation in a
reasonable and equitable manner;
(c) Parent's compensation to Xxxxx Xxxxxxxx consistent with his
compensation level at the date of this Agreement shall be considered an expense
of the Surviving Corporation;
(d) any services provided by Parent to the Surviving Corporation and
vice-versa will be at burdened cost incurred for such services, if applicable;
(e) no effect will be given for any change in accounting methods for the Company
and the Surviving Corporation from those utilized as of the date of this
Agreement;
(f) indemnification amounts recovered by the Surviving Corporation pursuant
to Article VII shall not be considered income of the Surviving Corporation;
(g) no effect will be given for any writedown or writeoff of goodwill of
the Surviving Corporation;
(h) for the purpose of calculating the Net Revenues and EBITDA of the
Surviving Corporation, the allocation of costs and revenues on cooperative or
joint contracts involving the joint sale of products or services of both Parent
and the Surviving Corporation will be negotiated in advance in good faith as if
the agreements were arm's-length; and
(i) a portion of Parent's audit fees will be allocated to the Surviving
Corporation for the expenses of auditing the Surviving Corporation's financial
statements, which amount shall equal for each Performance Period the arithmetic
mean of the aggregate accounting and auditing fees paid by the Company in
respect of the two fiscal years immediately preceding the Closing.
Section 2.7 Allocation and Distribution of Shareholder Consideration.
Subject to Section 2.12, Section 2.16, Section 2.17, Section 2.18, and other
provisions of this Article II, the Shareholder Consideration shall be allocated
among all pre-Closing shareholders of the Company pro rata according to the
respective number of shares of Company Common Stock held by each such
shareholder immediately prior to the Effective Time. Parent (and, to the extent
applicable, the Shareholder Agent) shall deliver the Shareholder Consideration
to the Exchange Agent for distribution to such shareholders, provided that
Parent may (i) retain any consideration in respect of any Dissenting
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Shareholders for distribution pursuant to Section 2.13 or for paying any
settlement, award or judgment of any Actions relating to such shareholder's
Dissenting Shares, and (ii) retain or refrain from issuing, as the case may be,
any consideration forfeited or assigned to Parent pursuant to the terms of any
Non-Competition Agreements.
Section 2.8 Adjustments to Parent Common Stock. The number of shares of
Parent Common Stock issuable hereunder and held in escrow (pursuant to Section
2.17 and the Escrow Agreement) shall be appropriately adjusted to fully reflect
the effect of any Capitalization Adjustment after the date hereof.
Section 2.9 No Fractional Shares. No fractional shares of Parent Common
Stock shall be issued in the Merger and in lieu thereof any fractional share
shall be rounded up to the nearest whole share of Parent Common Stock.
Section 2.10 Surrender of Certificates; Lost, Stolen or Destroyed
Certificates.
(a) Exchange Agent. Continental Stock Transfer & Trust Co. (or such other
Person as Parent may appoint as transfer agent for the Parent Common Stock or
exchange agent for purposes hereof from time to time) shall serve as the
exchange agent (the "EXCHANGE AGENT") for the Merger.
(b) Exchange Procedures. As promptly as practicable after the Effective
Time, to the extent any holder of record of any certificates which, immediately
prior to the Effective Time, represented outstanding shares of Company Common
Stock (the "CERTIFICATES"), has not already delivered a letter of transmittal
substantially in the form attached as Exhibit C (a "LETTER OF TRANSMITTAL"),
which provides, inter alia, for a release of all claims from such shareholder
qua shareholder against the Company, Merger Sub and Parent, at the Closing,
Parent shall cause the Exchange Agent to mail to each holder of record of any
Certificates whose Company Common Stock was converted into the right to receive
shares of Parent Common Stock pursuant to this Article II, a Letter of
Transmittal. Upon surrender of a Certificate to the Exchange Agent for exchange
(or the delivery of the affidavit and bond, if any, specified in Section
2.10(e)), together with a duly executed Letter of Transmittal and such other
documents as may be reasonably required by the Exchange Agent, the Exchange
Agent shall (i) deliver to the holder of such Certificate a certificate
representing the number of shares of Parent Common Stock that such holder has
the right to receive as Shareholder Closing Consideration pursuant to this
Article II, and (ii) deliver to the Escrow Agent under the Escrow Agreement on
behalf of such holder a certificate in the name of the Escrow Agent with respect
to the portion of the Escrow Shares that such holder has placed in escrow
pursuant to this Article II.
(c) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to Parent
Common Stock with a record date after the Effective Time but prior to the
surrender of a Certificate (or the delivery of the affidavit and bond, if any,
specified in Section 2.10(e)) will be paid to the holder of such Certificate in
respect of the shares of Parent Common Stock exchangeable therefor.
(d) Transfers of Ownership. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which the Certificates
surrendered in exchange therefor is registered, it will be a condition of the
issuance thereof that the Certificates so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the Person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a certificate for shares of
Parent Common Stock in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Parent or any
agent designated by it that such tax has been paid or is not payable.
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(e) Lost Stock Certificates. If any Certificate shall have been lost,
stolen, or destroyed, Parent shall deliver the applicable portion of the
Shareholder Consideration exchangeable therefor only upon (i) the making of an
affidavit of that fact by the holder thereof claiming such Certificate to be
lost, stolen, or destroyed, including the form of affidavit included in the
Letter of Transmittal, and (ii) if Parent reasonably requires, the posting by
such holder of a bond in such reasonable amount as Parent may direct as
indemnity against any claim that may be made against it with respect to such
Certificate.
Section 2.11 Stock Options; Stock Bonus Plan. The Company shall notify all
holders of options to purchase Company Common Stock issued under the Company
Option Plan and all other Commitments to acquire Company Common Stock (the
"COMPANY OPTION HOLDERS") of the need to exercise such options or Commitments on
or prior to the Closing Date and that such options and Commitments will
terminate as of the Effective Time in accordance with the Company Option Plan.
All such options and Commitments that are not exercised prior to the Effective
Time shall be cancelled, retired and extinguished and shall terminate and expire
as of the Effective Time and the Company shall take all actions necessary to
timely effectuate such termination. The Company shall terminate its Stock Bonus
Plan and distribute the assets thereof prior to the Effective Time. Neither
Parent nor the Surviving Corporation shall assume, become responsible for or
otherwise assume any obligations with respect to, any outstanding options,
warrants or other Commitments to purchase or otherwise acquire capital stock of
the Company or the Stock Bonus Plan, and no consideration shall be delivered or
deliverable in respect thereof. The Company shall cause Company Option Holders
who exercise their options or Commitments prior to the Closing Date to execute a
Letter of Transmittal together with an addendum thereto prior to the Closing,
which addendum shall ratify, affirm and approve each of the actions taken by the
shareholders of the Company at the Company Shareholders Meeting.
Section 2.12 Treasury Stock. All shares of capital stock of the Company
held on the treasury of the Company immediately prior to the Effective Time
shall be cancelled, retired and extinguished without any conversion thereof, and
no consideration shall be delivered or deliverable in exchange therefor.
Section 2.13 Shares of Dissenting Shareholders. Notwithstanding anything in
this Agreement to the contrary, as and if applicable, Dissenting Shares that are
issued and outstanding immediately prior to the Effective Time shall not be
converted into or be exchangeable for the right to receive the Shareholder
Consideration unless and until the corresponding Dissenting Shareholders shall
have failed to perfect or shall have effectively withdrawn or lost their
dissenter's rights under the CBCA or other applicable Law, and until such time
Parent shall retain the Shareholder Consideration otherwise payable in respect
of such Dissenting Shares. If any Dissenting Shareholder shall have failed to
perfect or shall have effectively withdrawn or lost such right, the applicable
Dissenting Shares shall thereupon be treated as though such shares of Company
Common Stock had been converted into and become exchangeable for the right to
receive, as of the Effective Time, the appropriate share of the Shareholder
Consideration as provided in Section 2.7 from the Shareholder Consideration
retained by Parent. The Company shall give Parent: (a) prompt notice of any
notice of dissenters' rights with respect to any shares of Company Common Stock
or attempted withdrawals of such notices and any other instruments served
pursuant to the CBCA or other applicable Law and received by the Company
relating to the Dissenting Shareholders' dissenters' rights, and (b) the
opportunity to direct, in its reasonable business judgment, all negotiations and
proceedings with respect to exercise of such dissenters' rights. Neither the
Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any such exercise of dissenters' rights.
Section 2.14 Tax Consequences. For federal income tax purposes, the Merger
is intended to constitute a reorganization within the meaning of Section 368 of
the Code.
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Section 2.15 Accounting Treatment. For accounting purposes, the Merger is
intended to be treated as a "purchase."
Section 2.16 Withholding Rights. Each of the Surviving Corporation, Parent
and the Exchange Agent shall be entitled to deduct and withhold from the
Shareholder Consideration otherwise payable pursuant to this Agreement to a
Shareholder such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code and the rules and regulations
promulgated thereunder, or any provision of a Tax Law. To the extent that
amounts are withheld from the Shareholder Consideration as provided in this
Article II, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Shareholder in respect to which such
deduction and withholding was made.
Section 2.17 Escrow Account.
(a) At the Closing, Parent shall deliver to the Escrow Agent, on behalf of
the Shareholders, stock certificates evidencing a number of shares equal to 50%
of the number of shares of Parent Common Stock issuable at Closing pursuant to
Section 2.4(b) (without taking into account any shares deliverable to the
Shareholder Agent at Closing for the satisfaction of Company Transaction
Expenses in accordance with Section 2.19). If any Performance Consideration is
payable for FY 2005, Parent shall deliver to the Escrow Agent on behalf of the
Shareholders stock certificates evidencing a number of shares equal to 50% of
the number of shares of Parent Common Stock issuable as Stock Earnout for FY
2005 (without taking into account any shares deliverable to the Shareholder
Agent at Closing for the satisfaction of Company Transaction Expenses in
accordance with Section 2.19).
(b) Subject to the obligation to fund the Expense Fund pursuant to Section
2.18, Parent shall cause the Escrow Agent to deposit any shares of Parent Common
Stock delivered to the Escrow Agent from time to time pursuant to Section
2.17(a) ("ESCROW STOCK") into an escrow account with the Escrow Agent (the
"ESCROW ACCOUNT") for the purpose of securing the indemnification obligations
set forth in Article VII, which Escrow Account shall be subject to the terms and
provisions of Section 7.2 and the Escrow Agreement. The Escrow Agent shall
maintain the Escrow Account for such purpose until ten days after the date of
the audit opinion for the Starsys Financial Statements for FY 2006 (the "ESCROW
PERIOD"); provided, however, that in the event any Indemnified Parties have made
any claims under Article VII prior to the end of the Escrow Period, the Escrow
Period and the release of any Escrow Stock shall be tolled, and a number of
shares having an aggregate value up to the maximum aggregate amount of such
claims shall remain in the Escrow Account as security and not be released to the
Shareholders, until all such claims shall have been fully and finally resolved
and settled.
(c) Releases of Escrow Stock from the Escrow Account shall be subject to
the terms and conditions of an Escrow Agreement (the "ESCROW AGREEMENT") and
Section 2.9. In the event that this Agreement is adopted by the Shareholders,
then all Shareholders shall, without further act of any Shareholder, be deemed
to have consented to and approved (i) the terms and conditions of the Escrow
Agreement, (ii) the use of the Escrow Account as collateral to secure the rights
of the Indemnified Parties under Article VII in the manner set forth herein and
in the Escrow Agreement, and (iii) the appointment of the Shareholder Agent as
the representative under the Escrow Agreement of the Shareholders receiving
shares of Parent Common Stock under this Agreement and as the attorney-in-fact
and agent for and on behalf of each such Person (other than holders of
Dissenting Shares).
(d) The terms and provisions of the Escrow Agreement shall be in the form
reasonably agreed by Parent, the Company and the Escrow Agent prior to the
filing of the Form S-4, consistent with the terms and provisions hereof, and
shall provide, among other standard and customary terms for agreements of its
type and nature, that (i) shares of Parent Common Stock claimed by Parent
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pursuant to Article VII shall be valued at the per-share value calculated
pursuant to Section 2.4(b) or Section 2.4(c), as applicable, (ii) claims against
shares of Parent Common Stock held in the Escrow Account shall be satisfied
against shares in the order delivered to the Escrow Account, and (ii) no shares
of Parent Common Stock held in the Escrow Account or Expense Fund may be
released or otherwise Transferred prior to the date 270 days after the Closing,
except for shares of Parent Common Stock claimed by Parent pursuant to Article
VII.
Section 2.18 Expense Fund.
(a) Funding. At the Closing, Parent shall deliver to the Escrow Agent, on
behalf of the Shareholders, out of the shares of Parent Common Stock to be
delivered to the Escrow Agent at the Closing pursuant to Section 2.17(a), a
number of shares of Parent Common Stock having a value equal to $100,000, with
such shares being valued at their VWAP as of the Trading Day next preceding the
Closing Date, for deposit into a separate escrow account with the Escrow Agent
(the "EXPENSE FUND"), to be held pursuant to the Escrow Agreement free and clear
of any lien or other claim of any creditor of any of the Parties.
(b) Use of Fund. The Escrow Agent shall maintain the Expense Fund solely
for the purposes of paying the out-of-pocket fees and expenses, including
independent accounting firm fees and attorneys' fees, reasonably incurred by the
Shareholder Agent in connection with performing and exercising its duties,
rights and responsibilities hereunder on behalf of the Shareholders. The Expense
Fund may be released, in whole or in part, solely upon written authority of the
Shareholder Agent. The Shareholder Agent may withdraw funds from the Expense
Fund only upon certification that such funds shall be used strictly in
accordance with the terms and provisions of this Section 2.18 and the Escrow
Agreement. The Expense Fund shall be deemed to have been withheld from each
Shareholder in proportion to amounts allocable to Shareholders pursuant to
Section 2.7.
(c) Closing. The Shareholder Agent shall close and liquidate the Expense
Fund, and cause any remaining shares in the Expense Fund to be deposited or
transferred to the Escrow Account for distribution in accordance with the terms
thereof, upon the latest to occur of (i) the final determination of the
Performance Consideration (if any) for the final Performance Period, (ii) the
Escrow Termination Date, and (iii) the final determination of any pending claim
for indemnification under Article VII.
(d) Illiquidity. The Shareholder Agent expressly acknowledges that the
shares of Parent Common Stock delivered to the Expense Fund will be illiquid for
a substantial period of time after the Closing and that Parent has no obligation
whatsoever, express or implied, to provide liquidity, or to waive any transfer
restrictions otherwise applicable to such shares.
Section 2.19 Company Expense Payments.
(a) Prior to the Closing, the Company shall deliver to Parent an itemized
schedule of Company Transaction Expenses to be paid at Closing or out of the
Performance Consideration (if any), which shall include all Company Transaction
Expenses as of the Closing Date and be reasonably satisfactory to Parent (the
"TRANSACTION EXPENSE PAYMENT SCHEDULE"), indicating for each cost or expense
itemized therein (A) the payee thereof, (B) the amount thereof, if any, to be
paid in cash, (C) and the amount thereof, if any, to be paid with shares of
Parent Common Stock, such amount to be specified either as a number of shares
or, in the case of Performance Consideration, a specified percentage of the
Stock Earnout (if any); provided that (i) the aggregate amount of Company
Transaction Expenses to be paid (1) in cash at Closing may not exceed the amount
of cash available for distribution under Section 2.4(a) (after giving effect to
any reduction pursuant to Section 2.20), (2) in cash and shares of Parent Common
Stock (using the per-share value calculated pursuant to Section 2.4(b)) at
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Closing may not exceed $2,000,000, (3) in shares of Parent Common Stock out of
Performance Consideration shall not exceed 1% of the Stock Earnout (if any), and
(4) in cash and shares of Parent Common Stock (using the per-share value
calculated pursuant to Section 2.4(c)) out of Performance Consideration may not
exceed $250,000, and (ii) each payee receiving more than an aggregate of 50,000
shares of Parent Common Stock in connection with the Closing and the first
Performance Period shall have duly executed and delivered to Parent a Standstill
and Lock-Up Agreement; provided that with respect to any such payee receiving
less than 50,000 shares of Parent Common Stock in connection with the Closing,
such Standstill and Lock-Up Agreement shall apply only to the number of shares
of Parent Common Stock received by such payee in connection with the first
Performance Period.
(b) At the Closing, if the Transaction Expense Payment Schedule satisfies
the provisos of Section 2.19(a), Parent shall deliver to the Shareholder Agent
(A) an amount of cash, to be delivered by wire transfer of same day funds to a
deposit account at a United States commercial bank notified by the Shareholder
Agent in writing prior to the Closing, equal to the aggregate sum of cash costs
and expenses listed in the Transaction Expense Payment Schedule, and (B) a stock
certificate evidencing for each payee listed as obtaining shares in the
Transaction Expense Payment Schedule the applicable number of shares of Parent
Common Stock. The Shareholder Agent shall apply such funds solely to the
satisfaction of the Company Transaction Expenses as provided in the Transaction
Expense Payment Schedule and, upon paying all such amounts, shall deliver any
remaining or returned funds and stock certificates to the Exchange Agent, to be
allocated and distributed as provided in Section 2.7.
Section 2.20 Closing Working Capital Deficit Adjustment.
(a) For purposes of this Section 2.20, the following terms shall have the
meanings ascribed to them below:
(1) "PRO FORMA WORKING CAPITAL" means, as of the date two business
days prior to the Closing Date, as reflected in a balance sheet delivered
by the Company to Parent the business day before the Closing Date (the
"CLOSING BALANCE SHEET"), an amount equal to: (i) the amount of the
Company's current assets; minus (ii) the amount of (A) the Company's
current liabilities (excluding the Company Transaction Expenses included
therein); minus (B) the lesser of (x) the Closing Debt, and (y) $5,800,000;
plus (C) $2,680,000.
(2) "WORKING CAPITAL DEFICIT" means an amount equal to:
[ 0 - Pro Forma Working Capital - $1,000,000 ].
For the avoidance of doubt, if the Pro Forma Working Capital is less than
-$1,000,000, the Working Capital Deficit will be a positive number. An
example of the calculation of the Working Capital Deficit is illustrated in
Schedule 2.20(a).
(b) If the Working Capital Deficit at Closing is a positive value, then
(i) the cash to be paid pursuant to Section 2.4(a) shall be reduced by
the product of (x) the Working Capital Deficit, times (y) the fraction 1/6,
and (b) the $7,500,000 value set forth in Section 2.4(b)(x) shall be
reduced by the product of (A) the Working Capital Deficit times (B) the
fraction 5/6.
Section 2.21 Transfer Of Contingent Rights.
(a) No Transfer. The Shareholder Consideration and the interests in the
Escrow Account, and the provisions of this Article II and the Escrow Agreement
related thereto, are intended solely for the benefit of the Persons who
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immediately prior to the Effective Time were holders of shares of Company Common
Stock. Without limiting the generality of Section 11.3(a), except as expressly
provided in Section 2.21(b), no Person may sell, assign or otherwise Transfer
(whether in connection with any sale, assignment or other Transfer of any shares
of Parent Common Stock or otherwise) to any other Person (i) any interest in any
Shareholder Consideration or in the Escrow Account or the Expense Fund, or in
any portion of either of them, or (ii) any right to participate, in whole or in
part, in any Shareholder Consideration or to obtain any proceeds or shares from
the Escrow Account pursuant to Section 2.17 or the Escrow Agreement; and any
attempt to do so shall be null and void ab initio and of no force or effect. In
no event shall the right to receive contingent shares or cash be evidenced by a
negotiable instrument or certificated security, or be readily marketable.
(b) Exceptions. Notwithstanding Section 2.21(a) and Section 11.3(a), an
interest in Shareholder Consideration may be assigned or Transferred: (i)
involuntarily pursuant to bequest, the laws of intestate succession or the order
of a court in connection with a settlement of property rights incident to
divorce, and (ii) voluntarily to a Key Shareholder in a transaction exempt from
the registration and prospectus delivery requirements of the Securities Act and
the registration or qualification requirements of applicable state securities or
"blue sky" laws, and otherwise in strict accordance with all applicable Law (it
being understood that Parent may require an opinion of counsel in form and
substance satisfactory to Parent to the effect that such transaction does not
require such registration or qualification).
Section 2.22 Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any such further action is necessary or desirable to
carry out the purposes of this Agreement and to vest the Surviving Corporation
with full right, title, and possession to all Contracts, Property, rights,
privileges and powers of the Company and Merger Sub, the officers and directors
of the Company, Parent and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and the Company and Parent shall
cause them to take, all such lawful and necessary action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
The Company and, with respect to Section 3.3, Section 3.5, Section 3.6,
Section 3.31, Section 3.32, Section 3.33 and Section 3.34, the Key Shareholders
each jointly and severally represents and warrants to Parent that the statements
contained in this Article III are true, correct and complete as of the date of
this Agreement and as of the Closing Date, except as set forth, with respect to
any specific Section or subsection in this Article III, in the corresponding
section or subsection of the schedules the Company has delivered to Parent on
the date hereof and as of the Closing Date (the "DISCLOSURE SCHEDULES").
Section 3.1 Organization and Qualification. The Company: (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Colorado; (ii) has the full corporate power and authority to own
or use its properties and assets, to carry on its business as currently
conducted and as currently contemplated to be conducted, and to perform all of
its obligations under this Agreement and the Related Agreements to which it is a
party or by which it is bound; (iii) is qualified or licensed to do business in
all jurisdictions in which the failure to do so would have a Material Adverse
Effect. The Company has delivered to Parent and its legal counsel a true and
correct copy of its Articles of Incorporation and Bylaws, including all
corrections, amendments and other modifications thereto, each of which is in
full force and effect. The Company is not in violation of any provision of its
Articles of Incorporation or Bylaws. Section 3.1 of the Disclosure Schedules
lists by name and title the directors and officers of the Company.
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Section 3.2 Subsidiaries. The Company presently does not have any
Subsidiaries or own or control, directly or indirectly, any Equity Interest in
any other Entity.
Section 3.3 Capital Structure.
(a) The authorized capital stock of the Company consists of twenty-five
million (25,000,000) shares of Company Common Stock, of which 520,448
shares are issued and outstanding. Except as provided in Section 3.3(a) of the
Disclosure Schedules, all outstanding shares have been duly authorized and
validly issued, are fully paid and non-assessable.
(b) The Company has reserved 160,000 shares of Company Common Stock for
issuance under the Company's 1998 Stock Incentive Plan (the "COMPANY OPTION
PLAN"), of which options to purchase 103,385 shares of Company Common Stock are
outstanding as of the date of this Agreement and of which no options will be
outstanding as of the Closing Date. All options to purchase capital stock of the
Company that have been granted under the Company Option Plan or otherwise since
the Company's inception (collectively, the "COMPANY OPTIONS") are set forth in
Section 3.3(b) of the Disclosure Schedules, including (i) the name of the Person
granted such Company Option, (ii) the total number and class of shares of stock
that are or were subject to such Company Option, and (iii) the vesting schedule
of such Company Option. The Company Options shall be exercised or otherwise
terminated prior to Closing.
(c) All outstanding shares of Company Common Stock and all outstanding
Company Options have been offered, issued, sold and granted in compliance with
(i) all applicable securities and "blue sky" Laws and other applicable Laws, and
(ii) all terms set forth in applicable Contracts and Commitments. Section 3.3(c)
of the Disclosure Schedules provides an accurate and complete description of the
terms of each repurchase option which is held by the Company and to which any
shares of capital stock of the Company is subject.
(d) The Company has not issued any Equity Interests or Securities other
than the Company Common Stock, the Company Options and notes evidencing the
Vectra Loans, the Shareholder Loans and the SpaceDev Loan. Except as set forth
in Section 3.3(d) of the Disclosure Schedules, there is no (i) outstanding
Commitment (whether or not currently exercisable) to acquire any Equity
Interests or other Securities of the Company, (ii) outstanding financial asset,
instrument or obligation that is or may become convertible into or exchangeable
for any Equity Interests or other Securities of the Company, (iii) Contract
under which the Company is or may become obligated to sell or otherwise issue
any Equity Interests or any other Securities of the Company, or (iv) condition
or circumstance that may give rise to or provide a reasonable basis for the
assertion of a claim, whether contingent or vested and whether or not subject to
conditions, by any Person to the effect that such Person is entitled to acquire
or receive any Equity Interests or other Securities of the Company.
Section 3.4 Approval of Transactions.
(a) The only notices or Consents required to execute and deliver this
Agreement and the Related Agreements or to consummate the Transactions are (i)
approval by a majority of the Company's board of directors, at a duly held
meeting at which quorum is present, and (ii) approval by the holders of a
majority of the shares of outstanding Company Common Stock, at a duly held
meeting at which a quorum is present.
(b) The Company's Board of Directors, by resolutions duly adopted (the
"COMPANY BOARD RESOLUTIONS"), has duly: (i) determined that this Agreement and
the Merger are advisable and are fair to and in the best interests of the
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Company and all Shareholders, (ii) approved this Agreement, the Related
Agreements to which the Company is a party or by which it is bound, the Merger
and the other Transactions, (iii) recommended that all of the Shareholders of
the Company adopt this Agreement and approve the Merger and the other
Transactions, and (iv) directed that this Agreement, the Merger and the other
Transactions be submitted for consideration by the Company's shareholders at a
meeting or by written consent of all of the shareholders of the Company to occur
on or about, or prior to, the date of the Parent Shareholders Meeting. The
Company Board Resolutions are in full force and effect. No action has been taken
or is pending for the purpose of revoking, rescinding, annulling, repealing,
correcting, changing, amending or otherwise modifying the Company Board
Resolutions or any of them.
Section 3.5 Authority. Each of the Company and the Key Shareholders has all
requisite right, power and authority, or all necessary legal capacity, as the
case may be, to execute, deliver, enter into and perform its obligations under
this Agreement and any Related Agreement to which it is a party or signatory and
to consummate the Merger and the other Transactions. The execution and delivery
of this Agreement, any Related Agreement to which the Company or such Key
Shareholder is a party or signatory and the consummation of the Merger will be
duly authorized at Closing at a duly held meeting at which quorum is present.
Subject to obtaining the Shareholders' approval set forth in Section 3.4(a), no
further action is required on the part of the Company or its shareholders to
authorize this Agreement, any Related Agreement to which it is a party or
signatory or the Merger. This Agreement has been duly executed and delivered by
the Company and the Key Shareholders, and assuming the due authorization,
execution and delivery by the other parties hereto and thereto, constitute its
valid and binding obligations, enforceable against them according to their
respective terms.
Section 3.6 No Conflict. Except as set forth in Section 3.6 of the
Disclosure Schedules, the execution and delivery by the Company and the Key
Shareholders of this Agreement and any Related Agreement to which it is a party
or signatory, and the consummation of the Merger, will not directly or
indirectly:
(a) conflict with or result in any Breach of or default under (with or
without the giving of notice or the lapse of time, or both) or give rise to a
right of termination, cancellation, modification or acceleration of any
obligation or loss of any benefit under (any such Event, a "CONFLICT") (i) any
provision of the Organizational Documents of the Company, or any resolutions of
the board of directors or the Company Shareholders, each as in effect and
Amended to date, (ii) any Contract to which the Company, or any of the Key
Shareholders is a party, or to which it is subject or by which any of them is
bound, or any license under which any of them is a licensee, or (iii) any Law or
Order applicable to the Company, the Key Shareholders, or the Company's
Property;
(b) give any Person the power, right or authority to challenge any of the
Transactions or to exercise any remedy or obtain any relief under any Law or
Order to which the Company or any Key Shareholders may be subject;
(c) contravene, conflict with or result in a violation or Breach of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Permit held by
the Company or that otherwise relates to the Properties or to the businesses of
the Company;
(d) cause Parent to become subject to, or to become liable for the payment
of, any Taxes owed by or on behalf of the Company or any properties, assets,
shareholder, officer or employee of the Company;
(e) result in the imposition or creation of any Encumbrance upon or with
respect to any Property of the Company; or
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(f) result in any shareholder of the Company having the right to exercise
dissenters', appraisal or other similar rights pursuant to any Contract,
Organizational Document of the Company or, except for dissenters' rights under
the CBCA, applicable Law.
Section 3.7 Consents. Except as set forth in Section 3.7 of the Disclosure
Schedules, no Order or Consent of, or registration, declaration or filing with,
any Governmental Body or any third party (including any party to any Contract
with, or licensor of, the Company), is required by or with respect to the
Company and the Key Shareholders in connection with the execution, delivery or
performance of this Agreement, any of the Related Agreements to which it is a
party or signatory, or the consummation of the Transactions, so as not to
trigger any Conflict (including the Breach of any Company Contract), except for
(i) such Orders and Consents as may be required under applicable securities or
"blue sky" Laws, (ii) the filing of the Statement of Merger with the Secretary
of State of the State of Colorado, (iii) the approval of this Agreement and the
Merger by the shareholders of the Company, (iv) the Consents required under
Section 3.4(a), and (v) any Consents of parties to Company Contracts (including
Company Licenses) summarized in reasonable detail in Section 3.7 of the
Disclosure Schedules, indicating for each such Company Contract if it is a
Material Company Contract and, if so, the name of each counterparty to such
Material Company Contract whose Consent is required.
Section 3.8 Books and Records.
(a) Financial Records. The books of account and other financial records,
all of which have been made available to Parent, (i) are accurate, complete and
correct in all Material respects, (ii) have been maintained in accordance with
sound business practices, (iii) fairly and accurately reflect the income,
expenses, assets and liabilities of the Company, and (iv) represent actual, bona
fide transactions.
(b) Minute Books. Except as set forth in Section 3.8(b) of the Disclosure
Schedules, the minute books of the Company, all of which have been made
available to Parent, contain accurate, complete and correct records of all
meetings held of, and corporate action taken by, the shareholders and board of
directors, and all committees of the shareholders and board of directors, of the
Company, including each action by written consent, since the inception of the
Company, no Material corporate action of such shareholders, board of directors
or committees has been taken, for which minutes have not been prepared and
provided to Parent, or which are not contained in such minute books.
(c) Stock Records. The stock record books, records and ledgers of the
Company, all of which have been made available to Parent, contain accurate,
complete and correct records of all issuances and transfers of Equity Interests
in the Company.
(d) Shareholder Table. Section 3.8(d) of the Disclosure Schedules sets
forth a shareholder table (as updated in accordance with the terms hereof, the
"SHAREHOLDER TABLE") containing a true and complete accounting of each
shareholder of record of the Company and all outstanding shares of capital stock
of the Company, and contains for each such shareholder (i) the full name(s) of
such shareholder, (ii) the number of certificates evidencing shares of Company
Common Stock held of record by such shareholder, specifying for each such
certificate its certificate number and the number of shares of Company Common
Stock evidenced thereby, and (iii) the full mailing address for such shareholder
set forth in the Company's stock transfer books and records.
Section 3.9 Company Financial Statements. Section 3.9 of the Disclosure
Schedules sets forth (i) the Company's audited balance sheets as of December 31,
2004 and 2003, and the related audited statements of income and cash flows for
the Company's fiscal years ended December 31, 2004 and 2003, and (ii) the
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Company's (x) unaudited balance sheet as of (A) on the date of this Agreement
only (this sub-clause (A) having no force or effect as of the Closing Date),
June 30, 2005, or (B) as of the Closing Date only (this sub-clause (B) having no
force or effect as of the date of this Agreement), the last day of a calendar
month ended not more than 45 prior to the Closing Date; and (y) the related
unaudited statements of income and cash flows for the partial-year period ended
on the Current Balance Sheet Date, including in each case the notes thereto,
except that no statement of cash flows is included for the partial-year period
ended June 30, 2005. The Financials are correct in all Material respects and
have been prepared in accordance with GAAP, consistently applied throughout the
periods indicated and with each other, except as disclosed in the notes to the
Financials, subject in the case of interim statements to normal year-end
adjustments. The Financials fairly and accurately present the financial
condition, operating results, changes in shareholders' equity and cash flows of
the Company as of the respective dates and during the respective periods
indicated therein. The Company maintains and will continue through the Closing
Date to maintain a standard system of accounting established and administered in
accordance with GAAP.
Section 3.10 No Undisclosed Liabilities.
(a) Except as provided in Section 3.10(a) of the Disclosure Schedules, the
Company has no Liabilities, Debt, Capital Lease Obligation, Guarantees,
obligations, expenses, claims, deficiencies, or endorsements of any type,
whether or not known, accrued, absolute, contingent, matured, secured,
conditional, liquidated, vested, due or required to be reflected in financial
statements in accordance with GAAP, except for those which (i) have been
adequately reserved against or otherwise reflected in the Current Balance Sheet,
(ii) have arisen in the Ordinary Course of Business consistent with past
practices since December 31, 2004, and which are not Material, and (iii) are an
Expense under Section 11.10, which will be paid at or prior to Closing.
(b) Section 3.10(b) of the Disclosure Schedules contains a complete and
accurate list of all trade accounts payable (other than a trade account payable
(i) to any shareholder or any Related Person of the Company or any Shareholder
for or with respect to the Expenses of the Company or the Shareholder Agent, and
(ii) adequately accounted for in the Company's financial statements delivered
from time to time to Parent prior to the date hereof) that remains unpaid as of
the Closing Date, specifying for each such trade account (A) its aging, and (B)
any amounts due as interest, penalties or similar charge thereon.
Section 3.11 No Off-Balance Sheet Arrangements. Except as set forth in
Section 3.11 of the Disclosure Schedules, the Company is not a party to, and has
no commitment to become a party to, any joint venture, off-balance sheet
partnership or any similar Contract (including any Contract relating to any
transaction or relationship between or among the Company, on the one hand, and
any unconsolidated affiliate, including any structured finance, special purpose
or limited purpose Entity, on the other hand, or any "off-balance sheet
arrangements" (as defined in Item 303(a) of Regulation S-K of the SEC)), where
the result, purpose or effect of such Contract is to avoid disclosure of any
material transaction involving, or material liabilities of, the Company in the
Company's financial statements.
Section 3.12 No Changes. Except as set forth on Section 3.12 of the
Disclosure Schedules, since (A) December 31, 2004 (with respect to subsections
(a) through (y) below) and (B) the Current Balance Sheet Date (with respect to
subsections (z) and (aa) below), there has not been, occurred or arisen any of
the following with respect to the Company:
(a) any transaction not in the Ordinary Course of Business;
(b) any Amendment to any Organizational Document of the Company or to the
rights, powers, privileges, designations or preferences of any Company Stock;
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(c) any capital expenditure or capital expenditure commitment exceeding
$5,000 individually or $10,000 in the aggregate;
(d) payment, discharge or satisfaction of any claim or Liability, other
than payment, discharge or satisfaction in the Ordinary Course of Business of
claims or Liabilities reflected or adequately reserved against in the Current
Balance Sheet;
(e) destruction of, damage to or loss of any Property or business;
(f) loss of, or notice or other clear and overt indication of an intention
to discontinue or change the terms of its relationship with the Company by, any
supplier, manufacturer, management-level employee, officer, senior engineer or
consultant, in each case whether or not covered by insurance;
(g) labor trouble or claim of wrongful discharge or other unlawful labor
practice or action; (h) change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) other than as required
by GAAP;
(i) change in any election in respect of Taxes, adoption or change in any
accounting method in respect of Taxes, agreement or settlement of any claim or
assessment in respect of Taxes, or extension or waiver of the limitation period
applicable to any claim or assessment in respect of Taxes;
(j) revaluation by the Company of any of its Properties or assets;
(k) declaration, setting aside or payment of a dividend or other
distribution (whether in cash, stock or property) in respect of any outstanding
share of capital stock or other Equity Interests of the Company, or any split,
combination or reclassification in respect of any share of capital stock of the
Company, or any issuance or authorization of any issuance of any other
Securities of the Company in respect of, in lieu of or in substitution for any
share of capital stock or other Equity Interests of the Company, or any direct
or indirect repurchase or redemption of any Equity Interests or other Securities
of the Company (or Commitments therefor);
(l) payment (other than in the Ordinary Course of Business) of, or increase
in, the salary, bonuses or other compensation (cash, equity or otherwise), or
material increase in fringe benefits, payable or to become payable to any
shareholder, director, officer, employee or consultant of the Company (other
than payments to outside counsel in connection with this Agreement and the
Transactions), or Related Person of the Company, or the declaration, payment or
commitment or obligation of any kind for the payment of a severance payment,
termination payment, bonus, substantial fringe benefit or other additional or
supplemental salary, bonus, substantial fringe benefit or other compensation
(cash, equity or otherwise) to any such Person;
(m) adoption, establishment or Amendment of any Company Employee Plan,
except as necessary to comply with applicable Law;
(n) entry into any Contract to which the Company is a party or signatory or
by or to which it or any of its Properties is bound or subject, except for the
Shareholder Loans, the SpaceDev Loan and the Vectra Loans, or any termination,
Amendment or receipt of notice of termination or non-renewal in respect of, any
such Contract;
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(o) Transfer, Lease or Encumbrance of any of its material assets or other
Properties, other than (i) sales of Inventories in the Ordinary Course of
Business and the security interests in favor of Vectra in respect of the Vectra
Loans and Parent in respect of the SpaceDev Loan, and (ii) with respect to any
Intellectual Property Rights (which are addressed in Section 3.12(u));
(p) a loan or advance to any Person, the incurrence, issuance or sale of
any Debt of the Company (except for the Shareholder Loans, the Vectra Loans and
the SpaceDev Loan) or the making of any Guarantee in respect of any other
Person, except for advances to employees for travel and business expenses in the
Ordinary Course of Business consistent with past practices;
(q) waiver or release of any right or claim, including any write-off or
other compromise of any Account Receivable in any amount; (r) the commencement,
settlement, notice or overt threat of any Action against the Company or its
business, Properties or affairs;
(s) written notice to the Company, or any of its Representatives, of any
claim or potential claim of ownership by any Person of any Company Intellectual
Property or of any interference with, misappropriation, violation or
infringement by the Company of any other Person's Intellectual Property Rights;
(t) issuance, grant or sale, or make or enter into a Contract to issue,
grant or sell, of any Equity Interests or other Securities of the Company, or
any Commitments to purchase or acquire any of the foregoing;
(u) (i) Transferring, Encumbering or licensing, or making or entering into
any other Contract or license regarding, any Company Intellectual Property,
other than in the Ordinary Course of Business, (ii) purchasing, licensing or
otherwise making or entering into any Contract with respect to any Material
Intellectual Property Rights owned or controlled or licensed by any other
Person, other than in the Ordinary Course of Business, (iii) making or entering
into any Contract with respect to the development of any Intellectual Property
Rights, other than in the Ordinary Course of Business, or (iv) changing the
pricing, fees, royalties or other compensation set or charged by the Company to
its customers or licensees or the pricing, fees, royalties or other compensation
set or charged by Persons who have licensed or granted rights to the Company to
use Intellectual Property Rights;
(v) entry into a Contract, or Amendment of any Contract, other than in the
Ordinary Course of Business, pursuant to which any other party was granted
marketing, distribution, development or similar rights of any type or scope with
respect to any Technology or any Company Products (including proposed Company
Products and Company Products under development);
(w) hiring or terminating any officer, director or senior employee of the
Company or terminating any management-level or senior employee or engineer
employed by the Company for a total period (whether or not continuous) in excess
of 3 years;
(x) any known material defect or design issue with the Company's existing
products in development, production or installed with the Company's customers;
(y) agreement or other Contract by the Company or any officer, director,
manager or employee thereof on behalf of the Company to do any of the things
described in Section 3.12(a) through (y) (other than negotiations with Parent
and its Representatives regarding the Transactions);
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(z) any Events having a Material Adverse Effect; or (aa) any Contract by
the Company or any officer, director, manager or employee thereof on behalf of
the Company that is likely to result in a Material Adverse Effect.
Section 3.13 Tax Matters.
(a) Tax Returns and Audits. Except as described in Section 3.13 of the
Disclosure Schedules:
(1) The Company has prepared and timely filed all required federal,
state, local and foreign Tax Returns and Tax estimates concerning or
attributable to itself or its operations, except where the failure to file
such Tax Returns and Tax estimates will not have a Material Adverse Effect,
and such Tax Returns and estimates are true and correct in all material
respects and have been completed in accordance with applicable Law.
(2) The Company (A) has timely paid all Taxes it is required to pay
and withheld and properly remitted with respect to its employees (and
timely paid over to the appropriate Taxing authority) all federal and state
income taxes, Federal Insurance Contribution Act, Federal Unemployment Tax
Act and other Taxes of any kind or nature required to be withheld, and (B)
has accrued on the Current Balance Sheet all Taxes attributable to the
periods preceding the Current Balance Sheet and will not have incurred any
liability for Taxes for the period commencing after the date of the Current
Balance Sheet and ending immediately prior to the Closing Date, other than
in the Ordinary Course of Business.
(3) The Company has not been delinquent in the payment of any material
Tax, nor is there any Tax deficiency or adjustment outstanding, assessed or
proposed against the Company, and the Company has not executed any waiver
of any statute of limitations on or extending the period for the assessment
or collection of any Tax.
(4) No audit or other examination of any Tax Return of the Company is
presently in progress, nor has the Company been notified of any request for
such an audit or other examination.
(5) The Company has made available to Parent, its legal counsel and
its accountants, copies of all Tax Returns filed by the Company for all
periods since its inception.
(6) There are (and immediately following the Closing Date there will
be) no Encumbrances on the assets of the Company relating or attributable
to Taxes other than Encumbrances for Taxes not yet due and payable.
(7) The Company has no Actual Knowledge of any basis for the assertion
of any claim for Taxes, which, if adversely determined, would result in any
Encumbrance on the assets of the Company.
(8) The Company has (a) never been a member of an affiliated group
(within the meaning of Code Section 1504(a)) filing a consolidated federal
income tax return (other than a group the common parent of which was the
Company), (b) never been a party to any Tax sharing, indemnification or
allocation Contract, and never owed any amount under any such Contract, (c)
no liability for the Taxes of any Person under Treas. Reg. Section 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee
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or successor, by Contract, or otherwise, and (d) never been a party to any
joint venture, partnership or other agreement that could be treated as a
partnership for Tax purposes.
(9) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock
intended to qualify for tax-free treatment under Section 355 of the Code.
(10) The Company has not engaged in a transaction that is the same or
substantially similar to one of the types of transactions that the Internal
Revenue Service has determined to be a tax avoidance transaction and
identified by notice, regulation, or other form of published guidance as a
listed transaction, as set forth in Treas. Reg. Section 1.6011-4(b)(2).
(11) The Company has not disposed of any property in a transaction
being accounted for under the installment method pursuant to Section 453 of
the Code.
(12) The Company (i) has not agreed nor is required to make any
adjustment pursuant to Section 481 of the Code by reason of a change in
accounting methods or otherwise, (ii) has no Actual Knowledge that any
taxing authority has proposed any such adjustment or change, which proposal
is currently pending, and (iii) does not have an application pending with
any taxing authority requesting permission for any change in accounting
methods that relate to its business and operations.
(13) No power of attorney has been granted by the Company with respect
to any matter relating to Taxes, which power of attorney is currently in
force.
(14) The Company has no direct or indirect beneficial ownership
interest in (i) a "passive foreign investment company", (ii) a "foreign
sales corporation", or (iii) a person other than a United States person,
each within the meaning of the Code.
(15) The Company does not own "corporate acquisition indebtedness"
within the meaning of Section 279 of the Code.
(16) No property of the Company is "tax-exempt use property" within
the meaning of Section 168 of the Code.
(b) Executive Compensation Tax. The Company is not a party to any Contract,
including the provisions of this Agreement, covering any employee or former
employee of the Company, which, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to Sections 280G
or 404 of the Code.
Section 3.14 Restrictions on Business Activities. Except as is described in
Section 3.14 of the Disclosure Schedules, there is no Contract (non-compete
agreement or otherwise) or Order to which the Company is a party or by which it
is bound, which has or may reasonably be expected to have the effect of
prohibiting or impairing any business practice, any acquisition of Property, the
conduct of business or otherwise limiting the freedom of the Company to engage
in any line of business or to compete with any Person. Without limiting the
generality of the foregoing, except as is described in Section 3.14 of the
Disclosure Schedules, the Company has not entered into any Contract under which
it is restricted from selling, licensing or otherwise distributing any of its
Material Intellectual Property Rights, Technology or Company Products, or
providing services, to customers or potential customers or any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
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Section 3.15 Title of Properties; Absence of Liens and Encumbrances;
Condition of Equipment.
(a) The Company does not own any real property, and has never owned any
real property. Section 3.15(a) of the Disclosure Schedules sets forth a list of
all real property currently leased by the Company, the name of the lessor, the
correct street address, the date and term of the lease, the aggregate annual
rental payable under such lease and a description of any other material terms of
the lease and each Amendment thereto. All such current leases are in full force
and effect, are valid and effective in accordance with their respective terms,
and there is no, existing default or event of default (or event which with
notice or lapse of time, or both, would constitute a default) by the Company, or
to the Knowledge of the Company, by any other party.
(b) Except as provided in Section 3.15(b) of the Disclosure Schedules, the
Company has good and valid title to, or, in the case of Leased properties and
assets, valid leasehold interests in, all of its tangible properties and assets,
real, personal and mixed, used or held for use in its business, free and clear
of any Encumbrances, except (i) as reflected in the Current Balance Sheet, (ii)
Encumbrances for Taxes not yet due and payable, and (iii) such imperfections of
title and Encumbrances, if any, which do not detract from the value, or
interfere with the present use, of the Property subject thereto or affected
thereby.
(c) Section 3.15(c) of the Disclosure Schedules lists all material items of
Tangible Personal Property (the "EQUIPMENT") owned or Leased by the Company.
Except as set forth in Section 3.15(c) of the Disclosure Schedules, such
Equipment is (i) adequate for the conduct of the business of the Company as
currently conducted and as currently anticipated to be conducted, (ii) in good
operating condition, regularly and properly maintained, subject to normal wear
and tear, (iii) suitable for immediate use in the Ordinary Course of Business,
and (iv) in the possession of the Company. No item of Equipment is in need of
repair or replacement other than as part of routine maintenance in the Ordinary
Course of Business.
(d) Except as provided in Section 3.15(d) of the Disclosure Schedules, the
Company owns free and clear of any Encumbrances, all customer correspondence,
customer licensing and purchasing histories, customer pricing mechanisms,
customer contract proposals and customer contracts awarded relating to their
respective current and former customers (the "CUSTOMER INFORMATION"). No Person
other than the Company possesses any claims or rights with respect to use of the
Customer Information.
Section 3.16 Intellectual Property.
(a) Intellectual Property Rights Owned, Licensed or Used. Section 3.16(a)
of the Disclosure Schedules contains a true and complete list of all (A)(i)
Patents, (ii) Trademarks (other than goodwill), and (iii) Copyrights which are
registered or constitute Material Intellectual Property Rights (other than
website content, marketing or sales materials, moral rights and publicity
rights), in each case licensed to, owned by or used by the Company or any of its
Subsidiaries with respect to the conduct of its business as presently conducted,
(B) all Company Licenses, and (C) Excluded Software. The Company or its
Subsidiaries has in its possession or control correct and complete,
fully-executed copies of all of the Company Licenses, and the Company has
heretofore delivered to Parent true and complete copies thereof. The Company
owns the "xxxxxxx.xxx" domain name
(b) Licenses. Section 3.16(b) of the Disclosure Schedules contains a true
and complete list of all Third-Party Licenses. Except as described in Section
3.16(b) of the Disclosure Schedules, (i) neither the Company nor any of its
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Subsidiaries has licensed, sub-licensed, restricted or Encumbered any of the
Company Intellectual Property, whether orally or in writing, and (ii) no
licensing fees, royalties or payments are due or payable by the Company or any
of its Subsidiaries in connection with its Material Intellectual Property Rights
or Excluded Software, other than registration, maintenance or renewal fees or
the like which are not Material individually or in the aggregate. The Company
has in its possession or control correct and complete, fully-executed copies of
all of the Third-Party Licenses, and the Company has heretofore delivered to
Parent true and complete copies thereof.
(c) No Actions orPayments Due. Except as set forth in Section 3.16(c), no
actions must be taken by the Company or the Surviving Corporation within sixty
(60) calendar days of the Closing for the purposes of maintaining, perfecting,
preserving or renewing any of its Registered Intellectual Property Rights,
Material Intellectual Property Rights, Company Licenses or Excluded Software,
including the payment of any registration, maintenance or renewal fees or the
filing of any documents, applications or certificates or the sending of any
renewal, change of control or other notices.
(d) No Infringement / Misappropriation of Third Party Rights. Except as set
forth on Section 3.16(d) of the Disclosure Schedules, neither the Company nor
any of its Subsidiaries (i) has interfered with, infringed upon, violated or
misappropriated any Intellectual Property Rights of any third party; (ii) has
Actual Knowledge that any of their respective current or former officers,
directors, employees, consultants or independent contractors has interfered
with, infringed upon, violated or misappropriated or is interfering with,
infringing upon, violating or misappropriating or has made or is making unlawful
use of any Intellectual Property Rights of any Person for the benefit of the
Company or any of its Subsidiaries; or (iii) has, nor has any of their
respective management level employees with direct responsibility for
Intellectual Property Rights matters, received any charge, complaint, claim,
demand, notice or other communication in writing alleging any such interference,
infringement, misappropriation or violation (including any demand or claim that
the Company or any of its Subsidiaries must license or refrain from using any
Intellectual Property Rights of any third party). Except as set forth on Section
3.16(d) of the Disclosure Schedules, to the Actual Knowledge of the Company and
its Subsidiaries, no third party (including their respective current or former
Representatives) has interfered with, infringed upon or misappropriated any
Company Intellectual Property.
(e) No Encumbrances on Company Rights. Except as set forth on Section
3.16(e) of the Disclosure Schedules, the Company and each of its Subsidiaries
(A) owns all right, title and interest in and to, or has a valid, binding,
unexpired and subsisting right and license to use (whether or not exclusive),
all Material Intellectual Property Rights and Material Excluded Software, and,
solely to the extent required in connection with the manner in which it has
conducted or is conducting its business, to make, have made, use, sell, import
and export, distribute, have distributed, publicly perform, publicly display,
reproduce and prepare derivative works of Material Intellectual Property Rights;
(B) have rights to the Material Intellectual Property Rights which are free and
clear of all Liens; (C) have taken all commercially reasonable action required
to maintain the validity and effectiveness of all registrations with and
applications to Governmental Bodies in respect of their respective Registered
Intellectual Property Rights, all of which, to the Knowledge of the Company, are
valid, subsisting and in full force and effect; (D) are not subject to any
restrictions (other than those which have been complied with or waived) on the
direct or indirect transfer or assignment of any Third-Party Licenses, or any
interest therein; and (E) has taken commercially reasonable measures to protect
the secrecy, confidentiality and value of its Proprietary Information.
(f) No Default; No Required Approvals or Consents. Except as set forth on
Section 3.16(f) of the Disclosure Schedules, (A) the Company and its
Subsidiaries and, to the Actual Knowledge of the Company all third parties are,
and upon the consummation of the Merger or other Transactions contemplated
hereby will be, in compliance in all material respects with the Licenses; (B)
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the rights of the Company and its Subsidiaries or any successor to the Company
and such Subsidiaries to the respective Material Intellectual Property Rights
will not be affected in any material respect as a result of the execution,
delivery or performance of this Agreement or the consummation of the Merger and
other Transactions contemplated hereby; (C) neither the Company nor any of its
Subsidiaries is, or as a result of the execution, delivery or performance of
this Agreement or the consummation of the Merger or other Transactions
contemplated hereby will be, in material Breach of any Licenses; (D) no event
has occurred, or by virtue of the execution, delivery or performance of this
Agreement or the consummation of the Merger or other Transactions contemplated
hereby will occur, which with notice or lapse of time or both would constitute a
material Breach or constitute a valid basis for the termination, modification or
acceleration under any License, and none of the Company and its Subsidiaries and
their respective management level employees with direct responsibility for
Intellectual Property Rights matters, has received any notice or other
communication in writing to the contrary; (E) no Consent of any Person is needed
so that the interest of the Surviving Corporation in the Material Intellectual
Property Rights shall continue to be in full force and effect upon the
consummation of the Merger and other Transactions contemplated hereby; and (F)
neither the Company nor any of its Subsidiaries is subject to any Contract,
Company License or Order pertaining to Material Intellectual Property Rights or
Material Excluded Software which would be Breached by the execution or delivery
of this Agreement or the consummation of the Merger and the other Transactions.
(g) No Claims or Actions. Other than examinations by intellectual property
officers of any pending Patent, Copyright or Trademark applications which are
not material, there are no claims or demands in writing of any Person pertaining
to, or any Actions that are pending or, to the Actual Knowledge of the Company,
threatened, including any interferences, oppositions, cancellations or other
contested proceedings, nor to the Actual Knowledge of the Company is there any
valid basis for the same, which challenge the rights of the Company or any of
its Subsidiaries in respect of any Intellectual Property Rights set forth in
Section 3.16(a) of the Disclosure Schedules or their respective Material
Intellectual Property Rights or Material Excluded Software.
(h) Confidential Treatment. Except as provided in Section 3.16(h) of the
Disclosure Schedules, (i) all Intellectual Property Rights of the Company or any
of its Subsidiaries for which confidentiality is appropriate has been maintained
in confidence in accordance with protection procedures believed by the Company
and such Subsidiary to be adequate for protection customarily used in the
industry to protect rights of like importance or in accordance with the
applicable Third-Party Licenses, as the case may be, and (ii) all commercially
reasonable measures have been taken to maintain the confidentiality of the
Proprietary Information of the Company and its Subsidiaries, and of all other
information the value of which to the Company and its Subsidiaries is contingent
upon maintenance of the confidentiality thereof.
(i) Assignment of Inventions. Except as set forth on Section 3.16(i) of the
Disclosure Schedules, each former and current shareholder or Representative of
the Company or any of its Subsidiaries who has (A) contributed in any material
way to or participated in any material way in the conception and development of
(i) any Intellectual Property Rights listed on Section 3.16(a) of the Disclosure
Schedules as being owned, in whole or in part, by the Company or any of its
Subsidiaries, or (ii) any Material Intellectual Property Rights, or (B) had
access to Proprietary Information of the Company or any of its Subsidiaries,
including Customer Information; in each case (1) was in an employment
relationship sufficient, or has executed and delivered to the Company or such
Subsidiary an agreement suitable, to vest full ownership rights to any
inventions, discoveries, innovations, improvements, creations, developments,
results and works in the Company or such Subsidiary, as applicable, and (2)
either (1) has entered into an agreement for maintaining Proprietary Information
of the Company or such Subsidiary in confidence, true and complete copies of
which Contracts have heretofore been delivered to Parent and all of which are
now in full force and effect and Enforceable in accordance with their respective
terms, or (2) entered into a professional relationship with the Company which
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obligates such Representative to maintain the confidentiality of such
Proprietary Information. Except as set forth on Section 3.16(i) of the
Disclosure Schedules, no former or current shareholder, director, officer,
employee or consultant of the Company or any of its Subsidiaries has filed,
asserted in writing or, to the Actual Knowledge of the Company or any of its
Subsidiaries (or management employees of the Company or such Subsidiary with
direct responsibility for Intellectual Property Rights matters), threatened in
writing any claim or Action against the Company or such Subsidiary in connection
with such Person's involvement in the conception and development of any of such
Intellectual Property Rights. Except as set forth on Section 3.16(i) of the
Disclosure Schedules, to the Actual Knowledge of the Company and its
Subsidiaries (or management employees of the Company or its Subsidiaries with
direct responsibility for Intellectual Property Rights matters), none of the
current employees or consultants of the Company or such Subsidiary has any
Patents issued or applications pending for any device, process, design or
invention of any kind used or expected to be used by the Company or such
Subsidiary in the furtherance of its businesses as presently conducted or as
contemplated to be conducted, which Patents or applications have not been duly,
validly and fully assigned to the Company or such Subsidiary.
(j) No Rights to Royalties. Except as set forth on Section 3.16(j) of the
Disclosure Schedules, no former or current shareholder or Representative of the
Company or any of its Subsidiaries has or will have any valid rights to future
royalty payments or license fees from the Company or such Subsidiary, deriving
from licenses, technology agreements or other agreements, whether written or
oral, among any such Person and the Company or such Subsidiary.
(k) Supporting Documents. The Company has in its possession or control true
and complete copies of all documents (including patents, registration
certificates, renewal certificates, applications, prosecution histories, and all
documents submitted to or received from the relevant patent, copyright,
trademark, domain name or other authorities in the United States and foreign
jurisdictions, as the case may be) relating to any Intellectual Property Rights
listed on Section 3.16(a) of the Disclosure Schedules that in whole or in part
are or are purported to be owned by the Company or any of its Subsidiaries. The
Company has heretofore delivered to Parent true and complete, fully-executed
copies of all of such documents.
(l) Documentation. The Company has heretofore delivered to Parent
documentation (to the extent in the possession of or under the control of the
Company) with respect to any invention, process, design, Software or other
know-how or Trade Secret included in the Material Intellectual Property Rights,
which documentation is (1) accurate in all material respects, and (2) reasonably
sufficient in detail and content to identify and explain such invention,
process, design, Software or other know-how or trade secret and to facilitate
its use and further improvement and development by an individual of ordinary
skill in the applicable art.
Section 3.17 Agreements, Contracts and Commitments.
(a) Except as set forth in Section 3.17(a) of the Disclosure Schedules, the
Company is not party to or bound by:
(1) any employment, sales or consulting agreement or other Contract
with an employee, individual consultant or salesperson;
(2) any agreement or plan, including any option plan, incentive plan
or purchase plan with respect to Equity Interests of the Company, any of
the benefits of which will be increased, or the vesting of benefits of
which will be accelerated, by the occurrence of any of the Transactions or
the value of any of the benefits of which will be calculated on the basis
of any of the Transactions;
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(3) any fidelity or surety bond or completion bond;
(4) any Lease of personal property having an annual rental rate in
excess of $5,000 individually or $10,000 in the aggregate;
(5) any Contract relating to capital expenditures involving future
payments in excess of $5,000 individually or $10,000 in the aggregate;
(6) any Contract relating to the disposition or acquisition of assets
or any interest in any Entity outside the Ordinary Course of Business;
(7) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other Contracts relating to the borrowing of money
or extension of credit;
(8) any purchase order or contract for the purchase of materials
exceeding $5,000 individually or $10,000 in the aggregate;
(9) any construction contracts;
(10) any dealer, distribution, sales, joint marketing or development
Contract;
(11) any sales representative, original equipment manufacturer, value
added, remarketing, reseller or independent software vendor or other
Contract (other than Licenses) for use or distribution of any Company
Product, any Company Intellectual Property, Material Intellectual Property
Rights or any services provided by the Company; or
(12) any other Contract not otherwise set forth in Section 3.17(a) of
the Disclosure Schedules that is not cancelable without penalty within
thirty (30) calendar days.
(b) Except as set forth in Section 3.17(b) of the Disclosure Schedules, the
Company is in compliance with and has not Breached or defaulted under, or
received notice that it has Breached or defaulted under, any of the terms or
conditions of any Contract or license to which it is party or by which it is
bound or under which it is a licensee, nor does the Company have Knowledge of
any Event that would constitute such a Breach or default with the lapse of time,
giving of notice or both. Each such Contract and license is in full force and
effect and is not subject to any default thereunder.
(c) Except as set forth in Section 3.17(c) of the Disclosure Schedules, the
Company has obtained, or will obtain prior to the Closing, all necessary
Consents of parties to all Company Contracts as are required thereunder in
connection with the consummation of the Transactions, so that (i) the
consummation of the Transactions shall not Breach any such Company Contract, and
(ii) each such Company Contract shall remain in full force and effect without
modification, limitation or alteration after the Closing. Following the Closing,
the Surviving Corporation will be permitted to exercise all of its rights under
the Contracts without the payment of any additional amounts or consideration
other than amounts or consideration which the Company would otherwise be
required to pay had the Merger not occurred. Without limiting the foregoing, the
consummation of the Transactions will not (i) result in the Breach of any
Company Contract, (ii) adversely impact any existing Company Contract with any
Governmental Body, or (iii) to the Knowledge of the Company, result in any
Material decrease in orders of Company Products or Technology from, or sales,
licensing or other distributions of Company Products or Technology to, any
customer or client set forth in Section 3.30 of the Disclosure Schedules.
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(d) Section 3.17(d) of the Disclosure Schedules sets forth a complete and
accurate list of all offers or bids made to any customer or prospective customer
of the Company, which offer or bid (i) could generate revenues or involve
expenses in excess of $150,000, and (ii) has not been rejected by each Person
who has the right to accept such offer or bid. The Company has heretofore
delivered true and complete copies of each such offer or bid to Parent.
Section 3.18 Government Contracts. Except for Section 3.18(a), which
applies to the time periods set forth therein, at all times since January 1,
1998:
(a) Section 3.18(a)(i)-(iv) of the Disclosure Schedules set forth a true
and complete list of (i) all Government Contracts, past and present, awarded by
the Government or by any higher tier subcontractor or prime contractor to the
Government to the Company or any of its Subsidiaries since December 31, 2002,
(ii) all Government Contracts (including options) currently in force between the
Company or any of its Subsidiaries and either the Government or any higher tier
subcontractor or prime contractor of the Government, (iii) all outstanding
quotations, bids and proposals submitted by the Company or any of its
Subsidiaries to either the Government or any proposed higher tier subcontractor
or prime contractor of the Government, and (iv) all Government Contracts
(including options) on which delivery or performance is currently in an
unsatisfactory or delinquent status, behind schedule or which the Company or any
of its Subsidiaries has Actual Knowledge or should have Actual Knowledge will be
unsatisfactory, behind schedule or delinquent in the future.
(b) The Company has complied in all material respects with all statutory
and regulatory requirements with respect to each Government Contract and each
bid, quotation or proposal submitted by the Company to the Government or any
prospective higher tier subcontractor or prime contractor of the Government.
(c) The Company has complied in all material respects with each and every
certification executed, acknowledged or set forth by the Company with respect to
each Government Contract awarded to the Company and each bid, quotation or
proposal submitted by the Company to the Government or any higher tier
subcontractor or prospective prime contractors of the Government.
(d) The Company has complied in all material respects with each
representation executed, acknowledged or set forth by the Company with respect
to each Government Contract awarded to the Company and each and every bid
quotation or proposal submitted by the Company to the Government or any higher
tier subcontractor or prospective prime contractor of the Government.
(e) Except as provided in Section 3.18(e) of the Disclosure Schedules, the
Company has complied in all material respects with all contract clauses,
provisions and requirements incorporated expressly, by reference, or by
operation of Law in each Government Contract awarded to the Company.
(f) Any and all facts set forth in or acknowledged by the Company in any
certifications, representations or disclosure statements submitted by the
Company with respect to any Government Contract were current, accurate and
complete in all material respects as of the date of submission.
(g) Except as provided in Section 3.18(g) of the Disclosure Schedules,
neither the Government nor any higher tier subcontractor or prime contractor has
notified the Company, either orally or in writing, that the Company has breached
or violated in any material respect any regulation, statute, certification,
representation or contract clause, provision or requirement with respect to any
Government Contract awarded to the Company or with respect to any bid, quotation
or proposal submitted by the Company.
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(h) Except as provided in Section 3.18(h) of the Disclosure Schedules, the
Company is not currently debarred or suspended from doing business with the
Government and the Company knows of no circumstances that would warrant the
institution of debarment or suspension proceedings in the future.
(i) Except as provided in Section 3.18(i) of the Disclosure Schedules, no
show cause notices or cure notices have been issued against the Company on any
of its Government Contracts with the Government or on any of the its Contracts
relating to any Government Contract.
(j) Except as provided in Section 3.18(j) of the Disclosure Schedules, no
default terminations have ever been issued against the Company on any of its
Contracts with the Government or on any of its Contracts relating to any
Government Contract.
(k) No negative determination of responsibility has ever been issued
against the Company in connection with any bid, quotation or proposal submitted
by the Company.
(l) No costs incurred by the Company have been disallowed or, within the
last six months, questioned, in either case as a result of a finding or
determination of any kind by the Government.
(m) Except as provided in Section 3.18(m) of the Disclosure Schedules,
neither the Government nor any higher tier subcontractor or prime contractor
under a Government prime contract has withheld or setoff monies, or in the last
six months attempted to withhold or set off material monies, due to the Company
or has made any claims against the Company under any of its Contracts, and there
are no outstanding claims arising under any Government Contract.
(n) To the Company's Knowledge there are not any irregularities,
misstatements or omissions relating to any of its Government Contracts, bids,
quotations or proposals, past or present, that have led or could lead to, either
before or after the Merger, (i) any administrative, civil or criminal
investigation or indictment of the Company, (ii) the questioning or disallowance
of any costs submitted for payment by the Company or Parent, (iii) the
recoupment of any payments previously made to the Company, or (iv) the
assessment of any penalties or damages of any kind against the Company or
Parent, arising out of such irregularities, misstatements or omissions.
(o) The Company is not currently under administrative, civil or criminal
investigation indictment with respect to any alleged irregularity, misstatement
or omission arising under or in any way relating to any of its Government
Contracts, bids, quotations or proposals, past or present.
(p) Except as set forth in Section 3.18(p) of the Disclosure Schedules,
there exist (i) no outstanding claims against the Company either by the
Government or by higher tier subcontractor, any prime contractor, subcontractor,
vendor or other third party arising under or relating to any Government
Contract, (ii) no facts or allegations which are known or should be known by the
Company upon which such a material claim may reasonably be based in the future,
(iii) no disputes between the Company and the Government or any prime
contractor, higher or lower tier subcontractor or vendor arising under or
relating to any Government Contract, and (iv) no facts or allegations which are
known or should be known by the Company over which such a material dispute may
reasonably arise in the future.
(q) Except as set forth in Section 3.18(q) of the Disclosure Schedules, the
Company is not undergoing and since January 1, 2001 has not undergone any audit,
and has no Actual Knowledge or reason to know of any basis for impending audits
in the future, arising under or relating to any Government Contract.
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Section 3.19 Related Party Transactions. To the Actual Knowledge of the
Company, no Related Party of the Company has, directly or indirectly, (i) any
interest in any Entity (A) which furnished or sold, or furnishes or sells,
services, products or Technology that the Company furnishes or sells, or
proposes to furnish or sell, or which otherwise competes with the Company with
respect to such services, products or Technology, or (B) that purchases from, or
sells or furnishes to, the Company any services, products or Technology, (ii) an
interest in any Property or Equipment used in or pertaining to any Company
Products or the business of the Company, or (iii) a beneficial interest in any
Contract to which the Company is a party or by which it is bound or any license
granted to or by the Company; provided, however, that ownership of no more than
1% of the outstanding voting stock of a publicly traded corporation with a
market capitalization in excess of $100 million shall not be deemed to be an
"interest in any entity" for purposes of this Section 3.19. No Related Party of
the Company is a party to any Contract with the Company. Except as provided in
Section 3.19 of the Disclosure Schedules, the Company (i) does not have
outstanding any loan or other extension of credit to, or any guarantee of any
loan or other debt of, any officer or director of the Company, and (ii) has not
forgiven or waived, in whole or in part, any extended credit, in the form of a
personal loan to or for any director or officer of the Company, which credit or
loan is reflected as an asset in the Financials.
Section 3.20 Compliance with Law; Governmental Authorization.
(a) Except as provided in Section 3.20(a)(i)-(iii) of the Disclosure
Schedules, (i) the Company is, and in the last three-year period has been, in
compliance in all material respects with all applicable Law that is or was
applicable to the Company or to its business or operations or to the ownership
or use of its Properties, (ii) no Event has occurred or circumstances exist that
(with or without notice or lapse of time) (A) may constitute or result in a
violation by the Company of, or a failure on the part of the Company to comply
with, any applicable Law in any material respect, or (B) may give rise to any
obligation of the Company to undertake, or to bear all or any portion of the
cost of, any remedial action of any nature; and (iii) the Company has not
received, at any time in the last three-year period, any oral or written notice
or other communication from any Governmental Body or any other Person regarding
any actual, alleged, possible or potential (x) violation of, or failure to
comply with, any applicable Law in any material respect, or (y) obligation on
the part of the Company to undertake, or to bear all or any portion of the cost
of, any remedial action of any nature.
(b) Each Consent and Governmental Permit (i) pursuant to which the Company
currently operates or holds any interest in any of its Properties, or (ii) which
is necessary for, or the absence of which would be Materially adverse to, the
operation of its business as currently conducted or currently contemplated to be
conducted or the holding of any such interest (collectively, "COMPANY
AUTHORIZATIONS") has been issued or granted. Section 3.20(b) of the Disclosure
Schedules lists all Company Authorizations and such list constitute all Company
Authorizations required to permit the Company to operate or conduct its business
as presently conducted or to hold any interest in its Properties. Each Company
Authorization is in full force and effect, and shall remain in full force and
effect without modification after the Closing.
Section 3.21 Litigation. Except as set forth on Section 3.21 of the
Disclosure Schedules, there is no Action of any nature pending or, to the Actual
Knowledge of the Company, threatened against the Company, its Properties or any
of its officers, managers or directors.
Section 3.22 Accounts Receivable, Customers and Inventory.
(a) Section 3.22(a) of the Disclosure Schedules sets forth a list of all
Accounts Receivable of the Company as of the date of the Current Balance Sheet,
together with a range of days elapsed since invoice. All of such Accounts
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Receivable represent valid obligations arising from sales actually made or
services actually performed by the Company in the Ordinary Course of Business,
are carried at values determined in accordance with GAAP consistently applied,
and are current and collectible (and within 270 days of the Closing Date will be
collected in full without any setoff) except to the extent (i) of reserves
therefor set forth in the Current Balance Sheet or, for receivables arising
subsequent to the date of the Current Balance Sheet, as reflected on the books
and records of the Company (which are prepared in accordance with GAAP), as
applicable, and (ii) the applicable customer files for bankruptcy or is
otherwise not able to pay its bills generally through no fault of the Company or
any of its Representatives. No Person has any Encumbrance on any Accounts
Receivable of the Company and no written request or oral or written agreement
for deduction or discount has been made with respect to any of such Accounts
Receivable.
(b) All raw materials, components and other parts, work-in-process,
finished goods and all other inventory (collectively, the "INVENTORIES")
reflected on the Current Balance Sheet or on the accounting records of the
Company as of the Closing Date, or thereafter acquired by the Company (and not
subsequently disposed of in the Ordinary Course of Business), are adequate and
sufficient for work in progress, consistent with the historical inventory
policies and practices of the Company. The Inventory consists of items of a
quality and quantity which are merchantable and fully usable in the normal
course of such business. The values at which such Inventories are carried on the
Current Balance Sheet or on the accounting records of the Company as of the
Closing Date reflect the normal inventory valuation policy of the Company
(including the writing down of or reserving against the value of slow-moving or
obsolete inventory) and state Inventory at the lower of cost or market (on a
first-in, first-out method) in accordance with GAAP, consistently applied. All
the Inventory is located at facilities owned or leased by the Company, the
addresses of which have previously been disclosed to Parent in writing.
(c) Section 3.22(c) of the Disclosure Schedules sets forth the customers of
the Company, as well as the aggregate dollar amount of business between each
customer and the Company, from December 31, 2002 to June 30, 2005. The Company
has not received any customer complaint since December 31, 2002 that the Company
has not been able to address to the satisfaction of the complainant, and no
purchaser or recipient of any Company Product has rejected or returned such
Company Product.
Section 3.23 Environmental Matters. Except as set forth in Section 3.23 of
the Disclosure Schedules, the Company now is, and at all times has been, in
compliance with, and has not been and is not in violation of or liable under,
any Environmental Law. Except as set forth in Section 3.23 of the Disclosure
Schedules, the Company has no basis to expect, nor has the Company or any other
Person for whose conduct the Company is or may be held to be responsible
received, any actual or threatened order, notice or other communication from (i)
any Governmental Body or private citizen acting or purporting to act in the
public interest, or (ii) the current or prior owner or operator of any
Facilities, in each case of any actual or potential violation or failure to
comply with any Environmental Law, or of any actual or threatened obligation to
undertake or bear the cost of any Environmental, Health and Safety Liabilities
with respect to any Environmental Property, or with respect to any such
Environmental Property at or to which Hazardous Materials were generated,
manufactured, refined, transferred, imported, used or processed by the Company
or any other Person for whose conduct the Company is or may be held responsible,
or from which Hazardous Materials have been transported, treated, stored,
handled, transferred, disposed, recycled or received. Except as set forth in
Section 3.23 of the Disclosure Schedules:
(a) There are no pending or, to the Actual Knowledge of the Company,
threatened claims, Encumbrances, or other restrictions of any nature resulting
from any Environmental, Health and Safety Liabilities or arising under or
pursuant to any Environmental Law with respect to or affecting any Environmental
Property.
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(b) The Company has no Actual Knowledge of, nor has it or any other Person
for whose conduct it is or may be held responsible received, any citation,
directive, inquiry, notice, Order, summons, warning or other communication that
relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or
potential violation or failure to comply with any Environmental Law, or of any
alleged, actual, or potential obligation to undertake or bear the cost of any
Environmental, Health and Safety Liabilities with respect to any Environmental
Property, or with respect to any property or facility to which Hazardous
Materials generated, manufactured, refined, transferred, imported, used or
processed by the Company or any other Person for whose conduct it is or may be
held responsible, have been transported, treated, stored, handled, transferred,
disposed, recycled or received.
(c) The Company nor any other Person for whose conduct the Company is or
may be held responsible has any Environmental, Health and Safety Liabilities
with respect to any Environmental Property.
(d) To the Company's Knowledge there are no Hazardous Materials present on
or in the Environment at any Facility, including any Hazardous Materials
contained in barrels, aboveground or underground storage tanks, landfills, land
deposits, dumps, equipment (whether movable or fixed) or other containers,
either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facility or such adjoining property, or incorporated
into any structure therein or thereon. Neither the Company nor any other Person
for whose conduct the Company is or may be held responsible, nor to the Actual
Knowledge of the Company any other Person, has permitted or conducted, or is
aware of, any Hazardous Activity conducted with respect to Environmental
Property, except in full compliance with all applicable Environmental Laws.
(e) There has been no Environmental Release or, to the Knowledge of the
Company, threat of Environmental Release, of any Hazardous Materials at or from
any Facility or at any other location where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by any Facility, or from any other Environmental Property, or
to the Actual Knowledge of the Company any geologically or hydrologically
adjoining property, whether by the Company or any other Person.
(f) The Company has delivered to Parent true and complete copies and
results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by the Company pertaining to Hazardous Materials or Hazardous
Activities in, on, or under the Facilities or any other Environmental Property,
or concerning compliance, by the Company or any other Person for whose conduct
the Company is or may be held responsible, with Environmental Laws.
Section 3.24 Brokers' and Finders' Fees. Except as provided in Section 3.24
of the Disclosure Schedules, for which obligations the shareholders of the
Company are solely responsible, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement, any
Related Agreement or any Transaction.
Section 3.25 Employee Benefit Plans and Compensation.
(a) Definitions. For all purposes of this Section 3.25 only, the following
terms shall have the following respective meanings:
(1) "AFFILIATE" means any other Entity under common control with the
Company within the meaning of Section 414(b), (c), (m) or (o) of the Code,
and the regulations issued thereunder.
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(2) "COBRA" means the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
(3) "DOL" means the United States Department of Labor.
(4) "EMPLOYMENT AGREEMENT" means each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, or contract between the Company or any Affiliate
and any Employee.
(5) "FMLA" means the Family Medical Leave Act of 1993, as amended.
(6) "PENSION PLAN" means each Company Employee Plan which is an
"employee pension benefit plan" (within the meaning of Section 3(2) of
ERISA).
(b) Schedule. Section 3.25(b) of the Disclosure Schedules contains an
accurate and complete list of each Company Employee Plan and each Employment
Agreement. The Company has no plan or commitment to establish any new Company
Employee Plan or Employment Agreement, to modify any Company Employee Plan or
Employment Agreement, or to enter into any Company Employee Plan or Employee
Agreement. Section 3.25(b) of the Disclosure Schedules also sets forth a table
setting forth the name, annual salary and, if applicable, bonus, of each
director, officer and employee of the Company, and the name of each consultant
of the Company.
(c) Documents. Except as set forth in Section 3.25(c) of the Disclosure
Schedules, the Company has provided to Parent correct and complete copies of (i)
all documents embodying each Company Employee Plan and each Employment Agreement
(including all Amendments thereto) and all related trust documents,
administrative service agreements, group annuity contracts, group insurance
contracts, and policies pertaining to fiduciary liability insurance covering the
fiduciaries for each Plan, (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan, (iii) the three (3) most recent
annual reports (Form Series 5500 and all schedules and financial statements
attached thereto), if any, required under ERISA or the Code in connection with
each Company Employee Plan, (iv) if the Company Employee Plan is funded, the
most recent annual and periodic accounting of Company Employee Plan assets, (v)
the most recent summary plan description, together with the summaries of
material modifications thereto, if any, required under ERISA with respect to
each Company Employee Plan, (vi) all IRS determination, opinion, notification
and advisory letters, and all applications and correspondence to or from the IRS
or the DOL with respect to any such application or letter, (vii) all
communications Material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any Amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other Events which
would result in any Material liability to the Company, (viii) all correspondence
to or from any Governmental Body relating to any Company Employee Plan, (ix) all
COBRA forms and related notices (or such forms and notices as required under
comparable Law), (x) the three (3) most recent plan years discrimination tests
for each Company Employee Plan, and (xi) all registration statements, annual
reports (Form 11-K and all attachments thereto) and prospectuses prepared in
connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth in Section 3.25(d) of the
Disclosure Schedules, (i) the Company has performed in all material respects all
obligations required to be performed by it under, is not in default or Breach
of, and has no Actual Knowledge of any default or Breach by any other party to
each Company Employee Plan, and each Company Employee Plan has been established
and maintained in all material respects in accordance with its terms and in
compliance with all applicable Laws, including ERISA and the Code, (ii) each
Company Employee Plan intended to qualify under Section 401(a) of the Code and
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each trust intended to qualify under Section 501(a) of the Code has either
received a favorable determination, opinion, notification or advisory letter
from the IRS with respect to each such Company Employee Plan as to its qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation, or has remaining a period of time
under applicable Treasury regulations or IRS pronouncements in which to apply
for such a letter and make any amendments necessary to obtain a favorable
determination as to the qualified status of each such Company Employee Plan,
(iii) no "prohibited transaction" (within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA) and not otherwise exempt under Section
4975 of the Code or Section 408 of ERISA (or any administrative class exemption
issued thereunder) has occurred with respect to any Company Employee Plan, (iv)
there are no Actions pending, or, to the Actual Knowledge of the Company,
threatened or reasonably anticipated (other than routine claims for benefits),
against any Company Employee Plan or against the assets of any Company Employee
Plan, (v) each Company Employee Plan (other than any stock option plan) can be
amended, terminated or otherwise discontinued after the Closing Date, without
Material liability to Parent, the Surviving Corporation, the Company or any of
its Affiliates (other than ordinary administration expenses), (vi) there are no
Actions pending or, to the Knowledge of the Company or any Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan, and
(vii) neither the Company nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) No Pension Plans. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any (i)
Pension Plans subject to Title IV of ERISA or Section 412 of the Code; (ii)
"multiemployer plan" within the meaning of Section (3)(37) of ERISA; or (iii)
multiemployer plan, or to any plan described in Section 413 of the Code.
(f) No Post-Employment Obligations. No Company Employee Plan provides, or
reflects or represents any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute and described in Section 3.25(f) of the
Disclosure Schedules.
(g) Health Care Compliance. Neither the Company nor any Affiliate has,
prior to the Closing Date and in any respect, violated in any material respect
any of the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and Accountability
Act of 1996, the requirements of the Women's Health and Cancer Rights Act of
1998, the requirements of the Newborns' and Mothers' Health Protection Act of
1996, or any amendment to each such act, or any similar provisions of state law
applicable to its Employees.
(h) Effect ofTransactions.
(1) Except as set forth on Section 3.25(h) of the Disclosure
Schedules, the execution of this Agreement and the consummation of the
Transactions will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company
Employee Plan, Employment Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of Debt, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
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(2) Except as set forth on Section 3.25(h) of the Disclosure
Schedules, no payment or benefit which will or may be made by the Company
or its Affiliates with respect to any Employee or any other "disqualified
individual" (as defined in Code Section 280G and the regulations
thereunder) will be characterized as a "parachute payment," within the
meaning of Section 280G(b)(2) of the Code.
(i) Employment Matters. Except as set forth in Section 3.25(i) of the
Disclosure Schedules, the Company (i) is in compliance with all applicable
foreign, federal, state and local Laws respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees, (ii) has withheld and reported all amounts required
by law or by agreement to be withheld and reported with respect to wages,
salaries and other payments to Employees, (iii) is not liable for any arrears of
wages or any Taxes or any penalty for failure to comply with any of the
foregoing, (iv) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any Governmental Body, with respect
to unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the
Ordinary Course of Business), and (v) has taken all commercially reasonable
actions necessary to comply with any applicable Law in connection with the
Company's employment of its employees and any terminations of employment
contemplated by this Agreement or the Merger, including the WARN Act, and has
paid, or adequately reserved against in the Current Balance Sheet, all amounts
required to be paid under any applicable Law, including the WARN Act and any
similar state laws, as a result of the termination or layoff of any employee of
the Company who is not a Transferred Employee in connection with the Merger.
There are no pending or, to the Actual Knowledge of the Company threatened or
reasonably anticipated, Actions against the Company under any worker's
compensation policy or long-term disability policy.
(j) Labor. No work stoppage or labor strike against the Company or, to the
Company's Actual Knowledge, its material suppliers, manufacturers and other
contractors is pending, threatened or reasonably anticipated. There are neither
any activities nor proceedings of any labor union to organize any Employees, nor
have there ever been. There are no Actions, labor disputes or grievances
pending, threatened or reasonably anticipated relating to any labor, safety or
discrimination matters involving any Employee, including charges of unfair labor
practices or discrimination complaints. Neither the Company nor any of its
Affiliates has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act. The Company is not presently, nor has been in the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees, and no collective bargaining agreement is
being negotiated by the Company.
(k) No Interference or Conflict. To the Actual Knowledge of the Company, no
Shareholder, officer, director, employee or consultant of the Company is
obligated under any Contract or subject to any Order of any court or
administrative agency that would interfere with such Person's efforts to promote
the interests of the Company or that would interfere with the Company's
business. Neither the execution nor delivery of this Agreement or any Related
Agreement, nor the carrying on of the Company's business and operations as
presently conducted or proposed to be conducted, nor any activity of such
officers, directors, employees or consultants in connection with the carrying on
of the Company's business as presently conducted (or, to the Company's Actual
Knowledge, as currently proposed to be conducted), will conflict with or result
in a Breach of the terms, conditions or provisions of any Contract under which
any of such officers, directors, employees or consultants is now bound.
(l) Perquisites. Section 3.25(l) of the Disclosure Schedule sets forth all
personal or non-business costs and expenses paid by the Company to, on behalf of
or for the benefit of any of its directors, officers, employees, consultants and
customers, including dues, costs and expenses for (i) personal travel, (ii) club
and other memberships, (iii) charge cards, (iv) cell or smart phones, (v) PDAs
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or similar electronic devices, (vi) notebook or personal computers, (vii)
automobiles, (viii) office d cor, (ix) use of Company property for personal use,
(x) home office equipment, and (xi) any other perquisites.
Section 3.26 Insurance. Except as set forth in Section 3.26 of the
Disclosure Schedules, no claim by the Company or any of its Subsidiaries is
pending under any insurance policies or fidelity bonds covering the assets,
business, equipment, properties, operations, employees, officers and directors
of the Company as to which coverage has been questioned, denied or disputed by
the underwriters of such policies or bonds. All premiums due and payable under
all such policies and bonds have been paid, and the Company and its Affiliates
are otherwise in Material compliance with the terms of such policies and bonds
(or other policies and bonds providing substantially similar insurance
coverage). The Company has no Actual Knowledge of any threatened termination of,
or premium increase with respect to, any of such policies.
Section 3.27 Relations With Governmental Entities. Neither the Company, nor
the Key Shareholders, nor to the Knowledge of the Company, any Representative of
the Company, has paid, given or received, or offered or promised to pay, give or
receive, any bribe or other unlawful payment of money or other thing of value,
any unlawful discount, or any other unlawful inducement, to or from any Person
or Governmental Body anywhere worldwide in connection with or in furtherance of
the business of the Company (including any offer, payment or promise to pay
money or other thing of value (a) to any foreign official, political party (or
official thereof) or candidate for political office for the purposes of
influencing any act, decision or omission in order to assist the Company in
obtaining business or orders for or with, or directing business to, any Person,
or (b) to any Person while knowing that all or a portion of such money or other
thing of value will be offered, given or promised to any such official or party
for such purposes). Neither the Company nor the Key Shareholders has otherwise
taken any action that would cause the Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any applicable Laws of similar
effect.
Section 3.28 Warranties. Except as provided in Section 3.28 of the
Disclosure Schedules, all Company Products and services provided by the Company
are sold, licensed or otherwise provided pursuant to terms that include (a) a
disclaimer of all warranties, express or implied, including those of
merchantability, fitness for a particular purpose and non-infringement, (b) a
disclaimer of all consequential damages arising from the use or possession of
the product or use or provision of the services, regardless of whether such
liability is based on tort, contract or otherwise, and (c) language stating that
if the foregoing disclaimers are held to be unenforceable, the Company's maximum
liability shall not exceed the amount of money(ies) paid for such product(s).
Section 3.29 Complete Copies of Materials. Except as set forth in Section
3.29 of the Disclosure Schedules, the Company has delivered true and complete
copies of each document (or summaries of same) that has been requested by Parent
or its counsel. Section 3.30 Customer Relations.
Section 3.30 of the Disclosure Schedules sets forth the names and addresses
of customers or clients of the Company (the "MATERIAL CUSTOMERS") which on
December 31, 2004, the date hereof or at the Closing (i) have Contracts with the
Company that have or are expected to generate sales revenues or expenses in
excess of $500,000, or (ii) accounted for 5% or more of the net revenue of the
Company, taken as a whole, for the fiscal year ended December 31, 2004 or the
partial-year period ended on the Current Balance Sheet Date. None of the
Material Customers has (A) registered any material complaint regarding the
services rendered by the Company, (B) overtly indicated any intention to reduce
the level of services under any Contract with the Company, other than based
solely on dissatisfaction with the Company's financial condition, (C) stated
verbally or in writing any intention to terminate any Contract with the Company,
or (D) delivered a written indication that it will not (1) rehire, (2) accept
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offers or bids from, (3) purchase any Company Products from, or (4) enter into
new, or renew existing, Contracts with; the Company or the Surviving
Corporation.
Section 3.31 Equity Ownership. Each Key Shareholder hereby severally
represents and warrants to Parent that it is the sole record and beneficial
owner of the shares of Company Common Stock in the amount set forth next to its
name in the Shareholder Table. Such Securities are not subject to any
Encumbrance of any kind or nature. There are no Commitments or Contracts of any
character, written or oral, to which any Key Shareholder is a party or by which
it or any of its Properties is bound obligating such Shareholder to issue,
Transfer, repurchase or redeem, or cause to be issued, Transferred, sold,
repurchased or redeemed, any such Securities or obligating such Shareholder to
grant or enter into any such Commitment or Contract. Each Key Shareholder has
good and valid title to, and has the sole right to Transfer or Encumber (if
applicable), such Securities.
Section 3.32 Form S-4 Information.
(a) The information supplied or to be supplied by or on behalf of the
Company or any of its Shareholders for inclusion or use, or incorporation by
reference, in (i) the Form S-4, (ii) the Proxy Statement, or (iii) any other
document (including any report filed by Parent under the Exchange Act) filed
with any Governmental Body in connection with the Transactions, or in each case
any amendment or supplement thereto; in each case do not and will not, at the
Applicable Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein regarding the Company Information, in light of the
circumstances under which they are made, not misleading. The Company Information
provides all information relating to the Company or its operations, business,
directors, officers, Subsidiaries and Shareholders required to be provided by
the provisions of the Securities Act and the Exchange Act, and the rules and
regulations promulgated by the SEC thereunder, including Form S-4 and Regulation
14A.
(b) Notwithstanding the foregoing provisions of this Section 3.32, the
Company makes no representation or warranty, and assumes no responsibility, with
respect to statements made or incorporated by reference in the Form S-4, the
Proxy Statement or any other such document based on information (other than
Company Information) supplied by Parent for inclusion or incorporation by
reference therein.
Section 3.33 Expenses of Sale. Section 3.33 of the Disclosure Schedule (the
"COMPANY TRANSACTION EXPENSES") itemizes in reasonable detail (A) on the date of
this Agreement only (this sub-clause (A) having no force or effect as of the
Closing Date), all costs and expenses the Company has incurred or paid or
reasonably expects to incur or pay related to the sale of the Company, including
all Expenses, and (B) as of the Closing Date only (this sub-clause (B) having no
force or effect as of the date of this Agreement), all costs and expenses the
Company has incurred or paid related to the sale of the Company, including all
Expenses, other than costs and expenses which have already been paid (as
reflected in the Closing Balance Sheet). All of the Company Transaction
Expenses, including all bonuses or transaction fees owed any Company
Representative in connection with the Merger or the other Transactions, shall be
fully and finally paid prior to the Closing or shall be properly itemized in the
Transaction Expense Payment Schedule to be paid at Closing or out of Performance
Consideration.
Section 3.34 Representations Complete. Except as set forth in Section 3.34
of the Disclosure Schedules, none of the representations or warranties made by
the Company or any Key Shareholder, and no financial statement, other written
financial information or statements made in any exhibit, schedule or certificate
furnished by the Company or any Key Shareholder pursuant to this Agreement or
any Related Agreement, or furnished by the Company or any Key Shareholder in or
in connection with documents mailed or delivered to the shareholders of the
Company or Parent for use in soliciting their consent to this Agreement and the
Merger, contains or will contain at the Closing Date any untrue statement of a
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material fact or omits or will omit at the Closing Date to state any material
fact necessary in order to make the statements contained herein or therein, in
light of the circumstances under which they were made, not misleading. The
Company has prepared the financial projections relating to the Company and its
Subsidiaries that were delivered to Parent prior to the date of this Agreement
(the "FINANCIAL PROJECTIONS") in good faith based upon reasonable assumptions,
and the Company and the Key Shareholder each believes that there is a reasonable
basis for such projections.
ARTICLE IV
PARENT AND MERGER SUB
REPRESENTATIONS AND WARRANTIES
Parent and Merger Sub represent and warrant to the Company that the
statements contained in this Article IV are true, correct and complete as of the
date of this Agreement and as of the Closing Date, except as set forth, with
respect to any specific Section or subsection in this Article IV, in the
corresponding section or subsection of the schedules Parent has delivered to the
Company on the date hereof and on the Closing Date (the "PARENT DISCLOSURE
SCHEDULES").
Section 4.1 Organization and Qualification. Each of Parent and Merger Sub:
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the State of Colorado; (ii) has the full corporate power and
authority to own or use its properties and assets, to carry on its business as
currently conducted and as currently contemplated to be conducted, and to
perform all of its obligations under this Agreement and the Related Agreements;
(iii) is qualified or licensed to do business in all jurisdictions in which the
failure to do so would have a Material Adverse Effect. Parent is not in
violation of any provision of its Articles of Incorporation and bylaws.
Section 4.2 Subsidiaries. Parent presently does not have any Subsidiaries
or own or control, directly or indirectly, any Equity Interest in any other
Entity, other than (i) Merger Sub, and (ii) SpaceDev Oklahoma, an Oklahoma
corporation ("SPACEDEV OKLAHOMA").
Section 4.3 Power and Authority; Enforceability. Parent has the relevant
corporate power and authority to execute and deliver each Transaction Document
to which it is party, and to perform and consummate the Merger. Except for
approval of the Merger by Parent's shareholders, Parent has taken all action
necessary to authorize the execution and delivery of each Transaction Document
to which it is party, the performance of its obligations thereunder, and the
consummation of the Merger including solicitation of Shareholders' consent. This
Agreement and each Transaction Document to which Parent is a party has been duly
authorized, executed, and delivered by, and is Enforceable against Parent.
Section 4.4 No Conflict. The execution and delivery by Parent and Merger
Sub of this Agreement and any Related Agreement to which it is a party or
signatory, and the consummation of the Merger, will not directly or indirectly:
(a) any Conflict with (i) any provision of the Organizational Documents of
Parent or Merger Sub, or any resolutions of the board of directors or Parent
shareholders, each as in effect and Amended to date, (ii) any Contract to which
Parent or Merger Sub is a party, or to which it is subject or by which any of
them is bound, or any license under which any of them is a licensee, or (iii)
any Law or Order applicable to Parent or Merger Sub, or Parent's Property;
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(b) give any Person the power, right or authority to challenge any of the
Transactions or to exercise any remedy or obtain any relief under any Law or
Order to which Parent or Merger Sub may be subject;
(c) contravene, conflict with or result in a violation or Breach of any of
the terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Permit held by
Parent or that otherwise relates to the Properties or to the businesses of
Parent;
(d) cause the Company or the Surviving Corporation to become subject to, or
to become liable for the payment of, any Taxes owed by or on behalf of Parent or
any properties, assets, shareholder, officer or employee of Parent;
(e) result in the imposition or creation of any Encumbrance upon or with
respect to any Property of Parent or Merger Sub; or
(f) result in any shareholder of Parent having the right to exercise
dissenters', appraisal or other similar rights pursuant to any Contract,
Organizational Document of Parent or, except for dissenters' rights under the
California General Corporation Law, applicable Law.
Section 4.5 Consents. No Order or Consent of, or registration, declaration
or filing with, any Governmental Body or any third party, including any party to
any Contract with, or licensor of, Parent (so as not to trigger any Conflict),
is required by or with respect to Parent and Merger Sub in connection with the
execution, delivery or performance of this Agreement, any of the Related
Agreements to which it is a party or signatory, or the consummation of the
Transactions, except for (i) the filing with the SEC of the Form S-4, the Proxy
Statement, a Form 8-K and such other reports under the Exchange Act as may be
required from time to time in connection with this Agreement and the
Transactions, (ii) such Orders and Consents as may be required under applicable
state securities or "blue sky" laws, (iii) the filing of the Statement of Merger
with the Secretary of State of the State of Colorado, (iv) the approval of this
Agreement, the Merger and other matters referred to herein by the shareholders
of Parent, (v) the Consents which have been obtained, (vii) such other Consents
and filings the failure of which to be made or obtained would not reasonably be
expected to (A) have a Material Adverse Effect on Parent, (B) impair in any
material respect the ability of Parent to perform its obligations under this
Agreement or any Related Agreement to which it is a party or signatory, or (C)
prevent or materially impede, interfere with, hinder or delay the consummation
of the Transactions, and (vi) such other Orders and Consents as are specified
with reasonable particularity in Section 4.5 of the Parent Disclosure Schedules.
Section 4.6 Capitalization. As of August 15, 2005, the authorized, issued
and outstanding capital stock of Parent is as set forth in the Quarterly Report
on Form 10-Q filed with the SEC on August 15, 2005 (the "PARENT FORM 10-Q"). All
of the outstanding shares of capital stock of Parent have been duly authorized
and are validly issued, fully paid and non-assessable and have not been issued
in violation of the preemptive or similar rights of any shareholder of Parent
arising by operation of securities or "blue sky" laws or the Articles of
Incorporation or bylaws of Parent.
Section 4.7 SEC Filings; Financial Statements.
(a) Parent has made available to the Company accurate and complete copies
(excluding copies of exhibits) of each report filed by Parent with the SEC for
the last two years (the "PARENT SEC DOCUMENTS"). As of the time it was filed
with the SEC (or, if amended or superseded by a filing prior to the date hereof,
then on the date of such later filing), (i) each of the Parent SEC Documents
complied in all material respects with the applicable requirements of the
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Securities Act or the Exchange Act, as the case may be, and (ii) none of the
Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) The consolidated financial statements contained in the Parent SEC
Documents: (i) complied as to form in all material respects with the published
rules and regulations of the SEC applicable thereto; (ii) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered, except as may be indicated in the notes to such consolidated financial
statements and (in the case of unaudited statements) as permitted by Form 10-QSB
of the SEC, and except that unaudited financial statements are subject to
year-end audit adjustments; and (iii) fairly present the consolidated financial
position of Parent as of the respective dates thereof and the consolidated
results of operations of Parent for the periods covered thereby.
Section 4.8 Form S-4 Information.
(a) None of the information (other than the Company Information) supplied
or to be supplied by or on behalf of Parent for inclusion or use, or
incorporation by reference, in (i) the Form S-4, (ii) the Proxy Statement, and
(iii) any other document (including any report filed by Parent under the
Exchange Act) filed with any Governmental Body in connection with the
Transactions, or in each case any amendment or supplement thereto; in each case
do not and will not, at the Applicable Time, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading. Except with respect to the Company
Information, as to which Parent makes no representation or warranty and assumes
no responsibility, the Form S-4 and the Proxy Statement will each comply as to
form in all material respects with the provisions of the Securities Act and the
Exchange Act and the rules and regulations promulgated by the SEC thereunder,
including Form S-4 and Regulation 14A.
(b) Notwithstanding the foregoing provisions of this Section 4.8, Parent
makes no representation or warranty, and assumes no responsibility, with respect
to statements made or incorporated by reference in the Form S-4, the Proxy
Statement or any other such document relating to the Company Information or
based on information supplied by the Company for inclusion or incorporation by
reference therein.
Section 4.9 No Undisclosed Liabilities.
Parent has no Liabilities, Debt, Capital Lease Obligation, Guarantees,
obligations, expenses, claims, deficiencies, or endorsements of any type,
whether or not known, accrued, absolute, contingent, matured, secured,
conditional, liquidated, vested, due or required to be reflected in financial
statements in accordance with GAAP, except for those which (i) have been
adequately reserved against or otherwise reflected or incorporated by reference
in the Parent Form 10-Q, as of the date of the financial statements contained
therein, (ii) have been disclosed in Parent SEC Documents filed after the Parent
Form 10-Q, (iii) have arisen in the Ordinary Course of Business consistent with
past practices since December 31, 2004, which are not Material, and (iv) are an
Expense under Section 11.10, which will be paid at or prior to Closing.
Section 4.10 Valid Issuance. The shares of Parent Common Stock to be issued
to shareholders of the Company as Shareholder Consideration, will, when issued
to such shareholders in accordance with the provisions of this Agreement, be
validly issued, fully paid and non-assessable.
Section 4.11 Merger Sub. Merger Sub has been formed for the sole purpose of
effecting the Merger and, except as contemplated by this Agreement, Merger Sub
has not conducted any business activities. Parent directly owns all of the
issued and outstanding shares of capital stock of Merger Sub.
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Section 4.12 SpaceDev Oklahoma. Parent directly owns all of the issued and
outstanding shares of capital stock of SpaceDev Oklahoma. SpaceDev Oklahoma in
an inactive corporation with no operations, assets or liabilities.
Section 4.13 Suspension and Trading. No order ceasing or suspending trading
in securities of Parent is currently outstanding, and no proceeding for this
purpose have been instituted or, to Parent's Knowledge, are pending or
threatened.
Section 4.14 Government Contracts. Except for Section 4.14(a), which
applies to the time periods set forth therein, at all times since January 1,
1998:
(a) Section 4.14(a)(i)-(iv) of the Parent Disclosure Schedules set forth a
true and complete list of (i) all Government Contracts, past and present,
awarded by the Government or by any higher tier subcontractor or prime
contractor to the Government to Parent or any of its Subsidiaries since December
31, 2002, (ii) all Government Contracts (including options) currently in force
between Parent or any of its Subsidiaries and either the Government or any
higher tier subcontractor or prime contractor of the Government, (iii) all
outstanding quotations, bids and proposals submitted by Parent or any of its
Subsidiaries to either the Government or any proposed higher tier subcontractor
or prime contractor of the Government, and (iv) all Government Contracts
(including options) on which delivery or performance is currently in an
unsatisfactory or delinquent status, behind schedule or which Parent or any of
its Subsidiaries has Actual Knowledge or should have Actual Knowledge will be
unsatisfactory, behind schedule or delinquent in the future.
(b) Parent has complied in all material respects with all statutory and
regulatory requirements with respect to each Government Contract and each bid,
quotation or proposal submitted by Parent to the Government or any prospective
higher tier subcontractor or prime contractor of the Government.
(c) Parent has complied in all material respects with each and every
certification executed, acknowledged or set forth by Parent with respect to each
Government Contract awarded to Parent and each bid, quotation or proposal
submitted by Parent to the Government or any higher tier subcontractor or
prospective prime contractors of the Government.
(d) Parent has complied in all material respects with each representation
executed, acknowledged or set forth by Parent with respect to each Government
Contract awarded to Parent and each and every bid quotation or proposal
submitted by Parent to the Government or any higher tier subcontractor or
prospective prime contractor of the Government.
(e) Parent has complied in all material respects with all contract clauses,
provisions and requirements incorporated expressly, by reference, or by
operation of Law in each Government Contract awarded to Parent.
(f) Any and all facts set forth in or acknowledged by Parent in any
certifications, representations or disclosure statements submitted by Parent
with respect to any Government Contract were current, accurate and complete in
all material respects as of the date of submission.
(g) Neither the Government nor any higher tier subcontractor or prime
contractor has notified Parent, either orally or in writing, that Parent has
breached or violated in all material respect any regulation, statute,
certification, representation or contract clause, provision or requirement with
respect to any Government Contract awarded to Parent or with respect to any bid,
quotation or proposal submitted by Parent.
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(h) Parent is not currently debarred or suspended from doing business with
the Government and Parent knows of no circumstances that would warrant the
institution of debarment or suspension proceedings in the future.
(i) No show cause notices or cure notices have been issued against Parent
on any of its Government Contracts with the Government or on any of the its
Contracts relating to any Government Contract.
(j) No default terminations have ever been issued against Parent on any of
its Contracts with the Government or on any of its Contracts relating to any
Government Contract.
(k) No negative determination of responsibility has ever been issued
against Parent in connection with any bid, quotation or proposal submitted by
Parent.
(l) No costs incurred by Parent have been disallowed or, within the last
six months, questioned, in either case as a result of a finding or determination
of any kind by the Government.
(m) Neither the Government nor any higher tier subcontractor or prime
contractor under a Government prime contract has withheld or setoff monies, or
in the last six months attempted to withhold or set off material monies, due to
Parent or has made any claims against Parent under any of its Contracts, and
there are no outstanding claims arising under any Government Contract.
(n) To Parent's Knowledge there are not any irregularities, misstatements
or omissions relating to any of its Government Contracts, bids, quotations or
proposals, past or present, that have led or could lead to, either before or
after the Merger, (i) any administrative, civil or criminal investigation or
indictment of Parent, (ii) the questioning or disallowance of any costs
submitted for payment by Parent or The Company, (iii) the recoupment of any
payments previously made to Parent, or (iv) the assessment of any penalties or
damages of any kind against Parent or The Company, arising out of such
irregularities, misstatements or omissions.
(o) Parent is not currently under administrative, civil or criminal
investigation indictment with respect to any alleged irregularity, misstatement
or omission arising under or in any way relating to any of its Government
Contracts, bids, quotations or proposals, past or present.
(p) Except as set forth in Section 4.14(p) of the Parent Disclosure
Schedules, there exist (i) no outstanding claims against Parent either by the
Government or by higher tier subcontractor, any prime contractor, subcontractor,
vendor or other third party arising under or relating to any Government
Contract, (ii) no facts or allegations which are known or should be known by
Parent upon which such a material claim may reasonably be based in the future,
(iii) no disputes between Parent and the Government or any prime contractor,
higher or lower tier subcontractor or vendor arising under or relating to any
Government Contract, and (iv) no facts or allegations which are known or should
be known by Parent over which such a material dispute may reasonably arise in
the future.
(q) Except as set forth in Section 4.14(q) of the Parent Disclosure
Schedules, Parent is not undergoing and has not undergone any audit, and has no
Actual Knowledge or reason to know of any basis for impending audits in the
future, arising under or relating to any Government Contract.
Section 4.15 Agreements, Contracts and Commitments.
(a) Parent is in compliance with and has not Breached or defaulted under,
or received notice that it has Breached or defaulted under, any of the terms or
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conditions of any Contract or license to which it is party or by which it is
bound or under which it is a licensee, nor does Parent have Knowledge of any
Event that would constitute such a Breach or default with the lapse of time,
giving of notice or both. Each such Contract and license is in full force and
effect and is not subject to any default thereunder.
(b) Parent has obtained, or will obtain prior to the Closing, all necessary
Consents of parties to any Governmental Contract as are required thereunder in
connection with the Transactions, or for such Governmental Contracts to remain
in full force and effect without modification, limitation or alteration after
the Closing. Following the Closing, Parent will be permitted to exercise all of
its rights under its Government Contracts without the payment of any additional
amounts or consideration other than amounts or consideration which Parent would
otherwise be required to pay had the Merger not occurred.
Section 4.16 Representations Complete. None of the representations or
warranties made by Parent or Merger Sub, and no financial statement, other
written financial information or statements made in any exhibit, schedule or
certificate furnished by Parent pursuant to this Agreement or any Related
Agreement, or furnished by Parent in or in connection with documents mailed or
delivered to the shareholders of the Company or Parent for use in soliciting
their proxies for approval of or consent to this Agreement and the Merger, other
than the Company Information (as to which neither Parent nor Merger Sub makes
any representation or warranty) contains or will contain at the Closing Date any
untrue statement of a material fact or omits or will omit at the Closing Date to
state any material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which they were made, not
misleading.
ARTICLE V
COVENANTS RELATED TO CONDUCT OF BUSINESS
Section 5.1 Conduct of Business of the Company Until Closing. The Company
hereby covenants and agrees that, from the date of this Agreement until the
Closing or the earlier termination of this Agreement, unless otherwise expressly
contemplated by this Agreement or consented to in advance and in writing by
Parent, the Company shall carry on its businesses only in the Ordinary Course of
Business, use its Best Efforts to preserve intact its business organization and
assets, maintain its rights and franchises, retain the services of its officers
and employees and maintain its relationships with customers, suppliers,
consultants, licensors, licensees and others having business dealings with it,
and use its Best Efforts to keep in full force and effect liability insurance
and bonds comparable in amount and scope of coverage to that currently
maintained. Without limiting the generality of the foregoing, subject to
applicable Laws, without the prior written consent of Parent, the Company shall
not:
(a) except as provided in Section 5.1(a) of the Disclosure Schedules, (i)
increase in any manner the compensation or fringe benefits of, or pay any bonus
to, any director, officer or employee; (ii) grant any severance or termination
pay to, or enter into any severance agreement with, any director, officer or
employee, or enter into any employment agreement with any director, officer or
employee; (iii) establish, adopt, enter into or amend any Employee Benefit Plan
or other arrangement, except (A) as may be required to comply with applicable
Law, and (B) the termination of the Company's Stock Bonus Plan and the
distribution of its assets; (iv) pay any benefit not provided for under any
Employee Benefit Plan or other arrangement; (v) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
Employee Benefit Plan or other arrangement (including the grant of stock
options, stock appreciation rights, stock based or stock related awards,
performance units or restricted stock, or the removal of existing restrictions
in any Employee Benefit Plan or other arrangement or agreement or awards made
thereunder); (vi) take any action to fund or in any other way secure the payment
of compensation or benefits under any Employee Agreement; (vii) promote or fire
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any director, officer or managerial employee; or (viii) change, alter or enter
into any employment agreement or consulting agreement;
(b) other than the distribution of the assets of the Stock Bonus Plan in
connection with the termination thereof, declare, set aside 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 Company Common
Stock or any Commitments of the Company; (ii) effect any reorganization,
recapitalization, merger or share exchange; or (iii) split, combine or
reclassify any of its 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 capital stock;
(d) issue, deliver, award, grant or sell, or authorize (by Contract or
otherwise) the issuance, delivery, award, grant or sale (including the grant of
any limitations in voting rights or other Encumbrances) of, any shares of
Company Common Stock (including shares held in treasury) or other Equity
Interests in or Securities of the Company, or Commitments therefor, other than
(i) the net exercise of outstanding Company Options in conformity with Section
2.11, and (ii) making required contributions to the Company's Stock Bonus Plan
in shares of Company Common Stock having a value not to exceed $60,000;
(e) acquire or agree to acquire, by merging or consolidating with, by
purchasing an Equity Interest in or a portion of the assets of, or by any other
manner, any business or any Entity 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) enter into any new real property, personal property or building Lease
or Amend any existing Lease or Contract involving personal property that has the
effect of increasing the Company's Liabilities or diminishing its rights, powers
or privileges thereunder;
(g) Amend, or propose or take any action to Amend, any of its
Organizational Documents (except as contemplated hereby);
(h) make or rescind any express or deemed election relating to Taxes, settle
or compromise any Action or controversy relating to Taxes, or change any of its
methods of reporting income or deductions for federal income Tax purposes from
those employed in the preparation of the federal income Tax Returns;
(i) make or agree to make any new capital expenditures which exceed,
individually or in the aggregate, $10,000;
(j) Transfer, Encumber or license, or agree to Transfer, Encumber or
license, any of its Property, except for Transfers, Encumbrances and licenses
made in the Company's Ordinary Course of Business;
(k) (i) incur any Debt or Capital Lease Obligation, or Guarantee any Debt
or Capital Lease Obligation of another Person, except for borrowings incurred in
the Ordinary Course of Business pursuant to Contracts set forth on the
Disclosure Schedules, or (ii) make any loans, advances or capital contributions
to, or investments in, or purchase any Securities of, any other Person, except
travel, expense and payroll advances made to employees in the Ordinary Course of
Business;
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(l) pay, discharge, settle or satisfy any Liabilities, other than (i)
payments, discharges or satisfactions of obligations in the Ordinary Course of
Business in accordance with their terms or liabilities reflected or reserved
against in the Financials, (ii) payments on the Company's Debt after providing
notice to Parent, or (iii) Expenses pursuant to Section 11.10;
(m) waive any material benefits of, or Amend or agree to Amend in any
material respect, any confidentiality, standstill or similar agreements to which
the Company is a party;
(n) waive, release or assign any rights or claims, or Amend or terminate
any Contract, to which the Company is a party or of which the Company is a
beneficiary;
(o) make any change in any method of accounting or accounting practice or
policy other than those required by GAAP or a Governmental Body;
(p) take any action or fail to take any action that could reasonably be
expected to have an adverse effect on the Company prior to the Closing or an
adverse effect on the Surviving Corporation or Parent after the Closing, or that
would adversely affect the ability of the Company prior to the Closing, or
Parent or the Surviving Corporation after the Closing, to obtain Consents of
third parties or Governmental Permits;
(q) collect Accounts Receivable or pay accounts payable other than
consistent with past practice and in the Ordinary Course of Business;
(r) enter into or make any Contract or Commitment with, or Amend any
existing Contract or Commitment with, any Related Party; or
(s) take, propose to take, or commit or agree in writing or otherwise to
take, any of the actions described in Section 5.1(a) through Section 5.1(r), or
any actions which would, individually or taken together, make any of the
representations or warranties made in Article III, or otherwise made by the
Company in this Agreement or any Related Agreement, untrue, misleading,
incomplete or incorrect.
Section 5.2 Reasonable Efforts and Further Assurances.
(a) Subject to the terms and conditions of this Agreement, each of Parent
and the Company shall (i) obtain (and cooperate with the other Party to obtain)
any Consent or Governmental Permit of, or any exemption by, any Governmental
Body and any other third party which is required to be obtained by the Company
or Parent or any of their respective Subsidiaries (if any) in connection with
the Transactions, and to comply with the terms and conditions of any such
Consent or Governmental Permit, (ii) obtain from any Governmental Bodies,
including the Government, any material licenses or novation agreements, if any,
required to be obtained or made by Parent, Merger Sub or the Company, in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Transactions, and (iii) make all necessary filings,
including the Form S-4 and the Proxy Statement (including any amendments or
supplements thereto) and any reports required to be filed under the Exchange
Act, and thereafter making any other required submissions, with respect to this
Agreement and the consummation of the Transactions required under any applicable
Law; provided that Parent and the Company shall cooperate with each other in
connection with the making of all such filings and submissions, including
providing copies of all such documents to the non filing party and its advisors
prior to filing and discussing all reasonable additions, deletions or changes
suggested in connection therewith. The Company and Parent shall furnish to each
other all information, including regarding itself and its Affiliates and
Representatives, required for any application or other filing to be made
pursuant to applicable Law in connection with the transactions contemplated by
this Agreement.
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(b) In the event that the Company and Parent fail to obtain any
Governmental Permit, the Company shall take any such actions reasonably
requested by Parent to minimize any adverse effect upon the Company and Parent
and their respective Subsidiaries and their respective businesses and
operations, which could reasonably be expected to result after the Closing from
the failure to obtain such Governmental Permit.
(c) Subject to the terms and conditions of this Agreement, each of Parent
and the Company shall use commercially reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective, as soon as practicable
after the date of this Agreement, the Transactions, including using commercially
reasonable efforts to lift or rescind any injunction or restraining order or
other Order adversely affecting the ability of such Party to consummate the
Transactions, and use commercially reasonable efforts to defend any Action
seeking to enjoin, prevent or delay the consummation of the Transactions or
seeking material damages.
Section 5.3 Certain Tax Matters. From the date hereof until the Closing,
the Company (a) will prepare and timely file with the relevant Governmental
Bodies all Tax Returns required to be filed by the Company during such period
("POST SIGNING RETURNS"), which Post Signing Returns shall be complete and
accurate in all material respects, (b) will timely pay all Taxes due and payable
with respect to such Post Signing Returns, (c) will pay or otherwise make
adequate provision for all Taxes payable by the Company for which no Post
Signing Return is due prior to the Closing, and (d) will promptly notify Parent
of any Action pending against or with respect to the Company in respect of any
Taxes. The Company shall submit each Tax Return described in clause (a) of the
preceding sentence to Parent at least ten business days prior to the date on
which such Tax Return is to be filed, and the Company shall not file such Tax
Return without Parent's prior approval (which approval shall not be unreasonably
withheld, conditioned or delayed). Each such Tax Return shall be prepared and
filed in a manner consistent with past practice and, on such Tax Return, no
position shall be taken, election made or method adopted that is inconsistent
with positions taken, elections made or methods used in preparing and filing
similar Tax Returns in prior periods. Without limiting the generality of the
foregoing, the Company shall not, in any such Tax Return, adopt a new position,
election or method that would have the effect of (i) deferring income from
periods or portions of periods ending on or before the Closing Date to periods
or portions of periods commencing after the Closing Date or (ii) accelerating
deductions from periods or portions of periods commencing after the Closing Date
to periods or portions or periods ending on or before the Closing Date.
Section 5.4 Access to Information.
(a) Between the date hereof and the Closing Date, the Company shall give to
Parent and its authorized Representatives reasonable access to all employees,
consultants, contractors, offices, warehouses, properties and other facilities
and to all books and records of such Company and will permit Parent to make such
reasonable inspections and reasonable investigations as Parent may from time to
time in their sole discretion require. The Company shall cause its
Representatives to furnish to Parent such financial, accounting, tax, business
and operating data and other information with respect to the business,
operations, prospects, properties, and Representatives of such Company as Parent
or Merger Sub may from time to time reasonably request
(b) Each of Parent and Merger Sub will hold and will cause its authorized
representatives to hold in confidence all documents and information concerning
the Company furnished to Parent or Merger Sub in connection with the
Transactions pursuant to the terms of that certain Mutual Nondisclosure
Agreement entered into between the Company and Parent dated as of July 20, 2005;
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provided that all of the obligations of Parent under such Mutual Nondisclosure
Agreement shall terminate as of the Effective Time.
Section 5.5 No Solicitation. Until the earlier of: (a) the Closing Date;
and (b) the termination of this Agreement pursuant to its terms, the Company and
the Key Shareholders shall not, and the Company and the Key Shareholders shall
cause their respective Representatives not to, directly or indirectly: (i)
initiate, solicit or encourage (including by way of furnishing information
regarding the Company) any inquiries, or make any statements to third parties
which may reasonably be expected to lead to any proposal concerning the sale of
the Company, its businesses or its Property (whether by way of merger, purchase
of capital shares, purchase of assets or otherwise) (each, a "COMPETING
TRANSACTION"); or (ii) subject to the fiduciary duties of the board of directors
of the Company under applicable Law, hold any discussions or enter into any
agreements with, or provide any information or respond to, any third party
concerning a proposed Competing Transaction or cooperate in any way with, agree
to, assist or participate in, solicit, consider, entertain, facilitate or
encourage any effort or attempt by any third party to do or seek any of the
foregoing. If at any time prior to the earlier of (x) the Closing Date and (y)
the termination of this Agreement pursuant to its terms, the Company or its
Representatives are approached in any manner by a third party concerning a
Competing Transaction (a "COMPETING PARTY"), the Company promptly shall inform
Parent regarding such contact and furnish Parent with a copy of any inquiry or
proposal, or, if not in writing, a description thereof, including the name of
such Competing Party, and the Company shall keep Parent informed of the status
and details of any future notices, requests, correspondence or communications
related thereto. In the event of Breach of this Section 5.5 by the Company or
any Key Shareholders, the Company shall be liable to Parent and shall pay to
Parent the greater of (i) all of the expenses incurred in connection with the
preparation, negotiation and drafting of this Agreement and Related Agreements,
and (ii) $250,000. The foregoing remedy shall not limit or prevent the exercise
by Parent of all other rights and remedies it may have against the Company and
the Key Shareholders. The provisions of this Section 5.5 shall survive the
termination of this Agreement, unless terminated by Parent other than because
the Company or any Key Shareholder is (A) in Material Breach of this Agreement,
or (B) responsible for the failure of a condition to the obligation of Parent to
consummate the Merger to be satisfied.
Section 5.6 Public Announcements; Employee Announcements.
(a) Each of Parent, Merger Sub, the Company and the Key Shareholders will
consult with one another before issuing any press release or otherwise making
any public statements in respect of the Transactions and shall not issue any
such press release or make any such public statement prior to such consultation,
except as may be required by applicable Law or by obligations pursuant to any
listing agreement with the OTCBB or the American Stock Exchange, as determined
by Parent.
(b) Prior to the Closing Date, each of Parent and the Company will consult
with one another regarding any written and spoken statements to be made to the
Company's employees, consultants or independent contractors in respect of the
Transactions, employee benefits, employee compensation and other transition and
integration matters. All written communications and formal oral presentations
shall be mutually agreed upon by Parent and the Company prior to any such
communication or presentation, and the Company shall not make any written or
oral statements to employees, consultants or independent contractors
inconsistent with the guidelines provided in conjunction with such consultation.
Section 5.7 Notification of Certain Matters.
(a) The Company shall give prompt notice to Parent and Merger Sub, and
Parent and Merger Sub shall give prompt notice to the Company, of (i) the
occurrence or nonoccurrence of any fact or Event the occurrence or nonoccurrence
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of which would be likely to cause any representation or warranty contained in
this Agreement to be Materially untrue or inaccurate at or prior to the Closing
Date, (ii) the discovery or receipt of information or Actual Knowledge
concerning any fact or circumstance which would be likely to cause any
representation or warranty contained in this Agreement to be Materially untrue
or inaccurate at or prior to the Closing Date, (iii) any failure of the Company,
Parent or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, (iv) any notice or other communication from any third party alleging
that the Consent of such third party is or may be required in connection with
the Transactions, or (v) any Events which would be likely to result in a
Material Adverse Effect; provided that with respect to any Event, information,
knowledge, failure, notice or communication referred to in clauses (i) through
(iv) next above, a Party shall not be required to provide notice pursuant to
this Section 5.7 unless such Event, information, knowledge, failure, notice or
communication, taken together with all other Events, information, knowledge,
failures, notices or communications described but not previously notified
pursuant to this Section 5.7, shall be material to Parent, Merger Sub or the
Company. The delivery of any notice pursuant to this Section 5.7 shall not cure
such Breach or non compliance or limit or otherwise affect the rights,
obligations or remedies available hereunder to the Party receiving such notice.
(b) From the date of this Agreement until the earlier of the Closing or the
termination of the Agreement, the Company and Parent shall promptly notify each
other in writing of any pending or, to the Actual Knowledge of the Company or
Parent, threatened action, proceeding or investigation by any Governmental Body
or any other Person (A) challenging or seeking damages in connection with the
Transactions, or (B) seeking to restrain or prohibit the consummation of the
Transactions or otherwise limit the right of Parent or its Subsidiaries to own
or operate all or any portion of the business or assets of the Company.
Section 5.8 Pre-Approval of Certain Transactions. Commencing on the date
hereof, the Company may propose transactions to Parent specifically for written
approval pursuant to this Section 5.8. In connection with any such proposed
transaction (a "PROPOSED TRANSACTION"), at the request of Parent, the Company
shall (i) prepare and deliver to Parent a written description of the Proposed
Transaction, summarizing in reasonable detail all of the material terms thereof
and any foreseeable material risks associated therewith, (ii) deliver to Parent
any definitive documentation proposed to be executed in connection with the
Proposed Transaction, and (iii) make available to Parent the opportunity to ask
questions of, and receive answers from, the Company and its Representatives
concerning the Proposed Transaction, and otherwise to obtain any additional
information, to the extent that the Company or its Representatives possess such
information or could acquire it without unreasonable effort or expense, related
to the Proposed Transaction. Any written request for such approval by the
Company shall constitute a representation and warranty of the Company that the
description of the Proposed Transaction made in writing to Parent does not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
regarding the Proposed Transaction, in light of the circumstances under which
they are made, not misleading. Based on the description of the Proposed
Transaction and such other information, in reliance thereon, Parent may
specifically approve the Proposed Transaction in a writing substantially in the
form of Exhibit J, which writing must specifically reference this Section 5.8
(such an approved Proposed Transaction, an "APPROVED TRANSACTION").
Section 5.9 Consents to Merger. Commencing on the date hereof, the Company
shall use its Best Efforts to obtain an unconditional, unlimited, enforceable
written consent to the consummation of the Merger (the "MERGER CONSENTS") from
each Person identified in Section 3.7 of the Disclosure Schedules as a
counterparty to a Material Company Contract (each, a "MATERIAL COUNTERPARTY").
The Company shall cooperate fully with Parent in seeking such Merger Consents
and, with respect to Company Contracts with the Government, in discussing the
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novation of such Company Contracts with the applicable Government contracting
officers.
Section 5.10 Export Licenses. Commencing on the date hereof, the Company
shall use its Best Efforts to amend (i) the "Permanent Export Licenses", or
applications therefor, identified in Section 3.20 of the original Disclosure
Schedules, and (ii) and the "Manufacturing License Agreement" identified in
Section 3.16(c) of the original Disclosure Schedules; in each case in connection
with the Merger and the other Transactions, as required by the International
Traffic in Arms Regulations (Title 22, Chapter 1, Subchapter M of the Code of
Federal Regulations) promulgated under the Arms Export Control Act, 22 U.S.C.
Sec. 2778, or any successor regulations.
Section 5.11 Petercsak Release. Commencing on the date hereof, the Company
shall use its commercially reasonable efforts to negotiate a release of all
claims arising from or related to the Petercsak Agreements (as defined in
Section 3.16(j) of the original Disclosure Schedules), in form and substance
reasonably satisfactory to Parent, to be tendered at the Closing in return for
the payment of a sum certain (which sum may be paid pursuant to Section 8.6).
Section 5.12 Preparation of Form S-4 and Proxy Statement.
(a) Subject to the strict satisfaction by the Company of the terms and
provisions of Section 5.15 and the condition specified in Section 6.2(n), and
the agreement of the applicable parties to the terms and conditions of the
Escrow Agreement as provided in Section 2.17(d), as promptly as practicable
after the execution of this Agreement, Parent shall, subject to the full and
prompt assistance of the Company and the Key Shareholders, prepare and file with
the SEC the Proxy Statement, and Parent shall prepare and file with the SEC the
Form S-4, in which the Proxy Statement shall be included as a prospectus. Each
of Parent and the Company shall use its reasonable Best Efforts to have the Form
S-4 declared effective under the Securities Act by the SEC as promptly as
practicable after such filing.
(b) The Company and Key Shareholders shall promptly provide, and shall use
their Best Efforts to cause the other shareholders of the Company promptly to
supply, to Parent and its Representatives any and all information in writing
concerning the Company, its business, operations, directors, officers,
Subsidiaries, shareholders or any other matters which may in Parent's reasonable
discretion be required for inclusion in the Form S-4 or Proxy Statement, or to
respond to any comments from the SEC thereon, or reasonably requested by Parent
in connection therewith.
(c) The Proxy Statement will solicit proxies for the approval by the
shareholders of Parent for (i) this Agreement and the Merger, (ii) an increase
in the amount of shares reserved for issuance under the SpaceDev 2004 Equity
Incentive Plan, or the approval of a new stock or equity plan, as provided in
Section 8.5(b), (iii) an increase in the number of shares of Parent Common Stock
authorized by its Articles of Incorporation (the "SHARE AUTHORIZATION") to
provide sufficient reserves for the issuance of (A) the Merger Consideration,
(B) any Private Financing, and (C) such additional shares as Parent in its
discretion deems prudent to have authorized, (iv) at the option of Parent, a
reverse stock split of the Parent Common Stock, (v) at the option of Parent, the
redomestication of Parent in the State of Delaware or other state selected by
Parent, (vi) at the option of Parent, the approval of a Private Financing, and
(vii) subject to the consent of the Company (which consent shall not be
unreasonably withheld, conditioned or delayed), such other matters as Parent
deems appropriate for approval of its shareholders in furtherance of the
Transactions contemplated herein (collectively, the "PARENT SHAREHOLDERS
MATTERS"). Parent, with the assistance of the Company and the Key Shareholders
(which such Parties shall promptly provide upon Parent's reasonable request),
shall promptly respond to any comments from the SEC. Parent shall use its
reasonable Best Efforts to cause the Proxy Statement to be mailed to the
shareholders of Parent as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Parent shall also take any action (other
than qualifying to do business in any jurisdiction in which it is not now so
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qualified) required to be taken under any applicable state securities or "blue
sky" laws in connection with the issuance of shares of Parent Common Stock in
the Merger, and the Company shall furnish all information concerning the Company
and the Shareholders as may be reasonably requested in connection with any such
action.
(d) Parent shall promptly provide the Proxy Statement, as amended or
supplemented from time to time, to the Company for use in connection with the
meeting of the shareholders of the Company to approve, among other matters, this
Agreement and the Merger.
(e) If at any time prior to the final conclusion of the Parent Shareholders
Meeting or Company Shareholders Meeting any Events occur relating to Parent or
the Company, or any of their respective officers, directors, Shareholders or
Subsidiaries, is discovered or learned by Parent or the Company which,
individually or together, (i) should be set forth in an amendment or supplement
to the Form S-4 or the Proxy Statement, so that the Form S-4 or Proxy Statement
would not include 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
therein, in light of the circumstances under which they were made, not
misleading, (ii) cause the Form S-4 or Proxy Statement to become incorrect,
incomplete or misleading in any material respect, or (iii) under the Securities
Act or the Exchange Act, or the rules and regulations promulgated thereunder,
are otherwise required to be set forth in an amendment or supplement to the Form
S-4 or Proxy Statement; then in each such case, the Party which discovers or
learns of such Events shall promptly inform the other of such Events, and shall
cooperate with Parent in filing with the SEC or its staff or any other
Governmental Bodies or officials thereof, or Parent and the Company mailing to
the shareholders of Parent or the Company, any appropriate amendment or
supplement thereto, including by providing Parent with such corrected, updated
or supplemental information as may be necessary in order to cause the Form S-4
and Proxy Statement, insofar as they relate to the Company and its directors,
officers, subsidiaries and Shareholders or the Company Information, to comply
with the Securities and the Exchange Act, and the rules and regulations
promulgated thereunder, and not to include 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 therein, in light of the circumstances under which they
were made, not misleading.
Section 5.13 Parent Shareholders Meeting. Promptly after the date on which
the Form S-4 is declared effective by the SEC and mailed to Parent's
shareholders, Parent will take all lawful and commercially reasonable action
necessary in accordance with the CBCA and its Organizational Documents to call,
notice, convene and hold a special meeting of its shareholders to approve this
Agreement, the Merger and the other applicable Parent Shareholders Matters (the
"PARENT SHAREHOLDERS MEETING"). Parent shall use its Best Efforts to hold the
Parent Shareholders Meeting within forty-five days of the date the SEC declares
the Form S-4 effective. Except to the extent that the Board of Directors of
Parent concludes, based upon facts, events or circumstances, or the context
thereof, unknown or changed since the date of this Agreement, that a
recommendation to Parent's shareholders to vote in favor of the Merger or any of
the other Parent Shareholders Matters related thereto would be a violation of
any of its fiduciary obligations under applicable Law as determined by the Board
of Directors of Parent in good faith after consultation with its legal counsel,
Parent's Board of Directors shall include in the Proxy Statement its
recommendation that Parent's shareholders vote in favor of the Merger.
Notwithstanding anything to the contrary contained in this Agreement, Parent may
adjourn or postpone the Parent Shareholders Meeting to the extent necessary to
ensure that any required supplement or amendment to the Form S-4 or Proxy
Statement is provided to the shareholders of Parent or, if as of the time for
which the Parent Shareholders Meeting is originally scheduled (as set forth in
the Proxy Statement) there are insufficient shares of the Parent Common Stock
represented (either in person or by proxy) to constitute a quorum necessary to
conduct the business of the Parent Shareholders Meeting.
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Section 5.14 Company Shareholders Meeting. Promptly after the date on which
the Form S-4 is declared effective by the SEC, the Company shall mail a copy of
the Proxy Statement to each of its shareholders and shall take all lawful and
commercially reasonable action necessary in accordance with the CBCA and its
Organizational Documents to call, notice, convene and hold a special meeting of
its shareholders to approve this Agreement and the Merger (the "COMPANY
SHAREHOLDERS MEETING"). The Company shall use its Best Efforts to hold the
Company Shareholders Meeting within forty days of the date the SEC declares the
Form S-4 effective. Except to the extent that the Board of Directors of the
Company concludes, based upon facts, events or circumstances, or the context
thereof, unknown or changed since the date of this Agreement, that a
recommendation to the Company's shareholders to vote in favor of this Agreement
or the Merger would be a violation of any of its fiduciary obligations under
applicable Law as determined by the Board of Directors of the Company in good
faith after consultation with its legal counsel, the Company's Board of
Directors shall mail with the Proxy Statement, and inform the shareholders of
the Company at the Company Shareholders Meeting, its recommendation that the
Company's shareholders vote in favor of the Merger. Notwithstanding anything to
the contrary contained in this Agreement, Parent may adjourn or postpone the
Company Shareholders Meeting to the extent necessary to ensure that any required
supplement or amendment to the Form S-4 or Proxy Statement is provided to the
shareholders of the Company or, if as of the time for which the Company
Shareholders Meeting is originally scheduled there are insufficient shares of
the Company Common Stock represented (either in person or by proxy) to
constitute a quorum necessary to conduct the business of the Company
Shareholders Meeting.
Section 5.15 Financial Statements. No later than (i) November 4, 2005, the
Company shall prepare and deliver to Parent the Company's unaudited balance
sheet as of September 30, 2005, together with the Company's related unaudited
statements of income and cash flows for the nine-month periods ended on
September 30, 2005 and September 30, 2004, and (ii) one business day prior to
the Closing Date, the Company shall prepare and deliver to Parent the Closing
Balance Sheet; in each case, together with a certificate duly executed by the
principal execute officer and principal financial officer of the Company
certifying, representing and warranting (with no qualifications, exceptions or
limitations) that (A) such balance sheet and, if applicable, statements of
income and cash flows, are correct in all Material respects and have been
prepared in accordance with GAAP, consistently applied throughout the periods
indicated and with each other, except as may be disclosed in notes thereto
(which notes, if any, may consist of (x) notes substantially identical to the
notes to the June 30, 2005 Financials, and (y) any other notes approved in
writing by Parent in its reasonable discretion), subject in the case of interim
statements to normal year-end adjustments, and (ii) such balance sheet and, if
applicable, statements of income and cash flows, fairly and accurately present
the financial condition, operating results (if applicable) and changes in
shareholders' equity and cash flows (if applicable) of the Company as of the
respective dates and during the respective periods indicated therein. The
Company shall continue through the Closing Date to maintain a standard system of
accounting established and administered in accordance with GAAP.
Section 5.16 Repayment of Certain Loans and Advances. Prior to the Closing,
the Company shall collect from each Key Shareholder in full all loans, advances
or other debt or credits owed by such Key Shareholder to the Company, including
the obligations set forth in Section 3.12(p) of the original Disclosure
Schedules, and the Company shall not in whole or in part forgive, cancel, assume
or otherwise reduce any of the foregoing.
Section 5.17 Private Financing. Parent shall use its Best Efforts to
execute definitive agreements for a Private Financing no later than December 15,
2005 and to close such Private Financing prior to or at the Closing.
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ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions to Obligations of Each Party Under This Agreement.
The respective obligations of the Company, Merger Sub and Parent to consummate
the Merger and the Transactions are subject to the fulfillment at or prior to
the Closing of each of the following additional conditions, any or all of which
may be waived in writing in whole or part by the Company or Parent (on behalf of
itself and Merger Sub), as the case may be, to the extent permitted by
applicable Law:
(a) No Governmental Body shall have enacted, issued, promulgated, enforced
or entered any Law or Order (in each case, whether temporary, preliminary or
permanent), which is in effect and which prevents or prohibits consummation of
the Transactions.
(b) (i) The shareholders of Parent shall have approved this Agreement, the
Merger and the Share Authorization at the Parent Shareholders Meeting, (ii) such
approval shall have satisfied all shareholder approval requirements under
applicable Law, and (iii) not more than 1.5% of the outstanding shares of Parent
Common Stock shall have exercised, or shall retain the unexpired right to
exercise, dissenters' rights (or similar rights of dissent), if any, in respect
of the Merger available under applicable Law.
(c) The SEC shall (i) have declared the Form S-4 effective under the
Securities Act, (ii) not have issued a stop order suspending the effectiveness
of the Form S-4, and (iii) shall not have initiated or threatened to initiate
any proceedings for that purpose. Any material state securities or "blue sky"
laws applicable to the issuance of the Closing Shares shall have been complied
with.
(d) There shall be no pending or threatened Action (i) challenging or
seeking to restrain or prohibit the consummation of the Transactions; (ii)
relating to the Transactions and seeking to obtain from Parent, Merger Sub or
the Company any damages that may be material to Parent, Merger Sub or the
Company; (iii) seeking to prohibit or limit in any respect Parent's ability to
vote, receive dividends with respect to or otherwise exercise ownership rights
with respect to the stock of the Company or the Surviving Corporation; or (iv)
which would have a Material Adverse Effect on the Company or a material adverse
effect on Parent's ability to operate the Surviving Corporation's business, or
to own, use and enjoy the Property of the Surviving Corporation, after
consummation of the Transactions.
(e) The VWAP as of the Trading Day next preceding the Closing shall be not
less than $0.77 per share.
Section 6.2 Additional Conditions to the Obligations of Parent. The
respective obligations of Parent and Merger Sub to consummate the Merger and the
Transactions are subject to the fulfillment at or prior to the Closing of each
of the following additional conditions, any or all of which may be waived in
writing in whole or part by Parent, to the extent permitted by applicable Law:
(a) Each of the representations and warranties of or in respect of the
Company and the Key Shareholders contained in Article III or elsewhere in this
Agreement shall be true and correct as of the date of this Agreement and shall
be true and correct as of the Closing Date, except for representations and
warranties which address matters only as of a particular date, which
representations and warranties shall be true and correct as of such date, except
for failures of representations and warranties to be true and correct as and as
of the dates as aforesaid which are not Material. For the purpose of determining
the truth and correctness of such representations and warranties, the Updated
Disclosure Schedules, and any other update or modification to the Disclosure
Schedules made or purported to have been made after the date of this Agreement,
shall be disregarded.
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(b) Each of the representations and warranties of or in respect of the
Company and the Key Shareholders contained in Section 3.2, Section 3.3, Section
3.5 and Section 3.9, and each of the representations and warranties of or in
respect of the Company and the Key Shareholders contained in Article III or
elsewhere in this Agreement which expressly includes a Knowledge, Actual
Knowledge, Material Adverse Effect, or other materiality qualification, shall be
true and correct as of the date of this Agreement and shall be true and correct
as of the Closing Date, except for representations and warranties which address
matters only as of a particular date, which representations and warranties shall
be true and correct as of such date. For the purpose of determining the truth
and correctness of such representations and warranties, the Updated Disclosure
Schedules, and any other update or modification to the Disclosure Schedules made
or purported to have been made after the date of this Agreement, shall be
disregarded.
(c) The Company and Key Shareholders shall each have performed or complied
in all material respects with all agreements and conditions contained herein
required to be performed or complied with by it prior to or on the Closing Date.
(d) The Company shall have delivered to Parent all Merger Consents it has
obtained from each Material Counterparty to Material Company Contracts, together
with a schedule indicating each Material Company Contract as to which a Merger
Consent from all Material Counterparties has been obtained (each, an "APPROVED
CONTRACT"). The Approved Contracts shall represent not less than 75% of all
Material Company Contracts, based, with respect to each Material Company
Contract, on the aggregate revenues generated in FY 2005 and projected by the
Company in good faith to be generated in FY 2006 under such Material Company
Contract. The Company shall also have delivered to Parent a schedule indicating
each Material Company Contract as to which one or more Material Counterparties
has affirmatively indicated that it does not intend to, or will not, provide a
Merger Consent (each, a "REJECTED CONTRACT"). The Rejected Contracts shall
represent not more than 10% of all Material Company Contracts, based on revenues
generated in FY 2005 and projected by the Company in good faith to be generated
in FY 2006 under each Material Company Contract; provided that, with respect to
Company Licenses, revenues shall be calculated based on the aggregate revenues
the Company may reasonably expect to lose from all other Company Contracts if
the Company is unable to use or exploit the applicable Intellectual Property
Rights (taking into account any increased costs of alternate Intellectual
Property Rights). For purposes of this Section 6.2(d), each Government
counterparty to a Material Company Contract shall be deemed to have provided a
Merger Consent, unless the applicable contracting officer shall have (A)
expressed opposition to the Merger to Parent or the Company, or (B) indicated to
Parent or the Company that such officer would not support a novation of the
applicable Contract; in which event such Contract shall be deemed a Rejected
Contract.
(e) Vectra shall not have foreclosed or collected on any collateral for any
Vectra Loan or otherwise.
(f) The Closing Debt shall not exceed $6,800,000 (as evidenced by full
pay-off notices or receipts tendered by the applicable lenders of the Vectra
Loans, the Shareholder Loans and the SpaceDev Loan).
(g) The Company shall have delivered the Transaction Expense Payment
Schedule in compliance with Section 2.19 and such Transaction Expense Payment
Schedule shall provide for the payment in full of all outstanding Company
Transaction Expenses.
(h) (i) The Company shall have delivered to Parent an executed officers'
certificate, in substantially the form attached hereto as Exhibit E-1, dated the
Closing Date, signed by the Chief Executive Officer, the President and the
Director of Business Management of the Company, certifying (A) the fulfillment
of the conditions specified in Section 6.2(a) through Section 6.2(f), inclusive,
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(B) that the updated Shareholder Table delivered at the Closing is true, correct
and complete in all respects as of the Closing, (C) that the balance sheets of
the Company described in Section 5.15 comply with the provisions thereof, and
(D) that the Company has not entered into any Contract or, to the Knowledge of
the signatory, incurred any Liabilities since the date of the Closing Balance
Sheet, except in the Ordinary Course of Business; and (ii) each Key Shareholder
shall have delivered to Parent an executed key shareholder's certificate, in
substantially the form attached hereto as Exhibit E-2, dated the Closing Date.
(i) No Events, effects, violations or Breaches shall have occurred since
the date hereof which have had, or are likely to have, a Material Adverse Effect
on the Company.
(j) The Escrow Agent and the Shareholder Agent shall have entered into the
Escrow Agreement, which shall be in full force and effect as of the Closing
Date.
(k) Shareholders of the Company holding not less than 98% of the shares of
each class of capital stock of the Company shall have approved this Agreement
and the Merger.
(l) The Company and all Shareholders shall have delivered to Parent
certificates evidencing not less than 98% of the shares of each class of capital
stock of the Company (including shares issued upon the exercise of any Company
Options on or prior to the Closing Date), or, in lieu thereof, the affidavit and
bond, if any, required of the holder of record of such shares by Section
2.10(e).
(m) At the Closing, the Company shall have delivered or caused to be
delivered to Parent all of the agreements, instruments and documents required to
be delivered to Parent pursuant to the foregoing provisions of this Section 6.2,
together with:
(1) the Updated Disclosure Schedules;
(2) the written and, other than with reference to the consummation of
the Merger, unconditional resignations of all of the current members of the
board of directors and of the current officers of the Company (other than
those offices to which Merger Sub has appointed such current officer),
effective as of the Effective Time;
(3) the Shareholder Table, updated as of the Closing Date;
(4) a legal opinion of Holland & Xxxx LLP, special counsel to the
Company, in substantially the form attached hereto as Exhibit D-1;
(5) certificates dated as of a date within a reasonable period of time
prior to the Closing Date as to the good standing of the Company, executed
by the appropriate officials of the State of Colorado and each other
jurisdiction in which the Company is licensed or qualified to do business
as a foreign corporation, as specified in Section 3.1 of the Disclosure
Schedules;
(6) a certificate signed by the secretary of the Company certifying,
as complete and accurate as of the Closing Date, (i) the complete
Organizational Documents of the Company, (ii) the resolutions or actions of
each of the Shareholders and the Board of Directors of the Company
approving the execution, delivery and performance of this Agreement and the
consummation of the Merger, and (iii) the Shareholder Table delivered at
the Closing;
(7) a pay off letter or similar paid-in-full receipt from Vectra, and
UCC-3 Terminations of financing statement encumbering any Property of the
Company and any other documents reasonably requested by Parent's counsel in
connection with the repayment in full of the Vectra Loan and the
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termination of the security interests and liens on the Properties of the
Company;
(8) a pay off letter or similar paid-in-full receipt from each lender
who made a Shareholder Loan;
(9) a duly executed counterpart of the Non-Competition Agreement with
each Key Shareholder, substantially in the form attached hereto as Exhibit
F (the "NON-COMPETITION AGREEMENT");
(10) a duly executed Letter of Transmittal from (i) each of the
shareholders of the Company who voted in favor of the Agreement and Merger,
(ii) each Company Option Holder required to execute a Letter of Transmittal
pursuant to Section 2.11; for delivery to the Exchange Agent, and (iii)
each Person listed as receiving shares of Parent Common Stock on the
Transaction Expense Payment Schedule;
(11) the Transaction Expense Payment Schedule, in form and substance
reasonably satisfactory to Parent and otherwise complying with the terms
and provisos of Section 2.19;
(12) a duly executed Executive Officer Release, substantially in the
form attached as Exhibit I, from each executive officer and director of the
Company; and
(13) a duly executed employment agreement with (i) Xxxxx Xxxxxxxx for
the position of Managing Director of the Company, substantially in the form
attached hereto as Exhibit G-1, and (ii) Xxxxxx Xxxxx, for the position of
President of the Surviving Corporation, in form and substance to be agreed
between Parent and Xx. Xxxxx (together, the "EXECUTIVE EMPLOYMENT
AGREEMENTS").
(n) As promptly as practicable after the date hereof, the Company shall
have delivered or caused to be delivered to Parent a duly executed Standstill
and Lock-Up Agreement, substantially in the form of Exhibit H (each, a
"STANDSTILL AND LOCK-UP AGREEMENT"), from each Shareholder or other Person
(including any Person to be listed as receiving shares of Parent Common Stock on
the Transaction Expense Payment Schedule or exercising Company Options in
conformity with Section 2.11 and the Shareholder Agent with respect to shares
held in the Expense Fund) expected to be entitled to receive 50,000 or more
shares of Parent Common Stock at or in connection with the Closing and the
payment of Performance Consideration (if any) for FY 2005, pursuant to this
Agreement or any Related Agreement.
Section 6.3 Additional Conditions to the Obligations of the Company. The
obligations of the Company to consummate the Transactions are subject to the
fulfillment at or prior to the Closing of each of the following conditions, any
or all of which may be waived in writing in whole or in part by the Company to
the extent permitted by applicable Law:
(a) Each of the representations and warranties of or in respect of Parent
and Merger Sub contained in Article IV or elsewhere in this Agreement shall be
true and correct as of the date of this Agreement and shall be true and correct
as of the Closing Date, except for representations and warranties which address
matters only as of a particular date, which representations and warranties shall
be true and correct as of such date, except for failures of representations and
warranties to be true and correct as and as of the dates as aforesaid which are
not Material. For the purpose of determining the truth and correctness of such
representations and warranties, the Updated Parent Disclosure Schedules, and any
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other update or modification to the Parent Disclosure Schedules made or
purported to have been made after the date of this Agreement, shall be
disregarded.
(b) Each of the representations and warranties of or in respect of Parent
and Merger Sub contained in Section 4.2, Section 4.3, Section 4.6 and Section
4.7(b), and each of the representations and warranties of or in respect of
Parent and Merger Sub contained in Article IV or elsewhere in this Agreement
which expressly includes a Knowledge, Actual Knowledge, Material Adverse Effect,
or other materiality qualification, shall be true and correct as of the date of
this Agreement and shall be true and correct as of the Closing Date, except for
representations and warranties which address matters only as of a particular
date, which representations and warranties shall be true and correct as of such
date. For the purpose of determining the truth and correctness of such
representations and warranties, the Updated Parent Disclosure Schedules, and any
other update or modification to the Parent Disclosure Schedules made or
purported to have been made after the date of this Agreement, shall be
disregarded.
(c) Parent and Merger Sub shall have performed in all material respects
(considered collectively and individually) all covenants and obligations in this
Agreement required to be performed by Parent or Merger Sub as of the Closing
Date.
(d) Parent shall have consummated the Private Financing.
(e) Parent's quantity contract awarded by the Missile Defense Agency on
March 31, 2004, shall not have terminated without a successor contract being in
effect.
(f) Parent shall have delivered to the Company an executed officer's
certificate, in substantially the form attached hereto as Exhibit E-3, dated the
Closing Date, signed by the President and Chief Financial Officer of Parent,
certifying the fulfillment of the conditions specified in Section 6.3(a) and
Section 6.3(e), inclusive.
(g) Parent shall have delivered or tendered the Closing Consideration
required under Article II.
(h) Parent shall have delivered a duly executed counterpart of each
Non-Competition Agreement.
(i) Parent shall have delivered a duly executed counterpart of each
Executive Employment Agreement.
(j) Sufficient funds to pay the Vectra Loans and Shareholder Loans in full
shall have been wired or delivered to the lenders thereunder contemporaneously
with the Closing.
(k) Parent shall have delivered or caused to be delivered to the Company a
legal opinion of Sheppard, Mullin, Xxxxxxx & Xxxxxxx LLP, special counsel to
Parent, in substantially the form attached hereto as Exhibit D-2.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
Section 7.1 Survival of Representations, Warranties and Covenants.
(a) The representations, warranties and certifications of Parent, Merger
Sub, the Company and the Key Shareholders contained in this Agreement, or in any
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certificate or other instrument delivered pursuant to this Agreement by such
Person or on its behalf, shall remain in effect until, and will expire on, the
Escrow Termination Date, except that:
(1) the representations and warranties contained in Section 3.13 (Tax
Matters), Section 3.18 (Agreements, Contracts and Commitments - Government
Contracts) and Section 4.15(a) (Agreements, Contracts and Commitments -
Government Contracts) shall survive until the date three calendar years
after the Closing Date;
(2) the representations and warranties contained in Section 3.3
(Capital Structure), Section 3.5 (Authority), Section 3.8(c) (Stock
Records), Section 3.8(d) (Shareholder Table), Section 3.31 (Equity
Ownership), Section 4.3 (Power and Authority) and Section 4.6
(Capitalization) shall survive until the termination of the statutes of
limitations applicable to the subject matter thereof;
(3) neither the Escrow Termination Date nor any of the other foregoing
time limits shall apply to claims based upon fraud or willful
misrepresentation; and
(4) the representation, warranty, covenant or obligation that is the
subject matter of a Claim Notice made in accordance with Section 7.1(c) on
or before the Escrow Termination Date, or such later date as applies to the
survival of such representation, warranty, covenant or obligation pursuant
to this Section 7.1(a), shall not so expire with respect to such Claim
Notice or any subsequent Claim Notice that is reasonably related to the
subject matter of such Claim Notice, but rather shall remain in full force
and effect until such time as each and every claim that is based upon has
been fully and finally resolved, either by means of a written settlement
agreement or by the dispute resolution procedure set forth in Section 7.6.
(b) The representations, warranties, certifications, covenants and
obligations of Parent, Merger Sub, the Company and the Key Shareholders, and the
rights and remedies that may be exercised by any Person having a right to
indemnification pursuant to this Article VII (collectively, the "INDEMNIFIED
PARTIES"), shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or any Knowledge of, any
of the Indemnified Parties or any of their Representatives.
(c) For purposes of this Agreement, a "CLAIM NOTICE" relating to a
particular representation, warranty, covenant or obligation shall be deemed to
have been delivered if any Indemnified Party, acting in good faith, delivers (i)
in the case of any claim against or on account of the Company, to the
Shareholder Agent and, if a claim is to be made against the Escrow Account, to
the Escrow Agent, (ii) in the case of any claim against a Key Shareholder, to
such Key Shareholder, or (iii) in the case of any claim against Parent, to
Parent; a written notice stating that such Indemnified Party believes that there
is or has been a possible breach of such representation, warranty, covenant or
obligation and containing (A) a brief description of the circumstances
supporting such Indemnified Party's belief that there is or has been such a
possible breach; and (B) a non-binding, preliminary estimate of the aggregate
dollar amount of the actual and potential Losses that have arisen and may arise
as a direct or indirect result of such possible breach.
(d) It is the intent of the Parties that all indemnification obligations
under this Article VII shall apply without regard to whether or not (x) the
Indemnifying Party was negligent or otherwise at fault in any respect with
regard to the existence or occurrence of any of the matters covered by any such
indemnification obligation, or (y) the Indemnifying Party otherwise caused or
created, or is claimed to have caused or created, the existence or occurrence of
any of the matters covered by any such indemnification obligation, whether
through its own acts or omissions or otherwise. Notwithstanding the foregoing,
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the indemnification obligation of the Indemnifying Party shall be reduced to the
extent that the Indemnified Party receives insurance proceeds or other payment
from a third party that specifically covers the Losses for which the
Indemnifying Party otherwise would be required to indemnify such Indemnified
Party pursuant to this Article VII. If an Indemnified Party receives insurance
proceeds or other payment from a third party that specifically covers Losses for
which one or more of the Indemnifying Parties previously paid such Indemnified
Party pursuant to this Article VII, then such Indemnified Party shall refund to
such Indemnifying Parties an amount equal to the lesser of (i) the amount that
such Indemnifying Parties previously paid to such Indemnified Party relating to
such Losses, and (ii) the amount of such insurance proceeds or other payment.
Section 7.2 Indemnification; Escrow Account; Expense Fund.
(a) The Key Shareholders and other Shareholders agree that from and after
the Closing Date, the Key Shareholders and other Shareholders (the "PARENT
INDEMNIFYING PARTIES") shall, subject to Section 7.3, indemnify and hold Parent
and its Representatives and Affiliates (including the Surviving Corporation)
(collectively, the "PARENT INDEMNIFIED PARTIES") harmless against all Losses
incurred by the Parent Indemnified Parties directly or indirectly as a result of
any material inaccuracy or Breach of a representation, warranty or certification
of the Company contained in this Agreement (without giving effect to (i) any
Updated Disclosure Schedules, or (ii) to any sections of the Disclosure
Schedules, or portions thereof, identified in Section 7.2 of the original Parent
Disclosure Schedules delivered on or prior to the date hereof) or any of the
Transaction Documents; provided that the Parent Indemnifying Parties shall have
no obligation to indemnify or hold the Parent Indemnified Parties harmless
against (A) Losses to the extent accrued for in the Closing Balance Sheet, and
(B) Losses arising out of Approved Transactions (other than for any such Losses
based on any breach of the representations and warranties made or deemed made by
the Company pursuant to Section 5.8 in connection with any Approved
Transaction).
(b) Each Key Shareholder further agrees that from and after the Closing
Date, such Key Shareholder shall, subject to Section 7.3 and in addition to its
obligations under Section 7.2(a), indemnify and hold the Parent Indemnified
Parties harmless against all Losses incurred by the Parent Indemnified Parties
directly or indirectly as a result of:
(1) any material inaccuracy or Breach of a representation, warranty or
certification of such Key Shareholder contained in this Agreement (without
giving effect to (i) any Updated Disclosure Schedules, or (ii) to any
sections of the Disclosure Schedules, or portions thereof, identified in
Section 7.2 of the original Parent Disclosure Schedules delivered on or
prior to the date hereof) or any of the Transaction Documents; or
(2) any Breach by such Key Shareholder of any covenants applicable to
it contained in this Agreement or the Non-Competition Agreement between
Parent and such Key Shareholder.
(c) Parent agrees that from and after the Closing Date, Parent (together
with the Parent Indemnifying Parties, the "INDEMNIFYING PARTIES") shall, subject
to Section 7.3, indemnify and hold the Shareholders (collectively, the
"SHAREHOLDER INDEMNIFIED PARTIES") harmless against all Losses incurred by such
Shareholder Indemnified Parties directly or indirectly as a result of any
material inaccuracy or Breach of a representation, warranty or certification of
Parent or (prior to the Closing) Merger Sub, as the case may be, contained in
this Agreement (without giving effect to any Updated Parent Disclosure
Schedules) or any of the Transaction Documents.
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(d) As security for the indemnity provided to the Parent Indemnified
Parties in this Article VII and by virtue of this Agreement and the Statement of
Merger, Parent will deposit the Escrow Stock into the Escrow Account pursuant to
the terms set forth in Section 2.17 and the Escrow Agreement.
(e) As security for the out-of-pocket expenses reasonably incurred by the
Shareholder Agent in performing its duties under this Article VII and by virtue
of this Agreement, Parent will deposit cash into the Expense Fund pursuant to
the terms set forth in Section 2.18 and the Escrow Agreement.
Section 7.3 Limitation on Indemnification.
(a) Notwithstanding any provision of this Agreement to the contrary, after
the Closing Date, the Shareholders and Key Shareholders shall have no obligation
to indemnify any Parent Indemnified Parties, and Parent shall have no obligation
to indemnify any Shareholder Indemnified Parties, until the aggregate of all
Losses suffered by the Parent Indemnified Parties or Shareholder Indemnified
Parties, as the case may be, exceeds $100,000 (the "BASKET AMOUNT"), in which
case the Parent Indemnified Parties or Shareholder Indemnified Parties, as the
case may be, shall be entitled to recover all Losses including the Basket
Amount; provided, however, any Losses resulting from a willful or intentional
Breach of this Agreement or any Transaction Document or fraud by any Party shall
not be subject to such Basket Amount.
(b) In the event any Parent Indemnified Party shall suffer any Losses for
which such Parent Indemnified Party is entitled to indemnification under this
Article VII, such Parent Indemnified Party shall be entitled to recover such
Losses:
(1) first, from the Escrow Account pursuant to the terms and
conditions set forth in the Escrow Agreement, until no additional amounts
remain in the Escrow Account (without consideration of any amounts to be
deposited therein at a later date); and
(2) next, to the extent such Losses shall not have been fully
recovered, from the Key Shareholders or any of them (including by set-off
against any Shareholder Performance Consideration to be delivered to the
Key Shareholders).
(c) Subject to Section 7.8, (i) the Shareholders shall have no liability
for Losses in excess of the Escrow Stock deposited in the Escrow Account under
the Escrow Agreement, and (ii) each Key Shareholder shall be liable to the
Parent Indemnified Parties for Losses up to the Consideration Received by such
Key Shareholder. For purposes of Section 7.3(c), "CONSIDERATION RECEIVED" means,
with respect to any Key Shareholder, the excess of (i) the aggregate value of
the Shareholder Consideration received from time to time by such Key Shareholder
pursuant to this Agreement (for avoidance of doubt, not including any
Shareholder Consideration held in the Escrow Account in respect of such Key
Shareholder until released therefrom), over (ii) the amount of Taxes actually
paid by such Key Shareholder in respect of the Shareholder Consideration
received by such Key Shareholder in exchange for such Key Shareholder's shares
of Company Common Stock, exclusive of any Taxes paid by such Key Stockholder (A)
if the Merger is determined (pursuant to a final determination, as defined in
Section 1313(a) of the Code or comparable provisions of state Laws) not to
constitute a reorganization within the meaning of Section 368 of the Code, but
only with respect to any Claim Notice delivered prior to the date of such
determination (any Claim Notice delivered after such determination being subject
to the limitations in this Section 7.3(c) without regard to this sub-clause
(A)), or (B) in respect of any other actual or deemed consideration received on
the Closing Date in connection with the Merger or the other Transactions, the
Merger Agreement or the Related Agreements. For purposes of calculating the
value of such Shareholder Consideration consisting of shares of Parent Common
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Stock, (i) shares sold by a Key Shareholder in an arm's length transaction shall
be valued at the lesser of (A) the per-share value calculated pursuant to
Section 2.4(b) or Section 2.4(c), as the case may be, at the time issued, and
(B) the greater of (x) the actual per-share value obtained by such Key
Shareholder in such sale (as determined by Parent in good faith), and (y) the
per-share value calculated pursuant to Section 2.4(b) or Section 2.4(c), as the
case may be, at the time issued but without giving effect to any minimum
per-share value contained in such subsections, and (ii) all other such shares
shall be deemed to have the per-share value calculated pursuant to Section
2.4(b) or Section 2.4(c), as the case may be, at the time issued or to be
issued, as the case may be. If Parent recovers any amounts owed by the Key
Shareholder hereunder from shares of Parent Common Stock of the Key Shareholder,
it may, in its sole discretion, elect to recover first against shares having the
lowest per-share value, as determined pursuant to this Section 7.3(c), even if
shares of greater value, as so determined, are evidenced by the same or other
stock certificates.
(d) Parent shall have no liability to the Shareholder Indemnified Parties
for their aggregate Losses in excess of 50% of the total Shareholder
Consideration actually paid in accordance with Article II; provided that, in the
event of any Breach of the representations and warranties contained in Section
4.6 (Capitalization) or Section 4.7 (SEC Filings; Financial Statements), Parent
shall have liability to the Shareholder Indemnified Parties for their aggregate
Losses up to (but no more than) 75% of the total Shareholder Consideration
actually paid in accordance with Article II. Parent shall make all payments for
its Liabilities under this Article VII to the Shareholder Agent and shall have
no obligation or responsibility whatsoever to allocate such payments among the
Shareholder Indemnified Parties.
(e) Subject to Section 7.8 and any claim based on the enumerated
representations set forth in Section 7.1(a), no claim for indemnification
hereunder or otherwise with respect to a breach of this Agreement may be made by
any Indemnified Party after the Escrow Termination Date.
Section 7.4 Indemnification Procedures. All claims for indemnification
under this Article VII shall be asserted and resolved as follows:
(a) Third-Party Claims.
(1) Notice. In the event (i) Parent becomes aware of a third-party
claim that Parent believes may result in a demand against the Escrow
Account or a claim against any Key Shareholder pursuant to this Article
VII, Parent shall promptly notify the Shareholder Agent of such claim, and
(ii) the Shareholder Agent becomes aware of a third-party claim that the
Shareholder Agent believes may result in a demand against Parent or the
Surviving Corporation (as successor to Merger Sub) pursuant to this Article
VII (it being understood that each Shareholder who becomes aware of a
third-party claim that such Shareholder believes may result in a demand
against Parent or the Surviving Corporation (as successor to Merger Sub)
pursuant to this Article VII shall promptly notify the Shareholder Agent of
such claim), the Shareholder Agent shall promptly notify Parent of such
claim; provided in any case that the failure to notify the Shareholder
Agent or Parent as aforesaid shall not relieve any Indemnifying Person of
any liability that it may have to any Indemnified Person, except to the
extent that the Indemnifying Person demonstrates that the defense of such
third-party claim is prejudiced by the failure to give such notice. For
purposes of this Section 7.4(a), Parent (in case of a third-party claim
described in clause (i) next above) and the Shareholder Agent (in case of a
third-party claim described in clause (ii) next above, as representative
for the Shareholders and Key Shareholders) shall be the "INDEMNIFIED
PERSON", and the Shareholder Agent (in case of a third-party claim
described in clause (i) next above, as representative for the Shareholders
and Key Shareholders) and Parent (in case of a third-party claim described
in clause (ii) next above) shall be the "PARTY IN INTEREST".
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(2) Defense. If an Indemnified Person gives notice to the Party in
Interest pursuant to Section 7.4(a)(1) of the assertion of a third-party
claim, the Party in Interest shall be entitled to participate in the
defense of such third-party claim and, to the extent that it wishes (unless
(i) the Party in Interest is also a Person against whom the third-party
claim is made and the Indemnified Person determines in good faith that
joint representation would be inappropriate, or (ii) the Party in Interest
fails to provide reasonable assurance to the Indemnified Person of both (x)
its financial capacity to defend such third-party claim, and (y) its
ability to provide indemnification, including against the Escrow Account or
Shareholder Performance Consideration (if any), if appropriate, with
respect to such third-party claim), to assume the defense of such
third-party claim with counsel satisfactory to the Indemnified Person.
After notice from the Party in Interest to the Indemnified Person of its
election to assume the defense of such third-party claim, the Party in
Interest shall not, so long as it diligently conducts such defense, be
liable to the Indemnified Person under Article VII for any fees of other
counsel or any other expenses with respect to the defense of such
third-party claim, in each case subsequently incurred by the Indemnified
Person in connection with the defense of such third-party claim, other than
reasonable costs of investigation. If the Party in Interest assumes the
defense of a third-party claim, (A) such assumption will conclusively
establish for purposes of this Agreement that the claims made in that
third-party claim are within the scope of and subject to indemnification,
and (B) no compromise or settlement of such third-party claims may be
effected by the Party in Interest without the Indemnified Person's written
consent unless (1) there is no finding or admission of any violation of Law
or any violation of the rights of any Person, (2) the sole relief provided
is monetary damages that are paid in full by the Party in Interest (or, as
applicable, the Escrow Account or a Key Shareholder), and (3) the
Indemnified Person shall have no liability with respect to any compromise
or settlement of such third-party claims effected without its written
consent. If notice is given to a Party in Interest of the assertion of any
third-party claim and the Party in Interest does not, within ten days after
the Indemnified Person's notice is given, give notice to the Indemnified
Person of its election to assume the defense of such third-party claim, the
Party in Interest shall be bound by any determination made in such
third-party claim or any compromise or settlement effected by the
Indemnified Person. The Shareholder Agent, if acting as the Party in
Interest pursuant to this Section 7.4(a)(2), shall be entitled to
reimbursement from the Expense Account as provided herein.
(3) Exception. Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
third-party claim may adversely affect it or its Related Persons other than
as a result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Person may, by notice
to the Party in Interest, assume the exclusive right to defend, compromise
or settle such third-party claim, but the Party in Interest shall not be
bound by any determination of any third-party claim (including the Losses
incurred in connection therewith) so defended for the purposes of this
Agreement or any compromise or settlement effected without its written
consent.
(4) Disputes. Any dispute between the Indemnified Person and the Party
in Interest under this Section 7.4(a) shall be resolved pursuant to the
dispute resolution procedures described in Section 7.4(b) and Section 7.6
(5) Finality. In the event that the Shareholder Agent has conducted
any defense or consented to any settlement under this Section 7.4(a),
neither the Shareholder Agent nor any of the Parent Indemnifying Parties
shall have the power or authority to object to the amount of any claim by
any Parent Indemnified Party against the Escrow Account, any Key
Shareholder or otherwise with respect to such settlement. In the event that
Parent has conducted any defense or consented to any settlement under this
Section 7.4(a), neither Parent nor the Surviving Corporation (as successor
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to Merger Sub) shall have the power or authority to object to the amount of
any claim by any Shareholder Indemnified Party against Parent with respect
to such settlement.
(b) Non-Third Party Claims.
(1) Parent. In the event a Parent Indemnified Party has a claim
hereunder that does not involve a claim being asserted against or sought to
be collected by a third party, such Parent Indemnified Party shall with
reasonable promptness deliver a Claim Notice with respect to such claim to
the Shareholder Agent and, if such Parent Indemnified Party intends to make
a claim against the Escrow Account, to the Escrow Agent. If the Shareholder
Agent does not notify such Parent Indemnified Party within thirty (30)
calendar days from the date of receipt of such Claim Notice that the
Shareholder Agent disputes such claim, the amount of such claim shall be
conclusively deemed a liability of the Parent Indemnifying Parties
hereunder. In case the Shareholder Agent shall object in writing to any
claim made in accordance with this Section 7.4(b)(1), the Parent
Indemnified Party shall have fifteen (15) calendar days to respond in a
written statement to the objection of the Shareholder Agent. If after such
fifteen (15) calendar day period there remains a dispute as to any claim,
the Parent Indemnified Party and Shareholder Agent shall attempt in good
faith for sixty (60) calendar days to agree upon the rights of the
respective Parties with respect to each of such claims. If the Parent
Indemnified Party and Shareholder Agent should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both Parties.
If such Parties do not so agree, the Parent Indemnified Party and
Shareholder Agent shall resolve such dispute pursuant to Section 7.6.
(2) Shareholder. In the event a Shareholder Indemnified Party has a
claim hereunder that does not involve a claim being asserted against or
sought to be collected by a third party, such Shareholder Indemnified Party
shall with reasonable promptness notify the Shareholder Agent and the
Shareholder Agent shall promptly (and in any event within two business
days) deliver a Claim Notice with respect to such claim to Parent. If
Parent does not notify the Shareholder Agent within thirty (30) calendar
days from the date of receipt of such Claim Notice that Parent disputes
such claim, the amount of such claim shall be conclusively deemed a
liability of Parent hereunder. In case Parent shall object in writing to
any claim made in accordance with this Section 7.4(b)(2), the Shareholder
Agent shall have fifteen (15) calendar days to respond in a written
statement to the objection of Parent. If after such fifteen (15) calendar
day period there remains a dispute as to any claim, the Shareholder Agent
and Parent shall attempt in good faith for sixty (60) calendar days to
agree upon the rights of the respective Parties with respect to each of
such claims. If the Shareholder Agent and Parent should so agree, a
memorandum setting forth such agreement shall be prepared and signed by
both Parties. If such Parties do not so agree, the Shareholder Agent and
Parent shall resolve such dispute pursuant to Section 7.6.
(c) Claims Against Escrow Account andShareholder Performance Consideration.
If Parent or any Parent Indemnified Party is making a claim against the Escrow
Account, the Escrow Agent shall refrain from disbursing any portion of the
Escrow Account until resolution of such dispute pursuant to Section 7.4
(including, if applicable, Section 7.6). If Parent or any Parent Indemnified
Party is making or planning a claim of set-off against Shareholder Performance
Consideration (if any) payable to any Key Shareholders, Parent may retain and
refrain from distributing any portion of such Shareholder Performance
Consideration until resolution of such dispute pursuant to Section 7.4(a)(1),
Section 7.4(b)(1) or, if applicable, Section 7.6.
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(d) Failure to Provide Notice. An Indemnified Party's failure to give
reasonably prompt notice to the Indemnifying Party of any actual, threatened or
possible claim or demand which may give rise to a right of indemnification
hereunder shall not relieve the Indemnifying Party of any liability which the
Indemnifying Party may have to the Indemnified Party unless the failure to give
such notice materially and adversely prejudiced the Indemnifying Party.
Section 7.5 Shareholder Agent.
(a) Each of the Shareholders, including each Key Shareholder, has
irrevocably appointed and constituted the Shareholder Agent as its exclusive
agent, and by virtue of this Agreement the Shareholder Agent is constituted as
the agent of all Shareholder Indemnified Parties and Parent Indemnifying
Parties, to do the following: (i) to give and receive notices and
communications, to agree to, negotiate, enter into settlements and compromises
of, make claims and demand arbitration and comply with orders of courts and
awards of arbitrators with respect to claims made or any other action to be
taken by or on behalf of any Shareholders under this Article VII, and to take
all actions necessary or appropriate in the judgment of the Shareholder Agent
for the accomplishment of the foregoing, and (ii) the deposit and withdrawal of
funds into and from the Expense Fund, and the use of the Escrow Stock as
collateral to secure the rights of the Indemnified Parties under this Article
VII in the manner set forth herein and in the Escrow Agreement. No bond shall be
required of the Shareholder Agent, and the Shareholder Agent shall receive no
compensation for its services.
(b) The Shareholder Agent shall not be liable for any act done or omitted
hereunder as Shareholder Agent while acting in good faith, and any act done or
omitted pursuant to the advice of counsel shall be conclusive evidence of such
good faith. The Key Shareholders shall severally indemnify the Shareholder Agent
and hold such agent harmless against any loss, liability or expense incurred
without bad faith on the part of the Shareholder Agent and arising out of or in
connection with the acceptance or administration of the Shareholder Agent's
duties hereunder. The Shareholder Agent may recover its reasonable out-of-pocket
costs and expenses incurred in connection with the performance of its duties,
rights and responsibilities hereunder on behalf of the Shareholders from the
Expense Fund, all as provided in Section 2.18 and in the Escrow Agreement.
Section 7.6 Resolution of Conflicts.
(a) Arbitration. If no agreement can be reached after good faith
negotiation between the Parent Indemnified Parties and the Shareholder Agent
pursuant to Section 7.4(b)(1), or between the Shareholder Agent and Parent
pursuant to Section 7.4(b)(2), the Person defending the claim (the "DEFENDING
PARTY"), may, by written notice to the Person asserting the claim (the
"PROSECUTING PARTY"), demand arbitration of the matter, which arbitration shall
be conducted by a single arbitrator. The Prosecuting Party and the Defending
Party shall agree on the arbitrator, provided that if the Prosecuting Party and
the Defending Party cannot agree on such arbitrator, either the Prosecuting
Party or the Defending Party can request that Judicial Arbitration and Mediation
Services ("JAMS") select the arbitrator. The arbitrator shall set a limited time
period and establish procedures designed to reduce the cost and time for
discovery while allowing the parties an opportunity, adequate in the sole
judgment of the arbitrator, to discover relevant information from the opposing
parties about the subject matter of the dispute. The arbitrator shall rule upon
motions to compel or limit discovery and shall have the authority to impose
sanctions, including attorneys' fees and costs, to the same extent as a court of
competent law or equity, should the arbitrator determine that discovery was
sought without substantial justification or that discovery was refused or
objected to without substantial justification. The decision of the arbitrator
shall be written, shall be in accordance with applicable Law and with this
Agreement, and shall be supported by written findings of fact and conclusion of
law, which shall set forth the basis for the decision of the arbitrator. The
decision of the arbitrator as to the validity and amount of any claim in a Claim
Notice shall be binding and conclusive upon the Prosecuting Party, the Defending
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Party, the Parties, the Shareholders, the Parent Indemnified Parties and,
notwithstanding any other provision of this Article VII, the Escrow Agent, if
applicable, and each of such Persons shall be entitled to act in accordance with
such decision and the Escrow Agent, if applicable, shall be entitled to make or
withhold payments out of the Escrow Account in accordance therewith.
(b) Judgment; Arbitration Expenses. Judgment upon any award rendered by the
arbitrator may be entered in any court having jurisdiction. Any such arbitration
shall be held in San Diego, California under the commercial rules then in effect
for JAMS. The non-prevailing party to an arbitration shall pay its own expenses,
the fees of the arbitrator, any administrative fee of JAMS, and the expenses,
including attorneys' fees and costs, reasonably incurred by the other party to
the arbitration.
Section 7.7 No Contribution. The Shareholder Agent waives, and acknowledges
and agrees that it shall not, on behalf of the Indemnifying Parties, or
otherwise, have and shall not exercise or assert (or attempt to exercise or
assert), any right of contribution, right of indemnity or other right or remedy
against the Surviving Corporation in connection with any indemnification or
other rights any Indemnified Party may have under or in connection with this
Agreement.
Section 7.8 Fraud; Willful Misrepresentation. Notwithstanding any provision
in this Agreement to the contrary, the liability of any Key Shareholder for
fraud or willful misrepresentation on the part of such Key Shareholder shall not
be subject to any limitations set forth in this Article VII. Without limiting
the generality of the foregoing, any claim with respect to such liability need
not be presented within the time limits set forth in Section 7.1(a) and shall be
subject only to the applicable statutes of limitation, and notwithstanding
Section 7.9, any such claim shall be cumulative to any remedies provided in this
Article VII.
Section 7.9 Exclusive Remedies. Except as set forth in Section 2.5(d) and
Section 7.8, the remedies set forth in this Article VII and elsewhere in this
Agreement shall be the sole and exclusive remedies of the Parties, the
Shareholders and the other Indemnified Parties against any Indemnifying Party,
Shareholder or other Party with respect to any claim relating to this Agreement
or the Merger and the facts and circumstances relating and pertaining thereto.
Section 7.10 Purchase Price Adjustment. Any payments made pursuant to this
Article VII shall be treated for tax purposes as an adjustment to the
Shareholder Consideration.
ARTICLE VIII
POST-CLOSING COVENANTS
Section 8.1 Parent Board of Directors. Promptly following the Closing,
Parent will take any actions necessary so that Xxxxx Xxxxxxxx shall be appointed
to the Board of Directors of Parent, subject to the fiduciary obligations of the
Board of Directors of Parent under applicable Law.
Section 8.2 Separate Books and Records. From the Closing until the end of
FY 2007 (the "EARNOUT PERIOD"), Parent shall operate the business of the Company
at Closing separately and shall maintain separate books and records for such
business, such that the financial results of such business can be audited and
reported as a separate business unit. Any such successor separate business unit
shall for purposes of this Agreement, unless the context requires otherwise, be
deemed to be the Surviving Corporation.
Section 8.3 Operation of Surviving Corporation. During the Earnout Period,
Parent shall use its Best Efforts to operate the Surviving Corporation, or cause
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the Surviving Corporation to be operated, in conformity with sound business
practices. Parent agrees that during the Earnout Period, taking into account the
goal of the Shareholders to earn the maximum Performance Consideration available
under Article II, it shall make all business decisions which affect the
financial or operating results of the Surviving Corporation in good faith, and
shall not take any action with the purpose of distorting the operational results
of the Surviving Corporation in a manner adverse to the Shareholders. Any
dispute regarding compliance by Parent with the terms and provisions of this
Section 8.3, or the remedy or Losses as a result thereof, shall be submitted to
dispute resolution under Section 7.6 (as if the dispute had arisen under Section
7.4(a)(1)).
Section 8.4 Sale of Surviving Corporation. Parent shall not sell all or
substantially all of the Surviving Corporation or its business during the
Earnout Period (it being understood and agreed that (i) for purposes of Section
2.5(d), the direct or indirect sale or other Transfer of shares of capital stock
of the Surviving Corporation in connection with a sale or other Transfer of the
capital stock of Parent or all or substantially all of the business or assets of
Parent shall be deemed not to be a material Breach of this Section 8.4, and (ii)
in the event of a direct sale or other Transfer of shares of capital stock of
the Surviving Corporation described in clause (i) next above, Parent shall
structure such sale or other Transfer to provide the Shareholders with
substantially similar protections and rights as are provided hereunder). No
injunctive relief shall be available to prevent a Breach of this Section 8.4.
Section 8.5 Stock Options.
(a) After the Closing, Parent shall cause the compensation committee of its
Board of Directors (the "COMPENSATION COMMITTEE"), at its first meeting held
following the Effective Time, to take appropriate action to reserve, to the
extent from time to time available under the SpaceDev 2004 Equity Incentive Plan
(or any other SpaceDev stock or equity plan in effect from time to time),
options to buy a number of shares of Parent Common Stock equal to at least 15%
of the number of shares of Parent Common Stock issued at Closing for issuance to
the executives, managers, employees and consultants from time to time of the
Company and, after the Closing, the Surviving Corporation (the "OPTION ELIGIBLE
EMPLOYEES"). Following each payment of Performance Consideration described in
Section 2.4(c), Parent shall, subject to the fiduciary duties of the
Compensation Committee under applicable Law, cause the Compensation Committee,
at its first meeting held after such payment, to take appropriate action to
grant options for a number of shares of Parent Common Stock under the SpaceDev
2004 Equity Incentive Plan (or any other SpaceDev stock or equity plan in effect
at the time of grant) equal to 15% of the number of shares of Parent Common
Stock issued as part of such Performance Consideration to Option Eligible
Employees, with due regard to the joint recommendations of the chief executive
officer of SpaceDev and the president of the Surviving Corporation.
(b) Parent shall seek approval of its shareholders at the Parent
Shareholder Meeting to increase the amount of shares available under the
SpaceDev 2004 Equity Incentive Plan, or under a new stock or equity plan to be
adopted at the Parent Shareholder Meeting, to provide sufficient reserves for
the issuance of the options contemplated by this Section 8.5.
(c) Parent shall grant the options to be granted Option Eligible Employees
pursuant to this Section 8.5 on substantially the same terms as are
contemporaneously awarded to Parent's officers and employees, including
registration of such options, and the shares of Parent Common Stock to be issued
upon exercise thereof, under the Securities Act.
Section 8.6 Capital Investments. After the Closing, Parent shall make
working capital investments (the "CAPITAL INVESTMENTS") in the Surviving
Corporation of not less than (i) $1,250,000 within thirty days of Closing in
respect of FY 2005, and (ii) an additional $1,250,000 no later than the end of
FY 2006; provided that Parent shall receive a credit against the required FY
2005 Capital Investment for any payments made by Parent, in its sole discretion,
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at the request of the Company to (i) the Company after the date hereof and prior
to Closing, to the extent not reflected as a current liability on the Closing
Balance Sheet, (ii) Vectra in respect of the Vectra Loans (other than payments
to the extent required by Section 2.3), or (iii) any Person at or in connection
with the Closing. Such working capital shall, subject to the foregoing proviso,
be used by the Surviving Corporation to implement the Surviving Corporation's
strategic plan, ongoing programs and internal initiatives, including a potential
relocation to an alternative primary facility in the Boulder or Denver, Colorado
metropolitan areas.
Section 8.7 Continuity of Business Enterprise. Parent intends to either
continue the Company's historic business or use a significant portion of the
Company's historic business assets in a business (within the meaning of Treasury
Regulations Section 1.368-1(d)(1)).
Section 8.8 Attorney-Client Privilege. The attorney-client privilege of the
Company related to the Merger shall be deemed to be the right of the
Shareholders, and not that of the Surviving Corporation, following the Closing,
and may only be waived by the Shareholder Agent. Absent the consent of the
Shareholder Agent, neither Parent nor the Surviving Corporation shall have a
right to access attorney-client privileged material related to the Merger
following the Closing.
ARTICLE IX
EMPLOYEES
Section 9.1 Retaining Employees. From the date hereof until the Closing,
the Company shall use its Best Efforts to retain its employees and consultants
in their employment or consulting relationship, until and following the Closing
Date.
Section 9.2 Employee Benefit Arrangements. In order to secure an orderly
and effective transition of the employee benefit arrangements for employees of
the Company and their respective beneficiaries and dependents, the Company and
its Representatives shall cooperate, before the Closing Date, with Parent to (i)
provide to Parent information related to such employees, including employment
records, benefits information and financial records, and (ii) take any other
actions requested by Parent or Merger Sub with respect to such employees and
their respective beneficiaries and dependents.
Section 9.3 No Benefit to the Company Employees Intended. This Article IX
is not intended to, and does not, create any rights or obligations to or for the
benefit of any Person other than Parent and Merger Sub.
ARTICLE X
TERMINATION
Section 10.1 Circumstances for Termination. At any time prior to the
Closing Date, this Agreement may be terminated by written notice explaining the
reason for such termination (without prejudice to other remedies which may be
available to the Parties under this Agreement, at law or in equity):
(a) by the mutual written consent of Parent and the Company;
(b) by Parent:
(1) if the closing condition specified in Section 6.2(n) has not been
satisfied within two weeks of the date hereof;
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(2) if the Company or any of the Key Shareholders is in Material Breach of
this Agreement, subject to the expiration of any cure period expressly provided
herein; or
(3) if Vectra Bank forecloses or collects on any collateral for any Vectra
Loan;
(c) by the Company:
(1) if Parent or Merger Sub is in Material Breach of this Agreement,
subject to the expiration of any cure period expressly provided herein; or
(2) if Parent has not held the Parent Shareholders Meeting within
forty-five days of the date the SEC declares the Form S-4 effective; and
(d) by either Parent or the Company:
(1) if (i) Parent has not received notice from the SEC that the SEC
will review the Form S-4 or any other report filed by Parent with the SEC;
(ii) shares of Parent Common Stock are listed on the American Stock
Exchange; (iii) the Closing has not occurred on or prior to December 31,
2005 for any reason; (iv) the terminating Party is not, on the date of
termination, in Material Breach of this Agreement; and (v) the terminating
Party has not Breached this Agreement in a manner which is responsible for
delaying the Closing;
(2) if (i) the Closing has not occurred on or prior to March 31, 2006
(the "OUTSIDE DATE") for any reason; (ii) the terminating Party is not, on
the date of termination, in Material Breach of this Agreement; and (iii)
the terminating Party has not Breached this Agreement in a manner which is
responsible for delaying the Closing;
(3) if (i) the satisfaction of a closing condition of the terminating
Party in Article VI is impossible; (ii) the terminating Party is not, on
the date of termination, in Material Breach of this Agreement; and (iii)
the terminating Party has not Breached this Agreement in a manner causing
the impossibility of satisfying such closing condition; or
(4) pursuant to Section 5.15.
Section 10.2 Effect of Termination. If this Agreement is terminated in
accordance with Section 10.1, all obligations of the Parties hereunder shall
terminate, except for the obligations set forth in Section 5.5, Article XI and
the confidentiality and non-disclosure provisions (and any associated remedies)
contained herein. The termination of this Agreement for any reason shall not
affect any of Parent's rights under the SpaceDev Loan.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Entire Agreement. This Agreement and the Related Agreements,
and any certificates, schedules and proxies delivered pursuant hereto or
thereto, constitute the entire agreement and understanding of the Parties in
respect of its and their subject matter and supersedes all prior understandings,
agreements, or representations by or among the Parties, written or oral, (except
for the SpaceDev Loan, its ancillary agreements, including that certain
Exclusivity Agreement, made effective September 8, 2005, by and between Parent
and the Company), to the extent they relate in any way to the subject matter
hereof or the transactions contemplated by this agreement.
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Section 11.2 Parties In Interest. This Agreement and the Transaction
Documents shall be binding upon and inure solely to the benefit of each Party
and its successors and permitted assigns and nothing in this Agreement, express
or implied, is intended to or shall confer upon any other Person (other than
Parent Indemnified Persons) any rights, benefits or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 11.3 Assignment; Amendment.
(a) Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder or under the Escrow Agreement shall be assigned without
the prior written consent of each other Party; provided, however, that Parent or
Merger Sub may assign, in its sole discretion, any or all of its rights,
interests and obligations under this Agreement to any direct wholly owned
Subsidiary of Parent. Any assignment in violation of the preceding sentence
shall be null and void and of no force or effect. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the Parties and their respective successors and permitted
assigns.
(b) Amendment. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by Parent, the Company (prior to the Closing), the Key Shareholders and
the Shareholder Agent.
Section 11.4 Notices. All notices, requests, instructions or other
documents to be given under this Agreement shall be in writing and shall be
deemed given, (i) five business days following sending by registered or
certified mail, postage prepaid, (ii) when sent if sent by facsimile; provided,
however, that the facsimile is promptly confirmed by telephone confirmation
thereof, (iii) when delivered, if delivered personally to the intended
recipient, and (iv) one business day following sending by overnight delivery via
a national courier service, and in each case, addressed to a party at the
following address for such Party:
If to Parent or Merger Sub (or, after consummation of the Merger, to the
Surviving Corporation):
SpaceDev, Inc.
Attn: Chief Executive Officer
00000 Xxxxx Xxxxx
Xxxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
with copies (which will not constitute notice) to:
Sheppard, Mullin, Xxxxxxx & Hampton LLP
Attn: Xxxx X. Xxxxxxxx, Esq.
00000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000-0000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Company (prior to consummation of the Merger) or any Shareholder:
Starsys Research Corporation
Attn: Xxxxx Xxxxxxxx, Chief Executive Officer
0000 Xxxxxxxx Xxxxx Xxxxx
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Xxxxxxx, Xxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy (which will not constitute notice) to:
Holland & Xxxx, LLP
Attn: Xxxxx Xxxxxx
000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to the Shareholder Agent:
Xxxxx Xxxxxxxx
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Fax: (000) 000-0000
If to a Key Shareholder, to the address set forth under such Key Shareholder's
name on the signature pages hereof.
Any Party may change its address or fax number for purposes hereof to such other
address or fax number as such Party may have previously furnished to the other
Parties in writing in accordance with this Section 11.4.
Section 11.5 Specific Performance. Each of the Parties acknowledges and
agrees that any Breach or non-performance of, or default under, any of the terms
and provisions hereof would cause substantial and irreparable damage to the
other Parties, and that money damages would be an inadequate remedy therefor.
Accordingly, subject to Section 7.9, each of the Parties agrees that each of
them shall be entitled to seek equitable relief, including specific performance
and injunctive relief, in the event of any such Breach, non-performance or
default in any Action instituted in any court of the United States or any state
having competent jurisdiction, or before any arbitrator, in addition to any
other remedy to which such Party may be entitled, at law or in equity.
Section 11.6 Submission to Jurisdiction; No Jury Trial; Service of Process.
(a) Submission to Jurisdiction. Except as set forth in Section 7.6, each
Party submits to the exclusive jurisdiction of the federal courts located in
Denver, Colorado, in any Action arising out of or relating to this Agreement,
any Transaction Document or any Transaction and agrees that all claims in
respect of the Action shall be heard and determined in any such court. Each
Party agrees that a final judgment in any Action so brought shall be conclusive
and may be enforced by Action on the judgment or in any other manner provided at
law or in equity. Each Party waives any defense of inconvenient forum to the
maintenance of any Action so brought and waives any bond, surety, or other
security that might be required of any other party with respect thereto.
(b) Waiver of Jury Trial. THE PARTIES EACH HEREBY AGREE TO WAIVE THEIR
RESPECTIVE RIGHTS TO JURY TRIAL OF ANY DISPUTE BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER AGREEMENTS RELATING HERETO OR ANY DEALINGS AMONG THEM
RELATING TO THE TRANSACTIONS. The scope of this waiver is intended to be all
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encompassing of any and all Actions that may be filed in any court and that
relate to the subject matter of any Transactions, including, contract claims,
tort claims, breach of duty claims, and all other common law and statutory
claims. The Parties each acknowledge that this waiver is a material inducement
to enter into a business relationship and that they will continue to rely on the
waiver in their related future dealings. Each Party further represents and
warrants that it has reviewed this waiver with its legal counsel, and that each
knowingly and voluntarily waives its jury trial rights following consultation
with legal counsel. NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, THIS WAIVER
IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED ORALLY OR IN WRITING, AND
THE WAIVER SHALL APPLY TO ANY AMENDMENTS, RENEWALS, SUPPLEMENTS, OR
MODIFICATIONS TO THIS AGREEMENT OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
HERETO. In the event of an Action, this Agreement may be filed as a written
consent to trial by a court.
(c) Service of Process. Any Party may make service on any other Party by
sending or delivering a copy of the process to the Party to be served at the
address and in the manner provided for the giving of notices in Section 11.17.
Nothing in this Section 11.6 shall affect any Party's right to serve legal
process in any other manner permitted at Law or in equity.
Section 11.7 Time. Time is of the essence in the performance of this
Agreement.
Section 11.8 Counterparts. This Agreement may be executed in two or more
original or facsimile counterparts, each of which shall be deemed an original
but all of which together shall constitute but one and the same instrument.
Section 11.9 Governing Law. This Agreement and the performance of the
Transactions and obligations of the Parties hereunder shall be governed by and
construed in accordance with the laws of the State of Colorado applicable to
contracts negotiated, executed and to be performed entirely within such State.
Section 11.10 Expenses. The Company and the Shareholder Agent shall be
solely responsible for their respective legal, accounting and other fees and
expenses incurred or reasonably expected to be incurred by the Company or the
Shareholder Agent in connection with the preparation, execution and delivery of
this Agreement and the consummation of the Transactions contemplated hereby,
including the preparation and filing of the Form S-4 and the holding of the
Company Shareholders Meeting ("EXPENSES"). Parent and Merger Sub shall be solely
responsible for their respective Expenses.
Section 11.11 Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement, if any, shall be paid by
the Shareholders.
Section 11.12 Extensions; Waiver.
(a) Extension. At any time following the Closing Date, Parent and the
Surviving Corporation, on the one hand, and the Shareholder Agent, on the other,
to the extent legally allowed, may (i) extend the time for the performance of
any of the obligations of the other of them, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any certificate,
instrument or other document delivered pursuant hereto, or (iii) waive
compliance with any of the agreements contained herein. Any agreement to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of the Person against which enforcement of such
extension or waiver is sought.
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(b) Waiver. The failure of any party hereto to exercise any right, power or
remedy provided under this Agreement or otherwise available in respect hereof at
law or in equity, or to insist upon compliance by any other party hereto with
its obligations hereunder, or any custom or practice of the parties at variance
with the terms hereof shall not constitute a waiver by such party of its right
to exercise any such or other right, power or remedy or to demand such
compliance. No waiver by any party of any default, misrepresentation or breach
hereunder, whether intentional or not, shall be effective unless in writing and
signed by the party against whom such waiver is sought to be enforced, and no
such waiver shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach hereunder or affect in any way any rights arising
because of any prior or subsequent such occurrence.
Section 11.13 Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof;
providedthat if any provision of -------- this Agreement, as applied to any
Party or to any circumstance, is adjudged by a Governmental Body, arbitrator, or
mediator not to be enforceable in accordance with its terms, the Parties agree
that the Governmental Body, arbitrator, or mediator making such determination
shall have the power to modify the provision in a manner consistent with its
objectives such that it is enforceable, and to delete specific words or phrases,
and in its reduced form, such provision shall then be enforceable and shall be
enforced.
Section 11.14 Incorporation of Exhibits and Disclosure Schedules. The
Exhibits and the Disclosure Schedules are incorporated herein by reference and
made a part hereof.
Section 11.15 Titles and Headings. The article, section and paragraph
titles and headings, and the table of contents, contained herein are inserted
purely as a matter of convenience and for ease of reference and shall be
disregarded for all other purposes, including the construction, interpretation
or enforcement of this Agreement or any of its terms or provisions.
Section 11.16 Facsimile Execution. A facsimile, telecopy or other
reproduction of this Agreement may be executed by one or more Parties, and an
executed copy of this Agreement may be delivered by one or more Parties by
facsimile or similar electronic transmission device pursuant to which the
signature of or on behalf of such Party can be seen, and such execution and
delivery shall be considered valid, binding and effective for all purposes. At
the request of any Party, all Parties agree to execute an original of this
Agreement as well as any facsimile, telecopy or other reproduction hereof.
Section 11.17 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement with the assistance of legal counsel,
and any rule of construction or interpretation otherwise requiring this
Agreement to be construed or interpreted against any party shall not apply to
any construction or interpretation hereof. If an ambiguity or question of intent
or interpretation arises, this Agreement shall be construed as if drafted
jointly by the Parties and no presumption or burden of proof shall arise
favoring or disfavoring any Party because of the authorship of any provision of
this Agreement. The Parties intend that each representation, warranty, and
covenant contained herein shall have independent significance. If any Party has
Breached any representation, warranty, or covenant contained herein in any
respect, the fact that there exists another representation, warranty, or
covenant relating to a similar subject matter (regardless of the relative levels
of specificity) which the Party has not breached shall not detract from or
mitigate the fact that the Party is in Breach of the first representation,
warranty, or covenant. For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires:
(a) all references in this Agreement to designated "Articles," "Sections"
and other subdivisions, or to designated "Exhibits," "Schedules" or
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"Appendices," are to the designated Articles, Sections and other subdivisions
of, or the designated Exhibits, Schedules or Appendices to, this Agreement;
(b) references to any Person includes such Person's successors and assigns
but, if applicable, only if such successors and assigns are not prohibited by
this Agreement, and reference to a Person in a particular capacity excludes such
Person in any other capacity or individually;
(c) references to any agreement, document or instrument means such
agreement, document or instrument as Amended and in effect from time to time in
accordance with the terms thereof, and shall be deemed to refer as well to all
addenda, annexes, appendices, exhibits, schedules and other attachments thereto;
(d) reference to any Law means such Law as Amended, codified, replaced or
reenacted, in whole or in part, and in effect from time to time, including rules
and regulations promulgated thereunder, and reference to any section or other
provision of any Law means that provision of such Law from time to time in
effect and constituting the substantive Amendment, codification, replacement or
reenactment of such section or other provision;
(e) references to "dollars" or "cash", and the "$" symbol, are references
to the lawful money of the United States of America;
(f) with respect to the determination of any period of time, "from" means
"from and including" and "to" means "to but excluding";
(g) the words "include," "includes," and "including" shall be deemed to be
followed by "without limitation";
(h) the term "or" shall not be exclusive;
(i) pronouns in masculine, feminine, and neuter genders shall be construed
to include any other gender;
(j) whenever the singular number is used, if required by the context, the
same shall include the plural, and vice versa;
(k) the words "this Agreement," "herein," "hereof," "hereby," "hereunder,"
and words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision; and
(l) all accounting terms shall be interpreted, and all accounting
determinations hereunder shall be made, in accordance with GAAP.
Section 11.18 Definitions. Unless otherwise expressly provided herein, the
following terms, whenever used in this Agreement, shall have the meanings
ascribed to them below or in the referenced Sections of this Agreement:
"ACCOUNTS RECEIVABLE" means (i) all trade accounts receivable and other
rights to payment from customers of the Company and the full benefit of all
security for such accounts or rights to payment, including all trade accounts
receivable representing amounts receivable in respect of goods shipped or
products sold or services rendered to customers of the Company, (ii) all other
accounts or notes receivable of the Company and the full benefit of all security
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for such accounts or notes, and (iii) any claim, remedy or other right related
to any of the foregoing.
"ACTION" means any action, appeal, petition, plea, charge, complaint,
claim, suit (whether civil, criminal, administrative, judicial or investigative,
whether formal or informal, whether public, private or otherwise, whether at law
or in equity), demand, litigation, arbitration, mediation, hearing, inquiry,
investigation, audit or similar event, occurrence, or proceeding, in each case
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental Body, arbitrator or mediator.
"ACTUAL KNOWLEDGE" of a particular fact or other matter means (i) with
respect to an individual, when such individual is actually aware of such fact or
other matter, and (ii) with respect to an Entity, if any Person who is serving,
or who has at any time served, as a director, officer, management-level
employee, partner, executor or trustee of such Entity (or, in all cases above,
in any similar or equivalent capacity), or any employee of such Entity charged
with responsibility for a particular functional or regional area of such
Entity's business or operations, has, or at any time had, Actual Knowledge of
such fact or other matter.
"AFFILIATE" or "AFFILIATED" with respect to any specified Person, means a
Person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, such specified
Person. For purposes of this definition, "CONTROL" (and its derivatives) means
the possession, directly or indirectly, or as trustee or executor, of the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting Equity Interests, as trustee or executor, by
contract or credit arrangements or otherwise.
"AMEND" means, with respect to any Contract or Organizational Document, to
amend, supplement, extend, waive a provision of or otherwise modify such
Contract or Organizational Document. The terms "AMENDED" and "AMENDMENT" shall
have the correlative meanings.
"APPLICABLE TIME" means (i) with respect to the Form S-4, the time the Form
S-4 is filed with the SEC, any time the Form S-4 is amended or supplemented and
the time the Form S-4 becomes effective under the Securities Act, (ii) with
respect to the Proxy Statement, the date the Proxy Statement or any amendment or
supplement thereto is first mailed to the shareholders of Parent and at the time
of the Parent Shareholder Meeting, or (iii) with respect to any other document,
the date such other document, or any amendment or supplement thereto, is filed
with the applicable Governmental Body.
"BEST EFFORTS" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously and effectively as possible.
"BREACH" means (a) any breach of, or inaccuracy in, any representation or
warranty, (b) any breach or violation of, default under, failure to perform,
failure to comply with or failure to notify, or noncompliance with, any
covenant, agreement or obligation, or (c) any one or more other Events the
existence of which, individually or together, whether unconditionally or with
the passing of time or the giving of notice, or both, would (i) constitute a
breach, violation, default, failure or noncompliance referred to in clauses (a)
and (b) next above, (ii) permit any Person to accelerate any monetary
obligation, (iii) permit any Person to abridge, delay, condition, terminate,
revoke, rescind or cancel any right, license, liability, debt, power, authority,
privilege or obligation, or (iv) require, or permit any Person to require, the
payment of a monetary penalty or liquidated damages.
"CAPITAL LEASE OBLIGATIONS" means a payment obligation under a Lease of
Property, real or personal, classified as a capital lease pursuant to FASB
Statement of Financial Accounting Standards No. 13, Accounting for Leases (Nov.
1976).
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"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.
"CLOSING CONSIDERATION" means, collectively, (i) all amounts payable by
Parent at the Closing pursuant to Section 2.3, (ii) the Shareholder Closing
Consideration, and (iii) the Company Expense Payments to be made at Closing
"CLOSING DEBT" means the sum of (i) the aggregate amount of "Bank Debt" (as
defined in the Intercreditor Agreement), together with any other Liabilities
under or in respect of the Vectra Loans, at Closing, plus (ii) the aggregate
Liabilities under or in respect of the Shareholder Loans at Closing, plus (iii)
the aggregate Liabilities under or in respect of the SpaceDev Loan at Closing.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT" means (a) options, warrants, convertible securities,
exchangeable securities, subscription rights, purchase or acquisition rights,
conversion rights, exchange rights, or other Contracts that require an Entity to
issue any of its Equity Interests, (b) any other securities convertible into,
exchangeable or exercisable for, or representing the right to subscribe for, in
each case with or without consideration, any Equity Interest of an Entity, (c)
statutory pre-emptive rights or pre-emptive rights granted under an Entity's
Organizational Documents, (d) rights of first refusal, tag-along rights, co-sale
rights, drag-along rights, piggyback rights, buy-sell arrangements, or voting
agreements, or (e) stock appreciation rights, phantom stock, profit
participation, or other similar rights with respect to an Entity.
"COMPANY COMMON STOCK" means the common stock, par value $.0001, of the
Company.
"COMPANY CONTRACT" means any Contract to which the Company or any of its
Subsidiaries is a party or signatory or by which any of them is bound, and any
Company License.
"COMPANY EMPLOYEE PLAN" means any plan, program, policy, practice,
contract, agreement or other material arrangement providing for compensation,
severance, termination pay, deferred compensation, performance awards, stock or
stock related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written, unwritten or otherwise, funded or unfunded,
including each "employee benefit plan" (within the meaning of Section 3(3) of
ERISA) which is or has been maintained, contributed to, or required to be
contributed to, by the Company or any Affiliate thereof for the benefit of any
Employee, or with respect to which the Company or any Affiliate thereof has or
may have any liability or obligation.
"COMPANY EXPENSE PAYMENTS" means all amounts paid, whether in cash or
shares of Parent Common Stock and whether at Closing or thereafter, in
satisfaction of Company Transaction Expenses pursuant to Section 2.19.
"COMPANY INFORMATION" means the statements regarding the Company, its
operations, business, directors, officers, Subsidiaries and Shareholders
contained in the Form S-4 or Proxy Statement.
"COMPANY INTELLECTUAL PROPERTY" means any Material Intellectual Property
Rights that are or are purported to be owned by, licensed exclusively to or
otherwise controlled by the Company.
"COMPANY LICENSES" means the license Contracts or licenses governing or
relating to Intellectual Property Rights licensed by the Company or any of its
Subsidiaries in writing from third parties, but excluding licenses solely for
Excluded Software.
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"COMPANY PRODUCTS" means all products designed, manufactured, shipped,
sold, marketed, distributed, licensed, Leased, delivered or introduced into the
stream of commerce by or on behalf of the Company, including any such products
sold in the United States by the Company as the distributor or agent, or
pursuant to any other contractual relationship with an offshore manufacturer,
and including all Company Software and all services provided by or through the
Company on or prior to the Closing Date.
"COMPANY SOFTWARE" means any Software constituting Company Intellectual
Property.
"CONFIDENTIAL INFORMATION" means all Trade Secrets and other confidential
or proprietary information of a Person disclosing such information (the
"DISCLOSING PARTY"), including information derived from reports, investigations,
research, work in progress, codes, marketing and sales programs, financial
projections, cost summaries, pricing formula, contract analyses, financial
information, projections, confidential filings with any Governmental Body, and
all other confidential concepts, methods of doing business, ideas, materials or
information prepared or performed for, by or on behalf of the Disclosing Party
by its Representatives; providedthat the following information shall not be
deemed to be Confidential Information: (i) information which is or becomes
available to or known by the public generally through no fault of the Person
receiving such information (the "RECEIVING PARTY"); or (ii) information that was
in the Receiving Party's possession at the time of disclosure or receipt, as
evidenced and verified by prior tangible evidence, and was not acquired under an
obligation of confidence or non-disclosure; (iii) information that the Receiving
Party demonstrates was rightfully received by it from a third party after the
time it was disclosed or obtained from the Disclosing Party, providedthat such
third party was not directly or indirectly under an obligation of confidence or
non-disclosure with the Disclosing Party at the time of the third party's
disclosure to the Receiving Party; or (iv) information that is independently
developed by the Receiving Party without use of or reference to the Confidential
Information of the Disclosing Party, as evidenced and verified by prior tangible
evidence.
"CONSENT" means any consent, approval, ratification, favorable vote,
authorization, waiver, or other similar action.
"CONTRACT" means any Government Contract, contract, agreement, instrument,
commitment, covenant, lease, promise, undertaking or other agreed or consensual
obligation, whether written or oral and whether express or implied.
"COPYRIGHTS" means worldwide (i) registered copyrights in published or
unpublished works, mask work rights and similar rights, including rights created
under Sections 901-914 of Title 17 of the United States Code, mask work
registrations, and copyright applications for registration, including any
renewals thereof, and (ii) copyrightable works and other rights of authorship in
published or unpublished works.
"CURRENT BALANCE SHEET" means (i) on the date hereof until the delivery of
the balance sheet described in clause (ii) of this definition, the balance sheet
described in Section 3.9(ii)(A), (ii) upon the certification and delivery
thereof to Parent until the Closing Date, the balance sheet described in Section
5.15, and (iii) on and after the Closing Date, the balance sheet described in
Section 3.9(ii)(B)
"CURRENT BALANCE SHEET DATE" means the date of the Current Balance Sheet
from time to time.
"DEBT" means, with respect to any Person, without duplication, (i) all
obligations of such Person for borrowed money, including bank loans, mortgages,
notes payable and earnouts payable, and all obligations of such Person evidenced
by bonds, debentures, notes or other similar instruments or Securities, in each
case together with any interest, fees, prepayment penalties or other amounts due
in respect thereof, (ii) all obligations of such Person to pay the deferred
purchase price of property or services, including Lease obligations, except
trade accounts payable arising in the Ordinary Course of Business, and (iii) all
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obligations of such Person to purchase Securities which arise out of or in
connection with the sale of the same or substantially similar Securities.
"DISCLOSING PARTY" has the meaning ascribed to such term in the definition
of the term "Confidential Information".
"DISSENTING SHAREHOLDERS" means shareholders of the Company who are
"Dissenters" (as defined in Sec. 0-000-000 of the CBCA), or are otherwise duly
exercising dissenters' rights under applicable Law, in respect of the Merger.
"DISSENTING SHARES" means the shares of Company Common Stock as to which a
Dissenting Shareholder has exercised such Person's right to dissent.
"EMPLOYEE" means any current or former employee, consultant or director of
the Company or any Affiliate.
"EMPLOYEE AGREEMENT" means each management, employment, severance,
consulting, or similar Contract between the Company and any employee,
consultant, independent contractor, or other individuals providing services
thereto pursuant to which the Company has or may have any Liability.
"EMPLOYEE BENEFIT PLAN" means each plan, program, policy, payroll practice,
contract, agreement (including Employee Agreements), or other arrangement
providing for compensation, severance, termination pay, performance awards,
stock or stock related awards, fringe benefits, or other employee benefits of
any kind, whether formal or informal, funded or unfunded, written or oral and
whether or not legally binding, including each "employee benefit plan," within
the meaning of Section 3(3) of ERISA and each "multiemployer plan" within the
meaning of Sections 3(37) or 4001(a)(3) of ERISA.
"EMPLOYEE PENSION PLAN" means any Employee Benefit Plan that is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA.
"ENCUMBRANCE" means, with respect to any Property, any Order, Lien,
easement, right of way, encroachment, servitude, right of first option, right of
first refusal or similar restriction, community or other marital property
interest, condition, equitable interest, license, encumbrance or other binding
restriction of any kind (including restrictions on use, Transfer, receipt of
income or exercise of any other attribute or indicia of ownership) on such
Property or any interest therein or right thereto, whether directly or
indirectly (through one or more intermediary Persons or otherwise), whether
voluntarily, involuntarily or by operation of law, and, where applicable, any
restriction on voting thereof or receipt of income thereon and any Commitments
in respect thereof; providedthat Transfer restrictions under federal and state
securities and "blue sky" laws and regulations shall be deemed not to be an
Encumbrance. The term "Encumber" has the correlative meaning.
"ENFORCEABLE" means, with respect to any Contract and any Person, that such
Contract is the legal, valid, and binding obligation of such Person enforceable
against such Person in accordance with its terms, except as such enforceability
may be subject to the effects of, or limited by, bankruptcy, insolvency,
reorganization, moratorium, or other Laws relating to or affecting the rights of
creditors, and general principles of equity.
"ENTITY" means any corporation (including any non profit corporation),
general partnership, limited partnership, limited liability partnership, joint
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venture, estate, trust, company (including any limited liability company or
joint stock company), firm, labor organization, unincorporated organization, or
other enterprise, association, organization or business entity.
"ENVIRONMENT" means soil, land surface or subsurface strata, surface waters
(including navigable waters and ocean waters), groundwaters, drinking water
supply, stream sediments, ambient air (including indoor air), plant and animal
life and any other environmental medium or natural resource.
"ENVIRONMENTAL, HEALTH AND SAFETY LIABILITIES" means any costs, damages,
expenses, Liabilities, or other responsibility arising from or under any
Environmental Law or Occupational Safety and Health Law, including those
consisting of or relating to (i) any environmental, health or safety matter or
condition (including on-site or off-site contamination, occupational safety and
health and regulation of any chemical substance or product), (ii) any Orders or
Losses arising under any Environmental Law or Occupational Safety and Health
Law, (iii) financial responsibility under any Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
cleanup, removal, containment or other remediation or response actions
("Cleanup") required by any Environmental Law or Occupational Safety and Health
Law (whether or not such Cleanup has been required or requested by any
Governmental Body or any other Person) and for any natural resource damages, or
(iv) any other compliance, corrective or remedial measure required under any
Environmental Law or Occupational Safety and Health Law. For purposes of this
Agreement, the terms "removal," "remedial" and "response action" include the
types of activities covered by CERCLA.
"ENVIRONMENTAL LAW" means any Law that requires or relates to (i) advising
appropriate authorities, employees or the public of intended, threatened or
actual Environmental Releases of Materials of Environmental Concern, violations
of discharge limits or other prohibitions and the commencement of activities,
such as resource extraction or construction, that could have significant impact
on the Environment, (ii) preventing or reducing to acceptable levels the
Environmental Release of Materials of Environmental Concern into the
Environment, (iii) reducing the quantities, preventing the Environmental Release
or minimizing the hazardous characteristics of wastes that are generated, (iv)
assuring that products are designed, formulated, packaged and used so that they
do not present unreasonable risks to human health or the Environment when used
or disposed of, (v) protecting the Environment, resources, species or ecological
amenities, (vi) reducing to acceptable levels the risks inherent in the
transportation of Materials of Environmental Concern, (vii) cleaning up
Materials of Environmental Concern that have been Environmental Released,
preventing the Threat of Release or paying the costs of such clean up or
prevention, (viii) making responsible parties pay private parties, or groups of
them, for damages done to their health or the Environment or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets, or (ix) the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Materials of
Environmental Concern or the protection of human health or the Environment.
"ENVIRONMENTAL PROPERTY" means any Facility or other property or asset
(whether real, personal or mixed) in which the Company has or had an interest.
"ENVIRONMENTAL RELEASE" means any release, spill, emission, leaking,
pumping, pouring, dumping, emptying, injection, deposit, disposal, discharge,
dispersal, leaching or migration on or into the Environment or into or out of
any property.
"EQUITY INTEREST" means (a) with respect to a corporation, any and all
shares of capital stock and any Commitments with respect thereto, (b) with
respect to a partnership, limited liability company, trust, or similar Person,
any and all units, interests, or other partnership/limited liability company
interests, and any Commitments with respect thereto, and (c) any other direct or
indirect equity ownership, participation or interest in a Person.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means the escrow agent appointed by Parent to act as escrow
agent under the Escrow Agreement, together with its successors as escrow agent
thereunder.
"ESCROW TERMINATION DATE" means the last day of the Escrow Period.
"EVENT" means any act, omission, occurrence, circumstance, condition or
other event.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED SOFTWARE" means any Software or rights thereto which (a) the
Company has purchased or licensed for less than a total annual aggregate cost
for all copies owned, licensed or used by the Company of $25,000, and (b) either
(1) is subject to a "shrink wrap" or similar commercial end-user licenses or
commodity type licenses widely available to the public generally, or (b)
consists of non-customized third-party Software licensed to the Company for
internal use on a non-exclusive basis and which is generally available to other
Persons, including the Surviving Corporation, on substantially similar terms and
conditions.
"FACILITIES" means any real property, leasehold or other interest in real
property currently owned, operated, occupied or Leased by the Company, including
the Tangible Personal Property used, operated or Leased by the Company at the
respective locations of the leased real property specified in Section 3.15(a) of
the Disclosure Schedules. Notwithstanding the foregoing, for purposes of the
definitions of "Hazardous Activity" and "Remedial Action" and Section 3.24,
Facilities means any real property, leasehold or other interest in real property
currently or formerly owned, operated, occupied or Leased by the Company,
including the Tangible Personal Property used, operated or Leased by the Company
at the respective locations of such real property.
"FIDUCIARY" means "fiduciary", as defined in ERISA Section 3(21).
"FINANCIALS" means the balance sheets and statements of income and cash
flows described in Section 3.9 and Section 5.15.
"FOREIGN EXPORT AND IMPORT LAWS" means the laws and regulations of a
foreign government regulating the provision of services to parties not of the
foreign country or the export and import of articles and information from and to
the foreign country and to parties not of the foreign country.
"FORM S-4" means the registration statement on Form S-4 to be filed by
Parent with the SEC in connection with the issuance of the shares of Parent
Common Stock in the Merger.
"FY 2005" means the fiscal year of the Surviving Corporation ended December
31, 2005.
"FY 2006" means the fiscal year of the Surviving Corporation ended December
31, 2006.
"FY 2007" means the fiscal year of the Surviving Corporation ended December
31, 2007.
"GAAP" means United States generally accepted accounting principles for
financial reporting, as in effect from time to time.
"GOVERNMENT" means any agency, division, subdivision, audit group, or
procuring office of the United States federal government, including the
employees or agents thereof.
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"GOVERNMENT CONTRACT" means any prime contract, subcontract, basic ordering
agreement, letter contract, purchase order or delivery order of any kind.
"GOVERNMENTAL BODY" and "GOVERNMENT BODIES" means any (i) nation, state,
county, city, town, borough, village, district or other jurisdiction, (ii)
federal, state, local, municipal, foreign or other government, (iii)
governmental or quasi-governmental authority of any nature (including any
legislature, agency, board, bureau, branch, department, division, commission,
court, tribunal, magistrate, justice or other entity exercising governmental or
quasi-governmental powers), (iv) multi national organization or body, (v) body
exercising, or entitled to exercise, any administrative, executive, judicial,
legislative, police, military, regulatory or taxing authority or power, or (v)
official of any of the foregoing.
"GOVERNMENTAL PERMIT" means any permit, license, certificate, Consent,
clearance, accreditation, or other similar authorization required by any Law or
Governmental Body.
"GUARANTEE" means, with respect to any Person, any obligation, contingent
or otherwise, of such Person directly or indirectly guaranteeing or insuring any
Debt or Capital Lease Obligation.
"HAZARDOUS ACTIVITY" means the distribution, generation, handling,
importing, exporting, management, manufacturing, processing, production,
refinement, Environmental Release, sale, storage, transfer, transportation,
treatment or use (including any withdrawal or other use of groundwater) of
Hazardous Material in, on, under, about or from any of the Facilities or any
part thereof into the Environment and any other act, business, operation or
thing that increases the danger, or risk of danger, or poses an unreasonable
risk of harm, to Persons or property.
"HAZARDOUS MATERIALS" means any material, substance or waste which is
defined as a "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste," "contaminant," "toxic
waste" or "toxic substance" under any provision of Environmental Law, and
including radioactive materials, petroleum, petroleum products, asbestos,
presumed asbestos-containing material or asbestos-containing material, urea
formaldehyde and polychlorinated biphenyls.
"INDEBTEDNESS" means all Debt or Capital Lease Obligation of the Company as
of the Closing, including any prepayment or similar fees or charges related to
the retirement or termination of bank Debt of the Company which will be
discharged or satisfied at or in connection with the consummation of the
Transactions.
"INTELLECTUAL PROPERTY RIGHTS" means Patents, Trademarks, Copyrights, Owned
Rights and Proprietary Information, and includes any rights to exclude others
from using or appropriating any Intellectual Property Rights, including the
rights to xxx for or assets claims against and remedies against past, present or
future infringements of any or all of the foregoing and rights of priority and
protection of interests therein, and any other proprietary, intellectual
property or other rights relating to any or all of the foregoing anywhere in the
world; provided that "Intellectual Property Rights" shall excluded any rights
for which a license is merely implied by the sale of a product.
"INTERCREDITOR AGREEMENT" means that certain Intercreditor Agreement, dated
as of September 8, 2005, by and among Vectra, Parent and the Company.
"IRS" means the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
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"KNOWLEDGE" of a particular fact or other matter means when: (i) an
individual is actually aware of such fact or other matter, or (ii) a prudent
individual could be expected to discover or otherwise become aware of such fact
or other matter in the course of conducting a comprehensive investigation
concerning the existence of such fact or other matter. If any individual who is
serving, or who has at any time served, as a director, officer, management-level
employee, partner, executor or trustee of such Person (or, in all cases above,
in any similar or equivalent capacity), or any employee of such Person charged
with responsibility for a particular functional or regional area of such
Person's business or operations, has, or at any time had, Knowledge of such fact
or other matter.
"LAW" means any federal, state, local, domestic, foreign, international or
multi national law (statutory, common, or otherwise), constitution, treaty,
order, writ, injunction, decree, award, stipulation, ordinance or administrative
doctrine, ordinance, equitable principle, code, rule, regulation, executive
order, request, or other similar authority enacted, adopted, promulgated, or
applied by any Governmental Body, each as amended.
"LEASE" means any lease of real or personal property or any lease or rental
agreement, license, right to use or installment and conditional sale agreement
to which the Company is a party or subject, and any other Contract of the
Company pertaining to the leasing or use of any Tangible Personal Property. The
terms "LEASE" and "LEASED" used as a verb shall have the correlative meanings.
"LIABILITY" or "LIABLE" means any liability or obligation of any kind,
character or description, whether known or unknown, absolute or contingent,
matured or unmatured, disputed or undisputed, secured or unsecured, conditional
or unconditional, accrued or unaccrued, liquidated or unliquidated, vested or
unvested, joint or several, due or to become due, executory, determined,
determinable or otherwise, and whether or not the same is required to be accrued
on financial statements.
"LICENSES" means, collectively, all Company Licenses and all Third-Party
Licenses.
"LIENS" means, in respect of any Property, any security interest, deed of
trust, mortgage, pledge, lien, statutory liens of any kind or nature,
hypothecation, charge, claim, lease or other similar interest or right in
respect of such Property.
"LOSSES" means, without duplication, all damages, losses (including loss
due to business interruption or operation shutdowns, increased costs of
operation, the loss of any available tax deduction, and including special,
exemplary, punitive or incidental loss or damage), deficiencies, costs of
mitigation or avoidance, Liabilities, expenses of whatever nature, costs
(including increased costs of business or operations), obligations, fines,
interest, penalties, and payments, whether incurred by or issued against a
Person, including (i) with respect to environmental liabilities and losses,
clean-up, remedial correction and responsive action, and (ii) with respect to
any Action or threatened Action, amounts paid in defense, settlement and
discovery, costs associated with obtaining injunctive relief, administrative
costs and expenses, reasonable fees and expenses of attorneys, expert witnesses,
accountants and other professional advisors, and other out-of-pocket costs of
investigation, preparation, and litigation in connection therewith. In computing
the amount of Losses, no offset shall be taken into account for tax savings,
insurance benefits (except as set forth in Section 7.1(d)) or similar reductions
for Losses.
"MARKS" means all fictitious business names, corporate names, trade names,
registered and unregistered trademarks and service marks, logos, product names
and slogans, Internet domain names, and trade dress rights, worldwide, including
any and all common law rights, registrations and applications (including intent
to use applications) for registration of any of the foregoing, and the goodwill
associated with all of the foregoing.
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"MASK WORKS" means mask work and similar rights, worldwide, including
rights created under Sections 901-914 of Title 17 of the United States Code,
including all registrations and applications to register any of the foregoing,
and any other rights protecting integrated circuit or chip topographies or
designs.
"MATERIAL" or "MATERIALLY" means, with respect to any Event, effect,
violation or Breach, any of the foregoing which, alone or in combination with
any other Events, effects, violations or Breaches, is reasonably likely to
result in or have a Material Adverse Effect, taken as a whole, on the Company.
"MATERIAL ADVERSE EFFECT" means, with respect to any Event, effect,
violation or Breach and any Party, that the effect thereof, alone or in
combination with any other Events, effects, violations or Breaches, is or is
reasonably likely to be materially adverse to the business, prospects,
operations, condition (financial or otherwise), assets, capitalization, equity
ownership, Properties or Liabilities of such Party; provided that, without
limiting the generality of, or implying a measure for, any of the foregoing,
losses to the Company in excess of $50,000 shall be deemed to be materially
adverse to its financial condition; and provided, further, that for purposes of
construing the terms "Material" and "Material Adverse Effect" as used in Article
VI (and only as used in Article VI), only Losses in excess of 10% of the
Shareholder Closing Consideration shall be deemed "materially adverse", as
reasonably calculated, in light of the probabilities and uncertainties of such
Losses in fact occurring and the magnitude thereof, by Parent (in the case of
Section 6.2) and the Company (in the case of Section 6.3) (it being agreed and
understood that, for purposes of this proviso, Losses related to customer
Contracts shall be calculated as any decrease in the margin between gross
revenues from such Contract less the costs and expenses, including properly
allocated general, overhead and administrative expenses, of performing under
such Contract and less the costs of goods sold under such Contract).
"MATERIAL COMPANY CONTRACT" means (i) any Contract which generated in FY
2005, or can reasonably be expected to generate in FY 2006, $200,000 or more of
revenues or expected revenues, as the case may be, for such fiscal year, and
(ii) any Company License licensing or governing Material Intellectual Property
Rights.
"MATERIAL EXCLUDED SOFTWARE" means Excluded Software which would constitute
Material Intellectual Property Rights but for the express exclusion from the
definition thereof.
"MATERIAL INTELLECTUAL PROPERTY RIGHTS" means all Intellectual Property
Rights, other than Excluded Software, which (a) are licensed to or sold,
licensed, owned, used or otherwise exploited by the Company or any of its
Subsidiaries, and (b) in the Company's reasonable determination, are necessary
for the conduct of the respective businesses of the Company or its Subsidiaries
as presently conducted or proposed to be conducted. For purposes of this
definition of "Material Intellectual Property Rights", Intellectual Property
Rights shall be deemed "necessary for the conduct of the business" of the
Company or any of its Subsidiaries if their inability to sell, license, use or
otherwise exploit such Intellectual Property Rights, individually or together
with other Intellectual Property Rights, would be reasonably likely to cause a
Material Adverse Effect on the Company and its Subsidiaries, taken as a whole.
"MATERIAL INTEREST" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Exchange Act) of voting securities or other
voting interests representing at least ten percent (10%) of the outstanding
voting power of an Entity or Equity Interests representing at least ten percent
(10%) of the outstanding Equity Interests in an Entity.
"MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
pollution, contaminants, wastes, Hazardous Materials and any other substance
that is now or hereafter regulated by any applicable Environmental Law or that
is otherwise a danger to health, reproduction or the Environment.
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"MERGER CONSIDERATION" means, collectively, (i) the Closing Consideration,
and (ii) the Performance Consideration.
"MULTIEMPLOYER PLAN" is defined in ERISA Section 3(37).
"OCCUPATIONAL SAFETY AND HEALTH LAW" means any Law designed to provide safe
and healthful working conditions and to reduce occupational safety and health
hazards, including the Occupational Safety and Health Act of 1970, as amended.
"ORDER" means any order, ruling, decision, verdict, decree, writ, subpoena,
award, judgment, injunction, assessment, or other similar determination or
finding by, before, or under the supervision of any Governmental Body,
arbitrator or mediator.
"ORDINARY COURSE OF BUSINESS" means, with respect to any action by any
Person, that such action (i) is consistent in nature, scope, quality, frequency
and magnitude with the past customs and practices of such Person, to the extent
practicable if such Person has a rapidly growing business, and is taken in the
ordinary course of the normal, day-to-day operations of such Person, and (ii)
does not require authorization by the board of directors (or any committee
thereof) or shareholders of such Person (or by any Person or group of Persons
exercising similar authority) or by the chief executive officer, chief operating
officer, president or any other officer performing substantially similar
functions of such Person.
"ORGANIZATIONAL DOCUMENTS" means, with respect to any Entity, (i) if a
corporation, the articles or certificate of incorporation and the bylaws, (ii)
if another type of Entity, any other charter, regulations or similar document,
including Contracts, adopted or filed in connection with the creation, formation
or organization of such Entity, in each case as Amended.
"OTHER IP" means moral rights, publicity rights and any other proprietary,
intellectual or industrial property or similar intangible rights of any kind or
nature, worldwide, that do not comprise or are not protected by Marks, Patents,
Copyrights, Trade Secrets or Mask Works, including, to the extent not so
covered, software and websites (including all related computer code and
content).
"OTCBB" means the OTC Bulletin Board.
"OWNED RIGHTS" means worldwide (i) Internet domain names; (ii) website
content; (iii) toll-free telephone numbers; and (iv) moral rights and publicity
rights; in each case (A) owned, purported to be owned, licensed exclusively to
or otherwise controlled by the Company or any of its Subsidiaries, and (B) to
the extent the same does not comprise or is not protected by Copyrights, Patents
or Trademarks.
"PARENT COMMON STOCK" means the common stock, par value $.0001, of Parent.
"PATENTS" means worldwide patents, patent applications, invention
disclosures and other rights of invention, filed with any Governmental Body, and
all reissues, divisions, renewals, extensions, provisional, continuations and
continuations-in-part thereof and all reexamined patents or other applications
or patents claiming the benefit of the filing date of any of the foregoing.
"PERSON" means any individual, Governmental Body or Entity.
"PRIVATE FINANCING" means a private financing of debt or equity securities
by Parent of at least $4.5 million in gross proceeds made on or before the
Closing Date.
"PROHIBITED TRANSACTIONS" is defined in ERISA Section 406 and Code Section
4975.
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"PROPERTY" means any present or future, legal or equitable, vested or
contingent right to or interest in any fixture, real property, personal property
or any other property or asset, including goods, leases, securities (whether or
not certificated), commercial paper, financial assets, commodities, accounts,
equipment, chattel paper, derivatives, instruments, money, claims, licenses,
Contracts, Intellectual Property Rights, royalties and general intangibles, and
any proceeds of any of the foregoing.
"PROPRIETARY INFORMATION" means worldwide Confidential Information or Trade
Secrets, including technical information, inventions and discoveries (whether or
not patentable and whether or not reduced to practice) and improvements thereto,
know-how, processes, discoveries, developments, designs, techniques, marketing
and purchasing strategies, plans, schematics, drawings, blue prints, formulae,
formulas, patterns, compilations, databases, specifications, research and
development information, data bases, computer programs (including source code,
scripts and interpreted instruction sets), technical data, inventions,
algorithms, concepts, ideas, devices, methods, processes, technical data, data
and other and other proprietary or confidential information or intellectual
property rights, whether business, technical or otherwise, including emails and
other electronic communications, such as instant messenger logs and website
submissions, website usage information, customer complaints and feedback,
customer and supplier lists and related information, pricing and cost
information, promotional ideas, advertising statistics, product roadmaps and
financial, business and marketing plans, data, specifications, technical data,
schematics, know-how and information.
"PROXY STATEMENT" means the proxy materials which shall constitute the
joint proxy statement and prospectus in connection with the Form S-4 and the
Merger.
"RECEIVING PARTY" has the meaning ascribed to such term in the definition
of the term "Confidential Information".
"REGISTERED INTELLECTUAL PROPERTY RIGHTS" means, with respect to any
Person, Intellectual Property Rights owned or purported to be owned by such
Person that have been issued, registered, filed, certified or otherwise
perfected by recordation, or are currently pending, by or with any Governmental
Body anywhere in the world.
"RELATED AGREEMENTS" means the Escrow Agreement, the Company Voting
Agreements, the Parent Voting Agreements, the Statement of Merger, the
Non-Competition Agreements, the Executive Employment Agreements, the Standstill
and Lock-Up Agreements and any other agreement delivered at the Closing.
"RELATED PARTY" means, (A) with respect to any individual, (i) each other
member of such individual's Family, (ii) any Entity that is directly or
indirectly controlled by any one or more members of such individual's Family,
and (iii) any Entity with respect to which one or more members of such
individual's Family has either a Material Interest or serves as a director,
officer, member, partner, executor or trustee (or in a similar capacity), and
(B) with respect to any Entity, (i) any Affiliate of specified Entity, and (ii)
each Person that either has a Material Interests, serves as a director, officer,
employee, partner, manager, member, executor or trustee (or in a similar
capacity) of such specified Entity.
"REMEDIAL ACTION" means all actions, including any capital expenditures,
required (i) to clean up, remove, treat or in any other way address any
Materials of Environmental Concern or other substance, (ii) to prevent the
Environmental Release or Threat of Release or to minimize the further
Environmental Release of any Materials of Environmental Concern or other
substance so it does not migrate or endanger or threaten to endanger public
health or welfare or the Environment, (iii) to perform pre-remedial studies and
investigations or post-remedial monitoring and care, or (iv) to bring all
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Facilities and the operations conducted thereon into compliance with
Environmental Laws and environmental Governmental Permits.
"REPRESENTATIVES" means, with respect to any Person, such Person's
officers, directors, employees, managers, consultants, contractors, agents,
financial, banking and legal advisors or other representatives.
"RESTRICTED TERRITORY" means every state, territory, country or
jurisdiction in which the Company has carried on business prior to the Closing
Date.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES" means any stock, capital stock or similar security, shares,
partnership (general or limited) interests, membership or limited liability
company interests or units, interests in a joint venture, voting trust
certificates, certificates of interest or participation in any profit sharing
agreement or arrangement or business trust, voting trust certificate, investment
contract, bonds, debentures, notes, or other evidences of indebtedness, secured
or unsecured, convertible, subordinated or otherwise, or in general any
instruments commonly known as "securities", or any certificates of interest or
participations in, temporary or interim certificates for, receipt for,
guarantees of, warrants or rights to subscribe to, purchase or otherwise
acquire, or any other Commitments, puts or other options, futures, or
certificate of deposit for, any of the foregoing.
"SECURITY INTEREST" means any Lien, except for (i) liens for taxes,
assessments, governmental charges, or claims that are being contested in good
faith by appropriate Actions promptly instituted and diligently conducted and
only to the extent that a reserve or other appropriate provision, if any, has
been made on the face of the Company Financial Statements in an amount equal to
the Liability for which the lien is asserted, (ii) statutory liens of landlords
and warehousemen's, carriers', mechanics', suppliers', materialmen's,
repairmen's or other like liens (including Contractual landlords' liens) arising
in the Ordinary Course of Business and with respect to amounts not yet
delinquent, or with respect to amounts being contested in good faith by
appropriate proceedings, and (iii) liens incurred or deposits made in the
Ordinary Course of Business in connection with workers' compensation,
unemployment insurance and other similar types of social security.
"SHAREHOLDER CLOSING CONSIDERATION" means all of the consideration payable
by Parent at the Closing pursuant to Section 2.4(a) or Section 2.4(b) (for
avoidance of doubt, exclusive of any Company Expense Payments to be made at
Closing).
"SHAREHOLDER CONSIDERATION" means the Shareholder Closing Consideration and
Shareholder Performance Consideration (if any) for each Performance Period,
inclusive of portions thereof released from the Escrow Account from time to
time.
"SHAREHOLDER LOANS" means (i) the loan evidenced by that certain
Subordinated Promissory Note, dated July 22, 2005, from the Borrower to Xxx
Xxxxxxxx, in the principal amount of $100,000; (ii) the loan evidenced by that
certain Subordinated Promissory Note, dated July 22, 2005, from the Borrower to
Xxxxx Xxxxxxxx, in the principal amount of $100,000; (iii) the loan evidenced by
that certain Subordinated Promissory Note, dated July 22, 2005, from the
Borrower to Xxxx Xxxxxxxx, in the principal amount of $100,000; and (iv) the
loan evidenced by that certain Subordinated Promissory Note, dated July 22,
2005, from the Borrower to Xxxxx Xxx, in the principal amount of $500,000.
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"SHAREHOLDERS" means all of the shareholders of the Company from time to
time, other than Dissenting Shareholders who do not hold any shares of Company
Common Stock other than Dissenting Shares.
"SOFTWARE" means any software or computer program, including firmware and
other software embedded in hardware devices, whether in the form of source code,
assembly code, script, interpreted language, instruction sets or binary or
object code (including compiled and executable programs), including any library,
component or module of any of the foregoing, together with (i) any related
default configuration files, (ii) runtime data, files and objects, such as
icons, buttons, configuration files and the like, needed for the proper
operation of the Software, (iii) screens, user interfaces, report formats,
templates and menus, and (iv) user documentation and help files, including with
regard to any command-line options and switches. With respect to source code,
"Software" also includes (i) all code written in any programming language or
scripting language, (ii) developer comments, (iii) associated header or
interface definition files, (iv) IDE configuration or project files and the
like, (v) compilation or build files, scripts or tools, including makefiles,
(vi) API and class documentation, Xxxxx charts and other diagrams, materials or
other documentation explaining the structure, flow controls, class hierarchy,
algorithms, data structures, API or composition of such source code, (vii)
compilation or build instructions (whether meant for use by developers or
compilation or build programs, scripts or tools), (viii) interpreted data,
icons, buttons and other images, files, materials and data used in the
generation of the executable or needed for the proper execution or use of the
Software, and (ix) any design notes and material proprietary information or
algorithms contained in or relating to such source code.
"SPACEDEV LOAN" means (i) that certain Loan Agreement, dated September 8,
2005, by and between Parent and the Company, and (ii) that certain Secured
Promissory Note dated September 8, 2005 issued pursuant such Loan Agreement.
"STOCK BONUS PLAN" means the separate plan incorporating certain accounts,
attributable to investments of monies in the Company's 401(k) and Stock Bonus
Plan, dated August 4, 1997, as amended, which was spun-off therefrom by the
Board of Directors effective as of October 21, 2005.
"SUBSIDIARY" means, with respect to any Person: (a) any corporation in
which a controlling interest in the total voting power of all classes of the
Equity Interests entitled (without regard to the occurrence of any contingency)
to vote in the election of directors is owned by such Person directly or through
one or more other Subsidiaries of such Person and (b) any Person other than a
corporation of which at least a controlling interest of the Equity Interests
(however designated) entitled (without regard to the occurrence of any
contingency) to vote in the election of the governing body, partners, managers,
or others that will control the management of such entity is owned by such
Person directly or through one or more other Subsidiaries of such Person.
"TANGIBLE PERSONAL PROPERTY" means all machinery, equipment, tools,
furniture, office equipment, computer hardware, supplies, materials, vehicles
and other items of tangible personal property (other than inventories) of every
kind owned or leased by the Company, wherever located and whether or not carried
on the Company's books.
"TAX" or, collectively, "TAXES," means (i) any and all taxes, including
federal, foreign, territorial, provincial, regional, state, city, municipal,
county, possession and local taxes, assessments and other governmental charges,
levies, fees, duties, impositions and liabilities, including taxes based upon or
measured by gross receipts, income, profits, sales, use, capital, occupation and
volume, quantity or weight of hazardous wastes generated or disposed of, and
value added, ad valorem, transfer, registration, stamp, estimated, franchise,
inventory, withholding, payroll, recapture, employment, windfall profits,
property, GST, capital, severance, premium, customs, duties and excise taxes,
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retail sales, goods and services, commodity, harmonized, health, education,
social service, estate, succession, death, interest equalization, severance,
license, payroll, business, branch, premium, environmental, disability,
employee's income withholding, worker's compensation, employment insurance,
unemployment insurance, social insurance, health insurance and social security
taxes together with all interest, penalties and additions imposed with respect
to such amounts by any taxing authority (domestic or foreign) and any
obligations under any Contracts with any other Person with respect to such
amounts and including any liability for taxes of a predecessor entity, including
transferee liability, (ii) any liability for the payment of any amounts of the
type described in clause (i) next above as a result of being a member of an
affiliated, consolidated, combined or unitary group for any period; and (iii)
any liability for the payment of any amounts of the type described in clauses
(i) or (ii) next above as a result of any express or implied obligation to
indemnify any other Person or as a result of any obligations under any Contract
with any other Person with respect to such amounts.
"TAX RETURN" means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes required to be filed with any
Governmental Body, including any schedule or attachment thereto, and including
any amendment thereof.
"TECHNOLOGY" means (A) the Company Products currently provided or proposed
to be provided (including those under development) by the Company in connection
with its business, and (B) the technology, tools, materials, products (other
than Excluded Software) and services used or proposed to be used in the
operation of the business of the Company.
"THIRD-PARTY LICENSES" means the Contracts or licenses governing or
relating to Intellectual Property Rights licensed by the Company or any of its
Subsidiaries in writing to third parties.
"THREAT OF RELEASE" means a reasonable likelihood of an Environmental
Release that may require action in order to prevent or mitigate damage to the
public health or welfare or the Environment that may result from such
Environmental Release.
"TRADE SECRETS" means all confidential or proprietary inventions and
discoveries (whether or not patentable or whether or not reduced to practice),
improvements thereto, trade secrets, know-how, concepts, ideas, devices,
methods, processes, designs, plans, schematics, drawings, blue prints, source
code, interpreted instruction sets, formulae, formulas, patterns, compilations,
databases, technical data, data, specifications, research and development
information, data bases and other proprietary or confidential information,
whether business, technical or otherwise, including emails and other electronic
communications, such as instant messenger logs and website submissions, customer
complaints and feedback, customer and supplier lists and related information,
pricing and cost information, advertising statistics, website user information,
technology, product roadmaps, and financial, sales, business and marketing
plans, data, specifications, technical data, schematics and information; which
in each case have some value and which a reasonably prudent Person would
maintain in confidence.
"TRADEMARKS" means worldwide (i) registered trademarks and service marks
and registrations and applications for such registrations, (ii) unregistered
trademarks and service marks, trade names, fictitious business names, corporate
names, trade dress, logos, product names and slogans, including any common law
rights; in each case together with the goodwill associated therewith.
"TRANSFER" means, with respect to any Property, to sell, deed, dividend,
distribute (including upon liquidation or distribution), exchange, convey,
consign, negotiate, gift, devise, bequeath, pass by intestate succession,
assign, issue, or otherwise alienate, transfer or dispose of such Property or
any interest therein or right thereto, whether directly or indirectly (through
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09EY-117690
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another Person or otherwise), whether voluntarily, involuntarily or by operation
of law, and whether with or without consideration. The terms "TRANSFERRED" and
"TRANSFERRING" shall have the correlative meanings
"TRANSACTION DOCUMENTS" means this Agreement, the Related Agreements and
any certificates, instruments or documents delivered pursuant to or in
connection with this Agreement, any Related Agreement or any Transaction.
"TRANSACTIONS" means all of the transactions contemplated by this
Agreement, including the Merger.
"TREAS. REG." or "TREASURY REGULATIONS" means the temporary and final
regulations promulgated under the Code.
"UPDATED DISCLOSURE SCHEDULES" means any amendment or supplement to, or
update of, the original Disclosure Schedules (which were delivered to Parent on
or prior to the date hereof).
"UPDATED PARENT DISCLOSURE SCHEDULES" means any amendment or supplement to,
or update of, the original Parent Disclosure Schedules (which were delivered to
the Company on or prior to the date hereof).
"U.S. EXPORT AND IMPORT LAWS" means the Arms Export Control Act (22 U.S.C.
2778), the International Traffic in Arms Regulations (ITAR) (22 C.F.R. 120-130),
the Export Administration Act of 1979, as amended (50 U.S.C. 2401-2420), the
Export Administration Regulations (EAR) (15 C.F.R. 730-774), and all other laws
and regulations of the United States Government regulating the provision of
services to non-U.S. parties or the export and import of articles or information
from and to the United States of America and non-U.S. parties.
"VECTRA" means Vectra Bank Colorado, National Association, a national
banking association.
"VECTRA LOANS" means, collectively, (i) those certain loans made from time
to time under that certain Revolving Credit and Term Loan Agreement, dated as of
March 30, 2005, by and between Vectra and the Company, together with any
forbearance agreements related thereto, and (ii) that certain Revolving
Promissory Note, dated March 30, 2005, those certain Term Promissory Notes,
dated March 30, 2005, and any other promissory notes issued by the Company to
Vectra in connection with any Vectra Loan.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
SPACEDEV, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------------------------------
Xxxxx X. Xxxxxx
Chairman and Chief Executive Officer
STARSYS RESEARCH CORPORATION
By: /s/ Xxxxx Xxxxxxxx
-----------------------------------------
Xxxxx Xxxxxxxx
Chief Executive Officer
KEY SHAREHOLDERS:
/s/ Xxxxx Xxxxxxxx
-----------------------------------------
Xxxxx Xxxxxxxx
Address for notices, etc.:
0000 Xxxxxx Xxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
SHAREHOLDER AGENT, as agent for all
Shareholders
By: /s/ Xxxxx Xxxxxxxx
----------------------------------------
Xxxxx Xxxxxxxx
Shareholder Agent
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09EY-117690
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MONOCEROS ACQUISITION CORP.
By: /s/ Xxxxxxx Xxxxxxx
----------------------------------------
Xxxxxxx Xxxxxxx
President
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09EY-117690
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