Exhibit
2.1
Execution Copy
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
INVERNESS MEDICAL INNOVATIONS, INC.,
IRIS MERGER SUB, INC.
AND
CHOLESTECH CORPORATION
TABLE OF
CONTENTS
Article 1 The Merger
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1
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1.1
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The Merger
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1
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1.2
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Effective Time; Closing
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1
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1.3
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Effect of the Merger
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2
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1.4
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Articles of Incorporation; Bylaws
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2
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1.5
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Directors and Officers
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2
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1.6
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Effect on Capital Stock
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2
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1.7
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Exchange of Certificates
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3
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1.8
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No Further Ownership Rights in Company Common Stock
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7
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1.9
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Restricted Stock
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7
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1.10
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Tax Consequences
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7
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1.11
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Taking of Necessary Action; Further Action
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7
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1.12
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Dissenters’ Rights
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7
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Article 2 Representations and
Warranties of the Company
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8
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2.1
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Organization; Subsidiaries
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8
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2.2
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Company Capitalization
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9
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2.3
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Obligations With Respect to Capital Stock
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10
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2.4
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Authority; Non-Contravention
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11
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2.5
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SEC Filings; Company Financial Statements
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13
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2.6
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Absence of Certain Changes or Events
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14
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2.7
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Taxes
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15
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2.8
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Title to Properties
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16
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2.9
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Intellectual Property
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17
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2.10
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Compliance with Laws
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19
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2.11
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Regulatory Matters
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20
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2.12
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Warranty Matters; Product Liability
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22
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2.13
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Litigation
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22
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2.14
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Employee Benefit Plans
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22
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2.15
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Environmental Matters
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27
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2.16
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Certain Agreements
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27
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2.17
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Brokers’ and Finders’ Fees
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29
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2.18
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Insurance
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29
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2.19
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Disclosure
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30
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2.20
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Board Approval
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30
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2.21
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Fairness Opinion
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30
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2.22
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Accounting System
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30
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2.23
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Company Rights Agreement
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31
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2.24
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Affiliates
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31
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Article 3 Representations and
Warranties of Parent and Merger Sub
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31
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3.1
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Organization of Parent and Merger Sub
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31
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3.2
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Parent and Merger Sub Capitalization
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32
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i
3.3
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Authority; Non-Contravention
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33
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3.4
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SEC Filings; Parent Financial Statements
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34
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3.5
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Absence of Certain Changes or Events
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35
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3.6
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Intellectual Property
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35
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3.7
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Compliance with Laws
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37
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3.8
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Litigation
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37
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3.9
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Disclosure
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38
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3.10
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Brokers’ and Finders’ Fees
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38
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3.11
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Accounting System
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38
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Article 4 Conduct Prior to the
Effective Time
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38
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4.1
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Conduct of Business by the Company
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38
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Article 5 Additional
Agreements
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41
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5.1
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Proxy Statement/Prospectus; Registration Statement;
Antitrust and Other Filings
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41
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5.2
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Meeting of Shareholders
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42
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5.3
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Confidentiality; Access to Information
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44
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5.4
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No Solicitation
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45
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5.5
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Public Disclosure
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46
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5.6
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Reasonable Efforts; Notification
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47
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5.7
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Third Party Consents
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48
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5.8
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Stock Options; Warrants and ESPP
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48
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5.9
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Form S-8
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49
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5.10
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Indemnification and Insurance
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49
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5.11
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Stock Exchange Listing
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50
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5.12
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Rights Agreement; Takeover Statutes
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50
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5.13
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Certain Employee Benefits
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50
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5.14
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Company Affiliates; Restrictive Legend
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51
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5.15
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Qualification as a Reorganization
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52
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5.16
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Section 16 Matters
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52
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5.17
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Merger Sub Compliance
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52
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5.18
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Resignations
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52
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Article 6 Conditions to the
Merger
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52
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6.1
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Conditions to Obligations of Each Party to Effect
the Merger
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52
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6.2
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Additional Conditions to Obligations of the Company
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53
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6.3
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Additional Conditions to the Obligations of Parent
and Merger Sub
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54
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Article 7 Termination,
Amendment and Waiver
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55
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7.1
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Termination
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55
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7.2
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Notice of Termination; Effect of Termination
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57
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7.3
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Fees and Expenses
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57
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7.4
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Amendment
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59
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7.5
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Extension; Waiver
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59
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ii
Article 8 General Provisions
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59
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8.1
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Non-Survival of Representations and Warranties
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59
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8.2
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Notices
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59
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8.3
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Interpretation; Certain Defined Terms.
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60
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8.4
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Counterparts
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61
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8.5
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Entire Agreement; Third-Party Beneficiaries
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61
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8.6
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Severability
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62
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8.7
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Other Remedies; Specific Performance; Fees
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62
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8.8
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Governing Law; Submission to Jurisdiction
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62
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8.9
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Rules of Construction
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63
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8.10
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Assignment
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63
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8.11
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Waiver of Jury Trial
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63
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iii
Agreement and Plan of Reorganization
This AGREEMENT
AND PLAN OF REORGANIZATION (this “Agreement”)
is made and entered into as of June 4, 2007, among Inverness Medical
Innovations, Inc., a Delaware corporation (“Parent”),
Iris Merger Sub, Inc., a California corporation and a wholly owned first-tier
subsidiary of Parent (“Merger Sub”),
and Cholestech Corporation, a California corporation (the “Company”).
Recitals
A. The
respective Boards of Directors of Parent, Merger Sub and the Company have
unanimously approved this Agreement and the merger of Merger Sub with and into
the Company (the “Merger”)
upon the terms and subject to the conditions of this Agreement and in
accordance with the California General Corporation Law (the “CGCL”).
B. For
United States federal income tax purposes, the Merger is intended to qualify as
a reorganization described in section 368 of the Internal Revenue Code of 1986,
as amended (the “Code”).
C. Concurrently
with the execution of this Agreement, and as a condition and inducement to Parent’s
willingness to enter into this Agreement, certain shareholders of the Company
are entering into Voting Agreements with Parent in the form of Exhibit A
(the “Voting Agreements”).
In consideration of the foregoing and the
representations, warranties, covenants and agreements set forth in this
Agreement, the parties agree as follows:
Article 1
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
of this Agreement and the applicable provisions of the CGCL, at the Effective
Time, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue
as the surviving corporation of the Merger (the “Surviving
Corporation”).
1.2 Effective
Time; Closing. Subject to the
provisions of this Agreement, the parties hereto shall cause the Merger to be
consummated by filing an agreement of merger consistent with this Agreement,
together with an officer’s certificate of each constituent corporation, each in
a form reasonably satisfactory to the parties, with the Secretary of State of
the State of California in accordance with the relevant provisions of the CGCL
(the “Merger Documents”) (the time
of such filing (or such later time as may be agreed in writing by the Company
and Parent and specified in the Merger Documents) being the “Effective Time”) as soon as
practicable on or after the Closing Date (as defined below). The closing of the Merger (the “Closing”) shall take place at the
offices of Foley Hoag LLP, Seaport
World Trade Center West, 155 Seaport Boulevard, Boston, Massachusetts, at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set
forth in Article 6 (other than those that by their nature must be satisfied at
the
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Closing), or at such
other time, date and location as the parties hereto agree in writing (the “Closing Date”).
1.3 Effect of
the Merger. At the Effective
Time, the effect of the Merger shall be as provided in this Agreement and the
applicable provisions of the CGCL.
Without limiting the generality of the foregoing, at the Effective Time,
all the property, rights, privileges, powers and franchises of the Company and
Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Merger Sub shall become the debts, liabilities
and duties of the Surviving Corporation.
1.4 Articles of
Incorporation; Bylaws.
(a) The Merger Documents shall provide that, at
the Effective Time, the Articles of Incorporation of the Surviving Corporation
shall be in the form of the Articles of Incorporation of Merger Sub as in
effect immediately prior to the Effective Time; provided,
however, that as of the Effective Time, Article First of the
Articles of Incorporation of the Surviving Corporation shall read: “The name of the corporation is Cholestech
Corporation.”
(b) At the Effective Time, the Bylaws of Merger
Sub, as in effect immediately prior to the Effective Time, shall be the Bylaws
of the Surviving Corporation until thereafter amended.
1.5 Directors
and Officers. The initial
directors of the Surviving Corporation shall be the directors of Merger Sub
immediately prior to the Effective Time, until their respective successors are
duly elected or appointed and qualified.
The initial officers of the Surviving Corporation shall be the officers
of Merger Sub immediately prior to the Effective Time, until their respective
successors are duly appointed.
1.6 Effect on
Capital Stock. Subject to the
terms and conditions of this Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, the Company or the
holders of any of the following securities:
(a) Conversion of Company
Common Stock.
(i) Each share of common stock, no par value, of the
Company (“Company Common Stock”)
issued and outstanding immediately prior to the Effective Time, other than any
shares of Company Common Stock to be canceled pursuant to Section 1.6(b) and
any “Dissenting Shares” (as defined, and to the extent provided in Section
1.12(a)), will be canceled and extinguished and automatically converted into
the right to receive the number of shares of common stock, par value $0.001 per
share, of Parent (“Parent
Common Stock”) equal to the “Exchange Ratio” (as defined in
Section 1.6(a)(ii) below) (the “Merger
Consideration”), upon surrender of the certificate representing
such share of Company Common Stock in the manner provided in Section 1.7. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof, a cash payment
shall be made pursuant to Section 1.7(e).
Unless otherwise stated or otherwise indicated by the context, all
references in this Agreement to “Company
Common Stock” shall be deemed to include the associated
preferred share purchase rights (“Rights”)
issued
2
pursuant to the Amended and Restated Preferred Share Rights Agreement,
dated January 1, 2005, between the Company and Computershare Investor Services,
LLC, as Rights Agent, as amended (the “Rights
Agreement”).
(ii) For purposes of this Agreement, the “Exchange Ratio” shall be
equal to 0.43642, subject to adjustment as set forth in Section 1.6(e).
(b) Cancellation of Company-Owned and Parent-Owned Stock. Each share of Company Common Stock held by
the Company or owned by Merger Sub, Parent or any direct or indirect wholly
owned subsidiary of the Company or of Parent immediately prior to the Effective
Time shall be canceled and extinguished without any conversion thereof.
(c) Stock Options; Warrants; Employee Stock Purchase Plan. At the Effective Time, all options to
purchase Company Common Stock then outstanding, whether under the Company’s
1997 Stock Incentive Program, 1999 Nonstatutory Stock Option Plan or 2000 Stock
Incentive Program (collectively, the “Company
Option Plans”) or pursuant to another Company compensatory plan
or otherwise (each such option, whether issued pursuant to the Company Option
Plans or otherwise, a “Company
Option”), and each warrant then outstanding to acquire Company
Common Stock (the “Company
Warrants”) shall be assumed by Parent in accordance with Section
5.8. At the Effective Time, Parent shall
assume each of the Company Stock Option Plans, subject to adjustment as
provided therein such that options granted under each such plan after the
Effective Time, if any, shall be exercisable for the purchase of Parent Common
Stock. Rights outstanding under the
Company’s 2002 Employee Stock Purchase Plan (the “Company ESPP”) shall be treated as set forth in Section
5.8 of this Agreement.
(d) Capital Stock of Merger Sub. Each share of common stock, no par value, of
Merger Sub (“Merger Sub Common Stock”),
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of common
stock, no par value, of the Surviving Corporation. Following the Effective Time, each
certificate evidencing ownership of shares of Merger Sub Common Stock shall evidence
ownership of shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), reorganization, recapitalization,
reclassification or other like change with respect to Parent Common Stock or
Company Common Stock occurring on or after the date hereof and prior to the
Effective Time.
1.7 Exchange of Certificates.
(a) Exchange Agent. Parent shall select an institution reasonably
acceptable to the Company to act as the exchange agent (the “Exchange Agent”) in the
Merger.
(b) Exchange Fund. Promptly after the Effective Time, Parent
shall make available to the Exchange Agent, for exchange in accordance with
this Article 1, the Merger Consideration issuable pursuant to Section 1.6 in
exchange for outstanding shares of Company
3
Common Stock and any payment in lieu of
fractional shares that such holders have the right to receive pursuant to
Section 1.7(e) (the “Exchange
Fund”).
(c) Exchange Procedures. Promptly after the Effective Time, Parent
shall instruct the Exchange Agent to mail to each holder of record of a
certificate or certificates (“Certificates”)
that immediately prior to the Effective Time represented outstanding shares of
Company Common Stock which were converted into shares of Parent Common Stock
pursuant to Section 1.6 and to each holder of Dissenting Shares, (i) a letter
of transmittal in customary form (that shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
proper delivery of the Certificates to the Exchange Agent and which letter
shall be reasonably acceptable to the Company), (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Parent Common Stock, and (iii) such notification as may
be required under the CGCL to be given to the holders of Dissenting
Shares. Upon surrender of Certificates
for cancellation to the Exchange Agent together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holders of such Certificates shall be entitled to
receive in exchange therefor certificates representing the number of whole
shares of Parent Common Stock into which their shares of Company Common Stock
were converted at the Effective Time (and any payment in lieu of fractional
shares that such holders have the right to receive pursuant to Section 1.7(e)
and any dividends or distributions payable pursuant to Section 1.7(d)), and the
Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all
corporate purposes, to evidence only the ownership of the number of whole
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted (and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.7(e)
and any dividends or distributions payable pursuant to Section 1.7(d)). No interest will be paid or accrued on any
cash in lieu of fractional shares of Parent Common Stock or on any unpaid
dividends or distributions payable to holders of Certificates. In the event of a transfer of ownership of
shares of Company Common Stock that is not registered in the transfer records
of the Company, a certificate representing the proper number of shares of
Parent Common Stock may be issued to a transferee if the Certificate
representing such shares of Company Common Stock is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid.
(d) Distributions With Respect to Unexchanged Shares. No dividends or other distributions declared
or made after the date of this Agreement with respect to Parent Common Stock
with a record date after the Effective Time will be paid to the holders of any
unsurrendered Certificates with respect to the shares of Parent Common Stock
represented thereby until the holders of record of such Certificates shall
surrender such Certificates. Subject to
applicable law, following surrender of any such Certificates, the Exchange
Agent shall deliver to the holders of certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) promptly,
the amount of any cash payable with respect to a fractional share of Parent
Common Stock to which such holder is entitled pursuant to Section 1.7(e) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of Parent
Common Stock, and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after
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the Effective Time but prior to surrender and
a payment date occurring after surrender, payable with respect to such whole
shares of Parent Common Stock.
(e) Fractional Shares. No fraction of a share of Parent Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Common Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from Parent an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the average closing price of a share of
Parent Common Stock for the ten most recent days that Parent Common Stock has
traded ending on the trading day immediately prior to the Effective Time, as
reported on the American Stock Exchange.
(f) Required Withholding. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of Company Common Stock such amounts as may be
required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other applicable
Legal Requirement (as defined in Section 2.2(d)). To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement
as having been paid to the person to whom such amounts would otherwise have
been paid.
(g) Lost, Stolen or Destroyed Certificates. In the event that any Certificates shall have
been lost, stolen or destroyed, the Exchange Agent shall issue in exchange for
such lost, stolen or destroyed Certificates, upon the making of an affidavit of
that fact by the holder thereof, certificates representing the Merger
Consideration into which the shares of Company Common Stock represented by such
Certificates were converted pursuant to Section 1.6, (and cash for fractional
shares, if any, as may be required pursuant to Section 1.7(e) and any dividends
or distributions payable pursuant to Section 1.7(d)); provided,
however, that Parent may, in its discretion and as a condition
precedent to the issuance of such Merger Consideration, cash and other
distributions, require the owner of such lost, stolen or destroyed Certificates
to deliver a bond in such sum as it may reasonably direct as indemnity against
any claim that may be made against Parent, the Surviving Corporation or the
Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
(h) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, neither the Exchange Agent, Parent, the Surviving Corporation
nor any party hereto shall be liable to any holder of shares of Parent Common
Stock or Company Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(i) Termination of Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of Company Common Stock for 12 months after the
Effective Time shall be delivered to Parent, upon demand, and any holders of
Company Common Stock who have not theretofore complied with the provisions of
this Section 1.7 shall thereafter look only to Parent for the shares of Parent
Common Stock, any cash in lieu of fractional shares of Parent Common Stock to
which they are entitled pursuant to Section 1.7(e)
5
and any dividends or other distributions with
respect to Parent Common Stock to which they are entitled pursuant to Section
1.7(d), in each case, without any interest thereon.
6
1.8 No Further
Ownership Rights in Company Common Stock. All shares of Parent
Common Stock issued in accordance with the terms hereof (and any payments in
respect thereof pursuant to Sections 1.7(d) and 1.7(e)) shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock, and there shall be no further registration of transfers
on the records of the Surviving Corporation of shares of Company Common Stock
that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates
are presented to Parent or the Surviving Corporation for any reason, they shall
be canceled and exchanged as provided in this Article 1.
1.9 Restricted
Stock. If any shares of
Company Common Stock that are outstanding immediately prior to the Effective
Time are unvested or are subject to a repurchase option, risk of forfeiture or
other condition providing that such shares (“Company
Restricted Stock”) may be forfeited or repurchased by the
Company upon any termination of the holder’s employment, directorship or other
relationship with the Company (and/or any affiliate of the Company) under the
terms of any restricted stock purchase agreement or other agreement with the
Company that does not by its terms provide that such repurchase option, risk of
forfeiture or other condition fully lapses upon consummation of the Merger,
then the shares of Parent Common Stock issued upon the conversion of such
shares of Company Common Stock in the Merger will, unless otherwise accelerated
by their terms as a result of the Merger, continue to be unvested and subject
to the same repurchase options, risks of forfeiture or other conditions
following the Effective Time, and the certificates representing such shares of
Parent Common Stock may accordingly be marked with appropriate legends noting
such repurchase options, risks of forfeiture or other conditions. The Company shall use its commercially
reasonable efforts to ensure that, from and after the Effective Time, Parent is
entitled to exercise any such repurchase option or other right set forth in any
such restricted stock purchase agreement or other agreement. A listing of the holders of Company
Restricted Stock, together with the number of shares and the vesting schedule
of Company Restricted Stock held by each, is set forth in Part 1.9 of the
Company Disclosure Schedule.
1.10 Tax
Consequences. It is intended
by the parties hereto that the Merger shall constitute a reorganization
described in section 368 of the Code.
The parties hereto adopt this Agreement as a “plan of reorganization”
within the meaning of sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations (the “Treasury Regulations”).
1.11 Taking of
Necessary Action; Further Action.
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Company and Merger
Sub, the officers and directors of the Surviving Corporation shall be
authorized to take all such lawful and necessary action.
1.12 Dissenters’ Rights.
(a) Notwithstanding any
provision of this Agreement to the contrary other than Section 1.12(b), any
shares of Company Common Stock held by a holder who, subject to and in
accordance with Section 1300 et seq. of the CGCL, has duly demanded the
Company to purchase such holder’s shares of Company Common Stock pursuant to
the CGCL and has
7
complied with all of the provisions of the
CGCL concerning the right of such holder to demand the Company to purchase such
holder’s shares of Company Common Stock and who, as of the Effective Time, has
not effectively withdrawn or lost such dissenters’ rights (“Dissenting Shares”),
shall not be converted into or represent the right to receive Merger
Consideration pursuant to Section 1.6, but instead shall be converted into the
right to receive only such consideration as may be determined to be due with
respect to such Dissenting Shares under the CGCL.
(b) Notwithstanding the
provisions of Section 1.6(a), if any holder of shares of Company Common Stock
who demands purchase of such shares under the CGCL shall effectively withdraw
or lose (through failure to perfect or otherwise) such right to demand
purchase, then, as of the later of the Effective Time and the occurrence of
such event, such holder’s shares shall no longer be Dissenting Shares and shall
automatically be converted into and represent only the right to receive, upon
surrender of the certificate representing such shares pursuant to Section 1.7,
Merger Consideration as provided in Section 1.6(a) (and any payment in lieu of
fractional shares that such holders have the right to receive pursuant to
Section 1.7(e) and any dividends or distributions payable pursuant to Section
1.7(d) as though such shares had been so converted as of the Effective Time),
in each case without interest thereon.
(c) The Company shall give
Parent (i) prompt notice of any demands for purchase of any shares of Company
Common Stock, withdrawals of such demands, and any other instruments served
pursuant to the CGCL which relate to any such demand for purchase and (ii) the
opportunity to participate in all negotiations and proceedings which take place
prior to the Effective Time with respect to demands for purchase under the
CGCL. The Company shall not, except with
the prior written consent of Parent, make any payment with respect to any
demands for purchase of Company Common Stock or settle, offer to settle or
otherwise negotiate any such demands.
Article 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company
represents and warrants to Parent and Merger Sub as set forth in this Article
2, subject to any exceptions stated in the disclosure schedule delivered by the
Company to Parent dated as of the date hereof (the “Company
Disclosure Schedule”).
The Company Disclosure Schedule shall be arranged in sections and
paragraphs corresponding to the numbered and lettered sections and paragraphs
contained in this Article 2 and the disclosure in any section or paragraph
shall qualify such sections and paragraphs, as well as other sections and
paragraphs in this Article 2 only to the extent that it is reasonably apparent
from a reading of such disclosure that it also qualifies or applies to such
other sections and paragraphs.
2.1 Organization; Subsidiaries.
(a) The Company and each of
its subsidiaries (which subsidiaries are identified on Part 2.1 of the Company
Disclosure Schedule) (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is organized;
(ii) has the corporate or other power and authority to own, lease and operate
its assets and property and to carry on its business as now being conducted;
and (iii) except as would not
8
reasonably be expected to have a Material
Adverse Effect (as defined in Section 8.3(c)) on the Company, is duly qualified
or licensed to do business in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary.
(b) Neither the Company nor
any of the other corporations identified in Part 2.1 of the Company Disclosure
Schedule owns any capital stock of, or any equity interest of any nature in,
any corporation, partnership, joint venture arrangement or other business
entity, other than the entities identified in Part 2.1 of the Company
Disclosure Schedule. Neither the Company
nor any of its subsidiaries has agreed or is obligated to make, or is bound by
any written or oral agreement, contract, lease, instrument, note, option,
warranty, purchase order, license, insurance policy, benefit plan or legally
binding commitment or undertaking of any nature, as in effect as of the date
hereof or as may hereinafter be in effect, under which it may become obligated
to make any future investment in or capital contribution to any other
entity. Neither the Company, nor any of
its subsidiaries, has, at any time, been a general partner of any general
partnership, limited partnership or other entity. Part 2.1 of the Company Disclosure Schedule
indicates the jurisdiction of organization of each entity listed therein and
the Company’s direct or indirect equity interest therein.
(c) The Company has
delivered or made available to Parent a true and correct copy of the Articles
of Incorporation and Bylaws of the Company and similar governing instruments of
each of its subsidiaries, each as amended to date (collectively, the “Company Charter Documents”),
and each such instrument is in full force and effect. The Company has not taken any action in
violation of any of the provisions of the Articles of Incorporation and Bylaws
of the Company. None of the Company’s
subsidiaries have taken any action in violation of its respective governing
instruments, except as would not reasonably be expected to have a Material Adverse
Effect on the Company.
2.2 Company Capitalization.
(a) The authorized capital
stock of the Company consists solely of 25,000,000 shares of Company Common
Stock, of which there were 15,681,174 shares issued and outstanding as of the
close of business on May 31, 2007, and 5,000,000 shares of preferred stock, no
par value, of which no shares are issued or outstanding. All outstanding shares of Company Common
Stock are duly authorized, validly issued, fully paid and nonassessable and are
not subject to preemptive rights created by statute, the Articles of
Incorporation or Bylaws of the Company or any agreement or document to which
the Company is a party or by which it is bound.
As of the date of this Agreement, there are no shares of Company Common
Stock held in treasury by the Company.
From and after the Effective Time, the shares of Parent Common Stock
issued in exchange for any shares of Company Restricted Stock will, without any
further act of Parent, the Company or any other person, become subject to the
restrictions, conditions and other provisions of such Company Restricted Stock,
and Parent will automatically succeed to and become entitled to exercise the
Company’s rights and remedies under such Company Restricted Stock.
(b) As of the close of business
on May 31, 2007, (i) 1,750,015 shares of Company Common Stock are subject to
issuance pursuant to outstanding Company Options for
9
an aggregate exercise price of
$19,326,064.39, (ii) no shares of Company Common Stock are subject to issuance
pursuant to outstanding Company Warrants and (iii) 92,674 shares of Company
Common Stock are reserved for future issuance under the Company ESPP. Part 2.2(b) of the Company Disclosure
Schedule sets forth the following information with respect to Company Options
and Company Warrants outstanding as of the date of this Agreement: (i) the number of shares of Company Common
Stock subject to Company Options or Company Warrants; (ii) the exercise prices
of such Company Options or Company Warrants; (iii) the dates on which such
Company Options or Company Warrants were granted or assumed; (iv) the Company
Option Plan pursuant to which such Company Options were granted; and (v)
whether, and to what extent, the exercisability of such Company Options or
Company Warrants will be accelerated upon consummation of the transactions
contemplated by this Agreement or any termination of employment thereafter.
(c) The Company has made
available to Parent an accurate and complete copy of the Company Option Plans
and each form of stock option agreement evidencing any Company Options and an
accurate and complete copy of each Company Warrant. All shares of Company Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions specified in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable.
Except as set forth in Part 2.2(b) of the Company Disclosure Schedule,
there are no commitments or agreements of any character to which the Company is
bound obligating the Company to accelerate the vesting of any Company Option
upon consummation of the Merger or any termination of employment thereafter.
(d) All outstanding shares
of Company Common Stock, all outstanding Company Options, all outstanding
Company Warrants and all outstanding shares of capital stock of each subsidiary
of the Company have been issued and granted in compliance in all material
respects with (i) all applicable securities laws and other applicable Legal
Requirements and (ii) except as would not reasonably be expected to have a
Material Adverse Effect on the Company, all requirements set forth in
applicable agreements or instruments.
For the purposes of this Agreement, “Legal Requirements” means any federal, state, local,
municipal, foreign or other law, statute, constitution, principle of common
law, resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issued, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any court, administrative agency or
commission or other governmental authority or instrumentality, foreign or
domestic (each, a “Governmental
Entity”).
2.3 Obligations
With Respect to Capital Stock.
Other than as set forth in Section 2.2, as of the date hereof there are
no equity securities, partnership interests or similar ownership interests of
any class of Company equity security, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except for securities the
Company owns free and clear of all claims and Encumbrances (as defined below),
directly or indirectly through one or more subsidiaries, as of the date of this
Agreement, there are no equity securities, partnership interests or similar
ownership interests of any class of equity security of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities, partnership interests or similar ownership interests,
issued, reserved for issuance or outstanding.
Except as set forth in Part 2.2 or Part 2.3 of the Company Disclosure
Schedule, as
10
of the date hereof there
are no subscriptions, options, warrants, equity securities, convertible debt,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries is bound obligating the Company or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend or enter into any such
subscription, option, warrant, equity security, call, right, commitment or
agreement. Except as contemplated by
this Agreement and the Rights Agreement, there are no registration rights, and
there is no voting trust, proxy, rights agreement, “poison pill” anti-takeover
plan or other agreement or understanding to which the Company is a party or by
which it is bound with respect to any equity security of any class of the
Company or with respect to any equity security, partnership interest or similar
ownership interest of any class of any of its subsidiaries.
For purposes of this Agreement, (a) “Encumbrances” means any lien,
pledge, hypothecation, charge, mortgage, security interest, encumbrance, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset (other than those imposed by U.S. federal or state
and foreign securities laws), any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset) and (b) “Permitted Encumbrances”
means any or all of the following: (i) liens for Taxes (as defined in
Section 2.7) and other similar governmental charges and assessments which are
not yet delinquent or liens for Taxes being contested in good faith by any
appropriate proceedings for which adequate reserves have been established;
(ii) liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable; (iii) Encumbrances imposed on the underlying fee
interest in leased property of the Company; (iv) zoning, entitlement, building
and other land use regulations imposed by Governmental Entities that do not
materially interfere with the use or operation of the property subject thereto;
(v) Encumbrances reflected in the Company Financials; and (vi) Encumbrances
which, individually or in the aggregate, are not material in character, amount
or extent.
2.4 Authority; Non-Contravention.
(a) The Company has all
requisite corporate power and authority to enter into this Agreement and,
subject only to the approval of the principal terms of the Merger by the
required vote of the Company’s shareholders (the “Company Shareholder Approval”), to consummate the
transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject only to the Company
Shareholder Approval and the filing of the Merger Documents pursuant to the
CGCL. The affirmative vote of the
holders of a majority of the outstanding shares of Company Common Stock is
sufficient for the Company’s shareholders to approve the principal terms of the
Merger, and no other approval of any holder of any securities of the Company is
required in connection
11
with the consummation of the transactions
contemplated hereby. This Agreement has
been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes the
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity.
(b) The execution and
delivery of this Agreement by the Company does not, and the performance of this
Agreement by the Company will not, (i) conflict with or violate the Company
Charter Documents, (ii) subject to obtaining the Company Shareholder Approval
and compliance with the requirements set forth in Section 2.4(c), conflict with
or violate any material Legal Requirement applicable to the Company or any of
its subsidiaries or by which the Company or any of its subsidiaries or any of
their respective material properties is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair the Company’s (or a
subsidiary’s) rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an Encumbrance (other than a
Permitted Encumbrance) on any of the properties or assets of the Company or any
of its subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, concession, or other instrument
or obligation to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries or any of their respective
properties are bound or affected, except in the case of this clause (iii) as
would not reasonably be expected to have a Material Adverse Effect on the Company.
(c) No consent, approval,
order or authorization of, or registration, declaration or filing with any
Governmental Entity or other person is required to be obtained or made by the
Company in connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Merger Documents
with the Secretary of State of the State of California, (ii) the filing of the
Proxy Statement/Prospectus (as defined in Section 2.19) with the Securities and
Exchange Commission (“SEC”)
in accordance with the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and the
effectiveness of the Registration Statement (as defined in Section 2.19), (iii)
the filing of Notification and Report Forms with the United States Federal
Trade Commission and the Antitrust Division of the United States Department of
Justice as required by the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the “HSR Act”),
together with the filing of any other comparable pre-merger notification forms
required by the merger notification or control laws of any other applicable
jurisdiction, as agreed by the parties hereto, (iv) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related)
laws and the securities or antitrust laws of any foreign country, and (v) such
other consents, authorizations, filings, approvals and registrations which if
not obtained or made would not be material to the Company or Parent or have a
material adverse effect on the ability of the parties hereto to consummate the
Merger.
12
2.5 SEC Filings; Company Financial Statements.
(a) Since January 1, 2004,
the Company has filed all forms, reports and documents required to be filed by
the Company with the SEC and (if and to the extent such forms, reports and
documents are not available on EDGAR) has made available to Parent such forms,
reports and documents in the form filed with the SEC. All such required forms, reports and
documents (including those that the Company may file subsequent to the date
hereof) are referred to herein as the “Company
SEC Reports.” As of their
respective dates, the Company SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act of 1933, as amended (the “Securities Act”), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports and (ii) did not at the time
they were filed (or if subsequently amended or superseded by a filing prior to
the date of this Agreement, then on the date of such subsequent filing) contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Company’s
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in the Company SEC Reports (the “Company Financials”), including each Company SEC Report
filed after the date hereof until the Closing, (i) complied as to form in all
material respects with the published rules and regulations of the SEC with
respect thereto, (ii) was prepared in accordance with generally accepted
accounting principles (“GAAP”)
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the requirements of Form 10-Q or Form 8-K or
any successor form under the Exchange Act) and (iii) fairly presented the
consolidated financial position of the Company and its subsidiaries as at the
respective dates thereof and the consolidated results of the Company’s
operations, cash flows and shareholders’ equity for the periods indicated,
except that the unaudited interim financial statements may not contain all the
footnotes required by GAAP for audited statements, and were or are subject to
normal and recurring year-end adjustments that the Company does not expect to
be material, individually or in the aggregate.
The balance sheet of the Company contained in the Company SEC Reports as
of December 29, 2006 is hereinafter referred to as the “Company Balance Sheet.”
Neither the Company nor any of its subsidiaries has any liabilities
(absolute, accrued, contingent or otherwise) except for (i) liabilities
reflected on the Company Balance Sheet, (ii) liabilities incurred since the
date of the Company Balance Sheet in the ordinary course of business consistent
with past practices, (iii) liabilities incurred in connection with this
Agreement and (iv) liabilities that would not reasonably be expected to have a
Material Adverse Effect on the Company.
(c) The Company has not
been notified by its independent registered public accounting firm or by the
staff of the SEC that such firm or the staff of the SEC, as the case may be, is
of the view that any financial statement included in any registration statement
filed by the Company under the Securities Act or any periodic or current report
filed by the Company under the Exchange Act should be restated, or that the
Company should modify its accounting in future periods in a manner that would
be materially adverse to the Company.
13
(d) The Company is in
compliance in all material respects with the provisions of the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley
Act”) that are applicable to the Company, and any related rules
and regulations promulgated by the SEC.
The Company’s disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act) and internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act) are effective in all
material respects. Neither the Company
nor, to the Company’s knowledge, its independent auditors have identified (i)
any significant deficiency or material weakness in the Company’s internal
control over financial reporting, (ii) any fraud, whether or not material,
that involves the Company’s management or other employees who have a role in
the preparation of financial statements or the Company’s internal control over
financial reporting or (iii) any claim or allegation regarding any of the
foregoing. Since December 29, 2006,
there has not been any change in the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
2.6 Absence of
Certain Changes or Events.
Since the date of the Company Balance Sheet, there has not been: (i) any Material Adverse Effect with respect
to the Company, (ii) any declaration, setting aside or payment of any dividend
on, or other distribution (whether in cash, stock or property) in respect of,
any of the Company’s or any of its subsidiaries’ capital stock, or any
purchase, redemption or other acquisition by the Company of any of the Company’s
capital stock or any other securities of the Company or its subsidiaries or any
grant or issuance of any options, warrants, calls or rights to acquire any such
shares or other securities except for repurchases from employees or service
providers following their termination of service pursuant to the terms of their
pre-existing stock option or purchase agreements, (iii) any split, combination
or reclassification of any of the Company’s or any of its subsidiaries’ capital
stock, (iv) other than in the ordinary course of business consistent with past
practice, any granting by the Company or any of its subsidiaries of any
increase in compensation or fringe benefits to any of their officers or
employees, or any payment by the Company or any of its subsidiaries of any
bonus to any of their officers or employees, or any granting by the Company or
any of its subsidiaries of any increase in severance or termination pay or any
entry by the Company or any of its subsidiaries into, or material modification
or amendment of, any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are materially altered upon the occurrence of a
transaction involving the Company of the nature contemplated hereby or any
acceleration or release of any vesting condition to the right to exercise any
option, warrant or other right to purchase or otherwise acquire any shares of
the Company’s capital stock or any acceleration or release of any right to
repurchase shares of the Company’s capital stock upon the termination of
employment or services with the Company, (v) any material change or alteration
in the policy of the Company relating to the granting of stock options or other
equity compensation to its employees and consultants, (vi) entry by the Company
or any of its subsidiaries into, or material modification, amendment or
cancellation of, any development services, licensing, distribution, sales,
services or other similar agreement with respect to any material Company
Intellectual Property Rights (as defined in Section 2.9) other than in the
ordinary course of business consistent with past practices, (vii) any
acquisition, sale or transfer of any material asset by the Company or any of
its subsidiaries other than in the ordinary course of business consistent with
past practices, (viii) any material change by the Company in its accounting
methods, principles or practices, except as required by concurrent changes in
GAAP, or (ix) any material revaluation
14
by the Company of any of
its material assets, including writing off notes or accounts receivable other
than in the ordinary course of business consistent with past practices.
2.7 Taxes.
(a) The Company and each of
its subsidiaries have timely filed all material Tax Returns required to be
filed by or on behalf of the Company and each of its subsidiaries; such Tax
Returns were accurate and complete in all material respects; and the Company
and each of its subsidiaries have paid all material Taxes due and owing
(whether or not shown on such Tax Returns).
(b) The Company and each of
its subsidiaries have withheld and paid all material Taxes required to be
withheld and paid in connection with any amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party.
(c) Neither the Company nor
any of its subsidiaries is currently the beneficiary of any extension of time
within which to file any material Tax Return.
(d) Neither the Company nor
any of its subsidiaries has waived any statute of limitations in respect of
material Taxes or agreed to any extension of time with respect to a material
Tax assessment or deficiency.
(e) Neither the Company nor
any of its subsidiaries has received from any taxing authority any (i) written
notice indicating an intent to open an audit or other review with respect to
material Taxes or (ii) written notice or deficiency or proposed adjustment for
any material amount of Tax proposed, asserted, or assessed by any taxing
authority against the Company or any of its subsidiaries.
(f) No tax audit or
administrative or judicial Tax proceeding is pending or presently in progress with respect to a
material Tax Return of the Company or any of its subsidiaries.
(g) The unpaid Taxes of the
Company and its subsidiaries did not, as of the date of the Company Balance
Sheet, exceed the reserve for Tax liability (rather than any reserve for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the face of the Company Balance Sheet (rather than in any
notes thereto) and do not exceed that reserve as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice
of the Company and its subsidiaries in filing their Tax Returns.
(h) Neither the Company nor
any of its subsidiaries is a party to any agreement, contract, arrangement or
plan that would result, separately or in the aggregate, in the payment of any
(i) “excess parachute payment” within the meaning of Code section 280G (or any
corresponding provision of state, local of foreign Tax law) or (ii) any amount
that will not be fully deductible as a result of Code section 162(m) or 404 (or
any corresponding provision of state, local of foreign Tax law).
(i) Neither the Company
nor any of its subsidiaries is party to or has any obligation under any
tax-sharing, tax indemnity or tax allocation agreement or arrangement.
15
(j) Neither the Company
nor any of its subsidiaries (A) has been a member of an Affiliated Group (as
defined below) filing a consolidated federal income Tax Return (other than a
group the common parent of which was the Company) or (B) has any liability for
the Taxes of any person (other than the Company or any of its subsidiaries)
under Treasury Regulation section 1.1502-6 (or any similar provision of state,
local, or foreign law), as a transferee or successor, by contract or otherwise.
(k) Neither the Company nor
any of its subsidiaries has been a United States real property holding
corporation within the meaning of section 897(c)(2) of the Code during the
applicable period specified in section 897(c)(1)(A)(ii) of the Code.
(l) Neither the Company
nor any of its subsidiaries has distributed stock of a corporation, or has had
its stock distributed, in a transaction purported or intended to be governed in
whole or in part by section 355 or 361 of the Code.
(m) To the Company’s
knowledge, there is no fact or circumstance, and the Company has no present
plan or intention, that would be reasonably likely to prevent the Merger from
qualifying as a “reorganization” pursuant to the provisions of section 368 of
the Code.
(n) The Company has made
available to Parent correct and complete copies of all foreign, federal and
state income tax and all state sales and use Tax Returns filed for the Company
and each of its subsidiaries and each of the Company’s and its subsidiaries’
predecessor entities, if any, filed since March 30, 2001.
“Tax” or “Taxes” means any federal, state,
local or foreign income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code section 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer,
registration, value added, alternative or add-on minimum, estimated, or other
tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not and including any obligations to indemnify or
otherwise assume or succeed to the Tax liability of any other person.
“Tax Return”
means any return, declaration, report, claim for refund, or information return
or statement relating to Taxes, including any schedule or attachment thereto,
and including any amendment thereof.
“Affiliated Group”
means any affiliated group within the meaning of Code section 1504(a) or any
similar group defined under a similar provision of state, local, or foreign
law.
2.8 Title to Properties.
(a) Neither the Company nor
any of its subsidiaries owns any interest in real property. Part 2.8 of the Company Disclosure Schedule
list all real property leases to which the Company or any of its subsidiaries
is a party and each amendment thereto that is in effect as of the date of this
Agreement. All such current leases are
in full force and effect, are valid and effective in accordance with their
respective terms (except as such enforceability may be subject to laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors and
16
rules of law governing specific performance,
injunctive relief, or other equitable remedies), and there is not, under any of
such leases involving the occupancy of more than 10,000 square feet
(collectively, the “Real
Estate Agreements”), any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default) that would give rise to a claim against the Company or any of its
subsidiaries in excess of $250,000.
(b) 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 for Permitted Encumbrances. Each of the Company’s subsidiaries 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 for Permitted Encumbrances.
(c) The assets owned or
leased by the Company and its subsidiaries include all of the material assets,
rights and properties necessary for, and all of the assets, rights and
properties used or held for use by the Company, its subsidiaries or any other
person in, carrying out the Company’s business as currently conducted,
including the design, development, marketing, production, upgrade, revision,
maintenance, licensing or manufacture of any of the products of the Company or
any of its subsidiaries under an FDA-compliant quality system. None of such assets and properties that are
material to the Company and its subsidiaries taken as a whole is in the
possession, custody or control of any person other than the Company and its
subsidiaries.
2.9 Intellectual
Property. For purposes of
this Agreement, the following terms shall have the definitions set forth below:
“Company Intellectual Property
Rights” means all intellectual property rights used by the
Company and its subsidiaries in the conduct of their business, including,
without limitation: (i) all
trademarks, service marks, trade names, Internet domain names, trade dress, and
the goodwill associated therewith, and all registrations or applications for
registration thereof (collectively, the “Company
Marks”); (ii) all patents, patent applications and
continuations (collectively, the “Company
Patents”); (iii) all copyrights, database rights and moral
rights in both published works and unpublished works, including all such rights
in software, user and training manuals, marketing and promotional materials,
internal reports, business plans and any other expressions, mask works,
firmware and videos, whether registered or unregistered, and all registrations
or applications for registration thereof (collectively, the “Company Copyrights”); and
(iv) trade secret rights and rights to confidential information, including
such rights in inventions (whether or not reduced to practice), know-how,
customer lists, technical information, proprietary information, technologies,
processes and formulae, software, data, plans, drawings and blue prints,
whether tangible or intangible and whether stored, compiled, or memorialized
physically, electronically, photographically, or otherwise (collectively, the “Company Secret Information”). For purposes of this Section 2.9, “software” means any and all: (w) computer programs and applications,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (x) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (y) descriptions, flow-charts,
library functions, algorithms, architecture, structure,
17
display screens and development tools, and other
information, work product or tools used to design, plan, organize or develop
any of the foregoing and (z) all documentation, including user manuals and
training materials, relating to any of the foregoing.
(a) Part 2.9 of the Company
Disclosure Schedule sets forth a complete and correct list of each of the
following which is owned by the Company or its subsidiaries: (i) each registered Company Mark, (ii)
each Company Patent and (iii) each registered Company Copyright. To the Company’s knowledge, the Company or
one of its subsidiaries: (i) owns
all right, title and interest in and to the Company Intellectual Property
Rights, free and clear of all Encumbrances, other than Permitted Encumbrances,
or (ii) is licensed to use, or otherwise possesses legally valid and
enforceable rights to use, the Company Intellectual Property Rights that it
does not so own. The Company and its
subsidiaries have made all necessary filings, recordations and payments (i) to
protect and maintain their interests in the Company Intellectual Property
Rights owned by the Company or any of its subsidiaries and listed or required
to be listed in Part 2.9 of the Company Disclosure Schedule and (ii) to comply
in all material respects with contractual obligations that the Company or any
of its subsidiaries has to third parties, if any, to protect and maintain
Company Intellectual Property Rights that are licensed to the Company or any of
its subsidiaries by such third parties.
(b) Immediately after the
Effective Time, the Surviving Corporation and its subsidiaries will have the
same rights with respect to the material Company Intellectual Property Rights
as the Company and its subsidiaries immediately before the Effective Time and
without the payment of any additional material amounts or consideration other
than ongoing fees, royalties or payments which the Company would otherwise be
required to pay. All of the rights of
the Company and its subsidiaries with respect to the Company Intellectual
Property Rights owned by the Company or any of its subsidiaries are freely
assignable in their own respective names, including the right to create
derivative works, and neither the Company nor any of its subsidiaries is under
any obligation to obtain any approval or consent for use of any of such Company
Intellectual Property Rights. As of the
Effective Time, the Surviving Corporation and its subsidiaries will own or have
a valid right to use the Company Intellectual Property Rights and will have the
unrestricted right and authority to fully use and exploit the Company
Intellectual Property Rights owned by the Company or any of its subsidiaries
for commercial purposes.
(c) To the Company’s knowledge,
neither the business of the Company or any of its subsidiaries nor any of the
products, services or technology used, sold, offered for sale or licensed or
publicly proposed for use, sale, offer for sale or license by the Company or
any of its subsidiaries infringes any intellectual property rights of any
person, other than such infringements as would not cause a material loss to the
Company.
(d) To the Company’s
knowledge, (i) all the Company Patents are valid and subsisting, (ii) none of
the Company Patents is being infringed and (iii) within the past three years
neither the validity nor the enforceability of any of the Company Patents has
been challenged by any person.
(e) To the Company’s
knowledge, (i) all the Company Marks are valid and subsisting, (ii) none of the
Company Marks is being infringed or diluted and (iii) within the past
18
three years none of the Company Marks has
been opposed or challenged and no proceeding has been commenced or threatened
that would seek to prevent the use by the Company or any of its subsidiaries of
any Company Mark.
(f) To the Company’s
knowledge, (i) all the Company Copyrights, whether or not registered, are valid
and enforceable, (ii) none of the Company Copyrights is being infringed, or its
validity challenged or threatened in any way and (iii) within the past three
years no proceeding has been commenced or threatened that would seek to prevent
the use by the Company or any of its subsidiaries of the Company Copyrights.
(g) The Company and its
subsidiaries have taken reasonable measures to protect the secrecy and
confidentiality of the Company Secret Information. To the Company’s knowledge, no Company Secret
Information has been used, divulged or appropriated for the benefit of any
person (other than the Company or any of its subsidiaries) or otherwise
misappropriated in a manner which would reasonably be expected to have a
Material Adverse Effect on the Company.
(h) No Company Intellectual
Property Right is subject to any outstanding order, proceeding (other than pending
proceedings pertaining to applications for patent or trademark or copyright
registration) or stipulation that has been served upon or, to the Company’s
knowledge, filed against, the Company that restricts in any manner the
licensing thereof by the Company or any of its subsidiaries.
(i) To the Company’s
knowledge, no employees engaged in the development of products or services or
in performing sales and marketing functions on behalf of the Company or any of
its subsidiaries is obligated under any contract with any third party which
would materially conflict with such employee’s rights to engage in any such
activity on behalf of the Company or any of its subsidiaries.
(j) All employees,
contractors, agents and consultants of the Company or any of its subsidiaries
who are or were involved in the creation of any Company Intellectual Property
Rights owned by the Company or any of its subsidiaries have executed an
assignment of inventions agreement to vest in the Company or its subsidiary, as
appropriate, exclusive ownership of such Company Intellectual Property Rights,
except where the failure to have executed such an agreement will not reasonably
be expected to have a Material Adverse Effect on the Company. All employees, contractors, agents and
consultants of the Company or any of its subsidiaries who have or have had
access to Company Secret Information owned by the Company or any of its
subsidiaries have executed nondisclosure agreements to protect the
confidentiality of such Company Secret Information, except where the failure to
have executed such an agreement will not reasonably be expected to have a
Material Adverse Effect on the Company.
2.10 Compliance with Laws.
(a) Neither the Company nor
any of its subsidiaries is in conflict with, or in default or violation of (i)
any Legal Requirement applicable to the Company or any of its subsidiaries or
by which the Company or any of its subsidiaries or any of their respective
19
properties is bound or affected, or (ii) any
Company Contract (as defined in Section 2.16), except for conflicts, violations
and defaults that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Company. To the Company’s knowledge, no investigation
or review by any Governmental Entity is pending or has been threatened against
the Company or any of its subsidiaries.
There is no agreement, judgment, injunction, order or decree binding
upon the Company or any of its subsidiaries which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any material
business practice of the Company or any of its subsidiaries, any acquisition of
material property by the Company or any of its subsidiaries or the conduct of
business by the Company and its subsidiaries as currently conducted.
(b) The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals from Governmental Entities that are material to or required for the
operation of the business of the Company and of its subsidiaries as currently
conducted (collectively, the “Company
Permits”), except where the failure to hold any permit, license,
variance, exemption, order or approval would not reasonably be expected to have
a Material Adverse Effect on the Company.
The Company and its subsidiaries are in compliance with the terms of the
Company Permits, except as would not reasonably be expected to have a Material
Adverse Effect on the Company.
2.11 Regulatory Matters.
(a) To the Company’s
knowledge, the Company and its subsidiaries are in compliance in all material
respects with all applicable statutes, rules and regulations of the U.S. Food
and Drug Administration and similar federal, state or local Governmental
Entities (collectively, the “FDA”)
and similar foreign Governmental Entities (“Foreign Authorities”) with respect to the sale,
labeling, storing, testing, development, distribution, or marketing of the
products being distributed or developed by or on behalf of the Company and its
subsidiaries. The Company has previously
made available to Parent true and complete copies of all applications,
approvals, clearances, registrations or licenses obtained by the Company or any
of its subsidiaries from the FDA or Foreign Authorities, or required in
connection with the conduct of the business of the Company and its subsidiaries
as currently conducted and has made all such information available to Parent.
(b) The Company has made
available to Parent true and correct copies of all material written
communications, and material oral communications to the extent reduced to
written form, between the Company and its subsidiaries, on the one hand, and
the FDA or Foreign Authorities, on the other hand, in each case since January
1, 2004, with respect to the products being distributed or developed by or on
behalf of the Company and its subsidiaries (collectively, the “FDA Correspondence”). The Company shall promptly deliver to Parent
copies of all FDA Correspondence received or reduced to written form from the
date hereof through the Closing. Neither
the Company nor any of its subsidiaries is in receipt of written notice of, or,
to the Company’s knowledge, is subject to, any adverse inspection, finding of
deficiency, finding of non-compliance, compelled or voluntary recall, investigation,
penalty for corrective or remedial action or other compliance or enforcement
action, in each case relating to any products being distributed or developed by
or on behalf of the Company or any of its
20
subsidiaries or to the facilities in which
any such products are manufactured, collected or handled, by the FDA or Foreign
Authorities.
(c) To the Company’s
knowledge, there are no pending or threatened actions, proceedings or
enforcement actions by the FDA or Foreign Authorities which would prohibit or materially
adversely impact the conduct of the business of the Company and its
subsidiaries as currently conducted.
(d) Neither the Company nor
any of its subsidiaries has made any material false statements on, or omissions
from, the applications, approvals, reports and other submissions to the FDA or
Foreign Authorities prepared or maintained to comply with the requirements of
the FDA or Foreign Authorities relating to the Company, its subsidiaries or any
product being distributed or developed by or on behalf of the Company or any of
its subsidiaries.
(e) Neither the Company nor
any of its subsidiaries has received any notification, written or oral, that
remains unresolved, from FDA or Foreign Authorities indicating that any product
of the Company or any of its subsidiaries is misbranded or adulterated as
defined in the U.S. Food, Drug & Cosmetic Act, 21 U.S.C. § 321, et seq., as
amended, and the rules and regulations promulgated thereunder, or has violated
in any similar respect the laws, rules or regulations of any Foreign Authority.
(f) No product of the
Company or any of its subsidiaries has been recalled or withdrawn from the
market as a result of any action by the FDA or any Foreign Authority against
the Company or any of its subsidiaries or, to the Company’s knowledge, any
licensee, distributor or marketer of any product of the Company or any of its
subsidiaries, whether in the United States or elsewhere.
(g) To the Company’s
knowledge, neither the Company nor any of its subsidiaries has committed any act,
made any statement or failed to make any statement that would reasonably be
expected to provide a basis for the FDA to invoke its policy with respect to “Fraud,
Untrue Statements of Material Facts, Bribery, and Illegal Gratuities” set forth
in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto. None of
the Company, its subsidiaries and, to the Company’s knowledge, any manager,
officer, employee or agent of the Company or any of its subsidiaries has been
convicted of any crime or engaged in any conduct that would reasonably be
expected to result in (i) debarment under 21 U.S.C. § 335a or any similar
Legal Requirement or (ii) exclusion under 42 U.S.C. § 1320a-7 or any
similar Legal Requirement.
(h) The FDA complaint
handling system of the Company and its subsidiaries has been made available for
review by Parent and contains complete and correct information about all
product defect claims and all products returned to the Company or any of its
subsidiaries because of warranty or other problems. The records of the Company and its
subsidiaries relating to credits and allowances made with respect to any
product have been made available to Parent and, to the Company’s knowledge, are
true and correct in all material respects.
Neither the Company nor any of its subsidiaries maintains any records of
warranty or other product defect claims other than the Company’s FDA complaint
handling system.
21
2.12 Warranty
Matters; Product Liability.
Each product sold, leased, licensed or delivered by the Company or any
of its subsidiaries has been in conformity in all material respects with all
applicable product specifications and contractual commitments and all express
warranties, and neither the Company nor any of its subsidiaries has any
liability or obligation of whatever kind or nature (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement or repair thereof or other damages in connection therewith
that, individually or in the aggregate would reasonably be expected to have a
Material Adverse Effect on the Company (and, to the Company’s knowledge, there
is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand giving rise to any such
liability or obligation). There are no
existing or, to the Company’s knowledge, threatened product liability,
warranty, failure to adequately warn or other similar claims against the
Company or any of its subsidiaries relating to or involving the products of the
Company or any of its subsidiaries which would reasonably be expected to give
rise to any material liability to the Company.
To the Company’s knowledge, there are no written statements, citations,
correspondence or decisions by any Governmental Entity indicating that any
marketed product is defective or unsafe or fails to meet any product warranty
or any standards promulgated by any Governmental Entity. To the Company’s knowledge, there is no (i)
fact relating to any product of the Company or any of its subsidiaries that
would impose upon the Company or any of its subsidiaries a duty to recall any
such product or a duty to warn customers of a defect in any such product or
(ii) material latent or overt design, manufacturing or other defect in any such
product. No written notice of claim has
been served against the Company or any of its subsidiaries for material
renegotiation or price redetermination of any business transaction that is
material to the business of the Company or any of its subsidiaries, and, to the
Company’s knowledge, there are no facts upon which any such claim could
reasonably be based.
2.13 Litigation. There are no claims, suits, actions or
proceedings pending or, to the Company’s knowledge, threatened against,
relating to or affecting the Company or any of its subsidiaries, before any
Governmental Entity or any arbitrator that seeks to restrain or enjoin the
consummation of the transactions contemplated by this Agreement or which would
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to have a Material Adverse Effect on the
Company or have a material adverse effect on the ability of the parties hereto
to consummate the Merger. No
Governmental Entity has at any time challenged in any proceeding the legal
right of the Company or any of its subsidiaries to design, offer or sell any of
its products or services in the present manner or style thereof or otherwise to
conduct its business as currently conducted.
2.14 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of “Affiliate”
set forth in Section 2.14(a)(i) below (which definition shall apply only to
this Section 2.14), for purposes of this Agreement, the following terms shall
have the meanings set forth below:
(i) “Affiliate”
shall mean any other person or entity under common control with the Company
within the meaning of Sections 414(b), (c), (m) or (o) of the Code and the
regulations issued thereunder;
22
(ii) “Company
Employee Plan” shall mean each “employee benefit plan” within
the meaning of Section 3(3) of ERISA and any other material plan, program,
policy, practice, contract, agreement or other arrangement providing for
deferred compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits of any kind,
whether written or unwritten or otherwise, funded or unfunded, which (i) is
maintained, contributed to, or required to be contributed to, by the Company or
any Affiliate for the benefit of any Employee or (ii) has been so maintained and
with respect to which the Company or any Affiliate has any current or future
liability or obligations;
(iii) “COBRA”
shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended;
(iv) “DOL”
shall mean the Department of Labor;
(v) “Employee”
shall mean any current, former or retired employee, officer or director of the
Company or any Affiliate;
(vi) “Employee
Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or
similar agreement or contract between the Company or any Affiliate and any
Employee or consultant with respect to which the Company or any Affiliate has
any current or future liability or obligations;
(vii) “ERISA”
shall mean the Employee Retirement Income Security Act of 1974, as amended;
(viii) “FMLA”
shall mean the Family Medical Leave Act of 1993, as amended;
(ix) “International
Employee Plan” shall mean each Company Employee Plan that has
been adopted or maintained by the Company, whether informally or formally, for
the benefit of Employees outside the United States;
(x) “IRS”
shall mean the Internal Revenue Service;
(xi) “Multiemployer
Plan” shall mean any “Pension Plan” (as defined below) which is
a “multiemployer plan,” as defined in Section 3(37) of ERISA;
(xii) “PBGC”
shall mean the Pension Benefit Guaranty Corporation; and
(xiii) “Pension
Plan” shall mean each Company Employee Plan which is an “employee
pension benefit plan,” within the meaning of Section 3(2) of ERISA.
23
(b) Disclosure of Plans. Part 2.14(b) of the Company Disclosure
Schedule contains an accurate and complete list of each material Company
Employee Plan and Employee Agreement.
The Company does not have any plan or commitment to establish any new
Company Employee Plan, to modify any Company Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such Company
Employee Plan or Employee Agreement to the requirements of any applicable law,
in each case as previously disclosed to Parent in writing, or as required by
this Agreement), or to enter into any Company Employee Plan or Employee
Agreement.
(c) Documents.
The Company has made available to Parent: (i) accurate and complete copies of all
documents embodying each Company Employee Plan and each Employee Agreement,
including all amendments thereto and written interpretations thereof; (ii) the
most recent annual actuarial valuations, if any, prepared for each Company
Employee Plan; (iii) the three 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 or
related trust; (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 summary of material
modifications thereto, if any, required under ERISA with respect to each
Company Employee Plan; (vi) the most recent IRS determination, opinion,
notification and advisory letters, and rulings relating to Company Employee
Plans and copies of all applications and correspondence to or from the IRS or
the DOL with respect to any Company Employee Plan; (vii) all material written
agreements and contracts relating to each Company Employee Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all written 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 material 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; (ix) all model COBRA forms and related
notices; and (x) all registration statements and prospectuses prepared in
connection with each Company Employee Plan.
(d) Employee
Plan Compliance. (i) Each of
the Company and its Affiliates has
performed in all material respects all obligations required to be performed by
it under, is not in default or violation of, and has no knowledge of any
default or violation by any other party to, each Company Employee Plan and/or
Employee Agreement, 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 Legal Requirements, including but not limited to
ERISA or the Code; (ii) each Company Employee Plan intended to qualify under
Section 401(a) of the Code and each trust intended to qualify under Section
501(a) of the Code has either received (A) a favorable determination letter
from the IRS with respect to each such Plan as to its qualified status under
the Code (or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination)
or (B) if such Plan is on a prototype or volume submitter plan document, such
prototype or volume submitter document has received a favorable opinion letter,
and no event has occurred which would adversely affect the status of such
determination letter or opinion letter or the qualified status of such Plan;
(iii) no “prohibited transaction,” within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA,
24
and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any Company Employee Plan;
(iv) there are no actions, suits or claims pending, or, to the Company’s
knowledge, 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 can be amended,
terminated or otherwise discontinued either before or after the Effective Time
in accordance with its terms, without liability to Parent, the Company or any
of its Affiliates (other than ordinary administration expenses typically
incurred in a termination event); (vi) there are no audits, inquiries or
proceedings pending or, to the Company’s knowledge, threatened by the IRS or
DOL with respect to any Company Employee Plan; (vii) neither the Company nor any
Affiliate is subject to any penalty or tax with respect to any Company Employee
Plan under Section 402(i) of ERISA or Sections 4975 through 4980 of the Code;
and (viii) all contributions due from the Company or any Affiliate with respect
to any of the Company Employee Plans have been made as required under ERISA or
have been accrued on the Company Balance Sheet.
(e) Pension
Plans. Neither the Company
nor any of its Affiliates has ever maintained, established, sponsored,
participated in, or contributed to, any Pension Plan which is subject to Title
IV of ERISA or Section 412 of the Code.
(f) Multiemployer
Plans. Neither the Company
nor any of its Affiliates has ever contributed to or been required to
contribute to any Multiemployer Plan.
(g) No
Post-Employment Obligations.
No Company Employee Plan provides, or has 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 neither the Company nor any of its Affiliates has
ever 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.
(h) COBRA. The requirements of COBRA have been met in
all material respects with respect to each Company Employee Plan subject to
COBRA.
(i) Effect of
Transaction. The execution of
this Agreement and the consummation of the transactions contemplated hereby
will not (either alone or upon the occurrence of any additional or subsequent
events) constitute an event under any Company Employee Plan, Employee
Agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(j) Employment
Matters. Each of the Company
and its subsidiaries: (i) is in
compliance in all material respects with all applicable Legal Requirements
respecting employment, employment practices, immigration, terms and conditions
of employment and wages and hours, in each case, with respect to Employees;
(ii) has withheld all amounts required by law or by agreement to be withheld
from the wages, salaries and other payments to Employees; (iii) has properly
classified independent contractors for purposes of federal and
25
applicable state tax laws and laws applicable to employee benefits;
(iv) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (v) is not liable for any
material payment to any trust or other fund or to any Governmental Entity with
respect to unemployment compensation benefits, social security or other
benefits or obligations for Employees (other than routine payments to be made
in the normal course of business and consistent with past practice). To the Company’s knowledge, there are no
pending, threatened or reasonably anticipated claims or actions against the
Company or any of its subsidiaries under any workers compensation policy or
long-term disability policy. To the
Company’s knowledge, no Employee has violated any employment contract,
nondisclosure agreement or noncompetition agreement by which such Employee is
bound due to such Employee’s employment by the Company or any of its
subsidiaries or disclosure to the Company or any of its subsidiaries or use of
trade secrets or proprietary information of any other person or entity. All Employees are legally permitted to be
employed by the Company or any of its subsidiaries in the United States of
America in their current jobs. To the
Company’s knowledge, there are no controversies pending or threatened between
the Company or any of its subsidiaries, on the one hand, and any Employee, on
the other hand, that would be reasonably likely to result in any material
liability to the Company or any of its subsidiaries. Neither the Company nor any of its
subsidiaries has any employment contracts, Employee Agreements, or consulting
agreements currently in effect that are not terminable at will (other than
agreements for the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions). Neither the Company nor any of its
subsidiaries will have any material liability to any Employee or to any
organization or any other entity as a result of the termination of any employee
leasing arrangement.
(k) Labor. No work stoppage or labor strike against the
Company or any of its subsidiaries is pending, threatened or reasonably
anticipated. The Company does not know
of any activities or proceedings of any labor union to organize any
Employees. To the Company’s knowledge,
there are no actions, suits, claims, 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, which, if adversely determined,
would, individually or in the aggregate, result in any material liability to
the Company or any of its subsidiaries.
Neither the Company nor any of its subsidiaries has engaged in any
unfair labor practices within the meaning of the National Labor Relations
Act. Neither the Company nor any of its
subsidiaries has ever been 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 or any of its
subsidiaries.
(l) International
Employee Plans. Neither the
Company nor any Affiliate currently maintains, has established, sponsors,
participates in, or contributes to, nor has it ever maintained, established,
sponsored, participated in, or contributed to any International Employee Plan
or had any obligation to do so.
(m) Code
Section 409A. Each
Company Employee Plan that is a “nonqualified deferred compensation plan” (as
defined in section 409A(d)(1) of the Code) complies in all material
respects with section 409A of the Code and any Internal Revenue Service
guidance issued thereunder.
26
2.15 Environmental
Matters.
(a) Hazardous
Material. Except as would not
reasonably be expected to have a Material Adverse Effect on the Company, no
underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by any applicable Legal Requirement to
be radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies
(a “Hazardous Material”)
are present, as a result of the actions of the Company or any of its
subsidiaries or any affiliate of the Company, or as a result of any actions of
any third party or otherwise, in, on or under any property, including the land
and the improvements, ground water and surface water thereof that the Company
or any of its present or former subsidiaries has at any time owned, operated,
occupied or leased.
(b) Hazardous
Materials Activities. Except
as would not reasonably be expected to have a Material Adverse Effect on the
Company, (i) neither the Company nor any of its subsidiaries has transported,
stored, used, manufactured, disposed of, released or exposed its Employees or
others to Hazardous Materials in violation of any Legal Requirement in effect
on or before the Closing Date, and (ii) neither the Company nor any of its
subsidiaries has disposed of, transported, sold, used, released, exposed its
Employees or others to or manufactured any product containing a Hazardous
Material (collectively “Hazardous
Materials Activities”) in violation of any Legal Requirement in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) Environmental
Liabilities. To the Company’s
knowledge, no action, proceeding, revocation proceeding, amendment procedure,
writ or injunction is pending or threatened by any Governmental Entity against
the Company or any of its subsidiaries concerning any Company Permit held
pursuant to environmental laws, any Hazardous Material or any Hazardous
Materials Activity of the Company or any of its subsidiaries.
2.16 Certain
Agreements. Except as
otherwise set forth in the applicable lettered subsection of Part 2.16 of the
Company Disclosure Schedule, neither the Company nor any of its subsidiaries is
a party to or is bound by:
(a) any employment or consulting agreement or
commitment with any Employee or member of the Company’s Board of Directors,
providing any term of employment or compensation guarantee or any consulting
agreement or any employment agreement that provides severance benefits or other
benefits after the termination of employment or services of such person
regardless of the reason for such termination, except as required by applicable
law;
(b) any agreement or plan, including any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will
be accelerated, by the occurrence of any of the transactions contemplated
27
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(c) any material agreement of indemnification by
the Company or any of its subsidiaries or any material guaranty by the Company
or any of its subsidiaries, but excluding any agreement of indemnification and
any guaranty entered into in connection with the distribution, sale or license
of the Company’s or its subsidiaries’ products or services or the procurement
of any third-party products or services, in each case in the ordinary course of
business;
(d) any loan agreement, promissory note or other
instrument evidencing indebtedness for borrowed money by way of direct loan,
sale of debt securities, purchase money obligation, conditional sale, or
otherwise in excess of $50,000;
(e) any agreement, obligation or commitment
containing covenants that limit the Company’s or any of its subsidiaries’
freedom to compete in any line of business or in any geographic area (but
excluding field of use, territorial and like limitations with respect to
Intellectual Property licensed to the Company or any of its subsidiaries) or
which would so limit Parent, the Company or the Surviving Corporation or any of
its subsidiaries after the Effective Time or granting any exclusive
distribution or other exclusive rights;
(f) any agreement or commitment currently in
force relating to the disposition or acquisition by the Company or any of its
subsidiaries after the date of this Agreement of a material amount of assets
not in the ordinary course of business and consistent with past practice, or
pursuant to which the Company has any material ownership or participation
interest in any corporation, partnership, joint venture, strategic alliance or
other business enterprise other than the Company’s subsidiaries;
(g) any licensing, distribution, resale or other
agreement, contract or commitment with regard to the distribution, sale or
licensing of any Company products under which the Company received in excess of
$1,000,000 during the fiscal year ended March 30, 2007;
(h) agreement to forgive any indebtedness of any
person to the Company or any of its subsidiaries in excess of $50,000;
(i) any Real Estate Agreements;
(j) agreement pursuant to which the Company or
any of its subsidiaries (A) has been granted license rights under any
intellectual property rights of any third party that are material to the operation
of its business (other than (i) licenses of off-the-shelf commercial software
programs and (ii) non-disclosure agreements and other agreements entered into
between the Company and its subsidiaries in the ordinary course of business);
(B) incorporates any third-party intellectual property in any of its products;
or (C) has granted to any third party an exclusive license of any Company
Intellectual Property Rights owned by the Company or any of its subsidiaries or
any license of source code (excluding customary source code escrow arrangements
entered into in the ordinary course of business);
28
(k) agreement obligating the Company or any of
its subsidiaries to make aggregate payments in excess of $250,000 to any third
party during the twelve-month period ending June 30, 2008 which is not
terminable by the Company or any of its subsidiaries without penalty or further
liability exceeding $50,000 upon 30 days’ notice or less (excluding Real Estate
Agreements);
(l) other than such agreements addressed by Section
2.16(g), agreement pursuant to which the Company or any of its subsidiaries
(A) reasonably expects to receive aggregate payments in excess of
$250,000 during the twelve-month period ending June 30, 2008 or
(B) reasonably expects to recognize revenue in such aggregate amount
during such period;
(m) agreement or commitment with any affiliate of
the Company;
(n) agreement or commitment providing for
capital expenditures by the Company or any of its subsidiaries in excess of
$250,000; or
(o) other agreement or commitment that is
material to the business of the Company and its subsidiaries, taken as a whole,
as presently conducted.
Each agreement, contract, obligation, plan or
commitment that is required to be disclosed in the Company Disclosure Schedule
pursuant to clauses (a) through (p) above or pursuant to Section 2.9 and each
agreement, contract, obligation, plan or commitment that is or is required to
be filed with any Company SEC Report shall be referred to herein as a “Company Contract.” Each Company Contract is enforceable against
the Company (except as such enforceability may be subject to laws of general
application relating to bankruptcy, insolvency, and the relief of debtors and
rules of law governing specific performance, injunctive relief, or other
equitable remedies) and, to the Company’s knowledge, is enforceable against the
other party or parties thereto (except as such enforceability may be subject to
laws of general application relating to bankruptcy, insolvency, and the relief
of debtors and rules of law governing specific performance, injunctive relief,
or other equitable remedies). Except as
would not reasonably be expected to have a Material Adverse Effect on the
Company, neither the Company nor any of its subsidiaries, nor to the Company’s
knowledge, any other party thereto, is in breach, violation or default under,
and neither the Company nor any of its subsidiaries has received written notice
alleging that it has breached, violated or defaulted under, any of the terms or
conditions of any Company Contract in such a manner as would permit any other
party thereto to cancel or terminate any such Company Contract, or would permit
any other party to seek damages or other remedies for any or all such alleged
breaches, violations or defaults.
2.17 Brokers’ and
Finders’ Fees. Except for
fees payable to Savvian Advisors, LLC pursuant to an engagement letter dated
October 6, 2006, a copy of which has been made available to Parent, 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 or any transaction contemplated hereby.
2.18 Insurance. Each of the Company and its subsidiaries has
policies of insurance and bonds of the type and in amounts customarily carried
by persons conducting business or owning assets similar to those of the Company
and its subsidiaries. There is no
material claim
29
pending under any of such policies or bonds as to which coverage has
been denied or disputed in writing by the underwriters of such policies or
bonds. All premiums due and payable
under all such policies have been paid, and the Company and its subsidiaries
are otherwise in compliance in all material respects with the terms of such
policies and bonds. To the Company’s
knowledge, there has been no threatened termination of, or material premium
increase with respect to, any of such policies.
2.19 Disclosure. The information regarding the Company
incorporated by reference in, or supplied by the Company for inclusion in, the
Registration Statement on Form S-4 (or any successor form thereto) to be filed
by Parent with the SEC in connection with the issuance of Parent Common Stock
in the Merger (the “Registration
Statement”) shall not at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the Securities
Act contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading. The information
regarding the Company incorporated by reference in, or supplied by the Company
for inclusion in, the proxy statement/prospectus to be filed with the SEC as
part of the Registration Statement (the “Proxy Statement/Prospectus”) shall not, as of
the date the Proxy Statement/Prospectus is mailed to the shareholders of the
Company, as of the time of the meeting of the Company’s shareholders (the “Company Shareholders’ Meeting”)
to consider the Company Shareholder Approval, or as of the Effective Time, (a)
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or (b) omit to state
any material fact necessary to correct any statement regarding the Company in
any earlier communication with respect to the solicitation of proxies for the
Company Shareholders’ Meeting which has become false or misleading. If at any time prior to the Effective Time
any event relating to the Company or any of its affiliates, officers, directors
or shareholders shall become known by the Company which is required to be set
forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement/Prospectus, the Company shall promptly inform Parent. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information supplied by
Parent or Merger Sub which is contained in any of the foregoing documents or
incorporated by reference into any of the foregoing documents from the Parent
SEC Reports.
2.20 Board
Approval. The Board of
Directors of the Company has, as of the date of this Agreement, unanimously (i)
determined that the Merger and the other transactions contemplated by this
Agreement are fair to, and in the best interests of, the Company and its
shareholders, (ii) approved this Agreement and (iii) recommended that the
shareholders of the Company approve the principal terms of the Merger.
2.21 Fairness
Opinion. The Company’s Board
of Directors has received a written opinion from Savvian Advisors, LLC, dated
as of the date hereof, to the effect that, as of the date hereof, the Exchange
Ratio is fair from a financial point of view to the holders of the outstanding
shares of Company Common Stock, and has delivered to Parent a copy of such
opinion.
2.22 Accounting
System. The Company and its
subsidiaries maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (a) transactions are executed in accordance with
management’s general or specific authorizations; (b) transactions
30
are recorded as necessary to permit preparation of financial statements
in conformity with GAAP and to maintain asset accountability; (c) access to
assets is permitted only in accordance with management’s general or specific
authorization; and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences. The
Company has delivered to Parent complete and accurate copies of any management
letter or similar correspondence since March 29, 2004 from any independent
registered public accounting firm or other auditor of the Company or any of its
subsidiaries.
2.23 Company
Rights Agreement. The Rights
Agreement is inapplicable to the Merger and the other transactions contemplated
by this Agreement, and (a) none of Parent or its subsidiaries will be an “Acquiring
Person” (as defined in the Rights Agreement) by virtue of the execution,
delivery, announcement or performance of this Agreement or the consummation of
the Merger or the other transactions contemplated hereby and (b) a “Distribution
Date” (as defined in the Rights Agreement) will not occur by reason of the
execution, delivery, announcement or performance of this Agreement, the
consummation of the Merger or the consummation of the other transactions
contemplated by this Agreement. No other
anti-takeover, control share acquisition, fair price, moratorium or other
similar statute (each, a “Takeover
Statute”) applies to this Agreement, the Merger or the other
transactions contemplated hereby.
2.24 Affiliates. Part 2.24 of the Company Disclosure Schedule
provides a complete list of those persons who may reasonably be deemed to be
affiliates of the Company within the meaning of Rule 145 promulgated under the
Securities Act (each, a “Company
Affiliate”). Except as
set forth in the Company SEC Reports, since the date of the Company’s last
proxy statement filed with the SEC (other than the Proxy Statement/Prospectus),
no event has occurred that would be required to be reported by the Company
pursuant to Item 404 of Regulation S-K promulgated by the SEC.
Article 3
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the
Company as set forth in this Article 3, subject to any exceptions expressly
stated in the disclosure schedule delivered by Parent to the Company dated as
of the date hereof (the “Parent Disclosure Schedule”). The Parent Disclosure Schedule shall be
arranged in sections and paragraphs corresponding to the numbered and lettered
sections and paragraphs contained in this Article 3 and the disclosure in any section
or paragraph shall qualify such sections and paragraphs, as well as other
sections and paragraphs in this Article 3 only to the extent that it is
reasonably apparent from a reading of such disclosure that it also qualifies or
applies to such other sections and paragraphs.
3.1 Organization of Parent and Merger Sub.
(a) Each of Parent and
Merger Sub (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized; (ii) has
the corporate or other power and authority to own, lease and operate its assets
and property and to carry on its business as now being conducted; and (iii)
except as would not have a Material Adverse Effect on Parent, is duly qualified
or licensed to do business in each jurisdiction where
31
the character of the properties owned, leased
or operated by it or the nature of its activities makes such qualification or
licensing necessary.
(b) Parent has delivered or
made available to the Company a true and correct copy of the Certificate of
Incorporation and Bylaws of Parent and the Articles of Incorporation and Bylaws
of Merger Sub, each as amended to date (collectively, the “Parent Charter Documents”),
and each such instrument is in full force and effect. Neither Parent nor Merger Sub has taken any
action in violation of any of the provisions of the Parent Charter Documents.
3.2 Parent and Merger Sub Capitalization.
(a) The authorized capital
stock of Parent consists solely of 100,000,000 shares of Parent Common Stock,
of which there were 46,616,277 shares issued and outstanding as of the close of
business on May 31, 2007, 2,666,667 shares of Series A Convertible Preferred
Stock, par value $0.001 per share (“Parent
Series A Preferred Stock”), and 2,333,333 shares of undesignated
Preferred Stock, par value $0.001 per share (“Parent Undesignated Preferred Stock” and together with
the Parent Series A Preferred Stock, the “Parent Preferred Stock”), of which no shares are issued
or outstanding as of the date hereof.
All outstanding shares of Parent Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Certificate of Incorporation or Bylaws of Parent
or any agreement or document to which Parent is a party or by which it is
bound.
(b) As of the close of
business on May 31, 2007, 7,716,082 shares of Parent Common Stock have been
authorized and remain reserved for issuance, of which (i) 6,462,545 shares
remain reserved for issuance pursuant to Parent’s 2001 Stock Option and
Incentive Plan (the “Parent
Stock Option Plan”), subject to adjustment on the terms set
forth in the Parent Stock Option Plan, (ii) 744,527 shares remain reserved for
issuance upon the exercise of outstanding stock options to purchase Parent
Common Stock that were not granted under the Parent Stock Option Plan, (iii)
203,483 shares remain reserved for issuance pursuant to Parent’s 2001 Employee
Stock Purchase Plan, as amended, and (iv) 305,527 shares were authorized and
remain reserved for issuance upon the exercise of outstanding warrants to
purchase shares of Parent Common Stock.
As of the close of business on May 31, 2007, there were outstanding
options to purchase 4,892,719 shares of Parent Common Stock under the Parent
Stock Option Plan, and options to purchase 1,569,826 shares of Parent Common
Stock remain available for grant thereunder.
All shares of Parent Common Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable. Except as otherwise set forth in this Section
3.2, as of the date hereof there are no equity securities of any class of
Parent equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities issued, reserved for issuance or
outstanding other than such equity securities that do not, in the aggregate,
represent in excess of 1% of outstanding shares of Parent Common Stock, on a
fully diluted as converted basis.
(c) The authorized capital stock of Merger Sub
consists of 1,000 shares of Merger Sub Common Stock, all of which, as of the
date hereof, are issued and outstanding and are held by Parent. All of the outstanding shares of Merger Sub
Common Stock have been duly authorized and validly issued, and are fully paid
and nonassessable. Merger Sub was formed
for
32
the purpose of consummating the Merger and has no material assets or
liabilities except as necessary for such purpose.
(d) The Parent Common Stock to be issued in the
Merger, when issued in accordance with the provisions of this Agreement, will
be validly issued, fully paid and nonassessable and not subject to preemptive rights created by statute, the Parent
Charter Documents or any agreement or document to which Parent is a party or by
which it or its assets is bound.
3.3 Authority;
Non-Contravention.
(a) Parent and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Merger Sub, subject only to the
filing of the Merger Documents pursuant to the CGCL. This Agreement has been duly executed and
delivered by Parent and Merger Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes the valid and binding
obligations of Parent and Merger Sub, enforceable against Parent and Merger Sub
in accordance with its terms, except as enforceability may be limited by
bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity.
(b) The execution and delivery of this Agreement
by Parent and Merger Sub does not, and the performance of this Agreement by
Parent and Merger Sub will not, (i) conflict with or violate the Parent Charter
Documents, (ii) subject to compliance with the requirements set forth in
Section 3.3(c), conflict with or violate any material Legal Requirement
applicable to Parent or Merger Sub or by which Parent or Merger Sub or any of
their respective material properties is bound or affected, or (iii) result in
any breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or impair Parent’s or Merger Sub’s
rights or alter the rights or obligations of any third party under, or give to others
any rights of termination, amendment, acceleration or cancellation of, or
result in the creation of an Encumbrance on any of the properties or assets of
Parent or Merger Sub pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which Parent or Merger Sub is a party or by which
Parent or Merger Sub or any of their respective properties are bound or
affected, except in the case of this clause (iii) as would not reasonably be
expected to have a Material Adverse Effect on Parent and its subsidiaries,
considered as a whole.
(c) No consent, approval, order or authorization
of, or registration, declaration or filing with any Governmental Entity or
other person is required to be obtained or made by Parent or Merger Sub in
connection with the execution and delivery of this Agreement or the
consummation of the Merger, except for (i) the filing of the Merger Documents
with the Secretary of State of the State of California, (ii) the filing of the
Proxy Statement/Prospectus and the Registration Statement with the SEC and a
Schedule 13D with regard to the Voting Agreements in accordance with the
Securities Act and the Exchange Act, and the effectiveness of the Registration
Statement, (iii) the filing of Notification and Report Forms with the United
States Federal Trade Commission and the Antitrust Division of the United States
Department of
33
Justice as required by the HSR Act, together with the filing of any
other comparable pre-merger notification forms required by the merger
notification or control laws of any other applicable jurisdiction, as agreed by
the parties hereto, (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the securities or
antitrust laws of any foreign country, and (v) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to Parent or the Surviving Corporation or have a
material adverse effect on the ability of the parties hereto to consummate the
Merger.
3.4 SEC
Filings; Parent Financial Statements.
(a) Since January 1, 2004, Parent has filed all
forms, reports and documents required to be filed by Parent with the SEC and
(if and to the extent such forms, reports and documents are not available on
EDGAR) has made available to the Company such forms, reports and documents in
the form filed with the SEC. All such
required forms, reports and documents (including those that Parent may file
subsequent to the date hereof) are referred to herein as the “Parent SEC Reports.” As of their respective dates, the Parent SEC
Reports (i) were prepared in accordance with the requirements of the Securities
Act or the Exchange Act, as the case may be, and the rules and regulations of
the SEC thereunder applicable to such Parent SEC Reports, and (ii) did not at
the time they were filed (or if subsequently amended or superseded by a filing
prior to the date of this Agreement, then on the date of such subsequent
filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. None of Parent’s
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in
the Parent SEC Reports (the “Parent
Financials”), including each Parent SEC Report filed after the
date hereof until the Closing, (i) complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto, (ii)
was prepared in accordance with GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto or, in
the case of unaudited interim financial statements, as may be permitted by the
requirements of Form 10-Q or Form 8-K or any successor form under the Exchange
Act) and (iii) fairly presented the consolidated financial position of Parent
and its subsidiaries as at the respective dates thereof and the consolidated
results of Parent’s operations, cash flows and shareholders’ equity for the
periods indicated, except that the unaudited interim financial statements may
not contain all the footnotes required by GAAP for audited statements and were
or are subject to normal and recurring year-end adjustments that Parent does
not expect to be material, individually or in the aggregate. The balance sheet of Parent contained in
Parent SEC Reports as of March 31, 2007 is hereinafter referred to as the “Parent Balance Sheet.” Neither Parent nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise), except for
(i) liabilities reflected on the Parent Balance Sheet, (ii) liabilities
incurred since the date of the Parent Balance Sheet in the ordinary course of
business consistent with past practices, (iii) liabilities incurred in
connection with this Agreement and (iv) liabilities that would not have a
Material Adverse Effect on Parent.
34
(c) Parent has not been notified by its independent
registered public accounting firm or by the staff of the SEC that such firm or
the staff of the SEC, as the case may be, is of the view that any financial
statement included in any registration statement filed by Parent under the
Securities Act or any periodic or current report filed by Parent under the
Exchange Act should be restated, or that Parent should modify its accounting in
future periods in a manner that would be materially adverse to Parent.
(d) Parent is in compliance in all material respects
with the provisions of the Sarbanes-Oxley Act that are applicable to Parent,
and any related rules and regulations promulgated by the SEC. Parent’s disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Exchange Act) and internal control over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) are
effective in all material respects.
Neither Parent nor, to Parent’s knowledge, its independent auditors have
identified (i) any significant deficiency or material weakness in Parent’s
internal control over financial reporting, (ii) any fraud, whether or not
material, that involves Parent’s management or other employees who have a role
in the preparation of financial statements or Parent’s internal control over
financial reporting or (iii) any claim or allegation regarding any of the
foregoing. Since March 31, 2007, there
has not been any change in the Company’s internal control over financial
reporting that has materially affected, or is reasonably likely to materially
affect, the Company’s internal control over financial reporting.
3.5 Absence of
Certain Changes or Events.
Since the date of the Parent Balance Sheet, there has not been: (i) any Material Adverse Effect with respect
to Parent, (ii) any declaration, setting aside or payment of any dividend on,
or other distribution (whether in cash, stock or property) in respect of, any
of Parent’s or any of its subsidiaries’ capital stock, or any purchase,
redemption or other acquisition by Parent of any of Parent’s capital stock or
any other securities of Parent or its subsidiaries or any options, warrants,
calls or rights to acquire any such shares or other securities except for
repurchases from employees or service providers following their termination of
service pursuant to the terms of their pre-existing stock option or purchase
agreements, (iii) any split, combination or reclassification of any of Parent’s
or any of its subsidiaries’ capital stock, (iv) any material change by Parent
in its accounting methods, principles or practices, except as required by
concurrent changes in GAAP, or (v) any material revaluation by Parent of any of
its material assets, including writing off notes or accounts receivable other
than in the ordinary course of business.
3.6 Intellectual
Property. For purposes of
this Agreement, the following terms shall have the definitions set forth below:
“Parent Intellectual
Property Rights” means all intellectual property rights used by
Parent and its subsidiaries in the conduct of their business, including,
without limitation: (i) all
trademarks, service marks, trade names, Internet domain names, trade dress, and
the goodwill associated therewith, and all registrations or applications for
registration thereof (collectively, the “Parent
Marks”); (ii) all patents, patent applications and
continuations (collectively, the “Parent
Patents”); (iii) all copyrights, database rights and moral
rights in both published works and unpublished works, including all such rights
in software, user and training manuals, marketing and promotional materials,
internal reports, business plans and any other expressions, mask works,
firmware and videos, whether registered or unregistered, and all registrations
or
35
applications for registration thereof (collectively,
the “Parent Copyrights”);
and (iv) trade secret rights and rights to confidential information,
including such rights in inventions (whether or not reduced to practice), know-how,
customer lists, technical information, proprietary information, technologies,
processes and formulae, software, data, plans, drawings and blue prints,
whether tangible or intangible and whether stored, compiled, or memorialized
physically, electronically, photographically, or otherwise (collectively, the “Parent Secret Information”). For purposes of this Section 3.6, “software” means any and all: (w) computer programs and applications,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (x) databases and compilations,
including any and all data and collections of data, whether machine readable or
otherwise, (y) descriptions, flow-charts, library functions,
algorithms, architecture, structure, display screens and development tools, and
other information, work product or tools used to design, plan, organize or
develop any of the foregoing and (z) all documentation, including user
manuals and training materials, relating to any of the foregoing.
(a) To Parent’s knowledge, Parent or one of its
subsidiaries: (i) owns all right,
title and interest in and to the Parent Intellectual Property Rights, free and
clear of all Encumbrances, other than Permitted Encumbrances, or (ii) is
licensed to use, or otherwise possesses legally valid and enforceable rights to
use, the Parent Intellectual Property Rights that it does not so own. Parent and its subsidiaries have made all
necessary filings, recordations and payments (i) to protect and maintain their
interests in each registered Parent Mark, Parent Patent and registered Parent Copyright
owned by Parent or any of its subsidiaries and (ii) to comply in all material
respects with contractual obligations that Parent or any of its subsidiaries
has to third parties, if any, to protect and maintain Parent Intellectual
Property Rights that are licensed to Parent or any of its subsidiaries by such
third parties.
(b) To Parent’s knowledge, neither the business
of Parent or any of its subsidiaries nor any of the products, services or
technology used, sold, offered for sale or licensed or publicly proposed for
use, sale, offer for sale or license by Parent or any of its subsidiaries
infringes any intellectual property rights of any person, other than such
infringements as would not cause a material loss to Parent.
(c) To Parent’s knowledge, (i) all the Parent
Patents are valid and subsisting, (ii) none of the Parent Patents is being
infringed and (iii) within the past three years neither the validity nor the
enforceability of any of the Parent Patents has been challenged by any person.
(d) To Parent’s knowledge, (i) all the Parent
Marks are valid and subsisting, (ii) none of the Parent Marks is being
infringed or diluted and (iii) within the past three years none of the Parent
Marks has been opposed or challenged and no proceeding has been commenced or
threatened that would seek to prevent the use by Parent or any of its
subsidiaries of any Parent Mark.
(e) To Parent’s knowledge, (i) all the Parent
Copyrights, whether or not registered, are valid and enforceable, (ii) none of
the Parent Copyrights is being infringed, or its validity challenged or
threatened in any way and (iii) within the past three years no proceeding has
been commenced or threatened that would seek to prevent the use by Parent or
any of its subsidiaries of the Parent Copyrights.
36
(f) Parent and its subsidiaries have taken
reasonable measures to protect the secrecy and confidentiality of the Parent
Secret Information. To Parent’s
knowledge, no Parent Secret Information has been used, divulged or appropriated
for the benefit of any person (other than Parent or any of its subsidiaries) or
otherwise misappropriated in a manner which would reasonably be expected to
have a Material Adverse Effect on Parent.
(g) No Parent Intellectual Property Right is
subject to any outstanding order, proceeding (other than pending proceedings
pertaining to applications for patent or trademark or copyright registration)
or stipulation that has been served upon or, to Parent’s knowledge, filed
against, Parent that restricts in any manner the licensing thereof by Parent or
any of its subsidiaries.
3.7 Compliance
with Laws.
(a) Neither Parent nor any of its subsidiaries
is in conflict with, or in default or violation of (i) any Legal Requirement
applicable to Parent or any of its subsidiaries or by which Parent or any of
its subsidiaries or any of their respective properties is bound or affected, or
(ii) any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise, concession, or other instrument or obligation to which
Parent or any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or any of their respective material properties is bound or
affected, except for conflicts, violations and defaults that, individually or
in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Parent. To Parent’s knowledge,
no investigation or review by any Governmental Entity is pending or has been
threatened against Parent or any of its subsidiaries. There is no agreement, judgment, injunction,
order or decree binding upon Parent or any of its subsidiaries which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any material business practice of Parent or any of its subsidiaries,
any acquisition of material property by Parent or any of its subsidiaries or
the conduct of business by Parent and its subsidiaries as currently conducted.
(b) Parent and its subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals from Governmental
Entities that are material to or required for the operation of the business of
Parent and of its subsidiaries as currently conducted (collectively, the “Parent Permits”), except
where the failure to hold any permit, license, variance, exemption, order or
approval would not reasonably be expected to have a Material Adverse Effect on
Parent. Parent and its subsidiaries are
in compliance with the terms of the Parent Permits, except as would not
reasonably be expected to have a Material Adverse Effect on Parent.
3.8 Litigation. There are no claims, suits, actions or
proceedings pending or, to the knowledge of Parent, threatened against,
relating to or affecting Parent or any of its subsidiaries, before any
Governmental Entity or any arbitrator that seeks to restrain or enjoin the
consummation of the transactions contemplated by this Agreement or which would
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to have a Material Adverse Effect on Parent or
have a material adverse effect on the ability of the parties hereto to
consummate the Merger. No Governmental
Entity has at any time challenged in any proceeding the legal right of Parent
or any of its subsidiaries to design, offer or sell any of its
37
products or services in the present manner or style thereof or
otherwise to conduct its business as currently conducted.
3.9 Disclosure. The information regarding Parent incorporated
by reference in, or supplied by Parent for inclusion in, the Registration
Statement shall not at the time the Registration Statement is filed with the
SEC and at the time it becomes effective under the Securities Act contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading. The information regarding
Parent incorporated by reference in, or supplied by Parent for inclusion in,
the Proxy Statement/Prospectus shall not, as of the date the Proxy
Statement/Prospectus is mailed to the Company’s shareholders, as of the time of
the Company Shareholders’ Meeting, or as of the Effective Time, (a) contain any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, or (b) omit to state
any material fact necessary to correct any statement regarding Parent or Merger
Sub in any earlier communication with respect to the solicitation of proxies
for the Company Shareholders’ Meeting which has become false or
misleading. If at any time prior to the
Effective Time any event relating to Parent or any of its affiliates, officers,
directors or shareholders shall become known by Parent which is required to be
set forth in an amendment to the Registration Statement or a supplement to the
Proxy Statement/Prospectus, Parent shall promptly inform the Company. Notwithstanding the foregoing, Parent makes
no representation or warranty with respect to any information supplied by the
Company which is contained in any of the foregoing documents or incorporated by
reference into any of the foregoing documents from the Company SEC Reports.
3.10 Brokers’ and
Finders’ Fees. Except for
fees payable to Covington Associates, LLC, Parent 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 or
any transaction contemplated hereby.
3.11 Accounting
System. Parent and its
subsidiaries maintain a system of internal accounting controls sufficient to
provide reasonable assurance that (a) transactions are executed in accordance
with management’s general or specific authorizations; (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability; (c) access to assets
is permitted only in accordance with management’s general or specific
authorization; and (d) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
Article 4
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of
Business by the Company.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, each of the Company and its subsidiaries shall, except to the
extent that Parent shall otherwise consent in writing (which consent shall not
be unreasonably withheld), carry on its business in the usual, regular and
ordinary course of business, in substantially the same manner as heretofore
conducted and in compliance in all material respects
38
with all applicable Legal Requirements, pay its debts and Taxes in the
ordinary course of business consistent with past practice, subject to good
faith disputes over such debts or Taxes, and pay or perform other material
obligations in the ordinary course of business consistent with past practice,
and use its commercially reasonable efforts consistent with past practice to
(i) preserve intact its present business organization and (ii) continue to
manage in the ordinary course of business its business relationships with third
parties.
In addition, except as permitted by the terms of this
Agreement or as set forth in Part 4.1 of the Company Disclosure Schedule,
without the prior written consent of Parent (which consent shall not be
unreasonably withheld), during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following:
(a) Waive any stock
repurchase rights, accelerate, amend or change the period of exercisability of
options or repurchase of restricted stock, or reprice options granted to any
employee, consultant, director or authorize cash payments in exchange for any
options or take any such action with regard to any warrant or other right to
acquire capital stock;
(b) Grant any severance or
termination pay to any officer or employee except pursuant to written
agreements in effect, or policies existing, on the date hereof and as
previously made available or disclosed in writing to Parent, or adopt any new
severance plan;
(c) Transfer or license to
any person or entity or otherwise extend, amend or modify in any material
respect any Company Intellectual Property Rights, other than in the ordinary
course of business;
(d) Declare, set aside or
pay any dividends on or make any other distributions (whether in cash, stock,
equity securities or property) in respect of any capital stock or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock;
(e) Purchase, redeem or
otherwise acquire, directly or indirectly, any shares of capital stock, except
repurchases of unvested shares at cost in connection with the termination of
the employment or service relationship with any employee or service provider
pursuant to option agreements or purchase agreements in effect on the date
hereof;
(f) Issue, deliver, sell,
authorize, pledge or otherwise encumber any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, other than the issuance, delivery and/or sale of (i)
shares of Company Common Stock pursuant to the exercise of Company Options and
Company Warrants, (ii) shares of Company Common Stock issuable to participants
in the Company ESPP consistent with the terms thereof, or (iii) granting to
employees or other service providers (other than directors or officers of the Company)
Company Options to acquire no more than the number of shares set forth in Part
4.1(f) of the Company Disclosure Schedule under the Company Option
39
Plans that are
existing as of the date hereof in the ordinary course of business consistent
with past practice in connection with periodic compensation reviews, ordinary
course promotions or to new hires; provided that
no Company Options permitted to be granted under this clause (iii) may provide
for any acceleration of any benefit, directly or indirectly, as a result of the
transactions contemplated by this Agreement or any termination of employment or
service thereafter;
(g) Cause, permit or
propose any amendments to the Company Charter Documents or to the charter
documents of any subsidiary of the Company;
(h) Acquire or agree to
acquire by merging or consolidating with, or by purchasing any equity interest
in or a portion of the assets of, or by any other manner, any business or any
corporation, partnership, association, business organization or other person or
division thereof; or otherwise acquire or agree to acquire any assets which are
material, individually or in the aggregate, to the business of the Company or
enter into any material joint ventures, strategic relationships or alliances or
make any material loan or advance to, or investment in, any person, except for
loans or capital contributions to a subsidiary or advances of routine business
or travel expenses to employees, officers or directors in the ordinary course
of business consistent with past practice;
(i) Sell, lease, license,
encumber or otherwise dispose of any properties or assets which are material,
individually or in the aggregate, to the business of the Company;
(j) Incur any indebtedness
for borrowed money or guarantee any such indebtedness of another person, issue
or sell any debt securities or options, warrants, calls or other rights to
acquire any debt securities of the Company, enter into any “keep well” or other
agreement to maintain any financial statement condition or enter into any
arrangement having the economic effect of any of the foregoing other than (i)
in connection with the financing of ordinary course trade payables in the
ordinary course of business or (ii) pursuant to existing credit facilities in
the ordinary course of business;
(k) Adopt or, except as
required by applicable Legal Requirements, amend any Company Employee Plan,
Employee Agreement or other employee benefit plan or equity plan, or enter into
any employment contract or collective bargaining agreement (other than offer
letters and letter agreements entered into in the ordinary course of business
consistent with past practice with employees who are terminable “at will”), pay
any special bonus or special remuneration to any director or employee, or
increase the salaries or wage rates or fringe benefits (including rights to
severance or indemnification) of its directors, officers, employees or
consultants, or change in any material respect any management policies or
procedures, other than salary increases for employees (other than officers and
directors) in the ordinary course of business consistent with past practice;
(l) Make any capital
expenditures in excess of $250,000 in the aggregate;
(m) Modify, amend or
terminate any Company Contract or waive, release or assign any material rights
or claims thereunder, except in the ordinary course of business consistent with
past practice;
40
(n) Enter into, modify,
amend or cancel any material development services, licensing, distribution,
purchase, sales, sales representation or other similar agreement or obligation
with respect to any material Company Intellectual Property Rights or enter into
any contract of a character required to be disclosed by Section 2.16 (except
for contracts of a character required to be disclosed by subsections (g) and
(l) of Section 2.16 and, to the extent addressed by (g) or (l), subsection (o)
of Section 2.16, and entered into in the ordinary course of business);
(o) Materially revalue any
of its assets or, except as required by GAAP, make any change in tax or
accounting methods, principles or practices;
(p) Discharge, settle or
satisfy any disputed claim, litigation, arbitration, disputed liability or
other controversy (absolute, accrued, asserted or unasserted, contingent or
otherwise), including any liability for Taxes, other than the discharge or
satisfaction in the ordinary course of business consistent with past practice,
or in accordance with their terms, of liabilities reflected or reserved against
in the Company Balance Sheet or incurred since December 29, 2006 in the
ordinary course of business consistent with past practice, or waive any
material benefits of, or agree to modify in any material respect, any
confidentiality, standstill or similar agreements to which the Company or any of
its subsidiaries is a party; provided, however,
that the discharge or settlement of any disputed claim, liability or other
controversy in the amount of less than $250,000 shall not be deemed to be
prohibited by the foregoing;
(q) Except as otherwise
contemplated by Sections 2.23 and 5.12, redeem the Rights or amend or terminate
the Rights Agreement;
(r) Take any action that
is intended or would reasonably be expected to prevent or materially impede the
consummation of any of the transactions contemplated by this Agreement,
including with respect to the Rights Agreement or any other “poison pill” or
similar plan, agreement or arrangement, any other anti-takeover measure, or any
Takeover Statute;
(s) Take any action that is
intended or would reasonably be expected to result in any of the conditions set
forth in Article 6 not being satisfied; or
(t) Agree in writing or
otherwise to take any of the actions described in Section 4.1(a) through 4.1(s)
above.
Article 5
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement;
Antitrust and Other Filings.
(a) As promptly as
practicable after the execution of this Agreement, the Company and Parent will
prepare and file with the SEC the Proxy Statement/Prospectus, and Parent will
prepare and file with the SEC the Registration Statement in which the Proxy
Statement/Prospectus will be included as a prospectus. Each of the Company and Parent will respond
to any comments of the SEC and will use commercially reasonable efforts to have
the Registration Statement declared effective under the Securities Act as
promptly as practicable
41
after such
filing. The Company will cause the Proxy
Statement/Prospectus to be mailed to its shareholders at the earliest
practicable time after the Registration Statement is declared effective by the
SEC.
(b) As promptly as practicable after the
execution of this Agreement, each of the Company and Parent will prepare and
file (i) Notification and Report Forms with the United States Federal Trade
Commission and the Antitrust Division of the United States Department of
Justice as required by the HSR Act, (ii) any other pre-merger notification
forms required by the merger notification or control laws of any other
applicable jurisdiction, as agreed by the parties hereto (all such filings
under clauses (i) and (ii), the “Antitrust
Filings”), and (iii) any other filings required to be filed by
it under the Exchange Act, the Securities Act or any other federal, state or
foreign laws relating to the Merger and the transactions contemplated by this
Agreement (the “Other
Filings”). The Company
and Parent each shall promptly supply the other with any information which may
be required in order to effectuate any filings pursuant to this Section 5.1.
(c) Each of the Company and Parent will notify
the other promptly upon the receipt of any comments from the SEC or its staff
or any other government officials in connection with any filing made pursuant
hereto and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Registration Statement, the
Proxy Statement/Prospectus or any Antitrust Filings or Other Filings or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy
Statement/Prospectus, the Merger or any Antitrust Filing or Other Filing. Each of the Company and Parent will cause all
documents that it is responsible for filing with the SEC or other regulatory
authorities under this Section 5.1 to comply in all material respects with all
applicable Legal Requirements. Whenever
any event occurs that is required to be set forth in an amendment or supplement
to the Proxy Statement/Prospectus, the Registration Statement or any Antitrust
Filing or Other Filing, the Company or Parent, as the case may be, will
promptly inform the other of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or mailing to
shareholders of the Company, such amendment or supplement.
5.2 Meeting of Shareholders.
(a) Promptly after the date
hereof, the Company will take all action necessary in accordance with the CGCL
and its Articles of Incorporation and Bylaws to convene the Company
Shareholders’ Meeting to be held as promptly as practicable, and in any event
(to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the Registration Statement, for the purpose of
voting upon approval of the principal terms of the Merger. Subject to Section 5.2(c), the Company will
use its commercially reasonable efforts to solicit from its shareholders
proxies in favor of the approval of the principal terms of the Merger and will
take all other action necessary or advisable to secure the vote or consent of
its shareholders required by the rules of the Nasdaq Stock Market, Inc. or the
CGCL to obtain such approvals. The
Company may adjourn or postpone the Company Shareholders’ Meeting to the extent
necessary to ensure that any necessary supplement or amendment to the Proxy
Statement/Prospectus is provided to the Company’s shareholders in advance of a
vote on the
42
approval of the principal terms of the Merger
or, if as of the time for which the Company Shareholders’ Meeting is originally
scheduled (as set forth in the Proxy Statement/Prospectus) there are
insufficient shares of Company Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Company
Shareholders’ Meeting. The Company shall
ensure that the Company Shareholders’ Meeting is called, noticed, convened,
held and conducted, and that all proxies solicited by the Company in connection
with the Company Shareholders’ Meeting are solicited, in compliance with the
CGCL, its Articles of Incorporation and Bylaws, the applicable rules of the
Nasdaq Stock Market, Inc. and all other applicable Legal Requirements. Subject to Section 7.1(f), the Company’s
obligation to call, give notice of, convene and hold the Company Shareholders’
Meeting in accordance with this Section 5.2(a) shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission
to the Company of any Acquisition Proposal or Superior Offer (each as defined
below), or by any withdrawal, amendment or modification of the recommendation
of the Board of Directors of the Company with respect to this Agreement or the
Merger.
(b) Subject to Section 5.2(c): (i) the Board of Directors of the Company
shall recommend that the Company’s shareholders vote in favor of the approval
of the principal terms of the Merger at the Company Shareholders’ Meeting; (ii)
the Proxy Statement/Prospectus shall include a statement to the effect that the
Board of Directors of Company has recommended that the Company’s shareholders
vote in favor of the approval of the principal terms of the Merger at the
Company Shareholders’ Meeting; and (iii) neither the Board of Directors of the
Company nor any committee thereof shall withdraw, amend or modify, or propose
or resolve to withdraw, amend or modify in a manner adverse to Parent, the
recommendation of the Board of Directors of the Company that the Company’s
shareholders vote in favor of the approval of the principal terms of the
Merger.
(c) Nothing in this Agreement shall prevent the
Board of Directors of the Company from withholding, withdrawing, amending or
modifying its recommendation (a “Change of
Recommendation”) that the Company’s shareholders vote in favor
of the approval of the principal terms of the Merger if (i) a Superior Offer
(as defined below) is made to the Company and is not withdrawn, (ii) the
Company shall have provided written notice to Parent (a “Notice of Superior Offer”)
advising Parent that the Company has received a Superior Offer, specifying all
of the terms and conditions of such Superior Offer and identifying the person
or entity making such Superior Offer, (iii) Parent shall not, within five (5)
business days of Parent’s receipt of the Notice of Superior Offer, have made an
offer that the Company’s Board of Directors reasonably determines in good faith
(after consultation with Savvian Advisors, LLC or another financial advisor of
national standing) to be at least as favorable to the Company’s shareholders as
such Superior Offer (it being agreed that the Board of Directors of the Company
shall promptly following the receipt of any such offer convene a meeting at
which it will consider such offer in good faith), (iv) the Board of Directors
of the Company reasonably determines in good faith, after consultation with its
outside counsel, that, in light of such Superior Offer, the withholding,
withdrawal, amendment or modification of such recommendation is required in
order for the Board of Directors of the Company to comply with its fiduciary
obligations to the Company’s shareholders under applicable law and (v) the
Company shall not have violated any of the restrictions set forth in this
Section 5.2 or Section 5.4. The Company
shall provide Parent with at least three business days prior notice (or such
43
lesser prior notice as is provided to the members of the Company’s
Board of Directors but in no event less than twenty-four hours) of any meeting
of the Company’s Board of Directors at which the Company’s Board of Directors
is reasonably expected to consider any Acquisition Proposal (as defined in
Section 5.4) or to determine whether such Acquisition Proposal is a Superior
Offer. Subject to Section 7.1(f),
nothing contained in this Section 5.2(c) shall limit the Company’s obligation
to hold and convene the Company Shareholders’ Meeting (regardless of whether
the recommendation of the Board of Directors of the Company shall have been
withheld, withdrawn, amended or modified).
For purposes of this Agreement, a “Superior Offer” shall mean an
unsolicited, bona fide, binding written offer
made by a third party to consummate any of the following transactions: (i) a
merger or consolidation involving the Company pursuant to which the
shareholders of the Company immediately preceding such transaction would hold
less than 50% of the equity interest in the surviving or resulting entity of
such transaction or (ii) the acquisition by any person or “group” (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) (including by way of a tender offer or an exchange offer or a
two-step transaction involving a tender offer followed with reasonable
promptness by a cash-out merger involving the Company), directly or indirectly,
of ownership of 50% or more of the then outstanding shares of capital stock of
the Company, on terms that the Board of Directors of the Company reasonably
determines in good faith (after consultation with Savvian Advisors, LLC or
another financial advisor of national standing) to be more favorable to the
Company shareholders than the terms of the Merger; provided,
however, that any such offer shall not be deemed to be a “Superior Offer” (A) unless any
financing required to consummate the transaction contemplated by such offer is
committed, or unless the Company’s Board of Directors shall reasonably
determine in good faith (after consultation with Savvian Advisors, LLC or
another financial advisor of national standing) that such financing is likely
to be obtained by such third party on a timely basis or (B) if there is a due
diligence condition to the third party’s obligation to consummate the
transaction that is the subject of the Superior Offer.
(d) Nothing contained in this Agreement shall
prohibit the Company or its Board of Directors from disclosing to its
shareholders a position contemplated by Rules 14d-9 and 14e-2(a) promulgated
under the Exchange Act, if, in the good faith judgment of the Company’s Board
of Directors, after consultation with its outside counsel, such disclosure is
required in order for the Board of Directors to comply with its fiduciary
obligations, or is otherwise required, under applicable law; provided that the Company shall not disclose a position
constituting a Change of Recommendation unless specifically permitted pursuant
to the terms of Section 5.2(c).
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that the Company and
Parent have previously executed that certain confidentiality agreement dated as
of March 30, 2007 between the Company and Parent, as amended to date (the “Confidentiality Agreement”),
which Confidentiality Agreement will continue in full force and effect in
accordance with its terms.
Notwithstanding the foregoing, the fourth paragraph of the
Confidentiality Agreement, which contains the so-called “stand-still”
provisions, is hereby waived for any action prior to the earlier of the
Effective Time or the termination of this Agreement pursuant to Section 7.1; provided,
44
however, that such fourth paragraph shall automatically
terminate and be of no further force or effect immediately upon any termination
of this Agreement pursuant to Section 7.1(f).
(b) Parent, on the one hand, and the Company, on
the other, will afford the other party and the other party’s accountants,
counsel and other representatives reasonable access during regular business
hours to its properties, books, records and personnel during the period prior
to the Effective Time to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel, as the other party may reasonably request. No information or knowledge obtained by a
party in any investigation pursuant to this Section 5.3 will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
5.4 No Solicitation.
(a) From and after the date of this Agreement
until the Effective Time or termination of this Agreement pursuant its terms,
the Company and its subsidiaries will not, nor will they authorize or permit
any of their respective officers, directors, affiliates or employees or any
investment banker, attorney or other advisor or representative retained by any
of them to, directly or indirectly, (i) solicit, initiate, encourage or induce
the making, submission or announcement of any Acquisition Proposal (as
hereinafter defined), (ii) participate in any discussions or negotiations
regarding, or furnish to any person any nonpublic information with respect to,
or take any other action intended or known to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected to lead
to, any Acquisition Proposal, (iii) engage in discussions with any person with
respect to any Acquisition Proposal, except to refer them to the provisions of
this Section 5.4(a), (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Proposal; provided, however,
that prior to the approval of the principal terms of the Merger at the Company
Shareholders’ Meeting, this Section 5.4(a) shall not prohibit the Company from
furnishing nonpublic information regarding the Company and its subsidiaries to,
or entering into discussions with, any person or group who has submitted (and
not withdrawn) to the Company an unsolicited, written, bona fide
Acquisition Proposal that the Board of Directors of the Company reasonably
determines in good faith (after consultation with Savvian Advisors, LLC or
another financial advisor of national standing) constitutes, or is likely to
lead to, a Superior Offer; provided that
(1) neither the Company nor any representative of the Company and its
subsidiaries shall have violated any of the restrictions set forth in this
Section 5.4, (2) the Board of Directors of the Company shall have concluded in
good faith, after consultation with its outside legal counsel, that such action
is required in order for the Board of Directors of the Company to comply with
its fiduciary obligations to the Company’s shareholders under applicable law,
(3) prior to furnishing any such nonpublic information to, or entering into any
such discussions with, such person or group, the Company shall have given
Parent written notice of the identity of such person or group and the material
terms and conditions of such Acquisition Proposal and of the Company’s
intention to furnish nonpublic information to, or enter into discussions with,
such person or group, and the Company shall have received from such person or
group an executed confidentiality agreement containing terms at least as
restrictive with regard to the Company’s confidential information as the
Confidentiality Agreement, (4) the Company shall have given Parent at least
three business days’ advance notice of its intent to
45
furnish such nonpublic information or enter into such discussions, and
(5) contemporaneously with furnishing any such nonpublic information to such
person or group, the Company shall have furnished such nonpublic information to
Parent (to the extent such nonpublic information shall not have been previously
furnished by the Company to Parent). The
Company and its subsidiaries shall immediately cease, and cause their
respective officers, directors, affiliates, employees, investment bankers,
attorneys and other advisors and representatives to cease, any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal.
Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding two sentences by any officer,
director or employee of the Company or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of the Company
or any of its subsidiaries shall be deemed to be a breach of this Section 5.4
by the Company.
For purposes of this Agreement, “Acquisition
Proposal” shall mean any inquiry, offer or proposal (other than
an inquiry, offer or proposal by Parent) relating to, or involving: (A) any acquisition or purchase by any person
or “group” (as defined under Section 13(d) of the Exchange Act and the rules
and regulations thereunder) of more than a 15% beneficial ownership interest in
the total outstanding voting securities of Company or any of its subsidiaries;
(B) any tender offer or exchange offer that if consummated would result in any
person or “group” (as defined under Section 13(d) of the Exchange Act and the
rules and regulations thereunder) beneficially owning 15% or more of the total
outstanding voting securities of the Company or any of its subsidiaries; (C)
any merger, consolidation, business combination or similar transaction
involving the Company or any of its subsidiaries pursuant to which the
shareholders of the Company immediately preceding such transaction hold or, in
the case of a subsidiary of the Company, the Company holds, less than 85% of
the equity interests in the surviving or resulting entity of such transaction;
(D) any sale, lease, exchange, transfer, license (other than in the ordinary
course of business), acquisition, or disposition of any assets of the Company
or any of its subsidiaries that generate or constitute 10% or more of the net
revenue, net income or assets of the Company and its subsidiaries, taken as a
whole; or (E) any liquidation, dissolution, recapitalization or other
reorganization of the Company or any of its subsidiaries.
(b) In addition to the obligations of the
Company set forth in Section 5.4(a), the Company as promptly as practicable,
and in any event within 24 hours of its receipt, shall advise Parent orally and
in writing of an Acquisition Proposal or any request for nonpublic information
or other inquiry which the Company reasonably believes could lead to an
Acquisition Proposal, the material terms and conditions of such Acquisition
Proposal, request or inquiry, and the identity of the person or group making
any such Acquisition Proposal, request or inquiry, and provide copies of all
written materials sent or provided to the Company by or on behalf of any person
or group or provided to any such person or group by or on behalf of the
Company. The Company will keep Parent
informed as promptly as practicable in all material respects of the status and
details (including material amendments or proposed amendments) of any such
Acquisition Proposal, request or inquiry.
5.5 Public
Disclosure. Parent and the
Company will consult with each other, and to the extent practicable, agree,
before issuing any press release or otherwise making any public statement with
respect to the Merger, this Agreement or an Acquisition Proposal and will not
issue any such press release or make any such public statement prior to such
consultation, except
46
as may be required by law
or any listing agreement with the American Stock Exchange or the Nasdaq Stock
Market, Inc. The parties hereto have
agreed to the text of the joint press release announcing the signing of this
Agreement.
5.6 Reasonable
Efforts; Notification.
(a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use its commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including
using its commercially reasonable efforts to accomplish the following: (i) causing the conditions precedent set
forth in Article 6 to be satisfied, (ii) obtaining all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and making of all necessary registrations, declarations
and filings (including registrations, declarations and filings with
Governmental Entities) and taking all steps that may be necessary to avoid any
suit, claim, action, investigation or proceeding by any Governmental Entity,
(iii) obtaining all necessary consents, approvals or waivers from third
parties, (iv) defending any suits, claims, actions, investigations or proceedings,
whether judicial or administrative, challenging this Agreement or the
consummation of the transactions contemplated hereby, including seeking to have
any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed and (v) executing and delivering any
additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement. Notwithstanding anything in this Agreement to
the contrary, neither Parent nor any of its affiliates shall be under any
obligation to make proposals, execute or carry out agreements or submit to
orders providing for the sale or other disposition or holding separate (through
the establishment of a trust or otherwise) of any assets or categories of
assets of Parent or any of its affiliates or the Company or any of its
subsidiaries or the holding separate of the shares of Company Common Stock (or
shares of stock of the Surviving Corporation) or imposing or seeking to impose any
limitation on the ability of Parent or any of its subsidiaries or affiliates to
conduct their business or own such assets or to acquire, hold or exercise full
rights of ownership of the shares of Company Common Stock (or shares of stock
of the Surviving Corporation).
(b) Each of the Company and
Parent will give prompt notice to the other of (i) any notice or other
communication from any person alleging that the consent of such person is or
may be required in connection with the Merger or any of the other transactions
contemplated by this Agreement, (ii) any notice or other communication from any
Governmental Entity in connection with the Merger or any of the other
transactions contemplated by this Agreement, (iii) any litigation relating to,
involving or otherwise affecting the Company, Parent or their respective
subsidiaries that relates to the Merger or any of the other transactions
contemplated by this Agreement. The
Company shall give prompt written notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate
in any material respect, or any failure of the Company to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement; provided,
however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the
47
parties under this Agreement. Parent shall give prompt written notice to
the Company of any representation or warranty made by it or Merger Sub
contained in this Agreement becoming untrue or inaccurate in any material
respect, or any failure of Parent or Merger Sub to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that
no such notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) The Company shall give
prompt notice to Parent of receipt by the Company of any demand for the
purchase of shares of Company Common Stock pursuant to the CGCL.
5.7 Third Party
Consents. As soon as
practicable following the date hereof, Parent and the Company will each use its
commercially reasonable efforts to obtain any consents, waivers and approvals
under any of its or its subsidiaries’ respective material agreements,
contracts, licenses or leases required to be obtained in connection with the
consummation of the Merger and the other transactions contemplated hereby.
5.8 Stock
Options; Warrants and ESPP.
(a) At the Effective Time,
each outstanding Company Option will be assumed by Parent. Each Company Option so assumed by Parent
under this Agreement will continue to have, and be subject to, the same terms
and conditions set forth in the applicable Company Stock Option Plan, if any,
pursuant to which the Company Option was issued and any option agreement between
the Company and the optionee with regard to the Company Option immediately
prior to the Effective Time, except that (i) each Company Option will be
exercisable for that number of whole shares of Parent Common Stock equal to the
product of the number of shares of Company Common Stock that were issuable upon
exercise of such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded down to the nearest whole number of
shares of Parent Common Stock and (ii) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such assumed Company
Option will be equal to the quotient determined by dividing the exercise price
per share of Company Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to
the nearest whole cent.
(b) It is intended that
Company Options assumed by Parent shall be adjusted in a manner consistent with
Section 424 of the Code (whether or not such Company Options qualify as
incentive stock options under Section 422 of the Code) and shall qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent Company Options qualified as incentive stock
options immediately prior to the Effective Time and the provisions of this
Section 5.8 shall be applied consistent with such intent.
(c) At the Effective Time,
each outstanding Company Warrant will be assumed by Parent. Each Company Warrant so assumed by Parent under
this Agreement will continue to have, and be subject to, the same terms and
conditions set forth in the applicable Company Warrant immediately prior to the
Effective Time, except that (i) each Company
48
Warrant will be exercisable for that number
of whole shares of Parent Common Stock equal to the product of the number of
shares of Company Common Stock that were issuable upon exercise of such Company
Warrant immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded down to the nearest whole number of shares of Parent Common
Stock and (ii) the per share exercise price for the shares of Parent Common
Stock issuable upon exercise of such assumed Company Warrant will be equal to
the quotient determined by dividing the exercise price per share of Company
Common Stock at which such Company Warrant was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(d) The Company shall take
all actions necessary pursuant to the terms of the Company ESPP in order to
shorten the participation period(s) under such plan which includes the
Effective Time (the “Current
Offerings”) such that a new purchase date for each such
participation period shall occur prior to the Effective Time and shares shall
be purchased by the Company ESPP participants prior to the Effective Time. The Current Offerings shall expire
immediately following such new purchase date, and the Company ESPP shall
terminate immediately prior to the Effective Time. Subsequent to such new purchase date, the
Company shall take no action, pursuant to the terms of the Company ESPP, to
commence any new offering period.
5.9 Form S-8. Parent agrees to file a registration
statement on Form S-8 for the shares of Parent Common Stock issuable with
respect to assumed Company Options promptly, but in no event later than two
business days, following the Effective Time and shall maintain the
effectiveness of such registration statement thereafter for so long as any such
Company Options remain outstanding.
5.10 Indemnification
and Insurance.
(a) Indemnity.
From and after the Effective Time, Parent shall, and shall cause the
Surviving Corporation to, to the fullest extent permitted by applicable Legal
Requirements, indemnify, defend and hold harmless, and provide advancement of
expenses to, each person who is now or who becomes prior to the Effective Time
an officer or director of the Company or any of its subsidiaries (the “Indemnified Parties”) against all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement of or in connection with any claim or action that
is based in whole or in part on, or arises in whole or in part out of, the fact
that such person is or was a director or officer of the Company or any of its
subsidiaries, and pertaining to any matter existing or occurring, or any acts
or omissions occurring, at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time (including matters, acts or omissions
occurring in connection with the approval of this Agreement and the
consummation of the transactions contemplated hereby), to the same extent such
persons are entitled to be indemnified or have the right to advancement of
expenses as of the date of this Agreement by the Company or any of its
subsidiaries pursuant to the Company Charter Documents, and indemnification
agreements of the Company and its subsidiaries in existence on the date hereof
with such persons. The articles of
incorporation and bylaws of the Surviving Corporation will contain provisions
with respect to exculpation and indemnification that are at least as favorable
to the Indemnified Parties as those contained in the Articles of Incorporation
and Bylaws of the Company as in effect on the date hereof, which
49
provisions will not be amended, repealed or
otherwise modified for a period of six (6) years from the Effective Time in any
manner that would adversely affect the rights thereunder of Indemnified
Parties, unless such modification is required by law.
(b) Insurance.
For a period of six years after the Effective Time, Parent shall cause
the Surviving Corporation to maintain in effect the directors’ and officers’
liability insurance maintained by the Company covering those persons who are
covered by the Company’s directors’ and officers’ liability insurance policy as
of the date hereof (the “D&O Insurance”)
for events occurring prior to the Effective Time on terms comparable to those
applicable to the current directors and officers of the Company for a period of
six years; provided that if the existing D&O
Insurance expires, is terminated or is canceled during such six-year period,
Parent shall cause the Surviving Corporation to substitute therefor policies
containing terms and conditions which are in all material respects no less
favorable in the aggregate than those applicable to the current directors and
officers of the Company; provided, however,
that in no event will the Surviving Corporation be required in any given year
to expend in excess of 250% of
the annual premium currently paid by the Company for such coverage (and to the
extent the annual premium would exceed 250% of the annual premium currently
paid by the Company for such coverage, Parent shall cause the Surviving
Corporation to maintain the maximum amount of coverage as is available for such
250% of such annual premium). To the
extent that a six-year “tail” policy to extend the Company’s existing D&O
Insurance is available prior to the Closing, the Company may obtain such “tail”
policy and such “tail” policy shall satisfy Parent’s obligation under this
Section 5.10(b).
(c) Third-Party Beneficiaries. This Section 5.10 is intended to be for the
benefit of, and shall be enforceable by, the Indemnified Parties and their
heirs and personal representatives and shall be binding on Parent and the
Surviving Corporation and its successors and assigns.
5.11 Stock
Exchange Listing. Parent
agrees to authorize for listing on the American Stock Exchange the shares of
Parent Common Stock issuable, and those required to be reserved for issuance,
in connection with the Merger, including those shares issuable pursuant to the
exercise of Company Options assumed by Parent, effective upon official notice
of issuance.
5.12 Rights
Agreement; Takeover Statutes.
The Board of Directors of the Company shall take such action as shall be
necessary in order to render the Rights inapplicable to this Agreement, the
Merger and the other transactions contemplated by this Agreement. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of Parent and the Company and their respective Boards of
Directors shall grant such approvals and take such lawful actions as are
necessary to ensure that such transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise act to
eliminate or minimize the effects of such statute and any regulations
promulgated thereunder on such transactions.
5.13 Certain
Employee Benefits.
(a) Effective as of the day immediately
preceding the Closing Date, the Company and its Affiliates, as applicable,
shall each terminate any plans intended to include a
50
Code Section 401(k) arrangement (unless Parent provides written notice
to the Company that such 401(k) plans shall not be terminated) (the “401(k) Plan(s)”). Unless Parent provides such written notice to
the Company, no later than five business days prior to the Closing Date, the
Company shall provide Parent with evidence that such 401(k) Plan(s) have been
terminated (effective as of the day immediately preceding the Closing Date)
pursuant to resolutions of the Company’s Board of Directors.
(b) As of the Closing Date, Parent will either (i) permit
employees of the Company and each of its subsidiaries who continue employment
with Parent or the Surviving Corporation following the Closing Date (“Continuing Employees”), and,
as applicable, their eligible dependents, to participate in the employee
benefit plans, programs or policies (including without limitation any plan
intended to qualify within the meaning of Section 401(a) of the Code and
any vacation, sick, or personal time off plans or programs) of Parent on terms
no less favorable than those provided to similarly situated employees of
Parent, (ii) continue comparable Company Employee Plans other than the
401(k) Plans (except as otherwise provided pursuant to Section 5.13(a)),
or (iii) a combination of clauses (i) and (ii) (it being understood that
Parent shall have no obligation to continue any Company Employee Plan not
comparable to plans or programs of Parent in effect on the Closing Date). To the extent Parent elects to have
Continuing Employees and their eligible dependents participate in its employee
benefit plans, program or policies following the Closing Date, (A) each
such Continuing Employee will receive credit for purposes of eligibility to
participate and vesting (but not for purposes of benefit accrual) under such
plan for years of service with the Company (or any of its subsidiaries),
including predecessor employers acquired directly or indirectly by the Company
prior to the Closing Date, and (B) Parent will use commercially reasonable
efforts to (1) cause any and all pre-existing condition limitations, eligibility
waiting periods and evidence of insurability requirements under any group
health plans of Parent in which such employees and their eligible dependents
will participate to be waived and (2) provide for credit for any co-payments
and deductibles prior to the Closing Date for purposes of satisfying any
applicable deductible, out-of-pocket or similar requirements under any such
plans that may apply after the Closing Date.
(c) Parent agrees that, from and after the
Closing Date, the Continuing Employees may participate in the employee stock
purchase plan sponsored by Parent (the “Parent ESPP”),
subject to the terms and conditions of the Parent ESPP, and that service with
the Company shall be treated as service with Parent or its subsidiaries for
determining eligibility of the Continuing Employees under the Parent ESPP.
5.14 Company
Affiliates; Restrictive Legend.
Parent will give stop transfer instructions to its transfer agent with
respect to any Parent Common Stock received pursuant to the Merger by any Company
Affiliate, and there will be placed on the certificates representing such
Parent Common Stock, or any substitutions therefor, a legend stating in
substance:
THE SHARES REPRESENTED BY
THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, APPLIES AND MAY BE TRANSFERRED
ONLY (A) IN CONFORMITY WITH RULE 145(D) UNDER SUCH ACT, (B) IN ACCORDANCE WITH
A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER, IN FORM AND
SUBSTANCE
51
REASONABLY ACCEPTABLE TO
THE ISSUER THAT THE TRANSFER IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS
DELIVERY REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED.
5.15 Qualification
as a Reorganization. Each of
the parties hereto agrees not to take any action (or fail to take any action),
either prior to or following the Closing, that would reasonably be expected to
cause the Merger to fail to qualify as a “reorganization” within the meaning of
section 368(a) of the Code and the regulations thereunder. None of the parties hereto shall take any
position on any federal, state or local income or franchise tax return, or take
any other tax reporting position, that is inconsistent with the treatment of
the Merger as a “reorganization” within the meaning of Section 368(a) of the
Code, unless otherwise required by applicable Legal Requirement.
5.16 Section 16
Matters. Prior to the
Effective Time, Parent and the Company shall take all such steps as may be
required (to the extent permitted under applicable Legal Requirements) to cause
any dispositions of Company Common Stock (including derivative securities with
respect to Company Common Stock) resulting from the transactions contemplated
by Article 1 of this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to the
Company, and the acquisition of Parent Common Stock (including derivative
securities with respect to Parent Common Stock) by each individual who is or
will be subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to Parent, to be exempt under Rule 16b-3
promulgated under the Exchange Act.
5.17 Merger Sub
Compliance. Parent shall cause Merger Sub to comply with all
of Merger Sub’s obligations under or relating to this Agreement. Merger Sub shall not engage in any business
which is not in connection with the Merger and the transactions contemplated
hereby.
5.18 Resignations. The Company shall use commercially reasonable
efforts to cause each director and officer of the Company and its subsidiaries
to deliver to Parent, at least five business days before the Closing, written
resignations from each such position as director or officer, in each case
effective at or before the Effective Time.
Article 6
CONDITIONS TO THE MERGER
6.1 Conditions
to Obligations of Each Party to Effect the Merger. The respective obligations of each party to
this Agreement to effect the Merger shall be subject to the satisfaction at or
prior to the Closing Date of the following conditions:
(a) Shareholder Approval. The Company Shareholder Approval shall have
been obtained.
(b) Registration Statement Effective; Proxy Statement. The SEC shall have declared the Registration
Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for
52
that purpose, and no similar proceeding in
respect of the Proxy Statement/Prospectus, shall have been initiated or
threatened in writing by the SEC.
(c) No Order.
No Governmental Entity shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent), including under
the HSR Act, which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger or any other
material transaction contemplated hereby.
All waiting periods, if any, under the HSR Act relating to the
transactions contemplated hereby shall have expired or been terminated.
6.2 Additional
Conditions to Obligations of the Company. The obligation of the Company to consummate
and effect the Merger shall be subject to the satisfaction at or prior to the
Closing Date of each of the following conditions, any of which may be waived,
in writing, exclusively by the Company:
(a) Representations and Warranties. Each representation and warranty of Parent
and Merger Sub contained in this Agreement (i) shall have been true and correct
as of the date of this Agreement and (ii) shall be true and correct (without
regard to any qualification or exception relating to materiality or Material
Adverse Effect) on and as of the Closing Date with the same force and effect as
if made on the Closing Date except (A) in each case, or in the aggregate, as
does not constitute a Material Adverse Effect on Parent as of the Closing Date;
provided, however, such Material Adverse
Effect qualification shall be inapplicable with respect to the representations
and warranties contained in (1) the first sentence of Section 3.2(a), (2) the
first sentence of Section 3.2(b) and (3) Section 3.3(a) (all of which
representations in clauses (1) through (3) shall be true and correct at the
applicable times in all material respects), and (B) for those representations
and warranties which address matters only as of a particular date (which
representations shall have been true and correct (subject to the qualifications
set forth in the preceding clause (A)) as of such particular date) (it being
understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Disclosure Schedule made or purported to have been made after the execution of
this Agreement shall be disregarded).
(b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
Parent shall have occurred since the date of this Agreement and be continuing.
(d) Officer’s Certificate. The Company shall have received a
certificate, in form and substance reasonably satisfactory to the Company,
signed on behalf of Parent by an authorized officer of Parent, to the effect
set forth in Sections 6.2(a), 6.2(b) and 6.2(c).
(e) Tax Opinion. The Company shall have received an opinion of
Wilson Sonsini Goodrich & Rosati, P.C., dated as of the Closing Date, in
form and substance reasonably satisfactory to it, on the basis of the facts,
representations and assumptions set forth or referred to
53
in such opinion, that the Merger will
constitute a reorganization within the meaning of section 368(a) of the Code
and that each of Parent and the Company will be a party to the reorganization
within the meaning of section 368(a) of the Code, provided, however, that if Wilson Sonsini Goodrich &
Rosati, P.C. does not render such opinion, this condition shall nonetheless be
deemed to be satisfied with respect to the Company if Foley Hoag LLP renders
such opinion to the Company. The parties
to this Agreement agree to make such reasonable representations as requested by
such counsel for the purpose of rendering such opinion.
(f) Stock
Exchange Listing. The shares
of Parent Common Stock to be issued in the Merger shall have been approved for
listing on the American Stock Exchange, subject to official notice of issuance.
6.3 Additional
Conditions to the Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to
consummate and effect the Merger shall be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. Each representation and warranty of the
Company contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct (without regard
to any qualification or exception relating to materiality or Material Adverse
Effect) on and as of the Closing Date with the same force and effect as if made
on and as of the Closing Date except (A) in each case, or in the aggregate, as
does not constitute a Material Adverse Effect on the Company as of the Closing
Date; provided, however, such Material Adverse
Effect qualification shall be inapplicable with respect to the representations
and warranties contained in (1) the first sentence of Section 2.2(a), (2) the
first sentence of Section 2.2(b), (3) the first and third sentences of Section
2.3, and (4) Sections 2.4(a), 2.20, 2.21 and 2.23 (all of which representations
in clauses (1) through (4) shall be true and correct at the applicable times in
all material respects), and (B) for those representations and warranties which
address matters only as of a particular date (which representations shall have
been true and correct (subject to the qualifications set forth in the preceding
clause (A)) as of such particular date) (it being understood that, for purposes
of determining the accuracy of such representations and warranties, any update
of or modification to the Company Disclosure Schedule made or purported to have
been made after the execution of this Agreement shall be disregarded).
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date.
(c) Material Adverse Effect. No Material Adverse Effect with respect to
the Company shall have occurred since the date of this Agreement and be
continuing.
(d) Officer’s Certificate. Parent shall have received a certificate, in
form and substance reasonably satisfactory to Parent, signed on behalf of the
Company by the Chief Executive Officer or Chief Financial Officer of the
Company, to the effect set forth in Sections 6.3(a), 6.3(b) and 6.3(c).
54
(e) Tax Opinion. Parent shall have received an opinion of
Foley Hoag LLP, dated as of the Closing Date, in form and substance reasonably
satisfactory to it, on the basis of the facts, representations and assumptions
set forth or referred to in such opinion, that the Merger will constitute a
reorganization within the meaning of section 368(a) of the Code and that each
of Parent and the Company will be a party to the reorganization within the
meaning of section 368(a) of the Code, provided,
however, that if Foley Hoag LLP does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to Parent if
Wilson Sonsini Goodrich & Rosati, P.C. renders such opinion to Parent. The parties to this Agreement agree to make
such reasonable representations as requested by such counsel for the purpose of
rendering such opinion.
(f) No
Restraints. There shall not
be instituted or pending any action or proceeding by any Governmental Entity,
including under the HSR Act, (i) seeking to restrain, prohibit or otherwise
interfere with the ownership or operation by Parent or any of its subsidiaries
of all or any portion of the business of the Company or any of its subsidiaries
or of Parent or any of its subsidiaries or to compel Parent or any of its
subsidiaries to dispose of or hold separate all or any portion of the business
or assets of the Company or any of its subsidiaries or of Parent or any of its
subsidiaries, (ii) seeking to impose or confirm limitations on the ability of
Parent or any of its subsidiaries effectively to exercise full rights of
ownership of the shares of Company Common Stock (or shares of stock of the
Surviving Corporation) including the right to vote any such shares on any
matters properly presented to shareholders or (iii) seeking to require
divestiture by Parent or any of its subsidiaries of any such shares.
Article 7
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the requisite approvals of
the shareholders of Parent and the Company:
(a) by mutual written
consent duly authorized by the Boards of Directors of Parent and the Company;
(b) by either the Company
or Parent if the Merger shall not have been consummated by December 3, 2007 for
any reason; provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement;
(c) by either the Company
or Parent if a Governmental Entity shall have issued an order, decree or ruling
or taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which order,
decree, ruling or other action is final and nonappealable;
(d) by either the Company
or Parent, if the Company Shareholder Approval shall not have been obtained by
reason of the failure to obtain the required vote at a meeting of
55
the Company shareholders duly convened
therefore or at any adjournment thereof; provided, however,
that the right to terminate this Agreement under this Section 7.1(d) shall not
be available to the Company where the failure to obtain the Company Shareholder
Approval shall have been caused by (i) the action or failure to act of the
Company and such action or failure to act constitutes a material breach by the
Company of this Agreement or (ii) a breach of any of the Voting Agreements by
any director or executive officer party thereto;
(e) by Parent (at any time
prior to the Company Shareholder Approval) if a Triggering Event (as defined
below) shall have occurred;
(f) by the Company (at any
time prior to the Company Shareholder Approval), upon a Change of
Recommendation in connection with a Superior Proposal; provided,
that contemporaneously with the termination of this Agreement, (i) the Company
pays to Parent the Termination Fee (as defined in Section 7.3(b)) and (ii) the
Company enters into a definitive agreement to effect such Superior Proposal.
(g) by the Company, upon a
breach of any covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied, provided that
if such inaccuracy in Parent’s representations and warranties or breach by
Parent is curable by Parent, then the Company may not terminate this Agreement
under this Section 7.1(g) for 30 days after delivery of written notice from the
Company to Parent of such breach and intent to terminate, provided Parent continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
the Company may not terminate this Agreement pursuant to this Section 7.1(g) if
such breach by Parent is cured during such 30-day period, or if the Company
shall be in material breach of this Agreement); or
(h) by Parent, upon a
breach of any covenant or agreement on the part of the Company set forth in
this Agreement, or if any representation or warranty of the Company shall have
become untrue, in either case such that the conditions set forth in Section 6.3(a)
or Section 6.3(b) would not be satisfied, provided that
if such inaccuracy in the Company’s representations and warranties or breach by
the Company is curable by the Company, then Parent may not terminate this
Agreement under this Section 7.1(h) for 30 days after delivery of written
notice from Parent to the Company of such breach and intent to terminate, provided the Company continues to exercise commercially
reasonable efforts to cure such breach (it being understood that Parent may not
terminate this Agreement pursuant to this Section 7.1(h) if such breach by the
Company is cured during such 30-day period, or if Parent shall be in material
breach of this Agreement).
For the purposes of this Agreement, a “Triggering Event” shall be deemed to
have occurred if: (i) the Board of
Directors of the Company or any committee thereof shall for any reason have
withheld or withdrawn or shall have amended or modified in a manner adverse to
Parent its recommendation in favor of the approval of the principal terms of
the Merger; (ii) the Company shall have failed to include in the Proxy
Statement/Prospectus the recommendation of the Board of Directors of the
Company in favor of the approval of the principal terms of the Merger; (iii)
the Board of Directors of the Company fails publicly to reaffirm its
recommendation in favor of the approval of the principal terms of the Merger
within ten business
56
days after Parent requests in writing that such
recommendation be reaffirmed at any time following the public announcement of
an Acquisition Proposal; (iv) the Board of Directors of the Company or any
committee thereof shall have approved or publicly recommended any Acquisition
Proposal; (v) the Company shall have entered into any letter of intent or
similar document or any agreement, contract or commitment accepting any
Acquisition Proposal; (vi) the Company shall have breached any of the
provisions of Sections 5.2 or 5.4 (other than in an immaterial manner); or
(vii) a tender or exchange offer relating to securities of the Company shall
have been commenced by a person unaffiliated with Parent, and the Company shall
not have sent to its security holders pursuant to Rule 14e-2 promulgated under
the Exchange Act, within ten business days after such tender or exchange offer
is first published sent or given, a statement disclosing that the Company
recommends rejection of such tender or exchange offer.
7.2 Notice of
Termination; Effect of Termination.
Any proper termination of this Agreement under Section 7.1 will be
effective immediately upon the delivery of written notice of the terminating
party to the other parties hereto. In
the event of the termination of this Agreement as provided in Section 7.1, this
Agreement shall be of no further force or effect, except (i) as set forth in
this Section 7.2, Section 7.3 and Article 8, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any willful breach of this Agreement. No termination of this Agreement shall affect
the obligations of the parties contained in the Confidentiality Agreement, all
of which obligations shall survive termination of this Agreement in accordance
with their terms.
7.3 Fees and
Expenses.
(a) Except as set forth in
this Section 7.3, all fees and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Merger is consummated; provided, however, that Parent and Company shall share
equally (i) all fees and expenses, other than attorneys’ and accountants fees
and expenses, incurred in relation to the printing and filing with the SEC of
the Proxy Statement/Prospectus (including any preliminary materials related
thereto) and the Registration Statement (including financial statements and
exhibits) and any amendments or supplements thereto (including SEC filing
fees), and (ii) the applicable filing fees associated with the Antitrust
Filings.
(b) In the event that this
Agreement is terminated by Parent or the Company, as applicable, pursuant to
Sections 7.1(b), 7.1(d), 7.1(e) or 7.1(f), the Company shall promptly, but in
no event later than two days after the date of such termination, pay Parent a
fee equal to $9,000,000 in immediately available funds (the “Termination Fee”); provided, that in the case of a termination under Sections
7.1(b) or 7.1(d) prior to which no Triggering Event has occurred, (i) such
payment shall be made only if (A) following the date of this Agreement and
prior to the termination of this Agreement, a person has publicly announced an
Acquisition Proposal and (B) within 12 months following the termination of this
Agreement a Company Acquisition (as defined below) is consummated or the
Company enters into a binding agreement providing for a Company Acquisition and
(ii) such payment shall be made promptly, but in no event later than two days
after the consummation of such Company Acquisition or the entry by the Company
into such agreement; and provided further,
that in the case of termination pursuant to Section 7.1(f),
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the Company shall pay the Termination Fee
contemporaneously with the termination of this Agreement.
(c) Each of the Company and
Parent acknowledges that the agreements contained in this Section 7.3 are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, neither the Company nor Parent would enter into this
Agreement. Accordingly, if the Company
or Parent fails to pay in a timely manner amounts due pursuant to Section
7.3(b), and, in order to obtain such payment, the Company or Parent makes a
claim for such amounts that results in a judgment against the other for the
amounts described in Section 7.3(b), the judgment debtor shall pay to the
judgment creditor its reasonable costs and expenses (including reasonable
attorneys’ fees and expenses as provided in Section 8.7(b)) in connection with
such suit, together with interest on the amounts described in Section 7.3(b)
(at the prime rate of Bank of America in effect on the date such payment was
required to be made) from such date until the payment of such amount (together
with such accrued interest). Payment of
the fees described in Section 7.3(b) shall not be in lieu of damages incurred
in the event of willful breach of this Agreement.
For the purposes of this Agreement, “Company Acquisition” shall mean any
of the following transactions (other than the transactions contemplated by this
Agreement); (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company or any of its subsidiaries pursuant to which the shareholders of the
Company immediately preceding such transaction hold or, in the case of a
subsidiary, the Company holds, less than 50% of the aggregate equity interests
in the surviving, resulting or parent entity of such transaction, (ii) a sale
or other disposition by the Company or any of its subsidiaries of assets
representing in excess of 50% of the aggregate fair market value of the Company’s
consolidated business immediately prior to such sale, or (iii) the acquisition
by any person or group (including by way of a tender offer or an exchange offer
or issuance by the Company or any of its subsidiaries), directly or indirectly,
of beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 50% of the voting power of the then outstanding
shares of capital stock of the Company or any of its subsidiaries.
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7.4 Amendment. Subject to applicable law, this Agreement may
be amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of Parent and the Company.
7.5 Extension;
Waiver. At any time prior to
the Effective Time any party hereto may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations
and warranties made to such party contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
Delay in exercising any right under this Agreement shall not constitute
a waiver of such right.
Article 8
GENERAL PROVISIONS
8.1 Non-Survival
of Representations and Warranties.
The representations and warranties of the Company, Parent and Merger Sub
contained in this Agreement shall terminate at the Effective Time, and only the
covenants that by their express terms survive the Effective Time shall survive
the Effective Time.
8.2 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given upon delivery either
personally or by commercial delivery service, or sent via facsimile (receipt
confirmed) to the parties at the following addresses or facsimile numbers (or
at such other address or facsimile numbers for a party as shall be specified by
like notice):
(a) if to Parent or Merger
Sub, to:
Inverness Medical
Innovations, Inc.
51 Sawyer Road, Suite 200
Waltham, Massachusetts
02453
Facsimile: (781) 647-3939
Attention: Chairman,
Chief Executive Officer and President and General Counsel
with a copy to:
Foley Hoag LLP
Seaport World Trade
Center West
155 Seaport Boulevard
Boston, Massachusetts
02210
Facsimile: (617) 832-7000
Attention: William R. Kolb
59
(b) if to the Company, to:
Cholestech Corporation
3347 Investment Boulevard
Hayward, California 94545
Facsimile: (510) 732-7227
Attention: President and Chief Executive Officer
with a copy to:
Wilson Sonsini Goodrich
& Rosati, P.C.
650 Page Mill Road
Palo Alto, California
94304
Facsimile: (650) 493-6811
Attention: Robert P. Latta
Chris F. Fennell
Robert T. Ishii
8.3 Interpretation;
Certain Defined Terms.
(a) When a reference is
made in this Agreement to Exhibits, such reference shall be to an Exhibit to
this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference
shall be to a Section of this Agreement unless otherwise indicated. The words “include,” “includes” and “including”
when used herein shall be deemed in each case to be followed by the words “without
limitation.” The table of contents and
headings contained in this Agreement are only for reference purposes and shall
not affect in any way the meaning or interpretation of this Agreement. When reference is made herein to “the
business of” an entity, such reference shall be deemed to include the business
of all direct and indirect subsidiaries of such entity. Unless otherwise indicated to the contrary,
(i) reference to an entity shall be deemed to include such entity and all
direct and indirect subsidiaries of such entity, taken as a whole, and (ii)
reference to the subsidiaries of an entity shall be deemed to include all
direct and indirect subsidiaries of such entity. Reference to an agreement herein is to such
agreement as amended in accordance with its terms up to the date hereof. Reference to a statute herein is to such
statute, as amended. Reference to forms,
reports, documents and information filed or required to be filed with the SEC
shall be deemed to include forms, reports, documents and information furnished
or required to be furnished to the SEC.
(b) For purposes of this
Agreement, “knowledge”
means, with respect to any fact, circumstance, event or other matter in
question, the actual knowledge of such fact, circumstance, event or other
matter of (i) an individual, if used in reference to an individual, or (ii) any
executive officer of such party, if used in reference to a person that is not
an individual. Any such individual will
be deemed to have actual knowledge of a particular fact, circumstance, event or
other matter if such fact, circumstance, event or other matter is reflected in
one or more documents (whether written or electronic, including e-mails sent to
or by such individual) in, or that have been in, such individual’s possession,
including personal files of such individual.
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(c) For purposes of this
Agreement, the term “Material
Adverse Effect” when used in connection with any party means any
change, event, circumstance or effect (whether or not such change, event,
circumstance or effect constitutes a breach of a representation, warranty or
covenant made by such party in this Agreement) that is or is reasonably likely
to be materially adverse to the business, assets, capitalization, financial
condition, operations or results of operations of such party taken as a whole
with its subsidiaries, except to the extent that any such change, event,
circumstance or effect proximately results from (i) changes in general economic
or political conditions or changes generally affecting the industry in which
such entity operates (provided that
such changes do not affect such entity in a disproportionate manner), (ii)
changes, effects or events resulting from the announcement or pendency of the
Merger or from the taking of any action required by this Agreement, (iii) any
change in the price at which the shares of a party are traded, in and of
itself, (iv) failure of a party to meet any particular revenue or earnings
forecast or estimate for any period ending after the date of this Agreement, in
and of itself, (v) in the case of the Company only, any act or failure to act
by Parent, including the effects of any agreement to which Parent is a party or
by which it is bound, (vi) any natural disaster or any acts of terrorism,
sabotage, military action or war (whether or not declared) or any escalation or
worsening thereof (provided that
such changes do not affect such entity in a disproportionate manner), (vii) in
the case of the Company only, any litigation arising from allegations of a
breach of fiduciary duty or misrepresentation in any disclosure, in each case
relating to this Agreement or the transactions contemplated hereby, (viii)
compliance by a party with
the express terms of this Agreement or the failure by such entity or any of its
subsidiaries to take any action that is prohibited by this Agreement, or (ix)
changes in Legal Requirements or GAAP (or any generally accepted
interpretations of GAAP) applicable to such entity.
(d) For purposes of this
Agreement, the term “person”
shall mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
(e) For purposes of this
Agreement, “subsidiary”
of a specified entity will be any corporation, partnership, limited liability
company, joint venture or other legal entity of which the specified entity
(either alone or through or together with any other subsidiary) owns, directly
or indirectly, 50% or more of the stock or other equity or partnership
interests the holders of which are generally entitled to vote for the election
of the Board of Directors or other governing body of such corporation or other
legal entity.
8.4 Counterparts. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire
Agreement; Third-Party Beneficiaries. This Agreement, its Exhibits and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure
Schedule and the Parent Disclosure Schedule constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and
61
oral, among the parties
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement. Nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any right, benefit
or remedy of any nature whatsoever under or by reason of this agreement other
than (a) as specifically provided in Section 5.10 and (b) after the
Effective Time, the rights of holders of shares of the Company’s capital stock
to receive the merger consideration specified in Section 1.6.
8.6 Severability. In the event that any provision of this
Agreement or the application thereof becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree to use their
commercially reasonable efforts to replace such void or unenforceable provision
of this Agreement with a valid and enforceable provision that will achieve, to
the extent possible, the economic, business and other purposes of such void or
unenforceable provision.
8.7 Other
Remedies; Specific Performance; Fees.
(a) Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that
the parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
(b) If any action, suit or
other proceeding (whether at law, in equity or otherwise) is instituted
concerning or arising out of this Agreement or any transaction contemplated
hereunder, the prevailing party shall recover, in addition to any other remedy
granted to such party therein, all such party’s costs and attorneys fees
incurred in connection with the prosecution or defense of such action, suit or
other proceeding.
8.8 Governing
Law; Submission to Jurisdiction.
The Merger shall be governed by and construed in accordance with the
laws of the State of California. Other
than the Merger, this Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law thereof. In any action or proceeding between any of
the parties arising out of or relating to this Agreement or any of the
transactions contemplated by this Agreement, each of the parties hereto: (a)
irrevocably and unconditionally consents and submits, for itself and its
property, to the exclusive jurisdiction and venue of any Delaware State court
(or, in the case of any claim as to which the federal courts have exclusive
subject matter jurisdiction, the Federal court of the United States of America,
sitting in Delaware); (b) agrees that all claims in respect of such action or
proceeding must be commenced, and may be heard and determined, exclusively in
62
such Delaware State court
(or, if applicable, such Federal court); (c) waives, to the fullest extent it
may legally and effectively do so, any objection which it may now or hereafter
have to the laying of venue of any such action or proceeding in such Delaware
State court (and, if applicable, such Federal court); and (d) waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in such Delaware State court (or, if
applicable, such Federal court). Each of the parties hereto agrees that a final
judgment in any such action or proceeding may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law. Each
party to this Agreement irrevocably consents to service of process in the
manner provided for notices in Section 8.2.
Nothing in this Agreement shall affect the right of any party to this
Agreement to serve process in any other manner permitted by applicable law.
8.9 Rules of
Construction. The parties
hereto agree that they have been represented by counsel during the negotiation
and execution of this Agreement and, therefore, waive the application of any
law, regulation, holding or rule of construction providing that ambiguities in
an agreement or other document will be construed against the party drafting
such agreement or document.
8.10 Assignment. No party may assign (whether by operation of
law or otherwise) either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written consent of the other parties
hereto provided, however, that the consent of the Company
shall not be required for: (a) an assignment by Parent and/or Merger Sub of any
or all of its or their rights (but not obligations) hereunder to any one or
more of its lenders; (b) an assignment by Parent of this Agreement and its
rights and obligations hereunder to any one or more of its Affiliates, provided
that Parent remains liable and responsible for fulfillment of all of its
obligations hereunder by such Affiliate or Affiliates; and (c) an assignment by
Parent of this Agreement and its rights and obligations hereunder in connection
with the sale, however effected (whether through a merger, sale of stock, sale
of all or substantially all of the assets, or a similar business combination)
of all or substantially all of the stock or assets of Parent or one of its
Affiliates, provided that the acquirer agrees in writing to assume and fulfill
the obligations of Parent under this Agreement.
Subject to the preceding sentence, this Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Any
purported assignment in violation of this Section 8.10 shall be void.
8.11 Waiver of
Jury Trial. EACH OF PARENT,
THE COMPANY AND MERGER SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, SUIT, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT,
TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS
OF PARENT, THE COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION,
PERFORMANCE AND ENFORCEMENT HEREOF.
* *
* * *
63
IN WITNESS WHEREOF, the parties have caused this
Agreement and Plan of Reorganization to be executed by their duly authorized
respective officers as of the date first written above.
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Inverness Medical Innovations,
Inc.
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By:
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/s/
Ron Zwanziger
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Ron Zwanziger,
President and Chief Executive
Officer
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Iris Merger Sub, Inc.
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By:
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/s/ John Yonkin
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John Yonkin,
President and Chief Executive
Officer
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Cholestech Corporation
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By:
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/s/ Warren E. Pinckert II
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Warren E.
Pinckert II, President and Chief
Executive Officer
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List of
Exhibits
Exhibit A Form
of Voting Agreement