Agreement and Plan of Merger (2006)Full Document 

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AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of August 2, 2006, by and among: APPLIED MICRO CIRCUITS CORPORATION, a Delaware corporation (“Parent”); QUASAR ACQUISITION CORPORATION, a Delaware corporation and a wholly owned subsidiary of Parent (“Merger Sub”); QUAKE TECHNOLOGIES, INC., a Delaware corporation (the “Company”); and DANIEL TREPANIER and THE VENGROWTH II INVESTMENT FUND INC., as the Stockholders’ Representatives (the “Stockholders’ Representatives”). Capitalized terms used but not defined in this Agreement are defined in Exhibit A.

RECITALS

WHEREAS, Parent, Merger Sub and the Company intend to effect a merger of Merger Sub into the Company (the “Merger”) in accordance with this Agreement and the Delaware General Corporation Law (the “DGCL”). Upon consummation of the Merger, Merger Sub will cease to exist, and the Company will become a wholly owned subsidiary of Parent.

WHEREAS, this Agreement has been approved by the respective boards of directors of Parent, Merger Sub and the Company and has been approved by Parent, as the sole stockholder of Merger Sub.

WHEREAS, simultaneously with the execution of this Agreement, the Company shall obtain the adoption of this Agreement and the approval of the transactions contemplated hereby, including (i) the escrow and indemnification obligations of the stockholders and the deposit of cash equal to the Escrow Amount into an escrow fund; and (ii) the appointment of Daniel Trepanier and The VenGrowth II Investment Fund Inc. as the Stockholders’ Representatives, pursuant to an Action by Written Consent in the form attached hereto as Exhibit B (the “Stockholder Written Consent”), signed by holders of at least (a) a majority of the issued and outstanding shares of Capital Stock, and (b) 75% of the issued and outstanding shares of Preferred Stock (on an as-converted basis and including for such purposes shares of Voting Common Stock issued upon conversion of Preferred Stock on or prior to February 9, 2004) in accordance with applicable Legal Requirements and the Company Constituent Documents.

NOW, THEREFORE, in consideration of the foregoing and the respective covenants, agreements and representations and warranties set forth herein, the parties to this Agreement, intending to be legally bound, agree as follows:

ARTICLE 1.

THE MERGER

1.1 Merger of Merger Sub into the Company. Upon the terms and subject to the conditions set forth in this Agreement, at the Effective Time (as defined in Section 1.3), Merger Sub shall be merged with and into the Company, and the separate existence of Merger Sub shall cease. The Company will continue as the surviving corporation in the Merger (the “Surviving Corporation”) and shall continue its existence under the laws of Delaware.

 

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1.2 Effect of the Merger. The Merger shall have the effects set forth in this Agreement and in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges, powers and franchises of Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities, obligations, restrictions, disabilities and duties of Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and duties of the Surviving Corporation.

1.3 Closing; Effective Time. The consummation of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Paul, Hastings, Janofsky & Walker LLP, 3579 Valley Centre Drive, San Diego, CA 92130 at 10:00 a.m. Pacific Time on a date to be designated by Parent after the date on which the last of the conditions set forth in Article 6 and Article 7 has been satisfied or waived in writing (except for conditions which in accordance with their terms must be satisfied at the Closing) or at such other date and time as the parties may mutually agree. The date on which the Closing actually takes place is referred to in this Agreement as the “Closing Date.” Subject to the provisions of this Agreement, a certificate of merger satisfying the applicable requirements of the DGCL and in the form of Exhibit C (the “Certificate of Merger”) shall be duly executed by the Company and Merger Sub and concurrently with the Closing delivered to the Secretary of State of the State of Delaware for filing. The Merger shall become effective upon the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware (the “Effective Time”).

1.4 Certificate of Incorporation and Bylaws; Directors and Officers. Unless otherwise mutually determined by Parent and the Company prior to the Effective Time:

(a) the Certificate of Incorporation of the Company as of immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation;

(b) the Bylaws of the Company as of immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation after the Effective Time; and

(c) the directors and officers of Merger Sub as of immediately prior to the Effective Time shall be appointed as and shall be the directors and officers of the Surviving Corporation as of immediately after the Effective Time.

1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger and without any further action on the part of Parent, Merger Sub, the Company or any stockholder of the Company:

(a) Series C Preferred. Each share of Series C Preferred Stock, other than Excluded Shares, outstanding as of immediately prior to the Effective Time shall be converted into the right to receive:

(i) at the Effective Time as provided in Section 1.8, an amount in cash, without interest, equal to the sum of (A) $0.7488 plus (B) the product of (1) the Voting Common Per Share Closing Consideration, multiplied by (2) the number of shares of Voting Common Stock issuable upon conversion of one share of Series C Preferred Stock outstanding as of immediately prior to the Effective Time (the sum of clauses “(A)” and “(B)”, the “Series C Per Share Closing Consideration”), minus (C) the Series C Per Share Closing Escrow Amount; and

 

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(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Series C Per Share Closing Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Reduction Amount, divided by (2) the total number of shares of Series C Preferred Stock outstanding as of immediately prior to the Effective Time.

(b) Series B Preferred. Each share of Series B Preferred Stock, other than any shares of Series B Preferred Stock held by Cisco or MDV and other than Excluded Shares, outstanding as of immediately prior to the Effective Time shall be converted into the right to receive:

(i) at the Effective Time as provided in Section 1.8, an amount in cash, without interest, equal to (A) $2.14, minus (B) the Series B Per Share Closing Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Series B Per Share Closing Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Deduction Amount, divided by (2) the total number of shares of Series B Preferred Stock other than any shares of Series B Preferred Stock held by Cisco or MDV and outstanding as of immediately prior to the Effective Time.

(c) Series B Preferred Held by Cisco. Each share of Series B Preferred Stock held by Cisco other than Excluded Shares, outstanding as of immediately prior to the Effective Time shall be converted into the right to receive:

(i) at the Effective Time as provided in Section 1.8, an amount in cash, without interest, equal to (A) $2.14, minus, (B) the quotient obtained by dividing (1) $400,000, by (2) the total number of shares of Series B Preferred Stock held by Cisco and outstanding as of immediately prior to the Effective Time (the amount obtained by subtracting clause “(B)” from clause “(A)” referred to herein as the “Cisco Series B Per Share Closing Consideration”), and minus (B) the Cisco Series B Per Share Closing Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Cisco Series B Per Share Closing Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Deduction Amount, divided by (2) the total number of shares of Series B Preferred Stock held by Cisco and outstanding as of immediately prior to the Effective Time.

For certainty, the sum deducted from the consideration that would otherwise be payable to Cisco pursuant to Section 1.5(b) above shall be contributed and applied, in part, to the payment of the consideration payable to the holders of Vested Non-Voting Common Stock Options pursuant to Section 1.6 below.

 

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(d) Series B Preferred Held by MDV. Each share of Series B Preferred Stock held by MDV other than Excluded Shares outstanding as of immediately prior to the Effective Time shall be converted into the right to receive:

(i) at the Effective Time as provided in Section 1.8, an amount in cash, without interest, equal to (A) $2.14, minus, (B) the quotient obtained by dividing (1) $750,000, by (2) the total number of shares of Series B Preferred Stock held by MDV and outstanding as of immediately prior to the Effective Time (the amount obtained by subtracting clause “(B)” from clause “(A)” referred to herein as the “MDV Series B Per Share Closing Consideration”), and minus (B) the MDV Series B Per Share Closing Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the MDV Series B Per Share Closing Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Deduction Amount, divided by (2) the total number of shares of Series B Preferred Stock held by MDV and outstanding as of immediately prior to the Effective Time.

For certainty, the sum deducted from the consideration that would otherwise be payable to MDV pursuant to Section 1.5(b) above shall be contributed and applied, in part, to the payment of the consideration payable to the holders of Vested Non-Voting Common Stock Options pursuant to Section 1.6 below.

(e) Series A Preferred. Each share of Series A Preferred Stock, other than Excluded Shares, outstanding as of immediately prior to the Effective Time shall be converted into the right to receive:

(i) at the Effective Time as provided in Section 1.8, an amount in cash, without interest, equal to (A) $1.81822, minus (B) the Series A Per Share Closing Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Series A Per Share Closing Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Deduction Amount, divided by (2) the total number of shares of Series A Preferred Stock outstanding as of immediately prior to the Effective Time.

(f) Voting Common Stock. Each share of Voting Common Stock, other than shares of Voting Common Stock held by any of the Founders and other than Excluded Shares, outstanding as of immediately prior to the Effective Time shall be converted into the right to receive:

(i) at the Effective Time as provided in Section 1.8, an amount in cash, without interest, equal to (A) the Voting Common Per Share Closing Consideration, minus (B) the Voting Common Per Share Closing Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Voting Common Per Share Closing Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Deduction Amount, divided by (2) the total number of shares of Voting Common Stock other than shares of Voting Common Stock held by any of the Founders and outstanding as of immediately prior to the Effective Time.

 

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(g) Voting Common Stock Held by Founders. Each share of Voting Common Stock held by any of the Founders other than Excluded Shares, outstanding as of immediately prior to the Effective Time shall be converted into the right to receive

(i) at the Effective Time as provided in Section 1.8, an amount in cash, without interest, equal to (A) the Voting Common Per Share Closing Consideration, minus (B) the quotient obtained by dividing (1) the Founder Contributed Amount, by (2) the total number of shares of Voting Common Stock held in the aggregate by the Founders and outstanding as of immediately prior to the Effective Time (the amount obtained by subtracting clause “(B)” from clause “(A)” referred to herein as the “Founder Voting Common Per Share Closing Consideration”), and minus (B) the Founder Voting Common Per Share Closing Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Founder Voting Common Per Share Closing Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Deduction Amount, divided by (2) the total number of shares of Voting Common Stock held by the Founders and outstanding as of immediately prior to the Effective Time.

(iii) Notwithstanding the foregoing, the provisions of this Section 1.5(g) shall only apply: (i) to those Founders that shall have, on or prior to that date that is at least three (3) Business Days prior to the Closing Date, executed and delivered an agreement pursuant to which the Founders consent to the contribution of consideration pursuant to this Section 1.5(g) (an “Accession Agreement”) in favour of the Parent and the Company and in a form acceptable to the Parent, in its sole discretion, and (ii) only to the maximum amount of the Founder Contribution subject to and set forth in the Accession Agreements to be delivered by the Founders in favour of the Parent and the Company pursuant hereto. In the event that any of Justin Chang, Petre Popescu or Sorin Voinegescu do not deliver an Accession Agreement in favour of the Company and the Parent prior to Closing in accordance with the provisions hereof: (i) such individual shall not be, and shall not be deemed to be, a “Founder” for purposes of this Agreement; (ii) the Founder Contributed Amount shall not include any consideration that would otherwise be payable to such individual pursuant to Section 1.5(f) above; and (iii) such individual’s entitlement to consideration payable hereunder in respect of the shares of Voting Common Stock held by such individual shall be determined solely in accordance with the terms and conditions of Section 1.5(f) above.

For certainty, the sum, if any, deducted from the consideration that would otherwise be payable to the Founders pursuant to Section 1.5(f) above shall be contributed and applied, in part, to the payment of the consideration payable to the holders of Vested Non-Voting Common Stock Options pursuant to Section 1.6 below.

 

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(h) each share of the common stock of Merger Sub outstanding as of immediately prior to the Effective Time shall be converted into one share of common stock of the Surviving Corporation; and

(i) each share of Voting Common Stock held by Parent or its Affiliates and each share of Capital Stock held by the Company as treasury stock immediately prior to the Effective Time shall be cancelled and extinguished and shall cease to exist, and no consideration shall be delivered in exchange therefore.

1.6 Company Options.

(a) Vested Voting Common Stock Options. Prior to the Effective Time, the board of directors of the Company shall approve all resolutions required in order to provide that, at the Effective Time, each Vested Voting Common Stock Option shall represent solely the right to receive, for each share of Voting Common Stock for which such Vested Voting Common Stock Option could have been exercised as of immediately prior to the Effective Time:

(i) at the Effective Time as provided in Section 1.8, an amount in cash equal to (A) (1) the Voting Common Per Share Closing Consideration, minus (2) an amount equal to the per share exercise price of such Vested Voting Common Stock Option as of immediately prior to the Effective Time, minus (B) the Vested Voting Common Stock Option Per Share Closing Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Vested Voting Common Stock Option Per Share Closing Escrow Amount, (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Reduction Amount, divided by (2) the total number of shares of Voting Common Stock issuable upon the exercise of all Vested Voting Common Stock Options outstanding as of immediately prior to the Effective Time.

(b) Vested Non-Voting Common Stock Options. Prior to the Effective Time, the board of directors of the Company shall approve all resolutions required in order to provide that, at the Effective Time, each Vested Non-Voting Common Stock Option shall represent solely the right to receive, for each share of Non-Voting Common Stock for which such Vested Non-Voting Common Stock Option could have been exercised as of immediately prior to the Effective Time:

(i) at the Effective Time as provided in Section 1.8, an amount in cash equal to (A) (1) the Vested Non-Voting Common Stock Option Per Share Closing Consideration, minus (2) an amount equal to the per share exercise price of such Vested Non-Voting Common Stock Option as of immediately prior to the Effective Time, minus (B) the Vested Non-Voting Common Stock Option Per Share Escrow Amount; and

(ii) upon release pursuant to the terms of the Escrow Agreement, (A) the Vested Non-Voting Common Stock Option Per Share Escrow Amount (plus interest to the extent set forth in the Escrow Agreement), minus (B) (1) the applicable Pro Rata Deduction Amount, divided by (2) the total number of shares of Non-Voting Common Stock issuable upon the exercise of all Vested Non-Voting Common Stock Options outstanding as of immediately prior to the Effective Time.

 

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(c) Unvested Stock Options. Prior to the Effective Time, the board of directors of the Company shall approve all resolutions required in order to provide that, at the Effective Time, each Unvested Stock Option that is then outstanding under the Company Stock Option Plan shall not be entitled to share in any consideration payable to holders of Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock, Voting Common Stock, Vested Voting Common Stock Options, or Vested Non-Voting Common Stock Options pursuant hereto and shall be assumed by Parent in accordance with the terms of the Company Stock Option Plan and the stock option agreements by which such Unvested Stock Option is evidenced. In accordance with the foregoing, all rights with respect to Voting Common Stock under each Unvested Stock Option then outstanding shall be converted into and become rights with respect to Parent Common Stock, and Parent shall assume each such Unvested Stock Option in accordance with the terms and conditions (as in effect as of the date of this Agreement) of the Company Stock Option Plan and the terms and conditions of the stock option agreement by which it is evidenced. From and after the Effective Time, (i) each Unvested Stock Option assumed by Parent may be exercised solely for shares of Parent Common Stock; (ii) the number of shares of Parent Common Stock subject to each such Unvested Stock Option shall be equal to the number of shares of Voting Common Stock subject to such Unvested Stock Option as of immediately prior to the Effective Time multiplied by the Unvested Stock Option Exchange Ratio (as defined below), rounding down to the nearest whole share; (iii) the per share exercise price under each such Unvested Stock Option shall be adjusted by dividing the per share exercise price under such Unvested Stock Option by the Unvested Stock Option Exchange Ratio and rounding up to the nearest cent; and (iv) any restriction on the exercise of any such Unvested Stock Option shall continue in full force and effect and the term, exercisability, vesting schedule and other provisions of such Unvested Stock Option shall otherwise remain unchanged; provided, however, that each Unvested Stock Option assumed by Parent in accordance with this Section 1.6(c) shall, in accordance with its terms, be subject to further adjustment as appropriate to reflect any stock split, stock dividend, reverse stock split, reclassification, recapitalization or other similar transaction effected subsequent to the Effective Time, to the extent set forth in the Company Stock Option Plan. The term “Unvested Stock Option Exchange Ratio” shall be equal to the fraction (rounded to the third decimal point) obtained by dividing (A) the Voting Common Per Share Closing Consideration, by (B) the Parent Share Price. The term “Parent Share Price” shall be equal to the average closing sales price for one share of Parent Common Stock on The Nasdaq Global Market for the ten trading-day period ending on the last business day immediately preceding the date of this Agreement.

1.7 Closing of the Company’s Transfer Books. At the Effective Time, holders of certificates representing shares of Capital Stock that were outstanding as of immediately prior to the Effective Time shall cease to have any rights as stockholders of the Company, except the right to receive any Merger Consideration as set forth in this Agreement and the stock transfer books of the Company shall be closed with respect to all shares of such Capital Stock outstanding as of immediately prior to the Effective Time. No further transfer of any such shares of Capital Stock shall be made on such stock transfer books after the Effective Time. If, after the Effective Time, a valid certificate previously representing any shares of Capital Stock (a “Company Stock Certificate”) is presented to the Surviving Corporation or Parent, such Company Stock Certificate shall be canceled and shall be exchanged as provided in Section 1.8.

 

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1.8 Company Stock Certificates and Company Option Agreements.

(a) At the Closing, Parent shall deliver in immediately available funds to LaBarge Weinstein Professional Corporation (“LWPC”), in trust, for further distribution to the holders of Company Stock Certificates or an originally executed stock option agreement evidencing a Vested Voting Common Stock Option or a Vested Non-Voting Common Stock Option (each, an “Option Agreement”), as applicable, an amount not less than the amount necessary to make the payments for the shares of Capital Stock, Vested Voting Common Stock Options and Vested Non-Voting Common Stock Options contemplated by Section 1.5 and Section 1.6 (the “Exchange Fund”).

(b) As soon as practicable after the date hereof, the Company shall mail (i) to each registered holder of a Company Stock Certificate, a letter of transmittal in form acceptable to Parent and instructions for use in effecting the surrender of Company Stock Certificates in exchange for that portion of any Merger Consideration calculated in accordance with Section 1.5; and (ii) to each registered holder of a Vested Voting Common Stock Option and Vested Non-Voting Common Stock Option, a letter of transmittal in form acceptable to Parent and instructions for use in effecting the surrender of a Vested Voting Common Stock Option and Vested Non-Voting Common Stock Option, as applicable, in exchange for the right to receive that portion of any Merger Consideration calculated in accordance with Section 1.6. Upon surrender of a Company Stock Certificate to the Company (or if after the Effective Time, to Parent) for exchange, together with a duly executed letter of transmittal and such other documents as may be reasonably required by Parent, Parent shall direct LWPC, within two (2) Business Days of the later of (i) Effective Time and (ii) the date on which the Company actually receives the Company Stock Certificate, to deliver to the holder of such Company Stock Certificate the portion of the Exchange Fund payable as of the Closing with respect to the Capital Stock formerly represented by such Company Stock Certificate pursuant to Section 1.5. Upon surrender of an Option Agreement to the Company (or if after the Effective Time, to Parent), together with a duly executed letter of transmittal and such other documents as may be reasonably required by Parent, Parent shall direct LWPC, within two (2) Business Days of the later of (i) the Effective Time, and (ii) the date on which the Company actually receives the Option Agreement to deliver to the holder of such Vested Voting Common Stock Option or Vested Non-Voting Common Stock Option, as applicable, the portion of the Exchange Fund payable as of the Closing with respect to such Vested Voting Common Stock Option and Vested Non-Voting Common Stock Option, as applicable, pursuant to Section 1.6. LWPC shall not distribute any portion of the Exchange Fund unless and until it has received written directions from Parent. LWPC shall indemnify the Company for any claims by any holder of Capital Stock, a Vested Voting Common Stock Option or a Vested Non-Voting Common Stock Option that it did not properly receive distributions of the Exchange Fund. All Company Stock Certificates and Option Agreements surrendered pursuant to this Section 1.8(b) shall be canceled. Until surrendered as contemplated by this Section 1.8(b), each Company Stock Certificate and Option Agreement shall be deemed, from and after the Effective Time of the Merger, to represent only the right to receive Merger Consideration in accordance with this Agreement. No interest shall accrue or be paid on the cash payable to the holders of shares of

 

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Capital Stock, Vested Voting Common Stock Options or Vested Non-Voting Common Stock Options upon delivery of the Company Stock Certificates, Option Agreements or letters of transmittal pursuant to this Section 1.8(b) other than to the extent set forth in the Escrow Agreement.

(c) Neither Parent nor the Surviving Corporation shall be liable to any holder or former holder of shares of Capital Stock, Vested Voting Common Stock Options or Vested Non-Voting Common Stock Options or to any other Person with respect to any portion of the Exchange Fund properly delivered to any public official as required by any applicable abandoned property law, escheat law or similar Legal Requirement.

(d) Notwithstanding subsection (a) above, in the event any Company Stock Certificate or Option Agreement has been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Company Stock Certificate or Option Agreement, as applicable, to be lost, stolen or destroyed and, if required by Parent or the Company, agreeing to indemnify Parent, the Surviving Corporation or the Company against any claim that may be made against Parent, the Surviving Corporation or the Company with respect to such Company Stock Certificate or Option Agreement, as applicable, the Parent or the Company, as applicable, will issue in exchange for such lost, stolen or destroyed Company Stock Certificate or Option Agreement, as applicable, the consideration otherwise payable pursuant to this Article 1.

(e) Any portion of the Exchange Fund that remains undistributed to holders of Company Stock Certificates and Vested Voting Common Stock Options as of the date 270 days after the date on which the Effective Time occurs shall be delivered to the Surviving Corporation upon demand, and any holders of Company Stock Certificates, Vested Voting Common Stock Options or Vested Non-Voting Common Stock Options who have not theretofore surrendered their Company Stock Certificates, Vested Voting Common Stock Options or Vested Non-Voting Common Stock Options in accordance with this Section 1.8 shall thereafter look only to the Surviving Corporation for satisfaction of their claims for the Merger Consideration relating thereto. Notwithstanding the foregoing, Parent hereby acknowledges and agrees that any withholding by Parent, the Stockholders’ Representatives, the Escrow Agent or LWPC pursuant hereto of applicable Taxes in respect of amounts payable hereunder or under the Escrow Agreement to the Canadian resident holders of Capital Stock, Vested Voting Common Stock Options and Vested Non-Voting Common Stock Options shall be calculated taking into account the deduction available for such holders under Section 110(1)(d) of the Income Tax Act (Canada).

(f) Each of the Company, Parent and the Surviving Corporation shall be entitled to deduct and withhold from any consideration payable or otherwise deliverable to any Securityholder pursuant to this Agreement such amounts as Parent or the Surviving Corporation may be required to deduct or withhold therefrom under the Code or under any provision of state, local or foreign tax law. LWPC shall deduct such amounts as Parent shall direct prior to any distributions to any holder of a Company Stock Certificate or Stock Option Agreement. To the extent such amounts are so deducted or withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the Person to whom such amount would otherwise have been paid. Notwithstanding the foregoing, Parent hereby

 

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acknowledges and agrees that any withholding by Parent, the Stockholders’ Representatives, the Escrow Agent or LWPC pursuant hereto of applicable Taxes in respect of amounts payable hereunder or under the Escrow Agreement to the Canadian resident holders of Capital Stock, Vested Voting Common Stock Options and Vested Non-Voting Common Stock Options shall be calculated taking into account the deduction available for such holders under Section 110(1)(d) of the Income Tax Act (Canada).

(g) The Company will calculate the proper amount of Taxes required to be withheld for each holder of Capital Stock, Vested Voting Common Stock Options, Vested Non-Voting Common Stock Options and/or required to be paid by the Surviving Corporation with respect to each distribution of the Merger Consideration, which such Taxes shall include, without limitation, full FICA, full FUTA, full Canada Pension Plan and for Quebec Pension Plan, full Employment Insurance, federal income taxes and any applicable state and provincial income taxes. Such withholding information shall be certified by the Company and be provided to Parent at least five business days prior to the Closing to facilitate the distributions by LWPC to holders of Capital Stock, Vested Voting Common Stock Options and Vested Non-Voting Common Stock Options required by this Agreement and shall be subject to the review and approval of Parent in all respects. The Company shall provide Parent and its Representatives with reasonable access to all relevant information and documentation relating to the Tax withholding calculation and the preparation thereof, including, without limitation, access to supporting detail and schedules. LWPC shall pay to the Parent or the Surviving Company all such amounts required to remit such Tax withholdings on a timely basis to the relevant taxing authorities, and upon receipt thereof Parent shall or shall cause the Surviving Corporation to remit such Tax withholdings on a timely basis to the relevant taxing authorities. Notwithstanding the foregoing, Parent hereby acknowledges and agrees that any withholding by Parent, the Stockholders’ Representatives, the Escrow Agent or LWPC pursuant hereto of applicable Taxes in respect of amounts payable hereunder or under the Escrow Agreement to Canadian resident holders of Capital Stock, Vested Voting Common Stock Options and Vested Non-Voting Common Stock Options shall be calculated taking into account the deduction available for such holders under Section 110(1)(d) of the Income Tax Act (Canada).

1.9 Appraisal Rights. Notwithstanding anything in this Agreement to the contrary, shares of Capital Stock held by a holder who is entitled to demand and properly demands appraisal of such shares pursuant to, and who complies in all respects with, the provisions of Section 262 of the DGCL (the “Appraisal Shares”) shall not be converted into the right to receive any Merger Consideration. If, after the Effective Time, such holder withdraws, fails to perfect or loses any such right to payment, such holder’s Appraisal Shares shall be treated as having been converted as of the Effective Time into the right to receive Merger Consideration, without interest, such holder would have otherwise been entitled to receive in accordance with Section 1.5 of this Agreement. At the Effective Time, any holder of Appraisal Shares shall cease to have any rights with respect thereto, except the rights provided in Section 262 of the DGCL or any respective successor provision to such provision and as provided in the immediately preceding sentence. The Company shall give prompt notice to Parent of any demands received by the Company for appraisal of shares of Capital Stock and the opportunity to participate in all negotiations and proceedings with respect to any such demand. Except to the extent otherwise required by the DGCL, the Company shall not make any payment or settlement offer prior to the Effective Time with respect to any such demand unless Parent shall have consented in writing to such payment or settlement offer.

 

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1.10 Escrow Account. Upon the Closing, Parent shall withhold the Total Escrow Amount and deliver such amounts to the La Salle Bank National Association, a national banking association (the “Escrow Agent”), to be held by the Escrow Agent as collateral (such amount, along with any interest earned thereon, the Escrow Fund”) and partial security for the rights of the Indemnitees under Article 9 hereof. The Escrow Fund shall be held pursuant to the provisions of an escrow agreement substantially in the form of Exhibit D (the “Escrow Agreement”). Subject to the next sentence of this Section 1.10, the Escrow Fund shall be held as an indemnification fund by the Escrow Agent until 11:59 p.m. Pacific Time on the date that is the first-year anniversary of the Closing Date (the “Escrow Period”). In the event any Indemnitee has made a claim under Article 9 prior to the end of the Escrow Period, then, in accordance with and subject to the terms and conditions of the Escrow Agreement, the Escrow Period shall continue in respect of that portion of the Escrow Fund subject to the claim (and the Escrow Agent will continue to hold such amount of the Escrow Fund in escrow) until such claim is fully and finally resolved. In the event that this Agreement is approved and adopted by the Company’s stockholders, then all such stockholders shall, without any further act of any Company stockholder, be deemed to have consented to and approved (i) the use of the Escrow Fund as collateral to secure the rights of the Indemnitees under Article 9 hereof in the manner set forth herein and in the Escrow Agreement; and (ii) the appointment of the Stockholders’ Representatives as the representatives under the Escrow Agreement of the Persons receiving Merger Consideration under this Agreement and as the attorney-in-fact and agent for and on behalf of each such Person (other than holders of Appraisal Shares).

1.11 Further Action. If, at any time after the Effective Time, any further action is determined by Parent to be necessary or desirable to carry out the purposes of this Agreement and any Related Agreement or to vest the Surviving Corporation or Parent with full right, title and possession of and to all rights and property of Merger Sub and the Company effective as of the Effective Time, the officers and directors of the Surviving Corporation and Parent shall be fully authorized (in the name of Merger Sub, in the name of the Company and otherwise) to take any such action effective as of the Effective Time.

ARTICLE 2.

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

Except as set forth on the Company Disclosure Schedule, which shall qualify the representations and warranties of the Company set forth in this Article 2 and which shall be organized in Parts corresponding to the numbering in this Article 2 with disclosures in each Part specifically corresponding to or cross-referencing another Part of the Company Disclosure Schedule specifically corresponding to a particular Section and Subsection of this Article 2, the Company represents and warrants as of the date of this Agreement, and as of the Closing Date, to and for the benefit of the Indemnitees, as follows:

 

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2.1 Due Organization; Etc.

(a) Each of the Acquired Corporations is a corporation duly organized, validly existing and in good standing under the laws of the respective jurisdictions of incorporation and has all necessary power and authority: (i) to conduct its business in the manner in which its business is currently being conducted; (ii) to own and use its assets in the manner in which its assets are currently owned and used; and (iii) to perform its obligations under all Company Contracts to which it is a party.

(b) The Acquired Corporations have not conducted any business under or otherwise used, for any purpose or in any jurisdiction, any fictitious name, assumed name, trade name or other name other than the name under which each is incorporated or amalgamated.

(c) The Acquired Corporations are not and within the last two years have not been required to be qualified, authorized, registered or licensed to do business as a foreign corporation in any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the Company Disclosure Schedule. Each of the Acquired Corporations is in good standing as a foreign corporation in each of the jurisdictions identified in Part 2.1(c) of the Company Disclosure Schedule.

(d) Part 2.1(d) of the Company Disclosure Schedule accurately sets forth (i) the names of the members of the board of directors of each of the Acquired Corporations; (ii) the names of the members of each committee of the board of directors of each of the Acquired Corporations; and (iii) the names and titles of the officers of each of the Acquired Corporations.

(e) Except as set forth on Part 2.1(e) of the Company Disclosure Schedule, none of the Acquired Corporations (i) own any controlling interest in any Entity, or (ii) own, beneficially or otherwise, any shares or other securities of, or any direct or indirect equity or other financial interest in, any Entity. No Acquired Corporation has agreed or is obligated to make any future investment in or capital contribution to any Entity. No Acquired Corporation has guaranteed or is responsible or liable for any obligation of any of the Entities in which it owns or has owned any equity or other financial interest. None of the Acquired Corporations or any of their respective stockholders has ever approved, or commenced any proceeding or made any election contemplating, the dissolution or liquidation of any Acquired Corporation or the winding up or cessation of any Acquired Corporation’s business or affairs.

2.2 Certificate of Incorporation and Bylaws; Records. The Company has delivered to Parent accurate and complete copies as existing as of the date hereof of: (a) the Certificate of Incorporation and Bylaws, including all amendments thereto, of each Acquired Corporation; (b) the stock records of each Acquired Corporation; and (c) the minutes and other records of the meetings and other proceedings (including any actions taken by written consent or otherwise without a meeting) of the stockholders of each Acquired Corporation, the board of directors of each Acquired Corporation and all committees of the board of directors of each Acquired Corporation (the items described in (a), (b) and (c) above, collectively, the “Company Constituent Documents”). There have been no formal meetings or other proceedings of the stockholders of any of the Acquired Corporations, the board of directors of any of the Acquired

 

12.


Corporations or any committee of the board of directors of any of the Acquired Corporations that are not fully reflected in the Company Constituent Documents. There has not been any violation of the Company Constituent Documents by any of the Acquired Corporations, and none of the Acquired Corporations has taken any action that is inconsistent in any material respect with the Company Constituent Documents. The books of account, stock records, minute books and other records of each of the Acquired Corporations are accurate, up-to-date and complete in all material respects, and have been maintained in accordance with Legal Requirements and prudent business practices. All the records of each of the Acquired Corporations are in the actual possession and direct control of the respective Acquired Corporation. Each of the Acquired Corporations has in place, and has at all times had in place, an adequate and appropriate system of internal controls which is reasonably comprehensive as to systems of internal controls customarily maintained by comparable Entities.

2.3 Capitalization, Etc.

(a) The authorized capital stock of the Company consists of (i) 66,773,284 shares of Voting Common Stock, (ii) 4,000,000 shares of Non-Voting Common Stock, and (iii) 35,403,594 shares of preferred stock, of which 7,356,757 shares have been designated as Series A Preferred Stock, 7,347,051 shares have been designated as Series B Preferred Stock and 20,699,786 shares have been designated as Series C Preferred Stock. As of the date of this Agreement, there are issued and outstanding (i) 23,197,176 shares of Voting Common Stock; (ii) no shares of Non-Voting Common Stock, (iii) 7,356,757 shares of Series A Preferred Stock; (iii) 7,347,051 shares of Series B Preferred Stock; and (iv) 7,345,086 shares of Series C Preferred Stock. Each share of Series A Preferred Stock is convertible into one (1) share of Voting Common Stock, each share of Series B Preferred Stock is convertible into one (1) share of Voting Common Stock and each share of Series C Preferred Stock is convertible into one (1) share of Voting Common Stock. All of the outstanding shares of Capital Stock have been duly authorized and validly issued, and are fully paid and non-assessable. All outstanding shares of Capital Stock have been issued and granted in compliance with (i) all applicable securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in applicable Contracts. The rights, preferences and privileges of the Preferred Stock are as set forth in the Certificate of Incorporation of the Company. Part 2.3(a) of the Company Disclosure Schedule provides as of the date of this Agreement, an accurate and complete description of the terms of each repurchase option which is held by the Company and to which any shares of Voting Common Stock and Non-Voting Common Stock is subject. None of the outstanding shares of Capital Stock is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right (whether pursuant to the Certificate of Incorporation or Bylaws of the Company or any Company Contract or any statute to which any of the Acquired Corporations is subject) and there is no Company Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging, transferring or otherwise disposing of (or granting any option or similar right with respect to), any shares of Capital Stock. None of the Acquired Corporations is under any obligation, or is bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding shares of capital stock of the Acquired Corporations.

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