EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
STEELCLOUD, INC.,
SCLD ACQUISITION CORP.
AND
V-ONE CORPORATION
DATED AS OF AUGUST 11, 2004
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TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND CONSTRUCTION
1.1 Certain Definitions 2
1.2 Additional Definitions 7
1.3 Terms Generally 8
ARTICLE II THE MERGER AND RELATED MATTERS
2.1 The Merger 9
2.2 Closing 10
2.3 Conversion of Securities 10
2.4 Exchange of Shares 12
2.5 Dissenting Shares 14
ARTICLE III CERTAIN ACTIONS
3.1 Stockholders Meetings 14
3.2 Joint Proxy Statement/Prospectus; S-4; Other Commission Filings 15
3.3 Identification of Rule 145 Affiliates 16
3.4 State Takeover Statutes 16
3.5 Reasonable Best Efforts 16
3.6 Employee Matters 17
3.7 Recapitalization 17
3.8 Note Cancellation 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
4.1 Organization and Qualification 17
4.2 Authorization and Validity of Agreement 18
4.3 Capitalization 18
4.4 Reports and Financial Statements 20
4.5 No Approvals or Notices Required; No Conflict with Instruments 20
4.6 Assets; Investment Securities 21
4.7 Absence of Certain Changes or Events 22
4.8 S-4; Joint Proxy Statement/Prospectus 22
4.9 Legal Proceedings 22
4.10 Licenses; Compliance with Regulatory Requirements 22
4.11 Brokers or Finders 23
4.12 Tax Matters 23
4.13 Employee Matters 25
4.14 Company Fairness Opinion 26
4.15 Recommendation of the Company Board 26
4.16 Vote and Approval Required 26
4.17 Patents, Trademarks and Other Rights 27
4.18 Certain Agreements, Affiliate Transactions and Insurance 31
4.19 No Investment Company 32
4.20 Takeover Statutes 32
4.21 Intentionally Omitted 33
4.22 Provided Information 33
4.23 Documents Made Available 33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
5.1 Organization and Qualification 33
5.2 Authorization and Validity of Agreement 34
5.3 Capitalization 34
5.4 No Approvals or Notices Required; No Conflict with Instruments 34
ii
5.5 S-4; Joint Proxy Statement/Prospectus 35
5.6 Report and Financial Statements 35
5.7 Absence of Certain Changes or Events 36
5.8 Brokers or Finders 36
5.9 Recommendation of the Parent Board 36
5.10 Legal Proceedings 36
5.11 Vote Required 36
5.12 Parent Fairness Opinion 36
5.13 Licenses; Compliance with Regulatory Requirements 36
5.14 Tax Matters 37
5.15 Patents, Trademarks and Other Rights 37
5.16 Provided Information 37
ARTICLE VI ADDITIONAL COVENANTS AND AGREEMENTS
6.1 Access to Information Concerning Properties and Records 38
6.2 Confidentiality 38
6.3 Public Announcements 39
6.4 Conduct of the Company's Business Pending the Effective Time 39
6.5 No Solicitation 41
6.6 Expenses 43
6.7 Actions by Merger Sub 43
6.8 Listing 43
6.9 Defense of Litigation 43
6.10 Indemnification of Directors and Officers; Exculpation and Insurance 43
6.11 Non-solicitation of Employees 44
6.12 Tax-free Reorganization 44
6.13 Notice by Parent 44
6.14 Company Monthly Budget 44
6.15 Tax Treatment Disclosure 45
ARTICLE VII CONDITIONS PRECEDENT
7.1 Conditions Precedent to the Obligations of Parent, Merger Sub and
the Company 45
7.2 Conditions Precedent to the Obligations of Parent and Merger Sub 46
7.3 Conditions Precedent to the Obligations of the Company 48
ARTICLE VIII TERMINATION
8.1 Termination by Mutual Consent 49
8.2 Termination by Either Parent or the Company 49
8.3 Termination by the Company 50
8.4 Termination by Parent 50
8.5 Effect of Termination and Abandonment 51
ARTICLE IX MISCELLANEOUS
9.1 No Waiver of Representations, Warranties, Covenants and
Agreements; Non-survival of Representations and Warranties 51
9.2 Notices 52
9.3 Entire Agreement 52
9.4 Assignment; Binding Effect; Benefit 52
9.5 Amendment 53
9.6 Extension; Waiver 53
9.7 Headings 53
9.8 Counterparts 53
9.9 Governing Law and Venue; Waiver of Jury Trial 53
9.10 Joint Participation in Drafting this Agreement 54
9.11 Severability 54
9.12 Enforcement 54
iii
EXHIBITS
Exhibit 2.1(a) Form of Certificate of Merger
Exhibit 2.3(a)(ii) Form of Cancellation Agreement for Series C Preferred
Stock Warrants
Exhibit 2.3(a)(iii) Form of Cancellation Agreement for Series D Convertible
Preferred Stock Warrants
Exhibit 2.3(b) Form of Certificate of Amendment
Exhibit 3.3 Form of Rule 145 Agreement
SCHEDULES
Company Disclosure Letter
Parent Disclosure Letter
iv
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made as of
this 11th day of August, 2004, by and among SteelCloud, Inc., a company
organized under the laws of the Commonwealth of Virginia ("PARENT"), SCLD
Acquisition Corp., a Delaware corporation ("MERGER SUB"), and V-ONE Corporation,
a Delaware corporation (the "COMPANY").
WHEREAS, the parties are entering into this Agreement to provide for
the terms and conditions upon which the Company will be acquired by Parent by
means of a merger of Merger Sub, a newly formed, direct wholly owned subsidiary
of Parent, with and into the Company (the "MERGER");
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, in the Merger, all of the issued and outstanding shares of the Common
Stock, par value $.001 per share, of the Company ("COMPANY COMMON STOCK"), will
be converted into the right to receive that number of shares of the Common
Stock, $.001 par value per share, of Parent ("PARENT COMMON Stock"), as
determined pursuant to the Exchange Ratio (as defined hereinafter), and
five-year warrants to purchase Parent Common Stock ("COMMON PARENT WARRANTS") as
provided herein;
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, in the Merger, all of the issued and outstanding shares of Series C
Preferred Stock, par value $.001 per share, of the Company ("SERIES C
PREFERRED") will be converted into the right to receive Parent Common Stock and
five-year warrants to purchase Parent Common Stock ("SERIES C PARENT WARRANTS")
as provided herein;
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, in the Merger, all of the issued and outstanding shares of Series D
Preferred Stock, par value $.001 per share, of the Company ("SERIES D PREFERRED"
and together with Series C Preferred, the "COMPANY PREFERRED STOCK") will be
converted into the right to receive Parent Common Stock and five-year warrants
to purchase Parent Common Stock ("SERIES D PARENT Warrants") as provided herein;
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, in the Merger, all of the outstanding 7% notes due February 27, 2009
of the Company in an aggregate unpaid principal and accrued interest amount as
of the date hereof of $1,222,167 (the "COMPANY NOTES") will be converted into
the right to receive Parent Common Stock and five-year warrants to purchase
Parent Common Stock ("NOTE PARENT WARRANTS" and together with the Common Parent
Warrants, Series C Parent Warrants and Series D Parent Warrants, the "PARENT
WARRANTS") as provided herein;
WHEREAS, pursuant to the terms and subject to the conditions of this
Agreement, in the Merger, all of the outstanding options, including the Company
Plan Stock Options, (the "COMPANY STOCK OPTIONS"), and all of the outstanding
warrants of the Company, other than those warrants held by holders of Company
Preferred Stock and Company Notes, each of which shall be cancelled pursuant to
this Agreement (the "COMPANY WARRANTS" and together with the Company Stock
Options, the "COMPANY DERIVATIVE SECURITIES"), to purchase Company Common Stock
shall be exchanged for options or warrants, as applicable, to purchase Parent
Common Stock (the "PARENT DERIVATIVE Securities"), as provided herein; and
WHEREAS, the parties hereto intend that the Merger qualify as a
tax-free "reorganization" under Section 368(a) of the Code (as defined
hereinafter).
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 CERTAIN DEFINITIONS
As used in this Agreement, the following terms shall have the following meanings
unless the context otherwise requires:
An "AFFILIATE" of any Person shall mean any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with, such Person. A Person shall be deemed to "control," be "controlled by" or
be "under common control with" any other Person if such other Person possesses,
directly or indirectly, power to direct or cause the direction of the management
or policies of such Person whether through the ownership of voting securities or
partnership interests, by contract or otherwise. Notwithstanding the foregoing,
for purposes of this Agreement, neither the Company nor any of its Affiliates
shall be deemed to be an Affiliate of Parent, any Controlling Party of Parent or
any of their respective Affiliates, and none of Parent, any Controlling Party of
Parent nor any of their respective Affiliates shall be deemed to be an Affiliate
of the Company or any of its other Affiliates.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
all Exhibits and Schedules hereto.
"ALTERNATIVE PROPOSAL" shall mean (i) any proposal (whether or not
in writing and whether or not delivered to the Company's stockholders
generally), other than as contemplated by this Agreement or otherwise proposed
by Parent or its Affiliates, regarding (A) a merger, consolidation, tender
offer, share exchange or other business combination or similar transaction
involving the Company, (B) the issuance by the Company of any equity interest in
or any voting securities of the Company which constitutes 15% or more of the
total of such equity interests or voting securities of the Company then
outstanding, (C) the acquisition in any manner, directly or indirectly, of 15%
or more of the assets of the Company, (D) the acquisition by any Person of
beneficial ownership or a right to acquire beneficial ownership of, or the
formation of any "group" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) which beneficially owns, or has the right
to acquire beneficial ownership of, 15% or more of the then outstanding shares
of any class or series of capital stock of the Company (or, in the case of an
arbitrage or similar investor with no intention of acquiring a controlling
interest in the Company, 20% or more), (E) any transaction the effect of which
would be reasonably likely to prohibit, restrict or delay the consummation of
the Merger or any of the other transactions contemplated by this Agreement or
(F) an Intellectual Property Transaction; or (ii) the occurrence of any of the
transactions described in clauses (A) - (F) of (i) above or any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
"CHANGE OF CONTROL" shall mean any (i) change in the direct or
indirect record or beneficial ownership of 30% of any class or series of the
equity securities of the Company, (ii) merger, consolidation or share exchange
involving the Company, (iii) change in the composition of the board of directors
or other governing body of the Company, or (iv) an agreement to provided for any
of the foregoing.
"CHANGE OF CONTROL COVENANT" shall mean any covenant, agreement or
other provision pursuant to which the occurrence or existence of a Change of
Control would result in a violation or breach of, constitute (with or without
due notice or lapse of time or both) or permit any Person to declare a default
or event of default under, give rise to any right of termination, cancellation,
amendment, acceleration, repurchase, prepayment or repayment or to increased
payments under, give rise to or accelerate any material obligation (including
any obligation to, or to offer to, repurchase, prepay, repay or make increased
payments) or result in the loss or modification of any material right or benefit
under, or result in any Restriction or give any Person the right to obtain any
Restriction on any capital stock or other securities or ownership interests
pursuant to, or result in any Lien or give any Person the right to obtain any
Lien on any material asset pursuant to, any Contract to which the Company is or
becomes a party or to which the Company or any of its assets are or become
subject or bound.
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"CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs
pursuant to Section 2.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMMISSION" shall mean the Securities and Exchange Commission
and the staff of the Securities and Exchange Commission.
"COMPANY DISCLOSURE LETTER" shall mean the disclosure schedule,
dated as of the date of this Agreement, delivered by the Company to Parent.
"COMPANY EXPENSES" shall mean (i) the expenses of the Merger
attributable to the Company and approved and borne by Parent and (ii) the legal
and other fees and costs attributable and payable to the Company's legal counsel
Xxxxxxxxxxx & Xxxxxxxx LLP and approved and borne by Parent, which shall include
any accounts payable for services rendered prior to and not in connection with
the Merger as well as the legal fees and expenses in connection with the
completion of the transactions contemplated hereby, which such legal expenses
shall not exceed $435,000. Such Company Expenses shall not exceed $1,000,000.
"COMPANY MATERIAL ADVERSE EFFECT" shall mean (i) a Material Adverse
Effect (A) on the Company, including, without limitation, the loss of a
Significant Party as a customer or (B) following the Merger, on the Surviving
Entity and its Subsidiaries taken as a whole, or (ii) a Material Adverse Effect
on the ability of the Company to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement; it being
acknowledged that any adverse effect of $100,000 or more on the operations of
the Company during any calendar month, or the failure to receive at least
$750,000 in revenues in the Company's third fiscal quarter or the failure to
receive at least $750,000 in revenues in the Company's fourth fiscal quarter
shall be deemed a Company Material Adverse Effect.
"COMPANY NOTE INSTRUMENTS" shall mean the Note and Warrant Purchase
Agreement, dated February 27, 2004, among the Company and certain purchasers set
forth on Exhibit A thereto, and the Registration Rights Agreement, dated
February 27, 2004, among the Company and certain purchasers set forth on
Schedule I thereto.
"COMPANY PLAN STOCK OPTION" shall mean any outstanding option to
purchase shares of Company Common Stock issued by the Company pursuant to the
Company Stock Plans.
"COMPANY STOCK PLANS" shall mean the following: 2001 Employee Stock
Purchase Plan, 1998 Incentive Stock Plan, 1996 Incentive Stock Plan, 1996
Non-Statutory Stock Option Plan, and 1995 Non-Statutory Stock Option Plan, each
as amended to date and each of which shall be terminated by the Company at the
Effective Time.
"CONTRACT" shall mean any note, bond, indenture, mortgage, deed of
trust, lease, franchise, permit, authorization, license, contract, instrument,
employee benefit plan or practice, or other agreement, obligation, commitment,
arrangement or concession of any nature whatsoever, oral or written.
"CONTROL" (including the terms "controlling," "controlled by" and
"under common control with") shall have the meaning given to such term in Rule
405 under the Securities Act.
A "CONTROLLING PARTY" of any Person shall mean any other Person
which, directly or indirectly, Controls such Person.
"DGCL" shall mean the General Corporation Law of the State of
Delaware.
"EFFECTIVE TIME" shall mean the time when the Merger
of Merger Sub with and into the Company becomes effective under applicable law
as provided in Section 2.1(a).
2
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
"GAAP" shall mean generally accepted accounting principles as
accepted by the accounting profession in the United States as in effect from
time to time.
"GOVERNMENTAL ENTITY" shall mean any court, arbitrator,
administrative or other governmental department, agency, commission, authority
or instrumentality, domestic or foreign.
"XXXX-XXXXX ACT" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, and the rules and regulations thereunder.
"INDEBTEDNESS" shall mean, with respect to any Person, without
duplication (whether or not the recourse of the lender is to the whole of the
assets of such Person or only to a portion thereof), (i) every liability of such
Person (A) for borrowed money, (B) evidenced by notes, bonds, debentures or
other similar instruments (whether or not negotiable), (C) for reimbursement of
amounts drawn under letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (D) issued or assumed as the
deferred purchase price of property or services (excluding accounts payable) or
(E) relating to a capitalized lease obligation and all debt attributable to
sale/leaseback transactions of such Person; and (ii) every liability of others
of the kind described in the preceding clause (i) that such Person has
guaranteed or which is otherwise its legal liability.
"INTELLECTUAL PROPERTY" shall mean all domestic or foreign rights
in, to and concerning: (i) inventions and discoveries (whether patented,
patentable or unpatentable and whether or not reduced to practice), including
ideas, research and techniques, technical designs, and specifications (written
or otherwise), improvements, modifications, adaptations, and derivations
thereto, and patents, patent applications, inventor's certificates, and patent
disclosures, together with divisionals, continuations, continuations-in-part,
revisions, reissuances and reexaminations thereof; (ii) trademarks, service
marks, brand names, certification marks, collective marks, d/b/a's, trade dress,
logos, symbols, trade names, assumed names, fictitious names, corporate names
and other indications or indicia of origin "(registered and unregistered)",
including translations, adaptations, derivations, modifications, combinations
and renewals thereof; (iii) published and unpublished works of authorship,
whether copyrightable or not (including databases and other compilations of data
or information), copyrights therein and thereto "(registered and unregistered)",
moral rights, and rights equivalent thereto, including but not limited to, the
rights of attribution, assignation and integrity; (iv) trade secrets,
confidential and/or proprietary information (including ideas, research and
development, know-how, show-how, formulas, compositions, manufacturing and
production processes and techniques, or software, technical data, schematics,
designs, discoveries, drawings, prototypes, specifications, software or hardware
configurations, customer and supplier lists, financial information, pricing and
cost information, financial projections, and business and marketing methods
plans and proposals), collectively "Trade Secrets"; (v) computer software
(regardless of whether such computer software is the subject of a patent, patent
application, copyright and/or copyright application), including programs,
applications, source and object code, markup, scripts, user interface elements,
data bases, data, models, algorithms, flowcharts, tables and documentation
related to the foregoing; (vi) other similar tangible or intangible intellectual
property or proprietary rights, information and technology and copies and
tangible embodiments thereof (in whatever form or medium); (vii) all
applications to register, registrations, restorations, reversions and renewals
or extensions of the foregoing; (viii) internet domain names, internet protocol
addresses and address blocks; and (ix) all the goodwill associated with each of
the foregoing and symbolized thereby; and (x) all other intellectual property or
proprietary rights and claims or causes of action arising out of or related to
any infringement, misappropriation or other violation of any of the foregoing,
including the right to recover damages for any past infringement and the rights
to recover for past, present and future violations thereof.
"INTELLECTUAL PROPERTY TRANSACTION" shall mean the grant of (i) an
exclusive or non-exclusive license, an exclusive or non-exclusive sublicense, an
exclusive or non-exclusive cross-license or an exclusive or non-exclusive
grant-back to any Person engaged in the secure access solutions business or
network security solutions and service industry (including any software,
hardware or middleware provider) of any material Intellectual Property of the
Company, (ii) an assignment, an exclusive license, an exclusive cross-license,
an exclusive sublicense or an exclusive grant-back of any of the Intellectual
Property of the Company or (iii) a covenant not-to-xxx, covenant-not-to-assert,
release of claims or similar release to any Person regarding any Intellectual
Property of the Company.
3
"LEGAL PROCEEDING" shall mean any private or governmental action,
suit, complaint, arbitration, mediation, legal or administrative proceeding or
investigation.
"LIEN" shall mean any security interest, mortgage, pledge,
hypothecation, charge, claim, option, right to acquire, adverse interest,
assignment, deposit arrangement, encumbrance, restriction, lien (statutory or
other), or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement, any financing lease involving substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
"MATERIAL ADVERSE EFFECT" on any Person shall mean any circumstance,
change or effect that is or could reasonably (as determined by the Person
adversely affected by such Material Adverse Effect) be expected to be materially
adverse to the business, assets, liabilities, obligations, financial condition,
results of operations or prospects of such Person or the Company, Parent or
their respective affiliates, other than any circumstance, change or effect
relating to (i) the economy or the financial markets in general resulting in a
decrease in the Dow Xxxxx Industrial Average of forty percent (40%) or more,
(ii) the industry in which such Person and its Subsidiaries operate in general
and not specifically relating to such Person, (iii) changes in applicable law or
regulations after the date hereof or (iv) changes in GAAP or regulatory
accounting principles after the date hereof.
"MERGER" shall have the meaning specified in the preamble hereto.
"PARENT DISCLOSURE LETTER" shall mean the disclosure schedule, dated
as of the date of this Agreement, delivered by Parent to the Company.
"PARENT SEC REPORTS" shall mean all reports, schedules, statements
and other documents (including exhibits and all other information incorporated
therein) filed by Parent with the Commission on or before the date of this
Agreement.
"PERMITTED ENCUMBRANCES" shall mean the following Liens with respect
to the properties and assets of the Company: (i) Liens for taxes, assessments or
other governmental charges or levies not at the time delinquent or for which
adequate reserves in accordance with GAAP shall have been set aside on the
Company's books; (ii) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not overdue
or being contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on the
Company's books; (iii) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other forms of
governmental insurance or benefits, or to secure performance of tenders,
statutory obligations, leases and contracts (other than for borrowed money)
entered into in the ordinary course of business or to secure obligations on
surety or appeal bonds; (iv) Liens on property acquired or held by the Company
in the ordinary course of business to secure the purchase price of such property
or to secure Indebtedness incurred solely for the purpose of financing the
acquisition of such property not exceeding $50,000 individually, or $100,000 in
the aggregate; and (v) easements, restrictions and other minor defects of title
which are not , in the aggregate, material and which do not, individually or in
the aggregate, materially and adversely affect the value of or the Company's use
or occupancy of the property affected thereby.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, unincorporated organization, association, or joint
venture or a government agency, political subdivision, or instrumentality
thereof.
"RELEVANT MARKET" shall mean the Nasdaq Stock Market or if the
Parent Common Stock is not traded on the Nasdaq Stock Market, such other
securities exchange or national market system on which such stock is traded).
4
"RESTRICTION" with respect to any capital stock or other security,
shall mean any voting or other trust or agreement, option, warrant, escrow
arrangement, proxy, buy-sell agreement, power of attorney or other Contract, or
any law, rule, regulation, order, judgment or decree which, conditionally or
unconditionally: (i) grants to any Person the right to purchase or otherwise
acquire, or obligates any Person to purchase or sell or otherwise acquire,
dispose of or issue, or otherwise results in or, whether upon the occurrence of
any event or with notice or lapse of time or both or otherwise, may result in,
any Person acquiring, (A) any of such capital stock or other security; (B) any
of the proceeds of, or any distributions paid or which are or may become payable
with respect to, any of such capital stock or other security; or (C) any
interest in such capital stock or other security or any such proceeds or
distributions; (ii) restricts or, whether upon the occurrence of any event or
with notice or lapse of time or both or otherwise, may restrict the transfer or
voting of, or the exercise of any rights or the enjoyment of any benefits
arising by reason of ownership of, any such capital stock or other security or
any such proceeds or distributions; or (iii) creates or, whether upon the
occurrence of any event or with notice or lapse of time or both or otherwise,
may create a Lien or purported Lien affecting such capital stock or other
security, proceeds or distributions.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations thereunder.
"SIGNIFICANT PARTY" shall mean those Persons listed on Section 1.1
of the Company Disclosure Letter, and any Affiliate of any such Person.
"SIGNIFICANT PARTY CONTRACT" shall mean any agreement, arrangement
or Contract, whether written or oral, between the Company and any Significant
Party.
"SIGNIFICANT STOCKHOLDER" shall mean any Person known to the Company
to be the beneficial owner of 5% or more of the outstanding shares of Company
Common Stock other than Parent or any of its Affiliates.
"SPECIFIED CONTRACT" shall mean (i) any Significant Party Contract,
and (ii) any Contract of the type described in clauses (iv) and (v) of Section
4.17(a), clauses (vi), (ix), (x) and (xii) of Section 4.18(a) or in Section
4.18(b).
"SUBSIDIARY" when used with respect to any Person, shall mean any
corporation or other organization, whether incorporated or unincorporated, of
which such Person or any other Subsidiary of such Person is a general partner or
at least 50% of the securities or other interests having by their terms ordinary
voting power to elect at least 50% of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or Controlled by such Person, by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
"SURVIVING ENTITY" shall mean the Company as the surviving entity in
the Merger as provided in Section 2.1(a).
"TAX" or "TAXES" shall mean (i) any and all federal, state, local
and foreign taxes and other assessments, governmental charges, duties, fees,
levies, impositions and liabilities in the nature of a tax, including taxes
based upon or measured by gross receipts, income, profits, sales, use and
occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes and (ii) all interest,
penalties and additions imposed with respect to such amounts in clause (i).
"TAX RETURN" shall mean a report, return or other information
required to be supplied to or filed with a Governmental Entity with respect to
any Tax including an information return, claim for refund, amended Tax return or
declaration of estimated Tax.
"TREASURY REGULATIONS" shall mean the regulations promulgated under
the Code in effect on the date hereof and the corresponding sections of any
regulations subsequently issued that amend or supersede such regulations.
5
"WHOLLY OWNED SUBSIDIARY" shall mean, as to any Person, a Subsidiary
of such person 100% of the equity and voting interest in which is owned,
directly or indirectly, by such Person.
1.2 ADDITIONAL DEFINITIONS
The following additional terms have the meaning ascribed thereto in the Section
indicated below next to such term:
DEFINED TERM SECTION
------------ -------
Agreement Preamble
Budget Review Period 6.14
Certificates 2.4(b)
Certificate of Merger 2.1(a)
Claim 6.10(a)
Company Preamble
Company 401(k) Plan 3.6
Company Board 3.1
Company Bylaws 3.1
Company Charter 3.1
Company Common Stock Recitals
Company Derivative Securities Recitals
Company Disclosure Letter Article IV
Company Employee 3.6
Company Fairness Opinion 4.14
Company Monthly Budget 6.14
Company Notes Recitals
Company Plans 4.13(a)
Company Plan Stock Option 2.3(b)
Company Preferred Stock Recitals and 4.3(a)
Company SEC Reports 4.4
Company Special Meeting 3.1
Company Stock Option Recitals and 4.3(a)
Company Warrants 4.3(a)
Confidential Information 6.2
Contract Consent 4.5(c)
Contract Notice 4.5(c)
Convertible Securities 4.3(c)
Disclosing Party 6.2
Dissenting Shares 2.5
Environmental Laws 4.10(b)
ERISA 3.6
ERISA Affiliate 4.13(a)
Excess Shares 2.4(f)
Exchange Agent 2.4(a)
Exchange Agent Agreement 2.4(a)
Exchange Ratio 2.3(a)(i)
Governmental Consent 4.5(b)
Governmental Filing 4.5(b)
Xxxxxxx Employment Agreement 7.2(r)
Indemnified Parties 6.10(a)
Injunction 3.5
Investment Security 4.6(e)
Issuance 3.1(b)
Joint Proxy Statement/Prospectus 3.2
Licenses 4.10(a)
Local Approvals 4.5(b)
Material Contract 4.18(a)
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Merger Recitals
Merger Consideration 2.3(a)(i)
Merger Proposal 3.1
Merger Sub Preamble
Other Filings 3.2
Parachute Gross-Up Payment 4.13(i)
Parent Preamble
Parent Bylaws 3.1(b)
Parent Charter 3.1(b)
Parent Derivative Securities Recitals
Parent Common Stock Recitals
Parent Disclosure Letter Article V
Parent Expenses 8.5
Parent Fairness Opinion 5.12
Parent Licenses 5.13
Parent Material Adverse Effect 5.1
Parent Permits 5.13
Parent Plans 3.6
Parent Stockholder Meeting 3.1(b)
Parent Warrants Recitals
Permits 4.10(a)
Reasonable Actions 4.17(c)(i)(x)
Recapitalization 2.3(b)
Recapitalization Proposal 3.1(a)
Receiving Party 6.2
Representatives 6.2
Rule 145 Agreement 3.3
S-4 3.2
Section 262 2.5
Subject Month 6.14
Substitute Option 2.3(b)
Superior Proposal 6.5
Termination Date 8.2
Termination Fee 8.5(b)
Transition Committee 3.6
Violation 4.5(d)
Voting Debt 4.3(b)
1.3 TERMS GENERALLY
The definitions set forth or referenced in Sections 1.1 and 1.2 shall apply
equally to both the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The words "herein",
"hereof" and "hereunder" and words of similar import refer to this Agreement
(including the Exhibits and Schedules) in its entirety and not to any part
hereof unless the context shall otherwise require. As used herein, the phrase
"to the Company's knowledge", or any similar phrase or term relating to the
knowledge of the Company means the actual knowledge of any of the officers or
directors of the Company and the actual knowledge, after reasonable inquiry, of
Xxxxxxxx Xxxxxxx, Xxxxx Xxxxxx or Xxxxxxxxxxx Xxxxx. "Reasonable inquiry" shall
mean communication by Xxxxxxxx Xxxxxxx, Xxxxx Xxxxxx or Xxxxxxxxxxx Xxxxx to the
officers and field personnel of the Company with direct responsibility for the
matter in question and to counsel with respect to matters involving questions of
law, requesting such individual to review specified provisions of this Agreement
and to advise such person of any matter relevant to the specified
representation, warranty or provision. All references herein to Articles,
Sections, Exhibits and Schedules shall be deemed references to Articles and
Sections of, and Exhibits and Schedules to, this Agreement unless the context
shall otherwise require. Unless the context shall otherwise require, any
references to any agreement or other instrument or statute or regulation are to
it as amended and supplemented from time to time (and, in the case of a statute
7
or regulation, to any successor provisions). Any reference in this Agreement to
a "day" or number of "days" (without the explicit qualification of "business")
shall be interpreted as a reference to a calendar day or number of calendar
days. If any action or notice is to be taken or given on or by a particular
calendar day, and such calendar day is not a business day, then such action or
notice shall be deferred until, or may be taken or given on, the next business
day. References to the term "business day" shall mean any day that is not a
Saturday, Sunday or day on which banks in New York, New York are authorized or
required by law to close. References to the term "trading day" shall mean, with
respect to any security, a day on which the principal United States or foreign
securities exchange on which such security is listed or admitted to trading, or
the Nasdaq Stock Market if such security is not listed or admitted to trading on
any such securities exchange, as applicable, is open for the transaction of
business (unless such trading shall have been suspended for the entire day) or,
if the applicable security is not listed or admitted to trading on any United
States or foreign securities exchange or the Nasdaq Stock Market, any business
day.
ARTICLE II
THE MERGER AND RELATED MATTERS
2.1 THE MERGER
(a) MERGER; EFFECTIVE TIME. At the Effective Time and subject to and
upon the terms and conditions of this Agreement, Merger Sub shall, and Parent
shall cause Merger Sub to, merge with and into the Company in accordance with
the provisions of the DGCL, the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the Surviving Entity. The Effective Time
shall occur upon the filing with the Secretary of State of the State of Delaware
of a Certificate of Merger (the "CERTIFICATE OF MERGER") substantially in the
form of Exhibit 2.1(a) and executed in accordance with the applicable provisions
of the DGCL, or at such later time as may be agreed to by Parent and the Company
and specified in the Certificate of Merger. Provided that this Agreement has not
been terminated pursuant to Article VIII, the parties will cause the Certificate
of Merger to be filed as soon as practicable on the Closing Date.
(b) EFFECTS OF THE MERGER. The Merger shall have the effect set
forth in Sections 259 and 261 of the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Entity, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Entity. If, at any time after the Effective Time, the Surviving Entity
considers or is advised that any deeds, bills of sale, assignments, assurances
or any other actions or things are necessary or desirable to vest, perfect or
confirm (of record or otherwise) in the Surviving Entity its right, title or
interest in, to or under any of the rights, properties, or assets of either the
Company or Merger Sub, or otherwise to carry out the intent and purposes of this
Agreement, the officers and directors of the Surviving Entity will be authorized
to execute and deliver, in the name and on behalf of each of the Company and
Merger Sub, all such deeds, bills of sale, assignments and assurances and to
take and do, in the name and on behalf of each of the Company and Merger Sub,
all such other actions and things as the Board of Directors of the Surviving
Entity may determine to be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Entity or otherwise to carry out the intent and
purposes of this Agreement.
(c) CERTIFICATE OF INCORPORATION AND BYLAWS OF SURVIVING Entity. At
the Effective Time, the Company Charter shall be amended pursuant to the
Certificate of Merger to be identical to the Certificate of Incorporation of
Merger Sub in effect immediately prior to the Effective Time, except that
Article FIRST thereof shall read as follows: "The name of the Corporation (which
is hereinafter called the "Corporation") is V-ONE Corporation" Such Company
Charter as so amended shall be the Certificate of Incorporation of the Surviving
Entity until thereafter duly amended or restated in accordance with the terms
thereof and the DGCL. At the Effective Time, the Company Bylaws shall be amended
to be identical to the bylaws of Merger Sub in effect immediately prior to the
Effective Time and, in such amended form, shall be the Bylaws of the Surviving
Entity until thereafter duly amended or restated in accordance with the terms
thereof, the terms of the Certificate of Incorporation of the Surviving Entity
and the DGCL.
8
(d) DIRECTORS AND OFFICERS OF SURVIVING ENTITY. At the Effective
Time, the directors of Merger Sub immediately prior to the Effective Time shall
be the directors of the Surviving Entity and all such directors will hold office
from the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of Incorporation
and Bylaws of the Surviving Entity, or as otherwise provided by applicable law.
At the Effective Time, the officers of Merger Sub immediately prior to the
Effective Time shall be the officers of the Surviving Entity and all such
officers will hold office until their respective successors are duly appointed
and qualify in the manner provided in the Bylaws of the Surviving Entity, or as
otherwise provided by applicable law.
2.2 CLOSING
The Closing shall take place (a) at 10:00 a.m. (New York time) at the offices of
Xxxxxxx, Savage, Kaplowitz, Wolf & Marcus, LLP, 000 X. 00xx Xxxxxx, 0xx Xxxxx,
Xxx Xxxx, Xxx Xxxx 00000, on the third business day following the date on which
Parent provides the Company with written notice that the last of the conditions
set forth in Article VII (other than the filing of the Certificate of Merger and
other than any such conditions which by their terms are not capable of being
satisfied until the Closing Date) is satisfied or, if permissible, waived, or
(b) on such other date and at such other time or place as is mutually agreed by
Parent and the Company, which shall be no later than October 31, 2004 unless
extended by mutual agreement of the parties.
2.3 CONVERSION OF SECURITIES
(a) CONVERSION OF COMPANY SECURITIES. At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holders of any of their respective securities:
(i) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than the Dissenting Shares, if
any, and the shares to be cancelled in accordance with Section 2.3(a)(vi)),
shall be converted into and represent the right to receive, and shall be
exchangeable for, a number (or fractional number) of shares of Parent Common
Stock equal to the Exchange Ratio PLUS Common Parent Warrants to purchase an
aggregate of 750,000 shares of Parent Common Stock at the greater of (A) 110% of
the fair market value of Parent Common Stock at Closing and (B) $3.30 (the
"COMMON MERGER CONSIDERATION"). The "EXCHANGE RATIO" means one (1) share of
Parent Common Stock for each 20.86 shares of Company Common Stock.
(ii) The shares of Series C Preferred issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive, and shall be exchangeable for, an aggregate of 557,000 shares of the
Parent Common Stock PLUS Series C Parent Warrants to purchase an aggregate of
82,000 shares of Parent Common Stock at the greater of (A) 110% of the fair
market value of Parent Common Stock at Closing and (B) $3.30 (collectively the
"SERIES C MERGER CONSIDERATION"), to be allocated to the holders of Series C
Preferred in accordance with Section 2.3(b); PROVIDED, HOWEVER, that the holders
of Series C Preferred agree to cancel at Closing any issued and outstanding
warrants of the Company pursuant to the Cancellation Agreement for Series C
Preferred Stock Warrants substantially in the form attached hereto as Exhibit
2.3(a)(ii).
(iii) The shares of Series D Preferred issued and outstanding
immediately prior to the Effective Time shall be converted into the right to
receive, and shall be exchangeable for, an aggregate of 1,726,000 shares of
Parent Common Stock PLUS Series D Parent Warrants to purchase an aggregate of
216,000 shares of Parent Common Stock at the greater of (A) 110% of the fair
market value of Parent Common Stock at Closing and (B) $3.30 (collectively, the
"SERIES D MERGER CONSIDERATION") to be allocated to the holders of Series D
Preferred in accordance with Section 2.3(b); PROVIDED, HOWEVER, that the holders
of Series D Preferred agree to cancel at Closing any issued and outstanding
warrants of the Company pursuant to the Cancellation Agreement for Series D
Convertible Preferred Stock Warrants substantially in the form attached hereto
as Exhibit 2.3(a)(iii).
(iv) The Company Notes outstanding immediately prior to the
Effective Time shall be cancelled and converted into the right to receive an
aggregate of 467,000 shares of Parent Common Stock PLUS Note Parent Warrants to
purchase an aggregate of 210,000 shares of Parent Common Stock at the greater of
(A) 110% of the fair market value of Parent Common Stock at Closing and (B)
9
$3.30 (collectively the "COMPANY NOTES MERGER CONSIDERATION" and together with
the Common Merger Consideration, Series C Merger Consideration, and Series D
Merger Consideration, the "MERGER Consideration"), to be allocated in accordance
with Section 2.3(c); PROVIDED, HOWEVER, that the holders of Company Notes agree
to cancel at Closing any issued and outstanding warrants of the Company.
(v) Subject to Section 2.5, all shares of Company Common Stock
and Company Preferred Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the Merger Consideration to be
issued pursuant to this Section 2.3(a) (and any cash in lieu of a fractional
share and any dividends or other distributions payable pursuant to Sections
2.4(f) and 2.4(g) with respect thereto) upon the surrender of such certificate
in accordance with Section 2.4, without interest.
(vi) Each share of Company Common Stock that immediately prior
to the Effective Time is held by the Company as a treasury share shall be
cancelled and retired without payment of any consideration therefor and without
any conversion thereof into the Merger Consideration.
(b) RECAPITALIZATION. The parties acknowledge that the Company shall
elect to adopt a plan of recapitalization (the "RECAPITALIZATION"), pursuant to
which, among other things, the outstanding shares of Series C Preferred shall
generally be converted into the right to receive Series C Merger Consideration
and the outstanding shares of Series D Preferred shall generally be converted
into the right to receive Series D Merger Consideration. The Recapitalization
shall be effected by the Company by filing an amendment to the Certificate of
Designation for the Series C Preferred and the Certificate of Designation for
the Series D Preferred, substantially in the form of Exhibit 2.3(b), as promptly
as practicable following the approval thereof by the holders of Series C
Preferred and Series D Preferred, and in any event before the consummation of
the Merger.
(c) NOTE CANCELLATION. The parties acknowledge that the Company
shall seek to cancel the Company Notes and terminate the Company Note
Instruments to the effect that the outstanding Company Notes shall generally be
converted into the right to receive the Company Notes Merger Consideration and
the Company Note Instruments shall generally be terminated (the "NOTE
CANCELLATION"). The Note Cancellation shall be effected by the execution by the
Company and the holders of the Company Notes of an agreement to cancel the
Company Notes and terminate the Company Note Instruments, which agreement shall
provide for the allocation of the Company Notes Merger Consideration among the
holders of Company Notes. The effectiveness of such cancellation and termination
shall be conditioned upon the consummation of the Merger.
(d) TREATMENT OF COMPANY DERIVATIVE SECURITIES. Each Company
Derivative Security will be exchanged for the respective Parent Derivative
Security as provided in this paragraph. Each Company Warrant shall become a
warrant to purchase, on the same terms, conditions and restrictions as were
applicable to the Company, without any change thereto resulting from the Merger,
that number of shares of Parent Common Stock which is equal to the number of
shares of Company Common Stock that were subject to such Company Warrant
immediately prior to the Effective Time divided by the Exchange Ratio, rounded
down to the nearest whole number, at an exercise price per share of Parent
Common Stock equal to the amount determined by multiplying the exercise price
per share of Company Common Stock subject to such Company Warrant immediately
prior to the Effective Time by the Exchange Ratio, and rounding the resulting
number up to the nearest whole cent. Each Company Stock Option shall be deemed
to constitute an option to purchase, on the same terms, conditions and
restrictions as were applicable under such Company Stock Option without any
change thereto (other than an acceleration of vesting as required by the terms
of the agreements listed in Section 2.3(d) of the Company Disclosure Letter)
resulting from the Merger, that number of shares of Parent Common Stock which is
equal to the number of shares of Company Common Stock that were subject to such
Company Stock Option immediately prior to the Effective Time divided by the
Exchange Ratio, rounded down to the nearest whole number (after taking into
account all Company Stock Options held by the holder of such Company Stock
Option), at an exercise price per share of Parent Common Stock equal to the
amount determined by multiplying the exercise price per share of Company Common
Stock subject to such Company Stock Option immediately prior to the Effective
Time by the Exchange Ratio, and rounding the resulting number up to the nearest
whole cent.
(e) CONVERSION OF MERGER SUB STOCK. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, Merger Sub, the
Company or the holders of any of their respective securities, each share of
capital stock of Merger Sub outstanding immediately prior to the Effective Time
shall be converted into one share of the common stock of the Surviving Entity
10
and the shares of common stock of the Surviving Entity so issued in such
conversion shall constitute the only outstanding shares of capital stock of the
Surviving Entity and the Surviving Entity shall be a wholly owned subsidiary of
Parent.
(f) ISSUANCE OF PARENT COMMON STOCK TO XXXXXXXX XXXXXXX. At the
Effective Time, in exchange for the cancellation of the Xxxxxxx Employment
Agreement and the release as set forth in Section 7.2(r), Parent shall issue to
Xx. Xxxxxxx 100,000 shares of Parent Common Stock, which shall be registered
under the S-4 and subject to a two-year lockup agreement; PROVIDED, HOWEVER,
that a certain number of shares of such Parent Common Stock issued to Xx.
Xxxxxxx, which number shall not exceed 35,000, shall be available for resale
immediately upon effectiveness of the S-4 and not subject to said lockup
agreement in order to pay for any taxes incurred by Xx. Xxxxxxx in connection
with the receipt of such 100,0000 shares of Parent Common Stock.
2.4 EXCHANGE OF SHARES
(a) APPOINTMENT OF EXCHANGE AGENT. On or before the Closing Date,
Parent shall enter into an agreement (the "EXCHANGE AGENT AGREEMENT") with an
exchange agent selected by Parent and reasonably acceptable to the Company (the
"EXCHANGE AGENT"), authorizing such Exchange Agent to act as Exchange Agent
hereunder.
(b) LETTER OF TRANSMITTAL. As soon as reasonably practicable after
the Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates that immediately prior to the Effective Time
represented issued and outstanding shares of Company Common Stock or Company
Preferred Stock (the "CERTIFICATES") whose shares were converted into the right
to receive the respective Merger Consideration: (i) a notice of the
effectiveness of the Merger and (ii) a letter of transmittal (which shall state
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent) with
instructions for use in effecting the surrender and exchange of the
Certificates. In addition, the Exchange Agent shall mail to each holder of
Company Derivative Securities whose derivative securities are to be exchanged
for the respective Parent Derivative Security: (i) a notice of the effectiveness
of the Merger and (ii) a letter of transmittal (which shall state that delivery
shall be effected only upon delivery of the Company Derivative Securities to the
Exchange Agent) with instructions for use in effecting the surrender and
exchange of the Company Derivative Securities. The Exchange Agent shall also
mail to each holder of Company Notes whose notes were cancelled and converted
into the right to receive the Company Notes Merger Consideration: (i) a notice
of the effectiveness of the Merger and (ii) a letter of transmittal (which shall
state that delivery shall be effected only upon delivery of the Company Notes to
the Exchange Agent) with instructions for use in effecting the surrender and
exchange of the Company Notes. Such notice, letter of transmittal and
instructions shall contain such provisions and be in such form as Parent and the
Company reasonably specify.
(c) EXCHANGE PROCEDURE. Promptly following the surrender, in
accordance with such instructions, of a Certificate or Company Note to the
Exchange Agent (or such other agent or agents as may be appointed by the
Exchange Agent or Parent pursuant to the Exchange Agent Agreement), together
with such letter of transmittal (duly executed) and any other documents required
by such instructions or letter of transmittal, the Exchange Agent shall, subject
to Section 2.4(d), cause to be distributed to the Person in whose name such
Certificate or Company Note shall have been issued (i) a certificate registered
in the name of such Person representing the number of whole shares of Parent
Common Stock into which the shares of Company Common Stock, Company Preferred
Stock or Company Note previously represented by the surrendered Certificate or
Company Note shall have been converted at the Effective Time pursuant to this
Article II, (ii) payment (which shall be made by check) of any cash payable in
lieu of fractional shares of Parent Common Stock pursuant to Section 2.4(f) and
(iii) a Parent Warrant representing such holder's pro rata portion, as
determined based on each holder's ownership percentage of Company Common Stock,
Series C Preferred, Series D Preferred or Company Notes, as the case may be.
Each Certificate and Company Note so surrendered shall be canceled. In addition,
promptly following the surrender, in accordance with such instructions, of a
Company Derivative Security to the Exchange Agent (or such other agent or agents
as may be appointed by the Exchange Agent or Parent pursuant to the Exchange
Agent Agreement), together with such letter of transmittal (duly executed) and
any other documents required by such instructions or letter of transmittal, the
Exchange Agent shall, subject to Section 2.4(d), cause to be distributed to the
Person in whose name such Company Derivative Security has been issued the
corresponding Parent Derivative Security.
11
(d) UNREGISTERED TRANSFERS OF COMPANY COMMON STOCK. If the Merger
Consideration (or any portion thereof) is to be delivered to a Person other than
the Person in whose name the Certificate surrendered in exchange therefor is
registered in the transfer records of the Company, it shall be a condition to
the payment of such Merger Consideration (and the cash in lieu of fractional
shares of Parent Common Stock to which such Person is entitled pursuant to
Section 2.4(f)) that (i) the Certificate representing such Company Common Stock
or Company Preferred Stock surrendered to the Exchange Agent in accordance with
Section 2.4(c) is properly endorsed for transfer or is accompanied by
appropriate and properly endorsed stock powers and is otherwise in proper form
for transfer, (ii) the Person requesting such transfer pays to the Exchange
Agent any transfer or other taxes payable by reason of such transfer or
establishes to the satisfaction of the Exchange Agent that such taxes have been
paid or are not required to be paid and (iii) such Person establishes to the
satisfaction of Parent that such transfer would not violate applicable Federal
or state securities laws or any restrictive legend on the Certificate. The
Merger Consideration to be issued to holders of Company Notes shall only be
delivered to the Person whose name appears on such Company Note.
(e) LOST, STOLEN OR DESTROYED CERTIFICATES. If any Certificate,
Company Derivative Security or Company Note shall have been lost, stolen or
destroyed, at the sole discretion of the Parent and upon the making of an
affidavit of that fact by the Person claiming such Certificate, Company
Derivative Security or Company Note to be lost, stolen or destroyed satisfactory
to Parent and complying with any other reasonable requirements imposed by
Parent, the Exchange Agent will cause to be delivered to such Person in respect
of such lost, stolen or destroyed Certificate, Company Derivative Security or
Company Note the Merger Consideration (and any cash in lieu of fractional shares
of Parent Common Stock to which such Person is entitled pursuant to Section
2.4(f)) in respect thereof as determined in accordance with this Article II.
Parent may, in its discretion, require the owner of such lost, stolen or
destroyed Certificate, Company Derivative Security or Company Note to give
Parent a bond in such reasonable sum as it may direct as indemnity against any
claim that may be made against Parent or the Surviving Entity with respect to
the Certificate, Company Derivative Security or Company Note alleged to have
been lost, stolen or destroyed.
(f) NO FRACTIONAL SHARES OF MERGER CONSIDERATION. No certificates or
scrip representing fractional shares of Parent Common Stock shall be issued in
the Merger and no dividend or other distribution with respect to Parent Common
Stock shall have any effect on any such fractional share, and such fractional
share will not entitle the owner thereof to vote or to any other rights of a
stockholder of Parent. In lieu of such fractional share, any holder of Company
Common Stock, Company Preferred Stock or Company Notes who would otherwise be
entitled to a fractional share of Parent Common Stock will, upon surrender of
his Certificate or Company Note to the Exchange Agent as described in Section
2.4(c), if applicable, be entitled to receive an amount in cash (without
interest) equal to such holder's proportionate interest in the proceeds from the
sale or sales in the open market by the Exchange Agent, on behalf of all such
holders, of the aggregate fractional shares of Parent Common Stock that, but for
this Section 2.4(f), would be issuable in the Merger. As soon as practicable
following the Effective Time, the Exchange Agent shall determine the excess of
(A) the number of full shares of Parent Common Stock required to effect the
delivery of the aggregate Merger Consideration payable pursuant to Section
2.3(a) over (B) the aggregate number of full shares of Parent Common Stock to be
distributed to holders of Company Common Stock, Company Preferred Stock and
Company Notes hereunder (such excess being herein called the "EXCESS Shares").
The Exchange Agent, as agent for the former holders of Company Common Stock,
Company Preferred Stock and Company Notes, shall then sell the Excess Shares at
the prevailing prices on the Relevant Market. The sales of the Excess Shares by
the Exchange Agent shall be executed on the Relevant Market through one or more
member firms of the Relevant Market and shall be executed in round lots to the
extent practicable. All commissions, transfer taxes and other out-of-pocket
transaction costs, if any, including the expenses and compensation, if any, of
the Exchange Agent, incurred in connection with such sale of Excess Shares,
shall be deducted from the proceeds otherwise distributable to the former
holders of Company Common Stock, Company Preferred Stock and Company Notes. As
soon as practicable after the determination of the amount of cash to be paid to
former holders of Company Common Stock, Company Preferred Stock and Company
Notes in lieu of any fractional interests, the Exchange Agent shall make
available in accordance with this Agreement such amounts to such former holders.
(g) NO DIVIDENDS ON MERGER CONSIDERATION BEFORE SURRENDER OF
CERTIFICATES. No dividends or other distributions declared with respect to
Parent Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate or Company Note with respect to the
shares of Parent Common Stock represented thereby until the holder of record of
such Certificate or Company Note shall surrender such Certificate or Company
12
Note as provided herein. Following surrender of any such Certificate or Company
Note, there shall be paid to the record holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of dividends or other
distributions, if any, with a record date after the Effective Time that shall
have become payable with respect to such whole shares of Parent Common Stock
between the Effective Time and the time of such surrender, and (ii) at the
appropriate payment date, the amount of dividends or other distributions, if
any, with a record date after the Effective Time but prior to surrender and with
a payment date subsequent to surrender payable with respect to such whole shares
of Parent Common Stock.
(h) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK, COMPANY
PREFERRED STOCK OR COMPANY NOTES. The Merger Consideration issued upon the
surrender for exchange of Company Common Stock and Company Preferred Stock and
the surrender for cancellation of the Company Notes in accordance with the terms
hereof (including any cash in lieu of fractional shares of Parent Common Stock
paid pursuant to Section 2.4(f)) shall be deemed to have been issued and paid in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, shares of Company Preferred Stock or Company Notes, and there shall be no
further registration of transfers on the stock transfer books of the Surviving
Entity of the shares of Company Common Stock or Company Preferred Stock that
were outstanding immediately prior to the Effective Time and there shall be no
further liability represented by such Company Notes recorded in the Surviving
Entity's balance sheet. Subject to Section 2.4(i), if, after the Effective Time,
Certificates or Company Notes are presented to the Surviving Entity for any
reason, they shall be canceled and exchanged as provided in, and in accordance
with, this Article II.
(i) ABANDONED PROPERTY LAWS. Payment or delivery of the Merger
Consideration shall be subject to applicable abandoned property, escheat and
similar laws and neither Parent nor the Surviving Entity shall be liable to any
holder of shares of Company Common Stock, Company Preferred Stock, Company Notes
or Parent Common Stock for any Merger Consideration (and for any dividends or
distributions with respect thereto or for any cash in lieu of fractional shares)
that may be delivered to any public official pursuant to any such abandoned
property, escheat or similar law.
2.5 DISSENTING SHARES
Notwithstanding anything to the contrary in this Agreement, if appraisal rights
are available to holders of the Company Common Stock pursuant to Section 262 of
the DGCL ("SECTION 262"), each outstanding share of Company Common Stock, the
holder of which has demanded and perfected his demand for appraisal of the fair
value of such shares in accordance with Section 262 and has not effectively
withdrawn or lost his right to such appraisal (the "DISSENTING SHARES"), shall
not be converted into or represent a right to receive the Merger Consideration,
but the holder thereof shall be entitled only to such rights as are granted by
Section 262. The Company shall give Parent prompt notice upon receipt of any
such written demands for appraisal of the fair value of shares of Company Common
Stock and of withdrawals of such demands and any other instruments provided to
the Company pursuant to Section 262.
ARTICLE III
CERTAIN ACTIONS
3.1 STOCKHOLDERS MEETINGS
(a) COMPANY STOCKHOLDER MEETING. The Company and its Board of
Directors (the "COMPANY BOARD") shall take all action necessary in accordance
with applicable law and the Company's Certificate of Incorporation (the "COMPANY
CHARTER") and Bylaws (the "COMPANY BYLAWS") to duly call and hold, as soon as
reasonably practicable after the date hereof, a meeting of the Company's
stockholders (the "COMPANY SPECIAL MEETING") for the purpose of considering and
voting upon (i) the approval and adoption of this Agreement and the Merger
contemplated hereby (the "MERGER PROPOSAL") and (ii) the approval of the
Recapitalization and amendment of the Company Charter in relation thereto (the
"RECAPITALIZATION PROPOSAL"). The only matters the Company shall propose to be
acted on by the Company's stockholders at the Company Special Meeting shall be
the Merger Proposal, Recapitalization Proposal and related matters incidental to
the consummation of the Merger and the Recapitalization. The Company Board will
13
recommend that the Company's stockholders vote in favor of approval and adoption
of the Merger Proposal, subject to Section 6.5, and the Recapitalization
Proposal in connection with the Merger, and the Company will use its reasonable
best efforts to solicit from its stockholders proxies in favor of such approval
and adoption and take all other action necessary or advisable to secure the vote
or consent of stockholders of the Company required by the DGCL, the Company
Charter or otherwise to effect the Merger and the Recapitalization.
(b) PARENT STOCKHOLDER MEETING. Parent and its Board of Directors
(the "PARENT BOARD") shall take all action necessary in accordance with
applicable law and the Parent's Articles of Incorporation (the "PARENT CHARTER")
and Bylaws (the "PARENT BYLAWS") to duly call and hold, as soon as reasonably
practicable after the date hereof, a meeting of the Parent's stockholders (the
"PARENT STOCKHOLDER MEETING") for the purpose of considering and voting upon (i)
the issuance of the shares of Parent Common Stock, Parent Warrants and Parent
Derivative Securities in connection with the Merger (the "ISSUANCE"), and (ii)
if and to the extent deemed necessary or advisable by the Parent Board, any
other actions, transactions or matters whether or not related to this Agreement
or any of the transactions contemplated hereby; PROVIDED, HOWEVER, that such
other actions, transactions or matters shall not delay the holding of the Parent
Stockholder Meeting. The Parent Board will recommend that Parent's stockholders
vote in favor of approval of the Issuance at such meeting, and Parent will use
reasonable best efforts to solicit from its stockholders proxies in favor of
such approval and take all other action necessary or advisable to secure the
vote or consent of stockholders of the Parent required by law, the Parent
Charter or otherwise to effect the Merger.
3.2 JOINT PROXY STATEMENT/PROSPECTUS; S-4; OTHER COMMISSION FILINGS
As promptly as practicable after the execution of this Agreement, the Company
and Parent shall prepare and file with the Commission a joint proxy
statement/prospectus (the "JOINT PROXY STATEMENT/PROSPECTUS") and Parent shall
prepare and file with the Commission a registration statement on Form S-4 in
connection with the issuance of shares of Parent Common Stock, Parent Warrants
and Parent Derivative Securities in or as a result of the Merger (the "S-4") in
which the Joint Proxy Statement/Prospectus shall be included as a prospectus.
Each of the Company and Parent shall respond to any comments of the Commission,
shall use its respective reasonable best efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing
and keep the S-4 effective for so long as necessary to consummate the Merger.
The Company and Parent shall cause the Joint Proxy Statement/Prospectus to be
mailed to their respective stockholders at the earliest practicable time after
the S-4 is declared effective by the Commission. As promptly as practicable
after the date of this Agreement, each of Company and Parent shall prepare and
file any other filings required to be filed by it under the Exchange Act, the
Securities Act or any other federal, foreign or blue sky or related laws
relating to the Merger and the transactions contemplated by this Agreement (the
"OTHER Filings"), provided that Parent shall not be required to qualify to do
business in any jurisdiction in which it is not now so qualified, subject itself
to taxation in any jurisdiction in which it is not now so subject, give any
consent to general service of process in any jurisdiction in which it is not now
subject to such service or change in any respect its authorized or outstanding
capital stock or the composition of its assets. Each of the Company and Parent
shall notify the other promptly upon the receipt of any comments from the
Commission, its staff or any other government officials and of any request by
the Commission, its staff or any other government officials for amendments or
supplements to the S-4, the Joint Proxy Statement/Prospectus or any Other Filing
or for additional information and shall supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the Commission, its staff or any other government officials, on the
other hand, with respect to the S-4, the Joint Proxy Statement/Prospectus, the
Merger or any Other Filing. Each of the Company and Parent shall cause all
documents that it is responsible for filing with the Commission or other
regulatory authorities under this Section 3.2 to comply in all material respects
with all applicable requirements of law and the rules and regulations
promulgated thereunder. If at any time prior to the Effective Time any
information relating to the Company or Parent, or any of their respective
Subsidiaries, Affiliates, directors or officers, should be discovered by the
Company or Parent which should be set forth in an amendment or supplement to the
S-4, Joint Proxy Statement/Prospectus or any Other Filing, so that such document
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the Company or the
Parent, as the case may be, shall promptly inform the other of such occurrence
and the parties shall cooperate in filing with the Commission, its staff or any
other government officials, and/or mailing to stockholders of the Company and
stockholders of Parent (to the extent such mailing is required by law), such
amendment or supplement.
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3.3 IDENTIFICATION OF RULE 145 AFFILIATES
Within 30 days after the execution of this Agreement, the Company shall deliver
to Parent a letter identifying all Persons who the Company knows are or who the
Company has reason to believe may be, as of the date of the Company Special
Meeting, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use its reasonable best efforts to cause each
Person who is identified as an "affiliate" in the letter referred to above to
deliver to Parent, on or prior to the Closing Date, a written agreement, in
substantially the form annexed hereto as Exhibit 3.3 (each a "RULE 145
AGREEMENT").
3.4 STATE TAKEOVER STATUTES
Upon the request of Parent, the Company will take all reasonable steps to (i)
exempt the Merger from the requirements of any applicable state takeover law and
(ii) assist in any challenge by Parent to the validity or applicability to the
Merger of any state takeover law.
3.5 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement and applicable law, each
of the parties hereto shall use its reasonable best efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement as soon as reasonably practicable, including such
actions or things as any other party hereto may reasonably request in order to
cause any of the conditions to such other party's obligation to consummate such
transactions specified in Article VII to be fully satisfied or to determine
whether such conditions have been satisfied. Without limiting the generality of
the foregoing, the parties shall (and shall cause their respective directors,
officers and Subsidiaries, and use their reasonable best efforts to cause their
respective Affiliates, employees, agents, attorneys, accountants and
representatives, to) consult and fully cooperate with and provide reasonable
assistance to each other in (a) the preparation and filing with the Commission
of the S-4, the Joint Proxy Statement/Prospectus, the Other Filings and any
necessary amendments or supplements to any of the foregoing; (b) seeking to have
the S-4 declared effective by the Commission as soon as reasonably practicable
after filing; (c) subject to the fourth sentence of Section 3.2, taking such
actions as may reasonably be required under applicable state securities or blue
sky laws in connection with the issuance of the Merger Consideration; (d) using
reasonable best efforts to obtain all necessary consents, approvals, waivers,
licenses, permits, authorizations, registrations, qualifications, or other
permissions or actions by, and giving all necessary notices to and making all
necessary filings with and applications and submissions to, any Governmental
Entity or other Person; (e) filing all pre-merger notification and report forms
required under the Xxxx-Xxxxx Act and responding to any requests for additional
information made by any Governmental Entity pursuant to the Xxxx-Xxxxx Act; (f)
using reasonable best efforts to cause to be lifted any permanent or preliminary
injunction or restraining order or other similar order issued or entered by any
court or Governmental Entity (an "INJUNCTION") of any type referred to in
Section 7.1(e), or to cause to be rescinded or rendered inapplicable any
statute, rule or regulation of any type referred to in Section 7.2(d); (g)
providing all such information about such party, its Subsidiaries and its
officers, directors, partners and Affiliates to, and making all applications and
filings with, any Governmental Entity or other Person as may be necessary or
reasonably requested in connection with any of the foregoing; and (h) in
general, consummating and making effective the transactions contemplated hereby;
provided, however, that in order to obtain any consent, approval, waiver,
license, permit, authorization, registration, qualification, or other permission
or action or the lifting of any Injunction, or causing to be rescinded or
rendered inapplicable any statute, rule or regulation, referred to in clause (d)
or (f) of this sentence, (i) no party shall be required to pay any consideration
(other than customary filing and similar fees), to divest itself of any of, or
otherwise rearrange the composition of, its assets or to agree to any of the
foregoing or any other condition or requirement that is materially adverse or
burdensome; (ii) none of Parent, its Controlling Parties nor their respective
Affiliates shall be required to take any action pursuant to the foregoing if the
taking of such action is reasonably likely to result in the imposition of a
condition or restriction of the type referred to in Section 7.2(d); and (iii)
without the Parent's prior written consent, the Company shall not, amend any
License or Contract, pay any consideration or make any agreement or reach any
understanding or arrangement other than in the ordinary course of business
consistent with prior practice. Subject to applicable laws relating to the
exchange of information, prior to making any application to or filing with any
Governmental Entity or other Person in connection with this Agreement, each
party shall provide the other party with drafts thereof and afford the other
party a reasonable opportunity to comment on such drafts.
15
3.6 EMPLOYEE MATTERS
Subject to the requirements of the Employee Retirement Income Security Act of
1974 ("ERISA") and the Code, neither Parent nor the Surviving Entity shall be
required to maintain any Company Plan after the Effective Time. At the Effective
Time, each of the Company Stock Plans shall be terminated. To the extent the
Surviving Entity elects to terminate a Company Plan after the Effective Time and
to the extent the V-ONE Corporation 401(k) Plan (the "COMPANY 401(K) PLAN") is
terminated prior to the Effective Time, as determined by Transition Committee
(as hereinafter defined), each employee of the Surviving Entity at such time who
was an employee of the Company immediately prior to the Effective Time ("Company
Employee") and entitled to participate in such terminated Company Plan that is
employed by SteelCloud (a) shall be entitled to participate in the comparable
plan maintained by Parent (the "PARENT PLANS") to the same extent as similarly
situated employees of Parent, (b) shall receive credit for such employee's past
service with the Company as of the Effective Time for purposes of determining
eligibility, participation and vesting (but not for purposes of benefit accrual
under a defined benefit pension plan) under the Parent Plans to the extent such
service was credited under the Company Plans on the Closing Date, and (c) shall
not be subject to any waiting periods limitations on benefits for pre-existing
conditions, active employment requirements or requirements to show evidence of
good health under the Parent Plans, including any group health and disability
plans, except to the extent such employees were subject to such limitations
under the Company Plans; PROVIDED, HOWEVER, that in the case of any Parent Plans
that are welfare plans that require a waiting period until the first day of a
calendar month, such employees shall continue to participate in a comparable
Company Plan until such waiting period has expired. A transition committee (the
"Transition Committee") comprised of directors and/or officers of each of the
Company and Parent has been established to determine the employment benefits of
the Company Employees after the Effective Time and shall in good faith negotiate
mutually acceptable terms for the Company Employees.
3.7 RECAPITALIZATION
The Company shall use its reasonable best efforts to cause the Recapitalization
to be effected in accordance with the terms of Section 2.3(b).
3.8 NOTE CANCELLATION
The Company shall use its reasonable best efforts to cause the Note Cancellation
to be effected in accordance with the terms of Section 2.3(c).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Company Disclosure Letter (with specific reference to
the section or subsection of this Agreement to which the information stated in
such disclosure letter relates; PROVIDED that any fact or condition disclosed in
any section of such disclosure letter in such a way as to make its relevance to
a representation or representations made elsewhere in this Agreement or
information called for by another section of such disclosure letter reasonably
apparent shall be deemed to be an exception to such representation or
representations or to be disclosed on such other section of such disclosure
letter notwithstanding the omission of a reference or cross reference thereto)
delivered by the Company to Parent, the Company represents and warrants to
Parent and Merger Sub as follows:
4.1 ORGANIZATION AND QUALIFICATION
The Company (a) is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, (b) has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted and (c) is duly qualified or
licensed to do business and is in good standing in each jurisdiction in which
16
the properties owned, leased or operated by it or the nature of its activities
makes such qualification necessary, except, in the case of clause (c), in such
jurisdictions where the failure to be so duly qualified or licensed and in good
standing has not had and is not reasonably likely to have, individually or in
the aggregate, a Company Material Adverse Effect. The Company has made available
to Parent true and complete copies of the Company Charter and Company Bylaws in
effect on the date hereof. No corporate action has been taken with respect to
any amendment to the Company Charter or the Company Bylaws (except for any such
amendments that have become effective and are reflected in the copies of the
Company Charter and the Company Bylaws made available by the Company to Parent
as described in the preceding sentence) and no such corporate action is
currently proposed. The Company's minute books, true and complete copies of
which have been made available to Parent, contain the minutes (or draft copies
of the minutes) of all meetings of directors and stockholders of the Company for
the last five years and such minutes accurately and fairly reflect in all
material respects the actions taken at such meetings.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT
The Company has all requisite corporate power and authority to enter into this
Agreement and, subject to obtaining the approval of its security holders and
holders of Company Notes specified in Section 4.16, to perform its obligations
hereunder and consummate the Merger and the other transactions contemplated
hereby. The execution, delivery and performance by the Company of this Agreement
and the consummation by the Company of the Merger and the other transactions
contemplated hereby have been duly and validly authorized by the Company Board
and by all other necessary corporate action on the part of the Company, subject,
in the case of the consummation by the Company of the Merger, to the approval of
the Company's security holders and holders of Company Notes described in the
previous sentence. This Agreement has been duly executed and delivered by the
Company and is a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
4.3 CAPITALIZATION
(a) As of the date hereof, the authorized capital stock of the
Company consists solely of (i) 75,000,000 shares of Company Common Stock and
(ii) 13,333,333 shares of Company Preferred Stock, 500,000 of which are
designated as Series C Preferred Stock and 3,675,000 of which are designated as
Series D Preferred Stock. As of the close of business on June 30, 2004, (i)
15,642,555 shares of Company Common Stock were issued and outstanding, (ii) no
shares of Company Common Stock were issued and held by the Company, (iii) 21,452
shares of Series C Preferred and 1,510,500 shares of Series D Preferred were
issued and outstanding or issued and held by the Company, (iv) 2,458,699 shares
of Company Common Stock were reserved for issuance upon exercise of outstanding
Company Plan Stock Options, (v) 10,940,810 shares were reserved for issuance
upon exercise of Company Plan Stock Options available for grant under the
Company Stock Plans, (vi) no shares of Company Common Stock were reserved for
issuance upon exercise of the options to purchase shares of Company Common Stock
described in Section 4.3(c) of the Company Disclosure Letter (other than the
Company Plan Stock Options and together with the Company Plan Stock Options, the
"COMPANY STOCK OPTIONS"), (vii) 4,693,663 shares were reserved for issuance upon
exercise of the warrants to purchase shares of Company Common Stock described in
Section 4.3(c) of the Company Disclosure Letter (the "COMPANY WARRANTS"), (viii)
1,510,500 shares were reserved for issuance upon conversion of Series D
Preferred and (ix) 3,000,000 shares were reserved for issuance upon conversion
of the Company Notes. Except as set forth in the preceding sentence, at the
close of business on June 30, 2004, no shares of capital stock or other
securities or other equity interests of the Company and no phantom shares,
phantom equity interests, or stock or equity appreciation rights relating to the
Company were issued, reserved for issuance or outstanding. Since the close of
business on June 30, 2004, no shares of capital stock or other securities or
other equity interests of the Company and no phantom shares, phantom equity
interests, or stock or equity appreciation rights relating to the Company have
been issued other than shares of Company Common Stock issued upon exercise of
Company Stock Options and Company Warrants or upon conversion of Series D
Preferred or Company Notes outstanding at the close of business on June 30, 2004
referred to in clauses (iv), (vi), (vii), (viii) and (ix) of the second
preceding sentence in accordance with the their terms. All outstanding shares of
Company Common Stock are, and all shares of Company Common Stock which may be
issued upon the exercise of Company Stock Options or Company Warrants will be,
when issued, duly authorized, validly issued, fully paid and non-assessable and
17
not subject to preemptive rights. All outstanding shares of Company Common
Stock, Company Preferred Stock, Company Stock Options and Company Warrants were
issued, and all shares of Company Common Stock which may be issued upon the
exercise of Company Stock Options or Company Warrants or conversion of Company
Preferred Stock prior to the Effective Time will be issued, when issued, in
compliance with all applicable state and federal laws concerning the offer, sale
and issuance of such securities.
(b) There are $1,200,000 issued or outstanding bonds, debentures,
notes or other Indebtedness of the Company that have the right to vote (or that
are convertible into other securities having the right to vote) on any matters
on which stockholders may vote ("VOTING DEBT"). Section 4.3(b) of the Company
Disclosure Letter sets forth with respect to each outstanding Voting Debt (i)
the name of the Person that holds such Voting Debt, (ii) the maturity date of
the Voting Debt, (iii) the interest rate of the Voting Debt and (iv) any other
material terms of the Voting Debt. Other than as described in Section 4.3(b) of
the Company Disclosure Letter and ordinary course payments or commissions to
sales representatives of the Company based upon revenues generated by them
without augmentation as a result of the transactions contemplated by this
Agreement, there are no Contracts pursuant to which any Person is or may
(contingently or otherwise) be entitled to receive any payment based on the
revenues, earnings or financial performance of the Company or assets or
calculated in accordance therewith.
(c) Except as described on Section 4.3(c) of the Company Disclosure
Letter, there are no, and immediately after the Effective Time there will be no,
outstanding or authorized subscriptions, options, warrants, securities, calls,
rights, commitments or any other Contracts of any character to or by which the
Company is a party or is bound that, directly or indirectly, obligate the
Company (contingently or otherwise) to issue, deliver or sell or cause to be
issued, delivered or sold any shares of Company Common Stock or any Company
Preferred Stock or other capital stock, securities, equity interests or Voting
Debt of the Company, any securities convertible into, or exercisable or
exchangeable for, or evidencing the right (contingent or otherwise) to subscribe
for any such shares, securities, interests or Voting Debt, or any phantom
shares, phantom equity interests or stock or equity appreciation rights, or
obligating the Company to grant, extend or enter into any such subscription,
option, warrant, security, call, right or Contract (collectively, "CONVERTIBLE
SECURITIES"). Section 4.3(c) of the Company Disclosure Letter sets forth with
respect to each outstanding Company Stock Option and Company Warrant (i) the
name of the Person that holds such Company Stock Option or Company Warrant, (ii)
the total number of shares of Company Common Stock issuable upon exercise of
such Company Stock Option or Company Warrant (assuming that all conditions to
the exercise thereof, including the passage of time, had been met), (iii) if
such Company Stock Option is a Company Plan Stock Option, the Company Stock Plan
pursuant to which such Company Plan Stock Option was issued, (iv) the total
number of shares of Company Common Stock issuable upon exercise of such Company
Stock Option or Company Warrant as of the date of this Agreement, (v) the
schedule upon which such Company Stock Option or Company Warrant becomes
exercisable (to the extent such Company Plan Stock Option or Company Warrant is
not exercisable in full as of the date of this Agreement), and a description of
any conditions to such exercise, (vi) the expiration date of such Company Stock
Option or Company Warrant, (vii) the per share exercise price of such Company
Stock Option or Company Warrant, (viii) whether such Company Stock Option or
Company Warrant shall by its terms terminate in connection with the consummation
of the Merger and (ix) with respect to each Company Stock Option or Company
Warrant that does not terminate by its terms in connection with the consummation
of the Merger, (A) a description of the kind and amount of shares of stock,
other securities, money or property the holder of such Company Stock Option or
Company Warrant is entitled to receive upon the exercise of such Company Stock
Option or Company Warrant and payment of the exercise price thereof after
consummation of the Merger, (B) the per share exercise price of such Company
Stock Option or Company Warrant after consummation of the Merger and (C) other
than as provided in clauses (ix)(A) and (B) of this sentence, any changes to the
material terms and conditions of such Company Stock Option or Company Warrant
resulting from the consummation of the Merger (whether alone or in conjunction
with other actions) including any acceleration of vesting of any Company Stock
Option. Except as described on Section 4.3(c) of the Company Disclosure Letter,
the Company is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any shares of its capital stock. The
Company has made available to Parent true and complete copies of the Company
Warrants and the Company Stock Options which copies (together, in the case of
the Company Stock Options, with the provisions of the applicable Company Stock
18
Plans) represent the complete terms, conditions, provisions, obligations and
undertakings of the Company with respect to all the Company Warrants and the
Company Stock Options.
(d) Except as described on Section 4.3(d) of the Company Disclosure
Letter, the Company has not adopted, authorized or assumed any plans,
arrangements or practices for the benefit of its officers, employees or
directors that require or permit the issuance, sale, purchase or grant of any
capital stock, securities or other equity interests or Voting Debt of the
Company, any phantom shares, phantom equity interests or stock or equity
appreciation rights or any Convertible Securities.
4.4 REPORTS AND FINANCIAL STATEMENTS
The Company (a) has heretofore made available to Parent true and complete copies
of all reports, registration statements, definitive proxy statements and other
documents (including exhibits and in each case together with all amendments
thereto) filed by the Company with the Commission from December 31, 2000 to the
date of this Agreement, and (b) agrees to timely file, and to make available to
Parent promptly after the filing thereof true and complete copies of, all
reports, registration statements and other documents (including exhibits and in
each case together with all amendments thereto) required to be filed by the
Company with the Commission after the date hereof and prior to the Closing Date
(such reports, registration statements, definitive proxy statements and other
documents, together with any amendments thereto, are collectively referred to as
the "COMPANY SEC REPORTS"). The Company SEC Reports filed with the Commission
constitute, and the Company SEC Reports to be made after the date hereof and on
or before the Closing Date will constitute, all of the documents (other than
preliminary materials) that the Company was or will be required to file with the
Commission from December 31, 2000, to the date hereof and the Closing Date,
respectively. Except as described in Section 4.4 of the Company Disclosure
Letter, as of their respective dates, each of the Company SEC Reports complied
and, in the case of Company SEC Reports filed after the date hereof and prior to
the Closing Date will comply, in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder. As of their respective dates, none of the
Company SEC Reports filed with the Commission contained, and none of the Company
SEC Reports filed with the Commission after the date hereof shall contain, any
untrue statement of a material fact or omitted, or will omit, to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were or are made, not
misleading. Except as described in Section 4.4 of the Company Disclosure Letter,
when filed with the Commission, the financial statements included in the Company
SEC Reports complied, and the financial statements included in any Company SEC
Reports filed with the Commission after the date hereof will comply, as to form
in all material respects with the applicable rules and regulations of the
Commission and were, or will have been, prepared in accordance with GAAP,
consistently applied (except as may be indicated therein or in the notes or
schedules thereto). Such financial statements fairly present, or will fairly
present, the financial position of the Company as at the dates thereof and the
results of its operations and its cash flows for the periods then ended,
subject, in the case of unaudited interim financial statements, to normal,
recurring year-end audit adjustments. Except as and to the extent reflected or
reserved against in the financial statements included in the Company's quarterly
report on Form 10-Q for the quarter ended March 31, 2004 or as disclosed therein
or in Section 4.4 of the Company Disclosure Letter, the Company did not have as
of such date any actual or potential liability or obligation of any kind,
whether accrued, absolute, contingent, unliquidated or other, or whether due or
to become due (including any liability for breach of contract, breach of
warranty, torts, infringements, claims or lawsuits), that individually or in the
aggregate was (or may be) material to the business, assets, financial condition,
results of operations or prospects of the Company taken as a whole or that
exceeds $50,000 individually, or $100,000 in the aggregate or that individually
is required by the applicable rules and regulations of the Commission and GAAP
to be disclosed, reflected or reserved against in financial statements
(including the notes thereto). Except as described on Section 4.4 of the Company
Disclosure Letter, since March 31, 2004 through the date hereof, the Company has
not incurred any such actual or potential liability or obligation. Except as set
forth on Section 4.4 of the Company Disclosure Letter, the Company has not
guaranteed or otherwise agreed to become responsible for any Indebtedness of any
other Person.
4.5 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS
The execution and delivery by the Company of this Agreement do not, and the
performance by the Company of its obligations hereunder and the consummation by
19
the Company of the Merger and the other transactions contemplated hereby will
not:
(a) assuming approval and adoption of the Merger Proposal and
Recapitalization Proposal by the Company's stockholders as contemplated by
Section 4.16, conflict with or violate the Company Charter or Company Bylaws;
(b) require any consent, approval, order or authorization of or
other action by any Governmental Entity (a "GOVERNMENTAL CONSENT") or any
registration, qualification, declaration or filing with or notice to any
Governmental Entity (a "GOVERNMENTAL FILING") on the part of the Company, except
for (i) the filing of the Certificate of Merger with the Secretary of State of
the State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business, (ii) the filing
of a Certificate of Amendment to the Company Charter with the Secretary of State
of the State of Delaware to effect the Recapitalization, (iii) the Governmental
Consents and Governmental Filings with foreign, state and local Governmental
Entities described on Section 4.5(b) of the Company Disclosure Letter (the
"LOCAL APPROVALS"), (iv) the Governmental Filings required to be made pursuant
to the pre-merger notification requirements of the Xxxx-Xxxxx Act, (v) the
filing with the Commission of (A) the Joint Proxy Statement/Prospectus and the
S-4 as contemplated by Section 3.2 and (B) such reports under Sections 13(a),
13(d), 15(d) or 16 of the Exchange Act as may be required in connection with
this Agreement or the transactions contemplated hereby and (vi) such other
Governmental Consents and Governmental Filings the absence or omission of which
will not, either individually or in the aggregate, have a Company Material
Adverse Effect;
(c) except as described on Section 4.5(c) of the Company Disclosure
Letter and except for the approval of the Note Cancellation by the holders of
Company Notes, require any consent by or approval or authorization of (a
"CONTRACT CONSENT") or notice to (a "CONTRACT NOTICE") any other Person (other
than a Governmental Entity), whether under any License or other Contract or
otherwise, except for such Contract Consents and Contract Notices the absence or
omission of which will not, either individually or in the aggregate, have a
Company Material Adverse Effect;
(d) assuming that the (i) holders of Company Notes approve the Note
Cancellation and (ii) Contract Consents and Contract Notices described in
Section 4.5(c) of the Company Disclosure Letter are obtained and given, conflict
with or result in any violation or breach of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation, suspension, modification or acceleration of any obligation or any
increase in any payment required by, or the impairment, loss or forfeiture of
any material benefit, rights or privileges under, or the creation of a Lien or
Restriction on any properties or assets pursuant to (any such conflict,
violation, breach, default, right of termination, cancellation or acceleration,
loss or creation, a "VIOLATION"), any Contract to which the Company is a party
by which the Company or any of its assets or properties is bound or affected or
pursuant to which the Company is entitled to any rights or benefits (including
Licenses)), except for such Violations that will not, individually or in the
aggregate, have a Company Material Adverse Effect; or
(e) assuming approval and adoption of the Merger Proposal and the
Recapitalization Proposal by the Company's stockholders as described in Section
4.16 and assuming that the Governmental Consents and Governmental Filings
specified in clause (b) of this Section 4.5 are obtained, made and given, result
in a Violation of, under or pursuant to any law, rule, regulation, order,
judgment or decree applicable to the Company by which any of its properties or
assets are bound, except for such Violations that will not, individually or in
the aggregate, have a Company Material Adverse Effect.
4.6 ASSETS; INVESTMENT SECURITIES
(a) Except as set forth on Section 4.6(a) of the Company Disclosure
Letter, the assets owned or leased by the Company are suitable and adequate for
the conduct of its businesses as presently conducted and as proposed to be
conducted and the Company has good and valid title to or valid leasehold or
other contractual interests in all such assets that are material to its business
free and clear of all Liens other than Permitted Encumbrances and not subject to
any Restrictions other than Liens or Restrictions the existence of which has not
had and is not reasonably likely to have, individually or in the aggregate, a
Company Material Adverse Effect.
(b) Section 4.6(b) of the Company Disclosure Letter sets forth a
complete and accurate list of each capital, participating, equity or other
interest owned of record or beneficially by the Company in any corporation,
partnership, joint venture or other Person (each, an "INVESTMENT SECURITY" and
collectively, the "INVESTMENT SECURITIES"). Section 4.6(b) of the Company
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Disclosure Letter includes, with respect to each Investment Security, the name
of the corporation, partnership, joint venture or other Person in respect of
which such Investment Security relates, the amount and nature of such interest,
and a description of the material terms of any Liens and Restrictions with
respect to such Investment Securities.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as otherwise disclosed in the Company SEC Reports filed and made
available to Parent prior to the date of this Agreement or as set forth on
Section 4.7 of the Company Disclosure Letter, since June 30, 2004 (a) there has
not been any change, and no event has occurred and no condition exists, that
individually or together with all other such changes, events and conditions, has
had or is reasonably likely to have a Company Material Adverse Effect and (b) no
action has been taken by the Company that, if Section 6.4 of this Agreement had
then been in effect, would have been prohibited by such Section without the
consent or approval of Parent, and no Contract to take any such action was
entered into during such period.
4.8 S-4; JOINT PROXY STATEMENT/PROSPECTUS
None of the information supplied or to be supplied by or on behalf of the
Company for inclusion or incorporation by reference in, and that is included or
incorporated by reference in, (a) the S-4 (or any amendment or supplement
thereto) filed or to be filed by Parent with the Commission under the Securities
Act in connection with the issuance of the Merger Consideration, (b) the Joint
Proxy Statement/Prospectus to be mailed to the stockholders of the Company and
the Parent or any amendment or supplement thereto, or (c) any documents filed or
to be filed with the Commission or any other Governmental Entity in connection
with the transactions contemplated hereby, will, at the respective times such
documents are filed, and, in the case of the S-4 or any amendment or supplement
thereto, when the same becomes effective, at the time of the Company Special
Meeting, at the time of the Parent Stockholder Meeting or at the Effective Time,
and, in the case of the Joint Proxy Statement/Prospectus or any amendment or
supplement thereto, at the time of mailing of the Joint Proxy
Statement/Prospectus to the stockholders of the Company and Parent, at the time
of the Company Special Meeting or at the time of the Parent Stockholder Meeting,
be false or misleading with respect to any material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading or necessary to correct any statement in any earlier
communication made in furtherance of, or in connection with, the transactions
contemplated hereby. Information provided by the Company in the Joint Proxy
Statement/Prospectus will comply in all material respects with the applicable
requirements of the Securities Act, the Exchange Act and the DGCL.
4.9 LEGAL PROCEEDINGS
Except as set forth on Section 4.9 of the Company Disclosure Letter, there is no
(a) Legal Proceeding pending or, to the knowledge of the Company, threatened,
against, involving or affecting the Company or any of its assets or rights, (b)
judgment, decree, Injunction, rule, or order of any Governmental Entity
applicable to the Company that has had or is reasonably likely to have, either
individually or in the aggregate, a Company Material Adverse Effect, (c) Legal
Proceeding pending or, to the knowledge of the Company, threatened, against the
Company that seeks to restrain, enjoin or delay the consummation of the Merger
or any of the other transactions contemplated by this Agreement or that seeks
damages in connection therewith, or (d) Injunction of any type referred to in
Section 7.1(e).
4.10 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS
(a) The Company holds all material licenses, franchises, ordinances,
authorizations, permits, certificates, variances, exemptions, concessions,
leases, rights of way, easements, instruments, orders and approvals, domestic or
foreign (collectively, the "LICENSES"), required for or which are material to
the ownership of the assets and the operation of the businesses of the Company.
The Company is in compliance with, in all material respects, and has conducted
its business so as to comply with, in all material respects, the terms of its
Licenses and with all applicable laws, rules, regulations, ordinances and codes
(domestic or foreign). Without limiting the generality of the foregoing, the
Company (i) has all Licenses of foreign, state and local Governmental Entities
required for the operation of the facilities being operated on the date hereof
by the Company (the "PERMITS"), (ii) has duly and currently filed all reports
21
and other information required to be filed with any Governmental Entity in
connection with such Permits and (iii) is not in violation of any of such
Permits, except for delays in filing reports or possible violations that have
not had and, are not reasonably likely to have, a Company Material Adverse
Effect.
(b) Except as set forth in Section 4.10(b) of the Company Disclosure
Letter, (i) the Company and the operation of its business, equipment and other
assets and the facilities owned or leased by it are in compliance in all
material respects with all applicable Environmental Laws, (ii) the Company holds
all Licenses required under Environmental Laws necessary to enable it to own,
lease or otherwise hold its assets and to carry on its business as presently
conducted, (iii) there are no investigations, administrative proceedings,
judicial actions, orders, claims or notices that are pending, anticipated or
threatened against the Company relating to or arising under any Environmental
Laws, (iv) there is no ongoing remediation of or other response activity to
address contamination or any other adverse environmental or indoor air quality
condition and no condition that would be reasonably expected to give rise to a
requirement under applicable Environmental Laws to conduct such remediation or
response activities, and no Governmental Entity has proposed or threatened any
such remediation or response, at any real property currently or formerly leased
or owned by the Company or resulting from any activity of the Company, (v) the
Company has not received any notice alleging a violation of or liability of the
Company under any Environmental Laws, and (vi) the Company has not contractually
agreed to assume or provide an indemnity for environmental liabilities of any
third party. For purposes of this Agreement, the term "ENVIRONMENTAL LAWS" means
any federal, state, local or foreign law, statute, rule or regulation or the
common law relating to the environment, the management of hazardous or toxic
substances, the protection of natural resources or wildlife, or occupational or
public health and safety, including the federal Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended and the federal
Occupational Safety and Health Act of 1970, as amended, and any state or foreign
law counterpart.
4.11 BROKERS OR FINDERS
No agent, broker, investment banker, financial advisor or other Person is or
will be entitled, by reason of any agreement, act or statement by the Company
or its directors, officers, employees or Affiliates, to any financial
advisory, broker's, finder's or similar fee or commission, to reimbursement
of expenses or to indemnification or contribution in connection with any of
the transactions contemplated by this Agreement, except X.X. Xxxxxxxxxx &
Co., Inc., whose fees and expenses will not exceed the higher of (A) $225,000
or (B) 2% of the Merger Consideration, less the fees paid for the Company
Fairness Opinion. Such fees and expenses will be paid by the Parent and are
a part of the Company Expenses. Copies of the Company's agreement with X.X.
Xxxxxxxxxx & Co., Inc. have been made available by the Company to Parent
prior to the date of this Agreement.
4.12 TAX MATTERS
Except as set forth on Section 4.12 of the Company Disclosure Letter:
(a) The Company has timely filed all Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by the Company (whether or not shown on any Tax Return)
have been timely paid. A reserve, which the Company reasonably believes to be
adequate, has been set up for the payment of all such Taxes anticipated to be
payable by the Company in respect of periods through the date hereof. The
Company is currently the beneficiary of an extension of time to file an Income
Tax Return for the year ended December 31, 2003.
(b) No claim has ever been made by an authority in a jurisdiction
where the Company does not file a Tax Return that the Company is or may be
subject to taxation by that jurisdiction.
(c) There are no Liens or security interests on any of the assets or
properties of the Company that arose in connection with any failure (or alleged
failure) to pay any Tax.
(d) The Company has withheld and paid over to the relevant taxing
authority all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder, or other third party.
22
(e) None of the Tax Returns filed by the Company has been or is
currently being examined by the Internal Revenue Service or relevant state,
local or foreign taxing authorities. There are no examinations or other
administrative or court proceedings relating to Taxes of the Company in progress
or pending, nor has the Company received any notice or report asserting a Tax
deficiency with respect to the Company. There are no current or threatened
actions, suits, proceedings, investigations, audits or claims relating to or
asserted for Taxes of the Company.
(f) All deficiencies or assessments asserted against the Company by
any taxing authority have been paid or fully and finally settled and, to the
knowledge of the Company, no issue previously raised in writing by any such
taxing authority reasonably could be expected to result in a material assessment
for any taxable period (or portion of a period) beginning on or after the
Closing Date.
(g) The Company has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax assessment or
deficiency.
(h) The Company is not required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a change in accounting
method.
(i) There is no contract, agreement, plan or arrangement to which
the Company is a party covering any employee, former employee, officer,
director, shareholder or contract worker of the Company which, individually or
collectively, could give rise to the payment of any amount that would not be
deductible pursuant to Sections 280G or 162(m) of the Code.
(j) The Company (i) is not or has not been a member of an affiliated
group (within the meaning of Section 1504 of the Code) filing a consolidated
federal income Tax Return other than an affiliated group the common parent of
which is the Company, (ii) is not or has not been a member of any affiliated,
combined, consolidated, unitary, or similar group for state, local or foreign
Tax purposes other than a group the common parent of which is the Company, (iii)
is not or has not been a party to any Tax allocation or Tax sharing agreement,
or (iv) has no liability for the Taxes of any Person under Treasury Regulations
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by Contract, or otherwise.
(k) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for tax-free treatment under Section 355 of the Code (i) in the two (2) years
prior to the date of this Agreement or (ii) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
transactions contemplated by this Agreement.
(l) The Company has not requested a ruling from, or entered into a
closing agreement with, the Internal Revenue Service or any other taxing
authority which will have an effect on the Surviving Entity or any of its
Subsidiaries in any taxable period ending after the Closing Date.
(m) None of the assets of the Company is "tax-exempt use property"
within the meaning of Section 168(h)(1) of the Code, "tax-exempt bond financed
property" within the meaning of Section 168(g)(5) of the Code, or may be treated
as owned by any other Person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior to
the enactment of the Tax Reform Act of 1986.
(n) The Company has not participated in a corporate tax shelter
within the meaning of Treasury Regulations Section 1.6011-4T or participated in
a transaction that it has disclosed pursuant to IRS Announcement 2002-2, 2002-2
I.R.B. 304. The Company has disclosed on its U.S. federal Tax Returns all
positions taken therein that are likely to give rise to a substantial
understatement of federal income Tax within the meaning of Section 6662 of the
Code.
23
4.13 EMPLOYEE MATTERS
(a) Section 4.13(a) of the Company Disclosure Letter contains a true
and complete list of all: (i) employee benefit plans (as defined in Section 3(3)
of ERISA), including retirement, pension, profit sharing, savings, deferred
compensation, supplemental retirement, hospitalization, medical, dental, vision
care, disability, life, accident or other insurance plans, programs or
arrangements, (ii) stock option, stock purchase, phantom stock or stock
appreciation right, plans, programs or arrangements, (iii) severance,
termination pay or supplemental unemployment benefits plans, programs or
arrangements, and (iv) bonus or incentive plans, programs or arrangements
(including fringe benefit plans or arrangements) sponsored, maintained or
contributed to or required to be contributed to at any time by the Company or by
any trade or business, whether or not incorporated ("ERISA AFFILIATE"), that
together with the Company would be deemed a "controlled group" within the
meaning of Section 4001 of ERISA or Section 414 of the Code, for the benefit of
any employee or former employee of the Company, including any such type of plan
established, maintained, sponsored or contributed to under the laws of any
foreign country (the "COMPANY PLANS"). To the extent applicable, the Company has
heretofore made available to Parent true and complete copies of (i) each Company
Plan and, if the Company Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding document, (ii) the most
recent determination letter issued by the IRS with respect to each Company Plan
for which such a letter has been obtained, (iii) annual reports on Form 5500
required to be filed with any Governmental Entity for each Company Plan for the
three most recent plan years and all required actuarial reports for the last
three plan years of each Company Plan.
(b) No Company Plan is subject to Title IV of ERISA or Section 412
of the Code and neither the Company nor any ERISA Affiliate made, or was
required to make, contributions to any employee benefit plan subject to Title IV
of ERISA or Section 412 of the Code during the six year period ending on the
Effective Time.
(c) Neither the Company nor any ERISA Affiliate maintains or has an
obligation to contribute to or has within the past six years maintained or had
an obligation to contribute to a "multiemployer plan" within the meaning of
Section 3(37) of ERISA.
(d) Each Company Plan that utilizes a funding vehicle described in
Section 501(c)(9) of the Code or is subject to the provisions of Section 505 of
the Code has been the subject of a notification by the IRS that such funding
vehicle (i) qualifies for tax-exempt status under Section 501(c)(9) of the Code
and (ii) complies with Section 505 of the Code, except for those Company Plans
listed on Section 4.13(d) of the Company Disclosure Letter which the IRS does
not as a matter of policy issue such notification with respect to that
particular type of plan. Each such Company Plan satisfies, where appropriate,
the requirements of Sections 501(c)(9) and 505 of the Code.
(e) There has been no event or circumstance which has resulted in
any liability being asserted by any Company Plan, the Pension Benefit Guaranty
Corporation or any other Person or entity under Title IV of ERISA or Section 412
of the Code against the Company or any ERISA Affiliate and there has not been
any event or circumstance which could reasonably be expected to result in such
liability.
(f) The Company is not a party to or bound by the terms of any
collective bargaining agreement. The Company is in compliance in all material
respects with all applicable laws respecting the employment and employment
practices, terms and conditions of employment and wage and hours of its
employees and is not engaged in any unfair labor practice. There is no labor
strike or labor disturbance pending or, to the knowledge of the Company,
threatened against the Company, and during the past five years the Company has
not experienced a work stoppage.
(g) Except as set forth in Section 4.13(g) of the Company Disclosure
Letter, each Company Plan has been operated and administered in accordance with
its terms and applicable law, including Section 406 of ERISA and Section 4975 of
the Code, for the last five (5) fiscal years and up to the effective date of
this Agreement.
(h) Each Company Plan which is intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts maintained
thereunder are exempt from taxation under Section 501(a) of the Code.
24
(i) No Company Plan provides welfare benefits, including death or
medical benefits, with respect to current or former employees or consultants of
the Company beyond their retirement or other termination of service (other than
coverage mandated by applicable law).
(j) There are no pending, threatened or anticipated claims by or on
behalf of any Company Plan, by any employee or beneficiary covered under any
such Company Plan with respect to such Company Plan, or otherwise involving any
such Company Plan (other than routine claims for benefits).
(k) Section 4.13(k) of the Company Disclosure Letter sets forth a
true and complete list as of the date hereof of each of the following
agreements, arrangements and commitments to which the Company is a party or by
which it may be bound (true and complete copies of which have been made
available to Parent): (i) each employment, consulting, agency or commission
agreement not terminable without liability to the Company upon 60 days' or less
prior notice to the employee, consultant or agent; (ii) each agreement with any
employee of the Company the benefits of which are contingent, or the terms of
which are materially altered, upon the consummation of the transactions
contemplated by this Agreement (whether alone or in conjunction with other
actions); (iii) each agreement with respect to any employee of the Company
providing any term of employment or compensation guarantee extending for a
period longer than one year; and (iv) each other agreement or Company Plan any
of the benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the transactions
contemplated by this Agreement (whether alone or in conjunction with other
actions) 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.
(l) Except as set forth in Section 4.13(l) of the Company Disclosure
Letter, (i) no employee of the Company will be entitled to any additional
benefits or any acceleration of the time of payment or vesting of any benefits
under any Company Plan as a result of the consummation of the transactions
contemplated by this Agreement (whether alone or in conjunction with other
actions), (ii) no amount payable or economic benefit provided by the Company
(including any acceleration of the time of payment or vesting of any benefit) as
a result of the consummation of the transactions contemplated by this Agreement
(whether alone or in conjunction with other actions) could be considered an
"excess parachute payment" under Section 280G of the Code, (iii) no Person is
entitled to receive any additional payment from the Company (a "PARACHUTE
GROSS-UP PAYMENT") in the event that the excise tax of Section 4999 of the Code
is imposed on such Person, and (iv) the Company has not granted to any Person
any right to receive any Parachute Gross-Up Payment.
4.14 COMPANY FAIRNESS OPINION
The Company Board has received the opinion of EKN Securities to the effect that,
as of the date hereof, the Merger Consideration is fair, from a financial point
of view, to the holders of the Company Common Stock (the "COMPANY FAIRNESS
OPINION"). The Company has delivered to Parent a true and complete copy of the
executed Company Fairness Opinion. The Company will include an executed copy of
the Company Fairness Opinion in or as an annex to the Joint Proxy
Statement/Prospectus.
4.15 RECOMMENDATION OF THE COMPANY BOARD
The Company Board, by vote at a meeting duly called and held, has approved this
Agreement, determined that the Merger is fair to and in the best interests of
the Company's stockholders and has adopted resolutions recommending approval and
adoption of this Agreement and the Merger contemplated hereby by the
stockholders of the Company.
4.16 VOTE AND APPROVAL REQUIRED
(a) The only vote of stockholders of the Company required under the
DGCL, the Company Charter, the Company Bylaws or otherwise in order to
consummate the transactions contemplated by this Agreement, including the Merger
and the Recapitalization, is the affirmative vote of (i) a majority of the total
number of votes entitled to be cast by the holders of the issued and outstanding
shares of Company Common Stock voting as a single class, except that the holders
of the issued and outstanding shares of Company Common Stock have no voting
rights with respect to the Recapitalization (ii) 51% of the total number of
votes entitled to be cast by the holders of the issued and outstanding shares of
25
Series C Preferred voting as a single class and (iii) 51% of the total number of
votes entitled to be cast by the holders of the issued and outstanding shares of
Series D Preferred voting as a single class, and no other vote or approval of or
other action by the holders of any capital stock of the Company is required for
such approval and adoption. The Company shall not require any vote greater than
that set forth in the preceding sentence for approval of the Merger Proposal.
(b) The approval of the holders of Company Notes is required under
the Company Note Instruments to effect the Note Cancellation. No other vote or
approval of or other action by the holders of Company Notes is required for such
action.
4.17 PATENTS, TRADEMARKS AND OTHER RIGHTS
(a) LIST OF PATENTS, TRADEMARKS AND SIMILAR RIGHTS. Sections
4.17(a)(i)-(vi) of the Company Disclosure Letter set forth complete and accurate
lists and status of:
(i) all foreign and domestic Intellectual Property
registrations and issued or granted patents, or if a registration or patent has
not been issued or granted, all pending and abandoned applications for
registrations or patents, and all applications to register inventions,
trademarks, trade names, service marks, copyrights and domain names, and all
extensions, renewals, restorations, revivals, resuscitations, continuations,
continuations-in-part, divisionals, reissues, and reexaminations thereof, as
well as all invention disclosure records for which the Company has not filed for
patent protection, which the Company owns or in which the Company claims or can
claim ownership;
(ii) all products, including computer software or technology,
commercially sold or licensed by the Company or computer software or technology
utilized internally by the Company and all types of services utilized internally
or commercially provided by the Company;
(iii) any material computer software and applications in
development by or owned by the Company;
(iv) in the case of Intellectual Property not owned by the
Company, all agreements under which any Intellectual Property is licensed or
sublicensed by the Company from others or otherwise permitted by other Persons
to use, indicating the parties to each such agreement, other than retail
"shrinkwrap" or generally available retail types of licenses;
(v) any source code licensed, obtained or utilized under an
open source license, including the GNU public license;
(vi) all agreements pursuant to which the Company has granted,
or has an obligation to grant, any rights in, to or concerning any patents or
other material Intellectual Property, including agreements that singularly
provide or that contain one or more provisions providing with respect to
Intellectual Property, assignments, covenants-not-to-xxx or assert, licenses
(exclusive or nonexclusive) or sublicenses, releases, grant-backs,
cross-licenses, confidentiality or escrow arrangements, indemnification, and all
settlement, consent or coexistent agreements involving Intellectual Property;
and
(vii) all other Intellectual Property (not identified pursuant
to clauses (i)-(v) above) that is material to the business and operations of the
Company.
(b) FREE TITLE AND LIENS. The Company owns exclusively all the
Intellectual Property identified and indicated in Sections 4.17(a)(i), (ii),
(iii) and (vi) of the Company Disclosure Letter. Except as set forth in Section
4.17(b)(i)-(iii) of the Company Disclosure Letter:
(i) with respect to the Intellectual Property (other than
patents, patent applications, or invention disclosure records) owned by the
Company, the Company has good and valid title thereto free and clear of all
26
Liens, or exclusive licenses or cross-licenses or escrow arrangements, or
covenants not-to-xxx or, or any obligations to impose or enter into any of the
foregoing;
(ii) with respect to the patents, patent applications and
invention disclosure records owned by the Company, the Company has good and
valid title thereto free and clear of (w) any obligations to license (exclusive
or nonexclusive), cross-license or sublicense, escrow or assign, or any
obligations to grant a covenant-not-to-xxx or assert; (x) any Liens or
restrictions on title; or (y) any license (exclusive or nonexclusive),
sublicense, cross-license, assignment or escrow arrangements or covenants
not-to-xxx or assert;
(iii) with respect to source code owned or utilized by the
Company to produce computer programs, modules or applications, commercially
distributed or utilized by customers of the Company, the source code is devoid
of any materials provided under an open source license which restricts or
otherwise limits the commerical utilization or redistribution of the computer
programs, modules or applications;
(iv) with respect to all Intellectual Property held by the
Company under license or sublicense, other than retail or generally available
licenses, the Company has the right to use such Intellectual Property in the
manner and subject to limitations on the scope of such use as set forth in such
licenses or sublicenses, free from any Lien and not subject to any restrictions,
other than as set forth in such license or sublicense agreement; and
(v) with respect to all Intellectual Property held by the
Company, the Company owes no obligation of assignment, license or shop right in
any portion of the Intellectual Property to the United States government, any
State government, or any foreign nation and the Company has neither accepted nor
utilized research support, including financial or material support, from any
public University or State, Federal or foreign governmental agency requiring the
assignment, license or shop right in the Intellectual Property, or legally
giving rise to an assignment, license or shop right.
(c) PROTECTION OF INTELLECTUAL PROPERTY. Except as set forth in
Sections 4.17(c)(i)-(iv) of the Company Disclosure Letter:
(i) the Company has taken actions that in its reasonable
business judgment, consistent with industry standards, are appropriate
("REASONABLE ACTIONS") to protect and police its Intellectual Property,
including filing the necessary documents (including submission to the
appropriate patent office or compliance with, as appropriate, the following:
full and timely payment of filing and similar fees during prosecution; issue or
registration fees; maintenance fees; compliance with "small entity"
requirements; compliance with inventorship requirements; compliance with
oath/declaration execution requirements; compliance with information disclosure
statement requirements; and compliance with assignment execution and recording
requirements) with the United States Patent and Trademark Office, or such other
filing offices, domestic or foreign, and duly registering with or causing the
respective Intellectual Property to be issued by such filing offices; and (y) to
the extent necessary to protect its interest therein (including affording itself
of the maximum remedies available under law), the Intellectual Property of the
Company has been used with all patent, trademark, copyright and other
Intellectual Property notices, markings and legends prescribed by law;
(ii) with respect to its Intellectual Property rights that
have been applied for or filed with the relevant Governmental Entities, or that
have been registered, granted or issued by such relevant Governmental Entities,
the Company has protected and maintained, respectively, such Intellectual
Property rights under applicable laws, and such applications, filings,
registrations, grants, issuances, and other actions remain valid, in full force
and effect, and, to the extent registered, granted or issued, fully enforceable
by the Company; (y) none of the material Intellectual Property rights owned by
the Company or, to the knowledge of the Company, licensed to any it has expired,
been abandoned or fallen into the public domain, has been canceled or
adjudicated invalid (except with respect to patent applications that have been
reasonably determined by patent counsel to have been justifiably abandoned in
the ordinary course of the patent application process based upon prior art
rejections set forth by a Governmental Entity which have been reasonably
determined by patent counsel to be insurmountable without incurring
extraordinary expense and are listed on Section 4.17(c)(ii)(x) of the Company
Disclosure Letter), or is subject to any outstanding order, judgment or decree
restricting its use or adversely affecting the Company's rights thereto; and (z)
27
the status and content of the Intellectual Property identified in Section
4.17(a)(i) of the Company Disclosure Letter is accurate and complete;
(iii) there are no allegations by any non-Governmental Entity
third party to indicate that such Intellectual Property rights owned by the
Company or that have been granted or applied for or filed with the relevant
Governmental Entities and that have not been registered, granted or issued by
such relevant Governmental Entities, are not entitled to registration, grant or
issuance by the relevant Governmental Entities; and
(iv) the Company has complied with, is complying with and will
comply with: (1) its duty of disclosure before the United States Patent and
Trademark Office, as defined by the relevant rules and regulations governing
such duty, in connection with the prosecution of pending United States patent
applications (including both patent applications pending as of the Closing Date
and patent applications issued as patents as of the Closing Date); and (2) any
comparable duty of disclosure before other patent offices in countries other
than the United States, if any, in connection with the prosecution of patent
applications in those countries.
(d) INTELLECTUAL PROPERTY FROM EMPLOYEES AND OTHERS
(i) Except as described in Section 4.17(d)(i) of the Company
Disclosure Letter, the employment policy of the Company requires, and at all
times in the past has required, that the entire right, title and interest of any
and all Intellectual Property conceived, created, invented, authored or
developed or caused to be reduced to practice by any employee of the Company
during the term of, and that relates to, such employee's employment with the
Company shall immediately and exclusively vest in the Company and that such
employees have in the past cooperated, and to the knowledge of the Company have
not shown any tendency to discontinue cooperation in the future, in perfecting
all Intellectual Property rights and registrations regardless of whether the
employees remain in the employ of the Company, and the Company has taken
Reasonable Actions to generally enforce such employment policies.
(ii) Except as described in Section 4.17(d)(ii) of the Company
Disclosure Letter, true and complete copies of the Company's employment policy
and all past and current forms of employment agreements implementing this policy
used by the Company are attached to Section 4.17(d)(ii) of the Company
Disclosure Letter.
(iii) Except for those employees identified in Section
4.17(d)(iii) of the Company Disclosure Letter, every current and past employee
of the Company and every individual named or identified as an inventor on any
patent applications filed by or to be filed or on behalf of the Company
(including issued patents, pending patent applications and invention
disclosures), has executed an agreement that sets forth therein a covenant and
assignment implementing the policy set forth in clause (d)(i) above.
(iv) Except as described in Section 4.17(d)(iv) of the Company
Disclosure Letter, the Company has a policy (a true and complete copy of which
is attached to Section 4.17(d)(iv) of the Company Disclosure Letter) to obtain,
and has obtained, from all technical consultants and technical contractors,
including all individuals named or identified as inventors on any patent
applications filed or to be filed by or on behalf of the Company (including
issued patents, pending patent applications and invention disclosures), who
contribute, will in the future contribute or have contributed to the creation or
the development of Intellectual Property for the Company valid written
assignments to the Company of such consultant's or contractor's rights to any
such contribution that the Company does not, or will not, own by operation of
law and the Company has generally enforced such policy.
(v) None of the individuals identified in Sections
4.17(d)(iii) and (iv) of the Company Disclosure Letter and none of the technical
consultants or technical contractors who have not provided the Company with a
valid written assignment to such consultant's or contractor's rights as
described in Section 4.17(d)(iv) has either generated or retained any
Intellectual Property listed in Section 4.17(a) of the Company Disclosure
Letter.
(vi) Except as described in Section 4.17(d)(vi) of the Company
Disclosure Letter, to the Company's knowledge, none of the current or past
employees owed an obligation of assignment, license or shop right to any third
party for any Intellectual Property rights generated by the employee while the
employee had been employed by the Company.
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(vii) For those patents, patent applications, invention
disclosure records and copyrightable materials listed in Section 4.17(a)(i) of
the Company Disclosure Letter that do not identify the Company as the assignee,
the Company has obtained, or the Company shall procure prior to Closing without
providing any additional compensation, obligation or consideration unless with
prior written approval from Parent, the necessary agreements and/or assignments
to vest complete title to such patents, patent applications, invention
disclosure records, and copyrightable materials in the Company.
(e) TRADE SECRETS. The Company has taken all reasonable steps to
document, protect and preserve the secrecy, confidentiality and value of all of
its Trade Secrets and there are no unauthorized uses, disclosures or
misappropriations of any Trade Secret.
(f) INTELLECTUAL PROPERTY INFRINGEMENT. Except as set forth in
Section 4.17(f) of the Company Disclosure Letter:
(i) the Company's activities (including the granting of any
licenses or sublicenses), products and services have not, as presently conducted
do not, and as presently contemplated to be conducted in the future will not,
infringe upon or otherwise misappropriate or violate, any Intellectual Property
rights of any other Person;
(ii) there are no claims or suits pending, no notice (formal
or informal) provided, no legal proceedings or claims threatened, including any
indemnification or contribution claims, in each instance, either currently
pending or asserted in the past, and, to the knowledge of the Company, no basis
for any such claim, suit or proceeding:
(x) alleging that the Company or any of its activities,
products or services, or the practice of the inventions defined by their issued
patents, infringe upon, violate or otherwise constitute an unauthorized use of
any other Person's Intellectual Property;
(y) challenging the Company's ownership of, right to use,
or the validity or enforceability or effectiveness of any Intellectual Property
it owns or in which it claims ownership, including the Intellectual Property
listed in Section 4.17(a) of the Company Disclosure Letter; or
(z) contending, with respect to any agreement entered
into by the Company that the Company has breached or violated such agreement,
that any Intellectual Property licensed to or used by the Company under such
agreements has been violated or is invalid, unenforceable, unpatentable,
unregisterable or cancelable, or violates, infringes or misappropriates any
other Person's Intellectual Property, that a party to such agreement intends to
cancel, terminate or fail to renew such agreement, or that there exists an
event, condition or occurrence that, with the giving of notice or lapse of time,
or both, would constitute a breach or default by any party to such agreement;
(iii) the Company has not filed a claim against, provided
notice to or taken any other action against any Person claiming the
infringement, violation, or unauthorized use by any Person of any Intellectual
Property owned by or licensed to the Company and, to the knowledge of the
Company, no Person is infringing, violating or misappropriating any such
Intellectual Property;
(iv) the execution and delivery of this Agreement by the
Company does not, and the consummation of the Merger and the other transactions
contemplated by this Agreement will not, result in the loss of the Company's
rights in any Intellectual Property; and
(g) NO WAIVER OF PRIVILEGE. The Company has taken Reasonable
Actions to maintain any attorney-client privilege or other legal privilege with
respect to oral and written communications relating to Intellectual Property and
legal claims and defenses related thereto.
(h) ADEQUACY OF RIGHTS. The Company owns or otherwise holds
sufficient rights to all Intellectual Property necessary to carry on its
business and all such rights shall survive the execution, consummation and
performance of this Agreement unchanged in any respect.
29
(i) PRIOR AGREEMENTS. To the knowledge of the Company, no current or
former employee is or was a party to any confidentiality agreement or agreement
not to compete which restricts or forbids, or restricted or forbade, during any
time of such employee's employment by the Company such employee's performance of
the business of the Company or any activity such employee was hired to perform.
4.18 CERTAIN AGREEMENTS, AFFILIATE TRANSACTIONS AND INSURANCE
(a) Section 4.18(a) of the Company Disclosure Letter lists or
describes each Contract to which the Company is a party, or by which any of its
assets are subject or bound, of the following nature (each Contract listed or
required to be listed on Section 4.18(a) of the Company Disclosure Letter, along
with each Contract listed or described, or required to be listed or described,
on Sections 4.3(c), 4.3(d), 4.17(a)(iv), 4.17(a)(v) or 4.18(b) of the Company
Disclosure Letter, a "MATERIAL CONTRACT"):
(i) Contracts that are required to be filed with the
Commission pursuant to the Exchange Act as an exhibit to the Company's Annual
Report on Form 10-K;
(ii) Contracts that were entered into outside the ordinary
course of business and pursuant to which any obligations or liabilities (whether
absolute, contingent or otherwise) remain outstanding;
(iii) employment, bonus or consulting agreements involving
potential payments in excess of $50,000 over any period of 12 months or more;
(iv) Contracts evidencing or securing Indebtedness of the
Company (other than trade accounts arising in the ordinary course of business
that do not exceed $10,000 individually or $100,000 in the aggregate);
(v) Contracts in which the Company has guaranteed the
obligations of any Person;
(vi) Contracts that may require the Company to indemnify any
other Person;
(vii) any Contract involving the potential payment (A) by the
Company of $25,000 or more or (B) to the Company of an amount that is reasonably
likely to be $25,000 or more;
(viii) Contracts that contain any "most favored nations"
provisions;
(ix) Contracts that guarantee any Person a particular amount
of payment from the Company irrespective of such Person's performance of any of
its obligations under such Contract;
(x) Contracts between the Company and any director, officer or
Significant Stockholder of the Company;
(xi) Contracts between the Company and any Significant Party;
(xii) Contracts that contain a Change of Control Covenant; and
(xiii) Contracts giving any Person the right (contingent or
otherwise) to require the Company to register under the Securities Act any
securities or to participate in any registration of such securities.
Except as set forth in Section 4.18(a) of the Company Disclosure Letter, each
Material Contract is in full force and effect and is valid and enforceable in
accordance with its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies and except that employees' covenants not to
compete may not be enforceable in accordance with their terms in California and
certain other jurisdictions), and the Company has taken all actions necessary to
comply in all material respects with such Material Contract and is not in breach
or violation of or default under (with or without notice or lapse of time or
both) of any such Material Contract. To the knowledge of the Company, except as
set forth in Section 4.18(a) of the Company Disclosure Letter, all parties to
30
the Material Contracts other than the Company have complied in all material
respects with the provisions thereof and no party is in breach or violation of,
or in default (with or without notice or lapse of time, or both) under, such
Material Contracts. Except as set forth in Section 4.18(a) of the Company
Disclosure Letter, the Company has not received notice of any actual or
threatened termination, cancellation or limitation to, and there has not been
any other adverse development in respect of, any of the Material Contracts. The
Company has made available to Parent a true and correct copy of each Material
Contract that is in writing, and a description of all material terms of each
Material Contract or arrangement that is not in writing, listed or described or
required to be listed or described on Section 4.18(a) of the Company Disclosure
Letter.
(b) Except as set forth in Section 4.18(b) of the Company Disclosure
Letter, (i) there is no Contract or any judgment, injunction, order or decree
binding upon the Company that has or would reasonably be likely to have the
effect of prohibiting or materially restricting or limiting the ability of the
Company to conduct its business as the same is currently conducted or
contemplated to be conducted and (ii) the Company is not a party to, and none of
its assets is bound by, any Contract or any judgment, injunction, order or
decree that, after the consummation of the transactions contemplated by this
Agreement, would be or would purport to be binding upon Parent, a Controlling
Party of Parent or any Affiliate of a Controlling Party of Parent (other than
the Surviving Entity and the Surviving Entity's Subsidiaries) or any Contract or
any judgment, injunction, order or decree in respect of which any act or
omission of Parent, a Controlling Party of Parent or any Affiliate of a
Controlling Party of Parent (other than the Surviving Entity and the Surviving
Entity's Subsidiaries) would result in a breach or violation thereof or, in the
case of any Contract, constitute (with or without notice or lapse of time or
both) a default or event of default thereunder, or give rise to any right of
termination, cancellation, amendment, acceleration, repurchase, prepayment or
repayment or to increased payments thereunder, or give rise to or accelerate any
material obligation or result in the loss or modification of any material rights
or benefits thereunder or result in any Lien or Restriction on any of the
material assets of the Surviving Entity or any of its Subsidiaries. The Company
has made available to Parent a true and correct copy of each Contract that is in
writing, a description of all material terms of each Contract or arrangement
that is not in writing, and a true and correct copy of each judgment,
injunction, order or decree, listed or described, or required to be listed or
described, on Section 4.18(b) of the Company Disclosure Letter.
(c) Except as set forth in Section 4.18(c) of the Company Disclosure
Letter, there are no transactions or Contracts between the Company and any
director, executive officer or Significant Stockholder of the Company of any
nature or kind whatsoever, whether written or oral.
(d) Section 4.18(d) of the Company Disclosure Letter sets forth all
directors' and officers', errors and omissions, fire and casualty, general
liability, business interruption, product liability, and sprinkler and water
damage insurance policies maintained by the Company. The Company has made
available to Parent true and complete copies of each policy set forth, or
required to be set forth, on Section 4.18(d) of the Company Disclosure Letter.
4.19 NO INVESTMENT COMPANY
The Company is not an "investment company" subject to the registration
requirements of, or regulation as an investment company under, the Investment
Company Act of 1940, as amended.
4.20 TAKEOVER STATUTES
No "fair price," moratorium," "control share acquisition," or other similar
anti-takeover statute or regulation (including Section 203 of the DGCL) or any
anti-takeover provision in the Company Charter or Company Bylaws is, or at the
Effective Time will be, applicable to the Company, the Company Common Stock, the
Merger or the other transactions contemplated by this Agreement. The Company
Board has taken all action so that none of Parent, any Controlling Party of
Parent or any Affiliates of a Controlling Party of Parent will be prohibited
from entering into a "business combination" with the Company as an "interested
stockholder" (in each case as such term is used in Section 203 of the DGCL) as a
result of the execution of this Agreement, or the consummation of the
transactions contemplated hereby.
31
4.21 [Intentionally Omitted]
4.22 PROVIDED INFORMATION
All written information (excluding financial projections) concerning the Company
that has been prepared by or on behalf of the Company or any of its officers or
authorized representatives and that has been made available to Parent, any of
its Affiliates or any of their respective authorized representatives in
connection with the Merger, was, as of the date thereof, correct in all material
respects and did not, as of the date thereof, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such statements are made. All financial projections concerning the
Company, whether oral or written, that have been prepared or made by or on
behalf of the Company, or any of its officers or authorized representatives, and
that have been provided to Parent, any of its Affiliates or any of their
respective authorized representatives in connection with the Merger or that have
been made public since March 31, 2004 by or on behalf of the Company or any of
its officers or authorized representatives (a) have been reasonably prepared or
made on a basis reflecting the best currently available estimates and judgments
of the Company's management as to the future financial performance of the
Company and (b) are the same financial projections used by the Company for
internal planning purposes. The Company has no knowledge that the future
financial performance of the Company is unlikely to be consistent in all
material respects with such financial projections.
4.23 DOCUMENTS MADE AVAILABLE
All documents which have been or shall be made available to Parent by or on
behalf of the Company pursuant to this Agreement or in connection with the
transactions contemplated hereby (including all documents and agreements
referenced in the Company Disclosure Letter or made available to Parent in
connection with its due diligence investigation of the Company) are or when made
available shall be correct, current and complete copies of the originals
thereof.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Except as set forth in the Parent Disclosure Letter (with specific reference to
the section or subsection of this Agreement to which the information stated in
such disclosure letter relates; PROVIDED that any fact or condition disclosed in
any section of such disclosure letter in such a way as to make its relevance to
a representation or representations made elsewhere in this Agreement or
information called for by another section of such disclosure letter reasonably
apparent shall be deemed to be an exception to such representation or
representations or to be disclosed on such other section of such disclosure
letter notwithstanding the omission of a reference or cross reference thereto)
delivered by the Parent and Merger Sub to the Company, the Parent and Merger Sub
represent and warrant to the Company as follows:
5.1 ORGANIZATION AND QUALIFICATION
Each of Parent and Merger Sub (a) is a corporation duly incorporated, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated, (b) has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its business as now being conducted
and (c) is duly qualified or licensed to do business and is in good standing in
each jurisdiction in which the properties owned, leased or operated by it or the
nature of its activities makes such qualification necessary, except, in the case
of clause (c), in such jurisdictions where the failure to be so duly qualified
or licensed and in good standing has not had and is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Parent and
its Subsidiaries taken as a whole or a Material Adverse Effect on the ability of
Parent and Merger Sub to perform their obligations under, and to consummate the
transactions contemplated by this Agreement (collectively, a "PARENT MATERIAL
ADVERSE EFFECT"), it being acknowledged that any liability incurred by the
Parent or any of its Subsidiaries of $2.0 million or more shall be deemed a
Parent Material Adverse Effect. Parent has made available to the Company a true
and complete copy of the Parent Charter, Parent Bylaws, and Merger Sub's
certificate of incorporation and bylaws, each as amended to the date hereof.
32
5.2 AUTHORIZATION AND VALIDITY OF AGREEMENT
Each of Parent and Merger Sub has all requisite corporate power and authority to
enter into this Agreement and subject to obtaining the approval of Parent's
stockholders contemplated by Section 3.1 and the satisfaction of the conditions
set forth in Section 7.1(b), to perform its obligations hereunder and to
consummate the Merger and the other transactions contemplated hereby. The
execution, delivery and performance by Parent and Merger Sub of this Agreement
and the consummation by each of Parent and Merger Sub of the Merger and the
other transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action on the part of Parent and Merger Sub, subject to
the approval of Parent's stockholders described in the previous sentence. This
Agreement has been duly executed and delivered by Parent and Merger Sub and is a
legal, valid and binding obligation of Parent and Merger Sub, enforceable
against Parent and Merger Sub in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable remedies).
5.3 CAPITALIZATION
(a) As of the date hereof, the authorized capital stock of Parent
consists solely of (i) 50,000,000 shares of Parent Common Stock and (ii) no
shares of preferred stock. As of the close of business on June 30, 2004,
13,738,420 shares of Parent Common Stock were issued and outstanding. All such
shares were validly issued, fully paid and nonassessable. As of the close of
business on June 30, 2004, there were outstanding Parent Warrants and employee
stock options exercisable for an aggregate of 3,392,782 shares of Parent Common
Stock. The shares of Parent Common Stock to be issued in the Merger will, when
issued, be validly issued, fully paid and nonassessable, and no stockholder of
Parent will have any preemptive right of subscription or purchase in respect
thereof. All other material aspects of Parent's capitalization have been
disclosed in the Parent SEC Reports.
(b) The authorized capital stock of Merger Sub consists of 1,000
shares of Common Stock, par value $0.001 per share, all of which shares are
validly issued and outstanding. All of the issued and outstanding capital stock
of Merger Sub is, and at the Effective Time will be, owned by Parent, and there
are (i) no other shares of capital stock or voting securities of Merger Sub,
(ii) no securities of Merger Sub convertible into or exchangeable for shares of
capital stock or voting securities of Merger Sub and (iii) no options or other
rights to acquire from Merger Sub, and no obligations of Merger Sub to issue,
any capital stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of Merger Sub. Merger Sub
has not conducted any business prior to the date hereof and has no, and prior to
the Effective Time will have no, assets, liabilities or obligations of any
nature other than those incident to its formation and pursuant to this Agreement
and the Merger and the other transactions contemplated by this Agreement.
5.4 NO APPROVALS OR NOTICES REQUIRED; NO CONFLICT WITH INSTRUMENTS
The execution and delivery by Parent and Merger Sub of this Agreement do not,
and the performance by Parent and Merger Sub of their respective obligations
hereunder and the consummation by Parent and Merger Sub of the Merger and the
other transactions contemplated hereby will not:
(a) conflict with or violate the Parent Charter or Parent Bylaws,
the certificate of incorporation or bylaws of Merger Sub or the charter or
bylaws of any Subsidiary of Parent;
(b) except as disclosed in Section 5.4(b) of the Parent Disclosure
Letter, require any Governmental Consent or Governmental Filing, in each case on
the part of Parent or any Subsidiary of Parent, except for (i) the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, (ii)
the Governmental Consents and Governmental Filings with foreign, state and local
Governmental Entities described on Section 5.4(b) of the Parent Disclosure
Letter, (iii) the Governmental Filings required to be made pursuant to the
pre-merger notification requirements of the Xxxx-Xxxxx Act, (iv) the filing with
the Commission, and the effectiveness, of the S-4 as contemplated by Section
3.2, (v) the filing with the Commission of the Joint Proxy Statement/Prospectus
33
and such reports and other documents under Sections 13(a), 13(d), 15(d) or 16 of
the Exchange Act as may be required in connection with this Agreement or the
transactions contemplated hereby and (vi) such other Governmental Consents and
Governmental Filings the absence or omission of which will not, either
individually or in the aggregate, have a Parent Material Adverse Effect;
(c) except as disclosed in the Parent SEC reports, require, on the
part of Parent or any Subsidiary of Parent, any Contract Consent by, or Contract
Notice to, any other Person (other than a Governmental Entity), under any
License or other Contract, except for such Contract Consents and Contract
Notices the absence or omission of which will not, either individually or in the
aggregate, have a Parent Material Adverse Effect;
(d) except as disclosed in the Parent SEC reports, give rise to any
Violation of any Contract to which Parent or any Subsidiary of Parent is a
party, by which Parent, any Subsidiary of Parent or any of their respective
assets or properties is bound or affected or pursuant to which Parent or any
Subsidiary of Parent is entitled to any rights or benefits, except for such
Violations that will not, individually or in the aggregate, have a Parent
Material Adverse Effect; or
(e) assuming that the Governmental Consents and Governmental Filings
specified in clause (b) of this Section 5.4 are obtained, made and given, result
in a Violation of, under or pursuant to any law, rule, regulation, order,
judgment or decree applicable to Parent or any Subsidiary of Parent or by which
any of their respective properties or assets are bound, except for such
Violations that will not, individually or in the aggregate, have a Parent
Material Adverse Effect.
5.5 S-4; JOINT PROXY STATEMENT/PROSPECTUS
None of the information supplied or to be supplied by or on behalf of the
Parent, it Subsidiaries or the Merger Sub for inclusion or incorporation by
reference in, and that is included or incorporated by reference in (a) the S-4
(or any amendment or supplement thereto) filed or to be filed by Parent with the
Commission under the Securities Act in connection with the issuance of the
Merger Consideration, (b) the Joint Proxy Statement/Prospectus to be mailed to
the stockholders of the Company and the Parent or any amendment or supplement
thereto, or (c) any documents filed or to be filed with the Commission or any
other Governmental Entity in connection with the transactions contemplated
hereby, will, at the respective times such documents are filed, and, in the case
of the S-4 or any amendment or supplement thereto, when the same becomes
effective, at the time of the Company Special Meeting, at the time of the Parent
Stockholder Meeting or at the Effective Time, and, in the case of the Joint
Proxy Statement/Prospectus or any amendment or supplement thereto, at the time
of mailing of the Joint Proxy Statement/Prospectus to the stockholders of the
Company and Parent, at the time of the Company Special Meeting or at the time of
the Parent Stockholder Meeting, be false or misleading with respect to any
material fact, or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Information provided
by the Parent, its Subsidiaries and the Merger Sub in the Joint Proxy
Statement/Prospectus and the S-4 will comply in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the DGCL.
5.6 REPORT AND FINANCIAL STATEMENTS
Except as set forth on Section 5.6 of the Parent Disclosure Letter, Parent's
Annual Report on Form 10-K for the fiscal year ended October 31, 2003 (the
"10-K") and Parent's Quarterly Report on Form 10-Q for the quarters ended
January 31, 2004 and April 30, 2004 (the "10-Q"), at the time filed, complied in
all material respects with the applicable requirements of Form 10-K and Form
10-Q under the Exchange Act, as applicable, and did not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including the notes thereto) of Parent and its
Subsidiaries included in the 10-K and 10-Q, at the time filed, fairly presented
in all material respects the consolidated financial position of Parent and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of their operations and their consolidated cash flows for the periods then ended
and, when filed with the Commission, complied as to form in all material
respects with the applicable rules and regulations of the Commission and were
34
prepared in accordance with GAAP, consistently applied (except as may be
indicated therein or in the notes or schedules thereto).
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as disclosed in the earnings releases issued by the Parent for the
quarterly period ended April 30, 2004, since the date of the most recent audited
financial statements included in the Parent SEC Reports, there has not been, as
of the date of this Agreement, (a) any change in the financial condition,
results of operations, business, assets or liabilities of Parent and its
Subsidiaries that, individually or in the aggregate, has had or is reasonably
likely to have a Parent Material Adverse Effect or (b) any change by Parent in
its accounting principles, practices or methods except as required by GAAP.
5.8 BROKERS OR FINDERS
No agent, broker, investment banker, financial advisor or other Person is or
will be entitled, by reason of any agreement, act or statement by Parent or any
of its Subsidiaries or their respective directors, officers, employees or
Affiliates, to any financial advisory, broker's, finder's or similar fee or
commission, to reimbursement of expenses or to indemnification or contribution
in connection with any of the transactions contemplated by this Agreement.
5.9 RECOMMENDATION OF THE PARENT BOARD
The Parent Board, by vote at a meeting duly called and held, has approved this
Agreement and the Issuance and has adopted resolutions recommending approval of
the Issuance by the stockholders of Parent.
5.10 LEGAL PROCEEDINGS
Except as set forth in the Parent SEC Reports, there is no (a) material Legal
Proceeding pending or, to the knowledge of the Parent, threatened, against,
involving or affecting the Parent, any of its Subsidiaries or the Merger Sub or
any of their assets or rights, (b) judgment, decree, Injunction, rule, or order
of any Governmental Entity applicable to the Parent, any of its Subsidiaries or
the Merger Sub that has had or is reasonably likely to have, either individually
or in the aggregate, a Parent Material Adverse Effect, (c) Legal Proceeding
pending or, to the knowledge of the Parent, threatened, against the Parent, any
of it Subsidiaries or the Merger Sub that seeks to restrain, enjoin or delay the
consummation of the Merger or any of the other transactions contemplated by this
Agreement or that seeks damages in connection therewith, or (d) Injunction of
any type referred to in Section 7.1(e).
5.11 VOTE REQUIRED
The only vote of stockholders of the Parent required by state law, the Parent
Charter, the Parent Bylaws or otherwise in order to consummate the transactions
contemplated by this Agreement, including the Merger, is the affirmative vote of
a majority of the total number of votes entitled to be cast by the holders of
the issued and outstanding shares of Parent Common Stock voting as a single
class, and no other vote or approval of or other action by the holders of any
capital stock of the Parent is required.
5.12 PARENT FAIRNESS OPINION
The Parent Board has received the opinion of Xxxxx Xxxxxx & Co., Inc. to the
effect that, as of the date thereof, the Issuance is fair, from a financial
point of view, to the holders of the Parent's Company Common Stock (the "PARENT
FAIRNESS OPINION"). The Parent has delivered to the Company a true and complete
copy of the executed Parent Fairness Opinion. The Parent will include an
executed copy of the Parent Fairness Opinion in or as an annex to the Joint
Proxy Statement/Prospectus.
5.13 LICENSES; COMPLIANCE WITH REGULATORY REQUIREMENTS
Except as disclosed in the Parent SEC Reports, Parent and its Subsidiaries hold
all licenses, franchises, ordinances, authorizations, permits, certificates,
variances, exemptions, concessions, leases, rights of way, easements,
instruments, orders and approvals, domestic or foreign (collectively, the
"PARENT LICENSES"), required for or which are material to the ownership of the
assets and the operation of the businesses of Parent or any of its Subsidiaries.
35
Except as disclosed in the Parent SEC Reports, Parent and each of its
Subsidiaries are in compliance with, and have conducted their respective
businesses so as to comply with, the terms of their respective Licenses and with
all applicable laws, rules, regulations, ordinances and codes (domestic or
foreign). Without limiting the generality of the foregoing, except as disclosed
in the Parent SEC Reports, Parent and its Subsidiaries (i) have all Licenses of
foreign, state and local Governmental Entities required for the operation of the
facilities being operated on the date hereof by Parent or any of its
Subsidiaries (the "PARENT PERMITS"), (ii) have duly and currently filed all
reports and other information required to be filed with any Governmental Entity
in connection with such Permits and (iii) are not in violation of any of such
Permits, delays in filing reports or possible violations that have not had and,
are not reasonably likely to have, a Parent Material Adverse Effect.
5.14 TAX MATTERS
(a) Except as set forth on Section 5.14(a) of the Parent Disclosure
Letter and except as disclosed in the Parent SEC Reports, Parent and each of its
Subsidiaries have timely filed all Tax Returns that they were required to file.
Except as disclosed in the Parent SEC Reports, all such Tax Returns were correct
and complete in all material respects. Except as disclosed in the Parent SEC
Reports, all Taxes owed by Parent and each of its Subsidiaries (whether or not
shown on any Tax Return) have been timely paid. A reserve, which Parent
reasonably believes to be adequate, has been set up for the payment of all such
Taxes anticipated to be payable by Parent and each of its Subsidiaries in
respect of periods through the date hereof. Except as disclosed in the Parent
SEC Reports, neither Parent nor any of its Subsidiaries is currently the
beneficiary of any extension of time within which to file any Tax Return.
(b) Except as disclosed in the Parent SEC Reports, there are no
Liens or security interests on any of the assets or properties of Parent or its
Subsidiaries that arose in connection with any failure (or alleged failure) to
pay any Tax.
(c) Except as disclosed in the Parent SEC Reports, none of the Tax
Returns filed by Parent or its Subsidiaries has been or is currently being
examined by the Internal Revenue Service or relevant state, local or foreign
taxing authorities.
5.15 PATENTS, TRADEMARKS AND OTHER RIGHTS
Except as set forth in the Parent SEC reports, Parent is not presently engaged
in any material litigation regarding its Intellectual Property rights or the
Intellectual Property rights of others, and to the best of its knowledge, Parent
has not been threatened with any material litigation or claims of infringement
or otherwise regarding its Intellectual Property rights or the Intellectual
Property rights of others. Parent has undertaken and will continue to undertake
reasonable measures in maintaining its Intellectual Property portfolio, and has
taken and will continue to undertake reasonable measures in protecting its trade
secrets.
5.16 PROVIDED INFORMATION
All written information concerning Parent, its Subsidiaries or the Merger Sub
that has been prepared by or on behalf of Parent or any of its officers or
authorized representatives and that has been made available to the Company, any
of its Affiliates or any of their respective authorized representatives in
connection with the Merger, was, as of the date thereof, correct in all material
respects and did not, as of the date thereof, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such statements are made. All documents which have been or shall be made
available to the Company by or on behalf of the Parent pursuant to this
Agreement or in connection with the transactions contemplated hereby (including
all documents and agreements referenced in the Parent Disclosure Letter or made
available to the Company in connection with its due diligence investigation of
the Parent) are or when made available shall be correct, current and complete
copies of the originals thereof.
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ARTICLE VI
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, upon
reasonable notice, each party will (and Parent will use reasonable efforts to
cause each of its Subsidiaries to) afford to the other party's officers,
employees, counsel, accountants and other authorized representatives reasonable
access during normal business hours to all its properties, personnel, books and
records and furnish promptly to such Persons such financial and operating data
and other information concerning its business, properties, personnel and affairs
as such Persons will from time to time reasonably request and instruct its
officers, directors, employees, counsel and financial advisors to discuss its
business operations, affairs and assets and otherwise fully cooperate with the
other party in its investigation. Each party agrees that it will not, and will
cause its officers, employees, counsel, accountants and other authorized
representatives not to, use any information obtained pursuant to this Section
6.1 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement.
6.2 CONFIDENTIALITY
Unless otherwise agreed to in writing by the party disclosing (or whose
Representatives disclosed) the same (a "DISCLOSING PARTY"), each party (a
"RECEIVING PARTY") will, and will cause its Affiliates, directors, officers,
employees, agents and controlling Persons (such Affiliates and other Persons
with respect to any party being collectively referred to as such party's
"REPRESENTATIVES") to, (a) keep all Confidential Information (as defined below)
of the disclosing party in strict confidence and not disclose or reveal any such
Confidential Information to any Person other than those Representatives of the
receiving party who are participating in effecting the transactions contemplated
hereby or who otherwise need to know such Confidential Information, (b) use such
Confidential Information only in connection with consummating the transactions
contemplated hereby and enforcing the receiving party's rights hereunder, and
(c) not use Confidential Information in any manner detrimental to the disclosing
party. In the event that a receiving party is requested pursuant to, or required
by, applicable law or regulation or by legal process to disclose any
Confidential Information of the disclosing party, the receiving party will
provide the disclosing party with prompt notice of such request(s) to enable the
disclosing party to seek an appropriate protective order. A party's obligations
hereunder with respect to Confidential Information that (a) is disclosed to a
third party with the disclosing party's written approval, (b) is required to be
produced under order of a court of competent jurisdiction or other similar
requirements of a governmental agency, or (c) is required to be disclosed by
applicable law or regulation, will, subject in the case of clauses (b) and (c)
above to the receiving party's compliance with the preceding sentence, cease to
the extent of the disclosure so consented to or required, except to the extent
otherwise provided by the terms of such consent or covered by a protective
order. If a receiving party uses a degree of care to prevent disclosure of the
Confidential Information that is at least as great as the care it normally takes
to preserve its own information of a similar nature, it will not be liable for
any disclosure that occurs despite the exercise of that degree of care, and in
no event will a receiving party be liable for any indirect, punitive, special or
consequential damages. In the event this Agreement is terminated, each party
will, if so requested by the other party, promptly return or destroy all of the
Confidential Information of such other party, including all copies,
reproductions, summaries, analyses or extracts thereof or based thereon in the
possession of the receiving party or its Representatives; PROVIDED, HOWEVER,
that the receiving party will not be required to return or cause to be returned
summaries, analyses or extracts prepared by it or its Representatives, but will
destroy (or cause to be destroyed) the same upon request of the disclosing
party.
For purposes of this Section 6.2, "CONFIDENTIAL INFORMATION" of a party means
all confidential or proprietary information about such party that is furnished
by it or its Representatives to the other party or the other party's
Representatives, regardless of the manner in which it is furnished.
"Confidential Information" does not include, however, information which (a) has
been or in the future is published or is now or in the future is otherwise in
the public domain through no fault of the receiving party or its
37
Representatives, (b) was available to the receiving party or its Representatives
on a non-confidential basis prior to its disclosure by the disclosing party, (c)
becomes available to the receiving party or its Representatives on a
non-confidential basis from a Person other than the disclosing party or its
Representatives who is not otherwise bound by a confidentiality agreement with
the disclosing party or its Representatives, or is not otherwise prohibited from
transmitting the information to the receiving party or its Representatives, or
(d) is independently developed by the receiving party or its Representatives
through Persons who have not had, either directly or indirectly, access to or
knowledge of such information. Nothing contained in this Section 6.2 shall be
construed to limit a receiving party's right to independently develop or acquire
products without use of the disclosing party's Confidential Information.
6.3 PUBLIC ANNOUNCEMENTS
Unless otherwise required by applicable law or by obligations pursuant to any
listing agreement with or rules of any securities exchange, the National
Association of Securities Dealers, Inc. or the Nasdaq Stock Market, each party
shall use commercially reasonable efforts to consult with, and use commercially
reasonable efforts to accommodate the comments of the other parties before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby. Notwithstanding the
preceding sentence, upon execution of this Agreement and upon the Closing, the
Company and Parent will consult with each other with respect to the issuance of
a joint press release with respect to this Agreement and the transactions
contemplated hereby.
6.4 CONDUCT OF THE COMPANY'S BUSINESS PENDING THE EFFECTIVE TIME
Except as set forth on Section 6.4 of the Company Disclosure Letter, the Company
will except as permitted, required or specifically contemplated by this
Agreement, including Section 6.5 hereof, or consented to or approved in writing
by Parent, during the period commencing on the date hereof and ending at the
Effective Time:
(a) conduct its business only in, and not take any action except in,
the ordinary and usual course of its business and consistent with past
practices;
(b) use reasonable best efforts to preserve intact its business
organization, to preserve its Licenses in full force and effect, to maintain its
Intellectual Property (including the payment of any administrative fees), to
keep available the services of its present officers and key employees, and to
preserve the goodwill of those having business relationships with it;
(c) not, other than as contemplated herein to effect the
Recapitalization, (i) make or permit any change or amendments in the Company
Charter or Company Bylaws or similar organizational documents; (ii) issue,
grant, sell or deliver any shares of its capital stock or any of its other
equity interests or securities (other than shares of Company Common Stock issued
upon the exercise of any Company Stock Options outstanding on the date hereof or
Company Warrants outstanding on the date hereof), any Convertible Securities or
any phantom shares, phantom equity interests or stock or equity appreciation
rights; (iii) split, combine or reclassify the outstanding shares of its capital
stock or any of its other outstanding equity interests or securities or issue
any capital stock or other equity interests or securities in exchange for any
such shares or interests; (iv) redeem, purchase or otherwise acquire, directly
or indirectly, any shares of capital stock or any equity interests, other
securities, Convertible Securities or phantom shares, phantom equity interests
or stock or equity appreciation rights of the Company; (v) amend, modify or
accelerate the period of exercisability or vesting of, any outstanding Company
Stock Options, Company Warrants or other Convertible Securities, or adopt,
authorize or amend any other stock or equity appreciation rights, restricted
stock or equity, stock or equity purchase, stock or equity bonus, option or
similar plan, arrangement or agreement (including any Company Stock Plan); (vi)
make any changes in its equity capital structure; (vii) declare, set aside, pay
or make any dividend or other distribution or payment (whether in cash, property
or securities) with respect to its capital stock or other securities ; (viii)
sell, transfer or otherwise dispose of, or pledge any Investment Security; or
(ix) enter into or assume any Contract with respect to any of the foregoing;
(d) not (i) modify or change in any material respect any License,
any Material Contract or any other Contract that is material to the business of
the Company, other than in the ordinary course of business consistent with past
practice; (ii) modify or change in any respect any of the Specified Contracts;
(iii) terminate any License, Material Contract or any other Contract that is
material to the business of the Company, (iv) offer to enter into, assume or
enter into, a Contract with any Person where the terms and provisions so
offered, or the terms and provisions of the Contract to be entered into or
assumed would give any other Person (an "MFN BENEFICIARY") the right to require
38
at any time that the terms and conditions of such MFN Beneficiary's Contract
with the Company be adjusted, changed or modified (including retroactively) in
any manner based upon the terms and provisions in the first Person's Contract or
that such Contract be terminated; (v) hire any new nonclerical or
nonadministrative employee, replace any existing nonclerical or
nonadministrative employee, enter into any new employment, consulting,
contractor, agency or commission agreement, make any amendment or modification
to any such existing agreement or grant any increases in compensation, other
than the regular annual salary increases required to be made to employees of the
Company who are not directors or officers of the Company; (vi) establish, amend
or modify any employee benefit plan of any kind referred to in Section 4.13(a),
except to the extent required by any applicable law, the existing terms of any
such plan or the provisions of this Agreement; (vii) modify, amend, renew or
enter into any directors' and officers' insurance policy with respect to the
Company; (viii) provide security for any of its outstanding unsecured
Indebtedness, provide additional security for any of its outstanding secured
Indebtedness or grant, create or suffer to exist any Lien on or with respect to
any assets or rights of the Company, except in any such case for Permitted
Encumbrances; (ix) pay, discharge or satisfy claims, liabilities or obligations
(absolute, accrued, contingent or otherwise), other than any payment, discharge
or satisfaction in the ordinary course of business consistent with past
practice; (x) cancel or forgive any Indebtedness or waive any claims or rights
of substantial value; (xi) make or authorize any capital expenditures other than
in the ordinary course of business in amounts of more than $50,000 individually
or $100,000 in the aggregate; (xii) accelerate the payment of, or otherwise
prepay, any existing outstanding Indebtedness; (xiii) other than as otherwise
permitted by this Agreement, make any advance or loan to or engage in any
transaction with any Significant Stockholder or director, former director,
officer, former officer, partner, Affiliate of the Company not required by the
terms of an existing Contract described in Section 4.18 of the Company
Disclosure Letter; (xiv) guarantee or otherwise become responsible for any
Indebtedness of any other Person; (xv) settle or compromise any claims,
litigation or arbitration; (xvi) enter into or assume any Contract that would be
a Specified Contract, or amend any term of any existing Contract in a manner
that would cause it to become a Specified Contract; or (xvii) enter into or
assume any Contract with respect to any of the foregoing;
(e) not acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to otherwise acquire any assets that are material,
individually or in the aggregate, to the Company;
(f) not sell, lease or encumber or otherwise voluntarily dispose of,
or agree to sell, lease, encumber or otherwise dispose of, any of its assets
that are material, individually or in the aggregate, to the Company;
(g) not incur any amount of Indebtedness (other than for trade
accounts arising in the ordinary course of business or in furtherance of the
transactions contemplated by this Agreement) that exceeds $10,000 individually
or $100,000 in the aggregate prior to the Closing Date or assume or enter into
any Contract to do so;
(h) not (i) modify or change in any respect, or terminate any
agreement related to Intellectual Property; (ii) provide, or enter into any
Contract that provides, or amend, modify or change any existing Contract to
provide (A) any assignment, grant-backs, cross-license, of, or covenant
not-to-xxx, covenant not to assert or grant of release regarding, any
Intellectual Property, (B) the granting or licensing to any other Persons of (1)
any exclusive right (within any geographic area or line of products or services
or field of use) to use any of the Company's owned or licensed Intellectual
Property or (2) any right (within any geographic area or line of products or
services or field of use) to use any of the Company's material owned or licensed
Intellectual Property, (C) any Person with "most favored nations" terms and
conditions, (D) that the Company would be required to use exclusively the
products or services provided by another party (or an Affiliate thereof) or a
specified third party (or refrain from using the products and services of any
Person other than such other party or such specified other Person) within any
geographic area or line of products or services or field of use, (E) that the
Company will not xxx or otherwise institute legal action against any other
Person for any reason, (F) subject to Section 6.5, any agreements with third
parties for the exchange and/or protection of confidential information, (G)
rights or obligations that are binding upon, or purport to be binding upon, any
Person that is not a party to such Contract, (H) that the Company indemnify any
Person, (I) that the Company guarantee any Person a particular amount of payment
from the Company irrespective of such Person's performance of any of its
obligations, or (J) a Change of Control Covenant with respect to the Company;
(iii) terminate or modify or change in any material respect any agreement
setting forth a covenant or assignment implementing the policies described in
39
Section 4.17(d); (iv) xxx or otherwise institute legal action (including by the
assertion of a counterclaim) against any Person for any reason; or (v) solicit,
initiate or encourage inquiries or submission of proposals or offers from any
Person relating to, or enter into or assume any Contract with respect to, any of
the foregoing;
(i) not (i) make, revoke or amend any Tax election, (ii) make any
material change in any accounting, financial reporting or Tax practice or
policy, except as required by GAAP, (iii) execute any waiver of restrictions on
assessment or collection of any Tax, (iv) enter into or amend any agreement or
settlement with any Tax authority, (v) change the Company's auditors or (vi)
permit any insurance policy naming it as a beneficiary or loss-payable payee to
be cancelled or terminated, except, in the case of clause (v), in the ordinary
course of business consistent with past practice;
(j) not take any action that would cause its representations and
warranties contained in Section 4.1 to be untrue in any respect or, except as
otherwise contemplated by this Agreement, make any changes to the corporate
structure of the Company (including the ownership by the Company of its
businesses and assets);
(k) not make any capital contribution to any Person or acquire any
securities or other debt or equity interests in any other Person or enter into
or assume any Contract with respect to the foregoing;
(l) not revalue any of its assets, including writing down the value
of any assets or writing off any notes or accounts receivable, except as
required by GAAP;
(m) prepare budgets, forecasts, and other internal management
reports in a manner and at times consistent with the Company's past practice;
and
(n) give prompt notice in writing to Parent of (i) any information
that indicates that any of the Company's representations or warranties contained
herein were not true and correct as of the date hereof or will not be true and
correct as of the Effective Time (except for changes permitted or contemplated
by this Agreement), (ii) the occurrence of any event that will result, or has a
reasonable prospect of resulting, in the failure of any condition specified in
Article VII hereof to be satisfied, (iii) any notice or other communication from
a third party alleging that the consent of such third party is or may be
required in connection with the transactions contemplated by this Agreement or
that such transactions otherwise may violate the rights of or confer remedies
upon such third party and (iv) any notice of, or other communication relating
to, any litigation referred to in Section 6.9 or any order or judgment entered
or rendered therein.
6.5 NO SOLICITATION
(a) From and after the date hereof until the earlier of the
Effective Time or the termination of this Agreement in accordance with its
terms, the Company agrees that it shall not, nor shall it permit any of its
Affiliates to, nor shall it authorize or permit any officer, director, employee,
agent or representative (including any investment banker, attorney, accountant
or other adviser) of the Company to, directly or indirectly, or otherwise (i)
solicit, initiate, encourage or otherwise facilitate any inquiries or the
submission of any proposals or offers from any Person that relates to any
Alternative Proposal, (ii) participate in any discussions or negotiations
regarding any Alternative Proposal, (iii) cooperate with, or furnish or cause to
be furnished any non-public information concerning the business or assets of the
Company to any Person in connection with any Alternative Proposal, (iv) approve,
recommend or permit the Company to enter into an agreement or understanding with
any Person relating to any Alternative Proposal, (v) amend or grant any waiver
or release of any standstill agreement or (vi) vote for, execute a written
consent (or equivalent instrument) in favor of, or otherwise approve or enter
into any agreements or understandings with respect to any of the foregoing;
PROVIDED, HOWEVER, that nothing contained in this Section 6.5 shall prevent the
Company or the Company Board from (A) complying with Rule 14e-2 and Rule 14d-9
promulgated under the Exchange Act with regard to an Alternative Proposal by
means of a tender offer; or (B) recommending an Alternative Proposal to the
stockholders of the Company if (x) the Company Board determines in good faith by
a majority vote that such Alternative Proposal is a Superior Proposal (as
defined below) and after consultation with the Company's outside legal counsel,
it is necessary to recommend such Superior Proposal to the stockholders of the
Company in order to comply with its fiduciary duties under applicable law, and
(y) the Company has complied with paragraphs (b), (c), (d) and (e) of this
Section 6.5. The Company agrees that it will take the necessary steps to
40
promptly inform the individuals or entities referred to in the first sentence
hereof of the obligations undertaken in this Section 6.5.
(b) The restrictions set forth in Section 6.5(a) shall not prevent
the Company Board (or any officer, director or employee of, or any investment
banker, attorney, accountant or other advisor, representative or agent, of the
Company) in the exercise of and as required by its fiduciary duties under
applicable law as determined by the Company Board in good faith (after
consultation with the Company's outside legal counsel) from engaging in
discussions or negotiations with (but not directly or indirectly soliciting or
initiating such discussions or negotiations or directly or indirectly
encouraging inquiries or the making of any Alternative Proposal), and furnishing
information concerning the Company and its business and assets to, a Person who
makes a written, unsolicited, bona fide Alternative Proposal (except that for
purposes of this Section 6.5(b), to constitute an Alternative Proposal such
proposal, (w) if relating to the issuance by the Company of any equity interest
in or any voting securities of the Company, must contemplate the issuance of
more than 50% rather than 15% or more, of the total of such equity interests or
voting securities, (x) if relating to the acquisition in any manner of any
assets of the Company, must contemplate the acquisition of more than 50%, rather
than 15% or more, of the total of such assets, and (y) if relating to the
acquisition by any Person in any manner of beneficial ownership or a right to
acquire beneficial ownership of, or the formation of any "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) which beneficially owns, or has the right to acquire beneficial
ownership of, outstanding shares of capital stock of the Company, must
contemplate the acquisition of more than 50%, rather than 15% or more, of the
then outstanding shares of capital stock of the Company that, (A) after taking
into consideration the strategic benefits to the Company of the Merger (after
consultation with its financial advisor), is more favorable to the stockholders
of the Company from a financial point of view than the Merger, as determined in
good faith by a majority of the Company Board after consultation with the
Company's financial advisors, which shall be of national reputation, (B) will
constitute a transaction for which financing, to the extent required, is then
committed or which, in the good faith judgment of a majority of the Company
Board, is reasonably capable of being obtained and (C) if accepted, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the transaction and the Person making the proposal, as
determined in the good faith judgment of a majority of the Company Board (after
consultation with its outside legal counsel) (any such Alternative Proposal
satisfying clauses (A),(B) and (C) above is herein referred to as a "SUPERIOR
PROPOSAL"); PROVIDED, that in advance of the taking of any such actions by the
Company, Parent shall have been notified in writing of such Superior Proposal
and given a copy of such Superior Proposal.
(c) The Company shall provide Parent (for at least five business
days following the receipt of such notice) an opportunity to propose an
amendment to this Agreement to provide for terms and conditions no less
favorable than the Superior Proposal in which event the Company shall cause its
respective financial and legal advisors to negotiate in good faith with Parent
for a reasonable period of time after the Company Board determines that the
terms and conditions proposed by Parent are no less favorable than the Superior
Proposal, to make such adjustments to the terms and conditions of this Agreement
as would enable the Company to proceed with the transactions contemplated
hereby. The provisions of this paragraph shall apply to successive Superior
Proposals (provided that each such Superior Proposal shall meet the then
applicable requirements thereof, based upon the terms of this Agreement in
effect on the date hereof or as such terms shall be modified, amended or
superseded).
(d) The Company shall promptly advise Parent orally and in writing
of any request for information or of any Alternative Proposal, or any inquiry,
offer or proposal with respect to or which could lead to any Alternative
Proposal (whether made directly to the Company or one of its advisers), the
material terms and conditions of such request, Alternative Proposal or inquiry,
offer or proposal, and the identity of the Person making any such request,
Alternative Proposal or inquiry, offer or proposal. The Company shall keep
Parent fully informed of the status and details of any such request, Alternative
Proposal or inquiry, offer or proposal.
(e) Notwithstanding Section 6.5(b), the Company shall not provide
any non-public information to a third party unless the Company provides such
non-public information pursuant to a non-disclosure agreement with terms
regarding the protection of confidential information at least as restrictive as
such terms set forth in Section 6.2.
(f) The Company shall immediately cease and cause to be terminated
any existing discussion or negotiations with any Persons (other than Parent)
conducted prior to the date of this Agreement with respect to any of the
foregoing and will exercise its rights under any confidentiality agreements with
any such Persons to require the return or destruction of confidential
information provided by the Company or its representatives to any such Persons.
41
6.6 EXPENSES
Except as otherwise provided in this Agreement, if the Merger is consummated,
all costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid by the Parent; PROVIDED, however,
that for the purpose of determining the Company Expenses, the Commission filing
fee for the S-4 (and any amendment or supplement thereto) and the Joint Proxy
Statement/Prospectus included in the S-4 (and any amendment or supplement
thereto), the fee for filing under the Xxxx-Xxxxx Act and the printing and
mailing expenses in connection with the proxy solicitation will be attributed
one-half to Parent and one-half to the Company. In the event that the Merger is
not consummated, each of the Parent and Company shall bear all of its own costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby.
6.7 ACTIONS BY MERGER SUB
In its capacity as the sole stockholder of Merger Sub, Parent will cause Merger
Sub to approve and adopt the Merger Proposal and to take all corporate action
necessary on its part to consummate the Merger and the transactions contemplated
hereby.
6.8 LISTING
Each party hereto agrees to take all action reasonably necessary to cause the
shares of Parent Common Stock and the common stock underlying the Parent
Warrants and Parent Derivative Securities to be issued in the Merger to be
authorized for listing or otherwise eligible for trading on the Relevant Market,
subject to official notice of issuance.
6.9 DEFENSE OF LITIGATION
Each of the parties agrees to vigorously defend against all actions, suits or
proceedings in which such party is named as a defendant which seek to enjoin,
restrain or prohibit the transactions contemplated hereby or seek damages with
respect to such transactions. The Company will not settle any such action, suit
or proceeding or fail to perfect on a timely basis any right to appeal any
judgment rendered or order entered against the Company therein without the
consent of Parent. Each of the parties further agrees to use its reasonable
efforts to cause each of its Affiliates, directors and officers to vigorously
defend any action, suit or proceeding in which such Affiliate, director or
officer is named as a defendant and which seeks any such relief to comply with
this Section to the same extent as if such Person were a party hereto.
6.10 INDEMNIFICATION OF DIRECTORS AND OFFICERS; EXCULPATION AND INSURANCE
(a) All rights to indemnification and exculpation from liabilities
for acts or omissions occurring at or prior to the Effective Time now existing
in favor of the current or former directors, officers and employees of the
Company (the "Indemnified Parties") as provided in the Company Charter or the
Company Bylaws (in each case, as in effect on the date hereof) shall be assumed
by the Surviving Entity in the Merger, without further action, as of the
Effective Time and shall survive the Merger and shall continue in full force and
effect in accordance with their terms. The Parent shall indemnify and hold
harmless, and provide advancement of expenses to the Indemnified Parties to the
same extent such persons are indemnified or have the right to advancement of
expenses as of the date hereof by the Company pursuant to the Company Charter
and the Company Bylaws.
(b) For three (3) years after the Effective Time, Parent shall
maintain in effect the Company's current directors' and officers' liability
insurance in respect of acts or omissions occurring at or prior to the Effective
Time (including for acts or omissions occurring in connection with the approval
of this Agreement and the consummation of the transactions contemplated hereby)
covering the Indemnified Parties currently covered by the Company's directors'
and officers' liability insurance policy (a correct and complete copy of which
has been heretofore made available to Parent), on terms with respect to such
coverage and amount no less favorable than those of such policy in effect on the
date hereof; PROVIDED, HOWEVER, that Parent may substitute therefor policies of
Parent containing terms with respect to coverage and amount no less favorable to
such Indemnified Parties; PROVIDED FURTHER, HOWEVER, that in satisfying its
42
obligation under this Section 6.10(b) Parent shall not be obligated to pay
aggregate premiums in excess of $140,000, it being understood and agreed that
Parent shall nevertheless be obligated to provide such coverage as may be
obtained for such $140,000 amount.
(c) The covenants contained in this Section 6.10 are intended to be
for the benefit of, and shall be enforceable by, each of the Indemnified Parties
and their respective heirs and legal representatives, and shall not be deemed
exclusive of any other rights to which an Indemnified Party is entitled, whether
pursuant to law, contract or otherwise.
6.11 NON-SOLICITATION OF EMPLOYEES
In the event that this Agreement is terminated, except as is consistent with
each party's standard recruitment practice which may include solicitation of
employees through employment agencies, advertisements in newspapers, magazines,
trade journals or the Internet, for a period of two (2) years from the date
hereof, neither Party shall, without the other party's prior written consent,
solicit any employee of the other party to leave the other party's employ in
order to accept employment with the soliciting party or any other person.
6.12 TAX-FREE REORGANIZATION
The parties intend that the Merger qualify as a tax-free "reorganization" under
Section 368(a) of the Code, and the parties will take the position for all
purposes that the Merger shall qualify as a reorganization under such Section.
In addition, the parties covenant and agree that they will not engage in any
action, or fail to take any action, which action or failure to take action would
reasonably be expected to cause the Merger to fail to qualify as a tax-free
"reorganization" under Section 368(a) of the Code, whether or not otherwise
permitted by the provisions of this Agreement. The parties further covenant that
they will endeavor to structure the Merger as a tax-free reorganization in a
manner that will allow the Parent to preserve, to the extent feasible, the
Company's current net operating loss. The Company, Parent and Merger Sub shall
deliver and execute to each of Xxxxxxxxxxx & Xxxxxxxx LLP, counsel to the
Company, and Xxxxxxx, Savage, Kaplowitz, Wolf & Marcus, LLP, counsel to Parent
and Merger Sub, certificates acceptable to said counsel at such time or times as
reasonably requested by each such law firm in connection with its delivery of
its opinion referred to in Section 7.2(p) or Section 7.3(g), as the case may be.
Prior to the Effective Time, none of the Company, Parent or Merger Sub shall
take or cause to be taken any action which would cause to be untrue any of the
representation in such certificates.
6.13 NOTICE BY PARENT
Parent shall, during the period commencing on the date hereof and ending at the
Effective Time, give prompt notice in writing to the Company of (a) any
information that indicates that any of Parent's representations or warranties
contained herein were not true and correct as of the date hereof or will not be
true and correct as of the Effective Time (except for changes permitted or
contemplated by this Agreement), (b) the occurrence of any event that will
result, or has a reasonable prospect of resulting, in the failure of any
condition specified in Article VII hereof to be satisfied, (c) any notice or
other communication from a third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated by
this Agreement or that such transactions otherwise may violate the rights of or
confer remedies upon such third party and (d) any notice of, or other
communication relating to, any litigation referred to in Section 6.9 or any
order or judgment entered or rendered therein.
6.14 COMPANY MONTHLY BUDGET
The Company shall, during the period commencing on the date hereof and ending on
the earlier of (i) the Termination Date or (ii) the Closing Date (the "BUDGET
REVIEW PERIOD"), provide to Parent a written monthly budget (the "COMPANY
MONTHLY BUDGET") for the upcoming month (the "SUBJECT MONTH") containing
estimates or projections of the Company's anticipated revenues and expenses for
such Subject Month. The Company shall provide the first Company Monthly Budget
to Parent upon the execution of this Agreement and all subsequent Company
Monthly Budgets at least ten calendar days prior to the beginning of the next
Subject Month.
43
6.15 TAX TREATMENT DISCLOSURE
Notwithstanding anything herein or in any confidentiality agreement between the
parties or their Affiliates to the contrary, except as reasonably necessary to
comply with applicable securities laws, each party to this Agreement (and each
employee, representative, or other agent of such party) may (i) consult any tax
advisor regarding the U.S. federal income tax treatment or tax structure of the
transaction, and (ii) disclose to any and all persons, without limitation of any
kind, the U.S. federal income tax treatment and tax structure of the transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to the taxpayer relating to such tax treatment and tax structure.
For this purpose, "tax structure" is limited to any facts relevant to the U.S.
federal income tax of the transaction and does not include information relating
to the identity of the parties.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT, MERGER SUB AND THE
COMPANY
The respective obligations of Parent, Merger Sub and the Company to consummate
the Merger are subject to the satisfaction at or prior to the Closing Date of
each of the following conditions, any of which, to the extent permitted by
applicable law, may be waived by Parent for itself or for Merger Sub (but not
for the Company), or by the Company for itself (but not for Parent or Merger
Sub):
(a) APPROVAL OF STOCKHOLDERS. This Agreement, the Merger Proposal
and the Recapitalization Proposal shall have been approved and adopted by the
requisite vote of the holders of the Company Common Stock and Company Preferred
Stock in accordance with applicable law, the Company Charter, and the Company
Bylaws. The Issuance shall have been approved by the requisite vote under the
rules of the Relevant Market by the stockholders of Parent.
(b) REGISTRATION. (i) the S-4 (as amended or supplemented) shall
have become effective under the Securities Act and shall not be subject to any
stop order, and no action, suit, proceeding or investigation by the Commission
seeking a stop order or to suspend the effectiveness of the S-4 shall have been
initiated and be continuing, and (ii) Parent shall have received all state
securities law or blue sky permits and authorizations necessary to issue the
Merger Consideration as contemplated hereby and such permits and authorizations
will be in full force and effect.
(c) XXXX-XXXXX ACT. The waiting period (and any extension thereof)
applicable to the transactions contemplated hereby under the Xxxx-Xxxxx Act
shall have expired or been terminated without litigation having been commenced
that is continuing, or threat of litigation having been made that remains
unresolved, by the United States Department of Justice or the United States
Federal Trade Commission.
(d) NASDAQ LISTING. The shares of Parent Common Stock to be issued
in the Merger and the common stock underlying the Parent Warrants and Parent
Derivative Securities will have been authorized for listing or otherwise
eligible for trading on the Relevant Market subject only to official notice of
issuance.
(e) ABSENCE OF INJUNCTIONS. No permanent or preliminary Injunction
or restraining order by any court or other Governmental Entity of competent
jurisdiction, or other legal restraint or prohibition, shall be in effect
preventing consummation of the transactions contemplated hereby as provided
herein, or permitting such consummation subject to any condition or restriction
that has had or would have a material adverse effect on the transactions
contemplated hereby or a Material Adverse Effect on Parent and its Subsidiaries
taken as a whole, any Controlling Party of Parent and its Subsidiaries taken as
a whole, or the Surviving Entity and its Subsidiaries taken as a whole.
44
(f) APPROVAL OF NOTE CANCELLATION. The holders of Company Notes
shall have approved the Note Cancellation.
(g) DUE DILIGENCE. Each party shall have completed to its own
reasonable satisfaction due diligence with respect to the other party.
7.2 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to consummate the Merger are also
subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, unless waived by Parent:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of the Company contained herein shall, if specifically qualified
by materiality, be true and correct and, if not so qualified, be true and
correct in all material respects in each case as of the date of this Agreement
and (except to the extent such representations and warranties speak of a
specified earlier date) on and as of the Closing Date, as though made on and as
of the Closing Date, except where the failure of the representations and
warranties to be true and correct has not had and would not reasonably be
expected to have a Material Adverse Effect.
(b) PERFORMANCE OF AGREEMENTS. The Company shall have performed in
all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to or on the Closing Date.
(c) OFFICERS' CERTIFICATE. The Company shall have delivered to
Parent (i) a certificate, dated the Closing Date, signed on behalf of the
Company by its Chief Executive Officer and Principal Financial Officer
certifying as to the fulfillment of the conditions specified in the first
sentence of Section 7.1(a) and in Sections 7.1(f), 7.2(a) and 7.2(b), and (ii) a
certificate of the Secretary of the Company certifying, among other things, (A)
the incumbency of the officers of the Company having authority to execute and
deliver this Agreement and the agreements and documents contemplated hereby and
(B) the resolutions of the Company Board referred to in Section 4.15, any
subsequent resolutions of the Company Board with respect to the Merger and the
resolution of the Company's stockholders approving the Merger Proposal.
(d) NO ADVERSE ENACTMENTS. There shall not have been any statute,
rule, regulation, order, judgment or decree proposed, enacted, promulgated,
entered, issued, enforced or deemed applicable by any foreign or United States
federal, state or local Governmental Entity, and there shall be no action, suit
or proceeding pending or threatened, which, in Parent's reasonable judgment (i)
makes or may make this Agreement, the Merger, or any of the other transactions
contemplated by this Agreement illegal or imposes or may impose material damages
or penalties in connection therewith, (ii) requires or may require Parent, any
Controlling Party of Parent, the Surviving Entity or any of their respective
Subsidiaries to divest or hold separate any material portion of the assets or
business of Parent, any Controlling Party of Parent, the Surviving Entity or any
of their respective Subsidiaries, if the Merger is consummated, (iii) imposes or
may impose material limitations on the ability of Parent or any Controlling
Party of Parent to effectively exercise full rights of ownership of shares of
capital stock of the Surviving Entity (including the right to vote such shares
on all matters properly presented to the stockholders of the Surviving Entity)
or makes or may make the holding by Parent or any Controlling Party of Parent of
any such shares illegal or subject to any materially burdensome requirement or
condition, (iv) requires or may require Parent or any Controlling Party of
Parent or the Company or any of their respective Subsidiaries or Affiliates to
cease or refrain from engaging in any material business, including any material
business conducted by the Company or any of its Subsidiaries, if the Merger is
consummated, or (v) otherwise prohibits or unreasonably delays, or may prohibit
or unreasonably delay, the consummation of the Merger or any of the other
transactions contemplated by this Agreement or increases in any material respect
the liabilities or obligations of Parent arising out of this Agreement, the
Merger or any of the other transactions contemplated by this Agreement.
(e) CONTRACT CONSENTS AND NOTICES. All Contract Consents and
Contract Notices which are referred to in Section 4.5 or otherwise required in
connection with the consummation of the transactions contemplated hereby and
which, if not obtained or given, would have, individually or in the aggregate, a
45
material adverse effect on the transactions contemplated hereby or a Material
Adverse Effect on Parent and its Subsidiaries taken as a whole or the Surviving
Entity and its Subsidiaries taken as a whole, shall have been obtained and
given.
(f) NO MATERIAL ADVERSE CHANGE. Since the date hereof, (i) nothing
shall have occurred, and Parent shall not have become aware of any circumstance,
change or event having occurred prior to such date, which individually or in the
aggregate, has had or, in the reasonable judgment of Parent, could be expected
to have, a Material Adverse Effect on (A) the transactions contemplated hereby
or Parent's liabilities or obligations with respect to such transactions, or (B)
the business, assets, results of operations, financial condition or prospects of
the Company, the Surviving Entity and its Subsidiaries, taken as a whole
(including any potential change or event disclosed on any Schedule (including
the Company Disclosure Letter) which, subsequent to the date hereof, actually
occurs), and (ii) there shall not have occurred (A) any general suspension of
trading in the Company Common Stock on the Pink Sheets or (B) a declaration of a
banking moratorium or any general suspension of payments in respect of banks in
the United States.
(g) RECEIPT OF LICENSES, PERMITS AND CONSENTS. Other than the filing
of the Certificate of Merger with the Secretary of State of the State of
Delaware and filings due after the Effective Time, all Local Approvals, and all
other Government Consents as are required in connection with the consummation of
the transactions contemplated hereby shall have been obtained and shall be in
full force and effect, all Governmental Filings as are required in connection
with the consummation of such transactions shall have been made, and all waiting
periods, if any, applicable to the consummation of such transactions imposed by
any Governmental Entity shall have expired, other than those which, if not
obtained, in force or effect, made or expired (as the case may be) would not,
either individually or in the aggregate, have a material adverse effect on the
transactions contemplated hereby or a Material Adverse Effect on the Company,
Parent and its Subsidiaries taken as a whole, any Controlling Party of Parent
and its Subsidiaries taken as a whole or the Surviving Entity and its
Subsidiaries taken as a whole.
(h) SIGNIFICANT PARTY CONTRACTS. Each of the Significant Party
Contracts shall be in full force and effect immediately prior to the Effective
Time and no party shall have taken any action (including the delivery of
notice), or threatened to take any action, to terminate, cancel, declare a
default or breach, or accelerate payments or performance obligations of the
Company or any of its Subsidiaries under, any Significant Party Contract, which
action (or notice) has not been withdrawn, rescinded or otherwise been legally
determined to be ineffective.
(i) PROCEEDINGS SATISFACTORY. All actions, proceedings, instruments
and documents required to carry out the transactions contemplated hereby or
incidental hereto and all other related legal matters shall have been reasonably
satisfactory to and approved by counsel for Parent and such counsel shall have
been furnished with such certified copies of such corporate actions and
proceedings and such other instruments and documents as such counsel shall have
reasonably requested.
(j) PARENT EMPLOYMENT AGREEMENTS. Each of Xxxxxxxx Xxxxxxx and
Xxxxxxxxxxx Xxxxx shall enter into mutually acceptable employment agreements
with the Parent to be effective as of the Closing. Xx. Xxxxxxx'x employment
agreement with the Parent shall be for a one-year term and provide for an annual
salary of $200,000. The Company will seek to procure the agreement of Xxxxx
Xxxxxx to enter into an employment agreement with the Parent to be effective as
of the Closing; PROVIDED, HOWEVER, that the execution of such employment
agreement shall not be a condition to Closing.
(k) DISSENTING SHARES. On the Closing Date, Dissenting Shares shall
not aggregate more than 5% of the shares of Company Common Stock, which shall
include any shares of Company Common Stock issuable upon conversion of the
Series D Preferred and Company Notes.
(l) INTELLECTUAL PROPERTY. The Parent has determined that the
Company has all necessary right to utilize its Intellectual Property and the
absence of any bona fide third party claim that the Company's Intellectual
Property infringes on the Intellectual Property of any other party.
(m) COMPANY'S CLOSING BALANCE SHEET. The Company provides a balance
sheet at Closing (the "CLOSING BALANCE SHEET").
(n) PARENT FAIRNESS OPINION. The Parent shall have received the
Parent Fairness Opinion that is acceptable to the Parent.
46
(o) RESIGNATION OF OFFICERS AND MEMBERS OF THE COMPANY BOARD. At the
Effective Time, all of the officers and members of the Company Board shall
tender their resignations as officers and directors of the Company, and the
vacancies created on the Company Board shall be filled by persons designated by
the Parent Board.
(p) TAX OPINION. Parent shall have received from Xxxxxxx, Savage,
Kaplowitz, Wolf & Marcus, LLP, counsel to Parent and Merger Sub, on the Closing
Date, an opinion in form and substance reasonably satisfactory to Parent and
dated as of the Closing Date, to the effect that the Merger will qualify for
United States Federal income tax purposes as a "reorganization" within the
meaning of Section 368(a) of the Code. In rendering such opinion, Xxxxxxx,
Savage, Kaplowitz, Wolf & Marcus, LLP may rely upon customary assumptions and
the representations and covenants contained in the certificates of the Company,
Parent and Merger Sub referred to in Section 6.12.
(q) COMPANY MONTHLY BUDGET. Parent shall have approved each Company
Monthly Budget. The Company shall have not received less than $750,000 in
revenues during its third fiscal quarter, less than $750,000 in revenues during
its fourth fiscal quarter, or incurred more than 10% in excess of the expenses
projected for such Subject Months by the respective Company Monthly Budget.
(r) CANCELLATION OF COMPANY EMPLOYMENT AGREEMENT. Xxxxxxxx Xxxxxxx,
President and CEO of the Company, shall have cancelled her November 26, 2000
employment agreement, as amended on June 27, 2002, with the Company
(collectively, the "Xxxxxxx Employment Agreement") and released Parent, the
Company and the Company's successors-in-interest of any obligations or
liabilities to Xx. Xxxxxxx under the Xxxxxxx Employment Agreement.
(s) COMPANY EXPENSES. The Company shall not have exceeded $1,000,000
in Company Expenses.
(t) COMPANY LEASE. The Company shall have terminated the lease for
its principal executive offices in Germantown, Maryland upon terms acceptable to
the Parent.
7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY
The obligation of the Company to consummate the Merger is also subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, unless waived by the Company:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties of Parent contained herein shall, if specifically qualified by
materiality, be true and correct and, if not so qualified, be true and correct
in all material respects in each case as of the date of this Agreement and
(except to the extent such representations and warranties speak of a specified
earlier date) on and as of the Closing Date, as though made on and as of the
Closing Date, except where the failure of the representations and warranties to
be true and correct has not had and would not reasonably be expected to have a
Material Adverse Effect.
(b) PERFORMANCE OF AGREEMENTS. Each of Parent and Merger Sub shall
have performed in all material respects all obligations and agreements, and
complied in all material respects with all covenants and conditions, contained
in this Agreement to be performed or complied with by them prior to or on the
Closing Date.
(c) OFFICERS' CERTIFICATES. Parent shall have delivered to the
Company a (i) certificate dated the Closing Date, signed by an officer of Parent
certifying as to the fulfillment of the conditions specified in the second
sentence of Section 7.1(a) and Sections 7.1(b), 7.1(d), 7.3(a) and 7.3(b), (ii)
a certificate of the Secretary of the Parent certifying, among other things, (A)
the incumbency of the officers of the Parent having authority to execute and
deliver this Agreement and the agreements and documents contemplated hereby and
(B) the resolutions of the Parent Board authorizing the Merger and approving the
Issuance, any subsequent resolutions of the Parent Board with respect to the
Merger and the resolution of the Parent's stockholders approving the Issuance;
and (iii) a certificate of the Secretary of the Merger Sub certifying, among
other things, (A) the incumbency of the officers of the Merger Sub having
47
authority to execute and deliver this Agreement and the agreements and documents
contemplated hereby and (B) the resolutions of the Board of Directors of the
Merger Sub authorizing the Merger and approving the Issuance, any subsequent
resolutions of the Board of Directors of the Merger Sub with respect to the
Merger and the resolution of the Merger Sub's stockholders approving the
Issuance.
(d) COMPANY FAIRNESS OPINION. The Company shall have received the
Company Fairness Opinion that is acceptable to the Company.
(e) NO ADVERSE ENACTMENTS. There shall not have been any statute,
rule, regulation, order, judgment or decree proposed, enacted, promulgated,
entered, issued, enforced or deemed applicable by any foreign or United States
federal, state or local Governmental Entity, and there shall be no action, suit
or proceeding pending or threatened, which, in the Company's reasonable judgment
(i) makes or may make this Agreement, the Merger, or any of the other
transactions contemplated by this Agreement illegal or imposes or may impose
material damages or penalties in connection therewith, (ii) otherwise prohibits
or unreasonably delays, or may prohibit or unreasonably delay, the consummation
of the Merger or any of the other transactions contemplated by this Agreement or
increases in any material respect the liabilities or obligations of the Company
arising out of this Agreement, the Merger or any of the other transactions
contemplated by this Agreement.
(f) NO MATERIAL ADVERSE CHANGE. Since the date hereof, (i) nothing
shall have occurred, and the Company shall not have become aware of any
circumstance, change or event having occurred prior to such date, which
individually or in the aggregate, has had or, in the reasonable judgment of the
Company, could be expected to have, a Material Adverse Effect on (A) the
transactions contemplated hereby or the Company's liabilities or obligations
with respect to such transactions, or (B) the business, assets, results of
operations, financial condition or prospects of the Parent, the Surviving Entity
and its Subsidiaries, taken as a whole (including any potential change or event
disclosed on any Schedule (including the Parent Disclosure Letter) which,
subsequent to the date hereof, actually occurs), and (ii) there shall not have
occurred (A) any general suspension of trading in Parent Common Stock on the
Relevant Market or (B) a declaration of a banking moratorium or any general
suspension of payments in respect of banks in the United States.
(g) TAX OPINION. The Company shall have received from Xxxxxxxxxxx &
Xxxxxxxx LLP, counsel to the Company, on the Closing Date, an opinion in form
and substance reasonably satisfactory to the Company and dated as of the Closing
Date, to the effect that the Merger will qualify for United States Federal
income tax purposes as a "reorganization" within the meaning of Section 368(a)
of the Code. In rendering such opinion, Xxxxxxxxxxx & Xxxxxxxx LLP may rely upon
customary assumptions and the representations and covenants contained in the
certificates of the Company, Parent and Merger Sub referred to in Section 6.12.
ARTICLE VIII
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, whether before or after the approval by
stockholders of the Company and Parent referred to in Section 7.1(a), by mutual
written consent of the Company and Parent if the Boards of Directors of each so
determines by the affirmative vote of a majority of the members of its entire
Board of Directors.
8.2 TERMINATION BY EITHER PARENT OR THE COMPANY
This Agreement may be terminated (upon notice from the terminating parties to
the other parties) and the Merger may be abandoned at any time prior to the
Effective Time by either Parent or the Company if (a) the Merger shall not have
been consummated by October 31, 2004, whether such date is before or after the
date of approval by the stockholders of the Company and the Parent (the
"TERMINATION DATE"), PROVIDED, that the right to terminate this Agreement
pursuant to this clause (a) shall not be available to any party whose failure to
fulfill any obligation under this Agreement proximately contributed to the
48
failure of the Merger to be consummated by the Termination Date, (b) the
approval of (i) the Merger Proposal or Recapitalization Proposal by the
stockholders of the Company entitled to vote thereon shall not have been
obtained at the Company Special Meeting or at any duly held adjournment or
postponement thereof, or (ii) the Issuance by the stockholders of Parent shall
not have been obtained at the Parent Special Meeting or any duly held
adjournment or postponement thereof, PROVIDED, that the right to terminate
pursuant to this clause (b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement proximately contributed to the
failure to obtain such approval of the stockholders, (c) the approval of the
Note Cancellation by the holders of Company Notes shall not have been obtained
or (d) any order, decree or ruling permanently restraining, enjoining or
otherwise prohibiting consummation of the Merger shall become final and
non-appealable (whether before or after the approval by the stockholders of the
Company or Parent).
8.3 TERMINATION BY THE COMPANY
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, whether before or after the approval by
stockholders of the Company and Parent referred to in Section 7.1(a), by action
of the Company Board:
(a) if (i) the Company is not in breach of Section 6.5 or in material
breach of any of the other terms of this Agreement, (ii) the Company Board
authorizes the Company, subject to complying with the terms of this Agreement,
to enter into a binding written agreement concerning a transaction that
constitutes a Superior Proposal and the Company notifies Parent in writing that
it intends to enter into such an agreement, attaching the most current version
of such agreement to such notice, (iii) Parent does not make, within five
business days of receipt of the Company's written notification of its intention
to enter into a binding agreement for a Superior Proposal, an offer that the
Company Board determines, in good faith after consultation with its financial
advisors, is no less favorable, from a financial point of view, to the
stockholders of the Company as the Superior Proposal, and (iv) the Company pays
to Parent in immediately available funds the Termination Fee. The Company agrees
(x) that it will not enter into a binding agreement referred to in clause (ii)
above until at least the sixth business day after it has provided the notice to
Parent required thereby and (y) to notify Parent promptly if its intention to
enter into a written agreement referred to in its notification shall change at
any time after giving such notification; or
(b) if Parent or Merger Sub breach or fail in any material respect to
perform or comply with any of their covenants and agreements contained herein or
breach any of their representations and warranties, in each case that is not
curable, such that the conditions set forth in Sections 7.3(a) or 7.3(b) cannot
be satisfied.
8.4 TERMINATION BY PARENT
This Agreement may be terminated and the Merger may be abandoned at any time
prior to the Effective Time, whether before or after the approvals by the
stockholders of the Company and Parent referred to in Section 7.1(a), by action
of the Parent Board if:
(a) the Company Board shall have withdrawn or modified in a manner
adverse to Parent its approval or recommendation of this Agreement or failed to
reconfirm its recommendation of this Agreement within three business days after
a written request by Parent to do so;
(b) the Company breaches or fails in any material respect to perform
or comply with any of its covenants or agreements contained herein, or breaches
any of its representations and warranties, in each case that is not curable,
such that the conditions set forth in 7.2(a) or 7.2(b) cannot be satisfied;
(c) the Company or any of the other Persons described in Section 6.5
as Affiliates, officers, directors, employees, representatives or agents of the
Company shall take any of the actions that would be proscribed by Section 6.5
but for the provisos contained in Section 6.5(a) allowing certain actions to be
taken pursuant to clause (A) or (B) of the provisos under the conditions set
forth therein;
(d) the Company fails to receive at least $750,000 in revenues in its
third fiscal quarter or at least $750,000 in revenues in its fourth fiscal
quarter, each as set forth in Section 7.2(q);
49
(e) Xxxxxxxx Xxxxxxx, in her capacity as CEO of the Company, is
unable to provide a notice to Parent, which shall be provided on a biweekly
basis, that she believes in good faith that the Company will be able to meet the
forecast for the Company during the third and fourth fiscal quarters that is
provided to Parent; or
(f) notwithstanding any of the foregoing provisions in this Section
8.4, the Parent Board makes a good faith determination, pursuant to the
fiduciary duties of the Parent Board under applicable law as determined by a
majority of such directors with the advice of legal counsel, that the Merger is
not in the best interests of the stockholders of the Parent because the Parent
Board has determined in good faith that the Company is not likely to meet its
projected 2004 annual revenues of $3.5 million, inclusive of deferred revenues
from orders booked in accordance with GAAP in the third and fourth quarters of
2004 of the Company.
8.5 EFFECT OF TERMINATION AND ABANDONMENT
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, this Agreement (other
than as set forth in Section 6.6, Section 6.11, this Section 8.5 and Article IX
each of which shall survive the termination of this Agreement) shall become void
and of no effect with no liability on the part of any party hereto (or of any of
its directors, officers, employees, agents, legal and financial advisors or
other representatives); PROVIDED, HOWEVER, except as otherwise provided herein
no such termination shall relieve any party hereto of any liability or damages
resulting from any willful or intentional breach of this Agreement.
(b) In the event that (x) an Alternative Proposal shall have been
made to the Company or its stockholders or any Person shall have publicly
announced an intention (whether or not conditional) to make an Alternative
Proposal with respect to the Company and thereafter this Agreement is terminated
by the Company pursuant to Section 8.3(a), then the Company shall promptly but
in no event later than two days after the date of such termination, reimburse
Parent for any costs and expenses (including legal, consulting and accounting
fees and disbursements and the costs and expenses incurred in connection with
the Merger, including, without limitation, printing and mailing the Joint Proxy
Statement/Prospectus (and any amendment or supplement thereto), filing the S-4
(and any amendment or supplement thereto) and the costs of filing under the
Xxxx-Xxxxx Act) incurred by Parent in connection with this Agreement; PROVIDED,
the Company shall not be required to reimburse Parent for any such expenses
exceeding $150,000 (collectively, the "TERMINATION FEE") in cash by wire
transfer of same day funds to an account designated by Parent. The Company
acknowledges that the agreements contained in this Section 8.5(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, Parent and Merger Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay the amount due
pursuant to this Section 8.5(b), and, in order to obtain such payment, Parent or
Merger Sub commences a suit which results in a judgment against the Company for
the Termination Fee set forth in this paragraph (b), the Company shall pay to
Parent, in addition to the Termination Fee, the reasonable costs and expenses
(including reasonable attorneys' fees) in connection with such suit, together
with interest on the amount of the Termination Fee at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
ARTICLE IX
MISCELLANEOUS
9.1 NO WAIVER OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES
The respective representations and warranties of Parent, Merger Sub and the
Company contained herein or in any certificate or other instrument delivered
pursuant hereto prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party hereto or any
knowledge of any party (including any employee of any party) for whose benefit
such representations and warranties are made. None of the representations and
warranties made by each of the parties herein shall survive after the Effective
Time. The respective covenants and agreements of the parties contained herein
which are to be performed after the Closing shall survive the Effective Time and
shall only terminate in accordance their respective terms.
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9.2 NOTICES
All notices, requests, demands, waivers and other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered personally (by courier service or
otherwise) or mailed, certified or registered mail with postage prepaid, or sent
by confirmed telecopier, as follows:
(a) If to Parent or Merger Sub:
Steelcloud, Inc.
0000 Xxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
with a copy (which shall not constitute notice) to:
Xxxxxxx, Savage, Kaplowitz, Wolf & Marcus, LLP
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxx X. Xxxxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Company:
V-ONE Corporation
00000-Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxxx Xxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxxxxxxx & Xxxxxxxx, LLP
0000 Xxxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Berkeley
Facsimile: (000) 000-0000
or to such other Person or address as any party shall specify by notice in
writing to the other party. Any such notice shall be deemed to have been given
(a) upon actual delivery, if delivered by hand, (b) on the third (3rd) business
day following deposit of such notice, properly addressed with postage prepaid,
with the United States Postal Service if mailed by registered or certified mail,
return receipt requested, or (c) upon sending such notice, if sent via
facsimile, with confirmation of receipt, except that any notice of change of
address shall be effective only upon actual receipt thereof.
9.3 ENTIRE AGREEMENT
This Agreement (including the Schedules, Annexes, Exhibits and other documents
referred to herein) constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, oral and written, between
the parties with respect to the subject matter hereof.
9.4 ASSIGNMENT; BINDING EFFECT; BENEFIT
Neither this Agreement nor any of the rights, benefits or obligations hereunder
may be assigned by any party (whether by operation of law or otherwise) without
the prior written consent of the other party. Subject to the preceding sentence,
51
this Agreement will be binding upon, inure to the benefit of and be enforceable
by the parties and their respective successors and assigns. Except for the
provisions of Section 6.10 (which may be enforced by the Indemnified Parties),
nothing in this Agreement, expressed or implied, is intended to confer on any
Person other than the parties or their respective successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
9.5 AMENDMENT
This Agreement may be amended by action of all the parties, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval and adoption of this Agreement and the Merger by the stockholders of
the Company, but, after any such approval by the stockholders of the Company, no
amendment shall be made which by law requires further approval by such
stockholders of the Company without such further approval. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties.
9.6 EXTENSION; WAIVER
At any time prior to the Effective Time, the parties, by action taken or
authorized by each such party's Board of Directors, may, to the extent legally
allowed, (i) extend the time specified herein for the performance of any of the
obligations of the other party, (ii) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto, (iii) waive compliance by the other party
with any of the agreements or covenants of such other party contained herein or
(iv) waive any condition to such waiving party's obligation to consummate the
transactions contemplated hereby or to any of such waiving party's other
obligations hereunder. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed by such party. Any such extension or waiver by any party shall be binding
on such party but not on the other party entitled to the benefits of the
provision of this Agreement affected unless such other party also has agreed to
such extension or waiver. No such waiver shall constitute a waiver of, or
estoppel with respect to, any subsequent or other breach or failure to strictly
comply with the provisions of this Agreement. The failure of any party to insist
on strict compliance with this Agreement or to assert any of its rights or
remedies hereunder or with respect hereto shall not constitute a waiver of such
rights or remedies. Whenever this Agreement requires or permits consent or
approval by any party, such consent or approval shall be effective if given in
writing in a manner consistent with the requirements for a waiver of compliance
as set forth in this Section 9.6.
9.7 HEADINGS
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. The phrase "made available" in this Agreement shall mean that
the information referred to has been made available if requested by the party to
whom such information is to be made available.
9.8 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be deemed to
be an original, and all of which together shall be deemed to be one and the same
instrument.
9.9 GOVERNING LAW AND VENUE; WAIVER OF JURY TRIAL
(a) THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS
SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW
OF THE STATE OF DELAWARE WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. The parties hereby irrevocably submit to the jurisdiction of the courts
of the State of Delaware and the Federal courts of the United States of America
located in the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement and of the documents referred to
in this Agreement, and in respect of the transactions contemplated hereby, and
hereby waive, and agree not to assert, as a defense in any action, suit or
proceeding for the interpretation or enforcement hereof or of any such document,
that it is not subject thereto or that such action, suit or proceeding may not
be brought or is not maintainable in said courts or that the venue thereof may
52
not be appropriate or that this Agreement or any such document may not be
enforced in or by such courts, and the parties hereto irrevocably agree that all
claims with respect to such action or proceeding shall be heard and determined
in such a Delaware State or Federal court. The parties hereby consent to
jurisdiction over the person of such parties and agree that mailing of process
or other papers in connection with any such action or proceeding in the manner
provided in Section 9.2 or in such other manner as may be permitted by law shall
be valid and sufficient service thereof.
(b) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH
MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH
PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.9
9.10 JOINT PARTICIPATION IN DRAFTING THIS AGREEMENT
The parties acknowledge and confirm that each of their respective attorneys have
participated jointly in the drafting, review and revision of this Agreement and
that it has not been written solely by counsel for one party and that each party
has had the benefit of its independent legal counsel's advice with respect to
the terms and provisions hereof and its rights and obligations hereunder. Each
party hereto, therefore, stipulates and agrees that the rule of construction to
the effect that any ambiguities are to be or may be resolved against the
drafting party shall not be employed in the interpretation of this Agreement to
favor any party against another and that no party shall have the benefit of any
legal presumption or the detriment of any burden of proof by reason of any
ambiguity or uncertain meaning contained in this Agreement.
9.11 SEVERABILITY
The provisions of this Agreement shall be deemed severable and the invalidity or
unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provisions of this
Agreement, or the application thereof to any Person or entity or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
9.12 ENFORCEMENT
The parties 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
of this Agreement in the Federal courts of the United States located in the
State of Delaware or in Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement and Plan of
Merger as of the date first above written.
STEELCLOUD, INC.
By:
---------------------------
Name:
Title:
SCLD ACQUISITION CORP.
By:---------------------------
Name:
Title:
V-ONE CORPORATION
By:---------------------------
Name:
Title:
54
