1
Exhibit 99.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
DIGITALTHINK, INC.,
LEARNINGBYTE INTERNATIONAL, INC.
AND
LBI ACQUISITION CORP.
DATED AS OF AUGUST 14, 2001
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TABLE OF CONTENTS
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ARTICLE I THE MERGER..............................................................................................2
1.1 The Merger...................................................................................2
1.2 Effective Time...............................................................................2
1.3 Effect of the Merger.........................................................................2
1.4 Articles of Incorporation; Bylaws............................................................2
1.5 Directors and Officers.......................................................................3
1.6 Merger Consideration.........................................................................3
1.7 Dissenting Shares for Holders of Company Capital Stock.......................................6
1.8 Surrender of Certificates; Exchange Agent....................................................6
1.9 Adjustments to Merger Exchange Ratio.........................................................8
1.10 Tax Consequences.............................................................................9
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................................................9
2.1 Organization of the Company..................................................................9
2.2 Company Capital Structure....................................................................9
2.3 Subsidiaries................................................................................10
2.4 Authority...................................................................................10
2.5 Company Financial Statements................................................................11
2.6 No Undisclosed Liabilities..................................................................11
2.7 No Changes..................................................................................11
2.8 Tax and Other Returns and Reports...........................................................13
2.9 Restrictions on Business Activities.........................................................14
2.10 Title to Properties; Absence of Liens and Encumbrances......................................15
2.11 Intellectual Property.......................................................................15
2.12 Agreements, Contracts and Commitments.......................................................16
2.13 Compliance with Laws........................................................................17
2.14 Litigation..................................................................................17
2.15 Insurance...................................................................................17
2.16 Minute Books................................................................................17
2.17 Environmental Matters.......................................................................17
2.18 Brokers'and Finders'Fees; Third Party Expenses..............................................18
2.19 Employee Matters and Benefit Plans..........................................................18
2.20 Accounts Receivable.........................................................................22
2.21 No Material Adverse Change..................................................................23
2.22 Board Approval..............................................................................23
2.23 Disclaimer of Other Representations and Warranties..........................................23
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..............................................23
3.1 Organization, Standing and Power............................................................23
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TABLE OF CONTENTS
(CONTINUED)
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3.2 Authority...................................................................................23
3.3 Capital Structure...........................................................................24
3.4 SEC Documents; Parent Financial Statements..................................................24
3.5 Litigation..................................................................................25
3.6 Brokers'and Finders'Fees....................................................................25
3.7 No Material Adverse Change..................................................................25
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME...................................................................25
4.1 Conduct of Business of the Company..........................................................25
4.2 No Solicitation.............................................................................26
ARTICLE V ADDITIONAL AGREEMENTS..................................................................................27
5.1 Exemption from Registration; California Permit; Shareholder Approval........................27
5.2 Access to Information.......................................................................29
5.3 Confidentiality.............................................................................29
5.4 Expenses....................................................................................29
5.5 Public Disclosure...........................................................................29
5.6 Consents....................................................................................29
5.7 Reasonable Efforts..........................................................................30
5.8 Lock-up Agreements..........................................................................30
5.9 Nasdaq Listing..............................................................................30
5.10 Registration................................................................................30
5.11 401(k) Plan.................................................................................30
5.12 Additional Documents and Further Assurances.................................................31
5.13 Section 368 Election........................................................................31
ARTICLE VI CONDITIONS TO THE MERGER..............................................................................31
6.1 Conditions to Obligations of Each Party to Effect the Merger................................31
6.2 Additional Conditions to Obligations of the Company.........................................32
6.3 Additional Conditions to the Obligations of Parent and Merger Sub...........................32
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW...................................................33
7.1 Survival of Representations and Warranties, Indemnity.......................................33
7.2 Escrow Arrangements.........................................................................34
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...................................................................41
8.1 Termination.................................................................................41
8.2 Effect of Termination.......................................................................43
8.3 Amendment...................................................................................43
8.4 Extension; Waiver...........................................................................43
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE IX GENERAL PROVISIONS....................................................................................44
9.1 Notices.....................................................................................44
9.2 Interpretation..............................................................................45
9.3 Counterparts................................................................................45
9.4 Entire Agreement; Assignment................................................................46
9.5 Severability................................................................................46
9.6 Other Remedies..............................................................................46
9.7 Governing Law...............................................................................46
9.8 Rules of Construction.......................................................................46
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and
entered into as of August 14, 2001 among DigitalThink, Inc., a Delaware
corporation ("Parent"), LBI Acquisition Corp., a Minnesota corporation and a
wholly owned subsidiary of Parent ("Merger Sub") and LearningByte International,
Inc., a Minnesota corporation (the "Company"), and with respect to Article VII
hereof only, Chase Manhattan Bank and Trust Company (the "Escrow Agent") and
Xxxxxx Xxxxxxxxx (the "Securityholder Agent").
RECITALS
A. The Boards of Directors of each of the Company and Parent believe it
is in the best interests of each company and their respective stockholders that
Parent acquire the Company through the statutory merger of Merger Sub, with and
into the Company (the "Merger") and, in furtherance thereof, have approved the
Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions of this Agreement, (i) all of the issued and outstanding shares
of common, preferred and other capital stock of the Company ("Company Capital
Stock") shall be converted into the right to receive shares of the common stock
of the Parent ("Parent Common Stock"), and (ii) all outstanding options,
warrants or other rights to acquire or receive shares of Company Capital Stock
shall be assumed by the Parent and converted into a right to receive a similar
option, warrant or other right consisting of Parent Common Stock as more
particularly described below.
C. A portion of the shares of Parent Common Stock otherwise issuable by
Parent in connection with the Merger shall be placed in escrow by Parent, the
release of which amount shall be contingent upon certain events and conditions,
all as set forth in Article VII hereof.
D. It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
E. It is further intended by the parties hereto that the Merger shall be
accounted for as a purchase for accounting purposes.
F. The Company, Merger Sub, and Parent desire to make certain
representations and warranties and other agreements in connection with the
Merger.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
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ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the Minnesota Business Corporation Act ("Minnesota
Law"), Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease and the Company shall continue as
the surviving corporation. The surviving corporation after the Merger is
sometimes referred to hereinafter as the "Surviving Corporation."
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant
to Section 8.1, the closing of the Merger (the "Closing") will take place as
promptly as practicable, but no later than two (2) business days following
satisfaction or waiver of the conditions set forth in Article VI, at the offices
of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx,
unless another place or time is agreed to in writing by Parent and the Company.
The date upon which the Closing actually occurs is herein referred to as the
"Closing Date." On the Closing Date, the parties hereto shall cause the Merger
to be consummated by filing a copy of the Articles of Merger attached hereto as
Exhibit A (the "Articles of Merger") including a Plan of Merger (the "Plan of
Merger") with the Secretary of State of the State of Minnesota in accordance
with the relevant provisions of applicable Minnesota Law. The effective time of
the Merger (the "Effective Time") shall be immediately upon filing the Articles
of Merger with the Secretary of State of the State of Minnesota.
1.3 Effect of the Merger.
At the Effective Time, the effect of the Merger shall be as provided in
the applicable provisions of Minnesota Law. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Articles of Incorporation of Surviving
Corporation shall be amended and restated to be identical to the Articles of
Incorporation of Merger Sub as in effect immediately prior to the Effective Time
until thereafter amended in accordance with Minnesota Law and as provided in
such Articles of Incorporation; provided, however, that at the Effective Time,
Article I of the Articles of Incorporation of the Surviving Corporation shall be
amended and restated in its entirety to read as follows: "The name of the
corporation is `LearningByte International, Inc.'"
(b) Unless otherwise determined by Parent prior to the Effective
Time, the Bylaws of Merger Sub as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation at the Effective Time,
until thereafter amended in accordance with
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Minnesota Law and as provided in the Articles of Incorporation of the Surviving
Corporation and such Bylaws.
1.5 Directors and Officers. Unless otherwise determined by Parent prior
to the Effective Time, the directors of Merger Sub immediately prior to the
Effective Time shall be the directors of the Surviving Corporation, each to hold
the office of a director of the Surviving Corporation in accordance with the
provisions of Minnesota Law and the Articles of Incorporation and Bylaws of the
Surviving Corporation until their successors are duly elected and qualified. The
officers of Merger Sub immediately prior to the Effective Time shall be the
officers of the Surviving Corporation, each to hold office in accordance with
the provisions of the Bylaws of the Surviving Corporation.
1.6 Merger Consideration.
(a) Certain Definitions. For purposes of this Agreement, the
following terms shall have the following meanings:
"Company Common Stock" shall mean shares of common stock of the
Company, par value $0.01.
"Company Shareholders" shall mean holders of any shares of Company
Capital Stock immediately prior to the Effective Time.
"Convertible Securities" shall mean the Company Options and Company
Warrants, exercisable for Company Common Stock.
"DTHK Closing Price" shall be equal to the closing price per share
of DTHK Common Stock on August 9, 2001, or $12.84.
"Equivalent Parent Common Stock Amount" shall be equal to the sum of
(i) 4,517,212, (ii) the Option Proceeds Number,
(iii) the Warrant Proceeds Number, and (iv) the Warrant Cancellation
Savings.
"Escrow Amount" shall mean that number of shares of Parent Common
Stock equal to ten percent (10%) of the total number of shares of Parent Common
Stock issued pursuant to this Agreement and the Merger and pursuant to the Stock
Purchase Agreement (as hereinafter defined); provided, however, that all such
shares of Parent Common Stock comprising the Escrow Amount shall be taken from
the shares of Parent Common Stock issuable pursuant to this Agreement and the
Merger.
"In-the-Money-Warrants" are Company Warrants with an exercise price
equal to or less than $3.56.
"Option Proceeds Number" is equal to (i) the proceeds received by
the Company from the exercise of Company Options from the date hereof until the
Effective Time divided by (ii) the DTHK Closing Price.
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"Out-of-the-Money-Warrants" are Company Warrants with an exercise
price more than $3.56.
"Outstanding Warrant Number" shall be equal to (A) 200,000 shares of
DTHK Common Stock, multiplied by (B) the quotient obtained by dividing (i) the
number of shares of Company Common Stock issuable upon exercise of
Out-of-the-Money Warrants which remain outstanding at the Effective Time by (ii)
the number of shares of Company Common Stock issuable upon exercise of
Out-of-the-Money Warrants which are outstanding at the date of this Agreement.
"Warrant Cancellation Savings" is equal to 50% of: (A) 200,000
shares of DTHK Common Stock less (B) the sum of (i) number of shares of DTHK
Common Stock paid from the date hereof until the Effective Time, to holders of
Out-of-the-Money Warrants to cancel their Out-of-the-Money Warrants, plus (ii)
the Outstanding Warrant Number.
"Warrant Proceeds Number" is equal to (i) the aggregate exercise
price (i.e. the number of shares multiplied by per share exercise price) of all
In-the-Money Warrants (regardless of whether or not exercised prior to the
Effective Time), divided by (ii) the DTHK Closing Price.
(b) Per Share Exchange Ratios. Subject to the terms and conditions
of this Agreement, as of the Effective Time, by virtue of the Merger and without
any action on the part of Merger Sub, the Company or the holder of any shares of
the Company Common Stock, each share of the Company Common Stock issued and
outstanding immediately prior to the Effective Time (other than any Dissenting
Shares, as defined in Section 1.7) will be canceled and extinguished and be
converted automatically into the right to receive, upon surrender of the Company
Certificate therefor such number of shares of Parent Common Stock as is equal to
the Merger Exchange Ratio.
The "Merger Exchange Ratio" shall be the result obtained by dividing the
Equivalent Parent Common Stock Amount by the number of shares of outstanding
Company Common Stock (including the number of shares of Company Common Stock
issuable upon the conversion of the outstanding Series B Preferred Stock)
immediately prior to the Effective Time plus the number of shares of Company
Common Stock issuable upon the exercise of outstanding In-the-Money Warrants,
less the number of shares of Company Common Stock issued from the date hereof
until the Effective Time to holders of Out-of-the-Money Warrants.
(c) Rights to Acquire Company Common Stock.
(i) At the Effective Time, each outstanding option (a "Company
Option") to acquire shares of Company Common Stock issued under the Company's
stock option plans or agreements (the "Company Stock Option Plans") shall be
terminated in accordance with the Company Stock Option Plans. Company shall take
all action necessary prior to the Effective Time to cause all such Company
Options to terminate as of the Effective Time.
(ii) At the Effective Time, all other outstanding options,
phantom stock, convertible securities or any other rights to acquire shares of
Company Common Stock or Company
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Preferred Stock, if any, other than Company Warrants, shall be canceled and
extinguished without any conversion thereof or payment with respect thereto.
(d) Assumption of Company Warrants. At the Effective Time, each
warrant (collectively, the "Company Warrants") to purchase shares of the
Company's Common Stock which is outstanding (whether or not then exercisable) as
of immediately prior to the Effective Time and which has not been exercised or
cancelled prior thereto, shall, at the Effective Time, be assumed by Parent,
subject to the provisions of this Section 1.6(d) (the "Assumed Warrant"). The
Assumed Warrants shall not terminate in connection with the Merger and shall
continue to have, and be subject to, the same terms and conditions as set forth
in the agreements (as in effect immediately prior to the Effective Time)
evidencing such Warrants, provided that (i) all references to the Company shall
be deemed references to shares of Parent Common Stock, (ii) each Assumed Warrant
shall be exercisable for that number of whole shares of Parent Common Stock
equal to the product of the number of shares of Company Common Stock covered by
such Assumed Warrant immediately prior to the Effective Time multiplied by the
Merger Exchange Ratio and rounded to the nearest whole number of shares of
Parent Common Stock, and (iii) the exercise price per share of Parent Common
Stock under such Assumed Warrant shall be equal to the exercise price per share
of Company Common Stock under the Assumed Warrant divided by the Merger Exchange
Ratio rounded to the nearest cent. Parent shall (A) reserve for issuance the
number of shares of Parent Common Stock that will become issuable upon the
exercise of such Assumed Warrant pursuant to this Section 1.6(d), and (B)
promptly after the Effective Time issue to each holder of a Company Warrant a
document evidencing the assumption by Parent of the Company's obligations with
respect thereto under this Section 1.6(d). Shares of Parent Common Stock
issuable upon exercise of such Assumed Warrants will be covered by the
California Permit (as defined in Section 5.1) or the Registration Statement on
Form S-4 or pursuant to a resale registration statement in accordance with the
Stock Purchase Agreement, as the case may be.
(e) Withholding Taxes. Any shares of Parent Common Stock shall be
subject to, and reduced by, the amount of any state, federal and foreign
withholding taxes incurred (and not previously paid by or on behalf of Company)
in connection with the acquisition of capital stock upon the exercise of Company
Options, Company Warrants, the acceleration of vesting of any Company Capital
Stock or Company Options, or the payment of a bonus, if any, as required by
applicable law.
(f) Fractional Shares. No fractional share of Parent Common Stock
shall be issued in the Merger. In lieu thereof, each holder of shares of Company
Capital Stock who would otherwise be entitled to a fraction of a share of Parent
Common Stock (after aggregating all fractional shares of Parent Common Stock to
be received by such holder) shall be entitled to receive from Parent an amount
of cash (rounded to the nearest whole cent) equal to the product of (i) such
fraction, multiplied by (ii) the DTHK Closing Price.
(g) Cancellation of Parent-Owned and Company-Owned Stock. At the
Effective Time, by virtue of the Merger and without any action on the part of
any of the parties hereto, each share of Company Capital Stock owned by Parent,
Merger Sub, Company or any direct or indirect wholly-owned subsidiary thereof
immediately prior to the Effective Time, shall be cancelled and extinguished
without any conversion thereof.
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(h) Capital Stock of Merger Sub. At the Effective Time, by virtue of
the Merger and without any action on the part of any of the parties hereto, each
share of capital stock of Merger Sub issued and outstanding immediately prior to
the Effective Time shall be converted into and exchanged for one validly issued,
fully paid and nonassessable share of common stock of the Surviving Corporation.
Each stock certificate of Merger Sub evidencing ownership of any such shares
shall continue to evidence ownership of such shares of capital stock of the
Surviving Corporation.
1.7 Dissenting Shares for Holders of Company Capital Stock.
Notwithstanding any provision of this Agreement to the contrary, any shares of
Company Capital Stock held by a holder who has demanded and perfected
dissenter's rights for such shares in accordance with Minnesota Law and who, as
of the Effective Time, has not effectively withdrawn or lost such dissenter's
rights ("Dissenting Shares"), shall not be converted into or represent a right
to receive Parent Common Stock pursuant to Section 1.6, but the holder thereof
shall only be entitled to such rights as are granted by Minnesota Law.
(a) Notwithstanding the provisions of subsection (a), if any holder
of shares of Company Capital Stock who asserts dissenter's rights with respect
to such shares under Minnesota Law shall effectively withdraw or lose (through
failure to perfect or otherwise) such dissenter's rights, then, as of the later
of the Effective Time and the occurrence of such event, each of such holder's
shares of Company Capital Stock shall automatically be converted into and
represent only the right to receive that number of shares of Parent Common Stock
equal to the Merger Exchange Ratio, rounded down to the next whole share as
provided in Section 1.6 (and subject to the provisions of Section 7.2 hereof),
without interest thereon, upon surrender of the certificate representing such
shares of the Company capital stock (the "Company Certificate").
(b) Company shall give Parent (i) prompt notice of any written
demands to assert dissenter's rights, withdrawals of such demands, and any other
instruments served pursuant to Minnesota Law and received by Company and (ii)
the opportunity to participate in all negotiations and proceedings with respect
to dissenter's rights under Minnesota Law. Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any dissenter's rights or settle any such claims.
1.8 Surrender of Certificates; Exchange Agent. The transfer agent of
Parent (or another entity reasonably acceptable to Parent and the Company) shall
serve as exchange agent (the "Exchange Agent") in the Merger.
(a) Parent to Provide Parent Common Stock. Prior to the Closing,
Parent shall make available to the Exchange Agent for exchange in accordance
with this Article I that number of shares of Parent Common Stock due and owing
and/or issuable to the holders of the Company Capital Stock, Company Options and
Company Warrants under Section 1.6, in exchange for outstanding shares of
Company Capital Stock or the exercise of Company Warrants, less the Escrow
Amount which Parent shall deposit into the Escrow Fund (as defined in Section
7.2(a) hereof) on behalf of the Company Shareholders. The portion of the Escrow
Amount contributed on behalf of each Company Shareholder shall be in proportion
to the aggregate number of shares of Parent
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Common Stock each such Company Shareholder would otherwise be entitled to
receive in the Merger by virtue of ownership of outstanding shares of Company
Capital Stock immediately prior to the Effective Time.
(b) Exchange Procedures. As soon as practicable following the
Closing, Parent shall cause to be mailed to each Company Shareholder (i) a
letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Company Certificates which immediately prior to
the Effective Time represent outstanding shares of Company Capital Stock whose
shares are converted into the right to receive such Company Shareholder's
portion of the consideration pursuant to Section 1.6, shall pass, only upon
delivery of the Company Certificates to the Exchange Agent and (ii) instructions
for use in effecting the surrender of the Company Certificates in exchange for
certificates representing such Company Shareholder's pro rata portion of the
consideration, and (iii) a Shareholder Certificate (a "Shareholder Certificate")
in form specified by Parent and approved prior to the Closing by the Company,
which approval shall not be unreasonably withheld, for execution by the Company
Shareholder. Upon surrender of a Company Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal and Shareholder Certificate, duly
completed and validly executed in accordance with the instructions thereto, the
Company Shareholder shall be entitled to receive, and the Exchange Agent shall
promptly deliver in exchange therefor, a certificate for the Parent Common Stock
("Parent Certificate") representing the number of whole shares of Parent Common
Stock (less the number of shares of Parent Common Stock to be deposited in the
Escrow Fund on such holder's behalf pursuant to Section 1.8(b) and Article 7
hereof) to which such holder is entitled pursuant to Section 1.6, and the
Company Certificate so surrendered shall forthwith be canceled. As soon as
practicable after the Effective Time, and subject to and in accordance with the
provisions of Article VII hereof, Parent shall cause to be distributed to the
Escrow Agent (as defined in Article VII) Parent Certificate(s) representing that
number of shares of Parent Common Stock equal to the Escrow Amount which shall
be registered in the name of the Escrow Agent. Such shares shall be beneficially
owned by the holders on whose behalf such shares were deposited in the Escrow
Fund and shall be available to compensate Parent as provided in Article VII.
Until so surrendered, each outstanding Company Certificate that, prior to the
Effective Time, represented shares of Company Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Capital Stock shall have been so
converted and the right to receive any dividends or distributions payable
pursuant to Section 1.8(d).
(c) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Parent Common Stock with a record date after the Effective Time will be paid to
the holder of any unsurrendered Company Certificate with respect to the shares
of Parent Common Stock represented thereby until the holder of record of such
Company Certificate shall surrender such Company Certificate. Subject to
applicable law, following surrender of any such Company Certificate, there shall
be paid to the record holder the Parent Certificates representing whole shares
of Parent Common Stock issued in exchange therefor, plus the amount of dividends
or other distributions (without interest) with a
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record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock.
(d) Transfers of Ownership. If any Parent Certificate is to be
issued in a name other than that in which the Company Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Company Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a Parent Certificate for
shares of Parent Common Stock in any name other than that of the registered
holder of the Company Certificate surrendered.
(e) Lost, Stolen or Destroyed Company Certificates. In the event any
Company Certificate evidencing shares of Company Capital Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Company Certificates, upon the delivery by the holder
thereof of an affidavit of that fact by the holder thereof containing customary
indemnification provisions, Parent Certificates representing whole shares of
Parent Common Stock to be issued in exchange for such lost, stolen or destroyed
Company Certificates.
(f) No Liability. Notwithstanding anything to the contrary in this
Section 1.8, neither Parent nor any party hereto shall be liable to a holder of
shares of Parent Common Stock or Company Capital Stock for any amount properly
paid to a public official pursuant to any applicable abandoned property, escheat
or similar law.
(g) No Further Ownership Rights in Company Capital Stock. The cash
and shares of Parent Common Stock issued in accordance with the terms hereof
shall be deemed to be full satisfaction of all rights pertaining to shares of
Company Capital Stock outstanding prior to the Effective Time, and there shall
be no further registration of transfers on the records of Parent of shares of
Company Capital Stock that were outstanding prior to the Effective Time. If,
after the Effective Time, any Company Certificate is presented to Parent for any
reason, they shall be canceled and exchanged as provided in this Article I.
(h) Taking of Necessary Action; Further Action. If, at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company, Parent, Merger Sub, and the officers and
directors of the Company, Parent and Merger Sub are fully authorized in the name
of their respective corporations or otherwise to take, and will take, all such
lawful and necessary action.
1.9 Adjustments to Merger Exchange Ratio. The Merger Exchange Ratio
determined above shall be adjusted to reflect appropriately the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Capital Stock), reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to the Parent Common Stock.
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1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a "reorganization" within the meaning of Section 368 of
the Code and Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax
Regulations. The parties shall not take a position on any tax return
inconsistent with this Section.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As of the date hereof, the Company represents and warrants to Parent,
subject to such exceptions as are clearly disclosed in the Schedule of
Exceptions (referencing the appropriate section number or as otherwise may be
obviously or clearly applicable by a reasonable person) supplied by the Company
to Parent (the "Company Schedules") and dated as of the date hereof, as follows:
2.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Minnesota. The Company has the corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified to
do business and in good standing as a foreign corporation in each jurisdiction
in which the nature of its business requires it by law to be so qualified except
for such failures to be so qualified and in good standing that would not
reasonably be likely, individually or in the aggregate, to have a Material
Adverse Effect. The Company has delivered a true and correct copy of its
Articles of Incorporation and Bylaws, each as amended to date, to Parent.
2.2 Company Capital Structure.
(a) The authorized capital stock of the Company consists of
50,000,000 shares of authorized Company Common Stock, of which 12,940,837 shares
are issued and outstanding. The Company Capital Stock is held of record by the
persons, and in the amounts set forth on Schedule 2.2(a). The Company has
delivered to Parent the address for each such holder as set forth on the books
and records of the Company. All outstanding shares of Company Capital Stock are
duly authorized, validly issued, fully paid and non-assessable and not subject
to preemptive rights created by statute, the Articles of Incorporation or Bylaws
of the Company or any agreement to which the Company is a party or by which it
is bound.
(b) The Company has reserved 4,871,405 shares of Common Stock for
issuance to employees and consultants pursuant to the Company's stock option
plans, of which 2,805,537 shares are subject to outstanding, unexercised options
and the remainder being available for future grant. The Company has reserved
3,818,648 shares of Company Common Stock for issuance pursuant to the Company
Warrants, a schedule of which is set forth in Schedule 2.2(b)(i). The Company
has not reserved any other shares of Company Capital Stock for issuance upon
exercises of an option, warrant, or convertible security or debt instrument, or
otherwise. Schedule 2.2(b)(ii) sets forth for each outstanding Company Option,
the number of shares of Common Stock subject to such option and the exercise
price of such option. The Company has delivered to Parent a list setting forth
the names and addresses of the holders of each Outstanding Company Option.
Except for the Company Warrants and Company Options or as otherwise described in
Schedule 2.2(b), there are no
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options, warrants, calls, rights, debt instruments, commitments or agreements of
any character, written or oral, to which the Company is a party or by which it
is bound obligating the Company to issue, deliver, sell, repurchase or redeem,
or cause to be issued, delivered, sold, repurchased or redeemed, any shares of
the capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the price of, otherwise amend or enter into
any such option, warrant, call, right, debt instrument, commitment or agreement.
The holders of Company Warrants and Company Options have been or will be given,
or shall have properly waived, any required notice prior to the Merger. As a
result of the Merger, Parent will be the record and sole beneficial owner of all
capital stock of the Company and rights to acquire or receive such capital
stock. Except as contemplated by this Agreement or set forth in Schedule 2.2(b)
there are no registration rights agreements, no voting trust, proxy or other
agreement or understanding to which the Company is a party or by which it is
bound with respect to any equity security of any class of the Company.
2.3 Subsidiaries. Schedule 2.3 sets forth a list of all Company
subsidiaries as of the date of this Agreement. Except as set forth on Schedule
2.3, the Company does not have any subsidiaries or affiliated companies and does
not otherwise own any shares of capital stock or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity.
2.4 Authority. Subject only to the requisite approval of the Merger and
this Agreement by the Company's shareholders, the Company has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, subject
only to the approval of the Merger by the Company's shareholders. This Agreement
has been duly executed and delivered by the Company and constitutes the valid
and binding obligation of the Company, enforceable in accordance with its terms,
subject to the laws of general application relating to bankruptcy, insolvency
and relief of debtors and to rules of law governing specific performance,
injunctive relief and other equitable remedies. Except as set forth on Schedule
2.4, subject only to the approval of the Merger and this Agreement by the
Company Shareholders, the execution and delivery of this Agreement by the
Company does not conflict with, or result in any violation of, or default under
(with or without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
of Incorporation or Bylaws of the Company or (ii) any mortgage, indenture,
lease, contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or its properties or assets except for any such
Conflicts that would not reasonably be likely to have a Material Adverse Effect.
No consent, waiver, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission ("Governmental Entity") or any third party
(so as not to trigger any Conflict) is required by or with respect to the
Company in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the filing
of the Articles of Merger with the Minnesota Secretary of State, (ii) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and
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state securities laws (iii) if applicable, the filing of such notices and the
expiration of such waiting periods as required by the Xxxx Xxxxx Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act") (iv) such
consents, waivers, approvals, orders, authorizations, registrations,
declarations or filings that would not reasonably be likely to have a Material
Adverse Effect, and (v) such other consents, waivers, authorizations, filings,
approvals and registrations which are set forth on Schedule 2.4.
2.5 Company Financial Statements. Schedule 2.5 sets forth the Company's
(i) unaudited balance sheet as of March 31, 2001, and the related unaudited
statements of income and cash flow and for the one (1) year period then ended
(collectively, the "Year-End Financials") and (ii) unaudited balance sheet as of
June 30, 2001, and the related unaudited statement of income for the three month
period and the fiscal year to date period then ended (collectively, the
"Quarterly Financials"). As used herein the Year End Financials and the
Quarterly Financials together are the "Company Financial Statements"). The
Company Financial Statements are materially complete and correct and have been
prepared in accordance with accounting principles applied on a basis consistent
throughout the periods indicated and consistent with each other, with the
exception that the Year End Financials are prepared on a consolidated basis and
the Quarterly Financials are prepared for U.S. operations only. The Company
Financial Statements present fairly the financial condition and operating
results of the Company as of the dates and during the periods indicated therein,
subject in the case of the Quarterly Financials to normal year-end adjustments,
which are not material in amount or significance in any individual case or in
the aggregate. The balance sheet contained in the Company's Quarterly Financials
is referred to hereinafter as the "Balance Sheet."
2.6 No Undisclosed Liabilities. Except as would not reasonably be likely
to have a Material Adverse Effect, the Company has no liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of any type,
whether accrued, absolute, contingent, matured, unmatured or other (whether or
not required to be reflected in the Company Financial Statements in accordance
with GAAP), which individually or in the aggregate, (i) has not been reflected
in the Balance Sheet, or (ii) has not arisen in the ordinary course of the
Company's business since the date of the Balance Sheet, consistent with past
practices.
2.7 No Changes. Except as set forth in Schedule 2.7 or as would not
reasonably be likely to have a Material Adverse Effect, since the date of the
Balance Sheet, there has not been, occurred or arisen any:
(a) transaction by the Company except in the ordinary course of
business as conducted on the date of the Balance Sheet and consistent with past
practices;
(b) amendments or changes to the Articles of Incorporation or Bylaws
of the Company;
(c) capital expenditure or commitment by the Company exceeding
$25,000 individually or $100,000 in the aggregate;
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(d) payment, discharge or satisfaction, in any amount in excess of
$20,000 in any one case, or $50,000 in the aggregate, of any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than payment, discharge or satisfaction in the ordinary course of business
of liabilities reflected or reserved against in the Balance Sheet
(e) destruction of, damage to or loss of any material assets,
business or customer of the Company (whether or not covered by insurance);
(f) labor trouble or claim of wrongful discharge or other unlawful
labor practice or action;
(g) event or condition that has or would be reasonably expected to
have a Material Adverse Effect on the Company;
(h) change in accounting methods or practices (including any change
in depreciation or amortization policies or rates) by the Company;
(i) revaluation by the Company of any of its assets;
(j) declaration, setting aside or payment of a dividend or other
distribution with respect to the capital stock of the Company, or any direct or
indirect redemption, purchase or other acquisition by the Company of any of its
capital stock;
(k) increase in the salary or other compensation payable or to
become payable to any of its officers or directors, or the declaration, payment
or commitment or obligation of any kind for the payment of a bonus or other
additional salary or compensation to any such person except in the ordinary
course of business or as described in Section 2.7(k) of the Company Schedule.
(l) sale, lease, license or other disposition of any of the assets
or properties of the Company, except for fair market value to the Company in the
ordinary course of business and consistent with past practices;
(m) amendment or termination (other than pursuant to its terms) of
any contract described in Section 2.12(a) of the Company Schedule
(n) material loan by the Company to any person or entity, incurring
by the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others, except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(o) waiver or release of any material right or claim of the Company,
including any write-off or other compromise of any account receivable of the
Company, other than in the ordinary course of business, consistent with past
practices;
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(p) change in any material respect in pricing or royalties set or
charged by the Company to its customers or licensees or in pricing or royalties
set or charged by persons who have licensed Intellectual Property (as defined in
Section 2.11) to the Company; or
(q) negotiation or agreement by the Company or any officer or
employees thereof to do any of the things described in the preceding clauses (a)
through (q) (other than negotiations with Parent and its representatives
regarding the transactions contemplated by this Agreement).
2.8 Tax and Other Returns and Reports
(a) Definition of Taxes. For the purposes of this Agreement, "Tax"
or, collectively, "Taxes," means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, 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, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.8:
(i) The Company as of the Effective Time will have prepared
and filed all required federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations and such Returns are
true and correct and have been completed in accordance with applicable law.
(ii) The Company as of the Effective Time: (A) will have paid
all Taxes it is required to pay and (B) will have withheld with respect to its
employees all federal and state income taxes, Federal Insurance Contribution
Act, Federal Unemployment Tax Act and other Taxes required to be withheld.
(iii) There is no Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(iv) Except as specified on Schedule 2.8(b)(iv), no audit or
other examination of any Return of the Company is currently in progress, nor has
the Company been notified of any request for such an audit or other examination.
(v) The Company does not have any liabilities for unpaid
federal, state, local and foreign Taxes which have not been accrued or reserved
against in accordance with GAAP on the Balance Sheet, whether asserted or
unasserted, contingent or otherwise.
(vi) The Company has provided to Parent copies of all federal
and state income and all state sales and use Tax Returns for all periods since
the date of Company's incorporation.
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(vii) There are (and as of immediately following the Effective
Date there will be) no liens, pledges, charges, claims, security interests or
other encumbrances of any sort ("Liens") on the assets of the Company relating
to or attributable to Taxes, other than Liens for Taxes not yet due or payable,
which, if required to be reflected, are reflected on the Quarterly Financials.
(viii) As of the Effective Time, there will not be any
contract, agreement, plan or arrangement, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G or 162(m) of
the Code.
(ix) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
(x) The Company is not a party to a tax sharing or allocation
agreement nor does the Company owe any amount under any such agreement.
(xi) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xii) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is, to the Company's knowledge, accurately reflected on the Company's
tax books and records.
(xiii) The Company has never been a member of an affiliated
group (as defined in Section 1504 of the Code) filing a consolidated federal
income Tax Return (or member of any analogous group under applicable local,
state or foreign law) other than a group of which Company was the common parent.
The Company does not have any actual or potential liability for Taxes under U.S.
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law) or as a successor or transferee.
(xiv) The Company has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock qualifying
for a tax-free treatment under Section 355 of the Code (X) in the two years
prior to the date of this Agreement or (Y) in a distribution that 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
Merger.
(xv) To the Company's knowledge, no power of attorney relating
to Taxes has been granted with respect to the Company.
2.9 Restrictions on Business Activities. Except as would not reasonably
be likely to have a Material Adverse Effect, there is no agreement (noncompete
or otherwise), commitment, judgment, injunction, order or decree to which the
Company is a party which has or reasonably would be expected to have the effect
of prohibiting or impairing any business practice of the
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Company, any acquisition of property (tangible or intangible) by the Company or
the conduct of business by the Company. Without limiting the foregoing, the
Company has not entered into any agreement under which the Company is restricted
from selling, licensing or otherwise distributing any of its technology or
products to or providing services to any class of customers, in any geographic
area, during any period of time or in any segment of the market except as would
not reasonably be likely to have a Material Adverse Effect.
2.10 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company owns no real property. Schedule 2.10(a) sets forth
a list of all real property currently leased by the Company. Except as would not
reasonably be likely to have a Material Adverse Effect, all such current leases
are in full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default by the Company, or to the knowledge of the
Company any other party to such leases).
(b) The Company has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens (as defined in Section 2.8(b)(vii)),
except as reflected in the Company Financial Statements or in Schedule 2.10(b)
and except for Liens for Taxes not yet due and payable which, if required to be
reflected, are reflected in the Quarterly Financials and such non-monetary
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
2.11 Intellectual Property. For the purposes of this Agreement,
"Intellectual Property" shall mean any or all of the following and
all rights in, arising out of, or associated therewith: (i) all United States
and foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof ("Patents"); (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets, proprietary information, know how,
technology, technical data and customer lists, and all documentation relating to
any of the foregoing; (iii) all copyrights, copyright registrations and
applications therefor and all other rights corresponding thereto throughout the
world; (iv) all rights to all mask works and reticles, mask work registrations
and applications therefor; (v) all industrial designs and any registrations and
applications therefor throughout the world; (vi) all trade names, logos, common
law trademarks and service marks; trademark and service xxxx registrations and
applications therefor and all goodwill associated therewith throughout the
world; (vii) all databases and data collections and all rights therein
throughout the world; (viii) all computer software including all source code,
object code, firmware, development tools, files, records and data, all media on
which any of the foregoing is recorded, all Web addresses, sites and domain
names; (ix) any similar, corresponding or equivalent rights to any of the
foregoing; and (x) all documentation related to any of the foregoing.
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Schedule 2.11 sets forth a list of all patents, patent rights, patent
applications, trademarks, trademark applications, service marks, service xxxx
applications, trade names and copyrights, and all applications for such which
are in the process of being prepared, owned by or registered in the name of the
Company, or of which the Company is a licensor or licensee or in which the
Company has any right. The Company, to the best of its knowledge after
reasonable investigation, represents and warrants as follows, in each case
except as set forth in Schedule 2.11.
(a) Except as would not reasonably be likely to have a Material
Adverse Effect, the Company has sufficient title and ownership of and the right
to use all Intellectual Property necessary for the operation of its business as
now conducted with no known infringement of the rights of others.
(b) The Company has not received any written notice that, and to
the Company's knowledge, no bona fide claim has been made or asserted that the
Company infringes on or otherwise violates the Intellectual Property Rights of
any other person or entity.
(c) To the knowledge of the Company: (i) there has been no
misappropriation of any material trade secrets or other material confidential
Intellectual Property of the Company by any other person or entity, and (ii) no
employee, independent contractor or agent of the Company has misappropriated any
material trade secrets of any other person in the course of such performance as
an employee, independent contractor or agent.
2.12 Agreements, Contracts and Commitments.
(a) Subsections (i) through (iii) of Schedule 2.12 contain a list
of the following types of written contracts and agreements, other than
employment agreements, to which the Company is a party (collectively, the
"Contracts"):
(i) each contract and agreement which (A) is likely to involve
consideration of more than $100,000 in the aggregate, during the fiscal year
ending March 31, 2002 or (B) is likely to involve consideration of more than
$250,000 in the aggregate, over the remaining term of such contract, and which,
in either case, cannot be canceled by the Company without penalty or further
payment and without more than 60 days' notice;
(ii) all contracts and agreements evidencing indebtedness of
more than $250,000 to unaffiliated third parties in any 12 month period; and
(iii) all contracts and agreements that limit the ability of
the Company to compete in any line of business or with any person or entity or
in any geographic area or during any period of time, in each case, (A) with
respect to any business currently conducted by the Company and (B) other than
distributor agreements entered into in the ordinary course of business.
To the Company's knowledge, each Contract is a legal, valid and binding
agreement in full force and effect in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the rights of creditors generally, and general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
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equity or at law, and in the case of any indemnity provisions contained therein,
is limited by public policy considerations) and the Company is not in default in
any material respect, or has not received notice that is in default, under any
Contract and to the Company's knowledge no other party is in default in any
material respect under any Contract.
2.13 Compliance with Laws. Except as would not reasonably be likely to
have a Material Adverse Effect, the Company has complied with and, is not in
violation of, and has not received any notices of violation with respect to, any
foreign, federal, state or local statute, law or regulation.
2.14 Litigation. Except as set forth in Schedule 2.15, there is no
action, suit or proceeding of any nature pending or to the Company's knowledge
threatened against the Company, its properties or any of its officers or
directors, in their respective capacities as such. Except as set forth in
Schedule 2.15, there is no investigation pending or, to the Company's knowledge,
threatened against the Company, its properties or any of its officers or
directors in their respective capacities as such by or before any governmental
entity. Schedule 2.15 sets forth, with respect to any pending or, to the
knowledge of the Company, threatened action, suit, proceeding or investigation,
the forum, the parties thereto, the subject matter thereof and the amount of
damages claimed or other remedy requested. No governmental entity has at any
time challenged or questioned the legal right of the Company to manufacture,
offer or sell any of its products in the present manner or style thereof.
2.15 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company, there is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have been
paid and the Company is otherwise in compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
premium increase with respect to, any of such policies.
2.16 Minute Books. The minute books of the Company made available to
counsel for Parent are the only minute books of the Company and contain
reasonably accurate summaries of all meetings of the Board of Directors (or
committees thereof) of the Company and its shareholders or actions by written
consent since the time of incorporation of the Company.
2.17 Environmental Matters.
(a) Hazardous Material. The Company has not operated any
underground storage tanks, and has no knowledge of the existence, of any
underground storage tank or related underground piping, at any property that the
Company has at any time owned, operated, occupied or leased. The Company has not
released any amount of any substance that has been designated by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, oil and petroleum products, urea formaldehyde and all substances
listed as a "hazardous substance," "hazardous waste," "hazardous material" or
"toxic substance" or words of similar import, under any law, including but not
limited to, the Comprehensive Environmental Response, Compensation, and
Liability Act of
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1980, as amended; the Resource Conservation and Recovery Act of 1976, as
amended; the Federal Water Pollution Control Act, as amended; the Clean Air Act,
as amended, and the regulations promulgated pursuant to said laws (a "Hazardous
Material"). No Hazardous Materials are present as a result of the actions or
omissions of the Company, or any of its agents, employees or contractors for
which the Company is legally liable, or to the knowledge of the Company any
other third party as a result of any actions of any third party or otherwise,
in, on or under any property, including the land and the improvements, ground
water and surface water thereof, that the Company has at any time owned,
operated, occupied or leased.
(b) Hazardous Materials Activities. The Company has not
transported, stored, used, manufactured, disposed of, released or exposed its
employees or others to Hazardous Materials in violation of any law in effect on
or before the Effective Time, nor has the Company disposed of, transported,
sold, or manufactured any product containing a Hazardous Material (any or all of
the foregoing being collectively referred to as "Hazardous Materials
Activities") in violation of any rule, regulation, treaty or statute promulgated
by any Governmental Entity in effect prior to or as of the date hereof to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity.
(c) Permits. The Company currently holds all environmental
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") necessary for the conduct of the Company's Hazardous Material
Activities and other businesses of the Company as such activities and businesses
are currently being conducted.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to the
Company's knowledge, threatened concerning any Environmental Permit, Hazardous
Material or any Hazardous Materials Activity of the Company. The Company is not
aware of any fact or circumstance which is reasonably likely to involve the
Company in any environmental litigation or impose upon the Company any
environmental liability.
2.18 Brokers' and Finders' Fees; Third Party Expenses. Other than with
respect to Credit Suisse First Boston or its affiliates, the Company has not
incurred, nor will it incur, directly or indirectly, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement or any transaction contemplated hereby.
2.19 Employee Matters and Benefit Plans. Definitions. With the exception
of the definition of "Affiliate" set forth in Section 2.20(a)(i) below (which
definition shall apply only to this Section 2.20), for purposes of this
Agreement, the following terms shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement providing for
compensation, severance,
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termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has been maintained, contributed to, or
required to be contributed to, by the Company or any Affiliate for the benefit
of any Employee, or with respect to which the Company or any Affiliate has or
may have any liability or obligation;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former or retired
employee, consultant or director of the Company or any Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between the
Company or any Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(ix) "International Employee Plan" shall mean each Company
Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is "multiemployer plan," as defined in Section 3(37) of
ERISA; and
(xii) "Pension Plan" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. The Company has made available to Parent each Company
Employee Plan, International Employee Plan, and each Employee Agreement.
Schedule 2.19 lists those employment agreements that contain material
post-employment obligations of the Company. The Company does not have any plan
or commitment to establish any new Company Employee Plan, International Employee
Plan, or Employee Agreement, to modify any Company Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such Company
Employee Plan or Employee Agreement to the requirements of any applicable law,
in each case as
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previously disclosed to Parent in writing, or as required by this Agreement), or
to adopt or enter into any Company Employee Plan, International Employee Plan,
or Employee Agreement.
(c) Documents. The Company has made available to Parent: (i)
correct and complete copies of all documents embodying each Company Employee
Plan, International Employee Plan, and each Employee Agreement including
(without limitation) all amendments thereto and all related trust documents;
(ii) the most recent annual actuarial valuations, if any, prepared for each
Company Employee Plan; (iii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Employee
Plan; (iv) if the Company Employee Plan is funded, the most recent annual and
periodic accounting of Company Employee Plan assets; (v) the most recent summary
plan description together with the summary(ies) of material modifications
thereto, if any, required under ERISA with respect to each Company Employee
Plan; (vi) all IRS determination, opinion, notification and advisory letters,
and all applications and correspondence to or from the IRS or the DOL with
respect to any such application or letter; (vii) all material written agreements
and contracts relating to each Company Employee Plan, including, but not limited
to, administrative service agreements, group annuity contracts and group
insurance contracts; (viii) all communications material to any Employee or
Employees relating to any Company Employee Plan and any proposed Company
Employee Plans, in each case, relating to any amendments, terminations,
establishments, increases or decreases in benefits, acceleration of payments or
vesting schedules or other events which would result in any liability to the
Company; (ix) all correspondence to or from any governmental agency relating to
any Company Employee Plan; (x) samples of standard COBRA forms and related
notices (or such forms and notices as required under comparable law); (xi) all
policies pertaining to fiduciary liability insurance covering the fiduciaries
for each Company Employee Plan; (xii) the three (3) most recent plan years
discrimination tests for each Company Employee Plan; and (xiii) all registration
statements, annual reports (Form 11-K and all attachments thereto) and
prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.19(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Company Employee Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of ERISA (or any administrative class exemption issued
thereunder), has
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occurred with respect to any Company Employee Plan; (iv) there are no actions,
suits or claims pending, or, to the knowledge of the Company, threatened or
reasonably anticipated (other than routine claims for benefits) against any
Company Employee Plan or against the assets of any Company Employee Plan; (v)
each Company Employee Plan (other than any stock option plan) can be amended,
terminated or otherwise discontinued after the Effective Time, without liability
to the Parent, Company or any of its Affiliates (other than ordinary
administration expenses); (vi) there are no audits, inquiries or proceedings
pending or, to the knowledge of the Company or any Affiliates, threatened by the
IRS or DOL with respect to any Company Employee Plan; and (vii) neither the
Company nor any Affiliate is subject to any penalty or tax with respect to any
Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code.
(e) Pension Plan. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer and Multiple Employer Plans. At no time has the
Company or any Affiliate contributed to or been obligated to contribute to any
Multiemployer Plan. Neither the Company, nor any Affiliate has at any time ever
maintained, established, sponsored, participated in, or contributed to any
multiple employer plan, or to any plan described in Section 413 of the Code.
(g) No Post-Employment Obligations. Except as set forth in Schedule
2.20(g), no Company Employee Plan provides, or reflects or represents any
liability to provide retiree health to any person for any reason, except as may
be required by COBRA or other applicable statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with retiree health,
except to the extent required by statute.
(h) Health Care Compliance. To the knowledge of the Company,
neither the Company nor any Affiliate has, prior to the Effective Time, violated
any of the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and Accountability
Act of 1996, the requirements of the Women's Health and Cancer Rights Act, the
requirements of the Newborns' and Mothers' Health Protection Act of 1996, or any
amendment to each such Act, or any similar provisions of state law applicable to
its Employees.
(i) Effect of Transaction.
(i) Except as set forth on Schedule 2.19(i), the execution of
this Agreement and the consummation of the transactions contemplated hereby will
not (either alone or upon the occurrence of any additional or subsequent events)
constitute an event under any Company Employee Plan, Employee Agreement, trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any
Employee.
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(ii) Except as set forth on Schedule 2.19(i), no payment or
benefit which will or may be made by the Company or its Affiliates with respect
to any Employee will be characterized as a "parachute payment," within the
meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. The Company: (i) is in compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees; (iii)
is not liable for any arrears of wages or any taxes or any penalty for failure
to comply with any of the foregoing; and (iv) is not liable for any payment to
any trust or other fund governed by or maintained by or on behalf of any
governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending, reasonably anticipated or, to the
knowledge of the Company, threatened claims or actions against the Company under
any worker's compensation policy or long-term disability policy.
(k) Labor. No work stoppage or labor strike against the Company is
pending, reasonably anticipated, or, to the knowledge of the Company,
threatened. The Company does not know of any activities or proceedings of any
labor union to organize any Employees. Except as set forth in Schedule 2.19(k),
there are no actions, suits, claims, labor disputes or grievances pending, or,
to the knowledge of the Company, threatened or reasonably anticipated relating
to any labor, safety or discrimination matters involving any Employee,
including, without limitation, charges of unfair labor practices or
discrimination complaints, which, if adversely determined, would, individually
or in the aggregate, result in any liability to the Company. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. Except as set forth in Schedule
2.19(k), the Company is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
(l) International Employee Plan. The Company does not now, nor has
it ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
2.20 Accounts Receivable. All of the Company's accounts receivable arose
in the ordinary course of business, are carried at values determined in
accordance with GAAP consistently applied, and to the knowledge of the Company
are collectible except to the extent of reserves therefor set forth in the
Balance Sheet or, for receivables arising subsequent to the date of the Balance
Sheet, are reflected on the books and records of the Company (which are prepared
in accordance with GAAP). No person has any lien on any of the Company's
accounts receivable and no request or agreement for deductions or discount has
been made or is contemplated with respect to any of the Company's accounts
receivable. No account receivable has been collected prior to the due date
thereof except as set forth on Schedule 2.20 or as otherwise consistent with
past practices in the ordinary course of business.
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2.21 No Material Adverse Change. Since the date of the Balance Sheet
there has not occurred, any Material Adverse Effect on the Company. 2.22 Board
Approval. The Board of Directors of the Company has, as of the date of this
Agreement (i) unanimously approved, subject to shareholder approval, this
Agreement and the transactions contemplated hereby, (ii) determined that the
Merger is in the best interests of the shareholders of the Company, and (iii)
recommended that the Company Shareholders approve this Agreement and the Merger.
2.23 Disclaimer of Other Representations and Warranties. Except as
expressly set forth in this Article II, the Company makes no representation or
warranty, express or implied, at law or in equity.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
As of the date hereof, Parent represents and warrants to the Company as
follows:
3.1 Organization, Standing and Power. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub will be a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota. Parent has the
corporate power to own its properties and to carry on its business as now being
conducted and is duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would be material to Parent
and Merger Sub as a whole. Merger Sub, when formed, will have the corporate
power to own its properties and to carry on its business as now being conducted
and will be duly qualified to do business and is in good standing in each
jurisdiction in which the failure to be so qualified would be material to Parent
and Merger Sub as a whole.
3.2 Authority. Parent has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent. This Agreement has been duly executed
and delivered by Parent and constitutes the valid and binding obligations of
Parent, enforceable in accordance with its terms subject to the laws of general
application relating to bankruptcy, insolvency and relief of debtors and to
rules of law governing specific performance, injunctive relief and other
equitable remedies. Subject only to the approval of the Merger and this
Agreement by the Company's shareholders, the execution and delivery of this
Agreement by the Parent does not, and, as of the Effective Time, the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a conflict under (i) any provision of the
Certificate of Incorporation or Bylaws of the Parent. No consent, waiver,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity or any third party (so as not to trigger any
Conflict) is required by or with respect to the Parent in connection with the
execution and
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delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (i) the filing of the Plan of Merger with the Minnesota
Secretary of State, (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, (iii) if applicable, the filing of
such notices and the expiration of such waiting periods as required by the HSR
Act, and (iv) such other consents, waivers, authorizations, filings, approvals,
and registrations which are set forth on Schedule 3.2.
3.3 Capital Structure.
(a) As of August 1, 2001, the authorized stock of Parent consisted
of 100,000,000 shares of Common Stock, of which 35,326,303 shares were issued
and outstanding as of August 1, 2001, and 10,000,000 shares of Preferred Stock,
none of which is issued or outstanding. The authorized capital stock of Merger
Sub will consist of 1,000 shares of Common Stock, 1,000 shares of which, will be
issued and outstanding and will be held by Parent. All such shares will be duly
authorized, and all such issued and outstanding shares will be validly issued,
are fully paid and nonassessable and are free of any liens or encumbrances other
than any liens or encumbrances created by or imposed upon the holders thereof.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger, when issued, will be duly authorized, validly issued, fully paid,
non-assessable, free of any liens or encumbrances, and not subject to any
preemptive rights or rights of first refusal created by statute or the
Certificate of Incorporation or Bylaws of Parent or any agreement to which
Parent is a party or is bound. The shares of Parent Common Stock issued by
Parent in the Merger shall be issued in compliance with applicable federal and
state securities laws, be freely transferable by the Company Shareholders and
shall be legended only as required by applicable law or as contemplated by this
Agreement or the documents to entered into pursuant to this agreement.
3.4 SEC Documents; Parent Financial Statements. Parent has furnished or
made available to the Company true and complete copies of all reports or
registration statements filed by it with the Securities and Exchange Commission
(the "SEC") for the two (2) years prior to the date hereof, all in the form so
filed, including the exhibits thereto (all of the foregoing being collectively
referred to as the "SEC Documents"). As of their respective filing dates, the
SEC Documents complied in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act") or the Securities Exchange Act of
1934 (the "Exchange Act") as the case may be, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not misleading,
except to the extent corrected by a document subsequently filed with the SEC.
The financial statements of Parent, including the notes thereto, included in the
SEC Documents (the "Parent Financial Statements") comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles consistently applied
(except as may be indicated in the notes thereto or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC) and present fairly the
consolidated financial position of Parent at the dates thereof and the
consolidated results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to
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normal audit adjustments). There has been no change in Parent accounting
policies except as described in the notes to the Parent Financial Statements;
provided, however, the Parent may have restated or may restate one or more of
the Parent Financial Statements to reflect acquisitions entered into subsequent
to the respective dates thereof. Except for those liabilities that are reflected
or reserved against on the balance sheet filed with Parent's Form 10-K filed
June 11, 2001, Parent has no outstanding liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to become
due), except for liabilities and obligations, which have been incurred since the
date of such balance sheet in the ordinary course of business. Since the date of
the balance sheet filed with Parent's Form 10-K filed June 11, 2001, Parent has
conducted its business only in the ordinary course and in a manner consistent
with past practice.
3.5 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending or to the knowledge of Parent, threatened against
Parent which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated by this Agreement.
3.6 Brokers' and Finders' Fees. Parent has not incurred, nor will it
incur directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.7 No Material Adverse Change. Since the date of the balance sheet
included in the Parent's report on Form 10-K filed June 11, 2001, there has not
occurred: (a) any Material Adverse Effect on Parent; or (b) any amendments or
changes in the Certificate of Incorporation or Bylaws of Parent.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, the Company agrees (except to the extent that
Parent shall otherwise consent or except as agreed to by Parent's
representatives on the Company's Board of Directors) to carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve the Company's
relationships with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, all with the goal of preserving
unimpaired its goodwill and ongoing businesses at the Effective Time. Except as
expressly contemplated by this Agreement, the Company shall not, without the
prior consent of Parent or except as agreed to by Parent's representatives on
the Company's Board of Directors:
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(a) Enter into any commitment, activity or transaction not in the
ordinary course of business, except for the Loan Termination Agreement, dated of
even date herewith, between the Company and P.T. Indo-Bharat Rayon;
(b) Transfer to any person or entity any rights to any Company
Intellectual Property or enter into any license agreement with respect to
Company Intellectual Property with any person or entity or with respect to the
Intellectual Property of any third party;
(c) Commence or settle any litigation;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any of its
capital stock, or split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of the Company, or purchase,
repurchase, redeem or otherwise acquire, directly or indirectly, any shares of
its capital stock (or options, warrants or other rights exercisable therefor);
(e) Except for the issuance of shares of Company Capital Stock upon
exercise or conversion of presently outstanding Company Options, or Company
Warrants, issue, sell, grant, contract to issue, grant or sell, or authorize the
issuance, delivery, sale or purchase of any shares of Company Capital Stock,
Convertible Securities, or any securities, warrants, options or rights to
purchase any of the foregoing (other than granting Company Options to employees
consistent with past practice);
(f) Cause or permit any amendments to its Articles of
Incorporation, Bylaws or other organizational documents;
(g) Fail to pay or otherwise satisfy its monetary obligations as
they become due, except such as are being contested in good faith;
(h) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(a) through (g) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
(i) Change or make any Tax election, or settle any tax controversy
or consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes.
4.2 No Solicitation. Until the earlier of the Effective Time or the one
month anniversary of the date of this Agreement, the Company will not (nor will
the Company permit any of the Company's officers, directors, shareholders,
agents, representatives or affiliates to) directly or indirectly, take any of
the following actions with any party other than Parent and its designees (except
to the extent that Parent shall otherwise consent or except as agreed to by
Parent's representatives on the Company's Board of Directors): (a) solicit,
initiate, entertain, or encourage any proposals or offers from, or conduct
discussions with or engage in negotiations with, any person relating to any
possible acquisition of the Company or any of its subsidiaries (whether by way
of
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merger, purchase of capital stock, purchase of assets or otherwise), any portion
of its capital stock or assets or any equity interest in the Company or any of
its subsidiaries, (b) provide information with respect to it to any person,
other than Parent, relating to, or otherwise cooperate with, facilitate or
encourage any effort or attempt by any such person with regard to, any possible
acquisition of the Company (whether by way of merger, purchase of capital stock,
purchase of assets or otherwise), any of its capital stock or assets or any
equity interest in the Company or any of its subsidiaries, (c) enter into an
agreement with any person, other than Parent, providing for the acquisition of
the Company (whether by way of merger, purchase of capital stock, purchase of
assets or otherwise), any of its capital stock or assets or any equity interest
in the Company or any of its subsidiaries, or (d) make or authorize any
statement, recommendation or solicitation in support of any possible acquisition
of the Company or any of its subsidiaries (whether by way of merger, purchase of
capital stock, purchase of assets or otherwise), any of its capital stock or
assets or any equity interest in the Company or any of its subsidiaries by any
person, other than by Parent. The Company shall immediately cease and cause to
be terminated any such contacts or negotiations with third parties relating to
any such transaction or proposed transaction. In addition to the foregoing, if
the Company receives prior to the Effective Time or the termination of this
Agreement any offer or proposal relating to any of the above, the Company shall
immediately notify Parent thereof, including information as to the identity of
the offeror or the party making any such offer or proposal and the specific
terms of such offer or proposal, as the case may be, and such other information
related thereto as Parent may reasonably request. Except as contemplated by this
Agreement, disclosure by the Company of the terms hereof (other than the
prohibition of this Section 4.2) shall be deemed to be a violation of this
Section 4.2.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Exemption from Registration; California Permit; Shareholder
Approval.
(a) The shares of Parent Common Stock to be issued in the Merger
will be issued in a transaction exempt from registration under the Securities
Act of 1933, as amended (the "Securities Act") by reason of Section 3(a)(10)
thereof. Subject to the provisions of clauses (b) and (c) below, the shares of
Parent Common Stock to be issued in the Merger will be qualified under the
California Corporation Code ("CCC"), pursuant to Section 25121 thereof, after a
fairness hearing has been held pursuant to the authority granted by Section
25142 of such law, and such fairness hearing shall also address the issuance of
Parent Common Stock in connection with the cancellation of Out-of-the-Money
Warrants and the assumption by Parent of all Company Warrants pursuant to this
Agreement. Parent and Company shall each use all requisite commercially
reasonable efforts (i) to file, as promptly as practicable following the
execution and delivery of this Agreement an application for issuance of a permit
pursuant to Section 25121 of the CCC to issue such securities and to assume such
Company Warrants (the "California Permit") and (ii) to obtain the California
Permit as promptly as practicable. In the event that the California Permit
cannot be obtained within a reasonable time or without the imposition of
burdensome conditions, then, at Parent's election and with the consent of
Company (which shall not be unreasonably withheld), Parent and Company shall use
all reasonable best efforts to effect the issuance of the shares of Parent
Common Stock to be
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issued pursuant to this Agreement on a Form S-4 registration statement filed
with the United States Securities and Exchange Commission.
(b) As promptly as practicable after the execution of this
Agreement, Parent shall prepare, with the cooperation and reasonable assistance
of the Company, and the Company shall furnish to its shareholders an Information
Statement for the shareholders of Company to approve and adopt this Agreement,
the Merger and the other transactions contemplated by this Agreement (the
"Information Statement"). The Information Statement shall constitute a
disclosure document for the offer and issuance of the shares of Parent Common
Stock to be received by the holders of Company Common Stock in the Merger and
shall be combined with a proxy statement for solicitation of shareholder consent
to or approval of this Agreement, the Merger and the other transactions
contemplated hereby (the "Joint Proxy/Information Statement"). Parent and
Company shall each use its reasonable best efforts to cause the Joint
Proxy/Information Statement to comply with applicable federal and state
securities laws requirements. Each of Parent and Company hereby (i) consents to
the use of its name and, on behalf of its subsidiaries and affiliates, the names
of such subsidiaries and affiliates and to the inclusion of financial statements
and business information relating to such party and its subsidiaries and
affiliates (in each case, to the extent required by applicable securities laws)
in the Joint Proxy/Information Statement, (ii) agrees to provide promptly to the
other such information concerning it and its respective affiliates, directors,
officers and securityholders as, in the reasonable judgment of the other party
or its counsel, may be required or appropriate for inclusion in the Information
Statement, or in any amendments or supplements thereto, and (iii) agrees to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the preparation of the Information Statement. Company will promptly
advise Parent, and Parent will promptly advise Company, in writing if at any
time prior to the Effective Time either Company or Parent shall obtain knowledge
of any facts that might make it necessary or appropriate to amend or supplement
the Joint Proxy/Information Statement in order to make the statements contained
or incorporated by reference therein not misleading or to comply with applicable
law. Except as expressly provided in Section 4.2 hereof, the Joint
Proxy/Information Statement shall contain the recommendation of the Board of
Directors of Company that Company Shareholders approve and adopt this Agreement,
the Merger and the other transactions contemplated by this Agreement, and the
conclusion of the Board of Directors that the terms and conditions of the Merger
are in the best interests of the Company and its shareholders.
(c) As soon as practicable after the execution of this Agreement,
Parent shall prepare, with the cooperation of Company, the application for the
California Permit (the "Permit Application"). Parent and Company shall each use
commercially reasonable efforts to cause the Permit Application to comply with
the requirements of applicable federal and state laws. Each of Parent and
Company hereby (i) consents to the use of its name and, on behalf of its
subsidiaries and affiliates, the names of such subsidiaries and affiliates and
to the inclusion of financial statements and business information relating to
such party and its subsidiaries and affiliates (in each case, to the extent
required by applicable securities laws) in the Permit Application, (ii) agrees
to provide promptly to the other such information concerning its business and
financial statements and affairs as, in the reasonable judgment of the providing
party or its counsel, may be required or appropriate for inclusion in the Permit
Application, or in any amendments or supplements thereto, and (iii) agrees to
cause its counsel and auditors to cooperate with the other's counsel and
auditors in the
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preparation of the Permit Application. Company will promptly advise Parent, and
Parent will promptly advise Company, in writing if at any time prior to the
Effective Time either Company or Parent shall obtain knowledge of any facts that
might make it necessary or appropriate to amend or supplement the Permit
Application in order to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law.
5.2 Access to Information. The Company shall afford Parent and its
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to (a) all of the
Company's properties, books, contracts, commitments and records and (b) all
other information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of the Company as Parent may reasonably
request, and (c) for the sole purpose of obtaining information in connection
with the transactions contemplated by this Agreement, all employees of the
Company as identified by Parent.
5.3 Confidentiality. Each of the parties hereto hereby agrees to keep
the terms of this Agreement (except to the extent contemplated hereby) and such
information or knowledge obtained in any investigation pursuant to Section 5.2,
or pursuant to the negotiation and execution of this Agreement or the
effectuation of the transactions contemplated hereby, confidential; provided,
however, that the foregoing shall not apply to information or knowledge which
(a) a party can demonstrate was already lawfully in its possession prior to the
disclosure thereof by the other party, (b) is generally known to the public and
did not become so known through any violation of law, (c) became known to the
public through no fault of such party, (d) is later lawfully acquired by such
party without confidentiality restrictions from other sources, (e) is required
to be disclosed by order of court or government agency with subpoena powers
(provided that such party shall have provided the other party with prior notice
of such order and an opportunity to object or take other available action) or
(f) which is disclosed in the course of any litigation between any of the
parties hereto.
5.4 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall, (subject to
Section 7.2(k)), be the obligation of the respective party incurring such fees
and expenses.
5.5 Public Disclosure. Unless otherwise required by law (including,
without limitation, federal and state securities laws) or, as to Parent, by the
rules and regulations of the National Association of Securities Dealers and/or
the Nasdaq National Market, prior to the Effective Time, no disclosure (whether
or not in response to an inquiry) of the subject matter of this Agreement
including, if applicable, its termination and the reasons therefor, shall be
made by any party hereto unless approved by Parent and the Company prior to
release, provided that such approval shall not be unreasonably withheld.
5.6 Consents. The Company shall promptly apply for or otherwise seek and
use its commercially reasonable efforts to obtain all consents and approvals
required to be obtained by it for the consummation of the Merger including all
consents, waivers and approvals under any of the
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Contracts as may be required in connection with the Merger so as to preserve all
rights of and benefits to the Company thereunder from and after the Effective
Time.
5.7 Reasonable Efforts. Subject to the terms and conditions provided in
this Agreement, each of the parties hereto shall use its reasonable efforts to
take promptly, or cause to be taken, all actions, and to do promptly, or cause
to be done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby, to obtain all necessary waivers, consents and approvals, to effect all
necessary registrations and filings, and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement. To
the extent required by law, as soon as may be reasonably practicable, the
Company and Parent each shall file with the United States Federal Trade
Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable premerger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. The Company and Parent each shall promptly (a) supply the other with
any information which may be required in order to effectuate such filings and
(b) supply any additional information which reasonably may be required by the
FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate.
5.8 Lock-up Agreements. Prior to the Closing Date, the Company shall use
commercially reasonable efforts to obtain from all holders of Company Capital
Stock agreements in the form attached as Exhibit B hereto ("Lock-Up Agreements")
providing that such holders will not sell, transfer or otherwise dispose of any
shares of Parent Common Stock received as a result of the transactions
contemplated by this Agreement, except in accordance with the terms of such
Lock-Up Agreements.
5.9 Nasdaq Listing. Parent agrees to authorize for listing on the Nasdaq
National Market the shares of Parent Common Stock issuable, and those required
to be reserved for issuance, in connection with the Merger, upon official notice
of issuance.
5.10 Registration. Parent agrees to file with the Securities and
Exchange Commission a registration statement registering a number of shares of
Parent Common Stock equal to the number of shares of Parent Common Stock
issuable upon the exercise of all Convertible Securities assumed by Parent
pursuant to Section 1.6 hereof as soon as reasonably possible after the Closing,
but not later than 10 days after the Closing.
5.11 401(k) Plan. The Company agrees to terminate its 401(k) plan
immediately prior to Closing, unless Parent, in its sole and absolute discretion
agrees to sponsor and maintain such plan by providing the Company with notice of
such election at least ten (10) days prior to the Effective Time.
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5.12 Additional Documents and Further Assurances. Each party hereto, at
the reasonable request of the other party hereto, shall execute and deliver such
other instruments and do and perform such other acts and things as may be
necessary or desirable for effecting completely the consummation of this
Agreement and the transactions contemplated hereby.
5.13 Section 368 Election. Parent, Merger Sub and the Company shall each
use its reasonable best efforts to cause the business combination to be effected
by the Merger to qualify as a "reorganization" within the meaning of Section 368
of the Code and to be accounted for using the purchase method of accounting.
5.14 Employee Benefits. After the Effective Time, employees who remain
with the Surviving Corporation shall be eligible, upon completion of Parent's
standard employee background and reference check, to participate in Parent's
employee benefits programs to the same extent as employees of Parent, provided
that Parent shall credit such employees' service with the Company for purposes
of eligibility and vesting under any such benefits.
5.15 Communications with Holders of Out-of-the-Money Warrants. From the
date of this Agreement until the Effective Time, Company will use commercially
reasonable efforts, with the reasonable cooperation of Parent, to enter into
agreements with the holders of outstanding Out-of-the-Money Warrants to cancel
such Out-of-the-Money Warrants. Company agrees to keep Parent informed and
apprised of such efforts, and agrees that all written communications delivered
to such holders shall be subject to the prior review and approval of Parent.
Company further agrees that all oral communications with such holders will not
be inconsistent with such Parent approved and reviewed written communications.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(b) No Injunctions or Restraints; Illegality; HSR Act. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
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(c) Stock Purchase Agreement. The Stock Purchase Agreement dated as
of August 14, 2001, between Parent and New Millennium Investments (the "Stock
Purchase Agreement") shall have been executed and the transactions contemplated
thereby shall have been consummated.
(d) California Permit; Securities Compliance. The California Permit
shall have been issued, or in the alternative, the Form S-4 shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings to seek a stop order.
6.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. There shall have been no breach
of the representations and warranties of Parent contained in this Agreement
which has had a Material Adverse Effect on Parent.
(b) Shareholder Approval. This Agreement and the Merger shall have
been approved and adopted by the shareholders of the Company.
(c) Secretary's Certificate. Each of Parent and Merger Sub shall
have delivered to the Company a copy of (i) the text of the resolutions adopted
by Parent's Board of Directors and the sole shareholder of Merger Sub,
respectively, authorizing the execution, delivery and performance of this
Agreement and the consummation of all of the transactions contemplated by this
Agreement and (ii) its certificate of incorporation and bylaws, along with a
certificate executed on behalf of such entity by its corporate secretary
certifying to the Company that such copies are true, correct and complete copies
of such resolutions, certificate of incorporation and bylaws, respectively, and
that such resolutions, certificate of incorporation and bylaws were duly adopted
and have not been amended or rescinded.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
(a) Representations and Warranties. There shall have been no
fraudulent breach of the representations and warranties of the Company contained
in this Agreement which has had a Material Adverse Effect on the Company.
(b) Shareholder Approval. The shareholders of the Company shall have
approved this Agreement, the Merger and the transactions contemplated hereby,
and no more than 10% of the shares of Company Common Stock shall be held by
persons entitled to exercise, or who have exercised, any dissenter's or
appraisal rights under applicable Minnesota Law.
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(c) Secretary's Certificate. The Company shall have delivered to
Parent a copy of (i) the text of the resolutions adopted by the Board of
Directors of the Company authorizing the execution, delivery and performance of
this Agreement and the consummation of all of the transactions contemplated by
this Agreement, (ii) the text of the resolutions adopted by the shareholders of
the Company approving and adopting this Agreement and the Merger and (iii) the
articles of incorporation and bylaws of the Company, along with a certificate
executed on behalf of the Company by its corporate secretary certifying to
Parent that such copies are true, correct and complete copies of such
resolutions, articles of incorporation and bylaws, respectively, and that such
resolutions, articles of incorporation and bylaws were duly adopted and have not
been amended or rescinded.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 Survival of Representations and Warranties, Indemnity.
(a) Survival Period. All of the Company's representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement (each as modified by the Company Schedules) shall survive the Merger
and continue until 5:00 p.m., California time, on the date which is one year
following the Closing Date (the "Expiration Date"); provided, however, that the
representations and warranties set forth in Section 2.8 shall survive the Merger
and continue until all applicable statute of limitations period shall have
expired.
(b) Indemnification. The Company Shareholders upon, and in
consideration of their receipt of Parent Common Stock pursuant to Section 1.6,
jointly and severally agree, to indemnify and hold harmless Parent, Surviving
Corporation, and each of their respective officers, directors, stockholders,
subsidiaries, affiliates, successors, and assigns (the "Parent Indemnified
Parties"), from and against all actions, claims, losses, liabilities, reasonable
attorneys' and experts fees, judgements, penalties, reasonable costs and
reasonable expenses actually incurred by a Parent Indemnified Party ("Losses")
directly resulting from:
(i) any misrepresentation, breach, or inaccuracy of a
representation or warranty of the Company contained in this Agreement or in any
other agreement, certificate, or other document executed by the Company or any
officer on behalf of the Company,
(ii) any failure by the Company to perform or comply with any
of its covenants under this Agreement to be performed prior to the Closing, the
failure of any Company Shareholder to have good, valid and marketable title to
the Company Capital Stock surrendered by it in the Merger, the failure of any
Company Shareholder to surrender any share of Company Capital Stock in the
Merger as required pursuant to this Agreement, any other claim by a shareholder
or former shareholder of the Company, or any other person or entity, seeking to
assert, or based upon: (a) ownership or rights to ownership of any shares of the
Company Capital Stock, (b) any rights of a shareholder (other than the right to
receive the Merger Consideration pursuant to this Agreement in the Merger or
dissenter's rights under the applicable provisions of the Minnesota Law),
including
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any option, preemptive rights or rights to notice or to vote; (c) any rights
under the Articles of Incorporation or By-laws of the Company; or (d) any claim
that his/her/its capital stock in the Company was wrongfully repurchased by the
Surviving Corporation or Parent pursuant to this Agreement.
(c) Limitations on Indemnification.
(i) it is understood and agreed that no claim for recovery of
indemnifiable damages may be asserted based on a representation, warranty or
applicable portion thereof set forth in this Agreement, or the other documents
referred to herein, after the survival of such representation or warranty has
terminated in accordance with Section 7.1(a) hereof.
(ii) Notwithstanding anything to the contrary contained in
this Agreement, Parent Indemnified Parties shall not be entitled to be
indemnified pursuant to Section 7.1 or any other provision hereof unless and
until the aggregate of all losses incurred by Parent Indemnified Parties exceed
$650,000 at which time the Company Shareholders shall only be obligated to
indemnify the Parent Indemnified Parties for Losses in excess of the first
$650,000. Notwithstanding anything to the contrary contained in this Agreement,
the Escrow Fund shall be the sole and exclusive source of recovery for the
indemnification obligations of the Company Shareholders under Article VII or any
other provision hereof except in the event of fraud by the Company, its
officers, directors, employees, or agents ("Fraud").
(iii) Notwithstanding anything to the contrary contained in
this Agreement, the Parent Indemnified Parties shall not be entitled to be
indemnified pursuant to Article VII or any other provision hereof for any
special, incidental or punitive damages unless such special, incidental or
punitive damages are payable by the Parent Indemnified Party to a third party
who is not an affiliate of the Parent Indemnified Party.
(iv) Notwithstanding anything to the contrary in this
Agreement, (a) any loss for which a Parent Indemnified Party shall be entitled
to be indemnified pursuant to Section 7.1 or any other provision hereof shall
take into account the proceeds of any insurance or any indemnity, contribution
or other similar payment actually recovered by the Parent Indemnified Party or
any of its affiliates from any third party with respect thereto (the "Insurance
Recovery Amount"), (b) the Company Shareholders shall have no liability pursuant
to Article VII or any other provision hereof with respect to any claim for
indemnification arising from a change in law or regulation (including generally
accepted accounting principles) after the date hereof having a retroactive
effect; and (c) a Parent Indemnified Party shall have a duty to mitigate damages
in accordance with applicable law.
(v) The indemnification obligations of the Company
Shareholders set forth in this Article VII shall constitute the sole and
exclusive remedy of any Parent Indemnified Party for the recovery of damages
with respect to any and all matters arising out of this Agreement and the other
documents referred to herein, other than damages resulting from Fraud.
7.2 Escrow Arrangements.
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(a) Escrow Fund. At the Effective Time, the Company Shareholders
will be deemed to have received and deposited with the Escrow Agent (as defined
below) the Escrow Amount (plus any additional shares as may be issued upon any
stock split, stock dividend or recapitalization effected by Parent after the
Effective Time) without any act of any Company Shareholder. As soon as
practicable after the Effective Time, the Escrow Amount, without any act of any
Company Shareholder, will be deposited with Chase Manhattan Bank and Trust
Company, National Association (or other institution acceptable to Parent and the
Securityholder Agent (as defined in Section 7.2(g) below)), as Escrow Agent,
such deposit to constitute an escrow fund (the "Escrow Fund") to be governed by
the terms set forth herein and at Parent's cost and expense. The Escrow Fund
shall be available to compensate Parent and its affiliates for the
indemnification obligations of the Company Shareholders as set forth in Section
7.1. Parent and the Company each acknowledge that such Losses, if any, would
relate to unresolved contingencies existing at the Effective Time, which if
resolved at the Effective Time would have led to a reduction in the aggregate
Merger Consideration.
(b) Escrow Period; Distribution upon Termination of Escrow Periods.
Subject to the following requirements, the Escrow Fund shall be in existence
immediately following the Effective Time and shall terminate and the Escrow
Agent shall deliver to the Company Shareholders the remaining portion of the
Escrow Fund, if any, at 5:00 p.m., California time, on the Expiration Date (the
"Escrow Period"); provided that the Escrow Period shall not terminate with
respect to such amount (or some portion thereof), that is necessary in the
reasonable judgment of Parent, subject to the objection of the Securityholder
Agent and the subsequent arbitration of the matter in the manner provided in
Section 7.2(f) hereof, to satisfy any unsatisfied claims existing prior to the
termination of such Escrow Period specified in any Escrow Claim Certificate
delivered to the Escrow Agent prior to termination of such Escrow Period. As
soon as all such claims have been resolved, the Escrow Agent shall deliver to
the Company Shareholders the remaining portion of the Escrow Fund not required
to satisfy such claims. Deliveries of Escrow Amounts to the Company Shareholders
pursuant to this Section 7.2(b) shall be made in proportion to their respective
original contributions to the Escrow Fund as determined pursuant to Section
1.8(b).
(c) Protection of Escrow Fund.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split) ("New Shares") in respect of Parent Common Stock in the Escrow Fund which
have not been released from the Escrow Fund and all interest earned on the
Escrow Fund shall be added to the Escrow Fund and become a part thereof. New
Shares issued in respect of shares of Parent Common Stock which have been
released from the Escrow Fund shall not be added to the Escrow Fund but shall be
distributed to the record holders thereof. Cash dividends on Parent Common Stock
shall not be added to the Escrow Fund but shall be distributed to the record
holders thereof.
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(iii) Each Company Shareholder shall be shown as the record
owner on the Parent's books and records, and shall have voting rights with
respect to the shares of Parent Common Stock contributed to the Escrow Fund by
such Company Shareholder (and on any voting securities added to the Escrow Fund
in respect of such shares of Parent Common Stock).
(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or before
the last day of the Escrow Period of a certificate signed by any officer of
Parent (an "Escrow Claim Certificate"): (A) stating that Parent is entitled to
an indemnification payment pursuant to Section 7.1, and (B) specifying in
reasonable detail the individual items of Losses included in the amount so
claimed, the date each such item was paid, sustained or properly accrued, or the
basis for such anticipated liability, and the nature of the misrepresentation,
breach of warranty or covenant to which such item is related, the Escrow Agent
shall, subject to the provisions of Section 7.2(e) hereof, deliver to Parent out
of the Escrow Fund, as promptly as practicable, such number of shares of Parent
Common Stock held in the Escrow Fund as are valued in an amount equal to the
unreimbursed amount of such payment that Parent is entitled to pursuant to
Section 7.1.
(ii) For the purposes of determining the number of shares of
Parent Common Stock to be delivered to Parent out of the Escrow Fund pursuant to
Section 7.2(d)(i) hereof, each share of Parent Common Stock shall be deemed to
have a value equal to the DTHK Closing Price.
(e) Objections to Claims. At the time of delivery of any Escrow
Claim Certificate to the Escrow Agent, a duplicate copy of such certificate
shall be delivered to the Securityholder Agent (as defined in Section 7.2(g))
and for a period of thirty (30) days after such delivery, the Escrow Agent shall
make no delivery to Parent of any Escrow Amounts pursuant to Section 7.2(d)
hereof unless the Escrow Agent shall have received written authorization from
the Securityholder Agent to make such delivery. After the expiration of such
thirty (30)-day period, the Escrow Agent shall make delivery of the shares in
the Escrow Fund in accordance with Section 7.2(d) hereof, provided that no such
delivery may be made if the Securityholder Agent shall object in a written
statement to the claim made in the Escrow Claim Certificate, and such statement
shall have been delivered to the Escrow Agent prior to the expiration of such
thirty (30)-day period.
(f) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Escrow Claim Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common Stock from the Escrow Fund in
accordance with the terms thereof.
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(ii) If no such agreement can be reached after good faith
negotiation, either Parent or the Securityholder Agent may demand arbitration of
the matter unless the amount of the damage or loss is at issue in pending
litigation with a third party, in which event arbitration shall not be commenced
until such amount is ascertained or both parties agree to arbitration; and in
either such event the matter shall be settled by arbitration conducted by three
arbitrators. Parent and the Securityholder Agent shall each select one
arbitrator, and the two arbitrators so selected shall select a third arbitrator.
The arbitrators shall set a limited time period and establish procedures
designed to reduce the cost and time for discovery while allowing the parties an
opportunity, adequate in the sole judgment of the arbitrators, to discover
relevant information from the opposing parties about the subject matter of the
dispute. The arbitrators shall rule upon motions to compel or limit discovery
and shall have the authority to impose sanctions, including attorneys' fees and
costs, to the extent as a court of competent law or equity, should the
arbitrators determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of a majority of the three arbitrators as to the
validity and amount of any claim in such Escrow Claim Certificate shall be
binding and conclusive upon the parties to this Agreement, and notwithstanding
anything in Section 7.2(e) hereof, the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold payments out of the Escrow
Fund in accordance therewith. Such decision shall be written and shall be
supported by written findings of fact and conclusions which shall set forth the
award, judgment, decree or order awarded by the arbitrators.
(iii) Judgment upon any award rendered by the arbitrators may
be entered in any court having jurisdiction. Any such arbitration shall be held
in Hennepin County, Minnesota under the rules then in effect of the American
Arbitration Association. For purposes of this Section 7.2(f), in any arbitration
hereunder in which any claim or the amount thereof stated in the Escrow Claim
Certificate is at issue, Parent shall be deemed to be the Non-Prevailing Party
in the event that the arbitrators award Parent less than the sum of one-half
(1/2) of the disputed amount plus any amounts not in dispute; otherwise, the
shareholders of the Company as represented by the Securityholder Agent shall be
deemed to be the Non-Prevailing Party. The Non-Prevailing Party to an
arbitration shall pay its own expenses, the fees of each arbitrator, the
administrative costs of the arbitration and the expenses, including without
limitation, reasonable attorneys' fees and costs, incurred by the other party to
the arbitration; provided, however, that notwithstanding any other provision of
this Agreement, in no event shall the Company Shareholders' aggregate liability
for any and all payment made pursuant to this Article VII exceed the Escrow
Amount, except in the event of Fraud or Losses attributable to Taxes.
(g) Securityholder Agent of the Shareholders; Power of Attorney.
(i) In the event that the Merger is approved, effective upon
such vote, and without further act of any Company Shareholder, Xxxxxx Xxxxxxxxx,
or another person reasonable to the Parent and the Company, shall be appointed
as agent and attorney-in-fact (the "Securityholder Agent") for each Company
Shareholder (except such shareholders, if any, as shall have perfected their
appraisal or dissenters' rights under Minnesota Law or any other applicable
law), for and on behalf of the Company Shareholders, to give and receive notices
and communications, to authorize delivery to Parent of shares of Parent Common
Stock from the Escrow Fund in satisfaction of claims
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by Parent, to object to such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and comply with orders of
courts and awards of arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgment of Securityholder Agent for the
accomplishment of the foregoing. Such agency may be changed by the Company
Shareholders from time to time upon not less than thirty (30) days prior written
notice to Parent; provided that the Securityholder Agent may not be removed
unless holders of a majority interest of the Escrow Fund agree to such removal
and to the identity of the substituted agent. Any vacancy in the position of
Securityholder Agent may be filled by approval of the holders of a majority in
interest of the Escrow Fund. No bond shall be required of the Securityholder
Agent, and the Securityholder Agent shall not receive compensation for his or
her services. Notices or communications to or from the Securityholder Agent
shall constitute notice to or from each of the Company Shareholders.
(ii) The Securityholder Agent shall not be liable for any act
done or omitted hereunder as Securityholder Agent while acting in good faith and
in the exercise of reasonable judgment; and any act done or omitted pursuant to
the advice of counsel shall be conclusive evidence of such good faith. The
Company Shareholders on whose behalf the Escrow Amount was contributed to the
Escrow Fund shall severally indemnify the Securityholder Agent and hold the
Securityholder Agent harmless against any loss, liability or expense incurred
without negligence or bad faith on the part of the Securityholder Agent and
arising out of or in connection with the acceptance or administration of the
Securityholder Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Securityholder Agent.
(h) Actions of the Securityholder Agent. A decision, act, consent or
instruction of the Securityholder Agent shall constitute a decision of all the
shareholders for whom a portion of the Escrow Amount otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each of such Company Shareholder, and the Escrow Agent and Parent may rely upon
any such decision, act, consent or instruction of the Securityholder Agent as
being the decision, act, consent or instruction of each every such Company
Shareholder. The Escrow Agent and Parent are hereby relieved from any liability
to any person for any acts done by them in accordance with such decision, act,
consent or instruction of the Securityholder Agent.
(i) Third-Party Claims. In the event Parent becomes aware of a
third-party claim which Parent believes may result in a demand against the
Escrow Fund, Parent shall notify the Securityholder Agent of such claim, and the
Securityholder Agent, as representative for the shareholders of the Company,
shall be entitled, at their expense, to participate in any defense of such
claim. Parent shall have the right in its sole discretion to settle any such
claim; provided, however, that except with the consent of the Securityholder
Agent, no settlement of any such claim with third-party claimants shall alone be
determinative of the amount of any claim against the Escrow Fund. In the event
that the Securityholder Agent has consented to any such settlement, the
Securityholder Agent shall have no power or authority to object under any
provision of this Article VII to the amount of any claim by Parent against the
Escrow Fund with respect to such settlement.
(j) Escrow Agent's Duties.
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(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent, and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed to be
genuine and to have been signed or presented by the proper party or parties. The
Escrow Agent shall not be liable for any act done or omitted hereunder as Escrow
Agent while acting in good faith and in the exercise of reasonable judgment, and
any act done or omitted pursuant to the advice of counsel shall be conclusive
evidence of such good faith. In no event shall Escrow Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Escrow Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
action.
(ii) The Escrow Agent is hereby expressly authorized to comply
with and obey orders, judgments or decrees of any court of law, notwithstanding
any notices, warnings or other communications from any party or any other person
to the contrary. In case the Escrow Agent obeys or complies with any such order,
judgment or decree of any court, the Escrow Agent shall not be liable to any of
the parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or decree being subsequently reversed,
modified, annulled, set aside, vacated or found to have been entered without
jurisdiction.
(iii) The Escrow Agent shall not be liable in any respect on
account of the identity, authority or rights of the parties executing or
delivering or purporting to execute or deliver this Agreement or any documents
or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the expiration
of any rights under any statute of limitations with respect to this Agreement or
any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the Escrow
Agent shall not be liable to any party for damages, losses, or expenses, except
for gross negligence or willful misconduct on the part of the Escrow Agent. The
Escrow Agent shall not incur any such liability for (A) any act or failure to
act made or omitted in good faith, or (B) any action taken or omitted in
reliance upon any instrument, including any written statement or affidavit
provided for in this Agreement that the Escrow Agent shall in good faith believe
to be genuine, nor will the Escrow Agent be liable or responsible for forgeries,
fraud, impersonations, or determining the scope of any representative authority.
In addition, the Escrow Agent may consult with the legal counsel in connection
with Escrow Agent's duties under this Agreement and shall be fully protected in
any act taken, suffered, or permitted by him/her in good faith in accordance
with the advice of counsel. The Escrow Agent is not responsible for determining
and verifying the authority of any person acting or purporting to act on behalf
of any party to this Agreement.
(vi) If any controversy arises between the parties to this
Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it.
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The Escrow Agent may hold all documents and shares of Parent Common Stock and
may wait for settlement of any such controversy by final appropriate legal
proceedings or other means as, in the Escrow Agent's discretion, the Escrow
Agent may be required, despite what may be set forth elsewhere in this
Agreement. In such event, the Escrow Agent will not be liable for damage.
Furthermore, the Escrow Agent may at its option, file an action of interpleader
requiring the parties to answer and litigate any claims and rights among
themselves. The Escrow Agent is authorized to deposit with the clerk of the
court all documents and/or shares of Parent Common Stock held in escrow, except
all cost, expenses, charges and reasonable attorney fees incurred by the Escrow
Agent due to the interpleader action and which the parties jointly and severally
agree to pay. Upon initiating such action, the Escrow Agent shall be fully
released and discharged of and from all obligations and liability imposed by the
terms of this Agreement.
(vii) The parties and their respective successors and assigns
agree jointly and severally to indemnify and hold Escrow Agent harmless against
any and all losses, claims, damages, liabilities, and expenses, including
reasonable costs of investigation, counsel fees, and disbursements that may be
imposed on Escrow Agent or incurred by Escrow Agent in connection with the
performance of his/her duties under this Agreement, including but not limited to
any litigation arising from this Agreement or involving its subject matter.
(viii) The Escrow Agent may resign at any time upon giving at
least thirty (30) days written notice to the parties; provided, however, that no
such resignation shall become effective until the appointment of a successor
escrow agent which shall be accomplished as follows: the parties shall use their
best efforts to mutually agree on a successor escrow agent within thirty (30)
days after receiving such notice. If the parties fail to agree upon a successor
escrow agent within such time, the Escrow Agent shall have the right to appoint
a successor escrow agent authorized to do business in the State of California.
The successor escrow agent shall execute and deliver an instrument accepting
such appointment and it shall, without further acts, be vested with all the
estates, properties, rights, powers, and duties of the predecessor escrow agent
as if originally named as escrow agent. The Escrow Agent shall be discharged
from any further duties and liability under this Agreement. Any company into
which the Escrow Agent may be merged or converted or with which it may be
consolidated or any company resulting from any merger, conversion or
consolidation to which it shall be a party or any company to which the Escrow
Agent may sell or transfer all or substantially all of its escrow/custody
business, provided such company shall be eligible to serve as Escrow Agent
hereunder, shall be the successor hereunder to the Escrow Agent without the
execution or filing of any paper or any further act.
(ix) The Escrow Agent may rely on the signatures contained on
the signature page hereto as the specimen signatures of the parties, until
changed in writing by a certificate to the Escrow Agent from the party so
changing.
(k) Fees. All fees of the Escrow Agent for performance of its duties
hereunder shall be paid by Parent. It is understood that the fees and usual
charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a
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substantial modification of its terms, or if any controversy arises, or if the
Escrow Agent is made a party to, or intervenes in, any litigation pertaining to
this escrow or its subject matter, the Escrow Agent shall be reasonably
compensated for such extraordinary services and reimbursed for all costs,
attorney's fees, and expenses occasioned by such default, delay, controversy or
litigation. Parent promises to pay these sums upon demand.
(l) Consent of Company Shareholders. Each Company Shareholder will
be deemed, by virtue of their approval of the Merger, to have consented to: (i)
the obligations of the Company Shareholder under this Article, (ii) the
establishment of the Escrow Fund to secure such obligations, (iii) the
appointment of the Security Holder Agent as their representative for purposes of
their obligations hereunder and as attorney-in-fact and agents for and on behalf
of each of them, (iv) the taking by the Security Holder Agent of any and all
action(s) and making of any and all decision(s) required or permitted to be
taken or made by them under this Agreement, and (v) all of the other terms,
conditions and limitation to be binding upon them pursuant to the terms of this
Article.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 8.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual consent of the Company and Parent;
(b) by Parent or the Company if: (i) the Effective Time has not
occurred before 5:00 p.m. (Pacific time) on December 31, 2001 (the "End Date")
(provided that the right to terminate this Agreement under this Section
8.1(b)(i) shall not be available to any party whose willful failure to fulfill
any obligation hereunder has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date); (ii) there shall be a final
nonappealable order of a federal or state court in effect preventing
consummation of the Merger; or (iii) there shall be any statute, rule,
regulation or order enacted, promulgated or issued or deemed applicable to the
Merger by any governmental entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Parent's or
the Company's ownership or operation of all or any material portion of the
business of the Company or (ii) compel Parent or the Company to dispose of or
hold separate all or a material portion of the business or assets of the Company
or Parent as a result of the Merger;
(d) by Parent, until the date of the approval of the Company
Shareholders referred to in Section 6.4 of the Stock Purchase Agreement at the
special meeting of shareholders held pursuant to Section 671 of Minnesota Law
(the "Section 671 Approval"), upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this
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Agreement which breach has a Material Adverse Effect on the Company, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) would not be satisfied
as of the time of such breach or as of the time such representation or warranty
shall have become untrue, provided that if such inaccuracy in the Company's
representations and warranties or breach by the Company is curable by the
Company within the Cure Period (as defined below) through the exercise of its
reasonable best efforts, then for so long as the Company continues to exercise
such reasonable best efforts Parent may not terminate this Agreement under this
Section 8.1(d) unless such breach is not cured within the Cure Period (it being
understood that Parent may not terminate this Agreement pursuant to this Section
8.1(d) if it shall have materially breached this Agreement);
(e) by the Company, until the date of the Section 671 Approval, upon
a breach of any representation, warranty, covenant or agreement on the part of
Parent set forth in this Agreement which breach has a Material Adverse Effect on
the Parent, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Parent's representations and warranties or breach by Parent is
curable by Parent within the Cure Period through the exercise of its reasonable
best efforts, then for so long as Parent continues to exercise such reasonable
best efforts the Company may not terminate this agreement under this Section
8.1(e) unless such breach is not cured within the Cure Period (it being
understood that the Company may not terminate this Agreement pursuant to this
Section 8.1(e) if it shall have materially breached this Agreement).
(f) by Parent, after the Section 671 Approval, upon a fraudulent
breach of any representation, warranty or covenant or agreement on the part of
the Company set forth in this Agreement which breach has a Material Adverse
Effect on the Company, such that the conditions set forth in Section 6.3(a)
would not be satisfied at the time of such breach (it being understood that
Parent may not terminate this Agreement pursuant to this Section 8.1(f) if it
shall have materially breached this Agreement).
(g) by the Company, after the Section 671 Approval, upon a
fraudulent breach of any representation, warranty or covenant or agreement on
the part of Parent set forth in this Agreement which breach has a Material
Adverse Effect on Parent, such that the conditions set forth in Section 6.2(a)
would not be satisfied at the time of such breach (it being understood that the
Company may not terminate this Agreement pursuant to this Section 8.1(g) if it
shall have materially breached this Agreement).
(h) by Parent or the Company if a temporary restraining order,
preliminary or permanent injunction or other order shall have been issued by any
court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(i) by Parent or the Company, if the Section 671 Approval shall not
have been obtained by August 31, 2001.
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(j) for purposes hereof, the term "Cure Period" shall mean the
period commencing upon delivery of notice of breach by Parent or Company, as the
case may be, and ending on the earlier of (i) the 30th calendar day after
delivery of such notice or (ii) 5:00 p.m., Minneapolis time, on the day prior to
the date of the Company Shareholders meeting at which the Section 671 Approval
is sought.
Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. (a) In the event of termination of this
Agreement as provided in Section 8.1, except as provided in clauses (b) and (c)
below, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of Parent, Merger Sub, or the Company, or
their respective officers, directors or stockholders, other than the provisions
of this Section 8.2, provided that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided further that,
the provisions of Sections 5.3, 5.4 and 5.5 and Article VIII of this Agreement
shall remain in full force and effect and survive any termination of this
Agreement.
(b) In the event of (i) termination by the Company (other than
pursuant to Section 8.1), and (ii) within sixty (60) days of such termination,
the Company has entered into an agreement with respect to, or consummated, or
adopted a resolution to approve, recommend, enter an agreement with respect to,
or consummate, a transaction with a person other than Parent, then the Company
shall promptly (but in no event later than the date of termination), pay to
Parent a termination fee in immediately available funds equal to the sum of
Three Million U.S. Dollars (US$3,000,000) (the "Termination Fee").
(c) The Termination Fee shall constitute liquidated damages to
Parent for any termination of this Agreement pursuant to Section 8.1(f) hereof
and the Company shall have no further liability to Parent in respect thereof.
8.3 Amendment. Except as is otherwise required by applicable law after
the Company Shareholders approve this Agreement, this Agreement may be amended
by the parties hereto at any time by execution of an instrument in writing
signed on behalf of each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Parent,
on the one hand, and the Company, on the other, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations of
the other party hereto, (ii) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto, and (iii) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
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ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent, to:
DigitalThink, Inc.
0000 Xxxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxx
Telephone No.: 000-000-0000
Facsimile No.: 000-000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxxxxx Xxxxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
(b) if to the Company, to:
LearningByte International, Inc.
0000 Xxxxx Xxxxxxx 000
Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxx, Chairman
Telephone No.:
Facsimile No.: (000) 000-0000
with copies to:
Xxxxxx & Whitney LLP
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
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(c) if to the Securityholder Agent:
Xxxxxx X. Xxxxxxxxx
00000 Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Facsimile No.: (000) 000-0000
(d) if to the Escrow Agent:
Chase Manhattan Bank and
Trust Company, National Association
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxx Xxxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
9.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." As used herein, the term "Material Adverse Effect" shall mean a
material adverse effect on the business, assets (including intangible assets),
financial condition, capitalization, and results of operations of the specified
entity taken as a whole, provided however, that none of the following shall be
deemed in themselves, either alone or in combination, to constitute, and none of
the following shall be taken into account in determining whether there has been
or will be a Material Adverse Effect: (a) any adverse effect attributable to the
announcement or pendency of the Merger (including any cancellations of or delays
in customer orders, any reduction in sales, any disruption in supplier,
distributor, partner or similar relationships or any loss of employees); (b) any
adverse effect attributable to conditions affecting the industries in which the
Company participates, the economy of the Unites States as a whole or foreign
economies in any locations where the Company has material operations or sales,
(c) any adverse effect arising from or relating to any change in accounting
requirements or principles or any change in applicable laws, rules or
regulations or the interpretation thereof, (d) any adverse effect arising from
or relating to compliance with the terms of, or the taking of any action
required by, this Agreement, (f) any adverse effect arising from any action
taken by Parent, Merger Sub or any of their respective directors, officers,
employees, agents or Affiliates, or (e) any adverse effect arising from or
relating to actions of the Company taken with the prior written consent of the
Parent. In addition, as used herein, the term "knowledge" shall mean, with
respect to Company or Parent, what is within the actual knowledge of any of the
executive officers (determined in accordance with Rule 16a-1(f) under the
Exchange Act) of Company or Parent, as the case may be. 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.
9.3 Counterparts. .This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being
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understood that all parties need not sign the same counterpart. A facsimile
signature, followed by an original, is sufficient to execute this Agreement.
9.4 Entire Agreement; Assignment. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise by a party without the prior written consent of
the other parties except as otherwise specifically provided, except that Parent
may assign their respective rights and delegate their respective obligations
hereunder to their respective affiliates, so long as Parent guarantees in
writing the performance of such affiliate.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of Delaware for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
[remainder of page intentionally left blank]
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company and, with respect to
Article VII only, the Escrow Agent and the Securityholder Agent, have signed
this Agreement or have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
DIGITALTHINK, INC. LEARNINGBYTE INTERNATIONAL, INC.
By: /s/ XXX X. XXXXXXX By: /s/ XXXXX XXXXXX
------------------------------ ---------------------------
Name: Xxx X. Xxxxxxx Name: Xxxxx Xxxxxx
------------------------------ ---------------------------
Title: President & Title: President &
Chief Executive Officer Chief Executive Officer
------------------------------ ---------------------------
SECURITYHOLDER AGENT: LBI ACQUISITION CORP.
/s/ XXXXXX XXXXXXXXX By: /s/ XXX X. XXXXXXX
------------------------------ ---------------------------
Name: Xxxxxx Xxxxxxxxx
Name: Xxx X. Xxxxxxx
---------------------------
Title: President
---------------------------
ESCROW AGENT:
CHASE MANHATTAN BANK AND
TRUST COMPANY, NATIONAL ASSOCIATION
By: /s/ XXXXXXXX XXXXXXXXXX
--------------------------------
Name: Xxxxxxxx Xxxxxxxxxx
--------------------------------
Title: Vice President
--------------------------------