AGREEMENT AND PLAN OF MERGER
by and among
GREAT PLAINS SOFTWARE, INC.,
GPS ACQUISITION, INC.,
FRx SOFTWARE CORPORATION
and
XXXXXXX X. XXXXX
February 22, 2000
TABLE OF CONTENT
PAGE NO.
ARTICLE I THE MERGER.............................................................................................2
1.01 THE MERGER..............................................................................................2
1.02 EFFECT OF MERGER........................................................................................2
1.03 EFFECTIVE TIME..........................................................................................2
1.04 DIRECTORS AND OFFICERS..................................................................................2
1.05 ARTICLES OF INCORPORATION; BYLAWS.......................................................................2
1.06 TAKING OF NECESSARY ACTION; FURTHER ACTION..............................................................3
1.07 THE CLOSING.............................................................................................3
ARTICLE II CONVERSION OF SECURITIES AND CLOSING..................................................................3
2.01 MERGER CONSIDERATION; POTENTIAL ADJUSTMENT TO MERGER CONSIDERATION......................................3
2.02 CONVERSION OF SECURITIES................................................................................4
2.03 STOCK OPTIONS...........................................................................................6
2.04 DISSENTING SHARES.......................................................................................7
2.05 EXCHANGE OF CERTIFICATES................................................................................7
2.06 RESTRICTIONS ON TRANSFER................................................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ROHAN..............................................9
3.01 INCORPORATION; CORPORATE POWER AND AUTHORITY............................................................9
3.02 SUBSIDIARIES...........................................................................................10
3.03 CAPITALIZATION.........................................................................................10
3.04 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT; MEETING OF STOCKHOLDERS..............................11
3.05 NO BREACH..............................................................................................12
3.06 FINANCIAL STATEMENTS...................................................................................12
3.07 ABSENCE OF UNDISCLOSED LIABILITIES.....................................................................13
3.08 NO MATERIAL ADVERSE CHANGES............................................................................13
3.09 ABSENCE OF CERTAIN DEVELOPMENTS........................................................................13
3.10 TITLE TO PROPERTIES....................................................................................15
3.11 ACCOUNTS RECEIVABLE....................................................................................16
3.12 TAX MATTERS............................................................................................16
3.13 CONTRACTS AND COMMITMENTS..............................................................................18
3.14 INTELLECTUAL PROPERTY RIGHTS...........................................................................20
3.15 SOFTWARE WARRANTIES....................................................................................23
3.16 LITIGATION.............................................................................................24
3.17 WARRANTIES.............................................................................................25
3.18 EMPLOYEES..............................................................................................25
3.19 EMPLOYEE BENEFIT PLANS.................................................................................25
3.20 INSURANCE..............................................................................................28
3.21 AFFILIATE TRANSACTIONS.................................................................................28
3.22 CUSTOMERS..............................................................................................28
3.23 COMPLIANCE WITH LAWS; PERMITS..........................................................................28
3.24 ENVIRONMENTAL MATTERS..................................................................................29
3.25 BANK ACCOUNTS..........................................................................................30
3.26 INDEMNIFICATION OBLIGATIONS............................................................................30
3.27 BROKERAGE..............................................................................................30
3.28 VOTE REQUIRED..........................................................................................30
3.29 TAX MATTERS............................................................................................30
3.30 DISCLOSURE.............................................................................................30
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..............................................31
4.01 INCORPORATION AND CORPORATE POWER......................................................................31
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4.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT.......................................................31
4.03 NO BREACH..............................................................................................31
4.04 PARENT COMMON STOCK....................................................................................31
4.05 SEC FILINGS; FINANCIAL STATEMENTS......................................................................32
4.06 ABSENCE OF UNDISLOSED LIABILITIES; NO LITITGATION......................................................33
4.07 NO MATERIAL ADVERSE CHANGES OF EVENTS..................................................................33
4.08 MERGER SUB.............................................................................................33
4.09 TAX MATTERS............................................................................................33
4.10 FULL DISCLOSURE........................................................................................33
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME...................................................................34
5.01 CONDUCT OF THE BUSINESS................................................................................34
5.02 ACCESS TO BOOKS AND RECORDS............................................................................35
ARTICLE VI ADDITIONAL AGREEMENTS...............................................................................366
6.01 STOCKHOLDER APPROVAL...................................................................................36
6.02 REGULATORY FILINGS.....................................................................................36
6.03 CONDITIONS.............................................................................................36
6.04 NO NEGOTIATIONS........................................................................................36
6.05 APPROVALS AND CONSENTS.................................................................................37
6.06 NOTIFICATION OF CERTAIN MATTERS........................................................................37
6.07 REORGANIZATION.........................................................................................37
6.08 TAX MATTERS............................................................................................37
6.09 REGISTRATION OF PARENT COMMON STOCK...................................................................379
6.10 FORM S-8...............................................................................................39
6.11 NASDAQ NATIONAL MARKET.................................................................................39
6.12 TERMINATION OF COMPANY INVESTOR RIGHTS.................................................................39
6.13 ESCROW ARRANGEMENTS....................................................................................40
6.14 COOPERATION WITH ROHAN.................................................................................40
ARTICLE VII CONDITIONS TO CLOSING...............................................................................40
7.01 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER...........................................40
7.02 ADDITIONAL CONDITIONS TO PARENT'S AND MERGER SUB'S OBLIGATIONS.........................................41
7.03 ADDITIONAL CONDITIONS TO COMPANY'S OBLIGATIONS.........................................................43
ARTICLE VIII TERMINATION........................................................................................44
8.01 TERMINATION............................................................................................44
8.02 EFFECT OF TERMINATION.................................................................................455
ARTICLE IX SURVIVAL; INDEMNIFICATION............................................................................45
9.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.............................................................45
9.02 INDEMNIFICATION........................................................................................45
9.03 INDEMNIFICATION BY PARENT..............................................................................46
9.04 METHOD OF ASSERTING CLAIMS.............................................................................47
9.05 SOLE AND EXCLUSIVE REMEDY..............................................................................48
ARTICLE X MISCELLANEOUS.........................................................................................48
10.01 PRESS RELEASES AND ANNOUNCEMENTS.......................................................................48
10.02 EXPENSES...............................................................................................49
10.03 FURTHER ASSURANCES.....................................................................................49
10.04 AMENDMENT AND WAIVER...................................................................................49
10.05 NOTICES................................................................................................49
10.06 ASSIGNMENT.............................................................................................50
10.07 SEVERABILITY...........................................................................................50
10.08 COMPLETE AGREEMENT.....................................................................................50
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10.09 COUNTERPARTS...........................................................................................50
10.10 GOVERNING LAW..........................................................................................50
EXHIBITS
Exhibit A Registration Provisions
Exhibit B Form of Escrow Agreement
Exhibit C Form of Opinion of Counsel to the Company
Exhibit D Form of Rohan Noncompete Agreement
Exhibit E Forms of Lock-Up Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated February 22,
2000, is made and entered into by and among Great Plains Software, Inc., a
Minnesota corporation ("Parent"), GPS Acquisition, Inc., a Delaware corporation
and wholly owned subsidiary of Parent ("Merger Sub"), FRx Software Corporation,
a Delaware corporation (the "Company"), and Xxxxxxx X. Xxxxx ("Rohan"). Merger
Sub and the Company are sometimes collectively referred to as the "Constituent
Corporations."
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and
the Company have determined that it is advisable and in the best interests of
the respective corporations and their Stockholders that Merger Sub be merged
with and into the Company in accordance with the General Corporation Law of the
State of Delaware (the "DGCL") and the terms of this Agreement, pursuant to
which the Company will be the surviving corporation and will be a wholly owned
subsidiary of Parent (the "Merger"); and
WHEREAS, Rohan owns approximately 62.5% of the issued and outstanding
capital stock of the Company and his agreement to indemnify Parent for certain
potential liabilities following the Merger is a material inducement to the
agreements of Parent and Merger Subsidiary to the Merger; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a "reorganization," within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and each of Parent,
Merger Sub and the Company shall be a "party to a reorganization," within the
meaning of Section 368(b) of the Code, with respect to the Merger; and
WHEREAS, Parent, Merger Sub, the Company and Rohan desire to make
certain representations, warranties, covenants, and agreements in connection
with, and establish various conditions precedent to, the Merger; and
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements set forth in this Agreement and in the Certificate of
Merger (as defined in Section 1.03 hereof), the parties hereto hereby agree as
follows:
1
ARTICLE I
THE MERGER
1.01 THE MERGER. At the Effective Time (as defined in Section 1.03
hereof), subject to the terms and conditions of this Agreement and the
Certificate of Merger (as defined in Section 1.03 hereof), Merger Sub shall be
merged with and into the Company, the separate existence of Merger Sub shall
cease, and the Company shall continue as the surviving corporation. The Company,
in its capacity as the corporation surviving the Merger, is hereinafter
sometimes referred to as the "Surviving Corporation."
1.02 EFFECT OF MERGER. The effect of the Merger shall be as set forth
in Section 259 of the DGCL and the Surviving Corporation shall succeed to and
possess all the properties, rights, privileges, immunities, powers, franchises
and purposes, and be subject to all the duties, liabilities, debts, obligations,
restrictions and disabilities, of the Constituent Corporations, all without
further act or deed.
1.03 EFFECTIVE TIME. The consummation of the Merger shall be effected
as promptly as practicable, but in no event more than three business days after
the satisfaction or waiver of the conditions set forth in Article VII of this
Agreement, and the parties hereto will cause a copy of the Certificate of Merger
to be executed, delivered and filed with the Secretary of State of the State of
Delaware in accordance with the DGCL. The Merger shall become effective at the
time and date specified in the Certificate of Merger. The time of effectiveness
is herein referred to as the "Effective Time." The day on which the Effective
Time shall occur is herein referred to as the "Effective Date."
1.04 DIRECTORS AND OFFICERS. From and after the Effective Time, the
directors of the Surviving Corporation shall be the persons who were the
directors of Merger Sub immediately prior to the Effective Time, and the
officers of the Surviving Corporation shall be the persons who were the officers
of Merger Sub immediately prior to the Effective Time. Said directors and
officers of the Surviving Corporation shall hold office for the term specified
in, and subject to the provisions contained in, the Certificate of Incorporation
and Bylaws of the Surviving Corporation and applicable law. If, at or after the
Effective Time, a vacancy shall exist on the Board of Directors or in any of the
offices of the Surviving Corporation, such vacancy shall be filled in the manner
provided in the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
1.05 ARTICLES OF INCORPORATION; BYLAWS. From and after the Effective
Time and until further amended in accordance with applicable law, the
Certificate of Incorporation of the Surviving Corporation shall be identical to
the Certificate of Incorporation of Merger Sub as in effect immediately prior to
the Effective Time except the name of the Surviving Corporation shall be "FRx
Software Corporation." From and after the Effective Time and until further
amended in accordance with law, the Bylaws of the Surviving Corporation shall be
identical to the Bylaws of Merger Sub as in effect immediately prior to the
Effective Time.
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1.06 TAKING OF NECESSARY ACTION; FURTHER ACTION.
(a) Parent, Merger Sub and the Company, respectively, shall each use
its or their best efforts to take all such action as may be necessary or
appropriate to effectuate the Merger under the DGCL at the time specified in
Section 1.03 hereof. 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
properties, rights, privileges, immunities, powers and franchises of either of
the Constituent Corporations, the officers of the Surviving Corporation are
fully authorized in the name of each Constituent Corporation or otherwise to
take, and shall take, all such lawful and necessary action.
(b) The parties intend to adopt this Agreement and the Merger as a
tax-free plan of reorganization under Section 368(a) of the Code. The Parent
Common Stock issued in the Merger will be issued solely in exchange for the
Company Capital Stock, and no other transaction other than the Merger
represents, provides for or is intended to be an adjustment to the consideration
paid for the Company Capital Stock. No consideration that could constitute
"other property" within the meaning of Section 356(b) of the Code is being
transferred by Parent, Merger Sub or any person related thereto for the Company
Capital Stock in the Merger. The parties shall not take a position on any Tax
Return inconsistent with this Section 1.06(b). Neither Parent, Merger Sub nor
the Company shall take any action at any time that could reasonably be expected
to cause the Merger not to be treated as a "reorganization," within the meaning
of Section 368(a) of the Code.
1.07 THE CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") will take place at the offices of Great Plains
Software, Inc., 1701 38th Street Southwest, Fargo, North Dakota, or at such
other place as is mutually agreeable to Parent and the Company. The Closing will
be effective as of the Effective Time.
ARTICLE II
CONVERSION OF SECURITIES
2.01 MERGER CONSIDERATION; POTENTIAL ADJUSTMENT TO MERGER
CONSIDERATION.
(a) MERGER CONSIDERATION. Subject to adjustment as set forth in
Section 2.01(b) and Section 2.03(c), the aggregate consideration to be paid by
Parent in the Merger shall be 1,000,000 shares of common stock, $.01 par value,
of Parent ("Parent Common Stock") (the "Merger Consideration").
(b) POTENTIAL ADJUSTMENT TO MERGER CONSIDERATION. The Merger
Consideration issued pursuant to Section 2.01(a) shall be subject to adjustment,
if any, based upon the 10 consecutive day trailing average closing price, as
adjusted for stock splits, stock dividends and similar reorganizations,
recapitalizations and the like (the "Average Price") of Parent
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Common Stock as reported by the Nasdaq National Market immediately preceding
(the "Adjustment Date") the later to occur of (i) the date on which the
registration statement relating to the Parent Common Stock issued pursuant to
this Agreement is first declared effective by the SEC (as defined herein) or
(ii) the Closing Date as follows:
(i) If the Average Price on the Adjustment Date is equal to
or greater than $60 per share but less than or equal to
$65 per share, an additional 21,000 shares of Parent
Common Stock shall be issued, so that the Merger
Consideration set forth in Section 2.01(a) shall be
1,021,000 shares of Parent Common Stock; or
(ii) If the Average Price on the Adjustment Date is less than
$60 per share, an additional 38,000 shares of Parent
Common Stock shall be issued, so that the Merger
Consideration set forth in Section 2.01(a) shall be
1,038,000 shares of Parent Common Stock; or
(iii) If the Average Price on the Adjustment Date is equal to
or greater than $75 per share but less than $80 per
share, the Merger Consideration set forth in Section
2.01(a) shall be 983,000 shares of Parent Common Stock;
or
(iv) If the Average Price on the Adjustment Date is equal to
or greater than $80 per share, the Merger Consideration
set forth in Section 2.01(a) shall be 973,000.
2.02 CONVERSION OF SECURITIES.
(a) At the Effective Time, by virtue of the Merger and without any
action on the part of Parent, Merger Sub, the Company, each share of Company
Common Stock and Series A Preferred that is issued and outstanding immediately
prior to the Effective time shall be cancelled and extinguished and be converted
into the right to receive upon surrender of certificates formerly representing
shares of Company Common Stock and Series A Preferred, equal to the Conversion
Ratio.
The "Conversion Ratio" shall mean the quotient obtained by dividing the Merger
Consideration (as adjusted, as the case may be) by the sum of (i) the number of
shares of Company Common Stock (assuming conversion of all outstanding Series A
Preferred into shares of Company Common Stock) issued and outstanding as of the
Effective Time and (ii) the number of shares of Common Stock issuable upon
unexercised options existing under the Company's 1996 Option Plan.
(b) ESCROW. 71,500 shares of Parent Common Stock to be issued to
Rohan at the Effective Time pursuant to Section 2.02 hereof shall be held in
escrow (the "Escrow Amount") pursuant to Article VI of this Agreement to
compensate Parent and its affiliates (including the Surviving Corporation) for
any Parent Losses (as defined in Section 9.02(a) hereof) incurred in connection
with this Agreement and the transactions contemplated hereby and for any
adjustment to the Merger Consideration applicable to Rohan, if any, pursuant to
Section
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2.01(b). Rohan shall be the owner of the Escrow Amount, unless and until, and
to the extent that, any portion of the Escrow Amount is offset by the amount
of any Parent Loss pursuant to Section 9.02 of this Agreement.
(c) CANCELLATION OF COMPANY STOCK. Each share of the Company Capital
Stock issued and outstanding immediately prior to the Effective Time and held in
the treasury of the Company or owned by the Company or any direct or indirect
subsidiary the Company or Parent or the Merger Sub shall be canceled and
extinguished and no payment shall be made with respect thereto.
(d) CONVERSION OF MERGER SUB COMMON STOCK. Each share of common
stock, par value $.01 per share, of Merger Sub ("Merger Sub Common Stock")
issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of Common Stock, par value
$0.01 per share, of the Surviving Corporation.
(e) ADJUSTMENTS TO CONVERSION RATIO. The Conversion Ratio shall be
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock), reorganization, recapitalization or other like change with
respect to Parent Common Stock occurring after the date hereof and prior to the
Effective Time.
(f) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock
will be issued at the Effective Time, but 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) $70.
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2.03 STOCK OPTIONS.
(a) At the Effective Time, all outstanding options to purchase
shares of Company Common Stock (each, a "Company Option") shall be assumed by
Parent and converted into an option (each, a "Parent Option") to acquire, on
substantially the same terms and conditions as were applicable under such
Company Option, the number of whole shares of Parent Common Stock equal to the
number of shares of Company Common Stock that were issuable upon exercise of
such Company Option immediately prior to the Effective Time multiplied by the
Conversion Ratio (rounded down to the nearest whole number of shares of Parent
Common Stock), and the per share exercise price of the shares of Parent Common
Stock issuable upon exercise of such Parent Option shall be equal to (x) the
aggregate exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such option divided by (y) the number of full shares of
Parent Common Stock deemed purchasable pursuant to such option (rounded to the
nearest whole cent); provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of its qualification under Section 422
of the Code ("Incentive Stock Options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise of
such option shall be determined in order to comply with Section 424(a) of the
Code.
(b) As soon as practicable after the Effective Time, Great Plains
shall deliver to the holders of Company Options appropriate notices setting
forth such holders' rights pursuant to the Company Stock Plan, and the
agreements evidencing the grants of Company Options shall be appropriately
amended so that such Company Options shall represent rights to acquire Parent
Common Stock on the same terms and conditions as contained in the outstanding
Company Options (subject to the adjustments required by this Section 2.03 after
giving effect to the assumption by Parent as set forth above).
(c) In determining the Merger Consideration pursuant to Section
2.01(a), the number of shares of Parent Common Stock shall be increased to the
extent of the outstanding unexpired and unexercised options existing under the
Company's 1996 Option Plan by dividing the aggregate exercise price with respect
to such options by $70.
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2.04 DISSENTING SHARES.
(a) Notwithstanding anything in this Agreement to the contrary, if
Section 262 of the DGCL shall be applicable to the Merger, shares of Company
Capital Stock that are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who have not voted such shares in favor
of the Merger, who shall have delivered, prior to any vote on the Merger, a
written demand for appraisal of such shares in the manner provided in Section
262 of the DGCL and who, as of the Effective Time, shall not have effectively
withdrawn or lost such right to dissenters' rights ("Dissenting Shares"), shall
not be converted into or represent a right to receive Parent Common Stock
pursuant to Section 2.02 hereof, but the holders thereof shall be entitled only
to such rights as are granted by Section 262 of the DGCL. Each holder of
Dissenting Shares who becomes entitled to payment for such shares pursuant to
Section 262 of the DGCL shall receive payment therefor from the Surviving
Corporation in accordance with the DGCL; PROVIDED, HOWEVER, that if any such
holder of Dissenting Shares shall have effectively withdrawn such holder's
demand for appraisal of such shares or lost such holder's right to appraisal and
payment of such shares under Section 262 of the DGCL, such holder or holders (as
the case may be) shall forfeit the right to appraisal of such shares and each
such share shall thereupon be deemed to have been canceled, extinguished and
converted, as of the Effective Time, into and represent the right to receive
payment from the Surviving Corporation of the Parent Common Stock, as provided
in Section 2.02 hereof.
(b) The Company shall give Parent (i) prompt notice of any written
demand for appraisal, any withdrawal of a demand for appraisal and any other
instrument served pursuant to Section 262 of the DGCL received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under such Section 262 of the DGCL. The Company shall
not, except with the prior written consent of Parent, voluntarily make any
payment with respect to any demand for appraisal or offer to settle or settle
any such demand.
2.05 EXCHANGE OF CERTIFICATES.
(a) DELIVERY PROCEDURES. At the Closing, the holders of certificates
evidencing outstanding shares of Company Capital Stock (the "Certificates")
shall be entitled to receive in exchange therefore (i) certificates evidencing
that number of shares of Parent Common Stock into which the shares formerly
evidenced by such Certificates are to be converted in accordance with Section
2.02 and (ii) if applicable, cash in lieu of fractional shares of Parent Common
Stock to which such holder is entitled pursuant to Section 2.02(h). The
Certificates so surrendered shall forthwith be canceled. On and after the
Effective Date each Certificate, until surrendered for exchange, shall be deemed
to evidence ownership of and to represent the Merger Consideration into which
the holder's shares of Company Capital Stock shall have been converted. As soon
as practicable after the Closing, Parent shall deliver to Rohan (the
"Shareholder Representative") or its designee, certificates evidencing ownership
of Parent Common Stock ("Parent Certificates") and cash payments in lieu of
fractional shares, if any, as provided in Section 2.02(h), and the Cash
Consideration, as the case may be, for each holder
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of Company Capital Stock from whom Parent has received a Certificate and an
executed Stockholder Certificate and Letter of Transmittal. The Shareholder
Representative shall deliver the Parent Certificates, and cash in lieu of
fractional shares, as the case may be, to the former stockholders of the
Company as soon as practicable after receipt thereof from Parent. Parent
Certificates, and cash payments in lieu of fractional shares, as the case may
be, from whom Parent has not received a Certificate and executed Stockholder
Certificate and Letter of Transmittal at Closing shall be held by Parent and
distributed to such holders after the Certificates and Stockholders
Certificates and Letter of Transmittal have been received.
(b) NO FURTHER RIGHTS IN COMPANY STOCK. Except as provided in
Section 2.01(b), all shares of Parent Common Stock issued, any cash paid in lieu
of fractional shares as contemplated by Section 2.02(h) upon conversion of the
shares of Company Capital Stock and satisfaction of any appraisal rights in
accordance with the terms hereof shall be deemed to have been issued or paid in
full satisfaction of all rights pertaining to such shares of Company Capital
Stock.
(c) NO TRANSFER. After the Effective Time, there shall be no
transfers on the stock transfer books of the Surviving Corporation of the shares
of the Company Capital Stock that were outstanding immediately prior to the
Effective Time.
(d) APPRAISAL RIGHTS. If the holder of any shares of Company Capital
Stock shall become entitled to receive payment for such shares pursuant to
Section 262 of the DGCL and Section 2.04 hereof, such payment shall be made by
the Surviving Corporation in accordance with Section 2.04 hereof.
2.06 RESTRICTIONS ON TRANSFER.
(a) Each certificate representing Parent Common Stock issued to the
holders of Certificates or to any subsequent holder shall include a legend in
substantially the following form; PROVIDED, HOWEVER, that such legend shall not
be required if a transfer is being made in connection with a sale of Parent
Common Stock registered under the Securities Act of 1933, as amended (the
"Securities Act"), or in connection with a sale in compliance with Rule 144 or,
if applicable, Rule 145 under the Securities Act (each, a "Public Sale"), or if
the opinion of counsel for Parent is to the further effect that neither such
legend nor the restrictions on transfer in this Section 2.06 are required in
order to ensure compliance with the Securities Act:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAW, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
(b) The restrictions set forth in this Section 2.06 shall terminate
and cease to be effective with respect to any of the Parent Common Stock issued
pursuant to this Agreement
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(i) upon the sale of any such Parent Common Stock, if such Parent Common Stock
has been registered under the Securities Act, or (ii) upon receipt by Parent of
an opinion of counsel (which counsel is reasonably acceptable to Parent, it
being agreed that E*Law Group is reasonably acceptable counsel), in form
reasonably satisfactory to Parent, to the effect that compliance with such
restrictions is not necessary to comply with the Securities Act with respect to
the transfer of such Parent Common Stock.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ROHAN
Each of the Company and Rohan hereby represents and warrants to Parent
and Merger Sub that, except as set forth in the Disclosure Schedule delivered by
the Company to Parent and Merger Sub on the date hereof (the "Disclosure
Schedule") (which Disclosure Schedule sets forth the exceptions to the
representations and warranties contained in this Article III under captions
referencing the Sections to which such exceptions apply; provided, however that
any exception or disclosure appearing under any caption on the Disclosure
Schedule shall be deemed to be made with respect to and responsive to any other
Section unless such exception or disclosure would not be reasonably interpreted
to apply to such other Section). For the purpose of this Article III,
"Knowledge" with respect to Rohan shall mean actually known by Rohan, without
any additional investigation, and "Knowledge" with respect to the Company shall
mean the actual knowledge of the Company's executive officers, without any
additional investigation. All representations qualified to the Knowledge of the
Company or Rohan, shall be deemed to be qualified to the Knowledge of the
Company and Rohan.
3.01 INCORPORATION; CORPORATE POWER AND AUTHORITY. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority and all authorizations, licenses, permits and certifications necessary
to carry on its business as now being conducted and to own, lease and operate
its assets. The Company is duly qualified as a foreign corporation to do
business in every jurisdiction in which the nature of its operations of its
business activities or its ownership of property requires it to be qualified,
except where the failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect (as defined below). The Company is
duly qualified as a foreign corporation to do business only in the following
jurisdictions: California and Colorado. The Company's subsidiary is also
qualified to do business in Australia and the United Kingdom. The Company is not
in violation of any of the provisions of its Certificate of Incorporation or
By-laws and has delivered to Parent accurate and complete copies of its
Certificate of Incorporation and By-laws, as currently in effect. As used
herein, the term "Material Adverse Effect" means any change, effect, event or
condition that has had or could reasonably be expected to (i) have a material
adverse effect on the business, assets, results of operations, business
prospects, condition (financial or otherwise) or (ii) prevent or materially
delay the Company's ability to consummate the Merger or the other transactions
contemplated hereby; provided, however, that any such change, effect, event or
condition that primarily results from changes in general economic conditions or
changes affecting the industry in which the Company operates shall not be
treated as a "Material Adverse Effect."
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3.02 SUBSIDIARIES. Except as set forth in the Disclosure Schedule
under the caption referencing Section 3.02, the Company does not own any stock,
partnership interest, limited liability company interest, joint venture interest
or any other security or ownership interest issued by any other corporation,
organization or entity, and the Company does not own any such security or
ownership interest in any such entity that is involved with or contributes to
the operation of the business of the Company.
3.03 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of (i)
30,000,000 shares of authorized Common Stock, of which (A) 20,000,000 shares
have been designated Class A Voting Common Stock, 3,260,000 of which are issued
and outstanding and (B) 10,000,000 shares of which have been designated Class B
Non-Voting Common Stock, 2,719,381 of which are issued and outstanding and (ii)
5,000,000 shares of authorized Preferred Stock. The authorized Preferred Stock
consists of (i) 1,000,000 shares of authorized Series A Preferred, of which
600,000 shares are issued and outstanding, (ii) 1,100,000 shares of authorized
Series B Preferred Stock, of which 1,041,667 shares are issued and outstanding,
and (iii) 2,900,000 of which are undesignated and are not issued or outstanding.
The Company Stock is held of record by the persons, with the addresses of record
and in the amounts set forth in the Disclosure Schedule under the caption
referencing this Section 3.03(a). All issued and outstanding Company Capital
Stock are duly authorized, validly issued, fully paid, nonassessable and free of
preemptive rights. All preferential rights of the Preferred Stock in connection
with the sale of substantially all of the assets of the Company or a merger
involving the Company are set forth in the Certificate of Incorporation of the
Company. All issued and outstanding shares of Company Stock have been offered,
sold and delivered by the Company in compliance with applicable federal and
state securities laws.
(b) The Company has reserved (i) 2,000,000 shares of Class B
Non-Voting Common Stock for issuance to employees and consultants pursuant to
the 1999 Stock Option/Issuance Plan, of which 976,250 shares are subject to
outstanding, unexercised options, and 926,312 shares remain available for future
grant and (ii) 3,600,000 shares of Class B Non-Voting Common Stock for issuance
to employees and consultants pursuant to the 1996 Stock Option Plan, of which
569,457 shares are subject to outstanding, unexercised options, and no shares
remain available for future grant. The Disclosure Schedule, under the caption
referencing this Section 3.03(b) sets forth each outstanding Company Option,
including the name of the holder of such option, an indication of whether such
holder is an employee of the Company, the status of the option as either an
Incentive Stock Option or a nonstatutory stock option, the date of grant or
issuance of such option, the number of shares of Common Stock subject to such
option, the exercise price of such option and the vesting schedule for such
option, including the extent vested on the date of this Agreement and whether
and to what extent the exercisability of such option will or may be accelerated
and become exercisable in connection with the transactions contemplated by this
Agreement. The Company has made available to Parent accurate and complete copies
of all stock option plans pursuant to which the Company has granted Company
Options that are currently outstanding and the form of all stock option
agreements evidencing
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Company Options. Except as set forth in the Disclosure Schedule under the
caption referencing this Section 3.03(b), there are no commitments or agreements
of any character to which the Company is bound which may obligate the Company to
accelerate the vesting of any Company Option as a result of the Merger. The
Company has reserved 3,000,000 shares of Company Common Stock for issuance upon
conversion of the Series A Preferred and 1,041,667 shares of Company Common
Stock for issuance upon conversion of the Series B Preferred. All shares of
Company Stock issuable upon exercise of such Company Options and upon conversion
of the Series A Preferred and Series B Preferred, upon issuance in accordance
with the terms and conditions specified in the instrument pursuant to which they
are issuable, would be duly authorized, validly issued, fully paid and
nonassessable.
(c) Except for the Company Options described in the Disclosure
Schedule under the caption referencing Section 3.03(b), there are no options,
warrants, calls, subscriptions, convertible securities, rights (including
preemptive rights), commitments or agreements of any character to which the
Company is a party or by which it is bound obligating the Company to issue,
exchange, transfer, sell, repurchase, redeem or otherwise acquire any shares of
Company Stock or obligating the Company to grant, extend, accelerate the vesting
of or enter into any such subscription, option, warrant, equity security, call,
right, commitment or agreement. Except as contemplated by this Agreement, or as
described in the Disclosure Schedule under the caption referencing Section
3.03(c), 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.
3.04 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT; MEETING OF
STOCKHOLDERS.
(a) The Company has all requisite power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all requisite corporate action and no other corporate proceedings
on the Company's part are necessary to authorize the execution, delivery or
performance of this Agreement, other than the approval of this Agreement,
including the Certificate of Merger, by the stockholders of the Company. This
Agreement has been duly executed and delivered by the Company and Rohan and
constitutes the valid and binding obligation of the Company and Rohan
enforceable in accordance with its terms and the Certificate of Merger and the
other documents contemplated hereby, when executed and delivered by the Company,
will constitute the valid and binding obligations of the Company, enforceable in
accordance with their respective terms, subject to the effect of (a) applicable
bankruptcy and other similar laws affecting the rights of creditors generally
and (b) rules of law and equity governing specific performance, injunctive
relief and other equitable remedies.
(b) The Board of Directors of the Company has, by resolutions duly
adopted, unanimously (a) approved this Agreement and the Certificate of Merger
and the transactions contemplated hereby and thereby, including the Merger, (b)
determined that the Merger is in the best interests of the stockholders of the
Company and is on terms that are fair to such
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stockholders and (c) resolved to recommend approval of this Agreement
and the Merger by the Company's Stockholders. None of the resolutions
described in this Section 3.03(b) has been amended or otherwise modified in
any respect since the date of adoption thereof and all such resolutions
remain in full force and effect.
3.05 NO BREACH. The execution, delivery and performance of this
Agreement by the Company does not and the consummation of the transactions
contemplated hereby will not: (a) contravene any provision of the Certificate of
Incorporation or Bylaws of the Company; (b) violate or conflict in any material
respect with any foreign, federal, state or local law, statute, ordinance, rule,
regulation or any decree, writ, injunction, judgment or order of any court or
administrative or other governmental body or of any arbitration award which is
either applicable to, binding upon or enforceable against the Company or the
business or any assets of the Company; (c) conflict with, result in any material
breach of any of the provisions of, or constitute a material default (or any
event which would, with the passage of time or the giving of notice or both,
constitute a default) under, result in a violation of, result in the creation of
a right of termination, amendment, modification, abandonment or acceleration
under any material indenture, mortgage, lease, license, loan agreement or other
material agreement or instrument which is either binding upon or enforceable
against the Company; (d) result in the creation of any material lien, security
interest, charge or encumbrance upon the Company or any of the assets of the
Company; or (e) require any authorization, consent, approval, exemption or other
action by or notice to any court, commission, governmental body regulatory
authority, agency or tribunal wherever located (a "Governmental Entity") or any
other third party, OTHER THAN (i) expiration or termination of the applicable
waiting periods under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder (the "HSR
Act"), (ii) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware, (iii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws and (iv) consents set forth in the
Disclosure Schedule under the caption referencing this Section 3.05 (which the
Company undertakes to obtain prior to the Effective Date).
3.06 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent true and complete copies of
(i) the audited balance sheets, as of June 30, 1999, 1998 and 1997, of the
Company and the audited statements of operations, and stockholders' equity of
the Company for each of the years ended June 30, 1999, 1998 and 1997
(collectively, the "Annual Financial Statements"), and (ii) the unaudited
balance sheet, as of January 31, 2000, of the Company (the "Latest Balance
Sheet") and the unaudited statements of operations, and stockholders' equity of
the Company for the seven-month period ended January 31, 2000 (such January 31,
2000 statements and the Company Latest Balance Sheet being herein referred to as
the "Latest Financial Statements").
(b) The Annual Financial Statements and the Latest Financial
Statements are based upon the information contained in the books and records of
the Company and fairly present the financial condition of the Company as of the
dates thereof and results of operations for the periods referred to therein. The
Annual Financial Statements have been prepared in accordance
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with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated ("GAAP"). The Latest Financial Statements have
been prepared on a basis consistent with the Annual Financial Statements and in
accordance with GAAP applicable to unaudited interim financial statements (and
thus may not contain all notes, and normal year-end adjustments and accruals and
may not contain prior period comparative data which are required to be prepared
in accordance with GAAP), and reflect all adjustments necessary to a fair
statement of the results for the interim period(s) presented.
(c) All accounting records maintained by the Company in connection
with the preparation of its financial statements are properly and accurately
kept and are complete in all material respects, and there are no material
inaccuracies or discrepancies of any kind contained or reflected therein.
3.07 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have
any liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) arising out of transactions or events heretofore
entered into, or any action or inaction, or any state of facts existing, with
respect to or based upon transactions or events heretofore occurring, except (i)
as reflected in the Latest Balance Sheet, (ii) liabilities which have arisen
after the date of the Latest Balance Sheet in the ordinary course of business
(none of which is a material uninsured liability for breach of contract, breach
of warranty, tort, infringement, claim or lawsuit), (iii) those that are not
required to be set forth in the Latest Balance Sheet under generally accepted
accounting principles or (iv) as otherwise set forth in the Disclosure Schedule
under the caption referencing this Section 3.07.
3.08 NO MATERIAL ADVERSE CHANGES. Since the date of the Latest
Balance Sheet (the "Balance Sheet Date"), there has been no change in the
Company which change has had or, with the passage of time, is reasonably likely
to have, a Material Adverse Effect.
3.09 ABSENCE OF CERTAIN DEVELOPMENTS. Since the date of the Latest
Balance Sheet, other than as described in the Disclosure Schedule under the
caption referencing this Section 3.09, the Company has not:
(a) borrowed any amount or incurred or become subject to any
liability for borrowed money in excess of $50,000 in the aggregate, except (i)
current liabilities incurred in the ordinary course of business and (ii)
liabilities under contracts entered into in the ordinary course of business,
none of which liabilities exceeds $50,000 individually or $100,000 in the
aggregate;
(b) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any of the assets of the Company with a fair market value in excess
of $50,000 individually or $100,000 in the aggregate except (i) liens for
current taxes not yet due and payable, (ii) liens imposed by law and incurred in
the ordinary course of business for obligations not yet due to carriers,
warehousemen, laborers, materialmen and the like, (iii) liens in respect of
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pledges or deposits under workers' compensation laws or (iv) liens set forth
under the caption referencing this Section 3.09 in the Disclosure Schedule
(collectively, the "Permitted Liens");
(c) discharged or satisfied any lien or encumbrance or paid any
liability, in each case with a value in excess of $50,000, other than current
liabilities paid in the ordinary course of business;
(d) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or stockholders) any tangible assets of
its business outside of the ordinary course of business;
(e) sold, assigned or transferred (including, without limitation,
transfers to any employees, affiliates or stockholders) any patents, trademarks,
trade names, copyrights, trade secrets or other intangible assets;
(f) disclosed, to any person other than Parent and authorized
representatives of Parent, any proprietary confidential information, other than
pursuant to a confidentiality agreement prohibiting the use or further
disclosure of such information, which agreement is in full force and effect on
the date hereof;
(g) waived any rights of material value or suffered any
extraordinary losses or adverse changes in collection loss experience, whether
or not in the ordinary course of business or consistent with past practice;
(h) taken any other action or entered into any other transaction
other than in the ordinary course of business and in accordance with past custom
and practice, or entered into any transaction with any "insider" (as defined in
Section 3.21 hereof) other than employment arrangements otherwise disclosed in
this Agreement and the Disclosure Schedule, or the transactions contemplated by
this Agreement;
(i) suffered any material theft, damage, destruction or loss of or
to any property or properties owned or used by it, whether or not covered by
insurance;
(j) entered into or modified any employment, severance or similar
agreements or arrangements with or granted any bonuses, salary or benefits
increases, severance or termination pay to, any executive officer;
(k) adopted or amended any bonus, profit sharing, compensation,
stock option, pension, retirement, deferred compensation, employment or other
employee benefit plan, trust, fund or group arrangement for the benefit or
welfare of any employees or any bonus, profit sharing, compensation, stock
option, pension, retirement, deferred compensation, employment or other employee
benefit plan, agreement, trust, fund or arrangements for the benefit or welfare
of any employee, officer, director or affiliate;
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(l) made any capital expenditure or commitment therefor in excess of
$50,000 individually or $100,000 in the aggregate;
(m) made any loans or advances to, or guarantees for the benefit of,
any persons;
(n) acquired (by merger, exchange, consolidation, acquisition of
stock or assets or otherwise) any corporation, partnership, limited liability
company, joint venture or other business organization or division or material
assets thereof;
(o) accrued, declared or paid any dividends or other distributions
with respect to any shares of the capital stock of the Company or redeemed or
purchased, directly or indirectly, any shares of capital stock or any
outstanding options or other rights to acquire any of such stock, except
pursuant to normal repurchase rights with respect to vested and unvested stock
with respect to terminated employees under the Company's stock option plans;
(p) issued, sold or transferred any of its equity securities (other
than pursuant to the valid exercise of Company Options), securities convertible
into or exchangeable for its equity securities or warrants, options or other
rights to acquire its equity securities, or any bonds or debt securities;
(q) made charitable contributions or pledges in excess of $1,000
individually, or $10,000 in the aggregate; or
(r) took or agreed to take in writing, or otherwise took any of the
actions described above.
3.10 TITLE TO PROPERTIES.
(a) The Company does not own any real property. The real property
demised by the leases (the "Leases") described under the caption referencing
this Section 3.10 in the Disclosure Schedule constitutes all of the material
real property rented, used or occupied by the Company in connection with its
business (the "Real Property").
(b) The Leases are in full force and effect and the Company holds a
valid and existing leasehold interest under each of their respective Leases for
the term set forth under such caption in the Disclosure Schedule. The Company
has delivered or made available to Parent for inspection complete and accurate
copies of each of its Leases, and none of the Leases has been modified in any
respect, except to the extent that such modifications are disclosed by the
copies delivered to the Company. The Company is not in default in any respect,
and no circumstances exist which, if unremedied, would, either with or without
notice or the passage of time or both, result in such default under any of the
Leases; nor, to the best knowledge of the Company, is any other party to any of
the Leases in default in any respect thereunder, except where such default would
not have a Material Adverse Effect on the Company.
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(c) The Company owns good and marketable title to each of the
tangible properties and tangible assets reflected on the Latest Balance Sheet or
acquired since the date thereof, free and clear of all liens and encumbrances,
except for (i) liens set forth under the caption referencing this Section 3.10
in the Disclosure Schedule, (ii) the Real Property subject to the Leases, (iii)
material personal property used by the Company and subject to lease, all of
which material leases are identified in the Disclosure Schedule under the
caption referencing this Section 3.10, and (iv) assets disposed of since the
date of the Latest Balance Sheet in the ordinary course of business.
(d) Except as otherwise described in the Disclosure Schedule under
the caption referencing this Section 3.10, all of the buildings, machinery,
equipment and other tangible assets that are necessary for the conduct of its
business are in good condition and repair, ordinary wear and tear excepted with
respect to all of such assets, and are usable in the ordinary course of
business. The Company owns, or leases under valid leases, all buildings,
machinery, equipment and other tangible assets necessary for the conduct of its
business as currently conducted.
(e) To the Company's knowledge, the Company is not in violation in
any material respect of any applicable zoning ordinance or other law, regulation
or requirement relating to the operation of any properties used in the operation
of its business, and the Company is not aware of any such violation, or the
existence of any threatened or actual condemnation proceeding with respect to
any of the Real Property, except, in each case, with respect to violations the
potential consequences of which do not or are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect.
(f) The Company has no knowledge of improvements made or
contemplated to be made by any public or private authority, the costs of which
are to be assessed as special taxes or charges against any of the Real Property,
and there are no present assessments.
3.11 ACCOUNTS RECEIVABLE. All of the accounts receivable of the
Company are valid and legally binding, represent bona fide transactions and
arose in the ordinary course of business. None of such accounts receivable are
subject to valid counterclaims or setoffs, and all are collectible in accordance
with their terms, except as otherwise described in the Disclosure Schedule under
the caption referencing this Section 3.11, and except to the extent of any bad
debt reserves reflected on the Latest Balance Sheet.
3.12 TAX MATTERS.
(a) The Company has: (i) timely filed (or has had timely filed on
its behalf) all returns, declarations, reports, estimates, information returns,
and statements ("Returns") required to be filed or sent by it in respect of any
material Taxes (as defined in subsection (k) below) due or payable on or prior
to the date hereof or required to be filed or sent by it by any taxing authority
having jurisdiction, which Returns are true and correct and have been completed
in accordance with applicable law; (ii) timely and properly paid (or has had
paid on its behalf) all Taxes payable with respect to such Returns and/or the
periods to which such Returns pertain; (iii)
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complied with all applicable laws, rules, and regulations relating to the
withholding of Taxes and the payment thereof (including, without limitation,
withholding of Taxes under Sections 1441 and 1442 of the Code, or similar
provisions under any foreign laws), and timely and properly withheld from
individual employee wages and paid over to the proper governmental authorities
all amounts required to be so withheld and paid over under all applicable laws.
(b) There are no material liens for Taxes upon any of the assets,
except liens for Taxes not yet due.
(c) The Company has not been delinquent in the payment of any
material Tax. No deficiency for any material Taxes has been proposed, asserted
or assessed against the Company that has not been resolved and paid in full. No
waiver, extension or comparable consent given by the Company regarding the
application of the statute of limitations with respect to any Taxes or Returns
is outstanding, nor is any request for any such waiver or consent pending. There
has been no Tax audit or other administrative proceeding or court proceeding
with regard to any Taxes or Returns, nor is any such Tax audit or other
proceeding pending, nor has there been any notice to the Company by any Taxing
authority regarding any such Tax, audit or other proceeding, or, to the best
knowledge of the Company, is any such Tax audit or other proceeding threatened
with regard to any Taxes or Returns. The Company expects no assessment of any
additional Taxes on the Company and is not aware of any unresolved questions,
claims or disputes concerning the liability for Taxes on the Company which would
exceed the estimated reserves established on its books and records.
(d) The Company is not a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code
and the consummation of the transactions contemplated by this Agreement will not
be a factor causing payments to be made by the Company or any Tax Affiliate that
are not deductible (in whole or in part) under Section 280G of the Code.
(e) The Company has not requested any extension of time within which
to file any Return, which Return has not since been filed.
(f) The Company has no liabilities for unpaid Taxes which have not
been accrued or reserved against in the Annual Financial Statements, whether
asserted or unasserted, contingent or otherwise, and the Company has not
incurred any liability for Taxes since the date of the Latest Balance Sheet
other than in the ordinary course of business consistent with past practice.
(g) The Company has provided or made available to Parent for
inspection copies of all federal and state income and all state sales and use
Tax Returns for all taxable years ending on or after December 31, 1996.
(h) The Company has (i) never been a member of an affiliated group
(within the meaning of Code Section 1504(a)) filing a consolidated federal
income Tax Return (other
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than a group the common parent of which was Company) and (ii) no liability for
the Taxes of any person (other than Company or any of its Subsidiaries) under
Treasury Regulation Section 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract, or otherwise.
(i) The Company is not a party to any tax sharing, indemnification
or allocation agreement and does not owe any amount under any such agreements.
(j) None of the Company's assets are "tax-exempt use property"
within the meaning of Section 168 of the Code.
(k) For purposes of this Agreement, the term "Tax" or "Taxes" means
all taxes, charges, fees, levies, or other assessments, including, without
limitation, all net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, withholding, payroll,
employment, social security, unemployment, disability, workers' compensation,
excise, estimated, severance, stamp, occupation, property, or other taxes,
customs duties, fees, assessments, or charges of any kind whatsoever, including,
without limitation, all interest and penalties thereon, and additions to tax or
additional amounts imposed by any taxing authority, domestic or foreign, upon
either the Company or any Tax Affiliate.
3.13 CONTRACTS AND COMMITMENTS.
(a) The Disclosure Schedule, under the caption referencing this
Section 3.13, lists the following agreements, whether oral or written, to which
the Company is a party and, which are currently in effect (the "Contracts"):
(i) collective bargaining agreement or contract with any
labor union;
(ii) bonus, pension, profit sharing, retirement or other form
of deferred compensation plan, other than as described under the caption
referencing Section 3.19 hereof in the Disclosure Schedule;
(iii) hospitalization insurance or other welfare benefit plan
or practice, whether formal or informal, other than as described under the
caption referencing Section 3.19 hereof in the Disclosure Schedule;
(iv) stock purchase or stock option plan;
(v) contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis or relating to
severance pay for any such person;
(vi) standard form of confidentiality or nondisclosure
agreement;
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(vii) contract, agreement or understanding relating to the
voting of any of the Company Capital Stock or the election of directors of the
Company to which the Company is a party;
(viii) agreement or indenture relating to the borrowing of
money or to mortgaging, pledging or otherwise placing a lien (other than a
purchase money security lien) on any of the assets of the Company;
(ix) guarantee of any material obligation for borrowed money
or otherwise;
(x) lease or agreement under which it is lessee of, or holds
or operates any property, real or personal, owned by any other party for which
the annual rental exceeds $50,000;
(xi) lease or agreement under which it is lessor of, or
permits any third party to hold or operate, any property, real or personal for
which the annual rental exceeds $50,000;
(xii) contract or group of related contracts with the same
party for the purchase of products or services under which the undelivered
balance of such products or services is in excess of $100,000;
(xiii) contract or group of related contracts with the same
party for the sale of products or services under which the undelivered balance
of such products or services has a sales price in excess of $100,000;
(xiv) contract or group of related contracts with the same
party (other than any contract or group of related contracts for the purchase or
sale of products or services) continuing over a period of more than six months
from the date or dates thereof, not terminable by it on 30 days' or less notice
without penalty and involving more than $50,000;
(xv) contract which prohibits the Company from freely
engaging in business anywhere in the world;
(xvi) contract for the distribution of any of the products of
the Company (including any distributor, sales and original equipment
manufacturer contract);
(xvii) license agreement or other agreement providing for the
payment or receipt of royalties or other compensation by the Company in
connection with the intellectual property rights listed under the caption
referencing Section 3.14 hereof in the Disclosure Schedule;
(xviii) contract or commitment for capital expenditures in
excess of $50,000 individually;
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(xix) agreement for the sale of any capital asset with a net
book value in excess of $20,000;
(xx) all contracts terminable by the other party thereto upon
a change of control of the Company or upon the failure of the Company to satisfy
financial or performance criteria specified in such contract as provided
therein; or
(xxi) other material agreement not entered into in the
ordinary course of business.
(b) The Company has performed in all material respects all
obligations required to be performed by it in connection with the Contracts and
is not in receipt of any claim of default under any such Contract. The Company
does not have a present expectation or intention of not fully performing any
material obligation pursuant to any Contract. The Company has no Knowledge of
any material breach or anticipated material breach by any other party to any
Contract.
(c) Prior to the date of Closing, Parent has been or will be
supplied with or had or will have made available to it a true and complete copy
of each written Contract, and a written description of each oral Contract,
together with all amendments, waivers or other changes thereto.
3.14 INTELLECTUAL PROPERTY RIGHTS.
(a) DEFINITIONS.
(i) "Copyrights" shall mean rights in original works of
authorship including, without limitation, computer programs, as those terms are
used in 17 U.S.C. Section 101 ET SEQ., and rights under corresponding foreign
laws.
(ii) "Intellectual Property Rights" shall mean the
Copyrights, Patent Rights, Trademarks and Trade Secrets that are owned or
controlled by the Company on the Effective Date.
(iii) "Know-How" shall mean information contained in (A)
design documents, (B) specifications and performance criteria, (C) operating
instructions and maintenance manuals, (D) source and object code copies of the
Owned Software in electronic and printed forms, (E) computer software tools
owned by the Company and related documentation, including, without limitation,
source and object code copies therefor in electronic and printed forms, (F)
prototypes, models or samples, (G) files related to the Owned Software stored on
any storage device or media that is under the control of the Company, (H) files
relating to applications for Intellectual Property Rights and (I) all other
tangible materials (not necessarily proprietary) used in or held for use in
connection with the Owned Software or the business of the Company, or otherwise
related to the Company, as of the Effective Date.
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(iv) "Licensed Software" shall mean all software and all
software design tools used or intended for use by the Company under license (or
for which the Company has a right to reproduce and distribute copies), including
without limitation those identified in the Disclosure Schedule under the caption
referencing this Section 3.14(a)(iv).
(v) "Owned Software" shall mean the computer programs that
the Company has developed, is developing or plans to develop, or has marketed,
is marketing or plans to market, in connection with the operation of the Company
as presently conducted or presently planned to be conducted, all of which are
identified in the Disclosure Schedule under the caption referencing this Section
3.14(a)(v).
(vi) "Owned Software Documentation" shall mean the manuals
and specifications for the Owned Software, which documentation is identified in
the Disclosure Schedule under the caption referencing this Section 3.14(a)(vi).
(vii) "Patent Rights" shall mean rights provided by a United
States or foreign patent, including renewals, reissues, reexaminations or
extensions thereof, and on any applications for the foregoing, including any
divisions, continuations and continuations-in-part thereof filed by the Company
on or before the Effective Date, including without limitation those identified
in the Disclosure Schedule under the caption referencing this Section
3.14(a)(vii).
(viii) "Trade Secrets" shall mean all proprietary information
that is used or held by the Company and that (A) derives independent economic
value, actual or potential, from not being generally known to, and not being
readily ascertainable through proper means by, third parties who can obtain
economic value from its disclosure or use and (B) is the subject of efforts by
the Company that have been reasonable under the circumstances to maintain its
secrecy, such as, without limitation, source and object code, software
documentation, computer program designs, and information regarding future
business opportunities.
(ix) "Trademarks" shall mean trade names, trademarks, service
marks, trade dress and product configurations that are used or intended to be
used by the Company and all (A) goodwill and common law rights associated
therewith, (B) registration applications pending thereon in any state and in any
country and (C) registrations issued thereon in any state and in any country
including, but not limited to, those tradenames, trademarks or service marks
identified in the Disclosure Schedule under the caption referencing this Section
3.14(a)(ix).
(b) REPRESENTATIONS AND WARRANTIES.
(i) The Company owns or has the exclusive right to use the
Intellectual Property Rights and has the right to disclose all the Know-How to
Parent. The Company has taken all necessary action reasonably necessary and
consistent with similarly situated companies to protect the Intellectual
Property Rights, including without limitation, use of reasonable secrecy
measures to protect the Trade Secrets included in the Intellectual Property
Rights. All source code in the Owned Software is protected as a Trade Secret and
all object code
-21-
in the Owned Software has been distributed pursuant to a valid license
prohibiting reverse engineering and providing that the rights in such object
code shall remain with the Company.
(ii) The Intellectual Property Rights together with the third
party rights licensed to the Company under the Licensed Software agreements
comprise all material intellectual property rights used or held for use by the
Company in, and constitute all intellectual property rights necessary for the
conduct of, the business of the Company as presently conducted or presently
planned to be conducted.
(iii) To the Knowledge of the Company, the Intellectual
Property Rights do not infringe, misappropriate or violate the intellectual
property rights of any third party. No claim by any third party contesting the
validity or enforceability of any Intellectual Property Rights has been made, is
currently outstanding or, to the Knowledge of the Company is threatened, and the
Company has not received any notice of and has no Knowledge of any infringement,
misappropriation or violation by others of its Intellectual Property Rights.
(iv) To the Knowledge of the Company, the products and
services offered by the Company, the Company's products under development and
the Company's development activities have not resulted in the infringement,
violation, illicit copying or misappropriation by the Company of any third party
intellectual property rights.
(v) The Licensed Software listed in the Disclosure Schedule
under the caption referencing this Section 3.14(b)(v) constitutes all software
for which the Company has obtained a license to use the intellectual property
rights of third parties in exchange for a royalty or any other consideration.
Except for the licenses for Licensed Software listed in the Disclosure Schedule
under the caption referencing this Schedule 3.14(b)(v) and other than
"shrink-wrap" commercial software, there are no other agreements requiring the
Company to make payments or provide any consideration for, or restricting the
Company's right to use, any material intellectual property rights of third
parties. Except as set forth on the Disclosure Schedule under the caption
referencing this Section 3.14(b)(v), there is no software or equipment of any
kind needed in order to make the Owned Software fully operational and capable of
performing in accordance with its specifications for the Company's customers in
all material respects.
(vi) The Company owns, has the unrestricted right to use and
has sole and exclusive possession of and has good and valid title to, or
sufficient license or other rights to, all of the Intellectual Property Rights,
free and clear of any lien, encumbrance, security interest, charge, mortgage,
option, pledge, or restriction on transfer of any nature whatsoever.
(vii) All Intellectual Property Rights are in compliance with
formal legal requirements (including the payment of filing, examination and
maintenance fees and proofs of working or use), except where the failure to do
so would not reasonably be expected to have a Material Adverse Effect on the
Company. All Patents are valid and enforceable and no Patents have been or are
now involved in any interference, reissue, reexamination, opposition,
declaratory judgment or other invalidating proceeding, nor, to the Company's
knowledge, is any such action threatened with respect to any of the Patents. To
the Knowledge of the Company, no
-22-
application for a potentially infringing product or service has been filed or
issued. No Trademarks have been or are involved in any opposition, invalidation
or cancellation proceeding and, to the Knowledge of the Company, there is no
basis for the commencement of any such proceeding. The Trademarks are valid and
enforceable and to the Company's Knowledge no infringement is taking place.
(viii) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 3.14(b)(viii), the Company is not obligated or
under any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner of, or licensor of, or other claimant to, any
Intellectual Property Rights or any Third Party Intellectual Property Rights.
(ix) Except as set forth in the Disclosure Schedule under the
caption referencing this Section 3.14(b)(ix), all current employees, contractors
and consultants of the Company have executed written agreements with the Company
which assign to the Company all rights to any inventions, improvements, or
discoveries of information made by them during their service to the Company. To
the Knowledge of the Company, no employee, contractor or consultant of the
Company has entered into any agreement which restricts or limits in any way the
scope or type of work in which such employee, contractor or other consultant may
be engaged or requires such employee, contractor or consultant to transfer,
assign or disclose information concerning such employee's contractor's or
consultant's work to anyone other than the Company.
(x) The Company has experienced no material disruption or
interruption of its business or operations as a result of or related to any of
its information systems, data processing and other hardware, software and other
systems, facilities, programs and procedures (collectively, "Information
Systems") or products failing to be Y2K Compliant. "Y2K Compliant" means, with
respect to any Information System or product of the Company, that such
Information System or product (i) handles date information involving any and all
dates before, during and/or after January 1, 2000, including accepting input,
providing output and performing date calculations in whole or in part; (ii)
operates accurately in all material respects without interruption on and in
respect of any and all dates before, during and/or after January 1, 2000 and
without any material change in performance; (iii) responds to and processes
two-digit year input without creating any ambiguity as to the century; and (iv)
stores and provides date input information without creating any ambiguity as to
the century, in each case without utilizing bridges, gateways and the like while
still preserving the level of functionality, usability, reliability, efficiency,
performance and accessibility of such data and associated programs in all
material respects as existed prior to any modification to such Information
System or product of the Company and its constituent elements to make the same
Y2K Compliant.
3.15 SOFTWARE WARRANTIES. Specifically with respect to the Owned
Software and without limiting Section 3.14 hereof, the Company hereby represents
and warrants as follows:
(a) The Company is the sole owner of the Owned Software and has not
granted to any third party any license for or access to the Owned Software other
than object code
-23-
licenses to end-users or licenses authorizing the distribution of such object
code licenses to such end-users (directly or through intermediary distributors);
(b) The Company has the full power and authority to exploit
commercially all rights in the Owned Software and has never previously assigned,
transferred or otherwise encumbered these rights, except as provided in Section
3.15(a);
(c) To the Knowledge of the Company, no portion of the Owned
Software has been obtained from or copied from public domain software, nor put
in the public domain by the Company. As used in this paragraph (c), "public
domain" shall mean copyrightable material for which the copyright or any other
intellectual property right therein has been disclaimed by the owner thereof so
that such materials are free to be used without restriction and without
accounting to such owner;
(d) To the Knowledge of the Company, the Owned Software and the
reproduction, distribution, preparation of derivative works based upon,
performance of or display of the Owned Software do not infringe any statutory or
common law copyright;
(e) The Disclosure Schedule, under the caption referencing this
Section 3.15(e), lists all material computer programs and modules comprising the
Owned Software;
(f) To the Knowledge of the Company, the Owned Software and the
reproduction, preparation of derivative works based upon, performance of or
display of the Owned Software and its use in the conduct of the business of the
Company as now conducted does not infringe or violate any intellectual property
right of any third party;
(g) The Owned Software delivered, or tested and ready to be
delivered, to customers of the Company and, to the Knowledge of the Company,
such Owned Software is free from viruses, worms, trojan horses or other such
"foreign" code which could interrupt normal processing, corrupt data, render
such software unusable or otherwise materially interfere with the operations of
such Owned Software;
(h) The Company has full and exclusive control of the source code
for the Owned Software, except pursuant to the terms of the Company's standard
license escrow agreements or as set forth in the Disclosure Schedule referencing
this Section 3.15; and
(i) To the Knowledge of the Company, the Company's use and intended
use of the Licensed Software, including the reproduction, distribution,
preparation of derivative works based upon, performance of or display of the
Licensed Software, do not infringe any statutory or common law copyright or
violate or breach any terms of any agreement applicable thereto.
3.16 LITIGATION. There are no material actions, suits, proceedings,
orders or investigations pending or, to the Knowledge of the Company threatened
against the Company, at
-24-
law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
3.17 WARRANTIES. The Disclosure Schedule summarizes under the caption
referencing this Section 3.17 all claims outstanding, pending or, to the
Knowledge of the Company threatened in writing for breach of any warranty
relating to any products sold by the Company prior to the date hereof. The
description of the Company's product warranties set forth under the caption
referencing this Section 3.17 is correct and complete in all material respects.
The reserves for warranty claims on the Latest Balance Sheet are consistent with
the Company's prior practices and are adequate to cover all warranty claims made
or to be made against any products of the Company sold prior to the date hereof
based on the Company's prior experience.
3.18 EMPLOYEES.
(a) Except as set forth in the Disclosure Schedule under the caption
referencing this Section 3.18:
(i) to the Knowledge of the Company, no officer, manager or
any employee identified to Parent by the Company as a "key employee"
(collectively, "Key Employees") of the Company and no group of the Company's
employees has notified the Company of any plans to terminate his, her or its
employment immediately prior to or immediately after the Effective Time; (ii)
the Company has substantially complied with all laws relating to the employment
of labor, including provisions thereof relating to wages, hours, equal
opportunity, collective bargaining and the payment of social security and other
taxes; (iii) the Company has no material labor relations problem pending and its
labor relations are satisfactory; (iv) there are no workers' compensation claims
pending against the Company nor is the Company aware of any facts that would
give rise to such a claim; (v) to the best knowledge of the Company, no employee
is subject to any secrecy or noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of the Company; (vi) no employee or former employee of the Company
has any claim with respect to any Intellectual Property Rights of the Company;
and (vii) no employee or, to the Knowledge of the Company, former employee has
worked or is working for a direct competitor of the Company, with or on a
product that is in competition with or derived from or similar to a present or
past product of the Company. The Disclosure Schedule, under the caption
referencing this Section 3.18, lists, as of the date set forth in the Disclosure
Schedule, each employee who performs functions in connection with the business
and the position, title, remuneration (including any scheduled salary or
remuneration increases), date of employment and accrued vacation pay of each
such employee.
3.19 EMPLOYEE BENEFIT PLANS.
(a) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and "Plan" means every plan, fund, contract, program
and arrangement (whether written or not) which is maintained or contributed to
by the Company for the benefit of present or
-25-
former employees or with respect to which the Company otherwise has current or
potential liability. "Plan" includes any arrangement intended to provide: (i)
medical, surgical, health care, hospitalization, dental, vision, workers'
compensation, life insurance, death, disability, legal services, severance,
sickness, accident, or cafeteria plan benefits (whether or not defined in
Section 3(1) of ERISA), (ii) pension, profit sharing, stock bonus, retirement,
supplemental retirement or deferred compensation benefits (whether or not tax
qualified and whether or not defined in Section 3(2) of ERISA), (iii) bonus,
incentive compensation, stock option, stock appreciation right, phantom stock or
stock purchase benefits, change in control benefits or (iv) salary continuation,
unemployment, supplemental unemployment, termination pay, vacation or holiday
benefits (whether or not defined in Section 3(3) of ERISA). Section 3.19 of the
Disclosure Schedule sets forth all Plans by name and brief description
identifying: (i) the type of Plan, including a specific reference to any Plan
which provides benefits (or increased benefits or vesting) as a result of a
change in control of the Company, (ii) the funding arrangements for the Plan,
(iii) the sponsorship of the Plan, and (iv) the participating employers in the
Plan.
(b) To the extent required (either as a matter of law or to
obtain the intended tax treatment and tax benefits), all Plans comply with the
requirements of ERISA and the Code. With respect to the Plans, (i) all required
contributions which are due have been made and an accrual required by GAAP has
been made on the books and records of the Company for all future contribution
obligations; (ii) there are no actions, suits or claims pending, other than
routine uncontested claims for benefits; and (iii) there have been no prohibited
transactions (as defined in Section 406 of ERISA or Section 4975 of the Code).
Except as otherwise disclosed in the Disclosure Schedule under the caption
referencing this Section 3.19(b), all benefits under the Plans are payable
either through a fully-funded trust or an insurance contract and no Plan is
self-funded.
(c) Parent has received true and complete copies of (i) all
Plan documents, including related trust agreements or funding arrangements; (ii)
the most recent determination letter, if any, received by the Company from the
IRS regarding the Plans and any amendment to any Plan made subsequent to any
Plan amendments covered by any such determination letter; (iii) the most recent
financial statements for the Plans; (iv) the most recently prepared actuarial
valuation reports; (v) current summary plan descriptions; (vi) annual
returns/reports on Form 5500 and summary annual reports for each of the most
recent three plan years; (vii) any filings (including drafts of intended
filings) with the IRS or the Department of Labor ("DOL") within the last five
years preceding the date of this Agreement; and (viii) any material
correspondence to or from the IRS or DOL within the last three years preceding
the Effective Date in connection with any Plan. To the knowledge of the Company,
nothing has occurred that could adversely affect the qualification of the Plans
and their related trusts.
(d) The Company does not maintain or contribute to (and has
never contributed to) any multi-employer plan, as defined in Section 3(37) of
ERISA. The Company has no actual or potential liabilities under Title IV of
ERISA, including under Section 4201 of ERISA for any complete or partial
withdrawal from a multi-employer plan.
-26-
(e) The Company has no actual or potential liability for
death or medical benefits after separation from employment, other than (i) death
benefits under the employee benefit plans or programs (whether or not subject to
ERISA) set forth in Section 3.19 of the Disclosure Schedule and (ii) health care
continuation benefits described in Section 4980B of the Code.
(f) Neither the Company nor, to its Knowledge, any of its
directors, officers, employees or other "fiduciaries", as such term is defined
in Section 3(21) of ERISA, has committed any breach of fiduciary responsibility
imposed by ERISA or any other applicable law with respect to the Plans which
would subject the Company, Parent or any of their respective directors, officers
or employees to any liability under ERISA or any applicable law.
(g) There are no other trades or businesses, whether or not
incorporated, which, together with the Company, would be deemed to be a "single
employer" within the meaning of Code Sections 414(b), (c) or (m).
(h) Except with respect to Taxes on benefits paid or
provided, no material Tax has been waived or excused, has been paid or is owed
by any person (including, but not limited to, any Plan, any Plan fiduciary or
the Company) with respect to the operations of, or any transactions with respect
to, any Plan. No action has been taken by the Company, nor has there been any
failure by the Company to take any action, nor is any action or failure to take
action contemplated by the Company (including all actions contemplated under
this Agreement), that would subject any person or entity to any liability or Tax
imposed by the IRS or DOL in connection with any Plan. No reserve for any Taxes
has been established with respect to any Plan by the Company nor has any advice
been given to the Company with respect to the need to establish such a reserve.
(i) There are no (i) legal, administrative or other
proceedings or governmental investigations or audits, or (ii) complaints to or
by any Governmental Entity, which are pending, anticipated or, to the Knowledge
of the Company, threatened, against any Plan or its assets, or against any Plan
fiduciary or administrator, or against the Company or its officers or employees
with respect to any Plan.
(j) There are no leased employees, as defined in Section
414(n) of the Code, providing services to the Company, that must be taken into
account with respect to the requirements under Section 414(n)(3) of the Code.
(k) Each Plan may be terminated directly or indirectly by
Parent and the Company, in their sole discretion, at any time before or after
the Effective Date in accordance with its terms, without causing the Parent or
the Company to incur any material liability to any person, entity or government
agency for any conduct, practice or omission of the Company which occurred prior
to the Effective Date, except for liabilities, to and the rights of, the
employees thereunder accrued prior to the Effective Date, or if later, the time
of termination, and except for continuation rights required by the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, or other applicable law.
-27-
3.20 INSURANCE. The Disclosure Schedule, under the caption
referencing this Section 3.20, lists and briefly describes each insurance policy
maintained by the Company and sets forth the date of expiration of each such
insurance policy. All of such insurance policies are in full force and effect
and are issued by insurers of recognized responsibility. The Company is not in
default with respect to its obligations under any of the insurance policies. The
Company has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
3.21 AFFILIATE TRANSACTIONS. Except as disclosed in the Disclosure
Schedule under the caption referencing this Section 3.21, and other than
pursuant to this Agreement, no director or Significant Employee of the Company
or, to the Knowledge of the Company, any member of the immediate family of any
such director or Significant Employee, or any entity in which any of such
persons owns any beneficial interest (other than any publicly held corporation
whose stock is traded on a national securities exchange or in the
over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such persons) (collectively "insiders"), has any
agreement with the Company (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible, used
in or pertaining to the business of the Company (other than ownership of capital
stock of the Company). To the Knowledge of the Company, none of the insiders has
any direct or indirect interest (other than any publicly held corporation whose
stock is traded on a national securities exchange or in the over-the-counter
market and less than one percent of the stock of which is beneficially owned by
any of such persons) in any competitor, vendor, supplier or customer of the
Company or in any person, firm or entity from whom or to whom the Company leases
any material property, or in any other person, firm or entity with whom the
Company transacts business which is material to the Company. For purposes of
this Section 3.21, the members of the immediate family of a director or
Significant Employee shall consist of the spouse, parents, children, siblings,
mothers- and fathers-in-law, sons- and daughters-in-law, and brothers- and
sisters-in-law of such director or Significant Employee.
3.22 CUSTOMERS. The Disclosure Schedule, under the caption
referencing this Section 3.22, lists the 10 largest customers of the Company for
the fiscal year ended June 30, 1999 and for the seven-month period ended January
31, 2000, and sets forth opposite the name of each such customer the approximate
percentage of net sales by the Company attributable to such customer for each
such period. Since January 31, 2000, no customer listed on the Disclosure
Schedule under the caption referencing this Section 3.22 has provided notice to
the Company that it will stop or substantially decrease the rate of business
done with the Company.
3.23 COMPLIANCE WITH LAWS; PERMITS.
(a) The Company and, to its Knowledge, its officers, directors,
agents and employees have complied in all material respects with all applicable
laws, regulations and other requirements, including, but not limited to,
federal, state, local and foreign laws, ordinances, rules, regulations and other
requirements pertaining to product labeling, consumer products safety, equal
employment opportunity, employee retirement, affirmative action and other hiring
-28-
practices, occupational safety and health, workers' compensation, unemployment
and building and zoning codes, which affect the business, the assets of the
Company or the Real Property and to which the Company may be subject, and no
claims have been filed against the Company alleging a violation of any such
laws, regulations or other requirements. The Company has no knowledge of any
action, pending or threatened, to change the zoning or building ordinances or
any other laws, rules, regulations or ordinances affecting the assets of the
Company or the Real Property. To its Knowledge, the Company is not relying on
any exemption from or deferral of any such applicable law, regulation or other
requirement that would not be available to the Surviving Corporation.
(b) The Company has, in full force and effect, all licenses,
approvals, permits and certificates, from federal, state and foreign authorities
(including, without limitation, federal and state agencies regulating
occupational health and safety) and all material licenses, approvals, permits
and certificates from local authorities, in each case, necessary to conduct its
business and own and operate its assets in all material respects (other than
Environmental Permits, as such term is defined in Section 3.24(c) hereof)
(collectively, the "Permits"). A true and complete list of all the Permits is
set forth under the caption referencing this Section 3.23 in the Disclosure
Schedule. The Company has conducted its business in compliance with all material
terms and conditions of the Permits.
(c) Neither the Company nor any person representing the Company has
at any time: (i) made any payment in violation of the Foreign Corrupt Practices
Act; or (ii) made any payment to any foreign, federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(d) In particular, but without limiting the generality of the
foregoing, the Company has not violated in any material respect and has no
material liability, and has not received a notice or charge asserting any
material violation of or liability under, the federal Occupational Safety and
Health Act of 1970 or any other federal or state acts (including rules and
regulations thereunder) regulating or otherwise affecting employee health and
safety.
3.24 ENVIRONMENTAL MATTERS. Neither the Company nor, to the Knowledge
of the Company, any other person (including, without limitation, any previous
owner, lessee or sublessee) has treated, stored or disposed of any material
amounts of petroleum products, hazardous waste, hazardous substances, pollutants
or contaminants on the Real Property, or any real property previously owned,
leased, subleased or used by the Company in the operation of its business, in
violation of any applicable foreign, federal, state or local statutes,
regulations or ordinances, or common law, in each case as in existence at or
prior to the Closing, which would constitute a material liability of the
Company. To the knowledge of the Company, there have been no releases of any
material amounts of petroleum, petroleum products, hazardous waste, hazardous
substances, pollutants or contaminants on, at or from any assets or properties,
including, without limitation, the Real Property, owned, leased, subleased or
used by the Company in the operation of its business during the time such assets
or properties were owned, leased, subleased or used by the Company (or, to the
knowledge of the Company, prior to such
-29-
time), including, without limitation, any releases of any material amounts of
petroleum, petroleum products, hazardous waste, hazardous substances, pollutants
or contaminants in violation of any law, which would constitute a material
liability of the Company.
3.25 BANK ACCOUNTS. The Disclosure Schedule under the caption
referencing this Section 3.25 sets forth a full and complete list of all bank
accounts and safe deposit boxes of the Company, the number of each such account
or box, and the names of the persons authorized to draw on such accounts or to
access such boxes. All cash in such accounts is held in demand deposits and is
not subject to any restriction or documentation as to withdrawal.
3.26 INDEMNIFICATION OBLIGATIONS. The Company has no Knowledge of any
action, proceeding or other event pending or threatened against any officer or
director of the Company which would give rise to any indemnification obligation
of the Company to its officers and directors under its Certificate of
Incorporation, Bylaws or any agreement between the Company and any of its
officers or directors.
3.27 BROKERAGE. Except as set forth in the Disclosure Schedule under
the caption 3.27, no third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of the Company.
3.28 VOTE REQUIRED. The affirmative written consent of the holders of
a majority of the shares of the Company voting stock is the only action of the
holders of any of the Company's Stock necessary to approve this Agreement and
the transactions contemplated thereby.
3.29 TAX MATTERS. Neither the Company nor, to its Knowledge, any of
its affiliates, has taken or agreed to take any action, or knows of any
circumstances, that (without regard to any action taken or agreed to be taken by
Parent or any of its affiliates) would prevent the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code.
3.30 DISCLOSURE. Neither this Agreement nor any of the Exhibits
hereto nor any of the documents delivered by or on behalf of the Company
pursuant to Article VII hereof nor the Disclosure Schedule nor any of the Annual
and Latest Financial Statements hereof, taken as a whole, contain any untrue
statement of a material fact regarding the Company or the business of the
Company or the transactions contemplated by this Agreement. This Agreement, the
Exhibits hereto, the documents delivered to Parent by or on behalf of the
Company pursuant to Article VII hereof, the Disclosure Schedule and the
Financial Statements, taken as a whole, do not omit any material fact necessary
to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed to Parent of which the Company is aware which has
or could reasonably be anticipated to have a Material Adverse Effect.
-30-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the
Company and Rohan that:
4.01 INCORPORATION AND CORPORATE POWER. Each of Parent and Merger Sub
is a corporation duly incorporated, validly existing and in good standing under
the laws of the state of its incorporation, with the requisite corporate power
and authority to enter into this Agreement and perform its obligations
hereunder. The execution, delivery and performance of this Agreement has been
duly and validly approved and authorized by Parent's Board of Directors in
compliance with applicable law (including the Minnesota General Corporation Law)
and Parent's Articles of Incorporation.
4.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The execution,
delivery and performance of this Agreement by Parent and Merger Sub and the
execution of the Certificate of Merger by Merger Sub, and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action, and no other corporate proceedings
on its part are necessary to authorize the execution, delivery or performance of
this Agreement or the Certificate of Merger. This Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes the valid and
binding obligation of Parent and Merger Sub, enforceable in accordance with its
terms and the Certificate of Merger, when executed and delivered by Merger Sub,
will constitute the valid and binding obligation of Merger Sub, enforceable in
accordance with its terms.
4.03 NO BREACH. The execution, delivery and performance of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the transactions contemplated hereby do not conflict with or result in any
breach of any of the provisions of, constitute a default under, result in a
violation of, result in the creation of a right of termination under the
provisions of the Articles of Incorporation or Bylaws of Parent or the
Certificate of Incorporation or Bylaws of Merger Sub or any indenture, mortgage,
lease, loan agreement or other agreement or instrument by which either Parent or
Merger Sub is bound or affected the breach, default, violation or termination of
which would result in a material adverse effect on Parent or Merger Sub. No
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity, is required by or with respect to Parent
or Merger Sub in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the consummation by Parent and Merger Sub of the
transactions contemplated hereby except for (a) expiration or termination of the
applicable waiting periods under the HSR Act, (b) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware and (c) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state and federal securities laws.
4.04 PARENT COMMON STOCK.
-31-
(a) The description of the authorized capital stock of Parent in the
Parent SEC reports (as that term is defined below) is accurate. All of
outstanding shares of Parent Common Stock have been duly authorized and are
validly issued, fully paid and nonassessable. Parent's outstanding stock options
to purchase shares of its Common Stock are accurately described in its SEC
Reports. Except as described in its SEC Reports, Parent has no other equity
securities or securities containing any equity features authorized, issued or
outstanding. Except as described in its SEC Reports, there are no agreements or
other rights or arrangements existing which provide for the sale or issuance of
capital stock by Parent and, except as described in its SEC Reports, there are
no rights, subscriptions, warrants, options, conversion rights or agreements of
any kind outstanding to purchase or otherwise acquire from Parent any shares of
capital stock or other securities of Parent of any kind. Except as may be
described in its SEC Reports, there are no agreements or other obligations
(contingent or otherwise) which may require Parent to repurchase or otherwise
acquire any shares of its capital stock.
(b) The shares of Parent Common Stock to be issued pursuant to the
Merger and upon exercise of Company Options assumed by Parent hereunder will,
when issued and delivered in accordance with this Agreement, be duly authorized,
validly issued, fully paid and nonassessable and issued pursuant to a valid
exemption from registration under the Securities Act and Regulation D
promulgated thereunder; provided, however, that the Parent Common Stock to be
issued hereunder will be subject to restrictions on transfer under applicable
federal and state securities laws.
4.05 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Parent has made or will make available to the Company a true and
complete copy of its latest Annual Report on Form 10-K, definitive proxy
statement, annual report to shareholders and all periodic reports filed by
Parent with the Securities and Exchange Commission ("SEC") since the end of
Parent's last fiscal year (collectively, as supplemented and amended since the
time of filing, the "Parent SEC Reports"). The Parent SEC Reports, including all
Parent SEC Reports filed after the date of this Agreement, (i) were or will be
prepared in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at the
time they were filed or will not at the time they are filed, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The representation
in clause (ii) of the preceding sentence does not apply to any misstatement or
omission in any Parent SEC Report filed prior to the date of this Agreement
which was superseded by a subsequent Parent SEC Report filed prior to the date
of this Agreement.
(b) The audited consolidated financial statements and unaudited
consolidated interim financial statements of Parent and its Subsidiaries
included or incorporated by reference in such Parent SEC Reports have been
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods involved (except as
may otherwise be indicated in the notes thereto) and present fairly, in all
material respects, the financial position and results of operations and cash
flows of Parent and its Subsidiaries on a
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consolidated basis at the respective dates and for the respective periods
indicated (except, in the case of all such financial statements that are interim
financial statements, for normal year-end adjustments).
4.06 ABSENCE OF UNDISCLOSED LIABILITIES; NO LITIGATION. Parent does
not have any liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) arising out of transactions or events heretofore
entered into, or any action or inaction, or any state of facts existing, with
respect to or based upon transactions or events heretofore occurring, except (i)
as reflected in the Parent SEC Reports, (ii) liabilities which have arisen after
the date of the Parent SEC Reports in the ordinary course of business (none of
which is a material uninsured liability for breach of contract, breach of
warranty, tort, infringement, claim or lawsuit) or (iii) those that are not
required to be set forth in the Parent SEC Reports under GAAP. There are no
material actions, suits, proceedings, orders or investigations pending or, to
the knowledge of Parent, threatened against Parent, at law or in equity, or
before any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
4.07 NO MATERIAL ADVERSE CHANGES OR EVENTS. Since the date of the
Parent SEC Reports (the "Balance Sheet Date"), there has been no change,
individually or in the aggregate, which change has had or, with the passage of
time, is reasonably likely to have, a material adverse effect on the business,
assets, results of operations, business prospects, condition (financial or
otherwise) of the Parent and its subsidiaries, taken as a whole or which could
prevent or materially delay Parent's or Merger Sub's ability to consummate the
Merger or the transactions contemplated hereby (a "Parent Material Adverse
Effect"), provided, however, for purposes of the definition of Parent Material
Adverse Effect, a change in the trading price of the Parent Common Stock as
reported by the Nasdaq National Market in and of itself shall not constitute a
Parent Material Adverse Effect and, provided further, however, that any such
change, effect, event or condition that primarily results from changes in
general economic conditions or changes affecting the industry in which Parent
operates shall not be treated as a "Parent Material Adverse Effect." .
4.08 MERGER SUB. All of the outstanding capital stock of Merger
Sub is owned by Parent free and clear of any lien, claim or encumbrance or
any agreement with respect thereto. Since the date of its incorporation,
Merger Sub has not engaged in any activity of any nature except in connection
with or as contemplated by this Agreement and the Certificate of Merger.
4.09 TAX MATTERS. Neither Parent nor Merger Sub, nor, to Parent's
knowledge, any of Parent's affiliates, has taken or agreed to take any action,
or knows of any circumstances that (without regard to any action taken or agreed
to be taken by the Company or any of its affiliates) would prevent the Merger
from qualifying as a reorganization within the meaning of Section 368 of the
Code.
4.10 FULL DISCLOSURE. Neither this Agreement nor any of the Exhibits
hereto nor any of the documents delivered by or on behalf of the Parent pursuant
to Article VII hereof nor
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the Disclosure Schedule nor any of the SEC Reports hereof, taken as a whole,
contain any untrue statement of a material fact regarding the Parent or the
business of the Parent or the transactions contemplated by this Agreement. This
Agreement, the Exhibits hereto, the documents delivered to the Company by or on
behalf of the Parent and Merger Sub pursuant to Article VII hereof, the
Disclosure Schedule and the SEC Reports, taken as a whole, do not omit any
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they were made, not misleading, and there is
no fact which has not been disclosed to the Company of which Parent is aware
which has or could reasonably be anticipated to have a Parent Material Adverse
Effect; provide, however, for purposes of the definition of Parent Material
Adverse Effect, a change in the trading price of Parent Common Stock as reported
by the Nasdaq National Market in and of itself shall not constitute a Parent
Material Adverse Effect .
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.01 CONDUCT OF THE BUSINESS. The Company shall observe, and Rohan
shall, to the extent he may legally do so, cause the Company to observe, each
term set forth in this Section 5.01 and agree that, from the date hereof until
the Effective Time, unless otherwise consented to by Parent in writing:
(a) The business of the Company shall be conducted only in, and the
Company shall not take any action except in, the ordinary course of the
Company's business, on an arm's-length basis and in accordance in all material
respects with all applicable laws, rules and regulations and the Company's past
custom and practice;
(b) The Company shall not cancel or terminate its current insurance
policies or cause any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies for substantially similar premiums are in full force and effect;
(c) The Company shall (i) use its best efforts to preserve intact
the Company's business organization and goodwill, keep available the services of
the Company's officers and employees as a group and maintain satisfactory
relationships with suppliers, distributors, customers and others having business
relationships with the Company; (ii) respond to reasonable requests from
representatives of Parent with respect to operational matters and the general
status of ongoing operations; (iii) not intentionally take any action which
would render, or which reasonably may be expected to render, any representation
or warranty made by it in this Agreement untrue in any material respect at the
Closing; (iv) notify Parent of any governmental or third party complaints,
investigations or hearings (or communications indicating that the same may be
contemplated); and (v) promptly notify Parent in writing if the Company shall
discover that any representation or warranty made by it in this Agreement was
when made, or has subsequently become, untrue in any material respect;
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(d) The Company (for purposes of this Section 5.01(d), all
references to the Company shall include the affiliates, and any former
subsidiaries and affiliates, of the Company) shall file (or cause to be filed)
at its own expense, on or prior to the due date, all Tax Returns, including all
Returns and reports relating to the Plans or the Other Arrangements, for all Tax
periods ending on or before the Effective Time where the due date for such
Returns or reports (taking into account valid extensions of the respective due
dates) falls on or before the Effective Time (all Tax Returns described in this
Section 5.01(d) and any schedules to be included therewith shall be prepared on
a basis consistent with those of the Company prepared for prior Tax periods);
PROVIDED, HOWEVER, that the Company shall not file any such Tax Returns, or
other returns, elections, claims for refund or information statements with
respect to any liabilities for Taxes (other than federal, state or local sales,
use, withholding or employment tax returns or statements) for any Tax period, or
consent to any adjustment or otherwise compromise or settle any matters with
respect to Taxes, without prior consultation with and approval by Parent. The
Company shall provide Parent with a copy of appropriate workpapers, schedules,
drafts and final copies of each federal and state income Tax Return or election
of the Company at least ten days before filing such return or election and shall
reasonably cooperate with any request by Parent in connection therewith;
(e) The Company shall not (i) make or rescind any express or deemed
election or take any other discretionary position relating to Taxes, (ii) settle
or compromise any claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to Taxes, or (iii) change any of
its methods of reporting income or deductions for federal income Tax purposes
from those employed in the preparation of the federal income Tax returns for the
taxable year ended June 30, 1999;
(f) The Company shall not change any of its methods of accounting in
effect at June 30, 1999, other than those required by GAAP; and
(g) The Company shall not perform any act referenced by (or omit to
perform any act which omission is referenced by) the terms of Section 3.09
hereof.
5.02 ACCESS TO BOOKS AND RECORDS. Between the date hereof and the
Effective Time, the Company shall afford to Parent and its authorized
representatives (the "Parent Representatives") full access at all reasonable
times and upon reasonable notice to the offices, properties, books, records,
officers, employees and other items of the Company, and the work papers of
PricewaterhouseCoopers LLP, the Company's independent accountants, and otherwise
provide such assistance as is reasonably requested by Parent in order that
Parent may have a full opportunity to make such investigation and evaluation as
it shall reasonably desire to make of the business and affairs of the Company.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 STOCKHOLDER APPROVAL. As promptly as practicable after the
execution of this Agreement, the Company shall, in accordance with the DGCL and
the Company's Certificate of Incorporation and Bylaws, obtain the approval of
the Company's stockholders of the principal terms of this Agreement and the
Merger. The Company shall ensure that the Stockholder approval is solicited in
compliance with the DGCL, the Certificate of Incorporation and Bylaws of the
Company and all other applicable legal requirements. The Company agrees to use
its best efforts and to take all action necessary or advisable to secure the
necessary votes required by the DGCL to effect the Merger. Rohan agrees to vote
(or consent to vote) all of his shares of Company Capital Stock in favor of
approval of the Merger, this Agreement and the transaction contemplated hereby.
6.02 REGULATORY FILINGS. As promptly as practicable after the
execution of this Agreement, Parent, Merger Sub, the Company and Rohan shall,
and the Company shall use its best efforts to cause any of its stockholders so
required to, make or cause to be made all filings and submissions under any laws
or regulations, including the HSR Act or any comparable laws of foreign
governmental entities, applicable to such party for the consummation of the
transactions contemplated herein. The Company will coordinate and cooperate with
Parent (or its affiliates) in exchanging such information necessary to make such
filings.
6.03 CONDITIONS. Each of Parent, Merger Sub, the Company and Rohan
shall take all commercially reasonable actions necessary or desirable to comply
promptly with all legal requirements which may be imposed on such party with
respect to the Merger and will promptly cooperate with and furnish such
information to any other party hereto in connection with any such requirements
imposed upon such other party in connection with the Merger. Each party will
take all reasonable actions to obtain (and will cooperate with the other parties
in obtaining) any consent, authorization, order or approval of or any
registration, declaration or filing with, or an exemption by any governmental
entity, or other third party, required to be obtained or made by such party in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement; provided, however, that Parent shall not be required to agree
to any divestiture by Parent or the Company or any of Parent's subsidiaries or
affiliates shares of capital stock or of any business, assets or property of
Parent or its subsidiaries or affiliates or of the Company or its affiliates or
the imposition of any material limitation on the ability of any of them to
conduct their business or to own or exercise control of such assets, properties
and stock.
6.04 NO NEGOTIATIONS. From and after the date of this Agreement until
the earlier to occur of the Effective Time or termination of this Agreement
pursuant to its terms, neither the Company nor Rohan shall, and the Company will
instruct its officers, directors, employees, agents, representatives and
affiliates, not to, directly or indirectly solicit, initiate or encourage
submission of any proposal or offer from any person or entity (including any of
its or their officers or employees, representatives, agents, or affiliates)
relating to any liquidation, dissolution, recapitalization, tender or exchange
offer, solicitation of proxies, merger,
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consolidation or acquisition or purchase of all or a material portion of the
assets of, or any equity interest in, the Company or other similar transaction
or business combination involving the Company except as provided pursuant to
this Agreement, or participate in any discussions or negotiations regarding, or
furnish to any other person any information with respect to, or otherwise
cooperate in any way with, or assist or participate in, facilitate or encourage,
any effort or attempt by any other person or entity to do or seek any of the
foregoing. The Company shall promptly notify Parent if any such proposal or
offer, or any inquiry from or contact with any person with respect thereto, is
made and shall promptly provide Parent with such information regarding such
proposal, offer, inquiry or contact as Parent may request.
6.05 APPROVALS AND CONSENTS. Each of the Company and Parent shall use
its reasonable best efforts to obtain all consents and approvals required to be
obtained by it to carry out the transactions contemplated by this Agreement,
including all consents, waivers or approvals under any of the Contracts in order
to preserve the benefits thereunder for the Surviving Corporation and otherwise
in connection with the Merger and will cooperate with Parent to obtain all such
approvals and consents required of Parent. All of such consents and approvals
are set forth in the Disclosure Schedule under the caption referencing Section
3.05.
6.06 NOTIFICATION OF CERTAIN MATTERS. The Company or Parent, as the
case may be, shall promptly notify the other of (i) its obtaining of knowledge
as to the matters set forth in clauses (x), (y) and (z) below, or (ii) the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be likely to cause (x) any representation or warranty contained in
this Agreement to be untrue or inaccurate in any material respect at any time
from the date hereof to the Effective Time, including, without limitation, any
Material Adverse Effect on the Company or Parent Material Adverse Effect, (y)
any material failure of the Company or Parent, as the case may be, or of any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or (z) the institution of any claim, suit, action or proceeding
arising out of or related to the Merger or the transactions contemplated hereby;
PROVIDED, HOWEVER, that no such notification shall affect the representations or
warranties of the parties or the conditions to the obligations of the parties
hereunder.
6.07 REORGANIZATION. From the date of this Agreement until the
Effective Time, neither Parent, Merger Sub or the Company shall take any action
that would prevent the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code.
6.08 TAX MATTERS.
(a) Parent will file (or cause to be filed) all Tax Returns
of the Company for all Tax periods ending after the Effective Time. After the
Effective Time, Parent, to the extent permitted by law, shall have the right to
amend, modify or to otherwise change all Tax Returns of the Company for all Tax
periods.
(b) Promptly after receipt by Parent of a written notice of
any demand claim or circumstance which, after the lapse of time, would or might
give rise to a claim or the
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commencement (or threatened commencement) of any action proceeding or
investigation with respect to which indemnity may be sought hereunder with
respect of any matter concerning Taxes, but not including receipt of a request
for information ("Asserted Tax Liability"), Parent shall give written notice
thereof to Rohan (the "Tax Claim Notice").
(i) A Tax Claim Notice shall contain factual information (to
the extent reasonable and available to Parent) generally
describing the Asserted Tax Liability in question and
shall include copies of any notice or other document
received from any taxing authority in respect of such
Asserted Tax Liability. Failure by Parent to give Rohan
prompt notice of an Asserted Tax Liability shall not
reduce or otherwise affect Parent's right to seek
indemnification hereunder; provided, however, that if
such failure to give prompt notice results in a material
detriment to Rohan, then any amount which Parent may
otherwise be entitled to as indemnification hereunder
with respect to such Asserted Tax Liability shall be
reduced by the amount which is solely and directly
attributable to such failure to give prompt notice.
(ii) In the event that Rohan shall provide notice to Parent
to the effect that there is a reasonable basis for
contesting an Asserted Tax Liability, then Rohan may
elect to direct through counsel of his own choosing and
at his own expense, a compromise or contest, either
administratively or in the courts, of any Asserted Tax
Liability; provided that Parent, in its sole and
absolute discretion, may notify Rohan at any time that
any such compromise or contest must be immediately
terminated in which case the foregoing obligation to
make indemnity payments hereunder with respect to such
asserted Tax Liability shall thereupon terminate.
(iii) If, in accordance with the foregoing Rohan elects to
direct the compromise or contest of any Asserted Tax
Liability, he shall, within 30 calendar days after
receiving the Tax Claim Notice with respect to such
Asserted Tax Liability (or sooner if the nature of the
Asserted Tax Liability so requires) notify Parent of his
intent to do so, and Parent shall cooperate, at Rohan's
sole expense, in the compromise or contest of such
Asserted Tax Liability.
(iv) Rohan may enter into a settlement agreement with respect
to or otherwise resolve any Asserted Tax Liability but
only with the prior written consent of Parent, which
consent may not unreasonably be withheld.
(v) In the event that and in accordance with the foregoing,
Rohan is attempting to compromise or contest any
Asserted Tax Liability, Parent may participate at its
own expense in all proceedings, either administratively
or in the courts. For all purposes hereof, the right to
participate in all proceedings, either administratively
or in the courts,
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relating to an Asserted Tax Liability shall include the
right to attend and be kept fully informed of all such
proceedings.
(vi) Notwithstanding any attempt to compromise or contest any
Asserted Tax Liability, Parent may reasonably determine
not to release or disclose to Rohan or his advisors,
representatives and agents any information relating to
matters which arose after the Closing Date which it
determines is of a confidential nature and which, in the
best interests of Parent, shall not be disclosed to
Rohan or the foregoing parties unless Rohan and the
foregoing parties agree in writing to protect the
confidential nature of such information and to use or
disclose such information solely to the extent necessary
to contest an Asserted Tax Liability.
(vii) The foregoing procedures with respect to matters
concerning Taxes shall apply in the event of any
conflict between the provisions thereof and those of
Article IX.
6.09 REGISTRATION OF PARENT COMMON STOCK. At Closing, Parent agrees
to register the shares of Parent Common Stock to be issued to stockholders of
the Company upon conversion of their shares of Company Stock on the terms and
conditions set forth in Exhibit A hereto; which shall be declared effective by
the SEC not later than 45 days following the Effective Time.
6.10 FORM S-8. As promptly as practicable after the Effective Time,
Parent shall file a Registration Statement on Form S-8 (or any successor or
other appropriate form) with the SEC covering the shares of Parent Common Stock
subject to issuance with respect to assumed Company Options; which shall be
declared effective by the SEC not later than five (5) days following the
Effective Time.
6.11 NASDAQ NATIONAL MARKET. On or prior to the date of filing of the
Registration Statement on Form S-8, as set forth in Section 6.10, Parent shall
apply for listing on the Nasdaq National Market of shares of Parent Common Stock
issuable with respect to the assumed Company Options, upon final notice of
issuance and shall take all other acts as necessary or appropriate to cause such
shares to become and remain so listed. On or prior to the Effective Date, Parent
shall apply for the listing on the Nasdaq National Market of the shares of
Parent Common Stock issuable, in connection with the Merger, upon official
notice of issuance and shall take all other acts as necessary or appropriate to
cause such shares to become and remain so listed.
6.12 TERMINATION OF COMPANY INVESTOR RIGHTS. The Company shall take
such steps as may be necessary to provide for the termination as of the
Effective Date of all Company investor rights granted by the Company to its
stockholders and in effect prior to the Closing, including but not limited to
rights of co-sale, voting, registration, first refusal, board observation or
information or operational covenants.
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6.13 ESCROW ARRANGEMENTS. Simultaneously with the Merger on the
Effective Date, 71,500 shares of Parent Common Stock to be delivered to Rohan in
the Merger under Section 2.02(a) will be delivered to the Escrow Agent (as such
term is defined in the Escrow Agreement attached hereto as Exhibit B (the
"Escrow Agreement")). Such stock shall constitute an escrow fund (the "Escrow
Fund") to be governed by the terms set forth in the Escrow Agreement. The Escrow
Fund shall terminate on the 91st day following the Effective Date (the "Escrow
Period"); provided that the Escrow Period shall not terminate with respect to
such amount (or some portion thereof) that, together with the aggregate amount
remaining in the Escrow Fund, is necessary in the reasonable judgment of Great
Plains, subject to the notice procedures in the Escrow Agreement, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period. As soon as all such claims have been
resolved, the Escrow Agent shall deliver to Rohan the remaining proceeds of the
Escrow Fund not required to satisfy such claims, in accordance with the
provisions of the Escrow Agreement.
6.14 COOPERATION WITH ROHAN. Parent shall reasonably cooperate with
Rohan to the extent Rohan so requests relating to his desire, if any, to
contribute his shares of Parent Common Stock to be received in the Merger to an
exchange or swap fund.
ARTICLE VII
CONDITIONS TO CLOSING
7.01 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 of each of the following conditions on or
before the Effective Date:
(a) STOCKHOLDER APPROVAL. The principal terms of this Agreement, the
Merger and the transactions contemplated hereby shall have been approved and
adopted by the stockholders of the Company by the requisite vote under
applicable law and the Company's Certificate of Incorporation.
(b) NO INJUNCTIONS OR RESTRAINTS. No judgment, order, decree,
statute, law, ordinance, rule or regulation entered, enacted, promulgated,
enforced or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect (i) imposing or seeking to impose limitations
on the ability of Parent to acquire or hold or to exercise full rights of
ownership of any securities of the Company; (ii) imposing or seeking to impose
limitations on the ability of Parent to combine and operate the business and
assets of the Company with any of its affiliates or other operations; (iii)
imposing or seeking to impose other material sanctions, damages, or liabilities
arising out of the Merger on Parent, Merger Sub or the Company, or any of their
officers or directors; (iv) requiring or seeking to require divestiture by
Parent of all or any portion of the business, assets, or property of the
Company; or (v) otherwise preventing the consummation of the Merger.
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(c) GOVERNMENTAL ACTION. No action or proceeding shall be instituted
by any Governmental Entity seeking to prevent consummation of the Merger,
asserting the illegality of the Merger or seeking material damages in connection
with the transactions contemplated hereby which continues to be outstanding.
(d) GOVERNMENTAL APPROVALS. Any applicable waiting periods under the
HSR Act shall have expired or been terminated, and all other material
governmental filings, authorizations and approvals that are required for the
consummation of the transactions contemplated hereby will have been duly made
and obtained.
7.02 ADDITIONAL CONDITIONS TO PARENT'S AND MERGER SUB'S OBLIGATIONS.
The obligation of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement is subject to the satisfaction or waiver (in
Parent's sole discretion) of each of the following conditions on or before the
Effective Date:
(a) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties set forth in Article III hereof shall be true and
correct in all material respects at and as of the Effective Date as though then
made and as though the Effective Date had been substituted for the date of this
Agreement throughout such representations and warranties (without taking into
account any disclosures by the Company of discoveries, events or occurrences
arising on or after the date hereof), except that any such representation or
warranty made as of a specified date (other than the date hereof) shall only
need to have been true on and as of such date; PROVIDED that, this condition
shall be deemed satisfied, solely for purposes of this Section 7.02(a) and not
for any other purpose (including, without limitation, any purpose in Article IX
hereof), if all of the changes in the representations and warranties in Article
III between the date hereof and the Effective Time do not, in the aggregate,
have a Material Adverse Effect;
(b) COVENANTS PERFORMED. The Company and Rohan shall have performed
in all material respects all of the covenants and agreements required to be
performed and complied with by them under this Agreement prior to the Closing;
(c) CONSENTS OBTAINED. The Company shall have obtained, or caused to
be obtained, each consent and approval referred to in Section 6.05 hereof;
(d) NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Effective Date, there shall not have occurred any change with respect to
the business, assets, properties, condition (financial or otherwise), results of
operations or prospects of the Company which would result in or would be
reasonably likely to have a Material Adverse Effect;
(e) DISSENTERS' RIGHTS. Holders of not more than 5% of the
outstanding shares of Company Stock shall have exercised, nor shall they have
any rights or continued right to exercise, dissenters' rights under the DGCL
with respect to the transactions contemplated by this Agreement;
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(f) NO DAMAGE TO PROPERTIES. There shall have been no damage,
destruction or loss of or to any property or properties owned or used by the
Company, whether or not covered by insurance, which, in the aggregate, has, or
would be reasonably likely to have, a Material Adverse Effect;
(g) OPINION OF COMPANY COUNSEL. Parent and Merger Sub shall have
received from counsel for the Company a written opinion, dated the Effective
Date, addressed to Parent and Merger Sub and reasonably satisfactory to Parent's
counsel, in form and substance substantially as set forth in Exhibit C;
(h) NON-COMPETE AGREEMENT WITH ROHAN. Parent and Rohan shall have
entered into a Non-Compete Agreement in substantially the form attached as
Exhibit D hereto.
(i) LOCK-UP AGREEMENTS. Parent shall have entered into a Lock-Up
Agreement in substantially the form attached as Exhibit E hereto with Rohan,
Xxxxxx Xxxxx, Xxxxx Xxxxxx, Xxxx Xxxxxxxxx and Xxxxx Xxxxxxx;
(j) DELIVERY OF CERTAIN DOCUMENTS. On the Effective Date, the
Company shall have delivered to Parent and Merger Sub all of the following:
(i) a certificate of the President and the Chief Financial
Officer of the Company, dated the Effective Date, stating that the conditions
precedent set forth in subsections (a) and (b) above have been satisfied;
(ii) a copy of the text of the resolutions adopted by the
Board of Directors and the stockholders of the Company authorizing the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated by this Agreement, including the Merger and (ii)
the Certificate of Incorporation and Bylaws of the Company, along with a
certificate executed by the Secretary of the Company, certifying to Parent 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;
(iii) copies of the third party and governmental consents and
approvals referred to in subsections (c) and (d) above;
(iv) the Company's minute books, stock transfer records,
corporate seal and other materials or copies thereof related to the Company's
corporate administration;
(v) a copy of the Certificate of Incorporation of the
Company, certified by the Secretary of State of the State of Delaware, and
Certificates of Good Standing from the Secretaries of State of the States of
Delaware, California and Colorado evidencing the good standing of the Company in
each such jurisdiction;
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(vi) a copy, fully executed by the Company and Rohan of the
Escrow Agreement in substantially the form attached as Exhibit B hereto;
(vii) Parent shall have received the resignation in writing of
the directors and officers of the Company effective as of the Effective Time;
and
(viii) such other certificates, documents and instruments as
Parent reasonably requests related to the transactions contemplated hereby.
7.03 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY AND ROHAN.
The obligations of the Company and Rohan to consummate the transactions
contemplated by this Agreement are subject to the satisfaction or waiver (in the
Company's sole discretion) of each of the following conditions on or before the
Effective Date:
(a) REPRESENTATIONS AND WARRANTIES TRUE AND CORRECT. The
representations and warranties set forth in Article IV hereof will be true and
correct in all material respects at and as of the Closing as though then made
and as though the Effective Date had been substituted for the date of this
Agreement throughout such representations and warranties (without taking into
account disclosures by Parent of discoveries, events or occurrences arising on
or after the date hereof), except that any such representation or warranty made
as of a specified date (other than the date hereof) shall only need to have been
true on and as of such date;
(b) COVENANTS PERFORMED. Parent shall have performed in all material
respects all the covenants and agreements required to be performed by it under
this Agreement prior to the Closing;
(c) DELIVERY OF CERTAIN DOCUMENTS. On the Effective Date, Parent
will have delivered to the Company:
(i) a certificate of an Officer of Parent dated the
Effective Date, stating that the conditions precedent set forth in subsections
(a) and (b) above have been satisfied;
(ii) a copy of the Escrow Agreement executed by Parent,
Merger Sub and the escrow agent; and
(iii) a copy of the resolutions adopted by Parent and Merger
Sub approving the transactions contemplated by this Agreement, certified by the
Secretary or Assistant Secretary of Parent and Merger Sub.
(d) TAX OPINION. The Company shall have received an opinion of
Xxxxxxxx & Xxxxxxxx LLP, special tax counsel to the Company, in form and
substance reasonably satisfactory to Company and upon which the Company's
stockholders may rely, on the basis of certain facts, representations and
assumptions set forth in such opinion, dated as of the Closing Date,
substantially to the effect that the Merger will be treated as a
"reorganization," within the
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meaning of Section 368(a) of the Code, and that each of Parent, Merger Sub and
the Company will be a "party to a reorganization," within the meaning of Section
368(b) of the Code, with respect to the Merger. Each of Parent, Merger Sub and
the Company shall cooperate with each other in obtaining the opinion of Xxxxxxxx
& Xxxxxxxx LLP described in this Section 7.03(d). In connection therewith, each
of Parent and the Company shall deliver to Xxxxxxxx & Xxxxxxxx LLP customary
representation letters.
(e) NO MATERIAL ADVERSE CHANGE. Between the date of this Agreement
and the Effective Date, there shall not have occurred any change with respect to
the business, assets, properties, condition (financial or otherwise), results of
operations or prospects of Parent which would result in or would be reasonably
likely to have a Parent Material Adverse Effect.
ARTICLE VIII
TERMINATION
8.01 TERMINATION. This Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual consent of Parent (on behalf of itself and Merger
Sub) and the Company;
(b) by either Parent (on behalf of itself and Merger Sub) or the
Company if there has been a material misrepresentation, breach of warranty or
breach of covenant on the part of the other in the representations, warranties
and covenants set forth in this Agreement; provided, that the nonbreaching party
may only terminate in the event that the breaching party has not cured such
materials breach within ten days after the party seeking to terminate this
Agreement has given the other party written notice of such materials breach and
its intention to terminate this Agreement pursuant to this Section 9.01(b).
(c) by either Parent (on behalf of itself and Merger Sub) or the
Company if the transactions contemplated hereby have not been consummated by
April 30, 2000; PROVIDED, THAT, neither Parent nor the Company will be entitled
to terminate this Agreement pursuant to this Section 8.01(c) if such party's
willful breach of this Agreement has prevented the consummation of the
transactions contemplated hereby;
(d) by Parent if, after the date hereof, there shall have been a
Material Adverse Effect or if, after the date hereof, an event shall have
occurred which, so far as reasonably can be foreseen, would result in any
Material Adverse Effect; or
(e) by Company if, after the date hereof, there shall have been a
Parent Material Adverse Effect or if, after the date hereof, an event shall have
occurred which, so far as reasonably can be foreseen, would result in any Parent
Material Adverse Effect.
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8.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Parent or the Company as provided in Section 8.01 hereof,
all provisions of this Agreement shall terminate and there shall be no liability
on the part of Parent, Merger Sub, or Parent's or Merger Sub's stockholders,
officers, or directors, except that: (i) Sections 10.01 (press releases), 10.02
(expenses) and 10.10 (governing law) hereof shall survive indefinitely, and (ii)
the parties shall remain liable for their willful breaches of this Agreement
prior to the time of such termination.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article III and
Article IV hereof shall survive the Closing for the greater of the following
periods: (i) one year from the Effective Time, or (ii) with respect to any
specific representation or warranty under which a party shall have made a claim
for indemnification hereunder prior to the first anniversary of the Effective
Time and as to which such claim has not been completely and finally resolved
prior to the first anniversary of the Effective Time, such representation or
warranty shall survive for the period of time beyond the first anniversary of
the Effective Time sufficient to resolve, completely and finally, the claim
relating to such representation or warranty; provided, however, that the
representations and warranties herein of the Company and Rohan relating to Taxes
shall survive the Effective Time until the end of the applicable statute of
limitations with respect to taxes (the "Tax Indemnity Period").
9.02 INDEMNIFICATION.
(a) Subject to the limitations of Section 9.02(b) hereof, Rohan
agrees to indemnify in full Parent, Merger Sub, the Surviving Corporation and
their respective officers, directors, employees, agents, stockholders and
subsidiaries (collectively, the "Parent Indemnified Parties") and hold them
harmless against any loss, liability, deficiency, damage, expense or cost
(including reasonable legal expenses)(collectively "Losses"), which the Parent
Indemnified Parties may suffer, sustain or become subject to, prior to the first
anniversary of the Effective Time, as a result of (i) any misrepresentation in
any of the representations and warranties of the Company contained in this
Agreement or in any exhibits, schedules, certificates or other documents
delivered or to be delivered by or on behalf of the Company pursuant to the
terms of this Agreement or otherwise referenced or incorporated in this
Agreement (collectively, the "Related Documents") or (ii) any breach of, or
failure to perform, any agreement of the Company contained in this Agreement or
any of the Related Documents occurring prior to the Effective Time
(collectively, the "Parent Losses"); provided, however, that notwithstanding
anything in this Agreement to the contrary, Rohan shall not be liable for any
Parent Loss relating to or arising in connection with disclosures to Parent in
connection with this Agreement and the transactions
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contemplated hereby . The indemnification provided by this Section 9.02(a) shall
be satisfied initially from the Escrow Amount (to the extent the Losses can be
satisfied through the Escrow Amount). The termination of the Escrow Period shall
not relive Rohan from his indemnification obligations hereunder.
(b) Rohan will be liable to the Parent Indemnified Parties for any
Parent Loss, and Parent shall be entitled to set off against the Escrow Amount
(i) only if Parent delivers Rohan a written notice, setting forth in reasonable
detail the identity, nature and amount of Parent Losses related to such claim or
claims prior to the first anniversary of the Effective Time, (ii) only if the
aggregate amount of all Parent Losses exceeds $500,000 (the "Basket Amount"), in
which case Rohan shall be obligated to indemnify the Parent Indemnified Parties
for the total amount of all such Parent Losses in excess of the Basket Amount
and (ii), except for fraud, Rohan's aggregate liability for all amounts under
this Section 9.02 shall not exceed an amount equal to $5,000,000 (the "Cap").
Parent's failure to provide the detail required by clause (i) in the preceding
sentence shall not constitute either a breach of this Agreement by Parent or any
basis for Rohan to assert that Parent did not comply with the terms of this
Section 9.02 sufficient to cause Parent to have waived its rights under this
Section 9.02, unless, and only to the extent, such failure has materially and
adversely affected Rohan's ability to defend successfully such claim.
9.03 INDEMNIFICATION BY PARENT.
(a) Subject to the limitations of Section 9.03(b) hereof, Parent
agrees to indemnify in full the Company's officers, directors, employees,
agents, stockholders and subsidiaries (collectively, the "Company Indemnified
Parties") and hold them harmless against any Losses which the Company
Indemnified Parties may suffer, sustain or become subject to, (A) prior to the
first anniversary of the Effective Time, as a result of (i) any
misrepresentation in any of the representations and warranties of Parent
contained in this Agreement or in any of the Related Documents or (ii) any
breach of, or failure to perform, any agreement of Parent contained in this
Agreement or any of the Related Documents or (B) any Losses which the Company
Indemnified Parties may suffer, sustain or become subject to at any time after
the Effective Time arising as a result of the conduct of the business subsequent
to the Closing Date or the consummation of the transactions contemplated hereby
on the Closing Date (collectively, the "Company Losses").
(b) Parent will be liable to the Company Indemnified Parties for any
Company Loss (i) only if Rohan delivers Parent a written notice, setting forth
in reasonable detail the identity, nature and amount of Company Losses related
to such claim or claims prior to the first anniversary of the Effective Time
(other than with respect to Section 9.03(a)(B)), (ii) only if the aggregate
amount of all Company Losses exceeds the Basket Amount, in which case Parent
shall be obligated to indemnify the Company Indemnified Parties for the total
amount of all such Company Losses in excess of the Basket Amount and (iii)
except for fraud, Parent's aggregate liability for all amounts under this
Section 9.03 shall not exceed the Cap. Rohan's failure to provide the detail
required by clause (i) in the preceding sentence shall not constitute either a
breach of this Agreement by Rohan or any basis for Parent to assert that Rohan
did not comply
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with the terms of this Section 9.03 sufficient to cause Rohan to have waived its
rights under this Section 9.03, unless, and only to the extent, such failure has
materially and adversely affected Parent's ability to defend successfully such
claim.
9.04 METHOD OF ASSERTING CLAIMS. As used herein, an "Indemnified
Party" shall refer to a "Parent Indemnified Party" or "Company Indemnified
Party," as applicable, the "Notifying Party" shall refer to the party hereto
whose Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim") the Notifying Party shall give the Indemnifying Party prompt notice
thereof. The failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to contest and defend such
Claim; PROVIDED, THAT the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) can diligently contest
and defend such Claim. Notice of the intention to so contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
retained by the Indemnifying Party. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
Notifying Party elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such defense. Neither
the Notifying Party nor the Indemnifying Party may concede, settle or compromise
any Claim without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim seeks
equitable relief or (ii) if the subject matter of a Claim relates to the ongoing
business of any of the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have the
right to contest and defend (but not settle) such Claim.
(b) In the event any Indemnified Party should have a claim against
any Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Notifying Party that it does not
dispute the claim described in such notice or fails to notify the Notifying
Party within 20 business days after delivery of such notice by the Notifying
Party
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whether the Indemnifying Party disputes the claim described in such notice, the
Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay (subject to the Basket Amount, to the extent applicable), the
amount of such Loss to the Indemnified Party on demand. If the Indemnifying
Party has timely disputed their liability with respect to such claim, the
Indemnifying Party and the Notifying Party will proceed in good faith to
negotiate a resolution of such dispute, and if not resolved through the
negotiations of such individuals within 20 days after the delivery of the
Notifying Party's notice of such claim, such dispute shall be resolved fully and
finally in Denver, Colorado, by an arbitrator selected pursuant to and an
arbitration governed by Commercial Arbitration Rules of the American Arbitration
Association, as modified herein. The parties will jointly appoint a mutually
acceptable independent arbitrator, seeking assistance in such regard from the
American Arbitration Association. The arbitrator shall resolve the dispute
within 30 days after selection and judgment upon the award rendered by such
arbitrator may be entered in any court of competent jurisdiction. Each of
Parent, on the one hand, and Rohan, on the other, shall bear its own fees and
expenses in connection with such arbitration and shall bear 50% of the fees and
expenses of the arbitrator.
9.05 SOLE AND EXCLUSIVE REMEDY. After the Closing, the rights set
forth in this Article IX shall be each party's sole and exclusive remedies
against the other party hereto for misrepresentations or breaches of covenants
contained in this Agreement and the Related Documents. Notwithstanding the
foregoing, nothing herein shall prevent any of the parties hereto from bringing
an action based upon allegations of fraud or other intentional breach of an
obligation of or with respect to the other parties in connection with this
Agreement and the Related Documents. In the event such action is brought,
Parent, on the one hand, and Rohan on the other, shall bear its own fees and
expenses in connection with such action.
ARTICLE X
MISCELLANEOUS
10.01 PRESS RELEASES AND ANNOUNCEMENTS. Parent, Merger Sub, and the
Company agree that the existence, nature and terms and conditions of this
Agreement and discussions between the parties regarding the transactions
contemplated hereby are, and shall be treated as, confidential by the parties.
Accordingly, each party agrees that, without the written consent of the others,
it (a) will make no public comment concerning or announcement of the
transactions contemplated hereby; (b) will respond to all inquiries concerning
the transactions contemplated hereby by stating that it is such company's policy
not to comment on such inquiries; (c) will take reasonable steps to restrict
knowledge of the transactions contemplated hereby to those who need to know; and
(d) will notify the other parties of any rumor external to the parties of the
transactions contemplated hereby. Notwithstanding the foregoing, the Company
acknowledges and agrees that Parent, as a public company, is subject to certain
disclosure requirements under applicable securities laws. For this reason,
Parent reserves the right to disclose the existence of and the status of
negotiations at any time it decides that securities laws or the rules of any
stock exchange require such disclosure, and Parent shall have
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the right to issue a press release regarding the transactions contemplated
hereby upon the signing of this Agreement and upon the Closing; PROVIDED THAT,
Parent agrees to notify the Company if Parent intends to make a disclosure and,
to the extent feasible, to provide the Company with the text of the disclosure
and opportunity to comment in advance of its release to the public.
10.02 EXPENSES. Except as otherwise expressly provided for herein, 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 (whether consummated
or not) shall be the obligation of the party incurring such fees and expenses.
10.03 FURTHER ASSURANCES. Each of the Company, Parent and Merger Sub
agree that, on and after the Effective Time, it shall take all appropriate
action and execute any documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out any of the provisions
hereof.
10.04 AMENDMENT AND WAIVER. This Agreement may not be amended or
waived except in a writing executed by the party against which such amendment or
waiver is sought to be enforced. No course of dealing between or among any
persons having any interest in this Agreement will be deemed effective to modify
or amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
10.05 NOTICES. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered,
or the next business day if sent by overnight courier, or three days after being
mailed by first class mail, return receipt requested. Notices, demands and
communications to Parent, the Company and Rohan will, unless another address is
specified in writing, be sent to the address indicated below:
NOTICES TO PARENT AND MERGER SUB: WITH A COPY TO:
Great Plains Software, Inc. Xxxxxx & Xxxxxxx LLP
0000 00xx Xxxxxx Xxxxxxxxx 000 Xxxxxxxx Xxxxxxxx
Xxxxx, XX 00000 0 0xx Xxxxxx Xxxxx
Xxxx: Xxxxxxx Xxxxxx, General Counsel Xxxxx Xxxxx, XX 00000
Attn: Xxxxxxxx Xxxxxxxx, Esq.
NOTICES TO THE COMPANY: WITH A COPY TO:
FRx Software Corporation E*Law Group
0000 X. Xxxxxxxx Xxxxxxx 0000 Xxxx 000xx Xxxxx
Xxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx Attn: Xxxxxx X. Xxxxxxxxxxx, Esq.
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NOTICES TO XXXXXXX X XXXXX: WITH A COPY TO:
00 Xxxxxxxxx Xxxxx X*Xxx Group
Xxxxxx Xxxxx Xxxxxxx, XX 00000 0000 Xxxx 000xx Xxxxx
Xxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxxxx, Esq.
10.06 ASSIGNMENT. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, EXCEPT that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the other party hereto.
10.07 SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Agreement.
10.08 COMPLETE AGREEMENT. This Agreement, the Articles of Merger, the
Escrow Agreement and the other exhibits hereto, the Disclosure Schedule and the
other documents referred to herein contain the complete agreement between the
parties and supersede any prior understandings, agreements or representations by
or between the parties, written or oral, which may have related to the subject
matter hereof in any way.
10.09 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
10.10 GOVERNING LAW. Except to the extent that the DGCL governs the
effectuation of the Merger, the internal law, without regard to conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
GREAT PLAINS SOFTWARE, INC.
By /s/ Xxxxx X. X'Xxxx
-------------------------------------
Name: Xxxxx X. X'Xxxx
Title:
GPS ACQUISITION, INC.
By /s/ Xxxxx X. X'Xxxx
-------------------------------------
Name: Xxxxx X. X'Xxxx
Title:
FRX SOFTWARE CORPORATION
By /s/ Xxxxxxx Xxxxx
-------------------------------------
Name: Xxxxxxx Xxxxx
Title:
/s/ Xxxxxxx Xxxxx
-------------------------------------
XXXXXXX XXXXX
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EXHIBIT A
REGISTRATION PROVISIONS
ARTICLE I
DEFINITIONS
Capitalized terms used but not otherwise defined in this
Exhibit A shall have the meanings set forth in the Merger Agreement. As used in
this Exhibit A, the following terms shall have the following meanings:
ADVICE has the meaning set forth in the final paragraph of
Section 2.04 below.
EFFECTIVE DATE has the meaning set forth in Section 2.01
below.
EFFECTIVENESS PERIOD has the meaning set forth in Section 2.01
below.
EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
FORM S-3 means a registration statement on Form S-3 under the
Securities Act or any successor form thereto.
HOLDER means the holders of Registrable Securities.
PROSPECTUS means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
The terms REGISTER, REGISTERED and REGISTRATION refer to a
registration effected by preparing and filing with the SEC a registration
statement in compliance with the Securities Act, and the declaration or ordering
by the SEC of the effectiveness of such registration statement.
REGISTRABLE SECURITIES means the Parent Common Stock issued to
the Holders or the Escrow Agent pursuant to the Merger Agreement; PROVIDED,
HOWEVER, that a security ceases to be a Registrable Security when it is no
longer a Restricted Security.
REGISTRATION STATEMENT means any registration statement of
Parent that covers any of the Registrable Securities pursuant to the provisions
of this Exhibit A, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
RESTRICTED SECURITY means the Parent Common Stock issued to
the Holders pursuant to the Merger Agreement until such Parent Common Stock (i)
has been effectively registered under the Securities Act and disposed of in
accordance with a registration statement filed under the Securities Act covering
it or (ii) can be sold in any three (3) month period without registration in
compliance with Rule 144 of the Securities Act.
RULE 144 means Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC providing for offers and sales of securities made in
compliance therewith and resulting in offers and sales by subsequent holders
that are not affiliates of an issuer of such securities and who are free of the
registration and prospectus delivery requirements of the Securities Act.
RULE 145 means Rule 145 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC providing for offers and sales of securities made in
compliance therewith.
RULE 415 means Rule 415 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC under the Securities Act.
SEC means the Securities and Exchange Commission or any
successor agency.
SECURITIES ACT means the Securities Act of 1933, as amended.
ARTICLE II
REGISTRATION RIGHTS
2
2.01 REGISTRATION. Except as otherwise provided herein, Parent file
a Registration Statement under the Securities Act with respect to the
Registrable Securities as soon as reasonably practical, but in no event later
than five business days after the consummation of the Merger. Parent shall use
reasonable best efforts to have the Registration Statement declared effective by
the SEC as soon as practicable after the Effective Time (the date of such
effectiveness being referred to herein as the "Effective Date"). Parent shall
use reasonable best efforts to keep the Registration Statement continuously
effective until the earlier of the date on which (i) all the Registrable
Securities covered by the Registration Statement have been sold or (ii) all of
the securities covered by the Registration Statement are no longer Restricted
Securities.
2.02 LIMITATIONS ON REGISTRATION. Notwithstanding the foregoing:
(a) Parent shall not be required to file any Registration
Statement pursuant to Section 2.01 above if Parent does not meet the filing
requirements of Form S-3. If, due to a change in circumstances, Parent does not
qualify for the registration of Registrable Securities on Form S-3, Parent shall
promptly notify the Holders that Parent does not meet the Form S-3 filing
requirements. In the event Parent does not meet the S-3 filing requirements,
Parent shall use reasonable best efforts to meet such filing requirements and
shall promptly file a Registration Statement upon meeting such filing
requirements.
(b) Parent shall be obligated to file only one (1)
Registration Statement pursuant to Section 2.01 above; PROVIDED that Parent
shall file additional Registration Statements if the initially filed
Registration Statement is withdrawn or suspended for any reason.
(c) Parent may delay filing of the Registration Statement
requested pursuant to Section 2.01 above for a period not to exceed thirty (30)
days if, in the reasonable discretion of Parent, Parent believes that filing the
Registration Statement and effecting the registration, would require the
premature disclosure of any material transaction or event (such as financings,
acquisitions, dispositions of assets or stock, mergers or other comparable
transactions) or would require Parent to make public disclosure of information,
the public disclosure of which would materially adversely affect Parent;
provided, that Parent shall only be entitled to delay such filing once.
2.03 SUPPLEMENTS AND AMENDMENTS TO THE REGISTRATION
STATEMENTS. If a Registration Statement ceases to be effective for any reason at
3
any time during the period for which it is required to be effective under this
Exhibit A, Parent shall use reasonable best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof and shall in
connection therewith promptly supplement and amend any such Registration
Statement in a manner reasonably and in good faith expected to obtain the
withdrawal of the order suspending the effectiveness thereof, and Parent shall
use reasonable best efforts to cause any such Registration Statement to be
declared effective as soon as practicable after such amendment or supplement.
Parent shall supplement and amend a Registration Statement as required by the
rules, regulations or instructions applicable to Form S-3 or if required by the
Securities Act or the SEC.
2.04 REGISTRATION PROCEDURES. In connection with any
Registration Statement, Parent shall:
(a) Promptly prepare and file with the SEC such Registration
Statement and cause such Registration Statement to become effective and remain
effective as provided herein.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the time period
specified in Section 2.01 hereof; cause the related Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented to be
filed pursuant to Rule 424 (or any similar provisions then in force) under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to it with respect to the sale of all Registrable Securities covered
by such Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders in writing (i) when a Prospectus or any
prospectus supplement or post-effective amendment has become effective, (ii) of
the issuance by the SEC of any stop order suspending the effectiveness of such
Registration Statement or of any order preventing or suspending the use of any
Prospectus or the initiation or threatening of any proceedings for that purpose,
(iii) of the receipt by Parent of any notification with respect to (A) the
suspension of the qualification or exemption from qualification of the
Registration Statement or any of the Registrable Securities covered thereby for
offer or sale in any state or (B) the initiation or threatening of any
proceeding for such purpose and (iv) of the occurrence of any event, the
existence of any condition or information becoming known that requires the
making of any changes in the Registration Statement or the Prospectus so that,
in the case of
4
such Registration Statement, it will conform in all material
respects with the requirements of the Securities Act and it will not contain any
untrue statement of a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(d) Use reasonable best efforts to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any state and, if any such order is issued, to promptly
obtain the withdrawal of any such order.
(e) Furnish to each of the Holders one (1) conformed copy of
the Registration Statement and each post-effective amendment thereto, including
financial statements and schedules but excluding all documents incorporated or
deemed to be incorporated therein by reference and all exhibits (including
exhibits incorporated by reference).
(f) Deliver to the Holders without charge sufficient copies of
each Prospectus and each amendment or supplement thereto and, subject to the
last paragraph of this Section 2.04, Parent hereby consents to the use of such
Prospectus and each amendment or supplement thereto by the Holders in connection
with the offering and sale of the Registrable Securities covered by such
Prospectus and any amendment or supplement thereto.
(g) Register or qualify, and cooperate with the Holders and
their counsel in connection with the registration or qualification (or exemption
from such registration or qualification) of, such Registrable Securities for
offer and sale under the federal or state securities laws of such jurisdictions
within the United States as may be required to permit the sale thereof by the
Holders. Parent agrees to cause its counsel to perform state securities law
investigations and file registrations and qualifications required to be filed
pursuant to this Section 2.04(g); keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period and do any
and all other acts or things necessary or advisable to enable the disposition in
such jurisdictions of the securities covered thereby; PROVIDED, HOWEVER, that
Parent will not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, or (ii) take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject.
5
(h) Upon the occurrence of any event contemplated by Section
2.04(c)(iv), as promptly as possible thereafter prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file such supplement, amendment or other document with
the SEC so that, as thereafter delivered to the purchasers of Registrable
Securities being sold thereunder, such Prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and such Prospectus
will otherwise comply with law; PROVIDED, HOWEVER, that Parent may elect to
delay filing such a post-effective amendment for a period not more than thirty
(30 days) or if, in Parent's reasonable discretion, it determines that the
disclosure of previously undisclosed material information regarding Parent
therein would materially adversely affect Parent and such delay will otherwise
comply with law; provided that Parent shall only be entitled to delay such
filing once.
(i) Comply with all applicable rules and regulations of the
SEC and make generally available to the Holders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any similar rule promulgated under the Securities Act) no later than
forty-five (45) days after the end of any twelve (12) month period (or ninety
(90) days after the end of any twelve (12) month period if such period is a
fiscal year) commencing on the first day of the first fiscal quarter of Parent
after the effective date of the relevant Registration Statement, which earnings
statements shall cover such twelve (12) month periods.
(j) Use reasonable best efforts to cause all Registrable
Securities covered by such Registration Statement to be listed on The Nasdaq
Stock Market or such other securities exchange on which the Parent Common Stock
is then listed.
The Holders agree, as a condition to the registration
obligations with respect to the Holders provided herein, to furnish to Parent
such information regarding the Holders and the distribution of such Registrable
Securities as Parent may, from time to time, reasonably request in writing to
comply with the Securities Act and other applicable law. Parent may exclude from
such registration the Registrable Securities of any Holder if such Holder
unreasonably fails to furnish such information within a reasonable time after
receiving such request. If the identity of the Holders is to be disclosed in the
Registration Statement, as may be reasonably requested, the Holders shall be
6
permitted to include all information necessary to properly disclose such
identity.
The Holders agree that, upon receipt of any notice from Parent
of the happening of any event of the kind described in Section 2.04(c)(ii),
2.04(c)(iii) or 2.04(c)(iv), the Holders will immediately discontinue
disposition of such Registrable Securities covered by the Registration Statement
or Prospectus until the Holders' receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 2.04(h), or until it is advised in
writing (the "Advice") by Parent that the use of the applicable prospectus may
be resumed, and the Holders have received copies of any amendments or
supplements thereto, and, if so directed by Parent, the Holders will deliver to
Parent all copies, other than permanent file copies, then in the Holders'
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice.
2.05 REGISTRATION EXPENSES. All fees and expenses incident
to the performance of or compliance with the provisions of Article II of this
Exhibit A by Parent shall be borne by Parent, including, without limitation, (i)
all SEC and state securities law registration and filing fees, (ii) fees and
disbursements of Parent' independent certified public accountants, (iii) fees
and expenses of all attorneys retained by Parent, (iv) internal expenses of
Parent, (v) fees and expenses incurred in connection with the listing and (vi)
the expenses relating to preparation and distribution and printing of any
Registration Statement or Prospectus. The fees and expenses of any attorneys or
other advisors retained by the Holders in connection with any Registration
Statement shall be borne by the Holders; provided, however, that in the event
that the Company requires an opinion of counsel of the Holders, the fees and
expenses of one counsel for the Holders in rendering such opinion shall be paid
by the Company.
2.06 RULES 144 AND 145. Parent undertakes to file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
to enable the Holders to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rules
144 and 145 under the Securities Act, as such Rules may be amended from time to
time, or (b) any similar rules or regulations hereafter adopted by the SEC.
7
ARTICLE III
INDEMNIFICATION
3.01 INDEMNIFICATION BY PARENT. Parent agrees to indemnify
and hold harmless the Holders from and against any and all losses, claims,
damages, liabilities and expenses, joint or several, to which Holders may become
subject, under the Securities Act or otherwise, caused by any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or any Prospectus or any amendment or supplement thereto or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated or necessary to make the
statements not misleading; PROVIDED, HOWEVER, that Parent will not be liable
insofar as such losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or omission based
solely upon information furnished in writing to Parent by Holders expressly for
use therein; FURTHER PROVIDED, HOWEVER, that the foregoing indemnity with
respect to any untrue statement in or omission from any preliminary prospectus
shall not inure to the benefit of the Holder from whom the person asserting any
such losses, claims, damages or liabilities purchased the Registrable Securities
if a copy of the Prospectus had not been sent or given to such person at or
prior to the written confirmation of the sale of such Registrable Securities to
such person if required by the Securities Act and the untrue statement or
omission of a material fact contained in such preliminary prospectus was
corrected in the Prospectus and such Prospectus was distributed to the Holder
prior to such sale of Registrable Securities.
3.02 INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES.
The Holders, severally and not jointly, agree to indemnify and hold harmless
Parent, Parent' directors, Parent' officers who sign the Registration Statement
and any person controlling Parent to the same extent as the foregoing indemnity
from Parent to the Holders set forth in Section 3.01, but only with reference
to, and in conformity with, information relating to the Holders furnished by the
Holders in writing expressly for use in a Registration Statement, the Prospectus
or any preliminary prospectus, and will reimburse any legal or other expenses
reasonably incurred by Parent in connection with investigating or defending any
such loss, claim, damage, liability or action as such expenses are incurred. The
maximum amount of any liability of any Holder under this Section 3.02 shall be
equal to the net proceeds received by any such Holder from any sales of
Restricted Securities under any Registration Statement.
3.03 CONDUCT OF INDEMNIFICATION PROCEEDING. In case any
proceeding (including any governmental investigation) shall be instituted
8
involving any person in respect of which indemnity may be sought pursuant to
either Section 3.01 or Section 3.02, such person (the "Indemnified Party") shall
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing; but the omission so to notify the Indemnifying
Party will not relieve it from any liability that it may have to any Indemnified
Party except to the extent the Indemnifying Party was prejudiced by such
omission. In case any such proceeding is instituted against any Indemnified
Party and it notifies the Indemnifying Party of the commencement thereof, the
Indemnifying Party shall have the right to retain counsel satisfactory to such
Indemnified Party to defend against such proceeding and the Indemnifying Party
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any Indemnified Party shall reasonably cooperate with
the Indemnifying Party and shall have the right to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them or (iii) the Indemnifying Party has not
retained counsel to defend such proceeding. It is understood that the
Indemnifying Party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such Indemnified Parties. Such
firm shall be designated in writing by the Holders in the case of parties
indemnified pursuant to Section 3.01 and by Parent in the case of parties
indemnified pursuant to Section 3.02. All fees and expenses that an Indemnified
Party is entitled to receive from an Indemnifying Party under this Article III
shall be reimbursed as they are incurred. No Indemnifying Party shall, without
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened action in respect of which any Indemnified Party is or
could have been a party and indemnity could have been sought hereunder by such
Indemnified Party unless such settlement includes an unconditional release of
such Indemnified Party from all liability on any claims that are the subject
matter of such action.
3.04 CONTRIBUTION. If the indemnification provided for in
Section 3.01 or Section 3.02 is unavailable as a matter of law to an Indemnified
Party in respect of any losses, claims, damages or liabilities referred to
therein, then each Indemnifying Party under either such section, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
9
relative fault of Parent on the one hand and of the Holders on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by
Parent or by the Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Parent and the Holders agree that it would not be just and equitable if
contribution pursuant to this Article III were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Party as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph of
this Section 3.04 shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article III, the Holders shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities sold by the Holders and distributed to
the public were offered to the public exceeds the amount of any damages that the
Holders have otherwise been required to pay by reason of such untrue statement
or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.
ARTICLE IV
MISCELLANEOUS
4.02 AMENDMENTS AND WAIVERS. The provisions of this
Exhibit A may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless (i) with
regard to obligations of the Holders, Parent has given its prior written consent
and (ii) with regard to obligations of Parent, Parent has obtained the prior
written consent of a majority in interest of the Holders.
4.03 NOTICES. All notices, consents, requests,
instructions or other communications or information shall be in writing and
shall be given or made in accordance with the provisions of the Merger
Agreement.
10
4.04 BENEFIT OF AGREEMENT. The registration right granted
to the Holders shall be for the benefit of, and enforceable by, such Holders
only and not for any third parties.
11
EXHIBIT B
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the "Escrow Agreement) is made and entered into
as of ________, 2000, by and among Great Plains Software, Inc. ("Great Plains")
a Minnesota corporation ("Parent"), GPS Acquisition, Inc., a Delaware
corporation and wholly owned subsidiary of Parent ("Merger Sub"), FRx Software
Corporation, a Delaware corporation (the "Company"), Norwest Bank Minnesota,
N.A., as escrow agent (the "Escrow Agent"), and Xxxxxxx X. Xxxxx ("Rohan").
WHEREAS, the Parent, the Merger Sub, the Company and Rohan entered into
an Agreement and Plan of Merger (the "Merger Agreement") dated as of February
__, 2000 pursuant to which the Merger Sub will be merged with and into the
Company (the "Merger"), the separate existence of the Merger Sub will cease, and
the Company will continue as the surviving corporation (the Company, in its
capacity as the corporation surviving the Merger, is referred to herein as the
"Surviving Corporation"). Capitalized terms used but not otherwise defined
herein shall have the meanings ascribed to them in the Merger Agreement;
WHEREAS, the Merger Agreement provides for the execution and delivery
of this Escrow Agreement;
WHEREAS, certain representations, warranties, covenants, agreements and
indemnities of the Company, Parent, and Merger Sub are set forth in the Merger
Agreement;
WHEREAS, the Merger Agreement requires that 71,500 shares of Parent
Common Stock issued at the Effective Time pursuant to Section 2.02of the Merger
Agreement shall be held in escrow (the "Escrow Amount") to compensate the Parent
Indemnified Parties for any Parent Losses (as defined in Section 9.02(a) of the
Merger Agreement) incurred in connection with the Merger Agreement and the
transactions contemplated thereby and to be available for any adjustment to the
Merger Consideration; and
WHEREAS, this Escrow Agreement sets forth the basis on which the Escrow
Agent will receive and hold, and make disbursements from, the Escrow Fund
(defined below) and the duties for which the Escrow Agent will be responsible.
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:
1. APPOINTMENT AND AGREEMENT OF ESCROW AGENT. Parent, Merger Sub,
Company and Rohan hereby appoint and designate Norwest Bank Minnesota, N.A. as
the Escrow Agent. Norwest Bank Minnesota, N.A. hereby accepts such appointment
and agrees to perform the duties of the Escrow Agent under the terms and
conditions set forth herein.
2. MERGER AGREEMENT NOT LIMITED BY THIS AGREEMENT. The Merger
Agreement and the procedures contained therein are not limited by this Escrow
Agreement. Notwithstanding any express provision of this Escrow Agreement to the
contrary, in the event this Escrow Agreement is unclear, silent or in conflict
with the Merger Agreement, reference shall be made to the Merger Agreement and
the Merger Agreement shall control.
3. DEPOSIT OF ESCROW SHARES AND ESTABLISHMENT OF ESCROW FUND.
(a) Promptly after the Effective Time, the Parent shall
deposit into an escrow account a number of shares of Parent Common Stock equal
to the Escrow Amount out of the aggregate number of shares of Parent Common
Stock otherwise issuable to Rohan pursuant to Section [2.02of the Merger
Agreement.
(b) The Escrow Agent shall establish and hold the Escrow
Shares in escrow (the "Escrow Fund") on behalf of the Parent Indemnified Parties
for the purposes of indemnifying them against loss in accordance with Article IX
of the Merger Agreement. The Escrow Agent agrees to disburse the Escrow Shares
in accordance with the terms and procedures set forth in this Escrow Agreement
and the Merger Agreement.
4. RIGHTS IN RESPECT OF ESCROW SHARES; DIVIDENDS AND
DISTRIBUTIONS.
(a) Rohan shall be deemed the record holder of, and shall
have voting, dividend, distribution and all other rights with respect to the
shares of Parent Common Stock contributed to the Escrow Fund by him (and on any
voting securities and other equity securities added to the Escrow Fund in
respect of such shares of Parent Common Stock).
(b) Any cash dividends received by the Escrow Agent in
respect of the Escrow Shares (the "Dividend Income") shall not be added to the
Escrow Fund. Such Dividend Income shall be distributed to the record holder of
the Parent Common Stock on the record date set for any such dividend.
(c) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split or stock dividend) (the "New Shares") in respect of Parent Common Stock in
the Escrow Fund which have not been released from 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
recordholders thereof.
5. TAX REPORTING. All tax reporting with respect to any Dividend
Income and Investment Income shall be the responsibility of Rohan, and the
Escrow Agent shall have no obligation to deliver Form 1099s or any other federal
or state income tax reports to the Parent.
2
6. ESCROW PERIOD; TERMINATION. Subject to the following
requirements, the Escrow Fund shall be in existence immediately following the
Effective Time and shall terminate at 5:00 p.m., Minnesota Time, on the later of
(i) the 91st day following the Effective Time (the "Escrow Period"): PROVIDED,
HOWEVER, that the Escrow Period shall not terminate with respect to such amount
that is necessary in the reasonable judgment of Parent to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period, specified in any Officer's Certificate
(defined below) delivered to the Escrow Agent prior to termination of such
Escrow Period. At the termination of the Escrow Period, the Escrow Agent shall
deliver to Rohan the portion of the Escrow Fund not required to satisfy the full
amount of any unsatisfied claims by the Parent as specified above. As soon as
all such claims have been resolved, pursuant to Section 8 hereof or written
memorandum of Rohan and Parent, the Escrow Agent shall deliver to Rohan the
remaining portion of the Escrow Fund not required to satisfy such claims. At all
times during which the Escrow Amount is maintained under the Escrow Fund, Rohan
shall be deemed to be the record holder of the Parent Common Stock comprising
the Escrow Amount.
7. PROCEDURES FOR DISBURSEMENTS. Except as otherwise provided
herein, the Escrow Agent shall not pay claims for Parent Losses from the Escrow
Fund unless and until the Parent has made claims for Parent Losses pursuant to
Section 8 hereof that exceed the Basket Amount (as defined in Section 9.02(b)of
the Merger Agreement). After the claims for Losses equal to the Basket Amount
have been made, any additional Losses incurred by the Parent shall be satisfied
by the Escrow Fund in accordance with the procedures set forth in Section 8 of
this Escrow Agreement.
8. CLAIMS UPON THE ESCROW FUND. Parent shall notify the Escrow
Agent in writing ("Officers Certificate"), with a copy to Rohan, that Parent has
exercised its rights to indemnification against all or a portion of the Escrow
Fund in accordance with Section 9.3 of the Merger Agreement. If Rohan does not
notify the Escrow Agent in writing within ten business days of Parent's notice,
with a copy to Parent, that Rohan objects to the disbursement, then the Escrow
Agent shall release and promptly disburse to Parent from the Escrow Fund the
number of shares of Parent Common Stock set forth in the Parent's notice, which
shall be that number of shares equal to the cash value of such offset amount
divided by $70 per share, rounded up to the nearest whole share, along with a
proportionate amount of Dividend Income and Investment Income on such shares. If
Rohan timely objects to the disbursement in accordance with the provisions of
this Section 8, the Escrow Agent may either (a) continue to hold such shares
until the Escrow Agent is notified by the Parent and Rohan in writing that the
dispute has been resolved or (b) pursue the remedies provided in Section 9.6
hereof.
9. ESCROW AGENT.
9.1 INDEMNIFICATION OF THE ESCROW AGENT. Parent, the
Surviving Corporation and Rohan jointly and severally agree to indemnify and
hold the Escrow Agent and its directors, officers and employees harmless from
and against any and all costs, charges, damages and reasonable attorneys' fees
that the Escrow Agent in good faith may incur or suffer in connection with or
arising out of this Escrow Agreement.
3
9.2 DUTIES OF THE ESCROW AGENT. The Escrow Agent shall
have no duties other than those expressly imposed on it herein and in the Merger
Agreement, and shall not be liable for any act or omission except for its own
gross negligence or willful misconduct.
9.3 FEES OF THE ESCROW AGENT. The fees and charges of the
Escrow Agent with respect to this Agreement are identified on SCHEDULE A
attached hereto and shall be paid by Parent.
9.4 INSTRUCTIONS TO THE ESCROW AGENT. Notwithstanding any
provision herein to the contrary, the Escrow Agent shall at any time and from
time to time take such additional actions hereunder with respect to the Escrow
Fund as shall be agreed to in writing by the Parent and Rohan. In the
performance of its duties hereunder, the Escrow Agent may rely on any document
reasonably believed by it to be genuine.
9.5 RESIGNATION OF THE ESCROW AGENT. The Escrow Agent may
resign at any time by providing Parent, the Surviving Corporation, and Rohan
with 30 days' prior written notice of its intention to do so, PROVIDED that a
successor Escrow Agent has been appointed in writing by Parent, the Surviving
Corporation, and Rohan. If a successor Escrow Agent is not appointed within the
30-day period following such notice, the Escrow Agent may petition any court of
competent jurisdiction to name a successor Escrow Agent. The Escrow Agent's
resignation shall be effective upon delivery of the Escrow Fund to the successor
Escrow Agent and upon such successor's assumption of the obligations, rights and
duties of the Escrow Agent hereunder.
9.6 DISPUTES. In the event conflicting demands are made
or notices are served upon the Escrow Agent with respect to the Escrow Fund, or
there is any dispute over action to be taken or not taken by the Escrow Agent,
the Escrow Agent will have the absolute right, at the Escrow Agent's election,
to do either or both of the following: resign so a successor can be appointed
pursuant to Section 9.5 hereof or file a suit in interpleader and obtain an
order from a court of competent jurisdiction requiring the parties to interplead
and litigate in such court their several claims and rights among themselves. The
Escrow Agent agrees that, if it files a suit in interpleader, it shall do so in
any of the state or federal courts having jurisdiction in the State of
Minnesota. In the event such interpleader suit is brought, the Escrow Agent will
thereby be fully released and discharged from all further obligations imposed
upon it under the provisions hereof, and the Parent will bear the costs,
expenses and reasonable attorneys' fees expended or incurred by the Escrow Agent
pursuant to the exercise of the Escrow Agent's rights under this Section 9.6.
10. MISCELLANEOUS.
10.1 SEVERABILITY. Whenever possible, each provision of
this Escrow Agreement will be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Escrow Agreement is
held to be prohibited by or invalid under applicable law, such provision will be
ineffective only to the extent of such prohibition or
4
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Escrow Agreement.
10.2 ASSIGNMENT. This Escrow Agreement and all of the
provisions hereof will be binding upon and inure to the benefit of the parties
hereto and their respective heirs, personal representatives, successors and
permitted assigns, except that neither this Escrow Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto.
10.3 AMENDMENT AND WAIVER. The provisions of this Escrow
Agreement may not be amended or waived except in a writing executed by each of
the parties hereto. No course of dealing between or among any persons having any
interest in this Escrow Agreement will be deemed effective to modify or amend
any part of this Escrow Agreement or any rights or obligations of any person
under or by reason of this Escrow Agreement.
10.4 NOTICES. All notices, requests, claims, demands and
other communications to be given or delivered under or by reason of the
provisions of this Escrow Agreement shall be in writing and shall be deemed to
have been given when personally delivered, or three days after being mailed, if
mailed by first class mail, return receipt requested, or one day after being
sent by reputable overnight delivery service. Notices, demands and
communications to any party hereto shall be sent to the address indicated below:
If to Parent and
Surviving Corporation: Great Plains Software, Inc.
0000 00xx Xxxxxx Xxxxxxxxx
Xxxxx, Xxxxx Xxxxxx 00000
Attention: Xxxxxxx Xxxxxx, General Counsel
With a copy to: Xxxxxx & Whitney LLP
0 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxx
Notices to: Xxxxxxx X. Xxxxx
With a copy to: E*Law Group
0000 Xxxx 000xx Xxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxxxxxxxxx, Esq.
5
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above
(provided that notice of any change of address shall be effective only upon
receipt thereof).
10.5 GOVERNING LAW. This Escrow Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Minnesota, without regard for its conflict of laws principles.
10.6 COUNTERPARTS. This Escrow Agreement may be executed
in one or more counterparts, each of which when so executed shall be deemed to
be an original, and any one of which need not contain the signatures of more
than one party, and all of such counterparts taken together shall constitute one
and the same instrument.
10.7 ADJUSTMENT OF MERGER CONSIDERATION. In the event
there is an adjustment to the Merger Consideration pursuant to Section 2.01(b)
of the Merger Agreement, Parent and Rohan shall provide a letter to the Escrow
Agent with instructions to release such number of shares as determined in
accordance with Section 2.01(b) of the Merger Agreement from the Escrow Fund to
Parent.
10.8 ENTIRE AGREEMENT. This Escrow Agreement and the
Merger Agreement constitute the entire understanding and agreement of the
parties hereto and supersede all other prior agreements and understandings,
written or oral, between or among the parties with respect to the subject matter
of this Escrow Agreement.
* * * * *
6
IN WITNESS WHEREOF, the parties hereto have executed this
Escrow Agreement as of the day and year first above written.
GREAT PLAINS SOFTWARE, INC.
-------------------------------------
Name:
Title:
GPS ACQUISITION, INC.
-------------------------------------
Name:
Title:
FRx SOFTWARE CORPORATION
-------------------------------------
Name:
Title:
NORWEST BANK MINNESOTA, N.A.
-------------------------------------
Name:
Title:
-------------------------------------
XXXXXXX X. XXXXX
7
SCHEDULE A
FEES OF ESCROW AGENT
8
EXHIBIT C
FORM OF OPINION OF COUNSEL TO FRX SOFTWARE CORPORATION
Based upon and subject to the foregoing, we are of the opinion that:
1. The Company is a corporation validly existing and in good
standing under the laws of the State of Delaware. The Company has all necessary
corporate power and corporate authority to own, operate and lease its properties
and to conduct its business as now conducted.
2. The Company has the corporate power and authority to execute,
deliver and perform its obligations under the Merger Agreement and the Related
Documents. The Merger Agreement and the Related Documents have been duly
authorized, executed and delivered by the Company.
3. Each of the Merger Agreement and the Related Documents is a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms, subject to the foregoing qualifications.
4. The execution and delivery by the Company of the Merger
Agreement and the Related Documents, the performance by the Company of its
obligations thereunder and the consummation of the Merger will not (a)
constitute a violation (with or without the giving of notice or lapse of time or
both) of any federal, state statute, regulation or rule having the force of law,
(b) to our knowledge, require any material authorization or any material consent
or approval of any domestic governmental or regulatory authority that has not
been obtained, other than compliance with applicable securities laws, the filing
of the Certificate of Merger with the Delaware Secretary of State, together with
an officers' certificate executed by Purchaser and an officers' certificate
executed by the Company, as required by Delaware Law, (c) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or impair the rights of the Company or alter
the rights or obligations of any third party under, or result in the creation of
any lien or encumbrance on the properties or assets of the Company, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any material provisions or any material instrument, contract or other agreement
specifically identified in the Disclosure Schedule, which are the only material
agreements which we are aware of or (d) violate the Articles or Bylaws of the
Company.
5. The capitalization of the Company is as follows:
(a) Common Stock. 30,000,000 shares of Common Stock, par
value $.01 per share (the "Common Stock") 20,000,000 of which are designated
Class A Common Stock and 10,000,000 of which are designated Class B Common
Stock, to our knowledge 3,260,000 shares and 2,719381 shares, respectively, of
which are currently issued and outstanding.
Such shares of outstanding Common Stock have been duly authorized and validly
issued, are nonassessable, and, to our knowledge, are fully paid.
(b) Preferred Stock. 5,000,000 shares of Preferred Stock,
par value $.01 per share (the "Preferred Stock"), 1,000,000 of which have been
designated Series A Preferred Stock, to our knowledge of which 600,000 shares
are currently issued and outstanding, and 1,100,000 of which have been
designated Series B Preferred Stock, 1,041,667 shares of which are currently
issued and outstanding. The respective rights, privileges, restrictions and
preferences of the Series A and Series B Preferred Stock are as stated in the
Company's Certificate of Incorporation, as amended.
(c) Except as set forth in the Merger Agreement or the
Disclosure Schedule, there are no preemptive rights or, to our knowledge,
options, warrants, conversion privileges or other rights (or agreements for any
such rights) outstanding to purchase or otherwise obtain from the Company any of
the Company's equity securities.
6. To our knowledge, there is no legal or governmental proceeding
pending or threatened to which the Company is a party that we believe is likely
to have a material adverse effect on the ability of the Company to consummate
the transactions contemplated by the Merger Agreement.
7. To our knowledge, no authorization of any domestic
governmental or regulatory authority is required for the execution and delivery
of the Merger Agreement on behalf of the Company or for the Merger, except such
as have been obtained, other than compliance with applicable securities laws,
the filing of the Certificate of Merger with the Delaware Secretary of State,
together with an officers' certificate executed by Purchaser and an officers'
certificate executed by the Company, as required by Delaware Law.
8. Subject to the filing of the Certificate of Merger with the
Delaware Secretary of State, together with an officers' certificate executed by
Purchaser and an officers' certificate executed by the Company, the Merger shall
become effective under Delaware law on the date and at the time set forth in the
Certificate of Merger.
-2-
EXHIBIT D
NON-COMPETITION AGREEMENT
This NON-COMPETITION AGREEMENT ("Agreement"), dated as of __________,
2000, is made by Xxxxxxx X. Xxxxx ("Rohan") in favor of Great Plains Software,
Inc., a Minnesota corporation ("Purchaser").
A. Purchaser, FRx Software Corporation ("the Company") and others
have entered into an Agreement and Plan of Merger dated as of February __, 2000
("Merger Agreement"), pursuant to which Purchaser has purchased all of the
outstanding share capital of FRx Software Corporation from its shareholders.
B. As the controlling person of FRx Software Corporation, Rohan
will benefit from the transactions contemplated in the Merger Agreement.
Accordingly, and in consideration of the above premises and other good
and valuable consideration, the receipt of which by Rohan is hereby
acknowledged, and in order to induce Purchaser to enter into the Merger
Agreement, Rohan hereby undertakes and agrees as follows:
1. Rohan will not, for a period of two (2) years from the date of
the closing of the transactions contemplated by the Merger
Agreement (the "Limited Period"), anywhere in the United
States or Canada or within the geographical area or territory
where the business of Company is presently being conducted or
may from time to time be conducted by Purchaser during the
Limited Period, own, manage, operate or control, or
participate in the ownership, management, operation or control
of, or be connected with or have any interest in, as a
stockholder, director, officer, employee, agent, consultant,
partner or otherwise, (a) any business which derives a
material portion of its revenues from the development, design,
manufacture, production, sale, license, distribution of (i)
any product which competes with the Software (as such term is
defined in the Merger Agreement), (ii) any product which is a
financial reporting component of back office industry modules,
or (iii) any other products which have been developed,
manufactured, produced, sold, licensed or distributed by
Company and which are assigned to Purchaser under the Merger
Agreement, or which are competitive with any of the above, or
(b) any business which derives a material portion of its
revenues by providing support or maintenance services for any
products described in subsection 1(a).
However, nothing contained herein shall prohibit Rohan from (i) owning
less than 5% of any class of securities listed on a national securities
exchange or traded publicly in the over-the-counter market or (ii)
pursuing research, design and development activities solely for up and
through feasibility purposes as defined in the research and development
tax credit sections of the Internal Revenue Code of 1986, as amended.
If any of the
provisions of this paragraph is held to be unenforceable because of the
scope, duration or area of its applicability, the court making such
determination shall have the power to modify such scope, duration or
area or all of them, and such provision shall then be applicable in
such modified form.
2. Furthermore, Rohan will not, for three (3) years from the
closing of the transactions contemplated by the Merger Agreement, alone or with
others, solicit or assist any one else in the solicitation of, any of
Purchaser's then-current employees to terminate their employment with Purchaser
and to become employed by any business enterprise with which Rohan may then be
associated, affiliated or connected.
3. Since Purchaser will be irreparably damaged if the provisions
hereof are not specifically enforced, Purchaser shall be entitled to an
injunction restraining any violation of this Agreement by Rohan (without any
bond or other security being required), or any other appropriate decree of
specific performance. Such remedies shall not be exclusive and shall be in
addition to any other remedy which Purchaser may have.
4. This Agreement shall inure to the benefit of Purchaser and its
successors and assigns, shall be binding upon Rohan and his successors and
assigns and may not be waived, modified or terminated except in a writing signed
by Rohan and Purchaser. This Agreement shall be governed by Minnesota law,
excluding its choice of law rules. The parties hereto agree to the exclusive
jurisdiction of the Federal or State courts located in Hennepin County,
Minnesota for any dispute arising from or relating to this Agreement.
5. Wherever possible, each provision of this Agreement will be
interpreted in such a manner as to be effective and valid under applicable law,
but if any provision shall become invalid or unenforceable under applicable law
such provision shall be stricken to the extent necessary and the remainder of
such provisions and the remainder of this Agreement shall continue in full force
and effect.
6. As noted in paragraph 4 herein, the parties have agreed that
this Agreement is to be governed by Minnesota law without regard to choice of
law and to be enforced exclusively in the courts of general jurisdiction in the
State of Minnesota. The undersigned recognize and acknowledge that receipt by
the Members of significant consideration from Purchaser for the units pursuant
to the Merger Agreement would not occur absent enforceable non-competition
agreements from Rohan. Inasmuch as the law of other states may be less favorable
concerning enforceability of reasonable non-competition agreements, the parties
acknowledge that reference to Minnesota law herein is intentional and by signing
these Agreements each party hereto expressly waives the right to proceed in any
other courts or under any other law with respect hereto.
7. If a court of competent jurisdiction issues a final and
non-appealable decision finding that the Purchaser is in material breach of the
Merger Agreement or any related documents or upon the payment by Purchaser of
any indemnity under the Merger Agreement in
connection with any such breach, Rohan's agreements in paragraphs 2 and 3 of
this Agreement shall be null and void and without further force and effect.
IN WITNESS WHEREOF, the undersigned has executed this Non-Competition
Agreement as of the day and year first above written.
------------------------------------
Xxxxxxx X. Xxxxx
Acknowledged and Accepted
GREAT PLAINS SOFTWARE, INC.
By:
---------------------------------
Its:
------------------------------
EXHIBIT E
LOCK-UP AGREEMENT
This Lock-Up Agreement (this "Agreement") is dated as of _____________,
2000, between Great Plains Software, Inc., a Minnesota corporation ("Great
Plains"), and ______________ (the "Shareholder").
RECITALS
WHEREAS, Great Plains, GPS Acquisition, Inc. ("Merger Sub") and
FRx Software Corporation (the "Company") entered into an Agreement and Plan
of Merger, dated ___________, 2000, (the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of Merger Sub
with and into the Company (the "Merger").
WHEREAS, this Agreement is required to be executed and delivered by
Shareholder to Great Plains and Great Plains would not enter into the Merger
Agreement without the execution and delivery of this Agreement;
WHEREAS, as a result of the Merger, Great Plains will issue to
Shareholder _________ shares of common stock of Great Plains ("Great Plains
Common Stock") in exchange for all the shares of common stock of the Company
held by Shareholder (such shares of Great Plains Common Stock, as adjusted for
stock splits, consolidations and the like, being referred to as the "Shares");
and
WHEREAS, in order to induce Great Plains to enter into the Merger
Agreement, the Shareholder has agreed to enter into and perform his, her or its
obligations under this Agreement.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Shareholder and Great Plains agree as follows:
1. RESTRICTION ON SALE OF SHARES
During the period from the Effective Date (as that term is defined in
the Merger Agreement) through the date which is 90 days after the Effective
Date, Shareholder shall not directly or indirectly sell, convey, offer or
otherwise transfer or dispose of, voluntarily or involuntarily, more than an
aggregate of 150,000 of the Shares held by Shareholder other than (i) as a BONA
FIDE gift or gifts, provided that the donee or donees thereof agree to be bound
by the restrictions set forth herein; (ii) as a distribution to limited partners
or shareholders of the undersigned, provided that the distributees thereof agree
in writing to be bound by the terms of this Agreement; (iii) any transfer to the
ancestors, descendants or spouse of the undersigned or to trusts for the benefit
of such persons or the undersigned, provided such transferees thereof agree in
writing to be bound by the terms of this
Agreement; or (iv) with the prior written consent of Great Plains which may be
withheld for any or no reason whatsoever; provided, however, during such 90 day
period Shareholder will not sell more than an aggregate of 15,000 of the Shares
on any one trading day. During each one month period thereafter, an additional
one sixth of the Shares shall be free from the transfer restrictions of this
Section 1 and may be transferred by Shareholder to the extent permitted by
applicable law, and the balance of such Shares shall remain subject to the
transfer restrictions of this Section. After the date which is 270 days
following the Effective Date, the balance of the Shares shall be free from the
transfer restrictions of this Section 1 and may be transferred to the extent
permitted by applicable law. The share certificates representing the Shares
shall bear legends indicating that such Shares are subject to the provisions of
this Agreement. Such legends shall only be removed after such provisions have
expired. The foregoing legends shall be removed by Great Plains as promptly as
practicable after receipt of notice from Shareholder that the foregoing
restriction periods have expired. Shareholder agrees and consents to the entry
of stop transfer instructions with Great Plains's transfer agent against the
transfer of Shares subject to the transfer restrictions of this Section 1.
2. GENERAL PROVISIONS
2.1 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Minnesota applicable to contracts executed in and to be
performed entirely in such State, without reference to any rules governing
conflict of laws.
2.2 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.3 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in counterparts, each of which when executed shall be deemed to be
an original but all of which taken together shall constitute one agreement.
-2-
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
GREAT PLAINS SOFTWARE, INC.
------------------------------------------
By:
Title:
SHAREHOLDER:
------------------------------------------
Name:
-3-
EXHIBIT E
LOCK-UP AGREEMENT
This Lock-Up Agreement (this "Agreement") is dated as of _____________,
2000, between Great Plains Software, Inc., a Minnesota corporation ("Great
Plains"), and ______________ (the "Shareholder").
RECITALS
WHEREAS, Great Plains, GPS Acquisition, Inc. ("Merger Sub") and
FRx Software Corporation (the "Company") entered into an Agreement and Plan
of Merger, dated ___________, 2000, (the "Merger Agreement") which provides
(subject to the conditions set forth therein) for the merger of Merger Sub
with and into the Company (the "Merger").
WHEREAS, this Agreement is required to be executed and delivered by
Shareholder to Great Plains and Great Plains would not enter into the Merger
Agreement without the execution and delivery of this Agreement;
WHEREAS, as a result of the Merger, Great Plains will issue to
Shareholder _________ shares of common stock of Great Plains ("Great Plains
Common Stock") in exchange for all the shares of common stock of the Company
held by Shareholder (such shares of Great Plains Common Stock, as adjusted for
stock splits, consolidations and the like, being referred to as the "Shares");
and
WHEREAS, in order to induce Great Plains to enter into the Merger
Agreement, the Shareholder has agreed to enter into and perform his, her or its
obligations under this Agreement.
NOW, THEREFORE, in consideration of the agreements and covenants
contained herein, the Shareholder and Great Plains agree as follows:
1. RESTRICTION ON SALE OF SHARES
During the period from the Effective Date (as that term is defined in
the Merger Agreement) through the date which is 90 days after the Effective
Date, Shareholder shall not directly or indirectly sell, convey, pledge, offer
or otherwise transfer or dispose of, voluntarily or involuntarily, over an
aggregate of 15,000 Shares held by Shareholder other than (i) as a BONA FIDE
gift or gifts, provided that the donee or donees thereof agree to be bound by
the restrictions set forth herein; (ii) as a distribution to limited partners or
shareholders of the undersigned, provided that the distributees thereof agree in
writing to be bound by the terms of this Agreement; (iii) any pledge made
pursuant to a bona fide loan transaction that creates a mere security interest,
provided the pledgee in any such transaction agrees in writing to be bound by
the terms of this Agreement; (iv) any transfer to the ancestors, descendants or
spouse of the undersigned or to trusts for the benefit of such persons or the
undersigned, provided such transferees thereof agree in writing to be bound
by the terms of this Agreement; or (v) with the prior written consent of
Great Plains which may be withheld for any or no reason whatsoever. During
each three month period thereafter, an additional one third of the Shares
shall be free from the transfer restrictions of this Section 1 and may be
transferred by Shareholder to the extent permitted by applicable law, and the
balance of such Shares shall remain subject to the transfer restrictions of
this Section. After the date which is 180 days following the Effective Date,
the balance of the Shares shall be free from the transfer restrictions of
this Section 1 and may be transferred to the extent permitted by applicable
law. The share certificates representing the Shares shall bear legends
indicating that such Shares are subject to the provisions of this Agreement.
Such legends shall only be removed after such provisions have expired. The
foregoing legends shall be removed by Great Plains as promptly as practicable
after receipt of notice from Shareholder that the foregoing restriction
periods have expired. Shareholder agrees and consents to the entry of stop
transfer instructions with Great Plains's transfer agent against the transfer
of Shares subject to the transfer restrictions of this Section 1.
2. GENERAL PROVISIONS
2.1 GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Minnesota applicable to contracts executed in and to be
performed entirely in such State, without reference to any rules governing
conflict of laws.
2.2 HEADINGS
The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
2.3 COUNTERPARTS
This Agreement may be executed and delivered (including by facsimile
transmission) in counterparts, each of which when executed shall be deemed to be
an original but all of which taken together shall constitute one agreement.
-2-
IN WITNESS WHEREOF, the parties hereto have entered into and signed
this Agreement as of the date and year first above written.
GREAT PLAINS SOFTWARE, INC.
------------------------------------------
By:
Title:
SHAREHOLDER:
------------------------------------------
Name:
-3-
