Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
AKAMAI TECHNOLOGIES, INC.,
AQUARIUS ACQUISITION CORP.,
SPEEDERA NETWORKS, INC.
AND
THE REPRESENTATIVE OF THE EQUITY HOLDERS
(NAMED HEREIN)
March 16, 2005
TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER............................................................ 1
1.1 The Merger.......................................................... 1
1.2 The Closing......................................................... 1
1.3 Actions at the Closing.............................................. 1
1.4 Additional Action................................................... 2
1.5 Conversion of Shares................................................ 2
1.6 Management Shares................................................... 3
1.7 Dissenting Shares................................................... 4
1.8 Exchange of Shares.................................................. 4
1.9 Issuance of Management Shares....................................... 6
1.10 Fractional Shares................................................... 6
1.11 Options and Warrants................................................ 6
1.12 Adjustment Before and After the Closing............................. 9
1.13 Escrow Arrangements................................................. 11
1.14 Representative...................................................... 11
1.15 Certificate of Incorporation and By-laws............................ 13
1.16 No Further Rights................................................... 13
1.17 Closing of Transfer Books........................................... 13
1.18 Withholding Obligations............................................. 13
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 14
2.1 Organization, Qualification and Corporate Power..................... 14
2.2 Capitalization...................................................... 14
2.3 Authorization....................................................... 16
2.4 Noncontravention.................................................... 16
2.5 Subsidiaries........................................................ 17
2.6 Financial Statements................................................ 17
2.7 Absence of Certain Changes.......................................... 18
2.8 Undisclosed Liabilities............................................. 18
2.9 Tax Matters......................................................... 18
2.10 Assets.............................................................. 20
2.11 Owned Real Property................................................. 21
2.12 Real Property Leases................................................ 21
2.13 Intellectual Property............................................... 22
2.14 Inventory........................................................... 24
2.15 Contracts........................................................... 24
2.16 Accounts Receivable................................................. 26
2.17 Powers of Attorney.................................................. 26
2.18 Insurance........................................................... 26
2.19 Litigation.......................................................... 26
2.20 Warranties.......................................................... 26
2.21 Employees........................................................... 27
2.22 Employee Benefits................................................... 29
2.23 Environmental Matters............................................... 31
2.24 Legal Compliance.................................................... 32
2.25 Customers and Suppliers............................................. 32
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2.26 Permits................................................................. 32
2.27 Certain Business Relationships With Affiliates.......................... 32
2.28 Brokers' Fees........................................................... 32
2.29 Books and Records....................................................... 32
2.30 Prepayments, Prebilled Invoices and Deposits............................ 32
2.31 Government Contracts.................................................... 33
2.32 Disclosure.............................................................. 33
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY
SUBSIDIARY......................................................................... 34
3.1 Organization and Corporate Power........................................ 34
3.2 Authorization of Transaction............................................ 34
3.3 Noncontravention........................................................ 34
3.4 Broker's Fees........................................................... 34
3.5 Investment Representation............................................... 34
3.6 Litigation.............................................................. 35
3.7 SEC Filings............................................................. 35
3.8 Merger Shares and Management Shares Validly Issued...................... 35
3.9 Disclosure.............................................................. 35
3.10 Actions Consistent With Reorganization Treatment........................ 35
ARTICLE IV COVENANTS................................................................ 36
4.1 Closing Efforts......................................................... 36
4.2 Treatment of the Merger as a Reorganization for Tax Purposes............ 36
4.3 Governmental and Third-Party Notices and Consents....................... 36
4.4 Stockholder Approval.................................................... 37
4.5 Operation of Business................................................... 39
4.6 Stay of Litigation...................................................... 42
4.7 Access to Information................................................... 42
4.8 Notice of Breaches...................................................... 42
4.9 Exclusivity............................................................. 43
4.10 Listing Notifications................................................... 44
4.11 Expenses................................................................ 44
4.12 Company 401(k) Plan..................................................... 44
4.13 280G Covenant........................................................... 44
4.14 FIRPTA.................................................................. 44
4.15 Silicon Valley Bank Registration Rights................................. 44
4.16 Option Acceleration..................................................... 44
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER...................................... 45
5.1 Conditions to Obligations of the Buyer and the Transitory Subsidiary.... 45
5.2 Conditions to Obligations of the Company................................ 47
ARTICLE VI INDEMNIFICATION.......................................................... 48
6.1 Indemnification by the Equity Holders................................... 48
6.2 Indemnification Claims.................................................. 49
6.3 Survival of Representations and Warranties.............................. 51
6.4 Limitations............................................................. 51
ARTICLE VII REGISTRATION OF SHARES.................................................. 52
7.1 California Permit; Registered Offering.................................. 52
7.2 Lock-up Agreements...................................................... 54
ARTICLE VIII TAX MATTERS............................................................ 54
8.1 Preparation and Filing of Tax Returns; Payment of Taxes................. 54
8.2 Tax Indemnification by the Equity Holders............................... 55
8.3 Allocation of Certain Taxes............................................. 55
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8.4 Termination of Tax-Sharing Agreements............................... 55
8.5 Scope of Article VIII............................................... 55
ARTICLE IX INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY............. 56
9.1 Indemnification and Insurance....................................... 56
ARTICLE X TERMINATION........................................................... 56
10.1 Termination of Agreement............................................ 56
10.2 Effect of Termination............................................... 57
ARTICLE XI DEFINITIONS.......................................................... 57
ARTICLE XII MISCELLANEOUS....................................................... 71
12.1 Press Releases and Announcements.................................... 71
12.2 No Third Party Beneficiaries........................................ 71
12.3 Entire Agreement.................................................... 71
12.4 Succession and Assignment........................................... 72
12.5 Counterparts and Facsimile Signature................................ 72
12.6 Headings............................................................ 72
12.7 Notices............................................................. 72
12.8 Governing Law....................................................... 73
12.9 Amendments and Waivers.............................................. 73
12.10 Severability...................................................... 73
12.11 Submission to Jurisdiction........................................ 73
12.12 Construction...................................................... 74
Exhibit A - Stockholder Agreement
Exhibit B - Management Participant Agreement
Exhibit C - Form of Notice and Transmittal
Exhibit D - Form of Indemnification Escrow Agreement
Exhibit E - Form of Contingent Settlement Agreement and Partial Release
Exhibit F - Form of Opinion of Counsel to the Company
Exhibit G - Form of Opinion of Counsel to the India Subsidiary
Exhibit H - Form of Opinion of Counsel to the Buyer
Schedule I - Management Participants
Schedule 12.1 - Press Releases and Announcements
Disclosure Schedule
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as of
March 16, 2005, by and among Akamai Technologies, Inc., a Delaware corporation
(the "Buyer"), Aquarius Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Buyer (the "Transitory Subsidiary"), Speedera
Networks, Inc., a Delaware corporation (the "Company"), and, solely for the
purposes of Section 1.14 hereof and carrying out its resulting responsibilities
hereunder as representative of the Company Stockholders, the Management
Participants and the holders of Options, the Representative specified in Article
XI. The Buyer, the Transitory Subsidiary and the Company are sometimes referred
to herein individually as a "Party" and collectively as the "Parties".
This Agreement contemplates a merger of the Transitory Subsidiary into the
Company. In such merger, (a) the Company Stockholders will receive Buyer Common
Shares in exchange for their capital stock of the Company, (b) options and
warrants to acquire common stock of the Company will become options and warrants
to acquire Buyer Common Shares and (c) Management Participants will receive
Buyer Common Shares in satisfaction of certain obligations of the Company to
such Management Participants, as set forth in the Management Participant
Agreement. The Representative will have the authority to act, with binding
effect, on behalf of the Equity Holders according to the terms and conditions
set forth in this Agreement. 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 Code.
Simultaneously with the execution of this Agreement, in order to induce
the Buyer and the Transitory Subsidiary to enter into the transactions
contemplated by this Agreement, the Principal Stockholders have executed the
Stockholder Agreement and the Management Participants have executed the
Management Participant Agreement.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties hereby agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company at
the Effective Time. From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the Surviving Corporation. The Merger shall have the effects set
forth in Section 259 of the Delaware General Corporation Law.
1.2 The Closing. The Closing shall take place at the offices of Xxxxxx
Xxxxxx Xxxxxxxxx Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx
00000, commencing at 9:00 a.m. local time on the Closing Date.
1.3 Actions at the Closing. At the Closing:
(a) the Company shall deliver to the Buyer and the Transitory
Subsidiary the various certificates, instruments and documents referred to in
Section 5.1;
(b) the Buyer and the Transitory Subsidiary shall deliver to the
Company the various certificates, instruments and documents referred to in
Section 5.2;
(c) the Surviving Corporation shall file with the Secretary of
State of the State of Delaware the Certificate of Merger;
(d) the Buyer or the Surviving Co the Exchange Agent to establish
a reserve account for the distribution of certificates representing the Initial
Merger Shares to the Company Stockholders in accordance with Sections 1.5(d) and
1.8(a);
(e) the Buyer or the Surviving Corporation shall deliver
instructions to the Exchange Agent to distribute certificates representing the
Initial Merger Shares to the Management Participants in accordance with Sections
1.6(b) and 1.9; and
(f) the Buyer, the Representative and the Escrow Agent shall
execute and deliver the Indemnification Escrow Agreement, and the Buyer shall
deliver to the Escrow Agent certificates for the Indemnification Escrow Shares
being placed in escrow on the Closing Date pursuant to Section 1.13.
1.4 Additional Action. The Surviving Corporation may, at any time from
and after the Effective Time, take any action, including executing and
delivering any document, in the name and on behalf of either the Company or the
Transitory Subsidiary, in order to consummate and give effect to the
transactions contemplated by this Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the Merger
and without any action on the part of any Party or the holder of any of the
following securities:
(a) Each Outstanding Common Share shall be converted into and
represent the right to receive (subject to the provisions of Section 1.13) a
fraction of a share (the "Common Conversion Ratio") of Buyer Common Shares as is
equal to the result obtained by dividing (i) the Adjusted Merger Consideration,
minus the Management Shares, minus the Preferred Consideration, by (ii) the
Adjusted Total Company Shares.
(b) Each Outstanding Series A Preferred Share shall be converted
into and represent the right to receive (subject to the provisions of Section
1.13) a fraction of a share of Buyer Common Shares equal to the Series A
Conversion Ratio; each Outstanding Series B Preferred Share shall be converted
into and represent the right to receive (subject to the provisions of Section
1.13) a fraction of a share of Buyer Common Shares equal to the Series B
Conversion Ratio; and each Outstanding Series C Preferred Share shall be
converted into and represent the right to receive (subject to the provisions of
Section 1.13) a fraction of a share of Buyer Common Shares equal to the Series C
Conversion Ratio.
(c) The Company shall take all steps necessary to ensure that all
outstanding convertible promissory notes issued by the Company, if any, shall be
converted into Common Shares immediately prior to the Closing, pursuant to the
conversion terms thereof.
(d) The Buyer Common Shares into which each Company Stockholder's
Company Shares shall be converted at the Effective Time pursuant to Section
1.5(a) shall be delivered as follows:
(i) On the Closing Date the Buyer shall (A) deposit into
escrow pursuant to Section 1.13 the Indemnification Escrow Percentage of the
Closing Buyer Common Shares, rounded up to the nearest whole number, which
shares shall be designated as Indemnification Escrow Shares, and (B) deliver to
the Exchange Agent for distribution to the Company Stockholders in accordance
with Section 1.8 the remainder of such Closing Buyer Common Shares, subject to
the provisions of Section 1.10, not deposited into escrow (the "Initial Merger
Shares").
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(ii) On the date specified in Section 1.12(f) (the "Asset
Value Adjustment Date"), if the Closing Net Asset Value Adjustment is positive,
the Buyer shall (A) deposit into escrow pursuant to Section 1.13 the
Indemnification Escrow Percentage of the Adjusted Buyer Common Shares, rounded
up to the nearest whole number, which shares shall be designated as
Indemnification Escrow Shares, and (B) deliver to the Exchange Agent for
distribution to the Company Stockholders in accordance with Section 1.8 the
remainder of such Adjusted Buyer Common Shares, subject to the provisions of
Section 1.10, not deposited into escrow.
(iii) On the date which is 18 months after Closing Date and is
before the payment on any claims under the Escrow Agreement, the Buyer shall (A)
deposit into escrow pursuant to Section 1.13 the Indemnification Escrow
Percentage of the Option Adjusted Buyer Common Shares, rounded up to the nearest
whole number, which shares shall be designated as Indemnification Escrow Shares,
and (B) deliver to the Exchange Agent for distribution to the Company
Stockholders in accordance with Section 1.8 the remainder of such Option
Adjusted Buyer Common Shares, subject to the provisions of Section 1.10, not
deposited into escrow.
(e) Each Company Share held in the Company's treasury immediately
prior to the Effective Time and each Company Share owned beneficially by the
Buyer or the Transitory Subsidiary shall be cancelled and retired without
payment of any consideration therefor.
(f) Each share of common stock, $0.01 par value per share, of the
Transitory Subsidiary issued and outstanding immediately prior to the Effective
Time shall be converted into and thereafter evidence one share of common stock,
$0.01 par value per share, of the Surviving Corporation.
(g) Each Preferred Warrant outstanding and not exercised as of the
Effective Time shall be converted into a warrant to acquire such number of
shares of Buyer Common Shares equal to the number of shares of Buyer Common
Shares that would be issusable pursuant to Section 1.5(b), if the warrant were
exercised immediately before the Effective Time for Preferred Shares. The
exercise price per Buyer Common Share shall equal the aggregate exercise price
of such warrant divided by the number of Buyer Common Shares subject to such
Preferred Warrants. The aggregate Option Value of the Preferred Warrants
outstanding and not exercised as of the Effective Time (whether vested or
exercisable) shall be added to the Preferred Consideration for all purposes of
this Agreement.
1.6 Management Shares.
(a) Each member of the Company's management named in Schedule I
attached hereto (each a "Management Participant" and collectively the
"Management Participants") shall have the right to receive as of the Effective
Time (subject to Sections 1.13 and 1.6(b)) the number of Buyer Common Shares
which have a Market Value equal to the excess, if any, of (x) such Management
Participant's Bonus Pool Percentage of the Bonus Pool minus, (y) such Management
Participant's Stockholder Payment (the "Management Shares"), it being understood
that such calculation is dependent on the Common Conversion Ratio which is
dependent on the definition of Management Shares and is an iterative
calculation.
(b) Of the Management Shares which each Management Participant
shall have the right to receive as of the Effective Time pursuant to Section
1.6(a):
(i) On the Closing Date the Buyer shall (A) deposit with the
Escrow Agent the Indemnification Escrow Percentage of such Management Shares,
calculated using the Closing Common Conversion Ratio, rounded up to the nearest
whole number, which shares shall be designated as Indemnification Escrow Shares
and deposited in escrow pursuant to Section 1.13(a) and (B) deliver the
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remainder of such Management Shares, calculated using the Closing Common
Conversion Ratio, not deposited into escrow (the "Initial Management Shares") to
the Exchange Agent for distribution to the Management Participants in accordance
with 1.9.
(ii) On the Asset Value Adjustment Date, if the Closing Net
Asset Value Adjustment is positive, the Buyer shall (A) deposit with the Escrow
Agent the Indemnification Escrow Percentage of such Management Shares,
calculated using the Adjusted Common Conversion Ratio, rounded up to the nearest
whole number, which shares shall be designated as Indemnification Escrow Shares
and deposited in escrow pursuant to Section 1.13(a), and (B) deliver the
remainder of such Management Shares not deposited into escrow to the Exchange
Agent for distribution to the Management Participants in accordance with 1.9; in
each case, less any Management Shares delivered to the Escrow Agent and the
Management Participants, as the case may be, pursuant to Section 1.6(b)(i).
(iii) On the date which is 18 months after the Closing Date,
the Buyer shall (A) deposit with the Escrow Agent the Indemnification Escrow
Percentage of any Management Shares not delivered pursuant to Section 1.6(b)(i)
or 1.6(b)(ii), rounded up to the nearest whole number, which shares shall be
designated as Indemnification Escrow Shares and deposited in escrow pursuant to
Section 1.13(a), and (B) deliver the remainder of any such Management Shares not
deposited into escrow (or delivered to the Management Participants pursuant to
Sections 1.6(b)(i) or 1.6(b)(ii)) to the Exchange Agent for distribution to the
Management Participants in accordance with Section 1.9; provided, however, that
if any Management Participant has received (or has had deposited into Escrow)
Buyer Common Shares pursuant to this Section 1.6(b) which exceeds such
Management Participants' Management Shares, the Management Participant shall
promptly return any such excess shares to the Buyer.
1.7 Dissenting Shares.
(a) Dissenting Shares shall not be converted into or represent the
right to receive Buyer Common Shares, unless the Company Stockholder holding
such Dissenting Shares shall have forfeited his, her or its right to appraisal
under each of the Delaware General Corporation Law and the California
Corporations Code or properly withdrawn, his, her or its demand for appraisal.
If such Company Stockholder has so forfeited or withdrawn his, her or its right
to appraisal of Dissenting Shares, then as of the occurrence of such event, such
holder's Dissenting Shares shall cease to be Dissenting Shares and shall be
converted into and represent the right to receive the Buyer Common Shares
issuable in respect of such Company Shares pursuant to Section 1.5, which Buyer
Common Shares shall be either deposited with the Escrow Agent or distributed to
the Company Stockholder holding Dissenting Shares as provided in Section 1.5(d).
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Delaware General Corporation Law or
the California Corporations Code, as applicable. The Company shall not, except
with the prior written consent of the Buyer, make any payment with respect to
any demands for appraisal of Company Shares or offer to settle or settle any
such demands.
1.8 Exchange of Shares.
(a) At or prior to the Effective Time, the Buyer shall appoint the
Exchange Agent to effect the issuance of Initial Merger Shares in exchange for
Certificates. On the Closing Date, the Buyer shall deliver instructions to the
Exchange Agent to establish a reserve account for the distribution of
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certificates representing the Initial Merger Shares issuable to the Company
Stockholders, as described in Section 1.5, and cash for any fractional shares as
described in Section 1.10 (the "Exchange Fund"). Within five (5) business days
after the Effective Time, provided that the Company has delivered to the Buyer
at least five (5) business days prior to the Effective Time a list setting forth
(i) the name of each holder of a Certificate, (ii) the mailing address of each
such holder, (iii) the number of Company Shares represented by each Certificate
held by each holder prior to the Effective Time and (iv) the total number of
shares of Buyer Common Stock represented by such Certificate following the
Effective Time, the Buyer shall cause the Exchange Agent to send to each holder
of a Certificate a notice and a transmittal in substantially the form attached
hereto as Exhibit C advising such holder of the effectiveness of the Merger and
the procedure for surrendering to the Exchange Agent such Certificate in
exchange for the Initial Merger Shares issuable to such holder pursuant to
Section 1.5. Each holder of a Certificate, upon proper surrender thereof to the
Exchange Agent in accordance with the instructions in such notice, shall be
entitled to receive in exchange therefor (subject to any Taxes required to be
withheld) the Initial Merger Shares issuable pursuant to Section 1.5 plus cash
in lieu of any fractional shares, as provided in Section 1.10 below. The Buyer
shall instruct the Exchange Agent to distribute the Initial Merger Shares and
cash in lieu of fractional shares to such holder as soon as practicable after
receipt of such Certificate and such other documents required by such notice.
Until properly surrendered, each such Certificate shall be deemed for all
purposes to evidence only the right to receive a certificate for the Initial
Merger Shares issuable pursuant to Section 1.5. Holders of Certificates shall
not be entitled to receive certificates for the Initial Merger Shares to which
they would otherwise be entitled until such Certificates are properly
surrendered.
(b) If any Initial Merger Shares are to be issued in the name of a
person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the issuance of such
Initial Merger Shares that (i) the Certificate so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and (iii)
the person requesting such transfer shall pay to the Exchange Agent any transfer
or other Taxes payable by reason of the foregoing or establish to the
satisfaction of the Exchange Agent that such Taxes have been paid or are not
required to be paid. Notwithstanding the foregoing, neither the Exchange Agent
nor any Party shall be liable to a holder of Company Shares for any Initial
Merger Shares issuable to such holder pursuant to Section 1.5 that are delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the Initial Merger
Shares issuable in exchange therefor pursuant to Section 1.5. The Exchange Agent
may, in its discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed Certificate to give the
Exchange Agent and the Buyer a bond in such sum as it may direct as indemnity
against any claim that may be made against the Exchange Agent or the Buyer with
respect to the Certificate alleged to have been lost, stolen or destroyed.
(d) No dividends or other distributions that are payable to the
holders of record of Buyer Common Shares as of a date on or after the Closing
Date shall be paid to former Company Stockholders entitled by reason of the
Merger to receive Initial Merger Shares until such holders surrender their
Certificates for certificates representing the Merger Shares. Upon such
surrender, the Buyer shall pay or deliver to the persons in whose name the
certificates representing such Initial Merger Shares are issued any dividends or
other distributions that are payable to the holders of record of Buyer Common
Shares as of a date on or after the Closing Date and which were paid or
delivered between the Effective Time and the time of such surrender; provided
that no such person shall be entitled to receive any interest on such dividends
or other distributions.
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(e) By demand, at any time after the first anniversary of the
Effective Time, the Buyer may require that any portion of the Exchange Fund
which remains undistributed to the Company Stockholders or Management
Participants at such time shall be delivered to the Buyer and any Company
Stockholder or Management Participant who has not previously complied with this
Section 1.8 shall thereafter look only to the Buyer, as a general unsecured
creditor, for payment of its claim for Buyer Common Shares, any cash in lieu of
fractional Buyer Common Shares and any dividends or distributions with respect
to Buyer Common Shares.
(f) To the extent permitted by applicable law, none of the Buyer,
the Transitory Subsidiary, the Company, the Surviving Corporation or the
Exchange Agent shall be liable to any Company Stockholder or any Management
Participant, as the case may be, for any Buyer Common Shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate or
required letter of transmittal shall not have been surrendered or delivered
prior to the third anniversary of the Effective Time (or immediately prior to
such earlier date on which any Buyer Common Shares, and any cash payable to any
Company Stockholder or Management Participant or any dividends or distributions
payable to the holder of such Buyer Common Shares pursuant to this Article I
would otherwise escheat to or become the property of any Governmental Entity),
any such Buyer Common Shares or cash, dividends or distributions in respect
thereof shall, to the extent permitted by applicable law, become the property of
the Surviving Corporation, free and clear of all claims or interest of any
person previously entitled thereto.
1.9 Issuance of Management Shares. The Buyer shall deliver instructions
to the Exchange Agent to distribute certificates representing the Management
Shares to the Management Participants, as described in Section 1.6(b). As soon
as practicable after the applicable date on which the Buyer is required to
deliver the Management Shares pursuant to Section 1.6(b), the Exchange Agent
shall deliver to the Management Participants the Management Shares issuable
pursuant to Section 1.6(b).
1.10 Fractional Shares. No certificates or scrip representing fractional
Merger Shares shall be issued to Company Stockholders upon the surrender for
exchange of Certificates, and such Company Stockholders shall not be entitled to
any voting rights, rights to receive any dividends or distributions or other
rights as a stockholder of the Buyer with respect to any fractional Merger
Shares that would have otherwise been issued to such Company Stockholders. In
lieu of any fractional Merger Shares that would have otherwise been issued, each
Company Stockholder that would have been entitled to receive a fractional Merger
Share shall, upon proper surrender of such person's Certificates, receive a cash
payment equal to the closing price of the Buyer Common Shares on the NASDAQ
Stock Market on the day immediately preceding the Closing multiplied by the
fraction of a share that such Company Stockholder would otherwise be entitled to
receive.
1.11 Options and Warrants.
(a) As of the Effective Time, all Options, whether vested or
unvested, and the Option Plan, insofar as it relates to Options outstanding
under such Plan as of the Closing, shall be assumed by the Buyer. Immediately
after the Effective Time, each Option outstanding immediately prior to the
Effective Time shall be deemed to constitute an option to acquire, on the same
terms and conditions as were applicable under such Option at the Effective Time,
such number of Buyer Common Shares as is equal to the number of Common Shares
subject to the unexercised portion of such Option multiplied by the Common
Conversion Ratio (with any fraction resulting from such multiplication to be
rounded down to the nearest whole number) (each such Option an "Assumed
Option"). The exercise price per share of each Assumed Option shall be equal to
the exercise price of such Option immediately prior to the Effective Time,
divided by the Common Conversion Ratio (rounded up to the nearest whole cent).
The term, exercisability, vesting schedule, status as an "incentive stock
option" under Section 422 of the
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Code, if applicable, and all of the other terms of the Options shall otherwise
remain unchanged, except as provided in Section 1.11(f) below, and except that
by virtue of the Merger each Option shall be amended to the extent set forth in
Section 4 of the Indemnification Escrow Agreement with respect to the deposit of
Indemnification Escrow Shares and the forfeiture of unexercised portions of any
Assumed Options.
(b) Prior to the Effective Time, the Company shall use its
Reasonable Best Efforts to obtain the agreement of each holder of a Warrant or
Preferred Warrant to exercise, no later than immediately prior to the Effective
Time, all vested Warrants and to terminate, as of such time, all unvested
Warrants. As of the Effective Time, all Warrants, whether vested or unvested,
not so exercised shall be assumed by the Buyer. Immediately after the Effective
Time, each Warrant outstanding immediately prior to the Effective Time shall be
deemed to constitute a warrant to acquire, on the same terms and conditions as
were applicable under such Warrant at the Effective Time, such number of shares
of Buyer Common Shares as is equal to the number of Common Shares subject to the
unexercised portion of such Warrant multiplied by the Common Conversion Ratio
(with any fraction resulting from such multiplication to be rounded down to the
nearest whole number) (each such Warrant an "Assumed Warrant"). The exercise
price per share of each such Assumed Warrant shall be equal to the exercise
price of such Warrant immediately prior to the Effective Time, divided by the
Common Conversion Ratio (rounded up to the nearest whole cent). The term,
exercisability, vesting schedule, and all of the other terms of the Warrant
shall otherwise remain unchanged, except as provided in Section 1.11(f) below,
and except that by virtue of the Merger each Warrant shall be amended to the
extent set forth in Section 4 of the Indemnification Escrow Agreement with
respect to the deposit of Indemnification Escrow Shares and the forfeiture of
unexercised portions of any Assumed Warrants.
(c) As soon as practicable after the Effective Time, the Buyer or
the Surviving Corporation shall deliver to the holders of Options and Warrants
appropriate notices setting forth such holders' rights pursuant to such Options
or Warrants, as applicable, as amended by this Section 1.11, and the agreements
evidencing such Options or Warrants, as applicable, and that such Options or
Warrants shall continue in effect on the same terms and conditions (subject to
the amendments provided for in this Section 1.11, the Indemnification Escrow
Agreement and such notice).
(d) The Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Shares for delivery
upon exercise of the Options and Warrants assumed in accordance with this
Section 1.11. As promptly as practicable after the Effective Time, but in no
event later than the date on which the Buyer has filed pursuant to Form 8-K the
financial statements required to be filed by the Buyer in connection with the
Merger pursuant to Regulation S-X of the Securities Act in connection with the
Merger, the Buyer shall file a Registration Statement on Form S-8 (or any
successor form) under the Securities Act with respect to all shares of Buyer
Common Shares subject to the Options that may be registered on a Form S-8, and
shall use its Reasonable Best Efforts to maintain the effectiveness of such
Registration Statement for so long as such Options remain outstanding. The Buyer
Common Shares subject to the Warrants will be tradeable at such time as they
become eligible for resale pursuant to Rule 144 under the Securities Act.
(e) The Company shall obtain, prior to the Closing, the consent
from each holder of an Option (other than holders of Options representing, in
the aggregate, less than 3% of the Total Company Shares) or a Warrant to the
amendment of such Option or Warrant pursuant to the Indemnification Escrow
Agreement and Sections 1.11 and 1.13(a) and Article VI of this Agreement (unless
such consent is not required under the terms of the applicable agreement,
instrument or plan).
(f) Each Assumed Option and Assumed Warrant (collectively, the
"Assumed Convertible Securities" and individually an "Assumed Convertible
Security") shall be subject to the following provisions:
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(i) Upon the exercise of an Assumed Convertible Security
after the Closing Date and before the date which is 18 months after the Closing
Date, the Buyer shall (A) deliver to the Escrow Agent a certificate representing
the Indemnification Escrow Percentage of the Buyer Common Shares acquired in
such exercise, rounded up to the nearest whole number, which shares shall be
designated as Indemnification Escrow Shares and deposited in escrow pursuant to
Section 1.13(a), and (B) deliver to the holder of such Assumed Convertible
Security a certificate representing the remainder of the Buyer Common Shares
acquired in such exercise and not deposited into escrow, which Buyer Common
Shares shall be considered Initial Merger Shares for all purposes of this
Agreement.
(ii) At any time before the Asset Value Adjustment Date, each
Assumed Convertible Security shall (x) only be exercisable for a number of Buyer
Common Shares as is equal to the number of Common Shares subject to the
unexercised portion of such corresponding Option or Warrant multiplied by the
Closing Common Conversion Ratio (with any fraction resulting from such
multiplication to be rounded down to the nearest whole number) and (y) have an
exercise price per share equal to the exercise price of such corresponding
Option or Warrant immediately prior to the Effective Time, divided by the
Closing Common Conversion Ratio (rounded up to the nearest whole cent).
(iii) On the Asset Value Adjustment Date, if the Closing Net
Asset Value Adjustment is positive, the Buyer shall with respect to each
Exercised Share (A) deposit into escrow pursuant to Section 1.13(a) the
Indemnification Escrow Percentage of the Adjusted Buyer Common Shares, rounded
up to the nearest whole number, which shares shall be designated as
Indemnification Escrow Shares, and (B) deliver to the person who exercised the
Assumed Convertible Security related to such Exercised Shares the remainder of
such Adjusted Buyer Common Shares not deposited into escrow.
(iv) At any time after the Asset Value Adjustment Date and
before the date which is 18 months after the Closing Date, each Assumed
Convertible Security shall (x) only be exercisable for a number of Buyer Common
Shares as is equal to the number of Common Shares subject to the unexercised
portion of such corresponding Option or Warrant multiplied by the Adjusted
Common Conversion Ratio (with any fraction resulting from such multiplication to
be rounded down to the nearest whole number) and (y) have an exercise price per
share equal to the exercise price of such corresponding Option or Warrant
immediately prior to the Effective Time, divided by the Adjusted Common
Conversion Ratio (rounded up to the nearest whole cent).
(v) On the date which is 18 months after the Closing Date
and immediately before the payment of any claims under the Escrow Agreement, the
Buyer shall with respect to each Exercised Share (A) deposit into escrow
pursuant to Section 1.13(a) the Indemnification Escrow Percentage of the Option
Adjusted Buyer Common Shares, rounded up to the nearest whole number, which
shares shall be designated as Indemnification Escrow Shares, and (B) deliver to
the person who exercised the Assumed Convertible Security related to such
Exercised Shares the remainder of such Option Adjusted Buyer Common Shares not
deposited into escrow.
(vi) Assumed Convertible Securities shall be amended to
reduce the number of Buyer Common Shares subject to the unexercised portion of
any Assumed Convertible Security by such Assumed Convertible Security's
percentage share of any Damages subject to indemnification, as follows:
(A) Immediately prior to any distributions made
pursuant to Section 3 of the Indemnification Escrow Agreement, each Assumed
Convertible Security shall be split into two securities, the "Escrow Assumed
Convertible Security" and the "Free Assumed Convertible Security". The Escrow
Assumed Convertible Security shall have an Option Merger Value equal to 15% of
the Option Merger Value of the Assumed Convertible Security, and the remaining
Assumed Convertible
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Security shall be the Free Assumed Convertible Security, which shall no longer
be subject to the Indemnification Escrow Agreement. If, after any forfeiture is
made pursuant to clause (B) below of the unexercised portion of such Escrow
Assumed Convertible Security attributable to Damages distributed to the Buyer in
respect of any claims for indemnification by the Buyer and/or the Surviving
Corporation pursuant to Article VI or Article VIII hereof, the Escrow Assumed
Convertible Security has an Option Merger Value in excess of the 5% of the
Option Merger Value of the Assumed Convertible Security before any amounts in
respect of Damages were paid, then the Escrow Assumed Convertible Security shall
be reduced by the amount of such excess Option Merger Value and the Free Assumed
Convertible Security shall be increased by a like amount. If an Escrow Assumed
Convertible Security is exercised after the Initial Distribution Date, 100% of
the Buyer Common Shares acquired upon exercise of such option shall be deposited
into escrow and held in trust for the holder of such exercised Escrow Assumed
Convertible Security.
(B) Upon any determination that the Buyer is entitled
to receive some or all of the Indemnification Escrow Shares through a
distribution in respect of Damages made pursuant to Section 3 of the
Indemnification Escrow Agreement, each holder of an Escrow Assumed Convertible
Security shall forfeit that amount of the unexercised portion of such Escrow
Assumed Convertible Security equal in value to such holder's "pro rata share" of
such Damages. Such holder's pro rata share of such Damages shall be determined
by dividing (x) the Option Merger Value of such holder's Escrow Assumed
Convertible Security immediately before the distribution in respect of Damages
is made by (y) the Aggregate Escrow Value immediately before such distribution
is made. Any forfeitures hereunder shall be applied against the Assumed
Convertible Security on a pro rata basis against the vested and unvested portion
of the Assumed Convertible Security.
1.12 Adjustment Before and After the Closing. The Base Purchase Price
shall be subject to adjustment as follows:
(a) Not later than three business days prior to the Closing Date,
the Company shall prepare and deliver to the Buyer a balance sheet of the
Company as of a date (the "Preliminary Closing Balance Sheet Date") within five
business days of the Closing Date (the "Preliminary Closing Balance Sheet"). The
Preliminary Closing Balance Sheet shall be prepared in accordance with the
provisions relating to the preparation of the Closing Balance Sheet set forth in
this Section 1.12. The Preliminary Closing Balance Sheet shall be accompanied by
(i) all relevant backup materials and schedules, in detail reasonably acceptable
to the Buyer, and (ii) a statement setting forth the amount, if any, by which
the estimated Net Asset Value is greater than, or less than, the Target Amount
(the "Preliminary Net Asset Value"). In calculating the Preliminary Net Asset
Value, the Preliminary Closing Balance Sheet shall include (A) as liabilities
the full amount of the transaction fees and expenses payable by the Company in
connection with the transactions contemplated by this Agreement, including legal
and accounting fees, to the extent such transaction fees and expenses have not
been paid prior to the date of the Preliminary Closing Balance Sheet; and (B)
reserves in respect of Taxes due with respect to periods ending (or deemed to
end pursuant to Section 8.3(b) hereof) at or prior to the Effective Time
determined in accordance with GAAP. The Preliminary Closing Balance Sheet shall
be accompanied by a statement setting forth the calculations showing the basis
for the determination of such sums. If the Preliminary Net Asset Value on the
Preliminary Closing Balance Sheet is (i) greater than the Target Amount, then
the difference shall be added to the Base Purchase Price, or (ii) less than the
Target Amount, then the difference shall be deducted from the Base Purchase
Price (the Base Purchase Price, as so adjusted, is referred to as the
"Preliminary Base Purchase Price").
(b) Not later than 60 calendar days after the Closing Date, the
Buyer shall deliver to the Representative the Closing Balance Sheet. The Closing
Balance Sheet shall be prepared in accordance with GAAP applied consistently
with the Company's past practices (to the extent such past
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practices are consistent with GAAP), except that the Closing Balance Sheet may
exclude all footnotes, subject to the adjustments set forth in this Section 1.12
(which shall be in addition to and not in lieu of those required by GAAP) and
shall be certified as such by the Buyer.
(c) The Closing Balance Sheet delivered pursuant to paragraph (a)
above shall be accompanied by (i) all relevant backup materials and schedules,
in detail reasonably acceptable to the Representative, and (ii) a statement
setting forth the amount, if any, by which the Net Asset Value (plus the amount
of Covered Costs in excess of the Cost Cap to be borne by the Buyer pursuant to
Section 10.1(g), if applicable) is greater than, or less than, the Preliminary
Net Asset Value. In calculating the Net Asset Value, the Closing Balance Sheet
shall include (A) as liabilities the full amount of the transaction fees and
expenses payable by the Company in connection with the transactions contemplated
by this Agreement, including legal and accounting fees, to the extent such
transaction fees and expenses were not paid prior to the Effective Time; and (B)
reserves in respect of Taxes due with respect to periods ending (or deemed to
end pursuant to Section 8.3(b) hereof) at or prior to the Effective Time
determined in accordance with GAAP. The Closing Balance Sheet shall be
accompanied by a statement setting forth the calculations showing the basis for
the determination of such sums.
(d) In the event that the Representative disputes the Closing
Balance Sheet or the calculation of the Closing Net Asset Value Adjustment, the
Representative shall notify the Buyer in writing (the "Dispute Notice") of the
amount, nature and basis of such dispute, within 30 calendar days after delivery
of the Closing Balance Sheet. In the event of such a dispute, the Buyer and the
Representative shall first use his, her or its diligent good faith efforts to
resolve such dispute among themselves. If the Buyer and the Representative are
unable to resolve the dispute within 30 calendar days after delivery of the
Dispute Notice, then any remaining items in dispute shall be submitted to an
independent nationally recognized accounting firm selected in writing by the
Representative and the Buyer or, if the Representative and the Buyer fail or
refuse to select a firm within 10 calendar days after written request therefor
by the Representative or the Buyer, such an independent nationally recognized
accounting firm shall be selected in accordance with the rules of the Boston,
Massachusetts office of the AAA (the "Neutral Accountant"). All determinations
pursuant to this paragraph (d) shall be in writing and shall be delivered to the
Buyer and the Representative. The determination of the Neutral Accountant as to
the resolution of any dispute shall be binding and conclusive upon all Parties.
A judgment on the determination made by the Neutral Accountant pursuant to this
Section 1.12 may be entered in and enforced by any court having jurisdiction
thereover.
(e) The fees and expenses of the Neutral Accountant in connection
with the resolution of disputes pursuant to paragraph (c) above shall be shared
equally by the Equity Holders, on the one hand, and the Buyer, on the other
hand; provided that if the Neutral Accountant determines that one such party has
adopted a position or positions with respect to the Closing Balance Sheet or the
calculation of the Closing Net Asset Value Adjustment that is frivolous or
clearly without merit, the Neutral Accountant may, in its discretion, assign a
greater portion of any such fees and expenses to such party. Any such fees and
expenses that are the responsibility of the Equity Holders pursuant to this
paragraph (e) shall be funded from the Indemnification Escrow Shares.
(f) Immediately upon the expiration of the 30-day period for
giving the Dispute Notice, if no such notice is given, or upon notification by
the Representative to the Buyer, that no such notice will be given, or
immediately upon the resolution of disputes, if any, pursuant to this Section
1.12, the Preliminary Base Purchase Price shall be adjusted as follows (as so
adjusted, the "Adjusted Base Purchase Price"):
(i) If the Closing Net Asset Value Adjustment is negative,
such deficiency shall be deducted from the Preliminary Base Purchase Price to
obtain the Adjusted Base Purchase Price,
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and the Buyer shall be entitled to recover such deficiency pursuant to the terms
of the Indemnification Escrow Agreement;
(ii) If the Closing Net Asset Value Adjustment is zero, the
Adjusted Base Purchase Price shall be equal to the Preliminary Base Purchase
Price; and
(iii) If the Closing Net Asset Value Adjustment is positive,
such surplus shall be added to the Preliminary Base Purchase Price to obtain the
Adjusted Base Purchase Price, and the Buyer shall deliver to the Exchange Agent
Buyer Common Shares as provided in Section 1.5(d)(ii) hereof.
1.13 Escrow Arrangements.
(a) On the Closing Date, the Buyer shall deliver to the Escrow
Agent a certificate (issued in the name of the Escrow Agent or its nominee)
representing the Indemnification Escrow Shares issuable pursuant to Sections
1.5(d) and 1.6(b)(i). The Indemnification Escrow Shares will be held in escrow
for the purpose of (i) providing security for any adjustment to the amount of
the Preliminary Base Purchase Price pursuant to Section 1.12 and (ii) securing
the indemnification obligations of the Equity Holders set forth in Section 6.1.
The Indemnification Escrow Shares shall be held by the Escrow Agent under the
Indemnification Escrow Agreement pursuant to the terms thereof. The
Indemnification Escrow Shares shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party, and shall be held and disbursed solely for the
purposes and in accordance with the terms of the Indemnification Escrow
Agreement. Equity Holders shall have the right to receive cash dividends (in
conjunction with any general distribution of cash dividends made by the Buyer
with respect to all Buyer Common Shares) with respect to any issued
Indemnification Escrow Shares held on their behalf. The Representative shall
have the right to vote any issued Indemnification Escrow Shares by instructing
the Escrow Agent in accordance with the terms of the Indemnification Escrow
Agreement.
(b) The execution of this Agreement by the Representative and the
adoption of this Agreement and approval of the Merger by the Company
Stockholders shall constitute approval of the Indemnification Escrow Agreement
and of all of the arrangements relating thereto, including the placement of the
Indemnification Escrow Shares in escrow.
1.14 Representative.
(a) In order to efficiently administer the transactions
contemplated hereby, including (i) the determination of the Net Asset Value and
Adjusted Base Purchase Price and (ii) the defense and/or settlement of any
claims for which the Equity Holders may be required to indemnify the Buyer
and/or the Surviving Corporation pursuant to Article VI or Article VIII hereof,
the Company Stockholders, by the approval of the Merger and adoption of this
Agreement, the holders of Options or Warrants by executing amendments to such
Options or Warrants, as applicable, pursuant to Section 1.11(f) hereof, the
Principal Stockholders, by their execution of the Stockholder Agreement, and the
Management Participants, by their execution of the Management Participant
Agreement, shall each be deemed to have designated the Representative as their
representative.
(b) The Company Stockholders, by the approval of the Merger and
adoption of this Agreement, and the holders of Options or Warrants by executing
amendments to such Options or Warrants, as applicable, pursuant to Section
1.11(f) hereof, shall each be deemed to have authorized the Representative (i)
to make all decisions relating to the determination of the Net Asset Value and
the Adjusted Base Purchase Price, (ii) to take all action necessary in
connection with the defense and/or
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settlement of any claims for which the Company Stockholders may be required to
indemnify the Buyer and/or the Surviving Corporation pursuant to Article VI or
Article VIII hereof, (iii) after the Effective Time, to give and receive all
notices required to be given under the Agreement, and (iv) to take any and all
additional action as is contemplated or permitted by this Agreement or the
Indemnification Escrow Agreement to be taken by or on behalf of the Equity
Holders.
(c) The Buyer shall be able to rely conclusively on the instructions
and decisions of the Representative as to the determination of the Net Asset
Value and the Adjusted Base Purchase Price, the settlement of any claims for
indemnification by the Buyer and/or the Surviving Corporation pursuant to
Article VI or Article VIII hereof or any other actions required or contemplated
or permitted to be taken by the Representative hereunder, and no party shall
have any cause of action against the Buyer for any action taken by the Buyer in
reliance upon the instructions or decisions of the Representative.
(d) The Representative will have the right to act as the
representative of the Equity Holders, and to act on behalf of the Equity Holders
and to take any and all actions required or permitted to be taken by the
Representative under this Agreement, with respect to any claims (including
payment thereof) made pursuant to Section 6.1 and with respect to any actions to
be taken by the Representative pursuant to the terms of the Escrow Agreement.
All decisions and actions by the Representative, including without limitation
any agreement between the Representative and the Buyer relating to the
determination of the Net Asset Value and the Adjusted Base Purchase Price or the
defense or settlement of any claims for which the Equity Holders may be required
to indemnify the Buyer and/or the Surviving Corporation pursuant to Article VI
or Article VIII hereof, shall be binding upon all of the Equity Holders, and no
Equity Holder shall have the right to object, dissent, protest or otherwise
contest the same.
(e) The Representative (or any of the directors, officers, agents,
employees or Affiliates thereof) shall incur no liability to the Equity Holders
with respect to any action taken or suffered by the Representative in reliance
upon any notice, direction, instruction, consent, statement, or other document
believed by the Representative to be genuinely and duly authorized, nor for any
other action or inaction with respect to distributions of the Indemnification
Escrow Shares, any defense or settlement of any claims, and the making of
payments with respect thereto, nor with respect to voting or failing to vote the
Indemnification Escrow Shares, except to the extent resulting from the
Representative's own willful misconduct or gross negligence. The Representative
may, in all questions arising under this Agreement, rely on the advice of
counsel, and for anything done, omitted, or suffered in good faith by the
Representative in reliance on such advice, shall not be liable to the Equity
Holders.
(f) In the event that the Representative dies or becomes unable to
perform his, her or its responsibilities as the Representative or resigns from
such position, Trinity Ventures shall appoint a new Representative, and if
within 30 days of such death, inability to perform his, her or its
responsibilities or resignation of the Representative, Trinity Ventures fails to
appoint a new Representative, the Equity Holders receiving an aggregate of
greater than 50% of the Adjusted Merger Consideration shall select another
representative to fill such vacancy and such substituted representative shall be
deemed to be the Representative for all purposes of this Agreement.
(g) The Buyer and the Surviving Corporation shall be entitled to
rely conclusively on a certificate from the Representative with respect to any
action taken by the Representative, and no party shall have any cause of action
against the Buyer for any action taken by the Buyer in reliance upon such a
certificate from the Representative.
(h) The Company Stockholders, by the approval of the Merger and
adoption of this Agreement, and the holders of Options or Warrants by executing
amendments to such Options or Warrants, as applicable, pursuant to Section (a)
hereof, shall
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each be deemed to (i) agree and authorize the Escrow Agent to withhold from the
Indemnification Escrow Shares, if any, otherwise payable to the Equity Holders
under the terms of the Indemnification Escrow Agreement a number of shares
having a value (using a price of $12.50 per share) equal to the reasonable costs
and expenses (including reasonable professional fees) incurred by, or reasonably
anticipated by the Representative to be incurred by, the Representative in
connection with the representation of the Equity Holders in any proceeding
arising out of this Agreement (including all matters concerning claims for
indemnification under Article VI or Article VIII of this Agreement) or the
transactions or agreements related hereto (the "Representative Fees"); (ii)
agree and authorize the Representative to withhold Buyer Common Shares (valued
at $12.50 per share) evidencing the Representative Fees from any shares
otherwise issuable to the Equity Holders pursuant to Section 1.12 hereof (to the
extent such fees are not withheld from the Escrow Shares); and (iii) agree to
reimburse the Representative for the Representative Fees.
(i) The provisions of this Section 1.14 are independent and
severable, are irrevocable and coupled with an interest and shall be enforceable
notwithstanding any rights or remedies that any Equity Holder may have in
connection with the transactions contemplated by this Agreement. Remedies
available at law for any breach of the provisions of this Section 1.14 are
inadequate; therefore, the Buyer and the Surviving Corporation shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
damages if either the Buyer and/or the Surviving Corporation brings an action to
enforce the provisions of this Section 1.14. The provisions of this Section 1.14
shall be binding upon the executors, heirs, legal representatives, personal
representatives, successors and permitted assigns of each Equity Holder, and any
references in this Agreement to a Equity Holder or the Equity Holders shall mean
and include the successors to the Equity Holder's rights hereunder, whether
pursuant to testamentary disposition, the laws of descent and distribution or
otherwise.
1.15 Certificate of Incorporation and By-laws
(a) The Certificate of Incorporation of the Surviving Corporation
immediately following the Effective Time shall be the same as the Certificate of
Incorporation of the Transitory Subsidiary immediately prior to the Effective
Time, except that (i) the name of the corporation set forth therein shall be
changed to the name of the Company and (ii) the identity of the incorporator
shall be deleted.
(b) The By-laws of the Surviving Corporation immediately following
the Effective Time shall be the same as the By-laws of the Transitory Subsidiary
immediately prior to the Effective Time, except that the name of the corporation
set forth therein shall be changed to the name of the Company.
1.16 No Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
1.17 Closing of Transfer Books. At the Effective Time, the stock transfer
books of the Company shall be closed and no transfer of Company Shares shall
thereafter be made. If, after the Effective Time, Certificates are presented to
the Buyer, the Surviving Corporation or the Exchange Agent, they shall be
cancelled and exchanged for Initial Merger Shares in accordance with Section
1.5, subject to Section 1.12 and to applicable law in the case of Dissenting
Shares.
1.18 Withholding Obligations. Each of the Buyer and the Surviving
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to any provision of this Agreement to any Equity
Holders such amounts as it reasonably determines that it is required to deduct
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and withhold with respect to the making of such payment under the Code, or any
other applicable U.S. or foreign law, rule or regulation. The Buyer or the
Surviving Corporation, as the case may be, shall timely pay over such withheld
amounts to the appropriate Governmental Entity on behalf of the Equity Holders
from whom such amounts are withheld in accordance with the Code or such other
applicable U.S. or foreign law, rule, or regulation. To the extent that amounts
are so withheld by the Buyer or the Surviving Corporation, as the case may be,
such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the Equity Holders in respect of which such deduction and
withholding was made by the Buyer or the Surviving Corporation, as the case may
be. The Buyer shall also have the right to collect Forms W-8 or W-9, or such
other forms relating to United States federal withholding obligations as may be
applicable, from the Equity Holders. Each Equity Holder from whom the Buyer or
the Surviving Corporation is required to withhold shall indemnify and hold
harmless the Buyer, the Surviving Corporation and their respective Affiliates
from and against any and all Taxes (but, for the purposes of this Section 1.18,
the term "Taxes" shall not include any penalty or interest) incurred or suffered
by any of them as a result of or relating to the calculation or payment
(including without limitation any errors in the calculation or failure to make
any payment) of any amounts required to be withheld from such Equity Holder
and/or paid to any Governmental Entity in respect of payment of the Merger
Consideration or Management Shares to such Equity Holder or in respect of the
exercise of any Options or Warrants held by such Equity Holder and the payment
of the Option/Warrant Consideration in connection with the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that, except as set forth
in the Disclosure Schedule, the statements contained in this Article II are true
and correct as of the date of this Agreement and will be true and correct as of
the Closing as though made as of the Closing, except to the extent such
representations and warranties are specifically made as of a particular date (in
which case such representations and warranties will be true and correct as of
such date). The Disclosure Schedule shall be arranged in sections and paragraphs
corresponding to the numbered and lettered sections and paragraphs contained in
this Article II, and the disclosures in any section or paragraph of the
Disclosure Schedule shall qualify only (a) the corresponding section or
paragraph in this Article II and (b) other sections or paragraphs in this
Article II to the extent that it is reasonably clear from a reading of the
disclosure that such disclosure also qualifies or applies to such other section
or paragraph.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and Tax good
standing under the laws of the State of Delaware. The Company is duly qualified
to conduct business and is in corporate and Tax good standing under the laws of
each jurisdiction listed in Section 2.1 of the Disclosure Schedule, which
jurisdictions constitute the only jurisdictions in which the nature of the
Company's businesses or the ownership or leasing of its properties requires such
qualification. The Company has all requisite power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. The Company has furnished to the Buyer complete and accurate copies
of its charter and by-laws, each as amended to date. The Company is not in
default under or in violation of any provision of its charter or by-laws.
2.2 Capitalization.
(a) The authorized capital stock of the Company consists of (i)
400,000,000 Common Shares, of which, as of the date of this Agreement,
38,645,605 shares were issued and outstanding and 3,729,109 shares were held in
the treasury of the Company, and (ii) 222,824,205 Preferred Shares, of which (A)
7,523,366 shares have been designated as Series A Convertible Preferred
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Stock, of which, as of the date of this Agreement, 7,433,330 shares were issued
and outstanding, (B) 122,463,448 shares have been designated as Series B
Convertible Preferred Stock, of which, as of the date of this Agreement,
110,189,329 shares were issued and outstanding, and (C) 92,837,391 shares have
been designated as Series C Convertible Preferred Stock, of which, as of the
date of this Agreement, 86,866,934 shares were issued and outstanding.
(b) Section 2.2(b) of the Disclosure Schedule sets forth a complete
and accurate list, as of the date of the Agreement, of the holders of Company
Shares, showing the number of shares and the class or series of such shares held
by each Company Stockholder and (for shares other than Common Shares) the number
of Common Shares (if any) into which such shares are convertible. Section 2.2(b)
of the Disclosure Schedule also indicates all outstanding Company Shares that
constitute restricted stock or that are otherwise subject to a repurchase or
redemption right, indicating the name of the applicable stockholder, the vesting
schedule (including any acceleration provisions with respect thereto), and the
repurchase price payable by the Company. All of the issued and outstanding
Company Shares have been and on the Closing Date will be duly authorized,
validly issued, fully paid, nonassessable and free of all preemptive rights. All
of the issued and outstanding Company Shares have been offered, issued and sold
by the Company in compliance with all applicable federal and state securities
laws.
(c) Section 2.2(c) of the Disclosure Schedule sets forth a complete
and accurate list, as of the date of this Agreement, of: (i) all Company Stock
Plans, indicating for each Company Stock Plan the number of Company Shares
issued to date under such Plan, the number of Company Shares subject to
outstanding options under such Plan and the number of Company Shares reserved
for future issuance under such Plan, (ii) all holders of outstanding Options,
indicating with respect to each Option the Company Stock Plan under which it was
granted, the number of Company Shares subject to such Option, the exercise
price, the date of grant, and the vesting schedule (including any acceleration
provisions with respect thereto), and (iii) all holders of outstanding Warrants,
indicating with respect to each Warrant the agreement or other document under
which it was granted, the number of shares of capital stock, and the class or
series of such shares, subject to such Warrant, the exercise price, the date of
issuance and the expiration date thereof. The Company has provided to the Buyer
complete and accurate copies of all Company Stock Plans and forms of all stock
option agreements evidencing Options and all agreements evidencing Warrants. All
of the Company Shares subject to Options and Warrants will be, upon issuance
pursuant to the exercise of such instruments, duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights.
(d) Except as set forth in Section 2.2(c) or 2.2(d) of the
Disclosure Schedule, (i) no subscription, warrant, option, convertible security
or other right (contingent or otherwise) to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, (ii) the Company has
no obligation (contingent or otherwise) to issue any subscription, warrant,
option, convertible security or other such right, or to issue or distribute to
holders of any shares of its capital stock any evidences of indebtedness or
assets of the Company, (iii) the Company has no obligation (contingent or
otherwise) to purchase, redeem or otherwise acquire any Company Shares or any
interest therein or to pay any dividend or to make any other distribution in
respect thereof, and (iv) there are no outstanding or authorized stock
appreciation, phantom stock or similar rights with respect to the Company.
(e) Except as set forth in Section 2.2(e) of the Disclosure
Schedule, there is no agreement, written or oral, between the Company and any
holder of its securities, or, to the Company's knowledge, among any holders of
its securities, relating to the sale or transfer (including agreements relating
to rights of first refusal, co sale rights or "drag along" rights), registration
under the Securities Act, or voting, of the capital stock of the Company.
-15-
(f) There are no claims by any stockholder or former stockholder of
the Company, or any other person or entity (including any officer or director of
the Company or any Subsidiary), seeking to assert, or based upon, any rights
under the charter, by-laws or comparable organizational documents of the
Company.
2.3 Authorization. The Company has all requisite corporate power and
authority to execute and deliver this Agreement and to perform its respective
obligations hereunder. The execution and delivery by the Company of this
Agreement and the agreements provided for herein, and, subject to obtaining the
Requisite Stockholder Approval, the performance by the Company of this Agreement
and the consummation by the Company of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate and
other action on the part of the Company. Without limiting the generality of the
foregoing, the Board of Directors of the Company, at a meeting duly called and
held, by the unanimous vote of all directors (i) determined that the Merger is
fair and in the best interests of the Company and its stockholders, (ii) adopted
this Agreement in accordance with the provisions of the Delaware General
Corporation Law, and (iii) directed that this Agreement and the Merger be
submitted to the stockholders of the Company for their adoption and approval and
resolved to recommend that the stockholders of the Company vote in favor of the
adoption of this Agreement and the approval of the Merger. This Agreement and
all other agreements provided for herein have been or will be as of the Closing
Date duly and validly executed and delivered by the Company and constitutes or
will constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and by general equitable principles, including those
limiting the availability of specific performance, injunctive relief and other
equitable remedies and those providing for equitable defenses.
2.4 Noncontravention. Subject to the filing of the Certificate of Merger
as required by the Delaware General Corporation Law, to the filing requirements
of the Xxxx-Xxxxx-Xxxxxx Act, to the regulatory approvals, if any, required
under Indian laws, and to the filing or other regulatory requirements of any
other applicable U.S. or foreign regulatory body, neither the execution and
delivery by the Company of this Agreement or any other agreement provided for
herein, nor the consummation by the Company of the transactions contemplated
hereby or thereby, will (a) conflict with or violate any provision of the
Certificate of Incorporation or By-laws of the Company each as amended or
restated to date, or the Certificate of Incorporation or By-laws (or comparable
organizational documents) of any Subsidiary each as amended or restated to date
, (b) require on the part of the Company, any Subsidiary or any Company
Stockholder or Management Participant any notice to or filing with, or any
permit, authorization, consent or approval of, any Governmental Entity, (c)
except as set forth in Section 2.4 of the Disclosure Schedule, conflict with,
result in a breach of, constitute (with or without due notice or lapse of time
or both) a default under, result in the acceleration of obligations under,
create in any party the right to accelerate, terminate, modify or cancel, or
require any notice, consent or waiver under, any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, instrument of indebtedness, Security Interest or other
arrangement to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound or to which any of the assets of the Company
or any Subsidiary are subject, (d) result in the imposition of any Security
Interest upon any assets of the Company or any Subsidiary or (e) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company, any Subsidiary, any Company Stockholder or Management Participant or
any of their respective properties or assets. Section 2.4 of the Disclosure
Schedule sets forth a true, correct and complete list of all consents and
approvals of third parties and Governmental Entities, and all filings and
notices, that are required in connection with the consummation by the Company,
the Company Stockholders and the Management Participants of the transactions
contemplated by this Agreement.
-16-
2.5 Subsidiaries.
(a) Section 2.5 of the Disclosure Schedule sets forth: (i) the name
of each Subsidiary; (ii) the number and type of outstanding equity securities of
each Subsidiary and a list of the holders thereof; (iii) the jurisdiction of
organization of each Subsidiary; (iv) the names of the officers and directors of
each Subsidiary; and (v) the jurisdictions in which each Subsidiary is qualified
or holds licenses to do business as a foreign corporation or other entity.
(b) Each Subsidiary is a corporation duly organized, validly
existing and in corporate and Tax good standing under the laws of the
jurisdiction of its incorporation. Each Subsidiary is duly qualified to conduct
business and is in corporate and Tax good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification. Each Subsidiary has all requisite
power and authority to carry on the businesses in which it is engaged and to own
and use the properties owned and used by it. The Company has delivered to the
Buyer complete and accurate copies of the charter, by-laws or other
organizational documents of each Subsidiary. No Subsidiary is in default under
or in violation of any provision of its charter, by-laws or other organizational
documents. All of the issued and outstanding shares of capital stock of each
Subsidiary are duly authorized, validly issued, fully paid, nonassessable and
free of preemptive rights. All shares of each Subsidiary that are held of record
or owned beneficially by either the Company or any Subsidiary are held or owned
free and clear of any restrictions on transfer (other than restrictions under
the Securities Act and state securities laws), claims, Security Interests,
options, warrants, rights, contracts, calls, commitments, equities and demands.
There are no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company or any Subsidiary is a party or which are
binding on any of them providing for the issuance, disposition or acquisition of
any capital stock of any Subsidiary. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to any Subsidiary.
There are no voting trusts, proxies or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary.
(c) The Company does not control directly or indirectly or have any
direct or indirect equity participation or similar interest in any corporation,
partnership, limited liability company, joint venture, trust or other business
association or entity which is not a Subsidiary.
2.6 Financial Statements.
(a) The Company has provided to the Buyer the Financial Statements
and the Current India Financial Statements. The Financial Statements have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby; provided, however, that the Financial Statements
referred to in clause (b) of the definition of such term are subject to normal
recurring year-end adjustments (which, individually and in the aggregate, will
not be material) and do not include footnotes.
(b) Each of the Financial Statements fairly presents the assets,
liabilities, business, financial condition, results of operations and cash flows
of the Company as of the date thereof and for the period referred to therein,
and is consistent with the books and records of the Company. The accruals for
vacation expenses, severance payments and Taxes are accounted for on the Most
Recent Balance Sheet and are adequate and properly reflect the expenses
associated therewith in accordance with GAAP. The Current India Financial
Statements fairly present the assets, liabilities, business, financial
condition, results of operations and cash flows of the India Subsidiary as of
the date thereof and for the period referred to therein, and are consistent with
the books and records of the India Subsidiary.
-17-
(c) The Company maintains accurate books and records reflecting its
assets and liabilities and maintains a system of internal accounting controls
which provide reasonable assurance that (i) transactions are executed with
management's authorization, (ii) transactions are recorded as necessary to
permit preparation of the financial statements of the Company and to maintain
accountability for the Company's assets, (iii) access to assets of the Company
is permitted only in accordance with management's authorization, (iv) the
reporting of assets of the Company is compared with existing assets at regular
intervals, and (v) accounts, notes and other receivables and inventory were
recorded accurately, and proper and adequate procedures are implemented to
effect the collection thereof on a current and timely basis.
(d) Section 2.6(d) of the Disclosure Schedule lists, and the Company
has delivered to the Buyer copies of the documentation creating or governing,
all securitization transactions and "off-balance sheet arrangements" (as defined
in Item 303 (a)(4) of Regulation S-K of the Securities and Exchange Commission)
effected by the Company since June 30, 2001. Section 2.6(d) of the Disclosure
Schedule lists all non-audit services performed by the Company's auditors for
the Company since June 30, 2001.
2.7 Absence of Certain Changes. Since the Most Recent Balance Sheet Date,
(a) there has occurred no event or development which, individually or in the
aggregate, has had, or would, based on information then known to the Company,
reasonably be expected to have in the future, a Company Material Adverse Effect,
and (b) neither the Company nor any Subsidiary has taken any of the actions set
forth in paragraphs (a) through (t) of Section 4.5.
2.8 Undisclosed Liabilities. The Company does not have any liability
(whether absolute or contingent, whether liquidated or unliquidated and whether
due or to become due), except for (a) liabilities shown on the Most Recent
Balance Sheet, a copy of which is attached to Section 2.8 of the Disclosure
Schedule, (b) liabilities which have arisen since the Most Recent Balance Sheet
Date in the Ordinary Course of Business and (c) contractual and other
liabilities incurred in the Ordinary Course of Business which are not required
by GAAP to be reflected on a balance sheet and that are not in the aggregate
material.
2.9 Tax Matters.
(a) The Company has filed on a timely basis all Tax Returns that it
was required to file, and all such Tax Returns were complete and accurate.
Neither the Company nor any Subsidiary is or has ever been a member of a group
of corporations with which it has filed (or been required to file) consolidated,
combined, unitary or similar Tax Returns, other than a group of which only the
Company and the Subsidiaries are or were members. Each of the Company and the
Subsidiaries has paid on a timely basis all Taxes that were due and payable
whether or not shown on any Tax Return. The unpaid Taxes of the Company and the
Subsidiaries for Tax periods through the Most Recent Balance Sheet Date do not
exceed the accruals and reserves for Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) set forth on the Most Recent Balance Sheet. All unpaid Taxes of the
Company or any Subsidiary attributable to periods commencing after the Most
Recent Balance Sheet Date arose in the Ordinary Course of Business and are
similar in nature and amount to Taxes which arose during the comparable period
of time in the immediate preceding fiscal year. All Taxes that the Company or
any Subsidiary is or was required by law to withhold or collect have been duly
withheld or collected and, to the extent required, have been paid to the proper
Governmental Entity.
(b) The Company has delivered or made available to the Buyer
complete and accurate copies of all federal income Tax Returns, examination
reports and statements of deficiencies
-18-
assessed against or agreed to by the Company or any Subsidiary with respect to
all taxable periods commencing on or after June 30, 2001 (or such earlier
taxable periods with respect to which the applicable statute of limitations does
not preclude the assessment of additional Tax). The U.S. federal income Tax
Returns of the Company and each Subsidiary and the Tax Returns of the India
Subsidiary under the Indian Income Tax Act, 1961, have been audited by the
Internal Revenue Service or comparable Indian Governmental Entity or are closed
by the applicable statute of limitations for all taxable years through the
taxable year specified in Section 2.9(b) of the Disclosure Schedule. The Company
has delivered or made available to the Buyer complete and accurate copies of all
other Tax Returns of the Company and the Subsidiaries together with all related
examination reports and statements of deficiency for all periods for which the
applicable period for the assessment of the Tax has not been closed by any
applicable statute of limitations. No examination or audit of any Tax Return of
the Company or any Subsidiary by any Governmental Entity is currently in
progress or, to the knowledge of the Company, threatened or contemplated.
Neither the Company nor any Subsidiary has been informed by any jurisdiction
that the jurisdiction believes that the Company or Subsidiary was required to
file any Tax Return that was not filed. Neither the Company nor any Subsidiary
has waived any statute of limitations with respect to Taxes or agreed to an
extension of time with respect to a Tax assessment or deficiency.
(c) Neither the Company nor any Subsidiary: (i) has ever been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(l)(A)(ii) of the Code; (ii) has made any payments, is obligated to make
any payments, or is a party to any agreement that could obligate it to make any
payments that may be treated as an "excess parachute payment" under Section 280G
of the Code (determined without regard to Section 280G(b)(4) of the Code); (iii)
has any actual or potential liability for any Taxes of any person (other than
the Company or any Subsidiary) under Treasury Regulation Section 1.1502-6 (or
any similar provision of federal, state, local, or foreign law), or as a
transferee or successor, by contract, or otherwise; and (iv) is not or has never
been required to make a basis reduction pursuant to Treasury Regulation Section
1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Company or any Subsidiary: (i) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; or
(ii) directly or indirectly secures any debt the interest on which is Tax exempt
under Section 103(a) of the Code.
(e) There are no adjustments under Section 481 of the Code (or any
similar adjustments under any provision of the Code or the corresponding
foreign, state or local Tax laws) that are required to be taken into account by
the Company or any Subsidiary in any period ending after the Closing Date by
reason of a change in method of accounting in any taxable period ending on or
before the Closing Date.
(f) Section 2.9(f) of the Disclosure Schedule sets forth the amount
of any net operating loss, net capital loss, unused investment, foreign Tax or
other credit, and excess charitable contribution allocable to the Company and
each Subsidiary as of the most recent practicable date.
(g) Neither the Company nor any Subsidiary has ever participated in
an international boycott as defined in Section 999 of the Code.
(h) Neither the Company nor any Subsidiary has distributed to its
stockholders or security holders stock or securities of a controlled
corporation, nor has stock or securities of the Company been distributed, in a
transaction to which Section 355 of the Code applies (i) in the two years prior
to the date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a "plan" or "series of
-19-
related transactions" (within the meaning of Section 355(e) of the Code) that
includes the transactions contemplated by this Agreement.
(i) Neither the Company nor any Subsidiary is or has been a passive
foreign investment company within the meaning of Sections 1291-1297 of the Code.
(j) Neither the Company nor any Subsidiary has incurred (or been
allocated) an "overall foreign loss" as defined in Section 904(f)(2) of the Code
which has not been previously recaptured in full as provided in Sections
904(f)(1) and/or 904(f)(3) of the Code.
(k) Neither the Company nor any Subsidiary is a party to a gain
recognition agreement under Section 367 of the Code.
(l) Section 2.9 of the Disclosure Schedule sets forth a complete and
accurate list of any Subsidiaries for which a "check-the-box" election under
Section 7701 has been made.
(m) To the knowledge of the Company and any Subsidiary, neither the
Company nor any Subsidiary is or ever has been a party to a transaction or
agreement that is in conflict with the Tax rules on transfer pricing in any
relevant jurisdiction.
(n) Section 2.9 of the Disclosure Schedule sets forth a complete and
accurate list of all material agreements, rulings, settlements or other Tax
documents relating to Tax incentives between the Company or any Subsidiary and a
Governmental Entity.
(o) Each of the Company and the Subsidiaries has delivered or made
available to the Buyer all payroll and other compensation records in respect of
the Management Participants, Company Stockholders and Option and Warrant
holders, necessary for the Buyer and/or the Surviving Corporation to fulfill
their respective withholding obligations as described in Section 1.18 of this
Agreement and, to the extent known to the Company or any Subsidiary, such other
information as may be necessary to (i) identify any other Equity Holder for whom
the Buyer and/or the Surviving Corporation may have a withholding obligation
under Section 1.18 and (ii) fulfill their withholding obligations under Section
1.18 with respect to such Equity Holders.
2.10 Assets.
(a) Except as disclosed in Section 2.10(a) of the Disclosure
Schedule, the Company or the applicable Subsidiary is the true and lawful owner,
and has good title to, all of the assets (tangible or intangible) purported to
be owned by the Company or the Subsidiaries, free and clear of all Security
Interests. Each of the Company and the Subsidiaries owns or leases all tangible
assets necessary or desirable for the conduct of its businesses as presently
conducted, which tangible assets are reflected in the Financial Statements
(other than to the extent disposed of in the Ordinary Course of Business). Each
such tangible asset is free from defects, has been maintained in accordance with
normal industry practice, is in good operating condition and repair (subject to
normal wear and tear) and is suitable for the purposes for which it presently is
used.
(b) Section 2.10(b) of the Disclosure Schedule lists individually
(i) all fixed assets (within the meaning of GAAP) of the Company or the
Subsidiaries, indicating the cost, accumulated book depreciation (if any) and
the net book value of each such fixed asset as of December 31, 2004, and (ii)
all other assets of a tangible nature (other than inventories) of the Company or
the Subsidiaries.
-20-
(c) Each item of equipment, motor vehicle and other asset that the
Company or a Subsidiary has possession of pursuant to a lease agreement or other
contractual arrangement is in such condition that, upon its return to its lessor
or owner in its present condition at the end of the relevant lease term or as
otherwise contemplated by the applicable lease or contract, the obligations of
the Company or such Subsidiary to such lessor or owner will have been discharged
in full.
2.11 Owned Real Property(a) . Neither the Company nor any Subsidiary does
own, or has ever owned, any real property.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule lists
all Leases and lists the term of such Lease, any extension and expansion
options, and the rent payable thereunder. The Company has delivered to the Buyer
complete and accurate copies of the Leases. With respect to each Lease:
(a) such Lease is legal, valid, binding, enforceable and in full
force and effect;
(b) such Lease will continue to be legal, valid, binding,
enforceable against the Company and, to the Company's knowledge, against each
other party thereto and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior to
the Closing;
(c) neither the Company, any Subsidiary nor, to the knowledge of the
Company, any other party to the Lease is in breach or violation of, or default
under, any such Lease, and no event has occurred, is pending or, to the
knowledge of the Company, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a breach or default by the Company
or any Subsidiary or, to the knowledge of the Company, any other party under
such Lease;
(d) there are no disputes, oral agreements or forbearance programs
in effect as to such Lease;
(e) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold;
(f) the Company is not aware of any Security Interest, easement,
covenant or other restriction applicable to the real property subject to such
lease which would reasonably be expected to impair the current uses or the
occupancy by the Company or a Subsidiary of the property subject thereto;
(g) no construction, alteration or other leasehold improvement work
with respect to the Lease remains to be paid for or performed by the Company or
any Subsidiary;
(h) neither the Company nor any Subsidiary is obligated to pay any
leasing or brokerage commission relating to such Lease and will not have any
obligation to pay any leasing or brokerage commission upon the renewal of the
Lease; and
(i) the Financial Statements contain adequate reserves to provide
for the restoration of the property subject to the Lease at the end of the
respective Lease term, to the extent required by the Lease.
-21-
2.13 Intellectual Property.
(a) Company Owned Intellectual Property. The Company or a Subsidiary
is the sole and exclusive owner of all Company Owned Intellectual Property, free
and clear of any Security Interests. No other person or business entity has any
joint ownership interest, royalty interest, or license right to any of the
Company Owned Intellectual Property, and, to the knowledge of the Company, no
other person or business entity is infringing, violating or misappropriating any
of the Company Owned Intellectual Property. Section 2.13(a) of the Disclosure
Schedule lists each agreement, contract, assignment or other instrument pursuant
to which the Company or any Subsidiary has at any time since the date of its
incorporation obtained any ownership interest in or to each item of Company
Owned Intellectual Property.
(b) Company Intellectual Property. The Company Intellectual Property
constitutes all Intellectual Property (i) used in the operation of the business
of the Company or any Subsidiary or necessary for the operation of such business
as presently conducted by the Company and its Subsidiaries, (ii) necessary to
develop, test, modify, make, use, sell, have made, used and sold, import,
reproduce, market and distribute the Customer Deliverables in the manner
currently done by the Company and its Subsidiaries, and (iii) necessary to
operate and use the Internal Systems as they are currently used by the Company
and its Subsidiaries. Each item of Company Intellectual Property will be owned
or available for use by the Company or the applicable Subsidiary immediately
following the Closing on substantially identical terms and conditions as it was
immediately prior to the Closing.
(c) Customer Deliverables. Except as set forth in the Disclosure
Schedule or as alleged in a Lawsuit, none of the Customer Deliverables, or the
development, manufacture, importation, marketing, sale, distribution, provision
or use thereof by the Company, any Subsidiary or any reseller, distributor,
customer or user thereof, or the conduct by the Company or any Subsidiary of its
business, infringes, violates or constitutes a misappropriation of (or in the
past infringed, violated or constituted a misappropriation of) any Intellectual
Property rights of any other person or business entity. Neither the Company nor
any Subsidiary has received any complaint, claim or notice alleging any such
infringement, violation or misappropriation (including any notification that a
license under any patent is or may be required). Neither the Company nor any
Subsidiary has agreed to indemnify any person against any infringement,
violation or misappropriation of any Intellectual Property rights with respect
to any Customer Deliverables, other than as required by customers in the
Ordinary Course of Business pursuant to (i) the Company's and each Subsidiary's
standard terms and conditions of sale, a copy of which has previously been
delivered to the Buyer and (ii) such customers' standard terms and conditions of
sale, where the annual amounts payable by or to the Company and its Subsidiaries
under all such standard terms and conditions of sale does not exceed $250,000
per contract.
(d) Intellectual Property Registrations. Section 2.13(d) of the
Disclosure Schedule identifies each Intellectual Property Registration that is
registered or filed in the name of the Company or any Subsidiary, alone or
jointly with others, in each case enumerating specifically the applicable filing
or registration number, title, subject matter, jurisdiction in which the filing
was made or from which registration issued, date of filing or issuance, names of
current registered owners (if other than the Company), and status of any
required issuance, renewal, maintenance or other payments due within one year
following the date of this Agreement. All assignments of Intellectual Property
Registrations have been properly executed and recorded. To the knowledge of the
Company, all Intellectual Property Registrations to the Company are valid and
enforceable and all issuance, renewal, maintenance and other payments that are
or have become due with respect thereto have been timely paid by or on behalf of
the Company or any Subsidiary, as applicable.
-22-
(e) Grant of Rights With Respect to Company Intellectual Property.
Section 2.13(e) of the Disclosure Schedule identifies each license, covenant or
other agreement pursuant to which the Company has assigned, transferred,
licensed, distributed or otherwise granted any right or access to any other
person or business entity, or covenanted not to assert any right, with respect
to any Company Intellectual Property other than non-exclusive licenses entered
into with customers of the Company or any Subsidiary in the Ordinary Course of
Business.
(f) Company Licensed Intellectual Property. Section 2.13(f) of the
Disclosure Schedule identifies each item of Company Licensed Intellectual
Property that the Company or any Subsidiary currently licenses that is owned by
a party other than the Company or such Subsidiary, and the license agreement
pursuant to which the Company or such Subsidiary licenses such Intellectual
Property (other than commercially available, off-the-shelf software programs
that are part of the Internal Systems and are licensed by the Company or such
Subsidiary pursuant to standard "shrink-wrap" licenses, with respect to which,
although not listed in Section 2.13(f) of the Disclosure Schedule, the
representations set forth in this Section 2.13(f) are true). Each license
agreement referenced in this clause (f) and in Section 2.13(a) above is legal,
valid, binding and enforceable against the Company or the applicable Subsidiary,
and, to the knowledge of the Company, against each other party thereto, except
as enforceability may be limited by bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors generally and by equitable principles, including those
limiting the availability of specific performance, injunctive relief and other
equitable remedies and those providing for equitable defenses, and is in full
force and effect. Each such license agreement will continue to be legal, valid,
binding and enforceable against the Company or such Subsidiary and, to the
knowledge of the Company, each other party thereto, except as enforceability may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws relating to or affecting the rights of
creditors generally and by equitable principles, including those limiting the
availability of specific performance, injunctive relief and other equitable
remedies and those providing for equitable defenses, and will continue to be in
full force and effect, immediately following the Closing in accordance with the
terms thereof as in effect prior to the Closing. Neither the Company nor any
Subsidiary nor, to the knowledge of the Company, any other party to such license
agreement is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification or acceleration thereunder.
(g) Company Source Code. Neither the Company nor any Subsidiary has
licensed, distributed or disclosed, and knows of no distribution or disclosure
by others (including its employees and contractors) of, the source code for any
Software ("Company Source Code") to any other person or business entity, other
than the Company and its Subsidiaries, and the Company and the Subsidiaries have
taken reasonable physical and electronic security measures to prevent disclosure
of such Company Source Code. To the knowledge of the Company, no event has
occurred, and no circumstance or condition exists, that (with or without notice
or lapse of time, or both) will, or would reasonably be expected to, nor will
the consummation of the transactions contemplated hereby, result in the
disclosure or release of such Company Source Code by the Company, any Subsidiary
or any escrow agent(s) or any other person to any third party.
(h) Software. None of the Software includes "shareware", "freeware"
or other code that was developed by or obtained by the Company or any Subsidiary
from third parties. Except as set forth in Section 2.13(h) of the Disclosure
Schedule, neither the Company nor any Subsidiary has incorporated Open Source
Materials into, or combined Open Source Materials with, the Software. To the
extent Open Source Materials are used in any way to provide the Customer
Deliverables, such use has not caused any Software to become subject to GNU
General Public License ("GPL") requirements.
-23-
2.14 Inventory. Other than general office supplies, neither the Company
nor any Subsidiary maintains any inventory.
2.15 Contracts.
(a) Section 2.15(a) of the Disclosure Schedule lists the following
agreements to which the Company or any Subsidiary is a party as of the date of
this Agreement (each a "Contract"):
(i) any agreement (or group of related agreements) for the
lease of personal property from or to third parties;
(ii) any agreement (or group of related agreements):
(A) with (1) any customer of the business of the Company
and the Subsidiaries (other than agreements with any such customer that is not
among the top 70 customers by revenue of the Company or any Subsidiary during
the three-month period ended December 31, 2004 (the "Top Customers"), which
agreements are not listed in Section 2.15(a) of the Disclosure Schedule but with
respect to which the representations set forth in this Section 2.15 are true;
Section 2.15(a)(ii)(A)(1) of the Disclosure Schedule sets forth the customer
name and corresponding redacted contract number for each Top Customer Contract
provided by the Company to the Buyer), (2) any network service provider that was
in effect at any time since January 1, 2004, and (3) the top 20 vendors (by
payment amount) to the Company for the twelve-month period ended December 31,
2004, and the eight-month period ended February 28, 2005;
(B) which involves more than the sum of $50,000 over the
term of the agreement (other than customer agreements, agreements with network
service providers and vendor agreements); or
(C) in which the Company or any Subsidiary has granted
manufacturing rights, "most favored nation" pricing provisions or exclusive
marketing or distribution rights relating to any services, products or territory
or has agreed to purchase a minimum quantity of goods or services or has agreed
to purchase goods or services exclusively from a certain party;
(iii) any agreement concerning the establishment or operation
of a partnership, joint venture or limited liability company;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness (including capitalized lease obligations but
excluding trade payables to vendors incurred in the Ordinary Course of Business)
or under which it has imposed (or may impose) a Security Interest on any of its
assets, tangible or intangible;
(v) any agreement for the disposition of any significant
portion of the assets or business of the Company or any Subsidiary (other than
sales of products and disposition of obsolete equipment in the Ordinary Course
of Business) or any agreement for the acquisition of the assets or business of
any other entity (other than purchases of inventory or components in the
Ordinary Course of Business);
(vi) any agreement concerning confidentiality, noncompetition
or non-solicitation (other than confidentiality agreements with customers or
employees of the Company or any Subsidiary set forth in the Company's or the
applicable Subsidiary's standard terms and conditions of sale
-24-
or standard form of employment agreement, copies of which have previously been
delivered to the Buyer);
(vii) any employment or consulting agreement (other than
agreements that are terminable at will without any cost, penalty or other
obligation to the Company or any Subsidiary);
(viii) any agreement involving any current or former officer,
director or stockholder of the Company or any Subsidiary;
(ix) any agency, distributor, sales representative, franchise
or similar agreements to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary is bound;
(x) any agreement which contains any provisions requiring the
Company or any Subsidiary to indemnify any other party (excluding indemnities
contained in agreements for the provision, purchase, sale or license of Customer
Deliverables entered into in the Ordinary Course of Business); and
(xi) any other agreement (or group of related agreements) (A)
not entered into in the Ordinary Course of Business or (B) the termination or
modification of which would have a Company Material Adverse Effect.
(b) The Company has delivered to the Buyer a complete and accurate
copy of each Contract (as amended to date). With respect to each Contract: (i)
the Contract is legal, valid, binding and enforceable against the Company or
applicable Subsidiary and, to the Company's knowledge, against each other party
thereto, and in full force and effect, except as enforceability may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors generally
and by general equitable principles, including those limiting the availability
of specific performance, injunctive relief and other equitable remedies and
those providing for equitable defenses; (ii) the Contract will continue to be
legal, valid, binding and enforceable against the Company or applicable
Subsidiary and, to the Company's knowledge, against each other party thereto
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing, except as enforceability may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
other similar laws relating to or affecting the rights of creditors generally
and by general equitable principles, including those limiting the availability
of specific performance, injunctive relief and other equitable remedies and
those providing for equitable defenses; and (iii) neither the Company, any
Subsidiary nor, to the knowledge of the Company, any other party, is in breach
or violation of, or default under, any such Contract, and no event has occurred,
is pending or, to the knowledge of the Company, is threatened, which, after the
giving of notice, with lapse of time, or otherwise, would constitute a breach or
default by the Company, any Subsidiary or, to the knowledge of the Company, any
other party under such Contract.
(c) Neither the Company nor any Subsidiary is a party to any oral
contract, agreement or other arrangement which, if reduced to written form,
would be required to be listed in Section 2.15(a) of the Disclosure Schedule
under the terms of Section 2.15(a). Neither the Company nor any Subsidiary is a
party to any written or oral arrangement (i) to perform services or sell
products which is expected to be performed at, or to result in, a loss or (ii)
for which the customer has already been billed or paid that have not been fully
accounted for on the Most Recent Balance Sheet. Neither the Company nor any
Subsidiary is restricted by any Contract from carrying on business anywhere in
the world.
-25-
2.16 Accounts Receivable. All accounts receivable of the Company and its
Subsidiaries reflected on the Most Recent Balance Sheet (other than those paid
since such date) are valid receivables subject to no setoffs or counterclaims
and are current and collectible (within 90 days after the date on which it first
became due and payable), net of the applicable reserve for bad debts on the Most
Recent Balance Sheet. A complete and accurate list of the accounts receivable as
of December 31, 2004, showing the aging thereof, is included in Section 2.16 of
the Disclosure Schedule. All accounts receivable of the Company and the
Subsidiaries that have arisen since the Most Recent Balance Sheet Date are valid
receivables subject to no setoffs or counterclaims and are collectible (within
90 days after the date on which it first became due and payable), net of a
reserve for bad debts in an amount proportionate to the reserve shown on the
Most Recent Balance Sheet. Neither the Company nor any Subsidiary has received
any written notice from an account debtor stating that any account receivable in
an amount in excess of $5,000 is subject to any contest, claim or setoff by such
account debtor.
2.17 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company or any Subsidiary.
2.18 Insurance. Section 2.18 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, comprehensive general
liability, workers compensation, business interruption, environmental, product
liability and automobile insurance policies and bond and surety arrangements) to
which the Company or any Subsidiary is a party, a named insured or otherwise the
beneficiary of coverage, all of which are in full force and effect. Except as
set forth in Section 2.18 of the Disclosure Schedule, there is no claim pending
under any such policy as to which coverage has been questioned, denied or
disputed by the underwriter of such policy. All premiums due and payable under
all such policies have been paid, neither the Company nor any Subsidiary will be
liable for retroactive premiums or similar payments, and the Company and its
Subsidiaries are otherwise in compliance with the terms of such policies.
Neither the Company nor any Subsidiary has any knowledge of any threatened
termination of, or pending premium increase with respect to, any such policy.
Each such policy will continue to be enforceable and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing. Section 2.18 of the Disclosure Schedule
identifies all claims asserted by the Company pursuant to any insurance policy
since January 1, 2001 and describes the nature and status of each such claim.
2.19 Litigation. Section 2.19 of the Disclosure Schedule identifies and
contains a brief description of (a) any unsatisfied judgment, order, decree,
stipulation or injunction, and (b) any claim, complaint, action, suit,
proceeding, hearing or investigation of or in any Governmental Entity or by a
private party or before any arbitrator, in the case of each of clauses (a) and
(b) to which the Company or any Subsidiary is a party or, to the knowledge of
the Company, is threatened to be made a party. None of the complaints, actions,
suits, proceedings, hearings and investigations set forth in Section 2.19 of the
Disclosure Schedule, individually or collectively, could have a Company Material
Adverse Effect.
2.20 Warranties.
(a) No service or product provided, manufactured, sold, leased,
licensed or delivered by the Company or any Subsidiary is subject to any
guaranty, warranty, right of return, right of credit or other indemnity other
than (i) the applicable standard terms and conditions of sale of each Customer
Deliverable, which are set forth in Section 2.20(a) of the Disclosure Schedule,
and (ii) manufacturers' warranties for which the Company has no liability.
Section 2.20(a) of the Disclosure Schedule sets forth the aggregate expenses
incurred and credits issued in fulfilling the Company's obligations under
service-level agreements and similar guarantees with respect to the Company's
services that were incurred or issued during the Company's most recent fiscal
year and the interim period covered by the Financial
-26-
Statements; and the Company does not know of any reason why such expenses should
significantly increase as a percentage of sales in the future.
(b) The reserve for warranty claims set forth on the Most Recent
Balance Sheet and any reserves for warranty claims created by the Company in the
Ordinary Course of Business subsequent to the Most Recent Balance Sheet Date are
adequate and were calculated in accordance with GAAP consistently applied.
(c) The Company has no liability to any customer in connection with
any service provided or product manufactured, sold, leased or delivered by the
Company to provide the customer with any other services or products of the
Company on pre-negotiated terms, including without limitation for upgrades to
other services or products at prices below the Company's published price for
such services or products. The Company has no liability to any customer in
connection with any service provided or product manufactured, sold, leased or
delivered by the Company other than those arising in the Ordinary Course of
Business.
2.21 Employees.
(a) Section 2.21(a) of the Disclosure Schedule contains a list of
all employees of the Company and each Subsidiary, along with the position, date
of hire, annual rate of compensation (or with respect to employees compensated
on an hourly, commission, piece rate or per diem basis, the hourly, commission,
piece rate or per diem rate of compensation) and estimated or target annual
incentive compensation of each such person. With the exception of employees
listed in Section 2.21(a) of the Disclosure Schedule, each of such employees is
retained at-will and none of such employees is a party to an employment
agreement, compensation agreement or contract with the Company or any
Subsidiary. Each such employee has entered into the Company's or a Subsidiary's
standard form of invention assignment and confidentiality agreement with the
Company, a copy of which has previously been delivered to the Buyer. All of the
agreements referenced in the preceding sentence will continue to be legal,
valid, binding and enforceable to the fullest extent under applicable laws
against the Company or the applicable Subsidiary and, to the Company's
knowledge, against each other party thereto and in full force and effect
immediately following the Closing in accordance with the terms thereof as in
effect immediately prior to the Closing. Each employee of the Company and each
Subsidiary who has at any time in the past four years been classified as exempt
from state and federal overtime requirements was properly classified as exempt
at all such times. Section 2.21(a) of the Disclosure Schedule contains a list of
all employees of the Company or any Subsidiary who are not citizens of the
United States. To the knowledge of the Company, no key employee or group of
employees has, as of the date of this Agreement, any plans to terminate
employment with the Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary is a party to or bound by
any collective bargaining agreement, nor has any of them experienced any
strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company has no knowledge of any organizational effort
made or threatened, either currently or within the past two years, by or on
behalf of any labor union with respect to employees of the Company or any
Subsidiary.
(c) None of (i) the Company, any Subsidiary, any of the Principal
Stockholders or Management Participants or any director or officer of the
Company, (ii) to the Company's knowledge, any Affiliate of the Company or any
Subsidiary or (iii) to the Company's knowledge, any Affiliate of any Principal
Stockholder, Management Participant or director or officer of the Company, has
any existing contractual relationship with the Company that has not been
disclosed in Section 2.21(c) of the Disclosure Schedule, or, to the Company's
knowledge, owns, directly or indirectly, any interest in any entity which is in
a business similar or competitive to the business of the Company and the
Subsidiaries.
-27-
(d) Section 2.21(d) of the Disclosure Schedule contains a list of
all independent contractors currently engaged by the Company and the
Subsidiaries, along with the position, date of retention and rate of
remuneration for each such person or entity. Except as set forth in Section
2.21(d) of the Disclosure Schedule, none of such independent contractors is a
party to a written agreement or contract with the Company or any Subsidiary.
Each such independent contractor has entered into the Company's or the
applicable Subsidiary's standard form of invention assignment and
confidentiality agreement with the Company or the applicable Subsidiary, a copy
of which has previously been delivered to the Buyer.
(e) Each individual who has received compensation for the
performance of services on behalf of the Company, the Subsidiaries or the ERISA
Affiliates has been properly classified as an employee or independent contractor
in accordance with applicable law.
(f) Section 2.21(f) of the Disclosure Schedule sets forth a list of
each employee of the Company or any Subsidiary who is providing services in the
United States and who holds a temporary work authorization ("Work Permit"),
including H-1B, TN, X-0, X-0, X-0, X-0 or J-1 visa status or Employment
Authorization Document ("EAD") work authorizations, setting forth the name of
such employee, the type of Work Permit and the length of time remaining on such
Work Permit. With respect to each Work Permit, all of the information that the
Company or any Subsidiary provided to the Department of Labor ("DOL") and the
Department of Homeland Security (collectively with its predecessor and
subsidiary entities, the "DOHS") in the applications for such Work Permit was,
to the knowledge of the Company, true and complete at the time of filing such
applications. The Company or applicable Subsidiary received the appropriate
notice of approval or other evidence of authorized employment from the DOHS, the
DOL, the Department of State or other relevant Governmental Entity with respect
to each such Work Permit. Neither the Company nor any Subsidiary has received
any notice from the DOHS or any other Governmental Entity that any Work Permit
has been revoked. There is no action pending or, to the knowledge of the
Company, threatened to revoke or adversely modify the terms of any of the Work
Permits.
(g) The Company and the Subsidiaries have obtained the necessary
prevailing wage documentation for each H-1B worker and has paid and continues to
pay each H-1B worker the prevailing wage according to the regulations of the
DOL. The Company and the Subsidiaries have complied with all terms of the Labor
Condition Applications for all H-1B workers and has maintained all documentation
required by the DOL regulations. The Company has provided the Buyer with a
written statement which summarizes the compliance of the Company with the DOL
regulations governing labor condition applications. Since December 1, 2004,
neither the Company nor any of the Subsidiaries has incurred any liability under
the Worker Adjustment Retraining and Notification Act (the "WARN Act") (29
U.S.C. Sections 2101, et seq.) or any similar state law or statute (such as
California Labor Code Section 1400 et seq.) and the transactions contemplated by
this Agreement will not give rise to any such liability. Section 2.21(g) of the
Disclosure Schedule will set forth, as of the Closing, all employee actions that
could be aggregated with any employment action on or after the Closing to result
in any liability under such laws.
(h) Except as set forth in Section 2.21(h) of the Disclosure
Schedule, there have been no federal or state or other claims based on sex,
sexual or other harassment, age, disability, race or other discrimination or
other claims, whether statutory or common law, including claims of wrongful
termination, by any Governmental Entity, employee or former employee or by any
individual who is or was performing work for the Company or any Subsidiary but
provided by an outside employment agency, and there are no facts or
circumstances that could reasonably be expected to give rise to such complaint
or claim. The Company and each Subsidiary have complied with all legal
requirements related to the employment of employees including, without
limitation, any legal requirement relating to wages, hours, collective
bargaining, the payment of Social Security and similar Taxes, equal employment
opportunity,
-28-
employment discrimination, employee health and safety (including without
limitation, those promulgated under the Occupational Safety and Health Act of
1970 and similar state laws). Neither the Company nor any Subsidiary has
received any notice of any claim that it has not complied with any legal
requirement, or that it is liable for any arrearages of wages or any Taxes or
penalties for failure to comply with any of the foregoing.
2.22 Employee Benefits.
(a) Section 2.22(a) of the Disclosure Schedule contains a complete
and accurate list of all Company Plans. Complete and accurate copies of (i) all
Company Plans which have been reduced to writing, together with all amendments
thereto (ii) written summaries of all unwritten Company Plans, (iii) all related
trust agreements, insurance contracts, summary plan descriptions and material
employee communications, (iv) all employee handbooks, employment manuals and
policies, and (v) all annual reports filed on IRS Form 5500 series (including
all schedules, financial statements and any other attachments thereto) have been
delivered to the Buyer. All Company Plans comply (and at all times have
complied) with applicable California law, to the extent not preempted by ERISA,
the Code or other federal law.
(b) Each Company Plan has been administered in accordance with its
terms and each of the Company, the Subsidiaries and the ERISA Affiliates has met
its obligations with respect to each Company Plan and has timely made all
required contributions thereto. The Company, each ERISA Affiliate and each
Company Plan are in compliance with the currently applicable provisions of ERISA
and the Code and the regulations thereunder (including Section 4980B of the
Code, Subtitle K, Chapter 100 of the Code and Sections 601 through 608 and
Section 701 et seq. of ERISA). All filings and reports as to each Company Plan
required to have been submitted to the Internal Revenue Service or to the United
States Department of Labor have been timely submitted.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of the Company Plans and proceedings with
respect to qualified domestic relations orders) against or involving any Company
Plan or asserting any rights or claims to benefits under any Company Plan that
could give rise to any liability. No Company Plan is or within the last three
calendar years has been the subject of, or has received notice that it is the
subject of, examination by a government agency or a participant in a government
sponsored amnesty, voluntary compliance or similar program.
(d) All the Company Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the Internal
Revenue Service to the effect that such Company Plans are qualified and the
plans and the trusts related thereto are exempt from federal income Taxes under
Sections 401(a) and 501(a), respectively, of the Code, or, if reliance is
permitted under IRS Announcement 2001-77, the Company relies on the favorable
opinion letter or advisory letter of the master and prototype or volume
submitter plan sponsor of such Company Plan, no such determination letter or
opinion or advisory letter has been revoked and revocation has not been
threatened, and no such Company Plan has been amended since the date of its most
recent determination letter, opinion or advisory letter, or application therefor
in any respect, and no act or omission has occurred, that would adversely affect
its qualification or increase its cost. There has been no termination or partial
termination of such a Company Plan. Each Company Plan that is required to
satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has been tested for
compliance with, and satisfies the requirements of Section 401(k)(3) and Section
401(m)(2) of the Code for each plan year ending prior to the Closing Date.
(e) Neither the Company, any Subsidiary nor any ERISA Affiliate has
ever maintained or contributed to an Employee Benefit Plan subject to Section
412 of the Code or Title IV of
-29-
ERISA. At no time has the Company, any Subsidiary or any ERISA Affiliate been
obligated to contribute to any "multiemployer plan" (as defined in Section
4001(a)(3) of ERISA).
(f) No Company Plan has assets that include securities issued by the
Company, any Subsidiary or any ERISA Affiliate.
(g) With respect to the Company Plans, there are no benefit
obligations for which contributions have not been made or properly accrued and
there are no benefit obligations that have not been accounted for by reserves,
or otherwise properly footnoted in accordance with GAAP, on the Financial
Statements. Neither the Company nor any Subsidiary has any liability for
benefits (contingent or otherwise) under any Company Plan, except as set forth
on the Financial Statements. The assets of each Company Plan that is funded are
reported at their fair market value on the books and records of such Employee
Benefit Plan. There are no unfunded obligations under any Company Plan providing
benefits after termination of employment to any employee of the Company or any
Subsidiary (or to any beneficiary of any such employee), including but not
limited to retiree health coverage and deferred compensation, but excluding
continuation of health coverage required to be continued under Section 4980B of
the Code or other applicable law and insurance conversion privileges under state
law, but only to the extent that such continuation of coverage is provided
solely at the participant's or beneficiary's expense.
(h) No act or omission has occurred and no condition exists with
respect to any Company Plan that would subject the Buyer, the Company, any
Subsidiary, any ERISA Affiliate, or any plan participant to (i) any fine,
penalty, Tax or liability of any kind imposed under ERISA or the Code or (ii)
any contractual indemnification or contribution obligation protecting any
fiduciary, insurer or service provider with respect to any Company Plan, nor
will the transactions contemplated by this Agreement give rise to any such
liability.
(i) No Company Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(j) Each Company Plan is amendable and terminable unilaterally by
the Company at any time without liability or expense other than administrative
and legal expenses related to such amendment or termination to the Company or
such Company Plan as a result thereof (other than for benefits accrued through
the date of termination or amendment and reasonable administrative expenses
related thereto) and no Company Plan, plan documentation or agreement, summary
plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Company Plan, or in any way limit such action.
(k) Section 2.22(k) of the Disclosure Schedule discloses each: (i)
agreement with any stockholder, director, executive officer or other key
employee of the Company or any Subsidiary (A) the benefits of which are
contingent, or the terms of which are altered, upon the occurrence of a
transaction involving the Company or any Subsidiary of the nature of any of the
transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee and (ii) agreement or plan binding the Company or any
Subsidiary, including any stock option plan, stock appreciation right plan,
restricted stock plan, stock purchase plan, severance benefit plan or Company
Plan, any of the benefits of which will be increased, or the vesting of the
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
-30-
(l) Section 2.22(l) of the Disclosure Schedule sets forth the policy
of the Company and each Subsidiary with respect to accrued vacation, accrued
sick time and earned time off for the past four years (and indicates whether the
Company or Subsidiary cashes (and has cashed) out such vacation, accrued sick
time and earned time off at termination of employment) and the amount of such
liabilities as of December 31, 2004.
(m) Section 2.22(m) of the Disclosure Schedule sets forth all
bonuses earned by the Company's employees through the Closing Date that are
expected to be accrued on the Closing Balance Sheet but unpaid as of the Closing
Date.
(n) There are no loans or extension of credit from the Company, any
Subsidiary or any ERISA Affiliate to any employee of or independent contractor
to the Company or any Subsidiary.
(o) There is no plan or commitment, whether legally binding or not,
to create any additional Company Plans or to modify any existing Company Plans
with respect to employees of the Company or any Subsidiary.
(p) There is no corporate-owned life insurance (COLI), split-dollar
life insurance policy or any other life insurance policy on the life of any
employee of the Company, any Subsidiary or on any Company Stockholder.
2.23 Environmental Matters.
(a) The Company and the Subsidiaries have complied with all
applicable Environmental Laws. There is no pending or, to the knowledge of the
Company, threatened civil or criminal litigation, written notice of violation,
formal administrative proceeding, or investigation, inquiry or information
request by any Governmental Entity, relating to any Environmental Law involving
the Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary has any liabilities or
obligations arising from the release of any Materials of Environmental Concern
into the environment.
(c) Neither the Company nor any Subsidiary is a party to or bound by
any court order, administrative order, consent order or other agreement between
the Company or any Subsidiary and any Governmental Entity entered into in
connection with any legal obligation or liability arising under any
Environmental Law.
(d) Set forth in Section 2.23(d) of the Disclosure Schedule is a
list of all documents (whether in hard copy or electronic form) that contain any
environmental reports, investigations and audits relating to premises currently
or previously owned or operated by the Company or any Subsidiary (whether
conducted by or on behalf of the Company, the Subsidiaries or a third party, and
whether done at the initiative of the Company or a Subsidiary or directed by a
Governmental Entity or other third party) which the Company has possession of or
access to. A complete and accurate copy of each such document has been provided
to the Buyer.
(e) The Company is not aware of any environmental liability of any
solid or hazardous waste transporter or treatment, storage or disposal facility
that has been used by the Company or any Subsidiary.
-31-
2.24 Legal Compliance. Each of the Company and the Subsidiaries is
currently conducting, and has at all times since January 1, 2002, conducted, its
business in compliance with each applicable law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity. Neither the Company nor any Subsidiary has received any
notice or communication from any Governmental Entity alleging noncompliance with
any applicable law, rule or regulation. Neither the Company nor any Subsidiary
has violated any law concerning the export or re-export of any products or
services or the prohibited boycott of any country.
2.25 Customers and Suppliers. Section 2.25 of the Disclosure Schedule sets
forth a list of (a) each customer during the last full fiscal year or the
interim period through December 31, 2004 (identifying only the Top Customers by
name), and the amount of revenues accounted for by such customer during each
such period and (b) each supplier that is the sole supplier of any significant
product or service to the Company or any Subsidiary. No such customer or
supplier has indicated within the past year that it will stop, or decrease the
rate of, buying materials, products or services or supplying materials, products
or services, as applicable, to the Company or any Subsidiary. No purchase order
or commitment of the Company or any Subsidiary is for the exchange or barter of
any products or services.
2.26 Permits. Section 2.26 of the Disclosure Schedule sets forth a list of
all Permits issued to or held by the Company or any Subsidiary. Such listed
Permits are the only Permits that are required for the Company and the
Subsidiaries to conduct their business as presently conducted. Each such Permit
is in full force and effect; the Company or the applicable Subsidiary is in
compliance with the terms of each such Permit; and, to the knowledge of the
Company, no suspension or cancellation of such Permit is threatened and there is
no basis for believing that such Permit will not be renewable upon expiration.
Each such Permit will continue in full force and effect immediately following
the Closing.
2.27 Certain Business Relationships With Affiliates. No Affiliate of the
Company or any Subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of the Company or any Subsidiary, (b)
to the Company's knowledge, has any claim or cause of action against the Company
or any Subsidiary, (c) owes any money to, or is owed any money by, the Company
or any Subsidiary, or (d) is a party to any contract or other arrangement
(written or oral) with the Company or any Subsidiary. Section 2.27 of the
Disclosure Schedule describes any transactions or relationships between the
Company or a Subsidiary and any Affiliate thereof which occurred or have existed
since the beginning of the time period covered by the Financial Statements.
2.28 Brokers' Fees. Except as set forth in Section 2.28 of the Disclosure
Schedule, none of the Company, any Subsidiary nor any of the Principal
Stockholders has any liability or obligation to pay any fees or commissions to
any broker, finder or agent with respect to the transactions contemplated by
this Agreement.
2.29 Books and Records. The minute books and other similar records of the
Company and each Subsidiary contain complete and accurate records of all actions
taken at any meetings of the Company's or such Subsidiary's stockholders, Board
of Directors or any committee thereof and of all written consents executed in
lieu of the holding of any such meeting. The books and records of the Company
and each Subsidiary accurately reflect the assets, liabilities, business,
financial condition and results of operations of the Company or such Subsidiary
and have been maintained in accordance with good business and bookkeeping
practices. Section 2.29 of the Disclosure Schedule contains a list of all bank
accounts and safe deposit boxes of the Company and the Subsidiaries and the
names of persons having signature authority with respect thereto or access
thereto.
2.30 Prepayments, Prebilled Invoices and Deposits.
-32-
(a) Section 2.30(a) of the Disclosure Schedule sets forth (i) all
prepayments, prebilled invoices and deposits that have been received by the
Company and the Subsidiaries as of January 31, 2005 from customers for products
to be shipped, or services to be performed, after the Closing Date, and (ii)
with respect to each such prepayment, prebilled invoice or deposit, (A) the
party and contract credited, (B) the date received or invoiced, (C) the products
and/or services to be delivered and (D) the conditions for the return of such
prepayment, prebilled invoice or deposit. All such prepayments, prebilled
invoices and deposits are properly accrued for on the Most Recent Balance Sheet,
and will be properly accrued for on the Closing Balance Sheet, in accordance
with GAAP applied on a consistent basis with the past practice of the Company.
(b) Section 2.30(b) of the Disclosure Schedule sets forth (i) all
prepayments, prebilled invoices and deposits that have been made or paid by the
Company and the Subsidiaries as of January 31, 2005 for products to be
purchased, services to be performed or other benefits to be received after the
Closing Date, and (ii) with respect to each such prepayment, prebilled invoice
or deposit, (A) the party to whom such prepayment, prebilled invoice or deposit
was made or paid, (B) the date made or paid, (C) the products and/or services to
be delivered and (D) the conditions for the return of such prepayment, prebilled
invoice or deposit. All such prepayments, prebilled invoices and deposits are
properly accrued for on the Most Recent Balance Sheet, and will be properly
accrued for on the Closing Balance Sheet, in accordance with GAAP applied on a
consistent basis with the past practice of the Company.
2.31 Government Contracts.
(a) Neither the Company nor any Subsidiary has been suspended or
debarred from bidding on contracts or subcontracts with any Governmental Entity;
no such suspension or debarment has been initiated or, to the knowledge of the
Company, threatened; and the consummation of the transactions contemplated by
this Agreement will not result in any such suspension or debarment of the
Company or any Subsidiary. Neither the Company nor any Subsidiary has been or is
now being audited or investigated by the United States Government Accounting
Office, the United States Department of Defense or any of its agencies, the
Defense Contract Audit Agency, the contracting or auditing function of any
Governmental Entity with which it is contracting, the United States Department
of Justice, the Inspector General of the United States Governmental Entity, or
any prime contractor with a Governmental Entity; nor, to the knowledge of the
Company, has any such audit or investigation been threatened. To the knowledge
of the Company, there is no valid basis for (i) the suspension or debarment of
the Company or any Subsidiary from bidding on contracts or subcontracts with any
Governmental Entity or (ii) any claim (including any claim for return of funds
to the Government) pursuant to an audit or investigation by any of the entities
named in the foregoing sentence. Neither the Company nor any Subsidiary has any
agreements, contracts or commitments which require it to obtain or maintain a
security clearance with any Governmental Entity.
(b) To the knowledge of the Company, no basis exists for any of the
following with respect to any of its contracts or subcontracts with any
Governmental Entity: (i) a Termination for Default (as provided in 48 C.F.R.
Ch.1 Section 52.249-8, 52.249-9 or similar sections), (ii) a Termination for
Convenience (as provided in 48 C.F.R. Ch.1 Section 52.241-1, 52.249-2 or similar
sections), or a Stop Work Order (as provided in 48 C.F.R. Ch.1 Section 52.212-13
or similar sections); and the Company has no reason to believe that funding may
not be provided under any contract or subcontract with any Governmental Entity
in the upcoming federal fiscal year.
2.32 Disclosure. No representation or warranty by the Company contained in
this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company or any Company Stockholder
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pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants to
the Company that the statements contained in this Article III are true and
correct as of the date of this Agreement and will be true and correct as of the
Closing as though made as of the Closing.
3.1 Organization and Corporate Power. Each of the Buyer and the Transitory
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation. The Buyer has all
requisite power and authority (corporate and other) to carry on the businesses
in which it is engaged and to own and use the properties owned and used by it.
3.2 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority (corporate and other) to
execute and deliver this Agreement and to perform its obligations hereunder. The
execution and delivery by the Buyer and the Transitory Subsidiary of this
Agreement and the consummation by the Buyer and the Transitory Subsidiary of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Buyer and
Transitory Subsidiary, respectively. This Agreement has been duly and validly
executed and delivered by the Buyer and the Transitory Subsidiary and
constitutes a valid and binding obligation of the Buyer and the Transitory
Subsidiary, enforceable against them in accordance with its terms.
3.3 Noncontravention. Subject to the filing of the Certificate of Merger
as required by the Delaware General Corporation Law and to the filing
requirements of the Xxxx-Xxxxx-Xxxxxx Act, neither the execution and delivery by
the Buyer or the Transitory Subsidiary of this Agreement or any other agreement
provided for herein, nor the consummation by the Buyer or the Transitory
Subsidiary of the transactions contemplated hereby or thereby, will (a) conflict
with or violate any provision of the charter or By-laws of the Buyer or the
Transitory Subsidiary, (b) require on the part of the Buyer or the Transitory
Subsidiary any filing with, or permit, authorization, consent or approval of,
any Governmental Entity, (c) conflict with, result in breach of, constitute
(with or without due notice or lapse of time or both) a default under, result in
the acceleration of obligations under, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Buyer or the
Transitory Subsidiary is a party or by which either is bound or to which any of
their assets are subject, or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer or the Transitory Subsidiary
or any of their properties or assets.
3.4 Broker's Fees. The Buyer has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
3.5 Investment Representation. The Buyer is acquiring the Company Shares
from each Company Stockholder for its own account for investment and not with a
view to, or for sale in connection with, any distribution thereof, nor with any
present intention of distributing or selling the same; and, except as
contemplated by this Agreement and the agreements contemplated herein, the Buyer
has no
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present or contemplated agreement, undertaking, arrangement, obligation,
indebtedness or commitment providing for the disposition thereof.
3.6 Litigation. Except for matters disclosed in the Buyer SEC Documents,
there is no claim, complaint, action, suit, proceeding, hearing or investigation
pending against the Buyer or any of its subsidiaries in any Governmental Entity
or before any arbitrator that is required to be disclosed in the Buyer SEC
Documents pursuant to Item 103 of Regulation S-K under the Securities Act.
3.7 SEC Filings.
(a) SEC Reports. The Buyer has filed with the SEC all registration
statements, prospectuses, reports, forms, statements, schedules, certifications
and other documents (including exhibits and all other items incorporated by
reference) required to be filed by the Buyer since January 1, 2004 (all such
required registration statements, prospectuses, reports, forms, statements,
schedules, certifications and other documents, including those that the Buyer
may file subsequent to the date of this Agreement, are referred to herein as the
"Buyer SEC Documents"). As of their respective dates, Buyer SEC Documents (i)
complied in all material respects with the requirements of the Securities Act,
the Exchange Act, the Sarbanes Act (to the extent then applicable), and the
rules and regulations of the SEC promulgated thereunder applicable to such Buyer
SEC Documents and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent corrected prior to the date hereof by
a subsequently filed Buyer SEC Document.
(b) Financial Statements. Each of the consolidated financial
statements (including, in each case, any related notes thereto) contained in the
Buyer SEC Documents (the "Buyer Financial Statements"), including each Buyer SEC
Document filed after the date of this Agreement until the Closing, (i) complied,
as of their respective dates of filing with the SEC, as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, (ii) was prepared in accordance with GAAP (except in the case of
unaudited interim financial statements, as may be permitted by the SEC on Form
10-Q or Form 8-K) applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto), and (iii) fairly presented in
all material respects the consolidated financial position of the Buyer and its
subsidiaries as at the respective dates thereof and the consolidated results of
Buyer's and its subsidiaries' operations and cash flows for the periods
indicated (except that the unaudited interim financial statements were subject
to normal and recurring year-end and quarter-end adjustments which were not
material).
3.8 Merger Shares and Management Shares Validly Issued. The Merger Shares
and Management Shares to be issued pursuant to the Agreement have been duly
authorized and, when issued and delivered in accordance with the Agreement, will
have been validly issued and will be fully paid and nonassessable and the
issuance thereof is not subject to any preemptive or other similar right.
3.9 Disclosure. No representation or warranty by the Buyer contained in
this Agreement, and no statement contained in any other document, certificate or
other instrument delivered or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
3.10 Actions Consistent With Reorganization Treatment. To their knowledge,
neither the Buyer nor the Transitory Subsidiary has taken any action that (alone
or in combination with other events)
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would cause the Merger to fail to qualify as a "reorganization" within the
meaning of Section 368(a) of the Code.
ARTICLE IV
COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its Reasonable Best
Efforts to take all actions and to do all things necessary, proper or advisable
to consummate the transactions contemplated by this Agreement, including using
its or his Reasonable Best Efforts to ensure that (a) its or his representations
and warranties remain true and correct through the Closing Date, except to the
extent expressly contemplated or permitted by this Agreement and (b) the
conditions to the obligations of the other Parties to consummate the Merger are
satisfied.
4.2 Treatment of the Merger as a Reorganization for Tax Purposes.
(a) To the extent permitted by applicable law, each of the Parties
shall file all of its Tax Returns on the basis that the Merger qualifies as a
"reorganization" as defined in Section 368(a) of the Code. No party shall
knowingly take any action that (alone or in combination with other of its
actions) would reasonably be interpreted to likely cause the Merger to fail to
qualify as a "reorganization."
(b) The Buyer presently intends that, following the Merger, it will
cause the Surviving Corporation to continue the Company's historic business or
will use a significant portion of the Company's historic business assets in a
business.
4.3 Governmental and Third-Party Notices and Consents.
(a) Subject to Section 4.3(c) below, the Company shall use its
Reasonable Best Efforts to obtain, at its expense, all waivers, permits,
consents, approvals or other authorizations from third parties and Governmental
Entities, and effect all registrations, filings and notices with or to third
parties and Governmental Entities, as may be necessary or desirable to
consummate the transactions contemplated by this Agreement and to otherwise
comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the Company shall promptly file any
Notification and Report Forms and related material that it may be required to
file with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice under the Xxxx-Xxxxx-Xxxxxx Act or other applicable
U.S. or foreign antitrust laws, shall use its Reasonable Best Efforts to obtain
an early termination of the applicable waiting period, and shall make any
further filings or information submissions pursuant thereto and take such
actions that may be necessary, proper or advisable, including, but not limited
to: (A) responding to formal requests for additional information or documentary
material pursuant to 16 C.F.R. 803.20 under the Xxxx-Xxxxx-Xxxxxx Act, (B)
negotiating in good faith to resolve any questions or concerns raised in the
course of investigation by such Governmental Entities; and (C) defending against
any action by such Governmental Entities seeking to enjoin the transactions
contemplated by this Agreement.
(b) Subject to Section 4.3(c) below, the Buyer shall use its
Reasonable Best Efforts to obtain, at its expense, all waivers, permits,
consents, approvals or other authorizations from third parties and Governmental
Entities, and effect all registrations, filings and notices with or to third
parties and Governmental Entities, as may be necessary or desirable to
consummate the transactions contemplated by this Agreement and to otherwise
comply with all applicable laws and regulations in
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connection with the consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, the Buyer shall
promptly file any Notification and Report Forms and related material that it may
be required to file with the Federal Trade Commission and the Antitrust Division
of the United States Department of Justice under the Xxxx-Xxxxx-Xxxxxx Act or
other applicable U.S. or foreign antitrust laws, shall use its Reasonable Best
Efforts to obtain an early termination of the applicable waiting period, and
shall make any further filings or information submissions pursuant thereto and
take such actions that may be necessary, proper or advisable, including, but not
limited to: (A) responding to formal requests for additional information or
documentary material pursuant to 16 C.F.R. 803.20 under the Xxxx-Xxxxx-Xxxxxx
Act, (B) negotiating in good faith to resolve any questions or concerns raised
in the course of investigation by such Governmental Entities; and (C) defending
against any action by such Governmental Entities seeking to enjoin the
transactions contemplated by this Agreement; provided, however, that
notwithstanding anything to the contrary in this Agreement, the Buyer shall not
be obligated to sell or dispose of or hold separately (through a trust or
otherwise) any assets or businesses of the Buyer or its Affiliates.
(c) The Buyer and the Company shall be equally responsible for the
payment of the filing fees required to be paid in connection with filings to be
made under the Xxxx-Xxxxx-Xxxxxx Act; provided, however, that if the Merger is
consummated, such filing fees paid or accrued by the Company shall be added to
the total assets of the Company on the Closing Balance Sheet for the purposes of
determining the Closing Net Asset Value Adjustment pursuant to Section 1.12.
4.4 Stockholder Approval.
(a) Subject to Section 4.4(c), the Company shall use its Reasonable
Best Efforts to obtain, as promptly as practicable following receipt of the
California Permit or, if not received, the effective date of the Registration
Statement (as hereinafter defined), the Requisite Stockholder Approval, either
at a special meeting of stockholders or pursuant to a written stockholder
consent, all in accordance with the applicable requirements of both the Delaware
General Corporation Law and California General Corporation Law. In connection
with such special meeting of stockholders or written stockholder consent, the
Company shall provide to its stockholders the Disclosure Statement, which shall
include (A) a summary of the Merger and this Agreement (which summary shall
include a summary of the terms relating to the indemnification obligations of
the Company Stockholders, the escrow arrangements and the authority of the
Representative, subject to Section 4.4(c), the unanimous recommendation of the
Board of Directors of the Company that the Company's stockholders adopt and
approve this Agreement and the Merger and, subject to Section 4.4(c), the
conclusion of the Board of Directors that the Merger is fair and in the best
interests of the Company and its stockholders, and a statement that the adoption
of this Agreement by the stockholders of the Company shall constitute approval
of such terms) and (B) a statement that appraisal rights are available for the
Company Shares pursuant to Section 262 of the Delaware General Corporation Law
and a copy of such Section 262. Each of the Company and the Buyer agrees to
cooperate with the other in the preparation of the Disclosure Statement,
including, without limitation, providing promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Disclosure Statement, and to cause its counsel
and auditors to cooperate with the other's counsel and auditors in the
preparation of the Disclosure Statement. The Buyer and the Company shall each
use Reasonable Best Efforts to cause the Disclosure Statement to comply with
applicable federal and state securities laws requirements. The Company will
promptly advise the Buyer, and the Buyer will promptly advise the Company, in
writing if at any time prior to the Effective Time either the Company or the
Buyer, as applicable, shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Disclosure Statement in
order to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. The Company agrees not to
distribute the Disclosure Statement until the Buyer has had a reasonable
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opportunity to review and comment on the Disclosure Statement and the Disclosure
Statement has been approved by the Buyer (which approval may not be unreasonably
withheld, conditioned or delayed). If the Requisite Stockholder Approval is
obtained (i) by means of a written consent, the Company shall send, (X) pursuant
to Section 228 and Section 262(d) of the Delaware General Corporation Law, a
written notice to all stockholders of the Company that did not execute such
written consent informing them that this Agreement and the Merger were adopted
and approved by the stockholders of the Company and that appraisal rights are
available for their Company Shares pursuant to Section 262 of the Delaware
General Corporation Law (which notice shall include a copy of such Section 262)
and (Y) pursuant to Chapter 13 of the California General Corporation Law, as
promptly as practicable but not later than 10 days after the date on which the
Requisite Stockholder Approval was obtained, a notice to all stockholders of the
Company entitled to vote on this Agreement and the Merger that did not execute
such written consent informing them that this Agreement and the Merger were
adopted and approved by the stockholders of the Company and that dissenters'
rights are available for their Company Shares pursuant to Chapter 13 of the
California General Corporation Law, which notice shall be accompanied by a copy
of Sections 1300-1304 of the California General Corporation Law, a statement of
the price determined by the Company to represent the fair market value of their
Company Shares and a brief description of the procedure to be followed if such
stockholder desires to exercise its dissenters' rights (the "California
Dissenters' Rights Notice), or (ii) at a special meeting of stockholders, then
the Company shall send the California Dissenters' Rights Notice as promptly as
practicable but not later than 10 days after the date on which the Requisite
Stockholder Approval was obtained. The Company shall promptly inform the Buyer
of the date on which each such notice, if applicable, was sent.
(b) The Company, acting through its Board of Directors, shall
include in the Disclosure Statement (subject to Section 4.4(c)) the unanimous
recommendation of its Board of Directors that the stockholders of the Company
vote in favor of the adoption of this Agreement and the approval of the Merger.
(c) Notwithstanding the foregoing, the Company's Board of Directors
may, in response to a Superior Proposal that did not result from a breach by the
Company of Section 4.9 hereof, withdraw or modify the recommendation by the
Company's Board of Directors of this Agreement and the Merger (an "Adverse
Recommendation"), if the Company's Board of Directors determines in good faith,
after consultation with outside counsel and taking into account any changes to
the terms of the Merger proposed by the Buyer, that its fiduciary obligations
require it to do so, but only at a time that is prior to the adoption of this
Agreement either at a special meeting of stockholders or pursuant to a written
stockholder consent and is after the fifth business day following the Buyer's
receipt of written notice advising the Buyer that the Company's Board of
Directors desires to withdraw or modify the recommendation due to the existence
of a Superior Proposal (or any material change in the terms of such Superior
Proposal), specifying the material terms and conditions of such Superior
Proposal (including any such material changes), and identifying the person
making such Superior Proposal. Such five business day period shall be required
for each and every Superior Proposal or material modification thereto. Nothing
in this Section 4.4 shall be deemed to (A) permit the Company to enter into any
letter of intent, memorandum of understanding, agreement in principle,
acquisition agreement, merger agreement or similar agreement (an "Alternative
Acquisition Agreement") constituting or relating to any Acquisition Proposal
(other than a confidentiality agreement referred to in Section 4.9 hereof
entered into in the circumstances referred to in Section 4.9), (B) affect any
obligation of the Company under this Agreement or (C) limit the Company's
obligation to call, give notice of, convene and hold the special meeting of
stockholders or distribute a written stockholder consent for purposes of
approving this Agreement and the Merger regardless of whether the Company's
Board of Directors has withdrawn or modified its recommendation of this
Agreement and the Merger.
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(d) The Company shall ensure that the Disclosure Statement does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading (provided that the
Company shall not be responsible for the accuracy or completeness of any
information concerning the Buyer or the Transitory Subsidiary furnished by the
Buyer in writing for inclusion in the Disclosure Statement).
(e) The Buyer shall ensure that any information furnished by the
Buyer to the Company in writing for inclusion in the Disclosure Statement does
not contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
(f) The Principal Stockholders have as of the date hereof entered
into a Stockholder Agreement in the form attached hereto as Exhibit A, pursuant
to which such Principal Stockholders have agreed, among other things, (i) if no
Adverse Recommendation has been made, to vote Company Shares that are
beneficially owned by the Principal Stockholders in favor of the adoption of
this Agreement and the approval of the Merger, and (ii) unless an Adverse
Recommendation is made, not to vote any Company Shares in favor of any
Acquisition Proposal other than the Merger.
4.5 Operation of Business. Except as expressly contemplated or permitted
by this Agreement, during the period from the date of this Agreement or as
required by applicable law to the Closing or the earlier termination of this
Agreement in accordance with Article X hereof (the "Pre-Closing Period"), the
Company shall, and shall cause each Subsidiary to, conduct its operations only
in the Ordinary Course of Business in all material respects and in compliance
with all applicable U.S. federal, foreign, regional, state, provincial, county
and local laws and regulations and, to the extent consistent therewith, use its
Reasonable Best Efforts to preserve intact its current business organization,
keep its physical assets in good working condition, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, except (I) as expressly contemplated
or permitted by this Agreement, (II) as set forth in Section 4.5 of the
Disclosure Schedule or (III) as required by applicable law, during the
Pre-Closing Period the Company shall not, and shall cause each Subsidiary not
to, without the written consent of the Buyer:
(a) issue or sell any stock or other securities of the Company or
any Subsidiary any options, warrants or rights to acquire any such stock or
other securities (except pursuant to the exercise of Options and Warrants
outstanding on the date hereof and upon conversion of Preferred Stock
outstanding as of the date of this Agreement and the issuance of Options to
purchase at fair market value up to 2,800,000 Company Shares to employees,
directors and consultants of or to the Company and its Subsidiaries on the terms
set forth in Section 4.5(a) of the Disclosure Schedule), or amend any of the
terms of (including the vesting of) any Options or Warrants or restricted stock
agreements, or repurchase or redeem any stock or other securities of the Company
(except from former employees, directors or consultants in accordance with
agreements in place as of the date of this Agreement and providing for the
repurchase of shares at their original issuance price in connection with any
termination of employment with or services to the Company or any Subsidiary);
(b) split, combine or reclassify any shares of its capital stock; or
declare, set aside or pay any dividend or other distribution (whether in cash,
stock or property or any combination thereof) in respect of its capital stock;
(c) create, incur or assume any indebtedness (including obligations
in respect of capital leases) other than for short-term borrowings not to exceed
$500,000 at any time outstanding under
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the Company's existing line of credit or a replacement line of credit on
comparable terms and reasonably acceptable to the Buyer; assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or entity; or
make any loans, advances or capital contributions to, or investments in, any
other person or entity (other than de minimis advances to employees in the
Ordinary Course of Business in respect of travel expenses);
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.22(k) or (except for normal increases in the Ordinary Course of
Business for employees who are not Affiliates) increase in any manner the
compensation or fringe benefits of, or materially modify the employment terms
of, its directors, officers or employees, generally or individually, or pay any
bonus or other benefit to its directors, officers or employees (except for
existing payment obligations for base salaries in the Ordinary Course of
Business and bonus and other benefit obligations listed in Section 2.22(k) or
(m) of the Disclosure Schedule) or hire any new officers or (except in the
Ordinary Course of Business) any new employees or consultants;
(e) acquire, sell, lease (other than the renewal of the lease for
the Company's current headquarters in Santa Clara, California, space leased in
Herndon, Virginia, at No. 501 in Olympus Tower of Acropolis, Xx. 00, Xxxxx Xxxx,
Xxxxxxxxx, Xxxxx and at No. 804 in Sparta Tower of Acropolis in Bangalore,
India, each as described in Section 2.12 of the Disclosure Schedule, upon the
terms and conditions set forth in Section 4.5(e) of the Disclosure Schedule),
license or dispose of any assets or property (including any shares or other
equity interests in or securities of any Subsidiary or any other corporation,
partnership, association or other business organization or division thereof),
other than purchases and sales of assets in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets or subject any
such property or assets to any Security Interest, except for purchase-money
Security Interests in respect of capital expenditures attributable to the
purchase of equipment to the extent permitted pursuant to Section 4.5(p);
(g) amend its charter, by laws or other organizational documents;
(h) sell, assign, transfer, license or sublicense any Intellectual
Property, other than pursuant to license or service agreements with customers
entered into in the Ordinary Course of Business;
(i) change the nature or scope of its business being carried on as
of the date of this Agreement or commence any new business not being ancillary
or incidental to such business or take any action to alter its organizational or
management structure;
(j) change its accounting methods, principles or practices, except
insofar as may be required by a generally applicable change in GAAP, or make any
new elections, or changes to any material current elections, with respect to
Taxes;
(k) enter into or amend in any material respect any contract or
agreement of a nature required to be listed in Section 2.12 of the Disclosure
Schedule (other than the Great America Parkway Lease, the space leased in
Herndon, Virginia, at No. 501 in Olympus Tower of Acropolis, Xx. 00, Xxxxx Xxxx,
Xxxxxxxxx, Xxxxx and at No. 804 in Sparta Tower of Acropolis in Bangalore,
India, each of which may be amended in the manner set forth in Section 4.5(k) of
the Disclosure Schedule);
(l) enter into or amend in any material respect any contract or
agreement of a nature required to be listed in Section 2.13 of the Disclosure
Schedule;
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(m) enter into or amend in any material respect any contract or
agreement of a nature required to be listed in Section 2.15(a)(i) or (ii) of the
Disclosure Schedule, except for (1) equipment leases entered into in the
Ordinary Course of Business with terms of twelve months or less, which shall
nevertheless be subject to the limitations set forth in paragraph (p) below; (2)
network service provider contracts entered into in the Ordinary Course of
Business, having a term of one year or less and involving 100 mbps or less; (3)
customer contracts entered into in the Ordinary Course of Business with pricing,
terms and other conditions equivalent in all material respects to comparable
customer contracts existing at the date of this Agreement; and (4) vendor
agreements entered into in the Ordinary Course of Business involving less than
the sum of $200,000 over the term of the agreement and are terminable within one
year;
(n) enter into or amend in any material respect any contract or
agreement of a nature required to be listed in Section 2.15 of the Disclosure
Schedule (other than in Section 2.15(a)(i) or 2.15(a)(ii) thereof);
(o) terminate, other than as a matter of right in the Ordinary
Course of Business (including, but not limited to, termination of agreements of
nonpaying customers) or take or omit to take any action that would constitute a
violation under, or waive any material rights under, any contract or agreement
of a nature required to be listed in Section 2.12, Section 2.13 or Section 2.15
of the Disclosure Schedule or any other contract or agreement with any customer
or the business of the Company and the Subsidiaries involving more than the sum
of $50,000 over the term of the agreement;
(p) make or commit to make any capital expenditure, including those
permitted by Section 4.5(m)(1), in excess of $50,000 per item or $200,000 in the
aggregate per month;
(q) institute any Legal Proceeding, except for any Legal Proceeding
brought by the Company for the purpose of enforcing the Buyer's performance of
its obligations under this Agreement, or settle and Legal Proceeding, except for
settlements of routine litigation in the Ordinary Course of Business, provided
that such settlements only involve cash payments of monetary damages, which
payments individually and in the aggregate shall not be material, or cash
payments paid in full during the Pre-Closing Period;
(r) take any action or fail to take any action permitted by this
Agreement with the knowledge that such action or failure to take action would
reasonably be expected to result in (i) any of the representations and
warranties of the Company set forth in this Agreement becoming untrue during the
Pre-Closing Period (other than as a result of changes to the representations and
warranties expressly contemplated or permitted by this Agreement) or (ii) any of
the conditions to the Merger set forth in Article V not being satisfied;
(s) fail to take any action necessary to preserve the validity of
any material Intellectual Property or Permit; or
(t) agree in writing or otherwise to take any of the foregoing
actions. In addition, during the Pre-Closing Period, the Company shall (i)
accept customer orders in the Ordinary Course of Business and (ii) cooperate
with the Buyer in communicating with suppliers and customers to prepare for the
transfer of the Company's business to the Buyer as a result of and conditioned
upon the Merger, on the Closing Date, so long as such communications are not
inconsistent with the Xxxx-Xxxxx-Xxxxxx Act.
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4.6 Stay of Litigation. Upon execution of this Agreement, all activities
as between the Parties in the prosecution and/or defense of the Lawsuits shall
be immediately suspended, and the Parties shall cause their counsel to prepare
and file, within two (2) business days following the date of this Agreement,
joint motions to indefinitely stay the Lawsuits. The motions shall identify this
Agreement, shall make a formal request for an Order vacating all currently
scheduled dates, including but not limited to (a) the remaining dates related to
the briefing and hearing on all pending discovery or other motions, (b) all
other pretrial dates, and (c) the trial dates, and shall further require the
parties to notify the Court upon either (i) any termination of this Agreement
pursuant to Article X of this Agreement, or (ii) any Closing of the Merger
pursuant to Article I of this Agreement. The joint motions shall also request
that any such stay be automatically lifted, five (5) business days after notice
to the court of any termination of this Agreement pursuant to Article X of this
Agreement. If the stay is lifted, the parties will request a new trial setting
conference as soon as reasonably practicable, at which time the Court will set a
new schedule for trial and pre-trial dates. In the action pending in Santa Xxxxx
Superior Court and pursuant to the terms of the Contingent Settlement Agreement
and Partial Release in the form attached hereto as Exhibit E, the Parties agree
not to seek a trial date fewer than one hundred twenty (120) days after the date
the stay is lifted. In the actions pending in U.S. District Court in
Massachusetts, the parties agree not to seek a trial date fewer than nine (9)
months after the date the stay is lifted. Upon the Closing, the Buyer shall
prepare and cause to be filed stipulations terminating the Lawsuits with a
dismissal with prejudice as to each of Xxxx Xxxxx, Xxxxxxx Xxx and the Company,
and all counsel will execute such stipulations.
4.7 Access to Information.
(a) Except to the extent limited by the Xxxx-Xxxxx-Xxxxxx Act or
other law, during the Pre-Closing Period, the Company shall (and shall cause
each Subsidiary to) afford the officers, attorneys, accountants and other
authorized representatives of the Buyer reasonable access upon reasonable notice
and during normal business hours to all personnel, offices, properties, books
and records of the Company, so that the Buyer may have full opportunity to make
such investigation as it shall desire to make of the management, business,
properties and affairs of the Company and the Subsidiaries, and the Buyer shall
be permitted to make such abstracts from, or copies of, all such books and
records as may be reasonably necessary to assist in planning for integration and
operation of the combined business following the Closing, provided that such
information shall be held pursuant to the terms and conditions of the
Nondisclosure Agreement dated August 26, 2004, between the Buyer and the
Company, as amended by Amendment No. 1 to the Nondisclosure Agreement dated
January 13, 2005, and Amendment No. 2 to the Nondisclosure Agreement dated
February 16, 2005 (the "NDA"). The Company shall (and shall cause each
Subsidiary to) furnish to the Buyer such financial and operating data and other
information as to the business of the Company and the Subsidiaries as the Buyer
shall reasonably request. The Company shall, from and after the date hereof,
cause its accountants to provide to the Buyer and its auditors such information
and work papers as the Buyer or such auditors may reasonably deem necessary in
connection with the preparation of the Buyer's SEC filings arising out of the
Merger. The Company shall execute and deliver to its accountants such consents
and waivers as may be necessary to afford the Buyer and its auditors access to
such information and work papers.
(b) Within 10 business days after the end of each month ending prior
to the Closing, beginning with March 1, 2005, the Company shall furnish to the
Buyer an unaudited income statement for such month and a balance sheet as of the
end of such month, prepared on a basis consistent with the Financial Statements.
Such financial statements shall present fairly the financial condition and
results of operations of the Company and the Subsidiaries as of the dates
thereof and for the periods covered thereby, and shall be consistent with the
books and records of the Company and the Subsidiaries.
4.8 Notice of Breaches.
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(a) During the Pre-Closing Period, the Company shall promptly
deliver to the Buyer supplemental information concerning events or circumstances
occurring subsequent to the date hereof which would render any representation,
warranty or statement of the Company in this Agreement or the Disclosure
Schedule inaccurate or incomplete in any material respect at any time after the
date of this Agreement until the Closing. No such supplemental information shall
be deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation, warranty or statement in this
Agreement or the Disclosure Schedule.
(b) During the Pre-Closing Period, the Buyer shall promptly deliver
to the Company supplemental information concerning events or circumstances
occurring subsequent to the date hereof which would render any representation,
warranty or statement of the Buyer in this Agreement or the Disclosure Schedule
inaccurate or incomplete in any material respect at any time after the date of
this Agreement until the Closing. No such supplemental information shall be
deemed to avoid or cure any misrepresentation or breach of warranty or
constitute an amendment of any representation, warranty or statement in this
Agreement or the Disclosure Schedule.
4.9 Exclusivity.
(a) During the Pre-Closing Period, the Company shall not, and the
Company shall require each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (i) initiate,
solicit, encourage or otherwise facilitate any inquiry, proposal, offer or
discussion with any party (other than the Buyer) concerning any Acquisition
Proposal, (ii) furnish any information concerning the business, properties or
assets of the Company or any Subsidiary or the Company Shares to any party
(other than the Buyer) or (iii) engage in negotiations or enter into any
agreement with any party (other than the Buyer) concerning any such transaction.
(b) Notwithstanding the foregoing, prior to the adoption of this
Agreement either at a special meeting of stockholders or pursuant to a written
stockholder consent, the Company may, to the extent required by the fiduciary
obligations of the Company's Board of Directors, as determined in good faith by
the Company's Board of Directors after consultation with outside counsel, in
response to a bona fide, unsolicited written Acquisition Proposal from an
unaffiliated third party made or received after the date of this Agreement that
the Company's Board of Directors determines in good faith after consultation
with outside counsel and a nationally recognized independent financial advisor
is reasonably likely to lead to a Superior Proposal, in each case that did not
result from a breach by the Company of this Section 4.9, and subject to
compliance with Section 4.9(c), (x) furnish information with respect to the
Company to the person making such Acquisition Proposal and its Advisors pursuant
to a customary confidentiality agreement not less restrictive of the other party
than the NDA and (y) participate in discussions or negotiations (including
solicitation of a revised Acquisition Proposal) with such person and its
Advisors regarding any Acquisition Proposal. Without limiting the foregoing, it
is agreed that any violation of the restrictions set forth in this Section 4.9
by any Advisor of the Company or any of its Subsidiaries, whether or not such
person is purporting to act on behalf of the Company or otherwise, shall be
deemed to be a material breach of this Section 4.9 by the Company.
(c) The Company shall promptly, and in any event within one business
day, notify any party with which discussions or negotiations of the nature
described in paragraph (a) above were pending that the Company is terminating
such discussions or negotiations. If the Company receives any Acquisition
Proposal or any request for information in connection with any Acquisition
Proposal, or of any inquiry with respect to, or that could reasonably be
expected to lead to, any Acquisition Proposal, the Company shall, within two
business days after such receipt, notify the Buyer of such Acquisition Proposal,
request or inquiry, including the identity of the other party and the terms of
such Acquisition Proposal, request or inquiry.
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4.10 Listing Notifications. The Buyer shall timely prepare and submit to
NASDAQ any notice or other document or instrument required to be filed with or
submitted to NASDAQ by applicable federal or state securities laws or the NASDAQ
Marketplace Rules with respect to the shares of the Buyer Common Stock issuable
in connection with the Merger.
4.11 Expenses. Except as otherwise expressly provided herein, the Buyer
will pay all fees and expenses (including legal and accounting fees and
expenses) incurred by it in connection with the transactions contemplated hereby
and the Equity Holders, jointly and severally, will pay all fees and expenses
incurred by the Equity Holders in connection with the transactions contemplated
hereby. Each Equity Holder shall be responsible for payment of all sales or
transfer Taxes (including real property transfer Taxes) arising out of the
conveyance of the Company Shares owned by such Company Stockholder.
4.12 Company 401(k) Plan. If requested by the Buyer, the Company shall
terminate its 401(k) Plan in accordance with its terms as of or prior to the
Effective Time.
4.13 280G Covenant. Prior to the Closing Date, the Company shall submit
to a stockholder vote the right of any "disqualified individual" (as defined in
Section 280G(c) of the Code) to receive any and all payments (or other benefits)
that could be deemed "parachute payments" under Section 280G(b) of the Code, in
a manner that satisfies the stockholder approval requirements for the small
business exemption of Section 280G(b)(5) of the Code and any regulations
(including proposed regulations) promulgated thereunder. Consistent with the
requirements of Section 280G(b)(5) and the regulations, such vote shall
establish the "disqualified individual's" right to the payment, benefit or other
compensation, and before the Closing Date, the Company shall provide adequate
disclosure to all Company Stockholders of all material facts concerning all
payments that, but for such vote, could be deemed "parachute payments" to a
"disqualified individual" under Section 280G of the Code in a manner that
satisfies Section 280G(b)(5)(B)(ii) of the Code and any regulations (including
proposed regulations) promulgated thereunder.
4.14 FIRPTA. Prior to the Closing, the Company shall deliver to the Buyer
and to the Internal Revenue Service notices that the Company Shares are not
"U.S. real property interests" in accordance with Treasury Regulations under
Sections 897 and 1445 of the Code. If the Buyer does not receive the notices
described above on or before the Closing Date, the Buyer, the Transitory
Subsidiary or the Exchange Agent shall be permitted to withhold from the
payments to be made pursuant to this Agreement any required withholding Tax
under Section 1445 of the Code in the manner provided in Section 1.18.
4.15 Silicon Valley Bank Registration Rights. Prior to the Closing, the
Company shall terminate all registration rights of Silicon Valley Bank disclosed
in Section 2.2(e) of the Disclosure Schedule.
4.16 Option Acceleration.
(a) Except in accordance with the terms of arrangements established
by the Company prior to the Effective Time as specifically disclosed in Sections
2.2(c)(ii) and 2.7(b) of the Disclosure Schedule or in accordance employment
arrangements between the Buyer and the Management Participants entered into as
of the date of this Agreement, during the 18 month period commencing at the
Effective Time, the Buyer agrees that it shall not (i) accelerate the vesting of
any Outstanding Options assumed by the Buyer or (ii) continue the vesting of any
Outstanding Options assumed by the Buyer for any employee that does not remain
an active employee of or consultant to the Buyer or any of its
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Subsidiaries, including any employee or consultant that is not generally
required to provide a minimum of 15 hours of service on a weekly basis to the
Buyer or any of its Subsidiaries.
(b) Following the 18 month anniversary of the Effective Time, the
Buyer shall provide the Representative with such relevant back-up materials and
documents as the Representative may reasonably request to allow the
Representative to confirm the calculation of the number of Option Adjusted Buyer
Common Shares issued pursuant to Section 1.5(d)(iii).
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the Merger is subject to the satisfaction of the following conditions
precedent, each of which may be waived in writing in the sole discretion of the
Buyer:
(a) the holders of at least 95% of the votes represented by the
outstanding Company Shares entitled to vote on this Agreement and the Merger
shall have voted to adopt this Agreement and approve the Merger;
(b) the Company shall have (i) obtained (and shall have provided
copies thereof to the Buyer) all of the waivers, permits, consents, approvals or
other authorizations (collectively, "Consents"), and effected all of the
registrations, filings and notices (collectively, "Filings"), which are listed
in Section 5.1(b)(i) of the Disclosure Schedule, and (ii) obtained (and shall
have provided copies thereof to the Buyer) all other Consents and effected all
other Filings that, if not obtained or effected, would reasonably be expected to
result in a Company Material Adverse Effect (it being understood that the
failure to obtain any of the Consents or effect any or all of the Filings listed
in Section 5.1(b)(ii) of the Disclosure Schedule would not reasonably be
expected to result in a Company Material Adverse Effect);
(c) the representations and warranties of the Company set forth in
this Agreement shall be true and correct in all respects when made as of the
date of this Agreement and as of the Closing as though made as of the Closing,
except (i) to the extent such representations and warranties are specifically
made as of a particular date (in which case such representations and warranties
shall be true and correct in all material respects as of such date), (ii) for
changes expressly contemplated or permitted by this Agreement and (iii) in any
event, as would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect. Notwithstanding anything to the
contrary herein, for purposes of this Section 5.1(c), each representation or
warranty made by the Company herein is made without any qualifications or
limitations as to materiality (including without limitation any qualifications
or limitations made by reference to a Company Material Adverse Effect) and,
without limiting the foregoing, the word "material" and words of similar import
shall be deemed deleted from any such representation or warranty;
(d) the Company shall have performed or complied with its agreements
and covenants required to be performed or complied with under this Agreement as
of or prior to the Closing except for any failures to perform or comply which,
individually or in the aggregate, are not material in amount or significance;
(e) there shall have been no Company Material Adverse Effect as of
or prior to the Closing;
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(f) no Legal Proceeding shall be pending wherein an unfavorable
judgment, order, decree, stipulation or injunction would (i) prevent
consummation of the transactions contemplated by this Agreement, (ii) cause the
transactions contemplated by this Agreement to be rescinded following
consummation or (iii) have, individually or in the aggregate, a Company Material
Adverse Effect, and no such judgment, order, decree, stipulation or injunction
shall be in effect;
(g) all applicable waiting periods (and any extensions thereof)
under the Xxxx-Xxxxx-Xxxxxx Act and under any other applicable U.S. or foreign
antitrust laws shall have expired or otherwise been terminated;
(h) all applicable approvals by the California Commissioner of
Corporations pursuant to Section 3(a)(10) of the Securities Act and California
law shall have been granted or the issuance of the Buyer Common Shares in
connection with the Merger shall have been registered on the Registration
Statement;
(i) the Buyer shall have received a counterpart executed by Xxxx
Xxxxx and Xxxxxxx Xxx of the Contingent Settlement Agreement and Partial Release
relating to the Lawsuits attached hereto as Exhibit E;
(j) the Company shall have delivered to the Buyer and the Transitory
Subsidiary the Company Certificate;
(k) the Buyer shall have received copies of the resignations,
effective as of the Closing, of each director and officer of the Company (other
than any such resignations which the Buyer designates, by written notice to the
Company, as unnecessary);
(l) the Buyer shall have received a counterpart of the
Indemnification Escrow Agreement executed by the Escrow Agent and the
Representative;
(m) the Buyer shall have received from Fenwick & West LLP, counsel
to the Company, an opinion in the form attached hereto as Exhibit F addressed to
the Buyer and dated as of the Closing Date;
(n) the Buyer shall have received from counsel to the India
Subsidiary an opinion in the form attached hereto as Exhibit G addressed to the
Buyer and dated as of the Closing Date;
(o) the Buyer shall have received from Silicon Valley Bank an
executed pay-off letter in the form reasonably satisfactory to the Buyer
certifying that all indebtedness of the Company to Silicon Valley Bank has been
repaid as of the Closing and releasing any Security Interests held by Silicon
Valley Bank in the business and/or the assets of the Company and the
Subsidiaries;
(p) the Buyer shall have received from the Company all UCC-3
termination statements set forth on Section 5.1(p) of the Disclosure Schedule
and all other UCC-3 termination statements obtainable by the Company prior to
Closing using its Reasonable Best Efforts for all filed UCC-1 financing
statements related to indebtedness of the Company, each duly executed by the
applicable lienholder and in a form proper to be filed with the appropriate
Governmental Entity, and all other necessary release documents for all Security
Interests in the business and/or assets of the Company and the Subsidiaries,
each duly executed by the appropriate lienholder;
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(q) the Buyer shall have received evidence that this Agreement and
the Merger have received the Requisite Stockholder Approval;
(r) the Buyer shall have received evidence that the stockholder vote
required by Section 4.13 has occurred;
(s) the Buyer shall have received a certificate of incorporation
from the concerned Registrar of Companies for the India Subsidiary;
(t) the Buyer shall have received documentation in form satisfactory
to the Buyer evidencing the appointment of at least two nominees of the Buyer as
additional directors of the India Subsidiary and authorizing the secretary of
the India Subsidiary or any other official of the India Subsidiary to file a
return on Form 32 with the concerned Registrar of Companies; and
(u) the Buyer shall have received such other certificates and
instruments (including certificates of good standing of the Company in its
jurisdiction of organization and the various foreign jurisdictions in which it
is qualified, certified charter documents, certificates as to the incumbency of
officers and the adoption of authorizing resolutions) as it shall reasonably
request in connection with the Closing.
5.2 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
conditions precedent, each of which may be waived in writing in the sole
discretion of the Company:
(a) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in this Agreement shall be true and correct when
made as of the date of this Agreement and as of the Closing as though made as of
the Closing, except (i) to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties shall be true and correct in all material respects as of such
date), (ii) for changes expressly contemplated or permitted by this Agreement
and (iii) in any event, as would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Buyer and its
Subsidiaries, taken as a whole. Notwithstanding anything to the contrary herein,
for purposes of this Section 5.2(a), each representation or warranty made by the
Buyer herein is made without any qualifications or limitations as to materiality
(including without limitation any qualifications or limitations made by
reference to a material adverse effect on the Buyer) and, without limiting the
foregoing, the word "material" and words of similar import shall be deemed
deleted from any such representation or warranty;
(b) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with its agreements and covenants required to be performed
or complied with under this Agreement as of or prior to the Closing except for
any failures to perform or comply which, individually or in the aggregate, are
not material in amount or significance;
(c) the Company shall have received a counterpart executed by the
Buyer to the releases and stipulations relating to the Lawsuits attached hereto
as Exhibit E;
(d) the Buyer shall have delivered to the Representative the Buyer
Certificate;
(e) the Representative shall have received a counterpart of the
Indemnification Escrow Agreement executed by the Buyer and the Escrow Agent;
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(f) the Representative shall have received evidence of delivery of
the Indemnification Escrow Shares to the Escrow Agent;
(g) the Representative shall have received such other certificates
and instruments (including certificates of good standing of the Buyer and the
Transitory Subsidiary in their jurisdiction of organization, certified charter
documents, certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing;
(h) the Representative shall have received from Xxxxxx Xxxxxx
Xxxxxxxxx Xxxx and Xxxx LLP, counsel to the Buyer, an opinion in the form
attached hereto as Exhibit H addressed to the Equity Holders and dated as of the
Closing Date; and
(i) no Legal Proceeding shall be pending by or before any
Governmental Entity in which a Governmental Entity is a party wherein an
unfavorable judgment, order, decree, stipulation or injunction would (A) prevent
consummation of the transactions contemplated by this Agreement or (B) cause the
transactions contemplated by this Agreement to be rescinded following the
Closing.
ARTICLE VI
INDEMNIFICATION
6.1 Indemnification by the Equity Holders. From and after the Effective
Time, the Equity Holders, on a basis providing for equal culpability via their
deposit of the Indemnification Escrow Shares, shall indemnify the Buyer in
respect of, and hold it harmless against, any and all Damages incurred or
suffered by the Company, the Surviving Corporation, the Buyer or any Affiliate
thereof resulting from, relating to or constituting:
(a) any breach, as of the date of this Agreement or as of the
Closing Date, of any representation or warranty of the Company contained in this
Agreement;
(b) any failure to perform any covenant or agreement of the Company
contained in this Agreement;
(c) any failure of any Company Stockholder to have good, valid and
marketable title to the issued and outstanding Company Shares issued in the name
of such Company Stockholder, free and clear of all Security Interests;
(d) any claim by a stockholder or former stockholder of the Company,
or any other person or entity (including any officer or director of the Company
or any Subsidiary), seeking to assert, or based upon: (i) ownership or rights to
ownership of any shares of stock of the Company; (ii) any rights of a
stockholder (other than the right to receive the Merger Consideration pursuant
to this Agreement or procedure to dissent under the applicable provisions of the
Delaware General Corporation Law or California Corporations Code), including any
option, preemptive rights or rights to notice or to vote; or (iii) any claim
that his, her or its shares were wrongfully repurchased by the Company; or
(e) any claim for indemnification by an Indemnified Party as
provided in Section 9.1 other than in connection with a claim by Buyer directly
against an officer or director of the Company to the extent such officer or
director is entitled to indemnification by the Company in connection with such
claim, unless it is ultimately determined that such officer or director is not
entitled to such indemnification.
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6.2 Indemnification Claims.
(a) The Buyer shall give written notification to the Representative
of the commencement of any Third Party Action. Such notification shall be given
within 20 days after receipt by the Buyer of notice of such Third Party Action,
and shall describe in reasonable detail (to the extent then known by the Buyer)
the facts constituting the basis for such Third Party Action and the amount of
the claimed damages. No delay or failure on the part of the Buyer in so
notifying the Representative shall relieve the Equity Holders of any liability
or obligation hereunder except to the extent of any damage or liability caused
by or arising out of such delay or failure. Within 20 days after delivery of
such notification, the Representative may, upon written notice thereof to the
Buyer, assume control of the defense of such Third Party Action with counsel
reasonably satisfactory to the Buyer; provided that (i) the Representative may
only assume control of such defense if (A) he, she or it acknowledges in writing
to the Buyer that any damages, fines, costs or other liabilities that may be
assessed against the Buyer in connection with such Third Party Action constitute
Damages for which the Buyer shall be indemnified pursuant to this Article VI,
(B) the ad damnum does not exceed 110% of the amount of Damages for which the
Equity Holders are liable under this Article VI, and (C) an adverse resolution
of the Third Party Action would not have a material adverse effect on the
goodwill or reputation of the Buyer or the business, operations or future
conduct of the Buyer and (ii) the Representative may not assume control of the
defense of Third Party Action involving criminal liability or in which equitable
relief is sought against the Buyer and may not assume control of any Tax
Proceeding to the extent such Tax Proceeding involves consolidated or combined
Tax Returns of the Buyer for any Tax period (or portion thereof) after the
Closing Date or a potential Tax liability which may exceed 110% of the amount
for which the Equity Holders may be liable under this Article VI after taking
into account the amount of all other liabilities for which claims have been made
by the Buyer. If the Representative does not, or is not permitted under the
terms hereof to, so assume control of the defense of a Third Party Action, the
Buyer shall control such defense. The Non-controlling Party may participate in
such defense at its own expense. The Controlling Party shall keep the
Non-controlling Party advised of the status of such Third Party Action and the
defense thereof and shall consider in good faith recommendations made by the
Non-controlling Party with respect thereto. The Non-controlling Party shall
furnish the Controlling Party with such information as it may have with respect
to such Third Party Action (including copies of any summons, complaint or other
pleading which may have been served on such party and any written claim, demand,
invoice, billing or other document evidencing or asserting the same) and shall
otherwise cooperate with and assist the Controlling Party in the defense of such
Third Party Action. The fees and expenses of counsel to the Buyer with respect
to a Third Party Action shall be considered Damages for purposes of this
Agreement if (i) the Buyer controls the defense of such Third Party Action
pursuant to the terms of this Section 6.2(a) or (ii) the Representative assumes
control of such defense and the Buyer reasonably concludes that the
Representative and the Buyer have conflicting interests or different defenses
available with respect to such Third Party Action. The Representative shall not
agree to any settlement of, or the entry of any judgment arising from, any Third
Party Action without the prior written consent of the Buyer, which shall not be
unreasonably withheld, conditioned or delayed; provided that the consent of the
Buyer shall not be required if the Representative agrees in writing to pay any
amounts payable pursuant to such settlement or judgment and such settlement or
judgment includes a complete release of the Buyer from further liability and has
no other adverse effect on the Buyer. Except as provided in Section 6.2(f)
below, the Buyer shall not agree to any settlement of, or the entry of any
judgment arising from, any such Third Party Action without the prior written
consent of the Representative, which shall not be unreasonably withheld,
conditioned or delayed.
(b) In order to seek indemnification under this Article VI, the
Buyer shall deliver a Claim Notice to the Representative.
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(c) Within 30 days after delivery of a Claim Notice, the
Representative shall deliver to the Buyer a Response, in which the
Representative, on behalf of the Equity Holders, shall: (i) agree that the Buyer
is entitled to receive all of the Claimed Amount (in which case the Response
shall be accompanied by a letter instructing the Escrow Agent to disburse to the
Buyer from the Indemnification Escrow Shares a number of shares that if
multiplied by a value of $12.50 per share will equal the Claimed Amount), (ii)
agree that the Buyer is entitled to receive the Agreed Amount (in which case the
Response shall be accompanied by a letter instructing the Escrow Agent to
disburse to the Buyer from the Indemnification Escrow Shares a number of shares
that if multiplied by a value of $12.50 per share will equal the Agreed Amount)
or (iii) dispute that the Buyer is entitled to receive any of the Claimed
Amount. The Equity Holders may contest the payment of all or a portion of the
Claimed Amount only based upon a good faith belief that all or such portion of
the Claimed Amount does not constitute Damages for which the Buyer is entitled
to indemnification under this Article VI. If no Response is delivered by the
Equity Holders within such 30-day period, the Equity Holders shall be deemed to
have agreed that all of the Claimed Amount is owed to the Buyer. Acceptance by
the Buyer of partial payment of any Claimed Amount shall be without prejudice to
the Buyer's right to claim the balance of any such Claimed Amount.
(d) During the 30-day period following the delivery of a Response
that reflects a Dispute, the Equity Holders and the Buyer shall use good faith
efforts to resolve the Dispute. If the Dispute is not resolved within such
30-day period, the Equity Holders and the Buyer shall submit the Dispute to
binding arbitration and such Dispute shall be resolved in accordance with
Section 6.2(e).
(e) Any arbitration shall be conducted in San Francisco, California,
in the case of a claim made by the Buyer, or in Boston, Massachusetts, in the
case of a claim made by the Representative, by a single arbitrator (the
"Arbitrator") in accordance with the Commercial Rules in effect from time to
time and the following provisions:
(i) In the event of any conflict between the Commercial Rules
in effect from time to time and the provisions of this Agreement, the provisions
of this Agreement shall prevail and be controlling;
(ii) Either party shall commence the arbitration by filing a
written submission with the office of the AAA in the appropriate city and state
as provided by this Section 6.2(e) in accordance with Commercial Rule 5 (or any
successor provision);
(iii) All depositions or other discovery shall be conducted
pursuant to the applicable U.S. federal rules relating to discovery;
(iv) Not later than 30 days after the conclusion of the
arbitration hearing, the Arbitrator shall prepare and distribute to the parties
a writing setting forth the arbitral award and the Arbitrator's reasons
therefor. Any award rendered by the Arbitrator shall be final, conclusive and
binding upon the parties, and judgment thereon may be entered and enforced in
any court of competent jurisdiction (subject to Section 12.11);
(v) The Arbitrator shall have no power or authority, under the
Commercial Rules or otherwise, to (x) modify or disregard any provision of this
Agreement, including the provisions of this Section 6.2(e), or (y) address or
resolve any issue not submitted by the parties; and
(vi) In connection with any arbitration proceeding pursuant to
this Agreement, each party shall bear its own costs and expenses, except that
the fees and costs of the AAA
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and the Arbitrator, the costs and expenses of obtaining the facility where the
arbitration hearing is held, and such other costs and expenses as the Arbitrator
may determine to be directly related to the conduct of the arbitration and
appropriately borne jointly by the parties (which shall not include any party's
attorneys' fees or costs, witness fees (if any), costs of investigation and
similar expenses) shall be shared equally by the Buyer and the Equity Holders.
(f) Notwithstanding the other provisions of this Section 6.2, if a
third party asserts (other than by means of a lawsuit) that the Buyer is liable
to such third party for a monetary or other obligation which may constitute or
result in Damages for which the Buyer may be entitled to indemnification
pursuant to this Article VI, and the Buyer reasonably determines that it has a
valid business reason to fulfill such obligation, then (i) the Buyer shall be
entitled to satisfy such obligation, without prior notice to or consent from the
Representative or the Equity Holders, (ii) the Buyer may subsequently make a
claim for indemnification in accordance with the provisions of this Article VI,
and (iii) the Buyer shall be reimbursed, in accordance with the provisions of
this Article VI, for any such Damages for which it is entitled to
indemnification pursuant to this Article VI (subject to the right of the Equity
Holders to dispute the Buyer's entitlement to indemnification, or the amount for
which it is entitled to indemnification, under the terms of this Article VI).
(g) The Representative shall have full power and authority on behalf
of each Equity Holder to take any and all actions on behalf of, execute any and
all instruments on behalf of, and execute or waive any and all rights of, the
Equity Holders under this Article VI. The Representative shall have no liability
to any Equity Holder for any action taken or omitted on behalf of the Equity
Holders pursuant to this Article VI.
6.3 Survival of Representations and Warranties. Unless otherwise
specified in this Section 6.3 or elsewhere in this Agreement, all provisions of
this Agreement shall survive the Closing and the consummation of the
transactions contemplated hereby and shall continue forever in full force and
effect in accordance with their terms; provided that the representations and
warranties of the Buyer set forth in Sections 3.6 and 3.7 and the covenants of
the Buyer set forth in Section 4.8(b) (as they relate to such representations
and warranties) shall terminate at, and shall not survive, the Closing. All
representations and warranties (other than those set forth in Sections 2.2, 2.3,
2.9, 2.13 and 2.23) and all covenants and other agreements of the Company set
forth in Article IV (other than those set forth in Sections 4.2, 4.13 and 4.14)
shall expire on the date 18 months following the Closing Date, and the
representations and warranties set forth in Sections 2.2, 2.3, 2.9, 2.13 and
2.23 and the covenants and other agreements of the Company set forth in Sections
4.2, 4.13 and 4.14 shall survive for a period of 30 months following the Closing
Date. If the Buyer delivers to the Representative, before expiration of a
representation or warranty, either a Claim Notice based upon a breach of such
representation or warranty, or an Expected Claim Notice based upon a breach of
such representation or warranty, then the applicable representation or warranty
shall survive until, but only for purposes of, the resolution of the matter
covered by such notice. If the legal proceeding or written claim with respect to
which a Claim Notice or an Expected Claim Notice has been given is definitively
withdrawn or resolved in favor of the Buyer, the Buyer shall promptly so notify
the Representative. The rights to indemnification set forth in this Article VI
shall not be affected by (i) any investigation conducted by or on behalf of the
Buyer or any actual or implied knowledge or notice acquired (or capable of being
acquired) by the Buyer, whether before or after the date of this Agreement or
the Closing Date, with respect to the inaccuracy or noncompliance with any
representation, warranty, covenant or obligation which is the subject of
indemnification hereunder, or (ii) any waiver by the Buyer of any closing
condition relating to the accuracy of representations and warranties or the
performance of or compliance with agreements and covenants.
6.4 Limitations.
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(a) Notwithstanding anything to the contrary herein, the Equity
Holders shall not be liable under Section 6.1(a) or clause (x) of Section 8.2
unless and until the aggregate Damages for which they would otherwise be liable
under Section 6.1(a) and clause (x) of Section 8.2 exceed $1,000,000 (at which
point the Equity Holders shall become liable for the aggregate Damages under
Sections 6.1(a) and clause (x) of Section 8.2 and not just amounts in excess of
$1,000,000); provided, however, that the limitation set forth in this paragraph
(a) shall not apply with respect to any liability with respect to breaches of
Section 2.9(o) or, for the avoidance of doubt, liability under clauses (y) or
(z) of Section 8.2.
(b) From and after the Effective Time, except in the case of fraud
or knowing misrepresentation, the sole and exclusive remedy of the Buyer with
respect to claims resulting from or relating to any misrepresentation, breach of
warranty or failure to perform any covenant or agreement contained in this
Agreement (including any claim under Article VIII) or arising out of or in
connection with the Company's obligations under this Agreement shall be the
Indemnification Escrow Shares.
(c) No Equity Holder shall have any right of contribution against
the Company or the Surviving Corporation with respect to any breach by the
Company of any of its representations, warranties, covenants or agreements.
(d) Notwithstanding anything to the contrary set forth herein,
nothing in this Article VI or in Article VIII is intended to create an
affirmative indemnity obligation by any Equity Holder for fraud or knowing
misrepresentation (it being understood that the foregoing shall not limit any
right of the Buyer to assert any claim based on fraud or knowing
misrepresentation not based on the indemnification obligations set forth in
Sections 6.1 and 8.2 of this Agreement (as affirmed by Section 4 of the
Stockholders Agreement and Section 2 of the Management Participant Agreement)).
(e) Any recovery of Damages by the Buyer for indemnification
pursuant to Article VI shall be offset by any insurance proceeds actually
received by the Buyer corresponding to such indemnification claim. To the extent
the Buyer receives any such insurance proceeds after the delivery of
Indemnification Escrow Shares from the Equity Holders pursuant to Section 3 of
the Indemnification Escrow Agreement, the Buyer will issue and deliver that
number of Buyer Common Shares equal to the value of the insurance proceeds to
the Equity Holders or to the Escrow Agent, to be allocated among the Equity
Holders in accordance with Article I of this Agreement.
ARTICLE VII
REGISTRATION OF SHARES
7.1 California Permit; Registered Offering.
(a) As promptly as practicable after the execution of this
Agreement, the Buyer shall prepare the necessary documents and apply to obtain a
California Permit so that the issuance of the Buyer Common Shares in the Merger
shall be exempt from registration under the Securities Act, by virtue of the
exemption from registration contained in Section 3(a)(10) thereof; provided,
however, that the Buyer shall use all Reasonable Best Efforts to prepare and
file the application to obtain a California Permit within 15 days after the
later of (i) execution of this Agreement and (ii) the date on which the Company
has furnished to the Buyer materials in conformity with the requirements of such
application. The Company shall cooperate with, and provide information to, the
Buyer in connection with the Buyer's application for the California Permit,
including such Disclosure Statement, financial statements and other information
with respect to the Company as, in the reasonable judgment of the Buyer or its
counsel, are required to be filed therewith. The Company and the Buyer will
respond promptly to any comments from the California Commissioner of
Corporations and will each use Reasonable Best Efforts to have the
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California Permit granted as soon as practicable after such filing; provided,
however, that nothing herein shall be understood to require either the Company
or the Buyer to amend its respective charter documents. None of the information
supplied by the Company to the Buyer, the California Commissioner of
Corporations or any representative thereof in connection with the California
Permit application or any other document prepared to comply with federal or
state securities laws shall contain any untrue statement of a material fact or
omit to state any material fact necessary in order to make the statements
contained therein, in the light of the circumstances under which they were made,
not misleading. None of the information supplied by the Buyer to the Company,
the California Commissioner of Corporations or any representative thereof in
connection with the California Permit application or any other document prepared
to comply with federal or state securities laws shall contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading. The Company shall
promptly advise the Buyer, and the Buyer shall promptly advise the Company, in
writing if at any time prior to the Effective Time either the Company or the
Buyer, as applicable, shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the California Permit
application in order to make the statements contained or incorporated by
reference therein not misleading or to comply with applicable law.
(b) If a California Permit cannot be issued for any reason, or is
not issued on or before the date that is 75 days after the date of the initial
filing of the application to obtain a California Permit, then the Parties shall
use their Reasonable Best Efforts to permit the delivery of Buyer Common Shares
pursuant to the Merger to be accomplished by means of registration of such Buyer
Common Shares on a Registration Statement on Form S-4 (or another appropriate
form) (the "Registration Statement") under the Securities Act. If the Buyer
Common Shares will be issued pursuant to an effective Registration Statement,
the Buyer shall prepare, with the assistance and cooperation of the Company, the
Registration Statement and the Proxy Statement/Prospectus with the SEC as
promptly as is reasonably practicable. The Buyer shall file the Registration
Statement with the SEC and shall, with the assistance and cooperation of the
Company, promptly respond to any SEC comments on the Registration Statement and
shall otherwise use its Reasonable Best Efforts to have the Registration
Statement declared effective by the SEC as promptly as practicable and to
maintain the effectiveness of the Registration Statement through the Effective
Time. The Buyer shall advise the Company promptly after it receives notice of
(i) the Registration Statement being declared effective or any supplement or
amendment thereto being filed with the SEC, (ii) the issuance of any stop order
in respect of the Registration Statement, and (iii) the receipt of any
substantive correspondence, comments or requests from the SEC in respect of the
Registration Statement. Following receipt of such notice from the Buyer, the
Company shall promptly distribute the Proxy Statement/Prospectus to the Company
Stockholders. The Company, acting through its Board of Directors, shall include
in the Proxy Statement/Prospectus the unanimous recommendation of its Board of
Directors that the Company Stockholders vote in favor of the adoption of this
Agreement and the approval of the Merger. Each of the Buyer and the Company
shall also cooperate to, and shall, take such other reasonable actions (other
than qualifying to do business in any jurisdiction in which it is not so
qualified) required to be taken under any applicable state securities laws in
connection therewith. The Buyer will pay all customary expenses in connection
with the Registration Statement, including, without limitation, registration
fees, legal and accounting fees, listing fees, transfer agent fees and printing
and mailing costs related to the Registration Statement. None of the information
supplied by the Company to the Buyer for inclusion in the Registration Statement
shall contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading. None
of the information supplied by the Buyer for inclusion in the Registration
Statement shall contain any untrue statement of a material fact or omit to state
any material fact necessary in order to make the statements contained therein,
in the light of the circumstances under which they were made, not misleading;
provided that, for the avoidance of
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doubt, the Buyer shall not be responsible for the accuracy or completeness of
any information relating to the Company or furnished by the Company in writing
for inclusion in the Registration Statement.
(c) Section 7.1(c) of the Disclosure Schedule sets forth a list of
those persons who are, in the Company's reasonable judgment, Rule 145
Affiliates. The Company shall notify the Buyer in writing of any change in the
identity of its Rule 145 Affiliates prior to the Closing Date. The Buyer shall
be entitled to place appropriate legends on the certificates evidencing any
shares of Buyer Common Stock to be received by Rule 145 Affiliates of the
Company in the Merger reflecting the restrictions set forth in Rule 145
promulgated under the Securities Act and to issue appropriate stop transfer
instructions to the transfer agent for Buyer Common Stock (provided that such
legends or stop transfer instructions shall be removed one year after the
Effective Time, upon the request of any holder of shares of Buyer Common Stock
issued in the Merger, if such holder is not then a Rule 145 Affiliate of the
Buyer).
7.2 Lock-up Agreements.
(a) The Company shall deliver to the Buyer at the Closing the
written undertaking of each Management Participant, each other Company
Stockholder that is a member of the Company's management and each Company
Stockholder that as a result of the consummation of the Merger, and together
with its Affiliates, would be the holder of more than 240,000 Buyer Common
Shares (or in lieu of any single such Company Stockholder, other Company
Stockholders who, in the aggregate, would be the holders of the same number of
shares held by the Company Stockholders as to which the Company would otherwise
be obligated to deliver such undertaking under this Section 7.2(a)) not to sell
or otherwise transfer or dispose of Buyer Common Shares, except as follows: (i)
one-third of the Buyer Common Shares held by such Management Participant or
Company Stockholder may be sold or otherwise transferred or disposed of during
the 180-day period immediately following the Closing, (ii) an additional
one-third of the Buyer Common Shares held by such Management Participant or
Company Stockholder may be sold or otherwise transferred during the period
commencing 180 days following the Closing and ending on the first anniversary of
the Closing, and (iii) the final one-third of the Buyer Common Shares held by
such Management Participant or Company Stockholder may be sold or otherwise
transferred following the first anniversary of the Closing.
(b) The Company may impose stop-transfer instructions with respect
to the shares or other securities subject to the foregoing restriction until the
end of such one year period.
ARTICLE VIII
TAX MATTERS
8.1 Preparation and Filing of Tax Returns; Payment of Taxes.
(a) The Company shall prepare and timely file all Tax Returns of the
Company required to be filed (taking into account extensions) prior to the
Closing Date.
(b) The Buyer shall prepare and timely file or shall cause to be
prepared and timely filed all Tax Returns not filed on or before the Closing
Date, including Tax Returns which were required to be filed before the Closing
but were not filed and all other Tax Returns with respect to the Company or in
respect of its business, assets or operations.
(c) Any Tax Return to be prepared and filed by the Buyer for taxable
periods beginning before the Closing Date shall be prepared on a basis
consistent with the last previous similar Tax Return, to the extent such
reporting is allowable without significant risk of the imposition of penalties
or additions to Tax as determined by the Buyer in consultation with its Tax
advisors; provided however, if
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the Company did not file a previous similar return, the Buyer shall prepare the
return in the manner determined in it sole discretion, in consultation with its
Tax advisors, including, but not limited to making voluntary disclosures of Tax
Returns which were not filed for previous taxable periods.
8.2 Tax Indemnification by the Equity Holders. The Equity Holders shall
indemnify via the Indemnification Escrow Shares, pursuant and subject to, and in
accordance with, Article VI, the Buyer, the Company, the Surviving Corporation
and their respective Affiliates in respect of, and hold the Buyer, the Company,
the Surviving Corporation and such Affiliates harmless, against (x) any and all
Damages resulting from, relating to, or constituting a breach of any
representation contained in Section 2.9 hereof, (y) the failure to perform any
covenant or agreement set forth in Article IV relating to Taxes or in this
Article VIII, and (z) without duplication, any and all Taxes due and payable by
the Surviving Corporation or the Company for any taxable period that ends (or is
deemed pursuant to Section 8.3(b) to end) on or before the Closing Date in
excess of any accruals for current Taxes (excluding accruals and reserves for
deferred Taxes established to reflect timing differences between book and Tax
income) on the Closing Balance Sheet. Amounts payable pursuant to this Section
8.2 shall be computed after taking into account all Tax consequences to the
Buyer (or the Surviving Corporation) of (i) the receipt of (or the right to
receive) the indemnification payment and (ii) the incurrence and payment of the
liability that gave rise to the right to receive the indemnification payment.
Thus, it is the intention of the Parties that the Buyer be held harmless with
respect to the liability that gave rise to the right to the indemnification
payment on a total after-Tax basis.
8.3 Allocation of Certain Taxes.
(a) If the Surviving Corporation or the Company is permitted, but
not required, under applicable foreign, state or local Tax laws to treat the
Closing Date as the last day of a taxable period, such day shall be treated as
the last day of a taxable period.
(b) Any Taxes for a taxable period beginning before the Closing Date
and ending after the Closing Date with respect to the Surviving Corporation
and/or the Company shall be apportioned for purposes of Sections 2.9 and 8.2
between the portion of the period ending on the Closing Date and the portion of
the period commencing on the day immediately following the Closing Date based on
the actual operations of the Surviving Corporation and/or the Company, as the
case may be, during such portions of the periods, and each such portion of such
period shall be deemed to be a taxable period (whether or not it is in fact a
taxable period). For purposes of computing the Taxes attributable to the two
portions of a taxable period pursuant to this Section 8.3(b), the amount of any
item that is taken into account only once for each taxable period (e.g., the
benefit of graduated Tax rates, exemption amounts, etc.) shall be allocated
between the two portions of the period in proportion to the number of days in
each portion.
8.4 Termination of Tax-Sharing Agreements. All Tax sharing agreements or
similar arrangements with respect to or involving the Company shall be
terminated prior to the Closing Date and, after the Closing Date, the Company
shall not be bound thereby or have any liability thereunder for amounts due in
respect of periods ending on or before the Closing Date.
8.5 Scope of Article VIII. Any claim by any Party relating to a breach
by another Party of their obligations under this Article VIII shall be pursued
in accordance with the procedures for indemnification claims, and shall
otherwise be subject to the terms and conditions, set forth in Article VI,
including, for the avoidance of doubt, Sections 6.3 and 6.4. Notwithstanding the
foregoing or any other term or condition of Article VI (except Sections 6.3 and
6.4), to the extent there is any inconsistency between the terms of Article VI
and this Article VIII with respect to the allocation of responsibility between
the Equity Holders and the Buyer for Taxes, the provisions of this Article VIII
shall govern.
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ARTICLE IX
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
9.1 Indemnification and Insurance.
(a) For a period of six years commencing at the Effective Time(1),
the Buyer shall, to the fullest extent permitted by law and subject to the
provisions of Section 6.1(e), cause the Surviving Corporation to honor all of
the Company's obligations to indemnify and hold harmless each present and former
director and officer of the Company and its Subsidiaries (the "Indemnified
Parties"), against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time (collectively, "Indemnifiable Matters"), to the extent that such
obligations to indemnify and hold harmless exist on the date of this Agreement
(the "Existing Indemnification Obligations").
(b) Prior to the Effective Time, the Company shall procure a six
year "tail" directors' and officers' liability insurance and fiduciary liability
insurance policy (the "Tail Policy"). The costs of the Tail Policy shall be
fully accrued for on both the Preliminary and Closing Balance Sheets (except to
the extent previously paid by the Company). The Surviving Corporation shall not
terminate or modify the Tail Policy following the Effective Time.
ARTICLE X
TERMINATION
10.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Closing (whether before or after Requisite Stockholder Approval),
as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written notice
to the Company in the event the Company is in breach of any representation,
warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (c) or (d) of Section 5.1 not to be satisfied and (ii) is not
cured within 30 days following delivery by the Buyer to the Company of written
notice of such breach;
(c) the Company may terminate this Agreement by giving written
notice to the Buyer in the event the Buyer or the Transitory Subsidiary is in
breach of any representation, warranty or covenant contained in this Agreement,
and such breach, individually or in combination with any other such breach, (i)
would cause the conditions set forth in clauses (a) or (b) of Section 5.2 not to
be satisfied and (ii) is not cured within 30 days following delivery by the
Company to the Buyer of written notice of such breach;
(d) the Buyer may terminate this Agreement by giving written notice
to the other Parties at any time after the stockholders of the Company have
voted on whether to approve this Agreement and the Merger in the event this
Agreement and the Merger failed to receive the Requisite Stockholder Approval;
------------------
(1) To be conterminous with tail police.
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(e) the Buyer may terminate this Agreement by giving written notice
to the Company if the Closing shall not have occurred by the earlier of (i) two
months after the Buyer has certified compliance with a second request, pursuant
to 16 CFR 803.6, if a second request is made, or (ii) before September 16, 2005,
(the "Outside Date"), by reason of the failure of any condition precedent under
Section 5.1 (unless the failure results primarily from a breach by the Buyer or
the Transitory Subsidiary of any representation, warranty or covenant contained
in this Agreement);
(f) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before the Outside Date, by reason of the failure of any
condition precedent under Section 5.2 (unless the failure results primarily from
a breach by the Company of any representation, warranty or covenant contained in
this Agreement); or
(g) the Buyer may terminate this Agreement by giving written notice
to the Company if the Buyer has incurred (or incurred on behalf of Seller) more
than an aggregate of $1,500,000 in Covered Costs (the "Cost Cap"); provided that
the Buyer shall not have the right to terminate this Agreement pursuant to this
paragraph (g) if the Company agrees to fund, and does fund, on a current basis,
all Covered Costs in excess of the Cost Cap. If the Company does fund Covered
Costs in excess of the Cost Cap and (i) clearance and approval of the Merger and
the other transactions contemplated by this Agreement is received such that (ii)
the Merger and the other transactions contemplated by this Agreement are
consummated and the Certificate of Merger is filed with the Secretary of State
of the State of Delaware, then all Covered Costs paid or accrued by the Company
in excess of the Cost Cap shall be added to the total assets of the Company on
the Closing Balance Sheet for the purposes of determining the Closing Net Asset
Value Adjustment pursuant to Section 1.12.
10.2 Effect of Termination.
(a) If any Party terminates this Agreement pursuant to Section 10.1,
all obligations of the Parties hereunder shall terminate without any liability
of any Party to any other Party (except for any liability of any Party for
willful or knowing breaches of this Agreement or for breaches of Section 4.9 and
except for any obligations of the Company pursuant to paragraph (b) below).
(b) If (i) a Specified Termination (as defined below) occurs, and
(ii) within 18 months of the Specified Termination, the Company (A) enters into
an Alternative Acquisition Agreement, or (B) otherwise agrees to an Acquisition
Proposal, then within two business days of such event, the Company shall tender
and pay to, or shall cause to be tendered and paid to, the Buyer, or its
designee, by wire transfer in immediately available funds, a termination fee of
$5,000,000. A "Specified Termination" shall mean (I) the valid termination of
this Agreement by the Buyer pursuant to Section 10.1(b), Section 10.1(d),
Section 10.1(e), Section 10.1(f) or Section 10.1(g) at a time when an Adverse
Recommendation has been made and not withdrawn, and (II) the valid termination
of this Agreement by the Buyer pursuant to Section 10.1(b) as a result of the
Company's breach of any of its covenants and agreements pursuant to this
Agreement to call, give notice of, convene and hold the special meeting of
stockholders or distribute a written stockholder consent for purposes of
approving this Agreement and the Merger regardless of whether the Company's
Board of Directors has withdrawn or modified its recommendation of this
Agreement and the Merger.
ARTICLE XI
DEFINITIONS
For purposes of this Agreement, each of the following terms shall have the
meaning set forth below.
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"AAA" shall mean the American Arbitration Association.
"Acquisition Proposal" shall mean any proposal or offer involving,
directly or indirectly, (i) the sale of more than 20% of the voting power of the
Company, (ii) any merger, reorganization, consolidation, recapitalization,
business combination, liquidation, dissolution or share exchange involving the
Company, (iii) any sale of securities representing more than 20% of the voting
power of the Company, (iv) the sale or other disposition (including, without
limitation, via license outside of the Ordinary Course of Business or joint
venture) of assets that constitute more than 20% of the Company's total assets
(on a consolidated basis) or assets that account for more than 20% of the
consolidated net revenues or net income of the Company.
"Adjusted Base Purchase Price" shall have the meaning set forth in Section
1.12(f).
"Adjusted Buyer Common Shares" shall mean, for each Outstanding Common
Share, a number of Buyer Common Shares equal to the difference between (w) the
Adjusted Common Conversion Ratio and (x) the Closing Common Conversion Ratio,
and, for each Outstanding Preferred Share, zero; and with respect to each
Exercised Share, a number of Buyer Common Shares equal to the fraction obtained
by dividing (x) the Adjusted Buyer Common Shares for each Outstanding Common
Share, by (y) the Closing Common Conversion Ratio.
"Adjusted Common Conversion Ratio" shall mean a fraction of a share of
Buyer Common Shares as is equal to the result obtained by dividing (i) the
Adjusted Merger Consideration, minus the Management Shares issued pursuant to
Sections 1.6(b)(i) and (ii), minus the Preferred Consideration, by (ii) the
Closing Total Company Shares.
"Adjusted Merger Consideration" shall mean the number of Buyer Common
Shares equal to the result obtained by dividing (i) the greater of (x) the
Preliminary Base Purchase Price or (y) the Adjusted Base Purchase Price by (ii)
$12.50 per share.
"Adjusted Total Company Shares" shall mean the number of Company Shares
equal to (A) the Closing Total Company Shares minus (B) the quotient of (x) the
number of Buyer Common Shares issuable upon exercise of Assumed Convertible
Securities (or any portion thereof) that have expired unexercised as of the date
18 months following the Closing Date, divided by (y) the Closing Common
Conversion Ratio or the Adjusted Common Conversion Ratio, as applicable to such
expired Assumed Convertible Security.
"Adverse Recommendation " shall have the meaning set forth in Section
4.4(c).
"Advisors" shall mean any of the Company's or any of a Subsidiary's
directors, officers, employees, investment bankers, attorneys, accountants or
other advisors or representatives.
"Affiliate" shall mean any affiliate, as defined in Rule 12b-2 under the
Securities Exchange Act of 1934.
"Aggregate Escrow Value" shall mean the sum of (A) the aggregate Option
Merger Value of all Escrow Assumed Convertible Securities as of the date of
determination plus (B) the product of $12.50 multiplied by the number of
Indemnification Escrow Shares.
"Agreed Amount" shall mean part, but not all, of the Claimed Amount.
"Agreement" shall have the meaning set forth in the first paragraph
hereto.
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"Alternative Acquisition Agreement" shall have the meaning set forth in
Section 4.4(c).
"Arbitrator" shall have the meaning set forth in Section 6.2(e).
"Asset Value Adjustment Date" is defined in Section 1.5(d)(ii).
"Assumed Convertible Security" shall have the meaning set forth in Section
1.11(f).
"Assumed Option" shall have the meaning set forth in Section 1.11(a).
"Assumed Warrant" shall have the meaning set forth in Section 1.11(b).
"Available Indemnification Amount" shall mean, at the time of any claim
for indemnification pursuant to Section 9.1(a), the product of (i) the
difference between (A) the number of Indemnification Escrow Shares held in
escrow at that time pursuant to Section 1.13(a) minus (B) the number of
Indemnification Escrow Shares attributable to any Claim Notice or Expected Claim
Notice that the Buyer has previously delivered to the Escrow Agent but as to
which the Escrow Agent has not received written notice of resolution multiplied
by (ii) a value of $12.50 per Indemnification Escrow Share.
"Base Purchase Price" shall mean $150,000,000.
"Bonus Pool" shall mean 10% of the sum of (A) the Market Value of the
Buyer Common Shares issuable upon conversion of Company Shares pursuant to
Section 1.5, plus (B) the aggregate Option Value of all Assumed Convertible
Securities and Preferred Warrants that collectively are vested and exercisable
as of the Closing Date, plus (C) the Market Value of the Management Shares.
"Bonus Pool Percentage" shall mean the Management Participant's applicable
bonus pool percentage as set forth in the Company Employee Change in Control
Bonus Plan, effective as of May 11, 2004.
"Buyer" shall have the meaning set forth in the first paragraph of this
Agreement.
"Buyer Certificate" shall mean a certificate delivered by the Buyer
(without qualification as to knowledge, materiality or otherwise), signed on
behalf of the Buyer by the Vice President and General Counsel of the Buyer, to
the effect that each of the conditions specified in clauses (a) and (b) of
Section 5.2 is satisfied in all respects.
"Buyer Common Shares" shall mean the common stock, par value $0.01 per
share, of the Buyer.
"Buyer Financial Statements" shall have the meaning set forth in Section
3.7(b).
"Buyer SEC Documents" shall have the meaning set forth in Section 3.7(a).
"California Permit" shall mean a permit from the California Commission of
Corporations obtained pursuant to Section 25121 of the California Corporate
Securities Law of 1968.
"California Dissenters' Rights Notice" shall have the meaning set forth in
Section 4.4(a).
"CERCLA" shall mean the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended.
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"Certificate of Merger" shall mean the certificate of merger or other
appropriate documents prepared and executed in accordance with Section 251(c) of
the Delaware General Corporation Law.
"Certificates" shall mean shall mean stock certificates that, immediately
prior to the Effective Time, represented Company Shares converted into the right
to receive Buyer Common Shares pursuant to Section 1.5 (including any Company
Shares referred to in Section 1.7).
"Claim Notice" shall mean written notification which contains (i) a
description of the Damages incurred or reasonably expected to be incurred by the
Buyer and the Claimed Amount of such Damages, to the extent then known, (ii) a
statement that the Buyer is entitled to indemnification under Article VI for
such Damages and a reasonable explanation of the basis therefor, and (iii) a
demand for payment in the amount of such Damages.
"Claimed Amount" shall mean the amount of any Damages incurred or
reasonably expected to be incurred by the Buyer in connection with a claim for
indemnification pursuant to Article VI.
"Closing" shall mean the closing of the transactions contemplated by this
Agreement.
"Closing Balance Sheet" shall mean the balance sheet of the Company as of
the Closing Date prepared in accordance with the provisions of Section 1.12
hereof.
"Closing Buyer Common Shares" shall mean, for each Outstanding Common
Share, a number of Buyer Common Shares equal to the Closing Common Conversion
Ratio, and, for each Outstanding Preferred Share, a number of Buyer Common
Shares equal to the applicable Series A Conversion Ratio, Series B Conversion
Ratio or Series C Conversion Ratio.
"Closing Common Conversion Ratio" shall mean a fraction of a share of
Buyer Common Shares as is equal to the result obtained by dividing (i) the
Closing Merger Consideration, minus the Management Shares issued pursuant to
Section 1.6(b)(i), minus the Preferred Consideration, by (ii) the Closing Total
Company Shares.
"Closing Date" shall mean the date two business days after the
satisfaction or waiver of all of the conditions to the obligations of the
Parties to consummate the transactions contemplated hereby (excluding the
delivery at the Closing of any of the documents set forth in Article V), or such
other date as may be mutually agreeable to the Parties.
"Closing Merger Consideration" shall mean the number of Buyer Common
Shares equal to the result obtained by dividing (i) the Preliminary Base
Purchase Price by (ii) $12.50 per share.
"Closing Net Asset Value Adjustment" shall mean the amount of the
difference between the Net Asset Value and the Preliminary Net Asset Value, as
it may be adjusted pursuant to the resolution of any disputes resolved pursuant
to Section 1.12(d). The Closing Net Asset Value Adjustment shall be expressed as
a positive number if the Net Asset Value on the Closing Balance Sheet is greater
than the Preliminary Net Asset Value and as a negative number if the Net Asset
Value on the Closing Balance Sheet is less than the Preliminary Net Asset Value.
"Closing Total Company Shares" shall mean the number of Company Shares
equal to the sum of (X) the number of Common Shares outstanding immediately
prior to the Effective Time plus (Y) the number of Common Shares that would be
issued upon the exercise of all of the vested and unvested outstanding Options
(provided that unvested Options shall not include Options held by employees of
the Company and its Subsidiaries who have been notified by the Buyer or the
Company at the direction of the
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Buyer that their employment will not continue after the Closing to the extent
such Options shall remain unvested as of the Effective Time) and Warrants (which
may be included on a net exercise treasury basis to the extent the Warrant
holder has agreed in writing prior to the Effective Time to exercise such
Warrant in full through a net exercise).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commercial Rules" shall mean the Commercial Arbitration Rules of the AAA.
"Common Conversion Ratio" shall have the meaning set forth in Section
1.5(a).
"Common Shares" shall mean the common stock, par value $0.001 per share,
of the Company.
"Company" shall have the meaning set forth in the first paragraph of this
Agreement.
"Company Certificate" shall mean a certificate delivered by the Company
(without qualification as to knowledge or materiality or otherwise), signed on
behalf of the Company by the President and the Chief Financial Officer of the
Company, to the effect that each of the conditions specified in clauses (a)
through (f) of Section 5.1 is satisfied in all respects.
"Company Intellectual Property" shall mean the Intellectual Property owned
by or licensed to the Company or a Subsidiary and covering, incorporated in,
underlying or used in connection with the Customer Deliverables or the Internal
Systems.
"Company Licensed Intellectual Property" shall mean shall mean the
Intellectual Property licensed to the Company or a Subsidiary and covering,
incorporated in, underlying or used in connection with the Customer Deliverables
or the Internal Systems.
"Company Material Adverse Effect" shall mean any material adverse change,
event, circumstance or development with respect to, or material adverse effect
on, (i) the business, assets, liabilities, capitalization, financial condition
or results of operations of the Company and the Subsidiaries, taken as a whole,
other than any change, event, circumstance or development resulting (A) from
changes in the United States economy in general, so long as such changes do not
disproportionately affect the business of the Company and its Subsidiaries, (B)
from changes in the industry in which the Company operates, so long as such
changes do not disproportionately affect the business of the Company and its
Subsidiaries, (C) from the announcement or pendency of the Merger, or (D)
primarily from the taking by the Company of any action expressly contemplated or
permitted by this Agreement; or (ii) the ability of the Buyer to operate the
business of the Company and the Subsidiaries immediately after the Closing. For
the avoidance of doubt, the parties agree that the terms "material,"
"materially" and "materiality" as used in this Agreement with an initial lower
case "m" shall have their respective customary and ordinary meanings, without
regard to the meaning ascribed to Company Material Adverse Effect.
"Company Owned Intellectual Property" shall mean shall mean the
Intellectual Property owned by the Company or a Subsidiary and covering,
incorporated in, underlying or used in connection with the Customer Deliverables
or the Internal Systems.
"Company Plan" shall mean any Employee Benefit Plan maintained, or
contributed to, by the Company, any Subsidiary or any ERISA Affiliate.
"Company Shares" shall mean the Common Shares and the Preferred Shares.
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"Company Source Code" shall have the meaning set forth in Section 2.13(g).
"Company Stock Plan" shall mean any stock option plan or other stock or
equity-related plan of the Company.
"Company Stockholders" shall mean the holders of Company Shares.
"Company Stockholders Shares" shall mean the Outstanding Common Shares and
the Common Shares issuable upon conversion of Outstanding Preferred Shares.
"Consents" shall have the meaning set forth in Section 5.1(b).
"Contract" shall have the meaning set forth in Section 2.15(a).
"Controlling Party" shall mean the party controlling the defense of any
Third Party Action.
"Cost Cap" shall have the meaning set forth in Section 10.1(g).
"Covered Costs" shall mean all out-of-pocket costs and expenses, including
applicable filing fees under the Xxxx-Xxxxx-Xxxxxx Act and other applicable U.S.
or foreign antitrust laws, fees and expenses of counsel, experts and other
advisors and costs of document production and assembly, incurred in seeking to
obtain clearance or approval of the Merger and the other transactions
contemplated by this Agreement.
"Current India Financial Statements" shall mean the unaudited accounts of
the India Subsidiary as of December 31, 2004.
"Customer Deliverables" shall mean (a) products that the Company or any
Subsidiary (i) currently manufactures, markets, sells or licenses or (ii) has
manufactured, marketed, sold or licensed within the previous three years and (b)
the services that the Company or any Subsidiary (i) currently provides or (ii)
has provided within the previous three years.
"Damages" shall mean any and all claims, debts, obligations and other
liabilities (whether absolute, accrued, contingent, fixed or otherwise, or due
or to become due or otherwise), diminution in value, monetary damages, fines,
fees, penalties, interest obligations, deficiencies, losses and expenses
(including amounts paid in settlement, interest, court costs, costs of
investigators, fees and expenses of attorneys, accountants, financial advisors
and other experts, and other expenses of litigation), other than those costs and
expenses of arbitration of a Dispute which are to be shared equally by the Buyer
and the Equity Holders as set forth in Section 6.2(e)(vi).
"Disclosure Schedule" shall mean the disclosure schedule provided by the
Company to the Buyer on the date hereof and accepted in writing by the Buyer.
"Disclosure Statement" shall mean a written proxy or information statement
containing the information prescribed by Section 4.4(a).
"Dispute" shall mean the dispute resulting if the Representative, acting
on behalf of the Equity Holders, in a Response disputes the liability of the
Equity Holders for all or part of a Claimed Amount.
"Dispute Notice" shall have the meaning set forth in Section 1.12(d).
"Dissenting Shares" shall mean Company Shares held as of the Effective
Time by a Company Stockholder who has not voted such Company Shares in favor of
the adoption of this Agreement and with
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respect to which appraisal shall have been duly demanded and perfected in
accordance with either (i) Section 262 of the Delaware General Corporation Act
or (ii) Section 1300 et seq. of the California Corporations Code, and such
perfected right was not effectively withdrawn or forfeited prior to the
Effective Time.
"DOHS" shall have the meaning set forth in Section 2.21(e).
"DOL" shall have the meaning set forth in Section 2.21(e).
"EAD" shall have the meaning set forth in Section 2.21(e).
"Effective Time" shall mean the time at which the Surviving Corporation
files the Certificate of Merger with the Secretary of State of the State of
Delaware.
"Employee Benefit Plan" shall mean any "employee pension benefit plan" (as
defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), any employee benefit plan or scheme
prescribed under the provisions of the Indian Employees' Provident Funds and
Miscellaneous Provisions Act, 1952, Employees' Pension Scheme, 1995, Payment of
Xxxxx Xxx, 0000, Payment of Xxxxxxxx Xxx, 0000 and Employees' State Insurance
Act, 1948, as applicable, and any other written or oral plan, agreement or
arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation, and all
severance agreements, written or otherwise, for the benefit of or relating to
any current or former employee or independent contractor of the Company, any
Subsidiary or any ERISA Affiliate.
"Environmental Law" shall mean any federal, state or local law, statute,
rule, order, directive, judgment, Permit or regulation or the common law
relating to the environment, occupational health and safety, or exposure of
persons or property to Materials of Environmental Concern, including any
statute, regulation, administrative decision or order pertaining to: (i) the
presence of or the treatment, storage, disposal, generation, transportation,
handling, distribution, manufacture, processing, use, import, export, labeling,
recycling, registration, investigation or remediation of Materials of
Environmental Concern or documentation related to the foregoing; (ii) air, water
and noise pollution; (iii) groundwater and soil contamination; (iv) the release,
threatened release, or accidental release into the environment, the workplace or
other areas of Materials of Environmental Concern, including emissions,
discharges, injections, spills, escapes or dumping of Materials of Environmental
Concern; (v) transfer of interests in or control of real property which may be
contaminated; (vi) community or worker right-to-know disclosures with respect to
Materials of Environmental Concern; (vii) the protection of wild life, marine
life and wetlands, and endangered and threatened species; (viii) storage tanks,
vessels, containers, abandoned or discarded barrels and other closed
receptacles; and (ix) health and safety of employees and other persons. As used
above, the term "release" shall have the meaning set forth in CERCLA.
"Equity Holders" shall mean the Company Stockholders, the Management
Participants and the holders of any Options or Warrants outstanding immediately
prior to the Effective Time.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any entity which is, or at any applicable
time was, a member of (i) a controlled group of corporations (as defined in
Section 414(b) of the Code), (ii) a group of trades or businesses under common
control (as defined in Section 414(c) of the Code), or (iii) an affiliated
service
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group (as defined under Section 414(m) of the Code or the regulations under
Section 414(o) of the Code), any of which includes or included the Company or a
Subsidiary.
"Escrow Agent" shall mean U.S. Bank National Association, Corporate Trust
Services.
"Escrow Assumed Convertible Security" shall have the meaning set forth in
Section 1.11(f)(vi)(A).
"Exchange Agent" shall mean Equiserve Trust Company, N.A.
"Exchange Fund" shall have the meaning set forth in Section 1.8(a).
"Exercised Shares" shall mean any Buyer Common Shares acquired upon the
exercise of an Assumed Convertible Securities after the Effective Time and on or
before the date which is 18 months after the Closing Date.
"Existing Indemnification Obligations" shall have the meaning set forth in
Section 9.1(a).
"Expected Claim Notice" shall mean a notice that, as a result of a legal
proceeding instituted by or written claim made by a third party, the Buyer
reasonably expects to incur Damages for which it is entitled to indemnification
under Article VI.
"Filings" shall have the meaning set forth in Section 5.1(b).
"Financial Statements" shall mean:
(a) the audited balance sheets and statements of income, changes in
stockholders' equity and cash flows of the Company as of the end of and for each
of the fiscal years ended June 30, 2002, 2003, and 2004, as certified without
qualification by PricewaterhouseCoopers LLP and BDO Xxxxxxx, LLP, the Company's
independent public accountants; and
(b) the unaudited balance sheets of the Company, including at
December 31, 2004, and any fiscal quarter between the date of this Agreement and
the Closing Date, and the related unaudited statements of operations, changes in
stockholders' equity and cash flows for each of the fiscal quarters then ended,
which interim financial statements shall have been reviewed in accordance with
Statement of Accounting Standards No. 100.
"Free Assumed Convertible Security" shall have the meaning set forth in
Section 1.11(f)(vi)(A).
"GAAP" shall mean United States generally accepted accounting principles.
"GPL" shall have the meaning set forth in Section 2.13(h).
"Governmental Entity" shall mean any domestic or foreign court,
arbitrational tribunal, administrative agency or commission or other domestic or
foreign governmental or regulatory authority or agency.
"Xxxx-Xxxxx-Xxxxxx Act" shall mean the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
"Indemnifiable Matters" shall have the meaning set forth in Section
9.1(a).
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"Indemnification Escrow Agreement" shall mean the Indemnification Escrow
Agreement in substantially the form attached hereto as Exhibit D by and among
the Buyer, the Representative and the Escrow Agent.
"Indemnification Escrow Percentage" shall mean 15%.
"Indemnification Escrow Period" shall mean the period during which
Indemnification Escrow Shares are to be held in escrow, as set forth in the
Indemnification Escrow Agreement.
"Indemnification Escrow Shares" shall mean the Buyer Common Shares
deposited in escrow pursuant to clause (i) of each of Sections 1.5(d), 1.6(b),
1.7(a) and 1.11(a) and pursuant to Section 1.13(a) and held and disposed of in
accordance with the terms of the Indemnification Escrow Agreement.
"Indemnification Obligations" shall have the meaning set forth in Section
9.1(a).
"Indemnified Parties" shall have the meaning set forth in Section 9.1(a).
"India Subsidiary" shall mean Saturn Networks India Private Limited.
"Initial Management Shares" shall have the meaning set forth in Section
1.6(b).
"Initial Merger Shares" shall have the meaning set forth in Section
1.5(d).
"Intellectual Property" shall mean all:
(a) patents, patent applications, patent disclosures and all related
continuation, continuation-in-part, divisional, reissue, reexamination, utility
model, certificate of invention and design patents, patent applications,
registrations and applications for registrations ("Patent Rights");
(b) registered trademarks and service marks, Internet domain names,
logos, trade names, corporate names, doing business designations and
registrations and applications for registration thereof (collectively,
"Trademark Registrations"), common law trademarks and service marks and trade
dress, and all goodwill in the foregoing;
(c) copyrights and registrations and applications for registration
thereof;
(d) mask works and registrations and applications for registration
thereof;
(e) domain names, computer software, data and documentation;
(f) inventions, trade secrets and confidential business and
technical information, whether patentable or nonpatentable and whether or not
reduced to practice, know-how, manufacturing and product processes and
techniques, research and development information, copyrightable works,
financial, marketing and business data, pricing and cost information, business
and marketing plans and customer and supplier lists and information;
(g) other proprietary rights relating to any of the foregoing
(including remedies against infringements thereof and rights of protection of
interest therein under the laws of all jurisdictions); and
(h) copies and tangible embodiments thereof.
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"Intellectual Property Registration" shall mean Patent Rights, Trademark
Registrations, registered copyrights and mask work registrations.
"Internal Systems" shall mean the internal systems of the Company or any
Subsidiary that are used in its business or operations, including computer
hardware systems, software applications and embedded systems.
"Lawsuits" shall mean all Legal Proceedings between the Buyer, on the one
hand, and the Company or any Subsidiary, on the other hand, pending as of the
Closing Date.
"Lease" shall mean any lease or sublease pursuant to which the Company or
any Subsidiary leases or subleases from another party any real property.
"Legal Proceeding" shall mean any action, suit, proceeding, claim,
arbitration or investigation before any Governmental Entity or before any
arbitrator.
"Management Participant Agreement" shall mean the Management Participant
Agreement executed by the Buyer and each of the Management Participants as of
the date hereof in the form of Exhibit B attached hereto.
"Management Participants" shall have the meaning set forth in Section
1.6(a).
"Management Shares" shall have the meaning set forth in Section 1.6(a).
"Market Value" shall mean the average of the closing prices of a share of
Buyer Common Shares on the NASDAQ National Market for the thirty (30) days
ending three (3) days before the Closing Date.
"Materials of Environmental Concern" shall mean any: pollutants,
contaminants or hazardous substances (as such terms are defined under CERCLA),
pesticides (as such term is defined under the Federal Insecticide, Fungicide and
Rodenticide Act), solid wastes and hazardous wastes (as such terms are defined
under the Resource Conservation and Recovery Act), chemicals, other hazardous,
radioactive or toxic materials, oil, petroleum and petroleum products (and
fractions thereof), or any other material (or article containing such material)
listed or subject to regulation under any law, statute, rule, regulation, order,
Permit, or directive due to its potential, directly or indirectly, to harm the
environment or the health of humans or other living beings.
"Merger" shall mean the merger of the Transitory Subsidiary with and into
the Company in accordance with the terms of this Agreement.
"Merger Consideration" shall mean the total payments received by the
Equity Holders pursuant to this Agreement in consideration for the consummation
of the Merger.
"Merger Shares" shall mean the Buyer Common Shares to be distributed to
the Equity Holders in the Merger.
"Most Recent Balance Sheet" shall mean the unaudited balance sheet of the
Company as of the Most Recent Balance Sheet Date.
"Most Recent Balance Sheet Date" shall mean February 28, 2005.
"NDA" shall have the meaning set forth in Section 4.7(a).
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"Net Asset Value" shall mean the total assets of the Company less the
total liabilities of the Company as shown on the Preliminary Closing Balance
Sheet or the Closing Balance Sheet, as the case may be.
"Neutral Accountant" shall have the meaning set forth in Section 1.12(d).
"Non-controlling Party" shall mean the party not controlling the defense
of any Third Party Action.
"Open Source Materials" shall mean all software or other material that is
licensed under a license approved by the Open Source Initiative or otherwise
distributed as "free software", "open source software" or under a similar
licensing or distribution model.
"Option" shall mean each option to purchase or acquire Company Shares.
"Option Adjusted Buyer Common Shares" shall mean, for each Outstanding
Common Share, a number of Buyer Common Shares equal to the difference between
(w) the Common Conversion Ratio and (x) the Adjusted Common Conversion Ratio,
and, for each Outstanding Preferred Share, zero; with respect to each Exercised
Share, a number of Buyer Common Shares equal to the fraction obtained by
dividing (x) the Options Adjusted Buyer Common Shares for each Outstanding
Common Share, by (y) the Adjusted Common Conversion Ratio.
"Option Merger Value" shall equal the product of (A) the difference, if
any, between $12.50 and the per share exercise price multiplied by (B) the
number of Buyer Common Shares which may yet be acquired upon exercise of the
relevant Assumed Convertible Security (assuming the full vesting thereof) as of
the time of such determination.
"Option Plan" shall mean the Company's 1999 Equity Incentive Plan.
"Option Value" shall mean with respect to an Assumed Convertible Security
or Preferred Warrant, the product of (x) the number of Buyer Common Shares
subject to such Assumed Convertible Security or Preferred Warrant multiplied by
(y) the excess, if any, of (A) the Market Value of a Buyer Common Share, minus
(B) the exercise price per each share of Buyer Common Shares or Preferred
Warrant subject to such Assumed Convertible Security.
"Option/Warrant Consideration" shall mean the aggregate amount payable to
all holders of Options and Warrants in accordance with Section 1.11.
"Ordinary Course of Business" shall mean the ordinary course of business
of the Company and the Subsidiaries consistent with past custom and practice
(including with respect to frequency and amount).
"Outside Date" shall have the meaning set forth in Section 10.1(e).
"Outstanding Common Shares", each an "Outstanding Common Share", shall
mean the Common Shares issued and outstanding immediately prior to the Effective
Time (other than Common Shares owned beneficially by the Buyer or the Transitory
Subsidiary, Dissenting Shares and Common Shares held in the Company's treasury).
"Outstanding Options", each an "Outstanding Option", shall mean the number
of Options outstanding as of immediately prior to the Closing.
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"Outstanding Preferred Shares," each an "Outstanding Preferred Share"
shall mean the Preferred Shares issued and outstanding immediately prior to the
Effective Time (other than Preferred Shares owned beneficially by the Buyer or
the Transitory Subsidiary, Dissenting Shares and Preferred Shares held in the
Company's treasury).
"Outstanding Series A Preferred Shares", each an "Outstanding Series A
Preferred Share", shall mean the shares of the Company's Series A Preferred
Stock, $.001 par value per share, issued and outstanding immediately prior to
the Effective Time (other than shares of Series A Preferred Stock owned
beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares and
shares of Series A Preferred Stock held in the Company's treasury).
"Outstanding Series B Preferred Shares", each an "Outstanding Series B
Preferred Share", shall mean the shares of the Company's Series B Preferred
Stock, $.001 par value per share, issued and outstanding immediately prior to
the Effective Time (other than shares of Series B Preferred Stock owned
beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares and
shares of Series B Preferred Stock held in the Company's treasury).
"Outstanding Series C Preferred Shares", each an "Outstanding Series C
Preferred Share", shall mean the shares of the Company's Series C Preferred
Stock, $.001 par value per share, issued and outstanding immediately prior to
the Effective Time (other than shares of Series C Preferred Stock owned
beneficially by the Buyer or the Transitory Subsidiary, Dissenting Shares and
shares of Series C Preferred Stock held in the Company's treasury).
"Outstanding Warrants" shall mean the Warrants outstanding as of
immediately prior to the Effective Time.
"Parties" shall have the meaning set forth in the first paragraph of this
Agreement.
"Permits" shall mean all permits, licenses, registrations, certificates,
orders, approvals, franchises, variances and similar rights issued by or
obtained from any Governmental Entity (including those issued or required under
Environmental Laws and those relating to the occupancy or use of owned or leased
real property).
"Pre-Closing Period" shall have the meaning set forth in Section 4.5.
"Preferred Consideration" shall mean the sum of (A) the Series A
Conversion Ratio times the Outstanding Series A Preferred Shares, plus (B) the
aggregate of the applicable Series B Conversion Ratios times the relevant
Outstanding Series B Preferred Shares, plus (C) the aggregate of the applicable
Series C Conversion Ratios times the relevant Outstanding Series C Preferred
Shares.
"Preferred Shares" shall mean the preferred stock, par value $0.001 per
share, of the Company.
"Preferred Warrant" shall mean each warrant to purchase or acquire
Preferred Shares.
"Preliminary Base Purchase Price" shall have the meaning set forth in
Section 1.12(a).
"Preliminary Closing Balance Sheet" shall have the meaning set forth in
Section 1.12(a).
"Preliminary Closing Balance Sheet Date" shall have the meaning set forth
in Section 1.12(a).
"Preliminary Net Asset Value" shall have the meaning set forth in Section
1.12(a).
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"Principal Stockholders" shall mean the Company Stockholders who have
executed the Stockholder Agreement.
"Proxy Statement/Prospectus" shall mean the proxy statement/prospectus
included as part of the Registration Statement, together with any accompanying
letter to stockholders, notice of meeting and form of proxy or written consent.
"Reasonable Best Efforts" shall mean best efforts, to the extent
commercially reasonable.
"Registration Statement" shall have the meaning set forth in Section
7.1(b).
"Representative" shall mean Xxxxxx Xxxx.
"Representative Fees" shall have the meaning set forth in Section 1.14(h).
"Requisite Stockholder Approval" shall mean the adoption of this Agreement
and the approval of the Merger by a majority of the outstanding Company Shares
voting as a single class and a majority of the votes represented by each class
of outstanding Company Shares entitled to vote on this Agreement and the Merger.
"Response" shall mean a written response containing the information
provided for in Section 6.2(c).
"Rule 145 Affiliates" shall mean affiliates of the Company within the
meaning of Rule 145 promulgated under the Securities Act.
"Sarbanes Act" shall mean the Xxxxxxxx-Xxxxx Act of 2002.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Interest" shall mean any mortgage, pledge, security interest,
encumbrance, charge or other lien (whether arising by contract or by operation
of law), other than (i) mechanic's, material men's and similar liens, (ii) liens
arising under worker's compensation, unemployment insurance, social security,
retirement and similar legislation, and (iii) liens on goods in transit incurred
pursuant to documentary letters of credit, in each case arising in the Ordinary
Course of Business of the Company and its Subsidiaries and not material to the
Company or its Subsidiaries.
"Series A Conversion Ratio" shall mean a fraction of a share of Buyer
Common Shares as is equal to the result obtained by dividing (i) Series A
Liquidation Amount per Share by (ii) the Market Value of a Buyer Common Share.
"Series B Conversion Ratio" shall mean a fraction of a share of Buyer
Common Shares as is equal to the result obtained by dividing (i) the applicable
Series B Liquidation Amount per Share by (ii) the Market Value of a Buyer Common
Share.
"Series C Conversion Ratio" shall mean a fraction of a share of Buyer
Common Shares as is equal to the result obtained by dividing (i) the applicable
Series C Liquidation Amount per Share by (ii) the Market Value of a Buyer Common
Share.
"Series A Liquidation Amount per Share" shall mean $0.75.
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"Series B Liquidation Amount per Share" shall mean $0.233, plus accrued
and unpaid dividends from the date of issuance of such share as provided in
Section 2.2 of the Company's Amended and Restated Certificate of Incorporation.
"Series C Liquidation Amount per Share" shall mean $0.273, plus accrued
and unpaid dividends from the date of issuance of such share as provided in
Section 2.3 of the Company's Amended and Restated Certificate of Incorporation.
"Software" shall mean any of the software owned by the Company or a
Subsidiary.
"Stockholder Agreement" shall mean the Stockholder Agreement executed by
the Buyer and each of the Principal Stockholders as of the date hereof in the
form of Exhibit A attached hereto.
"Stockholder Payment" shall mean the sum of (A) the Market Value of the
Buyer Common Shares issuable pursuant to Section 1.5 upon the conversion of
Common Shares owned by the applicable Management Participant (or by any member
of such Management Participant's family to the extent acquired by gift from such
Management Participant) as of the Effective Time (other than such Common Shares
acquired upon conversion of Preferred Shares), plus (B) the Option Value of all
Assumed Convertible Securities owned by the applicable Management Participant
that are vested and exercisable as of the Effective Time.
"Subsidiary" shall mean any corporation, partnership, trust, limited
liability company or other non-corporate business enterprise in which the
Company (or another Subsidiary) holds stock or other ownership interests
representing (a) more than 50% of the voting power of all outstanding stock or
ownership interests of such entity or (b) the right to receive more than 50% of
the net assets of such entity available for distribution to the holders of
outstanding stock or ownership interests upon a liquidation or dissolution of
such entity.
"Superior Proposal" shall mean any bona fide written proposal made by a
third party (other than one made in response to any solicitation by the Company
or its Advisors that is in violation of or inconsistent with the terms of this
Agreement) to acquire all the equity securities or assets of the Company,
pursuant to a stock purchase, tender or exchange offer, a merger, a
consolidation or a sale of its assets, (i) on terms which the Company's Board of
Directors determines in its good faith judgment to be materially more favorable
from a financial point of view to the holders of Company Shares than the
transactions contemplated by this Agreement (based on the written opinion, with
only customary qualifications, of a nationally recognized independent financial
advisor), taking into account all the terms and conditions of such proposal and
this Agreement (including any proposal by the Buyer to amend the terms of this
Agreement) and (ii) that is reasonably capable of being completed on the terms
proposed, taking into account all financial, regulatory, legal and other aspects
of such proposal; provided, however, that no Acquisition Proposal shall be
deemed to be a Superior Proposal if any financing required to consummate the
Acquisition Proposal is not committed.
"Surviving Corporation" shall mean the Company, as the surviving
corporation in the Merger.
"Target Amount" shall mean zero dollars ($0.00).
"Taxes" shall mean all taxes, charges, fees, levies or other similar
assessments or liabilities, including income, gross receipts, ad valorem,
premium, value-added, excise, real property, personal property, sales, use,
transfer, withholding, employment, unemployment, insurance, social security,
business license, business organization, environmental, workers compensation,
payroll, profits, license, lease, service, service use, severance, stamp,
occupation, windfall profits, customs, duties, franchise and
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other taxes imposed by the United States of America or any state, local or
foreign government, or any agency thereof, or other political subdivision of the
United States or any such government, and any interest, fines, penalties,
assessments or additions to tax resulting from, attributable to or incurred in
connection with any tax or any contest or dispute thereof.
"Tax Proceeding" shall mean any audit, claim for refund, or contest or
defense against any assessment, notice of deficiency, or other proposed
adjustment relating to any and all Taxes of the Company or any Subsidiary.
"Tax Returns" shall mean all reports, returns, declarations, statements or
other information required to be supplied to a Taxing authority in connection
with Taxes.
"Third Party Action" shall mean any suit or proceeding by a person or
entity other than a Party for which indemnification may be sought by a Party
under Article VI.
"Top Customers" shall have the meaning set forth in Section
2.15(a)(ii)(A)(1).
"Transitory Subsidiary" shall have the meaning set forth in the first
paragraph of this Agreement.
"WARN Act" shall have the meaning set forth in Section 2.21(g).
"Warrant" shall mean each warrant to purchase or acquire Common Shares.
"Work Permit" shall have the meaning set forth in Section 2.21(e).
ARTICLE XII
MISCELLANEOUS
12.1 Press Releases and Announcements. No Party shall issue any press
release or public announcement relating to the subject matter of this Agreement
without the prior written approval of the other Parties; provided, however, that
(a) any Party may make any public disclosure it believes in good faith is
required by applicable law, regulation or stock market rule (in which case the
disclosing Party shall use reasonable efforts to advise the other Parties and
provide them with a copy of the proposed disclosure prior to making the
disclosure); (b) the Buyer and its Affiliates shall not be bound by the
provisions of this Section 12.1 following the Closing Date; and (c) the Parties
will issue such joint communications as are described and at the times set forth
in Schedule 12.1 attached hereto.
12.2 No Third Party Beneficiaries. Except as set forth in Article IX, This
Agreement shall not confer any rights or remedies upon any person other than the
Parties and their respective successors and permitted assigns.
12.3 Entire Agreement. This Agreement (including the documents referred to
herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof; provided that the
NDA shall remain in effect in accordance with its terms. The Parties acknowledge
that, except as set forth in Article II, in the case of the Company, or Article
III, in the case of the Buyer, neither the Company nor the Buyer has made or is
making any representations or warranties whatsoever to any other Party or
person, expressed, implied or otherwise, provided that, subject to Section
6.4(d), the foregoing shall not be deemed to limit any right of any Party to
assert a claim of fraud in connection with the transactions contemplated by this
Agreement.
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12.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; provided that the Transitory Subsidiary may assign its
rights, interests and obligations hereunder to an Affiliate of the Buyer.
12.5 Counterparts and Facsimile Signature. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument. This Agreement
may be executed by facsimile signature.
12.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
12.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered two business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
To the Buyer or the Transitory Subsidiary: With a copy to:
Akamai Technologies, Inc. Xxxxxx Xxxxxx Xxxxxxxxx Xxxx
0 Xxxxxxxxx Xxxxxx xxx Xxxx XXX
Xxxxxxxxx, XX 00000 00 Xxxxx Xxxxxx
Xxxx: Xxxxxxx Xxxxxxxxxx, Xxxxxx, XX 00000
Vice President and General Counsel Attn: Xxxxx X. Xxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
To the Company: With a copy to:
Speedera Networks, Inc. Fenwick & West LLP
0000 Xxxxx Xxxxxxx Xxxxxxx Embarcadero Center West
Second Floor 000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000 Xxx Xxxxxxxxx, XX 00000
Attn: Xxxx Xxxxx Attn: Xxxxxx X. Xxxxxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
To the Representative: With a copy to:
Xxxxxx Xxxx Xxxxxx Godward LLP
as the Representative of the Equity Holders Five Palo Alto Square
Trinity Ventures 0000 Xx Xxxxxx Xxxx
0000 Xxxx Xxxx Xxxx Xxxx Xxxx, XX 00000-0000
Xxxxxxxx 0, Xxxxx 000 Attention: Xxxx X. Xxxxxx, Esq.
Xxxxx Xxxx, XX 00000 Telecopy: (000) 000-0000
Telecopy: (000-000-0000 Telephone: (000) 000-0000
Telephone: (000) 000-0000
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Any Party may give any notice, request, demand, claim or other communication
hereunder using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
12.8 Governing Law. This Agreement (including the validity and
applicability of the arbitration provisions of this Agreement, the conduct of
any arbitration of a Dispute, the enforcement of any arbitral award made
hereunder and any other questions of arbitration law or procedure arising
hereunder) shall be governed by and construed in accordance with the internal
laws of the State of Delaware without giving effect to any choice or conflict of
law provision or rule (whether of the State of Delaware or any other
jurisdiction) that would cause the application of laws of any jurisdictions
other than those of the State of Delaware.
12.9 Amendments and Waivers. The Parties may mutually amend any provision
of this Agreement at any time prior to the Closing; provided, however, that any
amendment effected subsequent to the Requisite Stockholder Approval shall be
subject to any restrictions contained in the Delaware General Corporation Act.
No amendment of any provision of this Agreement shall be valid unless the same
shall be in writing and signed by all of the Parties. No waiver of any right or
remedy hereunder shall be valid unless the same shall be in writing and signed
by the Party giving such waiver. No waiver by any Party with respect to any
default, misrepresentation or breach of warranty or covenant hereunder shall be
deemed to extend to any prior or subsequent default, misrepresentation or breach
of warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
12.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
12.11 Submission to Jurisdiction. Each Party (a) submits to the
jurisdiction of any state or federal court sitting in the State of Delaware in
any action or proceeding arising out of or relating to this Agreement (including
any action or proceeding for the enforcement of any arbitral award made in
connection with any arbitration of a Dispute hereunder), (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, (c) waives any claim of inconvenient forum or other challenge to
venue in such court, (d) agrees not to bring any action or proceeding arising
out of or relating to this Agreement in any other court, and (e) waives any
right it may have to a trial by jury with respect to any action or proceeding
arising out of or relating to this Agreement; provided in each case that, solely
with respect to any arbitration of a Dispute, the Arbitrator shall resolve all
threshold issues relating to the validity and applicability of the arbitration
provisions of this Agreement, contract validity, applicability of statutes of
limitations and issue preclusion, and such threshold issues shall not be
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heard or determined by such court. Each Party agrees to accept service of any
summons, complaint or other initial pleading made in the manner provided for the
giving of notices in Section 12.7, provided that nothing in this Section 12.11
shall affect the right of any Party to serve such summons, complaint or other
initial pleading in any other manner permitted by law.
12.12 Construction.
(a) The language used in this Agreement shall be deemed to be the
language chosen by the Parties to express their mutual intent, and no rule of
strict construction shall be applied against any Party.
(b) Any reference to any federal, state, local or foreign statute or
law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise.
(c) Any reference herein to "including" shall be interpreted as
"including without limitation".
(d) Any reference to any Article, Section or paragraph shall be
deemed to refer to an Article, Section or paragraph of this Agreement, unless
the context clearly indicates otherwise.
(e) Any calculation of any conversion ratio pursuant to this
Agreement, or of any number of Buyer Common Shares calculated pursuant to this
Agreement, shall be subject to equitable adjustment in the event of any stock
split, stock dividend, reverse stock split or similar event affecting the Buyer
Common Shares after the date hereof.
[REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
BUYER:
AKAMAI TECHNOLOGIES, INC.
By: /s/ Xxxx Xxxxx
--------------
Title: President
TRANSITORY SUBSIDIARY:
AQUARIUS ACQUISITION CORP.
By: /s/ Xxxx Xxxxx
--------------
Title: President
COMPANY:
SPEEDERA NETWORKS, INC.
By: /s/ Xxxx Xxxxx
--------------
Title: President
REPRESENTATIVE:
Name: Xxxx Xxxx
/s/ Xxxx Xxxx
-------------
Signature
-Signature Page to Agreement and Plan of Merger-
Schedule I
Management Participants
Xxxxxxx Xxx
Xxxx Xxxxx
Xxxx Swildens
I-1
