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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
by and among
NEXT LEVEL COMMUNICATIONS, INC.,
SP ACQUISITION CORP.,
SOFTPROSE, INC.,
and
THE STOCKHOLDERS OF SOFTPROSE, INC.
Dated as of July 14, 2000
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS........................................................1
1.1 DEFINED TERMS................................................1
1.2 INTERPRETATION PROVISIONS...................................10
ARTICLE 2 THE MERGER........................................................11
2.1 THE MERGER..................................................11
2.2 EFFECTIVE TIME..............................................11
2.3 EFFECT OF THE MERGER........................................11
2.4 ARTICLES OF INCORPORATION; BYLAWS...........................11
2.5 DIRECTORS AND OFFICERS......................................12
2.6 CONVERSION OF SECURITIES....................................12
2.7 SURRENDER OF CERTIFICATES...................................13
2.8 NO FURTHER OWNERSHIP RIGHTS IN SHARES OF COMPANY STOCK......13
2.9 LOST, STOLEN OR DESTROYED CERTIFICATES......................13
2.10 TAX CONSEQUENCES............................................14
2.11 TAKING OF NECESSARY ACTION; FURTHER ACTION..................14
2.12 STOCKHOLDER AGENT; POWER OF ATTORNEY........................14
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................15
3.1 ORGANIZATION OF THE COMPANY.................................15
3.2 CAPITALIZATION OF THE COMPANY...............................15
3.3 STOCKHOLDERS'AGREEMENTS, ETC................................16
3.4 AUTHORIZATION...............................................16
3.5 OFFICERS AND DIRECTORS......................................16
3.6 BANK ACCOUNTS...............................................16
3.7 SUBSIDIARIES, ETC...........................................16
3.8 REAL PROPERTY...............................................16
3.9 PERSONAL PROPERTY...........................................17
3.10 ENVIRONMENTAL MATTERS.......................................18
3.11 CONTRACTS...................................................18
3.12 NO CONFLICT OR VIOLATION; CONSENTS..........................20
3.13 PERMITS.....................................................20
3.14 FINANCIAL STATEMENTS; BOOKS AND RECORDS.....................20
3.15 ABSENCE OF CERTAIN CHANGES OR EVENTS........................21
3.16 LIABILITIES.................................................22
3.17 LITIGATION..................................................22
3.18 LABOR MATTERS...............................................22
3.19 EMPLOYEE BENEFIT PLANS......................................23
3.20 TRANSACTIONS WITH RELATED PARTIES...........................24
3.21 COMPLIANCE WITH LAW.........................................24
3.22 INTELLECTUAL PROPERTY.......................................24
3.23 TAX MATTERS.................................................25
3.24 INSURANCE...................................................27
3.25 ACCOUNTS RECEIVABLE.........................................27
3.26 INVENTORY...................................................28
3.27 YEAR 2000 PROBLEM...........................................28
3.28 BROKERS; TRANSACTION COSTS..................................28
3.29 NO OTHER AGREEMENTS TO SELL THE COMPANY OR THE ASSETS.......28
3.30 TAKEOVER STATUTES...........................................28
3.31 MATERIAL MISSTATEMENTS OR OMISSIONS.........................28
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..................28
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TABLE OF CONTENTS
(Continued)
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4.1 ORGANIZATION................................................28
4.2 CAPITALIZATION..............................................29
4.3 AUTHORIZATION...............................................29
ARTICLE 5 ACTIONS BY THE COMPANY, PARENT AND SUB PRIOR TO THE CLOSING......30
5.1 CONDUCT OF BUSINESS.........................................30
5.2 ACCESS BY PARENT............................................31
5.3 NOTIFICATION OF CERTAIN MATTERS.............................31
5.4 NO MERGERS, CONSOLIDATIONS, SALE OF STOCK, ETC..............31
5.5 COMPANY STOCKHOLDER APPROVAL................................32
5.6 CLOSING DATE................................................32
5.7 TAKEOVER STATUTES...........................................32
5.8 FURTHER ASSURANCES..........................................32
5.9 TERMINATION OF 401(K) PLAN AND COMPANY STOCK OPTION PLANS...33
ARTICLE 6 CONDITIONS TO THE COMPANY'S OBLIGATIONS...........................33
6.1 REPRESENTATIONS, WARRANTIES AND COVENANTS...................33
6.2 CONSENTS....................................................33
6.3 NO COURT ORDERS.............................................33
6.4 CLOSING DOCUMENTS...........................................33
6.5 MATERIAL ADVERSE CHANGE.....................................33
6.6 GRANT OF PARENT OPTIONS AND RESTRICTED STOCK................33
6.7 REGISTRATION RIGHTS AGREEMENT...............................34
ARTICLE 7 CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS......................34
7.1 REPRESENTATIONS, WARRANTIES AND COVENANTS...................34
7.2 CONSENTS....................................................34
7.3 NO ACTIONS OR COURT ORDERS..................................34
7.4 CLOSING DOCUMENTS...........................................34
7.5 EXEMPTION UNDER FEDERAL AND STATE SECURITIES LAWS...........35
7.6 STOCKHOLDER CONSENT.........................................35
7.7 TAX MATTERS................................................ 35
7.8 MATERIAL ADVERSE CHANGE.....................................35
7.9 APPRAISAL RIGHTS............................................35
7.10 OTHER AGREEMENTS............................................35
ARTICLE 8 CLOSING...........................................................35
8.1 DELIVERIES BY THE COMPANY AND THE STOCKHOLDERS TO PARENT....35
8.2 DELIVERIES BY PARENT TO THE STOCKHOLDER AGENT...............35
ARTICLE 9 INDEMNIFICATION...................................................36
9.1 SURVIVAL OF REPRESENTATIONS, ETC........................... 36
9.2 INDEMNIFICATION.............................................36
9.3 NO RIGHT OF CONTRIBUTION....................................38
9.4 PAYMENT FOR DAMAGES.........................................39
9.5 LIMITATIONS ON INDEMNITY....................................39
ARTICLE 10 MISCELLANEOUS....................................................39
10.1 TERMINATION.................................................39
10.2 ASSIGNMENT..................................................40
10.3 NOTICES.....................................................40
10.4 REPRESENTATION BY COUNSEL...................................41
10.5 ENTIRE AGREEMENT; AMENDMENTS AND WAIVERS....................41
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TABLE OF CONTENTS
(Continued)
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10.6 COUNTERPARTS................................................42
10.7 INVALIDITY..................................................42
10.8 EXPENSES....................................................42
10.9 401(K) PLAN CONTRIBUTION....................................42
10.10 PRIOR SERVICE...............................................42
10.11 PUBLICITY...................................................42
10.12 NO THIRD PARTY BENEFICIARIES................................42
10.13 ATTORNEY FEES...............................................43
10.14 GOVERNING LAW...............................................43
10.15 CONSENT TO JURISDICTION.....................................43
10.16 WAIVER OF JURY TRIAL........................................43
10.17 SERVICE OF PROCESS..........................................43
ARTICLE 11 TAX MATTERS......................................................43
11.1 TAX MATTERS.................................................43
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is dated as of July 14, 2000 (the
"Agreement"), by and among Next Level Communications, Inc., a Delaware
corporation ("Parent"), SP Acquisition Corp., an Iowa corporation and a direct,
wholly owned subsidiary of Parent ("Sub"), SoftProse, Inc., an Iowa corporation
(the "Company"), and the Stockholders (as defined herein).
RECITALS:
A. The Boards of Directors of Parent, Sub and the Company have
determined that it is advisable and in the best interests of their respective
stockholders for Parent, Sub and the Company to enter into a business
combination upon the terms and subject to the conditions set forth herein.
B. In furtherance of such combination, the Boards of Directors of
Parent, Sub and the Company have each approved and declared advisable this
Agreement and the merger of Sub with and into the Company (the "Merger"), upon
the terms and subject to the conditions set forth herein, in accordance with the
applicable provisions of the Iowa Business Corporation Act (the "IBCA").
C. Parent, Sub and the Company intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
and that the Merger qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder.
D. Pursuant to the Merger, each outstanding share of the Company's
common stock, no par value per share, (the "Company Stock") shall be converted
solely into Parent Stock (as defined herein), upon the terms and subject to the
conditions set forth herein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Sub, the Company and the Stockholders hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings:
"Action" means any action, claim, suit, litigation,
proceeding, labor dispute, arbitral action, government audit, inquiry, criminal
prosecution, investigation, unfair labor practice charge, complaint or dispute.
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"Affiliate" of a Person means any other Person which, directly
or indirectly, controls, is controlled by, or is under common control with, such
Person. The term "control" (including, with correlative meaning, the terms
"controlled by" and "under common control with"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.
"Assets" means the right, title and interest of the Company in
their properties, assets and rights of any kind, whether tangible or intangible,
real or personal, including, without limitation, the right, title and interest
in the following:
(a) all Contracts and Contract Rights;
(b) all Fixtures and Equipment;
(c) all Books and Records;
(d) all Proprietary Rights;
(e) all Permits;
(f) all return and other rights under or pursuant to all
warranties, representations and guarantees made by suppliers and other third
parties in connection with the Assets or services furnished to such Person;
(g) all cash, accounts receivable, deposits, inventory and
prepaid expenses;
(h) all goodwill; and
(i) all shares of capital stock or other securities or
ownership interests in any Person.
"Average Share Price" means the average of the closing prices
of Parent Stock on the Nasdaq Stock Market as reported in the Wall Street
Journal for the ten (10) Trading Days ending on the Trading Day that is two (2)
days prior to the Closing Date.
"Balance Sheet" means the balance sheet of the Company as of
the Balance Sheet Date.
"Balance Sheet Date" means December 31, 1999.
"Benefit Arrangement" means any employment, consulting,
severance or other similar contract, arrangement or policy (written or oral) and
each plan, arrangement, program, agreement or commitment (written or oral)
providing for insurance coverage (including, without limitation, any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits,
life, health or accident benefits (including, without limitation, any "voluntary
employees' beneficiary
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association" as defined in Section 501(c)(9) of the Code providing for the same
or other benefits) or for deferred compensation, profit-sharing, bonuses, stock
options, stock appreciation rights, stock purchases or other forms of incentive
compensation or post-retirement insurance, compensation or benefits which (a) is
not a Welfare Plan, Pension Plan or Multiemployer Plan, (b) is entered into,
maintained, contributed to or required to be contributed to, as the case may be,
by the Company or any ERISA Affiliate or under which the Company or any ERISA
Affiliate may incur any liability, and (c) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with any such entity).
"Books and Records" means all books, records, lists,
correspondence, ledgers, financial and other data, files, reports, surveys,
formulae, technical manuals and operating records of every kind relating to the
Assets or the Business (including records and lists of customers, distributors,
suppliers and personnel).
"Business" means the business and operations of the Company,
consisting of its business of providing products and development services for
consumer electronics, embedded systems, real-time systems and communication
systems.
"Closing" has the meaning set forth in Section 2.1(b).
"Closing Date" means the date of the Closing.
"Code" has the meaning set forth in the Recitals hereto.
"Company Material Adverse Effect" or "Company Material Adverse
Change" means a Material Adverse Effect with respect to the Company, the
Business or the Assets.
"Company Options" means options to purchase shares of Company
Stock issued by the Company pursuant to the Company Stock Option Plans or
otherwise to Company employees.
"Company Stock" has the meaning set forth in the Recitals
hereto.
"Company Stock Option Plans" mean the SoftProse, Inc. 2000
Stock Option and Incentive Plan, the SoftProse, Inc. Recognition and Retention
Plan and option agreements entered into with certain Employees.
"Consents" means any and all Permits and any and all consents,
approvals or waivers from third parties that are required for the consummation
of the transactions contemplated by this Agreement.
"Contract Rights" means all rights and obligations under the
Contracts.
"Contracts" means all agreements, contracts, leases (whether
for real or personal property), purchase orders, open tenders, warranties or
guarantees (express or implied) undertakings, covenants not to compete,
employment agreements, confidentiality agreements, licenses, entitlements,
instruments, obligations and commitments to which the Company is a
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party or by which the Company or any of its Assets are bound or affected,
whether written or oral.
"Court Order" means any judgment, decision, consent decree,
injunction, ruling or order of any foreign, federal, state or local court or
governmental agency, department or authority that is binding on any Person or
its property under applicable law.
"Default" means (a) a breach of or default under any Contract,
(b) the occurrence of an event that with the passage of time or the giving of
notice or both would constitute a breach of or default under any Contract or (c)
the occurrence of an event that with or without the passage of time or the
giving of notice or both would give rise to a right of termination,
renegotiation or acceleration under any Contract.
"Effective Time" has the meaning set forth in Section 2.2.
"Employee Plans" means all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"Employees" means all officers and directors of the Company
and all other Persons employed by the Company on a full or part-time basis
(including those employees on long-term disability leave or other absence)
together with all persons retained as "independent contractors" as of the
relevant date.
"Encumbrance" means any claim, lien, pledge, option, lease,
license, occupancy agreement, charge, easement, tax assessment, security
interest, deed of trust, mortgage, right-of-way, encroachment, building or use
restriction, title defect, work order, conditional sales agreement, encumbrance
or other right of third parties or other restriction on use, whether voluntarily
incurred or arising by operation of law, and includes any agreement to give any
of the foregoing in the future, and any contingent sale or other title retention
agreement or lease in the nature thereof.
"Environmental Claims" means all accusations, allegations,
notices of violation, liens, claims, demands, suits, or causes of action for any
damage, including, without limitation, personal injury, property damage
(including, without limitation, any depreciation or diminution of property
values), lost use of property or consequential damages, arising directly or
indirectly out of (i) Environmental Laws or (ii) the presence, use, handling,
storage, treatment, recycling, generation, transportation, release, spilling,
leaking, pumping, pouring, emptying, discharging, injecting, escaping, leaching,
disposal, dumping or threatened release of Hazardous Substances at any location,
whether or not owned, leased or operated by the Company.
"Environmental Laws" means all applicable federal, state,
district, local and foreign laws, all rules or regulations promulgated
thereunder, and all orders, consent orders, judgments, notices, permits or
demand letters issued, promulgated or entered pursuant thereto, relating to
pollution or protection of the environment (including, without limitation,
ambient air, surface water, ground water, land surface, or subsurface strata).
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any entity which is (or at any
relevant time was) a member of a "controlled group of corporations" with, under
"common control" with, or a member of an "affiliated service group" with, or
otherwise required to be aggregated with, the Company as set forth in Section
414(b), (c), (m) or (o) of the Code.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Facilities" means all real property and related facilities
owned, leased or operated by the Company.
"Financial Statements" means the unaudited balance sheets of
the Company as of December 31, 1999 and 1998 and the related statements of
income, changes in stockholders' equity and cash flows, of the Company for the
years ended December 31, 1999 and 1998.
"Fixtures and Equipment" means all of the furniture, fixtures,
furnishings, machinery, computer hardware, equipment, parts, tools, discs and
other tangible personal property owned by the Company, wherever located.
"GAAP" means generally accepted accounting principles of the
United States applied on a consistent basis.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof, city or municipality, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, including, without limitation, any
governmental authority, agency, department, board, commission or instrumentality
of the United States, any State of the United States, or any political
subdivision thereof, any government authority, agency, department, board,
commission or instrumentality of the United States or any political subdivision
thereof and any tribunal or arbitrator(s) of competent jurisdiction, and any
self-regulatory organization.
"Hazardous Substances" means all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances or materials (whether solids, liquids or
gases) and any other materials or substances subject to regulation, control or
remediation under Environmental Laws.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended.
"Laws" means all laws, statutes, by-laws, ordinances, rules,
regulations, orders, judgments or decrees of any Governmental Authority.
"Leases" has the meaning set forth in Section 3.8(c).
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"Liability" means any direct or indirect liability,
indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or
endorsement of or by any Person of any type, whether accrued, absolute,
contingent, matured, unmatured, liquidated, unliquidated, known or unknown.
"Material Adverse Effect" or "Material Adverse Change" or a
similar phrase means, with respect to any Person, any material adverse effect on
or change with respect to (i) the business, operations, assets (taken as a
whole), liabilities (taken as a whole), financial condition or results of
operations of such Person and its Subsidiaries, taken as a whole, or (ii) the
right or ability of such Person to consummate any of the transactions
contemplated hereby.
"Merger Shares" has the meaning set forth in Section 2.6(b).
"Multiemployer Plan" means any "multiemployer plan," as
defined in Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, after September 25, 1980, maintained, administered,
contributed to or was required to contribute to, or under which the Company or
any ERISA Affiliate may incur any liability and (b) covers any employee or
former employee of the Company or any ERISA Affiliate (with respect to their
relationship with any such entity).
"Non-Disclosure Agreement" means that certain Non-Disclosure
Agreement dated as of May 15, 2000 between Parent and the Company relating to
the delivery by the Company of confidential information to Parent and its
Representatives.
"Option Purchase Price" means the number of shares of Parent
Stock equal to the difference between the (i) number of shares of Parent Stock
into which each share of Company Stock subject to the Company Option is
convertible under Section 2.6(a) and (ii) the number of shares of Parent Stock
with a fair market value equal to the exercise price of such Company Option,
with the fair market value equal to the Average Share Price.
"Parent Stock" means the common stock, par value $0.01 per
share, of Parent.
"Parent Stock Option Plans" means the Next Level
Communications, Inc. 1999 Equity Incentive Plan, the Next Level Communications,
Inc. 1999 Employee Stock Purchase Plan, the Next Level Communications, Inc. 1999
Stock Plan, Next Level Communications, Inc. 1997 Long Term Incentive Plan and
option agreements entered into with certain management employees of Parent.
"Pension Plan" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the
Company or any ERISA Affiliate maintains, administers, contributes to or is
required to contribute to, or, within the five (5) years prior to the Closing
Date, maintained, administered, contributed to or was required to contribute to,
or under which the Company or any ERISA Affiliate may incur any liability
(including, without limitation, any contingent liability) and (b) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with any such entity).
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"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the Business or
ownership of the Assets of such Person.
"Permitted Encumbrances" means (a) statutory liens of
landlords, liens of carriers, warehousepersons, mechanics and materialpersons
incurred in the ordinary course of business for sums (i) not yet due and
payable, or (ii) being contested in good faith, if, in either such case, an
adequate reserve, shall have been made therefor in such Person's financial
statements, (b) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, (c) easements, rights-of-way,
restrictions and other similar non-monetary charges or encumbrances, in each
case, which do not interfere with the ordinary conduct of business of the
Company and do not materially detract from the value of the property upon which
such encumbrance exists, and (d) liens securing taxes, assessments and
governmental charges not yet delinquent or the amount or validity of which are
being contested in good faith by appropriate proceedings by the Company, as
applicable.
"Permitted Transferee" means (i) any Affiliate or immediate
family member of a holder, or any trust or entity for the benefit of any such
Persons, to whom Registrable Shares are transferred for no consideration, or
(ii) any arms-length bona fide donee or pledgee of Registrable Shares of any of
the foregoing Persons.
"Person" means any person or entity, whether an individual,
whether in their capacity as a trustee, executor, administrator or other legal
representative, sole proprietorship, corporation, limited liability company,
general partnership, limited partnership, trust, unincorporated organization,
syndicate, business association, firm, joint venture, governmental agency or
authority or any similar entity.
"Proprietary Information and Inventions Agreement" means the
Next Level Communications, Inc. Proprietary Information and Inventions
Agreement, substantially in the form of Exhibit A hereto, to be entered into by
each Stockholder and the Parent.
"Proprietary Rights" means all intellectual property rights of
every nature and kind, including without limitation, (a) U.S. and foreign
patents, patent applications, patent disclosures and improvements thereto,
including xxxxx patents and utility models and applications therefor, (b) U.S.
and foreign trademarks, service marks, trade dress, logos, commercial symbols,
trade names and corporate names and the goodwill associated therewith and
registrations and applications for registration thereof, (c) U.S. and foreign
copyrights and registrations and applications for registration thereof, (d) U.S.
and foreign mask work rights and registrations and applications for registration
thereof, (e) Trade Secrets, (f) URL registrations, (g) other proprietary rights,
including industrial designs, (h) copies and tangible embodiments thereof (in
whatever form or medium), (i) licenses granting any rights with respect to any
of the foregoing and (j) any
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renewal applications, divisions, extensions and reissues, where applicable with
respect to any of the foregoing.
"Registrable Shares" has the meaning set forth in the
Registration Rights Agreement.
"Registration Rights Agreement" means a mutually acceptable
registration rights agreement, substantially in the form of Exhibit B hereto, to
be entered into among Parent and the Stockholders, with respect to the Parent
Stock to be delivered to the Stockholders pursuant to this Agreement.
"Regulations" means any laws, statutes, ordinances,
regulations, rules, notice requirements, court decisions, agency guidelines, and
orders of any foreign, federal, state or local government and any other
governmental department or agency, including without limitation energy, motor
vehicle safety, public utility, zoning, building and health codes, Environmental
Laws, and occupational safety and health and laws respecting employment
practices, employee documentation, human rights code, terms and conditions of
employment and wages and hours.
"Related Party" means (i) any of the Company's officers,
directors and stockholders, and any officers, directors, partners, associates or
relatives of such officers, directors and stockholders, (ii) any Person in which
the Company or any Stockholder or any Affiliate or relative of any such Person
has any direct or indirect controlling interest, and (iii) any direct or
indirect trustee or beneficiary of any Stockholder.
"Representative" of any Person means any officer, director,
principal, attorney, accountant, agent, employee or other representative of such
Person.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Stockholder" means each holder of Company Stock, including
Persons holding Company Options, and "Stockholders" means all holders of the
Company Stock, including Persons holding Company Options, in each case as
determined immediately prior to the Effective Time.
"Stockholder Agent" has the meaning set forth in Section
2.12(a).
"Stockholder Consent" has the meaning set forth in Section
5.5.
"Stockholder Representation Letter" means the letter,
substantially in the form of Exhibit C hereto, to be executed by each
Stockholder and the Parent.
"Subsidiary" means, with respect to any Person, (a) any
corporation of which at least 50% of the securities or interests having, by
their terms, ordinary voting power to elect members to the board of directors,
or other persons performing similar functions with respect to such corporation,
is held, directly or indirectly, by such Person, (b) any partnership or limited
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liability company of which (i) such Person is a general partner or managing
member or (ii) such person possesses a 50% or greater interest in the total
capital or total income of such partnership or limited liability company.
"Survival Period" has the meaning set forth in Section 9.1.
"Takeover Statute" means a "fair price," "moratorium,"
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States.
"Tax Returns" means any report, return (including information
return), election, document, estimated tax filing, declaration or other
information or filing required to be supplied to any taxing authority or
jurisdiction with respect to Taxes including any schedule or attachment thereto,
and amendments thereto and any document with respect to or accompanying requests
for the extension of time in which to file any such item.
"Taxes" means any and all taxes, assessments, charges, duties,
fees, levies, imposts or other governmental charges, including, without
limitation, all federal, state, local, municipal, county, foreign and other
income, franchise, profits, capital gains, capital stock, capital structure,
transfer, gross receipt, sales, use, service, occupation, ad valorem, property,
excise, severance, windfall profits, withholding, premium, stamp, license,
payroll, employment, social security, unemployment, health insurance, employment
insurance, workers compensation, disability, environmental (including taxes
under Code Section 59A), alternative minimum, add-on, value-added, goods and
services, harmonized sales, customs, import, export, registration, excise,
production, frankings, fringe benefits, occupancy, real property, personal
property, business and occupation, education, mercantile, withholding and other
taxes, assessments, charges, duties, fees, levies, imposts or other governmental
charges of any kind whatsoever imposed by any taxing authority or jurisdiction
(whether payable directly or by withholding and whether or not requiring the
filing of a Tax Return), and all estimated taxes, deficiency assessments,
additions to tax, additional amounts imposed by any governmental authority
(domestic or foreign), penalties, fines and interest, and shall include any
liability for such amounts of any other Person as a result either of being (or
having been) a member of a combined, consolidated, unitary or affiliated group
or of a contractual obligation to indemnify any Person, and shall include any
liability for such amounts relating to any other Person if such liability is
imposed by reason of law (including transferee or successor liability). Any such
amount shall also include any interest whether paid or received, fines,
penalties, surtaxes, or additional amounts attributable to, or imposed upon, or
with respect to, any such taxes, assessments, charges, duties, fees, levies,
imposts or other governmental charges.
"to the knowledge" or "knowledge" of a party (or similar
phrases) means to the extent of matters which are actually known by such party
and when used in respect of the Company, the term "to the knowledge" or
"knowledge" shall mean the matters actually known by each of the directors,
officers and Stockholders of the Company and with respect to the Parent, shall
mean the matters actually known by the Parent's Chief Executive Officer,
President, Chief Technical Officer and any Senior Vice President.
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"Trade Secrets" means all trade secrets and confidential
business information (including ideas, formulas, compositions, inventions
(whether patentable or unpatentable and whether or not reduced to practice),
know-how, research and development information, software, drawings,
specifications, circuit, topographies, designs, plans, proposals, technical
data, copyrightable works, concepts, methods, procedures, financial, marketing
and business data, pricing and cost information, business and marketing plans
marketing mailing and e-mail lists, and customer and supplier mailing and e-mail
lists and information).
"Trading Day" means any day on which the Nasdaq Stock Exchange
is open and available for at least five (5) hours for the trading of securities.
"Transaction Costs" means all costs and expenses incurred by
the Company in connection with the preparation and execution of this Agreement
and in anticipation of the Merger and the transactions contemplated hereby for
reasonable legal, accounting and transaction costs.
"Welfare Plan" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate
maintains, administers, contributes to or is required to contribute to, or under
which the Company or any ERISA Affiliate may incur any liability and (b) covers
any employee or former employee of the Company or any ERISA Affiliate (with
respect to their relationship with any such entity).
1.2 Interpretation Provisions
(a) The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement, and article, section,
schedule and exhibit references are to this Agreement unless otherwise
specified. The meaning of defined terms shall be equally applicable to the
singular and plural forms of the defined terms. The terms "include" and
"including" are not limiting and mean "including without limitation."
(b) References to agreements and other documents shall be
deemed to include all subsequent amendments and other modifications thereto.
(c) References to statutes shall include all regulations
promulgated thereunder and references to statutes or regulations shall be
construed as including all statutory and regulatory provisions consolidating,
amending or replacing the statute or regulation.
(d) The captions and headings of this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
(e) The parties participated jointly in the negotiation and
drafting of this Agreement and the language used in this Agreement shall be
deemed to be the language chosen by the parties to express their mutual intent.
If an ambiguity or question of intent or interpretation arises, then this
Agreement will accordingly be construed as drafted jointly by the parties to
this Agreement, and no presumption or burden of proof will arise favoring or
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disfavoring any party to this Agreement by virtue of the authorship of any of
the provisions of this Agreement.
(f) The schedules and exhibits to this Agreement are a
material part hereof and shall be treated as if fully incorporated into the body
of the Agreement.
ARTICLE 2
THE MERGER
2.1 The Merger.
(a) Effective Time. At the Effective Time (as defined in
Section 2.2 hereof), and upon the terms and subject to the conditions of this
Agreement and the IBCA, Sub shall be merged with and into the Company, the
separate corporate existence of Sub shall cease, and the Company shall continue
as the surviving corporation. The Company, as the surviving corporation after
the Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
(b) Closing. Unless this Agreement shall have been terminated
pursuant to Section 10.1, and subject to the satisfaction (or to the extent
permitted, the waiver) of the conditions set forth in Articles 6 and 7, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place (i) at the offices of Xxxxxx & Xxxxxxx, 000 Xxxxx Xxxxxx Xxxxx, Xxxxx
0000, Xxxxxxx, XX 00000, as promptly as practicable (and in any event within
five (5) business days) after satisfaction (or the extent permitted, the waiver)
of the conditions set forth in Articles 6 and 7 or (ii) at such other time, date
or place as Parent and the Company may mutually agree.
2.2 Effective Time. As promptly as practicable after the
satisfaction (or to the extent permitted, the waiver) of the conditions set
forth in Articles 6 and 7, and provided that this Agreement has not been
terminated pursuant to Section 10.1, the parties hereto shall cause the Merger
to be consummated by executing and filing articles of merger as contemplated by
the IBCA (the "Articles of Merger"), with the Secretary of State of the State of
Iowa as provided in Section 1105 of the IBCA. The Merger shall be effective at
the time indicated in such Articles of Merger (the "Effective Time").
2.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of the IBCA.
2.4 Articles of Incorporation; Bylaws.
(a) Articles of Incorporation. At the Effective Time, the
Articles of Incorporation of the Company, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving
Corporation (except that Surviving Corporation shall be named and operate as
"Next Level SoftProse, Inc."), until duly amended in accordance with applicable
law.
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(b) Bylaws. At the Effective Time, the Bylaws of Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter duly amended in accordance with
applicable law, the Articles of Incorporation of the Surviving Corporation and
such Bylaws.
2.5 Directors and Officers. The directors of Sub immediately prior
to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified in the manner provided in the Articles
of Incorporation and Bylaws of the Surviving Corporation and in accordance with
applicable law. Upon request of Parent, the Company shall cause each or any
director and officer of the Company to tender his or her resignation prior to
the Effective Time, with each such resignation to be effective as of the
Effective Time.
2.6 Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any further action on the part of Parent, Sub, the
Company or any Stockholder:
(a) Company Stock. Subject to Section 2.6(f), each share of
Company Stock issued and outstanding immediately prior to the Effective Time
will by virtue of the Merger be, converted into one and one half (1.5) validly
issued, fully paid and nonassessable shares of Parent Stock.
(b) Options. Upon the terms and subject to the conditions set
forth herein, the Board of Directors of the Company shall adopt resolutions to
the effect that, and the Company will take such other action as shall be
necessary such that, each outstanding Company Option shall become fully vested
immediately prior to the Effective Time and, at the Effective Time, shall be
cancelled, retired and extinguished and upon the cancellation thereof, each
holder of a Company Option (each an "Optionholder") shall exchange any rights
with respect thereto for the right to receive the Option Purchase Price. Prior
to the Effective Time, the Company shall deliver to Parent appropriate
documentation evidencing the Optionholders' agreement to cancel his or her
Company Option in respect of the consideration to be paid pursuant to this
Section 2.6(b). The shares of Parent Stock issued in connection with the Merger
as a result of the conversion and exchange provided for in Sections 2.6(a) and
(b) are sometimes referred to herein as the "Merger Shares."
(c) Sub Stock. Each share of common stock, par value $0.01 per
share, of Sub issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger and without any action on the part of the holder
thereof, automatically be converted into and thereafter represent one (1)
validly issued, fully paid and nonassessable common share, no par value per
share, of the Surviving Corporation, so that thereafter Parent will be the sole
and exclusive owner of the capital stock of the Surviving Corporation.
(d) Cancellation. Each share of Company Stock held in the
treasury of the Company immediately prior to the Effective Time shall, by virtue
of the Merger and without any
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action on the part of the holder thereof, automatically cease to be outstanding,
be canceled and retired without payment of any consideration therefor and cease
to exist.
(e) Fractional Shares. No certificates or scrip representing
fractional shares of Parent Stock shall be issued in connection with the Merger,
but in lieu thereof each Stockholder who would otherwise be entitled to receive
a fraction of a Merger Share shall receive from Parent an amount of cash equal
to the product of (i) the fraction of a share of a Merger Share to which such
holder would otherwise be entitled multiplied by (ii) the Average Share Price.
(f) Adjustments to Exchange Ratio. The number of shares of
Parent Stock into which a share of Company Stock is convertible or to be
exchanged pursuant to Sections 2.6(a) and (b), shall be equitably adjusted to
reflect fully the effect of any stock split, reverse split, stock combination,
stock dividend, reorganization, reclassification, recapitalization or other like
change with respect to Parent Stock or Company Stock after the date hereof and
prior the Effective Time.
2.7 Surrender of Certificates.
(a) Delivery of Certificates. At the Effective Time, Parent
shall make available, and each Stockholder shall be entitled to receive, upon
surrender to Parent or its designated representative of any Certificates for
cancellation, duly endorsed in blank for transfer, such number of shares of
Parent Stock as is set forth in the respective Stockholder Representation
Letter.
(b) Cancellation of Company Stock. Upon surrender of each
Certificate and delivery by Parent of the Merger Shares to be delivered in
exchange therefor, such Certificate shall forthwith be canceled. Until so
surrendered, each Certificate shall be deemed for all corporate purposes to
evidence only the right to receive upon such surrender the aggregate number of
Merger Shares into which the Company Stock represented thereby shall have been
converted in accordance with the terms and upon the conditions of this
Agreement.
2.8 No Further Ownership Rights in Shares of Company Stock.
The shares of Parent Stock delivered upon the surrender for exchange of Company
Stock in accordance with the terms hereof shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Stock, and
there shall be no further registration of transfers of Company Stock which were
outstanding immediately prior to the Effective Time on the records of the
Surviving Corporation. If, after the Effective Time, the Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Article 2.
2.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, Parent shall issue in
exchange for such lost, stolen or destroyed Certificates, upon the making of an
affidavit of that fact by the holder thereof, such shares of Parent Stock as may
be required pursuant to Section 2.8; provided, however, that Parent may, in its
sole discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Certificates to deliver a bond in
such sum as it may reasonably direct as
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indemnity against any claim that may be made against Parent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
2.10 Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a reorganization within the meaning of Section
368(a) of the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the
U.S. Treasury Regulations.
2.11 Taking of Necessary Action; Further Action. Each of Parent,
Sub, the Company and each Stockholder will take all such reasonable lawful
action as may be necessary or appropriate in order to effect the Merger in
accordance with this Agreement as promptly as practicable. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Parent with full right, title and
possession to all the property, rights, privileges, power and franchises of the
Company, the officers and directors of Sub, Parent and Company immediately prior
to the Effective Time are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
2.12 Stockholder Agent; Power of Attorney
(a) Stockholder Agent. In the event that the Merger is
approved by the Stockholders, effective upon such vote, and without further act
of any Stockholder, Xxxxx Xxxxxxx shall be appointed as agent and
attorney-in-fact (the "Stockholder Agent") for each Stockholder, to exclusively
take any and all actions required or permitted to be taken by the Stockholders
under this Agreement and the Registration Rights Agreement, including but not
limited to, to give and receive notices and communications, to agree to,
negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims and to take all actions necessary or appropriate in the judgment of the
Stockholder Agent for the accomplishment of the foregoing. The Stockholders
shall have the right, at any time and from time to time, to appoint, by written
notice to Parent signed by a majority in interest of the Stockholders, a
replacement Stockholder Agent, in which event such replacement shall be
considered the Stockholder Agent from and after the date of Parent's receipt of
notice of such appointment. Any vacancy in the position of Stockholder Agent may
be filled by approval of a majority in interest of the Stockholders. No bond
shall be required of the Stockholder Agent, and the Stockholder Agent shall not
receive compensation for his services. Notices or communications to or from the
Stockholder Agent shall constitute notice to or from each of the Stockholders.
(b) Exculpation. The Stockholder Agent shall not be liable for
any act done or omitted hereunder as Stockholder Agent while acting in good
faith and in the exercise of reasonable judgment.
(c) Actions of the Stockholder Agent. A decision, act, consent
or instruction of the Stockholder Agent shall constitute a decision for all of
the Stockholders, and shall be final, binding and conclusive upon each of the
Stockholders, and Parent and Sub may rely exclusively upon any such decision,
act, consent or instruction of the Stockholder Agent as being the
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decision, act, consent or instruction of each Stockholder. Parent and Sub are
hereby relieved from any liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of the Stockholder
Agent.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement of Parent to enter into this Agreement, the Company
hereby makes, as of the date hereof and as of the Closing Date, the following
representations and warranties to Parent, except as otherwise set forth in
written disclosure schedules (the "Schedules"). The Schedules are numbered to
correspond to the various sections of this Article 3 setting forth certain
exceptions to the representations and warranties contained in this Article 3 and
certain other information called for by this Agreement. Unless otherwise
specified, no disclosure made in any particular Schedule shall be deemed made in
any other Schedule unless expressly made therein (by cross-reference or
otherwise) or the Schedules otherwise expressly and completely disclose the
specific exception.
3.1 Organization of the Company. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Iowa, with all requisite corporate power and authority to conduct the Business
as it is presently being conducted and to own or lease, as applicable, the
Assets owned or leased by it. The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which such
qualification is necessary under applicable law as a result of the conduct of
the Business or the ownership of its properties and where the failure to be so
qualified could reasonably be expected to have a Company Material Adverse
Effect. Each jurisdiction in which the Company is qualified to do business as a
foreign corporation is set forth in Schedule 3.1.
3.2 Capitalization of the Company.
(a) Authorized Capitalization. As of the date of this
Agreement, the authorized capitalization of the Company consists of 1,000,000
shares of Company Stock of which 82,200 shares are issued and outstanding and
30,300 shares are reserved for issuance under the SoftProse, Inc. Recognition
and Retention Plan and no additional shares of capital stock of the Company will
be issued after the date hereof except for shares issued in respect of Company
Options outstanding on the date hereof. The Company has no other capital stock
authorized, issued or outstanding. The Stockholders beneficially and of record
collectively own, and will beneficially and of record collectively own
immediately prior to the Effective Time, all of the outstanding Company Stock
and Company Options.
(b) Options. As of the date of this Agreement, 41,100 shares
of Company Stock are reserved for issuance upon the exercise of outstanding
Company Options and options to purchase 10,300 shares of Company Stock remain
outstanding pursuant to the Company Options. Each Stockholder's Stockholder
Representation Letter sets forth the number of Company Options held by each
Stockholder, the number of shares of Company Stock for which each such Company
Option is exercisable on the date hereof, the date upon which each such Company
Option becomes exercisable and the price per share of Company Stock for which
each such
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Company Option is exercisable (without taking into account whether or not such
Company Option is in fact exercisable on the date hereof). Attached as Schedule
3.2(b) is a true and correct copy of the Company Stock Option Plans and the
forms of option agreement used in all cases.
(c) No Other Capital Stock, Options, Warrants. Except for the
Company Options referred to above, there are no outstanding options, warrants,
convertible securities or rights of any kind to purchase or otherwise acquire
any shares of capital stock or other securities of the Company. Except as
described in Section 3.2(a) and (b) above, no shares of capital stock of the
Company are reserved for issuance.
(d) Valid Issuances. All outstanding shares of Company Stock
are, and any shares of Company Stock issued upon exercise of any Company Option
will be, validly issued, fully paid and non-assessable and not subject to any
preemptive rights created by statute, the Company's Articles of Incorporation or
Bylaws, or any Contract. The Company Options have been, and the shares of
Company Stock have been or will be, issued in compliance with all federal and
state corporate and securities laws.
3.3 Stockholders' Agreements, etc. Except as disclosed on Schedule
3.3, to the knowledge of the Company, there are no stockholder agreements,
voting trusts, proxies or other agreements or understandings with respect to or
concerning the purchase, sale or voting of the capital stock of the Company.
3.4 Authorization. The Company has all necessary corporate or
other power and authority to enter into this Agreement and has taken all
corporate or other action necessary to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and thereunder. This
Agreement has been duly executed and delivered by the Company, and this
Agreement is a valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except that enforceability may be
limited by the effect of (a) bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights of creditors or (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
3.5 Officers and Directors. Schedule 3.5 contains a true, correct
and complete list of all the officers and directors of the Company.
3.6 Bank Accounts. Schedule 3.6 contains a list of all of the
Company's bank accounts, safe deposit boxes and persons authorized to draw
thereon or have access thereto.
3.7 Subsidiaries, Etc. The Company has no Subsidiaries and does
not have any ownership interest of any kind in any other corporation,
partnership, limited liability company or other entity.
3.8 Real Property.
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(a) General. The real property set forth on Schedule 3.8(c)
constitutes all real property necessary for the conduct of the business of the
Company as presently conducted and, except as set forth on Schedule 3.8(a), all
of such real property, and the improvements thereon, are (i) in good condition,
repair and proper working order having regard for their use and age, have been
properly maintained, and are fit for the current uses thereof by the Company;
(ii) serviced by adequate electric, gas, water, sewer, telephone and other
utilities; (iii) legally entitled to access, both vehicular and pedestrian, to a
public street; (iv) not in violation of any material zoning requirement, permit
or other governmental or private restriction or entitlement relating to the real
property or the conduct of the business thereon as currently conducted; and (v)
to the Company's knowledge, not the subject of any pending or contemplated
condemnation.
(b) Owned Real Property. The Company does not own any Facility
or other real property.
(c) Leased Real Property. Schedule 3.8(c) sets forth all
leases, subleases or other occupancy agreements pursuant to which Facilities are
leased by the Company (as lessee) (the "Leases"), true and complete copies of
which (including all amendments, extensions, renewals, guarantees and other
related agreements) have been delivered to Parent. Except as set forth on
Schedule 3.8(c), Company has good and valid leasehold title to, and enjoys
peaceful and undisturbed possession of, all leased property described in such
Leases (the "Leased Property"), free and clear of any and all Encumbrances other
than any Permitted Encumbrances which would not permit the termination of the
Lease therefor by the lessor.
With respect to each Lease listed on Schedule 3.8(c), (i) such lease is
in full force and effect; (ii) there is no material default under any such Lease
by the Company or, to the knowledge of the Company, by any other party and no
event has occurred which, with the giving of notice, the passage of time or both
would cause a material default by the Company and (iii) the execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby will not cause a material default under any such
Lease. The Company does not own any leasehold improvements located on properties
leased pursuant to the Leases.
3.9 Personal Property.
(a) General. The Company owns or leases all personal property
Assets necessary for the conduct of its business as presently conducted, and the
personal property Assets (taken as a whole) are in such operating condition and
repair (subject to normal wear and tear) as is necessary for the conduct of its
business as presently conducted.
(b) Owned Personal Property. Except as set forth on Schedule
3.9(b), the Company has good title to all such personal property owned by it,
free and clear of any and all Encumbrances other than Permitted Encumbrances.
(c) Leased Personal Property. Except as set forth on Schedule
3.9(c), the Company has good and valid leasehold title to all of such Fixtures
and Equipment, vehicles and other tangible personal property Assets leased by it
from third parties, free and clear of any and
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all Encumbrances other than Permitted Encumbrances which would not permit the
termination of the lease therefor by the lessor. Schedule 3.9(c) sets forth all
Leases for personal property involving annual payments in excess of $5,000, true
and complete copies of which have been delivered or made available to Parent.
With respect to each lease listed on Schedule 3.9(c), except as set
forth on Schedule 3.9(c), (i) there is no material default under such lease by
the Company or, to the knowledge of the Company, by any other party and (ii) the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby will not cause (with or without
notice and with or without the passage of time) a default under any such lease.
3.10 Environmental Matters. Except as disclosed on Schedule 3.10,
the Company is currently and has in the past been in material compliance with
all Environmental Laws. There are no existing, and the Company is not aware
of any potential or threatened, Environmental Claims against the Company. To the
Company's knowledge (i) no underground or above-ground tank or other storage
receptacle or pipeline for Hazardous Substances is currently or formerly located
on the Company's Facilities; (ii) there have been no releases or threatened
releases of Hazardous Substances on, upon or into the Company's Facilities;
(iii) there are no PCBs or asbestos located at or on the Company's Facilities;
and (iv) there are no consent decrees, consents orders, judgments, judicial or
administrative orders, agreements with (other than permits) or liens by, any
Governmental Authority or quasi-governmental authority relating to any
Environmental Laws which regulate, obligate or bind the Company.
True and correct copies of any environmental reports, audits or
assessments which have been conducted, either by or on behalf of the Company,
regarding any of the Company's current or former Facilities have been made
available to the Parent.
3.11 Contracts.
(a) Disclosure. Schedule 3.11(a) sets forth a complete and
accurate list of all of the Contracts of the following categories:
(i) Contracts not made in the ordinary course of
business which are material to the Business or the Assets;
(ii) License agreements or royalty agreements, whether
the Company is the licensor or licensee thereunder (excluding licenses that are
commonly available on standard commercial terms, such as software "shrink-wrap"
licenses);
(iii) Confidentiality and non-disclosure agreements
(whether the Company is the beneficiary or the obligated party thereunder);
(iv) Contracts or commitments involving future
expenditures or Liabilities, actual or potential, in excess of $25,000 after the
date hereof or otherwise material to the Business or the Assets;
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(v) Contracts or commitments relating to commission
arrangements with others that are material to the Business;
(vi) Employment contracts, consulting contracts,
severance agreements, "stay-bonus" agreements and similar arrangements,
including Contracts (A) to employ or terminate executive officers or other
personnel and other contracts with present or former officers or directors of
the Company or (B) that will result in the payment by, or the creation of any
Liability of the Company, the Stockholders or Parent to pay any severance,
termination, "golden parachute," or other similar payments to any present or
former personnel following termination of employment or otherwise as a result of
the consummation of the transactions contemplated by this Agreement;
(vii) Indemnification agreements;
(viii) Promissory notes, loans, agreements, indentures,
mortgages, deeds of trust, evidences of indebtedness, letters of credit,
guarantees, or other instruments relating to an obligation to pay money, whether
the Company shall be the borrower, lender or guarantor thereunder;
(ix) Contracts containing covenants limiting the freedom
of the Company, or any officer, director, Employee or Affiliate of the Company,
to engage in any line of business or compete with any Person that relates
directly or indirectly to the Business;
(x) Any Contract with the federal, state or local
government or any agency or department thereof;
(xi) Any Contract or other arrangement with a Related
Party;
(xii) Leases of real property or personal property
involving annual payments of more than $5,000; and
(xiii) Any other Contract under which the consequences
of a default or termination could reasonably be expected to have a Company
Material Adverse Effect, individually or in the aggregate.
Complete and accurate copies of all of the Contracts listed on Schedule
3.11(a), including all amendments and supplements thereto, have been made
available to Parent. The Company has included as part of Schedule 3.11(a) a
brief summary of the material terms of each oral Contract.
(b) Absence of Defaults. Except as set forth on Schedule
3.11(b), all of the Contracts set forth on Schedule 3.11(b) are valid, binding
and enforceable in accordance with their terms, except as such enforceability
may be limited by (1) applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability or (2) general principles
of equity, and there is no existing material Default by the Company under the
Contracts. The Company has fulfilled all of its material obligations under each
of such Contracts accrued to the date of such determination. To the knowledge of
the Company, all parties to such Contracts have complied in all material
respects with the provisions thereof, no party is in
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material Default thereunder and no notice of any claim of Default has been given
to the Company.
3.12 No Conflict or Violation; Consents. Except as set forth on
Schedule 3.12, none of the execution, delivery or performance of this Agreement
or the consummation of the transactions contemplated hereby, nor compliance by
the Company with any of the provisions hereof, will (a) violate or conflict with
any provision of the governing documents of the Company, (b) violate, conflict
with, or result in a breach of or constitute a default (with or without notice
or the passage of time) under, or result in the termination of, or accelerate
the performance required by, or result in a right to terminate, accelerate,
modify or cancel under, or require a notice under, or result in the creation of
any Encumbrance upon any of its respective assets 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 is a party or by which the Company is
bound or to which any of its respective assets are subject, (c) violate any
applicable Regulation or Court Order, or (d) impose any Encumbrance on any
Assets or the Business. Except as set forth on Schedule 3.12, no notices to,
declaration, filing or registration with, approvals or Consents of, or
assignments by, any Persons (including any federal, state or local governmental
or administrative authorities) are necessary to be made or obtained by the
Company in connection with the execution, delivery or performance of this
Agreement to which it is a party or the consummation of the transactions
contemplated hereby or thereby.
3.13 Permits. Schedule 3.13 sets forth a complete list of all
material Permits of the Company, all of which are as of the date hereof, and
will be as of the Closing Date, in full force and effect. The Company has, and
at all times has had, all Permits required under any applicable Regulation in
their operation of the Business or in their ownership of the Assets, and own or
possess such Permits free and clear of all Encumbrances, except for Permitted
Encumbrances. The Company is not in default, nor, to the knowledge of the
Company, has the Company received any notice of any claim of default, with
respect to any such Permit.
3.14 Financial Statements; Books and Records.
(a) General. Except as contemplated by Schedule 3.14(a), the Financial
Statements are complete, are in accordance with the Company's Books and Records
and fairly present in all material respects the financial condition, results of
operations and cash flows of the Company as of the dates and for the periods
indicated thereby, in accordance with GAAP consistently applied throughout the
periods covered thereby (except as otherwise expressly indicated in the notes to
the Financial Statements.
(b) Books and Records. The Books and Records accurately and fairly
reflect in all material respects the activities of the Company and the Business
and have been made available at the Company's offices for Parent's inspection.
(c) All Accounts Recorded. The Company has not engaged in any
transaction, maintained any bank account or used any corporate funds except for
transactions,
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bank accounts or funds which have been and are reflected in the normally
maintained Books and Records.
(d) Corporate Records. The stock records and minute books of the
Company that have been made available to Parent fully reflect all minutes of
meetings, resolutions and other material actions and proceedings of its
stockholders, trustees and board of directors and all committees thereof, all
issuances, transfers and redemptions of capital stock of which the Company is
aware and contain true, correct and complete copies of their respective
organizational documents and bylaws and all amendments thereto through the date
hereof.
3.15 Absence of Certain Changes or Events. Except as set forth on
Schedule 3.15, since the Balance Sheet Date there has not been any:
(a) Company Material Adverse Change;
(b) resignation or termination of any officer, director or manager
listed on Schedule 3.15(b), or any increase in the rate of compensation payable
or to become payable to any officer, director or manager or Representative of
the Company (other than increases in the rate of compensation as a result of
general, regularly scheduled reviews), including the making of any loan to any
such Person (other than normal advances or expense allowances), or the payment,
grant or accrual of any bonus, incentive compensation, service award or other
similar benefit to any such Person (other than pursuant to existing arrangements
heretofore disclosed to Parent), or material modification, addition or
contribution (other than regularly scheduled contributions) to any Employee
Plan;
(c) any payment, loan or advance of any amount to or in respect of, or
the sale, transfer or lease of any properties or the Assets to, or entering into
of any Contract with, any Related Party except for regular compensation and
normal advances or expense allowances to Employees;
(d) actual or, to the knowledge of the Company, threatened, termination
of any material customer account or group of accounts or actual or, to the
knowledge of the Company, threatened material reduction in purchases or
royalties payable by any such customer or, to the knowledge of the Company,
occurrence of any event that is likely to result in any such termination or
reduction;
(e) disposition or lapsing of any material Proprietary Rights of the
Company, in whole or in part, or any disclosure of any trade secret, process or
know-how to any Person not an Employee or adviser to the Company;
(f) change in accounting methods or practices by the Company;
(g) declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any redemption,
purchase or other acquisition of any equity securities of the Company;
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(h) issuance or reservation for issuance by the Company of, or
commitment of it to issue or reserve for issuance, any shares of capital stock
or other equity securities or obligations or securities convertible into or
exchangeable for shares of capital stock or other equity securities;
(i) increase, decrease or reclassification of the capital stock of the
Company;
(j) amendment of the organizational documents or bylaws of the Company;
or
(k) agreement by the Company, directly or indirectly, to do any of the
foregoing.
3.16 Liabilities. The Company has no Liabilities or obligations
(absolute, accrued, contingent, inchoate or otherwise) except (i) Liabilities
which are reflected and properly reserved against in the Financial Statements,
(ii) Liabilities incurred in the ordinary course of business and consistent with
past practice since the Balance Sheet Date and (iii) Liabilities arising under
the Contracts (other than obligations which are required to be reflected on a
balance sheet prepared in accordance with GAAP) set forth on Schedule 3.11 or
Liabilities which are not required to be disclosed on such Schedule and which
have arisen or been incurred in the ordinary course of business. None of the
Liabilities described in this Section 3.16 relates to any Actions.
3.17 Litigation. Except as set forth on Schedule 3.17, there
is no Action, pending or, to the knowledge of the Company, threatened or
reasonably anticipated (i) against, relating to or affecting the Company, any of
the Assets or any of their respective officers and directors as such, (ii) which
seeks to enjoin or obtain damages in respect of the transactions contemplated
hereby or (iii) with respect to which there is a reasonable likelihood of a
determination which would prevent the Company from consummating the transactions
contemplated hereby. There are presently no outstanding judgments, decrees or
orders of any court or any governmental or administrative agency against or
affecting the Company, the Business or any of the Assets.
3.18 Labor Matters.
(a) General. The Company is not a party to any labor agreement with
respect to its Employees with any labor organization, group or association and
has not experienced any attempt by organized labor or its representatives to
make the Company conform to demands of organized labor relating to its Employees
or to enter into a binding agreement with organized labor that would cover the
Employees of the Company. There are no controversies pending or, to the
knowledge of the Company, threatened between the Company and its Employees, and
the Company is not aware of any facts which could reasonably result in any such
controversy.
(b) Compliance. The Company is in compliance with all applicable
Regulations respecting employment practices, terms and conditions of employment,
wages and hours, equal employment opportunity, and the payment of social
security and similar taxes and is not engaged in any unfair labor practice. The
Company is not liable for any claims for past due wages or any penalties for
failure to comply with any of the foregoing.
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(c) Severance Obligations. Except for Company Options granted under the
Company Stock Option Plans prior to the date hereof that will vest on the
consummation of the Merger, the Company has not entered into any severance,
"stay-bonus" or similar arrangement in respect of any present or former Employee
that will result in any obligation (absolute or contingent) of Parent or the
Company to make any payment to any present or former Employee following
termination of employment or upon consummation of the transactions contemplated
by this Agreement (whether or not employment is continued for any specified
period after the Effective Time). Except as specifically provided for in this
Agreement, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby or thereby will result in
the acceleration or vesting of any other rights of any Person to benefits under
any Employee Plans.
3.19 Employee Benefit Plans.
(a) Schedule 3.19 hereto contains a true and complete list of each
Employee Plan. The Company has delivered to Parent true and complete copies of
all documents embodying or relating to the Employee Plans, including, without
limitation, with respect to each Employee Plan, all amendments to the Employee
Plans, and any trust or other funding arrangement.
(b) None of the Pension Plans is subject to the requirements of Title
IV of ERISA, Section 302 of ERISA or Section 412 of the Code. Each Pension Plan
that is intended to be "qualified" within the meaning of Section 401(a) of the
Code has received a determination letter from the IRS that it is so qualified,
and no fact or event has occurred since the date of such determination letter
that could adversely affect the qualified status of any such Pension Plan.
(c) Neither the Company nor any ERISA Affiliate has incurred any
liability for any penalty or tax under Sections 4971, 4972, 4975, 4976, 4979, or
4980 of the Code or Section 502 of ERISA.
(d) Each of the Employee Plans has been maintained and operated in
compliance with ERISA, the Code and its terms in all material respects.
(e) No Employee Plan is a Multiemployer Plan.
(f) No amount that could be received (whether in cash or property or
the vesting of property) as a result of the consummation of the transactions
contemplated by this Agreement by any employee, officer or director of the
Company who is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any Benefit Arrangement could be
characterized as an "excess parachute payment" (as defined in Section 280G(b)(1)
of the Code).
(g) Each of the Employee Plans which is a "welfare plan" (as defined in
Section 3(1) of ERISA) (the "Welfare Plans") has at all times been in compliance
with the provisions of Section 4980B of the Code and Parts 6 and 7 of Title I of
ERISA and any similar applicable state laws. None of the Welfare Plans provides
or promises post-retirement health or
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life benefits to current employees or retirees of Company, except to the extent
required under any applicable state law or under Section 601 of ERISA. Each
Welfare Plan contains a procedure for amendment and termination of such plan.
(h) No Employee Plan is funded by a trust described in Section
501(c)(9) of the Code or subject to the provisions of Section 505 of the Code.
(i) Full payment of all amounts has been made to each Employee Plan
which are required to be made as contributions thereto, under applicable Law or
under any Employee Plan or any agreement relating to a Employee Plan as of the
last day of the most recent fiscal year of such Employee Plan ended prior to the
date hereof. Company has made adequate provision for reserves to meet
contributions that have not been made because they are not yet due under the
terms of any Employee Plan or related agreements. Benefits under all Employee
Plans are as represented and have not been increased subsequent to the date as
of which documents have been provided.
3.20 Transactions with Related Parties. Except for employment
agreements and other compensation arrangements and loans disclosed on Schedule
3.20, no Related Party has (a) borrowed or loaned money or other property to the
Company which has not been repaid or returned, (b) any contractual relationship
with or other claims, express or implied, of any kind whatsoever against the
Company or (c) any interest in any property used by the Company.
3.21 Compliance with Law. The Company has conducted the Business in
compliance with all applicable Regulations and Court Orders, except as could not
reasonably be expected to cause a Company Material Adverse Effect. The Company
has not received any notice to the effect that, or has otherwise been advised
that, the Company is not in compliance with any such Regulations or Court
Orders, and the Company has no reason to anticipate that any existing
circumstances are likely to result in any material violation of any of the
foregoing.
3.22 Intellectual Property.
(a) General. Schedule 3.22(a) sets forth with respect to Proprietary
Rights of the Company: (i) for each trademark, tradename or service xxxx,
whether or not registered, the date first used, the application serial number or
registration number, as appropriate, the class of goods covered, the nature of
the goods or services on or in connection with which such name or xxxx has been
used, the countries in which the name or xxxx is used and the expiration date
for each country in which a trademark has been registered, (ii) for each
copyright for which registration has been sought whether or not registered, the
date of creation and first publication of the work, the registration number and
date of registration for each country in which a copyright application has been
registered, (iii) for each mask work (if any), whether or not registered, the
date of first commercial exploitation and, if registered, the registration
number and date of registration, (iv) a description of all Trade Secrets that
are material to the Business and (v) all such Proprietary Rights in the form of
licenses. True and correct copies of all Proprietary Rights (including all
pending applications, application related documents and materials and
descriptions of Trade Secrets) owned, controlled or used by or on behalf of the
Company or in which the Company has any interest whatsoever have been provided
or made available to Parent.
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(b) Adequacy. The Proprietary Rights owned, controlled or used by the
Company are all those necessary for the normal conduct of the Business as
presently conducted and as presently contemplated.
(c) Ownership. The Company owns or has a valid right to use its
Proprietary Rights, and such Proprietary Rights will not cease to be valid
rights of the Company by reason of the execution, delivery and performance of
this Agreement or the consummation of the transactions contemplated hereby or
thereby.
(d) Royalties and Licenses. Except as set forth on Schedule 3.22(d),
the Company has no obligation to compensate any Person for the use of any
Proprietary Rights nor has the Company granted to any Person any license, option
or other rights to use in any manner any of its respective Proprietary Rights,
whether requiring the payment of royalties or not.
(e) Absence of Claims. Except as set forth in Schedule 3.17, the
Company (A) has not received any notice alleging, or otherwise has no knowledge
of facts that could reasonably be expected to give rise to, invalidity with
respect to any of the Proprietary Rights of the Company or (B) has not received
any notice of alleged infringement of any rights of others due to any activity
by the Company. The use by the Company of its Proprietary Rights in its past,
current and planned products and services do not and would not infringe upon or
otherwise violate the valid rights of any third party in the current or planned
markets for such products. No other Person (i) has notified the Company that it
is claiming any ownership of or right to use any of the Proprietary Rights of
the Company or (ii) to the knowledge of the Company, is infringing upon any such
Proprietary Rights in any way.
(f) Protection of Proprietary Rights. All of the pending applications
for Proprietary Rights of the Company have been properly filed and all other
actions to protect such Proprietary Rights have been taken. The Company has
taken reasonable steps necessary or appropriate (including, entering into
appropriate confidentiality and nondisclosure agreements with officers,
directors, subcontractors, Employees, licensees and customers in connection with
the Assets or the Business) to safeguard and maintain the secrecy and
confidentiality of, and the proprietary rights in, the Proprietary Rights that
are material to the Business. The Company has no knowledge of any breach of any
such confidentiality or nondisclosure agreement by any party thereto.
3.23 Tax Matters.
(a) Filing of Tax Returns. The Company has timely filed with the
appropriate taxing authorities all Tax Returns required to be filed. The Tax
Returns filed are complete, correct and accurate in all respects. Except as set
forth on Schedule 3.23(a), the Company has not requested any extension of time
within which to file any Tax Return. The Company has delivered to Parent
complete and accurate copies of all federal, state, local and foreign Tax
Returns of the Company for the years ended December 31, 1999, 1998 and 1997.
(b) Payment of Taxes. All Taxes for which the Company is or may be
liable, in respect of periods (or portions thereof) ending on or before the
Closing Date have been timely
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paid or an adequate reserve (in conformity with GAAP) has been established
therefor, as set forth in the Financial Statements, and the Company has no
Liability for Taxes in excess of the amounts so paid or reserves so established.
All Taxes that the Company has been required by law to withhold or collect have
been duly withheld or collected and have been timely paid over to the
appropriate governmental authorities to the extent due and payable.
(c) Audits, Investigations or Claims. No deficiencies for Taxes of the
Company have been claimed, proposed or assessed by any taxing or other
governmental authority. Except as set forth on Schedule 3.23(c), there are no
pending or, to the knowledge of the Company, threatened audits, assessments or
other Actions for or relating to any Taxes of the Company and there are no
matters under discussion with any governmental authorities with respect to Taxes
of the Company. Audits of federal, state and local Tax Returns by the relevant
taxing authorities have been completed for the periods set forth on Schedule
3.23(c) and, except as set forth in such Schedule, the Company has not been
notified that any taxing authority intends to audit a Tax Return for any other
period. Except as set forth on Schedule 3.23(c), no extension of a statute of
limitations relating to Taxes is in effect with respect to the Company.
(d) Lien. There are no Encumbrances for Taxes (other than for current
Taxes not yet due and payable) on any of the Assets or any shares of Company
Stock.
(e) Tax Elections. All elections with respect to Taxes affecting the
Company, or the Assets, as of the date hereof are set forth on Schedule 3.23(e).
The Company has not (i) consented at any time under Section 341(f)(1) of the
Code to have the provisions of Section 341(f)(2) of the Code apply to any
disposition of any Assets; (ii) agreed, or is required, to make any adjustment
under Section 481(a) of the Code by reason of a change in accounting method or
otherwise; (iii) made an election, or is required, to treat any Asset as owned
by another Person pursuant to the provisions of Section 168(f) of the Code or as
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code; (iv) acquired and does not own any assets that
directly or indirectly secure any debt the interest on which is tax exempt under
Section 103(a) of the Code; or (v) made any of the foregoing elections or is
required to apply any of the foregoing rules under any comparable state or local
Tax provision.
(f) Tax Sharing Agreements. There are no Tax-sharing agreements or
similar arrangements (including indemnity arrangements) with respect to or
involving the Company, the Assets or the Business and, after the Closing Date,
none of the Company, the Assets or the Business shall be bound by any
Tax-sharing agreements or similar arrangements or have any Liability thereunder
for amounts due in respect of periods prior to the Closing Date.
(g) Partnerships. The Company has no interest in and is not subject to
any joint venture, partnership, trust, co-tenancy or other arrangement or
contract which is treated as a partnership for federal income tax purposes.
(h) No Withholding. The transactions contemplated herein are not
subject to the tax withholding provisions of Section 3406 of the Code, or of
Subchapter A of Chapter 3 of the Code or of any other provision of law.
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(i) USRPC. The Company is not and has not 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)(1)(A)(ii) of the Code.
(j) Other Entity Liability. None of the Company, any of its respective
predecessors or affiliates of any of them has any Liability for the Taxes of any
other Person (other than Taxes of the Company) under Treasury Regulation Section
1.1502-6 (or any similar provision of state or local law), as a transferee or
successor, by contract or otherwise.
(k) Compliance with Withholding Taxes. The Company has properly
requested, received and retained all necessary exemption certificates and other
documentation supporting any claimed exemption or waiver of Taxes on sales or
other transactions for which the Company would have been obligated to collect or
withhold Taxes.
(l) S Corporation. The Company is, and has been at all times since its
formation, an "S Corporation" (within the meaning of Section 1361(a) of the
Code) for which a valid election under Section 1362 of the Code has been in
effect (and which has also been in effect for state Tax purposes). The Company's
election under Section 1362 (and applicable provisions of state law) has not
been revoked or otherwise terminated and is still in full force and effect for
federal and state Tax purposes. The Company is not subject to the income
recognition provisions of Section 1374 of the Code (or any comparable provision
of state or local tax law) with respect to any of its assets.
(m) No Failure to File. No claim has been made within the last three
years by any taxing authority in a jurisdiction where the Company does not file
Tax Returns that the Company may be subject to taxation in that jurisdiction.
(n) Tax Basis of Company Stock. As of December 31, 1999, each
Stockholder has an aggregate tax basis in his or her Company Stock as set forth
in such Stockholder's Stockholder Representation Letter.
3.24 Insurance. Schedule 3.24 contains a complete and accurate list
of all policies or binders of insurance (showing as to each policy or binder the
carrier, policy number, coverage limits, expiration dates, annual premiums, a
general description of the type of coverage provided and any pending claims
thereunder) of which the Company is the owner, insured or beneficiary. The
Company is not in material default under any such policies or binders, or has
not failed to give any notice or to present any material claim under any such
policy or binder in a due and timely fashion. There are no outstanding unpaid
claims under any such policies or binders. Such policies and binders are in full
force and effect on the date hereof and shall be kept in full force and effect
by the Company through the Closing Date.
3.25 Accounts Receivable. The accounts and notes receivable
reflected in the Balance Sheet, and all accounts or notes receivable arising
since the Balance Sheet Date, represent bona fide claims against debtors for
sales, services performed or other charges arising on or before the date of
recording thereof, and, to the Company's knowledge, all the goods delivered and
services performed which gave rise to said accounts were delivered or performed
in accordance with the
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applicable orders, Contracts or customer requirements in all material respects.
Except to the extent of any reserves provided for in the Books and Records, all
such accounts and notes receivable are collectible at the aggregated recorded
amounts or that any such accounts and are not subject to any defense,
counterclaim or set-off.
3.26 Inventory. The Company maintains no inventory.
3.27 Year 2000 Problem. The "Year 2000 Problem" (that is, the
risk that computer applications used by any person may be unable to recognize
and perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999) did not, and will not, result in a Company
Material Adverse Effect.
3.28 Brokers; Transaction Costs. Except as set forth on Schedule
3.28, the Company has not entered into and will not enter into any contract,
agreement, arrangement or understanding with any Person which will result in the
obligation of Parent or the Company to pay any finder's fee, brokerage
commission, legal, accounting, or similar payment in connection with the
transactions contemplated hereby.
3.29 No Other Agreements to Sell the Company or the Assets.
The Company has no legal obligation, absolute or contingent, to any other Person
to sell the Assets (other than Inventory in the ordinary course of business) or
to sell any capital stock of the Company or to effect any merger, consolidation
or other reorganization of the Company or to enter into any agreement with
respect thereto, except pursuant to or as contemplated in this Agreement.
3.30 Takeover Statutes. No Takeover Statute applicable to the
Company is applicable to the Merger or the transactions contemplated hereby.
3.31 Material Misstatements or Omissions. No representations
or warranties by the Company in this Agreement or in any document, written
information, exhibit, statement, certificate or schedule heretofore or
hereinafter furnished by the Company or any of its Representatives to Parent or
Sub pursuant hereto, or in connection with the transactions contemplated by this
Agreement contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact necessary to make the statements
or facts contained therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
As an inducement of the Company and each of the Stockholders to enter
into this Agreement, Parent represents and warrants to the Company as follows,
which representations and warranties are, as of the date hereof, and will be, as
of the Closing Date, true and correct:
4.1 Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Parent
has full corporate power and authority to conduct its business as it is
presently being conducted. Parent is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which such
qualification is
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necessary under applicable law as a result of the conduct of its business or the
ownership of its properties and where the failure to be so qualified could
reasonably be expected to have a Material Adverse Effect on Parent. Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Sub has not engaged in any business (other than in
connection with this Agreement and the transactions contemplated hereby) since
the date of its incorporation.
4.2 Capitalization.
(a) Parent has authorized under its Certificate of
Incorporation 400,000,000 shares of Parent Stock, 70,000,000 shares of Class B
non-voting common stock and 10,000,000 shares of preferred stock, par value
$0.01 per share, of which, as of June 2, 2000, 80,278,935 shares of Parent Stock
and no shares of Class B non-voting common stock or preferred stock were issued
and outstanding. Parent has no other stock authorized, issued or outstanding.
(b) As of July 6, 2000, there were 21,122,565 outstanding
options granted under Parent's Stock Option Plans (the "Parent Options") and
outstanding warrants to purchase 6,033,655 shares of Parent Stock (the "Parent
Warrants").
(c) Except for the Parent Options and Parent Warrants, there
are no outstanding options, warrants, convertible securities or rights of any
kind to purchase or otherwise acquire any shares of capital stock or other
securities of Parent. Except as set forth above, no shares of capital stock of
Parent are reserved for issuance.
(d) The Merger Shares to be issued pursuant to the terms of
this Agreement have been duly authorized and, when issued in accordance with the
terms hereof, will be validly issued, fully paid and nonassessable.
(e) The authorized capital stock of Sub consists of 1,000
shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding. All of such outstanding shares are owned by Parent, and
all such shares are validly issued, fully paid and non-assessable.
4.3 Authorization. Each of Parent and Sub has all necessary
corporate power and authority to enter into this Agreement and has taken all
action necessary to consummate the transactions contemplated hereby and thereby
and to perform its respective obligations hereunder and thereunder. This
Agreement has been duly executed and delivered by each Parent and Sub, and this
Agreement is a valid and binding obligation of each of Parent and Sub
enforceable against each of Parent and Sub in accordance with its terms, except
that enforceability may be limited by the effect of (a) bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights of creditors or (b) general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
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ARTICLE 5
ACTIONS BY THE COMPANY, PARENT
AND SUB PRIOR TO THE CLOSING
The Company, Parent and Sub, each as indicated below, covenant as
follows for the period from the date hereof through the Closing Date:
5.1 Conduct of Business. From the date hereof through the
Closing, the Company shall, except as otherwise expressly contemplated by this
Agreement, or as consented to by Parent in writing which consent shall not be
unreasonably withheld or delayed, operate the Business solely in the ordinary
course of business and in accordance with past practice and will not, in any
event, take any action inconsistent with this Agreement or the consummation of
the Closing. Without limiting the generality of the foregoing, the Company shall
not, except as specifically contemplated by this Agreement or as consented to by
Parent in writing:
(a) incur any indebtedness for borrowed money, or assume,
guarantee, endorse (other than endorsements for deposit or collection in the
ordinary course of business), or otherwise become responsible for obligations of
any other Person in excess of $25,000.
(b) issue (except pursuant to Company Options outstanding on
the date of this Agreement and disclosed on Schedule 3.2(b)) or commit to issue
any shares of its capital stock or any other securities or any securities
convertible into shares of its capital stock or any other securities, including,
without limitation, any options to acquire capital stock;
(c) declare, pay or incur any obligation to pay any dividend
on its capital stock or declare, make or incur any obligation to make any
distribution or redemption with respect to capital stock;
(d) make any change to the Company's Articles of Incorporation
or Bylaws;
(e) mortgage, pledge or otherwise encumber any Assets or sell,
transfer, license or otherwise dispose of any Assets except for the sale of
inventory to customers in the ordinary course of business and consistent with
past practice;
(f) (i) enter into or modify any employment Contract, (ii) pay
any compensation to or for any Employee, officer or director other than in the
ordinary course of business and pursuant to existing employment arrangements,
(iii) pay or agree to pay any bonus, incentive compensation, service award,
severance, "stay bonus" or other like benefit not in the ordinary course of
business consistent with past practice, (iv) establish, enter into or modify any
Employee Plan, (v) modify the Company Stock Option Plans, or (vi) accelerate the
vesting of any Company Options;
(g) enter into or modify any Contract or other arrangement
with a Related Party;
(h) make any change in any method of accounting or accounting
practice;
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(i) make or change any election in respect of Taxes, adopt or
change any accounting method in respect of Taxes, enter into any tax allocation
agreement, tax sharing agreement, tax indemnity agreement or closing agreement,
settle or compromise any claim, notice, audit report or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes;
(j) do any other act which would cause any representation or
warranty of the Company or Stockholders in this Agreement to be or become untrue
in any material respect or that is not in the ordinary course of business
consistent with past practice; or
(k) directly or indirectly take, agree to take or otherwise
permit to occur any of the actions described in Sections 5.1(a) through 5.1(j).
Notwithstanding the foregoing, nothing in this Section 5.1 shall prohibit the
Company from taking any action or omitting to take any action as required or as
contemplated by this Agreement.
5.2 Access by Parent. Subject to the Non-Disclosure Agreement,
from the date hereof through the Closing Date, the Company shall, and shall
cause the Company's officers, Employees and Representatives to, afford the
Representatives of the Parent and those of its lenders access upon reasonable
notice and at all reasonable times to its Business for the purpose of inspecting
the same, and to its officers, Employees and Representatives, properties, Books
and Records, Contracts and other Assets, and shall furnish Parent and its
Representatives and those of its lenders, upon reasonable notice and in a timely
manner, all financial, operating and other data and information as Parent or its
affiliates, through their respective Representatives, may reasonably request.
5.3 Notification of Certain Matters. The Company and the
Stockholders shall give prompt notice to Parent of (i) the occurrence, or
failure to occur, of any event which occurrence or failure would be likely to
cause any representation or warranty of the Company contained in this Agreement
to be untrue or inaccurate in any material respect and (ii) any material failure
of the Company to comply with or satisfy any covenant, condition or agreement to
be complied with or satisfied by it hereunder; provided, however, that such
disclosure shall not be deemed to cure any breach of a representation, warranty,
covenant or agreement or to satisfy any condition. The Company shall promptly
notify Parent of any Default, the threat or commencement of any Action, or any
development that occurs before the Closing that could reasonably be expected to
result in a Company Material Adverse Effect.
5.4 No Mergers, Consolidations, Sale of Stock, etc. The
Company shall not, directly or indirectly, through any Representative or
otherwise, (a) solicit or encourage any inquiries or proposals or enter into or
continue any discussions, negotiations or agreements relating to (i) the sale or
exchange of the Company's capital stock, (ii) the merger of the Company with, or
the direct or indirect disposition of a significant amount of the Assets or the
Business to, any Person other than Parent or (iii) other than in the ordinary
course of Business, the licensing of the Company's Proprietary Rights to any
Person or (b) provide any assistance or any information to or otherwise
cooperate with any Person in connection with any such inquiry, proposal or
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transaction. The Company hereby represents that the Company is not now engaged
in discussions or negotiations with any party other than Parent with respect to
any transaction of the kind described in clauses (a) (i) through (a) (iii) of
the preceding sentence (a "Proposed Acquisition Transaction"). The Company
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which it is a party. The Company
shall (w) immediately notify Parent (orally and in writing) if any offer is
made, any discussions or negotiations are sought to be initiated, any inquiry,
proposal or contact is made or any information is requested with respect to any
Proposed Acquisition Transaction, (x) promptly notify Parent of the terms of any
proposal which it may receive in respect of any such Proposed Acquisition
Transaction, including, without limitation, the identity of the prospective
purchaser or soliciting party, (y) promptly provide Parent with a copy of any
such offer, if written, or a written summary (in reasonable detail) of such
offer, if not in writing, and (z) keep Parent informed of the status of such
offer and the offeror's efforts and activities with respect thereto.
5.5 Company Stockholder Approval. The Company agrees that it
will submit to the Stockholders a written consent in lieu of a meeting of such
Stockholders (the "Stockholder Consent") in substantially the form attached
hereto as Exhibit D, (a) approving the execution, delivery and performance by
the Company of this Agreement and the consummation of the transactions
contemplated hereby and (b) expressly waiving any dissenters' appraisal or
similar remedy available under the IBCA or other applicable law.
5.6 Closing Date. Each party to this Agreement shall use all
reasonable commercial efforts to cause the Closing to occur on or before August
31, 2000.
5.7 Takeover Statutes. If any Takeover Statute is or may
become applicable to the transactions contemplated hereby, the Board of
Directors of the Company will grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby may be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate the effects of any Takeover Statute on any of the transactions
contemplated hereby.
5.8 Further Assurances. Upon the terms and subject to the
conditions contained herein, the parties agree, in each case both before and
after the Closing, (i) to use all commercially reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective the transactions
contemplated by this Agreement, including fulfillment of the conditions set
forth in Article 6 hereof, (ii) to use their respective commercially reasonable
efforts to cause the Merger to qualify, and will not take any actions which to
their knowledge could reasonably be expected to prevent the Merger from
qualifying, as a reorganization under the provisions of Section 368(a) of the
Code, (iii) to execute any documents, instruments or conveyances of any kind
which may be reasonably necessary or advisable to carry out any of the
transactions contemplated hereunder and thereunder and (iv) to cooperate with
each other in connection with the foregoing. Without limiting the foregoing, the
parties agree to use their respective reasonable commercial efforts (A) to
obtain any necessary Consents, (B) to give all notices to, and make all
registrations and filings with third parties, including submissions of
information requested by governmental authorities and (C) to fulfill all other
conditions to this Agreement.
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5.9 Termination of 401(k) Plan and Company Stock Option Plans.
Prior to the Closing, the Company shall take all action necessary to, at the
Closing, (a) terminate the Company's 401(k) Plan and allow employees to receive
distribution of their accounts thereunder to the extent permitted by ERISA and
(b) terminate the Company Stock Option Plans.
ARTICLE 6
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to effect the Merger and complete the
related transactions contemplated by this Agreement are subject, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
6.1 Representations, Warranties and Covenants. All
representations and warranties of Parent and Sub contained in this Agreement
shall be true and correct in all material respects (without regard to any
materiality qualifier contained therein) at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date, and
Parent and Sub shall have performed in all material respects all agreements and
covenants required hereby to be performed by it prior to or at the Closing Date
(without regard to any materiality qualifier contained therein). There shall be
delivered to the Company a certificate of Parent, signed by its Senior Vice
President, General Counsel and Secretary and Sub, signed by its President, to
the foregoing effect ("Parent Closing Certificate").
6.2 Consents. All Consents, approvals and waivers from
governmental authorities necessary to permit consummation of the Merger as
contemplated hereby shall have been obtained and all approvals required under
any Regulations to permit Parent and Sub to carry out the transactions
contemplated by this Agreement shall have been obtained. All required approvals,
if any, under United States federal and state securities laws and regulations
shall have been obtained.
6.3 No Court Orders. There shall not be any Regulation or
Court Order that makes the transactions contemplated hereby illegal or otherwise
prohibited.
6.4 Closing Documents. Parent shall have delivered to the
Stockholder Agent the documents and other items described in Section 8.2 and
such other documents and items as the Company may reasonably require.
6.5 Material Adverse Change. There shall not have been any
Material Adverse Change with respect to Parent.
6.6 Grant of Parent Options and Restricted Stock. Certain
Stockholders shall have received from Parent an "offer letter" prior to Closing
regarding the terms of such Stockholder's employment by Parent or one of its
Subsidiaries. Each such Stockholder's offer letter shall provide for a grant of
options to purchase shares of Parent Stock under the Next Level Communications,
Inc. 1999 Equity Incentive Plan pursuant to Parent's standard form of stock
option agreement. In connection with certain Stockholder's employment by Parent,
each such
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Stockholder's offer letter shall provide for a grant of restricted Parent Stock
under the Next Level Communications, Inc. 1999 Equity Incentive Plan on the
sixtieth (60th) day after the execution of such Stockholder's offer letter, so
long as such Stockholder is an employee of Parent or a Subsidiary of Parent on
such date. The number of options to purchase Parent Stock and shares of
restricted Parent Stock granted to each Stockholder shall be set forth in each
Stockholder's offer letter.
6.7 Registration Rights Agreement. Parent shall have entered into
the Registration Rights Agreement.
CONDITIONS TO PARENT'S AND SUB'S OBLIGATIONS
The obligations of Parent and Sub to effect the Merger and complete the
related transactions contemplated by this Agreement are subject to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions:
7.1 Representations, Warranties and Covenants. All
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects (without regard to any materiality
qualifier contained therein) at and as of the Closing Date as if such
representations and warranties were made at and as of the Closing Date, and the
Company shall have performed in all material respects all agreements and
covenants required hereby to be performed prior to or at the Closing Date
(without regard to any materiality qualifier contained therein). There shall be
delivered to Parent a certificate of the Company signed by its President (the
"Company Closing Certificate") to the foregoing effect.
7.2 Consents. All Consents, approvals and waivers from
governmental authorities and other parties necessary to permit consummation of
the Merger as contemplated hereby and for the operation of the Business after
the Closing (including all required third party consents under the Contracts)
shall have been obtained. Parent shall be satisfied that all approvals required
under any Regulations to permit the Company to carry out the transactions
contemplated by this Agreement shall have been obtained. All required approvals,
if any, under United States federal and state securities laws and regulations
shall have been obtained.
7.3 No Actions or Court Orders. No Action by any court,
governmental authority or other Person shall have been instituted or threatened
which questions the validity or legality of the transactions contemplated
hereby. There shall not be any Regulation or Court Order that makes the
acquisition of the Company Stock contemplated hereby illegal or otherwise
prohibited or that otherwise may have a Company Material Adverse Effect.
7.4 Closing Documents. The Company and/or the Stockholders, as
the case may be, shall have delivered to Parent the documents and other items
described in Section 8.1 and such other documents and items as Parent may
reasonably require.
7.5 Exemption under Federal and State Securities Laws. Parent
shall be satisfied in its sole discretion that the issuance of shares of Parent
Stock in the Merger will not violate any
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United States federal or state securities laws and the Stockholders shall have
executed and delivered to Parent all documents necessary to allow Parent to make
such determination.
7.6 Stockholder Consent. Each of the Stockholders shall have
executed the Stockholder Consent and the Company shall have taken all further
actions related to the due authorization of the Merger as may be required under
the IBCA.
7.7 Tax Matters. The Company shall have provided Parent with a
clearance certificate or any other document (including, without limitation, a
properly executed statement in a form reasonably acceptable to Parent that
satisfies Parent's obligations under Treasury Regulation Section 1.1445-2(c)(3))
which may be required by any taxing authority to relieve Parent of any
obligation to withhold any portion of the payments to the Stockholders pursuant
to this Agreement.
7.8 Material Adverse Change. There shall not have been any
Company Material Adverse Change between April 1, 2000 and the Closing Date.
7.9 Appraisal Rights. None of the Stockholders shall have
asserted any appraisal rights under the IBCA.
7.10 Other Agreements. Each of the Stockholders shall have
entered into the Registration Rights Agreement and a Proprietary Information and
Inventions Agreement.
ARTICLE 8
CLOSING
On the Closing Date:
8.1 Deliveries by the Company and the Stockholders to Parent. The
Company and each Stockholder, as applicable, shall deliver (or cause to be
delivered) to Parent:
(a) any Consents required to be obtained by the Company;
(b) the Company Closing Certificate;
(c) the certificates and documents described in Sections 7.7
and 7.10;
(d) the Stockholder Consent; and
(e) all share certificates representing the shares of Company
Stock to be canceled in connection with the Merger.
8.2 Deliveries by Parent to the Stockholder Agent. Parent
shall deliver to the Stockholder Agent:
(a) any Consents required to be obtained by Parent;
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(b) the Parent Closing Certificate; and
(c) the Merger Shares to be issued to the Stockholders as
provided for herein.
ARTICLE 9
INDEMNIFICATION
9.1 Survival of Representations, etc. All statements contained
in this Agreement, any schedule or in any certificate or instrument of
conveyance delivered by or on behalf of the parties pursuant to this Agreement
or in connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by such party hereunder. The representations and
warranties contained herein shall survive after the Closing Date for (and claims
based upon or arising out of such representations and warranties, as well as any
claims based upon or arising out of any covenants and agreements herein or made
hereunder, may be asserted at any time before) a period of two (2) years,
provided that (a) the representations and warranties of the Company contained in
Sections 3.1, 3.2, 3.3, 3.4, 3.10, 3.12 and 3.29 and of the Parent contained in
Section 4.2(d) shall survive indefinitely, (b) the representations and
warranties of the Company contained in Section 3.19 and 3.23 shall survive until
90 days following the expiration of the applicable statute or similar period of
limitations (the respective "Survival Periods"). No investigation made by any of
the parties hereto (whether prior to, on or after the Closing Date) shall in any
way limit the representations and warranties of the parties. On the Closing Date
all representations and warranties contained in this Agreement and made by the
Company shall expire as to the Company and thereafter will be deemed to have
been made exclusively by the Stockholders. The termination of the
representations and warranties provided herein shall not affect the rights of a
party in respect of any claim made by such party in a writing received by the
other party prior to the expiration of the applicable survival period provided
herein.
9.2 Indemnification.
(a) General.
(i) Subsequent to the Closing, the Stockholders, subject
to Section 9.5, jointly, shall indemnify Parent, its Affiliates, and each of
their respective, officers, directors, employees, stockholders and agents
("Parent Indemnified Parties") against, and hold each of the Parent Indemnified
Parties harmless from, any damage, claim, loss, cost, Tax, Liability or expense,
including without limitation, interest, penalties, reasonable attorneys' fees
and expenses of investigation, response action, removal action or remedial
action (collectively "Damages") incurred by any such Parent Indemnified Party,
that are incident to, arise out of, in connection with, or related to, (A) the
breach of any warranty, representation, covenant or agreement of the Company
contained in this Agreement or any schedule hereto or in any certificate or
instrument of conveyance delivered by or on behalf of the Company pursuant to
this Agreement or in connection with the transactions contemplated hereby and
(B) except to the extent provided in (A), Taxes of: (I) the Company (to the
extent liability for Taxes of the Company is imposed on Parent or any Subsidiary
of Parent) with respect to the transactions contemplated by this Agreement; and
(II) the Company with respect to Tax years or portions
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thereof ending on or before the Closing Date (and for any Tax year beginning
before and ending after the Closing Date, for the portion of such year ending on
the Closing Date) to the extent such Taxes are not reflected in the reserve for
Tax liability (other than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) on the Balance Sheet. For
purposes of this Section 9.2(a)(i), in the case of any Taxes that are imposed on
a periodic basis and are payable for a Taxable period that includes (but does
not end on) the Closing Date, the portion of such Tax which relates to the
portion of such Taxable period ending on the Closing Date shall (i) in the case
of any Taxes other than Taxes based upon or related to income or receipts, be
deemed to be the amount of such Tax for the entire Taxable period multiplied by
a fraction the numerator of which is the number of days in the Taxable period
ending on the Closing Date and the denominator of which is the number of days in
the entire Taxable period, and (ii) in the case of any Tax based upon or related
to income or receipts be deemed equal to the amount which would be payable if
the relevant Taxable period ended on the Closing Date. Any credits relating to a
Taxable period that begins before and ends after the Closing Date shall be taken
into account as though the relevant Taxable period ended on the Closing Date.
All determinations necessary to give effect to the foregoing allocations shall
be made in a manner consistent with the prior practice of the Company.
(ii) Subsequent to the Closing, Parent shall indemnify
the Stockholders, their Affiliates, and each of their respective partners,
officers, directors, employees, stockholders and agents, as the case may be
("Stockholder Indemnified Parties"), against, and hold each of the Stockholder
Indemnified Parties harmless from, any Damages incurred by such Stockholder
Indemnified Party, that are incident to, arise out of, in connection with, or
related to, whether directly or indirectly, the breach of any warranty,
representation, covenant or agreement of Parent or Sub contained in this
Agreement, any schedule or in any certificate or instrument of conveyance
delivered by or on behalf of Parent or Sub pursuant to this Agreement or in
connection with the transactions contemplated hereby.
The term "Damages" as used in this Section 9.2 is not limited to
matters asserted by third parties against Stockholder Indemnified Parties or
Parent Indemnified Parties, but includes Damages incurred or sustained by such
persons in the absence of third party claims. The right to obtain
indemnification provided in this Section 9.2(a) is in addition to any other
remedy at contract or in the law (but without duplication of recovery).
(b) Procedure for Claims.
If a claim for Damages (a "Claim") is to be made by a person
entitled to indemnification hereunder, the person claiming such indemnification
(the "Indemnified Party") shall give written notice (a "Claim Notice") to the
indemnifying person (the "Indemnifying Party") promptly after the Indemnified
Party becomes aware of any fact, condition or event which may give rise to
Damages for which indemnification may be sought under this Section 9.2;
provided, that if the Indemnified Party is a Stockholder Indemnified Party, such
Claim Notice shall only be valid if it is delivered by the Stockholder Agent;
and provided further, that if the Indemnified Party is a Parent Indemnified
Party, such Claim Notice shall be valid if it is delivered to the Stockholder
Agent. The failure of any Indemnified Party to give timely notice hereunder
shall not affect rights to indemnification hereunder, except and only to the
extent that,
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the Indemnifying Party demonstrates actual material damage caused by such
failure, and then only to the extent thereof. In the case of a Claim involving
the assertion of a claim by a third party (whether pursuant to a lawsuit, other
legal action or otherwise, a "Third-Party Claim"), if the Indemnifying Party
shall acknowledge in writing to the Indemnified Party that the Indemnifying
Party shall be obligated to indemnify the Indemnified Party under the terms of
its indemnity hereunder in connection with such Third-Party Claim, then (A) the
Indemnifying Party shall be entitled and, if it so elects, shall be obligated at
its own cost, risk and expense, (1) to take control of the defense and
investigation of such Third-Party Claim and (2) to pursue the defense thereof in
good faith by appropriate actions or proceedings promptly taken or instituted
and diligently pursued, including, without limitation, to employ and engage
attorneys of its own choice reasonably acceptable to the Indemnified Party to
handle and defend the same, and (B) the Indemnifying Party shall be entitled
(but not obligated), if it so elects, to compromise or settle such claim, which
compromise or settlement shall be made only with the written consent of the
Indemnified Party, such consent not to be unreasonably withheld. In the event
the Indemnifying Party elects to assume control of the defense and investigation
of such lawsuit or other legal action in accordance with this Section 9.2(b),
the Indemnified Party may, at its own cost and expense, participate in the
investigation, trial and defense of such Third-Party Claim; provided that, if
the named persons to a lawsuit or other legal action include both the
Indemnifying Party and the Indemnified Party and the Indemnified Party has been
advised in writing by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or additional to
those available to the Indemnifying Party, the Indemnified Party shall be
entitled, at the Indemnifying Party's cost, risk and expense, to retain one firm
of separate counsel of its own choosing. If the Indemnifying Party fails to
assume the defense of such Third-Party Claim in accordance with this Section 9.2
within ten (10) calendar days after receipt of the Claim Notice, the Indemnified
Party against which such Third-Party Claim has been asserted shall (upon
delivering notice to such effect to the Indemnifying Party) have the right to
undertake, at the Indemnifying Party's cost, risk and expense, the defense,
compromise and settlement of such Third-Party Claim on behalf of and for the
account of the Indemnifying Party; provided that such Third-Party Claim shall
not be compromised or settled without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. In the event the
Indemnifying Party assumes the defense of the claim, the Indemnifying Party
shall keep the Indemnified Party reasonably informed of the progress of any such
defense, compromise or settlement, and in the event the Indemnified Party
assumes the defense of the claim, the Indemnified Party shall keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement. The Indemnifying Party shall be liable for any
settlement of any Third-Party Claim effected pursuant to and in accordance with
this Section 9.2 and for any final judgment (subject to any right of appeal),
and the Indemnifying Party agrees to indemnify and hold harmless each
Indemnified Party from and against any and all Damages by reason of such
settlement or judgment.
9.3 No Right of Contribution. After the Closing, no Stockholder
shall have any right of contribution against the Surviving Corporation for any
breach of any representation, warranty, covenant or agreement of the Company
herein. The Stockholders and Parent shall be entitled to specific performance
and injunctive relief, without posting bond or other security, for the purpose
of asserting their respective rights under this Article 9. The remedies
described in this Section 9
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shall be in addition to, and not in lieu of, any other remedies at law or in
equity that the parties may elect to pursue, but without duplication of
recovery.
9.4 Payment for Damages. If and to the extent that any Damages
shall arise and shall be payable pursuant to an order or judgment by a court of
proper jurisdiction (unless and to the extent such payment is stayed by a
court), or written agreement of the parties (a "Final Determination") then the
Stockholders or Parent, as the case may be, shall satisfy their obligations
under this Article 9 by delivering cash to the Stockholders or Parent, as the
case may be, within sixty (60) days of the Final Determination or such longer
period as is set forth in the Final Determination, to satisfy all or part of
their obligations in respect of the amount of Damages which is due and payable
under the terms of this Agreement to the Stockholder Indemnified Parties or the
Parent Indemnified Parties, as the case may be (the "Damages Payment").
9.5 Limitations on Indemnity. Notwithstanding any provision of
this Agreement to the contrary, the Parent Indemnified Parties may not, in the
aggregate, recover any Damages in excess of $2,000,000.
ARTICLE 10
MISCELLANEOUS
10.1 Termination.
(a) This Agreement may be terminated at any time prior to
Closing:
(i) By the written agreement of Parent and the Company;
(ii) By Parent or the Company if the Closing shall not
have occurred on or before September 30, 2000, other than due to a breach of
this Agreement by the party seeking to terminate;
(iii) By Parent if there is a material breach of any
representation or warranty set forth in Article 3 or any covenant or agreement
to be complied with or performed by the Company or any Stockholder pursuant to
the terms of this Agreement and such breach persists for fourteen (14) days or
more after notice is given, so long as any such breach is not caused by the
action or inaction of Parent or Sub;
(iv) By the Company if there is a material breach of any
representation or warranty set forth in Article 4 hereof or of any covenant or
agreement to be complied with or performed by Parent or Sub pursuant to the
terms of this Agreement and such breach persists for fourteen (14) days or more
after notice is given, so long as any such breach is not caused by the action or
inaction of the Company or any of the Stockholders; or
(b) In the event of termination of this Agreement:
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(i) The provisions of the Non-Disclosure Agreement shall
continue in full force and effect; and
(ii) No party hereto shall have any liability to any
other party to this Agreement, except for any willful breach of, or knowing
misrepresentation made in, this Agreement occurring prior to the formal
termination of this Agreement.
10.2 Assignment. Neither this Agreement nor any of the rights or
obligations hereunder may be assigned by the Company without the prior written
consent of Parent, or by Parent or Sub without the prior written consent of the
Company.
10.3 Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to the
other shall be in writing and delivered in person or by courier, telegraphed,
telexed, sent by facsimile transmission, sent via overnight delivery service or
mailed by registered or certified mail (such notice to be effective upon
receipt), as follows:
If prior to the Closing, to the Company:
SoftProse, Inc.
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx Xxxxxxx
President
Fax: 000-000-0000
With a copy to:
Dickinson, Mackaman, Tyler & Xxxxx, P.C.
1600 Hub Tower, 000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: Xxxxx Xxxx
Fax: 000-000-0000
If to the Stockholder Agent:
Xxxxx Xxxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxx, Xxxxxxxxxx 00000-0000
Fax: 000-000-0000
With a copy to:
Dickinson, Mackaman, Tyler & Xxxxx, P.C.
1600 Hub Tower, 000 Xxxxxx Xxxxxx
Xxx Xxxxxx, Xxxx 00000
Attention: Xxxxx Xxxx
Fax: 000-000-0000
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If to Parent or Sub or, if after the Closing, to the Surviving
Corporation:
Next Level Communications, Inc.
0000 Xxxxx Xxxx Xxxxx
Xxxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Fax: 000-000-0000
With a copy to:
Xxxxxx & Xxxxxxx
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Fax: (000) 000-0000
or to such other place and with such other copies as any party may designate as
to itself by written notice to the others.
10.4 Representation By Counsel. Each party hereto represents
and agrees with each other that it has been represented by or had the
opportunity to be represented by, independent counsel of its own choosing, and
that it has had the full right and opportunity to consult with its respective
attorney(s), that to the extent, if any, that it desired, it availed itself of
this right and opportunity, that it or its authorized officers (as the case may
be) have carefully read and fully understand this Agreement in its entirety and
have had it fully explained to them by such party's respective counsel, that
each is fully aware of the contents thereof and its meaning, intent and legal
effect, and that it or its authorized officer (as the case may be) is competent
to execute this Agreement and has executed this Agreement free from coercion,
duress or undue influence.
10.5 Entire Agreement; Amendments and Waivers. This Agreement,
together with all exhibits and schedules hereto, and the Non-Disclosure
Agreement, constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersede all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. No
supplement, modification or waiver of this Agreement shall be binding unless
executed in writing by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
10.6 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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10.7 Invalidity. In the event that any one or more of the
provisions contained in this Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement or any other such instrument.
10.8 Expenses. Except as provided in the next succeeding
sentence or elsewhere in the Agreement, Parent will be liable for its and Sub's
expenses, and the Stockholders will be liable for the Company's and the
Stockholder's expenses, incurred in connection with the negotiations,
preparation, execution and performance of this Agreement. Notwithstanding the
foregoing, in the event that the Merger is not consummated for any reason other
than a termination by the Company pursuant to Section 10.1(a)(ii) or by the
Parent pursuant to Section 10.1(a)(iii), Parent will reimburse the Company for
its reasonable legal and accounting fees incurred in connection with the
negotiation and documentation of this Agreement up to a maximum amount of
$50,000. In connection with such reimbursement, the Company shall provide Parent
with a reasonably detailed description of such expenses.
10.9 401(k) Plan Contribution. The Surviving Corporation shall
pay SoftProse's normal 401(k) Plan contribution for the period immediately
preceding the Closing Date in an amount not to exceed $35,275, if such
contribution is unpaid on the Closing Date.
10.10 Prior Service. Parent and the Surviving Corporation
shall recognize each Stockholder's service with the Company as of the Closing
Date as service with the Surviving Corporation for all purposes, including
eligibility, vesting and benefit levels, as applicable in Parent's employee
welfare benefit plans or policies, but only to the extent that such service was
recognized by the Company under the applicable Benefit Arrangement.
10.11 Publicity. Except as required by law or on advice of
counsel, neither party shall issue any press release or make any public
statement regarding the transactions contemplated hereby without the prior
approval of the other parties, and the parties hereto shall issue a mutually
acceptable press release as soon as practicable after the date hereof and after
the Closing Date. Notwithstanding the foregoing, Parent shall be permitted to
make any public statement without obtaining the consent of any other party
hereto if (i) the disclosure is required by law or the requirements of the
Nasdaq Stock Exchange and (ii) Parent has first used its reasonable efforts to
consult with (but not to obtain the consent of) the other parties about the form
and substance of such disclosure.
10.12 No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Agreement, express or implied, is intended to or shall confer upon any
other person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, including, without limitation, by way of subrogation,
except as specifically set forth in Article 9 hereof.
10.13 Attorney Fees. If any party to this Agreement brings an
action to enforce its rights under this Agreement in accordance with the
provisions hereof, the prevailing party shall be entitled to recover its actual
out-of-pocket costs and expenses, including without limitation
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reasonable attorneys' fees reasonably incurred in connection with such action,
including any appeal of such action.
10.14 Governing Law. This Agreement and the transactions
contemplated hereby shall be construed in accordance with, and governed by, the
laws of the State of Delaware; provided, however, that matters of Iowa corporate
law shall be governed by the IBCA.
10.15 Consent to Jurisdiction. Each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated
hereby, (ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iii)
agrees that it will not bring any action relating to this Agreement in any court
other than a federal court sitting in the State of Delaware or a Delaware state
court.
10.16 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
WAIVES ITS RESPECTIVE RIGHT TO A JURY TRIAL OF ANY PERMITTED CLAIM OR CAUSE OF
ACTION ARISING OUT OF THIS AGREEMENT, ANY OF THE TRANSACTIONS CONTEMPLATED
HEREBY, OR ANY DEALINGS BETWEEN ANY OF THE PARTIES HERETO RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY.
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL
DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF
THIS AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING,
WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE
MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR OTHER MODIFICATIONS TO THIS AGREEMENT, ANY
OF THE TRANSACTIONS CONTEMPLATED HEREBY OR TO ANY OTHER DOCUMENT OR AGREEMENT
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY.
10.17 Service of Process. EACH OF THE PARTIES HERETO
IRREVOCABLY CONSENTS TO THE SERVICE OF ANY PROCESS, PLEADING, NOTICES OR OTHER
PAPERS BY THE MAILING OF COPIES THEREOF BY REGISTERED, CERTIFIED OR FIRST CLASS
MAIL, POSTAGE PREPAID, TO SUCH PARTY AT SUCH PARTY'S ADDRESS SET FORTH HEREIN,
OR BY ANY OTHER METHOD PROVIDED OR PERMITTED UNDER DELAWARE LAW.
ARTICLE 11
TAX MATTERS
11.1 Tax Matters.
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(a) Tax Periods Ending on or Before the Closing Date. The
Company shall at Parent's direction prepare or cause to be prepared and file or
cause to be filed all Tax Returns of the Company for Tax periods ending on or
prior to the Closing Date which are filed after the Closing Date. The Company
shall permit the Stockholder Agent, upon request, to review any such Tax Return
prior to filing. Each Stockholder agrees to include in his or her individual tax
return his or her respective share of the Company's income, gain, loss,
deduction or credit items for Tax periods ending on or before the Closing Date
as and to the extent required by law. The Stockholders shall pay any Tax imposed
on the Company under Section 1374 of the Code (or any comparable provision of
state or local Tax law).
(b) Tax Periods Beginning Before and Ending After the Closing
Date. The Company shall at Parent's direction prepare or cause to be prepared
and file or cause to be filed all Tax Returns of the Company for all Tax periods
which begin before the Closing Date and end after the Closing Date.
(c) Cooperation on Tax Matters. Parent and the Stockholders
shall cooperate fully, as and to the extent reasonably requested by the other
party, in connection with the filing of Tax Returns pursuant to this Section and
any audit, litigation or other proceeding with respect to Taxes. Such
cooperation shall include the retention and (upon the other party's request) the
provision of records and information which are reasonably relevant to any such
audit, litigation or other proceeding. Parent and the Stockholders agree (A) to
retain all books and records with respect to Tax matters pertinent to the
Company relating to any Tax period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by Parent,
any extensions thereof) of the respective Tax periods, and to abide by all
record retention agreements entered into with any Taxing authority, and (B) to
give the other parties reasonable written notice prior to transferring,
destroying or discarding any such books and records and, if the other parties so
request, Parent or a Stockholder, as the case may be, shall allow the other
parties to take possession of such books and records.
(d) Transfer Taxes. Parent shall pay and be responsible for
all transfer and recording taxes and charges, if any, arising from the
transactions contemplated by this Agreement. Parent and the Stockholders shall
timely cooperate in filing all Tax Returns as may be required to comply with the
provisions of such Tax laws. Parent and the Stockholders shall use their best
efforts to obtain any certificate or other document or take any other reasonable
action to reduce or eliminate any such taxes or charges that may be imposed.
* * * * * *
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IN WITNESS WHEREOF, each party hereto has executed this Agreement and
Plan of Merger or caused this Agreement and Plan of Merger to be duly executed
on its behalf by its officer thereunto duly authorized, as of the day and year
first above written.
NEXT LEVEL COMMUNICATIONS, INC.
a Delaware corporation
By: /s/ Xxxxx X. Zar
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Name: Xxxxx X. Zar
Title: Senior Vice President, General Counsel
and Secretary
SP ACQUISITION CORP.
an Iowa corporation
By: /s/ Xxxxx X. Zar
-------------------------------------------
Name: Xxxxx X. Zar
Title: President
SOFTPROSE, INC.
an Iowa corporation
By: /s/ Xxxxx Xxxxxxx
-------------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
STOCKHOLDERS:
XXXXX XXXXXXX
/s/ Xxxxx Xxxxxxx
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XXXXXXX XXXXXXX
/s/ Xxxxxxx Xxxxxxx
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XXXX XXXXXXX
/s/ Xxxx Xxxxxxx
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50
XXXXXXXXX XXXXX
/s/ Xxxxxxxxx Xxxxx
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XXXXXX XXXXXXX
/s/ Xxxxxx Xxxxxxx
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XXXXX XXXXXXXX
/s/ Xxxxx Xxxxxxxx
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XXXXXX XXXXX
/s/ Xxxxxx Xxxxx
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XXXX XXX
/s/ Xxxx Xxx
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XXXXXX XXXXXX
/s/ Xxxxxx Xxxxxx
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IN HIS CAPACITY AS THE
STOCKHOLDER AGENT:
/s/ Xxxxx Xxxxxxx
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XXXXX XXXXXXX
