Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
DIGITAL INSIGHT CORPORATION,
MUREAU ACQUISITIONS LLC
AND
MAGNET COMMUNICATIONS, INC.
Dated as of October 23, 2003
TABLE OF CONTENTS
ARTICLE I
THE MERGER
1.1 The Merger 1
1.2 Effective Time; Closing 1
1.3 Effect of the Merger 2
1.4 Certificate of Formation; Operating Agreement. 2
1.5 Managers 2
1.6 Effect on Capital Stock 2
1.7 Surrender of Certificates. 6
1.8 No Further Ownership Rights in Company Stock 7
1.9 Lost, Stolen or Destroyed Certificates 7
1.10 Dissenters' Rights 8
1.11 Tax Consequences 8
1.12 Taking of Necessary Action; Further Action 8
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
2.1 Corporate Organization 9
2.2 Capitalization of Company 9
2.3 No Subsidiaries and Equity Investments 10
2.4 Corporate Authority, Etc 10
2.5 No Violation 11
2.6 Consents and Approvals 11
2.7 Financial Statements; Absence of Undisclosed Liabilities 11
2.8 Absence of Certain Changes or Events 12
2.9 Tax Matters. 12
2.10 Title to Property 13
2.11 Compliance with Laws 13
2.12 Litigation 13
2.13 Contracts 14
2.14 Employee Plans; ERISA. 15
2.15 Intellectual Property. 17
2.16 Restrictions on Business Activities 18
2.17 Brokers and Finders 18
2.18 Environmental Matters 18
2.19 Accounts Receivable 19
2.20 Transactions with Affiliates. 19
2.21 Board and Stockholder Approval 19
2.22 Opinion of Financial Advisor 20
2.23 Information 20
2.24 Reorganization 20
2.25 Section 203 of the DGCL Not Applicable 20
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
3.1 Corporate Organization; Subsidiaries 20
3.2 Capitalization 21
3.3 Corporate Authority, Etc 21
3.4 No Violation 22
3.5 Consents and Approvals 22
3.6 SEC Filings; Financial Statements; Absence of Undisclosed
Liabilities. 22
3.7 Absence of Certain Changes or Events 23
3.8 Litigation 23
3.9 Brokers and Finders 23
3.10 Board Approval 23
3.11 Reorganization 24
3.12 Merger Sub Operations 24
3.13 Information 24
3.14 Financial Ability 24
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company 24
4.2 Conduct of Business by Parent 26
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Exempt Offering 27
5.2 Notices; Information Statement 27
5.3 Confidentiality; Access to Information. 27
5.4 Acquisition Proposal 28
5.5 Public Disclosure. 28
5.6 Reasonable Efforts; Notification. 29
5.7 Third Party Consents 30
5.8 Stock Options 30
5.9 Warrants; Existing Agreements 30
5.10 Employees 30
5.11 Executive Payments 31
5.12 Excess Cash Payment 31
5.13 Closing Financial Certificate 31
5.14 Affiliates 32
5.15 Indemnification 32
5.16 Tax Opinions 32
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger 33
6.2 Additional Conditions to Obligations of Company 33
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub 34
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination 35
7.2 Notice of Termination; Effect of Termination 36
7.3 Fees and Expenses 36
7.4 Amendment 36
7.5 Extension; Waiver 36
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Stockholders 37
8.2 Sole Remedy; Limitation on Damages. 37
8.3 Notice and Payment of Claims. 38
8.4 Procedure for Indemnification of Third Party Claims. 38
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival 40
9.2 Notices 40
9.3 Interpretation; Definitions. 41
9.4 Counterparts 42
9.5 Entire Agreement; Third Party Beneficiaries 42
9.6 Severability 42
9.7 Other Remedies; Specific Performance 42
9.8 Governing Law 42
9.9 Waiver of Trial by Jury 43
9.10 Rules of Construction 43
9.11 Assignment 43
INDEX OF EXHIBITS
Exhibit A List of Defined Terms
Exhibit B Form of Certificate of Merger
Exhibit C Form of Escrow Agreement
Exhibit D Form of Stockholder Agreement
Exhibit E Form of Registration Rights Agreement
Exhibit F Form of Termination/General Release/Consulting
Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of October
23, 2003, among Digital Insight Corporation, a Delaware corporation ("Parent"),
Mureau Acquisitions LLC, a Delaware limited liability company and a wholly owned
subsidiary of Parent ("Merger Sub"), and Magnet Communications, Inc., a Delaware
corporation ("Company"). A list of defined terms used herein appears in Exhibit
A.
RECITALS
A. Upon the terms and subject to the conditions of this Agreement and
in accordance with the Delaware General Corporation Law ("DGCL") and the
Delaware Limited Liability Company Act ("DLLCA"), Parent and Company intend to
enter into a business combination transaction.
B. The board of directors of Company has (i) determined that the Merger
(as defined in Section 1.1) is fair to, and in the best interests of, Company
and its stockholders and, (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement, and the stockholders of Company
have adopted and approved this Agreement and approved the Merger by written
consent.
C. The board of directors of Parent has (i) determined that the Merger
is consistent with, and in furtherance of, the long-term business strategy of
Parent and is fair to, and in the best interests of, Parent and its
stockholders, and (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL and DLLCA, Company shall be merged with and
into Merger Sub (the "Merger"), the separate corporate existence of Company
shall cease and Merger Sub shall continue as the surviving company. Merger Sub
as the surviving company after the Merger is hereinafter sometimes referred to
as the "Surviving Company."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger in the form
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attached hereto as Exhibit B with the Secretary of State of the State of
Delaware in accordance with the relevant provisions of the DGCL and DLLCA (the
"Certificate of Merger") (the time of such filing being the "Effective Time") as
soon as practicable following the Closing (as defined below). The closing of the
Merger (the "Closing") shall take place at the offices of Xxxxxxxx & Xxxxxxxx
LLP, 0000 Xxxxxxx Xxxx Xxxx, Xxx Xxxxxxx, Xxxxxxxxxx, at a time and date to be
specified by the parties, which shall be no later than the second business day
after the satisfaction or waiver of the conditions set forth in Article VI, or
at such other time, date and location as the parties hereto agree in writing
(the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the DGCL and DLLCA.
1.4 Certificate of Formation; Operating Agreement.
(a) The certificate of formation of Merger Sub as in effect
immediately prior to the Effective Time shall be the certificate of formation of
the Surviving Company, until duly amended as provided therein or by applicable
law (the "Certificate of Formation").
(b) The Operating Agreement of Merger Sub as in effect immediately
prior to the Effective Time shall be the operating agreement of the Surviving
Company, until duly amended as provided therein or by applicable law (the
"Operating Agreement").
1.5 Managers. The manager or managers of Merger Sub at the Effective
Time shall, from and after the Effective Time, be the manager or managers of the
Surviving Company until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Certificate of Formation and the Operating Agreement.
1.6 Effect on Capital Stock. Subject to the terms and conditions of
this Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
(a) Conversion of Company Stock. Subject to the terms of this
Agreement, upon surrender of the certificates representing shares of Company
Stock in the manner provided in Section 1.7 or, in the case of a lost, stolen or
destroyed certificate, upon delivery of an affidavit (and indemnity, if
required) pursuant to Section 1.9, all shares of Company Stock issued and
outstanding immediately prior to the Effective Time, other than Excluded Shares
and Dissenting Shares, will be canceled and extinguished and automatically
converted into the right to receive in the aggregate (A) $33,500,000 in cash,
less the Dissenters Set Aside (as defined below) (the "Cash Consideration"), and
(B) that number of shares of Common Stock, par value $0.001 per share, of Parent
(the "Parent Common Stock") described below (the "Stock Consideration" and,
together with the Cash Consideration, the "Merger Consideration"):
(i) if the Parent Common Stock Market Price (as defined below)
is at least $18.93 (the "Low-End Collar Price") but not more than $27.33 (the
"High-End Collar Price"), the Stock Consideration will equal 1,448,335 shares of
Parent Common Stock (the "Base Stock Consideration");
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(ii) if the Parent Common Stock Market Price is less than the
Low-End Collar Price, the Stock Consideration will equal (A) the Base Stock
Consideration plus (B) a number of shares of Parent Common Stock, not to exceed
200,000 shares, equal to the product (rounded to the nearest whole share) of (1)
86,956.522 (the "Adjustment Rate") and (2) the amount by which the Low-End
Collar Price exceeds the Parent Common Stock Market Price;
(iii) if the Parent Common Stock Market Price is more than the
High-End Collar Price, the Stock Consideration will equal (A) the Base Stock
Consideration minus (B) a number of shares of Parent Common Stock, not to exceed
200,000 shares, equal to the product (rounded to the nearest whole share) of (1)
the Adjustment Rate and (2) the amount by which the Parent Common Stock Market
Price exceeds the High-End Collar Price; and
(iv) if a Triggering Event has occurred, the Stock
Consideration will equal the Base Stock Consideration plus 200,000 shares of
Parent Common Stock.
The term "Parent Common Stock Market Price" means the average (rounded
to the nearest cent) of the closing price per share of Parent Common Stock as
quoted on the Nasdaq National Market over the 20 calendar day period ending
three business days prior to the Tentative Closing Date. The term "Dissenters
Set Aside" means an amount of cash equal to the amount the Dissenting
Stockholders would have received at the Closing if they had elected 100% Cash
Consideration.
(b) Allocation of Merger Consideration. The Merger Consideration
will be allocated and paid to the stockholders of Company in accordance with the
liquidation provisions of the Company's Fifth Amended and Restated Certificate
of Incorporation (the "Company Charter") as follows:
(i) first, to each holder of Company's Series D Preferred
Stock, par value $0.001 per share (the "Series D Preferred Stock" and, together
with the Junior Preferred Stock, the "Preferred Stock"), such portion of the
Merger Consideration equal to the sum of the aggregate Liquidation Value (as
defined in the Company Charter) of such shares plus all accrued and unpaid
dividends thereon;
(ii) second, to the holders of Company's Series A Preferred
Stock, par value $0.001 per share (the "Series A Preferred Stock"), Series B-1
Preferred Stock, par value $0.001 per share (the "Series B-1 Preferred Stock"),
Series C Preferred Stock, par value $0.001 per share (the "Series C Preferred
Stock"), and Series C-1 Preferred Stock, par value $0.001 per share (the "Series
C-1 Preferred Stock" and, together with the Series A Preferred Stock, the Series
B-1 Preferred Stock and the Series C Preferred Stock, the "Junior Preferred
Stock"), on a pari passu basis, such portion of the Merger Consideration, if
any, equal to the sum of the aggregate Liquidation Value (as defined in the
Company Charter) of such shares plus all accrued and unpaid dividends thereon;
(iii) third, to the holders of Company's Common Stock, par
value $0.001 per share (the "Company Common Stock" and, together with the Series
D Preferred Stock and Junior Preferred Stock, the "Company Stock"), together
with all holders of Series A Preferred Stock, Series B-1 Preferred Stock and
Series D Preferred Stock on an as-converted
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basis, such portion of the Merger Consideration, if any, such that the Series A
Preferred Stock and the Series B-1 Preferred Stock receive no more than an
amount equal to three times (including amounts paid pursuant to (ii) above) the
Liquidation Value (as defined in the Company Charter) of such shares of such
classes held by such holders; and
(iv) finally, to the holders of Company Common Stock, together
with all holders of Series D Preferred Stock on an as-converted basis, any
remaining portion of the Merger Consideration.
The amounts allocated as provided above shall take into account the
distribution of the Excess Cash pursuant to Section 5.12.
Subject to the provisions and limitations of this Section 1.6(b), the
allocation of Cash Consideration and Stock Consideration for each stockholder of
Company entitled to share in the Merger Consideration shall be determined by
such stockholders and Company prior to the Closing. Promptly following execution
of this Agreement, subject to the limitation set forth in the last sentence of
this paragraph, Company shall solicit from each holder of Preferred Stock an
election of the relative percentage of Cash Consideration and Stock
Consideration which such holder desires to receive in satisfaction of such
holder's liquidation preference. Company will accommodate stockholders' requests
for allocation of the Cash Consideration and Stock Consideration, subject to (A)
reasonable mechanisms for cutback and reallocation of the relative percentages
in order to fully distribute the Merger Consideration to the stockholders in
accordance with their interests and to assure that only Accredited Investors (as
defined below) will receive Stock Consideration and that stockholders of Company
who are not Accredited Investors will only receive Cash Consideration, (B) the
amounts withheld from the Merger Consideration and placed in the Escrow Account
pursuant to Section 1.6(d) and (C) the requirement that the Merger Consideration
withheld from each stockholder be comprised in the same proportion of Cash
Consideration and Stock Consideration. Company shall deliver to Parent, no later
than two business days prior to the Closing, a schedule listing the portion of
the Cash Consideration and Stock Consideration payable to each stockholder of
Company at the Effective Time. A schedule listing the percentage interest in the
Escrow Account of each stockholder of Company will be attached to the Escrow
Agreement as Schedule I thereto. To the extent that a Company stockholder does
not timely provide an election of the relative percentage of Cash Consideration
and Stock Consideration which such holder desires to receive, subject to the
limitation set forth in the last sentence of this paragraph, such holder will be
deemed to have requested an allocation of 50% Cash Consideration and 50% Stock
Consideration. For purposes of determining the number of shares of Parent Common
Stock issuable to each stockholder electing to receive Stock Consideration in
satisfaction of the stockholder's liquidation preference pursuant to the Company
Charter, the value of a share of Parent Common Stock shall be deemed to be the
Parent Common Stock Market Price. Notwithstanding the foregoing, only
stockholders of Company that are accredited investors (as defined in Rule 501(a)
under the Securities Act, "Accredited Investors") will be offered and be
entitled to elect and receive any Parent Common Stock.
(c) Adjustment to Prevent Dilution. The Stock Consideration shall
be adjusted to reflect fully the effect of any stock split, stock dividend
(including any dividend or distribution of stock convertible into Parent Common
Stock), reorganization, recapitalization or
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other similar change with respect to Parent Common Stock after the date hereof
and prior to the Effective Time.
(d) Holdback Amount; Escrow. At the Closing, Parent shall withhold
from the Merger Consideration (i) $3,350,000 in cash, less 10% of the Dissenters
Set Aside, and (ii) that number of shares of Parent Common Stock equal to 10% of
the Stock Consideration (together, the "Holdback Amount") for the purpose of
satisfying the indemnification obligations of Company and the stockholders of
Company pursuant to Article VIII and for paying any Excess Cash Shortfall
pursuant to Section 5.13. Parent shall establish and maintain an escrow account
(the "Escrow Account") comprised of the Holdback Amount and shall designate and
appoint The Bank of New York or such other third party escrow agent that is
mutually and reasonably acceptable to Parent and the Stockholders' Agent (as
defined in the Escrow Agreement) in connection therewith (the "Escrow Agent") to
serve in accordance with the Escrow Agreement attached as Exhibit C hereto (the
"Escrow Agreement") to be entered into among Parent, the Escrow Agent and the
Stockholders' Agent at Closing. In addition, if any person who otherwise would
be deemed a Dissenting Stockholder shall have failed to properly perfect or
shall have effectively withdrawn or lost the right to dissent with respect to
any shares of Company Stock, 10% of any Merger Consideration received by such
person shall be added to the Holdback Amount and deposited in the Escrow
Account. Schedule I to the Escrow Agreement shall be amended appropriately and
such person shall be required to execute the Stockholders Agreement. The
Holdback Amount, less the amount required to be paid to Parent pursuant to
Article VIII hereof and amounts in dispute, shall be paid by Escrow Agent on the
one-year anniversary of the Closing Date (or, if not a business day, the first
business day following such anniversary) (the "Escrow Termination Date") to the
holders of Company Stock in proportion to their pro rata share of the Merger
Consideration.
(e) Cancellation of Excluded Shares. Each share of Company Stock
held by Company or owned by Merger Sub, Parent or any direct or indirect wholly
owned subsidiary of Company or of Parent immediately prior to the Effective Time
(collectively, the "Excluded Shares") shall be canceled and extinguished without
any conversion thereof.
(f) Stock Options and Warrants. At the Effective Time, each option
to purchase Company Stock then outstanding under Company's incentive stock
option plan and stock issuance plan (the "Company Option Plans") shall be
cancelled in accordance with Section 5.8 and each outstanding Warrant shall be
cancelled in accordance with Section 5.9.
(g) Common Units of Merger Sub. Each Common Unit (as defined in the
Operating Agreement) of Merger Sub outstanding immediately prior to the
Effective Time shall remain outstanding and be one Common Unit of the Surviving
Company.
(h) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Company Stock who would otherwise be entitled to a fraction of a share
of Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock that otherwise would be received by such holder) shall, upon surrender of
such holder's Certificate(s) (as defined in Section 1.7(b)) receive from Parent
an amount of cash (rounded to the nearest whole cent), without interest, equal
to the product of (i) such fraction, multiplied by (ii) the Parent Common Stock
Market Price.
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(i) Adjustment Based on Net Assets. If the Net Assets (as defined
below) of Company is negative, the Cash Consideration shall be reduced by the
absolute value of such negative amount and the Escrow Agent shall pay such
amount to Parent on the day following the determination of such amount. "Net
Assets" means the total assets of Company as of the Tentative Closing Date (as
defined below) less (i) the Excess Cash (as defined in Section 5.12) and (ii)
the total liabilities of Company as of the Tentative Closing Date (including
liabilities subtracted from the definition of Excess Cash), as set forth on the
Closing Financial Certificate (as defined in Section 5.13). "Tentative Closing
Date" means the first business day on which all of the conditions set forth in
Article VI are fulfilled or waived in accordance with this Agreement (other than
those conditions that by their nature are to be satisfied at the Closing).
1.7 Surrender of Certificates.
(a) Paying and Exchange Agent. Parent shall act as the paying and
exchange agent in the Merger.
(b) Payment and Exchange Procedures. At or prior to the Effective
Time, Parent shall mail to each holder of record (as of the Effective Time) of a
certificate or certificates (the "Certificates"), which immediately prior to the
Effective Time represented outstanding shares of Company Stock whose shares are
to be converted into the right to cash and shares of Parent Common Stock
pursuant to Section 1.6(a), cash in lieu of any fractional shares pursuant to
Section 1.6(h) and any dividends or other distributions pursuant to Section
1.7(c), (i) a letter of transmittal in customary form (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to Parent and shall contain such
other provisions as Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for cash and shares
of Parent Common Stock pursuant to Section 1.6(a), cash in lieu of any
fractional shares pursuant to Section 1.6(h) and any dividends or other
distributions pursuant to Section 1.7(c). Upon surrender of the Certificates for
cancellation to Parent or to such other agent or agents as may be appointed by
Parent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holders of such
Certificates shall be entitled to receive in exchange therefor cash and shares
of Parent Common Stock pursuant to Section 1.6(a), payment in lieu of fractional
shares which such holders have the right to receive pursuant to Section 1.6(h)
and any dividends or distributions payable pursuant to Section 1.7(c), and the
Certificates so surrendered shall forthwith be canceled. No interest will be
paid or accrued on any amount payable upon due surrender of the Certificates.
Until so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.7(c) as to the
payment of dividends, to evidence only the right to cash and ownership of the
number of full shares of Parent Common Stock into which such shares of Company
Stock shall have been so converted and the right to receive an amount in cash in
lieu of the issuance of any fractional shares in accordance with Section 1.6(h)
and any dividends or distributions payable pursuant to Section 1.7(c).
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the
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holders of record of such Certificates shall surrender such Certificates.
Subject to applicable law, following surrender of any such Certificates, Parent
shall deliver to the record holders thereof, without interest, cash and
certificates representing whole shares of Parent Common Stock issued in exchange
therefor pursuant to Section 1.6(a), along with payment in lieu of fractional
shares pursuant to Section 1.6(h), and the amount of any such dividends or other
distributions with a record date after the Effective Time payable with respect
to such whole shares of Parent Common Stock.
(d) Transfers of Ownership. If certificates representing shares of
Parent Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Parent Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(e) No Liability. Notwithstanding anything to the contrary in this
Section 1.7, neither Parent, the Surviving Company nor any party hereto shall be
liable to a holder of shares of Parent Common Stock or Company Stock for any
amount properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
1.8 No Further Ownership Rights in Company Stock. All cash paid and
shares of Parent Common Stock issued in exchange for shares of Company Stock in
accordance with the terms hereof (together with any cash paid in respect thereof
pursuant to Sections 1.6(h) and 1.7(c)) 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 on the records of the
Surviving Company of shares of Company Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Company for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, Parent shall cause the
transfer agent for Parent Common Stock to issue in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof, cash and certificates representing the shares of Parent
Common Stock into which the shares of Company Stock represented by such
Certificates were converted pursuant to Section 1.6, cash for fractional shares,
if any, as may be required pursuant to Section 1.6(h) and any dividends or
distributions payable pursuant to Section 1.7(c); provided, however, that Parent
may, in its discretion and as a condition precedent to the issuance of such cash
and certificates representing shares of Parent Common Stock, cash and other
distributions, require the owner of such lost, stolen or destroyed Certificates
to deliver an indemnity agreement reasonably satisfactory in form and amount to
Company as indemnity against any claim that may be made against Parent or the
Surviving Company with respect to the Certificates alleged to have been lost,
stolen or destroyed.
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1.10 Dissenters' Rights. A holder of Company Stock exercising appraisal
rights pursuant to Section 262 of the DGCL (a "Dissenting Stockholder") shall be
entitled to receive only the payment provided by Section 262 of the DGCL with
respect to shares of Company Stock owned by such holder ("Dissenting Shares").
No Dissenting Stockholder shall be entitled to any portion of the Merger
Consideration pursuant to Section 1.6(a), cash in lieu of any fractional shares
pursuant to Section 1.6(h) or any dividends or other distributions pursuant to
Section 1.7(c) unless and until such holder shall have failed to perfect or
shall have effectively withdrawn or lost such holder's right to dissent from the
Merger under the DGCL. If any person who otherwise would be deemed a Dissenting
Stockholder shall have failed to properly perfect or shall have effectively
withdrawn or lost the right to dissent with respect to any shares of Company
Stock, such shares shall thereupon be treated as though such shares had been
converted into the Merger Consideration pursuant to Section 1.6(a) (with such
shares being deemed to have elected 100% Cash Consideration), and are entitled
to cash in lieu of any fractional shares pursuant to Section 1.6(h) and any
dividends or other distributions pursuant to Section 1.7(c), and 10% of such
Merger Consideration shall be deposited into the Escrow Account pursuant to
Section 1.6(d). Schedule I to the Escrow Agreement shall be amended
appropriately and such person shall be required to execute the Stockholders
Agreement. Company shall give Parent (i) prompt notice of any written demands
for appraisal, attempted withdrawals of such demands, and any other instruments
served pursuant to applicable law received by Company relating to stockholders'
rights of appraisal and (ii) the opportunity to advise Company in all
negotiations and proceedings with respect to demand for appraisal under the
DGCL. Company shall not, except with the prior written consent of Parent, which
shall not be unreasonably withheld, voluntarily make any payment with respect to
any demands for appraisals of Dissenting Shares, offer to settle or settle any
such demands or approve any withdrawal of any such demands.
1.11 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations. No party or entity related to a party shall take a
position on any tax return or reports or take any action inconsistent with this
Section 1.11, and each party shall use its commercially reasonable efforts to
validate such action or maintain such reporting in the context of an audit. Each
party shall give the other parties prompt notice of any challenges or
investigations undertaken by any taxing agency in connection with such action or
reporting and shall keep such other parties fully informed of all aspects of
such ongoing challenge or investigation. In the event that the closing price per
share of Parent Common Stock as quoted on the Nasdaq National Market on the
trading day before the Closing Date shall be less than $13.55 (a "Triggering
Event"), the parties shall restructure the Merger as a reverse triangular merger
of Merger Sub with and into Company.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Company with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the current officers and directors of
Company and Merger Sub will take all such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Except as otherwise disclosed in the Company disclosure schedule
attached hereto (the "Company Schedule"), Company hereby represents and warrants
to Parent and Merger Sub as follows:
2.1 Corporate Organization. Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Company has furnished to Parent complete and correct copies of the Company
Charter and its By-Laws, as amended to the date hereof (together, the "Company
Charter Documents"), which are in full force and effect. Company is not in
violation of any of the provisions of the Company Charter Documents. Company has
all requisite corporate power and authority to own, lease and operate its assets
and properties and to conduct its business as now conducted. Company is
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the properties owned or leased by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified would not have a Material Adverse
Effect on Company. As used in this Agreement, the phrase "Material Adverse
Effect on Company" means (i) as to matters which can reasonably be quantified in
economic terms, any effect which has resulted in or would reasonably be expected
to result in, with respect to Company, a material diminution or decrease in the
value of properties or assets, an increase in liabilities or obligations
(whether accrued, contingent or otherwise), an adverse change in the business or
financial condition, or any combination thereof involving, individually or in
the aggregate, with respect to the applicable representation or warranty, more
than $250,000, (ii) as to matters which cannot reasonably be quantified in
economic terms, a material adverse effect on the condition (financial or
otherwise), business, assets, liabilities or results of operations of Company,
or (iii) a material adverse effect on the ability of Company to consummate the
transactions contemplated by this Agreement; provided, however, that in no event
shall any of the following be deemed, in and of itself, to constitute a Material
Adverse Effect on Company: (i) a change that results from conditions generally
affecting the U.S. economy or the industry in which Company operates (including
laws and regulations applicable to such industry), (ii) a change that results
from the announcement or pendency of the transactions contemplated hereby or
(iii) a change that results from the taking of any action required by this
Agreement.
2.2 Capitalization of Company. The authorized capital stock of Company
consists of (i) 50,000,000 shares of Company Common Stock, of which (A)
3,256,112 shares are issued and outstanding, (B) 64,643 shares are reserved for
issuance upon exercise of outstanding Warrants, (C) 20,281,981 shares are
reserved for issuance upon conversion of outstanding shares of Series A
Preferred Stock, Series B-1 Preferred Stock, Series C Preferred Stock, Series
C-1 Preferred Stock and Series D Preferred Stock and (D) 5,111,577 shares are
reserved for issuance under Company Stock Options; (ii) 2,480,000 shares of
Series A Preferred Stock, of which 2,381,984 shares are issued and outstanding;
(iii) 2,800,000 shares of Series B Preferred Stock, par value $0.001 per share
(the "Series B Preferred Stock"), of which no shares are issued and outstanding;
(iv) 3,200,000 shares of Series B-1 Preferred Stock, of which 3,169,375 shares
are issued and outstanding; (v) 3,800,000 shares of Series C Preferred Stock, of
which 1,120,667 shares are issued and outstanding; (vi) 13,250,000 shares of
Series C-1 Preferred Stock, of which 6,409,983 shares are issued and
outstanding; and (vii) 7,200,000 shares of Series D Preferred Stock, of
9
which 7,199,972 shares are issued and outstanding. All of the outstanding shares
of Company Stock have been duly authorized and validly issued and are fully paid
and non-assessable. Company has made available to Parent accurate and complete
copies of all Warrant agreements and Company Option Plans pursuant to which
Company has granted such Company Stock Options that are currently outstanding
and the form of all stock option agreements evidencing such Company Stock
Options. All shares of Company Stock subject to issuance as aforesaid, upon
issuance on the terms and conditions specified in the instrument pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and
nonassessable and will be issued in all material respects in compliance with
applicable securities laws and other requirements of law. All outstanding shares
of Company Stock and all outstanding options granted under any of Company's
stock option or incentive plans have been issued and granted in all material
respects in compliance with applicable securities law and other requirements of
law. Except as set forth above and in Section 2.2 of the Company Schedule, there
are no preemptive or other outstanding rights, options, warrants, conversion
rights, stock appreciation rights, redemption rights, repurchase rights,
agreements, arrangements, calls, commitments or rights of any kind that obligate
Company to issue or sell any shares of capital stock or other securities of
Company or any securities or obligations convertible or exchangeable into or
exercisable for, or giving any person a right to subscribe for or acquire, any
securities of Company, and no securities or obligations evidencing such rights
are authorized, issued or outstanding. No stockholder, option holder or warrant
holder has any claim against Company as a result of any prior issuances of
Company Stock, options or warrants or, upon the Closing, the transactions
contemplated by this Agreement, other than the right to receive the Merger
Consideration or demand appraisal rights under the DGCL, each as provided for
herein. The Company reasonably believes that all holders of the Preferred Stock
and any other stockholders of Company that will be offered or will receive
Parent Common Stock in the Merger are Accredited Investors. The Merger
Consideration and Excess Cash to be paid or distributed to Company's
stockholders, and the amounts payable pursuant to the Bonus Plan, will be
determined and made accurately by Company and in accordance with the Company
Charter Documents, the Bonus Plan and this Agreement.
2.3 No Subsidiaries and Equity Investments. Company has no subsidiaries
nor does Company have, or have the right to acquire, any equity interest or
investment in any other entity.
2.4 Corporate Authority, Etc. Company has all necessary corporate power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by Company, the performance of Company's
obligations hereunder and the consummation by Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Company, and no other corporate proceedings on the part of
Company are necessary to authorize such execution, delivery, performance and
consummation other than the filing of the Certificate of Merger by the Surviving
Company pursuant to the DGCL and the DLLCA. This Agreement has been adopted and
approved, and the Merger has been approved, by Company's stockholders by written
consent in accordance with the DGCL and the Company Charter Documents. This
Agreement has been duly executed and delivered by Company and, assuming the due
authorization, execution and delivery of this Agreement by Parent and Merger
Sub, constitutes a valid and legally binding obligation of Company, enforceable
against Company in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, receivership, moratorium or other laws relating to
or
10
affecting the rights and remedies of creditors generally and to general
equitable principles (regardless of whether at law or in equity).
2.5 No Violation. Subject to receipt of the consents, waivers,
authorizations and approvals or the making of the declarations or filings
referred to in Section 2.6, the execution, delivery and performance by Company
of this Agreement, and to the knowledge of Company the execution by any
stockholder or employee of Company of the Escrow Agreement, the Registration
Rights Agreement, the Stockholder Agreements and the Employment Agreements
(collectively, the "Transaction Agreements"), will not (a) violate any provision
of any statute, rule or regulation applicable to Company or any order, judgment
or decree of any court, governmental or regulatory authority, or arbitrator to
which Company is subject, (b) violate the Company Charter Documents, (c)
violate, conflict with or constitute (or, with due notice or lapse of time or
both, result in) a default under, or result in the change or acceleration of any
rights or obligations under or entitle any party to change or accelerate
(whether after the giving of notice or lapse of time or both) any right or
obligation under, any provision of any contract, lease, loan agreement,
mortgage, security agreement, trust indenture, license or other agreement,
contract, commitment or instrument to which Company is a party or by which it is
bound, or (d) result in the creation or imposition of any lien, charge or
encumbrance upon or security interest in any of the properties or assets of
Company, that in the case of clauses (a), (c) or (d) would have a Material
Adverse Effect on Company or interfere with the consummation of the Merger.
2.6 Consents and Approvals. Except as set forth in Section 2.14 of the
Company Schedule and except for the applicable requirements of federal and state
securities laws and the pre-merger notification requirements of the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the filing of the Certificate of Merger as required by the DGCL and
the DLLCA, no consent, waiver, authorization or approval of any court,
administrative agency, commission, governmental or regulatory authority (a
"Governmental Entity"), or of any other person or entity, and no declaration to
or filing with any such Governmental Entity, is required in connection with the
execution and delivery of this Agreement by Company or the performance by
Company of its obligations hereunder, except for those as to which the failure
to make, file, give or obtain would not have a Material Adverse Effect on
Company or interfere with the consummation of the Merger.
2.7 Financial Statements; Absence of Undisclosed Liabilities. Section
2.7 of the Company Schedule sets forth the audited balance sheets of Company as
of December 31, 2002, 2001 and 2000, together with the related statements of
operations, stockholders' equity (deficit) and cash flows for each such fiscal
year and notes thereto (the "Financial Statements"). The Financial Statements
are complete in all material respects, and fairly present the financial position
and results of operations of Company as of December 31, 2002, 2001 and 2000 and
for the periods then ended in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved, and
comply as to form in all material respects with applicable accounting
requirements except as may be set forth in the notes thereto. Except (a) as
reflected, reserved against or otherwise disclosed in the Financial Statements,
(b) for liabilities incurred since December 31, 2002 in the ordinary course of
business, and (c) for liabilities disclosed in Section 2.7 of the Company
Schedule, Company has no indebtedness or liability that would, individually or
in the aggregate, exceed $250,000.
11
2.8 Absence of Certain Changes or Events. Except as set forth in Section
2.8 of the Company Schedule, since June 30, 2003, Company has not taken any
action of a type referred to in Section 4.1 of this Agreement that would have
required the consent of Parent if such action were to have been taken during the
period between the date hereof and the Closing Date, and there has been no
Material Adverse Effect on Company.
2.9 Tax Matters.
(a) For purposes of this Agreement, "Tax" or "Taxes" shall include
any and all federal, state, county, local, foreign and other taxes, assessments
and other governmental charges, including, without limitation, income, gross
receipts, capital stock, franchise, profits, employee and payroll related,
withholding, foreign withholding, social security, unemployment, disability,
real property, personal property, stamp, excise, occupation, sales, use,
transfer, value added, alternative minimum or estimated taxes, including any
interest, penalties or additions to tax in respect of the foregoing.
(b) (i) Except as set forth in Section 2.9(b)(i) of the Company
Schedule, all material Tax declarations, reports and returns required to be
filed with respect to Company have been duly and timely filed (taking into
account any valid extensions of time); (ii) such Tax declarations, reports and
returns are complete and correct in all material respects; (iii) all Taxes shown
on such declarations, reports or returns and on assessments received with
respect thereto have been paid in full; and (iv) there are no material
unresolved claims for Taxes with respect to which Company is or may be liable
and for which Company has received written notice from a Governmental Entity
relating to such claims, except as may have been provided for in a reserve on
the Financial Statements.
(c) No deficiencies for any Taxes for which Company is or may be
liable have been asserted or assessed in writing to Company, and to the
knowledge of Company, no deficiencies otherwise have been proposed to Company
(and are currently pending).
(d) No waivers of the time to assess any Taxes for which Company is
or may be liable have been given or requested by Company.
(e) To Company's knowledge, it is not a party to any pending action
or proceeding before any court or any other governmental or regulatory authority
for the assessment or collection of any Taxes.
(f) To Company's knowledge, there are no liens with respect to Taxes
(except for liens with respect to property taxes not yet due) upon any of the
properties or assets of Company.
(g) Company as of the Effective Time will have withheld with respect
to its employees all federal and state income Taxes, Taxes pursuant to the
Federal Insurance Contribution Act, Taxes pursuant to the Federal Unemployment
Tax Act and other Taxes required to be withheld.
(h) Except as set forth on Section 2.9(h) of the Company Schedule,
there is no contract, agreement, plan or arrangement to which Company is a party
as of the date of this
12
Agreement, including but not limited to the provisions of this Agreement,
covering any employee or former employee of Company that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code. There is no contract, agreement, plan or arrangement to which Company
is a party or by which it is bound to compensate any individual for excise taxes
paid pursuant to Section 4999 of the Code.
(i) Company has not filed any consent agreement under Section 341(f)
of the Code or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the
Code) owned by Company.
(j) Company is not party to nor has any obligation under any
tax-sharing, tax indemnity or tax allocation agreement or arrangement.
(k) Company has not distributed the stock of any corporation in a
transaction satisfying the requirements of Section 355 of the Code. No Company
Stock has been distributed in a transaction satisfying the requirements of
Section 355 of the Code.
2.10 Title to Property. Company does not own any real property. Except
as set forth in Section 2.10 of the Company Schedule, Company has good title to
or any required right to use all of its material properties and assets, free and
clear of all liens, charges and encumbrances except liens reflected in the
Financial Statements, or which have arisen in the ordinary course of business
since the date of the Financial Statements, liens for taxes not yet due and
payable and such liens or other imperfections of title which would not,
individually or in the aggregate, have a Material Adverse Effect on Company. All
leases pursuant to which Company leases from others material real or personal
property are in full force and effect, and Company is not in default under any
of such leases nor, to Company's knowledge, is there any event which, with
notice or lapse of time, or both, would constitute a default by Company under
any of such leases except for any such default as would not have a Material
Adverse Effect on Company.
2.11 Compliance with Laws. The business and operations of Company are in
compliance with all laws, regulations, rules, judgments, orders and decrees
applicable thereto, except where the failure so to comply would not have a
Material Adverse Effect on Company.
2.12 Litigation. Except as set forth in Section 2.12 of the Company
Schedule, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of Company, threatened before any court, arbitrator or
Governmental Entity or any claims made or threatened against Company which would
reasonably be expected to interfere with the consummation of the Merger, to
affect the allocation of the Merger Consideration among the stockholders of
Company (other than any possible exercise of appraisal rights under the DGCL) or
to have a Material Adverse Effect on Company. Neither Company nor any of its
assets or properties is subject to any order, judgment or decree of any court,
governmental or regulatory authority or arbitrator which would reasonably be
expected to interfere with the consummation of the Merger, to affect the
allocation of the Merger Consideration among the stockholders of Company (other
than any possible exercise of appraisal rights under the DGCL) or to have a
Material Adverse Effect on Company.
13
2.13 Contracts. Except as set forth in Section 2.13 of the Company
Schedule Company is not a party to or bound by: (a) any employment or consulting
agreement, contract or commitment with any officer, director or employee, other
than those that are terminable by Company on no more than 30 days' notice
without liability or financial obligation to Company;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification entered into in connection with the sale or license
of software products in the ordinary course of business the form of which has
been provided, with all material variations, to Parent prior to the date hereof;
(d) any agreement, contract or commitment relating to the
disposition or acquisition by Company after the date of this Agreement of a
material amount of assets not in the ordinary course of business or pursuant to
which Company has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise;
(e) any mortgages, indentures, guarantees, loans or credit
agreements, security agreements or other agreements or instruments relating to
the borrowing of money or extension of credit;
(f) any settlement agreement entered into prior to the date of this
Agreement;
(g) any contracts or agreements that limit or restrict Company, or
to Company's knowledge, any of its officers or key employees, from engaging in
any business and any contracts or agreements that limit or restrict anyone other
than Company's employees or consultants from competing with Company;
(h) any contract, agreement or commitment requiring Company to
register the resale of its capital stock or securities under federal or state
securities laws;
(i) any powers of attorney or comparable delegations of authority
granted by Company; or
(j) any other agreement, contract or commitment that has a value of
$250,000 or more individually.
Neither Company, nor to Company's knowledge any other party to a Company
Contract (as defined below), is in breach, violation or default under, and
Company has not received written notice that it has breached, violated or
defaulted under, any of the material terms or conditions of any of the
agreements, contracts or commitments to which Company is a party or by which it
is bound that are required to be disclosed in the Company Schedule (any such
14
agreement, contract or commitment, a "Company Contract") in such a manner as
would permit any other party to cancel or terminate any such Company Contract,
or would permit any other party to seek material damages or other remedies (for
any or all of such breaches, violations or defaults, in the aggregate).
2.14 Employee Plans; ERISA.
(a) Except as set forth in Section 2.14 of the Company Schedule,
Company is not a party to any written employment agreement.
(b) Company is not a party to any collective bargaining agreement.
(c) Set forth in Section 2.14 of the Company Schedule is a list of
(i) all employee benefit plans (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), and (ii) all
profit sharing, stock bonus, pension, 401(k), employee stock ownership plan
("ESOP"), savings, medical, dental, disability, life or accident insurance,
bonus, incentive, stock option, deferred compensation and other similar
compensation or employee benefit plans, funds, programs or arrangements, which
are maintained for the benefit of, or relate to any or all current or former
employees or directors of Company (the plans referred to in clauses (i) and (ii)
being collectively referred to as the "Plans"). A complete and correct copy, as
of the date hereof, of each Plan which is set forth in writing has been
furnished to Parent.
(d) None of the Plans is a "multiemployer plan" within the meaning
of Section 4001(3) of ERISA (a "Multiemployer Plan"). ------------------
(e) Each of the Plans is in substantial compliance with the
requirements of all applicable statutes, orders and governmental rules and
regulations currently in effect, including, but not limited to, the Code and
ERISA.
(f) There are no audits, inquiries or proceedings pending or, to the
knowledge of Company, threatened by the Internal Revenue Service (the "IRS") or
Department of Labor (the "DOL") with respect to any Plans. All contributions,
reserves or premium payments required to be made or accrued as of the date
hereof to the Plans have been timely made or accrued. Any Plan intended to be
qualified under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code either has been issued a favorable
determination letter from the Internal Revenue Service covering all tax law
changes prior to the Economic Growth and Tax Relief Reconciliation Act of 2001
or still has a remaining period of time under applicable Treasury Regulations or
IRS pronouncements in which to apply for such a letter and to make any amendment
necessary to obtain such a favorable determination letter. Company does not have
any commitment (other than to the extent required to comply with the provisions
of this Agreement) to establish any new Plan or to modify any Plan (except to
the extent required by law or to conform any such Plan to the requirements of
any applicable law). Each Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms.
(g) Neither Company nor any entity which is considered one employer
with Company under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate") has
15
at any time ever maintained, established, sponsored, participated in, or
contributed to any plan subject to Title IV of ERISA or Section 412 of the Code
and at no time has Company or any ERISA Affiliate contributed to or been
obligated to contribute to any Multiemployer Plan, or to any plan described in
Section 413(c) of the Code. Neither Company nor any officer or director of
Company or any of its subsidiaries is subject to any material liability or
penalty under Sections 4975 through 4980B of the Code or Title I of ERISA. No
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, not otherwise exempt under Section 408 of ERISA,
has occurred with respect to any Plan.
(h) As of the date hereof, there is no material pending or, to the
knowledge of Company, threatened, litigation relating to the Plans. Except as
set forth in Section 2.14 of the Company Schedule, none of the Plans promises or
provides medical or other welfare benefits to any former employee of Company
except as required by Sections 6.1 through 6.7 of ERISA or other applicable law,
and Company has not represented, promised or contracted (whether in oral or
written form) to provide such retiree benefits to any employee, former employee,
director, consultant or other person, except to the extent required by statute.
(i) Company is not bound by or subject to (and none of its
respective assets or properties is bound by or subject to) any arrangement with
any labor union. No employee of Company is represented by any labor union or
covered by any collective bargaining agreement and, to the knowledge of Company,
no campaign to establish such representation is in progress. There is no pending
or, to the knowledge of Company, threatened labor dispute involving Company and
any group of its employees nor has Company experienced any labor interruptions
over the past three years. Company is in substantial compliance with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours.
(j) Except as provided in Company's Bonus Plan (as defined below)
and other stock option or incentive plans or employment arrangements set forth
in Sections 2.14 and 5.11 of the Company Schedule and as otherwise specifically
contemplated herein, neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute, bonus
or otherwise) becoming due to any stockholder, director or employee of Company
under any Plan or otherwise, (ii) increase any benefits otherwise payable under
any Plan, or (iii) result in the acceleration of the time of payment, funding or
vesting of any such benefits under any Plan. Company's Second Amended and
Restated Executive Change of Control Bonus Plan (the "Bonus Plan") was duly
adopted on October 13, 2003 by Company's board of directors and duly approved on
October 14, 2003 by the holders of not less than 75% of the Company Stock on an
as-converted basis qualified to approve such Bonus Plan, in each case in
accordance with the Company Charter Documents and applicable law, and has not
subsequently been amended, modified or restated. No stockholder, employee or
creditor of Company has made or is entitled to or will at any time be entitled
to make any claims against Company as a result of Company's adoption of the
Bonus Plan or with respect to any payment thereunder.
16
2.15 Intellectual Property.
(a) Except as set forth in Section 2.15 of the Company Schedule,
Company owns or is licensed or otherwise possesses legally enforceable rights to
use, all patents, inventions, trademarks, trade names, service marks, domain
names, copyrights, and any applications and registrations therefor, maskworks,
net lists, schematics, technology, know-how, trade secrets, algorithms,
processes, computer software programs or applications and all other intellectual
property and proprietary rights (collectively, "Intellectual Property") that are
owned by Company or used in the business of Company as currently conducted (the
"Business Intellectual Property") other than such Intellectual Property the loss
of use of which would not have a Material Adverse Effect on Company, and all
such rights shall survive unchanged the consummation of the transactions
contemplated by this Agreement.
(b) Section 2.15 of the Company Schedule lists (i) all U.S. and
foreign Intellectual Property which is owned by Company and material to its
business as currently conducted and/or the subject of an application,
registration or issued patent, including the jurisdictions in which each such
Company Intellectual Property has been issued or registered or in which any
application for such issuance and registration has been filed (the "Company
Intellectual Property"), and (ii) all material licenses and other agreements as
to which Company is a party, a beneficiary or otherwise bound and pursuant to
which any person is authorized to use any Company Intellectual Property or
Company is authorized to use any third party Intellectual Property ("Third Party
Intellectual Property Rights") which is incorporated in, are, or form a part of
any Company product of which is otherwise material to its business, except for
commercially available software used by Company in the ordinary course of
business. Company owns (beneficially, and of record where applicable) or has
adequate rights to the Business Intellectual Property exclusively, free and
clear of all liens and encumbrances, exclusive licenses, and non-exclusive
licenses not granted in the ordinary course of business, and to the knowledge of
Company, such Business Intellectual Property is valid, subsisting and
enforceable, and is not subject to any outstanding order, judgment, decree or
agreement adversely affecting Company's use thereof or its rights thereto.
(c) To the knowledge of Company, there is no unauthorized use,
disclosure, infringement or misappropriation of any Company Intellectual
Property, or any Third Party Intellectual Property Rights to the extent licensed
by or through Company, by any person.
(d) Company is not, and to the knowledge of Company no other person
is, in breach of any license or other agreement relating to any Company
Intellectual Property or Third Party Intellectual Property Rights, except for
such breaches which would not, individually or in the aggregate, have a Material
Adverse Effect on Company.
(e) Company is not a party to, and to the knowledge of Company there
is no valid basis for, and Company has not served or received any notice or
threat of, any suit, action or proceeding (i) which involves a claim of
ownership, invalidity, unregisterability, unenforceability, misappropriation,
infringement or other violation of, or the right to use any, Company
Intellectual Property; and (ii) for actual or alleged breach of any license
agreement involving Company Intellectual Property. To the knowledge of Company,
Company's operation of its business, including without limitation the design,
development, distribution, marketing,
17
licensing and sale of Company's products or services, does not infringe or
otherwise violate any person's Intellectual Property rights.
(f) Company has secured valid written assignments or work for hire
agreements from all consultants and employees who contributed to the creation
and development of Company Intellectual Property for the rights to such
contributions that Company does not already own by operation of law, except such
assignments or work for hire agreements of which the failure to obtain would
not, individually or in the aggregate, have a Material Adverse Effect on
Company.
(g) Company has taken reasonable steps to protect Company's rights
in confidential information and trade secrets owned, used or held by Company,
and to the knowledge of Company, such confidential information and trade secrets
have not been used, disclosed to or discovered by any person except pursuant to
valid and appropriate non-disclosure and/or license agreements which have not
been breached.
(h) "IT Assets" means Company's computers, computer software,
firmware, middleware, servers, workstations, routers, hubs, switches, data
communications lines, and all other information technology equipment, and all
associated documentation. The IT Assets operate and perform in all material
respects in accordance with their documentation and functional specifications
and otherwise as required by Company in connection with its business, and have
not materially malfunctioned or failed within the past three years. To the
knowledge of Company, the IT Assets do not contain any "time bombs," "Trojan
horses," "back doors," "trap doors," "worms," viruses, bugs, faults or other
devices or effects that (A) allow any person to access without authorization the
IT Assets, or (B) otherwise significantly adversely affect the functionality of
the IT Assets, except as disclosed in its documentation. To Company's knowledge,
no person has gained unauthorized access to the IT Assets. The Company has
implemented reasonable backup and disaster recover technology consistent with
industry practices. To Company's knowledge, none of the IT Assets contains any
shareware, open source code, or other software whose use requires disclosure or
licensing of Intellectual Property. 2.16 Restrictions on Business Activities.
There is no agreement, judgment, injunction, order or decree binding upon
Company which has or could reasonably be expected to have the effect of
prohibiting or materially impairing the conduct of business by Company as
presently conducted.
2.17 Brokers and Finders. Except as set forth in Section 2.17 of the
Company Schedule, Company has not engaged any broker, finder or investment
banker in connection with this Agreement, except for Brookwood Associates,
L.L.C.
2.18 Environmental Matters. Company (i) has obtained all applicable
permits, licenses, and other authorizations that are required under
Environmental Laws (as defined below) the absence of which is reasonably likely
to have a Material Adverse Effect on Company; and (ii) is in compliance in all
material respects with all material terms and conditions of such permits,
licenses and authorizations, and also is in compliance in all material respects
with all Environmental Laws. "Environmental Laws" means all Federal, state,
local and foreign laws and regulations relating to pollution of the environment
(including ambient air, surface water,
18
ground water, land surface or subsurface strata) or the protection of human
health and worker safety, including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of Hazardous
Materials (as defined below), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials. "Hazardous Materials" means chemicals,
pollutants, contaminants, wastes, toxic substances, radioactive and biological
materials, asbestos-containing materials, hazardous substances, petroleum and
petroleum products or any fraction thereof, excluding, however, Hazardous
Materials contained in products typically used for office and janitorial
purposes properly and safely maintained in accordance with Environmental Laws.
2.19 Accounts Receivable. All accounts receivable of Company (i) are
valid, existing and collectible in a manner consistent with Company's past
practice (net of an allowance for doubtful accounts not to exceed $350,000 in
the aggregate), (ii) represent monies due in the ordinary course of business and
(iii) to Company's knowledge, are not subject to any refunds or adjustments or
any defenses, contractual rights of set-off, assignment, contractual
restrictions, security interests or other encumbrances.
2.20 Transactions with Affiliates.
(a) Except as set forth in Section 2.20(a) of the Company Schedule,
no director, officer or other "affiliate" or "associate" (as such terms are
defined in Rule 12b-2 under the Securities Exchange Act of 1934 (the "Exchange
Act")) of Company or, to Company's knowledge, any person with whom any such
director, officer or other affiliate or associate has any direct or indirect
relation by blood, marriage or adoption, or, to Company's knowledge, any entity
in which any such director, officer or other affiliate or associate, owns any
beneficial interest (other than a publicly held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market and
less than 1% of the stock of which is beneficially owned by all such persons) or
has any interest in (i) any contract, arrangement or understanding with Company,
or relating to the business or operations of Company (other than such contracts
as relate solely to any such person's ownership of capital stock or other
securities of Company, (ii) any loan, arrangement, understanding, agreement or
contract for or relating to indebtedness of Company, or (iii) any property
(real, personal or mixed), tangible or intangible, used or currently intended to
be used in, the business or operations of Company.
(b) Section 2.20(b) of the Company Schedule lists all instruments
evidencing outstanding loans from Company to any of its directors, officers or
other affiliates or associates. Except as set forth in Section 2.20(b) of the
Company Schedule, the entire outstanding principal balance and all accrued and
unpaid interest on such loans shall be paid in full prior to or at the Effective
Time.
2.21 Board and Stockholder Approval. The board of directors of Company
has, as of the date of this Agreement, (i) approved this Agreement and the
Merger and the other transactions contemplated hereby and (ii) determined that
the Merger is fair to, and in the best interests of, Company and its
stockholders. The requisite percentage of the stockholders of Company has
adopted and approved this Agreement and has approved the Merger by written
consent in accordance with the DGCL and the Company Charter Documents.
19
2.22 Opinion of Financial Advisor. Company has received an opinion from
its financial advisor, Brookwood Associates, L.L.C., dated as of the date
hereof, that the aggregate Merger Consideration to be received by the holders of
all classes of common and preferred stock of Company in connection with the
Merger is fair, from a financial point of view, to the holders of the various
classes of common and preferred stock of Company taken as a whole and without
regard to the relative rights among them as to their portion, if any, of the
aggregate Merger Consideration.
2.23 Information. Any information or materials used to solicit the
consent or vote of Company's stockholders or provided to stockholders after the
date of this Agreement (other than information or materials supplied by Parent,
to which Company makes no representations or warranties) complied and will
comply with the Company Charter Documents and any applicable rules and
regulations and did not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
made, in light of the circumstances under which they were made, not misleading.
2.24 Reorganization. Other than as specifically contemplated to the
contrary in this Agreement, Company is not aware of any agreement, plan or other
circumstance that would prevent the Merger from constituting a reorganization
under Section 368 of the Code.
2.25 Section 203 of the DGCL Not Applicable. The board of directors and
stockholders of Company have approved the Merger and the transactions
contemplated by this Agreement, and such approval is sufficient such that, were
it to apply, the restrictions relating to "business combinations" contained in
Section 203 of the DGCL would not apply to the execution, delivery or
performance of this Agreement by Company or the consummation by Company of the
Merger or the other transactions contemplated by this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, subject to such exceptions as are specifically disclosed in writing in
a disclosure letter and referencing a specific representation supplied by Parent
or Merger Sub to Company dated as of the date hereof and certified by a duly
authorized officer of Parent (the "Parent Schedule"), as follows:
3.1 Corporate Organization; Subsidiaries. Each of Parent and Merger Sub
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation. Parent has furnished to Company
complete and correct copies of its Certificate of Incorporation and Bylaws as
amended to date (together, the "Parent Charter Documents") and the Certificate
of Formation and Operating Agreement of Merger Sub in effect as of the date
hereof, which are in full force and effect. Parent is not in violation of any of
the provisions of the Parent Charter Documents, and Merger Sub is not in
violation of any of the provisions of the Certificate of Formation and the
Operating Agreement. Each of Parent and Merger Sub has all requisite corporate
or other power and authority to own, lease and operate its assets and properties
and to conduct its business as now conducted. Each of Parent and Merger Sub is
qualified to do business as a foreign corporation or limited liability company,
as applicable, and is in good standing in each jurisdiction where the character
of the properties
20
owned or leased by it or the nature of the business conducted by it makes such
qualification necessary, except where such failures to be so qualified would not
have a Material Adverse Effect on Parent. As used in this Agreement, the phrase
"Material Adverse Effect on Parent" means a material adverse effect on the
condition (financial or otherwise), business, assets, liabilities or results of
operations of Parent and its subsidiaries considered as a whole, or a material
adverse effect on the ability of Parent to consummate the transactions
contemplated by this Agreement; provided, however, that in no event shall any of
the following be deemed, in and of itself, to constitute a Material Adverse
Effect on Parent: (i) a change that results from conditions generally affecting
the U.S. economy, or the industry in which Parent operates (including laws and
regulations applicable to such industry), (ii) a change that results from the
announcement or pendency of the transactions contemplated hereby, (iii) a change
that results from the taking of any action required by this Agreement, or (iv) a
reduction in the stock price of Parent Common Stock.
3.2 Capitalization. The authorized capital stock of Parent consists of
(i) 100,000,000 shares of Parent Common Stock, and (ii) 5,000,000 shares of
Preferred Stock, par value $0.001 per share ("Parent Preferred Stock"). At the
close of business on October 20, 2003, (i) 33,199,397 shares of Parent Common
Stock were issued and outstanding, (ii) no shares of Parent Common Stock were
held in treasury by Parent or by subsidiaries of Parent, (iii) 460,143 shares of
Parent Common Stock were reserved for future issuance pursuant to Parent's
employee stock purchase plan and (iv) 5,446,095 shares of Parent Common Stock
were reserved for issuance upon the exercise of outstanding options ("Parent
Options") to purchase Parent Common Stock. As of the date hereof, no shares of
Parent Preferred Stock were issued or outstanding. The authorized capital of
Merger Sub consists of 100 Common Units, all of which, as of the date hereof,
are issued and outstanding and held of record by Parent. All of the outstanding
shares of Parent's capital stock have been duly authorized and validly issued
and are fully paid and nonassessable. All outstanding Common Units of Merger Sub
have been duly authorized and validly issued. 1,648,335 shares of Parent Common
Stock have been reserved for issuance pursuant to the Merger. All shares of
Parent Common Stock subject to issuance as aforesaid, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
and the shares of Parent Common Stock to be issued pursuant to the Merger, will
be duly authorized, validly issued, fully paid and nonassessable and will be
issued in all material respects in compliance with applicable securities laws
and other requirements of law. All outstanding shares of Parent Common Stock,
all outstanding Parent Stock Options, and all outstanding Common Units of Merger
Sub have been issued and granted in all material respects in compliance with
applicable securities laws and other requirements of law.
3.3 Corporate Authority, Etc. Each of Parent and Merger Sub, as
applicable, has the corporate or company power and authority to execute and
deliver this Agreement and the Transaction Agreements, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Transaction Agreements by Parent and Merger Sub, as applicable, the
performance by Parent and Merger Sub of their respective obligations hereunder
and thereunder and the consummation by Parent and Merger Sub of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate or company action on the part of Parent and Merger Sub, and no other
corporate or company proceedings on the part of Parent or Merger Sub are
necessary to authorize such execution, delivery, performance or consummation,
subject only
21
to the filing of the Certificate of Merger pursuant to the DGCL and the DLLCA
and the registration or exemption from registration of the Parent Common Stock
under the Securities Act of 1933 (the "Securities Act"). This Agreement and the
Transaction Agreements have been duly executed and delivered by Parent and
Merger Sub, as applicable, and, assuming the due authorization, execution and
delivery of this Agreement by Company and of the Transaction Agreements by the
other parties thereto, constitute valid and legally binding obligations of
Parent and Merger Sub, as applicable, enforceable against Parent and Merger Sub,
as applicable, in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, receivership, moratorium or other laws relating to
or affecting the rights and remedies of creditors generally and to general
equitable principles (regardless of whether at law or in equity).
3.4 No Violation. Subject to receipt of the consents, waivers,
authorizations and approvals or the making of the declarations or filings
referred to in Section 3.5, the execution, delivery and performance by Parent
and Merger Sub, as applicable, of this Agreement and the Transaction Agreements
will not (a) violate any provision of any statute, rule or regulation applicable
to Parent and Merger Sub or any order, judgment or decree of any court,
governmental or regulatory authority, or arbitrator to which Parent or Merger
Sub is subject, (b) violate the Parent Charter Documents or the Certificate of
Formation or the Operating Agreement, (c) violate, conflict with or constitute
(or, with due notice or lapse of time or both, result in) a default under, or
result in the change or acceleration of any rights or obligations under or
entitle any party to change or accelerate (whether after the giving of notice or
lapse of time or both) any right or obligation under, any provision of any
contract, lease, loan agreement, mortgage, security agreement, trust indenture,
license or other agreement, contract, commitment or instrument to which Parent
or any subsidiary is a party or by which it is bound, or (d) result in the
creation or imposition of any lien, charge or encumbrance upon or security
interest in any of the properties or assets of Parent and its subsidiaries, that
in the case of clauses (a), (c) or (d) would have a Material Adverse Effect on
Parent and its subsidiaries as a whole or interfere with the consummation of the
Merger.
3.5 Consents and Approvals. Except for any consents previously obtained,
the applicable requirements of federal and state securities laws and the
pre-merger notification requirements of the HSR Act, and the filing of the
Certificate of Merger as required by the DGCL and the DLLCA, no consent, waiver,
authorization or approval of any Governmental Entity, or of any other person or
entity, and no declaration to or filing with any such Governmental Entity, is
required in connection with the execution and delivery of this Agreement by
Parent and Merger Sub or the performance by Parent and Merger Sub of their
respective obligations hereunder, except for those as to which the failure to
make, file, give or obtain would not have a Material Adverse Effect on Parent or
interfere with the consummation of the Merger.
3.6 SEC Filings; Financial Statements; Absence of Undisclosed
Liabilities.
(a) Parent has filed all reports, schedules, registration statements
and definitive proxy statements required to be filed by Parent with the
Securities and Exchange Commission (the "SEC") on or after January 1, 2001 (the
"Parent SEC Reports") and has made available to Company correct and complete
copies of the Parent SEC Reports. The Parent SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act or the
22
Exchange Act, as the case may be, and (ii) did not at the time they were filed
(or, if amended or superseded by a filing prior to the date of this Agreement,
on the date of such filing) contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of Parent's subsidiaries is required to
file any reports or other documents with the SEC.
(b) The financial statements and any related notes thereto contained
in the Parent SEC Reports were prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-Q of the Exchange Act) and fairly present the
consolidated financial position of Parent and its subsidiaries at the respective
dates thereof and the consolidated results of its operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal year-end adjustments which were not or are not
expected to be material in amount.
(c) Except as disclosed in the Parent SEC Reports filed to the date
hereof, Parent has no liabilities (absolute, accrued, contingent or otherwise)
which are, individually or in the aggregate, material to the business, results
of operations or financial condition of Parent and its subsidiaries taken as a
whole, except for (a) liabilities reflected, reserved against or otherwise
disclosed on Parent's balance sheet as of June 30, 2003 and (b) liabilities
incurred since June 30, 2003 in the ordinary course of business.
3.7 Absence of Certain Changes or Events. Except as disclosed in the
Parent SEC Reports filed to the date hereof, since June 30, 2003, there has not
been (a) any Material Adverse Effect on Parent, (b) any declaration, setting
aside or payment of any dividend on, or other distribution (whether in cash,
stock or property) in respect of, any of Parent's capital stock, or (iii) any
split, combination or reclassification of any of Parent's capital stock.
3.8 Litigation. Except as set forth in Section 3.8 of the Parent
Schedule and except as disclosed in the Parent SEC Reports filed to the date
hereof, there are no actions, suits, proceedings or investigations pending or,
to the knowledge of Parent, threatened before any court, arbitrator or
Governmental Entity or any claims made or threatened against Parent or Merger
Sub which would reasonably be expected to interfere with the consummation of the
Merger or to have a Material Adverse Effect on Parent. None of Parent, Merger
Sub or any of their assets or properties is subject to any order, judgment or
decree of any court, governmental or regulatory authority or arbitrator which
would reasonably be expected to interfere with the consummation of the Merger or
to have a Material Adverse Effect on Parent.
3.9 Brokers and Finders. Parent has not engaged any broker, finder or
investment banker in connection with this Agreement, except Deutsche Bank
Securities Inc.
3.10 Board Approval. The board of directors of Parent has, as of the
date of this Agreement, unanimously (i) determined that the Merger is consistent
with and in furtherance of the long-term business strategy of Parent and is fair
to, and in the best interests of, Parent and its stockholders, and (ii) approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement. Parent, as the sole member of Merger Sub, has, as of the date
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of this Agreement, approved this Agreement, the Merger and the other
transactions contemplated by this Agreement.
3.11 Reorganization. Other than as specifically contemplated to the
contrary in this Agreement, Parent is not aware of any agreement, plan or other
circumstance that would prevent the Merger from constituting a reorganization
under Section 368 of the Code.
3.12 Merger Sub Operations. Merger Sub was formed solely for the purpose
of engaging in the transactions contemplated hereby and has not (a) engaged in
any business activities, (b) conducted any operations other than in connection
with the transactions contemplated hereby or (c) incurred any liabilities other
than in connection with the transactions contemplated hereby.
3.13 Information. Any information or materials provided by Parent to
Company for use in soliciting the consent or vote of Company's stockholders did
not and will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made, in light
of the circumstances under which they were made, not misleading.
3.14 Financial Ability. Parent has sufficient cash or has existing
borrowing facilities that are sufficient to enable it to consummate the
transactions contemplated by this Agreement. Each of Parent and its subsidiaries
is able to pay its debts generally and as they become due and is solvent and
will not be, as of the Effective Time, rendered insolvent as a result of the
transactions contemplated hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company shall, except to
the extent that Parent shall otherwise consent in writing, carry on its
business, in the ordinary course in all material respects, and in compliance in
all material respects with all applicable laws and regulations, pay its debts
and Taxes when due subject to good faith disputes over such debts or Taxes, pay
or perform other material obligations when due, and use its commercially
reasonable efforts consistent with past practices and policies to (i) preserve
intact its present business organization, (ii) keep available the services of
its present officers and employees and (iii) preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others with which
it has business dealings.
In addition, except as provided by the proviso below or as otherwise
expressly permitted by the terms of this Agreement, without the prior written
consent of Parent, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Company shall not do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change
the period of exercisability of options or reprice options granted under any
employee, consultant, director or
24
other stock plans or authorize cash payments in exchange for any options granted
under any of such plans;
(b) Grant any severance or termination pay to any officer or
employee except pursuant to written agreements outstanding on the date hereof
and as previously disclosed in writing to Parent, or adopt any new severance
plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Company's Intellectual Property other than in
the ordinary course of business consistent with past practice, or enter into
grants to transfer or license to any person future Intellectual Property rights
other than in the ordinary course of business consistent with past practices,
provided that in no event shall Company license on an exclusive basis, sell,
abandon, fail to renew, allow to lapse or otherwise forfeit any of its
Intellectual Property;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock (other than as contemplated in Section 5.12), or split,
combine or reclassify any capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for any
capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly,
any shares of capital stock of Company;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing with respect to, any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, other than the issuance, delivery and/or sale of shares
of Company Stock pursuant to the exercise of Company Stock Options or Warrants
outstanding as of the date of this Agreement;
(g) Cause, permit or propose any amendments to the Company Charter
Documents;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets or enter outside the ordinary course of Company's business
consistent with past practice into any joint ventures, strategic partnerships or
alliances;
(i) Sell, lease, license, option, encumber or otherwise dispose of
any of Company's material properties or assets other than in the ordinary course
of business consistent with past practice;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or
25
other rights to acquire any debt securities of Company, enter into any "keep
well" or other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing;
(k) Adopt or amend any employee benefit plan, policy or arrangement,
any employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement, pay any special bonus or
special remuneration to any director or employee (other than payments
contemplated in Section 5.11), or increase the salaries or wage rates or fringe
benefits (including rights to severance or indemnification) of its directors,
officers, employees or consultants other than in the ordinary course consistent
with past practices;
(l) Extend or modify the terms of, or discount or factor, any
accounts receivable of Company;
(m) Make any individual or series of related payments outside of the
ordinary course of business in excess of $250,000;
(n) Revalue any of its assets or, except as required by GAAP, make
any change in accounting methods, principles or practices;
(o) Incur or enter into any agreement, contract or commitment
outside of the ordinary course of business in excess of $250,000 individually;
(p) Make any Tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of Company or settle or compromise any material income Tax
liability;
(q) Engage in any action that would cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code except as
provided in Section 1.11; or
(r) Agree in writing or otherwise to take any of the actions
described in Section 4.1 (a) through (q) above.
4.2 Conduct of Business by Parent. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent and Merger Sub
shall, except to the extent that Company shall otherwise consent in writing,
carry on its business, in the ordinary course in all material respects, and in
compliance in all material respects with all applicable laws and regulations. In
addition, during the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Parent and Merger Sub shall not:
(a) declare, set aside or pay any dividends on, or make any other
payment on, or make any other distribution (whether in cash, stock or property)
in respect of any of Parent's capital stock, or split, combine or reclassify any
of Parent's capital stock;
(b) engage in any action that would cause the Merger to fail to
qualify as a "reorganization" under Section 368(a) of the Code except as
provided in Section 1.11; or
26
(c) agree in writing or otherwise to take any of the actions
described in Section 4.2(a) or (b) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Exempt Offering. Upon the Effective Time and in the manner described
in Section 1.7, Parent will take such action to issue the Parent Common Stock
only to stockholders of Company who are Accredited Investors in an offering (an
"Exempt Offering") exempt from registration pursuant to Regulation D under the
Securities Act. Company will take all necessary steps to cooperate fully with
Parent in complying with the terms and conditions of the Exempt Offering. Parent
agrees to provide the stockholders receiving Parent Common Stock in the Merger
with registration rights as set forth in a Registration Rights Agreement in the
form attached hereto as Exhibit E (the "Registration Rights Agreement").
5.2 Notices; Information Statement. Promptly after the date of this
Agreement, Company shall prepare and distribute the notices required by Section
228(e) and 262(d)(2) of the DGCL and an information statement (the "Information
Statement") to the stockholders of Company who did not previously consent to the
adoption and approval of this Agreement and the approval of the Merger. Parent
agrees to furnish Company with all such information concerning it and its
directors, officers and stockholders as may be reasonably required to be
included in the Information Statement and Parent will have the right to review
and comment on the Information Statement prior to its distribution. Company will
promptly advise Parent, and Parent will promptly advise Company, in writing if
at any time prior to the Effective Time either Company or Parent shall obtain
knowledge of any facts that might make it necessary or appropriate to amend or
supplement the Information Statement in order to make the statements contained
or incorporated by reference therein not misleading or to comply with applicable
law.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Company and Parent have previously
executed a mutual nondisclosure agreement, dated as of July 15, 2003 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Each of Company and Parent will afford the other and the other's
accountants, counsel and other representatives reasonable access during normal
business hours and upon reasonable notice to its properties, books, records and
personnel during the period prior to the Effective Time to obtain all
information concerning its business as such other party may reasonably request;
provided that such access may be denied to the extent necessary to prevent a
breach of any agreement to which Company or Parent is a party, to prevent a
violation of law or to preserve attorney-client or work product privileges with
respect to pending legal proceedings; provided further that any such withholding
of access shall be disclosed to such other party at the time such withholding of
access is determined to be required. Any investigation shall be conducted in
such a manner as to minimize the interference with the operation of their
respective business. No information or knowledge obtained in any investigation
pursuant to this
27
Section 5.3 will affect or be deemed to modify any representation or warranty
contained herein or the conditions to the obligations of the parties to
consummate the Merger.
5.4 Acquisition Proposal. Company agrees that neither it nor any of its
officers and directors shall, and that it shall direct and use its best efforts
to cause its employees, agents and representatives (including any investment
banker, attorney or accountant retained by it) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation or similar transaction involving, or any purchase of all
or 15% or more of the assets or any equity securities of, it (any such proposal
or offer being hereinafter referred to as an "Acquisition Proposal"). Company
further agrees that neither it nor any of its officers and directors shall, and
that it shall direct and use its best efforts to cause its employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. Company will notify Parent immediately if any such
inquiries, proposals or offers are received by, any such information is
requested from, or any such discussions or negotiations are sought to be
initiated or continued with, any of its representatives, indicating, in
connection with such notice, the name of such person and the material terms and
conditions of any proposals or offers. Company also agrees that it will promptly
request each person that has heretofore executed a confidentiality agreement in
connection with its consideration of acquiring it to return all confidential
information heretofore furnished to such person by or on behalf of it. The
letter, dated September 18, 2003 and amended October 7, 2003, relating to
exclusivity is hereby terminated.
5.5 Public Disclosure.
(a) Parent and Company will consult with each other and agree before
issuing any press release or otherwise making any public statement with respect
to the Merger or this Agreement and will not issue any such press release or
make any such public statement prior to such agreement, except as may be
required by law or any listing agreement with a national securities exchange, in
which case reasonable efforts to consult with the other party will be made prior
to any such release or public statement.
(b) Notwithstanding anything in this Agreement to the contrary, each
party hereto (and each employee, representative or other agent of any party) may
disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of any and all transaction(s) contemplated herein
and all materials of any kind (including opinions or other tax analyses) that
are or have been provided to any party (or to any employee, representative or
other agent of any party) relating to such tax treatment or tax structure;
provided, however, that this authorization of disclosure shall not apply to
restrictions reasonably necessary to comply with securities laws.
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5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article VI to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all necessary consents, approvals or
waivers from third parties required as a result of the transactions contemplated
by this Agreement, (iv) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed and (v) the execution or
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement. In
connection with and without limiting the foregoing, each of Parent and Company
and their respective boards of directors shall, if any state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement or any of the transactions contemplated by this Agreement, use all
reasonable efforts to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger, this Agreement and the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require Parent, Company or any subsidiary or
affiliate of Parent or Company to agree to any divestiture by itself or any of
its affiliates of shares of capital stock or the imposition of any material
limitation on the ability of any of them to conduct their business or to own or
exercise control of such assets, properties and stock, if such divestiture or
limitation would have a Material Adverse Effect on Parent or Company.
(b) Company shall give prompt notice to Parent upon becoming aware
that any representation or warranty made by it contained in this Agreement has
become untrue or inaccurate in any material respect, or of any failure of
Company to comply with or satisfy in any material respect any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. If any event, condition, fact or circumstance that is required to be
disclosed pursuant to this Section 5.6(b) requires any change in the Company
Schedule, or if any such event, condition, fact or circumstance would require
such a change assuming the Company Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Company shall promptly deliver to Parent an update to the
Company Schedule specifying such change. No such update shall be deemed to
supplement or amend the Company Schedule for the purpose of determining (i) the
accuracy of any of the
29
representations and warranties made by Company in this Agreement and (ii)
whether any of the conditions set forth in Section 6 have been satisfied.
(c) Parent shall give prompt notice to Company upon becoming aware
that any representation or warranty made by it or Merger Sub contained in this
Agreement has become untrue or inaccurate in any material respect, or of any
failure of Parent or Merger Sub to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement. If any event, condition, fact or circumstance that is
required to be disclosed pursuant to this Section 5.6(c) requires any change in
the Parent Schedule, or if any such event, condition, fact or circumstance would
require such a change assuming the Parent Schedule were dated as of the date of
the occurrence, existence or discovery of such event, condition, fact or
circumstance, then Parent shall promptly deliver to Company an update to the
Parent Schedule specifying such change. No such update shall be deemed to
supplement or amend the Parent Schedule for the purpose of determining (i) the
accuracy of any of the representations and warranties made by Parent and Merger
Sub in this Agreement and (ii) whether any of the conditions set forth in
Section 6 have been satisfied.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained by
it in connection with the consummation of the transactions contemplated hereby.
Section 5.7 of the Company Schedule lists all such consents, waivers and
approvals required to be obtained by Company.
5.8 Stock Options. At or prior to the Effective Time, each outstanding
option to purchase shares of Company Common Stock (each, a "Company Stock
Option") under the Company Option Plans, whether vested or unvested, shall
terminate and be of no further force and effect.
5.9 Warrants; Existing Agreements. At or prior to the Effective Time,
each outstanding warrant to purchase shares of Company Stock (each, a "Warrant")
shall either be exercised and converted into Company Stock or be canceled and
have no further force and effect. Company will take all necessary steps to
ensure that at or prior to the Effective Time the Fourth Amended and Restated
Registration Agreement, dated May 2, 2002, and the Fourth Amended and Restated
Stockholders Agreement, dated as of May 2, 2002, each by and among the Company
and certain investors of the Company, shall be terminated and of no further
force and effect.
5.10 Employees. Employees of Company employed by the Surviving Company
after the Effective Time (the "Retained Employees") will be entitled to
participate in such employee benefit plans provided by the Surviving Company or
Parent after the Closing to the extent that other similarly situated employees
of Parent are entitled to participate in similar plans and consistent with the
terms of such plans. If any employee of Company becomes a participant in any
employee benefit plan of Parent or one of its subsidiaries, such employee shall,
to the extent permitted by such plan, be given credit for all service with
Company prior to the Effective Time for purposes of vesting and eligibility
only. In addition, in Parent's discretion, certain Retained Employees will be
eligible to participate in Parent's employee stock option plans. As promptly
30
after the Effective Time as practicable, Parent will create a bonus plan
providing for payments up to $2,000,000 for retention, performance bonuses and
other purposes with respect to selected key Retained Employees, which bonuses
shall be paid in the sole discretion of Parent. Nothing in this Section 5.10
shall be deemed to constitute an employment contract between the Surviving
Company and any individual, or a waiver of the Surviving Company's right to
discharge any employee at any time, with or without cause, subject to the terms
of any employment agreement with such employee.
5.11 Executive Payments. Section 5.11 of the Company Schedule sets forth
(a) the percentage allocation to individual employees of Company of payments
pursuant to the Bonus Plan (the "Bonus Payments"), (b) payments to be due all
executives of Company in connection with the Merger or the termination of their
employment at or prior to the Effective Time denoted as "Specified Payments"
therein and (c) all other payments (the "Other Payments") to be due to all
executives of Company in connection with the Merger or the termination of their
employment at or prior to the Effective Time, other than payments for
unreimbursed business expenses due and payable in the ordinary course of
business of Company. Company will pay the Bonus Payments and the Other Payments
in full immediately prior to the Effective Time. Parent will assume the
obligation to pay the Specified Payments at the Effective Time and any amounts
in excess thereof shall be deemed Other Payments.
5.12 Excess Cash Payment. Company will, immediately prior to the
Effective Time, distribute or cause to be paid the Excess Cash (as defined
below), if any, to stockholders of Company pursuant to the Company Charter
Documents; provided, however, that Company will not distribute or cause to be
paid any Excess Cash if Net Assets is or would be negative immediately following
the distribution or payment. The payment of such Excess Cash shall be deemed a
partial payment of accrued and unpaid dividends to holders of Series D Preferred
Stock pursuant to the Company Charter. "Excess Cash" means cash and cash
equivalents of Company as of the Tentative Closing Date, less an amount equal to
(a) the payroll obligations of Company for the first full payroll period ending
subsequent to the Closing, (b) the Bonus Payments, (c) the Other Payments and
(d) all fees and expenses incurred and to be incurred by Company through the
Closing in connection with the Merger, all as set forth on the Closing Financial
Certificate. Notwithstanding the foregoing, the parties hereto and their
advisors may agree on a different method of accomplishing the distribution of
Excess Cash to minimize any financial impact on Company and any legal or tax
burdens on the recipients of Excess Cash and the parties hereto.
5.13 Closing Financial Certificate. On the Tentative Closing Date,
Company will deliver to Parent a certificate (the "Closing Financial
Certificate") dated as of the Tentative Closing Date executed on behalf of
Company by its Chief Executive Officer and Chief Financial Officer setting forth
(i) Company's balance sheet (the "Closing Balance Sheet") as of five days prior
to the Tentative Closing Date (the "Closing Balance Sheet Date"), (ii) any
material adjustments to the Closing Balance Sheet through the Tentative Closing
Date, (iii) the Net Assets and (iv) the Excess Cash (including a specific
calculation of all of the deductions therefrom). The Closing Balance Sheet (a)
will be derived from and be in accordance with the books and records of Company
and (b) fairly and accurately represent the financial condition of Company at
the Closing Balance Sheet Date in conformity with GAAP on a basis consistent
with prior periods. The values set forth on the Closing Financial Certificate
for Net Assets and Excess Cash will give effect to the full amounts expected to
be paid by Company and to be deducted in
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determining such values. Parent will review and approve the Closing Financial
Certificate, and if Parent and Company cannot agree as to the values set forth
in the Closing Financial Certificate by the Closing Date, then Parent shall
engage, at its own cost and expense, Xxxxx Xxxxxxxx LLP (or, if Xxxxx Xxxxxxxx
LLP is unavailable or unable to perform such services in the time required, such
other accounting expert mutually agreed upon by Company and Parent) (the
"Special Auditor") following the Closing Date to perform a review or other
mutually agreed procedures sufficient to determine the disputed amount. Parent
and Company shall provide the Special Auditor with access to all of Company's
books and records and shall assist the Special Auditor in obtaining
confirmations of the assets and liabilities of Company and the other values set
forth in the Closing Financial Certificate. The Special Auditor shall complete
the review or agreed upon procedures and issue its report setting forth its
conclusions regarding Company's determination of Excess Cash and any appropriate
adjustments thereto (Excess Cash so adjusted being "Revised Excess Cash") as
promptly as possible but in no event more than ten days after the Closing Date.
If the Revised Excess Cash amount is less than the Excess Cash amount set forth
on the Closing Financial Certificate (such difference being the "Excess Cash
Shortfall"), and the Excess Cash Shortfall was distributed to the stockholders
of Company pursuant to Section 5.12, then Parent shall be entitled to
indemnification pursuant to Section 8.1 in an amount equal to the Excess Cash
Shortfall. Any payment for indemnification relating to Excess Cash Shortfall
shall be funded first by all holders of Company Stock other than Series D
Preferred Stock, pro rata amongst such stockholders based upon each
stockholder's pro rata share in the Holdback Amount relative to the aggregate
pro rata share in the Holdback Amount of all such stockholders, and, to the
extent not paid in full, second by all holders of Series D Preferred Stock, pro
rata amongst such stockholders based upon each such stockholder's pro rata share
in the Holdback Amount relative to the aggregate pro rata share in the Holdback
Amount of all such holders of Series D Preferred Stock. If the Revised Excess
Cash amount is greater than the Excess Cash amount set forth on the Closing
Financial Certificate, then Parent shall distribute such difference, as soon as
reasonably practicable thereafter, to the former holders of the Company Stock in
accordance with the preferences set forth in the Charter. The determination of
the Special Auditor shall be final and binding upon the parties.
5.14 Affiliates. Section 5.14 of the Company Schedule sets forth a list
of those persons who may be deemed to be, in Company's reasonable judgment,
affiliates of Company within the meaning of Rule 145 promulgated under the
Securities Act or Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations. Company will provide Parent with such information and
documents as Parent reasonably requests for purposes of reviewing such list.
5.15 Indemnification. From and after the Effective Time, the Surviving
Company shall fulfill and honor in all respects the obligations of Company
pursuant to the indemnification obligations of the Company Charter Documents.
5.16 Tax Opinions. Each of Company and Parent shall use reasonable best
efforts to cause its legal counsel to issue a written opinion, in form and
substance reasonably satisfactory to it, to the effect that the Merger will
constitute a reorganization, and that Company and Parent will be treated as
parties to the reorganization, within the meaning of Section 368(a) of the Code,
and such opinion shall not have been withdrawn. Each of Company and Parent
agrees to make
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such reasonable representations as requested by its and the other's legal
counsel for the purpose of rendering such opinion. Notwithstanding the
foregoing, no opinion from Parent's legal counsel shall be requested or required
upon a Triggering Event and no opinion from Company's legal counsel shall be
requested or required in the event that the aggregate Stock Consideration
(valued at the closing price per share of Parent Common Stock on the trading day
immediately prior to the Effective Time) is less than 45% of the aggregate
Merger Consideration.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
(b) HSR Act. All waiting periods, if any, under the HSR Act relating
to the transactions contemplated hereby will have expired or terminated early.
6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation and warranty
of Parent and Merger Sub contained in this Agreement (i) shall have been true
and correct as of the date of this Agreement and (ii) shall be true and correct
on and as of the Closing Date with the same force and effect as if made on and
as of the Closing Date except for (A) such failures to be true and correct that
do not in the aggregate constitute a Material Adverse Effect on Parent
(provided, however, that this "Material Adverse Effect on Parent" qualifier
shall be inapplicable with respect to representations and warranties contained
in Sections 3.2, 3.10 and 3.11) and (B) those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct as of such particular date) (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, (i) all "Material Adverse Effect on Parent" qualifications and other
qualifications based on the word "material" or similar phrases contained in such
representations and warranties shall be disregarded and (ii) any update of, or
modification to, Parent Schedule made or purported to have been made after the
date of this Agreement shall be disregarded). Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent by an
authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and
33
Company shall have received a certificate to such effect signed on behalf of
Parent by an authorized officer of Parent.
(c) Material Adverse Effect. There shall not have been any Material
Adverse Effect on Parent since the date of this Agreement. Company shall have
received a certificate with respect to the foregoing signed on behalf of Parent
by its Chief Executive Officer and Chief Financial Officer.
(d) Escrow Agreement. Parent and the Escrow Agent shall have
executed and delivered the Escrow Agreement substantially in the form attached
hereto as Exhibit C.
(e) Registration Rights Agreement. Parent shall have executed and
delivered a Registration Rights Agreement substantially in the form attached
hereto as Exhibit E.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligation of Parent and Merger Sub to consummate and effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of each of
the following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. Each representation and warranty
of Company contained in this Agreement (i) shall be true and correct on and as
of the Closing Date with the same force and effect as if made on and as of the
Closing Date, except for (A) such failures to be true and correct that do not in
the aggregate constitute a Material Adverse Effect on Company (provided,
however, that such Material Adverse Effect on Company qualifier shall be
inapplicable with respect to representations and warranties contained in
Sections 2.2, 2.21, 2.22 and 2.24, and in determining whether a Material Adverse
Effect on Company has occurred for purposes of this clause (A), the amount set
forth in clause (i) of the definition of such term shall be $500,000) and (B)
those representations and warranties which address matters only as of a
particular date (which representations shall have been true and correct as of
such particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, (i) all "Material Adverse
Effect on Company" qualifications and other qualifications based on the word
"material" or similar phrases contained in such representations and warranties
shall be disregarded and (ii) any update of or modification to the Company
Schedule made or purported to have been made after the date of this Agreement
shall be disregarded). Parent shall have received a certificate with respect to
the foregoing signed on behalf of Company by its President and Chief Financial
Officer.
(b) Agreements and Covenants. Company shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by its Chief Executive Officer and Chief Financial Officer.
(c) Consents. Company shall have obtained all material or customer
consents, waivers and approvals required in connection with the consummation of
the transactions contemplated hereby.
34
(d) Material Adverse Effect. There shall not have been any Material
Adverse Effect on Company since the date of this Agreement; provided, however,
that in determining whether a Material Adverse Effect on Company has occurred
for purposes of this Section 6.3(d), the amount set forth in clause (i) of the
definition of such term shall be $500,000. Parent shall have received a
certificate with respect to the foregoing signed on behalf of Company by its
President and Chief Financial Officer.
(e) Escrow Agreement. The Escrow Agent and the Stockholders' Agents
(as defined in the Escrow Agreement) shall have executed and delivered to Parent
an Escrow Agreement substantially in the form attached hereto as Exhibit C.
(f) Stockholder Agreements. Each of the stockholders of Company who
will receive shares of Parent Common Stock in the Merger shall have executed and
delivered to Parent a Stockholder Agreement substantially in the form attached
hereto as Exhibit D (a "Stockholder Agreement").
(g) Registration Rights Agreement. Each of the stockholders of
Company who will receive shares of Parent Common Stock in the Merger shall have
executed and delivered to Parent a Registration Rights Agreement substantially
in the form attached hereto as Exhibit E.
(h) Termination/General Release/Consulting Agreement. Each executive
officer of Company identified in Section 6.3(h) of the Company Schedule shall
have executed and delivered to Parent a Termination/General Release/Consulting
Agreement substantially in the form attached hereto as Exhibit F.
(i) Dissenting Stockholders. Holders of no more than 10% of the
capital stock of Company shall be Dissenting Stockholders immediately prior to
the Effective Time.
(j) Stock Options and Warrants. All Company Stock Options and
Warrants shall have been either exercised and converted into Company Stock or
shall have been canceled and have no further force and effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after the requisite approval of the
stockholders of Company:
(a) by mutual written consent duly authorized by the Boards of
Directors of Parent and Company;
(b) by either Company or Parent, by written notice to the other, if
the Merger shall not have been consummated by December 15, 2003 for any reason;
provided, however, that the right to terminate this Agreement under this Section
7.1(b) shall not be available to any party whose action or failure to act has
been a principal cause of or resulted in the failure of the Merger to occur on
or before such date and such action or failure to act constitutes a breach of
this Agreement;
35
(c) by either Company or Parent, by written notice to the other, if
a Governmental Entity shall have issued an order, decree or ruling or taken any
other action, in any case having the effect of permanently restraining,
enjoining or otherwise prohibiting the Merger, which order, decree, ruling or
other action is final and nonappealable;
(d) by Company, by written notice to Parent, upon a breach of any
representation, warranty, covenant or agreement on the part of Parent or Merger
Sub set forth in this Agreement, or if any representation or warranty of Parent
shall have become untrue, in either case such that the conditions set forth in
Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time of such
breach or as of the time such representation or warranty shall have become
untrue, provided, that if such inaccuracy in Parent's representations and
warranties or breach by Parent is curable by Parent, then Company may not
terminate this Agreement under this Section 7.1(d) for 30 days after delivery of
written notice from Company to Parent of such breach, provided Parent continues
to exercise reasonable efforts to cure such breach (it being understood that
Company may not terminate this Agreement pursuant to this paragraph (d) if such
breach by Parent is cured during such 30-day period); or
(e) by Parent, by written notice to Company, upon a breach of any
representation, warranty, covenant or agreement on the part of Company set forth
in this Agreement, or if any representation or warranty of Company shall have
become untrue, in either case such that the conditions set forth in Section
6.3(a) or Section 6.3(b) would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided, that if such inaccuracy in Company's representations and warranties or
breach by Company is curable by Company, then Parent may not terminate this
Agreement under this Section 7.1(e) for 30 days after delivery of written notice
from Parent to Company of such breach, provided Company continues to exercise
reasonable efforts to cure such breach (it being understood that Parent may not
terminate this Agreement pursuant to this paragraph (e) if such breach by
Company is cured during such 30-day period).
7.2 Notice of Termination; Effect of Termination. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except as set forth in Section 9.1. Nothing
herein shall relieve any party from liability for fraud in connection with, or
any willful breach of, this Agreement.
7.3 Fees and Expenses. Each of Parent and Company shall pay all fees and
expenses incurred by it in connection with this Agreement and the transactions
contemplated hereby.
7.4 Amendment. Subject to applicable law, this Agreement may be amended
by the parties hereto at any time prior to the Effective Time by execution of an
instrument in writing signed on behalf of each of Parent, Merger Sub and
Company.
7.5 Extension; Waiver. At any time prior to the Effective Time, any
party hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such
36
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Stockholders. Each stockholder of Company,
severally but not jointly, shall indemnify and hold harmless Parent and its
successors, assigns, stockholders, controlling persons and related persons and
the representatives of each of them (collectively, the "Indemnified Persons")
from and against, and shall reimburse the Indemnified Persons for, any and all
losses, liabilities, actions, deficiencies, expenses (including costs of
investigation and defense and reasonable attorneys' and accountants' fees), or
damages of any kind or nature whatsoever, whether or not involving a third-party
claim (collectively, "Damages"), incurred thereby or caused thereto, directly or
indirectly, based on, arising out of, resulting from, relating to, or in
connection with any breach of representation or warranty or failure to perform
any covenant or agreement of Company contained, or referred to, in this
Agreement, the Company Schedule or any other agreement or certificate delivered
pursuant to this Agreement. Any Excess Cash Shortfall shall be deemed Damages
hereunder and subject to indemnification under this Section 8.1 and shall not be
subject to the limitations of Section 8.2(b) below. Notwithstanding the
foregoing, with respect to any Damages resulting from the breach of the
representations set forth in Section 2.19(i) as a result of any accounts
receivable of Company which are not paid following the Effective Time in excess
of the allowance for doubtful accounts, no Indemnified Person shall have any
liability hereunder unless and until Parent shall have given the Stockholders'
Agents (as defined in the Escrow Agreement) or their designee(s) (i) a detailed
notice of the nonpayment of any such account and a full and fair opportunity (at
least 45 days) to collect such account on behalf of Parent or Merger Sub and
(ii) reasonable cooperation in connection with the collection of such amounts.
In determining the amount of any Damage attributable to a breach, any
materiality standard contained in a representation, warranty or covenant of
Company shall be disregarded. No claims for indemnification by Indemnified
Persons under this Section 8.1 may be made after 12 months from the Closing Date
(except for claims due to a breach of the representations and warranties
contained in Section 2.9 (Tax Matters) which may be made until the expiration of
the applicable statute of limitations).
8.2 Sole Remedy; Limitation on Damages.
(a) The rights of Parent set forth in this Article VIII constitute
the sole and exclusive remedy for any and all claims by Parent against the
stockholders of Company and the Holdback Amount shall be the sole source of
payment for any Damages incurred by Parent, Merger Sub or any other Indemnified
Party, except that any liability incurred by Parent, Merger Sub or any other
Indemnified Party as a result of fraud or due to a breach of the representations
and warranties set forth in Sections 2.2, 2.7 and 2.9 shall be limited to the
Merger Consideration (instead of the Holdback Amount) and shall first be payable
from the Holdback Amount. Any liability of Company's stockholders under this
Agreement shall be allocated among the stockholders pro rata in accordance with
the percentage of the Merger Consideration received by each such stockholder,
and, subject to first being payable from the Holdback Amount, Parent agrees not
to attempt to recover from any Company stockholder any amounts in excess of such
37
stockholder's pro rata liability. No stockholder of Company shall have any
liability in an amount in excess of the amount set forth beside such
stockholder's name on the schedule to be provided by Company pursuant to Section
1.6(b). Amounts payable from the Holdback Amount shall be made pursuant to the
Escrow Agreement.
(b) The Indemnified Persons may not recover Damages from Company or
any stockholder pursuant to Section 8.1 until the aggregate amount of Damages
for which the Indemnified Parties, in the aggregate, are seeking indemnification
exceeds $250,000 (the "Threshold") ; provided, however, that in the event that
the aggregate amount of Damages for which the Indemnified Parties, in the
aggregate, are seeking indemnification exceeds the Threshold, the Indemnified
Parties may recover the full amount of such Damages starting from the first
dollar.
(c) So long as the Escrow Agreement shall be in effect, all claims
by any Indemnified Party under this Article VIII shall be made solely in
accordance with the terms of such agreement. Any claims made pursuant to the
Escrow Agreement shall be deemed to be made against all stockholders of Company
on a several basis.
8.3 Notice and Payment of Claims.
(a) Notice. After the termination of the Escrow Agreement, the party
entitled to indemnification pursuant to this Article VIII (the "Indemnified
Party") shall notify the party liable for indemnification pursuant to this
Article VIII (the "Indemnifying Party") within ten days after becoming aware of,
and shall provide to the Indemnifying Party as soon as practicable thereafter
all information and documentation necessary to support and verify, any Damages
that the Indemnified Party shall have determined to have given or is reasonably
likely to give rise to a claim for indemnification hereunder, and the
Indemnifying Party shall be given access to all books and records in the
possession or under the control of Parent or the Indemnified Party which the
Indemnifying Party reasonably determines to be related to such claim.
Notwithstanding the foregoing, the failure to so notify the Indemnifying Party
shall not relieve the Indemnifying Party of any liability that it may have to
the Indemnified Party, except to the extent that the Indemnifying Party
demonstrates that it is prejudiced by the Indemnified Party's failure to give
such notice.
(b) Payment. In the event an action for indemnification under this
Article VIII shall have been finally determined, such final determination shall
be paid to the Indemnified Party on demand in immediately available funds in
U.S. dollars. An action, and the liability for and amount of Damages therefor,
shall be deemed to be "finally determined" for purposes of this Article VIII
when the parties to such action have so determined by mutual agreement or, if
disputed, when a final non-appealable order shall have been entered.
8.4 Procedure for Indemnification of Third Party Claims.
(a) After the termination of the Escrow Agreement, upon receipt by
the Indemnified Party of notice of the commencement of any action, suit or
proceeding by a third party (a "Third Party Claim") against it, the Indemnified
Party shall, if a claim is to be made against an Indemnifying Party under this
Article VIII, give notice to the Indemnifying Party of
38
the commencement of such Third Party Claim as soon as practicable, but in no
event later than ten days after the Indemnified Party shall have been served,
but the failure to so notify the Indemnifying Party shall not relieve the
Indemnifying Party of any liability that it may have to the Indemnified Party,
except to the extent that the Indemnifying Party demonstrates that the defense
of such Third Party Claim is prejudiced by the Indemnified Party's failure to
give such notice.
(b) If a Third Party Claim is brought against the Indemnified Party
and it gives proper notice to the Indemnifying Party of the commencement of such
Third Party Claim, the Indemnifying Party will, unless the claim involves Taxes,
be entitled to participate in such Third Party Claim and, to the extent that it
wishes (unless (i) the Indemnifying Party is also a party to such Third Party
Claim and the Indemnified Party determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnifying Party fails to
provide reasonable assurance to the Indemnified Party of its financial capacity
to defend such Third Party Claim and provide indemnification with respect to
such Third Party Claim) to assume the defense of such Third Party Claim with
counsel reasonably satisfactory to the Indemnified Party and, after notice from
the Indemnifying Party to the Indemnified Party of its election to assume the
defense of such Third Party Claim, the Indemnifying Party shall not, as long as
it legitimately conducts such defense, be liable to the Indemnified Party under
this Article VIII for any fees of other counsel or any other expenses with
respect to the defense of such Third Party Claim, in each case subsequently
incurred by the Indemnified Party in connection with the defense of such Third
Party Claim, other than reasonable costs of investigation.
If the Indemnifying Party assumes the defense of a Third Party Claim,
(i) it shall be conclusively established for purposes of this Agreement that the
claims made in such Third Party Claim are within the scope of and subject to
indemnification; (ii) no compromise, discharge or settlement of, or admission of
liability in connection with, such claims may be effected by the Indemnifying
Party without the Indemnified Party's written consent (which consent shall not
be unreasonably withheld or delayed) unless (A) there is no finding or admission
of any violation of law or any violation of the rights of any person and no
effect on any other claims that may be made against the Indemnified Party, and
(B) the sole relief provided is monetary damages that are paid in full by the
Indemnifying Party; (iii) the Indemnifying Party shall have no liability with
respect to any compromise or settlement of such claims effected without its
written consent; and (iv) Parent and the Indemnified Party shall cooperate in
all reasonable respects with the Indemnifying Party in connection with such
defense, and shall have the right to participate, at the Indemnified Party's
sole expense, in such defense, with counsel selected by it.
Should the Indemnified Party withhold consent under clause (ii) above,
the Indemnifying Party shall have the right, upon notice to the Indemnified
Party within ten days of receipt of the Indemnified Party's denial of consent,
to pay to the Indemnified Party the full amount of such judgment or settlement,
including all interest, costs or other charges relating thereto, and shall pay
all attorneys' fees incurred to such date for which the Indemnifying Party is
obligated under this Agreement, at which time the Indemnifying Party's rights
and obligations with respect to the Third Party Claim shall cease. If proper
notice is given to an Indemnifying Party of the commencement of any Third Party
Claim and the Indemnifying Party does not, within ten days after the Indemnified
Party's notice is given, give notice to the Indemnified Party of its election to
assume the defense of such Third Party Claim, the Indemnifying Party shall be
bound by any
39
determination made in such Third Party Claim or any compromise or settlement
effected by the Indemnified Party.
(c) Notwithstanding the foregoing, if an Indemnified Party
determines in good faith that there is a reasonable probability that a Third
Party Claim may adversely affect it or its subsidiaries other than as a result
of monetary damages for which it could be entitled to indemnification under this
Agreement, the Indemnified Party may, by notice to the Indemnifying Party,
assume the exclusive right to defend, compromise, or settle such Third Party
Claim, but the Indemnifying Party shall not be bound by any determination of a
Third Party Claim so defended or any compromise or settlement effected without
its written consent (which may not be unreasonably withheld or delayed).
(d) The Indemnifying Party hereby consents to the non-exclusive
jurisdiction of any court in which a Third Party Claim is brought against the
Indemnified Party for purposes of any claim that the Indemnified Party may have
under this Agreement with respect to such Third Party Claim or the matters
alleged therein, and agree that process may be served on the Indemnifying Party
with respect to such a claim anywhere in the world.
ARTICLE IX
GENERAL PROVISIONS
9.1 Survival. This Article IX and the agreements of the Company, Parent
and Merger Sub contained in Sections 1.3 through 1.10, 1.12, 5.10 (Employees)
and 5.13 (Closing Financial Certificate) and Article VIII (Indemnification)
shall survive the consummation of the Merger. This Article IX, the agreements of
the Company, Parent and Merger Sub contained in Section 5.5 (Public Disclosure),
Section 7.2 (Notice of Termination; Effect of Termination), Section 7.3 (Fees
and Expenses) and the Confidentiality Agreement shall survive the termination of
this Agreement. All other representations, warranties, covenants and agreements
in this Agreement shall not survive the consummation of the Merger or the
termination of this Agreement, except that all representations and warranties
contained in Section 2.9 (Tax Matters) shall survive until the expiration of the
applicable statute of limitations.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given on the date of delivery if delivered
personally or by commercial delivery service, or sent via telecopy (receipt
confirmed) to the parties at the following addresses or telecopy numbers (or at
such other address or telecopy numbers for a party as shall be specified by like
notice):
(a) if to Parent or Merger Sub, to:
Digital Insight Corporation
00000 Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
40
with a copy (not constituting notice) to:
Xxxxxxxx & Xxxxxxxx LLP
0000 Xxxxxxx Xxxx Xxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
(b) if to Company, to:
Magnet Communications, Inc.
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xx., Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
Attention: President
Facsimile: (000) 000-0000
with a copy (not constituting notice) to:
Xxxxxx, Xxxxxxx & Xxxxxx, LLP
1600 Atlanta Financial Center
0000 Xxxxxxxxx Xx.
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
9.3 Interpretation; Definitions.
(a) When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
(b) For purposes of this Agreement:
(i) the term "knowledge" of a party hereto, with respect to any
matter in question, means the knowledge of the executive officers of such party
after the making by such officers of a reasonable investigation of the
circumstances related thereto in light of the facts known to such officers,
including by such officers making reasonable due inquiry of other individuals
who such officers reasonably believe should be aware of such matter;
41
(ii) the term "person" shall mean any individual, corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental Entity.
9.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Schedule and Parent
Schedule (a) constitute the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, it being understood that the Confidentiality Agreement shall continue in
full force and effect until the Closing and shall survive any termination of
this Agreement, and (b) except as otherwise specifically contemplated herein,
are not intended to confer upon any other person any rights or remedies
hereunder.
9.6 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
9.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
9.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
42
9.9 Waiver of Trial by Jury. The parties hereby knowingly, voluntarily
and intentionally waive (to the extent permitted by applicable law) any right
they may have to a trial by jury of any dispute arising under or relating to
this Agreement and agree that any such dispute shall be tried before a judge
sitting without a jury.
9.10 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
9.11 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
[Signature Page Follows]
43
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
DIGITAL INSIGHT CORPORATION
By: /s/ Xxxx Xxxxxxxx
-------------------------------
Xxxx Xxxxxxxx
Chief Executive Officer
By: /s/ Xxxxxxxxx S.C.S. Xxxxxx
-------------------------------
Xxxxxxxxx S.C.S. Xxxxxx
Chief Financial Officer
MUREAU ACQUISITIONS LLC
By: /s/ Xxxx Xxxxxxxx
-------------------------------
Xxxx Xxxxxxxx
Authorized Signatory
MAGNET COMMUNICATIONS, INC.
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx
President
By: /s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx
Chief Financial Officer
[Signature Page to Merger Agreement]
44
Exhibit A
LIST OF DEFINED TERMS
Term Section
--------------------------------- ----------------------------------
Accredited Investors Section 1.6(c)
Acquisition Proposal Section 5.4
Adjustment Rate Section 1.6(a)(ii)
Agreement Preamble
Base Stock Consideration Section 1.6(a)(i)
Bonus Payments Section 5.11
Bonus Plan Section 2.14
Business Intellectual Property Section 2.15(a)
Cash Consideration Section 1.6(a)
Certificate of Formation Section 1.4(a)
Certificate of Merger Section 1.2
Certificates Section 1.7(b)
Closing Section 1.2
Closing Balance Sheet Section 5.13
Closing Balance Sheet Date Section 5.13
Closing Date Section 1.2
Closing Financial Certificate Section 5.13
Code Recitals
Company Preamble
Company Charter Section 1.6(b)
Company Charter Documents Section 2.1
Company Common Stock Section 1.6(b)(iii)
Company Contract Section 2.13
Company Intellectual Property Section 2.15(b)
Company Option Plans Section 1.6(f)
Company Schedule Article II
Company Stock Section 1.6(b)(iii)
Company Stock Option Section 5.8
Confidentiality Agreement Section 5.3(a)
Damages Section 8.1
DGCL Recitals
Dissenters Set Aside Section 1.6(a)
Dissenting Shares Section 1.10
Dissenting Stockholder Section 1.10
DLLCA Recitals
DOL Section 2.14(f)
Effective Time Section 1.2
Environmental Laws Section 2.18
ERISA Section 2.14(c)
ERISA Affiliate Section 2.14(g)
Escrow Account Section 1.6(d)
Escrow Agent Section 1.6(d)
Escrow Agreement Section 1.6(d)
Escrow Termination Date Section 1.6(d)
A-1
Exhibit A
Term Section
--------------------------------- ----------------------------------
Excess Cash Section 5.12
Excess Cash Shortfall Section 5.13
Exchange Act Section 2.20
Excluded Shares Section 1.6(e)
Exempt Offering Section 5.1
Financial Statements Section 2.7
Governmental Entity Section 2.6
Hazardous Materials Section 2.18
High-End Collar Price Section 1.6(a)(i)
Holdback Amount Section 1.6(d)
HSR Act Section 2.6
Indemnified Party Section 8.3(a)
Indemnified Persons Section 8.1
Indemnifying Party Section 8.3(a)
Information Statement Section 5.2
Intellectual Property Section 2.15(a)
IRS Section 2.14(f)
IT Assets Section 2.15(h)
knowledge Section 9.3(b)
Low-End Collar Price Section 1.6(a)(i)
Material Adverse Effect on Company Section 2.1
Material Adverse Effect on Parent Section 3.1
Merger Section 1.1
Merger Consideration Section 1.6(a)
Merger Sub Preamble
Multiemployer Plan Section 2.14(d)
Net Assets Section 1.6(i)
Operating Agreement Section 1.4(b)
Other Payments Section 5.11
Parent Preamble
Parent Charter Documents Section 3.1
Parent Common Stock Section 1.6(a)
Parent Common Stock Market Price Section 1.6(a)
Parent Options Section 3.2
Parent Preferred Stock Section 3.2
Parent Schedule Article III
Parent SEC Reports Section 3.6(a)
person Section 9.3(b)
Plans Section 2.14(c)
Preferred Stock Section 1.6(b)(i)
Registration Rights Agreement Section 5.1
Retained Employees Section 5.10
Revised Excess Cash Section 5.13
SEC Section 3.6(a)
Securities Act Section 3.3
A-2
Exhibit A
Term Section
--------------------------------- ----------------------------------
Series A Preferred Stock Section 1.6(b)(ii)
Series B Preferred Stock Section 2.2
Series B-1 Preferred Stock Section 1.6(b)(ii)
Series C Preferred Stock Section 1.6(b)(ii)
Series C-1 Preferred Stock Section 1.6(b)(ii)
Series D Preferred Stock Section 1.6(b)(i)
Special Auditor Section 5.13
Specified Payments Section 5.11
Stock Consideration Section 1.6(a)
Stockholder Agreements Section 6.3(f)
Surviving Company Section 1.1
Tax or Taxes Section 2.9(a)
Tentative Closing Date Section 1.6(i)
Third Party Claim Section 8.4(a)
Third Party Intellectual Property Rights Section 2.15(b)
Threshold Section 8.2(b)
Transaction Agreements Section 2.5
Triggering Event Section 1.11
Warrant Section 5.9
A-3