AGREEMENT AND PLAN OF MERGER BY AND AMONG APOLLO GROUP, INC., ASTEROID ACQUISITION CORPORATION AND APTIMUS, INC. Dated as of August 7, 2007
BY
AND AMONG
APOLLO
GROUP, INC.,
ASTEROID
ACQUISITION CORPORATION
AND
APTIMUS,
INC.
Dated
as of August 7, 2007
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TABLE
OF CONTENTS
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Page
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ARTICLE
I
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THE
MERGER
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1
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1.1
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The
Merger
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1
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1.2
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Closing;
Effective Time
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2
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1.3
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Effects
of the Merger
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2
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1.4
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Further
Assurances
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2
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ARTICLE
II
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EFFECT
ON CAPITAL STOCK; SURRENDER OF
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CERTIFICATES
AND PAYMENT
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3
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2.1
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Effect
on Capital Stock
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3
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2.2
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Surrender
of Stock Certificates and Payment
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4
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2.3
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Withholding
Rights
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5
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2.4
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Lost,
Stolen or Destroyed Certificates
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6
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2.5
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Dissenting
Shares
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6
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2.6
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Company
Stock Options; Company SARS
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7
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2.7
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Warrants
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9
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2.8
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ESPP
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9
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ARTICLE
III
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REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
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10
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3.1
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Organization
and Good Standing
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10
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3.2
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Capitalization
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10
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3.3
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Subsidiaries
of the Company
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13
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3.4
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Authority
and Enforceability
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14
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3.5
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No
Conflict; Authorizations
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15
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3.6
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SEC
Filings; Financial Statements
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16
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3.7
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No
Undisclosed Liabilities
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17
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3.8
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Accounts
Receivable
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18
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3.9
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Taxes
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18
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3.10
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Compliance
with Law
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21
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3.11
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Authorizations
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21
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3.12
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Title
to Personal Properties
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22
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3.13
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Condition
of Tangible Assets
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23
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3.14
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Real
Property
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23
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3.15
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Intellectual
Property
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24
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3.16
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Absence
of Certain Changes or Events
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30
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3.17
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Contracts
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32
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3.18
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Litigation
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35
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3.19
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Employee
Benefits
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35
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3.20
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Labor
and Employment Matters
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39
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3.21
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Environmental
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40
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3.22
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Related
Party Transactions
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42
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3.23
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Insurance
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42
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TABLE
OF CONTENTS
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(continued)
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Page
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3.24
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Books
and Records
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43
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3.25
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Opinion
of Financial Advisor
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43
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3.26
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Brokers
or Finders
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43
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3.27
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No
Illegal Payments
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44
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3.28
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Customers
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44
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3.29
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Bank
Accounts
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44
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3.30
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Powers
of Attorney
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45
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3.31
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Rights
Plan
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45
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3.32
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Proxy
Statement
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45
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ARTICLE
IV
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REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
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45
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4.1
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Organization
and Good Standing
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45
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4.2
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Authority
and Enforceability
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46
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4.3
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No
Conflicts; Authorizations
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46
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4.4
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Availability
of Funds
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47
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4.5
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Brokers
or Finders
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47
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4.6
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Interim
Operations of Sub
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47
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4.7
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Stock
Ownership
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47
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4.8
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Proxy
Statement
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47
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ARTICLE
V
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COVENANTS
OF THE COMPANY
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48
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5.1
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Conduct
of Business
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48
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5.2
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Negative
Covenants
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48
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5.3
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Access
to Information
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51
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5.4
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Resignations
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51
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5.5
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Consents
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51
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5.6
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Notification
of Certain Matters
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51
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5.7
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Exclusivity
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52
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5.8
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Company
Shareholders' Meeting
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55
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5.9
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Proxy
Statement
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55
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5.10
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Rights
Plan
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56
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5.11
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FIRPTA
Certificate
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57
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5.12
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Company
Benefit Plans
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57
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ARTICLE
VI
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COVENANTS
OF PARENT
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57
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6.1
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Form
S-8
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57
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6.2
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Benefit
Plans
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57
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6.3
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Delisting
and Xxxxxxxxxxxxxx
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00
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6.4
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Indemnification
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58
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6.5
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Notification
of Certain Matters
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60
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TABLE
OF CONTENTS
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(continued)
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Page
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ARTICLE
VII
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COVENANTS
OF THE COMPANY AND PARENT
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60
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7.1
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Regulatory
Approvals
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60
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7.2
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Public
Announcements
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60
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7.3
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Section
16 Matters
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60
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7.4
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Further
Assurances
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61
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ARTICLE
VIII
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CONDITIONS
TO MERGER
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61
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8.1
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Conditions
to Each Party's Obligation to Effect the Merger
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61
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8.2
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Conditions
to Obligations of Parent and Merger Sub to Effect the Merger
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61
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8.3
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Conditions
to Obligation of the Company to Effect the Merger
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63
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ARTICLE
IX
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TERMINATION
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63
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9.1
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Termination
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63
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9.2
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Effect
of Termination
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66
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9.3
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Remedies
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66
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9.4
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Termination
Fee
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66
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ARTICLE
X
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MISCELLANEOUS
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68
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10.1
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Notices
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69
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10.2
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Survival
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69
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10.3
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Amendments
and Waivers
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69
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10.4
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Fees
and Expenses
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69
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10.5
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Successors
and Assigns
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70
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10.6
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Governing
Law
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70
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10.7
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Consent
to Jurisdiction
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70
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10.8
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Counterparts
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70
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10.9
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Third
Party Beneficiaries
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70
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10.10
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Entire
Agreement
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71
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10.11
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Captions
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71
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10.12
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Severability
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71
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10.13
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Specific
Performance
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71
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ARTICLE
XI
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DEFINITIONS
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71
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11.1
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Definitions
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71
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11.2
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Interpretation
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74
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iii
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AGREEMENT
AND PLAN OF MERGER (the "Agreement"),
dated
as of August 7, 2007 (the "Agreement
Date"),
by
and among Apollo Group, Inc., an Arizona corporation ("Parent"),
Asteroid Acquisition Corporation, a Washington corporation and a wholly owned
subsidiary of Parent ("Merger
Sub"),
and
Aptimus, Inc., a Washington corporation (the "Company").
WHEREAS,
the respective Boards of Directors of Parent, Merger Sub and the Company deem
it
advisable and in the best interests of their respective shareholders to
consummate the business combination provided for herein;
WHEREAS,
in furtherance thereof, the respective Boards of Directors of Parent, Merger
Sub
and the Company have approved this Agreement and the Merger, upon the terms
and
subject to the conditions set forth in this Agreement;
WHEREAS,
the Board of Directors of the Company has determined to recommend to the
shareholders of the Company the adoption of this Agreement; and
WHEREAS,
concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, certain
shareholders of the Company are entering into voting agreements with Parent
in
substantially the form attached as Exhibit A
hereto
(collectively, the "Company
Voting Agreements").
NOW,
THEREFORE, in consideration of the foregoing premises and the respective
representations and warranties, covenants and agreements contained herein,
the
parties hereto agree as follows:
ARTICLE I
THE
MERGER
1.1. The
Merger.
Subject
to the terms and conditions of this Agreement and the Articles of Merger in
such form as is required by the relevant provisions of the Washington Business
Corporation Act, as amended (the "WBCA"),
at
the Effective Time, Merger Sub shall be merged with and into the Company and
the
separate corporate existence of Merger Sub shall thereupon cease (the
"Merger").
As a
result of the Merger, the outstanding shares of capital stock of the Company
and
Merger Sub shall be converted or canceled in the manner provided in Article II
of this
Agreement, the separate corporate existence of Merger Sub shall cease and the
Company shall be the surviving corporation following the Merger. Merger Sub
and
the Company are sometimes referred to herein as the "Constituent
Corporations"
and the
Company as the surviving corporation following the Merger is sometimes referred
to herein as the "Surviving
Corporation."
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1
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1.2. Closing;
Effective Time.
The
closing of the Merger (the "Closing")
shall
take place at the offices of Xxxxxx, Xxxxx & Xxxxxxx LLP, One Market
Street, San Francisco, California, at 10:00 a.m. on a date to be specified
by
the parties which shall be no later than two Business Days after satisfaction
(or waiver as provided herein) of the conditions set forth in Article VIII
(other
than those conditions that by their nature will be satisfied at the Closing),
unless another time, date and/or place is agreed to in writing by the parties.
The date upon which the Closing occurs is herein referred to as the
"Closing
Date."
At the
Closing, the Company as the surviving corporation shall file the
Articles of Merger with the Secretary of State of the State of Washington
as provided in Chapter 23B.11.050 of the WBCA. The Merger shall become
effective at such time as the Articles of Merger is so filed or at such
later time as is set forth in the Articles of Merger, if different, which
time is hereinafter referred to as the "Effective
Time."
1.3. Effects
of the Merger.
(a) At
and
after the Effective Time, the Merger shall have the effects specified in
Chapter 23B.11.060 of the WBCA.
(b) At
the
Effective Time, the Articles of Incorporation of the Company as the
Surviving Corporation shall be amended and restated to read the same as the
Articles of Incorporation of Merger Sub as in effect immediately prior to
the Effective Time, except that Article I
of the
Articles of Incorporation of the Surviving Corporation shall read as
follows: "The name of this corporation is Aptimus, Inc." As so amended and
restated, the Articles of Incorporation of the Company shall be the
Articles of Incorporation of the Surviving Corporation until amended
thereafter in accordance with applicable Law.
(c) At
the
Effective Time, the Bylaws of Merger Sub shall be the Bylaws of the Surviving
Corporation (except that all references to Merger Sub in the Bylaws of the
Surviving Corporation shall be changed to refer to Aptimus, Inc.), until amended
thereafter in accordance with applicable Law.
(d) At
the
Effective Time, the directors and officers of Merger Sub immediately prior
to
the Effective Time shall be the directors and officers of the Surviving
Corporation, each to hold office until their respective death, permanent
disability, resignation or removal or until their respective successors are
duly
elected and qualified, all in accordance with the Articles of Incorporation
and Bylaws of the Surviving Corporation and applicable Law.
1.4. Further
Assurances.
If, at
any time after the Effective Time, the Surviving Corporation shall consider
or
be advised that any deeds, bills of sale, assignments or assurances or any
other
acts or things are necessary, desirable or proper (a) to vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its right, title
and interest in, to or under any of the rights, privileges, powers, franchises,
properties or assets of either of the Constituent Corporations, or
(b) otherwise to carry out the purposes of this Agreement, the Surviving
Corporation and its proper officers and directors or their designees shall
be
authorized to execute and deliver, in the name and on behalf of either
Constituent Corporation, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of either Constituent
Corporation, all such other acts and things as may be necessary, desirable
or
proper to vest, perfect or confirm the Surviving Corporation's right, title
and
interest in, to and under any of the rights, privileges, powers, franchises,
properties or assets of such Constituent Corporation and otherwise to carry
out
the purposes of this Agreement.
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2
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ARTICLE II
EFFECT
ON
CAPITAL STOCK; SURRENDER OF CERTIFICATES AND PAYMENT
2.1. Effect
on Capital Stock.
At the
Effective Time, by virtue of the Merger and without any action on the part
of
Parent, Merger Sub, the Company or any shareholder of the Company (each such
shareholder, a "Company
Shareholder"):
(a) Each
share of common stock of the Company, no par value ("Company
Common Stock"),
together with the associated rights to purchase shares of capital stock of
the
Company ("Rights")
issued
pursuant to that certain Rights Agreement dated as of March 12, 2002, by and
between the Company and Mellon Investor Services LLC, as Rights Agent (the
"Rights
Plan")
(each
such share of Company Common Stock, together with the associated Rights, a
"Share"),
issued and outstanding immediately prior to the Effective Time (other than
Excluded Shares and Dissenting Shares) shall be converted into the right to
receive and become exchangeable for $6.25 in cash, without interest thereon
(the
"Merger
Consideration"),
as
provided in Section 2.2
hereof.
(b) Each
Share issued and outstanding and owned by Parent, Merger Sub or any other
Subsidiary of Parent and Shares owned by the Company or any wholly owned
subsidiary of the Company, in each case not held on behalf of third parties
(collectively, "Excluded
Shares"),
immediately prior to the Effective Time shall be canceled and retired and shall
cease to exist, and no cash, securities or other consideration shall be payable
in respect thereof.
(c) Each
share of common stock of Merger Sub, no par value, issued and outstanding
immediately prior to the Effective Time shall be converted into and become
one
fully paid and nonassessable share of common stock of the Surviving
Corporation.
(d) If
between the Agreement Date and the Effective Time, the outstanding Shares shall
have been changed into a different number of shares or a different class, by
reason of any stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares or any similar event, the Merger
Consideration and any other amounts payable pursuant to this Agreement shall
be
correspondingly adjusted to the extent appropriate to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination
or
exchange of shares or similar event.
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3
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2.2. Surrender
of Stock Certificates and Payment.
(a) Prior
to
the Effective Time, Parent shall enter into an agreement with Mellon Investor
Services LLC, or such other bank or trust company of nationally recognized
standing that may be designated by Parent and is reasonably satisfactory to
the
Company (the "Paying
Agent").
As
soon as reasonably practicable following the Effective Time, Parent shall
deposit, or shall cause to be deposited, with the Paying Agent, for the benefit
of the Company Shareholders (other than with respect to Excluded Shares), the
amount of cash payable pursuant to Section 2.1
as of
the Effective Time in respect of the Shares (other than Excluded Shares) (such
cash being hereinafter referred to as the "Payment
Fund").
The
Paying Agent shall make the cash payments provided for in the preceding sentence
out of the Payment Fund. The Payment Fund shall not be used for any other
purpose.
(b) As
promptly as reasonably practicable after the Effective Time, Parent shall cause
the Paying Agent to mail to each holder of record of Shares a letter of
transmittal and instructions (which shall be in customary form and shall specify
that delivery shall be effected, and risk of loss and title to Shares shall
pass, only upon proper delivery of the certificates representing Shares
("Certificates")
or
transfer of uncertificated Shares ("Uncertificated
Shares")
to the
Paying Agent) for use in exchanging Shares for the Merger Consideration payable
in respect of such Shares. Upon (x) surrender to the Paying Agent of a
Certificate for cancellation, together with such letter of transmittal, duly
executed and completed in accordance with the instructions thereto, and such
other documents as may be reasonably required by the Paying Agent pursuant
to
such instructions, or (y) receipt of an "agent's message" by the Paying Agent
(or any other evidence that the Paying Agent may reasonably request) in the
case
of a book-entry transfer of Uncertificated Shares, the holder of such Shares
shall be entitled to receive in exchange therefor cash in an amount (subject
to
any applicable withholding taxes) equal to the product of the number of Shares
represented by a Certificate or Uncertificated Shares and the Merger
Consideration, and the Certificate or Uncertificated Shares so surrendered
shall
forthwith be canceled.
(c) If
any
portion of the Merger Consideration is to be paid to a Person other than the
Person in whose name the surrendered Certificate or uncertificated Share is
surrendered, it shall be a condition to such payment that (i) such
Certificate shall be properly endorsed or shall otherwise be in proper form
for
transfer or, in the case of an Uncertificated Share, such Uncertificated Share
shall be properly transferred and (ii) the Person requesting such payment
shall pay to the Paying Agent any and all Taxes required as a result of the
payment to a Person other than the registered holder of the Certificate or
Uncertificated Share or establish by evidence reasonably satisfactory to the
Paying Agent that any such Taxes have been paid or are not payable. Until
surrendered or transferred as contemplated by this Section 2.2,
each
Certificate and Uncertificated Share (other than Certificates or Uncertificated
Shares representing Excluded Shares and Dissenting Shares) shall represent
at
all times after the Effective Time solely the right to receive, upon such
surrender or transfer, in accordance with the terms hereof, the Merger
Consideration in respect of the Company Common Stock represented
thereby.
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4
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(d) All
cash
paid upon surrender of the Certificates or Uncertificated Shares in accordance
with the terms of this Article II
shall be
deemed to have been paid in full satisfaction of all rights pertaining to the
Shares theretofore represented by such Certificates or such Uncertificated
Shares. At the close of business on the day of the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of Shares thereafter on the records of the Company.
From and after the Effective Time, the Company Shareholders shall cease to
have
any rights with respect to Shares outstanding immediately prior to the Effective
Time, except as otherwise provided in this Agreement or by Law. On or after
the
Effective Time, any Certificates or Uncertificated Shares (other than those
representing Excluded Shares or Dissenting Shares) presented to the Paying
Agent
or Parent for any reason shall be canceled and exchanged for the Merger
Consideration provided for, and in accordance with the procedures set forth
in,
this Article II.
(e) Any
portion of the aggregate Merger Consideration made available to the Paying
Agent
to pay for Shares for which appraisal rights have been perfected shall be
returned to Parent upon demand. Any portion of the Payment Fund that remains
undistributed to the Company Shareholders for a period of six months after
the
Effective Time shall be redelivered to Parent, and any Company Shareholders
who
have not theretofore complied with this Article II
shall
thereafter look only to Parent for the cash to which they are entitled pursuant
to Section 2.1.
Any
portion of the Payment Fund remaining unclaimed by Company Shareholders as
of a
date that is immediately prior to such time as such amounts would otherwise
escheat to or become property of any Governmental Entity shall, to the extent
permitted by applicable Law, become the property of Parent free and clear of
any
claims or interest of any Person previously entitled thereto. To the fullest
extent permitted by Law, neither Parent nor the Surviving Corporation shall
be
liable to any Company Shareholder or other Person for cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
Law.
2.3. Withholding
Rights.
Each of
the Surviving Corporation, Parent and the Paying Agent shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any Company Shareholder such amounts as it is required to deduct
and withhold with respect to the making of such payment under the Internal
Revenue Code of 1986 (the "Code"),
or
any provision of state, local or foreign Tax Law. To the extent that amounts
are
so withheld by the Surviving Corporation, Parent or the Paying Agent, as the
case may be, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the Shares in respect of which
such deduction and withholding was made by the Surviving Corporation, Parent
or
the Paying Agent, as the case may be.
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5
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2.4. Lost,
Stolen or Destroyed Certificates.
If any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed, and, if required by the Surviving Corporation or the Paying
Agent, the posting by such Person of a bond, in such reasonable amount as the
Surviving Corporation or Paying Agent may direct, as indemnity against any
claim
that may be made against it with respect to such Certificate, the Paying Agent
will issue in exchange for such lost, stolen or destroyed Certificate the amount
of cash to which the holder thereof is entitled pursuant to
Section 2.1
(subject
to any applicable withholding taxes).
2.5. Dissenting
Shares.
(a) Notwithstanding
anything in this Agreement other than Section 2.5(b)
to the
contrary, any Shares that are issued and outstanding immediately prior to the
Effective Time and held by a shareholder who is entitled to dissent from the
Merger under Chapter 23B.13 of the WBCA and who has exercised, when and in
the manner required by Chapter 23B.13 of the WBCA to the extent so required
prior to the Effective Time, such right to dissent and to obtain payment of
the
fair value of such shares under Chapter 23B.13 of the WBCA in connection
with the Merger ("Dissenting
Shares")
shall
not be converted into the right to receive the Merger Consideration unless
and
until such shareholder shall have effectively withdrawn or lost (through failure
to perfect or otherwise) such shareholder's right to obtain payment of the
fair
value of such shareholder's Dissenting Shares under Chapter 23B.13 of the
WBCA, but shall instead be entitled only to such rights with respect to such
Dissenting Shares as may be granted to such shareholder under
Chapter 23B.13 of the WBCA. From and after the Effective Time, Dissenting
Shares shall not be entitled to vote for any purpose or be entitled to the
payment of dividends or other distributions (except dividends or other
distributions payable to shareholders of record prior to the Effective Time).
The Company shall promptly provide any notices of dissent to
Parent.
(b) If
any
shareholder who holds Dissenting Shares effectively withdraws or loses (through
failure to perfect or otherwise) such shareholder's right to obtain payment
of
the fair value of such shareholder's Dissenting Shares under Chapter 23B.13
of the WBCA, then, as of the later of the Effective Time and the occurrence
of
such effective withdrawal or loss, such shareholder's shares of Common Stock
shall no longer be Dissenting Shares and, if the occurrence of such effective
withdrawal or loss is later than the Effective Time, shall be treated as if
they
had as of the Effective Time been converted into the right to receive Merger
Consideration as set forth in Section 2.1(a).
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(c) The
Company shall give Parent (i) prompt notice of any notices of dissent
received by the Company, withdrawals of such notices, and any other related
instruments served pursuant to the WBCA and received by the Company and
(ii) the opportunity to direct all negotiations and proceedings with
respect to Dissenting Shares under the WBCA. The Company shall not, except
with
the prior written consent of Parent or as otherwise required by the WBCA, make,
offer to make or agree to make any payment with respect to any Dissenting
Shares.
2.6. Company
Stock Options; Company SARS.
(a) At
the
Effective Time, by virtue of the Merger and without the need for any further
action on the part of the Company or holders of Company Stock Options, Parent
shall assume the Company's 1997 Stock Option Plan and 2001 Stock Plan (the
"Company
Stock Plans"),
with
the result that all obligations of the Company under the Company Stock Plans,
including with respect to Company Stock Options outstanding at the Effective
Time, shall be obligations of Parent following the Effective Time. Without
limiting the foregoing, at the Effective Time, each outstanding option to
purchase shares of Company Common Stock under the Company Stock Plans (each
such
option, a "Company
Stock Option"),
whether vested or unvested, shall, by virtue of the Merger and without any
further action on the part of the Company or the holder thereof, be assumed
by
Parent (each such assumed option, a "Replacement
Option").
Each
Replacement Option shall be subject to the same terms and conditions as the
applicable Company Stock Option it replaced, except that (A) each such
Replacement Option shall be exercisable for, and represent the right to acquire,
that whole number of shares of Parent Common Stock (rounded down to the nearest
whole share) equal to the number of shares of Company Common Stock subject
to
such Company Stock Option multiplied by the Option Exchange Ratio, and
(B) the exercise price per share of Parent Common Stock shall be an amount
equal to the exercise price per share of the shares of Company Common Stock
subject to such Company Stock Option in effect immediately prior to the
Effective Time divided by the Option Exchange Ratio (the exercise price per
share, as so determined, being rounded up to the nearest full cent). To the
extent that Company Stock Options were intended to qualify as "incentive stock
options," each Replacement Option will be intended to qualify as an "incentive
stock option" under the Code. As
promptly as reasonably practicable following the Effective Time, Parent shall
issue to each Person who immediately prior to the Effective Time was a holder
of
an outstanding Company Stock Option under the Company Stock Plans a document
evidencing the foregoing assumption of such Company Stock Option.
"Option
Exchange Ratio"
means a
fraction, the numerator of which is the Merger Consideration and the denominator
of which is the average closing price of Parent Common Stock on the five trading
days immediately preceding the date on which the Effective Time
occurs.
Notwithstanding the foregoing, at the option of a holder of a vested Company
Stock Option delivered to the Company and Parent not less than 10 Business
Days
prior to Closing, such Company Stock Option shall not be assumed by Parent
and
shall be net exercised (subject to receipt by the Company and Parent of the
relevant documentation evidencing such Company Stock Option and any agreement
reasonably requested by Parent to evidence such net exercise), and such holder
shall be entitled to receive, subject to and in accordance with
Section 2.2,
an
amount of cash, without interest, equal to the difference between (i) the
product of (A) the number of shares of Company Common Stock subject to such
vested Company Stock Option multiplied by (B) the Merger Consideration, less
(ii) the product of (A) number of shares of Company Common Stock subject to
such
vested Company Stock Option multiplied by (B) the exercise price per share
of
Company Common Stock, in each case subject to the withholding by the Company
of
required Taxes. As of the Effective Time, all such vested Company Stock Options
that have been net exercised as provided in the immediately preceding sentence
shall automatically be cancelled and no longer deemed outstanding, and the
holders thereof shall not have any rights with respect thereto, except the
right
to receive the amount resulting from the calculation set forth in the
immediately preceding sentence, without interest, upon surrender of their option
documentation and compliance with Section 2.2.
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(b) At
the
Effective Time all obligations of the Company under the Company Stock Plans,
including with respect to Company stock appreciation rights outstanding at
the
Effective Time ("Company
SARS"),
shall
be obligations of Parent following the Effective Time. Without limiting the
foregoing, at the Effective Time, each outstanding Company SAR under the Company
Stock Plans, whether vested or unvested, shall, by virtue of the Merger and
without any further action on the part of the Company or the holder thereof,
be
assumed by Parent (each such assumed option, a "Replacement
SAR").
Each
Replacement SAR shall be subject to the same terms and conditions as the
applicable Company SAR it replaced, except that (A) each such Replacement
SAR shall be exercisable for, and represent the right to acquire, that whole
number of shares of Parent Common Stock (rounded down to the nearest whole
share) equal to the number of shares of Company Common Stock subject to such
Company SAR multiplied by the Option Exchange Ratio, and (B) the exercise
price per share of Parent Common Stock shall be an amount equal to the exercise
price per share of the shares of Company Common Stock subject to such Company
SAR in effect immediately prior to the Effective Time divided by the Option
Exchange Ratio (the exercise price per share, as so determined, being rounded
up
to the nearest full cent). As
promptly as reasonably practicable following the Effective Time, Parent shall
issue to each Person who immediately prior to the Effective Time was a holder
of
an outstanding Company SAR under the Company Stock Plans a document evidencing
the foregoing assumption of such Company SAR.
(c) At
the
Effective Time, each share of Company Common Stock that is subject to vesting
and a repurchase option in favor of the Company immediately prior to the
Effective Time (collectively, "Company
Restricted Shares")
shall
be canceled and shall cease to exist. In lieu of payment of the Merger
Consideration for each Company Restricted Share, Parent agrees to pay the
Applicable Amount to each holder of Company Restricted Shares promptly after
each Applicable Vesting Date (subject to any applicable withholding taxes);
provided
that
if such
holder is not employed by Parent or its Affiliates on the Applicable Vesting
Date, Parent shall not be required to make a payment of, and such holder shall
not be entitled to receive, the Applicable Amount with respect to any Company
Restricted Shares that would not have vested as of the date on which such holder
ceased to be employed by Parent or its Affiliates. "Applicable
Amount"
means
the product of the Merger Consideration and the number of Company Restricted
Shares held by such holder which would have vested on the Applicable Vesting
Date if such Company Restricted Shares had remained outstanding. "Applicable
Vesting Date"
means,
in respect of any Company Restricted Shares, each date on which the Company's
right to repurchase such Company Restricted Shares would have lapsed if such
Company Restricted Shares had remained outstanding.
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2.7. Warrants.
At the
Effective Time, by virtue of the Merger and without the need for any further
action on the part of the Company or holders of warrants to purchase capital
stock of the Company ("Warrants"),
each
Warrant issued and outstanding immediately prior to the Effective Time shall
be
converted into and represent the right to receive an amount of cash, without
interest, equal to the product of (a) the number of shares of Company Common
Stock subject to such Warrant immediately prior to the Effective Time (whether
vested or unvested) multiplied by (b) the Merger Consideration, less the
exercise price per share attributable to such Warrant; provided,
however,
that
the Surviving Corporation and Parent shall be entitled to deduct and withhold
from such payment made to the holder of a Warrant the amount of withholding
for
Taxes required to be deducted and withheld as a result of the transactions
contemplated by this Section 2.7;
provided further,
that
the right of the holder of a Warrant to receive such cash shall remain subject
to the same terms and conditions set forth in such Warrant.
2.8. ESPP.
Immediately prior to and effective as of the Effective Time (and subject to
the
consummation of the Merger), the Company shall take all reasonable actions
necessary to cause the termination of the Company's 2000 Employee Stock Purchase
Plan (the "ESPP").
To
the extent permitted by the ESPP, the rights of participants in the ESPP with
respect to any outstanding offering period under the ESPP shall be determined
by
treating the Business Day prior to the Effective Time (such date, the
"Designated
Date")
as the
last day of such offering period and by making pro-rata adjustments as may
be
necessary to reflect the shortened offering period but otherwise treat such
shortened offering period as a fully effective and completed offering period
for
all purposes under the ESPP. On the Designated Date, the Company shall apply
the
funds credited as of such date under the ESPP within each participant's payroll
withholding account to the purchase of Company
Common Stock in accordance with the terms of the ESPP unless such participant
has previously withdrawn from such offering period in accordance with the terms
of the ESPP.
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ARTICLE III
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company represents and warrants to Parent and Merger Sub that the statements
contained in this Article III
are true
and correct, except as set forth in the disclosure letter dated and delivered
on
the Agreement Date by the Company to Parent (the "Company
Disclosure Letter"),
which
is being concurrently delivered to Parent in connection herewith and is
designated therein as being the Company Disclosure Letter. The Company
Disclosure Letter shall be arranged in paragraphs corresponding to each
representation and warranty section heading set forth in this Article III.
Each
exception to a representation and warranty set forth in the Company Disclosure
Letter shall be deemed to qualify the specific representation and warranty
which
is referenced in the applicable paragraph of the Company Disclosure Letter,
and
no other representation or warranty, unless the applicability to any other
representation or warranty is reasonably apparent from the wording of such
exception.
3.1. Organization
and Good Standing.
The
Company is a corporation duly organized, validly existing and in good standing
under the Laws of the jurisdiction of its incorporation, has all requisite
power
to own, lease and operate its properties and to carry on its business as now
being conducted, and is duly qualified to do business and is in good standing
as
a foreign corporation in each jurisdiction in which it owns or leases property
or conducts any business so as to require such qualification, except for those
jurisdictions where the failure to be so qualified and in good standing would
not reasonably be expected to be, individually or in the aggregate, material
to
the Company and its Subsidiaries taken as a whole. The Company has made
available to Parent prior to the Agreement Date true and complete copies of
(i) its Charter Documents and (ii) all minutes of (A) the
meetings of its Board of Directors, (B) the meetings of each committee of
its Board of Directors and (C) the meetings of its shareholders (in each
case including any and all written consents in lieu of such meetings) held
since
January 1, 2005. Such Charter Documents are in full force and effect and the
Company is not in default of any provision thereunder. There are no resolutions
of the Board of Directors, any committee of the Board of Directors or the
shareholders other than as disclosed in the minutes and written consents
provided to Parent. "Charter
Documents"
means,
with respect to any entity, the certificate of incorporation, the articles
of
incorporation, by-laws, articles of organization, limited liability company
agreement, partnership agreement, formation agreement, joint venture agreement
or other similar organizational documents of such entity (in each case, as
amended to date).
3.2. Capitalization.
(a) The
authorized capital stock of the Company consists of 100,000,000 shares of
Company Common Stock, of which 6,611,401 shares of Company Common Stock are
issued and outstanding as of August 6, 2007 (and none of which are subject
to
vesting), and 10,000,000 shares of preferred stock, no par value (the
"Company
Preferred Stock"),
of
which no shares of Company Preferred Stock are issued and outstanding as of
the
Agreement Date. All issued and outstanding shares of Company Common Stock have
been duly authorized and validly issued, are fully paid and nonassessable,
and
were issued in compliance with all applicable federal and state securities
Laws.
No shares of Company Common Stock are held by any Subsidiary of the Company.
No
shares of Company Common Stock or Company Preferred Stock are held in the
Company's treasury. On the Agreement Date, 10,000 shares of Company Preferred
Stock are designated as Series C Preferred Stock and are reserved for issuance
upon the exercise of Rights issued pursuant to the Rights Plan.
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(b) The
Company has duly reserved (i) 2,681,078 shares of Company Common Stock for
future issuance pursuant to the Company Stock Plans, of which Company Stock
Options to purchase 1,855,862 shares of Company Common Stock are outstanding
as
of August 6, 2007, and 219,000 shares of Company Common Stock are subject to
Company SARS outstanding as of August 6, 2007, and (ii) 1,925,176 shares of
Company Common Stock for future issuance pursuant to the Company ESPP as of
August 6, 2007. The Company has issued 25,000 shares of restricted stock that
is
subject to vesting (the “Company
Restricted Stock”)
all of
which are unvested as of the Agreement Date. The Company has made available
to
Parent a report dated as of August 6, 2007 that sets forth with respect to
each
Company Stock Option that is outstanding as of such date: (i) the name of
the holder of such Company Stock Option; (ii) the date on which such
Company Stock Option was granted; (iii) the term of such Company Stock
Option; (iv) the total number of shares of Company Common Stock that was
originally subject to such Company Stock Option; (v) the number of shares
of Company Common Stock that remain subject to such Company Stock Option and
the
number of such shares of Company Common Stock that have vested; (vi) the
vesting schedule for such Company Stock Option; (vii) the exercise price
per share of Company Common Stock purchasable under such Company Stock Option;
and (viii) whether such Company Stock Option has been designated an
"incentive stock option" as defined in section 422 of the Code. The Company
has made available to Parent accurate and complete copies of (A) its
standard form of option agreement, (B) any option agreement which deviates
in any material respect from the standard form of option agreement and
(C) the Company Stock Plans. The Company has made available to Parent a
report dated as of August 6, 2007 that sets forth with respect to each Company
SAR that is outstanding as of such date: (i) the name of the holder of such
Company SAR; (ii) the date on which such Company SAR was granted;
(iii) the term of such Company SAR; (iv) the total number of shares of
Company Common Stock that was originally subject to such Company SAR;
(v) the number of shares of Company Common Stock that remain subject to
such Company SAR and the number of such shares of Company Common Stock that
have
vested; (vi) the vesting schedule for such Company SAR; and (vii) the
exercise price per share of Company Common Stock subject to such Company SAR.
The Company has made available to Parent accurate and complete copies of
(A) its standard form of stock appreciation right agreement and
(B) any stock appreciation right agreement which deviates in any material
respect from the standard form of stock appreciation right
agreement.
The
Company has made available to Parent a report that sets forth, with respect
to
Company Restricted Stock, the name of the holder of such stock, the date of
issuance of the Company Restricted Stock, the total number of shares of Company
Restricted Stock, the total number of shares of Company Restricted Stock that
have vested and the vesting schedule for such stock.
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(c) Except
for (i) the shares of Company Common Stock outstanding as of the Agreement
Date, (ii) the Company Stock Options and Company SARS outstanding as of the
Agreement Date, (iii) the
Rights, (iv) purchase rights under the Company ESPP and (v) the
other options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights and other Contracts that, directly or indirectly, could
require the Company to issue, sell or otherwise cause to become outstanding
shares of Company Common Stock that are outstanding as of the Agreement Date
and
disclosed in Section 3.2(c)(v)
of the
Company Disclosure Letter (the options, warrants, rights and other Contracts
required to be disclosed pursuant to this Section 3.2(d),
the
"Other
Purchase Rights"),
the
Company does not have outstanding securities of any kind as of the Agreement
Date. Except as set forth in the preceding sentence, the Company is not a party
to any Contract in effect as of the Agreement Date obligating the Company,
directly or indirectly, to issue additional securities.
(d) All
outstanding Company Stock Options, Company SARS, Company Restricted Stock and
Other Purchase Rights have been duly authorized and validly issued and were
issued in compliance with all applicable federal and state securities Laws.
All
shares of Company Common Stock subject to issuance upon exercise, conversion
and/or exchange of Company Stock Options, Company SARS and Other Purchase
Rights, upon issuance in accordance with the terms and conditions specified
in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable.
(e) No
Company Stock Option, Company SAR, Company Restricted Stock or Other Company
Purchase Right will by its terms require an adjustment in its terms in
connection with the Merger, except as contemplated by this Agreement. Neither
the consummation of the transactions contemplated by this Agreement, nor any
action taken or to be taken by the Company in connection with such transactions,
will result in (i) any
acceleration of exercisability or vesting or lapse of restrictions (including
any right to acceleration of vesting or lapse of restrictions that is contingent
upon the occurrence of a subsequent event) in favor of any holder of Company
Stock Options, Company SARS, Company Restricted Stock, Warrants or Other
Purchase Rights (ii) any additional benefits for any holder of Company
Stock Options, Company Restricted Stock, Company SARS, Warrant or Other Purchase
Rights or (iii) the
inability of Parent after the Effective Time to exercise any right or benefit
held by the Company prior to the Effective Time with respect to any Company
Stock Option, Company SAR, Company Restricted Stock, Warrant or Other Purchase
Right assumed by Parent. The assumption by Parent of the Company Stock Plans
and
the Company Stock Options and Company SARS in accordance with
Section 2.6
hereunder will not give rise to any event described in
clauses (i) through (iii) of the immediately preceding sentence. Each
holder of a Company Stock Option, Company SAR, Company Restricted Stock or
Other
Purchase Right has been or will be given, or shall have properly waived, any
required notice of the Merger prior thereto, and all such rights of notice
will
terminate at or prior to the Effective Time.
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(f) None
of
the shares of Company Common Stock, Company Stock Options, Company SARS or
Other
Purchase Rights were issued, or to the Company's Knowledge have been
transferred, in violation of, or are subject to, any preemptive rights, rights
of first offer or subscription agreements of the Company. The Company is not
a
party to any shareholder agreements, voting agreements, voting trusts or any
such other similar arrangements with respect to the transfer, voting or other
rights associated with its securities (other than the Company Voting
Agreements).
(g) Except
for the repurchase at cost of shares of Company Common Stock from employees
or
contractors of the Company and its Subsidiaries in connection with the
termination of their service provider relationship, the Company has not
repurchased or otherwise reacquired any of its securities. The repurchase of
any
such securities was duly approved and authorized by the Board of Directors
and
complied in all respects with applicable Law, and the Company has no liability,
contingent or otherwise, to make any payments with respect to any such
repurchased securities. There are no obligations, contingent or otherwise,
of
the Company to repurchase, redeem or otherwise acquire any of its securities.
There are no declared or accrued unpaid dividends with respect to any of the
Company's securities.
(h) The
Company does not have outstanding or authorized any phantom stock, profit
participation, or similar rights.
(i) The
Company does not have outstanding any bonds, debentures, notes or other
obligations or debt securities the holders of which have the right to vote
(or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matter.
3.3. Subsidiaries
of the Company.
(a) Section 3.3(a)
of the
Company Disclosure Letter contains a true and complete list of the Subsidiaries
of the Company and sets forth with respect to each such Subsidiary the
jurisdiction of formation, the authorized and outstanding capital stock of
such
Subsidiary and the owner(s) of record of such outstanding capital stock. The
outstanding shares of capital stock of each Subsidiary of the Company have
been
duly authorized and validly issued, are fully paid and nonassessable and are
owned by the Company or another Subsidiary of the Company free and clear of
all
liens, claims, charges, security interests, mortgages, pledges, easements,
conditional sale or other title retention agreements, defects in title,
covenants or other restrictions of any kind, including, any restrictions on
the
use, voting, transfer or other attributes of ownership (collectively,
"Liens")
other
than Permitted Liens.
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(b) Each
Subsidiary of the Company is validly existing and in good standing under the
Laws of the jurisdiction of its formation, has all requisite power to own,
lease
and operate its properties and to carry on its business as now being conducted,
and is duly qualified to do business and is in good standing in each
jurisdiction in which it owns or leases property or conducts any business so
as
to require such qualification, except for those jurisdictions where the failure
to be so qualified and in good standing would not reasonably be expected to
be,
individually or in the aggregate, material to the Company and its Subsidiaries
taken as a whole.
(c) Other
than the shares of capital stock set forth in Section 3.3(a)
of the
Company Disclosure Letter, no Subsidiary of the Company has outstanding
securities of any kind. No Subsidiary of the Company is party to any Contract
obligating such Subsidiary, directly or indirectly, to issue any additional
securities.
(d) No
Subsidiary of the Company has outstanding any bonds, debentures, notes or other
obligations or debt securities the holders of which have the right to vote
(or
convertible into, or exercisable or exchangeable for, securities having the
right to vote) on any matter.
(e) Other
than the Subsidiaries set forth in Section 3.3(a)
of the
Company Disclosure Letter, neither the Company nor any Subsidiary of the
Company, directly or indirectly, owns any securities or other interest in any
corporation, partnership, joint venture or other business association or
entity.
(f) There
are
no obligations, contingent or otherwise, of the Company or any Subsidiary of
the
Company to make an investment (in the form of a loan, capital contribution
or
otherwise) in any entity.
3.4. Authority
and Enforceability.
(a) The
Company has all necessary corporate power and authority to enter into this
Agreement, and, subject in the case of the consummation of the Merger to the
Company Shareholder Approval, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution and delivery
by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company, subject in the case of the
consummation of the Merger to the Company Shareholder Approval. The affirmative
vote of the holders of a majority of the outstanding shares of Company Common
Stock at a duly convened meeting of the Company Shareholders to approve this
Agreement is the only vote of the holders of any class of capital stock or
other
security of the Company necessary to approve this Agreement and the Merger
(the
"Company
Shareholder Approval").
This
Agreement has been duly executed and delivered by the Company and, assuming
due
authorization, execution and delivery by Parent and Merger Sub, constitutes
the
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or other similar
Laws affecting or relating to creditors' rights generally, and (ii) the
availability of injunctive relief and other equitable remedies.
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(b) The
Board
of Directors of the Company has, by the unanimous vote of all directors then
in
office, (i) approved this Agreement and the transactions contemplated
hereby, (ii) determined that the Merger is advisable and in the best
interests of the Company Shareholders and (iii) resolved to recommend that
the Company Shareholders adopt this Agreement and directed that this Agreement
be submitted to the Company Shareholders for adoption.
3.5. No
Conflict; Authorizations.
(a) The
execution and delivery of this Agreement by the Company do not, and the
performance by the Company of its obligations hereunder and the consummation
by
the Company of the transactions contemplated hereby (in each case, with or
without the giving of notice or lapse of time, or both) will not,
(i) violate the provisions of the Company's or any of its Subsidiaries'
Charter Documents, (ii) violate
or conflict with, or constitute a default, an event of default or an event
creating rights of acceleration, termination, cancellation, imposition of
additional obligations or loss of rights, or require a consent to assignment,
under any Material Contract, (iii) assuming
compliance by the Company with the matters referred to in
Section 3.5(b),
violate
or conflict with any Law, Authorization or Order applicable to the Company
or
any of its Subsidiaries, or give any Governmental Entity or other Person the
right to challenge any of the transactions contemplated hereby or to exercise
any remedy, obtain any relief under or revoke or otherwise modify any rights
held under, any such Law, Authorization or Order, or (iv) result
in the creation of any Liens upon any of the assets owned or used by the Company
or any of its Subsidiaries, except for any such violations, conflicts, defaults
and events referred to in clause (ii)
and for
any such violations, conflicts, challenges, remedies, relief, revocations,
modifications or Liens referred to in clauses (iii)
and
(iv)
that
would not reasonably be expected to have, individually or in the aggregate,
a
Company Material Adverse Effect. Section 3.5(a)
of the
Company Disclosure Letter sets forth all consents, waivers, assignments and
other approvals and actions that are required in connection with the
transactions contemplated by this Agreement under any Material Contract
(collectively, "Consents")
in
order to preserve all material rights of, and material benefits to, the
Surviving Corporation and its Subsidiaries thereunder.
(b) No
Authorization or Order of, registration, declaration or filing with, or notice
to any Governmental Entity or other Person, is required by or with respect
to
the Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement and the consummation of the Merger, except for
(i) the filing of the Articles of Merger with the Secretary of State
of the State of Washington, (ii) the filing with the Securities and
Exchange Commission (the "SEC")
of the
Proxy Statement and such reports and filings under the Securities Exchange
Act
of 1934 (the "Exchange
Act")
as may
be required in connection with this Agreement and the transactions contemplated
hereby, (iii) such filings and notifications under the rules of the Nasdaq
Capital Market or applicable securities Laws as may be required in connection
with this Agreement and the transactions contemplated hereby, and (iv) such
other consents, approvals, orders, authorizations, releases, waivers,
registrations, declarations or filings that if not made or obtained would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of the Company to consummate the Merger or have
a
Company Material Adverse Effect.
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3.6. SEC
Filings; Financial Statements.
(a) The
Company has filed all forms, reports and documents required to be filed by
it
with the SEC since January 1, 2005 (collectively, the "Company
SEC Reports").
As of
the respective dates they were filed (and if amended or superseded by a filing
prior to the Agreement Date then on the date of such filing), (i) each
Company SEC Report complied in all material respects with the requirements
of
the Securities Act of 1933, as amended (the "Securities
Act"),
or
the Exchange Act, as the case may be, and (ii) none of the Company SEC
Reports contained any untrue statement of a material fact or omitted to state
a
material fact required to be stated therein or necessary in order to make the
statements made therein, in the light of the circumstances under which they
were
made, not misleading, except to the extent corrected (A) prior to the Agreement
Date with respect to any Company SEC Report that was filed prior to the
Agreement Date, or (B) prior to the Effective Time with respect to any Company
SEC Report that is filed subsequent to the Agreement Date. No Subsidiary of
the
Company is required to file any form, report or other document with the SEC
or
any similar Governmental Entity or any national securities exchange or quotation
service.
(b) Each
of
the consolidated financial statements (including, in each case, any notes
thereto) contained in the Company SEC Reports (the "Company
Financial Statements")
was
prepared in accordance with United States generally accepted accounting
principles ("GAAP")
applied on a consistent basis throughout the periods indicated (except as may
be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Form 10-Q or Form 8-K of the SEC) and each presents fairly, in
all material respects, the consolidated financial position, results of
operations and cash flows of the Company and its consolidated Subsidiaries
as at
the respective dates thereof and for the respective periods indicated therein,
except as otherwise noted therein (subject, in the case of unaudited statements,
to normal and recurring year-end and quarter-end adjustments which would not
reasonably be expected to be, individually or in the aggregate, material to
the
Company and its Subsidiaries taken as a whole). The most recent balance sheet
of
the Company contained in the Company SEC Reports as of March 31, 2007 is
hereinafter referred to as the "Company
Balance Sheet"
and the
date thereof is hereinafter referred to as the "Company
Balance Sheet Date."
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(c) The
Company has made available to Parent a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but
which are required to be filed, to agreements, documents or other instruments
that previously had been filed by the Company with the SEC pursuant to the
Securities Act or the Exchange Act.
(d) The
Company is in compliance in all material respects with (i) the applicable
provisions of the Xxxxxxxx-Xxxxx Act of 2002 ("SOX")
and
(ii) the applicable listing and corporate governance rules and regulations
of the Nasdaq Capital Market.
(e) The
Company has established and maintained disclosure controls and procedures (as
defined in Rule 13a-15 promulgated under the Exchange Act). Such disclosure
controls and procedures are sufficient to ensure that all information that
is
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the SEC, and that all
such
information is accumulated and communicated to the Company's management as
appropriate to allow timely decisions regarding required disclosure and to
make
the certifications of the Chief Executive Officer and the Chief Financial
Officer of the Company required under the Exchange Act with respect to such
reports.
(f) The
Company has established and maintained internal controls over financial
reporting (as defined in Rule 13a-15 promulgated under the Exchange Act).
Such internal controls over financial reporting provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with GAAP. There are
no
significant deficiencies or material weaknesses in the design or operation
of
the Company's internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data. To the
Company's Knowledge, there is no fraud, whether or not material, that involves
management or other employees who have a significant role in the Company's
internal controls.
3.7. No
Undisclosed Liabilities.
The
Company and its Subsidiaries have no material liabilities, obligations or
commitments of any nature whatsoever, asserted or unasserted, known or unknown,
absolute or contingent, accrued or unaccrued, matured or unmatured or otherwise
("Liabilities")
that
would be required by GAAP to be reflected on a consolidated balance sheet of
the
Company and its consolidated Subsidiaries, except (a) those which are
adequately reflected or reserved against in the Company Balance Sheet or
described in the notes thereto, (b) those which have been incurred in the
ordinary course of business and consistent with past practice since the Company
Balance Sheet Date and which would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect, and (c)
those incurred in connection with the transactions contemplated by this
Agreement, as listed on Section 3.7 of the Company Disclosure Letter. Neither
the Company nor any of its Subsidiaries is a party to, or has any commitment
to
become a party to, any joint venture, off-balance sheet partnership or any
similar Contract or arrangement (including any Contract or arrangement relating
to any transaction or relationship between or among the Company and any of
its
Subsidiaries, on the one hand, and any unconsolidated Affiliate, including
any
structured finance, special purpose or limited purpose entity or Person, on
the
other hand, or any "off-balance sheet arrangement" (as defined in
Item 303(a)(iv) of Regulation S-K)).
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3.8. Accounts
Receivable.
The
accounts receivable of the Company and its Subsidiaries as set forth on the
Company Balance Sheet or arising since the date thereof are, to the extent
not
paid in full by the account debtor prior to the Agreement Date, (a) valid
and genuine, have arisen solely out of bona fide sales and deliveries of goods,
performance of services and other business transactions in the ordinary course
of business consistent with past practice, and (b) not subject to valid
defenses, set-offs or counterclaims. The allowance for collection losses on
the
Company Balance Sheet and, with respect to accounts receivable arising since
the
Company Balance Sheet Date, the allowance for collection losses shown on the
accounting records of the Company and its Subsidiaries, have been determined
in
accordance with GAAP consistent with past practice.
3.9.
Taxes.
(a) As
used
in this Agreement, the following words and terms have the following
definitions:
(i) "Tax"
or
"Taxes"
means
any and all federal, state, local, or foreign net or gross income, gross
receipts, net proceeds, sales, use, ad valorem, value added, franchise, bank
shares, withholding, payroll, employment, excise, property, deed, stamp,
alternative or add-on minimum, environmental, profits, windfall profits,
transaction, license, lease, service, service use, occupation, severance,
energy, unemployment, social security, workers' compensation, capital, premium,
and other taxes, assessments, customs, duties, fees, levies, or other
governmental charges of any nature whatever, whether disputed or not, together
with any interest, penalties, additions to tax, or additional amounts with
respect thereto.
(ii) "Tax
Returns"
means
any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto,
and
including any amendment thereof.
(iii) "Taxing
Authority"
means
any Governmental Entity having jurisdiction with respect to any
Tax.
(b) Each
of
the Company and its Subsidiaries has duly and timely filed all material Tax
Returns required to have been filed by or with respect to the Company or such
Subsidiary. Each such Tax Return is
true and
correct in all material respects and have been completed in substantial
compliance with applicable Law.
All
material Taxes owed by the Company and each Subsidiary of the Company (whether
or not shown on any Tax Return) have been timely paid (or, if due between the
Agreement Date and the Closing Date, will be duly and timely paid). Each of
the
Company and its Subsidiaries has adequately provided for, accrued or reserved
on
the Company Balance Sheet all Liability for all material unpaid
Taxes.
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18
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(c) Each
of
the Company and its Subsidiaries has withheld and timely paid all material
Taxes
required to have been withheld and paid by it and has complied in all material
respects with all information reporting and backup withholding requirements,
including maintenance of required records with respect thereto.
(d) The
statute of limitations for the assessment of U.S. Federal, material State,
material local and foreign income Taxes has expired for all periods prior to
December 31, 2002. Neither the Company nor any of its Subsidiaries is the
beneficiary of any extension of time within which to file any Tax Return, nor
has the Company or any of its Subsidiaries made (or had made on its behalf)
any
requests for such extensions. Neither the Company nor any of its Subsidiaries
has waived (or is subject to a waiver of) any statute of limitations in respect
of Taxes or has agreed to (or is subject to) any extension of time with respect
to a Tax assessment or deficiency.
(e) No
Tax
Returns have been audited or are currently are the subject of audit. There
is no
Action now pending or, to the Company's Knowledge, threatened against or with
respect to the Company or any of its Subsidiaries in respect of any Tax or
any
assessment or deficiency. No written inquiries or written notices have been
received by the Company or any of its Subsidiaries from a Taxing Authority
with
respect to possible claims for Taxes in any material amount that have not been
resolved (and paid, if applicable) prior to the Agreement Date, and no such
inquiry or notice is pending or, to the Company's Knowledge, threatened. There
are no liens for Taxes (other than for current Taxes not yet due and payable)
upon the assets of the Company. The Company has made available to Parent correct
and complete copies of all federal income Tax Returns, examination reports,
and
statements of deficiencies assessed against or agreed to by the Company or
any
of its Subsidiaries since January 1, 2000.
(f) Section 3.9(f)
of the
Company Disclosure Letter lists, as of the Agreement Date, all jurisdictions
in
which the Company or any of its Subsidiaries currently files Tax Returns.
No
written notice has been delivered to the Company or any of its Subsidiaries
by
an authority in a jurisdiction where the Company or any of its Subsidiaries
does
not file Tax Returns that any of them is or may be subject to taxation by that
jurisdiction or that any of them must file Tax Returns.
(g) Neither
the Company nor any of its Subsidiaries has filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provisions of state, local or foreign income Tax Law). None of
the
assets or properties of the Company or any of its Subsidiaries constitutes
tax-exempt bond financed property or tax-exempt use property within the meaning
of Section 168 of the Code. Neither the Company nor any of its Subsidiaries
is a party to any "safe harbor lease" within the meaning of
Section 168(f)(8) of the Code, as in effect prior to amendment by the Tax
Equity and Fiscal Responsibility Act of 1982, or to any "long-term contract"
within the meaning of Section 460 of the Code. Neither the Company nor any
of its Subsidiaries has ever been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code. Neither
the Company nor any of its Subsidiaries is a party to any agreement, arrangement
or plan with any employee or independent contractor that has resulted or would
result, separately or in the aggregate, in the payment of any amount that will
not be fully deductible as a result of Section 162(m) of the Code (or any
corresponding provision of state, local or foreign income Tax Law). Neither
the
Company nor any of its Subsidiaries has made any payments, is obligated to
make
any payments, or is a party to any agreement that under certain circumstances
could obligate it to make payments that would result in a nondeductible expense
under Section 280G of the Code or an excise tax to the recipient of such
payments pursuant to Section 4999 of the Code.
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19
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(h) Neither
the Company nor any of its Subsidiaries has been the "distributing corporation"
(within the meaning of Section 355(c)(2) of the Code) with respect to a
transaction described in Section 355 of the Code within the 5-year period
ending as of the Agreement Date. Neither the Company nor any of its Subsidiaries
is currently subject to any ruling from any Taxing Authority or has entered
into
(or is subject to) any written agreement with a Taxing Authority. Each of the
Company and its Subsidiaries have disclosed on its federal income Tax Returns
all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Section 6662 of the
Code.
(i) Neither
the Company nor any of its Subsidiaries (i) is currently a party to or bound
by
any Tax allocation or sharing agreement or Tax indemnification agreement, (ii)
has ever been a member of an affiliated, consolidated, condensed or unitary
group (other
than a group the common parent of which was Company)
or (iii)
has any liability for or obligation to pay Taxes of any other Person under
Treas. Reg. 1.1502-6 (or any similar provision of Tax Law), or as transferee
or
successor, by contract or otherwise. Neither the Company nor any of its
Subsidiaries is a party to any joint venture, partnership, or, to the Company’s
Knowledge, other arrangement that is treated as a partnership for federal income
tax purposes.
(j) Neither
the Company nor any of its Subsidiaries will be required to include any item
of
income in taxable income for any taxable period (or portion thereof) ending
after the Closing Date as a result of (A) an open transaction disposition made
on or before the Closing Date, (B) a prepaid amount received on or prior to
the
Closing Date, (C) an installment
sale made on or prior to the Closing Date or,
(D) the
completed contract method of accounting, (E) the long-term contract method
of
accounting, (F) the cash method of accounting or Section 481 of the Code,
(G) an intercompany transaction or excess loss account described in Treasury
Regulations under Section 1502 of the Code, (H) any "closing agreement" as
described in Section 7121 of the Code executed on or prior to the Closing
Date or (I) any comparable provisions of state or local tax law, domestic or
foreign.
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20
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(k) The
Company has not entered into any transaction that constitutes a "reportable
transaction" within the meaning of Treasury Regulation
Section 1.6011-4(b).
3.10. Compliance
with Law.
(a) Each
of
the Company and its Subsidiaries has complied, and is in compliance, in all
material respects with each, and is not in violation in any material respect
of,
any applicable Law to which the Company or any of its Subsidiaries or its
business, operations, assets or properties are or have been
subject.
(b) No
event
has occurred and no circumstances exist that (with or without the passage of
time or the giving of notice) would reasonably be expected to result in a
violation of, conflict with or failure on the part of the Company or any of
its
Subsidiaries to comply with, any Law, except for any such events or
circumstances that would not reasonably be expected to have, individually or
in
the aggregate, a Company Material Adverse Effect. Neither the Company nor any
of
its Subsidiaries has received written notice regarding any material violation
of, material conflict with, or material failure to comply with, any
Law.
3.11. Authorizations.
(a) Each
of
the Company and its Subsidiaries owns, holds or lawfully uses in the operation
of its business all Authorizations which are necessary for it to conduct its
business as currently conducted or for the ownership and use of the assets
owned
or used by the Company or such Subsidiary in the conduct of its business free
and clear of all Liens (other than Permitted Liens), except where the failure
to
own, hold, possess or lawfully use any such Authorizations would not reasonably
be expected to have, individually or in the aggregate, a Company Material
Adverse Effect. Such Authorizations are valid and in full force and effect
and
none of such Authorizations will be terminated or impaired or become terminable
as a result of the transactions contemplated by this Agreement.
(b) No
event
has occurred and no circumstances exist that (with or without the passage of
time or the giving of notice) may result in a violation of, conflict with,
failure on the part of the Company or any of its Subsidiaries to comply with
the
terms of, or the revocation, withdrawal, termination, cancellation, suspension
or modification of any Authorization, except for any such events or
circumstances that would not reasonably be expected to have, individually or
in
the aggregate, a Company Material Adverse Effect. Neither the Company nor any
of
its Subsidiaries has received written notice regarding any violation of,
conflict with, failure to comply with the terms of, or any revocation,
withdrawal, termination, cancellation, suspension or modification of, any
material Authorization. Neither the Company nor any of its Subsidiaries is
in
material default, nor has the Company or any of its Subsidiaries received
written notice of any claim of material default, with respect to any material
Authorization.
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21
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3.12. Title
to Personal Properties.
(a) Section 3.12(a)
of the
Company Disclosure Letter sets forth a complete and accurate list of all the
personal properties and assets owned, leased or used by the Company or any
of
its Subsidiaries or otherwise used in the businesses of the Company and its
Subsidiaries as of the date of this Agreement, with a current fair market value
in excess of $100,000, specifying whether and by whom each such asset is owned
or leased and, in the case of leased assets, indicating the parties to,
execution dates of and annual payments under, the lease.
(b) With
respect to personal properties and assets that they own, including all
properties and assets reflected as owned on the Company Balance Sheet (other
than inventory sold in the ordinary course of business since the date thereof),
the Company or one of its Subsidiaries has good and valid title to all of such
properties and assets, free and clear of all Liens other than Permitted Liens.
"Permitted
Liens"
means
(i) liens for current real or personal property taxes not yet due and
payable, (ii) workers', carriers' and mechanics' or other similar statutory
liens, (iii) liens
to
secure obligations to landlords or lessors under leases or rental agreements
in
the ordinary course of business, (iv) deposits or pledges made in connection
with, or to secure payment of, workers' compensation, unemployment insurance
or
similar programs in the ordinary course of business, (v) solely with respect
to
Intellectual Property, the
grant
of Out-Bound Licenses on a non-exclusive basis, in each case in the ordinary
course of business consistent with past practice, (vi) liens imposed on the
underlying fee interest held by a third party in leased property, and
(vii) liens that are immaterial in character, amount, and extent and which
do not materially detract from the value or materially interfere with the
present use of the properties they affect.
(c) With
respect to personal properties and assets that are leased, the Company or one
of
its Subsidiaries has a valid leasehold interest in such properties and assets
and all such leases are in full force and effect and to the Company's Knowledge
constitute valid and binding obligations of the other party(ies) thereto.
Neither the Company nor any of its Subsidiaries nor to the Company's Knowledge
any other party thereto is in violation of any of the terms of any such lease,
except where any such violation would not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse
Effect.
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(d) For
the
avoidance of doubt, the representations and warranties set forth in this
Section 3.11 do not apply to Intellectual Property, which matters are
specifically addressed in Section 3.15.
3.13. Condition
of Tangible Assets.
All
buildings, plants, leasehold improvements, structures, facilities, equipment
and
other items of tangible property and assets which are owned, leased or used
by
the Company or any of its Subsidiaries are to the Company's Knowledge
structurally sound, are in good operating condition and repair (subject to
normal wear and tear given the use and age of such assets), are usable in the
regular and ordinary course of business and conform in all material respects
to
all Laws and Authorizations relating to their construction, use and
operation.
3.14. Real
Property.
(a) Section 3.14(a)
of the
Company Disclosure Letter contains (i) a list of all real property and
interests in real property leased by the Company or any of its Subsidiaries
(the
"Real
Property").
Neither the Company nor any of its Subsidiaries owns in fee any real property
or
interests in real property. The Real Property listed in
Section 3.14(a)
of the
Company Disclosure Letter includes all interests in real property used in or
necessary for the conduct of the businesses and operations of the Company and
its Subsidiaries as currently conducted.
(b) The
Company has made available to Parent a true and complete copy of every lease
and
sublease pursuant to which the Company or any Subsidiary of the Company is
a
party or by which any of them is bound (each, a "Lease").
The
Company or one of its Subsidiaries has peaceful, undisturbed and exclusive
possession of the Real Property.
(c) The
Real
Property and all present uses and operations of the Real Property comply in
all
material respects with all Laws, Authorizations, covenants, conditions,
restrictions, easements, disposition agreements and similar matters affecting
the Real Property. The continued use, occupancy and operation of the Real
Property as currently used, occupied and operated do not constitute a
nonconforming use and are not the subject of a special use permit under any
Law.
(d) No
Person
other than the Company or a Subsidiary of the Company is in possession of any
of
the Real Property or any portion thereof, and to the Company's Knowledge, there
are no leases, subleases, licenses, concessions or other Contracts granting
to
any Person other than the Company or a Subsidiary of the Company the right
of
use or occupancy of the Real Property or any portion thereof.
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23
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3.15. Intellectual
Property.
(a) As
used
in this Agreement, "Intellectual
Property"
means:
(i) inventions
(whether or not patentable), trade secrets, technical data, databases, customer
lists, designs, tools, methods, processes, technology, ideas, know-how, source
code, product road maps and other proprietary information and materials
("Proprietary
Information");
(ii) trademarks and service marks (whether or not registered), trade names,
logos, trade dress and other proprietary indicia and all goodwill associated
therewith; (iii) documentation, advertising copy, marketing materials,
web-sites, specifications, mask works, drawings, graphics, databases, recordings
and other works of authorship, whether or not protected by Copyright;
(iv) computer
programs, including any and all software implementations of algorithms, models
and methodologies, whether in source code or object code, firmware, development
tools, files, records and data, design documents, flow-charts, user manuals
and
training materials relating thereto and any translations thereof and all media
on which any of the foregoing is recorded (collectively, "Software");
(v)
domain names, uniform resource locators ("URLs")
and
other names and locators associated with the Internet (collectively,
"Domain
Names");
and
(vi) all
forms of intangible common law and statutory legal rights and protections that
may be obtained for, or may pertain to, the Intellectual Property set forth
in
clauses (i)
through
(v) in any country of the world ("Intellectual
Property Rights"),
such
as letters patent, patent applications, provisional patents, design patents,
PCT
filings, invention disclosures and other rights to inventions or designs
("Patents"),
registered and unregistered copyrights in both published and unpublished works
("Copyrights"),
trademarks, service marks, trade names and other proprietary indicia (whether
or
not registered) ("Marks"),
trade
secret rights, mask works, moral rights or other literary property or authors
rights ("Moral
Rights"),
and
all applications, registrations, issuances, divisions, continuations, renewals,
reissuances and extensions of the foregoing.
(b) Section
3.15(b) of the Company Disclosure Letter contains a complete and accurate list
of (by name, owner and, where applicable, registration number and jurisdiction
of registration, application, certification or filing) all Intellectual Property
that is owned by or filed in the name of the Company and/or one or more of
its
Subsidiaries (whether exclusively, jointly with another Person or otherwise)
("Company
Owned Intellectual Property");
provided that the Company Disclosure Letter is not required to list items of
Company Owned Intellectual Property which are either (i) immaterial to the
Company and its Subsidiaries or (ii) not Intellectual Property Rights that
are registered or the subject of an application for registration. Except as
specifically identified and described in the Company Disclosure Letter, the
Company or one of its Subsidiaries owns the entire right, title and interest
to
all material Company Owned Intellectual Property (other than Moral Rights that
are not assignable) free and clear of all Liens (other than Permitted
Liens).
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24
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(c) Section
3.15(c)
of the
Company Disclosure Letter contains a complete and accurate list of (i) all
licenses, sublicenses and other Contracts ("In-Bound
Licenses")
to
which the Company or one of its Subsidiaries is a party pursuant to which a
third party authorizes the Company or any of its Subsidiaries to use, practice
any rights under, or grant sublicenses with respect to, any Intellectual
Property owned by such third party, including the incorporation of any such
Intellectual Property into the Company's or any of its Subsidiaries' products
and, with respect to each In-Bound License, whether the In-Bound License is
exclusive or non-exclusive; provided,
however, that the Company Disclosure Letter is not required to list In-Bound
Licenses that are Ordinary Course In-Bound Licenses; and
(ii)
all such In-Bound Licenses, excluding licenses governing the Company’s or any of
its Subsidiaries’ use of Open Source Materials, that require the Company to
license, assign, or otherwise transfer rights to additions, modifications or
improvements to such licensed Intellectual Property made by or for the Company
to any third party. The Company is in compliance in all material respects with
the terms and conditions of all such In-Bound Licenses. The Company does not
have any Knowledge of any written assertion, claim or threatened claim, that
Company has breached any terms or conditions of such In-Bound
Licenses.
"Ordinary
Course In-Bound Licenses"
means
(A) non-exclusive licenses for generally commercially available Intellectual
Property licensed to the Company or any of its Subsidiaries for a cost of not
more than $50,000 per annum, (B) non-disclosure agreements, and (C) licenses
to
advertiser content and Marks granted to the Company or any of its Subsidiaries
contained in advertiser contracts, in the case of each of (A), (B) and (C),
pursuant to Contracts entered into by the Company or any of its Subsidiaries
in
the ordinary course of business consistent with past practices.
(d) Section
3.15(d)
of the
Company Disclosure Letter contains a complete and accurate list of all licenses,
sublicenses and other Contracts ("Out-Bound
Licenses")
to
which the Company or any of its Subsidiaries is party pursuant to which the
Company or any of its Subsidiaries authorizes a third party to use, practice
any
rights under, or grant sublicenses with respect to, any Company Owned
Intellectual Property or pursuant to which the Company or any of its
Subsidiaries grants rights to use or practice any rights under any Intellectual
Property owned by a third party and, with respect to each Out-Bound License,
whether the Out-Bound License is exclusive or non-exclusive; provided,
however, that the Company Disclosure Letter is not required to list Ordinary
Course Out-Bound Licenses.
"Ordinary
Course Out-Bound Licenses"
means
(i) non-disclosure agreements, (ii) rights granted to contractors or vendors
to
use Company Owned Intellectual Property or Intellectual Property owned by a
third party for the sole benefit of Company or any of its Subsidiaries, and
(iii) rights in Company marketing materials and Marks granted to sales
representatives solely for use in connection with the marketing of Company
products and services, in the case of each of (i), (ii), and (iii), pursuant
to
Contracts entered into by the Company or any of its Subsidiaries in the ordinary
course of business consistent with past practices.
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(e) To
the
Company’s Knowledge, the Company and/or one or more of its Subsidiaries
(i) exclusively own the entire right, interest and title (other than Moral
Rights that are not assignable) to all Intellectual Property that is used in
or
necessary for the businesses of the Company and its Subsidiaries as they are
currently conducted (including the design, manufacture, license and sale, to
the
extent any of these activities are currently carried on by the Company or any
of
its Subsidiaries) of all products currently in production) free and clear of
Liens other than Permitted Liens, or (ii) otherwise rightfully use or
otherwise enjoy such Intellectual Property pursuant to the terms of a valid
and
enforceable Contract. Without limiting the generality of the foregoing, to
the
Company’s Knowledge, (i) the Company is the exclusive owner of all Marks used in
connection with the operation or conduct of the business of Company, including
the sale, distribution or provision of any Company product (to the extent any
of
these activities are currently carried on by the Company or any of its
Subsidiaries), (ii) the Company owns exclusively, and has good title to, all
Copyrights in works that are included or incorporated into Company’s products,
and (iii) to the extent that any Patents would be infringed by any Company
product (including but not limited to the manufacture, sale or use thereof
to
the extent any of these activities are currently carried on by the Company
or
any of its Subsidiaries), the Company is the exclusive owner of such Patents,
other than any Marks, Copyrights or Patents, owned by third parties and licensed
to the Company or its Subsidiaries pursuant to a valid and enforceable Contract.
To the Knowledge of the Company, the Company Owned Intellectual Property,
together with the Company's and its Subsidiaries' rights under the In-Bound
Licenses listed in the Company Disclosure Letter or that are Ordinary Course
In-Bound Licenses (collectively, the "Company
Intellectual Property"),
constitutes all the Intellectual Property used in or necessary for the operation
of the Company's and its Subsidiaries' businesses as they are currently
conducted.
(f) All
registration, maintenance and renewal fees related to Patents, Marks, Copyrights
and any other applications or registrations for Intellectual Property Rights
that are owned by the Company or any of its Subsidiaries and that are material
to the business of the Company and its Subsidiaries ("Company
Registered Items")
that
are currently due have been paid and all documents and certificates related
to
such Company Registered Items that are currently required to be filed have
been
filed with the relevant Governmental Entity or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Items. All Company Registered Items are
in
good standing and held in compliance with all applicable legal
requirements.
(g) The
Company does not have Knowledge of any challenges with respect to the validity
or enforceability of any Company Owned Intellectual Property. Section
3.15(g)(i)
of
the Company Disclosure Letter lists the status of any Actions before the United
States Patent and Trademark Office or any other Governmental Entity anywhere
in
the world related to any of the Company Registered Items, including the due
date
for any outstanding response by the Company or any of its Subsidiaries in such
Actions. There are no actions that are required to be taken by the Company
within ninety (90) days of the Agreement Date that are necessary to maintain
any
Company Registered Items. Neither the Company nor any of its Subsidiaries has
taken any action or failed to take any action that has resulted or would
reasonably be expected to result in the abandonment, cancellation, forfeiture,
relinquishment, invalidation, waiver or unenforceability of any material Company
Owned Intellectual Property (other than (i) the expiration of Company Registered
Items at the end of their statutory term, (ii) good faith business decisions
to
not file applications and seek registrations for copyrights, trademarks or
patents, (iii) trade secrets that lost their status as trade secrets upon the
release of a new product or service, upon the issuance of a patent or
publication of a patent application, or as a result of a good faith business
decision to disclose such trade secret, and (iv) Marks and Domain Names that
the
Company or any of its Subsidiaries made a good faith business decision to stop
using).
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(h) To
the
Company’s Knowledge, none of the products or services currently or formerly
developed manufactured, sold, distributed, provided, shipped or licensed, by
the
Company or any of its Subsidiaries, has infringed or infringes upon, has
misappropriated or misappropriates, the Intellectual Property Rights of any
third party. To the Company’s Knowledge, neither the Company nor any of its
Subsidiaries, by conducting its business as currently conducted, has infringed
or infringes upon, has misappropriated or misappropriates, any Intellectual
Property Rights of a third party. Neither the Company nor any of its
Subsidiaries has received any written communication alleging that the Company
or
any of its Subsidiaries or any of their respective products, services,
activities or operations infringe upon, or misappropriates any Intellectual
Property Rights of a third party. No Action has been instituted, or, to the
Company's Knowledge, threatened against the Company or any of its Subsidiaries,
relating to any Intellectual Property formerly or currently used by the Company
or any of its Subsidiaries and none of the Company Owned Intellectual Property
is subject to any outstanding Order. Neither the Company nor any of its
Subsidiaries has received any written opinion of counsel regarding any third
party patents. To the Company's Knowledge, no Person has infringed or is
infringing any Intellectual Property Rights owned by the Company or any of
its
Subsidiaries or has otherwise misappropriated or is otherwise misappropriating
any material Company Owned Intellectual Property, including any employee or
former employee of Company, or has materially breached any license or agreement
involving any material Company Owned Intellectual Property. The Company has
not
entered into any agreement granting any third party the right to bring
infringement actions with respect to, or otherwise enforce rights with respect
to any Intellectual Property Rights owned by the Company.
(i) The
Company and its Subsidiaries have taken commercially reasonable steps to protect
and preserve the confidentiality of all confidential, non-public Proprietary
Information owned by the Company or any of its Subsidiaries and that is material
to the business of the Company and its Subsidiaries (other than trade secrets
that lost their status as trade secrets upon the release of a new product or
service, upon the issuance of a patent or publication of a patent application,
or as a result of a good faith business decision to disclose such trade secret)
(“Confidential
Proprietary Information”).
Any
receipt or use by, or disclosure to, a third party of Confidential Proprietary
Information owned by the Company or any of its Subsidiaries has been pursuant
to
the terms of binding written confidentiality agreement between the Company
or
such Subsidiary and such third party ("Nondisclosure
Agreements").
The
Company and its Subsidiaries are, and to the Company's Knowledge, all other
parties thereto are, in material compliance with the provisions of the
Nondisclosure Agreements. The Company and its Subsidiaries are in material
compliance with the terms of all Contracts pursuant to which a third party
has
disclosed to, or authorized the Company or any of its Subsidiaries to use,
Confidential Proprietary Information owned by such third party.
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(j) All
current and former employees, consultants and contractors of the Company and
its
Subsidiaries involved in the development of material Intellectual Property
for
the Company and its Subsidiaries have executed and delivered, and, to the
Company’s Knowledge, are in compliance with, enforceable agreements regarding
the protection of Proprietary Information and providing valid written
assignments of all Intellectual Property (other than Moral Rights that are
not
assignable) conceived or developed by such employees, consultants or contractors
in connection with their services for the Company and its Subsidiaries
("Work
Product Agreements").
No
such current or former employee, consultant or contractor has any right, claim
or interest to any of the Company Owned Intellectual Property (other than Moral
Rights that are not assignable).
(k) To
the
Company’s Knowledge, no employee, consultant or contractor of the Company or any
of its Subsidiaries has been, or is, by performing services for the Company
or
such Subsidiary, in violation of any term of any employment, invention
disclosure or assignment, confidentiality, noncompetition agreement or other
restrictive covenant or any Order as a result of such employee's, consultant's
or independent contractor's employment by the Company or any Subsidiary or
any
services rendered by such employee, consultant or independent contractor to
the
Company or any of its Subsidiaries.
(l) As
of the
Agreement Date, all Intellectual Property that has been distributed, sold or
licensed to a third party by the Company or any of its Subsidiaries that is
covered by a warranty in all material respects conformed to or conforms to,
and
performed or performs in accordance with, the representations and warranties
provided with respect to such Intellectual Property by or on behalf of the
Company or such Subsidiary for the time period during which such representations
and warranties apply, except to the extent that the liability of the Company
and
its Subsidiaries to comply with any such representation or warranty is reflected
in the reserves on the Company Financial Statements.
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(m) The
execution and delivery of this Agreement by the Company does not, and the
consummation of the Merger (in each case, with or without the giving of notice
or lapse of time, or both) will not, result in breach, modification,
cancellation, termination, suspension of, the loss or impairment of, or give
rise to any right of any third party to terminate, or reprice or otherwise
renegotiate any of the Company's or any of its Subsidiaries' rights to own
any
of its Intellectual Property or their respective rights under any Out-Bound
License or In-Bound License, nor require the consent of any Governmental Entity
or other third party in respect of any such Intellectual Property, except for
any breach, modification, cancellation, termination, suspension, loss,
impairment, or third party right or consent that would not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect. Each of the Company and its Subsidiaries is in material compliance
with,
and has not materially breached any term of any Out-Bound License or In-Bound
License that is a Material Contract and, to the Knowledge of the Company, all
other parties to any Out-Bound License or In-Bound License that is a Material
Contract are in compliance with, and have not materially breached any term
of,
such any Out-Bound License or In-Bound License. Assuming the timely receipt
of
all third party consents set forth in Section 3.5(a) and Section 3.14(m) of
the
Company Disclosure Letter, following the Closing Date, the Surviving Corporation
and its Subsidiaries will be permitted to exercise all of the Company's and
its
Subsidiaries' rights under such any Out-Bound License or In-Bound License that
are Material Contracts to the same extent the Company and its Subsidiaries
would
have been able to had the transactions contemplated by this Agreement not
occurred and without the obligation to grant any additional rights and without
the payment of any additional amounts or other consideration other than ongoing
rights, fees, royalties or payments which the Company or any of its Subsidiaries
would otherwise be required to pay or grant. Neither this Agreement nor the
transactions contemplated by this Agreement, will as a result of a Contract
to
which the Company or any of its Subsidiaries is a party result in (i) Surviving
Company’s being bound by, or subject to, any non-compete or other material
restriction on the operation or scope of its business, or (ii) Surviving
Company’s being obligated to pay any royalties or other material amounts to any
third party in excess of those payable by Company prior to the
Closing.
(n) The
Company and its Subsidiaries use commercially available antivirus software
with
the intention of protecting Company's ad platform Software from becoming
infected by viruses and other harmful code. To the Company's Knowledge, the
Company's ad platform Software does not contain any computer code that is
designed and has the ability to disrupt, disable, harm, distort or otherwise
impede the legitimate operations of such software products by or for the Company
or its authorized users.
(o) The
Company and its Subsidiaries own and possess source or executable code for
all
ad platform Software owned by the Company or its Subsidiaries and own or have
valid licenses for all Software incorporated in the ad platform Software of
the
Company or its Subsidiaries. Except for software development tools, development
kits, bug fixes, error corrections and similar code licensed or otherwise
provided by the Company or any of its Subsidiaries in the ordinary course of
business, the source code of any of the ad platform Software owned by the
Company or any of its Subsidiaries have not been licensed or otherwise provided
by the Company or its Subsidiaries to another Person (other than to employees
and contractors involved in development of Software for the Company or any
of
its Subsidiaries) and have been safeguarded and protected as confidential and
proprietary Company information.
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(p) "Open
Source Materials"
means
any software that is licensed or distributed under any of the following licenses
or distribution models, or licenses or distribution models similar to any of
the
following: (i) GNU General Public License (GPL) or Lesser/Library (LGPL), (ii)
Mozilla Public License (MPL), (iii) BSD licenses, (iv) the Artistic License
(e.g. PERL), (v) the Netscape Public License, (vi) the Sun Community Source
License (SCSL), (vii) the Sun Industry Standards License (SISL), and (viii)
the
Apache License.
(q) "Viral
License"
shall
mean any license for Open Source Materials that requires, as a condition of
use,
modification and/or distribution of software subject to such license, that
such
software or other software combined and/or distributed with such software must
be: (i) disclosed or distributed in source code form; (ii) licensed for the
purpose of making derivative works; or (iii) redistributable at no charge.
Company has not distributed any Software that is Company Intellectual Property
in a manner that would cause any component of such Software to become subject
to
any of the terms of a Viral License.
3.16. Absence
of Certain Changes or Events.
Since
the Company Balance Sheet Date:
(a) there
has
not occurred any event, occurrence or change that has had, or would reasonably
be expected to have, a Company Material Adverse Effect;
(b) neither
the Company nor any of its Subsidiaries has amended or otherwise modified its
Charter Documents;
(c) neither
the Company nor any of its Subsidiaries has declared, set aside or paid any
dividend or other distribution (whether in cash, stock or property) with respect
to any of its securities;
(d) neither
the Company nor any of its Subsidiaries has split, combined or reclassified
any
of its securities, or issued, or authorized for issuance, any securities except
for the grant of Company Stock Options and Company SARS and the issuance of
shares of Company Common Stock upon exercise of Company Stock Options and
Company SARS;
(e) neither
the Company nor any of its Subsidiaries has materially altered any material
term
of any outstanding securities;
(f) neither
the Company nor any of its Subsidiaries has (i) increased or modified the
compensation or benefits payable or to become payable to any of their respective
current or former directors, employees, contractors or consultants,
(ii) increased or modified any bonus, severance, termination, pension,
insurance or other employee benefit plan, payment or arrangement made to, for
or
with any of its current or former directors, employees, contractors or
consultants other than, with respect to (i) and (ii) above, increases or
modifications (x) pursuant to the terms of an existing Contract made available
to Parent or (y) made in the ordinary course of business consistent with past
practice or as required by applicable Law, or (iii) entered into any
employment, severance or termination agreement (other than offer letters with
newly-hired employees in the ordinary course of business consistent with past
practice);
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(g) neither
the Company nor any of its Subsidiaries has sold, leased, transferred or
assigned any material property or assets of the Company or any of its
Subsidiaries except for the grant of Out-Bound Licenses on a non-exclusive
basis, in each case in the ordinary course of business consistent with past
practice;
(h) neither
the Company nor any of its Subsidiaries has incurred, assumed or guaranteed
any
Indebtedness individually in excess of $50,000 or in the aggregate in excess
of
$100,000, or materially modified the terms of any Indebtedness individually
in
excess of $50,000 or in the aggregate in excess of $100,000 outstanding as
of
the Balance Sheet Date;
(i) neither
the Company nor any of its Subsidiaries has incurred any material Liability
or
created or assumed any Lien on any asset, except for Permitted Liens, Liens
arising under lease financing arrangements existing as of the Company Balance
Sheet Date and Liens for taxes not yet due and payable with respect to which
the
Company maintains adequate reserves;
(j) neither
the Company nor any of its Subsidiaries has made any loan, advance or capital
contribution to, or investment in, any Person except for travel loans or expense
advances in the ordinary course of business consistent with past
practice;
(k) neither
the Company nor any of its Subsidiaries has entered into any Material
Contract;
(l) (i) no
Material Contract has been materially modified, (ii) no material rights
under any Material Contract have been waived or accelerated and (iii) no
Contract that would be required to be listed as a Material Contract pursuant
to
Section 3.17
hereof
if such Contract were in effect on the Agreement Date has been terminated or
cancelled;
(m) neither
the Company nor any of its Subsidiaries has sold, transferred, pledged or
assigned, and there has been no material reduction in the value of, any Company
Owned Intellectual Property (except for the grant of Out-Bound Licenses on
a
non-exclusive basis, in each case in the ordinary course of business consistent
with past practice);
(n) there
has
not been any material labor dispute, except for individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the Company or any of its Subsidiaries;
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(o) there
has
not been any material violation of or material conflict with any Law to which
the business, operations, assets or properties of the Company or any of its
Subsidiaries are subject;
(p) there
has
not been any material damage, destruction or loss with respect to the material
property and assets of the Company or any of its Subsidiaries, whether or not
covered by insurance;
(q) there
has
not been any revaluation of the Company's or any of its Subsidiaries' assets,
including writing down the value of inventory or writing off notes or accounts
receivable, other than in the ordinary course of business consistent with past
practice;
(r) neither
the Company nor any of its Subsidiaries has made any change in accounting
practices, except as required by GAAP;
(s) neither
the Company nor any of its Subsidiaries has made any material Tax election,
changed its method of Tax accounting or settled any material claim for Taxes,
except as required by applicable Law; or
(t) neither
the Company nor any of its Subsidiaries has agreed in writing or in any other
legally binding manner to do any of the foregoing.
3.17. Contracts.
(a) The
Company Disclosure Letter contains a complete and accurate list of each Contract
or series of related Contracts to which the Company or any of its Subsidiaries
is a party or is subject, or by which any of their respective assets are bound
as of the Agreement Date:
(i) for
the
purchase of materials, supplies, goods, services, equipment or other assets
and
that involves or would reasonably be expected to involve (A) annual
payments by the Company or any of its Subsidiaries of $250,000 or more, or
(B) aggregate payments by the Company or any of its Subsidiaries of
$500,000 or more;
(ii) (A) for
the sale by the Company or any of its Subsidiaries of products or services,
and
that involves (1) a specified annual minimum dollar sales amount by the
Company or any of its Subsidiaries of $250,000 or more, or (2) aggregate
payments to the Company or any of its Subsidiaries of $500,000 or more, or
(B) pursuant to which the Company or any of its Subsidiaries received
payments of more than $250,000 in the year ended December 31, 2006 or reasonably
expects to receive payments of more than $250,000 in the year ending December
31, 2007;
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(iii) that
requires the Company or any of its Subsidiaries to purchase its total
requirements of any product or service from a third party or that contains
"take
or pay" provisions;
(iv) pursuant
to which the Company or any of its Subsidiaries purchases or licenses Software
components for inclusion into its ad platform software except for components
purchased or licensed solely on an Ordinary Course In-Bound
License;
(v) that
continues over a period of more than six months from the Agreement Date (except
for Contracts that can be terminated or not renewed by the Company or any of
it
Subsidiaries during this period without penalty or other liability) and involves
payments to or by the Company or any of its Subsidiaries exceeding $150,000
per
annum, except for arrangements disclosed pursuant to the preceding subparagraphs
(i) and (ii);
(vi) that
is
an employment, consulting, employment termination, change in control or
severance Contract, except for any such Contract that is terminable at-will
by
the Company or any of its Subsidiaries on 90 days or less notice without further
liability to the Company or such Subsidiary;
(vii) that
is a
partnership, joint venture or similar Contract;
(viii) that
is a
distribution, dealer, representative or sales agency Contract pursuant to which
the Company or any of its Subsidiaries has granted a third party the right
to
market, solicit orders for or resell Company products or services and that
involve or would reasonably be expected to involve annual payments to the
Company or any of its Subsidiaries of $250,000 or more;
(ix) that
is a
(A) Lease or (B) Contract for the lease of personal property, in
either case which provides for payments to or by the Company or any of its
Subsidiaries in any one case of $50,000 or more annually or $200,000 or more
over the term of the lease;
(x) which
provides for the indemnification by the Company or any of its Subsidiaries
of
any Person (other than indemnities granted or received by the Company and its
Subsidiaries under customer, reseller, license, supply and similar commercial
Contracts entered into by the Company or any of its Subsidiaries in the ordinary
course of business consistent with past practice and indemnification agreements
with directors and officers of the Company and its Subsidiaries in the form
made
available to Parent), or the assumption by the Company or any of its
Subsidiaries of any Tax or environmental Liability or any Liability of any
third
party;
(xi) with
any
Governmental Entity;
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(xii) that
is a
note, debenture, bond, equipment trust, letter of credit, loan or other Contract
for Indebtedness individually in excess of $50,000 or in the aggregate in excess
of $100,000 or lending of money (other than to employees for travel expenses
in
the ordinary course of business) or Contract for a line of credit or guarantee,
pledge or undertaking of the Indebtedness individually in excess of $50,000
or
in the aggregate in excess of $100,000 of any other Person;
(xiii) for
any
capital expenditure or leasehold improvement in any one case in excess of
$50,000 or any such Contracts in the aggregate greater than
$100,000;
(xiv) that
materially restricts the right of the Company or any of its Subsidiaries to
engage in any line of business, acquire any property, develop or distribute
any
product or provide any service (including geographic restrictions) or to compete
with any Person or the Company or any of its Subsidiaries granting a third
party
any exclusive distribution rights, in any market, field or
territory;
(xv) that
is
an In-Bound License or Out-Bound License other than an Ordinary Course In-Bound
License or an Ordinary Course Out-Bound License;
(xvi) that
relates to the acquisition or disposition of any material business (whether
by
merger, sale of stock, sale of assets or otherwise); and
(xvii) that
is a
collective bargaining Contract or other Contract with any labor organization,
union or association.
(b) Each
Contract required to be listed in Section 3.17
of the
Company Disclosure Letter (collectively, the "Material
Contracts")
is in
full force and effect and valid and enforceable in accordance with its terms
against the Company or its Subsidiaries and, to the Company’s Knowledge, against
the other parties thereto.
(c) Neither
the Company nor any of its Subsidiaries is, and to the Company's Knowledge,
no
other party thereto is, in default in the performance, observance or fulfillment
in any material respect of any material obligation, covenant, condition or
other
material term contained in any Material Contract, and neither the Company nor
any of its Subsidiaries has given or received written notice to or from any
Person relating to any such alleged or potential default that has not been
cured. No event has occurred which with or without the giving of notice or
lapse
of time, or both, may conflict in any material respect with or result in a
violation or breach in any material respect of, or give any Person the right
to
exercise any remedy under or accelerate the maturity or performance of, or
cancel, terminate or modify, any Material Contract.
(d) The
Company has made available accurate and complete copies of each Material
Contract to Parent.
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3.18. Litigation.
(a) There
is
no action, suit or proceeding, claim, arbitration, litigation or investigation
(each, an "Action")
pending or, to the Company's Knowledge, threatened (i) against the Company
or any of its Subsidiaries that would reasonably be expected to be, individually
or in the aggregate, material to the Company and its Subsidiaries taken as
a
whole or (ii) that challenges or seeks to prevent, enjoin or otherwise
delay the Merger. To the Company's Knowledge, there is no Action against any
current or former director or employee of the Company or any of its Subsidiaries
with respect to which the Company or any of its Subsidiaries has or is
reasonably likely to have an indemnification obligation.
(b) There
is
no unsatisfied judgment, penalty or award against or affecting the Company
or
any of its Subsidiaries or any of their respective properties or assets that
would reasonably be expected to be, individually or in the aggregate, material
to the Company and its Subsidiaries taken as a whole. There is no outstanding
Order to which the Company or any of its Subsidiaries or any of their respective
properties or assets are subject that would reasonably be expected to be,
individually or in the aggregate, material to the Company and its Subsidiaries
taken as a whole.
3.19. Employee
Benefits.
(a) Section 3.19(a)
of the
Company Disclosure Letter sets forth a complete and accurate list of all Company
Benefit Plans. A current, accurate and complete copy of each Company Benefit
Plan has been made available to Parent. Neither the Company nor any of its
Subsidiaries has any present intent or commitment to create any additional
Company Benefit Plan or materially amend any Company Benefit Plan. "Company
Benefit Plan"
means
any "employee benefit plan" as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA"),
including any (a) nonqualified deferred compensation or retirement plan or
arrangement which is an Employee Pension Benefit Plan (as defined in ERISA
Section 3(2)), (b) qualified defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified
defined benefit retirement plan or arrangement which is an Employee Pension
Benefit Plan (including any Multiemployer Plan (as defined in ERISA
Section 3(37)), (d) Employee Welfare Benefit Plan (as defined in ERISA
Section 3(1)) or material fringe benefit plan or program, or (e) stock
purchase, stock option, severance pay, employment, change-in-control, vacation
pay, company awards, salary continuation, sick leave, excess benefit, bonus
or
other incentive compensation, life insurance, or other employee benefit plan,
contract, program, policy or other arrangement, whether or not subject to ERISA,
in each case which is sponsored, maintained or contributed to by the Company,
any of its Subsidiaries or any ERISA Affiliate, or with respect to which the
Company, any of its Subsidiaries or any ERISA Affiliate otherwise has any
present or future Liability. "ERISA
Affiliate"
means
any entity which is a member of a "controlled group of corporations" with,
under
"common control" with or a member of an "affiliated services group" with, the
Company or any of its Subsidiaries, as defined in Section 414(b), (c), (m)
or (o) of the Code.
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(b) Each
Company Benefit Plan has been and is currently administered in compliance in
all
material respects with its constituent documents and with all reporting,
disclosure and other requirements of ERISA and the Code applicable to such
Company Benefit Plan. Each Company Benefit Plan that is an Employee Pension
Benefit Plan (as defined in Section 3(2) of ERISA) and which is intended to
be qualified under Section 401(a) of the Code (a "Pension
Plan"),
is
the recipient of a favorable determination letter or opinion letter from the
Internal Revenue Service and to the Company's Knowledge, no condition exists
that would adversely affect any such determination. No Company Benefit Plan
is a
"defined benefit plan" as defined in Section 3(35) of ERISA.
(c) To
the
Company's Knowledge, none of the Company, any Subsidiary of the Company, any
ERISA Affiliate or any trustee or agent of any Company Benefit Plan has been
or
is currently engaged in any prohibited transactions as defined by
Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not applicable which could subject Company, any Subsidiary of
the
Company, any ERISA Affiliate or any trustee or agent of any Company Benefit
Plan
to the tax or penalty imposed by Section 4975 of the Code or
Section 502 of ERISA.
(d) There
is
no event or condition existing which could be deemed a "reportable event"
(within the meaning of Section 4043 of ERISA) with respect to which the
30-day notice requirement has not been waived. To the Company's Knowledge,
no
condition exists which could subject the Company or any of its Subsidiaries
to a
penalty under Section 4071 of ERISA.
(e) None
of
the Company, any Subsidiary of the Company or any ERISA Affiliate is, or has
been, party to any "multi-employer plan," as that term is defined in
Section 3(37) of ERISA.
(f) True
and
correct copies of the most recent annual report on Form 5500 and any
attached schedules for each Company Benefit Plan (if any such report was
required by applicable Law) and a true and correct copy of the most recent
determination letter issued by the Internal Revenue Service for each Pension
Plan have been provided to Parent.
(g) With
respect to each Company Benefit Plan, there are no actions, suits or claims
(other than routine claims for benefits in the ordinary course) pending or,
to
the Company's Knowledge, threatened against any Company Benefit Plan, the
Company, any Subsidiary of the Company, any ERISA Affiliate or any trustee
or
agent of any Company Benefit Plan.
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(h) To
the
Company's Knowledge, with respect to each Company Benefit Plan to which the
Company, any Subsidiary of the Company or any ERISA Affiliate is a party which
constitutes a group health plan subject to Section 4980B of the Code, each
such Company Benefit Plan complies, and in each case has complied, in all
material respects with all applicable requirements of Section 4980B of the
Code.
(i) Full
payment has been made of all amounts which the Company, any Subsidiary of the
Company or any ERISA Affiliate was required to have paid as a contribution
to
any Company Benefit Plan as of the last day of the most recent fiscal year
of
each of the Benefit Plans ended prior to the date of this Agreement, and none
of
the Company Benefit Plans has incurred any "accumulated funding deficiency"
(as
defined in Section 302 of ERISA and Section 412 of the Code), whether
or not waived, as of the last day of the most recent fiscal year of each such
Company Benefit Plan ended prior to the date of this Agreement.
(j) To
the
Company's Knowledge, each Company Benefit Plan is, and its administration is
and
has been during the six-year period preceding the date of this Agreement, in
all
material respects in compliance with, and none of Company, any Subsidiary of
the
Company or any ERISA Affiliate has received any claim or notice that any such
Company Benefit Plan is not in material compliance with, all applicable Laws
and
Orders and prohibited transaction exemptions, including to the extent
applicable, the requirements of ERISA.
(k) None
of
the Company, any Subsidiary of the Company and any ERISA Affiliate is in default
in any material respect in performing any of its contractual obligations under
any of the Company Benefit Plans or any related trust agreement or insurance
contract.
(l) There
are
no material outstanding Liabilities of any Company Benefit Plan other than
Liabilities for benefits to be paid to participants in any Company Benefit
Plan
and their beneficiaries in accordance with the terms of such Company Benefit
Plan.
(m) Subject
to ERISA and the Code, each Company Benefit Plan may be amended, modified,
terminated or otherwise discontinued by the Company, a Subsidiary of the Company
or an ERISA Affiliate at any time without material liability.
(n) No
Company Benefit Plan other than a Pension Plan, retiree medical plan or
severance plan provides benefits to any individual after termination of
employment, except as required by applicable Law.
(o) The
consummation of the Merger will not (either alone or in conjunction with any
other event) (i) entitle any current or former director, employee,
contractor or consultant of the Company or any of its Subsidiaries to severance
pay, unemployment compensation or any other payment, (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due to any
such director, employee, contractor or consultant, or result in the payment
of
any other benefits to any Person or the forgiveness of any Indebtedness of
any
Person, or (iii) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
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(p) With
respect to each Company Benefit Plan that is funded wholly or partially through
an insurance policy, all premiums required to have been paid to date under
the
insurance policy have been paid, all premiums required to be paid under the
insurance policy through the Closing will have been paid on or before the
Closing and, as of the Closing, there will be no liability of the Company,
any
Subsidiary of the Company or any ERISA Affiliate under any insurance policy
or
ancillary agreement with respect to such insurance policy in the nature of
a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the Closing.
(q) Each
Company Benefit Plan that constitutes a "welfare benefit plan," within the
meaning of Section 3(1) of ERISA, and for which contributions are
claimed by the Company, any Subsidiary of the Company or any ERISA Affiliate
as
deductions under any provision of the Code, is in compliance in all material
respects with all applicable requirements pertaining to such deduction. With
respect to any welfare benefit fund (within the meaning of Section 419 of
the Code) related to a welfare benefit plan, there is no disqualified benefit
(within the meaning of Section 4976(b) of the Code) that would result in
the imposition of a tax under Section 4976(a) of the Code. All welfare
benefit funds intended to be exempt from tax under Section 501(a) of the
Code have been determined by the Internal Revenue Service to be so exempt and
no
event or condition exists which would adversely affect any such
determination.
(r) Section 3.19(r)
of the
Company Disclosure Letter sets forth a list of all plans, programs Contracts
or
arrangements to which the Company or any of its Subsidiaries is a party, or
to
which either is subject, which the Company believes in good faith provide for
the payment of deferred compensation subject to Section 409A of the
Code.
(s) Each
Company Benefit Plan that is a "nonqualified deferred compensation plan" (as
defined under Section 409A(d)(1) of the Code) has been operated and
administered in good faith compliance with Section 409A of the Code during
the period beginning January 1, 2005 through the Agreement Date and has not
been
materially modified since October 2, 2004. With respect to stock options granted
after December 31, 2004, the Company's Board of Directors or its duly
constituted committee set the exercise price at or above the dollar amount
which
it determined in good faith to be the fair market value of the underlying shares
on the date of grant. With respect to stock options granted before January
1,
2005, the Company's Board of Directors or its duly constituted committee made
a
good faith attempt to set the exercise price at or above the fair market value
of the underlying shares on the date of grant. The Company believes in good
faith that any amounts paid or payable pursuant to each Company Benefit Plan
subject to Section 409A of the Code is not includible in the gross income
of a service provider (within the meaning of Section 409A) until received
by the service provider and is not subject to interest or the additional tax
imposed by Section 409A of the Code, and there are no agreements in place
that would entitle a participant in any such plan to reimbursement for any
such
additional tax.
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(t) The
Company has no Company Benefit Plans covering employees of the Company or any
of
its Subsidiaries outside of the United States.
3.20. Labor
and Employment Matters.
(a) Section 3.20(a)
of the
Company Disclosure Letter sets forth (i) (A) a list of all directors,
employees, contractors and consultants of the Company and its Subsidiaries
(including title and position) as of the Agreement Date, and (B) the base
compensation and target bonus of each such director, employee, consultant and
consultant whose base compensation and target bonus exceeds $100,000 in the
year
ending December 31, 2007, and (ii) a list of all former directors,
employees, contractors and consultants of the Company and each of its
Subsidiaries who are receiving benefits or scheduled to receive benefits in
the
future, and the pension benefit, medical insurance coverage and other benefits
of each such director, employee, contractor and consultant (except for benefits
required to be made available by applicable Law). All employees, contractors
and
consultants of the Company and its Subsidiaries may be terminated by the Company
or the relevant Subsidiary at any time with or without cause and without the
payment of any severance or other material Liability to the Company or such
Subsidiary. To the Company's Knowledge, all contractors and consultants of
the
Company have been properly characterized as independent
contractors.
(b) Neither
the Company nor any of its Subsidiaries is a party or subject to any labor
union
or collective bargaining Contract. There have not been and there are not pending
or threatened any labor disputes, work stoppages, requests for representation,
pickets, work slow-downs due to labor disagreements or any actions or
arbitrations which involve the labor or employment relations of the Company
or
any of its Subsidiaries. There is no unfair labor practice, charge or complaint
pending, unresolved or, to the Company's Knowledge, threatened before the
National Labor Relations Board.
(c) Each
of
the Company and its Subsidiaries has complied in all material respects with
each, and is not in violation in any material respect of any, Law relating
to
anti-discrimination and equal employment opportunities and there are, and have
been, no material violations of any other Law respecting the hiring, hours,
wages, occupational safety and health, employment, promotion, termination or
benefits of any employee or other Person. Each of the Company and its
Subsidiaries has filed all reports, information and notices required under
any
Law respecting the hiring, hours, wages, occupational safety and health,
employment, promotion, termination or benefits of any employee or other
Person.
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(d) Each
of
the Company and its Subsidiaries has paid or properly accrued in the ordinary
course of business all wages and compensation due to employees, including all
vacations or vacation pay, holidays or holiday pay, sick days or sick pay,
and
bonuses.
(e) Neither
the Company nor any of its Subsidiaries is a party to any Contract which
restricts the Company or any of its Subsidiaries from relocating, closing or
terminating any of its operations or facilities or any portion thereof. Neither
the Company nor any of its Subsidiaries have effectuated a "plant closing"
(as
defined in the Worker Adjustment and Retraining Notification Act of 1988 (the
"WARN
Act"))
or
(ii) a "mass lay-off" (as defined in the WARN Act), in either case
affecting any site of employment or facility of the Company or any of its
Subsidiaries, except in accordance with the WARN Act.
(f) Each
of
the Company and its Subsidiaries has complied and is in compliance in all
material respects with the requirements of the Immigration Reform and Control
Act of 1986. Section 3.20(f)
of the
Company Disclosure Letter sets forth a true and complete list of all employees
working in the United States who are not U.S. citizens and a description of
the
legal status under which each such employee is permitted to work in the United
States.
3.21. Environmental.
(a) Each
of
the Company and its Subsidiaries possesses all material Environmental Permits
necessary to conduct its businesses and operations as being conducted as of
the
Agreement Date, and all such Environmental Permits are in full force and effect.
None of the Company or its Subsidiaries has been notified in writing by any
Governmental Entity prior to the date of this Agreement that any Environmental
Permits will be modified, suspended or revoked.
(b) Each
of
the Company and its Subsidiaries is in compliance in all material respects
with
all applicable Environmental Laws and the terms and conditions of all
Environmental Permits. None of the Company or its Subsidiaries has received
any
written communication from any Governmental Entity or other Person that alleges
that the Company or any of its Subsidiaries has materially violated or is liable
for any material amount under any Environmental Law.
(c) There
are
no pending or, to the Knowledge of the Company, past or threatened material
Environmental Claims (i) against the Company or any of its Subsidiaries or
(ii)
against any Person whose liability for any Environmental Claim the Company
or
any of its Subsidiaries has retained or assumed, either by Contract or by
operation of Law.
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(d) To
the
Knowledge of the Company, there have been no Releases of any Hazardous Materials
at, from, in, to, on or under any real properties currently or previously owned,
leased, or utilized by the Company or any of its Subsidiaries or predecessors
that would reasonably be expected to form the bases of any material
Environmental Claim against the Company or any of its Subsidiaries.
(e) To
the
Knowledge of the Company, neither the Company nor any of its Subsidiaries or
predecessors transported or arranged for the transportation, treatment, storage,
handling or disposal of any Hazardous Materials to any off-site location that
could reasonably be anticipated to result in a material Environmental Claim
against the Company or any of its Subsidiaries.
(f) To
the
Knowledge of the Company, there are no (i) underground storage tanks, active
or
abandoned, (ii) polychlorinated-biphenyl-containing equipment or (iii)
asbestos-containing material, within the leasehold of any site or building
utilized by the Company or any of its Subsidiaries.
(g) There
have been no environmental investigations, studies, tests, audits, reviews
or
other analyses conducted by or on behalf of, or that are in the possession
of,
the Company or any of its Subsidiaries which have not been made available to
Parent.
(h) For
purposes of this Agreement, the following defined terms shall
apply:
(i) "Environmental
Claims"
means
any and all actions, Orders, decrees, suits, demands, directives, claims, Liens,
investigations, proceedings or notices of violation by any Governmental Entity
or other Person alleging potential responsibility or liability arising out
of,
based on or related to (A) the presence, Release or threatened Release of,
or
exposure to, any Hazardous Materials at any location or (B) circumstances
forming the basis of any violation or alleged violation of any Environmental
Law;
(ii) "Environmental
Laws"
means
all Laws, Orders, decrees, common law, judgments or binding agreements issued,
promulgated or entered into by or with any Governmental Entity with applicable
authority over such matters relating to pollution or protection of the
environment or human health;
(iii) "Environmental
Permits"
means
all permits, licenses, registrations and other authorizations required under
applicable Environmental Laws;
(iv) "Hazardous
Materials"
means
all hazardous, toxic, explosive or radioactive substances, wastes or other
pollutants, including petroleum or petroleum distillates, asbestos,
polychlorinated biphenyls, radon gas and all other substances or wastes of
any
nature regulated pursuant to any Environmental Law (other than office and
cleaning supplies safely stored and maintained); and
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(v) "Release"
means
any release, spill, emission, leaking, dumping, injection, pouring, deposit,
disposal, discharge, dispersal, leaching or migration into the environment
or
within any building, structure, facility or fixture.
3.22. Related
Party Transactions.
Except
as disclosed in the Company's proxy statement for its 2007 annual meeting of
shareholders as filed with the SEC on or about May 18, 2007 (the "2007
Proxy Statement"),
there
are no Contracts of any kind entered into by the Company or any of its
Subsidiaries with, or for the benefit of, any officer, director or immediate
family member of an officer or director, or greater than 5% shareholder of
the
Company ("Related
Parties"),
except in each case, for (a) employment agreements, fringe benefits and
other compensation paid to directors, officers and employees consistent with
previously established policies (including normal merit increases in such
compensation in the ordinary course of business) and copies of which have been
made available to Parent and are listed on the Company Disclosure Letter,
(b) reimbursements of ordinary and necessary expenses incurred in
connection with their employment or service, (c) amounts paid pursuant to
Company Benefit Plans of which copies have been made available to Parent, and
(d) indemnification agreements for officers and directors in the form made
available to Parent. To the Knowledge of the Company, except as disclosed in
the
2007 Proxy Statement, none of the Related Parties has any material direct or
indirect ownership interest in any firm or corporation with which the Company
or
any of its Subsidiaries has a business relationship, or with any firm or
corporation that competes with the Company or any of its Subsidiaries (other
than ownership of securities in a publicly traded company representing less
than
5% of the outstanding stock of such company). To the Company's Knowledge, none
of the Related Parties is directly or indirectly interested in any Material
Contract, except for Material Contracts with the Related Party pursuant to
which
the Related Party receives compensation for services as an officer or
director.
3.23. Insurance.
(a) Section 3.23(a)
of the
Company Disclosure Letter sets forth (i) an accurate and complete list of
each insurance policy, binder of insurance and fidelity bond which covers the
Company or any of its Subsidiaries or their respective businesses, properties,
assets, directors or employees (the "Policies")
and
(ii) a list of all pending claims and the claims history for the Company
and each Subsidiary during the current year and the preceding two years
(including with respect to insurance obtained but not currently maintained).
There are no pending claims under any of such Policies as to which coverage
has
been questioned, denied or disputed by the insurer or in respect of which the
insurer has reserved its rights.
(b) Section 3.23(b)
of the
Company Disclosure Letter describes any self-insurance arrangement by or
affecting the Company or any of its Subsidiaries, including any reserves
thereunder, and describes the loss experience for all claims that were
self-insured in the current year and the preceding two years.
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(c) All
Policies are in full force and effect and to the Company's Knowledge, are
enforceable in accordance with their terms and will continue in full force
and
effect with respect to the Company and its Subsidiaries following the Merger.
Such Policies provide insurance coverage for the Company and its Subsidiaries
and their respective businesses, properties, assets and employees in scope
and
amount customary for businesses of the nature conducted by the Company and
its
Subsidiaries, and are sufficient in all material respects for compliance with
all Laws and Contracts to which the Company or any of its Subsidiaries is a
party or by which it is bound which by their terms require the procurement
of
such Policies.
(d) All
premiums due under the Policies have been paid in full or, with respect to
premiums not yet due, accrued. Neither the Company nor any of its Subsidiaries
has received a written notice of cancellation of any Policy or of any material
changes that are required in the conduct of the business of the Company or
any
of its Subsidiaries as a condition to the continuation of coverage under, or
renewal of, any such Policy. There is no existing default or event which, with
the giving of notice or lapse of time or both, would constitute a default under
any Policy or entitle any insurer to terminate or cancel any Policy. The Company
has no Knowledge of any threatened termination of, or material premium increase
with respect to, any Policy and none of such Policies provides for retroactive
premium adjustments.
3.24. Books
and Records.
The
books, records and accounts of the Company and its Subsidiaries accurately
and
fairly reflect, in reasonable detail, the transactions and the assets and
Liabilities of the Company and its Subsidiaries in all material respects.
Neither the Company nor any of its Subsidiaries has engaged in any transaction,
maintained any bank account or used any of the funds of the Company or any
of
its Subsidiaries other than transactions, bank accounts and funds which have
been and are reflected in the normally maintained books and records of the
business. The minute books (containing the records of the meetings, or written
consents in lieu of such meetings, of the shareholders, the board of directors
and any committees of the board of directors), the stock certificate books,
and
the stock record books of the Company and its Subsidiaries are correct and
complete in all material respects, and have been maintained in accordance with
commercially reasonable business practices. At the Closing, all of those books
and records will be in the possession of the Company.
3.25. Opinion
of Financial Advisor.
The
financial advisor to the Company, JMP Securities, has delivered to the Company
an opinion dated the date of this Agreement to the effect that the Merger
Consideration is fair from a financial point of view to the Company
Shareholders. A copy of such opinion has been made available to Parent for
informational purposes only.
3.26. Brokers
or Finders.
(a) There
is
no investment banker, broker, finder, financial advisor or other intermediary
which has been retained by or is authorized to act on behalf of the Company
who
is entitled to any fee or commission payable by the Company in connection with
the transactions contemplated by this Agreement, other than JMP Securities.
The
Company has made available a true and complete copy of the Company's Contract
with JMP Securities to Parent. No claim exists or will exist against the
Company, any of its Subsidiaries or the Surviving Corporation or, based on
any
action by the Company or any of its Subsidiaries, against Parent for payment
of
any "topping," "break-up" or "bust-up" fee or any similar compensation or
payment arrangement as a result of the transactions contemplated hereby (other
than with respect to the payment of any fee contemplated by
Section 9.4).
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(b) Section 3.26(b)
of the
Company Disclosure Letter sets forth the Company's good faith estimate, as
of
the Agreement Date, of the estimated fees and expenses incurred and to be
incurred by the Company and its Subsidiaries in connection with the negotiation,
execution and delivery of this Agreement and the other agreements and documents
(including the Proxy Statement) contemplated hereby, and the performance of
its
obligations hereby and thereby (including the fees and expenses of JMP
Securities and of the Company's legal counsel and accountants).
3.27. No
Illegal Payments.
To the
Company's Knowledge, none of the Company, any of its Subsidiaries or any
Affiliate, officer, agent or employee thereof, has, since inception, on behalf
of or with respect to the Company or any of its Subsidiaries, (a) made any
unlawful domestic or foreign political contributions, (b) made any payment
or provided services which were not legal to make or provide or which the
Company, any of its Subsidiaries or any Affiliate thereof or such officer,
agent
or employee should reasonably have known were not legal for the payee or the
recipient of such services to receive, (c) received any payment or any
services which the Company, any of its Subsidiaries or any Affiliate thereof
or
such officer, agent or employee should reasonably have known were not legal
for
the payer or the provider of such services to make or provide, or (d) had any
off-book bank or cash accounts or "slush funds."
3.28. Customers.
Section 3.28
of the
Company Disclosure Letter sets forth the names of the 10 customers with the
greatest dollar volume of purchases from the Company and its Subsidiaries in
the
year ended December 31, 2006 and the five-month period ended May 31, 2007.
The
Company believes the relationship of the Company and its Subsidiaries with
each
such customer are good commercial working relationships. No such customer has
canceled or otherwise terminated, or to the Company's Knowledge, threatened
to
cancel or otherwise terminate, its relationship with the Company and its
Subsidiaries. Neither the Company nor any of its Subsidiaries has received
written notice as of the Agreement Date that any such customer will cancel
or
otherwise materially and adversely modify its relationship with the Company
or
such Subsidiary as a result of the Merger or otherwise.
3.29. Bank
Accounts.
Section 3.29
of the
Company Disclosure Letter sets forth the name of each bank, safe deposit company
or other financial institution in which the Company or any of its Subsidiaries
has an account, lock box or safe deposit box and the names of all persons
authorized to draw thereon or have access thereto.
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3.30. Powers
of Attorney.
There
are no outstanding powers of attorney executed by or on behalf of the Company
or
any of its Subsidiaries in favor of any Person.
3.31. Rights
Plan.
The
Rights Plan has been amended (a copy of which amendment has been provided to
Parent prior to the Agreement Date) so that entering into this Agreement and
the
Company Voting Agreements and the transactions contemplated hereby and thereby,
do not and will not on the Agreement Date or as a result of the passage of
time
(i) result in any person being deemed to have become an Acquiring Person
(as defined in the Rights Plan), (ii) result in the ability of any person
to exercise any Rights (as defined in the Rights Plan) under the Rights Plan,
(iii) enable or require the Rights to separate from the Shares to which
they are attached or to be triggered or become exercisable or (iv) enable
the Company to exchange any Rights for shares of the Company's capital stock,
pursuant to the Rights Plan. No Distribution Date, Shares Acquisition Date,
Triggering Event (as such terms are defined in the Rights Plan) or similar
event
has occurred or will occur by reason of (A) the adoption, approval,
execution or delivery of this Agreement and the Company Voting Agreements,
(B) the public announcement of such adoption, approval, execution or
delivery or (C) the consummation of the transactions contemplated hereby
and thereby.
3.32. Proxy
Statement.
The
Proxy Statement and any amendments or supplements to the Proxy Statement will,
when filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act. At the time the Proxy Statement or any
amendment or supplement to the Proxy Statement is first mailed to the Company
Shareholders and at the time the Company Shareholders vote on the adoption
of
this Agreement, the Proxy Statement, as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not
misleading.
ARTICLE IV
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent
and Merger Sub represent and warrant to the Company that the statements
contained in this Article IV
are true
and correct.
4.1. Organization
and Good Standing.
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, has
all
requisite power to own, lease and operate its properties and to carry on its
business as now being conducted, and is duly qualified to do business and is
in
good standing as a foreign corporation in each jurisdiction in which it owns
or
leases property or conducts any business so as to require such qualification,
except for those jurisdictions where the failure to be so qualified and in
good
standing would not reasonably be expected to be, individually or in the
aggregate, material to Parent and its Subsidiaries taken as a
whole.
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4.2. Authority
and Enforceability.
Each of
Parent and Merger Sub has the requisite power and authority to enter into this
Agreement and to consummate the Merger. The execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger
Sub
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Parent and Merger Sub. This Agreement
has been duly executed and delivered by Parent and Merger Sub and, assuming
due
authorization, execution and delivery by the Company, constitutes the valid
and
binding obligation of Parent and Merger Sub, enforceable against each of them
in
accordance with its terms, except as such enforceability may be limited by
(a) bankruptcy, insolvency, reorganization, moratorium or other similar
Laws affecting or relating to creditors' rights generally, and (b) the
availability of injunctive relief and other equitable remedies.
4.3. No
Conflicts; Authorizations.
(a) The
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance by Parent and Merger Sub of their obligations hereunder and
the
consummation by Parent and Merger Sub of the transactions contemplated hereby
(in each case, with or without the giving of notice or lapse of time, or both)
will not, (i) violate
the provisions of any of the Charter Documents of Parent or Merger Sub,
(ii) violate
or conflict with, or constitute a default, an event of default or an event
creating rights of acceleration, termination, cancellation, imposition of
additional obligations or loss of rights, or require a consent to assignment,
under any material contract (as defined under Item 601(b)(10) of Regulation
S-K
under the Exchange Act) to which the Parent or Merger Sub is a party,
(iii) assuming
compliance by Parent with the matters referred to Section 4.3(b),
violate
any Law, Authorization or Order applicable to Parent, Merger Sub or any of
their
respective subsidiaries, or give any Governmental Entity or other Person the
right to challenge any of the transactions contemplated hereby or to exercise
any remedy, obtain any relief under or revoke or otherwise modify any rights
held under, any such Law, Authorization or Order, or (iv) result
in the creation of any Liens upon any of the assets owned or used by Parent,
Merger Sub or any of their respective subsidiaries, except for any such
violations, conflicts, defaults and events referred to in
clause (ii)
and for
any such violations, conflicts, challenges, remedies, relief, revocations,
modifications or Liens referred to in clauses (iii)
and
(iv)
that
would not reasonably be expected to have, individually or in the aggregate,
a
material adverse effect on Parent or the ability of Parent or Merger Sub to
consummate the Merger or perform their respective obligations under this
Agreement.
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(b) No
Authorization or Order of, registration, declaration or filing with, or notice
to any Governmental Entity or other Person is required by or with respect to
Parent or Merger Sub or any of their respective subsidiaries in connection
with
the execution and delivery of this Agreement and the consummation of the Merger,
except for (i) the filing of the Articles of Merger with the Secretary
of State of the State of Washington, (ii) the filing with the SEC of the
Proxy Statement and such reports and filings under the Exchange Act as may
be
required in connection with this Agreement and the transactions contemplated
hereby, (iii) such filings and notifications under the rules of the Nasdaq
Global Select Market or applicable securities Laws as may be required in
connection with this Agreement and the transactions contemplated hereby, and
(iv) such other consents, approvals, orders, authorizations, releases, waivers,
registrations, declarations or filings that if not made or obtained would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the ability of Parent or Merger Sub to consummate the Merger
or have a material adverse effect on Parent.
4.4. Availability
of Funds.
Parent
has, and will as of the Closing have, cash available or existing borrowing
facilities which together are and will be sufficient to enable it to satisfy
its
obligations under this Agreement.
4.5. Brokers
or Finders.
There
is no investment banker, broker, finder, financial advisor or other intermediary
which has been retained by or is authorized to act on behalf of Parent who
is
entitled to any fee or commission in connection with the transactions
contemplated by this Agreement, other than Savvian Advisors, LLC.
4.6. Interim
Operations of Sub.
Merger
Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities
and
has conducted its operations only as contemplated by this
Agreement.
4.7. Stock
Ownership.
As of
the Agreement Date, neither Parent nor Merger Sub beneficially owns any shares
of Company capital stock.
4.8. Proxy
Statement.
The
information supplied by Parent for the purpose of inclusion in the Proxy
Statement and any amendments or supplements to the Proxy Statement will, when
the Proxy Statement is filed, comply as to form in all material respects with
the applicable requirements of the Exchange Act. At the time the Proxy Statement
or any amendment or supplement to the Proxy Statement is first mailed to the
Company Shareholders and at the time the Company Shareholders vote on the
adoption of this Agreement, the information supplied by Parent for inclusion
in
the Proxy Statement, as supplemented or amended, if applicable, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading.
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ARTICLE V
COVENANTS
OF THE COMPANY
5.1. Conduct
of Business.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement or the Effective Time, the Company shall,
and
it shall cause each of its Subsidiaries to:
(a) maintain
its corporate existence and carry on its business in the ordinary course in
a
manner consistent with past practice and in accordance with the provisions
of
this Agreement and in compliance with all Laws, Authorizations and
Contracts;
(b) use
its
commercially reasonable efforts consistent with past practices and policies
to
preserve intact its present business organization, keep available the services
of its present officers and preserve its relationships with the material
customers, distributors, licensors, licensees and others having material
business dealings with it; provided
that
the
Company is not authorized to, and shall not, make any commitments to any of
the
foregoing Persons on behalf of Parent; and
(c) maintain
its books and records in accordance with past practice, and to use its
commercially reasonable efforts to maintain in full force and effect all
Authorizations and Policies which are necessary for it to conduct its business
as currently conducted.
5.2. Negative
Covenants.
During
the period from the date of this Agreement and continuing until the earlier
of
the termination of this Agreement or the Effective Time, the Company shall
not,
and it shall not permit any of its Subsidiaries to do any of the following,
except (i) with the prior written consent of Parent, (ii) as set forth
in Section 5.2
of the
Company Disclosure Letter, (iii) as expressly provided or permitted in this
Agreement, or (iv) as required by applicable Law (including the Code and
ERISA):
(a) adopt
or
propose any amendment to the Charter Documents of the Company or any of its
Subsidiaries;
(b) declare,
set aside or pay any dividend or other distribution (whether in cash, stock
or
other property) with respect to any securities (except for the repurchase of
stock from its employees, directors, consultants or contractors in connection
with the termination of their services pursuant to the Company's standard form
of option/restricted shares agreement);
(c) (i) issue
or authorize for issuance any securities, except the grant of Company Stock
Options and Company SARS to newly hired non-officer employees in the ordinary
course of business consistent with past practice or the issuance of shares
of
Company Common Stock upon the exercise of Company Stock Options, Company SARS
or
Warrants or pursuant to the ESPP, or (ii) make any material change in the
rights, preferences or privileges associated with any issued and outstanding
securities, or redeem, purchase or otherwise acquire any securities (except
for
the repurchase of stock from its employees, directors, consultants or
contractors in connection with the termination of their services pursuant to
the
Company's standard form of option/restricted shares agreement);
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(d) (i) other
than pursuant to a written agreement or Company Benefit Plan disclosed in the
Company Disclosure Letter or pursuant to performance reviews and in the ordinary
course of business consistent with past practice, (A) increase the
compensation or benefits payable or to become payable by the Company or any
of
its Subsidiaries to any of its current or former directors, employees,
contractors or consultants, or (B) increase the benefits under any bonus,
severance, termination, pension, insurance or other employee benefit plan,
payment or arrangement made to, for or with any current or former directors,
employees, contractors or consultants of the Company or any of its Subsidiaries
or (ii) enter into any employment (other than offer letters and letter
agreements entered into in the ordinary course of business consistent with
past
practice with employees who are terminable "at-will"), severance or termination
agreement;
(e) establish,
adopt, enter into, amend or terminate any Company Benefit Plan or any collective
bargaining, thrift, compensation or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors, employees,
contractors or consultants of the Company or any of its
Subsidiaries;
(f) other
than (A) sales of inventory, (B) the grant of Out-Bound Licenses on a
non-exclusive basis and (C) other dispositions of property and assets that
are not material, individually or in the aggregate, to the Company and its
Subsidiaries, taken as a whole, in each case in the ordinary course of business
consistent with past practice, sell, lease, transfer or assign any material
property or assets of the Company or any of its Subsidiaries;
(g) other
than intra-company Indebtedness solely by and among the Company and one or
more
of its wholly-owned Subsidiaries or for intra-company Indebtedness solely by
and
among one or more wholly-owned Subsidiaries of the Company, (i) assume,
incur or guarantee any Indebtedness, other than endorsements for collection
in
the ordinary course of business or pursuant to existing borrowing arrangements
disclosed in Section 3.17(a)(xii)
of the
Company Disclosure Letter, (ii) materially modify the terms of any existing
Indebtedness or (iii) repay any existing Indebtedness in advance of its
maturity date;
(h) mortgage,
pledge or permit to become subject to Liens (other than Permitted Liens) any
material properties or assets of the Company or any of its
Subsidiaries;
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(i) other
than travel loans or expense advances in the ordinary course of business
consistent with past practice, make any loans, advances or capital contributions
to, or investments in, any other Person;
(j) cancel
any material debts or waive any material claims or rights of substantial
value;
(k) (i) materially
amend, materially modify or terminate, or waive, release or assign any material
rights under, any Material Contract, (ii) enter into any Contract which, if
entered into prior to the Agreement Date, would have been required to be set
forth in Section 3.17(a)
of the
Company Disclosure Letter (where the subject matter of such Contract is not
already covered by another subsection of this Section 5.2, in which case such
subsection of this Section 5.2 shall control), other than customer agreements
entered into in the ordinary course of business consistent with past
practice;
(l) (i) make
any capital expenditure, or commit to make any capital expenditure, which in
any
one case exceeds $50,000 or capital expenditures which in the aggregate exceed
$100,000 or (ii) except as permitted by clause (i),
acquire
any assets, properties or rights other than Inventory or pursuant to In-Bound
Licenses entered into in the ordinary course of business consistent with past
practice;
(m) settle
or
compromise any litigation other than settlements or compromises of litigation
where the monetary payment by the Company or any of its Subsidiaries does not
exceed $100,000 in the aggregate or $50,000 in any individual case and
injunctive or equitable relief is not involved;
(n) amend
any
Company Stock Option, Company SAR or Other Purchase Right or authorize cash
payments in exchange for any of the foregoing;
(o) make
any
material filings or registrations, with any Governmental Entity, except routine
filings and registrations made in the ordinary course of business;
(p) be
party
to (i) any merger, acquisition, consolidation, recapitalization,
liquidation, dissolution or similar transaction involving the Company or any
of
its Subsidiaries or (ii) any purchase of all or any substantial portion of
the assets or securities of the Company or any of its Subsidiaries;
(q) other
than as required by GAAP (as advised by its regular independent accounts),
make
any changes in its accounting methods, principles or practices;
(r) make
any
material Tax election, change its method of Tax accounting or settle any
material claim relating to Taxes; or
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(s) agree
in
a legally binding manner, whether in writing or otherwise, to do any of the
foregoing.
5.3. Access
to Information.
Subject
to the terms of the Confidentiality Agreement by and between Parent and the
Company dated May 18, 2007 (the "Confidentiality
Agreement"),
the
Company shall, and shall cause its Subsidiaries to, afford to Parent's officers,
directors, employees, accountants, counsel, consultants, advisors and agents
("Representatives")
free
and full access to and the right to inspect, during normal business hours and
with reasonable advance notice, all of the Real Property, properties, assets,
records, Contracts and other documents related to the Company and its
Subsidiaries, and shall permit them to consult, during normal business hours
and
with reasonable advance notice, with the officers, employees, accountants,
counsel and agents of the Company and its Subsidiaries for the purpose of making
such investigation of the Company and its Subsidiaries as Parent shall desire
to
make. The Company shall make available to Parent all such documents and copies
of documents and records and information with respect to the Company and its
Subsidiaries and copies of any working papers relating thereto as Parent may
reasonably request.
At the
Closing, the Company will deliver, or cause to be delivered, to Parent or its
designee all of the minute books of the Company and its
Subsidiaries.
5.4. Resignations.
On the
Closing Date, the Company shall cause to be delivered to Parent duly signed
resignations, effective at the Effective Time, of all members of the boards
of
directors of the Company and its Subsidiaries of their positions as directors
and of all officers of the Company and its Subsidiaries of their position as
officers (but not as employees).
5.5. Consents.
The
Company shall, and shall cause each of its Subsidiaries to, use its commercially
reasonable efforts to obtain all Consents; provided
that
no
Indebtedness shall be repaid, except as otherwise required pursuant to the
terms
of any applicable loan Contract, and no Contract shall be amended nor any right
thereunder be waived, and no money or other consideration shall be expended,
to
obtain any such Consent (except any processing or other fee provided for under
the terms of the underlying Contract).
5.6. Notification
of Certain Matters.
The
Company shall give prompt notice to Parent of any fact, event or circumstance
of
which it has Knowledge that (a) individually or taken together with all
other facts, events and circumstances of which it has Knowledge, constitutes
or
is reasonably likely to result in a Company Material Adverse Effect,
(b) constitutes a material breach of any of representations, warranties,
covenants or agreements contained herein, (c) the failure of any condition
precedent to Parent's obligations that is under the control of the Company
and
cannot reasonably be expected to be cured through the exercise of commercially
reasonable efforts by the Company on or prior to the Outside Date, (d) any
notice or other communication from any third party alleging that the consent
of
such third party is required in connection with the Merger, (e) any notice
or other communication from any Governmental Entity in connection with the
Merger, or (f) any Actions commenced relating to the Company or any of its
Subsidiaries that, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 3.18;
provided,
however, that
(i) the delivery of any notice pursuant to this Section 5.6
shall
not limit or otherwise affect any remedies available to Parent or prevent or
cure any misrepresentations, breach of warranty or breach of covenant, and
(ii) disclosure
by the Company shall not be deemed to amend or supplement the Company Disclosure
Letter or constitute an exception to any representation or warranty; provided,
provided,
further,
that
the failure to deliver any notice pursuant to this Section 5.6 shall not be
considered in determining whether the condition set forth in Section
8.2(b)
has been
satisfied.
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5.7. Exclusivity.
(a) Subject
to Section 5.7(b),
except
with respect to this Agreement and the transactions contemplated hereby, the
Company agrees that it will not, and it will cause its Subsidiaries and its
and
their respective directors, officers, employees and other agents and
representatives (including any investment banking, legal or accounting firm
retained by it or any of them and any individual member or employee of the
foregoing) who have authority (or who could reasonably be perceived by a third
party to have authority) to act on behalf of the Company in connection with
a
Third Party Proposal (each, an "Agent")
not
to: (i) initiate, solicit, seek or knowingly encourage, directly or
indirectly, any inquiries relating to or the making or implementation of any
Third Party Proposal; (ii) engage in any negotiations concerning, or
provide any non-public information or data to, or have any substantive
discussions with, any Person relating to a Third Party Proposal;
(iii) otherwise cooperate in or knowingly facilitate any effort or attempt
to make or implement a Third Party Proposal; (iv) enter into Contract with
any Person relating to a Third Party Proposal or (v) release any third
party from, or waive any provision of, any confidentiality or standstill
agreement that would otherwise restrict or limit a Third Party Proposal to
which
it is a party. The Company will immediately cease, and will cause its
Subsidiaries and Agents immediately to cease, any and all existing activities,
discussions or negotiations with any third parties conducted heretofore with
respect to any Third Party Proposal. "Third
Party Proposal"
means
any Contract, proposal or offer (including any proposal or offer to the
shareholders of the Company) with respect to an Acquisition Transaction.
"Acquisition
Transaction"
means:
(A) any sale, lease or other disposition, direct or indirect (and however
structured), of any business or assets of the Company and/or any of its
Subsidiaries (which business or assets represent 20% or more of the consolidated
assets of the Company and its Subsidiaries, taken as a whole), (B) any
tender offer or exchange offer that, if consummated, would result in a third
party beneficially owning 20% or more of any class of securities of the Company,
(C) a merger, consolidation, share exchange, business combination,
reorganization or other similar transaction involving the Company and/or any
of
its Subsidiaries (which Subsidiaries represent 10% or more of the consolidated
revenues, net income or assets of the Company and its Subsidiaries, taken as
a
whole) pursuant to which the shareholders of the Company or such Subsidiary
immediately preceding such transaction hold securities representing less than
80% of the total outstanding voting power of the surviving or resulting entity
of such transaction (or parent entity of such surviving or resulting entity),
(D) the issuance, sale or other disposition, direct or indirect (and
however structured), by the Company of securities (or securities or other rights
convertible into, or exercisable or exchangeable for, such securities)
representing 20% or more of the voting power or capital stock of the Company
and/or any of its Subsidiaries (which Subsidiaries represent 10% or more of
the
consolidated revenues, net income or assets of the Company and its Subsidiaries,
taken as a whole) or (E) any combination of the foregoing (other than the
Merger) in a series of related transactions.
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(b) Notwithstanding
anything to the contrary in Section 5.7(a),
the
Board of Directors of the Company may, so long as the Company Shareholder
Approval has not yet been obtained, furnish information to, and enter into
and
conduct discussions or negotiations with, a Person who has made a written bona
fide Third Party Proposal not solicited in violation of Section 5.7(a)
if, and
only if, the Board of Directors of the Company has (i) concluded in good
faith after consultation with the Company's independent financial advisors
of
nationally recognized reputation that such Third Party Proposal constitutes
or
is reasonably likely to result in a Superior Proposal, (ii) concluded in
good faith, after consultation with its outside legal counsel, that, in light
of
such Superior Proposal, failing to furnish such information or enter into or
conduct discussions is reasonably likely to result in a breach of its fiduciary
obligations to the Company Shareholders under applicable Law,
(iii) provided contemporaneous written notice to Parent of its furnishing
information or entering into or conducting discussions or negotiations with
such
Person and (iv) obtained from such Person an executed confidentiality
agreement on terms no less favorable to the Company than those contained in
the
Confidentiality Agreement. The Board of Directors of the Company shall furnish
to Parent all non-public information provided to the Person who has made the
Superior Proposal to the extent that such information has not been previously
provided to Parent and shall keep Parent promptly and reasonably informed as
to
the status of any discussions regarding such Superior Proposal. "Superior
Proposal"
means
an written bona fide Third Party Proposal not solicited in violation of Section
5.7(a)
(provided for purposes of this definition, each reference to "20%" or "80%"
in
the definition of "Acquisition Transaction" shall be deemed to be a reference
to
"50%") on terms that the Board of Directors of the Company determines, in its
good faith judgment (after consultation with its financial advisor of nationally
recognized reputation), to be more favorable to the Company Shareholders from
a
financial point of view than the terms of the Merger and with any financing
required to consummate the transaction contemplated by such Third Party Proposal
reasonably capable of being obtained. In addition to the obligations of the
Company set forth in this Section 5.7(b),
the
Company shall promptly, but in no event later than 24 hours after the receipt
thereof, advise Parent in writing of any Third Party Proposal or inquiry or
request for non-public information that the Company reasonably believes could
lead to a Third Party Proposal, the terms and conditions of such request, Third
Party Proposal or inquiry (including any subsequent material amendment or
modification to such terms and conditions) and the identity of the Person making
the request, inquiry or Third Party Proposal. The Company shall keep Parent
informed in all material respects on a timely basis of any change in the status
of, or any modification or amendment to, any Third Party Proposal.
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(c) Nothing
in this Agreement shall prevent the Board of Directors of the Company from
withholding, withdrawing, amending, modifying or changing its recommendation
in
favor of the Company Shareholder Approval and, in the case of a tender or
exchange offer made directly to the Company Shareholders, recommending that
the
Company Shareholders accept the tender or exchange offer (each, a "Change
of Recommendation")
in
response to a Superior Proposal, if all of the following conditions are
satisfied:
(i) a
Superior Proposal is made to the Company and is not withdrawn;
(ii) the
Company Shareholder Approval has not been obtained;
(iii) the
Company shall have provided at least three Business Days’ prior written notice
(the "Notice
Period")
to
Parent stating (A) that it has received a Superior Proposal, (B) the
terms and conditions of such Superior Proposal and the identity of the Person
making such Superior Proposal, including providing Parent with complete copies
of all documents and agreements, including exhibits and other attachments,
in
connection with such Superior Proposal, and (C) that it intends to effect a
Change of Recommendation and the manner in which it intends to do so (it being
agreed that (x) the Company shall not enter into a definitive agreement with
respect to the Superior Proposal during such three Business Day Period, and
(y)
any change to the terms of the Superior Proposal shall commence a new three
Business Day period);
(iv) Parent
shall not have, within the Notice Period, made an offer that the Board of
Directors of the Company by a majority vote determines in its good faith
judgment (based on consultation with its financial advisor) to be at least
as
favorable to the Company Shareholders from a financial point of view as such
Superior Proposal (it being agreed that the Board of Directors of the Company
shall convene a meeting to consider any such offer by Parent promptly following
the receipt thereof); and
(v) the
Board
of Directors of the Company concludes in good faith, after consultation with
its
outside legal counsel, that, in light of such Superior Proposal, the failure
of
the Board of Directors to effect a Change of Recommendation would be reasonably
likely to result in a breach of its fiduciary obligations to the Company
Shareholders under applicable Law.
(d) Nothing
contained in this Agreement shall prohibit the Company or its Board of Directors
from taking and disclosing to the Company Shareholders a position contemplated
by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act;
provided
that
the
Company shall not take a position that effects, or otherwise make any public
statement that constitutes, a Change of Recommendation unless specifically
permitted pursuant to the terms of Section 5.7(c).
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5.8. Company
Shareholders' Meeting.
(a) As
promptly as reasonably practicable after the Agreement Date, the Company shall
take all action necessary under the WBCA and its Charter Documents (i) to
call, convene and hold a meeting of the Company Shareholders to vote upon the
adoption of this Agreement (the "Company
Shareholders' Meeting")
and
(ii) to solicit the Company Shareholder Approval. The Board of Directors of
the Company will recommend, by unanimous vote of all directors then in office,
that the Company Shareholder Approval be given and will use its commercially
reasonable efforts to solicit from the Company Shareholders the Company
Shareholder Approval, except to the extent that the Board of Directors of the
Company effects a Change of Recommendation as provided in
Section 5.7(c).
(b) Until
the
termination of this Agreement in accordance with its terms, nothing in this
Agreement shall limit the Company's obligation to convene the Company
Shareholders' Meeting (regardless of whether the Board of Directors of the
Company effects a Change of Recommendation).
5.9. Proxy
Statement.
(a) As
promptly as practicable after the execution of this Agreement, the Company
shall
prepare and file with the SEC a proxy statement (together with any amendments
thereof or supplements thereto, the "Proxy
Statement")
relating to the Company Shareholders' Meeting. Parent will provide reasonable
cooperation and assistance with the preparation of the Proxy Statement. The
Company shall use commercially reasonable efforts to have cleared by the SEC
and
thereafter mail to the Company Shareholders as promptly as reasonably
practicable the Proxy Statement and all other proxy materials for the Company
Shareholders' Meeting.
(b) Except
to
the extent expressly permitted by Section 5.7(c),
(i) the Board of Directors of the Company shall recommend that the Company
Shareholders vote in favor of the Company Shareholder Approval, (ii) the
Proxy Statement shall include a statement that the Board of Directors of the
Company has recommended that the Company Shareholders vote in favor of the
Company Shareholder Approval and (iii) neither the Board of Directors of
the Company nor any committee thereof shall effect any Change of Recommendation.
However, nothing herein shall prohibit the Board of Directors of the Company
from fulfilling its duty of candor or disclosure to its shareholders under
applicable Law.
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(c) The
Proxy
Statement and any amendments or supplements to the Proxy Statement will, when
filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act. At the time the Proxy Statement or any
amendment or supplement to the Proxy Statement is first mailed to the Company
Shareholders and at the time the Company Shareholders vote on the adoption
of
this Agreement, the Proxy Statement, as supplemented or amended, if applicable,
will not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. If,
at
any time prior to the Company Shareholders' Meeting, any event or circumstance
relating to the Company that should be set forth in an amendment or a supplement
to the Proxy Statement should be discovered by the Company, the Company shall
promptly inform Parent. The covenant contained in this Section 5.9(c) will
not apply to statements or omissions included in the Proxy Statement based
upon
information furnished to the Company in writing by Parent specifically for
use
therein.
(d) The
Company shall give Parent and its counsel a reasonable opportunity to review
and
comment on the Proxy Statement, each time before that document (or any amendment
or supplement thereto) is filed with the SEC, and reasonable and good faith
consideration shall be given to any comments made by Parent and its counsel.
The
Company shall (i) promptly provide Parent and its counsel with any comments
or other communications, whether written or oral, that the Company or its
counsel may receive from time to time from the SEC or its staff with respect
to
the Proxy Statement promptly after receipt of those comments or other
communications and (ii) provide Parent with a reasonable opportunity to
participate in the response to those comments and to provide comments on that
response (to which reasonable and good faith consideration shall be given),
including by participating in any discussions or meetings with the
SEC.
5.10. Rights
Plan.
Prior
to the earlier of the termination of this Agreement or the Effective Time,
except in connection with a Change in Recommendation, the Company and its Board
of Directors shall not amend or modify or take any other action with regard
to
the Rights Plan in any manner or take any other action so as to (a) render
the Rights Plan inapplicable to any transaction(s) other than the Merger and
other transactions contemplated by this Agreement and the Company Voting
Agreements, (b) permit any Person or group who would otherwise be an
Acquiring Person (as defined in the Rights Plan) not to be an Acquiring Person,
(c) provide that a Distribution Date or Shares Acquisition Date or
Triggering Event (as such terms are defined in the Rights Plan) or similar
event
does not occur as promptly as practicable by reason of the execution of any
agreement or transaction other than this Agreement and the Company Voting
Agreements and the Merger and the agreements and transactions contemplated
hereby and thereby, or (d) except as specifically contemplated by this
Agreement, otherwise affect the rights of holders of Rights (as defined in
the
Rights Plan). The Company and its Board of Directors shall take all action
to
ensure that the Rights Plan is and, through the Effective Time, will be
inapplicable to Parent and Merger Sub, this Agreement, the Merger, the Company
Voting Agreements and the transactions contemplated hereby and thereby. Pursuant
to the amendment of the Rights Plan contemplated in Section 3.31
hereof,
the rights under the Rights Plan shall expire immediately prior to the Effective
Time.
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5.11. FIRPTA
Certificate.
The
Company shall prepare and deliver to Parent at the Closing a certificate stating
that the Company is not a "United States Real Property Holding Corporation"
as
defined in Section 897 of the Code in accordance with Treasury Regulation
promulgated under Sections 897 and 1445 of the Code (the "FIRPTA
Certificate").
5.12. Company
Benefit Plans.
Unless
Parent consents otherwise in writing, the Company shall take all action
necessary to terminate, or cause to terminate, before the Effective Time, any
Company Benefit Plan that is a 401(k) plan or other defined contribution
retirement plan or employee stock purchase plan.
ARTICLE VI
COVENANTS
OF PARENT
6.1. Form S-8.
Within
10 Business Days following the Effective Time, Parent shall file a registration
statement on Form S-8 to register shares of Parent Common Stock issuable
upon exercise of the Replacement Options and Replacement SARS to the extent
the
shares of Parent Common Stock may be registered on Form S-8. Parent shall
use its commercially reasonable efforts to maintain the effectiveness of such
registration statement for so long as the Replacement Options and Replacement
SARS remain outstanding.
6.2. Benefit
Plans.
Parent
shall take all reasonable actions necessary to allow eligible employees of
the
Company and any of its Subsidiaries that will be employees of the Surviving
Corporation and any of its Subsidiaries ("Transitioned
Employees"),
to
participate on substantially similar terms in benefit programs which are
substantially comparable to those maintained for the benefit of, or offered
to,
similarly situated employees of Parent, as soon as practicable after the
Effective Time, to the extent permitted by the terms of such Parent benefit
plan
or any insurance contract or agreement applicable thereto; provided,
however,
that in
the case of plans for which the Company maintains a plan offering the same
type
of benefit, such participation need not be offered by Parent until the
corresponding plan of the Company ceases to be available or is terminated after
the Effective Time. Parent will recognize employment services of each
Transitioned Employee with the Company and any of its Subsidiaries for purposes
of eligibility and vesting (but not benefit accrual) under any benefit plan
of
Parent. Each Transitioned Employee's years of service with the Company and
any
of its Subsidiaries shall be otherwise recognized for all general employment
purposes, including seniority, vacation, personal time and similar general
employment purposes; provided
that
any
vacation time offered by Parent in the calendar year of the Effective Time
to
any Transitioned Employee shall be offset by any vacation time used by or paid
to a Transitioned Employee by the Company or any of its Subsidiaries in the
calendar year of the Effective Time. In addition, Parent will use commercially
reasonable efforts to (a) waive all limitations as to preexisting
conditions, exclusions, waiting periods and service requirements with respect
to
participation and coverage requirements applicable to Transitioned Employees
under any group health plan sponsored by Parent, except to the extent such
preexisting conditions, exclusion, waiting period or service requirement had
not
been satisfied by any such Transitioned Employee as of the Effective Time under
a group health plan sponsored by the Company or any of its Subsidiaries; and
(b) provide each Transitioned Employee with credit for any deductible,
copayment and out-of-pocket limits applicable to such employees under any such
group medical plan sponsored by the Company or any of its Subsidiaries and
paid
by the Transitioned Employee prior to the Effective Time during the calendar
year of the Effective Time.
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6.3. Delisting
and Deregistration.
Parent
shall use its reasonable best efforts to cause the Company Common Stock to
be no
longer quoted on the Nasdaq Capital Market and to be deregistered under the
Exchange Act as soon as practicable following the Effective Time.
6.4. Indemnification.
(a) From
and
after the Effective Time, Parent shall, and Parent shall cause the Surviving
Corporation to, to the fullest extent permitted by applicable Law, indemnify,
defend and hold harmless, and provide advancement of expenses to, each Person
who is now, or has been at any time prior to the Agreement Date or who becomes
prior to the Effective Time, an officer, director or employee of the Company
or
any of its Subsidiaries (the "Indemnified
Parties")
against all losses, claims, damages, costs, expenses, liabilities or judgments
or amounts that are paid in settlement of or in connection with any claim or
Action that is based in whole or in part on, or arises in whole or in part
out
of, the fact that such Person is or was a director, officer or employee of
the
Company or any of its Subsidiaries, and pertaining to any matter existing or
occurring, or any acts or omissions occurring, at or prior to the Effective
Time, whether asserted or claimed prior to, or at or after, the Effective Time
(including matters, acts or omissions occurring in connection with the approval
of this Agreement and the consummation of the transactions contemplated hereby)
to the same extent such Persons are entitled to be indemnified or have the
right
to advancement of expenses as of the Agreement Date by the Company or any of
its
Subsidiaries pursuant to the Charter Documents and indemnification agreements
of
the Company and its Subsidiaries, if any, in existence on the Agreement Date
with any directors, officers and employees of the Company and its Subsidiaries
(“Indemnity
Payments”).
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(b) For
a
period of six years after the Effective Time, Parent shall cause to be
maintained in effect the current directors' and officers' liability insurance
policies maintained by the Company with respect to claims arising from facts
or
events that occurred prior to the Effective Time (including matters, acts or
omissions occurring in connection with the approval of this Agreement and the
Company Voting Agreements and the consummation of the transactions contemplated
hereby and thereby); provided
that
if
the existing directors' and officers' liability insurance policy expires, is
terminated or cancelled during such six-year period, Parent shall cause to
be
substituted therefor policies containing terms and conditions which are no
less
favorable to the former officers and directors of the Company and its
Subsidiaries only with respect to claims arising from facts or events that
occurred prior to the Effective Time (including matters, acts or omissions
occurring in connection with the approval of this Agreement and the Company
Voting Agreements and the consummation of the transactions contemplated hereby
and thereby); provided,
further, that
if
the aggregate annual premiums for such policies at any time during such period
exceed 200% of the annual premium paid by the Company for such insurance as
of
the Agreement Date, Parent shall be required to provide such coverage as will
then be available at an annual premium equal to 200% of such rate; and
provided,
further,
that,
in the alternative, the Surviving Corporation (or the Company prior to Closing
with Parent’s consent, which consent shall not be unreasonably withheld or
delayed), and after consultation with Parent, may purchase a tail policy
effective as of the Effective Time with respect to the directors’ and officers’
insurance, which tail policy shall (i) be effective for a period from the
Effective Time through and including the date six years after the Closing Date
with respect to claims arising from facts or events that occurred on or before
the Effective Time, (ii) shall contain substantially the same coverage and
amounts as, and contain terms and conditions substantially the same as the
coverage currently provided by the directors’ and officers’ insurance in effect
as of the Agreement Date, and (iii) shall cost no more than 200% of the annual
premium paid by the Company for such insurance as of the Agreement Date. Prior
to the Closing the Company shall consult with Parent before renewing the
existing directors' and officers' liability insurance policy.
(c) This
Section 6.4
is
intended to be for the benefit of, and shall be enforceable by, the Indemnified
Parties and their heirs and personal representatives and shall be binding on
Parent, the Surviving Corporation and their respective successors and
assigns.
(d) In
the
event Parent, the Surviving Corporation or any of their respective successors
or
assigns (i) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity in such consolidation
or
merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each case, proper provision shall be made
so
that the successors and assigns of Parent, the Surviving Corporation or their
respective successors or assigns honor the indemnification and insurance
obligations set forth in this Section 6.4.
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6.5. Notification
of Certain Matters.
Parent
shall give prompt notice to the Company of any fact, event or circumstance
of
which it has Knowledge that (a) constitutes a material breach of any of
Parent's or Merger Sub's representations, warranties, covenants or agreements
contained herein, (c) the failure of any condition precedent to the
Company's obligations that is under the control of Parent or Merger Sub and
cannot reasonably be expected to be cured through the exercise of commercially
reasonable efforts by Parent or Merger Sub on or prior to the Outside Date,
(d) any notice or other communication from any third party alleging that
the consent of such third party is required in connection with the Merger,
or
(e) any notice or other communication from any Governmental Entity in
connection with the Merger; provided,
however, that
the
delivery of any notice pursuant to this Section 6.5
shall
not limit or otherwise affect any remedies available to the Company or prevent
or cure any misrepresentations, breach of warranty or breach of
covenant.
ARTICLE VII
COVENANTS
OF THE COMPANY AND PARENT
7.1. Regulatory
Approvals.
Each
of
Parent, Merger Sub and the Company shall promptly after the Agreement Date
apply
for, and take all reasonably necessary actions to obtain or make, as applicable,
all Authorizations, Orders, declarations and filings with, and notices to,
any
Governmental Entity or other Person required to be obtained or made by it for
the consummation of the transactions contemplated hereby. Each party shall
cooperate with and promptly furnish to the other party any information that
may
be necessary in connection with any requirements imposed upon such other party
in connection with the consummation of the Merger.
7.2. Public
Announcements.
Each of
Parent and the Company will issue the initial press release relating to the
execution and delivery of this Agreement that has been approved in advance
by
the other party. Thereafter, each of Parent and the Company shall not issue
any
press release or otherwise make any public statements with respect to this
Agreement, the Merger or any of the other transactions contemplated by this
Agreement without the prior consent of the other parties (such consent not
to be
unreasonably withheld or delayed); provided
that
a party
may, without such consent (but after prior consultation to the extent
practicable in the circumstances), issue such press releases and make such
public statements that it believes are required by applicable Law or the rules
of the Nasdaq Capital Market or Nasdaq Global Select Market. Notwithstanding
the
foregoing, a party may make public statements in response to questions from
the
press, analysts, investors and make internal announcements to employees, so
long
as such statements and announcements are consistent with previous press releases
or public statements made jointly by the Company and Parent and do not violate
the terms of the Confidentiality Agreement.
7.3. Section 16
Matters.
Prior
to the Effective Time, Parent, Merger Sub and the Company shall take all steps
as may be required to cause (a) the acquisition of Replacement Stock
Options and Replacements SARS resulting from the operation of
Section 2.6
of this
Agreement by each individual who will be immediately following the Effective
Time subject to the reporting requirements of Section 16(a) of the
Exchange Act with respect to Parent, and (b) any dispositions of Company
Common Stock, Company Stock Options, Company SARS or Warrants resulting from
the
Merger or the other transactions contemplated by this Agreement by each
individual who will be immediately prior to the Effective Time subject to the
reporting requirements of Section 16(a) of the Exchange Act with
respect to the Company, to be exempt under Rule 16b-3 under the Exchange
Act in accordance with the interpretative guidance of the SEC.
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7.4. Further
Assurances.
Upon
the terms and subject to the conditions hereof each of the parties hereto shall
execute such documents and other instruments and take such further actions
as
may be reasonably required to carry out the provisions hereof and consummate
the
Merger and the transactions contemplated by this Agreement.
ARTICLE VIII
CONDITIONS
TO MERGER
8.1. Conditions
to Each Party's Obligation to Effect the Merger.
The
obligations of Parent, Merger Sub and the Company to consummate the Merger
are
subject to the satisfaction on or prior to the Closing Date of the following
conditions:
(a) The
Company Shareholder Approval shall have been obtained.
(b) All
Authorizations and Orders of, declarations and filings with, and notices to
any
Governmental Entity required to permit the consummation of the Merger shall
have
been obtained or made and shall be in full force and effect.
(c) No
temporary restraining order, preliminary or permanent injunction or other Order
preventing the consummation of the Merger shall be in effect. No Law shall
have
been enacted or shall be deemed applicable to the Merger which makes the
consummation of the Merger illegal.
8.2. Conditions
to Obligations of Parent and Merger Sub to Effect the Merger.
The
obligations of Parent and Merger Sub to effect the Merger are subject to the
satisfaction (or waiver by Parent in its sole discretion) of the following
further conditions:
(a) (i)
The
representations and warranties of the Company in Sections 3.2(a)
(first
sentence), 3.2(b)
(first
sentence), 3.2(c)
(first
two sentences) and 3.4(a)
of this
Agreement shall be true and correct in all material respects on and as of the
date of this Agreement and on and as of the Closing Date as though such
representations and warranties were made on and as of such date (except for
representations and warranties which address matters only as to a specified
date, which representations and warranties shall be true and correct in all
material respects with respect to such specified date), and (ii) all other
representations and warranties of the Company in this Agreement, disregarding
the phrase "in all material respects" or any Company Material Adverse Effect
qualifications contained in such representations and warranties, shall be true
and correct in all respects on and as of the date of this Agreement and on
and
as of the Closing Date as though such representations and warranties were made
on and as of such date (except for representations and warranties which address
matters only as to a specified date, which representations and warranties,
disregarding the phrase "in all material respects" or any Company Material
Adverse Effect qualifications contained in such representations and warranties,
shall be true and correct with respect to such specified date); provided,
however,
that
any inaccuracies in such representations and warranties shall be disregarded
unless all such inaccuracies, considered collectively, shall have had, and
shall
continue to have, a Company Material Adverse Effect. Parent shall have received
a certificate to such effect signed on behalf of the Company by the Chief
Executive Officer and Chief Financial Officer of the Company.
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(b) The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date.
Parent shall have received a certificate to such effect signed on behalf of
the
Company by a duly authorized executive officer of the Company.
(c) No
Action
shall be pending by any Governmental Entity seeking to prevent consummation
of
the Merger.
(d) The
individuals set forth on Schedule 8.2(d) shall have executed and delivered
the
Employment Arrangements in the form agreed upon by Parent and such individuals
prior to the Agreement Date, all of which shall be in full force and effect
(excluding any failure to be in full force or effect as a result of the death
or
incapacity of any such individual).
(e) Xxxxxxx
X. Xxxxxx shall have executed and delivered (i) a non-competition agreement
and
(ii) a consulting agreement, each in the form agreed upon by Parent and Xx.
Xxxxxx prior to the Agreement Date, and there shall be no Order outstanding
obtained with the consent of Parent or Merger Sub that such non-competition
agreement or consulting agreement is not enforceable in any
respect.
(f) The
Company shall have delivered to Parent a duly executed and certified FIRPTA
Certificate.
(g) All
actions necessary to cause all outstanding Rights (as defined in the Rights
Plan) under the Rights Plan to expire immediately prior to the Effective Time
and to render such Rights inapplicable to Parent, Merger Sub, this Agreement,
the Merger, the Company Voting Agreements and the other transactions
contemplated by this Agreement and the Company Voting Agreements shall have
been
taken.
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8.3. Conditions
to Obligation of the Company to Effect the Merger.
The
obligation of the Company to effect the Merger is subject to the satisfaction
(or waiver by the Company in its sole discretion) of the following further
conditions:
(a) (i)
The
representations and warranties of Parent and Merger Sub in Section 4.2
shall be
true and correct in all material respects on and as of the date of this
Agreement and on and as of the Closing Date as though such representations
and
warranties were made on and as of such date, and (ii) all other representations
and warranties of the Parent and Merger Sub in this Agreement, disregarding
the
phrase "in all material respects" or any material adverse effect qualifications
contained in such representations and warranties, shall be true and correct
in
all respects on and as of the date of this Agreement and on and as of the
Closing Date as though such representations and warranties were made on and
as
of such date (except for representations and warranties which address matters
only as to a specified date, which representations and warranties, disregarding
the phrase "in all material respects" or any material adverse effect
qualifications contained in such representations and warranties, shall be true
and correct with respect to such specified date); provided,
however,
that
any inaccuracies in such representations and warranties shall be disregarded
unless all such inaccuracies, considered collectively, shall have had, and
shall
continue to have, a material adverse effect on Parent and Merger Sub or the
ability of either of them to consummate the Merger or perform their respective
obligations under this Agreement. The Company shall have received a certificate
to such effect signed on behalf of Parent and Merger Sub by a duly authorized
officer thereof.
(b) Each
of
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to
the Closing Date. The Company shall have received a certificate to such effect
signed on behalf of Parent and Merger Sub by a duly authorized officer
thereof.
ARTICLE IX
TERMINATION
9.1. Termination.
(a) This
Agreement may be terminated and the Merger abandoned at any time prior to the
Effective Time (with any termination by Parent also being an effective
termination by Merger Sub):
(i) by
mutual
written consent duly authorized by the Board of Directors of Parent and the
Company;
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(ii) by
Parent
or the Company if:
(A) the
Merger is not consummated on or before December 28, 2007 (the "Outside
Date");
provided,
however,
that if
the Merger shall not have been consummated by the Outside Date, but on such
date, all of the conditions to Closing set forth in Article VIII
(other
than conditions that by their nature are only to be satisfied as of the Closing
and other than the conditions set forth in Section 8.1(b))
have
been satisfied or waived in writing, then the Outside Date shall be extended
until February 28,
2008; provided further, that
the
right to terminate this Agreement under this clause (ii)(A)
shall
not be available to any party whose breach of a covenant or agreement under
this
Agreement has been the proximate cause of the failure of the Closing to occur
on
or before such date;
(B) a
Governmental Entity of competent jurisdiction shall have issued an Order or
taken any other action, in any case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, which Order or
other
action is final and non-appealable; or
(C) the
Company Shareholder Approval shall not have been obtained at the Company
Shareholders' Meeting or any adjournment or postponement thereof; provided,
however,
that
the right to terminate this Agreement under this Section 9.1(a)(ii)(C) shall
not
be available to the Company where the failure to obtain such Company Shareholder
Approval is caused by any action or failure to act of the Company that
constitutes a willful breach of this Agreement;
(iii) by
Parent
if:
(A) there
has
been a breach by the Company of any representation, warranty, covenant or
agreement contained in this Agreement or if any representation or warranty
of
the Company shall have become untrue, in either case such that the conditions
set forth in Section 8.2(a)
or
Section 8.2(b),
as
applicable, would not be satisfied; provided
that if
such inaccuracy in the Company's representations and warranties or breach by
the
Company is curable within 15 Business Days by the Company, then Parent may
not
terminate this Agreement under this Section 9.1(a)(iii)(A)
for 15
Business Day after delivery of written notice from Parent of such inaccuracy
or
breach, (it being understood that Parent may not terminate this Agreement
pursuant to this Section 9.1(a)(iii)(A)
if such
inaccuracy or breach by the Company is cured in all material respects during
such 15 Business Day period);
or
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(B) (i) the
Board of Directors of the Company fails to call the Company Shareholders'
Meeting in accordance with Section 5.8(a),
(ii) the Company fails to include in the Proxy Statement the recommendation
of the Board of Directors of the Company in favor of the Company Shareholder
Approval, (iii) the Board of Directors of the Company effects a Change of
Recommendation, (iv) the Company recommends to the Company Shareholders or
approves or endorses a Third Party Proposal or in violation of Section 5.7
enters into any letter of intent, memorandum of understanding or similar
document or any Contract (other than a nondisclosure agreement) constituting,
accepting or directly related to any Third Party Proposal, (v) following the
receipt of a Third Party Proposal, the Board of Directors of the Company fails
to reaffirm its recommendation to the Company’s shareholders in favor of the
Company Shareholder Approval within 10 Business Days after Parent requests
in
writing that such recommendation be reaffirmed, (vi) the Company willfully
breaches its obligations under Section 5.7 and Parent is materially prejudiced
thereby, or (vii) a tender offer or exchange offer relating to the
outstanding shares of capital stock of the Company is commenced, and the Board
of Directors of the Company fails to recommend within 10 Business Days against
acceptance of such tender offer or exchange offer by the Company Shareholders
(including by taking no position with respect to the acceptance of such tender
offer or exchange offer by the Company Shareholders (other
than a "stop, look and listen" letter or similar communication of the type
contemplated by Rule 14d-9(f) under the Exchange Act));
(iv) by
the
Company if there
has
been a breach by Parent or Merger Sub of any representation, warranty, covenant
or agreement contained in this Agreement or if any representation or warranty
of
Parent or Merger Sub shall have become untrue, in either case such that the
conditions set forth in Section 8.3(a)
or
Section 8.3(a),
as
applicable, would not be satisfied; provided
that if
such inaccuracy in Parent or Merger Sub's representations and warranties or
breach by Parent or Merger Sub is curable within 15 Business Days by Parent
or
Merger Sub, then the Company may not terminate this Agreement under this
Section 9.1(a)(iv)
for 15
Business Days after delivery of written notice from the Company of such
inaccuracy or breach (it being understood that the Company may not terminate
this Agreement pursuant to this Section 9.1(a)(iv)
if such
inaccuracy or breach by Parent or Merger Sub is cured in all material respects
during such 15 Business Day Period);
or
(v) by
the
Company, prior to obtaining the Company Shareholder Approval, and concurrently
with or following a Change of Recommendation in compliance with the provisions
of Section 5.7(c),
if the
Company's Board of Directors by majority vote authorizes the Company to accept
(or to enter into a written agreement for a transaction constituting) a Superior
Proposal; provided
that
prior to or concurrently with such termination, the Company shall pay all
amounts due pursuant to Section 9.4(a)(ii)
of this
Agreement in accordance with the terms specified therein.
(b) The
party
desiring to terminate this Agreement pursuant to Section 9.1(a)(ii),
(iii),
(iv)
or (v)
shall give written notice of such termination to the other parties
hereto.
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9.2. Effect
of Termination.
In the
event of termination of this Agreement as provided in Section 9.1,
this
Agreement shall immediately become void and there shall be no liability or
obligation on the part of the Company or Parent or their respective officers,
directors, shareholders or Affiliates, except as set forth in
Sections 9.3
and
9.4;
provided,
however, that
the
provisions of Section 7.2
(Public
Announcements) and Section 9.2 (Effect of Termination),
Section 9.3
(Remedies), Section 9.4
(Termination Fee) and Article X
of this
Agreement shall remain in full force and effect and survive any termination
of
this Agreement.
9.3. Remedies.
Any
party terminating this Agreement pursuant to Section 9.1
shall
have the right to recover damages sustained by such party as a result of any
willful or intentional breach by the other party of any representation,
warranty, covenant or agreement contained in this Agreement or fraud or willful
misrepresentation; provided,
however, that
the
party seeking relief is not in breach of any representation, warranty, covenant
or agreement contained in this Agreement under circumstances which would have
permitted the other party to terminate the Agreement under
Section 9.1.
Payments made pursuant to Section 9.4
shall be
in addition to any other rights, remedies and relief of the parties hereto
or
with respect to the subject matter of this Agreement.
In the
event Parent terminates this Agreement in violation of the terms of this
Agreement, including Section 9.1, as determined by a court of competent
jurisdiction, Parent agrees that, in addition to any other rights, remedies
and
relief of the Company, the Company shall be entitled to recover damages from
Parent not to exceed the amount set forth on Schedule
9.3
hereto
to cover Indemnity Payments to directors and officers of the Company that
resulted from Specified Actions; provided,
that
the
foregoing shall not apply unless each of the following two requirements have
been satisfied: (i) the Company shall have first sought and obtained all amounts
payable under the Company’s directors’ and officers’ liability insurance policy,
and (ii) the Company shall have provided Parent with reasonable documentation
evidencing such Indemnity Payments.
9.4. Termination
Fee.
(a) The
Company shall pay Parent, by wire transfer of immediately available funds to
an
account designated by Parent, a fee of $1,400,000, plus the amount of all of
the
reasonable fees and expenses incurred by Parent in connection with this
Agreement and the transactions contemplated hereby (not to exceed $400,000)
(the
"Termination
Fee")
as
follows:
(i) if
Parent
terminates this Agreement pursuant to Section 9.1(a)(iii)(B),
the
Company shall pay Parent the Termination Fee in full on the second Business
Day
following the date of such termination;
(ii) if
the
Company terminates this Agreement pursuant to Section 9.1(a)(v),
the
Company shall pay Parent the Termination Fee in full prior to or concurrently
with
such
termination; or
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(iii) if
(A) Parent or the Company terminates this Agreement pursuant to Section
9.1(a)(ii)(A) or Section 9.1(a)(ii)C) and (B) (i) prior to any such
termination but following the Agreement Date any Person shall have made to
the
Company or the Company Shareholders, or publicly announced, a proposal or offer
for any Acquisition Transaction that is not subsequently withdrawn and (ii)
within
12
months following termination of this Agreement, any Acquisition Transaction
with
respect to the Company is consummated or the Company enters into a Contract
providing for any Acquisition Transaction, the
Company shall pay Parent the Termination Fee concurrently
with the earlier of the date of the consummation of such Acquisition Transaction
or the execution of such Contract, as applicable. For
purposes of this Section 9.4,
the
term "Acquisition
Transaction"
shall
have the meaning given to such term in Section 5.7(a)
hereof,
except that each reference to "80%" or "20%" therein shall be deemed to have
been changed to "50%".
(b) In
the
event that either of Parent or the Company terminates this Agreement following
failure to obtain the Company Shareholder Approval at a meeting of the
shareholders of the Company duly convened therefor or at any adjournment
thereof, regardless of whether the circumstances set forth in
Section 9.4(a)
shall
have occurred, within two Business Days after such termination the Company
shall
pay Parent the amount of all of the reasonable fees and expenses incurred by
Parent in connection with this Agreement and the transactions contemplated
hereby (not to exceed $400,000) by wire transfer of same day funds to an account
designated by Parent. The amount of any such fee paid by the Company to Parent
shall be credited against any subsequent payment by the Company to Parent of
the
Termination Fee pursuant to Section 9.4(a).
(c) In
the
event that either Parent or the Company terminates this Agreement (other than
a
termination pursuant to which a Termination Fee is payable under Section
9.4(a)(i)
or
9.4(a)(ii)),
Parent
will enter into an agreement with the Company (or amend any existing agreement)
providing for the payment by Parent to the Company of at least $500,000 per
month for the six-month period following the date of such termination in
consideration of additional services to be provided by the Company on terms
and
conditions that are consistent with the terms and conditions for such services
in existence on the date of this Agreement; provided,
however,
that if
this Agreement is terminated pursuant to Section 9.4(a)(iii),
then
such new agreement (or such amendment to any existing agreement) shall also
provide that such additional payments shall cease at the time any
Acquisition Transaction (as defined in Section 9.4.(a)(iii)) with respect to
the
Company is consummated or the Company enters into a Contract providing for
any
such Acquisition Transaction.
(d) The
Company acknowledges that (i) the agreements contained in
Sections 9.4(a)
and
9.4(b)
are an
integral part of the transactions contemplated by this Agreement, (ii) the
amount of, and the basis for payment of, the fees and expenses described therein
is reasonable and appropriate in all respects, and (iii) without this agreement,
Parent would not enter into this Agreement. Accordingly, if the Company fails
to
pay in a timely manner the fees and expenses due pursuant to
Sections 9.4(a)
or
9.4(b),
and, in
order to obtain such payment, Parent makes a claim that results in a judgment
for the amounts set forth in Sections 9.4(a)
or
9.4(b),
the
Company shall pay to Parent its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such suit, together
with interest on the amount set forth in Sections 9.4(a)
or
9.4(b)
at the
prime rate of Bank of America, N.A. in effect on the date such payment was
required to be made hereunder.
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ARTICLE X
MISCELLANEOUS
10.1. Notices.
Any
notice, request, demand, waiver, consent, approval or other communication which
is required or permitted hereunder shall be in writing and shall be deemed
given: (a) on the date established by the sender as having been delivered
personally; (b) on the date delivered by a private courier as established
by the sender by evidence obtained from the courier; (c) on the date sent
by facsimile, with confirmation of transmission, if sent during normal business
hours of the recipient, if not, then on the next Business Day; or (d) on
the fifth day after the date mailed, by certified or registered mail, return
receipt requested, postage prepaid. Such communications, to be valid, must
be
addressed as follows:
If
to Parent or Sub, to:
Apollo
Group, Inc.
0000
Xxxx
Xxxxxx Xxxxxx
Xxxxxxx,
XX
Attn:
Chief Financial Officer
Facsimile:
(000) 000-0000
With
a required copy to:
Xxxxxx,
Xxxxx & Bockius LLP
Xxx
Xxxxxx Xxxxxx
Xxx
Xxxxxxxxx, XX 00000
Attn:
Xxxxxxx X. Xxxxx, Esq.
Facsimile:
(000) 000-0000
If
to the Company, to:
Aptimus,
Inc.
000
Xxxxx
Xx., Xxxxx 0000
Xxx Xxxxxxxxx,
XX 00000
Attn:
President
Facsimile:
(000) 000-0000
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With
a
required copy to:
Fenwick
&
West
LLP
Silicon
Valley Center
000
Xxxxxxxxxx Xxxxxx
Xxxxxxxx
Xxxx, XX 00000
Attn:
Xxx X. Xxxx, Esq.
Xxxxxx
X.
Xxx, Esq.
Facsimile:
(000)
000-0000
or
to
such other address or to the attention of such Person or Persons as the
recipient party has specified by prior written notice to the sending party
(or
in the case of counsel, to such other readily ascertainable business address
as
such counsel may hereafter maintain). If more than one method for sending notice
as set forth above is used, the earliest notice date established as set forth
above shall control.
10.2. Survival.
The
representations and warranties and covenants and agreements in this Agreement
and in any certificate delivered pursuant hereto shall terminate at the
Effective Time, except that the covenants and agreements set forth in
Article VI and this Article X
shall
survive the Effective Time.
10.3. Amendments
and Waivers.
(a) Any
provision of this Agreement may be amended or waived if, and only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by
each party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective; provided
that,
after
adoption of this Agreement by the Company Shareholders, no amendment or waiver
shall be made which by Law requires further approval by the Company Shareholders
without such further approval.
(b) No
failure or delay by any party in exercising any right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
(c) To
the
maximum extent permitted by Law, (i) no waiver that may be given by a party
shall be applicable except in the specific instance for which it was given
and
(ii) no notice to or demand on one party shall be deemed to be a waiver of
any obligation of such party or the right of the party giving such notice or
demand to take further action without notice or demand.
10.4. Fees
and Expenses.
Except
as set forth in Section 9.4,
all
fees and expenses incurred in connection with the Merger, this Agreement and
the
transactions contemplated by this Agreement shall be paid by the party incurring
such fees or expenses, whether or not the Merger is consummated.
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10.5. Successors
and Assigns.
This
Agreement may not be assigned by any party hereto without the prior written
consent of the other parties; provided
that
Parent
or Merger Sub may assign any of their respective rights and obligations to
any
direct or indirect Subsidiary of Parent. Subject to the foregoing, all of the
terms and provisions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective executors, heirs, personal
representatives, successors and assigns.
10.6. Governing
Law.
This
Agreement and the Exhibits and Schedules hereto shall be governed by and
interpreted and enforced in accordance with the Laws of the State of California,
without giving effect to any choice of Law or conflict of Laws rules or
provisions (whether of the State of California or any other jurisdiction) that
would cause the application of the Laws of any jurisdiction other than the
State
of California; provided,
however,
that
issues involving the consummation and effects of the Merger shall be governed
by
the Laws of the State of Washington.
10.7. Consent
to Jurisdiction.
Each
party irrevocably submits to the exclusive jurisdiction of (a) California
state courts located in San Francisco, California, and (b) the United
States District Court for the Northern District of California, for the purposes
of any Action arising out of this Agreement or any transaction contemplated
hereby. Each party agrees to commence any such Action in such courts. Each
party
further agrees that service of any process, summons, notice or document by
U.S.
registered mail to such party's respective address set forth above shall be
effective service of process for any Action in such courts with respect to
any
matters to which it has submitted to jurisdiction in this
Section 10.7.
Each
party irrevocably and unconditionally waives any objection to the laying of
venue of any Action arising out of this Agreement or the transactions
contemplated hereby in (i) California state courts located in San
Francisco, California, or (ii) the United States District Court for the
Northern District of California, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such Action brought in any such court has been brought in an inconvenient
forum.
10.8. Counterparts.
This
Agreement may be executed in any number of counterparts, and any party hereto
may execute any such counterpart, each of which when executed and delivered
shall be deemed to be an original and all of which counterparts taken together
shall constitute but one and the same instrument. This Agreement shall become
effective when each party hereto shall have received a counterpart hereof signed
by the other parties hereto. The parties agree that the delivery of this
Agreement may be effected by means of an exchange of facsimile signatures with
original copies to follow by mail or courier service.
10.9. Third
Party Beneficiaries.
No
provision of this Agreement is intended to confer upon any Person other than
the
parties hereto any rights or remedies hereunder; except that in the case of
Section 6.4
hereof,
the Indemnified Parties and their respective heirs, executors, administrators,
legal representatives, successors and assigns, are intended third party
beneficiaries of such sections and shall have the right to enforce such sections
in their own names.
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10.10. Entire
Agreement.
This
Agreement and the documents, instruments and other agreements specifically
referred to herein or delivered pursuant hereto set forth the entire
understanding of the parties hereto with respect to the Merger. All Exhibits
and
Schedules referred to herein are intended to be and hereby are specifically
made
a part of this Agreement. Any and all previous agreements and understandings
between or among the parties regarding the subject matter hereof, whether
written or oral, are superseded by this Agreement, other than the
Confidentiality Agreement which shall continue in full force and effect in
accordance with its terms.
10.11. Captions.
All
captions contained in this Agreement are for convenience of reference only,
do
not form a part of this Agreement and shall not affect in any way the meaning
or
interpretation of this Agreement.
10.12. Severability.
Any
provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall be ineffective to the extent of such invalidity or
unenforceability without invalidating or rendering unenforceable the remaining
provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in
any
other jurisdiction.
10.13. Specific
Performance.
Parent
and the Company each agree that irreparable damage would occur in the event
that
any of the provisions of this Agreement were not performed by them in accordance
with the terms hereof and that each party shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at Law or
equity.
ARTICLE XI
DEFINITIONS
11.1. Definitions.
When
used in this Agreement, the following terms shall have the meanings assigned
to
them in this Section 11.1,
or in
the applicable Section of this Agreement to which reference is made in this
Section 11.1.
"Affiliate"
means,
with respect to any specified Person, any other Person directly or indirectly
controlling, controlled by or under common control with such specified
Person.
"Authorization"
means
any authorization, approval, consent, certificate, license, permit or franchise
of or from any Governmental Entity or pursuant to any Law.
"Business
Day"
means a
day other than a Saturday, Sunday or other day on which banks located in
Phoenix, Arizona or San Francisco, California are authorized or required by
Law
to close.
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"Company
Material Adverse Effect"
means
any state of facts, development, event, circumstance, condition, occurrence
or
effect ("Effects")
that,
individually or taken collectively with all other Effects that have occurred
prior to the date of determination of the occurrence of the Company Material
Effect, (a) is
materially adverse to the condition (financial or otherwise), business,
operations or results of operations of the Company and its Subsidiaries taken
as
a whole or (b) materially impairs the ability of the Company to perform its
obligations hereunder, other than any such Effect arising out of (i) any changes
affecting the economy generally or the industry in which the Company and its
Subsidiaries operate or any changes in general economic conditions (provided
that
any such
change or changes do not disproportionately affect in any material respect
the
Company and its Subsidiaries, taken as a whole), (ii) changes in the trading
volume or trading prices of the Company Common Stock in and of themselves
(provided that
such
exclusion shall not apply to any underlying Effect
that may
have caused such change in trading prices or volumes), (iii) any failure to
meet
analysts estimates or expectations as to revenue, earnings or other financial
performance (provided that
such
exclusion shall not apply to any underlying Effect
that may
have caused such failure), (iv) the
taking of any action required by this Agreement, (v) the
termination, reduction or other negative development in the Company's
relationships with any of its customers, suppliers or other business partners
to
the extent such Effect was proximately caused by the announcement or pendency
of
the transactions contemplated hereby, (vi) any employee attrition resulting
from
either Parent’s failure to offer continued employment to such employee or Parent
offering continued employment to such employee with base salary and target
bonus
terms less favorable in the aggregate than those provided by the Company as
of
the Agreement Date, (vii) any
Action, whether commenced or threatened, which asserts allegations of a breach
of fiduciary duty relating to this Agreement or the Company Voting Agreements
or
violations of securities Laws in connection with any of the transactions
contemplated by this Agreement or the Company Voting Agreements (“Specified
Action”),
(viii)
changes in applicable Law or GAAP, or (ix) natural disasters.
"Contract"
means
any legally binding agreement, contract, license, lease, commitment, arrangement
or understanding, written or oral, including any sales order and purchase
order.
"Governmental
Entity"
means
any entity or body exercising executive, legislative, judicial, regulatory
or
administrative functions of or pertaining to United States federal, state,
local, or municipal government, foreign, international, multinational or other
government, including any department, commission, board, agency, bureau,
subdivision, instrumentality, official or other regulatory, administrative
or
judicial authority thereof, and any quasi-governmental regulatory body to the
extent that the rules and regulations or orders of such body have the force
of
Law.
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"XXX
Xxx"
means
the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended.
"Indebtedness"
means
any of the following: (a) any indebtedness for borrowed money, (b) any
obligations evidenced by bonds, debentures, notes or other similar instruments,
(c) any obligations to pay the deferred purchase price of property or
services, except trade accounts payable and other current Liabilities arising
in
the ordinary course of business, (d) any obligations as lessee under
capitalized leases, (e) any indebtedness created or arising under any
conditional sale or other title retention agreement with respect to acquired
property, (f) any obligations, contingent or otherwise, under acceptance
credit, letters of credit or similar facilities, and (g) any guaranty of
any of the foregoing.
"Knowledge"
of a
party or any similar phrase means, with respect to any fact or matter, the
actual knowledge of the directors and executive officers of the party, together
with such knowledge that such directors and executive officers could be expected
to discover after reasonable inquiry concerning the existence of the fact or
matter in question.
"Law"
means
any statute, law, constitution, treaty, ordinance, code, order, decree,
judgment, rule, regulation and any other binding requirement or determination
of
any Governmental Entity.
"Order"
means
any award, injunction, judgment, decree, order, ruling, subpoena or verdict
or
other decision entered, issued or rendered by any Governmental
Entity.
"Person"
means
an individual, a corporation, a partnership, a limited liability company, a
trust, an unincorporated association, a Governmental Entity or any agency,
instrumentality or political subdivision of a Governmental Entity, or any other
entity or body.
"Subsidiary"
or
"Subsidiaries"
means,
with respect to any party, any Person, of which (i) such party or any
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary
of
such party do not have a majority of the voting interest in such partnership)
or
(ii) at least a majority of the securities or other interests having by
their terms ordinary voting power to elect a majority of the Board of Directors
or others performing similar functions with respect to such Person is directly
or indirectly owned or controlled by such party and/or by any one or more of
its
Subsidiaries.
"$"
means
United States dollars.
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11.2. Interpretation.
(a) The
meaning assigned to each term defined herein shall be equally applicable to
both
the singular and the plural forms of such term and vice versa, and words
denoting either gender shall include both genders as the context requires.
Where
a word or phrase is defined herein, each of its other grammatical forms shall
have a corresponding meaning.
(b) The
terms
"hereof", "herein" and "herewith" and words of similar import shall, unless
otherwise stated, be construed to refer to this Agreement as a whole and not
to
any particular provision of this Agreement.
(c) When
a
reference is made in this Agreement to an Article, Section, paragraph,
Exhibit or Schedule, such reference is to an Article, Section, paragraph,
Exhibit or Schedule to this Agreement unless otherwise
specified.
(d) The
word
"include", "includes", and "including" when used in this Agreement shall be
deemed to be followed by the words "without limitation", unless otherwise
specified.
(e) A
reference to any party to this Agreement or any other agreement or document
shall include such party's predecessors, successors and permitted
assigns.
(f) Reference
to any Law means such Law as amended, modified, codified, replaced or reenacted,
and all rules and regulations promulgated thereunder.
(g) The
parties have participated jointly in the negotiation and drafting of this
Agreement. Any rule of construction or interpretation otherwise requiring this
Agreement to be construed or interpreted against any party by virtue of the
authorship of this Agreement shall not apply to the construction and
interpretation hereof.
(h) All
accounting terms used and not defined herein shall have the respective meanings
given to them under GAAP.
(i) In
this
Agreement, "made available" shall mean that such documents or information
referenced (i) shall have been contained in the Company's IntraLinks electronic
data room to which Parent and its counsel had access no later than 11:59 p.m.
Pacific Time on the date that is two days prior to the Agreement Date (the
"Inclusion
Date")
(except with respect to documents required to be "made available" at a later
time by the terms of this Agreement or that Parent or its counsel requested
be
added to the electronic data room after the Inclusion Date), and (ii) a
reasonable person accessing such electronic data room would have been able
to
discover such documents or information based upon the labeling of the file
containing such document or information and the placement thereof in the
electronic data room.
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(Remainder
of Page Intentionally Left Blank)
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IN
WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger
to be
signed by their respective officers thereunto, duly authorized as of the date
first written above.
| APOLLO GROUP, INC. | ||
| |
|
|
| By: |
/s/
Xxxxxx X. X’Xxxxx
|
|
|
Name:
Xxxxxx
X. X'Xxxxx
Title:
Executive
VP & CFO
|
||
| ASTEROID ACQUISITION CORPORATION | ||
| |
|
|
| By: | /s/ Xxxxx Xxxxxxx | |
|
Name:
Xxxxx Xxxxxxx
Title:
President
|
||
| APTIMUS, INC. | ||
| |
|
|
| By: | /s/ Xxxxxx Xxxxxx | |
|
Name:
Xxxxxx Xxxxxx
Title:
CEO & President
|
||
