1
EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
i2 TECHNOLOGIES, INC.,
STARFISH MERGER CORP.
AND
SUPPLYBASE, INC.
MARCH 12, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER...........................................................................1
1.1 The Merger...................................................................1
1.2 Closing; Effective Time......................................................2
1.3 Effect of the Merger.........................................................2
1.4 Certificate of Incorporation; Bylaws.........................................2
1.5 Directors and Officers.......................................................2
1.6 Effect on Capital Stock......................................................2
1.7 Surrender of Certificates....................................................6
1.8 No Further Ownership Rights in Target Capital Stock..........................7
1.9 Lost, Stolen or Destroyed Certificates.......................................8
1.10 Tax and Accounting Consequences..............................................8
1.11 Exempt Securities............................................................8
1.12 Taking of Necessary Action; Further Action...................................8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF TARGET............................................8
2.1 Organization, Standing and Power.............................................9
2.2 Capital Structure............................................................9
2.3 Authority...................................................................10
2.4 Financial Statements........................................................11
2.5 Absence of Certain Changes..................................................11
2.6 Accounts Receivable.........................................................12
2.7 Litigation..................................................................12
2.8 Restrictions on Business Activities.........................................12
2.9 Governmental Authorization..................................................12
2.10 Title to Property...........................................................12
2.11 Intellectual Property.......................................................13
2.12 Environmental Matters.......................................................15
2.13 Taxes.......................................................................16
2.14 Employee Benefit Plans......................................................18
2.15 Employees and Consultants...................................................20
2.16 Certain Agreements Affected by the Merger...................................21
2.17 Related-Party Transactions..................................................21
2.18 Insurance...................................................................22
2.19 Compliance with Laws........................................................22
2.20 Brokers' and Finders' Fees..................................................22
2.21 Support Agreements..........................................................22
2.22 Board Approval; Stockholder Approval Required...............................22
2.23 Customers and Suppliers.....................................................22
2.24 Material Contracts..........................................................23
2.25 No Breach of Material Contracts.............................................24
2.26 Third-Party Consents........................................................24
2.27 Material Third Party Consents...............................................24
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2.28 Minute Books................................................................24
2.29 Complete Copies of Materials................................................25
2.30 Year 2000 Compatibility.....................................................25
2.31 Absence of Undisclosed Liabilities..........................................25
2.32 Inventory...................................................................25
2.33 Accounting and Tax Matters..................................................25
2.34 Export Control Laws.........................................................26
2.35 Product Releases............................................................26
2.36 Representations Complete....................................................26
2.37 Permit Application; Information Statement...................................26
2.38 Registration Rights.........................................................27
ARTICLE III REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB.........................27
3.1 Organization, Standing and Power............................................27
3.2 Capital Structure...........................................................28
3.3 Authority...................................................................28
3.4 SEC Documents; Financial Statements.........................................29
3.5 Accounting and Tax Matters..................................................29
3.6 Absence of Undisclosed Liabilities..........................................29
3.7 No Brokers..................................................................29
3.8 Representations Complete....................................................29
3.9 Information to be Supplied by Acquiror......................................30
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................................30
4.1 Conduct of Business of Target...............................................30
4.2 Restrictions on Conduct of Business of Target...............................30
4.3 Notices.....................................................................33
ARTICLE V ADDITIONAL AGREEMENTS...............................................................33
5.1 No Solicitation.............................................................33
5.2 Preparation of Information Statement; Permit Application....................34
5.3 Stockholders' Meeting or Consent Solicitation...............................36
5.4 Access to Information.......................................................36
5.5 Confidentiality.............................................................37
5.6 Public Disclosure...........................................................37
5.7 Consents; Cooperation.......................................................37
5.8 Update Disclosure; Breaches.................................................38
5.9 Legal Requirements..........................................................38
5.10 Tax-Free Reorganization.....................................................39
5.11 Blue Sky Laws...............................................................39
5.12 Stock Options...............................................................39
5.13 Target Director and Officer Indemnification.................................40
5.14 Escrow Agreement............................................................41
5.15 Form S-8....................................................................41
5.16 Listing of Additional Shares................................................41
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5.17 Employees...................................................................41
5.18 Benefit Arrangements........................................................41
5.19 Conversion of Target Preferred Stock........................................41
5.20 Additional Agreements; Best Efforts.........................................42
5.21 Notice to Holders of Target Warrants........................................42
ARTICLE VI CONDITIONS TO THE MERGER...........................................................42
6.1 Conditions to Obligations of Each Party to Effect the Merger................42
6.2 Additional Conditions to Obligations of Target..............................43
6.3 Additional Conditions to the Obligations of Acquiror........................44
ARTICLE VII TERMINATION, EXPENSES, AMENDMENT AND WAIVER.......................................46
7.1 Termination.................................................................46
7.2 Effect of Termination.......................................................47
7.3 Expenses and Termination Fees...............................................47
7.4 Amendment...................................................................48
7.5 Extension; Waiver...........................................................49
ARTICLE VIII ESCROW AND INDEMNIFICATION.......................................................49
8.1 Survival of Representations, Warranties and Covenants.......................49
8.2 Indemnification.............................................................49
8.3 Escrow Fund.................................................................50
8.4 Escrow Basket...............................................................50
8.5 Escrow Period...............................................................50
8.6 Claims upon Escrow Fund.....................................................50
8.7 Objections to Claims........................................................51
8.8 Resolution of Conflicts; Arbitration........................................51
8.9 Stockholders' Agent.........................................................52
8.10 Distribution Upon Termination of Escrow Period..............................53
8.11 Actions of the Stockholders' Agent..........................................53
8.12 Third-Party Claims..........................................................53
8.13 Maximum Liability and Remedies..............................................54
ARTICLE IX GENERAL PROVISIONS.................................................................54
9.1 Notices.....................................................................54
9.2 Interpretation..............................................................55
9.3 Counterparts................................................................55
9.4 Entire Agreement; Third Party Beneficiaries.................................55
9.5 Severability................................................................56
9.6 Remedies Cumulative.........................................................56
9.7 Governing Law...............................................................56
9.8 Assignment; Amendment; Binding Effect.......................................56
9.9 Rules of Construction.......................................................56
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SCHEDULES
Target Disclosure Schedule
Acquiror Disclosure Schedule
EXHIBITS
Exhibit A Support Agreement
Exhibit B Certificate of Merger
Exhibit C Escrow Agreement
Exhibit D-1 Employment Agreement for Xxxxx Xxxxx
Exhibit D-2 Employment and Noncompetition Agreement for Xxx Xxxxxxxx
Exhibit D-3 Employment Agreement for Xxxxxxxxxx Xxxxxx
Exhibit D-4 Employment and Noncompetition Agreement for Xxxx Xxxxxxxx
Exhibit D-5 Employment Agreement for Xxxxx Xxxxxxx
Exhibit D-6 Employment and Noncompetition Agreement for Xxxxx Xxxxx
Exhibit D-7 Employment Agreement for Xxxx Xxxxxxxxx
Exhibit D-8 Employment Agreement for Xxxxx Xxx
Exhibit D-9 Employment Agreement for Xxxxxxx Xxxxxxxx
Exhibit D-10 Employment and Noncompetition Agreement for Xxxxx Xxxxxx
Exhibit D-11 Employment and Noncompetition Agreement for Xxxxx Xxxxxx
Exhibit D-12 Employment Agreement for Xxx Xxxxx
Exhibit D-13 Employment and Noncompetition Agreement for Xxxxxx Xxxxxxxxx
Exhibit D-14 Employment and Noncompetition Agreement for Xxxx Xxxxx
Exhibit D-15 Employment Agreement for Xxxxxxx Xxxxxxxx
Exhibit E Legal Opinion of Xxxxxxx, Phleger & Xxxxxxxx LLP
Exhibit F Legal Opinion of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
Exhibit G FIRPTA Notice
Exhibit H 280G Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into as of March 12, 2000 by and among i2 Technologies, Inc., a
Delaware corporation ("ACQUIROR"), Starfish Merger Corp., a Delaware corporation
("MERGER Sub"), and SupplyBase, Inc. a Delaware corporation ("TARGET").
RECITALS
A. The Boards of Directors of Target, Acquiror and Merger Sub
believe it is in the best interests of their respective companies and the
stockholders of their respective companies that Target and Merger Sub combine
into a single company through the statutory merger of Merger Sub with and into
Target (the "MERGER") and, in furtherance thereof, have approved the Merger.
B. Pursuant to the Merger, among other things, each
outstanding share of the capital stock of Target ("TARGET CAPITAL STOCK"), shall
be converted into shares of common stock of Acquiror, $0.00025 par value
("ACQUIROR COMMON STOCK"), at the exchange rates set forth herein.
C. Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "CODE"), and to cause the Merger to qualify as a
reorganization under the provisions of Sections 368(a)(1)(A) and 368(a)(2)(E) of
the Code.
E. Concurrent with the execution of this Agreement and as an
inducement to Acquiror to enter into this Agreement, each affiliate of Target
who is a stockholder, officer or director of Target is entering into a Support
Agreement in the form attached hereto as Exhibit A (each, a "SUPPORT AGREEMENT")
to vote the shares of Target Capital Stock owned by such person to approve this
Agreement and the Merger .
NOW, THEREFORE, in consideration of the covenants and representations
set forth herein, and for other good and valuable consideration, the parties
agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined)
and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit B (the "CERTIFICATE OF MERGER")
and the applicable provisions of the Delaware General Corporation Law ("DELAWARE
LAW"), Merger Sub shall be merged with and into Target, the separate corporate
existence of Merger Sub shall cease and Target shall continue as the surviving
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corporation. Target as the surviving corporation after the Merger is hereinafter
sometimes referred to as the "SURVIVING CORPORATION."
1.2 Closing; Effective Time. The closing of the transactions
contemplated hereby (the "CLOSING") shall take place as soon as practicable
after the satisfaction or waiver of each of the conditions set forth in Article
VI hereof, or at such other time as the parties hereto agree (the date on which
the Closing shall occur being the "CLOSING DATE"). The Closing shall take place
at the offices of Xxxxxxx, Phleger & Xxxxxxxx LLP at 000 Xxxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxx, Xxxxx, or at such other location as the parties hereto agree. On
the Closing Date, the parties hereto shall cause the Merger to be consummated by
filing the Certificate of Merger with the Secretary of State of the State of
Delaware, in accordance with the relevant provisions of Delaware Law (the time
and date of such filing being the "EFFECTIVE TIME" and the "EFFECTIVE DATE,"
respectively).
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement, the Certificate of Merger and the
applicable provisions of Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Target shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Target shall become the
debts, liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation of
Merger Sub, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Delaware Law and such Certificate of Incorporation;
provided, however, that Article I of the Certificate of Incorporation shall be
amended to read as follows: "The name of the corporation is SupplyBase, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 Directors and Officers. At the Effective Time, the directors of
Merger Sub immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, to hold office until such time as such directors resign,
are removed or their respective successors are duly elected or appointed and
qualified. The officers of Merger Sub immediately prior to the Effective Time
shall be the officers of the Surviving Corporation, to hold office until such
time as such officers resign, are removed or their respective successors are
duly elected or appointed and qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and without any
action on the part of Acquiror, Merger Sub, Target or the holders of any of
Target's securities:
(a) Conversion of Target Capital Stock. The maximum number of
shares of Acquiror Common Stock to be issued (including Acquiror Common Stock to
be reserved for issuance upon exercise of options to purchase shares of Target
Common Stock (as hereinafter
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defined) ("TARGET OPTIONS") and warrants to purchase shares of Target Common
Stock ("TARGET WARRANTS") assumed by Acquiror pursuant to Sections 1.6(d) and
5.12) in exchange for the acquisition by Acquiror of all Target Capital Stock
outstanding immediately prior to the Effective Time and the assumption by
Acquiror of all unexpired and unexercised Target Options outstanding immediately
prior to the Effective Time shall be 1,875,000 shares (the "TOTAL ACQUIROR
CAPITAL SHARES"), reduced (i) by any Dissenting Shares (as hereinafter defined)
and (ii) subject to payment by Acquiror at the Closing of the Target Merger
Expenses (as hereinafter defined), by the Target Merger Expense Set Off Shares
(as hereinafter defined). Certain of such shares of Acquiror Common Stock shall
be deposited in the Escrow Fund (as hereinafter defined) in accordance with
Article VIII hereof. At the Closing, Acquiror shall pay all costs and expenses
incurred by Target through the Closing Date in connection with this Agreement
and the transactions contemplated hereby including, without limitation, the fees
and expenses of its advisers, accountants and legal counsel (collectively, the
"TARGET MERGER EXPENSES"). The term "TARGET MERGER EXPENSE SET OFF SHARES" shall
equal the Target Merger Expenses divided by the average closing "sale" price of
a share of Acquiror Common Stock for the ten (10) most recent days that Acquiror
Common Stock has traded ending on the fifth trading day immediately preceding
the Closing Date, as reported on the Nasdaq National Market (such average price
being the "ACQUIROR CLOSING STOCK PRICE"). No other adjustment shall be made in
the number of shares of Acquiror Common Stock issued in the Merger as a result
of any cash proceeds received by Target from the date hereof to the Closing Date
pursuant to the exercise of Target Options and Target Warrants. Except for the
Target Options and Target Warrants, there are no other options, warrants or
other rights, whether contingent or otherwise, to purchase shares of Target
Capital Stock. Subject to the terms and conditions of this Agreement and the
Certificate of Merger, as of the Effective Time, by virtue of the Merger and
without any action on the part of the holder of any shares of Target Capital
Stock:
(A) Each share of Target common stock, par value $0.001 per
share (the "TARGET COMMON STOCK"), issued and outstanding immediately prior to
the Effective Time (other than (i) shares to be cancelled pursuant to Section
1.6(b) and (ii) shares, if any, held by persons who have not voted such shares
for approval of the Merger and with respect to which such persons shall become
entitled to exercise dissenters' rights in accordance with Delaware Law and, if
applicable, the California General Corporation Law, as amended ("CALIFORNIA
LAW") (the shares referred to in clause (ii) being the "DISSENTING SHARES"))
shall be converted into and exchanged for the number of shares of Acquiror
Common Stock equal to (i) (A) the Total Acquiror Shares minus (B) the Target
Merger Expense Set Off Shares divided by (ii) the sum of (x) all Target Common
Stock outstanding immediately prior to the Effective Time, (y) the Target Common
Stock issuable upon the conversion of all Target Series A Preferred Stock, par
value $0.001 per share ("TARGET SERIES A PREFERRED STOCK"), Target Series B
Preferred Stock, par value $0.001 per share ("TARGET SERIES B PREFERRED STOCK"),
and Target Series C Preferred Stock, par value $0.001 per share ("TARGET SERIES
C PREFERRED STOCK"), outstanding immediately prior to the Effective Time and (z)
the Target Common Stock issuable upon the exercise of all Target Options and
Target Warrants outstanding immediately prior to the Effective Time (the result
of clause (i) divided by clause (ii) being referred to as the "COMMON EXCHANGE
RATIO").
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(B) Each share of Target Series A Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares) shall be converted into and exchanged for a number of shares of Acquiror
Common Stock determined by multiplying (i) the Common Exchange Ratio by (ii) the
number of shares of Target Common Stock issuable upon the conversion of one
share of Target Series A Preferred Stock immediately prior to the Effective Time
(the product of clause (i) multiplied by clause (ii) being referred to as the
"SERIES A EXCHANGE RATIO").
(C) Each share of Target Series B Preferred Stock issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares) shall be converted into and exchanged for a number of shares of Acquiror
Common Stock determined by multiplying (i) the Common Exchange Ratio by (ii) the
number of shares of Target Common Stock issuable upon the conversion of one
share of Target Series B Preferred Stock immediately prior to the Effective Time
(the product of clause (i) multiplied by clause (ii) being referred to as the
"SERIES B EXCHANGE RATIO").
(D) Each share of Target Series C Preferred Stock (as defined
below) issued and outstanding immediately prior to the Effective Time (other
than Dissenting Shares) shall be converted into and exchanged for a number of
shares of Acquiror Common Stock determined by multiplying (i) the Common
Exchange Ratio by (ii) the number of shares of Target Common Stock issuable upon
the conversion of one share of Target Series C Preferred Stock immediately prior
to the Effective Time (the product of clause (i) multiplied by clause (ii) being
referred to as the "SERIES C EXCHANGE RATIO").
The Common Exchange Ratio, Series A Exchange Ratio, Series B Exchange Ratio and
Series C Exchange Ratio are collectively referred to as the "EXCHANGE RATIOS"
and individually as an "EXCHANGE RATIO."
(b) Cancellation of Target Capital Stock Owned by Acquiror or
Target. At the Effective Time, each share of Target Capital Stock owned by
Acquiror or Target or any direct or indirect wholly owned subsidiary of Acquiror
or of Target immediately prior to the Effective Time shall be canceled and
extinguished without any conversion thereof.
(c) Target Stock Option Plans. At the Effective Time, the
Target 1998 Stock Option Plan and 1999 Stock Plan, each as amended (together,
the "TARGET STOCK OPTION PLAN"), and all options to purchase Target Common Stock
then outstanding under the Target Stock Option Plan shall be assumed by Acquiror
in accordance with Section 5.12.
(d) Target Warrants. At the Effective Time, each outstanding
Target Warrant shall be assumed by Acquiror. Each such warrant so assumed by
Acquiror under this Agreement shall continue to have, and be subject to, the
same terms and conditions as those that existed immediately prior to the
Effective Time, except that (i) such warrant shall be exercisable for that
number of whole shares of Acquiror Common Stock equal to the product of the
number of shares of Target Common Stock that were issuable upon exercise of such
warrant immediately prior to the Effective Time multiplied by the Common
Exchange Ratio and rounded down to the nearest whole number of shares of
Acquiror Common Stock and (ii) the per share exercise price for the
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shares of Acquiror Common Stock issuable upon exercise of such assumed warrant
shall be equal to the quotient determined by dividing the exercise price per
share of Target Common Stock at which such warrant was exercisable immediately
prior to the Effective Time by the Common Exchange Ratio, rounded up to the
nearest whole cent. Acquiror shall take all corporate action necessary to
reserve and make available for issuance a sufficient number of shares of
Acquiror Common Stock for delivery under the Target Warrants assumed in
connection with this Section 1.6(d).
(e) Capital Stock of Merger Sub. At the Effective Time, each
share of Merger Sub common stock, par value $0.01 per share, issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of common
stock, $0.01 par value, of the Surviving Corporation. Each stock certificate of
Merger Sub evidencing ownership of any such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(f) Adjustments to Exchange Ratios. The Exchange Ratios shall
be adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Acquiror Common Stock or Target Capital Stock), reorganization, recapitalization
or other like change with respect to Acquiror Common Stock or Target Capital
Stock occurring after the date hereof and prior to the Effective Time.
(g) Fractional Shares. No fraction of a share of Acquiror
Common Stock will be issued, but in lieu thereof each holder of shares of Target
Capital Stock who would otherwise be entitled to a fraction of a share of
Acquiror Common Stock (after aggregating all fractional shares of Acquiror
Common Stock to be received by such holder) shall receive from Acquiror an
amount of cash (rounded to the nearest whole cent) equal to the product of (i)
such fraction, multiplied by (ii) the Acquiror Closing Stock Price.
(h) Dissenters' Rights. Any Dissenting Shares shall not be
converted into Acquiror Common Stock and shall not receive any cash in lieu of
fractional shares but instead shall be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to Delaware Law and, if applicable, California Law. Target
agrees that, except with the prior written consent of Acquiror, or as required
under Delaware Law and, if applicable, California Law, it will not make any
payment with respect to, or settle or offer to settle, any claim, demand or
other liability with respect to any Dissenting Shares. Each holder of Dissenting
Shares (a "DISSENTING STOCKHOLDER") who, pursuant to the provisions of Delaware
Law and, if applicable, California Law, becomes entitled to payment of the fair
value for shares of Target Capital Stock shall receive payment therefor (but
only after the value therefor shall have been agreed upon or finally determined
pursuant to such provisions). If, after the Effective Time, any Dissenting
Shares shall lose their status as Dissenting Shares, Acquiror shall issue and
deliver, upon surrender by such Dissenting Stockholder of a certificate or
certificates representing shares of Target Capital Stock, the number of shares
of Acquiror Common Stock to which such Dissenting Stockholder would otherwise be
entitled under this Section 1.6 and the Certificate of Merger less the number of
shares allocable to such Dissenting Stockholder that have been or will be
deposited in the Escrow Fund (as defined below) pursuant to Section 1.7(c) and
Article VIII hereof.
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1.7 Surrender of Certificates.
(a) Exchange Agent. ChaseMellon Shareholder Services, L.L.C.,
the transfer agent and registrar for the Acquiror Common Stock, shall act as
exchange agent (the "EXCHANGE AGENT") in the Merger.
(b) Acquiror to Provide Common Stock and Cash. Promptly after
the Effective Time (and in any event no later than ten (10) business days after
the Effective Time), Acquiror shall make available in accordance with this
Article I, through such reasonable procedures as Acquiror may adopt, (i) the
shares of Acquiror Common Stock issuable pursuant to Section 1.6(a) in exchange
for shares of Target Capital Stock outstanding immediately prior to the
Effective Time less the number of shares of Acquiror Common Stock to be
deposited into an escrow fund (the "ESCROW FUND") pursuant to the requirements
of Article VIII hereof and (ii) cash in an amount sufficient to permit payment
of cash in lieu of fractional shares pursuant to Section 1.6(f).
(c) Exchange Procedures. Promptly after the Effective Time
(and in any event no later than ten (10) business days after the Effective
Time), Acquiror shall cause the Exchange Agent to mail to each holder of record
(the "FORMER TARGET STOCKHOLDERS") of a certificate or certificates (the
"CERTIFICATES") which immediately prior to the Effective Time represented
outstanding shares of Target Capital Stock, whose shares were converted into the
right to receive shares of Acquiror Common Stock pursuant to Section 1.6, (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Acquiror may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for certificates
representing shares of Acquiror Common Stock (and cash in lieu of fractional
shares). Upon surrender of a Certificate for cancellation to such agent or
agents as may be appointed by Acquiror, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Acquiror Common Stock (less the number of shares of Acquiror Common
Stock to be deposited in the Escrow Fund on such holder's behalf pursuant to
Article VIII hereof), and the Certificate so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Certificate that, prior to the
Effective Time, represented shares of Target Capital Stock will be deemed from
and after the Effective Time, for all corporate purposes, other than the payment
of dividends, to evidence the ownership of the number of full shares of Acquiror
Common Stock into which such shares of Target Capital Stock shall have been so
converted and the right to receive an amount in cash in lieu of fractional
shares pursuant to Section 1.6. As soon as practicable after the Effective Time
(and in any event no later than ten (10) business days after the Effective Time)
and subject to and in accordance with the provisions of Section 8.3, Acquiror
shall cause to be delivered to the Escrow Agent (as defined in Section 8.3) a
certificate or certificates representing (x) an amount of shares (allocated
pro-rata among all Target stockholders) equal to the sum of 10% of the Acquiror
Common Stock issued in exchange for outstanding Target Capital Stock
(collectively the "ESCROW SHARES"), which shall be registered in the name of the
Escrow Agent as nominee for the holders of Certificates cancelled pursuant to
this Section 1.7. Such shares shall be
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beneficially owned by such holders and shall be held in escrow and shall be
available to compensate Acquiror for damages as provided in Article VIII. To the
extent not used for such purposes, such shares shall be released, all as
provided in Article VIII hereof.
(d) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Acquiror Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Acquiror Common Stock
represented thereby until the holder of record of such Certificate surrenders
such Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing whole shares of Acquiror Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
which would have been previously payable (but for the provisions of this Section
1.7(d)) with respect to such shares of Acquiror Common Stock.
(e) Transfers of Ownership. If any certificate for shares of
Acquiror Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of the issuance thereof that the Certificate so surrendered is
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Acquiror or the Exchange Agent any
transfer or other Taxes (as defined in Section 2.13(c)) required by reason of
the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the Certificate surrendered, or
established to the satisfaction of Acquiror or the Exchange Agent that such Tax
has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.7, no party hereto or any of their respective agents shall be
liable to any person for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
(g) Dissenting Shares. The provisions of this Section 1.7 also
shall apply to Dissenting Shares that lose their status as such, except that the
obligations of Acquiror under this Section 1.7 shall commence on the date of
loss of such status and the holder of such shares shall be entitled to receive
in exchange for such shares the number of shares of Acquiror Common Stock to
which such holder is entitled pursuant to Section 1.6 hereof.
1.8 No Further Ownership Rights in Target Capital Stock. All shares of
Acquiror Common Stock issued upon the surrender for exchange of shares of Target
Capital Stock in accordance with the terms hereof shall be deemed to have been
issued in full satisfaction of all rights pertaining to such shares of Target
Capital Stock, and there shall be no further registration of transfers on the
records of the Surviving Corporation of shares of Target Capital Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for any
reason, they shall be canceled and exchanged as provided in this Article I.
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1.9 Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, the Acquiror shall issue
or cause to be issued in exchange for such lost, stolen or destroyed
Certificate, upon the making of an affidavit of that fact by the holder thereof,
such shares of Acquiror Common Stock as may be required pursuant to Section 1.6;
provided, however, that Acquiror may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificate to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Acquiror, the Surviving
Corporation or any of their agents with respect to the Certificate alleged to
have been lost, stolen or destroyed.
1.10 Tax and Accounting Consequences. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning of
Section 368 of the Code. No party shall take any action which would, to such
party's knowledge, cause the Merger to fail to so qualify as a reorganization
within the meaning of Section 368 of the Code.
1.11 Exempt Securities. The parties hereto expect that the shares of
Acquiror Common Stock to be issued in connection with the Merger will be exempt
securities under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
by reason of Section 3(a)(10) thereof, and that the issuance of Acquiror Common
Stock and Acquiror's assumption of Target Options and Target Warrants hereunder
will be qualified under the securities laws of the State of California pursuant
to Section 25121 thereof, after a fairness hearing (the "FAIRNESS HEARING") has
been held pursuant to the authority granted by Section 25142 of such law. Each
of Acquiror, Merger Sub and Target shall use their respective best efforts (a)
to file an application for such hearing and qualification as soon as reasonably
practicable after the date of this Agreement and (b) to obtain such
qualification.
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Target and Merger Sub, the officers and directors of Target
and Merger Sub are fully authorized in the name of their respective corporations
or otherwise to take, and shall take, all such lawful and necessary action, so
long as such action is not inconsistent with this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TARGET
In this Agreement, any reference to any event, change, condition or
effect being "MATERIAL" with respect to any entity means any material event,
change, condition or effect related to the financial condition, properties,
assets (including intangible assets), liabilities, business, operations or
results of operations of such entity and its subsidiaries, taken as a whole. In
this Agreement, any reference to a "MATERIAL ADVERSE EFFECT" with respect to any
entity means any event, change or effect that is materially adverse to the
financial condition, properties, assets (including intangible assets),
liabilities, business, operations or results of operations of such entity and
its subsidiaries, taken as a whole; provided, that for purposes of Section
6.2(a) and
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Section 6.3(a), neither of the following shall constitute a Material Adverse
Effect: (i) changes or effects which are primarily and directly cause by the
execution and delivery of this Agreement or the announcement of the transactions
contemplated hereby (it being understood that in any controversy concerning the
applicability of this clause (i) the party claiming the benefit of this clause
(i) shall have the burden of proof with respect to the elements of such clause)
and (ii) changes or effects which are primarily and directly caused by
Acquiror's refusal to consent to action requested to be taken by Target which
Target (at the time of such request) certified to Acquiror was necessary, in the
good faith judgment of Target's Board of Directors, to avoid a Material Adverse
Effect on Target.
In this Agreement, the words "AWARE," "KNOWLEDGE" or similar words,
expressions or phrases with respect to a party means such party's actual
knowledge after inquiry of officers, directors and other key employees of such
party and its subsidiaries reasonably believed to have knowledge of the relevant
matters.
Target represents and warrants to Acquiror and Merger Sub that the
statements contained in this Article II are true and correct, except as set
forth in the Disclosure Schedule delivered by Target to Acquiror prior to the
execution and delivery of this Agreement (the "TARGET DISCLOSURE SCHEDULE"). The
Target Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered Sections contained in this Article II, and the disclosure in any
Section shall qualify only the corresponding Section in this Article II. Any
reference in this Article II to an agreement being "ENFORCEABLE" shall be deemed
to be qualified to the extent such enforceability is subject to (i) laws of
general application relating to bankruptcy, insolvency, moratorium, fraudulent
conveyance and the relief of debtors and (ii) the availability of specific
performance, injunctive relief and other equitable remedies.
2.1 Organization, Standing and Power. Target is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to conduct its business as
presently conducted and as proposed to be conducted and to enter into this
Agreement and to carry out the transactions contemplated by this Agreement.
Target is duly qualified and in good standing to do business as a foreign
corporation in California and is not required to be so qualified in any other
jurisdiction, except where the failure to be so qualified would not have a
Material Adverse Effect on Target. Target has furnished to Acquiror true and
complete copies of its Certificate of Incorporation and Bylaws, each as amended
to date and currently in effect. Target is not in violation of any of the
provisions of its Certificate of Incorporation or Bylaws. Target does not own,
directly or indirectly, any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
2.2 Capital Structure. The authorized capital stock of Target consists
of 20,000,000 shares of common stock, par value $0.001 per share (the "TARGET
COMMON STOCK"), of which 4,717,354 shares are issued and outstanding, and
12,753,326 shares of preferred stock, par value $0.001 per share, of which
4,289,496 shares have been designated as Target Series A Preferred Stock,
2,963,830 shares have been designated as Target Series B Preferred Stock and
5,500,000 shares have been designated as Target Series C Preferred Stock. As of
the date of this
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Agreement, there are 4,289,496 shares of Target Series A Preferred Stock,
2,963,830 shares of Target Series B Preferred Stock and 4,676,667 shares of
Target Series C Preferred Stock issued and outstanding. All of the issued and
outstanding shares of Target Capital Stock have been duly authorized and validly
issued and are fully paid and nonassessable. Except as set forth in Section 2.2
of the Target Disclosure Schedule, (a) no subscription, warrant, option,
convertible security or other right (contingent or otherwise) to purchase or
acquire from Target any shares of capital stock of Target is authorized or
outstanding, (b) Target has no obligation (contingent or otherwise) to issue any
subscription, warrant, option, convertible security or other such right or to
issue or distribute to holders of any shares of its capital stock any evidences
of indebtedness or assets of Target and (c) Target has no obligation (contingent
or otherwise) to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof. True and complete copies of all agreements and
instruments relating to or issued under the Target Stock Option Plan have been
made available to Acquiror, and such agreements and instruments have not been
amended, modified or supplemented, and there are no agreements to amend, modify
or supplement such agreements or instruments from the forms made available to
Acquiror. All of the issued and outstanding shares of capital stock of Target
have been offered, issued and sold by Target in compliance with applicable
securities laws.
2.3 Authority. The execution and delivery by Target of this Agreement
and the Certificate of Merger, and the consummation by Target of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of Target, subject only to the approval
of the Merger by Target's stockholders. This Agreement has been duly executed
and delivered by Target and constitutes a valid and binding obligation of Target
enforceable in accordance with its terms. The execution and delivery of this
Agreement by Target does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of, or
breach of or default under (with or without notice or lapse of time, or both),
or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under, or require a waiver or consent under
(a) its Certificate of Incorporation or Bylaws (each as amended to date) or (b)
any material mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Target or any of its
subsidiaries or their properties or assets, except where such conflict,
violation, default, termination, cancellation or acceleration with respect to
the foregoing provisions of clause (b) would not, individually or in the
aggregate, have a Material Adverse Effect on Target. No consent, approval, order
or authorization of, or registration, qualification, designation, declaration or
filing with, any court, administrative agency or commission or other
governmental authority or instrumentality ("GOVERNMENTAL ENTITY") is required on
the part of Target in connection with the execution and delivery of this
Agreement or the consummation of the other transactions contemplated by this
Agreement, except for (w) the filing of the Certificate of Merger, (x) such
consents, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable state securities laws and the
securities laws of any foreign country; (y) such filings as may be required
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
("HSR"), and (z) such other consents, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained or made, would
not
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have a Material Adverse Effect on Target and would not prevent, or materially
alter or delay, any of the transactions contemplated by this Agreement. The
terms of the Target Stock Option Plan permit the assumption thereof by Acquiror
or the substitution of options to purchase Acquiror Common Stock as provided in
this Agreement, without the consent or approval of the holders of such options,
the Target stockholders or otherwise and without any acceleration of the
exercise schedule or vesting provisions in effect for such options. The terms of
the Target Warrants permit the assumption thereof by Acquiror or the
substitution of warrants to purchase Acquiror Common Stock as provided in this
Agreement, without the consent or approval of the holders of such warrants, the
Target stockholders or otherwise and without any acceleration of the exercise
schedule or vesting provisions in effect for such warrants.
2.4 Financial Statements. Target has delivered to Acquiror its audited
financial statements (balance sheet, statement of operations and statement of
cash flows) on a consolidated basis as at, and for the fiscal years ended,
December 31, 1997 and 1998, and its unaudited financial statements (balance
sheet, statement of operations and statement of cash flows) on a consolidated
basis as at, and for the 12-month period ended, December 31, 1999 (collectively,
the "TARGET FINANCIAL STATEMENTS"). The Target Financial Statements were
complete and correct in all material respects as of their respective dates, and
were prepared in accordance with generally accepted accounting principles
("GAAP") (except that the unaudited financial statements do not have notes
thereto) applied on a consistent basis throughout the periods indicated and with
each other (except as may be indicated in the notes thereto). The Target
Financial Statements fairly present in all material respects the consolidated
financial condition and operating results of Target as of the dates, and for the
periods, indicated therein, subject to normal year-end audit adjustments. Target
maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP.
2.5 Absence of Certain Changes. Since December 31, 1999 (the "TARGET
BALANCE SHEET DATE"), Target has conducted its business in the ordinary course
of business and there has not occurred: (a) up to and including March 12, 2000,
any change, event or condition (whether or not covered by insurance) that has
resulted in, or would result in, a Material Adverse Effect on Target; (b) any
acquisition, sale or transfer of any material asset of Target other than in the
ordinary course of business (including transfers of Target Intellectual Property
(as defined in Section 2.11) on a non-exclusive basis to Target's customers,
distributors or other licensees in the ordinary course of business); (c) any
material change in accounting methods or practices (including any change in
depreciation or amortization policies or rates) by Target or any material
revaluation by Target of any of its assets; (d) any declaration, setting aside,
or payment of a dividend or other distribution with respect to the capital stock
Target, or any direct or indirect redemption, purchase or other acquisition by
Target of any of its capital stock; (e) any Material Contract entered into by
Target; (f) any material amendment or termination of, or default under, any
contract to which Target is a party or by which it is bound which would
reasonably be expected to have a Material Adverse Effect on Target; (g) any
amendment or change to the Certificate of Incorporation or Bylaws of Target or
any proposal by Target's Board of Directors or stockholders relating thereto;
(h) any material increase in or modification of the compensation or benefits
payable or to become payable by Target to any of its consultants, independent
contractors, directors or employees or (i) any negotiation or agreement by
Target or any of its
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subsidiaries to do any of the things described in the preceding clauses (a)
through (h) (other than negotiations with Acquiror and its representatives
regarding the transactions contemplated by this Agreement).
2.6 Accounts Receivable. The accounts receivable shown on the most
recent Balance Sheet included in the Target Financial Statements (the "TARGET
BALANCE SHEET") arose in the ordinary course of business. Allowances for
doubtful accounts and returns have been prepared in accordance with the past
practices of Target. The accounts receivable of Target arising after the Target
Balance Sheet Date and prior to the date hereof arose in the ordinary course of
business. No agreement for deduction or discount has been made with respect to
any accounts receivable.
2.7 Litigation. There is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target, threatened
against Target or any of its properties or any of its officers or directors (in
their capacities as such) that, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Target. All actions,
suits, proceedings, claims, arbitrations or investigations to which Target is a
party (or, to the knowledge of Target, threatened to become a party) is
disclosed in Section 2.7 of the Target Disclosure Schedule. There is no
judgment, decree or order against Target or, to the knowledge of Target, any of
its directors or officers (in their capacities as such), that would prevent,
enjoin, or materially alter or delay any of the transactions contemplated by
this Agreement.
2.8 Restrictions on Business Activities. There is no agreement,
judgment, injunction, order or decree binding upon Target which would reasonably
be expected to have the effect of prohibiting or materially impairing any
current business practice of Target, any acquisition of property by Target or
the conduct of business by Target as currently conducted by Target.
2.9 Governmental Authorization. Target has obtained each federal,
state, county, local or foreign governmental consent, license, permit, grant or
other authorization of a Governmental Entity (a) pursuant to which Target
currently operates or holds any interest in any of its properties or (b) that is
required for the operation of Target's business or the holding of any such
interest ((a) and (b) herein collectively called the "TARGET AUTHORIZATIONS"),
and all of such Target Authorizations are in full force and effect, in each case
except where the failure to obtain or have any such Target Authorizations would
not have a Material Adverse Effect on Target.
2.10 Title to Property. Target has good and valid title to all of its
properties, interests in properties and assets, real and personal, reflected in
the Target Balance Sheet or acquired after the Target Balance Sheet Date (except
properties, interests in properties and assets sold or otherwise disposed of
since the Target Balance Sheet Date in the ordinary course of business), or with
respect to leased properties and assets, valid leasehold interests in, free and
clear of all mortgages, liens, pledges, charges or encumbrances of any kind or
character, except (a) the lien of current taxes not yet due and payable, (b)
such imperfections of title, liens and easements as do not and will not
materially detract from or interfere with the use of the properties subject
thereto or affected thereby, or otherwise materially impair business operations
involving such properties and (c) liens securing debt which is reflected on the
Target Balance Sheet. The plant,
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property and equipment of Target that are used in the operations of their
business are in good operating condition and repair. All properties used in the
operations of Target are reflected in the Target Balance Sheet to the extent
GAAP requires the same to be reflected. Section 2.10 of the Target Disclosure
Schedule identifies each parcel of real property owned or leased by Target.
2.11 Intellectual Property.
(a) Target owns or is licensed for, and in any event possesses
sufficient and legally enforceable rights with respect to, all Intellectual
Property (as hereinafter defined) that is used in, or that may be necessary for,
its business as currently conducted or, to Target's knowledge, as proposed to be
conducted ("TARGET INTELLECTUAL PROPERTY," which term will also include all
other Intellectual Property owned by or licensed to Target now or in the past)
without any conflict with or infringement or misappropriation of any rights or
property of others ("INFRINGEMENT"), except to the extent that the failure to
have such rights has not had and would not have a Material Adverse Effect on
Target and except for such items as may reasonably be expected to be available
for licensing on reasonable terms from third parties. Such ownership, licenses
and rights are exclusive except (A) with respect to Inventions (as hereinafter
defined) in the public domain that are not important differentiators of Target's
business or proposed business, (B) with respect to standard, generally
commercially available, "off-the-shelf" third party products that are not part
of any current or proposed product, service or Intellectual Property offering of
Target and (C) where the failure to be exclusive has not had and would not have
a Material Adverse Effect on Target. No Target Intellectual Property (excluding
Intellectual Property licensed to Target only on a nonexclusive basis) was
conceived or developed directly or indirectly with or pursuant to government
funding or a government contract. "INTELLECTUAL PROPERTY" means: (i) inventions
(whether or not patentable); trade names, trade marks, service marks, logos and
other designations (collectively, "MARKS"); works of authorship; mask works;
data; technology, know-how, trade secrets, ideas and information; designs;
formulas; algorithms; processes; schematics; computer software (in source code
and/or object code form); and all other intellectual and industrial property of
any sort (collectively, "INVENTIONS") and (ii) patent rights; Xxxx rights;
copyrights; mask work rights; sui generis database rights; trade secret rights;
moral rights; and all other intellectual and industrial property rights of any
sort throughout the world, and all applications, registrations, issuances and
the like with respect thereto ("IP RIGHTS"). With respect to patent rights,
moral rights and Xxxx rights, the representations and warranties of this Section
2.11(a) are made only to Target's knowledge and without having conducted any
special investigation or patent or trademark search. All copyrightable matter
within Target Intellectual Property has been created by persons who were
employees or contractors of Target at the time of creation and no third party
has or will have "moral rights" or rights to terminate any assignment or license
with respect thereto. Target has not received any written communication and, to
its knowledge, has not received any verbal communication alleging that Target
has been or may be (whether in its current or proposed business or otherwise)
engaged in, liable for or contributing to any Infringement, nor does Target have
any particular reason to expect that any such communication will be forthcoming.
(b) To the extent included in Target Intellectual Property
(but excluding Intellectual Property licensed to Target only on a nonexclusive
basis), Section 2.11 of the Target Disclosure Schedule lists (by name, number,
jurisdiction, owner and, where applicable, the name
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and address of each inventor) all patents and patent applications; all
registered and unregistered Marks; and all registered and, if material,
unregistered copyrights and mask works; and all other issuances, registrations,
applications and the like with respect to those or any other IP Rights. No
cancellation, termination, expiration or abandonment to the knowledge of Target
of any of the foregoing (except natural expiration or termination at the end of
the full possible term, including extensions and renewals, and failures to
obtain allowable subject matter for patent applications from applicable
registration authorities) is anticipated by Target, except where such event
would not have a Material Adverse Effect on Target. Except as referenced in
written documentation previously provided to Acquiror (including without
limitation file wrappers), Target is not aware of any material challenges (or
any specific basis therefor) with respect to the validity of any of the
foregoing issued or registered IP Rights (or any part or claim thereof) or with
respect to the patentability of any claim of any of the foregoing patent
applications.
(c) There is, to the knowledge of Target, no unauthorized use,
disclosure, infringement or misappropriation of any Target Intellectual Property
(excluding any such activity with respect to third party Intellectual Property
outside the scope of any exclusivity granted to Target) by any third party,
including, without limitation, any employee or former employee of Target.
(d) Target has taken all commercially reasonable and
appropriate steps to protect and preserve the confidentiality of all Target
Intellectual Property with respect to which Target has exclusivity and wishes to
maintain confidentiality and that is not otherwise disclosed in published
patents or patent applications or registered copyrights (collectively, the
"TARGET CONFIDENTIAL INFORMATION"). All use by and disclosure to employees or
others of Target Confidential Information has been pursuant to the terms of
valid and binding written confidentiality and nonuse/restricted-use agreements.
Target has not disclosed or delivered to any third party (other than an escrow
holder), or permitted the disclosure or delivery by any escrow holder or other
person any part of any Source Materials (as defined in Section 2.24(m)).
(e) Each current and former employee and contractor of Target
who is or was involved in, or who has contributed to, the creation or
development of any Target Intellectual Property (other than third-party
Intellectual Property licensed to Target) has executed and delivered and is in
compliance with an enforceable agreement in substantially the form of Target's
standard Proprietary Information and Inventions Agreements (which agreement
provides valid written assignments of all title and rights to any Target
Intellectual Property conceived or developed thereunder, or otherwise in
connection with his or her contracting, consulting or employment, but not
already owned by Target by operation of law).
(f) To Target's knowledge, Target is not using, and it will
not be necessary to use, (i) any Inventions of any of its past or present
employees or contractors (or people currently intended to be hired) made prior
to or outside the scope of their employment by Target or (ii) any confidential
information or trade secrets of any former employer of any such person.
(g) There are no actions that must be taken by Target or any
subsidiary within sixty (60) days following the Closing Date that, if not taken,
will result in the loss of any Intellectual Property, including the payment of
any registration, maintenance or renewal fees or
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the filing of any responses to U.S. Patent and Trademark Office actions,
documents, applications or certificates for the purposes of obtaining,
maintaining, perfecting or preserving or renewing any Intellectual Property.
2.12 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "ENVIRONMENTAL AND SAFETY LAWS" shall mean any
federal, state, local or foreign laws, ordinances, codes, regulations, rules and
orders relating to the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect to, or
list or define air, water, groundwater, solid waste, hazardous or toxic
substances, materials, wastes, pollutants or contaminants, or which relate to
the health and safety of employees, workers or other persons, including the
public, as in effect on the date hereof.
(ii) "HAZARDOUS MATERIALS" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
such substances, materials, wastes, pollutants defined in or regulated under any
Environmental and Safety Laws.
(iii) "PROPERTY" shall mean all real property leased
or owned by Target or any subsidiary either currently or in the past.
(iv) "FACILITIES" shall mean all buildings and
improvements on the Property of Target.
(b) Target represents and warrants as follows: (i) to its
knowledge, no methylene chloride or asbestos is contained in or has been used at
or released from the Facilities; (ii) all Hazardous Materials and wastes have
been used, handled and disposed of in material compliance with all Environmental
and Safety Laws; and (iii) Target has received no written notice of any
noncompliance of the Facilities or of its past or present operations with
Environmental and Safety Laws (except for such matters which have been resolved
without material liability to Target); (iv) to its knowledge, no notices,
administrative actions or suits are pending or threatened relating to a
violation of any Environmental and Safety Laws; (v) Target has not received
written notice that it is a potentially responsible party under the federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
or analogous state statute or any similar foreign law or regulation requiring
assessment or clean up, arising out of events occurring prior to the Closing
Date; (vi) to Target's knowledge, there have not been in the past, and are not
now, any Hazardous Materials on, under or migrating to or from the Facilities or
Property, for which Target could reasonably be expected to have a material
liability; (vii) to Target's knowledge, there have not been in the past, and are
not now, any underground tanks at, on or under the Property including without
limitation, treatment or storage tanks, sumps, or water, gas or oil xxxxx;
(viii) to Target's knowledge, there are no polychlorinated biphenyls ("PCBs")
deposited, stored, disposed of or located on the Property or Facilities or any
equipment on the Property containing PCBs at levels in excess of 50 parts per
million; (ix) to Target's knowledge, there is no formaldehyde on the Property or
in the Facilities,
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nor any insulating material containing urea formaldehyde in the Facilities; (x)
to Target's knowledge, the Facilities and Target's activities therein have at
all times been in material compliance with all Environmental and Safety Laws;
(xi) Target has all the permits and licenses required to be issued for its
operations and are in full compliance with the terms and conditions of those
permits, except where the failure to have or comply with such permits or
licenses would not have a Material Adverse Effect on Target; and (xii) all
written environmental assessments known to Target of Target's current or past
Properties or Facilities have been provided to Acquiror.
2.13 Taxes.
(a) All Tax returns, statements, reports, declarations and
other forms and documents (including without limitation estimated Tax returns
and reports and material information statements, returns and reports) required
to be filed with any Tax Authority with respect to any Taxable period ending on
or before the Effective Time, by or on behalf of Target (collectively "TAX
RETURNS" and individually a "TAX RETURN"), have been or will be properly
completed and filed when due (including any extensions of such due date) and all
amounts shown due on such Tax Returns on or before the Effective Time have been
or will be paid on or before such due date. The Target Balance Sheet (i) fully
accrues all actual and contingent liabilities for Taxes with respect to all
periods through the Target Balance Sheet Date and Target has not and will not
incur any Tax liability in excess of the amount reflected on such Target Balance
Sheet with respect to such periods (excluding any amount thereof that reflects
timing differences between the recognition of income for purposes of GAAP and
for Tax purposes) and (ii) properly accrues in accordance with GAAP all material
liabilities for Taxes payable after the Target Balance Sheet Date with respect
to all transactions and events occurring on or prior to such date. All
information set forth in the notes to the Target Financial Statements relating
to Tax matters is true, complete and accurate in all material respects. No
material Tax liability since the Target Balance Sheet Date has been or will be
incurred by Target other than in the ordinary course of business, and adequate
provision has been made by Target for all Taxes since that date in accordance
with GAAP on at least a quarterly basis.
(b) Target has previously provided or made available to
Acquiror true and correct copies of all Tax Returns. Target has withheld and
paid to the applicable financial institution or Tax Authority all amounts
required to be withheld. To the knowledge of Target, Tax Returns filed with
respect to Taxable years of Target through the Taxable year ended December 31,
1998 in the case of the United States, have been examined and closed. Target (or
any member of any affiliated or combined group of which Target has been a
member) has not granted any extension or waiver of the limitation period
applicable to any Tax Returns that is still in effect. There is no material
claim, audit, action, suit, proceeding, or (to the knowledge of Target)
investigation now pending or (to the knowledge of Target) threatened against or
with respect to Target in respect of any Tax or assessment. No notice of
deficiency or similar document of any Tax Authority has been received by Target,
and there are no liabilities for Taxes (including liabilities for interest,
additions to Tax and penalties thereon and related expenses) with respect to the
issues that have been raised (and are currently pending) by any Tax Authority
that would, if determined adversely to Target, materially and adversely affect
the liability of Target for Taxes. There are no liens for Taxes (other than for
current Taxes not yet
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due and payable) upon the assets of Target. Target has never been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the
Code. Target is in full compliance with all the terms and conditions of any Tax
exemptions or other Tax-sharing agreement or order of a foreign government and
the consummation of the Merger will not have any adverse effect on the continued
validity and effectiveness of any such Tax exemption or other Tax-sharing
agreement or order. Neither Target nor any person on behalf of Target has
entered into or will enter into any agreement or consent pursuant to the
collapsible corporation provisions of Section 341(f) of the Code (or any
corresponding provision of state, local or foreign income tax law) or agreed to
have Section 341(f)(2) of the Code (or any corresponding provision of state,
local or foreign income tax law) apply to any disposition of any asset owned by
Target. None of the assets of Target is property that Target is required to
treat as being owned by any other person pursuant to the so-called "safe harbor
lease" provisions of former Section 168(f)(8) of the Code. None of the assets of
Target directly or indirectly secures any debt the interest on which is
tax-exempt under Section 103(a) of the Code. None of the assets of Target is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
Target has not made and will not make a deemed dividend election under Treas.
Reg. ss.1.1502-32(f)(2) or a consent dividend election under Section 565 of the
Code. Target has never been a party (either as a distributing corporation as a
corporation that has been distributed) to any transaction intended to qualify
under Section 355 of the Code or any corresponding provision of state law.
Target has not participated in (and will not participate in) an international
boycott within the meaning of Section 999 of the Code. No Target stockholder is
other than a United States person within the meaning of the Code. Target does
not have and has not had a permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention between the United States of
America and such foreign country and Target has not engaged in a trade or
business within any foreign country. Target has never elected to be treated as
an S-corporation under Section 1362 of the Code or any corresponding provision
of federal or state law. All material elections with respect to Target's Taxes
made during the fiscal years ended December 31, 1997, 1998 and 1999 are
reflected on the Target Tax Returns for such periods, copies of which have been
provided or made available to Acquiror. After the date of this Agreement, no
material election with respect to Taxes will be made without the prior written
consent of Acquiror, which consent will not be unreasonably withheld or delayed.
Target is not party to any joint venture, partnership or other arrangement or
contract which would reasonably be expected to be treated as a partnership for
federal income tax purposes. Target is not currently and never has been subject
to the reporting requirements of Section 6038A of the Code. There is no
agreement, contract or arrangement to which Target is a party that could,
individually or collectively, as a result of the Merger, result in the payment
of any amount that would not be deductible by reason of Section 280G (as
determined without regard to Section 280G(b)(4)), Section 162(a) (by reason of
being unreasonable in amount), Section 162 (b) through (p) or Section 404 of the
Code. Target is not a party to or bound by any Tax indemnity, Tax sharing or Tax
allocation agreement (whether written or unwritten or arising under operation of
federal law as a result of being a member of a group filing consolidated Tax
returns, under operation of certain state laws as a result of being a member of
a unitary group, or under comparable laws of other states or foreign
jurisdictions) which includes a party other than Target nor does Target owe any
amount under any such Agreement. Target is not, and has not been, a United
States real property holding corporation (as defined in Section 897(c)(2) of the
Code)
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during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Other than by reason of the Merger, Target has not been and will not be required
to include any material adjustment in Taxable income for any Tax period (or
portion thereof) pursuant to Section 481 or 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions, events or
accounting methods employed prior to the Closing.
(c) For purposes of this Agreement, the following terms have
the following meanings: "TAX" (and, with correlative meaning, "TAXES" and
"TAXABLE") means any and all taxes including, without limitation, (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, transfer, franchise, profits, value added, net worth, license,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental or windfall profit tax, custom, duty or other tax
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to tax or additional amount
imposed by any Governmental Entity (a "TAX AUTHORITY") responsible for the
imposition of any such tax (domestic or foreign), (ii) any liability for the
payment of any amounts of the type described in (i) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any Taxable
period or as the result of being a transferee or successor thereof and (iii) any
liability for the payment of any amounts of the type described in (i) or (ii) as
a result of any express or implied obligation to indemnify any other person. As
used in this Section 2.13, the term "TARGET" means Target and any entity
included in, or required under GAAP to be included in, any of the Target
Financial Statements.
2.14 Employee Benefit Plans.
(a) Section 2.14 of the Target Disclosure Schedule lists, with
respect to Target, any subsidiary of Target and any trade or business (whether
or not incorporated) which is treated as a single employer with Target (each, an
"ERISA AFFILIATE") within the meaning of Section 414(b), (c), (m) or (o) of the
Code, (i) all material employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), (ii) each
loan to any employee, officer or director and any stock option, stock purchase,
phantom stock, stock appreciation right, supplemental retirement, severance,
sabbatical, medical, dental, vision care, disability, employee relocation,
cafeteria benefit (Code Section 125) or dependent care (Code Section 129), life
insurance or accident insurance plans, programs or arrangements, (iii) all
bonus, pension, profit sharing, savings, deferred compensation or incentive
plans, programs or arrangements, (iv) other fringe or employee benefit plans,
programs or arrangements that apply to senior management of Target and that do
not generally apply to all employees, and (v) any current or former employment
or executive compensation or severance agreements, written or otherwise, as to
which unsatisfied obligations of Target of greater than $10,000 remain for the
benefit of, or relating to, any present or former employee, consultant or
director of Target (together, the "TARGET EMPLOYEE PLANS").
(b) Target has furnished to Acquiror a copy of each of the
Target Employee Plans and related plan documents (including trust documents,
insurance policies or contracts, employee booklets, summary plan descriptions
and other authorizing documents, and any material employee communications
relating thereto) and has, with respect to each Target Employee Plan which is
subject to ERISA reporting requirements, provided copies of the
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Form 5500 reports filed for the last three plan years. Any Target Employee Plan
intended to be qualified under Section 401(a) of the Code has either obtained
from the Internal Revenue Service a favorable determination letter as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has applied (or has
time remaining in which to apply) to the Internal Revenue Service for such a
determination letter prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination or has been established under a
standardized prototype plan for which an Internal Revenue Service opinion letter
has been obtained by the plan sponsor and is valid as to the adopting employer.
Target has also furnished Acquiror with the most recent Internal Revenue Service
determination or opinion letter issued with respect to each such Target Employee
Plan, and nothing has occurred since the issuance of each such letter which
could reasonably be expected to cause the loss of the tax-qualified status of
any Target Employee Plan subject to Code Section 401(a). Target has also
furnished Acquiror with all registration statements and prospectuses prepared in
connection with each Target Employee Plan.
(c) (i) None of the Target Employee Plans promises or provides
retiree medical or other retiree welfare benefits to any person other than as
required under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA"); (ii) there has been no "prohibited transaction," as such term is
defined in Section 406 of ERISA and Section 4975 of the Code, with respect to
any Target Employee Plan, which could reasonably be expected to have, in the
aggregate, a Material Adverse Effect on Target; (iii) each Target Employee Plan
has been administered in accordance with its terms and in compliance with the
requirements prescribed by any and all statutes, rules and regulations
(including ERISA and the Code), except as would not have, in the aggregate, a
Material Adverse Effect on Target, and Target and each subsidiary or ERISA
Affiliate have performed all obligations required to be performed by them under,
are not in any material respect in default under or violation of, and have no
knowledge of any material default or violation by any other party to, any of the
Target Employee Plans; (iv) neither Target nor any subsidiary or ERISA Affiliate
is subject to any liability or penalty under Sections 4976 through 4980 of the
Code or Title I of ERISA with respect to any of the Target Employee Plans; (v)
all material contributions required to be made by Target or any subsidiary or
ERISA Affiliate to any Target Employee Plan have been made on or before their
due dates and a reasonable amount has been accrued for contributions to each
Target Employee Plan for the current plan years; (vi) with respect to each
Target Employee Plan, no "reportable event" within the meaning of Section 4043
of ERISA (excluding any such event for which the 30-day notice requirement has
been waived under the regulations to Section 4043 of ERISA) nor any event
described in Section 4062, 4063 or 4041 of ERISA has occurred; (vii) no Target
Employee Plan is covered by, and neither Target nor any subsidiary or ERISA
Affiliate has incurred or expects to incur any liability under Title IV of ERISA
or Section 412 of the Code; and (viii) each Target Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability to Acquiror (other than ordinary administrative
expenses typically incurred in a termination event). With respect to each Target
Employee Plan subject to ERISA as either an employee pension plan within the
meaning of Section 3(2) of ERISA or an employee welfare benefit plan within the
meaning of Section 3(1)
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of ERISA, Target has prepared in good faith and timely filed all requisite
governmental reports (which were true and correct as of the date filed) and has
properly and timely filed and distributed or posted all notices and reports to
employees required to be filed, distributed or posted with respect to each such
Target Employee Plan. No suit, administrative proceeding, action or other
litigation has been brought, or to the knowledge of Target is threatened,
against or with respect to any such Target Employee Plan, including any audit or
inquiry by the Internal Revenue Service or United States Department of Labor. No
payment or benefit which will or may be made by Target to any Employee will be
characterized as an "excess parachute payment" within the meaning of Section
280G(b)(1) of the Code.
(d) With respect to each Target Employee Plan, Target and each
of its U.S. subsidiaries have complied with (i) the applicable health care
continuation and notice provisions of COBRA and the regulations (including
proposed regulations) thereunder except to the extent that such failure to
comply would not, in the aggregate, have a Material Adverse Effect on Target,
(ii) the applicable requirements of the Family Medical and Leave Act of 1993 and
the regulations thereunder, except to the extent that such failure to comply
would not, in the aggregate, have a Material Adverse Effect on Target and (iii)
the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations (including proposed regulations)
thereunder, except to the extent that such failure to comply would not, in the
aggregate, have a Material Adverse Effect on Target.
(e) There has been no amendment to, written interpretation or
announcement (whether or not written) by Target, any Target subsidiary or other
ERISA Affiliate relating to, or change in participation or coverage under, any
Target Employee Plan which would materially increase the expense of maintaining
such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in the Target Financial Statements.
(f) Target does not currently maintain, sponsor, participate
in or contribute to, nor has it ever maintained, established, sponsored,
participated in, or contributed to, any pension plan (within the meaning of
Section 3(2) of ERISA) which is subject to Part 3 of Subtitle B of Title I of
ERISA, Title IV of ERISA or Section 4.12 of the Code.
(g) Neither Target nor any Target subsidiary or other ERISA
Affiliate is a party to, or has made any contribution to or otherwise incurred
any obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
2.15 Employees and Consultants. Target has provided Acquiror with a
true and complete list of all persons employed by Target, all persons who
perform work for Target pursuant to any agreement(s) between Target and any
employment agency, and all independent contractors of Target as of the date
hereof and the position and total compensation, including base salary or wages,
bonus, commissions, and all other available forms of compensation, payable to
each such individual. Section 2.15 of the Target Disclosure Schedule lists all
current written or oral employment agreements, independent contractor
agreements, consulting agreements or termination or severance agreements to
which Target is a party. Any employment, independent contractor or consulting
agreement which varies in any material terms from Target's standard form
agreement has been provided to Acquiror. This Agreement and the
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transactions contemplated hereby do not and will not violate any such
employment, independent contractor or consulting agreements. Target is in
compliance in all material respects with all currently applicable laws and
regulations respecting employment, discrimination in employment, terms and
conditions of employment, wages, hours and occupational safety and health and
employment practices, and is not engaged in any unfair labor practice. All
individuals performing services for Target as independent contractors (defined
as any individual who provides services for Target who is not treated as a
common-law employee for purposes of statutory withholdings and/or employment
benefits) at any time are properly classified as independent contractors
pursuant to all applicable regulations, including but not limited to I.R.S.
Revenue Ruling 87-41, 1987-1 C.B. 296. Target withheld all amounts required by
law or by agreement to be withheld from the wages, salaries, and other payments
to employees; and is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing. Target is not liable
for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending claims against Target under any workers
compensation plan or policy or for long term disability. There are no claims or
controversies pending or, to the knowledge of Target, threatened, between Target
and any of its employees, which claims of controversies have or could reasonably
be expected to result in an action, suit, proceeding, claim, arbitration or
investigation before any agency, court or tribunal, foreign or domestic. Target
is not a party to any collective bargaining agreement or other labor union
contract nor does Target know of any activities or proceedings of any labor
union to organize any such employees. To the knowledge of Target, no employees
or independent contractors of Target are in violation of any term of any
employment contract, patent disclosure agreement, enforceable noncompetition
agreement, or any enforceable restrictive covenant to a former employer or
customer relating to the right of any such employee or independent contractor to
be employed by Target because of the nature of the business conducted or
presently proposed to be conducted by Target or to the use of trade secrets or
proprietary information of others. No employees or independent contractors of
Target have given notice to Target, nor is Target otherwise aware, that any such
employee intends to terminate his or her employment with Target.
2.16 Certain Agreements Affected by the Merger. Neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (a) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director, employee or consultant of Target or any
of its subsidiaries, (b) materially increase any benefits otherwise payable by
Target or any of its subsidiaries or (c) result in the acceleration of the time
of payment or vesting of any such benefits, except as required under Code
Section 411(d)(3).
2.17 Related-Party Transactions. No employee, officer or director of
Target, or to Target's knowledge, any member of his or her immediate family, is
indebted to Target, nor is Target indebted (or committed to make loans or extend
or guarantee credit) to any such employee, officer or director or, to Target's
knowledge, any member of his or her immediate family. To Target's knowledge,
none of such persons has a direct ownership interest in any firm
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or corporation with which Target has a material business relationship, except
(a) to the extent that employees, officers, or directors of Target and members
of their immediate families own stock in publicly traded companies and (b)
ownership interests held by investment funds affiliated with Target's directors.
To Target's knowledge, no member of the immediate family of any officer or
director of Target is directly or indirectly interested in any Material Contract
(as defined below) of Target.
2.18 Insurance. Section 2.18 of the Target Disclosure Schedule lists
all policies of insurance and bonds, and the respective amounts of such policies
and bond, carried by Target. There is no claim pending under any of such
policies or bonds as to which coverage has been questioned, denied or disputed
by the underwriters of such policies or bonds. All premiums due and payable
under all such policies and bonds have been paid and Target is otherwise in
compliance with the terms of such policies and bonds. Target has no knowledge of
any threatened termination of, or material premium increase with respect to, any
of such policies.
2.19 Compliance with Laws. Target and each of its subsidiaries have
complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of their business, or the ownership or
operation of their business, except for such violations or failures to comply as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on Target.
2.20 Brokers' and Finders' Fees. Target has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or investment bankers' or financial advisory fees or any
similar charges in connection with this Agreement or the Merger.
2.21 Support Agreements. All of the persons and/or entities deemed in
the reasonable judgment of Target to be "affiliates" of Target within the
meaning of Rule 145 promulgated under the Securities Act ("RULE 145") are listed
in Section 2.21 of the Target Disclosure Schedule. Each of such persons has
executed and delivered to Acquiror a Support Agreement.
2.22 Board Approval; Stockholder Approval Required. The Board of
Directors of Target has unanimously (i) approved this Agreement and the Merger,
(ii) determined that in its opinion the Merger is advisable and in the best
interests of the stockholders of Target and (iii) recommended that the
stockholders of Target approve this Agreement and the Merger. The affirmative
vote of the holders of (i) a majority of the outstanding shares of Target
Capital Stock and (ii) the holders of at least 65% of the outstanding shares of
Target Series B Preferred Stock and Target Series C Preferred Stock (voting
together as a single class and not as separate series and on an as-converted
basis), in each case outstanding on the record date set for the determination of
stockholders entitled to vote on or consent to the Merger are the only votes or
consents of the holders of Target Capital Stock necessary to approve this
Agreement and the Merger.
2.23 Customers and Suppliers. As of March 12, 2000 no customer which
individually accounted for more than 5% of Target's gross revenues during the
12-month period preceding
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such date, and no material supplier of Target during such period, has canceled
or otherwise terminated, or made any threat to Target to cancel or otherwise
terminate its relationship with Target for any reason including, without
limitation the consummation of the transactions contemplated hereby, or has at
any time on or after the Target Balance Sheet Date decreased materially its
services or supplies to Target in the case of any such supplier, or its usage of
the services or products of Target in the case of such customer. Target has not
knowingly breached, so as to provide a benefit to Target that was not intended
by the parties, any agreement with, or engaged in any fraudulent conduct with
respect to, any customer or supplier of Target.
2.24 Material Contracts. Section 2.24 of the Target Disclosure Schedule
sets forth a list of all material agreements or commitments ("MATERIAL
CONTRACTS") of any nature to which Target is a party or by which it is bound,
including without limitation:
(a) each agreement which requires future expenditures by
Target in excess of $40,000 in any one case or $80,000 in the aggregate or which
might result in payments to Target in excess of $40,000 in any one case or
$80,000 in the aggregate;
(b) all employment and consulting agreements, employee
benefit, bonus, pension, profit-sharing, stock option, stock purchase and
similar plans and arrangements, and distributor and sales representative
agreements;
(c) each agreement with any 1% or greater stockholder, officer
or director of Target, or any "affiliate" or "associate" of such persons (as
such terms are defined in the rules and regulations promulgated under the
Securities Act), including without limitation any agreement or other arrangement
providing for the furnishing of services by, rental of real or personal property
from, or otherwise requiring payments to, any such person or entity;
(d) any agreement between Target and a third party relating to
Target Intellectual Property, other than non-exclusive licenses generally
available from third parties;
(e) any agreement for the borrowing of money or line of
credit, trust indenture, mortgage, promissory note, loan agreement or any
currency exchange, commodities or other hedging arrangement or any leasing
transaction of the type required to be capitalized in accordance with GAAP;
(f) agreements with respect to security interests, liens or
pledges;
(g) any agreement not made in the ordinary course of Target's
business;
(h) any agreement which provides for the restraint or
restriction of Target's right to compete with any person in the conduct of its
business;
(i) any confidentiality, secrecy or non-disclosure agreement
with any party with which Target has, has had or reasonably expects to have a
significant relationship;
(j) any distributor, reseller, agency or manufacturer's
representative contract;
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(k) any contract to support or maintain Target's products,
that expires or may be renewed at the option of any person other than Target so
as to expire more than one year after the date of this Agreement;
(l) any agreement of guarantee, support, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other person;
(m) any agreement pursuant to which Target has deposited or is
required to deposit with an escrow holder or any other person or entity, all or
part of the source code (or any algorithm or documentation contained in or
relating to any source code) of any Target Intellectual Property ("SOURCE
MATERIALS"); and
(n) any agreement to indemnify, hold harmless or defend any
other person with respect to any assertion of personal injury, damage to
property or Intellectual Property infringement, misappropriation or violation or
warranting the lack thereof, other than indemnification provisions contained in
a customary purchase orders/purchase agreements/product licenses arising in the
ordinary course of business.
2.25 No Breach of Material Contracts. The Target has performed all of
the material obligations required to be performed by it, and is not in default
in any material respect under, any Material Contract. Each of the Material
Contracts is (as to Target) in full force and effect, unamended, and there
exists no default or event of default or event, occurrence, condition or act,
with respect to Target or to Target's knowledge with respect to the other
contracting party, or otherwise that, with or without the giving of notice, the
lapse of the time or the happening of any other event or conditions, would
reasonably be expected to (a) become a material default or event of default
under any Material Contract, (b) result in the loss or expiration of any
material right or option by Target (or the gain thereof by any third party)
under any Material Contract or (c) result in the release, disclosure or delivery
to any third party of any Source Materials. True, correct and complete copies of
all Material Contracts have been delivered to the Acquiror.
2.26 Third-Party Consents. Section 2.26 of the Target Disclosure
Schedule lists all contracts that require a novation or consent to assignment,
as the case may be, prior to the Effective Time so that the Surviving
Corporation shall be made a party in place of Target or as assignee.
2.27 Material Third Party Consents. Section 2.27 of the Target
Disclosure Schedule sets forth every contract which, if no novation occurs to
make Acquiror or the Surviving Corporation a party thereto or if no consent to
assignment is obtained, would have a material adverse effect on Acquiror's or
the Surviving Corporation's ability to operate the business in the same manner
as the business was operated by Target prior to the Effective Time.
2.28 Minute Books. The minute books of Target made available to
Acquiror contain an accurate summary of all resolutions adopted and all other
material actions taken at all meetings of directors and stockholders and all
actions by written consent since the time of incorporation of Target through the
date of this Agreement.
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2.29 Complete Copies of Materials. Target has delivered or made
available true and complete copies of each document which has been requested in
writing by Acquiror or its counsel or other representatives in connection with
their legal and accounting review of Target.
2.30 Year 2000 Compatibility. None of the products and services sold,
licensed, rendered, or otherwise provided by Target in the conduct of its
business has materially malfunctioned, materially ceased to function, generated
materially incorrect data or produced materially incorrect results or caused any
of the above with respect to the property or business of third parties using
such products or services when processing, providing or receiving (a)
date-related data from, into and between the Twentieth (20th) and Twenty-First
(21st) centuries or (b) date-related data in connection with any valid date in
the Twentieth (20th) and Twenty-First (21st) centuries. Target has not made any
other representations or warranties specifically relating to the ability of any
product or service sold, licensed, rendered or otherwise provided by Target in
the conduct of its business to operate without malfunction, to operate without
ceasing to function, to generate correct data or to produce correct results when
processing, providing or receiving (x) date-related data from, into and between
the Twentieth (20th) and Twenty-First (21st) centuries and (y) date-related data
in connection with any valid date in the Twentieth (20th) and Twenty-First
(21st) centuries.
2.31 Absence of Undisclosed Liabilities. Target has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (a) those set forth or adequately provided for in the
Target Balance Sheet, (b) those not required to be set forth or adequately
provided for in the Target Balance Sheet under GAAP, (c) those incurred in the
ordinary course of business since the Target Balance Sheet Date and (d) those
incurred in connection with the execution of this Agreement.
2.32 Inventory. The inventories shown on the Target Financial
Statements, or thereafter acquired by Target, net of revenues on the Target
Financial Statements consisted of items of a quantity and quality usable or
salable in the ordinary course of business. Since the Target Balance Sheet Date,
Target has continued to replenish inventories in a normal and customary manner
consistent with past practices. Target has not received written or oral notice
that it will experience in the foreseeable future any difficulty in obtaining,
in the desired quantity and quality and at a reasonable price and upon
reasonable terms and conditions, the raw materials, supplies or component
products required for the manufacture, assembly or production of its products.
The values at which inventories are carried reflect the inventory valuation
policy of Target, which is consistent with its past practice and in accordance
with GAAP applied on a consistent basis. Since the Target Balance Sheet Date,
due provision was made on the books of Target in the ordinary course of business
consistent with past practices to provide for all slow-moving, obsolete, or
unusable inventories to their estimated useful or scrap values and such
inventory reserves are adequate to provide for such slow-moving, obsolete or
unusable inventory and inventory shrinkage. Target has no inventory in the
distribution channel and Target has no commitments to purchase inventory.
2.33 Accounting and Tax Matters. Except as set forth in the preliminary
letter issued by KPMG LLP, Target's independent accountants, as of the date
hereof, to Target's knowledge neither Target nor any of its affiliates has taken
or agreed to take any action, nor does Target
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have knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
2.34 Export Control Laws. Target has conducted its export transactions
in accordance with applicable provisions of United States export control laws
and regulations, including but not limited to the Export Administration Act and
implementing Export Administration Regulations. Without limiting the foregoing,
Target represents and warrants that:
(a) Target has obtained all export licenses and other
approvals required for its exports of products, software and technologies from
the United States;
(b) Target is in compliance with the terms of all applicable
export licenses or other approvals;
(c) There are no pending or, to Target's knowledge, threatened
claims against Target with respect to such export licenses or other approvals;
(d) To Target's knowledge there are no actions, conditions or
circumstances pertaining to Target's export transactions that may give rise to
any future claims; and
(e) No consents or approvals for the transfer of export
licenses to Acquiror are required, or such consents and approvals can be
obtained expeditiously without material cost.
2.35 Product Releases. Target has provided Acquiror a Schedule of
Product Releases, which Schedule is included in Section 2.35 of the Target
Disclosure Schedule. Target has a good faith belief that it can achieve the
release of products on the schedule described therein and is not currently aware
of any material change in its circumstances or other fact that has occurred that
would cause it to believe that it will be unable to meet such release schedule.
2.36 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement, when all such documents are read together in their entirety, contains
or will contain at the Effective Time any untrue statement of a material fact,
or omits or will omit at the Effective Time to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading in any material respect.
2.37 Permit Application; Information Statement. The information
supplied by Target for inclusion in the application for issuance of the Permit
pursuant to which the shares of Acquiror Common Stock to be issued in the Merger
and the Target Options to be assumed in the Merger will be qualified under
California Law (the "PERMIT APPLICATION") shall not, at the time the Fairness
Hearing is held and the time the qualification of such securities is effective
under Section 25122 of California Law, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The information
supplied by Target for inclusion in the information statement to be sent to the
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stockholders of Target in connection with the Target stockholders' consideration
of this Agreement and the Merger (the "TARGET STOCKHOLDERS' ACTION") (such
information statement as amended or supplemented is referred to herein as the
"INFORMATION STATEMENT") shall not, on the date the Information Statement is
first mailed to Target stockholders, at the time of the Target Stockholders'
Action and at the Effective Time, contain any statement which, at such time, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they are made, not false or misleading; or omit
to state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or consents for the
Target Stockholders' Action which has become false or misleading.
Notwithstanding the foregoing, Target makes no representation, warranty or
covenant with respect to any information supplied by Acquiror or Merger Sub
which is contained in the Permit Application or the Information Statement.
2.38 Registration Rights. There is no agreement of Target to register
under the Securities Act any shares of Target Capital Stock or any shares of
Target Capital Stock issuable upon the exercise of Target Options or Target
Warrants, except pursuant to agreements that will be terminated or that will
terminate pursuant to their terms at or prior to the Closing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub represent and warrant to Target that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedule delivered by Acquiror to Target prior to the
execution and delivery of this Agreement (the "ACQUIROR DISCLOSURE SCHEDULE").
The Acquiror Disclosure Schedule shall be arranged in paragraphs corresponding
to the numbered Sections contained in this Article III, and the disclosure in
any Section shall qualify only the corresponding Section in this Article III.
Any reference in this Article III to an agreement being "ENFORCEABLE" shall be
deemed to be qualified to the extent such enforceability is subject to (i) laws
of general application relating to bankruptcy, insolvency, moratorium,
fraudulent conveyance and the relief of debtors and (ii) the availability of
specific performance, injunctive relief and other equitable remedies.
3.1 Organization, Standing and Power. Each of Acquiror and its
subsidiaries, including Merger Sub, is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each of Acquiror and its subsidiaries has the corporate power to
own its properties and to carry on its business as now being conducted and as
proposed to be conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified and in
good standing would have a Material Adverse Effect on Acquiror. Acquiror has
delivered a true and correct copy of the Certificate of Incorporation and Bylaws
or other charter documents, as applicable, of Acquiror and Merger Sub, each as
amended to date, to Target. Neither Acquiror nor Merger Sub is in violation of
any of the provisions of its Certificate of Incorporation or Bylaws or
equivalent organizational documents.
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3.2 Capital Structure. The authorized capital stock of Acquiror
consists of 500,000,000 shares of Acquiror Common Stock, par value $0.00025, and
5,000,000 shares of preferred stock, par value $0.001 per share, of which there
were issued and outstanding as of the close of business on March 3, 2000,
156,835,002 shares of Acquiror Common Stock and no shares of preferred stock.
The authorized capital stock of Merger Sub consists of 1,000 shares of common
stock, par value $0.01 per share, all of which are issued and outstanding and
held by Acquiror. All outstanding shares of Acquiror and Merger Sub have been
duly authorized, validly issued, fully paid and are nonassessable and free of
any liens or encumbrances other than any liens or encumbrances created by or
imposed upon the holders thereof. The shares of Acquiror Common Stock to be
issued pursuant to the Merger will be duly authorized, validly issued, fully
paid and nonassessable, and no stockholder of Acquiror will have any preemptive
right of subscription or purchase in respect thereof.
3.3 Authority. Acquiror and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Acquiror and Merger
Sub. This Agreement has been duly executed and delivered by Acquiror and Merger
Sub and constitutes the valid and binding obligations of Acquiror and Merger Sub
enforceable against Acquiror and Merger Sub in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of a benefit under (a) any provision of the Certificate
of Incorporation or Bylaws of Acquiror or Merger Sub, as amended, or (b) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or any of its subsidiaries
or their properties or assets, except where such conflict, violation, default,
termination, cancellation or acceleration with respect to the foregoing
provisions of clause (b) would not, individually or in the aggregate, have a
Material Adverse Effect on Acquiror. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity, is required by or, to the knowledge of Acquiror, with respect to
Acquiror or any of its subsidiaries in connection with the execution and
delivery of this Agreement by Acquiror and Merger Sub or the consummation by
Acquiror and Merger Sub of the Merger and the other transactions contemplated
hereby, except for (u) the filing of the Certificate of Merger, (v) any filings
as may be required under applicable state securities laws and the securities
laws of any foreign country, (w) the filing of a Form 8-K with the Securities
and Exchange Commission ("SEC") within fifteen (15) days after the Closing Date,
(x) the filing with the Nasdaq National Market of a Notification Form for
Listing of Additional Shares with respect to the shares of Acquiror Common Stock
issuable upon conversion of the Target Capital Stock in the Merger and upon
exercise of the Target Options, (y) such filings as may be required under HSR,
and (z) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, would not have a Material Adverse
Effect on Acquiror and would not prevent, materially alter or delay any of the
transactions contemplated by this Agreement.
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3.4 SEC Documents; Financial Statements. As of their respective filing
dates, each statement, report, registration statement (with the prospectus in
the form filed pursuant to Rule 424(b) of the Securities Act), definitive proxy
statement and other filing filed with the SEC by Acquiror (collectively, the
"ACQUIROR SEC DOCUMENTS") complied in all material respects with the applicable
requirements of the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and the Securities Act, and none of the Acquiror SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading in any
material respect, except to the extent corrected by a subsequently filed
Acquiror SEC Document. All documents required to be filed as exhibits to the
Acquiror SEC Documents have been so filed. The financial statements of Acquiror,
including the notes thereto, included in the Acquiror SEC Documents (the
"ACQUIROR FINANCIAL STATEMENTS") were complete and correct in all material
respects as of their respective dates, complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto as of their respective dates,
and were prepared in accordance with generally accepted accounting principles
applied on a basis consistent throughout the periods indicated and consistent
with each other (except as may be indicated in the notes thereto or, in the case
of unaudited statements included in Quarterly Reports on Form 10-Q, as permitted
by Form 10-Q under the Exchange Act). The Acquiror Financial Statements fairly
present in all material respects the consolidated financial condition and
operating results of Acquiror and its subsidiaries at the dates and during the
periods indicated therein (subject, in the case of unaudited statements, to
normal, recurring year-end audit adjustments). There has been no change in
Acquiror's accounting policies except as described in the notes to the Acquiror
Financial Statements.
3.5 Accounting and Tax Matters. Except as set forth in the preliminary
letter issued by Xxxxxx Xxxxxxxx XXX, Xxxxxxxx'x independent accountants, as of
the date hereof, to Acquiror's knowledge neither Acquiror nor any of its
affiliates has taken or agreed to take any action, nor does Acquiror have
knowledge of any fact or circumstance, that would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
3.6 Absence of Undisclosed Liabilities. Acquiror has no material
obligations or liabilities of any nature (matured or unmatured, fixed or
contingent) other than (i) those set forth or adequately provided for in
Acquiror's Balance Sheet dated December 31, 1999 (the "ACQUIROR BALANCE SHEET"),
(ii) those not required to be set forth or adequately provided for in the
Acquiror Balance Sheet under GAAP, (iii) those incurred in the ordinary course
of business since December 31, 1999 and (iv) those incurred in connection with
the execution of this Agreement.
3.7 No Brokers. Acquiror has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or investment bankers' or financial advisory fees or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
3.8 Representations Complete. None of the representations, warranties
or statements made by Acquiror herein or in any Schedule hereto, including the
Acquiror Disclosure Schedule, or certificate furnished by Acquiror pursuant to
this Agreement, when all such documents are
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read together in their entirety, contains or will contain at the Effective Time
any untrue statement of a material fact, or omits or will omit at the Effective
Time to state any material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading in any material respect.
3.9 Information to be Supplied by Acquiror. The information supplied by
Acquiror and Merger Sub for inclusion in the Permit Application shall not, at
the time the Fairness Hearing is held and the time the qualification of such
securities is effective under Section 25122 of California Law, contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The information supplied by Acquiror for
inclusion in the Information Statement shall not, on the date the Information
Statement is first mailed to Target's stockholders, at the time of the Target
Stockholders' Action and at the Effective Time, contain any statement which, at
such time, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements therein, in
light of the circumstances under which they are made, not false or misleading;
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies or consents
for the Target Stockholders' Action which has become false or misleading.
Notwithstanding the foregoing, Acquiror and Merger Sub make no representation,
warranty or covenant with respect to any information supplied by Target which is
contained in any of the foregoing documents.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business of Target. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, Target agrees (except to the extent expressly
contemplated by this Agreement or as consented to in writing by Acquiror), to
carry on its business in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted. During such period, Target further
agrees to (a) pay debts and Taxes when due subject to good faith disputes over
such debts or Taxes, (b) subject to Acquiror's consent to the filing of material
Tax Returns, if applicable, pay or perform other obligations when due and (c)
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organizations, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others having
business dealings with it, to the end that its goodwill and ongoing business
shall be unimpaired at the Effective Time. Target agrees to promptly notify
Acquiror of any event or occurrence not in the ordinary course of Target's
business, and of any event which could have a Material Adverse Effect on Target.
4.2 Restrictions on Conduct of Business of Target. During the period
from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, except as expressly
contemplated by this Agreement, Target shall not do, cause or permit any of the
following, without the prior written consent of Acquiror:
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(a) Charter Documents. Cause or permit any amendments to its
Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Declare or pay any
dividends on or make any other distributions (whether in cash, stock or
property) in respect of any of its capital stock, or split, combine or
reclassify any of its capital stock or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock except from former employees, directors and
consultants in accordance with agreements providing for the repurchase of shares
in connection with any termination of service to it;
(c) Material Contracts. Enter into any material contract,
agreement, license or commitment, or violate, amend or otherwise modify or waive
any of the terms of any of its material contracts, agreements or licenses other
than in the ordinary course of business consistent with past practice;
(d) Stock Option Plans, Etc. Accelerate, amend or change the
period of exercisability or vesting of options or other rights granted under its
stock plans or authorize cash payments in exchange for any options or other
rights granted under any of such plans;
(e) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of Target Capital Stock or securities convertible
into, or subscriptions, rights, warrants or options to acquire, or other
agreements or commitments of any character obligating it to issue any such
shares or other convertible securities, other than the (i) issuance of shares of
Target Common Stock pursuant to the exercise of stock options, warrants or other
rights therefor outstanding as of the date of this Agreement and (ii) the
issuance of shares of Target Common Stock or the grant of Target Options,
aggregating not more than 152,764 shares, to non-officer employees of Target, in
each case in the ordinary course of business;
(f) Intellectual Property. Transfer to or license any person
or entity or otherwise extend, amend or modify any rights to Target Intellectual
Property other than the grant of non-exclusive licenses in the ordinary course
of business;
(g) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing, manufacturing
or other exclusive rights of any type or scope with respect to any of its
products or technology;
(h) Dispositions. Sell, lease, license or otherwise dispose of
or encumber any of its properties or assets (other than Target Intellectual
Property) which are material, individually or in the aggregate, to its business;
(i) Indebtedness. Incur or commit to incur any indebtedness
for borrowed money in excess of $80,000 in the aggregate or guarantee any such
indebtedness in excess of $80,000 in the aggregate or issue or sell any debt
securities or guarantee any debt securities of others;
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(j) Leases. Enter into any operating leases requiring payments
in excess of $40,000 in the aggregate;
(k) Payment of Obligations. Pay, discharge or satisfy in an
amount in excess of $40,000 in any one case or $80,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than (i) in the ordinary course of
business and (ii) the payment, discharge or satisfaction of liabilities
reflected or reserved against in the Target Financial Statements;
(l) Capital Expenditures. Incur or commit to incur any capital
expenditures in excess of $80,000 in the aggregate;
(m) Insurance. Materially reduce the amount of any insurance
coverage provided by existing insurance policies;
(n) Termination or Waiver. Terminate or waive any right of
substantial value;
(o) Employee Benefits; Severance. Take any of the following
actions: (i) increase or agree to increase the compensation, including base
salary, wages, bonus, and/or commissions payable or to become payable to its
directors, officers, employees, or independent contractors, except for increases
in base salary or wages of non-officer employees that are scheduled to take
place in the ordinary course of business; (ii) grant any additional severance or
termination pay to, or enter into any employment or severance agreements with,
any officer, employee, or independent contractor; (iii) enter into any
collective bargaining agreement; or (iv) establish, adopt, enter into or amend
any bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, trust, fund, policy or arrangement for the benefit of any
directors, officers, employees or independent contractors;
(p) Lawsuits. Commence a lawsuit or arbitration proceeding
other than (i) for the routine collection of bills, (ii) in such cases where it
in good faith determines that failure to commence suit would result in the
material impairment of a valuable asset of its business, provided that it
consults with Acquiror prior to the filing of such a suit, or (iii) for a breach
of this Agreement;
(q) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets, in each case which are material, individually or in
the aggregate, to its business;
(r) Taxes. Make any material Tax election other than in the
ordinary course of business and consistent with past practice, change any
material Tax election, adopt any Tax accounting method other than in the
ordinary course of business and consistent with past practice, change any Tax
accounting method, file any Tax Return (other than any estimated Tax Returns,
immaterial information returns, payroll tax returns or sales Tax Returns) or any
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amendment to a Tax Return, enter into any closing agreement, settle any Tax
claim or assessment or consent to any Tax claim or assessment;
(s) Revaluation. Revalue any of its assets, including without
limitation writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business; or
(t) Other. Take or agree in writing or otherwise to take, any
of the actions described in Sections 4.2(a) through (s) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
4.3 Notices. Target shall give all notices and other information
required to be given to the employees of Target, any collective bargaining unit
representing any group of employees of Target, and any applicable government
authority under the National Labor Relations Act, the Internal Revenue Code, the
Consolidated Omnibus Budget Reconciliation Act, and other applicable law in
connection with the transactions provided for in this Agreement.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 No Solicitation.
(a) From and after the date of this Agreement until the
earlier of the termination of this Agreement or the Effective Time, Target shall
not, directly or indirectly, through any officer, director, employee,
representative or agent, (i) solicit, initiate, or knowingly encourage any
written inquiries or proposals that constitute, or could reasonably be expected
to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of all or substantially all of the assets, sale of shares of
capital stock (including without limitation by way of a tender offer) or similar
transactions involving Target, or any asset of Target the absence of which would
materially diminish the value of the Merger to Acquiror or the benefits expected
by Acquiror to be realized from the Merger, other than the transactions
contemplated by this Agreement (any of the foregoing written inquiries or
proposals being referred to in this Agreement as a "TAKEOVER PROPOSAL") or (ii)
engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Takeover Proposal, (iii)
agree to, approve or recommend any Takeover Proposal; provided, however, that
nothing herein shall prohibit Target, before the adoption of this Agreement by
the stockholders of Target, from (x) furnishing information regarding Target,
(y) entering into negotiations or discussions with, any person or group in
response to a Takeover Proposal submitted by such person or group (and not
withdrawn) and (z) subject to the provisions of Section 5.3 of this Agreement,
endorsing and/or recommending a superior Takeover Proposal, and any such actions
shall not be considered a breach of this Agreement to the extent they are taken
in compliance with the conditions and limitations set forth in this Agreement if
(1) neither Target nor any of its representatives shall have violated any of the
restrictions set forth in this Section 5.1 or Section 5.3, (2) the Board of
Directors of Target concludes, in good faith, after consultation with its
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outside legal counsel, that failure to take such action would be inconsistent
with the fiduciary obligations of the Board of Directors of Target to Target
stockholders under applicable law, (3) prior to furnishing any such information
to, or entering into discussions or negotiations with, such person or group,
Target gives Acquiror written notice of the identity of such person or group,
the terms and conditions of the offer and Target's intention to furnish
information to, or enter into discussions or negotiations with, such person or
group, and (4) contemporaneously with furnishing any such information to such
person or group, Target furnishes such information to Acquiror (to the extent
that such information has not been previously furnished by Target to Acquiror).
(b) Target and its representatives will immediately cease and
cause to be terminated any and all existing discussions, negotiations, exchanges
of information and other activities with respect to any Takeover Proposal.
Promptly following the execution and delivery of this Agreement, Target shall
(i) inform each of its representatives of the obligations undertaken in this
Section 5.1 and (ii) request each person that has heretofore executed a
confidentiality or non-disclosure agreement in connection with its consideration
of acquiring it to return to Target all confidential information heretofore
furnished to such person by or on behalf of it; provided, however, that within
ten (10) business days of Target's receipt from Acquiror of the form of a letter
concerning termination of such existing discussions, negotiations, exchanges of
information and other activities, Target shall send such letter to the other
parties engaged in such discussions, negotiations, exchanges of information and
other activities. Target shall notify Acquiror forthwith if any written
inquiries, proposals or offers relating to a Takeover Proposal are received by,
any such information is requested from, or any such discussions or negotiations
are sought to be initiated or continued with, Target or any of its
representatives, indicating, in connection with such notice, the name of the
person making the inquiry, proposal or offer and the material terms and
conditions of any proposals or offers. Thereafter Target shall provide Acquiror
with a true and complete copy of such Takeover Proposal or communication and
shall otherwise keep Acquiror informed, on a current basis, with respect to the
status and terms of any such proposal or offer and the status of any such
negotiations or discussions.
(c) Target and Acquiror agree that irreparable damage would
occur in the event that the provisions of this Section 5.1 were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed by the parties hereto that Acquiror shall be entitled to seek
an injunction or injunctions to prevent breaches of this Section 5.1 and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which the parties may be entitled at law or in equity.
5.2 Preparation of Information Statement; Permit Application.
(a) As soon as practicable after the execution of this
Agreement, Target shall prepare, with the cooperation of Acquiror, an
Information Statement for the stockholders of Target to approve this Agreement,
the Certificate of Merger and the transactions contemplated hereby and thereby.
The Information Statement shall constitute a disclosure document for the offer
and issuance of the shares of Acquiror Common Stock to be received by the
holders of Target Capital Stock in the Merger. Acquiror and Target shall each
use its best efforts to cause
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the Information Statement to comply with applicable federal and state securities
laws requirements. Each of Acquiror and Target agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Information Statement, or in
any amendments or supplements thereto, and to cause its counsel and independent
accountants to cooperate with the other's counsel and independent accountants in
the preparation of the Information Statement. Target will promptly advise
Acquiror, and Acquiror will promptly advise Target, in writing if at any time
prior to the Effective Time either Target or Acquiror shall obtain knowledge of
any facts that might make it necessary or appropriate to amend or supplement the
Information Statement in order to make the statements contained therein not
misleading or to comply with applicable law. The Information Statement shall
contain the recommendation of the Board of Directors of Target that the Target
stockholders approve the Merger and this Agreement and the conclusion of the
Target Board of Directors that the terms and conditions of the Merger are fair
and reasonable to the stockholders of Target. Anything to the contrary contained
herein notwithstanding, Target shall not include in the Information Statement
any information with respect to Acquiror or its affiliates or associates, the
form and content of which information shall not have been approved by Acquiror
prior to such inclusion.
(b) As soon as practicable after the execution of this
Agreement, Acquiror shall (i) prepare, with the cooperation of Target, the
Permit Application, (ii) file the Permit Application under Section 25121 of
California Law with the California Commissioner of Corporations (the
"COMMISSIONER") and (iii) file a request for a hearing to be held by the
Commissioner to consider the terms, conditions and fairness of the transactions
contemplated by this Agreement pursuant to Section 25142 of California Law.
Acquiror and Target shall each use commercially reasonable efforts to cause the
Permit Application to comply with the requirements of applicable federal and
state laws. Each of Acquiror and Target agrees to provide promptly to the other
such information concerning its business and financial statements and affairs
as, in the reasonable judgment of the providing party or its counsel, may be
required or appropriate for inclusion in the Permit Application, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the Permit
Application. Target will promptly advise Acquiror and Acquiror will promptly
advise Target, in writing, if at any time prior to the Effective Time either
Target or Acquiror shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Permit Application in order
to make the statements contained or incorporated by reference therein not
misleading or to comply with applicable law. Anything to the contrary contained
herein notwithstanding, Acquiror shall not include in the Permit Application any
information with respect to Target or its affiliates or associates, the form and
content of which information shall not have been approved by Target prior to
such inclusion.
(c) As soon as permitted by the Commissioner, Target shall
cause the mailing of the hearing notice to all holders of securities entitled to
receive such notice pursuant to the requirements of the rules of the
Commissioner and California Law. Target shall furnish to Acquiror such data and
information as is reasonably necessary for Acquiror's preparation and filing of
the request for the hearing and the hearing notice.
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5.3 Stockholders' Meeting or Consent Solicitation.
(a) As soon as permitted by the Commissioner, Target shall
promptly take all actions necessary to either (a) call a meeting of its
stockholders to be held for the purpose of voting upon this Agreement and the
Merger or (b) commence a consent solicitation to obtain such approvals in order
to effect consummation of the Merger on or before April 3, 2000, or as soon
thereafter as is practicable. Target will, through its Board of Directors,
recommend to its stockholders approval of such matters as soon as practicable
after the date hereof. Target shall use all reasonable efforts to solicit from
its stockholders proxies or consents in favor of such matters.
(b) Subject to the right of Target to terminate this Agreement
pursuant to Section 7.1, nothing contained in Section 5.1 shall limit Target's
obligation to call, give notice of, convene and hold a meeting of Target's
stockholders to consider the Merger or solicit Target stockholder consents
(regardless of whether the recommendation of the Board of Directors of Target
shall have been withdrawn, amended or modified and regardless of whether any
Takeover Proposal has been commenced, disclosed, or announced).
5.4 Access to Information.
(a) Target shall afford Acquiror and its accountants, counsel
and other representatives, reasonable access during normal business hours during
the period prior to the Effective Time to (i) all of Target's properties, books,
contracts, commitments and records and (ii) all other information concerning the
business, properties and personnel of Target as Acquiror may reasonably request.
Target agrees to provide to Acquiror and its independent auditors, counsel and
other representatives copies of internal financial statements promptly upon
request.
(b) Subject to compliance with applicable law, from the date
hereof until the earlier of the termination of this Agreement or the Effective
Time, each of Acquiror and Target shall confer on a regular and frequent basis
with one or more representatives of the other party to report operational
matters of materiality and the general status of ongoing operations.
(c) No information or knowledge obtained in any investigation
pursuant to this Section 5.4 shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
(d) Target shall provide Acquiror and its accountants, counsel
and other representatives reasonable access, during normal business hours during
the period prior to the earlier of the termination of this Agreement or the
Effective Time, to all of Target's Tax Returns and other records and workpapers
relating to Taxes and shall provide the following information to Acquiror and
its representatives promptly upon any request therefor: (i) a list of the types
of Tax Returns being filed by Target in each Taxing jurisdiction, including the
year of the commencement of the filing of each such type of Tax Return and all
closed years with respect to each such type of Tax Return filed in each
jurisdiction, (ii) a list of all material Tax elections filed in each
jurisdiction by Target, (iii) a schedule of any deferred intercompany gain with
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respect to transactions to which Target has been a party and (iv) receipts for
any Taxes paid to foreign Tax Authorities.
5.5 Confidentiality. The parties each agree that all information
provided by one party to the other in the course of pursuing the Merger will be
deemed confidential and proprietary to the providing party, and will not be
disclosed to any other person or entity (other than the receiving party's
attorneys, accountants, or other advisers subject to similar confidentiality
restrictions), and such information will not be used by the receiving party
except for the limited purpose of evaluating the desirability of completing this
proposed transaction; provided, however, that these confidentiality restrictions
will not apply to information that the receiving party can demonstrate is
publicly available or was already known by the receiving party through a third
party with no confidentiality obligations to the other party. All documents and
other written information (and all copies thereof, including copies on
electronic media) received by one party from the other shall promptly be
returned to the disclosing party upon the written request of the disclosing
party. The parties further acknowledge that the provisions of this Section 5.5
shall be in addition to, and not in substitution for, the provisions of
paragraph 15 of the letter agreement dated February 25, 2000 between Target and
Acquiror (the "NON-DISCLOSURE AGREEMENT"), and that to the extent there is a
conflict between this Section 5.5 and the Non-Disclosure Agreement, the
provisions of this Section 5.5 shall prevail.
5.6 Public Disclosure. Unless otherwise permitted by this Agreement,
Acquiror and Target shall consult with each other before issuing any press
release or otherwise making any public statement or making any other public (or
non-confidential) disclosure (whether or not in response to an inquiry)
regarding the terms of this Agreement and the transactions contemplated hereby,
and neither shall issue any such press release or make any such statement or
disclosure without the prior approval of the other (which approval shall not be
unreasonably withheld), except as may be required by law or required by Acquiror
to comply with the rules and regulations of the SEC or The Nasdaq Stock Market
or to comply with disclosure obligations under applicable securities laws.
5.7 Consents; Cooperation.
(a) Each of Acquiror and Target shall promptly apply for or
otherwise seek, and use all reasonable efforts to obtain, all consents and
approvals required to be obtained by it for the consummation of the Merger, and
shall use all commercially reasonable efforts to obtain all necessary consents,
waivers and approvals under any of its material contracts in connection with the
Merger for consent therefor or assignment thereof or otherwise. The parties
hereto will consult and cooperate with one another, and consider in good faith
the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to HSR or any other federal or state antitrust or fair trade
law.
(b) Each of Acquiror and Target shall use all commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under HSR, the Xxxxxxx Act, as amended, the Xxxxxxx Act, as amended,
the Federal Trade Commission Act, as amended, and any other
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federal, state or foreign statutes, rules, regulations, orders or decrees that
are designed to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade (collectively, "ANTITRUST LAWS").
In connection therewith, if any administrative or judicial action or proceeding
is instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Acquiror and Target shall cooperate and use all commercially reasonable efforts
vigorously to contest and resist any such action or proceeding and to have
vacated, lifted, reversed, or overturned any decree, judgment, injunction or
other order, whether temporary, preliminary or permanent (each an "ORDER"), that
is in effect and that prohibits, prevents, or restricts consummation of the
Merger or any such other transactions, unless by mutual agreement Acquiror and
Target decide that litigation is not in their respective best interests.
Notwithstanding the provisions of the immediately preceding sentence, it is
expressly understood and agreed that neither party shall have any obligation to
litigate or contest any administrative or judicial action or proceeding or any
Order beyond the earlier of (a) sixty (60) days after the date of this Agreement
or (b) the date of a ruling preliminarily enjoining the Merger issued by a court
of competent jurisdiction. Each of Acquiror and Target shall use all
commercially reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under HSR or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement.
(c) Notwithstanding the foregoing, neither Acquiror nor Target
shall be required to agree, as a condition to any Approval, to divest itself of
or hold separate any subsidiary, division or business unit which is material to
the business of such party and its subsidiaries, taken as a whole, or the
divestiture or holding separate of which would be reasonably likely to have a
Material Adverse Effect on (a) the business, properties, assets, liabilities,
financial condition or results of operations of such party and its subsidiaries,
taken as a whole or (b) the benefits intended to be derived as a result of the
Merger.
5.8 Update Disclosure; Breaches. From and after the date of this
Agreement until the Effective Time, each party hereto shall promptly notify the
other party, by written update to its Disclosure Schedule, of (a) the occurrence
or non-occurrence of any event which would be likely to cause any condition to
the obligations of any party to effect the Merger and the other transactions
contemplated by this Agreement not to be satisfied, or (b) the failure of Target
or Acquiror, as the case may be, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it pursuant to this
Agreement which would be likely to result in any condition to the obligations of
any party to effect the Merger and the other transactions contemplated by this
Agreement not to be satisfied. The delivery of any notice pursuant to this
Section 5.8 shall not cure any breach of any representation or warranty
requiring disclosure of such matter prior to the date of this Agreement or
otherwise limit or affect the remedies available hereunder to the party
receiving such notice.
5.9 Legal Requirements. Each of Acquiror and Target will, and will
cause their respective subsidiaries to, take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any party hereto
necessary in connection with any such requirements imposed upon such other party
in connection with the consummation of the transactions contemplated by
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this Agreement and will take all reasonable actions necessary to obtain (and
will cooperate with the other parties hereto in obtaining) any consent,
approval, order or authorization of, or any registration, declaration or filing
with, any Governmental Entity or other person, required to be obtained or made
in connection with the taking of any action contemplated by this Agreement.
5.10 Tax-Free Reorganization. Neither Target, Acquiror nor Merger Sub
will, either before or after consummation of the Merger, take any action which,
to the knowledge of such party, would cause the Merger to fail to constitute a
"reorganization" within the meaning of Code Section 368.
5.11 Blue Sky Laws. Acquiror shall take such steps as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of the Acquiror Common Stock in connection with the
Merger. Target shall use its best efforts to assist Acquiror as may be necessary
to comply with the securities and blue sky laws of all jurisdictions which are
applicable in connection with the issuance of Acquiror Common Stock in
connection with the Merger.
5.12 Stock Options.
(a) At the Effective Time, the Target Stock Option Plan and
each outstanding option to purchase shares of Target Common Stock under such
Plan, whether vested or unvested, shall be assumed by Acquiror. Each such option
so assumed by Acquiror under this Agreement shall continue to have, and be
subject to, the same terms and conditions set forth in the Target Stock Option
Plan and related stock option agreement immediately prior to the Effective Time,
except that (i) such option shall be exercisable for that number of whole shares
of Acquiror Common Stock equal to the product of the number of shares of Target
Common Stock that were issuable upon exercise of such option immediately prior
to the Effective Time multiplied by the Common Exchange Ratio and rounded down
to the nearest whole number of shares of Acquiror Common Stock and (ii) the per
share exercise price for the shares of Acquiror Common Stock issuable upon
exercise of such assumed option shall be equal to the quotient determined by
dividing the exercise price per share of Target Common Stock at which such
option was exercisable immediately prior to the Effective Time by the Common
Exchange Ratio, rounded up to the nearest whole cent. It is the intention of the
parties that the options so assumed by Acquiror qualify following the Effective
Time as incentive stock options as defined in Section 422 of the Code to the
extent such options qualified as incentive stock options prior to the Effective
Time. After the Effective Time, Acquiror will issue to each person who,
immediately prior to the Effective Time was a holder of an outstanding option
under the Target Stock Option Plan, a document in form and substance
satisfactory to the Stockholders' Agent (as defined in Section 8.9) evidencing
the foregoing assumption of such option by Acquiror.
(b) Acquiror shall comply with the terms of the Target Stock
Option Plan and ensure, to the extent required by, and subject to the provisions
of, such Target Stock Option Plan, that Target Options which qualified as
incentive stock options prior to the Effective Time continue to quality as
incentive stock options after the Effective Time.
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(c) Acquiror shall take all corporate action necessary to
reserve and make available for issuance a sufficient number of shares of
Acquiror Common Stock for delivery under Target Options assumed in accordance
with this Section 5.12.
(d) All outstanding rights of Target which it may hold
immediately prior to the Effective Time to repurchase unvested shares of Target
Capital Stock (the "REPURCHASE OPTIONS") shall be assigned to Acquiror in the
Merger and shall thereafter be exercisable by Acquiror upon the same terms and
conditions in effect immediately prior to the Effective Time, except (i) as
described in Section 5.12 of the Target Disclosure Schedule and (ii) that the
shares purchasable pursuant to the Repurchase Options and the purchase price per
share shall be adjusted to reflect the Common Exchange Ratio.
(e) Target shall use all reasonable efforts to prepare a
spreadsheet in form acceptable to Acquiror or its agent which spreadsheet shall
list, as of the Effective Time, all Target stockholders, and optionholders and
warrantholders and their respective addresses, the number of Target shares or
options or warrants to purchase shares held by such persons (including in the
case of shares, the respective certificate numbers), the Exchange Ratio
applicable to each holder, the number of shares of Acquiror Common Stock (or
options or warrants to purchase Acquiror Common Stock) to be issued to each
holder, the number of shares of Acquiror Common Stock to be deposited into the
Escrow Fund on behalf of each holder and the vesting arrangement with respect to
Target Options and Target Warrants (the "OPTION AND WARRANT SPREADSHEET"). The
Option and Warrant Spreadsheet shall be certified as complete and correct by a
duly elected officer of Target at the Closing.
5.13 Target Director and Officer Indemnification.
(a) Until the third anniversary of the Effective Date,
Acquiror will, and will cause the Surviving Corporation to, indemnify and hold
harmless the present and former officers, directors, employees and agents of
Target in respect of acts or omissions occurring on or prior to the Effective
Time to the extent provided under written agreements with such individuals and
Target's Certificate of Incorporation and Bylaws, in each case as in effect on
the date hereof; provided, that such indemnification shall be subject to any
limitation imposed from time to time under applicable law.
(b) In the event any claim, action, suit, proceeding or
investigation is asserted for which a person is entitled to indemnification
hereunder, (i) any counsel retained by the indemnified parties shall be
reasonably satisfactory to Acquiror and the Surviving Corporation and (ii)
Acquiror and the Surviving Corporation will cooperate in the defense of any such
matter; provided, however, that neither Acquiror nor the Surviving Corporation
shall be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld); and provided, further, that, in the
event that any claim or claims for indemnification are asserted or made within
such three-year period, all rights to indemnification in respect of any such
claim or claims shall continue until the disposition of any and all such claims.
(c) The provisions of this Section 5.13 are intended to be for
the benefit of, and shall be enforceable by, each such indemnified party.
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5.14 Escrow Agreement. On or before the Effective Time, the Escrow
Agent, the Stockholders' Agent, Target and Acquiror will execute the Escrow
Agreement contemplated by Article VIII in substantially the form attached hereto
as Exhibit C (the "ESCROW AGREEMENT").
5.15 Form S-8. Acquiror agrees to file, after the Closing, no later
than fifteen (15) business days after Acquiror's receipt of the Option and
Warrant Spreadsheet, a registration statement on Form S-8 covering the shares of
Acquiror Common Stock issuable pursuant to outstanding options under the Target
Stock Option Plan assumed by Acquiror; provided, that Acquiror has received not
less than ten (10) business days prior to such projected filing date, all option
documentation relating to the outstanding options); and provided further, that
such options qualify for registration on such Form S-8. Target shall cooperate
with and assist Acquiror in the preparation of such registration statement.
5.16 Listing of Additional Shares. Prior to the Effective Time,
Acquiror shall file with the Nasdaq Stock Market a Notification Form for Listing
of Additional Shares with respect to the shares of Acquiror Common Stock
issuable upon conversion of the Target Capital Stock in the Merger and upon
exercise of the Target Options and Target Warrants assumed by Acquiror.
5.17 Employees. Set forth in Section 5.17 of the Acquiror Disclosure
Schedule is a list of employees of Target to whom Acquiror will make an offer of
employment pursuant to either (i) an Employment Agreement or (ii) an Employment
and Noncompetition Agreement substantially in the forms attached hereto as
Exhibits D-1 through D-15. Acquiror will negotiate in good faith to enter into
an agreement with the employees listed in Section 5.17 of the Acquiror
Disclosure Schedule. Target shall cooperate with Acquiror to assist Acquiror in
entering into an agreement with such employees.
5.18 Benefit Arrangements. Acquiror shall offer employment to all
employees of Target as of the Effective Time except those listed in Section 5.18
of the Acquiror Disclosure Schedule. Acquiror and Target agree that Acquiror
will provide benefits following the Effective Time to Target employees who
accept such offer of employment that are substantially identical to the benefits
currently provided to similarly situated employees of Acquiror. From and after
the Effective Time, Acquiror shall grant all employees of Target who accept such
offer of employment credit for all service (to the same extent as service with
Acquiror is taken into account with respect to similarly situated employees of
Acquiror) with Target prior to the Effective Time for (i) eligibility and
vesting purposes and (ii) for purposes of vacation accrual after the Effective
Time as if such service with Target was service with Acquiror. Acquiror and
Target agree that where applicable with respect to any medical or dental benefit
plan of Acquiror, any covered expenses incurred on or before the Effective Time
by an employee or an employee's covered dependents shall be taken into account
for purposes of satisfying applicable deductible, coinsurance and maximum
out-of-pocket provisions after the Effective Time to the same extent as such
expenses are taken into account for the benefit of similarly situated employees
of Acquiror.
5.19 Conversion of Target Preferred Stock. Target shall use its
reasonable best efforts to ensure that either all of Target's outstanding
Preferred Stock shall have been converted into Target Common Stock in accordance
with the Certificate of Incorporation of Target or that the
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Certificate of Incorporation of Target shall provide that the Merger shall cause
a liquidation event with respect to the Target Preferred Stock, with the holders
of the Target Preferred Stock receiving in the Merger, in exchange for their
shares of Target Preferred Stock, shares of Acquiror Common Stock.
5.20 Additional Agreements; Best Efforts. Each of the parties agrees to
use their best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, subject to the appropriate vote or consent of
stockholders of Target described in Section 5.3, including cooperating fully
with the other party, including by provision of information. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement or to vest the Surviving Corporation with
full title to all properties, assets, rights, approvals, immunities and
franchises, the proper officers and directors of each party to this Agreement
shall take all such necessary action.
5.21 Notice to Holders of Target Warrants. As soon as practicable after
the execution of this Agreement, Target shall notify all holders of outstanding
Target Warrants of the Merger (including notifying such holders that no
registration rights with respect to such Target Warrants and underlying shares
will exist following the Closing) and shall, notwithstanding Section 5.5 hereof
but pursuant to a non-disclosure agreement approved by Target and Acquiror,
provide such holders all information requested by such holders relevant to the
exercise of Target Warrants.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Effective Time of each of the following
conditions, any of which may be waived, in writing, by agreement of all the
parties hereto:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the holders of at least 90% of the shares of
the Target Common Stock and 90% of the Target Preferred Stock outstanding as of
the record date set for the Target stockholders' meeting or solicitation of
stockholder consents, and any agreements or arrangements that may result in the
payment of any amount that would not be deductible by reason of Section 280G of
the Code shall have been approved by such number of stockholders of Target as is
required by the terms of Code Section 280G(b)(5)(B).
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission
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or other governmental authority or instrumentality, domestic or foreign, seeking
any of the foregoing be pending; nor shall there be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger, which makes the consummation of the Merger illegal. In
the event an injunction or other order shall have been issued, each party agrees
to use its reasonable diligent efforts to have such injunction or other order
lifted.
(c) Governmental Approval. Acquiror and Target and their
respective subsidiaries shall have timely obtained from each Governmental Entity
all approvals, waivers and consents, if any, necessary for consummation of or in
connection with the Merger and the several transactions contemplated hereby,
including such approvals, waivers and consents as may be required under the
Securities Act and under state blue sky laws.
(d) Fairness Hearing. The Commissioner shall have approved the
terms and conditions of the transactions contemplated by this Agreement and the
Certificate of Merger and the fairness of such terms and conditions pursuant to
Section 25142 of California Law following a fairness hearing and shall have
issued a Permit under Section 25121 of California Law for the issuance of (i)
the Acquiror Common Stock to be issued in the Merger, (ii) Acquiror options in
substitution for the Target Options, (iii) the Acquiror Common Stock issuable on
exercise of the Target Stock Options to be assumed by Acquiror, (iv) Acquiror
warrants in substitution for the Target Warrants and (v) the Acquiror Common
Stock issuable on exercise of the Target Warrants to be assumed by Acquiror.
(e) Tax Opinions. Acquiror and Target shall have received
written opinions of Acquiror's legal counsel and Target's legal counsel,
respectively, in form and substance reasonably satisfactory to them, and dated
on or about the Closing Date, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code, and such
opinions shall not have been withdrawn. In rendering such opinions, counsel
shall be entitled to rely upon, among other things, reasonable assumptions as
well as representations of Acquiror and Target.
(f) Escrow Agreement. Acquiror, Target, the Escrow Agent and
the Stockholders' Agent shall have entered into an Escrow Agreement
substantially in the form attached hereto as Exhibit C.
6.2 Additional Conditions to Obligations of Target. The obligations of
Target to consummate and effect this Agreement and the transactions contemplated
hereby shall be subject to the satisfaction at or prior to the Effective Time of
each of the following conditions, any of which may be waived, in writing, by
Target:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Acquiror Disclosure Schedule dated the date of this Agreement,
(i) the representations and warranties of Acquiror and Merger Sub in this
Agreement shall be true and correct in all material respects (except for such
representations and warranties that are qualified by their terms by a reference
to materiality which representations and warranties as so qualified shall be
true in all respects), except where the failure to be so true and correct would
not be reasonably expected to have a Material Adverse Effect on Acquiror, on and
as of the Effective Time as though such
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representations and warranties were made on and as of such time (except that
representations and warranties which by their express terms are made on and as
of a specified earlier date shall be made only on and as of such specified
earlier date) and (ii) Acquiror and Merger Sub shall have performed and complied
in all material respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by them as of the Effective
Time.
(b) Certificate of Acquiror. Target shall have been provided
with a certificate executed on behalf of Acquiror by its Chief Financial Officer
to the effect set forth in Section 6.2(a).
(c) Legal Opinion. Target shall have received a legal opinion
from Acquiror's legal counsel substantially in the form attached as Exhibit E
hereto.
6.3 Additional Conditions to the Obligations of Acquiror. The
obligations of Acquiror and Merger Sub to consummate and effect this Agreement
and the transactions contemplated hereby shall be subject to the satisfaction at
or prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Acquiror:
(a) Representations, Warranties and Covenants. Except as
disclosed in the Target Disclosure Schedule dated the date of this Agreement,
(i) the representations and warranties of Target in this Agreement shall be true
and correct in all material respects (except for (A) changes contemplated by
Section 4.2 of this Agreement and (B) such representations and warranties that
are qualified by their terms by a reference to materiality which representations
and warranties as so qualified shall be true in all respects) on and as of the
Effective Time as though such representations and warranties were made on and as
of such time (except that representations and warranties which by their express
terms are made on and as of a specified earlier date shall be made only on and
as of such specified earlier date), except where the failure to be so true and
correct would not be reasonably expected to have a Material Adverse Effect on
Target, and (ii) Target shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the Effective Time.
(b) Certificate of Target. Acquiror shall have been provided
with a certificate executed on behalf of Target by its President and Chief
Financial Officer to the effect set forth in Section 6.3(a).
(c) Third Party Consents. Acquiror shall have been furnished
with evidence satisfactory to it of the consent or approval of those persons, if
any, whose consent or approval shall be required in connection with the Merger
under the contracts of Target set forth in Section 2.27 of the Target Disclosure
Schedule.
(d) Legal Opinion. Acquiror shall have received a legal
opinion from Target's legal counsel, in substantially the form attached hereto
as Exhibit F.
(e) FIRTPA Certificate. Target shall, prior to the Closing
Date, provide Acquiror with a properly executed FIRPTA Notification Letter,
substantially in the form of
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Exhibit G attached hereto, which states that shares of capital stock of Target
do not constitute "United States real property interests" under Section 897(c)
of the Code, for purposes of satisfying Acquiror's obligations under Treasury
Regulation Section 1.1445-2(c)(3). In addition, simultaneously with delivery of
such Notification Letter, Target shall have provided to Acquiror, as agent for
Target, a form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) and substantially in
the form of Exhibit G attached hereto along with written authorization for
Acquiror to deliver such notice form to the Internal Revenue Service on behalf
of Target upon the Closing of the Merger.
(f) 280G Agreements. Target shall, prior to the Closing Date,
provide Acquiror with a properly executed Section 280G Agreement in the form of
Exhibit H hereto from each person identified by Target or Acquiror as
potentially receiving excess parachute payments, as defined in Section 280G of
the Code, in connection with the Merger.
(g) Resignation of Directors. The directors of Target in
office immediately prior to the Effective Time shall have resigned as directors
of Target effective as of the Effective Time.
(h) Employment Agreements; Employment and Non-Competition
Agreements. The employees of Target set forth in Section 5.17 of the Acquiror
Disclosure Schedule shall have accepted employment with Acquiror and shall have
entered into either (i) an Employment Agreement or (ii) an Employment and
Noncompetition Agreement substantially in the forms attached hereto as Exhibits
D-1 through D-15.
(i) Certificates of Good Standing. Target shall, prior to the
Closing Date, provide Acquiror a certificate from the Secretary of State of
California as to Target's good standing and payment of all applicable taxes.
(j) Termination of Pension Plan. Unless otherwise stated by
Acquiror in writing, Target shall, immediately prior to the Closing Date,
terminate Target's 401(k) Plan (the "401(k) PLAN") and no further contributions
shall be made to the 401(k) Plan, provided that as a condition of such
termination Target's employees shall be eligible to participate in Acquiror's
401(k) plan immediately following the Closing Date. Target shall provide to
Acquiror (i) executed resolutions by the Board of Directors of Target
authorizing the termination and (ii) an executed amendment to the 401(k) Plan
sufficient to assure compliance with all applicable requirements of the Code and
regulations thereunder so that the tax-qualified status of the 401(k) Plan will
be maintained at the time of termination.
(k) Option and Warrant Spreadsheet. Acquiror shall have
received the Option and Warrant Spreadsheet, which shall have been certified as
true and correct by an authorized officer of Target.
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ARTICLE VII
TERMINATION, EXPENSES, AMENDMENT AND WAIVER
7.1 Termination. At any time prior to the Effective Time, whether
before or after approval by Target's stockholders of matters presented to
Target's stockholders in connection with the Merger, this Agreement may be
terminated:
(a) by mutual consent duly authorized by the Boards of
Directors of Acquiror and Target;
(b) by either Acquiror or Target, if the Closing shall not
have occurred on or before July 15, 2000 (provided, that the right to terminate
this Agreement under this Section 7.1(b) shall not be available to any party
whose action or failure to act has been a principal cause or resulted in the
failure of the Merger to occur on or before such date and such action or failure
to act constitutes a material breach of this Agreement);
(c) by Acquiror, if (i) Target shall have materially breached
any representation or warranty made as of the date of this Agreement (or shall
have breached in any respect, any representation or warranty which is qualified
by its terms as to materiality), or shall materially breach any obligation or
agreement hereunder in a manner causing conditions precedent to the Closing not
to be satisfied and such breach shall not have been cured within ten (10)
business days of receipt by Target of written notice of such breach, provided
that the right to terminate this Agreement by Acquiror under this Section
7.1(c)(i) shall not be available to Acquiror where Acquiror is at that time in
material breach of this Agreement or (ii) the Board of Directors of Target shall
have omitted, withdrawn or modified its recommendation of this Agreement or the
Merger in a manner adverse to Acquiror or recommended, endorsed, accepted or
agreed to a Takeover Proposal;
(d) by Target, if Acquiror shall have materially breached any
representation or warranty made as of the date of this Agreement (or shall have
breached in any respect, any representation or warranty which is qualified by
its terms as to materiality), or shall materially breach any obligation or
agreement hereunder in a manner causing conditions precedent to the Closing not
to be satisfied and such breach shall not have been cured within ten (10)
business days following receipt by Acquiror of written notice of such breach,
provided that the right to terminate this Agreement by Target under this Section
7.1(d) shall not be available to Target where Target is at that time in material
breach of this Agreement;
(e) by Acquiror if (i) any permanent injunction or other order
of a court or other competent authority preventing the consummation of the
Merger shall have become final and nonappealable or (ii) any required approval
of the stockholders of Target shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a duly held meeting of
Target's stockholders or at any adjournment thereof or the failure to obtain the
consent of Target's stockholders within five (5) business days after the date
upon which such consent is sought in accordance with Section 5.3;
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(f) by Target if (i) any permanent injunction or other order
of a court or other competent authority preventing the consummation of the
Merger shall have become final and nonappealable or (ii) any required approval
of the stockholders of Target shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at a duly held meeting of
Target's stockholders or at any adjournment thereof or the failure to obtain the
consent of Target's stockholders within five (5) business days after the date
upon which such consent is sought in accordance with Section 5.3;
(g) by Acquiror, if Target or any of its representatives shall
participate in discussions or negotiations, or take any other action, in breach
(other than an immaterial breach) of Section 5.1; or
(h) by Target, in response to a Takeover Proposal which is
superior to the Merger (as determined in good faith by Target's Board of
Directors); provided that Target shall have complied in all material respects
with its obligations under Sections 5.1 and Section 5.3 and such Takeover
Proposal did not otherwise result from a material breach of any of Target's
obligations under this Agreement; and provided further, that no termination
pursuant to this Section 7.1(h) shall be effective until after the third
business day following Acquiror's receipt of written notice advising Acquiror
that Target's Board of Directors is prepared to accept a Takeover Proposal which
is superior in the good faith determination of Target's Board of Directors to
the Merger, specifying the material terms of such Takeover Proposal and
identifying the person or persons making such Takeover Proposal; and the payment
of any applicable termination fee pursuant to Section 7.3.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror or Target
or their respective officers, directors, stockholders or affiliates, except to
the extent that such termination results from the breach by a party hereto of
any of its representations, warranties or covenants set forth in this Agreement;
provided, that the provisions of Section 5.5 (Confidentiality), Section 7.3
(Expenses and Termination Fees), this Section 7.2 and Article IX shall remain in
full force and effect and survive any termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to paragraphs (b) and (c) below, whether or not
the Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of advisers, accountants and legal counsel)
shall be paid by the party incurring such expense; provided, however, that if
the Merger is consummated, Acquiror shall pay all Target Merger Expenses
pursuant to Section 1.6(a). Any such costs and expenses incurred by Target prior
to, at or after the Closing and not presented to Acquiror for payment at or
prior to the Closing shall remain an obligation of the Former Target
Stockholders. If Acquiror or Target receives any invoices for said costs and
expenses after the Closing, it may, with Acquiror's written approval, pay such
expenses; provided, however, that such payment shall, if not promptly reimbursed
by the Former Target Stockholders at Acquiror's request, constitute "Damages"
recoverable under
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the Escrow Agreement and such Damages shall not be subject to the Escrow Basket
(as defined in Section 8.4).
(b) In the event that Acquiror shall terminate this Agreement
pursuant to any provision of Section 7.1(c), Target shall reimburse Acquiror for
all of the out-of-pocket costs and expenses incurred by Acquiror in connection
with this Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel). In the event that (i) after a Takeover Proposal has been made to
Target or to Target stockholders generally or otherwise has become publicly
known and Target's Board of Directors shall have omitted, withdrawn or modified
its recommendation of this Agreement or the Merger in a manner adverse to
Acquiror or recommended, endorsed, accepted or agreed to a Takeover Proposal,
this Agreement shall be terminated by Acquiror pursuant to Section 7.1(c)(i)
(but only as a result of Target's breach of any material covenant or other
agreement made in this Agreement) or Section 7.1(e)(ii) or by Target pursuant to
Section 7.1(f)(ii) or by either party pursuant to Section 7.1(b)(but only as a
result of Target's breach of any material covenant or other agreement made in
this Agreement), or (ii) this Agreement shall be terminated by Acquiror pursuant
to Section 7.1(c)(ii) (other than as a result of (A) a change in Target's Board
of Directors recommendation based on a right of termination by Target under
Section 7.1(d) or (B) the occurrence of any event or condition that has a
Material Adverse Effect on Acquiror)) or Section 7.1(g), or (iii) this Agreement
shall be terminated by Target pursuant to Section 7.1(h), then, in any such
event, in addition to any other remedies Acquiror may have, Target shall pay to
Acquiror the sum of $15,600,000, which shall be due and payable in full within
five (5) business days after the termination of this Agreement.
(c) In the event that Target shall terminate this Agreement
pursuant to Section 7.1(d), Acquiror shall reimburse Target for all of the
out-of-pocket costs and expenses incurred by Target in connection with this
Agreement and the transactions contemplated hereby (including, without
limitation, the fees and expenses of its advisors, accountants and legal
counsel).
(d) Each party acknowledges that the agreements contained in
this Section 7.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the other party would not enter
into this Agreement. Accordingly, if a party fails promptly to pay any of the
amounts due pursuant to this Section 7.3 and, in order to obtain such payment,
the other party commences a suit which results in a judgment or settlement for
any of the fees set forth in this Section 7.3, the liable party shall pay to the
party commencing such suit its costs and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Chase Bank of Texas, N.A.
in effect on the date such payment was required to be made.
7.4 Amendment. The boards of directors of the parties hereto may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto; provided that an
amendment made subsequent to adoption of this Agreement by the stockholders of
Target shall not (a) alter or change the amount or kind of consideration to be
received on conversion of the Target Capital Stock, (b) alter or change any term
of the Certificate of Incorporation of the Surviving Corporation to be effected
by the
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Merger, or (c) alter or change any of the terms and conditions of this Agreement
if such alteration or change would adversely affect the holders of Target
Capital Stock.
7.5 Extension; Waiver. At any time prior to the Effective Time
any party hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE VIII
ESCROW AND INDEMNIFICATION
8.1 Survival of Representations, Warranties and Covenants. All the
representations and warranties set forth in this Agreement shall survive the
Effective Time until the first anniversary of the Effective Time; provided,
however, that there shall be no limitation period for matters involving fraud.
The covenants and agreements of the parties shall survive until the expiration
of the time period for their performance as provided herein.
8.2 Indemnification.
(a) Subject to the limitations set forth in this Article VIII,
the stockholders of Target will indemnify and hold harmless Acquiror and its
officers, directors, agents and employees, and each person, if any, who controls
or may control Acquiror within the meaning of the Securities Act (hereinafter
referred to individually as an "INDEMNIFIED PERSON" and collectively as
"INDEMNIFIED PERSONS") from and against any and all losses, costs, damages,
liabilities and expenses arising from claims, demands, actions, causes of
action, including, without limitation, reasonable legal fees, net of any
recoveries by Acquiror under existing insurance policies or indemnities from
third parties (collectively, "DAMAGES") arising out of any misrepresentation or
breach of or default in connection with any of the representations, warranties,
covenants and agreements given or made by Target in this Agreement, the Target
Disclosure Schedule or any exhibit or schedule to this Agreement. The Escrow
Fund shall be security for this indemnity obligation subject to the limitations
in this Agreement. If the Merger is consummated, recovery from the Escrow Fund
shall be the exclusive remedy under this Agreement for any breach or default in
connection with any of the representations, warranties, covenants or agreements
set forth in this Agreement or any exhibit hereto, absent fraud. "Damages" as
used herein is not limited to matters asserted by third parties, but includes
Damages incurred or sustained by Acquiror in the absence of claims by a third
party.
(b) Acquiror and Target each acknowledge that such Damages, if
any, would relate to unresolved contingencies existing at the Effective Time,
which if resolved at the Effective Time would have led to a reduction in the
total number of shares Acquiror would have agreed to issue in connection with
the Merger. Nothing in this Agreement shall limit the liability (i) of Target
for any breach of any representation, warranty or covenant if the Merger does
not
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close or (ii) of any Target stockholder in connection with any breach by such
stockholder of the Support Agreement.
8.3 Escrow Fund. As security for the indemnity provided for in Section
8.2 hereof, the Escrow Shares issuable pursuant to Section 1.6(a) shall be
registered in the name of, and be deposited with, ChaseMellon Shareholder
Services, L.L.C., as escrow agent (the "ESCROW AGENT"), such deposit to
constitute an escrow fund to be governed by the terms set forth herein and in
the Escrow Agreement attached hereto as Exhibit C. The Escrow Fund shall be
allocated among the Former Target Stockholders on a pro-rata basis in accordance
with Section 1.6 hereof (the "ESCROW ALLOCATION") (excluding for purposes of
this calculation any Dissenting Shares). Upon compliance with the terms hereof
and subject to the provisions of this Article VIII, Acquiror and the Surviving
Corporation shall be entitled to obtain indemnity from the Escrow Fund for
Damages covered by the indemnity provided for in Section 8.2.
8.4 Escrow Basket. Notwithstanding the foregoing, Acquiror may not
receive any shares from the Escrow Fund unless and until an Officer's
Certificate (as defined in Section 8.6 below) identifying Damages, the aggregate
amount of which exceeds $200,000 (the "ESCROW BASKET"), has been delivered to
the Escrow Agent as provided in Section 8.5 below and such amount is determined
pursuant to this Article VIII to be payable, in which case Acquiror shall
receive shares equal in value to the full amount of Damages; provided, however,
that in no event shall Acquiror receive more than the number of shares of
Acquiror Common Stock originally placed in the Escrow Fund. In determining the
amount of any Damage resulting from any misrepresentation, breach or default or
whether a misrepresentation, breach or default has occurred, any materiality
standard contained in the applicable representation, warranty or covenant shall
be disregarded.
8.5 Escrow Period. The Escrow Period shall terminate on the first
anniversary of the Closing Date; provided, however, that a portion of the Escrow
Shares, which is necessary to satisfy any unsatisfied claims specified in any
Officer's Certificate delivered to the Escrow Agent prior to termination of the
Escrow Period with respect to facts and circumstances existing prior to
expiration of the Escrow Period, shall remain in the Escrow Fund until such
claims have been resolved.
8.6 Claims upon Escrow Fund.
(a) Upon receipt by the Escrow Agent on or before the last day
of the Escrow Period (the "TERMINATION DATE") of a certificate signed by the
chief financial or chief executive officer of Acquiror (an "OFFICER'S
CERTIFICATE"):
(i) stating that Acquiror or the Surviving
Corporation has incurred or paid or properly accrued or disclosed (in accordance
with GAAP) Damages in an aggregate stated amount with respect to which Acquiror
or the Surviving Corporation is entitled to payment from the Escrow Fund
pursuant to this Agreement; and
(ii) specifying in reasonable detail the individual
items of Damages included in the amount so stated, the date each such item was
incurred, paid, properly accrued or
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disclosed (in accordance with GAAP) and the specific nature of the breach to
which such item is related, the Escrow Agent shall, subject to the provisions of
Sections 8.7 and 8.8 of this Agreement, deliver to Acquiror shares of Acquiror
Common Stock in an amount necessary to indemnify Acquiror for the Damages
claimed; provided, however, that no shares of Acquiror Common Stock shall be
delivered to Acquiror, as a result of a claim based upon an accrual or
disclosure of Damages until such time as the Acquiror has actually incurred or
paid Damages. All shares of Acquiror Common Stock subject to such claims shall
remain in the Escrow Fund until the earliest to occur of (A) Damages actually
are incurred or paid, (B) Acquiror determines in its reasonable good faith
judgment that no Damages will be required to be incurred or paid, or (C) with
respect to claims which Acquiror has accrued or disclosed, the earlier of (1)
such time as the claims are no longer accrued or disclosed or (2) the expiration
of the applicable statute of limitations (in which event such shares shall be
distributed in accordance with Section 8.10).
(b) For the purpose of compensating Acquiror for its Damages
pursuant to this Agreement, the Acquiror Common Stock in the Escrow Fund shall
be valued at the Acquiror Closing Stock Price.
8.7 Objections to Claims. At the time of delivery of any Officer's
Certificate to the Escrow Agent, a duplicate copy of such Officer's Certificate
shall be delivered by Acquiror to the Stockholders' Agent and, for a period of
forty-five (45) days after such delivery to the Escrow Agent, the Escrow Agent
shall make no delivery of Acquiror Common Stock or other property pursuant to
Section 8.6 hereof unless the Escrow Agent shall have received written
authorization from the Stockholders' Agent to make such delivery. After the
expiration of such 45-day period, the Escrow Agent shall make delivery of the
Acquiror Common Stock or other property in the Escrow Fund in accordance with
Section 8.6 hereof and as set forth in a certificate provided by Acquiror,
provided that no such payment or delivery may be made if the Stockholders' Agent
shall object in a written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to the Escrow Agent
and to Acquiror prior to the expiration of such 45-day period.
8.8 Resolution of Conflicts; Arbitration.
(a) In case the Stockholders' Agent shall so object in writing
to any claim or claims by Acquiror made in any Officer's Certificate, the
Stockholders' Agent and Acquiror shall attempt in good faith for sixty (60) days
to agree upon the rights of the respective parties with respect to each of such
claims. If the Stockholders' Agent and Acquiror should so agree, a memorandum
setting forth such agreement shall be prepared and signed by both parties and
shall be furnished to the Escrow Agent. The Escrow Agent shall be entitled to
rely on any such memorandum and shall distribute the Acquiror Common Stock or
other property from the Escrow Fund in accordance with the terms thereof.
(b) If no such agreement can be reached after good faith
negotiation, either Acquiror or the Stockholders' Agent may, by written notice
to the other, demand arbitration of the matter unless the amount of the Damages
is at issue in pending litigation with a third party, in which event arbitration
shall not be commenced until such amount is ascertained or both Acquiror and the
Stockholders' Agent agree to arbitration; and in such event the matter shall be
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settled by arbitration conducted by a single arbitrator. Acquiror and the
Stockholders' Agent shall jointly select an arbitrator. If Acquiror or the
Stockholders' Agent fail to agree upon an arbitrator within thirty (30) days, an
arbitrator shall be selected for them by the American Arbitration Association
("AAA"). The decision of the arbitrator so selected as to the validity and
amount of any claim in such Officer's Certificate shall be binding and
conclusive upon the parties to this Agreement, and, notwithstanding anything in
Section 8.6, the Escrow Agent shall be entitled to act in accordance with such
decision and make or withhold payments or distributions out of the Escrow Fund
in accordance with such decision.
(c) Judgment upon any award rendered by the arbitrators may be
entered in any court having jurisdiction. Any such arbitration shall be held in
Dallas County, Texas under the commercial rules then in effect of the American
Arbitration Association. For purposes of this Section 8.8, in any arbitration
hereunder in which any claim or the amount thereof stated in the Officer's
Certificate is at issue, Acquiror shall be deemed to be the Non-Prevailing Party
unless the arbitrators award Acquiror more than one-half (1/2) of the amount in
dispute, plus any amounts not in dispute; otherwise, the Target stockholders for
whom shares of Target Capital Stock otherwise issuable to them have been
deposited in the Escrow Fund shall be deemed to be the Non-Prevailing Party. The
Non-Prevailing Party to an arbitration shall pay its own expenses, the fees of
each arbitrator, the administrative fee of the American Arbitration Association,
and the expenses, including without limitation, attorneys' fees and costs
reasonably incurred by the other party to the arbitration.
8.9 Stockholders' Agent.
(a) In the event that the Merger is approved by the Target
stockholders, effective upon such vote, and without further act of any Target
stockholder, Xxxxx Xxxxxxxx shall be appointed as agent and attorney-in-fact
(the "STOCKHOLDERS' AGENT") for and on behalf of each stockholder of Target
(except such stockholders, if any, as shall have perfected their dissenters'
rights under Delaware Law), to give and receive notices and communications, to
authorize delivery to Acquiror of shares of Acquiror Common Stock from the
Escrow Fund in satisfaction of claims by Acquiror, to object to such deliveries,
to agree to, negotiate, enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or appropriate in the
judgment of the Stockholders' Agent for the accomplishment of the foregoing.
Such agency may be changed by the stockholders of Target from time to time upon
not less than thirty (30) days prior written notice to Acquiror; provided,
however, that the Stockholders' Agent may not be removed unless holders of a
two-thirds interest in the Escrow Fund agree to such removal and to the identity
of the substituted stockholders' agent. Any vacancy in the position of the
Stockholders' Agent may be filled by approval of the holders of a majority in
interest of the Escrow Fund. No bond shall be required of the Stockholders'
Agent, and the Stockholders' Agent shall not receive compensation for his
services. Notice or communications to or from the Stockholders' Agent shall
constitute notice to or from each of the stockholders of Target.
(b) The Stockholders' Agent shall not be liable for any act
done or omitted hereunder as Stockholders' Agent while acting in good faith and
in the exercise of reasonable judgment, and any act done or omitted pursuant to
the advice of counsel shall be conclusive
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evidence of such good faith. The Target stockholders shall severally indemnify
the Stockholders' Agent and hold him or her harmless against any loss, liability
or expense (including legal fees and other expenses incurred in connection with
the exercise of the Stockholders' Agent's duties as such) incurred without gross
negligence or bad faith on the part of the Stockholders' Agent and arising out
of or in connection with the acceptance or administration of his or her duties
hereunder.
(c) The Stockholders' Agent shall have reasonable access to
information about Target and Acquiror and the reasonable assistance of Target's
and Acquiror's officers and employees for purposes of performing its duties and
exercising its rights hereunder; provided, that the Stockholders' Agent shall
treat confidentially and not disclose any nonpublic information from or about
Target or Acquiror to anyone (except on a need to know basis to individuals who
agree to treat such information confidentially).
(d) The Stockholders' Agent shall be entitled to a
distribution from the Escrow Fund equal to any claim for indemnification or
reimbursement for legal fees and other expenses under Section 8.9(b) which has
not been satisfied; provided, however, that no such distribution shall be made
until all claims of Acquiror set forth in any Officer's Certificate delivered to
the Escrow Agent on or prior to the Termination Date have been resolved.
8.10 Distribution Upon Termination of Escrow Period. Promptly following
the Termination Date, the Escrow Agent shall deliver to the Former Target
Stockholders all of the shares in the Escrow Fund in excess of any amount of
such shares reasonably necessary to satisfy any unsatisfied or disputed claims
for Damages specified in any Officer's Certificate delivered to the Escrow Agent
on or before the Termination Date pursuant to Section 8.6 and any unsatisfied or
disputed claims by the Stockholders' Agent under Section 8.9. As soon as all
such claims have been resolved, the Escrow Agent shall deliver to the Former
Target Stockholders all shares remaining in the Escrow Fund and not required to
satisfy such claims. Deliveries of shares to the Former Target Stockholders
pursuant to this section shall be made in proportion to the allocation set forth
in Section 8.3.
8.11 Actions of the Stockholders' Agent. A decision, act, consent or
instruction of the Stockholders' Agent shall constitute a decision of all Target
stockholders for whom shares of Acquiror Common Stock otherwise issuable to them
are deposited in the Escrow Fund and shall be final, binding and conclusive upon
each such Target stockholder, and the Escrow Agent and Acquiror may rely upon
any decision, act, consent or instruction of the Stockholders' Agent as being
the decision, act, consent or instruction of each and every such Target
stockholder. The Escrow Agent and Acquiror are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of the Stockholders' Agent.
8.12 Third-Party Claims. In the event Acquiror becomes aware of a
third-party claim that Acquiror believes may result in a demand against the
Escrow Fund, Acquiror shall notify the Stockholders' Agent of such claim, and
the Stockholders' Agent and the Target Stockholders for whom shares of Acquiror
Common Stock otherwise issuable to them are deposited in the Escrow Fund shall
be entitled, at their expense, to participate in any defense of such claim.
Acquiror
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shall have the right in its sole discretion to settle any such claim; provided,
however, that Acquiror may not effect the settlement of any such claim without
the consent of the Stockholders' Agent, which consent shall not be unreasonably
withheld, conditioned or delayed. In the event that the Stockholders' Agent has
consented to any such settlement, the Stockholders' Agent shall have no power or
authority to object under Section 8.6 or any other provision of this Article
VIII to the amount of any claim by Acquiror against the Escrow Fund for
indemnity with respect to such settlement.
8.13 Maximum Liability and Remedies. The liability of any Former Target
Stockholder for damages under this Article VIII shall be several and not joint,
and any assertion of Damages against any Former Target Stockholder may only be
made pro rata based on the percentage of Escrow Shares attributable to each
Former Target Stockholder as set forth on the Escrow Allocation and shall be the
sole and exclusive remedy of Acquiror and the Surviving Corporation after the
Closing with respect to any representation, warranty, covenant or agreement made
by Target under this Agreement and no former stockholder, optionholder,
warrantholder, director, officer, employee or agent of Target shall have any
personal liability to Acquiror or the Surviving Corporation after the Closing in
connection with the Merger; provided, however, that nothing herein limits any
potential remedies and liabilities of Acquiror or the Surviving Corporation,
arising under applicable state and federal laws against any security holder,
director, officer, employee or agent of Target with respect to that person's
commission of fraud.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following address (or at such other address for a party as shall be
specified by like notice):
(a) if to Acquiror or Merger Sub, to:
i2 Technologies, Inc.
One i2 Place
00000 Xxxx Xxxx
Xxxxxx, Xxxxx 00000
Attention: Corporate Counsel
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
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with a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
000 Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx X. Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to Target, to:
SupplyBase, Inc.
000 Xxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Corporate Secretary
Facsimile No.: (___) ___-____
Telephone No.: (___) ___-____
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxxx
Facsimile No.: (000) 000-0000
Telephone No.: (000) 000-0000
9.2 Interpretation. When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used
herein shall be deemed in each case to be followed by the words "WITHOUT
LIMITATION." The phrase "MADE AVAILABLE" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "THE DATE OF THIS
AGREEMENT", "THE DATE HEREOF", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to March 12, 2000. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements specifically referred to herein
or delivered pursuant hereto, including the Exhibits, the Schedules, the Target
Disclosure Schedule and the Acquiror
55
61
Disclosure Schedule (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, except for the Non-Disclosure Agreement, which shall
continue in full force and effect, and shall survive any termination of this
Agreement or the Closing, in accordance with its terms and (b) are not intended
to confer upon any other person any rights or remedies hereunder, except as set
forth in Article I, Sections 5.12, 5.13, 5.15, 5.18 and Article VIII of this
Agreement.
9.5 Severability. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Remedies Cumulative. Except as otherwise provided herein, any and
all remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or equity
upon such party, and the exercise by a party of any one remedy will not preclude
the exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas without regard to applicable
principles of conflicts of law. Each of the parties hereto irrevocably consents
to the exclusive jurisdiction of any court located within the State of Texas, in
connection with any matter based upon or arising out of this Agreement or the
matters contemplated herein, agrees that process may be served upon them in any
manner authorized by the laws of the State of Texas for such persons and waives
and covenants not to assert or plead any objection which they might otherwise
have to such jurisdiction and such process.
9.8 Assignment; Amendment; Binding Effect. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. This Agreement may be amended after
the Effective Time only by the written agreement of Acquiror, Target and the
Stockholders' Agent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and permitted assigns.
9.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation, preparation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, Target, Acquiror and Merger Sub have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized, all as of the date first written above.
i2 TECHNOLOGIES, INC.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
SUPPLYBASE, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: President and Chief
Executive Officer
STARFISH MERGER CORP.
By: /s/ Xxxxxx X. Xxxxx
--------------------------------
Name: Xxxxxx X. Xxxxx
Title: Chief Executive Officer
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF REORGANIZATION]
