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EXHIBIT 10.31
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AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
among:
XXXXXXX.XXX, INC.,
a Delaware corporation;
MEDIBUY ACQUISITION CORPORATION,
a Utah corporation;
PARTNET, INC.,
a Utah corporation;
and
SHAREHOLDERS OF PARTNET, INC.
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Dated as of October 29,1999
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TABLE OF CONTENTS
PAGE
DEFINITIONS..................................................................................2
SECTION 1. DESCRIPTION OF TRANSACTION....................................................7
1.1 Merger of Merger Sub into the Company.........................................7
1.2 Effect of the Merger..........................................................7
1.3 Closing; Effective Time.......................................................7
1.4 Articles of Incorporation and Bylaws; Directors and Officers..................8
1.5 Conversion of Shares..........................................................8
1.6 Employee Stock Options........................................................9
1.7 Closing of the Company's Transfer Books.......................................9
1.8 Exchange of Certificates.....................................................10
1.9 Dissenting Shares............................................................11
1.10 Tax Consequences.............................................................11
1.11 Further Action...............................................................12
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................12
2.1 Due Organization; No Subsidiaries; Etc.......................................12
2.2 Articles of Incorporation and Bylaws; Records................................13
2.3 Capitalization, Etc..........................................................13
2.4 Financial Statements.........................................................14
2.5 Absence of Changes...........................................................14
2.6 Title to Assets..............................................................16
2.7 Bank Accounts; Receivables...................................................16
2.8 Equipment; Leasehold.........................................................17
2.9 Company Proprietary Assets...................................................17
2.10 Contracts....................................................................18
2.11 Liabilities..................................................................23
2.12 Compliance with Legal Requirements...........................................23
2.13 Governmental Authorizations..................................................23
2.14 Tax Matters..................................................................23
2.15 Employee and Labor Matters; Benefit Plans....................................25
2.16 Environmental Matters........................................................27
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TABLE OF CONTENTS
(CONTINUED)
PAGE
2.17 Insurance....................................................................27
2.18 Company Related Party Transactions...........................................28
2.19 Legal Proceedings; Orders....................................................28
2.20 Authority; Binding Nature of Agreement.......................................28
2.21 Non-Contravention; Consents..................................................29
2.22 Full Disclosure..............................................................30
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.....................30
3.1 Valid Issuance...............................................................30
3.2 Due Organization; Subsidiaries; Etc..........................................30
3.3 Certificate of Incorporation and Bylaws; Records.............................30
3.4 Capitalization, Etc..........................................................31
3.5 Financial Statements.........................................................31
3.6 Absence of Changes...........................................................32
3.7 Title to Assets..............................................................33
3.8 Liabilities..................................................................33
3.9 Compliance with Legal Requirements...........................................33
3.10 Legal Proceedings; Orders....................................................34
3.11 Authority; Binding Nature of Agreement.......................................34
3.12 Non-Contravention; Consents..................................................34
3.13 Equipment; Leasehold.........................................................35
3.14 Parent Proprietary Assets....................................................35
3.15 Contracts....................................................................36
3.16 Governmental Authorizations..................................................38
3.17 Tax Matters..................................................................38
3.18 Environmental Matters........................................................39
3.19 Shareholder Market Stand-Off Agreements......................................39
3.20 Insurance....................................................................40
3.21 Parent Related Party Transactions............................................40
3.22 Full Disclosure..............................................................40
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TABLE OF CONTENTS
(CONTINUED)
PAGE
SECTION 4. SHAREHOLDER REPRESENTATIONS; RELEASE.........................................40
4.1 Shareholder Representations..................................................40
4.2 Investment Representations...................................................41
4.3 Market Stand-Off Agreement...................................................42
4.4 Release......................................................................43
SECTION 5. CERTAIN COVENANTS OF THE PARTIES.............................................44
5.1 Filings and Consents.........................................................44
5.2 Notice Filing................................................................44
5.3 Company Shareholders' Consent................................................44
5.4 Public Announcements.........................................................44
5.5 Best Efforts.................................................................44
5.6 Employment and Noncompetition Agreements.....................................44
5.7 [Intentionally Omitted]......................................................44
5.8 Termination of Employee Plans................................................44
5.9 FIRPTA Matters...............................................................45
5.10 Company Location.............................................................45
5.11 Retention of Company Employees...............................................45
5.12 Allocation for Future Stock Options..........................................45
5.13 Access and Investigation.....................................................45
5.14 Operation of the Company's Business..........................................46
5.15 Operation of Parent's Business...............................................47
5.16 Notification; Updates to Company Disclosure Schedule.........................48
5.17 No Company Negotiation.......................................................49
5.18 No Parent Negotiation........................................................49
SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB................50
6.1 Accuracy of Representations..................................................50
6.2 Performance of Covenants.....................................................50
6.3 Consents.....................................................................50
6.4 Shareholder Approval.........................................................50
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TABLE OF CONTENTS
(CONTINUED)
PAGE
6.5 Agreements and Documents.....................................................50
6.6 No Restraints................................................................51
6.7 No Legal Proceedings.........................................................51
6.8 Employees....................................................................51
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY...........................51
7.1 Accuracy of Representations..................................................51
7.2 Performance of Covenants.....................................................51
7.3 Legal Opinion................................................................51
7.4 No Restraints................................................................52
7.5 No Legal Proceedings.........................................................52
7.6 Consents.....................................................................52
SECTION 8. TERMINATION..................................................................52
8.1 Termination Events...........................................................52
8.2 Termination Procedures.......................................................53
8.3 Effect of Termination........................................................53
8.4 Survival of Certain Covenants................................................53
SECTION 9. INDEMNIFICATION, ETC.........................................................53
9.1 Survival of Representations, Etc.............................................53
9.2 Indemnification by Shareholders..............................................54
9.3 Indemnification by Parent....................................................55
9.4 Limited Remedies.............................................................55
9.5 Satisfaction of Indemnification Claims.......................................55
9.6 No Contribution..............................................................56
9.7 Threshold....................................................................56
9.8 Defense of Third Party Claims................................................56
9.9 Exercise of Remedies by Indemnitees Other Than Parent or Shareholders........58
SECTION 10. MISCELLANEOUS PROVISIONS.....................................................58
10.1 Shareholders' Agent..........................................................58
10.2 Further Assurances...........................................................59
10.3 Fees and Expenses............................................................59
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TABLE OF CONTENTS
(CONTINUED)
PAGE
10.4 Attorneys' Fees..............................................................59
10.5 Notices......................................................................59
10.6 Confidentiality..............................................................60
10.7 Time of the Essence..........................................................61
10.8 Headings.....................................................................61
10.9 Counterparts.................................................................61
10.10 Governing Law................................................................61
10.11 Successors and Assigns.......................................................61
10.12 Remedies Cumulative; Specific Performance....................................61
10.13 Waiver.......................................................................61
10.14 Amendments...................................................................62
10.15 Severability.................................................................62
10.16 Parties in Interest..........................................................62
10.17 Entire Agreement.............................................................62
10.18 Construction.................................................................62
Exhibit A - Shareholders
Exhibit B - Form of Amended and Restated Articles of Incorporation of
Surviving Corporation
Exhibit C - Directors and officers of Surviving Corporation
Exhibit D - Escrow Agreement
Exhibit E - Persons to sign Employment and Noncompetition Agreements
Exhibit F - Form of legal opinion of Xxxxxxx Xxxxx & Xxxxx LLP
Exhibit G - Form of legal opinion of Cooley Godward LLP
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Table of Contents/Authorities.
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AGREEMENT AND PLAN
OF
MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION ("Agreement") is
made and entered into as of October 29, 1999, by and among: XXXXXXX.XXX, INC., a
Delaware corporation ("Parent"); MEDIBUY ACQUISITION CORPORATION, a Utah
corporation and a wholly owned subsidiary of Parent ("Merger Sub"); PARTNET,
INC. a Utah corporation (the "Company"); and the parties identified on EXHIBIT A
(the "Shareholders"). Certain other capitalized terms used in this Agreement are
defined in the Section titled "Definitions."
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger of
Merger Sub into the Company in accordance with this Agreement and the URBCA (the
"Merger"). Upon consummation of the Merger, Merger Sub will cease to exist, and
the Company will become a wholly owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. This Agreement has been approved by the respective boards of
directors of Parent, Merger Sub and the Company, and by the shareholders of
Merger Sub and the Company.
D. The Shareholders own a total of 109,569 shares of the common stock,
$.01 par value, of the Company ("Company Common Stock").
DEFINITIONS
For purposes of the Agreement the following terms shall have the
meanings specified below:
AGREEMENT. "Agreement" shall mean this Agreement and Plan of Merger and
Reorganization (including the Company Disclosure Schedule and the Parent
Disclosure Schedule), as it may be amended from time to time.
ASSOCIATED PARTIES. "Associated Parties," when used herein with respect
to a Shareholder, shall mean and include: (i) such Shareholder's predecessors,
successors, executors, administrators, heirs and estate; (ii) such Shareholder's
past, present and future assigns, agents and representatives; (iii) each entity
that such Shareholder has the power to bind (by such Shareholder's acts or
signature) or over which such Shareholder directly or indirectly exercises
control; and (iv) each entity of which such Shareholder owns, directly or
indirectly, at least 50% of the outstanding equity, beneficial, proprietary,
ownership or voting interests.
CLOSING CERTIFICATE. "Closing Certificate" shall have the meaning
ascribed thereto in Section 6.5.
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COMPANY ACQUISITION TRANSACTION. "Company Acquisition Transaction" shall
mean any transaction involving:
(a) the sale, lease, license, disposition or acquisition of all or a
material portion of the Company's business or assets;
(b) the issuance, disposition or acquisition of (i) any capital
stock or other equity security of the Company (other than common stock issued to
employees of the Company, upon exercise of Company Options or otherwise, in
routine transactions in accordance with the Company's past practices), (ii) any
option, call, warrant or right (whether or not immediately exercisable) to
acquire any capital stock or other equity security of the Company (other than
stock options granted to employees of the Company in routine transactions in
accordance with the Company's past practices), or (iii) any security, instrument
or obligation that is or may become convertible into or exchangeable for any
capital stock or other equity security of the Company; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the Company.
COMPANY COMMON STOCK. "Company Common Stock" shall have the meaning
ascribed thereto in Recital D of this Agreement.
COMPANY CONTRACT. "Company Contract" shall mean any Contract: (a) to
which the Company is a party; (b) by which the Company or any of its assets is
or may become bound or under which the Company has, or may become subject to,
any obligation; or (c) under which the Company has or may acquire any right or
interest.
COMPANY DISCLOSURE SCHEDULE. "Company Disclosure Schedule" shall mean
the schedule (dated as of the date of the Agreement) delivered to Parent on
behalf of the Company.
COMPANY MATERIAL ADVERSE EFFECT. A matter will be deemed to have a
"Company Material Adverse Effect" if such matter would have a material adverse
effect on the Company's business, condition, assets, liabilities, operations,
financial performance or prospects, taken as a whole.
COMPANY MATERIAL CONTRACT. "Company Material Contract" shall have the
meaning ascribed thereto in Section 2.10(a).
COMPANY OPTION. "Company Option" shall have the meaning ascribed thereto
in Section 1.6.
COMPANY PLAN. "Company Plan" shall have the meaning ascribed thereto
under Section 1.6
COMPANY PROPRIETARY ASSET. "Company Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to the Company or otherwise used by the
Company.
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COMPANY RELATED PARTY. "Company Related Party" shall have the meaning
ascribed thereto in Section 2.18.
COMPANY RETURNS. "Company Returns" shall have the meaning ascribed
thereto in Section 2.14.
CONSENT. "Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
CONTRACT. "Contract" shall mean any written or oral agreement, contract,
subcontract, lease, understanding, instrument, note, warranty, insurance policy,
benefit plan or legally binding commitment.
DAMAGES. "Damages" shall include any loss, damage, injury, decline in
value, lost opportunity, liability, claim, demand, settlement, judgment, award,
fine, penalty, Tax, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature.
ENCUMBRANCE. "Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, claim, infringement, option,
right of first refusal, preemptive right, community property interest or
restriction of any nature (including any restriction on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset, any restriction
on the use of any asset and any restriction on the possession, exercise or
transfer of any other attribute of ownership of any asset).
EFFECTIVE TIME. "Effective Time" shall have the meaning ascribed thereto
in Section 1.3.
EMPLOYEE. "Employee" shall have the meaning ascribed therein in Section
2.15(a).
ENTITY. "Entity" shall mean any corporation (including any non-profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, company (including any limited
liability company or joint stock company), firm or other enterprise,
association, organization or entity.
ENVIRONMENTAL LAW. "Environmental Law" shall mean any federal, state,
local or foreign Legal Requirement relating to pollution or protection of human
health or the environment (including ambient air, surface water, ground water,
land surface or subsurface strata), including any law or regulation relating to
emissions, discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern.
EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
EXCHANGE RATIO. "Exchange Ratio" shall have the meaning ascribed thereto
in Section 1.5(a)(iii).
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GOVERNMENT BID. "Government Bid" shall mean any quotation, bid or
proposal submitted to any Governmental Body or any proposed prime contractor or
higher-tier subcontractor of any Governmental Body.
GOVERNMENT CONTRACT. "Government Contract" shall mean any prime
contract, subcontract, letter contract, purchase order or delivery order
executed or submitted to or on behalf of any Governmental Body or any prime
contractor or higher-tier subcontractor, or under which any Governmental Body or
any such prime contractor or subcontractor otherwise has or may acquire any
right or interest.
GOVERNMENTAL AUTHORIZATION. "Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, permission, clearance,
registration, qualification or authorization issued, granted, given or otherwise
made available by or under the authority of any Governmental Body or pursuant to
any Legal Requirement; or (b) right under any Contract with any Governmental
Body.
GOVERNMENTAL BODY. "Governmental Body" shall mean any: (a) nation,
state, commonwealth, province, territory, county, municipality, district or
other jurisdiction of any nature; (b) federal, state, local, municipal, foreign
or other government; or (c) governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, body or Entity and any court or other tribunal).
INDEMNITOR. "Indemnitor" shall mean either Parent or the Shareholders,
as the case may be, which Person or Persons are required to hold harmless,
indemnify, compensate or reimburse the Shareholder Indemnitees or Parent
Indemnitees, as applicable, pursuant to Section 9.
KNOWLEDGE. An individual will be deemed to have "Knowledge" of a
particular fact or other matter if such individual is actually aware of such
fact or other matter. A Person (other than an individual) will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving, or who has at any time served, as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has, or at any
time had, actual knowledge of such fact or matter. Further, "Knowledge" of the
Company will be deemed to include Knowledge of Xxx Xxxxx, Xxxxxx Xxxxx and
Xxxxxx Xxxxxx.
LEGAL PROCEEDING. "Legal Proceeding" shall mean any action, suit,
litigation, arbitration, proceeding (including any civil, criminal,
administrative, investigative or appellate proceeding), hearing, inquiry, audit,
examination or investigation commenced, brought, conducted or heard by or
before, or otherwise involving, any court or other Governmental Body or any
arbitrator or arbitration panel.
LEGAL REQUIREMENT. "Legal Requirement" shall mean any federal, state,
local, municipal, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Body.
MATERIALS OF ENVIRONMENTAL CONCERN. "Materials of Environmental Concern"
include chemicals, pollutants, contaminants, wastes, toxic substances, petroleum
and petroleum products
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and any other substance that is now or hereafter regulated by any Environmental
Law or that is otherwise a danger to health, reproduction or the environment.
PARENT ACQUISITION TRANSACTION. "Parent Acquisition Transaction" shall
mean any transaction involving:
(a) the purchase, lease, license or acquisition of all or a material
portion of the business or assets of any Person that markets and sells
technology that is substantially similar to and competitive with the Company's
technology ("Company Competitor");
(b) the purchase or acquisition of (i) any capital stock or other
equity security of any Company Competitor, (ii) any option, call, warrant or
right (whether or not immediately exercisable) to acquire any capital stock or
other equity security of any Company Competitor, or (iii) any security,
instrument or obligation that is or may become convertible into or exchangeable
for any capital stock or other equity security of any Company Competitor; or
(c) any merger, consolidation, business combination, reorganization
or similar transaction involving the acquisition by Parent of a Company
Competitor.
PARENT COMMON STOCK. "Parent Common Stock" shall mean the common stock,
$.001 par value, of Parent.
PARENT CONTRACT: "Parent Contract" shall mean any Contract: (a) to which
Parent is a party; (b) by which Parent or any of its assets is or may become
bound or under Parent has, or may become subject to, any obligation; or (c)
under which Parent has or may acquire any right or interest.
PARENT DISCLOSURE SCHEDULE. "Parent Disclosure Schedule" shall mean the
schedule (dated as of the date of the Agreement) delivered to the Company on
behalf of Parent and Merger Sub.
PARENT INDEMNITEES. "Parent Indemnitees" shall mean the following
Persons: (a) Parent and (b) the successors and assigns of Parent; provided,
however, that no Shareholder shall be deemed to be a "Parent Indemnitee."
PARENT MATERIAL ADVERSE EFFECT. A matter will be deemed to have a
"Parent Material Adverse Effect" if such matter would have a material adverse
effect on Parent's business, condition, assets, liabilities, operations,
financial performance or prospects, taken as a whole.
PARENT MATERIAL CONTRACT. "Parent Material Contract" shall have the
meaning ascribed thereto in Section 3.15(a).
PARENT OPTION. "Parent Option" shall have the meaning ascribed thereto
in Section 3.6(d).
PARENT PREFERRED STOCK. "Parent Preferred Stock" shall have the meaning
ascribed thereto in Section 3.4(a).
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PARENT PROPRIETARY ASSET: "Parent Proprietary Asset" shall mean any
Proprietary Asset owned by or licensed to Parent or otherwise used by Parent.
PARENT RETURNS. "Parent Returns" shall have the meaning ascribed thereto
in Section 3.17.
PARENT SUBSTITUTED OPTION. "Parent Substituted Option" shall have the
meaning ascribed thereto in Section 1.6.
PERSON. "Person" shall mean any individual, Entity or Governmental Body.
PROPRIETARY ASSET. "Proprietary Asset" shall mean any: (a) patent,
patent application, trademark (whether registered or unregistered), trademark
application, trade name, fictitious business name, service xxxx (whether
registered or unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork, maskwork
application, trade secret, know-how, customer list, franchise, system, computer
software, computer program, invention, design, blueprint, engineering drawing,
proprietary product, technology, proprietary right or other intellectual
property right or intangible asset; or (b) right to use or exploit any of the
foregoing.
RELEASEES. "Releasees" shall mean and include: (i) Parent; (ii) the
Company; (iii) each of the direct and indirect subsidiaries of Parent and the
Company; (iv) each other affiliate of Parent and the Company; and (v) the
successors and past, present and future assigns, directors, officers, employees,
agents and representatives of the respective entities identified or otherwise
referred to in clauses "(i)" through "(iv)" of this sentence, other than the
Shareholders.
RELEASED CLAIMS. "Released Claims" shall mean and include each and every
Shareholder Claim that (i) any Shareholder or any Associated Party of any
Shareholder may have had in the past, may now have or may have in the future
against any of the Releasees, and (ii) has arisen or arises directly or
indirectly out of, or relates directly or indirectly to, any circumstance,
agreement, activity, action, omission, event or matter occurring or existing on
or prior to the date of this Agreement (excluding only such Shareholder's rights
or claims, if any, arising from or relating to (x) this Merger Agreement, (y)
any agreement entered in connection with the Merger; or (z) laws applicable to
this Merger Agreement, or any agreement entered into in connection with the
Merger, or the transactions contemplated thereby, including, but not limited to,
applicable securities laws and regulations.
REPRESENTATIVES. "Representatives" shall mean officers, directors,
employees, agents, attorneys, accountants, advisors and representatives.
SEC. "SEC" shall mean the United States Securities and Exchange
Commission.
SECURITIES ACT. "Securities Act" shall mean the Securities Act of 1933,
as amended.
SHAREHOLDER CLAIMS. "Shareholder Claims" shall mean and include all
past, present and future disputes, claims, controversies, demands, rights,
obligations, liabilities, actions and causes of action of every kind and nature,
including, without limitation: (i) any unknown, unsuspected or undisclosed
claim; (ii) any claim or right that may be asserted or exercised by a
Shareholder in
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such Shareholder's capacity as a shareholder, director, officer or employee of
the Company or in any other capacity; (iii) any claim, right or cause of action
based upon any breach of any express, implied, oral or written contract or
agreement; and (iv) any claim, right or cause of action arising in connection
with any acquisition of Company securities from the Company or the sale,
transfer or assignment of any Company securities to the Company.
SHAREHOLDERS' AGENT. "Shareholders' Agent" shall have the meaning
ascribed thereto in Section 10.1.
SHAREHOLDER INDEMNITEES. "Shareholder Indemnitees" shall mean the
following Persons: (a) the Shareholders; and (b) the respective successors and
assigns of the Shareholders.
SHAREHOLDERS INDEMNITY SHARES. "Shareholders Indemnity Shares" shall
have the meaning ascribed thereto in Section 1.8(b).
TAX. "Tax" shall mean any tax (including any income tax, franchise tax,
capital gains tax, gross receipts tax, value-added tax, surtax, excise tax, ad
valorem tax, transfer tax, stamp tax, sales tax, use tax, property tax, business
tax, withholding tax or payroll tax), levy, assessment, tariff, duty (including
any customs duty), deficiency or fee, and any related charge or amount
(including any fine, penalty or interest), imposed, assessed or collected by or
under the authority of any Governmental Body.
TAX RETURN. "Tax Return" shall mean any return (including any
information return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information filed
with or submitted to, or required to be filed with or submitted to, any
Governmental Body in connection with the determination, assessment, collection
or payment of any Tax or in connection with the administration, implementation
or enforcement of or compliance with any Legal Requirement relating to any Tax.
URBCA. "URBCA" shall mean the Utah Revised Business Corporation Act.
AGREEMENT
The parties to this Agreement agree as follows:
SECTION 1. DESCRIPTION OF TRANSACTION
1.1 MERGER OF MERGER SUB INTO THE COMPANY. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time (as defined in
Section 1.3), Merger Sub shall be merged with and into the Company, and the
separate existence of Merger Sub shall cease. The Company will continue as the
surviving corporation in the Merger (the "Surviving Corporation").
1.2 EFFECT OF THE MERGER. The Merger shall have the effects set forth in
this Agreement and in the applicable provisions of the URBCA.
1.3 CLOSING; EFFECTIVE TIME. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Xxxxxx Godward LLP, 4365
7.
00
Xxxxxxxxx Xxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx
00000-0000 at 10:00 a.m. on November ___, 1999 or such other date and time as
the parties hereto may agree (the "Closing Date"). Contemporaneously with or as
promptly as practicable after the Closing, properly executed articles of merger
conforming to the requirements of Section 16-10a-1105 of the URBCA shall be
filed with the Utah Department of Commerce, Division of Corporations and
Commercial Code. The Merger shall become effective at the time such agreement of
merger is filed with and accepted by the Utah Department of Commerce, Division
of Corporations and Commercial Code (the "Effective Time").
1.4 ARTICLES OF INCORPORATION AND BYLAWS; DIRECTORS AND OFFICERS. Unless
otherwise determined by Parent and the Company prior to the Effective Time:
(a) the Articles of Incorporation of the Surviving Corporation shall
be amended and restated as of the Effective Time to conform to EXHIBIT B;
(b) the Bylaws of the Surviving Corporation shall be amended and
restated as of the Effective Time to conform to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the individuals identified on
EXHIBIT C.
1.5 CONVERSION OF SHARES.
(a) Subject to Sections 1.8(d) and 1.9, at the Effective Time, by
virtue of the Merger and without any further action on the part of Parent,
Merger Sub, the Company or any shareholder of the Company:
(i) each share of Company Common Stock outstanding immediately
prior to the Effective Time shall be converted into the right to receive: (A)
one share of Parent Common Stock multiplied by (B) the Exchange Ratio; and
(ii) each share of the common stock, no par value, of Merger Sub
outstanding immediately prior to the Effective Time shall be converted into one
share of common stock of the Surviving Corporation.
(iii) the term "Exchange Ratio" shall mean a fraction equal to
(A) 875,000 divided by (B) the sum of (1) the total number of outstanding shares
of Company Common Stock, and (2) the total number of shares of Company Common
Stock which are issuable upon exercise of all Company Options outstanding
immediately prior to the Effective Time.
(b) If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option,
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risk of forfeiture or other condition, and the certificates representing such
shares of Parent Common Stock may accordingly be marked with appropriate
legends.
(c) A total of 775,000 of the shares of Parent Common Stock issuable
with respect to Company Common Stock under Section 1.5(a)(i) above shall be
either subject to Parent Substituted Options granted pursuant to Section 1.6 or
delivered to the Shareholders in accordance with Section 1.8(a) below, and
100,000 of such shares of Parent Common Stock shall be delivered to the Escrow
Agent in accordance with Section 1.8(b) below.
1.6 EMPLOYEE STOCK OPTIONS. At the Effective Time, each stock option
that is then outstanding under the Company's 1995 Stock Option Plan (the
"Company Plan"), whether vested or unvested (a "Company Option"), shall be
substituted by Parent with a stock option under Parent's 1999 Omnibus Equity
Plan (or an equivalent plan) (the "Parent Plan") with a term, exercisability and
vesting schedule equivalent to such Company Option and with all other terms in
accordance with the Parent Plan and as set forth in this Section 1.6 (a "Parent
Substituted Option"). Accordingly, from and after the Effective Time, (a) each
Parent Substituted Option substituted for a Company Option may be exercised
solely for shares of Parent Common Stock, (b) the number of shares of Parent
Common Stock subject to each Parent Substituted Option shall be equal to the
number of shares of Company Common Stock that were subject to such Company
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock, (c)
the per share exercise price for the Parent Common Stock issuable upon exercise
of each Parent Substituted Option shall be determined by dividing the exercise
price per share of Company Common Stock subject to such substituted Company
Option, as in effect immediately prior to the Effective Time, by the Exchange
Ratio, and rounding the resulting exercise price up to the nearest whole cent,
and (d) the Parent Substituted Option shall contain all restrictions on the
exercise of each such substituted Company Option, which shall continue in full
force and effect; provided, however, that each such Parent Substituted Option
shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction effected by Parent after the
Effective Time. The Company and Parent shall take all action that may be
necessary (under the Company Plan, the option agreements thereunder and
otherwise) to effectuate the provisions of this Section 1.6. Following the
Closing, Parent will send to each holder of a substituted Company Option a Stock
Option Grant Notice and Stock Option Agreement under the Parent Plan reflecting
the terms of the Parent Substituted Option for execution by such holder.
1.7 CLOSING OF THE COMPANY'S TRANSFER BOOKS. At the Effective Time,
holders of certificates representing shares of the Company's capital stock that
were outstanding immediately prior to the Effective Time shall cease to have any
rights as shareholders of the Company, and the stock transfer books of the
Company shall be closed with respect to all shares of such capital stock
outstanding immediately prior to the Effective Time. No further transfer of any
such shares of the Company's capital stock shall be made on such stock transfer
books after the Effective Time. If, after the Effective Time, a valid
certificate previously representing any of such shares of the Company's capital
stock (a "Company Stock Certificate") is presented to the Surviving Corporation
or Parent, such Company Stock Certificate shall be canceled and shall be
exchanged as provided in Section 1.8.
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1.8 EXCHANGE OF CERTIFICATES.
(a) Subject to Section 1.8(b), at or as soon as practicable after
the Effective Time, the holders of Company Common Stock shall be entitled to
certificates representing Parent Common Stock as calculated pursuant to Section
1.5(a)(i). Parent will send to the holders of Company Stock Certificates (i) a
letter of transmittal in customary form and containing such provisions as Parent
may reasonably specify and (ii) instructions for use in effecting the surrender
of Company Stock Certificates in exchange for certificates representing Parent
Common Stock. Upon surrender of a Company Stock Certificate to Parent for
exchange, together with a duly executed letter of transmittal and such other
documents as may be reasonably required by Parent, the holder of such Company
Stock Certificate shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of Parent Common Stock that
such holder has the right to receive pursuant to the provisions of this Section
1, and the Company Stock Certificate so surrendered shall be canceled. Until
surrendered as contemplated by this Section 1.8, each Company Stock Certificate
shall be deemed, from and after the Effective Time, to represent only the right
to receive upon such surrender a certificate representing shares of Parent
Common Stock (and cash in lieu of any fractional share of Parent Common Stock)
as contemplated by this Section 1. If any Company Stock Certificate shall have
been lost, stolen or destroyed, Parent may, in its discretion and as a condition
precedent to the issuance of any certificate representing Parent Common Stock,
require the owner of such lost, stolen or destroyed Company Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such sum as Parent
may reasonably direct) as indemnity against any claim that may be made against
Parent or the Surviving Corporation with respect to such Company Stock
Certificate.
(b) At or as soon as practical after the Effective Time, Parent
shall deposit certificates representing 100,000 shares of the Parent Common
Stock issuable to the holders of Company Common Stock in the Merger into an
escrow (the "Shareholders Indemnity Shares") administered by a third party
escrow agent selected by Parent and reasonably acceptable to the Company (the
"Escrow Agent") and which shall be held subject to the terms and conditions set
forth in the Escrow Agreement of even date herewith between Parent, the Company,
the Escrow Agent and the Shareholders (the "Escrow Agreement") attached hereto
as EXHIBIT D. Upon release from the escrow under the Escrow Agreement, the
Shareholders Indemnity Shares shall be distributed to the Shareholders in
accordance with the Escrow Agreement.
(c) No dividends or other distributions declared or made with
respect to Parent Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Company Stock Certificate with
respect to the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of any fractional share shall be paid to any such holder, until
such holder surrenders such Company Stock Certificate in accordance with this
Section 1.8 (at which time such holder shall be entitled to receive all such
dividends and distributions and such cash payment).
(d) No fractional shares of Parent Common Stock shall be issued in
connection with the Merger, and no certificates for any such fractional shares
shall be issued. In lieu of such fractional shares, any holder of capital stock
of the Company who would otherwise be entitled to receive a fraction of a share
of Parent Common Stock (after aggregating all
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fractional shares of Parent Common Stock issuable to such holder) shall, upon
surrender of such holder's Company Stock Certificate(s), be paid in cash the
dollar amount (rounded to the nearest whole cent), without interest, determined
by multiplying such fraction by the fair market value per share of the Parent
Common Stock as of the Effective Time, as determined in good faith by Parent's
board of directors.
(e) Parent and the Surviving Corporation shall be entitled to deduct
and withhold from any consideration payable or otherwise deliverable to any
holder or former holder of capital stock of the Company pursuant to this
Agreement such amounts as Parent or the Surviving Corporation may be required to
deduct or withhold therefrom under the Code or under any provision of state,
local or foreign tax law. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
(f) Neither Parent nor the Surviving Corporation shall be liable to
any holder or former holder of capital stock of the Company for any shares of
Parent Common Stock (or dividends or distributions with respect thereto), or for
any cash amounts, delivered to any public official pursuant to any applicable
abandoned property, escheat or similar law.
1.9 DISSENTING SHARES.
(a) Notwithstanding anything to the contrary contained in this
Agreement, any shares of capital stock of the Company that, as of the Effective
Time, are or may become subject to a Company shareholder's exercise of his, her
or its right to dissent pursuant to Section 16-10a-1302 of the URBCA, shall not
be converted into or represent the right to receive Parent Common Stock in
accordance with Section 1.5 (or cash in lieu of fractional shares in accordance
with Section 1.8(d)), and the dissenting holder or holders of such shares shall
be entitled only to such rights as may be granted to such holder or holders
under Section 16-10a-1302 of the URBCA; provided, however, that if the status of
any such shareholder as a dissenter shall not be perfected, or if any such
shareholder shall lose his, her or its status as a dissenter, then, as of the
later of the Effective Time or the time of the failure to perfect such status or
the loss of such status, the shares held by such shareholder shall automatically
be converted into and shall represent only the right to receive (upon the
surrender of the certificate or certificates representing such shares) Parent
Common Stock in accordance with Section 1.5 (and cash in lieu of fractional
shares in accordance with Section 1.8(c)).
(b) The Company shall give Parent (i) prompt notice of any written
demand received by the Company prior to the Effective Time to require the
Company to purchase shares of capital stock of the Company pursuant to Section
16-10a-1302 of the URBCA and of any other demand, notice or instrument delivered
to the Company prior to the Effective Time pursuant to the URBCA, and (ii) the
opportunity to participate in all negotiations and proceedings with respect to
any such demand, notice or instrument. The Company shall not make any payment or
settlement offer prior to the Effective Time with respect to any such demand
unless Parent shall have consented in writing to such payment or settlement
offer.
1.10 TAX CONSEQUENCES. For federal income tax purposes, the Merger is
intended to constitute a reorganization within the meaning of Section 368 of the
Code. The parties to this
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Agreement hereby adopt this Agreement as a "plan of reorganization" within the
meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States Treasury
Regulations.
1.11 FURTHER ACTION. If, at any time after the Effective Time, any
further action is determined by Parent to be necessary or desirable to carry out
the purposes of this Agreement or to vest the Surviving Corporation or Parent
with full right, title and possession of and to all rights and property of
Merger Sub and the Company, the officers and directors of the Surviving
Corporation and Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants, to and for the benefit of the
Parent Indemnitees, as follows:
2.1 DUE ORGANIZATION; NO SUBSIDIARIES; ETC.
(a) The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Utah and has all necessary
power and authority: (i) to conduct its business in the manner in which its
business is currently being conducted and (ii) to own and use its assets in the
manner in which its assets are currently owned and used.
(b) Except as set forth in Part 2.1(b) of the Company Disclosure
Schedule, the Company has not conducted any business under or otherwise used,
for any purpose or in any jurisdiction, any fictitious name, assumed name, trade
name or other name, other than the name "PartNET, Inc."
(c) The Company is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 2.1(c) of the
Company Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Company
Material Adverse Effect. The Company is in good standing as a foreign
corporation in each of the jurisdictions identified in Part 2.1(c) of the
Company Disclosure Schedule, except where the failure to be in good standing
would not have a Company Material Adverse Effect.
(d) Part 2.1(d) of the Company Disclosure Schedule accurately sets
forth (i) the names of the members of the Company's board of directors, (ii) the
names of the members of each committee of the Company's board of directors, and
(iii) the names and titles of the Company's officers.
(e) The Company does not own any controlling interest in any Entity
and, except for the equity interests identified in Part 2.1(e) of the Company
Disclosure Schedule, the Company has never owned, beneficially or otherwise, any
shares or other securities of, or any direct or indirect equity interest in, any
Entity. The Company has not agreed and is not obligated to make any future
investment in or capital contribution to any Entity. The Company has not
guaranteed and is not responsible or liable for any obligation of any of the
Entities in which it owns or has owned any equity interest.
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2.2 ARTICLES OF INCORPORATION AND BYLAWS; RECORDS. The Company has
delivered to Parent accurate and complete copies of: (1) the Company's articles
of incorporation and bylaws, including all amendments thereto; (2) the stock
records of the Company; and (3) except as set forth in Part 2.2 of the Company
Disclosure Schedule, the minutes and other records of the meetings and other
proceedings (including any actions taken by written consent or otherwise without
a meeting) of the shareholders of the Company, the board of directors of the
Company and all committees of the board of directors of the Company. There have
been no formal meetings or other proceedings of the shareholders of the Company,
the board of directors of the Company or any committee of the board of directors
of the Company that are not reflected in such minutes or other records. There
has not been any violation of any of the provisions of the Company's articles of
incorporation or bylaws, and the Company has not taken any action that is
inconsistent in any material respect with any resolution adopted by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors. The books of account, stock records, minute books
and other records of the Company are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
2.3 CAPITALIZATION, ETC.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of Common Stock, $.01 par value, of which 109,569 shares have
been issued and are outstanding as of the date of this Agreement. All of the
outstanding shares of Company Common Stock have been duly authorized and validly
issued, and are fully paid and non-assessable. Part 2.3(a) of the Company
Disclosure Schedule provides an accurate and complete description of the terms
of each repurchase option which is held by the Company and to which any of such
shares is subject.
(b) Except as set forth in Part 2.3(b) of the Company Disclosure
Schedule, there is no: (i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any shares of the
capital stock or other securities of the Company; (ii) outstanding security,
instrument or obligation that is or may become convertible into or exchangeable
for any shares of the capital stock or other securities of the Company; (iii)
Contract under which the Company is or may become obligated to sell or otherwise
issue any shares of its capital stock or any other securities; or (iv) to the
Knowledge of the Company, condition or circumstance that may give rise to or
provide a basis for the assertion of a claim by any Person to the effect that
such Person is entitled to acquire or receive any shares of capital stock or
other securities of the Company.
(c) All outstanding shares of Company Common Stock have been issued
and granted in compliance with (i) all applicable securities laws and other
applicable Legal Requirements, and (ii) all requirements set forth in applicable
Contracts.
(d) Except as set forth in Part 2.3(d) of the Company Disclosure
Schedule, the Company has never repurchased, redeemed or otherwise reacquired
any shares of capital stock or other securities of the Company. All securities
so reacquired by the Company were reacquired in compliance with (i) the
applicable provisions of the URBCA and all other applicable Legal Requirements,
and (ii) all requirements set forth in applicable restricted stock purchase
agreements and other applicable Contracts.
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2.4 FINANCIAL STATEMENTS.
(a) The Company has delivered to Parent the following financial
statements and notes (collectively, the "Company Financial Statements"):
(i) The unaudited balance sheets of the Company as of March 31,
1999, 1998 and 1997, and the related unaudited income statements, statements of
shareholders' equity and statements of cash flows of the Company for the years
then ended, together with the notes thereto; and
(ii) the unaudited balance sheet of the Company for the interim
period as of September 30, 1999 (the "Company Unaudited Interim Balance Sheet"),
and the related unaudited income statement of the Company as of September 30,
1999 (the "Company Balance Sheet Date").
(b) The Company Financial Statements are accurate in all material
respects and present fairly the financial position of the Company as of the
respective dates thereof and the results of operations and (in the case of the
financial statements referred to in Section 2.4(a)(i)) cash flows of the Company
for the periods covered thereby. The Company Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered (except that the financial
statements do not contain footnotes and the financial statements referred to in
Section 2.4(b)(ii) are subject to normal and recurring year-end audit
adjustments, which will not, individually or in the aggregate, be material in
magnitude).
2.5 ABSENCE OF CHANGES. Except as set forth in Part 2.5 of the Company
Disclosure Schedule, since the Company Balance Sheet Date:
(a) there has not been any material adverse change in the Company's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the Knowledge of the Company, no event has occurred that
will, or could reasonably be expected to, have a Company Material Adverse
Effect;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the Company's material assets
(whether or not covered by insurance);
(c) the Company has not declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of capital
stock, and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(d) the Company has not sold, issued or authorized the issuance of
(i) any capital stock or other security (except for Company Common Stock issued
upon the exercise of outstanding Company Options), (ii) any option or right to
acquire any capital stock or any other security (except for Company Options
described in Part 2.3(b) of the Company Disclosure Schedule), or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
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(e) the Company has not amended or waived any of its rights under,
or permitted the acceleration of vesting under, (i) any provision of any
agreement evidencing any outstanding Company Option or (ii) any restricted stock
purchase agreement;
(f) there has been no amendment to the Company's articles of
incorporation or bylaws, and the Company has not effected or been a party to any
Company Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(g) the Company has not formed any subsidiary or acquired any equity
interest or other interest in any other Entity;
(h) the Company has not made any capital expenditure which, when
added to all other capital expenditures made on behalf of the Company since the
Company Balance Sheet Date, exceeds $25,000;
(i) the Company has not (i) entered into or permitted any of the
assets owned or used by it to become bound by any Contract that is or would
constitute a Company Material Contract, or (ii) amended or prematurely
terminated, or waived any material right or remedy under, any such Company
Material Contract;
(j) the Company has not (i) acquired, leased or licensed any right
or other asset from any other Person, (ii) sold or otherwise disposed of, or
leased or licensed, any right or other asset to any other Person, or (iii)
waived or relinquished any right, except for immaterial rights or other
immaterial assets acquired, leased, licensed or disposed of in the ordinary
course of business and consistent with the Company's past practices;
(k) the Company has not written off as uncollectible, or established
any extraordinary reserve with respect to, any account receivable or other
indebtedness in excess of the bad debt reserve on the Company Financial
Statements;
(l) the Company has not made any pledge of any of its assets or
otherwise permitted any of its assets to become subject to any Encumbrance,
except for pledges of immaterial assets made in the ordinary course of business
and consistent with the Company's past practices;
(m) the Company has not (i) lent money to any Person (other than
pursuant to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money in
excess of $25,000 in the aggregate;
(n) the Company has not (i) established or adopted any Employee
Benefit Plan, (ii) paid any bonus or made any profit-sharing or similar payment
to, or increased the amount of the wages, salary, commissions, fringe benefits
or other compensation or remuneration payable to, any of its directors, officers
or employees other than in accordance with the Company's past practices, or
(iii) hired any new employee;
(o) the Company has not changed any of its methods of accounting or
accounting practices in any material respect;
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(p) the Company has not made any material Tax election;
(q) the Company has not commenced or settled any material Legal
Proceeding;
(r) the Company has not entered into any material transaction or
taken any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(s) the Company has not agreed or committed to take any of the
actions referred to in clauses "(c)" through "(r)" above.
2.6 TITLE TO ASSETS
(a) The Company owns, and has good, valid and marketable title to,
all assets purported to be owned by it (other than Company Proprietary Assets,
as to which representations and warranties are set forth in Section 2.9),
including: (i) all assets reflected on the Company Unaudited Interim Balance
Sheet; (ii) all assets referred to in Parts 2.1 and 2.7(b) of the Company
Disclosure Schedule and all of the Company's rights under the Contracts
identified in Part 2.10 of the Company Disclosure Schedule; and (iii) all other
assets reflected in the Company's books and records as being owned by the
Company. Except as set forth in Part 2.6 of the Company Disclosure Schedule, all
of said assets are owned by the Company free and clear of any liens or other
Encumbrances, except for (x) any lien for current taxes not yet due and payable,
and (y) minor liens that have arisen in the ordinary course of business and that
do not (in any case or in the aggregate) materially detract from the value of
the assets subject thereto or materially impair the operations of the Company.
(b) Part 2.6 of the Company Disclosure Schedule identifies all
assets that are material to the business of the Company (other than Company
Proprietary Assets, which are identified pursuant to Section 2.9 and in Part 2.9
of the Company Disclosure Schedule) and that are being leased or licensed to the
Company.
2.7 BANK ACCOUNTS; RECEIVABLES.
(a) Part 2.7(a) of the Company Disclosure Schedule provides accurate
information with respect to each account maintained by or for the benefit of the
Company at any bank or other financial institution.
(b) Part 2.7(b) of the Company Disclosure Schedule provides an
accurate and complete breakdown and aging of all accounts receivable, notes
receivable and other receivables of the Company as of September 30, 1999. Except
as set forth in Part 2.7(b) of the Company Disclosure Schedule, all existing
accounts receivable of the Company (including those accounts receivable
reflected on the Company Unaudited Interim Balance Sheet that have not yet been
collected and those accounts receivable that have arisen since September 30,
1999 and have not yet been collected) (i) represent valid obligations of
customers of the Company arising from bona fide transactions entered into in the
ordinary course of business, and (ii) are current and will be collected in full
when due, without any counterclaim or set off (net of an allowance for doubtful
accounts not to exceed $10,000 in the aggregate).
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2.8 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to the Company are adequate for the uses to which they are being
put, are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of the Company's business in the manner in which such
business is currently being conducted.
(b) The Company does not own any real property or any interest in
real property, except for the leasehold created under the real property lease
identified in Part 2.10 of the Company Disclosure Schedule.
2.9 COMPANY PROPRIETARY ASSETS.
(a) Part 2.9(a)(i) of the Company Disclosure Schedule sets forth,
with respect to each Company Proprietary Asset registered with any Governmental
Body or for which an application has been filed with any Governmental Body, (i)
a statement identifying such Proprietary Asset, and (ii) the names of the
jurisdictions covered by the applicable registration or application. Part
2.9(a)(ii) of the Company Disclosure Schedule provides a statement identifying
all other Company Proprietary Assets. Part 2.9(a)(iii) of the Company Disclosure
Schedule identifies each Proprietary Asset licensed to the Company by any Person
(except for any Proprietary Asset that is licensed to the Company under any
third party software license generally available to the public at a cost of less
than $10,000), and identifies the license agreement under which such Proprietary
Asset is being licensed to the Company. Except as set forth in Part 2.9(a)(iv)
of the Company Disclosure Schedule, the Company has good, valid and marketable
title to all of the Company Proprietary Assets identified in Parts 2.9(a)(i) and
2.9(a)(ii) of the Company Disclosure Schedule, free and clear of all liens and
other Encumbrances, and has a valid right to use all Proprietary Assets
identified in Part 2.9(a)(iii) of the Company Disclosure Schedule. Except as set
forth in Part 2.9(a)(v) of the Company Disclosure Schedule, the Company is not
obligated to make any payment to any Person for the use of any Company
Proprietary Asset. Except as set forth in Part 2.9(a)(vi) of the Company
Disclosure Schedule, the Company has not developed jointly with any other Person
any Company Proprietary Asset with respect to which such other Person has any
rights.
(b) The Company has taken reasonable measures and precautions
necessary to protect and maintain the confidentiality and secrecy of all Company
Proprietary Assets (except Company Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Company Proprietary Assets. Except as set forth in Part 2.9(b) of the
Company Disclosure Schedule, the Company has not (other than pursuant to license
agreements identified in Part 2.10 of the Company Disclosure Schedule) delivered
to any Person, or permitted the disclosure or delivery to any Person of, the
source code, or any portion of the source code, of any Company Proprietary
Asset. The Company has not delivered to any Person any object code of any
Company Proprietary Asset unless such Person entered into a license or other
similar agreement with the Company which governs the use of such object code and
retains all ownership rights of such object code in the Company.
(c) To the Knowledge of the Company, none of the Company Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To
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the Knowledge of the Company, the Company is not infringing, misappropriating or
making any unlawful use of, and the Company has not at any time infringed,
misappropriated or made any unlawful use of, or received any notice or other
communication (in writing or orally) of any actual, alleged, possible or
potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the Knowledge of the Company, no
other Person is infringing, misappropriating or making any unlawful use of, and
no Proprietary Asset owned or used by any other Person infringes with, any
Company Proprietary Asset.
(d) Except as set forth in Part 2.9(d) of the Company Disclosure
Schedule: (i) each Company Proprietary Asset conforms in all material respects
with any written specification, documentation, performance standard,
representation or statement made or provided with respect thereto by the
Company, and (ii) there has not been any claim by any customer or other Person
alleging that any Company Proprietary Asset (including each version thereof that
has ever been licensed or otherwise made available by the Company to any Person)
does not conform in all material respects with any written specification,
documentation, performance standard, representation or statement made or
provided by the Company, and, to the Knowledge of the Company, there is no valid
basis for any such claim.
(e) The Company Proprietary Assets constitute all the Proprietary
Assets necessary to enable the Company to conduct its business in the manner in
which such business is being conducted. Except as set forth in Part 2.9(e) of
the Company Disclosure Schedule, (i) the Company has not licensed any of the
Company Proprietary Assets to any Person on an exclusive basis, and (ii) the
Company has not entered into any covenant not to compete or Contract limiting
its ability to exploit fully any of its Proprietary Assets or to transact
business in any market or geographical area or with any Person.
(f) Except as set forth in Part 2.9(f) of the Company Disclosure
Schedule, (i) all current and former employees of the Company have executed and
delivered to the Company an agreement (containing no exceptions to or exclusions
from the scope of its coverage) that is substantially identical to the form of
Confidential Information and Invention Assignment Agreement previously delivered
to Parent, and (ii) all current and former consultants and independent
contractors to the Company have executed and delivered to the Company an
agreement (containing no exceptions to or exclusions from the scope of its
coverage) that is substantially identical to the form of Consultant Confidential
Information and Invention Assignment Agreement previously delivered to Parent.
2.10 CONTRACTS.
(a) Part 2.10 of the Company Disclosure Schedule identifies:
(i) each Company Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor
in excess of $25,000 annually;
(ii) each Company Contract relating to the acquisition,
transfer, use, development, sharing or license of any material technology or any
material Company Proprietary Asset;
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(iii) each Company Contract imposing any material restriction on
the Company's right or ability (A) to compete with any other Person, (B) to
acquire any product or other asset or any services from any other Person, to
sell any product or other asset to or perform any services for any other Person
or to transact business or deal in any other manner with any other Person, or
(C) develop or distribute any technology;
(iv) each Company Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship that is not
cancelable according to its terms on 30 days notice or less;
(v) each Company Contract relating to the acquisition, issuance
or transfer of any securities;
(vi) each Company Contract relating to the creation of any
Encumbrance with respect to any material asset of the Company;
(vii) each Company Contract involving or incorporating any
material guaranty, any pledge, any performance or completion bond, any indemnity
or any surety arrangement;
(viii) each Company Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Company Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Company Related Party;
(x) each Company Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Company Contract that was entered into outside
the ordinary course of business or was inconsistent with the Company's past
practices or is subject to audit by any Governmental Body;
(xii) any other Company Contract that has a term of more than 30
days and that may not be terminated by the Company (without penalty) within 30
days after the delivery of a termination notice by the Company; and
(xiii) any other Company Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $25,000 in the aggregate, or (B) the performance of
services having a value in excess of $25,000 in the aggregate.
(Contracts in the respective categories described in clauses "(i)" through
"(xiii)" above are referred to in this Agreement as "Company Material
Contracts.")
(b) The Company has delivered to Parent accurate and complete copies
of all written Contracts identified in Part 2.10 of the Company Disclosure
Schedule, including all
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amendments thereto. Part 2.10 of the Company Disclosure Schedule provides an
accurate description of the terms of each Company Contract that is not in
written form. Each Contract identified in Part 2.10 of the Company Disclosure
Schedule is valid and in full force and effect, and, to the Knowledge of the
Company, is enforceable by the Company in accordance with its terms, subject to
(i) laws of general application relating to bankruptcy, insolvency and the
relief of debtors, and (ii) rules of law governing specific performance,
injunctive relief and other equitable remedies.
(c) Except as set forth in Part 2.10 of the Company Disclosure
Schedule:
(i) the Company has not violated or breached, or committed any
default under, any Contract, and, to the Knowledge of the Company, no other
Person has violated or breached, or committed any default under, any Company
Material Contract;
(ii) to the Knowledge of the Company, no event has occurred, and
no circumstance or condition exists, that (with or without notice or lapse of
time) will, or could reasonably be expected to, (A) result in a violation or
breach of any of the provisions of any Company Material Contract, (B) give any
Person the right to declare a default or exercise any remedy under any Company
Material Contract, (C) give any Person the right to accelerate the maturity or
performance of any Company Material Contract, or (D) give any Person the right
to cancel, terminate or modify any Company Material Contract;
(iii) since January 1, 1997, the Company has not received any
notice (or to the Knowledge of the Company, any other communication) regarding
any actual or possible violation or breach of, or default under, any Company
Material Contract; and
(iv) the Company has not waived any of its material rights under
any Company Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Company Material Contract to renegotiate, any amount paid or payable to
the Company under any Company Material Contract or any other material term or
provision of any Company Material Contract.
(e) Part 2.10 of the Company Disclosure Schedule identifies each
proposed Company Material Contract as to which any bid, offer, award, written
proposal, term sheet or similar document has been submitted or received by the
Company since January 1, 1997.
(f) Except as set forth in Part 2.10(f) of the Company Disclosure
Schedule:
(i) the Company has not had any determination of noncompliance,
entered into any consent order or undertaken any internal investigation relating
directly or indirectly to any Government Contract or Government Bid;
(ii) the Company has complied in all material respects with all
Legal Requirements with respect to all Government Contracts and Government Bids;
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(iii) the Company has not, in obtaining or performing any
Government Contract, violated (A) the Truth in Negotiations Act of 1962, as
amended, (B) the Service Contract Act of 1963, as amended, (C) the Contract
Disputes Act of 1978, as amended, (D) the Office of Federal Procurement Policy
Act, as amended, (E) the Federal Acquisition Regulations (the "FAR") or any
applicable agency supplement thereto, (F) the Cost Accounting Standards, (G) the
Defense Industrial Security Manual (DOD 5220.22-M), (H) the Defense Industrial
Security Regulation (DOD 5220.22-R) or any related security regulations, or (I)
any other applicable procurement law or regulation or other Legal Requirement;
(iv) all facts set forth in or acknowledged by the Company in
any certification, representation or disclosure statement submitted by the
Company with respect to any Government Contract or Government Bid were current,
accurate and complete as of the date of submission;
(v) neither the Company nor any of its employees has been
debarred or suspended from doing business with any Governmental Body, and, to
the Knowledge of the Company and the Shareholders, no circumstances exist that
would warrant the institution of debarment or suspension proceedings against the
Company or any employee of the Company;
(vi) no negative determinations of responsibility have been
issued against the Company in connection with any Government Contract or
Government Bid;
(vii) no direct or indirect costs incurred by the Company have
been questioned or disallowed as a result of a finding or determination of any
kind by any Governmental Body;
(viii) no Governmental Body, and no prime contractor or
higher-tier subcontractor of any Governmental Body, has withheld or set off, or
threatened to withhold or set off, any amount due to the Company under any
Government Contract;
(ix) to the Knowledge of the Company, there are not and have not
been any irregularities, misstatements or omissions relating to any Government
Contract or Government Bid that have led to or could reasonably be expected to
lead to (A) any administrative, civil, criminal or other investigation, Legal
Proceeding or indictment involving the Company or any of its employees, (B) the
questioning or disallowance of any costs submitted for payment by the Company,
(C) the recoupment of any payments previously made to the Company, (D) a finding
or claim of fraud, defective pricing, mischarging or improper payments on the
part of the Company, or (E) the assessment of any penalties or damages of any
kind against the Company;
(x) there is not and has not been any (A) outstanding claim
against the Company by, or dispute involving the Company with, any prime
contractor, subcontractor, vendor or other Person arising under or relating to
the award or performance of any Government Contract, (B) fact known by the
Company upon which any such claim could reasonably be expected to be based or
which may give rise to any such dispute, (C) final decision of any Governmental
Body against the Company;
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(xi) the Company is not undergoing and has not undergone any
audit, and the Company has no Knowledge of any basis for any impending audit,
arising under or relating to any Government Contract (other than normal routine
audits conducted in the ordinary course of business);
(xii) the Company has not entered into any financing arrangement
or assignment of proceeds with respect to the performance of any Government
Contract;
(xiii) no payment has been made by the Company or by any Person
acting on the Company's behalf to any Person (other than to any bona fide
employee or agent (as defined in subpart 3.4 of the FAR) of the Company) which
is or was contingent upon the award of any Government Contract or which would
otherwise be in violation of any applicable procurement law or regulation or any
other Legal Requirement;
(xiv) the Company's cost accounting system is in compliance with
applicable regulations and other applicable Legal Requirements, and has not been
determined by any Governmental Body not to be in compliance with any Legal
Requirement;
(xv) the Company has complied with all applicable regulations
and other Legal Requirements and with all applicable contractual requirements
relating to the placement of legends or restrictive markings on technical data,
computer software and other Proprietary Assets;
(xvi) in each case in which the Company has delivered or
otherwise provided any technical data, computer software or Company Proprietary
Asset to any Governmental Body in connection with any Government Contract, the
Company has marked such technical data, computer software or Company Proprietary
Asset with all markings and legends (including any "restricted rights" legend
and any "government purpose license rights" legend) necessary (under the FAR or
other applicable Legal Requirements) to ensure that no Governmental Body or
other Person is able to acquire any unlimited rights with respect to such
technical data, computer software or Company Proprietary Asset;
(xvii) the Company has not made any disclosure to any
Governmental Body pursuant to any voluntary disclosure agreement;
(xviii) the Company has reached agreement with the cognizant
government representatives approving and "closing" all indirect costs charged to
Government Contracts for 1994, 1995, 1996, 1997 and 1998, and those years are
closed;
(xix) the responsible government representatives have agreed
with the Company on the "forward pricing rates" that the Company is charging on
cost-type Government Contracts and including in Government Bids; and
(xx) the Company is not and will not be required to make any
filing with or give any notice to, or to obtain any Consent from, any
Governmental Body under or in connection with any Government Contract or
Government Bid as a result of or by virtue of (A) the execution, delivery of
performance of this Agreement or any of the other agreements referred
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to in this Agreement, or (B) the consummation of the Merger or any of the other
transactions contemplated by this Agreement.
2.11 LIABILITIES. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured (whether or not required
to be reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Company
Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries that
have been incurred by the Company since the Company Balance Sheet Date in the
ordinary course of business and consistent with the Company's past practices;
(c) liabilities under the Company Contracts identified in Part 2.10 of the
Company Disclosure Schedule, to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Company Contracts; and (d) the liabilities identified in Part 2.11 of the
Company Disclosure Schedule.
2.12 COMPLIANCE WITH LEGAL REQUIREMENTS. The Company is, and has at all
times since its inception been, in compliance with all applicable Legal
Requirements, except where the failure to comply with such Legal Requirements
has not had and will not have a Company Material Adverse Effect. Except as set
forth in Part 2.12 of the Company Disclosure Schedule, since its inception, the
Company has not received any notice or other communication from any Governmental
Body regarding any actual or possible violation of, or failure to comply with,
any Legal Requirement.
2.13 GOVERNMENTAL AUTHORIZATIONS. Part 2.13 of the Company Disclosure
Schedule identifies each material Governmental Authorization held by the
Company, and the Company has delivered to Parent accurate and complete copies of
all Governmental Authorizations identified in Part 2.13 of the Company
Disclosure Schedule. The Governmental Authorizations identified in Part 2.13 of
the Company Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable the
Company to conduct its business in the manner in which its business is currently
being conducted. To the Company's Knowledge, the Company is, and at all times
since its inception has been, in substantial compliance with the terms and
requirements of the respective Governmental Authorizations identified in Part
2.13 of the Company Disclosure Schedule. Since its inception, the Company has
not received any notice or other communication from any Governmental Body
regarding (a) any actual or possible violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (b) any actual or
possible revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization.
2.14 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of the
Company with any Governmental Body with respect to any taxable period ending on
or before the Closing Date (the "Company Returns") (i) have been or will be
filed on or before the applicable due date (including any extensions of such due
date), and (ii) have been, or will be when filed, accurately and completely
prepared in all material respects in compliance with all applicable Legal
Requirements. All amounts shown on the Company Returns to be due on or before
the Closing
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Date have been or will be paid on or before the Closing Date. The Company has
delivered to Parent accurate and complete copies of all Company Returns filed
since December 31, 1996 which have been requested by Parent.
(b) The Company Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles. The Company
will establish, in the ordinary course of business and consistent with its past
practices, reserves adequate for the payment of all Taxes for the period from
January 1, 1999 through the Closing Date, and the Company will disclose the
dollar amount of such reserves to Parent on or prior to the Closing Date.
(c) No Company Return relating to income Taxes has ever been
examined or audited by any Governmental Body. Except as set forth in Part 2.14
of the Company Disclosure Schedule, there have been no examinations or audits of
any Company Return. The Company has delivered to Parent accurate and complete
copies of all audit reports and similar documents (to which the Company has
access) relating to the Company Returns. Except as set forth in Part 2.14 of the
Company Disclosure Schedule, no extension or waiver of the limitation period
applicable to any of the Company Returns has been granted (by the Company or any
other Person), and no such extension or waiver has been requested from the
Company.
(d) Except as set forth in Part 2.14 of the Company Disclosure
Schedule, no claim or Legal Proceeding is pending or, to the Knowledge of the
Company, has been threatened against or with respect to the Company, in respect
of any Tax. There are no unsatisfied liabilities for Taxes (including
liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document received
by the Company with respect to any Tax (other than liabilities for Taxes
asserted under any such notice of deficiency or similar document which are being
contested in good faith by the Company and with respect to which adequate
reserves for payment have been established). There are no liens for Taxes upon
any of the assets of the Company except liens for current Taxes not yet due and
payable. The Company has not entered into or become bound by any agreement or
consent pursuant to Section 341(f) of the Code. The Company has not been, and
the Company will not be, required to include any 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 or events occurring, or accounting methods employed, prior to the
Closing.
(e) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company that, considered individually or
considered collectively with any other such Contracts, will, or could reasonably
be expected to, give rise directly or indirectly to the payment of any amount
that would not be deductible pursuant to Section 280G or Section 162 of the
Code. The Company is not, and has never been, a party to or bound by any tax
indemnity agreement, tax sharing agreement, tax allocation agreement or similar
Contract.
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2.15 EMPLOYEE AND LABOR MATTERS; BENEFIT PLANS.
(a) Part 2.15(a) of the Company Disclosure Schedule identifies each
salary, bonus, deferred compensation, incentive compensation, stock purchase,
stock option, severance pay, termination pay, hospitalization, medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program or agreement (collectively, the "Plans") sponsored,
maintained, contributed to or required to be contributed to by the Company for
the benefit of any employee of the Company ("Employee"), except for Plans which
would not require the Company to make payments or provide benefits having a
value in excess of $25,000 in the aggregate.
(b) Except as set forth in Part 2.15(a) of the Company Disclosure
Schedule, the Company does not maintain, sponsor or contribute to, and, to the
Knowledge of the Company, has not at any time in the past maintained, sponsored
or contributed to, any employee pension benefit plan (as defined in Section 3(2)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
whether or not excluded from coverage under specific Titles or Merger Subtitles
of ERISA) for the benefit of Employees or former Employees (a "Pension Plan").
(c) The Company maintains, sponsors or contributes only to those
employee welfare benefit plans (as defined in Section 3(1) of ERISA, whether or
not excluded from coverage under specific Titles or Merger Subtitles of ERISA)
for the benefit of Employees or former Employees which are described in Part
2.15(c) of the Company Disclosure Schedule (the "Welfare Plans"), none of which
is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(d) With respect to each Plan, the Company has delivered to Parent:
(i) an accurate and complete copy of such Plan (including all
amendments thereto);
(ii) an accurate and complete copy of the annual report, if
required under ERISA, with respect to such Plan for the last two years;
(iii) an accurate and complete copy of the most recent summary
plan description, together with each Summary of Material Modifications, if
required under ERISA, with respect to such Plan, and all material employee
communications relating to such Plan;
(iv) if such Plan is funded through a trust or any third party
funding vehicle, an accurate and complete copy of the trust or other funding
agreement (including all amendments thereto) and accurate and complete copies
the most recent financial statements thereof;
(v) accurate and complete copies of all Contracts relating to
such Plan, including service provider agreements, insurance contracts, minimum
premium contracts, stop-loss agreements, investment management agreements,
subscription and participation agreements and recordkeeping agreements; and
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(vi) an accurate and complete copy of the most recent
determination letter received from the Internal Revenue Service with respect to
such Plan (if such Plan is intended to be qualified under Section 401(a) of the
Code).
(e) The Company is not required to be, and, to the Knowledge of the
Company, has never been required to be, treated as a single employer with any
other Person under Section 4001(b)(1) of ERISA or Section 414(b), (c), (m) or
(o) of the Code. The Company has never been a member of an "affiliated service
group" within the meaning of Section 414(m) of the Code. To the Knowledge of the
Company, the Company has never made a complete or partial withdrawal from a
multiemployer plan, as such term is defined in Section 3(37) of ERISA, resulting
in "withdrawal liability," as such term is defined in Section 4201 of ERISA
(without regard to subsequent reduction or waiver of such liability under either
Section 4207 or 4208 of ERISA).
(f) The Company does not have any plan or commitment to create any
additional Welfare Plan or any Pension Plan, or to modify or change any existing
Welfare Plan or Pension Plan (other than to comply with applicable law) in a
manner that would affect any Employee.
(g) Except as set forth in Part 2.15(g) of the Company Disclosure
Schedule, no Welfare Plan provides death, medical or health benefits (whether or
not insured) with respect to any current or former Employee after any such
Employee's termination of service (other than (i) benefit coverage mandated by
applicable law, including coverage provided pursuant to Section 4980B of the
Code, (ii) deferred compensation benefits accrued as liabilities on the Company
Unaudited Interim Balance Sheet, and (iii) benefits the full cost of which are
borne by current or former Employees (or the Employees' beneficiaries)).
(h) With respect to each of the Welfare Plans constituting a group
health plan within the meaning of Section 4980B(g)(2) of the Code, the
provisions of Section 4980B of the Code ("COBRA") have been complied with in all
material respects.
(i) To the Knowledge of the Company, each of the Plans has been
operated and administered in all material respects in accordance with applicable
Legal Requirements, including but not limited to ERISA and the Code.
(j) Each of the Plans intended to be qualified under Section 401(a)
of the Code has received a favorable determination from the Internal Revenue
Service, and neither the Company nor any of the Shareholders is aware of any
reason why any such determination letter should be revoked.
(k) Except as set forth in Part 2.15(k) of the Company Disclosure
Schedule, neither the execution, delivery or performance of this Agreement, nor
the consummation of the Merger or any of the other transactions contemplated by
this Agreement, will result in any payment (including any bonus, golden
parachute or severance payment) to any current or former Employee or director of
the Company (whether or not under any Plan), or materially increase the benefits
payable under any Plan, or result in any acceleration of the time of payment or
vesting of any such benefits.
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(l) Part 2.15(l) of the Company Disclosure Schedule contains a list
of all salaried employees of the Company as of the date of this Agreement, and
correctly reflects, in all material respects, their salaries, any other
compensation payable to them (including compensation payable pursuant to bonus,
deferred compensation or commission arrangements), their dates of employment and
their positions. The Company is not a party to any collective bargaining
contract or other Contract with a labor union involving any of its Employees.
All of the Company's employees are "at will" employees.
(m) Part 2.15(m) of the Company Disclosure Schedule identifies each
Employee who is not fully available to perform work because of disability or
other leave and sets forth the basis of such leave and the anticipated date of
return to full service.
(n) To the Knowledge of the Company, the Company is in compliance in
all material respects with all applicable Legal Requirements and Contracts
relating to employment, employment practices, wages, bonuses and terms and
conditions of employment, including employee compensation matters.
(o) Except as set forth in Part 2.15(o) of the Company Disclosure
Schedule, the Company has good labor relations, and none of the Shareholders has
any reason to believe that (i) the consummation of the Merger or any of the
other transactions contemplated by this Agreement will have a material adverse
effect on the Company's labor relations, or (ii) any of the Company's employees
intends to terminate his or her employment with the Company.
2.16 ENVIRONMENTAL MATTERS. To the Knowledge of the Company, the Company
is in compliance in all material respects with all applicable Environmental
Laws, which compliance includes the possession by the Company of all permits and
other Governmental Authorizations required under applicable Environmental Laws,
and compliance with the terms and conditions thereof. The Company has not
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that the Company is not in compliance with any Environmental Law, and, to the
Knowledge of the Company, there are no circumstances that may prevent or
interfere with the Company's compliance with any Environmental Law in the
future. To the Knowledge of the Company, no current or prior owner of any
property leased or controlled by the Company has received any notice or other
communication (in writing or otherwise), whether from a Governmental Body,
citizens group, employee or otherwise, that alleges that such current or prior
owner or the Company is not in compliance with any Environmental Law. All
Governmental Authorizations currently held by the Company pursuant to
Environmental Laws are identified in Part 2.16 of the Company Disclosure
Schedule.
2.17 INSURANCE. Part 2.17 of the Company Disclosure Schedule identifies
all insurance policies maintained by, at the expense of or for the benefit of
the Company and identifies any material claims made thereunder, and the Company
has delivered to Parent accurate and complete copies of the insurance policies
identified on Part 2.17 of the Company Disclosure Schedule. Each of the
insurance policies identified in Part 2.17 of the Company Disclosure Schedule is
in full force and effect. Since January 1, 1998, the Company has not received
any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any insurance policy, (b) refusal of any
coverage or rejection of any claim under
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any insurance policy, or (c) material adjustment in the amount of the premiums
payable with respect to any insurance policy.
2.18 COMPANY RELATED PARTY TRANSACTIONS. Except as set forth in Part
2.18 of the Company Disclosure Schedule: (a) no Company Related Party has, and
no Company Related Party has at any time since January 1, 1998 had, any direct
or indirect interest in any material asset used in or otherwise relating to the
business of the Company; (b) no Company Related Party is, or has at any time
since January 1, 1998 been, indebted to the Company; (c) since January 1, 1998,
no Company Related Party has entered into, or has had any direct or indirect
financial interest in, any material Contract, transaction or business dealing
involving the Company; (d) no Company Related Party is competing, or has at any
time since January 1, 1998 competed, directly or indirectly, with the Company;
and (e) no Company Related Party has any claim or right against the Company
(other than rights under Company Options and rights to receive compensation for
services performed as an employee of the Company). (For purposes of this Section
2.18 each of the following shall be deemed to be a "Company Related Party": (i)
each of the Shareholders; (ii) each individual who is, or who has at any time
since January 1, 1998 been, an officer or director of the Company; (iii) each
member of the immediate family of each of the individuals referred to in clauses
"(i)" and "(ii)" above; and (iv) any trust or other Entity (other than the
Company) in which any one of the individuals referred to in clauses "(i)",
"(ii)" and "(iii)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary or
equity interest.)
2.19 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Part 2.19 of the Company Disclosure
Schedule, there is no pending Legal Proceeding, and (to the Knowledge of the
Company) no Person has threatened to commence any Legal Proceeding: (i) that
involves the Company or any of the assets owned or used by the Company or any
Person whose liability the Company has or may have retained or assumed, either
contractually or by operation of law, except for such Legal Proceedings that
would not have a Company Material Adverse Effect; or (ii) that challenges, or
that may have the effect of preventing, delaying, making illegal or otherwise
interfering with, the Merger or any of the other transactions contemplated by
this Agreement. To the Knowledge of the Company and the Shareholders, except as
set forth in Part 2.19 of the Company Disclosure Schedule, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that could reasonably be expected to, give rise to or serve as a basis
for the commencement of any such Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree to which
the Company, or any of the assets owned or used by the Company, is subject. To
the Knowledge of the Company, no officer or other employee of the Company is
subject to any order, writ, injunction, judgment or decree that prohibits such
officer or other employee from engaging in or continuing any conduct, activity
or practice relating to the Company's business.
2.20 AUTHORITY; BINDING NATURE OF AGREEMENT. The Company has the
absolute and unrestricted right, power and authority to enter into and to
perform its obligations under this Agreement; and the execution, delivery and
performance by the Company of this Agreement have been duly authorized by all
necessary action on the part of the Company, its board of
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directors and its shareholders. This Agreement constitutes the legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
2.21 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 2.21 of
the Company Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of the Company's articles of incorporation or bylaws, or (ii) any
resolution adopted by the Company's shareholders, the Company's board of
directors or any committee of the Company's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which the Company, or any of the assets owned or used by the
Company, is subject;
(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by the Company or that otherwise relates to the Company's business
or to any of the assets owned or used by the Company;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Company Contract that is or
would constitute a Company Material Contract, or give any Person the right to
(i) declare a default or exercise any remedy under any such Company Contract,
(ii) accelerate the maturity or performance of any such Company Contract, or
(iii) cancel, terminate or modify any such Company Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by the Company
(except for minor liens that will not, in any case or in the aggregate,
materially detract from the value of the assets subject thereto or materially
impair the operations of the Company);
except, in the case of subparagraphs (b), (c), (d) and (e), such that would not
have a Company Material Adverse Effect.
Except as set forth in Part 2.21 of the Company Disclosure Schedule, the Company
is not and will not be required to make any filing with or give any notice to,
or to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement, except for Consents
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which the failure to obtain would not have a Company Material Adverse Effect or
prevent or delay the Merger or the other transactions contemplated hereby.
2.22 FULL DISCLOSURE. This Agreement (including the Company Disclosure
Schedule) does not, and the Closing Certificate will not, (i) contain any
representation, warranty or information that is false or misleading with respect
to any material fact, or (ii) omit to state any material fact or necessary in
order to make the representations, warranties and information contained and to
be contained herein and therein (in the light of the circumstances under which
such representations, warranties and information were or will be made or
provided) not false or misleading.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
the Company and the Shareholders as follows:
3.1 VALID ISSUANCE. Subject to Section 1.5(c), the Parent Common Stock
to be issued in the Merger will, when issued in accordance with the provisions
of this Agreement, be validly issued, fully paid and nonassessable.
3.2 DUE ORGANIZATION; SUBSIDIARIES; ETC.
(a) Each of Parent and Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of its state of
organization and has all necessary power and authority: (i) to conduct its
business in the manner in which its business is currently being conducted and
(ii) to own and use its assets in the manner in which its assets are currently
owned and used.
(b) Parent is not and has not been required to be qualified,
authorized, registered or licensed to do business as a foreign corporation in
any jurisdiction other than the jurisdictions identified in Part 3.2 of the
Parent Disclosure Schedule, except where the failure to be so qualified,
authorized, registered or licensed has not had and will not have a Parent
Material Adverse Effect. Parent is in good standing as a foreign corporation in
each of the jurisdictions identified in Part 3.2 of the Parent Disclosure
Schedule, except where the failure to be in good standing would not have a
Parent Material Adverse Effect.
3.3 CERTIFICATE OF INCORPORATION AND BYLAWS; RECORDS. Parent has made
available to the Company accurate and complete copies of: (1) Parent's
certificate of incorporation and bylaws, including all amendments thereto; (2)
the stock records of Parent; and (3) except as set forth in Part 3.3 of the
Parent Disclosure Schedule, the minutes and other records of the meetings and
other proceedings (including any actions taken by written consent or otherwise
without a meeting) of the stockholders of Parent, the board of directors of
Parent and all committees of the board of directors of Parent. There have been
no formal meetings or other proceedings of the stockholders of Parent, the board
of directors of Parent or any committee of the board of directors of Parent that
are not fully reflected in such minutes or other records. There has not been any
violation of any of the provisions of Parent's certificate of incorporation or
bylaws, and Parent has not taken any action that is inconsistent in any material
respect with any resolution
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adopted by Parent's stockholders, Parent's board of directors or any committee
of Parent's board of directors. The books of account, stock records, minute
books and other records of Parent are accurate, up-to-date and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
3.4 CAPITALIZATION, ETC.
(a) The authorized capital stock of Parent consists of 50,000,000
shares of stock, 40,000,000 shares are designated Common Stock, $.001 par value,
of which 6,101,555 shares were issued and are outstanding as of the date of this
Agreement and 10,000,000 shares are designated Preferred Stock, $.001 par value,
("Parent Preferred Stock") of which 68,100 shares are designated Series A
Preferred Stock, all of which were issued and outstanding as of the date of this
Agreement, 334,907 shares are designated Series B Preferred Stock, all of which
are issued and outstanding as of the date of this Agreement, 5,000,000 shares
are designated Series C Preferred Stock, of which 4,458,332 shares are issued
and outstanding as of the date of this Agreement, and 2,400,000 shares are
designated Series D Preferred Stock, of which 1,714,940 shares are issued and
outstanding as of the date of this Agreement. All of the outstanding shares of
Parent Common Stock and Parent Preferred Stock have been duly authorized and
validly issued, and are fully paid and non-assessable. The authorized capital
stock of Merger Sub consists of 10,000 shares of common stock, of which 1,000
shares are issued and outstanding. All of the outstanding shares of Merger Sub
common stock have been duly authorized and are validly issued, and are
fully-paid and non-assessable.
(b) Except as contemplated in the Merger or as set forth in Part
3.4(b) of the Parent Disclosure Schedule, there is no: (i) outstanding
subscription, option, call, warrant or right (whether or not currently
exercisable) to acquire any shares of the capital stock or other securities of
Parent or Merger Sub; (ii) outstanding security, instrument or obligation that
is or may become convertible into or exchangeable for any shares of the capital
stock or other securities of Parent or Merger Sub; (iii) Contract under which
Parent or Merger Sub is or may become obligated to sell or otherwise issue any
shares of its capital stock or any other securities; or (iv) to the Knowledge of
Parent, condition or circumstance that may give rise to or provide a basis for
the assertion of a claim by any Person to the effect that such Person is
entitled to acquire or receive any shares of capital stock or other securities
of Parent.
3.5 FINANCIAL STATEMENTS.
(a) Parent has delivered to the Company the following financial
statements and notes (collectively, the "Parent Financial Statements"):
(i) The audited balance sheets of Parent as of December 31,
1998, and the related audited income statements, statements of shareholders'
equity and statements of cash flows of Parent for the years then ended, together
with the notes thereto and the unqualified report and opinion of
PricewaterhouseCoopers LLP relating thereto; and
(ii) the unaudited balance sheet of Parent as of August 30, 1999
(the "Parent Unaudited Interim Balance Sheet"), and the related unaudited income
statement of Parent as of August 30, 1999 (the "Parent Balance Sheet Date").
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(b) Parent Financial Statements are accurate in all material
respects and present fairly the financial position of Parent as of the
respective dates thereof and the results of operations and (in the case of the
financial statements referred to in Section 3.5(a)(i)) cash flows of Parent for
the periods covered thereby. Parent Financial Statements have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered (except that the financial statements
referred to in Section 3.5(a)(ii) do not contain footnotes and are subject to
normal and recurring year-end audit adjustments, which will not, individually or
in the aggregate, be material in magnitude).
3.6 ABSENCE OF CHANGES. Except as set forth in Part 3.6 of the Parent
Disclosure Schedule, since the Parent Balance Sheet Date:
(a) there has not been any material adverse change in Parent's
business, condition, assets, liabilities, operations, financial performance or
prospects, and, to the Knowledge of Parent, no event has occurred that will, or
could reasonably be expected to, have a Parent Material Adverse Effect;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of Parent's material assets
(whether or not covered by insurance);
(c) Parent has not declared, accrued, set aside or paid any dividend
or made any other distribution in respect of any shares of capital stock, and
has not repurchased, redeemed or otherwise reacquired any shares of capital
stock or other securities;
(d) Parent has not sold, issued or authorized the issuance of (i)
any capital stock or other security (except for Parent Common Stock issued upon
the exercise of outstanding stock options, warrants and other rights to acquire
capital stock of Parent ("Parent Options"); (ii) any option or right to acquire
any capital stock or any other security; (iii) any instrument convertible into
or exchangeable for any capital stock or other security;
(e) Parent has not amended or waived any of its rights under, or
permitted the acceleration of vesting under, (i) any provision of any agreement
evidencing any outstanding Parent Option or (ii) any restricted stock purchase
agreement;
(f) there has been no amendment to Parent's Certificate of
Incorporation or bylaws, and Parent has not effected or been a party to any
Parent Acquisition Transaction, recapitalization, reclassification of shares,
stock split, reverse stock split or similar transaction;
(g) Parent has not formed any subsidiary, other than Merger Sub, or
acquired any equity interest or other interest in any other Entity;
(h) Parent has not made any capital expenditure which, when added to
all other capital expenditures made on behalf of Parent since the Parent Balance
Sheet Date, exceeds $100,000;
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(i) Parent has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
indebtedness in excess of the bad debt reserve on the Parent Financial
Statements;
(j) Parent has not made any pledge of any of its assets or otherwise
permitted any of its assets to become subject to any Encumbrance, except for
pledges of immaterial assets made in the ordinary course of business and
consistent with Parent's past practices;
(k) Parent has not (i) lent money to any Person (other than pursuant
to routine travel advances made to employees in the ordinary course of
business), or (ii) incurred or guaranteed any indebtedness for borrowed money;
(l) Parent has not changed any of its methods of accounting or
accounting practices in any material respect;
(m) Parent has not commenced or settled any material Legal
Proceeding;
(n) Parent has not entered into any material transaction or taken
any other material action outside the ordinary course of business or
inconsistent with its past practices; and
(o) Parent has not agreed or committed to take any of the actions
referred to in clauses "(c)" through "(n)" above.
3.7 TITLE TO ASSETS. Parent owns, and has good, valid and marketable
title to, all assets purported to be owned by it (other than Parent Proprietary
Assets, as to which representations and warranties are set forth in Section
3.14), including: (i) all assets reflected on the Parent Unaudited Interim
Balance Sheet; and (ii) all other assets reflected in Parent's books and records
as being owned by Parent. Except as set forth in Part 3.7 of the Parent
Disclosure Schedule, all of said assets are owned by Parent free and clear of
any liens or other Encumbrances, except for (x) any lien for current taxes not
yet due and payable, and (y) minor liens that have arisen in the ordinary course
of business and that do not (in any case or in the aggregate) materially detract
from the value of the assets subject thereto or materially impair the operations
of Parent.
3.8 LIABILITIES. Parent has no accrued, contingent or other liabilities
of any nature, either matured or unmatured (whether or not required to be
reflected in financial statements in accordance with generally accepted
accounting principles, and whether due or to become due), except for: (a)
liabilities identified as such in the "liabilities" column of the Parent
Unaudited Interim Balance Sheet; (b) accounts payable or accrued salaries that
have been incurred by Parent since the Parent Balance Sheet Date in the ordinary
course of business and consistent with Parent's past practices; (c) liabilities
under Parent Contracts to the extent the nature and magnitude of such
liabilities can be specifically ascertained by reference to the text of such
Parent Contracts; and (d) the liabilities identified in Part 3.8 of the Parent
Disclosure Schedule.
3.9 COMPLIANCE WITH LEGAL REQUIREMENTS. To Parent's Knowledge, Parent
is, and has at all times since its inception been, in compliance with all
applicable Legal Requirements, except where the failure to comply with such
Legal Requirements has not had and will not have a Parent Material Adverse
Effect. Parent has not received any notice or other communication
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from any Governmental Body regarding any actual or possible violation of, or
failure to comply with, any Legal Requirement.
3.10 LEGAL PROCEEDINGS; ORDERS.
(a) There is no pending Legal Proceeding, and (to the Knowledge of
Parent) no Person has threatened to commence any Legal Proceeding: (i) that
involves Parent or any of the assets owned or used by Parent or any Person whose
liability Parent has or may have retained or assumed, either contractually or by
operation of law, except for such Legal Proceedings that would not have a Parent
Material Adverse Effect; or (ii) that challenges, or that may have the effect of
preventing, delaying, making illegal or otherwise interfering with, the Merger
or any of the other transactions contemplated by this Agreement. To the
Knowledge of Parent, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that will, or that could reasonably be
expected to, give rise to or serve as a basis for the commencement of any such
Legal Proceeding.
(b) There is no order, writ, injunction, judgment or decree to which
Parent, or any of the assets owned or used by Parent, is subject. To the
Knowledge of Parent, no officer or other employee of Parent is subject to any
order, writ, injunction, judgment or decree that prohibits such officer or other
employee from engaging in or continuing any conduct, activity or practice
relating to Parent's business.
3.11 AUTHORITY; BINDING NATURE OF AGREEMENT. Parent has the absolute and
unrestricted right, power and authority to enter into and to perform its
obligations under this Agreement; and the execution, delivery and performance by
Parent of this Agreement have been duly authorized by all necessary action on
the part of Parent and its board of directors. This Agreement constitutes the
legal, valid and binding obligation of Parent, enforceable against Parent in
accordance with its terms, subject to (i) laws of general application relating
to bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
3.12 NON-CONTRAVENTION; CONSENTS. Except as set forth in Part 3.12 of
the Parent Disclosure Schedule, neither (1) the execution, delivery or
performance of this Agreement or any of the other agreements referred to in this
Agreement, nor (2) the consummation of the Merger or any of the other
transactions contemplated by this Agreement, will directly or indirectly (with
or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of (i) any of
the provisions of Parent's certificate of incorporation or bylaws, or (ii) any
resolution adopted by Parent's stockholders, Parent's board of directors or any
committee of Parent's board of directors;
(b) contravene, conflict with or result in a violation of, or give
any Governmental Body or other Person the right to challenge any of the
transactions contemplated by this Agreement or to exercise any remedy or obtain
any relief under, any Legal Requirement or any order, writ, injunction, judgment
or decree to which Parent, or any of the assets owned or used by Parent, is
subject;
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(c) contravene, conflict with or result in a violation of any of the
terms or requirements of, or give any Governmental Body the right to revoke,
withdraw, suspend, cancel, terminate or modify, any Governmental Authorization
that is held by Parent or that otherwise relates to Parent's business or to any
of the assets owned or used by Parent;
(d) contravene, conflict with or result in a violation or breach of,
or result in a default under, any provision of any Parent Contract that is or
would constitute a material Contract, or give any Person the right to (i)
declare a default or exercise any remedy under any such Parent Contract, (ii)
accelerate the maturity or performance of any such Parent Contract, or (iii)
cancel, terminate or modify any such Parent Contract; or
(e) result in the imposition or creation of any lien or other
Encumbrance upon or with respect to any asset owned or used by Parent (except
for minor liens that will not, in any case or in the aggregate, materially
detract from the value of the assets subject thereto or materially impair the
operations of Parent).
Except as set forth in Part 3.12 of the Parent Disclosure Schedule, Parent is
not and will not be required to make any filing with or give any notice to, or
to obtain any Consent from, any Person in connection with (x) the execution,
delivery or performance of this Agreement or any of the other agreements
referred to in this Agreement, or (y) the consummation of the Merger or any of
the other transactions contemplated by this Agreement.
3.13 EQUIPMENT; LEASEHOLD.
(a) All material items of equipment and other tangible assets owned
by or leased to Parent are adequate for the uses to which they are being put,
are in good condition and repair (ordinary wear and tear excepted) and are
adequate for the conduct of Parent's business in the manner in which such
business is currently being conducted.
(b) Parent does not own any real property or any interest in real
property, except for the leasehold created under the real property leases
identified in Part 3.13 of the Parent Disclosure Schedule.
3.14 PARENT PROPRIETARY ASSETS.
(a) Except as set forth in Part 3.14(a)(i) of the Parent Disclosure
Schedule, Parent has good, valid and marketable title to all of its Parent
Proprietary Assets, free and clear of all liens and other Encumbrances, and has
a valid right to use all Proprietary Assets. Except as set forth in Part
3.14(a)(ii) of the Parent Disclosure Schedule, Parent is not obligated to make
any payment to any Person for the use of any Parent Proprietary Asset. Parent
has not developed jointly with any other Person any Parent Proprietary Asset
with respect to which such other Person has rights.
(b) Parent has taken reasonable measures and precautions necessary
to protect and maintain the confidentiality and secrecy of all Parent
Proprietary Assets (except Parent Proprietary Assets whose value would be
unimpaired by public disclosure) and otherwise to maintain and protect the value
of all Parent Proprietary Assets. Except as set forth in Part 3.14(b) of the
Parent Disclosure Schedule, Parent has not delivered to any Person, or permitted
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the disclosure or delivery to any Person of, the source code, or any portion or
aspect of the source code, of any Parent Proprietary Asset. Parent has not
delivered to any Person any object code of any Parent Proprietary Asset unless
such Person entered into a license or other similar agreement with Parent which
restricts the use of such object code and retains all ownership rights of such
object code in the Company.
(c) To the Knowledge of Parent, none of the Parent Proprietary
Assets infringes or conflicts with any Proprietary Asset owned or used by any
other Person. To the Knowledge of Parent, Parent is not infringing,
misappropriating or making any unlawful use of, and Parent has not at any time
infringed, misappropriated or made any unlawful use of, or received any notice
or other communication (in writing or orally) of any actual, alleged, possible
or potential infringement, misappropriation or unlawful use of, any Proprietary
Asset owned or used by any other Person. To the Knowledge of Parent, no other
Person is infringing, misappropriating or making any unlawful use of, and no
Proprietary Asset owned or used by any other Person infringes or conflicts with,
any Parent Proprietary Asset.
(d) Except as set forth in Part 3.14(d) of the Parent Disclosure
Schedule: (i) each Parent Proprietary Asset conforms in all material respects
with any specification, documentation, performance standard, representation or
statement made or provided with respect thereto by Parent; and (ii) there has
not been any claim by any customer or other Person alleging that any Parent
Proprietary Asset (including each version thereof that has ever been licensed or
otherwise made available by Parent to any Person) does not conform in all
material respects with any specification, documentation, performance standard,
representation or statement made or provided by Parent, and, to the Knowledge of
Parent, there is no basis for any such claim.
(e) The Parent Proprietary Assets constitute all the Proprietary
Assets necessary to enable Parent to conduct its business in the manner in which
such business has been and is being conducted. Except as set forth in Part
3.14(e) of the Parent Disclosure Schedule, (i) Parent has not licensed any of
the Parent Proprietary Assets to any Person on an exclusive basis, and (ii)
Parent has not entered into any covenant not to compete or Contract limiting its
ability to exploit fully any of its Proprietary Assets or to transact business
in any market or geographical area or with any Person.
3.15 CONTRACTS.
(a) The following Contracts shall be deemed to be "Parent Material
Contracts":
(i) each Parent Contract relating to the employment of, or the
performance of services by, any employee, consultant or independent contractor
in excess of $25,000 annually;
(ii) each Parent Contract relating to the acquisition, transfer,
use, development, sharing or license of any material technology or any material
Parent Proprietary Asset;
(iii) each Parent Contract imposing any material restriction on
Parent's right or ability (A) to compete with any other Person, (B) to acquire
any product or other asset or
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any services from any other Person, to sell any product or other asset to or
perform any services for any other Person or to transact business or deal in any
other manner with any other Person, or (C) develop or distribute any technology;
(iv) each Parent Contract creating or involving any agency
relationship, distribution arrangement or franchise relationship that is not
cancelable according to its terms on 30 days notice or less;
(v) each executory Parent Contract relating to the acquisition,
issuance or transfer of any securities;
(vi) each Parent Contract relating to the creation of any
Encumbrance with respect to any material asset of Parent;
(vii) each Parent Contract involving or incorporating any
material guaranty, any pledge, any performance or completion bond, any indemnity
or any surety arrangement;
(viii) each Parent Contract creating or relating to any
partnership or joint venture or any sharing of revenues, profits, losses, costs
or liabilities;
(ix) each Parent Contract relating to the purchase or sale of
any product or other asset by or to, or the performance of any services by or
for, any Parent Related Party;
(x) each Parent Contract constituting or relating to a
Government Contract or Government Bid;
(xi) any other Parent Contract that was entered into outside the
ordinary course of business or was inconsistent with Parent's past practices;
(xii) any other Parent Contract that has a term of more than 30
days and that may not be terminated by Parent (without penalty) within 30 days
after the delivery of a termination notice by Parent; and
(xiii) any other Parent Contract that contemplates or involves
(A) the payment or delivery of cash or other consideration in an amount or
having a value in excess of $100,000 in the aggregate, or (B) the performance of
services having a value in excess of $100,000 in the aggregate.
(b) Each Parent Material Contract is valid and in full force and
effect, and, to the Knowledge of Parent, is enforceable by Parent in accordance
with its terms, subject to (i) laws of general application relating to
bankruptcy, insolvency and the relief of debtors, and (ii) rules of law
governing specific performance, injunctive relief and other equitable remedies.
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(c) Except as set forth in Part 3.15 of the Parent Disclosure
Schedule:
(i) Parent has not violated or breached, or committed any
default under, any Contract, and, to the Knowledge of Parent, no other Person
has violated or breached, or committed any default under, any Parent Material
Contract;
(ii) to the Knowledge of Parent, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will, or could reasonably be expected to, (A) result in a violation or breach of
any of the provisions of any Parent Material Contract, (B) give any Person the
right to declare a default or exercise any remedy under any Parent Material
Contract, (C) give any Person the right to accelerate the maturity or
performance of any Parent Material Contract, or (D) give any Person the right to
cancel, terminate or modify any Parent Material Contract;
(iii) since August 18, 1998, Parent has not received any notice
(or to the Knowledge of Parent, any other communication) regarding any actual or
possible violation or breach of, or default under, any Parent Material Contract;
and
(iv) Parent has not waived any of its material rights under any
Parent Material Contract.
(d) No Person is renegotiating, or has a right pursuant to the terms
of any Parent Material Contract to renegotiate, any amount paid or payable to
Parent under any Parent Material Contract or any other material term or
provision of any Parent Material Contract.
3.16 GOVERNMENTAL AUTHORIZATIONS. Parent's material Governmental
Authorizations are valid and in full force and effect, and collectively
constitute all material Governmental Authorizations necessary to enable Parent
to conduct its business in the manner in which its business is currently being
conducted. To Parent's Knowledge, Parent is, and at all times since its
inception has been, in substantial compliance with the terms and requirements of
the respective Governmental Authorizations. Since its inception, Parent has not
received any notice or other communication from any Governmental Body regarding
(a) any actual or possible violation of or failure to comply with any term or
requirement of any Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification of
any Governmental Authorization.
3.17 TAX MATTERS.
(a) All Tax Returns required to be filed by or on behalf of Parent
with any Governmental Body with respect to any taxable period ending on or
before the Closing Date (the "Parent Returns") (i) have been or will be filed on
or before the applicable due date (including any extensions of such due date),
and (ii) have been, or will be when filed, accurately and completely prepared in
all material respects in compliance with all applicable Legal Requirements.
Parent has delivered to the Company accurate and complete copies of all Parent
Returns filed since August 18, 1998 which have been requested by the Company.
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(b) The Parent Financial Statements fully accrue all actual and
contingent liabilities for Taxes with respect to all periods through the dates
thereof in accordance with generally accepted accounting principles.
(c) No Parent Return relating to income Taxes has ever been examined
or audited by any Governmental Body. Except as set forth in Part 3.17 of the
Parent Disclosure Schedule, there have been no examinations or audits of any
Parent Return. Parent has delivered to the Company accurate and complete copies
of all audit reports and similar documents (to which Parent has access) relating
to Parent Returns. Except as set forth in Part 3.17 of the Parent Disclosure
Schedule, no extension or waiver of the limitation period applicable to any of
the Parent Returns has been granted (by Parent or any other Person), and no such
extension or waiver has been requested from Parent.
(d) No claim or Legal Proceeding is pending or, to the Knowledge of
Parent, has been threatened against or with respect to Parent in respect of any
Tax. There are no unsatisfied liabilities for Taxes (including liabilities for
interest, additions to tax and penalties thereon and related expenses) with
respect to any notice of deficiency or similar document received by Parent with
respect to any Tax (other than liabilities for Taxes asserted under any such
notice of deficiency or similar document which are being contested in good faith
by Parent and with respect to which adequate reserves for payment have been
established). There are no liens for Taxes upon any of the assets of Parent
except liens for current Taxes not yet due and payable. Parent has not entered
into or become bound by any agreement or consent pursuant to Section 341(f) of
the Code. Parent has not been, and Parent will not be, required to include any
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 or events occurring, or accounting
methods employed, prior to the Closing.
(e) Parent is not, and has never been, a party to or bound by any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar Contract.
3.18 ENVIRONMENTAL MATTERS. To the Knowledge of Parent, Parent is in
compliance in all material respects with all applicable Environmental Laws,
which compliance includes the possession by Parent of all permits and other
Governmental Authorizations required under applicable Environmental Laws, and
compliance with the terms and conditions thereof. Parent has not received any
notice or other communication (in writing or otherwise), whether from a
Governmental Body, citizens group, employee or otherwise, that alleges that
Parent is not in compliance with any Environmental Law, and, to the Knowledge of
Parent, there are no circumstances that may prevent or interfere with Parent's
compliance with any Environmental Law in the future. To the Knowledge of Parent,
no current or prior owner of any property leased or controlled by Parent has
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that such current or prior owner or Parent is not in compliance with any
Environmental Law.
3.19 SHAREHOLDER MARKET STAND-OFF AGREEMENTS. All of Parent's
stockholders are obligated to comply with market stand-off agreements upon terms
which are substantially the same as the provisions of Section 4.3.
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3.20 INSURANCE. Parent has delivered to the Company accurate and
complete copies of Parent's insurance policies. There have been no material
claims made under any of Parent's insurance policies. Each of Parent's insurance
policies is in full force and effect. Parent has not received any notice or
other communication regarding any actual or possible (a) cancellation or
invalidation of any insurance policy, (b) refusal of any coverage or rejection
of any claim under any insurance policy, or (c) material adjustment in the
amount of the premiums payable with respect to any insurance policy.
3.21 PARENT RELATED PARTY TRANSACTIONS. Except as set forth in Part 3.21
of the Parent Disclosure Schedule, since June 11, 1999:
(a) no obligations of Parent to any Parent Related Party have been
incurred other than (i) rights under Parent Options and rights to receive
compensation for services performed as an employee or consultant of Parent, (ii)
reimbursement for reasonable expenses incurred on behalf of Parent and (iii) for
other standard employee benefits made generally available to all employees;
(b) no Parent Related Party has become indebted to Parent for any
material amount; and
(c) no Parent Related Party has become interested in any material
Contract with Parent (other than such Contracts as they relate to any such
person's purchase or ownership of capital stock or other securities of Parent).
For purposes of this Section 3.21 each of the following shall be deemed to be a
"Parent Related Party": (i) each officer or director of Parent; (ii) each member
of the immediate family of an officer or director of Parent; and (iii) any trust
or other Entity (other than Parent) in which any one of the individuals referred
to in clauses "(i)" and "(ii)" above holds (or in which more than one of such
individuals collectively hold), beneficially or otherwise, a material voting,
proprietary or equity interest.
3.22 FULL DISCLOSURE. This Agreement (including the Parent Disclosure
Schedule) does not, (i) contain any representation, warranty or information that
is false or misleading with respect to any material fact, or (ii) omit to state
any material fact or necessary in order to make the representations, warranties
and information contained and to be contained herein and therein (in the light
of the circumstances under which such representations, warranties and
information were or will be made or provided) not false or misleading.
SECTION 4. SHAREHOLDER REPRESENTATIONS; RELEASE
4.1 SHAREHOLDER REPRESENTATIONS. Each Shareholder severally, and not
jointly, represents and warrants to Parent and Merger Sub that:
(a) this Agreement has been duly and validly executed and delivered
by such Shareholder;
(b) this Agreement is a valid and binding obligation of such
Shareholder and is enforceable against such Shareholder in accordance with its
terms, subject to (i) laws of
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general application relating to bankruptcy, insolvency and the relief of
debtors, and (ii) rules of law governing specific performance, injunctive relief
and other equitable remedies;
(c) there is no action, suit, proceeding, dispute, litigation,
claim, complaint or investigation by or before any court, tribunal, governmental
body, governmental agency or arbitrator pending or, to the Knowledge of such
Shareholder, threatened against such Shareholder that challenges or would
challenge the execution and delivery of this Agreement or the taking of any of
the actions required to be taken by such Shareholder under this Agreement;
(d) neither the execution and delivery of this Agreement nor the
performance hereof will (i) result in any violation or breach of any agreement
or other instrument to which such Shareholder is a party or by which such
Shareholder is bound, or (ii) result in a violation or any law, rule,
regulation, treaty, ruling, directive, order, arbitration award, judgment or
decree to which such Shareholder is subject; and
(e) no authorization, instruction, consent or approval of any person
or entity is required to be obtained by such Shareholder in connection with the
execution and delivery of this Agreement or the performance hereof.
4.2 INVESTMENT REPRESENTATIONS. Each of the Shareholders makes the
following certifications and representations in connection with his, her or its
receipt of Parent Common Stock in the Merger:
(a) The Shareholder represents and warrants that the Shareholder is
acquiring the shares of Parent Common Stock solely for the Shareholder's account
for investment and not with a view to or for sale or distribution of the shares
of Parent Common Stock or any part thereof. The Shareholder also represents that
the entire legal and beneficial interests of the shares of Parent Common Stock
the Shareholder is acquiring is being acquired for, and will be held for, the
Shareholder's account only.
(b) The Shareholder understands that the shares of Parent Common
Stock have not been registered under the Securities Act, on the basis that no
distribution or public offering of the Shares is to be effected. The Shareholder
realizes that the basis for the exemption may not be present if, notwithstanding
the Shareholder's representations, the Shareholder has in mind merely acquiring
the shares of Parent Common Stock for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does not rise. The
Shareholder has no such intention.
(c) The Shareholder recognizes that the shares of Parent Common
Stock being acquired by the Shareholder must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. The Shareholder recognizes that Parent has no
obligation to register the shares of Parent Common Stock or to comply with any
exemption from such registration.
(d) The Shareholder is aware that the shares of Parent Common Stock
may not be sold pursuant to Rule 144 and/or Rule 145 adopted under the
Securities Act ("Rule 144/145") unless certain conditions are met and until the
Shareholder has held the shares of Parent Common Stock for at least one year.
Among the conditions for use of Rule 144/145 is the
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availability of current information to the public about Parent. The Shareholder
understands that Parent has not made such information available.
(e) The Shareholder further agrees not to make any disposition of
all or any part of the shares of Parent Common Stock being acquired in any event
unless and until:
(i) The shares of Parent Common Stock are transferred pursuant
to Rule 144/145, and Parent shall have received from the Shareholder
documentation acceptable to Parent that a sale of the shares of Parent Common
Stock has occurred in accordance with all of the provisions of Rule 144/145; or
(ii) Parent shall have received a letter secured by the
Shareholder from the SEC stating that no action will be recommended to the SEC
with respect to the proposed disposition; or
(iii) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with said registration statement; or
(iv) (1) The Shareholder shall have notified Parent of the
proposed disposition and shall have furnished Parent with a detailed statement
of the circumstances surrounding the proposed disposition, (2) the Shareholder
shall have furnished Parent with an opinion of counsel for the Shareholder to
the effect that such disposition will not require registration of such shares of
Parent Common Stock under the Securities Act, and (3) such opinion of counsel
for the Shareholder shall have been concurred in by Parent's counsel and Parent
shall have advised the Shareholder of such concurrence.
(f) The Shareholder understands and agrees that all certificates
evidencing the shares of Parent Common Stock to be issued to the Shareholder may
bear the following legend:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO
THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
4.3 MARKET STAND-OFF AGREEMENT. Each of the Shareholders acknowledges
and agrees that in connection with the first underwritten registration of the
offering of any securities of Parent under the Securities Act, the Shareholder
will not sell or otherwise transfer or dispose of any common stock or any other
stock or other securities of Parent during such period (not to exceed one
hundred eighty (180) days) following the effective date of the registration
statement of Parent filed under the Securities Act as may be requested by the
representative of Parent's underwriters or by Parent (based upon the request of
Parent's underwriters); provided that the foregoing shall be effective only if
all officers and directors of Parent who then hold common stock (or other
securities of Parent) enter into similar agreements. Each Shareholder further
agrees that Parent may impose stop-transfer instructions with respect to
securities subject to the
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foregoing restrictions until the end of such period and the Shareholder will
enter into further agreements requested by Parent and/or Parent's underwriters
from time to time to further document the foregoing agreement.
4.4 RELEASE.
(a) Each Shareholder, for himself and for each of such Shareholder's
Associated Parties, hereby generally, irrevocably, unconditionally and
completely releases and forever discharges each of the Releasees from, and
hereby irrevocably, unconditionally and completely waives and relinquishes, each
of the Released Claims.
(b) Each Shareholder also hereby waives the benefits of, and any
rights such Shareholder may have under, any statute or common law principle of
similar effect in any jurisdiction with respect to the Released Claims.
(c) Each Shareholder further represents and warrants that:
(i) such Shareholder has not assigned, transferred, conveyed or
otherwise disposed of any Shareholder Claim against any of the Releasees, or any
direct or indirect interest in any such Shareholder Claim, in whole or in part;
(ii) to the Shareholder's Knowledge, no other person or entity
has any interest in any of the Released Claims;
(iii) no Associated Party of such Shareholder has or had any
Shareholder Claim against any of the Releasees;
(iv) no Associated Party of such Shareholder will in the future
have any Shareholder Claim against any Releasee that arises directly or
indirectly from or relates directly or indirectly to any circumstance,
agreement, activity, action, omission, event or matter occurring or existing on
or before the date of this Agreement;
(d) Without in any way limiting any of the rights or remedies
otherwise available to any Releasee and notwithstanding any other provision of
this Agreement (including, without limitation, the provisions of Section 9),
each Shareholder shall indemnify and hold harmless each Releasee against and
from any loss, damage, injury, harm, detriment, lost opportunity, liability,
exposure, claim, demand, settlement, judgment, award, fine, penalty, tax, fee,
charge or expense (including attorneys' fees) that is directly or indirectly
suffered or incurred at any time by such Releasee, or to which such Releasee
otherwise becomes subject at any time, and that arises directly or indirectly
out of or by virtue of, or relates directly or indirectly to, (a) any failure on
the part of such Shareholder to observe, perform or abide by, or any other
breach of, any restriction, covenant, obligation, representation, warranty or
other provision contained in this Section 4.4, or (b) the assertion or purported
assertion of any of the Released Claims by such Shareholder or any of such
Shareholder's Associated Parties.
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SECTION 5. CERTAIN COVENANTS OF THE PARTIES
5.1 FILINGS AND CONSENTS. As promptly as practicable after the execution
of this Agreement, each party to this Agreement (a) shall make all filings (if
any) and give all notices (if any) required to be made and given by such party
in connection with the Merger and the other transactions contemplated by this
Agreement, and (b) shall use all commercially reasonable efforts to obtain all
Consents (if any) required to be obtained (pursuant to any applicable Legal
Requirement or Contract, or otherwise) by such party in connection with the
Merger and the other transactions contemplated by this Agreement. The Company
shall (upon request) promptly deliver to Parent a copy of each such filing made,
each such notice given and each such Consent obtained by the Company during the
Pre-Closing Period.
5.2 NOTICE FILING. Promptly after the execution of this Agreement, the
Company and Parent shall prepare and cause to be filed a Form D under Rule 506
of the Securities Act and such other state securities filings as may be required
under any applicable state securities laws.
5.3 COMPANY SHAREHOLDERS' CONSENT. Concurrently with the execution of
this Agreement, the Company shall, in accordance with its articles of
incorporation and bylaws and the applicable requirements of the URBCA, cause its
shareholders who represent at least ninety percent (90%) of the outstanding
shares of Company Common Stock to execute written consents approving the Merger
and this Agreement.
5.4 PUBLIC ANNOUNCEMENTS. During the Pre-Closing Period, neither the
Company nor any of the Shareholders nor Parent shall (and neither the Company
nor Parent shall permit any of its Representatives to) issue any press release
or make any public statement regarding this Agreement or the Merger, or
regarding any of the other transactions contemplated by this Agreement, without
the other party's prior written consent, except as required by law and except
that Parent may disclose this Agreement and file it with the SEC in accordance
with applicable federal securities laws.
5.5 BEST EFFORTS. During the Pre-Closing Period, (a) the Company and the
Shareholders shall use their best efforts to cause the conditions set forth in
Section 6 to be satisfied on a timely basis, and (b) Parent and Merger Sub shall
use their best efforts to cause the conditions set forth in Section 7 to be
satisfied on a timely basis.
5.6 EMPLOYMENT AND NONCOMPETITION AGREEMENTS. At or prior to the
Closing, each of the Persons identified on EXHIBIT E shall execute and deliver
to the Company and Parent an Employment Agreement and a Noncompetition Agreement
in a form acceptable to Parent. The Company shall use best efforts to cause such
individuals to execute and deliver to the Parent, at the Closing, an Employment
Agreement and a Noncompetition Agreement.
5.7 [INTENTIONALLY OMITTED] .
5.8 TERMINATION OF EMPLOYEE PLANS. At the Closing, the Company shall
terminate its Company Plan, and shall ensure that no employee or former employee
of the Company to certain of the Company's employees and affiliates has any
rights under such Plan and that any liabilities of the Company under such Plan
(including any such liabilities relating to services performed prior to the
Closing) are fully extinguished at no cost to the Company or Parent.
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5.9 FIRPTA MATTERS. At the Closing, (a) the Company shall deliver to
Parent a statement (in such form as may be reasonably requested by counsel to
Parent) conforming to the requirements of Section 1.897 - 2(h)(1)(i) of the
United States Treasure Regulations, and (b) the Company shall deliver to the
Internal Revenue Service the notification required under Xxxxxxx 0.000 - 0(x)(0)
xx xxx Xxxxxx Xxxxxx Treasury Regulations.
5.10 COMPANY LOCATION. Following the Effective Time, Parent will use
commercially reasonable efforts to maintain the surviving Corporation's
operations in or around Salt Lake City, Utah; provided, however, that Parent
shall not be restricted from relocating the operations of the Company if
Parent's board of directors determines in good faith that it is in the best
interests of Parent to relocate such operations.
5.11 RETENTION OF COMPANY EMPLOYEES. Following the Effective Time,
Parent shall cause the Company to offer the employees of the Company salary
compensation at the same levels as in effect prior to the Effective Time, Parent
will offer such employees participation in Parent's health and benefit plans,
and employees of the Company will be eligible to participate in Parent's
company-wide bonus plan, if any, and in the Parent Plan; provided, however, that
except as expressly provided in this Agreement, such employees will not receive
any bonuses or stock awards under the Parent Plan in connection with such
employees becoming employees of Parent in connection with the Merger, and
provided further that nothing in this Agreement shall prevent Parent from
adjusting salaries, benefit levels or bonus criteria and levels from time to
time following the Effective Time in the sole discretion of its board of
directors.
5.12 ALLOCATION FOR FUTURE STOCK OPTIONS. Following the Effective Time,
Parent shall allocate at least 75,000 shares of Parent Common Stock for issuance
to future new-hires of the Company under the Parent Plan. Such grants to any new
employees will be made as determined by the board of directors of Parent and
upon terms no more favorable than grants made to other participants under the
Parent Plan.
5.13 ACCESS AND INVESTIGATION. During the period from the date of this
Agreement through the Effective Time (the "Pre-Closing Period"), the Company
shall, and shall cause its Representatives to: (a) provide Parent and Parent's
Representatives with reasonable access to the Company's Representatives,
personnel and assets and to all existing books, records, Tax Returns, work
papers and other documents and information relating to the Company; and (b)
provide Parent and Parent's Representatives with copies of such existing books,
records, Tax Returns, work papers and other documents and information relating
to the Company, and with such additional financial, operating and other data and
information regarding the Company, as Parent may reasonably request. During the
period from the date of this Agreement through the Effective Time (the
"Pre-Closing Period"), Parent shall, and shall cause its Representatives to: (a)
provide the Company and the Company's Representatives with reasonable access to
Parent's Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and information relating
to Parent; and (b) provide the Company and the Company's Representatives with
copies of such existing books, records, Tax Returns, work papers and other
documents and information relating to Parent, and with such additional
financial, operating and other data and information regarding Parent, as the
Company may reasonably request.
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5.14 OPERATION OF THE COMPANY'S BUSINESS. During the Pre-Closing Period:
(a) the Company shall conduct its business and operations in the
ordinary course and in substantially the same manner as such business and
operations have been conducted prior to the date of this Agreement;
(b) the Company shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
material suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with the Company;
(c) the Company shall keep in full force all material insurance
policies identified in Part 2.17 of the Company Disclosure Schedule;
(d) the Company shall not declare, accrue, set aside or pay any
dividend or make any other distribution in respect of any shares of capital
stock, and shall not repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities (except that the Company may repurchase
Company Common Stock from former employees pursuant to the terms of existing
restricted stock purchase agreements);
(e) the Company shall not sell, issue or authorize the issuance of
(i) any capital stock or other security, (ii) any option or right to acquire any
capital stock or other security, or (iii) any instrument convertible into or
exchangeable for any capital stock or other security (except that the Company
shall be permitted (y) to grant stock options to employees in accordance with
its past practices, and (z) to issue Company Common Stock to employees upon the
exercise of outstanding Company Options);
(f) the Company shall not amend or waive any of its rights under, or
permit the acceleration of vesting under, (i) any provision of any agreement
evidencing any outstanding Company Option, or (ii) any provision of any
restricted stock purchase agreement;
(g) the Company shall not amend or permit the adoption of any
amendment to the Company's articles of incorporation or bylaws, or effect or
permit the Company to become a party to any Company Acquisition Transaction,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(h) the Company shall not form any subsidiary or acquire any equity
interest or other interest in any other Entity;
(i) the Company shall not make any capital expenditure, except for
capital expenditures that, when added to all other capital expenditures made on
behalf of the Company during the Pre-Closing Period, do not exceed $5,000 per
month;
(j) the Company shall not (i) enter into, or permit any of the
assets owned or used by it to become bound by, any Contract that is or would
constitute a Company Material Contract, or (ii) amend or prematurely terminate,
or waive any material right or remedy under, any such material Contract;
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(k) the Company shall not (i) acquire, lease or license any right or
other asset from any other Person, (ii) sell or otherwise dispose of, or lease
or license, any right or other asset to any other Person, or (iii) waive or
relinquish any right, except for assets acquired, leased, licensed or disposed
of by the Company pursuant to Contracts that are not Company Material Contracts;
(l) the Company shall not (i) lend money to any Person (except that
the Company may make routine travel advances to employees in the ordinary course
of business and may, consistent with its past practices, allow employees to
acquire Company Common Stock in exchange for promissory notes upon exercise of
Company Options), or (ii) incur or guarantee any indebtedness for borrowed money
in excess of $25,000;
(m) the Company shall not (i) establish, adopt or amend any Employee
Benefit Plan, (ii) pay any bonus or make any profit-sharing payment, cash
incentive payment or similar payment to, or increase the amount of the wages,
salary, commissions, fringe benefits or other compensation or remuneration
payable to, any of its directors, officers or employees unless in the ordinary
course of business and consistent with post practices, or (iii) hire any new
employee whose aggregate annual compensation is expected to exceed $40,000;
(n) the Company shall not change any of its methods of accounting or
accounting practices in any material respect;
(o) the Company shall not make any material Tax election;
(p) the Company shall not commence or settle any material Legal
Proceeding;
(q) the Company shall not agree or commit to take any of the actions
described in clauses "(e)" through "(p)" above.
Notwithstanding the foregoing, the Company may take any action described in
clauses "(e)" through "(q)" above if Parent gives its prior written consent to
the taking of such action by the Company, which consent will not be unreasonably
withheld.
5.15 OPERATION OF PARENT'S BUSINESS. During the Pre-Closing Period:
(a) Parent shall conduct its business and operations in the ordinary
course and in substantially the same manner as such business and operations have
been conducted prior to the date of this Agreement;
(b) Parent shall use reasonable efforts to preserve intact its
current business organization, keep available the services of its current
officers and employees and maintain its relations and good will with all
material suppliers, customers, landlords, creditors, employees and other Persons
having business relationships with Parent;
(c) Parent shall not commence or settle any material Legal
Proceeding;
(d) Parent shall not agree or commit to take any of the actions
described in clauses "(a)" through "(c)" above.
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Notwithstanding the foregoing, Parent may take any action described in clause
"(c)" above if the Company gives its prior written consent to the taking of such
action by Parent, which consent will not be unreasonably withheld.
5.16 NOTIFICATION; UPDATES TO COMPANY DISCLOSURE SCHEDULE.
(a) During the Pre-Closing Period, the Company shall promptly notify
Parent in writing of:
(i) the discovery by the Company of any event, condition, fact
or circumstance that occurred or existed on or prior to the date of this
Agreement and that caused or constitutes an inaccuracy in or breach of any
representation or warranty made by the Company in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
the Company in this Agreement if (A) such representation or warranty had been
made as of the time of the occurrence, existence or discovery of such event,
condition, fact or circumstance, or (B) such event, condition, fact or
circumstance had occurred, arisen or existed on or prior to the date of this
Agreement;
(iii) any breach of any covenant or obligation of the Company or
any of the Shareholders; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
(b) During the Pre-Closing Period, Parent shall promptly notify the
Company in writing of:
(i) the discovery by Parent of any event, condition, fact or
circumstance that occurred or existed on or prior to the date of this Agreement
and that caused or constitutes an inaccuracy in or breach of any representation
or warranty made by Parent in this Agreement;
(ii) any event, condition, fact or circumstance that occurs,
arises or exists after the date of this Agreement and that would cause or
constitute an inaccuracy in or breach of any representation or warranty made by
Parent in this Agreement if (A) such representation or warranty had been made as
of the time of the occurrence, existence or discovery of such event, condition,
fact or circumstance, or (B) such event, condition, fact or circumstance had
occurred, arisen or existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of Parent; and
(iv) any event, condition, fact or circumstance that would make
the timely satisfaction of any of the conditions set forth in Section 6 or
Section 7 impossible or unlikely.
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(c) If any event, condition, fact or circumstance that is required
to be disclosed pursuant to Section 5.16(a) or 5.16(b) requires any change in
the Company's or Parent's Disclosure Schedule, as the case may be, or if any
such event, condition, fact or circumstance would require such a change assuming
the Company Disclosure Schedule or Parent Disclosure Schedule, as applicable,
were dated as of the date of the occurrence, existence or discovery of such
event, condition, fact or circumstance, then the Company or Parent, as
applicable, shall promptly deliver to Parent or the Company, as applicable, an
update to the Company Disclosure Schedule or Parent Disclosure Schedule
specifying such change. No such update shall be deemed to supplement or amend
the Company Disclosure Schedule or Parent Disclosure Schedule for the purpose of
(i) determining the accuracy of any of the representations and warranties made
by the Company or Parent in this Agreement, or (ii) determining whether any of
the conditions set forth in Section 6 has been satisfied.
5.17 NO COMPANY NEGOTIATION. During the Pre-Closing Period, neither the
Company nor any of the Shareholders shall, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Company
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Company Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Company Acquisition
Transaction.
The Company shall promptly notify Parent in writing of any inquiry, proposal or
offer relating to a possible Company Acquisition Transaction that is received by
the Company or any of the Shareholders during the Pre-Closing Period.
5.18 NO PARENT NEGOTIATION. During the Pre-Closing Period, Parent shall
not, directly or indirectly:
(a) solicit or encourage the initiation of any inquiry, proposal or
offer from any Person (other than Parent) relating to a possible Parent
Acquisition Transaction;
(b) participate in any discussions or negotiations or enter into any
agreement with, or provide any non-public information to, any Person (other than
Parent) relating to or in connection with a possible Parent Acquisition
Transaction; or
(c) consider, entertain or accept any proposal or offer from any
Person (other than Parent) relating to a possible Parent Acquisition
Transaction.
Parent shall promptly notify the Company in writing of any material inquiry,
proposal or offer relating to a possible Parent Acquisition Transaction that is
received by Parent during the Pre-Closing Period.
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SECTION 6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PARENT AND MERGER SUB
The obligations of Parent and Merger Sub to effect the Merger and
otherwise consummate the transactions contemplated by this Agreement are subject
to the satisfaction, at or prior to the Closing, of each of the following
conditions:
6.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by the Company in this Agreement and in each of the other
agreements and instruments delivered to Parent in connection with the
transactions contemplated by this Agreement shall have been accurate in all
material respects as of the date of this Agreement (without giving effect to any
"Company Material Adverse Effect" or other materiality qualifications, or any
similar qualifications, contained or incorporated directly or indirectly in such
representations and warranties), and shall be accurate in all material respects
as of the Closing Date as if made at the Closing Date without giving effect to
any "Company Material Adverse Effect" or other materiality qualifications, or
any similar qualifications, contained or incorporated directly or indirectly in
such representations and warranties).
6.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
the Company and the Shareholders are required to comply with or to perform at or
prior to the Closing shall have been complied with and performed in all material
respects.
6.3 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this Agreement (including
the Consents identified in Part 2.21 of the Company Disclosure Schedule) shall
have been obtained and shall be in full force and effect.
6.4 SHAREHOLDER APPROVAL. The principal terms of the Merger shall have
been duly approved by the affirmative vote of 90% of the shares of Company
Common Stock entitled to vote with respect thereto.
6.5 AGREEMENTS AND DOCUMENTS. Parent shall have received the following
agreements and documents, each of which shall be in full force and effect:
(a) Employment Agreements in a form acceptable to Parent, executed
by Xxx Xxxxx and Xxxxx Xxxxx;
(b) confidential invention and assignment agreements, reasonably
satisfactory in form and content to Parent, executed by all employees of the
Company and by all consultants and independent contractors to the Company who
have not already signed such agreements (including the individuals identified in
Part 2.9(f) of the Company Disclosure Schedule);
(c) an estoppel certificate, dated as of a date not more than five
days prior to the Closing Date and satisfactory in form and content to Parent,
executed by [Landlord];
(d) a certificate executed by the Chief Executive Officer of the
Company to the effect that each of the representations and warranties set forth
in Section 2 is accurate in all
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respects as of the Closing Date as if made on the Closing Date and that the
conditions set forth in Sections 6.1, 6.2, 6.3 and 6.4 have been duly satisfied
(the "Closing Certificate");
(e) an executed stock option agreement in the form acceptable to
Parent from each holder of a Company Option who will receive a Parent
Substituted Option upon the Merger;
(f) a legal opinion of Xxxxxxx Xxxxx & Xxxxx LLP, dated as of the
Closing Date, in the form of EXHIBIT F; and
(g) written resignations of all directors and officers of the
Company (other than those directors and officers listed on EXHIBIT C, which
shall have been duly appointed), effective as of the Effective Time.
6.6 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
6.7 NO LEGAL PROCEEDINGS. No Person shall have commenced or threatened
to commence any Legal Proceeding challenging or seeking the recovery of a
material amount of damages in connection with the Merger or seeking to prohibit
or limit the exercise by Parent of any material right pertaining to its
ownership of stock of the Surviving Corporation.
6.8 EMPLOYEES. None of Xxx Xxxxx, Xxxxxx Xxxxx or Xxxxxx Xxxxxx shall
have ceased to be employed by, or expressed an intention to terminate their
employment with, the Company.
SECTION 7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY
The obligations of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement are subject to the
satisfaction, at or prior to the Closing, of the following conditions:
7.1 ACCURACY OF REPRESENTATIONS. Each of the representations and
warranties made by Parent and Merger Sub in this Agreement shall have been
accurate in all material respects as of the date of this Agreement (without
giving effect to any materiality or similar qualifications contained in such
representations and warranties), and shall be accurate in all material respects
as of the Closing Date as if made at the Closing Date (without giving effect to
any materiality or similar qualifications contained in such representations and
warranties).
7.2 PERFORMANCE OF COVENANTS. All of the covenants and obligations that
Parent and Merger Sub are required to comply with or to perform at or prior to
the Closing shall have been complied with and performed in all material
respects.
7.3 LEGAL OPINION. The Company shall have received a legal opinion of
Xxxxxx Godward llp, dated as of the Closing Date, in the form of EXHIBIT G.
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7.4 NO RESTRAINTS. No temporary restraining order, preliminary or
permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
7.5 NO LEGAL PROCEEDINGS. No Person shall have commenced any Legal
Proceeding challenging or seeking to prevent consummation of the Merger.
7.6 CONSENTS. All Consents required to be obtained in connection with
the Merger and the other transactions contemplated by this shall have been
obtained and shall be in full force and effect; provided that if Parent elects
to indemnify the Company and the Shareholders against any damages on account of
the failure to obtain such Consents, this condition may be waived by Parent.
SECTION 8. TERMINATION
8.1 TERMINATION EVENTS. This Agreement may be terminated prior to the
Closing:
(a) by Parent if Parent reasonably determines that the timely
satisfaction of any condition set forth in Section 6 has become impossible
(other than as a result of any failure on the part of Parent or Merger Sub to
comply with or perform any covenant or obligation of Parent or Merger Sub set
forth in this Agreement);
(b) by the Company if the Company reasonably determines that the
timely satisfaction of any condition set forth in Section 7 has become
impossible (other than as a result of any failure on the part of the Company or
any of the Shareholders to comply with or perform any covenant or obligation set
forth in this Agreement or in any other agreement or instrument delivered to
Parent);
(c) by Parent at or after the Closing Date if any condition set
forth in Section 6 has not been satisfied by the Effective Time;
(d) by the Company at or after the Closing Date if any condition set
forth in Section 7 has not been satisfied by the Effective Time;
(e) by Parent if the Closing has not taken place on or before
November 1, 1999 (other than as a result of any failure on the part of Parent to
comply with or perform any covenant or obligation of Parent set forth in this
Agreement);
(f) by the Company if the Closing has not taken place on or before
November 1, 1999 (other than as a result of the failure on the part of the
Company or any of the Shareholders to comply with or perform any covenant or
obligation set forth in this Agreement or in any other agreement or instrument
delivered to Parent); or
(g) by the mutual consent of Parent and the Company.
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8.2 TERMINATION PROCEDURES. If Parent wishes to terminate this Agreement
pursuant to Section 8.1(a), Section 8.1(c) or Section 8.1(e), Parent shall
deliver to the Company a written notice stating that Parent is terminating this
Agreement and setting forth a brief description of the basis on which Parent is
terminating this Agreement. If the Company wishes to terminate this Agreement
pursuant to Section 8.1(b), Section 8.1(d) or Section 8.1(f), the Company shall
deliver to Parent a written notice stating that the Company is terminating this
Agreement and setting forth a brief description of the basis on which the
Company is terminating this Agreement.
8.3 EFFECT OF TERMINATION. If this Agreement is terminated pursuant to
Section 8.1, all further obligations of the parties under this Agreement shall
terminate; provided, however, that: (a) neither the Company, any Shareholder nor
Parent shall be relieved of any obligation or liability arising from any prior
breach by such party of any provision of this Agreement; (b) the parties shall,
in all events, remain bound by and continue to be subject to the provisions set
forth in Section 10; and (c) the Company shall, in all events, remain bound by
and continue to be subject to Section 5.4.
8.4 SURVIVAL OF CERTAIN COVENANTS. Notwithstanding anything to the
contrary herein, the Shareholders' covenants under Section 4.3 ("Market
Stand-Off Agreement") shall survive the Closing of the Merger and shall survive
the expiration of any of the representations and warranties hereunder.
SECTION 9. INDEMNIFICATION, ETC.
9.1 SURVIVAL OF REPRESENTATIONS, ETC.
(a) The representations and warranties of the Company (including the
representations and warranties set forth in Section 2 and the representations
and warranties set forth in the Closing Certificate) shall survive the Closing
and shall expire on the first anniversary of the Closing Date (the "Expiration
Date"); provided, however, that if, at any time prior to the Expiration Date,
any Parent Indemnitee delivers to the Shareholders' Agent a written notice
alleging the existence of an inaccuracy in or a breach of any of the
representations and warranties made by the Company (and setting forth in
reasonable detail the basis for such Parent Indemnitee's belief that such an
inaccuracy or breach may exist) and asserting a claim for recovery under Section
9.2 based on such alleged inaccuracy or breach, then the claim asserted in such
notice shall survive the Expiration Date until such time as such claim is fully
and finally resolved. All representations and warranties made by Parent and
Merger Sub shall terminate and expire on the Expiration Date, and any liability
of Parent or Merger Sub with respect to such representations and warranties
shall thereupon cease; provided, however, that if prior to the Expiration Date,
the Shareholders' Agent delivers to Parent a written notice alleging the
existence of an inaccuracy in or breach of any of the representations made by
Parent (and setting forth in reasonable detail the basis for the Shareholders'
Agent's belief that such an inaccuracy or breach may exist) and asserting a
claim for recovery under Section 9.3 based on such alleged inaccuracy or breach,
then the claim asserted in such notice shall survive the Expiration Date until
such time as such claim is fully and finally resolved.
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(b) The representations, warranties, covenants and obligations of
the Company, and the rights and remedies that may be exercised by the Parent
Indemnitees, shall not be limited or otherwise affected by or as a result of any
information furnished to, or any investigation made by or knowledge of, any of
the Parent Indemnitees or any of their Representatives. The representations,
warranties, covenants and obligations of Parent, and the rights and remedies
that may be exercised by the Shareholder Indemnitees, shall not be limited or
otherwise affected by or as a result of any information furnished to, or any
investigation made by or knowledge of, any of the Shareholder Indemnitees or any
of their Representatives.
(c) For purposes of this Agreement, each statement or other item of
information set forth with respect to the Company in the Company Disclosure
Schedule or in any update to the Company Disclosure Schedule shall be deemed to
be a representation and warranty made by the Company in this Agreement, and each
statement or other item of information set forth with respect to Parent in the
Parent Disclosure Schedule or in any update to the Parent Disclosure Schedule
shall be deemed to be a representation and warranty made by Parent in this
Agreement.
9.2 INDEMNIFICATION BY SHAREHOLDERS.
(a) From and after the Effective Time (but subject to Section 9.1(a)
and Section 9.4(a)), the Shareholders, jointly and severally, shall hold
harmless and indemnify each of the Parent Indemnitees from and against, and
shall compensate and reimburse each of the Parent Indemnitees for, any Damages
which are directly or indirectly suffered or incurred by any of the Parent
Indemnitees or to which any of the Parent Indemnitees may otherwise become
subject (regardless of whether or not such Damages relate to any third-party
claim) and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty set forth in Section 2 or in the Closing Certificate (without giving
effect to any "Material Adverse Effect" or other materiality qualification or
any similar qualification contained or incorporated directly or indirectly in
such representation or warranty, but giving effect to any update to the Company
Disclosure Schedule delivered by the Company to Parent prior to the Closing);
(ii) any breach of any covenant or obligation of the Company or any of the
Shareholders (including the covenants set forth in Section 5); (iii) any Legal
Proceeding relating to any inaccuracy or breach of the type referred to in
clause "(i)" or "(ii)" above (including any Legal Proceeding commenced by any
Parent Indemnitee for the purpose of enforcing any of its rights under this
Section 9); or (iv) any claim or right of, or dispute with Xxxx Xxxxx related to
the ownership of or right to acquire any securities or other assets or property
of the Company.
(b) The Shareholders acknowledge and agree that, if the Surviving
Corporation suffers, incurs or otherwise becomes subject to any Damages as a
result of or in connection with any inaccuracy in or breach of any
representation, warranty, covenant or obligation, then (without limiting any of
the rights of the Surviving Corporation as a Parent Indemnitee) Parent shall
also be deemed, by virtue of its ownership of the stock of the Surviving
Corporation, to have incurred Damages as a result of and in connection with such
inaccuracy or breach.
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9.3 INDEMNIFICATION BY PARENT. From and after the Effective Time (but
subject to Section 9.1(a) and Section 9.4(b)), Parent shall hold harmless and
indemnify each of the Shareholder Indemnitees from and against, and shall
compensate and reimburse each of the Shareholder Indemnitees for, any Damages
which are directly or indirectly suffered or incurred by any of the Shareholder
Indemnitees or to which any of the Shareholder Indemnitees may otherwise become
subject (regardless of whether or not such Damages relate to any third-party
claim) and which arise from or as a result of, or are directly or indirectly
connected with: (i) any inaccuracy in or breach of any representation or
warranty set forth in Section 3 (without giving effect to any "Material Adverse
Effect" or other materiality qualification or any similar qualification
contained or incorporated directly or indirectly in such representation or
warranty, but giving effect to any update to the Parent Disclosure Schedule
delivered by Parent to the Company prior to the Closing); (ii) any breach of any
covenant or obligation of Parent or Merger Sub (including the covenants set
forth in Section 5); or (iii) any Legal Proceeding relating to any inaccuracy or
breach of the type referred to in clause "(i)" or "(ii)" above (including any
Legal Proceeding commenced by any Shareholder Indemnitee for the purpose of
enforcing any of its rights under this Section 9).
9.4 LIMITED REMEDIES.
(a) The sole and exclusive remedy of the Parent Indemnitees under
this Section 9 shall be cancellation of the Shareholders Indemnity Shares in
accordance with the terms of the Escrow Agreement.
(b) Parent will have no liability (for indemnification or otherwise)
under this Section 9 for any Damages which exceed the fair market value (as
determined by Parent's board of directors in its sole discretion) of the
Shareholders Indemnity Shares on the date of the Merger.
9.5 SATISFACTION OF INDEMNIFICATION CLAIMS.
(a) In the event any Shareholder shall have any liability (for
indemnification or otherwise) to any Parent Indemnitee under this Section 9,
Parent is authorized to make a claim against the Shareholders Indemnity Shares
by notifying the Escrow Agent in writing with a copy to the Shareholders' Agent
pursuant to the terms of the Escrow Agreement.
(b) In the event Parent shall have any liability (for
indemnification or otherwise) to any Shareholder Indemnitee under this Section
9, the Shareholders' Agent shall have the sole right to make a claim for
indemnification, reimbursement or contribution hereunder and shall do so by
notifying Parent in writing of such claim clearly stating the basis for such
claim. Parent shall have the option to satisfy such liability by delivering to
the Shareholders' Agent shares of Parent Common Stock equal in value to the
amount of the liability, such number of shares of Parent Common Stock to be
determined using the fair market value of Parent Common Stock (as determined
Parent's board of directors in its sole discretion) at the time the obligation
to make such payment accrues in accordance with this Section 9. Further, upon
notice to the Shareholders' Agent specifying in reasonable detail the basis for
such set-off, Parent may set off any amount to which it may be entitled to
receive under this Section 9 against amounts otherwise payable to Shareholder
Indemnitees.
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(c) Each of the Indemnitors will have the right to dispute the
validity of any claim submitted for indemnification, reimbursement or
contribution hereunder, provided that with respect to claims arising under
Section 9.2(a), any such dispute shall be carried out pursuant to the terms of
the Escrow Agreement.
9.6 NO CONTRIBUTION. Each Shareholder waives, and acknowledges and
agrees that he shall not have and shall not exercise or assert (or attempt to
exercise or assert), any right of contribution, right of indemnity or other
right or remedy against the Surviving Corporation in connection with any
indemnification obligation or any other liability to which he may become subject
under or in connection with this Agreement or the Closing Certificate.
9.7 THRESHOLD. No Indemnitor shall be required to make any
indemnification payment pursuant to Section 9.2(a) or Section 9.3, as
applicable, for any inaccuracy in or breach of any of the Company's or Parent's
and Merger Sub's representations and warranties set forth in Section 2 or
Section 3, as the case may be, until such time as the total amount of all
Damages (including the Damages arising from such inaccuracy or breach and all
other Damages arising from any other inaccuracies in or breaches of any
representations or warranties) that have been directly or indirectly suffered or
incurred by any one or more of the Parent Indemnitees or Shareholder
Indemnitees, as the case may be, or to which any one or more of the Parent
Indemnitees or Shareholder Indemnitees, as the case may be, has or have
otherwise become subject, exceeds $50,000 in the aggregate; provided, however,
that the threshold requirement will not apply to any indemnification obligation
related to any right or claim of, or dispute with Xxxx Xxxxx as contemplated in
Section 9.2(a), and Parent Indemnitees will be entitled to recover all Damages
arising therefrom. If the total amount of such Damages exceeds $50,000, then the
Parent Indemnitees or Shareholder Indemnitees, as the case may be, shall be
entitled to be indemnified against and compensated and reimbursed for all
Damages from the applicable Indemnitor.
9.8 DEFENSE OF THIRD PARTY CLAIMS.
(a) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Surviving Corporation,
against Parent or against any other Person) with respect to which any of the
Shareholders may become obligated to hold harmless, indemnify, compensate or
reimburse any Parent Indemnitee pursuant to this Section 9, Parent shall have
the right, at its election, to designate the Shareholders' Agent to assume the
defense of such claim or Legal Proceeding at the sole expense of the
Shareholders. If Parent so elects to designate the Shareholders' Agent to assume
the defense of any such claim or Legal Proceeding:
(i) the Shareholders' Agent shall proceed to defend such claim
or Legal Proceeding in a diligent manner with counsel satisfactory to Parent;
(ii) the Shareholders' Agent shall keep Parent informed of all
material developments and events relating to such claim or Legal Proceeding;
(iii) Parent shall have the right to participate in the defense
of such claim or Legal Proceeding;
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(iv) the Shareholders' Agent shall not settle, adjust or
compromise such claim or Legal Proceeding without the prior written consent of
Parent; and
(v) Parent may at any time (notwithstanding the prior
designation of the Shareholders' Agent to assume the defense of such claim or
Legal Proceeding) assume the defense of such claim or Legal Proceeding with
counsel selected by Parent.
If Parent does not elect to designate the Shareholders' Agent to assume the
defense of any such claim or Legal Proceeding (or if, after initially
designating the Shareholders' Agent to assume such defense, Parent elects to
assume such defense), Parent may proceed with the defense of such claim or Legal
Proceeding on its own, with counsel selected by Parent. If Parent so proceeds
with the defense of any such claim or Legal Proceeding:
(vi) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by the
Shareholders;
(vii) each Shareholder shall make available to Parent any
documents and materials in his possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
(viii) Parent shall have the right to settle, adjust or
compromise such claim or Legal Proceeding with the consent of the Shareholders'
Agent; provided, however, that such consent shall not be unreasonably withheld.
Parent shall give the Shareholders' Agent prompt notice of the commencement of
any such Legal Proceeding against Parent or the Surviving Corporation; provided,
however, that any failure on the part of Parent to so notify the Shareholders'
Agent shall not limit any of the obligations of the Shareholders under this
Section 9 (except to the extent such failure materially prejudices the defense
of such Legal Proceeding).
(b) In the event of the assertion or commencement by any Person of
any claim or Legal Proceeding (whether against the Shareholders or against any
other Person but specifically excluding any claim or Legal Proceeding brought
against Parent) with respect to which Parent may become obligated to hold
harmless, indemnify, compensate or reimburse any Shareholder Indemnitee pursuant
to this Section 9, the Shareholders' Agent shall have the right, at his
election, to designate Parent to assume the defense of such claim or Legal
Proceeding at the sole expense of Parent. If the Shareholders' Agent so elects
to designate Parent to assume the defense of any such claim or Legal Proceeding:
(i) Parent shall proceed to defend such claim or Legal
Proceeding in a diligent manner with counsel satisfactory to the Shareholders'
Agent;
(ii) Parent shall keep the Shareholders' Agent informed of all
material developments and events relating to such claim or Legal Proceeding;
(iii) the Shareholders' Agent shall have the right to
participate in the defense of such claim or Legal Proceeding;
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65
(iv) Parent shall not settle, adjust or compromise such claim or
Legal Proceeding without the prior written consent of the Shareholders' Agent;
and
(v) the Shareholders' Agent may at any time (notwithstanding the
prior designation of Parent to assume the defense of such claim or Legal
Proceeding but specifically excluding any claim or Legal Proceeding brought
against Parent) assume the defense of such claim or Legal Proceeding with
counsel selected by the Shareholders' Agent.
If the Shareholders' Agent does not elect to designate Parent to assume the
defense of any such claim or Legal Proceeding (or if, after initially
designating Parent Agent to assume such defense, the Shareholders' Agent elects
to assume such defense), the Shareholders' Agent may proceed with the defense of
such claim or Legal Proceeding on its own, with counsel selected by the
Shareholders' Agent. If the Shareholders' Agent so proceeds with the defense of
any such claim or Legal Proceeding:
(vi) all reasonable expenses relating to the defense of such
claim or Legal Proceeding shall be borne and paid exclusively by Parent;
(vii) Parent shall make available to the Shareholders' Agent any
documents and materials in its possession or control that may be necessary to
the defense of such claim or Legal Proceeding; and
(viii) the Shareholders' Agent shall have the right to settle,
adjust or compromise such claim or Legal Proceeding with the consent of Parent;
provided, however, that such consent shall not be unreasonably withheld.
The Shareholders' Agent shall give Parent prompt notice of the commencement of
any such Legal Proceeding against any Shareholder; provided, however, that any
failure on the part of the Shareholders' Agent to so notify Parent shall not
limit any of the obligations of Parent under this Section 9 (except to the
extent such failure materially prejudices the defense of such Legal Proceeding).
9.9 EXERCISE OF REMEDIES BY INDEMNITEES OTHER THAN PARENT OR
SHAREHOLDERS. No Indemnitee (other than Parent or a Shareholder or any successor
thereto or assign thereof) shall be permitted to assert any indemnification
claim or exercise any other remedy under this Agreement unless Parent or the
Shareholder, as the case may be (or any successor thereto or assign thereof),
shall have consented to the assertion of such indemnification claim or the
exercise of such other remedy.
SECTION 10. MISCELLANEOUS PROVISIONS
10.1 SHAREHOLDERS' AGENT. The Shareholders hereby irrevocably appoint
Xxx Xxxxx as their agent for purposes of Section 9 (the "Shareholders' Agent"),
and Xxx Xxxxx hereby accepts his appointment as the Shareholders' Agent. Parent
shall be entitled to deal exclusively with the Shareholders' Agent on all
matters relating to Section 9 and the Escrow Agreement, and shall be entitled to
rely conclusively (without further evidence of any kind whatsoever) on any
document executed or purported to be executed on behalf of any Shareholder by
the Shareholders' Agent, and on any other action taken or purported to be taken
on behalf of any
58.
66
Shareholder by the Shareholders' Agent, as fully binding upon such Shareholder.
If the Shareholders' Agent shall die, become disabled or otherwise be unable to
fulfill his responsibilities as agent of the Shareholders, then the Shareholders
shall, within ten days after such death or disability, appoint a successor agent
and, promptly thereafter, shall notify Parent of the identity of such successor.
Any such successor shall become the "Shareholders' Agent" for purposes of
Section 9 and this Section 10.1. If for any reason there is no Shareholders'
Agent at any time, all references herein to the Shareholders' Agent shall be
deemed to refer to the Shareholders.
10.2 FURTHER ASSURANCES. Each party hereto shall execute and cause to be
delivered to each other party hereto such instruments and other documents, and
shall take such other actions, as such other party may reasonably request (prior
to, at or after the Closing) for the purpose of carrying out or evidencing any
of the transactions contemplated by this Agreement.
10.3 FEES AND EXPENSES. Each party to this Agreement shall bear and pay
all fees, costs and expenses (including legal fees and accounting fees) that
have been incurred or that are incurred by such party in connection with the
transactions contemplated by this Agreement, including all fees, costs and
expenses incurred by such party in connection with or by virtue of (a) the
investigation and review conducted by Parent and its Representatives with
respect to the Company's business (and the furnishing of information to Parent
and its Representatives in connection with such investigation and review), (b)
the negotiation, preparation and review of this Agreement (including the
Disclosure Schedules) and all agreements, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
transactions contemplated by this Agreement, (c) the preparation and submission
of any filing or notice required to be made or given in connection with any of
the transactions contemplated by this Agreement, and the obtaining of any
Consent required to be obtained in connection with any of such transactions, and
(d) the consummation of the Merger; provided, however, that, to the extent the
total amount of all such fees, costs and expenses incurred by or for the benefit
of the Company (including all such fees, costs and expenses incurred prior to
the date of this Agreement) exceeds $150,000 in the aggregate, such fees, costs
and expenses shall be borne and paid by the Shareholders and not by the Company.
10.4 ATTORNEYS' FEES. If any action or proceeding relating to this
Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto, the prevailing party shall be entitled to recover
reasonable attorneys' fees, costs and disbursements (in addition to any other
relief to which the prevailing party may be entitled).
10.5 NOTICES. Any notice or other communication required or permitted to
be delivered to any party under this Agreement shall be in writing and shall be
deemed properly delivered, given and received when delivered (by hand, by
registered mail, by courier or express delivery service or by facsimile) to the
address or facsimile telephone number set forth beneath the name of such party
below (or to such other address or facsimile telephone number as such party
shall have specified in a written notice given to the other parties hereto):
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IF TO PARENT:
xxxxxxx.xxx, Inc.
Attn: Chief Executive Officer
00000 Xxxxxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxx Xxxxx, XX 00000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Cooley Godward LLP
Attn: Xxxxxx X. Xxxxxx, Esq.
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, XX 00000-0000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
IF TO THE COMPANY:
PartNET, INC.
Attn: President
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Telephone Number: (000) 000-0000.
Facsimile: (000) 000-0000.
WITH A COPY TO (WHICH SHALL NOT CONSTITUTE NOTICE):
Xxxxxxx Xxxxx & Xxxxx LLP
Attn: Xxxxx Xxxxxxx, Esq.
Xxx Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000-0000
Telephone Number: (000) 000-0000
Facsimile: (000) 000-0000
IF TO ANY OF THE SHAREHOLDERS:
c/o Xxx Xxxxx
000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Telephone Number: (000) 000-0000.
Facsimile: (000) 000-0000.
10.6 CONFIDENTIALITY. Without limiting the generality of anything
contained in Section 5.4, on and at all times after the Closing Date, each
Shareholder shall keep confidential, and shall not use or disclose to any other
Person, any non-public document or other non-public
60.
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information in such Shareholder's possession that relates to the business of the
Company or Parent.
10.7 TIME OF THE ESSENCE. Time is of the essence of this Agreement.
10.8 HEADINGS. The underlined headings contained in this Agreement are
for convenience of reference only, shall not be deemed to be a part of this
Agreement and shall not be referred to in connection with the construction or
interpretation of this Agreement.
10.9 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one agreement.
10.10 GOVERNING LAW. Except with respect to the effect of the Merger,
which shall be governed by Utah law, this Agreement shall be construed in
accordance with, and governed in all respects by, the internal laws of the State
of California (without giving effect to principles of conflicts of laws).
10.11 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon: the
Company and its successors and assigns (if any); the Shareholders and their
respective personal representatives, executors, administrators, estates, heirs,
successors and assigns (if any); Parent and its successors and assigns (if any);
and Merger Sub and its successors and assigns (if any). This Agreement shall
inure to the benefit of: the Company; the Company's shareholders (to the extent
set forth in Section 1.5); Parent; Merger Sub; the other Indemnitees (subject to
Section 9.9); and the respective successors and assigns (if any) of the
foregoing.
10.12 REMEDIES CUMULATIVE; SPECIFIC PERFORMANCE. The rights and remedies
of the parties hereto shall be cumulative (and not alternative). The parties to
this Agreement agree that, in the event of any breach or threatened breach by
any party to this Agreement of any covenant, obligation or other provision set
forth in this Agreement for the benefit of any other party to this Agreement,
such other party shall be entitled (in addition to any other remedy that may be
available to it) to (a) a decree or order of specific performance or mandamus to
enforce the observance and performance of such covenant, obligation or other
provision, and (b) an injunction restraining such breach or threatened breach.
10.13 WAIVER.
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part of any
Person in exercising any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or remedy; and no
single or partial exercise of any such power, right, privilege or remedy shall
preclude any other or further exercise thereof or of any other power, right,
privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or remedy is
expressly set forth in a written instrument duly
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executed and delivered on behalf of such Person; and any such waiver shall not
be applicable or have any effect except in the specific instance in which it is
given.
10.14 AMENDMENTS. This Agreement may not be amended, modified, altered
or supplemented other than by means of a written instrument duly executed and
delivered on behalf of all of the parties hereto.
10.15 SEVERABILITY. In the event that any provision of this Agreement,
or the application of any such provision to any Person or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to Persons or circumstances other than those as to which it is determined to be
invalid, unlawful, void or unenforceable, shall not be impaired or otherwise
affected and shall continue to be valid and enforceable to the fullest extent
permitted by law.
10.16 PARTIES IN INTEREST. Except for the provisions of Sections 1.6,
4.4 and 9, none of the provisions of this Agreement is intended to provide any
rights or remedies to any Person other than the parties hereto and their
respective successors and assigns (if any).
10.17 ENTIRE AGREEMENT. This Agreement and the other agreements referred
to herein set forth the entire understanding of the parties hereto relating to
the subject matter hereof and thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter hereof and thereof.
10.18 CONSTRUCTION.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the masculine
gender shall include the feminine and neuter genders; the feminine gender shall
include the masculine and neuter genders; and the neuter gender shall include
the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party shall not
be applied in the construction or interpretation of this Agreement.
(c) As used in this Agreement, the words "include" and "including,"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words "without limitation."
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this Agreement
and Exhibits to this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
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The parties hereto have caused this Agreement to be executed and delivered
as of the date first set forth above.
PARENT:
XXXXXXX.XXX, INC.,
a Delaware corporation.
By: /s/ XXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: CEO: President
MERGER SUB:
MEDIBUY ACQUISITION CORPORATION,
a Utah corporation.
By: /s/ XXXXXX X. XXXXXX
---------------------------------
Name: Xxxxxx X. Xxxxxx
Title: CEO: President
COMPANY:
PARTNET, INC.,
a Utah corporation.
By: /s/ XXX X. XXXXX
---------------------------------
Name: Xxx X. Xxxxx
Title: CEO
SHAREHOLDERS:
/s/ Xxx X. Xxxxx
XXX XXXXX
UNIVERSITY OF UTAH RESEARCH
FOUNDATION
By: /s/ XXXXXXX X. XXXXX
---------------------------------
Name: Xxxxxxx X. Xxxxx
Title: President
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HEWLETT PACKARD COMPANY*
By: /s/ XXX X. XXXXXXX
---------------------------------
Name: Xxx X. Xxxxxxx
Title: Associate General Counsel
and Assistant Secretary
/s/ XXXXXX XXXXXXX
------------------------------------
XXXXXX XXXXXXX
Trustee of the Xxxxxx X. Xxxxxxx
Family Trust
/s/ XXXXXXX XXXXXX
------------------------------------
XXXXXXX XXXXXX
Trustee of the WFM
Profit Sharing Plan
* The signature marking the assent
of Hewlett-Packard Company does
not apply to Section 4.4 of this
Agreement and Plan of
Reorganization, which section
Hewlett-Packard Company expressly
declines to become a party to.
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EXHIBIT A
SHAREHOLDERS
NAME
--------------------------------------
Xxx Xxxxx
University of Utah Research Foundation
Hewlett Packard Corporation
Xxxxxx Xxxxxxx
Xxxxxxx Xxxxxx
65.
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EXHIBIT B
FORM OF AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF SURVIVING CORPORATION
1.
74
EXHIBIT C
DIRECTORS AND OFFICERS
OF SURVIVING CORPORATION
DIRECTORS
Xxxxxx Xxxxxx
Xxxxxx Xxxxxxxx
Xxx Xxxxx
OFFICERS
Xxxxxx Xxxxxx - Chief Executive Officer
Xxx Xxxxx - President
Xxxxxx Xxxxxxxx - Chief Financial Officer, Vice President, Secretary and
Treasurer
1.
75
EXHIBIT D
FORM OF ESCROW AGREEMENT
1.
76
EXHIBIT E
PERSONS EXECUTING
EMPLOYMENT AND NONCOMPETITION AGREEMENTS
Xxx Xxxxx
Xxxxx Xxxxx
1.
77
EXHIBIT F
FORM OF LEGAL OPINION OF XXXXXXX XXXXX & XXXXX LLP
1.
78
EXHIBIT G
FORM OF LEGAL OPINION OF COOLEY GODWARD LLP
1.
