Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AMONG
SYMYX TECHNOLOGIES, INC.
ORION ACQUISITION CORPORATION,
INTELLICHEM, INC.
AND
XXXX VAN EIKEREN, AS REPRESENTATIVE
NOVEMBER 12, 2004
TABLE OF CONTENTS
Article 1 Certain Definitions.................................................................... 2
Article 2 The Merger............................................................................. 7
2.1 Effect of Merger on Capital Stock...................................................... 7
2.2 Company Options........................................................................ 8
2.3 Escrow................................................................................. 10
2.4 Effects of the Merger.................................................................. 10
2.5 Further Assurances..................................................................... 11
Article 3 Representations and Warranties of Company and principal shareholders................... 11
3.1 Organization and Good Standing......................................................... 11
3.2 Subsidiaries........................................................................... 11
3.3 Power, Authorization and Validity...................................................... 11
3.4 Capitalization of Company.............................................................. 12
3.5 No Conflict............................................................................ 13
3.6 Litigation............................................................................. 13
3.7 Taxes.................................................................................. 14
3.8 Financial Statements................................................................... 15
3.9 Title to Properties.................................................................... 16
3.10 Absence of Certain Changes............................................................. 16
3.11 Contracts and Commitments/Licenses and Permits......................................... 18
3.12 No Default; No Restrictions............................................................ 20
3.13 Intellectual Property.................................................................. 20
3.14 Compliance with Laws................................................................... 22
3.15 Certain Transactions and Agreements.................................................... 23
3.16 Employees, ERISA and Other Compliance; Independent Contractors......................... 23
3.17 Corporate Documents.................................................................... 25
3.18 No Brokers............................................................................. 25
3.19 Insurance.............................................................................. 25
3.20 Environmental Matters.................................................................. 25
3.21 Board Actions.......................................................................... 26
3.22 Disclosure............................................................................. 26
Article 4 Representations and Warranties of Parent and Sub....................................... 26
4.1 Organization and Good Standing......................................................... 27
4.2 Power, Authorization and Validity...................................................... 27
4.3 No Conflict............................................................................ 28
4.4 Finders or Brokers..................................................................... 28
4.5 Availability of Funds.................................................................. 28
Article 5 Covenants of Company and Principal Shareholders........................................ 28
5.1 Advise of Changes...................................................................... 28
5.2 Maintenance of Business................................................................ 29
5.3 Conduct of Business.................................................................... 29
5.4 Regulatory Approvals................................................................... 31
5.5 Necessary Consents..................................................................... 31
5.6 Litigation............................................................................. 31
5.7 No Other Negotiations.................................................................. 31
5.8 Access to Information.................................................................. 32
5.9 Satisfaction of Conditions Precedent................................................... 32
5.10 Company Shareholder Approval........................................................... 32
5.11 Retention of Employees................................................................. 33
5.12 Employment Agreements.................................................................. 33
Article 6 Parent Covenants....................................................................... 33
6.1 Advise of Changes...................................................................... 33
6.2 Regulatory Approvals................................................................... 34
6.3 Satisfaction of Conditions Precedent................................................... 34
6.4 Form S-8............................................................................... 34
6.5 Employee Matters....................................................................... 34
Article 7 Closing Matters........................................................................ 35
7.1 ....................................................................................... 35
7.2 Exchange............................................................................... 35
7.3 Dissenters' Rights..................................................................... 36
Article 8 Conditions to Obligations of Company................................................... 36
8.1 Accuracy of Representations and Warranties............................................. 36
8.2 Covenants.............................................................................. 37
8.3 Compliance with Law; No Legal Restraints............................................... 37
8.4 Government Consents.................................................................... 37
Article 9 Conditions to Obligations of Parent.................................................... 37
9.1 Accuracy of Representations and Warranties............................................. 37
9.2 Covenants.............................................................................. 37
9.3 No Material Adverse Change............................................................. 38
9.4 Compliance with Law; No Legal Restraints; No Litigation................................ 38
9.5 Government Consents.................................................................... 38
9.6 Opinion of Company's Counsel........................................................... 38
9.7 Consents............................................................................... 38
9.8 Company Shareholder Approvals.......................................................... 38
9.9 Employment Matters..................................................................... 38
9.10 Termination of Vested Company Options.................................................. 38
9.11 Ancillary Agreements................................................................... 38
9.12 Resignation of Directors and Officers.................................................. 39
9.13 Consideration Allocation Certificate................................................... 39
Article 10 Termination of Agreement............................................................... 39
10.1 Termination by Mutual Consent.......................................................... 39
10.2 Unilateral Termination................................................................. 39
10.3 No Liability for Termination........................................................... 40
Article 11 Survival of Representations, Indemnification and Remedies, Continuing Covenants........ 40
11.1 Survival of Representations............................................................ 40
11.2 Agreements to Indemnify................................................................ 40
11.3 Limitation............................................................................. 41
11.4 Appointment of Representative.......................................................... 41
11.5 Notice of Claim........................................................................ 42
11.6 Defense of Third-Party Claims.......................................................... 42
11.7 Contents of Notice of Claim............................................................ 44
11.8 Resolution of Notice of Claim.......................................................... 44
11.9 Distribution Upon Termination of Escrow Period......................................... 44
11.10 Access................................................................................. 45
11.11 Indemnification of Former Directors and Officers....................................... 45
Article 12 General Provisions..................................................................... 45
12.1 Governing Law.......................................................................... 45
12.2 Assignment; Binding Upon Successors and Assigns........................................ 46
12.3 Severability........................................................................... 46
12.4 Counterparts........................................................................... 46
12.5 Other Remedies......................................................................... 46
12.6 Amendment and Waivers.................................................................. 46
12.7 Expenses............................................................................... 47
12.8 Attorneys' Fees........................................................................ 47
12.9 Notices................................................................................ 47
12.10 Interpretation; Rules of Construction.................................................. 49
12.11 No Joint Venture....................................................................... 49
12.12 Further Assurances..................................................................... 49
12.13 Third Party Beneficiary Rights......................................................... 49
12.14 Public Announcement.................................................................... 50
12.15 Company Disclosure Letter.............................................................. 50
12.16 Confidentiality........................................................................ 50
12.17 Entire Agreement....................................................................... 50
12.18 Waiver Of Jury Trial................................................................... 50
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of November 12, 2004 (the "AGREEMENT DATE") by and among Symyx
Technologies, Inc., a Delaware corporation ("PARENT"), Orion Acquisition
Corporation, an Oregon corporation that is a wholly-owned subsidiary of Parent
("SUB"), IntelliChem, Inc., an Oregon corporation ("COMPANY"), and , for
purposes of Article 11 only, Xxxx van Eikeren, as REPRESENTATIVE.
RECITALS
A. The parties intend that, subject to the terms and conditions
hereinafter set forth, Sub will merge with and into Company (the "MERGER"), with
Company to be the surviving corporation of the Merger, all pursuant to the terms
and conditions of this Agreement and applicable law.
B. The Boards of Directors, or a duly authorized committee thereof, of
Parent, Sub and Company have determined that the Merger is in the best interests
of their respective companies and stockholders or shareholders, as applicable,
have approved and declared advisable an Agreement and Plan of Merger
substantially in the form of this Agreement and, accordingly, have agreed to
effect the Merger provided for herein upon the terms and conditions of this
Agreement.
C. Concurrently with the execution and delivery of this Agreement, and as
a condition and inducement to Parent's willingness to enter into this Agreement,
(i) the Principal Shareholders and certain other shareholders of Company are
executing and delivering to Parent a Voting and Shareholder Agreement and an
Irrevocable Proxy in which each such Principal Shareholder or other shareholder
will agree to vote all shares of Company capital stock owned by such Principal
Shareholder or other shareholder in favor of the Merger and the transactions
contemplated by this Agreement; and (ii) each of Xxxx van Eikeren and Josh van
Eikeren are executing and delivering to Parent an Employment Agreement (as
defined in Section 5.12) as provided herein.
D. Upon the Effective Time (as defined in Section 1.36), and subject to
the terms and conditions hereof, (i) the shares of capital stock of Company that
are outstanding immediately prior to the Effective Time and vested options to
purchase capital stock of the Company under the Company Plan (as defined in
Section 2.2.1) that are automatically exercised pursuant to Section 2.2.1 will
be converted into the right to receive a certain amount of cash from Parent,
(ii) unvested options to purchase capital stock of Company under the Company
Plan shall be assumed or replaced with options to purchase Common Stock of
Parent subject to and on the terms provided herein, (iv) all other rights to
purchase capital stock of Company that are outstanding immediately prior to the
Effective Time shall terminate, and (iii) Sub will be merged with and into
Company, in each case, as provided in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants and conditions contained herein, the parties hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
As used in this Agreement, the following terms will have the meanings
set forth below:
1.1 "AFFIDAVIT" has the meaning given in Section 7.2.1.
1.2 "AGREEMENT" has the meaning given in the introductory paragraph.
1.3 "AGREEMENT DATE" has the meaning given in the introductory paragraph.
1.4 "APPLICABLE LAW" means all federal, state or local laws, ordinances,
regulations and rules, and all orders, writs, injunctions, awards, judgments and
decrees, applicable to a specified Person or to such Person's assets, properties
and business.
1.5 "ARTICLES OF MERGER" means an Articles of Merger in substantially the
form attached hereto as Exhibit A.
1.6 "BALANCE SHEET" has the meaning given in Section 3.8.
1.7 "BALANCE SHEET DATE" has the meaning given in Section 3.8.
1.8 "CASH CONSIDERATION" means (i) Merger Consideration (as adjusted
pursuant to Section 2.1 hereof), less (ii) the Unvested Company Option
Consideration.
1.9 "CLAIM" has the meaning given in Section 11.5.
1.10 "CLOSING" has the meaning given in Section 7.1.
1.11 "CLOSING DATE" has the meaning given in Section 7.1.
1.12 "CODE" shall mean the Internal Revenue Code of 1986, as amended.
1.13 "COMMON STOCK DISTRIBUTION AMOUNT" means that portion of the Cash
Consideration equal to an amount per share of Common Stock of Company to be
distributed in accordance with the provisions of Section 2 of Article III of the
Company's articles of incorporation, including all amendments thereto, which the
parties hereto determine to be an amount equal to $1.08174 per share (subject to
adjustment for changes to Company Stock occurring after the date hereof and
assuming that those shares of Company Common Stock subject to Company Options as
of the Agreement Date that will be vested as of the Closing Date are outstanding
as of the Closing Date) prior to adjustment pursuant to Section 2.1 hereof.
1.14 "COMPANY" has the meaning given in the introductory paragraph.
1.15 "COMPANY ANCILLARY AGREEMENTS" has the meaning given in Section
3.3.1.
1.16 "COMPANY BUSINESS" means the business of Company as presently
conducted, and shall further include any products of Company currently under
development.
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1.17 "COMPANY CERTIFICATES" has the meaning given in Section 7.2.1.
1.18 "COMPANY COMMON STOCK" means the common stock of Company.
1.19 "COMPANY DISCLOSURE LETTER" has the meaning given in the introductory
paragraph of Article 3.
1.20 "COMPANY FINANCIAL STATEMENTS" has the meaning given in Section 3.8.
1.21 "COMPANY IP RIGHTS" has the meaning given in Section 3.13.1.
1.22 "COMPANY IP RIGHTS AGREEMENTS" has the meaning given in Section
3.13.2.
1.23 "COMPANY-LICENSED IP RIGHTS" has the meaning given in Section 3.13.1.
1.24 "COMPANY MATERIAL AGREEMENTS" has the meaning given in Section 3.11.
1.25 "COMPANY-OWNED IP RIGHTS" has the meaning given in Section 3.13.1.
1.26 "COMPANY OPTIONS" has the meaning given in Section 2.2.1.
1.27 "COMPANY PLAN" has the meaning given in Section 2.2.1.
1.28 "COMPANY PREFERRED STOCK" means the Series A Preferred Stock.
1.29 "COMPANY SHAREHOLDERS" means the record holders of issued and
outstanding Company Stock immediately prior to the Effective Time.
1.30 "COMPANY SHAREHOLDERS' APPROVAL" has the meaning given in Section
5.10.
1.31 "COMPANY STOCK" means Company Common Stock and Company Preferred
Stock.
1.32 "CONSIDERATION ALLOCATION CERTIFICATE" has the meaning given in
Section 2.1.2.
1.33 "CONTESTED CLAIM" has the meaning given in Section 11.8.2.
1.34 "DAMAGES" has the meaning given in Section 11.2.
1.35 "DISSENTING SHARES" has the meaning given in Section 7.3.
1.36 "EFFECTIVE TIME" means the date and time on which the Merger first
becomes legally effective under the laws of the State of Oregon as a result of
the filing with the Oregon Secretary of State of the Articles of Merger and any
required related certificates pursuant to, and in conformity with, the
requirements of Section 60.494 of the Oregon Law.
1.37 "EMPLOYEE PLANS" has the meaning given in Section 3.16.3.
1.38 "EMPLOYMENT AGREEMENT" has the meaning given in Section 5.12.
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1.39 "ENCUMBRANCE" means, with respect to any asset, any mortgage, deed of
trust, lien, pledge, charge, security interest, title retention device,
collateral assignment, claim, charge, restriction or other encumbrance of any
kind in respect of such asset (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), excluding Permitted
Encumbrances.
1.40 "ENVIRONMENTAL LAW" has the meaning given in Section 3.20.
1.41 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
1.42 "ESCROW AGENT" means U.S. Bank National Association.
1.43 "ESCROW AGREEMENT" has the meaning given in Section 2.3.
1.44 "ESCROW FUND" has the meaning given in Section 2.3.
1.45 "ESCROW RELEASE DATE" has the meaning given in Section 2.3.
1.46 "EXCESS TRANSACTION EXPENSES" has the meaning given in Section 12.7.
1.47 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
1.48 "GOVERNMENTAL AUTHORITY" means any court, administrative agency,
commission or other governmental authority.
1.49 "GOVERNMENTAL PERMITS" has the meaning given in Section 3.14.3.
1.50 "INTELLECTUAL PROPERTY" means, collectively, all worldwide industrial
and intellectual property rights, including patents, patent applications, patent
rights, trademarks, trademark registrations and applications therefor, trade
dress rights, trade names, service marks, service xxxx registrations and
applications therefor, Internet domain names, Internet and World Wide Web URLs
or addresses, copyrights, copyright registrations and applications therefor,
mask work rights, mask work registrations and applications therefor, franchises,
licenses, inventions, trade secrets, know-how, customer lists, supplier lists,
proprietary processes and formulae, software source code and object code,
algorithms, net lists, architectures, structures, screen displays, photographs,
images, layouts, inventions, development tools, designs, blueprints,
specifications, technical drawings (or similar information in electronic format)
and all documentation and media constituting, describing or relating to the
foregoing, including manuals, programmers' notes, memoranda and records.
1.51 "IRREVOCABLE PROXY" means the Irrevocable Proxy in the form attached
as Exhibit A to the Voting and Shareholder Agreement.
1.52 "KNOWLEDGE," means, with respect to any fact, circumstance, event or
other matter in question as of the Agreement Date or as of the Effective Time,
as applicable, the actual
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knowledge of such fact, circumstance, event or other matter of (a) an
individual, if used in reference to an individual, or (b) any executive officer
of such party, if used in reference to Company or any Person that is not an
individual. Any such individual executive officer will be deemed to have actual
knowledge of a particular fact, circumstance, event or other matter if such
knowledge could have been obtained through reasonable inquiry by such Person.
1.53 "LEGAL REQUIREMENTS" means any federal, state, local, municipal,
foreign or other law, statute, constitution, 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 Authority. 1.54 "MATERIAL ADVERSE CHANGE" or "MATERIAL
ADVERSE EFFECT," when used with reference to any entity or group of related
entities, means any event, change, violation or effect that is or is reasonably
likely to be, individually or in the aggregate, materially adverse to the
condition (financial or otherwise), properties, employees, assets (including
intangible assets), operations or results of operations of such entity and its
Subsidiaries, taken as a whole with its Subsidiaries; provided, however, that in
no event shall (i) a change in the price of the publicly traded stock of Parent,
or (ii) changes in general economic conditions or changes affecting the industry
generally in which Parent or Company operates or (iii) any adverse change or
effect resulting from compliance by Company with the terms of this Agreement or
the announcement of the Merger, constitute, in and of itself, a Material Adverse
Change or Material Adverse Effect in Parent or Company, as the case may be.
1.55 "MATERIAL OF ENVIRONMENTAL CONCERN" has the meaning given in Section
3.20.2.
1.56 "MERGER" has the meaning given in Recital A.
1.57 "MERGER CONSIDERATION" means consideration in the aggregate amount of
$30,000,000, payable in the form of cash and the Unvested Company Option
Consideration as herein provided.
1.58 "NOTICE OF CLAIM" has the meaning given in Section 11.5.
1.59 "OPTION EXCHANGE RATIO" has the meaning given in Section 2.2.2
1.60 "OREGON LAW" means Oregon Business Corporation Act.
1.61 "PARENT" has the meaning given in the introductory paragraph.
1.62 "PARENT ANCILLARY AGREEMENTS" has the meaning given in Section 4.2.1.
1.63 "PARENT COMMON STOCK" has the meaning given in Section 2.2.2.
1.64 "PARENT COMMON STOCK VALUE" has the meaning given in Section 2.2.2.
1.65 "PARENT DISCLOSURE LETTER" has the meaning given in the introductory
paragraph of Article 4.
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1.66 "PARENT INDEMNIFIED PERSON" has the meaning given in Section 11.2.1.
1.67 "PERSON" means any individual, corporation (including any
not-for-profit corporation), partnership, limited liability partnership, joint
venture, estate, trust, firm, company (including any limited liability company
or joint stock company), association, organization, entity or Governmental
Authority.
1.68 "PERMITTED ENCUMBRANCE" shall mean (a) liens for taxes and
assessments or governmental charge or levies not at the time due or in respect
of which the validity thereof shall currently be contested in good faith by
appropriate proceedings; and (b) liens in respect of pledges or deposits under
workers' compensation laws or similar legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent or are being contested in good
faith by appropriate proceedings.
1.69 "PRINCIPAL SHAREHOLDERS" means Xxxx van Eikeren, Josh van Eikeren and
Summit Accelerator Fund, L.P.
1.70 "PRO RATA SHARE" means each Principal Shareholder's pro rata portion
of the Company Stock based on the total number of shares of Company Stock held
by all Principal Shareholders.
1.71 "REGULATIONS" has the meaning given in Section 3.7.1.
1.72 "REPRESENTATIVE" has the meaning given in Section 11.4.
1.73 "SEC" means the Securities and Exchange Commission.
1.74 "SECURITIES ACT" means the Securities Act of 1933, as amended.
1.75 "SERIES A PREFERRED" means the Company's Series A Preferred Stock.
1.76 "SERIES A PREFERRED STOCK DISTRIBUTION AMOUNT" means that portion of
the Cash Consideration equal to an amount per share of Series A Preferred to be
distributed in accordance with the provisions of Section 2 of Article III the
Company's articles of incorporation, including all amendments thereto; which the
parties hereto determine to be amount equal to $0.70416 per share (subject to
adjustment for changes to the Company Stock occurring after the date hereof and
assuming that all shares of Company Common Stock subject to Company Options as
of the Agreement date are outstanding as of the Closing Date) prior to
adjustment pursuant to Section 2.1 hereof.
1.77 "SUB" has the meaning given in the introductory paragraph.
1.78 "SUB ANCILLARY AGREEMENTS" has the meaning given in Section 4.2.1.
1.79 "SUBSIDIARY" of a specified entity means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified entity (either alone or through or together with any other
subsidiary) owns, directly or indirectly, 50% or more of the
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stock or other equity or partnership interests the holders of which are
generally entitled to vote for the election of the Board of Directors or other
governing body of such corporation or other legal entity.
1.80 "SURVIVING CORPORATION" has the meaning given in Section 2.4.
1.81 "TERMINATING PARTY" has the meaning given in Section 10.3.
1.82 "TERMINATION DATE" means December 6, 2004.
1.83 "THIRD-PARTY CLAIM" has the meaning given in Section 11.6.1.
1.84 "TRANSACTION EXPENSES" has the meaning given in Section 12.7.
1.85 "UNCERTIFICATED SHARES" means uncertificated shares of Company Stock
issuable upon the exercise of any Company Options between the Agreement Date and
the Effective Time.
1.86 "UNVESTED COMPANY OPTION" has the meaning given in Section 2.2.2.
1.87 "UNVESTED COMPANY OPTION CONSIDERATION" means an amount equal to (i)
the product of all shares of Parent Common Stock that will be issuable upon
exercise of the Parent Options into which the Unvested Company Options convert
times the Parent Common Stock Value; less (ii) the aggregate exercise price for
all Unvested Company Options.
1.88 "VOTING AND SHAREHOLDER AGREEMENT" means a voting and shareholder
agreement in the form attached hereto as Exhibit D.
ARTICLE 2
THE MERGER
2.1 Effect of Merger on Capital Stock.
2.1.1 Conversion of Sub Stock. At the Effective Time, each share of
Sub common stock that is issued and outstanding immediately prior to the
Effective Time will be converted into one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation. Each
certificate evidencing ownership of shares of Sub common stock will evidence
ownership of such shares of common stock of the Surviving Corporation.
2.1.2 Effect on Company Stock. Subject to the terms and conditions
of this Agreement, at the Effective Time, each share of Company Stock held by a
Company Shareholder that is issued and outstanding immediately prior to the
Effective Time will, by virtue of the Merger and without the need for any
further action on the part of the holder thereof (except as expressly provided
herein), be converted into and represent the right to receive such portion of
the Cash Consideration as set forth below and as more fully set forth on a
consideration allocation certificate to be delivered by the Company at Closing
(the "CONSIDERATION ALLOCATION CERTIFICATE").
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(a) Each holder of Series A Preferred issued and outstanding
immediately prior to the Effective Time shall be entitled to receive the Series
A Preferred Distribution Amount for each share of such Series A Preferred.
(b) Each holder of Company Common Stock issued and outstanding
immediately prior to the Effective Time shall be entitled to receive the Common
Stock Distribution Amount for each share of such Company Common Stock; provided,
however, that with respect to each share of Company Common Stock issued
immediately prior to the Effective Time as a result of the automatic exercise of
a vested Company Option pursuant to Section 2.2.1, Parent shall withhold (in
addition to amounts that Parent is otherwise authorized with respect to such
Company Option as provided in this Section 2.1.2) that portion of the Common
Stock Distribution Amount allocated to such share of Company Common Stock in an
amount equal to the per share exercise price (as set forth in the stock option
agreement governing the related Company Option) of such share of Company Common
Stock, and in each case, as set forth on the Consideration Allocation
Certificate.
The preceding provisions of this Section 2.1.2 are subject to the
provisions of Section 2.1.3 (regarding rights of holders of Dissenting Shares)
and Section 2.3 (regarding the withholding of Escrow Fund). In no event shall
the amount of cash payable under this Agreement by Parent exceed the Cash
Consideration as reduced for withholdings pursuant to Section 2.1.2(b) as to the
unpaid exercise price for any vested Company Options exercised pursuant to
Section 2.2.1 prior to the Closing for which the exercise price has not been
fully paid.
The Company, and on its behalf Parent and the Surviving Corporation, shall
be entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Stock such amounts as may be required to be deducted or withheld therefrom under
any provision of federal, state, local or foreign tax law or under any other
applicable legal requirement at the lowest rate permitted by law. To the extent
such amounts are properly 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.
2.1.3 Dissenting Shares. As more fully set forth in Section 7.3,
holders of shares of Company Stock who have complied with all requirements for
perfecting shareholders' dissenters' rights, as set forth in Sections 60.551
through 60.594 of the Oregon Law, shall be entitled to their rights under the
Oregon Law with respect to such shares.
2.2 Company Options.
2.2.1 Vested Options, Warrants and Other Rights. Other than as
explicitly provided in Section 2.2.2 below, no options, warrants or other rights
to purchase Company Common Stock (collectively, "COMPANY OPTIONS"), including
without limitation any vested Company Options granted under the Company's 2003
Stock Option Plan (the "COMPANY PLAN"), shall be assumed by Parent, and the
Company agrees to take all action necessary to (i) enable each holder of the
Company Options to fully exercise the Company Options on or before the Closing;
(ii) provide that all vested Company Options outstanding immediately prior to
the Closing with a per share exercise price that is less than the per share
Common Stock Distribution
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Amount (assuming the exercise of all then outstanding vested Company Options)
shall be automatically exercised as of immediately prior to the Effective Time
and all shares of Company Common Stock subject thereto shall be immediately
issued to the holder of such Company Option (such that at the Effective Time
such shares shall be outstanding and such holder shall be a Company
Shareholder), provided that the Common Stock Distribution Amount payable with
respect to such shares of Company Common Stock shall be subject to Sections
2.1.2(b) and 2.3; (iii) effect the termination of all then outstanding vested
Company Options at the Effective Time in accordance with their terms, and (iv)
give any notice required under any agreements relating to Company Options as to
such acceleration, if any, exercise and termination.
2.2.2 Unvested Options. At the Effective Time, the unvested portion
of each outstanding Company Option to purchase shares of Company Common Stock
under the Company Stock Option Plan (the "UNVESTED COMPANY OPTION") will be
assumed by Parent and converted into an option to purchase shares of Parent
Common Stock (each a "PARENT OPTION") as set forth in this Section 2.2.2.
Schedule 2.2.2 hereto sets forth (i) a true and complete list as of the date
hereof of all holders of outstanding Company Options under the Company Stock
Plan, including the number of shares of Company Common Stock subject to each
such Company Option, the exercise or vesting schedule, the exercise price per
share and the term of each such Company Option; and (ii) any acceleration of the
vesting of such Company Options that shall be effective as of the Closing Date.
Schedule 2.2.2 may be updated prior to the Closing Date to reflect any Company
Options granted to new employees of the Company from the date hereof to the
Closing Date as approved by Parent in accordance with Section 5.3(m) below.
Subject to acceleration of Company Options set forth in Schedule 2.2.2, each
Unvested Company Option assumed by Parent under this Agreement shall retain its
respective vesting schedule under the Company Stock Plan and its respective
stock option agreement and each such Unvested Company Stock Option shall
continue to be subject to the terms and conditions set forth in the Company
Option Plan, except that (i) each such Unvested Company Option will be
exercisable for that number of whole shares of Common Stock of Parent ("PARENT
COMMON STOCK") equal to the product of the number of shares of Company Common
Stock that would be issuable upon exercise of such Unvested Company Option
immediately prior to the Effective Time, assuming that all vesting conditions
applicable to such Unvested Company Option were then satisfied, multiplied by
the quotient obtained by dividing (A) the price per share paid by Parent from
the Common Stock Distribution Amount; by (B) the average closing price of Parent
Common Stock on the NASDAQ National Market System for the ten (10) trading days
preceding (but not including) the Closing Date, (such quotient, the "OPTION
EXCHANGE RATIO" and such average closing price of Parent Common Stock, the
"PARENT COMMON STOCK VALUE") rounded down to the nearest whole number of shares
of Parent Common Stock, and (ii) the per share exercise price for the shares of
Parent Common Stock issuable upon exercise of such assumed or replaced Unvested
Company Option will be equal to the quotient determined by dividing the exercise
price per share of Company Common Stock at which such Unvested Company Option
was exercisable immediately prior to the Effective Time by the Option Exchange
Ratio, rounded up to the nearest whole cent. Consistent with the terms of the
Company Stock Option Plan and the documents governing the outstanding Company
Options under such plan, except as set forth on Schedule 2.2.2, the Company
shall not accelerate the exercisability or vesting of such Company Options or
the shares of Parent Common Stock which will be subject to those options upon
the assumption of the Company Options in connection with the Merger. As soon as
practicable after the Effective Time, Parent shall deliver to each holder of an
outstanding Unvested Company
9
Stock Option an appropriate notice setting forth such holder's rights pursuant
thereto and that such Company Stock Option shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section 2.2.2
after giving effect to the Merger).
2.3 Escrow. At the Effective Time, Parent will withhold from the amounts
of cash to be paid to Principal Shareholders in the Merger in respect of their
Company Stock pursuant to Section 2.1.2, each such Principal Shareholder's Pro
Rata Share of $*** of the Cash Consideration as set forth on Schedule 2.3 hereto
(such withheld amount of cash, the "ESCROW FUND"). Escrow Agent will hold the
Escrow Fund as security for the indemnification obligations of the Principal
Shareholders for Damages under Article 11 and an Escrow Agreement in
substantially the form attached hereto as Exhibit B to be entered into among the
Company, Parent and the Representative (the "ESCROW AGREEMENT"), until the day
***** after the Closing Date (the "ESCROW RELEASE Date").
2.4 Effects of the Merger. At and upon the Effective Time:
(a) the separate existence of Sub will cease and Sub will be merged
with and into Company, and Company will be the surviving corporation of the
Merger (sometimes referred to herein as the "SURVIVING CORPORATION") pursuant to
the terms of this Agreement and the Articles of Merger;
(b) the Articles of Incorporation of the Surviving Corporation will
be amended in their entirety to read as set forth in the Articles of Merger
filed with the Oregon Secretary of State;
(c) the Bylaws of Sub will continue unchanged and be the Bylaws of
the Surviving Corporation immediately after the Effective Time;
(d) each share of Company Stock that is outstanding immediately
prior to the Effective Time and each vested Company Option that is automatically
exercised pursuant to Section 2.2.1 will be converted into the right to receive
cash as provided in this Article 2;
(e) subject to obtaining any required consents, each Unvested
Company Option shall be assumed or replaced by Parent and converted into a
Parent Option as provided in Section 2.2.2;
(f) each share of Sub common stock that is outstanding immediately
prior to the Effective Time will be converted into one validly issued, fully
paid and nonassessable share of common stock, no par value per share, of the
Surviving Corporation as provided in Section 2.1.1;
(g) the officers of the Surviving Corporation immediately after the
Effective Time will be those individuals who were the officers of Sub
immediately prior to the Effective Time, and each such individual shall,
immediately after the Effective Time, hold the same office or offices of the
Surviving Corporation as the office or offices that such individual held with
Sub immediately prior to the Effective Time;
10
(h) the members of the Board of Directors of the Surviving
Corporation immediately after the Effective Time will be the members of the
Board of Directors of Sub immediately prior to the Effective Time; and
(i) the Merger will, from and after the Effective Time, have all of
the effects provided by applicable law.
2.5 Further Assurances. If, at any time after the Effective Time, any
further instruments, deeds, assignments, assurances or other actions are
reasonably necessary or desirable to vest the Surviving Corporation with all of
the rights and property of the Company or to carry out the purposes and intent
of this Agreement, the officers and directors of Company and Sub are fully
authorized on behalf of Company or Sub, as the case may be, to execute and
deliver all such proper instruments, deeds, assignments and assurances and do
all other things necessary or desirable to carry out the purposes and intent of
this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent that, except as set forth
in the letter addressed to Parent from Company and dated as of the Agreement
Date (including all schedules thereto) which has been delivered by Company to
Parent concurrently herewith (the "COMPANY DISCLOSURE LETTER"), each of the
representations, warranties and statements contained in the following sections
of this Article 3 is true and correct as of the Agreement Date. For all purposes
of this Agreement, the statements contained in the Company Disclosure Letter and
its schedules shall also be deemed to be representations and warranties made and
given by Company under Article 3 of this Agreement.
3.1 Organization and Good Standing. Company is a corporation duly
organized and validly existing under the laws of the State of Oregon. Company
has the corporate power and authority to own, operate and lease its properties
and to carry on its business as now conducted and as currently proposed to be
conducted, and is qualified or licensed to do business and is in good standing
in each jurisdiction in which the failure to be so qualified or licensed would
have a Material Adverse Effect on Company. Company has delivered to Parent true
and complete copies of its currently effective Articles of Incorporation and
Bylaws, each as amended to date. Company is not in violation of its Articles of
Incorporation or Bylaws.
3.2 Subsidiaries. Company has no Subsidiaries or any equity or ownership
interest, whether direct or indirect, in, or loans to, any corporation,
partnership, limited liability company, joint venture or other business entity.
Company is not obligated to make, nor bound by any agreement or obligation to
make, any investment in or capital contribution in or on behalf of any other
entity.
3.3 Power, Authorization and Validity.
3.3.1 Power and Authority. Company has the right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement and all agreements and documents to which Company is or will be a
party that are required to be executed pursuant to this Agreement (the "COMPANY
ANCILLARY AGREEMENTS"). The execution, delivery and
11
performance of this Agreement and the Company Ancillary Agreements have been
duly and validly approved and authorized by Company.
3.3.2 No Consents. No consent, approval, permit, order or
authorization from, or registration, declaration or filing with, any
Governmental Authority or any other Person, governmental or otherwise, is
necessary or required to be made or obtained by Company to enable Company to
lawfully execute and deliver, enter into, and to perform their respective
obligations under, this Agreement, the Company Ancillary Agreements, and for
Company to consummate the Merger, except for the filing of the Articles of
Merger with the Oregon Secretary of State.
3.3.3 Enforceability. This Agreement has been duly executed and
delivered by Company. This Agreement and the Company Ancillary Agreements are,
or when executed by Company will be, valid and binding obligations of Company
enforceable against Company in accordance with their respective terms, subject
only to the effect now or hereafter, if any, of (a) applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
3.4 Capitalization of Company.
3.4.1 Outstanding Securities. The authorized capital stock of
Company consists entirely of: (a) Thirty Million (30,000,000) shares of Company
Common Stock, of which, as of the Agreement Date, a total of Fourteen Million
Sixty-Two Thousand Four Hundred Fifty-Five (14,062,455) shares are issued and
outstanding, and (b) Six Million Five Hundred Fifty-Seven Thousand Three Hundred
Seventy-Seven (6,557,377) shares of Company Preferred Stock, all of which are
designated Series A Preferred and all of which, as of the Agreement Date are
issued and outstanding. The numbers of issued and outstanding shares of Company
Common Stock and Company Preferred Stock held by each of the Company
Shareholders are set forth in Section 3.4.1 of the Company Disclosure Schedule.
Except as expressly set forth in Section 3.4.1 of the Company Disclosure
Schedule attached hereto, no shares of Company Common Stock or Company Preferred
Stock are issued or outstanding. An aggregate of Four Million (4,000,000) shares
of Company Common Stock are reserved and authorized for issuance pursuant to the
Company Plan. True and complete copies of the standard option agreement under
the Company Plan and each agreement for each Company Option that does not
conform to the standard option agreement under the Company Plan have been
delivered by Company to Parent. No Company Options have been granted or are
outstanding except under and pursuant to the Company Plan.
3.4.2 Valid Issuance. As of the Closing Date, there will have been
no change in the authorized or outstanding capital stock of Company as
represented in Section 3.4.1 above. All issued and outstanding shares of Company
Stock have been duly authorized and validly issued, are fully paid and
nonassessable, are not subject to any preemptive right, right of first refusal,
right of first offer or right of rescission, and have been offered, issued, sold
and delivered by Company in compliance with (a) all registration or
qualification requirements (or applicable exemptions therefrom) of all
applicable securities laws (both state and federal) and other applicable Legal
Requirements and (b) all requirements set forth in applicable agreements or
instruments.
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3.4.3 No Other Options, Warrants or Rights. Other than as set forth
in Sections 3.4.1 and 3.4.2 above, there are no options, warrants, convertible
securities or other securities, calls, commitments, conversion privileges,
preemptive rights, rights of first refusal, rights of first offer or other
rights or agreements outstanding to purchase or otherwise acquire (whether
directly or indirectly) any shares of Company's authorized but unissued capital
stock or any securities convertible into or exchangeable for any shares of
Company's capital stock or obligating Company to grant, issue, extend or enter
into any such option, warrant, convertible security or other security, call,
commitment, conversion privilege, preemptive right, right of first refusal,
right of first offer or other right or agreement to obtain any shares of
Company's capital stock, and there is no liability for dividends accrued but
unpaid.
3.4.4 No Voting Arrangements or Registration Rights. Except as
contemplated by this Agreement, there are no voting agreements, voting trusts or
proxies applicable to any of Company's outstanding capital stock or any Company
Options or to the conversion of any shares of Company's capital stock in the
Merger pursuant to any agreement or obligation to which Company or, to Company's
knowledge, pursuant to any other agreement or obligation. Company is not under
any obligation to register under the Securities Act any of its presently
outstanding shares of stock or other securities or any stock or other securities
that may be subsequently issued.
3.5 No Conflict. Neither the execution and delivery of this Agreement nor
any of the Company Ancillary Agreements by Company, nor the consummation of the
Merger or any of the other transactions contemplated hereby or thereby, will (a)
conflict with, or (with or without notice or lapse of time, or both) result in a
termination, breach, impairment or violation of, or constitute a default under,
(i) any provision of the Articles of Incorporation or Bylaws of Company, as
currently in effect, or (ii) any federal, state, local or foreign judgment,
writ, decree, order, statute, rule or regulation applicable to Company or any of
its material assets or properties, or (iii) any material instrument, obligation
or agreement to which Company is a party or by which its properties or assets
are bound, or result in the creation of any lien, charge or other encumbrance
upon any of the properties of Company under the terms of any note, bond,
mortgage or indenture or any other material instrument, obligation or agreement,
or (b) except as set forth in Schedule 3.5 of the Company Disclosure Letter,
require the consent, approval, assignment, notice, release, waiver,
authorization or other certificate of any third party to ensure that, following
the Effective Time, any Company Material Agreement to which Company is a party
or by which Company or any of its assets or properties are bound or affected
continues to be in full force and effect without any breach or violation
thereof. Neither Company's entering into this Agreement, nor the consummation of
the Merger or any other transaction contemplated by this Agreement or any
Company Ancillary Agreement, will give rise to, or trigger the application of,
any rights of any third party that would come into effect upon the consummation
of the Merger.
3.6 Litigation. There is no action, suit, arbitration, mediation,
proceeding, claim or, to Company's knowledge, investigation pending against
Company (or against any officer, director, employee or agent of Company in their
capacity as such or relating to their employment, services or relationship with
Company) before any court, Governmental Authority or arbitrator, nor, to
Company's knowledge, has any such action, suit, arbitration, mediation,
proceeding, claim or investigation been threatened. There is no judgment,
decree, injunction,
13
rule or order of any court, Governmental Authority or arbitrator outstanding
against Company. To Company's knowledge, there is no reasonable basis for any
Person to assert a claim against Company based upon: (a) Company's entering into
this Agreement, any Company Ancillary Agreement or consummating the Merger or
any of the transactions contemplated by this Agreement or any Company Ancillary
Agreement; (b) any claim that Company has agreed to sell or dispose of all or
any substantial portion of its assets or business or shares of Company Stock to
any party other than Parent, whether by way of merger, consolidation, sale or
assets or otherwise; (c) any wrongful failure by Company to issue any of its
stock or other securities to any party; (d) any rights under any agreement among
Company and the Company Shareholders; or (e) a claim of ownership of, or
options, warrants or other rights to acquire ownership of, any shares of the
capital stock of Company or any rights as a Company Shareholder, including any
option, warrant or preemptive rights or rights to notice or to vote.
3.7 Taxes.
3.7.1 The Company has timely filed all material federal, state,
local and foreign tax and information returns and reports required by applicable
law to be filed by it prior to the Effective Time, has timely paid all material
taxes required to be paid by it as shown on such returns, except to the extent
that an accrual or reserve for such taxes has been reflected on the Balance
Sheet, has established an adequate accrual or reserve for the payment of all
material taxes payable in respect of the periods subsequent to the periods
covered by its most recent applicable tax returns (which accrual or reserve as
of the Balance Sheet Date is fully reflected on the Balance Sheet and in any
more recent balance sheet of Company provided by Company to Parent on or before
the Agreement Date), has made all material required estimated tax payments and,
as of the Balance Sheet Date, has no material liability for taxes in excess of
the amount so paid or accruals or reserves so established. The amount of
Company's liability for unpaid material taxes for all periods ending on or
before the Effective Time shall not, in the aggregate, exceed the amount of the
current liability accrual or reserve for taxes (excluding reserves for deferred
taxes), as such accrual or reserve is reflected on the Balance Sheet, as
adjusted for operations and transactions in the ordinary course of business
since the Balance Sheet Date in accordance with past custom and practice. All
such returns and reports are true, correct and complete in all material
respects, and Company has provided Parent with true and correct copies of all
federal and state income or franchise tax returns for the Company for all
periods since inception as well as any other returns and reports that have been
requested by Parent. Company is not delinquent in the payment of any material
tax or in the filing of any material tax returns, and, to the Company's
knowledge, no deficiencies for any tax have been threatened, claimed, proposed
or assessed against Company. Company has not received any notification from the
Internal Revenue Service or any other taxing authority regarding any potential
assessments that: (a) are currently pending before the Internal Revenue Service
or any other taxing authority (including, but not limited to, any sales or use
tax authority) regarding Company taxes, or (b) have been raised by the Internal
Revenue Service or other taxing authority and not yet finally resolved. No tax
return of Company is, to the Company's knowledge, under audit by the Internal
Revenue Service or any other taxing authority, and any such past audits (if any)
have been completed and fully resolved and all taxes and any penalties or
interest determined by such audit to be due from Company have been paid in full
to the applicable taxing authorities. No tax liens are currently in effect
against any assets of Company other than liens which arise by operation of law
for taxes not yet due and payable. There is not in effect any waiver by Company
of any
14
statute of limitations with respect to any taxes or agreement to any extension
of time for filing any tax return which has not been filed, and Company has not
consented to extend to a date later than the date hereof the period in which any
tax may be assessed or collected by any taxing authority. Company is not a
"personal holding company" within the meaning of Section 542 of the Code.
Company has not filed any election under Section 341(f) of the Code. Company has
withheld all material taxes, including, but not limited to, federal and state
income taxes, FICA, Medicare, FUTA and other taxes, required to be withheld, and
paid such withheld amounts to the appropriate taxing authority within the time
prescribed by law. Since its inception, Company has not been a "United States
real property holding corporation," as defined in Section 897(c)(2) of the Code,
and in Section 1.897-2(b) of the Treasury Regulations issued thereunder (the
"REGULATIONS"), and Company has filed with the Internal Revenue Service all
statements, if any, with its United States income tax returns which are required
under Section 1.897-2(h) of the Regulations. Company neither is a party to nor
has any obligation under any tax-sharing, tax indemnity or tax allocation
agreement or arrangement. Company has never been involved in a distribution,
either as a distributing corporation or a controlled corporation, in a
transaction qualifying, or intended to be qualified, under Section 355 of the
Code. Company has never been a member of an affiliated group filing consolidated
returns. Company has disclosed on its federal income tax returns all positions
taken therein that could give rise to a substantial understatement penalty
within the meaning of Section 6662 of the Code.
3.7.2 The Company is not obligated to make any "excess parachute
payment" (as defined in Section 280G(b)(1) of the Code), nor will any excess
parachute payment be deemed to have occurred as a result of or arising out of
the Merger to the extent Section 280G of the Code is applicable to Company.
3.7.3 For the purposes of this Section 3.7, the terms "TAX" and
"TAXES" include all federal, state, local and foreign income, alternative or
add-on minimum income, gains, franchise, excise, property, property transfer,
sales, use, employment, license, payroll, services, ad valorem, documentary,
stamp, withholding, occupation, recording, value added or transfer taxes,
governmental charges, fees, customs duties, levies or assessments (whether
payable directly or by withholding), and, with respect to any such taxes, any
estimated tax, interest, fines and penalties or additions to tax and interest on
such fines, penalties and additions to tax. The term "returns" shall include all
reports, estimates, declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection with, any taxes,
including information returns or reports with respect to backup withholding and
other payments to third parties.
3.8 Financial Statements. The Company has delivered to Parent its audited
financial statements (balance sheet and statement of operations) at December 31,
2003 and for the fiscal year then ended, and its unaudited financial statements
(balance sheet, statement of operations and statement of cash flows) as at and
for the nine-month period ended September 30, 2004 (the "COMPANY FINANCIAL
STATEMENTS"). The Company Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis,
except that the Company Financial Statements do not include a statement of cash
flows, nor do the Company Financial Statements contain the footnotes required by
generally accepted accounting principles. The Company Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein. Without
15
limitation of the foregoing, the Company Financial Statements prepared as of
September 30, 2004 ("BALANCE SHEET DATE") have been prepared in accordance with
generally accepted accounting principles for interim financial information, and
all adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position of the Company as of September 30, 2004
and the results of its operations for the nine (9) month period then ended.
Except as set forth in the balance sheet at the Balance Sheet Date ("BALANCE
SHEET"), the Company has no material liabilities, contingent or otherwise, other
than (i) liabilities incurred in the ordinary course of business subsequent to
the Balance Sheet Date and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected on the Balance Sheet or otherwise
in the Company Financial Statements. Except as disclosed in the Company
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.9 Title to Properties. Company has good and marketable title to, or a
valid leasehold interest in, all of the assets and properties used in Company's
business, free and clear of all Encumbrances, other than liens for current taxes
that are not yet due and payable and except for liens which in the aggregate do
not secure more than $25,000 in liabilities. All machinery, vehicles, equipment
and other tangible personal property owned or leased by Company or used in its
business are in good condition and repair, normal wear and tear excepted, and
all leases of real or personal property to which Company is a party are fully
effective and afford Company peaceful and undisturbed leasehold possession of
the real or personal property that is the subject of the lease. Company is not
in violation of any zoning, building, safety or environmental ordinance,
regulation or requirement or other law or regulation applicable to the operation
of its owned or leased properties, where such violation would result in a
Material Adverse Effect on the Company, nor has Company received any notice of
violation of law with which it has not complied. Company does not own any real
property. Schedule 3.9 of the Company Disclosure Letter sets forth a complete
and accurate list and a brief description of all personal property owned or
leased by Company with an individual value of $25,000 or greater.
3.10 Absence of Certain Changes. Since the Balance Sheet Date, Company has
operated its business in the ordinary course, consistent with its past practice,
and there has not been with respect to Company any:
(a) Material Adverse Change;
(b) amendment or change in the Articles of Incorporation or Bylaws;
(c) incurrence, creation or assumption by Company of (i) any
Encumbrance on any of the assets or properties of Company, (ii) any obligation
or liability or any indebtedness for borrowed money, or (iii) any contingent
liability as a guarantor or surety with respect to the obligations of others;
(d) grant or issuance of any options, warrants or other rights to
acquire from Company, directly or indirectly, except as described in Sections
3.4.1 and 3.4.2, or any offer, issuance or sale by Company of, any debt or
equity securities of Company;
16
(e) acceleration or release of any vesting condition to the right to
exercise any option, warrant or other right to purchase or otherwise acquire any
shares of Company's capital stock, or any acceleration or release of any right
to repurchase shares of Company's capital stock upon any shareholder's
termination of employment or services with Company or pursuant to any right of
first refusal;
(f) payment or discharge by Company of any liability of Company or
Encumbrance on any asset or property of Company in an amount in excess of
$10,000 for any liability or Encumbrance, other than payments or discharges by
Company in the ordinary course of business, consistent with past practices;
(g) purchase, license, sale, assignment or other disposition or
transfer, or any agreement or other arrangement for the purchase, license, sale,
assignment or other disposition or transfer, of any of the assets, properties or
goodwill of Company, other than purchases, licenses, sales, assignments or other
dispositions or transfers in the ordinary course of business, consistent with
past practices;
(h) damage, destruction or loss of any material property or asset,
whether or not covered by insurance;
(i) declaration, setting aside or payment of any dividend on, or the
making of any other distribution in respect of, the capital stock of Company, or
any split, combination or recapitalization of the capital stock of Company or
any direct or indirect redemption, purchase or other acquisition of any capital
stock of Company or any change in any rights, preferences, privileges or
restrictions of any outstanding security of Company;
(j) change or increase in the compensation, including severance
compensation, payable or to become payable to any of the officers, directors,
employees or consultants of Company or in any bonus or pension, insurance or
other benefit payment or arrangement (including stock awards, stock option
grants, stock appreciation rights or stock option grants) made to or with any of
such officers, employees or agents, other than changes or increases in the
ordinary course of business, consistent with past practices;
(k) change with respect to the management or other key personnel of
Company;
(l) obligation or liability incurred by Company to any of its
officers, directors or shareholders, except for normal and customary
compensation and expense allowances payable to Company officers in the ordinary
course of Company's business, consistent with its past practice;
(m) making by Company of any loan, advance or capital contribution
to, or any investment in, any officer, director or shareholder of Company or any
firm or business enterprise in which any such Person had a direct or indirect
material interest at the time of such loan, advance, capital contribution or
investment;
(n) entering into, amendment of, relinquishment, termination or
non-renewal by Company of any contract, lease, transaction, commitment or other
right or obligation other
17
than in the ordinary course of business, consistent with its past practice, or
any written or oral indication or assertion by the other party thereto of any
material problems with Company's services or performance under such contract,
lease, transaction, commitment or other right or obligation or its desire to so
amend, relinquish, terminate or not renew any such contract, lease, transaction,
commitment or other right or obligation;
(o) assertion by any customer of Company of any material complaint
regarding Company's services or products that has not been addressed or is being
addressed by Company by such methods that Company employs in the ordinary course
of business, consistent with past practices;
(p) agreement made by Company to provide exclusive services to any
Person or not to engage in any type of business activity;
(q) material change in the manner in which Company extends
discounts, credits or warranties to customers or otherwise deals with its
customers;
(r) entering into by Company of any transaction, contract or
agreement that by its terms requires or contemplates a current and/or future
financial commitment, expense (inclusive of overhead expense) or obligation on
the part of Company that involves in excess of $20,000 or that is not entered
into in the ordinary course of Company's business, consistent with its past
practice, or the conduct of any business or operations other than in the
ordinary course of Company's business, consistent with its past practice;
(s) license, transfer or grant of a right under any Company IP
Rights, other than non-exclusive licenses to end-user customers in the ordinary
course of business, consistent with past practices; or
(t) material change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Company or any
material revaluation by Company of any of its material assets.
3.11 Contracts and Commitments/Licenses and Permits. Schedule 3.11 of the
Company Disclosure Letter sets forth a list of each of the following written or
oral contracts, agreements, leases, licenses, permits, assignments, mortgages,
transactions, obligations, commitments or other instruments to which Company is
a party or to which Company or any of its assets or properties is bound:
(a) any contract or agreement providing for payments (whether fixed,
contingent or otherwise) by or to Company in an aggregate amount of $50,000 or
more;
(b) any contract providing for the development of any software,
content (including textual content and visual, photographic or graphics
content), technology or intellectual property for (or for the benefit or use of)
Company, or providing for the purchase or license of any software, content
(including textual content and visual, photographic or graphics content),
technology or intellectual property to (or for the benefit or use of) Company,
which software, content, technology or intellectual property is in any manner
used or incorporated (or is contemplated by Company to be used or incorporated)
in connection with any aspect or element
18
of any product, service or technology of Company (other than software generally
available to the public at a per copy license fee of less than $500 per copy);
(c) any joint venture or partnership contract or other agreement
which has involved, or is reasonably expected to involve, a sharing of profits,
expenses or losses with any other party;
(d) any contract or commitment for or relating to the employment of
any officer, employee or consultant of Company or any other type of contract or
understanding with any officer, employee or consultant of Company that is not
immediately terminable by Company without cost or other liability;
(e) any indenture, mortgage, trust deed, promissory note, loan
agreement, security agreement, guarantee or other agreement or commitment for
the borrowing of money, for a line of credit or for a leasing transaction of a
type required to be capitalized in accordance with Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board;
(f) any lease or other agreement under which Company is lessee of or
holds or operates any items of tangible personal property or real property owned
by any third party;
(g) any agreement that restricts Company from engaging in any aspect
of its business, from participating or competing in any line of business or
market, from freely setting prices for Company's products, services or
technologies (including, but not limited to, most favored customer pricing
provisions), from engaging in any business in any market or geographic area, or
from soliciting potential employees, consultants, contractors or other suppliers
or customers;
(h) any Company IP Rights Agreement other than object code licenses
of commercial off-the-shelf computer software under shrink-wrap or other
non-negotiated agreements having a cost of less than $500 per seat;
(i) any agreement relating to the sale, issuance, grant, exercise,
award, purchase, repurchase or redemption of any shares of capital stock or
other securities of Company or any options, warrants or other rights to purchase
or otherwise acquire any such shares of capital stock, other securities or
options, warrants or other rights therefor;
(j) any contract with or commitment to any labor union; and
(k) any Governmental Permit.
A true and complete copy of each agreement or document required by these
subsections (a) through (k) of this Section 3.11 to be listed on Schedule 3.11
of the Company Disclosure Letter (such agreements and documents being herein
collectively referred to as the "COMPANY MATERIAL AGREEMENTS") and a copy of
each Governmental Permit required by subsection (k) of this Section 3.11 to be
listed on Schedule 3.11 of the Company Disclosure Letter has been delivered to
Parent's legal counsel.
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3.12 No Default; No Restrictions.
3.12.1 Company is not, nor to Company's knowledge is any other
party, in material breach or default under any Company Material Agreement. No
event has occurred, and no circumstance or condition exists, that (with or
without notice or lapse of time, or both) could reasonably be expected to, (i)
result in a violation or breach by Company, or to Company's knowledge, by any
other party, of any of the provisions of any Company Material Agreement, other
than a violation or breach that would not result in a Material Adverse Effect on
the Company, or (ii) give any third party (A) the right to declare a material
breach under any Company Material Agreement, (B) the right to a material refund,
rebate, chargeback or penalty under any Company Material Agreement, (C) the
right to accelerate the maturity or performance of any obligation of Company
under any Company Material Agreement, or (D) the right to cancel, terminate or
modify any Company Material Agreement. Company has not received any notice or
other communication regarding any actual or possible violation or breach of, or
default under, any Company Material Agreement. Company has no material liability
for renegotiation of government contracts or subcontracts, if any.
3.12.2 Company is not a party to, and no asset or property of
Company is bound or affected by, any judgment, injunction, order, decree,
contract, covenant or agreement (noncompete or otherwise) that restricts or
prohibits, or purports to restrict or prohibit, Company or, following the
Effective Time, the Surviving Corporation or Parent, from freely engaging in any
business now conducted or contemplated by Company or from competing anywhere in
the world (including any contracts, covenants or agreements restricting the
geographic area in which Company may sell, license, market, distribute or
support any products or technology or provide services or restricting the
markets, customers or industries that Company may address in operating its
business or restricting the prices which Company may charge for its products,
technology or services), or includes any grants by Company of exclusive rights
or licenses.
3.13 Intellectual Property.
3.13.1 Company (a) owns and has independently developed, or (b) has
the valid right or license to all Intellectual Property material to the conduct
of the Company Business (such Intellectual Property being hereinafter
collectively referred to as the "COMPANY IP RIGHTS"). Such Company IP Rights
include all rights necessary for such conduct of the Company Business. As used
in this Section 3.13, "COMPANY-OWNED IP RIGHTS" means Company IP Rights which
are owned by Company; and "COMPANY-LICENSED IP RIGHTS" means Company IP Rights
which are not Company-Owned IP Rights.
3.13.2 Neither the execution, delivery and performance of this
Agreement, the Articles of Merger, or the consummation of the Merger and the
other transactions contemplated by this Agreement and/or by Company Ancillary
Agreements will, in accordance with their terms: (a) constitute a material
breach of or default under any instrument, contract, license or other agreement
governing any Company IP Right to which Company is a party (collectively, the
"COMPANY IP RIGHTS AGREEMENTS"); (b) cause the forfeiture or termination of, or
give rise to a right of forfeiture or termination of, any Company IP Right; or
(c) materially impair the right of Company or the Surviving Corporation to use,
possess, sell or license any Company IP Right or portion thereof. There are no
royalties, honoraria, fees or other payments payable by Company
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to any third Person (other than salaries payable to employees and independent
contractors not contingent on or related to use of their work product) as a
result of the ownership, use, possession, license-in, sale, marketing,
advertising or disposition of any Company IP Rights by Company to the extent
necessary for the conduct of the Company Business and none will become payable
as a result of the consummation of the transactions contemplated by this
Agreement, in and of themselves.
3.13.3 Neither the use, development, manufacture, marketing,
license, sale, furnishing or intended use of any product or service currently
licensed, utilized, sold, provided or furnished by Company or currently under
development by Company violates any license or agreement between Company and any
third party or infringes or misappropriates any Intellectual Property Right of
any other party in any material respect. There is no pending or, to the best
knowledge of the Company, threatened, claim or litigation contesting the
validity, ownership or right of Company to exercise any Company IP Right nor, to
the best knowledge of Company, is there any legitimate basis for any such claim,
nor has Company received any notice asserting that any Company IP Right or the
proposed use, sale, license or disposition thereof conflicts or will conflict
with the rights of any other party, nor, to the best knowledge of Company, is
there any legitimate basis for any such assertion.
3.13.4 To the Company's knowledge, no current or former employee,
consultant or independent contractor of Company: (a) is in material violation of
any term or covenant of any employment contract, patent disclosure agreement,
invention assignment agreement, non-disclosure agreement, noncompetition
agreement or any other contract or agreement with any other party by virtue of
such employee's, consultant's, or independent contractor's being employed by, or
performing services for, Company or using trade secrets or proprietary
information of others without permission; or (b) has developed any technology,
software or other copyrightable, patentable, or otherwise proprietary work for
Company that is subject to any agreement under which such employee, consultant
or independent contractor has assigned or otherwise granted to any third party
any rights (including Intellectual Property) in or to such technology, software
or other copyrightable, patentable or otherwise proprietary work. To the best
knowledge of the Company, the employment of any employee of Company or the use
by Company of the services of any consultant or independent contractor does not
subject Company to any liability to any third party for improperly soliciting
such employee or consultant, or independent contractor to work for Company,
whether such liability is based on contractual or other legal obligations to
such third party.
3.13.5 Company has taken necessary and appropriate steps to protect,
preserve and maintain the secrecy and confidentiality of Company material
confidential information and to preserve and maintain all Company's interests
and proprietary rights in Company IP Rights. All officers, employees and
consultants of Company having access to proprietary information of Company, its
customers or business partners and inventions owned by Company, have executed
and delivered to Company an agreement regarding the protection of such
proprietary information and the assignment of Company's inventions to Company
(in the case of proprietary information of Company's customer and business
partners, to the extent required by such customers and business partners); and
copies of all such agreements have been delivered to Parent's counsel. Company
has secured valid written assignments from all of Company's consultants,
contractors and employees who were involved in, or who contributed to, the
creation or development of any
21
Company-Owned IP Rights, of the rights to such contributions that may be owned
by such Persons or that Company does not already own by operation of law. No
current or former employee, officer, director, consultant or independent
contractor of Company has any right, license, claim or interest whatsoever in or
with respect to any Company IP Rights.
3.13.6 Schedule 3.13.6 of the Company Disclosure Letter contains a
true and complete list of (a) all worldwide registrations made by or on behalf
of Company of any patents, copyrights, mask works, trademarks, service marks,
rights in Internet or World Wide Web domain names or URLs with any governmental
or quasi-governmental authority, including Internet domain name registrars; and
(b) all applications, registrations, filings and other formal written
governmental actions made or taken pursuant to federal, state and foreign laws
by Company to secure, perfect or protect its interest in Company IP Rights,
including all patent applications, copyright applications, and applications for
registration of trademarks and service marks. All patent applications,
registered trademarks, service marks, rights in Internet or World Wide Web
domain names or URLs, and copyrights held by Company are valid, enforceable and
subsisting.
3.13.7 Schedule 3.13.7 of the Company Disclosure Letter contains a
true and complete list of (a) all licenses, sublicenses and other agreements as
to which Company is a party and pursuant to which any Person is authorized to
use any Company IP Rights, and (b) all licenses, sublicenses and other
agreements as to which Company is a party and pursuant to which Company is
authorized to use any third party Intellectual Property other than object code
licenses of commercial off-the-shelf computer software under shrink-wrap or
other non-negotiated agreements having a cost of less than $500 per seat.
3.13.8 To Company's knowledge, there is no unauthorized use,
disclosure, infringement or misappropriation of any Company IP Rights by any
third party, including any employee or former employee of Company. Company has
not agreed to indemnify any Person for any infringement of any Intellectual
Property of any third party by any product or service that has been sold,
licensed to third parties, leased to third parties, supplied, marketed,
distributed, or provided by Company.
3.13.9 No government funding; facilities of a university, college,
other educational institution or research center; or funding from third parties
(other than funds received in consideration for capital stock of Company) was
used in the development of the computer software programs or applications owned
by Company. No current or former employee, consultant or independent contractor
of Company, who was involved in, or who contributed to, the creation or
development of any Company IP Rights, has performed services for the government,
university, college, or other educational institution or research center during
a period of time during which such employee, consultant or independent
contractor was also performing services for Company.
3.14 Compliance with Laws.
3.14.1 Company has materially complied, and is now and at the
Closing Date will be in material compliance, with all Applicable Law, unless
failure to comply would not have a Material Adverse Effect on the Company.
Company holds all valid material licenses and other
22
governmental permits that are necessary and/or legally required to be held by it
to conduct its business as presently conducted.
3.14.2 All materials and products distributed or marketed by Company
have at all times made all disclosures to users or customers required by
Applicable Law, and none of such disclosures made or contained in any such
materials and products has been inaccurate, misleading or deceptive in any
material respect.
3.14.3 Company holds all material permits, licenses and approvals
from, and has made all material filings with, government (and
quasi-governmental) agencies and authorities that are necessary for Company to
conduct its present business without any material violation of Applicable Law
("GOVERNMENTAL PERMITS"), and all such Governmental Permits are in full force
and effect. Company has not received any notice or other communication from any
Governmental Authority regarding (a) any actual or possible violation of law or
any Governmental Permit or any failure to comply with any term or requirement of
any Governmental Permit, or (b) any actual or possible revocation, withdrawal,
suspension, cancellation, termination or modification of any Governmental
Permit.
3.14.4 Neither Company nor, to the Company's knowledge, any
director, officer, agent or employee of Company has, for or on behalf of
Company, (a) used any funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity, (b) made any unlawful
payment to foreign or domestic government officials or employees or to foreign
or domestic political parties or campaigns or violated any provision of the
Foreign Corrupt Practices Act of 1977, as amended, or (c) made any other payment
in violation of Applicable Law.
3.15 Certain Transactions and Agreements. None of the Principal
Shareholders, nor any member of their immediate families, has any direct or
indirect ownership interest in any firm or corporation that competes with, does
business with, or has any contractual arrangement with, Company (except with
respect to any interest in less than one percent (1%) of the stock of any
corporation whose stock is publicly traded). None of the officers, directors,
shareholders or employees of Company, nor any member of their immediate
families, is a party to, or otherwise directly or indirectly interested in, any
contract or informal arrangement with Company, except for normal compensation
for services as an officer, director or employee thereof that have been
disclosed to Parent. None of the officers, directors, shareholders or employees
of Company, nor any member of their immediate families, has any interest in any
property, real or personal, tangible or intangible (including, but not limited
to, any Company IP Rights or any other Intellectual Property), that is used in,
or that pertains to, the business of Company, except for the rights of a
shareholder.
3.16 Employees, ERISA and Other Compliance; Independent Contractors.
3.16.1 Company is in compliance in all material respects with all
Applicable Laws, agreements and contracts relating to employment, employment
practices, immigration, wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation matters, and has correctly
classified employees as exempt employees and non-exempt employees under the Fair
Labor Standards Act. A list of all employees, officers and
23
consultants of Company and their current title and/or job description, current
compensation rates, bonuses paid during the last fiscal year, and accrued
vacation and sick leave for all employees is set forth in Schedule 3.16.1 of the
Company Disclosure Letter. Except as set forth in Schedule 3.16.1 of the Company
Disclosure Letter, Company does not have any employment contracts or consulting
agreements currently in effect that are not terminable at will (other than
agreements with the sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
3.16.2 Company (a) is not now, nor has it ever been, subject to a
union organizing effort, (b) is not subject to any collective bargaining
agreement with respect to any of its employees, (c) is not subject to any other
contract, written or oral, with any trade or labor union, employees' association
or similar organization, and (d) has no current labor disputes. The Company does
not have knowledge (a) of any facts indicating that the consummation of the
Merger or any of the other transactions contemplated hereby will have a material
adverse effect on its labor relations, or (b) that any of Company's key
employees listed on Exhibit G intends to leave the Company's employ. All of
Company's employees are legally permitted to be employed by Company in their
current job capacities under Applicable Laws.
3.16.3 Schedule 3.16.3 of the Company Disclosure Letter lists (i)
all "employee benefit plans" within the meaning of Section 3(3) of ERISA, and
(ii) all other employee benefit, bonus or other incentive compensation, stock
option, stock purchase, stock appreciation, severance pay, lay-off or reduction
in force, change in control, sick pay, vacation pay, salary continuation,
retainer, leave of absence, educational assistance, service award, employee
discount, fringe benefit plans, arrangements, policies or practices, to which
the Company contributes to or has any obligation to or liability for
(collectively, the "EMPLOYEE PLANS"). Each Employee Plan may be, and provides
that it may be, amended or terminated at any time and, except for benefits
protected under Section 411(d) of the Code or Section 204(g) of ERISA, or
benefits to which a plan participant or beneficiary has accrued a vested right,
all benefits payable to current or terminated employees or any beneficiary may
be amended or terminated by the Company at any time without liability. None of
the Employee Plans is subject to Section 302 or Title IV of ERISA or Section 412
of the Code (a "Defined Benefit Plan") or is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA (a "Multiemployer Plan") and the Company has
never (i) sponsored, maintained or contributed to, or been obligated to
contribute to, a Defined Benefit Plan or (ii) contributed to, or been obligated
to contribute to, a Multiemployer Plan. The Company does not maintain or
contribute to any welfare benefit plan that provides health benefits to an
employee after the employee's termination of employment or retirement except as
required under Section 4980B of the Code and Sections 601 through 608 of ERISA
("COBRA") or other applicable legal requirements. All expenses and liabilities
relating to all of the Employee Plans described in Schedule 3.16.3 of the
Company Disclosure Letter have been, and will on the Closing be, fully and
properly accrued on the Company's books and records and are disclosed on the
Company Financial Statements and such Employee Plans have no unfunded
liabilities not reflected on the Company Financial Statements.
3.16.4 Each independent contractor that currently performs or has in
the past performed services for the Company are subject to written agreements
with the Company, copies of which have been provided to counsel for Parent. All
such independent contractors have been fully paid all amounts owing to them by
the Company through the date hereof, and there are no
24
disputes or controversies between any such independent contractor and the
Company whatsoever, including without limitation, disputes regarding amounts
owned or ownership of Intellectual Property. All such written agreements are in
full force and effect, and neither the Company nor any such independent
contractor is in breach thereof.
3.17 Corporate Documents. Company has provided or made available to Parent
copies of documents and information identified in the Company Disclosure Letter
or in any schedule thereto or in any other Exhibit or Schedule called for by
this Agreement which are complete and correct in all material respects,
including the following: (a) copies of Company's Articles of Incorporation and
Bylaws, as currently in effect; (b) Company's minute book containing records of
all proceedings, consents, actions and meetings of Company's Board of Directors,
committees of the Board of Directors and Shareholders; (c) Company's stock
ledger and journal reflecting all stock issuances and transfers, and all grants
of other Company securities; (d) all Governmental Permits, and all applications
for such Governmental Permits; and (e) all Company Material Agreements.
3.18 No Brokers. Neither Company nor any affiliate of Company is obligated
for the payment of any fees or expenses of any investment banker, broker, finder
or similar party in connection with the origin, negotiation or execution of this
Agreement or in connection with the Merger or any other transaction contemplated
by this Agreement, and Parent will not incur any liability, either directly or
indirectly, to any such investment banker, broker, finder or similar party as a
result of this Agreement, the Merger or any act or omission of Company or any of
its employees, officers, directors, stockholders, agents or affiliates.
3.19 Insurance. Company maintains with third parties policies of fire and
casualty, liability and other forms of insurance in such amounts, with such
deductibles and retained amounts, and against such risks and losses, as are, to
the Company's knowledge, customarily carried by Persons conducting businesses or
owning assets similar in type and size to those of Company, including without
limitation all legally required workers' compensation insurance and casualty,
fire and general liability insurance. There is no claim pending under any of
such policies or bonds as to which coverage has been questioned, denied or
disputed by the underwriters of such policies or bonds. All premiums due and
payable under all such policies and bonds have been timely paid, and Company is
otherwise in material compliance with the terms of such policies and bonds and
all such policies are in full force and effect. The Company does not have any
knowledge of any threatened termination of, or material premium increase with
respect to, any of such policies.
3.20 Environmental Matters.
3.20.1 Company is in material compliance with all applicable
Environmental Laws (as defined below), which compliance includes the possession
by Company of all permits and other governmental authorizations required under
applicable Environmental Laws, and material compliance with the terms and
conditions thereof. 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 Company is not in compliance with any
Environmental Law, and there are no circumstances that may prevent or interfere
with the material compliance by Company with any current Environmental Law in
the future. To
25
Company's knowledge, no current or prior owner of any property leased, used,
occupied or possessed by 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 Company
has not complied with, or is not in compliance with, any Environmental Law. All
permits and other governmental authorizations currently held by Company pursuant
to any Environmental Law (if any) are identified in Schedule 3.20 of the Company
Disclosure Letter.
3.20.2 For purposes of this Section 3.20: (a) "ENVIRONMENTAL LAW"
means any federal, state or local statute, law regulation or other 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 any Material of Environmental
Concern, or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of any Material of
Environmental Concern; and (b) "MATERIAL OF ENVIRONMENTAL CONCERN" includes
chemicals, pollutants, contaminants, wastes, toxic substances, petroleum and
petroleum products and any other substance that is currently regulated by an
Environmental Law or that is otherwise a danger to health, reproduction or the
environment.
3.21 Board Actions. The Board of Directors of Company (a) has unanimously
determined that the Merger is in the best interests of the Company Shareholders
and is on terms that are fair to such Company Shareholders, and has recommended
the Merger to the Company Shareholders, and (b) will submit the Merger, this
Agreement, each of the Company Ancillary Agreements and all other agreements,
transactions and actions contemplated hereby and thereby, to the extent that
Company Shareholder approval is required thereof under applicable law and
Company's Articles of Incorporation and Bylaws, to the vote and approval of or
consent by the Company Shareholders.
3.22 Disclosure. Neither this Agreement, its Exhibits and Schedules and
the Company Disclosure Letter, nor any Company Ancillary Agreements delivered by
Company to Parent under this Agreement, taken together, to the Company's
knowledge, contains any untrue statement of a material fact or omits to state
any material fact necessary in order to make the statements contained herein and
therein, in light of the circumstances under which such statements were made,
not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby represent and warrant to Company that, except as set
forth in the letter addressed to Company from Parent and dated as of the
Agreement Date (including all schedules thereto) which has been delivered by
Parent to Company concurrently herewith (the "PARENT DISCLOSURE LETTER"), each
of the representations, warranties and statements contained in the following
sections of this Article 4 is true and correct as of the Agreement Date and will
be true and correct on and as of the Closing Date. For all purposes of this
Agreement, the statements contained in the Parent Disclosure Letter and its
schedules shall also be deemed to be
26
representations and warranties made and given by Parent and Sub under Article 4
of this Agreement.
4.1 Organization and Good Standing. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the corporate power and authority to own, operate and lease
its properties and to carry on its business as now conducted and as proposed to
be conducted. Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Oregon, and has the corporate power and
authority to own, operate and lease its properties and to carry on its business.
Parent owns all of the issued and outstanding capital stock of Sub. Each of
Parent and Sub is duly qualified or licensed to do business and is in good
standing in each jurisdiction where the properties owned, leased or operated by
it or the nature its activities makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed would not individually
or in the aggregate have a Material Adverse Effect on Parent. Parent has made
available to Company true and complete copies of the Articles of Incorporation
and Bylaws Sub, as currently in full force and effect.
4.2 Power, Authorization and Validity.
4.2.1 Power and Authority. Parent has the right, power, legal
capacity and authority to enter into and perform its obligations under this
Agreement and all agreements and documents to which Parent is or will be a party
that are required to be executed pursuant to this Agreement (the "PARENT
ANCILLARY AGREEMENTS"). The execution, delivery and performance of this
Agreement and the Parent Ancillary Agreements have been duly and validly
approved and authorized by all necessary corporate and stockholder action on the
part of Parent. Sub has the right, power, legal capacity and authority to enter
into and perform its obligations under this Agreement and all agreements and
documents to which Sub is or will be a party that are required to be executed
pursuant to this Agreement (the "SUB ANCILLARY AGREEMENTS"). The execution,
delivery and performance of this Agreement and the Sub Ancillary Agreements have
been duly and validly approved and authorized by all necessary corporate and
shareholder action on the part of Sub.
4.2.2 No Consents. No consent, approval, permit, order or
authorization from, or registration, declaration or filing with, any
Governmental Authority or any other Person, governmental or otherwise, is
necessary or required to be made or obtained by Parent or Sub to enable Parent
and Sub to lawfully execute and deliver, enter into, and to perform their
respective obligations under, this Agreement, the Parent Ancillary Agreements or
the Sub Ancillary Agreements, and for Parent and Sub to consummate the Merger,
except for: (a) the filing of the Articles of Merger with the Oregon Secretary
of State; (b) the filing by Parent of such reports and information with the SEC
under the Exchange Act and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement, the Merger and
the other transactions contemplated by this Agreement; (c) the filing of a
registration statement on Form S-8 with the SEC, or other applicable form
covering the shares of Parent Common Stock issuable pursuant to the Unvested
Company Options assumed by Parent, (d) such other filings as may be required by
the Nasdaq Stock Market with respect to the Merger and the other transactions
contemplated by this Agreement; and (e) such other filings, if any, as may be
required in order for Parent to comply with applicable federal and state
securities laws.
27
4.2.3 Enforceability. This Agreement has been duly executed and
delivered by Parent and Sub. This Agreement and the Parent Ancillary Agreements
are, or when executed by Parent will be, valid and binding obligations of Parent
enforceable against Parent in accordance with their respective terms, subject
only to the effect of (a) applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally
and (b) rules of law and equity governing specific performance, injunctive
relief and other equitable remedies. This Agreement and the Sub Ancillary
Agreements are, or when executed by Sub will be, valid and binding obligations
of Sub enforceable against Sub in accordance with their respective terms,
subject only to the effect, if any, of (a) applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws affecting the rights of
creditors generally and (b) rules of law and equity governing specific
performance, injunctive relief and other equitable remedies.
4.3 No Conflict. Neither the execution and delivery of this Agreement nor
any of the Parent Ancillary Agreements or Sub Ancillary Agreements by Parent or
Sub, nor the consummation of the Merger or any of the other transactions
contemplated hereby or thereby, will conflict with, or (with or without notice
or lapse of time, or both) result in a termination, breach, impairment or
violation of, or constitute a default under, (i) any provision of the
Certificate of Incorporation or Bylaws of Parent or the Articles of
Incorporation or Bylaws of Sub, as currently in effect, (ii) any federal, state,
local or foreign judgment, writ, decree, order, statute, rule or regulation
applicable to Parent, Sub or any of their respective material assets or
properties, or (iii) any material instrument, obligation or agreement to which
Parent or Sub is a party or by which its properties or assets are bound, or
result in the creation of any lien, charge or other encumbrance upon any of the
properties of Parent or Sub under the terms of any note, bond, mortgage or
indenture or any other material instrument, obligation or agreement.
4.4 Finders or Brokers. None of Parent, Sub, the other Subsidiaries of
Parent, the Boards of Directors (or any committee thereof) of Parent and Sub or
any member of such Boards of Directors (or committee) has employed any agent,
investment banker, broker, finder or intermediary in connection with the
transactions contemplated hereby who might be entitled to a fee or any
commission in connection with the Merger or the other transactions contemplated
hereby.
4.5 Availability of Funds. Parent currently has access to sufficient
immediately available funds in cash or cash equivalents, and will at the Closing
have sufficient immediately available funds, in cash, to pay the Cash
Consideration.
ARTICLE 5
COVENANTS OF COMPANY
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10, Company covenants and agrees with Parent as
follows:
5.1 Advise of Changes. Company will promptly advise Parent in writing of
any (a) event occurring subsequent to the Agreement Date that would render any
representation or warranty of Company contained in this Agreement, if made on or
as of the date of such event or
28
the Closing Date, untrue or inaccurate, (b) breach of any covenant or obligation
of Company pursuant to this Agreement or any Company Ancillary Agreement, or (c)
Material Adverse Change in Company.
5.2 Maintenance of Business. Company will use commercially reasonable
efforts to carry on and preserve its business and its relationships with
customers, advertisers, suppliers and others with whom Company has contractual
relations in substantially the same manner as it has prior to the Agreement Date
consistent with its past practices. If Company becomes aware of a material
deterioration in the relationship with any key customer, advertiser, supplier or
business partner, it will promptly bring such information to Parent's attention
in writing and, if requested by Parent, will exert commercially reasonable
efforts to promptly restore the relationship.
5.3 Conduct of Business. Except as expressly contemplated by this
Agreement, Company will continue to conduct its business and maintain its
business relationships in the ordinary and usual course, and Company will not,
without the prior written consent of Parent (which consent shall not be
unreasonably withheld, delayed or conditioned):
(a) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person;
(b) lend any money, other than reasonable and normal advances to
employees for bona fide expenses that are incurred in the ordinary course of
Company's business, consistent with its past practices;
(c) enter into any transaction or agreement that involves payments
of more than $50,000 either from or to Company (or payments from and to Company
which exceed $100,000 in the aggregate) or that involves the performance of
obligations over a period of three (3) months or more from the date of execution
thereof, other than transactions or agreements entered into in the ordinary
course of business, consistent with past practices or take any other action not
in the ordinary course of Company's business, consistent with its past
practices;
(d) grant any Encumbrance on any of its assets;
(e) sell, transfer or dispose of any of its assets except in the
ordinary course of Company's business, consistent with its past practice;
(f) enter into any material lease or contract for the purchase or
sale of any property, whether real or personal, tangible or intangible;
(g) pay any bonus, increased salary, severance or special
remuneration to any officer, director, employee or consultant or amend or enter
into any employment, consulting agreement or severance agreement with any such
Person or create or amend any Company Benefit Arrangement; provided, however,
that (i) the Company shall cause each Company Option held by each member of the
Board of Directors, the chief financial officer and each employee who is not
offered employment by the Parent or the Surviving Corporation at the Closing on
substantially similar terms and conditions as his or her employment with the
Company to accelerate and become immediately exercisable and vested as to 100%
of the shares subject to the Company Option immediately prior to the Closing;
and (ii) the Company may,
29
after consultation with the Parent, cause those Company Options identified on
Schedule 2.2.2 that are not subject to automatic acceleration to so accelerate
and become immediately exercisable and vested as to not more than 25% of the
shares subject to the Unvested Company Options immediately prior to the Closing;
(h) change any of its accounting methods;
(i) declare, set aside or pay any cash or stock dividend or other
distribution in respect of its capital stock, redeem, repurchase or otherwise
acquire any of its capital stock or other securities (except for the repurchase
of stock from employees, directors, consultants or contractors of Company in
connection with the termination of their services to Company at the original
purchase price of such stock or other securities), pay or distribute any cash or
property to any shareholder or security holder of Company or make any other cash
payment to any shareholder or security holder of Company;
(j) amend or terminate any material contract, agreement or license
to which Company is a party, other than any amendments or terminations in the
ordinary course of business, consistent with past practices;
(k) terminate, or modify the terms of, the Company's agreements with
any of the independent contractors which are in effect as of the date hereof;
(l) waive or release any material right or claim;
(m) issue, sell, create or authorize any shares of its capital stock
of any class or series or any other of its securities, or issue, grant or create
any warrants, obligations, subscriptions, options, convertible securities, or
other commitments to issue shares of its capital stock or any securities that
are potentially exchangeable for, or convertible into, shares of its capital
stock, other than the issuance of shares of capital stock upon the exercise of
outstanding Company Options listed on Section 3.4.1 of the Company Disclosure
Schedule or any other issuances contemplated by Section 3.4.1 of the Company
Disclosure Schedule;
(n) subdivide, split, combine or reverse split the outstanding
shares of its capital stock of any class or series or enter into any
recapitalization affecting the number of outstanding shares of its capital stock
of any class or series or affecting any other of its securities;
(o) merge, consolidate or reorganize with, acquire, or enter into
any other business combination with, any corporation, partnership, limited
liability company or other entity (other than Parent or Sub);
(p) amend its Articles of Incorporation or Bylaws;
(q) license any of its technology or Intellectual Property, or
acquire any Intellectual Property (or any license thereto) from any third party
other than in the ordinary course of business consistent with past practices;
(r) materially change any insurance coverage;
30
(s) agree to any audit assessment by any taxing authority or file
any federal or state income or franchise tax return unless copies of such
returns have first been delivered to Parent for its review at a reasonable time
prior to filing;
(t) modify or change the purchase prices of any capital stock of
Company; or
(u) agree to do any of the things described in the preceding clauses
5.3(a) through 5.3(t).
5.4 Regulatory Approvals. Company will promptly execute and file, or join
in the execution and filing of, any application, notification or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Authority which may be reasonably required, or which Parent
may reasonably request, in connection with the consummation of the Merger or any
other transactions contemplated by this Agreement or any Company Ancillary
Agreement. Company will use all commercially reasonable efforts to obtain, and
to cooperate with Parent to promptly obtain, all such authorizations, approvals
and consents.
5.5 Necessary Consents. Company will promptly obtain such written consents
and authorizations of third parties, give notices to third parties and take such
other actions as may be necessary or appropriate in order to effect the
consummation of the Merger and the other transactions contemplated by this
Agreement, to enable Parent to carry on Company's business immediately after the
Effective Time and to keep in effect and avoid the breach, violation of,
termination of, or adverse change to, any agreement or contract to which Company
is a party or is bound or by which any of its assets is bound.
5.6 Litigation. Company will notify Parent in writing promptly after
learning of any claim, action, suit, arbitration, mediation, proceeding or
investigation by or before any court, arbitrator or arbitration panel, board or
governmental agency, initiated by or against it, or known by Company to be
threatened against Company or any of its officers, directors, employees or
shareholders in their capacity as such.
5.7 No Other Negotiations. Company will not, and will not authorize,
knowingly encourage or permit any director, officer, employee, shareholder,
affiliate or agent of Company or any attorney, investment banker or other Person
on Company's or their behalf to, directly or indirectly: (i) solicit, initiate,
knowingly encourage or induce the making, submission or announcement of any
offer or proposal from any Person concerning any Alternative Transaction (as
defined below) or take any other action that could reasonably be expected to
lead to an Alternative Transaction or a proposal therefor; (ii) consider any
inquiry, offer or proposal received from any party concerning any Alternative
Transaction (other than to respond to such inquiry, offer or proposal by
indicating that Company is not interested in any Alternative Transaction); (iii)
furnish any information regarding Company to any Person (other than Parent) in
connection with or in response to any inquiry, offer or proposal for or
regarding any Alternative Transaction (other than to respond to such inquiry,
offer or proposal by indicating that Company is not
31
interested in any Alternative Transaction); (iv) participate in any discussions
or negotiations with any Person (other than Parent) with respect to any
Alternative Transaction (other than to respond to such inquiry, offer or
proposal by indicating that Company is not interested in any Alternative
Transaction); (v) cooperate with, facilitate or encourage any effort or attempt
by any Person (other than Parent) to effect any Alternative Transaction; or (vi)
execute, enter into or become bound by any letter of intent, agreement,
commitment or understanding between Company and any Person (other than Parent)
that is related to, provides for or concerns any Alternative Transaction.
Company will promptly notify Parent orally and in writing of any inquiries or
proposals received by Company or its directors, officers, employees,
shareholders, affiliates or agents regarding any Alternative Transaction and
will identify the party making the inquiry or proposal and the nature and terms
of any inquiry or proposal. Any violation of the restrictions set forth in this
Section 5.7 by any director or officer of Company or any attorney, investment
banker or other director or representative of Company authorized to act for the
Company shall be deemed a breach of this Section 5.7 by Company. As used herein,
the term "ALTERNATIVE TRANSACTION" means any commitment, agreement or
transaction, other than as contemplated by this Agreement, involving or
providing for (a) the possible disposition of all or any substantial portion of
Company's business, assets or capital stock, whether by way of merger,
consolidation, sale of assets, sale of stock, stock exchange, tender offer
and/or any other form of business combination, or (b) any initial public
offering of capital stock or other securities of Company pursuant to a
registration statement filed under the Securities Act.
5.8 Access to Information. Subject to the terms and conditions of this
Agreement relating to the confidentiality and use of confidential and
proprietary information, Company will allow Parent and its agents reasonable
access at reasonable times to the files, books, records, technology, contracts,
personnel and offices of Company, including, but not limited to, any and all
information relating to Company's taxes, commitments, contracts, leases,
licenses, liabilities, financial condition and real, personal and intangible
property. Company will use its commercially reasonable best efforts to cause its
accountants to cooperate with Parent and its agents in making available all
financial information reasonably requested by Parent, including the right to
examine all working papers pertaining to all financial statements prepared or
audited by such accountants.
5.9 Satisfaction of Conditions Precedent. Company will use best efforts to
satisfy or cause to be satisfied all the conditions precedent which are set
forth in Article 9, and Company will use best efforts to cause the Merger and
the other transactions contemplated by this Agreement to be consummated in
accordance with the terms of this Agreement.
5.10 Company Shareholder Approval.
5.10.1 Promptly after the Agreement Date, Company will take all
action necessary in accordance with the Oregon Law and its Articles of
Incorporation and Bylaws to convene a special meeting of Company shareholders to
be held as promptly as practicable for the purpose of voting upon approval and
adoption of this Agreement and approval of the Merger or to secure the written
consent of Company shareholders with respect thereto (such meeting or written
consent, the "COMPANY SHAREHOLDERS' APPROVAL"). Company will use all reasonable
efforts to solicit from its shareholders proxies in favor of the adoption and
approval of this Agreement and approval of the Merger and will take all other
action necessary to secure the vote or consent of its shareholders required by
the rules of the Oregon Law and Company's Articles of Incorporation and Bylaws
to obtain such approvals. Notwithstanding anything to the contrary contained in
this Agreement, if a meeting of the Company shareholders is held to seek the
32
Company Shareholders' Approval, Company may adjourn or postpone a Company
shareholders' meeting to the extent necessary to ensure that there are
sufficient shares of Company Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business at the Company
shareholders' meeting. Company shall ensure that the Company shareholders'
meeting is called, noticed, convened, held and conducted, and that all proxies
solicited by Company in connection with the Company shareholders' meeting are
solicited, or to the extent the Company secures written consent of the Company's
shareholders, that such solicitation is done in compliance with the Oregon Law,
its Articles of Incorporation and Bylaws and all other applicable legal
requirements. Company's obligation to call, give notice of, convene, hold and
conduct the Company shareholders' meeting or otherwise to solicit the consent of
its shareholder hereunder shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Alternative Transaction, or by any withdrawal, amendment or modification of the
recommendation of the Board of Directors of Company with respect to this
Agreement or the Merger.
5.10.2 The Board of Directors of Company shall recommend that
Company's shareholders vote in favor of and adopt and approve this Agreement and
approve the Merger at the Company shareholders' meeting. Any communication sent
to Company Shareholders shall include a statement to the effect that the Board
of Directors of Company has recommended that Company's shareholders vote in
favor of and adopt and approve this Agreement and the Merger at the Company
shareholders' meeting. Neither the Board of Directors of Company nor any
committee thereof shall withdraw, amend or modify, or propose or resolve to
withdraw, amend or modify in a manner adverse to Parent, the recommendation of
the Board of Directors of Company that Company's shareholders vote in favor of
and adopt and approve this Agreement and the Merger.
5.11 Retention of Employees. Company will use all commercially reasonable
efforts to retain for continued employment following the Closing, all employees
of Company identified by Parent, and Company will promptly notify Parent if any
of Company's officers receive oral or written notice or otherwise become aware
that any of such employees intends to leave Company's employ.
5.12 Employment Agreements. Each of Xxxx Van Eikeren and Josh Van Eikeren
shall execute and deliver to Parent an employment agreement in the form attached
hereto as Exhibit C ("EMPLOYMENT AGREEMENT") to be effective as of the Closing.
ARTICLE 6
PARENT COVENANTS
During the time period from the Agreement Date until the earlier to occur
of (a) the Effective Time or (b) the termination of this Agreement in accordance
with the provisions of Article 10 (or during such other time period as may be
specified below), Parent covenants and agrees with Company as follows:
6.1 Advise of Changes. Parent will promptly advise Company in writing of
any (a) event occurring subsequent to the Agreement Date that would render any
representation or warranty of Parent or Sub contained in this Agreement, if made
on or as of the date of such event
33
or the Closing Date, untrue or inaccurate, (b) breach of any covenant or
obligation of Parent or Sub pursuant to this Agreement, any Parent Ancillary
Agreement or any Sub Ancillary Agreement, or (c) Material Adverse Change in
Parent.
6.2 Regulatory Approvals. Parent will promptly execute and file, or join
in the execution and filing of, any application, notification or other document
that may be necessary in order to obtain the authorization, approval or consent
of any Governmental Authority which may be reasonably required, or which Company
may reasonably request, in connection with the consummation of the Merger or any
other transactions contemplated by this Agreement, any Parent Ancillary
Agreement or any Sub Ancillary Agreement. Parent will use all commercially
reasonable efforts to obtain, and to cooperate with Company to promptly obtain,
all such authorizations, approvals and consents. Notwithstanding anything in
this Agreement to the contrary, neither Parent nor any of its affiliates shall
be under any obligation to make proposals, execute or carry out agreements, or
submit to orders providing for the sale or other disposition or holding separate
(through the establishment of a trust or otherwise) of any assets or categories
of assets of Parent, or any of its affiliates or Company, or the holding
separate of the shares of Company Stock or imposing or seeking to impose any
limitation on the ability of Parent or any of its Subsidiaries or affiliates to
conduct their business or own such assets or to acquire, hold or exercise full
rights of ownership of the shares of Company Stock.
6.3 Satisfaction of Conditions Precedent. Parent will use all commercially
reasonable efforts to satisfy or cause to be satisfied all of the conditions
precedent which are set forth in Article 8, and Parent will use all commercially
reasonable efforts to cause the Merger and the other transactions contemplated
by this Agreement to be consummated in accordance with the terms of this
Agreement.
6.4 Form S-8. Parent agrees to file, as soon as practicable on or after
(but no later than 2 business days) after the Closing, a registration statement
on Form S-8 covering the sale of shares of Parent Stock issuable pursuant to
outstanding Unvested Company Options under the Company Plan assumed by Parent
pursuant to the terms hereof. Company will cooperate and assist Parent in the
preparation of such registration statement.
6.5 Employee Matters. Following the Effective Time, Parent or its
affiliates will provide each employee of Company who continues as an employee of
Parent or any of its affiliates (a "CONTINUING EMPLOYEE") employee benefits that
are reasonably equivalent to employee benefits provided to similarly situated
employees of Parent, and full credit for prior service with Company for purposes
of (i) eligibility and vesting under Parent's employee benefit plans, (ii)
determination of benefits levels under any Parent employee benefit plans or
policies relating to vacation or severance and (iii) determination of "retiree"
status under any Parent employee benefit plans, in each case for which the
Continuing Employee is otherwise eligible and in which the Continuing Employee
is offered participation, but except where such crediting would (A) result in a
duplication of benefits or (B) otherwise cause Parent or its affiliates or any
Parent employee benefit plan or trust relating thereto to accrue or pay for
benefits that relate to any time period prior to the Continuing Employee's
participation in the Parent's employee benefit plan. With respect to any health
plans in which Continuing Employees are eligible to participate after the
Effective Time, Parent and its affiliates shall waive all limitations as to
pre-existing conditions exclusions and waiting periods with respect to
participation and coverage
34
requirements applicable to such employees (to the extent such exclusion was
waived under applicable health plans offered to such employees by Company).
ARTICLE 7
CLOSING MATTERS
7.1 Closing. Subject to termination of this Agreement as provided in
Article 10, the closing of the transactions to consummate the Merger (the
"CLOSING") will take place at the offices of Xxxxxxxx & Xxxxxxxx LLP, 000 Xxxx
Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx at 2:00 p.m., Pacific Time on the first
business day after all of the conditions to Closing set forth in Sections 8 and
9 have been satisfied and/or waived in accordance with this Agreement, or at
such other place, time or date as Parent and Company may mutually agree (the
"CLOSING Date"). Concurrently with the Closing or at such later date and time as
may be mutually agreed by Parent and Company, the Articles of Merger will be
filed with the Oregon Secretary of State.
7.2 Exchange.
7.2.1 At the Effective Time, outstanding shares of Company Stock as
of immediately prior to the Effective Time (other than Dissenting Shares for
which dissenters rights have been or will be perfected in accordance with the
Oregon Law) will, by virtue of the Merger and without further action, be
cancelled and extinguished, and all such shares will be automatically converted
into the right to receive from Parent, and shall be exchangeable for, the amount
of cash to which the holder thereof is entitled pursuant to Section 2.1.2,
subject to the provisions of Sections 2.1.3, and 2.3.
(a) Promptly following the Agreement Date, Parent shall
appoint an agent (the "PAYMENT AGENT") for the purpose of exchanging for those
amounts distributable pursuant to Section 2.1.2 hereof certificates (the
"COMPANY CERTIFICATES") and Uncertificated Shares, in each case representing
shares of Company Stock outstanding as of immediately prior to the Effective
Time. Prior to the Effective Time, Parent shall make available, subject to
Section 2.3 hereof, to the Payment Agent, an amount equal to the Cash
Consideration (less the Escrow Fund) to be paid in respect of Company Stock
outstanding as of immediately prior to the Effective Time. As promptly as
reasonably practicable following the Agreement Date, and in any event within two
(2) business days, Parent shall send, or shall cause the Payment Agent to send,
to each Company Shareholder, (i) a letter of transmittal in substantially the
form attached hereto as Exhibit E and (ii) instructions for use in effecting the
exchange of Company Certificates and Uncertificated Shares for the cash payment
distributable pursuant to Section 2.1.2.
(b) Each holder of Company Stock that, by virtue of the
Merger, has been canceled and extinguished and automatically converted into the
right to receive the Cash Consideration shall be entitled to receive, upon
surrender to the Payment Agent of (i) a Company Certificate (or upon delivery of
an affidavit of lost certificate and an indemnity in form and substance
satisfactory to Parent (an "AFFIDAVIT")) (provided, however, that the holders of
Uncertificated Shares identified as such on the Consideration Allocation
Certificate shall not be required to comply with clause (i) with respect to such
Uncertificated Shares), together with (ii) a properly executed and completed
letter of transmittal, the Cash Consideration payable for each
35
share of Company Stock represented by such Company Certificate, Affidavit or
Uncertificated Shares, as the case may be. For purposes of clarification, in the
event a Company Shareholder shall have complied with clauses (i) and (ii) above
prior to the Closing Date, Parent shall cause the Payment Agent to deliver to
such Company Shareholder, at the Effective Time, the Cash Consideration payable
with respect to the Company Stock represented by such surrendered Company
Certificates, Affidavit or Uncertificated Shares, as the case may be.
7.2.2 After the Effective Time there will be no further registration
of transfers on the stock transfer books of Company or its transfer agent of any
shares of capital stock of Company that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, Company Certificates or an
Affidavit are presented for any reason, they will be cancelled and exchanged as
provided in this Section 7.2.
7.2.3 Until Company Certificates representing shares of Company
Stock that are outstanding immediately prior to the Effective Time are
surrendered pursuant to Section 7.2.1, such Company Certificates will be deemed,
for all purposes, to evidence only ownership of the right to receive cash in the
amounts determined in accordance with the provisions of Section 2.1.2.
7.3 Dissenters' Rights. If holders of Company Stock are entitled to
appraisal rights pursuant to the Oregon Law in connection with the Merger, any
shares held by Company Shareholders who exercise and perfect such appraisal
rights ("DISSENTING SHARES") will not be converted into a right to receive cash,
but shall be converted into the right to receive such consideration as may be
determined to be due with respect to such Dissenting Shares pursuant to the
Oregon Law. Company shall give Parent prompt notice (and in no event more than
two business days) of any demand received by Company for appraisal of Company
Stock, and Parent shall have the right to control all negotiations and
proceedings with respect to such demand. Company agrees that, except with the
prior written consent of Parent, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such demand for appraisal. In the
event that any Company Shareholder fails to make an effective demand for payment
or otherwise loses his status as a holder of Dissenting Shares, Parent shall, as
of the later of the Effective Time or ten business days from the occurrence of
such event, deliver, upon surrender by such shareholder of its Company
Certificate(s), the Cash Consideration without interest thereon, to which such
shareholder would have been entitled to under Section 2.1.2.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF COMPANY
Company's obligation to consummate the Merger are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Company, but only in a
writing signed by Company):
8.1 Accuracy of Representations and Warranties. The representations and
warranties of Parent and Sub set forth in this Agreement (a) that are qualified
as to materiality shall be true and correct and (b) that are not qualified as to
materiality shall be true and correct, in each case on and as of the Closing,
with the same force and effect as if they had been made on the Closing Date
except where failure to be true and correct would not result in a Material
Adverse Effect on
36
the Parent or Sub (except for any such representations or warranties that, by
their terms, speak only as of a specific date or dates, in which case such
representations and warranties that are qualified as to materiality shall be
true and correct, and such representations and warranties that are not qualified
as to materiality shall be true and correct in all material respects, on and as
of such specified date or dates).
8.2 Covenants. Parent will have performed and complied in all material
respects with all of its covenants contained in this Agreement on or before the
Closing (to the extent that such covenants require performance by Parent on or
before the Closing).
8.3 Compliance with Law; No Legal Restraints. There will not be issued,
enacted or adopted, or threatened in writing by any Governmental Authority, any
order, decree, temporary, preliminary or permanent injunction, legislative
enactment, statute, regulation, action or proceeding, or any judgment or ruling
by any Governmental Authority, that prohibits or renders illegal or imposes
limitations on the Merger or any other material transaction contemplated by this
Agreement, any Parent Ancillary Agreement or any Sub Ancillary Agreement.
8.4 Government Consents. There will have been obtained at or prior to the
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any Governmental Authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
lawfully consummate the Merger, including, but not limited to, requirements
under applicable federal and state securities laws.
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF PARENT
Parent's obligation to consummate the Merger are subject to the
fulfillment or satisfaction, on and as of the Closing, of each of the following
conditions (any one or more of which may be waived by Parent, but only in a
writing signed by Parent):
9.1 Accuracy of Representations and Warranties. The representations and
warranties of Company set forth in this Agreement (a) that are qualified as to
materiality shall be true and correct and (b) that are not qualified as to
materiality shall be true and correct, in each case on and as of the Closing,
with the same force and effect as if they had been made on the Closing Date,
except where failure to be true and correct would not result in a Material
Adverse Effect on the Company (except for any such representations or warranties
that, by their terms, speak only as of a specific date or dates, in which case
such representations and warranties that are qualified as to materiality shall
be true and correct, and such representations and warranties that are not
qualified as to materiality shall be true and correct in all material respects,
on and as of such specified date or dates), and at the Closing Parent will have
received a certificate to such effect executed by Company's President or Chief
Executive Officer.
9.2 Covenants. Company will have performed and complied in all material
respects with all of its covenants contained in this Agreement at or before the
Closing (to the extent that such covenants require performance by Company on or
before the Closing), and at the Closing Parent will have received a certificate
to such effect executed by Company's President or Chief Executive Officer.
37
9.3 No Material Adverse Change. There will not have been any Material
Adverse Change in Company from the date of this Agreement that is still
continuing, whether or not resulting from a breach in any representation,
warranty or covenant in this Agreement, and at the Closing Parent will have
received a certificate to such effect executed by Company's President or Chief
Executive Officer.
9.4 Compliance with Law; No Legal Restraints; No Litigation. There will
not be issued, enacted or adopted, or threatened in writing by any Governmental
Authority, any order, decree, temporary, preliminary or permanent injunction,
legislative enactment, statute, regulation, action or proceeding, or any
judgment or ruling by any Governmental Authority, that prohibits or renders
illegal or imposes limitations on: (a) the Merger or any other material
transaction contemplated by this Agreement or any Company Ancillary Agreement;
or (b) Parent's right (or the right of any Subsidiary of Parent) to own, retain,
use or operate any of its products, properties or assets (including securities,
properties or assets of Company) on or after consummation of the Merger or
seeking a disposition or divestiture of any such products, properties or assets,
except where such prohibition or limitation could be reasonably expected to have
a Material Adverse Effect on Company or Parent. No litigation or proceeding will
be threatened or pending for the purpose or with the probable effect of
enjoining or preventing the consummation of any of the transactions contemplated
by this Agreement, or which could be reasonably expected to have a Material
Adverse Effect on Company or Parent.
9.5 Government Consents. There will have been obtained at or prior to the
Closing Date such permits or authorizations, and there will have been taken all
such other actions by any Governmental Authority having jurisdiction over the
parties and the actions herein proposed to be taken, as may be required to
consummate the Merger.
9.6 Opinion of Company's Counsel. Parent will have received from Xxxxx
Xxxxxx Xxxxxxxx LLP, counsel to Company, an opinion opining to the matters set
forth in Exhibit F.
9.7 Consents. Parent shall have received duly executed copies of all
third-party consents set forth in Schedule 3.5 of the Company Disclosure Letter.
9.8 Company Shareholder Approvals. This Agreement, the Company Ancillary
Agreements and the Merger will have been duly and validly approved, authorized
and adopted, as required by applicable law and Company's Articles of
Incorporation and Bylaws, by the valid and affirmative vote of more than ninety
percent (90%) of each of the outstanding shares of Company Common Stock and
Company Preferred Stock.
9.9 Employment Matters. None of the key Company employees identified by
Parent in Exhibit G hereto shall have terminated their employment with Company
and Parent and Company shall have received a release in a form reasonably
acceptable to the Parent from Xxxxxxx Xxxxxxx.
9.10 Termination of Vested Company Options. All vested Company Options
shall have been terminated in full prior to the Closing Date.
9.11 Ancillary Agreements. Each Employment Agreement shall be in full
force and effect.
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9.12 Resignation of Directors and Officers. The directors and officers of
Company in office immediately prior to the Effective Time will have resigned as
directors and officers of the Company in writing effective as of the Effective
Time.
9.13 Consideration Allocation Certificate. Company shall deliver the
Consideration Allocation Certificate which spreadsheet shall be certified as
complete and correct by the President or Chief Financial Officer of the Company
as of the Closing and which shall separately list, as of the Closing, all
Company Shareholders and holders of Company Options and their respective
addresses, the number of shares of Company Stock and/or vested Company Options
held by such persons and the respective certificate numbers (or, if applicable,
that such shares are Uncertificated Shares), the Cash Consideration to be paid
to each Company Shareholder or holders of Company Options and the amount of cash
to be deposited into the Escrow Fund on behalf of each Company Shareholder. The
Consideration Allocation Certificate shall also include the information called
for in Schedule 2.2.2 as of the Closing Date for Unvested Company Options.
ARTICLE 10
TERMINATION OF AGREEMENT
10.1 Termination by Mutual Consent. This Agreement may be terminated at
any time prior to the Effective Time by the mutual written consent of Parent and
Company.
10.2 Unilateral Termination.
10.2.1 Either Parent or Company, by giving written notice to the
other, may terminate this Agreement at any time prior to the Effective Time if a
court of competent jurisdiction or other Governmental Authority shall have
issued a nonappealable final order, decree or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger.
10.2.2 Either Parent or Company, by giving written notice to the
other, may terminate this Agreement at any time prior to the Effective Time if
the Merger shall not have been consummated by midnight Pacific Time on the
Termination Date; provided, however, that the right to terminate this Agreement
pursuant to this Section 10.2.2 shall not be available to any party whose
failure to perform in any material respect any of its obligations or covenants
under this Agreement results in the failure of any condition set forth in
Article 8 or Article 9 or if the failure of such condition results from facts or
circumstances that constitute a material breach of a representation or warranty
or covenant made under this Agreement by such party.
10.2.3 Either Parent or Company may terminate this Agreement at any
time prior to the Effective Time if the other has committed (or, in the case of
a termination by Company, Sub has committed) a material breach of (a) any of
such party's representations and warranties contained in this Agreement or (b)
any of such party's covenants contained in this Agreement, and has not cured
such material breach within ten days after the party seeking to terminate this
Agreement has given the other party written notice of the material breach and
its intention to terminate this Agreement pursuant to this Section 10.2.3.
39
10.2.4 Parent, by giving written notice to Company, may terminate
this Agreement if a Material Adverse Change in Company has occurred and such
Material Adverse Change continues for a period of ten (10) days following
written notice by Parent to Company.
10.3 No Liability for Termination. Termination of this Agreement by a
party (the "TERMINATING PARTY") in accordance with the provisions of this
Article 10 will not give rise to any obligation or liability on the part of the
Terminating Party on account of such termination; provided, however, that
nothing herein shall relieve a party from liability for a willful breach of this
Agreement. The provisions of this Article 10 and Article 12 shall survive any
termination of this Agreement.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES, CONTINUING COVENANTS
11.1 Survival of Representations. All representations and warranties of
Company contained in this Agreement and the other agreements, certificates and
documents contemplated hereby and all representations and warranties of
Principal Shareholders contained in the Company Ancillary Agreements will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of any of the parties to this Agreement, until the earlier of (a)
the termination of this Agreement in accordance with its terms and (b) **** from
the Closing Date; provided, however, that Parent and any Parent Indemnified
Person shall be entitled to seek recovery for the fraudulent breach of any
representation or warranty until the expiration of the applicable statute of
limitations for any claim which seeks recovery of Damages. All representations
and warranties of Parent and Sub contained in this Agreement and the other
agreements, certificates and documents contemplated hereby will remain operative
and in full force and effect into perpetuity, regardless of any investigation
made by or on behalf of any of the parties to this Agreement. All covenants of
the parties shall survive according to their respective terms.
11.2 Agreements to Indemnify.
11.2.1 Each Principal Shareholder shall, severally and not jointly,
based on such holder's Pro Rata Share of the Escrow Fund, indemnify and hold
harmless, Parent and the Surviving Corporation and their respective officers,
directors, agents, representatives, stockholders, shareholders and employees,
and each Person, if any, who controls or may control Parent or the Surviving
Corporation within the meaning of the Securities Act or the Exchange Act (each
hereinafter referred to individually as a "PARENT INDEMNIFIED PERSON" and
collectively as "PARENT INDEMNIFIED PERSONS") from and against any and all
claims, demands, suits, actions, causes of actions, losses, costs, damages,
liabilities and expenses including reasonable attorneys' fees, other
professionals' and experts' reasonable fees, and court or arbitration costs
(hereinafter collectively referred to as "DAMAGES") directly or indirectly
incurred, paid or accrued in connection with or resulting from or and arising
out of: (i) any breach of, or default in, any of the representations, warranties
or covenants given or made by Company in this Agreement or in the Company
Disclosure Letter or in any certificate delivered by or on behalf of Company or
an officer of Company pursuant hereto; or (ii) any Excess Transaction Expenses.
40
11.2.2 Any claim of indemnity made by a Parent Indemnified Person
under this Section 11.2 must be raised in a writing delivered to the
Representative (as defined in Section 11.4) by no later than the Escrow Release
Date and, if raised by such date, such claim shall survive the Escrow Release
Date until final resolution thereof pursuant to the terms of this Agreement.
11.2.3 Parent and Sub shall, jointly and severally, indemnify and
hold harmless the Company Shareholders and their respective officers, directors,
agents, representatives, stockholders, shareholders and employees, and each
Person, if any, who controls or may control such Company Shareholder within the
meaning of the Securities Act or the Exchange Act (each hereinafter referred to
individually as a "COMPANY SHAREHOLDER INDEMNIFIED Person" and collectively as
the "COMPANY SHAREHOLDER INDEMNIFIED PERSONS") from and against any and all
Damages directly or indirectly incurred, paid or accrued in connection with or
resulting from or and arising out of any breach of, or default in, any of the
representations, warranties or covenants given or made by Parent or Sub in this
Agreement or in any Parent Ancillary Agreement or in any Sub Ancillary
Agreement.
11.3 Limitation.
11.3.1 Notwithstanding anything to the contrary set forth herein,
the Principal Shareholders shall not have any liability under Section 11.2.1
unless the aggregate of all Damages thereunder exceeds $*** (the "DAMAGE
THRESHOLD"), in which case the Parent Indemnified Persons shall be entitled to
recover all Damages, including the amount equal to the Damage Threshold;
provided, however, that the Damage Threshold shall not apply to Excess
Transaction Expenses.
11.3.2 Except for fraudulent or intentional misrepresentation by a
Principal Shareholder, at the Effective Time, the liability of each such
Principal Shareholder pursuant to Section 1.2.1 hereof shall not exceed such
holder's Pro Rata Share of the Escrow Fund and the Escrow Fund shall be the sole
and exclusive remedy for the indemnity obligations of the Principal
Shareholders. In no event shall a Principal Stockholder be liable for the
fraudulent or intentional misrepresentation of another Principal Shareholder.
11.3.3 For the purposes of computing the individual or aggregate
amounts of Damages, the amount of each Claim shall be calculated (i) net of any
tax benefits realized by a Parent Indemnified Person as a result of the
incurrence or payment of such Damages, and (ii) net of any insurance proceeds
payable to any Parent Indemnified Person (net of any premiums paid by Parent or
Company following the Effective Date).
11.4 Appointment of Representative. Each Principal Shareholder approves
the designation of and designates Xxxx van Eikeren as the representative of the
Principal Shareholders and as the attorney-in-fact and agent for and on behalf
of each Principal Shareholder (the "REPRESENTATIVE") with respect to claims for
indemnification under Article 11 and the taking by the Representative of any and
all actions and the making of any decisions required or permitted to be taken by
the Representative under this Agreement, including the exercise of the power to:
(a) authorize the release or delivery to Parent of Escrow Fund in satisfaction
of indemnity claims by Parent or any other Parent Indemnified Person pursuant to
41
Article 11; (b) agree to, negotiate, enter into settlements and compromises of,
demand arbitration of, and comply with orders of courts and awards of
arbitrators with respect to, such claims; (c) arbitrate, resolve, settle or
compromise any claim for indemnity made pursuant to Article 11; and (d) take all
actions necessary in the judgment of the Representative for the accomplishment
of the foregoing. The Representative will have authority and power to act on
behalf of each Principal Shareholder with respect to the disposition, settlement
or other handling of all claims under Article 11 and all rights or obligations
arising under Article 11. The Principal Shareholders will be bound by all
actions taken and documents executed by the Representative in connection with
Article 11, and Parent will be entitled to rely on any action or decision of the
Representative. In performing the functions specified in this Agreement, the
Representative will not be liable to any Principal Shareholder in the absence of
gross negligence or willful misconduct on the part of the Representative. The
Principal Shareholders shall severally indemnify the Representative and hold him
harmless against any loss, liability or expense incurred without gross
negligence or willful misconduct on the part of the Representative and arising
out of or in connection with the acceptance or administration of his duties
hereunder. If the Representative shall die, become disabled or otherwise be
unable to fulfill his responsibilities as agent of the Principal Shareholders,
then a majority in interest of the Principal 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 "Representative" for purposes of this Agreement and
the Escrow Agreement. Any out-of-pocket costs and expenses reasonably incurred
by the Representative in connection with actions taken by the Representative
pursuant to the terms of Article 11 (including the hiring of legal counsel and
the incurring of legal fees and costs) shall be deducted from the Escrow Fund.
11.5 Notice of Claim. As used herein, "CLAIM" means a claim for
indemnification of Parent or any other Parent Indemnified Person for Damages
under Article 11. Parent shall give a written notice of a Claim executed by an
officer of Parent (a "NOTICE OF CLAIM") to Representative and Escrow Agent,
whether for its own Damages or for Damages incurred by any other Parent
Indemnified Person. Parent may give a Notice of Claim at any time Parent or any
other Parent Indemnified Person suffers Damages or is subject to a claim,
demand, suit, action, cause of action or other dispute that may give rise to a
Claim. In the event that Parent delivers a Notice of Claim on its own behalf or
is requested to deliver a Notice of Claim on behalf of any other Parent
Indemnified Person, Parent will do so within thirty (30) days after Parent
becomes aware of the existence of any potential claim by a Parent Indemnified
Person for indemnity under this Article 11. Parent shall deliver a Notice of
Claim before the Escrow Release Date. Until the Escrow Release Date, no delay on
the part of Parent in giving Representative a Notice of Claim will relieve
Representative or any Principal Shareholder from any of its obligations under
Article 11 unless (and then only to the extent) that Representative or the
Principal Shareholders are actually prejudiced thereby.
11.6 Defense of Third-Party Claims.
11.6.1 Parent shall give Representative and Escrow Agent notice,
within thirty (30) days after Parent becomes aware of the existence of the same,
of the assertion, whether orally or in writing, against Parent or any other
Parent Indemnified Person of a claim, demand, suit, action, arbitration,
investigation, inquiry or proceeding brought by a third party against such
Parent Indemnified Person (in each such case, a "THIRD-PARTY CLAIM") that is
based upon, or
42
includes assertions that would, if true, constitute any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by Representative or Company in this
Agreement, or any Excess Transaction Expenses. The Representative, acting on
behalf of the Principal Shareholders pursuant to this Section 11.6, is referred
to as the "INDEMNIFYING PARTY" for purposes of this Section 11.6. Until the
Escrow Release Date, no delay on the part of Parent in giving the Indemnifying
Party notice of such Third-Party Claim will relieve the Indemnifying Party from
any of its obligations under Article 11 unless (and then only to the extent)
that such Indemnifying Party is actually prejudiced thereby.
11.6.2 The Indemnifying Party shall be entitled to assume and
control the defense of such Third-Party Claim at its expense and through counsel
of its choice if it gives notice of its election to do so to Parent within
fifteen (15) days of the receipt of the notice from Parent; provided, however,
that if there exists or is reasonably likely to exist a conflict of interest
that would make it inappropriate in the judgment of Parent, in its reasonable
discretion, for the same counsel to represent both the Parent Indemnified Person
and the Indemnifying Party, then the Parent Indemnified Person shall be entitled
to retain its own counsel to defend against such Third-Party Claim, in each
jurisdiction for which the Parent Indemnified Person determines counsel is
required, at the expense of the Indemnifying Party. In the event that the
Indemnifying Party fails to undertake any such defense as provided above or
fails to diligently pursue any such defense, Parent shall be entitled to assume
and control the defense of such Third-Party Claim, in which case all costs and
expenses incurred by Parent in connection with the defense of such Third-Party
Claim (including, but not limited to, reasonable attorneys' fees, other
professionals' and experts' fees and court or arbitration costs) shall be
included in the Damages for which indemnity may be sought. In the event that the
Indemnifying Party exercises the right to undertake any such defense against any
such Third-Party Claim as provided above, the Parent Indemnified Person shall
cooperate with the Indemnifying Party in such defense and make available to the
Indemnifying Party, at the Indemnifying Party's expense, all witnesses,
pertinent records, materials and information in the Parent Indemnified Person's
possession or under the Parent Indemnified Person's control related thereto as
is reasonably required by the Indemnifying Party. Similarly, in the event that
the Parent Indemnified Person is, directly or indirectly, conducting the defense
against any such Third-Party Claim, the Indemnifying Party shall cooperate with
the Parent Indemnified Person in such defense and make available to the Parent
Indemnified Person, at the Indemnifying Party's expense, all such witnesses,
records, materials and information in the Indemnifying Party's possession or
under the Indemnifying Party's control relating thereto as is reasonably
required by the Parent Indemnified Person.
11.6.3 A Third-Party Claim for which indemnification is sought
pursuant to Section 11.2.1 may not be settled by an Indemnifying Party without
the prior written consent of the Parent Indemnified Person, which may not be
unreasonably withheld. Parent may not settle a Third-Party Claim for which
indemnification is sought pursuant to Section 11.2.1 without the prior written
consent of the Indemnifying Party, which consent will not be unreasonably
withheld, delayed or conditioned.
11.6.4 If the Indemnifying Party is controlling the defense of any
Third-Party Claim, Parent shall have the right to receive copies of all
pleadings, notices and communications with respect to such Third-Party Claim to
the extent that receipt of such documents by Parent does not affect any
privilege relating to the Indemnifying Party; provided, that the parties will
43
use commercially reasonable efforts to ensure that any such privilege will not
apply or will not be violated. If any Parent Indemnified Person is controlling
the defense of any Third-Party Claim, the Indemnifying Party shall have the
right to receive copies of all pleadings, notices and communications with
respect to such Third-Party Claim to the extent that receipt of such documents
by Parent does not affect any privilege relating to the Indemnifying Party;
provided, that the parties will use commercially reasonable efforts to ensure
that any such privilege will not apply or will not be violated.
11.7 Contents of Notice of Claim. Each Notice of Claim by Parent given
pursuant to Section 11.5 will contain the following information:
11.7.1 that Parent has incurred, paid or properly accrued (in
accordance with GAAP) or reasonably believes it will have to incur, pay or
accrue (in accordance with GAAP), Damages in an aggregate stated amount arising
from such Claim (which amount may be the amount of damages claimed by a third
party in an action brought against any Parent Indemnified Person based on
alleged facts, which if true, would give rise to liability for Damages to such
Parent Indemnified Person under Article 11); and
11.7.2 a description, in reasonable detail (to the extent reasonably
available to Parent), of the facts, circumstances or events giving rise to the
alleged Damages based on Parent's good faith belief thereof, including the
identity and address of any third-party claimant and copies of any formal demand
or complaint, the amount of Damages, the date each such item was incurred, paid
or accrued, or the basis for such anticipated liability, and the specific nature
of the breach to which such item is related.
11.8 Resolution of Notice of Claim. Any Notice of Claim delivered by
Parent will be resolved as follows:
11.8.1 Uncontested Claims. In the event that, within thirty (30)
business days after a Notice of Claim is received by Representative at any time
on or prior to the Escrow Release Date, Representative does not contest such
Notice of Claim in writing to Parent as provided in Section 11.8.2,
Representative and the Principal Shareholders will be conclusively deemed to
have consented to the recovery by the Parent Indemnified Person of the full
amount of Damages specified in the Notice of Claim in accordance with this
Article 11, including the forfeiture of the amount of Damages from Escrow Fund
and, without further notice.
11.8.2 Contested Claims. In the event that Representative at any
time on or prior to the Escrow Release Date gives Parent written notice
contesting all or any portion of a Notice of Claim (a "CONTESTED CLAIM") within
the thirty (30) day period specified in Section 11.8.1 above, then such
Contested Claim will be resolved by either (i) a written settlement agreement
executed by Parent, on the one hand, and Representative on the other hand, or
(ii) in the absence of such a written settlement agreement, by litigation (which
either Parent, on the one hand, or Representative on the other hand may initiate
at any time) in any court having competent jurisdiction.
11.9 Distribution Upon Termination of Escrow Period. Within ten (10)
business days following the Escrow Release Date, Escrow Agent shall deliver to
the Representative for
44
distribution to the Principal Shareholders all of the Escrow Fund in excess of
any amount of Escrow Fund necessary to satisfy any then Contested Claims for
Damages specified in any Notice of Claim delivered to the Representative before
the Escrow Release Date. As soon as all such claims have been finally resolved,
Escrow Agent shall deliver to the Representative for distribution to the
Principal Shareholders all remaining amounts in the Escrow Fund not applied to
the satisfaction of such claims. In addition to any amount of the Escrow Fund
distributed to the Principal Shareholders pursuant to this Section 11.9, Escrow
Agent shall deliver to Representative any interest or other income amounts
earned with respect to such amount of the Escrow Fund during the period such
funds were held in escrow.
11.10 Access. After the Effective Time, Parent shall cause the Surviving
Corporation to provide reasonable access to the books and records of Company to
each Principal Shareholder, if so requested, to facilitate a legitimate business
or legal reason arising from such Principal Shareholder's ownership of capital
stock in Company prior to the Effective Time. The Surviving Corporation's
obligation in this Section 11.10 shall be limited to those books and records of
Company, or the portions thereof, that were in existence at the Effective Time
and that are in the Surviving Corporation's possession or under its control at
the time of request for access thereto, it being understood that the Surviving
Corporation shall not be restricted in any way from disposing of books and
records in the ordinary course of business, consistent with its general record
retention policies.
11.11 Indemnification of Former Directors and Officers. Parent shall cause
the Surviving Corporation to maintain and perform in the same manner Company's
existing indemnification obligations with respect to present and former
directors and officers of Company to the extent required under applicable law,
Company's Articles of Incorporation and Bylaws in effect as of the date hereof
(to the extent consistent with applicable law) and any existing indemnification
agreements between the Company its directors at the Effective Time, for a period
of not less than *** after the Effective Time. In the event that Parent (i)
causes the Surviving Corporation to consolidate with or merge into any other
entity and Surviving Corporation is not the continuing or surviving corporation
or entity of such consolidation or merger, or (ii) causes the Surviving
Corporation to transfer or convey all of substantially all of Surviving
Corporation's properties and assets to any entity, then and in each such case,
to the extent necessary to effect the purposes of this Section 11.11 proper
provision shall be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 11.11 and none of
the actions described in clause (i) or (ii) shall be taken until such provision
is made. The provisions of this Section 11.11 are intended to be for the benefit
of, and will be enforceable by, each present and former director and officer of
Company entitled to indemnification from Company.
ARTICLE 12
GENERAL PROVISIONS
12.1 Governing Law. The internal laws of the State of California,
irrespective of its choice of law principles, will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto. Any legal suit, action or
proceeding brought by the Company or any Principal Shareholder arising out of or
relating to this Agreement shall be commenced in a federal court in the Northern
District of
45
California or in state court in the County of Santa Clara, California, and each
party hereto irrevocably submits to the exclusive jurisdiction and venue of any
such court in any such suit, action or proceeding. Any legal suit, action or
proceeding brought by the Parent arising out of or relating to this Agreement
shall be commenced in a federal court in the District of Oregon or in state
court in the County of Multnomah, Oregon, and each party hereto irrevocably
submits to the exclusive jurisdiction and venue of any such court in any such
suit, action or proceeding.
12.2 Assignment; Binding Upon Successors and Assigns. Neither party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. Any assignment in violation of this provision
shall be void. This Agreement will be binding upon and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
12.3 Severability. If any provision of this Agreement, or the application
thereof, will for any reason and to any extent be invalid or unenforceable, then
the remainder of this Agreement and the application of such provision to other
Persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
12.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
all parties reflected hereon as signatories.
12.5 Other Remedies. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party hereunder will be deemed
cumulative with and not exclusive of any other remedy conferred hereby or by law
on such party, and the exercise of any one remedy will not preclude the exercise
of any other. Parent and Company agree that the indemnification provisions set
forth in Article 11 shall be each such Person's sole and exclusive remedy with
respect to any inaccuracy, misrepresentation, breach of, or default in, any of
the representations, warranties, covenants or agreements of any such party in
this Agreement; provided, however, that the foregoing shall not limit the
parties' respective rights to seek specific performance or other injunctive
relief, or damages in connection with a claim of fraudulent conduct or
fraudulent misrepresentation. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction.
12.6 Amendment and Waivers. Any term or provision of this Agreement may be
amended, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only by a writing signed by the party to be bound thereby. The waiver by a party
of any breach hereof or default in the
46
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. This Agreement may be amended by
the parties hereto as provided in this Section 12.6 at any time before or after
approval of this Agreement by the Company Shareholders, but, after such
approval, no amendment will be made which by applicable law requires the further
approval of the Company Shareholders without obtaining such further approval. At
any time prior to the Effective Time, each of Company and Parent, by action
taken by its Board of Directors (or any duly authorized committee thereof), may,
to the extent legally allowed: (i) extend the time for the performance of any of
the obligations or other acts of the other; (ii) waive any inaccuracies in the
representations and warranties made to it contained herein or in any document
delivered pursuant hereto; and (iii) waive compliance with any of the agreements
or conditions for its benefit contained herein. No such waiver or extension will
be effective unless signed in writing by the party against whom such waiver or
extension is asserted. The failure of any party to enforce any of the provisions
hereof will not be construed to be a waiver of the right of such party
thereafter to enforce such provisions.
12.7 Expenses. Each party will bear its respective legal, auditors',
investment bankers', fees of the Escrow Agent, the cost of a tail policy for the
Company's directors' and officers' insurance and financial advisors' fees and
other expenses incurred with respect to this Agreement, the Merger and the
transactions contemplated hereby ("TRANSACTION EXPENSES"); provided, that (a)
*** of the fees payable to the Escrow Agent pursuant to the Escrow Agent and (b)
$*** payable for the tail policy for the Company's directors' and officers'
insurance shall be deemed Transaction Expenses of the Company and the Principal
Shareholders for purposes of this Section 12.7. Notwithstanding the foregoing,
if the Merger is successfully consummated, Company will pay Transaction Expenses
incurred by Company and the Principal Shareholders, and Parent shall be entitled
to reimbursement from the Escrow Fund for all Transaction Expenses incurred and
paid by Company that are related to the Merger in excess of $*** (the "EXCESS
TRANSACTION EXPENSES") as contemplated by Section 11.2.1.
12.8 Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Agreement, the prevailing party will be entitled to recover, as an
element of the costs of suit and not as damages, reasonable attorneys' fees to
be fixed by the court (including costs, expenses and fees on any appeal). The
prevailing party will be entitled to recover its costs of suit, regardless of
whether such suit proceeds to final judgment.
12.9 Notices. All notices and other communications required or permitted
under this Agreement will be in writing and will be either hand delivered in
person, sent by facsimile, sent by certified or registered first class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications will be effective upon receipt if hand
delivered or sent by facsimile, five days after mailing if sent by mail, and one
day after dispatch if sent by express courier, to the following addresses, or
such other addresses as any party may notify the other parties in accordance
with this Section 12.9:
47
If to Parent:
Symyx Technologies, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
Fax Number: (000) 000-0000
with copies to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
Fax Number: (000) 000-0000
If to Company:
IntelliChem, Inc.
000 XX Xxxxxxx Xxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxx van Eikeren
Fax Number: (000) 000-0000
with a copy to:
Xxxxx Xxxxxx Xxxxxxxx LLP
Suite 2300
0000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxx
Fax Number: (000) 000-0000
If to Representative:
Xxxx van Eikeren
000 XX Xxxxxxx Xxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Fax Number: (000) 000-0000
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with a copy to:
Xxxxx Xxxxxx Xxxxxxxx LLP
Suite 2300
0000 X.X. Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxx 00000-0000
Attention: Xxxxx X. Xxxx
Fax Number: (000) 000-0000
12.10 Interpretation; Rules of Construction. When a reference is made in
this Agreement to Exhibits, such reference shall be to an Exhibit to this
Agreement unless otherwise indicated. When a reference is made in this Agreement
to Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Articles,
such reference shall be to an Article of this Agreement unless otherwise
indicated. The words "INCLUDE," "INCLUDES" and "INCLUDING" when used herein
shall be deemed in each case to be followed by the words "WITHOUT LIMITATION."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "THE BUSINESS OF" an entity,
such reference shall be deemed to include the business of all direct and
indirect Subsidiaries of such entity. Reference to the Subsidiaries of an entity
shall be deemed to include all direct and indirect Subsidiaries of such entity.
The parties hereto agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
12.11 No Joint Venture. Nothing contained in this Agreement will be deemed
or construed as creating a joint venture or partnership between any of the
parties hereto. No party is by virtue of this Agreement authorized as an agent,
employee or legal representative of any other party. No party will have the
power to control the activities and operations of any other and their status is,
and at all times will continue to be, that of independent contractors with
respect to each other. No party will have any power or authority to bind or
commit any other party. No party will hold itself out as having any authority or
relationship in contravention of this Section 12.11.
12.12 Further Assurances. Each party agrees to cooperate fully with the
other parties and to execute such further instruments, documents and agreements
and to give such further written assurances as may be reasonably requested by
any other party to evidence and reflect the transactions described herein and
contemplated hereby and to carry into effect the intents and purposes of this
Agreement.
12.13 Third Party Beneficiary Rights. No provisions of this Agreement are
intended, nor will be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, Shareholder or partner of any party hereto or any other Person unless
specifically provided otherwise herein and, except as so provided, all
provisions hereof will be personal solely between the parties to this Agreement;
except that Article 11 is intended to benefit the Parent Indemnified Persons and
Section 6.5 is intended to benefit certain employees of the Company.
49
12.14 Public Announcement. Upon execution of this Agreement, neither
Parent nor Company nor any other party to this Agreement will issue a press
release or make any other public disclosure regarding this Agreement and the
transactions contemplated hereby without the prior mutual consent of Parent and
Company; provided, however, that Parent may issue such press releases, and make
such other disclosures regarding the Merger, as it determines are required under
applicable securities laws or regulatory rules. Prior to the publication of such
initial and mutually agreed press release, no party hereto will make any public
announcement relating to this Agreement or the transactions contemplated hereby
(except as may be required by law), the Company will use its reasonable efforts
to prevent any trading in Parent Common Stock by its officers and directors.
12.15 Company Disclosure Letter. The Company Disclosure Letter shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Article 3, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only the particular
representation or warranty set forth in the corresponding numbered or lettered
section in Article 3 and shall not be deemed to relate to or to qualify any
other representation or warranty, unless it is readily apparent that such
disclosure is applicable to such other representation or warranty.
12.16 Confidentiality. Company and Parent each confirm that they have
entered into the Non-Disclosure Agreement dated October 6, 2004 and that they
are each bound by, and will abide by, the provisions of such Non-Disclosure
Agreement. If this Agreement is terminated, the Non-Disclosure Agreement shall
remain in full force and effect, and all copies of documents containing
confidential information of a disclosing party will be returned by the receiving
party to the disclosing party or be destroyed, as provided in the Non-Disclosure
Agreement.
12.17 Entire Agreement. This Agreement and the Exhibits hereto constitute
the entire understanding and agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements or
understandings, inducements or conditions, express or implied, written or oral,
between the parties with respect hereto other than the Non-Disclosure Agreement
referenced in Section 12.16. The express terms hereof control and supersede any
course of performance or usage of the trade inconsistent with any of the terms
hereof.
12.18 Waiver Of Jury Trial. EACH OF PARENT, COMPANY AND SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR SUB IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
50
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SYMYX TECHNOLOGIES, INC. INTELLICHEM, INC.
By: _________________________________ By: ___________________________________
Xxxxx X. Xxxxxxxx, Xxxx van Eikeren, President and
Senior Vice President, Chief Executive Officer
Chief Financial Officer
ORION ACQUISITION CORPORATION
By: _________________________________
Xxxxx X. Xxxxxxxx,
Chief Financial Officer
REPRESENTATIVE,
solely for purposes of Article 11
_________________________________
Xxxx van Eikeren
[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
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LIST OF EXHIBITS
Pursuant to Item 601(b)(2) of Regulation S-K, the following exhibits to
this Agreement have been omitted. Such exhibits will be submitted to the
Securities and Exchange Commission upon request.
Exhibit A Form of Articles of Merger
Exhibit B Form of Escrow Agreement
Exhibit C Form of Employment Agreement
Exhibit D Form of Voting and Shareholder Agreement
Exhibit E Form of Letter of Transmittal
Exhibit F Matters to be Covered in the Opinion of Xxxxx, Xxxxxx & Xxxxxxxx LLP
Exhibit G Key Employees
52
