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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OTG SOFTWARE, INC., OTG MERGER CORP.
AND
xVAULT INC.
APRIL 17, 2000
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TABLE OF CONTENTS
PAGE
ARTICLE I THE MERGER.................................................................................1
1.1 The Merger................................................................................1
1.2 The Closing...............................................................................1
1.3 Actions at the Closing....................................................................2
1.4 Additional Action.........................................................................3
1.5 Conversion of Shares......................................................................3
1.6 Dissenting Shares.........................................................................4
1.7 Fractional Shares.........................................................................5
1.8 Options, Warrants and Other Rights........................................................5
1.9 Indemnity Escrow..........................................................................6
1.10 Repurchase Escrow.........................................................................6
1.11 Certificate of Incorporation and By-laws..................................................7
1.12 No Further Rights.........................................................................7
1.13 Closing of Transfer Books.................................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................................7
2.1 Organization, Qualification and Corporate Power...........................................8
2.2 Capitalization............................................................................8
2.3 Authorization of Transaction..............................................................9
2.4 Noncontravention.........................................................................10
2.5 Subsidiaries.............................................................................10
2.6 Financial Statements.....................................................................11
2.7 Absence of Certain Changes...............................................................12
2.8 Undisclosed Liabilities..................................................................12
2.9 Tax Matters..............................................................................12
2.10 Assets...................................................................................15
2.11 Owned Real Property......................................................................15
2.12 Real Property Leases.....................................................................15
2.13 Intellectual Property....................................................................16
2.14 Inventory................................................................................18
2.15 Contracts................................................................................18
2.16 Accounts Receivable......................................................................20
2.17 Powers of Attorney.......................................................................20
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2.18 Insurance................................................................................20
2.19 Litigation...............................................................................20
2.20 Warranties...............................................................................21
2.21 Employees................................................................................21
2.22 Employee Benefits........................................................................22
2.23 Environmental Matters....................................................................25
2.24 Legal Compliance.........................................................................26
2.25 Customers and Suppliers..................................................................26
2.26 Permits..................................................................................27
2.27 Certain Business Relationships With Affiliates...........................................27
2.28 Brokers' Fees............................................................................27
2.29 Books and Records........................................................................27
2.30 Disclosure...............................................................................28
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY...............28
3.1 Organization, Qualification and Corporate Power..........................................28
3.2 Capitalization...........................................................................28
3.3 Authorization of Transaction.............................................................29
3.4 Noncontravention.........................................................................29
3.5 Reports and Financial Statements.........................................................30
3.6 Absence of Material Adverse Change.......................................................30
3.7 Litigation...............................................................................30
3.8 Interim Operations of the Transitory Subsidiary..........................................31
3.9 Brokers' Fees............................................................................31
3.10 Disclosure...............................................................................31
ARTICLE IV COVENANTS................................................................................31
4.1 Closing Efforts..........................................................................31
4.2 Governmental and Third-Party Notices and Consents........................................31
4.3 Stockholder Approval.....................................................................32
4.4 Operation of Business....................................................................33
4.5 Access to Information....................................................................35
4.6 Notice of Breaches.......................................................................35
4.7 Exclusivity..............................................................................36
4.8 Expenses.................................................................................37
4.9 Indemnification..........................................................................37
4.10 Restrictions on Disposition of Merger Shares.............................................37
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ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER......................................................37
5.1 Conditions to Each Party's Obligations...................................................37
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary.....................37
5.3 Conditions to Obligations of the Company.................................................39
ARTICLE VI INDEMNIFICATION..........................................................................40
6.1 Indemnification by the Company Stockholders..............................................41
6.2 Indemnification Claims...................................................................41
6.3 Survival of Representations and Warranties...............................................45
6.4 Limitations..............................................................................46
ARTICLE VII TAX MATTERS.............................................................................47
7.1 Preparation and Filing of Tax Returns....................................................47
7.2 Allocation of Certain Taxes..............................................................48
7.3 Cooperation on Tax Matters...............................................................48
7.4 Termination of Tax-Sharing Agreements....................................................49
7.5 Election Pursuant to Section 338(h)(10)..................................................50
ARTICLE VIII REGISTRATION RIGHTS....................................................................50
8.1 Registration of Shares...................................................................50
8.2 Limitations on Registration Rights.......................................................50
8.3 Registration Procedures..................................................................51
8.4 Requirements of Company Stockholders.....................................................52
8.5 Indemnification..........................................................................53
8.6 Assignment of Rights.....................................................................53
ARTICLE IX TERMINATION..............................................................................53
9.1 Termination of Agreement.................................................................53
9.2 Effect of Termination....................................................................54
ARTICLE X DEFINITIONS...............................................................................55
ARTICLE XI MISCELLANEOUS............................................................................57
11.1 Press Releases and Announcements.........................................................57
11.2 No Third Party Beneficiaries.............................................................58
11.3 Entire Agreement.........................................................................58
11.4 Succession and Assignment................................................................58
11.5 Counterparts and Facsimile Signature.....................................................58
11.6 Headings.................................................................................58
11.7 Notices..................................................................................58
11.8 Governing Law............................................................................59
11.9 Amendments and Waivers...................................................................59
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11.10 Severability...............................................................................60
11.11 Submission to Jurisdiction.................................................................60
11.12 Construction...............................................................................60
Exhibit A-1 - Indemnification Escrow Agreement
Exhibit A-2 - Repurchase Escrow Agreement
Exhibit B - Employee List
Exhibit C - Investment Representation Letter
Exhibit D - Opinion of Counsel to the Company
Exhibit E-1 - Employment Agreements
Exhibit E-2 - List of Employees signing Employment Agreements
Exhibit F-1 - Non-Competition Agreements (with Employees)
Exhibit F-2 - List of Individuals signing Non-Competition Agreements
Exhibit F-3 - Non-Competition Agreements (with non-Employees)
Exhibit F-4 - List of Individuals signing Non-Employee Non-Competition
Agreements
Exhibit G - Opinion of Counsel to the Buyer and the Transitory Subsidiary
Exhibit H - List of agreements to be terminated
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of April 17, 2000 by and among OTG Software,
Inc., a Delaware corporation (the "Buyer"), OTG Merger Corp., a Delaware
corporation and a wholly-owned subsidiary of the Buyer (the "Transitory
Subsidiary"), and xVault, Inc., a Delaware corporation (the "Company") (the
"Agreement"). The Buyer, the Transitory Subsidiary and the Company are referred
to collectively herein as the "Parties."
This Agreement contemplates a merger of the Transitory Subsidiary into
the Company. In such merger, the stockholders of the Company will receive common
stock of the Buyer and a certain amount of cash in exchange for their capital
stock of the Company.
Now, therefore, in consideration of the representations, warranties and
covenants herein contained, the Parties agree as follows.
ARTICLE I
THE MERGER
1.1 The Merger. Upon and subject to the terms and conditions of this
Agreement, the Transitory Subsidiary shall merge with and into the Company (with
such merger referred to herein as the "Merger") at the Effective Time (as
defined below). From and after the Effective Time, the separate corporate
existence of the Transitory Subsidiary shall cease and the Company shall
continue as the surviving corporation in the Merger (the "Surviving
Corporation"). The "Effective Time" shall be the time at which the Surviving
Corporation files a certificate of merger or other appropriate documents
prepared and executed in accordance with Section 251(c) of the Delaware General
Corporation Law (the "Certificate of Merger") with the Secretary of State of the
State of Delaware. The Merger shall have the effects set forth in Section 259 of
the Delaware General Corporation Law.
1.2 The Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxx and Xxxx LLP
in Washington, D.C., commencing at 9:00 a.m. local time on April 19, 2000, or,
if all of the conditions to the obligations of the Parties to consummate the
transactions contemplated hereby have not been satisfied or waived by such date,
on such mutually agreeable later date as soon as practicable (and in any event
not later than three business days) after the satisfaction or waiver of all
conditions (excluding the delivery of any documents to be delivered at the
Closing by any of the Parties) set forth in Article V hereof (the "Closing
Date").
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1.3 Actions at the Closing. At the Closing:
(a) the Company shall deliver to the Buyer and the Transitory
Subsidiary the various certificates, instruments and documents referred to in
Section 5.2;
(b) the Buyer and the Transitory Subsidiary shall deliver to
the Company the various certificates, instruments and documents referred to in
Section 5.3;
(c) the Surviving Corporation shall file with the Secretary of
State of the State of Delaware the Certificate of Merger;
(d) each of the stockholders of record of the Company
immediately prior to the Effective Time (the "Company Stockholders") shall
deliver to the Buyer the certificate(s) representing his, her or its Company
Shares (as defined below);
(e) the Buyer shall deliver a certificate for the Initial
Shares (as defined below) to each Company Stockholder in accordance with Section
1.5;
(f) the Buyer or the Surviving Corporation shall pay to each
Company Stockholder 90% of the Merger Consideration (as defined in Section 1.5
below) into which his or her Company Shares are converted pursuant to Section
1.5; and
(g) the Buyer, Xxxxxx Xxxxxxxxx and Xxxx Xxxxx (the
"Indemnification Representatives") and Bankers Trust Co. (the "Indemnification
Escrow Agent") shall execute and deliver the Indemnification Escrow Agreement
attached hereto as Exhibit A-1 (the "Indemnification Escrow Agreement") and the
Buyer shall deliver to the Indemnification Escrow Agent a certificate for the
Indemnity Escrow Shares (as defined below) being placed in escrow on the Closing
Date pursuant to Section 1.9.
(h) the Buyer, Xxxxxx Xxxxxxxxx and Xxxx Xxxxx (the "Repurchase
Representatives") and Bankers Trust Co. (the "Repurchase Escrow Agent") shall
execute and deliver the Repurchase Escrow Agreement attached hereto as Exhibit
A-2 (the "Repurchase Escrow Agreement") and the Buyer shall deliver to the
Repurchase Escrow Agent a certificate for the Repurchase Escrow Shares (as
defined below) being placed in escrow on the Closing Date pursuant to Section
1.10.
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1.4 Additional Action. The Surviving Corporation may, at any time
after the Effective Time, take any action, including executing and delivering
any document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
1.5 Conversion of Shares. At the Effective Time, by virtue of the
Merger and without any action on the part of any Party or the holder of any of
the following securities:
(a) Each share of common stock, $.01 par value per share, of
the Company ("Company Shares") issued and outstanding immediately prior to the
Effective Time (other than Company Shares owned beneficially by the Buyer or the
Transitory Subsidiary, Dissenting Shares (as defined below) and Company Shares
held in the Company's treasury) shall be converted into and represent the right
to receive (subject to the provisions of Section 1.9, Section1.10 and Section
1.5(c)):
(i) such number of shares of common stock, $.01 par
value per share, of the Buyer ("Buyer Common Stock") as is equal to the Common
Conversion Ratio (as defined below)(subject to the provisions of Section 1.9,
Section 1.10 and Section 1.5(c)); and
(ii) such amount of cash per Company Share, without any
interest thereon, as is equal to the Cash Conversion Ratio (as defined below).
(b) The "Common Conversion Ratio" shall be the result obtained
by dividing (i) One hundred and sixty thousand (160,000) by (ii) the number of
outstanding Company Shares immediately prior to the Effective Time. The Common
Conversion Ratio shall be subject to equitable adjustment in the event of any
stock split, stock dividend, reverse stock split or similar event affecting the
Buyer Common Stock. Twenty three thousand four hundred fifteen (23,415) shares
of Buyer Common Stock, shall be deposited in escrow pursuant to Section 1.9 and
shall be held and disposed of in accordance with the terms of the
Indemnification Escrow Agreement (the "Indemnity Escrow Shares"). A certain
number of shares of Buyer Common Stock, equal to 53,333 shall be deposited in
escrow pursuant to Section 1.10 (the "Repurchase Escrow Shares") and shall be
held and disposed of in accordance with the terms of the Repurchase Escrow
Agreement. The remaining shares of Buyer Common Stock into which their Company
Shares were converted pursuant to this Section 1.5 (the "Initial Shares") will
be immediately available to the Company Stockholders. (The Initial Shares, the
Indemnity Escrow Shares and the Repurchase Escrow Shares are collectively
referred to as the "Merger Shares.")
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(c) The Repurchase Escrow Shares are subject to repurchase by
the Buyer, at a per share price equal to the average of the closing prices of
Buyer Common Stock as quoted on Nasdaq for the three trading days immediately
prior to the Closing Date, if any two employees listed on Exhibit B attached
hereto cease employment with the Surviving Corporation, the Buyer or any other
wholly-owned subsidiary of the Buyer for any reason other than death, disability
(within the meaning of Section 22(e)(3) of the Internal Revenue Code (the
"Code")) or termination of the employee without cause (as that term is used in
the employee's respective employment agreement executed in accordance with
Sections 5.2(b) and 5.3(e) hereof)(the "Repurchase"). The Repurchase Escrow
Shares shall be deposited into escrow pursuant to Section 1.10 and shall be held
and disposed of in accordance with the terms of the Repurchase Escrow Agreement.
(d) The "Cash Conversion Ratio" shall be the result obtained by
dividing (i) One million nine hundred thousand dollars ($1,900,000) less all
expenses incurred by the Company in connection with the transaction contemplated
hereby, including, fees to legal counsel and investment advisors, by (ii) the
number of outstanding Company Shares immediately prior to the Effective Time
(rounding up to the nearest $ .01). The Initial Shares, the Indemnity Escrow
Shares, the Repurchase Escrow Shares and the cash received upon conversion of
the Company Shares shall together be referred to herein as the "Merger
Consideration."
(e) Each Company Share held in the Company's treasury
immediately prior to the Effective Time and each Company Share owned
beneficially by the Buyer or the Transitory Subsidiary shall be cancelled and
retired without payment of any consideration therefor.
1.6 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares" means
Company Shares held as of the Effective Time by a Company Stockholder who has
not voted such Company Shares in favor of the adoption of this Agreement and the
Merger and with respect to which appraisal shall have been duly demanded and
perfected in accordance with Section 262 of the Delaware General Corporation Law
and not effectively withdrawn or forfeited prior to the Effective Time.
Dissenting Shares shall not be converted into or represent the right to receive
Merger Shares, unless such Company Stockholder shall have forfeited his, her or
its right to appraisal under the Delaware General Corporation Law or properly
withdrawn, his, her or its demand for appraisal. If such Company Stockholder has
so forfeited or withdrawn his, her or its right to appraisal of Dissenting
Shares, then (i) as of the occurrence of such event, such holder's
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Dissenting Shares shall cease to be Dissenting Shares and shall be converted
into and represent the right to receive the Merger Shares issuable in respect of
such Company Shares pursuant to Section 1.5, and (ii) promptly following the
occurrence of such event, the Buyer shall deliver to such Company Stockholder a
certificate representing such portion of the Merger Shares to which such holder
is entitled pursuant to Section 1.5 and shall deliver to the Escrow Agent a
certificate representing the remaining Merger Shares to which such holder is
entitled pursuant to Section 1.5.
(b) The Company shall give the Buyer (i) prompt notice of any
written demands for appraisal of any Company Shares, withdrawals of such
demands, and any other instruments that relate to such demands received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under the Delaware General Corporation Law. The
Company shall not, except with the prior written consent of the Buyer, make any
payment with respect to any demands for appraisal of Company Shares or offer to
settle or settle any such demands.
1.7 Fractional Shares. No certificates or scrip representing
fractional Merger Shares shall be issued to former Company Stockholders upon the
surrender for exchange of Merger Shares of certificates that, immediately prior
to the Effective Time, represented Company Shares converted into Merger Shares
pursuant to Section 1.5 ("Certificates"), and such former Company Stockholders
shall not be entitled to any voting rights, rights to receive any dividends or
distributions or other rights as a stockholder of the Buyer with respect to any
fractional Merger Shares that would have otherwise been issued to such former
Company Stockholders. In lieu of any fractional Merger Shares that would have
otherwise been issued, each former Company Stockholder that would have been
entitled to receive a fractional Merger Share shall, upon proper surrender of
such person's Certificates, receive a cash payment equal to the closing price
per share of the Buyer Common Stock on the Nasdaq National Market, as reported
by Nasdaq, on the business day immediately preceding the Closing Date,
multiplied by the fraction of a share that such Company Stockholder would
otherwise be entitled to receive.
1.8 Options, Warrants and Other Rights.
(a) Prior to the Effective Time, the Company shall enter into
an agreement, in a form reasonably satisfactory to the Buyer, with each holder
of an outstanding stock option for the purchase of Company Shares (collectively,
"Options") providing for the full exercise and/or termination of such Option
effective as of the Effective Time.
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(b) Prior to the Effective Time, the Company shall enter into
an agreement, in a form reasonably satisfactory to the Buyer, with each holder
of an outstanding warrant or other right for the purchase of Company Shares or
other securities of the Company (collectively, "Warrants") providing for full
exercise and/or the termination of such Warrant effective as of the Effective
Time.
(c) The Company shall terminate all stock option plans and
other stock or equity-related plans of the Company immediately prior to the
Effective Time.
1.9 Indemnity Escrow.
(a) On the Closing Date, the Buyer shall deliver to the
Indemnification Escrow Agent a certificate (issued in the name of the
Indemnification Escrow Agent or its nominee) representing the Indemnity Escrow
Shares, as described in Section 1.5, for the purpose of securing the
indemnification obligations of the Indemnifying Stockholders (as defined in
Section 6.1) set forth in this Agreement. The Indemnity Escrow Shares shall be
held by the Indemnification Escrow Agent under the Indemnity Escrow Agreement
pursuant to the terms thereof. The Indemnity Escrow Shares shall be held as a
trust fund and shall not be subject to any lien, attachment, trustee process or
any other judicial process of any creditor of any party, and shall be held and
disbursed solely for the purposes and in accordance with the terms of the
Indemnity Escrow Agreement.
(b) The adoption of this Agreement and the approval of the
Merger by the Company Stockholders shall constitute approval of the Indemnity
Escrow Agreement and of all of the arrangements relating thereto, including
without limitation the placement of the Indemnity Escrow Shares in escrow and
the appointment of the Indemnification Representatives.
1.10 Repurchase Escrow.
(a) On the Closing Date, the Buyer shall deliver to the
Repurchase Escrow Agent a certificate (issued in the name of the Repurchase
Escrow Agent or its nominee) representing the Repurchase Escrow Shares, as
described in Section 1.5, for the purpose of securing the employment obligations
of the employees listed on Exhibit B. The Repurchase Escrow Shares shall be held
by the Repurchase Escrow Agent under the Repurchase Escrow Agreement pursuant to
the terms thereof. The Repurchase Escrow Shares shall be held as a trust fund
and shall not be subject to any lien, attachment, trustee process or any other
judicial process
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of any creditor of any party, and shall be held and disbursed solely for the
purposes and in accordance with the terms of the Repurchase Escrow Agreement.
(b) The adoption of this Agreement and the approval of the
Merger by the Company Stockholders shall constitute approval of the Repurchase
Escrow Agreement and of all of the arrangements relating thereto, including
without limitation the placement of the Repurchase Escrow Shares in escrow and
the appointment of the Repurchase Representatives.
1.11 Certificate of Incorporation and By-laws.
(a) The Certificate of Incorporation of the Surviving
Corporation immediately following the Effective Time shall be the same as the
Certificate of Incorporation of the Transitory Subsidiary immediately prior to
the Effective Time, except that (1) the name of the corporation set forth
therein shall be changed to OTG E-Mail Corp. and (2) the identity of the
incorporator shall be deleted.
(b) The By-laws of the Surviving Corporation immediately
following the Effective Time shall be the same as the By-laws of the Transitory
Subsidiary immediately prior to the Effective Time, except that the name of the
corporation set forth therein shall be changed to OTG E-Mail Corp.
1.12 No Further Rights. From and after the Effective Time, no Company
Shares shall be deemed to be outstanding, and holders of Certificates shall
cease to have any rights with respect thereto, except as provided herein or by
law.
1.13 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company Shares
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Buyer or the Surviving Corporation, they shall be cancelled and
exchanged for Initial Shares in accordance with Section 1.5, subject to Sections
1.09 and 1.10 and to applicable law in the case of Dissenting Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer that the statements
contained in this Article II are true and correct, except as set forth in the
disclosure schedule provided by the Company to the Buyer on the date hereof and
accepted in writing by the Buyer (the "Disclosure
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Schedule"). The Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
II, and the disclosures in any paragraph of the Disclosure Schedule shall
qualify only the corresponding paragraph in this Article II. For purposes of
this Article II, the phrase "to the knowledge of the Company" or any phrase of
similar import shall be deemed to refer to the actual knowledge of the officers
of the Company, as well as any other knowledge which such officers would have
possessed had they made reasonable inquiry of appropriate employees and agents
of the Company with respect to the matter in question.
2.1 Organization, Qualification and Corporate Power. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Delaware. The Company is duly qualified
to conduct business and is in corporate and tax good standing under the laws of
each jurisdiction in which the nature of its businesses or the ownership or
leasing of its properties requires such qualification, except where the failure
to be so qualified or in good standing, individually or in the aggregate, has
not had and would not reasonably be expected to have a Company Material Adverse
Effect (as defined below). The Company has all requisite corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. The Company has furnished to the Buyer
complete and accurate copies of its Certificate of Incorporation and By-laws.
The Company is not in default under or in violation of any provision of its
Certificate of Incorporation or By-laws. For purposes of this Agreement,
"Company Material Adverse Effect" means a material adverse effect on the assets,
business, condition (financial or otherwise), results of operations or future
prospects of the Company and the Subsidiaries (as defined below), taken as a
whole.
2.2 Capitalization. The authorized capital stock of the Company
consists of (a) 15,000,000 Company Shares, of which, as of the date of this
Agreement, 9,553,130 shares were issued and outstanding and no shares were held
in the treasury of the Company. Section 2.2 of the Disclosure Schedule sets
forth a complete and accurate list of (i) all stockholders of the Company,
indicating the number and class or series of Company Shares held by each
stockholder, (ii) all outstanding Options and Warrants, indicating (A) the
holder thereof, (B) the number and class or series of Company Shares subject to
each Option and Warrant, (C) the exercise price, date of grant, vesting schedule
and expiration date for each Option or Warrant, and (D) any terms regarding the
acceleration of vesting, and (iii) all stock option plans and other stock or
equity-related plans of the Company. All of the issued and outstanding Company
Shares are, and all Company Shares that may be issued upon exercise of Options
or Warrants
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will be (upon issuance in accordance with their terms), duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights. Other than
the Options and Warrants listed in Section 2.2 of the Disclosure Schedule, there
are no outstanding or authorized options, warrants, rights, agreements or
commitments to which the Company is a party or which are binding upon the
Company providing for the issuance or redemption of any of its capital stock.
There are no outstanding or authorized stock appreciation, phantom stock or
similar rights with respect to the Company. Except as set forth on Schedule 2.2,
there are no agreements to which the Company is a party or by which it is bound
with respect to the voting (including without limitation voting trusts or
proxies), registration under the Securities Act of 1933 (the "Securities Act"),
or sale or transfer (including without limitation agreements relating to
pre-emptive rights, rights of first refusal, co-sale rights or "drag-along"
rights) of any securities of the Company. To the knowledge of the Company, there
are no agreements among other parties, to which the Company is not a party and
by which it is not bound, with respect to the voting (including without
limitation voting trusts or proxies) or sale or transfer (including without
limitation agreements relating to rights of first refusal, co-sale rights or
"drag-along" rights) of any securities of the Company. All of the issued and
outstanding Company Shares were issued in compliance with applicable federal and
state securities laws.
2.3 Authorization of Transaction. The Company has all requisite power
and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by the Company of this
Agreement and, subject to the adoption of this Agreement and the approval of the
Merger by a majority of the votes represented by the outstanding Company Shares
entitled to vote on this Agreement and the Merger (the "Requisite Stockholder
Approval"), the consummation by the Company of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
on the part of the Company. Without limiting the generality of the foregoing,
the Board of Directors of the Company, at a meeting duly called and held, by the
unanimous vote of all directors (i) determined that the Merger is fair and in
the best interests of the Company and its stockholders, (ii) adopted this
Agreement in accordance with the provisions of the Delaware General Corporation
Law, and (iii) directed that this Agreement and the Merger be submitted to the
stockholders of the Company for their adoption and approval and resolved to
recommend that the stockholders of Company vote in favor of the adoption of this
Agreement and the approval of the Merger. This Agreement has been duly and
validly executed and delivered by the Company and constitutes a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms.
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2.4 Noncontravention. Subject to the filing of the Certificate of
Merger as required by the Delaware General Corporation Law, neither the
execution and delivery by the Company of this Agreement, nor the consummation by
the Company of the transactions contemplated hereby, will (a) conflict with or
violate any provision of the Certificate of Incorporation or By-laws of the
Company or the charter, By-laws or other organizational document of any
Subsidiary (as defined below), (b) require on the part of the Company or any
Subsidiary any filing with, or any permit, authorization, consent or approval
of, any court, arbitrational tribunal, administrative agency or commission or
other governmental or regulatory authority or agency (a "Governmental Entity"),
(c) conflict with, result in a breach of, constitute (with or without due notice
or lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party the right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Company or any Subsidiary is a party or by which the Company or any
Subsidiary is bound or to which any of their assets is subject, (d) result in
the imposition of any Security Interest (as defined below) upon any assets of
the Company or any Subsidiary or (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company, any Subsidiary or
any of their properties or assets. For purposes of this Agreement: "Security
Interest" means any mortgage, pledge, security interest, encumbrance, charge or
other lien (whether arising by contract or by operation of law), other than (i)
mechanic's, materialmen's, and similar liens, (ii) liens arising under worker's
compensation, unemployment insurance, social security, retirement, and similar
legislation, and (iii) liens on goods in transit incurred pursuant to
documentary letters of credit, in each case arising in the Ordinary Course of
Business (as defined below) of the Company and not material to the Company; and
"Ordinary Course of Business" means the ordinary course of the Company's
business, consistent with past custom and practice (including with respect to
frequency and amount).
2.5 Subsidiaries.
(a) Section 2.5 of the Disclosure Schedule sets forth: (i) the
name of each corporation, partnership, joint venture or other entity in which
the Company has, directly or indirectly, an equity interest representing 50% or
more of the capital stock thereof or other equity interests therein
(individually, a "Subsidiary" and, collectively, the "Subsidiaries"); (ii) the
number and type of outstanding equity securities of each Subsidiary and a list
of the holders thereof; (iii) the jurisdiction of organization of each
Subsidiary; (iv) the names of the officers and directors of each Subsidiary; and
(v) the jurisdictions in which each Subsidiary is qualified or holds licenses to
do business as a foreign corporation.
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(b) Each Subsidiary is a corporation duly organized, validly
existing and in corporate and tax good standing under the laws of the
jurisdiction of its incorporation. Each Subsidiary is duly qualified to conduct
business and is in corporate and tax good standing under the laws of each
jurisdiction in which the nature of its businesses or the ownership or leasing
of its properties requires such qualification, except where the failure to be so
qualified or in good standing, individually or in the aggregate, has not had and
would not reasonably be expected to have a Company Material Adverse Effect. Each
Subsidiary has all requisite power and authority to carry on the businesses in
which it is engaged and to own and use the properties owned and used by it. The
Company has delivered to the Buyer complete and accurate copies of the charter,
By-laws or other organizational documents of each Subsidiary. No Subsidiary is
in default under or in violation of any provision of its charter, By-laws or
other organizational documents. All of the issued and outstanding shares of
capital stock of each Subsidiary are duly authorized, validly issued, fully
paid, nonassessable and free of preemptive rights. All shares of each Subsidiary
that are held of record or owned beneficially by either the Company or any
Subsidiary are held or owned free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
claims, Security Interests, options, warrants, rights, contracts, calls,
commitments, equities and demands. There are no outstanding or authorized
options, warrants, rights, agreements or commitments to which the Company or any
Subsidiary is a party or which are binding on any of them providing for the
issuance, disposition or acquisition of any capital stock of any Subsidiary.
There are no outstanding stock appreciation, phantom stock or similar rights
with respect to any Subsidiary. There are no voting trusts, proxies or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary.
(c) The Company does not control directly or indirectly or have
any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust or
other business association which is not a Subsidiary.
2.6 Financial Statements. The Company has provided to the Buyer (a)
the audited consolidated balance sheets and statements of income, changes in
stockholders' equity and cash flows of the Company for the periods since
inception through August 31, 1999; and (b) the unaudited consolidated balance
sheet and statements of income, changes in stockholders' equity and cash flows
as of and for the six months ended March 31, 2000 (the "Most Recent Balance
Sheet Date"). Such financial statements (collectively, the "Financial
Statements") have been prepared in accordance with United States generally
accepted accounting principles ("GAAP") applied on a consistent basis throughout
the periods covered thereby, fairly present the financial
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17
condition, results of operations and cash flows of the Company and the
Subsidiaries as of the respective dates thereof and for the periods referred to
therein and are consistent with the books and records of the Company and the
Subsidiaries; provided, however, that the Financial Statements referred to in
clause (b) above are subject to normal recurring year-end adjustments (which
will not be material) and do not include footnotes.
2.7 Absence of Certain Changes. Since the Most Recent Balance Sheet
Date, (a) there has occurred no event or development which has had, or could
reasonably be expected to have in the future, a Company Material Adverse Effect,
and (b) neither the Company nor any Subsidiary has taken any of the actions set
forth in paragraphs (a) through (n) of Section 4.4.
2.8 Undisclosed Liabilities. None of the Company and its Subsidiaries
has any liability (whether known or unknown, whether absolute or contingent,
whether liquidated or unliquidated and whether due or to become due).
2.9 Tax Matters.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Taxes" means all taxes, charges, fees, levies or
other similar assessments or liabilities, including without limitation income,
gross receipts, ad valorem, premium, value-added, excise, real property,
personal property, sales, use, transfer, withholding, employment, unemployment
insurance, social security, business license, business organization,
environmental, workers compensation, payroll, profits, license, lease, service,
service use, severance, stamp, occupation, windfall profits, customs, duties,
franchise and other taxes imposed by the United States of America or any state,
local or foreign government, or any agency thereof, or other political
subdivision of the United States or any such government, and any interest,
fines, penalties, assessments or additions to tax resulting from, attributable
to or incurred in connection with any tax or any contest or dispute thereof.
(ii) "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) Each of the Company and the Subsidiaries has filed on a
timely basis all Tax Returns that it was required to file, and all such Tax
Returns were complete and accurate in all material respects. Neither the Company
nor any Subsidiary is or has ever been a member of a
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group of corporations with which it has filed (or been required to file)
consolidated, combined or unitary Tax Returns, other than a group of which only
the Company and the Subsidiaries are or were members. Each of the Company and
the Subsidiaries has paid on a timely basis all Taxes that were due and payable.
The unpaid Taxes of the Company and the Subsidiaries for tax periods through the
Most Recent Balance Sheet Date do not exceed the accruals and reserves for Taxes
(excluding accruals and reserves for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the Most Recent
Balance Sheet. Neither the Company nor any Subsidiary has any actual or
potential liability for any Tax obligation of any taxpayer (including without
limitation any affiliated group of corporations or other entities that included
the Company or any Subsidiary during a prior period) other than the Company and
the Subsidiaries. All Taxes that the Company or any Subsidiary is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Entity.
(c) The Company has delivered to the Buyer complete and
accurate copies of all federal income Tax Returns, examination reports and
statements of deficiencies assessed against or agreed to by the Company or any
Subsidiary since inception of the Company. The Company has filed Tax Returns for
calendar year 1999, and the federal income Tax Returns of the Company and each
Subsidiary have not been audited by the Internal Revenue Service. No examination
or audit of any Tax Return of the Company or any Subsidiary by any Governmental
Entity is currently in progress or, to the knowledge of the Company, threatened
or contemplated. Neither the Company nor any Subsidiary has been informed by any
jurisdiction that the jurisdiction believes that the Company or Subsidiary was
required to file any Tax Return that was not filed. Neither the Company nor any
Subsidiary has waived any statute of limitations with respect to Taxes or agreed
to an extension of time with respect to a Tax assessment or deficiency.
(d) Neither the Company nor any Subsidiary: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or the Subsidiaries are subject to an election
under Section 341(f) of the Code; (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code; (iv) has any actual
or potential liability for any Taxes of any person (other than the Company and
its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or
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any similar provision of federal, state, local, or foreign law), or as a
transferee or successor, by contract, or otherwise; or (v) is or has been
required to make a basis reduction pursuant to Treasury Regulation Section
1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(e) None of the assets of the Company or any Subsidiary: (i) is
property that is required to be treated as being owned by any other person
pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; or
(iii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
(f) Neither the Company nor any Subsidiary has undergone a
change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481 of the Code.
(g) No state or federal "net operating loss" of the Company
determined as of the Closing Date is subject to limitation on its use pursuant
to Section 382 of the Code or comparable provisions of state law as a result of
any "ownership change" within the meaning of Section 382(g) of the Code or
comparable provisions of any state law occurring prior to the Closing Date.
(h) At all times since May 17, 1999, for federal income tax
purposes, the Company has validly been treated as an "S corporation" within the
meaning of Section 1361(a) of the Code and has validly been treated in a similar
manner for purposes of the income tax laws of all states in which it has been
subject to taxation. At all times since inception for federal income tax
purposes, each Subsidiary has validly been treated as a "qualified subchapter S
subsidiary" within the meaning of Section 1361(b)(3) of the Code and has validly
been treated in a similar manner for purposes of the income tax laws of all
states in which it has been subject to taxation. Neither the Company nor any
Subsidiary at any time has had any "net unrealized built-in gain" within the
meaning of Section 1374(d) of the Code that would give rise to taxation pursuant
to Section 1374 of the Code (or comparable provisions of state law) if all of
the assets of the Company and the Subsidiaries were disposed of as of the end of
the day immediately preceding the Closing Date at their respective fair market
values.
(i) Section 2.9(i) of the Disclosure Schedule sets forth the
following information with respect to the Company and each Subsidiary (or, in
the case of clause (ii) below, with respect to each of the Subsidiaries) as of
the most recent practicable date: (i) the basis of the Company or the Subsidiary
in its assets; (ii) the basis of the stockholder(s) of the
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Subsidiary in its stock (or the amount of any "excess loss account"); (iii) the
amount of any net operating loss, net capital loss, unused investment or other
credit, unused foreign tax, or excess charitable contribution allocable to the
Company or the Subsidiary; and (iv) the amount of any deferred gain or loss
allocable to the Company or the Subsidiary arising out of any "deferred
intercompany transaction."
2.10 Assets. Each of the Company and the Subsidiaries owns or leases
all tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. Each such tangible asset is
free from material defects, has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear) and is suitable for the purposes for which it presently is used.
No asset of the Company or any Subsidiary (tangible or intangible) is subject to
any Security Interest. All of the tangible assets of the Company are set forth
on Schedule 2.10.
2.11 Owned Real Property. The Company does not own any real property.
2.12 Real Property Leases. Section 2.12 of the Disclosure Schedule
lists all real property leased or subleased to or by the Company or any
Subsidiary and lists the term of such lease, any extension and expansion
options, and the rent payable thereunder. The Company has delivered to the Buyer
complete and accurate copies of the leases and subleases (as amended to date)
listed in Section 2.12 of the Disclosure Schedule. With respect to each lease
and sublease listed in Section 2.12 of the Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding, enforceable
and in full force and effect;
(b) the lease or sublease will continue to be legal, valid,
binding, enforceable and in full force and effect immediately following the
Closing in accordance with the terms thereof as in effect immediately prior to
the Closing;
(c) neither the Company nor any Subsidiary nor, to the
knowledge of the Company, any other party, is in breach or violation of, or
default under, any such lease or sublease, and no event has occurred, is pending
or, to the knowledge of the Company, is threatened, which, after the giving of
notice, with lapse of time, or otherwise, would constitute a breach or default
by the Company or any Subsidiary or, to the knowledge of the Company, any other
party under such lease or sublease;
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21
(d) neither the Company nor any Subsidiary has assigned,
transferred, conveyed, mortgaged, deeded in trust or encumbered any interest in
the leasehold or subleasehold; and
(e) the Company is not aware of any Security Interest,
easement, covenant or other restriction applicable to the real property subject
to such lease, except for recorded easements, covenants and other restrictions
which do not materially impair the current uses or the occupancy by the Company
or a Subsidiary of the property subject thereto.
2.13 Intellectual Property.
(a) Each of the Company and the Subsidiaries owns or has the
right to use all Intellectual Property (as defined below) necessary (i) to use,
manufacture, market and distribute the products manufactured, marketed, sold or
licensed, and to provide the services provided, by the Company to other parties
(together, the "Customer Deliverables") or (ii) to operate the Company's
internal systems that are material to the business or operations of the Company,
including, without limitation, computer hardware systems, software applications
and embedded systems (the "Internal Systems"; the Intellectual Property owned by
or licensed to the Company and incorporated in or underlying the Customer
Deliverables or the Internal Systems is referred to herein as the "Company
Intellectual Property"). Each item of Company Intellectual Property will be
owned or available for use by the Surviving Corporation immediately following
the Closing on substantially identical terms and conditions as it was
immediately prior to the Closing. The Company has taken all reasonable measures
to protect the proprietary nature of each item of Company Intellectual Property.
Except as set forth on Schedule 2.13, (a) no other person, including any
employee or independent contractor of the Company, or entity has any rights to
any of the Company Intellectual Property owned by the Company (except pursuant
to agreements or licenses specified in Section 2.13(c) of the Disclosure
Schedule), and (b) no other person, including any employee or independent
contractor of the Company, or entity is infringing, violating or
misappropriating any of the Company Intellectual Property. For purposes of this
Agreement, "Intellectual Property" means all (i) patents and patent
applications, (ii) copyrights and registrations thereof, (iii) mask works and
registrations and applications for registration thereof, (iv) computer software,
data and documentation, (v) trade secrets and confidential business information,
whether patentable or unpatentable and whether or not reduced to practice,
know-how, manufacturing and production processes and techniques, research and
development information, copyrightable works, financial, marketing and business
data, pricing and cost information, business and marketing plans and customer
and supplier lists
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and information, (vi) trademarks, service marks, trade names, domain names and
applications and registrations therefor and (vii) other proprietary rights
relating to any of the foregoing. Section 2.13(a) of the Disclosure Schedule
lists each patent, patent application, copyright registration or application
therefor, mask work registration or application therefor, and trademark, service
xxxx and domain name registration or application therefor of the Company or any
Subsidiary.
(b) None of the Customer Deliverables, or the marketing,
distribution, provision or use thereof, infringes or violates, or constitutes a
misappropriation of, any Intellectual Property rights of any person or entity.
To the knowledge of the Company, none of the Internal Systems, or the use
thereof, infringes or violates, or constitutes a misappropriation of, any
Intellectual Property rights of any person or entity. Section 2.13(b) of the
Disclosure Schedule lists any complaint, claim or notice, or written threat
thereof, received by the Company or any Subsidiary alleging any such
infringement, violation or misappropriation; and the Company has provided to the
Buyer complete and accurate copies of all written documentation in the
possession of the Company or any Subsidiary relating to any such complaint,
claim, notice or threat. The Company has provided to the Buyer complete and
accurate copies of all written documentation in the Company's possession
relating to claims or disputes known to the Company concerning any Company
Intellectual Property.
(c) Section 2.13(c) of the Disclosure Schedule identifies each
license or other agreement (or type of license or other agreement) pursuant to
which the Company or a Subsidiary has licensed, distributed or otherwise granted
any rights to any third party with respect to, any Company Intellectual
Property.
(d) Section 2.13(d) of the Disclosure Schedule identifies each
item of Company Intellectual Property that is owned by a party other than the
Company or a Subsidiary, and the license or agreement pursuant to which the
Company or a Subsidiary uses it (excluding off-the-shelf software programs
licensed by the Company pursuant to "shrink wrap" licenses).
(e) Neither the Company nor any Subsidiary has disclosed the
source code for any of the software owned by the Company or a Subsidiary (the
"Software") or other confidential information constituting, embodied in or
pertaining to the Software to any person or entity, except pursuant to the
agreements listed in Section 2.13(e) of the Disclosure Schedule, and the Company
has taken reasonable measure to prevent disclosure of such source code.
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(f) All of the copyrightable materials (including Software)
incorporated in or bundled with the Customer Deliverables have been created by
employees of the Company or a Subsidiary within the scope of their employment by
the Company or a Subsidiary or by independent contractors of the Company or a
Subsidiary who have executed agreements expressly assigning all right, title and
interest in such copyrightable materials to the Company or a Subsidiary. No
portion of such copyrightable materials was jointly developed with any third
party.
(g) To the knowledge of the Company, the Customer
Deliverables and the Internal Systems are free from significant defects or
programming errors and conform in all material respects to the written
documentation and specifications therefor.
2.14 Inventory. All inventory of the Company and the Subsidiaries,
whether or not reflected on the Most Recent Balance Sheet, consists of a quality
and quantity usable and saleable in the Ordinary Course of Business, except for
obsolete items and items of below-standard quality, all of which have been
written-off or written-down to net realizable value on the Most Recent Balance
Sheet. All inventories not written-off have been priced at the lower of cost or
market on a first-in, first-out basis. The quantities of each type of inventory,
whether raw materials, work-in-process or finished goods, are not excessive in
the present circumstances of the Company and the Subsidiaries.
2.15 Contracts.
(a) Section 2.15 of the Disclosure Schedule lists the following
agreements (written or oral) to which the Company or any Subsidiary is a party
as of the date of this Agreement:
(i) any agreement (or group of related agreements) for
the lease of personal property from or to third parties providing for lease
payments in excess of $10,000 per annum or having a remaining term longer than
12 months;
(ii) any agreement (or group of related agreements) for
the purchase or sale of products or for the furnishing or receipt of services
(A) which calls for performance over a period of more than one year, (B) which
involves more than the sum of $10,000 or (C) in which the Company or any
Subsidiary has granted manufacturing rights, "most favored nation" pricing
provisions or exclusive marketing or distribution rights relating to any
products or
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24
territory or has agreed to purchase a minimum quantity of goods or
services or has agreed to purchase goods or services exclusively from a certain
party;
(iii) any agreement establishing a partnership or joint
venture;
(iv) any agreement (or group of related agreements) under
which it has created, incurred, assumed or guaranteed (or may create, incur,
assume or guarantee) indebtedness (including capitalized lease obligations)
involving more than $10,000 or under which it has imposed (or may impose) a
Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any employment or consulting agreement;
(vii) any agreement involving any officer, director or
stockholder of the Company or any affiliate (an "Affiliate"), as defined in Rule
12b-2 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), thereof;
(viii) any agreement under which the consequences of a
default or termination would reasonably be expected to have a Company Material
Adverse Effect;
(ix) any agreement which contains any provisions
requiring the Company or any Subsidiary to indemnify any other party thereto
(excluding indemnities contained in agreements for the purchase, sale or license
of products entered into in the Ordinary Course of Business); and
(x) any other agreement (or group of related agreements)
either involving more than $10,000 or not entered into in the Ordinary Course of
Business.
(b) The Company has delivered to the Buyer a complete and
accurate copy of each agreement listed in Section 2.13 or Section 2.15 of the
Disclosure Schedule. With respect to each agreement so listed: (i) the agreement
is legal, valid, binding and enforceable and in full force and effect; (ii) the
agreement will continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing; and (iii) neither the
Company nor any Subsidiary nor, to the knowledge of the Company, any other
party, is in breach or violation of, or default
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under, any such agreement, and no event has occurred, is pending or, to the
knowledge of the Company, is threatened, which, after the giving of notice, with
lapse of time, or otherwise, would constitute a breach or default by the Company
or any Subsidiary or, to the knowledge of the Company, any other party under
such contract.
2.16 Accounts Receivable. All accounts receivable of the Company and
the Subsidiaries reflected on the Most Recent Balance Sheet are valid
receivables subject to no setoffs or counterclaims and are current and
collectible (within 90 days after the date on which it first became due and
payable), net of the applicable reserve for bad debts on the Most Recent Balance
Sheet. All accounts receivable reflected in the financial or accounting records
of the Company that have arisen since the Most Recent Balance Sheet Date are
valid receivables subject to no setoffs or counterclaims and are collectible
(within 90 days after the date on which it first became due and payable), net of
a reserve for bad debts in an amount proportionate to the reserve shown on the
Most Recent Balance Sheet.
2.17 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company or any Subsidiary.
2.18 Insurance. Section 2.18 of the Disclosure Schedule lists each
insurance policy (including fire, theft, casualty, general liability, workers
compensation, business interruption, environmental, product liability and
automobile insurance policies and bond and surety arrangements) to which the
Company or any Subsidiary is a party. Such insurance policies are of the type
and in amounts customarily carried by organizations conducting businesses or
owning assets similar to those of the Company and the Subsidiaries. There is no
material claim pending under any such policy as to which coverage has been
questioned, denied or disputed by the underwriter of such policy. All premiums
due and payable under all such policies have been paid, neither the Company nor
any Subsidiary may be liable for retroactive premiums or similar payments, and
the Company and the Subsidiaries are otherwise in compliance in all material
respects with the terms of such policies. The Company has no knowledge of any
threatened termination of, or material premium increase with respect to, any
such policy. Each such policy will continue to be enforceable and in full force
and effect immediately following the Closing in accordance with the terms
thereof as in effect immediately prior to the Closing.
2.19 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation before any Governmental
Entity or before any arbitrator (a "Legal Proceeding") which is pending or has
been threatened in writing against the Company or any Subsidiary which (a) seeks
either damages in excess of $10,000 or equitable relief or (b) in
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any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
2.20 Warranties. No product or service manufactured, sold, leased,
licensed or delivered by the Company or any Subsidiary is subject to any
guaranty, warranty, right of return, right of credit or other indemnity other
than (i) the applicable standard terms and conditions of sale or lease of the
Company or the appropriate Subsidiary, which are set forth in Section 2.20 of
the Disclosure Schedule and (ii) manufacturers' warranties for which neither the
Company nor any Subsidiary has any liability. Section 2.20 of the Disclosure
Schedule sets forth the aggregate expenses incurred by the Company and the
Subsidiaries in fulfilling their obligations under their guaranty, warranty,
right of return and indemnity provisions during each of the fiscal years and the
interim period covered by the Financial Statements; and the Company does not
know of any reason why such expenses should significantly increase as a
percentage of sales in the future.
2.21 Employees.
(a) Section 2.21(a) of the Disclosure Schedule contains a list
of all employees of the Company and each Subsidiary, along with the position and
the annual rate of compensation of each such person. Each such employee has
entered into a confidentiality/assignment of inventions agreement with the
Company or a Subsidiary, a copy of each such agreement has previously been
delivered to the Buyer. Section 2.21(a) of the Disclosure Schedule contains a
list of all employees of the Company or any Subsidiary who are a party to a
non-competition agreement with the Company or any Subsidiary; a copy of each
such agreement has previously been delivered to the Buyer. To the knowledge of
the Company, no key employee or group of employees has any plans to terminate
employment with the Company or any Subsidiary.
(b) Neither the Company nor any Subsidiary is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strikes, grievances, claims of unfair labor practices or other collective
bargaining disputes. The Company has no knowledge of any organizational effort
made or threatened, either currently or within the past two years, by or on
behalf of any labor union with respect to employees of the Company or any
Subsidiary.
(c) Section 2.21(c) of the Disclosure Schedule contains a list
of all independent contractors of the Company and each Subsidiary, along with
the rate of
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compensation of such individuals. The Company is in compliance with all rules
and regulations which qualify these individuals as independent contractors.
2.22 Employee Benefits.
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
(i) "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement or arrangement involving direct or indirect compensation,
including without limitation insurance coverage, severance benefits, disability
benefits, deferred compensation, bonuses, stock options, stock purchase, phantom
stock, stock appreciation or other forms of incentive compensation or
post-retirement compensation.
(ii) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended.
(iii) "ERISA Affiliate" means any entity which is, or at
any applicable time was, a member of (1) a controlled group of corporations (as
defined in Section 414(b) of the Code), (2) a group of trades or businesses
under common control (as defined in Section 414(c) of the Code), or (3) an
affiliated service group (as defined under Section 414(m) of the Code or the
regulations under Section 414(o) of the Code), any of which includes or included
the Company or a Subsidiary.
(b) Section 2.22(b) of the Disclosure Schedule contains a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Company, any Subsidiary or any ERISA Affiliate. Complete
and accurate copies of (i) all Employee Benefit Plans which have been reduced to
writing, (ii) written summaries of all unwritten Employee Benefit Plans, (iii)
all related trust agreements, insurance contracts and summary plan descriptions,
and (iv) all annual reports filed on IRS Form 5500, 5500C or 5500R and (for all
funded plans) all plan financial statements for the last five plan years for
each Employee Benefit Plan, have been delivered to the Buyer. Each Employee
Benefit Plan has been administered in all material respects in accordance with
its terms and each of the Company, the Subsidiaries and the ERISA Affiliates has
in all material respects met its obligations with respect to such Employee
Benefit Plan and has made all required contributions thereto. The Company, each
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Subsidiary, each ERISA Affiliate and each Employee Benefit Plan are in
compliance in all material respects with the currently applicable provisions of
ERISA and the Code and the regulations thereunder (including without limitation
Section 4980 B of the Code, Subtitle K, Chapter 100 of the Code and Sections 601
through 608 and Section 701 et seq. of ERISA). All filings and reports as to
each Employee Benefit Plan required to have been submitted to the Internal
Revenue Service or to the United States Department of Labor have been duly
submitted.
(c) There are no Legal Proceedings (except claims for benefits
payable in the normal operation of the Employee Benefit Plans and proceedings
with respect to qualified domestic relations orders) against or involving any
Employee Benefit Plan or asserting any rights or claims to benefits under any
Employee Benefit Plan that could give rise to any material liability.
(d) All the Employee Benefit Plans that are intended to be
qualified under Section 401(a) of the Code have received determination letters
from the Internal Revenue Service to the effect that such Employee Benefit Plans
are qualified and the plans and the trusts related thereto are exempt from
federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost. Each Employee Benefit Plan which
is required to satisfy Section 401(k)(3) or Section 401(m)(2) of the Code has
been tested for compliance with, and satisfies the requirements of, Section
401(k)(3) and Section 401(m)(2) of the Code for each plan year ending prior to
the Closing Date.
(e) Neither the Company, any Subsidiary, nor any ERISA
Affiliate has ever maintained an Employee Benefit Plan subject to Section 412 of
the Code or Title IV of ERISA.
(f) At no time has the Company, any Subsidiary or any ERISA
Affiliate been obligated to contribute to any "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA).
(g) There are no unfunded obligations under any Employee
Benefit Plan providing benefits after termination of employment to any employee
of the Company or any Subsidiary (or to any beneficiary of any such employee),
including but not limited to retiree health coverage and deferred compensation,
but excluding continuation of health coverage
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required to be continued under Section 4980B of the Code or other applicable law
and insurance conversion privileges under state law. The assets of each Employee
Benefit Plan which is funded are reported at their fair market value on the
books and records of such Employee Benefit Plan.
(h) No act or omission has occurred and no condition exists
with respect to any Employee Benefit Plan maintained by the Company, any
Subsidiary or any ERISA Affiliate that would subject the Company, any Subsidiary
or any ERISA Affiliate to (i) any material fine, penalty, tax or liability of
any kind imposed under ERISA or the Code or (ii) any contractual indemnification
or contribution obligation protecting any fiduciary, insurer or service provider
with respect to any Employee Benefit Plan.
(i) No Employee Benefit Plan is funded by, associated with or
related to a "voluntary employee's beneficiary association" within the meaning
of Section 501(c)(9) of the Code.
(j) Each Employee Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as a
result thereof and no Employee Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Employee Benefit Plan.
(k) Section 2.22(k) of the Disclosure Schedule discloses each:
(i) agreement with any stockholder, director, executive officer or other key
employee of the Company or any Subsidiary (A) the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company or any Subsidiary of the nature of any of
the transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee or (C) providing severance benefits or
other benefits after the termination of employment of such director, executive
officer or key employee; (ii) agreement, plan or arrangement under which any
person may receive payments from the Company or any Subsidiary that may be
subject to the tax imposed by Section 4999 of the Code or included in the
determination of such person's "parachute payment" under Section 280G of the
Code; and (iii) agreement or plan binding the Company or any Subsidiary,
including without limitation any stock option plan, stock appreciation right
plan, restricted stock plan, stock purchase plan, severance benefit plan or
Employee Benefit Plan, any of the benefits of which will be increased, or the
vesting of the benefits of which will be accelerated, by the occurrence of any
of the
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transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(l) Section 2.22(l) of the Disclosure Schedule sets forth the
policy of the Company and any Subsidiary with respect to accrued vacation,
accrued sick time and earned time-off and the amount of such liabilities as of
March 31, 2000.
2.23 Environmental Matters.
(a) Each of the Company and the Subsidiaries has complied with
all applicable Environmental Laws (as defined below). There is no pending or, to
the knowledge of the Company, threatened civil or criminal litigation, written
notice of violation, formal administrative proceeding, or investigation, inquiry
or information request by any Governmental Entity, relating to any Environmental
Law involving the Company or any Subsidiary. For purposes of this Agreement,
"Environmental Law" means any federal, state or local law, statute, rule or
regulation or the common law relating to the environment or occupational health
and safety, including without limitation any statute, regulation, administrative
decision or order pertaining to (i) treatment, storage, disposal, generation and
transportation of industrial, toxic or hazardous materials or substances or
solid or hazardous waste; (ii) air, water and noise pollution; (iii) groundwater
and soil contamination; (iv) the release or threatened release into the
environment of industrial, toxic or hazardous materials or substances, or solid
or hazardous waste, including without limitation emissions, discharges,
injections, spills, escapes or dumping of pollutants, contaminants or chemicals;
(v) the protection of wild life, marine life and wetlands, including without
limitation all endangered and threatened species; (vi) storage tanks, vessels,
containers, abandoned or discarded barrels, and other closed receptacles; (vii)
health and safety of employees and other persons; and (viii) manufacturing,
processing, using, distributing, treating, storing, disposing, transporting or
handling of materials regulated under any law as pollutants, contaminants, toxic
or hazardous materials or substances or oil or petroleum products or solid or
hazardous waste. As used above, the terms "release" and "environment" shall have
the meaning set forth in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA").
(b) There have been no releases of any Materials of
Environmental Concern (as defined below) into the environment at any parcel of
real property or any facility formerly or currently owned, operated or
controlled by the Company or a Subsidiary. With respect to any such releases of
Materials of Environmental Concern, the Company or such Subsidiary has given all
required notices to Governmental Entities (copies of which have been provided to
the Buyer).
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The Company is not aware of any releases of Materials of Environmental Concern
at parcels of real property or facilities other than those owned, operated or
controlled by the Company or a Subsidiary that could reasonably be expected to
have an impact on the real property or facilities owned, operated or controlled
by the Company or a Subsidiary. For purposes of this Agreement, "Materials of
Environmental Concern" means any chemicals, pollutants or contaminants,
hazardous substances (as such term is defined under CERCLA), solid wastes and
hazardous wastes (as such terms are defined under the Resource Conservation and
Recovery Act), toxic materials, oil or petroleum and petroleum products or any
other material subject to regulation under any Environmental Law.
(c) Set forth in Section 2.23(c) of the Disclosure Schedule is
a list of all documents (whether in hard copy or electronic form) that contain
any environmental reports, investigations and audits relating to premises
currently or previously owned or operated by the Company or a Subsidiary
(whether conducted by or on behalf of the Company or a Subsidiary or a third
party, and whether done at the initiative of the Company or a Subsidiary or
directed by a Governmental Entity or other third party) which the Company has
possession of or access to. A complete and accurate copy of each such document
has been provided to the Buyer.
(d) The Company is not aware of any material environmental
liability of any solid or hazardous waste transporter or treatment, storage or
disposal facility that has been used by the Company or any Subsidiary.
2.24 Legal Compliance. Each of the Company and the Subsidiaries, and
the conduct and operations of their respective businesses, are in compliance
with each applicable law (including rules and regulations thereunder) of any
federal, state, local or foreign government, or any Governmental Entity, except
for any violations or defaults that, individually or in the aggregate, have not
had and would not reasonably be expected to have a Company Material Adverse
Effect.
2.25 Customers and Suppliers. Section 2.25 of the Disclosure Schedule
sets forth a list of (a) each customer that accounted for more than 5% of the
consolidated revenues of the Company during the last full fiscal year or the
interim period through the Most Recent Balance Sheet Date and the amount of
revenues accounted for by such customer during each such period and (b) each
supplier that is the sole supplier of any significant product to the Company or
a Subsidiary. No such customer or supplier has indicated within the past year
that it will stop, or decrease the rate of, buying products or supplying
products, as applicable, to the Company or any Subsidiary. No unfilled customer
order or commitment obligating the Company or any
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Subsidiary to process, manufacture or deliver products or perform services will
result in a loss to the Company or any Subsidiary upon completion of
performance. No purchase order or commitment of the Company or any Subsidiary
is in excess of normal requirements, nor are prices provided therein in excess
of current market prices for the products or services to be provided
thereunder.
2.26 Permits. Section 2.26 of the Disclosure Schedule sets forth a list
of all permits, licenses, registrations, certificates, orders or approvals from
any Governmental Entity (including without limitation those issued or required
under Environmental Laws and those relating to the occupancy or use of owned or
leased real property) ("Permits") issued to or held by the Company or any
Subsidiary. Such listed Permits are the only Permits that are required for the
Company and the Subsidiaries to conduct their respective businesses as presently
conducted or as proposed to be conducted, except for those the absence of which,
individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect. Each such Permit is in full
force and effect and, to the knowledge of the Company, no suspension or
cancellation of such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration. Each such Permit will
continue in full force and effect immediately following the Closing.
2.27 Certain Business Relationships With Affiliates. No Affiliate of
the Company or of any Subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of the Company or any Subsidiary, (b)
has any claim or cause of action against the Company or any Subsidiary, or (c)
owes any money to, or is owed any money by, the Company or any Subsidiary.
Section 2.27 of the Disclosure Schedule describes any transactions or
relationships between the Company or a Subsidiary and any Affiliate thereof
which have occurred or existed since inception of the Company.
2.28 Brokers' Fees. Neither the Company nor any Subsidiary has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
2.29 Books and Records. The minute books and other similar records of
the Company and each Subsidiary contain complete and accurate records of all
actions taken at any meetings of the Company's or such Subsidiary's
stockholders, Board of Directors or any committee thereof and of all written
consents executed in lieu of the holding of any such meeting. The books and
records of the Company and each Subsidiary accurately reflect in all material
respects the assets, liabilities, business, financial condition and results of
operations of the Company or
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such Subsidiary and have been maintained in accordance with good business and
bookkeeping practices.
2.30 Disclosure. No representation or warranty by the Company contained
in this Agreement, and no statement contained in the Disclosure Schedule or any
other document, certificate or other instrument delivered or to be delivered by
or on behalf of the Company pursuant to this Agreement, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading.
The Company has disclosed to the Buyer all material information relating to the
business of the Company or any Subsidiary or the transactions contemplated by
this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE BUYER
AND THE TRANSITORY SUBSIDIARY
Each of the Buyer and the Transitory Subsidiary represents and warrants
to the Company as follows:
3.1 Organization, Qualification and Corporate Power. Each of the Buyer
and the Transitory Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation. The Buyer
is duly qualified to conduct business and is in corporate and tax good standing
under the laws of each jurisdiction in which the nature of its businesses or the
ownership or leasing of its properties requires such qualification, except where
the failure to be so qualified or in good standing would not have a Buyer
Material Adverse Effect (as defined below). The Buyer has all requisite
corporate power and authority to carry on the businesses in which it is engaged
and to own and use the properties owned and used by it. The Buyer has furnished
or made available to the Company complete and accurate copies of its Certificate
of Incorporation and By-laws. For purposes of this Agreement, "Buyer Material
Adverse Effect" means a material adverse effect on the assets, business,
condition (financial or otherwise), results of operations or future prospects of
the Buyer and its subsidiaries, taken as a whole.
3.2 Capitalization. The authorized capital stock of the Buyer consists
of (a) 65,000,000 shares of Buyer Common Stock, of which 25,476,188 shares were
issued and outstanding as of March 9, 2000, and (b) 5,000,000 shares of
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding. All of the issued and outstanding shares of
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Buyer Common Stock are duly authorized, validly issued, fully paid,
nonassessable and free of all preemptive rights. All of the Merger Shares will
be, when issued in accordance with this Agreement, duly authorized, validly
issued, fully paid, nonassessable and free of all preemptive rights.
3.3 Authorization of Transaction. Each of the Buyer and the Transitory
Subsidiary has all requisite power and authority to execute and deliver this
Agreement, (in the case of the Buyer) the Indemnification Escrow Agreement and
the Repurchase Escrow Agreement and to perform its obligations hereunder and
thereunder. The execution and delivery by the Buyer and the Transitory
Subsidiary of this Agreement (in the case of the Buyer) the Indemnification
Escrow Agreement and the Repurchase Escrow Agreement and the consummation by the
Buyer and the Transitory Subsidiary of the transactions contemplated hereby and
thereby have been duly and validly authorized by all necessary corporate action
on the part of the Buyer and Transitory Subsidiary, respectively. This Agreement
has been duly and validly executed and delivered by the Buyer and the Transitory
Subsidiary and constitutes a valid and binding obligation of the Buyer and the
Transitory Subsidiary, enforceable against them in accordance with its terms.
3.4 Noncontravention. Subject to compliance with the applicable
requirements of the Securities Act and any applicable state securities laws, the
Exchange Act and the filing of the Certificate of Merger as required by the
Delaware General Corporation Law, neither the execution and delivery by the
Buyer or the Transitory Subsidiary of this Agreement (in the case of the Buyer)
the Indemnification Escrow Agreement or the Repurchase Escrow Agreement, nor the
consummation by the Buyer or the Transitory Subsidiary of the transactions
contemplated hereby or thereby, will (a) conflict with or violate any provision
of the charter or By-laws of the Buyer or the Transitory Subsidiary, (b) require
on the part of the Buyer or the Transitory Subsidiary any filing with, or
permit, authorization, consent or approval of, any Governmental Entity, (c)
conflict with, result in breach of, constitute (with or without due notice or
lapse of time or both) a default under, result in the acceleration of
obligations under, create in any party any right to terminate, modify or cancel,
or require any notice, consent or waiver under, any contract or instrument to
which the Buyer or the Transitory Subsidiary is a party or by which either is
bound or to which any of their assets are subject, except for (i) any conflict,
breach, default, acceleration, termination, modification or cancellation which
would not adversely affect the consummation of the transactions contemplated
hereby or (ii) any notice, consent or waiver the absence of which would not
adversely affect the consummation of the transactions
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contemplated hereby, or (d) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Buyer or the Transitory
Subsidiary or any of their properties or assets.
3.5 Reports and Financial Statements. The Buyer has previously
furnished or made available to the Company complete and accurate copies, as
amended or supplemented, of its prospectus dated March 10, 2000, filed pursuant
to Rule 424(b) of the Securities Act and all of its reports as filed with the
Securities and Exchange Commission (the "SEC") as required under the Securities
Act and the Exchange Act (such prospectus reports are collectively referred to
herein as the "Buyer Reports"). The Buyer Reports complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations thereunder when filed. As of their
respective dates, the Buyer Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements and
unaudited interim financial statements of the Buyer included in the Buyer
Reports (i) complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto when filed, (ii) were prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby (except as may be
indicated therein or in the notes thereto, and in the case of quarterly
financial statements, as permitted by Form 10-Q under the Exchange Act, (iii)
fairly present the consolidated financial condition, results of operations and
cash flows of the Buyer as of the respective dates thereof and for the periods
referred to therein, and (iv) are consistent with the books and records of the
Buyer.
3.6 Absence of Material Adverse Change. Since December 31, 1999, there
has occurred no event or development which has had, or could reasonably be
expected to have in the future, a Buyer Material Adverse Effect.
3.7 Litigation. Except as disclosed in the Buyer Reports, as of the
date of this Agreement, there is no Legal Proceeding which is pending or, to the
Buyer's knowledge, threatened against the Buyer or any subsidiary of the Buyer
which, if determined adversely to the Buyer or such subsidiary, could have,
individually or in the aggregate, a Buyer Material Adverse Effect or which in
any manner challenges or seeks to prevent, enjoin, alter or delay the
transactions contemplated by this Agreement.
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3.8 Interim Operations of the Transitory Subsidiary. The Transitory
Subsidiary was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has engaged in no business activities other
than as contemplated by this Agreement.
3.9 Brokers' Fees. Neither the Buyer nor the Transitory Subsidiary has
any liability or obligation to pay any fees or commissions to any broker, finder
or agent with respect to the transactions contemplated by this Agreement.
3.10 Disclosure. No representation or warranty by the Buyer contained
in this Agreement, and no statement contained in the any document, certificate
or other instrument delivered or to be delivered by or on behalf of the Buyer
pursuant to this Agreement, contains or will contain any untrue statement of a
material fact or omit or will omit to state any material fact necessary, in
light of the circumstances under which it was or will be made, in order to make
the statements herein or therein not misleading.
ARTICLE IV
COVENANTS
4.1 Closing Efforts. Each of the Parties shall use its best efforts,
to the extent commercially reasonable ("Reasonable Best Efforts"), to take all
actions and to do all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement, including without limitation using
its Reasonable Best Efforts to ensure that (i) its representations and
warranties remain true and correct in all material respects through the Closing
Date and (ii) the conditions to the obligations of the other Parties to
consummate the Merger are satisfied.
4.2 Governmental and Third-Party Notices and Consents.
(a) Each Party shall use its Reasonable Best Efforts to obtain,
at its expense, all waivers, permits, consents, approvals or other
authorizations from Governmental Entities, and to effect all registrations,
filings and notices with or to Governmental Entities, as may be required for
such Party to consummate the transactions contemplated by this Agreement and to
otherwise comply with all applicable laws and regulations in connection with the
consummation of the transactions contemplated by this Agreement.
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(b) The Company shall use its Reasonable Best Efforts to
obtain, at its expense, all such waivers, consents or approvals from third
parties, and to give all such notices to third parties, as are required to be
listed in Section 2.4 of the Disclosure Schedule.
4.3 Stockholder Approval.
(a) The Company shall use its Reasonable Best Efforts to obtain, as
promptly as practicable, the Requisite Stockholder Approval, either at a special
meeting of stockholders or pursuant to a written stockholder consent, all in
accordance with the applicable requirements of the Delaware General Corporation
Law. In connection with such special meeting of stockholders or written
stockholder consent, the Buyer shall prepare, with the assistance and
cooperation of the Company, an information statement (the "Information
Statement"). The Information Statement shall include a prospectus to be used for
providing information concerning the Buyer in connection with offering the
Merger Shares to stockholders of the Company and soliciting proxies or written
consents from stockholders of the Company for the purpose of obtaining the
Requisite Stockholder Approval. If the Requisite Stockholder Approval is
obtained by means of a written consent, the Company shall send, pursuant to
Sections 228 and 262(d) of the Delaware General Corporation Law, a written
notice to all stockholders of the Company that did not execute such written
consent informing them that this Agreement and the Merger were adopted and
approved by the stockholders of the Company and that appraisal rights are
available for their Company Shares pursuant to Section 262 of the Delaware
General Corporation Law (which notice shall include a copy of such Section 262),
and shall promptly inform the Buyer of the date on which such notice was sent.
(b) The Company, acting through its Board of Directors, shall include
in the Information Statement the unanimous recommendation of its Board of
Directors that the stockholders of the Company vote in favor of the adoption of
this Agreement and the approval of the Merger.
(c) The Company shall ensure that the Information Statement does not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made, in light of the circumstances
under which they were made, not misleading (provided that the Company shall not
be responsible for the accuracy or completeness of any information relating to
the Buyer or furnished by the Buyer in writing for inclusion in the Information
Statement).
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(d) The Buyer shall ensure that the Information Statement does not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading (provided that the Buyer shall not be responsible for the accuracy or
completeness of any information relating to the Company or furnished by the
Company in writing for inclusion in the Information Statement).
(e) Xxxxx Xxxx, Xxxxx Xxxxxxxx, Xxxxx Xxxxx, Xxxxx Xxxxx, Xx Xxxxxx,
Xxxx Xxxxxxxxx and Xxxxxx Xxxxxxxxx each agree (i) to vote all Company Shares
that are beneficially owned by him, her or it in favor of the adoption of this
Agreement and the approval of the Merger, (ii) not to vote any Company Shares in
favor of any other acquisition (whether by way of merger, consolidation, share
exchange, stock purchase or asset purchase) of all or a majority of the
outstanding capital stock or assets of the Company and (iii) otherwise to use
his, her or its Reasonable Best Efforts to obtain the Requisite Stockholder
Approval.
4.4 Operation of Business. Except as contemplated by this Agreement,
during the period from the date of this Agreement to the Effective Time, the
Company shall (and shall cause each Subsidiary to) conduct its operations in the
Ordinary Course of Business and in compliance with all applicable laws and
regulations and, to the extent consistent therewith, use its Reasonable Best
Efforts to preserve intact its current business organization, keep its physical
assets in good working condition, keep available the services of its current
officers and employees and preserve its relationships with customers, suppliers
and others having business dealings with it to the end that its goodwill and
ongoing business shall not be impaired in any material respect. Without limiting
the generality of the foregoing, prior to the Effective Time, the Company shall
not (and shall cause each Subsidiary not to), without the written consent of the
Buyer:
(a) issue or sell, or redeem or repurchase, any stock or other
securities of the Company or any rights, warrants or options to acquire any such
stock or other securities (except pursuant to the redemption, termination,
conversion or exercise of convertible securities or Options or Warrants
outstanding on the date hereof), or amend any of the terms of (including without
limitation the vesting of) any such convertible securities or Options or
Warrants;
(b) split, combine or reclassify any shares of its capital
stock; declare, set aside or pay any dividend or other distribution (whether in
cash, stock or property or any combination thereof) in respect of its capital
stock;
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(c) create, incur or assume any indebtedness (including
obligations in respect of capital leases); assume, guarantee, endorse or
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity; or make any loans,
advances or capital contributions to, or investments in, any other person or
entity, except for trade debt incurred in the Ordinary Course of Business, not
to exceed $10,000 in the aggregate;
(d) enter into, adopt or amend any Employee Benefit Plan or any
employment or severance agreement or arrangement of the type described in
Section 2.22(k) (not including the Stock Option Plan) or (except for normal
increases in the Ordinary Course of Business for employees who are not
Affiliates) increase in any manner the compensation or fringe benefits of, or
materially modify the employment terms of, its directors, officers or employees,
generally or individually, or pay any bonus or other benefit to its directors,
officers or employees (except for existing payment obligations listed in Section
2.20 of the Disclosure Schedule);
(e) acquire, sell, lease, license or dispose of any assets or
property (including without limitation any shares or other equity interests in
or securities of any Subsidiary or any corporation, partnership, association or
other business organization or division thereof), other than purchases and sales
of assets in the Ordinary Course of Business;
(f) mortgage or pledge any of its property or assets or subject
any such property or assets to any Security Interest;
(g) discharge or satisfy any Security Interest or pay any
obligation or liability other than in the Ordinary Course of Business;
(h) amend its charter, by-laws or other organizational
documents;
(i) change in any material respect its accounting methods,
principles or practices, except insofar as may be required by a generally
applicable change in GAAP;
(j) enter into, amend, terminate, take or omit to take any
action that would constitute a violation of or default under, or waive any
rights under, any material contract or agreement;
(k) make or commit to make any capital expenditure in excess of
$1,000 per item or $10,000 in the aggregate;
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(l) institute or settle any Legal Proceeding;
(m) take any action or fail to take any action permitted by
this Agreement with the knowledge that such action or failure to take action
would result in (i) any of the representations and warranties of the Company set
forth in this Agreement becoming untrue or (ii) any of the conditions to the
Merger set forth in Article V not being satisfied; or
(n) agree in writing or otherwise to take any of the foregoing
actions.
4.5 Access to Information.
(a) The Company shall (and shall cause each Subsidiary to)
permit representatives of the Buyer to have full access (at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of the Company and the Subsidiaries) to all premises, properties,
financial and accounting records, contracts, other records and documents, and
personnel, of or pertaining to the Company and each Subsidiary.
(b) The Company shall introduce the Buyer to its principal
suppliers, customers and employees to facilitate discussions between such
persons and the Buyer in regard to the conduct of business following the Closing
Date.
(c) Each of the Buyer and the Transitory Subsidiary (i) shall
treat and hold as confidential any Confidential Information (as defined below),
(ii) shall not use any of the Confidential Information except in connection with
this Agreement, and (iii) if this Agreement is terminated for any reason
whatsoever, shall return to the Company all tangible embodiments (and all
copies) thereof which are in its possession. For purposes of this Agreement,
"Confidential Information" means any confidential or proprietary information of
the Company or any Subsidiary that is furnished in writing to the Buyer or the
Transitory Subsidiary by the Company or any Subsidiary in connection with this
Agreement and is labeled confidential or proprietary; provided, however, that it
shall not include any information (A) which, at the time of disclosure, is
available publicly, (B) which, after disclosure, becomes available publicly
through no fault of the Buyer or the Transitory Subsidiary, (C) which the Buyer
or the Transitory Subsidiary knew or to which the Buyer or the Transitory
Subsidiary had access prior to disclosure or (D) which the Buyer or the
Transitory Subsidiary rightfully obtains from a source other than the Company or
a Subsidiary.
4.6 Notice of Breaches.
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(a) From the date of this Agreement until the Effective Time,
the Company shall promptly deliver to the Buyer supplemental information
concerning events or circumstances occurring subsequent to the date hereof which
would render any representation, warranty or statement in this Agreement or the
Disclosure Schedule inaccurate or incomplete in any material respect at any time
after the date of this Agreement until the Closing Date. No such supplemental
information shall be deemed to cure any misrepresentation or breach of warranty
or constitute an amendment of any representation, warranty or statement in this
Agreement or the Disclosure Schedule.
(b) From the date of this Agreement until the Effective Time,
the Buyer shall promptly deliver to the Company supplemental information
concerning events or circumstances occurring subsequent to the date hereof which
would render any representation or warranty in this Agreement inaccurate or
incomplete in any material respect at any time after the date of this Agreement
until the Closing Date. No such supplemental information shall be deemed to cure
any misrepresentation or breach of warranty or constitute an amendment of any
representation or warranty in this Agreement.
4.7 Exclusivity.
(a) The Company shall not, and the Company shall require each
of its officers, directors, employees, representatives and agents not to,
directly or indirectly, (i) initiate, solicit, encourage or otherwise facilitate
any inquiry, proposal, offer or discussion with any party (other than the Buyer)
concerning any merger, reorganization, consolidation, recapitalization, business
combination, liquidation, dissolution, share exchange, sale of stock, sale of
material assets or similar business transaction involving the Company, any
Subsidiary or any division of the Company or any Subsidiary, (ii) furnish any
non-public information concerning the business, properties or assets of the
Company, any Subsidiary or any division of the Company to any party (other than
the Buyer) or (iii) engage in discussions or negotiations with any party (other
than the Buyer) concerning any such transaction.
(b) The Company shall immediately notify any party with which
discussions or negotiations of the nature described in paragraph (a) above were
pending that the Company is terminating such discussions or negotiations. If the
Company receives any inquiry, proposal or offer of the nature described in
paragraph (a) above, the Company shall, within one business day after such
receipt, notify the Buyer of such inquiry, proposal or offer, including the
identity of the other party and the terms of such inquiry, proposal or offer.
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4.8 Expenses. Except as set forth in Article VI, the Indemnification
Escrow Agreement and the Repurchase Escrow Agreement, each of the Parties shall
bear its own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
4.9 Indemnification. The Buyer shall not, for a period of three years
after the Effective Time, take any action to alter or impair any exculpatory or
indemnification provisions now existing in the Certificate of Incorporation or
By-laws of the Company for the benefit of any individual who served as a
director or officer of the Company at any time prior to the Effective Time,
except for any changes which may be required to conform with changes in
applicable law and any changes which do not affect the application of such
provisions to acts or omissions of such individuals prior to the Effective Time.
4.10 Restrictions on Disposition of Merger Shares. The Stockholders
covenant that until September 9, 2000, they will not directly or indirectly
sell, transfer, dispose of, pledge, or hypothecate the Merger Shares received in
connection with the Merger, without the prior written consent of the Buyer,
which may be withheld in the Buyer's sole discretion.
ARTICLE V
CONDITIONS TO CONSUMMATION OF MERGER
5.1 Conditions to Each Party's Obligations. The respective obligations
of each Party to consummate the Merger are subject to the satisfaction of the
following conditions:
(a) this Agreement and the Merger shall have received the
Requisite Stockholder Approval.
5.2 Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligation of each of the Buyer and the Transitory Subsidiary to
consummate the Merger is subject to the satisfaction (or waiver by the Buyer) of
the following additional conditions:
(a) a satisfactory due diligence investigation of the Company
and the business of the Company by the Buyer;
(b) the number of Dissenting Shares shall not exceed 5% of the
number of outstanding Company Shares as of the Effective Time and the number of
Company Stockholders shall not exceed 35;
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(c) the Company and the Subsidiaries shall have obtained (and
shall have provided copies thereof to the Buyer) all of the waivers, permits,
consents, approvals or other authorizations, and effected all of the
registrations, filings and notices, referred to in Section 4.2 which are
required on the part of the Company or the Subsidiaries;
(d) the representations and warranties of the Company set forth
in the first sentence of Section 2.1 and in Section 2.3 and any representations
and warranties of the Company set forth in this Agreement that are qualified as
to materiality shall be true and correct in all respects, and all other
representations and warranties of the Company set forth in this Agreement shall
be true and correct in all material respects, in each case as of the date of
this Agreement and as of the Effective Time as though made as of the Effective
Time, except to the extent such representations and warranties are specifically
made as of a particular date or as of the date of this Agreement (in which case
such representations and warranties shall be true and correct as of such date);
(e) the Company shall have performed or complied with, in all
material respects, its agreements and covenants required to be performed or
complied with under this Agreement as of or prior to the Effective Time;
(f) no Legal Proceeding shall be pending or threatened wherein
an unfavorable judgment, order, decree, stipulation or injunction would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation or (iii) have a Company Material Adverse
Effect, and no such judgment, order, decree, stipulation or injunction shall be
in effect;
(g) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a certificate (the "Company Certificate") to the effect
that each of the conditions specified in clause (a) of Section 5.1 and clauses
(a) through (f) (insofar as clause (f) relates to Legal Proceedings involving
the Company or a Subsidiary) of this Section 5.2 is satisfied in all respects;
(h) the Company shall have delivered to the Buyer and the
Transitory Subsidiary a Closing Date balance sheet, prepared in accordance with
generally accepted accounting principles, which balance sheet shall reflect no
liabilities;
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(i) each of the Company Stockholders shall have executed and
delivered to the Buyer an Investment Representation Letter in the form attached
hereto as Exhibit C and the Buyer shall have no reason to believe that the
statements set forth therein are not true and shall be reasonably satisfied that
the issuance and sale of the Merger Shares is exempt from the registration
requirements of the Securities Act;
(j) the Buyer shall have received from counsel to the Company
an opinion addressed to the Buyer and dated as of the Closing Date, reasonably
acceptable to the Buyer's counsel;
(k) the Buyer shall have received copies of the resignations,
effective as of the Effective Time, of each director and officer of the Company
and the Subsidiaries (other than any such resignations which the Buyer
designates, by written notice to the Company, as unnecessary);
(l) the Buyer shall have received executed copies of Employment
Agreements entered into between the Surviving Corporation and certain employees,
in the form attached hereto as Exhibit E-1, which employees are listed on
Exhibit E-2 attached hereto;
(m) the Buyer shall have received executed copies of
Non-Competition Agreements entered into between the Surviving Corporation and
certain individuals, in the form attached hereto as Exhibit F-1, which
individuals are listed on Exhibit F-2 attached hereto, and with other
individuals in the form attached hereto as Exhibit F-3, which individuals are
listed on Exhibit F-4;
(n) the Buyer shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Company and the Subsidiaries in their jurisdiction of organization and the
various foreign jurisdictions in which they are qualified, certified charter
documents, certificates as to the incumbency of officers and the adoption of
authorizing resolutions) as it shall reasonably request in connection with the
Closing;
(o) the Company shall have terminated the agreements listed on
Exhibit H prior to the Effective Time.
5.3 Conditions to Obligations of the Company. The obligation of the
Company to consummate the Merger is subject to the satisfaction of the following
additional conditions:
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(a) the representations and warranties of the Buyer and the
Transitory Subsidiary set forth in the first sentence of Section 3.1 and Section
3.3 and any representations and warranties of the Buyer and the Transitory
Subsidiary set forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of the Buyer
and the Transitory Subsidiary set forth in this Agreement that are not so
qualified (other than those set forth in Section 3.1 and Section 3.3) shall be
true and correct in all material respects, in each case as of the date of this
Agreement and as of the Effective Time as though made as of the Effective Time,
except to the extent such representations and warranties are specifically made
as of a particular date or as of the date of this Agreement (in which case such
representations and warranties shall be true and correct as of such date);
(b) each of the Buyer and the Transitory Subsidiary shall have
performed or complied with, in all material respects, its agreements and
covenants required to be performed or complied with under this Agreement as of
or prior to the Effective Time;
(c) the Buyer shall have delivered to the Company a certificate
(the "Buyer Certificate") to the effect that each of the conditions specified in
clauses (a) and (b) of this Section 5.3 are satisfied in all respects;
(d) the Company shall have received from counsel to the Buyer
and the Transitory Subsidiary an opinion with respect to the matters set forth
in Exhibit G attached hereto, addressed to the Company and dated as of the
Closing Date;
(e) the Company shall have received executed copies of
Employment Agreements entered into between the Surviving Corporation and certain
employees, in the form attached hereto as Exhibit E-1, which employees are
listed on Exhibit E-2 attached hereto;
(f) the Company shall have received such other certificates and
instruments (including without limitation certificates of good standing of the
Buyer and the Transitory Subsidiary in their jurisdiction of organization,
certified charter documents, certificates as to the incumbency of officers and
the adoption of authorizing resolutions) as it shall reasonably request in
connection with the Closing.
ARTICLE VI
INDEMNIFICATION
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6.1 Indemnification by the Company Stockholders. The Company
Stockholders receiving the Merger Consideration pursuant to Section 1.5 (the
"Indemnifying Stockholders") shall, jointly and severally, indemnify the Buyer
in respect of, and hold it harmless against, any and all debts, obligations and
other liabilities (whether absolute, accrued, contingent, fixed or otherwise, or
whether known or unknown, or due or to become due or otherwise), monetary
damages, fines, fees, penalties, interest obligations, deficiencies, losses and
expenses (including without limitation amounts paid in settlement, interest,
court costs, costs of investigators, fees and expenses of attorneys,
accountants, financial advisors and other experts, and other expenses of
litigation) ("Damages") incurred or suffered by the Surviving Corporation or the
Buyer or any Affiliate thereof resulting from, relating to or constituting:
(a) any misrepresentation, breach of warranty or failure to
perform any covenant or agreement of the Company contained in this Agreement or
the Company Certificate;
(b) any failure of any Company Stockholder to have good, valid
and marketable title to the issued and outstanding Company Shares issued in the
name of such Company Stockholder, free and clear of all Security Interests; or
(c) any claim by a stockholder or former stockholder of the
Company, or any other person or entity, seeking to assert, or based upon: (i)
ownership or rights to ownership of any shares of stock of the Company; (ii) any
rights of a stockholder (other than the right to receive the Merger Shares
pursuant to this Agreement or appraisal rights under the applicable provisions
of the Delaware General Corporation Law), including any option, preemptive
rights or rights to notice or to vote; (iii) any rights under the Certificate of
Incorporation or By-laws of the Company; or (iv) any claim that his, her or its
shares were wrongfully repurchased by the Company.
6.2 Indemnification Claims.
(a) Where the Buyer is entitled, or seeking to assert rights, to
indemnification under this Article VI (the "Indemnified Party") it shall give
written notification to the Company Stockholders (the "Indemnifying Party") of
the commencement of any suit or proceeding relating to a third party claim for
which indemnification pursuant to this Article VI may be sought. Such
notification shall be given within 20 business days after receipt by the
Indemnified Party of notice of such suit or proceeding, and shall describe in
reasonable detail (to the extent known by the Indemnified Party) the facts
constituting the basis for such suit or proceeding and the amount of the claimed
damages; provided, however, that no delay on the part of the
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Indemnified Party in notifying the Indemnifying Party shall relieve the
Indemnifying Party of any liability or obligation hereunder except to the extent
of any damage or liability caused by or arising out of such failure. Within 20
days after delivery of such notification, the Indemnifying Party may, upon
written notice thereof to the Indemnified Party, assume control of the defense
of such suit or proceeding with counsel reasonably satisfactory to the
Indemnified Party; provided that (i) the Indemnifying Party may only assume
control of such defense if (A) it acknowledges in writing to the Indemnified
Party that any damages, fines, costs or other liabilities that may be assessed
against the Indemnified Party in connection with such suit or proceeding
constitute Damages for which the Indemnified Party shall be indemnified pursuant
to this Article VI and (B) the ad damnum is less than or equal to the amount of
Damages for which the Indemnifying Party is liable under this Article VI and
(ii) the Indemnifying Party may not assume control of the defense of a suit or
proceeding involving criminal liability or in which equitable relief is sought
against the Indemnified Party. If the Indemnifying Party does not so assume
control of such defense, the Indemnified Party shall control such defense. The
party not controlling such defense (the "Non-controlling Party") may participate
therein at its own expense; provided that if the Indemnifying Party assumes
control of such defense and the Indemnified Party reasonably concludes that the
Indemnifying Party and the Indemnified Party have conflicting interests or
different defenses available with respect to such suit or proceeding, the
reasonable fees and expenses of counsel to the Indemnified Party shall be
considered "Damages" for purposes of this Agreement. The party controlling such
defense (the "Controlling Party") shall keep the Non-controlling Party advised
of the status of such suit or proceeding and the defense thereof and shall
consider in good faith recommendations made by the Non- controlling Party with
respect thereto. The Non-controlling Party shall furnish the Controlling Party
with such information as it may have with respect to such suit or proceeding
(including copies of any summons, complaint or other pleading which may have
been served on such party and any written claim, demand, invoice, billing or
other document evidencing or asserting the same) and shall otherwise cooperate
with and assist the Controlling Party in the defense of such suit or proceeding.
The Indemnifying Party shall not agree to any settlement of, or the entry of any
judgment arising from, any such suit or proceeding without the prior written
consent of the Indemnified Party, which shall not be unreasonably withheld or
delayed. The Indemnified Party shall not agree to any settlement of, or the
entry of any judgment arising from, any such suit or proceeding without the
prior written consent of the Indemnifying Party, which shall not be unreasonably
withheld or delayed.
(b) In order to seek indemnification under this Article VI, the
Indemnified Party shall give written notification (a "Claim Notice") to the
Indemnifying Party which contains
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(i) a description and the amount (the "Claimed Amount") of any Damages incurred
or reasonably expected to be incurred by the Indemnified Party, (ii) a statement
that the Indemnified Party is entitled to indemnification under this Article VI
for such Damages and a reasonable explanation of the basis therefor, and (iii) a
demand for payment (in the manner provided in paragraph (c) below) in the amount
of such Damages. If the Indemnified Party is seeking to enforce such claim
pursuant to the Indemnification Escrow Agreement, the Indemnifying Party shall
deliver a copy of the Claim Notice to the Indemnification Escrow Agent.
(c) Within 20 days after delivery of a Claim Notice, the
Indemnifying Party shall deliver to the Indemnified Party a written response
(the "Response") in which the Indemnifying Party shall: (i) agree that the
Indemnified Party is entitled to receive all of the Claimed Amount (in which
case the Response shall be accompanied by a payment by the Indemnifying Party to
the Indemnified Party of the Claimed Amount, by check or by wire transfer;
provided that if the Indemnified Party is seeking to enforce such claim pursuant
to the Indemnification Escrow Agreement, the Indemnifying Party and the
Indemnified Party shall deliver to the Indemnification Escrow Agent, within
three days following the delivery of the Response, a written notice executed by
both parties instructing the Indemnification Escrow Agent to distribute to the
Buyer such number of Indemnity Escrow Shares as have an aggregate Value (as
defined below) equal to the Claimed Amount), (ii) agree that the Indemnified
Party is entitled to receive part, but not all, of the Claimed Amount (the
"Agreed Amount") (in which case the Response shall be accompanied by a payment
by the Indemnifying Party to the Indemnified Party of the Agreed Amount, by
check or by wire transfer; provided that if the Indemnified Party is seeking to
enforce such claim pursuant to the Escrow Agreement, the Indemnifying Party and
the Indemnified Party shall deliver to the Indemnification Escrow Agent, within
three days following the delivery of the Response, a written notice executed by
both parties instructing the Indemnification Escrow Agent to distribute to the
Buyer such number of Indemnity Escrow Shares as have an aggregate Value equal to
the Agreed Amount) or (iii) dispute that the Indemnified Party is entitled to
receive any of the Claimed Amount. If the Indemnifying Party in the Response
disputes its liability for all or part of the Claimed Amount, the Indemnifying
Party and the Indemnified Party shall follow the procedures set forth in Section
6.2(d) for the resolution of such dispute (a "Dispute"). For purposes of this
Article VI, the "Value" of any Indemnity Escrow Shares delivered in satisfaction
of an indemnity claim shall be the average of the last reported sale prices per
share of the Buyer Common Stock on the Nasdaq National Market over the ten
consecutive trading days ending on the trading day that is three trading days
prior to the Closing Date (subject to equitable adjustment in the event of any
stock split, stock dividend, reverse stock split or similar event affecting the
Buyer Common
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Stock since the beginning of such ten-day period), multiplied by the number of
such Indemnity Escrow Shares.
(d) During the 60-day period following the delivery of a Response
that reflects a Dispute, the Indemnifying Party and the Indemnified Party shall
use good faith efforts to resolve the Dispute. If the Dispute is not resolved
within such 60-day period, the Indemnifying Party and the Indemnified Party
shall discuss in good faith the submission of the Dispute to a mutually
acceptable alternative dispute resolution procedure (which may be non-binding or
binding upon the parties, as they agree in advance) (the "ADR Procedure"). In
the event the Indemnifying Party and the Indemnified Party agree upon an ADR
Procedure, such parties shall, in consultation with the chosen dispute
resolution service (the "ADR Service"), promptly agree upon a format and
timetable for the ADR Procedure, agree upon the rules applicable to the ADR
Procedure, and promptly undertake the ADR Procedure. The provisions of this
Section 6.2(d) shall not obligate the Indemnifying Party and the Indemnified
Party to pursue an ADR Procedure or prevent either such party from pursuing the
Dispute in a court of competent jurisdiction; provided that, if the Indemnifying
Party and the Indemnified Party agree to pursue an ADR Procedure, neither the
Indemnifying Party nor the Indemnified Party may commence litigation or seek
other remedies with respect to the Dispute prior to the completion of such ADR
Procedure. Any ADR Procedure undertaken by the Indemnifying Party and the
Indemnified Party shall be considered a compromise negotiation for purposes of
federal and state rules of evidence, and all statements, offers, opinions and
disclosures (whether written or oral) made in the course of the ADR Procedure by
or on behalf of the Indemnifying Party, the Indemnified Party or the ADR Service
shall be treated as confidential and, where appropriate, as privileged work
product. Such statements, offers, opinions and disclosures shall not be
discoverable or admissible for any purposes in any litigation or other
proceeding relating to the Dispute (provided that this sentence shall not be
construed to exclude from discovery or admission any matter that is otherwise
discoverable or admissible). The fees and expenses of any ADR Service used by
the Indemnifying Party and the Indemnified Party shall be shared equally by the
Indemnifying Party and the Indemnified Party. If the Indemnified Party is
seeking to enforce the claim that is the subject of the Dispute pursuant to the
Indemnification Escrow Agreement, the Indemnifying Party and the Indemnified
Party shall deliver to the Indemnification Escrow Agent, promptly following the
resolution of the Dispute (whether by mutual agreement, pursuant to an ADR
Procedure, as a result of a judicial decision or otherwise), a written notice
executed by both parties instructing the Indemnification Escrow Agent as to what
(if any) portion of the Indemnity Escrow Shares shall be distributed to the
Buyer and/or the
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Indemnifying Stockholders (which notice shall be consistent with the terms of
the resolution of the Dispute).
(e) Notwithstanding the other provisions of this Section 6.2,
if a third party asserts (other than by means of a lawsuit) that the Indemnified
Party is liable to such third party for a monetary or other obligation which may
constitute or result in Damages for which the Indemnified Party may be entitled
to indemnification pursuant to this Article VI, and such Indemnified Party
reasonably determines that it has a valid business reason to fulfill such
obligation, then (i) the Indemnified Party shall be entitled to satisfy such
obligation, without prior notice to or consent from the Indemnifying Party, (ii)
the Indemnified Party may subsequently make a claim for indemnification in
accordance with the provisions of this Article VI, and (iii) the Indemnified
Party shall be reimbursed, in accordance with the provisions of this Article VI,
for any such Damages for which it is entitled to indemnification pursuant to
this Article VI (subject to the right of the Indemnifying Party to dispute the
Indemnified Party's entitlement to indemnification, or the amount for which it
is entitled to indemnification, under the terms of this Article VI).
(f) For purposes of this Section 6.2 and the last two sentences
of Section 6.3, any references to the Indemnifying Party (except provisions
relating to an obligation to make any payments provided for in Section 6.2 or
Section 6.3) shall be deemed to refer to the Indemnification Representatives.
The Indemnification Representatives shall have full power and authority on
behalf of each Indemnifying Stockholder to take any and all actions on behalf
of, execute any and all instruments on behalf of, and execute or waive any and
all rights of, the Indemnifying Stockholders under this Article VI. The
Indemnification Representatives shall have no liability to any Indemnifying
Stockholder for any action taken or omitted on behalf of the Indemnifying
Stockholders pursuant to this Article VI.
6.3 Survival of Representations and Warranties. All representations
and warranties contained in this Agreement or the Company Certificate shall (a)
survive the Closing and any investigation at any time made by or on behalf of
the Indemnified Party and (b) shall expire on the date nine months following the
Closing Date, except that (i) the representations and warranties set forth in
Sections 2.1, 2.2, 2.3, 3.1, 3.2 and 3.3 (and the portion of the Company
Certificate relating thereto) shall survive the Closing without limitation and
(ii) the representations and warranties set forth in Sections 2.9, 2.13, 2.22
and 2.23 (and the portion of the Company Certificate relating thereto) shall
survive until 30 days following expiration of all statutes of limitation
applicable to the matters referred to therein. If the Indemnified Party
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delivers to the Indemnifying Party, before expiration of a representation or
warranty, either a Claim Notice based upon a breach of such representation or
warranty, or a notice that, as a result a legal proceeding instituted by or
written claim made by a third party, the Indemnified Party reasonably expects to
incur Damages as a result of a breach of such representation or warranty (an
"Expected Claim Notice"), then such representation or warranty shall survive
until, but only for purposes of, the resolution of the matter covered by such
notice. If the legal proceeding or written claim with respect to which an
Expected Claim Notice has been given is definitively withdrawn or resolved in
favor of the Indemnified Party, the Indemnified Party shall promptly so notify
the Indemnifying Party; and if the Indemnified Party has delivered a copy of the
Expected Claim Notice to the Indemnification Escrow Agent and Indemnity Escrow
Shares have been retained in escrow after the Termination Date (as defined in
the Indemnification Escrow Agreement) with respect to such Expected Claim
Notice, the Indemnifying Party and the Indemnified Party shall promptly deliver
to the Indemnification Escrow Agent a written notice executed by both parties
instructing the Indemnification Escrow Agent to distribute such retained
Indemnity Escrow Shares to the Indemnifying Stockholders in accordance with the
terms of the Indemnification Escrow Agreement.
6.4 Limitations.
(a) The Indemnifying Stockholders shall not be liable under
this Article VI unless and until the aggregate Damages for which they would
otherwise be liable exceed $50,000, at which point the Indemnifying Stockholders
shall become liable for the aggregate Damages, and not just amounts in excess of
$50,000.
(b) For purposes solely of this Article VI, all representations
and warranties of the Company in Article II shall be construed as if the term
"material" and any reference to "Company Material Adverse Effect" (and
variations thereof) were omitted from such representations and warranties.
(c) The Indemnification Escrow Agreement is intended to secure
the indemnification obligations of the Indemnifying Stockholders under this
Agreement. However, the rights of the Buyer under this Article VI shall not be
limited to the Escrow Amount nor shall the Indemnification Escrow Agreement be
the exclusive means for the Buyer to enforce such rights; provided that the
Buyer shall not attempt to collect any Damages directly from the Indemnifying
Stockholders unless there are no remaining Indemnity Escrow Shares held in
escrow pursuant to the Indemnification Escrow Agreement.
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(d) The rights of the Buyer under this Article VI and the
Indemnification Escrow Agreement shall not be the exclusive remedy of the
Indemnified Parties with respect to claims resulting from or relating to any
misrepresentation, breach of warranty or failure to perform any covenant or
agreement contained in this Agreement.
(e) Subject to Section 6.3, the Parties acknowledge and agree
that the Indemnification Escrow Agreement and the Indemnification Escrow shall
terminate nine months after the Effective Time.
(f) No Indemnifying Stockholder shall have any right of
contribution against the Company or the Surviving Corporation with respect to
any breach by the Company of any of its representations, warranties, covenants
or agreements.
ARTICLE VII
TAX MATTERS
7.1 Preparation and Filing of Tax Returns.
(a) The Company Stockholders shall cause to be prepared and
timely filed all income Tax Returns of the Company or any Subsidiary
attributable to any Tax period ending on or before the Closing Date.
(b) The Buyer shall prepare and timely file or shall cause to
be prepared and timely filed all other Tax Returns with respect to the Company
and any Subsidiaries or in respect of their businesses, assets or operations.
(c) Any Tax Return to be prepared and filed by the Buyer for
taxable periods beginning before the Closing Date shall be prepared on a basis
consistent with the last previous similar Tax Return, and the Buyer shall
consult with the Indemnification Representatives concerning each such Tax Return
and report all items with respect to the portion of the period ending on the
Closing Date in accordance with the instructions of the Indemnification
Representatives to the extent such reporting is allowable without significant
risk of the imposition of penalties or additions to Tax as reasonably determined
by the Buyer in consultation with its Tax advisors. The Buyer shall cause the
Company to provide the Indemnification Representatives with a copy of each such
proposed Tax Return (and such
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additional information regarding such Tax Return as may reasonably be requested
by the Indemnification Representatives) at least 45 days prior to the filing of
such Tax Return, except that (i) in the case of a Tax Return relating to a
monthly taxable period, the copy shall be provided to the Indemnification
Representatives at least 10 days prior to the filing of such Tax Return and (ii)
in the case of a Tax Return due within 90 days following the Closing Date, the
copy shall be provided to the Indemnification Representatives in such shorter
period of time prior to filing as the Buyer shall reasonably determine to be
practicable.
7.2 Allocation of Certain Taxes.
The Buyer and the Company Stockholders agree that if the Company or any
Subsidiary is permitted but not required under applicable foreign, state or
local Tax laws to treat the Closing Date as the last day of a taxable period,
the Buyer and the Company Stockholders shall treat such day as the last day of a
taxable period.
7.3 Cooperation on Tax Matters.
(a) The Buyer and the Company Stockholders and their respective
Affiliates shall cooperate in the preparation of all Tax Returns for any Tax
periods for which one party could reasonably require the assistance of the other
party in obtaining any necessary information. Such cooperation shall include,
but not be limited to, furnishing prior years' Tax Returns or return preparation
packages illustrating previous reporting practices or containing historical
information relevant to the preparation of such Tax Returns, and furnishing such
other information within such party's possession requested by the party filing
such Tax Returns as is relevant to their preparation. Such cooperation and
information also shall include without limitation provision of powers of
attorney for the purpose of signing Tax Returns and defending audits promptly
forwarding copies of appropriate notices and forms or other communications
received from or sent to any taxing authority which relate to the Company or the
Subsidiaries, and providing copies of all relevant Tax Returns, together with
accompanying schedules and related workpapers, documents relating to rulings or
other determinations by any taxing authority and records concerning the
ownership and tax basis of property, which the requested party may possess. The
Buyer and the Company and their respective Affiliates shall make their
respective employees and facilities available on a mutually convenient basis to
provide explanation of any documents or information provided hereunder.
(b) For a period of ten (10) years after the Closing Date or
such longer period as may be required by law, the Buyer shall, and shall cause
the Company and the Subsidiaries to,
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retain and not destroy or dispose of all Tax Returns (including supporting
materials), books and records (including computer files) of, or with respect to
the activities or Taxes of, such entities for all taxable periods ending on or
prior to the Closing Date to the extent the Buyer, the Company or any Subsidiary
received or had possession of such records on the Closing Date. Thereafter, the
Buyer shall not destroy or dispose of any such Returns, books or records unless
it first offers such Returns, books and records to the Company Stockholders in
writing and the Company Stockholders fails to accept such offer within sixty
(60) days of its being made.
(c) For a period of ten (10) years after the Closing Date or
such longer period as may be required by law, the Company Stockholders shall
retain and not destroy or dispose of all Tax Returns (including supporting
materials), books and records (including computer files) of, or with respect to
the activities or Taxes of, the Company and the Subsidiaries for all taxable
periods ending on or prior to the Closing Date to the extent the Company
Stockholders did not deliver such records to the Buyer, the Company or any
Subsidiary. Thereafter, the Company Stockholders shall not destroy or dispose of
any such Tax Returns, books or records unless it first offers them to the Buyer
in writing and the Buyer fails to accept such offer within sixty (60) days of
its being made.
(d) If the Buyer or any of the Company and the Subsidiaries (as
the case may be) on the one hand, or the Company Stockholders on the other,
fails to provide any information requested by the other party in the time
specified herein, or if no time is specified pursuant to this Section 7.3,
within a reasonable period, or otherwise fails to do any act required of it
under this Section 7.3, then the party failing to so provide the information or
do such act shall be obligated, notwithstanding any other provision of this
Agreement, to indemnify the party requesting the information or act and shall so
indemnify the requesting party and hold such party harmless from and against any
and all costs, claims or damages, including, without limitation, all Taxes or
deficiencies thereof, payable as a result of such failure. Notwithstanding the
foregoing, the party that failed to deliver the information or do the act
requested, shall in no event be obligated to make any payments pursuant to this
Section 7.3(d) or otherwise be liable, if such party used all reasonable
commercial efforts to provide the requested information or perform the requested
act.
7.4 Termination of Tax-Sharing Agreements. All Tax sharing agreements
or similar arrangements with respect to or involving the Company and its
Subsidiaries shall be terminated prior to the Closing Date and, after the
Closing Date, the Company and its Subsidiaries shall not
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be bound thereby or have any liability thereunder for amounts due in respect of
periods ending on or before the Closing Date.
7.5 Election Pursuant to Section 338(h)(10). At the Buyer's election,
the Company Stockholders will join with Buyer in making an election pursuant to
Section 338(h)(10) of the Code (and any corresponding provisions under state,
local or foreign law) with respect to the acquisition of the Company and the
Subsidiaries pursuant to this Agreement. The parties agree that if the Buyer
makes such an election, it will indemnify the Company and the Company
Stockholders for any additional Taxes payable by the Company or the Company
Stockholders as a result of making such election.
ARTICLE VIII
REGISTRATION RIGHTS
8.1 Registration of Shares. Upon the request of stockholders of the
Buyer holding at least 50% of the voting power of the Merger Shares made within
the period that begins 30 days following the date the Buyer becomes eligible to
file a Registration Statement on Form S-3 and ends on the second anniversary of
the Closing, the Buyer shall file with the SEC a registration statement on Form
S-3, covering the resale to the public by the Company Stockholders of any Merger
Shares then held by Company Stockholders, provided that such Merger Shares are
not otherwise saleable by a Company Stockholder pursuant to Rule 144 of the
Securities Act of 1933, as amended (the "Stockholder Registration Statement").
The Buyer shall use its best efforts to cause the Stockholder Registration
Statement to be declared effective by the SEC as soon as practicable, provided
that the Stockholder Registration Statement shall not be declared effective
until after financial results covering at least 30 days of combined operations
of the Company and the Buyer after the Effective Time shall have been publicly
released. The Buyer shall cause the Stockholder Registration Statement to remain
effective until the date one year after the Closing Date or such earlier time as
all of the Merger Shares covered by the Stockholder Registration Statement have
been sold pursuant thereto.
8.2 Limitations on Registration Rights.
(a) The Buyer may, by written notice to the Company
Stockholders, (i) delay the filing or effectiveness of the Stockholder
Registration Statement or (ii) suspend, but not for more than 120 days in each
instance, the Stockholder Registration Statement after effectiveness and require
that the Company Stockholders immediately cease sales of shares pursuant to the
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Stockholder Registration Statement, in the event that (A) the Buyer files a
registration statement (other than a registration statement on Form S-8 or its
successor form) with the SEC for a public offering of its securities or (B) the
Buyer is engaged in any activity or transaction or preparations or negotiations
for any activity or transaction that the Buyer desires to keep confidential for
business reasons, if the Buyer determines in good faith that the public
disclosure requirements imposed on the Buyer under the Securities Act in
connection with the Stockholder Registration Statement would require disclosure
of such activity, transaction, preparations or negotiations.
(b) If the Buyer delays or suspends the Stockholder
Registration Statement or requires the Company Stockholders to cease sales of
shares pursuant to paragraph (a) above, the Buyer shall, as promptly as
practicable following the termination of the circumstance which entitled the
Buyer to do so, take such actions as may be necessary to file or reinstate the
effectiveness of the Stockholder Registration Statement and/or give written
notice to all Company Stockholders authorizing them to resume sales pursuant to
the Stockholder Registration Statement. If as a result thereof the prospectus
included in the Stockholder Registration Statement has been amended to comply
with the requirements of the Securities Act, the Buyer shall enclose such
revised prospectus with the notice to Company Stockholders given pursuant to
this paragraph (b), and the Company Stockholders shall make no offers or sales
of shares pursuant to the Stockholder Registration Statement other than by means
of such revised prospectus.
8.3 Registration Procedures.
(a) In connection with the filing by the Buyer of the
Stockholder Registration Statement, the Buyer shall furnish to each Company
Stockholder a copy of the prospectus, including a preliminary prospectus, in
conformity with the requirements of the Securities Act.
(b) The Buyer shall use its best efforts to register or qualify
the Merger Shares covered by the Stockholder Registration Statement under the
securities laws of each state of the United States; provided, however, that the
Buyer shall not be required in connection with this paragraph (b) to qualify as
a foreign corporation or execute a general consent to service of process in any
jurisdiction.
(c) If the Buyer has delivered preliminary or final
prospectuses to the Company Stockholders and after having done so the prospectus
is amended or supplemented to comply with the requirements of the Securities
Act, the Buyer shall promptly notify the Company Stockholders and, if requested
by the Buyer, the Company Stockholders shall
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immediately cease making offers or sales of shares under the Stockholder
Registration Statement and return all prospectuses to the Buyer. The Buyer shall
promptly provide the Company Stockholders with revised or supplemented
prospectuses and, following receipt of the revised or supplemented prospectuses,
the Company Stockholders shall be free to resume making offers and sales under
the Stockholder Registration Statement.
(d) The Buyer shall pay the expenses incurred by it in
complying with its obligations under this Article VIII, including all
registration and filing fees, exchange listing fees, fees and expenses of
counsel for the Buyer, and fees and expenses of accountants for the Buyer, but
excluding (i) any brokerage fees, selling commissions or underwriting discounts
incurred by the Company Stockholders in connection with sales under the
Stockholder Registration Statement and (ii) the fees and expenses of any counsel
retained by Company Stockholders.
8.4 Requirements of Company Stockholders. The Buyer shall not be
required to include any Merger Shares in the Stockholder Registration Statement
unless:
(a) the Company Stockholder owning such shares furnishes to the
Buyer in writing such information regarding such Company Stockholder and the
proposed sale of Merger Shares by such Company Stockholder as the Buyer may
reasonably request in writing in connection with the Stockholder Registration
Statement or as shall be required in connection therewith by the SEC or any
state securities law authorities;
(b) such Company Stockholder shall have provided to the Buyer
its written agreement:
(i) to indemnify the Buyer and each of its directors and
officers against, and hold the Buyer and each of its directors and officers
harmless from, any losses, claims, damages, expenses or liabilities (including
reasonable attorneys fees) to which the Buyer or such directors and officers may
become subject by reason of any statement or omission in the Stockholder
Registration Statement made in reliance upon, or in conformity with, a written
statement by such Company Stockholder furnished pursuant to this Section 8.4;
and
(ii) to report to the Buyer sales made pursuant to the
Stockholder Registration Statement.
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8.5 Indemnification. The Buyer agrees to indemnify and hold harmless
each Company Stockholder whose shares are included in the Stockholder
Registration Statement against any losses, claims, damages, expenses or
liabilities to which such Company Stockholder may become subject by reason of
any untrue statement of a material fact contained in the Stockholder
Registration Statement or any omission to state therein a fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, expenses or liabilities arise
out of or are based upon information furnished to the Buyer by or on behalf of a
Company Stockholder for use in the Stockholder Registration Statement. The Buyer
shall have the right to assume the defense and settlement of any claim or suit
for which the Buyer may be responsible for indemnification under this Section
8.5.
8.6 Assignment of Rights. A Company Stockholder may not assign any of
its rights under this Article VIII except in connection with the transfer of
some or all of his, her or its Merger Shares to a child or spouse, or trust for
their benefit or, in the case of a partnership, to the partners of such
partnership pursuant to a pro rata distribution, provided each such transferee
agrees in a written instrument delivered to the Buyer to be bound by the
provisions of this Article VIII.
ARTICLE IX
TERMINATION
9.1 Termination of Agreement. The Parties may terminate this Agreement
prior to the Effective Time (whether before or after Requisite Stockholder
Approval), as provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company in the event the Company is in breach of any
representation, warranty or covenant contained in this Agreement, and such
breach, individually or in combination with any other such breach, (i) would
cause the conditions set forth in clauses (c) or (d) of Section 5.2 not to be
satisfied and (ii) is not cured within 20 days following delivery by the Buyer
to the Company of written notice of such breach;
(c) the Company may terminate this Agreement by giving written
notice to the Buyer in the event the Buyer or the Transitory Subsidiary is in
breach of any representation,
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warranty or covenant contained in this Agreement, and such breach, individually
or in combination with any other such breach, (i) would cause the conditions set
forth in clauses (a) or (b) of Section 5.3 not to be satisfied and (ii) is not
cured within 20 days following delivery by the Company to the Buyer of written
notice of such breach;
(d) any Party may terminate this Agreement by giving written
notice to the other Parties at any time after the Company Stockholders have
voted on whether to approve this Agreement and the Merger in the event this
Agreement and the Merger failed to receive the Requisite Stockholder Approval;
(e) the Buyer may terminate this Agreement by giving written
notice to the Company if the Closing shall not have occurred on or before the
tenth calendar day following the signing of the Agreement (provided, however,
that if the tenth calendar day falls on a weekend or holiday, the tenth calendar
day shall be considered the following business day) by reason of the failure of
any condition precedent under Section 5.1 or 5.2 hereof (unless the failure
results primarily from a breach by the Buyer or the Transitory Subsidiary of any
representation, warranty or covenant contained in this Agreement); or
(f) the Company may terminate this Agreement by giving written
notice to the Buyer and the Transitory Subsidiary if the Closing shall not have
occurred on or before the tenth calendar day following the signing of the
Agreement (provided, however, that if the tenth calendar day falls on a weekend
or holiday, the tenth calendar day shall be considered the following business
day) by reason of the failure of any condition precedent under Section 5.1 or
5.3 hereof (unless the failure results primarily from a breach by the Company of
any representation, warranty or covenant contained in this Agreement).
9.2 Effect of Termination.
(a) If any Party terminates this Agreement pursuant to Section
9.1, all obligations of the Parties hereunder shall terminate without any
liability of any Party to any other Party (except for any liability of any Party
for willful breaches of this Agreement); provided, however, that all obligations
pursuant to Section 4.5(c) shall survive the termination of this Agreement under
this Section 9.
(b) Notwithstanding Section 9.2(a), in the event of a
termination of this Agreement pursuant to Sections 9.1(b), 9.1(d) or 9.1(e)
(other than with respect to the failure of the condition precedent under Section
5.2(a) if the failure does not result from a breach by the
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Company of its obligation to provide reasonable access to the appropriate
materials and/or personnel), the Company will pay to the Buyer a cancellation
fee in the amount of 10% of the value of the total Merger Consideration, plus
all reasonable out-of-pocket expenses of the Buyer and the Transitory Subsidiary
incurred in connection with this Agreement, including without limitation
attorneys' fees, accountants' fees, appraiser's fees and other similar expenses.
ARTICLE X
DEFINITIONS
For purposes of this Agreement, each of the following defined terms is
defined in the Section of this Agreement indicated below.
Defined Term Section
------------ -------
ADR Procedure 6.2(d)
ADR Service 6.2(d)
Affiliate 2.15(a)(vii)
Agreed Amount 6.2(c)
Buyer Introduction
Buyer Certificate 5.3(c)
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
Cash Conversions Ratio 1.5(e)
CERCLA 2.23(a)
Certificates 1.7(a)
Certificate of Merger 1.1
Claim Notice 6.2(b)
Claimed Amount 6.2(b)
Closing 1.2
Closing Date 1.2
Closing Price 1.5(b)
Code 1.5(c)
Common Conversion Ratio 1.5(c)
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Company Introduction
Company Certificate 5.2(g)
Company Intellectual Property 2.13(a)
Company Material Adverse Effect 2.1
Company Shares 1.5(a)
Company Stockholder 1.3(d)
Confidential Information 4.5(c)
Controlling Party 6.2(a)
Customer Deliverables 2.13(a)
Damages 6.1
Disclosure Schedule Article II
Dispute 6.2(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.22(a)(i)
Environmental Law 2.23(a)
ERISA 2.22(a)(ii)
ERISA Affiliate 2.22(a)(iii)
Expected Claim Notice 6.4
Exchange Act 2.15(a)(vii)
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Escrow Agent 1.3
Indemnification Escrow Agreement 1.3
Indemnification Representatives 1.3
Indemnified Party 6.2(a)
Indemnifying Party 6.2(a)
Indemnifying Stockholders 6.1
Indemnity Escrow Shares 1.5(b)
Information Statement 4.3
Initial Shares 1.5(d)
Intellectual Property 2.13(a)
Internal Systems 2.13(a)
Legal Proceeding 2.19
Materials of Environmental Concern 2.23(b)
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Merger 1.1
Merger Consideration 1.5(d)
Merger Shares 1.5(b)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-controlling Party 6.2(a)
Options 1.8(a)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.26
Reasonable Best Efforts 4.1
Repurchase 1.5(c)
Repurchase Escrow Agent 1.3(h)
Repurchase Escrow Agreement 1.3(h)
Repurchase Escrow Shares 1.5(c)
Response 6.2(c)
Requisite Stockholder Approval 2.3
SEC 3.5
Securities Act 2.2
Security Interest 2.4
Software 2.13(e)
Stockholder Registration Statement 8.1
Subsidiary 2.5(a)
Surviving Corporation 1.1
Taxes 2.9(a)(i)
Tax Returns 2.9(a)(ii)
Transitory Subsidiary Introduction
Value 6.2(c)
Warrants 1.8(b)
ARTICLE XI
MISCELLANEOUS
11.1 Press Releases and Announcements. Prior to Closing, no Party shall
issue any press release or public announcement relating to the subject matter of
this Agreement without the prior written approval of the other Parties;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law, regulation or stock
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market rule (in which case the disclosing Party shall use reasonable efforts to
advise the other Parties and provide them with a copy of the proposed disclosure
prior to making the disclosure).
11.2 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Parties and their respective
successors and permitted assigns; provided, however, that (a) the provisions in
Article I concerning issuance of the Merger Shares, and (b) the provisions in
Section 4.9 concerning indemnification are intended for the benefit of the
individuals specified therein and their successors and assigns.
11.3 Entire Agreement. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements or representations by or among the Parties,
written or oral, with respect to the subject matter hereof.
11.4 Succession and Assignment. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other Parties; provided that the Transitory Subsidiary may
assign its rights, interests and obligations hereunder to an Affiliate of the
Buyer.
11.5 Counterparts and Facsimile Signature. This Agreement may be
executed in two or more counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument. This
Agreement may be executed by facsimile signature.
11.6 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly delivered four business
days after it is sent by registered or certified mail, return receipt requested,
postage prepaid, or one business day after it is sent for next business day
delivery via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
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If to the Company: Copy to:
xVault, Inc. Xxxxxx & Hannah LLP
0000 Xxxxxxxx Xxxx 000 Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx, XX 00000
Xxxxx Xxxxxx, XX00000 Attn: Xx. Xxxxxx X. Xxxxx, Esq.
Attn: Xxxxxx Xxxxxxxxx
If to the Buyer or Copy to:
the Transitory Subsidiary:
Xxxx and Xxxx LLP
OTG Software, Inc. 0000 Xxxxxxxxxxxx Xxxxxx, X.X.
0000 Xxxxxxxxx Xxxxxxxxx, Xxxxx 000 Xxxxxxxxxx, X.X. 00000
Xxxxxxxx, XX 00000 Attn: Mr. Xxxxx Xxxxxxxxx, Esq.
Attn: Xxxxxxx X. Xxx
Any Party may give any notice, request, demand, claim or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the party for whom it is intended. Any Party may change
the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
11.8 Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Delaware without giving
effect to any choice or conflict of law provision or rule (whether of the State
of Delaware or any other jurisdiction) that would cause the application of laws
of any jurisdictions other than those of the State of Delaware.
11.9 Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time; provided,
however, that any amendment effected subsequent to the Requisite Stockholder
Approval shall be subject to any restrictions contained in the Delaware General
Corporation Law. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No
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waiver of any right or remedy hereunder shall be valid unless the same shall be
in writing and signed by the Party giving such waiver. No waiver by any Party
with respect to any default, misrepresentation or breach of warranty or covenant
hereunder shall be deemed to extend to any prior or subsequent default,
misrepresentation or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such occurrence.
11.10 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be enforceable as so
modified.
11.11 Submission to Jurisdiction. Each of the Parties (a) submits to the
jurisdiction of any state or federal court sitting in Maryland in any action or
proceeding arising out of or relating to this Agreement, (b) agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such court, and (c) agrees not to bring any action or proceeding arising out
of or relating to this Agreement in any other court. Each of the Parties waives
any defense of inconvenient forum to the maintenance of any action or proceeding
so brought and waives any bond, surety or other security that might be required
of any other Party with respect thereto. Any Party may make service on another
Party by sending or delivering a copy of the process to the Party to be served
at the address and in the manner provided for the giving of notices in Section
11.7. Nothing in this Section 11.11, however, shall affect the right of any
Party to serve legal process in any other manner permitted by law.
11.12 Construction.
(a) The language used in this Agreement shall be deemed to be
the language chosen by the Parties to express their mutual intent, and no rule
of strict construction shall be applied against any Party.
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(b) Any reference to any federal, state, local or foreign
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise.
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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first above written.
OTG SOFTWARE, INC.
By: /s/ Xxxxxxx X. Xxx
------------------
Title: Chairman, President and Chief Executive
Officer
OTG MERGER CORP.
By: /s/ Xxxxxxx X. Xxx
------------------
Title: President
xVAULT, INC.
By: /s/ Xxxxxx X. Xxxxxx
--------------------
Title: President
The undersigned, being the duly elected Secretary of the Transitory
Subsidiary, hereby certifies that this Agreement has been adopted by a majority
of the votes represented by the outstanding shares of capital stock of the
Transitory Subsidiary entitled to vote on this Agreement.
/s/ F. Xxxxxxx Xxxxx
--------------------
Secretary
The undersigned, being the duly elected Secretary of the Company, hereby
certifies that this Agreement has been adopted by a majority of the votes
represented by the outstanding Company Shares entitled to vote on this
Agreement.
/s/ Xxxxxxxx O"Brien
--------------------
Secretary
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The following stockholders of the Company hereby execute this Agreement
for the limited purpose of agreeing to and becoming bound by the provisions of
Section 4.3(e).
/s/ Xxxxx Xxxx
--------------
Xxxxx Xxxx
/s/ Xxxxx Xxxxxxxx
------------------
Xxxxx Xxxxxxxx
/s/ Xxxxx Xxxxx
---------------
Xxxxx Xxxxx
/s/ Xxxxx Xxxxx
---------------
Xxxxx Xxxxx
/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
/s/ Xxxx Xxxxxxxxx
------------------
Xxxx Xxxxxxxxx
/s/ Xxxxxx Xxxxxxxxx
--------------------
Xxxxxx Xxxxxxxxx
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