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AGREEMENT AND PLAN OF MERGER
BY AND AMONG
OTG SOFTWARE, INC.,
OTG ACQUISITION CORP.,
SMART STORAGE, INC.
AND
THE PRINCIPAL STOCKHOLDERS NAMED HEREIN
MARCH 22, 2001
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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...............................................................1
1.4 Additional Action....................................................................2
1.5 Conversion of Shares.................................................................2
1.6 Dissenting Shares....................................................................3
1.7 Exchange of Shares...................................................................3
1.8 Fractional Shares....................................................................5
1.9 Options and Warrants.................................................................5
1.10 Escrow...............................................................................6
1.11 Certificate of Incorporation and By-laws.............................................6
1.12 No Further Rights....................................................................7
1.13 Closing of Transfer Book.............................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS......7
2.1 Organization, Qualification and Corporate Power......................................7
2.2 Capitalization.......................................................................8
2.3 Authorization of Transaction.........................................................8
2.4 Noncontravention.....................................................................9
2.5 Subsidiaries.........................................................................9
2.6 Financial Statements................................................................10
2.7 Absence of Certain Changes..........................................................11
2.8 Undisclosed Liabilities.............................................................11
2.9 Tax Matters.........................................................................11
2.10 Assets..............................................................................14
2.11 Owned Real Property.................................................................14
2.12 Real Property Leases................................................................13
2.13 Intellectual Property...............................................................15
2.14 Contracts...........................................................................17
2.15 Accounts Receivable.................................................................18
2.16 Powers of Attorney..................................................................18
2.17 Insurance...........................................................................18
2.18 Litigation..........................................................................19
2.19 Warranties..........................................................................19
2.20 Employees...........................................................................19
2.21 Employee Benefits...................................................................20
2.22 Environmental Matters...............................................................22
2.23 Legal Compliance....................................................................23
2.24 Customers and Suppliers.............................................................24
2.25 Permits.............................................................................24
2.26 Certain Business Relationships With Affiliates......................................24
2.27 Brokers' Fees.......................................................................24
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2.28 Bank Accounts.......................................................................24
2.29 Books and Records...................................................................25
2.30 Pooling.............................................................................25
2.31 Disclosure..........................................................................25
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY.......25
3.1 Organization, Qualification and Corporate Power.....................................25
3.2 Capitalization......................................................................26
3.3 Authorization of Transaction........................................................26
3.4 Noncontravention....................................................................26
3.5 Reports and Financial Statements....................................................26
3.6 Absence of Material Adverse Change..................................................27
3.7 Litigation..........................................................................27
3.8 Pooling; Reorganization.............................................................27
3.9 Interim Operations of the Transitory Subsidiary.....................................27
3.10 Brokers' Fees.......................................................................27
3.11 Validity of Merger Shares; Nasdaq Listing...........................................27
3.12 Disclosure..........................................................................28
ARTICLE IV COVENANTS........................................................................28
4.1 Closing Efforts.....................................................................28
4.2 Governmental and Third-Party Notices and Consents...................................28
4.3 Stockholder Approval................................................................28
4.4 Operation of Business...............................................................29
4.5 Access to Information...............................................................31
4.6 Notice of Breaches..................................................................31
4.7 Exclusivity.........................................................................32
4.8 Expenses............................................................................32
4.9 Indemnification.....................................................................32
4.10 Agreements from Certain Affiliates of the Company...................................32
4.11 Employee Benefit Matters............................................................33
4.12 Future Negotiations.................................................................33
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER..............................................33
5.1 Conditions to Each Party's Obligations..............................................33
5.2 Conditions to Obligations of the Buyer and the Transitory Subsidiary................33
5.3 Conditions to Obligations of the Company............................................35
ARTICLE VI INDEMNIFICATION..................................................................36
6.1 Indemnification by the Company Stockholders.........................................36
6.2 Indemnification Claims..............................................................37
6.3 Survival of Representations and Warranties..........................................40
6.4 Limitations.........................................................................40
ARTICLE VII TERMINATION.....................................................................41
7.1 Termination of Agreement............................................................41
7.2 Effect of Termination...............................................................42
ARTICLE VIII DEFINITIONS....................................................................42
ARTICLE IX MISCELLANEOUS....................................................................44
9.1 Press Releases and Announcements....................................................44
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9.2 No Third Party Beneficiaries........................................................44
9.3 Entire Agreement....................................................................45
9.4 Succession and Assignment...........................................................45
9.5 Counterparts and Facsimile Signature................................................45
9.6 Headings............................................................................45
9.7 Notices.............................................................................45
9.8 Governing Law.......................................................................46
9.9 Amendments and Waivers..............................................................46
9.10 Severability........................................................................46
9.11 Construction........................................................................47
Exhibit A - Escrow Agreement
Exhibit B - Affiliate Agreement
Exhibit C - Investment Representation Letter
Exhibit D - Opinion of Counsel to the Company
Exhibit E - Form of Employment Agreement
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AGREEMENT AND PLAN OF MERGER
Agreement entered into as of March 22, 2001, by and among OTG
Software, Inc., a Delaware corporation (the "Buyer"), OTG Acquisition Corp., a
Delaware corporation and a wholly-owned subsidiary of the Buyer (the
"Transitory Subsidiary"), and Smart Storage, Inc., a Delaware corporation (the
"Company"), and the stockholders of the Company named on the signature page
hereto (the "Principal Stockholders"). 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 in exchange for their capital stock of the Company.
The parties intend that the Merger (as defined below) will qualify as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and intend that this Agreement will
constitute a plan of reorganization.
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, 00000 Xxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000, commencing at 9:00 a.m. local
time on March 30, 2001, 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").
1.3 Actions at the Closing. At the Closing:
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(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) the Buyer shall deliver a certificate for the Initial
Shares (as defined below) to a bank trust company or other entity reasonably
satisfactory to the Company appointed by the Buyer to act as the exchange agent
(the "Exchange Agent") in accordance with Section 1.7; and
(e) the Buyer, Xxxxx Xxxxx and Xxxx Xxxxx (the
"Indemnification Representatives") and Bankers Trust Co. (the "Escrow Agent")
shall execute and deliver the Escrow Agreement attached hereto as Exhibit A
(the "Escrow Agreement"), and the Buyer shall deliver to the Escrow Agent a
certificate for the Escrow Shares (as defined below) being placed in escrow on
the Closing Date pursuant to Section 1.10.
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, $.0001 par value per
share, of the Company ("Common Shares") issued and outstanding immediately
prior to the Effective Time (other than Common Shares owned beneficially by the
Buyer or the Transitory Subsidiary, Dissenting Shares (as defined below) and
Common Shares held in the Company's treasury) shall be converted into and
represent the right to receive (subject to the provisions of Section 1.10) such
number of shares of common stock, $0.01 par value per share, of the Buyer
("Buyer Common Stock") as is equal to the Common Conversion Ratio (as defined
below).
(b) The "Common Conversion Ratio" shall be the result
obtained by dividing (i) the Adjusted Purchase Price (as defined below) by (ii)
the number of outstanding Common Shares immediately prior to the Effective
Time, plus the number of Common Shares subject to Options (as defined below)
which remain outstanding but unexercised as of the Effective Time, and dividing
such amount by (iii) $10.00. The "Adjusted Purchase Price" shall be equal to
$35,500,000 (the "Purchase Price"). Stockholders of record of the Company
immediately prior to the Effective Time ("Company Stockholders") shall be
entitled to receive immediately 90% of the shares of Buyer Common Stock into
which their Common Shares were converted pursuant to this Section 1.5 (the
"Initial Shares"); the remaining 10% of the shares of Buyer Common Stock into
which their Common Shares were converted pursuant to this Section 1.5, rounded
to the
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nearest whole number (the "Escrow Shares"), shall be deposited in escrow
pursuant to Section 1.10 and shall be held and disposed of in accordance with
the terms of the Escrow Agreement. The Initial Shares and the Escrow Shares
shall together be referred to herein as the "Merger Shares."
(c) 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.
(d) Each share of common stock, $.01 par value per share,
of the Transitory Subsidiary issued and outstanding immediately prior to the
Effective Time shall be converted into and thereafter evidence one share of
common stock, $.01 par value per share, of the Surviving Corporation.
1.6 Dissenting Shares.
(a) For purposes of this Agreement, "Dissenting Shares"
means Common Shares held as of the Effective Time by a Company Stockholder who
has not voted such Common 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 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 Common Shares pursuant to Section 1.5, and (ii) promptly
following the occurrence of such event, the Buyer shall deliver to the Exchange
Agent a certificate representing 90% of the Merger Shares to which such holder
is entitled pursuant to Section 1.5 (which shares shall be considered Initial
Shares for all purposes of this Agreement) and shall deliver to the Escrow
Agent a certificate representing the remaining 10% of the Merger Shares to
which such holder is entitled pursuant to Section 1.5 (which shares shall be
considered Escrow Shares for all purposes of this Agreement).
(b) The Company shall give the Buyer (i) prompt notice of
any written demands for appraisal of any Common 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 Common
Shares or offer to settle or settle any such demands.
1.7 Exchange of Shares.
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(a) Prior to the Effective Time, the Buyer shall appoint
the Exchange Agent to effect the exchange for the Initial Shares of
certificates that, immediately prior to the Effective Time, represented Common
Shares converted into Merger Shares pursuant to Section 1.5 (including any
Common Shares referred to in the last sentence of Section 1.6(a))
("Certificates"). On the Closing Date, the Buyer shall deliver to the Exchange
Agent, in trust for the benefit of holders of Certificates, a stock certificate
(issued in the name of the Exchange Agent or its nominee) representing the
Initial Shares, as described in Section 1.5. Alternatively, the Buyer may
cause its Transfer Agent to provide a certification that it has received on its
books a number of shares of Buyer Common Stock equal to the Initial Shares for
issuance upon the surrender of Certificates. As soon as practicable after the
Effective Time, the Buyer shall cause the Exchange Agent to send a notice and a
transmittal form to each holder of a Certificate advising such holder of the
effectiveness of the Merger and the procedure for surrendering to the Exchange
Agent such Certificate in exchange for the Initial Shares issuable pursuant to
Section 1.5. Each holder of a Certificate, upon proper surrender thereof to
the Exchange Agent in accordance with the instructions in such notice, shall be
entitled to receive in exchange therefor (subject to any taxes required to be
withheld) the Initial Shares issuable pursuant to Section 1.5. Until properly
surrendered, each such Certificate shall be deemed for all purposes to evidence
only the right to receive a certificate for the Initial Shares issuable
pursuant to Section 1.5. Holders of Certificates shall not be entitled to
receive certificates for the Initial Shares to which they would otherwise be
entitled until such Certificates are properly surrendered, except as provided
in Section 1.7(c).
(b) If any Initial Shares are to be issued in the name of
a person other than the person in whose name the Certificate surrendered in
exchange therefor is registered, it shall be a condition to the issuance of
such Initial Shares that (i) the Certificate so surrendered shall be
transferable, and shall be properly assigned, endorsed or accompanied by
appropriate stock powers, (ii) such transfer shall otherwise be proper and
(iii) the person requesting such transfer shall pay to the Exchange Agent any
transfer or other taxes payable by reason of the foregoing or establish to the
satisfaction of the Exchange Agent that such taxes have been paid or are not
required to be paid. Notwithstanding the foregoing, neither the Exchange Agent
nor any Party shall be liable to a holder of Common Shares for any Initial
Shares issuable to such holder pursuant to Section 1.5 that are delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(c) In the event any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Buyer shall
issue in exchange for such lost, stolen or destroyed Certificate the Initial
Shares issuable in exchange therefor pursuant to Section 1.5. The Board of
Directors of the Buyer may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
Certificate to give the Buyer a bond in such sum as it may direct as indemnity
against any claim that may be made against the Buyer with respect to the
Certificate alleged to have been lost, stolen or destroyed.
(d) No dividends or other distributions that are payable
to the holders of record of Buyer Common Stock as of a date on or after the
Closing Date shall be paid to former
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Company Stockholders entitled by reason of the Merger to receive Initial Shares
until such holders surrender their Certificates for certificates representing
the Merger Shares. Upon such surrender, the Buyer shall pay or deliver to the
persons in whose name the certificates representing such Initial Shares are
issued any dividends or other distributions that are payable to the holders of
record of Buyer Common Stock as of a date on or after the Closing Date and
which were paid or delivered between the Effective Time and the time of such
surrender; provided that no such person shall be entitled to receive any
interest on such dividends or other distributions.
1.8 Fractional Shares. No certificates or scrip representing
fractional Initial Shares shall be issued to former Company Stockholders upon
the surrender for exchange of 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 Initial Shares that would have otherwise been issued
to such former Company Stockholders. In lieu of any fractional Initial Shares
that would have otherwise been issued, each former Company Stockholder that
would have been entitled to receive a fractional Initial Share shall, upon
proper surrender of such person's Certificates, receive such whole number of
Initial Shares as is equal to the precise number of Initial Shares to which
such person would be entitled, rounded up or down to the nearest whole number
(with a fractional interest equal to .5 rounded to the nearest odd number);
provided that each such holder shall receive at least one Initial Share.
1.9 Options and Warrants.
(a) As of the Effective Time, all options to purchase
Common Shares issued by the Company pursuant to the Company's 1994 Stock Plan
(the "Option Plan"), whether vested or unvested ("Options"), and the Option
Plan, insofar as it relates to Options outstanding under such Option Plan as of
the Closing, shall be assumed by the Buyer. Immediately after the Effective
Time, each Option outstanding immediately prior to the Effective Time shall be
deemed to constitute an option to acquire, on the same terms and conditions as
were applicable under such Option at the Effective Time, such number of shares
of Buyer Common Stock as is equal to the number of Common Shares subject to the
unexercised portion of such Option multiplied by the Common Conversion Ratio
(with any fraction resulting from such multiplication to be rounded down to the
nearest whole number). The exercise price per share of each such assumed
Option shall be equal to the exercise price of such Option immediately prior to
the Effective Time, divided by the Common Conversion Ratio (rounded up to the
nearest whole cent). The term, exercisability, vesting schedule, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
of the other terms of the Options shall otherwise remain unchanged.
(b) As soon as practicable after the Effective Time, the
Buyer or the Surviving Corporation shall deliver to the holders of Options
appropriate notices setting forth such holders' rights pursuant to such
Options, as amended by this Section 1.9, and the agreements evidencing such
Options shall continue in effect on the same terms and conditions (subject to
the amendments provided for in this Section 1.9 and such notice).
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(c) The Buyer shall take all corporate action necessary
to reserve for issuance a sufficient number of shares of Buyer Common Stock for
delivery upon exercise of the Options assumed in accordance with this Section
1.9. Within 90 days after the Effective Time, the Buyer shall file a
Registration Statement on Form S-8 (or any successor form) under the Securities
Act of 1933 (as amended, the "Securities Act") with respect to all shares of
Buyer Common Stock subject to such Options that may be registered on a Form
S-8, and shall use its best efforts to maintain the effectiveness of such
Registration Statement for so long as such Options remain outstanding.
(d) The Company shall cause the termination, as of the
Effective Time, of all outstanding options, warrants and other rights (other
than Options) to purchase any Common Shares (the "Purchase Rights") which
remain unexercised.
(e) The Company shall obtain, prior to the Closing, the
consent from each holder of an Option or Purchase Right to the amendment of
such Option or Purchase Right pursuant to this Section 1.9 (unless such consent
is not required under the terms of the applicable agreement, instrument or
plan).
1.10 Escrow.
(a) On the Closing Date, the Buyer shall deliver to the
Escrow Agent a certificate (issued in the name of the Escrow Agent or its
nominee) representing the 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
Escrow Shares shall be held by the Escrow Agent under the Escrow Agreement
pursuant to the terms thereof. The 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 Escrow
Agreement.
(b) The adoption of this Agreement and the approval of
the Merger by the Company Stockholders shall constitute approval of the Escrow
Agreement and of all of the arrangements relating thereto, including without
limitation the placement of the Escrow Shares in escrow and the appointment of
the Indemnification 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 the name of the Company 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
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to the Effective Time, except that the name of the corporation set forth
therein shall be changed to the name of the Company.
1.12 No Further Rights. From and after the Effective Time, no
Common 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 Common Shares
shall thereafter be made. If, after the Effective Time, Certificates are
presented to the Buyer, the Surviving Corporation or the Exchange Agent, they
shall be cancelled and exchanged for Initial Shares in accordance with Section
1.5, subject to Section 1.10 and to applicable law in the case of Dissenting
Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE PRINCIPAL STOCKHOLDERS
The Company and the Principal Stockholders, jointly and severally,
represent and warrant 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 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 other paragraphs in this Article II only to
the extent it is clear from a reading of the disclosure that such disclosure is
applicable to such other paragraphs. For purposes of this Article II, the
phrase "to the knowledge of the Company and the Principal Stockholders" or any
phrase of similar import shall be deemed to refer to the actual knowledge of
the executive officers of the Company and the Principal Stockholders, as well
as any other knowledge which such executive officers or Principal Stockholders
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, financial condition, prospects or results of
operations of the Company and the Subsidiaries (as defined below), taken as a
whole.
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2.2 Capitalization; Stockholders. The authorized capital stock of
the Company consists of 35,000,000 Common Shares, of which, as of the date of
this Agreement, 27,194,256 shares were issued and outstanding and 37,556 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 of Common Shares held by each stockholder, (ii)
all outstanding Options and Purchase Rights to acquire any shares of the
capital stock of the Company, indicating (A) the holder thereof, (B) the number
of Common Shares subject to each Option and Purchase Right, (C) the exercise
price, date of grant, vesting schedule and expiration date for each Option or
Purchase Right, 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 Common Shares are, and all Common
Shares that may be issued upon exercise of Options or Purchase Rights will be
(upon issuance in accordance with the terms of such Options and Purchase
Rights), duly authorized, validly issued, fully paid, nonassessable and free of
all preemptive rights. Other than the Options and Purchase Rights 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. There are no agreements to which the Company or any of the Principal
Stockholders is a party or by which any of them is bound with respect to the
voting (including without limitation voting trusts or proxies), registration
under 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 and the Principal Stockholders, there are no
agreements among other parties, to which neither the Company nor any of the
Principal Stockholders is a party and by which they are 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 Common Shares were issued in
compliance with applicable federal and state securities laws. Among all of the
holders of Common Shares, as of the date hereof there are, and as of the
Effective Time there will be, no more than thirty-five (35) such holders who
are not each an "accredited investor" as such term is defined in, and as such
number is calculated under, Rule 501 under the Securities Act for purposes of
their acquisition of Merger Shares pursuant to this Agreement.
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 Common
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
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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 the Principal
Stockholders and constitutes a valid and binding obligation of the Company and
the Principal Stockholders, enforceable against the Company and the Principal
Stockholders in accordance with its terms.
2.4 Noncontravention. Subject to the filing of the Articles of
Merger as required by the Delaware General Corporation Law, neither the
execution and delivery by the Company and the Principal Stockholders of this
Agreement, nor the consummation by the Company and the Principal Stockholders
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, any Principal Stockholder or any Subsidiary is
a party or by which the Company, any Principal Stockholder or any Subsidiary is
bound or to which any of their assets is subject and which, in the case of the
Company or any Subsidiary, is listed on Sections 2.12, 2.13 or 2.14 of the
Disclosure Schedule, (d) result in the imposition of any Security Interest (as
defined below) upon any assets of the Company, any Principal Stockholder or any
Subsidiary or (e) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any Principal Stockholder, 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
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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.
(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.
(a) The Company has provided to the Buyer (i) the audited
consolidated balance sheets and statements of income, changes in stockholders'
equity and cash flows of the Company as of and for each of the last three
fiscal years; and (ii) the unaudited consolidated balance sheet and statements
of income, changes in stockholders' equity and cash flows as of and for the two
months ended February 28, 2001 (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 in all material respects (i) the financial
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 and are consistent with the books and records of the Company and
the Subsidiaries; provided, however, that the Financial Statements referred to
in clause (ii) above are subject to normal recurring year-end
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adjustments (which will not be material) and do not include notes. Without
limiting the foregoing, the Financial Statements accurately and fairly present
the valuation of the Company's assets and the amounts of any net operating loss
carryforwards and research and development tax credits reflected thereon.
(b) The Company will provide to the Buyer an estimated
unaudited consolidated balance sheet as of the Closing Date (the "Closing Date
Balance Sheet"). The Closing Date Balance Sheet will be prepared in accordance
with GAAP applied on a consistent basis, fairly present in all material
respects the financial condition of the Company and the Subsidiaries as of the
Closing Date and will be consistent with the books and records of the Company
and the Subsidiaries, subject to normal recurring year-end adjustments (which
will not be material) and the absence of notes. Without limiting the foregoing,
the Closing Date Balance Sheet will accurately and fairly present in all
material respects the valuation of the Company's assets and the amounts of any
net operating loss carryforwards and research and development tax credits
reflected thereon. For purposes of this Section 2.6(b) only, "material" shall
mean any amount in excess of $10,000 individually or $50,000 in the aggregate.
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 (o) 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), except for (a) liabilities shown on the balance sheet referred to in
clause (ii) of Section 2.6 (the "Most Recent Balance Sheet"), (b) liabilities
which have arisen since the Most Recent Balance Sheet Date in the Ordinary
Course of Business and which are similar in nature and amount to the
liabilities which arose during the comparable period of time in the immediately
preceding fiscal period and (c) contractual and other liabilities incurred in
the Ordinary Course of Business which are not required by GAAP to be reflected
on a balance sheet. As of the Closing Date, none of the Company and its
Subisidiaries will have any liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated and whether due or
to become due) except for liabilities shown on the Closing Balance Sheet and
contractual and other liabilities incurred in the Ordinary Course of Business
which are not required by GAAP to be reflected on a balance sheet.
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,
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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 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 Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any Subsidiary
since December 31, 1997. The federal income Tax Returns of the Company and
each Subsidiary have been audited by the Internal Revenue Service or are closed
by the applicable statute of limitations for all taxable years through the
taxable year specified in Section 2.9(c) of the Disclosure Schedule. 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
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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 any similar
provision of federal, state, local, or foreign law), or as a transferee or
successor, by contract, or otherwise; (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); or (vi) is neither a party to, bound
by, nor obligated under any tax allocation, tax sharing, tax indemnity or other
tax agreement.
(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,
agreed to undergo, or become required to undergo, a change in its method of
accounting resulting in an adjustment to its taxable income pursuant to Section
481 of the Code.
(g) Neither the Company nor any Subsidiary is a party to
any Tax litigation or the subject of any Tax audit. Neither the Company nor
any Subsidiary is or has been a party to any specific transaction, the
principal purpose of which is the avoidance or evasion of Taxes. Neither the
Company nor any Subsidiary is or has been a party to any transaction or
agreement that is in conflict with the Tax rules on transfer pricing in any
relevant jurisdiction. The Company and each of the Subsidiaries have disclosed
on their federal income Tax returns all positions taken therein that could give
rise to a substantial understatement of federal income Tax within the meaning
of Section 6662 of the Code.
(h) There are no liens or other encumbrances with respect
to Taxes upon any of the assets or properties of the Company or any Subsidiary,
other than with respect to Taxes not yet due and payable.
(i) No Company Stockholder holds Company Common Stock
that is non-transferable and subject to a substantial risk of forfeiture within
the meaning of Section 83 of the Code with respect to which a valid election
under Section 83(b) of the Code has not been made.
(j) There is no limitation on the utilization by the
Company of its net operating losses, built-in losses, Tax credits, or similar
items under Sections 382, 383, or 384 of the Code or comparable provisions of
state law (other than such limitation arising as a result of the consummation
of the transactions contemplated by this Agreement).
(k) The Company has not distributed to its stockholders
or security holders stock or securities of a controlled corporation, nor has
stock or securities of the Company been distributed, in a transaction to which
Section 355 of the Code applies (i) in the two years prior to
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the date of this Agreement or (ii) in a distribution that could otherwise
constitute part of a "plan" or "series of related transactions" (within the
meaning of Section 355(e) of the Code) that includes the transactions
contemplated by this Agreement.
(l) The Company is not a passive foreign investment
company within the meaning of Sections 1291-1297 of the Code.
(m) The Company has not incurred (or been allocated) an
"overall foreign loss" as defined in Section 904(f)(2) of the Code that has not
been previously recaptured in full as provided in Sections 904(f)(1) and/or
904(f)(3) of the Code.
(n) The Company has never participated in an
international boycott as defined in Section 999 of the Code.
(o) All employees of the Company or any Subsidiary who
are subject to tax in the United Kingdom have agreed to assume all liabilities
for national insurance and other social taxes assessed with respect to the
exercise of stock options.
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.
2.11 Owned Real Property. Neither the Company nor any Subsidiary
owns 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 and the Principal Stockholders, 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
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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 the Principal Stockholders, any
other party under such lease or sublease;
(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 and the Principal Stockholders are 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" and, collectively
with the Intellectual Property owned by or licensed to the Company and
incorporated in or underlying the Customer Deliverables or the Internal
Systems, 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. No other person 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, to the knowledge of the Company and the Principal Stockholders,
no other person 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 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.
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(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.
Except as set forth in Section 2.13(b) of the Disclosure Schedule, 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
(including, without limitation, Microsoft Corporation, Softrax, Inc. or Lotus
Development Corporation). 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, except for any software licenses to a customer of the
Company.
(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" or "web 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 measures to prevent disclosure of such source
code.
(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, and all of such employees and independent contractors
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 and the Principal
Stockholders, 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, except for any
Customer Deliverables currently in development.
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2.14 Contracts.
(a) Section 2.14 of the Disclosure Schedule lists the
following agreements (whether 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 $25,000 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 $25,000, 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 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 $25,000 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 reseller, independent software vendor,
distributor or original equipment manufacturer agreement currently in effect,
together with the revenues attributable to each such agreement for the fiscal
years ended December 31, 1999 and 2000;
(viii) 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;
(ix) any agreement under which the consequences of
a default or termination would reasonably be expected to have a Company
Material Adverse Effect;
(x) 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
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(xi) any other agreement (or group of related
agreements) either involving more than $25,000 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 2.14 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 and the Principal Stockholders, any other party, is in breach or
violation of, or default under, any such agreement, and no event has occurred,
is pending or, to the knowledge of the Company and the Principal Stockholders,
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 and the Principal Stockholders,
any other party under such contract.
2.15 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 reserves for bad debts (which reserves have
been created in the Ordinary Course of Business) 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 will be reflected on the Closing Date Balance Sheet and 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 (which reserve has been created in the Ordinary Course of
Business) in an amount proportionate to the reserve shown on the Most Recent
Balance Sheet, which reserve will be reflected on the Closing Date Balance
Sheet.
2.16 Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company or any Subsidiary.
2.17 Insurance. Section 2.17 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,
neither the Company nor any Subsidiary has entered into any arrangement to
finance any premiums, and the Company and the Subsidiaries are otherwise in
compliance in all material respects with the terms of such policies. The
Company and the Principal Stockholders have no knowledge of any threatened
termination of, or material premium increase with respect to, any
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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.
2.18 Litigation. 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 $25,000 (either individually or in the aggregate with other Legal
Proceedings) or equitable relief or (b) in any manner challenges or seeks to
prevent, enjoin, alter or delay the transactions contemplated by this
Agreement.
2.19 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 2.19 of
the Disclosure Schedule and (ii) manufacturers' warranties for which neither
the Company nor any Subsidiary has any liability. Section 2.19 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 and the Principal Stockholders do not know of any reason why such
expenses should significantly increase as a percentage of sales in the future.
2.20 Employees.
(a) Section 2.20 of the Disclosure Schedule contains a
list of all employees of and consultants to the Company and each Subsidiary,
along with the position and the annual or other rate of compensation of each
such person, the location in which each such person is employed, and, with
respect to persons employed in the United States who are not U.S. citizens or
legal resident aliens, the immigration status of each such person and the type
and expiration date of such person's visa or work permit. Each employee and
consultant has entered into a confidentiality/assignment of inventions
agreement with the Company or a Subsidiary, a copy of which has previously been
delivered to the Buyer. Section 2.20 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; copies of such
agreements have previously been delivered to the Buyer. To the knowledge of
the Company and the Principal Stockholders, 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 and the Principal Stockholders
have 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.
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(c) The Company has complied, in all material respects,
with all laws, rules and regulations governing the employment of personnel by
U.S. companies and the employment of non-U.S. nationals in the United States,
including, without limitation, the Immigration and Nationality Act (8 U.S.C.
Sections 1101 et seq.) and its implementing regulations. Each person employed
by the Company or any Subsidiary in the United States who is not a U.S. citizen
has a valid work permit or visa that will allow such person to continue working
for the Company or the applicable Subsidiary in the United States until at
least March 31, 2002.
2.21 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 2.21(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 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,
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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 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.
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(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 2.21(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 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 2.21(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
the Most Recent Balance Sheet Date.
2.22 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 and the Principal Stockholders, 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) the 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
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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 wildlife, 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 by the Company, or, to
the knowledge of the Company and the Principal Stockholders, by any third
party, 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). The Company and the
Principal Stockholders are 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 2.22(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 and the Principal Stockholders are 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.
2.23 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.
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2.24 Customers and Suppliers. Section 2.24 of the Disclosure
Schedule sets forth a list of (a) each customer that accounted for more than 1%
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 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.
2.25 Permits. Section 2.25 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 and the
Principal Stockholders, 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.
2.26 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 2.26 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 December 31, 1997.
2.27 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.
2.28 Bank Accounts. Section 2.28 of the Disclosure Schedule sets
forth a list of all bank accounts of the Company, including the names of the
banking institutions, the account numbers, the type of account and all
authorized signatories on each account.
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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 such Subsidiary and have been maintained in
accordance with good business and bookkeeping practices. The financial records
of the Company have been maintained in accordance with GAAP.
2.30 Pooling. To the knowledge of the Company and the Principal
Stockholders, neither the Company nor any of its Affiliates has through the
date of this Agreement taken or agreed to take any action that would prevent
the Buyer from accounting for the business combination to be effected by the
Merger as a "pooling of interests" in conformity with GAAP.
2.31 Disclosure. No representation or warranty by the Company or
the Principal Stockholders 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 or
the Principal Stockholders 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 and the Principal Stockholders have 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, financial condition, or results of operations of the
Buyer and its subsidiaries, taken as a whole.
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3.2 Capitalization. The authorized capital stock of the Buyer
consists of (a) 65,000,000 shares of Buyer Common Stock, of which 28,106,618
shares were issued and outstanding as of March 16, 2001, 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 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 and (in the case of the Buyer) the Escrow Agreement and
to perform its obligations hereunder and thereunder. The execution and
delivery by the Buyer and the Transitory Subsidiary of this Agreement and (in
the case of the Buyer) the 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 or (in the case of the
Buyer) the 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, and which is filed as an exhibit to the Buyer Reports (as
defined in Section 3.5, below), 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 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 (a) Annual Report on Form 10-K for the fiscal
year ended December 31, 2000, as filed with the Securities and Exchange
Commission (the "SEC"), and (b) all other reports filed by the Buyer
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under Section 13 or subsections (a) or (c) of Section 14 of the Exchange Act
with the SEC since December 31, 2000 (such reports are collectively referred to
herein as the "Buyer Reports"). The Buyer Reports constitute all of the
documents required to be filed by the Buyer under Section 13 or subsections (a)
or (c) of Section 14 of the Exchange Act with the SEC from December 31, 2000
through the date of this Agreement. The Buyer Reports complied in all material
respects with the requirements of the Exchange Act 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 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), (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, 2000,
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.
3.8 Pooling. To the knowledge of the Buyer, neither the Buyer nor
any of its Affiliates has through the date of this Agreement taken or agreed to
take any action that would prevent the Buyer from accounting for the business
combination to be effected by the Merger as a "pooling of interests" in
conformity with GAAP.
3.9 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.
3.10 Brokers' Fees. Except for fees for financial advisory
services payable to Updata Capital, 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.
3.11 Validity of Merger Shares; Nasdaq Listing. The Merger Shares,
when issued and delivered in exchange for the Common Shares, as provided in
this Agreement, will be validly
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issued, fully paid and non-assessable, and not subject to any preemptive rights
of Buyer shareholders. Shares of Buyer Common Stock are listed on the Nasdaq
National Market.
3.12 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. The
Company shall use its Reasonable Best Efforts to obtain, at its expense, all
such waivers, consents, approvals, permits and authorizations 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 Company shall deliver to its
stockholders a written proxy or information statement (the "Disclosure
Statement") which includes (A) a summary of the Merger and this Agreement
(which summary shall include a summary of the terms relating to the
indemnification obligations of the Company Stockholders, the escrow
arrangements and the authority of the Indemnification Representatives, and a
statement that the adoption of this Agreement by the stockholders of the
Company shall constitute approval of such
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terms) prepared by the Company, (B) all of the information required by Rule
502(b)(2) of Regulation D under the Securities Act, which shall be prepared by
the Buyer to the extent that such information relates to the Buyer, and (C) a
statement that appraisal rights are available for the Common Shares pursuant to
Section 262 of the Delaware General Corporation Law and a copy of such Section
262. The Buyer agrees to cooperate with the Company in the preparation of the
Disclosure Statement. The Company agrees not to distribute the Disclosure
Statement until the Buyer has had a reasonable opportunity to review and
comment on the Disclosure Statement and the Disclosure Statement has been
approved by the Buyer (which approval may not be unreasonably withheld or
delayed). 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 Common 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 Disclosure 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 Disclosure
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 furnished by the Buyer in writing for inclusion in the Disclosure
Statement).
(d) The Buyer shall ensure that any information furnished
by the Buyer to the Company in writing for inclusion in the Disclosure
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.
(e) The Principal Stockholders each agree (i) to vote all
Common Shares that are beneficially owned by him or over which he has voting
control in favor of the adoption of this Agreement and the approval of the
Merger, (ii) not to vote any Common 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 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
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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 conversion or
exercise of Options or Purchase Rights outstanding on the date hereof), or
amend any of the terms of (including without limitation the vesting of) any
such Options or Purchase Rights (except as contemplated by Section 1.9 of this
Agreement);
(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;
(c) create, incur or assume any indebtedness (including
obligations in respect of capital leases), other than in the Ordinary Course of
Business in an amount not to exceed $50,000 in the aggregate; 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;
(d) enter into, adopt or amend any Employee Benefit Plan
or any employment or severance agreement or arrangement of the type described
in Section 2.21(k) 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;
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(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 $25,000 per item or $50,000 in the aggregate;
(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;
(n) take any action that would jeopardize the treatment
of the Merger as a "pooling of interests" for accounting purposes; or
(o) agree in writing or otherwise to take any of the
foregoing actions.
4.5 Access to Information. 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.
4.6 Notice of Breaches.
(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.
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4.7 Exclusivity.
(a) The Company and the Principal Stockholders 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 information
about this Agreement or 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, and shall provide the Buyer with a copy of any written
materials submitted by such other party.
4.8 Expenses. Except as set forth in Article VI and the Escrow
Agreement or in Section 7.2, 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; provided, however, that if
the Merger is consummated, the Company and the Subsidiaries shall not have
incurred more than $750,000 in non-operating expenses, including without
limitation, fees and expenses of attorneys, accountants and financial advisors,
which remain unpaid as of the Effective Time.
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 contemplated by Section 1.11 of this
Agreement, 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 Agreements from Certain Affiliates of the Company. Upon the
execution of this Agreement, the Company shall provide to the Buyer a list of
those persons who are, in the Company's reasonable judgment, Affiliates of the
Company. The Company shall provide the Buyer with such information and
documents as the Buyer shall reasonably request for purposes of reviewing such
list and shall notify the Buyer in writing regarding any change in the identity
of its Affiliates prior to the Closing Date. In order to help ensure that the
Merger will be
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accounted for as a "pooling of interests", that the issuance of and any resale
of the Merger Shares will comply with the Securities Act and that the Merger
will be treated as a reorganization, the Company shall use its Reasonable Best
Efforts to deliver or cause to be delivered to the Buyer, as soon as
practicable and in any case prior to the mailing of the Disclosure Statement
(or, in the case of any person who becomes an Affiliate after such date, as
soon as practicable after such person becomes an Affiliate), an Affiliate
Agreement, in the form attached hereto as Exhibit B (an "Affiliate Agreement"),
executed by each of its Affiliates. The Buyer shall be entitled to place
appropriate legends on the certificates evidencing any Merger Shares to be
issued to Affiliates of the Company, and to issue appropriate stop transfer
instructions to the transfer agent for the Buyer Common Stock, setting forth
restrictions on transfer consistent with the terms of the Affiliate Agreement.
Each of the Principal Stockholders hereby agrees to execute and deliver to the
Buyer an Affiliate Agreement.
4.11 Employee Benefit Matters. Buyer and the Company shall
cooperate to integrate the Company employees into the employee benefit plans
maintained by Buyer, or in which employees of the Buyer participate. Each
employee of the Company immediately prior to the Effective Time shall be
entitled to receive credit for the time he or she was employed by the Company
for purposes of determining such employee's eligibility to participate in the
various benefit plans offered by the Buyer.
4.12 Future Negotiations. In the event that the transactions
contemplated by this Agreement do not qualify for accounting treatment as a
"pooling of interests" in conformity with GAAP, the parties hereto agree to
negotiate in good faith to restructure the transaction to receive "purchase"
accounting treatment in conformity with GAAP. The Company and the Principal
Stockholders acknowledge that such negotiations will include discussions of a
reduction in the Purchase Price.
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 condition
that 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) there shall be no Dissenting Shares as of the
Effective Time;
(b) 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;
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(c) the representations and warranties of the Company and
the Principal Stockholders set forth in the first sentence of Section 2.1 and
in Section 2.3 and any representations and warranties of the Company and the
Principal Stockholders 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 and the Principal Stockholders
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);
(d) the Company and the Principal Stockholders shall have
performed or complied with each of agreements and covenants required to be
performed or complied with by them under this Agreement as of or prior to the
Effective Time;
(e) 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;
(f) 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 Section 5.1 and clauses (a) through
(e) (insofar as clause (e) relates to Legal Proceedings involving the Company
or a Subsidiary) of this Section 5.2 is satisfied in all respects;
(g) 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;
(h) the Buyer shall have received a letter from KPMG LLP,
auditors for the Buyer, in a form reasonably satisfactory to the Buyer,
regarding its concurrence with the conclusion of the Buyer that the Buyer may
treat the Merger as a "pooling of interests" for accounting purposes under
Accounting Principles Board Opinion No. 16;
(i) the Buyer shall have received from counsel to the
Company an opinion with respect to the matters set forth in Exhibit D attached
hereto, addressed to the Buyer and dated as of the Closing Date;
(j) the Buyer shall have received executed employment
agreements from Xxxxx Xxxxx, Xxxx Xxxxx, Xxxxxx Xxxxx, Xxxxx Xxxxx, Xxxxx
Xxxxxx, Xxxxx Xxxxxx, Xxxxx Xxxxx and
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Xxxxx Xxxxxx, substantially in the form attached hereto as Exhibit E (the
"Employment Agreements");
(k) the Company shall have delivered to the Buyer the
Closing Date Balance Sheet, which balance sheet will reflect a positive net
worth (after excluding any deferred revenues), together with a certificate from
the Company's Vice President, Finance and Chief Financial Officer (the "Company
CFO Certificate") to the effect that the Closing Date Balance Sheet has been
prepared in accordance with GAAP applied on a consistent basis, fairly presents
the financial condition of the Company and the Subsidiaries as of the Closing
Date and is consistent with the books and records of the Company and the
Subsidiaries, subject to normal recurring year-end adjustments (which will not
be material) and the absence of footnotes;
(l) 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);
(m) 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; and
(n) the Buyer shall have received either (i) notices from
the Company, also delivered to the Internal Revenue Service, that the Common
Shares are not a "U.S. real property interest" in accordance with the Treasury
Regulations under Sections 897 and 1445 of the Code, or (ii) certifications
from the Company Stockholders that they are not foreign persons in accordance
with the Treasury Regulations under Section 1445 of the Code. If the Buyer
does not receive either the notices or certifications described above on or
before the Closing Date, the Buyer shall be permitted to withhold from the
merger consideration any required withholding tax under Section 1445 of the
Code.
(o) the Buyer shall have received written evidence,
satisfactory to the Buyer and its legal counsel, that among all of the holders
of Common Shares, there are no more than thirty-five (35) such holders who are
not each an "accredited investor" as such term is defined in, and as such
number is calculated under, Rule 501 under the Securities Act for purposes of
their acquisition of Merger Shares pursuant to this Agreement.
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:
(a) the Buyer shall have effected all of the
registrations, filings and notices referred to in Section 4.2 which are
required on the part of the Buyer, except for any which if not
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obtained or effected would not have a Buyer Material Adverse Effect or a
material adverse effect on the ability of the Parties to consummate the
transactions contemplated by this Agreement;
(b) 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);
(c) each of the Buyer and the Transitory Subsidiary shall
have performed or complied with its agreements and covenants required to be
performed or complied with under this Agreement as of or prior to the Effective
Time;
(d) 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 Buyer Material Adverse
Effect, and no such judgment, order, decree, stipulation or injunction shall be
in effect;
(e) 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) through (e) (insofar as clause (e) relates to Legal
Proceedings involving the Buyer) of this Section 5.3 is satisfied in all
respects;
(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
6.1 Indemnification by the Company Stockholders. The Company
Stockholders receiving the Merger Shares 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
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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, the Company Certificate or the Company CFO Certificate;
(b) any failure of any Company Stockholder to have good,
valid and marketable title to the issued and outstanding Common Shares issued
in the name of such Company Stockholder, free and clear of all Security
Interests;
(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; or
(d) any material variation of the estimates in the
Closing Date Balance Sheet from the actual amounts which should have been
reflected thereon. For purposes of this clause (d) only, "material" shall mean
any amount in excess of $10,000 individually or $50,000 in the aggregate.
6.2 Indemnification Claims.
(a) A party entitled, or seeking to assert rights, to
indemnification under this Article VI (an "Indemnified Party") shall give
written notification to the party from whom indemnification is sought (an
"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 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
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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, an Indemnified Party shall give written notification (a "Claim Notice") to
the Indemnifying Party which contains (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
Escrow Agreement, the Indemnifying Party shall deliver a copy of the Claim
Notice to the 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 Escrow Agreement, the Indemnifying Party and the Indemnified
Party shall deliver to the Escrow Agent, within three days following the
delivery of the Response, a written notice executed by both parties instructing
the Escrow Agent to distribute to the Buyer such number of
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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 Escrow Agent, within three days following the delivery of the
Response, a written notice executed by both parties instructing the Escrow
Agent to distribute to the Buyer such number of 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 6.3(d) for the resolution of such
dispute (a "Dispute"). For purposes of this Article VI, the "Value" of any
Escrow Shares delivered in satisfaction of an indemnity claim shall be $10.00,
multiplied by the number of such Escrow Shares.
(d) Notwithstanding the other provisions of this Section
6.3, if a third party asserts (other than by means of a lawsuit) that an
Indemnified Party is liable to such third party for a monetary or other
obligation which may constitute or result in Damages for which such 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) such Indemnified Party shall be entitled to
satisfy such obligation, without prior notice to or consent from the
Indemnifying Party, (ii) such Indemnified Party may subsequently make a claim
for indemnification in accordance with the provisions of this Article VI, and
(iii) such 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).
(e) For purposes of this Section 6.2 and the last two
sentences of Section 6.3, (i) if the Indemnifying Stockholders comprise the
Indemnifying Party, any references to the Indemnifying Party (except provisions
relating to an obligation to make or a right to receive any payments provided
for in Section 6.2 or Section 6.3) shall be deemed to refer to the
Indemnification Representatives, and (ii) if the Indemnifying Stockholders
comprise the Indemnified Party, any references to the Indemnified Party (except
provisions relating to an obligation to make or a right to receive 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.
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6.3 Survival of Representations and Warranties. All
representations and warranties contained in this Agreement, the Company
Certificate or the Buyer Certificate shall (a) survive the Closing and any
investigation at any time made by or on behalf of an Indemnified Party and (b)
shall expire on the date one year following the Closing Date, except that (i)
the representations and warranties set forth in Sections 2.1, 2.2 and 2.3 (and
the portion of the Company Certificate or Company CFO Certificate relating
thereto) shall survive the Closing without limitation and (ii) the
representations and warranties set forth in Sections 2.9, 2.21 and 2.22 (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 an Indemnified Party delivers to an
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 Escrow Agent and Escrow Shares have been retained
in escrow after the Termination Date (as defined in the Escrow Agreement) with
respect to such Expected Claim Notice, the Indemnifying Party and the
Indemnified Party shall promptly deliver to the Escrow Agent a written notice
executed by both parties instructing the Escrow Agent to distribute such
retained Escrow Shares to the Indemnifying Stockholders in accordance with the
terms of the Escrow Agreement.
6.4 Limitations.
(a) Notwithstanding anything to the contrary herein, the
aggregate liability of the Indemnifying Stockholders for Damages under this
Article VI shall not exceed the Purchase Price; provided that the limitation
set forth in this sentence shall not apply to a claim pursuant to Section
6.1(a) relating to a breach of the representations and warranties set forth in
Sections 2.1, 2.2 and 2.3 (or the portion of the Company Certificate or Company
CFO Certificate relating thereto) or to a breach of the covenants set forth in
Section 4.7. For purposes solely of this Article VI, all representations and
warranties of the Company in Article II (other than Section 2.6(b) and Section
2.31) 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.
(b) The 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 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 Escrow Shares held in escrow pursuant to the
Escrow Agreement; provided further that, in the event that the Buyer seeks to
collect Damages in excess of the Value
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of the Escrow Shares, the Indemnifying Stockholders will be required to
surrender to the Buyer, and the Buyer will be required to accept from the
Indemnifying Stockholders, Merger Shares having a Value equal to such excess to
the extent such Merger Shares are still held by the Indemnifying Stockholders
before any such amounts are paid in cash.
(c) Except with respect to claims based on fraud, after
the Closing, the rights of the Indemnified Parties under this Article VI shall
be the exclusive procedure 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.
(d) 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.
(e) Notwithstanding anything else set forth herein, the
Buyer shall not be entitled to any indemnification under this Article VI unless
and until the Buyer has incurred Damages of at least an amount equal to
$150,000 in the aggregate for any and all claims for Damages, in which case the
Buyer shall be entitled to indemnification to the full amount of any and all
Damages.
ARTICLE VII
TERMINATION
7.1 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, 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 (b) or (c) 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;
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(e) the Buyer may terminate this Agreement by giving
written notice to the Company if the Closing shall not have occurred on or
before April 30, 2001 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 April 30, 2001 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).
7.2 Effect of Termination. If any Party terminates this Agreement
pursuant to Section 7.1(a), (d), (e) or (f), 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 breaches of this Agreement);
provided however, that (i) if the Buyer terminates this Agreement pursuant to
Section 7.1(b), then the Company shall be required to pay to the Buyer, in
cash, a fee equal to the lesser of $1,260,000 or 5% of the Value of the Merger
Shares, as determined in accordance with Section 6.3(c) of this Agreement, in
addition to any other damages the Buyer may have suffered as a result of the
breach giving rise to such right of termination, and (ii) if the Company
terminates this Agreement pursuant to Section 7.1(c), then the Buyer shall be
required to pay to the Company, in cash, a fee equal to the lesser of
$1,260,000 or 5% of the Value of the Merger Shares, as determined in accordance
with Section 6.3(c) of this Agreement, in addition to any other damages the
Company may have suffered as a result of the breach giving rise to such right
of termination.
ARTICLE VIII
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
------------ -------
Adjusted Purchase Price 1.5(b)
Affiliate 2.14(a)(vi)
Affiliate Agreement 4.10
Agreed Amount 6.2(c)
Buyer Introduction
Buyer Certificate 5.3(f)
Buyer Common Stock 1.5(a)
Buyer Material Adverse Effect 3.1
Buyer Reports 3.5
CERCLA 2.22(a)
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Certificates 1.7(a)
Articles of Merger 1.1
Claim Notice 6.2(b)
Claimed Amount 6.2(b)
Closing 1.2
Closing Date 1.2
Closing Date Balance Sheet 2.6(b)
Code 1.9(a)
Common Conversion Ratio 1.5(c)
Common Shares 1.5(a)
Company Introduction
Company Certificate 5.2(f)
Company Intellectual Property 2.13(a)
Company Material Adverse Effect 2.1
Company Stockholder 1.5(b)
Controlling Party 6.2(a)
Customer Deliverables 2.13(a)
Damages 6.1
Disclosure Schedule Article II
Disclosure Statement 4.3(a)
Dispute 6.2(c)
Dissenting Shares 1.6(a)
Effective Time 1.1
Employee Benefit Plan 2.21(a)(i)
Environmental Law 2.22(a)
ERISA 2.21(a)(ii)
ERISA Affiliate 2.21(a)(iii)
Escrow Agreement 1.3
Escrow Agent 1.3
Escrow Shares 1.5(c)
Expected Claim Notice 6.3
Exchange Act 2.14(a)(vi)
Exchange Agent 1.3
Financial Statements 2.6
GAAP 2.6
Governmental Entity 2.4
Indemnification Representatives 1.3
Indemnified Party 6.2(a)
Indemnifying Party 6.2(a)
Indemnifying Stockholders 6.1
Initial Shares 1.5(c)
Intellectual Property 2.13(a)
Intended Uses 2.11(a)
Internal Systems 2.13(a)
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Legal Proceeding 2.19
Materials of Environmental Concern 2.22(b)
Merger 1.1
Merger Shares 1.5(c)
Most Recent Balance Sheet 2.8
Most Recent Balance Sheet Date 2.6
Non-controlling Party 6.2(a)
Options 1.9(a)
Ordinary Course of Business 2.4
Parties Introduction
Permits 2.25
Principal Stockholders Indtroduction
Purchase Price 1.5(b)
Purchase Rights 1.9(d)
Reasonable Best Efforts 4.1
Response 6.2(c)
Requisite Stockholder Approval 2.3
SEC 3.5
Securities Act 1.9(c)
Security Interest 2.4
Software 2.13(e)
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)
ARTICLE IX
MISCELLANEOUS
9.1 Press Releases and Announcements. The Company and the
Principal Stockholders shall not issue any press release or public announcement
relating to the subject matter of this Agreement without the prior written
approval of the Buyer; provided, however, that they may make any public
disclosure they believe, upon written advice of counsel, is required by
applicable law or regulation (in which case they shall use reasonable efforts
to advise the Buyer and provide the Buyer with a copy of the proposed
disclosure prior to making the disclosure). The Buyer may make any press
release or public announcement relating to the subject matter of this Agreement
it believes, in good faith, is required by applicable law, regulation or stock
market rule (in which case the Buyer shall use reasonable efforts to advise the
Company before making such press release or announcement.
9.2 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
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assigns; provided, however, that the provisions in Article I concerning
issuance of the Merger Shares are intended for the benefit of the Company
Stockholders 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.
9.3 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;
provided that the Confidentiality Agreement, dated February 15, 2001 between
the Buyer and the Company shall remain in effect in accordance with its terms.
9.4 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, including without limitation heirs,
representatives and successors by operation of law. 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.
9.5 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 signatures.
9.6 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.
9.7 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: Smart Storage, Inc. Copy to: Xxxxxx, Gesmer & Xxxxxxxxx, LLP
000 Xxxxx Xxxx 00 Xxxxx Xxxxxx
Xxxxxxx, XX 00000 Xxxxxx, XX 00000
Telephone: (000) 000-0000 Telephone: (000) 000-0000
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
Attention: Xxxx Xxxxx
If to the Buyer or the Copy to: Xxxx and Xxxx LLP
Transitory Subsidiary: OTG Software, Inc. 00000 Xxxxxxx Xxxxx
0000 Xxxxxxxxx Xxxx. Xxxxxx, XX 00000
8th floor Facsimile: (000) 000-0000
Xxxxxxxx, XX 00000 Attention: Xxxxx Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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.
9.8 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.
9.9 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
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.
9.10 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
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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.
9.11 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.
(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.
THE BUYER:
OTG SOFTWARE, INC.
By: /s/ Xxxxxxx X. Xxx
----------------------------
Title: Chief Executive Office
-----------------------
THE TRANSITORY SUBSIDIARY:
OTG ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxx
----------------------------
Title: President
------------------------
THE COMPANY:
SMART STORAGE, INC.
By: /s/ Xxxxx Xxxxx
----------------------------
Title: Chief Executive Officer
------------------------
THE PRINCIPAL STOCKHOLDERS:
/s/ Xxxxx Xxxxx
-------------------------------
Xxxxx Xxxxx
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THE P GRANTOR RETAINED ANNUITY TRUST - 2000
By: /s/ Xxxxx Xxxxx
----------------------------
Xxxxx Xxxxx, Trustee
/s/ Xxxx Xxxxx
-----------------------------
Xxxx Xxxxx
/s/ Xxxxx Xxxxx
-------------------------------
Xxxxx Xxxxx
/s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx
/s/ Xxxxx Xxxxxx
-------------------------------
Xxxxx Xxxxxx
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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 Common Shares entitled to vote on this
Agreement.
/s/ F. Xxxxxxx Xxxxx
---------------------
Secretary
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