Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PROGRESS SOFTWARE CORPORATION,
ACTC ACQUISITION CORP.,
ACTIONAL CORPORATION,
CERTAIN STOCKHOLDERS OF ACTIONAL CORPORATION
AND
XXXXXXXX X'XXXXX, AS THE COMPANY STOCKHOLDER REPRESENTATIVE
DATED AS OF
JANUARY 18, 2006
TABLE OF CONTENTS
Page
ARTICLE 1 The Merger.........................................................1
1.1 Certain Definitions..............................................1
1.2 The Merger.......................................................7
1.3 Effective Time; Closing..........................................8
1.4 Effect of the Merger.............................................8
1.5 Certificate of Incorporation; Bylaws.............................8
1.6 Directors and Officers...........................................8
1.7 Effect on Capital Stock..........................................8
1.8 Merger Consideration.............................................9
1.9 Election to Receive Shares of Parent Stock......................11
1.10 Surrender of Certificates; Delivery of Merger Consideration.....12
1.11 Allocation of Total Merger Consideration........................14
1.12 Distribution of Merger Consideration............................15
1.13 No Further Ownership Rights in Company Stock....................15
1.14 Company Stockholder Representative..............................15
1.15 Taking of Necessary Action; Further Action......................17
1.16 Dissenters' Rights..............................................17
ARTICLE 2 Representations and Warranties of the Company Stockholders........18
2.1 Organization....................................................18
2.2 Authority; Non-Contravention....................................18
2.3 Title to Company Stock..........................................19
2.4 Waiver of Appraisal Rights......................................19
2.5 Agreements with the Company.....................................20
2.6 Brokers' and Finders' Fees......................................20
2.7 Private Placement...............................................20
2.8 Limitations on Transfer.........................................20
2.9 Restrictive Legends.............................................21
2.10 Accredited Investor.............................................21
2.11 Investment Intent...............................................21
2.12 Investment Experience and Status................................22
2.13 Acknowledgement of Risk.........................................22
2.14 Documents Delivered; Information................................22
2.15 No General Solicitation.........................................22
2.16 Further Representations by Foreign Stockholders.................22
2.17 Professional Advice.............................................23
ARTICLE 3 Representations and Warranties of the Company.....................23
3.1 Organization; Subsidiaries......................................23
3.2 Company Capitalization..........................................24
3.3 Obligations With Respect to Capital Stock.......................26
3.4 Authority; Non-Contravention....................................26
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3.5 Financial Statements............................................27
3.6 Absence of Certain Changes or Events............................28
3.7 Taxes...........................................................28
3.8 Title to Properties.............................................30
3.9 Intellectual Property...........................................31
3.10 Compliance with Laws............................................37
3.11 Litigation......................................................37
3.12 Employee Benefit Plans..........................................37
3.13 Employment Matters..............................................39
3.14 Environmental Matters...........................................40
3.15 Certain Agreements..............................................41
3.16 Brokers' and Finders' Fees......................................42
3.17 Insurance.......................................................43
3.18 Customers; Accounts Receivable..................................43
3.19 Board Approval..................................................44
3.20 Minutes and Stock Records.......................................44
3.21 Accounting System...............................................44
3.22 Corrupt Practices...............................................44
3.23 Disclosure......................................................44
3.24 Voting Agreement................................................45
3.25 Private Placement...............................................45
3.26 Information Statement...........................................45
ARTICLE 4 Representations and Warranties Regarding Parent and Merger Sub....45
4.1 Organization of Parent and Merger Sub...........................46
4.2 Authority; Non-Contravention....................................46
4.3 Litigation......................................................48
4.4 Brokers' and Finders' Fees......................................48
4.5 Sufficient Funds................................................48
4.6 Private Placement...............................................48
4.7 Business of Parent..............................................48
4.8 Information Statement...........................................48
ARTICLE 5 Conduct Prior to the Effective Time...............................48
5.1 Conduct of Business by the Company..............................48
5.2 Tax Matters.....................................................49
ARTICLE 6 Covenants.........................................................49
6.1 Information Statement...........................................49
6.2 Other Holders of Company Stock..................................50
6.3 Approval by Stockholders of the Company.........................50
6.4 Confidentiality.................................................50
6.5 No Solicitation.................................................51
6.6 Public Disclosure...............................................52
6.7 Reasonable Efforts; Notification................................52
6.8 Benefit Plans...................................................52
6.9 Indemnification, Exculpation and Insurance Plans................53
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6.10 Company 401(k) Plan.............................................53
6.11 Takeover Statutes...............................................54
6.12 Company Audited Financial Statements............................54
6.13 Shelf Registration Statement....................................54
6.14 Company Employee Bonuses........................................55
6.15 Upstream Merger.................................................55
6.16 Termination of Financing Documents..............................56
ARTICLE 7 Indemnification; Survival of Representations......................56
7.1 Agreement to Indemnify..........................................56
7.2 Survival; Limitation of Liability...............................57
7.3 Process of Indemnification for Parent Claims....................59
7.4 Exclusive Remedy................................................61
7.5 Release of Claims...............................................61
ARTICLE 8 Closing Conditions................................................62
8.1 Conditions to Obligations of Each Party to Effect the Merger....62
8.2 Additional Conditions to Obligations of the Company.............63
8.3 Additional Conditions to the Obligations of Parent and Merger
Sub.............................................................64
ARTICLE 9 Termination, Amendment and Waiver.................................67
9.1 Termination.....................................................67
9.2 Notice of Termination; Effect of Termination....................69
9.3 Fees and Expenses...............................................69
9.4 Amendment.......................................................69
9.5 Extension; Waiver...............................................69
ARTICLE 10 General Provisions...............................................69
10.1 Tax Matters.....................................................69
10.2 Notices.........................................................71
10.3 Interpretation; Certain Defined Terms...........................73
10.4 Counterparts....................................................73
10.5 Entire Agreement; Third-Party Beneficiaries.....................73
10.6 Severability....................................................74
10.7 Other Remedies; Specific Performance; Fees......................74
10.8 Governing Law; Submission to Jurisdiction.......................74
10.9 Rules of Construction...........................................74
10.10 Assignment......................................................75
10.11 Waiver of Jury Trial............................................75
Exhibit A - Form of Company Officer Certificate
Exhibit B - Form of Certificate of Outstanding Indebtedness and Transaction Expenses
Exhibit C - Form of Escrow Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") is made and entered
into as of January 18, 2006, by and among Progress Software Corporation, a
Massachusetts corporation ("PARENT"), ACTC Acquisition Corp., a Delaware
corporation and a wholly owned first-tier Subsidiary of Parent ("MERGER SUB"),
Actional Corporation, a Delaware corporation (the "COMPANY"), the stockholders
the Company named on Schedule I hereto (the "PRINCIPAL STOCKHOLDERS"), the other
stockholders of the Company who become bound by this Agreement pursuant to the
terms hereof (collectively, with the Principal Stockholders, the "COMPANY
STOCKHOLDERS"), and Xxxxxxxx X'Xxxxx (the "COMPANY STOCKHOLDER REPRESENTATIVE").
RECITALS
A. The respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement, and declared advisable the merger of
Merger Sub with and into the Company (the "MERGER") upon the terms and subject
to the conditions of this Agreement and in accordance with the General
Corporation Law of the State of Delaware, as amended and currently in effect
("DELAWARE LAW") and, to the extent applicable, the General Corporation Law of
the State of California, as amended and currently in effect ("CALIFORNIA LAW").
B. The respective Boards of Directors of Merger Sub and the Company have
recommended this Agreement for adoption and approval by their respective
stockholders, and each of the Principal Stockholders, by his, her or its
execution hereof, has consented to the Merger.
In consideration of the foregoing and the representations, warranties,
covenants and agreements set forth in this Agreement, the Parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
1.1.1 "ACQUISITION PROPOSAL" shall mean any offer or proposal (other
than an offer or proposal by Parent or Merger Sub) relating to, or involving:
(A) any acquisition or purchase by any Person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
more than a 15% beneficial ownership interest in the total outstanding voting
securities of any Target Company; (B) any tender offer or exchange offer that if
consummated would result in any Person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning 15% or more of the total outstanding voting securities of any Target
Company; (C) any merger, consolidation, business combination or similar
transaction involving any Target Company pursuant to which the stockholders of
the Company or such Subsidiary immediately preceding such transaction hold less
than 85% of the equity interests in the surviving or resulting entity of such
transaction; (D) any sale, lease, exchange, transfer, license (other than in the
ordinary course of business), acquisition, or disposition of any material assets
of any Target Company; or (E) any liquidation or dissolution of any Target
Company.
1.1.2 "ADAPTER BUSINESS" shall mean the business sold pursuant to
the iWay Asset Purchase Agreement.
1.1.3 "AVERAGE PARENT STOCK PRICE" shall mean the average of the
closing prices of the Parent Stock as reported on the Nasdaq National Market on
the thirty trading days prior to the Closing Date.
1.1.4 "BASE MERGER CONSIDERATION" shall mean $35,000,000.
1.1.5 "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
1.1.6 "COMPANY AUDITED FINANCIAL STATEMENTS" shall mean consolidated
financial statements of the Company that, in the reasonable opinion of Parent,
fulfill the filing obligations of Parent under Form 8-K, including any required
audit report of an independent accountant and the consent of such accountant to
the inclusion or incorporation by reference of any such audit report in any
registration statement filed by Parent under the Securities Act.
1.1.7 "COMMERCIALLY AVAILABLE SOFTWARE" shall mean any commercially
available third-party "off-the-shelf" software for which the aggregate fees
(excluding customary ongoing maintenance and support fees) have not exceeded,
and are not reasonably expected to exceed, $5,000 per year or $15,000 for a
perpetual license (regardless of the number of sites, users, seats, installed
CPUs or other measurement criteria).
1.1.8 "COMPANY COMMON STOCK" shall mean the common stock, par value
par value $0.01 per share, of the Company.
1.1.9 "COMPANY EMPLOYEE BONUSES" shall mean the bonuses approved by
the Board of Directors of the Company on January 18, 2006, providing for the
payment of bonuses, on the terms and subject to the conditions stated therein,
to employees of the Company pursuant to the written consent of the Board of
Directors delivered to Parent on the date hereof.
1.1.10 "COMPANY EMPLOYEE PLAN" shall mean any plan, program, policy,
practice, contract, agreement, trust or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other benefits or remuneration of any
kind, whether written or unwritten, funded or unfunded, which is or has been
maintained, contributed to, or required to be contributed to, by any Target
Company for the benefit of any Employee or any relative or dependent of any
Employee, including without limitation (i) each "employee benefit plan" within
the meaning of Section 3(3) of ERISA, (ii) any stock, stock option, stock
appreciation right, stock purchase, bonus, deferred compensation, pension,
profit-sharing, commission, retirement, severance, retention, change of control,
or similar plan, contract or arrangement, and (iii) any provision in any staff
handbook or written employment policies for any Target Company.
1.1.11 "COMPANY MATERIAL ADVERSE EFFECT" means any change, event,
circumstance or effect (whether or not such change, event, circumstance or
effect constitutes a breach of a representation, warranty or covenant regarding
the Company in this Agreement) that is or is reasonably likely to be materially
adverse to the business, assets (including intangible
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assets), capitalization, financial condition, operations, results of operations
or prospects of the Target Companies, taken as a whole; provided, however, that
a Company Material Adverse Effect shall not include (i) any change in the market
price or trading volume of the stock of Parent or of any publicly traded
software companies, or publicly-traded companies comparable to the Company or
the Parent, or relating to or resulting from the domestic or international
securities markets in general; (ii) any change that the Company can reasonably
demonstrate arises out of conditions affecting the economy or industry of the
Company or Parent in general, except to the extent that such conditions shall
have a disproportionate effect on the Target Companies; (iii) the acquisition,
change of control or initial public offering of any competitor of the Company or
Parent; (iv) any change or effect resulting from a change in accounting rules or
procedures announced after the date of this Agreement by the Financial
Accounting Standards Board, the SEC or any other accounting body with authority
to promulgate GAAP; (v) any effect, event or change resulting from a breach of
this Agreement by Parent; (vi) any effect, event or change resulting from or
arising out of any change in any law enacted after the date of this Agreement
which is applicable to Parent or any Target Company; (vii) the outbreak of war
or international hostilities, acts of war, sabotage or terrorism or military
actions or any escalation or material worsening of any such war, hostilities,
acts of war, sabotage or terrorism or military actions, whether in the United
States or elsewhere, except to the extent that any such event shall have a
disproportionate effect on the Target Companies; or (viii) any effect, event or
change that the Company can reasonably demonstrate results from the public
disclosure of this Agreement or the transactions contemplated hereby.
1.1.12 "COMPANY OFFICER CERTIFICATE" shall mean the certificate of
the Chief Executive Officer and Chief Financial Officer of the Company pursuant
to Section 8.3.1 in the form attached hereto as Exhibit A.
1.1.13 "COMPANY OPTION" shall mean each outstanding unexercised
option, warrant or other right whatsoever to purchase Company Stock, whether or
not vested or fully exercisable, granted under any Company Option Plan or
otherwise.
1.1.14 "COMPANY OPTION PLAN(s)" shall mean the 2001 Stock Plan and
the 2004 Stock Plan.
1.1.15 "COMPANY PREFERRED STOCK" shall mean the Series AA-1
Preferred Stock, the Series AA-2 Preferred Stock and the Series BB Preferred
Stock.
1.1.16 "COMPANY PREFERRED STOCKHOLDER" shall mean a holder of record
of any shares of Company Preferred Stock as of the Effective Time.
1.1.17 "COMPANY SECRETARY'S CERTIFICATE" shall mean the certificate
of the Secretary of the Company pursuant to Section 8.3.18.
1.1.18 "COMPANY STOCK" shall mean the Company Common Stock and
Company Preferred Stock.
1.1.19 "CONFIDENTIAL INFORMATION" shall mean any information
concerning the business and affairs of Parent and its Subsidiaries or the Target
Companies, as the case may be, that is not already generally available to the
public, other than (i) information which becomes
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generally available to the public other than as a result of a disclosure in
violation of this Agreement, and (ii) information which becomes available to the
applicable Party on a non-confidential basis from a Person who is not known or
reasonably suspected (in each case after reasonable inquiry) by such Party to be
bound not to disclose the information. All information concerning the business
and affairs of Parent and its Subsidiaries and the Target Companies (including
the information contained in the Company Disclosure Schedule) shall be presumed
to be Confidential Information, and the applicable Party who receives such
Confidential Information shall have the burden of proving that any such
information is not Confidential Information.
1.1.20 "CORE REPRESENTATIONS" shall mean the representations and
warranties of the Company identified in Part 1.1.20 of the Parent Disclosure
Schedule.
1.1.21 "EMPLOYEE" shall mean any current, former or retired
employee, officer, director of the Company or any ERISA Affiliate.
1.1.22 "EMPLOYEE AGREEMENT" shall mean each management, employment,
retention, severance, change-of-control, consulting, indemnification,
relocation, repatriation, expatriation, visa, work permit or similar agreement
or contract between the Company or any ERISA Affiliate and any Employee or
consultant, including any offer letter.
1.1.23 "ENCUMBRANCES" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, restrictive covenant, claim,
infringement, interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature (including any
restriction on the voting of any security, any restriction on the transfer of
any security or other asset, any restriction on the receipt of any income
derived from any asset, any restriction on the use of any asset and any
restriction on the possession, exercise or transfer of any other attribute of
ownership of any asset, in each case except as arising under applicable federal
or state securities laws) and, in the case of leasehold real property, rent and
service charges, except for liens for Taxes not yet due and payable.
1.1.24 "ENVIRONMENTAL CLAIM" shall mean any notice alleging
potential liability (including potential liability for investigatory costs,
cleanup costs, response or remediation costs, natural resources damages,
property damages, personal injuries, fines or penalties) arising out of, based
on or resulting from (a) the presence, or release of any Environmental Material
at any location, whether or not owned by that party or any of its affiliates or
(b) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law and, in each case, which is reasonably likely to have a
Company Material Adverse Effect.
1.1.25 "ENVIRONMENTAL LAWS" shall mean any and all statutes,
regulations and ordinances relating to the protection of public health, safety
or the environment.
1.1.26 "ENVIRONMENTAL MATERIAL" shall mean PCBs, asbestos, petroleum
and its by-products, any substance that has been designated by any Governmental
Entity or by applicable law to be radioactive, toxic, hazardous or otherwise a
danger to health or the
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environment, and all other substances or constituents that are regulated by, or
form the basis of liability under, any Environmental Law.
1.1.27 "ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended.
1.1.28 "ERISA AFFILIATE" shall mean any other Person under common
control with the Company within the meaning of Sections 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder.
1.1.29 "ESCROW PERCENTAGE" shall mean (i) $3,500,000 divided by (ii)
$35,000,000 less the sum of the Outstanding Indebtedness (other than the Company
Employee Bonuses) and the Excess Transaction Expenses, in each case as stated on
the certificate delivered pursuant to Section 1.8.4.
1.1.30 "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
1.1.31 "FINANCING DOCUMENTS" shall mean each of the agreements and
letters referred to in Section 8.3.12 hereof.
1.1.32 "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended.
1.1.33 "FRAUD CLAIMS" shall mean any Parent Claims arising out of
fraud by the Company or any holder of Company Stock.
1.1.34 "GOVERNMENTAL ENTITY" shall mean any court, administrative
agency or commission or other governmental or regulatory authority or
instrumentality, foreign or domestic.
1.1.35 "IP REPRESENTATIONS" shall mean the representations and
warranties in Section 3.9.
1.1.36 "IRS" shall mean the Internal Revenue Service.
1.1.37 "LEGAL REQUIREMENT" shall mean any federal, state, local,
municipal, provincial, foreign or other law, statute, constitution, principle of
common law, resolution, ordinance, code, edict, decree, rule, regulation, ruling
or requirement issued, enacted, adopted, promulgated, implemented or otherwise
put into effect by or under the authority of any Governmental Entity.
1.1.38 "MULTIEMPLOYER PLAN" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA.
1.1.39 "OTHER INTERESTED COMPANY" shall mean the companies listed in
Part 1.1.39 of the Parent Disclosure Schedule.
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1.1.40 "PARENT STOCK" shall mean the common stock, $0.01 par value
per share, of Parent.
1.1.41 "PARTIES" shall mean Parent, Merger Sub, the Company, the
Company Stockholders and the Company Stockholder Representative.
1.1.42 "PENSION PLAN" shall mean each Company Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of ERISA.
1.1.43 "PERSON" shall mean any individual, corporation (including
any non-profit corporation), general partnership, limited partnership, limited
liability partnership, joint venture, estate, trust, company (including any
limited liability company or joint stock company), firm or other enterprise,
association, organization, entity or Governmental Entity.
1.1.44 "REQUIRED STOCKHOLDER VOTE" shall mean the affirmative vote,
by written consent in accordance with Section 228(a) of the Delaware Law (and if
applicable, California Law), of the holders of a majority of the votes entitled
to be cast by the holders of the outstanding shares of Company Stock (voting
together as a single class on an as-converted to Company Common Stock basis)
entitled to vote at a duly called meeting of stockholders of the Company, the
separate affirmative vote, by similar written consent, of the holders of a
majority of the outstanding shares of Company Common Stock (voting together as a
single class), and the separate affirmative vote, by similar written consent, of
the holders of not less than 60% of the outstanding shares of Company Preferred
Stock (voting together as a single class on an as-converted to Company Common
Stock basis).
1.1.45 "SEC" shall mean the United States Securities and Exchange
Commission.
1.1.46 "SECURITIES ACT" shall mean the United States Securities Act
of 1933, as amended.
1.1.47 "SERIES AA-1 PREFERRED STOCK" shall mean the Series AA-1
Preferred Stock, par value $0.01 per share, of the Company.
1.1.48 "SERIES AA-2 PREFERRED STOCK" shall mean the Series AA-2
Preferred Stock, par value $0.01 per share, of the Company.
1.1.49 "SERIES BB PREFERRED STOCK" shall mean the Series BB
Preferred Stock, par value $0.01 per share, of the Company.
1.1.50 "STOCKHOLDER ACTION" shall mean any action, suit, demand,
proceeding, investigation or claim by any holder of Company Stock for actions or
omissions by the Company or any of its directors, officers, employees,
stockholders, affiliates or agents relating to the transactions contemplated by
this Agreement based upon misrepresentation, lack of disclosure, oppression,
duress, noncompliance with any Legal Requirement or otherwise in connection with
this Agreement.
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1.1.51 "SUBSIDIARY" of a specified entity shall mean any
corporation, partnership, limited liability company, joint stock company, joint
venture or other legal entity of which the specified entity (either alone or
through or together with any other Subsidiary) owns, directly or indirectly, 50%
or more of the stock or other equity or partnership interests the holders of
which are generally entitled to vote for the election of the Board of Directors
or other governing body of such corporation or other legal entity.
1.1.52 "TARGET COMPANY" shall mean any of the Company and its
Subsidiaries.
1.1.53 "TARGET AUDIT FEES" shall mean any and all fees and expenses
incurred by Parent or any Target Company in connection with any audit of the
financial statements of the Target Companies that Parent shall determine, in its
sole and reasonable discretion, to be necessary to meet its obligations under
federal securities laws. The Target Audit Fees shall be calculated in accordance
with Part 1.1.53 of the Parent Disclosure Schedule.
1.1.54 "TAX" or "TAXES" shall mean any federal, state, local or
foreign income, gross receipts, license, payroll, employment, excise, severance,
stamp, stamp duty, stamp duty land tax, occupation, premium, windfall profits,
environmental (including taxes under Code Section 59A), customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not and including any obligations to
indemnify or otherwise assume or succeed to the Tax liability of any other
Person.
1.1.55 "TAX RETURN" shall mean any return (including any land
transaction return), declaration, report, claim for refund, notice, accounting
computations, assessment, election or information return or statement relating
to Taxes, including any schedule or attachment thereto, and including any
amendment thereof.
1.1.56 "VOTING AGREEMENT" shall mean the Amended and Restated Voting
Agreement, dated as of October 12, 2004, by and among the Company and certain
stockholders of the Company parties thereto.
1.2 THE MERGER. Upon the terms and subject to the conditions of this
Agreement and the applicable provisions of Delaware Law (and if applicable,
California Law), at the Effective Time (as defined below), Merger Sub shall be
merged with and into the Company, the separate corporate existence of Merger Sub
shall cease, and the Company shall continue as the surviving corporation of the
Merger (the "SURVIVING CORPORATION").
1.3 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the Parties shall cause the Merger to be consummated by filing a certificate of
merger consistent with this Agreement with the Secretary of State of the State
of Delaware in accordance with the relevant provisions of Delaware Law (and if
applicable, California Law) (the "CERTIFICATE OF MERGER"), the time of such
filing (or such later time as may be agreed in writing by the Company and Parent
and specified in the Certificate of Merger) being the "EFFECTIVE TIME", as soon
as
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practicable on or after the Closing Date (as defined below). The closing of the
Merger (the "CLOSING") shall take place at the offices of Xxxxx Xxxx LLP,
Seaport World Trade Center West, 000 Xxxxxxx Xxxxxxxxx, Xxxxxx, Xxxxxxxxxxxxx,
at 10:00 a.m., Boston time, on the date hereof, or at such other time, date and
location as Parent and the Company hereto agree in writing (the "CLOSING DATE").
1.4 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law (and if applicable, California Law). Without limiting the generality of the
foregoing, at the Effective Time, all the property, rights, privileges, powers
and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION; BYLAWS.
1.5.1 The Certificate of Merger shall provide that, at the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall be in
the form of the Certificate of Incorporation of Merger Sub as in effect
immediately prior to the Effective Time; provided, however, that as of the
Effective Time, Article I of the Certificate of Incorporation of the Surviving
Corporation shall read: "The name of the corporation is Actional Corporation."
1.5.2 At the Effective Time, the Bylaws of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation until thereafter amended.
1.6 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.7 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Parent, Merger Sub, the Company, the holders of Company Stock or
the holders of any of the following securities:
1.7.1 At the Effective Time, each share of Company Stock issued and
outstanding immediately prior to the Effective Time, other than any shares of
Company Stock to be canceled pursuant to Section 1.7.2 and any Dissenting Shares
(as defined, and to the extent provided in, Section 1.16.1), will be canceled
and extinguished and automatically converted (subject to Section 1.7.2) into the
right to receive such portion of the Total Merger Consideration (as defined
below) as shall be determined pursuant to the terms of the Certificate of
Incorporation of the Company. Upon surrender of certificates representing shares
of Company Stock in the manner provided in Sections 1.10 and 1.12, the holder
thereof shall be entitled to receive, at such time as any portion of the Total
Merger Consideration shall become payable to such holder pursuant to Sections
1.8 through 1.12, such portion of such Total Merger Consideration as shall be
applicable to such holder's ownership of Company Stock represented
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by such certificates. Immediately prior to the Effective Time, all of the
outstanding and unexercised Company Options shall become fully vested and
exercisable, and at the Effective Time, all of the outstanding and unexercised
Company Options shall be canceled and extinguished.
1.7.2 At the Effective Time, each share of Company Stock held by the
Company or owned by Merger Sub, Parent or any direct or indirect wholly owned
Subsidiary of the Company or Parent immediately prior to the Effective Time,
shall be canceled and extinguished without any conversion thereof.
1.7.3 At the Effective Time, each share of common stock, par value
$0.01 per share, of Merger Sub ("MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of common stock, par value
$0.01 per share, of the Surviving Corporation. Following the Effective Time,
each certificate evidencing ownership of shares of Merger Sub Common Stock shall
evidence ownership of such shares of capital stock of the Surviving Corporation.
1.7.4 The applicable portion of the Total Merger Consideration shall
be adjusted to reflect appropriately the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into any Company Stock), reorganization,
recapitalization, reclassification or other like change with respect to any
Company Stock occurring on or after the date hereof and prior to the Effective
Time.
1.8 MERGER CONSIDERATION.
1.8.1 The total consideration into which all of the shares of
Company Stock outstanding immediately prior to the Effective Time shall be
converted (the "TOTAL MERGER CONSIDERATION") shall consist of the Base Merger
Consideration minus (i) the Company Employee Bonuses and (ii) ninety-two percent
(92%) of the sum of (A) the Outstanding Indebtedness (other than the Company
Employee Bonuses) and (B) the Excess Transaction Expenses.
1.8.2 The "OUTSTANDING INDEBTEDNESS" shall mean all Indebtedness of
the Target Companies as of the Effective Time. "INDEBTEDNESS" shall mean (i) all
obligations for borrowed money, (ii) all obligations evidenced by bonds,
debentures, notes or other similar instruments and all reimbursement or other
similar obligations in respect of letters of credit (excluding standby letters
of credit issued in connection with the Company's real property leases), bankers
acceptances, or other similar financial products, (iii) all obligations or
liabilities secured by any Encumbrance on any asset of any Target Company, (iv)
all obligations for the deferred purchase price of assets (other than trade debt
incurred in the ordinary course of business consistent with past practice and
repayable in accordance with customary trade practices), (v) all obligations
guaranteeing any monetary obligation of any Person other than the Target
Companies that constitutes Indebtedness under any of clauses (i) through (iv)
above, and (vi) all obligations for Company Employee Bonuses. For the purposes
of the preceding sentence, the term "ALL OBLIGATIONS" includes, without
limitation, any and all principal, interest, fees and other costs.
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1.8.3 The "EXCESS TRANSACTION EXPENSES" shall mean the excess over
$500,000 of all Transaction Expenses. The "TRANSACTION EXPENSES" shall mean all
costs and expenses incurred or payable by any Target Company in connection with
the negotiation, preparation and performance of this Agreement and the
consummation of the transactions contemplated hereby, including (i) fees and
disbursements of investment bankers, brokers, dealers, finders, other financial
advisors, counsel, accountants and consultants related to the transactions
contemplated hereby, (ii) any obligations of any Target Company that become
payable either as a result of the consummation of the transactions contemplated
hereby alone or as a result of termination of employment in connection therewith
(regardless of the amount of time that may lapse between the Closing Date and
the date of such termination), including any such obligations under the
agreements disclosed in Part 3.12.1 or Part 3.15.1 of the Company Disclosure
Schedule, but excluding the payments listed in Part 1.8.3 of the Company
Disclosure Schedule (as defined below) that may be due to employees of the
Target Companies pursuant to the employment agreements listed in Part 1.8.3 of
the Company Disclosure Schedule as a result of the constructive termination of
those employees on or after the Closing, (iii) one half of the amounts payable
to the Escrow Agent in accordance with the Escrow Agreement, including any
amounts payable pursuant to Section 7 or Section 8 of the Escrow Agreement, and
(iv) the Target Audit Fees. Prior to the Closing, the Company shall request that
each of Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, Deloitte
& Touche LLP, Perseus Advisors, LLC, and any other service firm provide to the
Company a final invoice for all services rendered to all Target Companies
through and including the Closing Date, which invoice shall include an estimate
of the maximum amount of fees and disbursements expected to be incurred for
services rendered to the Target Companies after the Closing Date.
1.8.4 At the Closing, the Company shall deliver to Parent a
certificate in substantially the form attached hereto as Exhibit B and
satisfactory to Parent, dated the Closing Date and signed by the President and
Chief Executive Officer and Chief Financial Officer of the Company, as to their
good faith determination of the Outstanding Indebtedness and the Transaction
Expenses, which certificate shall provide an itemization, satisfactory to
Parent, of each component of the Outstanding Indebtedness and their good faith
estimate of the Transaction Expenses. For each Transaction Expense, such
certificate shall specify the name of each payee, the amount paid or estimated
in good faith to be payable to each payee, and the nature of the obligation
giving rise to the payment.
1.8.5 If, after the Closing, there shall be more than $5,000 of
Excess Transaction Expenses not identified on the certificate delivered pursuant
to Section 1.8.4, Parent shall so notify the Company Stockholder Representative
and Parent shall be entitled to deduct the appropriate amount of such Excess
Transaction Expenses from the Escrow Fund in satisfaction of such obligation of
the Company Stockholders.
1.8.6 If Parent shall determine that the aggregate Excess
Transaction Expenses actually incurred are more than $5,000 less than the Excess
Transaction Expenses reflected in the calculation of Excess Transaction Expenses
at the Closing, Parent shall so notify the Company Stockholder Representative.
The Company Stockholder Representative shall promptly provide Parent and the
Surviving Corporation with an allocation, prepared in accordance with this
Article 1, of such excess among the holders of Company Stock. Promptly after
receipt of such
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allocation, Parent shall deliver the excess to the holders of Company Stock in
accordance with such allocation.
1.9 ELECTION TO RECEIVE SHARES OF PARENT STOCK.
1.9.1 Each Company Preferred Stockholder shall be entitled, subject
to and in accordance with this Section 1.9, to elect to receive shares of Parent
Stock in lieu of the cash payment which such holder would otherwise be entitled
to receive under this Agreement with respect to the shares of Company Stock held
by such holder. Each Company Preferred Stockholder may elect to receive shares
of Parent Stock only by properly completing, executing and delivering to Parent
or the Surviving Corporation a Stockholder Agreement or a comparable instrument
satisfactory to Parent (which agreement or instrument shall expressly indicate
the Company Preferred Stockholder's election to receive shares of Parent Stock)
together with the other documents described in Section 1.10.2.
1.9.2 The number of shares of Parent Stock which an electing Company
Preferred Stockholder shall be entitled to receive shall be determined by
dividing (i) the applicable portion of the Total Merger Consideration which such
Company Preferred Stockholder is entitled to receive under Section 1.11 of this
Agreement with respect to the shares of Company Stock held by such holder by
(ii) the Average Parent Stock Price. Notwithstanding the foregoing, no
fractional share of Parent Stock shall be issued in respect of any portion of
the Total Merger Consideration, and no Company Preferred Stockholder shall be
entitled to receive any such fractional share. If a Company Preferred
Stockholder would otherwise be entitled to receive a fractional share of Parent
Stock, then Parent shall, in lieu thereof, pay to such Company Preferred
Stockholder an amount in cash equal to the product of such fraction and the
Average Parent Stock Price.
1.9.3 Notwithstanding any provision of this Agreement or any other
document to the contrary, Parent shall not be required to issue any shares of
Parent Stock to a Company Preferred Stockholder, and such Company Preferred
Stockholder shall not be entitled to receive any shares of Parent Stock, if
Parent shall not be satisfied, in its sole discretion, that such Company
Preferred Stockholder is an "accredited investor" within the meaning of Rule
501(a) of Regulation D under the Securities Act. If Parent is unable to satisfy
itself, in its sole discretion, that a Company Preferred Stockholder is an
"accredited investor" as so defined, or that the issuance of shares of Parent
Stock to such Company Preferred Stockholder is otherwise lawful, then such
Company Preferred Stockholder shall be entitled to receive the applicable
portion of the Total Merger Consideration attributable to the shares of Company
Stock held by such Company Preferred Stockholder solely in cash.
1.9.4 A Company Preferred Stockholder that submits to Parent or the
Surviving Corporation a Stockholder Agreement executed by such Company Preferred
Stockholder that Parent determines, in its sole and reasonable discretion, does
not properly make an election to receive shares of Parent Stock shall be deemed
to have elected to receive the applicable portion of the Total Merger
Consideration attributable to the shares of Company Stock held by such Company
Preferred Stockholder in cash, provided that Parent shall provide any such
Company Preferred Stockholder with notice and an opportunity to cure any such
defective election within five (5) business days after Parent provides such
notice. A Company
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Preferred Stockholder that does not, on or before the 20th day after Parent or
the Surviving Corporation shall have sent to such Company Preferred Stockholder
the documents described in Section 1.10.2 (such 20-day period being referred to
as the "STOCK ELECTION PERIOD"), comply with the requirements of Section 1.9.1
for an election to receive shares of Parent Stock, shall be deemed to have
elected to receive the applicable portion of the Total Merger Consideration
attributable to the shares of Company Stock held by such Company Preferred
Stockholder in cash.
1.9.5 A Company Preferred Stockholder may change such Company
Preferred Stockholder's election pursuant to this Section 1.9 only with the
prior written consent of Parent, which consent shall not be unreasonably
withheld during the Stock Election Period. Subject to the five (5) business day
cure period described in Section 1.9.4 for Company Preferred Stockholders
entitled thereto, a Company Preferred Stockholder's election shall become
irrevocable upon the expiration of the Stock Election Period.
1.9.6 Parent intends to issue shares of Parent Stock pursuant to
this Section 1.9 in reliance on the exemption from the registration requirements
of the Securities Act provided by Rule 506 of Regulation D under the Securities
Act, and/or Section 4(2) of the Securities Act, and in reliance on exemptions
from the registration or qualification requirements of state securities or "blue
sky" laws.
1.9.7 Notwithstanding Section 1.10.6, the right to make an election
pursuant to this Section 1.9 is personal to each Company Preferred Stockholder
and may not be assigned or otherwise transferred to any Person without the prior
written consent of Parent, which consent shall not be unreasonably withheld. Any
such assignment or transfer without Parent's consent shall be void. Parent shall
not be required to issue any shares of Parent Stock to or in the name of any
Person other than a Company Preferred Stockholder who shall have validly elected
to receive shares of Parent Stock in accordance with this Section 1.9.
1.10 SURRENDER OF CERTIFICATES; DELIVERY OF MERGER CONSIDERATION.
1.10.1 At the Closing, Parent shall deliver to U.S. Bank, as escrow
agent (the "ESCROW AGENT"), pursuant to an escrow agreement (the "ESCROW
AGREEMENT") in substantially the form attached as Exhibit C hereto, (i) shares
of Parent Stock representing the Escrow Percentage of the number of shares of
Parent Stock (rounded up to the nearest whole share) which each Company
Preferred Stockholder shall have elected, prior to the Closing, to receive as
Merger Consideration and (ii) by certified or bank check or wire transfer, an
amount in cash equal to the Escrow Percentage of the portion of the Total Merger
Consideration allocated to each other holder of Company Stock (such shares of
Parent Stock and such amount of cash constituting the "ESCROW FUND"). The Escrow
Fund shall be distributed in accordance with the terms of the Escrow Agreement,
it being understood that distributions of the Escrow Fund to Company
Stockholders shall be made in proportion to the allocation of the Total Merger
Consideration under this Article 1. If any Company Preferred Stockholder shall
validly elect to receive shares of Parent Stock in accordance with Section 1.9,
Parent shall promptly deliver to the Escrow Agent for deposit in the Escrow Fund
shares of Parent Stock representing the Escrow Percentage of the number of
shares of Parent Stock (rounded up to the nearest whole share) issuable to such
Company Preferred Stockholder, subject to the return to Parent of the amount of
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cash deposited by Parent in the Escrow Fund with respect to such Company
Preferred Stockholder. Parent and the Company Stockholder Representative shall
cause the Escrow Agent to return such cash to Parent.
1.10.2 Promptly (but in no event later than five (5) business days)
after the Effective Time, Parent or the Surviving Corporation shall mail to each
holder of record of a certificate that immediately prior to the Effective Time
represented outstanding shares of Company Preferred Stock (a "CERTIFICATE") (i)
a notice of the effectiveness of the Merger, (ii) a letter of transmittal in
customary form (that shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to Parent or the Surviving Corporation and shall contain such other
provisions as Parent or the Surviving Corporation may specify), (iii)
instructions for use in surrendering such Certificates and receiving the
applicable portion of the Total Merger Consideration in respect thereof, if any,
and (iv) in the case of Company Preferred Stockholders other than the Principal
Stockholders, the form of the Stockholder Agreement. Upon surrender to Parent or
the Surviving Corporation of a Certificate, together with such letter of
transmittal duly executed and completed in accordance with the instructions
thereto and, in the case of Company Preferred Stockholders electing to receive
shares of Parent Stock pursuant to the Merger (other than the Principal
Stockholders), a copy of the Stockholder Agreement duly executed by the Company
Preferred Stockholder (or another instrument satisfactory to Parent and in
accordance with applicable law), (1) subject to the terms of this Article 1, the
holder of such Certificate shall be entitled to receive, in exchange therefor,
the applicable portion of the Total Merger Consideration in respect thereof, if
any, and (2) Parent or the Surviving Corporation shall promptly deliver such
portion of the Total Merger Consideration to such holder. Each Certificate so
surrendered shall forthwith be canceled.
1.10.3 Until surrendered in accordance with the provisions of this
Section 1.10, each outstanding Certificate (other than Certificates representing
Dissenting Shares or shares of Company Stock to be canceled pursuant to Section
1.7.2) will be deemed from and after the Effective Time, for all corporate
purposes, to evidence only the right to receive the applicable portion of the
Total Merger Consideration. No interest will be paid or accrued on any of the
Total Merger Consideration.
1.10.4 Each of Parent and the Surviving Corporation shall be
entitled to deduct and withhold from any consideration payable or otherwise
deliverable pursuant to this Agreement to any holder or former holder of Company
Stock such amounts as may be required to be deducted or withheld therefrom under
the Internal Revenue Code of 1986, as amended (the "CODE") or under any other
applicable Legal Requirement. To the extent such amounts are so deducted or
withheld, such amounts shall be treated for all purposes under this Agreement as
having been paid to the Person to whom such amounts would otherwise have been
paid.
1.10.5 If any Certificate shall have been lost, stolen or destroyed,
the Person who is the record owner of such Certificate shall deliver to the
Surviving Corporation an affidavit (in form and substance acceptable to Parent
and the Surviving Corporation) with respect to such loss, theft or destruction.
The Surviving Corporation may, in its discretion and as a condition precedent to
the delivery of any portion of the Total Merger Consideration to such owner,
require such Person to indemnify Parent and the Surviving Corporation against
any claim
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that may be made against Parent or the Surviving Corporation with respect to the
Certificate alleged to have been lost, stolen or destroyed. Parent and the
Surviving Corporation shall not deliver to such Person any portion of the Total
Merger Consideration attributable to any such lost, stolen or destroyed
Certificate until such Person shall have complied with this Section 1.10.5.
1.10.6 If the consideration provided for herein is to be delivered
in the name of a Person other than the Person in whose name the Certificate
surrendered is registered, it shall be a condition of such delivery that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such delivery shall pay any
transfer or other Taxes required by reason of such delivery to a Person other
than the registered holder of the Certificate, or that such Person shall
establish to the satisfaction of the Surviving Corporation that such Tax has
been paid or is not applicable.
1.11 ALLOCATION OF TOTAL MERGER CONSIDERATION.
1.11.1 The holders of Company Stock acknowledge and agree that the
Merger and the other transactions contemplated by this Agreement constitute a
Liquidation Event (as such term is defined in the Certificate of Incorporation
of the Company), and that the Total Merger Consideration shall be distributed in
accordance with the terms of Section 2 of Article IV.B. of the Certificate of
Incorporation of the Company, including (a) the payment in full of the amount to
which the holders of Series BB Preferred Stock are entitled pursuant to Sections
2(a) and 2(d) of Article IV.B. of the Certificate of Incorporation of the
Company prior to any distribution or payment to the holders of Series AA-2
Preferred Stock, Series AA-1 Preferred Stock or Company Common Stock, and (b)
the payment in full of the amount to which the holders of Series AA-2 Preferred
Stock and Series AA-1 Preferred Stock are entitled pursuant to Sections 2(b) and
2(d) of Article IV.B. of the Certificate of Incorporation of the Company prior
to any distribution or payment to the holders of the Company Common Stock. The
holders of the Company Stock acknowledge and agree that the amount of the Total
Merger Consideration is insufficient to pay the full preference amounts of the
Company Preferred Stock and, accordingly, that the holders of Company Common
Stock shall not be entitled to receive any portion of the Total Merger
Consideration pursuant to Section 2(c) of Article IV.B. of the Certificate of
Incorporation of the Company or otherwise.
1.11.2 The Total Merger Consideration and the Escrow Fund shall be
allocated among the holders of Company Stock in accordance with Part 3.2.5 of
the Company Disclosure Schedule. Parent, the Surviving Corporation and the
Escrow Agent shall not be liable in any way to any holder of Company Stock for
any distribution of the Total Merger Consideration in accordance with Part 3.2.5
of the Company Disclosure Schedule. The Parties acknowledge that Part 3.2.5 of
the Company Disclosure Schedule has been prepared on the basis of an assumed
exercise of all outstanding options to purchase shares of Series AA-2 Preferred
Stock and that, if any such options are not properly exercised prior to the
Effective Time, Part 3.2.5 of the Company Disclosure Schedule shall be revised
in accordance with Section 1.11.1 and such revision shall be applicable for all
purposes under this Agreement.
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1.12 DISTRIBUTION OF MERGER CONSIDERATION.
1.12.1 After the Effective Time, each holder of a Certificate (other
than Certificates representing any shares of Company Stock to be canceled
pursuant to Section 1.7.2 and any Dissenting Shares) shall be entitled to
receive, subject to the terms of Section 1.10 and the Escrow Agreement, the
applicable portion of the Total Merger Consideration into which the shares of
Company Stock represented by such Certificate were converted at the Effective
Time in accordance with Section 1.11; provided, however, that Parent and the
Surviving Corporation shall not distribute any portion of the Total Merger
Consideration attributable to any Certificate unless and until such Certificate
has been surrendered in accordance with Section 1.10.
1.12.2 Notwithstanding anything to the contrary in this Section
1.12, neither Parent, the Surviving Corporation nor any Party hereto shall be
liable to a holder of Company Stock or of any rights to receive any portion of
the Total Merger Consideration for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar Legal
Requirement.
1.13 NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. The applicable portion
of the Total Merger Consideration issued upon the surrender of Certificates or
issuable thereafter in accordance with this Agreement, if any, shall be deemed
to have been issued in full satisfaction of all rights pertaining to such shares
of Company Stock formerly represented thereby. After the Effective Time, there
shall be no transfers on the stock transfer books of the Surviving Corporation
of any shares of Company Stock that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article 1.
1.14 COMPANY STOCKHOLDER REPRESENTATIVE.
1.14.1 In order to administer efficiently the defense and/or
settlement of any Parent Claims for which the Company Stockholders may be
required to indemnify any Parent Indemnified Parties (as defined in Section 7.1)
pursuant to Article 7 hereof, the Company Stockholders, by their execution of
this Agreement or a Stockholder Agreement (as defined in Section 6.1),
irrevocably appoint the Company Stockholder Representative as their agent,
attorney-in-fact and representative (with full power of substitution in the
premises), and, by his execution hereof, the Company Stockholder Representative
hereby accepts such appointment.
1.14.2 The Company Stockholders hereby authorize the Company
Stockholder Representative to (i) take all action necessary in connection with
the defense and/or settlement of any Parent Claims for which the Company
Stockholders may be required to indemnify any Parent Indemnified Party pursuant
to Article 7 hereof and (ii) give and receive all notices required to be given
under this Agreement, the Escrow Agreement and the other agreements contemplated
hereby to which the Company Stockholders or their respective properties or
assets are subject.
1.14.3 In the event that the Company Stockholder Representative
dies, becomes unable to perform his responsibilities hereunder or resigns from
such position, the Company Stockholders shall, by election of the Company
Stockholders (or, if applicable, their respective
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heirs, legal representatives, successors and assigns) who held a majority of the
voting power represented by the shares of Company Stock issued and outstanding
immediately prior to the Effective Time and held by the Company Stockholders,
select another representative to fill such vacancy, and such substituted
representative shall be deemed to be the Company Stockholder Representative for
all purposes of this Agreement. If the position of Company Stockholder
Representative shall remain vacant for more than 30 days, Parent may designate
any Company Stockholder as the Company Stockholder Representative, and such
Company Stockholder shall serve as the Company Stockholder Representative until
the Company Stockholders shall elect a successor pursuant to this Section
1.14.3.
1.14.4 All decisions and actions by the Company Stockholder
Representative, including the defense and/or settlement of any Parent Claims for
which the Company Stockholders may be required to indemnify any Parent
Indemnified Party pursuant to Article 7, shall be binding upon all of the
Company Stockholders, and no Company Stockholder shall have the right to object,
dissent, protest or otherwise contest the same.
1.14.5 The Company Stockholders agree that:
1.14.5.1 Parent shall be able to rely conclusively on the
instructions and decisions of the Company Stockholder Representative as to
the settlement of any Parent Claims for indemnification of any Parent
Indemnified Party pursuant to Article 7 or any other actions required to
be taken by the Company Stockholder Representative hereunder, and no Party
hereunder shall have any cause of action against any Parent Indemnified
Party for any action taken by any Parent Indemnified Party in reliance
upon the instructions or decisions of the Company Stockholder
Representative;
1.14.5.2 all actions, decisions and instructions of the
Company Stockholder Representative shall be conclusive and binding upon
all of the Company Stockholders and no Company Stockholder shall have any
cause of action against the Company Stockholder Representative for any
action taken or not taken, decision made or instruction given by the
Company Stockholder Representative under this Agreement, except for fraud,
gross negligence, willful misconduct or bad faith by the Company
Stockholder Representative;
1.14.5.3 the Company Stockholders shall indemnify and hold
harmless, in proportion to their respective distributions of the Total
Merger Consideration, the Company Stockholder Representative from all
loss, liability or expense (including the reasonable fees and expenses of
counsel) arising out of or in connection with the Company Stockholder
Representative's execution and performance of this Agreement and the
Escrow Agreement, except for fraud or willful misconduct by the Company
Stockholder Representative;
1.14.5.4 the provisions of this Section 1.14 are independent
and severable, are irrevocable and coupled with an interest and shall be
enforceable notwithstanding any rights or remedies that any Company
Stockholder may have in connection with the transactions contemplated by
this Agreement; and
1.14.5.5 the provisions of this Section 1.14 shall be binding
upon the heirs, legal representatives, successors and assigns of each
Company Stockholder, and any
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references in this Agreement to a Company Stockholder or the Company
Stockholders shall mean and include the successors to the rights of the
Company Stockholders hereunder, whether pursuant to testamentary
disposition, the laws of descent and distribution, assignment or
otherwise.
1.14.6 All reasonable fees and expenses incurred by the Company
Stockholder Representative in connection with this Agreement shall be paid by
the Company Stockholders (in proportion to their respective distributions of the
Total Merger Consideration), and the Company Stockholder Representative may
deduct the appropriate amount of such fees and expenses from any distribution of
the Total Merger Consideration in satisfaction of such obligation of the Company
Stockholders; provided, however, that the Company Stockholder Representative
shall, in connection with such distribution, promptly deliver to each Company
Stockholder a reasonably detailed itemization of the fees and expenses so
deducted.
1.14.7 The Company Stockholder Representative is hereby authorized
by the Company Stockholders to enter into the Escrow Agreement on the behalf of
the Company Stockholders.
1.15 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company and Merger Sub, the officers and directors of the
Company and Merger Sub will take all such lawful and necessary action. Parent
shall cause Merger Sub to perform all of its obligations relating to this
Agreement and the transactions contemplated hereby.
1.16 DISSENTERS' RIGHTS.
1.16.1 Notwithstanding any provision of this Agreement to the
contrary other than Section 1.16.2, any shares of Company Stock held by a holder
who duly and validly demands appraisal of such shares in accordance with
Delaware Law (and, if the Company is subject to Section 2115 of the California
Law, the provisions of Chapter 13 thereof) and is in compliance with all the
provisions of Delaware Law (and, if applicable, Chapter 13 of the California
Law) concerning the right of such holder to demand appraisal of such shares in
connection with the Merger and who, as of the Effective Time, has not
effectively withdrawn or lost such appraisal or dissenters' rights ("DISSENTING
SHARES"), shall not be converted into or represent a right to receive any
portion of the Total Merger Consideration pursuant to Section 1.7, but instead
shall be converted into the right to receive only such consideration as may be
determined to be due with respect to such Dissenting Shares under Delaware Law
(and, if applicable, Chapter 13 of the California Law). From and after the
Effective Time, a holder of Dissenting Shares shall not be entitled to exercise
any of the voting rights or other rights of a stockholder of the Surviving
Corporation.
1.16.2 Notwithstanding the provisions of Section 1.7.1, if any
holder of shares of Company Stock who demands appraisal or purchase of such
shares under Delaware Law (or, if applicable, Chapter 13 of the California Law)
shall effectively withdraw or lose (through failure to perfect or otherwise) the
right to appraisal or purchase, then, as of the later of the
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Effective Time and the occurrence of such event, such holder's shares shall no
longer be Dissenting Shares and shall automatically be converted into and
represent only the right to receive the applicable portion of the Total Merger
Consideration, as provided in Section 1.7, without interest thereon, upon
surrender of the certificate representing such shares in accordance with Section
1.10.
1.16.3 The Company shall give Parent (i) prompt notice of any
written demands for appraisal or purchase of any shares of Company Stock,
withdrawals of such demands, and any other instruments served pursuant to
Delaware Law (and, if applicable, Chapter 13 of the California Law) and received
by the Company which relate to any such demand for appraisal or purchase and
(ii) the opportunity to participate in all negotiations and proceedings which
take place prior to the Effective Time with respect to demands for appraisal or
purchase under Delaware Law (and, if applicable, Chapter 13 of the California
Law). The Company shall not, except with the prior written consent of Parent,
either (y) voluntarily make any payment with respect to any demands for
appraisal or purchase of Company Stock or offer to settle or settle any such
demands or (z) make any offer to buy, or accept any offer to sell, any shares of
Company Stock.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY STOCKHOLDERS
Each Company Stockholder, severally and not jointly, represents and
warrants to Parent and Merger Sub as set forth in this Article 2.
2.1 ORGANIZATION. Such Company Stockholder (if not a natural person) is
duly organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized.
2.2 AUTHORITY; NON-CONTRAVENTION.
2.2.1 Such Company Stockholder has all requisite power and authority
(including all requisite power and authority as a corporation or other entity)
to enter into this Agreement and the Escrow Agreement and to consummate the
transactions contemplated hereby and thereby. If such Company Stockholder is not
a natural person, the execution and delivery of this Agreement and the Escrow
Agreement and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by all necessary action on the part of such
Company Stockholder (including authorization by the board of directors or other
managing body and by the stockholders or other securityholders of such Company
Stockholder). This Agreement has been duly executed and delivered by such
Company Stockholder and, assuming the due authorization, execution and delivery
of this Agreement by Parent, Merger Sub, the Company, the Company Stockholder
Representative and the other Principal Stockholders, constitutes the valid and
binding obligation of such Company Stockholder, enforceable against such Company
Stockholder in accordance with its terms, except as enforceability may be
limited by bankruptcy and other similar laws affecting the rights of creditors
generally and general principles of equity. Assuming the due authorization,
execution and delivery of the Escrow Agreement by Parent, Merger Sub and the
Escrow Agent, the Escrow Agreement, when executed and delivered by the Company
Stockholder Representative on behalf
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of such Company Stockholder, will constitute the valid and binding obligation of
such Company Stockholder, enforceable against such Company Stockholder in
accordance with its terms, except as enforceability may be limited by bankruptcy
and other similar laws affecting the rights of creditors generally and general
principles of equity.
2.2.2 The execution and delivery of this Agreement and the Escrow
Agreement by or on behalf of such Company Stockholder does not, and the
performance of this Agreement and the Escrow Agreement by or on behalf of such
Company Stockholder will not, (i) if such Company Stockholder is not a natural
person, conflict with or violate the certificate of incorporation, by-laws or
other organizational documents of such Company Stockholder, (ii) conflict with
or violate any Legal Requirement applicable to such Company Stockholder or by
which such Company Stockholder or any of its properties or assets is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
result in the creation of an Encumbrance on any of the securities of any Target
Company pursuant to, any contract, agreement, instrument or other obligation to
which such Company Stockholder is a party or by which such Company Stockholder
or any of its properties or assets is bound or affected. No consent, waiver or
approval of any Person, nor any notice to any Person, is required to be obtained
or made under any contract, agreement, instrument or other obligation to which
such Company Stockholder is a party or by which such Company Stockholder or any
of its properties or assets is bound or affected in connection with the
execution and delivery by or on behalf of such Company Stockholder of this
Agreement or the Escrow Agreement or the performance of this Agreement or the
Escrow Agreement by or on behalf of such Company Stockholder.
2.2.3 No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other
Person, is required to be obtained or made by such Company Stockholder in
connection with the execution and delivery by or on behalf of such Company
Stockholder of this Agreement or the Escrow Agreement or the performance of this
Agreement or the Escrow Agreement by or on behalf of such Company Stockholder.
2.3 TITLE TO COMPANY STOCK. Such Company Stockholder holds of record and
owns the number of shares of Company Stock set forth next to the name of such
Company Stockholder on Part 3.2.1 of the Company Disclosure Schedule, free and
clear of any Encumbrances.
2.4 WAIVER OF APPRAISAL RIGHTS. Such Company Stockholder acknowledges that
he, she or it (a) has received a copy of Section 262 of the Delaware Law (and
Chapter 13 of the California Law) from the Company, (b) is consenting in writing
to the Merger pursuant to Section 228 of the Delaware Law (and if applicable,
the California Law) and (c) is thereby waiving any right pursuant to Section 262
of the Delaware Law (and if applicable, Chapter 13 of the California Law), or
otherwise, to dissent from the Merger or to demand an appraisal by the Court of
Chancery or any other Person of the fair value of the shares of Company Stock
held by such Company Stockholder.
2.5 AGREEMENTS WITH THE COMPANY. Except to the extent the Company
Disclosure Schedule specifically names such Company Stockholder as a party
thereto, neither such Company Stockholder nor any of its properties or assets is
a party or otherwise subject to any contract, agreement, instrument or other
obligation to which any
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Target Company is a party or by which any Target Company or any of its
properties or assets is bound or affected.
2.6 BROKERS' AND FINDERS' FEES. Such Company Stockholder has not incurred,
nor will it incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby.
2.7 PRIVATE PLACEMENT. Such Company Stockholder understands and
acknowledges that the issuance of the shares of Parent Stock pursuant to the
Merger Agreement will not be registered under the Securities Act and that any
shares of Parent Stock will be issued to such Company Stockholder in a private
placement transaction effected in reliance on an exemption from the registration
requirements of the Securities Act and in reliance on exemptions from the
registration or qualification requirements of applicable state securities or
"blue sky" laws. Such Company Stockholder acknowledges that any shares of Parent
Stock so issued to such Company Stockholder will be "restricted securities"
within the meaning of Rule 144(a)(3) under the Securities Act and must be held
indefinitely unless they are subsequently registered under the Securities Act or
an exemption from such registration is available. Such Company Stockholder
represents and acknowledges that such Company Stockholder is familiar with Rule
144 under the Securities Act as presently in effect and understands the
restrictions and resale limitations imposed thereby and by the Securities Act.
2.8 LIMITATIONS ON TRANSFER. Such Company Stockholder understands and
agrees that any such shares of Parent Stock cannot be offered, resold or
otherwise transferred except pursuant to (a) an effective registration statement
under the Securities Act covering such offer, sale or transfer and such offer,
sale or transfer is made in accordance with such registration statement, or (b)
an available exemption from registration, in which case such Company Stockholder
shall furnish Parent with (i) a written statement of the circumstances
surrounding the proposed sale or transfer and (ii) an opinion of counsel
reasonably satisfactory to Parent, in form and substance reasonably satisfactory
to Parent, that such sale or transfer will not require registration under the
Securities Act. Such Company Stockholder understands and agrees that any shares
of Parent Stock that are issued to such Company Stockholder pursuant to the
Merger and that are subject to the terms of the Escrow Agreement cannot be
offered, resold or otherwise transferred in any manner until certificates
representing such shares are released and delivered to such Company Stockholder
pursuant to and in accordance with the terms of the Escrow Agreement. Such
Company Stockholder hereby covenants and agrees that such Company Stockholder
will not offer, sell or otherwise transfer any such shares of Parent Stock
except in compliance with the terms of this Agreement and with applicable
federal and state securities and "blue sky" laws.
2.9 RESTRICTIVE LEGENDS.
2.9.1 The certificates representing any shares of Parent Stock
issued pursuant to the Merger shall bear, in addition to any other legends
required under applicable state securities or "blue sky" laws, a legend in
substantially the following form:
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"These securities have not been registered under the Securities Act of
1933, as amended (the `Securities Act'), or under any applicable state
securities or `blue sky' laws. These securities may not be sold, offered,
pledged, hypothecated or otherwise transferred except pursuant to
registration under the Securities Act or pursuant to an available
exemption from registration. The issuer of these securities may require an
opinion of counsel reasonably satisfactory to the issuer, in form and
substance reasonably satisfactory to the issuer, to the effect that any
sale or transfer of these securities will be in compliance with the
Securities Act and any applicable state securities or `blue sky' laws."
2.9.2 In addition, any certificates representing the shares of
Parent Stock that are issued pursuant to the Merger and that are subject to the
terms of the Escrow Agreement shall bear a legend in substantially the following
form:
"These securities are subject to the terms of an Agreement and Plan of
Merger dated as of January 18, 2006 by and among Progress Software
Corporation, ACTC Acquisition Corp., Actional Corporation, certain
stockholders of Actional Corporation, and Xxxxxxxx X'Xxxxx, as Company
Stockholder Representative, and the terms of the Escrow Agreement dated as
of January __, 2006 by and among Progress Software Corporation, ACTC
Acquisition Corp., Xxxxxxxx X'Xxxxx, as Company Stockholder
Representative, and U.S. Bank, as escrow agent. A copy of such Merger
Agreement and such Escrow Agreement shall be furnished by the issuer to
the holder hereof upon written request."
2.9.3 In order to prevent any transfer from taking place in
violation of applicable law or the terms of this Agreement, Parent may cause a
stop transfer order to be placed with its transfer agent with respect to any
shares of Parent Stock issued to such Company Stockholder pursuant to the
Merger. Parent will not be required to transfer on its books any shares of
Parent Stock that have been sold or transferred in violation of any provision of
applicable law or the terms of this Agreement.
2.10 ACCREDITED INVESTOR. Such Company Stockholder is an "accredited
investor" within the meaning of Rule 501(a) of Regulation D under the Securities
Act, as presently in effect.
2.11 INVESTMENT INTENT. The Company Stockholder is acquiring the shares of
Parent Stock issued pursuant to the Merger, if any, for the Company
Stockholder's own account for investment and not with a view to, or for resale
in connection with, the distribution thereof, without prejudice, however, to
such Company Stockholder's rights under this Agreement to dispose of all or any
part of such shares of Parent Stock pursuant to the Shelf Registration Statement
or under an exemption from the registration requirements of the Securities Act.
The Company Stockholder has no present intention of selling or otherwise
distributing any portion of any such shares of Parent Stock (or any interest
therein), subject to such rights as aforesaid. Such Company Stockholder
understands that any shares of Parent Stock so issued to such Company
Stockholder will not be registered under the Securities Act by reason of the
exemption from the registration requirements of the Securities Act provided by
Rule 506 of Regulation D under the Securities Act, and/or Section 4(2) of the
Securities Act. If such Company
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Stockholder is not an individual, such Company Stockholder has not been formed
to acquire any shares of Parent Stock issuable to such Company Stockholder
pursuant to the Merger.
2.12 INVESTMENT EXPERIENCE AND STATUS. Such Company Stockholder has such
knowledge and experience in financial and business matters that such Company
Stockholder is capable of evaluating the merits and risks of an investment in
Parent Stock and protecting such Company Stockholder's own interests in
connection with such investment.
2.13 ACKNOWLEDGEMENT OF RISK. Such Company Stockholder acknowledges that
any investment in Parent Stock involves a high degree of risk, and represents
that such Company Stockholder (a) has the financial ability to bear the economic
risk of an investment in shares of Parent Stock, (b) is aware that such Company
Stockholder may be required to bear the economic risk of any such investment in
Parent Stock for an indefinite period of time, (c) has no need for liquidity
with respect to any investment in Parent Stock, and (d) has adequate other means
of providing for such Company Stockholder's current needs and particular
contingencies.
2.14 DOCUMENTS DELIVERED; INFORMATION. Such Company Stockholder
acknowledges that such Company Stockholder has received and reviewed the terms
of the Merger Agreement and all schedules and exhibits hereto. Such Company
Stockholder has received or has had access to all the information relating to
Parent that such Company Stockholder has requested and considers necessary and
relevant to making an informed investment decision with respect to the shares of
Parent Stock, including the annual reports, quarterly reports, current reports,
proxy statements and other information filed by Parent with the SEC. Such
Company Stockholder has been given the opportunity to make a thorough
investigation of the activities of Parent and has been furnished with access to
materials relating to Parent and its activities. Such Company Stockholder has
been afforded the opportunity to obtain any additional information deemed
necessary by such Company Stockholder to verify the accuracy of any
representations made or information conveyed by Parent to such Company
Stockholder. Such Company Stockholder has had an opportunity to ask questions of
and receive answers from Parent, or from a person or persons acting on Parent's
behalf, concerning the terms and conditions of this investment.
2.15 NO GENERAL SOLICITATION. The Company Stockholder is not, to such
Company Stockholder's Knowledge, acquiring any shares of Parent Stock as a
result of any general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act), including advertisements,
articles, notices or other communications published in any newspaper, magazine
or similar media or broadcast over radio or television, or any seminar or
meeting whose attendees have been invited by general solicitation or general
advertising.
2.16 FURTHER REPRESENTATIONS BY FOREIGN STOCKHOLDERS. If such Company
Stockholder is not a United States person, such Company Stockholder hereby
represents that such Company Stockholder is satisfied as to the full observance
of the laws of such Company Stockholder's jurisdiction in connection with
acquiring any shares of Parent Stock and the execution and delivery by such
Company Stockholder of this Agreement and any other instrument or document
executed and delivered by such Company Stockholder pursuant hereto, including
(a) the legal requirements within such Company Stockholder's jurisdiction for
acquiring any shares of Parent Stock issued pursuant to the Merger, (b) any
foreign exchange restrictions applicable to any such acquisition of shares of
Parent Stock issued in connection with
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the Merger, (c) any governmental or other consents that may need to be obtained,
and (d) the income tax and other tax consequences, if any, that may be relevant
to the purchase, holding, redemption, sale, or transfer of any shares of Parent
Stock issued pursuant to the Merger.
2.17 PROFESSIONAL ADVICE. With respect to the legal, tax, accounting,
financial and other economic considerations involved in acquiring any shares of
Parent Stock, such Company Stockholder is not relying on Parent, Merger Sub, the
Company or any other Company Stockholder, or any director, officer, employee,
agent or other representative of any of the foregoing.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as set forth
in this Article 3, subject to any exceptions expressly stated in the disclosure
schedule delivered by the Company to Parent dated as of the date hereof and
certified on behalf of the Company by a duly authorized officer of the Company
(the "COMPANY DISCLOSURE SCHEDULE"). Exceptions on the Company Disclosure
Schedule shall specifically identify the representation to which they relate;
provided, however, that any matter disclosed pursuant to one section or
subsection of the Company Disclosure Schedule is deemed disclosed for such other
sections or subsections of the Company Disclosure Schedule as, and only to the
extent that, it is reasonably apparent that such matter relates to such other
section or subsection of the Company Disclosure Schedule and the level of
particularity and manner of disclosure of the matter expressly disclosed in one
section or subsection of the Company Disclosure Schedule would make a reasonable
person aware that such disclosure is relevant to such other sections or
subsections.
3.1 ORGANIZATION; SUBSIDIARIES.
3.1.1 Each Target Company (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized; (ii) has the corporate or other power and authority to
own, lease and operate its assets and property and to carry on its business as
now being conducted; and (iii) is duly qualified or licensed to do business in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed
would not have a Company Material Adverse Effect. Part 3.1.1 of the Company
Disclosure Schedule lists each Subsidiary of the Company and each jurisdiction
where any Target Company is qualified or licensed to do business. Part 3.1.1 of
the Company Disclosure Schedule indicates the jurisdiction of organization of
each entity listed therein, the capitalization of each such entity (other than
the Company), and the ownership of all securities of such entity, including the
direct or indirect equity interest of each Target Company therein (all of which
are held free and clear of all Encumbrances).
3.1.2 Other than the corporations identified in Part 3.1.1 of the
Company Disclosure Schedule, no Target Company owns any capital stock of, or any
equity interest of any nature in, any Person. No Target Company has agreed or is
obligated to make, or is bound by any written or oral agreement, contract,
lease, instrument, note, option, warranty, purchase order, license, insurance
policy, benefit plan or legally binding commitment or undertaking of any
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nature, as in effect as of the date hereof or as may hereinafter be in effect
under which it may become obligated to make any future investment in or capital
contribution to any other Person. No Target Company has at any time been a
general partner of any general partnership, limited partnership or other Person.
3.1.3 The Company has delivered or made available to Parent true and
correct copies of the Certificate of Incorporation and Bylaws of the Company and
similar governing instruments of each of its Subsidiaries, each as amended to
date (collectively, the "COMPANY CHARTER DOCUMENTS"), and each such instrument
is in full force and effect. No Target Company is in violation of any of the
provisions of the Company Charter Documents. The Company has delivered or made
available to Parent all proposed or considered amendments to the Company Charter
Documents.
3.1.4 Part 3.1.4 of the Company Disclosure Schedule lists all of the
current directors and officers (or equivalent) of each Target Company.
3.2 COMPANY CAPITALIZATION.
3.2.1 The authorized capital stock of the Company consists solely of
(i) 45,500,000 shares of Company Common Stock, of which 1,579,775 shares are
issued and outstanding on the date of this Agreement, (ii) 7,330,773 shares of
Series AA-1 Preferred Stock, all of which are issued and outstanding on the date
of this Agreement, (iii) 8,750,000 shares of Series AA-2 Preferred Stock, of
which 7,962,500 shares are issued and outstanding on the date of this Agreement,
and (iv) 15,000,000 shares of Series BB Preferred Stock, of which 12,950,833
shares are issued and outstanding on the date of this Agreement. Except as
aforesaid, there are no other authorized, issued or outstanding shares of
capital stock of the Company. The outstanding shares of Company Stock are held
of record by the holders of the Company Stock in the amounts set forth opposite
their respective names in Part 3.2.1 of the Company Disclosure Schedule. All
outstanding shares of Company Stock are duly authorized, validly issued, fully
paid and nonassessable and are not subject to preemptive rights created by
statute, the Certificate of Incorporation or Bylaws of the Company or any
agreement or document to which the Company is a party or by which it is bound.
There are no shares of Company Stock held in treasury by the Company.
3.2.2 The Company Option Plans are the only equity plans of any
Target Company. Part 3.2.2 of the Company Disclosure Schedule sets forth the
following information with respect to each Company Option outstanding on the
date of this Agreement: (i) the name of the optionee; (ii) the number and type
of shares of Company Stock subject to such Company Option; (iii) the exercise
price of such Company Option; (iv) the date on which such Company Option was
granted or assumed; (v) the date on which such Company Option expires, (vi) if
applicable, the Company Option Plan pursuant to which such Company Option was
granted, and (vii) whether the exercisability of such Company Option will be
accelerated in any way by the transactions contemplated by this Agreement, and
indicates the extent of any such acceleration. The Company has delivered to
Parent accurate and complete copies of each Company Option Plan and each form of
agreement evidencing any Company Options. Except as set forth in Part 3.2.2 of
the Company Disclosure Schedule, there are no commitments or agreements of any
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character to which the Company is bound obligating the Company to accelerate the
vesting of any Company Option as a result of any of the transactions
contemplated hereby.
3.2.3 All necessary action has been taken (or prior to the Effective
Time will be taken) to cause the termination or cancellation of all Company
Options to be effective at the Effective Time.
3.2.4 All securities of each Target Company have been issued and
granted in compliance with (i) all applicable securities laws and other
applicable material Legal Requirements and (ii) all material requirements set
forth in applicable agreements or instruments.
3.2.5 Section 3.2.5 of the Company Disclosure Schedule sets forth
the allocation of the Total Merger Consideration and the Escrow Fund to each
holder of Company Common Stock, Series AA-1 Preferred Stock, Series AA-2
Preferred Stock and Series BB Preferred Stock pursuant to the Certificate of
Incorporation of the Company, based on the amounts of the Outstanding
Indebtedness and Excess Transaction Expenses set forth on the certificate being
delivered by the Company pursuant to Section 1.8.4.
3.3 OBLIGATIONS WITH RESPECT TO CAPITAL STOCK. Except as set forth in
Parts 3.2.2 and 3.3 of the Company Disclosure Schedule, there are no equity
securities, partnership interests or other ownership interests of any class, or
any securities exchangeable or convertible into or exercisable for any of the
foregoing, issued, reserved for issuance or outstanding with respect to the
Company or, except as set forth in Part 3.1.1 of the Company Disclosure
Schedule, with respect to any Target Company. Except as set forth in Part 3.2.2
or Part 3.3 of the Company Disclosure Schedule, there are no subscriptions,
options, warrants, equity securities, convertible debt, partnership interests or
other ownership interests, calls, rights (including preemptive rights),
commitments or agreements of any character to which any Target Company is a
party or by which it is bound obligating any Target Company to issue, deliver or
sell, or repurchase, redeem or otherwise acquire, any equity securities,
partnership interests or other ownership interests of any Target Company or
obligating any Target Company to grant, extend, accelerate the vesting of or
enter into any such subscription, option, warrant, equity security, call, right,
commitment or agreement. There are no registration rights, and there is no
voting trust, proxy, rights agreement, "poison pill" anti-takeover plan or other
agreement or understanding to which any Target Company is a party or by which it
is bound with respect to any equity security of any class of the Company or any
equity security, partnership interest or other ownership interest of any class
of any other Target Company.
3.4 AUTHORITY; NON-CONTRAVENTION.
3.4.1 The Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby by the Company have been duly authorized by all
necessary corporate action on the part of the Company, subject only to obtaining
the Required Stockholder Vote for the adoption and approval of this Agreement
and the Merger, and the filing of the Certificate of Merger pursuant to Delaware
Law. The Required Stockholder Vote is sufficient for the Company's stockholders
to approve and adopt this Agreement and approve the Merger, and no other
approval of any
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holder of any securities of the Company is required in connection with the
consummation of the transactions contemplated hereby. The Principal Stockholders
and Xxxxx Xxxxxxxx hold sufficient shares of Company Stock to deliver the
Required Stockholder Vote. This Agreement has been duly executed and delivered
by the Company and, assuming the due authorization, execution and delivery of
this Agreement by the other Parties, constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as enforceability may be limited by bankruptcy and other
similar laws affecting the rights of creditors generally and general principles
of equity.
3.4.2 The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Company Charter Documents, (ii) subject to compliance with
the requirements set forth in Section 3.4.3, conflict with or violate in any
material respect any Legal Requirement applicable to any Target Company or by
which any Target Company or any of its material properties or assets is bound or
affected, or (iii) result in any material breach of or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under, or materially impair a Target Company's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination or cancellation of or material rights of amendment or
acceleration of, or result in the creation of a material Encumbrance on any of
the properties or assets of any Target Company pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which any Target
Company is a party or by which any Target Company or its material properties or
assets are bound or affected. No consent, waiver or approval of any Person, nor
any notice to any Person, is required to be obtained or made under any note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which any Target
Company is a party or by which any Target Company or any of its properties or
assets is bound or affected in connection with the execution and delivery by the
Company of this Agreement or the performance of this Agreement by the Company,
except for such consents, waivers, approvals and notices the lack of which,
individually or in the aggregate, would not be material to the Company.
3.4.3 No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other
Person, is required to be obtained or made by the Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for the filing of (i) the Certificate of Merger with
the Secretary of State of the State of Delaware, (ii) appropriate documents with
the relevant authorities of other states in which the Company is qualified or
licensed to do business and (iii) a notification of the acquisition of control
of an existing Canadian business under the Investment Canada Act.
3.5 FINANCIAL STATEMENTS.
3.5.1 The Company Disclosure Schedule includes complete and correct
copies of the financial statements identified in Part 3.5 of the Parent
Disclosure Schedule (the "COMPANY FINANCIAL STATEMENTS"). The unaudited
consolidated balance sheet of the Target Companies as of December 31, 2005 is
sometimes referred to herein as the "COMPANY BALANCE SHEET." Each of the
Financial Statements (1) was prepared in accordance with United States
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generally accepted accounting principles ("GAAP") applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes
thereto), and (2) fairly presented the consolidated financial position of the
Target Companies as at the respective dates thereof and the consolidated results
of the Target Companies' operations and cash flows for the periods indicated,
except that the unaudited Company Financial Statements referred to in clauses
(ii) and (iv) of Part 3.5 of the Parent Disclosure Schedule do not contain any
of the footnotes required by GAAP, and were or are subject to normal and
recurring year-end adjustments that the Company does not reasonably expect to be
material, individually or in the aggregate. No Target Company has any
liabilities (absolute, accrued, contingent or otherwise) that are, individually
or in the aggregate, material to the business, results of operations or
financial condition of the Target Companies taken as a whole, except for
liabilities (other than Indebtedness) reflected on the Company Balance Sheet or
incurred since the date of the Company Balance Sheet in the ordinary course of
business consistent with past practices.
3.5.2 The Company has not been notified by Deloitte & Touche LLP or
any other independent auditor that such auditor is of the view that any of the
Company Financial Statements should be restated, or that the Company should
modify its accounting for any period in a manner that would be materially
adverse to the Company.
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3.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the Company
Balance Sheet, there has not been: (i) any Company Material Adverse Effect
(except for operating losses incurred in the ordinary course of business), (ii)
any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of any
Target Company's capital stock, or any purchase, redemption or other acquisition
by any Target Company of any Target Company's capital stock or any other
securities of any Target Company or any grant or issuance of any options,
warrants, calls or rights to acquire any such shares or other securities, (iii)
any split, combination or reclassification of any Target Company's capital
stock, (iv) any granting by any Target Company of any increase in compensation
or fringe benefits to any officers or employees of any Target Company, or any
payment by any Target Company of any bonus to any officers or employees of any
Target Company, (v) any acquisition, sale or transfer of any material asset by
any Target Company other than software licenses granted by the Company to
customers in the ordinary course of business and consistent with past practice,
(vi) any change by any Target Company in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP, (vii) any material
revaluation by any Target Company of any of its assets, including writing off
notes or accounts receivable, (viii) any granting by any Target Company of any
increase in severance or termination pay, (ix) any cancellation of any
development, licensing, distribution, sales, services or other similar agreement
with respect to any Intellectual Property Rights (as defined in Section 3.9),
(x) any cancellation, compromise, waiver or release of any right or claim (or
series of rights or claims) involving more than $25,000, (xi) any material
damage, destruction or loss (whether or not covered by insurance) to any
property or assets material to the conduct of the business of any Target
Company; (xii) any creation of any material Encumbrance on any of the property
or assets of any Target Company, (xiii) any capital expenditure, or any
commitment to make any capital expenditure, in excess of $25,000, (xiv) any
creation of any Indebtedness in excess of $10,000, or (xv) any commitment to do
anything described in this Section 3.6.
3.7 TAXES.
3.7.1 Each Target Company has filed all federal Tax Returns and all
other material Tax Returns that it was required to file under applicable Legal
Requirements and has complied with all material Legal Requirements in respect of
all Taxes. All such Tax Returns were correct and complete in all material
respects and were prepared in substantial compliance with all applicable Legal
Requirements. All Taxes due and owing by any Target Company (whether or not
shown on any Tax Return) have been paid. No Target Company is currently the
beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by a Governmental Entity in a jurisdiction where a
Target Company does not file Tax Returns that such Target Company is or may be
subject to taxation by that jurisdiction. There are no liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of any Target
Company.
3.7.2 Each Target Company has withheld and paid all Taxes required
to have been withheld and paid in connection with any amounts paid or owing to
any employee, independent contractor, creditor, stockholder, or other third
party.
3.7.3 To the Company's Knowledge (as defined in Section 10.3.2), no
Governmental Entity is reasonably likely to assess any additional Taxes for any
period for which
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Tax Returns have been filed. No foreign, federal, state, or local tax audits or
administrative or judicial Tax proceedings are pending or, to the Company's
Knowledge, being conducted with respect to any Target Company. No Target Company
has received from any foreign, federal, state, or local Governmental Entity
(including jurisdictions where such Target Company has not filed Tax Returns)
any (i) written notice indicating an intent to open an audit or other review,
(ii) request for information related to Tax matters, or (iii) notice of
deficiency or proposed adjustment for any amount of Tax proposed, asserted, or
assessed by any Governmental Entity against any Target Company. Part 3.7.3 of
the Company Disclosure Schedule lists all federal, state, local, and foreign
income Tax Returns filed with respect to any Target Company for taxable periods
ended on or after August 31, 1999, indicates those Tax Returns that have been
audited, and indicates those Tax Returns that currently are the subject of
audit. The Company has delivered to Parent correct and complete copies of all
such Tax Returns and all examination reports, and statements of deficiencies
assessed against or agreed to by any Target Company since August 31, 1999.
3.7.4 No Target Company has waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
3.7.5 No Target Company is a party to any agreement, contract,
arrangement or plan that has resulted or could result, separately or in the
aggregate, in the payment of (i) any "excess parachute payment" within the
meaning of Code Section 280G (or any corresponding provision of state, local or
foreign Tax law) and (ii) any amount that will not be fully deductible as a
result of Code Section 162(m) (or any corresponding provision of state, local or
foreign Tax law). No Target Company has been a United States real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). Each Target
Company has disclosed on its federal income Tax Returns all positions taken
therein that could give rise to a substantial understatement of federal income
Tax within the meaning of Code Section 6662. No Target Company is a party to or
bound by any Tax allocation or sharing agreement. No Target Company (A) has been
a member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was the Company) or (B) has any
Liability for the Taxes of any Person (other than any Target Company) under Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
3.7.6 The unpaid Taxes of the Target Companies (A) did not, as of
the date of the Company Balance Sheet, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Company
Balance Sheet (rather than in any notes thereto) and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Target Companies in filing
their Tax Returns. Since the date of the Company Balance Sheet, no Target
Company has incurred any liability for Taxes arising from extraordinary gains or
losses, as that term is used in GAAP, outside the ordinary course of business
consistent with past custom and practice.
3.7.7 No Target Company will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable
period (or portion thereof) ending after the Closing Date as a result of any:
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3.7.7.1 change in method of accounting for a taxable period
ending on or prior to the Closing Date;
3.7.7.2 "closing agreement" as described in Code Section 7121
(or any corresponding or similar provision of state, local or foreign
income Tax law) executed on or prior to the Closing Date;
3.7.7.3 intercompany transaction or excess loss account
described in Treasury Regulations under Code Section 1502 (or any
corresponding or similar provision of state, local or foreign income Tax
law);
3.7.7.4 installment sale or open transaction disposition made
on or prior to the Closing Date; or
3.7.7.5 prepaid amount received on or prior to the Closing
Date.
3.7.8 No Target Company has distributed stock of another Person, or
has had its stock distributed by another Person, in a transaction that was
purported or intended to be governed in whole or in part by Code Section 355 or
Code Section 361.
3.7.9 No Target Company will at any time be deemed to have a capital
gain pursuant to subsection 80.03(2) of the Income Tax Act (Canada) or any
analogous Legal Requirement as a result of any transaction or event taking place
in any taxation year ending on or before the Closing Date. No Target Company has
participated, directly or through a partnership, in a transaction or series of
transactions contemplated in subsection 247(2) of the Income Tax Act (Canada) or
any analogous Legal Requirement. There are no circumstances existing which could
result in the application of section 78 or 160 of the Income Tax Act (Canada) or
any equivalent Legal Requirement to any Target Company.
3.8 TITLE TO PROPERTIES.
3.8.1 No Target Company holds any interest in real property, other
than the leaseholds described in Part 3.8 of the Company Disclosure Schedule
(such property being the "LEASED REAL PROPERTY"). Part 3.8 of the Company
Disclosure Schedule lists all real property leases (including underleases,
serviced office agreements and any licenses, consents and approvals required
from the landlords and any superior landlords with respect to any such lease) to
which any Target Company is a party and each amendment thereto. All such current
leases are in full force and effect, are valid and effective in accordance with
their respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time, or
both, would constitute a default) that would give rise to a claim against any
Target Company in excess of $10,000. Such leases permit the current occupation
and use of such real property by the Target Companies. The Leased Real Property
comprises all the real property occupied or otherwise used by the Target
Companies.
3.8.2 Each Target Company has good and marketable title to, or, in
the case of leased properties and assets, valid leasehold interests in, all of
its tangible properties and assets, real, personal and mixed, used or held for
use in its business, free and clear of any Encumbrances (other than Intellectual
Property Rights), except for liens for Taxes not yet due and payable and
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such Encumbrances, if any, which are not, individually or in the aggregate,
material in character, amount or extent. The Leased Real Property is free of any
tenancy, sub-tenancy, license or other arrangement entitling a person other than
the Target Companies to occupy the whole or any part. There are no outstanding
actions, disputes, claims or demands between any Target Company and any third
party affecting the Leased Real Property or any neighboring property or any
boundary walls and fences, or with respect to any easement, right or means of
access to the Leased Real Property. To the Knowledge of the Company, there is no
resolution, proposal, scheme or order, whether or not formally adopted, that
would materially interfere with the use or occupation of, or access to, the
Leased Real Property by the Target Companies.
3.8.3 All of the tangible properties and assets of the Target
Companies are in adequate operating condition to conduct the operations of the
Target Companies in substantially the same manner as currently conducted.
3.8.4 Except as set forth in the leases set forth in Part 3.8 of the
Company Disclosure Schedule, there is no actual or contingent liability of any
Target Company arising directly or indirectly out of any agreement, lease,
underlease, tenancy, conveyance, transfer, license or any other deed or document
relating to real property or to any estate or interest in real property entered
into by any Target Company including any actual or contingent liability arising
directly or indirectly out of (i) any estate or interest held by any Target
Company as original lessee or underlessee; (ii) any guarantee given by any
Target Company in relation to a lease or underlease; or (iii) any other covenant
made by any Target Company in favor of any lessor or head lessor.
3.9 INTELLECTUAL PROPERTY.
3.9.1 For purposes of this Agreement, "INTELLECTUAL PROPERTY RIGHTS"
shall mean all intellectual property rights anywhere in the world used (whether
or not owned) by any Target Company in the conduct of its business, including,
without limitation: (i) all trademarks, service marks, trade names, Internet
domain names, trade dress, and the goodwill associated therewith, and all
registrations or applications for registration thereof (collectively, the
"COMPANY MARKS"); (ii) all patents, patent applications and continuations,
industrial design registrations and applications therefor (collectively, the
"COMPANY PATENTS"); (iii) all copyrights, database rights and moral rights in
both published works and unpublished works, including all such rights in
software, user and training manuals, marketing and promotional materials,
websites, internal reports, business plans and any other expressions, mask
works, firmware and videos, whether registered or unregistered, and all
registrations or applications for registration thereof (collectively, the
"COMPANY COPYRIGHTS"); and (iv) trade secret and confidential information,
including such rights in inventions (whether or not reduced to practice),
know-how, customer lists, technical information, proprietary information,
technologies, processes and formulae, software, data, plans, drawings and blue
prints, whether tangible or intangible and whether stored, compiled, or
memorialized physically, electronically, photographically, or otherwise
(collectively, the "COMPANY SECRET Information"). For purposes of this Section
3.9, "SOFTWARE" means any and all: (w) computer programs and applications,
including any and all software implementations of algorithms, models and
methodologies, whether in source code or object code, (x) databases and
compilations, including any and all data and collections of data, whether
machine readable or otherwise, (y) descriptions,
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flow-charts, library functions, algorithms, architecture, structure, display
screens and development tools, and other information, work product or tools used
to design, plan, organize or develop any of the foregoing and (z) all
documentation, including user manuals and training materials, relating to any of
the foregoing.
3.9.2 Part 3.9.2 of the Company Disclosure Schedule contains a true,
complete and correct list of all the software that any Target Company licenses
or has licensed or otherwise makes or has made available to customers, including
all modules, components, add-ons and other options, and separately identifies
(i) each item of third-party software that constitutes or has constituted an
element of any of the foregoing and (ii) each license or other agreement with
respect to each such item of third-party software. Part 3.9.2 of the Company
Disclosure Schedule contains a true, complete and correct list of all other
third-party software used by any Target Company (other than Commercially
Available Software) and indicates each license or other agreement with respect
to such third-party software (other than Commercially Available Software).
3.9.3 The Company or another Target Company: (i) owns all right,
title and interest in and to the Intellectual Property Rights, free and clear of
all Encumbrances (other than licenses to customers of any Target Company
required to be disclosed (or specifically exempted from disclosure) pursuant to
Section 3.15.5 and distribution and reseller agreements required to be disclosed
(or specifically exempted from disclosure) pursuant to Section 3.15.6), or (ii)
pursuant to the licenses and other agreements set forth in Part 3.9.3 of the
Company Disclosure Schedule (or licenses and other agreements for Commercially
Available Software), is licensed to use, or otherwise possesses legally valid
and enforceable rights to use, the Intellectual Property Rights that it does not
so own. With respect to (i) each registered Company Xxxx, (ii) each material
unregistered Company Xxxx, (iii) each Company Patent and (iv) each registered
Company Copyright, Part 3.9.3 of the Company Disclosure Schedule sets forth (A)
a complete and correct list of each of the foregoing which is owned by the
Company or another Target Company (which list identifies the owner thereof), (B)
a complete and correct list of each of the foregoing which the Company or
another Target Company is exclusively licensed or otherwise entitled to use
exclusively (which list identifies the applicable license or other agreement and
the licensee or entitlement holder) and (C) a complete and correct list of each
patent which is material to the products of the Company and which the Company or
another Target Company is licensed or otherwise entitled to use (which list
identifies the applicable license or other agreement and the licensee or
entitlement holder), but only where the licensed patents are specifically listed
in the applicable license agreement. The Target Companies have made necessary
filings, recordations and payments as are reasonable and customary in their
industry to protect and maintain their interests in the Intellectual Property
Rights owned or exclusively licensed (but only if such filing, recordation or
payment obligations are imposed by the license agreement therefor) by any Target
Company. None of the products, services or technology developed, used, sold,
offered for sale or licensed or proposed for development, use, sale, offer for
sale or license by any Target Company infringes, violates, passes off on or
otherwise misuses or has infringed, violated, passed off on or otherwise misused
any intellectual property rights of any Person. To the Company's Knowledge with
respect to patent rights and xxxx rights, no Target Company requires or has
required any additional intellectual property rights of any third party to
develop, use, sell, offer for sale or license its products or services or in
relation to the processes employed by the Target Companies in connection with
the operation of their
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respective businesses, other than commercially available intellectual property
rights that are not material in amount or expense. With respect to the subject
matter of any non-exclusive license granted to a Target Company by a third-party
licensor, the representations and warranties of this Section 3.9.3, and in
Sections 3.9.5 through 3.9.7 with respect to infringement of intellectual
property owned by third parties (excluding such licensor) are made to the
Company's Knowledge.
3.9.4 The Company makes the representations and warranties set forth
in Part 3.9.4 of the Parent Disclosure Schedule.
3.9.5 To the Company's Knowledge, all the issued Company Patents
owned by or exclusively licensed to any Target Company are valid and subsisting.
To the Company's Knowledge, (i) all the material issued Company Patents not
owned by or exclusively licensed to any Target Company are valid and subsisting,
(ii) if and when the Company Patents owned by any Target Company that have not
been issued are so issued, such Company Patents will be valid and subsisting,
(iii) none of the issued Company Patents owned by or exclusively licensed to any
Target Company or material to the products of any Target Company is being or has
been infringed, (iv) none of the Company Patents owned by or exclusively
licensed to any Target Company that have not been issued would have been
infringed had they been issued, and (v) neither the validity nor the
enforceability of any of the Company Patents owned by or exclusively licensed to
any Target Company has been challenged by any Person except by the United States
Patent and Trademark Office (or equivalent foreign Governmental Entity) in the
normal course of prosecution of patent applications.
3.9.6 To the Company's Knowledge, all the Company Marks owned by or
exclusively licensed to any Target Company are valid and subsisting. To the
Company's Knowledge, (i) all of the material Company Marks not owned by or
exclusively licensed to any Target Company are valid and subsisting, (ii) none
of the Company Marks owned by or exclusively licensed to any Target Company, or
material to the business of any Target Company, is being or has been infringed,
violated, passed off on or otherwise misused or diluted, (iii) none of such
Company Marks is being or has been opposed or challenged, and (iv) and no
proceeding has been commenced or threatened or is reasonably anticipated that
would seek to prevent the use by any Target Company of any such Company Xxxx.
3.9.7 All the Company Copyrights, whether or not registered, owned
by or exclusively licensed to any Target Company are valid and, once registered,
enforceable. To the Company's Knowledge, (i) all the material Company
Copyrights, whether or not registered, not owned by or exclusively licensed to
any Target Company, are valid and, once registered, enforceable, (ii) none of
the Company Copyrights owned by or exclusively licensed to any Target Company or
material to the business of any Target Company is being or has been infringed,
and the validity of the Company Copyrights is not being and has not been
challenged or threatened in any way, and (iii) no proceeding has been commenced
or threatened or is reasonably anticipated that would seek to prevent the use by
any Target Company of such Company Copyrights.
3.9.8 The Target Companies have taken commercially reasonable
measures to protect the secrecy, confidentiality and value of the Company Secret
Information, consistent with
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prevailing practices in the software industry sector in which the Target
Companies operate. To the Company's Knowledge, no Company Secret Information has
been, without written authorization, used, divulged or appropriated for the
benefit of any Person (other than any Target Company) or otherwise
misappropriated in a manner which would result in a material loss of benefits to
the Company.
3.9.9 No Intellectual Property Right owned by or exclusively
licensed to any Target Company and, to the Company's Knowledge, no other
Intellectual Property Right, is subject to any outstanding order, proceeding
(other than pending proceedings pertaining to uncontested applications for
patent, trademark or copyright registration) or stipulation that restricts in
any manner the licensing thereof by any Target Company.
3.9.10 To the Knowledge of the Company, none of the present or
former employees or consultants engaged in the development of Intellectual
Property Rights (including software) or in performing sales and marketing
functions on behalf of any Target Company is or was obligated under any contract
with any third party which conflicts or did conflict with such employee's or
consultant's rights to develop Intellectual Property Rights (including software)
or engage in such sales and marketing functions on behalf of any Target Company.
3.9.11 All present and former contractors, agents and consultants of
each Target Company who are or were involved in the creation of any of the
Intellectual Property Rights on behalf of a Target Company, and all present and
former employees of each Target Company, have executed an assignment of
inventions agreement to vest in the Company or its Subsidiary, as appropriate,
exclusive ownership of the Intellectual Property Rights so created by them, and
such assignment includes a complete, perpetual and irrevocable waiver of moral
rights by all authors of any applicable Company Copyrights, to the extent
allowed by applicable law. All present and former contractors, agents and
consultants of each Target Company who have or have had access to Company Secret
Information, and all present and former employees of any Target Company, have
executed nondisclosure agreements to protect the confidentiality of Company
Secret Information.
3.9.12 Without limiting the generality of the foregoing, all the
software that any Target Company licenses or licensed or otherwise makes or made
available to customers was: (i) developed by employees of a Target Company
within the scope of their employment and subject to their obligation to assign
inventions and patents therein; or (ii) developed by independent contractors or
consultants who assigned all of their right, title and interest in and to that
software to the Company; or (iii) otherwise acquired or licensed by the Company
from a third party by an agreement or contract that is disclosed in Part 3.9.3
of the Company Disclosure Schedule, and in each case under clauses (i) and (ii)
complete, perpetual and irrevocable waivers of moral rights were obtained from
all authors of such software, to the extent allowed by applicable law.
3.9.13 No funding or grant provided to any Target Company by any
third party has affected or will affect, in any manner, the Intellectual
Property Rights created by or on behalf of, or exclusively licensed to, any
Target Company in connection with such funding or grant, and no such third party
has any right, title or interest in Intellectual Property Rights resulting from
such funding or grant.
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3.9.14 All material contracts, licenses and agreements relating to
the Intellectual Property Rights to which a Target Company is a party are in
full force and effect, except such as have expired naturally at the end of their
terms and are not currently material to the Company. The consummation of the
transactions contemplated by this Agreement will neither violate nor result in
the breach, modification, cancellation, termination, or suspension of any such
contract, license or agreement. Each Target Company is in material compliance
with, and has not materially breached any term of any of such contracts,
licenses and agreements and, to the Company's Knowledge, all other parties to
such contracts, licenses and agreements are in compliance in all material
respects with, and have not materially breached any term of, such contracts,
licenses and agreements. Following the Closing Date, the Surviving Corporation
and its Subsidiaries will be permitted to exercise all of the rights of the
Target Companies under such contracts, licenses and agreements to the same
extent the Target Companies would have been able to had the transactions
contemplated by this Agreement not occurred and without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which the Target Companies would otherwise have been required to pay.
3.9.15 Part 3.9.15 of the Company Disclosure Schedule lists all Open
Source Materials (as defined below) used by any Target Company in any way in
connection with software provided by Target Companies to third parties. Such
description includes, without limitation, whether (and, if so, how) the Open
Source Materials were embedded, linked (including dynamic linking), modified
and/or distributed by any Target Company and whether and the extent to which
each of the Open Source Materials was used to develop, distribute or design any
Target Company products to link with (including dynamic linking at runtime) or
access in any way (whether by calls, execution branching, interprocess control
or other technique of any kind whatsoever) any Open Source Materials. Except as
set forth in Part 3.9.15 of the Company Disclosure Schedule, the Target
Companies have not (i) incorporated Open Source Materials into, or combined Open
Source Materials with, any Target Company products, (ii) distributed Open Source
Materials in conjunction with any Target Company products or (iii) used Open
Source Materials that create, or purport to create, obligations for any Target
Company with respect to Intellectual Property Rights or any Target Company
products or grant, or purport to grant, to any third party, any rights or
immunities under Intellectual Property Rights owned by or exclusively licensed
to any Target Company (including, but not limited to, using any Open Source
Materials that require, as a condition of use, modification and/or distribution
of such Open Source Materials that other software incorporated into, derived
from or distributed with such Open Source Materials be generally (A) made
available or distributed in source code form; (B) licensed for the purpose of
making derivative works; (C) licensed under terms that allow reverse
engineering, reverse assembly or disassembly of any kind; or (D) redistributable
at no charge). No Intellectual Property Right or Company product is subject to
the terms of license of any such Open Source Materials. No Target Company has
used Program Code (as defined below) that includes the Linux kernel version 2.4
or any later version. "OPEN SOURCE MATERIALS" means any software, library,
utility, tool or other computer or program code (collectively, "PROGRAM CODE")
that is licensed or distributed as "free software", "freeware", "open source
software" or under any terms or conditions that impose (other than by a Target
Company) any requirement that any software using, linked with, incorporating,
distributed with, based on, derived from or accessing Program Code: (i) be made
available or distributed generally in source code form; (ii) be generally
licensed for the purpose of making derivative works; (iii) be generally licensed
under terms that allow reverse engineering, reverse assembly or
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disassembly of any kind; or (iv) be generally redistributable at no charge. Open
Source Materials shall include, without limitation, any Program Code licensed or
distributed under any of the following licenses or distribution models or
similar licenses or distribution models: the GNU General Public License (GPL),
GNU Lesser General Public License or GNU Library General Public License (LGPL),
Mozilla Public License (MPL), BSD licenses, the Artistic License, the Netscape
Public License, the Sun Community Source License, (SCSL), the Sun Industry
Standards License (SISL) and the Apache License.
3.10 COMPLIANCE WITH LAWS.
3.10.1 Since January 1, 2004, no Target Company has been in conflict
with, or in default or violation of (i) any Legal Requirement applicable to such
Target Company or by which such Target Company or any of its properties or
assets was or is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or
obligation to which such Target Company was or is a party or by which such
Target Company or any of its properties or assets was or is bound or affected,
except for conflicts, violations and defaults that, individually or in the
aggregate, would not have a material adverse effect on the Company. No
investigation or review by any Governmental Entity is pending or, to the
Company's Knowledge, has been threatened or is reasonably anticipated against
any Target Company, nor, to the Company's Knowledge, has any Governmental Entity
indicated an intention to conduct an investigation of any Target Company. There
is no agreement, judgment, injunction, order or decree binding upon any Target
Company which has or could reasonably be expected to have the effect of
prohibiting or materially impairing any material business practice of any Target
Company, any acquisition of material property by any Target Company or the
conduct of business by any Target Company as currently conducted.
3.10.2 The Target Companies hold all permits, licenses, variances,
exemptions, orders and approvals from Governmental Entities that are material to
or required for the operation of the business of the Target Companies as
currently conducted (collectively, the "COMPANY PERMITS"), except where the
failure to hold a Company Permit would not be reasonably likely to result in a
Company Material Adverse Effect. The Target Companies are in compliance with the
terms of the Company Permits, except where the failure to comply would not be
reasonably likely to result in a Company Material Adverse Effect.
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3.11 LITIGATION. There are no claims, suits, actions or proceedings
pending or, to the Company's Knowledge, threatened or reasonably anticipated
against, relating to or affecting any Target Company, before any Governmental
Entity or any arbitrator. No Governmental Entity has at any time challenged or
questioned in a writing delivered to any Target Company the legal right of any
Target Company to design, offer or sell any of its products or services in the
present manner or style thereof or otherwise to conduct its business as
currently conducted or that otherwise has had or is reasonably likely to have a
Company Material Adverse Effect. To the Company's Knowledge, no event has
occurred, and no claim, dispute or other condition or circumstance exists, that
will, or that would reasonably be expected to, cause or provide a bona fide
basis for a director or executive officer of any Target Company to seek
indemnification from any Target Company.
3.12 EMPLOYEE BENEFIT PLANS.
3.12.1 Part 3.12.1 of the Company Disclosure Schedule contains an
accurate and complete list of each Company Employee Plan and each Employee
Agreement (other than Employee Agreements that are terminable at will without
further obligation (other than by operation of law) or that involve aggregate
payments of less than $10,000 after the date hereof), and each staff handbook or
written employment policies for each Target Company. Except as disclosed in Part
3.12.1 of the Company Disclosure Schedule, no Target Company is paying
compensation or other payment to any former Employee (or relative or dependent)
or former consultant.
3.12.2 The Company has provided to Parent accurate and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the IRS, the most recent annual report (Form
5500, with all applicable attachments), and all related trust agreements,
insurance contracts and other funding arrangements that implement each Company
Employee Plan, and all documents embodying each Employee Agreement listed on
Part 3.12.1 of the Company Disclosure Schedule.
3.12.3 Each of the Company and its ERISA Affiliates has performed in
all material respects all obligations required to be performed by it under, is
not in material default or violation of, and the Company has no Knowledge of any
default or violation by any other party to, each Company Employee Plan or
Employee Agreement, and each Company Employee Plan has been maintained, funded
and administered in all material respects in accordance with its terms and in
compliance in form and in operation with all applicable Legal Requirements
(including ERISA and the Code), including the maintenance of reasonably accurate
records. Each Company Employee Plan that is intended to meet the requirements of
a "qualified plan" under Section 401(a) of the Code has received a determination
from the IRS that such Company Employee Plan is so qualified, and nothing has
occurred since the date of such determination that could adversely affect the
qualified status of such plan; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan. There are no actions, suits, claims or proceedings
pending, or, to the Company's Knowledge, threatened or reasonably anticipated
(other than routine claims for benefits) against any Company Employee Plan and,
to the Knowledge of the Company, there are no facts or circumstances which may
give rise to any such action, suit, claim, proceeding or investigation.
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Each Company Employee Plan can be amended, terminated or otherwise discontinued
either before or after the Effective Time in accordance with its terms, without
liability to Parent, the Surviving Corporation, the Company or any of their
ERISA Affiliates (other than ordinary administration expenses typically incurred
in a termination event). All contributions due from the Company or any ERISA
Affiliate with respect to any of the Company Employee Plans have been made as
required under ERISA or have been accrued on the Company Balance Sheet and no
further contributions will be due or will have accrued thereunder as of the
Closing Date.
3.12.4 Neither any Target Company, nor any ERISA Affiliate
contributes to, has any obligation to contribute to, or has any liability under
or with respect to any Pension Plan which is subject to Title IV of ERISA or
Section 412 of the Code.
3.12.5 Neither any Target Company, nor any ERISA Affiliate
contributes to, has any obligation to contribute to, or has any material
liability (including withdrawal liability as defined in ERISA Section 4201)
under or with respect to any Multiemployer Plan.
3.12.6 No Company Employee Plan or Employee Agreement provides, or
has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any Person for any reason, except as may be
required by COBRA or other applicable statute.
3.12.7 Neither the Company nor any ERISA Affiliate has in any
material respect violated any of the health care continuation requirements of
COBRA, the requirements of FMLA or any similar provisions of law applicable to
any Employees.
3.12.8 The execution of this Agreement and the consummation of the
transactions contemplated hereby will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any Company
Employee Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, loss of rights, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee.
3.12.9 Each Company Employee Plan required to be listed in Part
3.12.1 of the Company Disclosure Schedule that is a "nonqualified deferred
compensation plan" (as defined in Section 409A(d)(1) of the Internal Revenue
Code) and was in existence prior to October 3, 2004, has not been "materially
modified" (within the meaning of Section 885(d)(2)(B) of the American Jobs
Creation Act of 2004 and any applicable guidance issued thereunder) since
October 3, 2004, in a manner which would cause amounts deferred in taxable years
beginning before January 1, 2005, under such plan to be subject to Section 409A
of the Internal Revenue Code. Each Company Employee Plan required to be listed
in Part 3.12.1 of the Company Disclosure Schedule that is a "nonqualified
deferred compensation plan" (as defined in Section 409A(d)(1) of the Internal
Revenue Code) and which has not been terminated has been operated since January
1, 2005 in good faith compliance with the provisions of Section 409A of the
Internal Revenue Code, Notice 2005-1 and the proposed regulations issued under
Section 409A.
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3.13 EMPLOYMENT MATTERS.
3.13.1 Each Target Company: (i) is in compliance in all material
respects with all applicable Legal Requirements respecting employment,
employment practices, immigration, terms and conditions of employment and wages
and hours; (ii) has withheld all amounts required by any Legal Requirement or by
agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) has properly classified independent contractors for purposes of
all applicable Legal Requirements; (iv) is not liable for any arrears of wages
or any Taxes (other than wages (and Taxes thereon) which have accrued in the
ordinary course of business but which are not yet payable) or any penalty for
failure to comply with any of the foregoing; and (v) is not liable for any
payment to any trust or other fund or to any Governmental Entity, with respect
to unemployment compensation benefits, social security, Canada Pension Plan or
other withholdings and remittances applicable to employee wages, or other
benefits or obligations for Employees (other than routine payments to be made in
the normal course of business and consistent with past practice). There are no
pending, or, to the Company's Knowledge, threatened or reasonably anticipated
actions, suits, claims or proceedings against any Target Company under any
workers' compensation policy or long-term disability policy. To the Company's
Knowledge, no Employee or consultant of any Target Company has violated any
employment, consulting, non-disclosure, non-competition, non-solicitation or
other agreement by which such Employee is bound (nor any Legal Requirement
relating to unfair competition, trade secrets or proprietary information) as a
result of providing services to any Target Company or disclosing or using any
information in connection with such services. There are no controversies pending
or, to the Company's Knowledge, threatened or reasonably anticipated, between
any Target Company and any Employee that would be reasonably likely to be
material to any Target Company. Except as set forth on Part 3.13.1 of the
Company Disclosure Schedule, no Target Company has any Employee Agreement
currently in effect that is not terminable at will by a Target Company without
any payment pursuant thereto or in connection therewith (other than agreements
for the sole purpose of providing for the confidentiality of proprietary
information or assignment of inventions). No Target Company will have any
liability to any Employee or to any other Person as a result of the termination
of any employee leasing arrangement.
3.13.2 No work stoppage, labor strike, slowdown, lockout or other
labor dispute against any Target Company is pending or, to the Company's
Knowledge, threatened or reasonably anticipated. No Employee of any Target
Company is represented by any union or other labor organization. The Company has
no Knowledge of any activities or proceedings of any labor union to organize any
Employees. There are no actions, suits, claims, labor disputes or grievances
pending, or, to the Company's Knowledge, threatened or reasonably anticipated
relating to any labor, safety or discrimination matters involving any Employee,
including charges of unfair labor practices or discrimination complaints, which,
if adversely determined, would, individually or in the aggregate, result in any
material loss to any Target Company. No Target Company has engaged in any unfair
labor practices within the meaning of the National Labor Relations Act. No
Target Company is or has been a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no collective
bargaining agreement is being negotiated by any Target Company.
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3.13.3 No Target Company has taken any action that could constitute
a "mass layoff", "group termination", "mass termination" or "plant closing"
which may trigger notice requirements or liability under any Legal Requirement,
including collective dismissal laws.
3.14 ENVIRONMENTAL MATTERS.
3.14.1 Each Target Company is in compliance in all material respects
with all applicable Environmental Laws. To the Knowledge of the Company, no
Target Company has received any communication that alleges that any Target
Company is not in compliance in all respects with all applicable Environmental
Laws. To the Knowledge of the Company, there are no circumstances that may
prevent or interfere with compliance by any Target Company with all applicable
Environmental Laws. All Company Permits and other governmental authorizations
currently held by any Target Company pursuant to any Environmental Law are in
full force and effect, the Target Companies are in compliance in all material
respects with all of the terms of such Company Permits and authorizations, and
no other Company Permits or authorizations material to the conduct of the
respective businesses of the Target Companies are required by any Target
Company. The management, handling, storage, transportation, treatment and
disposal by the Target Companies of all Environmental Materials have been in
compliance in all material respects with all applicable Environmental Laws.
3.14.2 There is no Environmental Claim pending or, to the Company's
Knowledge, threatened or reasonably anticipated against or involving any Target
Company or, to the Company's Knowledge, against any Person whose liability for
any Environmental Claim any Target Company has or may have retained or assumed
either contractually or by operation of law, nor, to the Company's Knowledge, is
there any circumstance that might form the basis for any Environmental Claim.
3.15 CERTAIN AGREEMENTS. Except as otherwise set forth in the applicable
lettered subsection of Part 3.15 of the Company Disclosure Schedule, no Target
Company is a party to or is bound by:
3.15.1 any plan, contract or arrangement, any of the benefits of
which will be increased, or the vesting of 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;
3.15.2 any agreement of indemnification (other than licenses to
customers of any Target Company required to be disclosed (or specifically
exempted from disclosure) pursuant to Section 3.15.5), any guaranty by a Target
Company or any instrument evidencing Indebtedness by way of direct loan, sale of
debt securities, purchase money obligation, conditional sale, or otherwise;
3.15.3 any agreement, obligation or commitment containing covenants
purporting to limit or which effectively limit any Target Company's freedom to
compete in any line of business or in any geographic area or which would so
limit Parent, the Company or the Surviving Corporation or any of their
respective Subsidiaries after the Effective Time or granting any exclusive
distribution or other exclusive rights;
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3.15.4 any agreement or commitment relating to the disposition or
acquisition by any Target Company of assets not in the ordinary course of
business;
3.15.5 any agreement or commitment with any customer with continuing
obligations entered into after January 1, 2002 and involving more than $10,000,
other than customers of only the Adapter Business;
3.15.6 any development, licensing, distribution, resale or other
agreement, contract or commitment with regard to the development, acquisition,
licensing, distribution or resale of any Intellectual Property Rights, other
than (i) licenses to customers of any Target Company required to be disclosed
(or specifically exempted from disclosure) pursuant to Section 3.15.5, (ii)
support and maintenance agreements required to be disclosed (or specifically
exempted from disclosure) pursuant to Section 3.15.5, (iii) agreements required
to be disclosed pursuant to Section 3.9, and (iv) agreements under which a
Target Company licenses Commercially Available Software from a third party;
3.15.7 any agreement to forgive any indebtedness in excess of
$10,000 of any Person to any Target Company;
3.15.8 any loan agreement, promissory note or other evidence of
Indebtedness;
3.15.9 any agreement (other than agreements required to be disclosed
pursuant to Section 3.9) pursuant to which any Target Company (A) uses any
intellectual property of any third party that is material to the operation of
its business (other than Commercially Available Software), (B) incorporates any
third-party intellectual property in any of its products; or (C) has granted to
any third party an exclusive license of any Intellectual Property Rights owned
by any Target Company or any license of source code (including customary source
code escrow arrangements entered into in the ordinary course of business);
3.15.10 any agreement (other than agreements required to be
disclosed pursuant to Section 3.9) which may obligate any Target Company to make
aggregate payments in excess of $25,000 to any third party during the period
from the date of this Agreement to December 31, 2007;
3.15.11 any agreement (other than agreements required to be
disclosed pursuant to Section 3.9) pursuant to which any Target Company (A)
reasonably expects to receive aggregate payments in excess of $50,000 during the
period from the date of this Agreement to December 31, 2007 or (B) reasonably
expects to recognize revenue in such aggregate amount during such period;
3.15.12 any agreement or commitment with any affiliate of any Target
Company (including any director, officer or stockholder of any Target Company),
except for (i) restricted stock agreements pursuant to a form furnished to
Parent and (ii) stock option agreements pursuant to the Company Option Plans
pursuant to a form furnished to Parent;
3.15.13 any agreement or commitment currently in force providing for
capital expenditures by any Target Company in excess of $25,000;
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3.15.14 any power of attorney or agency agreement or arrangement;
3.15.15 any other agreement or commitment that cannot be terminated
by the Target Company party thereto within 30 days without any liability or
obligation in excess of $25,000;
3.15.16 any other agreement or commitment entered into outside the
ordinary course of business or at other than arm's length; or
3.15.17 any other agreement or commitment currently in effect that
is material to the any Target Company's business as presently conducted or
proposed to be conducted.
Each plan, contract, agreement, arrangement or other commitment that is
required to be disclosed in the Company Disclosure Schedule pursuant to this
Section 3.15 or otherwise shall be referred to herein as a "COMPANY CONTRACT."
Each Company Contract is valid and in full force and effect in accordance with
its terms. No Target Company, nor to the Company's Knowledge, any other party
thereto, is in breach, violation or default under, and no Target Company has
received written notice alleging that it has breached, violated or defaulted
under, any of the terms or conditions of any Company Contract in such a manner
as would permit any other party thereto to cancel or terminate any such Company
Contract, or would permit any other party to seek material damages or other
remedies for any or all such alleged breaches, violations, or defaults.
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3.16 BROKERS' AND FINDERS' FEES. No Target Company has incurred, nor will
any of them incur, directly or indirectly, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
this Agreement or any transaction contemplated hereby. There are no Transaction
Expenses other than (a) fees and disbursements of Xxxxxxxxx Xxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, Deloitte & Touche LLP, and Perseus
Advisors, LLC, (b) the fees payable to the Escrow Agent pursuant to the Escrow
Agreement and (c) the Target Audit Fees.
3.17 INSURANCE. Part 3.17 of the Company Disclosure Schedule sets forth a
description of each insurance policy or bond which provides coverage for any
Target Company. Each Target Company has provided notice to its insurers in
accordance with the applicable insurance policies or bonds of all potential
claims of which such Target Company has Knowledge, and there is no material
claim pending under any of such policies or bonds as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
All premiums due and payable under all such policies have been paid, and each
Target Company is otherwise in compliance in all material respects with the
terms of such policies and bonds. To the Knowledge of the Company, there has
been no threatened or reasonably anticipated termination of, or material premium
increase with respect to, any of such policies. No Target Company has incurred
any material uninsured loss or casualty, nor does the Company have Knowledge of
any circumstance or occurrence that could result in a material uninsured loss or
casualty for any Target Company. No Target Company has made any knowing or
intentional misrepresentation of, or knowingly or intentionally omitted to
disclose, any material fact to any of its insurers that might justify denial by
such insurer of any coverage under any such policy or bond.
3.18 CUSTOMERS; ACCOUNTS RECEIVABLE.
3.18.1 Part 3.18 of the Company Disclosure Schedule lists each
customer of each Target Company from January 1, 2003 to the date hereof, other
than customers of only the Adapter Business. No such customer with license fees
in excess of $50,000 has indicated to any Target Company that it will or may
stop buying, discontinue services, or materially decrease the rate of buying
services or products of any Target Company.
3.18.2 The receivables shown on the Company Balance Sheet arose in
the ordinary course of business, consistent with past practice, and have been
collected or are collectible in the book amounts thereof, less the allowance for
doubtful accounts provided for on the Company Balance Sheet. Allowances for
doubtful accounts and warranty returns are adequate in all material respects and
have been prepared in accordance with GAAP consistently applied and in
accordance with the Company's past practices. The Target Companies' receivables
arising after the date of the Company Balance Sheet and prior to the Closing
Date arose in the ordinary course of business, consistent with past practice,
and have been collected or are collectible in the book amounts thereof, less a
reasonable allowance for doubtful accounts determined in accordance with the
Company's past practices. To the Company's Knowledge, none of the Target
Companies' receivables is subject to any material claim of setoff, recoupment or
counter claim and it has no Knowledge of any specific facts or circumstances
(whether asserted or unasserted) that could give rise to any such claim. No
receivables are contingent upon the performance by any Target Company of any
obligation or contract other than normal
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warranty repair and replacement or in the ordinary course of business under
support and maintenance agreements required to be disclosed (or specifically
exempted from disclosure) pursuant to Section 3.15.5. No Person has any
Encumbrance on any of such receivables and no agreement for deduction or
discount has been made with respect to any of such receivables.
3.19 BOARD APPROVAL. The Board of Directors of the Company has approved
this Agreement and declared the advisability of this Agreement and the Merger
and recommended that the stockholders of the Company approve and adopt this
Agreement and approve the Merger. The Board of Directors of the Company has
taken all actions so that the restrictions contained in Section 203 of Delaware
Law applicable to a "business combination" (as defined therein) will not apply
to the execution, delivery or performance of this Agreement or the consummation
of the Merger or the other transactions contemplated by this Agreement.
3.20 MINUTES AND STOCK RECORDS. The minute books of each Target Company
contain records that are accurate in all material respects of all meetings and
consents in lieu of meetings of its Board of Directors (or equivalent) and any
committees thereof (whether permanent or temporary), and of its stockholders (or
equivalent) since inception. The stock books (or equivalent) of each Target
Company accurately reflect the ownership of the capital stock (or equivalent) of
such Target Company. The Company has made available to Parent true, correct and
complete copies of the minutes, consents and stock books (and equivalents) of
each Target Company.
3.21 ACCOUNTING SYSTEM. The Company maintains a system of internal
accounting controls for the Target Companies at a comparable level to that of
other similarly situated private companies and sufficient to provide reasonable
assurance that (a) transactions are executed in accordance with management's
general or specific authorizations; (b) transactions are recorded as necessary
to permit preparation of financial statements in conformity with GAAP and to
maintain asset accountability; (c) access to assets is permitted only in
accordance with management's general or specific authorization; and (d) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. To the Company's Knowledge, there is no significant deficiency or
material weakness in the Company's internal control over financial reporting.
Part 3.21 of the Company Disclosure Schedule includes complete and accurate
copies of any management letter or similar correspondence from any independent
auditor of the Target Companies.
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3.22 CORRUPT PRACTICES. No Target Company has taken any action which would
cause it to be in violation of the Foreign Corrupt Practices Act of 1977, as
amended, or any rules and regulations thereunder. No Target Company has paid any
commission or made any payment whether to secure business or otherwise to any
Person which in the hands of such Person would in accordance with the relevant
Legal Requirement be regarded as illegal or improper. No director, officer,
employee, agent or other Person acting on behalf of any Target Company has been
a party to the use of any assets of any Target Company for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to any
activity, including any political activity, or to the establishment or
maintenance of any unlawful or unrecorded fund of monies or other assets, or to
the making of any false or fictitious entries in the books or records of any
Target Company, or to the making of any unlawful payment.
3.23 DISCLOSURE. None of this Agreement, the Company Disclosure Schedule,
or any certificate to be executed or delivered pursuant hereto by the Company at
or prior to the Closing Date, is false or misleading or contains any
misstatement of a material fact, or omits to state any material fact required to
be stated in order to make the statements herein or therein not misleading in
light of the circumstances under which they were made. There is no fact Known to
the Company and not disclosed to Parent in writing that is reasonably likely to
give rise to a Company Material Adverse Effect or to have the effect of
preventing, materially delaying, making illegal or otherwise interfering with
the Merger and the other transactions contemplated by this Agreement.
3.24 VOTING AGREEMENT. Each Company Preferred Stockholder (including
holders of shares of Series AA-2 Preferred Stock issued on or about the date
hereof upon the exercise of options to purchase such shares) and each Key Common
Holder (as defined in the Voting Agreement) is, and after the Effective Time
will be, bound by Section 5 of the Voting Agreement. The Merger and the other
transactions contemplated by this Agreement constitute a "Sale of the Company"
(as defined in the Voting Agreement). The Principal Stockholders collectively
hold more than sixty percent (60%) of the Investor Shares (as defined in the
Voting Agreement) (voting together as a single class and not as separate series
and on an as-converted basis).
3.25 PRIVATE PLACEMENT. Each Company Preferred Stockholder that is not a
Principal Stockholder is an "accredited investor" within the meaning of Rule
501(a) of Regulation D under the Securities Act. The Company has received
written representations from each Company Preferred Stockholder regarding such
Company Preferred Stockholder's status as such an "accredited investor." The
Company acknowledges and agrees that Parent is relying on this representation in
entering into this Agreement and offering shares of Parent Stock pursuant to the
Merger.
3.26 INFORMATION STATEMENT. The information regarding the Company supplied
by the Company for inclusion in the Information Statement shall not contain any
untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company and the Company
Stockholders as set forth in this Article 4, subject to any exceptions expressly
stated in the disclosure schedule delivered by Parent to the Company dated as of
the date hereof and certified by a duly authorized officer of Parent (the
"PARENT DISCLOSURE SCHEDULE"). Exceptions on the Parent Disclosure Schedule
shall specifically identify the representation to which they relate; provided,
however, that any matter disclosed pursuant to one section or subsection of the
Parent Disclosure Schedule is deemed disclosed for such other sections or
subsections of the Parent Disclosure Schedule as, and only to the extent that,
it is reasonably apparent that such matter relates to such other section or
subsection of the Parent Disclosure Schedule and the level of particularity and
manner of disclosure of the matter expressly disclosed in one section or
subsection of the Parent Disclosure Schedule would make a reasonable person
aware that such disclosure is relevant to such other sections or subsections.
4.1 ORGANIZATION OF PARENT AND MERGER SUB. Each of Parent and Merger Sub
(i) is a corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized; (ii) has the corporate or
other power and authority to own, lease and operate its assets and property and
to carry on its business as now being conducted; and (iii) except as would not
be material to Parent, is duly qualified or licensed to do business in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its activities makes such qualification or licensing
necessary.
4.2 AUTHORITY; NON-CONTRAVENTION.
4.2.1 Parent and Merger Sub have all requisite corporate power and
authority to enter into this Agreement and the Escrow Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Parent and Merger Sub of this Agreement and the Escrow Agreement and
the consummation by Parent and Merger Sub of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub, subject only to the adoption and approval
of this Agreement and the Merger by Parent as the sole stockholder of Merger Sub
and the filing of the Certificate of Merger pursuant to Delaware Law. No
approval of any holder of any securities of Parent is required in connection
with the consummation of the transactions contemplated hereby. This Agreement
has been duly executed and delivered by Parent and Merger Sub and, assuming the
due authorization, execution and delivery of this Agreement by the other
Parties, constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable against Parent and Merger Sub in accordance with its terms, except
as enforceability may be limited by bankruptcy and other similar laws affecting
the rights of creditors generally and general principles of equity. Assuming the
due authorization, execution and delivery of the Escrow Agreement by the Company
Stockholder Representative and the Escrow Agent, the Escrow Agreement, when
executed and delivered by Parent and Merger Sub, will constitute the valid and
binding obligations of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms, except as enforceability may be limited
by bankruptcy and other similar laws affecting the rights of creditors generally
and general principles of equity.
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4.2.2 The execution and delivery of this Agreement and the Escrow
Agreement by Parent and Merger Sub does not, and the performance of this
Agreement and the Escrow Agreement by Parent and Merger Sub will not, (i)
conflict with or violate the Articles of Organization or By-Laws of Parent or
the Certificate of Incorporation or By-Laws of Merger Sub, (ii) subject to
compliance with the requirements set forth in Section 4.2.3 below, conflict with
or violate any material Legal Requirement applicable to Parent or Merger Sub or
by which any of their respective material properties or assets is bound or
affected, or (iii) result in any material breach of or constitute a material
default (or an event that with notice or lapse of time or both would become a
material default) under or materially impair Parent or Merger Sub's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a material Encumbrance on any of the properties or assets of
Parent or Merger Sub pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, concession, or other
instrument or obligation to which Parent or Merger Sub is a party or by which
Parent or Merger Sub or any of their respective material properties or assets
are bound or affected.
4.2.3 No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or other Person
is required to be obtained or made by Parent or Merger Sub in connection with
the execution and delivery of this Agreement or the Escrow Agreement or the
consummation of the Merger, except for the filing of (i) the Certificate of
Merger with the Secretary of State of the State of Delaware, (ii) a notification
of the acquisition of control of an existing Canadian business under the
Investment Canada Act and (iii) such other filings as may be necessary under the
Securities Act or the securities or "blue sky" laws of any jurisdiction.
4.3 LITIGATION. There are no claims, suits, actions or proceedings pending
or, to Parent's Knowledge, threatened or reasonably anticipated, against,
relating to or affecting Parent or any of its Subsidiaries, before any
Governmental Entity or any arbitrator that seeks to restrain or enjoin the
consummation of the transactions contemplated by this Agreement or which could
reasonably be expected, either singularly or in the aggregate with all such
claims, actions or proceedings, to have a material adverse effect on the ability
of the Parties hereto to consummate the Merger.
4.4 BROKERS' AND FINDERS' FEES. Parent has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
4.5 SUFFICIENT FUNDS. As of the date hereof, Parent has sufficient
unrestricted cash on hand to pay the Base Merger Consideration and all costs and
expenses incurred by Parent in connection with the transactions contemplated
hereby.
4.6 PRIVATE PLACEMENT. Subject to the truth and accuracy of the
representations of the Company Stockholders in Article 2 of this Agreement and
the representations of the Company in Section 3.25 of this Agreement, the offer,
sale and issuance of the Parent Stock as contemplated by this Agreement are
exempt from the registration or qualification requirements of any applicable
state and federal securities laws, and neither Parent nor any authorized agent
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acting on its behalf will knowingly take any action hereafter that would cause
the loss of such exemption.
4.7 BUSINESS OF PARENT. Parent's business includes, directly or indirectly
through one or more Subsidiaries, the development and sale of the products
listed in Part 4.7 of the Parent Disclosure Schedule.
4.8 INFORMATION STATEMENT. The information regarding Parent supplied by
Parent for inclusion or incorporation by reference in the Information Statement
shall not contain any untrue statement of a material fact, or omit to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
ARTICLE 5
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 CONDUCT OF BUSINESS BY THE COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company shall, and
shall cause each Target Company, except to the extent that Parent shall
otherwise consent in writing, which consent shall not be unreasonably withheld,
carry on its business in the usual, regular and ordinary course, in
substantially the same manner as heretofore conducted and in compliance in all
material respects with all applicable Legal Requirements, pay its debts and
Taxes when due subject to good faith disputes over such debts or Taxes, pay or
perform other material obligations when due, limit its capital expenditures to
$25,000 in the aggregate, and use commercially reasonable efforts consistent
with past practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees (subject to attrition not materially different than past practices),
(iii) collect its accounts receivable and any other amounts payable to it when
due and otherwise enforce any obligations owed to it by others substantially in
accordance with their terms, (iv) preserve its relationships with customers,
suppliers, licensors, licensees, and others with which it has business dealings,
and (v) engage in any action with the intent to directly or indirectly adversely
affect any of the transactions contemplated by this Agreement, including with
respect to any "poison pill" or similar plan, agreement or arrangement, or any
anti-takeover, control share acquisition, fair price, moratorium or other
similar statute (each, a "TAKEOVER STATUTE"). In addition, the Company will
promptly notify Parent of any material adverse event involving its business or
operations. Any act or omission requiring action by, or the consent or approval
of the Board of Directors (or equivalent) or stockholders (or equivalent) of any
Target Company shall be deemed to be out of the ordinary course of business.
5.2 TAX MATTERS. Without the prior written consent of Parent, which
consent shall not be unreasonably withheld, the Company shall not, and shall
cause each Target Company not to, make or change any election, change an annual
accounting period, adopt or change any accounting method, file any amended Tax
Return, enter into any closing agreement, settle any Tax claim or assessment
relating to any Target Company, surrender any right to claim a refund of Taxes,
consent to any extension or waiver of the limitation period applicable to any
Tax claim or assessment relating to any Target Company, or take any other
similar action relating to the filing of any Tax Return or the payment of any
Tax, if such election, adoption, change,
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amendment, agreement, settlement, surrender, consent or other action would have
the effect of increasing the Tax liability of any Target Company for any period
ending after the Closing Date or decreasing any Tax attribute of any Target
Company existing on the Closing Date.
ARTICLE 6
COVENANTS
6.1 INFORMATION STATEMENT.
6.1.1 Promptly after the execution of this Agreement, Parent and the
Company jointly shall circulate to certain holders of Company Stock an
information statement (the "INFORMATION STATEMENT") for use by the Board of
Directors of the Company in connection with its solicitation of the written
consent of the holders of Company Stock and in connection with the offer by
Parent of shares of Parent Stock pursuant to the Merger. The Information
Statement shall be in form and substance reasonably acceptable to each of Parent
and the Company. The Information Statement shall include notice under Delaware
Law and California Law that the holders of Company Stock are or may be entitled
to assert dissenters' or appraisal rights under such laws. Each of Parent and
the Company shall provide promptly to the other such information concerning its
business and affairs as the other shall reasonably request. The Company will
promptly advise Parent, and Parent will promptly advise the Company, if at any
time prior to the Effective Time either the Company or Parent, as applicable,
shall obtain knowledge of any facts that might make it necessary or appropriate
to amend or supplement the Information Statement in order to make the statements
contained or incorporated by reference therein not misleading or to comply with
applicable law. The Information Statement shall contain the unanimous
recommendation of the Board of Directors of the Company that the holders of
Company Stock approve the Merger and this Agreement.
6.2 OTHER HOLDERS OF COMPANY STOCK. Promptly after the date hereof, the
Company and the Principal Stockholders will commence, and continue to use,
commercially reasonable efforts to obtain from each Company Preferred
Stockholder (other than the Principal Stockholders), within ten business days of
the date hereof, a written agreement in form and substance reasonably
satisfactory to Parent, pursuant to which such holder shall agree to become a
party to, and be bound by the terms and conditions (including representations
and warranties) of this Agreement and the Escrow Agreement (each, a "STOCKHOLDER
AGREEMENT"). The obligations of the Company and the Principal Stockholders in
this Section 6.1 shall not be limited or otherwise affected by the commencement,
disclosure, announcement or submission of any proposal for any third-party
acquisition transaction described in Section 6.5. At the request of Parent from
time to time, the Company and the Principal Stockholders shall apprise Parent of
their progress toward obtaining such agreements and shall provide such
documentation thereof as Parent shall reasonably request.
6.3 APPROVAL BY STOCKHOLDERS OF THE COMPANY.
6.3.1 Each Principal Stockholder shall, simultaneously with the
execution of this Agreement, pursuant to Section 228 of Delaware Law (and, if
applicable, the California Law), execute and deliver to the Company and Parent
the written consent of such Principal Stockholder to the adoption and approval
of this Agreement and the Merger in form and
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substance satisfactory to Parent. The Company shall, simultaneously with the
execution of this Agreement, cause such other Persons to so execute and deliver
to the Company and Parent such written consent so that the Required Stockholder
Approval shall have been obtained simultaneously with the execution of this
Agreement.
6.3.2 The Company Stockholders hereby waive, on behalf of themselves
and all other holders of Company Stock, compliance by the Company with any
requirement to give notice of this Agreement and the Merger, including pursuant
to Section 2(e) of Article IV.B. of the Certificate of Incorporation of the
Company.
6.4 CONFIDENTIALITY. Each Company Stockholder will treat and hold all of
the Confidential Information as confidential and refrain from using any of the
Confidential Information except in connection with the enforcement of this
Agreement. In the event that any Company Stockholder is requested or required
pursuant to oral or written question or request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar process to disclose any Confidential Information, such Company
Stockholder will notify Parent and the Surviving Corporation promptly of the
request or requirement so that Parent and the Surviving Corporation may seek an
appropriate protective order or waive compliance with the provisions of this
Section 6.4. If, in the absence of a protective order or the receipt of a waiver
hereunder, any Company Stockholder is legally required to disclose any
Confidential Information other than pursuant to any agreement, contract,
obligation or other undertaking of such Company Stockholder, such Company
Stockholder may disclose the Confidential Information to the extent so required
(but only to the extent so required); provided, however, that the disclosing
Company Stockholder shall permit, to the maximum extent possible, Parent and the
Surviving Corporation to seek, prior to any such disclosure, an order or other
assurance that confidential treatment will be accorded to the Confidential
Information required to be disclosed. Each Company Stockholder will cooperate
with Parent and the Surviving Corporation in seeking such treatment. The
provisions of this Section 6.4 shall survive termination of this Agreement for
any reason.
6.5 NO SOLICITATION.
6.5.1 From and after the date of this Agreement until the Effective
Time or termination of this Agreement pursuant to its terms, the Company will
not and will cause each Target Company not to, and the Company Stockholders will
not, nor will they authorize or permit any of their respective officers,
directors, affiliates or employees or any investment banker, attorney or other
consultant, advisor or representative retained by any of them to, directly or
indirectly, (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal, (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any nonpublic information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any Person with respect
to any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition
Proposal or (v) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Acquisition Proposal. The Company will and will cause each Target Company to,
and the Company Stockholders will, immediately cease any and all existing
activities, discussions or negotiations with any Persons conducted heretofore
with
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respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding two
sentences by any Target Company, or by any officer, director, affiliate or
employee of any Target Company or any of the Company Stockholders or any
investment banker, attorney or other consultant, advisor or representative of
any Target Company or any of the Company Stockholders shall be deemed to be a
breach of this Section 6.5 by the Company.
6.5.2 In addition to the obligations of the Company and the Company
Stockholders set forth in Section 6.5.1, each of the Company and the Company
Stockholders as promptly as practicable, and in any event within 24 hours of its
receipt, shall advise Parent orally and in writing of an Acquisition Proposal or
any request for nonpublic information or other inquiry which the Company or such
Company Stockholder reasonably believes could lead to an Acquisition Proposal,
the material terms and conditions of such Acquisition Proposal, request or
inquiry, and the identity of the Person or group making any such Acquisition
Proposal, request or inquiry. The Company and the Company Stockholders will keep
Parent informed as promptly as practicable in all material respects of the
status and details (including material amendments or proposed amendments) of any
such Acquisition Proposal, request or inquiry.
6.6 PUBLIC DISCLOSURE. Parent, Merger Sub, the Company, the Target
Companies and the Company Stockholders will not make any public disclosure
concerning the Merger or any of the other transactions contemplated hereby
without the prior written consent of Parent and the Company, except as Parent
may be required by law or any listing agreement with the Nasdaq Stock Market,
Inc.
6.7 REASONABLE EFFORTS; NOTIFICATION.
6.7.1 Upon the terms and subject to the conditions set forth in this
Agreement, each of the Parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other Parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using all commercially reasonable efforts to accomplish the
following: (i) causing the conditions precedent set forth in Article 8 to be
satisfied, (ii) obtaining all necessary actions or non-actions, waivers,
consents, approvals, orders and authorizations from Governmental Entities and
making all necessary registrations, declarations and filings (including
registrations, declarations and filings with Governmental Entities) and taking
all steps that may be necessary to avoid any suit, claim, action, investigation
or proceeding by any Governmental Entity, (iii) obtaining all necessary
consents, approvals or waivers from, and giving all necessary notices to, third
parties, (iv) defending any suits, claims, actions, investigations or
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of the transactions contemplated hereby, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (v) executing and delivering any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement.
6.7.2 Parent and Merger Sub, on the one hand, and the Company, on
the other hand, will give prompt notice to the other of (i) any notice or other
communication from any
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Person alleging that the consent of such Person is or may be required in
connection with the Merger, (ii) any notice or other communication from any
Governmental Entity in connection with the Merger and (iii) any litigation
relating to, involving or otherwise affecting the consummation of the Merger or
the other transactions contemplated hereby.
6.8 BENEFIT PLANS. From and after the Closing, each employee of any Target
Company shall be eligible to participate in the employee benefit plans of Parent
(the "PARENT BENEFIT PLANS") to the same extent as any similarly situated and
geographically located employee of Parent and its affiliated companies. All
employee welfare benefit plans of Parent which Parent elects to continue after
the Effective Time and in which the employees of any Target Company shall be
entitled to participate after the Effective Time shall, to the extent permitted
by applicable Legal Requirements and the terms of such plans (including any
approval requirements), (a) recognize expenses and claims that were incurred by
the employees of the Target Companies in the year in which the Effective Time
occurs for purposes of computing deductible amounts, co-payments or other
limitations on coverage under such plans and (b) provide coverage for
pre-existing health conditions of any employee of any Target Company. In
addition, for eligibility and vesting purposes (but not for benefit computation
or accrual purposes) under plans of Parent, service by an employee for a Target
Company prior to the Effective Time shall be taken into account to the same
extent as service for Parent; provided, that nothing herein shall require the
inclusion of any such Employee in any such plan prior to the Effective Time; and
further provided, that in determining the amount of vacation time to which any
such Employee shall be entitled from and after the Effective Time under the
applicable terms of the vacation policy of Parent (which terms need not be
comparable to the terms of the vacation plan or policy of the Company), credit
shall be given (up to the limits provided for in the vacation policy of Parent)
for such Employee's service for any Target Company prior to the Effective Time
(it being understood that Parent does not have a policy of paying for unused
vacation time during employment). Nothing in this Section 6.8 shall obligate
Parent or any of its affiliated companies to employ any person for any period of
time after the Closing, and this Section 6.8 shall not be construed to limit the
ability of Parent or any of its affiliated companies to alter the terms and
conditions of, or terminate, the employment of any person. In addition, nothing
contained in this Section 6.8 shall be deemed to prevent Parent from amending or
terminating any Parent Benefit Plan in accordance with its terms.
6.9 INDEMNIFICATION, EXCULPATION AND INSURANCE PLANS.
6.9.1 Parent agrees that all rights to indemnification and
exculpation (including the advancement of expenses) from liabilities for acts or
omissions occurring at or prior to the Effective Time (including with respect to
the transaction contemplated by this Agreement) now existing in favor of the
current or former directors or officers of the Target Companies as provided in
their respective certificates of incorporation or by-laws (or comparable
organizational documents) and indemnification agreements (as each is in effect
on the date hereof), shall be assumed by the Surviving Corporation in the
Merger, without further action, as of the Effective Time, shall survive the
Merger and shall continue in full force and effect in accordance with their
terms, and Parent shall cause the Surviving Corporation to honor all such
rights.
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6.9.2 In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any Person, or otherwise dissolves, then, and in each
such case, Parent shall cause proper provision to be made so the successors and
assigns of the Surviving Corporation assume the obligations set forth in this
Section 6.9.
6.9.3 The provisions of this Section 6.9: (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
6.10 COMPANY 401(K) PLAN. Prior to the Effective Time, each Target Company
shall terminate its 401(k) plan effective as of the date immediately prior to
the Effective Time, but contingent on the Effective Time. Parent hereby agrees
that it will use its commercially reasonable efforts to cause its 401(k) plan to
accept rollovers or direct rollovers of "eligible rollover distributions" within
the meaning of Section 402(c) of the Code made with respect to the Target
Companies' employees pursuant to the Target Companies' 401(k) plan(s) by reason
of the transactions contemplated by this Agreement. Rollover amounts contributed
to Parent's 401(k) plan in accordance with this Section 6.10 shall at all times
be 100% vested and shall be invested in accordance with the provisions of
Parent's 401(k) plan.
6.11 TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger or the other transactions contemplated by this
Agreement, each of the Parties shall grant such approvals and take such lawful
actions as are necessary to eliminate or minimize the effects of such Takeover
Statute and any regulations promulgated thereunder on such transactions.
6.12 COMPANY AUDITED FINANCIAL STATEMENTS. Parent shall use commercially
reasonable efforts to prepare or cause to be prepared the Company Audited
Financial Statements within 75 days after the Effective Time. Parent shall file
the Company Audited Financial Statements with the SEC on Form 8-K as promptly as
practicable after they become available.
6.13 SHELF REGISTRATION STATEMENT.
6.13.1 Subject to the terms and conditions of this Section 6.13,
Parent hereby agrees to prepare and file with the SEC a registration statement
(the "SHELF REGISTRATION STATEMENT") under Rule 415 under the Securities Act (or
any successor rule relating to continuous offerings by security holders), with
respect to the resale of the shares of Parent Stock issued pursuant to the
Merger (the "REGISTRABLE SHARES"), provided that at the time of the filing of
the Shelf Registration Statement (i) Parent shall be eligible to use Form S-3
(or any successor short-form registration statement available for such resale
that permits incorporation by reference at least to the same extent as Form S-3)
with respect to the disposition of such Registrable Securities and (ii) Parent
shall have received a consent from each independent accountant whose audit
report is required to be included or incorporated by reference in the Shelf
Registration Statement. Parent shall use commercially reasonable efforts to
obtain any such consent.
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6.13.2 Parent shall use commercially reasonable efforts to (i) cause
the Shelf Registration Statement to become effective on the same date on which
Parent shall file the Company Audited Financial Statements with the SEC on Form
8-K, and (ii) maintain the effectiveness of the Shelf Registration Statement
until the close of business on the first anniversary of the termination of the
Stock Election Period; provided, however, that Parent's obligations under this
Section 6.13.2 shall be suspended during any period (A) when Parent shall
conclude in its sole discretion exercised in good faith, after consultation with
its legal counsel, that it is advisable to suspend use of any prospectus as a
result of pending corporate developments, the disclosure requirements of the
securities laws or other events deemed material by Parent or (B) when the filing
or effectiveness of the Shelf Registration Statement could, in the good faith
opinion of Parent, after consultation with its financial advisors, impair
Parent's ability to pursue a material financing, acquisition or other
transaction. Parent shall prepare and file with the SEC such amendments and
supplements to the Shelf Registration Statement and the prospectus used in
connection therewith as may be necessary in its opinion to comply with its
obligations under this Section 6.13.2.
6.13.3 If Parent's obligations under Section 6.13.2 are suspended
for any reason, Parent shall promptly provide each Company Preferred Stockholder
then holding Registrable Shares with notice (which may provided in writing,
orally or electronically) of both the commencement and termination of the period
of suspension. After receipt of such notice, no Company Preferred Stockholder
shall offer, sell, pledge, hypothecate, transfer, distribute or otherwise
dispose of, in reliance on the Shelf Registration Statement, any Registrable
Securities during any period in which Parent's obligations under Section 6.13.2
are suspended.
6.13.4 It shall be a condition to Parent's obligations to any
Company Preferred Stockholder under this Section 6.13 that such Company
Preferred Stockholder (i) shall have promptly taken all such actions as Parent
shall reasonably request in connection with the Shelf Registration Statement and
(ii) shall have provided promptly (and in any event within seven business days)
such information and other materials as Parent or its counsel shall request in
connection with the Shelf Registration Statement. Each Company Preferred
Stockholder represents, warrants and agrees that all such information provided
by such Company Preferred Stockholder or on behalf of such Company Preferred
Stockholder shall be true, complete and correct. If any information provided by
a Company Preferred Stockholder shall cease to be true, complete and correct,
such Company Preferred Stockholder shall promptly provide the true, complete and
correct information to Parent. Each Company Preferred Stockholder shall provide
Parent with a valid e-mail address which Parent may use for communications
regarding the Shelf Registration Statement. Such Company Preferred Stockholder
shall comply with the Securities Act and any other Legal Requirements applicable
to any disposition of Registrable Securities pursuant to the Shelf Registration
Statement. Such Company Preferred Stockholder shall pay all expenses incurred by
such Company Preferred Stockholder in connection with the disposition of such
Company Preferred Stockholder's Registrable Securities, including any broker's
fees or commissions, selling expenses, messenger and delivery expenses, and fees
and expenses of any counsel retained by such Company Preferred Stockholder (it
being understood that no Company Preferred Stockholder shall be required to pay
any expenses incurred by Parent in connection with the preparation, filing and
maintenance of the Shelf Registration Statement). All of Parent's obligations to
Company Preferred Stockholder under this Section 6.13 shall terminate on the
date on which all of such Company Preferred Stockholder's Registrable Securities
may be sold at one
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time under Rule 144 under the Securities Act. Parent's obligations under this
Section 6.13 may be waived by either Company Preferred Stockholders who
initially held a majority of the Registrable Securities or Company Preferred
Stockholders who at the time of the waiver hold a majority of the Registrable
Securities then eligible for sale under the Shelf Registration Statement.
6.14 COMPANY EMPLOYEE BONUSES. Parent shall cause the Surviving
Corporation to pay that portion of the Company Employee Bonuses due at Closing
within five business days following the Closing. Parent shall cause the
Surviving Corporation to pay the remaining portion of the Company Employee
Bonuses (the "WITHHELD COMPANY EMPLOYEE BONUSES") within five business days
following the distribution to the Company Stockholders of proceeds from the
Escrow Fund, such Withheld Company Employee Bonuses to be subject to reduction
in an amount proportional to the amount by which the Escrow Fund has been
reduced as a result of indemnified claims before the Escrow Fund is released to
the Company Stockholders.
6.15 UPSTREAM MERGER. In the event that the Merger fails to qualify as a
tax-free reorganization described in Sections 368(a)(2)(E) and 368(a)(1)(A) of
the Code, Parent will not cause the Surviving Corporation to be merged into
Parent or any affiliate of Parent in a transaction in which Parent or such
affiliate is the surviving entity at any time within eighteen months after the
Effective Date.
6.16 TERMINATION OF FINANCING DOCUMENTS. The Company and the Company
Stockholders agree that immediately prior to the Effective Time each of the
Financing Documents shall be terminated and have no further force and effect,
except for such sections of the Voting Agreement as shall be necessary to
preserve the effect of Section 5 thereof, each of which shall remain in full
force and effect until Parent shall determine otherwise.
ARTICLE 7
INDEMNIFICATION; SURVIVAL OF REPRESENTATIONS
7.1 AGREEMENT TO INDEMNIFY.
7.1.1 Subject to the terms and conditions of this Article 7, each
Company Stockholder, severally and not jointly, hereby agrees (without any right
of indemnification, contribution or subrogation from or against any Target
Company or the Surviving Corporation or any of its Subsidiaries) to indemnify,
defend and hold harmless Parent and each of its Subsidiaries and each of their
respective directors, officers, employees, agents and affiliates (collectively,
the "PARENT INDEMNIFIED PARTIES") from and against any loss, claim, liability,
damage, cost or expense (including costs and reasonable attorneys' fees and
disbursements) suffered, incurred or paid by any Parent Indemnified Party
(collectively, all such amounts are hereinafter referred to as "PARENT CLAIMS")
for any of the following: (i) as a result of any breach of any representation or
warranty of such Company Stockholder in (A) Article 2, Section 1.14, Section
6.13 or Section 7.5 of this Agreement or (B) if executed by such Company
Stockholder, the Stockholder Agreement (or other instrument accepted by Parent
in lieu thereof), and (ii) as a result of any breach of any covenant or
agreement of such Company Stockholder in this Agreement or such Stockholder
Agreement (or such other instrument). For the avoidance of doubt, no Company
Stockholder shall have any obligation to indemnify or hold harmless any
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Parent Indemnified Party for any Parent Claim as a result of any such breach by
another Company Stockholder.
7.1.2 Subject to the terms and conditions of this Article 7, the
Company Stockholders, jointly and severally, hereby agree (without any right of
indemnification, contribution or subrogation from or against any Target Company
or the Surviving Corporation or any of its Subsidiaries) to indemnify, defend
and hold harmless the Parent Indemnified Parties from and against any Parent
Claims for any of the following: (i) as a result of any breach of any
representation or warranty in Article 3 of this Agreement, (ii) as a result of
any breach of any representation or warranty of the Company in the Company
Officer Certificate or the Company Secretary Certificate, (iii) as a result of
any breach, but solely prior to the Effective Time, of any covenant or agreement
of the Company in this Agreement, (iv) as a result of any act or failure to act,
or any alleged act or alleged failure to act, of the Company Stockholder
Representative (including fraud, gross negligence, willful misconduct or bad
faith by the Company Stockholder Representative), (v) as a result of there being
any Outstanding Indebtedness (including the amount thereof), other than
Outstanding Indebtedness which is (A) set forth on the certificate delivered to
Parent pursuant to Section 1.8.4 and (B) deducted from the total consideration
paid at the Closing pursuant to Section 1.8.1, (vi) as a result of there being
any Excess Transaction Expenses (including the amount thereof), other than
Excess Transaction Expenses which are (A) set forth on the certificate delivered
to Parent pursuant to Section 1.8.4 and (B) deducted from the total
consideration paid at the Closing pursuant to Section 1.8.1, (vii) as a result
of the commencement or exercise, or attempted exercise, by any holder of Company
Stock of appraisal or dissenters' rights in connection with the transactions
contemplated by this Agreement or any other Stockholder Action, and (viii) as a
result of any claim by any director, officer, employee or other indemnitee of
any Target Company for indemnification, contribution or advancement of expenses
pursuant to the Certificate of Incorporation or By-Laws of the Company (or other
organization documents of any other Target Company) or any indemnification
agreement with any Target Company.
7.1.3 With respect to any Parent Indemnified Party other than
Parent, the Company Stockholders and the Company Stockholder Representative
acknowledge and agree that Parent is contracting on its own behalf and for such
Parent Indemnified Party and Parent shall obtain and hold the rights and
benefits provided for in this Section 7.1 in trust for and on behalf of such
Parent Indemnified Party.
7.1.4 Solely for purposes of determining the amount of any Parent
Claim resulting from any breach of any representation, warranty, covenant or
agreement (but not for purposes of determining whether or not any such breach
has occurred), such amount shall be determined as if each such representation,
warranty, covenant or agreement contained no qualification as to materiality or
Company Material Adverse Effect.
7.2 SURVIVAL; LIMITATION OF LIABILITY.
7.2.1 Except as set forth in this Section 7.2, all representations,
warranties, covenants and agreements made by any Party in this Agreement, the
Company Officer Certificate, the Company Secretary Certificate, the Escrow
Agreement and any Stockholder
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Agreement (or other instrument accepted by Parent in lieu thereof) shall survive
the Closing and any investigation at any time made by or on behalf of any other
Party.
7.2.2 A Parent Claim may be brought only if Parent has given the
Company Stockholder Representative written notice of such Parent Claim (i) in
the case of Parent Claims under Section 7.1.2(i) or Section 7.1.2(ii) (in each
case, other than with respect to IP Representations and Core Representations) or
under Section 7.1.2(v) or Section 7.1.2(vi), on or before the date which is
fifteen (15) months after the Closing Date, (ii) in the case of Parent Claims
under Section 7.1.2(i) or Section 7.1.2(ii), in each case with respect to IP
Representations, on or before the third anniversary of the Closing Date, and
(iii) in the case of Parent Claims under Section 7.1.2(i) or Section 7.1.2(ii),
in each case with respect to Core Representations, on or before the expiration
of the statute of limitations applicable with respect to such Parent Claim.
7.2.3 No indemnification shall be required to be made by the Company
Stockholders for Parent Claims under Section 7.1.2(i) or Section 7.1.2(ii)
(other than the representation in Section 3.2.5) unless the total amount of all
Parent Claims exceeds $200,000 in the aggregate, in which case the Company
Stockholders' indemnification obligations shall extend to the full amount of all
such Parent Claims, relating back to the first dollar.
7.2.4 Notwithstanding anything contained in this Agreement to the
contrary, the aggregate liability of the Company Stockholders shall not exceed
the following limits:
7.2.4.1 in the case of Parent Claims under Section 7.1.2(i),
Section 7.1.2(ii) (in each case, other than to the extent arising from IP
Representations or Core Representations), Section 7.1.2(v) or Section
7.1.2(vi), the limit shall be an aggregate amount equal to the Escrow
Fund; or
7.2.4.2 in the case of Parent Claims under Section 7.1.2(i) or
Section 7.1.2(ii), in each case to the extent arising from IP
Representations, together with all other Parent Claims subject to the
limit under Section 7.2.4.1, the limit shall be an aggregate amount equal
to seventy-five percent (75%) of the Total Merger Consideration; provided,
however, that the limit under this Section 7.2.4.2 for Parent Claims first
made after the first anniversary of the Closing Date shall be an amount
equal to the lesser of (A) fifty percent (50%) of the Total Consideration
and (B) seventy-five percent (75%) of the Total Merger Consideration, less
the aggregate amount of Parent Claims resolved or pending as of the first
anniversary of the Closing Date; and provided, further, that the limit
under this Section 7.2.4.2 for Parent Claims first made after the second
anniversary of the Closing Date shall be an amount equal to the lesser of
(A) twenty-five percent (25%) of the Total Merger Consideration and (B)
fifty percent (50%) of the Total Merger Consideration, less the aggregate
amount of Parent Claims resolved or pending as of the second anniversary
of the Closing Date. For the avoidance of doubt, the Parties agree that
the aggregate amount of Parent Claims for IP Representations under this
Section 7.2.4.2 and for all Parent Claims under Section 7.2.4.1,
regardless of whether such Parent Claims are satisfied out of the Escrow
Fund or by indemnification from the Company Stockholders outside the
Escrow Fund, shall not exceed the applicable limits specified in this
Section 7.2.4.2, which would
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for example be seventy-five percent (75%) of the Total Merger
Consideration until the first anniversary of the Closing; or
7.2.4.3 in the case of Parent Claims under Section 7.1.2(i) or
Section 7.1.2(ii), in each case to the extent arising from Core
Representations, together with all other Parent Claims subject to the
limits under Sections 7.2.4.1 and 7.2.4.2, the limit shall be an aggregate
amount equal to the Total Merger Consideration.
7.2.5 For purposes of satisfying any Parent Claim, shares of Parent
Stock held in the Escrow Fund shall be valued at the Average Parent Stock Price.
For purposes of satisfying any Parent Claim (other than with respect to payments
from the Escrow Fund), a Company Stockholder may tender either (a) shares of
Parent Stock, which shall also be valued at the Average Parent Stock Price or
(b) cash.
7.2.6 Notwithstanding any other provision of this Agreement, Parent
shall not seek indemnification under Section 7.1.2 from any Company Stockholder
for any Parent Claim (except for a Fraud Claim), except to the extent that the
amount of such Parent Claim exceeds the value of the assets in the Escrow Fund
that are not subject to pending Parent Claims. All Parties acknowledge that
Parent may claim against the Escrow Fund for any Parent Claim against any
Company Stockholder. If, but only if, the amount of any Parent Claim under
Section 7.1.2 (other that Parent Claims for which Parent's sole recourse under
this Agreement is the Escrow Fund) exceeds the value of the assets in the Escrow
Fund that are not subject to pending Parent Claims, then Parent may seek
indemnification against the Company Stockholders, subject to the limits and
other terms of this Article 7. If Parent seeks indemnification against the
Company Stockholders to the extent permitted by this Section 7.2.6, it shall use
commercially reasonable efforts to bring such claim against each Company
Stockholder on a pro rata basis in accordance with the allocation on Part 3.2.5
of the Company Disclosure Schedule. For purposes of this Section 7.2.6,
"commercially reasonable efforts" shall mean only sending notice to each Company
Stockholder of such Company Stockholder's indemnification obligation for such
claim and, if such Company Stockholder shall not have paid such Company
Stockholder's pro rata portion of such claim within 45 days after such notice,
sending a second notice thereof. For purposes of clarity, Parent shall not be
required to (i) commence litigation against any Company Stockholder or (ii)
pursue any claim for more than 120 days (or, if earlier, after the time when
litigation has become the only commercially reasonable alternative). Prior to
the completion of such commercially reasonable efforts with respect to a Parent
Claim, no Company Stockholder shall be required to pay Parent, with respect to
such Parent Claim, an amount greater than such Company Stockholder's pro rata
portion of such Parent Claim. If a Company Stockholder pays more than its pro
rata share of any Parent Claim in accordance with the allocation on Part 3.2.5
of the Company Disclosure Schedule, each other Company Stockholder shall be
required to contribute to such Company Stockholder so that the aggregate amount
paid by all Company Stockholders, taking into account the amount of such
contribution, is in accordance with the allocation on Part 3.2.5 of the Company
Disclosure Schedule. Any Company Stockholder shall be entitled to enforce its
right of contribution pursuant to this Section 7.2.6 against each other Company
Stockholder. Each Company Stockholder hereby agrees to indemnify and hold
harmless each other Company Stockholder for any loss, claim, liability, damage,
cost or expense (including costs and reasonable attorneys' fees and
disbursements) suffered, incurred or paid by any such other Company Stockholder
as a result of the failure of the indemnifying Company
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Stockholder to promptly pay such indemnifying Company Stockholder's pro rata
share of any Parent Claim, including reasonable costs and expenses incurred in
attempting to collect, enforce or defend against any of the foregoing.
7.2.7 Section 7.2.2, Section 7.2.3, Section 7.2.4 and Section 7.2.6
shall not apply to any Fraud Claim.
7.2.8 Notwithstanding any other provision of this Agreement to the
contrary, the aggregate liability of any Company Stockholder for indemnification
and contribution under this Agreement, including under this Article 7 and
Section 10.1 (taking into account amounts satisfied from the Escrow Fund), shall
not under any circumstance exceed the portion of the Total Merger Consideration
actually received by such Company Stockholder.
7.3 PROCESS OF INDEMNIFICATION FOR PARENT CLAIMS.
7.3.1 Parent shall not be entitled to receive any payment with
respect to a Parent Claim unless Parent shall have given the Company Stockholder
Representative written notice of the existence of such Parent Claim. Such notice
shall contain a reasonable summary of the basis for the Parent Claim and the
provision or provisions of this Agreement (or other agreement, certificate or
document) under which such indemnification is sought. If the Company Stockholder
Representative does not dispute the basis or amount of any Parent Claim within
30 days of receiving written notice thereof, Parent shall have the right
promptly to recover indemnity as and to the extent provided herein. If the
Company Stockholder Representative disagrees with the basis for or amount of the
Parent Claim, then within 30 days of receiving written notice thereof, the
Company Stockholder Representative shall give written notice to Parent of such
disagreement (which notice shall contain a reasonable summary of the basis for
such disagreement) and, in that case, Parent shall have the right promptly to
recover indemnity for any undisputed amount as and to the extent provided
herein, but shall have no right to recover indemnity for any disputed amount
hereunder until such time, if at all, as (a) a court of competent jurisdiction
issues a final, non-appealable order specifying the amount of Parent's recovery,
in which case Parent shall have the right promptly to recover the amount so
specified (subject to the limitations contained in this Article 7) or (b) Parent
and the Company Stockholder Representative agree in writing to the amount of
Parent's recovery, in which case Parent shall have the right promptly to recover
the amount so agreed.
7.3.2 The obligations and liabilities of any Party against which an
indemnification claim is brought (the "INDEMNIFYING PARTY") with respect to
matters resulting from the assertion of liability by third parties (each, a
"THIRD-PARTY CLAIM") shall be subject to the following terms and conditions:
7.3.2.1The Person entitled to indemnification hereunder (the
"INDEMNIFIED PARTY") shall give written notice to the Indemnifying Party
(or, in the case of indemnification under Section 7.1.2, the Company
Stockholder Representative) within 15 days after the receipt by such
Indemnified Party of any Third-Party Claim, which notice shall contain a
reasonable summary of the basis of such Third Party Claim, and the amount
of such claim to the extent known; provided, however, that no delay or
failure to give such notice on the part of the Indemnified Party shall
relieve any Indemnifying Party from any
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obligation hereunder unless (and then solely to the extent) such
Indemnifying Party is materially prejudiced thereby. Such notice shall be
accompanied by copies of all relevant documentation with respect to such
Third-Party Claim, including but not limited to, any summons, complaint or
other pleading which may have been served or written demand, or other
document or instrument.
7.3.2.2 The Indemnified Party shall have the right and
obligation to defend against, negotiate, settle or otherwise deal with any
Third-Party Claim in good faith but otherwise in such manner as the
Indemnified Party deems appropriate and to be represented by counsel of
its own choice reasonably satisfactory to the Company Stockholder
Representative. The Indemnified Party shall not admit any liability with
respect thereto or settle, compromise, pay or discharge the same without
the consent of the Indemnifying Party (or, in the case of indemnification
under Section 7.1.2, the Company Stockholder Representative), which
consent shall not be unreasonably withheld, so long as the Indemnified
Party is contesting or defending the same with reasonable diligence and in
good faith; provided, however, that the Indemnifying Party may participate
in any proceeding with counsel of its choice and at its expense. In the
event the Indemnified Party fails to defend against, negotiate, settle or
otherwise deal with such Third Party Claim as provided above in this
Section 7.3.2, then the Indemnifying Party shall have the right to defend
against, negotiate, settle or otherwise deal with the Third Party Claim in
good faith and otherwise in such manner as the Indemnifying Party deems
appropriate; provided, however, that the Indemnifying Party will not
consent to the entry of any judgment on or enter into any settlement with
respect to the Third-Party Claim (A) in the case of a settlement, unless
the settlement includes, as an unconditional term thereof, the giving by
the third party of a release of the Indemnified Party from all liability
in respect of such Third-Party Claim (other than pursuant to the terms of
the settlement), (B) if the judgment or settlement involves any injunctive
or other equitable relief, without the prior written consent of the
Indemnified Party, and (C) if the judgment or settlement with respect to
an Indemnified Party involves any amount in excess of the indemnification
obtained by the Indemnified Party hereunder with respect to such Third
Party Claim, without the prior written consent of the Indemnified Party,
which consent shall not be unreasonably withheld (it being agreed that it
shall be deemed to be reasonable to withhold such consent if such
withholding is based on the advice of counsel). The Indemnified Party
acknowledges that any settlement, compromise, payment or discharge of any
Third-Party Claim (other than by a judgment of a court or with the consent
of the Indemnifying Party) shall not preclude the Indemnifying Party (or
the Company Stockholder Representative) from disagreeing with the amount
of any Parent Claim relating to such Third-Party Claim pursuant to Section
7.3.1 and that any court, arbitrator, mediator or other party resolving
any dispute as to whether the Indemnified Party shall be entitled to
indemnification with respect to such Parent Claim shall consider all
evidence presented by the Indemnifying and Indemnified Parties with
respect to such Parent Claim, including evidence relating to the quality,
competency, cost and efficiency of the counsel selected to defend the
Third-Party Claim, the quality and intensity with which such defense was
conducted and whether the conduct of such defense was affected in any way
the Indemnified Party's existing or anticipated relationship with the
third-party claimant.
7.4 EXCLUSIVE REMEDY. Except as otherwise provided in Article 7 or Article
10 and
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subject to the limitations set forth therein, Parent shall have no claim or
cause of action, whether in contract, tort, under statute or otherwise, against
the Company Stockholders for monetary damages arising out of or relating to this
Agreement and the representations, warranties, covenants and agreements
contained herein apart from the remedies set forth in Article 7 hereof.
7.5 RELEASE OF CLAIMS.
7.5.1 Each Company Stockholder, on its own behalf and, to the extent
of its legal authority, on behalf of its successors, assigns, heirs,
next-of-kin, representatives, administrators, executors, directors, officers,
employees, partners, members, agents and affiliates, and any other Person
claiming by, through, or under any of the foregoing, does hereby unconditionally
and irrevocably release, waive and forever discharge, effective as of the
Effective Time, the Company, and each of its past and present directors,
officers, employees, agents, predecessors, successors, assigns, stockholders,
partners, insurers, Subsidiaries and affiliates (the "RELEASED PARTIES"), from
any and all claims, demands, damages, judgments, causes of action and
liabilities of any nature whatsoever, whether or not known, suspected or
claimed, arising directly or indirectly from any act, omission, event or
transaction occurring (or any circumstances existing) on or prior to the Closing
(the "RELEASED CLAIMS"), including without limitation any and all of the
foregoing arising out of or relating to (i) such Company Stockholder's capacity
as a current or former stockholder, option holder, warrant holder or other
security holder, director, officer, employee, member, manager, partner or agent
of the Company or any of its predecessors, Subsidiaries or affiliates (or such
Company Stockholder's capacity as a current or former trustee, director,
officer, employee, member, manager, partner or agent where such Company
Stockholder is or was serving at the request of any Target Company), (ii) any
rights of indemnification or contribution existing as of the Closing, whether
pursuant to the Released Parties' certificates of incorporation, bylaws, other
organizational document, applicable law, contract or otherwise (other than such
rights arising from such Company Stockholder's services as a director or officer
of a Target Company), or (iii) any contract, agreement or other arrangement
(whether verbal or written, but excluding this Agreement and the Escrow
Agreement) entered into or established prior to the Closing, including any
contracts, agreements or other arrangements required to be disclosed on the
Company Disclosure Schedule and any stockholder agreements, investor agreements,
employment agreements or non-competition agreements, in all cases whether or not
known, suspected or claimed, arising directly or indirectly from any act,
omission, event or transaction occurring (or any circumstances existing) on or
prior to the Closing. For purposes of clarity, no Company Stockholder is hereby
releasing, waiving or discharging any rights of indemnification or contribution,
whether pursuant to the Released Parties' certificates of incorporation, bylaws,
other organizational document, applicable law, contract or otherwise, arising
from such Company Stockholder's services as a director or officer of a Target
Company. Each Company Stockholder understands that this is a full and final
general release of all claims, demands, damages, judgments, causes of action and
liabilities of any nature whatsoever, whether or not known, suspected or
claimed, that could have been asserted in any legal or equitable proceeding
against the Released Parties.
7.5.2 Each Company Stockholder represents and warrants to the
Released Parties that there are no Encumbrances on or against any of the
Released Claims released by such Company Stockholder.
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7.5.3 The terms of this Section 7.5 are contractual and not mere
recitals. Except as expressly set forth herein, this Agreement is executed
without reliance upon any representation, warranty, covenant or agreement of the
Released Parties or any representative of the Released Parties, and each Company
Stockholder has carefully read this Agreement, has been advised of its meaning
and consequences by such Company Stockholder's attorney, and has signed the same
freely and willingly.
7.5.4 Notwithstanding the foregoing provisions of this Section 7.5,
nothing contained in this Agreement shall be construed as an admission by any
Party of any liability of any kind to any other Party.
ARTICLE 8
CLOSING CONDITIONS
8.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each Party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
8.1.1 Stockholder Approvals. The Required Stockholder Vote of the
adoption and approval of this Agreement and the Merger shall have been obtained.
8.1.2 No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger.
8.1.3 Governmental Consents. All consents, approvals, permits of,
authorizations from, notifications to and filings with any Governmental Entities
required to be made or obtained prior to the consummation of the Merger shall
have been made or obtained.
8.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
8.2.1 Representations and Warranties. Each representation and
warranty of Parent and Merger Sub contained in this Agreement (i) shall have
been true and correct in all material respects as of the date of this Agreement
and (ii) shall be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if made on the Closing Date,
except for those representations and warranties which address matters only as of
a particular date prior to the date hereof (which representations shall have
been true and correct in all material respects as of such particular date) (it
being understood that, for purposes of determining the accuracy of such
representations and warranties, any update of or modification to the Parent
Disclosure Schedule made or purported to have been made after the execution of
this Agreement shall be disregarded). The Company shall have received a
certificate with respect to the foregoing signed on behalf of Parent by an
authorized officer of Parent. For purposes of this Section 8.2.1 only, the
representations and warranties regarding Parent contained in this Agreement
shall be true and correct "in all material respects" as of the date of
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this Agreement unless the circumstances giving rise to the inaccuracies
(considered collectively) in the representations regarding Parent result (or
could reasonably be expected to result) in claims in excess of $1,000,000 (it
being understood that this sentence shall not be interpreted to preclude, limit
or otherwise affect any claim for breach of such representations and warranties
otherwise permitted under this Agreement).
8.2.2 Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or prior
to the Closing Date, and the Company shall have received a certificate to such
effect signed on behalf of Parent by an authorized officer of Parent.
8.2.3 Escrow Agreement. Parent, Merger Sub, the Company Stockholder
Representative and the Escrow Agent shall have duly executed and delivered the
Escrow Agreement.
8.2.4 Documents. All actions to be taken by Parent and Merger Sub in
connection with the consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to effect the
transactions contemplated hereby or to be delivered to the Company will be
reasonably satisfactory in form and substance to the Company.
8.2.5 Legal Opinion. The Company shall have received from Xxxxx Xxxx
LLP, counsel to Parent, an opinion, in form and substance satisfactory to the
Company, as to Parent's legal existence and authorization of the transactions
contemplated by this Agreement.
8.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
8.3.1 Company Representations and Warranties. Each representation
and warranty regarding any Target Company contained in this Agreement (i) shall
have been true and correct in all material respects as of the date of this
Agreement and (ii) shall be true and correct in all material respects on and as
of the Closing Date with the same force and effect as if made on and as of the
Closing Date, except for those representations and warranties which address
matters only as of a particular date prior to the date hereof (which
representations shall have been true and correct in all material respects as of
such particular date) (it being understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or modification
to the Company Disclosure Schedule made or purported to have been made after the
execution of this Agreement shall be disregarded). Parent shall have received a
certificate with respect to the foregoing signed on behalf of the Company by the
Chief Executive Officer and Chief Financial Officer of the Company. For purposes
of this Section 8.3.1, the representations and warranties regarding any Target
Company contained in this Agreement shall be true and correct "in all material
respects" as of the date of this Agreement unless the circumstances giving rise
to the inaccuracies (considered collectively) in the representations regarding
any Target Company and the Company Stockholders result (or could reasonably be
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expected to result) in Parent Claims in excess of $1,000,000 (it being
understood that this sentence shall not be interpreted to preclude, limit or
otherwise affect any claim for breach of such representations and warranties
otherwise permitted under this Agreement).
8.3.2 Company Agreements and Covenants. Each Target Company shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it at
or prior to the Closing Date, and Parent shall have received a certificate to
such effect signed on behalf of the Company by the Chief Executive Officer and
Chief Financial Officer of the Company.
8.3.3 Company Stockholder Representations and Warranties. Each
representation and warranty of each Company Stockholder contained in this
Agreement (i) shall have been true and correct in all material respects as of
the date of this Agreement and (ii) shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if made
on and as of the Closing Date except for those representations and warranties
which address matters only as of a particular date prior to the date hereof
(which representations shall have been true and correct in all material respects
as of such particular date). For purposes of this Section 8.3.3, the
representations and warranties regarding the Company Stockholders contained in
this Agreement (other than the representations and warranties of the Company
Stockholders in Sections 2.7 and 2.10 through 2.16) shall be true and correct
"in all material respects" as of the date of this Agreement unless the
circumstances giving rise to the inaccuracies (considered collectively) in the
representations regarding any Target Company and the Company Stockholders
(including the representations and warranties in Sections 2.7 and 2.10 through
2.16) result (or could reasonably be expected to result) in Parent Claims in
excess of $1,000,000 (it being understood that this sentence shall not be
interpreted to preclude, limit or otherwise affect any claim for breach of such
representations and warranties otherwise permitted under this Agreement).
8.3.4 Company Stockholder Agreements and Covenants. Each Company
Stockholder shall have performed or complied in all material respects with all
agreements and covenants required by this Agreement to be performed or complied
with by it at or prior to the Closing Date.
8.3.5 Material Adverse Effect. No Company Material Adverse Effect
shall have occurred. For purposes of this Section 8.3.5 only, a Company Material
Adverse Effect will be deemed to exist if the change, event, circumstance or
effect results in or could reasonably be expected to result in a loss, liability
or reduction in value in an amount in excess of $1,000,000; provided, however,
that this provision shall not be interpreted to exclude from the definition of
Company Material Adverse Effect (either in this Section 8.3.5 or elsewhere in
this Agreement) losses, liabilities or reductions in value in amounts less than
$1,000,000.
8.3.6 Consents. (i) All required approvals or consents of any
Governmental Entity in connection with the Merger and the consummation of the
other transactions contemplated hereby, and all approvals and consents
identified on Part 8.3.6 of the Parent Disclosure Schedule, shall have been
obtained (and all relevant waiting periods shall have expired), and (ii) all
such approvals and consents shall be on terms reasonably satisfactory to Parent.
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8.3.7 Consent to the Merger. Holders of shares of Company Capital
Stock representing the right to receive not less than 80% of Total Merger
Consideration, shall be Principal Stockholders or shall have executed and
delivered to Parent Stockholder Agreements.
8.3.8 No Restraints. There shall not be instituted or pending any
action or proceeding by any Governmental Entity (i) seeking to restrain,
prohibit or otherwise interfere with the ownership or operation by Parent or any
of its Subsidiaries of all or any portion of the business of any Target Company
or of Parent or any of its Subsidiaries or to compel Parent or any of its
Subsidiaries to dispose of or hold separate all or any portion of the business
or assets of any Target Company or of Parent or any of its Subsidiaries, (ii)
seeking to impose or confirm limitations on the ability of Parent or any of its
Subsidiaries effectively to exercise full rights of ownership of the shares of
Company Stock (or shares of stock of the Surviving Corporation), including the
right to vote on any matter or (iii) seeking to require divestiture by Parent or
any of its Subsidiaries of any such shares.
8.3.9 Legal Opinion. Parent shall have received from Xxxxxxxxx
Xxxxxxx Xxxxxx Xxxxxxxxxx Xxxxxxxx & Xxxxxxxxx, LLP, counsel to the Company, an
opinion in form and substance satisfactory to Parent.
8.3.10 Employment Arrangements. Each employee designated on Part
8.3.10 of the Parent Disclosure Schedule shall have accepted employment with
Parent or an affiliate of Parent on terms and conditions satisfactory to Parent,
subject only to the Closing, and no such employee shall have provided notice of
his or her intention to terminate such employment arrangement.
8.3.11 Termination of Options and Warrants. Parent shall be
satisfied that all Company Options shall have expired or been terminated or
otherwise cancelled (or shall expire or terminate or otherwise be cancelled as
of immediately prior to the Effective Time).
8.3.12 Termination or Modification of Investor Agreements. Parent
shall be satisfied that (i) the Amended and Restated Investors' Rights Agreement
and the Amended and Restated First Refusal and Co-Sale Agreement, each dated as
of October 12, 2004, by and among the Company and certain stockholders of the
Company parties thereto shall have been terminated as of immediately prior to
the Effective Time, (ii) the Voting Agreement shall have been terminated as of
immediately prior to the Effective Time, except such provisions thereof as
Parent shall determine to be necessary to preserve Section 5 thereof, which
provisions shall survive after the Effective Time until Parent shall determine
otherwise, and (iii) all letter agreements between the Company and any party or
parties, granting such party or parties any management rights, including (A) the
three letter agreements dated as of November 8, 2001 between the Company and
each of August Capital III, L.P., Granite Ventures, L.P. and Xxxx U.S. Ventures,
LLC, (B) the letter agreement dated as of March 7, 2003 between the Company and
Xxxxx Xxxxx Fund VIII L.P., and (C) the letter agreement dated as of October 12,
2004 among the Company, Xxxxx Xxxxx Fund VIII L.P. and Xxxxx Xxxxx VIII
Affiliates Fund L.P., in each case shall have been terminated as of immediately
prior to the Effective Time.
8.3.13 Resignations. Parent shall have received written resignations
from all of the directors and officers of the Target Companies effective as of
the Effective Time.
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8.3.14 Escrow Agreement. The Escrow Agent and the Company
Stockholder Representative shall have duly executed and delivered the Escrow
Agreement.
8.3.15 Change in Fiscal Year. Parent shall be satisfied that the
Company shall have changed the end of its fiscal year from January 31, 2006 to
December 31, 2005.
8.3.16 FIRPTA. On or before the Closing Date, the Company shall have
delivered to Parent a certification that shares of Company Stock are not "U.S.
real property interests" in accordance with Treasury Regulations under Sections
897 and 1445 of the Code, together with authorization for Parent, as agent for
the Company, to deliver a copy of the certification, along with the appropriate
notification, to the Internal Revenue Service on behalf of the Company, in
accordance with the provisions of Section 1.897-2(h)(2) of the Treasury
Regulations. If Parent does not receive the certification and authorization to
file the notice as described above on or before the Closing Date, Parent, Merger
Sub, the Company, or the Surviving Corporation shall be permitted to withhold
from the payments to be made pursuant to this Agreement any required withholding
tax under Section 1445 of the Code.
8.3.17 Certified Charter; Good Standing Certificates. Parent shall
have received from the Company a copy of the Certificate of Incorporation of the
Company, certified as of or within three business days prior to the Closing Date
by the Secretary of State of the State of Delaware, together with certificates,
dated as of or within three business days prior to the Closing Date, as to the
good standing of each Target Company from the Secretary of State (or comparable
officer) of such jurisdictions as Parent shall request.
8.3.18 Secretary's Certificate. Parent shall have received from the
Company a certificate of the secretary of each Target Company, dated the Closing
Date, in form and substance reasonably satisfactory to Parent, as to: (i) no
amendments to the certificate of incorporation or other organizational documents
of such Person since the date specified in Section 8.3.17; (ii) the bylaws of
such Person; (iii) any resolutions of the board of directors (or a duly
authorized committee thereof) and stockholders of such Person relating to this
Agreement and the transactions contemplated hereby, and (iv) as to the Company,
the delivery of written notice, in accordance with Section 228(e) of Delaware
Law (and if applicable, the California Law), of the taking of the Required
Stockholder Vote for the adoption and approval of this Agreement and the Merger,
together with the written notice required by Section 262(d)(2) of the Delaware
Law (and if applicable, the California Law), to each stockholder of the Company
entitled thereto.
8.3.19 Documents. All actions to be taken by the Company and the
holders of Company Stock in connection with the consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other
documents required to effect the transactions contemplated hereby or to be
delivered to Parent or Merger Sub will be reasonably satisfactory in form and
substance to Parent and Merger Sub.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
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Effective Time, whether before or after the Required Stockholder Vote for the
adoption and approval of this Agreement and the Merger has been obtained:
9.1.1 by the written consent of Parent and the Company;
9.1.2 by either the Company or Parent if the Merger shall not have
been consummated within 60 days of the date hereof for any reason; provided,
however, that the right to terminate this Agreement under this Section 9.1.2
shall not be available to (i) the Company if any action or failure to act by any
Target Company or any Company Stockholder has been a principal cause of or
resulted in the failure of the Merger to occur on or before such date and such
action or failure to act constitutes a breach of this Agreement, or (ii)Parent
if any action or failure to act by Parent or Merger Sub has been a principal
cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a breach of this Agreement;
9.1.3 by either the Company or Parent if a Governmental Entity shall
have issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise prohibiting
the Merger, which order, decree, ruling or other action is final and
non-appealable;
9.1.4 by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Merger Sub set forth in this
Agreement, or if any representation or warranty of Parent or Merger Sub shall
have become untrue, in either case such that the conditions set forth in Section
8.2.1 or Section 8.2.2 would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided that if such inaccuracy in Parent's or Merger Sub's representations and
warranties or breach by Parent or Merger Sub is curable by Parent or Merger Sub,
then the Company may not terminate this Agreement under this Section 9.1.4 until
ten business days after delivery of written notice from the Company to Parent of
such breach and intent to terminate, provided Parent and Merger Sub continue to
exercise commercially reasonable efforts to cure such breach (it being
understood that the Company may not terminate this Agreement pursuant to this
Section 9.1.4 if such breach by Parent or Merger Sub is cured during such ten
business-day period, or if the Company shall have materially breached this
Agreement); or
9.1.5 by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company or any Company Stockholder, if
applicable, set forth in this Agreement, or if any representation or warranty of
the Company or any Company Stockholder shall have become untrue, in either case
such that the conditions set forth in Section 8.3.1, Section 8.3.2, Section
8.3.3 or Section 8.3.4 would not be satisfied as of the time of such breach or
as of the time such representation or warranty shall have become untrue,
provided that if such inaccuracy in the representations and warranties of the
Company or such Company Stockholder or breach by the Company or such Company
Stockholder is curable by the Company or such Company Stockholder, then Parent
may not terminate this Agreement under this Section 9.1.5 until ten business
days after delivery of written notice from Parent to the Company of such breach
and intent to terminate, provided the Company and such Company Stockholder, if
applicable, continue to exercise commercially reasonable efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this
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Section 9.1.5 if such breach by the Company or such Company Stockholder is cured
during such ten business-day period, or if Parent shall have materially breached
this Agreement).
9.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any proper termination
of this Agreement under Section 9.1 will be effective immediately upon the
delivery of written notice of the terminating Party, in the case of Parent, to
the Company, and, in the case of the Company, to Parent. In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect, except (i) as set forth in Section 6.4, this
Section 9.2, Section 9.1 and Article 10, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any Party
from liability for any breach of this Agreement. No termination of this
Agreement shall affect the obligations of the Parties contained in the Letter of
Intent dated as of November 23, 2005 by and between Parent and the Company (the
"LETTER OF INTENT"), all of which obligations shall survive termination of this
Agreement in accordance with their terms.
9.3 FEES AND EXPENSES. Except to the extent otherwise provided in this
Agreement, all fees and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the Party incurring such
expenses whether or not the Merger is consummated.
9.4 AMENDMENT. Subject to applicable Legal Requirements, this Agreement
may be amended by the Parties hereto at any time by execution of an instrument
in writing signed on behalf of Parent, Merger Sub, the Company and Company
Stockholders who hold such number of shares of Company Stock sufficient to take
the Required Stockholder Vote.
9.5 EXTENSION; WAIVER. Any Party hereto may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations or
other acts of the other Parties hereto, (ii) waive any inaccuracies in the
representations and warranties made to such Party contained herein or in any
document delivered pursuant hereto, and (iii) waive compliance with any of the
agreements or conditions for the benefit of such Party contained herein. Each
holder of Company Stock shall be bound by any extension or waiver granted by
Company Stockholders who hold such number of shares of Company Stock sufficient
to take the Required Stockholder Vote. Subject to the foregoing, any agreement
on the part of a Party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such Party.
Delay in exercising any right under this Agreement shall not constitute a waiver
of such right.
ARTICLE 10
GENERAL PROVISIONS
10.1 TAX MATTERS. The following provisions shall govern the allocation of
responsibility as among Parent, the Surviving Corporation and the Company
Stockholders for certain tax matters following the Closing Date:
10.1.1 The Company Stockholders, jointly and severally, hereby agree
(without any right of indemnification, contribution or subrogation from or
against any Target Company or the Surviving Corporation or any of its
Subsidiaries) to indemnify, defend and hold harmless
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Parent, the Surviving Corporation, its Subsidiaries and each affiliate of Parent
from and against any loss, claim, liability, damage, cost or expense (including
costs and reasonable attorneys' fees and disbursements) suffered, incurred or
paid by any such Person arising from or attributable to: (i) any and all Taxes
(or the non-payment thereof) of the Target Companies for all taxable periods
ending on or before the Closing Date and the portion through the end of the
Closing Date for any taxable period that includes (but does not end on) the
Closing Date ("PRE-CLOSING TAX PERIOD"), (ii) any and all Taxes of any member of
an affiliated, consolidated, combined or unitary group of which the any Target
Company (or any predecessor of any of the foregoing) is or was a member on or
prior to the Closing Date, including pursuant to Treasury Regulation Section
1.1502-6 or any analogous or similar foreign, state or local Legal Requirement,
and (iii) any and all Taxes of any Person (other than the Target Companies)
imposed on any Target Company as a transferee or successor, by contract or
pursuant to any Legal Requirement, which Taxes relate to an event or transaction
occurring before the Closing; provided, however, that in the case of clauses
(i), (ii), and (iii) above, the Company Stockholders shall be liable only to the
extent that such Taxes exceed the amount, if any, reserved for such Taxes
(excluding any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) on the face of the Company Balance
Sheet (rather than in any notes thereto). The Company Stockholders shall jointly
and severally reimburse Parent for any Taxes of the Target Companies that are
the responsibility of the Company Stockholders pursuant to this Section within
15 business days after Parent shall notify the Company Stockholder
Representative that such Taxes have been paid. Notwithstanding anything
contained in this Agreement to the contrary, the aggregate liability of the
Company Stockholders under this Section 10.1.1 and under Section 3.7, together
will all other Parent Claims subject to the limit under Section 7.2.4.1, shall
not exceed an aggregate amount equal to the Escrow Fund.
10.1.2 In the case of any taxable period that includes (but does not
end on) the Closing Date (a "STRADDLE PERIOD"), the amount of any Taxes based on
or measured by income or receipts of the Target Companies for the Pre-Closing
Tax Period shall be determined based on an interim closing of the books as of
the close of business on the Closing Date (and for such purpose, the taxable
period of any partnership or other pass-through entity in which any Target
Company holds a beneficial interest shall be deemed to terminate at such time)
and the amount of other Taxes of the Target Companies for a Straddle Period that
relates to the Pre-Closing Tax Period shall be deemed to be the amount of such
Tax for the entire taxable period multiplied by a fraction the numerator of
which is the number of days in the taxable period ending on the Closing Date and
the denominator of which is the number of days in such Straddle Period.
10.1.3 Parent shall prepare or cause to be prepared and file or
cause to be filed all Tax Returns for the Target Companies that are filed after
the Closing Date.
10.1.4 The Company Stockholders shall cooperate fully, as and to the
extent reasonably requested by Parent or the Surviving Corporation, in
connection with the filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes. Such cooperation shall include (upon the
request of Parent or the Surviving Corporation) the provision of records and
information that are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
hereunder.
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10.1.4.1 The Company Stockholders further agree, upon request,
to use their commercially reasonable efforts to obtain any certificate or
other document from any Governmental Entity or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
upon Parent, the Surviving Corporation or any of its Subsidiaries
(including, but not limited to, with respect to the transactions
contemplated hereby).
10.1.4.2 The Company Stockholders further agree, upon request,
to provide Parent or the Surviving Corporation with all information that
Parent or the Surviving Corporation may be required to report pursuant to
Code Sections 6043 and 6043A and all Treasury Regulations promulgated
thereunder.
10.1.5 All tax-sharing agreements or similar agreements with respect
to or involving the Target Companies shall be terminated as of the Closing Date
and, after the Closing Date, the Target Companies shall not be bound thereby or
have any liability thereunder.
10.1.6 All transfer, documentary, sales, use, stamp, registration
and other such Taxes, and all conveyance fees, recording charges and other fees
and charges (including any penalties and interest) incurred in connection with
the consummation of the transactions contemplated by this Agreement shall be
paid by the Company Stockholders when due, and the Company Stockholders will, at
their own expense, file all necessary Tax Returns and other documentation with
respect to all such Taxes, fees and charges, and, if required by applicable law,
Parent will, and will cause its affiliates to, join in the execution of any such
Tax Returns and other documentation (provided such Tax Returns and documentation
are satisfactory in form and substance to Parent).
10.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given upon delivery either personally or by
commercial delivery service, or sent via facsimile (receipt confirmed) to the
Parties at the following addresses or facsimile numbers (or at such other
address or facsimile numbers for a Party as such Party shall specify by like
notice, except that, notwithstanding any notice by any holder of Company Stock
to the contrary, any notice or communication to the Company Stockholder
Representative shall be deemed to be a notice or communication to each holder of
Company Stock):
if to Parent or Merger Sub, to:
Progress Software Corporation
00 Xxx Xxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxx, Chief Executive Officer
with copies to:
Progress Software Corporation
00 Xxx Xxxx
Xxxxxxx, XX 00000
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Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxxxx, Senior Vice President and
General Counsel
and
Xxxxx Xxxx LLP
Seaport World Trade Center West
000 Xxxxxxx Xxxxxxxxx
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq. and
Xxxx X. Xxxxxxx, Esq.
if to the Company, to:
Actional Corporation
000 X. Xx Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Chief Financial Officer
with a copy to:
Xxxxxxxxx Xxxxxxx Xxxxxx Xxxxxxxxxx
Xxxxxxxx & Xxxxxxxxx, LLP
000 Xxxxxxxxxxxx Xxxxx
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
Attention: Xxxxxx Xxxxxx, Esq.
if to any holder of Company Stock or the Company Stockholder
Representative, to:
Company Stockholder Representative
Xxxxxxxx X'Xxxxx
Xxx Xxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
10.3 INTERPRETATION; CERTAIN DEFINED TERMS.
10.3.1 When a reference is made in this Agreement to Exhibits, such
reference shall be to an Exhibit to this Agreement unless otherwise indicated.
When a reference is made in this Agreement to Sections, such reference shall be
to a Section of this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The headings contained
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in this Agreement are only for reference purposes and shall not affect in any
way the meaning or interpretation of this Agreement. When reference is made
herein to "the business of" an entity, such reference shall be deemed to include
the business of all direct and indirect Subsidiaries of such entity. Reference
to the Subsidiaries of an entity shall be deemed to include all direct and
indirect Subsidiaries of such entity. Reference to an agreement herein is to
such agreement as amended in accordance with its terms up to the date hereof.
Reference to a statute herein is to such statute, as amended.
10.3.2 For purposes of this Agreement, "KNOWLEDGE" means, with
respect to any fact, circumstance, event or other matter in question, the
admission or actual knowledge of such fact, circumstance, event or other matter
of (i) an individual, if used in reference to an individual, or (ii) any
corporate officer of such Party (in the case of the Company, Xxxxxx X. Xxxxx,
Xxxx Xxxxx, Xxx Xxxx, Xxxx Xxxxxxx and Xxxx Xxxxxxxx), if used in reference to a
Person that is not an individual. Without limiting the foregoing, any such
individual (including such officer) will be deemed to have actual knowledge of a
particular fact, circumstance, event or other matter if such knowledge could be
obtained from (y) reasonable inquiry of the persons employed by such Party
charged with administrative or operational responsibility for such matters for
such Party or (z) other investigation that is reasonable under the
circumstances.
10.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
Parent, Merger Sub, the Company, the Company Stockholder Representative and the
Principal Stockholders and delivered to Parent and the Company, it being
understood that all such Parties need not sign the same counterpart.
10.5 ENTIRE AGREEMENT; THIRD-PARTY BENEFICIARIES. This Agreement, its
Exhibits and the documents and instruments and other agreements among the
Parties hereto as contemplated by or referred to herein, including the Company
Disclosure Schedule and the Parent Disclosure Schedule (a) constitute the entire
agreement among the Parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the Parties with respect to the subject matter hereof, it being understood that
the Letter of Intent shall continue in full force and effect until the Closing
and shall survive any termination of this Agreement in accordance with its
terms; and (b) except as expressly set forth herein, including Section 6.9
hereof, are not intended to confer upon any other Person any rights or remedies
hereunder.
10.6 SEVERABILITY. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other Persons or circumstances will be interpreted so as reasonably
to effect the intent of the Parties hereto. The Parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.7 OTHER REMEDIES; SPECIFIC PERFORMANCE; FEES.
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10.7.1 Except as otherwise provided herein, any and all remedies
herein expressly conferred upon a Party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
Party, and the exercise by a Party of any one remedy will not preclude the
exercise of any other remedy. The Parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that, subject to the terms of Section 10.8, the Parties
shall be entitled to seek an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions hereof in
any court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.7.2 If any action, suit or other proceeding (whether at law, in
equity or otherwise) is instituted concerning or arising out of this Agreement
or any transaction contemplated hereunder, the prevailing Party shall recover,
in addition to any other remedy granted to such Party therein, all such Party's
costs and attorneys fees incurred in connection with the prosecution or defense
of such action, suit or other proceeding.
10.8 GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement and the
transactions contemplated hereby (including the Merger) shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof. The Parties hereby irrevocably and unconditionally consent to
submit to the exclusive jurisdiction of the state and federal courts located in
Boston, Massachusetts for any actions, suits or proceedings arising out of or
relating to this Agreement and the transactions contemplated hereby (including
the Merger) (and the Parties agree not to commence any action, suit or
proceeding relating thereto except in such courts), and further agree that
service of any process, summons, notice or document by certified mail shall be
effective service of process for any action, suit or proceeding brought against
the Parties in any such court. The Parties hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement in the state or federal courts
located in Boston, Massachusetts, and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
10.9 RULES OF CONSTRUCTION. The Parties agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any Legal Requirement, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the Party drafting such agreement or document.
10.10 ASSIGNMENT. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written consent of
Parent, Merger Sub, the Company and Company Stockholders who hold such number of
shares of Company Stock sufficient to take the Required Stockholder Vote.
Subject to the preceding sentence, this Agreement shall be binding upon and
shall inure to the benefit of the Parties hereto and their respective successors
and permitted assigns. Any purported assignment in violation of this Section
10.10 shall be void.
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10.11 WAIVER OF JURY TRIAL. EACH OF PARENT, MERGER SUB, THE COMPANY, THE
COMPANY STOCKHOLDERS and the company stockholder representative HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, MERGER SUB, THE COMPANY,
ANY COMPANY STOCKHOLDER or the company stockholder representative IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
* * * * *
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Company
Stockholder Representative and the Principal Stockholders have caused this
Agreement and Plan of Merger to be executed by their duly authorized respective
officers as of the date first written above.
PROGRESS SOFTWARE CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxxxxx, Senior Vice President,
Finance and Administration and Chief
Financial Officer
ACTC ACQUISITION CORP.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------------
Xxxxxx X. Xxxxxxxxx, Treasurer
ACTIONAL CORPORATION
By: /s/ Xxx Xxxx
---------------------------------------------
Xxx Xxxx, Chief Executive Officer
COMPANY STOCKHOLDER REPRESENTATIVE:
/s/ Xxxxxxxx X'Xxxxx
------------------------------------------------
Xxxxxxxx X'Xxxxx, as Company Stockholder
Representative
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SCHEDULE I
ENTITIES:
Arrowpath Entrepreneur Fund, LP
Arrowpath Fund II, LP
August Capital III, LP
E*Trade eCommerce Fund, LP
Granite Ventures, LP
Xxxxx Xxxxx Xxxxxxx Management Company
Xxxxx Xxxxx Fund VIII XX
Xxxxx Xxxxx VIII Affiliates Fund LP
NeoCarta Scout Fund, LLC
NeoCarta Ventures, LP
New Enterprise Associates VIII, LP
New Enterprise Associates 8A, XX
Xxxx U.S. Ventures, LLC
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